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CISG CASE PRESENTATION

Spain 7 June 2003 Appellate Court Valencia (Cherubino Valsangiacomo, S.A. v. American Juice Import, Inc.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030607s4.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20030607 (7 June 2003)

JURISDICTION: Spain

TRIBUNAL: Audiencia Provincial de Valencia

JUDGE(S): Sr. D. Vincente Ortega Llorca

CASE NUMBER/DOCKET NUMBER: 142/2003

CASE NAME: Cherubino Valsangiacomo, S.A. v. American Juice Import, Inc.

CASE HISTORY: 1st instance Sentencia del Jozgado de Primero Instancia No. 16 de Valencia 2 December 2002; 3rd instance Tribunal Supremo 9 December 2008

SELLER'S COUNTRY: Spain (plaintiff)

BUYER'S COUNTRY: United States (defendant)

GOODS INVOLVED: 1,500 tons of concentrated grape juice


Case abstract

SPAIN: Audiencia Provincial de Valencia 7 June 2003

Case law on UNCITRAL texts (CLOUT) abstract no. 549

Reproduced with permission of UNCITRAL

Abstract prepared by María del Pilar Perales Viscasillas, National Correspondent

The parties were in dispute over whether there had been a contractual breach in regard to a contract for the international sale of 1,500 tons of concentrated grape must and also over the sum payable as damages. In its ruling, the lower court ordered the buyer to pay the seller damages of approximately 17 million pesetas.

The buyer (appellant) claimed that the CISG applied. The court of appeal applied the Convention on the basis of article 1, paragraph (1)(a).

The court also made interesting observations relating to the interpretation of the Convention. Firstly, referring to paragraphs (1) and (2) of article 7, it drew attention to the need for uniform interpretation, a principle found in other conventions, which reflects a current trend in international trade law. Secondly, it referred to the relevance, in interpreting the Convention, of the commentary by the UNCITRAL Secretariat on the 1978 draft of the Convention, citing specifically the comments on article 6 of that draft. Thirdly, it referred to the importance of the legal principle that calls for an independent interpretation of the Convention visà-vis national law, for which purpose it is necessary to adopt a methodology different from that used in applying domestic law. Fourthly, the court pointed out that the only way in which to ensure uniformity in its application was to take into account what other courts in other countries had done when applying it in cases brought before them and to seek the expert opinion of legal writers in achieving such uniformity. The court referred specifically to the CLOUT system.

The court concluded this issue by stating that the CISG, precedents of other national or foreign courts, Spanish domestic law, contractual agreements, the claims of the parties and evidence presented would be the means by which the subjectmatter of the dispute would be dealt with.

Turning to substantive issues, the sales contract contained an ex factory clause, which the court interpreted in the light of Incoterms 2000. The court also referred to the UNCITRAL recommendation regarding the use of Incoterms. The facts of the case showed that the buyer had failed to meet its obligation to collect the goods from the seller's establishment within the agreed period of time. The goods suffered significant loss of colour as a result of the delay; that delay was caused by problems experienced by the buyer in opening documentary credit, which was not done until the end of November 1997. The buyer claimed that it was entitled to collect the goods at any time between the end of October 1997 and February 1998. The court, however, pointed out that that period was not intended to benefit the buyer, such a contention not being provided for under article 33 or article 7 CISG (principle of good faith). The period for collection of the goods was closely linked to the nature of the goods, whose manufacture required the raw material to be available sufficiently in advance and entailed a complex process of preparation that was impossible to improvise. It was therefore unreasonable to argue that, in the absence of any express agreement, the matter should be left in the hands of the buyer, with the grave risk that such an arrangement represented for the seller. From the contractual documents the court concluded that the parties had agreed that the goods should be made available and delivered on a staggered basis between the end of October 1997 and February 1998.

Referring to the complaint of lack of conformity, the court concluded that the buyer had not lodged the complaint within a reasonable period. It alluded to CLOUT Cases 98 and 81 with a view to determining what constituted a reasonable period. In the case in question, in which there was an ex factory clause, it held that the buyer had not acted with due diligence, since it had not examined the goods -- it only collected part of the total agreed quantity--until their arrival at their destination in the United States of America, which was particularly important in the case in question since grape must loses intensity of colour over time; also, the transportation had been inadequate. Citing CLOUT Case 251, the court ruled that the burden of proof was on the buyer.

Of those goods that had not been collected, the seller was able to sell only a part to third parties (resale). The profit gained through the resale had to be deducted from the damages in order to avoid unjust enrichment, since the amount of damages would have been increased by the lost profit on the goods that the buyer had failed to collect.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 7 ; 33 ; 38 ; 39 ; 74 [Also cited: Articles 2 ; 3 ; 10 ; 19 ; 40 ] [Also relevant: Article 50 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): burden of proof ("issues related to burden of proof are not governed by the Convention but, taking into account its systematic structure, some principles can be inferred")];

7B [Materials for interpretation: international case law, legislative history and scholarly studies]

33B [Time for delivery: contract provides period of time for delivery];

38A [Buyer's obligation to examine goods: time for examining goods];

39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];

74A [General rules for measuring damages: loss suffered as consequence of breach]

Descriptors: Internationality ; Scope of Convention ; Burden of proof ; Delivery ; Incoterms ; Examination of goods ; Lack of conformity notice, timeliness ; Damages

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Editorial remarks

EDITOR: Pilar Perales Viscasillas

In this case, the Spanish seller and the U.S. buyer concluded a contract for the sale of 1,500 tons of concentrated wine. The court referred to the interpretation of the Convention and held:

      -   First, a uniform interpretation is needed (Art. 7(1) and (2)). This principle of uniform interpretation is present in other international treaties, thus showing an actual tendency in international commercial law.
 
- Second, focusing on the legislative history of the Convention, the court expressly refers to the importance that can be attached the Secretariat Commentary on Article 6 of the 1978 UNCITRAL Draft Text [antecedent to Article 7(1) CISG].
 
- Third, the court expressly refers to the importance of doctrine, which demands an autonomous interpretation of the Convention separate from domestic interpretation.
 
- Fourth, the court stated that a different methodological approach than that of domestic law is needed to interpret the Convention.
 
- Fifth, the court stated that the only way to assure uniformity of interpretation of the Convention is to take into account that which other tribunals have held when applying the Convention. The court cited several cases found in CLOUT, and expert opinions of scholars.

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Spanish: CISG-Spain and Latin America website <http://www.uc3m.es/cisg/respan39.htm>

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spain and Latin America website <http://www.uc3m.es/cisg/sespan39.htm>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Audiencia Provincial [Court of Appeal] de Valencia 7 June 2003

Translation [*] by Mercedes Romero Iglesias [**]

Translation edited by Mª Pilar Perales Viscasillas [***]

[...]

FACTS

First. -- On 2 December 2002, the Court of First Instance ruled partially allowing the statement of claim brought by Cherubino Valsangiacomo, S.A. [Seller] against American Juice Import, Inc. [Buyer], declaring the contract avoided and directed [Buyer] to pay [Seller] 17,552,158 pesetas plus the appropriate legal interest and the costs of the proceedings. The Court also dismissed the Statement of Claim brought by the [Buyer] against [Seller] and directed the [Buyer] to pay the cost of the proceedings associated with that.

Second. -- [Buyer] has appealed, stating, in summary, that:

     a) The applicable law is the United Nations Convention on Contracts for the International Sale of Goods, CISG (RCL 1991, 229 and RCL 1996, 2896) instead of the Spanish Civil Code [LEG 1889,27] and the Spanish Commercial Code [LEG 1885,21] and that, if there are doubts or gaps, interpretation should be made in light of an "international code" avoiding the automatic application of the parameters created by each State for domestic sales. This is the principle of autonomous interpretation of the CISG, contemplated by Art. 7 CISG.

     b) The main basis for the decision of the Court of First Instance in its ruling of 2 December 2002 was that, if the goods were non-conforming when delivered this was due to the [Buyer]'s delay in collecting the goods. However, there was no delay as the deadline was stipulated in favor of [Buyer], this is deduced from Art. 33(b) CISG interpreted in light of INCOTERMS.

     -      There was no abusive exercise of the faculty to choose the moment of charging because, on the contrary, no order of charging that would have been arbitrarily changed by [Buyer] has been presented.
     -      There was no delay because the contract was not concluded on October 15 but on November 7 (Art. 19 CISG).
     -      It is false that the [Seller]'s concentrated grape juice plant only worked for [Buyer].
     -      It is false that [Buyer] had cash flow problems to pay the price of the sale.
     -      Clarifications as to the EX FACTORY clause:

  • Either this clause only produces effects from the moment clean [correct] documents are presented which is not the case at hand, as [Seller] did not provide a document which certified the color of the product;
  • Or it only determines the passing of risk of the product and not the deadline to provide notice of lack of conformity of the goods, which is regulated by Art. 39 CISG which calls for such notice "within a reasonable time after [Buyer] has discovered [the lack of conformity] or ought to have discovered it";
  • Or, in any event, Art. 40 CISG makes the EX FACTORY clause irrelevant to resolve this case, because the lack of conformity refers to facts that the seller knew or could have not been unaware of and that were not disclosed to the buyer.

     c) [Seller] breached the contract.

     -      It is factually proved that [Seller] breached the contract because it recognized that before delivering the goods they were outside specification; they did not comply with the conditions of colors agreed in the contract. (documentary evidence and confession of Mr. Jorge).
     -      Such lack of color must be considered IMPORTANT, as this was how the expert called it.
     -      This fact justifies the avoidance of the contract and the request for damages and prejudicial consequences by [Buyer] which has also been proved.

     d) There was error in the appreciation of evidence of the supposed damages suffered by [Seller].

[Seller] demanded damages (relying on the report presented by the auditor as document 42 of its Statement of Claim) without taking into account, as it even recognizes, that [Seller] resold the goods not delivered to [Buyer], thus, those damages even if they existed, would have been reduced by the price of such other sale. [Seller] would have been entitled to claim something, if [Seller] would have proved that these new buyers paid a lower price than that agreed with [Buyer].

This has been recognized by [Seller] at pages 2 and 47 of its summary of evidence. Mr. Pedro has not taken into account this fact for the realization of its report of damages.

     e) Evidence assessment carried out on the damages requested by [Buyer].

[Buyer] claims as damages the extra cost which it incurred after having to go, at a late stage in the season, to the open market to buy at a higher price, an adequate product in order to comply with its commitments to its customer, Nestlé. [Buyer]'s burden of proof was to demonstrate that [Seller] knew that [Buyer] was going to address such goods to cover an order from Nestlé (documents 2 and 101 of its Statement of Claim and documents 231 of the [Buyer]'s Statement of Claim).

[Buyer] claims damages derived from not having been able to cover it in the proportion and with the conditions foreseen with [Seller]'s product. Found in the experts report presented as document 12 of [Buyer]'s Statement of Claim.

     f) Regarding [Buyer]'s subsidiary claim of "quanti minoris" [price reduction]:

Once having proved that [Seller] delivered goods with 21% less color than agreed and having the expert call such loss important, the requirements in order to reduce the price of the goods by an equitable amount are met. Consequently, [Seller] should have reimbursed the excess of price charged to [Buyer] according to the moderation made by the Court and the $200,000 that [Seller] still possesses and that were assigned for the payment of deliveries which will never occur (as a consequence of the avoidance of the contract).

[Buyer]'s appeal seeks:

  1. To have the Appellate Court set aside the entire ruling of the Court of First Instance, reject the Statement of Claim presented by [Seller], accept the Statement of Claim presented by [Buyer] and direct [Seller] to pay the costs of the proceedings.

  2. Subsidiarily, [Buyer] seeks a partial set aside of the ruling of the Court of First Instance without directing [Buyer] to pay any indemnification because of the lack of evidence of damages alleged by [Seller]. The Court should reject the judicial set-off in the manner [Seller] has requested. Also, as a result of the severe doubts regarding facts and legal issues, the Court should not direct [Buyer] to pay the costs of its Statement of Claim.

Third. -- [Seller] in its defense of appeal, in summary stated:

  1. [Buyer] purchased from [Seller] 1,500 tons (297,000 gallons) of concentratedgrape juice, 68 ("grados brix") of which it removed 258,110 (litres) (68,193 gallons), breaching, in this sense, the contract.

  2. [Seller] claims damages derived from the contractual breach that amount to 46,952,158 pesetas, plus interest for delayed payment, disbursements and costs. This quantity should be reduced by virtue of judicial set-off by the sum of $200,000 (29,400,000 pesetas) which is on deposit in [Seller]'s possession.

  3. [Buyer] alleges that the concentrated grape juice did not posses the intensity of color agreed, which is not true, because [Buyer] accepted the delivery of concentrated grape juice, without making any reservations. Also, the good condition of the goods has been verified by the oficial analysis made by the Analysis Service of the Ministry of Agriculture, Food and Fishing [Servicio de análisis Agroalimentaria de la Consellería de Agricultura y Pesca y Alimentación].

    Finally, the conformity of the goods with the contract is proved by the fact that the Texas State Bank gave the 30%, as agreed, of the letter of credit opened by [Buyer] for each delivery, as all the documents were in conformity with the requirements of the bank.

  4. The burden of proof, based on the loss of color or any other point about the supposed breach of contract made by [Seller] is incumbent on [Buyer] which has not been able to prove anything. Regarding the color that the grape juice had once the goods were handed to [Buyer], there is no proof that the grape juice lacked the agreed intensity of color. It has been proved by the expert, that taking into account the time that passed from the moment the goods were handed over to [Buyer] up to the present moment, it is impossible to deduce the intensity of color of the grape juice at the moment they were handed over to [Buyer].

  5. Regarding a supposed unforeseeable lost of color, the condition agreed between the parties "EX FACTORY" is essential for the determination of risk. The goods were handed over at [Seller]'s facilities, at Chiva, and from this place [Buyer] assumed all the risks of the sale.

  6. [Buyer] was in arrears accipiendi as [Buyer] did not confirm the letter of credit nor did [Buyer] remove the goods once these were handed over to it, as agreed, thus the loss of intensity of color that the goods have suffered is chargeable to [Buyer] because of the passing of time or other circumstances.

  7. As this was an EX FACTORY sales, the carriage of the concentrated grape juice was carried out by [Buyer], thus [Buyer] is liable for the conditions of the carriage, and the expert remarks on the deficiencies both in the transport and in the chosen route. As well, [Buyer] is liable for the time passing from the moment the concentrated grape juice was removed at Chiva, until the moment the goods arrived in the U.S.

  8. The reasons that lead [Buyer] to sustain its own breach regarding the lost of color of the concentrated grape juice supplied by [Seller], were distorted because of the documentation and correspondence incorporated in the roll. This is proved by the fact that on 12 February 1998 [Buyer] was still interested in the order of concentrated grape juice.

  9. [Buyer] contradicts itself trying to justify its breach of contract with arguments that were not stated in the appeal.

  10. There is no evidence in regard to the supposed lack of quality of the goods alleged by [Buyer] (rotten grape, lack of color). To the contrary, the evidence confirms the arguments alleged by [Seller].

  11. In any case, in order to claim in court it is necessary for [Buyer] to have handed over to [Seller] entirely the concentrated grape juice that had previously been handed over to [Buyer[. This has not been done.

  12. In order to avoid the contract, [Buyer] should have notified [Seller] which has not been done.

Fourth - The date for deliberation and vote of the Court was established at 2 June 2003.

LEGAL REASONING

First. -- The [Buyer] is correct when it alleges that the connection that links the parties is an international sales contract, this is the characterization given in the challenged ruling of the Court of First Instance and is admitted by the [Buyer]. Consequently, as Spain (Chiva, Valencia) is the place where the [Seller] has its place of business with the closest connection with the contract and its performance (Art. 10 CISG) and the [Buyer] has its place of business with the closest such connection in the U.S., as both States are Contracting States to the Convention (RCL 1991, 229 and RCL 1996, 2896), as we are considering a contract for the supply of goods (concentrated grape juice) not excluded by Arts. 2 and 3 CISG and as the contract was concluded in 1997, after the entry of the CISG into force in Spain, there is no doubt that the law governing the contract is the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG), which Spain acceded to on 17 July 1990. Art. 1 CISG states:

"This Convention applies to contracts of sale of goods between parties whose places of business are in different States:(a) When the States are Contracting States; (b) When the rules of private international law lead to the application of the law of a Contracting State."

The spirit of the Convention is to achieve uniform law not only in regard to its text; courts should also apply it in a uniform manner. In this sense, Art 7(1) states:

"In the interpretation of this Convention, regard has to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."

Second. --

"Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."

This commitment of interpretation is also established in other conventions; it is already a standard reflecting the present tendency in international commercial law.

As for the importance of this issue, the UNCITRAL Secretariat Commentary regarding rules and principles contained in Art. 7 of the Convention is relevant:

"National rules on the law of sales of goods are subject to sharp divergencies in approach and concept. Thus, it is especially important to avoid differing constructions of the provisions of this Convention by national courts, each dependent upon the concepts used in the legal system of the country of the forum. To this end, article 6 [draft counterpart of CISG article 7(1)] emphasizes the importance, in the interpretation and application of the provisions of the Convention, of having due regard for the international character of the Convention and for the need to promote uniformity."

Scholars maintain that the international character of the Convention obliges an autonomous interpretation of the Convention independent of domestic law, for this purpose, it is necessary to adopt a different methodology than used to apply domestic law. The only way to assure the uniformity of the Convention is to take into account decisions from tribunals of other countries when applying the Convention and to consult expert opinions of scholars in the subject, in order to achieve uniformity.

In response, a set of precedents for the interpretation and application of the Convention has been developed. The UNCITRAL Secretariat has established a system for compilation and circulation of information on judicial and arbitral decisions related to Conventions and Model Laws which have emanated from the work of the Commission. The aim of this system of precedents is to promote awareness of the international character of the legal texts made by the Commission and to reach a uniform interpretation and application of such texts. This system of compilation of precedents is explained in Document A/CN.9/SER.C/GUIDE/1 of the Secretariat. Since 1994 more than 400 cases which refer to different articles of the Convention have been compiled. They come from different jurisdictions such as: Argentina, Australia, Austria, Belgium, Peoples' Republic of China, Denmark, European Court of Justice, France, Germany, Hungary, the International Chamber of Commerce, Israel, Italy, Mexico, Netherlands, Russia, Spain, Switzerland and United States of America.

Third. -- INCOTERMS also belong to the same process of unification. They are the most common set of international trade rules that define the positions where the risks of the shipper, carrier and shippers' agents begin and finish. This set of rules was initially published by the International Chamber of Commerce in 1936 and is revised every ten years. INCOTERMS constitute a common and universal international trade language which results from international commercial practice, easily understandable for the parties involved, voluntarily accepted by them, and which determine the scope of the clauses of international contract of sales by means of acronyms and abbreviations which indicated their content.

The aim of INCOTERMS is to provide a collection of international rules for the interpretation of the most common used terms in international trade. INCOTERMS, in their uniformity and extension, reduce uncertainties deriving from the multiple interpretations given to commercial transactions by countries with different legislation, usages and customs.

UNCITRAL has recommended the universal use of INCOTERMS 2000, as they consider that this set of commercial definitions, elaborated by private business persons as opposed to commercial legislators, harmonize the laws that govern international trade and call them "a valuable contribution to make international trade easier". Another agency of the United Nations, the Economic Commission for Europe, has renewed its own recommendation Number 5 and states that INCOTERMS should be indicated by their correct abbreviation of three letters, for example: EXW, FOB, FCA and CIF.

INCOTERMS are divided into four groups: Group 1, Group 2, Group 3, Group 4. EXW, FAS. FOB, FCA, CFR, CPT, CIF, CIP, DES, DEQ, DDU, DDP, DAF. When passing from one condition of sale to the other, in the order established in INCOTERMS, the obligations of the seller increase and the obligations of the buyer decrease.

The CISG (RCL 1991, 229 and RCL 1996, 2896), the precedents of other national or foreign tribunals, our own domestic law, the contractual agreements, the claim and counterclaim, and the evidence will be the instruments by which we will try to give answers to the questions raised.

Under INCOTERMS EXW, Ex-Works, Ex factory, Ex warehouse:

"the seller has complied with its obligation to deliver the goods at its factory, workshop, etc to the buyer. It is not liable for loading the goods in the vehicle provided by the buyer, nor for dispatching the goods at customs for exportation, unless otherwise agreed. The buyer bears all the expense and risks of removing the goods from the seller's domicile up to its final destination."

Fourth. -- It is not true that [Buyer] was the only party who benefited from the deadline of compliance with the contract, as it could not have unilaterally decided, during whole the contractual period from October 1997 to February 1998, the moment of taking over the goods, as this would have meant that the other party would have had at the other party's disposal goods sensitive to the passing of time as is grape juice and that these would have remained unalterable with an 800 intensity coloring.

Such an approach is not shielded by Art. 33 CISG. It violates the principle of good faith referred to in Art. 7 CISG, as the deadline of compliance of the contract agreed since the end of October 1997 till February 1998 was strongly related to the nature of the concentrated grape juice, whose manufacture requires the disposal of the raw materials in advance and requires a complex process of elaboration impossible to improvise and thus it is not reasonable to interpret that, without an express agreement, it was left at the buyer's disposal with the severe risk that this would have implied for the seller.

This is why, even if it is not true that [Seller] announced to [Buyer] the start of the process by fax on 10 October 1997, that it occurred before the acceptance of the offer during the previous contacts and that it could not have referred to the preparation of the grape juice for [Buyer] but for clients in general. (paper 946). It is true that [Buyer] was aware that the excess passing of time could damage the color of the grape juice, this is proved by the fax 17 June 1997 as it indicates regarding another order: "in order to avoid more damage to the color, please put the ordered product in refrigerators. Looking forward to hearing from you, regards" (paper 922) and the fax of 9 January 1998 where it is stated:

"Please try to do everything possible for the containers to leave next day 12 as I have serious problems with the finance of the product of Bagnarese as well as the RISK OF DEGRADATION OF THE LOSS OF COLOR. This would seriously affect the value of the product and would affect all parties involved in the transaction." (papers 53 and 921).

The deadline to remove the goods was agreed on the offer of 15 October 1997 which was accepted by [Buyer] "REMOVED: LAST STEP October 97 / February 98" (paper 39). Therefore, the moment at which the removal of the goods should have commenced was the end of October and that commencement could not have been changed unilaterally. That same idea is strengthened by the fax of 6 November 1997 by which [Buyer] proposes to [Seller] a new shipping schedule. (papers 956 and 957).

On the other hand, the [Buyer] states that the contract with [Seller] was related to [Buyer]'s need to obtain as much grape juice as possible in order to satisfy Nestlé's order with which it had another contract. In particular, this contract strengthens the argument put forward by [Buyer] because in that contract, [Buyer] undertook to make the first shipping on 1 November 1997 (paper 395).

Finally, the complexity of the process of elaboration required enough time in advance to have the product ready in optimum condition at the end of October.

Fifth. -- It is not lawful for Appellant [Buyer], to now maintain that the conclusion of the contract occurred with the fax 5 November 1997 (paper 1119) because on its statement of defense, [Buyer] maintained that the conclusion occurred on 27 October 1997, when the sample of [Seller] was accepted (papers 108 and 109) and the same was said in [Buyer]'s own Statement of Claim (paper 284) when it maintained that the date was "27 October 1997." The fact is that the conclusion of the contract only occurred when [Buyer] accepted the product sample sent by [Seller] of the contract which had 872 coloring (Documents 13 and 14).

The alteration which [Buyer] seeks to introduce in the remedy of appeal, modifying the terms of debate, is against the procedural duty of good faith, introducing an element ex novo which cannot be considered by the Court, as this would limit the right and opportunities of the other party's defense who cannot defend itself about it.

In any case, it is necessary to point out that no confusion should exist with respect to the conclusion of the contract which occurred on 27 October 1997; the confusion has to do with the events afterwards. The variations that occurred afterwards related to the way to make the payment that affected the performance of the contract, variations that were caused by the [Buyer]'s cash difficulty problems. [Buyer] should have had its letter of credit ready to be drawn upon at the moment the grape juice was made in the end October, but the letter of credit was not made available until 30 November, which led to the consequent delay in shipping, provoking with this delay the risk of damage to the intensity of the color of the concentrated grape juice.

On the other hand, having in the contract an EX FACTORY clause, it was [Buyer]'s duty to remove the goods from [Seller]'s factory in Chiva, providing the Flexi / Tank necessary for the shipment. On the contrary, as [Buyer] did not provide the ones needed, it was necessary to have one more shipment than the two previously agreed for the order of October, and the letter of credit which was opened for two shipments had to be increased for "multiple shipments" (paper 51).

Sixth. -- It is not true that [Seller] did not render the appropriate documentation in order to understand correctly the delivery EX FACTORY. On the contrary, the proper adaptation of that documentation to the letter of credit led the Texas State Bank to grant on behalf of [Buyer] the 30% of the price as agreed. In any case, this is another issue ex novo brought up in the remedy of appeal whose study, trying to resolve a new issue which has not been properly known by the opposite party and impeding that party to practice the necessary evidence, would imply a violation of the principles of hearing, bilateralism and consistency. This would imply defenselessness of the [Seller] and would violate Art. 24 of the Spanish Constitution (RCL 1978, 2836), as the Spanish Supreme Court has declared in different decisions, amongst others: 10 June 1985 (RJ 1985, 3105), 28 January (RJ 1986, 442), 16 May (RJ 1986, 2729) 27 November 1986 (RJ 1986, 6615), 14 December 1987 (RJ 1987, 9432) and 25 January 1989 (RJ 1989, 126).

It is true that the deadline to notify of lack of conformity of the goods is governed by Art. 39(1) CISG (RCL 1991, 229 and RCL 1996, 2896) according to which:

"The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it."

Regarding the concept of reasonable time:

CLOUT Case 98 UNCITRAL: Netherlands: Rechtbank Roermond; 900336, 19 December 1991, Fallini Stefano & Co. S.n.c. (Italy) v. Foodic B.V. (Netherlands). The Court declared that the reasonable character of the deadline to notify depended on the nature of the goods. In this case, the Court held that the buyer had notified the seller of the lack of conformity of the cheese slightly after delivery. This was considered by the Court as a reasonable time taking into account that cheese is a perishable item (Arts. 38 and 39 CISG). The Court stated also that: the buyer had not notified the seller of the nature of the lack of conformity, that the cheese was infested; and that the fact that the cheese was frozen (which was not stipulated in the contract) was not a sufficient reason for not having examined it. It was declared that in order for the seller not to be able to invoke Arts. 38 and 39 CISG, the buyer had to prove that the seller knew or could not have been unaware that the goods were infested at the moment they were frozen (Art. 40 CISG).

In CLOUT Case 81 UNCITRAL: Germany: Oberlandesgericht Düsseldorf; 6 U 32/93, 10 February 1994, the Appellate Court held that the buyer provided notice of the lack of conformity of the goods two months after delivery of the goods, although had buyer have made a chance examination, it would have easily discovered the defects and could have objected a few days after delivery. It was held that buyer had lost its right to allege lack of conformity as it did not object within a reasonable time.

In the present case, the nature of the goods and the INCOTERM EX FACTORY required more diligence from the [Seller] testing the state of the grape juice at the moment the goods were at its disposal, taking into account that with the passing of time the state of the goods could have changed, as it has been said, the color loses intensity. If [Buyer] did not examine the goods immediately after having received them in Spain and waited several weeks until they reached the U.S., being liable for the transport and storage and having assumed the risk of their alteration, [Buyer] cannot untimely allege that the goods lacked the agreed color.

When [Seller] delivered the grape juice to [Buyer] at the end of October 1997, it was in conformity with the contract; the fact that when the grape juice was removed it did not have the intensity of color agreed is not attributable to the fault of the [Seller] but to the [Buyer], for not having taken care of the grape juice in a timely manner and for having transported it under inadequate conditions for it to keep its coloring. At least there is no evidence against this. It must be considered that the burden of proof was on [Buyer]. Thus, in CLOUT Case 251: Switzerland: Handelsgericht des Kantons Zürich; HG930634, 30 November 1998, the Court held that the issues related to burden of proof were not governed by the Convention, but taking into account its systematic structure some principles can be inferred. Taking into account that the liability for defects of the goods constitutes a core aspect of the seller's obligations by virtue of the contract, it is the seller who must demonstrate the lack of defects at the moment of passing of risk. The buyer assumes the burden of proof in regard to the reasonable examination and the notification of the lack of conformity and, once having accepted the goods without notifying of lack of conformity, the burden of proof regarding the existences of defects at the moment of the passing of risk passes to the buyer (Art. 4 CISG).

The fax of 29 December 1997 is not beneficial for the [Buyer]. On the contrary, it states that: "The goods when they were prepared to be shipped amounted to 800 units. But as they left more or less one month after their manufacture because of L/C reasons its color was …" between 788 and 630 (papers 461 and 462).

The passing of time since the manufacture till delivery, the transport chosen, the conditions during the transportation, the temperature conditions at which the goods once removed were exposed, influence the loss of color, as explained by the expert Mr. Furió and the witnesses Mr. Pedro Miguel and Mr. Alejandro.

Seventh. -- The damages and prejudicial consequences suffered by [Seller].

The [Buyer] recognizes "it is true that if some part of the … grape juice could have been resold, the concentrated grape juice could not. Thus, the damages are those resulting from the given report. [Seller] had to look for an allocation of the raw material of the concentrated grape juice (macerado,…) that could have been resold and that could not serve for the order of [Buyer] due to [Buyer]'s own fault …". Moreover, it is not stated that [Seller] had to destroy or throw away any quantity of the grape juice not removed by [Buyer].

A long tradition in Spanish jurisprudence regarding the interpretation of Art. 1214 of the Spanish Civil Code (LEG 1889, 27), states that, as the Decision of the Supreme Court num. 933/2002 (Civil Division of the Court) 16 October, appeal to the Supreme Court num. 872/1997 (RJ 2002, 8897) "the burden of proof does not respond to inflexible principles but rather relies on a case-by-case approach, taking into account the nature of the facts affirmed or denied and the availability or facility to prove that each party has (amongst others, SSTS 9 February 1994 [RJ 1994, 834] and 30 July 1999 [RJ 1999, 6358] and the Constitutional Tribunal case 227/1991 [RTC 1991, 227] has declared that when the sources of evidence are at the disposal of one of the parties to the proceedings, the constitutional duty to collaborate with the court during the proceedings (Art. 118 of the Spanish Constitution) [RCL 1978, 2836] means that that party is the one who must provide the information so that the juridical body can discover the truth. And finally, amongst others the SSTCE 17 January 1994 (RTC 1994, 7), 17 July 1995 (RTC 1995, 116) 28 February 1997 and 26 July 1999 have declared that the impediments and difficulties manifested by the party who has the duty to prove the relevant facts of the process, without a justifiable reason, cannot prejudice the other party because it is not lawful to benefit from your own blunder.

Consequently, as it was [Seller] who could prove the assignment given to the grape juice not removed by [Buyer] and as [Seller] claims the gross loss of profit not obtained from it, [Seller] cannot rely on the absence of evidence from what it obtained from the substitute sale to achieve an unjustifiable enrichment, because to the profit obtained from that substitute sale it would be added, now, the restitution of the profit not obtained from the goods not removed by [Buyer]. Also the juridical auditor Mr. Pedro did not include in his report (papers 56 to 65) such profit obtained from the substitute sales; it is thus necessary to deduct from the indemnification of 46,952,158 pesetas, the quantity which in execution of the decision can be proved that [Seller] obtained from the sale to third parties of the grape juice not removed by [Buyer]. Once we have the result it will reduce wholly or partially the U.S. $200,000 (29,400,000 pesetas) of the compensation.

Eighth. -- The seller having complied with all of its contractual duties and the [Buyer]'s behavior being the cause that frustrated the contract, the [Buyer]'s action "quanti minoris" [price reduction] has no legal basis and thus should be dismissed.

Ninth. -- Regarding articles 394 and 398 LECiv (RCL 2000, 34,962 and RCL 2001, 1892), no party will bear the imposition of the costs of none of the instances, not only because we have partially allowed the appeal but also because it is obvious that the case presented serious doubts related to facts and legal reasons.

On behalf of the King, and according to the authorization given by the Constitution approved by the Spanish people, we:

1st: Partially allow the appeal presented by [Buyer] ;

2nd: Set aside partially the challenged decision and direct [Buyer] to pay to [Seller] the amount resulting from deducting from 46,952,158 pesetas the quantity, which in execution of the decision is proved that [Seller] obtained from the sale to third parties of the grape juice not removed by [Buyer], operating over the result wholly or partially the compensation agreed in the decision of the Court of First Instance. We do not allocate the costs resulting from the first instance judgment.

3rd: We do not make specific allocation of the cost resulting from this appeal.

By means of our decision we pronounce, order and sign.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee of Spain is referred to as [Seller]; the Defendant-Appellant of the United States is referred to as [Buyer].

** Mercedes Romero Iglesias, Member of the Willem C. Vis Moot team of Universidad Carlos III de Madrid (2003); Degree in Law at Universidad Carlos III; postgraduate diploma in International Commercial Arbitration (2003-2004); Queen Mary, University of London; currently, Lawyer at "Ledesma y asociados, estudio jurídico" (Madrid, Spain).

*** Mª Pilar Perales Viscasillas. Doctor in Law. Professor of Commercial Law, Universidad Carlos III de Madrid. Representative of Spain at UNCITRAL.

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