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CISG CASE PRESENTATION

Canada 21 August 2003 Supreme Court of British Columbia (Mansonville v. Kurtz)
[Cite as: http://cisgw3.law.pace.edu/cases/030821c4.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20030821 (21 August 2003)

JURISDICTION: Canada

TRIBUNAL: Supreme Court, British Columbia

JUDGE(S): Tysoe

CASE NUMBER/DOCKET NUMBER: C993594

CASE NAME: Mansonville Plastics (B.C.) Ltd. v. Kurtz GmbH

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Austria / Germany (defendant)

BUYER'S COUNTRY: Canada (plaintiff)

GOODS INVOLVED: Pre-expander and block mould equipment for manufacture of polystyrene products


Case abstract

CANADA: British Columbia Supreme Court 21 August 2003 (Mansonville Plastics (B.C.) ltd. v. Kurtz GmbH)

Case law on UNCITRAL texts (CLOUT) abstract no. 532

Reproduced with permission from UNCITRAL

Abstract prepared by Geneviève Saumier, National Correspondent

The buyer, a British Columbia based producer of styrofoam blocks, purchased over Canadian $800,000 of equipment manufactured by the Austrian subsidiary of the German seller. The buyer was not satisfied with the performance of the equipment, despite numerous technical adjustments made by the vendor, and sued for breach of contract, including late delivery, and breach of warranties. The main complaint was that the equipment failed to produce goods in conformity with contractual specifications for at least a year after delivery.

The Court rejected the claim that the contract was governed by German law, under which the claim was time-barred, holding that a German choice-of-law clause in the vendor's general terms of sale was never brought to the attention of the buyer or put in its possession. The Court then determined that British Columbia law applied using its own conflict of laws rules.

On the late delivery claim, the vendor argued that the buyer forfeited its right to complain because it was itself in breach of its payment obligation, specifically by failing to provide a timely letter of credit. The vendor relied expressly on article 71 CISG to justify its suspension of delivery due to the buyer's failure regarding payment. The Court accepted the application of CISG as part of British Columbia's law, and assessed the evidence to conclude that there had been suspension and notification, as per article 71(3) CISG, but only during a two week period. Given that the equipment was eight weeks late in total, the Court found that the vendor was in breach for having delivered six weeks late. On the issue of conformity, the Court referred to article 35 CISG and found that local law included the same "statutory warranty of fitness". Relying on local case law, the Court concluded that the equipment was fit for the purpose given that it eventually functioned adequately without any mechanical alterations. While the cause of the initial problems was unknown, it did not allow a presumption of defect to be drawn. The Court then considered what it called "contractual warranties" and found that the vendor had made five such warranties, of which three were breached. No reference was made to any CISG provision or case law in this section of the decision. Damages were then also assessed without reference to CISG and included increased operating costs and lost profits (past and future) due to the delays caused by late delivery and the non-conformities. The Court awarded Canadian $575,000 in damages, plus prejudgment interest.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 8 ; 35 ; 71 ; 74 ; 78

Classification of issues using UNCITRAL classification code numbers:

8A ; 8C [Intent of party making statement or engaging in conduct; Interpretation in light of surrounding circumstances];

35A ; 35B [Conformity of goods: quality, quantity and description required by contract; Requirements implied by law];

71A1 [Grounds for suspension of performance: apparent that other party will not perform substantial part of obligations];

74A ; 74A1 [General rules for measuring damages: loss suffered as consequence of breach; Includes loss of profit];

78A [Interest on delay in receiving price or any other sum in arrears: pre-judgment interest on past losses allowed]

Descriptors: Suspension of performance ; Conformity of goods ; Intent ; Damages ; Profits, loss of ; Interest

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Editorial remarks

Excerpt from Rajeev Sharma, "The United Nations Convention on Contracts for the International Sale of Goods: The Canadian Experience", Victoria University of Wellington Law Review (2005/4) 852-853

Mansonville Plastics (BC) Limited v Kurtz GmbH ... involved a dispute between Mansonville, a Canadian company, who manufactured styrofoam blocks and Kurtz, a German company, who manufactured equipment for the production of styrofoam. Mansonville contracted to buy equipment from Kurtz which was manufactured by Kurtz's Austrian subsidiary. The equipment was late and did not produce proper styrofoam blocks until almost a year after delivery. As a result, Mansonville brought a claim against Kurtz alleging a breach of contract and breach of statutory warranties of fitness.

With regard to the late delivery of the equipment, Kurtz argued that they had validly suspended performance of the contract because Mansonville had not provided them with the stipulated letter of credit and that they were therefore not liable for the late delivery. In support of their position, they argued that article 71 of the CISG was applicable. Article 71 of the Convention provides that a party to a contract may suspend the performance of its obligations if it becomes apparent that the other party will not perform a substantial part of its obligations. However, Tysoe J also compared sections 17 and 18 of the British Columbia Sale of Goods Act 1996 to article 71 CISG as being "to like effect". To consider the British Columbia statute at this point was unnecessary as it was clear that the CISG governed the dispute. Article 71(3) provides that a party suspending performance must immediately give notice of the suspension to the other party. Tysoe J found that Kurtz was indeed entitled to suspend performance of its obligations under the contract pursuant to article 71 and did in fact do so, but only for a two week period. Thus, Kurtz was still in breach of the contract for the remaining six week delay in the delivery of the equipment to Mansonville.

Also in dispute was the suitability of the equipment when it arrived and whether or not any statutory warranties of fitness existed. Tysoe J considered both the CISG and the British Columbia Sale of Goods Act 1996 and found that Kurtz did not breach the statutory warranties of fitness under either the Convention or the British Columbia statute. Article 35 of the Convention reads:

"(1) the seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract and,

"(2) except where the parties have agreed otherwise, the goods do not conform with the contract unless they:

a) are fit for the purpose for which goods of the same description would ordinarily be used, or
b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract."

The Court found that because the machinery eventually worked without any major repairs, it was fit for its intended purpose at the time of its delivery and, therefore, Kurtz did not breach its statutory warranty of fitness. This case clearly represents a step in the right direction because the court applied provisions of the Convention where appropriate and provided more in-depth analysis and reasoning. However, the troublesome fact remains that Tysoe J (as in all of the previous cases) unnecessarily and improperly applied the British Columbia Sale of Goods Act 1996 and Canadian common law to assist in interpreting and applying the CISG provisions.

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1168&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (English): CISG-Canada website <http://www.osgoode.yorku.ca/cisg/cases/masonville>; 2003 BCSC 1298 Docket(s) C993594; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1168&step=FullText>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]; Mazzacano, Canadian Jurisprudence and the Uniform Application of the CISG (August 2005) ch. 5

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Pace Law School Institute of International Commercial Law - Last updated May 29, 2007
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