CISG CASE PRESENTATION

The 2003 case of Diversitel Communications Inc v Glacier Bay Inc [19] represents the most positive application of the CISG by Canadian courts thus far. In August of 2002, Diversitel, a Canadian company, entered into a contract with Glacier Bay, an American company, for the supply of vacuum panel installation. Diversitel required the product to be delivered by 30 July 2003 in order to meet the terms of a pre-existing contract with the Canadian Department of National Defence. Diversitel paid Glacier Bay US $40,000 when it issued its purchase order on 26 August 2002. Glacier Bay failed to deliver the goods on time leading Diversitel to terminate the contract and commence an action claiming US $40,000 in damages. Glacier Bay argued that Diversitel terminated the contract without appropriate justification and counterclaimed for breach of contract and damages for lost profits in the amount of US $144,900.00.

This case is especially noteworthy because it is the first Canadian case to consider other international decisions interpreting the provisions of the CISG. Diversitel argued that, pursuant to article 25 of the CISG, a failure to deliver what was contracted for may constitute a fundamental breach of contract.[20] Furthermore, Diversitel argued that article 33 of the CISG provides that a seller must deliver by the date specified in the contract.[21]

Diversitel argued that its position was further strengthened by article 49[22] which provides that a buyer may declare the contract avoided in a case of fundamental breach, thereby giving way to a claim for restitution pursuant to article 81(2) of the Convention.[23] Diversitel argued that the CISG may, therefore, establish a lower threshold for the proof of fundamental breach than that required by the common law. However, the Court disagreed with this position. Roccamo J commented that counsel for Diversitel submitted a number of cases which reflected how European Courts had construed late delivery under article 33 CISG as tantamount to fundamental breach of contract.

Roccamo J then summarised one such case involving a contract between an Egyptian businessman and a German company. In an unpublished decision, the plaintiff, an Egyptian businessman, entered into a contract with the defendant, a German company, for the sale of nine used printing machines that were to be shipped to Egypt.[24] The defendant was obliged to send the machines in two shipments with the first shipment containing six machines and the second shipment containing the remaining three machines. The first shipment only included three machines. After demanding the shipment of the missing machines several times, the plaintiff declared the contract at an end and demanded the return of his money. The Court in that case held that the plaintiff properly ended the contract pursuant to the "fundamental breach" provision of article 49 of the CISG. The Court in Diversitel concluded that this decision, while instructive, did not lower the threshold for proving fundamental breach as established by the common law. However, while the Court went on to conclude that a fundamental breach had taken place, it did so on the basis of the common law and not on the basis of article 49 of the CISG, as it should have done.