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CISG CASE PRESENTATION

Spain 5 November 2003 Appellate Court Vizcaya (Scrap metal case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/031105s4.html]

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

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Case identification

DATE OF DECISION: 20031105 (5 November 2003)

JURISDICTION: Spain

TRIBUNAL: Audiencia Provincial de Vizcaya, sección 5ª

JUDGE(S): Dª Mª Elisabeth Huerta Sanchez, Dª Leonor Cuenca Garcia, Dª Magdalena Garcia Larragan

CASE NUMBER/DOCKET NUMBER: Rollo No. 648/2000

CASE NAME: Unavailable

CASE HISTORY: 1st instance Juzgado de Primera Instancia No. 8 de Bilbao 21 June 2002

SELLER'S COUNTRY: United Kingdom (plaintiff)

BUYER'S COUNTRY: Spain (defendant)

GOODS INVOLVED: Scrap metal


Case abstract

Audiencia Provincial de Vizcaya, 5 November 2003

Editor: Enrique Alberto Iglesias Segovia

The dispute has to do with a claim for payment and allegations of defective delivery of scrap under an international sales contract between an English seller and a Spanish buyer. It is the Buyer's position that the goods that were delivered were not of the quality contracted for. Buyer claims a price reduction and damages to compensate for costs of separation of the scrap that was mixed, the costs of cleaning the scrap that was dirty, and the costs of storage of the worst quality scrap until a buyer could be found.

The Tribunal first considered the applicable law. In accordance with his interpretation of the Convention of Rome of 19 June 1980, Seller alleges that English law is the governing law of the contract based on the understanding that the characteristic performance of the sales contract is the delivery of the goods sold. The Tribunal nevertheless finds that in a sales contract that is bilateral - a creator of mutual obligations - it cannot be said that the obligation to deliver is necessarily the characteristic performance of the sales contract, because there is also the payment of the price. In the Tribunal's opinion, this contract has more connections with Spanish law. Regardless, the Tribunal holds that Spanish law - which in this case is the CISG - should apply since Seller has not proven the content of the English law it alleges is applicable.

With respect to the substantive issues, the Tribunal elected not to rule on the Buyer's claim for damages because it was raised in a procedurally deficient manner. Whether or not Buyer was entitled to a price reduction pursuant to art. 50 CISG turned on the credibility of the evidence Buyer presented. The Tribunal evaluated the evidence and ruled against the Buyer on this claim.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 50 [Also cited: Articles 35 ; 45 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

50A [Buyer's right to reduce price for non-conforming goods]

Descriptors: Reduction of price, remedy of

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Spanish: CISG-Spain and Latin America website <http://www.uc3m.es/cisg/respan25.htm>

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spain and Latin America website <http://www.uc3m.es/cisg/sespan25.htm>; see also Fuente: Aranzadi Westlaw JUR 2004\35988

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Audiencia Provincial de Vizcaya, 5 November 2003

Translation by Enrique Alberto Iglesias Segovia [*]

[...]

FACTS

The facts in the appealed judgment are taken as if here reproduced.

First.- The Court of First Instance handed down the following judgment on 21 June 2002:

In response to the claim by Plaintiff [Seller] EASCO Ltd. SPC against Defendant [Buyer] Sereo S.L., the [Buyer] is ordered to pay to [Seller] the amount of 12,486.95 pounds (sterling), plus legal interest since the presentation of the claim, and the costs of the trial.

Second.- [Buyer] filed an appeal.

Third.- The [Buyer] seeks to have this court:

         -    Revoke the judgment of the Court of First Instance;
         -    Issue a new resolution reducing the price to the sum of 6,750.53 pounds (sterling), based on the difference between the value of the invoice sent to [Buyer] and the real contribution of the delivered merchandise; and
         -    Require [Seller] to compensate [Buyer]'s damages caused in the sum of 8,470,290 pesetas and from illegal profit in the sum of 2,371.80 pounds (sterling).

The [Seller], in turn, asks the court to reject the [Buyer]'s appeal, affirm the lower court judgment, and charge costs of the proceeding to the [Buyer].

Fourth.- In the proceedings in both instances, the formalities and legal terms have been observed, except for the time to hand down the judgment in order to best resolve the dispute, according to article 342 of the former L.E.C., of September 2003.

LEGAL GROUNDS

First.- The [Buyer] opposes the appealed judgment and seek to have it revoked. In addition, applying article 50 of the Vienna Convention of 11 April 1980 (BOE no. 20, of 30 January 1991, [Buyer] seeks to have the price of the sale reduced to an amount equivalent to 6,750.33 pounds (sterling); and seeks to be compensated for damages according to article 74 of the Convention, claiming with respect to the loss suffered in the amount of 8,470,290 pesetas for storage, transportation, separation and cleaning costs and 2,371,8063 pounds [sic] (sterling) for illegal profit.

Second.- The [Buyer] bases its petition on the consideration that:

     1. The goods [Buyer] purchased were those referred to in the contract concluded by the parties on 28 February (offer) and 4 February (acceptance) (documents 2 and 3 of the [Seller]), later modified in a unilateral way by [Seller] in his fax of 17 February (document one of the claim) and later again modified in a unilateral way by [Seller] by the sending of its invoice by fax on 23 February. As a result of this modification, the agreements as to quantity were changed from 2,500 kilos of scrap of good quality (3B) to a purchase of 1,567 kilos of scrap, that is to say, 48% less, of quality 1-2, that is, of medium quality.

     2. Also, Buyer alleges that the goods that arrived at Bilbao were not the goods shipped from England and indicated in the loading manifest. As reported by the Alfred H. Knight Company, hired by [Seller], in its download and weight certificate, the quality 3 B kept diminishing (1,537 kilos), whereas the diminishment with respect to the quantity initially contracted was 40%, being the total weight in port of arrival of 2,234,880 kilos against the 2,215,277 kilos indicated in the shipment notice and on the [Seller]'s invoice, that is to say, nothing less than 19,653 kilos of goods were of a worse quality that was never contracted for.

     3. The quality control inspection made by SGS, that is referred to in Document c, disclosed that the merchandise was clearly defective and therefore, of less value. According to the SGS report, 5% of the material 3B was rusted, and therefore, unusable and 30% of the material 1-2 was "chapajo", that is, scrap material that was light and of little value (washing machine doors, etc.) and that has to be mixed with other material for its sale and is of grade 5C, with very little value, and hard to sell in the market; From the photographs in the report by SGS, it is seen that the scrap was mixed and very dirty, full of soil. The parties did not reach any agreement in successive negotiations because the proposals of the [Seller] were not viable from a practical point of view once the goods were in the warehouse and finally, when mixed with other materials, the "chapajo" could only be sold on 31 August 1999 (189 days later) (invoice added as document e), causing from that defective delivery severe damages as a consequence of the delivery of goods of worse quality than contracted for, costs of separation of the scrap that was mixed, costs of cleaning the scrap that was dirty, and costs of storage of the worst quality scrap until a buyer could be found.

     Lastly, [Buyer] alleges that the [Seller], being of English nationality, and the United Kingdom as well as Spain, being signature States of the Law Applicable to Contractual Obligations, made in Rome the 19 June 1980, which turns on the obligation to provide the characteristic performance of the sale, it is clear that the applicable law would be English law. However, since English law has not been proven, [Buyer] states that:

   -    We have before us an international sale of goods and not a sale between Spanish parties governed by the Commercial Code of Spain;
 
   -    We have before us a contract for which it would be appropriate to apply the Vienna Convention of 11 April 1980 on Contracts for the International Sale of Goods.

[Buyer] requests in that sense, a reduction of price according to article 50 and the compensation of damages according to article 74 of the Vienna Convention (CISG).

Third.- [Buyer] first called attention to English law on the understanding that it would apply since [Seller] is of English nationality and United Kingdom and Spain are signature States of the Law Applicable to Contractual Obligations, signed in Rome on 19 June 1980 (BOE no 171, of 19 July 19939 (sic), estimating that since the obligation to deliver is the characteristic of a sales contract, it is clear that the applicable law would be English law. Proof of English law was requested but not provided.

Therefore, that being the initial issue raised in the debate, and with independence that, even though the insistent attempts of the Court to prove which would be the content and scope of the English law applicable to the case at hand, as the parties already know, since the court tried even after the extraordinary period proof period passed, from the perspective of the practice of the proofs admitted in its day, the truth is that now, at the time of resolving the matters raised in this instance, and set that it is unknown which would be the English law applicable to the case at hand, since there was no proof of its content and validity by the means of proof admitted by the Spanish legislation, it is not relevant to resolve the matters raised in this claim, due to the lack of proof of its content.

According to the Rome Convention of 19 June 1980, the applicable law, where the contract is silent on the subject, should be the law of the country with which the present contract has the most connections. Assuming that the contract presents the most connections with the country in which the party that should realize the characteristic performance, at the time of the conclusion of the contract, if we are dealing with a company then its central administration, finding ourselves as we are, before the assumption that the sale of goods from Spain by a company as the buyer and from England the other company as seller, it is not admissible the statement of the [Buyer], that the English law should be applicable since the delivery is the characteristic of the sale, when equivalent to it is the payment of the price. This obligation has more connections with Spain since it is from this country that the goods were sought and in Spain where the goods were delivered to the [Buyer]. Therefore, it is undisputed that the application of Spanish Law, having pronounced, in between other resolutions, in these terms, the judgment dictated by the Supreme Tribunal on 27 March 2000, lacking in any case of relevance the matter here dealt with, since the party that has invoked the application of the foreign law has not proven its content, therefore, Spanish law is applicable, according to the doctrine established by the resolutions of the Supreme Tribunal of 9 November 1984, 11 May 1989, 10 March 1993, 31 December 1994, 3 March 1997, 13 December 2000 and 5 March 2002, among others.

Fourth.- In regard to the substantive issues set forth, it should be said that the court is not going to enter to analyze the matters set forth by the [Buyer] in regard to damages asked for the concepts of loss (expenditures of storage, transport, sieve and manipulation) and excessive gain, since these matters cannot be an object of analysis in this instance, because they are not constituted properly in the appeal, they were not set forth at the right moment of the procedure, as would have been the response to the claim, being the respondent has remained contempt of court, by his own will, during the first instance, and therefore the only matters that can be analyzed by this Court are the ones raised during the first instance.

Fifth.- From this perspective, the [Buyer] argues that since we are dealing with an international sale of goods and not a sale between Spanish persons subject to the Commercial Code, in a case in which the English law cannot be proven, it would therefore be appropriate to apply Spanish law, which would be the United Nations Convention on the International Sale of Goods, made in Vienna 11 April 1980.

The [Buyer] alleges that the [Seller] has not complied with the standards established in article 35 of that Convention, since the quality, quantity and the type of goods received were not as agreed for, having so informed the [Seller] of the lack of conformity of the goods in a reasonable time and in a proper manner. Where the seller is so notified of the lack of conformity of the goods, then according to article 45 of the Convention, if the seller does not comply with obligations that were his according to the contract or the Convention, the buyer can: a) exercise the rights established in articles 46 to 52; and b) request damages according to articles 74 to 77. Therefore, [Buyer] requests a reduction in the price according to article 50 as well as damages according to article 74.

Since the possibility of granting damages is excluded because that matter was raised in an extemporary procedural time, the matter to be resolved in the present appeal centers on determining if the remedy of price reduction as authorized under article 50 of the Vienna Convention of 11 April 1980 to which Spain adhered to the 17 July 1990 (BOE of 30 January 1991) applies, or in any case, if a price reduction should proceed due to not satisfying exactly and adequately the performance to which the seller obliged himself, with arrangement to the internal Spanish law (exceptio non rite adimpleti contractus, for a defective or inadequate fulfillment of the primary obligation). The [Buyer] argues that a price reduction should proceed because the merchandise that supposedly arrived in Bilbao was not even the supposedly shipped to England and indicated in the loading manifest, but that the quality 3B continued to diminish (1,537,700 kilos) when the1-2 had raised (697,187 kilos), which can be seen from the report of SGS that 5% of material 3 B was rusted, that is, not usable, 30% of the material 1-2 was not of that quality but "chapajo", that is, light material and of little value, that is necessary to mix with other materials for it to be sold.

In light of these allegations, it should be noted that according to the shipping knowledge (document no 7 of the claim, t-7) in the Halse ship 1,567,567 tons of fragmented scrap type 3B and 647,600 tons of type 1-2, both of them by bulk, were shipped, reaching the merchandise the Port of Bilbao on 25 February 1999 and in this place the merchandise was proceeded to be weighed by the H. Knight Company, which acted on behalf of the [Seller], and according to documents numbers 11 and T-11, the transported materials matched when the ship arrived in port with the material shipped in its day, and the Spanish company SGS, which acted on behalf of the [Buyer] concurred, as can be seen from document No. 12 that was annexed in the claim and document c that was annexed in the transfer of article 705 and 707 of the former LEC, proceeding [Buyer]'s payment the same day, 25 February 1999, of the 90% of the price agreed, this is, 112,328.51 pounds sterling, according to the invoice that was sent by fax on 19 February 1999, according to the documents 6 and 6T annexed in the claim, in which the weight of the types of merchandise of scrap that were being sent and its respective prices were sufficiently specified and differentiated.

That stated, the merits of the allegations of the [Buyer] decline since [Buyer] cannot invoke with success now that the merchandise delivered did not meet the agreed characteristics since the documents numbers 6 and 6T are very clear; they reflect clearly that on 19 January 1999 [Seller] was well aware of the characteristics of the merchandise that was being sent, whose weight, when the ship arrived matched plainly with the goods that were originally shipped, and so the company that acted in the weighing in port on his behalf certified, and proof of all of it is that, according to the agreement, he paid at the reception of the merchandise 90% of the price established, having admitted so, by means of judicial confession, the legal representative of [Buyer] that the sum of 112,382.50 pounds sterling was paid in fulfillment of the obligation derived from the sales contract concluded between [Buyer] and [Seller] for the purchase of 1,567,502 kgs of steel scrap 1-2 by bulk, according to the content of page 172 of the file, demonstrating with all of it that the modification of the initial contract was plainly accepted by [Buyer], since, at the time [Buyer] received the documentation on 23 February, [Buyer] did not make any reservation or protest with respect to the quality and quantity delivered, paying 90% of the price, and having agreed that the merchandise disembarked, weighed and delivered to [Buyer] on its arrival to the port of Bilbao was adjusted to the agreed obligation, resulting to this effect very significant that [Buyer] did not make any protest of damages, while in this type of merchandise little rusts, corrosion or dirtiness are substantial to this type of material, and also it calls to attention that the [Buyer] did not answer the [Seller]'s claim and only presented itself after the first judgment was made, constituting in a de-measured enlargement of the trial in this second instance, and benefiting from the broad and arguable faculties that article 862.5 of the former Law of Civil Procedure granted to the rebellious [Seller], at the time of proposing a proof in the second instance.

The obligated consequence of these considerations is the de-estimation of the appeal and the confirmation of the judgment of the lower court in all of its parts.

Sixth.- With respect to the costs of trial in this second instance, it should be paid by the [Buyer] according to article 398, first paragraph, of the Law of Civil Procedure.

Considering the legal precepts cited in this judgment and in the appeal, and other pertinent and of general application.

THE [BUYER]'S APPEAL FAILS

We reject the appeal by the [Buyer] against the judgment of 21 June 2000 of the Court of First Instance in the declarative trial no. 654 of 1999 from which the present trial derives; we affirm that judgment and we do so, with an express imposition on the [Buyer] of the costs derived from this second instance.

Return the file to the Court of precedence with a testimony of this judgment, for it to be executed.

By this judgment, of which a certification will adhere to the file, definitely judging, we pronounce, order and sign it.

Publication.- Given and pronounced that was this judgment by the Judges that sign and read by the Speaker Judge in the same day of its date, of which me the Secretary, certify.


FOOTNOTE

* Enrique Alberto Iglesias Segovia has a Law Degree by "Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM)". He has practiced in several areas of Law including litigation, corporate and public notary law. (Páramo, Fernández, Nájera y Rodarte, Abogados; Notaría Publica 130 de Monterrey, Nuevo León; Quintanilla y Asociados, Abogados) He colaborated with Lic. Ricardo Treviño García in the creation of a book to be published on Civil Obligations. He was a participant in the 12th Annual Willem C. Moot.

All translations should be verified by cross-checking against the original text.

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Pace Law School Institute of International Commercial Law - Last updated November 22, 2005
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