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CISG CASE PRESENTATION

Poland 19 December 2003 Supreme Court ("O.O." AG in M. v. Leszek W. & Zbigniew W.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/031219p1.html]

Primary source(s) of information for case presentation: Aleksandra M. Jurewicz

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Case identification

DATE OF DECISION: 20031219 (19 December 2003)

JURISDICTION: Poland

TRIBUNAL: Supreme Court

JUDGE(S): Jacek Gudowski, Hubert Wrzesczcz, Kazimierz Zawada

CASE NUMBER/DOCKET NUMBER: III CK 80/02

CASE NAME: "O.O." AG in M. v. Leszek W. & Zbigniew W.

CASE HISTORY: 1st instance [1]; 2d instance Circuit Court Lubin 25 April 2001 [reversed]

SELLER'S COUNTRY: Italy (plaintiff is the Swiss assignee of the Italian seller)

BUYER'S COUNTRY: Poland (defendants)

GOODS INVOLVED: Door components


UNCITRAL case abstract

POLAND: Supreme Court 19 December 2003

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/110],
CLOUT abstract no. 1081

Reproduced with permission of UNCITRAL

Abstract prepared by Rohan Batra and Nimrat Kaur

The defendants (Polish buyers) and the Italian seller concluded a contract for purchasing door components to produce harmonica-type doors. The seller delivered the goods to the buyers and issued four invoices. Thereafter, the seller assigned the debt of the defendants in the amount of 93,841,007 liras to the plaintiff, a Swiss company. The assignment contract stated that the contract was governed by "Swiss property law". By a letter addressed to the plaintiff, the defendants acknowledged the debt to the extent of 95,270.08 zlotych (the currency of the debt had been changed in the meantime) and disputed the rest. Yet, the defendants only deposited 9,600 zlotych with the plaintiff and made no further payments.

The plaintiff brought a suit against the defendants for the payment of 85,670.08 zlotych with statutory interest. In reply, the defendants claimed that the plaintiff was not entitled to the payment of the debt since the limitation period had expired and they were entitled to set off the claim. The Circuit Court did not agree that the limitation period had expired. Referring to article 13 of the Convention, the Court stated that the "period ceases to run when the creditor performs any act which under the law of the court where the proceedings are instituted, is recognized as commencing judicial proceedings against the debtor, and according to Article 20 of the Convention, when the debtor acknowledges the obligation in writing". In the case at hand, the plaintiff had filed the complaint before the limitation period set forth in Article 8 Limitation Convention had passed.

The defendant's appeal was rejected by the Appellate Court substantially upholding the decision of the Circuit Court.

The Polish Supreme Court made the following determinations. First, the Court held that the CISG was applicable to the sales contract as the requirements of Articles 1 (1)(a) and 100 (2) CISG were met. Secondly, with respect to the assignment of debt, the Court noted that even though the CISG was applicable to the sales contract, it did not regulate the assignment of debt. Therefore, the applicable law must be determined in accordance with Article 7 (2) CISG, i.e. in conformity with Polish Private International Law. According to Polish Private International Law, Italian law was applicable. The Court further explained that the clause designating Swiss law insofar it indicated Swiss civil substantive law and not Swiss property law should be respected in relation to the assignment contract as a prerequisite to the assignment of a debt governed by Italian law. Hence, the validity of the assignment contract should be decided according to Swiss law and issues of interest shall be decided based on the law applicable to the obligation. Thirdly, the court observed that the Limitation Convention was not applicable in accordance with Articles 3.1 (a) or 3.1 (b) since Italy was not a party to the Convention.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)], but the CISG is not discussed in the reported opinion other than exclusions from its scope. The matters that are discussed are the validity of an assignment (held to be outside the scope of the CISG) and statute of limitation issues (also treated as outside the scope of the CISG)

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 7(2) ; 100(2)

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention: issues excluded]

Descriptors: Scope of Convention ; Assignment ; Statute of limitations

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Polish): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Aleksandra Jurewicz, The First Decision of Sad Najwyzszy of December 19, 2003: The Polish Supreme Court applying the UN Convention on Contracts for the International Sale of Goods, Columbia Journal of East European Law (2007) 231-255

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Case text (English translation) [second draft]

Supreme Court of Poland

"O.O." AG in M. v. Leszek W. & Zbigniew W.

19 December 2003 [III CK 80/02]

Translation by Aleksandra M. Jurewicz [*]

Supreme Court Judge Jacek Gudowski
Supreme Court Judge Hubert Wrzeszcz
Supreme Court Judge Kazimierz Zawada

On December 9, 2003 the Civil Division of the Supreme Court heard a cassation complaint [appeal] of Zbigniew W. from the judgment of the Court of Appeals in Lublin from November 14, 2001. The original suit was brought by "O.O." AG in M. [Plaintiff] against Leszek W. and Zbigniew W. [Defendants] for the payment of debt. The Supreme Court reversed the appealed judgment and remanded the case to the Court of Appeals in Lublin to decide the case and determine the payment of the costs of the cassation proceedings.

OPINION

In its complaint of September 29, 2000 the Plaintiff "O.O." AG in M. of Switzerland sought payment jointly from Leszek W. and Zbigniew W, general partners, of 85,670.08 zlotych with statutory interest beginning on November 25, 1999. The Defendants in answer to the complaint claimed that the statute of limitations expired and that they were entitled to set-off the claim.

The Circuit Court in Lublin, in a decision of April 25, 2001, acknowledged the cause of action against Zbigniew W. by making the following determinations.

Zbigniew W. and Leszek W. earlier had been purchasing pre-made harmonica-type doors from partners of a general partnership, the "Corporation of Brothers K", who assembled doors from components purchased from the Italian company "A.P." Beginning in April 1997, the Defendants [themselves] started to purchase the components from company "A.P." for producing harmonica-type doors. The "A.P." company delivered the goods to the Defendants and issued four invoices. (...) On August 24, 1999, in Warsaw "A.P." company entered into a contract with the Plaintiff, a Swiss corporation "O.O." as a result of which the "A.P." company assigned [to the Swiss corporation] the debt of Zbignew W. and Leszek W., general partners, in the amount of 93,841,007 lira [arising from purchases of door components from "A.P."], payable partially on January 26, 1998 and February 16, 1998. In the annex to the contract of August 24, 1999, it was stated that the assignment of debt had been made in order to bring an action in the name of the assignee and on behalf of the assignor for the payment of the debt. The assignee was supposed to pay the amount of the debt to the assignor within less than three months from the date the contract of assignment of debt was signed. After the expiration of the fixed time period without successful recovery, the contract was to expire with respect to the unpaid debt [the assignment would be reversed], but in Annex No. 4 the time period was prolonged until August 14, 2001. Article 6 of the assignment contract stated that the contract was "governed by Swiss property law."

On November 15, 1999, Zbigniew W. gave his solicitor Aleksander H. written authority to take all steps in order to settle the claim of the Plaintiff. Acting within his authority, Aleksander H., in a letter from November 25, 1999, partially acknowledged the debt, meaning up to 95,270.08 zlotych; the rest of the debt he described as being in dispute. As to the acknowledged part of the debt, he proposed payment in installments. This letter was sent to Krystyn W., the representative of the Plaintiff in Poland, first by fax and then by registered mail. On December 17, 1999, the Defendants deposited 9,600 zlotych in the representative's account. The Defendants did not make any other payments.

In the opinion of the Circuit Court, the "A.P." company of Italy and the Defendants, domiciled in Poland, entered into four contracts for sale described in invoices. These contracts were not governed by the law indicated by [A]rticle 27 1 pkt 1 [1] of the statute of November 12, 1965- Private International Law (Dz.U. Nr 46, poz. 290 with amendments- hereinafter called "p.p.m."), Italian law, but according to [A]rticle 1 2 p.p.m.[2] the applicable law was the UN Convention on Contracts for the International Sale of Goods adopted in Vienna on April 11, 1980 (Dz.U. from 1997 nr 45, poz. 287- hereinafter called "Vienna Convention"). In respect to the limitation period, the UN Convention on the Limitation Period in the International Sale of Goods concluded in New York on June 14, 1974 (Dz.U. from 1997 nr 45, poz. 282 with amendments- hereinafter called the "[Limitation] Convention"). The Circuit Court decided that the contract for the assignment of the debt arising out of the last two contracts for sale concluded in Warsaw between the Plaintiff and the "A.P." company was legally effective. The court explained that, according to [A]rticle 12 of p.p.m.[3], in order to conclude a valid assignment contract, the requirements of the law of the place where the contract was concluded must be met. Moreover, the court emphasized that assignment contract[s] [are] known in all legal systems based on Roman law. [The court said that] [i]t [was] certain that "also according to Swiss property law the formation of such a contract results in a transfer of an obligation to an assignee." In the opinion of the Circuit Court, the Plaintiff proved that, as a result of the contract, it had obtained the outstanding debt. The unpaid debt in that amount was acknowledged by the solicitor Aleksander H. in the letter of November 25, 1999 written in the name of Zbigniew W. who granted actual authority [to Aleksander H.]. As a result of the acknowledgment, the currency of the debt was changed from lira to zloty.

The Circuit Court did not agree with the Defendants that the statute of limitations had expired. [The court explained that] [a]ccording to [A]rticle 8 of the [Limitation] Convention, the limitation period is four years. According to [A]rticle 13 of this Convention, the limitation period ceases to run when the creditor performs any act which, under the law of the court where the proceedings are instituted, is recognized as commencing judicial proceedings against the debtor, and according to [A]rticle 20 of the Convention, when the debtor acknowledges the obligation in writing. The complaint in this suit was filed on September 29, 2000, which means that it was filed before the four year long limitation period had passed, as it is mandated in [A]rticle 8 of the Convention.

The appeal of Defendant Zbigniew W. from the judgment of the Circuit Court was denied by the Appellate Court which emphasized that the Plaintiff effectively obtained the obligation of the "A.P." company against the Defendants and that the acknowledgment of Aleksander H. tolled the running of the limitation period.

In cassation, the Appellant [Swiss assignee] claimed a violation of:

   -    art.58 1 of the Civil Code in connection with art.2.2 and art.9.8 of a statute of December 18, 1998- Foreign Exchange Law (Dz.U. Nr 160, poz. 1063 with amendments- hereinafter called "Pr.dew. of 1998") [by the lower court's] non application [of these provisions];
 
   -    art.25 1 p.p.m.[4] by [the lower court's] non application of the Swiss law chosen by the parties to the assignment contract;
 
   -    art.481 1 and art.68 of the Civil Code when [the lower court] awarded interest starting from November 25, 1999;
 
   -    art.316 1 in connection with art.391 1 of the Code of Civil Procedure when [the lower court] disregarded the fact that the assignment contract became invalid before the day of adjudication;
 
   -    art.382 in connection with art.233 and 328 1 of the Code of Civil Procedure when [the lower court] excluded evidence and omitted determination of facts;
 
   -    art.328 2 in connection with art.391 1 of the Code of Civil Procedure when [the lower court] omitted any indication of the legal basis of the judgment, particularly the Swiss law applicable to the assignment contract.

The Supreme Court decided the following: (...)

We agree with the Appellant that art.328 2 k.p.c. was violated by [the lower court's] failure to indicate the legal basis of the judgment. The Appellate Court's statement that the Plaintiff effectively obtained the obligation of the "A.P." company against the Defendants is not sufficient in this matter. This statement does not even contain a general indication of its legal basis by referring to the legal determinations of the court of first instance. Such an indication would be impossible in any event since the Circuit Court did not mention the Swiss law applicable to the assignment contract, but only imagined the Swiss provisions by noting that Swiss civil law is rooted in Roman legal traditions. By reason of this omission, the Appellant invoked a legitimate basis for the cassation.

Multiple problems arise in connection with a claim of violation of art. 25 1 p.p.m. by non application of the Swiss law chosen by the parties to the assignment contract.

The Polish statute of private international law, unlike other codifications of some countries and the European Community's Convention on the Law Applicable to Contractual Obligations concluded in Rome on June 19, 1980 (hereinafter Rome Convention), does not contain a provision that designates the law applicable to an assignment of debt. Comparative studies indicate that there are three possible solutions [in this situation]:

   -    Applicability of the law governing [the assigned] obligation (legis causae);
   -    Applicability of the law governing the legal act that is the basis of an assignment contract; or
   -    Applicability of the law of the "location of the debt" usually meaning the domicile (place of business) of the debtor.

The need to protect a debtor of an assigned debt leads to the first solution, which is the applicability of the law governing the assigned obligation itself. This solution was adopted in art.12 of the Rome Convention, art.145.1 first sentence in fine of Swiss private international law, 45 of Austrian private international law and art.33.2 of German private international law (adopted from the Rome Convention), and is widely recognized in Polish literature on this subject. (...)

According to this solution, the character of an obligation determines the negative and positive aspects of an assignment. (...). It determines whether the obligation is assignable and what contract assigns it (...), what conditions must be met, what are the consequences of the assignment, particularly the point in time when the assignee obtained the obligation, the scope of rights of the assignee, the possibility of a discharge of a debt by payment to the assignor, and what claims the debtor has against the assignee.

(...)

In light of these remarks, the law applicable to the assignment of the debt in dispute shall be the law applicable to the debt, meaning the law which governs the contracts that resulted in these obligations. We agree with the Circuit Court that the last two deliveries of goods from the "A.P." company to Leszek W. and Zbigniew W. were conducted in performance of contracts for the international sale of goods subject to the Vienna Convention since the requirements of art.1(1)(a) and art.100(2) are met.

The Vienna Convention does not, however, regulate assignment of debt arising out of contracts governed by the [C]onvention. Therefore, even though it is the law applicable to the contracts concluded between the "A.P." company and Leszek W. and Zbigniew W., and to the obligation to pay the price, it cannot be applied to the assignment of the debt since it does not govern this issue. Because this gap cannot be filled otherwise, the applicable law must be determined according to art.7(2) in fine of the Convention, meaning in conformity with Polish private international law. According to art.27 1(1) of p.p.m., the law applicable to this obligation and its assignment is Italian law, especially art. 1260-1267 of the Italian Civil Code, unless its application is preempted by a more specific law, particularly provisions governing assignment of a company's obligations. At the same time, it is important to mention that according to art. 13 of p.p.m.,[5] Italian law governs the limitation period. The [Limitation] Convention is not applicable on the ground of art. 3.1(a) or art. 3.1(b) since Italy is not a party to that Convention (...).

Pursuant to these remarks, Italian law is applicable to the assignment and, therefore, shall govern the conditions of the assignment of the debt, specifically its assignability, formal contract requirements, consequences to the debtors (in particular the time at which the assignee obtained the obligation), the scope of the rights of the assignee, and what claims the debtor has against the assignee. (...)

The argument of the Appellant, that art. 25 1 of p.p.m. was violated because Swiss law, chosen by the parties, was not applied may be understood in two ways. First of all, it may be understood that an assignor and assignee may subject [all aspects and effects of] an assignment to the law designated by them and in this way opt out the law applicable to the obligation. Second, it may be understood that parties may designate the law only to govern the assignment contract itself (as a prerequisite to assignment); the choice of law clause in the contract of September 24, 1999 favors this meaning when it refers to the choice of law for "this contract', and states that "this contract" contains agreements describing the basis of the assignment.

The first interpretation is without merit. It would mean that art. 25 1 of p.p.m. allows choice of law with respect to matters outside the contractual obligations of the assignor and assignee. Assignment of debt raises complex matters connected with a debtor, and designation by the assignor and assignee of different law than the one applicable to the assigned obligation may infringe an interest of the debtor. What is significant, even in legal systems that allow choice of law for assignment (art. 145.1. first sentence in principio of Swiss private international law), is that the effectiveness of such choice against a debtor depends on the debtor's consent (art. 145.1 second sentence of Swiss private international law.) Therefore, if a debtor and creditor designate the law applicable to their legal relations, this law will govern the assignment of obligations. Choice by an assignor and assignee of a different law than the one applicable to the obligation is, according to art. 25 1 p.p.m., forbidden and inoperative.

(...) In the second interpretation, the clause designating Swiss law should be respected in reference to [the assignment] contract as a prerequisite to the assignment of debt governed by Italian law. It should be clear that this clause indicates not Swiss property law (...), but Swiss civil substantive law.

The abovementioned remarks on the law applicable to obligations and their assignment have an influence on determination of two other claims raised by the Appellant. The issue of loss of validity of the [assignment] contract of September 24, 1999 before the date of adjudication by the Appellate Court shall be decided based on the law governing this contract [Swiss law]. On the other hand, the issues of interest and the date from which the interest is recoverable shall be decided based on the law applicable to the obligation.

[Discussion of Foreign Exchange Law omitted].


FOOTNOTES

* Aleksandra M. Jurewicz, J.D. candidate, 2007, University of Pittsburgh School of Law; LL.M. 2005, University of Pittsburgh School of Law; J.D. (magister prawa), 2003, Jagiellonian University School of Law, Cracow, Poland.

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

1. Article 27 1 pkt 1 of 'Polish Private International Law' statute states that if the parties are not domiciled in the same country and they did not choose the governing law, the law of the country in which the seller has a domicile at the time of the contract for sale was made will govern their legal relations. <http://isip.sejm.gov.pl/servlet/Search?todo=open&id=WDU19650460290>. [trans. footnote]

2. Article 1 2 of the statute 'Polish Private International Law' states that the statute is not applicable if an international agreement, to which Poland is a party, governs the particular issue. <http://isip.sejm.gov.pl/servlet/Search?todo=open&id=WDU19650460290>. [trans. footnote]

3. Article 12 of Polish Private International Law states that generally the form of a legal act is governed by the law applicable to that legal act. However, it is enough when the parties use the form required by the law of the country in which the legal act is concluded. <http://isip.sejm.gov.pl/servlet/Search?todo=open&id=WDU19650460290>. [trans. footnote]

4. Article 25 1 of Polish Private Law states that the parties may choose a governing law if it has a sufficient relation to their legal relationship. <http://isip.sejm.gov.pl/servlet/Search?todo=open&id=WDU19650460290>. [trans. footnote]

5. Article 13 of Private International Law states that the limitation period for an obligation is governed by the law applicable to that obligation. <http://isip.sejm.gov.pl/servlet/Search?todo=open&id=WDU19650460290>. [trans. footnote]

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Pace Law School Institute of International Commercial Law - Last updated January 19, 2011
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