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CISG CASE PRESENTATION

Belgium 20 October 2004 Appellate Court Gent (NV Van Heygen Staal v. GmbH Stahl- und Metalhandel Klockner) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/041020b1.html]

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

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Case identification

DATE OF DECISION: 20041020 (20 October 2004)

JURISDICTION: Belgium

TRIBUNAL: Hof van Beroep [Appellate Court] Gent

JUDGE(S): E. Teirlinck, J. Baudrez, E. Dursin

CASE NUMBER/DOCKET NUMBER: 1999/AR/9

CASE NAME: NV Van Heygen Staal v. GmbH Stahl- und Metalhandel Klockner

CASE HISTORY: 1st instance Rechtbank van Koophandel Gent 10 November 1998; previous decision of Hof van Beroep Gent 24 February 2001

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Belgium (defendant)

GOODS INVOLVED: Steel coils


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(b)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 25 ; 74 ; 75 ; 77 ; 78

Classification of issues using UNCITRAL classification code numbers:

6B [Agreements to apply Convention: choice of law of Contracting State = choice of Convention];

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

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

75B [Damages established by substitute transaction after avoidance: relationship between avoidance and substitute transaction];

77A [Obligation to take reasonable measures to mitigate damages];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Choice of law ; Fundamental breach ; Avoidance ; Damages ; Resale of goods ; Cover transactions ; Mitigation of loss ; Interest

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Editorial remarks

Overview comments (CISG-Belgium database): "Choice of German law -- CISG applicable; Refusal to accept delivery -- fundamental breach. Reselling goods -- permitted if fundamental breach; Mitigating loss -- not proved by buyer that seller did not mitigate; Damage -- stocking, transporting goods and difference between contract price and price of new sale (when reselling); Interest."

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Dutch): CISG-Belgium database <http://www.law.kuleuven.ac.be/ipr/eng/cases/2004-10-20.html>

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

Appellate Court (Hof van Hoger Beroep) Gent

20 October 2004 [1999/AR/9]

Translation [*] by Thorsten Tepasse [**]

IN THE DISPUTE BETWEEN

NV [*] Van Heyghen Staal of Belgium [hereafter Buyer], inscribed in the commercial register of Gent..., Plaintiff against the judgment of the Commercial Court of Gent, given after full argument on both sides by third chamber on 10 November 1998 - DID NOT APPEAR BEFORE THE COURT - Defendant in the first instance proceeding, represented by Mr. Rik Torrekens, lawyer in 9000 Gent...

vs.

GmbH [*] Stahl- und Metallhandel Kloeckner of Germany [hereafter Seller], domiciled in 47057 Duisburg, Germany..., Defendant in appeal and Claimant in first instance, represented by Mr. Luc van Dorpe, Mr.Charles van Haesebrouck, Mr. Christian Deleu and Mr. Philippe Casier, all lawyers from 8500 Kortrijk...;

1. FACTS AND PLEADINGS

The appointment of 14 August 2003 ordered, pursuant to Art. 747, 2 Ger.W. [*], that the court proceeding in this dispute should take place on 22 September 2004. Such appointment is usually communicated to the parties and their representatives respectively. Since Buyer neither appeared in person nor was represented by its lawyers in the proceeding of 22 September 2004, Seller rightfully asked for a judgment in a defended action.

Seller presented its view of the case and evidence during the public proceeding on 22 September 2004. It also adduced, as far as available, Buyer's items of evidence. The evidence was determined.

     1.1 The interim judgment of 14 February 2001 confirms Seller's claim regarding Buyer's unlawful refusal to accept delivery of 3,400 tons of steel coils from its order of October 1995 and orders an appraiser to determine the damage and to give advice regarding this damage.

In his report, the appraiser found that:

  1. No damage resulted from the sea accident that took place;
  2. Seller was able to deliver steel to Buyer in full compliance with the contract

Seller suffered damages because of Buyer's refusal to accept delivery. In his report, the appraiser calculates the loss on 141,252.16 EURO [*] (106,625.04 EURO loss of profit, 20,488.20 EURO further treatment expenses and additional charge as well as 14,138.92 EURO loss of interest); this reckoning does, however, require that Seller was able to resell the steel to other clients by the end of December 1995.

At first, Seller claimed compensation for damages in the amount of 307,287.15 EURO in its writ of summons and now 346,524.65 EURO, namely 260,758.86 EURO deficiency in receipts compared to the price contracted for, 53,953.21 EURO additional charge and 31,812.58 EURO loss of interest.

     1.2 In first instance, Buyer challenged this claim as exorbitant and asks for affirmation of the appealed judgment, since it calculates the damage with (4,233,941 Belgian francs [BEF] (= 104,956.66 EURO). In addition, Buyer disputes the rate of interest applied by the appraiser: it should be 3% instead of 8%, which would mean a total loss of 132,415.45 EURO, maximum 141,252.16 EURO. Buyer requests in any event a reduction of the rate of interest to 4.5%.

     1.3 Buyer wrongly infers, as Seller's principal obligation under the contract was to deliver the goods to Antwerp, Belgium, that thus Belgian law would be applicable.

The interim judgment states rightfully that the modalities derive from the contractual agreement of 12 June 1995; these obligations can incidentally also be found in the order of 15 August 1995 (...).

These terms expressly foresaw applicability of the body of laws binding for the inhabitants of the Federal Republic of Germany ("das für Inländer in der Bundesrepublik Deutschland mabgebende Recht"). Buyer never objected to this - by the way ordinary - provision, hence it can be assumed, that the rule was the parties' will.

The applicability of German law leads consequently to the application of the Convention for the International Sale of Goods (CISG) of 11 April 1980, which is German law since 1 January 1991 (and since 1 November 1997 also in Belgium, where the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods done at The Hague on 1 July 1964 [1964 Hague Formation Convention] previously was in force).

Pursuant to Art. 74 CISG, a claim for damages includes, besides the damage itself, also any loss of profit a party suffered due to the breach of contract. Further, Art. 75 reads:

"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74."

     1.4 The Seller does not follow the appraiser's calculation, since he only calculated the difference between the contract and market price and not the actual cover sale price.

It has moreover to be determined if Seller conducted the cover sale "in a reasonable manner and within a reasonable time after avoidance", since the difference between the contract price and the price for the cover sale can only be awarded if this requirement is met (cf. Art. 75 CISG). Concerning this issue, the appraiser holds (...):

"5. Seller accused the Buyer of breach of contract no earlier than on 13 March 1996; this was about five months after the goods had arrived in Antwerp. On 12 June 1996 Seller declared avoidance of the contract and claimed compensation for damages; this was about eight months after the goods had arrived in Antwerp.

"6. The (long) time frame between the possible delivery by Seller to Buyer (October 1995) and the date the breach of contract was communicated (13 March 1996) as well as the date avoidance was declared (12 June 1996) points to speculation on the steel's world market price by the Seller".

Seller wrongly alleges that avoidance took place when it decided to avoid the contract and that it still had to grant Buyer an additional period of time for undue receipt of the goods.

It appears at first, that Seller proceeded with the (more or less complete) cover sale even before declaration of avoidance on 12 June 1996 and without any cogent reason, which means implicitly but certainly, that it considered the contract to be avoided.

It further appears, that Buyer was not willing to accept the delivery ("Since the delivery dates were not met, we are forced to annul both contracts"- letter of Buyer of 27 September 1995) - even before the steel coils were offered for delivery. Buyer confirmed this position in its letters of 11 October 1995 and 26 October 1995 (...). Such unlawful refusal of acceptance is a fundamental breach, which would in itself justify an avoidance of contract after an additional period of time.

Latest by letter of 27 September 1995 (conveyed 2 October 1995), Seller recognized that Buyer had annuled the contract.

Finally Seller wrote in its fax of 31 October 1995 (exhibit no. 16, translated version inferred by the Buyer):

"We kindly ask you to accept the goods, stored in Antwerp, by 7 November 1995. If we do not receive any response from you by that date, we will be forced to initiate the steps to be taken."

By this clear charge of Buyer's failing and declaration to accept performance by 7 November 1995 (when Buyer's refusal was known for more than one month already), Seller forced itself to take an avoidance of contract into account at least by this date.

In fact, Seller started reselling the goods from January 1996 on, but only about 10% in that month. The bulk of the steel was resold since February 1996 (not less than three months after Buyer breached the contract), for 76% of the market price in November 1995 and 72% of the contract price. About eight months after breach of contract on part of the Buyer, Seller finally resold the last 20% of the goods (respectively on 24 June 1996 and 17 July 1996) for less than 66% of the contract price.

Since Seller waited with the resale at least two months without any particular reason and let the resale drag on for more than six months, it cannot be assumed that it acted "in a reasonable manner and within a reasonable time after avoidance".

     1.5 The appraiser does not present any precise reasoning - besides the allegation that Seller may have speculated on the price (see above) - for his assumption, why Seller did not resell all of the remaining steel in stock by end of December 1995, which would have been in his eyes "a realistic time frame for the Seller to find other buyers at the world market price". Confronted with the objection by the Seller (which asks among other questions, why it should have preferred Buyer's uncertain behavior to a certain cover sale), the appraiser offers finally a variety of possibilities "for the Court to determine the point in time the damages should be calculated" (cf. appraiser's report p. 14 in fine).

Naturally, a new buyer for a specific order of 3,400 tons of steel coils cannot be found instantly. But, pursuant to the accounts Seller brought forward, it could resell 75% of that particular order from February 1996 to March 1996. From this point of view, a sale period until 31 December 1995 seems to be too short. Considering all these facts and circumstances, the resale of these 3,400 tons of steel coils could have been performed by the end of January 1996. Seller,on the one hand, did not substantiate, that the cover sale did inevitably last longer, while, on the other hand, Buyer did not prove, that it could have been performed earlier.

Pursuant to the chart the appraiser generated (...), the damages amount to 151,607.48 EURO loss of profit, 28,683.47 EURO storage costs and 21,208.39 EURO loss of interest (which is in fact an extrapolation from the facts laid down in the appraiser's calculation of 141,252.16 EURO in his report).

Since the appraiser firstly, assumed - by the way in conformity with the order sales slips (...) - that "the charges for loading and transport were charges for the Buyer's account" (...) and secondly, Seller proved that it had finally borne these costs (Seller's exhibits nos. 1-12. 20) alongside the storage costs, this part of the damages is well founded. Even though Seller substantiated that the transport costs amount to 2,176,467.00 BEF [*] (= 53,878.84 EURO), it only claims a sum of 53,953.21 EURO for "additional-, loading- and transport charges", which includes pursuant to this calculation the former determined additional charges (...). This part of the claim is founded.

Further, Buyer challenges the interest rate, on which the appraiser calculated the "loss of interest" (which is the financing provided for the stock): even though Buyer does not object to the calculation principal itself, it only accepts an interest rate of 3%, or the one for futures minus input tax. Seller rightfully replies, that it never intended to bank the money, but that it was necessary, as a result of the breach of contract by the Buyer, to acquire money in the short term to provide coverage, whereas (short term) credits at a rate beneath 8% are virtually excluded.

     1.6 Finally, Buyer unlawfully requests 'mitigation' of the compensation, due to Seller's late delivery and inferior quality of the steel. These last attempts of defense are irrelevant to the extent, that the interim judgment states, that Seller's claim is admissible and founded (even Buyer's present allegations were rejected), whereas Buyer did not substantiate that Seller breached the contract, or did not abide by its obligations. Thus, there is no reason for mitigating the compensation.

On this basis, the damages Seller suffered are calculated at 151,607.48 + 53,953.21 + 21,208.39 = 226,769.08 EURO.

2. DECISION

THE COURT, hands down the following decision after the full argument pursuant to Art. 24 of the law on parlance in legal matters of 15 June 1935:

   -    Declares the principal appeal as unfounded and the cross appeal as founded as follows;
 
   -    Affirms the appealed judgment with the amendment that the sum of the judgment increases to 226,769.08 EURO;
 
   -    Orders Buyer to bear the costs for this instance, which are on part of Seller: 2,974.72 EURO (costs and salary for appraiser), 58.25 EURO (further litigation costs) and 466.04 EURO (litigation costs for the appeal).

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, in the appeal Plaintiff of Belgium is referred to as [Buyer] and Defendant of Germany is referred to as [Seller]. Amounts in European currency are indicated as [EURO]. Amounts in former Belgian currency (Belgian francs) are indicated as [BEF].

Translator's note on other abbreviations: Ger.W. = Gerechtelijk Wetboek [Belgian Civil Procedure Code]; GmbH = Gesellschaft mit beschränkter Haftung [limited liability company]; N.V. = Naamloze Vennootschap [incorporated company].

** Thorsten Tepasse is a law student at the University of Osnabrück, Germany.

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Pace Law School Institute of International Commercial Law - Last updated June 20, 2007
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