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CISG CASE PRESENTATION

Netherlands 31 August 2005 Appellate Court Leeuwarden (Auto-Moto Styl S.R.O. v. Pedro Boat B.V.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050831n1.html]

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

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Case identification

DATE OF DECISION: 20050831 (31 August 2005)

JURISDICTION: Netherlands

TRIBUNAL: Hof Leeuwarden [Hof = Gerechtshof = Appellate Court)

JUDGE(S): Mrs. Verschuur (voorzitter)

CASE NUMBER/DOCKET NUMBER: Rolnummer 0400549 (date published: 1 September 2005)

CASE NAME: Auto-Moto Styl S.R.O. v. Pedro Boat B.V.

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Netherlands (defendant)

BUYER'S COUNTRY: Switzerland (plaintiff is buyer's assignee)

GOODS INVOLVED: Motor boat


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 2 ; 25 ; 71 [Also cited: Articles 29 ; 47 ; 73 ]

Classification of issues using UNCITRAL classification code numbers:

2E [Scope of Convention (ships, vessels): boat held covered by Convention];

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

71A [Grounds for suspension of performance: apparent that a party will not perform substantial part of obligations]

Descriptors: Ships or vessels ; Fundamental breach ; Suspension of performance

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1045&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (Dutch): Website of the Dutch courts <http://www.rechtspraak.nl>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1045&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Spaic, Analysis of Fundamental Breach under the CISG (December 2006) n.295

French: Claude Witz, Recueil Dalloz (22 February 2007) 532

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Appellate Court (Gerechtshof) Leeuwarden

31 August 2005 [0400549; LJN: AU1870]

Translation [*] by Thorsten Tepasse [**]

Decision of the third civil chamber in the dispute between:

Auto-Moto Styl S.R.O.[*] [Buyer's Assignee], domiciled in Ostrava-Hrabová, Czech Republic, Claimant, at first instance: Claimant of the main claim and Respondent to the counterclaim, procurator: Mr. J.V. van Ophem, represented by Mr. D. Vanicková, lawyer in Rotterdam,

vs.

Pedro Boat B.V. [*] [Seller], domiciled in Zuidbroek, Netherlands, Defendant at first instance: Respondent to the main claim and counterclaimant, Procurator: Mr. H.C.J. Laagland, represented by Mr. P.H.F. Yspeert, lawyer in Groningen.

The facts of the interim judgment of 30 March 2005 are adopted.

1. DEVELOPMENT OF THE CASE

     1.1. The case was handed over to the Court by the interim judgment of 30 March 2005, with the parties encouraged to come to a settlement. In its written pleading, Buyer's Assignee expressed its intent to have the case decided by the Court. Both parties brought forward proof to allow a supported decision.

During the hearing of 22 June 2005, when the facts were initially introduced for a decision, Buyer's Assignee's procurator withdrew from the case.

2. FURTHER REASONING

     2.1. Regarding the amendment of the claim:

            2.1.1. Buyer's Assignee amended its demands in the statement of claim as well as in the written pleading. Since Seller did not remonstrate against the amendment, the Court will decide on the changed case.

            2.1.2. For a subsequent amendment of claim as formulated in the written pleading, the requirements of Art. 130 Rv [*] must be satisfied: amendments of claim have to be done by statement or in writing. The written pleading was not signed by the procurator, thus it could not be introduced into the dispute. However, this defect was cleared during the hearing and since Seller explicitly waived its right to challenge the introduction of the amendment and a writ signed by the lawyer for Buyer's Assignee was filed after the hearing, the Court will decide on the amended claim.

     2.2. Regarding the facts:

            2.2.1. No objection was raised against the facts laid down in the decision of 25 June 2004 under item one, so these facts are to be applied in the appellate proceeding. The Court will repeat the facts enriched with material determined during the appeal.

            2.2.2. Seller and Seneca Holding Ltd. of Zurich, Switzerland [Buyer] agreed upon six contracts ("Agreement to sell") on 8 November 2002. By virtue of these contracts, Seller was obliged to deliver to Buyer six boats of the model "Pedro Bora 43" pursuant to the specifications of construction plan no. 1370 (marked by parties as "special by Seneca"). The first three boats (hull numbers 1404, 1405 and 1406) were sold for 350,000.00 EURO per boat, the other three (hull numbers 1419, 1420 and 1421) were sold for 355,000.00 EURO per boat. The contracts were signed on behalf of Buyer by [the relevant person].

            2.2.3. The contract for hull no. 1404 contained among others the following provisions:

"-  Date of delivery: June 2003 (last working day of the month).
-   Every production phase shall be inspected by the buyer, the payment follows this.
-   Seller agrees that Buyer is entitled to transfer rights and obligations to a third party.
-   The boat shall be identical with prototype Bora 43' special by Seneca, hull no. 1370,
     made in Holland
-   When 50% has been pai,d the ownership will be transferred to the customer,
-   Sanction: according to standard
-   Down payment shall be used upon start of manufacturing
-   10% with contract
-   20% when hull is ready
-   20% when engine room is ready
-   25% when woodwork and painting is ready
-   25% when ready for delivery and after sea trail."

The contracts for hull numbers 1405 and 1406 contained a similar scheme of payment.

            2.2.4. In a Czech contract of 11 November 2002, concluded by Buyer, represented by [the relevant person] and the Buyer's Assignee, represented by engineering consultant [the relevant person] (hereinafter [Engineering Consultant of Buyer's Assignee]), Buyer's Assignee acquired the Buyer's rights from the contract of 8 November 2002 concerning the boat with hull no. 1404. The purchase price was 350,000.00 EURO payable within 70 days after receiving the motor boat with hull no. 1404 by the Buyer and transportation to the "Middellandse Zee" (Midland Sea).

            2.2.5. On 15 November 2002. Buyer's Assignee transferred a sum of 105,000.00 EURO to Seller with the notice "down payment for Bora 43 special by Seneca, according to contracts of 8 November 2002".

            2.2.6. On 27 February 2003, Buyer's Assignee transferred a sum of 70,000.00 EURO to Seller with the notice "Second payment for Pedro Boat 43".

On 24 April 2003, another 70,000.00 EURO were submitted by the Buyer's Assignee to Seller with the notation "Payment for Bora 1404 50 percent is paid".

            2.2.7. On 24 May 2003, Buyer sent a fax to Seller with, among other things, the following content:

"According to the will of Seneca Holding Ltd. [Buyer] and the contract between Seneca Holding Ltd. [Buyer] and Pedro Boat B.V. [Seller] we would like to ask you to transfer the ownership of the boat Bora 43, special by Seneca, hull 1404 to our client, the following company: Auto-Moto Styl ... [Buyer's Assignee]."

            2.2.8. Seller assigned property in the boat with hull no. 1404 to Buyer's Assignee on 2 February 2004.

[The relevant person] (simultaneously) works for Nautica Europe Center S.R.O. [*] (Prague, Czech Republic) [hereafter Nautica]. Nautica corresponded with Seller about the orders of the Pedro Bora 43 special by Seneca.

     2.3. Regarding the essence of the dispute

            2.3.1. The reason for the dispute between the parties is the interpretation of the payment of 15 November 2002. Was it meant to be an advance payment for hull no. 1404 or also a first payment for the hull numbers 1405 and 1406?

     2.4. Regarding the question of the applicable law:

            2.4.1. Both parties requested in the pleadings to have the dispute decided under Dutch law. The Court interprets this as a choice of law as provided for in Art. 3 of the Convention on the Law applicable to Contractual Obligations (Rome Convention); the Court therefore applies Dutch law. In this context, Buyer's Assignee opted for applying Dutch law including the Vienna Convention (CISG) (cf. Trb. [*] 1981, 184), while Seller left the applicability open.

            2.4.2. On the basis of the choice of Dutch law, the Court holds that pursuant to Art. 2 of the Law of 18 December 1991 the applicability of Dutch law also implies applicability of the CISG to international sales contracts. Moreover, Switzerland as well as the Czech Republic are parties to the Vienna Convention, so that the CISG can also be applied via its Art. 1(1)(a).

     2.5. Regarding issues under I in connection with section VIII of the memorandum:

            2.5.1. These issues challenge the decision of the Court of First Instance, which regarded the first payment (s.a. 2.2.5.) as a down payment for three boats. Buyer's Assignee seeks for common treatment.

            2.5.2. The preceding court stated that the fact that Seller agreed in advance to permit Buyer to transfer rights and obligations to a third party would not mean regarding the Buyer's Assignee - as the party accompanying Buyer on some visits at the Seller - as the responsible party.

This Court agrees. For a change in the contract, which is ruled by Art. 29 CISG, since it is a modification of contract, it is necessary that the Seller (in this case: Pedro Boat) be informed by the buyer (in this case: Seneca) about the actual state of affairs. The first writing concerning transfer of Buyer's rights and obligations was the fax of 24 May 2003 (s.a. 2.2.7.).

            2.5.3. Seller disputes having been verbally informed of this at an earlier point in time. Buyer's Assignee brought forward a number of written testimonies in Czech as well as English, including authentication by Czech and Croatian notaries and Dutch translations. Buyer's Assignee stated that Seller did not agree to its suggestion to attend the interrogations. The Court concludes that Seller did not have any obligation to assist in the interrogations of Czech witnesses by Czech (and Croatian) notaries. The extrajudicial RiK [*] passed in Rotterdam - and not signed by the Court - is moreover only applicable if sanctioned by two or more parties, which is undoubtedly not the case. On this basis, the fact, that Seller did not accept attending interrogations out of court at miscellaneous locations abroad, cannot have a disadvantageous effect.

The Court deems the written statements presented - whose contents are disputed by Seller - as insufficient to date, to draw the conclusion that information about the contract adoption was forwarded to Seller before the fax of 24 May 2003. If it should become clear, that [the Engineering Consultant of Buyer's Assignee] was introduced to Seller as the new owner of the ship with hull no. 1404 during the "Boat Show" in Düsseldorf, Germany, in January 2003 - as mentioned several times in written declarations - that does not mean that the payment of 15 November 2002 has to be interpreted retroactively as a payment solely for hull no. 1404. Moreover [the Engineering Consultant of Buyer's Assignee] was not presented as (the executive of) the Buyer's Assignee in the letter of [the relevant person] of 20 February 2003 (exhibit 18 of the responding memorandum), but as a member of the controlling body of Buyer [Seneca]'s investors.

            2.5.4. Concerning the question, how Seller must have understood the payment of 15 November 2002, the preceding judge rightfully considered the correspondence between Seller and Nautica, which stationery was also used by [the relevant person] for the exchange of letters regarding the hull numbers under 2.2.2.

The fax of 12 November 2002, when Nautica requested Seller's bank data "to enable us to carry out the payments lined up with contracts we signed on Friday. 8 November 2002" as well as the payment of 15 November 2002, read "contracts" and "payments", in plural. Moreover, the amount of 105,000.00 EURO is equal to three times 10% of the purchase price of the contracts for the ships with hull numbers 1404, 1405 and 1406, as provided for in the contract cited under 2.2.3. Even [the relevant person] assumed that three down payments were conducted, as it can be gathered from his letter of 20 February 2003, where he wrote at the top of page three:

"The reason for paying the down payments in advance was to enable you to employ more workers to produce more Boras 43' special by Seneca."

Further, the Court of First Instance correctly held that the notice, forwarded with the third payment of 24 April 2003, that 50% of the price was now paid was decisive, since, if the first payments were only meant for hull no. 1404, that notice could have been given already with the transfer of 27 February 2003.

            2.5.5. In conclusion, the appeal of the Buyer's Assignee on these issues is denied.

     2.6. Regarding issue XII of the memorandum:

            2.6.1. This item pertains to the amendment of claim in which Buyer asks to be disengaged from its contractual obligations.

            2.6.2. In this connection, the Court notes, that avoidance cannot be reached by seeking preliminary relief, so this part of the amended claim is inadmissible just because of this fact alone. The same applies for the declaration in the pleading alleging that an avoidance of contract would be lawful and due.

            2.6.3. As far as this claim is supposed to be a reference to the right of suspension of performance, due to an attributable deficiency, as provided for in Art. 71 CISG, the Court states:

            2.6.4. Buyer's Assignee alleges that:

                     2.6.4.1. The ownership did not pass in time. Pursuant to the contract, the ownership should have been passed after payment of 50% of the purchase price -- that was right after 24 April 2003. Indeed, the ownership did not pass until 2 February 2004, which meant a breach of contract on part of Seller.

In the meantime, the passage of title has taken place and since it cannot be assumed that the Buyer's Assignee suffered damage as a result of this delay, it is the Court's position, that no suspension of Buyer's Assignee's obligation to pay was thereby justified.

                     2.6.4.2. Further, Buyer's Assignee alleges, that the yacht was not seaworthy by the end of June 2003. On the one hand, Seller concedes that it was behind the schedule, but argues on the other hand, that the ship was about to be finished by June 2003 and that Buyer's Assignee was in arrears with the fourth payment, which was due upon completion of woodwork and painting.

The Court lays down Art. 47 CISG, which provides that a buyer may fix an additional period of time of reasonable length for performance, unless the late delivery amounts to a fundamental breach.

A fundamental breach does not exist; it was further neither proved that Buyer's Assignee fixed an additional period of time for Seller nor that it was in arrears withthe fourth payment and with organizing a test drive.

Thus, this claim may not lead to a right to suspend performance.

                     2.6.4.3. In addition, Buyer's Assignee argues that Seller did not communicate the differences between the boat with hull no. 1404 and the prototype with hull no. 1370. The Court holds, with Seller, that Seller was not obligated to do so.

With its written statement of 22 December 2004, Buyer's Assignee forwarded as exhibit 43 an expert's opinion by appraiser Beekmann from Muiden, Netherlands, containing an analysis of hull no. 1404. In its pleading, Buyer's Assignee alleged that the differences Beekmann detected would amount to a fundamental breach of contract.

The Court concludes, in accordance with Seller's pleading, that Beekmann only discovered differences between the product produced by the Seller and the product described in the brochure handed out by Buyer - concerning which it was not proven either that Seller knew of this brochure, or that a copy of it had become part of the contract - thus no breach of contract on the part of Seller existed on this account.

Further, delivery did not yet take place, since Buyer's Assignee refused to organizing a test drive, which is used to reveal and repair minor defects (such as jammed hatches, etc.), so that such defects would not legitimate suspension of performance. Concerning the driver's console, the survey does not manifest the allegation that Seller manufactured an unsound construction for hull no. 1404.

Finally, it has not been substantiated that the boat had defects which could not have been fixed in a short time after the trial period. Hence a fundamental breach cannot be assumed.

            2.6.5. Item XII fails.

     2.7. Regarding issue XI

            2.7.1. In this item, Buyer's Assignee alleges that the Court did not consider Seller's unlawful behavior.

In the first instance, Buyer's Assignee did not rely on a tortious act. During the appeal, it first did so in the pleading, and submitted to refer to the damage statement procedure.

            2.7.2. The Court finds, that reference to the damage statement procedure is not admissible in interim judgments, so this component of the amended claim has to be rejected. Further, contrary to Art. 6:52 BW [*], the CISG does not know a general right to suspend performance arising from obligations which are not part of the contract. The only exemption is Art. 73 CISG, which aims at successive deliveries, but is inapplicable in the instant case. Even though Buyer has concretized its claim due to a tortious act - under which Buyer subsumes unjustified enrichment - it may not lead to a right to refuse performance.

            2.7.3. This allegation of Buyer's Assignee is without merit.

     2.8. Regarding issues IX and X:

            2.8.1. In item IX, Buyer's Assignee deplores that the preceding court did not consider the repayment risk. Buyer's Assignee alleges in item X that the Court did not bear in mind the problems that could arise if Buyer's Assignee was forced to pay 70,000.00 EURO more than expected.

            2.8.2. In the first instance, Buyer's Assignee did not rely on repayment risk, so there was no reason for the judge to take such risk into account.

            2.8.3. In the appeal, Buyer's Assignee alluded that Seller could hardly meet its short-term financial obligations and that, if Buyer's Assignee initiated a procedure for payment the amount, Seller would be unable to pay the sum back. Seller responds that the company it belongs to is stable and possesses large capital resources. It disputes any repayment risk.

            2.8.4. Neither in the first instance nor in the appeal did Buyer's Assignee challenge Seller's alleged urgent need for the money. The Court has already examined the conclusiveness of Seller's claim and holds, that it is fully founded, whereas Buyer's Assignee's defense does not arrive at its destination.

In contrast to Buyer's Assignee's assertion, it is not a requirement under Dutch law, that a monetary claim can only be awarded in an interim judgment if it is guaranteed that the awarded amount can be paid back if the claimant forfeits the amount awarded. (Only) when determining the parties' interests, shall the judge consider the repayment risk (cf. HR 14 June 2002, NJ 2002, 395 [*]).

            2.8.5. The Court lays down as a start:

That it is very likely, that Seller has a considerable payment request against the Buyer's Assignee and that the declaration concerning Seller's inability to pay and the subsequent problems for Buyer's Assignee's continuity - which certainly do not exist - do not prevent the Court from directing Buyer's Assignee to pay the outstanding accounts;

That a possible repayment risk on part of Seller - which was not substantiated - does not constitute a hindrance.

Further, it has to be considered that the Buyer's Assignee, if it accepted the judgment, would achieve an authority to dispose of a boat, which embodies an enormous value.

            2.8.6. The Court rules against Buyer's Assignee under issues IX and X.

3. CONCLUSION

     3.1. The preceding judgment is affirmed, with the proviso that Buyer's Assignee, as the losing complaining party, bears the costs of the appeal, on part of Seller amounting to three process points pursuant to rate V.

4. DECISION

The Court:

   -    Confirms the preceding decision in the appeal;
   -    Directs Buyer's Assignee to bear the costs of the appeal amounting to 3,159.00 EURO for advances and 7,896.00 EURO for attorneys' fees on part of Seller;
   -    Declares this decision provisionally enforceable;
   -    Denies further or differing claims.

Judgment given by Mr. Verschuur, chief judge, Mr. Kuiper and Mr. Van Hees, advisors and pronounced by Mr. Steppel, vice-president and member of a consistent chamber as well as in presence of Ms. Mellink as recording clerk in the public hearing of the Court, on Wednesday, 31 August 2005.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, in the appeal, Plaintiff of Czech Republic is referred to as [Buyer's Assignee]; Defendant of Netherlands is referred to as [Seller]. Amounts in European currency are indicated as [EURO].

Translator's note on other abbreviations: B.V. = Besloten Vennootschap met beperkte aansprakelijkheid [Limited liability company]; BW = Burgerlijk Wetboek [Dutch Civil Code]; HR = Hoge Raad der Nederlanden [Dutch Supreme Court]; NJ = Nederlandse Jurisprudentie [Database of Dutch decisions]; RiK = Regeling inzake Kantoorverklaaringen [Rules concerning extrajudicial nterrogations]; Rv. = Wetboek van Burgerlijke Rechtsvordering [Dutch Civil Prodecure Code]; S.R.O. = Limited liability company under Czech Law; Trb. = Tractatenblad [Dutch Treaty Bulletin].

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

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