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CISG CASE PRESENTATION

France 13 October 2005 Appellate Court Versailles (Caterpillar toys case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/051013f1.html]

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

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Case identification

DATE OF DECISION: 20051013 (13 October 2005)

JURISDICTION: France

TRIBUNAL: Cour d’appel [Appellate Court] Versailles

JUDGE(S): Madame François La Porte (président); M. Jean-François Fedou, M. Denis Coupin (conseillers); Mme Marie-Thérèse Genissel (greffier)

CASE NUMBER/DOCKET NUMBER: 04/04128

CASE NAME: Unavailable

CASE HISTORY: 1st instance Tribunal de commerce de Pontoise

SELLER'S COUNTRY: Germany

BUYER'S COUNTRY: France

GOODS INVOLVED: Plush caterpillar toys for infants


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 35 ; 39 ; 74 [Also cited: Articles 7(2) ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): Agency issues, statute of limitations];

35A ; 35B [Conformity of goods to contract: quality, quantity and description required by contract; Requirements implied by law];

39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];

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

Descriptors: Scope of Convention ; Agency issues ; Statute of limitations ; Conformity of goods ; Lack of conformity notice, timeliness ; Damages

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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

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (French): CISG-France database <http://witz.jura.uni-sb.de/CISG/decisions/131005a.htm>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

French: Claude Witz, Recueil Dalloz (22 February 2007) 534

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Case text (English translation)

Queen Mary Case Translation Programme

Court of Appeal of Versailles

13 October 2005

Translation [*] by Andrea Vincze [**]

Edited by Leandro Tripodi [***]

[...]

FACTS OF THE CASE

In response to the inquiry by Company T.R., a member of the group P.R., on 7 August 1998, SARL B.C. [of France] (hereinafter: [Buyer]) ordered from Company T.D. [of France] a quantity of toys for infants (2,400 plush caterpillars) for the purposes of distributing them in the stores of the "C." supermarkets during a marketing operation.

Because of difficulties with delivery of the goods, [Buyer] directly turned to Company E. GmbH, a company subject to German law, a regular supplier of Company T.D. and importer of such toys in the European Union. [The German company, Company E, is hereinafter referred to as the [Company that supplied the goods].]

The goods were delivered to the warehouses of Company E.D. in Gonesse [France] and the invoice was issued by the [Company that supplied the goods]. [Buyer] then paid for the goods.

The caterpillars were withdrawn from sale at the "C." supermarkets due to their non-conformity with security and labeling provisions, [Buyer] sued Company T.D. and the [Company that supplied the goods] for damages and interest before the Commercial Court of Pontoise.

After Company T.D. became subject to liquidation, on 24 January 2000, Ms. G.H., serving as representative in the collective liquidation proceedings, was ordered to appear before the Court. In its judgment of 28 April 2002, the Court reversed the judgment of 23 October 2001 and confirmed jurisdiction of the Tribunal.

That Tribunal, by a second decision made on 30 September 2003, ordered the [Company that supplied the goods] to pay [Buyer] a sum of EUR 12,099 as compensation for its material damages and EUR 50,000 in damages and interest, as well as an indemnification of EUR 4,000 pursuant to Art. 700 of the New Code of Civil Procedure, [all of those], as well as the costs, subject to provisional enforcement.

By two proceedings which were joined by the judge in charge of hearing the parties [Conseiller de la mise en État], the [Company that supplied the goods] appealed the latter judgment and, through the order of the President of the Court made on 19 November 2004, obtained a stay of the enforcement measures, conditioned upon depositing a sum of EUR 69,950 with the President of the respective Chambre des Avoués ["Chamber of Attorneys"], with which the [Company that supplied the goods] complied.

[Submissions by the Company that supplied the goods]

The [Company that supplied the goods] argues that even if it is acknowledged that an international sales contract exists between it and [Buyer], which it contests, the claims by the [Buyer], submitted on 10 February 2000, are time-barred.

The [Company that supplied the goods] argues that the Vienna Convention of 11 April 1980 on the International Sale of Goods does not cover the limitation period concerning the issue at hand, and that the limitation period must be established, pursuant to Art. 7(2) of the Convention, by application of contract law rules, and therefore national law, which [i.e., the applicable national law] is to be determined according to the private international law of the forum, that is, French private international law.

The [Company that supplied the goods] argues that German law is applicable pursuant to Art. 4(2) of the Rome Convention of 18 June 1980 on the Law Applicable to Contractual Obligations, because, according to the [Company that supplied the goods], Germany is the country of characteristic performance relating to the sale.

Thereupon, the [Company that supplied the goods] concludes that the lawsuit by [Buyer] is time-barred pursuant to Art. 477(1) of the BGB a.F. (the old version of the German Civil Code), which stipulates a limitation period of six months, and pursuant to Art. 3 of the "Contract Act" ["Vertragsgesetz"] of 5 July 1989.

The [Company that supplied the goods] argues that, contrary to the erroneous ruling of the Tribunal, applying the terms of Art. 3 of the Hague Convention of 15 June 1955 on the Law Applicable to International Sale of Goods leads to German law as the applicable law. However, in the absence of any evidence concerning agency or an exclusive distributorship agreement between the [Company that supplied the goods] and Company T.D., as well as of any apparent authorization, the Hague Convention cannot be applied in the instant case.

The [Company that supplied the goods] argues that actually the sales contract was concluded between [Buyer] and Company T.D., following the dispatch of a sales quote by Company T.D. to [Buyer] dated 17 July 1998, after which the order was sent to Company T.D. on 7 August 1998 and confirmed by Company T.D. on 10 August 1998, and therefore, that the Hague Convention and the Rome Convention are not to be applied.

The [Company that supplied the goods] adds that even supposing that a second sales contract was concluded directly between [Buyer] and the [Company that supplied the goods], the limitation period also ran out pursuant to Art. 477 of the German BGB a.F.

The [Company that supplied the goods] stresses the lack of any contractual relationship between it and [Buyer], criticizing the reasoning of the Court during the conflict of jurisdiction proceeding, as regards Company T.D.'s status as exclusive distributor of the [Company that supplied the goods], and the sale resulting from issuance of an invoice by the [Company that supplied the goods] on 2 October 1998 which, according to the itself, was issued merely for the purposes of documentation.

The [Company that supplied the goods] denied the Court's judgment dated 28 November 2002 any res judicata effect over the underlying issues and, especially, regarding the contractual liens between the parties, since the Court, as well as the Tribunal, only decided on their competence in the operative part of the decisions.

The [Company that supplied the goods] argued that, in the judgment referred to, the Court made an autonomous interpretation of the notion of contractual matters in the light of Art. 5 (1) of the Brussels Convention of 27 September 1968 on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, whose result cannot be upheld in order to assess the possible existence of a contractual relationship under another convention or under national law.

The [Company that supplied the goods] made a subsidiary submission that the claims of [Buyer] were unfounded under the Vienna Convention of 11 April 1980 since the [Company that supplied the goods] performed its obligations in accordance with Art. 35 (1) of the Convention, as the goods were in conformity with the contractual requirements concerning their packaging and/or containing, considering the sample that was delivered to [Buyer] before the order was issued, and also with the national provisions applicable to the vendor, especially the DIN EN 71-1 to 3, as established in the "test report by T.R.P.S. GmbH" dated 23 October 2000.

The [Company that supplied the goods] submitted that EU Directive No. 88/378/CEE of 3 May 1998 concerning the harmonization of European national toy safety legislations is not directly applicable.

The [Company that supplied the goods] argued that, in any event, [Buyer] lost its right under Art. 39 of the Vienna Convention as it failed to notify the seller about the alleged non-conformity.

In addition, the [Company that supplied the goods] contests [any claim] concerning the costs of destruction, as well as the commercial and moral harm argued, which, according to the [Company that supplied the goods], was unfounded.

The [Company that supplied the goods], therefore, requests the Court to find that the claim of [Buyer] is time-barred in this regard or, alternatively, to reject all claims of [Buyer] or, alternatively, to reduce the damages to no more than EUR 11,604.83.

The [Company that supplied the goods] also requests an indemnification of EUR 15,000 pursuant to Art. 700 of the New Code of Civil Procedure.

[Buyer's submissions]

[Buyer] contends that it was in a direct contractual relationship with the [Company that supplied the goods] relating to acquisition of caterpillar-shaped plush toys, and argues an agency relationship between the [Company that supplied the goods] and Company T.D. and that the latter served as a French intermediary of the [Company that supplied the goods] regarding the sales order.

[Buyer] sustains, under Art. 95 of the New Code of Civil Procedure, that one cannot challenge the findings (on the conflict of jurisdiction proceedings) of the Tribunal made on 23 October 2001, which were confirmed by the Court by its judgment on 28 November 2002, regarding the contractual liens between the parties.

[Buyer] acknowledges the application of the Vienna Convention of 11 April 1980 on the contract at issue, as claimed by the [Company that supplied the goods].

[Buyer] alleges that the [Company that supplied the goods] violated its duty to deliver conforming goods under Art. 35(2) of the Convention, because the goods were not fit for the purposes for which goods of the same description would ordinarily be used, as they were not suitable for very young children.

[Buyer] relies on non-conformity with the applicable safety requirements, which was discovered through testing in Laboratory W., a certified organization engaged in such activity, which found that the plush caterpillars were not in conformity with toy standard "EN-71".

[Buyer] argues that such safety requirements were harmonized under European law by way of Council Directive 88/378/CEE of 3 May 1988, and that such requirements are applicable in France as well as in Germany.

[Buyer] argues that one would not suspect any defect in the goods since the sample furnished displayed the "CE" marking , and denies that two subsequent orders had been placed.

[Buyer] states that, in its submissions during the proceedings, the [Company that supplied the goods] failed to prove the conformity of the goods under European Union law.

[Buyer] contests that the [Company that supplied the goods] was undoubtedly aware of [Buyer]'s intention to resell the plush caterpillars in France, and should have assessed conformity of the goods under the safety requirements applicable in France, emphasizing that they are identical to those applied in Germany, and recalling that the [Company that supplied the goods] acts as an importer of the toys on the European market.

Similarly to the [Company that supplied the goods], [Buyer] states that the issue of the statute of limitations regarding non-conformity is not covered by the Vienna Convention of 11 April 1980, but sustains that the Hague Convention of 15 June 1955 has priority over the Rome Convention of 19 June 1980.

[Buyer] argues that solving the conflict of laws issue under the Hague Convention of 15 June 1955 (Art. 3(2)) leads to application of French law, because Company T.D. acted as an agent and represented the [Company that supplied the goods].

[Buyer] contends that the following facts leave no doubt as to its allegations: the negotiations and the acceptance of the order by Company T.D. on behalf of the [Company that supplied the goods]; Company T.D.'s role as an intermediary in France of the [Company that supplied the goods]; the latter's admission of payment of an agency fee to Company T.D.; the close relationship between the two companies; the acknowledgement of the agency relationship in writing because the stationery of Company T.D. displayed the [Company that supplied the goods]'s letterhead, as well as a permanent and lasting agency relationship.

[Buyer] emphasizes that the concepts of "representative, agent or salesman ["commercial traveler", in the English translation of the Convention]" included in Art. 3 of the Hague Convention of 15 June 1955 must be given the same meaning as in private international law and specifically in the Hague Convention of 14 March 1978 on the law applicable to agency and representation.

[Buyer] claims for the application of a ten-year limitation period, as provided in Art. L 11O-4 of the French Commercial Code.

[Buyer] submits that even if the conflict of law issue were examined under the Rome Convention of 19 June 1980, the applicable law would still be French law.

[Buyer] states that the Hague and Vienna Conventions are not in conflict regarding the disputed issues expressly regulated by the Vienna Convention.

[Buyer] alleges that the foreign law, referred to by the [Company that supplied the goods], was not proved; moreover, it is not applicable since, by virtue of the German Act of 5 July 1989, the seller can refer to Art. 477 of the BGB only under the condition that "lack of conformity is not due to facts that the seller knew or could not have been unaware of, and failed to disclose to the buyer", and that the [Company that supplied the goods] knew that no safety tests had taken place regarding the safety requirements applicable in Europe.

[Buyer] states that it had appropriately notified the seller about the alleged non-conformity as early as 10 November 1998, and that it had reiterated this on several occasions.

[Buyer] argues that it suffered losses as a result of cancellation of the billing to Company T.R., due to the costs of destruction, storage and replacement of the goods, the loss of business with Group P.R., whereupon [Buyer] seeks compensation pursuant to Art. 74 of the Vienna Convention, and complains that the Tribunal did not fairly assess its losses.

[Buyer], therefore, requests the Court to reverse the [previous judgment] concerning the amount of damages and interest, and to order the [Company that supplied the goods] to pay the sums of EUR 13,518 and EUR 76,000, respectively, for the material and for the moral and commercial damage suffered.

[Buyer] also requests a compensation of EUR 20,000 under Art. 700 of the New Code of Civil Procedure.

[Buyer] reiterated its conclusions on 26 May 2005, i.e., the end of discovery date. On 13 June 2005 the [Company that supplied the goods] requested the Court to dismiss the proceedings due to disregard of the principle of contradictory proceedings (the audi alteram partem principle); or, alternatively, to reduce the damages awarded.

The [Buyer] opposed this claim.

At the hearing of the oral argument on 23 June 2005, the procedural part was attached by the Court to the merits, as evidenced by the summary docket.

REASONING ON PROCEDURAL ISSUES

The Court considered that the latter arguments submitted by [Buyer] encompass an answer to the allegation by the [Company that supplied the goods], raised in its written submissions on 6 May 2005, regarding the failure to send a notice about the non-conformity pursuant to Art. 39 of the Vienna Convention of 11 April 1980.

The Court considered that, in support of its answer, [Buyer] did not submit any new information during the oral hearings and merely referred to the chronology of the previous correspondence, which was, as it is plain to see, known to the [Company that supplied the goods].

The Court considered that the disputed conclusions constitute a response concerning the lack of proof of foreign law and the alleged concealment of German law by the [Company that supplied the goods], which was already referred to in the previous submissions by [Buyer].

The Court considered that, in its latter summary arguments, the [Buyer] stated that the [Company that supplied the goods] did not provide any proof concerning the conformity of the goods with the sample furnished and the two subsequent orders without raising a new legal argument, and finally added a new argument concerning the standard EN-71, which had already been the subject of previous disagreement between the parties.

The Court considered that the respective written submissions were subjected to a response by the opposite party, and no new legal basis or new claims have been raised so to deserve the Court's attention.

[Therefore, the Court decides] to dismiss the allegations by the [Company that supplied the goods] regarding jurisdictional issues.

REASONING ON THE MERITS

The Court considered that, after having been contacted by Company TR., belonging to the corporate group P.R. which intended to introduce a self-liquidating [direct] premium operation in its "C." stores, using plush caterpillar toys, [Buyer], on 7 August 1998 ordered from Company T.D. 2,400 items for a total price of 56,640 French francs (EUR 3,634.71) excl. tax, for delivery on the following 15 September at Company E.D.'s headquarters located in Gonesse.

[Buyer] encountered several difficulties in having the order performed, as indicated in the faxes sent to Company T.D. and the letter sent by registered mail on 29 September 1998.

In the fax dated 28 September 1998, [Buyer] asked the [Company that supplied the goods] to confirm the order of the goods by Company T.D. and whether shipment had taken place.

The [Company that supplied the goods] finally delivered the toys to the warehouse of the Company E.D., and on 2 October 1998, issued an invoice to [Buyer] for delivering 2,280 plush caterpillars at a global price of DM 16,689.60 equaling 63,808 French francs (EUR 8,202.98).

The Court considered that the tests performed upon request of Company P.R. at Laboratory "W." revealed that the plush toys did not conform to toy standard EN-71 and the labeling requirements; that the plush caterpillars were subsequently withdrawn from the stores where they were on sale, and that in such circumstances, [Buyer] filed a lawsuit for compensation against Company T.D. and the [Company that supplied the goods].

ON THE RELATIONSHIP BETWEEN THE PARTIES

The Court considered that the judgment of the Court (ordering reversal) on 28 November 2002, on the conflict of jurisdiction procedure, recognized that a contractual relationship was established between [Buyer] and the [Company that supplied the goods] under the following conditions:

"... it follows that T.D., exclusive distributor in France of the goods marketed by the [Company (from Germany) that supplied the goods], participated in the transaction in dispute as agent and representative of the German party, which ultimately sold the goods and sent a relating invoice directly to [Buyer], having [the goods] been delivered to the warehouse of E.D. located in Gonesse; that the fact that an invoice was issued clarifies and proves that a commercial sales transaction took place, since, based on such document, the [Company that supplied the goods] acknowledged to be the creditor of [Buyer] regarding the delivery of 2,280 items, for which the [Company that supplied the goods] received the total price by a CTC check issued on 18 October 1998 and debited the money of the account of [Buyer] of the 28th of the same month."

[...]

"Consequently, the ruling of the Tribunal confirming the existence of a contractual relationship between [Buyer] and the [Company that supplied the goods] must be confirmed."

The Court considered that that it had already ruled on the nature of the contractual relationship resulting, on one hand, from the sale, between [Buyer] and the [Company that supplied the goods], and, on the other hand, from the agency relationship between, the [Company that supplied the goods] and Company T.D., , in order to make a decision on its competence and as to the application of Article 6(1) of the Brussels Convention of 27 September 1968, that was in force at the time, which derogates from the general rule of competence in Art. 2, and allows the plaintiff in contractual matters to file a lawsuit at the place where the obligation subject to the claim was performed, as sustained by [Buyer] and contested by the [Company that supplied the goods].

The Court considered that pursuant to Art. 95 of the New Code of Civil Procedure, when a judge, in considering his jurisdiction, resolves the substantive issue determinative of the same, his ensuing decision shall have res judicata effect in relation to this substantive consideration.

[Therefore, the Court finds that], as the final and binding nature of the judgment of 18 November 2002 was not disputed, the [Company that supplied the goods] is not allowed to question the nature of the contractual relationship between [Buyer], the [Company that supplied the goods] and Company T.D.

[For purposes of this presentation, the [Company that supplied the goods] will hereafter be referred to as the [Seller].]

ON THE LIMITATATION PERIOD

The Court considered that the parties correctly argued that the Vienna Convention on Contracts for the International Sale of Goods of 11 April 1980, which was ratified by both France and Germany, is applicable to the present lawsuit for determining whether the [Seller] is liable for the alleged breach of its obligation to deliver goods conforming to the standards, based on a sales contract concluded between companies subject to French and German law "having their places of business in different countries."

As the Vienna Convention of 11 April 1980 does not cover the limitation period for lawsuits on guarantee of conformity of the goods under Art. 35(2), the limitation period must be established, pursuant to Art. 7(2) of the Convention, by application of contract law rules, and therefore national law, which [i.e., the applicable national law] is to be determined according to the private international law of the forum, that is, French private international law.

By application of French private international law, two international conventions, of which France is a signatory, may be applied here, i.e., the Hague Convention of 15 June 1955 on the Law Applicable to the International Sale of Goods and the Rome Convention of 19 June 1980 on the Law Applicable to Contractual Obligations.

Nevertheless, the Hague Convention of 15 June 1955 has priority by virtue of Art. 21 of the Rome Convention, and it is commonly accepted that it complements the Vienna Convention of 11 April 1980.

The Hague Convention of 15 June 1955 has a universal role and it is applicable without the need for reciprocity, and the sole condition for its application is that the court be seated in a Contracting State.

The Court considered that this is the case because the latter Convention has been in force in France since 1 September 1964.

Hence, the Court considered that such Convention applies regarding the claim at hand. The law applicable to the contract in dispute must be determined by Art. 3 of the Hague Convention of 15 June 1955, according to which:

"In default of a law declared applicable by the parties under the conditions provided in the preceding Article, a sale shall be governed by the domestic law of the country in which the vendor has his habitual residence at the time when he receives the order. If the order is received by an establishment of the vendor, the sale shall be governed by the domestic law of the country in which the establishment is situated.

"Nevertheless, a sale shall be governed by the domestic law of the country in which the purchaser has his habitual residence, or in which he has the establishment that has given the order, if the order has been received in such country, whether by the vendor or by his representative, agent or commercial traveler."

[See <http://www.jus.uio.no/ln/hcpil.applicable.law.sog.convention.1955/doc.html>.]

The Court considered that Company T.D. acted as an agent of the [Seller] with the [Buyer], during the order process, in particular, conducting the negotiations with [Buyer] concerning the conditions of the sale of the plush toys in dispute.

The [Seller] thereafter delivered the goods and sent an invoice directly to [Buyer].

Company T.D. used for its written correspondence stationery with the letterhead "T.E. France Import-Export" as evidenced by the letter of 6 August 1998.

The [Seller] itself admitted to have issued an invoice directly to [Buyer] and paid Company T.D. a markup.

All these elements support that Company T.D. acted as a representative of the [Seller] in France regarding the transaction at issue.

The [Seller] cannot contest its agency relationship by denying that it had acted as principal or apparent principal of Company T.D., as stated by the Court in its judgment of 28 November 2002 and by the Commercial Tribunal of Pontoise in its judgment of 30 September 2003, to the extent that Art. 3(2) of the Hague Convention of 15 June 1955 does not clarify such notions and that analysis of the qualification of intermediaries as "representative, agent or commercial traveler" by that Convention must be performed in the light of private international law rather than the characteristic features of agency in French law.

The Court considered that those notions are clarified by the Hague Convention of 14 March 1978 on the Law Applicable to Agency Contracts, signed and ratified by France.

The Court considered that an "agent" under Art. 1 of the latter Convention is a person who has the authority to act, acts or purports to act on behalf of another person, the principal, in dealing with a third party.

The Court considered that activities of an agent can consist, in particular, of receiving and communicating inquiries or conduct negotiation on behalf of the principal.

Additionally, the Court considered that the Convention shall remain applicable even if the agent acts in its own name and his activities are only occasional.

The Court considered that the law of the country where the agent is established at the time of the intervention applies to the relationship between the principal and the third party, under Art. 11 of the Hague Convention of 14 March 1978:

"As between the principal and the third party, the existence and extent of the agent's authority and the effects of the agent's exercise or purported exercise of his authority shall be governed by the internal law of the State in which the agent had his business establishment at the time of his relevant acts."

Consequently, the limitation period applicable to the warranty of conformity under the Vienna Convention of 11 April 1980 must be determined under French law, and specifically, the ten-year limitation period set out in Art. L 110-4 of the French Commercial Code must be retained.

Therefore, the lawsuit by [Buyer], which was filed within such period, is timely.

ON THE GROUND THAT NO NOTICE WAS RECEIVED REGARDING THE ALLEGED LACK OF CONFORMITY:

ON THE LACK OF CONFORMITY ISSUE

The [Seller] relies on Art. 39 of the Vienna Convention of 11 April 1980 which provides that the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has (or should have) discovered it, and requests the court to reject the claim of [Buyer].

The notice of lack of conformity under the latter Convention does not include filing a lawsuit by buyer.

In this case, it appears from the documents produced that [Buyer], when notified by Company T.R. on 9 November 1998 of the fact that the plush toys did not conform to the security norms, informed Company T.D., the representative of the [Seller] in France, about this on the same day, and the [Seller] on 10 November 1998; then in correspondence and faxes sent on 16, 18, 19, 24 and 26 November 1998 and 10 December 1998, [Buyer] demanded the certificates of conformity from Company T.D., forwarded the results of the tests performed by Company T.R. regarding the goods, and sent a formal notice requesting to take back the non-conforming goods and to reimburse the purchase price.

Therefore, the [Seller] cannot maintain that it was not aware of the lack of conformity that was communicated within a reasonable time.

The lawsuit of [Buyer] is admissible.

ON THE GROUND THAT [SELLER] VIOLATED ITS OBLIGATION TO DELIVER CONFORMING GOODS UNDER THE VIENNA CONVENTION OF 11 APRIL 1980

The Vienna Convention provides for a specific action under its Art. 35, which states as follows:

"(1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.

"(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:

(a) are fit for the purposes for which goods of the same description would ordinarily be used;

(b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement;

(c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;

(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods."

The tests performed by laboratory "W.", that was authorized by the decisions of 26 September 1990 and 29 November 2003 to perform "CE type" examinations as set out in Art. 3 (2) and 5 of the Decree of 12 September 1989 on the prevention of risks during the use of toys, revealed that the pearls located at the ends of the antennas of the plush caterpillars in dispute may fall off and may be ingested by infants, and therefore, the laboratory declared that the goods do not conform to toy standard "EN-71", and they are not suitable for infants under 36 months, the age group which such toys are usually targeted at.

The toy security norms have been subjected to European harmonization by virtue of Council Directive 88/378/CEE of 3 May 1988, modified by Council Directive 93/68/CEE of 22 July 1993.

The Directive of 3 May 1988 was implemented in France by Decree No. 89-662 of 12 September 1989, modified by Decree No. 96-796 of 6 September 1996, and in Germany on 21 December 1989, under the names "NF EN 71-EN" in France and "DIN EN 71 TEIL 1" in Germany.

Therefore, the [Seller] cannot argue that it was not obliged to search for the applicable security norms currently in force in the buyer's country, and it was simply obliged to comply with those applicable in its own country since both countries had implemented the harmonized norms arising out of the Community Directive. A reference to the European norm is indicated on the label of the plush toys by displaying the "CE" marking required by the Directive, and for marketing the goods originating from outside of the Community within the internal market, it was [Seller]'s duty to verify the initial conformity of the products to standard EN-71.

In lack of a contrary agreement by the parties, the goods sold do not conform to the contract unless they fulfill the four cumulative conditions set out in Art. 35(2) of the Vienna Convention of 11 April 1980 (see above).

In the instant case, it was established in the report by W. that the plush caterpillars "are not suitable for purposes for which goods of the same type are habitually used", as in this case, such purpose is use by very young children and such use is prohibited due to their lack of conformity with the necessary security measures being appropriate to that age group.

Furthermore, the toys do not have "the quality that was represented by the seller to the buyer by furnishing a model or sample", which is one of the quality features implied in the fact that they are targeted at very young children; nothing suggests that [Buyer] is liable for such non-conformity, since the sample furnished by the [Seller] bears the "CE" marking which does indeed constitute a legal presumption of conformity with the safety norms applicable in the European Union.

Therefore, the [Seller] cannot reproach [Buyer] for not having performed additional tests, nor can it argue without any proof that two additional orders were placed by [Buyer], which only issued one order, on 7 August 1998.

Finally, the [Seller] also cannot argue that the conformity of the plush toys with the Community safety norms is established merely by producing a report by "S.I.E.T. Inspection Center of China" and two others issued by a German company, T., all of them written in a foreign language, without finding it necessary to furnish translations for those documents, as otherwise the Court cannot consider their contents.

Therefore, the [judgment] condemning the [Seller] is confirmed.

REGARDING THE LOSS SUFFERED BY [BUYER]

The [Buyer] is entitled to seek compensation for its losses under Art. 74 of the Vienna Convention of 11 April 1980.

The [Buyer] is also entitled to obtain the equivalent of the sum credited to [Company T.R. P.R] in the amount of EUR 9,622 insofar as it represents the loss suffered because of the payment to the [Seller] for the price of the goods declared to be unmerchantable, as well as its lost profit resulting from the deprivation from its commercial margin.

The appealed judgment is amended regarding this issue.

The [Buyer] also proved that it had paid to Company TR. P.R., as requested by the latter, the costs of destruction, storage and replacement of the plush caterpillars with Dalmatians, which represents a total sum of EUR 3,896, as accepted by the Tribunal.

Furthermore, the judges on first instance estimated the damages and interest due for [Buyer] at EUR 50,000, as compensation for the other losses, for the reasons stated by the Court.

REGARDING ACCESSORY CLAIMS

Equity mandates an award of additional damages in the amount of EUR 7,000 to [Buyer], pursuant to Art. 700 of the New Code of Civil Procedure.

The [Seller], which was unsuccessful regarding the main points of its appeal and must pay the costs of appeal, does not prevail regarding its own claim [under Art. 700].

FOR THE ABOVE REASONS;

The Court made its decision in a public hearing, in contradictory proceedings and at the final instance, examined the summary docket of 23 June 2005, and

REJECTS the claim of the [Seller] on juridiction;

DECLARES that the lawsuit regarding warranty of conformity under Art. 35 (2) of the Vienna Convention of 11 April 1980 and filed by the [Buyer] is admissible;

CONFIRMS the judgment appealed in its entirety, except for raising the value of compensation to be paid by the [Seller] for damages to the [Buyer] to the amount of EUR 13,158;

ORDERS the [Seller] to pay the [Buyer] additional damages of EUR 7,000 by virtue of Art. 700 of the New Code of Civil Procedure;

REJECTS an identical claim by the [Seller]; and

ORDERS the [Seller] to pay the costs of the appeal [to the extent] incurred by Ms. T., attorney, under Art. 669 of the New Code of Civil Procedure.

The judgment was announced by Ms. Françoise La Porte, Président and by Ms. Marie-Therese Genissel, Court Clerk, who were present at the time of announcement.


FOOTNOTES

* All translations should be cross-checked against the original text. For purposes of this translation, Plaintiff-Appellee of France is referred to as [Buyer] and Defendant-Appellant of Germany is referred to as the [Company that supplied the goods] or [Seller].

** Andrea Vincze is a Fellow of the Institute of International Commercial Law of the Pace University School of Law. She received her law degree from the University of Miskolc, Hungary, and her LL.M at Pace Law School. She is working on her Ph.D. on ICSID arbitration and is researching international commercial law and arbitration.

*** Leandro Tripodi is a Law Student at the University of São Paulo and participated in the University of São Paulo's team in the 16th Willem C. Vis Moot in Vienna. He is a member of the Brazilian Arbitration Committee (CBAr) and an employee at Brazil's Ministry of Finance since 1997.

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Pace Law School Institute of International Commercial Law - Last updated September 9, 2009
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