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CISG CASE PRESENTATION

Finland 14 October 2005 Korkein oikeus [Supreme Court] (Log house case) [Editorial analysis available]
[Cite as: http://cisgw3.law.pace.edu/cases/051014f4.html]

Primary source(s) of information for case presentation: UNCITRAL abstract

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Case identification

DATE OF DECISION: 20051014 (14 October 2005)

JURISDICTION: Finland

TRIBUNAL: Korkein oikeus [Supreme Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: KKO 2005:114

CASE NAME: Unavailable

CASE HISTORY: Kouvolan hovioikeus [Appellate Court] (13 November 2003) confirmed the decision by Heinolan käräjäoikeus [District Court] (27 January 2003) where the case was dismissed on the grounds for jurisdiction. The Supreme Court returned the matter to the District Court to be retired on the matters relating to the CISG. A decision by the Kouvolan hovioikeus (S 06/737 (14 March 2007) was rendered on appeal against the decision by the Heinolan käräjäoikas, Judgment 06/425, L 05/947 (21 April 2006)

SELLER'S COUNTRY: Finland (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Log house


Case abstract

FINLAND: Finnish Supreme Court 14 October 2005

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/83],
CLOUT abstract no. 843

Reproduced with permission of UNCITRAL

Abstract prepared by Johan Bärlund, National Correspondent

The plaintiff, a Finnish seller of log houses, sold a family house to a German buyer, who at the same time became the sales agent of the Finnish seller in Germany. The buyer, however, failed to make the last payment for the house and the plaintiff brought proceedings against the defendant in the court of the seller's place of business in Finland. According to the defendant, though, the Finnish court did not have jurisdiction.

The Supreme Court held that since the house had been purchased not only for personal use, but partly for the professional use of the agent, in accordance with article 2 (a) CISG, the Convention applied to the case. The court further stated that, according to article 57(1) (a) CISG, the buyer must pay the price to the seller at the seller's place of business. Therefore, the seller could bring proceedings against the buyer in Finland, pursuant to the 1968 Convention on jurisdiction and the enforcement of judgements in civil and commercial matters (so called Brussels Convention).

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 2(a) ; 57(1)(a)

Classification of issues using UNCITRAL classification code numbers:

2A [Purchase for personal, family or household use: purchase partly for professional use];

57A [Place for payment: in absence of agreement, payment at seller's place of business]

Descriptors: Consumer sales ; Payment, place of ; Jurisdiction

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Editorial remarks

EDITOR: Sanna Kuoppala

Excerpt from "The Application and Interpretation of the CISG in Finnish Case Law 1997-2005" (April 2009)

SUPREME COURT 2005:114, S 2004/50 (14 OCTOBER 2005)

11.3.1   Classification of the issues present
11.3.2   Jurisdiction and applicable law
11.3.3   Decision commented

[...]

11.3.1 Classification of the issues present

The case involved a sale of a log house kit in connection with a contract of agency. A Finnish company (the plaintiff) had sold a log house kit to a German buyer (the defendant) to be used as his and his family's home but also as a model house in connection with the agency.

The case had firstly been tried by the District Court of Heinola as early as in January 2003. The case had then been dismissed on the grounds of jurisdiction. The Court of Appeal of Kouvola confirmed the decision in November 2003. The plaintiff petitioned for and was granted leave to appeal by the Supreme Court. The Supreme Court returned the matter to the District Court to be retried on the matters relating to the CISG. The decision by the Distrcit Court of Heinola given in April 2006 was again appealed. The decision of the Court of Appeal of Kouvola in March 2007 became final.

11.3.2 Jurisdiction and applicable law

In relation to the jurisdiction, the Supreme Court had first to resolve the issue whether the buyer was a consumer. The sale of a log house kit had been concluded on the same day as the contract for agency. The negotiations for both contracts had been held simultaneously and the contracts had been signed concurrently. By referring to several judgements of the European Court of Justice (among the others mentioned C-269/95, Benincasa, Judgment 3 July 1997 and C-464/01, Gruber, Judgement 20 January 2005) the Supreme Court concluded -- contrary to the District Court and the Court of Appeal -- that the sale of the log house kit was closely connected with the Buyer's business operations and that the connection between the sale and the business operations could not be held insignificant taking into account the agreement as a whole. The Buyer could not be held to be a consumer as provided for in the Brussels Convention.

The next question related to the place of performance. According to Article 5 Paragraph 1 Subparagraph 1 of the Convention in matters relating to a contract, the action must be brought in the courts for the place of performance of the obligation in question.

In relation to this matter, the District Court had applied the 1980 Rome Convention. The reference in the agency agreement to the Finnish law did not suffice; as the parties had not made an explicit choice on applicable law, according to Article 4 of the 1980 Rome Convention, the contract is governed by the law of the country with which it is most closely connected. Article 4(2) provides that it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate, its central administration. The Official Report on the 1980 Rome Convention provides some examples in identifying the characteristic performance of a contract. Usually in the modern contract one party's obligation takes the form of money and the other party's obligation the form of delivery of goods, the provision of a service, transport, security etc., depending on the type of the contract. It is the performance for which the payment is due which usually constitutes the characteristic performance of the contract.[609] Thus the applicable law was the Finnish law according to which a debt of money must be paid at the debtor's place and the claim in question could be tried in Finland. However, as note above, the District Court dismissed the case on the grounds that it held the Buyer to be a consumer, thus the contents of the Finnish law was not discussed further. The Court of Appeal had confirmed the District's Court's decision on the status of the Buyer.

The Supreme Court noted that according to Article 21, the application of the 1980 Rome Convention does not prejudice the application of international conventions to which a Contracting State is, or becomes, a party. Both Finland and Germany were contracting parties to the CISG and thus the CISG was the applicable law. The Supreme Court took into account CISG Article 2(a) which states that the Convention does not apply to sales of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use. The Supreme Court held that taking into account the legislative history of the Convention, Article 2(a) must be interpreted to mean that the CISG is also applicable in relation to the sale of goods where the goods are bought only partly for business purposes and partly for personal use. When drafting the Article, it was considered whether the principal purpose of use ought to be given any significance in determining the scope of the Convention but this proposal was dismissed. The meaning of Article 2(a) must be interpreted restrictively so that it applies only to sales of goods for exclusively personal use.

Progressively, the Supreme Court specifically referred to Professor Schlechtriem's Commentary on the UN Convention on the International Sale of Goods (CISG), 1998, p. 32 and other commentary by Jan Ramberg and Johnny Herre, Internationella Köplagen (CISG) 2004, p. 93. Thus even though the immediate and principal purpose of the log house was to function as a home for the buyer and his family the sale had a connection to the agency business to be commenced at a later stage. In relation to the scope of application, the intended purpose of goods was decisive not the actual use (the agency had not been commenced at all due to the disagreements between the parties).

Thus the place of performance was to be determined by the rules of the CISG. According to Article 57(1)(a), if the buyer is not bound to pay the price at any other particular place, he must pay it to the seller at the seller's place of business. Thus the purchase price referred to in the claim must be paid for at the seller's place of business, in Finland. The Court has jurisdiction to examine the claim and therefore the matter was returned to the District Court.

11.3.3 Decision commented

The questions in dispute relating to the actual contract and the CISG and involved among the others the dispute on the contents of the contract, the dispute on the conformity of the goods, whether the reclamation was given within a reasonable time and whether reasonable measures where taken to mitigate the losses.

The detailed and well reasoned approach by the Supreme Court is the approach to be promoted and recommended. The fact that the case involved an EU-connection may have influenced the more liberal use of international sources of law. Unfortunately, the lower courts did not fully follow the lead. However, the core of the case in relation to the contract itself and the issues covered by the CISG had todo with evidentiary issues where CISG in essence surely sets the legal boundaries and consequences for the certain acts but does not of course determine as such what has actually happened between the parties. Nevertheless, the criticism presented earlier applies also here: in order to fully appreciate and honour the international nature of the Convention, those who apply it and interpret it ought to emphasize also international sources of law -- academic literature as well as case law - more thoroughly and openly.

[...]


FOOTNOTE

[...]

609. Giuliano-Lagarde 1980, p. 20-21, reference added here.

See entire text of Sanna Kuoppala, "The Application and Interpretation of the CISG in Finnish Case Law 1997-2005" (April 2009)

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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 (Finnish): [2005] Korkeimman oikeuden ratkaisuja II, KKO 2005: 114; [2005] KKO: n ratkaisut kommentein II (ed. Pekka Timonen), KKO 2005: 114; <http://www.finlex.fi/fi/oikeus/kko/kko/2005/20050114>; see also CISG Nordic website <http://www.cisgnordic.net/051014FI.shtml>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Pace Law School Institute of International Commercial Law - Last updated January 14, 2014
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