Greece 2006 Decision 4861/2006 of the Court of Appeals of Athens (Autombile catalyst case) [editorial analysis available]
[Cite as: http://cisgw3.law.pace.edu/cases/060000gr.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 4861/2006
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Germany (plaintiff)
BUYER'S COUNTRY: Greece (defendant)
GOODS INVOLVED: Automobile catalysts
APPLICATION OF CISG: Unclear. However, there is an extensive analysis of CISG provisions and a likelihood that Article 1(1)(a) applied.
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4B [Scope of Convention (issues excluded): retention of title clause]; 62A1 [Seller may compel performance of any of buyer's obligations unless seller has exercised inconsistent remedy: for example, avoidance of contract]; 74A [General rules for measuring damages: loss suffered as consequence of breach]; 81A1 [Effect of avoidance obligations (release of obligations of both parties under Convention): exception (damages for breach)]
4B [Scope of Convention (issues excluded): retention of title clause];
62A1 [Seller may compel performance of any of buyer's obligations unless seller has exercised inconsistent remedy: for example, avoidance of contract];
74A [General rules for measuring damages: loss suffered as consequence of breach];
81A1 [Effect of avoidance obligations (release of obligations of both parties under Convention): exception (damages for breach)]
EDITOR: Dionysios P. Flambouras [*]
The Seller, an enterprise having its place of business in Germany producing automobile catalysts, agreed to provide exclusively a specific type of automobile catalysts to the Buyer, an enterprise having its place of business in Greece; the Buyer agreed to buy and then sell a minimum number of catalysts. This framework contract (described by the court as an exclusive distribution agreement) was concluded by private agreement on 12 December 2001 [the "Framework Contract"]. Under the Framework Contract, 50% of the purchase price would be paid upon receipt of the goods by the Buyer and the remaining balance would be paid 45 days after receipt of the goods.
On 10 May 2002, the Buyer ordered via telephone (and on 11 May 2002 via facsimile) automobile catalysts for an amount equal to €28,919.95 and other products (not included in the initial framework agreement) such as other types of automobile catalysts for an amount equal to €7,978.09. The Seller dispatched the mentioned goods to the Buyer together with invoice no. 408886/24 May 2002 for an aggregate amount of €36,198.04 including the following terms: "payment: 45 days after issuance of the invoice" and "goods dispatched to remain at the seller's ownership until full repayment."
The Buyer did not pay the purchase price at the agreed time. The Seller continuously sent notices requesting payment of the purchase price. On 24 September 2002, the Seller sent to the Buyer a letter titled "Unpaid invoice - Invoice no. 408886 dated 24 May 2002" ["Termination Notice"] by means of which the Seller terminated the Framework Contract for the following reason (as stated in the Termination Notice): "since you do not accept to pay the outstanding amount of €36,198.40, you are obliged to return the catalysts to GAT by 4 October 2002."
The Seller also demanded payment of the purchase price of €36,198.40 from the Buyer on the basis of the contract of sale referred to in Invoice no. 408886 dated 24 May 2002.
The Court found that the Seller had avoided the contract by means of the Termination Notice and was therefore not entitled to demand payment of the purchase price.
2.1 Application of the CISG
The Court does not expressly mention whether the CISG applies. However, there is extensive analysis of various CISG provisions and reference is made to the solution that should be followed if CISG were to apply under the specific facts. From the text of the judgment it is clear that under Clause 8 of the Framework Contract: "... the validity, conclusion and performance of the agreement shall be governed and construed in accordance with Greek law." Based on this clause, the Buyer appears to have raised an argument that Greek domestic law would apply, instead of the CISG. From the text of the judgment of the Court of Appeal it can be inferred that the Court of First Instance judged [the judgment of that court is not available to us] that, due to the above clause, the CISG did not apply. The wording of the judgment of the Court of Appeal is rather cryptic on this issue. However, towards the end of the judgment [and following a thorough examination of CISG provisions in connection with the critical issues] the Court states:
"... even if it is accepted that the Convention applies as [the Seller] pleads in the particular circumstances and the Buyer denies, in view of clause 8 of the contract dated 12 December 2001."
Irrespective of whether the Court of First Instance and the Court of Appeal applied the CISG or not (see also no. 2.4 below), the editor suggests that reference to the law of a Contracting State shall mean the law of this State including the CISG; therefore, both courts should have judged that the CISG applies (as part of Greek law)."
2.2 Retention of title clause - Its effects are governed by domestic Greek law: art. 532 of the Greek Civil Code and its interpretation
Based on the content of the invoice the Court found that Seller had retained title on the goods until full repayment of the purchase price. With respect to the effect of the retention of title clause the Court applied art. 532 of the Greek Civil Code [the editor suggests that this is correct since matters related to the ownership including the effect of retention of title clauses are not governed by the CISG: see CISG art. 4(b)]. In particular art. 532 provides that "[I]f the contract of sale incorporates a condition pursuant to which the seller retains ownership until full repayment of the purchase price, then it is deemed that title passes to the buyer as of the fulfillment of the relevant condition [payment of the purchase price] and if the buyer delays payment of the purchase price, then the seller is entitled either to demand payment of the purchase price or to declare the contract avoided by exercising its rights that result from ownership."
Based on art. 532 of the Greek Civil Code the Court interpreted the law as follows:
|-||In the event of delay by the buyer to pay the purchase price the buyer is entitled to select between
two remedies: (a) either to demand payment of the purchase price; or (b) to avoid the contract of
|-||If the buyer elects to avoid the contract of sale, then the contract is retrospectively "dissolved" and as a consequence the seller must return to the buyer any part of the purchase price that he received whereas the buyer must return the goods delivered to him pursuant to the provisions on unjust enrichment (adikaiologitos ploutismos) (articles 904 of the Greek Civil Code). Accordingly, the seller is entitled to demand return of the goods delivered to the buyer either: (a) by virtue of a claim on the grounds of unjust enrichment (ex lege contractual obligation under articles 904 of the Greek Civil Code); or (b) by virtue of a claim in rem as owner of the goods.
|-||If the seller elects to exercise remedies arising under the contract of sale and to demand payment
of the purchase price together with compensation for any damage that he might have suffered, then
the contract of sale remains effective. Accordingly, if the buyer does not pay the purchase price
and the compensation to the seller, the latter is entitled to avoid the contract.
|-||Finally, the seller may demand payment of the purchase price and at the same time notify the buyer that it will declare the contract avoided if the buyer fails to pay the purchase price; in this instance the avoidance of the contract is subject to a dilatory condition (anavlitiki eresi) [art. 201 of the Greek Civil Code] being the non-payment of the purchase within a reasonable period or within the time frame set by the seller.|
2.3. Legal issues connected to the CISG - Avoidance of contract: inability of the Seller to demand payment of the purchase price
Referring to various provisions of the CISG, the Court provided an interesting summary of the law. In particular, the Court stated that the following results from the joint application of CISG articles 1, 6, 61 and 81(1):
|-||The CISG applies to contracts for the sale of movables between parties whose places of business are in different States, when the States are Contracting States;
|-||The parties may derogate from the provisions of the CISG or may amend its consequences;
|-||If the buyer does not perform any obligation under the contract of sale or the CISG, the seller is entitled to exercise the remedies set out in articles 62 to 65 and claim damages based on what is provided in articles 74 to 77 and the seller is not deprived of any right he may have to claim damages by exercising his right to other remedies;
|-||A declaration of avoidance of the contract releases both parties from their contractual obligations.|
From the above, it can be concluded that, in the Court's opinion, if a contract governed by the CISG is declared avoided, then pursuant to the provisions of the CISG, this releases both parties from their contractual obligations; however, the right to declare the contract avoided does not affect a claim to damages by the person declaring the contract avoided and thus the person declaring the contract avoided is entitled to claim both positive (actual) loss suffered and negative loss (loss of profits). In such instance, that is, if the seller declares the contract avoided, the compensable positive (actual) loss shall include any damages he suffered, such as, e.g., the transportation costs, insurance premiums or depreciation of the value of goods due to deterioration, etc.; however, the compensable positive loss of the seller does not include the contractual price of the goods sold, since upon declaration of the contract avoided, it is terminated and the seller is entitled to demand from the buyer to return the goods sold. Any different interpretation of the CISG would result to unjust enrichment, a result which is not allowed.
2.4 Actual judgment
The Court found that by means of the Termination Notice (see no. 1 above), if it is interpreted pursuant to the principle of good faith, and having taken into consideration business morals, the Seller had demanded from the Buyer payment of the outstanding purchase price of €36,198.04 by 4 October 2002 and if such payment did not occur within the set period, then the Seller would be deemed to have declared that it avoided the contract of sale incorporated in the relevant invoice [inv. no. 4088886 dated 24 May 2002 -see no. 1 above]. Since the Buyer did not pay the purchase price by 4 October 2002, the Termination Notice resulted to the termination by the Seller of the contract of sale and released the Buyer from its obligation to pay the purchase price, due to the discharge of the parties' obligations arising from the contract of sale.
Based on the above and since the contract of sale had already been avoided by the Seller, the Court rejected the Seller's claim against the Buyer for the recovery of the purchase price as positive damage (actual loss).
As already mentioned, it is not clear whether the Court delivered the above judgment in accordance with the domestic provisions (no. 2.2 above) or the CISG provisions (see no. 2.3 above). The fact that the Court stated that "this would apply even if the provisions of CISG had applied", provides an additional argument for one to conclude that the Court of Appeal applied the Greek domestic provisions; however, the extensive analysis of the CISG provisions can also support an opposite opinion. It is important to note though that the same solution can be legally based under either the Greek domestic law or the CISG.
In addition, the Court stated that: (a) the Seller would only be entitled to demand return of the goods provided to the Buyer following avoidance of the contract of sale; and (b) only if return of the goods is not possible for any reason, is the Seller entitled to demand payment of the value of the goods [it is noted that these two grounds were included in the judgment in the interests of completeness; since the Plaintiff-Seller did not plead those legal grounds and did not include a relevant claim in its action, the Court could not examine them at its own initiative].
2.5 Other citations
Excerpt from commentary by Dionysios P. Flambouras "Case Law of Greek Courts for the Vienna Convention (1980) for International Sale of Goods" (publication forthcoming in the Nordic Journal of Commercial Law).
* Adjunct Lecturer (PD 407) in Civil Law, University of Athens (Dep. of Economics); Advocate of the Athens Bar, Solicitor in England & Wales; Member of M. & P. Bernitsas Law Offices. LL.M. (Brist.), M. Stud. (Oxon), Dr. Jur. in Civil Law (Athens). For comments: <firstname.lastname@example.org>Go to Case Table of Contents
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Greek): Click here for Greek text; see also Commercial Law Survey (Episkopisi Emporikoy Dikeou) 2005, 841 (with introductory note from Ach. Behlivanis at p. 842)
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents