Spain 22 May 2006 District Court Badalona (Bermuda shorts case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/060522s4.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: Rollo No. 574/2003-A
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Spain (defendant)
BUYER'S COUNTRY: Germany (plaintiff)
GOODS INVOLVED: Bermuda shorts
SPAIN: Juzgado de Primera Instancia de Badalona 22 May 2006 (Bermuda shorts Case)
Case law on UNCITRAL texts (CLOUT) abstract no. 796
Reproduced with permission of UNCITRAL
The case concerns a contract between a Spanish company (seller/defendant) and a German company (buyer/plaintiff) for the sale of Bermuda shorts intended for Egypt and Iran; the transport was the responsibility of the seller, which had an obligation to deliver the goods to Dubai. The parties had already had commercial relations earlier. The contract stipulated an advance payment, and the German buyer satisfied this requirement. The seller, however, did not deliver the goods and proceeded to avoid the contract arguing that the buyer had breached its obligation to sell the goods in countries of the Middle East, as garments from previous sales contracts had been detected in Japan.
The court found, in the first place, that the contract had been concluded between the parties through the exchange of electronic mails showing the offer and the acceptance of the order (CISG article 23).
Secondly, the court found that the sales contract contained a fundamental condition that the goods should be resold in countries of the Middle East, but that there was no provision giving the buyer an obligation to verify that its customers in the Middle East sold the products only in such countries. There was therefore no obligation on the part of the buyer to supervise the chain of sales following its own sale to its customer in the Middle East.
As was adequately demonstrated in the proceedings, the buyer performed its obligation to sell the goods to countries in the Middle East. There being no basis for the seller to declare the contract avoided, it was concluded that the seller had breached the sales contract by not delivering the goods stipulated in the contract (CISG article 40), all the more so as the contract was not a distribution contract but a sales contract relating not to delivery of goods by instalments but to a single delivery, even though other contracts existed. Consequently, avoidance of the contract could not be based on an expected future breach of contract by the buyer -- something that had not yet occurred. Such avoidance was permitted in the Convention (CISG article 73(2)) only in cases of delivery of goods by instalments, and not with individual, isolated deliveries as in the present case.
Thirdly, as a result of the foregoing, the court found that the buyer was entitled under CISG article 45 to claim damages in accordance with CISG articles 74 to 77 and to declare the contract avoided under CISG article 49(1)(a).
With regard to the refunding of the price, the buyer claimed a small part of the price that was not returned by the seller with the argument that this related to the cost generated by the bank transfer. The court found that that amount must also be refunded since the circumstance in question was not demonstrated and, moreover, the restitution of the price referred to the whole quantity paid, as could be deduced from CISG article 81(2).
The court also awarded the buyer interest on the basis of CISG article 84(1).
Regarding damages, the court awarded to the buyer, under the heading of consequential damages, the costs of lawyers' fees in relation to extrajudicial claims addressed to the plaintiff outside Spain. Under the heading of loss of earnings, the court ordered the seller to pay the buyer the difference between the price of the sales contract breached and the price that the buyer would have received from its customer.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract]; 73B [Anticipatory breach (avoidance in installment contracts): refusal of future installments]; 74A ; 74A1 [General rules for measuring damages: loss suffered as consequence of breach; Includes loss of profit]; 84A [Restitution of benefits received: seller bound to refund price must pay interest]
49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract];
73B [Anticipatory breach (avoidance in installment contracts): refusal of future installments];
74A ; 74A1 [General rules for measuring damages: loss suffered as consequence of breach; Includes loss of profit];
84A [Restitution of benefits received: seller bound to refund price must pay interest]
CITATIONS TO OTHER ABSTRACTS OF DECISION
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1145&step=Abstract>
Spanish: CISG-Spain and Latin America website <http://www.uc3m.es/cisg/respan50.htm>
CITATIONS TO TEXT OF DECISION
Original language (Spanish): CISG-Spain and Latin America website <http://www.uc3m.es/cisg/sespan50.htm>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1145&step=FullText>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
Translation [*] by Luiz Gustavo Meira Moser [**]
FACTS OF THE CASE
Plaintiff [Buyer] requested from the Defendant [Seller] the payment of € 40,686.11 as a result of the termination of a contract for the sale of Bermuda shorts.
The contract asserted that the delivery of the goods would be in the Middle East and that the [Buyer] would pay in advance, including the cost of transportation to Dubai, the total price of € 129,154.48. The contract also set out that the [Buyer]'s customer would resell the goods in the Middle East. Nevertheless, before the date of delivery, the [Seller] ascertained that the [Buyer]'s customer would possibly resell the goods to Japan, a place where the [Seller] had an exclusive distributor. Therefore, the [Seller] immediately notified the [Buyer] that it would not deliver the goods. The [Buyer] alleged that it asked the [Seller] to respect their contract, but the [Seller] refused to perform its central obligation.
Nonetheless, the [Seller] paid back the principal amount previously anticipated by the [Buyer], however, discounting the amount of € 257.12 (bank transfer costs). [Seller] alleged that the [Buyer] had breached its obligation of reselling the goods exclusively to customers in the Middle East and that this contradictory behavior by the [Buyer] was an anticipatory breach of contract, which would exempt the [Seller] from paying interest and unpaid extra costs.
[Buyer] requested from the [Seller] return of the remaining unpaid amount (€ 257.12), as well as legal fees related to the expenses with [Seller]'s notification (€ 4.070,47), lost profits (€ 36,000) and legal interest (€ 358.52).
ON THE ABOVE
The Court of First Instance sustained [Buyer]'s claim in its entirety.
The Court a quo applied the United Nations Convention on International Sales of Goods (Art. 1(1) CISG) and held that the contract had been concluded in accordance with Art. 23 CISG. Moreover, the Court stated that the [Buyer] was not contractually responsible to assure that its customers would not resell the goods to places far from the Middle East.
The Court held that the [Buyer] did not commit an anticipatory breach of contract because its obligation was only to deliver the goods to a customer based in the Middle East, not to oversee the later destination of the goods. Additionally, the Court stated that the contract was neither a distributorship contract, nor an installment contract governed by Art. 73(2) CISG. Accordingly, the [Seller] could not avoid the contract by claiming an anticipatory breach by the [Buyer].
Finally, the Court decided that the [Buyer] performed its obligations and the [Seller] breached its central obligation to deliver the goods. Consequently, the [Buyer] was allowed to declare the contract avoided under Art. 49(1)(a) CISG and to claim damages in accordance with Article 45(1) (a) CISG.
ON THIS GROUND
The Court sustained [Buyer]'s claim and compelled the [Seller] to repay the amount due, in accordance with Art. 81(2) CISG, plus interest on that amount under Art. 84(1) CISG. The Court also granted to the [Buyer] the payment of legal fees as well as lost profits (Art. 74 CISG) calculated as the difference between the purchase price and the price agreed by the [Buyer] and its customer.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff is referred to as [Buyer]; Defendant is referred to as [Seller]. Amounts in European currency (Euros) are indicated as [€].
** Luiz Gustavo Meira Moser is a member of the Brazilian Arbitration Committee, YIAG, Association Suisse d'Arbitrage (ASA), ICDR, International Law Association - Brazilian Committee and Queen Mary Case Translation Programme participant. Moser is the Brazilian correspondent in the Global Sales Law Project.Go to Case Table of Contents