Serbia 28 June 2006 Commercial Court in Cacak (Crystal Sugar case)
[Cite as: http://cisgw3.law.pace.edu/cases/060628sb.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: II P-33/06
CASE HISTORY: 1st instance Commercial Court; 2d instance High Commercial Court [remanded the case for incorrect application of the law]
SELLER'S COUNTRY: Serbia (defendant)
BUYER'S COUNTRY: Germany (plaintiff)
GOODS INVOLVED: Sugar
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
1B1 [Parties in different Contracting States; 6A [Exclusion of Convention by contract]; 7A3 [Observance of good faith]; 35A [Quality, quantity and description required by contract; 38A [Buyer's obligation to examine goods]; 39A [Buyer must notify seller within reasonable time]
1B1 [Parties in different Contracting States;
6A [Exclusion of Convention by contract];
7A3 [Observance of good faith];
35A [Quality, quantity and description required by contract;
38A [Buyer's obligation to examine goods];
39A [Buyer must notify seller within reasonable time]
Editor: Milena Djordjevic
The CISG was applied in this case although the parties explicitly excluded its application in the Contract. However, the judge invoked its provisions stating that "The obligation to comply with the good faith principle in international trade is prescribed by Article 7 of [the CISG], which was signed and ratified by [Serbia] and the parties have referred to it when concluding the contract." It goes without saying that such a decision was erroneous, which was later confirmed by the High Commercial Court decision which remanded the case for incorrect application of the law.
The dispute at hand revolved around non-conforming delivery of one million of metric tons of crystal sugar, agreed upon in the contract of December 2002 concluded between the Serbian seller and the German buyer. Although the contract required sugar to be of Yugoslav origin, the seller delivered Polish sugar. This, in turn, caused damages to the buyer since it had to pay customs for the import of sugar. Had the seller complied with its contractual obligation regarding the origin of the goods, the imported Yugoslav sugar would have been entitled to preferential treatment i.e. excused from payment of customs duties.
The court invoked the provisions of Art. 35, 38 and 39 CISG in its decision, when rejecting the buyer's claim:
"The obligation of the seller, within the meaning of Art. 35 of the Convention, is to deliver the goods which are of the quantity, quality and description required by the contract, while the obligation of the plaintiff as a buyer is to examine the goods or to cause them to be examined, within as short a period as is practicable in the circumstances.
The plaintiff/buyer could have noted by simple examination the label on the bags stating the origin of the sugar.
The plaintiff/buyer has lost its right to invoke non-conformity of the goods within the meaning of Art. 39(1) of the Convention since it failed to send a notice of non-conformity to the seller specifying the nature of non-conformity within a reasonable period of time from the moment he has discovered it or ought to have discovered it.
It has been determined, on the basis of the submitted evidence, that the parties in dispute have agreed to Incoterms-CPT clause, which prescribes that the seller bears the risk of loss and damage to the goods until handing over the goods to the carrier. It has also been determined, on the basis of submitted EUR 1 and other documents, that the first delivery of the sugar occurred on 1 March 2003 while the plaintiff requested the money back [relating to payment of customs duties] in the amount of EUR 85.978,80 from the defendant only on 4 November 2003.
The Court has found that the plaintiff could have easily determined the non-conformity regarding the origin of the goods by simple examination, since the bags contained a label specifying the Polish origin of the goods, and instantly inform the seller of such non-conformity.
The examination of the evidence presented to the Court shows that the plaintiff failed to prove both that it timely made notice of non-conformity and that it returned the goods to the seller. On the contrary, it reacted to the non-conformity of the goods only upon payment of the customs debt.
On the basis of the aforementioned the Court has decided as in the holding.
The fact that the defendant/seller has agreed in the contract to cover all subsequent costs related to the transaction [particularly the customs duties charged by the German Customs administration] did not impact the current decision, since the Court holds that such a contractual stipulation does not change the abovementioned rule on notice of non-conformity."
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Serbian): Click here for Serbian text of case
CITATIONS TO COMMENTS ON DECISION
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