France 19 December 2006 Cour d'appel [Appellate Court] Rouen (Potato seedling case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/061219f1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 05/03275
CASE HISTORY: 1st instance Tribunal de Grande Instance de Rouen 13 July 2005; 3d instance Cour de cassation 16 September 2008 [affirming]
SELLER'S COUNTRY: Netherlands (defendant)
BUYER'S COUNTRY: France (plaintiff)
GOODS INVOLVED: Potato seedlings
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4A [Scope of Convention (issues covered): only contract dealings between buyer and seller]; 35A [Conformity of goods to contract: quality, quantity and description required by contract]; 36A2 [Time for assessing conformity of goods (conformity determined as of time when risk passes to buyer): seller responsible when lack of conformity becomes apparent later]; 38A [Buyer's obligation to examine goods: time for examining goods]; 39B2 [Requirement to notify seller of lack of conformity (cut-off period of two years): effect of time limit: buyer loses right to rely on non-conformity]; 40A [Seller's knowledge of non-conformity: seller fails to disclose known non-conformity]
4A [Scope of Convention (issues covered): only contract dealings between buyer and seller];
35A [Conformity of goods to contract: quality, quantity and description required by contract];
36A2 [Time for assessing conformity of goods (conformity determined as of time when risk passes to buyer): seller responsible when lack of conformity becomes apparent later];
38A [Buyer's obligation to examine goods: time for examining goods];
39B2 [Requirement to notify seller of lack of conformity (cut-off period of two years): effect of time limit: buyer loses right to rely on non-conformity];
40A [Seller's knowledge of non-conformity: seller fails to disclose known non-conformity]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (French): CISG-France database <http://www.cisg-france.org/decisions/191206v.htm>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Queen Mary Case Translation Programme
19 December 2006
Translation [*] by Leandro Tripodi [**]
Translation reviewed by Paul Komba,
Barrister-at-law (Middle Temple, London) and Fellow of Wolfson College, University of Cambridge
[FACTS OF THE CASE]
On 5 February 1998, Agrico Cooperatieve Handelsvereniging Voor Akkerbouwgewassen B.A. [Seller], a company incorporated under Dutch law, delivered 25 tons of Estima potato plants to the French firm Société Industrielle et Agricole du pays de Caux or S.I.A.C [Buyer]. The plants stemmed from seeds produced by Mr. Schenk in The Netherlands. They were identified as lot no. 5-6329 and certified by the Dutch regulatory body NAK.
The [Buyer] grew and dug up the plants in September 1998 after certification by the French Official Control Service (SOC). Part of the yield (A1) was sold to potato farmers and the remaining lot (i.e., 21 tons) was retained for a second multiplication.
The tubers resulting from that second multiplication were grown and, after certification by the SOC, [Buyer] harvested them in September 1999 and sold them to a number of French farmers.
In 2000, the potato plants cultivated by the farmers were invaded by the Ralstonia Solnacearum bacteria, also known as Brown Rot. As this is a quarantinable disease, the Regional Plant Protection Agency (SRPV) launched an enquiry into the outbreak. In October 2000, the Agriculture and Forestry Authority in Upper Normandy, by virtue of Articles 352 and 359 of the French Rural Code, ordered the [Buyer] to destroy the contaminated crops and disinfect the premises as well as the equipment. The authorities also imposed a ban on further cultivation of potato plants.
On 14 November 2000, [Buyer] obtained an interim measure to instruct an expert witness. By successive orders, this measure was extended to several other traders and farmers.
In his report dated 17 May 2003, the expert witness, Mr. A. found that the only probable source of contamination was consignment No. 5-6329 from The Netherlands which was introduced in the spring of 1998. That was, according to the expert, the consignment that [Buyer] purchased from [Seller]. The expert witness assessed the amount of damages suffered by [Buyer] to be EUR 316,835.74, and estimated the global losses to the farmers involved at EUR 420,003.96.
[DECISION OF COURT OF FIRST INSTANCE]
On 13 July 2005, the Tribunal de Grande Instance of Rouen ruled on applications brought by the [Buyer] against the [Seller] on 4, 5, 7, 8, 9, 10, 11, 16, 17, 22, 25 and 28 July 2003 and 17 February 2004. The Tribunal also ruled on claims filed in May 2004 by Mr. Sylvain acting as manager for EARL de la Régie (a farm corporation based in Gannay-sur-Loire] as well as on applications by 19 other farmers whose crops had also been contaminated.
The tribunal having confirmed its own jurisdiction under the Brussels Convention of 27 September 1968 relating to the application of Articles 35 and 36 of the United Nations Convention on Contracts for the International Sale of Goods (CISG), and as a result of matters set out above, ordered that:
|-|| EARL de S.A. Forestiere Plichet be joined as a party to the proceedings (under
Arts. 328 to 330 of the New Code of Civil Procedure) in lieu of Mr. ..., summoned at
the request of the [Buyer];|
|-||[Buyer] pay EARL de la Régie the sum of EUR 4,821.81 as compensation for losses
suffered and EUR 1,500 for costs;|
|-||[Buyer] and [Seller] be jointly and severally liable to account for the sums of:
|-||The above awards of damages be made, together with interest, from
the date of judgment;|
|-||[Seller] pay [Buyer] the sums of EUR 316,835.74 for physical damage,
EUR 25,000 in compensation for pain and suffering and EUR 15,000,
pursuant to Art. 700 of the New Code of Civil Procedure;|
|-||[Buyer] be awarded interest from the date of judgment;|
|-||[Buyer] and [Seller] jointly and severally pay, as required by Art. 700
of the New Code of Civil Procedure, the sums of:
|-||[Seller] provide [Buyer] with a guarantee of payment regarding the
sums owed to the farmers, including interest;|
|-||An interim enforcement of the judgment be awarded;|
|[Seller] pay litigation costs, including trial and expert witness costs.|
[Arguments raised on appeal]
[Seller] made an application for leave to appeal against this decision and, on the faith of [Seller]'s final submissions -- to which this court shall refer so as to provide a complete background of allegations and grounds -- [Seller] asks that the decision of the first instance be reversed in full and that the [Buyer] and the farmers lose the right to rely on a non-conformity argument as their action is time-barred, under Articles 38 and 39 of the CISG and under Article 1648 of the French Civil Code.
Further or alternatively, [Seller] sought leave to set aside the expert witness report produced by Mr. A. Moreover, were the court to reject these submissions, [Seller] argued, the court should remove [Seller] from the proceedings and strike out the actions brought by [Buyer] and the farmers. Besides, in the event that the court finds that [Seller] is liable for damages suffered by the farmers and the [Buyer], the [Seller] submits that any amount of losses should be assessed as follows: EUR 45,130.31 payable by [Buyer] and EUR 255,077.63 by the farmers.
Further still, [Seller] asks this court to impose a joint liability for damages as between [Seller] and [Buyer]; and that [Buyer] should be ordered to pay [Seller] the sum of EUR 15,000, as required under Art. 700 of the New Code of Civil Procedure. Furthermore, [Seller] argues that the farmers should be ordered to pay, jointly and severally, the [total] amount of EUR 5,000 on the basis of the same provision of the New Code. Lastly, [Seller] contends that all respondents should be ordered to pay full litigation costs: that would include costs incurred at trial and on this appeal, plus the costs for the expert witness report -- subject to the right of recovery by attorney on behalf of SCP CVRE Law Firm as provided under Art. 699 of the New Code of Civil Procedure.
[Seller] describes how it rigorously observed the procedures involved in the growing of its plants, and alleges that [Buyer] was in breach of the terms of the contract, under which [Buyer] agreed not to perform a second multiplication of the plants. (In fact, [Buyer] is alleged to have performed three multiplications in total). Furthermore, [Seller] states that such contractual stipulation is consistent with French legislation.
[Seller] contends that, under the CISG, [Buyer] lost the right to sue [Seller] and that the CISG is applicable to contracts for the international sale of goods concluded between parties of two signatory States. Further, [Seller] submits that Art. 39 of the CISG precluded [Buyer] from relying on a lack of conformity of the goods unless notice of the nature of the defect has been given to [Seller] at the latest within a period of two years from the date on which the goods actually passed to [Buyer]. Further still, [Seller] contends that that this is a strict time limit and that the concept of non-conformity includes latent defects unknown to the [Seller].
[Seller] denies having admitted that the area where its supplier, Mr. Schenk, operates had been contaminated and states that it was only aware that the area was close to a contaminated area. [Seller] then submits that [Buyer] cannot rely on the provisions of Art. 40 of the CISG.
[Seller] also avers that the action by the farmers or sub-purchasers is time-barred: The Vienna Convention does not apply to the relationship between the sub-purchasers and the initial seller; instead, the "short time" rule of Art. 1648 of the French Civil Code should apply; [Seller] was first summoned, under request of the sub-purchasers in March and May 2004, while the disease was detected as early as the summer of 2000. Since the limitation period is not subject to interruption, the court should dismiss the sub-purchasers' claims.
[Seller] submits that the sub-purchasers have a contractual and not a tort-based claim so long as precedents on chains of contracts apply which allow the end-user to sue the manufacturer.
Alternatively, [Seller] seeks a declaration that the expert witness report should be set aside since the expert witness failed to observe the adversarial principle when considering a number of documents provided by the SRPV. These documents, it was alleged, were not subject to the parties' discussion prior to the report being filed and during the proceedings the documents were only partially discussed. Moreover, the expert witness did not himself undertake the inspection.
Further or alternatively, [Seller] seeks permission to be dismissed from the proceedings on the basis that no hidden defects have been shown to have existed at the time of passing of risk, as required by the CISG. Moreover, it would be impossible, according to [Seller], to ascertain such defects given the lapse of time between the delivery of goods and the moment the bacteria was detected, and on account of the successive multiplications of seedlings. Thus, it is highly likely that there were several potential sources of contamination during those processes. Besides, there is no evidence to suggest that [Seller] is to blame, no causal link exists between [Seller]'s actions and the damage suffered by the victims. Accordingly, [Seller] rejects as unacceptable the contention that the contamination originated from The Netherlands.
In essence, [Seller]'s submissions are a reiteration of arguments raised before the Tribunal de Grande Instance. [Seller] contends that this tribunal erred in being too quick to find that the likely cause of contamination of the goods was all attributable to [Seller]. [Seller] also attacks the tribunal for deciding that the source of such contamination was within the area where the Dutch farmer Schenk is established, in order to assess the extent of [Seller]'s liability. [Seller] further maintains that the expert witness could not confirm any contamination in the original consignment imported in 1998. Furthermore, [Seller] places reliance on terms of the CISG stating that the seller is liable only for any defect of conformity existing at the time of the passing of risk and, where such defects occur long after the passing of risk -- in the absence of any proof of contamination at the time of delivery to [Buyer] and where there is doubt -- the buyer should bear the consequences for failure to provide satisfactory evidence of lack of conformity.
[Seller] refutes the presumptions underlying the trial judge's decision and describes them as lacking in seriousness and consistency as well as accuracy. [Seller] identifies gaps in the SRPV and expert reports, both of which name the [Buyer] as the potential source of contamination. Yet, [Seller] argues:
|-||The successive multiplications of seedlings by [Buyer] may well have brought
in new external factors of contamination, rendering the finding of [Seller]'s
liability inaccurate. Crucially, the conditions under which [Buyer] cultivated and
multiplied the seedlings were not fully investigated -- especially the conditions
that prevailed in 1998 at the farms of Ectot-lès-Baons and Gremonville. The
SRPV at Rouen made serious errors in maintaining that the plots of land in
which [Buyer] sowed Estima seedlings had not experienced any previous
potato cultivation. In fact, that does not hold true for at least one of the plots.
Vital pieces of evidence gathered by the SRPV were passed on to the expert
witness quite late and thus were neither verified nor fully incorporated in the
report. This, the [Seller] contends, undermines the discussion of relevant
|-||The traceability of [Buyer]'s production process was impaired because [Buyer]
rents the plots where it cultivates plants; hence, the information about those
plots is quite incomplete. The contentious consignment was tested both in The
Netherlands and in France prior to its introduction and, all in all, the tests
produced negative results.|
|-||The contested batch of plants was part of a larger consignment sold to other
customers. These customers successfully multiplied and sold the plants whose
progeny have also been free from any bacterial attack.|
|-||Mr. Schenk's business is extensively supervised, probably because it is located
in a high-risk area, and such a business has been long recognized as exempt
from any attack before and after the delivery of the contentious lot. It is
therefore wrong to suggest that Mr. Schenk was banned from cultivating
potatoes and that the terms of any such prohibition were breached by both the
[Seller] and [Buyer].|
|-||Only the plants multiplied by [Buyer] in 1999 were affected by the Ralstonia
Solanacearum virus at the time of the 2000 harvest. The award of
compensation made by the European Commission to the victims of attacks of
Ralstonia Solanacearum cannot be taken as any admission of liability, since
the settlement may have been granted on the basis of mere presumption.|
|-||[Buyer] performed unauthorized multiplications, breaching the terms of the
contract which provided for a single multiplication to be performed, and the
tribunal wrongly construed a fax from [Seller] dated 11 March 1999 as an
indication that [Seller] had approved of [Buyer]'s move to carry out several
multiplications of the plants.|
|-||The unauthorized multiplications, coupled with the [Buyer]'s disregard for cultivation standards, constitute the source of the Ralstonia Solanacearum outbreak.|
[Seller] finally submits that [Buyer] could not discharge the onus of proof which squarely falls upon [Buyer].
In the alternative, [Seller] claims for apportionment of liability with [Buyer] and challenges the way in which the expert witness assessed the damage suffered by the farmers.
Buyer] asks the court to uphold the findings of the tribunal as well as that an award of costs be made against [Seller].
At the outset, [Buyer] denies having agreed with [Seller] that [Buyer] would not proceed with a second multiplication. [Buyer] points out that among the parties a practice exists which falls outside the contractual arrangements, but well into technical standards. Moreover, [Buyer] denies having performed a third multiplication of the plants and stresses that French Official Service had certified its production. .
[Buyer] indicates that, contrary to [Seller]'s claims, when the Estima consignment was introduced and tested in France, the test results did not prove all negative and that at least one of the plants tested positive. However, control tests focused on Clavibacter and not on Ralstonia Solanacearum.
In addition, a farmer who did not purchase "Estima" plants in the 5-6329 consignment from [Buyer] -- but instead sourced directly from [Seller] -- had his plantation ruined due to Ralstonia Solanacearum, following the IF+ tests performed on two different serums and a positive confirmation test.
[Buyer] contends that Article 39 of the CISG is not applicable to hidden defects, but only to a defect of conformity. Moreover, [Buyer] alleges that [Seller] knew that the operations of its supplier, Mr. Schenk, were located in a contaminated zone where potato seeds should not have been sown -- a fact that [Seller] admitted before the first instance tribunal. Further, [Buyer] argues, [Seller] concealed that circumstance from [Buyer] and cannot therefore avail itself of the time-limitation of Article 39, as provided by Article 40 of the Convention. By the provisions of Article 40, the seller is not entitled to rely on articles 38 and 39 where the lack of conformity pertains to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.
[Buyer] submits that [Seller]'s plea to set aside the expert witness report should be declared inadmissible because [Seller] did not raise such an argument in the first instance proceedings but moved straight to the merit of the case. Besides, under Articles 175 and 112 of the New Code of Civil Procedure, an expert witness is perfectly entitled to collect written as well as oral evidence from anybody providing that the names, surnames and other details of such persons are clearly specified. The parties, [Buyer] argues, were able to discuss the expert's findings and numerous meetings took place which involved the parties, the expert witness, the SRPV and its Dutch counterpart.
On the faith of Article 35 of the CISG, [Buyer] says it has produced evidence suggesting that the source of contamination was in The Netherlands and that there was a lack of conformity of the goods delivered by the Dutch seller. [Seller] has adduced no evidence to the contrary as the tests carried out by NAK are not sufficiently accurate [to defeat Buyer's argument]. Besides, [Buyer] would like to remind the court that under Art. 36 of the CISG, the seller is liable for any lack of conformity existing when the risk passes to the buyer, irrespective of whether the defect is only detected at a later stage.
[Buyer] denies that it performed a third multiplication of the plants and challenges the claim that expert investigations into its production methods were inadequate.
In further submission, the [Buyer] contends that::
|-||Every possible source of contamination at [Buyer]'s premises was investigated
by both the SRPV and the expert witness and the results of these investigations
|-||Unlike the production zone where Mr. Schenk operates, Pays de Caux is free
from Ralstonia Solanacearum;|
|-||Mr. Schenk shares his equipment with another farmer;|
|-||The tests performed by the health services do not guarantee the absence of
germs and, furthermore, the contentious lot gave rise to a positive result under
|-||The expert witness and Plant Protection Agency agree that the contamination
stems from lot no 5-6329;|
|-||By commercializing potato plants grown from seeds arriving from a
contaminated zone, [Seller] violated European regulations -- which only
provide for the sale of consumption potatoes -- and tried long to conceal this
fact by withholding the information required by the expert about the location
of the affected areas. [Seller] meant to profit from that fraudulent concealment,
since seed potato prices are five times higher than the cost of consumption
|-||Evidence of contamination collated by the Plant Protection Agency was
persuasive enough for the European Commission to award compensation to
France under Directive 2000/29, after a review confirmed the seriousness of
the health control measures and administrative investigations.
|-||There has been a positive result for Ralstonia Solanacearum outside
[Buyer]'s lands (in the case of Mr. Alvoet);|
|-||[Seller] experienced several cases of outbreak in the lots sold in 2004;|
|-||The SRPV was wrong to assert that all the plots sowed with "Estima" plants
were virgin since one of them was cultivated with potatoes in 1994;
nonetheless, this fact alone has no consequences because the area assigned to
[Buyer], as well as its crops, were free from Ralstonia Solanacearum prior
to the issuance of the epidemic warning;|
|-||Several official services have praised [Buyer]'s product traceability;|
|-||The tests performed in The Netherlands are unable to guarantee [the health of]
plants originating from a high-risk area;|
|-||The cases of contamination in France referred to by [Seller] were isolated ones
and have since been eradicated;|
|-||Although [Buyer] cultivates different varieties of potatoes, only "Estima" plants were affected by the Ralstonia Solanacearum bacteria.|
[Arguments raised by the farmers as respondents]
The farmers request that the decision be upheld.
They urge that their action is not time-barred, since it bears a quasi-tort character and hence does not fall under Article 1648 of the French Civil Code. Alternatively, if the court were to retain the contractual nature of the action, they would argue the contract was a sui generis one and not a proper contract of sale.
If, however, the court decided to apply Article 1648 of the French Civil Code, the farmers request the court to find that they acted within a short time after the expert's report was filed. The [farmers] also ask the court to have regard for the difficulties in identifying the origin of the contamination, and they submit that when the expert's report was filed the limitation period was interrupted. Moreover, [Seller] waived its right to rely on the argument of prescription of an action by not raising the issue at trial.
They also oppose the request to invalidate the expert witness' report.
Finally, they maintain that [Buyer] is liable to them in breach of contract whereas their action against [Seller] lies in quasi-tort.
In the light of this, by arguments dated 3 May 2006, Mr. E. L..., EARL Deve, EARL Bigot, EARL Des Hetres, Mr. Rémy L..., Mr. N..., SCEA De La Chapelle, Mr. D..., SCEA Vandenmersch, Mr. B..., Mr. D..., Mr. C..., Mr. B..., Mrs. L..., Mrs. F..., Mr. H..., Mr. B..., Mr. J..., EARL De Forest, ask the court to declare [Seller]'s appeal admissible but unfounded and to confirm the first instance decision in its entirety. Furthermore, they ask the court to order [Seller] to pay the amount of € 1,000 to each of them, in accordance with section 700 of the New Code of Civil Procedure, as well as the costs incurred at trial and appellate level
On 23 June 2006, EARL de Yemanville appealed to seek confirmation for its own benefit of the judgment against [Buyer]. Also, if [Seller]'s appeal were to be rejected, Earl de Yemanville would request the court to confirm the judgment regarding joint and several liability of [Seller]. In conclusion, Earl asks the court to order [Seller] and [Buyer] jointly or severally to pay EUR 1,500 and costs, by application of Article 700 of the New Code of Civil Procedure..
Mr. Claude H... filed his final brief on 19 September 2006, requesting the court to:
|-||Quash the order closing the pre-trial stage [ordonnance de clôture];|
|-||Declare [Seller]'s appeal admissible but unfounded and to confirm the trial award of costs for the first instance (including costs for the expert report) and appeal proceedings against [Seller] as well as the sum of EUR 1,000 as provided by Art. 700 of the New Code of Civil Procedure.|
On 19 September 2006, EARL de la Régie made similar submissions in its last brief on 19 September 2006.
[RULING OF THE COURT]
On the above facts:
Whereas, it is appropriate to quash the pre-trial closing order and to receive the briefs thereafter filed by Mr. H... and EARL de la Régie, taking into consideration the tardiness and extensiveness of the brief filed by [Seller] on 1 September 2006 -- as to which no other party disagrees.
On the appeal of [Seller] against [Buyer] and on the motion to dismiss [Buyer]'s claim for falling outside the limitation period
Whereas, the parties do not now disagree that the CISG is the law applicable to the contract between [Seller] and [Buyer];
Whereas, [Seller] alleges that the action brought by [Buyer] is time-barred under Art. 39 of the Convention;
Given that [Seller] is entitled to the defense of estoppel, despite not raising it at raising at trial;
Whereas, Articles 38 and 39 of the CISG, which provide the conditions under which the buyer can bring an action against the seller for lack of conformity of the goods with the contract, state that the buyer must examine the goods or cause them to be examined, within as short a period as is practicable under the circumstances (Art. 38), and given that under Art. 39 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 defect within a reasonable time from the moment he discovered or ought to have discovered such defect and, since he loses such right within two years from the date of delivery, unless this time-limit is inconsistent with the duration of a contractual period of guarantee;
Whereas, the limitation period under the above provisions is deemed strict under penalty of preclusion, and is not subject to interruption; given that the period begins to run from the date of the delivery of the goods, barring any hidden defects; considering that, unlike [Buyer]'s allegation, hidden defects fall under the concept of defect of conformity; and that their discovery has no bearing upon the start of such limitation period;
Whereas, [Buyer] seeks to avail itself of the provisions of Article 40 of the CISG, which state that the seller cannot rely on Articles 38 and 39 if he knew or should have known the facts giving rise to the defect and which he did not disclose to the buyer;
Whereas, initially, the court needs to decide whether the goods were affected by a defect of conformity in the sense of Article 35 et seq of the CISG before allowing [Buyer] to place reliance on Art. 40;
The court finds that the issue of the dismissal of [Buyer]'s action must as a result be determined prior to the question whether the plants delivered by [Seller] were infected with Ralstonia Solanacearum and whether [Seller] knew about such defect of conformity, and if so whether [Seller] concealed such defect from the [Buyer].
On the admissibility of the action brought by the sub-purchasers [farmers] against the [Seller]
Whereas, pursuant to its Articles 1 and 4, the CISG only applies to international sales and exclusively governs the rights and obligations between the parties, in this instance, between [Seller] and [Buyer] and given that the CISG does not apply to dealings with sub-purchasers [the farmers in this case] and that, hence, these are not parties to the international contract;
Whereas, [Seller] alleges that, under the notion of chain of contracts, the sub-purchasers' cause of action is breach of contract and subject to the "short time" requirement of Art. 1648 of the French Civil Code as regards hidden defects in the goods;
Whereas, the original international sale is admittedly governed by the CISG and no contractual relationship exists between [Seller] and the farmers who purchased from the [Buyer], Art. 1641 et seq. [of the French Civil Code] cannot apply and the action for damages brought by the sub-purchasers thus arises from quasi-tort;
Whereas, according to the Hague Convention of 3 October 1973 on product liability, the applicable law is the law of the State where the injury occurred, if that State is also the place of habitual residence of the persons suffering damage (Art. 4 of the Convention);
The Court finds that French law should govern the present dispute;
Whereas, the action for quasi-tort liability commenced by the sub-purchasers, based on Articles 1382, 1383 and 1384 of the French Civil Code, is not time-barred, since the limitation period is ten years, pursuant to Article 2270-1 of the French Civil Code and the claims were brought in within that period;
Concerning [Seller]'s liability for the supply of Ralstonia solanacearum-infected plants
On the [Seller]'s motion to declare null and void the expert witness' report
Whereas, [Seller] raises for the first time the issue of setting aside the report by the expert witness, alleging that he conducted his operations in a non-adversarial fashion and took into consideration materials which he did not gather and survey in person;
Considering that those grounds are based on the regime of nullity under Article 175 of the New Code of Civil Procedure;
Given that Article 112 of the New Code of Civil Procedure states that the nullity of procedural papers may be raised as and when they are served; but their impropriety shall be waived where the person seeking to rely upon the same, has proffered, subsequent to the impugned instrument, a substantive defense;
The court finds that [Seller]'s application to set aside the expert witness report should be dismissed since that party discussed the report at trial without raising the issue of its nullity;
Whereas, the facts taken into account by the expert witness have been discussed by the parties as his investigations were under way;
Evidence and burden of proof
Whereas, in order to hold [Seller] liable either under Articles 38 and 39 of the CISG or Articles 1382 and 1383 of the French Civil Code, one needs to prove that [Buyer] delivered potentially defective goods in February 1998;
The court finds that the burden of proof lies with the parties seeking to hold [Seller] liable;
Whereas the expert witness made the following findings:
The tests were performed on samples from all the farms involved in this dispute, and from homogeneous lots directly derived from the clonal source 5/6329, having the same physiological age, from each one of the relevant crops. Those tests have revealed the presence of the Ralstonia Solanacearum bacteria. The ensemble of lots of other varieties produced both by [Buyer] and by its clients have all proved negative. The likely sources of contamination within [Buyer] were all explored. The evidence gathered by the SRPV at Rouen bear witness to that fact, and we have been able to confirm it when inspecting [Buyer]'s premises. The plots where the 'Estima' were planted have never experienced any previous potato cultivation. [Buyer] does not conduct irrigation. Farming equipment and facilities are regularly disinfected. There is no use of external materials. There is no place for use of industrial residues, sludge or scum from factories.
All these facts lead to the conclusion that the source of contamination was external.
The analyses carried out on the contentious consignment, both by the NAK in The Netherlands and the SOC in France did not reveal any contamination. Therefore, it is no longer possible to assert a direct contamination of the lot imported in 1998. However, there has been contamination in The Netherlands since 1995. Even though no contamination in Mr. Schenk's land has been proved, farms in the zone where he is established are contaminated. In spite of the efforts by the Dutch government, contamination is latent in almost all potato-farming areas. If the level of contamination is too weak at the outset, no analyses will reveal its existence. Under certain favorable environmental conditions, the disease can develop by means of successive multiplications two years after the introduction of the plants. We concur with the conclusions reached by the Plants Protection Agency, the central administration and the LNPV: these investigations lead us to believe that the only probable source of contamination is the batch of Estima seeds originating from Holland and introduced in the in the spring of 1998.
To assess the amount of losses of [Buyer] and of each of the farmers involved, concerning the destruction of crops, the tracking measures and, notably, the commercial damages:
We have assessed the loss suffered by [Buyer] and the farmers in Chapter VIII.
The facts date back to 2000, the figures are in Swiss francs, all calculations were made in Swiss francs and the result converted into Euros. The final damage for the SIAC amounts to 316,835.74 €. The overall damage to farmers is EUR 420,003.96.
Since the facts date back to the year 2000; the figures are shown in Swiss francs and then converted into Euros. The final damages payable to [Buyer] amount to EUR 316,835.74; whereas the overall losses to the producers amount to EUR 420,003.96."
Whereas, [Buyer] as well as the farmers seek to uphold the integrity of the expert witness report;
Whereas, [Seller] dismisses the expert witness report as unacceptable and considering that [Seller] denies having at any time admitted liability for the occurrence of the contamination at trial;
Whereas, [Seller] reiterates that the lots sold to [Buyer] were certified by the Dutch regulatory body, and its French counterpart, and that, although the business of their supplier, Mr. Schenk, is located near the sites of contamination, such business is so rigorously controlled that it has never faced any production ban from the authorities.
Whereas, in its last conclusions [Seller] stresses the diversity of possible causes of contamination, be it from the original plants or due to external factors;
Considering that, in view of a number of reasoned critiques by [Seller], the expert's report and the administrative investigation cannot be immediately taken as "serious, concordant and accurate presumptions" within the meaning of Art. 1353 of the French Civil Code, so as to warrant reversal of the burden of proof;
The court deems it appropriate to revisit the expert witness report and the conclusions of the administrative investigation;
Whereas, it should be recalled that:
The SRPV investigation -- which was conducted in accordance with the Order of 11 February 1999 on the control of the bacteria after GAEC H, a Champagne-based truck-farmer, reported the outbreak in August 2000 -- highlighted the presence of Ralstonia Solanacearum in a sample obtained from that farmer's crop. That investigation concluded that the contaminated patato seedlings commercialized in Champagne originated from the lot No. 5-6329 which [Seller] sold to [Buyer] in February 1998. Besides, the investigation showed that the source of infection is not endemic but lies outside [Buyer]'s operations and that the only possible source of contamination is the consignment of Estima potato seedlings originating from the Netherlands and introduced in 1998.
Following that investigation, the French government obtained compensation from the European Community in accordance with Art. 23.1 of the European Directive 2000/29, which allows a Member State to obtain a financial contribution for the control and compensation of the outbreak, where such outbreak is due to a harmful organism introduced through consignments of vegetable products from either a third country or the Community;
Whereas the expert witness came to his conclusions after conducting numerous investigations both with the French authorities in charge of control measures (having thus relied on the investigations carried out by the SRPV under the administrative investigation) and within premises occupied by [Buyer] and [Seller]'s supplier, Mr. Schenk, as well as with the P.V. of The Netherlands, and considering that the [expert] has successfully answered all questions from all the parties involved;
Whereas, the expert has noted the following points:
The potato plants derive from a second multiplication of seedlings that [Buyer] purchased from [Seller] (A2) and harvested in 1999 which developed the disease after sale to farmers who cultivated them in 2000;
The expert states the features of the disease and notes in particular that contaminated plants may well produce healthy tubers and those plants which show no sign of disease can nevertheless produce infected tubers. The disease propagates through surface waters and particularly through irrigation waters and potato seedlings represent the main vector of cross-border contamination;
Among the regulations applicable at the time of the sale, namely February 1998, one finds the Community Directive 77/93 CCC (Annex PVI) and the decision 97/649, which allow Member States temporarily to take additional measures in order to protect themselves against the spread of Ralstonia Solanacearum originated from The Netherlands. That text has now been repealed.
The expert stresses the need to perform several cross-tests given the risk of false positive or false negative results in certain tests; and where the infection proves very weak, it is possible that screening tests are not robust enough to detect the disease where it affects very few subjects likely to escape the probe test and develop themselves through multiplication;
According to the administrative investigation which followed the declaration of the disease by GAEC H, a truck-farmer in Champagne, the phytosanitary passport of 1999 has been tracked back to [Buyer] who purchased the plants from [Seller] in 1998; such study found that, given the absence of irrigation on [Buyer]'s crops and the fact that [Buyer] cultivated certified plants only on lands which were known to have had no previous potato growing and that [Buyer] did not share any materials with other farmers, the likely source of contamination was the lot of potato seedlings stemming from The Netherlands and introduced in February 1998 and multiplied over two years by [Buyer].
Three other plants producers No. 210/189 and 210/014 in the North and No. 22/278 in Champagne Ardennes received seed potatoes directly from the Dutch producer and those were resold to several consumption potato farmers. One Picardie-based farmer has withheld part of his 1999 harvest for personal use in 2000. The routine analysis showed positive results. The confirmation tests were unable to isolate the bacteria. Even though the cultivation was considered negative under applicable regulation, the crops were eventually destroyed as a precautionary measure.
According to the letter dated 27 April 2001 from the DGAL/SDQPV, concerning the results of a survey conducted by the EEC in 1999, the overall results show the extent of the contamination in potatoes and surface waters. Those results also indicate the level of control methods put in place by The Netherlands.
The biological tests performed in The Netherlands, while carried out in compliance with the procedure laid down by the EEC Directive L235 of 21 August 1998, do not guarantee a 100% result. There is a narrow margin of error, basically due to the sampling process. However, the responsiveness of the tests is very high and can reveal the presence of bacteria even when the symptoms have not been observed in the plants field. In fact, the bacteria may lie dormant for some time. The tests were performed on samples of 200 tubers each 25 tons and other tests conducted in The Netherlands and France proved inclusive.
The Netherlands also conducts a screening of its surface waters on a regular basis (and at least 10,000 tests are carried out per year).
The records tracking the sampling process are perfectly safe.
The disputed lot was tested by the SOC upon its introduction in France in 1998 and those tests proved negative.
A visit to Mr. Schenk's business revealed that two cases of Ralstonia emerged in the northeast of the polder in 1996 and that, in 1997, two other cases were reported 15km away from his farm. Mr. Schenk stores his production in a sorting area some km away from his farm. His equipment is clean but may be shared from time to time with a neighbor who cultivates potato for consumption purposes..
Before entering the sorting area, the goods are controlled by the NAK. The conservation and tracking conditions are excellent.
According to the SRPV representative of the SRPV, it is not out of character that the tests conducted upon the introduction of the impugned goods in France could prove negative; inasmuch as the tests proves positive only if the contamination is large enough; and where such contamination is weak it will take several years during which the germs are reproduced before we can identify infected plants.
In 2001 and 2002, [Buyer]'s customers were all inspected and nothing was found as a result of such inspection. This confirms that the contamination did not come from the soil. The Plant Protection Agency [SRPV] believes the contamination stems from the lot introduced in 1998 by [Buyer] in Seine-Maritime -- a region which until that time remained disease-free, especially in lands occupied by [Buyer]. According to [SR]PV, the A2 plants were replanted by [Buyer], which was inconsistent with the technical stipulations of the contract, but there was some tolerance in that regard.
[Buyer] undertakes various assorted crop rotations and on an annual basis rents virgin lands where no potato has been planted before. [Buyer] does not use irrigation or watering, nor does [Buyer] exchange any material with other potato producers. The region of Pays de Caux, where [Buyer] is established, is free from Ralstonia.
From its own investigations, the LNPV observes that the contamination came from the Dutch lot 5/6329 imported by [Buyer]. The production zones in The Netherlands are very strongly contaminated, in particular Mr. Schenk's area, where irrigation has been prohibited since 1996.
The expert's report, on page 96, provides that the decision by the EEC against The Netherlands on 24 November 1995, indicates that "in the case of potatoes from the zones where the presence of the disease is known, the tubers should not be used as seed potatoes."
While irrigation generates higher profitability, Mr. Schenk did not make any returns; and operating in a high-risk, he got his share of the strains of the virus. .
The chances of retrieving an infected tuber are 18.13% for samples of 200 units in 25 tons.
The Dutch authorities did not specify the boundaries of the contaminated area and the extent to which the EEC decision of 24 November 1995 had been applied as regards the ban on irrigation and watering as well as the ban on any sale involving seed potatoes from contaminated area even though the tests proved inclusive..
All water canals of water do communicate throughout the polders.
The investigation by the SRPV at Rouen confirmed that that [Buyer] made no use of irrigation and that [Buyer] did not resort to hiring of equipment or manure spreading. The negative environmental controls confirmed, according to the SRPV, the origin of the contamination as being the plants imported from The Netherlands. The SRPV have always conducted thorough investigations, which rules out the notion that contamination goes back to the period before 1998. A contamination prior to 1998 would have spread the disease over the whole territory and would have been accounted for in the surveillance report. Even with 100 analyses per lot, the probability of detecting a contaminated lot is 63%, which leaves 37% undetected, that is, one chance in three for a contaminated lot to be found safe.(See page 129 of the report).
The contract clause prohibiting multiplication for two consecutive years amounts to a tacit acknowledgement of the risk; if the bacteria did not exist on the onset, the multiplication would not be a matter for concern and yet the multiplication by [Buyer] allowed the bacteria to be detected and its spread to be contained.
The Commission granted France's request for a financial contribution regarding the destruction and disinfection operations performed on the basis of Article 23.1 of Directive 2000/29, since the harmful organisms have been introduced through consignments of vegetables from a third country or another area of the Community.
Whereas, it is now established that the contaminated plants descended from the "Estima" plants of "Elite" grade pertaining to the lot 5/6329 purchased by [Buyer] in February 1998 from [Seller];
Concerning the probative value of the tests
Whereas, the existence of negative results by both by the Dutch and the French control services does not absolutely guarantee the absence of the bacteria, particularly in a latent form: as a matter of fact, the tests were performed under a probe scheme at the rate of 200 tubers per 25 tons and the North Committee conducted several tests at a rate of 10 in 100 -- which significantly increased the likelihood of detecting the bacteria;
Whereas, as a result, the negative character of the tests performed on the plants delivered by [Seller] could not show that those plants were completely exempt from Ralstonia Solanacearum bacteria;
Whereas, [Buyer] performed the first multiplication (A1) from plants delivered by [Seller], considering that the resulting yield was certified as safe by the SOC and in view of the fact that such certification has no more absolute probative value than those issued in respect of the initial plants;
Considering that [Buyer] replanted part of that harvest (A2) and resold it as seed potato plants largely to farmers and that, once cultivated, the [farmers]' plants began to develop signs of the Ralstonia Solanacearum infection;
Considering that,the same bacteria also wreaked havoc in [Buyer]'s crop;
Whereas, the initial plants delivered by [Seller] were part of a broader consignment that the producers (No. 210/189, and 210/014 in the North and 222/278 in Champagne) directly supplied by [Seller] have multiplied the plants and sold them as potato seedlings to 18 producers who planted them in 1999; and since the tests performed on those plants turned out negative and their 2000 offspring were not affected by the same disorder as those belonging to [Buyer](see analysis by GAEC Prieuse, VANHAECKE, Dagbert);
Whereas, on the other hand, following the 1998 tests performed on 1,000 tubers nicknamed "Demazieres" when the plants were introduced in France (see p. 98 of the expert's report), two IF tests turned out positive and one request for confirmation was made to the laboratory P.V. at Rennes, but these concerned Clavibacter rather than Ralstonia Solanacearum;
Whereas, the 2000 harvest of Mr. Alvoet -- who bought from SARL Dagbert rather than from [Buyer] and kept part of the yield back for personal use -- gave rise to positive results under one PCR and two immunofluorescence tests, but the analyses were unable to isolate the bacteria and, for that reason, the results should ultimately be considered negative under the regulations;
Whereas, when confronted by [Seller] on 10 September 2002 and 12 December 2002, the expert could offer an explanation as to why only the plants produced by [Buyer] following a second multiplication were hit by Ralstonia Solanacearum and the descendants of lot 5/6329 raised by different farmers in 2000 were not;
The court finds that the aforementioned elements are not sufficient enough to come to any meaningful conclusions as to the presence of Ralstonia Solanacearum in the imported plants at the moment when they were delivered.
Concerning the probative value of other investigations
Whereas, [Seller] complains that the expert report placed undue reliance on the findings of the administrative investigations which were not subject to parties' discussion, and thus left many questions unanswered, and considering that the expert was biased since he construed the facts systematically in favor of [Buyer], so as to rule [Buyer] out as the likely cause of contamination, and given the expert's finding that the location within a contaminated zone of Mr. Schenk (supplier of plants for [Seller]) should be taken to mean the contamination was necessarily from that source; considering that [Seller] stresses that the investigations were insufficient especially with respect to the plots rented by [Buyer] for its business and to those belonging to Ectot-lès-Baons and Gremonville, since the SRPV was wrong to say that all lands cultivated by [Buyer] were free of previous potato cultivation in the previous years -- which is shown to be false as regards the plot of Gremonville -- and in relation to the conditions of storage, bearing in mind that the trade activity of [Buyer] is more relevant than that of production;
Whereas, according to the administrative inquiry (except for the plot of Gremonville, which had been cultivated with potatoes in 1994), the plots where the plants at issue were cultivated were free of previous potato cultivation; and since no antecedent of Ralstonia Solanacearum was ever reported in the Pays de Caux, where [Buyer] conducts its farming activities;
Whereas, the expert raised the issues which had to be tackled by the administrative inquiry by virtue of the Order of 11 February 1999, regarding places of production and irrigation waters;
Whereas, contrary to [Seller]'s allegations, the expert did not restrict himself to pointing out the issues which the administrative inquiry should deal with, but also assured himself that: (a) the SPRV did check the drilling authorizations and possible sources of contamination and verified that [Buyer] did not resort to irrigation; (b) it was impossible to carry out a genealogical survey regarding the Dutch origin of the clone, (c) the SRPV checked on all of [Buyer]'s customers;
The expert reviewed the records of the cultivated plots in the 1998-1999 season and found that they comprised SOC's crop register, crop declaration, list of earlier crops, results of analyses, and furthermore ascertained the separation of plots required by technical regulations of GNIS [French Association for Seeds and Seedlings], as well as the existence of annual controls by the SOC regarding [Buyer]'s farming business since 1993 (copies of the control sheets are available in the files);
The SRPV found that the disinfection operations had been under control and that billing was regular, and a research on the invoices disclosed no evidence of [Buyer] having leased equipment or purchased any fertilizing sludge;
Whereas the checks carried out suggest that the lands managed by [Buyer], with the exception of Gremonville in 1994, were never cultivated with potato plants in the previous years; it must be noted that if those lands contained Ralstonia Solanacearum, the latter would have manifested itself at an earlier time, and yet up to the year 2000 both the Pays de Caux and the Seine Maritime were free from any bacteria attack;
Whereas, the expert pointed out that [Buyer] cultivated several varieties of potatoes and that only the "Estima" variety plants were shown to be contaminated;
Whereas, the investigations by the expert appear to have been duly carried out, albeit not exhaustive, having disregarded the cultivation techniques of the producers who rented lands to [Buyer]; considering that those investigations were to be based on documents concerning the years 1998 and 1999 or sooner, and that any examination of the plots from the date of his intervention would be pointless;
Whereas, in addition, it does not seem that by performing the multiplication of plants for over two years [Buyer] breached the technical regulations of the GNIS regarding certified plants as the regulations specify that the production of class A plants within the producer's facilities is limited to two years;
Considering that the third multiplication that [Buyer] performed on the plants that were delivered was designed for its own industrial use and not for outside commercialization;
Whereas, the production sold to the respondents-farmers corresponds to the second year of multiplication;
Whereas the investigations into Mr Schenk's production conditions in The Netherlands revealed that (a) his farm was located near a contamination area, some 15km away in 1997; (b) the two cases of Ralstonia Solanacearum were discovered in the north-east of the polder; (c) as a result of this vicinity, he was subject to tight surveillance from the Dutch authorities; (d) his farming practices are acceptable but his material is sometimes used by his neighbor Mr. Brouwer who cultivates consumption potatoes and, on that basis, was not subject to such a rigorous control as Mr. Schenk, who produces seed potatoes; (e) the aforementioned fact constitutes a failure of the guarantees provided by the latter; (f) if, according to his declarations, he does not employ irrigation because the water is brackish, it is not untrue that waters communicate across the polder;
Whereas, finally, thirty-six points of contamination by Ralstonia Solanacearum were reported in The Netherlands;
Whereas, the map of contaminated sites, which was transmitted to the expert with some delay, does not measurably demonstrate the proximity of contaminated places to Mr. Schenk's lands, located closely inside a Slootdorp-Wieringerwerf-Middenmeer triangle, where the surface waters are contaminated; however, he does not figure in a list of contaminated farms;
Whereas, according to the Dutch protection service, the tests performed on Mr. Schenk's production activities between 1996 and 2000 all proved negative, although the 1995 test results have not been disclosed as they are missing;
Whereas the aforementioned Dutch service indicates that Mr. Schenk was never found within the prohibited zone following the Ralstonia Solanacearum contamination (see letter from the Dutch Ministry of Agriculture dated 12 September 2005);
Whereas, the decision by the European Commission of 24 November 1995 authorizing Member States provisionally to take urgent supplementary measures to contain the spread of Ralstonia Solanacearum (95/506/CE) -- a decision particularly directed to The Netherlands which was particularly hit by the contamination -- states that the following conditions should be satisfied in order for tubers arriving from The Netherlands to be introduced into other Member States:
Regarding potato seedlings originated from areas where the presence of Ralstonia Solanacearum is known:
aaa) Potato seedlings, which have been cultivated in places of production where the 1995 contamination was confirmed, cannot be used as such and must therefore be destroyed;
aab) The plants grown on production sites -- and which were included in the official investigation to determine the extent of contamination -- are subject to control by the competent official body that will undertake the sampling and trial procedure;
The plants cultivated in places referred to in item aab) -- which responded negatively to the testing for detection of Ralstonia Solanacearum, and were officially known as having no contact or clonal linkage to contaminated potato plants or plants irrigated with waters of a source that is shared with contaminated places of production -- may be used as potato seedlings.
bbb) In the case of potato seedlings from areas other than those stated in item Aaa), tests are due in accordance with Article 16a of Directive 77/93/EEC, comprising at least 200 tubers each 25 tons or fraction thereof and declaring the samples free of Ralstonia solanacearum.
Whereas, Mr. Schenk's production seems to be of this latter kind;
Whereas, it does not follow from any evidence that Mr. Schenk's estate is located in an area referred to in item aaa) or even in item aab);
Whereas, in light of that, the appealed judgment was not entitled to conclude that Mr. Schenk produced the seeds neglectfully of the fact that he was situated in a contaminated zone, thus violating the European Commission regulation issued on 24 November 1995;
Whereas, contrarily to the trial judge's finding, Mr. Schenk was in fact never barred from producing seed potato plants, even if one can imagine that proximity to contaminated zones increases the risk of contamination, the security perimeter covered three kilometers at a minimum;
The Court finds that since they were certified, the contentious lots were allowed for commercialization;
Implications for [Buyer] concerning admissibility of its action
Whereas, Article 40 of the CISG prevents seller from placing reliance on Articles 38 and 39 (providing for the non-admissibility of a claim based on a lack of conformity if the defect is not reported within two years from the delivery date) where the defect of conformity (even a hidden defect) relates to facts which he was aware of and did not disclose to the buyer;
Whereas, so long as there was a certificate showing that the tests on the contentious plants were negative, [Buyer] cannot argue that [Seller] had concealed a lack of conformity that he did not know, given that Mr. Schenk was not subject to ban from production, and since the mere fact that the plants were grown in an area devastated by potato Brown Rot cannot on its own amount to concealment as provided by Article 40 above;.
Whereas [Buyer] failed as a result to notify [Seller], within the two-year period of the defect regarding the goods delivered on 2 February 1998, the notification-period having run out on 2 February 2000, and thus [Buyer] is time-barred as to its action against [Seller] -- regardless of whether the Ralstonia Solanacearum outbreak occurred at a later stage since this time-limitation period cannot be disapplied;
Whereas the court dismisses [Buyer]'s action against [Seller] and reverses the Tribunal de Grande Instance's judgment which made [Seller] liable to pay damages as a result of contamination by Ralstonia Solanacearum.
Concerning the civil liability action brought by the respondent farmers
Whereas, it will be recalled that [Buyer] does not dispute its contractual liability towards the farmers;
Concerning the [farmers]' action against the [Seller]
Whereas Articles 1382 and 1383 [of the French Civil Code] -- cited by the [farmers] and imposing a duty to answer for damages caused by negligence or recklessness -- imply proof of causation between the damage and the wrongful act;
Whereas, the evidence of causation may be adduced by any means, a set of serious and concordant presumptions;
Whereas, both the Plant Protection Agency and the expert witness have proceeded by successive elimination of possible causes of contamination within [Buyer]'s premises and have deduced that the only possibility of contamination was the fact that Mr. Schenk's business was located in a contaminated area, that he shared his equipment with a producer of potatoes who was not subject to the same level of control as the [Buyer], and that the negative tests do not constitute sufficient proof of the absence of contamination of the consignment prior to its delivery;
Considering that such factors -- which rest on a set of probabilities which hardly exclude the likelihood of contamination by means other than the original consignment -- cannot be seriously regarded as irrebuttable presumptions sufficient enough to establish the existence of the contamination at the date of delivery, and given that the portion of the lot directly delivered by [Seller] to customers other than [Buyer] has not been affected by the Ralstonia Solanacearum in 2000 or before;
Whereas [Seller]'s recklessness of running the risk of sourcing its plants from a contaminated area -- rather than from a producer who was subject to strict control measures and known to be free of contamination from the disease but not under a production ban -- cannot be treated as a case of reckless misconduct;
Whereas, the absence of proof as to contamination of the original lot excludes any consideration about the relevamce of the action brought by the farmers underArticle 1384 of the French Civil Code;
Whereas, in consequence, the tribunal's decision will be reversed for ordering [Seller] to pay compensation to the farmers, whose claims against [Seller] will be dismissed;
The Court finds that [Seller] will be relieved from liability and discharged from any order.
Of litigation costs and expenses
Whereas, [Buyer] as well as the farmers who lost their case, will be ordered to pay the costs of appeal incurred by [Seller];
The court finds that [Buyer] will be ordered to pay the costs incurred at trial as well as the expert witness fees;
The court upholds the tribunal's decision to order [Buyer] to pay compensation to each of the farmers under Art. 700 of the New Code of Civil Procedure; and decides that [Buyer] should pay the following discretionary costs:
|-||EUR 3,000 payable to [Seller];|
|-||EUR 1,000 to EARL de Yemanville;|
The court also finds that no claim has been made against [Buyer] in the course of this Appeal under Article 700 of the New Code of Civil Procedure regarding the appeal costs by EARL de la Règie, Mr. Claude Huard, Mr. E. Leforestier, EARL Deve, EARL Bigot, EARL des Hetres, Mr. Rémy Lefrançois, Mr. Nemery, SCEA la Chapelle, Mr. Drouet, SCEA Vandenmersch, Mr. Bunel, Mr. D'Hoine, Mr. Castel, Mr. Bodele, Mrs. Lestriez-Desmettre, Mrs. Fromont, Mr. Haccard, Mr. Buisset, Mr. Jonquais, EARL de Forest;
ON THOSE GROUNDS
The Court, deliberating in open session and by way of judgment after oral hearing:
|-||Orders revocation of the order of closure of the pre-trial phase and declares admissible
the submissions of EARL de la Régie and Mr. Claude HUARD;|
|-||Dismisses [Buyer]'s action for defect of conformity because of failure to notify of the
defect within the period of two years from the date of delivery;|
|-||Allows the appeal by [Seller] and accepts its claim, reverses the tribunal's judgment
|-||Rejects the farmers' action for compensation brought against [Seller];|
|-||Upholds the determinations of the tribunal which found against the [Buyer];|
|-||Orders [Buyer] to pay the costs of the first instance proceedings, which should include
the costs for the expert witness;|
|-||Uphold the tribunal's decision which ordered [Buyer] to pay compensation to the
farmers under Article 700 of the New Code of Civil Procedure;|
|-||Orders [Buyer] to pay appeal costs incurred by [Seller] and EARL de Yemanville,
subject to the recovery for the benefit of SCP Galliere Lejeune Marchand Gray,
associated attorneys and SCP Colin Voinchet Radiguet Enault, attorneys;|
|-||Orders [Buyer] to pay [Seller] the discretionary appeal costs of EUR 3,000 under Art.
700 of the New Code of Civil Procedure;|
|-||Orders [Buyer] to pay EARL de Yemanville the sum of EUR 1,000 on the same grounds.|
* All translations should be cross-checked against the original text. For purposes of this translation, Agrico Cooperatieve of Netherlands is referred to as [Seller] and SIAC of France is referred to as [Buyer].
** Leandro Tripodi is a law student at the University of São Paulo and waqs a member of its team in the 16th Willem C. Vis International Commercial Arbitration Moot. He is an associate of the Brazilian Arbitration Committee (CBar) and an employee of Brazil's Ministry of Finance.Go to Case Table of Contents
3 September 2009
1. The complex case adjudicated by the Court of Appeals of Rouen on 19 December 2006 (Potato seedlings case), is interesting both from the perspective of the factual and of the legal issues involved.
Dutch cooperative Agrico [Seller] and French agribusiness wholesaler SIAC [Buyer] entered into an international contract for the sale of 25 tons of potato seedlings. The Court found that the law governing the contract was the CISG.
After [Buyer] grew the seedlings, performing two successive multiplications in the course of two years, it marketed the resulting crops to several potato farmers established in the French region of Seine Maritime. Unexpectedly, they found the potatoes to be hit by a bacterium that provokes an illness so-called potato brown rot, making them improper for consumption.
As is natural, many of the farmers turned to [Buyer] and [Seller] and, for its part, [Buyer] turned to the [Seller]. All sought compensation for their respective losses.
2. The challenge was to determine who was responsible for the contamination. Two hypotheses were important:
|-||[Seller] had been supplied with the seedlings by one of its members, Mr. Schenk. The
area in which he is established was found to be contaminated, and though he had been set
under rigid control by the authorities, he shared equipment with another producer subject
to more lenient control.
|-||The region where [Buyer] is located was free of potato brown rot, but [Buyer] violated a contractual prohibition of doing multiplications of the plants (this prohibition certainly embodies, as the Court correctly asserted, an assumption of the risk if the seedlings were affected by the bacteria right from the outset); the process of multiplication gives room for the development of the bacteria, which would otherwise remain latent;|
Another difficulty existed because, convincingly, [Seller] tolerated the multiplications, despite the contract clause forbidding them.
3. The provisions of the CISG at issue were basically Articles 38, 39 and 40.
4. Under Article 38, a buyer has the duty to examine the products -- in pursuit of any potential non-conformity. The potato seedlings were not technically examined by the [Buyer], but by vegetable protection bureaus, both Dutch and French. The [Buyer] reasonably gave credit to the documents attesting the well being of the plants.
5. Under Article 39, the buyer loses the right to rely on a lack of conformity of the goods, if he fails to give a proper notice within a reasonable time. Article 39(2) states that this time cannot be more than two years from the date when the goods were delivered.
The potato seedlings were delivered on 2 February 1998. They were multiplied by [Buyer] over two years and only manifested the infection at a later time (after the period of exclusion of Article 39(2) had ran out). If they were infected already at the date of dispatch, they carried a hidden defect.
On the other hand, the appearance of this defect could have been prevented if [Buyer] had not reproduced the plants. (One may conclude that [Buyer] contributed, if not to the cause of the defect, at least to its materialization.)
In any case, the CISG and French Law have distinct solutions for the problem, since according to the French Civil Code the limitation period for such a claim is ten years (as referred to in the decision). It fell upon the Court to determine the applicable law, bearing in mind that, in this regard, the CISG was less favorable to the French buyer than French law.
The Court concluded that the law applicable to the initial contract was the CISG and this finding does not seem to have been disputed by any party. Even so, the law applicable to the sub-purchasers' claims was found to be, as expected, French law. Hence, [Buyer]'s claim was excluded, but that of the sub-purchasers was not.
6. [Buyer] requested application of Article 40 of the CISG. According to Article 40, the seller cannot rely on the period of exclusion of Article 39(2) if he knew about the defect and did not disclose that information to the buyer.
[Seller] acknowledged that it was aware, at the time of dispatch, that Mr. Schenk was established in (or near to) a contaminated area. However, [Seller] alleged that:
|-||Mr. Schenk was under rigorous control;
|-||His business was acknowledged as never having been touched by the potato brown rot;
|-||Satisfactory official tests and certificates were duly arranged.|
[Seller] stated that it really believed that Mr. Schenk's production was uncontaminated; in other words, that [Seller] did not intentionally conceal any circumstance from the [Buyer]. Furthermore, since both governments (of France and The Netherlands) had certified the goods, there was no legal obstacle for their commercial sale.
7. The Court evaluated whether these arguments were sufficient to release [Seller] from the penalty of Article 40 of the CISG. Court concluded that:
"The fact that the plants were grown in a zone attacked by the potato brown rot cannot by itself amount to the dissimulation required by the aforementioned Article 40." [italics added]
In other words, the Court found that Article 40 requires dissimulation by the seller about the facts that gave rise to the lack of conformity, in a sense that the seller may be said to have deceived the buyer, and not mere knowledge of facts that potentially may cause the goods to be defective.
8. As to the sub-purchasers' claims, the Court made its findings under French law, and considered that no negligence was perpetrated by [Seller] or by its supplier Mr. Schenk.
9. The French Supreme Court confirmed the judgment in its entirety.Go to Case Table of Contents