Brazil 3 July 2007 Appellate Court of São Paulo (Gas station fuel case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/070703b5.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 1.170.013-1
CASE HISTORY: 1st instance Comarca de Diadema, SP (partially reversed)
SELLER'S COUNTRY: Brazil (plaintiff)
BUYER'S COUNTRY: Brazil (defendant)
GOODS INVOLVED: Fuel (gas station)
BRAZIL: Tribunal de Justiça do Estado de São Paulo - 16ª Câmara de Direito Privado
(Appellate Court of the State of São Paulo - 16th Civil Division) 3 July 2007
(Mercoil Distribuidora de Petróleo Ltda.)
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/122]
CLOUT abstract no. 1181
Reproduced with permission of UNCITRAL
Abstract prepared by Marcelo Boff Lorenzen
This is a case between two parties from Brazil which contains a dicta reference to Article 77 CISG. The case deals primarily with the duty of a party who relies on a breach of contract to mitigate losses arising out of the breach and the principles of fairness and good faith in performance and enforcement of contracts.
The buyers entered into a contract with the seller for fuel distribution. The contract contained a compulsory clause of minimum fuel distribution and foresaw specific penalties and interest rates to be applied in case of breach. Due to an alleged trademark usurpation, the seller brought suit in the District Court of Diadema requesting the rescission of the contract, contractual and moral damages. The District Court rendered a judgment partially favourable to the seller.
On appeal, the Appellate Court of the State of São Paulo noted that the failure of the seller (i.e. the plaintiff) to claim payment of contractual penalties for approximately one year after breach led the defendants to assume that the clause was no longer in force. The Court invoked Article 77 CISG — and its corresponding provision, enshrined in section 169 of the Brazilian Restatement of Law — to state that the party who relies on a breach of contract must take reasonable measures to mitigate the loss resulting from the breach. In the case, the Court held that the plaintiff failed to fulfil this duty, thus exempting the defendants from payment of any contractual penalties and partially reversing the Lower Court decision. The Court further observed that, under Articles 187 and 422 of the Brazilian Civil Code, fairness and good faith should permeate any contractual relationship.Go to Case Table of Contents
APPLICATION OF CISG: No. Dicta reference to CISG (Article 77)
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions mentioned:
Classification of issues using UNCITRAL classification code numbers:
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language (Portuguese): Click here for text of case; see also Diário de Justiça do Estado de São Paulo (DJE), Appellate Court of São Paulo, Case no. 1.170.013-1, 16th Civil Division, Justice Windor Santos, published on 27 July 2007. Available at <http://www.tjsp.jus.br>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation)[summary]
Queen Mary Case Translation Programme
Translation [*] by Luiz Gustavo Meira Moser [**]
FACTS OF THE CASE
Plaintiff [Seller] requested from the Defendant [Buyer] the rescission of a fuel distribution contract, as well as contractual damages, and moral damages due to a trademark usurpation.
In its defense, [Buyer] alleged that the Seller is responsible for the rescission of the contract because of the abusive penalties and interest on late payment, disposed in the contract, as well as the compulsory clause of minimum fuel distribution.
ON THE ABOVE
The Court of First Instance rendered a decision partially favorable to the [Seller].
[Buyer] appealed the decision, reinforcing the reasons previously stated in its defense.
The Appellate Court held that the inaction of the [Seller] to compel the [Buyer] to pay the contractual penalty - almost one year after the breach of contract - led the [Buyer] to assume that this clause was no longer into force.
The Court also invoked art. 77 of the CISG and its reception in Brazilian Restament of Law no. 169 (Enunciado do Conselho da Justiça Federal, proposed by Profa. Véra Jacob de Fradera), to the effect that the party who relies on a breach must take measures to reduce the loss. In the case at hand, the [Seller] failed to mitigate its own loss.
Finally, the contractual principle of good faith and the duty of fair dealing compliment this decision, in terms of holding parties accountable for the confidences and expectations created between them.
ON THIS GROUND
The Court partially reverses the judgment of the lower Court, exempting the [Buyer] from payment of any penalty amount.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff is referred to as [Seller]; Defendant is referred to as [Buyer].
** Luiz Gustavo Meira Moser is a member of the Brazilian Arbitration Committee, YIAG, Association Suisse d'Arbitrage (ASA), ICDR, International Law Association - Brazilian Committee, Queen Mary Translation Programme and Global Sales Law Project.Go to Case Table of Contents