Switzerland 6 September 2007 Kantonsgericht [District Court] Appenzel Ausserhoden (Clothing case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/070906s1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: K1Z 06 53
CASE HISTORY: 2d instance Obergericht Appenzell Ausserhoden 18 August 2008
SELLER'S COUNTRY: Italy (plaintiff)
BUYER'S COUNTRY: Switzerland (defendant)
GOODS INVOLVED: Clothes
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:
38A [Buyer's obligation to examine goods: time for examining goods]; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time]; 78A [Interest on delay in receiving price or any other summons in arrears]
38A [Buyer's obligation to examine goods: time for examining goods];
39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];
78A [Interest on delay in receiving price or any other summons in arrears]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (German): CISG-online.ch website <http://www.globalsaleslaw.com/content/api//cisg/urteile/1781.pdf>
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
6 September 2007 [K1Z 06 53]
Translation [*] by Jan Henning Berg [**]
POSITION OF THE PARTIES
With respect to its action, Plaintiff-Appellee [Seller] requests the Court:
With respect to the cross-action, [Seller] requests the Court:
With respect to the action, [Buyer] requests the Court:
The remaining part of the action (claim for Sfr. 40,638.05) should be dismissed to the extent that it is even admissible;
With respect to the cross-action, [Buyer] requests the Court:
On 30 September 2002, 25 November 2002 and 20 January 2003, [Buyer] ordered clothes from [Seller]. Between 27 January and 5 April 2003, [Seller] performed deliveries of these clothes to [Buyer] (total value Sfr. 115,551.05). On 2 April 2003, [Buyer] raised complaints about the quality of several pieces of clothing. Thereupon, [Buyer] returned thirteen items and invoiced a sum of Sfr. 32,641.00. [Seller] decided to deduct this amount from its purchase price claim against [Buyer]. The remaining part of the purchase price of Sfr. 82,910.05 has been claimed by virtue of the present proceedings.
However, [Buyer] asserts that additional pieces of clothing (worth Sfr. 40,638.05) were not in conformity with the relevant samples. While it acknowledges [Seller]'s claim for Sfr. 42,272.00 (Sfr. 82,910.05 minus Sfr. 40,638.05), [Buyer] relies on a set-off with respect to a counterclaim for storage costs of Sfr. 43,200.00. The latter incurred these costs because [Seller] had refused to collect the non-conforming clothes. By way of another counterclaim, [Buyer] demands Sfr. 928.00 (Sfr. 43,200.00 minus Sfr. 42,272.00) and expenditures of Sfr. 4,000.00 for an attempted resale.
B. [Case history]
[Seller] commenced the present proceedings with its statement of claim dated 13 September 2006 (court file, p. 2). [Buyer]'s statement of defense and its cross-action were filed on 11 December 2006 (court file, p. 9). On 20 December 2006, the latter also provided translations of various Italian documents (court file, pp. 13 et seq.). [Seller]'s response to the cross-action was submitted on 13 February 2006 (court file, p. 19). By letter of 6 March 2007, [Buyer] amended the request made in the course of its cross-action (court file, p. 23). On 10 April 2007, [Seller] submitted its statement in response to this amendment (court file, p. 28). The Court held an oral hearing on 6 September 2007 (court file, pp. 31/1, 31/2, 33). By letter of 24 September 2007, [Buyer]'s legal representative declared that an appeal would be lodged (court file, p. 36).
REASONING OF THE COURT
1. [Procedural issues]
1.1. [Value of the dispute]
The procedural value of an action which is directed to a payment of money is determined according to the claim submitted by the plaintiff. If a cross-action has been filed, the asserted claims are added up, unless these claims are in contradiction to each other by their nature (Art. 115(1) and (4) ZPO [*]). [Seller] demands payment of Sfr. 82,910.05 (court file, p. 2). [Buyer] demands payment of Sfr. 4,928.00 by way of its cross-action (court file, p. 23). Therefore, the value of the present dispute amounts to Sfr. 87,838.05.
1.2. [Jurisdiction of the Court]
[Seller] is domiciled in Italy, whereas [Buyer] is domiciled in Switzerland. The case has an international dimension. Territorial jurisdiction of the Court follows from the Lugano Convention, because Switzerland and Italy are Contracting States to this Convention. Under the Lugano Convention, persons domiciled in a Contracting State may be sued in the courts of another Contracting State (Art. 2(1) Lugano Convention). [Buyer] is domiciled in X., Canton Appenzell Ausserrhoden, Switzerland. Therefore, the District Court (Kantonsgericht) Appenzell Ausserrhoden has territorial jurisdiction over the dispute.
Jurisdiction of the District Court as a court of first instance in terms of subject-matter is determined according to the Code on Civil Procedure of the Canton Appenzell Ausserrhoden (Art. 12 No. 1 ZPO).
1.3. [Applicable law]
Both parties have their places of business in Contracting States to the United Nations Convention on Contracts for the International Sale of Goods (CISG, SR [*] 0.221.211.1). The Convention is applicable under Art. 1(1)(a) CISG. Moreover, both parties assume that the CISG applies (court file, p. 14, p. 9/17).
1.4. [Arguments concerning the admissibility of the action]
[Buyer] has not given a reasoned submission as to why it contests the admissibility of the action. The facts do not give any indication that there could be any ground of inadmissibility. Therefore, [Buyer]'s respective argument must be disregarded.
On the other hand, [Seller] has filed an objection against the admissibility of [Buyer]'s cross-action because of an ambiguously asserted counterclaim. Consequently, the Court has set a time limit for [Buyer] to rephrase its counterclaim according to Arts. 134(2) No. 3, 135(1) ZPO (court file, p. 22). The addressee has partially complied with this request (court file, p. 23). [Buyer]'s claim "for incurred storage costs" has not been substantiated in an exact amount. The counterclaim is thus inadmissible in this regard, Art. 116(1) No. 2 ZPO (M. Ehrenzeller, Zivilprozessordnung des Kantons Appenzell Ausserrhoden, Speicher 1988, Art. 116 para. 2 and Art. 124 para. 9).
1.5. [Interpretation of procedural requests filed by the parties]
At the oral hearing, the Presiding Judge indicated to [Buyer]'s legal representative (Art. 105 ZPO) that it would be contradictory to request that the claim be allowed, the objection against enforcement be removed and a counterclaim be subject to a set-off. [Buyer]'s legal representative was of the opinion that, according to its procedural request, a partial claim was to be allowed and another part was to be dismissed. If the second part was indeed allowed, [Buyer] would rely on a set-off in the amount allowed in favor of [Seller].
The District Court (Kantonsgericht) assumes on the basis of these facts and [Buyer]'s statements concerning its procedural request that the latter in fact seeks a dismissal of the entire action filed against it. This is because [Buyer] contests the existence of [Seller]'s claim for Sfr. 40,638.05 and further argues that [Seller]'s claim for Sfr. 42,272.00 ceased to exist as a result of its set-off. With a valid set-off, an existing claim ceases to exist (Art. 124(2) OR [*]). Therefore, a valid set-off is incompatible with an acknowledgement of a claim and request for removal of an objection against enforcement.
[Seller] has claimed default interest for the time since the year 2006, while -- on another occasion -- it has claimed interest since 2003. With due consideration of the court file (pp. 20 and 21), it appears that the former statement is a typographical error. This error may be corrected and properly interpreted by the Court (see in express terms M. Ehrenzeller, Art. 102 para. 4).
2. [Substance of the dispute]
2.1. [Factual basis]
[Seller] delivered clothes to [Buyer]. As a consequence, [Seller] demanded Sfr. 115,551.05 according to various invoices which had been issued between 19 July 2002 and 4 April 2003 (court file, pp. 2/4, 3/6/1-3/610, 3/7). After [Buyer] had asserted the non-conformity of the goods, [Seller] accepted a return of the clothes of a value of Sfr. 32,641.00 (court file, p. 2/6). [Buyer] acknowledges a part of [Seller]'s claim, in the extent of Sfr. 42,272 (court file, p. 9/2). Therefore, the present action is directed at a payment of Sfr. 40,638.05 for clothes.
2.2. [Delayed delivery]
[Buyer] alleges that [Seller] failed to perform the delivery of three orders of 30 September, 22 November 2002 and 20 January 2003 within the required time (court file, pp. 9/6 et seq.). However, [Buyer] has also stated in its statement of defense that it accepted the delayed deliveries in respect for the long-standing commercial relationship (court file, p. 9/8).
2.2.2. [Reasoning of the Court]
Since [Buyer] accepted these delayed deliveries, its argument on this subject cannot be considered. [Buyer] has failed to set an additional period of time for [Seller] to perform the delivery and to declare avoidance of the contract within a reasonable time as required by the CISG (Art. 49(1)(b) and 49(2)(a) CISG). Consequently, [Buyer] may no longer rely on any remedies which have arisen out of delayed deliveries.
2.3. [Lack of conformity]
2.3.1. [Time limit for examination and notification]
On 2 and 15 April 2003, [Buyer] has asserted the lack of conformity of the goods (court file, pp. 10/12a/b, 10/13a/b). On 4 and 6 November 2003, it also notified [Seller] in writing about additional non-conformities with respect to clothes referred to in the list dated 10 November 2003 (court file, pp. 3/13, 3/15). [Buyer] argues that it made a prompt and sufficient notice of non-conformity (court file, p. 9/7).
The bills of delivery bear the dates 27 January, 20 February, 20 and 31 March 2003 (court file, pp. 3/8.1-4). [Buyer] states that it received the clothes on 27 January, 10 and 25 March and 5 April 2003 (court file, pp. 9/7 et seq.).
On 19 August 2003, [Buyer] confirmed to [Seller] that it would pay the unsettled invoices by 15 September 2003 (court file, p. 3/11). After [Buyer] had lost in a lawsuit against one of the purchasers of its clothes, on 4 November 2003 [Buyer] demanded that [Seller] bear a part of the incurred loss (court file, p. 3/13). [Buyer] has stated in this regard that it had attempted to resell these clothes in concurrence with [Seller], with the exact allocation of the losses between [Seller] and [Buyer] to be designated at a later date. All of a sudden, [Seller] was no longer willing to comply with this agreement. This is why [Buyer] now demands that [Seller] accept a return of the clothes (court file, p. 9/16). However, [Seller] contests the existence of any agreement to that effect (court file, pp. 2/9, 3/14).
The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances (Art. 38(1) CISG). The notice of a lack of conformity must be made within a reasonable time after he has discovered it or sought to have discovered it (Art. 39(1) CISG).
2.3.2. [Reasoning of the Court]
[Buyer] is engaged in the importation of goods. This is because it resells the clothes to its customers. Under normal circumstances, only these customers will identify the existence of any lacks of conformity. Therefore, an extended period of time for examination and notification applies. Usually, a time for examination of two weeks and a time for notification of one month may be assumed. This leads to an overall time for notification of about six weeks. According to German jurisprudence, a time for notification of one month is reasonable in these cases (Gerhard Walter / Monique Jametti Greiner / Ivo Schwander, Internationales Privat- und Verfahrensrecht, Berne 2007, Art. 39 CISG para. 96). The District Court (Kantonsgericht) holds that [Buyer] has complied with its duty to examine and notify with respect to the particular lacks of conformity referred to in the letters of 2 and 15 April 2003 (court file, pp. 10/12a/b, 10/13a/b).
By letter of 15 April 2003, [Buyer] limited its notice of non-conformity to thirteen models after it has arranged for amicable solutions with the major part of its customers (court file, p. 10/13b). Subsequently, [Seller] accepted the return of these clothes without acknowledging any legal liability and it reduced its claim against [Buyer] by Sfr. 32,641.00 (court file, p. 2/6). This sum is no longer subject to the present action. With respect to the remaining clothes which had been notified on 2 April 2003, it must be assumed that [Buyer] no longer seeks to uphold its assertion of non-conformity. This is because its notification was expressly limited to the thirteen models taken back by [Seller].
It was only on 4 and 6 November 2003 that [Buyer] notified [Seller] about the alleged lacks of conformity with respect to the clothes referred to in the list dated 10 November 2003 (court file, pp. 3/13, 3/15). However, [Buyer] also relies on an oral notification (court file, p. 9/7). The District Court (Kantonsgericht) holds that [Buyer] has not sufficiently proven the existence of an oral notification. The available correspondence exchanged between the parties does not indicate anything to that effect. Instead, [Buyer] has declared in its letter of 19 August 2003 without any reservation that it would pay the unsettled invoices by 15 September 2003 (court file, p. 3/11). Therefore, [Buyer] has confirmed its willingness to pay the purchase price, which is equivalent to a waiver of any warranty claims arising out of the contract. The notice of non-conformity of 4 and 6 November 2003 has not been made within the required time limit.
The Court holds that [Buyer] has limited its notice of non-conformity to thirteen models by virtue of its letter of 15 April 2003. Thereupon, [Seller] accepted a return of these clothes. [Buyer] also declared on 19 August 2003 that it would pay all of the unsettled invoices. Given that, its assertion that it reached an agreement with [Seller] concerning the resale is not convincing. Rather, [Buyer] has stated in its letter dated 16 November 2003 that it regretted the fact that it had not come to an agreement (court file, pp. 10/16/2 and 14/4/2). The former legal representative of [Buyer] mentioned on 20 October 2004 that [Seller] received a proposal on 4 November 2003, according to which a discount of 50% should in fact be granted. After this proposal had been rejected, it was confirmed on 10 November 2003 that the returned goods (worth Sfr. 40,638.00) could be collected by [Seller] and were put at its disposal (court file, p 3/19/2). Consequently, the agreement alleged by [Buyer] is hardly probable and is not supported by any evidence. Therefore, the action is to be allowed in favor of [Seller].
2.4. [Default interest]
[Seller] claims default interest of 5% since 31 May 2003 (court file, pp. 2/12 and 14 et seq.). In the absence of any agreement to the contrary, the purchase price becomes mature at the time when the goods are handed over (Art. 58(1) CISG). The obligation to pay default interest exists as of the time of maturity (Art. 78 CISG); a reminding notice need not be submitted (Art. 59 CISG). The interest rate is not determined by the CISG itself. It is governed by the domestic law applicable to the contract (Honsell / Magnus, Kommentar zum UN-Kaufrecht, Berlin/Heidelberg 1997, Art. 78 CISG para. 12), which is Italian law in the present case. Within the jurisdiction of the European Community (Italy being a Member State), Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on Combating Late Payment in Commercial Transactions requires that the default interest rate be set at least at 7% above the prime lending rate. Thus, an interest rate of 5% as claimed by [Seller] is justified in any event. Therefore, [Seller] is entitled to claim default interest of 5% since the time when the clothes were handed over to [Buyer]. Since the clothes were delivered until 5 April 2003 (court file, pp. 9/7 et seq.), [Seller]'s interest claim for 5% is justified as of that date.
[Buyer] demands redemption of allegedly non-conforming clothes worth Sfr. 40,638.05 (court file, p. 9/3). It states that the respective sale of clothes had a total volume of Sfr. 42,272.00. It was not possible for [Buyer] to accept delivery of the residual position of clothes worth about Sfr. 40,000.00. [Seller] was notified about this situation on 4 November 2003, at which time [Buyer] proposed that a 50% discount be granted. However, [Seller] rejected this proposal. Thereupon, [Buyer] confirmed on 10 November 2003 that clothes of a value of Sfr. 40,638.05 were being put at [Seller]'s disposal for collection (court file, pp. 3/19/2 and 9/13 et seq.).
[Buyer] further demands that [Seller] pay the storage costs incurred, including insurance premiums as well as additional damages of Sfr. 4,928.00 plus 5% interest since 1 December 2003. These constituted internal costs, which is why no invoices could have been submitted. The Court would have to calculate the damages in accordance with Art. 42(2) OR [*] (court file, pp. 9/15 et seq.).
2.5.2. [Reasoning of the Court]
It has already been mentioned beforehand (at 2.2. and 2.3.) that [Seller] has performed the delivery of clothes in conformity with the contract. [Buyer] is not entitled to demand redemption of the clothes worth Sfr. 40,638.05 by [Seller]. As a consequence, [Buyer] may not claim compensation for storage costs. It is obliged to pay the total purchase price of Sfr. 83,910.05 for the delivery of clothes. There is no counterclaim which might be subject to a set-off. Moreover, [Buyer] has not sufficiently specified or proven the existence of the alleged counterclaim. There is also not sufficient evidence to assume that [Seller] should be obliged to bear a part of [Buyer]'s losses (see above, at 2.3.2.).
[Seller]'s action is founded in its entirety. [Buyer] is obliged to pay [Seller] Sfr. 82,910.05 plus 5% interest since 31 May 2003. With respect to this sum, the objection filed against the debt enforcement no. 20627018 pending at the Office for the Enforcement of Debts in X. of 23 May 2006 is nullified. [Buyer]'s cross-action is dismissed.
3.1. [Court fees]
The value of the present dispute amounts to Sfr. 87,838.05 (see above, at 1.1.). According to the Cost Regulation Act, the maximum court fee is Sfr. 5,000.00 for civil proceedings. In case of complex proceedings, this fee may be quadrupled to Sfr. 20,000 (Art. 17 lit. b and c of the Cost Regulation Act). The present dispute has a relatively high value. However, proceedings for the taking of evidence have not been necessary. With due consideration of the extent and complexity of the case, a court fee of Sfr. 3,600.00 is justified.
In general, court fees are to be borne by the party which has lost in the proceedings (Art. 81(1) ZPO). Since [Buyer] is the losing party in the present case, it has to pay for the court fees. Both parties have already made an advance on the court fees of Sfr. 800.00 each, instead of Sfr. 500.00 -- which have been erroneously mentioned in the draft of the judgment. The actual judgment has been corrected. Thus, [Seller] has a right to claim excessive costs of Sfr. 300.00 from [Buyer].
3.2. [Additional expenses incurred by the parties]
According to the applicable rules on civil procedure, the losing party is obliged to compensate the winning party for all costs which the latter has incurred as a consequence of the legal proceedings (Art. 86 in conjunction with Arts. 81 to 85 ZPO).
[Seller]'s legal representative has invoiced fees of Sfr. 17,040.60 (court file, p. 32). Given a value of the dispute of Sfr. 87,838.05, the average fee amounts to Sfr. 11,329.75 (Art. 9 AT [*]). [Seller]'s legal representative claims an additional surcharge of Sfr. 2,832.50 on the basis of Art. 11(2)(c) AT (court file, p. 32). However, this claim is not founded. The Court decides that a compensation of Sfr. 13,992.55 including VAT is justified.
The District Court (Kantonsgericht) renders the following judgment:
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellee of Italy is referred to as [Seller] and Defendant-Appellant of Switzerland is referred to as [Buyer]. Amounts in the currency of Switzerland (Swiss francs) are indicated as [Sfr].
Translator's note on other abbreviations: AT = Anwaltstarif des Kantons Appenzell Ausserrhoden [Act on the Calculation of Attorney's Fees of the Swiss Canton of Appenzell Ausserrhoden]; OR = Obligationenrecht [Swiss Code on the Law of Obligations]; SR = Systematische Sammlung des Bundesrechts [Official database of Swiss federal legislation]; ZPO = Zivilprozessordnung [Code on Civil Procedure of the Swiss Canton of Appenzell Ausserrhoden].
** Jan Henning Berg has been a law student at the University of Osnabrück, Germany and at King's College London. He participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and 4th Willem C. Vis (East) Moot.Go to Case Table of Contents