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CISG CASE PRESENTATION

Spain 27 December 2007 Appellate Court Navarra (Case involving machine for repair of bricks) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/071227s4.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20071227 (27 December 2007)

JURISDICTION: Spain

TRIBUNAL: Audiencia Provincial de Navarra, sección 3ª

JUDGE(S): Don Juan José Garcia Pérez

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Unavailable

CASE HISTORY: 1st instance Juzgado de primera instancia e instrucción no. 3 de Tudela 29 March 2005; Tribunal Supremo 20 July 2011; Juzgado de Primera Instancia no. 3 de Tudela (Navarra) 25 July 2014

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Spain (defendant)

GOODS INVOLVED: Machine for repair of bricks


UNCITRAL case abstract

SPAIN: Navarra Provincial High Court, Section 3 (Case involving machine for repair of bricks) 27 December 2007

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/105],
CLOUT abstract no. 1039

Reproduced with permission of UNCITRAL

Abstract prepared by María del Pilar Perales Viscasillas

The case, which had previously been heard by the Court of First Instance and Investigation, (See Abstract 1041 at http://cisgw3.law.pace.edu/cases/050329s4.html) turned on the defective functioning of a machine that the German seller had manufactured and sold to the Spanish buyer.

The appeal concerned not only the judgement of the Court of First Instance but also various orders imposed on the parties in relation to other issues. First, the Spanish court's jurisdiction had been questioned, on the grounds that the general conditions of the German company referred to the German courts. The Court had ruled that the German company could not be taken to have tacitly agreed to come under Spanish jurisdiction by contesting the claim, since at the same time it was challenging the jurisdiction of the Spanish courts. Article 16 of Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters was also not applicable, since the case involved companies and not a private customer. The Court had also held, on the basis of article 23 of Council Regulation (EC) No. 44/2001, that the general conditions of the German company with regard to the jurisdiction of the German courts were not applicable. It had thus held that, while the validity of the general conditions was not affected by the fact that they were written, in German, in small print at the back of the document, that validity was called into question by the fact that the contract did not contain an explicit reference to a clause attributing jurisdiction at the end of the general conditions. Furthermore, the Court had considered that the clause attributing jurisdiction to the German courts was not valid under the principle of good faith set out in article 7 of CISG, since that principle implied that a contract should have the content that the parties might with reasonable confidence hope it would have. The principle of good faith would be breached if a clause in the general conditions recognizing a particular jurisdiction, to which the Spanish party had not given its consent, was considered valid.

The Provincial High Court rejected practically all the claims by the seller regarding the judgement of the Court of First Instance.

The seller claimed that the Court of First Instance had applied national provisions and case law rather than CISG. The Provincial High Court, hearing the appeal, ruled that, although the Court of First Instance had used Spanish case law with regard to the avoidance of the contract under article 1124 of the Civil Code, it had, nonetheless, referred to CISG, particularly articles 39, 46 and 49.1 (a). The Court also rejected the seller's claim that article 26 of CISG should be interpreted to mean that it was an absolute requirement for the buyer to submit a legal claim for extrajudicial avoidance, particularly since the seller was aware of it through its own court order. The Court further held that, since the issuance and notification of the claim, there had been constant complaints by the buyer to the seller about the malfunctioning of the machine. It therefore held that avoidance had taken place within a reasonable period of time.

The Court also considered the seller's claim that the buyer had acted in contradiction with its previous conduct in avoiding the contract of sale and purchase. The Court applied article 8 of CISG, which it considered a provision for the interpretation not only of the statements and conduct of the parties but also of the contract itself; moreover, article 8.3, in referring to the subsequent conduct of the parties, enshrined the well-known prohibition of venire contra factum propium, thus recognizing that the subsequent conduct of the parties should be taken into consideration when assessing the intention of each party.

The seller also claimed that the judgement of the Court of First Instance had not resolved the issue, since it considered that there had been a basic breach of contract under the terms of article 25 of CISG. The Provincial High Court considered that, although the judgement appealed against also cited Spanish case law in relation to article 1124 of the Civil Code (Discharge by breach), such case law was along the same lines as article 25 of CISG, which provided that the buyer might declare the contract avoided where the breach was serious and fundamental, without needing to adduce the failure to perform secondary or complementary actions that, not being of vital importance, had not prevented the creditor from obtaining the financial result that had prompted it to conclude the contract.

Lastly, as regards the interpretation of the contract where it concerned the specific features that the machine in question was required to have, the Court held that the aim of article 8.1 of CISG in introducing the rule or subjective criterion of interpretation was to discern the real intent of a contracting party -- without going so far as a psychological investigation -- so that, if the terms of the contract were clear, there was an obligation to abide by the literal meaning, without either party being able to claim that its unstated wishes should prevail.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 8 ; 25 ; 35 [Also cited: Articles 26 ; 39 ; 46 ; 49(1)(a) ]

Classification of issues using UNCITRAL classification code numbers:

7A33 [Application of good faith standards: applied to method of incorporating standard terms and conditions in contract];

8A ; 8C [Intent of party making statement or engaging in conduct: relevant if other party "knows" or "could not have been unaware"; Interpretation in light of surrounding circumstances];

25B [Definition of fundamental breach];

35A ; 35B [Conformity of goods to contract: quality, quantity and description required by contract; Requirements implied by law]

Descriptors: Good faith ; Standard terms and conditions ; Intent ; Conformity of goods

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Spanish: CISG-Spanish website <http://www.cisgspanish.com/seccion/jurisprudencia/espana/?anio=2007>

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spanish website <http://www.cisgspanish.com/jurisprudencia/espana/audiencia-provincial-de-navarra-27-diciembre-2007/

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court of Navarra

27 December 2007

Translation [*] by Lindsey J. Ramistella [**]

Edited by Juan Manuel Falabella [***]

This appeal follows the Ruling of Court of First Instance No. 3 of Tudela, dated 29 March 2005. The dispute relates to the functioning of a machine that a German company [Seller] manufactured and sold to a Spanish firm [Buyer].

This Court will discuss the rulings made on various issues by the Court of First Instance.

[JURISDICTION]

First, the jurisdiction of the Spanish court is examined since, in the [Seller]'s general conditions, the German courts were mentioned.

It may not be assumed that the [Buyer] tacitly submitted to the jurisdiction of the Spanish courts by answering the complaint, because the [Buyer] also challenged the jurisdiction of the Spanish courts at the same time. Article 16 of Regulation 44/2001 on jurisdiction does not apply because the dispute involves companies rather than consumers.

[Good faith and General terms and conditions]

The general terms and conditions in the contract that the [Buyer] claims confer jurisdiction on German courts do not apply by virtue of Article 23, Regulation 44/2001. The general conditions are not undermined by the fact that they are on the backside of the document printed in small German letters. However, they are undermined by the fact that there is no express reference on the front side of the contract to the general conditions that contain the jurisdictional clause. Moreover, the Court finds that the jurisdictional clause is invalid pursuant to the principle of good faith contained in Article 7 of The United Nations Convention on Contracts for the International Sale of Goods (hereinafter CISG). This principle indicates that a contract shall provide for its content in a manner the parties would reasonably expect. In this sense, the principle of good faith would be violated if this Court were to give validity to the jurisdictional clause on the backside of the contract, to which the [Seller] did not consent.

[SUBSTANTIVE ISSUES]

With respect to the ruling of the Court of First Instance on the substantive issues, this Court rejects almost all of [Seller['s arguments.

[Applicable law] The [Seller] claims that the Court of First Instance applied domestic law and case law, and not the CISG. This Court finds that, although the ruling in the First Instance made reference to Spanish case law related to the termination of contracts under Art. 1124 of the Civil Code, the Court also made reference to the CISG, specifically Articles 39, 46 and 49(1)(a).

[Notice to Seller]

In addition, this Court rejects [Seller]'s argument that Article 26 of the CISG is to be interpreted as meaning that the buyer must submit the issue, as a sine qua non requirement, first to an out-of-court decision in order to bring this lawsuit. This is so because the [Seller] already has notice of such decision in this action.

The Court also finds that, since the commencement of the suit, there were additional complaints made by the [Buyer] in connection with the malfunctioning machine, and that notice was provided to the [Seller] within a reasonable period of time.

[Intent]

This Court also considers the [Seller]'s argument that [Buyer]'s conduct was against its own behavior in connection with the termination [avoidance] of the contract. This Court finds that Article 8 of the CISG provides a rule for interpreting not only the contract but also parties' declarations and actions. Under Article 8(3) of the CISG, which refers to the subsequent conduct of the parties, the recognized principle of venire contra factum propium ("No one may set himself in contradiction to his own previous conduct") is adopted. Therefore, the subsequent behavior of the parties must be taken into account when assessing the intent of each party.

[Fundamental breach]

[Seller] also claims that the Court has not explained its finding of a fundamental breach of contract within the meaning of Article 25 of the CISG. The Court of Appeals considers that while the ruling also cites case law in connection with Spanish Art. 1124 CC ("resolute breach"), such case law is harmonious with Article 25. In this regard, the CISG distinguishes a fundamental breach of contract from a breach that is ancillary or supplementary, by which the non-breaching party could still obtain the economic result that it expected from the contract.

[Conformity of goods]

Finally, in interpreting the provision of the contract that refers to the machine's specific characteristics, the Court finds that Article 8(1)of the CISG, in recognizing subjective criteria for interpretation, invites an inquiry as to the true intent of the parties, but excludes the use of in-depth psychological investigations. Therefore, if the terms of the contract are clear, they are to be given their literal meaning, so parties cannot later claim that their undeclared intentions should prevail.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellant of Germany is referred to as [Seller] and Defendant-Appellee of Spain is referred to as [Buyer].

** Lindsey J. Ramistella is a second-year student at Pace Law School and a member of the Pace William C. Vis Moot Court team. She earned a Bachelor of Arts in Spanish from the University of Connecticut in 2006.

*** Juan Manuel Falabella has also participated in the Willem C. Vis International Commercial Arbitration Moot, in his case representing the School of Law, Universidad de Buenos Aires. He has attended the Summer Institute in International and Comparative Law, Stetson University, and has Sworn Legal Translation credentials, School of Modern Languages, Pontifica Universidad Catolica Argentina. He is currently a Legal Assistant at the Buenos Aires law firm of Hope, Duggan & Silva.

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