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CISG CASE PRESENTATION

Spain 8 April 2008 Appellate Court Valencia (Extruding machine case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080408s4.html]

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

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Case identification

DATE OF DECISION: 20080408 (8 April 2008)

JURISDICTION: Spain

TRIBUNAL: Audiencia Provincial de Valencia, sección 8ª

JUDGE(S): Sr. D. Eugenio Sánchez Alcaraz

CASE NUMBER/DOCKET NUMBER: Recurso de Apelación No. 908/2007

CASE NAME: Unavailable

CASE HISTORY: 1st instance Juzgado de Primera Instancia No. 3 de Onteniente 30 January 2007

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: Spain (defendant)

GOODS INVOLVED: Extruding machine


UNCITRAL case abstract

SPAIN: Valencia Provincial High Court (Extruding machine case) 8 April 2008

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/105],
CLOUT abstract no. 1038

Reproduced with permission of UNCITRAL

Abstract prepared by María del Pilar Perales Viscasillas

The Spanish buyer and the Italian seller concluded a sale and purchase contract for a single-screw extruder. On the basis of the Spanish principle aliud pro alio, the buyer claimed that there were defects in the screw and a lack of capacity, or power, in the extruder's motor.

The Court deemed CISG to be applicable on the basis of article 1.1 (a), namely that the parties were based in States party to the Convention. It held that the delivery entailed the obligation to pay the price, in accordance with articles 53 and 59 of CISG. The buyer's response was to adduce the defects mentioned above. In application of the Spanish principle of aliud pro alio, the Court ruled that it was for the buyer to prove the significance of the defects. In fact, the seller had attempted to find a solution to the problem by ordering a new screw to be made at a workshop, although there had subsequently been shown also to be a lack of capacity or power in the extruder's motor. Despite this, the buyer had not notified the seller of the existence of the defects within a reasonable time (CISG, art. 39), even though the seller had put in a series of requests for payment; the buyer had not avoided the contract, either. In particular, the Court considered the periods of time that had elapsed between the replacement of the screw in June 2004, the request for payment on 2 March 2005 and the submission of the claim on 14 February 2006. It concluded that the buyer had not complied with the reasonable time stipulated in article 39 of CISG.

The Court held that, although article 78 of CISG did not establish a dies a quo for arrears to be paid, article 7.2 provided that questions that were not expressly settled in the Convention were to be settled in conformity with the general principles on which it was based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. In these circumstances, the applicable provision was article 63, paragraph 1, of the Commercial Code, under which late payment in fulfilment of a commercial obligation would, in contracts that specified a day for payment, begin to attract interest the day following the expiry date, as provided for in Act No. 3/2004 of 29 December, which incorporated Directive 2000/35/EC on combating late payment in commercial transactions.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 39 ; 78 [Also cited: Articles 53 ; 59 ]

Classification of issues using UNCITRAL classification code numbers:

39A [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 sum in arrears]

Descriptors: Lack of conformity notice, timeliness ; Interest

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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-Spain and Latin America website <http://turan.uc3m.es/uc3m/dpto/PR/dppr03/cisg/respan74.htm>

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spain and Latin America website <http://turan.uc3m.es/uc3m/dpto/PR/dppr03/cisg/sespan74.htm>; see also Fuente: Aranzadi Westlaw

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Audiencia Provincial de Valencia

Technomatic S.p.A. v. Plasticos Ferrando SL

8 April 2008

Translation [*] by Maria Villeda Wohlers [**]

[…]

FACTUAL BACKGROUND

FIRST: On appeal delivered by the Judge of First Instance Number 3 Onteniente, as of 30 January 2007, which contains the following:

"DECISION: Regarding the lawsuit brought by Tecnomatic S.p.A. of Italy (hereinafter [Seller]), duly represented by Counsel Ms. Rosario Calatayud Rivera, against Plasticos Ferrando SL of Spain (hereinafter [Buyer]), duly represented by Counsel Ms. Francisca Cerda Vidal, I direct the [Buyer] to pay to the [Seller] the amount of twenty-six thousand six hundred seventy-four Euros and ninety-eight cents (EUR 26,674.98 ); plus legal interest since the date of the judicial pleading and costs."

SECOND: An appeal against this decision was timely and properly filed by [Buyer]. The orders were sent to this Court. The appeal is acknowledged. Deliberation and vote are due on 1 April 2009.

THIRD: The requirements and legal formalities have been observed.

LEGAL

FIRST: [Seller], an Italian entity, on 14 February 2006, under the United Nations Convention on Contracts for the International Sale of Goods (promulgated in Vienna on 11 April 1980) made a demand for ordinary proceedings against the [Buyer], claiming the amount of 9,827,574 Euros, of which 9,826,674 Euros corresponded to the last deadlines for the purchase of a single screw extruder called a "Mod monovite Estrusore LC-1.90/30S" and the remaining 900 Euros (see invoice 42 / B) for the intervention of an Italian technician who tested the machine in April 2003. The [Buyer] objected to the claim, arguing, in essence, the failure of the [Seller], which provided and sold to [Buyer] a machine not suitable for the purpose for which it was purchased, in other words, delivery of an "aliud pro alio", which is reflected in two very specific issues: on the one hand, spindle defects; and on the other, lack of capacity (power) of the extruder motor.

The Court of First Instance partially uphold the [Seller]'s claim, directing [Buyer] to pay the amount of 9,826,674 Euros to [Seller], plus legal interest since the judicial pleading, without imposing costs. This decision has been challenge on appeal by the [Buyer]; and challenged by the [Seller] regarding the rejection of the invoice 42 / B and the statement of legal interest and judicial costs.

SECOND: The legal relationship that binds the parties is governed by the United Nations Convention on Contracts for the International Sale of Goods (issued in Vienna on 11 April 1980; ratified on 17 July 1990) as provided in Article 1(1)(a) which indicates that the Convention shall apply to contracts of sale of goods between parties whose places of business are in different States, when such States are Contracting States.

It is an undisputed fact that the [Buyer] placed an order on the [Seller] on 22 October 2002 for a single screw extruder, model. LC-1.90 / 305, designed and built to produce PE (polyethylene), PP (polypropylene) and other polyolefin resin beads, with a production capacity of 600 Kg / h + 10% and that it was delivered to the [Buyer] in April 2003. The obligation to pay the price arose from the date of delivery, as provided in Article 53 of the Convention, under which the buyer must pay the price of the goods and receive them if they comply with the contract. According to Article 59 of the Convention, payment shall be made on the date fixed by or determined under the contract, and without any request or compliance with any other formality on the part of the seller.

Against this issue, the [Buyer] argues spindle defects and lack of capacity (power) of the extruder motor determined as an "aliud pro alio." Several judicial decisions (TS SS. of 28 February 1997, 27 November 1999, 16 November 2000, 20 April 2001, 21 September 2001, 22 April 2004, 14 February 2007 and 9 July 2007 among others) evidence that a delivery of a different kind or an "aliud pro alio" occurs when there is a full failure of the object of the contract, the goods being unfit for the purpose for which they were intended to serve. This circumstance allows the buyer to claim the protection provided in Articles 1101 and 1124 of the Civil Code. However, the inability must proceed from defects in the object that prevent the buyer from obtaining the utility that led to its acquisition, without being merely the purely subjective dissatisfaction of the buyer (2 September 1998 SS. of TS). In accordance with Article 217.3 of the Code of Civil Procedures, the burden of proof lies with the party so pleading. In accordance with the rules, the [Buyer] must prove any facts that prevent, extinct or invalidate the legal effects of the claim, so that any questions that may arise in this regard will be detrimental to [Buyer]'s satisfaction of this burden of proof.

The problems presented by the spindle were recognized by the [Seller]. The [Seller] states that it has arranged for the manufacture of a new spindle by Talleres Pena SA which solved the problem but that, even after having solved the problem, the [Buyer] neither responded to the successive demands of payment, nor terminated the contract. Mister Luis Pedro, the legal representative of Talleres Pena SA, declared in his witness statement that in the middle of 2003 the [Buyer] contacted them because of the serious problems posed by the extruder screw (1: 04 '49'' ) and that, after studying the issue with Involca SL, it was concluded that the extruder screw was flawed and inadequate (1: 05 '06''); thus, in July they made the first intervention (1: 05' 14'') and that in September he sent to the [Seller] the causes, that he estimated were preventing the spindle from working as specified (0 '24''). Additionally, he indicated that costs of making a new spindle according to their own design (0'38) were borne by [Seller] and that it was asked as a condition "sine qua non" that once [Buyer] confirmed the proper conduct and operation of the extruder (1 '00'') [Buyer] would pay the invoice.

Document number 58 of the claim (f. 99) is displayed. The document is a fax sent to [Seller] by the [Buyer], indicating that the spindle manufactured by Talleres Pena, permitted the machine to properly plasticize the production, but that it was much lower than the rate guaranteed (2 '56''). Hence, the spindle's defects are not the issue of discussion, as the spindle was replaced with a new product made by Talleres Pena. Therefore, the resistance offered by [Buyer] remained confined to the single issue of lack of capacity (power) of the extruder motor.

THIRD: In relation to this issue, the [Buyer]'s legal representative, Juan Antonio Ferrando Benavent, while conducting the interrogation, declared that the machine plasticizes up to 60% or less of the production capacity that it was meant to have (24 '46'' ) and that when the new spindle was placed on the machine on November 2003, a new hidden and unknown defect of the machine was revealed. He stated that the engine was poorly designed, with respect to the gearbox and that the drive (25 '16''), which although very powerful (192 kW), gave no speed to the spindle (25' 26'') overheating the engine, to 20% more consumption (25 '30 '').

Witness Aurelio is of the same opinion. He indicated that, since the very beginning, the extruder was unable to produce a single meter of pipe suitable for marketing (7'30) and that with the new spindle although the extruder plasticized correctly (8'16), the production was less than that agreed upon (8'32), as when they changed the spindle they became aware of the fact that the engine overheated (8'49") and stopped working -- the limit to which the machine can work is of a hundred revolutions (9' 31''), but not beyond these values (9 '36''). In addition, it must be kept in mind that this witness works as a technician (7'10) for [Buyer] (6 '50''), which raises questions about the objectivity and impartiality of his testimony.

For his part, Francisco Duart Berenguer, legal representative of Involca S.L., declared in his witness statement, that as a supplier of [Buyer] (57 '21'') who participated in the sale of the extruder (58' 04''), he was aware that from the very beginning the machine presented serious operational problems (58 '40''), but that once the spindle was replaced [Buyer] told him that the machine plasticized correctly, although the production was negatively far apart from that guaranteed (59' 30''), stating that he knew that from that moment the machine was working a little better (1: 01 '07''), although he was unaware of the optimum point of production (1: 00'12'').

The arguments previously presented, highlight the inadequacy of the evidence offered by the [Buyer] to justify the incapacity of the extruder's engine power. Moreover, Witness Luis Pedro, confirmed in his statement that Mr. Ferrando orally communicated to him that he was producing between 450 / 500 kg (3 '12'') -- figures which are, as stated by the first instance judge, virtually consistent with the agreement and even within its boundaries (document number eight in the lawsuit, the f. 32 to 35, singularly f. 34).

In any event, it is clear that the solution to this question would require expert evidence, given the highly technical profile of the controversy. However, [Buyer] failed to produce such evidence, from which its legal position must suffer the consequences. Especially, considering that, as admitted by [Buyer]'s legal representative, Juan Antonio Ferrando Benavent, in the interrogation presented to him, the machine is currently in use (9 ' 42''), which contradicts the inability of the machine that is claimed by [Buyer].

In addition, it must be considered that since the moment the spindle was replaced, particularly since June 2004 [Buyer] has not made any claim regarding the deficiency which [Buyer] now alleges. Furthermore, [Buyer] has not even replied to the payment requirement addressed to him by the [Seller]'s attorney on 2 March 2005 (document number sixty-one of the application from folios 102 to 108). Therefore, it is concluded that [Buyer]'s position is inappropriate, as article 39 of the Convention provides that the buyer loses the right to invoke lack of conforming goods if he does not give notice to the seller specifying the nature, within a reasonable time; from the moment that has or ought to have discovered it. It is clear that the lapse of time between those dates and the filing of the application on 14 February 2006 (f. 1) far exceeds what could be meant by a "reasonable time, which must lead to, as a result of the foregoing, the dismissal of the action brought by [Buyer].

FOURTH: [Seller] challenged the decision regarding the rejection of the obligation of [Buyer] to pay the amount of 900 Euros that correspond to the invoice 42 / B issued on 13 June 2003 for testing the machine on April 2003 (document number 3 and 4 of the application of proceedings, folios 24 and 25). The judge "a quo" rejected the merits of this claim for two reasons: first, it is not to be accepted that the proof of payment lies with the [Buyer]; and second, upon challenge of the invoice, [Seller] failed to provide the testimony of the technician who provided the service, so as to establish that the amount been claimed was in accordance to the nature of the entity or service. Against this decision, [Seller] argues the existence of the agreement contained in documents numbered 7 and 8 of the application of proceedings, folios 28 and 35, which include the following words: "The cost of our technician is of 300 Euros (travel, food and accommodation are paid by you);" and that, despite the challenge of the invoice, the [Buyer] did not dispute the presence of Mr. Julian in its establishment, which is also true.

In this regard, [Buyer] argues that the presence of Mr. Julian in its establishment was useless and ineffective, because the tests of acceptance did not succeed; regardless of the reasons why, an acceptance did not occur. The fact is that payment of his intervention was not contractually connected to any circumstance. Accordingly, this first issue is upheld by the court. The second issue argued by [Buyer] refers to the decision of the first instance judge to award interest from the moment the judicial pleading started and not from the due dates of the invoices; as in the absence of agreement on the default interest, the provisions of Articles 1100, 1108 and 1109 of the Civil Code apply. Article 78 of the Convention provides that if a party fails to pay the price or any other sum owed, the other party is entitled to receive interest. Certainly, that provision does not set the "dies a quo" of the establishment of the interest, but Article 7(2) of the Convention provides that those matters not expressly settled, are to be settled in conformity with the general principles underlying the Convention or, in their absence in accordance to the law applicable under the rules of private international law; therefore, article 63.1 of the Commercial Code applies. It provides that the effects of late compliance with trade obligations in contracts that provide a due day, commence on the following due date, and that the type of interest will be that provided in Act 3 / 2004 of 29 December 2003. As both arguments are upheld, it becomes unnecessary to review the third argument regarding the judicial costs that are to be imposed on the [Buyer] under the provisions of Article 394.1 of the Code of Civil Procedures.

FIFTH: In accordance with Article 398 of the Code of Civil Procedures, dismissal of the appeal imposes the costs of the appeal on the appellant party, without indication of those costs arising from the challenge. Attention is directed to the mentioned articles as well as to other provisions of general application.

DECISION

The appeal filed by [Buyer] is dismissed. The challenge brought by [Seller] is uphold; both against the sentence issued on 30 January 2007 by the First Instance Court No. 3 Oteniente, in the Ordinary Case Number 111/06. The decision is partially revoked as the request fully considers the challenge made by [Seller] directing [Buyer] to pay the amount of 27,574.98 Euros; plus legal interest accrued since the maturity of the respective invoices; and the judicial costs of first instance. The costs incurred in this appeal shall be borne by the appellant, without indication of those costs arising from the challenge. The measures herein stated must be strictly complied with. Please refer the legal copy of this decision to the First Instance Court; as the decision and its effects must be acknowledged by the court.

There is no appeal against this decision. Notwithstanding of the provisions of Article 477.2.3 of the Code of Civil Procedures, which in this case, should be prepared in written and filed before this Court within five days of notification

This is our decision. Once certified, it will be attached to the roll. We pronounce, command and sign it. The measures herein stated must be strictly complied with. Please refer the legal copy of this decision to the First Instance Court, as the decision and its effects must be acknowledged by that court. There is no appeal against this decision. Notwithstanding the provisions of Article 477.2.3 of the Code of Civil Procedures, which in this case, should be prepared in written and filed before this Court within five days of notification. Accordingly, we pronounce, command and sign this decision which once certified will be attached to the roll.

PUBLICATION. On the due date this decision has been read and published. The hearing was held on Section Eight of the Appellate Court of Valencia. I issue a legal copy of the decision, which is to be attached to the roll, on this date. I attest.

Sr. D. Eugenio Sánchez Alcaraz


FOOTNOTES

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

** Maria Villeda Wohlers [insert bio lines]

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