France 27 May 2008 Court of Appeals Rennes (Brassiere cups case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080527f1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 07/03098
CASE HISTORY: 1st instance Tribunal de commerce de Rennes 21 December 2006 [reversed]
SELLER'S COUNTRY: Italy (plaintiff)
BUYER'S COUNTRY: France (defendant)
GOODS INVOLVED: Brassiere cups
FRANCE: Rennes Appeal Court (Brassier cups case) 27 May 2008
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/104],
CLOUT abstract no. 1029
Reproduced with permission of UNCITRAL
Abstract prepared by Claude Witz and Stephan Pache
A company based in France had put in a series of orders to a company based in Italy for bra linings to be used in the manufacture of swimsuits. Citing manufacturing defects, the buyer cancelled his orders, obtained replacement goods and sued the Italian supplier for damages and interest in compensation.
Hearing an appeal against the Rennes Commercial Court, the Rennes Appeal Court ruled that two contracts had indeed existed, in accordance with the provisions of CISG, articles 18 and 23. The Court found, however, that a third contract had not taken effect, in view of the fact that the Italian company had changed the price mentioned in the order. In the Court's view, this constituted a counter-offer, containing an element that substantially altered the terms of the offer, in line with CISG, article 19.
The Appeal Court ruled that the goods lacked conformity under the terms of CISG, article 35, in that the adhesive used on the fabric did not stand up to handling. The Commercial Court had held the cancellation of the orders by the buyer to be a statement of intent that it considered effective under the terms of CISG, article 49. It had also held that the notification by facsimile was in accordance with the requirements of CISG, article 26. In explaining its reasoning, however, it had failed to examine whether the lack of conformity constituted a fundamental breach of contract, thus entirely overlooking the provisions of CISG, article 25.
The Appeal Court dismissed part of the plaintiff's claim for damages and interest. It ruled that the buyer was not entitled to the difference between the price on the contract and the price of the replacement goods, as he had claimed, since he had not acted in a reasonable manner under the terms of CISG, article 75, in that he paid what the judges considered an excessive price for his replacement goods.
The Court of Appeal also applied CISG, article 77. After making its complaint about the lack of conformity, the buyer had taken three days to stop the swimsuit production chain, thus contravening, in the court's view, his obligation to minimize the damage.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
19C ["Acceptance" with modifications: modifications that are material]; 26A [Notification of avoidance: effective declaration of avoidance]; 35A [Conformity of goods to contract: quality, quantity and description required by contract]; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time]; 47A3 [Buyer's right to fix additional period for avoidance: content of notice as basis for avoidance]; 49A [Buyer's right to avoid contract: ground for avoidance]; 74A [General rules for measuring damages: loss suffered as consequence of breach]; 75A2 [Damages established by substitute transaction after avoidance: repurchase by aggrieved buyer]; 77A [Obligation to take reasonable measures to mitigate damages]
19C ["Acceptance" with modifications: modifications that are material];
26A [Notification of avoidance: effective declaration of avoidance];
35A [Conformity of goods to contract: quality, quantity and description required by contract];
39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];
47A3 [Buyer's right to fix additional period for avoidance: content of notice as basis for avoidance];
49A [Buyer's right to avoid contract: ground for avoidance];
74A [General rules for measuring damages: loss suffered as consequence of breach];
75A2 [Damages established by substitute transaction after avoidance: repurchase by aggrieved buyer];
77A [Obligation to take reasonable measures to mitigate damages]
CITATIONS TO OTHER ABSTRACTS OF DECISION
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1354&step=Abstract>
CITATIONS TO TEXT OF DECISION
Original language (French): CISG-France database <http://www.cisg-france.org/decisions/270508.htm>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1354&step=FullText>
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
27 May 2008
Translation [*] by Nathalie Hofmann [**]
Particulars of the proceeding
Composition of the Court during the hearings and deliberations: Mr. Yves Le Guillanton, president, Mrs. Françoise Cocchiello, reporting judge, Mrs. Véronique Boisselet, judge; Clerk: Mrs. Béatrice Fournier, present during the hearings and the pronouncement of the decision. Hearing: The hearing took place publicly on 27 March 2008, before Mrs. Cocchiello, reporting judge, who, without objection of the parties' representatives, conducted the hearing alone and whose report was the basis of the deliberations. Decision: The decision was pronounced after the oral hearing and after an adjournment on 27 May 2008 by Mr. Yves Le Guillanton, president. Parties: Plaintiff. Company M.C.S., herinafter referred to as "[Seller]", incorporated according to Italian law, [...] Italy, represented by Guillou & Renaudin, partnership of lawyers, assisted by Me Xavier Skowron-Galves (Law firm Isabel Zivy), lawyer. Defendant: Stock Corporation H.D., hereinafter referred to as "[Buyer]" of [...] Rennes, France, represented by C., C., P. & LCB, partnership of lawyers, assisted by Me. Christine B., lawyer
The [Buyer] has maintained a business relationship with the [Seller] since 2001.
The [Buyer] procures brassiere cups from the [Seller] for the fabrication of bathing suits; these bra cups were produced on standard cones of the [Seller] according to specifications of the [Buyer].
Several orders were placed in 2003.
The [Buyer] complained about the poor adhesion of the covering material to the filling of the
cups and, after some correspondence, instituted proceedings.
[2. Decision of the Court of First Instance]
By judgment of 21 December 2006, the Commercial Court (Tribunal de commerce) of Rennes, notably:
|-||Declared the avoidance of the sale contracts,|
|-||Ordered the [Seller] to pay the amount of 32,490 EUR to the [Buyer] in damages,|
|-||Ordered the [Buyer] to keep and preserve the bra cups for the [Seller],|
|-||Ordered the [Seller] to pay the amount of 5,000 EUR to the [Buyer] for unrecoverable fees [Translator's note: The French term is "frais irépetibles"or legal fees not generally recoverable by the winning party, for example some attorney fees. The French judge has discretion to order the losing party to pay a certain amount to cover such fees according to Art. 700 of the French New Code of Civil Procedure.], and|
|-||Ordered the [Seller] to bear the costs of the proceedings.|
The [Seller] appealed the decision.
[3. Submissions of the Seller]
The [Seller] requests the court to;
|-||Allow the appeal,|
|-||Dismiss all of the [Buyer]'s claims,|
|-||Order the [Buyer] to reimburse the amount of 32,490 EUR in damages, and|
|-||Order the [Buyer] to pay the [Seller] the amount of 12,663.93 EUR based on Art. 700 Code of Civil Procedure.|
Furthermore, the [Seller] asks for the costs of the first instance and appeal proceedings to be recovered according to Art. 699 Code of Civil Procedure.
[4. Submissions of the Buyer]
The [Buyer] requests the court to:
|-||Dismiss all of the [Seller]'s claims,|
|-||Confirm the first instance judgment,|
|-||Order the [Seller] to pay the [Buyer] 7,000 EUR based on the application of Art. 700 Code of Civil Procedure,|
|-||Order the [Seller] to bear the full costs of the appeal according to Art. 699 Code of Civil Procedure.|
Additionally, the court refers to the more exhaustive description of the facts in the written submissions of the parties of 14 September and 17 December 2007.
[5. Reasoning of the court]
The parties do not contest that their business relationships are subject to the Vienna Convention [CISG], which they invoke to be applied in their written memoranda.
The documents submitted to the court establish the following factual elements:
On 19 June 2003, the [Buyer] ordered from the [Seller] 3,500 pairs of bra cups, which were delivered on 11 July 2003 and which were then sent by the [Buyer] to its Tunisian sewer. The defaults were notified to the agent of the [Seller], Mr. P, on 26 September 2003, who was adverted of the necessity to pass on this notification to the [Seller] as soon as possible. On 16 October, the [Buyer] informed the [Seller] about the poor quality of the bathing suits produced in September and about the fact that an expert analysis, ordered as intermediate measure, had shown that the adhesive of the garment did not resist the mechanical handling. The [Seller] did not contest this.
On 21 August 2003, the [Buyer] ordered from the [Seller] 14,100 [Translator's note: Typo in case text: should be 14,000] pairs of bra cups (11,000 bra cups of type MB 01 and 3,000 bra cups of type MB 03), which were delivered on 12 September 2003, and the price was paid 90 days after the end of the month, on the 10th of the following month.
On 22 October 2003, the [Buyer] informed the [Seller] that 13,800 of the 14,100 pairs proved to be unsatisfactory due to the missing adhesive of the material.
Those bra cups that had not been sent to the Tunisian sewer were taken back by the [Seller].
On 3 November 2003, the [Seller] proposed that there be no further processing of the other bra cups, that the goods be returned at the [Seller]'s cost, that within three weeks the [Seller] would propose a sample and, if approved, it would need five weeks to re-manufacture and resend the goods. This proposal was subject to strict payment conditions (30 % in advance, after approval; 70 % at the time of delivery), which the [Seller] explained with the fact that it would have to buy special foam for the [Buyer] which had to be paid for in advance.
On 17 November 2003, the [Buyer] confirmed the previous order, which it reduced by 500 bra cups, though, on the same day, the [Buyer] placed another order for 2,100 cups of type MB01.
The [Seller] indicated on 19 November that the previous order was confirmed and that it did not have a problem with the reduction of the orders and with the new orders, that the delivery period would be between 12 January 2004 and the end of January, that the price for the new order of bra cups was fixed at 1.10 EUR [per pair], and that the conditions were those stipulated on 3 November 2003.
On 20 November, the [Buyer] answered, disagreeing with regards to the delivery period because it could not wait until January, with regards to the increase in price and with regards to the conditions of 3 November 2003.
Subsequently, the correspondence between the parties did not improve the situation and the [Buyer] cancelled all of its orders by fax of 11 December 2003.
[CONCLUSIONS OF LAW]
From these elements, which the parties explain abundantly in their written submissions, it can be concluded:
1) The parties concluded a first contract of sale by the [Buyer]'s offer (order) of 19 June 2003 and the [Seller]'s acceptance by delivering the goods within the prescribed period without objecting to the conditions regarding price and payment or to the quality and quantity of the goods. The contract of sale was thus concluded in accordance with the provisions of Arts. 18 to 23 CISG.
This contract was not duly performed by the [Seller] for two reasons: the first being that the obligation of conformity in Art. 35 CISG had not been respected, given that the [Seller] acknowledged the non-conformity, the other being that the [Seller], although it would have been possible and although the [Seller] had proposed it itself by fax from 3 November 2003, did not deliver conforming goods within the additional period of time that was set and which postponed the delivery date to January 2004.
Consequently, the contract could by avoided according to Art. 49 CISG, therefore, the [Buyer] could avoid the contract of sale according to Art. 49 CISG by cancelling the order. The notification of avoidance by fax of 11 December 2003 was in conformity with Art. 26 CISG.
2) The parties concluded a second contract, subject to the same conditions of sale, notably with regards to the price, the payment of the purchase price and the delivery, when the offer (order) of the [Buyer] dated 21 August 2003 was accepted by the [Seller] who delivered the goods in accordance with the conditions of the order.
However, this contract was not performed in conformity with the conditions which the parties have initially agreed on, in fact, the non-conformity of the goods that the [Seller] took back was not contested by the [Seller], which clearly results from the content of its fax of 3 November. Nevertheless, the parties have shown their willingness to continue their business relations by their correspondence of 3 and 17 November, agreeing on new quantities, the delivery period and the payment conditions stipulated on 3 November, which have not been objected to by the [Buyer] at the time of its new order, given that Mr. P did not act as its [Buyer's] agent.
By subsequently modifying the delivery period on 19 November 2003, the [Seller] did not respect the terms of the parties' agreement on the postponement of the delivery period to five weeks counting from the date of the agreement as suggested in the fax of 3 November 2003. The contract therefore could by avoided in accordance with Art. 49 CISG.
Thus, the [Buyer], by cancelling the order on 11 December, made known to the [Seller] that the contract was avoided according to Arts. 26 and 49 CISG.
3) In contrast, subsequent to the order of the [Buyer] on 17 December, the parties did not conclude a contract in the first place, in fact, the [Buyer]'s offer, which was subject to the price conditions fixed in the contracts concluded earlier, was not accepted by the [Seller] who modified the price of the newly ordered bra cups, with the result that there was no agreement between the parties with regards to that order. Hence, the [Seller] made a counter-offer to the [Buyer]'s offer within the meaning of Art. 19 CISG, containing an element (the price) which materially altered the terms of the initial offer.
The [Buyer]'s claims are based on Art. 45 and 74 et. seq. CISG; the [Buyer] makes two claims for damages, which the [Seller] contests.
1) First, the [Buyer] requests compensation for the costs of further processing the bra cups in Tunisia following the first order amounting to 16,290 EUR corresponding to the costs of manufacturing 1,800 bras at a price of 9.05 EUR per item, whereas the [Seller], who does not contest the quantity of the faulty goods, submits that the [Buyer], who could have avoided incurring part of the damage by stopping the manufacturing process earlier, has not taken reasonable measures to mitigate the loss in the sense of Art. 77 CISG. Besides, the [Seller] puts forward that the net costs, which are excessive with regards to the Tunisian market, are not justified.
Art. 74 CISG provides:
"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."
Given that the [Buyer] had already contacted Mr. P on 26 September when 860 pairs of cups had been processed in Tunisia, but nevertheless, the [Buyer] did not decide to stop the processing until three days later, when already 1,800 pairs of cups had been processed, and given that a production line of bathing suits produces 1,200 bathing suits within three days, as explained by the [Buyer], a non-conformity like the poor adhesion between "the covering fabric and the whole piece" and its debonding during the mechanical handling requires a very quick reaction. The three-day period can therefore not be considered as sufficiently short, wherefrom follows that the [Seller]'s request for the application of Art. 77 is well founded
Moreover, the manufacturing costs, which the [Buyer] asserts, cannot simply be established by the single calculation slip of the net cost price of a bra and the elements of the net cost price calculation certified by the [Buyer]'s accountant, although nothing proves that this calculation slip concerns the cost of the type of bathing suit which was intended to be manufactured; furthermore, the labor costs for the manufacture of a bathing suit in Tunisia amount to about 1 EUR.
For these different reasons considered above, the sum allocated to the [Buyer] in damages as compensation for the manufacturing costs is fixed at 3,000 EUR.
2) Secondly, the [Buyer] requests damages as compensation for the cost of replacing the goods.
The [Buyer] asserts that in December 2003 it had to resort to another supplier, T, and, not having been in a powerful bargaining position, it had to bear extra costs of 1 EUR per pair of bra cups for an order of 16,200 pairs, whereas the [Seller] contests this claim by explaining that the [Buyer]'s decision to purchase pairs of bra cups for 1.98 EUR is difficult to understand, notably, if one bears in mind the [Seller]'s proposal of 0.93 EUR or 0.98 EUR dependent on the color for the second order and given that the delivery periods offered by T were identical to those proposed by the [Seller] on 20 November 2003.
The [Seller] also puts forward that its liability for the orders 2 and 3 is not established, which reduces the resulting damage even more.
Art. 75 CISG states:
"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74."
As stated above, no contract concerning the order for 2,100 bra cups was concluded on 17 November, since the parties did not agree on the price. Therefore, the contractual liability of the [Seller] cannot be invoked with regards to this order.
The order of August 2003, on the other hand, which was modified in November 2003, was agreed between the parties and the postponement of the delivery date by the [Seller] justified the avoidance declared by the [Buyer] on 11 December 2003.
The [Buyer] bought goods in replacement, within the meaning of Art. 75 CISG, from the
company T on 14 December 2003. However, the provisions of Art. 75 require the [Buyer] to
act in a reasonable manner. In this case, the purchase for a price per pair of 1.98 EUR, being
more than one EUR above the price per pair proposed by the [Seller], after having declared, in
order not to accept the increase in price proposed by the [Seller], that the [Seller] could not
"now modify (the) purchase price to be paid by (its) customers", together with the acceptance
of delivery dates in mid-January or end of January 2004, although the [Buyer] refused the
deliveries of bra cups at a price per pair between 0.93 and 0.98 EUR proposed by the [Seller]
for the same period, does not constitute the "reasonable manner" prescribed by Art. 75 CISG.
For this reason, the [Buyer] cannot recover the difference between the contract price and the price of the replacement purchase.
This claim of the [Buyer] is therefore rejected; and the [first instance] judgment has to be corrected.
The [Seller] brings up the behavior of the [Buyer], who, allegedly, invented damages, who sought to be compensated for its own inconsequence, and who imposed abusive proceedings on the [Seller] in "a foreign jurisdiction". The [Seller] asserts that it suffered a moral damage which should be compensated by damages amounting to the sum claimed in damages by the [Buyer], whereas the [Buyer] refutes having done anything wrong.
The attitude of the [Buyer] is neither characterized by any such malignity or abuse, as alleged by the [Seller]; nor can the fact that some of the [Buyer]'s claims will be rejected be sufficient ground for the accusations of the [Seller]. The claims and defenses presented by the parties are part of a normal judicial procedure and common to the law applicable to such international sale contracts, which the parties entered into and which were examined by the judiciary.
Therefore, the [Seller]'s claim is rejected.
There is no room for the application of this provision, neither with regards to the first instance proceedings, nor with regards to the proceedings before this court.
The [Seller], as the losing party, bears the costs of the proceedings to be recovered according Art. 699 Code of Civil Procedure.
On these grounds, the court, reversing the judgment, and ruling anew:
|-||Declares the avoidance of the contract of sale concluded in June and August 2003,
|-||Finds that the parties have not concluded a contract in November 2003,
|-||Orders the [Seller] to pay the [Buyer] the amount of 3,000 EUR in damages,
|-||Rejects the other claims of the [Buyer] and the [Seller]'s claim for damages,
|-||Declares that there is no room for compensation for unrecoverable fees, and
|-||Orders the [Seller] to bear the costs of the proceedings to be recovered according to Art. 699 Code of Civil Procedure.|
* 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 France is referred to as [Buyer].
** Nathalie Hoffmann is a law student at Humboldt-University Berlin. During the academic year 2007-2008 she studied at the University of Geneva, where she obtained the "Certificat du droit transnational" in summer 2008. As a member of the Geneva team, she participated in the 15th Willem C. Vis International Commercial Arbitration Moot.Go to Case Table of Contents