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CISG CASE PRESENTATION

Czech Republic 25 June 2008 Supreme Court (Manufactured paint case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080625cz.html]

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

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Case identification

DATE OF DECISION: 20080625 (25 June 2008)

JURISDICTION: Czech Republic

TRIBUNAL: Supreme Court

JUDGE(S): Frantisek Faldyna (Cbairman), Zdenek Des and Miroslav Gallus (Judges)

CASE NUMBER/DOCKET NUMBER: 32 Odo 824/2007

CASE NAME: Unavailable

CASE HISTORY: 1st instance Regional Court in Hradec Kralove (31 Cm 69/94) 25 August 2003 [sustained]; later instance High Court in Prague (8 Cmo 426/2005-309) 14 July 2006 [sustained]

SELLER'S COUNTRY: [-] (plaintiff)

BUYER'S COUNTRY: [-] (defendant)

GOODS INVOLVED: Manufactured paint


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 14 ; 18 ; 55

Classification of issues using UNCITRAL classification code numbers:

18A [Acceptance (time and manner of): criteria for acceptance];

55A [Open-price contracts: enforceability of]

Descriptors: Acceptance of offer ; Open-price contracts

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Czech): Click here for Czech text of case

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

Supreme Court of the Czech Republic

25 June 2008 [File No. 32 Odo 824/2007]

Translation by [*] Šárka Havránková [**]

RESOLUTION

The Supreme Court of the Czech Republic in the panel of judges composed of the Chairman Mr. František Faldyna, and Judges Mr. Zdenk Des, and Mr. Miroslav Gallus has decided in the legal matter raised by the Plaintiff [Seller], "L.L.G. & C.K.", represented by attorney at law Ms. H.K., against the Defendant [Buyer], a joint stock company "K. a.s.", represented by attorney at law Ms. J.C. before the Regional Court in Hradec Králové concerning the payment of EUR 46,358 with interest (File no. 31 Cm 69/94) on the extraordinary appeal of [Seller] against the judgment of the High Court in Prague dated 14 July 2006 (File no. 8 Cmo 426/2005-309) as follows:

  1. The [Seller]'s extraordinary appeal is dismissed.

  2. The [Seller] shall reimburse [Buyer]'s costs of the extraordinary appeal proceedings in the amount of CZK 12,257, payable to [Buyer]'s legal representative within three days following the day when this resolution comes into effect.

REASONS FOR THE DECISION

[Ruling of the Court of First Instance]

On 25 August 2005, the Regional Court in Hradec Králové dismissed (File no. 31 Cm 69/1994-290) [Seller]'s claim for payment of EUR 46,358 with interest (originally Deutsche Mark [DM] 92,400 with interest) (statement under II.). The proceedings concerning 9 percent interest on late payment were stayed, due to a partial withdrawal of the claim (statement under I.). In statements under III. and IV., the court has ruled on the cost of proceedings.

The Court of First Instance has decided by the fourth judgment in a row after its first judgment dated 26 September 1997 (File no. 31 Cm 69/94-46) had been cancelled by the resolution of the High Court in Prague dated 30 March 1999 (File no. 8 Cmo 5/98-70), another judgment dated 21 March 2000 (File no. 31 Cm 69/94-117) cancelled by the resolution of the High Court in Prague dated 2 November 2000 (File no. 8 Cmo 383/2000-142) and the judgment dated 23 July 2002 (File no. 31 Cm 69/94-214) cancelled by the resolution of the High Court in Prague dated 29 May 2003 (File no. 8 Cmo 301/2002-231).

The Court of First Instance in the judgment preceding the appealed decision of the Appellate Court stated that the subject of the dispute was a claim for payment of a price of manufactured paint in the amount of EUR 36,205 as well as a claim for damages of [Seller]'s expenses incurred to clean up the paint in the amount of EUR 10,153 and further a claim for interest on late payment.

The Court of First Instance has dealt primarily with the issue of whether the right to pay the price for the manufactured paint existed, namely, the issue of conclusion of the purchase agreement on the delivery of a paint in the sense of Article 55 of the United Nations Convention on Contracts for the International Sale of Goods, promulgated under no. 160/1991 Coll. (hereinafter "CISG"). The Court of First Instance concluded that:

   -    From the language of Article 55, it follows that an offer for the conclusion of a contract requires a confirmation, in which either the purchase price or a provision for determining the purchase price does not have to be stated explicitly;
 
   -    In this case, however, no evidence presented in the proceedings has proved that the respective proposal for concluding an agreement has been in any way confirmed by the [Seller].

Since the [Seller] has not proved that the purchase agreement has been concluded, the Court of First Instance dismissed the claim for the price of the paint. The Court of First Instance has also dismissed the claim for damages and the interest on late payment due to [Seller]'s failure to prove [Buyer]'s breach of a contractual obligation and [Buyer]'s delay in payment under the agreement.

[Appellate ruling by Court of Second Instance:

The High Court (Appellate Court) in Prague]

The High Court in Prague has in the judgment identified in the headline confirmed the judgment of the Court of First Instance on the merits (statement under I.a); it has also confirmed the judgment in statement IV. concerning the costs of proceedings (statement I.b). The statement under III. of the judgment of the Court of First Instance concerning the costs of proceedings has been changed in statement I.c). The Appellate Court has stayed the appellate proceedings against statement I. of the Court of First Instance (statement under II.). In its statement under III., the Appellate Court has ruled on the costs of the proceedings.

The Appellate Court agreed with the conclusions of the Court of First Instance that the evidence provided has not proved that the purchase agreement was concluded between the parties. On the basis of these outcomes, the Appellate Court concluded that the [Seller] has proved merely the existence and the contents of the [Buyer]'s order dated 4 May 1993 but has not proved that this offer to conclude an agreement was accepted by the [Seller]. (It is necessary to apply Article 55 of CISG to an offer and its plausible acceptance by the [Seller].) In the Appellate Court's view, the fact that, in the sense of Article 18(3) of the CISG, for example, on the basis of the mentioned order or as a result of the practices which the parties have established between themselves or of usage, the [Seller] has indicated assent by performing an act such as dispatching the goods, within the period of time laid down in Article 18(2) of the CISG, has not been proved either.

Having provided the documentary evidence by the deed (writing) dated 14 May 1993, which, according to the [Seller], should have proven the existence of the purchase agreement, the Appellate Court has come to conclude that not even this evidence helped to prove the existence of the purchase agreement because this document contained merely [Buyer]'s request for explanation of the change in wrapping of the paint. For the above mentioned reasons, the Appellate Court confirmed the judgment of the Court of First Instance on the merits since, due to the non-existence of a purchase agreement there is no right, as the court stated, to collect the purchase price, or to claim damages ensuing from the breach of a contractual obligation.

As to the objection of the [Seller] that the evidence by means of bank statements concerning the payment for liquidation of paints that have been ordered but not taken over, has not been properly considered, the Appellate Court has stated that since the existence of the purchase agreement has not been proven it was unnecessary to consider the damage and its amount. As to the statement of the Institute of State and Law of the Academy of Sciences of the Czech Republic dated 28 December 2003, the Appellate Court has stated that the conclusion that the agreement has been validly concluded was made on the basis of applying Article 55 of CISG without a clarification on what the offer to conclude the agreement and its acceptance was.

[Seller's extraordinary appeal to the Supreme Court]

The [Seller] has filed in a timely manner an extraordinary appeal against the judgment of the Appellate Court referring as to its admissibility to Article 237, Section 1, letter c) of the Act on Civil Procedure (further "ACP"). From the contents of the extraordinary appeal (Article 41, Section 2 ACP), it is inferable that the [Seller] relies on an incorrect legal consideration of the matter by the Appellate Court and also points out the fact that the proceedings are affected by a flaw that could have caused an incorrect decision in the matter (therefore, that the appellate reasons according to Article 241a, section 2, letter b) and a) of the ACP have been satisfied). From the contents of the extraordinary appeal, it is further inferable that the [Seller] considers the decision of the Appellate Court to be of major legal relevance because "the aspects of purchase agreement conclusion according to the CISG have not been so far deal with in any case law"). The [Seller] disagrees with the conclusions of the Appellate Court that the purchase agreement could not be concluded because the [Seller] did not prove that the offer to conclude the purchase agreement has been accepted by the [Seller]. The [Seller] further contends that the Appellate Court has not properly considered a number of items of evidence suggested by the [Seller] (e.g., letter dated 17 September 1993, letter dated 10 September 2001), nor has the Appellate Court stated reason why such evidence has not been properly considered. According to the [Seller], the lower courts have not taken into proper account in their decisions that it is necessary to consider practices established between the parties, usages, and the subsequent conduct of the parties. The [Seller] disagrees with the conclusions of the Appellate Court regarding the letter dated 15 May 1993 and also with the assessment of the statement made by the Institute of State and Law of the Academy of Sciences of the Czech Republic dated 28 December 2003.

The [Seller] urges that the decision of the Appellate Court be cancelled together with the decision of the Court of First Instance and that the matter be returned to the Court of First Instance for further hearing. In its submission, the [Buyer] has asked the Supreme Court to confirm the decision of the Appellate Court as correct.

[Ruling of the Supreme Court]

The Supreme Court as a court of extraordinary appeal (Article 10a ACP) having found that the extraordinary appeal has been submitted in a timely manner by the [Seller] represented by attorney at law in the sense of Article 241, section 1 ACP, first dealt with the matter of extraordinary appeal's admissibility because an extraordinary appeal can be filed against a final and conclusive decision of the Appellate Court if it is allowed by law (Article 236, section 1 ACP).

The admissibility of the extraordinary appeal against the decision is governed by Article 237 ACP. As it ensues from the statement of the decision of the Court of First Instance and the decision of the Appellate Court, the decision of the Appellate Court in the merits is a confirmatory decision; an appeal against which is not according to Article 237, section 1, letter a) ACP admissible.

Another admissibility criterion of an extraordinary appeal against a decision on the merits ensues from Article 237, section 1, letter b) ACP, according to which an extraordinary appeal shall be admissible against a judgment of the court of appeal confirming the decision of the first instance court, in which the first instance court decided on the merits of the case in a different way than in the previous judgment (ruling) because it was bound by the legal opinion of the court of appeal that has quashed the original decision. The Court of First Instance has decided the matter repetitively but in all previous decisions has ruled on matters in the same way, i.e., dismissed the claim. Therefore, the admissibility of the extraordinary appeal cannot be derived from Article 237, section 1, letter b) ACP either.

What is remaining is to assess the admissibility of the extraordinary appeal pursuant to Article 237, section 1, letter c) ACP. In accordance with this provision, an extraordinary appeal is admissible against a decision of the Appellate Court confirming the decision of the first instance court if the extraordinary appeal is not admissible according to letter b) and the court of extraordinary appeal comes to the conclusion that the contested decision on the merits of the case is of a fundamental importance from the legal point of view.

A decision of the court of appeal shall be considered of a fundamental legal importance [Article 237, section 1, letter c) ACP] where it, in particular, deals with a legal issue that has not yet been solved in the decision practice of the court of extraordinary appeal or that is being decided differently by the courts of appeal or by the court of extraordinary appeal or if it deals with a legal issue that is at variance with the substantive law (Article 237, section 3 ACP).

The prerequisite of an extraordinary appeal being admissible according to Article 237, section 1, letter c) ACP is that the matter that is dealt with has a decisive meaning for the decision on the merits, thus it was not merely an issue on which the statement of the court of appeal was not based as regards the legal consideration of the matter. The decision of the Appellate Court is of fundamental importance, especially when the legal matter that is dealt with therein is of fundamental importance not only for the decision of a particular matter (in an individual case) but for courts' decision-making in general (case law) or contains the solution of the legal issue that is in contrariety with substantive law. An extraordinary appeal is admissible if it concerns the solution of legal matters (procedural or substantive); other issues (especially determination of correctness or completeness of factual findings) do not make the extraordinary appeal admissible according to the cited provision.

Although the [Seller] has not raised an issue of fundamental legal importance that would supersede the case law, [Seller]'s objections are directed to the fact that the lower courts determined the conclusion of the purchase agreement to be in contrariety with substantive law (the CISG).

According to Article 18(2) of the CISG:

"An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately unless the circumstances indicate otherwise."

According to Section (3) of this Article:

"However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph."

In Article 55 of CISG it is stated that:

"Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned."

From the cited provision of the CISG, it follows that Article 55 concerning the purchase price is applicable only on the condition that the agreement has been validly concluded. Therefore, it is first necessary to assess from the legal point of view whether there was a purchase agreement, i.e., whether such an agreement has been concluded and whether it is valid. In this regard, it was necessary to apply in the given case not only Article 18, section (2) but also section (3) of this Article concerning acceptance of an offer by performing an act (sending of goods, payment of purchase price, etc.). In such a case, it is necessary to examine practices established between the parties, namely their usages, ensuing from business so far undertaken between them including subsequent conduct of the parties after submitting the order (namely after the conclusion of agreement). In this sense, it was also necessary to take into consideration [Seller]'s document dated 9 May 1993, by which the acceptance of an order no. 93/1/0754 dated 4 May 1993 (in file under no. 1.75) was made, and the further document dated 14 May 1993 requesting "the change of paint WG 24-9100 wrapping" (in file under no. 1.122) and [Seller]'s subsequent letter (in file under no. 1.123).

If, on the basis of evidence considered, the Appellate Court has come to the conclusion that the agreement has not been concluded, such a legal consideration cannot be challenged as flawed because the reasoning does not contradict substantive law, i.e., Article 18 of the CISG. The [Seller] has objected to the ruling of the Appellate Court (as well as the ruling of the Court of First Instance) alleging that they have failed to properly consider relevant evidence and contends that the proceedings suffered from flaws that could have caused an incorrect legal consideration of the matter in the sense of Article 241a, section 2, letter a) of the ACP. That is, however, without any legal meaning with regard to solving the issue of admissibility of the extraordinary appeal pursuant to Article 237, section 1, letter c) of the ACP.

The remaining objections of the [Seller] can be subsumed under the reason of the extraordinary appeal pursuant to Article 241a, section 3 ACP (i.e., the decision is based, according to the contents of the file, on a factual ascertainment that is not supported by the undertaken evidence). These objections, however, under the situation when the admissibility of the extraordinary appeal pursuant to Article 237, section 1, letter c) ACP is being contemplated, cannot be successfully invoked.

Since the Supreme Court has not found the decision of the Appellate Court as to the reasons for the extraordinary appeal applied by the [Seller] and their contents to be of a legal significance, it has dismissed pursuant Article 243b, section 5, first sentence and Article 218, letter c) of the ACP the extraordinary appeal of the [Seller] that is not admissible even in accordance with Article 237, section 1, letter c) of the ACP.

The court of extraordinary appeal has ruled on the costs of extraordinary appeal pursuant to Article 243b, section 5, first sentence, Article 224, section 1 and Article 146, section 3 ACP as mentioned in the statement in such a way that the [Buyer] shall be reimbursed the cost of proceedings in accordance with Article 3, section 6, Article 10, section 3, Article 14, section 1 and Article 18 of the Regulation no. 484/2000 Coll., as amended, in the amount of CZK 10,000 and a lump sum of CZK 300 for legal advice (submission to the extraordinary appeal) pursuant to Article 13, section 3 of the Regulation no. 177/1996 Coll., with the value added tax of 19 percent according to Article 137, section 3 ACP in the amount of CZK 1,957, which together makes CZK 12,257.

No legal remedies shall be admissible against this resolution.

Should the [Seller] fail to voluntarily fulfill the obligations imposed by this resolution, the [Buyer] is entitled to file for enforcement.

In Brno, on 25 June 2008

Mr. František Faltyna
Chairman of the Senate


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellant is referred to as [Seller] and Defendant-Appellee is referred to as [Buyer]. Amounts in the currency of the Czech Republic (Czech koruna) are indicated as [CZK].

** Šárka Havránková is a trainee lawyer in an independent law firm located in Prague practicing mainly in areas of arbitration, mergers and acquisitions, and public procurement prior to qualifying for the bar exams of the Czech Bar Association. She has participated as a member of the team at the 12th Willem C. Vis International Commercial Arbitration Moot 2004/2005

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Pace Law School Institute of International Commercial Law - Last updated March 4, 2009
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