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CISG CASE PRESENTATION

Slovak Republic 17 September 2008 District Court in Trnava (Chicken products case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080917k1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20080917 (17 September 2008)

JURISDICTION: Slovak Republic

TRIBUNAL: Supreme Court of the Slovak Republis

JUDGE(S): JUDr. Martina Valentova

CASE NUMBER/DOCKET NUMBER: 9 Cb/72/2007

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Czech Republic (plaintiff)

BUYER'S COUNTRY: Slovak Republic (defendant)

GOODS INVOLVED: Chicken products


Classification of issues present

APPLICATION OF CISG: Yes, but the case turned on an issue that had nothing to do with the CISG

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 4 [Also cited: Articles 30 ; 53 ; 78 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): Assignment]

Descriptors: Scope of Convention ; Assignment

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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 (Slovak): Click here for Slovak 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

District Court Trnava

17 September 2008 [9 Cb/72/2007]

Translation [*] by Juraj Kotrusz [**]


JUDGMENT
IN THE NAME OF THE SLOVAK REPUBLIC

The District Court of Trnava, deciding by a single judge, JUDr. Martina Valentova, in the case of Plaintiff M.D.Z.P., a.s. [Seller], with its registered office in O., ___, Czech Republic, , represented by JUDr. Z.V., attorney, versus Defendant K., spol. s.r.o. [Buyer], with its registered office in J. D. ___, [Slovak Republic], regarding payment of 643,239.33 Czech koruna [Kc] with appurtenances

h a s   d e c i d e d   a s   f o l l o w s:

The Court dismisses the action.

The [Seller] is obliged to pay to the [Buyer] the reimbursement of costs of the proceedings amounting to 92,047.50 Slovak koruna [Sk], within three days after the judgment comes into force.

REASONING

The [Seller] claimed in the proceedings by its action filed with the District Court Bratislava I. on 16 June 2006, delegated to this Court on 23 October 2006, its right to payment of the sum of 643,239.33 Kc with appurtenances, claiming the right to payment of the purchase price for delivered goods, as evidenced by bill of lading no. 302514 of 29 May 2003, amounting to 424,080.33 Kc and the right to payment of interest from previous business transactions with the [Buyer] where the [Buyer] failed to duly pay the price on time, as set forth in invoice no. 210404 of 21 April 2004 for the sum of 219,159.- Kc.

The Court upheld the action and issued an Order to pay [Rec. no.: 35Rob/1007/2006-56] on 19 June 2007. Subsequently, the [Buyer] filed an appeal against the Order, The Court therefore cancelled the Order to pay and ordered a public hearing.

The Court gathered evidence by interrogating the parties to the proceedings and reading the submitted documents and thereby determined the following factual and legal circumstances of the case:

Before the opening of the first hearing, the [Seller] partially withdrew its action with respect to the sum of 180,000.- Kc and respective appurtenances because of payment made by the [Buyer].

The [Seller] referred to its partial withdrawal and explained that it claims the right to payment of the sum of 463,239.33 Kc with interest of 3% annually:

   -    on the sum of 424,080.33 Kc for the period from 13 June 2003 until 6 March 2007;
   -    on the sum of 379,080.33 Kc for the period from 13 June 2003 until 13 April 2007;
   -    on the sum of 334,080.33 Kc for the period from 13 June 2003 until 21 May 2007;
   -    on the sum of 289,080.33 Kc for the period from 13 June 2003 until 12 June 2007; and
   -    on the sum of 244,080.33 Kc for the period from 13 June 2003 until payment.

As to the amount of the claim, the [Seller] explained that it consists of interest from previous late payments in the sum of 219,159.- Kc and part of the unpaid price for goods -- chicken products delivered under a contract of sale.

   -    The [Seller] disagreed with arguments presented by the [Buyer] in its protest and pointed to statements of the [Buyer] of 21 July 2005 and 15 February 2007 where in its second statement the [Buyer] accepted the entire claim, including the part of the claim which was initially denied by the [Buyer].
 
   -    Despite this express acceptance of its debt by the [Buyer], the [Seller] had no knowledge of any notice of lack of conformity to be made by the [Buyer] and therefore asked the Court to uphold its claim in its entirety, as described by the action and the partial withdrawal.
 
   -    With respect to the part of the principal which corresponds to interest on previous late payments by the [Buyer], the [Seller] explained that these late payments were made under previous business transactions under contracts of sale, where purchase prices were set forth in invoices and in two cases, the claims emerged from assignment of claims against the [Buyer].

The [Buyer] stated in the proceedings that it disagrees with the arguments of the [Seller].

   -    With respect to the amount of the claim, the [Buyer] agreed that it partially paid the sum in amount of 180,000.- Kc.
 
   -    As to the delivery of chicken products related to invoice no. 302514 of 2003, the [Buyer] agreed that [Seller] had handed over the goods for 897,665.- Kc. The purchase price was billed by invoice no. 03104784 where the [Buyer] still owed the sum of 424,080.33 Kc. The [Buyer] recognized this debt and promised to pay it in installments and explained that it did not pay this sum because of pending notice of lack of conformity of other goods previously delivered by the [Seller], i.e., a delivery of chicken thighs on 16 November 2001, where the purchase price had already been paid and therefore the [Buyer] made a unilateral set-off of its claim for the lack of conformity of the chicken thighs against the pending obligation to pay the purchase price for these other goods.
 
   -    The [Buyer] was not able to ascertain the time and form of this set-off. However, the [Buyer] had notified the [Seller] of the lack of conformity of the goods -- 5,941.31 kg of cooled chicken thighs -- immediately after their delivery. The notification was via [Buyer]'s employee Mr. P. by a phone call to the director of export of the [Seller], who subsequently came to control the delivery and informed the [Buyer] that he had to consult this situation with Mr. K. and Mr. M. As there was no answer provided from the [Seller], Mr. P. once again contacted the [Seller] and asked to draw a credit note but received no answer.
 
   -    With respect to the asserted interest [as a part of the principal], the [Buyer] did not disagree that it had been late in the payment of several prices but alleged that the right to this interest was not asserted against the [Buyer] and it can therefore not react to its amount or grounds. The [Buyer] also argued that the limitation period had passed with respect to this claim.

In the course of the proceedings, the [Buyer] also argued that the [Seller] did not have legitimate standing to assert the claim because of an assignment contract dated 25 May 2004, whereby the [Seller] assigned its claim subject to these proceedings to company P.S., S.r.o. as an assignee. The [Buyer] also presented to the Court the information on that assignment that it received on 25 May 2004.

The [Seller] responded acknowledging that there was such an assignment but stated that subsequent to this assignment, upon oral agreement of the [Seller] and the assignee, the assignment contract was cancelled and that the [Buyer] subsequently recognized its debt on 21 July 2005. The [Seller] therefore considered itself to be competent to act as a plaintiff in these proceedings.

The [Buyer] stated that it is not aware of any oral cancellation of the assignment contract and even if such oral cancellation was made, it would be invalid, as the assignment contract was made in a written form and it could therefore be validly cancelled only in a written form. The [Buyer] also invoked passing of the limitation period with respect to part of the claim in sum of 219,159.- Kc, since it is clear from the records that the last invoices in default were due on 19 February 2002, 22 February 2002 and 31 March 2002 which means that with respect to all the invoices in default, the limitation period had already passed. The only claim where the limitation period had not yet passed could be invoice no. 3104784 but the [Seller] did not specify the due date with respect to this invoice.

The Court determined from the submitted evidence that the [Seller] delivered goods to the [Buyer] -- chicken products -- on 29 May 2003 and asserted its right to payment of the price by invoice no. 3104784 of 29 May 2003 due on 12 June 2003 for the sum of 897,665.- Kc. The delivery and drawing of the invoice was not opposed by the parties to the proceedings.

The Court further determined that the [Seller] also billed interest in the amount of 219,159.- Kc by invoice no. 210404 due on 5 May 2004 (the [Seller] asserted its right to interest for delayed payment of prices for goods delivered in the period November 2001 to February 2002 and in May 2003, as specified in letter, rec. no. 15 and respective invoices).

The executive of the [Buyer], Ing. K. P., recognized in a letter dated 21 July 2005 that, with respect to invoice no. 03104784, it did not pay the sum of 616,080.33 Kc, wherefrom the sum of 120,000.- Kc was still to be settled by the parties and hat the residual part of approximately 500,000.- Kc was to be paid in installments of 50,000.- Kc from 8 January 2005 where, in case of default with payment of at least one installment, the right to pay in installments would be lost.

The Court determined from the recognition of debt of 15 February 2007 signed by Ing. K.P. that the [Buyer] recognized its debt emerging from invoice no. 03104784 in the sum of 424,080.33 Kc to be paid in installments. The Court determined from the assignment contract that the [Seller] had assigned to company P. SR, S.r.o. on 25 May 2004 in O. its claim in amount of 835,239.33 Kc with appurtenances, consisting of a claim from invoice no. 3104784 from 29 May 2003 due on 12 June 2003 for the sum of 616,080.33 Kc and a claim from invoice no. 210404 from 21 April 2004 due on 5 May 2007 for the sum of 219,159.- Kc. The [Seller] informed the [Buyer] about the assignment by its letter from 25 May 2004 (rec. no. 138).

The Court also determined from the evidence gathered that the [Buyer] partially paid its debt on 6 March 2007 in sum of 45,000.- Kc, on 13 April 2007 in sum of 45,000.- Kc, on 21 May 2007 in sum of 45,000.- Kc, on 12 June 2007 in sum of 45.000,- Kc, whereby [Buyer] had paid in total the sum of 180,000.- Kc. In response thereto, the [Seller] partially withdrew its action in its motion of 1 November 2007.

With reference to the foreign aspect in the relationship (parties to the proceedings having their places of business in different States) the Court had to decide on the law applicable to the claim asserted by the [Seller]. As the parties to the proceedings have their place of business in Contracting States of the Vienna Convention, the Court must qualify their relationship under this Convention and, in case of matter not governed thereby, under the law of the State where the [Seller] had its place of business at the time of concluding of the contract (applicable law by virtue of rules of private international law). With respect to the assignment of the claim in question, the Court qualified this issue under the applicable law which was the law of the Czech Republic.

Under article 1 of the Convention, this Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State.

Under article 30 of the Convention, the seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention.

Under article 53 of the Convention, the buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.

Under article 78 of the Convention, if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74.

Under section 1 part 1 and 2 of the Slovak Commercial Code, this act governs status of entrepreneur, commercial contractual relationships, and other issues connected with conducting business. Issues enumerated in part 1 of section 1 are governed by this act. If any such issues cannot be resolved by this act, they shall be resolved under provisions of the Slovak Civil Code. If any such issues cannot be resolved even with reference to Civil Code, they shall be resolved in accordance with trade usages and in their absence in accordance with general principles upon which this act is based.

Under section 323 part 1 of the Commercial Code, if a person recognizes its debt in a written form, it is considered to be existing and valid at the time of such recognition. This presumption is valid also in case the limitation period has passed with respect to this claim.

Under section 524 part 1, 2 of the Civil Code, the creditor can assign his claim without approval from the debtor in a written form. The claim is assigned including its appurtenances and all rights related thereto.

Under section 40 part 1, 2 of the Civil Code, a legal act made in a form other than prescribed by law or by agreement of the parties is invalid. Any agreement made in written form can be changed or cancelled only in a written form.

Under section 120 part 1 first sentence, part 3 of the Slovak Civil Procedure Code (hereinafter referred to as the "CPC"), the parties to proceedings are obliged to provide evidence to support their arguments. Except for issues enumerated in part 2, the Court can accept joint declarations and statements of both parties to the proceedings without investigation.

The Court determined from the evidence gathered and from the joint declarations of the parties to the proceedings that the parties concluded a contract of sale under which the [Seller] delivered the goods to the [Buyer] on 29 May 2003 -- chicken products -- and subsequently asseted its right to payment of the purchase price by invoice no. 3104784 for the sum of 897,665.- Kc due on 12 June 2003. As stated in the letter of 21 July 2005, the [Buyer] did not pay the sum of 620,000.- Kc, wherefrom it undertook to pay the uncontested part of 500,000.- Kc in installments of 50,000.- Kc where, in case of default with payment of at least one installment, the right to pay in installments would be lost. The [Buyer] recognized by its letter of 15 February 2007 the debt arising from invoice no. 3104784 of 29 May 2003 for the sum of 424,080.33 Kc and undertook to pay this sum in installments.

The [Buyer] argued in the proceedings that the [Seller] was not the legitimate party to claim the sum, as this claim had previously been assigned by the [Seller] to a third person. The [Buyer] presented assignment contract of 25 May 2004, whereby the [Seller] assigned its claim subject to these proceedings to company P.S., s.r.o. as an assignee. The [Buyer] presented to the Court also the information on assignment of the contract received on 25 May 2004. The [Seller] acknowledged such assignment and information but stated that subsequent to this assignment, upon oral agreement of the [Seller] and the assignee, the assignment contract was cancelled and the [Buyer] subsequently recognized its debt on 21 July 2005. [Seller] therefore considered itself competent to act as a plaintiff in this case. The [Seller] also stressed that the [Buyer] partially paid its debt in the course of the proceedings.

An assignment of claim constitutes a change in the person of a creditor. A person can assign any claim which exists at the time of its assignment and which can be disposed by the creditor. The basis for the claim is irrelevant. With reference to sec. 524 part 2 of the Civil Code, together with assignment of the claim, its appurtenances and related rights can be assigned. Assignment contracts are concluded by initial creditors and new creditors and the law requires written form for such legal act. In case the claim is assigned, the person of a creditor is changed and no consent of the debtor or his knowledge about this contract is required, however, the law requires that the debtor be notified of such an assignment.

The Court therefore concluded that, based upon a valid assignment contract, the [Seller] had assigned its claim asserted in these proceedings to a third person (which was not opposed by the parties to the proceedings) and therefore the lost capacity to act as a plaintiff in these proceedings with reference to sec. 530 of the Civil Code.

As to the cancellation of the assignment contract and subsequent recognitions of debts of 29 May 2003 and 15 February 2007, the Court refers to sec. 40 part 2 of the Civil Code, which states that a written contract can only be changed or cancelled in a written form. The Court therefore concluded that despite recognitions of debt from 25 July 2005 and 15 February 2007 and partial payments made, the [Buyer] effectively rebutted the presumption of existence of the debt at the time its recognition when it opposed the capacity of the [Seller] to act as a plaintiff and evidenced the assignment of the claim in question to a third person.

Because of lack of capacity of the [Seller] to act as a plaintiff, the Court dismissed the [Seller]'s action in its entirety.

The Court ruled on the reimbursement of the costs of the proceedings with reference to sec. 142 part 1 CPC and granted to the [Buyer] full reimbursement of its costs, as it was successful in its defense in its entirety.

Instruction: An appeal against this judgment must be filed via this Court within fifteen days from its receipt.

District Court Trnava, 17 September 2008.

JUDr. Martina Valentova, Judge


FOOTNOTES

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

** Juraj Kotrusz is a Slovak lawyer who studied law at the University of Trnava, Slovakia, and at the Hague Academy of International Law. He is the Editor of the CISG Slovakia website.

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