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CISG CASE PRESENTATION

Switzerland 26 September 2008 Appellate Court Basel-Stadt (Packaging machine case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080926s1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20080926 (26 September 2008)

JURISDICTION: Switzerland

TRIBUNAL: Appellationsgericht [Appellate Court] Basel-Stadt

JUDGE(S): Dr. Dieter Moor (Vorsitz), Dr. Stephan Wullschleger, Dr. Verena Trutmann, Dr. Paul Rüst, Dr. Matthias Meier

CASE NUMBER/DOCKET NUMBER: 16/2007/MEM/chi

CASE NAME: Unavailable

CASE HISTORY: 1st instance Zivilgericht Basel-Stadt 8 November 2006 [affirmed]; 3rd instance Bundesgerichtshof 18 May 2009 [affirmed]

SELLER'S COUNTRY: Switzerland (defendant)

BUYER'S COUNTRY: Spain (plaintiff)

GOODS INVOLVED: Packaging machine


IHR headnote

Reproduced from Internationales Handelsrecht (4/2009) 164

"1. To interpret the intentions of a party upon concluding a contract Art. 8 CISG allows the recourse to that party's conduct after the conclusion of the contract.

"2. Within the scope of the CISG, the parties are free to define the term 'acceptance'.

"3. If the seller continuously tries to remedy defects after a Nachfrist coupled with a warning of refusal was set, the contract may still be avoided 15 months after the Nachfrist expired. Changes made to the object of sale in the course of the attempts to remedy the defect do not hinder the avoidance per Art. 82 para.1 CISG.

"4. The disruption of the limitation periods is ruled by the law underlying the sales contract."

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 8 ; 25 ; 35 ; 47 ; 49 ; 82 [Also cited: Article 3 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): statute of limitations, set-off];

8A ; 8B ; 8C [Interpretation of party's statement or other conduct: intent of party making statement or engaging in conduct; Interpretation based on objective standards; Interpretation in light of surrounding circumstances];

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

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

47A2 [Buyer's right to fix additional period for avoidance: basis for avoidance for delay in delivery];

49A1 ; 49A2 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract; Seller does not deliver or refuses to deliver within additional period set under art. 47];

82B3 [Buyer's inability to return goods in same condition: buyer loses right to avoid unless goods sold or transformed by buyer in normal use]

Descriptors: Scope of Convention ; Statute of limitations ; Set-off ; Intent ; Burden of proof ; Fundamental breach ; Avoidance ; Nachfrist ; Restitution

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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 (German): CISG-online.ch website <http://globalsaleslaw.com/content/api/cisg/urteile/1732.pdf>; Internationales Handelsrecht (4/2009) 164-167

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

Appellate Court (Appellationsgericht) Basel-Stadt

26 September 2008 [16/2007/MEM/chi]

Translation [*] by Jan Henning Berg [**]

FACTS

On 12 December, the Spanish Plaintiff-Appellee [Buyer] and the Swiss Defendant-Appellant [Seller] (the latter being domiciled in Basel), entered into a contract for the sale and delivery of a packaging machine. The entire machine consisted of ten individual devices and several transportation and interconnection systems. The total purchase price amounted to Spanish pesetas [Pta.] 247,278,337 (= Euros [EUR] 1,486,172.74). [Seller] was also obliged under the contract to install the packaging machine and prepare for its operation by [Buyer].

Subsequent to its installation, [Seller] sought to perform a certification run of the packaging machine. Thereupon, the parties began a dispute about which exact performance of the machine was required under their contract. [Buyer] mainly asserted that an output of 180 vials per minute had been promised by [Seller]. On the other hand, the latter argued that such overall performance was neither possible nor had it ever been agreed upon by the parties. [Seller] attempted on several occasions to increase the performance of the machine which had been well below 180 vials per minute at that time. On 23 March 2003, [Buyer] declared avoidance of the contract and claimed both restitution of the purchase price and additional damages. By submission dated 5 August 2004, [Buyer] filed an action against [Seller] before the District Court (Zivilgericht) Basel-Stadt. In the course of that action, [Seller] filed a cross-action against [Buyer] as a means of claiming the remaining part of the purchase price and additional damages. By its judgment of 8 November 2006, the District Court allowed [Buyer]'s action to the major extent and dismissed [Seller]'s cross-action.

[Seller] has submitted its statement of appeal within the relevant time limit. By virtue of its reasoned submission of 10 May 2007, it has petitioned the Appellate Court to overturn the District Court judgment. [Seller] alleged that [Buyer]'s action should be dismissed and the latter should be ordered to pay EUR 731,675.19 plus interest in accordance with [Seller]'s cross-action. On the other hand, [Buyer] seeks to have [Seller]'s appeal dismissed.

REASONING OF THE COURT

1. [Jurisdiction]

The parties have designated the jurisdiction of the courts of the Swiss Canton Basel-Stadt by virtue of their contract dated 12 December 2000. Pursuant to Art. 17(1) Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (SR [*] 0.275.11), this agreement is effective and must be considered. Thus, the courts of Basel-Stadt have jurisdiction over the present dispute. [Seller]'s appeal has also been filed within the relevant time limit and is therefore admissible.

2. [Application of the CISG]

The District Court has applied the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG; SR 221.211.1) to the contract at hand. According to Art. 1 CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different Contracting States. In terms of subject matter, Art. 3 CISG states that the Convention also governs contracts for the supply of goods to be manufactured or produced. The parties are not in dispute about the application of the CISG to the present case. Consequently, the CISG governs the sales contract between [Buyer] and [Seller].

3. [Overview]

In the following, the exact content of the contract for delivery between [Buyer] and [Seller] will be determined. The Court will also clarify the question of whether [Seller]'s performance has complied with the contract, whether [Buyer] has been entitled to declare the contract avoided and whether any such right has been properly exercised.

4. [Subject matter of the contract]

      4.1 The parties are in dispute about which performance of the packaging machine is required under their contract. The District Court has considered that the parties had entered into an agreement for the sale of a packaging machine whose line of production should yield an overall output of 180 units per minute. However, [Seller] argues that an output of not more than 127 units per minute had been possible and owed.

      4.2 According to Art. 8(1) CISG, statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was. This rule means that declarations of intent are to be primarily interpreted in accordance with the actual and subjective intent of the party making the declaration. It is at least necessary that the other party could not have been unaware of what that intent was. Only where these requirements are not fulfilled will declarations of intent be interpreted with respect to their objective meaning in accordance with Art. 8(2) CISG (cf. Schlechtriem, Internationales UN-Kaufrecht, 2nd ed., Tübingen 2003, para. 54; BGer [*], judgment of 5 April 2005, case docket 4C.474/2004, at E. 3.2 et seq. with further references).

      4.3 In the following, the exact object of [Seller]'s contractual obligation will be determined. The District Court has correctly held that [Buyer] requested a "production line with an output of 180 units per minute" on 27 July 2000 ([Buyer]'s exhibit 36). [Seller] did not respond by expressly saying that the requested output was technically impossible. Instead, it refrained from any rejections by virtue of its response dated 28 July 2000 ([Buyer]'s exhibit 38). [Buyer] also inquired whether its laser-encoding device would still be operable at the desired output rates. [Seller] also responded to this inquiry on 28 July 2000 by stating that the encoding device would be perfectly operable even at an output of 200 units per minute. The content of [Seller]'s response demonstrates that [Seller] had in fact not assumed that [Buyer] intended to yield an output of merely 127 vials per minute. The parties have rather negotiated about a line of production which should yield a performance of 180 units per minute. The performance report of 3 August 2000 ([Buyer]'s exhibit 24) as well as the contract dated 12 December 2000 ([Buyer]'s exhibit 1a) contain tables in which the performances of the individual devices are denominated as "nominal velocities" and "actual velocities". The respective partial velocities are all well below these values, but none of them below 180 units per minute. The District Court has correctly established that all of these facts have not been sufficiently contested by [Seller]. In particular, the latter has never declared any reservation with respect to the assumption that a performance of 180 units per minute was possible. Moreover, [Seller] failed to point to the combined calculation, which it now relies upon in order to argue that only 127 units per minute were owed. The District Court has also taken account of the subsequent conduct of the parties. It considered that [Seller] had unsuccessfully attempted for more than one year to increase the performance of the installed packaging machine. In the course of these attempts, [Seller] continuously lowered the performance allegedly owed under the contract: By August 2002, the packaging machine should yield an output of 150 units per minute. However, a target output of only 145 units per minute was predicted early in November 2002. By the end of November 2002, a target output rate of 120 to 130 units per minute was announced. [Seller]'s final estimation was an output of 127 units per minute. Based on this conduct, the District Court concluded that [Seller] itself knew that it promised a higher performance than it was finally able to deliver. According to the District Court, the parties had agreed on the delivery of a packaging machine with an overall performance of 180 units per minute.

      4.4 Contrary to this, [Seller] asserts that the parties had been using different terms in order to describe the required performance of the machine. One had to distinguish between "velocidad effectiva", "effective velocity", "actual velocity" and "effective output". Technological knowledge was necessary in order to properly understand these terms. Therefore, the District Court had had to obtain an expert opinion on this issue. Even [Buyer] had requested the Court that such opinion be obtained. However, the interpretation of statements made by the parties is a question of law, which must be resolved by the judge. Such a question may be subject to an expert opinion only where the judge is dependent on expert advice in order to understand the very terms which are to be interpreted (cf. Staehelin/Sutter, Zivilprozessrecht, Zurich 1992, 14 para. 61). On 27 July 2000, [Buyer] declared that it wanted to purchase a machine for "180 Uds / minute" (Uds = unidades = units). [Seller] responded on 28 July 2000 by stating that its encoding device was capable of processing up to 200 "frascos / minuto" (frascos = vials). Consequently, the parties have negotiated about an effective output while the meaning of the terms used has not been subject to any disagreement. They negotiated about a machine yielding an output of 180 units per minute. [Buyer] has demonstrated by virtue of its explicit inquiry that performance was of the essence. Insofar as offer and contract identify a higher "velocidad nominal" (nominal velocity) as well as a lower "velocidad effectiva" (actual velocity), this merely refers to maximum and average velocities. Even subsequent conduct shows that this has been the corresponding interpretation adopted by both parties. It is for the competent judge to determine if such concurrence of wills has in fact existed in a given case. Consequently, the District Court was right not to obtain an expert opinion.

      4.5 The District Court has taken recourse to conduct by the parties subsequent to the conclusion of their contract in order to identify their intent at the time of contract conclusion. When the packaging machine had been installed and when it turned out that it would not achieve the performance demanded by [Buyer], [Seller] attempted on several occasions to increase its output. These attempts by [Seller] to remedy the problems clearly demonstrate that [Seller] was not of the opinion that it had already complied with its obligations under the contract in the first place. Moreover, [Seller] announced a certification run with "up to" 150 vials per minute on 12 August 2002 ([Buyer]'s exhibit B40). On the following day, [Buyer] rejected this announcement and demanded that [Seller] increase the machine's performance to 180 units per minute ([Buyer]'s exhibit B41). [Seller] did not object to this response by [Buyer], but it continued its attempts to achieve a better performance. By the end of October 2002, [Seller] finally proposed another certification run "in order to improve the packaging machine within the bounds of possibility" ([Buyer]'s exhibit B45). [Seller]'s subsequent conduct clearly shows that it reckoned not to have delivered a machine in conformity with the contract.

      4.6 [Seller] also criticizes the District Court's reasoning in that it had omitted "to determine, whether the course of negotiations expressly indicated that such agreement should not be valid from the seller's point of view" (cf. statement of appeal, para. 30). This allegation is unfounded. [Seller] fails to recognize the adversarial principle governing civil law proceedings (Verhandlungsmaxime). Under this principle, it is for the parties to make the relevant arguments before the court and to furnish any necessary evidence (cf. Staehelin / Sutter, 11 para. 15). In civil law proceedings, the court is not under any duty to investigate the factual basis on its own. Instead, it would have been for [Seller] to substantiate and to prove the content of its contract with [Buyer], especially if neither the prior negotiations, the wording of the contract itself nor its own subsequent conduct were to be relevant. Contrary to [Seller]'s opinion (cf. statement of appeal, para. 36), it is indeed relevant whether or not it declared any reservation with respect to the designated performance of 180 vials per minute. [Seller] has not declared such reservation and it cannot subsequently construe it. [Seller] wrongly identifies recital 3.3 of the District Court judgment as being "completely confusing". The District Court has correctly set out the mechanism of contract conclusion by taking account of inquiry, response, performance description, second offer, request for specification and the final contract document.

      4.7 [Seller] seeks to rely upon several irregularities arising out of the contract of 12 December 2000. However, this cannot succeed, given that [Seller] itself has drafted the contract. This also applies to those sections of the contract which have been adopted by it from [Buyer]. Likewise, [Seller] cannot attain any legal advantage by arguing that the obligation owed under the contract was impossible to perform (cf. statement of appeal, para. 31). [Seller]'s attempts to remedy the lack of conformity show that this has not been a case of objective frustration of performance ab initio.

5. [Performance of the contract]

The above reasoning demonstrates that the parties have agreed on the delivery of a packaging machine which had to achieve a performance of 180 units per minute. [Seller] has not contested the fact that the machine actually fails to do so. The District Court has correctly identified that [Seller] would not have properly performed the contract irrespective of whether the actual performance of the machine amounted to 52 or 115 units per minute. These levels of output are equivalent to losses of productivity of 36% or even 71% in comparison to the required performance of 180 units per minute. Pursuant to Art. 35(1) CISG, the seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. Therefore, it can easily be determined that the quality of the machine is below the requirements imposed by the contract. [Seller] has not delivered goods which are in conformity with the contract (cf. Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht, 3rd ed., Munich 2000, Art. 35 para. 9).

6. [No subsequent agreement on lower performance]

On the basis of the submitted correspondence, [Seller] seeks to argue that [Buyer] declared an approval to a reduced performance of the machine. The above reasoning already indicates that such argument cannot hold true. Moreover, [Seller] argues that [Buyer] accepted a lower performance when the latter had paid the second instalment on the purchase price after the Factory Acceptance Test (FAT) on 28 and 29 August 2001. This argument is unfounded, as well. Under this particular contract, the FAT refers to test-runs conducted by [Seller]. While the FAT could have triggered the maturity of an instalment on the purchase price, it could not have possibly amounted to an anticipated handing-over of the machine at [Buyer]'s works or even to have any influence on it. According to the corresponding intention of the parties, the handing-over should occur only as soon as the machine would operate to [Buyer]'s full satisfaction. [Buyer] has never declared its approval to a reduced performance of the packaging machine.

7. [Non-performance and fundamental breach of contract]

      7.1 The District Court has reasoned that [Buyer] was entitled to declare the contract avoided, both as a result of non-performance and of a fundamental breach of contract. [Seller] asserts that it had not failed to perform the contract, because delivery of the machine had taken place. The parties have defined the term "delivery" in deviation of the meaning adopted by the CISG. In this case, delivery should refer to the time when the machine has been installed at [Buyer]'s works and when it operates to its full satisfaction. Thus, it is immaterial whether the machine has actually been transported to [Buyer]'s place of business, but whether a delivery has taken place as is defined by the contract. This also follows from [Buyer]'s email of 13 August 2002, where reference is made to the upcoming "certification of the machine" ([Buyer]'s exhibit B41). [Seller] has not made any objection.

      7.2 According to the parties, delivery should occur at the time when installation of the packaging machine has been completed and when it operates to [Buyer]'s "full satisfaction". Given that [Buyer] had sufficient reason not be fully satisfied with the performance of the machine, the exact meaning of this term may remain undetermined.

      7.3 First of all, the District Court has ascertained why the actual performance of the machine lagged well-below the performance required under the contract (judgment, E.4.4.6). Moreover, it has held that [Seller] acknowledged the fact that the machine had not complied with the maximum time limits for an adjustment to different types of products, and that the time limits could not even be achieved after certain individual devices would have been modified (judgment, E.4.4.3). Furthermore, the machine was susceptible to defects. This is readily evidenced by the numerous attempts by [Seller] to remedy the problems (judgment, E.4.4.4). According to Art. 25 CISG, a breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract. In this respect, the reasoning exposed by the District Court is elaborate and conclusive. On that basis, [Seller] is liable for a fundamental breach of contract.

8. [Avoidance of contract]

The District Court has held that [Buyer] has properly fixed an additional period of time -- which is necessary in cases of non-performance -- on 5 December 2001 until 20 December 2001. In the following, [Buyer] was entitled to declare the contract avoided on 25 March 2003. In the alternative, the District Court has reasoned that avoidance would have also been effectively declared on 23 May 2003 on the grounds of [Seller]'s fundamental breach of contract. Prior to this date, [Buyer] had notified [Seller] about the lack of conformity and fixed an additional period of time (within which [Seller] failed to remedy the lack of conformity, cf. judgment, E.4.6). [Seller] asserts that [Buyer] failed to declare avoidance of the contract following non-performance within the applicable time limit. It seems that [Seller] seeks to argue that [Buyer] had forfeited its right to declare avoidance. However, [Seller] does not address the reasoning of the District Court which has set out why [Buyer] did in fact declare avoidance of contract within a reasonable time. The District Court has identified that the right to declare avoidance had not been forfeited: [Seller] has constantly attempted to remedy the lack of conformity. Moreover, [Buyer] had sent more than twenty letters until December 2002 which contain detailed descriptions of those lacks of conformity which were not successfully resolved (cf. inter alia before the additional period of time had been fixed: letters of 5 October 2001 ([Buyer]'s exhibit 2), 11 October 2001 ([Buyer]'s exhibit B6), 30 October 2001 ([Buyer]'s exhibit 3), 31 October 2001 ([Buyer]'s exhibit 4), 16 November 2001 ([Buyer's exhibit B12), 29 November 2001 ([Buyer]'s exhibit B16), 30 November 2001 ([Buyer]'s exhibit B17; cf. inter alia after the fixing of the additional period: letters of 24 January 2002 ([Buyer]'s exhibit B23), 4 April 2002 ([Buyer]'s exhibit B30), 10 May 2002 ([Buyer]'s exhibit B32), 31 May 2002 ([Buyer]'s exhibit B35), 19 June 2002 ([Buyer]'s exhibit B38), 2 August 2002 ([Buyer]'s exhibit B39), 23 August 2002 ([Buyer]'s exhibit B42), 5 November 2002 ([Buyer]'s exhibit 6), 28 November 2002 ([Buyer]'s exhibit B51), 10 December 2002 ([Buyer]'s exhibit B52). In order to exercise avoidance, [Buyer] needed to make the respective declaration within a reasonable time after it had been established that the breach of contract was fundamental (cf. Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht, Art. 49 para. 46). [Buyer] was entitled to declare avoidance and also made the relevant declaration within a reasonable time.

9. [Forfeiture of the right to declare avoidance]

[Seller] alleges that [Buyer] lost its right to declare the contract avoided in accordance with Art. 82(1) CISG, because it was impossible to make restitution of the packaging machine substantially in the condition in which the latter had received it. In that respect, the District Court has correctly set out the reasons why [Buyer] did not lose its right to declare avoidance (judgment, E.4.7). [Seller] does not recognize the fact that it itself performed the modifications of the machine. The relevant modifications have not been performed by [Buyer] in the course of operating the machine, but by [Seller] in the course of its attempts to attain conformity of the machine with the contract. Therefore, [Buyer]'s right to declare avoidance could not have been possibly forfeited. However, it may be discussed whether this right was forfeited because of utilization of the machine by [Buyer]. On the other hand, Art. 82(2)(c) CISG provides that the right to declare avoidance will not be lost if the buyer has consumed or transformed the goods in the course of normal use before he discovered or ought to have discovered the lack of conformity. It is important to note that this rule does only apply where the consumption or transformation has taken place before the buyer was aware or ought to have been aware of the lack of conformity (cf. Schlechtriem, Internationales UN-Kaufrecht, para. 329). [Buyer] correctly indicates that, in the present case, the relevant timeframe for utilization extends to the time when avoidance was declared. It was not readily ascertained at this point in time that the breach of contract was actually fundamental. Any utilization of the machine by [Buyer] after its declaration of avoidance (i.e., during the time when [Seller] was in arrears with redeeming the goods) does not have any bearing on the validity of the declaration.

10. [Statute of limitations]

[Seller] has also argued that [Buyer]'s claims were already time-barred. [Seller] asserts that the District Court "completely failed" to address the controversial issue of limitation within the scope of application of the CISG. However, this argument is unfounded. The District Court has in fact pointed out that the CISG does not contain provisions on the limitation of claims. According to Art. 118 in conjunction with Art. 148 IPRG [*], the limitation (respectively, the term of exclusion) of the right to declare avoidance of contract is governed by the laws of Switzerland. Art. 39(2) CISG provides that any lack of conformity must be notified to the seller two years at the latest after the goods have been delivered. The one-year limitation period contained in Art. 210 OR [*] is not compatible with this rule of the CISG concerning the notification of lacks of conformity. Therefore, an application of Art. 210 OR by way of analogy is generally not possible for reasons of legal consistency. The United Nations Convention on the Limitation Period in the International Sale of Goods of 1974 provides in its Art. 8 for a four-year limitation period for claims arising out of international sales of goods. However, Switzerland has not acceded to this Convention, which means that it cannot be applied to the present case. Another possibility advocated by some legal scholars is to apply the ten-year limitation period contained in Art. 127 OR. Other scholars, however, propose a two-year period of limitation. In this context, some argue that Art. 39(2) CISG should be construed as a combined limitation period and term of exclusion of two-years. Others argue that the limitation period under Art. 210 OR should be extended to two years (cf. Schlechtriem, Internationales UN-Kaufrecht, para. 347; Honsell, Schweizerisches Obligationenrecht, Besonderer Teil, 7th ed., Berne 2003, pp. 154 et seq.). In the present case, these issues concerning the appropriate period of limitation need not to be resolved. The District Court has correctly decided that the laws of Switzerland govern the suspension of limitation. Art. 135 OR provides that the running of the period of limitation will be suspended if the debtor acknowledges the existence of the creditor's claim or if the creditor files an action for the claim. The existence of a claim can be acknowledged by way of any conduct on the part of the debtor which can reasonably be understood as a confirmation of its own liability in terms of law against the creditor (BGer, judgment of 16 May 2002, case docket 4C.60/2002, at E.1.3). [Seller] has suspended the limitation period by virtue of its final attempt to remedy the lack of conformity on 31 October 2002 (cf. BGE [*] 121 III 270, at E.3.c, p. 272). [Buyer] has filed an action with respect to the asserted claim on 9 February 2004. Consequently, the claim would not be time-barred even if a limitation period of two years were applied in this case. The District Court has correctly reasoned on this issue.

11. [Cross-action and set-off]

Finally, [Seller] complains before the Appellate Court that the District Court did not allow its counterclaim for compensation in relation to [Buyer]'s utilization of the machine in order to rely on a set-off. [Seller] refers to the reasoning of the District Court, which is that [Buyer] would have suffered an even greater extent of damage had it not operated the machine within the bounds of possibility (statement of appeal, paras. 201 and 202). However, [Seller] has not sufficiently set out why the District Court should have come to a different conclusion. The prevailing opinion among legal scholars and courts is that the CISG does not govern issues in relation to a set-off (BGer, judgment of 20 December 2006, case docket 4C.314/2006, at E.2.2.1, SZIER [*] 2008, pp. 175 et seq.). In the present case, it may remain undecided whether any duty on the part of [Buyer] to mitigate its losses as applied by the District Court necessarily excludes any counterclaims of [Seller] which could be put to a set-off. Moreover, the Court does not need to resolve the question of whether [Seller] has failed to file its legal application in the appropriate manner, as has been asserted by [Buyer] (response to statement of appeal, p. 38). The critical point is that [Seller] has failed to substantiate and prove in its statement of defense the existence of the asserted claim which should be offset (cf. paras. 120 to 124). Its mere request that the Court should obtain an expert opinion on [Buyer]'s financial benefit resulting from utilization of the machine is not sufficient to substantiate a claim whereas [Seller] itself would have been well-able to submit a definitive amount. In order to prove the undefined counter-claim, [Seller] has merely offered an expert opinion and information to be provided by one of its own employees. First, it would hardly constitute useful evidence if that employee were being heard as a witness. Second, the evidence offered by [Seller] is ineligible. Witnesses can only be such persons who are actually aware from their own sensory perception of the facts subject to being proven (cf. 113 ZPO [*]). However, witnesses are not suitable to take the burden of substantiation (cf. judgment by the Appellate Court Basel-Stadt of 25 April 2008). Consequently, [Seller] has neither substantiated nor proved the existence of a counterclaim within the required time which might have been put to a set-off. The District Court has been correct to dismiss the counterclaim asserted by [Seller] for compensation of [Buyer]'s utilization of the packaging machine.

12. [Magnitude of claims]

With respect to their magnitude, the claims allowed by the District Court have not been contested by [Seller] and are therefore confirmed by the Appellate Court.

13. [Conclusion]

As a consequence, [Seller]'s appeal is dismissed. The judgment rendered by the District Court is confirmed. Given this outcome, [Seller] will be ordered to bear both the regular and the additional uncommon costs of the proceedings. Those costs which have been incurred by [Buyer] are to be determined in accordance with its request. The value of the dispute and the attorneys' fees ( 4(1) No. 15 HO [*]) will be set in accordance with the invoice of 11 September 2008. The basic fees roughly amount to Swiss francs [Sfr.] 96,500.00. This constitutes a sufficient remuneration. Surcharges pursuant to 5(1)(a) HO need not be granted. With one third being deducted under 11(1) HO, the relevant attorneys' fees amount to Sfr. 65,000.00. Out-of-pocket expenses of Sfr. 554.80 plus VAT are to be added.

JUDGMENT

Consequently, the Appellate Court holds that:

   1.   The judgment rendered by the District Court is confirmed.
 
   2.   [Seller] is ordered to bear the regular costs caused by the appellate proceedings. These costs amount to Sfr. 100,000.00, including out-of-pocket expenses and compensation in favor of [Buyer] in the amount of Sfr. 65,554.80 plus 7.6% VAT (Sfr. 4,982.15).

A further appeal may be lodged against this judgment in accordance with Arts. 72 et seq. BGG [*] within 30 days after the decision has been served on the parties. With respect to proprietary affairs, this applies only if the value of the dispute reaches the required minimum in accordance with Art. 74(1)(a) or (b) BGG (Sfr. 15,000.00 for tenancy and employment cases; Sfr. 30,000.00 for any other cases), or if the case addresses a legal issue of general importance. The statement of appeal must be submitted to the Swiss Federal Supreme Court in Lausanne within the applicable time limit. Art. 42 BGG specifies its required content. The Swiss Federal Supreme Court will decide on the admissibility of the remedy.

The applicable statutory provisions determine whether a different remedy is admissible (e.g., a constitutional complaint before the Swiss Federal Supreme Court under Art. 113 BGG). Should both an appeal and a constitutional complaint be raised in relation to the same case, both remedies need to be submitted by way of the same statement.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellee of Spain is referred to as [Buyer] and the Defendant-Appellant of Switzerland is referred to as [Seller]. Amounts in the uniform European currency (Euro) are indicated as [EUR]. Amounts in the currency of Switzerland (Swiss francs) are indicated as [Sfr]. Amounts in the former currency of Spain (Spanish pesetas) are indicated as [Pta].

Translator's note on other abbreviations: BGE = Bundesgerichtsentscheidung [Reported decisions of the Swiss Federal Supreme Court]; BGer = Bundesgericht [Swiss Federal Supreme Court]; BGG = Bundesgerichtsgesetz [Swiss Code on the Functioning of the Federal Supreme Court]; HO = Honorarordnung [Swiss Code on Attorneys' Fees]; IPRG = Bundesgesetz über das Internationale Privatrecht [Swiss Code on the Conflict of Laws]; OR = Obligationenrecht [Swiss Code on the Law of Obligations]; SR = Systematische Sammlung des Bundesrechts [Official database of Swiss federal legislation]; SZIER = Schweizerische Zeitschrift für internationales und europäisches Recht [Swiss law journal]; ZPO = Zivilprozessordnung des Kantons Basel-Stadt [Code on Civil Procedure of the Canton Basel-Stadt].

** Jan Henning Berg has been a law student at the University of Osnabrück, Germany and at King's College London. He participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and 4th Willem C. Vis (East) Moot.

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Pace Law School Institute of International Commercial Law - Last updated September 30, 2009
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