Slovak Republic 12 November 2008 Regional Court in Nitra (Beer case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/081112k2.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 15 Cob/180/2008
CASE HISTORY: 1st instance District Court Topolcany (7 Cb/82/2008) 19 May 2005 [reversed and remanded]; 3d instance District Court Topolcany 20 March 2009
SELLER'S COUNTRY: Slovak Republic (defendant)
BUYER'S COUNTRY: Czech Republic (plaintiff)
GOODS INVOLVED: Beer
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
61 [Seller’s remedies for breach by buyer]; 81 [Effect of Avoidance on Obligations: Arbitration, Restitution]
61 [Seller’s remedies for breach by buyer];
81 [Effect of Avoidance on Obligations: Arbitration, Restitution]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
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
UnavailableGo to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
12 November 2008 [15 Cob/180/2008]
Translation [*] by Juraj Kotrusz [**]
The Regional Court in Topolcany, deciding in a three-judge panel presided by JUDr. Jan Bzdusek, in the case of Plaintiff F.C. [Buyer], with its registered office in T., ___, Czech Republic, represented by Mgr. R.S., attorney, versus P.T., a.s. [Seller], with its registered office in T. ___, [Slovak Republic], represented by JUDr. L. J., attorney, on the validity of an avoidance of contract, deciding on appeal of the [Seller] against the judgment of the District Court Topolcany of 19 May 2008, rec. no. 7 Cb/82/2008
h a s d e c i d e d a s f o l l o w s:
The Court reverses the judgment of the District Court Topolcany of 19 May 2008, rec. no. 7 Cb/82/2008 and remands the case to the District Court Topolcany for further proceedings.
The District Court Topolcany decided by the challenged judgment that the termination of contract of sale no. 80/EX 03 of 31 July 2003 concluded between the [Buyer] and the [Seller], as amodified by amendments no. 1 to 5 of 2 January 2004, 20 February 2004, 31 December 2004, 24 February 2005 and 4 April 2005, as noticed by letters of 10 October 2006 and 31 October 2006 is invalid. The Court also bound the [Seller] to pay to the [Buyer] the reimbursement of costs of the proceedings amounting to 48,474.- Slovak koruna [Sk] within three days after the judgment comes into force.
The Court reasoned the challenged judgment by explaining that the [Buyer] asked the Court by its action to declare the termination of contract of sale no. 80/EX 03 of 31 July 2003 concluded between the [Buyer] and the [Seller], as modified by amendments no. 1 to 5 of 2 January 2004, 20 February 2004, 31 December 2004, 24 February 2005 and 4 April 2005, and as noticed by letters of 10 October 2006 and 31 October 2006, to be invalid. The [Buyer] justified its action by stating that it had duly performed its obligations under the contract and had not breached the contract in a way that would enable the [Seller] to terminate the contract.
With reference to the evidence gathered, the Court of First Instance determined that the [Buyer]'s action was justified. The parties to the proceedings concluded a contract of sale which established the commercial relationship between them. The object of the contract was delivery of foodstuffs, particularly beer, packed and in ownership of the [Seller]. The Court determined from the testimony of witnesses and from the length and course of the mutual business relations that the parties to the proceedings had enjoyed good business relationships. This was also evidenced also by the fact that the parties had concluded an amendment to the contract which prolonged the initial period of cancellation from three months to twelve months. The Court explained that, in its opinion, the parties would not have made such an amendment, if the [Seller] hadd not been satisfied with performance of obligations by the [Buyer]. Despite existence of such a solid relationship, the [Seller] terminated the contract by sending a letter without any prior warnings.
The [Seller] justified its first notice on termination of the contract by breach of art. XI part 1 of the contract, as the [Buyer] did not comply with period of 90 days for returning of packing. Although the contract required the returning of the packing in the prescribed period, the Court determined that the parties had not ever complained about time of returning of packing, despite the fact that the [Buyer] had several times been in default with their return. The parties to the proceedings and also other subjects in this area of business (other buyers purchasing goods from the [Seller]) established a trade practice with respect to returning of packing, which was observed also by the [Buyer] and prolongation of 90 days period was usually caused by belated performance of obligations of sub-contractors in busy seasons, i.e., the [Buyer] was not able to influence time of such performance. Furthermore, the Court considered it to be contrary to good business manners that the [Seller] avoided the contract with reference to such a default of the [Buyer], although it did not draw the same consequences from similar behavior of its other buyers. The [Seller] had the right under the contract to notify of the alleged breach of contract and to reduce amount of deliveries to the [Buyer], as provided by art. XI part 3 of the contract…
The [Seller] justified its second notice by stating that the [Buyer] had used the purchased goods intended for export to the Czech Republic to supply customers in Germany and Italy. The Court determined from the testimony of witnesses that the [Seller] had been aware of exports of the goods to both of the abovementioned countries for a long time and had not objected thereto. The [Seller] had even fabricated new etiquettes for its products in the languages of these countries. It should also be mentioned that by enabling the export of the goods to other countries, the [Buyer] increased the amount of deliveries from the [Seller] and thereby considerably increased the profit of the [Seller] which is in accordance with interest of the [Seller], as profit presents a basic element of conducting business. Such benefit for the [Seller] cannot constitute a reason for avoidance of the contract. The Court considered such rigorous enforcement of rights of the [Seller], as in case of the abovementioned declaration of avoidance of the contract, to violate the principles of fair trade and was intended to override the agreed period of twelve months for termination of the contract. The Court found this avoidance of the contract to be contrary to good manners and consequently invalid and therefore declared the avoidance invalid.
The Court of First Instance qualified the facts of the case under sec. 261 and 409 of the Slovak Commercial Code and under sec. 488, 489 and 39 of the Slovak Civil Code.
The Court of First Instance decided about reimbursement of costs of the proceedings with reference to sec. 142 part 1 of the Slovak Civil Procedure Code (hereinafter referred to as "CPC") and granted to the [Buyer], which successfully claimed its rights in the proceedings, reimbursement of costs of the proceedings amounting to 48,474.- Sk.
The [Seller] filed an appeal against this judgment claiming that the Court of First Instance incorrectly legally qualified the case and did not take into account the argument of the [Seller] that there was no urgent legal interest on the part of the [Buyer] in deciding on the invalidity of the termination of the contract. The [Seller] also referred to art. IX part 1 of the contract where the [Buyer] was obliged to return packing within 90 days after handing over the goods. With respect to the goods delivered on 1 July 2006, the [Buyer] was obliged to return the packing by 30 September 2006. The [Buyer] failed to perform this obligation and did not return 16 KEG barrels until 9 October 2006, whereby it breached the agreed system of delivery. The [Seller] also pointed out that the [Buyer] did not refute the alleged breach of art. XII part 6 of the contract emerging from export of the goods to countries other than the Czech Republic. The [Seller] also complained that the challenged judgment is indefinite, as it does not explain which manners generally observed by society were breached by the [Seller], as determined by the Court of First Instance. Enforcement of rights vested in the contract cannot constitute acting contrary to good manners. The [Seller] therefore asked the Appellate Court to reverse the judgment and dismiss the action.
The [Buyer] did not respond to the appeal.
The Regional Court in Nitra, as an Appellate Court, tried the case in accordance with sec. 212 part 1 CPC and decided on appeal at public hearing with reference to sec. 221 part 1 h) CPC whereby it reversed the challenged judgment and remanded the case to the Court of First Instance for further proceedings.
With reference to the abovementioned provision [sec. 221 part 1 h) CPC], the Court reverses the challenged judgment. The Court of First Instance incorrectly legally qualified the facts of the case, i.e., it did not use proper legal provisions nor did it sufficiently investigate factual circumstances of the case.
The Appellate Court determined from the challenged judgment that the Court of First Instance incorrectly qualified the facts of case under the provisions of the Slovak Commercial Code and Slovak Civil Code, whereas it should have used the UN Convention on Contracts for the International Sale of Goods which was published in the Collection of Acts as no. 160/1991 Coll., particularly its articles 1(1)(a), 61 et seq. and 81 et seq. This Convention was ratified with the reservation that the Czechoslovak Republic will not be bound by art. 1(1)(b) of the Convention, with subsequent succession to its rights and obligations by the Czech Republic and Slovakia, the Convention is valid also in these States.
However, before deciding about the subject-matter of the case, the Court of First Instance shall determine existence of urgent legal interest of the [Buyer] on the decision on the invalidity of termination of the contract, as is required by sec. 80 c) CPC.
In the following proceedings the Court shall also decide about reimbursement of costs of the appellate proceeding (sec. 224 part 3 CPC).
Instruction: An appeal against this judgment is not admissible.
Regional Court in Nitra, 12 November 2008.
JUDr. Jan Bzdusek, Chairman of the Panel
* 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 [Buyer] and Defendant of the Slovak Republic is referred to as [Seller]. 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.Go to Case Table of Contents