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CISG CASE PRESENTATION

Switzerland 27 November 2008 Kantonsgericht [District Court] Zug (Packaging foils case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/081127s1.html]

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

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Case identification

DATE OF DECISION: 20081127 (27 November 2008)

JURISDICTION: Switzerland

TRIBUNAL: Kantonsgericht [District Court] Zug

JUDGE(S): Dr. R. Meyer (Presiding Judge); St. Scherer, Furrer (District Court Judges)

CASE NUMBER/DOCKET NUMBER: A3 2004 112

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Switzerland (plaintiff)

BUYER'S COUNTRY: Ireland (defendant)

GOODS INVOLVED: Packaging foils


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(b)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 74 ; 78 [Also cited: Articles 6 ; 30 ; 35 ; 58 ; 59 ; 61 ]

Classification of issues using UNCITRAL classification code numbers:

74A [General rules for measuring damages (loss suffered as consequences of breach): can include pre-trial attorney fees];

78B [Rate of interest

Descriptors: Damages ; Interest ; Collection costs

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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/2024.pdf>

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 (Kantonsgericht) Zug

27 November 2008 [A3 2004 112]

Translation [*] by Andrea Vincze [**]

For purposes of this translation, Plaintiff of Switzerland is referred to as [Seller] and Defendant of Ireland is referred to as [Buyer].

REQUESTS OF THE PARTIES

[Seller] requests the court to order [Buyer] to pay to [Seller]:

1.    EUR 41,928.94 plus 5% interest from 18 June 2003;
2.    EUR 33,641.05 plus 5% interest from 25 June 2003;
3.    CHF 180 plus 5% interest from 16 September 2004;
4.    EUR 2,000 plus 5% interest from 29 October 2004; and to pay
5.    All costs and compensations.

[Buyer] requests the court to dismiss the [Seller]'s claim to the extent it exceeds EUR 42,662.83.

FACTS OF THE CASE

1. [Seller] is a limited company engaged in the international sale of packaging materials. On 2 December 1999, [Seller] concluded a contract with [Buyer] which concerned the sale of [Seller]'s products in Ireland through [Buyer] ([Seller]'s exhibit no. 6).

2. As the cooperation did not go as expected according to [Seller], the parties concluded a Termination and Settlement Agreement on 26 February 2003, according to which their cooperation was to end on 31 March 2003 ([Seller]'s exhibits nos. 7-10). In its reasoning, the court will refer to the contents of this agreement as well as the additional agreement concluded on the same day, if necessary.

3. On 29 October 2004, [Seller] filed a claim against [Buyer] before the District Court of Canton Zug with the requests stated above (paras. 1, 2, 3 and 5). Essentially, [Seller] based its claim on the allegation that [Buyer] failed to perform its obligations arising out of the Termination and Settlement Agreement as well as the additional agreement dated 26 February 2003. In particular, [Seller] argued that [Buyer] had not paid for the products delivered by [Seller] prior to 31 March 2003.

4. On 8 March 2006, the claim was served on [Buyer], which is domiciled abroad, by way of judicial assistance. At the same time, [Buyer] was ordered to file an answer to the claim within the statutory deadline of 20 days. As [Buyer] had not filed an answer to the claim within the deadline, the District Court of Zug subpoenaed the parties to the oral hearing on 13 July 2006.

5. In its submission on 3 July 2006, [Buyer] filed a motion requesting the District Court of Zug to withdraw the subpoena ordering [Buyer] [to appear] at the oral hearing on 13 July 2006 and to set a new date for the oral hearing. On 4 July 2006, the District Court informed the [Seller] that the oral hearing was adjourned upon the motion by [Buyer]. At the same time, the court inquired from [Seller] whether it agrees with the fact that the deadline for submitting an answer is extended in order to be able to conclude the written phase prior to the oral hearing and to possibly conduct the taking of evidence. In its submission dated 13 July 2006, [Seller] communicated to the District Court that it agreed with the setting of a new deadline to submit an answer to the claim. Subsequently, [Buyer] filed its answer to the claim within the deadline set for 4 September 2006, and it contained the above mentioned request.

6. On 30 November 2006, [Seller] filed its response to [Buyer]'s answer. [Seller] repeated its claims already included in its original claim. Regarding [Buyer]'s answer to the claim, [Seller] requested the court to order [Buyer] to acknowledge the claim in its entirety. Thus, the subject matter of the dispute should only include the claims set-off by [Buyer]. Yet, according to [Seller], a set-off is impossible because [Buyer] had expressly waived the right to enforce set-off claims in Art. 8 of the Termination and Settlement Agreement. In addition, [Buyer] did not substantiate the claims raised for the purposes of a set-off. [Seller] contests these claims. According to [Seller], [Buyer]'s sole purpose was to delay the proceedings and to postpone the payment of its outstanding debt.

7. On 31 January 2007, [Buyer] filed its response to [Seller]'s response.

8. By an order on 5 March 2007, the District Court of Zug ordered the hearing of Witness [...] by way of judicial assistance. On 21 April 2008, the Supreme Court of England and Wales informed the District Court of Zug that it had not been possible to contact the witness, therefore, the witness was not heard.

9. Subsequently, the District Court of Zug subpoenaed the parties to the oral hearing on 25 September 2008. As [Buyer] had been absent from the mediation procedure before the Magistrate of Baar without making an excuse, the subpoena was peremptory, subject to the penalty that if [Buyer] is absent again without a [proper] excuse, [Buyer] would be considered to have acknowledged [Seller]'s claim and to have waived its right to object. As the subpoena could not be served on [Buyer] by way of judicial assistance, on 18 July 2008 the subpoena was published in the official journal of the District Court of Zug.

10. The oral hearing took place on 25 September 2008. As [Buyer] was absent from the oral hearing without making an excuse, subject to the penalty stated above, the court ruled that [Buyer] had acknowledged [Seller]'s claim and waived its right to object. Thereupon, [Seller] waived its right to argue the case at the hearing, and referred to its previous written submissions and the requests included therein. In addition, [Seller] requested the court to order [Buyer] to pay EUR 2,000 plus 5% interest from 29 October 2004 as compensation for the expenses of its Irish legal representative.

REASONING

1. [Seller] has its place of business in the Canton of Zug. [Buyer]'s place of business is located in Ireland. Therefore, the dispute has an international subject matter pursuant to Art. 1 of the Federal Act on Private International Law Dated 18 December 1987 (IPRG).

2. The dispute involves a civil or commercial matter in the sense of the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 16 September 1988 [hereinafter: Lugano Convention]. If the parties, one or more of which is domiciled in a Contracting State, have agreed that a court or the courts of a Contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction unless the Lugano Convention provides for mandatory jurisdiction of another court. Such an agreement conferring jurisdiction shall be either in writing or evidenced in writing, or in a form which accords with practices which the parties have established between themselves, or in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, [parties to contracts of the type involved in the particular trade or commerce concerned]. (Art. 17(1) of the Lugano Convention).

3. Pursuant to Article 16 of the "Termination and Settlement Agreement" concluded by the parties on 26 February 2003, the court in Zug has exclusive jurisdiction ([Seller]'s exhibit no. 7. As the Lugano Convention does not provide for mandatory jurisdiction of another court and the formal requirements set out in Art. 17 of the Lugano Convention were met, the matter of jurisdiction is governed by the Termination and Settlement Agreement. The court having jurisdiction according to that is also the proper venue.

4. Pursuant to Art. 116(1) IPRG, contracts are governed by the law chosen by the parties unless it is contrary to international law having supremacy.

      4.1 Pursuant to Art. 1(1)(a) and (b) of the United Nations Convention on Contracts for the International Sale of Goods dated 11 April 1980 (CISG), the CISG applies to contracts of sale of goods between parties whose places of business are in different States when the States are Contracting States; or, as in the present case, when the rules of private international law lead to the application of the law of a Contracting State. Pursuant to Art. 6 CISG, if the parties chose the applicable law, it must be examined whether the parties had thereby excluded application of the CISG or it is applicable by virtue of Art. 1(1)(b) CISG (Brunner, Kommentar zum UN-Kaufrecht -- CISG, Bern 2004, No. 1 on Art. 1 CISG). Art. 6 CISG provides that the parties may exclude the application of the CISG. Such exclusion may be express or implied. Firm intent of the parties is required for an implied exclusion. According to prevailing opinion, it does not qualify as express exclusion of the CISG if the parties choose the law of a Contracting State, as in the present case (see [Seller]'s exhibit no. 7: "This agreement shall be governed by Swiss law"), unless the interpretation of the agreement on choice of law suggests otherwise with great certainty (Brunner, op. cit., No. 1 on Art. 6 CISG). In the present case, there are no apparent references that could be interpreted as an exclusion of the CISG. Therefore, the CISG is applicable to the subject matter and the parties (Art. 1(1)(b) CISG, cf. Art. 6 CISG).

      4.2 Consequently, the court finds that adjudication of the present dispute must take place primarily under the CISG.

5. The applicable procedural law is determined by the lex fori in any case. Any party, summoned properly to the oral hearing or the final hearing and staying absent without a proper excuse or contesting admission of the claim without a proper ground, must be ordered to bear the costs and summoned by way of a peremptory subpoena. If the [Buyer] was absent from the mediation procedure as well without stating a proper excuse, it must be summoned to the proceedings of the Court of First Instance by way of a peremptory subpoena, i.e., subject to the penalty that that if the [Buyer] is absent again without a [proper] excuse, the [Buyer] would be considered to have acknowledged the [Seller]'s claim and to have waived its right to object (Art. 96 (1)-(3) ZPO).

[Buyer] was absent from the proceedings before the Magistrate on 2 September 2004 and did not provide a proper excuse, therefore, it was summoned to the oral hearing of 25 September 2008 by way of a peremptory subpoena ([Seller]'s exhibit no. 4). As [Buyer] stayed absent from the oral hearing as well without stating a proper excuse, subject to the penalty stated above, the court ruled that [Buyer] had acknowledged [Seller]'s claim and waived its right to object. Therefore, the court based the reasoning of its judgment on the factual scenario presented by [Seller]. According to the judgment of the Court of Appeal of Canton Zug dated 24 September 1996, it does not have to be considered what the defaulting party presented in a timely manner in previous stages of the proceedings, such as the written phase (GVP 1995/96, p. 94). Therefore, the court will not consider [Buyer]'s submission included in its answer to the claim and its response to [Seller]'s answer.

6. By way of the Termination and Settlement Agreement of 26 February 2003, the parties terminated their cooperation as of 31 March 2003. This agreement replaces the Agency Agreement of 2 December 1999 and regulates mutual rights and obligations of the parties up until termination of their cooperation on 31 March 2003.

7. [Seller] requests (in paragraphs 1 and 2 of the "Requests" above) that the court order [Buyer] to pay EUR 41,928.94 plus 5% interest from 18 June 2003 and EUR 33,641.05 plus 5% interest from 25 June 2003. Therefore, the legal question to be answered is whether there is an adequate legal ground for the claims presented.

      7.1 [Seller] supports its claims by e-mails dated 16 January 2003, 30 January 2003, 3 February 2003 and 10 March 2003, among others, through which [Buyer] had ordered goods from [Seller] for a total price of EUR 75,569.99 ([Seller]'s exhibits Nos. 11-14). These orders were subsequently delivered to [Buyer] on 20 March 2003 and on 27 March 2003. Indicating the date of delivery, [Seller] issued invoices regarding the delivery on 20 March 2003 for EUR 36,844.78 and EUR 5,084.16 ([Seller]'s exhibits nos. 17 and 18), and regarding the delivery on 27 March 2003 for EUR 18,638.65 and EUR 15,002.40 ([Seller]'s exhibits nos. 15 and 16). The foils delivered had no defects and [Buyer] did not make any complaint concerning the foils. Therefore, [Seller] claimed payment of the invoiced sums. Pursuant to Art. 7 of the Termination and Settlement Agreement dated 26 February 2003, [Buyer] was obliged to pay for several deliveries that had taken place prior to 31 March 2003 within 90 days from the date on the invoice. The invoices were dated 20 March 2003 and 27 March 2003, respectively. Although [Seller] called upon [Buyer] several times to pay for its outstanding debt, this has not taken place.

[Buyer] did not contest the above factual scenario, and therefore, it had acknowledged it.

      7.2 The parties concluded a sale of goods contract subject to the CISG. The seller is obliged by the sale of goods contract to deliver the goods, hand over any documents relating to them and transfer the property in the goods (Art. 30 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 (Art. 35 CISG). The buyer must pay the price for the goods and take delivery of them (Art. 53 CISG).

It is undisputed that [Seller] had complied with its obligations arising out of the sales contract. [Buyer] did not perform its obligations in conformity with the contract, nor did it raise any objections. Even the sums included in the invoices are undisputed. Therefore, [Seller] has a claim for payment of the outstanding debt, whereby [Buyer] must be ordered to pay to [Seller] a sum of EUR 41,928.94 for the delivery on 20 March 2003 ([Seller]'s exhibits nos. 17 and 18), and EUR 33,641.05 for the delivery on 27 March 2003 ([Seller]'s exhibits nos. 15 and 16).

      7.3 In addition to the sum specified in the request for payment, [Seller] requests 5% interest on EUR 41,928.94 from 18 July 2003 and on EUR 33,641.05 from 25 June 2003.

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 (Art. 78 CISG). Therefore, the only condition of ordering payment of interest is that the payment must be due; a delay under Swiss law and its conditions are not applicable. The due date is primarily governed by the agreement of the parties, in lack of which Art. 58 et seq. applies (Schlechtriem-Schwenzer, Kommentar zum EInheitlichen UN-Kaufrecht, 4th ed., Mnchen 2004, No. 7 et seq. on Art. 78 CISG).

Pursuant to Art. 7 of the Termination and Settlement Agreement dated 26 February 2003, the parties agreed that the deliveries by [Seller] to [Buyer] must be paid for within 90 days of the invoice date ([Seller]'s exhibit no. 7). The deliveries on 20 and 27 March 2003 were invoiced on these same days, respectively ([Seller]'s exhibits nos. 15-18). Therefore, [Seller]'s requests for payment of the purchase price became due on 18 and 25 June 2003, respectively. As [Buyer] failed to pay the purchase price when they were due, pursuant to Art. 78 CISG, [Buyer] must pay to [Seller] default interest from 18 and 28 June 2003, respectively.

The CISG is silent on the interest rate. Therefore, the interest rate is determined by the applicable domestic law (Schlectriem-Schwenzer, op. cit., no. 26 et seq. on Art. 78 CISG). In the present case, Swiss law is applicable to the interest rate, as the parties agreed upon the application of Swiss law in the Termination and Settlement Agreement ([Seller]'s exhibit no. 7). Pursuant to Art. 104(1) and (2) of the Swiss Code of Obligations, the debtor must pay 5% interest in case of a delay unless a higher interest rate was agreed upon in the contract. In lack of such a provision in the contract, [Buyer] must pay to [Seller] 5% interest on EUR 41,928.94 from 18 June 2003 and on EUR 33,641.05 from 25 June 2003.

8. In addition, [Seller] requests the court to order [Buyer] to reimburse its costs amounting to CHF 180 incurred in the Magistrate proceedings, plus 5% interest from 16 September 2004.

The letter of reference issued by the Magistrate of Baar does not contain any provision on costs ([Seller]'s exhibit no. 4). Although the costs of the Magistrate proceedings were charged to [Seller] ([Seller]'s exhibit no. 27) and [Seller] paid such costs, these costs cannot be reimbursed. The costs of the Magistrate proceedings represent pre-trial expenditures by [Seller] which must be reimbursed as part of the compensation for party expenses if [Seller] wins the case.

9. Finally, [Seller] requests the court to order [Buyer] to pay EUR 2,000 plus 5% interest from 29 October 2004 because [Buyer] performed its obligation arising out of the Termination and Settlement Agreement, i.e., to de-register Company [...] in Ireland, only upon intervention of an Irish legal representative ([Seller]'s exhibit no. 7, para 10). Therefore, the costs incurred by the Irish legal representative must be considered as pre-trial enforcement costs. [Seller] must bear half of these costs, i.e., EUR 2,000.

      9.1 The judgment of the District Court of Zug referred to by [Seller] (GVP 1985/86, p. 122) dealt with the expenses of an attorney before the Magistrate court, yet it cannot be applied to make any conclusions regarding other pre-trial expenses of the parties. In that judgment, the District Court ruled that pre-trial expenses cannot be calculated into the costs of a pending dispute itself, thus, the allocation of such expenses is not governed by Art. 40 ZPO (compensation for party expenses). Rather, these expenses would represent financial loss to the (finally prevailing) party, which must be enforced as a separate item for compensation and, according to the conditions of compensation, it must be paid by the party causing them. Therefore, the court agrees with [Seller]'s contention that such costs must be enforced as part of the compensation for party expenses.

Therefore, it must be examined whether the costs incutted by the Irish legal representative can be enforced as separate loss under Art. 61(1)(b) in conjunction with Art. 74 CISG. Doctrine and jurisprudence generally argue that reimbursement for such pre-trial enforcement costs is subject to the CISG because such costs are hard to separate from claims regarding damages and in domestic law they are often not separated. However, such costs may be reimbursed only if they are business-related expenses in a legal sense, incurred as a result of the debtor's conduct violating the contract and which the debtor could foresee as a reasonable reaction to its conduct (Schlechtriem-Schwenzer, op. cit. no. 20 on Art. 74 CISG).

The Irish legal representative was engaged by [Seller] because despite a written reminder [Buyer] failed to comply with its obligation arising out of the Termination and Settlement Agreement, i.e., to de-register the Irish company [...] ([Seller]'s exhibits nos. 19-21). As in-depth knowledge of Irish law was necessary to perform the request to de-register the company, that [Seller] and its Swiss legal representative did not possess, employment of the Irish legal representative was justified and [Buyer] had to foresee that as a result of its non-compliant conduct.

Under these circumstances, [Seller] incurred justified pre-trial enforcement costs regarding its Irish legal representative and they can be reimbursed as specific damages under Art. 74 CISG. The sum of EUR 2,000 requested by [Seller] was not disputed by [Buyer], therefore, it is considered acknowledged. Consequently, [Buyer] is ordered to pay to [Seller] EUR 2,000.

      9.2 In addition, [Seller] requests 5% interest on the sum of EUR 2,000 from 29 October 2004. Under Art. 78 CISG, the only condition for payment of interest is that the sum must be in arrears (cf. para 7.3.). Regarding demands other than a demand for payment of the purchase price, the CISG does not expressly determine the due date. In lack of other indications, the baseline is that demands, like the request for compensation in the present case, are due upon accrual (Schlechtriem-Schwenzer, op.cit., no. 9 on Art. 78 CISG). However, in the present case, the question regarding the time of accrual of the request for compensation can remain open because [Seller] requests interests only as of 29 October 2004 (date of the claim). Under the principle of disposition (Art. 54 ZPO), [Seller] cannot be awarded more than requested.

In lack of a relating provision in the CISG, the interest rate is governed by domestic law. The interests requested by [Seller] are compensation interest under Swiss jurisprudence. In accordance with Art. 73(1) of the Swiss Code of Obligations and jurisprudence of the Supreme Court of Switzerland, the general interest rate is 5% (BGR 122 III 54). Therefore, the court has no objection against the 5% interest rate suggested by [Seller].

Therefore, [Buyer] is ordered to pay to [Seller] 5% interest on the sum of EUR 2,000 from 29 October 2004.

10. As a result of the outcome of the dispute, [Buyer] must bear the costs of the court proceedings (Art. 38(1) ZPO) and [Seller] shall bear its costs and expenses proportionately. (Art. 40(1) ZPO)).

Pursuant to Art. 3 of the Regulation of the Court of Appeal on Attorney's Fees, the honorarium depends on the amount in dispute. Upon application of the Regulation, if the amount in dispute is EUR 77,569.99 (i.e., CHF 118,612.30; exchange rate 1:1.5291 on 29 October 2004), the honorarium of [Seller]'s legal representative equals CHF 9,730.60. The expenses and the VAT are added to the latter sum.

It must be noted that the cost equaling CHF 180 for the proceedings before the Magistrate is awarded to [Seller] as part of the compensation for party expenses.

JUDGMENT

1.    [Buyer] is ordered to pay to [Seller] EUR 77,569.99 plus 5% interest on EUR 41,928.94 from 18 June 2003, on EUR 33,641.05 from 25 June 2003 and on EUR 2,000 from 29 October 2004.
 
2.    The costs of the proceedings must be borne by [Buyer]. They are: CHF 6,000 judgment fee; CHF 2,103 translation expenses; CHF 40 registration fee; CHF 160 expenses; CHF 8,303 total.
 
3.    [Seller] must pay to [Buyer] CHF 12,654.40 representing procedural expenses (VAT included).
 
4.    Pursuant to Art. 201 ZPO, this judgment may be appealed within 30 days upon receipt, by filing a written request, including reasoning and addressed to the Court of Appeal of Canton Zug, in two copies, with the Registry of the Court of Appeal.
 
5.    The order on costs and compensations may be appealed within 10 days, by submitting a written request, including reasoning and the appealed decision attached, with the Judiciary Department of the Court of Appeal of Canton Zug provided that the decision is not referred to another forum during the appeal and the order on costs and compensations does not exceed CHF 500.
 
6.    This judgment is communicated to the parties (to [Buyer] by way of judicial assistance) and the court archives (anticipated).


FOOTNOTES

* All translations should be cross-checked against the original text. For purposes of this translation, amounts in European currency (Euro) are indicated as [EUR]; amounts in Swiss currency (Swiss francs) are indicated as [CHF].

** Andrea Vincze is a Fellow of the Institute of International Commercial Law of Pace University School of Law. She received her law degree from the University of Miskolc, Hungary, and her LL.M. at Pace Law School. She is working on her Ph.D. on ICSID arbitration, and is researching international commercial law and ADR.

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