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CISG CASE PRESENTATION

Italy 11 December 2008 Tribunale di Forli [District Court] (Mitias v. Solidea S.r.l.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/081211i3.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20081211 (11 December 2008)

JURISDICTION: Italy

TRIBUNAL: Tribunale di Forli

JUDGE(S): Dott. Francesco Cortesi

CASE NUMBER/DOCKET NUMBER: n.2280/2007

CASE NAME: Mitias v. Solidea S.r.l

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (defendant)

BUYER'S COUNTRY: Slovenia (plaintiff)

GOODS INVOLVED: Shoes


Classification of issues present

APPLICATION OF CISG: Yes [Art. 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 25 ; 35 ; 39 ; 49 ; 84 [Also cited; Articles 3 ; 6 ; 9 ; 30 ; 38 ; 53 ; 85 ; 86 ]

Classification of issues using UNCITRAL classification code numbers:

7B1 [Interpretation of Convention (materials for interpretation): international case law];

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

35A ; 35B [Conformity of goods: quality, quantity, description required by contract; Requirements imposed by law];

39A [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];

49A [Buyer's right to avoid the contract];

84A [Seller bound to refund price must pay interest]

Descriptors: Internationality ; Fundamental breach ; Avoidance ; Conformity of goods ; Notice of lack of conformity, timeliness ; Interest

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Editorial remarks

Reproduced with permission of European Journal of Contract Law (3/2009) 160-161

EDITOR: Francesco A. Schurr, University of Innsbruck

In this decision, the District Court (of Forli) gave a clear definition of the concept of fundamental breach of an international sales contract and outlined the right of the buyer to avoid the contract. This case is therefore a valuable contribution to the interpretation of some essential provisions of the United Nations Convention on Contracts for the International Sale of Goods 1980 (ratified in Italy via Law no. 765 of 11 December 1988, entered into force on 1 January 1988).

The buyer, a company incorporated under Slovenian law, brought from the seller, an Italian limited company, various models of shoes, paying the agreed amount of around EUR 7,000.

After delivery, the buyer discovered defects in a great part of the purchased items, thus the goods could not be sold to third parties. The buyer immediately sent various messages to the seller stating the non-conformity of the goods. In these messages, the buyer asked the seller to send its representative to inspect the defective goods and to replace the items that were not in conformity with the contract. In his reply, the seller admitted liability and offered replacement of the defective goods. The buyer replied that it was interested in substituting some models (value around EUR 850) for those that the seller had offered as substitutes and requested the restitution of the higher amount of money that had originally been paid. The latter request for restitution was rejected by the seller. The latter declared itself available for the replacement of the goods only. The buyer pleaded the right of restitution of the amount paid for the defective goods; the seller did not participate in the proceedings. At the first hearing, the judge declared proceedings would take place on the sole basis of the documents disclosed.

The Court declared its jurisdiction over the parties pursuant to European Regulation no. 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, which is applicable to the present case from both a temporal and substantial point of view.

According to the Court, the substantive rules provided in the CISG are applicable. According to Articles 30 and 53 CISG, the seller had to deliver the goods (the shoes) and the buyer had to pay the price for these goods. Therefore the Convention is applicable rather than national Italian law. In his claim, the buyer had originally argued under Italian national law.

Disclosed documents that were not opposed by the seller proved that the buyer discovered the defects in the goods immediately after delivery and gave a detailed notice of them to the seller by e-mail seven days after the goods had arrived at its premises. On this occasion the buyer proposed the substitution of the non-conforming goods with other non-defective goods. In its reply acknowledging the receipt of the notice, the seller apologized for the defects in the shoes and declared that it did not have available goods for immediate replacement. The seller offered alternative replacement shoes from the next season's collection. The buyer party accepted the offer and requested restitution of the price paid for those defective goods that were not adequately recompensed by the other goods from the seller.

Article 35 of the CISG obliges the seller to deliver goods that are of the quantity, quality and description required by the contract. If the quality is not determined by the parties or if it is not possible - according to Article 9 CISG - to derive the requisite quality by referring to usages or practice established between the parties, reference has to be made to Article 35(2) in order to determine the characteristics that the goods must possess. In the present case, there was no doubt that the goods must have been at least fit for resale. The court had no doubt about the lack of conformity of the goods delivered.

According to Article 39(1) CISG, the buyer specified the nature of the lack of conformity within a reasonable time of discovery. In the present case, it was proved that the buyer inspected the goods at the time of delivery and that the criteria of Article 38 therefore were met. The seller accepted the notice as sent within a reasonable time by offering substitute goods to keep the contract alive.

The request by the buyer for partial avoidance of the contract expressed is allowed. The CISG links specific consequences to the concept of fundamental breach, allowing the party that acted according to the contract to declare the contract avoided in its entirety or offering the buyer substitute goods. Article 25 provides a definition of fundamental breach. That provision is recalled in Article 49, also stating the circumstances in which the buyer can avoid the contract.

Article 25 CISG does not specify when a fundamental breach is relevant but simply contains the criteria for distinguishing between a fundamental and a non-fundamental breach the effects of which have to be determined - according to the above-referenced interpretative method - by other articles of the CISG connected to or based on Article 25. The Convention does not differentiate between the breach of a main obligation and an ancillary obligation. Even a breach of an ancillary obligation may be considered fundamental if it is firmly connected to the trade in goods. Article 25 gives a uniform definition without distinguishing several types of breach, such as delay, non-payment, impossibility to perform or non-delivery.

According to a basic principle of the CISG, the avoidance of the contract is to be regarded as extrema ratio. Thus only where lack of conformity cannot be remedied by the seller or can only be remedied with serious inconvenience to the buyer, is there the chance to avoid the contract. If performance were still possible, the buyer would still have an interest in keeping the contract alive.

From the seller's behaviour, the Court concluded that the defects could not be removed: the offer made it clear that the shoes would have been replaced by different items that the buyer declared not fit or its retail market. This offer was not adequate for making up for the lack of conformity without an unreasonable inconvenience to the buyer. It is therefore reasonable that the buyer refused the offer to remedy. The fundamental breach thus legally leads to avoidance of the contract.

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1372&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (Italian): Click here for Italian text of case; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1372&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

District Court [Tribunale] Forli

11 December 2008

Translation [*] by Paolo Esposito [**]

Edited by Roberto Pirozzi [***]

Dr. Francesco Cortesi, sitting as a sole judge, rendered judgment in the civil proceedings of first instance, filed as n. 2280 in the court's general register for the year 2007 between:

Plaintiff: MITIAS d.o.o. [Buyer], acting through its legal representative pro tempore Seiko Scagnetti, a company incorporated under Slovenian law, with its main business office in Koper, Ankaranska 5B, registration no. SI65559428, for the present purposes having domicile in Forli' at via J. Allegretti 17, seat of the legal office of Roberto Roccari who jointly represents this company with Rado Race of Trieste's Bar in the present litigation proceedings, power of attorney reproduced at the bottom of the statement of claim

and

Default Defendant: SOLIDEA S.r.l. [Seller ].

Sale of goods

[BUYER]'S REQUEST FOR RELIEF

[Buyer requests] the tribunal, having rejected any objection, to:

   -    Preliminarily declare the non-conformity of the goods received by the [Buyer], of which formal notice has been given to the [Seller] within the legal time-limit;
 
   -    Declare the contract avoided because of the [Seller]'s breach;
 
   -    Ascertain that the [Seller] owes Euro 6,779.00 to the [Buyer] for the cost of the goods, Euro 125.00 monthly for storage costs from the day of delivery until the day of re-delivery or of payment, and interest at the legal rate from the date of each advanced payment until the payment of the final balance and, consequently, order the [Seller] to pay to the [Buyer] the aforementioned amounts along with interest at the legal rate from the date of each advanced payment until the payment of the final balance;
 
   -    Order the [Seller] to pay litigation costs.

THE PROCEEDINGS

The [Buyer] sued the [Seller] alleging that:

   -    The [Buyer] bought several different models of shoes from the [Seller], fully paying the agreed amount of Euro 7,030.80 plus transportation / delivery costs;
 
   -    After delivery, which took place on 26 October 2006, the [Buyer] discovered defects in a great part of the purchased items that rendered them non-merchantable;
 
   -    [Buyer] sent notice of the alleged non-conformity to the [Seller] by e-mail dated 2 November 2006 requesting the [Seller] to send its personnel for inspection of the defective goods and to replace the non-conforming items;
 
   -    To this notice, reiterated in e-mails dated 13 November and 17 November, the [Seller] replied on 20 November 2006 admitting its liability, and offering to replace the defective goods with different items of the collection produced;
 
   -    [Buyer] replied expressing interest in the substitution of some models with the ones offered in substitution by the [Seller] (whose value amounted to Euro 846.00) and requested the restitution of the higher amount paid;
 
   -    [Seller] rejected the request of restitution of money and declared itself only available to replace the goods.

Against this background, the [Buyer] pleaded its right to obtain the restitution of the amount paid for the defective goods, i.e., deducting from the amount paid the value of the defective items, and requested the Court to order [Seller] to pay this amount -- corresponding to Euro 6,779.00, not inclusive of the monthly cost of storage, amounting to Euro 125.00 -- and interest.

The [Seller] did not participate to the proceedings.

At the first hearing, the judge decided to proceed on the sole basis of the documents disclosed, ordered no further gathering of evidence, and he reserved to render his final decision after having dealt with the proceedings under article 281 quinquies Italian Code of Civil Procedure.

THE REASONING OF THE COURT

[Buyer]'s action has good legal basis and judgment has to be entered in his favor.

[Jurisdiction of the court]

1. Preliminarily, the Court declares its jurisdiction over the parties pursuant to European Regulation n. 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, which is applicable to the present case from both a temporal and substantial point of view.

      1.1 From the temporal point of view, indeed, the European Regulation is applicable because the lawsuit has been brought after the entry into force of that Regulation (see art. 66), i.e., after 1 March 2002.

      1.2 With reference to the substantial point of view, it is well known that the dispute has to concern a "civil and commercial matter" (art. 1(1) of the Regulation). The Regulation, indeed, does not specify when such circumstance occurs; that does not, however, lead to "interpreting the legislative terminology as a mere renvoi to the national legislation of one of the States concerned" (ECJ, decision 14 November 2002, case 271/00, Gemeente Steenbergen, para 28). It is instead necessary to interpret the concept "autonomously", as stressed by the ECJ jurisprudence in relation to the Bruxelles Convention. See:

   -    Decision 15 May 2003, case 266/01, Preservatrice fonciere TIARD SA, para 20;
   -    Decision 21 April 1993, case 172/91, Volker Sonntag, para 18;
   -    Decision 16 December 1980, case 814/79, Niederlande, para 7;
   -    Decision 22 February 1979, case 133/78, Henri Gourdain, para 3.

The latter jurisprudence can without doubt be taken into account for the proposition that it is important to "guarantee the continuity between the Bruxelles Convention and the present Regulation", to which refers to the "considering" no. 19. See:

   -    Tribunale Padova [Italy], 10 January 2006 in Giur. Merito 2006, 91 et seq.

From the aforesaid, the present dispute undoubtedly is a "civil and commercial matter" as it concerns a sales contract. Moreover, the Regulation is also applicable as the dispute is not included among the subject matters listed in art. 1(2) for which the applicabilityof the Regulation is excluded.

      1.3 As the Regulation is applicable, it consequently follows that it is the duty of the Court to verify ex officio, see:

   -    Voorzieningenrechter Rechtbank s'Gravenhage [Netherlands], in Nederlands Internationaal Privaatrecht 2005, 232,

its own jurisdiction according to article 26 of the Regulation, especially (as in the present circumstance) where the [Seller], having its place of business in a member State, is sued in a Court of another member State and does not participate to the proceedings. With reference to the present case, a positive answer has to be given to that question according to the fundamental criterion of the jurisdiction of the Court of the defendant's domicile, in application of the principle actor sequitur forum rei (ECJ, 13 July 2000, case 412/98, Group JosiReinsurance Company SA, para 35), endorsed in article 2 of the Regulation with the aim of "providing the defendant, generally, with an easier way of defense" (see ibid.; see also ECJ, 17 June 1992, case 26/91, Handte, Racc. page I-3967, para 14), and the defendant being domiciled in the Italian territory according to article 60 of the said Regulation.

[Applicable law]

2. Having declared the jurisdiction of this Tribunal, the present case needs some considerations about the applicable law.

Without any doubt, the contractual relation has an international character, the [Buyer] being a Slovenian company and the [Seller] an Italian company.

The [Buyer] argued under Italian law, considering it -- implicitly -- to be the applicable law under International Private Law. Nonetheless, the Court considers that in lieu of an International Private Law approach, it favors the application of the substantive rules provided in the United Nation Convention on Contracts for the International Sale of Goods 1980, ratified [by the Italian Republic], Law of 11 December 1985 n. 765, which entered into force on 1 January 1988.

This interpretation conforms to the predominant jurisprudence. See:

   -    Trib. Pavia [Italy] [(Tessile S.r.l. v. Ixele S.A)], 29 December 1999, in Corr. Giur. 2000, 932 et seq. [available in English translation at <http://cisgw3.law.pace.edu/cases/991229i3.html>];
 
   -    Trib. Vigevano [Italy] [(Rheinland Vertsicherungen v. Atlarex)], 12 July 2000, in Giur. it. 2001, 280 et seq. [available in English translation at <http://cisgw3.law.pace.edu/cases/000712i3.html>];
 
   -    Trib. Padova [Italy] [(Agricultural products case)], 25 February 2004, in Giur. it. 2004, 1405 et seq. [available in English translation at <http://cisgw3.law.pace.edu/cases/040225i3.html>];
 
   -    Trib. Padova [Italy] [(Pizza boxes case)], 31 March 2004, in Giur. merito 2004, 1065 et seq. [available in English translation at <http://cisgw3.law.pace.edu/cases/040331i3.html>];
 
   -    Trib. Padova [Italy] [(Ostorznik Savo v. La Farrona)], 11 January 2005, in Riv. dir. int. priv. e proc. 2005, 791 et seq.) [available in English translation at <http://cisgw3.law.pace.edu/cases/050111i3.html>], is based on considerations relating the nature of conventions on uniform substantive law.

      2.1 A convention such as the CISG, first of all, has a special application, more limited than the rules of International Private Law. The United Nation Convention on Contracts for the International Sale of Goods 1980, specifically, regulates solely the sales contract, whose international character depends on the different national places of business of the contracting parties, as opposed to the Rules of International Private Law that refer to all kind of contracts, without any sort of limitation.

Moreover, and most importantly, the specificity -- and thus the prevalence -- of the uniform substantive rules is based on the mechanism they offer for settling the substantive issues at stake. The substantive rules have to be considered specific because they directly address those issues, avoiding the double step necessary for the application of the international private law, consisting, first, in the determination of the applicable law based on the connections' criteria and then in its application.

It still has to be ascertained whether the prerequisites for the applicability of the Vienna Convention are met.

From an objective standpoint, the contract has to be a sales contract. It has been pointed out in the jurisprudence that there is no definition of what constitutes a sales contract in the Convention. See:

   -    Trib. Padova [Italy] [(Agricultural products case)], 25 February 2004 [Italy], quoted above;
 
   -    Kantonsgericht Schaffhausen [Switzerland] [(Machinery case)], 25 February 2002, available at <http://www.cisg-online.ch/cisg/urteile/723.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/020225s1.html>];
 
   -    Cour d'appel Colmar [France] [(Polyurethane case)], 12 June 2001, available at <http://witz.jura.uni-sb.de/CISG/decisions/120601v.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/010612f1.html>].

See also:

   -    Tribunal Cantonal de Vaud [Switzerland] [(Aluminum granules case)], 11 March 1996, available at <http://www.unilex.info/case.cfm?pid=1&do=case&id=320&step=FullText> [available in English translation at <http://cisgw3.law.pace.edu/cases/960311s2.html>];
 
   -    Oberster Gerichtshof [Austria] [(Chinchilla furs case)], 10 November 1994, available at <http://www.cisg.at/2_54793.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/941110a3.html>].

Thus a preliminary investigation as to the object of the dispute is necessary for setting it in the appropriate legal framework.

      2.2 Thus, it is not correct to refer to the definition provided for by the domestic (Italian) law, see supra:

   -    Trib. Padova [Italy] [(Ostorznik Sano v. La Farrona)], 11 January 2005;
 
   -    Trib. Padova [Italy] [(Agricultural products case)], 25 February 2004,

and especially to the definition provided in article 1470 of the Italian Civil Code. Instead, the concept of "sale" in the Convention has to be autonomously determined, without referring to specific notions of a particular national legislation (the same applies to the greatest part of the relevant concepts [in the Convention], such as "place of business", "habitual residence", "goods").

In that regard, attention has to be paid to articles 30 and 53 of the Convention, as pointed out in:

   -    Juzgado de primera instancia e instrucción no. 3 de Tudela [Spain] [(Machine for rectification of bricks case)], 29 March 2005, available at <http://www.uc3m.es/cisg/sespan45.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/050329s4.html>];
 
   -    Tribunal Cantonal du Jura [Switzerland] [(Sand and gravel case)], 3 November 2004, available at <http://www.cisg-online.ch/cisg/urteile/965.pdf> [available in English translation at <http://cisgw3.law.pace.edu/cases/041103s1.html>];
 
   -    Trib. Padova [Italy] [(Ostorznik Savo v. La Farrona)], 11 January 2005, supra.;
 
   -    Trib. Padova [Italy] [(Agricultural products case)], 25 February 2004, supra;
 
   -    Trib. Rimini [Italy] [(Porcelain tableware case)], 26 November 2002, supra;
 
   -    Tribunal Cantonal de Vaud [Switzerland] [(Clothing case)], 11 April 2002, available at <http://www.cisg-online.ch/cisg/urteile/899.pdf>;
 
   -    Kantonsgericht Schaffhausen [Switzerland] [(Machinery case)], 25 February 2002, available at <http://www.cisg-online.ch/cisg/urteile/723.htm>) [available in English translation at <http://cisgw3.law.pace.edu/cases/020225s1.html>].

Articles 30 and 53 make it clear that, under the Convention, a sales contract is a contract by which the seller is obliged to deliver goods, transfer the property in the goods and eventually hand over all the documents relating the goods, while the buyer is obliged to pay the price and take delivery of the goods. See:

   -    Cour d'appel de Colmar [France] [(Polyurethane case)], 12 June 2001, available at <http://witz.jura.uni-sb.de/CISG/decisions/120601v.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/010612f1.html>];
 
   -    Cour d'appel de Paris [France] [(Dataprocessing material case)], 12 October 2000, available at <http://witz.jura.uni-sb.de/CISG/decisions/121000v.htm>;
 
   -    Audiencia Provincial de Navarra [Spain] [(Electrical goods case)], 27 March 2000, available at <http://www.uc3m.es/cisg/sespan11.htm>;
 
   -  Tribunal Cantonal de Vaud [Switzerland][(Aluminum granules case)], 11 March 1996, supra.

Indeed, the contract of the present case meets the aforementioned elements. Actually, the contract [that is the object of the present dispute] is one by which the seller transferred the property of some models of shoes with the additional obligation to deliver them against payment of the price, to be made once the buyer had taken delivery [of the goods].

      2.3 The Convention prescribes the object of the contract to be movable and tangible goods. For that requirement, see:

   -    KG Zug [Switzerland] [(PVC case)], 21 October 1999, available at <http://www.unilex.info/case.cfm?pid=1&do=case&id=412&step=FullText> [available in English translation at <http://cisgw3.law.pace.edu/cases/991021s1.html>];
 
   -    OLG Köln [Germany] [(Used car case)], 21 May 1996, available at <http://www.unilex.info/case.cfm?pid=1&do =case&id=227&step=FullText> [available in English translation at <http://cisgw3.law.pace.edu/cases/960521g1.html>];
 
   -    OLG Köln [Germany] [(Market study case)], 26 August 1994, available at <http://www.unilex.info/case.cfm?pid=1&do=case&id=66&step=FullText> [available in English translation at <http://cisgw3.law.pace.edu/cases/940826g1.html>].

In that regard, it does not matter the shape of the goods (so that a sale of gas can be regulated under the Vienna Convention, see:

   -    Oberster Gerichtshof [Austria] [(Propane case)], 6 February 1996, available [in English translation] at <http://cisgw3.law.pace.edu/ cases/960206a3.html>;

nor the fact that the good are new[ly manufactured] or resold, alive or inanimate, see:

   -    OLG Köln [Germany] [(Used car case)], 21 May 1996, supra;
 
   -    LG Köln [Germany] [(Used car case)], 16 November 1995, available at <http://www.cisg-online.ch/cisg/urteile/265.htm>;
 
   -    LG Flensburg [Germany] [(Live sheep case)], 19 January 2001, available at <http://www.cisg-online.ch/cisg/urteile/619.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/010119g1.html>];
 
   -    Cour d'appel Paris [France] [(Two elephants case)], 14 January 1998, available at <http://www.unilex.info/case.cfm?pid=1&do=case&id=278&step=FullText>;
 
   -    Hof Arnhem [Netherlands] [(Live lambs case)], 22 August 1995, available at <http://www.unilex.info/case.cfm?pid=1&do=case&id=156&step=FullText>.

In the present case, no doubt exists as to the applicability of the Convention because the contract concerns the sale of shoes.

      2.4 The contract must also be international in character. For this requisite, the Convention, as well the greatest part of the conventions on uniform substantive law, provides a clear definition. In that regard, it is necessary that at the time of the contract the contracting parties have their places of business -- the place where a business activity having the character of duration, stability and autonomy is set -- in different States. For a definition, see the aforementioned jurisprudence and also:

   -    OLG Stuttgart [Germany] [(Floor tiles case)], 28 February 2000, in Internationales Handelsrecht 2000, 66 [available in English translation at <http://cisgw3.law.pace.edu/cases/000228g1.html>].

As to the contract in dispute, it is patent that the international requisite exists, the parties having their places of business, respectively, in Slovenia and Italy. Additionally, this international character was clear to the parties at the time of the contract so that article 1(2) of the Convention is not relevant.

Nonetheless the internationality of the contract alone does nonetheless not suffice for the Convention to be applicable, see:

   -   Trib. Padova [Italy] [(Agricultural products case)], 24 Feb. 2004, supra.

It is also necessary to satisfy an additional requirement, which is that the countries where the parties have their places of business are signatories of the Convention at the time the contract was entered into (art. 1(1)(a)), or that the rules of private international law of the forum refer to the law of a Contracting State (art. 1(1)(b)).

In the present case, it is useful to point out that the Vienna Convention entered into force for both Slovenia and Italy before the contract was entered into. Consequently, the Convention is applicable under article 1(1)(a).

      2.5 It also has to be added that parties did not exclude the application of the Convention, even if they could still have done so tacitly, as often pointed out by Italian and foreign jurisprudence, e.g., see:

   -    Cour de cassation [France] [(Weed killer case)], 25 October 2005, available at <http://witz.jura.uni-sb.de/CISG/decisions/251005v.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/051025f1.html>];
 
   -    Oberster Gerichtshof [Austria] [(Gasoline and gas oil case)], 22 October 2001, available at <http://www.cisg.at/1_7701g.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/011022a3.html>];
 
   -    Cour de cassation [France] [(Anton Huber v. Polyspace)], 26 June 2001, available at <http://witz.jura.uni-sb.de/CISG/decisions/2606012v.htm>;
 
   -    OLG München [Germany] [(Leather goods case)], 9 July 1997, available at <http://www.cisg-online.ch/cisg/urteile/282.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/970709g1.html>];
 
   -    LG München [Germany] [(Computer hardware case)], 29 May 1995, available at <http://www.cisg-online.ch/cisg/urteile/235.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/950529g1.html>];
 
   -    OLG Celle [Germany] [(Used printing press case)], 24 May 1995, available at <http://www.cisg-online.ch/cisg/urteile/152.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/950524g1.html>].

Based on the aforementioned considerations, the applicability of the United Nation Convention is affirmed.

[Substantive issues]

[ - The factual background]

3. As to the subject matter, preliminary attention has to be given to the factual background of the case.

From the disclosed documents -- which have not been opposed, there having been a default on the part of the [Seller] -- it has been proven that [Buyer], once it took delivery of the goods, discovered defects and sent detailed notice of them to the seller by e-mail seven days after [delivery] (doc. 7 "there are several defects preventing us from selling them: the heels in the same pair of shoes are not equal, the seams are out of line ..."). The alleged defects were also photographed at the time delivery took place (doc. 6). By means of the mentioned notice, the [Buyer] proposed the substitution of the non-conforming goods with others non-defective, subject to preliminary control (of the goods).

In acknowledging receipt of the notice, that was followed by others of similar content, (see docs. 8-9), [Seller] sent to the [Buyer] the following communication (doc. 10, e-mail dated 20 November 2006):

"We are sorry for the defects in the shoes and we would be willing to accept your offer, but we do not have available items for the replacement. Thus, I am asking whether you are interested to accept different substitute items of your choice ... for the fall/winter 2006/07 collection."

The [Buyer] accepted that offer only in part (see e-mail dated 24 November 2006, doc. 14), requesting restitution of the price paid for the defective goods and not adequately replaceable with other produced by the [Seller]: The [Seller], however, refused the counter-offer, stating that "the company's policy does not allow the refund of money" (see e-mail dated 27 November 2006, doc. 15).

      [Conformity of the goods]

      3.1 Relying on this factual background, the [Buyer] seeks restitution equal to the value of the defective shoes. In this direction the corresponding legislative provision is article 35 of the Vienna Convention, which obliges the seller to deliver goods that are of the quantity, quality and description required by the contract.

If the quality has not been bargained for (or if it has not been specifically or clearly described, see:

   -    Oberster Gerichtshof [Austria] [(Frozen fish case)], 27 February 2003, available at <http://www.unilex.info/case.cfm?pid=1&do=case&id=908&step=FullText> [available in English translation at <http://cisgw3.law.pace.edu/cases/030227a3.html>),

and if it is not possible to derive the requisite quality by referring to usages or practice established between the parties (according to article 9 of the Convention), reference has to be made to article 35(2) in order to determine the characteristics the goods must possess.

The latter article -- which is of a subsidiary nature and application (see ibid.) -- fixes the minimum objective standards the purchased goods must possess, see:

   -    KG Schaffhausen [Switzerland] [(Model locomotives case)], 27 January 2004, available at <http://www.cisg-online.ch/cisg/urteile/960.pdf> [available in English translation at <http://cisgw3.law.pace.edu/cases/040127s1.html>].

Article 35(2) states four criteria for determining the characteristics the goods must possess absent the parties' different agreement or different practices established between them.

According to article 35(2)(a), the goods must be fit for all (and not only some) of the purposes for which goods of the same type would ordinarily be used. Taking into account that the contracts regulated by the Vienna Convention are generally contracts between dealers, the objective evaluation of conformity (intended as fitness for the purpose for which goods of the same type would ordinarily be used) has to be made referring to the expectation of a reasonable dealer in the same circumstances: it follows that the goods must at least be merchantable for resale. In the present case, it has been proven that the shoes were to have been sold at retail in the country of the buyer, and that the seller was fully aware of such destination, as evidenced by its offer to provide substitute items and the inability of the items to serve to this scope.

      [Notice of lack of conformity]

      3.2 In the event the goods lack conformity, the buyer must give notice to the seller of the alleged non-conformity and specify in so far as possible the nature of the defects within a "reasonable time" after he has discovered them or ought to have discovered them (article 39(1)). According to the prevailing opinion, the concept of "reasonable" time is a "general clause", see:

   -    Trib. Vigevano [Italy] [(Rheinland Versicherungen v. Atlarex)], 12 July 2000, supra;
 
   -    Pretura Torino [Italy] [(Cotton fabric case)], 30 January 1997, in Giur. it., 1998, 985 [available in English translation at <http://cisgw3.law.pace.edu/cases/970130i3.html>],

requiring the judge to take into account all the circumstances of the specific case, see:

   -    Oberster Gerichtshof [Austria] [(Wood case)], 15 October 1998, available at <http://www.cisg.at/2_19198x.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/981015a3.html>];
 
   -    OLG Düsseldorf [Germany] [(Clothing case)], 12 March 1993, available at <http://www.cisg-online.ch/cisg/urteile/82.htm> [available in English translation at <http://cisgw3.law.pace.edu/cases/930312g1.html>];
 
   -    Rechtbank Roermond [Netherlands] [(Cheese case)], 19 December 1991, available at <http://www.unilex.info/case.cfm?pid =1&do=case&id= 34&step=FullText>.

The moment the lack of conformity should have been discovered has to be determined according to article 38, which states that "the buyer must examine the goods, or cause them to be examined, as soon as possible according with the circumstances."

In the present case, it has been proven that [Buyer] basically inspected the goods at the time of delivery and -- as already pointed out -- made pictures of all of the defects and sent notice to the seller of the lack of conformity within seven days.

For the sake of completeness, it has to be stressed that the seller accepted the notice as sent within a reasonable time when he, having admitted the lack of conformity, offered substitute goods to keep the contract alive.

      [Avoidance for fundamental breach]

      3.3 Having ascertained the violation of the seller's obligation under the contract, it has now to be determined whether the [Buyer]'s request of partial avoidance of the contract shall be allowed.

For this purpose, a basic provision to look at is article 25 of the Convention, providing a definition of "fundamental breach": that provision is recalled in article 49, also stating the circumstances in which the buyer can avoid the contract. The Convention links specific consequences to the concept of fundamental breach, offering to the party not-in-breach the possibility to declare the contract avoided in its entirety or [offering] to the buyer the possibility to require substitute goods, in addition to causing the party in breach to bear the risk of peril of goods.

However, article 25 does not specify when a fundamental breach is relevant: it only sets forth the criteria for distinguishing between a fundamental and a non-fundamental breach which effects have to be determined -- according to the above-referenced interpretative method -- by other articles of the Convention connected to or based on article 25.

      3.4 The following two considerations seem to be worth mentioning.

      First, it is imperative that an obligation arising out of the contract, [or] of the practice established between the parties, [or] of the usages referred to in article 9(2), [or] of an obligation established by the Convention itself, has been violated; if not, article 25 shall not be applicable.

Consequently, no "fundamental breach" will occur if a party misconducts under the Convention but with a reasonable justification; i.e., the debtor's right to refuse his own performance, or the creditor's lack of cooperation that makes the performance of the debtor's obligation impossible.

In that regard, the Convention does not distinguish between breach of a main obligation and an ancillary obligation. As is pointed out by the foreign jurisprudence, see:

   -    OLG Köln [Germany] [(Tannery machines case)], 8 January 1997, available [in English translation] at <http://cisgw3.law.pace.edu/cases/970108g1.html>;
 
   -    Bundesgerichtshof [Germany] [(Cobalt sulphate case)], 3 April 199[6], available at Recht der Internationalen Wirtschaft 1996, 594) [available in English translation at <http://cisgw3.law.pace.edu/cases/960403g1.html>],

even a breach of an ancillary obligation (and not a main obligation of the contract) may be considered as fundamental breach if it is firmly connected to the trade of goods.

      Second, article 25 does not differentiate among several types of breach, e.g., non-delivery, non-payment, impossibility to perform, delay, or others, but encapsulates a unique concept of breach, see:

   -    Bundesgerichtshof [Germany] [(Cobalt sulphate case)], 3 April 199[6], supra).

The essentiality of the breach is based on the prejudice to the legitimate contractual expectations of the claiming party, because the latter paragraph of the cited article requires that the breach has to be so serious as to deprive the party of his interest in the performance of the contract, see:

   -    HG Kanton Aargau [Switzerland] [(Inflatable triumphal arch case)], 5 November 2002, available [in English translation] at <http://cisgw3.law.pace.edu/cases/021105s1.html>.

This is also a general principle upon which the Convention is based: indeed, the Convention looks at the avoidance of the contract as the extrema ratio, provided only for fundamental breach, see:

   -    OLG Köln [Germany] [(Designer clothes case)], 14 October 2002, available [in English translation] at <http://cisgw3.law.pace.edu/cases/021014g1.html>;
 
   -    LG München [Germany] [(Globes case)], 27 February 2002, available [in English translation] at <http://cisgw3.law.pace.edu/cases/020227g1.html>;
 
   -    Oberster Gerichtshof [Austria] [(Tombstones case)], 7 September 2000, available [in English translation] at <http://cisgw3.law.pace.edu/cases/000907a3.html>.

According to the jurisprudence, the seriousness of the prejudice has to be investigated in relation to specific cases and by looking objectively at the contractual expectations of the damaged party; such expectations can be inferred from the contract, from the practice established between the parties and from all the surrounding circumstances existing until the contract was entered into, i.e., pre-contractual negotiations, see:

   -    OLG Linz [Austria] [(Auto case)], 23 January 2006, available [in English translation] at <http://cisgw3.law.pace.edu/cases/060123a3.html>;
 
   -    Oberster Gerichtshof [Austria] [(Software case)], 21 June 2005, available [in English translation] at <http://cisgw3.law.pace.edu/cases/050621a3.html>;
 
   -    Schweizerisches Bundesgericht [Switzerland] [(Meat case)], 28 October 1998, available [in English translation] at <http://cisgw3.law.pace.edu/cases/981028s1.html>.

Where, as in the present case, such investigation is not possible because no contractual document exists, reference can be made to circumstances that have been recognized and standardized by the jurisprudence. When, as in the case at issue, a substantial non-performance exists -- it has to be noted that the value of the non-defective goods is less than one tenth of the overall value of the purchased goods -- it is legitimate to consider that the damaged party has substantially been deprived of what he was entitled to expect; thus, the breach has to be regarded as fundamental under article 25.

Additionally, the jurisprudence equalizes the non-performance to the illegitimate and final refusal to perform, see:

   -    OLG Celle [Germany] [(Used printing press case)], 24 May 1995, available [in English translation] at <http://cisgw3.law.pace.edu/cases/950524g1.html>.

Specifically, seller's delivery of items that do not conform to the contractual description amounts to a fundamental breach if the lack of conformity is so serious that damages or price reduction would not be an adequate remedy for the buyer, see:

   -    OLG Köln [Germany] [(Designer clothes case)], 14 October 2002, supra;
 
   -    Bundesgerichtshof [Germany] [(Cobalt Sulphate case)], 3 April 199[6], available [in English translation] at <http://cisgw3.law.pace.edu/cases/960403g1.html>.

Again, this corresponds to the basic principle of the Convention, already mentioned, according to which contract avoidance should be regarded as extrema ratio. Therefore, delivery of goods that do not conform to the contract, where lack of conformity cannot be remedied by the seller (at all or within a reasonable time) or can only be remedied with serious inconvenience for the buyer will always be considered a fundamental breach, see:

   -    OLG Köln [Germany] [(Designer clothes case)], 14 October 2002, supra;
 
   -    LG München [Germany] [(Globes case)], 27 February 2002, supra;
 
   -    LG Regensburg [Germany] [(Cloth case)], 24 September 1998, available [in English translation] at <http://cisgw3.law.pace.edu/cases/980924g1.html>;
 
   -    OLG Koblenz [Germany] [(Acrylic blankets case)], 31 January 1997, available [in English translation] at <http://cisgw3.law.pace.edu/cases/970131g1.html>.

If not, performance would still be possible and so the buyer's interest in the performance would still be alive, see:

   -   HG Kanton Aargau [Switzerland] [(Inflatable triumphal arch case)], 5 November 2002, supra.

      3.5 The latter hypothesis has to be excluded in the present dispute. The Seller's conduct leads to the conclusion that the defects cannot be removed: [Seller]'s offer made clear that the shoes would have been replaced with different items that the buyer declared not fit for its retail market.

Absent [Seller]'s objections, the latter assumption has to be accepted; nor, again, the [Seller] changed its position, because the e-mail dated 20 November 2006 ("We do not have substitute items available") and the following one dated 27 November ("The company does not refund money") drastically excluded such an occurrence.

Accordingly, [Seller]'s offer was not adequate for making up for the lack of conformity without an unreasonable inconvenience for the buyer. So, it is easy to understand the [Buyer]'s refusal to accept the [Seller]'s offer to remedy the defects of the goods as proposed. Thus, once it has preliminarily been ascertained that the breach was fundamental, such conduct legally leads to the avoidance of the contract.

[ - Remedy]

4. Conclusively, [Seller]'s breach was fundamental and therefore the [Buyer] can legitimately avoid the contract.

Accordingly, the [Seller] shall be ordered to pay to the [Buyer] the amount of Euro 6,779.00, plus the monthly amount of Euro 125.00 for storage costs until the day of re-delivery, and also interest under article 84 of the Convention (according to which "if the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid") together with litigation costs.

As to article 84, it only provides for the right to claim interest without specifying the applicable rate. This situation of the applicable rate has to be considered as a gap not filled by the Convention; it is consequently necessary to determine the applicable law according to the private international rules of the lex fori, see:

   -    KG Schaffhausen [Switzerland] [(Model locomotives case)], 27 January 2004, available [in English translation] at <http://cisgw3.law.pace.edu/cases/040127s1.html>;
 
   -    OLG Celle [Germany] [(Used printing press case)], 24 May 1995, available [in English translation] at <http://cisgw3.law.pace.edu/cases/950524g1.html>.

These rules, in the present dispute, are the provisions of the Aja Convention 15 June 1955, ratified by the [Italian Republic] under Law 4 February 1958 n. 50, which entered into force on 1 September 1964. As, according to article 3(1) of the latter convention, the applicable law is the law of the Italian seller, the legal rate of interest in force in Italy is consequently applicable.

As to the storage costs, these expenses have been incurred for the preservation of the goods already paid by the Buyer and, according to article 85 of the Convention, they have to be considered reasonable.

Judgment has thus to be entered against the [Seller] as stated above. Costs follow the event and are quantified in the dispositive part.

FOR THESE REASONS

The Court renders final judgment in the civil proceedings filed as n. 2280/2007 between the [Buyer] and the [Seller] in default.

The Court:

   -    Declares the contract avoided because of the fundamental breach of the [Seller] and orders the latter to pay to the [Buyer] the amount of Euro 6,779.00 plus storage costs and interest as specified in the above reasoning.
 
   -    Orders the [Seller] to pay litigation costs as follows: Euro 1,800 for legal fees [...], plus VAT, CNA and an additional 12.5% for general expenditures.

So decided in Forlì on 9 December 2008.

The judge: Dr. Francesco Cortesi


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposs of this translation, Plaintiff of Slovenia is referred to as [Buyer] and Defendant of Italy is referred to as [Seller].

** Paolo Esposito, LL.M., FCI Arb, avvocato (Italian lawyer) and soliciter (England and Wales).

*** Roberto Pirozzi LL.M. candidate December 2009, avvocato (Italian lawyer) and assistant in Comparative Constitutional law (LUMSA, University of Rome)

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