Slovak Republic 24 February 2009 District Court in Komarno (Potatoes case) [translation
[Cite as: http://cisgw3.law.pace.edu/cases/090224k1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 5 Cb/114/2006<
CASE HISTORY: 1st instance District Court Komarno (5 Cb/114/2006-116) 25 March 2008; 2d instance Regional Court Nitra 15 October 2008 [reversing and remanding]
SELLER'S COUNTRY: Czech Republic (plaintiff)
BUYER'S COUNTRY: Slovak Republic (defendant)
GOODS INVOLVED: Potatoes
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:
38A [Buyer's obligation to examine goods: time for examining goods]; 39A11 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within
reasonable time; Degree of specificity required]; 50B [Buyer's right to reduce price of goods: this right available whether or not the price has been paid]; 77A [Obligation to take reasonable measures to mitigate damages]
38A [Buyer's obligation to examine goods: time for examining goods];
39A11 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Degree of specificity required];
50B [Buyer's right to reduce price of goods: this right available whether or not the price has been paid];
77A [Obligation to take reasonable measures to mitigate damages]
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=1471&step=Abstract>
CITATIONS TO TEXT OF DECISION
Original language (Slovak): Click here for Slovak text of case; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1471&step=FullText>
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
24 February 2009 [5 Cb/114/2006]
Translation [*] by Juraj Kotrusz [**]
IN THE NAME OF THE SLOVAK REPUBLIC
The District Court of Komarno, deciding by a single judge, Mgr. Peter Mezoszallasi, in the case of Plaintiff T., spol. s.r.o. [Seller], with its registered office in U.K., U.B., Czech Republic, …, represented by JUDr. B.B., attorney, versus Defendant T. P. - Z. S. [Buyer], with its registered office in L. R., M. ___, [Slovak Republic], represented by JUDr. I. M., attorney, regarding payment of 34,960.- Czech koruna [Kc] with appurtenances
h a s d e c i d e d a s f o l l o w s:
The action of the [Seller] is dismissed.
The [Seller] is obliged to pay to the [Buyer] the reimbursement of costs of the proceedings amounting to 1,005.65 Euro [EUR], all within three days after the judgment comes into force.
The [Seller] claimed in the proceedings by its action from 30 August 2005 its right to payment of the sum of 1,005.65 EUR with interest of 13 % annually on this sum for the period from 16 July 2004 until payment and for the [Buyer] to reimburse its costs of the proceedings.
The [Seller] justified its claim by stating that the [Buyer] failed to pay the residual part of the purchase price in the stipulated amount.
The [Buyer] filed a protest with the Court against the Order to pay issued by the Court on 26 October 2005 [Rec. no. 5Ro/536/2005] and alleged that the [Seller]'s right to the claimed residual part of the purchase price ceased, as the [Buyer] was entitled to a reduction of the price for the delivery of defective goods.
The attorney of the [Seller] changed the factual reasoning of the action at the oral hearing and stated that the claim refers to an unpaid part of the purchase price billed by the [Seller] by invoice no. 320626 for the sum of 138,700.- Kc. The [Seller] alleged that the goods were delivered to the [Buyer] by truck and that the [Buyer] approved the handing over of the goods by signing the CMR on 10 June 2004. The [Buyer] partially paid the price in the amount of 103,740,- Kc after the due date, i.e., on 1 November 2004. The [Seller] therefore claimed in the proceedings payment of the residual part of the purchase price amounting to 34,960.- Kc.
The [Buyer] argued in its written motion as well as in its oral answer at the hearing that the claim of the [Seller] is unjustified. The [Buyer] stated that it deducted from the invoiced sum of 138,700.- Kc a part in the sum of 34,960.- Kc which was unjustified. The deduction was performed by a unilateral set-off of the [Buyer] against its right to reduction of the purchase price for the goods delivered on 11 April 2004 -- 12,000 kg of new potatoes, where the [Buyer] initially refused to accept 144 kg of the goods, as they were defective, and subsequently notified the [Seller] of the lack of conformity of a further 3,680 kg of potatoes, being rotten. The [Buyer] argued that it duly provided notice of lack of conformity on time. Since the [Buyer] already partially paid the price listed in invoice no. 320651 in the sum of 103,147.- Kc. [Buyer] claimed its right to reduction of the price by a set-off against the residual part of the invoiced sum.
The [Seller] insisted on its claim and argued that the [Buyer] notified of the lack of conformity of the goods belatedly and asked the Court not to take this claim of the [Buyer] into account.
The [Buyer] alleged that it notified of the lack of conformity on the day after the delivery of the goods when representatives of the parties to the proceedings met in L. The [Buyer] asked the Court to interrogate witnesses in order to evidence this fact. [Buyer] argued that its claim for reduction of the price emerged from the fact that at the time of the delivery, on Friday, 11 June 2004 in the evening, it examined the goods only randomly. Therefore, it initially noticed lack of conformity only with reference to 144 kg of the goods. Subsequently, when the [Buyer] was sorting the goods, it detected a lack of conformity with reference to the abovementioned further amount and notified of the lack of conformity also with respect to this amount of the goods. Upon instructions of the employee of the [Seller], the [Buyer] washed the goods and sorted them in order to mitigate damages emerging from lack of conformity of the goods. The [Buyer] was able to ascertain the amount of reduction of the price only after reselling the goods to its customers. Subsequent to the resale, the [Buyer] claimed price reduction in the stipulated sum by telefax message sent to the [Seller] on 29 June 2004.
On 25 March 2008, the Court issued a judgment [Rec. no.: 5Cb/114/2006-116] in which it dismissed the action of the [Seller] and bound the [Seller] to pay to the [Buyer] the reimbursement of costs of the proceedings. The [Seller] filed an appeal against this judgement. Upon the appeal, the Appellate Court [Regional Court in Nitra], in its resolution of 15 October 2008 [Rec. no.: 15Cob/140/2008-149], overruled the judgment of the Court of First Instance and remanded the case to this Court for further proceedings. The Appellate Court stressed in its reasoning that the Court of First Instance, when deciding the case, used improper legal reasoning to judge the factual situation, as it referred to the Slovak Commercial Code instead of the UN Convention on Contracts for the International Sale of goods published in the Collection of Acts as no. 160/1991 Coll.
The Court of the First Instance subsequently ordered a public hearing on 24 February 2009. The [Seller] pointed out that the Court performed extensive investigations with reference to this case and no further investigation was proposed by the [Seller]. In the end, nevertheless, the [Seller] proposed to inspect company T. S. in its warehouse in T., where the second part of the goods were unloaded, in order to ascertain whether those goods were also defective in such amount, as in case of goods inspected by the [Buyer]. No further investigation was proposed by the [Buyer]. With reference to the evidence proposed by the [Seller], the [Buyer] pointed out that the company to be inspected is a subsidiary of the [Seller] and therefore any testimony provided by its representatives can be influenced by this fact.
With reference to instructions provided by the Appellate Court, the Court of First Instance re-examined the evidence gathered …the determined the following factual and legal situation:
On 11 June 2004 the [Seller] delivered to the [Buyer] the goods -- 12 000 kg of new potatoes. When the goods were being handed over the goods, in late Friday evening, the driver and the warehouseman a detected lack of conformity of the goods -- mechanical deterioration in amount approximately 40 dkg per bag. The next working day, on Monday, the [Buyer] inspected the goods in detail and found out that the bags were wet and the process of amyloid fermentation was already initiated in the potatoes. On the same day, [Buyer]'s employee. Ing. S.S., telephoned Mrs. S, an employee of the [Seller]. He notified her of the lack of conformity of the goods and informed her that he cannot take over the goods and is going to reject the goods because he considers this defect a fundamental breach of the contract. The employee of the [Seller] proposed that the [Buyer] should wash the potatoes in its premises in order to mitigate damages. The [Buyer] accepted this proposal, but warned the [Seller] that by this procedure additional costs will be incurred by the [Buyer] and damages will be incurred which can be calculated only after distribution of the goods to shops. A meeting of the parties to the contract took place on 17 June 2004 where Ing. S.S., P.G. and the [Seller] negotiated about reimbursement of additional costs and damages to the [Buyer] caused by the lack of conformity of the goods. The [Buyer] and Ing. S.S asked the employee of the [Seller] to also inform [Seller]'s employee, Mrs. S., about these conclusions.
The [Buyer] paid for the potatoes delivered on 11 June 2004 the purchase price amounting to 103,147.20 Kc on 11 June 2004, This amount emerged from a reduction of the price by the [Buyer] for 1,252.80 Sk for 144 kg of goods referred to in invoice no. 320651.
The [Buyer] sent by telefax the calculation of damages to the [Seller] on 29 June 2004. Meanwhile, the [Seller] made another delivery to the [Buyer] on 8 June 2004 for which the [Seller] claimed its right to the purchase price in the amount of 138,700.- Kc by invoice no. 320626. The [Buyer] paid the price for this delivery partially on 11 November 2004 in the amount of 103,740. - Kc. The [Buyer] made a unilateral set-off of damages against this price amounting to 34,960. - Kc.
Under article 1(1) of the UN Convention on Contracts for the International Sale of Goods (hereinafter referred to as "Convention"), published in Collection of Acts as number 160/1991 Coll., which was ratified with reservation from article 1(1)(b) of the Convention, this Convention applies to contracts of sale of goods between parties whose places of business are in different States when the States are Contracting States.
Under article 13 of the Convention, for the purposes of this Convention "writing" includes telegram and telex.
Under article 31(3)(c) of the Convention, if the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists in other cases -- in placing the goods at the buyer's disposal at the place where the seller had his place of business at the time of the conclusion of the contract.
Under article 38(1) of the Convention, the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances. If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination. If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination.
Under article 39(1) of the Convention, the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. Under section (2) of article 39, in any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee.
Under article 50 of the Convention, if the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price.
Under article 62 of the Convention, the seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.
Under article 66 of the Convention, loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.
Under article 79(4) of the Convention, if there is an impediment to performance the party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt.
With reference to the evidence gathered, the Court determined that the claim of the [Seller] for payment of residual part of the purchase price is unjustified. The Court stresses that the notice of lack of conformity of the goods was given duly and on time. This fact was evidenced by testimony of witness -- business representative of the [Buyer] Ing. S. who noticed lack of conformity by phone call to the employee of the [Seller] Mrs. S. on the next working day after inspection of the goods, i.e., on Monday 14 June 2004. The witness precisely described the manner of notifying of the lack of conformity and expression of intent of the [Buyer] to avoid the contract and that the [Buyer] changed his mind only upon request of the employee of the [Seller] in order to mitigate damages and subsequently washed the potatoes. The witness also asked the employee of the [Seller] to permit the [Buyer] to ascertain the amount of the price reduction after resale of the goods to the shops.
This fact was not challenged by the witness Mrs. S. The witness simply stated that she did not remember these facts, as they happened a long time ago. The witness Mr. P. G. affirmed that in case of regular deliveries of goods, notice of lack of conformity can be given by a phone call. The witness also confirmed that mutual negotiations between the parties to the proceedings concerned the notified lack of conformity.
The [Buyer] also set-off claims against the [Seller] against the unpaid invoices, but the [Seller] challenged these claims and considered them unjustified, as the [Buyer] did not prove legal grounds despite being called upon for such proof. Testimony of the witnesses related to the [Seller] therefore did not oppose to the testimony of the [Buyer]'s witness Mr. S with respect to manner of notifying the lack of conformity. Calculation of damages was delivered to the [Seller] via telex on 29 June 2004. The witness Mr. S also affirmed that the goods that were delivered were stored by the [Buyer] in the warehouse in B.I. which has good climatic conditions to preserve goods. Since the Court found from testimony of the witnesses that the [Buyer] had notified of the lack of conformity duly and on time, the Court therefore determined that all requirements for application of article 50 of the Convention, i.e., for reduction of the price, are met, irrespective to the fact that the price was already paid.
The Court determined that the [Buyer] met the requirements of sections (1) and (2) of article 39 of the Convention, as it notified the [Seller] of the lack of conformity of the goods, specifying the nature of the defects, within a reasonable time after it discovered them or ought to have discovered them. The Court also refers to character of the goods -- new potatoes, which are not subject to rapid deterioration. The Court dismissed [Seller]'s proposal for evidence- investigation of the warehouse in T. of Company T.S., as this company is a subsidiary of the [Seller] and its testimony could be influenced by this fact. The Court therefore did not develop this evidence.
The Court ruled on the reimbursement of the costs of the proceedings with reference to sec. 142 part 1 CPC and granted to the [Buyer] full reimbursement of its costs, as it was successful in its defense.
Instruction: An appeal against this judgment must be filed via this Court within fifteen days from its receipt.
District Court Komarno, 24 February 2009.
Mgr. Peter Mezoszallasi, Judge
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of the Czech Republic is referred to as [Seller] and Defendant of the Slovak Republic is referred to as [Buyer]. Amounts in the currency of the European Union (Euro) are indicated as [EUR] and amounts in the currency of the Czech Republic (Czech koruna) are indicated as [Kc].
** 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