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CISG CASE PRESENTATION

Spain 24 March 2009 Appellate Court Barcelona (Cuttlefish case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/090324s4.html]

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

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Case identification

DATE OF DECISION: 20090324 (24 March 2009)

JURISDICTION: Spain

TRIBUNAL: Audiencia Provincial de Barcelona, sección 13ª

JUDGE(S): Don Joan Baulista Cremades Morant

CASE NUMBER/DOCKET NUMBER: Recurso de Apelación No. 403/2008

CASE NAME: Unavailable

CASE HISTORY: 1st instance Juzgado de Primera Instancia No. 35 de Barcwelona 29 January 2009

SELLER'S COUNTRY: Pakistan (plaintiff)

BUYER'S COUNTRY: Spain (defendant)

GOODS INVOLVED: Cuttlefish


UNCITRAL case abstract

SPAIN: Barcelona Provincial High Court (Cuttlefish case) 24 March 2009

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/105],
CLOUT abstract no. 1037

Reproduced with permission of UNCITRAL

Abstract prepared by María del Pilar Perales Viscasillas

The Spanish buyer and the Pakistani seller, which had concluded a contract for the sale and purchase of 1,920 boxes of frozen cuttlefish having a net weight of 12.920 kg were in dispute over the quality of part of the merchandise: part of the product (5.589 kg) had been declared unfit and destroyed by order of the health authorities, while the rest had been inferior in quality to that contracted for and the quantity was also smaller, at 12.740 kg.

This was a cost and risk sale (or cost and freight, or with a cost-and-freight clause), with a bill of lading effected through a bank credit; the parties did not question the application of CISG. Quality and accuracy of description were also covered by Pakistani health certificates, which had not been contested by the port health authority of the port of destination, Barcelona, where health checks had been carried out on the goods.

The Court held, on the basis of articles 25, 30, 31, 34, 35, 37, 38, 39, 48 and 50 of CISG, that the seller had complied with all its obligations under the sale contract: it had delivered the goods, with customs documentation -- an export permit -- and health certificates, as well as a quality certificate (in line with the regulations and practices of the port of embarkation), it had arranged transport and it had carried the goods on board the vessel in the port of embarkation in a symbolic transfer of title. It had thus delivered the goods, handed over documents relating to them and transferred the property in the goods (CISG, arts. 30, 31 and 34) and ensured that the goods were of the quantity, quality and description required by the contract and packaged in the manner required (CISG, art. 35).

The seller had not provided sufficient evidence of the non-conformity of the goods prior to the risk transfer. That was without prejudice to any action that the seller might take against the carrier.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 31 ; 36 [Also cited: Articles 25 ; 30 ; 34 ; 35 ; 37 ; 38 ; 39 ; 48 ; 50 ]

Classification of issues using UNCITRAL classification code numbers:

31A [Place for delivery: contracts involving carriage of goods];

36A [Time for assessing conformity of goods: conformity determined as of time when risk passes to buyer]

Descriptors: Delivery ; Passage of risk ; Incoterms

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Spanish: CISG-Spain and Latin America website <http://turan.uc3m.es/cisg/respan78.htm>

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spain and Latin America website <http://turan.uc3m.es/cisg/sespan78.htm>; see also Fuente: Aranzadi Westlaw

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

Audiencia Provincial de Barcelona
People Fisheries (Pvt) Ltd v. Pescados Videla SA

24 March 2009

Translation [*] by Guillermo Coronado Aguilar [**]

In the City of Barcelona, twenty-four March two thousand and nine:

Awaiting Sentence, in the appeal lodged before the Thirteenth Section of this Provincial Audience, the present records of the case of ordinary Process, number 622/2007 held by First Instance Judge number 35 Barcelona, by instance of People Fisheries (Pvt) Ltd. [of Pakistan) (hereinafter "[Seller]") v. Pescados Videla S.A. [of Spain] (hereinafter "[Buyer]"] which are pending before this Court by virtue of the appeal lodged by [Seller] against the Sentence pronounced by the Court of First Instance on 29 January 2008.

FINDINGS

FIRST.- The appealed Sentence:

[Buyer] was directed to pay to [Seller] the sum of US $18,119 or €13,129.71, with interest in arrears from 1 June 2006 at the rate of 5.07%, without any special pronouncement on the court costs.

SECOND.- [Seller] lodge an appeal bringing the proceedings to this Audiencia Provincial.

[...]

LEGAL GROUNDS

FIRST.- The object of the [Seller]'s appeal is a Court ruling that [Buyer] shall instead pay [Seller] the sum of US $37,161.00 (€27,524.06) plus interest in arrears from 28 July 2006. [Seller] alleges that this is for the sale price + interest for 1,920 boxes of frozen cuttlefish of a total weight of 12,920 kg, for which quality and correction exist as reflected in the Pakistan phyto-sanitary certificate, and not objected to at the final destination port, Barcelona (border checkpoint) at which the Sanitary Control of the goods was made.

[Buyer] objects to the [Seller]'s claim, alleging that there was a partial breach of the contract by [Seller]. It is [Buyer]'s position that there was a non-conformity of the goods which were partially destroyed by order of the Sanitary Authorities (5,589 kg), the rest of the goods were of lower quality to the contract. [Buyer alleges the reception of goods of lower quantity than established in the invoice, by receiving 12,740 kg, and for this reason alleges that [Seller] is entitled to payment of US $19,042, of which only US $18,119 (€13,129.71) need be paid, this being the sum that is in the deposits and consignments account, considering the CISG applicable. The Court order of 7 November 2007 settled for this partial acceptance of the [Seller]'s claim, ruling that [Seller] was only entitled to receive the sum of €13,129.21 with interest on that amount.

The Sentence of the Court of First Instance (which considers the CISG applicable) awarded [Seller] that amount -- an amount that was less than [Seller] claimed -- by virtue of [Seller]'s breach of contract which gave [Buyer] the right to a price reduction with respect to the goods that did not conform to the contract either in quality or quantity, directing [Buyer] to pay [Seller] the sum of US $18,119 (€13,129.71) plus interest -- at the rate of 5.07% -- from 1 June 2006, without declaration of court costs.

Against this, [Seller] lodged an appeal. The [Seller]'s position is that it sold the cuttlefish on CFR terms whereby, when the goods pass the ship's rail at the port of shipment, the risk is upon the [Buyer], and that [Buyer] has not proved that there was any defect of the goods at a prior time. On the contrary, [Seller] has proved that the goods were in perfect condition at the time of the ship's loading (See the sanitary certificate of the Pakistan Government, quality certificate, microbiological analysis -- all, official documents û and the examination of the goods by Spanish authorities at the time the goods were withdrawn at the port).

SECOND.- A new and definitive review establishes:

1)    The reality of the commercial relations between [Seller] and [Buyer], the supply of sepia and calamari (cuttlefish).
 
2)    In this context, and in a previous contract, [Seller] sent to [Buyer] a container MAEU570835O, with 19,362kg of sepia fish (bill of lading, and the corresponding invoice), which was received on 20 January 2006, being analyzed by the quality department, which rendered the corresponding veterinarian information, thus demonstrate that the product caused a great diminishment in order to proceed to its defrost, showing that the organoleptic qualities of the cuttlefish (qualities of the product which can be perceive by the senses) were faulty; this was communicated to the [Seller] by e-mail as well as by the pictures of the product, [Seller] being contacted for a solution to the problem. [Seller] solicited the [Buyer]'s acceptance of an examination of all of the cuttlefish sent. After its elaboration, [Buyer] forwarded the corresponding information offering to [Seller] the possibility of examination of the goods at the [Buyer]'s plant, as well. [Buyer] proceeded to value the goods which it was not able to use at US $12,732; the product was subject to [Seller]'s examination by its representatives, to verify the [Buyer]'s exposition. Thus [Buyer] sought to have [Seller] reimburse the said sum of US $12,732.
 
3)    The existence of a subsequent sales contract, adduced in support of the claim, of 12,920kg frozen sepia fish of different calibers, origin Pakistan and destination EEC (commercial invoice and content list) which was packed in closed boxes of 10kg each by means of documental credit equal to the claimed price (in relation with fact number 5 of the [Buyer]'s argument, on which conditions of conformity were in relation of the conformance of the product received), must being paid after 80 days of the bill of lading 28 July 2006; the sales condition supposed to apply CFR (Cost and Freight) Barcelona ([Seller] must pay the cost and freight necessary to deliver the goods in the port of destination, Barcelona). The first consequences of this is that the obligation of delivery is satisfied "when the goods pass the ship's rail at the port of shipment", in the way that, if [Seller] assumes the cost and freight of the port of destination, the risks are assumed by [Buyer] from the said moment.
 
4)    Through [Buyer]'s instructions, 100 boxes of class B cuttlefish were loaded in the container (pursuant to a first communication from the [Buyer]), and 121 boxes (pursuant to a second communication from the [Buyer]) and by piece or commercial sample at the bottom of the container, which must not have been mentioned in the documentation (if yes, only, the class A product), in order of [Buyer]'s instruction, that at the time of unloading was delivered directly to [Buyer].
 
5)    The goods were subject to analysis at [Seller]'s laboratories: microbiological reports (contested by [Buyer], due to the fact that they were unilateral); the correspondent sanitary bill was rendered on 9 May 2006, by the Pakistani Government's Maritime Fishing Bureau, after the said examination and putting the cuttlefish to organoleptic, parasitological, chemistry and microbiological tests (contributed in the previous audience, also contested, due to not accreditation of the goods fit for the particular purpose) and the quality and origin certificate in the sense that the consignment was correct and suitable for human consumption (also contested as improper; in accordance with the said certificate, which value is relative due to the fact that it "does not absolves the exporter's responsibility for the total quality, quantity and any other delivery defect").
 
6)    With the above certificate, the goods were loaded in the container MWCU6594395, and delivered by the ship owner MAERSK LINE, from Karachi to Barcelona (bill of lading, 9 May 2006). The container arrived at Barcelona on 30 May 2006. It was retrieved on 1 June 2006, and was loaded at the refrigeration facilities contracted by [Buyer] UNIDADES FRIGORIFICAS SA. Upon arrival at Barcelona, on 1 June 2006, the goods passed through the Official Sanitarian Control by the Consumers and Health Department, indicating that the goods passed the documental controls, of identity, physic, with organoleptic test approved in the stall 32 as "suitable for human consumption".
 
7)    Two boxes of each lot were sent to the [Buyer]'s quality department, which reported a lack of quality and defective condition, materialized in the existence of yellow goods, irregular glaze, strong and unpleasant acid smell, many pieces with ice burns or chemical treatment, soft texture in small pieces which, at the touch, broke.
 
8)    Eight days later (9 June 2006), [Buyer] sent an e-mail to [Seller] informing of the above situation, with a further report of the results sent on 13 June 2006.
 
9)    From this date (13 June 2006) on, there were intense communications via telephone and e-mail, making notice of the lack of conformity (including an e-mail of 15 June 2006 with pictures attached, and another on 16 June 2006 asking for an answer).
 
10)    [Buyer] considers that: a) it can commercialize 50% of the shipment; b) but not as premium goods, resulting in a lower price and for sales to residual commercial channels or purchasers who can accept this kind of product.
 
11)    On 19 June 2006, [Seller] answered showing surprise at the pictures, and being interested in a solution, reiterated on 21 June 2006, even thought it did not give an immediate answer due to the fact that Mr. Domingo ([Buyer]'s CEO) was on a journey.
 
12)    On 17 July 2006, the product was dispatched from the UNIDADES FRIGORIFICAS SAs refrigerator (not being on the records of the case the treatment to the goods) to MANUFACTURACION SERVICIOS SLs facilities, an entity that processed and packaged goods for [Buyer].
 
13)    From the referred date on, [Buyer] proceeded to diverse analyses: a) examination of the goods for their organoleptic characteristics, resulting a lower quality; b) template of semi-preserve in which appears the destruction of 5,589kg; c) examination of the final product that shows the destruction of 5,589kg and the destination of the rest of the goods as lower quality, not as semi-preserve, but for frozen product.
 
14)    On 21 July 2006, [Buyer], communicated via e-mail to [Seller], showing the magnitude of the damages (lower quantity, destruction of Class "B" sepia fish and the sale of the rest as a lower quality product), about 50% of the goods.
 
15)    On 24 July 2006, [Seller] communicated to [Buyer], rejecting the proposal that [Buyer] pay only the 50%, and announcing that it will go to Spain, so the goods must not be sold, and if it is appropriate, it will make a reimbursement; however, it is not shown in the records of the case that any [Seller]'s representative went to examine the goods.
 
16)    Simultaneously, it is shown that the Catalan Health Department, seized 5,589kg of the goods without establishing the quality A or B, which was communicated on 9 August 2006.
 
17)    The payment date having arrived, the [Seller]'s bank solicited [Buyer]'s bank to proceed with the payment instructions. [Buyer]'s bank refused to pay, advising that [Buyer] did not want to pay, according to [Buyer], part of the goods were in bad condition, specifically "the quality B goods had to be destroyed -- about 50% -- due to its unfitness for human consumption", and the existence of differences "between the goods listed on the invoice and those handed over" and "proposing more than the 50% of discount (US $19,042) of the price of the goods to proceed for payment." After this, there was a series of communications between the parties without reaching any settlement.

THIRD.- This is a dispute involving goods sold on CFR terms, with bill of lading, and "documentary credit", with neither party questioning the application of the CISG.

We draw the following conclusions.

a) In a CFR sale, the price includes the price of the goods and the freight, with the [Buyer] assuming those payments and, the [Seller] being obligated to deliver at the port of shipment, by placing the goods on board, from which moment, the risk passes to [Buyer]. "From that moment" the [Buyer] is the "owner" (the effective passing is produced in conjunction between the loading of the goods and the possession of the bill of lading, as a title representing the goods); that is to say, the goods travel at [Buyer]'s risk, the loss or damage of the goods being on [Buyer]'s account, from the time they pass the ship's rail (Art. 36 CISG).

b) In a Carriage of goods transaction documented by a bill of lading, this document (1) functions as a receipt to prove the delivery of the goods by a maritime carrier and the shipment of the goods, (2) incorporates the carrier's right to claim for the delivery of the goods (credit instrument latu sensu) to the port of destination, (3) is representative of the goods possession, and (4) unquestionably documents the formation of the contract.

c) Furthermore, it is instrumental in a "credit transaction", which assumes that the Bank will implement the [Seller]'s trust that [Seller] will received payment and thus will send the goods; the Bank receives the representative titles, has to prove the formal regularity, and send the titles to the [Buyer].

d) Relevant provisions of the CISG include:

      Article 25. The CISG regards a breach of the contract as fundamental when "it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee ... such a result", understanding that, "a reasonable person of the same kind in the same circumstances would not have foreseen such a result."

      Article 38. Furthermore, the [Buyer] must "examine the goods or caused them to be examined, within as short period as is practicable in the circumstances", there not being in the records of the case any agreement on such examination at the moment of the delivery of the goods at the destination port.

      Article 39. The [Buyer] loses the "right to rely on a lack of conformity of the goods" and the right to any remedy under the CISG. including the possibility of price reduction, if it does not give notice to [Seller], specifying the "nature" (the specific nature of the defects, transmitting the results of the examination and identifying the damaged goods, with every "lack of conformity" requiring notice, so that [Seller] can take proper measures to remedy the defect). This notice must be provided within a reasonable time from the moment the [Buyer] knew or ought to have known of the defect (that which is reasonable can depend on the type of goods and previous transactions). Thus [Buyer] has the obligation to give notice to the [Seller] of a lack of conformity (Art. 35) if alleged; logically the notice must be communicated in a reliable manner (in the sense that, in any event, the [Seller] must be able to receive the notice, which can be sent by any means). The notice must be given to the [Seller] (not to an intermediary or third party), and that has to be demonstrated by [Buyer].

e) Article 50. In order to be entitled to a "price reduction" for the delivery of non-conforming goods, Article 50 of the Convention imposes a series of preconditions. It must be established that:

      1) The goods do not conform to the contract (following Art. 35: defects on quantity -- including weight -- quality, description ("aliud"), packing, or even documents);

      2) The [Buyer] give notice of the lack of conformity (Art. 39);

      3) The [Seller] did not remedy (or offer to remedy) the defect, before or after the time of delivery (Arts. 37 and 48);

Unless otherwise agreed, the price can be reduced in accordance with the CISG (Article 50 talks in terms of a reduction of "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 ...").

FOURTH.- We agree with the Lower Court as the issues identified (when the goods where damaged and who incurs the risk of loss), but not with its legal finding.

      In principle, [Seller] executed all of its obligations by delivering the goods, with the border control documents (exportation permit) and sanitary bill, plus the quality certificate (conforming with the destination port's regulations and port's use), contracting the carriage, and loading the goods at the port of departure.

      That is to say, [Seller] "delivered the goods, transmitted the property, handed over the documents" (Arts. 30, 31 and 34 CISG), and delivered the quantity, quality and description, packaged in the manner required by the contract (Art. 35 CISG).

We cannot see what else [Seller] was required to do.

a) The goods were examined by [Seller]'s laboratories: microbiological reports were provided from March-May 2006 (contested by [Buyer], due to having been unilateral, but not being the sanitary certificate and quality certificate, and definitely the microbiological correction is not contested, but only its organoleptic features. And the same unilateral character has been realized by [Buyer]).

b) The corresponding sanitary certificate was obtained on 9 May 2006, after the corresponding inspection (rightfully contested due to not proving the condition and conformity of the goods, when noting the reality of the organoleptic, parasitological, chemical and microbiological official examinations)

c) Origin and quality of 4 May 2006 (also contested, above all because according to the said certificate "does not exonerate the exporter of the total quality, quantity and any other defect of delivery", but at the same it is an official document). All that, in relation with the certifications made by the Fishing Department of Pakistan, proportionate to the records of the case)

d) [Seller] contracted carriage, and uploaded the goods at the port of departure.

e) The e-mail of Maersk, does not serve as an immediate communication, after the delivery of the goods, but, in any event, it was delivered without any reservation and the empty container was turned back, the day after, also without reservation

f) At the Inspection Port, no objection was made to the entry of the abovementioned goods, and the corresponding certificate was only presented by [Buyer] at [Seller]'s instance, on which the said information notes the controls of the sanitarian inspector, who has not been called as a witness by [Buyer]. There does not exist any proof that the documentation was the only thing effectively examined at the Inspection Port due to "not having more time for something else".

g) Furthermore, the CIF sales contract was instrumented in a "documentary credit", presupposing that the Bank would receive the titles representative of the goods, ascertain the formal regularity and refer them to [Buyer]. [Translator's note: Although the text refers to a "CIF sales contract", as the court was dealing with a "CFR sales contract", it is believed that the court meant to refer here to a "CFR sales contract".]

[Buyer] caused the goods to be examined by experts in their field from the Universidad Autnoma de Barcelona. The examinations were supported by the pictures taken by the [Buyer], with respect to which it is argued that the goods did not satisfy the quality requirement, in a case in which [Seller]'s quality department alleges that the goods were of the "correct quality". However, this Court concludes that [Buyer] did not prove that the goods where not fit at the moment they passed the ship's rail at the departure port, presenting instead data on the microbiological and organoleptic aptitude of the goods

FIFTH.- It is beyond doubt that:

      (1) The greater part of the goods (5,589kg), were regarded as unsatisfactory by the Spanish Sanitarian Authorities, but this was several days after the goods were delivered;

      (2) It is affirmed that less kgs were received than set forth in the invoice, but several boxes were sent, that, by instance of [Buyer] were not mention in the documents; and that

      (3) The rest of the goods could not be sold as a Prime quality product (which is not in the records of the case), 7,332kg being commercialized, but this neither destroys the presumption of quantity and quality when upload at the destination port, nor does it support a "breach" of contract by the [Seller].

Also not supported is what happened until the time of the seizure of the goods by the Spanish authorities. And it is not contested that the goods could have suffered damages in transit, and there is only a generic notice, at least eight days, in UNIFRISA; but this is independent of what is said here, that is to say, a debate over the obligations of the carrier (custody with the proper diligence attending the nature of the goods, carriage under the designed schedule and in the established period of time, delivery to addressee without any delay and in the same condition as the goods were received), independent of the legal claims [Buyer] may have against the carrier, as owner, to claim the proper compensation for damages.

Nevertheless, if everything was correct after delivery on 1 June 2006, it has not being excluded -- via the proper proof -- that the anomalies may have been produced in the subsequent refrigeration deposit. Thus, this Court accepts entirely the appeal lodged by [Seller], directing [Buyer] to pay the entire sales price claimed, with interest in arrears of 5.07% from 28 July 2006 and expressly assigning the first instance court cost to [Buyer].

HOLDING

This Court accepts the appeal lodged by [Seller] against the First Instance Sentence. We overrule partially that Sentence and, instead, accept the [Seller]'s claim in its entirety. This Court directs [Buyer] to pay [Seller], the sum of US $37,161 (€27,524.06) plus interest in arrears of 5.07% from 28 July 2006, and expressly imposes the First Instance court costs upon [Buyer], without declaring the court costs of the present appeal.

Being final, the present sentence not subject to appeal, we return the main files to the Court of First Instance. Thus we rendered the decision, we mandate and sign it.

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellant of Pakistan is referred to as [Seller] and Defendant-Appellee of Spain is referred to as [Buyer]

** Guillermo Coronado Aguilar was a participant in the 15th annual Willem C. Vis International Commercial Arbitration Moot representing Universidad Panamericana, campus Guadalajara. He is now correspondent of the Global Sales Law project directed by Ingeborg Schwenzer and adaptor from English to Spanish of articles of the book "Commentary on the UN Convention on the International Sale of Goods", directed by Ingeborg Schwenzer and Edgardo Muñoz. He is Legal Advisor for the law firm Coronado Figueros y Associados, S.C.

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