Russia 15 October 2009 Supreme Arbitration Court (or Presidium of Supreme Arbitration Court) of the Russian Federation
[Cite as: http://cisgw3.law.pace.edu/cases/091015r1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: VAS-11307/09
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Austrian
BUYER'S COUNTRY: Russia
GOODS INVOLVED: Technical Equipment
RUSSIAN FEDERATION: Judicial Division of the Supreme Arbitration Court of the Russian Federation (VAS)
Case No. VAS-11307/09 of 15 October 2009
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/113],
CLOUT abstract no. 1110
Reproduced with permission of UNCITRAL
A Russian buyer claimed compensation from an Austrian seller for avoidance of a contract for international sale of goods (technical equipment) and compensation for the cost of equipment, assembly, commissioning, training and materials.
The parties had concluded a contract stating that the seller took responsibility for the delivery of the goods and the provision of technical documentation, while the buyer undertook to pay for the supplied goods. The buyer paid for the goods in full.
In the buyer's opinion, the seller had breached the contract, in particular by not providing the technical documentation and failing to begin assembly of the supplied goods within the time period stated in the contract. The Austrian company submitted a counterclaim seeking to have the parts of the contract related to contract work for assembly and adjustment of the equipment declared not concluded, and seeking penalties and damages on the grounds that the buyer had not paid for the supplied goods on time.
The court upheld the claims for compensation in full and rejected the counterclaim, on the grounds that the plaintiff's claim was justified and that there was no justification for applying contractual penalties in respect of the counterclaim or for granting compensation because no proof had been submitted. The court of appeal overturned the decision relating to dismissal of the claim and rejected that claim, but upheld the rest of the decision. The court of cassation overturned the decision of the court of appeal and upheld the decision by the court of first instance.
The Austrian company, claiming incorrect application of CISG by the courts, submitted a complaint to the Supreme Arbitration Court of the Russian Federation, which upheld the decisions of the court of first instance and the court of cassation on the following grounds.
The seller's main obligation was to supply goods (articles 1 and 3 CISG). Its obligations relating to the assembly of the equipment were not fundamental. It was not possible to separate off the part of the contract relating to the provision of labour (all the terms were included in a single contract, a single payment was made, the cost of the labour was approximately 1 per cent of the total, and the work had to be done by the seller itself). In the light of the above, CISG should be applied to the entire business relationship between the parties relating to the disputed contract, including the assembly of the equipment.
The seller's failure to observe the conditions relating to assembly of the equipment constituted a fundamental breach of the contract, as provided for in article 25 CISG and the terms of the contract. The buyer could not bring in another contractor to assemble the equipment, since under the contract the guarantees for the equipment would only apply if it was assembled by the seller. During the guarantee period, the seller took responsibility for the quality of the supplied equipment (necessary preparations, assembly, construction and working conditions) and was obliged to remedy any shortcomings by repairing defective parts or replacing them with new ones at its own expense, which included assembly, dismantling, freight charges and staff transport costs. The seller's argument, justifying its failure to assemble the equipment by the buyer's failure to carry out preparatory work for the assembly process, was considered unfounded by the court, since the contract did not place any obligation on the buyer to create in advance the technical conditions which would be needed for the installation of the equipment, but did state that the seller was obliged to begin assembly of the equipment no later than 14 days after it had received notification in writing from the buyer that all the equipment had arrived at the buyer's warehouse.
The court also agreed that the seller had breached article 34 CISG by not proving the receipt by the buyer of authentic technical documentation, registration documents and certificates for the equipment.
In a letter dated 1 July 2008, the seller notified the buyer that it considered its contractual obligations relating to the delivery of the equipment and the technical documentation to have been discharged in full and considered that the signing of the final acceptance certificate had been delayed for reasons which were beyond the seller's control, and that the guarantee period for the goods had accordingly expired. On 7 July 2008, the buyer, in view of the seller's refusal to assemble the equipment, notified the seller of its avoidance of the contract. The court, basing its decision on article 49 CISG, agreed that the buyer had not exceeded a reasonable period for the submission of a claim of avoidance of the contract, since it had sent its reply to the seller six days after receiving a letter from the seller, which was the point at which the fundamental breach of the contract had taken place.
The counterclaim by the seller, that the part of the contract relating to the assembly of the equipment should be declared not concluded because of the failure to specify the start and finish dates for assembly of the equipment, was declared unfounded. According to the provisions of CISG (article 33) the seller should have fulfilled its obligations either on the date fixed by the contract, or within the period of time fixed by the contract, or within a reasonable time. Moreover, the contract stated that the seller must begin assembly of the equipment no later than 14 days from receipt of the written notification from the buyer that all the equipment was present in the buyer's warehouse. When the equipment was assembled and found to be in working order, the parties were obliged to sign the assembly completion certificate.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
3 ["Goods"]; 25A [Effect of a fundamental breach]; 34A [Seller's obligation to hand over documents]
25A [Effect of a fundamental breach];
34A [Seller's obligation to hand over documents]
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language (Russian): online database of court judgements <http://kad.arbitr.ru>
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents