Slovenia 13 September 2011 Vrhovno sodišče [Supreme Court]
[Cite as: http://cisgw3.law.pace.edu/cases/110913sv.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: III Ips 90/2008
CASE HISTORY: Višje sodišče v Ljubljani (High Court of Ljubljana) [VSL sodba I Cpg 1100/2005]
SELLER'S COUNTRY: Unavailable
BUYER'S COUNTRY: Unavailable
GOODS INVOLVED: Water and Oil pumps
SLOVENIA: Vrhovno sodišče [Supreme Court] 13 September 2011
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/118],
CLOUT abstract no. 1148
Reproduced with permission of UNCITRAL
The parties (both with places of business in CISG contracting states) entered into a contract for sale of water and oil pumps. Regarding the payment, they agreed that the buyer (plaintiff) was to open irrevocable letters of credit (L/Cs) to ensure payment for the pumps. After the buyer opened the L/Cs, the seller protested stating that they had not been filled out correctly. The seller then refused to deliver the goods unless they were paid for in advance. The buyer asked the seller to provide the text of the conditions for the L/Cs, which the seller failed to do. The buyer then purchased equivalent goods elsewhere and brought a claim against the seller for payment of the difference between the substitute transaction price and the contract price.
The court of first instance ruled for the buyer applying the CISG and awarding the damages sought. The seller appealed, claiming that the contract had not been avoided and that the awarded damages were inappropriate.
The appellate court dealt first with the question of whether the contract had been amended in a way that required the buyer to pay the price for the goods in advance. It examined the formation of the contract and stated that, under article 19(3) CISG, additional or different terms relating to the payment are considered to materially alter the terms of the offer. Consequently, it ruled that in situations where the contract has already been concluded such amended payment terms would fundamentally change the contract conditions and that consent of the parties is, therefore, required for such amendments to be valid. Because the buyer did not agree to the changes to the terms of payment and insisted on the seller’s performance according to the (original) contract, the court found that the contract had not been validly amended. According to the court, the seller was relying on a mode of payment that had not been agreed upon in the contract.
The court further found that, even if the letters of credit were to be considered as not in conformity with the contract, the seller cannot rely on this fact. Namely, under article 80 CISG, a party may not rely on a failure of the other party to perform when the failure was caused by the first party’s act or omission. The seller should have, if it felt that the letters of credit did not conform to the contract, sent the buyer the relevant information required to open new letters of credit. Therefore, the court found that the seller was unable to rely on the buyer’s failure to properly fulfil its obligations regarding the letters of credit because the seller had caused that failure.
Regarding the seller’s claim that the contract had not been avoided, the court found that, when the seller does not perform his obligations in the additional period of time allowed for under article 47 or when the seller remedies the failure to perform his obligations after the date of delivery under article 48, the buyer retains a right to claim damages regardless of whether the contract has been avoided. Here, because the buyer had fixed an additional period of time for delivery of the goods and because the seller had failed to perform its obligation, the court ruled that the buyer was entitled to recovery of damages that it had suffered due to the seller’s breach of contract.
Based on all these circumstances, the appellate court confirmed the decision of the court of first instance. Thereupon, the seller filed a request for revision of the decision claiming incorrect application of law.
The Supreme Court granted the request and found that the appellate court had indeed misapplied the CISG. It stated that a claim for recovery of the difference between the contract price and the price in the substitute transaction can only be recovered when the contract has been avoided and that, under article 26 CISG, an avoidance is effective only if made by notice to the other party. Because it was not evident whether a notice had actually been given by one of the parties, the Supreme Court overturned the decisions of the appellate court and the court of first instance and remanded the case for retrial.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:
19C [Modifications that are material]; 26 [Notification of Avoidance]; 47 [Notice Fixing Additional Final Period for Performance]; 48 [Cure by Seller after Date for Delivery]; 75 [Avoidance: Damages Established by Substitute Transaction]; 80 [Failure of Performance Caused by Other Party]
19C [Modifications that are material];
26 [Notification of Avoidance];
47 [Notice Fixing Additional Final Period for Performance];
48 [Cure by Seller after Date for Delivery];
75 [Avoidance: Damages Established by Substitute Transaction];
80 [Failure of Performance Caused by Other Party]
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language (Slovene): Slovenian court website <http://www.sodisce.si/znanje/sodna_praksa/vrhovno_sodisce_rs/2010040815258125/>
Translation (English): Unavailable
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents