Spain 25 May 2012 Appellate Court Murcia (Red Pepper Powder Case)
[Cite as: http://cisgw3.law.pace.edu/cases/120525s4.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 267/2012
CASE HISTORY: Juzgado de Primera Instancia n. 11 de Murcia 126/08
SELLER'S COUNTRY: Spain
BUYER'S COUNTRY: Netherlands
GOODS INVOLVED: Red pepper powder
SPAIN: Murcia Provincial High Court 25 May 2012
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/142],
CLOUT abstract no. 1342
Reproduced with permission of UNCITRAL
The parties, a Spanish seller and a buyer from the Netherlands, had concluded a series of contracts for the international sale and purchase of red chilli powder. There was no dispute between the parties with regard to the application of CISG.
A number of the batches of chilli delivered — a total of five between 15 November 2004 and 18 March 2005 — turned out to contain unauthorized colourants (Sudan Red and Para Red), which, in the buyer’s view, made the goods unfit for human consumption and thus constituted a fundamental defect that amounted to a fundamental breach. The buyer therefore claimed for loss and damages caused to it by the breach (CISG arts. 25 and 35 (2)(a)).
The buyer alleged that various food regulations, both Spanish and European, had been breached. The case arose at a time when the presence of illegal colourants in chilli had produced a “food crisis” in Europe, leading to an intervention by the European Union, which issued its first warning on 14 April 2005. This prompted a subsequent policy intervention by the European Union, including the issue of an order to withdraw products containing more than a certain degree of contamination. It also turned out that there was some confusion regarding the method that could be used to analyse affected products, which had the additional result that the European authorities decision on food security had to be corrected. In view of all this, the Court considered that it could not rule on the breach of the European regulations.
With regard to four of the five batches, the Court held, on the basis of the analysis that had been conducted, that the presence of low levels of colourant was not due to any intentional policy on the part of the seller but resulted from a chance contamination of the environment or the machinery used to process the chilli, which, in turn, could have a variety of causes: the use of lubricants in the machines, the packaging used or the printing ink on the bags. The level of contamination was very low, so the seller was not obliged to withdraw and destroy its merchandise. As for the remaining batch, the Court ruled that the contamination exceeded the minimum levels permitted under European regulations. Unlike the previous batches, that batch had been made in part with pepper skins that the seller had acquired in Uzbekistan. The seller claimed that, as provided for in CISG article 79, the effect could not have been foreseen.
However, the Court considered that the criteria for determining unforseeability had not been met, particularly since the company operated in a sector in which safety concerns had to be paramount. The presence of contaminating colourants was not unusual in the food sector. Moreover, the fact that the health authorities had not issued warnings was not conclusive, particularly since the product concerned was from Uzbekistan — the first time that it had been bought from that country — and the pepper skins had been added in the interests of improving safety, which already indicated some lack of confidence in the product, particularly since other illegal colourants had been detected in another batch.
With regard to the breach of CISG articles 38, 39 and 77, the Court considered that, since the defect in the chilli was not obvious and no problem had previously arisen with the goods, it could not rule that the time limits for these articles had been breached.
Turning to the question of damages for the contaminated chilli powder, the Court considered various aspects of the case that supported the rulings of the lower court judge. Among the various aspects considered — the remaining stocks of the finished product, the cost of destroying the contaminated product, the leftover packaging, the cost of storing the product, the expenditure on containers and pallets, the hiring of additional transport, the adverse impact on the work management cycle and the costs of laboratory tests — attention may be drawn to the question of the difference between the contract price and the substitute transaction price (CISG art. 75). The buyer had had to buy replacement goods and was claiming the difference. However, the court dismissed the claim, on the grounds that, since the case did not concern the avoidance of the contract, the substitute transaction was not relevant.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:
25B [Definition: Substantial deprivation of expectation, etc.]; 35A ; 35B ; 35B1 [Quality, quantity and description required by contract (art. 35(1)) ; Requirements implied by law (art. 35(2) ; Fitness for purposes for goods of same description (art. 35(2)(a)))]; 38A [Buyer's obligation to examine goods]; 39A ; 39A1 [Buyer must notify seller within reasonable time (art. 39(1)) ; Specification of nature of non-conformity]; 77A [Obligation to take reasonable measures to mitigate damages]; 79B ; 79B11 [Impediments excusing party ; Impediment beyond party's control]
25B [Definition: Substantial deprivation of expectation, etc.];
35A ; 35B ; 35B1 [Quality, quantity and description required by contract (art. 35(1)) ; Requirements implied by law (art. 35(2) ; Fitness for purposes for goods of same description (art. 35(2)(a)))];
38A [Buyer's obligation to examine goods];
39A ; 39A1 [Buyer must notify seller within reasonable time (art. 39(1)) ; Specification of nature of non-conformity];
77A [Obligation to take reasonable measures to mitigate damages];
79B ; 79B11 [Impediments excusing party ; Impediment beyond party's control]
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language (Spanish): CISG-Spanish website <http://www.cisgspanish.com/wp-content/uploads/2013/07/murcia25mayo2012.pdf>
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents