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CISG CASE PRESENTATION

Spain 9 July 2013 Appellate Court Cantabria [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/130709s4.html]

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

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Case identification

DATE OF DECISION: 20130709 (9 July 2013)

JURISDICTION: Spain

TRIBUNAL: Audiencia Provincial de Cantabria, Sección 2

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 400/2013 [JUR/2013/352743]

CASE NAME: Unavailable

CASE HISTORY: 1st instance Juzgado no. 8 de Santander 26 November 2010

SELLER'S COUNTRY: Spain

BUYER'S COUNTRY: Dubai

GOODS INVOLVED: Steel Cable


UNCITRAL case abstract

SPAIN: Cantabria Provincial High Court 9 July 2013

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/142],
CLOUT abstract no. 1340

Reproduced with permission of UNCITRAL

Abstract prepared by María del Pilar Perales Viscasillas, National Correspondent

A Spanish seller and a buyer from Dubai were in contention over the execution of a cost, insurance and freight (CIF) sales contract for steel cable from Dubai at a total value of US$ 1,860,000 (US$ 930,000 each). The court of first instance ruled that the contract had not been executed and that there had therefore been no breach. An appeal against the decision was lodged by the buyer before the Provincial High Court.

The Court heard that, on 31 January 2008, the buyer issued two purchase orders and that both orders were received by the seller, whose representative signed them in accordance with CISG articles 18 and 23. The form of payment for each of the orders was to be by open credit telegraphic transfer (TT) 90 days from bill of lading (B/L) date or letter of credit (L/C) at 90 days from bill of lading.

The day after the purchase orders were received, the seller sent two pro forma invoices, although it had been established that payment should be “by confirmed and irrevocable L/C at 90 days B/L date”. The court of first instance held that the contract that had been put into effect by the purchase orders could not be amended and that the subsequent pro forma invoices could thus not have contractual effectiveness: that is, they could not vary what was initially agreed when the initial offer was accepted.

The Provincial High Court disagreed. It considered that a letter from the seller’s representative of 13 February 2008 amounted to novation, when it informed the buyer that: “You currently have a credit of US$ 600,000, the order has already been processed, so you should receive the goods shortly. This credit does not cover everything, but a letter of credit or a letter of agreement from VSL int. [the buyer] may do.” The Court therefore held that the conditions of the documentary credit had been changed, since that was what was implied by the use of the phrase “may do” in the e-mail and the provision of CISG article 29 that “a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct. That was what had happened in this case, when, on 26 February 2008, the buyer had obtained an irrevocable and unconditional guarantee from a bank in Switzerland in favour of the seller in order to pay the first instalment of a sum not exceeding US$ 930,000.

Having established that the sales contract had been executed, the Court considered that the buyer had not complied with its obligation to pay the price under the conditions laid down in the contract and in the Convention (CISG arts. 53 and 54), which were, according to the e-mail of 13 February 2008, that “a letter of credit or a letter of agreement from VSL int.” should be obtained, which should, on the face of it, guarantee the whole of the agreed price of US$ 1,860,000. However, the buyer had done no more than obtain a guarantee from a Swiss bank, which only partially met the requirement of the “letter of agreement from VSL int.” requested by the buyer, since it did not cover the whole of the price — US$ 1,860,000 — but only half that amount, US$ 930,000.

This failure to guarantee the price constituted a fundamental breach of the contract by the buyer, which meant that it could not invoke any breach of the seller’s own obligations, in accordance with CISG article 80, which stated that “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.”

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 18 ; 23 ; 29 ; 53 ; 54 ; 80

Classification of issues using UNCITRAL classification code numbers:

18A [Criteria for acceptance];

18A2 [Other conduct indicating assent];

23 [Contract concluded when acceptance becomes effective];

29 [Parties by agreement may modify or terminate the contract]

80A [Party causing non-performance: loss of rights]

Descriptors: Acceptance of offer; Formation of Contract; Letters of Credit

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spanish website <http://www.cisgspanish.com/wp-content/uploads/2013/12/SAP-Cantabria-9-julio-2013.pdf>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

The CISG Translation Network

Provincial Audience of Cantabria (Section 2)
9 July 2013 [400/2013]
JUR/2013/352743

Translation [*] by Weldon Black

Translation edited by Pilar Perales Viscasillas

COMMERCIAL SALE: AVOIDANCE: DENIAL OF A MOTION: international contract conclusion through the acceptance signatures of the purchase orders: fundamental breach of contract by the purchasing company plaintiff for lack of price insurance.

Jurisdiction: Civil

Appeal: 416/2011

[...]

In the city of Santander on July 9th, 2013.

Seen in this appeal proceedings before the Second Section of the Hon. Provincial Audience of Cantabria the present proceedings of the Trial number 1499/2009, (Chamber’s records number 416 of 2011), from the Court of First Instance number Eight of Santander, by petition of VSL MIDDLE EAST LLC versus TRENZAS Y CABLES DE ACERO PSC S.L.

In the second instance VSL MIDDLE EAST LLCD. has been the appellant, represented by the attorney Mrs. De Llanos Benavent and assisted by the attorney Mr. Learrata Olarra; and defendant party TRENZAS Y CABLES DE ACERO PSC SL, represented by the attorney Mrs. Moreno Rodriguez and assisted by the attorney Barrera Llorca.

Is speaker of this sentence the Hon. Mr. Magistrate Don Bruno Arias Berrioategortua.

FACTS BACKGROUND

FIRST: By the Hon. Mr. Judge-Magistrate of the Court of First Instance number eight of Santander, in the proceedings stated, has dictate Sentence of November 26th, 2010, in which its dispositive section is literally written: “JUDGEMENT: that been the suit dismissed presented by “VSL MIDDLE EAST LLC” represented by the court attorney Mrs. Llanos Benavent, against “TRENZAS Y CABLE DE ACERO, PSC, S.L.”, represented by the attorney Mrs. Moreno Rodriguez, must absolve like I absolve the latter, of all pretensions wielded against it by the plaintiff, with express imposition of court fees to “VSL MIDDLE EAST LLC”.

SECOND: Against that Sentence, the representation from the plaintiff party filed in duly time and form an appeal, that was admitted by the Court; the proceeded, having been sent the proceedings to the Hon. Provincial Audience, previous citation toward the parties, corresponding the distribution to the Second Section, were deliberation took place and ruled the appeal on the set date, pending the corresponding Sentence.

THIRD: In the proceedings, conflict with the statute of limitations has been observed, except with the limitation to resolve the appeal, in reason of previous existing civil matters.

LEGAL GROUNDS

FIRST: The present controversy has its origin in the lawsuit filed by VSL Middle East LLC versus Trenzas y Cables de Acero PSC SL, that between these two companies, purchase orders were agreed for the purchase of a series of CIF Dubai steel cable, in the amount of U$ 1.860.000 (U$ 930.000 each one), contract that motivated the delivery of several documentary guarantees by the plaintiff, but unfulfilled by the defendant company, generating damages in the amount of U$ 776.710,29. Through that lawsuit, VSL Middle East LLC requested the contract avoidance of the sale, the return of the guarantees and the compensation for damages.

The sentence of the instance has dismissed the lawsuit for considering the contract of steel cable acquisition “has not been completed” and “that not existing a contract between the parties, the plaintiff has no action to seek a contract resolution, neither damages for breach of the agreement with the defendant”.

The plaintiff rises against the sentence dismissing alleging diverse motives and seeking the complete estimation of the lawsuit. The defendant opposes the appeal, seeking confirmation of the sentence.

SECOND: The appellant VSL Middle East LLC argues in its first and second allegations error in evidence valuation, though in his opinion, the litigious contract has been concluded with the acceptance of the purchase orders by Trenzas y Cables de Acero PSC SL, without attributing the pro forma invoices issued by the defendant, any contractual efficacy.

The evidence revision reveals that VSL Middle East LLC issued on January 31st, 2008 the purchase orders numbers TYCSA-20080131-A and TYCSA-SOO80131, introduced as documents 3 and 5 of the lawsuit, and that both orders were accepted by Trenzas y Cables de Acero PSC SL, signed by the representative Mr. Feliciano. Each of these orders stipulated as payment of the U$ 930.000 as “Open credit TT 90 days from Bill of Lading date or LC from 90 days from Bill of Lading” (which has undisputedly translated by the plaintiff as “Open credit TT 90 days from Bill of Lading date or LC from 90 days from Bill of Lading”).

The next day of the orders acceptance, Trenzas y Cables de Acero PSC SL issued two proforma invoices (proforma invoices) numbers VSLMIDDLEEAST 010208 and VSLMIDDLEEAST 010208-1, that corresponded to the precedent orders, even though a payment condition was established as “By confirmed and irrevocable l/c 90 days b/l date” (with bold and underlined in the original, and translated by the plaintiff as “Through letter of credit, confirmed and irrevocable, from the date of Bill of lading”). In these proforma invoices, the bank account was perfectly identified: Banco Bilbao Vizcaya Argentaria – AVDA: DIAGONAL 662-664 – 08034 BARCELONA – C.C. 0182 0999 8000 1001 9941 - SWIFT. BBVAESMM – IBAN ES44 0182 0999 8000 1001 9941.

On July 27, 2008, BNP PARIBAS of Dubai presented a request of documentary credit up to U$ 930.000 from VSL Middle East LLC in favor of Trenzas y Cables de Acero PSC SL, without stating that such request was accepted by the Bank. This form is incomplete, missing its reverse, and only the client’s signature is on the page presented, that is to say a representative from VSL Middle East LLC, and an partially illegible stamp that reads “RECEIVED – 27 FEB 2008 – PNB PARIBAS – DUBAI”.

On February 26, 2008, VSL (Switzerland) Ltd., granted Trenzas y Cables de Acero PSC SL by order of VSL Middle East LLC, in respect of the contract signed by them on February 1, “2005” (sic in the Spanish translation even though from the original it infers “2008”), irrevocable and unconditional guarantee to proceed to payment, on the first requirement of any amount not exceeding U$ 930.000. A copy of this guarantee is presented as document N˚ 7 of the lawsuit.

It is undisputed for the parties that any controversy between them will be governed by the Spanish legal system, and, therefore, to the United Nations Conventions for the International Sale of Goods, made in Vienna on April 11th, 1980 (forward, the Convention), one of whose objective of regulation is sale contract conclusion according to art. 4. In accordance to Art. 23 “A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention”, specifying the 18 that “A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance”.

Consequently, with the Convention and the regulations mentioned, it’s clear that the acceptance signatures made by Don Feliciano, in representation of Trenzas y Cables de Acero PSC SL on the purchase orders, was an unconditional expression of consent to the offer of VSL Middle East LLC that produces the conclusion of the contract, having to comply with the obligations of buyer and seller respectively. With the missing agreement of Art. 28 of the Convention, it is not possible to modify the contract in the purchase orders and therefore it is not attributable contractual efficacy to the subsequent proforma invoices, that is to say, aptitude to modify the initially agreement when assenting to the initial offer.

THIRD: The third allegations insists in the existence of a sales contract, confirmed by email and replies of Don Feliciano, that – according to the appellant – acted as if the contract existed and assumed the obligation to provide the material.

In this regard, standing out is the existence of an email of January 13th, 2008, from Don Feliciano to Mr. Virgilio, of VSL Middle East LLC, in which it reports that “Actually, you have a credit of 600.000 #, the order has been processed, receiving the merchandise shortly. This credit does not cover everything, but a letter of documentary credit or conforming letter of VSL int. will serve (‘may do’ in original English)”. Few days after, in letter of March 3rd, VSL Middle East LLC addressed Trenzas y Cables de Acero PSC SL, alluding several emails from Don. Feliciano were he manifested that the company was unable to satisfy the acquired commitments. Don. Feliciano explained in court that VSL Middle East LLC did not give the established credits in the purchase orders, which are consistent with subsequent communications, and the stated by this gentleman regarding that the 600.000 # credit was granted by Mapfre upon request and at the expense of Trenzas y Cables de Acero PSC SL, to process, on the phases previous to production and delivery of the order, waiting for the purchaser to sufficiently guarantee the payment.

This allegation, in which tends to sustain that Trenzas y Cables de Acero PSC SL acted as if the contract existed, is absolutely irrelevant when in the precedent argument is has been settled that the contract did exist, and it existed in the terms configured by the accepted purchase orders.

However, what we can attribute novation efficacy is to Don. Feliciano email of February 13th, 2008, by which the payment of the price in the purchase orders deviate from the original stipulation, “Open credit TT 90 days from Bill of Lading date or LC from 90 days from Bill of Lading” for “Documentary credit or conforming letter of VSL int.”, because the wording is so from the unchallenged Spanish translation of that email in which it employs the tense “serves”, and the provision in art. 29 of the Convention “any party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct”, happening when VSL Middle East LLC obtained the conforming letter and payment guarantee from VLC (Switzerland) Ltd.

FOURTH: With the following allegation, the appellant accuses the erroneous valuation of evidence when founding VSL Middle East LLC complies with its contractual obligations.

The facts previously entered are reproduced and stated.

“The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention” (art. 53 of the Convention).

“The buyer´s obligation includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made” (art. 54 of the Convention)

This Tribunal considers that VSL Middle East LLC has not complied with the obligation paying the price in the conditions established in the contract and the Convention, it being these – after Don. Feliciano’s email of February 13th, 2008 – obtaining a “letter documentary credit or conforming letter of VSL int.” that, logically, guaranteeing the total price convened of U$ 1.860.000, the purchaser limited itself to solicit – not obtain – a documentary credit of BNP PARIBAS, and obtain – effectively – a guarantee from VSL (Switzerland) Ltd. that partially covered the requirements of the “conforming letter of VSL int.” requested by Don. Feliciano, not referring to the total price, but only half, U$ 930.000.

In summary, the purchasing party did not insured the total price in neither of the forms that it was successively agreed by the parties: open credit to 90 days from the date of Bill of Lading, letter of credit to 90 days from the date of Bill of Lading, or a letter documentary credit or the conforming letter of VSL int.; and this lack of price assurance constitutes a fundamental breach of contract by the purchasing company, which it keeps VSL Middle East LLC from invoking interest for breach of obligations of the seller, when art. 80 of the Convention establishes that “A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party´s acts or omission”.

This unequivocal breach and objective of the plaintiff party, that clearly frustrates the purpose of the contract, prevents the estimation of the appeal and the request for contract avoidance, return of the conceded guarantees, and suffered damages.

FIFTH: The dismissal of the appeal justifies the imposition of court fees to the appellant, in accordance to art. 398 LEC.

So, in the exercise of the judicial power given by the Spanish Constitution, and in name of its Majesty the King,

WE RULE

That we must dismiss and we dismiss the appeal filed by the representation of VSL Middle East LLC, against the Sentence dictated by the Court of First Instance number Eight of Santander, that we must confirm and we confirm in all its parts, with imposition of court fees to the appellant.

This Sentence is not final, against it, an appeal to a supreme tribunal for violations of procedural law may be filed, in the legal form before this Audience, in 20 days period.

This being the Sentence, we pronounce, send and sign.


FOOTNOTES

* All translations should be verified by cross-checking against the original text.

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Pace Law School Institute of International Commercial Law - Last updated June 25, 2014
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