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CISG CASE PRESENTATION

Spain 28 November 2013 La Almunia de Doña Godina (Electrical actuators case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/131128s4.html]

Primary source(s) of information for case presentation: CISG-Spanish website

Case Table of Contents


Case identification

DATE OF DECISION: 20131128 (28 November 2013)

JURISDICTION: Spain

TRIBUNAL: Court of First Instance and Instruction No.2 of La Almunia de Doña Godina

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 107/2013

CASE NAME: SMR Automotive Systems Spain v. Buhler Motor GMBH

CASE HISTORY: Audiencia Provincial de Zaragoza, 27 mayo 2014

SELLER'S COUNTRY: Belgium

BUYER'S COUNTRY: Spain

GOODS INVOLVED: Electrical actuators (component of rearview mirrors of cars)


Classification of issues present

APPLICATION OF CISG: [-]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 8 ; 9 ; 36 ; 38 ; 39 ; 78

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spanish website <http://www.cisgspanish.com/wp-content/uploads/2014/08/jdoPrimeraInstancia28nov2013.pdf>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [first draft]

The CISG Translation Network

Translated by Luis Alberto King M. [1]

PLAZA DE LA PAZ S/N EDIFICIO JUZGADOS
TELEFONO 976813400
FAX 976600240
N08340
N.I.G.: 50025 41 1 2013 0000449

ORDINARY PROCEDURE 0000145/2013 [2]

Claimant: (Buyer) SMR Automotive Systems España, SAU

Prosecutor Mr. Francisco Javier Sanz Romero

Attorney Wencesla García Zubíri

Respondent: (Seller) Bühler Motor GmbH

vwProsecutor Mr Juan José García Gayarre

Attorney Mr Cristian Casanovas Perez

Ruling Nº 107/2013

In La Alumnia de Doña Godina, 28 November 2013.

Seen by Mr. Agustín Barrera Orozco, Judge of the First Instruction and Instance Court number 2 of the Alumnia de Doña Godina, the partial rulings of the Ordinary Procedure No. 145 of 2013, issued by this Court by instance of Buyer, represented the Attorney General Mr. Don Francisco Javier Sanz Romero assisted by the attorney Mr. Wenceslao García Zubíri, against Seller, represented by the Attorney General Mr. Juan José García Gayarre assisted by the attorney Mr. Don Cristian Casanova Pérez, for the claim of the amount of three hundred twenty-seven thousand four hundred twenty-three euros and fifty-six cents (€327,423.65)

FACTUAL BACKGROUND

FIRST. - Through the referred commercial (via), an ordinary procedure claim was brought against the Seller, by means of which, in summary, payment of three hundred twenty-seven thousand four hundred twenty-three euros and fifty-six cents (€327,423.65) is sought for damages and lost profits, and a subsidiary claim for €109,141.19 for legal interest and procedure expenses.

SECOND. - By decree of May 9, 2013, the claim was admitted and serviced to the Seller in order for it to answer within 20 labor days, with all legal warnings and subpoenas. Seller filled a writ answering the claim in this Court on 20 June 2013 asking this claim to be dismissed and all judicial expenses charged to Buyer.

THIRD. - The parties were called to a preliminary hearing to try to reach an agreement or transaction that would end this process. In the alternative, to examine the procedural matters that may impede the following of the process and termination through a final ruling.

FOURTH.- That being there no agreement between the parties, after examination of the procedural matters analyzed, and with fixation of the controversial facts, the parties submitted evidence, being admitted (by this Court) due to its usefulness and pertinence, rendering (in every admittance and acts) the partial rulings in preparation for this final ruling.

LEGAL GROUNDS

FIRST. - Buyer states that company it represents was hired by SEAT ESPAÑA for the crafting and supply of external rearview mirrors. At the same time, Buyer hired Seller for the supply, in the Épila facility, of the actuators or assembled motors, which together with the rearview mirrors manufactured by Buyer would control the mirrors from the inside of the cars. The actuators or assembled motors supplied by Seller turned out to be defective (nonconforming) in a large percentage and gave way to this claim. Seller was informed of this defects and charges time and again within the corresponding timeframe. Pursuant to the contractual terms, and to the usage and custom within the automotive market, samples of the defective mirrors were tested conjunctively by the parties to determine the percentage seller was responsible for (this procedure leads to the TECHNICAL FACTOR), resulting in the amount of €327,423.65. Initially the relationship was not documented until February 2008 when a global agreement was executed with Seller in virtue of which it came to be the supplier of the electric motors that the Buyer’s Group would attach to the rearview mirrors they produce. The price per unit is €5.57. In 2008, it supplied 140,460 units. The pieces go from Seller to Épila, from them to SEAT in Martorell, with a related cost of €19, approximately. Specifically, they are used in the SEAT LEON which is merchandised in a number of countries and offers two years of guarantee upon matriculation. Due to the impossibility of calling back every rearview mirror, the liability is calculated through statistic calculation (TECHNICAL FACTOR), which affects both Buyer’s Group and Seller, as it is stablished in the Long Term Agreement. The complaints were received regarding two defects: one for unusual and vexing noises and the other for contact problems with the mirror which did not move. The communications with Seller to complaint for defects begins with an email sent on 14 May 2008. It considers that the United Nations Convention on Contracts for the International Sale of Goods is applicable and, for those maters not foreseen by it, the Laws of Spain. Buyer requests the Seller to be ordered to pay the amount of €327,423.65 due to damages and lost profits, or, secondarily, the amount of €109,141.19 for legal interests and procedural expenses.

Seller claims that it has always manufactured and supplied goods in conformity with Buyers requests. There must always be, after reception, a functionally and conformity test when receiving and when sending. Seller claims that the test is very simple and must be done in that moment. Not to perform this test is seriously negligent on behalf of Buyer. Between 2007 and 2009 many orders for millions of actuators were sent to Seller conforming to the specifications, to Épila. On 14 May 2008, the Buyer made its first complaint (for defects in the electrical contact of the actuator, manufactured on 1 September 2007 and delivered few days later). Notwithstanding the extemporaneous nature of this claim, Seller requests a verification procedure called CORRECTIVE ACTION REPORT (CAR) number No. 20080751. A problem was detected and a third party was hired, with expenses paid by Seller, to go to Épila and isolate the defective actuators with participation of Buyer. The defective actuators were replaced and a productive guideline was set into place to avoid the malfunction that caused the technical problem. On 12 June 2008, a new claim was filed due to excessive noise in two actuators manufactured on 28 April 2008. A second CAR was started and found malfunctions in only one actuator. The next claims were rejected by Seller, by email dated 29 July 2008. On 6 November 2008, a third claim was made relating to actuators manufactured between 2 July 2008 and 10 September 2008; a new CAR was started and an anomaly in the electric contact of the first actuator was found and no malfunction in the second. These were replaced as well. On 4 February 2009, a new claim was brought regarding 20 actuators. They were supplied between 2006 and 2007 and the most recent one in 2008. According to Seller, the extemporaneous nature of the claim was lacerating (February 2009) and thus did not start a CAR and refused any responsibility. The contractual performance and good faith of Seller is clear. Seller argues that there is no clear evidence of the supposed defect in undetermined actuators and no relationship between it and the claimed lost profits. The right to demand compensation for defects is no longer enforceable due to lack of notice in time and pursuant to the required terms. There is negligence on behalf of Buyer. There is no legal or contractual obligation that would bind Seller to respect the TECHNICAL FACTOR statistic calculation. The general regime of the German purchase must be applied and, in subsidiary way, the Spanish Commercial Code (CCo). Definitively, Buyer asks for the dismissal of the suit and the payment of procedural expenses.

SECOND. - The first issue that must be clarified is the applicable law. Buyer states, in its claim, that the contractual relationship started in February 2008, before the Reglamento de Roma I (CE) No. 593/2008 entered into force. This CE states, in article 28, that it shall be applicable to the contracts executed after 17 December 2009. The applicable rule is, therefore, the previous one, the Convenio 80/934/CEE regarding the applicable law to the contractual relationships first adopted on Rome on 19 June 1980, executed by the Kingdom of Spain and by the Federal German Republic. Its article 4.1 states that “Insofar as the applicable law to the contract has not been selected pursuant to article 3, the contract shall be ruled by the laws of the country with closer relations to the contract”. The first supply takes place in Épila. Later, they are installed in the SEAT LEON in Martorell. Thus, the Spanish rules must be applied. In the present case and pursuant to article 96.1 of the Constitution, the CISG must be applied. This convention is applicable to contracts executed between parties having their main place of business in different states and regarding matters not foreseen in the CISG, Spanish Law shall be applicable. It also calls on the UNIDROIT principles, for them being tantamount to international customs.

The claim upholds that the Buyer did not consider article 4.2 of the Rome Convention, which states: “Notwithstanding section 5, it shall be considered that the contract has closer bonds with the country where the party with the characteristic obligation has its main place of business at the time of the execution of the contract. Seller is German and German Law must be applied. Pursuant to German Law, there is an obligation of examining the goods immediately, to the extent it is possible. If a nonconformity is discovered, it must be notified immediately to the Seller or it shall be considered as accepted. If the Judge considers Spanish Law applicable, it calls on articles 325 to 345 of the Spanish CC.

The rule that gives answer to law conflicts is, ratione temporis, the Convention on Law Applicable to Contractual Obligations first adopted in Rome, on 19 June 1980. Between the parties, there is no clear submission clause. Thus, the parties select State Courts to resolve the present and any future disputes that may arouse from that legal relationship. Also, there is no clear exclusion to the application of the CISG, foreseen on article 6 of the same. Article 4.1 of the Convention states that the applicable law shall be that of the country to which there is a closer bond. In the second subsection, it states that it shall be considered that the contract holds closer bonds to the country in which the party in charge of the characteristic obligation has its address (main place of business). However, section 5 of that precept states that said consideration must be overruled if “from the joint circumstances of the agreement, it appears to be closer to other country”. This Judge understands that every activity was ordered to fulfill the installation of the actuators in the rearview mirrors (in Épila) for them to be later transported to their final destination, the SEAT LEON in Martorell, reason why Spanish Law shall be applicable. This turns us to international law (article 9.6 of the CE and article 1.5 of the CCo) and we will have no option but to turn to said internal law for matters not expressly resolved (article 7.2 of the CISG).

THIRD. - The second priority shall be to resolve whether the claim is extemporaneous or not. If this exception is upheld, we would not go into the substance of this matter. Firstly, article 36 of the CISG recognizes that Seller will be responsible even if the noncompliance is notified after delivery. The legal framework applicable is established in articles 38 and 39 of the CISG. Article 38 states (1) that the Buyer must examine or cause to examine the goods as soon as possible, with due consideration to the circumstances. (3) If the Buyer changes, in transit, the destination of the goods or reships them without a reasonable opportunity to examine them and, if in the execution of the contract, the Buyer had or ought to have knowledge of the possibility of said change in destination or shipping, the examination may be delayed until the moment when the goods reach their final destination. This Judge considers that it has been credited that Buyer has fulfilled its duty to test the pieces received once they were mounted with the mirrors. This is, at the moment when they had to function. Also, that it has not been possible to detect the problem until the moment when the customer’s complaints stated to come in. This has been sufficiently credited (they performed the usual test that considers up to 16 variants once the mirror has been mounted and no detection of nonconformities were discovered). Seller’s attorney states that Buyer did not perform its inspection obligation and that it acted with serious negligence. However, common sense (which has been called on repeatedly, which this Judge usually takes into consideration before issuing a ruling) must be present and due consideration must be given to the fact that neither Seller nor SEAT detected the malfunction and they (SEAT) sold the product with a malfunction in the rearview mirrors. This seems to uphold that this was truly an invisible or latent defect and Buyer could not have notified Seller of it before. It turns out to be basic in this dispute that article 39 of the CISG states (1) the Buyer shall loose the right to rely on lack of conformity of the goods if it does not notify Seller, specifying the nature of the noncompliance, within reasonable time after he discovered it or ought to have discovered it. (2) In any case, Buyer shall loose the right to invoke lack of conformity of the goods if it does not notify it to the Seller within 2 years after the goods were effectively delivered to the Buyer, unless this period is incompatible with a contractual guarantee period. Buyer met what is set on article 39 of the CISG because it was not possible to discover the defect until the car was used and the defect remained undetected. Granted that this is a hidden defect, we must consider the maximum timeframe of 2 years set in article 39. Seller delivered the defective pieces without noticing the nonconformity, having performed previous quality testing; the Buyer performed a test once the piece was mounted in the rearview mirror and did not detect anything; SEAT sold the SEAT LEON and then some of the cars present the defects (noises) and contact failures) having (SEAT) also performed their own quality checks, without noticing any defect. It seems to be clear that we are dealing with a hidden defect. Buyer, therefore, has not been able to provide notice to Seller until it receives the complaints coming from SEAT. Thus, it is credited that it correctly fulfills its duty to examine the goods and to notify any unconformities within 2 years. From November 2006 up to May 2006, moment in which Buyer notifies Seller of the first complaints, two years have not elapsed. Thus, the notice of the Buyers has been performed within the term set by the CISG in article 39 for hidden defects. This would, also imply the appearance of an act that interrupts the term. According to this Judge, there notice was performed within time and we shall consider the substance of the matter.

FOURTH. - Going into the claim, another matter that is important and that will be crucial at the end, that must be clarified before it is considered, is the issue related to the burden of proof. We wonder who had the burden of proof regarding the expert opinion which, by the way, the Seller stated (in the preliminary hearing) that it would file right away. In this sense, the LEC is very clear. Article 217 of the law states: “It will be duty of the plaintiff and the reconvening respondent to prove the certainty of the facts on which the claim and reconvention derive their legal effects, pursuant to the applicable legal framework. Therefore, the fact that the claimant offered an expert opinion that was never presented does not alter or dismiss what is stated in law. Thus, it was the claimant the one who had the burden of proof. And, even though this does not force Buyer to file an expert opinion, it would be in its interest to actually present this evidence. According to this Judge, the claimant many not imply that the Seller had this burden or the obligation of proving something that was of its own interest. Also, as stated by the attorney of the Buyer in the conclusions, it was not necessary to file an expert witness opinion from the moment in which the Seller and its attorney recognized Sellers responsibility when it took the stand and acknowledged the defects. Nevertheless, the matters to be decided will be: If the claim was issued within time (already seen) and the extent of the responsibility (where an expert witness statement would guide the criterion of this judge). It is true that Seller acknowledges its responsibility but it is also true that the parties have not found an agreement regarding the amount or percentage of responsibility in each case.

This dispute has turned on the axis of the so called TECHNICAL FACTOR; a formula used to determine the responsibility. It works by setting a certain percentage of blame over the nonconformities of the pieces delivered by the suppliers to the final destination to extract the amount of responsibility of each party. This formula was created due to the impossibility of recalling millions of already installed pieces. The question is whether this TECHNICAL FACTOR is applicable to the relationship between Seller and Buyer. This, taking into consideration that Buyer considers it shall be applicable to Seller just as SEAT (Volkswagen Group) applies it to them, and thus, shall be applicable to all the supply chain (including Seller and Buyer). According to Buyer, this is a practice and custom within the automotive sector. Nevertheless, the Seller considers that the TECHNICAL FACTOR was never agreed upon by the parties and that this FACTOR distinguishes between tier 1 (Buyer) and tier 2 (Seller) suppliers. A number of documents and testimonies that must be analyzed have been filed. It is well known that the analysis of documents and testimonies must be done according to healthy critic, pursuant to article 376 LEC. It is also well known that the evidence must be weighted jointly. This way of weighting evidence by Judges and Tribunals is a jurisprudential construction. The jurisprudence of the Tribunal Superior (Supreme Tribunal), considering the restriction of the legal norms regarding legal or preset value to evidence and of the legal framework foreseen for the “free value” of evidence, created a “complementary” system destined to help judges and allow them to value their intimate perception over the evidentiary results, weighing jointly all the evidence presented in the trial. In this dispute, however, there is no definitive expert opinion. There is an expert opinion regarding German Law but, considering the aforementioned recitals, it will not be weighted.

First, the manager of the Buyer has been interviewed, Mr. Stephan González Lemonier. He stated that they test the 100% of the actuators every time. 16 functions are tested over the actuator once it is installed. According to him, this was a hidden defect and problems surface later. The complaints include pieces from 2006. The actuator costs between 5 and 6 euros but they change the whole mirror (somewhere close to €75 charged by SEAT). Those were SEAT guarantee charges when they noticed the problems. He said that Seller did not want to have a meeting with them until 2009. He acknowledges that there is no inspection at the time when the goods are received, it is performed once the actuator is mounted in the mirror. In document No. 7 we can see reception slips marking “pending later inspection” which ratifies this. He explains that OEM (SEAT) is the builder, they are the tier 1 supplier for SEAT and tier 2 is Seller. SEAT applied the TECHNICAL FACTOR to them. To questions of Seller’s attorney regarding the presence of the TECHNICAL FACTOR in claimant’s document No. 3, he answers that it is a practice in the market and with Volkswagen. Document No. 4 talks about the TECHNICAL FACTOR as general term. Seller is, in Germany, tier 1 to Volkswagen and now appears as tier 2. The attorney further states that the truth of the matter is that signatures of Volkswagen and the suppliers are required. Document 16 is signed (Volkswagen to Buyer) but document 4 (Buyer to Seller) is not signed and this precept clearly requires signature of both parties. The manager explains that, by defect, if it is not signed a 100% shall be applicable. Not all the mirrors have been sent because it is impossible to recall all the mirrors from all over the world and it would be very expensive. That is why the percentage of responsibility or TECHNICAL FACTOR is used. He says that Seller also did not realize there was a problem, a hidden defect. He considers that there was a complete breach by Seller and clarifies that they remained doing business with them because you cannot change supplier because it would stop the production line, which is not an option. It further states that: Seller did not accept the responsibility for the 20 mirrors of the analyzed sample, that they went to Épila to execute a TECHNICAL FACTOR and they did not accept it, and that that is the reason why the claim was filed. He understands that the Seller must test the goods before shipping (as evidenced by document No. 10, emails, on 22 May 2008, from Jan Morava, he recognizes that he has tested the actuators before leaving the facility) and he is not the one to receive them. According to him, because SEAT belongs to Volkswagen, it implies that the TECHNICAL FACTOR shall be applicable to all the members of the group (described in document 4, as the group applies it). Seller must know this conditions because it is their supplier. Supply was effected 2 years before the first complaints and the guarantee starts from the moment of the registering or selling of the car. He states that Seller recognized its fault, took corrective measures, they set a blue mark on pieces, and still continued to have problems. Document No. 2 from the preliminary hearing is an email where Seller is reminded that the TECHNICAL FACTOR will be applied to them (July 2008). The TECHNICAL FACTOR was drafted with SEAT and it was later presented to Seller and in no time was the sampling challenged. They tried to effect a payment retention and a warning of supply discontinuation came from Seller, which would crippled SEAT.

A clarifying testimony has been that of Mr. Giménez Marín, who is now responsible for supplies and accessories purchase for SEAT and was, at that time, senior manager. It may be argued that he is the only impartial witness because he is not employed by any of the parties and was allowed by both parties. He talks about the relationship between SEAT and the parties. In document No. 1 of claimant (Buyer), it is said that Seller is a recognized and important supplier of SEAT and, therefore, is familiar with the TECNHICAL FACTOR (negotiated between client and supplier, the price of piece redemption is translated to tier 1). He says that other options are unviable, it is common sense. They detected a high TECHNICAL FACTOR and he states that the sampling is objective and were not tampered with. They charged Buyer’s group a significant quantity. He also explains that changing supplier in a short or medium period of time is impossible because the production line would be paralyzed. The guarantee of the car is good for 2 years from purchase and registration and the suppliers accept this and all of its consequences and, thus, is applicable to them too. In Respondents document No. 30, there is a document where the problem of the TECHNICAL FACTOR is evidenced pursuant to the information they had (14 out of 40 mirrors were defective) and it is a common usage that the supplier takes care of the costs for defective materials. Tier 1 suppliers have the responsibility to face TECHNICAL FACTOR. Recognizing a supplier is to credit a supplier, as in the case of the Seller. Document no. 1 of the 2003 AP understands that it relies on the mentioned piece and that the set terms shall always apply.

Second and third witnesses were not accepted by Seller because the entities that employ them are dependent to Buyer. They will not be decisive and they only come to attest on the functioning of their companies. Mr. Uson is an industrial engineer and responsible before CEFA of quality, car supplier. He comes to attest that the guarantee is applicable to the same extent to all the suppliers, as well as the TECHNICAL FACTOR and the inability to stop production. He acknowledges that they perform the reception inspection and, that if it is possible to return faulted goods at that moment, the goods are rejected. Everybody applies the TECHNICAL FACTOR. Mr. Jesús Bella Gómez is responsible for quality at Buyer, is here to attest to the same issues. He says that it is applicable even when there is no signature because it is a trade usage.

Mr. Merino, quality responsible for Buyer, confirms that the policies in place for them from SEAT are also applied by them to their suppliers, starting from car’s registration for all: clients and suppliers. He states that complaints were received from SEAT and were ongoing to Seller. Seller had to test them and then Buyer had to test them once they are mounted in the mirrors and no one detected nonconformity until SEAT received complaints the clients.

Mr. Angulo, local sales representative, has come to attest the same. He says that Seller knew that the pieces were destined for SEAT and that the same policies applicable to Buyer will be applicable to Seller. Document No. 2 is the long term contract; in the quality clause of the OEM (SEAT) is stated: this means that the conditions applicable to the final client will also be applicable to Seller. Not everything can be signed and through quality clause the responsibility is transferred. The supplier to provide goods is dictated by SEAT and if it does not comply in accordance with the terms (they are in the middle of the chain) it is a very dangerous situation. The Long Term Agreement is a long term collaboration agreement. He states that both entities were pressured. It further states that Seller did not respond to complaints.

Mr. Ludwig Webber, “Key Account Manager” of Seller, is the commercial responsible for the automation, suspension, and interior product department. He has excluded by the Buyer because he works in this entity. He says that he has not agreed upon the TECHNICAL FACTOR with Buyer’s group or SEAT and that they have provided the faulted goods. Seller is a certified supplier which means that they are bound to perform tests. They did not accept the TECHNICAL FACTOR proposed by Buyer’s group. The guarantee system is a client complaint procedure, the pieces are received, tested and substituted. Then, the first test is performed and the client is notified of the results and subsequent examination is performed and it is determined if the piece is conforming or not. The Volkswagen group only applies the TECHNICAL FACTOR to the first tier and denies being a client of the group. The quality clause refers to technical specifications, they can be used for different OEMs, each one with their own specifications, and this clause regulates some technical aspects with the requirement of 30 per million. Seller also has different suppliers, among them a Korean entity who only produce zinc and plastic. The motors and others are bought from other suppliers and they do not apply the TECHNICAL FACTOR to them. He recognizes that there are other suppliers, such as those who supply water pumps directly to the Volkswagen group (OEM). He knows how the TECHNICAL FACTOR works (statistical coefficient). He states that the conditions of the manufacturer are not applied to second tier suppliers in automotive market. He says that he knew that the actuators were going to SEAT. He explains that they got the contract through a German Firm and that they did not negotiate with SEAT. He recognizes that they went to Épila to test the TECHNICAL FACTOR over 40 actuators sent by SEAT to examine them and he recognizes that they had already received some before. He also admits the two defects of the goods supplied by Seller, the notice and the electric contact malfunction.

FIFTH. - Considering the elements seen in the hearing, suit, response, and additional documentation filed, it is clear that the TECHNICAL FACTOR is a usage within the automotive market, that the usage has application in the international sale of goods, that some of the pieces from the millions supplied by Seller had two hidden defects and, that the claim was brought within time.

But, furthermore, we are in a situation where Seller’s responsibility does not offer any doubt because Seller recognizes it in different ways. From the meeting in Épila, it can be concluded that from the 40 sampled pieces, they acknowledge their responsibility in at least 5 of them. Responsibility for 11 out of 490 sampled pieces as is shown in document No. 10 of respondent and Mr. Morava recognizes 2.2% of responsibility. In the mail sent 20 may 2008 of document no 11 of the respondent the defect in the pins of contact of the actuators it recognized. In document no 22 after the meeting at Épila, responsibility is recognized over some of the pieces, rejecting the other based on the application of the German law, and the extemporary nature of the action. Mr. Webber comes to accept in his participation that there were two faults (noise and contact). The issue seems to be how to determine the responsibility. The TECHNICAL FACTOR seems like the likely way to resolve this matter. It has been explained how this factor works and why it is applicable to determine responsibility. TECHINICAL FACTOR is a usage within the automotive market and this has been credited. The CISG recognizes that usages or customs shall be applicable to international sale of goods in article 8 and 9 that state that (1) the parties shall be bound by any usages that they have agreed upon and by any practices set between them. (2) Unless something else is specifically set, it will be considered that the parties have made applicable to the contract or to its formation the usage of which they had or ought to have known and that, in international commerce, is commonly known and regularly observed by the parties to contracts of the same commercial venue. With the information filed, it is clear that the TECHNICAL FACTOR is a practice used within the Volkswagen group, without regard to whether it was signed by the parties or not. The quality clause may be interpreted to include said FACTOR. It is true that the document containing this FACTOR is not signed and that it is an internal memo (as stated by counsel) but it is not determining. In international sale of goods, flexibility is much more valued that national law dispositions, due to the fact that normally the relationships between the entities of different countries are regulated in master agreements that are drafted for particular markets, that the parties know, that regulate the usage in the same and that usually do not require the sharing of said documents (without signing), being of undisputed application. Seller may not allege that it did not know the TECHNICAL FACTOR and the meeting at Épila had the objective of determining the percentage of responsibility of each one, what happens is that they differ in terms of the result. Besides document No. 1 of claimant filled in the preliminary hearing, is determining. This is the term sheet of conditions of the rearview mirror SE-350 of SEAT, stating in page 21 that it must apply to all of the suppliers and in page 39 the name of Seller is mentioned as actuator supplier. From the meeting at Épila, it is clear that Buyer’s Group considers that the responsibility of respondent relays on 15 pieces (14 plus 1 for notices) and Seller only assumes 5, according to plaintiff. Here it would have been very helpful to have an expert report, not to allocate responsibility but to quantify it. In fact, it can be said that absent of expert opinion on such a technical and complex matter is quite surprising. It’s common to know of small amounts disputes were there is an expert opinion on both sides, a judicial expert opinion, and in this case, there no technical expert opinion. In facto, reaching this point, this judge has no guide or assistance. Buyer had the burden of proof. A lot of documents were filled before this Judge: the Long Term Agreement, where specifications of the OEM (Original Equipment Manufacturer or SEAT); SEAT’s General Purchase Conditions, the TECHNICAL FACTOR, Term sheet of conditions of the rearview mirror SE-350 (that states in its page 21 that the obligations with the other suppliers or subcontractors are subject to the terms of this document). Much of this documentation are email but they are relevant because they evidence when the complaints are made, and how responsibility is been face by Seller, the 8D reports, the corrective measures implemented by Seller (marking with a blue dot the new pieces that continued to be faulty) the acceptance of the noise defect, the acceptance of the electrical contact defect, document No. 16 of the suit stating that the TECHNICAL FACTOR is applicable between SEAT and Buyer’s Group over 49 pieces (82%), the pressure brought to bare until the meeting at Épila, that in this Judge’s opinion may not have any other purpose than determining the responsibility of each entity over the 40 pieces sampling. If this wasn’t so, why was there a high level meeting between the two entities to test some samples? Notwithstanding, there is no expert witness report that credits that there were 14, 5 or 10… of the 40 pieces tested responsibility of Seller. Here the expert witness report (burden of claimant, 217.2 LEC) was paramount.

We have spoken of the difference between tier 1 and tier 2. First level suppliers are the systems, subsystems and components manufacturers that, generally, are completely terminated. They have high tech and supply directly to the vehicle manufacturer. Second level suppliers are those systems, subsystems and components manufacturers that supply tier 1 suppliers. Buyer’s group is tier 1 in relationship to SEAT and Seller is tier 2 to SEAT. Pursuant to all the aforementioned and understanding that all this provisions shall be applicable to all suppliers, tier 1 or 2, it seems that there is no way of determining Seller’s responsibility other than by using the TECHNICAL FACTOR. How can we do this if this is not detected in millions of pieces distributed all over the world? The issue is that from the meeting in Épila we only have two versions that contradict each other and there is no reason why we should allot more credit to one over the other. The attorney of Seller has, among others, presented an argument based on a ruling of the Superior Tribunal, dated 17 January 2008, a third legal foundation. In said foundation it is specified the legal framework in discussion, making reference to articles 8, 38 and 39 of the CISG, but, as was claimed before, because we are talking about hidden defects, Buyer has fulfilled its obligation of notifying the nonconformity within 2 years. The high Tribunal makes a distinction between fundamental breach and breach, which is not contrary to what is being discussed here, because the breach may be remedied by compensation, which is sought here.

Definitively, considering that Seller recognized its responsibility and that lacking any expert witness opinion that may value the percentage of responsibility of each one, this Judge considers that it can not but apply the same TECHNICAL FACTOR rule, but that there may not be consideration to more than 5 pieces (which were recognized by Seller as faulted) out of the 40% tested in Épila, which amount to 12.5%, minimal amount recognized by respondent and same that claimant asks in subsidiary nature for in the suit. The others are not backed up by any technical report that may shed light to this Judge. Therefore, the subsidiary claim of the claimant is upheld and Seller must be forced to pay € 109,141.19.

SIXTH.- Regarding interests, CISG article 78 recognizes its application but leaves it open and it is general appreciation that it is a matter leaved aside from the CISG, thus by application of the norms of International Private Law, by not being regulated by the CISG it is remised to Spanish Law. Pursuant to articles 1101 and 1108 of the CC, the legal interests plus two points shall be applied, from the judicial interruption of time.

SEVENTH. - Regarding judicial expenses, we shall have to apply Spanish Law, according to the norms of International Private Law, regulated on articles 394 and SS of the LEC. Considering there is a partial consideration of the suit, and the fact and law doubts that have been brought up, each one of the parties must pay for their own expenses and those joined expenses shall be paid in half by each one.

RULING

Having partially upheld plaintiff’s suit, I hereby condemn Seller to pay Buyer the amount of one hundred nine thousand one hundred forty-one euros and nineteen cents (109,141.19) and the corresponding interests generated from the date of judicial interruption.

May this ruling be notified to the parties, letting them know that it is not definitive and there is an appeal, that must be filled (if applicable) before this Court within the 20 days after this ruling is notified, which shall be resolved by the Ilustrisima Audiencia Provincial de Zaragoza (High Chamber of Zaragoza).

Take the original to the ruling book.

For this, my ruling of which testimony shall be issued to be added to the docket, I state it, command it and sign it.


FOOTNOTES

1. Von Wobeser y Sierra, S.C., <lking@vwys.com.mx>, <luisalbertoking@hotmail.com>, o: 52 55 5258 1027, m: 52 1 55 1885 6758, <www.vonwobeserysierra.com>.

2. All translations should be verified by cross-checking agains the original text.

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Pace Law School Institute of International Commercial Law - Last updated June 15, 2014
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