Switzerland 21 December 1992 Civil Court Basel (Textiles case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/921221s1.html]
Primary source(s) for case presentation: Case text
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: P4 1991/238
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Austria (plaintiff)
BUYER'S COUNTRY: Switzerland (defendant)
GOODS INVOLVED: Textiles
Case law on UNCITRAL texts (CLOUT) abstract no. 95
Reproduced with permission from UNCITRAL
The Austrian seller sued the Swiss buyer for the purchase price of fiber. In support of its suit, the seller argued that a sales contract had been concluded between the parties on the basis of an order sent by the Swiss buyer and a written confirmation sent by the seller.
The court found that the letters of confirmation sent by the seller and the subsequent omission of any reaction by the buyer reflected a usage as to the formation of contracts in the sense of Article 9(1) CISG; that the parties had impliedly made that usage applicable to their contract since they knew or ought to have known the binding nature of such confirmations under both Austrian and Swiss law; and that there was no evidence of any other particular rules or usages prevailing in the trade of fiber. Furthermore, the court found that the exchange of confirmations was consistent with the practice which the parties had established between themselves and which was binding pursuant to Article 9(2) CISG.
The court ordered the buyer to pay the purchase price with interest at the rate of 9%, i.e. the rate set out in the general terms of the letter of confirmation, which was found to be consistent with the applicable Austrian law, even though it was 3.5% higher than the Austrian discount rate.
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APPLICATION OF CISG: Yes [Articles 1(1)(b) and 100(1)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4A [Scope of Convention: as far as the formation of the contract is concerned, the Convention merely governs the issue of the objective requirements for the conclusion of the contract]; 8C2 ; 8C3 [Interpretation in light of surrounding circumstances:
practices established by the parties;
9C ; 9D2 [Practices established by the parties; Usages impliedly
made applicable to contract];
18A ; 18A3 [Criteria for acceptance; Silence or inactivity
78B1 [Rate of interest: provided by contract]
100A1 [Applicability based on date of proposal or offer]
4A [Scope of Convention: as far as the formation of the contract is concerned, the Convention merely governs the issue of the objective requirements for the conclusion of the contract];
8C2 ; 8C3 [Interpretation in light of surrounding circumstances: practices established by the parties; Usages];
9C ; 9D2 [Practices established by the parties; Usages impliedly made applicable to contract];
18A ; 18A3 [Criteria for acceptance; Silence or inactivity insufficient];
78B1 [Rate of interest: provided by contract]
100A1 [Applicability based on date of proposal or offer]
EDITOR: Albert H. Kritzer
CISG issues ruled upon:
Usages and practices/Intent/Conclusion of contract/Acceptance of offer/Commercial letters of confirmation. Three key provisions of the CISG can bear on the core issue of this case: Article 9; and Articles 8 and 18. The Article 18(1) rule is: silence or inactivity cannot generally be regarded as an acceptance. The rule that the court held to be in effect under the domestic laws of the countries of the parties to this case (Austria and Switzerland) was said to be: silence or inactivity can be regarded as an acceptance when there is no reply to a "commercial letter of confirmation". Treating this rule -- a rule that is not in effect under the domestic laws of most other jurisdictions -- as an implied usage "of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned" (Article 9(2)), the court regarded no response to a commercial letter of confirmation as an acceptance of the terms contained in it.
"The potential use and misuse of trade usage was ... demonstrated in [this] Swiss court decision. The court used Articles 9(1) (inter-party usage) and 9(2) (international trade usage) to recognize the binding nature of a written confirmation. It creatively argued that the parties 'knew or ought to have known the binding nature of such confirmations under both Austrian and Swiss law.' The court asserted that due to that knowledge, and that there was no other practice prevailing in the particular trade, the binding nature of a confirmation was a usage under both Articles 9(1) and 9(2). Although, the court was correct in recognizing the binding nature of confirmations as a general trade usage, it is a dangerous precedent to use domestic law as a vehicle in establishing an international trade usage." Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at 434.
Article 8(3) is a companion provision of the CISG that could be deemed relevant to the facts at issue: "In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves [and] usages . . ." The Article 8(3) reference to "practices" parallels the reference to practices in Article 9(1). Also, as compared to the reference to "usages" in Article 9(2), the Article 8(3) reference to usages may more readily encompass usages that are only local, national or followed in particular business circles.
Interest, rate of. The final holding of the case is on interest. The CISG upholds the right of the seller to interest on the unpaid price (Article 78), but it does not specify the rate of interest. The rate of interest to which the parties had contractually agreed (the rate specified in the commercial letter of confirmation) was held to apply.
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English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=104&step=Abstract>
French: Revue de Droit des Affaires Internationales (1995) 1012 [CLOUT abstract]
German: Schweizerische Zeitschrift für Internationales und Europäisches Recht (SZIER) / Revue suisse de droit international et de droit européen 2/1995, 276-277
Italian: Diritto del Commercio Internazionale 1995, 447-448 No. 65
Polish: Hermanowski/Jastrzebski, Konwencja Narodow Zjednoczonych o umowach miedzynarodowej sprzedazy towarow (Konwencja wiedenska) - Komentarz (1997) 258-259
CITATIONS TO TEXT OF DECISION
Original language (German): Basler Juristische Mitteilungen (BJM) 1993, 310-313; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=104&step=FullText>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Ferrari, International Legal Forum (4/1998) 138-225 [253 n.1079 (interest issues)]; Behr, 17 Journal of Law and Commerce (1998) 266-288 [abstracts and comments on 29 interest rulings from 10 countries (this case presented at 274)]; Gillette, 39 Virginia Journal of International Law (1999) 707 [714 n.26]; Spanogle/Winship, International Sales Law: A Problem Oriented Coursebook (West 2000) [contract formation with the use of forms, use of one form: parol evidence and confirmation letters 123-130 (this case at 130)]; Liu Chengwei, Recovery of interest (November 2003) n.260;  Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 9 paras. 19, 22, 23, 24 Art. 11 para. 6; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 85; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 98
German: Kramer, Basler Juristische Mitteilungen (BJM) 1995, 1 [8-10]; Schlechtriem in von Caemmerer/Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht (Beck) (2d ed. 1995) 133 n.24 [Art. 14-24]; Schlechtriem, Internationales UN-Kaufrecht (1996) 39-40 n.92
Spanish: Perales, Revista Jurídica (Peru 1997) No. 13, 241-262 [commercial letters of comfirmation]Go to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
Translation by Yvonne P. Salmon [*]
The plaintiff [seller] is a company with limited liability under Austrian law established in […] Austria. The defendant is a joint stock company established in Basel.
Austria ratified the United Nations Convention on Contracts for the International Sale of Goods of 18 April 1980 (CISG; SR 0.221.211.1) on 29 December 1987. It came into force on 1 January 1989. Article 100(1) CISG provides that the Convention applies only to contracts concluded on or after the date when the Convention enters into force in respect of the Contracting State referred to in Article 1(1)(b). The business transactions leading to the contract, which are considered below, indisputably took place at a time when the Convention had already entered into force in Austria.
Under Article 1(1)(b) CISG, the Convention applies to contracts for the sale of goods between parties whose places of business are in different States when the rules of private international law lead to the application of the law of a Contracting State. The CISG is thus also applicable if only one of the contracting parties is established in a Contracting State (cf. v. Caemerrer/Schlechtriem, Commentary to the UN Uniform Sales Law, Münich, 1990, note 36 to Article 1). As discussed above, the Swiss Conflict of Laws Statute indicates that Austrian Law is applicable. As such the CISG is applicable, even if Switzerland had not acceded to the Convention at the time of the conclusion of the contract of sale considered here. The CISG not only defines pure contracts of sale as "contracts for the sale of goods", but also encompasses contracts for the supply of goods to be manufactured or produced (Article 3(1) CISG). It is undisputed that the [seller] in this case had undertaken to supply the finished textiles. Consequently, the provisions of this Convention are to be applied to the contract.
The [seller] alleges that in 1989 the defendant ordered 187,000 meters of material. The order was confirmed by a letter of 24 February 1989. Later the quantities were specified as 176,000 meters. Then invoices were made and credit notes were issued for a faulty partial delivery. The last invoice of 15 January 1990 for 433,755 Ffr [French francs] (Annex 6e to Statement of Claim) was not paid. Payment of this is claimed.
The defendant disputes its capacity to be made a defendant in this action. [Buyer] alleges that the contract on which the [seller] bases its claim was not between the [seller] and itself, but was concluded between the [seller] and a third company, firm […], resident in France. In the development of the contract, the defendant claims that [buyer] merely had the function of an agent.
It is not contested that in February 1989 negotiations took place in […] (France), in which […] as representative of the [seller], as well as Mrs. […] the CEO of firm […] took part, [nor is it contested that] the contract upon which the [seller] bases its claim was the subject of the talks.
Only the telex drawn up by […] of 14 February 1989 (Annex 1 to defendant's plea) confirms the position of the defendant that there was only one contract concluded with […]. This telex is addressed to Mrs […]. In this telex, reference is made to "OUR VISIT WITH […], ON 10/02/89 AT […]. PRODUCTION […] AND […]"
The telex contains, inter alia, the acknowledgement concerning the article […] "3. Confirmation of your new order in Article […]" for 252,000 meters, to be delivered from May to December 1989. The communication states further that the defendant had received a copy of the telex of 14 February 1989. This communication standing alone would allow the conclusion that the contract was verbally concluded between the [seller] and firm […], and not between the [seller] and the defendant.
However, on 24 February 1989, the [seller] drew up a confirmation of order addressed to the defendant. It confirmed the order (Number […]), in Article […]) 187,000 meters to be manufactured.
Moreover, in the future, invoices and correspondence were delivered to the defendant without ever having made clear that [buyer] was acting only as a representative of firm […]:
In addition, for "wrongly delivered goods" with article number […], the defendant was given a credit note with the letter of 31 December 1989 for invoice No. 890352 for the amount of 17,188.92 Ffr (Annex 7 to defendant's plea). Another credit note to the defendant for the amount of 56,250.- Ffr was issued on 27 June 1990 (Annex 8 to defendant's plea). The defendant recognized that form of compensation. [Buyer] announced by telex: "We have given directions to our bank to transfer to the account (of the claimant) with […] in […] account […] the amount of 354,421 Ffr: (According to the list contained in the telex the defendant deducted the credited sums mentioned above from the total sum of 427,850.10 Ffr. (see Annex 9 to defendant's plea).
With regard to the coming into existence of the contract, the CISG basically has regard only to the express consent that results from offer and acceptance.
According to the prevailing opinion, a confirmation of order only has contractual effect in the meaning of the CISG, if this form of contract formation can be qualified as commercial practice under Article 9 of the CISG (cf. v. Caemmerer/Schlechtriem, Commentary on the Uniform UN Sales Law, N 6 for Article 14-24; Huber/Czerwenka, International Sales Law, Commentary to the Sales Convention, N 18 for Article 14).
Article 9(1) CISG provides that the parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. Under Article 9(2), the parties are considered, unless it has been otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.
At the outset, it is to be noted that in both Austria and Switzerland the contractual effect of commercial communications of confirmation (in domestic contractual relations) is not denied and thus that both parties recognized the legal effects of such a communication and also had to take into account that they might be held to those legal effects. For Swiss Law, the contractual effect of a letter of confirmation is based on Article 6 of the Code of Obligations. According to the prevailing opinion, a letter of confirmation constitutes an "indication for the formation and the content of the concluded contract". (Schönenberger/Jäggi, Berne Commentary, Note 84 to Article 6 Code of Obligations; BGE 114 II 250 ff.; cf. for Austrian Law Commentary to the General Civil Code, 1. Band, editor Prof. Dr. P. Rummel, Vienna 1990, N 13 to 861). As the legal systems of both States generally agree on this issue for domestic contractual relationships, it is not to be assumed that other rules are applicable to contracts for the supply of textiles in international relationships between contractual partners established in Switzerland and Austria.
A corresponding commercial usage, at least in the sense of Article 9(2) CISG, is thus confirmed.
Moreover, the [seller] had not only drawn up a confirmation letter in connection with the contested invoice for 433,755 Ffr (letter of confirmation of 24 February 1992, Annex 4 to Statement of Claim), but also another concerning an order for 6,500 meters of articles 26166 (Annex 3 to defendant's plea) on 24 February 1989.
The defendant likewise does not argue that the first mentioned confirmation letter had represented an innovation with relation to the business relations between the parties. This allows the conclusion that the letters of confirmation must have constituted a practice that the parties had established between themselves in the sense of Article 9(1) CISG.
The parties, in this case namely the defendant, are bound by the effects of this usage. Had the defendant, after receipt of the confirmation letter of 24 February 1989, wished to have been understood by the [seller] to be in fact not a contractual partner but rather an agent, [buyer] would have had to inform the [seller] of this at that moment.
A final indication for the formation of a contract between the parties is the purpose registered in the commercial register by the defendant, i.e., "Purchase, sale and supply of textiles of all kinds". The defendant had made no attempt to correct the inaccuracy of this entry. Thus it is to be held that the contested contract between the parties did come into existence. The communications raised by the defendant, which were sent by the [seller] to firm […] in the course of the development of the deliveries have no bearing on this (cf. Communication from the defendant to the [seller] of 26 June 1990, Annex 7 to defendant's plea). The evidence of the defendant that [buyer] did not itself decide the negotiations of the payment of invoices is also irrelevant (cf. Communication of the defendant to the [seller] of 26 June 1990, Annex 10 to defendant's plea). Even if it was the case that firm […] had the power of control over the defendant, this could not invalidate the contractual relationship between the parties in any way. On all these grounds, the answerability of the defendant as the proper party in the case at hand is to be confirmed.
In so doing, the defendant raises an issue that is not provided for in the Basel Civil Code of Procedure or in general civil procedural law, and so is not to be admitted.
All submissions of the defendant regarding damages, whether caused by itself or by firm […], were generally not sufficiently substantiated: if it is established that the defendant is the contractual partner of the [seller], [buyer] must in any case raise and quantify its own damages claim. The defendant states that in any event it is not in a position to prove the damages which were caused to firm [...].
Likewise, that is to be established if one wished to raise a case of possible third-party damages in the case at hand. Also, in this case the relevant third-party damages should be raised and quantified.
That the bank rate of the Austrian National Bank 1989 was 5.5% or more according to the General Terms and Conditions of Trade of the [seller] can, given the interest situation in Austria, be regarded as established. Therefore, it is to be established that the 9% interest claimed by the [seller] was agreed upon. Thus the interest claim of the [seller] can also be awarded in full.
* Associate, Institute of International Commercial Law, Pace University School of Law.
All translations should be verified by cross-checking against the original text.
All translations should be verified by cross-checking against the original text.Go to Case Table of Contents