3. The financing company, Ecoban, is identified as the shipper
on the
waybill.
4. The original fax was in Hungarian. An English
translation of unidentified
origin reads in part, "After weighting [sic] the full material it was stated
that altogether 5600 yard [sic] is missing." However, the reference to
weighing
appears to be a mistranslation. First, Sandor Braun, the president of the
plaintiff corporation, translated the same sentence to read, "After
measuring
the whole material it was found, that 5,600 yards (6,124.2M) material
lacking
altogether." Pl. Exh. 5. Second, the word originally translated as
"weighing"
is "osszes," which appears again as "osszesen" immediately before "5600
yard." Since in the latter context this word clearly refers to length, it
may be inferred that it has a similar meaning earlier in the sentence.
5. Mr. Braun testified that the meeting took place "maybe in
October." Tr. 33. His airline tickets indicate that he was in Budapest
between September 23 and October 5. Pl. Exh. 19.
6 Braun has never argued that a waybill is finally determinative of the
legal
rights as between a buyer and seller. Such a contention would be
unavailing.
Although waybills and bills of lading constitute prima facie evidence of
delivery of the cargo indicated, the presumption they create is a rebuttable
one. See Insurance Co. of North America v. S/S "Globe
Nova", 820 F.2d 546,
549 (2d Cir.), cert.
denied, 484 U.S. 965 (1987); Internatio, Inc. v. M/V
Yinka Folawiyo, 480 F. Supp. 1245, 1251-53 (E.D. Pa.
1979)(consignee recovers for shortage where goods delivered exceeded
quantity
indicated in bill of lading but consignee proved more goods in fact loaded
on
vessel).
7. If anything, Alitalia has been paid freight charges based
on a weight lower
than that which Braun contends is correct.
(. . .)
II. Braun v. Alitalia-Linee: Reduction in Price Under Article 50
The court rejected Braun's argument, explaining that
(. . .)
Go to entire text of Flechtner commentary
[*] Professor, University of Pittsburgh
School
of Law. A.B. 1973, Harvard College; A.M. 1975, Harvard University; J.D.
1981,
Harvard University School of Law. The author thanks Cathy Sakach for her
intelligent and diligent assistance with this article, and the University of
Pittsburgh School of Law for supporting this project through a summer
research
grant. I also thank Professor Volker Behr of the Law Faculty at the
University
of Augsburg, Germany for his generous help on certain issues. See
infra
note 32.
[1] U.N. Conference on Contracts for the
International Sale of Goods, Final Act (April 10, 1980), U.N. DOC. A/CONF.
97/18, reprinted in S. Treaty Doc. No. 98-9, 98th Cong., 1st Sess.
and
19 I.L.M. 668 (1980) [hereinafter CISG or Convention].
[2] Journal of Law & Commerce
CISG
Contracting States and Declarations Table, 14 J.L. & COM. 237, 244
(1995).
[3] The following U.S. cases cite CISG:
Beijing
Metals & Minerals Import/Export Corp. v. American Bus. Ctr., Inc., 993
F.2d
1178, 1183 (5th Cir. 1993); Orbisphere Corp. v. United States, 13 Ct. Int'l
Trade 866, 882 (1989); Graves Import Co., Ltd. v. Chilewich Int'l Corp.,
No.
92 CIV. 3655, 1994 U.S. Dist. LEXIS 13393, at *13 (S.D.N.Y. Sept. 21 1994);
Delchi Carrier SpA v. Rotorex Corp., No. 88-CV-1078, 1994 U.S. Dist. LEXIS
12820, at *11, *12 (N.D.N.Y. Sept. 9, 1994); Filanto, S.p.A. v. Chilewich
Int'l
Corp., 789 F. Supp. 1229, 1237 (S.D.N.Y. 1994); S.V. Braun Inc. v.
Alitalia-Linee Aeree Italiane, S.p.A. No. 91 CIV. 8484 (LBS), 1994 WL
121680,
at *5 (S.D.N.Y. Apr. 6, 1994); Interag Co. Ltd. v. Stafford Phase Corp., No.
91
Civ. 3253, at *11 (S.D.N.Y. May 22, 1990); Promaulayko v. Amtorg Trading
Corp.,
540 A.2d 893, 897 (N.J. Super. Ct. App. Div. 1988), rev'd (on grounds
unconnected to CISG) 562 A.2d 202 (N.J. 1989).
(. . .)
[62] No. 91 CIV. 8484 (LBS), 1994 WL
121680
(S.D.N.Y. Apr. 6, 1994).
[63] The court assumed (without
discussion)
that the Convention applied to the sales transaction between Braun and
Nikex.
The assumption was probably correct. The seller was presumably located in
the
United States (although the court never specified Braun's location) and the
buyer operated out of Hungary. Because CISG was in force with respect to
both
Hungary and the U.S. when the sale occurred in 1990, and because there is no
evidence that the parties agreed to displace CISG with other law, the
Convention would apply under Article 1(1)(a). See CISG Art. 6.
[64] Article 50 continues: "However, if
the
seller remedies any failure to perform his obligations in accordance with
article 37 or article 48 or if the buyer refuses to accept performance by
the
seller in accordance with those articles, the buyer may not reduce the
price."
[65] 1994 WL 121680 at *5.
[66] Eric E. Bergsten & Anthony J.
Miller, The Remedy
of
Reduction of Price, 27 AM. J. COMP. L. 255, 258, 265-67. Bergsten and
Miller were not working with the final text of CISG, but were analyzing an
earlier draft.
[67] 1994 WL 121680 at *4.
[68] Article 35(l) itself does not
explicitly
state that delivery of an insufficient quantity of goods creates a
"non-conformity." In contrast, Article 35(2) expressly declares that goods
do
not conform to the contract unless they meet quality specifications.
Article 37, furthermore, seems to draw a distinction between a "deficiency
in
the quantity of the goods" and "non-conforming goods."
[69] See, e.g., BIANCA &
BONELL,
supra note 43, art. 50 para. 1.1-3.4 (fails to mention the
availability of price reduction where the seller delivers the wrong quantity
of
goods); HONNOLD, supra note 12, § 313.1 (fails to mention
insufficient
quantity as among the "types of non-performance" for which Article 50
arguably
might provide a remedy).
[70] Professor Honnold declares that
Article
50 has its "principal significance" in situations where the seller can claim
exemption from damages under Article 79. HONNOLD, supra note
12,
§ 312, at 393.
[71] BIANCA & BONELL, supra
note
43, art. 50 para. 1.2 at 368; HONNOLD, supra note 12, §
313 at 395;
KRITZER, supra note 12, at 375; Bergsten & Miller,
supra
note 63, at 256-58, 272; Winship, supra note 12, at 49; Sara G.
Zwart, The New International Law of Sales: A Marriage
Between Socialist, Third World, Common, and Civil Law
Principles,
13 N.C. J. INT'L L. & COM. REG. 109, 120-21 (1988).
[72] BIANCA & BONELL, supra
note 43, art. 50 para. 2.1.2; HONNOLD, supra note 12,
§ 312;
KRITZER, supra note 12, at 375-78; Bergsten
&
Miller, supra note 66, at 259-63 (n.b., the discussion in the
Bergsten
& Miller article is based on an earlier draft of the Convention, and
their
analysis would change under the version of Article 50 finally adopted).
[73] BIANCA & BONELL,
supra
note 43, art. 50 para. 1.2 at 368-69 & para. 2.1.3 at 372; HONNOLD,
supra
note 12, § 311; Andrew Babiak, Comment, Defining "Fundamental
Breach"
Under the United Nations Convention on Contracts for the
International
Sale of Goods, 6 TEMP. INT'L & COMP. L.J 113, 131; Bergsten &
Miller, supra note 66, at 256, 271-72.
[74] BIANCA & BONELL, supra
note 43, art. 50 para. 1.2 at 368-69; HONNOLD, supra note12,
§ 313 at
396; Bergsten & Miller, supra note 66, at 255-56, 267-72.
[75] At the request of the UNCITRAL
working
group drafting the Convention, the U.N. Secretariat prepared a report
dealing,
inter alia, with the reduction in price remedy. The report criticized the
remedy for producing results inconsistent with "acceptable principles for
measuring damages" -- specifically for violating the principle that, "to the
extent practicable, the injured party should be placed in the same position
as
would have resulted from performance of the contract." REPORT OF THE
SECRETARY-GENERAL: OBLIGATIONS OF THE SELLER IN AN INTERNATIONAL SALE OF
GOODS;
CONSOLIDATION OF WORK DONE BY THE WORKING GROUP OF THE INTERNATIONAL SALE OF
GOODS AND SUGGESTED SOLUTIONS FOR UNRESOLVED PROBLEMS, IV UNCITRAL Y.B. 36
at
para. 150, U.N. Doc. A/CN.9/WG.2/WP.16 (1973), reprinted in JOHN O.
HONNOLD, DOCUMENT INTERNATIONAL SALES 112, 134 (1989). See also
Bergsten & Miller, supra note 66, at 274 ("to allow the buyer to
reduce the price where he has made a bad bargain would put him in a
better
position than he would be in if the seller were to perform the contract,
a
situation which cannot be justified by the usual explanation of the function
of
damages" (emphasis added)). Flechtner, supra note 47, at 59 n.28
("Article 50 offers aggrieved buyers an alternative to damages which, in
certain situations, yields results at odds with expectation-based remedies")
and 102-03 (the Article 50 remedy "will in some circumstances violate
expectation principles").
[76] See MURRAY, supra note
12,
§ 117(A) for discussion of the three interests protected by common law
contract
remedies.
[77] See Commentary on the Draft
Convention
on Contracts for the International Sale of Goods, Prepared
by
the Secretariat, art. 70, para. 7, U.N. Doc. A/CONF.97.5 (1979)
[hereinafter
Secretariat Commentary], reprinted in JOHN 0. HONNOLD,
DOCUMENTARY HISTORY OF THE UNIFORM LAW FOR INTERNATIONAL SALES
404, 449 (1989); BIANCA & BONELL, supra note 43, art. 74 para. 3.12-3.16; Flechtner, supra note 47, at 107 and authority cited n.262. Article 74 of the Convention does not specify when or where values are
to be measured for purposes of determining damages, but there is
authority
for measuring value at the time and place of delivery. BIANCA & BONELL,
supra note 43, art. 74 para. 3.16; Flechtner, supra note 47,
at 107
n.262.
[78] There is nothing in CISG equivalent
to §
2-717 of the U.C.C., which permits a buyer to set off its damages before
paying
the contract price. Professor Honnold, nevertheless, suggests that a buyer
with a damage claim may have a right of "set-off and counterclaim" as a
matter
of "procedural systems" and "payment and settlement practices" that are
outside
the scope of the Convention. HONNOLD, supra note 12, §
313.2.
CISG's drafting history, furthermore, contains suggestions that parties to a
sale governed by the Convention retain setoff rights they enjoy under
otherwise-applicable domestic law. Cf. Secretariat Commentary, supra
note 77, art. 77, para. 9, reprinted in HONNOLD, supra
note
77, at 453 (1989)(stating that party who has "claims arising out of the
contract or
its breach" and who resells goods under the CISG provision that became
Article
88(3) retains whatever rights it had "under the applicable national law" to
"defer the transmission of the balance [from the resale] until the
settlement
of those claims").
[79] The fact that Buyer would end up
paying
$20/barrel for oil worth only $15/barrel suggests that it may look for an
alternative remedy. Buyer can refuse the tendered oil and "avoid the
contract"
if the non-conformity (the excessive sulphur content of the oil) constitutes
a
"fundamental breach." See CISG Arts. 49(1)(a) and 25. By relieving Buyer
of
its obligation to pay the price (see CISG Art. 81), avoidance would put
Buyer
in a better financial position than if Buyer kept the oil, no matter what
remedy it chose in the latter case -- i.e., whether it claimed damages under
Article 74 or reduced the price under Article 50. The point of the textual
discussion, however, is not to identify Buyer's best remedy, but to
demonstrate
that the remedy of price reduction under Article 50 departs from
expectation-based remedies. For a more complete discussion of the remedies
available to someone in Buyer's position see Flechtner, supra note
47,
at 54 ff.
[80] In other words, if Seller had
shipped
conforming 1% oil Buyer would have paid the contract price of $25/barrel for
oil worth $20/barrel, losing $5/barrel. By paying $20/barrel for 2% oil
worth
only $15, buyer similarly loses $5/barrel --its "expectation" is
"protected."
[81] Formulas for calculating the price
reduction are given in BIANCA & BONELL, supra note 43, art. 50
para.
2.1.2, and KRITZER, supra note 12, at 377. Note that the Article 50
calculation is based on the value of goods "at the time of the delivery." In
earlier drafts of the Convention price reduction was based on values "at the
time of the conclusion of contract." The change was made to avoid requiring
proof of the value of goods as of a time when the goods might not exist.
BIANCA & BONELL, supra note 43, art. 50 para. 1.3.2; HONNOLD,
supra
note 12, § 313 at 396. The discussion of price reduction in
Bergsten
& Miller, supra note 66, at 258-63, is based on the earlier
version
of the price reduction provision under which value was measured at the time
the
contract was formed; in other respects the analysis and examples in that
article are consistent with the methodology used in the text.
[82] "[W]hen, between the date of the
contract
and the date of delivery, there has been a decline in the value the goods
would
have had when delivered if the goods had conformed to the contract . . . the
Article 50 formula can enable the buyer to obtain a larger recovery than the
Article 74 formula." KRITZER, supra note 12, at 377.
[83] On the facts of the example there
are no
apparent reliance damages or restitutionary amounts for Buyer to recover
from
Seller. Of course one might require Buyer to pay for the goods it has
received
at a restitutionary rate -- i.e., the reasonable value of the 2% sulphur
oil,
which is $15/barrel. This amount does not correspond to the $18.75/barrel
price produced by Article 50. Under the U.C.C., furthermore, Seller would
not
be limited to a restitutionary recovery against Buyer: Because Buyer has
accepted the non-conforming oil, it must pay for the goods "at the contract
rate," U.C.C. § 2-607(l), with an offset for damages, U.C.C.
§§ 2-714 and
2-717. The result would correspond to the CISG Article 74 damages described
in
the text. At any rate, it is clear on the facts of the example in the text
that the amount of the price reduction under CISG Article 50 does not
conform to common law restitutionary principles.
[84] Thus if on May 1 the market
value
of 1% sulphur oil was $35/barrel and 2% sulphur oil was worth $30/barrel,
Buyer
could claim $5/barrel damages under Article 74 (the difference between the
value of conforming 1% sulphur oil and the 2% sulphur oil actually
delivered).
Subtracting these damages from the $25 contract price, Buyer ends up paying
$20/barrel. The reduced price under Article 50 on these facts, in contrast,
is
approximately $21.43/barrel (30/35, or
6/7, times $25/barrel).
[85] "The proportion between the purchase
price and the objective value of the goods is maintained." BIANCA &
BONELL,
supra note 43, art. 50 para. 2.1.1 at 370. Bergsten & Miller,
supra note 66, at 262 & 274, use the phrase "balance of the
bargain."
[86] See Bergsten & Miller,
supra note 66,
at 274 ("The
justification for a reduction of price for defect in quality is a
reformation
of the original contract which retains the relative balance of the bargain
made
by the parties.").
[87] CISG Art. 45(2) provides that "[t]he
buyer is not deprived of any right he may have to claim damages by
exercising
his right to other remedies." See also HONNOLD, supra note
12,
§ 312 at 395; KRITZER, supra note 12, at 377-78; Bergsten &
Miller,
supra note 66, at 259; Flechtner, supra note 47, at 106.
[88] The situation also raises questions
concerning damage remedies: could the buyer keep the goods and claim
difference-in-value damages under Article 74 despite the seller's notice?
[89] So many, in fact, that one
commentary
states: "Price reduction as a remedy in international sales law meets with
the
greatest difficulties." BIANCA & BONELL, supra note 43, art. 50
para.
1.2 at 368.
[90] Id. para. 3.3; FRITZ
ENDERLEIN &
DIETRICH MASKOW, INTERNATIONAL SALES LAW: UNITED NATIONS CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS: CONVENTION ON THE LIMITATION
PERIOD IN THE INTERNATIONAL SALE OF GOODS art. 50 para. 4 (1992).
[91] BIANCA & BONELL, supra
note
43, art. 50 para. 3.4; HONNOLD, supra note 12, § 313.1.
[92] HONNOLD, supra note 12,
§ 312 at
394-95; Bergsten & Miller, supra note 66, at 264.
Other questions include what notice, if any,
a buyer who wishes to reduce the price must give the seller (compare
BIANCA & BONELL, supra note 43, art. 50 para. 2.1.3 (implying
that
reduction in price requires notice that takes effect upon dispatch) and
HONNOLD, supra note 12, § 312 at 394 (assuming that a buyer
will
give notice of price-reduction) with Bergsten & Miller, supra
note 66, at 263 (stating that "no [notice] requirement is placed on the
declaration of reduction of price")); the time limits for invoking Article
50
(see BIANCA & BONELL, supra note 43, art. 50 para. 2.1.3); how
the reduction is to be calculated if the price is payable other than in money (id., art. 50 para. 3.1); and the consequences of the "unilateral" nature of remedy (id., art. 50 para. 2.1.3; HONNOLD, supra note 12, § 313.2; Bergsten & Miller, supra note 66, at 263). (. . .)
Case commentary
Reproduced with permission from 14 Journal of Law and Commerce
153-176
(1995)MORE U.S. DECISIONS ON THE U.N. SALES CONVENTION:
If the goods do not conform with the contract and
whether or not the
price has already been paid, the buyer
may reduce the price in the same proportion as the value that the
goods actually delivered had at the time
of the delivery bears to the value that conforming goods would
have
had at that time.[64]
[t]he Vienna Convention may permit a proportionate reduction
in price for
non-conforming goods,
but Braun has stipulated here that the goods delivered to Nikex were
conforming. Accordingly, Nikex
had no legal justification for withholding payment.[65]
FOOTNOTES
Pace Law School Institute of International
Commercial Law - Last updated January 9, 2008
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents
|| Go to Case Search Form || Go to Bibliography