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CISG CASE PRESENTATION

Netherlands 22 August 1995 Appellate Court Arnhem (Diepeveen-Dirkson v. Nieuwenhoven Veehandel)
[Cite as: http://cisgw3.law.pace.edu/cases/950822n1.html]

Primary source(s) for case presentation: Unilex abstract; case comment


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Case identification

DATE OF DECISION: 19950822 (22 August 1995)

JURISDICTION: Netherlands

TRIBUNAL: Hof Arnhem [Hof = Gerechtshof = District Appeal Court]

JUDGE(S): Van Eupen, Runia, Van Loo

CASE NUMBER/DOCKET NUMBER: 94/305

CASE NAME: Diepeveen-Dirkson BV v. Nieuwenhoven Veehandel GmbH

CASE HISTORY: 1st instance Rb Arnhem 30 December 1993 [affirmed]; see also Rb Arnhem 3 February 1991

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Netherlands (defendant)

GOODS INVOLVED: Live lambs


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 7 ; 8 ; 77 ; 78

Classification of issues using UNCITRAL classification code numbers:

7A33 ; 7C231 [Application of good faith standards; Gap-filling by domestic law: recourse to domestic law selected by private international law];

8C [Interpretation of party's statements or other conduct: interpretation in light of surrounding circumstances];

77A [Obligation to take reasonable measures to mitigate damages];

78B [Interest on delay in receiving price or any other sum in arrears: rate of interest]

Descriptors: Scope of Convention ; Penalty clauses ; Good faith ; Intent ; Mitigation of loss ; Interest

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Editorial remarks

EDITORS: Franco Ferrari and Albert H. Kritzer

Buyer (Netherlands) contracted for the purchase of live lambs from seller (Germany) at a time when the CISG was in effect in both countries. The contract did not specify the governing law. The court held that the contract is governed by German law and that the CISG applies pursuant to Article 1(1).

Issues ruled upon:

Penalty clauses/Scope of CISG/Good faith/Gap-filling/Mitigation of damages. The contract contained a penalty clause in the event of late payment. Seller delivered the lambs to buyer on 18 May 1992. Buyer resisted payment on the grounds that "the agreed weight was insufficient". Without further discussion of the facts and issues, the District Court had ruled that buyer is obligated to pay the contract price and the fixed penalty.

The District Court's ruling on the penalty clause was based on German domestic law. On appeal, buyer contended that the penalty was disproportionate to the harm suffered by the late payment and should be decreased on grounds of fairness. Citing Articles 7 (good faith), 8(3) and 77, buyer stated that the penalty should be moderated. The court stated: "Article 8 . . . is about the interpretation of the intent of a party. That is no basis for moderation. Article 77 determines that a party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss. This provision is also no basis for moderating the penalty. Neither this provision nor other provisions of the CISG regulate the question whether the penalty the parties agreed upon is confiscatory or can be moderated. Therefore, this question must be answered according to German law." Applying German law, the court upheld the penalty.

Interest (rate of). The Appellate Court upheld the following ruling of the District Court. "[Seller] also claimed interest is due according to CISG Article 78. Because the rate of interest has not been arranged in the CISG, a rate of interest should be paid in a reasonable amount according to German law, Section 288 BGB (4%)". The basis of this conclusion is said to be "because the payment has been agreed in Germany currency and moreover, besides the CISG, German law is applicable."

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=156&step=Abstract>; [1996] The International Legal Forum (München), English language edition 1 [210]

CITATIONS TO TEXT OF DECISION

Original language (Dutch): Nederlands Internationaal Privaatrecht (NIPR) 1995 No. 514 [683-685]; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=156&step=FullText>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Papandréou-Deterville, English translation of Dalloz case comment cited below [text presented below]; Ferrari, International Legal Forum (4/1998) 138-255 [194 n.484 (definition of "goods"), 226 n.797 (scope of CISG: penalty clause)]; Gillette/Walt, Sales Law Domestic and International (Foundation Press 1999) 354 n.95 [scope of CISG: penalty clause]; Zeller, Leap forward towards unified international sales (May 2000) [Good faith: n.86]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 2-6 n.68 [cited as 24 August 1995]; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 8 para. 30 Art. 74 para. 49

French: Papandréou-Deterville, Dalloz Sirey (1997) 223-224

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Case comment

Translation of comment published in Dalloz Sirey (1997) 223-224

Appellate Court (Gerechtshof) Arnhem 22 August 1995
Diepeveen-Dirkson BV v. Nieuwenhoven Vichandel GmbH

Case comment by Marie-France Papandréou-Deterrville
Maître de conferences, Université de Strasbourg

Translation by Annabel V. Teiling

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In the case submitted to the Court of Appeals of Arnhem, a contract for the sale of live lambs was concluded in 1992 between a Company established in Germany and a buyer established in the Netherlands. The seller brought an action demanding the payment of the price and damages in fulfillment of a penalty clause contained in the contract. The Tribunal of First Instance held that the buyer had to pay the price, as well as the amount anticipated by the penalty clause. In the appeal, the buyer alleged that the penalty should be diminished in accordance with articles 7, 8(3), and 77 of the CISG. The penalty was inequitable, for it was not proportional to the loss incurred. The Court of Appeals held that neither article 8(3) concerning the interpretation of the declarations of the parties, nor article 77 relative to the obligation to mitigate losses resulting from the infraction of the contract, nor any other clause of the Convention can serve as a foundation for the reduction of the penalty amount. This question must therefore be settled according to the applicable law of the contract, in this case German law for which the reduction is not possible in commercial matters ( 348, c. com. German).

We approve the Court of Appeals of Arnhem for having justified the recourse to the German applicable law and the reject of the buyer's arguments, who invoked articles 8(3), and 77: according to the judges of Arnhem, none of these provisions provides a solution that can be linked back to the Convention. The Court thus followed an appropriate reasoning in presence of a internal gap arising from article 7(2). It is well known that, during the drafting of the Convention, no agreement was reached on the highly controversial question of penalty clauses (see C. Witz, op. cit., no. 79 and the ICC arbitral ruling cited). Incontestably, the question is a concern for national laws.

We can regret, however, that the judges did not elaborate on their consideration of the live lambs as goods. The Court of Appeals should have done so though, since the Convention does not include any definition for the term "goods," but restricts itself to exclude from its field of application certain goods without specifically mentioning live animals. In spite of the tendency that we observe in numerous laws that do not consider animals as "things" anymore, there is no doubt however that the Vienna Convention applies to the sale of animals.

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Pace Law School Institute of International Commercial Law - Last updated August 15, 2005
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