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CISG CASE PRESENTATION

Argentina 31 October 1995 Appellate Court (Bedial v. Müggenburg) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/951031a1.html]

Primary source(s) for case presentation: Case text


Case Table of Contents


Case identification

DATE OF DECISION: 19951031 (31 October 1995)

JURISDICTION: Argentina

TRIBUNAL: Cámara Nacional de Apelaciones en lo Comercial [Appellate Court]

JUDGE(S): José Luis Monti and Bindo B. Caviglione Fraga

CASE NUMBER/DOCKET NUMBER: 47.448

CASE NAME: Bedial S.A. v. Paul Müggenburg and Co. GmbH

CASE HISTORY: 1st instance Trib. Buenos Aires 18 March 1994 [affirmed]

SELLER'S COUNTRY: Germany (defendant)

BUYER'S COUNTRY: Argentina (plaintiff)

GOODS INVOLVED: Dehydrated mushrooms


Case abstract

ARGENTINA: Cámara Nacional de Apelaciones en lo Comercial 31 October 1995

Case law on UNCITRAL texts (CLOUT) abstract no. 191

Reproduced with permission from UNCITRAL

An Argentinean buyer and a German seller concluded a contract, containing a C & F clause, for the sale of dried mushrooms to be shipped to the buyer. In the course of their transport to Buenos Aires, the goods deteriorated. The buyer sued the seller claiming lack of conformity of the goods.

In accordance with article 67 CISG, the court held that the risk passed to the buyer when the goods were handed over to the first carrier for transmission to the buyer in keeping with the contract of sale. In addition, the court held that the C & F clause obliged the seller to hand over the goods to the carrier and to pay the freight. However, a C & F clause does not affect the passing of the risk. Further, it should be noted that the buyer, pursuant to the C & F clause in the contract of sale, had taken out an insurance policy for transportation risks.

In accordance with article 66, the court held that the buyer, after passing of the risk, was not discharged from its obligation to pay the purchase price, even in the event of loss or damage to the goods, unless the loss or damage was due to an act or omission of the seller. In this case, the damage of the goods occurred after the passing of the risk to the buyer, who did not adduce that it was owing to an act or omission of the seller. Accordingly, the court dismissed the action.

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Classification of issues present

APPLICATION OF CISG: No [Article 100, but the court applied the CISG]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 31 ; 36 ; 66 ; 67 ; 100 [Also cited: Articles 30 ; 39 ; 86 ]

Classification of issues using UNCITRAL classification code numbers:

31A [Place for delivery: contracts involving carriage of goods];

36A ; 36B1 [Time for assessing conformity of goods: conformity determined as of time when risk passes to buyer; Unless lack of conformity caused by seller's breach of any of his obligations];

66B [Loss or damage after risk has passed to buyer: buyer not relieved of obligation to pay unless damage due to seller's act or omission];

67A [Risk passes on handing goods over to first carrier]

Descriptors: Delivery ; Passage of risk

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=226&step=Abstract>

Spanish: CISG-Spain and Latin America database at http://www.uc3m.es/uc3m/dpto/PR/dppr03/cisg/rargen9.htm

CITATIONS TO TEXT OF DECISION

Original language (Spanish): CISG-Spain and Latin America database at http://www.uc3m.es/uc3m/dpto/PR/dppr03/cisg/sargen9.htm; El Derecho (Buenos Aires) No. 9110 (21 October 1996) 1-5; 1, 4-5; Derecho y Empressa (1996) 245-246; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=226&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Rosch, translation of Dalloz commentary cited below [text presented below]; Ferrari, International Legal Forum (4/1998) 138-225 [241 n.953 (reference to Art. 39(2))]; Honnold, Uniform Law for International Sales (1999) 401 [Art. 67]; Garro, 17 Journal of Law & Commerce (1998) 219-244 [the analysis of Bedial v. Paul Müggenburg is presented at pages 238-243 of this commentary]; Flambouras, Transfer of risk (1999) n.275; Spanogle/Winship, International Sales Law: A Problem Oriented Coursebook (West 2000) [seller's obligations: delivery 164-187 (case at 172-174)]; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.676, 681; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 67 para. 4

French: Rosch, Dalloz Sirey (1997) 225; Zuppi, in: Sebastien Bettschart ed., Les ventes internationales (CDICAC 1998) Vol. 36, 23 [25-28]

Spanish: Iud, El Derecho (Buenos Aires) No. 9110 (21 October 1996) 1-9; Menicocci, Derecho y Empressa (1996) 246-249

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Case comment

Translation of comment published in Dalloz Sirey (1997) 225

National Chamber of Commercial Appeals of Argentina
(Cámara Nacíonal de Apelaciones enlo Comercial)

31 October 1995

Case comment by Wolfgang Rosch
Rechtsanwalt au barreau de Sarrebruck

Translation by Annabel V. Teiling

[…]

In 1987, Bedial SA [buyer], established in Argentina, concluded a sales contract with Paul Müggenburg and Co GmbH [seller, headquartered in Hamburg (Federal Republic of Germany). The contract involved 1100 kilos of dehydrated mushrooms and contained a clause "C&F Buenos Aires (without insurance)," Hong Kong was listed as a port of embarkation for the goods. Before the embarkation, the competent Chinese authorities verified the quality of the mushrooms and found them to be in a good state. Such was not the case when the goods were re-examined after the arrival of the vessel in Argentina. Indeed, the official analysis operated on a sample of the goods gave then a poor result, the mushrooms having been gnawed away by insects and contaminated by grubs. The goods having been declared inapt for human consumption, [buyer] refused them and took advantage of the situation to demand the annulment of the contract. The seller obtained nonetheless the money it was due because of a letter of credit accepted by the [buyer].

Must the seller reimburse the buyer for the defective goods? To this question, the courts of first instance and second instance answer negatively.

1 - The decision of the court of first instance begins by reminding us of the fact that under a C&F clause, the transfer of the risks is at the transfer of the goods to the transporter, and consequently, that responsibility is passed on to the buyer to prove that the deterioration of the goods is based on an anterior events, or that it is imputable to the seller's fault. There is reason to plainly approve the decision in the sense that it correctly summarizes the importance of a C&F clause, which states that the seller is not held to the risks of the transportation, once the goods are on board -- more exactly, just when they pass the ship's rail. Based on a popular doctrine, the burden of proof lies on the buyer, who must invoke the defectiveness of the goods as subsequently noticed. This repartition of the burden of proof could indeed be inspired from the American Uniform Commercial Code from which certain authors deduce the general principle that from which the party invoking the bad execution of the contract must also bring the proof. (C. M. Bianca and M. J. Bonell, op. cit., article 36 no. 3). However, it is important to underline that the clause C&F, such as, does not expressly rule the regime of the proof applicable to the contract.

Assuredly, the decision from Argentina could have stopped there its reasoning to nonsuit the [buyer]'s demand. In the absence of the proof of a contractual violation imputable to the seller, and considering the aptitude certificate established before the embarkation, the obligation of the buyer to pay the price could not be called into question by the simple record of the deterioration of the goods at the port of destination. The judge from Argentina invoked as reinforcement the Vienna Convention, inapplicable in this case.

2 - The decision of the court of second instance examined the action of the [buyer] "in light of the norms that have been established to be applied in such case," such as articles 66 and 67 on the Vienna Convention.

Brought into force in Argentina on January 1, 1988, the Convention did not have the standing to be applied to the contract concluded in 1987. The principle of the non-retroactivity of the new uniform law is clearly enounced in article 100. Based on this clause, the moment of the formation of the contract is decisive for the application of the contract, even if the parties had the discretion of opting retroactively, even at the time of the suit, in favor of the application of the Convention to their contract. However, in this case, we cannot retrieve any revealing evidence of the communal intention of the parties to submit the contract to articles 66 et seq. of the Convention. Quite to the opposite in fact, the parties had their contract governed by the C&F clause which, even though very close to the clauses of the Convention on the transfer of risks, could not however be assimilated to this latter.

We can, however, regret that the ruling seems to insinuate the mandatory character of the Vienna Convention (see cass. 1st civ., 23 January 1996, D. 1996, Jur. p. 332, note C. Witz). The Convention has only a gap-filling character (article 6), with parties able to in principle introduce in their contracts clauses that derogate from the Convention. If the parties include Incoterms in their contract, these terms of course have an obligatory power; they prevail over the clauses of the Vienna Convention (see article 6; on this general question, see La Convention de Vienne sur la vente internationale et les incoterms, Acts of the colloquium of 1 and 2 December 1989, under the direction of Y. Derains and J. Ghestin, LGDJ, 1990).

The decision reported presents a double interest. On the one hand, it opens the opportunity to remind of the importance of Incoterms when a contract falls under the regime of the CISG. In addition, it reveals the zealousness of Judges of Argentina in favor of the application of the new uniform law, which should win a vivacious success in the jurisdictions of this country.

[…]

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

"Bedial S.A. v. Paul Mggenburg and Co. GmbH, ordinary proceedings"

Translation [*] by Juan Manuel Falabella [**]

[International sales of goods: governing law, loss and damage, Buyer's obligation to pay the price]

   -    Decision of the Court of Original Jurisdiction
   -    Decision of the Appellate Court

DECISION OF THE COURT OF ORIGINAL JURISDICTION

[Summary]

1. In the case of an international sales of goods, it is necessary to consider that, by application of articles 66 and 67 of the United Nations Convention on Contracts for the International Sale of Goods 1980 (Act 22.765) [*], loss of or damage to the goods after the risk has passed to the buyer does not discharge the buyer from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.

2. Considering that, in this case, the [Buyer] failed to make any reference to a cause-effect relation between [Seller]'s conduct and the damage suffered by the goods after they were handed over to the first carrier, it is concluded that, by application of articles 66 and 67 of the United Nations Convention on Contracts for the International Sale of Goods 1980 (Act No. 22.765 [*]) governing the international sales of goods -- [Buyer] is not discharged from the obligation to pay the agreed price.

3. In the case of an international sale of goods with a Cost & Freight ("C&F") clause, the seller meets his obligation by delivering the goods on board, by paying the freight to destination, and by handing in the relevant documents, with the buyer bearing any risk during transportation (Decision of the Court of Original Jurisdiction).

4. Considering that, in an international sale of goods concluded with a C&F clause, the shipment entails the delivery of the goods to the buyer and, thus, the transfer of property to him, it is the buyer's who, from such moment, bears the risks for loss of or damage to the goods. Therefore, it is concluded that the buyer can only be excused from complying with his obligation to pay the agreed price if he evidences that the damage has occurred prior to the time in which the goods were under his responsibility or is the result of seller's breach of contract or negligence (Decision of the Court of Original Jurisdiction).

5. In the case of a contract for the sale of goods with a C&F clause in which the goods are transported at buyer's cost and risk, seller can only be held liable if the damage results from causes preceding the shipment; circumstances that must be evidenced by the buyer since it is a general presumption that the goods remained in good conditions at the moment of shipment (Decision of the Court of Original Jurisdiction).

Juzgado Comercial (Commercial Court of Original Jurisdiction) No. 11

Buenos Aires, 18 March 1994

[BACKGROUND]

1. On pages 156/159 of the record, Juan Jos Val, on behalf of [Buyer] filed a claim against the [Seller] under sections 553 and provisions of the Commercial Code of Procedure that are in accord, after the proceedings captioned "Bedial S.A. v. Paul Muggenburg and Co. GmbH, summary procedure for the enforcement of court decision" heard by this very same Court and Court Clerk. [Buyer] pleaded that [Seller] should be ordered to reimburse:

   a)    The deposits in the amounts of US $13,319 and US $1,600 that [Buyer] made on 16 June 1989 in the enforcement procedure, as a performance bond resulting from that procedure plus an annual interest rate of 8%;
 
   b)    The amount in relation to the fees [Buyer] had to pay to the attorneys of both parties in the procedure for the enforcement of the court decision, plus an annual interest rate of 6%;
 
   c)    The amount of AR $31,943.33 that [Buyer] paid to [Seller] as court filing fee, plus an annual interest rate of 6%; and
 
   d)    The amount [Buyer] had to pay for the expenses derived from the international sale of goods, in accordance with the detailed description and amounts, plus an annual interest rate of 6%.
 
   e)    In addition, [Buyer] claimed, as damages to reputation, the payment of an amount equivalent to 20% of the total amount of the claim and the court costs of these proceedings.

[Buyer] further reported the transaction of sale and import of 1,100 kilograms of dehydrated mushrooms by which defendant, in its capacity as seller, issued the draft which gave grounds for the stated enforcement procedure and which was accepted, in due time, by the [Buyer].

[Buyer] also argued that the analysis performed by the Federal Department of Health and Human Services indicated that the sample was considered "unfit for human consumption" which thus prevented their sale at the market.

In this regard, [Buyer] argued that the negotiations opened by [Seller] through its representative, [the trustee of] Emilio Ghergo's Estate, were fruitless and that [Buyer] was informed that the accepted draft would be enforced. Moreover, [Buyer] referred to the subsequent negotiations until [Buyer] sent to the [Seller]:

   a)    A Telex (Identification No. 2,163,082), on 9 February 1988, informing the [Seller] of termination of the contract on the grounds that the goods were unfit for human consumption and thus their import was prohibited and further demanding that the [Seller] refrain from enforcing the draft and return it; and
 
   b)    A certified letter (Identification No. 471,833) attaching a copy of the official chemical study.

[Buyer] further sent a registered letter (Identification No. 1,391) to [Seller]'s representative answering a letter through which it has been informed of the existence of a subsequent test stating that the goods were indeed fit for human consumption.

[Buyer] also reported the content of a letter sent by the [Seller] emphasizing the fact that subsequent tests evidenced that the goods were fit for human consumption, demanding the performance of the contract, and rejecting any relation between the draft and the closing of the contract.

In addition, [Buyer] reported the subsequent correspondence and, in particular, the fact that [Seller] changed its arguments by stating circumstances prior to the official chemical study, clauses stated in the invoice and bill of lading under international health regulations, which were firmly rejected by the [Buyer].

Next, [Buyer] explained the proceedings it must observe so as to lift the suspension as importer ordered by the Customs Authority, which threatened to order the reshipment of the goods or to destroy them in case of noncompliance.

[Buyer] further reported the new correspondence with [Seller], the filing of the proceedings, the reshipment of the goods and [Seller]'s rejection, [Buyers]'s answer demanding that [Seller] accept the reshipped goods, and [Buyer]'s decision to leave the goods at [Seller]'s disposal and charge at the port of Hong Kong. Then, the [Buyer] supported its claim on legal bases and offered evidence to the Court.

Finally, [Buyer] further claimed a sum as lost profits equivalent to 20% of the purchase price, which would have been [Buyer]'s benefit.

2. On pages 192/199 of the record, Silvia Mara Furfafo, on behalf of [Seller] made a detailed denial of [Buyer]'s allegations and then challenged the authenticity of the documents filed by the [Buyer]. She further argued that the parties have agreed on an international sale of goods governed by Act. No. 22.765 [*] which introduced the United Nations Convention on Contracts for the International Sale of Goods to the [Argentine] legal system.

Based on this Convention and applicable case law, [Seller argued that] the risk of damage after the goods were handed over to the first carrier passes to the buyer and that the [Buyer] must evidence that the damage existed before the goods were handed over if [Seller] is to be held liable for the damages suffered by the goods. [Seller] further stated that it will provide evidence that the goods were in perfect condition at the time of leaving the country of origin and that the operation was agreed with a C&F clause. In addition, [Seller] made reference to and transcribed the applicable articles of the United Nations Convention on Contracts for the International Sale of Goods, stating that the goods left its country with the relevant phytosanitary certificate (indicating that the goods were suitable for consumption), issued by the Government of the China Republic, through the official export office, on 30 June 1987 (date of shipment) under accepted International Health Regulations, consistent with Argentine Food Regulations.

In relation to the analysis done in Buenos Aires, [Seller] stated that the certificate No. 746,141 evidences that it was performed on a sole bulk and it does not specify either the causes of the irregularities observed in the goods or the date in which such irregularities were made.

[Seller] further argued that, under the regulations of the Customs Office, any of the parties that took part in the collection of samples for the first test may request a second analysis and that [Buyer] which indeed took part did not request it. In this regard, [Seller] further argued that it has even been possible to perform a third analysis and [Buyer] had the obligation to perform it so as to determine the actual existence, cause and time of the damage.

[Seller] added that the exporter's representative, [the trustee of] Emilio Ghergo's Estate, did the only thing available to him, which was to get the sample given by the [Buyer] analyzed by qualified experts, resulting that the goods were perfectly suitable under the provisions of section 1249 of [Argentine] Food Regulations, with no grubs, insects or worms whatsoever.

In addition, [Seller] stated that it informed the [Buyer], through the stated correspondence, that it had a phytosanitary certificate issued by the Government of the Republic of China stating that the goods complied with international standards. [Seller] further stated that, notwithstanding this, [Buyer] reshipped the goods, thus destroying the evidence which would have been decisive for the performance of an experts' examination.

[Finally, Seller] supported its claim on legal bases and offered evidence to the Court.

3. On pages 202/203 of the record, [Buyer] answered the service of the evidence submitted by [Seller], making particular remarks on the phytosanitary certificate of the country of origin and challenging the authenticity of the phytosanitary certificate and its date [...]. In relation to the analysis performed at Guagnini Laboratories, [Buyer] challenged its authenticity and whether it has been performed on samples provided by the [Seller] or samples belonging to the purchased goods.

4. At the back of page 204 of the record, the Court brought the case to trial. On pages 210, 212 and 216, the Clerk of the Court reported the examined evidence. Then, on pages 490 after attaching the briefs with the final arguments filed by the parties, the case was ripe for decision.

[LEGAL REASONING]

Whereas,

1. [Buyer] brought ordinary proceedings after the summary procedure for the enforcement of the draft filed by the [Seller] at this very same Court, so as to get the reimbursement of the payments [Buyer] has made as well as other payments to be made for different reasons, during such procedure, to get the payment of the fees and expenses arising from the international sales of goods and to recover damages to [Buyer]'s reputation and lost profits.

2. [Buyer] alleged that:

   a)    [Buyer] entered into an international sale of goods with [Seller] in relation to 1,100 kilograms of dehydrated mushrooms coming from Sheungwan, Hong Kong;
 
   b)    In order to make the payment, a draft was issued which, once accepted, was enforced at the summary procedure;
 
   c)    The goods could not be sold since they were "unfit for human consumption" in accordance with the analysis performed by the Chemistry Office of the Regulation and Control Department of the Ministry of Health and Social Affairs;
 
   d)    Since no agreement could be reached with [Seller], the [Buyer] informed the [Seller] of the termination of the contract and the resulting reshipment of the goods.

3. The [Seller], however, challenged [Buyer]'s claim by arguing that:

   a)    The transaction was agreed under a C&F clause, thus [Seller]'s liability extended only to the moment of handing over the goods to the first carrier;
 
   b)    The goods were shipped along with the relevant phytosanitary certificate (indicating that the goods were suitable for consumption), issued by the Government of the Republic of China, through the official exportation office;
 
   c)    The analysis done in Buenos Aires was performed on a sole bulk and it did not specify either the causes of the irregularities observed in the goods or the date in which they occurred;
 
   d)    [Buyer] did not request that more quantities of goods be examined nor the performance of another analysis as was authorized under the regulations of the Customs Office;
 
   e)    [Buyer] tried to terminate the contract without verifying whether the alleged damage affected the whole shipment and further prevented the performance of conclusive experts' examinations when ordering the reshipment of the goods.

4. In this regard, the Court finds that [Seller]'s arguments are correct since [Buyer]'s termination (actually rescission) of the contract does not have factual or legal support, considering that:

   a)    The parties entered into a contract for the international sale of goods with a C&F clause as stated by the parties in the pleadings and evidenced by the documents attached to the record;
 
   b)    Such modality is an alternative of the Cost, Insurance & Freight ("CIF") sale that limits seller's consideration to the delivery of the goods with freight paid until the place of destination but remaining in force the principles of the CIF sale (cf. Mu±oz, Luis "Derecho Comercial - Contratos."Ed. 60, Volume 2, Chapter XX-VII, p. 369, º456). In this regard, it has been stated that a sale is [considered to have been concluded with a CIF clause] when the price entails the cost and freight, remaining at buyer's discretion the taking out of insurance (cf. Zavala Rodrguez, Carlos Juan, "Cdigo de Comercio". Ed. 72, p. 181, º1390);
 
   c)    Seller meets its obligation by delivering the good on board, by paying the freight to destination, and by handing in the relevant documents, with the buyer bearing any risk during transportation (cf. Zavala Rodrguez, Carlos Juan, op. cit., p. 174, º1374). In this sense, it has been stated that shipment entails the delivery of the goods to the buyer and, thus, the transfer of property; then it is the buyer who, from such moment, bears the risks for loss or damage (cf. Fernßndez Raimundo, L., "Cdigo de Comercio." Ed. 48, Volume II, pp. 330/331). The fact that [Buyer] took out transportation insurance on the purchased goods (pages 312/314 of the record) entails the fact that the policyholder, in this case, the [Buyer], understood it was bearing any risk during transportation;
 
   d)    [Buyer] acknowledged, in its complaint, that on 30 June 1987 -- which was also the date of shipment -- the representative of [Seller], [the trustee of] Emilio Ghergo's Estate, sent [Buyer] a shipment notice with a copy of the bill of lading and the certificate of origin (pages 158, last paragraph, and 158 back); therefore, there is no doubt that, on such date, the goods were transferred to the [Buyer] and thus the sold goods were at [Buyer]'s cost and risk;
 
   e)    In addition, [Seller] evidenced that the goods that were sold were fit for human consumption at the time of shipment. In this regard, the Intermediate People's Court of Shanghai informed that: (i) the Importation and Exportation Inspection Bureau of Shanghai issued, on 20 June 1987, a certificate of origin No. 1,271,919; (ii) that Bureau issued, on 20 June 1987, a certificate of inspection No. 1,271,919; (iii) an analysis in relation to the quality, plagues, impurities, and water quantity was performed over the dehydrated mushrooms, producing satisfactory results; (iv) the phytosanitary certificate was issued by China's Corporation on Importation and Exportation of Native and Farm Products -- Shanghai branch -- and it evidenced that the dehydrated mushrooms were in good condition and fit for human consumption. In relation to this evidence and its scope, [Buyer] remained significantly silent when filing its complaint;
 
   f)    In this regard, if the [Buyer] wanted to reject the goods because they did not have the agreed quality; the [Buyer] carried the burden of evidencing that the damage existed at the time of shipment. It has been stated that customary practices have introduced the "quality certificate" that seller must obtain under the regulations and practices of the port of shipment and, if after the payment or acceptance of the draft, the buyer finds that the quality does not meet the agreed conditions, the buyer might bring a claim against the seller but, in such case -- quite the opposite of the situation in a regular sale of goods -- in the case of contracts for the sale of goods with a CIF clause, there exists a presumption that the quality of the goods, at the time of shipment, met the terms and conditions of the contract and thus the buyer bears the burden of proving otherwise. In this regard, it has been stated that, in the case of contracts for the sale of goods with a CIF clause in which the goods are transported at buyer's cost and risk, seller can only be held liable if the damage results from causes preceding the shipment; circumstance that must be evidenced by the buyer, since it is a general presumption that the goods remained in good conditions at the moment of shipment. Pursuant to section 472, last paragraph, of the Argentine Commercial Code, it has been previously decided that if the transfer of title of the goods is considered to occur at the time of shipment, there is no ground to refuse to pay the price if the buyer did not invoke the apparent manifest damages at the time of shipment (In re, "Dalca Insdustria y Comercio Limitada v. Shebel S.A. Importadora y Exportadora, Inmobiliaria y Financiera, ordinary proceedings", Commercial Court of Appeal, 23 June 1986). This is stated since, in spite of the fact that the Vienna Convention is the governing law of the contract; the very same [Buyer] supported its claim in provisions of the Argentine Commercial Code.
 
   g)    In this case, [Buyer] did not evidence the occurrence of damage as stated in the previous paragraph. No satisfactory evidence has been submitted in relation to the fact that the goods were damaged prior to the shipment and this is central to dismiss [Buyer]'s arguments. This is so even when the [Seller] has mainly focused its arguments on another circumstance, since it cannot be presumed that [Seller] has waived its right to raise other defenses;
 
   h)    It is true that the analysis performed by the Chemistry Office of the Regulation and Control Department of the Ministry of Health and Social Affairs evidenced that the sample taken on 15 October 1987 was unfit for human consumption, since there were found insects and worms and damages produced by such for more than 1% mm and, therefore, the goods did not comply with the provisions of section 1249, subsection c), B) of [Argentine] Food Regulations. However, this is not enough to acknowledge [Buyer]'s right to terminate the contract since: (i) as stated by the [Seller], the analysis was performed on a sole bulk and it does not specify either the causes of the irregularities observed in the goods or the date in which were made; (ii) [Buyer] did not request another analysis as allowed by Regulation 2,200/82 of the Customs Office, in spite of the fact that the [Seller] had challenged the results of the analysis stating the existence of a subsequent analysis with different results [showing that the goods were fit for human consumption]; (iii) [Buyer] omitted such opportunity, thus wasting the time elapsed between the arrival at the port and 15 October 1987, without offering any reason in relation to such delay; (iv) in such case, even if the goods were unfit for human consumption, [Buyer] did not evidence that such circumstance would have occurred prior to the time in which the goods were under buyer's responsibility or would have been the result of seller's breach of contract or negligence; and finally (v) [Buyer] adopted a wrongful attitude when ordering the reshipment of the goods and thus preventing the performance of a decisive experts' examination -- which has a legal character under Argentine law. [Buyer] acted, in such way, in spite of [Seller]'s warning through a registered letter dated 26 July 1988. What is more, [Buyer] did not even try to resort to the mechanism to produce evidence before the trial as stated by section 326 of the Commercial Code of Procedure; and
 
   i)    As stated by the [Seller] in the answer to the complaint, this conclusion is consistent with the provisions of the United Nations Convention on Contracts for the International Sale of Goods, introduced to the [Argentine] legal system by Act No. 22.765 [*]. In this sense, the relevant parts of the Convention refer to:
 
      

  1. Seller's obligation to deliver the goods, hand over any documents relating to them and transfer the property in the goods (article 30);

  2. Seller's obligation to deliver the goods by handing the goods over to the first carrier for transmission to the buyer (article 31(a)); and state that:

  3. The seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time (article 36(1));

  4. The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it (article 39);

  5. The loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller (article 66);

  6. If the contract of sale involves carriage of the goods, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer (article 67(1)); and

  7. If the buyer has received the goods and intends to exercise any right to reject them, he must take such steps to preserve them as are reasonable in the circumstances (article 86).
     

       In this regard, it has been stated that "article 67(1), considers a very common transaction in international sales of goods, that is, a shipment contract in which seller's duty is limited to the handing over of the goods to a carrier. In such case, the risk is passed when the goods are 'handed over' to the first carrier. If the goods get lost or damaged during transportation, the buyer will notice the loss of or damage to the goods when they arrived at the port of destination. It seems sound then that buyer should bear the risk during the transportation period since he is in a more favorable position to claim compensation from the carrier or the insurance company. This is the dominant solution in the domestic system and in the Uniform Commercial Code of the United States of America. CIF and C&F clauses are also the result of such criterion since, even though seller pays the cost of transportation, under such clauses, buyer takes the risks of the goods during transportation" (cf. Garro, Alejandro Miguel - Zuppi, Alberto Luis, "Compraventa Internacional de Mercaderias". Ed. 90, p. 250, Chapter X, section 2-a).

5. Therefore, the Court has examined the evidence and has concluded, pursuant to the provisions of section 386 of the Commercial Code of Procedure, that [Buyer] has not evidenced the facts sustaining its decision to terminate the contract, thus, the [Buyer]'s claim should be rejected. Other evidence attached to the record has not been examined since, in accordance with the grounds stated in this decision, this has become unnecessary or superfluous.

[HOLDING]

Now therefore, it is ordered that:

      1. The complaint filed by [Buyer] against [Seller] be completely dismissed;

      2. The costs shall be borne by the [Buyer] pursuant to section 68 of the Commercial Code of Procedure;

[...]

Miguel F. Bargallo


DECISION OF THE APPELLATE COURT

Cámara Nacional de Apelaciones en lo Comercial de Buenos Aires

(Federal Commercial Court of Appeal)

Buenos Aires, 31 October 1995

In Buenos Aires, on 31 October 1995, the judges of the Commercial Court of Appeal held a meeting to decide the case "Bedial S.A. v. Paul Mggenburg and Co. GmbH, ordinary proceedings."

[...]

In this regard, Judge Jos Luis Monti states:

1. The case is submitted to this Appellate Court by virtue of the appeal lodged by the [Buyer] in relation to the decision rendered on pages 491/497 of the record, in which the claim for the recovery of a sum of money paid in a summary procedure for the enforcement of a draft issued for the payment of an international sale of goods was dismissed.

2. The issues of fact have been thoroughly stated by the Court of Original Jurisdiction; to which careful account I hereby refer to, for reasons of brevity.

However, it is necessary to stress that the claim was supported on the damages suffered by the goods purchased by the [Buyer] (an imported shipment of dehydrated mushrooms for human consumption which must be transported from Hong Kong to Buenos Aires) which would have forced [Buyer] to terminate the contract for the sale of goods, first, and then to demand the recovery of the amount paid after the enforcement of the draft.

3. The Court of Original Jurisdiction examined evidence attached to the record of the case, particularly, evidence related to the regular conditions of the goods at the time they were handed over to the carrier as well as the reports informing of the existence of grubs and insects in the samples analyzed in Buenos Aires.

In addition, that Court considered that this case involved a contract for the international sale of goods concluded with a C&F clause which, in that Court's opinion, in accordance with the construction made by legal scholars in relation to such clause, entailed the fact that [Buyer] has taken the risks caused by loss or damages after the goods were handed over to the first carrier. Additionally, the Court stated that [Seller]'s liability is limited to until the time of handing over the goods and that the [Buyer] can only be excused from complying with the obligation to pay the agreed price if the [Buyer] evidences that the damages occurred prior to the time in which the goods were under [Buyer]'s responsibility or were the result of [Seller]'s breach of contract or negligence, pursuant to section 472 of the Commercial Code and the provisions of the United Nations Convention on Contracts for the International Sale of Goods.

Therefore, the Court of Original Jurisdiction concluded that the termination of the contract by the [Buyer] was unfair thus resulting, as stated hereinbefore, in the rejection of the [Buyer]'s complaint.

4. In order to sustain the appeal, the [Buyer] made an extensive development trying to refute the arguments of the Court of Original Jurisdiction emphasizing the fact that that Court omitted certain circumstances that would have resulted in a different decision.

[Buyer] centered its arguments in a repeated idea that [Buyer] reported on and on. In this regard, [Buyer] stated that, even though [Buyer] concluded an international sale of goods with a C&F clause that would have excluded [Seller]'s liability for the "risk of shipment", it cannot be followed that [Seller] has been released from its obligation to take care of the "intrinsic quality" of the goods and to hand over the goods in a regular and fit-to-consumption condition.

Considering such arguments and the damage suffered by the goods at the time of arrival at the port, the termination of the contract would have been justified in [Buyer]'s opinion and, therefore, the payment of the price in the summary procedure for the enforcement of the draft would have been groundless.

5. In my opinion, the arguments offered by the [Buyer] are not enough to refute the reasons expressed by the Court of Original Jurisdiction in its decision.

I consider that the majority of the arguments stated by the [Buyer], though they might be relevant in relation to the issues of fact of this case, are not related to the central theme of the Court's decision, that is to say, the scope of seller's liability.

In relation to this central matter, [Buyer]'s arguments cannot be admitted in the light of the provisions governing this case related to the international sale of goods, which provided a correct frame for the analysis made by the Court of Original Jurisdiction.

Indeed, article 66 of the United Nations Convention on Contracts for the International Sale of Goods states that "loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller." In turn, article 67(1), states that "the risk passes to the buyer when the goods are handed over to the first carrier."

In this case, even though the scope ascribed by the [Buyer] to the [Seller]'s liability during sea transportation -- considering that the goods were in good conditions at the time of shipment (pages 450, 464, 466 and 468 of the record) -- there is no evidence proving that the damage suffered by the shipment of mushrooms has been the result of "an act or omission of the [Seller]," evidence that should have been submitted by the [Buyer] (cf. section 377 of the Commercial Code) and which omission leads to [Buyer]'s obligation to pay the price.

[Buyer]'s argument on allocating responsibility to the [Seller] entails a groundless assertion which has been repeated in the objection filed with this Appellate Court.

[Buyer] has failed to make any reference to a cause-effect relation between [Seller]'s conduct and the damage suffered by the goods, the only hypothesis that might have discharged [Buyer]'s obligation to pay the price. Such omission decides the fate of [Buyer]'s claim resulting in the rejection of the grounds supporting [Buyer]'s objections to the decision of the Court of Original Jurisdiction.

6. For such reasons, if my opinion is shared by the other members of this Court of Appeal, the appealed decision should be upheld, and the costs of this appellate procedure should be borne by the [Buyer] pursuant to section 68 of the Commercial Code of Procedure.

Based on the very same reasons, Judge Bindo B. Caviglione Fraga adheres to the preceding vote.

Now, therefore:

The appealed decision is hereby upheld and the cost and expenses of this appellate procedure shall be borne by the [Buyer].

Judge Hctor Di Tella does not execute this decision for he is entitled to a leave of absence pursuant to section 109 of the Rules of the Federal Justice. Bindo B. Caviglione Fraga, Jos Luis Monti.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellant of Argentina, Bedial S.A., is referred to as [Buyer] and Defendant-Appellee of Germany, Paul Mggenburg ABD Co. GmbH, is referred to as [Seller].

Act No. 22.765: Federal Argentine Act passed on 24 March 1983, through which the Argentine Republic adheres to the United Nations Convention on Contracts for the International Sale of Goods and thus it becomes a part of the Argentine legal system.

** Juan Manuel Falabella was a participant in the 16th annual Willem C. Vis International Commercial Arbitration Moot representing the School of Law, Universidad de Buenos Aires, where he received his law degree cum laude. He has attended the Summer Institute in International and Comparative Law, Stetson University, and has Sworn Legal Translation credentials, School of Modern Languages, Pontificia Universidad Catlica Argentina. He is currently a Legal Assistant at the Buenos Aires law firm of Hope, Duggan & Silva.

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