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CISG CASE PRESENTATION

Belgium 18 June 1996 Appellate Court Antwerp (Clothes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960618b1.html]

Primary source(s) of information for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISIONS: 19960618 (18 June 1996)

JURISDICTION: Belgium

TRIBUNAL: Hof [Appellate Court] van Beroep Antwerpen

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 1993/AR/2933

CASE NAME: M.M. v. S.A.P.

CASE HISTORY: Unavailable

SELLER'S COUNTRY: France (plaintiff)

BUYER'S COUNTRY: Belgium (defendant)

GOODS INVOLVED: Clothes


Case outline

Reproduced with permission from CISG-Belgium database of Katholieke Universiteit Leuven

Applicable law - Application of CISG - Rules of Private International Law of the forum referring to law of Contracting State, i.e., France as law of the seller (Article 3 Convention on the Law Applicable to Contracts for the International Sale of Goods, Hague PIL Conference, June 15, 1955) and as law chosen in seller’s general conditions of sale (Article 2 Convention on the Law Applicable to Contracts for the International Sale of Goods, Hague PIL Conference, June 15, 1955) - CISG applicable because part of French law at time contract was concluded, i.e., in 1989

Case concerns first validity and nullity of clauses of contract – CISG not applicable to validity questions – French law applicable

Punitive clause - considered whether valid according to French law - valid, but reduced on basis of reasonableness

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 4 ; 100

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): validity, penalty clauses]

Descriptors: Scope of Convention ; Validity ; Penalty clauses

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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 (Dutch): CISG-Belgium database of Katholieke Universiteit Leuven <http://www.law.kuleuven.ac.be/ipr/eng/cases/1996-06-18.html>; [1998-99] Algemeen Juridisch Tijdschrift (AJT) 941-944

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Dutch: Van Neck, [1998-99] AJT 944-951

English: [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 7 para. 30

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Hof van Beroep [Court of Appeals] Antwerp
M.M. [Buyer] v S.A. P. [Seller]

18 June 1996 [1993/AR/2935]

Translation [*] by Kristof Cox [**]

[...]

1. Applicable law

Under the Hague Convention of 15 July 1995 on International Contracts of Sale of Goods, which is ratified by Belgium and France, the applicable law in this case is French law based on the conflict rules of that Convention.

According to these conflict rules, the sale is governed by the internal law of the country chosen by the parties (Article 2 Convention) and, if they did not choose the applicable law, by the internal law of the country where the seller has his habitual residence at the moment he receives the order (Article 3 Convention).

In the case at hand, Article 5 of the general conditions of sale of [Seller] explicitly indicates French law as the law applicable to the contract. [Buyer] explicitly accepted these conditions, as may be derived from his signature on the order.

Unlike [Buyer]'s contention, this choice of law clause is not revoked by the forum selection clause on the confirmation of order that [Seller] sent later and which leaves the choice to file claims in Paris or at the habitual residence of the seller or buyer in case a dispute may arise.

Applicable law and jurisdiction of the courts are two completely distinct questions.

Even if [Seller] would have revoked the choice of law clause in the signed orders, quod non, French law would still be applicable since Article 3 of the Hague Convention of 15 June 1955 makes the law of the residence of the seller applicable.

[Buyer] mistakenly contends that the Rome Convention of 19 July 1980 would be applicable.

However, a commercial sale falls outside the reach of the Rome Convention; the Hague Convention of 1955 on the International Sale of Goods is the Belgian private international law.

According to the principles of private international law, the Hague Convention prevails over the Rome Convention (cf. N. Watte, "La vente internationale de marchandises: bilan et perspectives", T.B.H. 1991, 373; N. Watte, "Les contrats internationaux: l'incidence de la convention de Rome du 19 juin 1980 sur la jurisprudence Belge, T.B.H. 1991, 780).

Article 21 of the Rome Convention explicitly determines that the Convention does not hinder the applicability of international conventions to which a Contracting State is a party or will become a party.

However, it has to be determined whether France, the country of the applicable law, has acceded to the Hague Uniform International Sales Law of 1964 (ULIS) or the CISG as, in that case, the substantive rules of those uniform laws are applicable.

France has not signed the Hague Uniform International Sales Law of 1 July 1964, thus this uniform law is not applicable; However, unlike what [Seller] states in its memorandum on appeal, the CISG has entered into force in France on 1 January 1988 (cf. J.H. Herbots, De transnationale koopovereenkomst, Het Weens Koopverdrag van 1980, p. 14).

Article 1 of the CISG states that it is applicable if the rules of private international law lead to the application of the law of a Contracting State.

The rules of the CISG are applicable to contracts that are concluded after the date this Convention entered into force in the State (Article 100(2), CISG).

Since the contract was concluded at a time when France was already a party to the CISG, and since the conflict of law rules point to French law, the Court principally has to apply the rules of the CISG, in as far as these rules govern the dispute at hand.

As will be explained further on, the dispute at hand specifically concerns the validity or invalidity of the clause of revocation or avoidance in the contract of sale between the parties.

Article 4 of the CISG determines that it only governs the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such contract, but that it expressly does not govern the validity of the contract or of any of its provisions.

Therefore, the CISG is not applicable to the clause in the contract and thus French law has to be applied to this matter.

2. Merits

[Seller] has determined a fixed compensation in Article 3 of its General Conditions in case of annulment of the order by [Buyer]:

  1. 30 % of the price of the order if it is withdrawn between the 9th and 15th day after the confirmation;
  2. 50 % if the order is withdrawn between the 16th and 45th day after the confirmation;
  3. 100 % if the order is withdrawn more than 45 days after the confirmation.

Both orders were confirmed on 12 March 1989 and 13 February 1989, respectively, and both orders mention that the delivery will take place starting from 1 July 1989 and on 15 September 1989 at the latest.

[Buyer] annulled both orders by letter of 1 June 1989.

[Seller] has claimed the conventional compensation of 89,109 French francs [Ff] being 100 % of the price of the orders, relying on Article 3 of its General Conditions. However, [Buyer] alleges that this Article is a punitive clause which is in breach of Belgian public policy (Article 6 and Article 1131 Civil Code) and with the private international public policy and thus has to be considered null and void.

Formally speaking, it is said by the [Seller] that:

   -   The clause is not a punitive clause, neither under French, nor under Belgian law, but a revocation- or avoidance-clause in which a sum of money is determined as a compensation for the right of the buyer to avoid the contract unilaterally and in which the seller is denied the opportunity to claim specific performance of the contract.
 
   -   The clause, as it is worded in concreto and in which the compensation progressively increases as the buyer withdraws the claim at a later time, is aimed at compensating the damage which the creditor suffers when the contract is avoided.

The [Seller] explains the increasing character of the compensation in case of avoidance of the sale by stating that this in fact represents the cost of not being able to sell the goods for which it has granted an option to its contracting partner and that this cost increases with the time it is not able to sell the goods;

However, even though the clause is formally stated as a revocation- or avoidance-clause, the compensatory character nevertheless makes it necessary to qualify it is a punitive clause. And it cannot be reasonably disputed that the clause, in as far as it obliges the buyer to pay the price of the order at 100 % as a compensation if the buyer annuls the order more than 45 days after the confirmation by the seller, in fact is nothing else than a private sanction of the buyer. This excessive compensation indeed has as a consequence that the seller has everything to gain from an annulment of the contract by the buyer after 45 days, since in that case the seller keeps the goods and receives full payment for those goods. This would create enrichment that is supported by no legal basis.

The argument of [Seller] that these goods cannot be sold because they are only produced at the order of the client and because the models are seasonal cannot be taken seriously. It cannot be accepted that the clothing [Buyer] selected from the prêt-à-porter collection "Kenzo" of [Seller] would already be impossible to sell 45 days after confirmation of the order.

However, these findings do not imply that the clause is void under French law. While the assimilation of a punitive clause with a civil sanction is not allowed under Belgian law, this is not the case under French law, since under French law a punitive clause can maintain its coercive character (cf. Gilles Paisant, "Dix ans d'application de la réforme des articles 1152 and 1231 du Code Civil relative à la clause pénale - loi du 9 juillet 1975", Rev. Trimest. Dr. Civil, 1985, p. 647 et seq.). Under French law, the punitive clause can maintain its validity even if the attributed sum would be higher than the damages suffered because of its comminatory aspect which makes that this clause is a method of coercion against the debtor. Thus, under the lex contractus the clause is not void.

Moreover, the application of the clause does not have to be refused for breach of the Belgian private international public order. This concept is more narrow than the internal public policy, the international public policy only applies in exceptional cases. A statute of internal public policy is only of private international public policy in as far as the legislator has intended to confirm in that statute a principle which it considers necessary for the established moral, political or economic order and for those reasons, in its opinion, necessarily excludes the application in Belgium of every rule that is in breach or different.

Article 1131 Civil Code does not meet this requirement. The private international public policy only excludes the application of a foreign lex contractus for consequences that are unacceptable for the international community, like for instance smuggling, foreign currency traffic, prostitution, etc. (cf. Rigaux F., Droit International Privé, T. II, 1993, p. 361 "Les mots ordre public international désignent très correctement des principes communs à l'ensemble des nations ... il en est ainsi des contrats ayant pour object la contrebande, un traffic de devises ou de merchandise prohibé par la loi d'un des Etats qui y est intéressé..." ["The words international public policy identify very correctly the principles common to all nations ... this is so for contracts for counterfeit, foreign currency traffic or goods prohibited by the law of one of the States that is interested ..."]

A damages clause which grants the creditor a higher advantage than the normal performance of the contract cannot be qualified as unacceptable for the international economic community since in several legal orders this is recognized as unacceptable (sic) and valid and the judge is given the possibility to adapt these clauses when necessary (cf. M. Fontaine, Droits des obligations, p. 163).

The application of the French law, which - contrary to Belgian law - allows the assimilation of a punitive clause with a civil sanction, is in conflict with the Belgian internal public policy (Articles 6, 1131 and 1133 Civil Code); nevertheless, the punitive clause as such cannot be considered in conflict with the Belgian private international public policy.

Under French law, Article 1152 § 2 Civil Code (introduced by Statute n° 75-597 of 9/7/1975), the judge has the possibility to modify or lower sua sponte the agreed punishment if it is manifestly exaggerated (Cour de Cassation 27/3/1990, Receuil Dalloz-Sirey 5/7/90, Jur. P390). Even if one takes into account that the punitive clause under French law is not merely compensatory but has a comminatory character as well, in this case there is reason to consider the clause as manifestly unreasonable in the specific case of cancellation of the sale more than 45 days after the confirmation of order.

As mentioned earlier, it is manifestly unreasonable that the conventional damages in this case amount to 100 % of the price since the cancellation of the ordered clothing by the buyer one full month before the starting date of deliveries cannot have as a consequence that it would no longer be possible to sell the clothes. It is indeed unthinkable that [Seller] would not succeed in selling the cancelled order to its clients or other buyers under said circumstances. Accordingly, the Court deems it just and fair to reduce the punitive clause to 50 % of the price and decides that the appeal is justified.

FOR THOSE REASONS

The court rules:

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of France is referred to as [Seller] and Defendant of Belgium is referred to as [Buyer].

** Kristof Cox is a researcher at the Institute for International Trade Law at the Catholic University of Leuven (Belgium). He is preparing a Ph.D. on the effects of an arbitration award on third parties. Further, he regularly publishes articles and case notes on the CISG and International Commercial Arbitration. Kristof Cox can be contacted at <Kristof.cox@law.kuleuven.be>.

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Pace Law School Institute of International Commercial Law - Last updated April 24, 2008
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