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CISG CASE PRESENTATION

Switzerland 3 July 1997 District Court St. Gallen (Fabrics case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/970703s1.html]

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

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Case identification

DATE OF DECISIONS: 19970703 (3 July 1997)

JURISDICTION: Switzerland

TRIBUNAL: BG St. Gallen [BG = Bezirksgericht = District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 3PZ 97/18

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Netherlands (plaintiff)

BUYER'S COUNTRY: Switzerland (defendant)

GOODS INVOLVED: Fabrics


Case abstract

SWITZERLAND: Bezirksgericht St. Gallen 3 July 1997

Case law on UNCITRAL texts (CLOUT) abstract no. 215

Reproduced with permission from UNCITRAL

A Dutch seller (plaintiff) and a Swiss buyer (defendant) entered into an agreement for goods to be manufactured by the buyer with the raw material delivered by the seller. After the buyer had used 10 percent of the raw material, the cooperation between the buyer and the seller was terminated and the remaining goods returned to the seller. The seller sued the buyer for the purchase price of the whole shipment.

The court held that the buyer had to pay the price for all the material delivered and not only for the 10 percent used. The court relied, in the first place, on the buyer's subsequent conduct (article 8(3) CISG).

The buyer had asked the seller to send the invoice without any reservations although it already knew that the whole material would not be used. The purchase price had not been fixed by the parties and was determined by the court in application of article 55 CISG. The interest rate was fixed based on the law applicable pursuant to the forum's rules of private international law, which led to Dutch law. However, the court mentioned the possibility of determining the rate of interest in application of the law at the debtor's place of business, pointing out that it was the debtor who could profit from the fact that the purchase price had not been paid.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Articles 8(3) ; 55 ; 78 [Also cited: Articles 1 ; 4 ; 7(2) ; 11 ; 14 ; 53 ; 54 ; 59 ]

Classification of issues using UNCITRAL classification code numbers:

8C [Interpretation of party's statements or other conduct; interpretation in light of surrounding circumstances (conduct subsequent to agreement)];

55A3 [Open-price contracts: when parties intend to be bound, Article 55 upholds the agreement];

78B [Interest on delay in receiving price or any other sum in arrears: rate of interest (determined pursuant to forum's rules of private international law, which led to Dutch law)]

Descriptors: Intent ; Open-price contracts ; Interest

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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=306&step=Abstract>; [1999] Transportrecht, Beilage "Internationales Handelsrecht" (TranspR-IHR) 10-11

German: 1 Schweizerische Zeitschrift für Internationales und Europäisches Recht (1998) 84-85

CITATIONS TO TEXT OF DECISION

Original language (German): Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=306&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Gabuardi, Open price contracts (June 2001); Liu Chengwei, Recovery of interest (November 2003) nn.125, 265; Pilar Perales Viscasillas in Ferrari, Flechtner & Brand ed., The Draft UNCITRAL Digest and Beyond, Sellier / Sweet & Maxwell (2004) 276; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.208, 217-218, 228-229; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 8 para. 51; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 80

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Case text (English translation)

Queen Mary Case Translation Programme

District Court (Bezirksgericht) St. Gallen

3 July 1997 [3PZ 97/18]

Translation [*] by Florian Arensmann [**]

Translation edited by Veit Konrad [***]

In the dispute between:

Plaintiff ______, selling textiles, hereafter referred to as [Seller], domiciled in The Netherlands

vs.

Defendant ______, a creator of fashion clothes, hereafter referred to as [Buyer], domiciled in Switzerland

the District Court of St. Gallen has decided that [Buyer] has to pay [Seller] the amount of 5,641.70 DM [*] plus interest of 5% since 26 September 1995.

[...]

FACTS OF THE CASE

1. The first contacts between the parties concerning a possible future cooperation took place in the spring of 1995. They agreed that [Buyer] would create 30 to 35 fashion clothes out of fabric of [Seller]'s stock. Prior to this, the fabric would be delivered to H.L. to be embroidered. This fashion collection should be decisive for a possible further cooperation between the parties.

   -    On 19 April 1995, [Buyer] sent a fax requesting [Seller] to deliver a certain amount of a certain fabric to be embroidered by H.L. (Defendant exhibit: act. Attachment A) and there were several subsequent contacts concerning the goods to be delivered (Plaintiff exhibit: act. 4 and 5).
 
   -    On 22 May 1995, [Buyer] informed [Seller] by letter that the collection would be finished approximately in the first week of June. However, [Buyer] wanted - with reference to an apparently dissatisfying visit to [Seller] in the Netherlands - to talk again about the possible cooperation before leaving the collection as well as [Buyer]'s name with [Seller].
 
   -    Thereafter, [Buyer] wrote to [Seller] repeatedly concerning issues of customs duties. In one letter, [Buyer]'s son commented extensively on the negotiations already carried out (Plaintiff exhibit: act. 8 to 10).
 
   -    On 12 June 1995, H.L., the embroidery, issued an invoice to [Seller] in the amount of 3,200.20 DM [*] for the fabrics delivered to [Buyer] on 18, 24 and 30 May as well as on 9 June 1995 (Plaintiff exhibit: act. 7).
 
   -    On 29 June 1995, [Buyer] informed [Seller] by letter that she was not interested in continuing the cooperation (Plaintiff exhibit: act. 11). [Buyer] did not want to give up her location in Switzerland as well as her independence and further had to regard her responsibility for her employees. At the end of this letter, [Buyer] requested [Seller] to issue an invoice for the textiles delivered to the embroidery and [Seller] issued an invoice in the amount of 21,779.40 DM [*] (Plaintiff exhibit: act. 1) which also included the costs for embroidering on 17 July 1995.
 
   -    Referring to a prior telephone call, [Buyer] requested an adjustment of the invoiced price by letter dated 18 August 1995 (Plaintiff exhibit: act. 12) as the amount of fabric invoiced was higher than the amount actually delivered. Thereupon, [Seller] placed a credit in the amount of 12,937.50 DM [*] on 23 August 1995 (Plaintiff exhibit: act. 2).
 
   -    By letter of 21 September 1995 (Defendant exhibit: act. on trial), [Buyer] informed [Seller] that she would return net lace, processed shantung as well as processed lining as she was not willing to pay the prices per meter as listed on the invoice. Simultaneously, [Buyer] noted that she had already paid the amount demanded for the embroidery which was also listed on the [Seller]'s invoice. Thereupon, [Seller] again placed a credit in this amount on 7 July 1995 [Translator's note: obviously wrong date in the original] (Plaintiff exhibit: act. 3).
 
   -    Despite several requests for payment, the balance in the amount of 5,641.70 DM [*] remained unpaid (cf. Plaintiff exhibit: acts. 13 and 14). [Buyer] filed an objection to the [Seller]'s payment summons delivered on 26 June 1996 alleging a lack of legal basis (Plaintiff exhibit: act. 15).

2. At the trial on 3 July 1997, the parties agreed that [Seller] would reduce its claim to 3,800 Sf [*] plus interest of 5% since 17 August 1995 and [Buyer] would withdraw her objection to this amount plus costs for debt enforcement. This settlement was to come into force as long as it was not be withdrawn by either party by 14 July 1997 (postmark). However, by letter of 14 July 1997, [Buyer] declared her withdrawal.

PARTIES' MOTIONS TO TAKE EVIDENCE

1. In its submission of 23 April 1997, [Seller] had relied on the testimony of Mr. M.B.B. as well as Ms. F.A. who were both employed by [Seller] at the time of the negotiations between the parties to this dispute. In the Court's opinion, the hearing of these witnesses in the Netherlands would not only increase the costs of the procedure of taking evidence massively but would also not be meaningful with regard to the position of Mr. B. as director and owner of C. V. BV, respectively. For this reason, an interrogation of the two proposed witnesses was not approved.

2. [Buyer] proposed her son as a possible witness. He was present at the first contact with [Seller] in the Netherlands and was also involved in the written correspondence. As already explained to [Buyer], an interrogation of her son as witness is not possible anymore after he pleaded as well on trial. [Buyer] proposed Mr H. from the embroidery H.L. as another witness. He could testify that fabrics delivered were neither accompanied by an invoice nor by a delivery note and that the delivered fabrics were depreciated goods. The Court, however, refrains from an interrogation of Mr H. since the quality of the goods is not decisive in the instant case but [Buyer]'s general duty of payment is in question. In this respect, neither the fact that the delivery note and the invoice were missing nor a possible depreciation of the goods by the supplier are of importance (cf. numeral IV 3c, 4a and 6b).

REASONING AND DECISION

1. As [Seller] has its place of business in the Netherlands and [Buyer] is domiciled in Switzerland, the jurisdiction over this dispute is determined according to Art. 112 IPRG [*]. Pursuant to this provision, the District Court of St. Gallen has jurisdiction over the instant case since it is the court of [Buyer]'s domicile.

2.   a) Arts. 116 et seq. IPRG [*] determine the applicable law. As the parties failed to agree on a choice of law, the contract is governed by the law of the State to which the contract is most closely connected or, respectively, where the party which performs the characteristic part of the contract has its place of business (Art. 117 IPRG). In the case at hand, the delivery of the fabric and the subsequent processing by [Buyer] is part of a more comprehensive commercial contact between the parties. A judicial qualification of the contract's content is necessary to determine the characteristic performance. The delivered fabric is a movable, physical object. As [Buyer] in her letter of 29 June 1995 requested to invoice the material, it can be assumed that the delivery was for remuneration. It is to be examined later if this concerned only the processed material as [Buyer] asserts on trial. However, the contract is basically a sales contract.

      b) Concerning the sale of movable, physical objects, Art. 118(1) IPRG refers to the Hague Convention of 15 June 1955 (HUe 55; SS 0.221.211.4). Art. 3 HUe 55 determines that a sales contract is governed by the domestic law of that State in which the [Seller] has its usual residence at the point of time when he receives the order. As far as known, the parties had commercial interactions in writing as well as by telephone; once, [Buyer] even visited [Seller] in the Netherlands to clarify questions at issue personally. On 19 April 1995, [Buyer] gave written instructions concerning the fabric to be delivered to [Seller]. Basically, Dutch law is to be applied pursuant to Art. 3 HUe 55. However, both the Netherlands and Switzerland - each as place of business of a party - are Contracting States to the United Nations Convention on Contracts for the International Sale of Goods (CISG; SR 0.221.211.1). For this reason, the CISG is solely applicable to govern the substantive questions of the conclusion of the contract as well as the rights and obligations arising out of it (cf. Art. 1 and 4 CISG).

      c) According to Art. 11 CISG, a contract does not need to be concluded in or evidenced by writing and is not subject to any other requirements as to form. The necessary parts of the contract correspond to the requirements of Art. 14 CISG for a valid offer: certainty of contractual partners, expression of the intent to be bound, description of the good to be sold, determination or determinability of the quantity and price (cf. Bucher, OR [*] BT, 1988, p. 142). In the instant case, [Buyer]'s intent to be bound, the quantitative amount of the goods and the purchase price are in dispute.

3.   a) In her letter of 29 June 1995, where [Buyer] informed [Seller] that she was not interested in a further cooperation, [Buyer] noted at the end: "Please invoice the material." With this, [Buyer] has objectively noticeably, clearly and unambiguously expressed that she was willing to pay for the material which she obtained. On trial, [Buyer] now claims that this note only covered the material which [Buyer] had already processed.

      b) Statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was, Art. 8 CISG. It is not documented that [Seller] knew or should have known [Buyer]'s alleged intent to demand the invoice only for the actually processed material, nor do the circumstances reveal such intent of [Buyer]. Pursuant to Art. 8(2) CISG, [Buyer]'s statements and conduct are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. In doing so, due consideration is to be given to all relevant circumstances including negotiations, any practices which the parties have established between themselves, usages and subsequent conduct of the parties (Art. 8(3) CISG).

      c) As possible agreements have neither been recorded in writing nor are particular usages known, the subsequent conduct of the parties is of major importance in the instant case. Hereby, the fact has to be considered that [Buyer] requested in her letter of 29 June 1995 the invoicing of the goods obtained without any (quantitative) restriction, although the collection had already been finished in the first week of June (cf. Plaintiff exhibit: act. 6). Moreover, [Buyer] knew that she had processed only a fractional amount of the fabric (Statement on trial).

Especially, [Buyer]'s reaction to the subsequently issued invoice dated 17 July 1995 which she contested only as to the quantity of goods is of high importance. [Buyer] did not object to the quality of the fabric, the invoiced prices per meter or generally to the fact that an invoice had been issued. In her letter of 21 September 1995 in which [Buyer] announced the returns of the fabrics, [Buyer] did not claim that the material obtained had been provided free of charge; in fact, the only reason [Buyer] gave for the returns was that the invoiced price was too high. If delivery of the fabric free of charge had been agreed upon from the very beginning, [Buyer] should have objected immediately and expressly after receiving the invoice or, respectively, should have claimed a restriction of the invoicing to the material which she actually processed. In this context, it is outstanding that [Buyer] objected to the typing error in the invoice of 17 July 1995 only after about one month had passed. After the receipt of the first credit advice, [Buyer] again waited one month to point out that she had already paid the invoice of the embroidery H.L. As far as known, [Buyer] did not announce the returns of the fabric obtained until that point of time.

As a result of this, [Buyer]'s assertion that the note in the letter of 29 June 1995 only covered the actually processed material, is not proven. Apart from this, [Buyer]'s intent to pay at least for the processed material is in doubt as [Buyer] had announced in her letter of 21 September 1995 the returns of not only the processed shantung but also the processed lining as she was not willing to pay the amount invoiced by [Seller].

4.   a) In her statement of defense dated 26 May 1997 as well as on trial, [Buyer] raised several objections. [Buyer] complained that the fabric delivered by [Seller] was depreciated material. Even if this allegation were true, it does not automatically lead to an exemption of the payment of the sales price. The quality of goods is not decisive for the general duty to pay. It could only be relevant for the distributor's accounting if depreciated goods had been delivered. Moreover, [Buyer] had never objected to the quality of the goods delivered.

The fact that [Buyer] apparently could only process ten percent of the material is not important for the question of the duty of payment. Anyway, in this context again, the fact is crucial that [Buyer] herself requested the invoicing of the material without mentioning any restriction or, respectively, without specifying her intent to pay only for the processed material after the receipt of the first invoice. Moreover, it is noticeable that [Buyer] only offered or announced the returns of the goods obtained two months after the first invoicing.

In her statement of defense of 26 May 1997 as well as in the proceedings, [Buyer] repeatedly pointed out that there was neither an invoice nor a delivery note attached to the goods delivered. This was also confirmed by Mr H. from the embroidery H.L. [Buyer] requested the "original documents" for the delivery. [Buyer] complained that the invoice dated 17 July 1995 could not constitute such a document. It contained incorrect data as concerns the fabrics' yardage, which was stated ten times higher than it actually was. The document also listed embroiderings which could not have been finished at the time of delivery. [Buyer]'s submission is unremarkable; it seems that [Buyer] is under a misapprehension concerning the legal meaning and the significance of the invoice or, respectively, the credit notes. It is irrelevant whether these documents were already attached to the delivered goods or were just issued ex post. In the instant case, the material was only invoiced after the delivery and by reason of [Buyer]'s request in her letter of 29 June 1995. Eventually, it is consequential that the invoice dated 17 July 1995 which was not issued at the time of delivery comprised also the finished embroidering. On trial, [Buyer] further claimed that she did not receive any written documents concerning the form and scope of the possible further cooperation although [Buyer] requested it several times. This may indeed be dissatisfying and may have resulted in [Buyer] not being interested in further commercial contacts with [Seller]. However, [Seller]'s general behavior in the negotiations is not relevant to the question of [Buyer]'s duty of payment.

5. In summary, [Buyer] has to be treated according to the legal appearance she has created by her note of 29 June 1995 as well as by her behavior after receiving the invoices. Thus, it is to be assumed that the parties have validly concluded a sales contract concerning the total amount of fabric delivered by [Seller]. [Seller] is therefore entitled to the accordant sales price.

By reason of the contract being already executed, the lack of an express determination of the sales price does not bar the contract's accomplishment. Rather, the sales price is to be determined according to Art. 55 CISG, the provision for filling gaps (cf. Schlechtriem, Internationales UN-Kaufrecht, 1996, para. 212; Bucher, OR [*] BT, 1988, p. 142; cf. subsequently para. 6).

6.   a) The sales price is to be paid as required by the contract and the CISG (Art. 53 CISG). "Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned" (Art. 55 CISG).

      b) There is no agreement of the parties concerning the determination of the price presented to the Court. In her letter of 29 June 1995, [Buyer] only requested the invoicing of the material without elaborating on her view concerning the amount or the currency of the sales price. After receiving the invoice issued subsequently on 17 July 1995, [Buyer] did not object to the prices charged per meter but only to the quantity of goods listed in the invoice. Just in her letter of 21 September 1995, [Buyer] referred to the - in her opinion - too high prices issued by [Seller] in order to justify the announced returns of the fabrics. For this reason, the sales price demanded with the invoice of 17 July 1995 seems, however, justified and not excessive as [Buyer] otherwise would have reacted immediately after the invoicing referring to a possible lack of compliance of the sales price to the goods' value. [Buyer]'s objection raised on trial that the material delivered has been depreciated, is hence irrelevant in this connection. Consequently, [Seller]'s claim for the requested amount is to be protected.

7.   a) According to the [Seller]'s complaint of 23 April 1997, an amount of 5,641.70 DM [*] is claimed. On trial, [Seller]'s attorney specified a legal motion to the effect that [Buyer] could pay the amount alternatively in Swiss francs pursuant to Art. 84 OR [*].

      b) The invoicing in DM [*] was not disputed by [Buyer]. Therefore, it can be assumed that this currency was agreed upon between the parties (cf. Art. 53 CISG). In the case at hand, Art. 84 OR [*] is not applicable as basically Dutch law or the CISG as a state treaty (concerning realization of the payment of the sales price as well as the kind of currency) overrides national substantive law (cf. Schlechtriem, loc. cit., para. 121 et seq.) Thus, [Seller]'s claim -- subject to possible subsequent agreement between the parties basically -- refers to DM [*] (cf. following para. 9).

8.   a) [Seller] claims interest on late payments of 5% since 17 August 1995. On trial, [Seller]'s attorney agreed to a suspension of the running of interest for ten days as the payment period issued by [Seller] in the invoice of 17 July 1996 is not clearly identifiable.

      b) The CISG does not regulate the rate of interest. Art. 78 CISG merely determines that a party who fails to pay the sales price or any other payable sum is obliged pay interest on this amount to the other party. The question of the interest rate is subject to discussion in legal literature and legal practice (cf. Schlechtriem, Internationales UN-Kaufrecht, 1996, para. 317 et seq.). It is basically to refer to the applicable law determined by the lex fori (cf. among others Piltz, Internationales Kaufrecht 1993, Par. 5 para. 412 et seq.; Schwenzer, Das UN-Abkommen zum internationalen Warenkauf, in: recht 1991, p. 121). At hand, this would be Dutch law.

On various occasions, it has been suggested, among others, to derive a conflict-of-law rule on the basis of Art. 7(2) CISG. Others favor the determination of the interest rate by the domestic law of the debtor's place of business as he could benefit from the withheld assets by not paying the sales price.

At hand, it seems not necessary to clarify the Dutch interest rate as this case affects basically a matter which is subject to freedom of contract. On trial, [Buyer] did not dispute [Seller]'s submission concerning the interest rate which was based on Swiss law. In accord with Swiss law, the claimed interest rate of 5% is low-estimated and may a fortiori be higher according to Dutch law (cf. Piltz, loc. cit., Par. 5 para. 415, where the compulsory interest rate in the Netherlands (1993) is listed as 12%).

      c) The duty to pay interest starts with the claim falling due as basically the non-payment at the due date already constitutes a breach of duty (cf. Schlechtriem, loc. cit., para. 319). The due date of the claim commences with the unused expiration of the last day of the payment period (Art. 59 CISG; for comparison: OR [*]-Wiegand, 1996, Art. 104, para. 2). The conditions for payment are not clearly readable on the invoice of 17 July 1995. As the same form was used for the credit notes of 23 August and 25 September 1995, it can, however, be assumed that the payment period listed there was meant. On the credit note of 25 September 1995 ([Seller] act. 3), there is the comment "payment conditions: ...within 60 days net". With the addition of a period for transport of ten days for the invoice, the due date is to be scheduled on 26 September 1995. [Seller] is therefore entitled to claim interest on late payments of 5% since 26 September 1995 on the requested amount.

9.   a) [Seller] seeks the removal of the objection filed by [Buyer] on 7 June 1996.

      b) The enforcement of debts in a foreign currency has basically to be carried out in that foreign currency. In a civil proceeding, it may not be referred to the debt enforcement where a foreign currency has to be converted into Swiss francs (cf. BK [*] Weber, 1993, Art. 84 para. 366). A sufficient enforceable title does, however, only exist if the debt is (also) determined in the national currency or at least is determinable by the declaration of the relevant exchange rate (cf. BK [*] Weber, loc. cit .,para. 373). At hand, it is referred to in the payment summons No. 96/7870 dated 7 June 1996 which recites an exchange rate of 82.40. This exchange rate is not disputed by [Buyer]. As a result, [Buyer] is entitled to pay the debt either in DM [*] or in an amount of Swiss francs which would be determined by the abovementioned market value.

The claimed amount of 4,648.75 Sf [*] in the debt enforcement obviously complies with the requested amount in this proceeding of 5,641.70 DM [*] at the exchange rate of 82.40. For this reason, the [Buyer]'s objection to the costs of debt enforcement is removed.

Accordingly, the Court's President has adjudged:

      1)   [Buyer] has to pay [Seller] the amount of 5,641.70 DM [*] plus interest of 5% since 26 September 1995.

[...]


FOOTNOTES

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

Translator's note on other abbreviations: BK =  ?  ; DM = Deutsche Mark [former German currency]; Sf = Swiss francs [Swiss currency]; IPRG = Bundesgesetz über das internationale Privatrecht [International Private Law of Switzerland]; OR = Obligationenrecht [Swiss law of obligations].

** Florian Arensmann is a law student at the University of Osnabrück, Germany, and participated in the 13th Willem C. Vis International Commercial Arbitration Moot with the team of the University of Osnabrück.

*** Veit Konrad has studied law at Humboldt University, Berlin since 1999. During 2001-2002 he spent a year at Queen Mary College, University of London, as an Erasmus student.

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Pace Law School Institute of International Commercial Law - Last updated July 19, 2007
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