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CISG CASE PRESENTATION

Switzerland 15 January 1998 Appellate Court Lugano, Cantone del Ticino (Cocoa beans case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980115s1.html]

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

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Case identification

DATE OF DECISIONS: 19980115 (15 January 1998)

JURISDICTION: Switzerland

TRIBUNAL: Lugano, Cantone del Ticino, La seconda Camera civile del Tribunale d'appello

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 12.97.00193

CASE NAME: Unavailable

CASE HISTORY: Pretore Lugano 12 June 1997 [reversed]

SELLER'S COUNTRY: Switzerland (defendant)

BUYER'S COUNTRY: Italy (plaintiff)

GOODS INVOLVED: Cocoa beans


Case abstract

SWITZERLAND: Cantone del Ticino, La seconda Camera civile del Tribunale d'appello 15 January 1998

Case law on UNCITRAL texts (CLOUT) abstract no. 253

Reproduced with permission from UNCITRAL

An Italian buyer, plaintiff, bought from a Swiss seller, defendant, 300 tons of [cocoa] beans which were shipped from Ghana. The beans were to contain fat of at least 45 per cent and acidity of no more than 7 per cent. As provided in the contract of sale, payment was made against documents, which included a certificate of conformity. Tests of the beans after delivery in Italy, however, revealed that their values were not as had been certified. In litigation commenced by the buyer in Switzerland for recovery of the purchase price, it was not possible to determine whether the goods were already defective when handed over to the carrier.

On the issue of which of the parties had to bear the burden of proof, the court stated that, as a matter of principle, attribution of the burden of proof is to be determined by the law applicable on the merits, which, in this case, was the CISG. The court noted that the CISG does not contain any particular rule on the burden of proof as to the conformity of goods. Furthermore, it noted that views on this matter as expressed by scholars are divided: according to some, the CISG implies that the buyer should bear the burden, whereas others would attribute the burden in accordance with domestic law. The court was able to leave the issue open because, under the law of the forum as well as under the CISG, the buyer had to bear the burden of proof.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 7(2) ; 36 ; 67 ; 78 [Also cited: 35 ; 38 ; 49 ; 74 ; 81 ; 84 ]

Classification of issues using UNCITRAL classification code numbers:

4A [Issues covered: court held that burden of proof may be an issue covered by the Convention or by the otherwise applicable law (the court did not have to resolve this issue)];

7C22 [Recourse to general principles on which Convention is based: burden of proof];

36A [Time for assessing conformity of goods (conformity determined as of time when risk passes to buyer): evidentiary issues];

67A [Risk when contract involves carriage of goods: risk passes on handing goods over to first carrier];

78B [Rate of interest]

Descriptors: Scope of Convention ; Burden of proof ; General principles ; Passage of risk ; 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=368&step=Abstract>

German: [1999] Schweizerische Zeitschrift für Internationales und Europäisches Recht (SZIER)/Revue suisse de droit international et de droit européen 189-190

CITATIONS TO TEXT OF DECISION

Original language (Italian): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/417.pdf>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=368&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Saidov, Damages under the CISG (December 2001) n.348; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 4-9 n.117; § 5-2 n.10; § 6-12 n.115; Liu Chengwei, Recovery of interest (November 2003) n.144; Valioti, Passing of Risk under CISG and Incoterms (2003) n.126; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.126 (burden of proof); [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 70, 172

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Case text (English translation)

Queen Mary Case Translation Programme

Lugano, Cantone del Ticino, Tribunale d'appelo 15 January 1998

Translation [*] by Charles Sant 'Elia [**]

Translation edited by Angela Maria Romito [***]

[]

[Buyer] brought a claim against [seller] for 118,008,066 Lire, in addition to 9.25% interest from 8 June 1994. The Court of First Instance rejected [buyer's] claim. The [buyer] appeals. The [seller] seeks rejection of the challenge to the judgment with protest of expenditures and restitution of costs.

The Appellate Court, having read and examined the pleadings and documents produced, set for judgment the following issues: (1) whether the appeal must be accepted; (2) court fees and restitution of costs.

Facts, proceedings prior to the appeal, and position of the parties

A. On 28 January 1994, the Italian [buyer], concluded a contract for the sale of goods with the Swiss [seller]. The [seller] was to furnish by two shipments of 100 tons each, a total of 200 tons of cocoa beans of third quality from Ghana. The fat content of the cocoa beans was to be 45-48%; the acidity of the cocoa beans was not to exceed 4% (doc. 3.2); values subsequently unanimously set at a minimum of 45% of fat material and a maximum of 7% acidity (doc. G). For payment of the price, set at FF 599.9 / lOO Kg, the parties agreed upon a letter of credit opened on behalf of [buyer] in favor of the seller, which the seller would be able to validly draw only if accompanied by, among the other documents required, a certificate of the Société Générale de Surveillance (SGS) attesting that the weight and quality of the goods conformed to the contractually established values (doc. 3.2). The goods were to be delivered to the buyer in Genoa and -- contingent to the transport -- a CIF clause was agreed upon, thus attributing to the seller the task of concluding the necessary shipping contract.

B. On 8 February 1994, the [buyer] sought to have Banca Nazionale del Lavoro [BNL] issue a documentary credit of FF 599,000 to Società di Banca Svizzera di Lugano [SBS] in favor of [seller], to be examined upon presentation of the documents required by the contract (doc. E).

C. On 27 April 1994, [] of Accra (Ghana), by order of forwarding agent [] of Accra, proceeded to the sampling of the cocoa contained in 1,104 bags of [] polypropylene marked "[] L ill: Cocoa Waste", for a Kg. 68,503.2 total, sending a sample for analysis to [] Ltd. of Accra, which ascertained a content of fat material equal to 48.5% and an acidity of 7% (doc. N). The bags, weighed between 13 and 17 May 1994 (doc. N. and doc. 4), were then enclosed in six containers and shipped on 19 May 1994 on board the [] to the port of Tema (doc. 1).

D. The seller then drew upon the letter of credit from the SBS bank of Lugano with the relevant documents (doc. K) and on 8 June 1994, the BNL bank paid the SBS bank the amount required by the seller (doc. L).

E. Upon arrival of the lot of cocoa in Genoa on 20 June 1994, a preliminary analysis revealed a fat material content of 43.5% and an acidity of 35.5% (doc. M), values substantially confirmed by a subsequent analysis performed by [] of Amsterdam (doc. Q). The [buyer] therefore immediately communicated to the [seller] its refusal of the goods (doc. M), and demanded the reimbursement of the amount already paid (doc. R). The seller opposed that request, maintaining the exclusive responsibility of the SGS inspection service (doc. V). After the unprofitable expiration of a further period of time assigned by the buyer for the substitution of the goods with others having the agreed qualities, the [buyer] declared the contract avoided and unsuccessfully sought the restitution of the price paid (doc. AA).

F. By petition of 30 March 1995, the [buyer] asks that the seller be required to return the price paid and reimburse commissions and costs owed to [buyer], in addition to interest at 9.25% on the whole of the amount.

The seller itself having affirmed that the theory that the merchandise deteriorated after loading or during shipping must be ruled out, one should necessarily deduce from this that the merchandise was already spoiled at the moment of loading, that is, upon the passage of risk to the buyer. The acceptance of the SGS certificate of quality on occasion of the payment of the letter of credit, not constituting the acceptance of the cocoa, would not pose an obstacle to this solution. In the line of a documentary credit, where the exchange of documents is independent of the underlying juridical relation, the acceptance of the certificate would not in fact deprive the buyer of the ability to subsequently contest the quality of the goods.

G. In its answer, the [seller] has maintained in the first place, that Mr .[], against whom [seller] has filed suit, had signed the contract in question without the ability to represent [seller], who consequently would not have liability for the obligation. On the merits, the [seller] has maintained that the presentation of a SGS certificate of quality attesting to the cocoa's conformity to pre-established values at the moment of the passage of risk to the buyer, that is, at the moment of the identification and of the verification on the part of SGS, whose examination, claimed by the [buyer], would have represented an anticipation of the examination to be conducted upon delivery of the goods, that would therefore be accepted. An eventual error in the analyses conducted at loading would consequently be a question regarding the [buyer], for which no consequence would bear upon the [seller].

H. On 13 March 1997, the Magistrate of the District of Lugano, section 5, granted the [seller] an insolvency moratorium for the duration of six months.

I. In the judgment here disputed, the Magistrate, supposing the applicability of the Vienna Convention on Contracts for the International Sale of Goods, observed that the only probative element relevant to the state of the cocoa at the moment of loading would be the SGS certificate, attesting to the cocoa's conformity to the contractual specifications. There would therefore be no proof of the asserted defectiveness of the goods at the moment of delivery, hence the rejection of the petition.

[Editorial note: There are no paragraphs J or K in the Court's opinion.]

L. With its appeal, the [buyer] seeks to have the Magistrate's judgment overturned, maintaining that the Magistrate had evaluated the preliminary findings regarding the state of the goods at the moment of loading in an incorrect fashion.

[Buyer] maintains that the SGS certificate would not have in fact shown their conformity, given that it solely attests that on 27 April 1994, indeed more than twenty days before the goods were sealed in the containers and loaded, a stock of refuse of cocoa not clearly identified as conforming to the contractually required values, which would not allow exclusion that in such lapse of time the goods had been switched, manipulated, or deteriorated. One should conclude from it, on the contrary, as far as received by the Magistrate, that the [seller], bearing the relevant burden of proof, did not manage to show the conformity of the goods at the moment of loading.

M. As for the pleadings of the [seller], who seeks the rejection of the challenge to the judgment with protest of expenditures and restitution of costs, we shall address, as far as necessary, in the following grounds for judgment.

N. On 22 December 1997, the Magistrate of the District of Lugano, section 5, approved the agreement proposed by the [seller] to its own creditors, in which a dividend of 44.67% was foreseen for non-preferential credits.

Rulings of law

1. The international sales nature of this contract is not in controversy, thus the applicability of the United Nations Convention on the International Sale of Goods of 11 April 1980 (Vienna Convention, [CISG]) is uncontestable.

2. As to the elements of judgment and the parameters of the case before us, it is not contested that the transfer of risk to the buyer occurred with the delivery of the identified goods to the carrier, indeed on 19 May 1994 (Art. 67 CISG; appeal, point 6, p. 6; pleadings, point 3, p. 4), and that the goods reached the port of destination in such condition as to be unserviceable for the buyer (appeal, point 3, p. 4; pleadings, point 2, p. 3).

The parties differ in the dispute as to whether the goods at the moment of delivery were defective -- in a manifest or latent way (Art. 36(1) CISG) -- and who bears the burden of proof for this circumstance.

3. In principle, it is doubtless that the attribution of burden of proof must be established from the rule of law to which the case at bar is subject (Walder, Einführung in das IZPR der Schweiz, 1989, p. 32 and 221; Guldener, Das intemationale und interkantonale ZPR der Schweiz, 1951, p. 27 et seq.), or indeed, here, in light of the Convention itself.

However, the CISG does not explicitly govern the question of the allocation of the burden of proof for the rights that it guarantees to the parties, and in particular to the buyer, as regards conformity of the goods (Art. 35 et seq. CISG). According to a part of the doctrine, this gap should be resolved by turning to the general principles of the Convention in which, implicitly, the governing of the burden of proof would be inherent (Honsell, Kommentar zum UN-Kaufrecht, 1997, n. 15 to Art. 36 CISG and references); that in the case of Art. 35 et seq. CISG would burden the buyer (Honsell, ibidem). The other opinion maintained is, instead, that one should deduce from the silence of the Convention the applicability of the principles regarding allocation of the burden of proof from internal law (Dessemontet, Les contrats de vente internationale de marchandises, 1991, p. 225), which would lead, all the same, to still concede that it is the buyer that has accepted delivery without reservations who must show that the goods were defective at that moment (Art. 8 CO [CO = Codice delle Obbligazioni = Swiss Code of Obligations]; Keller/Siehr, Kaufrecht, 1995, p. 79; Honsell/Vogt/Wiegand, OR I, 2d edition, 1996, n. 12 to Art 197 CO; Tercier, Les contrats speciaux, 1995, p. 48 and 57). The burden of proof regarding the defectiveness of goods sold thus, in any case, weighs upon the appellant as a buyer .

4. The elements of the cause of action present in the pleadings regarding the claimed defectiveness of the goods at the moment of their delivery to the carrier to be evaluated in the manner set by the procedural law of the adjudicating tribunal, or indeed, according to the free appraisal of the judge (Art. 90 CPC) are rather limited [CPC = Codice di Procedura Civile = Swiss Code of Civil Procedure].

      4.1 The result of the analysis conducted by [] Ghana LTD on the basis of samples extracted on 27 Apri1 1994, reported in the certificate of warranty 220/1220 (doc. 15), is certainly not an element of the cause of action favorable to the position of the [buyer], given that it does not allow one to infer any defectiveness of the goods. On the other hand, it is true that from the results of that examination preceding the delivery and essentially linked to the method of payment on the contract, it is not permissible, as the [seller] would have it, to deduce the definitive acceptance of the goods on the part of the buyer, who on the contrary was free to subsequently verify their condition and, if appropriate, to contest their defects (Art. 38(2) and (2) CISG).

      4.2 The cargo arrived at Genoa 4 June 1994, while only on 23 and 28 June did [] of Genoa take steps to extract some samples, which were revealed to be of non-conforming quality during the analyses (doc. Q). The report of [] of Genoa limits itself, nevertheless, to the assessment of the poor quality of the goods at the moment of the analyses -- an uncontested issue -- but is silent as to the reasons for the defects. Consequently, it does not allow one to reach any conclusion regarding the existence or latency of the defects at the determining moment of 19 May 1994.

      4.3 The only other element of the cause of action that, however, has the aspect of decisive importance consists of the affirmations made by the [seller] in its pretrial correspondence.

Compared to the [buyer's] timely complaint -- on 20 June 1994, [buyer] was already declaring the unserviceability (uselessness) of the lot of cocoa (doc. M) -- the [seller] on 28 June had declared its own "complete bewilderment" (doc. U), but, on the other hand, did not deny the presumed defectiveness of the goods at the moment of loading, entrenching itself instead behind merely formal arguments, according to which the certification provided by the Ghanian [] would be "decisive", from which -- to the [seller's] mind -- would derive the impossibility of rendering [seller] liable.

Consequently, again according to the [seller], the certifying company at the most should assume the warranty obligations in relation to the order conferred upon it, which is equivalent to affirming that the goods were really defective, but since that circumstance was not revealed by the [seller] at the port of loading, the liability of the seller would have lapsed and, in any case, would be up to the certifying company to bear the consequences of its own mistake.

Such an admission had been insisted upon by the [seller] for the first time by its subsequent writing of 6 July 1994 (doc. V), in which the "exclusive liability of the certifying company, once the defects of the goods were definitively ascertained" was asserted, and again a second time with the letter dated 23 January 1995 by [seller's] Attorney Gandolfi (doc. FF. Page 2: "it would seem that the conduct of [] Ltd. is not at all free from criticisms." This latter writing is particularly significant for another important admission which comes from it, particularly that one would exclude that the cargo could have deteriorated during transport by ship to Italy (page 1, last para.). From these circumstances, counsel for the [seller] deduced that "performance became impossible without any fault on the part of [seller]", a hypothesis lacking any foundation whatsoever, not taking into account that, in reality, from the implicit admission of the defectiveness of the goods at the moment of departure, which one would have us find culpably not revealed by [] Ltd., and from the affirmation of the impossibility of the goods' deterioration during shipping, emerges with clarity the admission of providing defective goods, and therefore of [seller's] own non-performance.

      4.4 To that one adds that the [seller] in the course of its case has not provided concrete elements apt to challenge its prior admission.

The overall evaluation of the circumstances then warrants holding highly unlikely an alteration of the goods subsequent to the sealing of the containers and their loading, the bags having reached Genoa in [legally] proven original perfect conditions (Sampling Report [] Genoa, doc. Q). The certificate [] attesting to the conformity of the cocoa on 27 April 1994 -- that is, more than twenty days before loading -- is certainly not sufficient to challenge such likelihood, the goods resulting much more liable to possible alterations during their stay in the port of Tema, not yet arranged and sealed in the containers, than it would have been during transport on the ship.

Contrary to the theories of the [seller], even an eventual error in the analyses carried out before loading would not touch upon the warranty against defects of the goods with which the seller must cope, but, however, the seller would be responsible even in a case where the defects were present in the goods at the moment of the passage of risk and in which the defects were manifest only subsequent to that moment. If it is thus practically ruled out that the cocoa had undergone damage after the loading, it is absolutely more likely to explain its non-conformity either by an error on the part of [] in the first analysis, or by damage or manipulation effectuated in the period of storage in the port of Tema or, possibly, by the development of a defect intrinsically already present in the goods, but not yet manifesting itself at the moment of the analyses three weeks before loading. One must therefore hold that the goods were non-conforming with respect to the agreed values already at the moment of the passage of risk to the buyer, and that the liability of such defect falls on the seller.

5. The buyer thus has rightfully avoided the contract in accordance with Art. 49 CISG and has therefore a right to restitution of the price already paid (Art. 81(2) CISG), equal to Lire 117,120,950. The [buyer] has in addition a right to compensation for damages incurred as a consequence of the non-performance (Arts. 74 and 81(1) CISG), or indeed, to the reimbursement of expenses uselessly incurred in relying on the contract (Honsell, op. cit., n. 15 to art. 74 CISG), in the case at bar, commissions and expenses for a total of Lire 887,116 (doc. L and GGl-6).

On these amounts are due interest counted from the day of payment (Art. 84(1) CISG), that is to say, from 8 June 1994 for the sale price; the same date has also to be employed for the expenses previously incurred as far as thus requested by [buyer]. The rate of the interest is not governed by the Convention, and must therefore be determined by internal law resulting from the application of the pertinent rules of conflict of laws (Honsell, op. cit., n. 10 to Art. 84 CISG), that is, according to Art. 188(1) LDIP [*], from the law of the country where the seller has its habitual residence, and therefore from Swiss law.

The interest is consequently to be set at the rate of 5% (Art. 93(1) CO; Giger, Commentario Bernese, n. 25 to art. 208), there being no sufficient proof of the fact that [buyer] had for the whole depended upon a bank credit at 9.25% (cf. the undecipherable indication at the bottom of doc. L), and not even of the fact that, the relationship being between merchants, the discount rate in Switzerland was at the moment greater than 5% (Art. 104(3) CO).

6. The overall debt of the [seller] therefore amounts to Lire 118,008,066 plus 5% interest beginning 8 June 1994. The determination of the amount owed on the basis of the insolvency agreement dividend considering as well the suspension of the running of the interest during the insolvency agreement proceedings (Art. 279(3) LEF) is up to the liquidator of the agreement [].

[Judgment]

For which reasons, recalling Art. 148 CPC [*] and TG, the Court declares and pronounces:

I. The appeal of 7 July 1997 of [buyer] is granted. Consequently the judgment of 12 June 1997 of the Court of First Instance of the District of Lugano, Section 2, is thus amended:

1. [Buyer's] petition is granted. [Seller] is ordered to pay to [buyer] Lire 118,008,066 plus 5% interest from 8 June 1994.

2. The court fees of Fr. 2,800- and expenses, to be advanced by [buyer], are placed on [seller], who will remit to [buyer] Fr. 6,000- by right of restitution of costs.

II. The expenses of the appellate proceeding consisting of court fees Fr. [Swiss Francs] 1,750.- and expenses Fr. 50.-, a total of Fr. 1,800.-previously advanced by [buyer], are shifted to [seller], who will remit to [buyer] Fr. 2,500.- appellate costs.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellant of Italy is referred to as [buyer]; Defendant-Appellee of Switzerland is referred to as [seller].

Translator's note on abbreviations: CPC = Codice di Procedura Civile [Civil Procedure Code]; LDIP = Legge di Diritto Internazionale Privato [Private International Law].

** Charles Sant 'Elia has a B.A. in Political Science and Italian Literature from New York University and studied Political Science at the Universitá degli Studi di Firenze. He received his J.D. from Pace University School of Law and is admitted to the Bar of the States of New York and Connecticut.

*** Angela Maria Romito holds a Law degree (cum laude) 1994, University of Bari, Bari, Italy. Admitted to the Bar in 1997. LL.M. University of Pittsburgh School of Law, 2000-2001. CWES Scholarship. Lawyer in Bari.

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