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CISG CASE PRESENTATION

Italy 11 December 1998 Appellate Court Milan (Bielloni Castello v. EGO) (Printer device case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981211i3.html]

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

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Case identification

DATE OF DECISIONS: 19981211 (11 December 1998)

JURISDICTION: Italy

TRIBUNAL: Corte di Appello di Milano

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Bielloni Castello S.p.A. v. EGO S.A.

CASE HISTORY: 1st instance Tribunale di Milano 30 November 1994 / 26 January 1995 [partly reversed]

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: France (defendant)

GOODS INVOLVED: Printer device


Case abstract

ITALY Corte di Appello di Milano 11 December 1998

Case law on UNCITRAL texts (CLOUT) abstract no. 645

Produced with permission of UNCITRAL

Abstract prepared by Maria Chiara Malaguti, National Correspondent, and Vincenzo Vinciguerra

An Italian seller entered into a contract for the sale of printing equipment with a French buyer. After a down payment, the buyer later on failed to offset the balance and take delivery of the goods despite several notices from the seller. Following the buyer's refusal, the seller brought an action against the buyer seeking damages. The buyer alleged that it had been unable to take delivery of the goods as originally agreed due to circumstances beyond its control, i.e. delays in the construction of the premises in which the goods were to be installed. The buyer further argued that it had asked for an extension of the delivery period and, it deemed, that this request had been accepted by the seller. Therefore the buyer asked the court to declare the seller in breach of contract and claimed the restitution of the down payment.

The Italian court of first instance, applying Italian domestic law, rendered a decision in favour of the buyer. As a matter of fact, the court failed to acknowledge any agreed modification of the terms of delivery. The seller appealed against the decision.

The Court of Appeal held that the substantive provisions of the Italian Civil Code did not apply and that the contract was instead governed by the CISG (art. 1(1)(a)). The court stated that the buyer had breached the contract since it had failed to perform its obligations even after the seller's notices.

The court found that the extension granted by the seller was reasonable under the circumstances (art. 63(1) CISG), furthermore, it recognised that an "interlocutory behaviour of the seller [had] de facto expanded the tolerance period already granted". Thus the court refused to accept the argument of the buyer that the unexpected delay of the construction of its premises could excuse its fundamental breach.

As to the principle of good faith invoked by the buyer, the court stated that, in light of art. 7(1) CISG, the circumstances affecting the buyer could not be taken into account. In addition, in the case concerned art. 7(2) CISG would apply, therefore the buyer's allegations should be settled according to Italian law. These allegations, however, were inconsistent also pursuant to Italy's domestic law.

Finally, the court found that the considerable delay of the buyer had caused the seller a substantial loss and, applying art. 75 CISG, held that this latter was entitled to damages in the measure of the difference between the contract price and the price of the substitute transaction. The court, in fact, rejected the seller's claim to recover damages according to the criterion of art. 74 CISG, since this claim appeared unjustified and not supported by convincing evidence. The court, however, stated that the seller was entitled to interest at the Italian legal rate.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7(1) ; 63(1) ; 64(1)(b) ; 74 ; 75 ; 78 ; 79 [Also cited: Articles 7(2) ; 26 ]

Classification of issues using UNCITRAL classification code numbers:

7A3 [Observance of good faith: principle of good faith held to preclude possibility of taking into account any impediments to perform];

63A [Notice fixing additional final period for buyer's performance];

64A21 [Grounds for avoidance: buyer does not pay within additional period of time set by seller];

74A [General rules for measuring damages];

75A [Damages established by substitute transaction];

78A [Interest on delay in receiving price: rate set at domestic law (citing Art. 7(2)) from date of avoidance of contract]

79A [Impediment excusing party from damages]

Descriptors: Applicability ; Choice of law ; Fundamental breach ; Exemptions or impediments ; Intent ; Damages ; Cover transactions ; Interest ; General principles ; Good faith

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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=359&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (Italian): Rivista trimestrale di diritto e procedura civile (1999) 112-116; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=359&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) §: 2-6 n.79; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.502; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 456

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Case text (English translation)

Queen Mary Case Translation Programme

Corte di Appello di Milano 11 December 1998
Bielloni Castello S.p.A. v. EGO S.A.

Translation [*] by Alex Turina [**]

Translation edited by Angela Maria Romito [***]

Description of the trial

On 20 February 1990, Bielloni Castello [seller] filed, before the Courts of Milan, an action against Ego S.A. [buyer], a French company, with relevant place of business in Oyonnax. The [seller] alleged that the [buyer] breached the contract entered into by the parties on 27 January 1989 for the sale of a printer device [hereinafter, the "goods"] for the price of ĢIT [Italian Lira] 528,000,000. The [seller] alleged that without success he has repeatedly urged -- ever since the month after the term agreed for delivery (5 January 1989) -- the [buyer] to pay the residual price and to finally pick up the goods. The [seller] forwarded his last notice on 6 December 1989.

The [seller] asked the Court to hold the [buyer] liable for damages in the amount of ĢIT 200,000,000 or subordinately, in such other amount as the Court would deem most appropriate. The [buyer] counterclaimed that the goods were ordered with the intent to be placed at a subsequent time in certain premises still to be built. The [buyer] alleged that this construction, however, for reasons beyond its control, had been substantially delayed. For this reason, the [buyer] asked the [seller] -- and deemed the request accepted -- to withhold the delivery until May 1990. The [buyer], claiming a violation of the provisions of Article 1375 of the Italian Civil Code [hereinafter, the "C.C."], asked the Court to rule that the contract was breached by the [seller] and to thereby order the restitution of the down payment advanced by the [buyer] in the amount of ĢIT 105,600,000 plus damages.

The Tribunale di Milano on 30 November 1994 - 26 January 1995, rendered its decision in which, not acknowledging any agreed modification of the terms of delivery, declared that the [seller] breached the contract. This Court of First Instance based its decision on the unsuccessful expiration of the 15-day term given in the first notice to the [buyer] on 17 November 1989, and condemned the [seller] to return the down payment to the [buyer], not granting any damages to the [buyer] and setting off the legal fees.

The [seller] filed appeal against this decision on 17 October 1995, asking the Appellate Court to partially modify the decision entered by the Lower Court, and thereby to declare the [buyer] liable for damages. The [buyer] renewed all its allegations already advanced in the first trial. The Appellate Court, after having asked the parties to precise their conclusions, decides as follows.

Reasoning

To correctly qualify the relationship between the parties, it is preliminary useful to point out that, being as the contract was entered into by the parties in January 1989, the determination of their right and duties must refer to the United Nations Convention on Contracts for the International Sale of Goods (hereinafter, the "Convention"), ratified by both Italy and France, and signed in Vienna on 11 April 1980, and enacted on January 1, 1988.

Therefore, except as specified infra, the Italian substantive law provisions found in the applicable sections of the C.C. do not apply. These internal provisions, derived sometimes explicitly (by the parties), sometimes implicitly (in the appealed decision, which actually does not even go that far), again do not apply at the case at bar; Article 1(1)(a) of the Convention applies instead.

The Appellate Court affirms that which has already been stated by the Tribunale of Milan about the breach of contract, but not by virtue of the national law, but due to application of the CISG.

The [seller's] position is strengthened considerably by the intervened breach of the contract (in light of the new qualification given above) depending upon the notice of the [seller], pursuant to the provisions of Articles 61-64(1) and 26 of the Convention, and pursuant to Article 74 in relation to the breach committed by the [buyer]: consisting in the [buyer's] failure to pay the owed price and to pick up the goods, pursuant to Articles 53, 59 and 60.

In particular, it appears that the [seller] granted the [buyer] an additional term to fulfill its obligations, and this term had a reasonable length within the meaning of Article 63 of the Convention.

In addition, taking into account the term of delivery/payment (originally agreed for 5 September 1989) after a first notification dated 17 November 1989 -- instructing the [buyer] to pick up the goods within 15 days -- an interlocutory behavior that de facto expanded the tolerance period already granted. On 6 December the [seller], in a letter to the [buyer], restated the content of the previous notice; also relevant is the final 15-day term, thus newly granted to the [buyer] by the [seller].

Therefore, the total extension granted after the deadline of the beginning of September, is two and a half months long, a term undoubtedly reasonable under the circumstances.

The fact that (i) the [buyer] who benefited from the extension, was impaired from fulfilling the agreed (and modified) obligations (to pick up the goods) for some additional time for technical reasons, and that (ii) there was an attempt to settle the controversy in fall (which obviously failed since the [buyer] was seeking a settlement in its letter dated 29 November 1989) are considerations which do not deserve attention at present time.

In fact, in light of the mutual agreements, of their international nature, and of the necessity to assure good faith in international transactions (as stated in Article 7(1) of the Convention): for sake of clarity, it is not possible to discuss circumstances which are presumed to be obstacles to the fulfillment of the duties provided under the Convention. Moreover, Art. 7(2) provides that: "questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law". The position of the buyer is therefore inconsistent with the circumstances described above to the extent of the application of Italian internal law. This substantive law would be relevant as of the country in which a buyer has its "permanent residence", or its relevant place of business. This is to be considered in light of Article 3 of the Hague Convention of 15 June 1955 on the Law Applicable to International Sales of Goods which, given its universal application (Art. 7) had replaced since its enactment (in Italy, on 1 September 1964) Art. 25 of the preamble to the C.C., and therefore represents a general and fundamental conflict of law provision in this area (contractual obligations).

Due to their intrinsic inconsistency, the circumstances alleged by the [buyer], in order to explain its difficulty in fulfilling the obligations [buyer] originally undertook, can hardly be usefully referred to in any legal category of Italian internal law. Thus, no presuppositions mentioned in the [buyer's] pleadings, nor its impossibility to perform, nor any other relevant defenses, are applicable. In fact, the [buyer] in its defense just mentions the principle of good faith in performance, as provided by Art. 1375 of C.C., which cannot in any way replace the definitive and mandatory context of the Convention's provisions which -- as specified in Art. 7(1) -- adopt an independent notion of good faith.

In light of the above, the decision of the Lower Court -- not to grant to the [seller] damages -- does not appear sound.

It is also appropriate to stress that, all references to the Italian internal law, (as substantive law) referring to this issue (damages) made by the [seller], do not appear appropriate. The provisions of the Convention should be deemed, in the area of remedies, basically self-sufficient, and in general cannot be integrated with other internal provisions, which would contradict the Convention's intended specificity.

As a matter of fact, as it appears from the documentation filed, it is incontrovertible that the goods -- which were impossible to be delivered by the [seller] to the [buyer] by the end of 1989 -- were sold at the beginning of the subsequent summer for an amount equal to ĢIT 440 million, a sum much inferior to the original amount.

Thus, also due to its time frame, the transaction may fulfill the provisions of Article 75 of the Convention: basically a replacement sale (a negative sale) which allows the [seller] to claim the difference between the contract price and the price in the substitute transaction (in the case at bar equal to ĢIT 528,000,000 minus 440,000,000) or ĢIT 88,000,000. As a practical matter, the transaction constitutes a loss pursuant Art. 74 (which provides the only remedy available), since the amount double-claimed by the [seller] appears unjustified (first as a net loss and then as consequential damages).

In other words, it does not appear that the [seller] was planning (as now [seller] claims) to carry out an equivalent sale with another client ever since the negotiation of the contract, so that "should the [buyer] have defaulted [seller] would have sold two printer drivers." Moreover, this assertion conflicts with the occurrence of the replacement sale described above.

The amount to which the [seller] would be entitled to should be increased by the accrued interest at the Italian legal rate, from the date of the breach, 1 January 1990, until payment is completed.

[….]

In witness whereof

The Court of Appeal of Milan, deciding on the appeal filed by the [seller] against the [buyer] on 17 October 1995, and on the partial appeal against the decision entered by the Court of Milan on 30 November 1994 - 25 January 1995, orders as follows:

1) The [buyer] shall be liable for damages towards the [seller] in the amount of ĢIT 88,000,000, plus interest accruing from 1 January 1990 until payment is completed.

2) The [buyer] shall bear the costs of the procedure.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellant of Italy is referred to as [seller]; the Defendant-Respondent of France is referred to as [buyer]. Monetary amounts in the currency of Italy [Italian Lira] are indicated as [ĢIT].

** Alex Turino received his LL.M. in International Comparative Law from the Pace University School of Law.

*** Angela Maria Romito, Associate of the Institute of International Commercial Law, Pace University School of Law. Law degree (cum laude) 1994, University of Bari, Bari, Italy. Admitted to the Bar 1997. LL.M. University of Pittsburgh School of Law 2000-2001. CWES Scholarship. Researcher of European Union Law at the University of Bari. Lawyer at Studio Legale Romito.

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Pace Law School Institute of International Commercial Law - Last updated March 2, 2007
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