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CISG CASE PRESENTATION

Switzerland 11 June 1999 Commercial Court Aargau (Granular plastic case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/990611s1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19990611 (11 June 1999)

JURISDICTION: Switzerland

TRIBUNAL: HG Aargau [HG = Handelsgericht = Commercial Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: OR.98.00010

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: France (plaintiff)

BUYER'S COUNTRY: Switzerland (defendant)

GOODS INVOLVED: Granular plastic


Case abstract

SWITZERLAND: Handelsgericht des Kantons Aargau 11 June 1999

Case law on UNCITRAL texts (CLOUT) abstract no. 333

Reproduced with permission from UNCITRAL

Both, [buyer] and its subsidiary K AG, defendant, had bought for many years granular plastic from a French seller, plaintiff. Later, [buyer] took over the entire plastic business from K AG and K AG was renamed I AG. However, after the corporate restructuring, employees of [buyer], formerly employed by K AG, continued ordering granulated plastic from the seller, using the letterhead and stamps of K AG. The respective invoices remained unpaid and the seller brought action against I AG, formerly K AG, for payment. I AG claimed that the materials had been ordered on behalf of [buyer] and that it was consequently not liable for the outstanding amount.

The court ruled on the question as to who was a party to the sales contract on the basis of article 7 CISG. The contract had to be interpreted applying the principle of good faith and with regard to all relevant circumstances of the case. Although the CISG does not contain any specific methods of interpretation, such interpretation nevertheless had to be based in principle on the CISG. The relevant national law should be applied only if this were not possible. The court as a matter of fact applied Swiss law and concluded that I AG had to respond to the claim.

The court held that pursuant to article 54 CISG, I AG was liable to pay the purchase price and that under article 62 CISG, the seller was entitled to claim such payment as a remedy for the buyer's failure to perform its obligation to pay.

As to the buyer's plea for a price reduction, the court found that the buyer had not fulfilled the conditions [under article 50 CISG] for such reduction.

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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 4 ; 7 ; 8(3) ; 50 ; 54 ; 62 ; 78 [Also cited: Articles 59 ; 63 ]

Classification of issues using UNCITRAL classification code numbers:

4A [Scope of Convention (issues excluded): Agency (validity issues)];

7A3 [Observance of good faith: interpretation of contract];

8C [Interpretation in light of surrounding circumstances];

50A [Buyer's right to reduce price for non-conforming goods];

54A [Buyer's obligation to pay price of goods];

62A [Seller's right to compel payment of price];

78A ; 78B [Interest on delay in receiving price or any other sum in arrears ; Rate of interest]

Descriptors: Scope of Convention ; Agency issues ; Validity ; Good faith ; General principles ; Intent ; Reduction of price, remedy ; Price ; Specific performance ; Interest

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Editorial remarks

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Citations to other abstracts, texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=485&step=Abstract>

German: [2000] Schweizerische Zeitschrift für internationales und europäisches Recht 117-118

CITATIONS TO TEXT OF DECISION

Original language (German): Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=485&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 50 para. 16

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Commercial Court (Handelsgericht) of the Canton Aargau

11 June 1999 [OR 98.00010]

Translation [*] by Linus Meyer [**]

I. SUMMARY OF THE RECORD

1. The Plaintiff [Seller] is a collective society under French law which has specialized in the delivery of plastic-granulates.

2. The Defendant [Buyer] produced plastic parts and articles for household, packaging, the construction of machines and electrical engineering under the name XYZ K. AG [*]. At its shareholders meeting on 21 May 1996, the company's purpose as well as its name was modified. The name was changed to XYZ I. AG. The purpose was changed to buying, long term management, financing and trading of real estate. Production activities ceased and were taken over by ABC O.C. AG in L., a holding company, as a contribution in kind.

3. This proceeding involves two invoices of the [Seller] of 18 July and 8 August 1996 for the delivery of plastic granulates.

4. By its lawsuit filed on 22 January 1998, the [Seller] requests the Commercial Court of the Canton Aargau to:

  1. Order the [Buyer] to pay 35,190 Swiss francs [Fr.] plus 5% interest on 17,340 Fr. since 17 September 1996 and 5 % interest on 17,850 Fr. since 8 October 1996;

  2. Grant definitive enforceability under request for enforcement K No. 17; and

  3. Order the [Buyer] to pay for the costs of the proceeding and to pay a compensation for the proceeding to the [Seller].

This request was mainly based upon the argument that the [Buyer] had ordered basic materials for 18,000 Fr. from the [Seller] to be delivered until 26 June 1996 using the XYZ K. Ag business paper. The [Seller] further states that it had demanded payment in advance. However, such payment was not made. Therefore, the goods that had been ordered have not been shipped.

II. CONSIDERATION BY THE COURT

1. The substantive law applicable to the matter in dispute is, according to the rules of private international law, the law which is applicable to the special questions at issue, the lex causae. (Vogel, chapter 1 para. 88). Art. 1(2) IPRG [*] states that international conventions generally take precedence in this respect. According to Art. 1(1) CISG, this Convention is applicable to contracts for the international sale of goods if the parties have their places of business in different States which are parties to the Convention or if the rules of private international plaw lead to the application of the law of a State which is a party to the Convention. The CISG is applicable to the present case according to Art. 1(1)(a) CISG as France as well as Switzerland are parties to the Convention. According to Art. 4 CISG, the Convention only governs the formation of a sales contract and the rights of the [Buyer] and the [Seller] resulting from it. Questions in dispute which are not explicitly answered by the CISG and which can also not be answered according to the general principles upon which the Convention is based have to be decided according to the law applicable by virtue of the rules of private international law (Art. 7(2) CISG).

2. First, the Commercial Court has to decide whether the [Buyer] is the proper person to be sued in this matter.

      a) According to Art. 7(1) CISG, the parties' behavior has to be judged according to the principle of good faith and all circumstances that lead to contract conclusion have to be taken into account. However, the CISG does not contain any provisions concerning the method to be used for interpreting a contract. The wording of Art. 7(2) CISG nevertheless indicates that contract interpretation should be done according to the Convention itself, i.e., autonomously. Only in cases where this is not possible, should interpretation be according to the national law to which international private law leads (Melis in: Kommentar zum UN-Kaufrecht, Honsell (Ed.) Berlin 1997, Art. 7 CISG No. 10). Art. 118 IPRG [*] provides that contracts for the purchase of moveable objects are governed by the Hague Convention of 15 June 1955 on the Law Applicable to International Sales of Goods to which Switzerland and France are parties. Art. 3(1) of that Convention provides that in case the parties have not made a declaration concerning the law applicable to the sales contract, the contract is governed by the law of the country in which the [Seller] had its residence at the time it received the order. If the order is received by a branch office, the contract is governed by the law of the country where the branch office is located. As the order was transacted by the [Seller]'s Swiss representation, the E.A. Company in St. ___, Swiss law is applied.

      b) Concerning the question of representation, Art. 38(1) OR [*] provides that the person represented only becomes party to a contract concluded by a representative who was not authorized to conclude that contract if it approves that contract. The approval then replaces the representative's authorization (BGE [*] 101, I, 230; OR-Wattner, Kommentar zum Schweizerischen Privatrecht, Obligationenrecht I, Art. 1-529 OR, 2nd ed., Basel 1995, Art. 38 para. 6). The lack of authority can, however, under certain conditions, also be overcome by the other parties' good faith. In this context it is called "Anscheinsvollmacht" (apparent authority) where the person represented had neither the will to give authority nor knowledge of the fact that the person acted as its representative, but would have been able to detect and prevent that person from acting as its representative (Gauch/Schluep/Schmid/Rey, Schweizerisches Obligationenrecht Allgemeiner Teil, vol. 1, 7th ed. Zurich 1998, para. 1412). If the person represented does not want to give authority to the other person but knows it is acting as a representative and does not intervene, a silent authorization is assumed (a so-called "Duldungsvollmacht" (authorization by toleration) Gauch/Schluep/Schmid/Rey, para. 1411, OR-Watter, Art. 33, No. 16).

      c) The [Seller] had assumed that it had received the order from the XYZ K. AG, to which the goods had been addressed and which was named in the invoices. The payment of the purchase price is now being refused by the [Buyer] with the argument that it had not been a party to the contract with the [Seller] either under its present name or under the name XYZ K. AG.

The two plastic factories of the ABC-P. AG (holding company) and the XYZ K. AG (subsidiary company) had procured plastic granulates in considerable amounts from the [Seller] for years (pages 18-20 of the protocol). The ABC Company had purchased more than its subsidiary (page 18 of the protocol). Several orders by the XYZ K. AG were not executed because earlier deliveries had not been paid for (page 20 of the protocol).

3. The [Seller] requests payment of 35,190 Fr. from the [Buyer] for an international sale of goods.

      a) Art. 54 CISG states that it is [Buyer]'s obligation to pay the purchase price and to take such steps and comply with such formalities as may be necessary for the payment of the purchase price. According to Art. 59 CISG, the [Buyer] has to pay the price at the time which is fixed by or determinable from the contract or the CISG. The [Seller] does not have to demand payment or abide by any formalities. Therefore, the due-date of the purchase price does not depend on a demand note by the [Seller] (Schnyder/Straub in: Kommentar zum UN-Kaufrecht, Honsell (Ed.), Berlin 1997, Art. 59 CISG No. 3). Art. 62 CISG gives the [Seller] a claim for performance of the contract. Under the CISG regime, this is an important legal remedy of the [Seller] against the [Buyer] (Schnyder/Straub, Art. 62 CISG No. 5).

Accordingly, the [Seller] can require payment of the purchase price if it has not exercised a right which is incompatible with this. Art. 63(1) CISG provides that the [Seller] can fix an appropriate additional period of time for the fulfilment of the [Buyer]'s obligations. Generally, this also applies to the obligation to pay the purchase price (Schnyder/Straub, Art. 63 CISG, No. 9). Until this period of time has elapsed, the [Seller] cannot exercise any right resulting from a breach of contract, if the [Buyer] has not indicated that it will not comply with its obligations within the additional period of time. The [Buyer] can invoke a reduction of the purchase price against the [Seller]'s claim for payment of that price. The [Seller] can then no longer request payment of the full purchase price. The request for full payment is, however, regarded as fully justified if no declaration of reduction was made (Schnyder/Straub, Art. 50 CISG, No. 47, 53). The right to reduce the price first requires that goods not in conformity with the contract were delivered by the [Seller] (Schnyder/Straub, Art. 50 CISG, No. 7). Conformity is defined by Art. 35(1) and (2) CISG. A right to reduce the price further requires that the [Buyer] has respected the time limits established by Art. 39 CISG (Schnyder/Straub, Art. 50 CISG No. 18). The [Buyer] bears the burden of proof for the non-conformity if it has accepted the goods (Magnus in: Kommentar zum UN-Kaufrecht, Honsell (Ed.), Berlin 1997, Art. 35 CISG No. 33).

      b) As ordered, the [Buyer] was supplied with plastic granulates on 22 July 1996 and on 9 August 1996, respectively. After the time limits for payment had not been complied with, the [Seller] set an additional period of time until 17 January 1997 by certified mail of 7 January 1997 ([Seller]'s exhibit no. 11). No payment was made within this period of time. As no valid declaration of a reduction of the purchase price had been made, there is no reason for doubt about the justification of the request for payment. There is even evidence for that justification: witness S. has explained that the material had to be good, otherwise he would know of the matter as head of production. In addition, S explained that all the material had been processed (page 17 of the protocol).

The [Seller]'s claim from the contract of sale is therefore justified.

4. The [Seller] has further requested 5% interest for 17,340 Fr. since 17 September 1996 and for 17,850 Fr. since 8 October 1996.

      a) If one party does not pay the purchase price or another amount due, the other party is entitled to interest according to Art. 78 CISG. The CISG autonomously and conclusively governs the prerequisites for an obligation to pay interest.

This means that relying on requirements established by national law is impossible. The obligation to pay interest comes into existence as soon as payment is due (Art. 78 CISG). There are no further requirements. The obligation to pay interest commences by itself at the time agreed upon in the contract or at the time defined by the CISG. A demand letter is not needed (Magnus in: Kommentar zum UN-Kaufrecht, Honsell (Ed.), Berlin 1997, Art. 78 CISG, No. 7-9).

The two invoices of 18 July 1995 ([Seller]'s exhibit No. 5) and 8 August 1996 ([Seller]'s exhibit No. 9) defined a period of 60 days for strictly net payment and 10 days with 2% discount, respectively. Consequently, the claim for 17,340 became due on 18 September 1996, the claim for 17,850 on 8 October 1996.

      b) Art. 78 does not define the interest rate. According to the prevailing opinion, the interest rate has to be determined according to national law (Magnus, Art. 78 CISG No. 12), in this case therefore according to the IPRG [*]. Consequently, as provided by Art. 118 IPRG in connection with Art. 3(1) of the Hague Convention of 15 June 1955, this question is governed by Swiss law.

The 5% interest rate claimed is the legal interest rate (Art. 104(1) OR). The [Seller]'s request for interest at this rate is therefore justified.

The [Buyer] is thus obliged to pay 35,190 Fr. plus 5% interest on 17,340 Fr. since 18 September 1997 and 5% interest on 17,850 since 8 October 1997. The [Seller]'s claim therefore has to be approved.

5. As requested, the proposition in the procedure for enforcement No. 17 of the office for enforcement K of 29 January 1997 ([Seller]'s exhibit No. 13) has to be removed.

The costs of the proceeding have to be assigned according to the outcome of the proceeding ( 112(1) ZPO [*]). The amount of the court fee is calculated according to the value in dispute which is defined by the requests of the parties ( 100(2) ZPO in connection with 4 VKD [*]). This amount is 35,190 Fr. ( 16 and 18(2) ZPO). The court fee has to be reduced according to Art. 13(1) VKD since no main proceeding was conducted.

The [Seller]'s legal costs are approved by the court in the amount of 9,579.65 Fr. (including 668.35 Fr. VAT) according to 3 et seq. AnwT [*].

III. DECISION

Consequently the following judgment is unanimously declared:

1. The [Buyer] is obliged to pay 35,190 Fr. plus 5% interest on 17,340 Fr. since 18 September 1997 and 5% interest on 17,850 since 8 October 1997.

2. The proposition in the procedure for enforcement No. 17 of the office for enforcement K of 29 January 1997 ([Seller]'s exhibit No. 13) is removed in the amount stated in No. 1.

3. The court costs, consisting of a court fee of 2,000 Fr., office fees and expenses of 634 Fr., totalling 2,634 are to be born by the [Buyer].

4. The [Buyer] has to compensate the [Seller] for [Seller]'s legal costs approved by the court in the amount of 9,579.65 Fr. (including 7.5% VAT: 668.35 Fr.).

5. This judgment is to be served upon the [Seller] (counsel) and the [Buyer].


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]; Defendant of Switzerland is referred to as [Buyer]. Amounts in Swiss currency are indicated as [Fr.].

Translator's note on other abbreviations: AG = Aktiengesellschaft [Corporation]; AnwT = Aargauisches Dekret über die Entschädigung der Anwälte [Decree by the Canton Aargau on compensation for lawyers]; BGE = Amtliche Sammlung der Entscheidungen des Schweizerischen Bundesgerichtes [Official reporter of decisions of the Swiss Federal Court]; IPRG = Bundesgesetz über das internationale Privatrecht [Swiss international Private law]; OR = Obligationenrecht [Swiss law of obligations]; VKD = Dekret über die Verfahrenskosten [Decree on costs of a proceeding by the Canton Aargau of 24 November 1987]; ZPO = Zivilprozessordnung [Law on Civil Procedure].

** Linus Meyer is a law student at the University of Osnabrueck, Germany.

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