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CISG CASE PRESENTATION

Switzerland 5 October 1999 Appellate Court Basel (Summer cloth collection case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/991005s1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19991005 (5 October 1999)

JURISDICTION: Switzerland

TRIBUNAL: OG Basel [OG = Obergericht = Canton Appellate Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 40-99160 (A15)

CASE NAME: Unavailable

CASE HISTORY: 1st instance President des Bezirksgerichts Sissach (A 98/55) 5 November 1998 [affirmed]

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Switzerland (defendant)

GOODS INVOLVED: Summer cloth collection


Case abstract

SWITZERLAND: Obergerichts des Kantons Basel-Landschaft 5 October 1999

Case law on UNCITRAL texts (CLOUT) abstract no. 332

Reproduced with permission from UNCITRAL

A German seller, plaintiff, supplied a Swiss buyer, defendant, with a summer cloth collection. As the buyer did not pay the purchase price, the seller did not supply the upcoming winter collection. Thereafter, the buyer paid part of the outstanding amount and sent a letter to the seller in which it set a payment schedule for the balance as well as the delivery dates with respect to the winter collection concerned. The seller did not immediately react to this letter, but instead refrained from delivering the winter collection. Later, the seller initiated debt collection proceedings against the buyer who sought set-off with damages allegedly arising out of the seller's failure to deliver the winter collection.

The appellate court upheld the ruling of the court of first instance, which had dismissed the buyer's claim for set-off and had allowed the seller's claim.

The court interpreted the buyer's letter, having regard to all relevant circumstances (article 8 CISG) and concluded that the agreement between the parties had not been amended (article 29 CISG) to the effect that the seller should have been obliged to deliver the winter collection upon the partial payment for the summer collection. The language of the letter was ambiguous and the buyer was unable to demonstrate that its explanation as to the meaning of the letter had to prevail. The court found that the seller's silence could not be interpreted as acceptance of the contents of the letter.

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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 8 ; 9 ; 29 ; 74

Classification of issues using UNCITRAL classification code numbers:

8C [Interpretation of party's statements or other conduct: interpretation in light of surrounding circumstances];

29A [Modification or termination of contract by agreement]

Descriptors: Intent ; Modification of contract ; Usages and practices ; Damages ; Burden of proof ; Loss of profits

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Editorial remarks

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Citations to other abstracts, texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

German: Schweizerische Zeitschift für internationales und europäisches Recht 115-116

CITATIONS TO TEXT OF DECISION

Original language (German): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Appellate Court (Obergericht) of the Canton Basel-Land

5 October 1999 [40-99/60 (A 15)]

Translation [*] by Ruth M. Janal [**]

I. [FINDINGS OF THE COURT OF FIRST INSTANCE]

With decision of 5 November 1998, the District Court Sissach [Court of First Instance] granted the [seller]'s claim and ordered the [buyer] to pay to the [seller] an amount of [Deutsche Mark] DM 8,539 plus interest at a rate of 7% from 12 September 1997. The Court of First Instance held that the enforcement no. 97/56,084 of the collection office Sissach - regarding an amount of [Swiss francs] Sf 7,070.30, plus 7% interest from 12 September 1997, plus the costs of the proceedings - was to be continued. The First Instance Court costs were also to be borne by the [buyer], which was why the [buyer] had to reimburse the [seller] for Sf 1,725.50 (including expenses and VAT).

In the reasons for the decision:

-   The previous instance recorded that the [buyer] did not dispute the existence of the [seller]'s claim in principle. However, [buyer] submitted that it was setting off a claim for damages, because the non-delivery of the ordered winter clothes had caused it to suffer a loss. [Buyer] pleaded that the [seller] had been obliged to deliver the goods despite the [buyer]'s default of payment, because the parties had reached a corresponding payment agreement.
 
The Court of First Instance held that the [buyer]'s letter to the [seller] constituted a commercial letter of confirmation. Since the [seller] accepted the attached check, which corresponded to the first installment of the payment agreement, and since [seller] did not oppose the [buyer]'s letter of confirmation within a reasonable time, the [buyer] had been entitled to assume that the [seller] agreed with the content confirmed. For this reason, the contract was modified through the [seller]'s silence according to the letter's content, with the result that the maturity of the claim owed was postponed. During the main hearing, the [seller] had declared that its accommodation was based on pure kindness. Following the Court of First Instance, this constituted an implicit concession that the [seller] tacitly concluded such an agreement.
 
-   The Court held that the [seller] was unable to rely on the defense of a non-performed contract, because the claim in the present case was not yet mature. The implicit acceptance of the payment agreement postponed the maturity of the [seller]'s claim.
 
Furthermore, the Court held that the [buyer] did not prove the extent of it set-off claim, as it did not submit any evidence that would support a damage to it property. Insofar, its claim for damages remained unproven.

II. [BUYER'S APPEAL]

The [buyer]'s attorney submitted a timely appeal against this decision and requests that:

-   The decision of the Court of First Instance be repealed in its entirety, that the [seller]'s claim be dismissed, that the [buyer]'s counterclaim be granted and that [seller] therefore be ordered to pay Sf 4,446.95 to the [buyer].
 
It is also requested that the [seller] be ordered to bear the costs for the present proceedings as well as for the proceedings before the Court of First Instance.
 
In the alternative, [buyer] requests that the matter be remitted back to the District Court Sissach for a new hearing and decision.

The [buyer] mainly bases its appeal on the argument that the previous instance held that [buyer] did not submit any proof to substantiate its claims for damages - a finding which, in the [buyer]'s opinion, stands contrary to the files. The previous instance therefore failed to hear the [buyer]'s evidence and incorrectly formed the conclusion that [buyer]'s counterclaim, respectively [buyer]'s defense of a set-off, was unjustified. Consequently, the previous instance was wrong in granting the [seller]'s claim. As the decision was in general very detailed and differentiated, the [buyer] concentrates its appeal on the question of the burden of proof for its alleged loss. The previous instance had correctly held that the parties had formed a payment agreement, according to which the [seller] was obliged to release the ordered autumn and winter goods for dispatch after receipt of the first installment of the purchase price. However, the [seller] did not keep to that promise, but sent the respective autumn goods to the USA. With letter of 13 October 1997, the [buyer] told the [seller] that the non-delivery of the winter goods caused considerable damage. Subsequently, the [buyer] informed the [seller] of its claim for damages, substantiated and in detail. It was a notorious fact that the margin in the textile trade was several 100%, in any case at least 140%. Without setting a precedent and out of kindness, the [buyer] only demanded a margin of 50%. The compensation claim amounted to DM 13,009.70 according to the written list of 13 October 1997. The [seller]'s alleged remaining claim in the amount of DM 8,539 was subtracted, leading to a balance of DM 5,370.70 or Sf 4,446.95.

[Buyer]'s attorney further submits that the [seller] did not in any way dispute the [buyer]'s set-off claim, neither in principle nor regarding the requested amount. Thus, the [seller] had acknowledged the [buyer]'s claim. Furthermore, it was certainly true that the compensation claim had been proven according to the general rules of civil procedure. During the hearing before the Court of First Instance, the [buyer] had repeatedly referred to business and trade usages in the textile trade. Moreover, it was generally well known, if not even well known to the Court, that the margins in the retail trade for textiles stand at several 100%. It had therefore not been necessary to prove such a fact, as it was generally well known or was known to the judge because of his professional activity. The corresponding documents had been submitted in the previous instance. The Court of First Instance had exaggerated the requirements for the standard of proof in the present case.

III. [SELLER'S REPLY TO THE APPEAL]

With its reply to the appeal of 11 August 1999, the [seller]'s attorney requests that the appeal be denied, that the decision of the Court of First Instance be affirmed in its entirety, and that the [buyer] be ordered to bear the cost of the proceedings.

In its reasoning, [seller] essentially declares that it denies the formation of a payment agreement by virtue of [seller]'s implicit conduct. The letter of 21 August 1997 did not constitute a commercial letter of confirmation, but had to be qualified as a request for payment by installments of a claim long due. The [seller]'s silence had to be interpreted as a refusal of the offer. It could not be expected from the [seller] to refuse acceptance of a mere partial payment in order to avoid the risk that its acceptance of the money would be interpreted as an acceptance of an unfavorable payment agreement. It was definitely not ascertained that the [seller] had obliged itself to release the ordered winter goods for dispatch immediately after the arrival of the first installment of the purchase price. The [seller] explicitly declared that it would only deliver after the mature claim had been completely paid. [Seller] was furthermore entitled to sell the winter goods otherwise, because the [buyer] had not even been able to pay for the already delivered summer collection. It could therefore not be expected from the [seller] to run the risk of an even greater loss by delivering further goods that would again not be paid.

[Seller] furthermore submits that the [buyer]'s letter of 13 October 1997 could not be considered as a serious claim for damages. The [buyer]'s alleged damages were in no way specified or proven by this letter. The [seller] refutes the [buyer]'s claim for damages. [Seller] had merely not commented on the letter, because it was of the opinion that the [buyer] could not have been serious when it raised the claim. The [buyer] had never proven its claim for damages, as the value of the ordered winter goods was not discernible. Furthermore, neither the margin nor the fact that [buyer] would have been able to sell the entire goods had been proven. To the contrary, the fact that not even the summer collection was paid by the [buyer] indicated that neither the profit margin nor the sales success was very high in [buyer]'s business.

IV. [FINDINGS OF THE COURT OF APPEAL]

On the occasion of today's hearing before the Court of Appeal, which the parties' legal representatives and the [buyer]'s husband attended, the legal representatives in their pleadings essentially kept to their motions and the reasoning in their briefs.

The Court of Appeal considers:

      1. The admissibility of an appeal against the appealed decision results from 9(1)(a) ZPO [*]. Following 11 no. 2 ZPO, the chamber of three judges of the Court of Appeal has the competence to adjudicate the present dispute. As the appeal was declared within the stipulated time period and as the other formal requirements have also been met, the appeal must be considered.

      2. The [buyer] firstly claims that the parties formed a payment agreement via telephone, which the [buyer] confirmed by letter of 21 August 1997. [Buyer] further pleads that the [seller] assured [buyer] that it would release the autumn and winter goods ordered after receipt of payment of a first installment in the amount of DM 5,655.20. The second installment of DM 8,539 was to follow at the end of August 1997. [Buyer] submits that the letter of 21 August 1997 constituted a commercial letter of confirmation, whose content needed to be regarded as a mutual agreement due to the recipient's silence and the cashing of the first check. [Buyer] is of the opinion that - as a result of the payment agreement - it was not obliged to pay the second installment because [seller] had not delivered the ordered winter goods as agreed. The previous instance also followed this line of thought. The [seller] on the other hand disputes that the parties formed a payment agreement and that the letter of 21 August 1997 constituted a commercial letter of confirmation. [Seller] submits that its silence had to be rated merely as an implicit refusal of the request for a payment by installments.

      3. In the Court's opinion, it firstly needs to be examined which content exactly was confirmed by the letter of 21 August 1997. The wording of the letter does not clearly reveal what is meant by the "receipt of payment" that would lead to the obligation to release the winter goods for dispatch.

The [buyer] pleads that "receipt of payment" meant the receipt of the first installment. Following [buyer]'s submission, it failed to pay the second installment because the goods were not delivered. The [seller], on the other hand, holds that it was only obliged to deliver after receipt of the second payment installment. Therefore, after the second installment was not effected, [seller] relied on a right of retention because of non-performance of the contract and sold the goods ordered to someone else in order to avoid further losses.

The [buyer]'s memo of 2 June 1997 shows that the obligation was to be fulfilled in two installments (first installment immediately, second installment in August 1997 at the latest). It is further noted that the delivery stop would not be lifted before the checks or promissory notes were received by the [seller]. The note explicitly mentions the plural, checks and promissory notes, and thereby supports the [seller]'s contention that it was only obliged to effect delivery after the payment of both installments.

Due to the unclear wording and the specific circumstances, the Court of Appeal finds that the [seller]'s silence at the most constituted the consent to an agreement that the delivery stop of the winter goods would be immediately lifted after [seller] had received both installments. This was in [seller]'s own interest, as it clarified that there was only a delivery stop and not a cancellation of order. It was supposed to assure both parties that the winter goods would still be delivered and not be cancelled because of the payment difficulties. In case of a default of payment until the end of August 1997, the [seller] would then still be able to dispose of the ordered goods in a different way. This interpretation is quite comprehensible and justified, as the alleged payment agreement is ambiguous and can also in good faith be understood in the way that the delivery is only to be released after the receipt of the second installment. As the content of the [buyer]'s alleged letter of confirmation is ambiguous, the following silence of the recipient cannot be considered as an implicit agreement, because it is not clear how the recipient interpreted that letter. In case of an unclear letter of confirmation, the burden of proof cannot be reversed by assuming the correctness of the letter's content. Consequently, it would have been up to the [buyer] to prove that its own interpretation of the letter of confirmation was correct. In view of these considerations, the Court of Appeal reached the conclusion that the [buyer] was unable to sufficiently prove in face of the law the alleged payment agreement.

      4. As a result of the above considerations, the Court of Appeal in the present case chooses not to examine whether the letter of 21 August 1997 did in fact constitute a commercial letter of confirmation, which would have had a constitutive effect in the absence of a protest. Even if one followed the reasoning given by the Court of First Instance and assumed that a payment agreement was formed as a result of silence towards a commercial letter of confirmation - an analysis viewed rather critically by the Court of Appeal - it is quite possible due to the ambiguous nature of the letter of confirmation, that the [seller] solely consented to an agreement not to cancel the delivery of the winter collection despite the default of payment, and to stop the delivery until the spring and summer collection had been paid completely.

      5. [Buyer] further claims that it suffered damages as a result of the non-delivery of the autumn and winter goods which had to be reimbursed by the [seller]. Accordingly, it seeks to set-off its alleged claim for damages. [Buyer] submits that it already explained to the [seller] with letter of 13 October 1997 that it suffered damages in the form of loss of profit as a result of the non-delivery of the autumn and winter goods. The alleged loss of profit was calculated on the basis of a purchase amount of DM 19,871 and a retail trade margin of 140%, which amounted to DM 27,819.40. However, the [buyer] informed the [seller] that - without binding effect - it invoiced only 50% of this sum, entitling it to a claim for damages in the amount of DM 13,909.70.

      6. Following the above considerations, according to which the payment agreement could be understood in the way that the [seller] was not obliged to release the delivery before payment of the second installment, the [buyer] does not possess a claim for damages. However, the Court of Appeal points out that the claim for damages would have to be dismissed even if the [seller] had been obliged to deliver the goods. The [buyer] in the present case failed to prove the damages suffered. [Buyer]'s claim for damages is therefore also dismissed for this reason.

      7. Art. 8 ZGB [*] generally provides for the allocation of the burden of proof. Pursuant to that provision, the existence of submitted facts is to be proven by that party which bases its rights on their existence. Consequently, the damage suffered and the extent of the loss must be proven by the party which claims damages. The previous instance dismissed the [buyer]'s claim because the [buyer] did not fulfill its duty of evidence and did not substantiate and prove the damage suffered. However, the [buyer] argues that it did prove sufficiently its damage in the face of the law and that the margin in the textile trade did not need to be proven, as it was a fact well-known to the Court. Furthermore, the [seller] had never disputed the claim for damages, thus the claim had to be considered accepted.

      8. The Court of Appeal follows the view of the previous instance, that the [buyer] did not prove sufficiently its claim for damages in the face of the law. Contrary to the [buyer]'s submissions, there is no evidence for the extent of the loss suffered. In its letter of 13 October 1999, the [buyer] claimed damages in the amount of DM 13,909.70. [Buyer] calculated this damage on the basis of a purchase amount of DM 19,871. However, the value of the ordered winter goods was not presented; therefore the basis for the damages calculation is already lacking. In the present case, at least the extent of the winter goods ordered would have had to be proven in order to calculate the lost profit.

      9. The [buyer] furthermore argued that the extent of the margin in the retail trade did not have to be proven, as this was a fact notorious to the Court. In this context, the Court of Appeal points out that business and trade usages generally also need to be proven, as they find application only by agreement (BGE [*] 94 II 159). Only in such cases where the law itself refers to a usage or local custom, does this no longer require a usage established between the parties, but constitutes a more specific definition of the law which generally does not need to be proven and which the judge applies by virtue of his position. It is however also possible that a certain trade usage is notorious to the Court and consequently does not need to be proven. Facts are considered notorious to the Court if they are generally known or known to the judge as a result of his or her profession. Such facts need to be weighed by the judge in his or her decision by virtue of their position (cf. Staehlin/Sutter, Zivilprozessrecht, 1992, 14 n. 6 et seq.). The Court of Appeal is of the opinion that the margin in the textile trade is not a fact notorious to the Court, which is why the [buyer] would have had to prove this trade usage.

      10. Regarding the [buyer]'s argument that the [seller] never disputed [buyer]'s set-off claim, the Court of Appeal points out that it follows from the record that the [seller] explicitly denied the [buyer]'s claim for damages in the oral hearing before the Court of First Instance. Thus, the claim for damages was timely denied by the other party and therefore cannot be considered as acknowledged.

      11. The Court of Appeal summarizes that the wording of the payment agreement does not reveal unambiguously that the [seller] was obliged to release the winter goods already after payment of the first installment. The [buyer]'s letter of 21 August 1997 can certainly also be interpreted in the way that the winter goods were supposed to be delivered only after the entire payment had been effected, that is, only after the receipt of the second installment. The [buyer] failed to prove sufficiently its interpretation of the alleged letter of confirmation in the face of the law. As the second installment was not paid within the stipulated period, the [seller] was entitled to dispose of the ordered goods in a different way, as [seller] otherwise would have run the risk of not being able to get rid of the respective goods. The [seller] insofar correctly relies on the defense of a non-performed contract under Art. 82 OR [*]. For this reason, the [buyer] is not entitled to claim damages and consequently the appeal is dismissed. The Court of Appeal is further convinced that the appeal would be dismissed even if the payment agreement had in fact been concluded as alleged by the [buyer], that is, if the [seller] had been obliged to release the goods after the receipt of the first installment. As the previous instance correctly noted, the [buyer] did not fulfill its obligation to substantiate and prove its claim, because it failed to submit any evidence regarding the extent of the loss suffered. The appeal would therefore also have been denied for a failure to prove the existence of a set-off claim.

      12. Since the [buyer]'s appeal was unsuccessful and the [seller]'s claim is granted, the [buyer] bears the ordinary costs of both instances. The fee for the proceedings before the Court of Appeal is fixed at Sf 400 (without expenses). The [buyer] furthermore has to reimburse the [seller] regarding both instances for its reasonable expenses.

The Court therefore

DECIDES:


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this presentation, Plaintiff-Appellee of Germany is referred to as [seller]; Defendant-Appellant of Switzerland is referred to as [buyer]. Amounts in Swiss currency (Swiss francs) are indicated by [Sf] and amounts in German currency (Deutsche Mark) are indicated by [DM].

Translator's note on other abbreviations: BGE = Entscheidungen des Bundesgerichts [Official Reporter of Cases of the Swiss Supreme Court]; OR = Das Obligationenrecht [Swiss Code on the Law of Obligations]; ZGB = Zivilgesetzbuch [Swiss Civil Code]; ZPO = Zivilprozessordnung [Swiss Code on Civil Procedure].

** Ruth M. Janal, LL.M. (UNSW) is a Ph.D. candidate at Albert-Ludwig-Universität Freiburg. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

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