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CISG CASE PRESENTATION

Switzerland 21 October 1999 District Court Zug (PVC and other synthetic materials case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/991021s1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19991021 (21 October 1999)

JURISDICTION: Switzerland

TRIBUNAL: KG Zug [KG = Kantonsgericht = District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: A3 1997 61

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (defendant)

BUYER'S COUNTRY: Switzerland (plaintiff)

GOODS INVOLVED: PVC and other synthetic materials


Case abstract

SWITZERLAND: Handelsgericht des Kantons Zug 21 October 1999

Case law on UNCITRAL texts (CLOUT) abstract no. 328

Reproduced with permission from UNCITRAL

A German seller, defendant, and a Swiss buyer, plaintiff, entered into an agreement for the supply of PVC and other synthetic materials for resale. Delivery was not forthcoming and the buyer declared the contract avoided. It further claimed damages. The buyer bought no goods in replacement.

The court held that damages resulting from the non-performance of the contract by the seller had to be assessed on the basis of an abstract calculation under article 76 CISG. Therefore, the buyer was entitled to claim the difference between the price fixed by the contract and the current average market price at the time of the avoidance of the contract.

[Interest was allowed at the rate determined by the otherwise applicable domestic law.]

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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 76(1) ; 78

Classification of issues using UNCITRAL classification code numbers:

76B1 [Damages recoverable based on current price at time of avoidance];

78A [Interest accruing from time damages due]

Descriptors: Damages ; 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=412&step=Abstract>

German: [2000] Schweizerische Zeitschrift für internationales und europäisches Recht 115

CITATIONS TO TEXT OF DECISION

Original language (German): Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=412&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Liu Chengwei, Recovery of interest (November 2003) nn.75, 117, 167; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.741 (assessment of damages); [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 76 para. 2

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

District Court (Kantonsgericht ) Zug

21 October 1999 [A 3 1997 61]

Translation [*] by Dr. Andrea Vincze [**]

[...]

FACTS

[...]

1. [Seller] is domiciled in Germany, while [buyer] is seated in Switzerland. Therefore, under Art. 1(1) of the Swiss Federal Act on Private International Law (hereinafter IPRG [*]) enacted on 17 December 1987, this is an international legal dispute. Under Art. 1(2) IPRG, with regard to the competence of Swiss courts and the applicable law, civil law courts have jurisdiction to hear the case. In the following, it must be determined whether the court has jurisdiction to hear the case, and also the law of which country is applicable.

[Jurisdiction of the court]

     1.1 In the case at hand, territorial jurisdiction is to be determined with regard to the Lugano Convention (hereinafter LC [*]). The LC entered into force in Switzerland on 1 January 1992, and in Germany on 1 March 1995. Under Art. 1 LC, this Convention is to be applied. By the [seller's] initial claim and the [buyer's] counterclaim in the present legal dispute, the parties wish to enforce a contract for the delivery of goods (PVC and other synthetic materials). Therefore, the dispute lies in a claim deriving from a contractual obligation which is covered by the LC (see Botschaft des Bundesrates - 21 February 1990, concerning the LC, p. 18; Kropholler, Europäisches Zivilprozessrecht 6 A, Heidelberg, 1998, at n.11 et seq., on Art. 1 LC).

Therefore, the court has territorial jurisdiction: (a) to hear the [seller's] initial claim, under Art. 2(1) in connection with Art. 53 LC; and (b) to hear the [buyer's] counterclaim, under Art. 6(3) LC.

Competence of authority and functional jurisdiction of the court follows from Art. 9 GOG [*] in connection with Art. 10 (2) GOG. Therefore, the present legal dispute is accepted by the court for judgment.

[The CISG as applicable law]

     1.2 Concerning the applicable law, firstly, it has to be determined whether the U.N. Convention on Contracts for the International sale of Goods (1980) [hereinafter CISG] is applicable to the present dispute.

1.2.1 CISG entered into force in Germany on 1 January 1991, and in Switzerland on 1 March 1991. According to Art. 1(1) CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State. The CISG is applicable only to movable property and to legal transactions where goods are exchanged for money (Siehr, in: Honsell, Kommentar zum UN-Kaufrecht, Berlin 1997, n.1, on Art. 2 CISG).

1.2.2 It is clear from the documents in the case that the parties agreed in springtime of 1994, to commence a future cooperation. In their contract, [seller] has agreed to deliver goods (PVC and other synthetic materials) at a certain purchase price to [buyer] for resale. The difference between the purchase price and the selling price - with regard to costs of transport, etc. - was to be divided equally between the parties (Appendix 1, p. 3; Appendix 2, p. 5). Therefore, the provisions of the CISG are applicable to this contract.

[Seller's initial claim for damages]

3. In theory, the legal procedure is governed by the law of the forum, even in international transactions, (Keller, Siehr, Allgemeine Lehren des internationalen Privatrechts, Zürich, 1986, p. 592 et seq.). According to Art. 96 of the Swiss Code of Civil Procedure (hereinafter ZPO [*], a party which is appropriately summoned to a main or a final trial but stays away without any sufficient excuse, or refuses to enter an appearance without a reason, has to bear all costs and should be summoned under forfeiture of right (Art. 96(1) ZPO). In this case, parties are warned that should the [seller], who made the initial claim for damages, stay away without an appropriate excuse, it is presumed that [seller] has withdrawn from that legal action, while the [buyer] has acknowledged the actual causes of action and has waived the right to object (Art. 96(3) ZPO).

[...]

[Formation of the contract and declaration of avoidance]

5. [Buyer] has not disputed that he had ordered 700 mt (metric tons) of PVC (type 7059 M) from [seller]. Therefore, a contract of sale of goods had been concluded between the parties, in accordance with the provision of CISG Art. 14 et seq. Therefore, [seller] was obliged to deliver the goods ordered, and [buyer] was obliged to pay the purchase price for the goods. [Seller] has undoubtedly not performed his obligation. Consequently, [buyer] declared withdrawal of the delivery and avoidance of the contract (see Appendix 2, p.18). Therefore, [buyer] avoided the contract for the delivery of 700 mt of PVC.

[Measurement of damages when contract avoided - Art. 76 CISG]

      5.1 If the contract is avoided and there is a current market price for the goods, the party claiming damages may, if he has not made a replacement purchase or resale of the goods under Art. 75 CISG, recover the difference between the price fixed by the contract and the market price prevailing at the time of avoidance as well as any further damages recoverable under Art. 74 CISG (see Art. 76(1) CISG; Schonle, in: Honsell, op. cit., at n.4, on Art. 76 CISG).

      5.2 It is not questioned that [buyer] avoided the contract of sale of goods for breach of contract by [seller], and that [buyer] has not made any substitute purchase transactions. It is beyond doubt that the goods agreed between the parties (PVC type 7059 M) have a standard contract price of US $725 per mt (order book 18), and that at the time of avoidance of the contract, i.e., November 1994, the market price of the goods was US $850-$900/mt (Appendix 11). [Seller] has neither objected to, nor contested the [buyer's] counterclaim. Therefore, [buyer] can claim damages for the [seller's] non-performance of the contract, in accordance with Art. 76 CISG. First of all, [buyer] may claim damages for the difference in the price of the goods, which have to be assessed on the basis of an abstract calculation, i.e., based on the difference between the price fixed by the contract and the current market price (Schonle, in: Honsell, op. cit., at n.19, on Art. 76 CISG). The difference between the average market price (US $875/mt) and the contract price (US $725/mt) is US $150/mt in the present case. Damages for the difference in the price of the goods amount to US $105,000 (700 mt multiplied by US $150/mt). However, [buyer] claims only a part of that amount, namely US $50,000. The court is bound to this claim (Art. 54 ZPO [*]). [Seller] is therefore obliged to pay [buyer] US $50,000. Under these circumstances, it is not necessary to decide whether, in addition to the damages deriving from the breach of the contract for the delivery of 700 mt of PVC type 7059 M, [seller] owes [buyer] the amount of US $8,990 (debit claim) and US $1,289.16 (expenses).

[Buyer's claim for interest - Art. 78 CISG]

6. Additionally, [buyer] claims interest of 5%, from 29 November 1994 onwards.

     6.1 According to Art. 78 CISG, if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, from the due date. Interest accrues from the due date for claims of damages as well, i.e., from the original date of breach. It is a uniform opinion that the interest rate is governed by the law of the country which the rules of conflict of laws refer to as law of the contract (Magnus, in: Honsell, op. cit., at n.5, 9 and 12 on Art. 78 CISG). Under Art. 117(1) IPRG [*], in the absence of a choice of law, the contract is governed by the law of the country to which the contract has the closest connection. Under Art. 117(2) and (3) IPRG, this country is Germany in the present case; therefore the interest rate is to be determined under German law. As both parties are undoubtedly businesspeople, as provided in Art. 1 of the German Commercial Code (hereinafter HGB [*]), the interest rate is to be adjusted by this source of law. According to Art. 352(1) HGB, the rate of interest in bilateral commercial transactions is 5% per annum.

     6.2 [Buyer's] claim for damages exceeding US $50,000 arose on 8 November 1994, when [seller] did not perform his obligations under the contract of sale of goods in spite of preliminary notice from [buyer] (see KB 16). As mentioned above, under Art. 78 CISG the obligation to pay interest arises at the due date of any payment; payment for a claim of damages for breach of contract is due from the date of the breach. [Buyer] claims interest only since 29 November 1994 (Appendix 18, p. 1), therefore, [buyer] is entitled to 5% interest on the amount of US $50,000 (Art. 54 ZPO [*]).

[Court costs and parties' expenses]

7. Therefore, the original claim made by [seller] is, as consequence of its subsequent withdrawal, dismissed in the court record. The [buyer's] counterclaim is endorsed by the court. On this outcome of the procedure, [seller] has to bear the costs. [Seller] has to bear the costs of the court proceedings (Art. 38(1) ZPO), while [buyer] has to compensate for his behavior prolonging the procedure, taking into account, however, that after the submission of [buyer's] counterclaim, another exchange of documents took place and the main trial consisted of several trials, the procedure at hand did not cause any significant difficulties either in legal or in factual respects (Art. 40(1) and 64 ZPO; see also Arts. 2, 3(3) and 5 ZPO on costs of the parties' legal representation).

DECISION

  1. The initial claim by [seller], following its withdrawal, is dismissed in the court record.

  2. The court's endorsement of the [buyer's] counterclaim entails that the [seller] is obliged to pay [buyer] US $50,000 plus 5% interest since 29 November 1994.


FOOTNOTES

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

Translator's note on abbreviations: GOG = Geschaftsordnungsgesetz [Swiss Federal Act on Rules of Procedure]; HGB = Handelsgesetzbuch [German Commercial Code]; IPRG = Bundesgesetz über das Internationale Privatrecht [Swiss Federal Act on Private International Law (Swiss Code on the Conflict of Laws)]; LC = Lugano Convention [EC EFTA Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters - Lugano, 16 September 1988]; ZPO = [Zivilprozessordnung] = Swiss Code of Civil Procedure.

** Dr. Andrea Vincze received her law degree from the University of Miskolc, Hungary, in 2002. Currently, she is a Ph.D. student at the same university, working on her research project on international commercial arbitration in European legal systems. She has also dealt with cross-border and Internet-related copyright issues in her thesis written in English. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

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Pace Law School Institute of International Commercial Law - Last updated August 15, 2005
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