ICC Arbitration Case No. 9083 of August 1999 (Books case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/999083i1.html]
DATE OF DECISION:
JURISDICTION:
TRIBUNAL:
JUDGE(S):
CASE NUMBER/DOCKET NUMBER: 9083 of August 1999
CASE NAME:
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Unavailable (claimant)
BUYER'S COUNTRY: Unavailable (respondent)
GOODS INVOLVED: Books
APPLICATION OF CISG: Yes. In choosing Austrian law the parties thereby also chose the CISG, which is part of that legal system.
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
3A ; 3B [Goods to be manufactured; Services [not] preponderant part of obligation];
8A ; 8C [Interpretation of party's statements or other conduct: intent of party making statement or engaging in conduct; Interpretation in light of surrounding circumstances];
9D1 [Usages and practices: parties bound by applicable usages and practices];
38A [Buyer's obligation to examine goods: time for examining goods];
39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];
40A ; 40B [Seller fails to disclose known non-conformity; Seller loses right to rely on articles 38 and 39 (not applicable in this case)]
Descriptors:
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=465&step=Abstract>
CITATIONS TO TEXT OF DECISION
Original language (German): Unavailable
Translation: (English): ICC International Court of Arbitration Bulletin [ICAB], Vol. 11/No. 2 (Fall 2000) 78-82; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=465&step=FullText>; cisg-online.ch website <http://www.cisg-online.ch/cisg/urteile/706.htm>; case digest presented below
CITATIONS TO COMMENTS ON DECISION
English: van Houtte, ICAB (Fall 2000) 24 n.14 [choice of law], 26 n.35 [CISG and concurrent national law], 27 n.45 [notion of "sale"], 29 n.58 [inspection and notification]; Witz, ICAB (Fall 2000) 21 n.50 [inspection and notification]; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.612, 615; CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (cases cited in addendum to opinion); [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 84; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 35 para. 8 Art. 37 para. 7 Art. 40 para. 7
Go to Case Table of ContentsEDITOR: Daniel J. Morse [*]
Facts. This dispute arose out of a printing and supply contract. The Claimant [seller] agreed to print and supply the Defendant [buyer] with books to be resold to supermarkets and cut-price bookshops. Delivery was made, however the [buyer] refused to make payment for the goods, citing discrepancies between the quantity of goods delivered as compared with the contract amount, delay in the shipment and deficiency in the restitution of the films used for the printing. As such, [buyer] argued that it was entitled to compensation for the [seller] to offset any amount owed to the [seller] by the [purchaser].
Applicable law; Choice of law. The Arbitrator determined that Austrian substantive law is to be applied. This decision was based on Art. 6(1) of the ICC Rules of Arbitration, according to which the arbitration rules in effect at the commencement of the arbitral proceedings will apply, unless the parties agree otherwise in the contract.
"The United Nations sales law (CISG) (not excluded in the present case) itself constitutes substantive law, unless excluded by the parties (Art. 6). The CISG provisions concerning the questions presently to be settled are largely similar to those of Austrian law." [page 78] [**]
With respect to the alleged discrepancies in the quantities delivered.
4.1. "The printing assignment at issue, whereby, upon [buyer]'s order, [seller] mass-produced movable goods in bulk (books) using means which it provided, should be described as a sales contract within the meaning of §377 Handelsgesetzbuch (HGB) [Austrian Commercial Code], Art. 1 CISG. There is no need to examine whether the material or labor aspect is predominant.
If the purchase is a commercial transaction for both parties, then under §371(1) HGB the buyer must inspect the goods immediately after delivery by the seller, to the extent that this is feasible in the ordinary course of business, and, if a deficiency is apparent, immediately notify the seller thereof. Failure to do this implies that the goods have been accepted, according to §377, para. 2 HGB, unless the deficiency is one that could not be recognized when the inspection took place." [page 78]
The Arbitrator determined that the above provision also pertains to the quantity of goods delivered, so long as the goods delivered do not so obviously differ from those ordered such that the [seller] should have known of the deficiency. Thus, the inspection must take place immediately and, if such inspection reveals a deficiency, notice must also be immediate. This notice must substantiate the deficiency and, in the case of a discrepancy in quantity, must denote the missing amount. Failure to do so results in the loss of the [buyer]'s rights to recover for the deficiency and thus all damages from same are excluded.
4.2. The CISG governs contracts for the sale of movable goods between parties residing in different Contracting States. In this matter, both the parties resided in States that have adopted the Convention [Contracting States]. Furthermore, Austria, the State whose law the Arbitrator determined to apply, also is a Contracting State.
Materials supplied by buyer; Services. "Contracts for the delivery of goods to be manufactured or produced are treated like contracts of sale, unless the person who placed the order provided a substantial part of the materials necessary for such manufacture or production (Art. 3 CISG). The CISG is also applicable to mixed contracts for sale and work when the sales contract aspect is foremost, as here." [page 79]
Examination of goods; Lack of conformity notice, timeliness. Pursuant to Art. 38 CISG, the [buyer] is obligated to examine the goods, or cause them to be examined, within as short a time as practicable. If the contract requires carriage of the goods, such examination may be deferred until after the arrival at the destination. Further, if the goods are to be re-dispatched while in transit, the examination can be deferred until their arrival at the new destination. The [buyer] loses its rights to recover for discrepancies or deficiencies, pursuant to Art. 39 CISG if it does not give notice of the deficiency to the [seller] within a reasonable time of discovering same or when the deficiency should have been discovered. Should the [buyer] be able to establish a reasonable excuse for the lack of notice, however, Art. 44 CISG allows it to do so.
However, the [seller] loses its entitlement to rely on Articles 38 or 39 if the deficiency is of such a nature that it "knew or could not have been unaware and which he did not disclose to the buyer". [page 79]
In the instant matter, the [buyer] did not comply with either Articles 38 or 39 CISG nor did it offer any evidence to establish a reasonable excuse pursuant to Art. 44 CISG. Thus, the [buyer] lost all legal remedies available to it pursuant to Art. 45 CISG, which includes all those rights included in Articles 46 to 52 CISG (performance, cancellation of the contract, price reduction) and damages pursuant to Articles 74 to 77.
4.3. In the instant matter, inspection by the [buyer] needed to be completed once the goods were deposited with the firm, which the [buyer] fully entrusted with its obligation to inspect the goods. According to the record, the auxiliary inspected the goods for quality and quantity and forwarded this to the [buyer].
Under the CISG, the "reasonable" time for inspection and complaints is longer than that of §377 HGB ("immediately"). The "reasonable" time is determined by the objective and subjective circumstances of each case, although it is specified as eight days to one month in Caemmerer/Schlechtriem (op. cit. no. 17 re Art. 39). In Schwimann (no. 4 re Art. 39), a complaint of more than six weeks is said to be too late.
"In Honsell (Kommentar zum UN-Kaufrecht, no. 21 re Art. 39), a time limit of one week is given for notification and a period of fourteen days indicated for the overall time limit for inspection and notification. The Supreme Court of Austria (15 October 1998, 2 Ob 1919/98x, RdW 1999, 139 et seq. [<http://cisgw3.law.pace.edu/cases/981015a3.html>]) has come to the same conclusion. In its view, 'an overall inspection and complaints time limit of fourteen days [is] to be considered as reasonable, when there are no special circumstances in support of a reduction or extension.'" [page 80] No such circumstances were established in this matter.
4.5. The initial complaint over the shortages in the quantities did not occur until a written document dated 3 July 1995 with attachments dated 15 June 1995. This constituted a period of 2-3 months after which a complaint could be made. The complaint did not even occur within a reasonable time of the last delivery of 31 May 1995 by which time the missing quantities had been more than made up. Thus, the complaints obligation of the [buyer] has been violated and thus it has lost its rights to claim damages due to an insufficient quantity.
Consideration must next be given to whether the [buyer] may benefit from Art. 40 CISG. In comparing this provision to §377 HGB, the Arbitrator indicates that Art. 40 provides much more protection to the [buyer] since §377 HGB only benefits the [buyer] where the [seller] has committed fraud. [page 81]
Lack of conformity known to seller. Art. 40 CISG relieves the [purchaser] of the complaints obligation where the seller did not disclose to the [purchaser] a non-conformity of which it was aware or could "not have been unaware". In the deliveries of 30 March 1995 and 17 April 1995, however, the [seller] unequivocally advised the [buyer] of the discrepancy in quantities in the invoices. Thus, the complaint obligation was preserved.
4.6. It remained to be seen whether the shipment of 27 April 1995, in which the [seller] made up for the temporary deficiencies in the two prior shipments and sent more than the contracted quantity will allow the [purchaser] to avail itself of the Art. 40 CISG protection. The issue presented was whether temporary shortages which are made up in later shipments constitutes a non-conformity with the contract. The Arbitrator determined that it did not.
Intent. The contract did not provide special explicit provision regarding quantity discrepancies in partial deliveries. Nor is there any evidence that an oral or written rider to this effect was agreed upon by the parties.
The facts presented revealed that the [buyer] had accepted shipments which included both excessive and insufficient quantities of books. Nonetheless, these shipments were accepted. As such, the [seller] was entirely reasonable in determining that it was in compliance with the contract.
Usages and practices. Likewise, the Arbitrator concluded that such practice was common in the shipping industry. Shipments cannot always consist of an equal number of goods being shipped with each shipment. The ability to ship goods depends on the space available and the manner in which such goods are loaded. Where, in this case, the total shipment consists of several partial shipments, where the total number of goods balances itself out in the end, then there cannot be a claim for non-conformity. Thus, the [buyer] has no claims for deficiencies.
FOOTNOTES
* Daniel J. Morse is a member of the New York Bar. He is associated with the law firm Hardin, Kundla, McKeon, Poletto & Polifroni.
** Pagination is to publication of the case text at ICC International Court of Arbitration Bulletin, Vol. 11/No. 2 (Fall 2000) 78-82.
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