Comments on Issues Relating to the Interaction between the Place of Payment under CISG Article 57 and Jurisdiction under Article 5 of the Brussels Convention
Joseph Lookofsky [*] & René Franz Henschel [**]
CISG Articles 54-59 regulate the payment of the price. Article 57(1) provides the gap-filling rules on the proper place of payment: If the buyer is not bound to pay the price at any other particular place, he must (a) pay it to the seller at the seller's place of business; or (b) if the payment is to be made against handing over the goods or of documents, at the place of the where the handing over takes place.
The distinction between payment at the seller's place of business and payment at the place where the handing over of the goods takes place was the issue in dispute in case number BS 2-2229/2002, decided by the County Court of Randers (Denmark), where a Danish seller and a German buyer entered into a contract for the sale of a mobile grain dryer and a stationary grain dryer to buyer (B) in Germany.
The seller was to deliver the dryers by truck to Wiesenbad, Germany, a few kilometers from the field where B intended to use the machinery. Payment was to be made in three equal installments: (1) on delivery of the stationary grain dryer, (2) on delivery of the mobile grain dryer, and (3) when the dryers had been put into operation.
After delivery of the mobile dryer, the buyer refused to pay the remaining portion of the price, claiming that the mobile dryer was defective due to incorrect unloading of the machinery by the seller. The seller commenced an action in Denmark claiming payment of the remaining price as well as interest.
In order to determine whether it had jurisdiction to decide the case, the Court applied Article 5(1) of the EC Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Brussels 1968) which states that a person domiciled in a Contracting State (in the case at hand: the buyer) may be sued in the Court for "the place of performance of the obligation in question" (in the case at hand: payment of price). The Court held that the CISG was the applicable law for determining the place of payment of the price (i.e., the place of performance of the obligation in question).
The buyer argued on the basis of CISG Article 57(1)(b), claiming that the Danish Court had no jurisdiction to decide the merits of the case, as (in the buyer's view) the second payment installment was to be made in Germany (against the handing over of the goods there), and that the third payment was also to be made in Germany (when the dryers had been put into operation); Consequently, the buyer argued, the seller could only sue the buyer in Germany, as this was "the place of performance of the (payment) obligation in question" under Article 5(1) of the EC Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.
The court, however, refused to follow the buyer's arguments. The mere fact that the contract provided for payment by installments did not indicate that payment was to be made in Germany (against the handing over of the goods or of documents) pursuant to Art. 57(1)(b). For this reason, the buyer remained obligated to pay price in accordance with the default rule in Article 57(1)(a), i.e., at the place of business of the seller (in Denmark). This meant that Denmark was the place of performance of the obligation in question under Article 5(1) of the Brussels Convention.
It is worth noting that as of 1 March 2002 the jurisdiction of European Member State courts - except Danish courts - in CISG cases brought against EU-domiciliaries is determined by the new Brussels Regulation rule in Article 5(1), litre b, which in sales of goods cases defines "the place of performance of the obligation in question" as the place of delivery of the goods. This means that the issue of whether a given EU Member State court has jurisdiction to decide a case brought by the seller for non-payment may be resolved on the basis of the default place-of-delivery rule in CISG Article 31.
* Professor of Law, University of Copenhagen.
** Assistant Professor, Aarhus School of Business. External Associate Professor, Aarhus University.
1. See Annoted text of Article 57 on the Pace Database available at <http://cisgw3.law.pace.edu/cisg/text/e-text-57.html>, and generally: Leif Sevón: Obligations of the buyer under the UN Convention on Contracts for the International Sale of Goods, in: Peter Sarcevic & Paul Volken eds. International Sale of Goods: Dubrovnik Lectures (Oceana, 1986), Ch. 6, p. 203-238, available at: <http://cisgw3.law.pace.edu/cisg/biblio/sevon1.html>.
2. The issues on Passing of Risk and payment of the remaining price were later dealt with by the court to the advantage of the seller, see Randers County Court 8 July 2004, available at <http://cisgw3.law.pace.edu/cases/040708d1.html>, commented on by J. Lookofsky and R.F. Henschel: Randers County Court 8 July 2004, Case BS Comments on the Issues relating to the Passing of Risk, available at <http://cisgw3.law.pace.edu/cisg/biblio/lookofsky10.html>.
3. For the interaction between the Brussels regulation and the rules on place of payment in CISG, see J. Lookofsky: Understanding the CISG in Scandinavia (2. ed. 2002), p. 104 et seq. and Ulrich G. Schroeter: Vienna Sales Convention: Applicability to "Mixed Contracts" and Interaction with the 1968 Brussels Convention, 5 Vindobona Journal of International Commercial law and Arbitration (2001) 74-86, available at <http://cisgw3.law.pace.edu/cisg/biblio/schroeter1.html>.
4. This interpretation of Article 57(1)(b) CISG is in line with case law from other countries, see Germany 4 December 1996 Bundesgerichtshof [Supreme Court], case presentation including English translation available at <http://cisgw3.law.pace.edu/cases/961204g1.html>; see also the Unilex database at <http://www.unilex.info/case.cfm?pid=1&do=case&id=273&step=Abstract>.
5. In cases involving parties domiciled in Denmark, the rules in the Brussels Convention still apply due to the special Danish EC Treaty reservations. See generally Joseph Lookofsky and Ketilbjørn Hertz, Transnational Litigation and Commercial Arbitration (2d ed. New York 2003), Ch. 2.2.
6. See Lookofsky & Hertz, id. See also J. Lookofsky: Understanding the CISG in Scandinavia (2d ed. 2002), p. 104.