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Italy 20 March 1998 Appellate Court Milan (Italdecor v. Yiu's Industries) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980320i3.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISIONS: 19980320 (20 March 1998)


TRIBUNAL: CA Milano [CA = Corte di Appello = Court of Appeals]

JUDGE(S): Unavailable


CASE NAME: Italdecor s.a.s. v. Yiu's Industries (H.K.) Limited

CASE HISTORY: 1st instance Tribunale di Milano 1991 (provisional order); 9 March - 18 April 1994 (ruling on merits) [reversed]

SELLER'S COUNTRY: Hong Kong (defendant)

BUYER'S COUNTRY: Italy (plaintiff)


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(b)] [Tribunal ruled that Hong Kong law applied but because it could not ascertain the substance of the applicable Hong Kong law, applied as per Italian law applicable to such situations, Italian law which, pursuant to Article 1(1)(b), led to the CISG]


Key CISG provisions at issue: Articles 25 ; 49(1)(a) [Also cited: Articles 26 ; 33(a) ; 45 ; 58(1) ]

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract]

Descriptors: Avoidance ; Fundamental breach

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Editorial remarks

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Citations to case abstracts, texts, and commentaries


(a) UNCITRAL abstracts: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=275&step=Abstract>


Original language (Italian): Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=275&step=FullText>; Rivista di diritto internazionale privato e processuale (1998) 170-175; Dritto del commercio internazionale (1999) 455-459

Translation: Text presented below


English: Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) §: 6-8 n.68 [cited as 20 March 1998]; Graffi, Case Law on the Concept of "Fundamental Breach" in the Vienna Sales Convention, Revue de droit des affaires internationales / International Business Law Journal, No. 3 (2003) 338-349 at n.53; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.602; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 8 para. 51 Art. 25 para. 14 Art. 26 para. 10 Art. 49 para. 5; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 385; Spaic, Analysis of Fundamental Breach under the CISG (December 2006) n.274

French: Speigel, Dalloz Sirey: Paris (November 1999) 364-365

Italian: Lopez De Gonzalo, Diritto del commercio internazionale (1999) 459-463

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Case text (English translation)

Queen Mary Case Translation Programme

Corte d'Appello di Milano 20 March 1998
Italdecor s.a.s v. Yiu's Industries (H.K.) Limited (default)

Translation by Angela Maria Romito [*]

Translation edited by Charles Sant ‘Elia [**]

Synopsis by the Court

There is Italian jurisdiction over a claim by an Italian [buyer] against a Hong Kong [seller] when the former brings before an Italian judge a claim for restitution of partial payment for the purchase of goods that were not delivered in the time fixed by the contract.

The Hague Convention of 15 June 1955, sets forth the choice of law rules for international sales of goods, notwithstanding the reference to the law of a non-Contracting State.

Pursuant to article 3 of the 1955 Hague Convention, where the parties have not specified the applicable law, the sales contract is governed by the national law of the country where the vendor has his habitual residence.

According to article 14, paragraph II, of Italian Law 218/1995 an Italian judge, when he cannot ascertain the substance of applicable foreign law (in this case, Hong Kong law), can apply Italian law.

Pursuant to article 1(1)(b), the CISG is applicable to international sales of good, not only when both parties have their place of business in Contracting States, but also when the rules of international private law lead to the application of the law of a Contracting State.

Where the situation is appropriate, failure to receive delivery of the goods by the date fixed in the contract, as required by CISG article 33, entitles the buyer to declare the contract avoided under CISG articles 45(1) and 49(1), and the cancellation of the purchase order is equivalent to a notice of avoidance under CISG article 26.


Procedural history

By a complaint filed before the President of the Tribunal of Milan dated 15 January 1991, [buyer] asked the Court to order a judicial attachment [1] of a bank check in the amount of US $6,000 issued in Hong Kong the previous November in favor of [seller], a firm with a place of business in that country [Hong Kong]. The check was issued on the price of knitted goods that the [buyer] purchased but that were not received on the agreed delivery date.

After the trial judge authorized the requested injunction on the title to the check at the Milanese drawer bank, and after the execution started on 25 January 1991, [buyer] sued [seller] before the Tribunal of Milan requesting affirmance of this attachment. On the merits, the [buyer] sought avoidance of the contract signed on 28 November 1990 for [fundamental] breach by the seller, and refund of the sum paid.[2]

The defendant [seller] was in default, and the Tribunal, by an opinion dated 9 March -18 April 1994, rejected the claim and refused to uphold the attachment. The Court recognized as "reasonable the seller's demand to proceed with the delivery of the goods against the settlement of payment," pursuant to articles 1498, 1510 and 1182 of the Italian Civil Code, and held that the plaintiff [buyer] did not prove that the term of delivery was essential, as the [buyer] claimed.

From this [trial] judgment, [buyer] appealed by notice dated 25 September 1995, asking for a full reversal.

[Seller] was in default and the [buyer] having submitted the final appellate brief, the procedure came before the Panel of judges for decision.

[The Court of Appeal of Milan reversed the trial judgment.]



[Note by translator on the procedural aspects of the opinion: According to Italian law, article 72 of Law 31 May 1995 no. 218, a case can be decided by an Italian judge if there are rules that refer to Italian jurisdiction. When faced with a matter included in the sphere of application of the Brussels Convention 1968, Italian law sets out rules for jurisdiction of Italian courts even if the defendant does not have his domicile in the territory of a Contracting State, article 3, paragraph 2, of Law no. 218 / 1995. With respect to the special competence of the court under article 3, paragraph 2, of Law no. 218 / 1995, the interpretative rule expressed by the Court of European Justice must be recalled. According to this rule, in order to apply article 5 no.1 of the Brussels Convention 1968, it is necessary to refer to the contractual obligation the non-performance of which is claimed to be the basis of the suit. There is Italian jurisdiction for litigation started by an Italian company against a company from Hong Kong when the former asks the Italian judge to certify its right to restitution of amounts paid for the purchase of goods that were not delivered within the time fixed in the contract.]

With respect to the law applicable to the pending case, the transaction is an international sale according to the Hague Convention, 15 September 1955, which entered into force for Italy on 1 September 1964.

According to article 7 of the Hague Convention 1955, the Contracting States incorporate articles 1 to 6 in their domestic law in place of the national rules on the same issues; this is true even though the domestic law of the Contacting States refers to the law of a non-Contracting State.

This aspect of the Hague Convention creates its universal character. In fact, the sale contract in the instant case was concluded without any list of the products sold, and with few words (Delivery: 3 December 1990; Terms of payment: deposit US $6,000.00; Balance: bank cheque) and without any statement by the parties as to choice of applicable law. As a consequence, according to article 3 of the Hague Convention, the sale is governed by the domestic law of the country of the residence of the seller, that is to say, Hong Kong; however, not having been able to ascertain that law, Italian law governs in conformity to article 14.2 of the Law no. 218 / 1995 reforming private international law. It has to be said that the applicable substantive Italian law is not the one stated in the Civil Code, but it is the law related to contracts of international sale introduced by the Vienna Convention, 11 April 1980, which entered into force in our judicial system on 1 January 1988.

This Convention applies not only when the parties have their places of business in [different] Contracting States (this is the case provided under article 1(1)(a)), but also when the rules of international private law lead to the application of the law of a Contracting State (article 1(1)(b)): the latter is the applicable rule in the present case because it leads to the specific regulation of the national law.

Article 33 of the United Nations Convention on Contracts for the International Sale of Goods (CISG) applies here. According to this provision, the seller must deliver the goods on the date fixed in the contract, and as a consequence of a failure to perform this obligation (like the breach of any other obligation), the [buyer] has the right to ask the Court to declare the avoidance of the contract if failure to comply with the fixed time for delivery constitutes a fundamental breach of contract (articles 45 and 49(1)). This does not seem refutable according to that which is said below.

In the pending case, even though the contract was of extremely short duration, taking into account clarifications between the parties in the days following the agreement, there is no doubt that the agreed time of delivery was a fundamental term and that the contract turned on the availability of the goods just before [buyer's] end of the year sales. However, the seller let the fixed time pass without any excuse; this behavior is unjustifiable. The fact that the seller sent an explanatory fax on 14 September (see the fax in the record) [3] expressing the intention (never shown before) to immediately receive payment [before delivery], is not an excuse.

The seller may have a right to immediate payment (article 58(1)), but not if it causes objective prejudice to the essential interest of the other party, because that could constitute "une contravention au contract ... essentielle"[4] (article 25).

In addition, in the middle of December, in response to the cancellation of the purchase order [by the buyer] – which, in light of the Convention has to be considered as a declaration of avoidance – the seller announced the imminent delivery of the goods ("we will release the goods for sale").

In light of these considerations, there exist the elements necessary to declare the contract avoided (article 26 CISG) and as a consequence [there exist the necessary elements to declare] the right to restitution of the part payment of US $6,000 already attached, with interest thereon.

However there is no evidence to support [buyer's] further claim (pursuant to article 45(1) and (2) CISG) "a demander les dommages- interets prévus aux articles 74 ŕ 77"[5] because there is no proof of any element relevant to this aspect.

As to the costs of the procedure [of this appeal],[6] in light of the emerging aspects of the investigation, these are charged against the unsuccessful party.

P.Q.M. [per tutti questi motivi (for all these reasons)]

The Court of Appeal of Milan, definitively pronouncing on the appeal brought by Italdecor s.a.s. [buyer] by notice served on 29 May 1995 versus Yiu's Industries (H.K.) Limited [seller] from the judgment of the Tribunal of Milan on 9 March - 18 April 1994, on the default of the Appellee [seller], in reform of the appellate ruling, decrees as follows:

The Court declares the right for the Appellant [buyer] to recover, by effect of the avoided contract, the total amount of US $6,000 which has already been attached, with interest thereon.


* Angela Maria Romito, Associate of the Institute of International Commercial Law, Pace University School of Law. Law degree (cum laude) 1994, University of Bari, Bari, Italy. Admitted to the Bar 1997. LL.M. University of Pittsburgh School of Law 2000-2001. CWES Scholarship. Researcher of European Union Law at the University of Bari. Lawyer at Studio Legale Romito.

** Charles Sant ‘Elia has a B.A. in Political Science and Italian Literature from New York University and studied Political Science at the Universitá degli Studi di Firenze. He received his J.D. from Pace University School of Law and is admitted to the Bar of the States of New York and Connecticut. In addition to editing and translation of cases for the cisgw3 database, he has translated Italian texts on linguistics into English.

All translations should be verified by cross-checking against the original text.

1. [According to article 670 of the Italian Code of Civil Procedure, judges can issue a judicial attachment when the subject property (either chattel or real estate) is in dispute, and it is necessary to provide for its custody and management. This and all the other footnotes are additions by the translator.]

2. [According to article 675 of the Italian Code of Civil Procedure the injunction is no longer valid if the proponent does not execute it within 30 days following issuance. It is a temporary restraining order, and as a consequence, in order to make it definitive, the proponent has to start a legal procedure on the merits.]

3. [The court referred to a document in evidence.]

4. [This phrase is from the French version of the CISG for " fundamental breach".]

5. [The French phrase means "claim damages - interest as provided in articles 74 to 77".]

6. [These are the filing costs and include revenue stamps and duty stamps.]

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