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| Abstract | ||||||||||||||||||
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| An Austrian company (the seller) sold coffee machines to an Italian company (the buyer) which intended to sell them on to its customers. Approximately one month after the first coffee machines were operated by the buyer’s customers the buyer started to receive complaints relating to defects in the goods (electric short circuit and water leakage stemming from outdated and defective construction of the machines). Notwithstanding several attempts by the buyer and by the seller to repair the machines, the defects persisted.
The buyer refused to pay the price for the goods, claiming that they had lost their entire value, and tried to return to the seller both the defective machines and the ones which were still packaged; the seller however refused to take the goods back and brought an action for payment of the outstanding price. The first and second instance Courts rejected the seller’s claim and the seller appealed to the Supreme Court. The Court first of all confirmed the lower instances’ decisions that the buyer was entitled to remedies for lack of conformity since the machines were undoubtedly unfit for their ordinary use, the seller had been aware of the defects from the beginning (Art. 40 CISG) and had not successfully cured them under Art. 48 CISG. The buyer however lost its right to declare the contract avoided since it had not given notice to the seller within a reasonable time as per Art. 49(2)(b) CISG. As to the application of the remedy of price reduction under Art. 50 CISG, the Court observed that this provision does not set any time-limit to the exercise of the action by the buyer. The Court then referred to diverging scholarly interpretations of Art. 50 as to the possibility for the buyer to invoke it also when the goods – as in the case at hand – were completely worthless and unsaleable, thereby reducing the price to a zero sum. According to the prevailing view, such a right should be recognized precisely for the situations where the buyer lost its right to declare the contract avoided. Another view contends on the contrary that the reduction of the price to a zero sum would practically have the same effects of an avoidance and therefore it should be subject to the same restrictive conditions applicable to the latter remedy. The Court chose the first opinion holding that the remedy of price reduction is not dependent on conditions set for the different remedy of avoidance and that Art. 50 CISG admits a reduction of the price also up to a zero sum in case of complete loss of value of the sold goods. In reaching this conclusion the Court, first observing that CISG must be interpreted autonomously and not referring to domestic law (Art. 7 CISG), took into account the clear meaning of Art. 50 which does not limit price reduction to specific situations. |