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| Abstract | ||||||||||||||||||
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| An Italian seller and a German buyer concluded a contract for the sale of leather. A dispute arose between the parties when the buyer refused to pay the full purchase price, alleging that it was entitled to set-off with a counterclaim arising from a substitute transaction it had entered into because of partial non-delivery by the seller. The seller contested that a contract had ever been concluded between the parties since confirmation of order had been made by an Italian agent lacking authority and argued that, in any case, the Bovine Spongiform Encephalopathy (BSE) crisis which occurred in the summer of 2000 hade made full performance of the contract impossible.
The First Istance Court dismissed the seller’s claim, holding the buyer entitled to damages under Arts. 75 and 76 CISG. The seller appealed, alleging that, since the non-performing party had not avoided (terminated) the contract and that no market price existed for the goods at issue, Art. 76 CISG had been erroneously applied. The Appellate Court upheld the lower’s Court decision. In so doing, it firstly confirmed that CISG was applicable to the case at hand (Art. 1(1)(a)). With respect to the merits, the Court found that refusal to perform by the seller on the ground of lack of authority by the Italian agent not only was in contrast with partial delivery made by it, but amounted also to fundamental breach of contract under Art. 49(1)(a) CISG. In the opinion of the Court, damages under Art. 76 CISG could be recovered by the buyer irrespective of whether it had declared the contract avoided (terminated), because the seller, by objecting that it was under a contractual obligation vis-à-vis the counterparty, had unequivocally refused to perform. The Court also stressed that such a solution would preserve legal certainty since, on the one hand, avoidance (termination) of contract would only be unnecessary where the obligor conclusively declares that it is not willing to render performance and, on the other hand, it would still make it possible to ascertain the decisive point in time for determination of market price under Art. 75 CISG or for substitute transaction to be allowed pursuant to Art. 76 CISG. In addition, the Court found that the its view was in line with the principle of good faith set forth in Art. 7(1) CISG which allows for an autonomous interpretation of the Convention to take into account "the well-established principles of the national legal systems of Contracting States" created with the view of specifying the content of the good faith principle. Included among these principles is the "venire contra factum proprium" principle. Finally, the Court rejected the seller’s argument that there was no market price for leather for the purposes of Art. 76 CISG. In the light of Art. 55 CISG, for a market price to exist it is sufficient that a price has been established on the basis of the amount generally charged for goods of the same type sold at a particular place of trade. In the case at hand, it was demonstrated that such a price did exist and that it had increased by approx. 30% in the period between contract conclusion and seller's refusal to perform. |