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| An US buyer and a Finnish seller concluded a contract for the sale of a certain quantity of naphtha. Despite the contract provision that any vessel chosen by the seller to carry the goods would have been subject to buyer’s approval, the seller committed itself to using a certain ship, and only afterwards, proposed the vessel to the buyer, who rejected it. Notwithstanding the buyer’s rejection, in addition to the fact that the seller was unable to find another vessel, the naphtha was loaded onto that ship. Because of delays in loading it was estimated that the ship would arrive after the date fixed in the contract. Therefore, the parties entered into another agreement according to which the seller would have additional time but would be required to offload the cargo onto a barge, not at the terminal, additionally, the price was reduced as a result of the delay. The ship arrived on time but the seller was unable to deliver the cargo by barge at the fixed date, after which the buyer was unable to take delivery. The buyer subsequently sued the seller for breach of contract, while the seller counterclaimed, asserting that it was the buyer that had breached the contract by refusing to accept delivery of the goods. Both parties claimed for damages.
The First Instance Court (see U.S. District Curt, New Jersey, 04.04.06, abstract and fulltext in Unilex) stated that CISG was applicable to the case at hand pursuant to its Art. 1(1)(a) CISG. The court also found that the buyer’s refusal of acceptance of the vessel was unreasonable and therefore amounted to breach of contract. Moreover, the court concluded that the buyer could not declare the contract avoided because of the delay in delivery, since it did not amount to a fundamental breach. The court found also that, according to Art. 47 CISG, the buyer had no right to resort to any remedy for breach of contract and to demand that the seller entered into a new agreement. Therefore, the second agreement, providing for a price reduction and an additional time for performance by the seller, could not be considered as valid. Consequently, the buyer was only entitled to recover damages resulting from a two-day delayed delivery, while the seller was granted damages arising from the buyer’s breach of contract. The buyer appealed asserting that the First Instance Court erred in finding that the second contract was invalid. The Court of Appeal confirmed the applicability of the CISG but reversed the first instance’s decision as to the effects of the second contract concluded by the parties. The Court held that this agreement constituted a permissible contract modification under Art. 29 CISG, rather than an extension of time performance under Art. 47 CISG. Accordingly, the Court concluded that the second agreement was valid and governed the conduct of the parties for the remainder of their interaction. The court remanded the case to the first instance to decide the merits in accordance to its ruling. |