A Spanish company entered into a contract with a Swedish seller for the sale of an industrial machine to be resold to a third party. Once delivered, the machine failed to function, notwithstanding several attempts to fix it also with the cooperation of the Swedish seller. As a consequence, the Spanish company had to fully refund the third party. The machine was then resold to an Australian party but the Spanish company had to bear all the expenses for packaging, delivery etc. Thus, the Spanish company brought an action against the Swedish seller for breach of contract alleging lack of conformity of goods and claiming damages. The Swedish seller argued that it did not breach the contract because it was the third party’s conduct (inappropriate conditions for placement, inappropriate kind of paper used, lack of expertise on use) which led to the failure of the equipment, not the equipment itself.
The Court of first instance ruled in favour of the Spanish company, finding that the machine was not fit for its purpose and that, according to the CISG (to be applied by virtue of its Art. 1(1)(a)), the conditions for its placement, the kind of paper to be used, etc., - which were argued by the Swedish seller to demonstrate the third party’s fault in the failure of the equipment - would have had to be known by the buyer at the time of the conclusion of the contract in order to be relevant. The seller appealed submitting, as to the merits, the same issues argued before the lower court.
The Appellate Court confirmed all the findings of the lower court. In particular, the Court found that the seller had breached its obligations set forth in Arts. 25 and 35 CISG, reasoning that the buyer was deprived of what he was entitled to expect under the contract since the machine’s functioning and technical qualities did not conform to those agreed upon and the seller, at the time of the conclusion of the contract, failed to inform the buyer of the correct way to use the machine.
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