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| Abstract | ||||||||||||||||||
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| A Latvian corporation (buyer) and a German professional car dealer (seller) concluded a contract for the sale of a second-hand car. In the contract it was stated that the car had not been repainted. The standard terms of the seller, incorporated into the contract, contained a forum selection clause in favor of German courts. After delivery, the buyer noticed inter alia that the car had been repainted and a fundamental damage to the car had not been properly repaired. The buyer therefore claimed for damages, but the seller refused to pay the sum requested. As a result, the buyer declared the contract avoided (terminated).
The Court of First Instance ruled in favor of the buyer. The seller appealed. The Court of Appeal held that the contract was governed by CISG as both parties had their places of business in Contracting States (Art. 1(1)(a) CISG). In so doing, the Court denied that the requirements for the exclusion of the Convention set forth in Art. 2(a) CISG were met, as the seller had reasonably believed that the buyer had entered into the contract in its professional capacity and had not been informed about the intention of a buyer’s employee to use the car for private purposes until the oral hearing. Moreover, neither the forum selection clause in favor of German Courts nor the mere reference to domestic law in the parties' pleadings was sufficient to exclude the application of CISG. As to the merits, the Court found that, taking into account all the circumstances of the case, the buyer’s declaration of avoidance two months and eighteen days after the discovery of lack of conformity was not given within reasonable time (Art. 49(2)(b) CISG). Consequently, the Court held that the buyer had lost its right to declare the contract avoided (terminated) and could not recover the purchase price. Furthermore, the Court rejected the buyer’s claims for damages. In so doing, the Court pointed out that, although CISG provides for the right to claim damages after a contract has been avoided, such damages are only intended to compensate the remaining loss after a substitute transaction has taken place. Where a substitute transaction has not – as in the present case - been concluded, the buyer’s claims for further damages under Art. 74 had to be dismissed. |