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| A German seller and an Italian buyer, both professional car dealers, entered into a contract for the sale of a used car. The seller had purchased the car from another car dealer and had submitted the vehicle registration document to the police for a preliminary check. Although nothing was revealed by the police's check, it later turned out that the car had been stolen prior to its sale. As a result, the Italian police returned the car to its original owner. In the meantime, the buyer, having resold the car to a third party, had to give back the two cheques received as payment for the car. The buyer then filed a suit claiming breach of contract plus damages and lost profits. The seller requested the dismissal of the claim, alleging that it had acted in good faith.
The Court of first instance dismissed the claim, holding that, according to Art. 79(1) CISG (which, pursuant to its Art. 1(1)(a), was the law applicable to the merits of the dispute), the seller was not liable. In fact, the seller demonstrated that its breach of contract was due to an impediment beyond its control which could not reasonably be expected to have been taken into account at the time of the conclusion of the contract or avoided or could its consequences be overcome. The buyer appealed. The Court of appeal partially reversed the decision of the Court of First Instance, finding that the seller had failed to perform its obligation, namely the transfer of ownership of the car to the buyer. After pointing out that CISG does not govern the effects of the contract on the property in the goods sold (Art. 4(b) CISG) and that, as a consequence, this is a matter governed by domestic law, the Court applied German law, which prohibits the acquisition of stolen property, even by those who pay value and are in good faith. Contrary to what the Court of First Instance affirmed, the Court of Appeal held that the seller could not be exempted from liability under Art. 79 CISG, since such an exemption implies the occurrence of objective circumstances preventing the fulfilment of the contractual obligations, while in the case at hand the alleged circumstances were of a subjective nature. Moreover, the argument that the alleged impediment could not reasonably be expected to have been taken into account at the time of the conclusion of the contract was not convincing. In fact, the low price of the car, the mileage and the disparities in the owner's name (which was different from the one on the registration document) should have led the seller to doubt about the ownership of the vehicle. Accordingly, the buyer was held entitled to damages under Arts. 45(1)(b) and 74 CISG, including loss of profit. |