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| Claimant, an Australian cherry grower, entered into an agreement with Respondent, an Australian exporter, whereby Claimant undertook to deliver at a fixed price consignments of cherries Respondent intended to order in the course of the season with a view to resell them to importers in Singapore and in Hong Kong. Respondent filled a total of 21 of such orders which Claimant promptly executed. A dispute arose when Respondent paid Claimant only 2/3 of the agreed price invoking quality defects apparent in most of the consignments of the cherries on arrival in Singapore and Hong Kong.
According to Respondent the price reduction was legitimate because due to the quality defects of the goods Respondent itself had to accept a similar reduction in the price paid by its Singapore and Hong Kong customers; moreover Respondent argued that according to a course of dealing established between itself and Claimant in previous transactions it was entitled to pass back the price reduction to Claimant as the grower/supplier of the cherries. Claimant objected that the parties had agreed to a fixed price to be paid by Respondent, and that there was no course of dealing from which a right of Respondent to an automatic reduction of the price even in the circumstances of the case at hand could be inferred. Claimant therefore brought an action for the payment of the full amount of the contract price. The Court decided in favour of Claimant. The Court first of all had to address the preliminary question of the nature of the relationship between the parties, i.e. whether it was one of seller and buyer (as argued by Claimant) or one of principal and agent (as argued by Respondent): indeed, if Respondent was acting as a mere agent of Claimant at least some of the consignments, i.e. those shipped by Claimant to the Singapore importer, would be an international sales contract governed by the CISG according to Article 1(1)(a) of the Convention, with the consequence that Articles 35, 39, 44 and 50 CISG providing for the remedy of price reduction in case of defects of the goods were applicable. However the Court held that the relationship between Claimant and Respondent was that of an independent seller and an independent buyer and that consequently it was governed by the Australian Sale of Goods Act 1895, which did not provide for a similar remedy. According to the Court a different characterisation of the relationship between the parties could have been justified on the basis of generally known practices and usages in the cherry sale/or exporting market – and in this context the Court expressly referred to Article 9(2) CISG, Article 1.9(2) UNIDROIT Principles 2004 and §1-303 of the Uniform Commercial Code, all recognising the relevance of trade usages – but neither Claimant nor Respondent had invoked such usages. Furthermore, the Court also rejected the argument put forward by Respondent that it was entitled to the price reduction on account of a course of dealing established in previous transactions with Claimant. The Court admitted that a course of dealing established between parties "can provide […]for the drawing of interferences as to the actual terms on which the parties have contracted and […] for the imputation of implied terms in their contract", and in this context expressly referred not only to “the domestic laws of common law countries […] e.g. Uniform Commercial Code § 1-303; Restatement of Contracts, Second, § 223 […]”, but also to “international instruments such as the CISG Art. 9 […] [and the] UNIDROIT Principles of International Commercial Contracts 2004, Arts. 1.9 and 5.1.2.” However, according to the Court Respondent had not produced sufficient evidence as to the existence of a course of dealing between itself and Claimant of the kind invoked. |