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| A Dutch buyer and a Czech seller entered into a business relationship for the sale of steel. A dispute arose after the seller asked for a 5% increase of the price for orders already confirmed but not yet performed due to an unexpected increase of the production costs. As the buyer rejected the proposed price increase, the seller cancelled the orders. The buyer then claimed for damages and opposed a counterclaim relating to payment of the price for the goods already delivered.
The Court held that the case was governed by CISG, as the parties had their places of business in different Contracting States (art. 1(1)(a) CISG), and the goods were not bought for personal purposes (Art. 2(a) CISG). It also held that, pursuant to Art. 7(2) CISG and according to Dutch private international law, the matters not expressly settled by CISG were subject to the law of the Czech Republic. With respect to the merits, the Court held that the buyer's request for set-off could be granted, insofar as it would appear the buyer's claim for damages to be well-founded. Furthermore, the Court pointed out that, since evidence established that the seller had accepted the orders placed by the buyer, the parties had validly concluded a contract pursuant to the provisions laid down in Part II of CISG. The Court also found that the seller was not entitled to violate its contractual obligations and declare the contract avoided (terminated) according to Art. 64 CISG. As a result, the seller's refusal to deliver the goods at the price agreed upon constituted a fundamental breach of contract and, therefore, the seller was under the duty to compensate the loss suffered by the buyer pursuant to Art. 45 in conjunction with Arts. 74 to 77 CISG. With regard to the amount of damages, the compensation for loss of profit was awarded in the amount requested by the buyer. The Court held that the seller foresaw, or was ought to have foreseen, that the buyer was going to resell the steel to its costumers and that, as a consequence of contract termination, it would have been impossible for buyer to do so (Art. 74 CISG). Moreover, the buyer's claim for the difference between the price agreed upon with its costumers and the price for the cover purchases concluded by the costumers with other suppliers according to art. 75 CISG, was fully rejected. At first, the Court held that the loss was foreseeable in the sense of art. 74 CISG and the buyer would have been entitled to this compensation insofar as the cover purchases had been conducted in a reasonable manner and within a reasonable period of time. However, as the buyer did not provide the relevant documents requested by the Court, it failed to demonstrate that its customers have actually performed purchases in replacement. The buyer also claimed for loss of prospective profit, since several of its customers declared that they were no longer willing to do business with buyer, as a consequence of seller’s termination of contract and the following non-delivery by buyer. The Court awarded a lower amount than the one requested by the buyer, since the latter failed to prove that seller’s termination of contract was the only reason for its costumers to end their business relationship with buyer. As to the buyer's failure to mitigate the loss, complained by the seller, the Court held that neither the acceptance of the price increase, nor the supply of the buyer's stockpile of steel to its customers, should be regarded as a reasonable measure the buyer was obliged to take according to Art. 77 CISG. |