Date: 13.09.1995
Country: France
Number: 48992
Court: Cour d'Appel de Grenoble, Chambre Commerciale
Parties: Roger Caiato v. Societe Francaise de Factoring International Factor France 'S.F.F.'
A French import firm (the buyer) ordered cheese from an Italian producer (the seller) to be resold in France, in the framework of an established business relationship. The seller replied that, as it had assigned its foreign receivables to an Italian company of factoring, it should wait for the factor's agreement before complying with the buyer's order. Consequently the buyer could not respect its undertakings towards its own clients and refused to pay part of the price due to the Italian seller under a prior sale contract. As a consequence, the Italian company of factoring assigned the seller's right to payment under the previous contract to a French company of factoring, who sued the buyer asking for payment of the remainder of the price. At first instance the case was decided in favor of the French factor. The buyer appealed, alleging non-conformity of the goods delivered by the Italian seller on the ground that, since neither the goods' composition nor the peremption dates were printed on the wrappings, the wrapping of the cheese did not conform with French law concerning the merchantability of food products. In the same proceedings the buyer claimed damages against the French factor for breach of commercial relationships with the Italian seller and required set-off against the payment of the remainder of the price due to the seller under the prior sale contract.

The Court of Appeal reversed the lower court decision and decided in favor of the buyer.

With respect to the alleged non conformity of the goods, the Court observed that, as the parties were in business relationship, the seller knew that the goods were to be resold in France. Therefore, pursuant to Art. 8(1) CISG, the seller had to interpret the buyer's statements in the sense that the buyer would purchase goods conforming with French law concerning the merchantability of the goods. As a consequence, the goods delivered by the seller were not conforming, since they were not wrapped in the manner required by French law (composition and peremption date printed on the wrapping) (Art. 35 CISG). The Court further found that, as the buyer had given notice to the seller of the lack of conformity within a reasonable time according to Art. 39(1) CISG (in this case within one month after the delivery of the goods), it was entitled to the amount demanded for defective goods. In addition the Court observed that the two years time-limit to give the notice of lack of conformity of the goods set forth in Art. 39(2) CISG does not apply to legal actions.

With regard to the buyer's claim for damages due to breach of commercial relationship, the Court held that the parties were bound by any practices which they had established between themselves in accordance with Art. 9 CISG. As the Italian seller had been complying with the buyer's orders for months without asking for its solvency, the Court stated that, when the seller decided to assign its foreign receivables by a contract of factoring and to suspend its business relationship with the buyer, it should have taken into account the buyer's interest. Subsequently the Court held that the buyer was entitled to damages for breach of business relationship.

Finally, in deciding upon the law applicable to the factoring contract, the Court stated that there is a gap in CISG as to the matter of assignment (in this case the assignment by the seller of the right to be paid the contract price) and that, since it is not possible to find any suitable general principle in CISG, this matter must be solved in compliance with the domestic law applicable by virtue of private international law rules.