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| Abstract | ||||||||||||||||||
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| A German and an Austrian company had entered into negotiations for the conclusion of a master contract, without reaching a definitive agreement thereon. Shortly afterwards the same parties entered into a sales contract according to which the German company (the seller) was to deliver propane gas to the Austrian company (the buyer). The buyer specified, inter alia, that the goods were to be exported to Belgium. According to the contract, payment was to be made through letter of credit. Thereafter the buyer repeatedly urged the seller to name the shipping port, as it had been contractually agreed. Failing this indication, the buyer could not open the letter of credit and informed the seller thereof. In its reply, the seller notified that its own supplier had not consented to exporting the gas to the Benelux countries, and therefore refused to deliver the gas. The buyer commenced an action to recover damages, including the amount claimed by the customer to which it had already resold the gas. The seller counterclaimed that no contract had been concluded, since contrary to the seller's standard terms the buyer's acceptance was not in writing. Moreover, was not in writing furthermore, that the buyer had not issued the letter of credit.
The Supreme Court upheld the lower courts' finding that the contract was governed by CISG, as the applicable private international law rules led to the law of Austria, a contracting State (Art. 1(1)(b) CISG). The Court held that an intent pursued by a party during the first phase of negotiation can bind the parties under Art 9(1) CISG as far as the other party knows this intent. In the case at hand the seller did not give evidence that the buyer knew the sellers standard terms or that it knew the sellers intent to make reference to the master agreement, which was never concluded and was referred to other types of contracts. Therefore the Court held that the written form was not required for the conclusion of the contract. The court observed that in accordance with Art. 54 CISG the buyer's obligation to pay the price included the issuing of the letter of credit. However the Court held that that the seller could not rely on the buyer's failure to issue the letter of credit as this was due to the fact that the seller did not name, as contractually agreed, the port of origin and the buyer was not obliged to obtain a 'blank' letter of credit. The Court held that the seller does not comply with the obligation to deliver goods which are free from any right or claim of third parties if after the formation of the contract the delivery of goods is made subject to a restriction of export limitations. The Court found the buyer entitled to recover damages. |