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| A Dutch seller and a German buyer concluded a contract for the sale of different types of textiles (acrylic blankets). Four days after delivery the buyer complained about lack of quantity and non-conformity of the goods. The buyer refused to pay the purchase price also assuming that the seller had breached a previously concluded distributorship agreement between the parties granting the buyer the exclusive right to distribute the textiles in Germany. The seller commenced an action to recover full payment and the buyer counterclaimed set-off with damages for lack of conformity. The lower Court decided in favor of the seller. The appellate Court confirmed the first instance decision.
As regards the lack of quantity, the Court found that the buyer had not sufficiently specified the nature of the lack of conformity according to Art. 39(1) CISG since it had not indicated the type of the lacking blankets. Therefore, it could not declare the contract avoided (Art. 51(1) CISG) as it had lost the right to rely on a lack of conformity. The buyer was also not entitled to declare the contract avoided on the basis of a lack of conformity of the goods. The Court stated that the lack of conformity entitles the buyer to declare the contract avoided only when it amounts to a fundamental breach of the contract (Art. 49(1)(a) CISG). In order to determine the occurrence of a fundamental breach regard is to be had not only to the nature of the lack of conformity but also to the readiness of the seller to remedy the non-conformity without unreasonable delay and unreasonable inconvenience to the buyer (Art. 48 CISG). In the case at hand, the Court excluded the presence of a fundamental breach of contract as the buyer had unjustifiably not accepted the seller's offer to remedy the non- conformity by delivering substituting goods, in accordance with Art. 48 CISG. This result was not precluded by the remark that, pursuant to Art. 48(1) CISG, the right to avoidance prevails over the seller's right to cure, since this prevalence is only effective in case of a fundamental breach of contract, an event which was excluded by the Court. Following the Court's reasoning, the buyer was also not entitled to reduce the price as it had refused to accept performance by the seller in accordance with Art. 48 CISG (Art. 50 CISG). The question whether the parties had concluded a distributorship agreement remained undecided. In the Court's opinion, although the breach of a secondary obligation under the contract, like that deriving from an exclusive distributorship agreement, may amount to a fundamental breach giving a right to avoid the contract (Art. 49(1)(a) CISG), the buyer had nonetheless not declared the contract avoided. In particular, a declaration of the buyer could not be interpreted as a declaration of avoidance as the subsequent conduct of the buyer was incompatible with such an interpretation (Art. 8(3) CISG). In any case, however, the buyer had lost the right to declare the contract avoided as it had not done so within a reasonable time after it knew of the breach (Art. 49(2)(b)(i) CISG). As regards the buyer's claim for damages (loss of profits) deriving from the delivery of non conforming goods, the Court stated that, pursuant to Art. 80 CISG, the buyer had lost the right to damages as it had hindered the seller's cure of non- conformity. |