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| A Dutch seller delivered to a German buyer equipment to be used in the manufacture of leather skins. Upon the buyer's refusal to pay the full price, the seller commenced an action before a German Court requiring full payment. In its counteraction the buyer alleged that the goods were defective and claimed compensation for damage suffered due to the seller's breach. The Court rejected the buyer's counterclaim. On appeal the first instance decision was partially reversed with respect to the buyer's counterclaim for damages.
As in the first instance decision, the appellate Court held that the seller was entitled to payment of the full price (Art. 53 CISG). With regard to the buyer's counterclaim, the appellate Court - again confirming the lower Court's decision - found that it had jurisdiction to hear it. The Court applied Art. 5(1) of the EC Convention on Jurisdiction and the Enforcement of Decisions in Civil and Commercial Matters (Brussels 1968), pursuant to which a person domiciled in a Contracting State (in the case at hand: the seller) may be sued in the Court of the place of performance of the obligation in question (in the case at hand: delivery of the goods). The Court applied CISG to determine the place of delivery and held that the parties had chosen the buyer's place of business, thereby derogating from Art. 31 CISG: for one item there was an express franco domicile clause, for the others the seller was obliged to take care of transportation by its own means to the buyer's place of business. The Court therefore affirmed its jurisdiction. As to the buyer's claim of non conformity of other delivered items, the appellate Court did not consider the argument put forward by the lower Court according to which second hand equipment is sold 'as it is', so that the buyer cannot claim it is defective merely because it does not function perfectly (Art. 35 CISG). The appellate Court solved the question holding that the buyer had not given notice within a reasonable time specifying the nature of the defects (Art. 39 CISG). Partly reversing the first instance decision, the appellate Court awarded to the buyer damages under Arts. 45 and 74 CISG. The seller agreed to take back some of the delivered items in order to modify them according to the buyer's specifications and to redeliver them within a short time, but failed to do so. According to the lower Court, the buyer could not claim damages for late delivery because the seller had made it conditional on payment of past debts, nor could it withhold payment of the price (Art. 80 CISG). The appellate Court held, on the contrary, that the seller had no right to suspend performance and make it conditional on payment of past debts because, with respect to the redelivery of the equipment, the parties had implicitly derogated from Art. 71 CISG. Since the parties had already discussed the question of the payment of the buyer's past debts, and the seller had not mentioned such a question in the agreement on modification and prompt redelivery of the machines, according to good faith the buyer could rely on the seller not withholding its performance on such grounds. Obiter the Court observed that the seller's late delivery, though being in this case a breach of a secondary obligation, was nevertheless a fundamental breach. The buyer was entitled to recover the cost incurred because of the seller's delay in redelivering the goods. This included loss of profit and all reasonable expenses incurred to mitigate or avoid loss caused by the breaching party (Art. 74 CISG). In particular, the loss caused by having the leather skins processed by a third party was foreseeable according to Art. 74 (1) CISG, also in view of the fact that the buyer had explicitly drawn the seller's attention to the importance of redelivering the equipment without delay. |