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| Abstract | ||||||||||||||||||
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| A German seller and a Swiss buyer concluded a contract for the sale of stainless wire. After delivery, the buyer gave notice to the seller that a certain quantity of the delivered raw material could not be processed, since the wire had splinters. With the same notice, the buyer placed the allegedly defective goods at the seller's disposal and asked what to do with them. The seller replied that were the complaints justified, it would credit the value of the defective goods. The seller also declared that it would be liable for any future justified complaints regarding the delivered goods. Both parties caused the wire to be examined by experts obtaining, however, conflicting results. The buyer refused to pay for the defective goods. The seller therefore commenced an action to recover the purchase price. During the legal proceedings the buyer processed the remaining raw material and declared the contract avoided with respect to the defective goods.
The lower Courts upheld the main part of the seller's action. The Court did not decide whether the buyer had properly examined the goods (Art. 38 CISG) and given notice of the lack of conformity within a reasonable time (Art. 39(1) CISG). In the Court's opinion, the seller had waived the right to set up the defense that notice of lack of conformity was not timely given, by declaring that it would be liable for present or future justified complaints regarding the conformity of the goods. According to the Court, the buyer had impliedly declared the contract avoided by giving notice that it could not make use of a certain quantity of the goods and by placing it at the seller's disposal. Therefore, the notice of avoidance had been timely given (Arts. 49(1)(a) and 51(1) CISG). Moreover, the Court found that though the buyer could not make restitution of the goods substantially in the condition in which it received them, because the goods underwent processing, the buyer had not lost the right to declare the contract avoided (Art. 82 CISG). As a matter of fact, only the processing did enable the buyer to properly examine the goods according to Art. 38 CISG. Since the buyer does not lose the right to declare the contract avoided if the goods have perished or deteriorated as a result of the examination provided for in Art. 38 CISG (Art. 82(2)(b) CISG), the same rule must apply when the processing of the raw material has augmented the goods' value, as it happened in the case at hand. With respect to the buyer's claim for damages, the Court found that the buyer was not entitled to recover the expenses incurred in adapting its equipment to be able to process the defective metal. Such expenses were to be considered unreasonable in relation to the amount of the outstanding purchase price (Arts. 74 and 77 CISG). |