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| Abstract | ||||||||||||||||||
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| A Chilean company (the seller) concluded a contract with a Belgian buyer for the delivery of frozen raspberries. The contract provided that the buyer should pay through letter of credit. Failing the required opening of the letter of credit, the seller did not proceed to ship the goods. The buyer itself asked for a delay in the delivery and requested the company which had acted as mediator to negotiate with the seller for a lower price, alleging a significant drop in the world market price for the purchased goods. After further communications between the parties, the seller refused to accept a reduced price, declared the contract avoided and commenced an action to recover damages.
The Court held that the contract was governed by CISG, as the parties at trial expressly agreed on CISG as the applicable law. The buyer alleged that the contract had been modified by agreement between the parties regarding the amount of the price. The Court held that as Chile had made a declaration pursuant to Art. 96 CISG and being the seller's place of business in Chile, in accordance with Art. 12 CISG the contract had to be modified in writing. No written modification agreement, however, had been produced by the parties. The Court further held that the significant drop in the market price of the purchased goods after the conclusion of the contract did not constitute a case of force majeure exempting the buyer for non-performance under Art. 79 CISG. Fluctuations of prices are foreseeable events in international trade and far from rendering the performance impossible they result in an economic loss well included in the normal risk of commercial activities. The seller had therefore a right to avoid the contract and was also granted damages, including the expenses incurred in storing the undelivered frozen goods and lost profits. The Court determined the amount of lost profits ex aequo et bono, taking into account the probability of a cover sale by the seller at a price significantly lower than the one agreed upon in the contract. |