|A Swiss seller and an Italian buyer concluded a contract for the sale of Ghana cocoa beans. The contract contained an Incoterm CIF (Cost, Insurance and Freight) clause, whereby the seller was to arrange for transportation of the goods by ship from Ghana to Italy. The price had to be paid by irrevocable letter of credit, payable upon presentation to a bank along with a certificate issued by an independent surveillance authority (Société Générale de Surveillance), attesting the quality of the goods specifically agreed by the parties. Before shipment, a certificate of analysis was issued by the surveillance authority, which found that the goods (examined by sample) possessed the agreed quality. Three weeks later, the goods were closed in containers and shipped from Ghana. The seller then presented the letter of credit along with the quality certificate and obtained payment from the bank. The goods arrived at their destination in Italy one month after shipment. The analysis made by the buyer upon receiving the goods revealed that their quality was well below the agreed margin of tolerance. The buyer gave notice of non-conformity to the seller requiring delivery of substitute goods within a given period of time. As the seller failed to do so, the buyer declared the contract avoided and commenced legal action against the seller claiming restitution of the purchase price and interest.
The Court of first instance (Pretore del distretto di Lugano, 13-03-1997) held CISG applicable (Art. 1(1)(a) CISG) and rejected the buyer's claim. The buyer appealed.
The Court of Appeals held that, as the sale involved carriage of the goods, the risk had passed to the buyer when the identified goods were handed over to the carrier in Ghana for transportation, pursuant to Art. 67 CISG. The Court also found that the goods arrived at destination in Italy in such conditions that the buyer could not make any use of them. However, in the case at hand it was necessary to ascertain whether or not the goods lacked conformity, in either latent or apparent manner (Art. 36 CISG), upon their being handed over the carrier, and which party is to provide evidence thereof.
The Court found that CISG does not expressly settle the matter of burden of proof regarding conformity of the goods (Art. 7(2) CISG). The Court noted that some scholars maintain that this is a matter governed but not expressly settled by the Convention and that Arts. 35 et seq. CISG is the expression of a general principle which can be used to fill this gap in the Convention, namely, that the burden of proof lies on the buyer. The Court also noted that other scholars maintain that, in the absence of a general principle, this matter is to be decided in conformity with the domestic law applicable by virtue of the rules of private international law, which in the case at hand led to the application of Swiss law. In this connection, the Court found that even under Swiss domestic law the burden of proof lies on the buyer.
The mere fact that the conformity of goods had been certified by the surveillance authority before shipment was no evidence of the buyer accepting the goods as such. In fact, the certificate of quality was intended only for the seller to receive payment by letter of credit, while the buyer was still entitled to examine the goods upon their arrival at the Italian port and to give notice of any non-conformity under Art. 38 CISG.
The Court also found that the seller, by letter sent to the buyer after delivery, had implicitly admitted that the goods lacked conformity at the time of shipment and that they could not have been deteriorated during transportation.
Therefore, either in the event that the analysis made before shipment was mistaken, or in the event that the goods were deteriorated during the three-week period before their being closed into the containers and shipped, or in the event that the goods lacked conformity upon passing of the risk but the defects became apparent only after their arrival at the port of destination, in all these cases the goods were defective when handed over to the carrier for transportation, so that the seller was in breach for non-conformity.
On these grounds, the Court held that the buyer was entitled to declare the contract avoided (Art. 49 CISG), and to restitution of the price paid under the contract (Art. 81(2) CISG) as well as to payment of expenses as further damages (Arts. 74 and 81(1) CISG). The buyer was also entitled to interest on the price, accruing from the date on which the price was paid (Art. 84(1) CISG). As to the rate of interest, the Court found this to be a matter not governed by the Convention and to be settled in accordance with the law applicable by virtue of the rules of private international law; in the case at hand Swiss domestic law.