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| Abstract | ||||||||||||||||||
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| Three German sellers and a Swiss buyer concluded a contract for the sale of meat to be further resold on the Egyptian market. After delivery the buyer complained about non-conformity of the goods caused by an excess of the fat and moisture content of the meat and declared the contract terminated. In the notice of non-conformity the buyer also offered to take delivery of the goods at a reduced price. As the buyer refused to pay the price the sellers filed suit against the buyer to recover the purchase prise plus interest. The buyer counterclaimed damages determined by defects of the goods and loss of profits.
The lower Court found that the buyer was only entitled to reduce the price of the defective goods. The Supreme Court affirmed the lower Court's decision and pointed out that in case of lack of conformity a fundamental breach entitling the buyer to terminate the contract under Arts. 49 and 25 CISG can not be inferred when the processing or resale of the goods is still possible in the ordinary course of business without an excessive burden for the buyer. In the case at hand, the Court found that the defects of the meat only determined a loss of weight after its industrial processing and did not prevent its resale on the Egyptian market as was also proved by the buyer's offer to take delivery of the goods at a reduced price. As to the buyer's claim for damages, the Court stated that according to Art. 45 CISG, the reduction of the price do not deprive the buyer of any right to claim damages. However this right cannot be exercised when the damages only refer to direct material defects of the goods. The Court therefore rejected the buyer's claim. On the other hand, the Court partially reversed the lower Court's decision as it found that the buyer was entitled to recover damages deriving from loss of profit. According to the lower Court, the buyer had failed to prove that the risk of loss of its customers due to the delivery of non-conforming goods was expressly discussed during the parties' negotiations. The Court held that there is no general rule according to which particular damages are only foreseeable according to Art. 74 when they have been explicitly pointed out during contract negotiations. The buyer's damage due to loss of customers could be considered as foreseeable if at the time of conclusion of the contract the sellers were or ought to have been aware of the fact that the buyer was a wholesaler in a sensitive market and had no possibility through its own conduct to supply its customers with conforming goods in due time. In the case at hand, the Court found that the sellers were aware of such circumstances and, considering also the huge amount of meat ordered by the buyer, should have been aware of the buyer's risk of losing customers in case of delivery of non-conforming goods. The Court finally held that the sellers were entitled to recover interests. Since CISG does not determine the interest rate (Art. 78 CISG), the Court applied the statutory interest rate provided by German law, as the law otherwise applicable to the contract. The sellers were also awarded a higher interest rate as further damages pursuant to Arts. 78 and 74 CISG, since they provided sufficient evidence of recourse to bank loans. |