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| Abstract | ||||||||||||||||||
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| A Czech seller and an Austrian buyer concluded several contracts for the sale of umbrellas. As the installments delivered under the first contracts remained unpaid, the seller suspended any further delivery of umbrellas ordered under the remaining contracts. The seller commenced an action to recover the unpaid price. The parties made no objection in the court proceeding to the choice of law clause in favor of Austrian law as the governing law of the contract.
The lower courts decided in favor of the seller. The Supreme Court reversed and remitted the case to the court of first instance. The Supreme Court held that the contract was governed by CISG. The Court clarified that where the parties agree upon a choice of the law in favor of the law of a contracting state as the governing law of the contract, according to Art. 1(1)(b) CISG is applicable as the law of that state even if no express reference is made by the parties as to the application of CISG. The Supreme Court denied the seller's right to suspend performance according to Art. 71 CISG. The Court first clarified that being the right of suspension of performance a matter expressly covered by CISG, no recourse to domestic law is given with respect to any facts that may justify the suspension of performance. The Court noted, however, that under Art. 71 CISG a suspension of performance by one party is only justified when it becomes apparent that the ability to perform of the other party may seriously be jeopardized. This may either be the result of the conduct of the party in preparing to perform or in performing the contract (Art. 71(b) CISG), or in the case of serious financial difficulties of the party which may give rise to a loss of creditworthiness (Art. 71(a) CISG). In the Court's opinion such loss of creditworthiness may be given if one of the party becomes subject to an insolvency procedure, or if a party has completely stopped to pay or to deliver the goods under the contract. The Court clarified that the failure by the seller to pay single installments, like in the case at hand, or a discontinuing payment of the delivered goods, is not in itself sufficient to justify a serious financial difficulty, or a loss of creditworthiness, as required under Art. 71(a) CISG. |