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| Abstract | ||||||||||||||||||
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| A Swiss buyer ordered from the seller two sets of cutlery. The seller delivered the goods but the buyer refused to take delivery and to pay the purchase price. The seller fixed the buyer an additional period of time for performance of its obligations under the contract. After the unsuccessful expiration of the additional period of time, the seller declared the avoidance of the contract and commenced an action for the recovery of damages arising from the substitute transaction, as well as further damages. The buyer counter-claimed that the contract had not been validly concluded as its order was to be considered as a declaration of intention regarding future purchases and not an offer; it further alleged that it had already avoided the contract before the seller, since the seller had broken the exclusivity agreement with regard to the second set of cutlery; finally, it alleged that it had cancelled the orders pursuant to the practice established between the parties according to which the buyer was allowed to unilaterally cancel or change its orders even after such orders had been received by the seller.
The court examined the first allegation of the buyer. By examining the order sent to the seller, the court noted that the buyer ordered two sets of cutlery specifying the exact number of the sets and the time of delivery. Moreover, in the opinion of the court the wording of the order clearly indicated the intention of the buyer to be bound by its offer in case of acceptance (Art. 14 (1) CISG). It therefore concluded that the order sent by the buyer constituted an offer under Art. 14 CISG which the seller had accepted and that therefore a valid contract had been concluded between the parties. With respect to the second allegation of the buyer, the court further held that indeed the violation of an exclusive distribution clause could amount to a fundamental breach of contract (Art. 25 CISG), and not simply a breach of a collateral obligation under the contract. In fact, in the reasoning of the court such breach may substantially impair the interest of the other party. However, in the case at hand, the court concluded that buyer did not have the right to avoid the contract, as it did not provide sufficient evidence about the existence of said exclusivity agreement between the parties with regard to the second set of cutlery. As to the third argument of the buyer, the court stressed that for a practice to be established under Art. 9(1) CISG, it is necessary that the parties be in a long-lasting business relationship, involving a number of sale agreements. To provide evidence of the practise, it is sufficient to prove that the parties have adopted the same behaviour in comparable situations and that such behaviour has not been objected. By examining the facts of the case, the court noted that within the business relationships between the parties, the buyer had in fact previously, in two occasions, cancelled or modified orders without the seller objecting to such behaviour, which the court recognised as a valid practise established between the parties under Art. 9(1) CISG. In the case at hand, however, the court found that the buyer could not invoke such a practice since it was not able to prove that the seller had agreed to the modification of the order. The court concluded that the seller had the right to declare the avoidance of the contract according to Arts. 61 and 64(1)(b), since it had fixed ad additional period of time as required under Art. 63(1) and the buyer had not performed its obligations under the contract. It awarded the seller the difference between the contract price and the price obtained from the substitute transaction, as provided under Art. 75 CISG, which has been set in 10 % of the purchase price, as well as further damages pursuant to Art. 74 CISG (purchase price of the part of the goods that could not be sold as well as the transportation cost). Finally, the court awarded the seller interest on the price of the unsold goods and the accrued damages. As to the applicable interest rate, in the absence of CISG the court held that the interest rate had to be determined according to the 1955 Hague Convention on the international sales of goods, which led to German law, being Germany the country where the Seller has its principal place of business. |