Date: 07.12.1999
Country: USA
Number: 99 C 5153
Court: U.S. District Court of Illinois
Parties: Magellan International Corporation v. Salzgitter Handel GMBH
A United States distributor entered into negotiations with a German trader with a view to reaching an agreement for the purchase of steel bars from an Ukrainian manufacturer. During the negotiations the parties agreed on several matters (seller acting as middle-man between the U.S. buyer and the Ukrainian manufacturer), quantity of the goods, amount and method of payment, instructions for manufacturing). Nevertheless, a dispute arose when the seller, in view of the buyer's refusal to modify the letter of credit issued for payment, threatened not to perform its contractual obligations and to sell the goods elsewhere. The buyer brought an action for anticipatory breach of contract claiming damages and specific performance of the seller's obligations.

As to the applicable law, the Court found that, according to the facts alleged by Plaintiff, the parties had agreed that either the Illinois version of the Uniform Commercial Code (UCC) or CISG would apply. The Court held that CISG was the law governing the dispute as a result of the fact that both parties had their places of business in Contracting States and did not expressly opt out of CISG.

The first substantive issue addressed by the Court was whether and when a contract had been concluded. In its view, the buyer's order of a determined quantity of steel, with indication of price, amounted to an offer (Art. 14(1) and Art. 8(2) CISG), whereas the seller's purported acceptance, which laid down some price adjustments, was rather a counter-offer (Art. 19(1) CISG). The Court concluded that the contract had been concluded with the buyer's acceptance of such counter-offer, which could reasonably be inferred from its issuing of the letter of credit (Art.18(1) CISG) and from the fact that, having claimed specific performance, it confirmed its willingness to pay the price as amended by the seller.

The second substantive issue dealt with by the Court was that of the alleged anticipatory repudiation of contract by the seller. The Court pointed out that the seller's threat not to perform its contractual obligations if the letter of credit was not amended, amounted to an anticipatory breach of contract, because the seller clearly intended to breach the contract before the contractual performance date (Art. 72 CISG) and the part of the letter of credit (the bill of lading requirement) that it asked to amend was an essential one, so that the seller's insistence upon amendment of that requirement would be a fundamental breach (Art. 25 CISG). The Court therefore awarded the buyer the damages arising out of this fundamental breach made by the seller.

Finally, in dealing with the buyer's plea for specific performance, the Court stated that this remedy is generally available under CISG (Art. 46(1) CISG), with the exception that a Court is not bound to enter judgement for specific performance unless it would do so under its own law of contracts (Art. 28 CISG). After having recalled that, according to modern judicial interpretation of Par. 2-716 (1) UCC, specific performance may be granted when the buyer proves the difficulty of obtaining similar goods on the market, the Court upheld the buyer's claim.