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| A Belgian buyer ordered frozen meat from a German seller. The seller's standard terms provided for advance payment by the buyer. They contained inter alia a choice of law clause in favour of German law and a provision regarding interests in case of non payment. When the seller requested advance payment the buyer did not comply, alleging that the seller had unilaterally changed the place for delivery of the goods. The seller commenced a legal action to obtain damages.
The Court did not decide whether the clause in favour of German law contained in the seller's standard terms was to be interpreted as an implied exclusion of CISG, or whether CISG was applicable, since it held that the seller's claim would be well founded in both cases. Firstly, the Court ascertained that it had jurisdiction according to the choice of forum clause contained in the seller's standard terms, which had been validly included in the contract both under German law as well as under the general rules on formation of contract in CISG (Arts. 14, 18 and 24 CISG). Moreover, the Court would have jurisdiction also in application of Art. 5(1) of the EC Convention on Jurisdiction and Enforcement of Judgements in Civil and Commercial Matters (Brussels 1968) under which a person domiciled in a contracting State (in the case at hand, the buyer) may be sued in the court of the place of performance of the obligation in question (here: non payment). According to Art. 57(1)(a) CISG, absent a different agreement between the parties, the price has to be paid at the seller's place of business, that is Germany. This rule is to be extended also to the seller's claim to damages for non payment (Art. 61 CISG). The seller's claim was not considered time barred according to German domestic law, which was exclusively applicable to limitation of action (prescription) falling this question out of the scope of CISG (Art. 4 CISG). As to the merits of the dispute the Court held that the seller was entitled to recover damages under Art. 61(1)(b) CISG because the buyer breached its contractual obligation of advance payment. On its part the seller was not obliged to deliver in advance when it became apparent that the buyer would not perform, but it had the right to avoid the contract pursuant to Art. 64(1)(a) CISG. According to Art. 74 CISG, the seller was awarded recovery of its full loss including expenses for preservation and storage of the goods (Art. 85 CISG). The Court further rejected the buyer's contention that the seller should have mitigated damages by reselling the goods. Art. 77 CISG does not oblige the seller to make a cover sale, even when there is the risk of a substantial decrease in the goods' price, unless such a long period of time has passed that one can expect the seller to choose among the remedies at its disposal. Nor does Art. 88(2) CISG create such an obligation for the seller, as the frozen meat is not subject to rapid deterioration nor are preservation expenses unreasonable. As to the right to interests on the sums due to the seller, the Court noted that pursuant to Art. 4(a) CISG the validity of standard terms is a matter excluded from CISG. Therefore the validity of the interests clause contained in the seller's standard terms was to be determined by the applicable German domestic law, according to which prefixed lump sums for damages are inadmissible. The right to interest was awarded under Art. 78 CISG and its rate was determined applying the law otherwise applicable to the contract (German law). |