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| Abstract | ||||||||||||||||||
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| A Brazilian seller concluded a contract with a German buyer for the sale of jeans. The buyer examined a sample of the goods immediately after delivery and made a first complaint to the seller one week later, around mid-May, alleging inter alia that the quantity delivered was less than that agreed upon in the contract and that the jeans were incorrectly labelled as far as their size was concerned. A second, more detailed notice of lack of conformity was given by the buyer at the beginning of September. Some twenty days thereafter the buyer notified that it had put the goods at the seller's disposal. Failing any action by the seller, the buyer resold a great part of the goods at a lower price. The seller commenced an action asking for payment, or alternatively for the proceeds of the cover sale, to which the buyer counterclaimed its right to avoid the contract and obtain damages for lack of conformity of the goods.
The first instance decision denied the seller's right to payment and recognised in principle that the buyer was entitled to damages for non performance by the seller. However, it granted the seller a sum corresponding to the difference between the proceeds obtained by the buyer with the cover sale and the buyer's damages. The buyer appealed. The Court upheld the buyer's claim. Firstly, it confirmed that the buyer was entitled to declare the contract avoided pursuant to Art. 49(1)(a) CISG, since the seller had fundamentally breached the contract by delivering goods which as a whole did not conform to the quality agreed upon. The buyer had also notified the seller of the lack of conformity within the reasonable time requested in Art. 39(1) CISG. Further, the contract had been validly avoided by the buyer within the reasonable time provided for in Art. 49(2) CISG, as it was reasonable to wait until the entire delivery had been examined and the precise entity of the lack of conformity ascertained. Thus, the seller could not claim payment (Art. 81(1) CISG). As to the buyer's appeal, the Court held that the seller could not be granted the proceeds of the buyer's cover sale. In the Court's opinion, though according to Art. 88(3) CISG the seller was in principle entitled to such proceeds, in the case at hand the buyer had the right to offset them with its right to damages under Art. 74 CISG, which amounted to a higher sum. In reaching this conclusion, the Court did not have to decide whether the right to set-off derives directly from CISG or from the applicable domestic law, though it observed that at least, as long as it concerns claims arising under the CISG, set-off could be considered a general principle underlying the Convention in accordance with its Art. 7(2). |