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| An Italian seller and a German buyer concluded a contract for the sale of machinery for the manufacturing of windows. The machinery had to be produced by the seller according to the buyer's specifications and design and the buyer had to supply a part of the materials necessary for such production. The seller also had to install the machinery and put it into operation. A dispute arose when the buyer, faced with delays in delivery, declared the contract avoided. The seller commenced legal action before an Italian Court claiming damages. The buyer objected to the jurisdiction of Italian courts and commenced legal action before a German court, claiming damages arising out of non delivery and the replacement purchase of a more expensive machinery.
The German Court of First Instance rejected the buyer's claim for lack of international jurisdiction. The buyer appealed. The Court of Appeal overruled the decision of the lower Court and remitted the case to the latter. It observed that, according to Art. 5(1) of the 1968 Brussels Convention, a person domiciled in a Contracting State may be sued before the Court of the place of performance of the disputed obligation. The Court held that the place of performance had to be determined in accordance with CISG, which was the governing law of the contract, since both parties had their places of business in Contracting States (Art. 1(1)(a) CISG). The Court stated that the contract of manufacture fell within the scope of CISG, because the materials supplied by the buyer, together with specifications and design, did not amount to a substantial part of the materials necessary for the production of the machinery (Art. 3 (1) CISG). Moreover, the financial value of the services rendered by the manufacturer (installation and putting into operation of the machinery) was not such as to make them a preponderant part of its obligations (Art. 3 (2) CISG). The Court held that, under the contract, the seller's obligations to install the machinery and put it into operation had to be performed at the buyer's place of business (Art. 31 CISG). In doing so, it overruled the decision of the lower Court, which, pursuant to a contractual clause referring to the seller's place of business for the determination of the price, had concluded that the seller's place of business was the place of performance. In the opinion of the Court, this clause only bound the buyer to pay an additional price for the carriage of the machinery. |