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| Abstract | ||||||||||||||||||
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| A Swedish seller and a German buyer concluded a contract for the sale of coal. The seller delivered the coal to a firm in Yugoslavia as provided by the contract. The Yugoslavian firm refused to pay the price to the German buyer, alleging non conformity of the goods. The German buyer conveyed the complaints to the seller five days after receiving the complaints from the Yugoslavian firm and did not pay the price. The seller replied that if the buyer did not paid, it would avoid the contract. The seller commenced action to recover the full price.
The court held that the seller's threat of avoidance did not constitute a declaration of avoidance pursuant to Art. 64(1) CISG. The court also held that the contract had not been avoided by the buyer. In order to avoid the contract the buyer should have issued a declaration to that purpose within a reasonable time after he first knew of the non conformity of the goods as required by Art. 49(2)(b) CISG. According to the court, a declaration of avoidance issued 4 months after this point must be regarded as late. Furthermore, the court held that the buyer could not avoid the contract because there was no fundamental breach of contract pursuant to Art. 49(1)(a) CISG. Although the composition of the coal actually deviated from the contract, this deviation did not amount to a fundamental breach. As to the remedy of reduction of the price (Art. 50 CISG) the court held that the buyer was precluded from relying on such remedy since it had never made a valid declaration to this effect. The court granted the seller the contract price and, pursuant to Art. 78 CISG, held that the seller was entitled to interest. The rate of interest was determined by applying German private international law rules, which led to the Swedish law. The Swedish statutory rate is 8% higher than the discount rate of the Swedish Central Bank. |