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| Abstract | ||||||||||||||||||
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| A Swiss buyer and a German seller entered into a contract for the sale of a used rotary textile printing machine that the buyer had previously inspected. The contract expressly stated that the machine had a "641 mm - 1018 mm" ratio and was "complete and ready to operate when inspected". As to the mode of payment, the contract provided for a down payment of a third of the price and the balance upon delivery. Should the buyer fail to pay the balance the seller had the right to terminate the contract and retain the down payment as a penalty.
After making the down payment, the buyer discovered that in order to meet the requirements indicated in the contract the machine had to be equipped with additional components. The buyer proposed to the seller two alternative solutions: either termination of the contract and restitution of the down payment, or a reduction of the price so as to cover part of the cost of the additional components. The seller refused both proposals and insisted that the contract be performed by the buyer as agreed. When the buyer announced it would refuse to pay the remaining price, the seller declared the contract terminated and informed the buyer that it would retain the down payment as a penalty as provided in the contract. Both the Court of First Instance and the Supreme Court dismissed the buyer’s claim to restitution of the down payment plus 5% interest. The Supreme Court held that, contrary to domestic law (in the case at hand Art. 197 Swiss Code of Obligations), according to Art. 35 CISG the decisive test was not which qualities the seller had promised but which qualities the the buyer could reasonably expect under the terms of the contract. Even assuming that the parties had a different understanding of the meaning of the contract, the relevant language in the contract had to be interpreted according to Art. 8(2) CISG, i.e. according to the meaning a reasonable person in the same situation as the parties would have given it. In the case at hand, as the buyer was an experienced trader of the kind of goods involved, the seller could reasonably expect the buyer to know that a machine 12 years old would not necessarily meet the same technical requirements as a new machine of the same kind and that therefore the buyer should have checked more carefully the machine before making a statement according to which it found the machine perfectly workable. |