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| Abstract | ||||||||||||||||||
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| An Italian seller entered into a contract with a German buyer for the supply of shoes to be produced by the seller according to the buyer's design. The parties agreed that the buyer had the exclusive right to distribute the shoes produced according to its design. The seller displayed the shoes at a trade fair without the buyer's consent and refused to remove them after receipt of notice to do so from the buyer. The day after the trade fair the buyer notified the seller that the relationship between them was finished and that another company would produce the shoes, and refused to pay the price.
The court held that the contract was governed by CISG, as German private international law rules led to the application of the law of Italy, a contracting State (Art. 1(1)(b) CISG), and under Art. 3(1) CISG contracts for the supply of goods to be manufactured or produced are to be considered contracts of sale governed by CISG unless the party who orders the goods undertakes to supply a substantial part of the necessary materials. According to the court, a breach of a secondary obligation under the contract may amount to a fundamental breach giving a right to avoid the contract if it so seriously jeopardises the purpose of the contract that the aggrieved party has no more interest in it (Arts. 25 and 49(1)(a) CISG). The buyer was found to be entitled to avoid the contract, as the display of the shoes by the seller led the public to believe that the shoes were also distributed by the seller and this cast serious doubts on the seller's future compliance with the contract and amounted to a fundamental breach of the contract by the seller. The court further held that although the buyer had not given express notice of avoidance, it had impliedly avoided the contract by notifying the seller of its intention to discontinue their relationship and to have the shoes produced by another company. The court finally found that in accordance with Art. 49(2)(b) CISG the notice of avoidance had been given within a reasonable time after discovery of the breach (one day after the trade fair). |