A Spanish seller (plaintiff) and an Austrian buyer (defendant) concluded several contracts for the sale of fruits and vegetables. When the seller requested the buyer the payment of some invoices which have not been paid, the buyer objected that party to the contracts concluded with the seller was not itself, but its 100% controlled subsidiary. The seller objected that, although on a number of occasion it had indeed dealt with with that subsidiary company, it was contacted first by the parent company and had from the outset made it clear that it intended to contract only with the parent company and not with its subsidiary; as to the direct contacts with the latter, the conduct of both the subsidiary and the parent company let it reasonable ti believe that the subsidiary acted as an agent of the parent company.
The Supreme Court held that the contracts were governed by CISG as both seller and buyer had their places of business in different contracting States (Art. 1 (1) (a) CISG). However, with respect to the question at stake, i.e. whether the seller could reasonably believe that the subsidiary company acted not on its begalf but as an (apparent) agent of the parent company, with the result that the latter and not the formare was party to the sales contracts,the Court held that question of agency are not covered by CISG and are therefore to be decided according to the applicable domestic law (in the case at hand: Austrian law. In this respect the Supreme Court expressly overruled the Court of Appeal which,though deciding the merits of the case in the same way,had argued that the fact that the seller had good reasons to believe that the subsidiary company was acting as an (apparent) agent on behalf of the parent company to contact with an agent could be explained in application of the Convention itself, more precisely in accordance with the principle of good faith (Art. 7(1) CISG) and the rules of interpretation laid down in Art. 8 CISG. |