- Højesteret (Supreme Court)
- Zweirad Technik v. C Reinhardt A/S
AVOIDANCE (ART. 73 CISG)– FUNDAMENTAL BREACH IN RESPECT OF ONE INSTALMENT INDICATING PROBABLE FUTURE FUNDAMENTAL BREACHES
RIGHT TO CLAIM DAMAGES (ART. 74 CISG) – LOSSES SUFFERED DUE TO BREACH – COST OF STORING GOODS FOR RESALE
DAMAGES IN CASE OF AVOIDANCE – INJURED PARTY´S RIGHT TO MAKE SUBSTITUTE TRANSACTION (ART. 75 CISG) – DIFFERENCE BETWEEN CONTRACT PRICE AND SUBSTITUTE TRANSACTION PRICE – REDUCTION OF DAMAGES DUE TO GOODS NOT SOLD IN A REASONABLE MANNER AND IN A REASONABLE TIME
For a number of years, a Danish importer of motorcycles from Japan had sold large quantities of motorcycles to a German trader who sold the motorcycles to customers in Germany. It was customary that the German trader ordered certain amounts of motorcycles based on forecasts of the anticipated sales in Germany and that the Danish seller subsequently ordered the motorcycles from the producer in Japan. It was also customary that both the buyer and the seller could make minor adjustments of the orders according to particular circumstances, e.g. because certain colors or quantities where not available from the producer in Japan. In the fall of 1999, the German trader ordered almost 1.600 motorcycles to be delivered by installments. As usual, the price had to be paid in yen when each installment was delivered. The total price was subject to a bank guarantee. However, due to the development in the exchange rate between Euro and Yen, the German buyer asked the seller to ask the producer for a price reduction reflecting the currency development. This, however, was refused by the producer. The buyer, however, placed more orders for the delivery of motorcycles in 2000. In December 1999, the buyer cancelled all orders. The seller immediately protested and the parties agreed that the buyer should accept delivery of approximately half of the ordered quantities of motorcycles with a certain discount given by the seller. Furthermore, the seller should try to get a further discount from the producer. As the German buyer was not satisfied with the seller´s efforts to obtain the further discount from the producer, the buyer refused to take delivery and cancelled the bank guarantee. Consequently the seller avoided the contract between the parties and informed the buyer that he would start to resell the motorcycles on the Danish market. The seller also claimed damages equal to the difference in the price under the contracts and the cover transactions. The cover sales took almost 5 years to complete. The buyer protested claiming that he had a right to cancel the orders. Furthermore buyer contested that the seller had taken reasonable measures in his cover sales as the motorcycles where only sold in Denmark, and not all over Europe, where the prices was higher. The seller contested that the European market where in a better condition than the Danish, and that he could have sold to higher prices.
The lower court decided in favor of seller. The seller had rightfully avoided the contracts under Art. 72 CISG and the cover sales were made in a reasonable manner and within a reasonable time. It would not have been feasible to sell the large amount of motorcycles within a short time all over Europe at the present market conditions, also taking into account the seller's business relations to the producer. Furthermore, the seller had the right to claim damages for the costs of storing the motorcycles. Consequently, the lower court awarded the seller damages in the amount of almost 4 million Danish Kroner.
The Supreme Court affirmed this decision however for other reasons and reduced the amount of damages. The Supreme Court unanimously stated that the seller had the right to avoid the contract, yet according to Art. 73 CISG. As a consequence, the seller had the right to claim damages. According to the majority in the Supreme Court, the cover sales which took almost 5 years to complete and only took place in the Danish market were not made in a reasonable manner and within a reasonable time. Consequently, the damages were reduced to the amount of 2 million Danish Kroner. A minority of the Supreme Court Judges did not find any reason to criticize the cover sales, also taking into consideration that the buyer could have taken care of his own interest by working for cover sales in other markets including the German.
Published in original:
- Ugeskrift for Retsvæsen (UfR) 2008.181 H}}