- S 00/82
- Helsinki Court of Appeals
FORMATION OF CONTRACT - WRITTEN FORM NOT NECESSARY (ART. 11 CISG)
INTEREST (ART. 78 CISG) - INTEREST RATE DETERMINED BY THE DOMESTIC LAW OTHERWISE APPLICABLE TO THE CONTRACT
A Finnish seller and a Swiss buyer entered into a contract for the sale of plastic carpets. The buyer was granted the right to exclusively sell plastic products to wholesalers in Switzerland. In 1996, without any written contract, the parties agreed that the sale would also include Powerturf carpets; however from the beginning of 1997, the seller granted exclusive selling rights of Powerturf carpets in Europe to a Danish distribution company. When the buyer sent the seller a written confirmation concerning the amount of 10,000 units to be delivered, the seller only delivered the first consignment of 207 units, stating that the sale would not be carried out in its totality because of the exclusive selling rights agreement concluded with the Danish company.
The Court of First Instance held that the contract was governed by CISG as the parties had their places of business in contracting States.
As to the merits, the Court held that according to Art. 11 CISG a contract of sale need not be concluded in or evidenced by writing and may be proved by any means. Moreover, according to Art. 13 CISG, "writing" includes telegram and telex. Therefore, since the parties had orally agreed on exclusive selling rights in Switzerland and the seller had in 1996 made an agreement granting the exclusive selling rights to another company, the buyer subsequently lost its exclusive rights without any notice. In the Court's opinion, the seller's behavior constituted breach of contract and therefore the buyer was entitled to damages and interest to be determined according to Finnish law. The seller appealed.
The Court of Appeals held that since the buyer had de facto exclusive selling rights of seller's products in Switzerland and had committed itself to resell the carpets to another company, it had a right and a duty to continue its operations according to the import agreement. Moreover, considering that the contract concluded between the seller and the Danish Company could not lead to the cancellation of the contract between the buyer and the seller, the Court of Appeals, notwithstanding a dissenting opinion which would overturn the previous judgement, withheld the first instance judgement, considering the seller liable for damages to the buyer.
Helsinki Court of Appeals 26 October 2000
PROCEEDINGS BEFORE THE HELSINKI COURT OF FIRST INSTANCE
Case history: The background of the case and undisputed circumstances
The claimant [hereinafter "buyer"] is a Swiss company that is in practice run by [buyer's manager] a Finnish native Mi. [Buyer] is active in the fields of imports and exports of a variety of goods to and from Switzerland.
The defendant [hereinafter "seller"] is a Finnish company active in the field of plastic products. [Seller] manufactures plastic parts for different industries and also a variety of plastic mud and doorstep carpets.
The parties have had business relations with one another from the latter half of 1995 until the first half of 1997 in a manner that [buyer] has bought plastic carpets from [seller] in an aim to resell them in the Swiss market.
In the beginning of this relationship the sales consisted of so-called [plastic] grass carpets. From the beginning of 1996 Powerturf- carpets were also included in the selection of [seller].
Through a contract, [seller] has granted exclusive selling rights of Powerturf- grass carpets in Europe to a multinational corporation, Company I, from the beginning of 1997. For reasons explained below, the business relationship between [buyer] and [seller] ended in the beginning of 1997.
Claims brought by the [buyer]
The [buyer] sought to have the Court of First Instance require the [seller] to pay damages of CHF 212,371 on the basis of a breach of contract relating to sales of plastic products. Additionally, the [buyer] sought interest, based on the Finnish law of interest, starting from official notification of [buyer's] claims on 28 October 1997.
The [buyer] also demanded that the [seller] pay the legal expenses of the [buyer], including the value-added tax, to the full, totaling FIM 235,500.
- Basis for [buyer's] claims
[Seller] and [buyer] agreed in 1995 that [seller] would sell and deliver plastic products to [buyer] in Switzerland. As agreed in the contract, [buyer] acted as the importer of [seller's] products and was granted the right to exclusively sell plastic products to wholesalers in Switzerland. During 1995, [seller] delivered such plastic products as agreed on in the contract.
In January 1996 the parties had agreed at a trade show that the imports will also encompass Powerturf- plastic carpets. [Buyer's manager] visited [seller] on 18 January 1996. [Buyer's manager] at that time told [seller] of [buyer's] Swiss business partner Company B and the parties have confirmed their agreement that took place at the trade show. In January and February, [buyer] and [seller] exchanged letters and phone calls and refined the details of their agreement.
[Seller] committed itself to delivering to [buyer] 500 square meters of Powerturf- carpets during the year 1997. Because [buyer's] negotiations with Company B have continued, [buyer's] commitment to purchase these plastic carpets was left open.
The parties continued their negotiations at [seller's] premises in March 1996. The parties at that time elaborated on earlier events and went through details. The parties confirmed the amount to be delivered, 4,700 square meters, and the terms of delivery. After Company B confirmed its order to [buyer] on 6 August 1996, [buyer] delivered to [seller] a written confirmation concerning the amount of 4,700 square meters. Of the sale concerning 10,000 units, [seller] has only delivered the first consignment, consisting of 207 units. Regardless of [buyer's] notifications the consignment, for January, consisting of 621 units, still remained undelivered in March.
[Seller] has informed that the sale will not be carried out in its totality because [seller] had made an exclusive sales agreement with Company I for distributing Powerturf- in Europe in 17 European countries including Switzerland. The delayed delivery and the cancellation of the sale are in breach of contract made with [buyer]. This is a matter of seller's breach of contract.
The [seller] denied the claim in its totality and demanded that it not be admitted. [Seller] also demanded compensation for its legal expenses amounting to FIM 181,430.50, including value added tax and lawful interest.
- Grounds for [seller's] rebuttal
[Seller] alleged that the [buyer] and the [seller] have never made the alleged agreement concerning sales of Powerturf- for the year 1997. Neither have the parties reached an agreement as to whether the [seller] would commit himself to selling the [buyer] a certain annual amount of this product, nor have the parties negotiated on expanding the contract.
[Seller] alleged that during their business relationship, the parties have entered into individual sales transactions, the terms of which have been agreed on individually, and that the fact that the [seller] has occasionally sold the [buyer] its products as individual consignments does not constitute a duty of delivery on the part of the [seller] as alleged in the [buyer's] statement of claims. No contract whatsoever concerning the year 1997 was specified in March 1996. The defendant has notified the [buyer] already in March 1996 that after 1996 the [seller] can no longer sell Powerturf- directly to the [buyer].
The [seller] has entered into an exclusive sales agreement concerning Powerturf- with a Danish distribution company [Company I]. The [seller] informed the [buyer] in writing on 17 December 1996 about the conclusion of that agreement. Simultaneously, the [seller] notified the [buyer] that Powerturf- will no longer be sold directly. The products involved in the sales between the parties before that point in time have been duly delivered to the [buyer] by the [seller]. The order made on 9 December 1996 was a normal individual order in which no annual delivery agreement was referred to. The parties had not made any agreement as to any 621 units. Additionally, the alleged amount of 5,000 square meters is a considerably large amount for a company like the [seller].
In its statement of claims, the [buyer] introduced a term "Jahreskontrakt" referring to an annual delivery agreement. This term was single-handedly created by the [buyer]. The [seller] was notified of the document unilaterally drafted and signed by the [buyer], the first time on 20 March 1997. At that time, it reached the [seller] through a fax message. The [seller] has never accepted the said contract/offer. Neither has the [seller] made an offer to the [buyer] involving a term "Jahreskontrakt".
The [seller] has not negotiated in any manner whatsoever with the [buyer] over a contract with the said content. No agreement as to coming about or existence of this kind of contract has been reached even later. The sales that have taken place do not in any manner support the allegations of the [buyer] concerning the conclusion of the contract, for example, impliedly.
The [buyer] was never granted exclusive selling rights as an importer of [seller's] products. Consequently the defendant could not have been in breach of any contract. No duty to pay damages exists.
Yes, [buyer's manager] has visited [seller], but every time the discussions have been over another product.
[Buyer] has ordered and [seller] has delivered Powerturf- products until the end of the year 1996. The deliveries have been conforming and they have been paid.
1. Have the parties agreed on deliveries for the year 1997? The existence of an import/exclusive selling rights contract? Does another contract exist between the parties? On the basis of individual orders, as alleged by the [seller], has there come about a trade usage or another type of a long-term arrangement? Have there been negotiations during 1996, as alleged by the [buyer]? Has an agreement been reached as to terms of delivery and amounts to be delivered?
2. Contractual breach (if the contract has been concluded in a manner brought forward by the [buyer]): By [seller's] actions at the end of 1996 and in the beginning of 1997?
3. The economic consequences to the [buyer]: overhead, liability to third parties and expenses and sum totals concerning all of them.
Both written and oral evidence was submitted.
The grounds for the ruling of the Court of First Instance
The written evidence submitted by the parties corroborates the corresponding circumstances and conceptions as do the oral submissions of the parties.
Freedom as to form of a contract is a principle in contract law. Contracts can also be concluded orally.
The places of business of the parties are in different States, which are Contracting States to the CISG.
According to Article 8(1) of the CISG, statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was. Paragraph (2) of this Article provides that if the preceding paragraph is not applicable, statements made by and other conduct of the party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. Paragraph (3) of the Article provides that in determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.
According to Article 9(1) of the CISG, a usage to which the parties have agreed to and practices to which they have established between themselves are binding on them. Paragraph (2) of this Article provides, that the parties, unless otherwise agreed, have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.
According to Article 11, a contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses. Article 13 of the CISG provides that, for the purposes of the Convention, "writing" includes telegram and telex.
The so-called principle of loyalty has been widely recognized in scholarly writings. According to this principle, the parties to a contract have to act in favor of the common goal; they have to reasonably consider the interests of the other party.
In scholarly writing on export trade, a reseller has been referred to as an entity that buys products from the principal, e.g., the manufacturer, and sells them further to his own customers at his own risk. This definition has been formulated to differentiate a resale agreement from an agency agreement. In the latter, the agent works on behalf of the principal and in a manner binding on the principal.
An importer is not a legal concept as such. The types of contracts in resale agreements vary according to whether the manufacturer has agreed, for example, to grant to the reseller an exclusive selling right to a certain area, or whether the manufacturer has reserved itself the right sell the products itself, or to name other resellers in the area. Exclusive selling rights have been seen as meaning that the manufacturer itself does not sell the products or name other sellers to a particular area.
Exclusive selling agreements can be ended on notice. If the parties have not agreed on a notice period, the situation can be problematic where the manufacture wishes to name a new exclusive seller for a certain area. Such actions during the tenure of an exclusive selling agreement have been classified as breaches of contract.
Court's evaluation of evidence submitted and its conclusions
As a conclusion of its evaluations, the Court of First Instance held that the parties have orally agreed on [buyer's] exclusive selling right in Switzerland. The duration of the contractual relationship or a period of notice have not been agreed on. In December 1996, [seller] made an agreement granting the exclusive selling rights to another company, Company I, concerning Powerturf- products. Consequently, [buyer] has lost his exclusive selling rights without notice.
Four witnesses have stated that selling and expanding a customer base takes a considerable amount of time and requires both work and financial input. Even if it has been brought forward that [seller] has notified [buyer] as to its negotiations with Company I on cooperation, it has not been established that [seller] would have informed [buyer] on the ending of the exclusive selling rights before the fax message of 17 December 1996. Hence, [buyer] may have continued its selling efforts, the result of which is that [buyer] has made a contract with Company B. As a result of the contract between [buyer] and Company B, [buyer] has been able to commit himself to buying from [seller] the amount mentioned in the annual contract. Through its actions, [seller] has been in breach of contract. This conclusion cannot be disregarded on the basis of the circumstance that it has not been established that [seller] was informed of the annual agreement in August 1996.
According to Article 74 of CISG, damages for breach of contract consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.
In Finnish scholarly writings, the central form of damages is seen as compensation for positive contractual interest. The aim of this is to place the contracting party in a position where he would have been if the contract had been duly performed.
According to the Finnish Sale of Goods Act, damages for breach of contract consist of compensation for expenses, price differences, lost profit and other direct and indirect loss that resulted from the breach of contract. An indirect loss is a loss such as profit that has been lost because a contract with a third party has been avoided or has not been performed properly.
In contract law, damages as a concept has a wider meaning than in the Finnish Sale of Goods Act. Contract law knows no general limitations as to types of loss. A contracting party's liability for damages is seen as based on negligence. Additionally, there is a presumption of negligence which requires that a contracting party claiming damages must prove the existence of a contract and the coming about of a loss.
It is apparent from the written exhibit of [buyer], namely a fax message, that [buyer] has claimed damages for a breach of the exclusive sales agreement amounting to CHF 120,000. This consists of CHF 20,000 for marketing expenses and CHF 100,000 for lost profit.
According to [buyer's] pleadings, it has not paid Company B anything; Company B has not yet initiated proceedings for collecting the sums.
[Buyer] has claimed CHF 51,371 for his own lost profit, CHF 30,000 for loss of good will and CHF 11,000 for general expenses relating to sales and marketing.
It is apparent from a written exhibit presented by the [buyer], namely a confirmation letter to Company B on 7 August 1996, that Company B and [buyer] have agreed on granting Company B exclusive selling rights in Switzerland by stating: "for our common sales goal and for fulfillment of your annual requirements we have agreed on a delivery of 5,000 square meters which is to be delivered in at least 200 square meter partial deliveries."
It is apparent from the statement provided by Witness N, that Company I had later sold Powerturf- carpets to Switzerland in the amount of 8,000 square meters during a period of three years.
Company B's claim as to lost profit has not become timely from [buyer's] point of view. On the other hand, it is apparent from the evidence presented that Company B is one of three largest carpet wholesalers in Switzerland. No clarification as to anticipated overhead in relation to the goods in question has been presented. Additionally, it is not clear whether Company B would have been able to buy these products from Company I. Consequently, no clarification as to mitigation of damages on Company B's behalf has been presented.
The Court of First Instance has been presented with a sales brochure produced by Company B. Clarification in writing has also been presented in relation to ordering of samples. The claim as to marketing expenses can thus be held as reasonably established.
Due to reasons mentioned above, the sales goal can not be used as a basis for estimating [buyer's] lost profits. [Buyer's] claim for general expenses can be held as credible in terms of them being accumulated in connection with sales and marketing efforts. In estimating the loss resulting from loss of good will, the Court of First Instance has taken into consideration the fact that the [buyer] has not done business in this trade sector before the coming about of the business relationship now in question. On the other hand, even according to [buyer's] own statement, it is still doing business in another trade section in Switzerland.
Based on the above, the Court of First Instance has estimated the damage caused to [buyer] on the basis of a rule laid down the Law of Civil Procedure (section 17). As a reasonable compensation for the loss suffered by the [buyer], the Court of First Instance holds the amount as being CHF 70,000.
- Legal expenses
Many claims have been made during the course of these proceedings, of which a part will be decided in favor of the [buyer] and a part in favor of the [seller]. Hence the Court of First Instance, as provided by The Law of Civil Procedure (section 21), rules on legal expenses in a manner laid down in the judgment.
[Seller] will pay [buyer] a sum total of CHF 70,000 or an equal amount of FIM at the exchange rate of the date of payment. The sum will be added with interest as defined in the Finnish Law on interest (section 4) starting from one month after the notification of summons onwards, 28 October 1997.
All other claims are denied.
The parties to these proceedings will not be compensated for their legal expenses.
The parties shall pay witness fees to the witnesses heard during these proceedings.
PROCEEDINGS BEFORE THE HELSINKI COURT OF APPEALS
Appellants and other parties: [Seller], Finland; [Buyer], Switzerland
Proceedings on the matter in the Court of Appeals: The Court of Appeals, in its judgment of 18 February 2000, has dismissed [seller's] request concerning barring of execution of the judgment of the Court of First Instance. In its interim judgment of 13 June 2000, the Court of Appeals considered [seller's] primary claim concerning repealing of the judgment of the Court of First Instance on the basis of the Finnish Law of Procedure (section 24).
As to other claims, a trial has been held in the Court of Appeals between the dates of 25 September - 27 September 2000, of which minutes have been drafted.
Basis for [seller's] appeal and their grounds
[Seller] has demanded that the statement of claims should be dismissed and that [buyer] should be made to pay [seller's] legal expenses added with lawful interest.
[Seller] and [buyer] had been in a business relationship with one another in a manner that [seller] had acted as a manufacturer of a variety of carpets and [buyer] had acted as a buyer in order to resell the products to the Swiss market. The parties had never concluded the annual agreement concerning the sale of Powerturf- products, as alleged by [buyer]. Neither had the parties made an agreement nor had they reached an understanding according to which [seller] would have committed itself to or would be under a duty to deliver a certain minimum amount of this product to [buyer]. There have been no negotiations whatsoever as to this kind of an agreement.
The parties have traded amongst themselves on the basis of individual sales and no commitments have been made in relation to deliveries for the year 1997. [Buyer] had no exclusive selling right for [seller's] products. In December 1996, [seller] had notified [buyer] that, due to an exclusive selling agreement with another company, it could no longer be able to sell Powerturf- products directly to [buyer]. At the time, [seller] was not aware of Company B's alleged order. The judgment of the Court of First Instance does not confirm the conclusion or the existence of the sales contract. Instead, the Court of First Instance has stated that the consignment of the alleged size had not been ordered from [seller] or the delivery of which was not otherwise agreed on. Therefore, [seller] could not have been in breach of the contract and the claim should be dismissed.
Additionally, [buyer] has not established that it had an order of the alleged size, the cancellation of which would have caused it damage. It is not likely, that the amount of 5,000 square meters of Powerturf- would have been sold in Switzerland in one year. It has not been established that [buyer] had paid or would have been under a duty to compensate [Company B] for expenses resulting from sales brochures. Moreover, it was not established that [Company B's] sales brochure, the subject of which was a product named Portalcleaner, dealt with Powerturf- in any way. Additionally, the damages awarded by the Court of First Instance concerning overhead were excessive.
In the Court of First Instance, [seller] brought out that there is no significance to the contract between [buyer] and Company B, because the subject matter of the proceedings is [buyer's] alleged order from [seller]. Consequently, [seller] had grounds not to appeal earlier to the circumstances concerning the contractual relationship between [buyer] and Company B.
[Buyer] has demanded that [seller] should be made to pay [buyer] FIM 235,500 for legal expenses from the Court of First Instance added with lawful interest and also legal expenses from the Court of Appeals added with lawful interest.
Initiation of this appellate proceeding in order to obtain compensation for legal expenses has been a necessity even where [seller] has won the case in the Court of First Instance because the legal expenses have been accrued as a result of establishing liability for damages where clear facts were denied and contradicting statements presented. The amount of damages has no effect on these expenses.
[Buyer] has demanded that [seller's] claims be denied in their entirety.
Based on an oral agreement made between [seller] and [buyer] in August 1995, [buyer] has acted as an importer of [seller's] products in Switzerland as an exclusive seller and at given prices. The intention of the agreement was that [buyer] would order everything it was able to sell and [seller] committed itself to delivering the required products. According to international trade usage, a contractual relationship concerning imports brings about duties to the parties, even if the details had not been agreed on. This usage knows of no procedure where each delivery would be regarded as an individual sale. The manufacturer has a duty to contribute to the sales carried out by the importer. Canceling an import agreement has to be carried out in a manner that neither of the parties has to suffer damage. Especially, liabilities to third parties have to be considered.
During contract negotiations carried out in 1996, [buyer] committed itself to delivering 5,000 square meters of Powerturf- carpet to Company B during the year 1997. Correspondingly, [seller] committed itself to delivering the said amount to [buyer]. [Seller] had a duty to deliver on the basis of both the import agreement and the contract concerning the order itself. In the beginning of the year 1997, it became apparent, however, that [seller] had no intention to fulfill its duty because it had granted the exclusive selling rights of the said product to [Company I] another company. This has caused [buyer] more damage than the amount mentioned in the Court of First Instance because it has been unable to fulfill its own duty in relation to Company B.
In the Court of First Instance, [seller] has not denied the damage caused to Company B or [buyer's] liability for it. The method of calculating the overhead has been undisputed in the Court of First Instance. The damages claimed on the basis of overhead is based on the actual amount of goods ordered by Company B. Consequently, it is insignificant from the point of view of the decision whether or not the said amount of Powerturf- can be sold in Switzerland. In any event, the said amount is not excessive in relation to Swiss market.
[Seller] has demanded that [buyer's] appeal be dismissed because the claims contained in [buyer's] statement of claims have been mainly dismissed in the Court of First Instance. [Seller] has had justified grounds to refuse to accept the claims and to refuse to take part in negotiations and it should not be made to pay [buyer's] legal fees.
The Court of Appeals has heard seven witnesses. The parties to these proceedings have also referred to all written evidence submitted during the proceedings in the Court of First Instance.
The judgment of the Court of Appeals
The representatives of the parties and witnesses heard have largely relied on their statements in the Court of First Instance.
- Conclusions drawn by the Court of Appeals
Basis for damages
It has become apparent from the statements of both the parties and Witness P, that during negotiations on 16 August 1995 there had been discussion at least about prices and times of delivery, according to which sales were to take place and that an agreement was reached. After the negotiations, [buyer] had received a price list of [seller's] carpet products which was supposed to be used as a basis for negotiations between the parties. Based on the evidence presented, the Court of Appeals evaluated the conclusion of the contract on 16 August 1995 between [seller] and [buyer] and also the issue of whether Powerturf- carpets were included in the contract later on. The contract between the parties has created duties to [seller] as a supplier in relation to [buyer] -- at least in the sense that [seller] has been under a duty to deliver the goods ordered by [buyer] -- at least to the extent that the orders have been made within the agreed framework. [Seller] has been under a duty to contribute to the achievement of the goals of the contract and to support [buyer's] selling activities in Switzerland through his own actions. Because [buyer's] ability to act in conformity with the contracts it concluded with its own customers could not have been possible without [seller's] support, the Court of Appeals fails to find [seller's] statement credible, the statement being that [seller] had obligations only in relation to individual deliveries and that [seller] could at will refuse orders placed by the [buyer], disregarding their terms altogether.
On grounds appearing from the judgment of the Court of First Instance, the Court of Appeals finds that [buyer] had at least until further notice obtained de facto exclusive selling rights of [seller's] carpet products in Switzerland. However, the Court of Appeals holds that this circumstance is of no significance because [seller's] duties in relation to [buyer] resulted from the aforementioned import agreement, regardless of whether exclusive selling rights had been granted or not.
Based on correspondence submitted in the case, it is apparent Company B had at the latest in August committed itself to buying 5,000 square meters of Powerturf-, which was to be supplied by [buyer]. Even if it remain unestablished that a fax message concerning this circumstance had reached [seller] on 8 August 1996, the Court of Appeals fails to find it credible that [seller] had no knowledge of negotiations over the matter. Even if it is possible that the representatives of [seller] did not pay attention to Company B as a name, the Court of Appeals, considering the experience of [buyer's manager], fails to believe that [buyer's manager] would have negotiated a cooperation agreement of this scale without contribution from [seller] and without informing the company of these negotiations. Thus [seller] has to have been aware of the negotiations and their outcome. Because [seller] did not prohibit the continuation of these negotiations, [buyer] has had a right, and a duty, to continue its operations according to the import agreement. Even if [seller] had told about its negotiations with another company about importing Powerturf-, this has no effect on [buyer's] right to operate because, in the manner described in the judgment of the Court of First Instance, it has not been established that the contract concluded between [seller] and Company I would lead to cancellation of the contract between [buyer] and [seller].
[Seller] has stated that because it has not been established that [buyer] had made the alleged order of 5,000 square meters before cancellation of the contract, [seller] cannot be held liable for non-delivery of ordered goods. However, the Court of Appeals holds that it bears no significance in the matter whether the actual order had already been made or not, because during the existence of the import agreement [buyer] had committed itself to delivering goods to Company B and that [seller] was aware of this. The cancellation of the import agreement by [seller] has resulted in a failure to fulfill these commitments. This Court of Appeals agrees with the view of Witness P, that even though an importer by definition acts on his own behalf and at his own risk, the operations cannot be based on a risk of an abrupt ending of a contract. Consequently, [seller], in the manner described in and on the basis of the legal considerations of the judgment of the Court of First Instance, is under a duty to pay damages to [buyer] for loss resulting from liability to a third party, Company B.
The amount of damages
The Court of Appeals will not overturn the amount of damages awarded by the Court of First Instance.
[Buyer] has won the case both in the Court of First Instance and the Court of Appeals. The proceedings have mostly concerned the grounds for damages. The Court of First Instance has admitted [buyer's] claim as to its grounds and awarded in and around a half of what [buyer] has claimed. [Buyer's] claim has thus been admitted only in part. Because the part of the claim that was not admitted was a discretionary issue that has had no bearing on the amount of legal expenses, the Court of Appeals holds that [seller] has to compensate for [buyer's] legal expenses in the Court of First Instance in full.
[Seller] will be made to pay for [buyer's] legal expenses accrued in the Court of First Instance in the amount of FIM 235,000. The sum is subject to interest on arrears as defined in the Finnish Law of Interest starting from one month after the issuance of judgment onwards.
Otherwise, the judgment of the Court of First Instance remains unchanged.
[Seller] will be made to pay [buyer] FIM 86,582.50 for legal expenses accrued in the Court of Appeals. This sum is also subject to interest on arrears in a manner described above.
A dissenting opinion of a member of the Court of Appeals in the matter S 00/82
For [buyer] to obtain damages from [seller] the following prerequisites should have been fulfilled:
- The parties ought to have had some sort of an exclusive selling agreement or a resale-agreement, which would have prevented [seller] from selling products to others or at least obliged it to fulfill [buyer's] orders or that [seller] would have committed itself to delivery on the basis of an order received or confirmed;
- [Buyer] ought to have committed itself to resell the products and as a consequence would have suffered damage by failing to deliver; and
- [Seller] ought to have foreseen the amount of damage (CISG Article 74).
Based on the statements of the parties and the witnesses and written evidence, it is apparent that there was no enforceable contract between the parties. I do not see that Witness P's view, that according to him such a contract existed, could be held as evidence enough to prove the existence of such a contract. Already based on the nature of the case it is apparent that the alleged agreement ought to have been concluded in writing and that it ought to have contained detailed terms on the obligations of both parties. It is my opinion that [buyer] has not agreed to deliver the alleged 5,000 square meter consignment to Company B. According to the statement of [buyer's manager], it was only a goal of the company to sell this amount during the year 1997. Later it had appeared that the amount of such products sold in all of Europe was 13,000 square meters for that year.
On the opposite, it had become apparent in the matter that [seller] had price lists which were enforced until further notice, based on which buyers made orders for each sale separately. The said orders were accepted when raw material and other costs had not risen. The so-called agreement with Company I was only the first exclusive selling agreement on behalf of [seller].
The representatives of the parties were not in a business relationship, as [buyer's manager] had imagined. They had met in trade shows and [buyer's manager] has often invited himself to visits while otherwise visiting Finland. On these occasions, there have been discussions about sales but no agreements have been reached. During these meetings, the parties have mentioned that if [buyer] can sell 5,000 square meters of industrial carpets in Switzerland in the year 1996, he will be granted exclusive selling rights. During none of these meetings have the parties mentioned that Company B buys and [buyer] orders the said amount.
[Buyer's manager] has alleged having made an order in German of 5,000 square meters on 8 August 1996 for the year 1997 and to have sent the alleged order by fax to [seller]. Witness N and the staff members of [seller] have not admitted to having seen such an order until, not earlier than in 1997, it was sent added with markings, when the representation of the products had already been given by the [seller] to the Danish company, [Company I].
As proof of sending such a fax, there is the signature of [buyer's manager], but no sending report. It is my opinion, as was the opinion of the Court of First Instance that no such fax message had been sent to [seller] during the summer of 1996. Altogether it is my opinion that [seller] has caused no damage whatsoever to [buyer], and that it ought not have foreseen such damage either.
I would overturn the judgment of the Court of First Instance and would not hold [seller] liable for damages to [buyer]. I would make [buyer] compensate [seller] for its legal expenses amounting to FIM 232,930.50. I would make this sum subject to interest on arrears as defined in the Finnish Law of Interest starting from the judgment of the issuance of judgment onwards.
The decision has become final.}}
Original in Finnish:
(to be published in CISG-Finland Website http://www.utu.fi/oik/tdk/xcisg/cisg.htm)
Published in English:
University of Pace Website (http://cisgw3.law.pace.edu/)}}