- 219436/HA ZA 06-2279
- Rechtbank Utrecht
- Prodema S.A. v. Michon B.V.
BUYER’S RIGHT TO AVOID (TERMINATE) CONTRACT - EXCLUDED IF BUYER FAILS TO DECLARE THE CONTRACT AVOIDED WITHIN A REASONABLE TIME (ART. 49(2) CISG)
RIGHT TO SUSPEND PERFORMANCE (ART. 71 CISG) – ONLY IN CASE OF PROSPECTIVE BREACH OF CONTRACT AND CONDITIONAL ON IMMEDIATE NOTICE TO OTHER PARTY (ART. 71(3) CISG)
A Dutch buyer ordered on a regular basis gable plates from a Spanish seller to be processed and assembled according to its customers’ needs. At the end of 2003, the buyer was informed by its customers of some defects in the goods proceeded; as a result, the seller replaced the defective plates. At the beginning of 2004, the buyer placed a new order and took delivery of the goods, though leaving the related invoices unpaid. During the summer, the buyer decided not to process the plates and, on 8 February 2005, it declared the contract avoided. The seller sued the buyer asking for the payment of the price plus costs and interest.
The Court held that the contract was governed by the CISG as the parties had their places of business in Contracting States (Art. 1(1)(a) CISG).
As to the merits, the Court observed that under CISG the buyer is entitled to declare the contract avoided (terminated) if the seller's failure to perform amounts to a fundamental breach of contract (Art. 49 (1)(a) CISG). Yet, the buyer looses this right if the notice of avoidance is not given within reasonable time after it discovered, or ought to have discovered, the breach of contract (Art. 49(2)(b)(i) CISG). Since in the case at hand the delivery of not conforming goods amounted to a fundamental breach by the seller, the Court had to ascertain whether the buyer’s notice of avoidance was timely as required by art. 49(2) CISG. In so doing, the Court held that, since the buyer had discovered that the goods were defective at the end of September 2004 but the notice of avoidance was given only on 8 February 2005, it had not the right to declare the contract avoided (terminated).
Furthermore, the Court rejected the buyer’s argument that it was entitled to suspend performance of its obligations under the contract, since Art. 71 CISG only applies in the event of prospective breach of contract, and the buyer did not demonstrate to have immediately informed the seller of its intention to suspend performance (Art. 71(3) CISG).
Original in Dutch:
- available at www.rechtspraak.nl
- available at the University of Pace website, http://www.cisg.law.pace.edu}}