- Fuenlabrada Court of First Instance
LACK OF CONFORMITY OF GOODS (ART. 35 CISG) - GOODS NOT FIT FOR ORDINARY USE (ART. 35(1)(A) CISG)
FUNDAMENTAL BREACH BY SELLER (ART. 25 CISG) - BUYER ENTITLED TO TERMINATE CONTRACT (ART. 49(1)(A) CISG)
RIGHT TO INTEREST IN CASE OF SUMS IN ARREARS (ART. 78 CISG) - INTEREST RATE - TO BE DETERMINED ACCORDING TO THE OTHERWISE APPLICABLE LAW
[CLOUT Case no. 1343; abstract prepared by María del Pilar Perales Viscasillas, National Correspondent]
The parties to an international contract between an Italian seller and a Spanish buyer for the sale of a machine forming part of a production line making air conditioning ducts were in dispute concerning the machine’s lack of conformity: once installed, it had failed to produce a single part.
With regard to the application of the Convention, the court considered that the Convention on the law applicable to contractual obligations (the Rome Convention) was subordinate to special regulations such as CISG, a special, uniform substantive law on the international sale of goods, of which both Spain and Italy — the countries where the parties were based — were contracting States (CISG art. 1 (1)(a)). Moreover, the contract in question related to the international sale of goods in the terms set out in CISG article 3 (1): the machine was manufactured in Italy, dismantled for transportation and reassembled in Spain. The fact that the goods to be delivered were prefabricated or preproduced did not change the fact that the contract in question was a sales contract and, if the buyer did not provide the materials, that also constituted strong grounds for calling the contract a contract for the sale of goods (Judgement of the European Court of Justice, 25 February 2010).
The judge also referred in general terms to the interpretative tools of CISG, making it clear that domestic law was not applicable in matters governed by the Convention and could not even be cited for interpretative purposes, since that would run counter to the principle of uniformity of application (CISG art. 7 (1)). He also emphasized that legal practitioners were helped in their work of interpretation by the United Nations Commission on International Trade Law (UNCITRAL), with its Case Law on UNCITRAL Texts (CLOUT), and the digest of case law on the United Nations Convention on the International Sale of Goods (2012) was a particularly useful reference tool. He further stated that the case law of any country that could be invoked but was not grounded in the Convention would have doctrinal value but could not add anything to the Convention.
After considering the evidence, and particularly the expert reports submitted by the parties, the judge held that it was a matter of common sense that the component parts of an air conditioning duct should be assembled with sufficient precision to prevent the escape of the air circulating through it, regardless of whether or not there were rules governing the margin of tolerance for this kind of part. If the machine was not fit for the purpose for which it had been bought owing to the malfunctioning of the roller system, it must be considered a breach by the seller. It may be noted that the judge also gave due consideration to the fact that machine design was not in the buyer’s line of business; the buyer did not have any qualified staff, nor had it provided proper training for operators, nor any manuals, nor had it participated in designing of the machine, although it had informed the seller of the use to which it proposed to put it. For all these reasons, the judge considered that there had been a breach of CISG article 35 (2).
The judge dismissed the seller’s claim that CISG article 9 (2) applied with regards to presumptive evidence. The court flatly dismissed this claim, since CISG article 9 (2) had nothing to do with presumptive evidence and, in any case, the applicable article would be CISG article 35 (3), inasmuch as the seller knew of the defect or could not have been unaware of it. It also held that the buyer had complied with the provisions of CISG article 39, in that it had not been possible to find the defect until the machine was in operation, so the defect had remained hidden.
Furthermore, it held that the date from which the time limit was calculated (dies a quo), as laid down in article 39 (2), had not even started, since there had been noformal recognition of the buyer’s taking possession of the machine and itsaccessories, in the form of documentation relating to occupational safety protection.The judge also considered that, in the case of non-perishable goods, or where a delay did not adversely affect the seller’s activities vis-à-vis third parties, the dies a quo of the “reasonable time” referred to in article 39 was the moment at which thebuyer became certain, rather than merely suspecting, that the machine did not work(here he cited Saarbrücken Regional Court, 1 June 2004, and Forli District Court,16 February 2009). Moreover, the dies a quo should be different in the case ofgoods requiring a period of training and regular repairs (here he referred to theDistrict Court for the Southern District of Ohio, United States of America, 26 March2009, and Versailles Court of Appeal, 29 January 1998).
With regard to the claim by the seller that there had been a double or reciprocal breach on the part of the parties, in that the seller had not paid the full amount, the judge said that, in such cases, it was necessary to determine which breach was the more serious, in order to reach a decision or dismiss a claim. The court applied the criteria laid down in the doctrine on the matter — chronology, causation and proportionality — and ruled that the breach on the part of the seller was the more serious and that the buyer’s was caused by the seller’s. The judge considered that the seller’s breach was fundamental (CISG art. 25), so the action for avoidance (CISG arts. 45 (1)(a) and 49 (1)(a)), which was taken within a reasonable time (CISG arts. 26 and 49 (2)(b)), was appropriate and was supported by CISG case law.
As for the effects of the avoidance, the judge considered the various sections of CISG article 81. With regard to the question of damages, the court considered the various claims, in the light of CISG articles 74-77 and in some cases accepted them and in others dismissed them outright for lack of evidence.
With regard to interest, the court took the majority position, on the basis of CISG article 78 and the digest of case law on the Convention, that the issue was outside the scope of the Convention and that there appeared to be a clear trend to apply the rate that would be applicable according to the rules of private international law if the Convention were not applicable. In the current case, that would mean the rate under Italian law.
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/142]
Original in Spanish:
- available at the University of Carlos III de Madrid website, http://www.cisgspanish.com}}