- VSL sodba I Cpg 1305/2003
- Ljubljana High Court
SELLER'S FUNDAMENTAL BREACH (ART. 25 CISG) - BUYER'S RIGHT TO TERMINATE CONTRACT
RIGHT TO INTEREST (ART. 78) - INTEREST RATE - MATTER EXCLUDED FROM THE SCOPE OF CISG (ART. 4 CISG) - DETERMINED BY DOMESTIC LAW GOVERNING THE CONTRACT IN THE ABSENCE OF CISG
BUYER'S RIGHT TO RESELL PRESERVED GOODS (ART. 88 CISG)
[Abstract: CLOUT Case no. 1153]
A German buyer (plaintiff) and a Slovenian seller (defendant) were in a long-term contractual relationship for the sale of doors and door frames, which were being produced by the seller for the buyer and then sold upon individual orders by the buyer. The buyer was paying the price for the individual shipments in advance.
The dispute arose after the buyer paid 18.000,00 Deutsche Marks in advance on 4 June 2001. On 8 June 2001, the seller issued a pro-forma invoice from which an offer for the sale of 119 doors and 123 door frames was evident, although at a higher price. The seller thereupon delivered a consignment of 22 doors and 174 door frames, although the buyer had made it known that it always needed approximately the same number of doors and door frames so that it could deliver kits consisting of a door and a door frame to its buyer.
The court of first instance stated that the seller was aware that it was supposed to deliver approximately the same number of doors and door frames in order for the buyer to make kits. It added that the seller knew of the buyer’s contractual relation with the end buyer under which it was under an obligation to deliver kits consisting of a door and a doorframe. It rejected the seller’s assertion that the buyer failed to specify the goods to which the advance payment referred and, therefore, the seller had chosen the goods itself from a consignment, previously prepared for the buyer. The court ruled that, considering that the goods had indeed been specified in the pro-forma invoice and that the seller knew that the buyer needed the same number of doors and door frames, the seller had failed to comply with its contractual obligation to deliver goods in conformity with the contract.
The court of appeal applied the CISG under article 1(1)(a), because both of the parties had their places of business in contracting States. It ruled that the seller had indeed breached the contract by delivering 22 doors and 174 door frames. In the court’s opinion, this constituted a fundamental breach under article 25 CISG as the buyer had been deprived of what it was entitled to expect under the contract, namely that it was unable to assemble kits for resale. The buyer was therefore entitled to declare the contract avoided under article 49(1)(a). Because the seller knew about the facts relating to the lack of conformity of the goods, the court further ruled that under article 40, the seller was not entitled to rely on the buyer’s delay in giving notice thereof.
The court stated that, although the court of first instance ruled on the consequences of the breach applying the Slovenian Obligation code, it contains the same provisions as CISG in article 81(2), namely that a party who has performed the contract may claim restitution from the other party of whatever the first party has supplied or paid under the contract. Therefore, it upheld the decision of the court of first instance ordering the seller to make restitution of the received part of the price for the goods. After having avoided the contract, the buyer also attempted to return the delivered goods to the seller, who refused to take them. Therefore, the buyer sold them according to article 88 to minimize the storage costs. The court found that the buyer had done so in an appropriate manner and that it had received an appropriate price. It further ruled that the seller was liable to the buyer for reimbursement of the costs it had suffered by storing the goods.
The court additionally found that, under article 78 CISG, the buyer is entitled to interest on the sum in arrears. After consulting article 7(2) CISG and applying the conflict-of-law rules of the forum, it found that Slovenian law was applicable to determining the interest rate.
The appellate court therefore rejected the appeal and confirmed the decision of the court of first instance.
Original in Slovenian:
- available at www.sodisce.si/znanje/sodna_praksa/visja_sodisca/36787/
Abstract: CLOUT Case no. 1153, in A/CN.9/SER.C/ABSTRACTS/118}}