- High Commercial Court
- P.HU.P. DAREK CO v. ORKA STUDIO D.O.O. ZAGREB
APPLICATION OF CISG - BASED ON RULES OF PRIVATE INTERNATIONAL LAW (ART. 1(1)(B) CISG)
BUYER'S RIGHT TO AVAIL ITSELF OF LACK OF CONFORMITY OF THE GOODS - NOTICE OF LACK OF CONFORMITY - WITHIN A REASONABLE TIME (ART. 39(2) CISG)
[CLOUT Case no. 1674]
A Polish corporation filed a claim in the Commercial Court of Zagreb against a Croatian buyer for the payment of goods delivered by it to the defendant. The Commercial Court found that the buyer had failed to notify the seller in a timely manner of the lack of conformity of the goods and subsequently ordered the buyer to pay the due amounts. The buyer appealed the decision, stating, among other things, that the parties’ relation was not based on the contract for the sale of goods, but rather on a commission agreement.
On appeal, however, the High Commercial Court of Croatia decided that the parties had concluded a sales contract because the buyer failed to submit any relevant proof to the contrary; the delivery of the goods by the seller was undisputed by both parties, which provided the plaintiff with adequate proof of the obligation of the defendant.
The Court upheld the lower court conclusion that the buyer-defendant had failed to notify, in a timely manner, the seller-plaintiff about the lack of conformity of the goods. The Court, however, found that the lower Court erred in applying the proper substantive law, since, due to the international nature of the party conflict, the CISG was applicable. The Croatian Obligations Act, the domestic counterpart to the CISG, is to be applied only to matters that are outside the scope of the Convention, or that could not be settled in conformity with the general principles on which the Convention was based (Article 7(2) CISG). The Court added that the provisions of the Convention are to be applied in cases of international sale of goods, except when the parties expressly excluded its application or when they agreed upon the application of the domestic law of one of the parties.
The Court noted that the Convention would be applicable in any event in the case at hand, since by virtue of Article 1(1) CISG, the Convention applies to international sales contracts not only when the parties have their place of business in two different Contracting States, but also when the rules of private international law lead to the application of the law of a Contracting State. Therefore, since in the case at hand the rules of private international law pointed to the application of the law of Poland (the place of business of the seller), the provisions of the CISG were applicable.
The Court further determined that in accordance with Article 39 CISG, the buyer loses its right to rely on a lack of conformity of the goods if it does not give notice to the seller specifying the nature of a lack of conformity within a reasonable time after it has discovered or ought to have discovered it. Under that obligation, the buyer should have notified the seller in writing, describing the defects of the goods, and the variation in their quality. Here, however, the buyer did not provide timely notification to the seller and even if it had done so, it would then only have been entitled to reduce the price in accordance with Article 50 CISG. As a result of this failure, the buyer had an obligation to pay the seller for the delivered goods and was also ordered to pay interest on the obligation starting from the time the payment of the goods was due.
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Abstract: CLOUT Case no. 1674, in A/CN.9/SER.C/ABSTRACTS/181}}