- Czech Republic
- No. 32 Cdo 2978/2016;
- Supreme Court of the Czech Republic
- Solarpower GmbH v. Servis FVE a. s. and M. B.
APPLICATION OF CISG - PARTIES' CHOICE IN FAVOR OF LAW OF A CONTRACTING STATE - CISG APPLICABLE
GENERAL PRINCIPLES CONCERNING COMPENSATION FOR DAMAGES - LAID DOWN BY THE CONVENTION
[CLOUT Case 1905; abstract prepared by Veronika Kubíková, National Correspondent]
This case deals primarily with liability for damage as a consequence of the termination of the sales contract due to non-performance.
The seller (Solarpower GmbH, a company with place of business in Germany) and the buyer (Servis FVE a. s., a company with place of business in the Czech Republic).
concluded on 11 November 2011 a contract for sale of photovoltaic panels. The payment of the first instalment of the price and the establishment of a lien on the shares of the buyer were conditions for the delivery of the goods. A third party (M.B., a Czech individual) agreed to guarantee that the buyer would fulfil its contractual obligations.
Despite several requests by the seller, the buyer did not pay in a timely fashion the first instalment of the price. The seller subsequently declared the sales contract terminated for breach of contractual obligations by the buyer with a letter dated 20 April 2012. The seller then sued the buyer and the third party seeking compensation for loss of profit.
According to the Court of First Instance, the buyer breached its obligations under the sales contract, thus giving the seller the right to terminate the contract. Therefore, the buyer was liable for damages pursuant to articles 74–77 CISG. The Court of First Instance referred to article 76 CISG as the basis for calculating the damages for loss of profit by comparing the agreed purchase price and the market price, as determined by an expert, and further deducting an amount corresponding to the costs incurred by the seller for comparable business. Moreover, the Court of First Instance noted that the CISG did not deal with guarantees and did not consider the guarantor obliged under Czech law in light of the terms of its declaration. The Court further noted that, even if the declaration of the third party could be characterized as a guarantee, it would refer to the payment of the price and not to compensation of damages for loss of profit. Therefore, the Court indicated that the third party was not liable for the damages resulting from the breach of contract by the buyer.
The case was appealed in front of the Court of Appeal, which indicated that the CISG did not contain general provisions on liability for damage and dealt only with certain aspects and types of damages. It also indicated that presumptions of liability for damage must be assessed in accordance with applicable Czech law. It stated that, although the buyer had breached its contractual obligation, the damage had been caused by the seller’s termination of the contract and concluded that, absent a claim against the buyer, there was no action against the third party.
The case was further appealed in front of the Supreme Court. Firstly, the Supreme Court confirmed that, although the parties had agreed that the sales contract would be governed by Czech law, this did not exclude the application of the CISG, which was also part of the Czech legal system.
The Supreme Court then considered incorrect the conclusions of the Court of Appeal on the need to assess liability for damage according to Czech law. It noted that a number of CISG provisions addressed several aspects of liability, including its constitutive elements such as causation (arts. 45(1)(a), 61(1)(b), 74–77, 79 and 80 CISG).
Furthermore, the Supreme Court indicated that compensation for damages was available under the CISG not only for direct damages but also for indirect ones, subject to their foreseeability. It recalled that it was always necessary to examine whether the damage would have occurred in the absence of the relevant action of the party in breach.
Accordingly, the Supreme Court set aside the appellate judgment and remanded the case to the Court of Appeal for review in light of the Supreme Court’s statement.
Original in Czech:
- available at the Supreme Court of the Czech Republic website, www.nsoud.cz}}
Case law on UNCITRAL texts (http://www.uncitral.org/uncitral/en/case_law.html) A/CN.9/SER.C/ABSTRACTS/208}}