Source: http://cisgw3.law.pace.edu/cases/930909s1.html
Timestamp: 2019-04-19 15:05:01+00:00

Document:
The Italian seller of furniture sued the Swiss buyer for payment of the purchase price. The buyer had claimed that the furniture was defective, but neither accepted the seller's offer to remedy any defects nor paid the purchase price.
It was found that CISG was applicable since the parties had their places of business in different [C]ontracting States (Article 1(1)(a) CISG) and a contract for the supply of goods to be manufactured or produced, which amounted to a sales contract, was involved (Article 3(1) CISG).
The court held that it was implicit in the Convention that the buyer had to prove the existence of defects and that it gave notice of lack of conformity within a reasonable time (Articles 7(2), 38 and 39 CISG). In view of the court's finding that the buyer had failed to meet its burden of proof, it was held that, even if the buyer ever had the right to rely on lack of conformity of the goods, the buyer had lost that right. The court ordered the buyer to pay the purchase price with interest at the statutory interest rate of the applicable Italian law (Article 78 CISG).
I. The instruction and claim arrived on 1 March 1993 (ex. 1). With an order of the presiding judge dated 8 March 1993, Defendant [Buyer] received a time limit of until 31 March 1993 to file its answer to Plaintiff [Seller]'s claim according to �� 113 and 127 ZPO [*] (File p. 2). By letter dated 17 March 1993, [Buyer] asked for an extension of time (ex. 13). After [Buyer] did not file its answer to the claim within the time limit that had been extended to 20 April 1993, [Buyer] received a further extension until 25 June 1993 in accordance with � 130 ZPO (File p. 3). This further time extension was accompanied by a notice that in the case of continued default, the [Seller]'s support for its claim would be accepted and the [Buyer]'s right to rely on defenses would be waived. The [Buyer]'s letter to the representatives of the [Seller] dated 15 March 1993, which, for the purposes of providing orientation and reasons, accompanied its request for an extension of the time limit of 17 March 1993 (ex. 15) was neither in content, nor in the way it was presented, sufficient to even come close to satisfying the legal requirements of an answer to [Seller]'s claim. Also, this attachment was not considered to be an answer to [Seller]'s claim by [Buyer] itself, otherwise [Buyer] would not have requested an extension of time. In any event, it must have become clear to [Buyer], owing to the renewed extension of time on 2 June 1993, that its first submission could not have been regarded as an answer to [Seller]'s claim. An answer to [Seller]'s claim was not received within the prescribed time limit, with the consequence that proceedings are to commence as described in the notice to [Buyer].
[Seller] produces and sells furniture and other interior items. In early 1991, [Buyer] ordered from [Seller] two specially-produced pieces of leather furniture for Italian lira [Lit.] 21,730,000.00 [*] (ex. 3). Taking into account a picture frame that was also ordered, the total amount of the invoice for the goods delivered on 17 December 1991 was Lit. 22,050,000.00 (ex. 4). [Buyer] paid Lit. 10,000,000 of this amount. "Much later", [Buyer] orally notified of minor defects in the goods (ex. 1, p. 4). By way of contrast, according to the opinion of [Seller], the goods were delivered in conformity with the contract (ex. 1, p. 8). In any case, as a sign of its good faith, [Seller] agreed to look into the matter. On 2 March 1992, [Seller] sent a fax to [�] the advisory board and shareholders of [Buyer] that it was intending to come to Zurich on 12 March 1992 in order to undertake work that may have been still necessary and asked for confirmation of the date by 10 March 1992 (ex. 5). In this regard, the secretary of [�] informed by phone on 5 March 1992, that [Seller] should wait for a confirmation, since she did not know when it was going to best suit [Buyer] ("... quando meglio stia."; ex. 5). Subsequently, nothing was heard from [Buyer]; similarly, [Seller] was unsuccessful in contacting [�]. By fax dated 25 March 1992 (ex. 6) and, finally, again on 30 April 1992, [Seller] offered to complete the necessary work on the furniture delivered and set a time limit until 5 May 1992. [Seller] offered to do the work on the condition that [Buyer] pay the outstanding amount of Lit. 12,050,000.00. [Seller] advised that, if [Buyer] did not pay, legal measures would be taken (ex. 7). No answer was received from [Buyer], which led [Seller] to turn the total outstanding debt over for collection on 26 May 1992. Without stating reasons, [Buyer] raised a plea to postpone the debt collection (Rechtsvorschlag).
III. 1. This court has both territorial (Art. 112 IPRG [*]) and subject-matter jurisdiction over the claim (� 63 1 GVG in connection with � 62 GVG [*]).
2. The rights and duties of the parties arising from the contractual relationship are to be evaluated under the "Vienna Sales Law'", the United Nations Convention on Contracts for the International Sale of Goods (CISG) of 11 April 1980, to which both Italy and Switzerland have acceded (cf. W. Schönenberger/P. Gauch, Schweizerisches Obligationenrecht, Textausgabe 39. A., Zurich 1992, p. 708). This Convention (hereinafter: CISG) applies, among other things, to contracts for the sale of goods between parties whose places of business are in different States if these States are Contracting States according to Art. 1(1)(a) CISG. Contracts for the supply of goods to be manufactured or produced are also to be considered sales contracts, unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production according to Art. 3(1) CISG, which is not the case here. Therefore, it is not relevant if the present contractual relationship is to be qualified as a contract for the supply of goods at hand or for for the supply of goods to be manufactured or produced.
3. 3.1 According to Art. 53 CISG, the buyer is obliged to pay the purchase price and to take delivery of the goods. In order for the purchase price to fall due, the goods delivered must be in conformity with the contract (cf. Wolfgang Weigand, Die Pflichten des Käufers und die Folgen ihrer Verletzung in: Wiener Kaufrecht, Der schweizerische Aussenhandel unter dem UN-Übereinkommen über den internationalen Warenkauf; Berner Tage für die juristische Praxis 1990, Bern 1991, p. 154).
3.2 The fact that [Seller], as a sign of its good faith, was prepared to undertake certain improvements, is not, of itself, to be equated with an acknowledgement of a defective delivery, or, as the case may be, of defects within the meaning of the law (cf. Ernst von Caemmerer/Peter Schlechtriem (eds.), Kommentar zum einheitlichen UN-Kaufrecht, München 1990, Art. 39 para. 14). According to the pleadings of [Seller], both pieces of furniture were delivered in conformity with the contract (ex. 1, p. 8). If the goods were delivered in conformity with the contract, [Buyer] has to pay the full contract price.
4. The result is no different if one were to assume, on the basis of the somewhat unclear portrayal of the facts by [Seller] (ex. 1, p. 4), that minor defects were present. In such a case, [Seller] refers to the fact that [Buyer] gave notice of defects too late and its rights under guarantee have expired (ex. 1, p. 4 and 7). In fact, the buyer's right to rely on qualities that were not in conformity with the contract pre-supposes that the duties to examine and give notice of lacks of conformity regulated in Arts. 38, 39 CISG have been fulfilled (cf. Peter Schlechtriem, Die Pflichten den Verkäufers und die Folgen ihrer Verletzung, insbesondere bezüglich der Beschaffenheit der Ware, in: Berner Tage, ibid, p. 125). In particular, according to Art. 39 CISG, the buyer loses the right to rely on the lack of conformity of the goods if it does not notify the seller within a reasonable time (dans un délai raisonnable) after it has discovered it or ought to have discovered it, whereby it must precisely describe the lack of conformity (according to caselaw, approximately 5-10 days, cf. v. Caemmerer/Schlechtriem, ibid, Art. 39 para. 8 line 31; Patrick Tann, Die Berechnung der Rügefrist im schweizerischen, deutschen und UN-Kaufrecht, thesis St. Gallen 1993, p. 281 paras. 56, 57; Gritli Ryffel, Die Schadenersatzhaftung des Verkäufers nach dem Wiener Übereinkommen über internationale Warenverträge vom  April 1980, thesis Bern/Frankfurt/New York/Paris/Wien, 1992, p. 21). Since [Seller] has not explained, in this regard, when the oral notification of [Buyer] took place, in this context, the parties' respective burdens of proof and allegations must first be examined.
4.1 As a general rule, according to Art. 7(2) CISG, questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. To the extent that general legal areas are governed by the CISG (Art. 4 CISG), other individual questions that form part of such a legal area, but are not expressly dealt with in the CISG, are also to be decided in accordance with the international uniform law (cf. v. Caemmerer/Schlechtriem, ibid, Art. 7 para. 8 CISG). The question of the burden of proof must be considered, although not expressly, to be implicitly regulated under the CISG (cf. v. Caemmerer/Schlechtriem, ibid, Art. 4 para. 22 CISG). Therefore, the buyer bears the burden of proving that the notification of a legal defect took place within a reasonable period of time (cf. v. Caemmerer/Schlechtriem, ibid, Art. 43 para. 12; Tann, ibid, p. 290). There is no reason to act in a different way with respect to a defect in quality.
4.2 In this regard, in accordance with its usual behavior thusfar, [Buyer] has not given any explanation and thereby, in particular, has not stated when it notified of the defects. The consequences of this omission must be borne by [Buyer]. Therefore, in the absence of appropriate statements, whether notification was ultimately made in good time and in the proper form cannot be examined. On the contrary, [Seller]'s version, that notification was made "much later", namely a long time after the delivery, is deemed to be acknowledged. Therefore, [Seller]'s legal claim that this notification was made too late, cannot be contradicted.
5. Consequently, [Buyer] is liable to pay to [Buyer] [sic - correct: [Seller]] Lit. 12,050,000.00; the plea to postpone the debt collection (Rechtsvorschlag) in the debt collection matter [�] of the collection agency [�] (demand for payment dated 26 May 1992) is therefore to be included in the corresponding amount of Swiss francs [CHF] 15,062.50.
6. a) If, according to Art. 78 CISG, a party fails to pay the purchase price or any other sum that is due, the other party is entitled to claim interest on these amounts. However, due to the numerous differences in opinion, a determination of the amount of the interest rate could not be achieved at the Vienna Conference. Above all, it was disputed whether the amount of the discount rate in the debtor's or in the creditor's country should be decisive. It has since become the prevailing opinion that, in order to determine the details of the obligation to pay interest, recourse should be had to the domestic law applicable under the rules of private international law (cf. Ryffel, ibid, p. 86; v. Caemmerer/Schlechtriem, ibid, Art. 78 para. 3). If the present contract is qualified as a contract for the supply of goods to be manufactured or produced, and therefore a service contract (Werkvertrag) under Swiss law (cf. Gaudenz G. Zindel/Urs Pulver in: Kommentar zum Schweizerischen Privatrecht, Obligationenrecht I, Art. 1-529 OR, ed. by Heinrich Honsell/Nedim Peter Vogt/Wolfgang Wieland, Basel 1992, Art. 363 para. 21, with references), Art. 117(3) IPRG [*] shall apply. According to this provision, with service contracts, the service is the characteristic performance of the contract. According to Art. 117(1) and (2) IPRG, the question of the amount of interest would thereby be regulated by Italian law. If the present contract is qualified as a contract for the sale of goods, the question is regulated by the Hague Convention on the Law Applicable to the International Sale of Goods of 15 June 1955, according to Art. 118(1) IPRG. According to Art. 3(1) of the Hague Convention, the present contract has to be regulated by Italian law as well. It is not alleged that [Buyer] made its order in Switzerland at a representative of [Seller] (Art. 3(2) Hague Convention). The result is, it is irrelevant whether the present contractual relationship is a contract for the supply of goods to be manufactured or produced or a contract for the sale of goods. The amount of the interest and the point in time from which interest is owed are to be determined by Italian law in any case. According to Art. 1219 Cc [*], the debtor comes into delay either by a request for payment (intimazione) or by a written reminder (richiesta). In addition, the delivery of a demand for payment (precetto) also brings about the default of the debtor (Giorgio Cian/Alberto Trabucchi, Commentario breve al Codice civile, 3. ediz. Padova 1988, Art. 1219, III. para. 11). According to Art. 1224 Cc, the legal rate of interest, namely 5% p.a., must generally be paid from the date of default (Art. 1284 Cc), except in cases where a higher rate of interest was previously due.
b) [Seller] regards an interest rate of 6% as reasonable (ex. 1, p. 8). It is not alleged that the parties agreed upon such a rate of interest. Therefore, [Buyer] is liable to pay [Seller] interest at the legal rate of 5% since 27 May 1992 on the amount of Lit. 12,050,000.00 (date of delivery of the demand for payment). [Seller]'s claim for a higher rate of interest is dismissed.
[Buyer] is liable to pay [Seller] Lit. 12,500,000.00 plus 5 % interest since 27 May 1992. The plea to postpone the debt collection (Rechtsvorschlag) in the debt collection matter [�] of the collection agency [�] (demand for payment dated 26 May 1992) is included in the corresponding amount of CHF 15,062.50 plus 5% interest since 27 May 1992 and for the debt collection costs. The [Seller]'s claim is dismissed in its remainder (interest).
[...] costs for delivery and postage.
[Buyer] has to bear the costs.
[Buyer] is liable to pay [Seller] procedural compensation in the amount of [...] (instructing costs included).
Written communications to the parties.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Italy is referred to as [Seller]; Defendant of Switzerland is referred to as [Buyer]. Amounts in the former currency of Italy (Italian lira) are indicated as [Lit]; amounts in the currency of Switzerland (Swiss francs) are indicated as [CHF].
Translator's note on other abbreviations: Cc = Codice civile [Italian Civil Code]; IPRG = Bundesgesetz über das Internationale Privatrecht in der Schweiz [Code in Switzerland for the International Private Law]; GVG = Schweizer Geschäftsverkehrsgesetz [Code in Switzerland for business connections]; ZPO = Zivilprozessordnung [Code on Civil Procedure in Switzerland].

References: Art. 1
 Art. 3
 Art. 53
 Art. 39
 Art. 39
 v. 
 Art. 39
 Art. 7
 v. 
 Art. 7
 v. 
 Art. 4
 v. 
 Art. 43
 Art. 78
 v. 
 Art. 78
 Art. 1
 Art. 363
 Art. 117
 Art. 117
 Art. 118
 Art. 3
 Art. 1219
 Art. 1219
 Art. 1224