Source: http://cisgw3.law.pace.edu/cases/950630s1.html
Timestamp: 2019-04-18 10:33:49+00:00

Document:
In 1990, a contract was entered into between an Austrian seller, plaintiff, and a Swiss buyer, defendant, for delivery and installation of four sliding gates. On grounds of lack of conformity, the buyer refused to pay the purchase price and the seller commenced proceedings.
The first issue was whether the CISG was applicable, since, in 1990, the CISG had entered into force in Austria but not yet in Switzerland. The court rejected the buyer's argument that all of the facts of the case pointed to Swiss law, noting that, therefore, Swiss law would apply only if the parties had so chosen. It held that, pursuant to the private international law rules of Switzerland, the contract was governed by Austrian law and that, therefore, the CISG was applicable (article 1(1)(b) CISG).
The agreement was characterized as a contract for the supply of goods to be manufactured (article 3(1) CISG). The court did not accept the buyer's defense, namely, that the reasonable period of time for notification of lack of conformity had not begun to run since the seller had not finished its work. Instead, the court found that delivery had taken place even though at the time of the first inspection, in which both parties had been involved, the work was not entirely completed (article 58(3) CISG). The minor improvements that were made thereafter, although necessary, did not affect the time of delivery in the sense of article 58(1) of the CISG. The court held that the notice of the lack of conformity, which had been given one year after delivery, was obviously too late (article 39(1) CISG).
The Defendant [Buyer] is obligated to pay the [Seller] Swiss francs [CHF] 12,642.00 (corresponding to Austrian schillings [AS] 98,000.00 at the exchange rate of 12.90) plus interest at 9% from 10 October 1990. with costs and compensation.
2.	Costs and compensation should be borne by the [Seller].
I. 1. The [Buyer] built two halls in 1989/90. [Buyer] retained the services of E.E. as prime contractor. The [Seller] was involved as a subcontractor. In the course of this project, the [Seller] delivered and assembled four sliding doors. Difficulties arose in this regard and the parties agreed, on the basis of an inspection, to replace the doors. For this purpose, the [Seller] made an offer by fax on 20 February 1990 to the architect S.U., who had coordinated the structural works and had also partially led the finishings, to deliver and assemble the new doors for an additional charge of AS 98,000.00. The architect accepted the offer, also by fax on 20 February 1990. On 15 March 1990, the assembly took place, and on 28 March 1990, the [Seller] sent an invoice for AS 98,000.00. This invoice is the subject of the present proceedings, which the [Seller] instituted on 11 January 1993 with the pleadings mentioned above on the basis of the approval to commence proceedings (Leitschein) issued by the intermediary office (Vermittleramt) Altstätten on 16 November 1992. The [Buyer] responded on 18 February 1993 with its application to dismiss the [Seller]'s claim.
2. On 30 March 1993, the main proceedings took place before the Judicial Commission. The publication of the decision was initially postponed in order to give the parties the possibility of reaching an amicable solution as proposed by the court. This attempt failed, which then, as determined by the Judicial Commission, led to the first part of the evidentiary proceedings being conducted. For this purpose, the testimony of witnesses S. U. and E. H. was initially heard on 20 September 1993. On 12 January 1994, the testimony of witnesses G. S. and F. H. followed, for the purposes of offering legal assistance by the District Court of Purkersdorf. Subsequently, the parties were supplied with a transcript of the testimony and given the opportunity to comment on the intermediate result of the evidentiary proceedings.
3. Their responses of 29 August 1994, as well as the further pleadings of the parties, the witness statements and the files, where appropriate, are to be addressed in the following way.
II. 1. The facts indicate international components, to the extent that the [Seller] is located in Austria and the [Buyer] is domiciled in Switzerland and the halls, for which the doors in question were intended, are also located in Switzerland. Therefore, the initial question arises as to the applicable law. In this regard, the parties have differing opinions. While the [Seller] relies on the view that Austrian law prevails and, thereby, the United Nations Convention on Contracts for the International Sale of Goods dated 11 April 1980 (Vienna Sales Law; CISG) applies, the [Buyer] is of the opinion that Swiss law applies.
a) According to Art. 117 IPRG [*], in the absence of a choice of law, the contract is subject to the law of the state with which it has the closest connection (subsection 1); in this regard, it is presumed that the closest connection exists with the state in which the party that has to make the characteristic performance has its usual place of residence (subsection 2). In the present case, this rule leads to the application of Austrian law, as the performance of the [Seller], who is located in Austria, is, on the basis of its content - namely the delivery and assembly of the doors - to be regarded as the characteristic performance. The applicability of Austrian law means that, in actual fact, the Vienna Sales Law does apply, as it not only applies if both parties are located in Contracting States, but also if the rules of private international law lead to the application of the law of a Contracting State (cf. Art. 1(1)(b) CISG). Since Austria was already a Member of the Convention at the point in time in question and Austrian law applies here, according to the foregoing, the facts are generally to be judged according to the CISG.
b) The [Buyer] objected to the applicability of the CISG in the main proceedings. [Buyer] argued that, on the basis of the circumstances (bank guarantee from a Swiss bank; participation from Swiss companies), it would have to be assumed that the main contract between the prime contractor and itself was to be judged under Swiss law and it would be inappropriate to apply different laws to the legal relationships existing in the prime contract. The same applies to the subcontract; Swiss law should also be applicable to it, as it could not be considered separately from the prime contract.
The argument of the [Buyer] cannot be followed. At the most, it would apply if a choice of law in the sense of the applicability of Swiss law had actually been made between the prime contractor and the [Buyer]. However, this is not the case here due to the formulation of the offer concerning the whole project. Solely the fact of the participation of a Swiss company, on the side of the orderer, and the location of the building site in Switzerland could be considered as circumstances that would advocate such a choice of law. By way of contrast, the fact of agreement on a bank guarantee is no indication, no less due to the fact that this guarantee could have also just as easily been given by an Austrian bank.
Therefore, according to the indications, a choice of law in the sense of an agreement on the applicability of Swiss law can (also) not be inferred, with the consequence that such an inference regarding the additional agreement cannot be sustained from the outset.
c) The applicability of the CISG can also be affirmed from the perspective of the subject matter of the agreement. Thereby, the starting point is Art. 3 CISG. According to this provision, the Convention is applicable to contracts for the supply of goods to be manufactured or produced unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production, or the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labor or other services. The performance by the [Seller] in the present case concerned the production and assembly of four doors. This characterizes its performance as the supply of goods to be manufactured or produced (Werklieferung) within the meaning of Art. 3(1) CISG, whereby the assembly obviously takes a back seat to the production within the meaning of Art. 3(2) CISG.
2. a) As already stated, the contractual relationship consisted of the delivery and assembly of both halls between the [Buyer] and E. E. as the prime contractor (cf. resp. ex. 1). The [Buyer] relied on this constellation in the main proceedings to dispute the right of the [Seller] to bring an action. As the first construction was defective and was objected to, the replacement of the four doors was allegedly agreed upon and an additional charge of AS 98,000.00 was agreed upon for the isolation of the replacement doors. As, according thereto, only the existing contract was intended to be fulfilled and a new contract did not arise, the [Seller] has no right to bring an action.
b) It is not disputed that the first construction showed defects. Thereby, it would be a logical conclusion that the subsequent work undertaken was for the purpose of removing the defects. However, this does not exclude the fact that the [Seller], as subcontractor, is entitled to claim against the [Buyer] directly for any eventual increase in value of the corresponding work to cure or remove the defects and, thereby, has a right to bring an action. This was obviously always the assumption of all parties concerned (up until the main proceedings). This can first be seen from the way in which the replacement of the doors was agreed upon, as, in this regard - absent other approaches - negotiations took place directly between the [Seller] and the [Buyer] through its representative, architect U (cf. also testimony H, p. 7). The acceptance of the offer then went directly from the architect to the [Seller] without any evidence on the file to suggest that the prime contractor had received notice thereof. Also in accordance with this evaluation is the fact that the invoice for the increased price on behalf of the [Seller] was sent directly to the [Buyer] on 28 March 1990 (claim. ex. 3), while the prime contractor, on 8 March 1990, merely sent the [Buyer] a pro-forma invoice for AS 250,000.00 for a free replacement delivery (resp. ex. 6, presented to the bench). The right of the [Seller] to bring an action for the increased price must, therefore, be affirmed.
3. The main contention of the [Buyer] is the objection that the work has not yet actually been completed, as a consequence of which the time limits for any eventual notification of defects have not yet commenced to run; at best, the work must be described as defective, in which case, the [Buyer] gave notification in good time.
a) Subject to an agreement of the parties to the contrary, the remuneration for a contract for work and materials (Werklieferungsvertrag) is to be paid after delivery (Art. 58(1) CISG). The party ordering is not obliged to make payment until it has had an opportunity to inspect the goods (Art. 58(3) CISG). This reservation is connected to the fact that the party ordering loses its rights arising from a non-conforming performance of the contract by the other party if it does not notify the lack of conformity within a reasonable period of time after the point in time at which the lack of conformity was discovered or should have been discovered and, in so doing, precisely describes the lack of conformity (Art. 39(1) CISG). Thereby, the rights of the buyer arise from Arts. 46-52 and Arts. 74-77 CISG; they comprise the right of the buyer, in the case of a fundamental breach of the contract, to require a substitute delivery under Art. 46 CISG, to declare the contract avoided under Art. 49 CISG or to assert a reduction of the [price] in accordance with Art. 50 CISG, or to claim damages if the requirements of Art. 74 CISG are met. These remedies are to be understood in direct conjunction with the buyer's eventual right to retain the goods to such an extent where, if the requirements for a substitute delivery or for the avoidance of contract are satisfied, the right to refuse acceptance and, thereby, the buyer's right to retain the goods are to be affirmed prima facie, while in the remaining cases - repair, reduction of the price, damages - these rights will only be granted to the buyer if it rejects the goods immediately (cf. von Caemmerer/Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, Munich 1990, para. 3 on Art. 60 CISG).
b) The parties did not make any agreement with respect to the due date. Therefore, the remuneration became due upon delivery (cf. also in this regard, to the extent that this connection to the original contract should be established, the clause in the offer of the prime contractor dated 20 May 1989, according to which a third of the remuneration became due upon completion; resp. ex. 1).
c) With respect to the delivery, the evidentiary proceedings showed that the assembly of the replacement doors took place on 15 March 1990. On 19 July 1990, the [Seller] carried out repair works after the [Buyer], together with E. E., had objected to certain defects (cf. claim. ex. 14 and 16-21 and resp. ex. 3-5 and 5/8). On 19 July 1990 at 7:30 p.m., they came to "1. Acceptance by the architect." Regarding the doors, the architect maintained his view in that the work on the isolated doors in the production hall had not yet been undertaken. At the time of his testimony, he provided additional information in this context, that he concluded from the minutes of the take over of the goods on 19 July 1990, that, in contrast to the storage hall doors, the work on the production hall doors had not yet been carried out and, in any event, there had been difficulties with all of the doors because they were heavier than those originally assembled. That the works to repair the defects were not yet concluded on 19 July 1990, when they were confirmed by S U (and E, the operations manager of the [Buyer]), has also been stated by witnesses S and H. In this context, witness S stated that, in the week concerned, three or four men had worked there; 80-90% of the defects had been repaired upon acceptance at approx. 2 or 3 pm. The sealing had not yet been completed; in this regard, work was continued until well into the evening. Witness H further stated that he was not on the building site on 19 July 1990; however, on the following day, G S stated to him that the work had been completed.
d) It can be concluded from the statements of the parties concerned that the work, including repair, on the doors was completed, at the latest, on 19 July 1990 (significantly, the [Buyer] also did not react to the [Seller]'s demands for payment on 1 October 1990 and 15 July 1991, respectively, with the information that the work was not yet completed, but rather with the comment that "we have to send you counter-invoices" and "we are not considering it - first do the work properly" (claim. ex. 5, 6 and 13). However, if it is assumed that the work was completed on 19 July 1990, it must still be examined whether the due date, within the meaning of Art. 58(3) CISG, in the absence of an ability to examine the goods, had been put back. This is not the case. At the outset, it is obvious that the [Seller]'s performance could have been inspected by the [Buyer] at any time. The [Buyer] had done this after the assembly on 15 March 1990 as well, and had notified the defects determined. In what way it had acted differently with respect to the work on 19 July 1990, cannot be ascertained. From the perspective of inspectability, there is nothing in this regard to counter that the [Seller]'s demand was due. There is also nothing to counter it from the perspective of the formal acceptance. It could well be that, with respect to the first part of the repair work, a "first acceptance" had taken place, and it can be found in the [Seller]'s Standard Terms that any eventual defects are to be notified in writing within 30 days after "acceptance" (claim. ex. 22, point 6.3.). To conclude, from this factor alone, that an agreement was made along the lines that the parties had wanted to make the due date of the [Seller]'s demand for payment dependent on a mutual inspection, thereby extending the application of Art. 58(3) CISG, cannot be sustained, as, apart from the fact that the Standard Terms are inapplicable, as the [Buyer] had disputed their delivery and the [Seller] was unable to prove that it had, in fact, delivered them, a corresponding allegation by the [Buyer] is lacking. Although it had asserted that it had not accepted the work with respect to the doors, on the basis of what was initially stated, this allegation would only be relevant if it could be understood in connection with an agreement regarding that payment would become due only after a mutual inspection. Such an agreement is neither alleged nor even proven by the [Buyer].
Even if one were to assume the existence of such an agreement, this would not change anything regarding the due date of the [Seller]'s demand for payment. Thereby, it must be considered that the work undertaken by the [Seller] in the week of 19 July 1990 was, at this stage, only repair work. The assembly had already taken place earlier, with the consequence that the process on 19 July 1990 could, in fact, have been regarded as a formal acceptance of the entire work, with which the time limit for the notification of defects - also those remaining after the repair work - would have started to run. Accordingly, it would have had to have been expected from the [Buyer] that it should have objected to the defects on the doors that still remained after completion on that evening within a reasonable period of time after 19 July 1990 (cf. also in this context, the witness statement of Schober, according to which the architect allegedly said that he would take a look at the work on the doors again after completion; minutes, p. 3). However, the [Buyer] did not do anything within a reasonable period of time; at least, it was unable to prove any appropriate notification, with the exception of the information after the demand for payment dated 15 July 1991.
e) In summary, it can be concluded that the [Seller] delivered its work, at the latest, on 19 July 1990 and, thereby, had made its claim for payment become due immediately. After 19 July 1990, the [Buyer] had not objected to the conduct of the (repair) works until 15/19 July 1991, an objection which was as late as it was unsubstantiated. Therefore, there is nothing to counter the fact that, in the absence of substantiated notice made in good time, the [Seller]'s claim for payment was due from the perspective of guarantees for the quality of the goods (Sachgewährleistung), without it being necessary to examine whether the [Seller]'s performance was, in fact, defective. Therefore, the claim is generally to be protected without further evidentiary proceedings. Yet another consideration also advocates this protection. The amount claimed is a claim for an increased price, which, according to the Response to Claim (p. 4), should also apply as the increased value for the additional isolation. The defects asserted by the [Buyer], by contrast, are with respect to the construction. In this regard, the [Buyer]'s remedy lies with the prime contractor, but not with the [Seller], which obviously performed its part of the work, for which it is asserting an independent claim, free from defects.
4. The [Buyer] has further stated in its objection to the protection of the claim that, for its part, Austrian schillings [AS], but not Swiss francs [CHF] are due. This is generally true. Analogous to the practice, according to which for claims for satisfaction of a debt due in foreign currency in Switzerland, the [Buyer] is granted the right to settle the claim either in CHF or AS (cf. in this regard BGE 72 III 100 et seq.; Weber, para. 367 on Art. 84 OR [*]); it can also be justified in the present case, in which the claim is to be satisfied at the seat of the [Seller] (cf. Art. 57(1)(a) CISG), not to simply dismiss the claim, but to protect it in AS, in conjunction with the instruction that, in the case of eventual collection, it is to be converted to CHF, whereby the exchange rate on the day of initiating the collection is decisive for the conversion (cf. Weber, para. 372 on Art. 84 OR [*]).
5. The [Buyer] does not dispute the rate of interest (9%) and the commencement of default (10 October 1990). The claim for default interest is therefore to be protected.
6. Conversely, the [Buyer] has asserted set-off claims, namely from performance which, in itself, should have been made by the [Seller], but which was, in fact, then made by local companies (A L, F. F. and T. T:), for which the [Buyer] made payment in the total amount of CHF 6,685.30.
The [Seller] disputed before the court the ability to set off these claims on the basis that its claim was generally based on Austrian schillings [AS], whilst the set-off claims would be asserted in Swiss francs [CHF]. Whether this argument is correct or not does not need to be ascertained. Rather, what is decisive is the argument already made by the [Seller] in its memorandum, that there is a lack of reciprocity of the claims. Namely, the set-off claims are claims which relate to the original project in its entirety. Accordingly, these invoices would have had to have been deducted with respect to the prime contractor. Conversely, they cannot be set off against the [Seller] (any longer).
III. According thereto, the [Seller]'s claim of AS 98,000.00 plus interest at 9% since 10 October 1990 is to be protected.
1. The [Seller]'s claim is protected in an amount of AS 98,000.00 plus interest at 9% since 10 October 1990.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Austria is referred to as [Seller] and Defendant of Switzerland is referred to as [Buyer]. Amounts in the currency of Switzerland (Swiss francs) are indicated as [CHF]; amounts in the former currency of Austria (Austrian schillings) are indicated as [AS].
Translator's notes on other abbreviations: IPRG = Bundesgesetz über das Internationale Privatrecht [Swiss Code on the Conflict of Laws]; OR = Bundesgesetz betreffend die Ergänzung des Schweizerischen Zivilgesetzbuches (Fünfter Teil: Obligationenrecht [Swiss Civil Code].

References: Art. 117
 Art. 1
 Art. 3
 Art. 3
 Art. 3
 Art. 46
 Art. 49
 Art. 50
 Art. 74
 Art. 60
 Art. 58
 Art. 58
 Art. 84
 Art. 57
 Art. 84