Source: http://cisgw3.law.pace.edu/cases/981104d1.html
Timestamp: 2019-04-19 14:48:51+00:00

Document:
The case concerned the delivery of 1,245 Christmas spruce trees to a buyer in France from a Danish seller based on an oral contract specifying “good quality” and certain heights of the trees. The trees were delivered to the buyer’s lot in France on 2 December, and the buyer notified of their non-conformity in height the same day and of their non-conformity in quality by telephone on 4 December. Following this complaint, the seller examined the trees and offered a price reduction. The buyer, however, gave notice to avoid the contract on 13 December. The Court found that the trees were non-conforming and that the breach was fundamental as only 50-75% of the trees were of good quality as specified in the oral contract. However, the Court stressed that although a notice of non-conformity was timely on 4 December, a notice of avoidance in accordance with Art. 49 was not within reasonable time considering the seasonal nature of the goods. The buyer was only entitled to a reduction in price and damages.
The following award has been handed down in case BS 9700016-4, Seller of Randers, Denmark, vs. Buyer of Bourgogne, France.
- Whether there is basis for claiming damages or a price reduction.
The judgment is handed down in accordance with the Danish Code of Procedure [retsplejeloven] article 366a, second paragraph, and therefore does not contain a complete presentation of the facts of the case.
In the lawsuit, which commenced 6 January 1997, the [Seller] asserted that the [Buyer] was liable for paying damages in the sum of 121,525 Danish Kroner [DKr] plus interest of 2.5% per month from the 14 December 1996 until payment is completed.
The [Buyer] denied responsibility for those charges. The [Buyer] furthermore claimed that the [Seller] is liable to paying 25,000 DKr plus the usual interest during process with accrual from 3 February 1997 until payment is completed. The [Seller] denied responsibility for those charges.
Price and delivery terms. DKr 100 loaded on truck.
"The truck has arrived at ... (France). It seems that the quality is correct but the size is not the one we agreed on the telephone and via fax. None of the Christmas trees is bigger than 1.80 - 1.90 m. A large quantity of them are between 1.30 m and 1.70 m. (products for which we would pay 60 - 65 DKr AB Denmark). Therefore your price is not acceptable.
Normally we load a truck with between 950 and maximum 1,050 units. You have loaded 1,245 units.
We are very displeased since we had expected an order of large sizes 1.70 - 2.20 m and paid in this context a price for the carriage that is 35% higher than normal. We are of the opinion that you are responsible for this additional cost.
At present the truck is parked in ... (France) at your cost."
"In response to your fax, I can inform you that I never spoke about an average size of 1.85 m during our telephone conversation of 28 November 1996. I said between 1.70 m and 2.20 m. That means an average size of minimum 1.95 m. We have also several times discussed the fact that none of the trees could be less than 1.70 m. Concerning the quality, we had accepted a secondary selection but they had to be voluminous trees. These requirements were in fact not complied with. TT acknowledged this as well but he has not noted that in his report. The fact that you succeeded in loading 1,275 units in a 13.5 meter truck confirms very well that the sizes are way below that which was agreed, when there is normally room for only 950 to 1,050 trees in this size truck. We maintain our suggestion that we will not pay more than 65 DKr per Nordmann loaded on truck.
We see your attempt at extortion in the end of your letter as unprofessional.
For your information, our company has bought between 25,000 and 30,000 trees each year in Denmark from serious suppliers without any major problems and this with only a few minor accidents with smaller suppliers which have more dubious business morals and that have been blacklisted as being out of our trading interest."
"In continuance of several telephone conversations, faxes and your latest maneuver (i.e., the letter from your lawyer), we hereby confirm that we are no longer interested in your Christmas trees. We again demand that you take back your goods.
With a large portion of patience, we allow you another 24 hours. After this time, we consider ourselves free from any responsibility.
The freight costs (transport and handling) and storage are, of course, at your expense."
By letter of 10 December 1996, the [Seller] maintained its claim and objected that there was no basis for avoiding the contract.
- Because of defects in your client's delivery, the agreement concerning purchase of Christmas trees is terminated based on lack of volume and size.
- In case I do not within normal working hours on the 11th of this month receive your confirmation that your client will take back the trees and at the same time keep my client indemnified with regard to the expenses my client has had due to your client's breach of the agreement between the parties, the case will continue by commencing an examination."
By letter of 11 December 1996, the [Seller] rejected the complaints. Thereafter, the [Buyer] maintained its non-conformity complaint by letter of 13 December 1996 accompanied by a copy of an examination outline that had been sent by the [Buyer] to the Decorative Fir Section of the Danish Forest Association [Dansk Skovforening, Pyntegrøntsektionen].
An examination had been conducted with HH appointed surveyor. The examination report was completed on 25 October 1997. MM, NN, TT and BB have given testimony, OO, UU and the examination report has been confirmed by the surveyor HH.
In support of its claim, the [Seller] alleged that it has a documented unpaid account against [Buyer] equal to the sum of delivery of 1,245 Nordmann fir Christmas trees to [Buyer] on 30 November 1996 with a reduction in price having been made as a token of goodwill because some of the trees was smaller than 1.70m. There were no defects in the trees at the time of the passing of risk. It is the [Buyer] that bears the full burden to prove that the delivered trees at the passing of risk had any legal relevant defects. [Buyer] should have complied with the rules on evidence, especially the rules on securing proof. It must be at the [Buyer]'s cost that the usual rules of securing evidence have not been followed.
- The risk passed to the [Buyer] on 30 November 1996, cf. art. 67.
- It appears from CISG art. 38(2) that the buyer can defer examination of the goods until they have arrived at the destination. Mr. Barboux examined the trees at the destination on 2 December 1996 after which the sizes resulted in a complaint.
Therefore, the [Seller] sent TT to the place and, after examining the goods, a reduction of 35 DKr for each tree under 1.7 m was given as a token of goodwill. This way, the [Seller] has not recognized that there was a non-conformity.
The [Buyer] has also this way not proved that the delivery at the transfer of the risk had a non-conformity that constituted a fundamental breach or that the circumstances could justify avoidance. The report by UU is excluded from the case and can therefore not be used as evidence. The examination conducted by HH is useless since it is unknown whether it concerns the right trees. There has been issued a declaration of destruction and the trees has been moved somewhere between 100-400 km away from Paris and at the examination there were only approximately 500 trees left. There is contradicting explanations since MM and OO have informed that the trees were good. TT has looked at approximately 750 trees where 85 of those were between 1.5 and 1.7 m, which has been taken into consideration. The three witnesses all agree that the trees were as agreed. One cannot attach much importance to Mr. BB's explanation since he has worked for the [Buyer] for several years and still does. UU's explanations point in the direction of discrepancies between that which was agreed and the delivery but one cannot attach more importance to the explanation of this witness than that which would be attached to the testimony of an ordinary witness. Furthermore, UU has only examined 110 trees and there is no guarantee that these trees are representative. One must conclude that the [Buyer] has not proved that the trees had a defect, by which it is noted that the requirement of fundamental breach in CISG art. 25 is not fulfilled.
The [Seller] also asserts that notice have been given too late in regard to the claim of lack of quality. It appears from CISG art. 39 that notice must be given within a reasonable time and since the goods in question have a short period of both sale and life, the time for notice is extremely short. Mr. BB has explained that he noticed NN of the bad quality but it was not noticed in the letter of 2 December 1996.
Should the court arrive at the result that there was a breach of contract, it is asserted that the [Buyer] did not avoid the contract by letter of 5 December 1996 since that was done in the letter of 10 December 1996 which was too late. There is no basis for a claim of damages or reduction in price since there is no documentation to support this. [Buyer] must bear the costs appearing from transport, consultants and the unilateral examination. There is no documentation of expenses for storage and the anticipated profit. Furthermore, there is no proof of the necessary causation since the loss is due to [Buyer]'s own fault. [Buyer] has not fulfilled its duty of care and mitigation of loss which is a duty no matter if the goods are rejected. [Buyer] has taken the goods in its possession and therefore has a duty of care, cf. CISG art. 88. [Buyer] is liable due to its breach of the duty of care.
In regard to [Buyer]'s counterclaims, the [Seller] asserts that the [Buyer] did not suffer a loss and that the claim is undocumented. There is no basis for liability and the requirements of causation and foreseeability are not fulfilled. In any event, the [Buyer] is at fault in regard to the alleged loss.
[Buyer] has supported its claim by asserting that the [Seller's] delivery of Christmas trees lacked conformity to requirements of height and quality. It was agreed that the average height should be a minimum of 1.85 meter and that the trees should be between 1.7 and 2.2 meters in height. In regard to quality, it is asserted that it was agreed that 40% of the trees had to be 1st selection and 60% of 2nd selection and that all trees should be voluminous and without any serious defects. The agreement was made by telephone and [Buyer] has confirmed it by letter of 29 November 1996. In this letter, there are clear requirements of size and quality and the [Seller] has not objected to the content of the letter. The subsequent correspondence has no relevance in relation to the content of the agreement. In regard to notice, it is asserted that this was done in due time since the letter of 2 December 1996 concerned the height of the trees and since this letter did not contain an acceptance of the quality. Notice of lack of conformity to quality requirement arrived on 4 December 1996, which is within forty-eight hours after the goods were received at the place of delivery. Even if the notice is too late, it is asserted that this is irrelevant since the [Seller] in fact considered the notice. Only after legal action was commenced, has the [Seller] asserted that the notice was given too late.
The [Buyer] has asserted that it has been proved that the Christmas trees were not in conformity. NN and Mr. BB agreed that the trees were impossible to sell and the independent witness UU has confirmed that the trees did not correspond to what was agreed. The witness has extensive knowledge and he has found defects in the representative sample of trees that he examined. This has to be compared with the completed examination report and even though there were only 500 trees left at the examination, there is no doubt that those tree were identical. It has not previously been asserted that a declaration of destruction would constitute a problem. These rules are of mere formal character and do not assure that the trees in fact have been destroyed. The explanations by MM and OO are useless and TT is neither an expert nor independent since he has considerable trade with some of the [Buyer]'s competitors. UU, on the other hand, is an independent witness with extensive knowledge. This witness conducted a thorough spot-check of the trees and established that there were discrepancies compared with the agreement. The [Buyer] has proved that the trees were not in compliance with either the requirement of height or the requirement of quality. It appears from the examination report that 28% of the trees were below 1.7 m, that the trees had an average height of 1.72 m, and that 38% of the trees can be described as unspecified. UU has explained that 37% of the trees were below 1.7 m and, of those trees, 75% were of prime quality and 25% were of secondary quality. This witness has also explained that, of the trees above 1.7 m, 25% were prime quality, 50% secondary quality and 25% of unspecified quality. Based on this, the [Buyer] has asserted that 28% of the trees have a height that was below 1.7 m and that 30% of the trees were so spacious that they had to be described as unspecified, that 38% of the trees did not conform with the description "voluminous trees without serious defects", and that the quality of the trees is 16% prime, 46% secondary and 38% of unspecified quality.
[Buyer] has asserted that the maximum, only 40-50% of the delivery was in conformity with the agreement of the parties and therefore the delivery must be seen as a fundamental breach. [Buyer] was therefore entitled to avoid the contract, cf. CISG art. 49(1)(a). Notice of avoidance was given immediately by letter of 2 December 1996 as this letter must be understood as a declaration of avoidance. The avoidance was confirmed by the [Seller] in the letter of 5 December 1996 and also confirmed by letter of 9 December 1996. As a result of the [Seller's] breach of contract, the [Buyer] is entitled to damages or a reduction in the price, cf. arts. 74-77. It has further been asserted that the [Buyer] has not breached its duty of care or duty of mitigation of loss since the [Buyer] has tried to reach a solution where the [Seller] has acted abnormally by rejecting any kind of cooperation. [Seller] would not accept UU's examination and there were four days available for the [Seller] to ask additional questions. It was not necessary at this point to secure a proof in which the [Seller] would not participate. As a result of this attitude, it was necessary to store the trees to secure proof. In addition, it was impossible to sell the trees. The [Seller] had to have realized that the trees had defects and that the trees were placed at disposal of the [Seller] as early as 2 December 1996. Subsequent to the examination, the [Seller] has not expressed a wish to take back the trees and the [Seller] was aware that the [Buyer] did not have the intention to sell the trees as long as the [Seller] did not recognize the defects. The burden of proving that the [Buyer] has breached his duty of care and duty to mitigate loss is on the [Seller] and this burden has not been fulfilled. In addition, there is no proof that the [Seller] has suffered a loss.
- Anticipated sales profit 60,000 DKr.
Should the court find that the trees delivered by the [Seller] do not contain fundamental defects, it is asserted that the defects entitle the [Buyer] to damages or a reduction in the price. This amount has to be set at a minimum at 60% of the original price of 124,500 DKr, in total 74,700 DKr. In addition, the [Seller] must pay for [Buyer]'s costs and loss of profit which also has to be set at 60% of the calculated amounts. In relation to the legal costs, it is asserted that the [Buyer] did not cause the delay nor the expansion of the case.
From the proof, it is established that an oral agreement was made on 28 November 1996 concerning delivery of Christmas trees to the [Buyer]. On 29 November 1996, the [Buyer] sent a confirmation of what [Buyer] thought was agreed in regard to the delivery and the [Seller] has not provided any proof of a subsequent repudiation of the content of this letter. Therefore, the court finds that the parties' agreement was that the [Seller] was to deliver 1,000 to 1,200 Nordmann trees, that 40% had to be prime quality, 60% of good secondary quality, voluminous trees without serious defects with a height between 1.7m and 2.2 m for a price of 100 DKr per tree.
After arrival of the trees at ... (France) on 2 December 1996, a discussion arose between the parties concerning the conformity of the delivery. This resulted in an examination of the trees by TT and as he was instructed to examine the size of the trees and, in accordance with TT's explanation, he did not conduct an examination of the quality. When the [Buyer] subsequently repeated the notice of non-conformity, an examination outline was sent to the Decorative Fir Section of the Danish Forest Association [Dansk Skovforening, Pynt- og Grøntsektionen]. The [Seller] received a copy of this on 13 December 1996 with an invitation to comment on the outline. No comments were provided. The [Buyer] has accepted that the report done by UU has been removed from the case, but according to this witness' explanation, it has been established that he was at the place of delivery on 14 December 1996 where he conducted a thorough spot-check of the trees and established that 37% of the trees were below 1.7 m and that the trees below this height were voluminous and that the quality grouping was 75% prime, 25% secondary, while the trees above 1.7 m, according to the examination, were grouped as 25% prime, 50% secondary and 25% unspecified. In these circumstances, the court finds that the delivered Christmas trees had a fundamental non-conformity. The court remarks that it does not find that the examination report made during the case can be used as proof that the [Seller]'s delivery was non-conforming since the proof is insecure in regard to whether the trees are identical. In addition, attaching value to the examination report is troublesome considering that there were only 500 trees left out of 1,245 trees.
In accordance with the presentation of evidence, it is established that the [Buyer] received the trees on 2 December 1996 and first avoided the contract by letter of 10 December 1996, as none of the previous correspondence contains a clear declaration of avoidance. In the light of the fact that the case concerns delivery of Christmas trees where the sale has to happen within a short time and where the trees must be considered worthless after 24 December 1996, the court finds that the [Buyer] -- due to the time that has passed from delivery to the avoidance -- has lost the right to avoid the contract, cf. art. 49 CISG.
The [Buyer] has by letter of 2 December 1996 complained about the height of the trees and it is undisputed that [Buyer] also complained about the quality in a telephone conversation of 4 December 1996. The court finds that notice of non-conformity has been given in due time and, in light of the established defects, the [Buyer] is entitled to a reduction in price which, from the circumstances, is set at 40,000 DKr of the original price of 124,500 DKr. In addition, the court finds that the [Buyer] had expenses due to handling of the trees. This is estimated to be 2,000 DKr. In relation to the [Buyer]'s additional damage claims, the court finds that there is no documentation for expenses from storage, additional transport or an expected sales profit. Because of that, these claims are dismissed. The court also dismisses claims concerning the costs suffered by the [Buyer] in relation to consulting support and payment to UU in regard to the examination report that has not been used in the case.
It is established that the [Buyer] urged the [Seller] to participate in an examination in order to secure proof. The [Seller] remained passive and did not recognize the examination. In these circumstances, the court find that the [Buyer] did not breach its duty of care and duty to mitigate loss.
As a result of the above, the [Buyer] is to pay the contract sum with a reduction of 42,000 DKr, as it is remarked that the [Buyer] did not object to the claim of interest.
The [Buyer] is to pay 82,500 DKr within 14 days plus interest at 2% per month from 14 December 1996 until payment, as well as legal costs in the sum of 20,000 DKr.
** Thomas Neumann, Ba. Jur, Master student at University of Aarhus. Participated in the 14th Willem C. Vis Moot with the team of the University of Aarhus and has published in The Vindobona Journal of International Commercial Law and Arbitration (2007) 11 VJ (1).

References: Art. 49
 art. 67
 art. 38
 art. 25
 art. 39
 art. 88
 art. 49
 art. 49