Source: http://www.cisg.law.pace.edu/cisg/biblio/perales4.html
Timestamp: 2019-04-22 04:57:35+00:00

Document:
The decision of the Court of First Instance, No. 3 of Tudela/Spain  is very instructive for practitioners and jurists applying the 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG) and scholars doing research on it. It shows the pitfalls of paying lip service only to the applicability of uniform law, while adhering to domestic concepts and reading the provisions of CISG through the lens of domestic law.
Leaving aside controversial factual allegations of the parties and assuming insofar that the facts as stated by the court are correct, the issue was one of the buyer's remedies in case of non-conforming goods, i.e., a brick rectifying machine, which -- according to expert testimony -- did not meet the contractual specifications in regard to output and percentage of acceptable malproduction.
The Spanish buyer (Cerámica Tudelana, S.A.) wanted to get out of the contract, while the German seller/manufacturer (Wassmer Gruppe Spezial Machinen GmbH) claimed the purchase price. This is a "classical" constellation of sales law.
c) If the buyer can restitute the goods "substantially in the condition in which he received them", Art. 82(1) CISG, unless in case of deterioration or loss of the goods one of the exceptions under Art. 82(2) CISG applies.
If these requirements are met, the buyer can avoid the contract by unilateral declaration, Arts. 49(1), 26 CISG; but he or she must do so within a reasonable time after becoming aware of the seller's breach, Art. 49(2) CISG. The declaration of avoidance can be combined with the notice of non-conformity.
The Tudela court cited most of the applicable provisions of the CISG correctly, but seemingly applied instead articles of the Spanish Civil Code, which were more familiar to the judge. Regardless of the outcome of the case -- which depended to a good extent on the evidence of the controversial facts and the contradictory allegations of the parties, which cannot be examined and evaluated by these annotators -- it is worthwhile to point out the legal fallacies in the court's reasoning in order to help practitioners and jurists in cases to come ... in order to help them avoid succumbing to the same errors.
a) By requiring that the non-conformity must constitute a fundamental breach in itself in order to avoid the contract, the CISG has set the threshold for avoidance very high. This case shows why: Avoidance results in an unwinding of the contract, i.e., restitution of performances which, on account of necessary transport and/or temporary storing of the goods, can often be expensive and may create risks for the goods. Contrary to cases of non-delivery, the buyer cannot overcome this high threshold by setting an additional period of time for curing the non-conformity, the lapse of which would allow avoidance. Even the delivery of an aliud would be merely a non-conformity under Art. 35 CISG  and not a non-delivery, thus blocking the route to avoidance via setting of an additional period of time.
b) In many cases, whether a non-conformity amounts to a fundamental breach depends on a number of circumstances, but it must be noted that, under the prevailing view, a fundamental breach cannot be regarded as having occurred if and as long the seller can and is willing to cure the non-conformity, unless time is of the essence.
The reasoning of the Tudela court does not explicitly state whether and why the non-conformity amounted to a fundamental breach. Since domestic sales laws often facilitate avoidance under less strict requirements, one cannot suppress the impression that the Tudela court applied the respective solutions and provisions of the Código Civil of Spain. It refers to the aliud pro alio rule and that the machinery was "unsuitable for the purpose for which it was intended", implying thereby that the non-conformity amounted to non-delivery. Under the Convention, delivery of an aliud, in itself, would not suffice to constitute a fundamental breach. Whether the words in the court's reasoning -- after having reiterated the experts' findings on the defects -- that "it must be understood that this [i.e., the defects] led to total dissatisfaction of the buyer" was meant to state a fundamental breach under Art. 25 CISG remains unclear.
Also, it is worth mentioning that Art. 82(1) CISG -- requiring that the goods can be restituted unharmed -- is not mentioned at all; this, however, is a factual point and shall not be pursued here, since it might not have been raised in the pleadings.
The court does not state clearly whether the notice required under Art. 39(1) CISG was sent, whether, if sent, it specified the nature of the lack of conformity, and whether it was sent within a reasonable time after buyer became aware of the lack of conformity. In addition, the court does not state whether and when a notice of avoidance was dispatched as required by Art. 26 CISG. Instead, the court rather vaguely refers to "communications and claims ... made within a reasonable time" by the buyer. Without more details, it is impossible to see whether the requirements of Arts. 39(1), 49(2), 26 and 27 CISG were met. References to the many cases dealing with Art. 39(1) CISG and the respective legal literature are missing, and it is, therefore, hard to know whether the court respected these provision of the uniform law at all and if so, how it applied them.
The court also seems to confuse the period of time to declare the contract avoided under Art. 49 CISG with the time limit to sue the other party. It seems so when, pointing to that provision of the Convention, the court states that "the statement of claim has not only been timely submitted ...".
a)	Although mentioning that, under the CISG, avoidance is brought about by a declaration of the aggrieved party, in the end the court terminated the contract by judicial fiat as is provided for in the Spanish Cc (art. 1124, 3rd sentence) and other Romanistic codifications (see no. 1 of the decision: "I declare the full avoidance of the contract ...".). This is a violation of the CISG, for under the CISG, the court could only have decided that the buyer had validly avoided the contract (and that, therefore, it could claim back the advances paid and ask the seller to take back the machinery).
b)	Also, the court in mentioning that the buyer could withhold the purchase price, based its reasoning on Arts. 1100 (last paragraph), and 1024 Cc.
It is true that the Convention does not explicitly grant a right to withhold payment in case of non-conformity, unless there is a situation that allows application of Art. 71 CISG (which is not the case here). But, before resorting to domestic law to find a right to withhold, the court should have considered gap-filling under Art. 7(2) CISG by resorting to general principles on which the Convention is based. A more careful analysis would then have shown proposals by a number of legal writers to implant a general right to withhold performance in case -- and to the extent -- that the other party is in default with performance of its obligations, including the obligation to deliver goods in conformity with the contract.
Contrary to the statements of the court based on Spanish law, the burden of proof that the goods were not conforming to the contract, i.e., the basis of a right to withhold under the CISG, might be found under CISG. The burden of proof is on the buyer after the risk had passed on account of the machine having been taken over by him, Art. 69(1) CISG. In the end, however, this does not matter, for the court in relying on the experts' testimony proceeded on the basis that the machine, indeed, did not conform to the contract.
The case could have been a textbook example how the CISG "works" in case of non-conformity of the goods delivered, and what the buyer has to do to secure his or her rights. It is a pity that the court, instead, based its decision on a stew of Spanish law and some CISG-provisions cited but not really respected. It confirms, thereby, the necessity of more training and educational offerings for practitioners in the field of transnational sales law -- not only in Tudela.
* Professor Emeritus University of Freiburg (Germany).
** Commercial Law Professor, University Carlos III of Madrid (Spain).
1. Original text at <http://www.uc3m.es/cisg/sespan45.htm>. English translation by Mercedes Romero at <http://cisgw3.law.pace.edu/cases/050329s4.html>.
2. By virtue of Art. 49(1)(b) CISG, the buyer might also avoid the contract in cases of non-delivery if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with Art. 47(1) CISG.
3. Cf. Rafael Illescas Ortiz/Pilar Perales Viscasillas, Derecho Mercantil Internacional. El Derecho Uniforme. Centro de Estudios Ramn Areces S.A., Madrid 2003, pp. 185 et seq.
4. Cf. Schwenzer in Schlechtriem/Schwenzer (ed.), Commentary on the UN-Convention on the International Sale of Goods (CISG), Oxford University Press, 2nd ed. 2005, Art. 39 para 13.
5. For detailed references, see AC-CISG opinion no. 5 (Rapporteur Ingeborg Schwenzer), forthcoming: to be published at <http://www.cisg-online.ch/publications>.
6. See AC-opinion no. 5 (reporter Ingeborg Schwenzer) (supra fn. 5), with numerous references.
7. Prevailing opinion, cf. The German Supreme Court case of 3 April 1996, <http://www.cisg-online.ch> case no. 135 = NJW 1996, 2364, 2366, English translation available at <http://cisgw3.law.pace.edu/cases/960403g1.html>; furthermore Schlechtriem in Schlechtriem/Schwenzer (supra fn. 4) Art. 25 para 21a.
8. Cf. AC-CISG opinion no. 5 (reporter Ingeborg Schwenzer) (supra fn. 5).
9. Apart from the CISG, that applies to international commercial contracts within its sphere of application, and Law 23/2003 on Guarantees on Consumer Goods that applies to consumer contracts within its field of application and that incorporates Directive 1999/44, 25 May 1999, of the European Parliament and of the Council on Certain Aspects of the Sale of Consumer Goods and Associated Guarantees, we have to add the regime of the Spanish Commercial Code that applies to domestic commercial contracts of sale (Articles 336 and 342, that refer to different periods of time, respectively, four days and thirty days to notify the lack of conformity of the goods; those fixed periods of time apply depending on the character of the lack of conformity: apparent or hidden defects) and Article 1690 Spanish Civil Code (six months), that applies to civil contracts of sale not falling within the sphere of application of the Law 23/2003. We will also need to add the doctrine of the Spanish Supreme Court, which usually goes beyond the classification of the contract (civil or commercial) in order to unify the regimes by applying the doctrine of aliud pro alio, i.e., the delivery of a completely different thing than that contracted for or the delivery of a thing that provokes a complete dissatisfaction of the buyer. In this situation, the period of time to apply in order to consider the correctness of the time to notify the lack of conformity of the goods and to sue would be the general period of time applicable in cases of breach of the contract (Article 1124 of the Spanish Civil Code, fifteen years). It is clear that the doctrine of the Spanish Supreme Court is as onerous for the seller as the application of the rigid period of times of the Commercial Code is for buyer.
In that situation, the failure of the Spanish legislators to unify the legal regimes on the lack of conformity of the goods -- following the trend established by the CISG, and more recently by the revision of the German Civil Code of 2001, in force since 1 January 2002 -- is simply not justified.
10. Whether counsel pleading for the parties properly introduced the applicable provisions of the CISG is not known to these annotators, but would be irrelevant, since jura novit curia.
- Fifthly, that the only way to assure the uniformity of the interpretation of the CISG is to take into account what other tribunals have held when applying the CISG as well as the opinions of legal scholars. Furthermore, the court explained extensively the CLOUT system and referred to UN document A/CN.9/SER.C/GUIDE/1 and relied on several CLOUT cases, namely 98, 81, and 251.
See also recently: BGH, 2 March 2005 (Germany), <http://www.cisg-online-ch> case no. 999, English translation by Birgit Kurtz available at <http://cisgw3.law.pace.edu/cases/050302g1.html>.
In the recent Spanish literature on CISG, see: Anselmo Martnez Canellas, La Interpretacin y la Integracin de la Convencin de Viena. Sobre la Compraventa International de Mercaderas, de 11 de Abril de 1980. Estudios de Derecho Mercantil, Granada, Comares, 2004.
11. A similar confusion is found in the opinion of the Court of Appeal of Barcelona, 12 September 2001, <http://www.uc3m.es/cisg/sespan22.htm>, English translation by Alejandro Osuna available at <http://cisgw3.law.pace.edu/cases/010912s4.html>, where the court considered that the period of two years of Art. 39(2) CISG is the maximum period of time within which to sue the other party.
12. The avoidance of the contract under Spanish Law may be also declared unilaterally by one of the parties. See Luis Dez Picazo/Antonio Gulln, Sistema de Derecho Civil. Vol.II. Madrid: Tecnos, 2001, 9th ed, p. 248.
13. Cf. Schlechtriem in Schlechtriem/Schwenzer (supra fn. 4), Art. 7 para 34.
14. Of course, the passing of risk could have occurred even earlier, but this is irrelevant here.

References: Art. 82
 Art. 82
 Art. 49
 Art. 35
 Art. 25
 Art. 82
 Art. 39
 Art. 26
 Art. 39
 Art. 49
 Art. 71
 Art. 7
 Art. 69
 Art. 49
 Art. 47
 Art. 39
 Art. 25
 Art. 39
 Art. 7