Source: http://cisgw3.law.pace.edu/cases/021202s1.html
Timestamp: 2019-04-21 04:39:55+00:00

Document:
84A ; 84B [Upon avoidance: seller bound to refund price must pay interest; Buyer must account to seller for benefits received].
A. By memorandum of 25 May 1999, the Plaintiffs [Buyers] requested that Defendant [Seller] pay an amount of Swiss francs [Sfr] 116,356.60, plus interest of 5% since 25 January 1999, [Seller] assuming attorneys' fees and costs.
In [Seller]'s reply brief of 5 January 2000, [Seller] requested that [Buyers'] claim be denied and, by way of counterclaim, claimed that [Buyers] be required pay an amount of Sfr 184,250, plus interest of 5% since 1 January 1999, [Buyers] assuming attorneys' fees and costs.
Following a second exchange of communications, the parties received notice for a preliminary hearing on 26 January 2000. They requested that Fiduciaire Suisse des hôteliers (hereafter, "FSH") act as judiciary expert. The expert filed his report on 29 June 2000 and made additions to it on 17 October 2000.
At the closing of pre-trial investigative hearings on 15 February 2000, the parties waived their right to oral proceedings and filed a memorandum modifying their claims. The [Buyers] demanded payment of an amount of Sfr 98,175.25 as well as denial of [Seller]'s counterclaim demanding that [Buyers]' claim be denied and that [Buyers] pay an amount of Sfr 200,24.85 while assuming attorneys' fees and costs.
"1. [Seller] shall pay [Buyers] an amount of Sfr 70,917, plus interest of 5% annually since 12 June 1999.
- Sfr 33,304.85, plus interest of 5% annually since 19 September 1999.
3. All other claims are denied.
4. Attorneys' fees and costs of an amount of Sfr 36,800 shall be assumed, in joint liability, by [Buyer] 1 and [Buyer] 2, for � of the price (Sfr 9,200), and by [Seller] for � of the price (Sfr 27,600).
5. [Seller] shall pay [Buyer] 1 and [Buyer] 2 an amount of Sfr 9,160 as partial reimbursement of their down payment.
6. [Seller] shall pay [Buyer] 1 and [Buyer] 2 an amount of Sfr 13,500 as reduced disbursements.
[Buyer] 1 and [Buyer] 2 shall pay, in joint liability, an amount of Sfr 4,500 as reduced disbursements."
1. The claim filed by [Buyer] 1 and [Buyer] 2 should be denied.
- Sfr 159,220, plus interest of 5% since 19 September 1999.
3. Attorneys' fees and costs incurred by [Seller], both at first instance stage and at appeal stage, shall be assumed by [Buyer] 1 and [Buyer] 2 in joint liability."
The case was forwarded to the Appellate Court in August 2002, that Court deciding the proceeding without a hearing.
1. a) [Seller] co-owns with her friend, [Buyer 1], the premises for the exploitation of a state-owned company [�]-[�], located at [�] street, in Sion, Switzerland. She is the sole owner of the furnishings, designs and business of this company; which she ran for several years. The company's expected sales for the period between 1 January 1992 and 31 May 1993 amounted to Sfr 1,686,640. On 15 January 1996, per [Seller]'s request, fiducial Gastroconsult created a budget for the company's business. Expected global sales were estimated at Sfr 650,000 (Croissanterie: Sfr 335.000; beverages: Sfr 315,000) and gross profit (before amortizations and financial costs) at Sfr 193,500.
[Buyer] 1 holds a certificate of baker-confectioner. As a French national, he worked freelance for several years in Australia and in the United States of America. His spouse [Buyer] 2, [�], has a background as a sales person in a bakery. At the end of 1996, they issued an advertisement in several daily newspapers in French-speaking Switzerland with a view to purchase or rent a bakery-confectionery.
[Seller] contacted them. Negotiations lasted several weeks, [Seller] participated in the talks. At first the [Buyers] considered buying the [Seller]'s company, with [Seller] retaining one-third (1/3) of ownership. To that end, two budgets were submitted to the [Buyers]. The first document, which was neither signed nor dated, indicated that, as of the date of the creation of the budget, the amounts for the company's sales were Sfr 690,000, Sfr 302,100 for fixed costs, Sfr 207,000 for raw material related costs, and Sfr 146,704 for the net profit, after deduction of a Sfr 30,000 annual amortization corresponding to the initial investment. The first budget gave an estimate of the call price of Sfr 300,000 for the design, furnishings and business. The second budget, which was hand-written, estimated sales at an amount of Sfr 730,000 and a monthly net profit at an amount of Sfr 11,125, to be divided in three parts, that is, approximately Sfr 3,708 per person. According to the [Buyers], the second budget was not made known to them during the negotiations for the conclusion of the contract.
Finally, [Seller] rejected the offer of business association and decided to run the business herself. However, [Seller] offered the future lessees the opportunity to buy the design, furnishings and the business. According to [Seller], the [Buyers] [�] were provided with Gastroconsult's expert report from the start of the negotiations.
b) By a contract dated of 28 February 1997, [Seller] leased to [Buyer] 1 and [Buyer] 2 the coffee shop [�]. They entered into a lease agreement for a 10-year period commencing on 1 June 1997 and ending on 31 May 2007, renewable every five (5) years, until termination by either party by serving a twelve-month written notice prior to the end of said time period. The amount of the monthly rent was fixed at Sfr 9,620 (Sfr 8,000 [rent] and Sfr 1,620 [amortization] plus Sfr 300 [charges]); that is, at a total amount of Sfr 9,920 per month.
According to the expert, in terms of percentage of the expected sales or of the actual sales (budget), the price of the rent was too high.
"Lessee shall eliminate alterations, notably the fixtures covered by this lease agreement, which Lessee made at its sole expense and without Lessor's prior written consent, if required by Lessor at the agreed date of the surrender of the premises. Lessee shall pay for the repairs to ceilings, walls, floors, etc., resulting from this elimination. However, where such alterations were made with Lessor's prior written consent, Lessor may not require rehabilitation, except as agreed by writing.
Lessee may demand an equitable compensation, where the object of lease shows an increase in value at the end of the contractual relationship, as a result of the repairs or alterations made by Lessee with Lessor's prior written consent".
"Promise of sale and purchase agreement relating to the furnishings and designs. Upon expiration of this contract, the lessees promise and bind themselves to sell to Mrs. [�], who accepts, promises and binds herself to purchase and acquire the furnishings and designs. The price shall be determined having regard to the purchase price and usual amortization rate.
Upon expiration of the lease agreement, the lessees of this lease will be granted a right of preference with respect to a possible renewal.
Lastly, Article 26 of the Contract provided that the price of rent could vary depending on the consumer price index.
[Seller] did not enter into any binding agreement as to the extent of charges and sales figures. In accord of the parties, the [Buyers] [�] were assigned the employment agreements relating to the current staff.
At the same date, on 28 February 1997, the parties also entered into a sale agreement containing a delayed reservation of title clause ("clause avec réserve de propriété") relating to the designs, furnishings and business of the "Croissanterie Sédunoise" for an amount of Sfr 60,000. The [Buyers] [X] paid Sfr 50,000 on 2 June 1997.
On the same day, the [Buyers] entered into a deed acknowledging debt ("reconnaissance de dette") of an amount of Sfr 240,000, which is included in the rental price, and "consequently will be totally reimbursed at the expiration of the contract; that is, on 31 May 2007."
With the consent of FSH's expert, the court inferred from these two exhibits and the declarations of the people concerned that the parties agreed on the price for the sale of the furnishings, designs and business for an amount of Sfr 200,000 and that, after the various contracts were signed, the sum remaining to be paid by the [Buyers] [X] amounted to Sfr 150,000. The sale agreement containing a delayed reservation of title clause ("clause avec réserve de propriété") forms part of the deed acknowledging debt ("reconnaissance de dette") of an amount of Sfr 240,000 entered into by the lessees. The remaining sum of Sfr 150,000, plus interest of 5%, was to be reimbursed by monthly installments of an amount of Sfr 1,620, to be added to the Sfr 8,000 rent.
The [Buyers] claimed that [Seller] undertook to make her trading license available to them as long as they needed it. However, they could not support this claim with sufficient evidence. [Seller] allegedly took the necessary measures to obtain a license, but did not meet the requirements for the registration (two years of practice in the branch). She therefore postponed this obligation to a later date.
Prior to the commencement of the lease, [Seller] carried out at her sole expense tiling and painting work, and replaced an oven.
c) The [Buyers] took possession of the premises in June 1997. They were submitted an inventory, which was not signed by the parties to the contract. Furthermore, the [Buyers] explained that the document they were provided with at the commencement of the lease did not mention that the tranching machine, which was not functioning according to the [Buyers], was put at their disposal. Exhibit no. 41, which was submitted by Mrs [�] for inventory at the commencement of the lease, is not signed and mentions a tranching machine as part of the equipment of the "Croissanterie".
Shortly after the commencement of the lease, the [Buyers] changed the business purpose. Indeed, until then, [Seller] limited herself to selling frozen food. Given [Buyer 1]'s background, the new lessees decided to sell home confectionery. The lessees acknowledges that this new cooking concept was a "plus" for the business. The [Buyers] replaced the existing sale "présentoir" with a new cold sale counter. Dame [�]'s son acknowledged that he helped [Seller] dismantle this piece of furniture, which was worthless according to Witness Burgi. Witness Donzé participated to the moving and saw [Seller] on the building site on this day. Lastly, Dame [�]'s friend did not deny the fact that the removed furniture had been loaded on a vehicle made available by the Lessor's brother. The [Buyers] [�] equipped themselves with cooking material used for the making of confectionery.
Dame [�] acknowledged that she was aware of the renovation and transformation work carried out by the [Buyers]; indeed, [�] contacted ESR SA, on behalf of the lessees and in the name of Dame [�], in order to obtain a quotation for the transformation of the electric wiring of the business. Moreover, Dame [�] advised the co-owners of the building of the work that was due to be carried out.
Various custom and transportation fees should be added to these amounts. According to the expert, the investments made by the [Buyers] [�] amounted to 63,7230.70, the very amount to be considered in the present case. According to the lessees, this material can still be found in the premises.
d) As of early 1998, tensions arose between the parties as to the amount of the rent. The [Buyers] [�] claim that they soon realized that they would not achieve the expected net profit, whereas [Seller] credits the poor business results to the lessees' bad management and unreasonable spending.
The Profit and Loss account as of 30 June 1998, set forth in September by [�] of Fiduciaire Fidaval SA in Sierre, showed a net operating revenue of Sfr 44,370 for a 13-month trading period (expert report, Schedule II). According to the [Buyers] [�], said net operating revenue was down 69.8% from the expected figure. Indeed, as noted by the experts, the annualized net profit amounted to Sfr 40,957.50, while the annualized net profit, as anticipated in the budget [�], amounted to Sfr 146,750 for a 12-month trading period (expert report, Schedule IV). However, [Seller] denied that the expert report established that certain lines in the P&L account could have been entered differently. In accordance with the FSH expert, the Court will retain the notion of cash flow in order to compare the Profit and Loss accounts (the cash flow being equal to the net profit inclusive of amortizations: Käfer, Bern commentaries, n. 357 ad art. 960). The annualized net profit shows a cash flow of an amount of Sfr 84,649.60, while the annualized net profit, as anticipated in the budget, amounted to Sfr 176,750 for a 12-month trading period.
According to the FSH expert, the business results reflect good management.
The [Buyers] [�] also claim that they were forced to work extra hours to the extent that [Buyer] 1's health deteriorated, which resulted in a lower work capacity.
Wages costs (including their own) paid by the [Buyers] amounted to Sfr 176,862.75.
e) On 24 February 1998, the [Buyers] [�] filed a request for a lease cut before the cantonal Commission of Mediation in Lease Matters, which issued an act of non-mediation on 6 October 1998.
In the course of proceedings, the parties attempted to reach an agreement, without any success, [Seller] having refused to sign a convening, according to [�].
Petitioned by Dame [�], the public prosecution office of Sion issued an inventory affidavit for a claim of a total amount of Sfr 74,880 on 5 November 1998. The prosecution office gave an estimate of the furnishings and designs at Sfr 87,840; regardless of this inventory affidavit, the [Buyers] [�] allegedly smuggled away several objects, according to [Seller].
On 23 October 1998, the [Buyers] [�] terminated the employment agreements entered into with three of their employees, to be effective at the end of November 1998. By letter of 26 November 1998, they modified the notice period, to be effective as of 31 October 1998.
f) By letter of 16 November 1998, the city police granted 10 days to Dame [�] so that she could settle the trading license issue, in light of the request for termination filed on 17 September 1998 by the Secretary to the Commission of Mediation in Lease Matters, before the cantonal Trading License Department of the city of Sion. Dame [�] took it upon herself to ask the city police to be patient. According to the latter, the [Buyers] [�] did not take any action to sort out the situation.
By the middle of October-November 1998, [Seller] withdrew, upon the intervention of the cantonal Trading License Department, the trading license that she had made available to the lessees. Dame [�] claimed that she had registered to the fall session of 1997, yet she had not participated to the class. Witness [�] confirmed that none of the [Buyers] had registered.
[Buyer] 1 and [Buyer] 2 then posted as deposit at the cantonal bank of Wallis the rents for November and December 1998, as well as arrears of an amount of Sfr 31,180.
By letter with acknowledged receipt of 2 December 1998, [Seller] sent a formal notice to the lessees demanding that they pay the lease arrears of an amount of Sfr 33,280 within a 30-day period and that they take any measures within 10 days with a view to personally run the coffee shop, failing which the lease agreement would be immediately terminated should the business be closed.
On 9 December 1998, the District Judge of Sion ordered the provisional withdrawal of the counterclaim lodged by [Buyer] 1 against the prosecution filed by [Seller] for the payment of the lease arrears.
On 10 December 1998, [Buyer] 2 filed a request for a provisional trading license before the cantonal Department of Trading Licenses. He was to obtain simultaneously a confirmation of his participation to the class for café proprietors. He did not, however, follow through with his endeavor, arguing that this registration was not possible until early 2000.
The [Buyers] [�] also offered [Seller], who came into contact with the lessor, to purchase the business. The lessor having asked for a Sfr 50,000 payment, [Buyer] 1 withdrew his purchase offer.
Failing the settlement of the trading license issue, the city police of Sion ordered the lessees to close their business as of 1 January 1999.
g) The FSH expertise contributed to demonstrate that, as to the furnishings, designs and business, the [Buyers] [�] paid an amount of Sfr 50,000 at the date of the conclusion of the contract, then paid an amount of Sfr 1,620 during 19 months, that is, Sfr 30,780. The total amount paid is therefore Sfr 80,780, inclusive of Sfr 13,180 of interest and Sfr 67,600 corresponding to the reimbursement of the arrears. The share of the agreed price (not inclusive of interest), still unpaid as of 31 December 1998, amounted to Sfr 132,400 (Sfr 200,000 - Sfr 67,600).
During the trading period, commencing on 1 June 1997 and ending on 31 December 1998, the amortization rate for these goods amounted to 13.2%, the annual amortization rate amounting to 8.3%. As to the cold sale counter, the expert retained an amortization rate of 10.6% for the same period, the annual amortization being of 6.7%.
h) The [Buyers] [�] then left the premises. They took back various objects and machines that they owned. They notably removed the compressors attached to the cold sale counter as well as a freezer and a refrigerator. As to the remaining sum, they simply abandoned the furnishings and designs. Pre-trial investigative hearings show that the premises were left in a deplorable state.
On 6 January 1999, the [Buyers] [�] terminated the lease agreement, effective immediately. By letter of 7 January 1999, [Seller] took note of the early termination of the object of lease, while disputing the immediate and unilateral termination of the contract, and demanding payment of the rents until the expiration of the lease. On 9 January 1999, the keys were handed over and the inventory and report on state of repair was signed.
[Seller] claims that she had to purchase the business in order to avoid an aggravation of the damage she suffered and in the process had to replace the missing material, notably a tranching machine, a refrigerator, a cold exposure glass refrigerator, and a coffee machine.
According to the parties - except for the refrigerator and the coffee machine which were expected to replace the appliances provided to the [Buyers] at the beginning of the lease and were eventually removed by them - the purpose for this material, which the [Buyers] purchased, was to make home confectionery, and not frozen confectionery, as used to be made under Dame [�]'s running of the business. Furthermore, the expert demonstrated that the missing coffee machine was removed by the [Buyers] [�], who replaced it with a machine that they deemed better performing and which was returned to the supplier consequent upon non-payment. Moreover, [Seller] acknowledged that he got rid of a refrigerator, which was initially part of the equipment of the "Croissanterie", because of it deemed its state "deplorable".
2. Pursuant to Article 22 par. 7 CPC, monetary claims submitted in the fast-track proceedings and which fall out of the city judge's jurisdiction are decided by the primary district judge where the judgment can still be appealed before the Federal Tribunal, and are decided without appeal in the other instances. By virtue of article 15 par. 5 CPC, for the purposes of determining if the grounds of appeal are admissible, the value of the dispute is calculated on the basis of the closing written submissions made before the earlier court.
In the present case, the [Buyers] requested the [Seller] to pay an amount of Sfr 98,175.25. By way of counterclaim, [Seller] claims an amount of Sfr 200,524.85. Consequently, the value of the dispute amounts to SFR 200,524.85 (art. 15 and 16 al. 2 CPC), which gives the cantonal tribunal jurisdiction to hear the appeal (art. 22 al. 7 and art. 48 OJ).
The written statements of appeal were submitted in accordance with the deadline and procedure as provided by law (art. 217, 300 al. 2 and 308 CPC). The required down payments having been posted (art. 219 CPC), the appeal of the [Buyers] and that of the [Seller] shall be considered.
Furthermore, notwithstanding the fact that the [Buyers] are domiciled in France (cf. p. 1 of the rental lease agreement) and are French nationals, the dispute rests with the tribunals where the [Seller] is domiciled (in Valais) and Swiss law is applicable (art. 2 and 5 ch. 1 CL, as well as art. 117, 118 LDIP and 3 al. 1 of the Hague Convention on the Law Applicable to International Sale of Goods.
3. Prior to considering the dispute on the merits, the Tribunal should review the legal relationships established between the parties, and the validity thereof, at the date of the conclusion of the various contracts, on 28 February 1997. The application of the law of landlord and tenant to the main contract (exhibit no. 2) entered into by the parties is not rightly disputed. On the grounds set out hereafter, however, these provisions are not the sole rules applicable to the present case.
a) aa) Article 254 CO provides that a transaction paired with the lease of residential properties and business premises is void where the conclusion or extension of the lease is subject thereto and where, by way of this transaction, the lessee undertakes to perform obligations which are not directly connected with the use of the rented property in favor of the lessor or a third party.
As a result, for a paired transaction to be void, two requirements must be concurrently met. First, the conclusion or extension of the lease agreement must be subject to the acceptance of the paired transaction. Second, the transaction must impose on the lessee such obligations that are not directly related to the use of the rented property.
Conversely, the use of the rented property may cover facilities and interior designs or purchase inventory or stocked merchandise in the hotel industry. There is no reason to regard prima facie any matter relating thereto as amounting to a void paired transaction. Rather the criterion to be taken into consideration should be the price paid by the lessee. The fact that the price is unrelated to the actual value of the facilities is an indication that, in all likelihood, the lessee will have performed under duress an unreasonable obligation in order to have the contract concluded (Higi, Zurich Commentary, ad art. 254 CO n. 16; USPI, Swiss law on the lease, ad art. 254 n. 17).
bb) A mixed contract, which involves elements of a lease alongside elements of other contracts, is not generally subject to the law of landlord and tenant in its entirety. Pursuant to generally accepted principles, each claim is governed by the rules applicable thereto. As to termination, it is governed by the contract rules pertaining to the predominant element (Tercier, Les contrats spéciaux, 2d ed., n. 1496).
However, pursuant to the case law, the center of gravity of the contractual relationships should be determined, where said relationships are analyzed as a sole agreement, in the case of composite contracts made up of separate but interdependent agreements, or in the case of a mixed contract which involves other elements than those pertaining to lease or farming lease. Assuming this, it is impossible to treat each element of the Contract, given their interdependence, as separate legal issues (SJ 1998 p. 320 recit. 4b, ATF 118 II 157 recit. 3a). In each particular case, it will be a matter of determining whether the various agreements are closely interconnected to the extent that they may be considered as forming a whole, thus calling for the application of the rules pertaining to the predominant contract, or whether each agreement, albeit interconnected, is sufficiently separate from the others to call for the application of its own rules.
b) On 28 February 1997, [Buyers] and [Seller] entered into a lease agreement for the running of a tea-room "Croissanterie". On the same day, they entered into a sale agreement, containing a delayed reservation of title clause ("clause avec réserve de propriété") for the designs, furnishings and business of [�]. Still on the same day, the [Buyers] signed a deed acknowledging debt of an amount of Sfr 240,000, which was included in the rent and was therefore to be wholly reimbursed upon the expiration of the lease.
The agreements at hand are paired agreements yet lawful agreements. Indeed, notwithstanding the fact that the furnishings sold to the [Buyers] were to be paid by monthly installments, to be added to the rent of the "Croissanterie", pre-trial investigative hearings could not demonstrate that the conclusion of the lease agreement was subject to the conclusion of the sale agreement containing a delayed reservation of title clause ("clause avec réserve de propriété") (Dame [�] disputes this, cf. alleged no. 137 in her reply brief). In any case, the obligations imposed on the lessees by the sale agreement are directly and closely related to the use of the rented property; the sale of the furnishing and designs of the "Croissanterie" is directly related to the running of the state-owned company. Furthermore, the price for the furnishings, designs and goodwill, eventually agreed upon after the negotiations between the parties for an amount of Sfr 200.000, is not overvalued (the parties do not so allege and pre-trial investigative hearings are silent on this point).
What is left to determine is which rules are applicable to the present case. Pre-trial investigative hearings demonstrated that the parties intended to be bound by a lease agreement. This is the predominant element of their contractual relationships, which shall prevail with respect to termination. However, the [Seller] intended to sell the furnishings and designs as well as the business. She did not intend to rent it and the amount added to the tea-room's rent constituted an advance on the sale price of the furnishings. To this end, she therefore entered into with the [Buyers] a sale agreement containing a delayed reservation of title clause ("clause avec réserve de propriété") and obtained a deed acknowledging debt for the sale price, with interest added.
In this regard and notwithstanding the terminology used by the parties, in light of the above-mentioned scheme, the existence of a loan granted by the [Seller] may be ruled out. The [Seller] did not show any will to give credit to the [Buyers], but simply agreed to defer the collection of the outstanding balance of the sale price because the [Buyers] lacked liquid assets. In these circumstances, it will be a matter of applying to each claim the rules of the contract (sale or lease) to which they are applicable.
4. Firstly, it should be clarified in which circumstances the lease agreement was prematurely terminated.
a) Termination is the formal act by which a party ends the contract and is subject to receipt. The contract term may be freely determined by the parties (art. 266a CO). The lease agreement may be terminated for just cause by any of the parties (art. 266g CO). The lessee may also terminate the lease agreement with immediate effect if any defect occurs in the rented property (art. 259b let. a CO). Article 32 of the lease agreement provides that where the lessee makes an early return of the object of lease within the meaning of Article 264 CO, i.e., without complying with the time limits or terms of notice, he is not released from his obligations to the lessor unless he introduces a new solvent lessee and such offer cannot reasonably be rejected by the lessor.
b) In the present case, the lease agreement was entered into for a definite duration, ending at a fixed term dated of 31 May 2007. However, the city police of Sion ordered the [Buyers] to close the business as of 1 January 1999 in the absence of a trading license. Pre-trial investigative hearings show that [Seller] had made her trading license temporarily available until the lessees obtained theirs. She did not undertake to give use of the trading license to them as long as necessary, which claim [Buyers] did not support, at least, by providing any evidence. It is also established that neither of the lessees signed up for class for café proprietor. [Seller] did not, as alleged by [Buyers], prevent a third party from "lending" a trading license to them. In these particular circumstances, it bears recognizing that the lessees, who knew that they needed a trading license to run the business, cannot argue that the [Seller]'s refusal to make the trading license available to them for a longer period constitutes a just cause for termination.
Moreover, the rent was freely determined. The lessees did not enter into the contract hastily; to the contrary, [Seller] declared that she had exercised great care when signing the contract. Indeed, the profit that was expected by the [Buyers] and anticipated in the budget submitted by [Seller] was not actually achieved. However, as noted by the expert, the difference may be partially explained by the various accounting methods used by the parties. One should compare the achieved cash flows, which significantly reduces the difference between said budget and the [Buyers'] business results. For the remaining part, the expert acknowledged that the estimates for sales and exploitation costs, as indicated in the budget set forth by the landlord, were reasonable, while the wages and merchandise costs were too low. In conclusion, the expert confirmed that the gross returns were conforming to the generally accepted rules, whereas exploitation costs were somewhat overvalued. Lastly, [Seller] had not made any commitment on this point. [Buyer] 1 could not, as a professional in the field, be unaware of the risks involved in such a business. The fact that the lessees did not achieve their self-defined goals does not indeed constitute just cause for terminating the lease agreement.
c) The [Seller] claims Sfr 8,000 as damages for the unpaid rent of January 1999. This amount is not disputed by the [Buyers], who must be ordered to pay, in joint liability, with interest of 5% as of 1 January 1999, at the agreed expiration date (art. 2 let. c of the lease agreement). For the remainder, the [Seller] personally took over the running of the tea-room. Since she neither established nor alleged that the net profit that she has achieved since February 1999 is lower than the rents that she would have collected, had the contract been executed until its expiration date, it cannot be found that she suffered harm (other than loss of the January rent) as a result of the termination without cause of the contract by the [Buyers] (art. 264 al. 3 let. b CO; Lachat, Le bail à loyer, n. 3.14 p. 454; Tercier, op. cit., n. 1946). In addition, it will be later noted infra (consid. 6) that the claims concerning the takeover of the commercial furnishings by the [Buyers] are not governed by the lease agreement.
5. At issue in the two appeals is the first instance judge's evaluation of the lessees' claim for payment as to the designs and business.
a) The concluded contract sets out the applicable rules in detail. By virtue of Article 21, the obligation imposed on the lessor to take back the inventory at the expiry of the lease agreement applies to the lessee' new acquisitions, provided that they proportionately fit into the returned inventory and that they are necessary to run the business. Article 23 specifies that "necessary to run" shall be defined by reference to the existing notion of running a business.
Article 9 lit. b of the Contract stipulates that Lessee shall not change the use of the goods, where such changes bear considerable consequence beyond the term of the lease, or shall make no alterations to the buildings, or improvements on the Premises without the lessor's prior written consent. Consequently, the lessee is bound, as provided by letter c, to eliminate any and all alterations made by him at his sole expense and without the lessor's prior written consent, if the lessor so requires at the surrender of the premises. The lessor who consented to those alterations shall not require rehabilitation unless provided by written agreement. Lastly, Letter c provides that, where the object of lease shows an increased in value as a result of repairs or alterations made by the lessee, the lessee may claim recovery as equitable compensation.
Article 9 lit. b and c must be interpreted in conjunction with Article 21. Indeed, the obligation to re-take possession of the good as provided by Article 21 applies to new acquisitions that proportionately fit into the returned inventory and are necessary to run the business. Necessity should be analyzed with regard to the existing notion of running a business. Nevertheless, more significant alterations "which bear considerable consequence beyond the term of the lease" require the lessor's prior written consent, who undertakes to re-take possession of them and shall not be entitled to require rehabilitation, unless the lessor was entitled to this by written agreement. In other words, the lessor shall take back the material acquired by the lessee, where, on the one hand, acquisitions proportionately fit into the returned inventory and where, on the other hand, the lessor agreed by written consent to more significant improvements.
b) In the case at hand, it is a matter of determining whether the installation of the cold sale counter required the lessor's prior written consent. The amount of investments made for this item was estimated by [Buyers] themselves at Sfr 63,240.70, which accounts for more than 30% of the total value of the furnishings and initial equipment, plus goodwill (the value of which is not indicated based on the evidence on record). Furthermore, this purchase cannot be regarded as necessary to run the business. Indeed, the lessee, who is a professional confectioner, decided to diversify and improve the offered products to consumers, transitioning from the sale of frozen confectionery to the sale of home confectionery. This investment is therefore directly related to the intentional change of direction taken by the lessees and cannot be regarded as necessary to run the state-owned business, which could have been continued in its previous form. Therefore it bears acknowledging that the purchase of the new cold sale counter does not proportionately fit into the returned inventory and was not necessary to run the tea-room's business. Thus the lessor's prior written consent was generally required.
Article 9 lit. c imposes on the lessee to eliminate the more significant alterations which have been made without the lessor's prior written consent, if the lessor so requires at the surrender of the premises. As a matter of fact, pre-trial investigative hearings show that at no time [Seller] formally required rehabilitation. To the contrary, she declared during her examination that the new direction taken by Lessees was a plus. Of course, this decision made her to hire a confectioner in order to continue running the business; hence, she uses the cold sale counter. She did not, in particular, demand that lessees rehabilitate at the surrender of the premises and at the inventory, which both happened on 9 January 1999.
That being so, as noted by [Seller], Article 9 lit. c of the lease agreement, where it requires the lessor's prior written consent to significant renovations and sets out the lessee's obligation to rehabilitation, has the same scope as Article 260a CO. Besides, the requirement of the lessor's prior written consent is imperative (as in this instance) and the parties cannot derogate therefrom. To this requirement, furthermore, is subject the lessee's right to be compensated for the increase in value that he generated relating to the object of lease. In other words, should the object of lease be significantly changed, the lessee is not entitled to any compensation without the lessor's prior written consent.The fact that the lessor waived his right to demand the rehabilitation of the rented premises or that alterations made without his consent generated an objective increase in value (Engel, Contrat de droit Suisse, 2ème éd., p. 161; Tercier, op. cit., 2ème éd., n. 1680 et 1888 ss; Lachat, op. cit., n. 2.5 p. 538 et 4.1 p. 541; Higi, op. cit., no. 5, 18 and 40 ad art. 260a). Furthermore, any attempt to ground [Buyers'] claim on the doctrine of abuse of rights would be in vain (art. 2 CC). If it is correct that the lessor knew of the renovation work during their implementation, and that she did not object to them, it must not be overlooked that such renovation work was carried out during the first months of a 10-year lease, renewable every 5 years. The lessor could therefore acknowledge in good faith that these fixtures would be amortized (at the very least, for the main part), at the expiry of the lease. In other words, the lessor's silence cannot be interpreted as consent to a possible increase in value and, a fortiori, to her compensation. Lastly, the issue of whether the lessees may re-take possession of some of the new fixtures goes beyond the issues of the present case, in the absence of closing written submissions on this point.
The fact that the lease agreement, with respect to the applicable legal provisions to the restitution of the object of lease, does not by any means obligate [Seller] to take back the new fixtures, [Buyers]' claims relating to the possible increase in value (the amount of which cannot be calculated based on the evidence on record), as a result of the change in business method, is dismissed.
6. [Buyers] challenge the existence of harm suffered by [Seller] as a result of the early termination of the lease agreement. As to [Seller], she avers that her harm amounts to the balance due by [Buyers] for purposes of paying the interest and amortization of the sum of Sfr 240,000, which they owe in arrears.
a) In an installment sale agreement, the seller shall deliver to the buyer movable goods prior to full payment of the price and the seller shall pay the price in partial installments (art. 226a CO). Article 226m ch. 4 CO provides that Articles 226h al. 2, 226i al. 1 and 226k CO are only applicable notably where the seller is registered at the trade registry in a business name or as an individual, or where the sale concerns goods, which are by nature to be sold to hand-craft or industrial businesses, or to have a professional use. Pursuant to Article 226h, if the buyer is required to pay the installments, the seller may demand the payment of either the payable installments, or the balance of the sale price in a sole installment, or termination of the contract. The seller may, nevertheless, demand payment of the balance of the sale price or termination of the contract, only if the seller expressly reserved this right and if the buyer has been required to pay at least the tenth (1/10) of the total sale price (�). For the remainder, general rules of sales law are applicable, among which Article 214 ch. 3, which provides that where the buyer was given possession of the object of sale prior to paying the price, the seller who required the buyer to pay may terminate the contract and recover the price of the goods, only if the seller expressly reserved this right. If the goods have already been delivered, it must be determined whether the parties included a termination clause in their contract. The termination clause allows the seller to terminate the contract as long as he required the buyer to pay the price. Such a clause may be express or implicit. It is implicitly contained in a delayed reservation of title clause (clause de réserve de propriété), notwithstanding its not being registered with the registrar or its being registered with an incompetent registrar; indeed, such a delayed reservation of title clause is premised, by definition, on the seller's right to terminate the contract (ATF 90 II 285 recit. 2a p. 292; Tercier, op. cit. n. 596-597).
Where termination occurs after delivery, each party is bound to make restitution of what it received under the contract. The buyer turns over the sold goods, whereas the seller returns the sale price, in capital and interest (Giger, Commentaire bernois, 2ème éd., n. 6 ad art. 226i CO; Stanislas, le droit de résolution dans le contrat de vente, p. 133). A forfeit clause is not generally admitted, which means that the seller may not claim to keep the full amount of paid installments. Pursuant to Article 226i ch. 3 CO, the seller may however ascribe a just and equitable rent on the payable installments due for the period running between delivery of the goods and their return (ATF 95 II 312 consid. 3 p. 317). The seller may also ascribe an amount for the extraordinary deterioration of the goods; that is, for deterioration above ordinary wear and tear, the latter being covered by rent (Tercier, op. cit., no. 1001-1002).
b) As noted at recital no. 3a above, it bears determining the nature of the contract entered into by the parties in order to apply to each claim the applicable rules of the Contract. In the case at hand, [Seller] claims payment as damages of a sum equal to the reimbursement of the outstanding sum due from lessees on the price of designs, furnishings and goodwill.
The parties entered into a sale agreement containing a delayed reservation of title clause (clause de réserve de propriété) of an amount of Sfr 60,000, a lease agreement and, last but not least, a deed acknowledging debt of an amount of Sfr 240,000. This amount is equal to the balance of the sale price of Sfr 150,000, plus interest until the expiration of the Contract in 2007. All said and done, the parties intended to enter into a sale contract for the furnishings, designs and goodwill of an amount of Sfr 200,000, whose price was payable as follows: Sfr 50.00 on 1 June 1997, the balance of Sfr 150,000 in monthly installments of SFR 1,620 (inclusive of interest), payable with rent. The sale containing a reservation of title ("réserve de propriété") of an amount of Sfr 60,000 covered the price for designs, furnishings and the business of the "Croissanterie". The expert highlighted that this amount is clearly too low, which leads to think that it is included in the amount for the deed acknowledging debt of an amount of Sfr 240,000. From an economic point of view, as indeed shown in the parties' examination, [Buyers] did not have sufficient personal funds to purchase the furnishings, designs and business. Hence, [Seller] sold these goods to them and agreed, after receiving a down payment of Sfr 50,000, to an installment plan. However, in order to secure her position, she made her lessees sign a deed acknowledging debt and enter into a sale agreement containing a delayed reservation of title clause (clause de réserve de propriété). Even if the sale agreement stipulates a sale price of Sfr 60,000, it bears acknowledging that, as did the expert, the sale was actually entered into, which is not disputed by [Seller], for a total price of Sfr 200,000. For this reason, the sale, and the delayed transfer of property clause attached thereto, covers the furnishings, designs and business for a price of Sfr 200,000. For reason of [Seller] having delivered the object of sale to the [Buyers] prior to the full payment of the price and of [Buyers] having undertaken to pay the price in partial installments, the rules of installment sale must be applied.
Besides, following the early termination of the lease, the lessees left the premises and cancelled the payment of installments, which, as they challenged, are not due from them; hence, they are required to pay them. The amount of arrears being higher than the tenth (1/10) of the total sale price of Sfr 200,000, it is justified to apply the rules pertaining to termination of the contract, as [Seller] reserved this right. [Buyers] must return the object of sale. In effect, this restitution occurred, for the main part as of February 1999, date at which the lessor took over the running of the business. In return for which, the latter must return to [Buyers] the amounts paid for the 19-month trade period, that is, Sfr 80,780 (Sfr 50,000 + [Sfr 1,620 X 19 monthly installments]). She may ascribe to this sum a just and equitable rent for the time period running between delivery of the good and the return thereof, that is, during twenty (20) months. In the absence of any offer of proof on this matter (on the relevant elements for purposes of determining this rent cf. Ginger, op. cit., no. 7 ff as art. 226i CO), the Honourable Court may only take into consideration the amortization, for the 20-month period, of installation, furnishings as well as goodwill (Käfer, op. cit., no. 286 ad art. 960 CO) as objects of sale (that is, Sfr 200,000 x 13.2% x 20/12 = Sfr 44,000), as well as interest of 5% on the balance of the average sale price ([Sfr 150,000 + Sfr 132,400] : 2 = Sfr 141,200) for the same period (ATF 110 II 244 recit. 2d; SJ 19988 p. 108, recit. 2c and 74 p. 165 recit. 2; Jeanprêtre, FJS no. 233 p. 18). It bears ascribing to the amount due to the lessees the coffee machine and the refrigerator, of which they got rid during the lease and which the lessor had to replace. [Buyers] having by no means proved that the state of the appliance justified their elimination or that they were not usable, regard must be had, absent any other proving elements, to the replacement values (Sfr 5,500 + Sfr 500).
c) aa) Due to the sale entered into by Dame  and the [Buyers]  and given that the lease agreement specifies that the buyers were domiciled in France in February 1997, the Vienna Convention on Contracts for the International Sale of Goods (hereafter, "CISG") is generally applicable (art. 1(1)(a) and 10(b) CISG, p. 67 no. 45 and p. 88 ff no. 61, also p. 74 s. n. 51 for the application of the Vienna Convention to installment sales; Neumayer/Ming, Vienna Convention on Contracts for the International Sale of Goods, no. 4, 10 ad art. 1 CSIG; Volken, scope of application, interpretation, gaps, usages in the 1980 Vienna Convention for the International Sale of Goods, p. 26 s.). The sale of immaterial rights, such as goodwill, falls out of its scope of application (Tercier, op. cit., no. 1138; Marchand, op. cit., p. 87 no. 59 and rem. no. 247; Neumayer/Ming, op. cit., no. 3 ad art. 1 CISG). In the case at hand, there is no indication on record for purposes of calculating goodwill or itemizing the sold machines and fixtures. This issue is only significant in the case where the application of the Convention would lead to a result different from that retained at the previous recital.
bb) As previously seen, the [Buyers] ceased to pay the agreed installments for the payment of the tea-room designs as of January 1999 (the last installment was paid in December 1998). On 6 January 199, [Buyers] made known to [Seller] that they were willing to terminate the "lease agreement" to be effective immediately and, implicitly, cease to pay the rent, along with the monthly installment. Upon receipt of this correspondence, it was thus clear that they were willing to suspend the payment of the balance of the sale price (that is, approximately, the two-thirds (2/3) of the total price). On 9 January 1999, the object of sale was furthermore returned to the [Seller] (except for the coffee machine and the refrigerator).
[Buyers'] final refusal to pay the main portion of the sale price allowed the [Seller] to terminate the sale agreement (art. 64(1)(a) CISG; Neumayer/Ming, op. cit., no. 3 ad art. 64 CISG). Moreover, this "termination" of the contract occurred by way of conclusive deeds, at the latest at the return of the object of sale (ATF unpublished in the matter 4C.105/2000 recit. 2c/aa and 3). In which case, each party is released from its obligations but is bound to make restitution of any and all of the benefits received under the contract (art. 81 CISG). The seller, in particular, is bound to return the price paid to him, in capital and interest (art. 84(1) CISG; Neumayer/Ming, op. cit. no. 2 ad art. 84 CSIG). However, where the buyer benefited from the object of sale, the seller may deduct from the enrichment of the buyer as a result of the use of the good, as well as the exchange value consequent upon loss (as it happens, to the refrigerator and the coffee machine) or upon the deterioration of the merchandize (art. 84(2) CISG; Neumayer/Ming, op. cit., no. 3 ad art. 84 CISG; Weber, Vertrasverletzungsfolgen in Wiener Kaufrecht, p. 188 s.).
[Buyers'] enrichment results from the use of the tea-room's equipment by saving the amortization on the 20-month period of the fixtures that they should have purchased, had they not re-taken possession of the commercial furnishings and enjoyed the use of this equipment, without paying the full amount of the price, which allowed them to benefit from the interest upon the unpaid balance. Hence, the evidence on record to be taken into consideration, for purposes of determining the debt corresponding to the return of paid installments, adds up with those retained as part of articles 226 ss CO. The application of the Vienna Convention therefore leads to a similar result.
d) In light of the above, [Seller] shall pay to [Buyers] the sum rounded off to Sfr 18,935 (Sfr 80,700 - Sfr 44,000 - [Sfr 141,200 x 5% x 20/12] - Sfr 6,000) with legal interest of 5% annually (art. 154 CO) as of 7 September 1999, the day after the receipt of the reply brief, first notice (art. 102 CO).
7. Lastly, [Seller] claims an amount of Sfr 33,304.85 as expenses relating to the replacement of the missing material.
a) At the expiry of the lease, Lessee shall return the goods in the state that results from using it in conformity with the Contract (art. 267 al. 1 CO). Besides, Article 18 of the Contract stipulates that upon expiry of the contractual relationships, Lessee shall return the commercial furnishings as well as the other objects covered by the lease, which are fit for use and equivalent in kind and in volume to the returned goods, in accordance with the signed inventory; what remains reserved, however, is the capital loss derived from the ordinary use of the goods, as well as the non-replaced used goods pursuant to Article 17 lit. a. Upon the lessee's choice, the missing or used objects may be paid at their residual value or be replaced in kind.
b) In the case at hand, [Buyers] removed, when vacating the premises, some material which had been made available to them at the beginning of the lease (that is, a coffee machine and a refrigerator). Their replacement was, however, taken into account (cf. 6b in fine). Furthermore, the balance of the material was purchased by the lessees during the lease and was thus not made available by [Seller], who may not require their replacement; even less may she do so since it was not established that this balance was essential (and not simply useful) to run the tea-room.
8. At first instance stage, [Buyers] submitted a claim for payment of the sum of Sfr 116,356, until the closing of pre-trial investigative hearings, then of the sum of Sfr 98,175.35. The judgment was eventually rendered in their favour, up to a limit of Sfr 18,935. [Seller] first submitted a claim for payment of a sum of Sfr 184,250, then for payment of a sum of Sfr 200,524.85 in her closing written submission. The court eventually found in her favor, up to a limit of Sfr 8,000. Moreover, each party disputed the other party's claims. Given the outcome of the case, the allocation of attorneys' costs and fees made at first instance stage (1/4 assumed by [Buyers] and � assumed by [Seller]) must be affirmed (art. 252 al. 1 CPC).
The quota lot of attorneys' fees and costs is not challenged at appeal stage. It is therefore referred, on this point, to the relevant recitals of the first instance judgment (recital 6).
9. By way of appeal, [Buyers] submitted a claim for payment of a sum of SFR 89.737, whereas [Seller] claimed a sum of Sfr 200,524.85. Given the outcome of the proceedings, [Buyers] shall assume 1/5th of attorneys' fees and costs (art. 252 al. 1 CPC).
a) When it comes to determining the legal fees, Article 11 LTar provides that they must be fixed depending on the value of the dispute, the scope and technicality of the case, the way in which the parties act and their financial situation. Pursuant to Article 14 LTar, legal fees at first instance stage range between Sfr 10,000 and Sfr 35,000 for a value of the dispute of an amount of Sfr 290,261.85 (Article 14 al. 2 and 27 LTar: Sfr 200,524.85 + Sfr 89,737). By virtue of Article 16 LTar, legal fees at appeal stage are calculated with a reduction coefficient of 60%.
In the case at hand, the appeal judgment is rendered without hearing on the basis of the parties' written submissions (art. 309 CPC). However, the present case raises relatively complex legal issues. Consequently, legal fees at appeal stage are fixed at Sfr 7,000, inclusive of disbursements. They will be deducted from the down payments made by each party (2 x Sfr 5,000, after deduction of Sfr 30 corresponding to the balance of legal fees at first instance stage, which are non covered by the down payments made by [Seller]), subject to the reimbursement by [Seller] to [Buyers] of the sum of Sfr 630 (Sfr 7,000 x 4/5 - Sfr 4,970), the registry of the tribunal returning them the sum of Sfr 2,970 (Sfr 5,000 - Sfr 600 - [Sfr 7,000 x 1/5].
b) The liability to pay legal fees entails the liability to pay legal costs (art. 260 al. 1 CPC). The latter comprises fees and expenses of the parties' attorneys. (art. 3 al. 3 LTar).
Attorneys' fees are fixed depending on the nature and significance of the case, its technicalities, the scale of work, the time usefully spent on the case and on the parties' financial situation (art. 26 al. LTar). Given the value of the dispute, attorneys' fees generally range between Sfr 14,600 and Sfr 19,900 at first instance stage (art. 32 al. 1 LTar). At appeal stage, attorneys' fees are fixed with a reduction coefficient of 60% (art. 35 al. 1 LTar).
In the case at hand, the parties' representatives each wrote a statement of appeal and a determination, the statement of appeal of [Seller]'s attorney being more detailed than that of [Buyers'] attorney. Consequently, having regard to the technicality of the case and to their activity, [Buyers]' representative's fees shall be fixed at Sfr 7,100 (inclusive of Sfr 20 as expenses) and [Seller]'s attorneys' fees at Sfr 7,500 (inclusive of Sfr 25 as expenses). [Seller] shall therefore pay to [Buyers] the sum of Sfr 5,680 (Sfr 7,100 x 4/5) as compensation for their expenses and [Buyers] shall pay to [Seller] the sum of Sfr 1,500 (Sfr 7,500 x 1/5), in joint liability and in equal shares (art. 253 al 1 CPC).
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiffs-Appellee of France are referred to as [Buyers] and the Defendant-Appellant of Switzerland is referred to as [Seller]. Amounts in the currency of Switzerland (Swiss francs) are indicated as [Sfr].
** Claire Chabat is a candidate for a Ph.D. in Comparative Law at the University Panthéon in Paris. She was a participant in the 2007 Willem C. Vis International Commercial Arbitration Moot on the CISG.

References: art. 960
 art. 48
 art. 117
 art. 254
 art. 254
 art. 260
 art. 226
 art. 226
 art. 960
 art. 1
 art. 1
 art. 64
 art. 84
 art. 84
in fine