Source: http://cisgw3.law.pace.edu/cases/061219f1.html
Timestamp: 2019-04-19 22:56:29+00:00

Document:
Agrico v. SIAC et al.
On 5 February 1998, Agrico Cooperatieve Handelsvereniging Voor Akkerbouwgewassen B.A. [Seller], a company incorporated under Dutch law, delivered 25 tons of Estima potato plants to the French firm Société Industrielle et Agricole du pays de Caux or S.I.A.C [Buyer]. The plants stemmed from seeds produced by Mr. Schenk in The Netherlands. They were identified as lot no. 5-6329 and certified by the Dutch regulatory body NAK.
The [Buyer] grew and dug up the plants in September 1998 after certification by the French Official Control Service (SOC). Part of the yield (A1) was sold to potato farmers and the remaining lot (i.e., 21 tons) was retained for a second multiplication.
The tubers resulting from that second multiplication were grown and, after certification by the SOC, [Buyer] harvested them in September 1999 and sold them to a number of French farmers.
In 2000, the potato plants cultivated by the farmers were invaded by the Ralstonia Solnacearum bacteria, also known as Brown Rot. As this is a quarantinable disease, the Regional Plant Protection Agency (SRPV) launched an enquiry into the outbreak. In October 2000, the Agriculture and Forestry Authority in Upper Normandy, by virtue of Articles 352 and 359 of the French Rural Code, ordered the [Buyer] to destroy the contaminated crops and disinfect the premises as well as the equipment. The authorities also imposed a ban on further cultivation of potato plants.
On 14 November 2000, [Buyer] obtained an interim measure to instruct an expert witness. By successive orders, this measure was extended to several other traders and farmers.
In his report dated 17 May 2003, the expert witness, Mr. A. found that the only probable source of contamination was consignment No. 5-6329 from The Netherlands which was introduced in the spring of 1998. That was, according to the expert, the consignment that [Buyer] purchased from [Seller]. The expert witness assessed the amount of damages suffered by [Buyer] to be EUR 316,835.74, and estimated the global losses to the farmers involved at EUR 420,003.96.
On 13 July 2005, the Tribunal de Grande Instance of Rouen ruled on applications brought by the [Buyer] against the [Seller] on 4, 5, 7, 8, 9, 10, 11, 16, 17, 22, 25 and 28 July 2003 and 17 February 2004. The Tribunal also ruled on claims filed in May 2004 by Mr. Sylvain acting as manager for EARL de la Régie (a farm corporation based in Gannay-sur-Loire] as well as on applications by 19 other farmers whose crops had also been contaminated.
[Seller] pay litigation costs, including trial and expert witness costs.
[Seller] made an application for leave to appeal against this decision and, on the faith of [Seller]'s final submissions -- to which this court shall refer so as to provide a complete background of allegations and grounds -- [Seller] asks that the decision of the first instance be reversed in full and that the [Buyer] and the farmers lose the right to rely on a non-conformity argument as their action is time-barred, under Articles 38 and 39 of the CISG and under Article 1648 of the French Civil Code.
Further or alternatively, [Seller] sought leave to set aside the expert witness report produced by Mr. A. Moreover, were the court to reject these submissions, [Seller] argued, the court should remove [Seller] from the proceedings and strike out the actions brought by [Buyer] and the farmers. Besides, in the event that the court finds that [Seller] is liable for damages suffered by the farmers and the [Buyer], the [Seller] submits that any amount of losses should be assessed as follows: EUR 45,130.31 payable by [Buyer] and EUR 255,077.63 by the farmers.
Further still, [Seller] asks this court to impose a joint liability for damages as between [Seller] and [Buyer]; and that [Buyer] should be ordered to pay [Seller] the sum of EUR 15,000, as required under Art. 700 of the New Code of Civil Procedure. Furthermore, [Seller] argues that the farmers should be ordered to pay, jointly and severally, the [total] amount of EUR 5,000 on the basis of the same provision of the New Code. Lastly, [Seller] contends that all respondents should be ordered to pay full litigation costs: that would include costs incurred at trial and on this appeal, plus the costs for the expert witness report -- subject to the right of recovery by attorney on behalf of SCP CVRE Law Firm as provided under Art. 699 of the New Code of Civil Procedure.
[Seller] describes how it rigorously observed the procedures involved in the growing of its plants, and alleges that [Buyer] was in breach of the terms of the contract, under which [Buyer] agreed not to perform a second multiplication of the plants. (In fact, [Buyer] is alleged to have performed three multiplications in total). Furthermore, [Seller] states that such contractual stipulation is consistent with French legislation.
[Seller] contends that, under the CISG, [Buyer] lost the right to sue [Seller] and that the CISG is applicable to contracts for the international sale of goods concluded between parties of two signatory States. Further, [Seller] submits that Art. 39 of the CISG precluded [Buyer] from relying on a lack of conformity of the goods unless notice of the nature of the defect has been given to [Seller] at the latest within a period of two years from the date on which the goods actually passed to [Buyer]. Further still, [Seller] contends that that this is a strict time limit and that the concept of non-conformity includes latent defects unknown to the [Seller].
[Seller] denies having admitted that the area where its supplier, Mr. Schenk, operates had been contaminated and states that it was only aware that the area was close to a contaminated area. [Seller] then submits that [Buyer] cannot rely on the provisions of Art. 40 of the CISG.
[Seller] also avers that the action by the farmers or sub-purchasers is time-barred: The Vienna Convention does not apply to the relationship between the sub-purchasers and the initial seller; instead, the "short time" rule of Art. 1648 of the French Civil Code should apply; [Seller] was first summoned, under request of the sub-purchasers in March and May 2004, while the disease was detected as early as the summer of 2000. Since the limitation period is not subject to interruption, the court should dismiss the sub-purchasers' claims.
[Seller] submits that the sub-purchasers have a contractual and not a tort-based claim so long as precedents on chains of contracts apply which allow the end-user to sue the manufacturer.
Alternatively, [Seller] seeks a declaration that the expert witness report should be set aside since the expert witness failed to observe the adversarial principle when considering a number of documents provided by the SRPV. These documents, it was alleged, were not subject to the parties' discussion prior to the report being filed and during the proceedings the documents were only partially discussed. Moreover, the expert witness did not himself undertake the inspection.
Further or alternatively, [Seller] seeks permission to be dismissed from the proceedings on the basis that no hidden defects have been shown to have existed at the time of passing of risk, as required by the CISG. Moreover, it would be impossible, according to [Seller], to ascertain such defects given the lapse of time between the delivery of goods and the moment the bacteria was detected, and on account of the successive multiplications of seedlings. Thus, it is highly likely that there were several potential sources of contamination during those processes. Besides, there is no evidence to suggest that [Seller] is to blame, no causal link exists between [Seller]'s actions and the damage suffered by the victims. Accordingly, [Seller] rejects as unacceptable the contention that the contamination originated from The Netherlands.
In essence, [Seller]'s submissions are a reiteration of arguments raised before the Tribunal de Grande Instance. [Seller] contends that this tribunal erred in being too quick to find that the likely cause of contamination of the goods was all attributable to [Seller]. [Seller] also attacks the tribunal for deciding that the source of such contamination was within the area where the Dutch farmer Schenk is established, in order to assess the extent of [Seller]'s liability. [Seller] further maintains that the expert witness could not confirm any contamination in the original consignment imported in 1998. Furthermore, [Seller] places reliance on terms of the CISG stating that the seller is liable only for any defect of conformity existing at the time of the passing of risk and, where such defects occur long after the passing of risk -- in the absence of any proof of contamination at the time of delivery to [Buyer] and where there is doubt -- the buyer should bear the consequences for failure to provide satisfactory evidence of lack of conformity.
- The successive multiplications of seedlings by [Buyer] may well have brought in new external factors of contamination, rendering the finding of [Seller]'s liability inaccurate. Crucially, the conditions under which [Buyer] cultivated and multiplied the seedlings were not fully investigated -- especially the conditions that prevailed in 1998 at the farms of Ectot-lès-Baons and Gremonville. The SRPV at Rouen made serious errors in maintaining that the plots of land in which [Buyer] sowed Estima seedlings had not experienced any previous potato cultivation. In fact, that does not hold true for at least one of the plots. Vital pieces of evidence gathered by the SRPV were passed on to the expert witness quite late and thus were neither verified nor fully incorporated in the report. This, the [Seller] contends, undermines the discussion of relevant evidence.
- The traceability of [Buyer]'s production process was impaired because [Buyer] rents the plots where it cultivates plants; hence, the information about those plots is quite incomplete. The contentious consignment was tested both in The Netherlands and in France prior to its introduction and, all in all, the tests produced negative results.
- The contested batch of plants was part of a larger consignment sold to other customers. These customers successfully multiplied and sold the plants whose progeny have also been free from any bacterial attack.
- Mr. Schenk's business is extensively supervised, probably because it is located in a high-risk area, and such a business has been long recognized as exempt from any attack before and after the delivery of the contentious lot. It is therefore wrong to suggest that Mr. Schenk was banned from cultivating potatoes and that the terms of any such prohibition were breached by both the [Seller] and [Buyer].
- Only the plants multiplied by [Buyer] in 1999 were affected by the Ralstonia Solanacearum virus at the time of the 2000 harvest. The award of compensation made by the European Commission to the victims of attacks of Ralstonia Solanacearum cannot be taken as any admission of liability, since the settlement may have been granted on the basis of mere presumption.
- [Buyer] performed unauthorized multiplications, breaching the terms of the contract which provided for a single multiplication to be performed, and the tribunal wrongly construed a fax from [Seller] dated 11 March 1999 as an indication that [Seller] had approved of [Buyer]'s move to carry out several multiplications of the plants.
- The unauthorized multiplications, coupled with the [Buyer]'s disregard for cultivation standards, constitute the source of the Ralstonia Solanacearum outbreak.
[Seller] finally submits that [Buyer] could not discharge the onus of proof which squarely falls upon [Buyer].
In the alternative, [Seller] claims for apportionment of liability with [Buyer] and challenges the way in which the expert witness assessed the damage suffered by the farmers.
Buyer] asks the court to uphold the findings of the tribunal as well as that an award of costs be made against [Seller].
At the outset, [Buyer] denies having agreed with [Seller] that [Buyer] would not proceed with a second multiplication. [Buyer] points out that among the parties a practice exists which falls outside the contractual arrangements, but well into technical standards. Moreover, [Buyer] denies having performed a third multiplication of the plants and stresses that French Official Service had certified its production. .
[Buyer] indicates that, contrary to [Seller]'s claims, when the Estima consignment was introduced and tested in France, the test results did not prove all negative and that at least one of the plants tested positive. However, control tests focused on Clavibacter and not on Ralstonia Solanacearum.
In addition, a farmer who did not purchase "Estima" plants in the 5-6329 consignment from [Buyer] -- but instead sourced directly from [Seller] -- had his plantation ruined due to Ralstonia Solanacearum, following the IF+ tests performed on two different serums and a positive confirmation test.
[Buyer] contends that Article 39 of the CISG is not applicable to hidden defects, but only to a defect of conformity. Moreover, [Buyer] alleges that [Seller] knew that the operations of its supplier, Mr. Schenk, were located in a contaminated zone where potato seeds should not have been sown -- a fact that [Seller] admitted before the first instance tribunal. Further, [Buyer] argues, [Seller] concealed that circumstance from [Buyer] and cannot therefore avail itself of the time-limitation of Article 39, as provided by Article 40 of the Convention. By the provisions of Article 40, the seller is not entitled to rely on articles 38 and 39 where the lack of conformity pertains to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.
[Buyer] submits that [Seller]'s plea to set aside the expert witness report should be declared inadmissible because [Seller] did not raise such an argument in the first instance proceedings but moved straight to the merit of the case. Besides, under Articles 175 and 112 of the New Code of Civil Procedure, an expert witness is perfectly entitled to collect written as well as oral evidence from anybody providing that the names, surnames and other details of such persons are clearly specified. The parties, [Buyer] argues, were able to discuss the expert's findings and numerous meetings took place which involved the parties, the expert witness, the SRPV and its Dutch counterpart.
On the faith of Article 35 of the CISG, [Buyer] says it has produced evidence suggesting that the source of contamination was in The Netherlands and that there was a lack of conformity of the goods delivered by the Dutch seller. [Seller] has adduced no evidence to the contrary as the tests carried out by NAK are not sufficiently accurate [to defeat Buyer's argument]. Besides, [Buyer] would like to remind the court that under Art. 36 of the CISG, the seller is liable for any lack of conformity existing when the risk passes to the buyer, irrespective of whether the defect is only detected at a later stage.
[Buyer] denies that it performed a third multiplication of the plants and challenges the claim that expert investigations into its production methods were inadequate.
- Evidence of contamination collated by the Plant Protection Agency was persuasive enough for the European Commission to award compensation to France under Directive 2000/29, after a review confirmed the seriousness of the health control measures and administrative investigations.
- Although [Buyer] cultivates different varieties of potatoes, only "Estima" plants were affected by the Ralstonia Solanacearum bacteria.
The farmers request that the decision be upheld.
They urge that their action is not time-barred, since it bears a quasi-tort character and hence does not fall under Article 1648 of the French Civil Code. Alternatively, if the court were to retain the contractual nature of the action, they would argue the contract was a sui generis one and not a proper contract of sale.
If, however, the court decided to apply Article 1648 of the French Civil Code, the farmers request the court to find that they acted within a short time after the expert's report was filed. The [farmers] also ask the court to have regard for the difficulties in identifying the origin of the contamination, and they submit that when the expert's report was filed the limitation period was interrupted. Moreover, [Seller] waived its right to rely on the argument of prescription of an action by not raising the issue at trial.
They also oppose the request to invalidate the expert witness' report.
Finally, they maintain that [Buyer] is liable to them in breach of contract whereas their action against [Seller] lies in quasi-tort.
On 23 June 2006, EARL de Yemanville appealed to seek confirmation for its own benefit of the judgment against [Buyer]. Also, if [Seller]'s appeal were to be rejected, Earl de Yemanville would request the court to confirm the judgment regarding joint and several liability of [Seller]. In conclusion, Earl asks the court to order [Seller] and [Buyer] jointly or severally to pay EUR 1,500 and costs, by application of Article 700 of the New Code of Civil Procedure..
- Declare [Seller]'s appeal admissible but unfounded and to confirm the trial award of costs for the first instance (including costs for the expert report) and appeal proceedings against [Seller] as well as the sum of EUR 1,000 as provided by Art. 700 of the New Code of Civil Procedure.
On 19 September 2006, EARL de la Régie made similar submissions in its last brief on 19 September 2006.
Whereas, it is appropriate to quash the pre-trial closing order and to receive the briefs thereafter filed by Mr. H... and EARL de la Régie, taking into consideration the tardiness and extensiveness of the brief filed by [Seller] on 1 September 2006 -- as to which no other party disagrees.
The court finds that the issue of the dismissal of [Buyer]'s action must as a result be determined prior to the question whether the plants delivered by [Seller] were infected with Ralstonia Solanacearum and whether [Seller] knew about such defect of conformity, and if so whether [Seller] concealed such defect from the [Buyer].
The tests were performed on samples from all the farms involved in this dispute, and from homogeneous lots directly derived from the clonal source 5/6329, having the same physiological age, from each one of the relevant crops. Those tests have revealed the presence of the Ralstonia Solanacearum bacteria. The ensemble of lots of other varieties produced both by [Buyer] and by its clients have all proved negative. The likely sources of contamination within [Buyer] were all explored. The evidence gathered by the SRPV at Rouen bear witness to that fact, and we have been able to confirm it when inspecting [Buyer]'s premises. The plots where the 'Estima' were planted have never experienced any previous potato cultivation. [Buyer] does not conduct irrigation. Farming equipment and facilities are regularly disinfected. There is no use of external materials. There is no place for use of industrial residues, sludge or scum from factories.
All these facts lead to the conclusion that the source of contamination was external.
The analyses carried out on the contentious consignment, both by the NAK in The Netherlands and the SOC in France did not reveal any contamination. Therefore, it is no longer possible to assert a direct contamination of the lot imported in 1998. However, there has been contamination in The Netherlands since 1995. Even though no contamination in Mr. Schenk's land has been proved, farms in the zone where he is established are contaminated. In spite of the efforts by the Dutch government, contamination is latent in almost all potato-farming areas. If the level of contamination is too weak at the outset, no analyses will reveal its existence. Under certain favorable environmental conditions, the disease can develop by means of successive multiplications two years after the introduction of the plants. We concur with the conclusions reached by the Plants Protection Agency, the central administration and the LNPV: these investigations lead us to believe that the only probable source of contamination is the batch of Estima seeds originating from Holland and introduced in the in the spring of 1998.
We have assessed the loss suffered by [Buyer] and the farmers in Chapter VIII.
The facts date back to 2000, the figures are in Swiss francs, all calculations were made in Swiss francs and the result converted into Euros. The final damage for the SIAC amounts to 316,835.74 €. The overall damage to farmers is EUR 420,003.96.
Since the facts date back to the year 2000; the figures are shown in Swiss francs and then converted into Euros. The final damages payable to [Buyer] amount to EUR 316,835.74; whereas the overall losses to the producers amount to EUR 420,003.96."
Whereas, [Seller] reiterates that the lots sold to [Buyer] were certified by the Dutch regulatory body, and its French counterpart, and that, although the business of their supplier, Mr. Schenk, is located near the sites of contamination, such business is so rigorously controlled that it has never faced any production ban from the authorities.
The SRPV investigation -- which was conducted in accordance with the Order of 11 February 1999 on the control of the bacteria after GAEC H, a Champagne-based truck-farmer, reported the outbreak in August 2000 -- highlighted the presence of Ralstonia Solanacearum in a sample obtained from that farmer's crop. That investigation concluded that the contaminated patato seedlings commercialized in Champagne originated from the lot No. 5-6329 which [Seller] sold to [Buyer] in February 1998. Besides, the investigation showed that the source of infection is not endemic but lies outside [Buyer]'s operations and that the only possible source of contamination is the consignment of Estima potato seedlings originating from the Netherlands and introduced in 1998.
Among the regulations applicable at the time of the sale, namely February 1998, one finds the Community Directive 77/93 CCC (Annex PVI) and the decision 97/649, which allow Member States temporarily to take additional measures in order to protect themselves against the spread of Ralstonia Solanacearum originated from The Netherlands. That text has now been repealed.
According to the administrative investigation which followed the declaration of the disease by GAEC H, a truck-farmer in Champagne, the phytosanitary passport of 1999 has been tracked back to [Buyer] who purchased the plants from [Seller] in 1998; such study found that, given the absence of irrigation on [Buyer]'s crops and the fact that [Buyer] cultivated certified plants only on lands which were known to have had no previous potato growing and that [Buyer] did not share any materials with other farmers, the likely source of contamination was the lot of potato seedlings stemming from The Netherlands and introduced in February 1998 and multiplied over two years by [Buyer].
Three other plants producers No. 210/189 and 210/014 in the North and No. 22/278 in Champagne Ardennes received seed potatoes directly from the Dutch producer and those were resold to several consumption potato farmers. One Picardie-based farmer has withheld part of his 1999 harvest for personal use in 2000. The routine analysis showed positive results. The confirmation tests were unable to isolate the bacteria. Even though the cultivation was considered negative under applicable regulation, the crops were eventually destroyed as a precautionary measure.
According to the letter dated 27 April 2001 from the DGAL/SDQPV, concerning the results of a survey conducted by the EEC in 1999, the overall results show the extent of the contamination in potatoes and surface waters. Those results also indicate the level of control methods put in place by The Netherlands.
The biological tests performed in The Netherlands, while carried out in compliance with the procedure laid down by the EEC Directive L235 of 21 August 1998, do not guarantee a 100% result. There is a narrow margin of error, basically due to the sampling process. However, the responsiveness of the tests is very high and can reveal the presence of bacteria even when the symptoms have not been observed in the plants field. In fact, the bacteria may lie dormant for some time. The tests were performed on samples of 200 tubers each 25 tons and other tests conducted in The Netherlands and France proved inclusive.
The Netherlands also conducts a screening of its surface waters on a regular basis (and at least 10,000 tests are carried out per year).
The records tracking the sampling process are perfectly safe.
The disputed lot was tested by the SOC upon its introduction in France in 1998 and those tests proved negative.
A visit to Mr. Schenk's business revealed that two cases of Ralstonia emerged in the northeast of the polder in 1996 and that, in 1997, two other cases were reported 15km away from his farm. Mr. Schenk stores his production in a sorting area some km away from his farm. His equipment is clean but may be shared from time to time with a neighbor who cultivates potato for consumption purposes..
Before entering the sorting area, the goods are controlled by the NAK. The conservation and tracking conditions are excellent.
According to the SRPV representative of the SRPV, it is not out of character that the tests conducted upon the introduction of the impugned goods in France could prove negative; inasmuch as the tests proves positive only if the contamination is large enough; and where such contamination is weak it will take several years during which the germs are reproduced before we can identify infected plants.
In 2001 and 2002, [Buyer]'s customers were all inspected and nothing was found as a result of such inspection. This confirms that the contamination did not come from the soil. The Plant Protection Agency [SRPV] believes the contamination stems from the lot introduced in 1998 by [Buyer] in Seine-Maritime -- a region which until that time remained disease-free, especially in lands occupied by [Buyer]. According to [SR]PV, the A2 plants were replanted by [Buyer], which was inconsistent with the technical stipulations of the contract, but there was some tolerance in that regard.
[Buyer] undertakes various assorted crop rotations and on an annual basis rents virgin lands where no potato has been planted before. [Buyer] does not use irrigation or watering, nor does [Buyer] exchange any material with other potato producers. The region of Pays de Caux, where [Buyer] is established, is free from Ralstonia.
From its own investigations, the LNPV observes that the contamination came from the Dutch lot 5/6329 imported by [Buyer]. The production zones in The Netherlands are very strongly contaminated, in particular Mr. Schenk's area, where irrigation has been prohibited since 1996.
The expert's report, on page 96, provides that the decision by the EEC against The Netherlands on 24 November 1995, indicates that "in the case of potatoes from the zones where the presence of the disease is known, the tubers should not be used as seed potatoes."
While irrigation generates higher profitability, Mr. Schenk did not make any returns; and operating in a high-risk, he got his share of the strains of the virus. .
The chances of retrieving an infected tuber are 18.13% for samples of 200 units in 25 tons.
The Dutch authorities did not specify the boundaries of the contaminated area and the extent to which the EEC decision of 24 November 1995 had been applied as regards the ban on irrigation and watering as well as the ban on any sale involving seed potatoes from contaminated area even though the tests proved inclusive..
All water canals of water do communicate throughout the polders.
The investigation by the SRPV at Rouen confirmed that that [Buyer] made no use of irrigation and that [Buyer] did not resort to hiring of equipment or manure spreading. The negative environmental controls confirmed, according to the SRPV, the origin of the contamination as being the plants imported from The Netherlands. The SRPV have always conducted thorough investigations, which rules out the notion that contamination goes back to the period before 1998. A contamination prior to 1998 would have spread the disease over the whole territory and would have been accounted for in the surveillance report. Even with 100 analyses per lot, the probability of detecting a contaminated lot is 63%, which leaves 37% undetected, that is, one chance in three for a contaminated lot to be found safe.(See page 129 of the report).
The contract clause prohibiting multiplication for two consecutive years amounts to a tacit acknowledgement of the risk; if the bacteria did not exist on the onset, the multiplication would not be a matter for concern and yet the multiplication by [Buyer] allowed the bacteria to be detected and its spread to be contained.
The Commission granted France's request for a financial contribution regarding the destruction and disinfection operations performed on the basis of Article 23.1 of Directive 2000/29, since the harmful organisms have been introduced through consignments of vegetables from a third country or another area of the Community.
The court finds that the aforementioned elements are not sufficient enough to come to any meaningful conclusions as to the presence of Ralstonia Solanacearum in the imported plants at the moment when they were delivered.
The plants cultivated in places referred to in item aab) -- which responded negatively to the testing for detection of Ralstonia Solanacearum, and were officially known as having no contact or clonal linkage to contaminated potato plants or plants irrigated with waters of a source that is shared with contaminated places of production -- may be used as potato seedlings.
bbb) In the case of potato seedlings from areas other than those stated in item Aaa), tests are due in accordance with Article 16a of Directive 77/93/EEC, comprising at least 200 tubers each 25 tons or fraction thereof and declaring the samples free of Ralstonia solanacearum.
Whereas, so long as there was a certificate showing that the tests on the contentious plants were negative, [Buyer] cannot argue that [Seller] had concealed a lack of conformity that he did not know, given that Mr. Schenk was not subject to ban from production, and since the mere fact that the plants were grown in an area devastated by potato Brown Rot cannot on its own amount to concealment as provided by Article 40 above;.
Whereas the court dismisses [Buyer]'s action against [Seller] and reverses the Tribunal de Grande Instance's judgment which made [Seller] liable to pay damages as a result of contamination by Ralstonia Solanacearum.
The Court finds that [Seller] will be relieved from liability and discharged from any order.
- Orders [Buyer] to pay EARL de Yemanville the sum of EUR 1,000 on the same grounds.
* All translations should be cross-checked against the original text. For purposes of this translation, Agrico Cooperatieve of Netherlands is referred to as [Seller] and SIAC of France is referred to as [Buyer].
** Leandro Tripodi is a law student at the University of São Paulo and waqs a member of its team in the 16th Willem C. Vis International Commercial Arbitration Moot. He is an associate of the Brazilian Arbitration Committee (CBar) and an employee of Brazil's Ministry of Finance.
1. The complex case adjudicated by the Court of Appeals of Rouen on 19 December 2006 (Potato seedlings case), is interesting both from the perspective of the factual and of the legal issues involved.
Dutch cooperative Agrico [Seller] and French agribusiness wholesaler SIAC [Buyer] entered into an international contract for the sale of 25 tons of potato seedlings. The Court found that the law governing the contract was the CISG.
After [Buyer] grew the seedlings, performing two successive multiplications in the course of two years, it marketed the resulting crops to several potato farmers established in the French region of Seine Maritime. Unexpectedly, they found the potatoes to be hit by a bacterium that provokes an illness so-called potato brown rot, making them improper for consumption.
As is natural, many of the farmers turned to [Buyer] and [Seller] and, for its part, [Buyer] turned to the [Seller]. All sought compensation for their respective losses.
- [Seller] had been supplied with the seedlings by one of its members, Mr. Schenk. The area in which he is established was found to be contaminated, and though he had been set under rigid control by the authorities, he shared equipment with another producer subject to more lenient control.
Another difficulty existed because, convincingly, [Seller] tolerated the multiplications, despite the contract clause forbidding them.
3. The provisions of the CISG at issue were basically Articles 38, 39 and 40.
4. Under Article 38, a buyer has the duty to examine the products -- in pursuit of any potential non-conformity. The potato seedlings were not technically examined by the [Buyer], but by vegetable protection bureaus, both Dutch and French. The [Buyer] reasonably gave credit to the documents attesting the well being of the plants.
5. Under Article 39, the buyer loses the right to rely on a lack of conformity of the goods, if he fails to give a proper notice within a reasonable time. Article 39(2) states that this time cannot be more than two years from the date when the goods were delivered.
The potato seedlings were delivered on 2 February 1998. They were multiplied by [Buyer] over two years and only manifested the infection at a later time (after the period of exclusion of Article 39(2) had ran out). If they were infected already at the date of dispatch, they carried a hidden defect.
In any case, the CISG and French Law have distinct solutions for the problem, since according to the French Civil Code the limitation period for such a claim is ten years (as referred to in the decision). It fell upon the Court to determine the applicable law, bearing in mind that, in this regard, the CISG was less favorable to the French buyer than French law.
The Court concluded that the law applicable to the initial contract was the CISG and this finding does not seem to have been disputed by any party. Even so, the law applicable to the sub-purchasers' claims was found to be, as expected, French law. Hence, [Buyer]'s claim was excluded, but that of the sub-purchasers was not.
6. [Buyer] requested application of Article 40 of the CISG. According to Article 40, the seller cannot rely on the period of exclusion of Article 39(2) if he knew about the defect and did not disclose that information to the buyer.
- Satisfactory official tests and certificates were duly arranged.
[Seller] stated that it really believed that Mr. Schenk's production was uncontaminated; in other words, that [Seller] did not intentionally conceal any circumstance from the [Buyer]. Furthermore, since both governments (of France and The Netherlands) had certified the goods, there was no legal obstacle for their commercial sale.
In other words, the Court found that Article 40 requires dissimulation by the seller about the facts that gave rise to the lack of conformity, in a sense that the seller may be said to have deceived the buyer, and not mere knowledge of facts that potentially may cause the goods to be defective.
8. As to the sub-purchasers' claims, the Court made its findings under French law, and considered that no negligence was perpetrated by [Seller] or by its supplier Mr. Schenk.
9. The French Supreme Court confirmed the judgment in its entirety.

References: v. 
 Art. 700
 Art. 699
 Art. 39
 Art. 40
 Art. 1648
 Art. 36
sui generis
 Art. 700