Source: http://cisgw3.law.pace.edu/cases/130701s4.html
Timestamp: 2019-04-22 08:07:49+00:00

Document:
A brokerage firm specializing in trading cereals issued an invoice on 17 June 2008, in which a Spanish company was given as the buyer and a French company as the seller in a deal involving 9,000 tons of forage wheat to be delivered in five batches (August, September, October, November and December 2008) at €195 per ton. The invoice specified the port of delivery, Tarragona, and included the commission of the brokerage firm. The invoice was issued to both the parties and in the days that followed no complaints or claims were made.
The invoice had a section headed “Comments”, which had the following entry: “10 lay days available. Transaction subject to acceptance by [the insurance company]”. The insurance company sent the seller a communication on 21 July 2008 formally agreeing to insure the transaction only for €150,000, out of the total value of €780,000.
On 18 August 2008, the seller made the first delivery at the port of Tarragona. There followed two further deliveries, which the buyer did not collect. The seller brought an action against the buyer for breach of contract and claimed damages, consisting of the difference in the price at which the wheat was sold to another buyer, storage costs and 5.5 per cent financing costs, and also, as regards the rest of the wheat contracted for but not sold on, the difference between the price agreed and the market price at the time of the avoidance of the contract in October 2008.
The ruling of the court of first instance was based on the fact that there existed a contract to buy and sell the wheat, documented in the brokerage firm’s records, but it dismissed the seller’s claim, on the grounds that the sale and purchase were subject to the condition that the risk was covered by the insurance company and that condition had not been met.
Hearing the appeal, the Provincial High Court held that the insurance provided by the insurer related to the payment of the price, so only the seller could protest at the lack of such insurance, not the buyer who was liable for payment. With regard to the execution of the contract, the Court’s view was that it had not been executed by the parties, since it had not been signed by the buyer, while the brokerage firm’s invoice was not sufficient to indicate that the buyer had given its consent either explicitly or tacitly.
In its appeal before the Supreme Court, the seller contested the interpretation that the judgement of the Provincial High Court had put on the rules governing the formation and execution of contracts and its interpretation of the contract.
The Supreme Court held, first of all, that CISG applied, inasmuch as both the buyer and the seller had their head offices in contracting States, Spain and France. With regard to the execution of the contract, it held that the issuance of an invoice such as that provided by the brokerage firm and the absence of any complaint by either of the parties when it was received implied the acceptance by both parties of a usage of trade in the cereals market, whereby the invoice proved the existence of a sales agreement, which had been formally made by word of mouth — specifically, by telephone — in accordance with the general principle of freedom of form for the conclusion of a contract, as provided for in CISG article 11, unless the exception in CISG article 29 applied. Furthermore, it ruled that the same conclusion would have been reached under Spanish domestic law on the application of the general principle of freedom of form (art. 1278 of the Civil Code) and that there was no special requirement on the form of such transactions.
With regard to the breach of the contract, the Court held that, since the delivery of the first three batches to the buyer and the failure to pay the price were attested, the sale and purchase contract had clearly been correctly avoided by the seller, in accordance with the provisions of CISG articles 61 (a) and 64 (1)(b). It held the contract to have been avoided when the seller notified the buyer of that fact in a fax sent on 16 October 2008. The avoidance entitled the seller to claim damages, pursuant to CISG articles 61 (1)(b), 74 and 75. Moreover, in accordance with CISG article 74, the seller could claim damages for damnum emergens and loss of profits, while under CISG article 75, it could claim the difference between the contract price and the substitute transaction price, as well as any further damages recoverable under CISG article 74. That was what the seller had done, keeping a documentary record of resale invoices. It had also used invoices to prove the storage costs incurred for the first three deliveries of wheat, which would form part of the damnum emergens resulting from the breach, in accordance with CISG article 74. The Court found insufficient justification, however, for what the seller called the “total financing costs”.
With regard to the rest of the wheat to be bought under the contract — the amount intended for delivery in November and December 2008 (4,000 tons) and the proportion of the three previous batches that had not been sold (350 tons) — the Court held that the seller was justified in claiming the difference between the contract price and the market price according to the data provided by the Barcelona Corn Exchange in October 2008 for the time that the contract was avoided. The seller was also entitled to claim interest on the damages, since an obligation to compensate arose with the avoidance of the contract.
BREACH OF CONTRACT: RESPONSIBILITY: ORIGIN: international sale of cereal formalized through an intermediary and based on the prevailing commercial usages in the cereal market: application of the United Nations - Vienna Convention on International Sales of Goods 1980: applicability in the contract formation in current use in the merchant cereal traffic: note issued by the intermediary, parties communication, which did not make any claim after its reception: suppose the assumption of a commerce use in the cereal market, that the note proves the existence of agreement stated verbally in regard with the general principle of freedom of contract provided in Art. 11 CISG: nonpayment of price: contractual resolution: damages: quantification: determination.
The Supreme Tribunal declares admissible the appeal to a Superior Court for violations of procedural law filed against the Sentence of 24-09-2010 dictated by the First Section of the Provincial Audience of Alava.
In the town of Madrid, on July 1st, 2013.
The First Chambers of the Supreme Tribunal, integrated by the Justices indicated on the margin, has attended the appeal to a Superior Court for violations of procedural law filed in respect to the sentence dictated in the appeal decree by the 1st section of the Provincial Audience of Vitoria, as a consequence of the ordinary trial carried out on the Court of First Instance num. 6 of Vitoria.
The motion was filed by Soufflet Negoce S.A. [Seller], represented by the attorney Nuria Lasa Gomez.
The counterparty is Alto Ebro Sociedad Cooperativa [Buyer], represented by the attorney Gabriel de Diego Quevedo.
Four hundred eighty three thousand six hundred thirty euros and nine cents (eur. 483.630,09).
Legal interest accrued from the breach of contract until the effective payment.
“SENTENCE: that having dismissed the lawsuit filed by [Seller], the court must acquit and absolve [Buyer] of all pretentions deduced against them.
4. The sentence of the First Instance Court was appealed by the representation of [Seller].
5. Attorney Iratxe Damborenea Agorria, on behalf of [Seller], filed an appeal to a superior court for violations of procedural law, before the Provincial Audience of Vitoria, Section 1.
Infraction for not applying the United Nations - Vienna Convention for the International Sale of Goods, of April 11, 1980, ratified by Spain by instrument of July 17, 1990 (forward, CCIM), violating articles 21.1 LPOJ and 1.5 CC.
Infraction for not applying articles 1, 4, and 9 of the Convention, about the link of a usage of trade applicable in the contract formation and conclusion in the commercial sector in which both operate, since in this specific sector it is common that the intermediary intervenes for the conclusion of the contract through the extension of a note, without being rejected by any of the parties.
Infraction for not applying articles 7 and 8 of the Convention, about contract interpretation. Also, the appeal states that the infraction of the national rules about obligations and contracts: art. 55 CCIM, in respect of the conclusion of contracts intervened in by an agent or broker; articles of 1254, 1255, 1256 and 1258 CC, about the conclusion of the contract; and article 1281 and 1282, in relation with its interpretation.
6. By Measure of January 18, 2011 the Provincial Audience of Vitoria, Section 1, has received the appeal to a superior court for violations for procedural law, and agreed to send the proceedings to the First Chamber of the Supreme Tribunal with summons to appear within thirty days.
7. Upon Receipt of the proceedings to these Chambers, appears as petitioner [Seller], represented by attorney Nuria Lasa Gomez; and defendant [Buyer], represented by attorney Gabriel de Diego Quevedo.
9. Given the notification, [Buyer’s] legal representation filed an opposing motion to the arguments manifested.
10. To not have been requested by all parties the public hearing; it was submitted to voting and ruled on June 6, 2013, which has taken place.
1. For the resolution of this current controversy, it’s convenient to start with the relevant facts accredited in this instance.
Gestora de Productos Agropecuarios S.L. (forward, GAP), intermediated the cereal sale and extended a note on June 17, 2008, related to the sale of 9.000 tons of feed wheat, at 195 euros/ton. In the note, [Seller], and [Buyer] appear, with the port of origin being Tarragona and five deliveries being agreed upon.
The note has a section, with the headline “Observations” with the following: “10 free laydays. Operation subject to COFACE’s acceptance”. The Insurance company COFACE sent [Seller] a communication on July 21, 2008, which stated it accepted to assume the risk of this operation only up to 150.000 euros, of the total 780.000.
On August 18, 2008 [Seller] sent [Buyer] the first delivery to Tarragona port, and after sent two more deliveries. None of them were collected by [Buyer].
2. [Seller] acted on the breach of contract by [Buyer] and claimed damages that consisted of the difference in price sold to another buyer, storage costs, financing cost of 5.5%, as well, as for the rest of the wheat in stock and not resold, the difference between price of contract and market price of the wheat at the time of contract resolution, October 2008. The amount was 483.630,09 euros.
The Sentence of first instance began with the consideration that there was a wheat sale contract, documented in the GAP note, even though dismissed because the sale was subject to the conditional provision that the risk was to be insured by COFACE, this condition not being fulfilled.
Sentence appealed, the Audience understood that the risk coverage by COFACE was in respect to the payment of the contract price, though missing the payment of coverage may only be opposed by [Seller], and not [Buyer]. An analysis of the presented documentation that certify the existence of a contract and concludes that the contract was not formalized by the parties, thus no signature by the [Buyer], being the GAP note insufficient to show [Buyer’s] consent, expressly or tacitly.
ii) in concrete, did not apply articles 1,4, and 9 of the Convention, about the link of usages of trade applicable in the contract formation and conclusion of a commercial contract in that specific sector in which both operate, since in this specific sector is common the intervention of an intermediate for the conclusion of the contract through the extension of the note, without being rejected by any of the parties.
iii) not applying articles 7 and 8 of the Convention, about contract interpretation. Also, the appeal states the infraction of the national rules about obligations and contracts: art. 55 CCIM, in respect of the conclusion of contract in those intervened by an agent or broker; articles of 1254, 1255, 1256 and 1258 CC, about the conclusion of the contract; and article 1281 and 1282, in relation with its interpretation.
Continuing, the appeal must be estimated by the motives expressed.
4. With the appeal to a superior court for violations of procedural law, the petitioner questions the interpretation that the appealed sentence has made of the national rules that regulate the formation and conclusion of contracts, as well as the interpretation.
It constitutes a certain fact, apart from the conclusion or not the sale of wheat that this operation was made with the intermediation of GAP that issued a note on July 17, 2008. This note has the headline “we confirm the sale operation with our intervention” and identifying the data of [Buyer] and [Seller], the object of the sale (9,000 tons of wheat), price (195 euros/ton + VAT), the five deliveries of the merchandise (August, September, October, November and December 2008), place (Tarragona port), and some observations (10 free laydays and operation subject to COFACE’s acceptance), also GAP’s commission (0.6 euros/ton). Also proven on the instance, that the note was sent to the [Buyer] and [Seller] that day, without any evidence of rejection of either party the following days.
The note, when identifying the [Buyer], states the address Avenida de los Olmos 1, de Vitoria, and when referring to the [Seller], states an address in France, Nogent Sur Seine. With due reason the [Seller] states that this contract is governed by United Nations – Vienna Convention for the International Sale of Goods (forward, CCIM), when according to article 1(a) CCIM, the [Buyer] and [Seller] have different directions in different States (Spain and France) and both are contracting parties. This Convention regulates controversy in this case: formation of contract and rights and obligations of [Buyer] and [Seller] arising from this contract (art. 4 CCIM). And in respect, art. 9.2 CCIM states “The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned”.
The issuance of a note as extended by GAP, in the intermediation of a sale, and with the absence of rejection by the parties after its reception, supposes the assumption of a usage of trade in the cereal market, having this note evidencing verbally the sale agreement – by telephone – as the general principle of freedom of form provided in art. 11 CCIM (without having to operate the exception in art. 29 CCIM).
The same conclusion must be reached if we were to consider that the International Convention were not applicable, understanding that it was a national transaction, when it operates the same usages and rules the same general principle of freedom of form (art. 1278 CC) and not existing a special form for this transaction. In this sense, we reasoned in sentence 696/2012 of November 26.
5. Consequently, the appeal to a superior court for violations of procedural law is esteemed and considers the sale contract concluded. Proven the three deliveries and set at the [Buyer’s] disposal in Tarragona port, the place agreed to in the contract, and with price nonpayment, we must declare the contract correctly avoided by the [Seller], according to arts. 61(a) and 64.1(b) CCIM. The contract was avoided, when the [Seller] notified the [Buyer], via fax on October 16, 2008, as accredited in document num. 60 of the lawsuit.
The resolution confers the [Seller] the right to claim damages, conforming arts. 61.1(b), 74 and 75 CCIM. In our case, art. 74 CCIM the seller may claim damages and lost profits. And art. 75 CCIM allows the [Seller] that has opted for a replacement sale, to claim the difference in price of contract and price of replacement, as well as the rest of damages of art. 74 CCIM. The petitioner has done so, in respect to 4.650 Tons, corresponding to the first three deliveries, stored at Tarragona. The difference between contract price and the price of the re sale, credited with re sale invoice (documents 73-91 of the lawsuit), was 209.075 euros. [Seller] also claims wheat storage expenses corresponding the first three deliveries, put at the [Buyer’s] disposal (83.794,95 euros), through the invoices of Silos de Tarragona, S.A. (documents 94-108 of the lawsuit), part of damages from the breach of contract, according to art. 74 CCIM. However, is not sufficiently justified the “final financing cost” by the petitioner.
With respect to the rest of the cereal part of the contract, the quota corresponding November and December 2008 (4.000 Tons) and the remaining quotas of the three previous (350 Tons), a claim for the difference in contract price and market price, according to data provided by Lonja cereals of Barcelona, on October 2008, at the resolution date, is justified. According to this documentation (documents 92 and 93), the difference in price would be 41euros/ton, being the lost profits in numbers 471.219,95 euros. The seller has rights to claim the interest of this compensation since the origin of the obligation, with the resolution of contract that led to the loss.
6. Considered the appeal to a superior tribunal, its not admissible to set court fees to either party (art. 398.2 LEC). The consideration of the appeal does not justify an express imposition of court fees generated by the appeal (art. 398.2 LEC).
By the previously exposed, in name of the King and the authority conferred by the Spanish people.
We consider that the appeal to a superior tribunal for violations of procedural law filed by [Seller] of the sentence of Provincial Audience of Vitoria (1st Section) on September 24, 2010 (num. 216/2010), we rescind. In its place, we agree the consideration in part of the appeal formulated by the representation of [Seller] of the Court of First Instance num. 6 of Vitoria (trial num. 690/2009), and condemn the [Buyer] to pay the [Seller], the sum of 471.219,95 euros, plus the interest accrued since October 16, 2008, without express court fee condemnation. No court fees on appeal to a superior tribunal and appeal to either party.
Publish this sentence based on law and return the original proceedings to the Audience and documents sent with copy of this sentence as testimony for the pertinent legal effect.
As for this sentence, that will be introduced in the LEGISLATIVE COLLECTION having the necessary copies, we pronounce, order and sign it. – Juan Antonio Xiol Rios. – Jose Ramon Ferrandiz Gabriel. – Antonio Salas Carceller. – Ignacio Sancho Gargallo. – Rafael Saraza Jimena. – Sebastian Sastre Papiol. – Signed and Sealed. PUBLICATION.- Read and publish was the previous sentence by the Hon. D. Ignacio Sancho Gargallo, Speaker in the proceeding of this process, having celebrated in Public Audience the First Chambers of the Supreme Tribunal, today; that as Secreary, I certify.
** Weldon Walter Black Zaldivar is admitted to practice law in Paraguay and holds an LL.M. in Banking, Corporate and Finance Law from Fordham Law School.

References: Art. 11
 art. 55
 art. 55
 art. 9
 art. 11
 art. 29
 art. 74
 art. 75
 art. 74
 art. 74