Source: http://cisgw3.law.pace.edu/cases/000915s1.html
Timestamp: 2019-04-23 00:35:31+00:00

Document:
CASE NAME: FCF S.A. v. Adriafil Commerciale S.r.l.
[*] Section C.5 of the judgment is highlighted because it contains the Court's only reference to the CISG in this case: it refers to the discussion of the [seller]'s appeal against the cantonal Appellate Court decision to reject the [seller]'s argument for exemption from liability for failure to perform his contractual obligations, under Article 79 CISG.
COURT COMPOSITION: M.M. Walter, President; Corboz, Judge; Pagan, Substitute Judge. Clerk of the Court: Ramelet. PARTIES and COUNSEL: FCF S.A., of Geneva, Switzerland, Defendant and Appellant, [seller], represented by Me Michel Amaudruz, Lawyer in Geneva, v. Adriafil Commercial S.r.l., of Rimini, Italy, Claimant and Appellee, [buyer], represented by Me Le Houelleur, Lawyer in Geneva.
In a matter of: Art. 9 Cst.; Civil Procedure.
Judgment concerning an appeal raised by [seller] against the judgment rendered on 18 February 2000, by the Appellate Court of the Canton of Geneva, regarding a dispute between [seller] and [buyer].
a) Intervening for the [buyer], an Italian company with its registered office in Rimini, Italy, a company under Italian law, Vieffe S.r.l. (hereinafter: Vieffe), located at Milan, Italy, sent, on 15 February 1994, to [seller], a Swiss company for which Vieffe was an agent, a proposal of Order No. 28 concerning the purchase by [buyer] of four times five tons of cotton, goods to which the quality and place of delivery had been specified. The goods were to be delivered between 25 May and 5 June 1994, payment to be made by letter of credit due sixty days after the date of customs clearance.
- 5,000 kg +/- 10% of cotton Ne 30/1 for �IT 5,510 / kg.
The contract stipulated that the loading of the goods must take place in a harbor in Egypt during the month of May 1994.
On 14 April 1994, Vieffe sent to [seller] a new proposal, Order No. 69, concerning the purchase by [buyer] of twenty tons of cotton thread with delivery at the end of August, payment due sixty days after customs clearance.
- 5,000 kg +/- 10% of cotton Ne 30/1 for �IT 6,850 / kg.
The loading was planned for the month of August 1994, payment due in sixty days.
The total goods included in the order were according to these two contracts, "cotton GIZA 75 on cone with Q.D.R. 5,57 non parafiné, raw".
b) On 27 April 1994, [seller] sent an acknowledgement by fax to [buyer] advising that the Egyptian authorities had imposed on the weaving mill of the country an increase in the price of cotton between 8.5% and 9% and that [buyer] was obliged to pay an increase of 8% in the price of sale. On 2 May 1994, [seller] sent to [buyer] a second message asking [buyer] to accept and confirm the increase of prices decided by the contract of 2 March 1994 by 6%, which represented �IT 5,790 / kg for the cotton Ne 8/1, 12/1 and 16/1 and �IT 5,840 / kg for the cotton Ne 30/1. [Buyer] accepted the increase of 6%.
c) On 3 June 1994, [buyer] was surprised to be informed that, after the delay taken by the [seller], both the agreement of 2 March and that of 14 April 1994 would not be respected. After having explained that this had the consequence of limiting [buyer]'s ability to fulfil its own contractual obligations, [buyer] invited [seller] to perform the contract. [Buyer] also asked to be informed exactly which goods would be delivered and reserved the possibility of legal action in case of non-performance.
Receiving no answer to this letter, [buyer] informed [seller] on 27 June 1994 that, concerning the goods of the contract of 2 March 1994, [buyer] was forced to purchase substitute goods from other suppliers at a more expensive price. Insistent especially upon the damage caused to its reputation, [buyer] valued its damages at �IT 100,000,000 and asked for compensation by [seller]. [Buyer]'s written document of 27 June 1994 was not a letter of termination from the [buyer], but an incentive for the [seller] to execute its obligations.
On 30 June 1994, Vieffe informed [buyer] that the "thread" contained in the contract of 2 March 1994 could be delivered during the month of July 1994 against payment by letter of credit due in sixty days.
On 8 July 1994, [buyer] wrote to [seller] that it had taken note that [seller] was ready to deliver during the month of July, the total quantity of the goods contained in the two contracts, and that [buyer] was happy with this result as far as the contract of 14 April 1994 was concerned. However, [buyer] stated that it could not accept the delivery of cotton contained in the contract of 2 March 1994 for the reasons explained in [buyer]'s letter of 27 June 1994. [Buyer] noted that if it had waited for an answer from [seller] before purchasing substitute goods from other suppliers, the damages for which it would be asking reparation would have been more significant.
On 23 July 1994, quantities of 6,357 kg and 5,697 kg of cotton Ne 16/1 and also 6,745 kg and 6,085 kg of cotton Ne 8/1 were loaded at Alexandria by [seller], and unloaded at Genoa on 7 August 1994. These goods corresponded little to the goods described in the contract of 14 April 1994.
After 7 August 1994, the parties had not established contact in relation to the delivery of cotton.
d) Between 31 May 1994 and 30 August 1994, [buyer] ordered elsewhere 47,243 kg of cotton of several categories to replace the undelivered cotton ordered from [seller]. 35,197 kg of the same quality cotton ordered in the earlier contracts concluded with [seller], were ordered on 7 July and 30 August.
In the purchase made on 7 July 1994, of 10,197 kg of cotton at an average price of �IT 6,500 / kg, which related to the contract of 2 March 1994, there was a difference of �IT 700 per kg in comparison with the price fixed after the increase of 6% at �IT 5,800 / kg. The increase of the cost represented �IT 7,137,900 (10,197 kg x �IT 700).
In the purchase concluded on 30 August 1994, amounting to 25,000 kg of cotton at an average price of �IT 7,640 / kg, which related to the contract of 14 April 1994, there was a difference of �IT 1,492 / kg in comparison with the increased price of this contract of �IT 6,148 / kg. Therefore, [buyer] paid an extra �IT 29,840,000 in comparison with the purchase of 20 tons of cotton stipulated in the previous contract (20,000 kg x �IT 1,492).
[Buyer] was able to acquire 35,197 kg of replacement cotton of the same quality; thus, 4,803 kg less of what was decided in the contracts. [Buyer] resold 31,000 kg, making a profit of �IT 17,000 / kg. The loss caused by the 4,803 kg that was missing was therefore �IT 81,651,000 (4,803 kg x �IT 17,000).
Founded on the fact that no quantity of cotton had been delivered, [buyer] claimed from [seller], on 21 October 1994, the payment of the sum of �IT 334,527,898.
On 5 December 1994, [buyer] notified [seller] that it would commence a lawsuit, and, on 5 April 1995, it brought an action against [seller], claiming the payment of Sf [Swiss francs] 238,000.60 (�IT 294,925,126). [Buyer] claimed against the [seller] that [seller] had breached its contractual obligations by not delivering the cotton included in the contracts of 2 March and 14 April 1994, conduct which, first, forced the [buyer] to purchase replacement goods with an increase of �IT 127,983,126 in the price, and to indemnify [buyer]'s clients, for �IT 52,800,000, and second, caused [buyer] a loss of profit of �IT 104,142,000 and commercial damage of �IT 10,000,000.
The [seller] replied that the [buyer] had unilaterally cancelled the contracts and, additionally, that the loss claimed was neither justified nor proven.
By judgment on 20 May 1999, the Court of First Instance [District Court of Geneva] held that the [seller] is in debt towards the [buyer] in the total amount of �IT 232,125,126 plus interest at the rate of 5% from 16 July 1994. Upon establishing the liability of the [seller] in view of the non-performance of the contracts, the Court of First Instance ordered the [seller] to indemnify the [buyer] for the loss it suffered.
By judgment on 18 February 2000, the Appellate Court of the Canton of Geneva, ruled on an appeal made by the [seller], partly quashing the judgment of the Court of First Instance on 20 May 1999; it ordered [seller] to pay to [buyer] Sf 95,720 plus interest at the rate of 5% from 5 December 1994, and ordered the withdrawal.
In substance, the cantonal Appellate Court declared applicable the United Nations Convention on Contracts for the International Sale of Goods, concluded in Vienna on 11 April 1980 (CVIM [*], RS 0.221.211.1).
The cantonal Appellate Court recognized that the [buyer], who had never received the goods ordered by the contract of 2 March 1994 in the period of time fixed by article 33(b) CISG, validly avoided the contract by the letter of 8 July 1994.
Concerning the contract of 14 April 1994, the cantonal Appellate Court considered that, on 8 July 1994, [buyer] had noted without protest that the goods would be deliverable during the month of August 1994. Many tons of cotton Ne 16/1 and 8/1 had been unloaded in Genoa on 7 August 1994 by the [seller]; nonetheless, these goods corresponded only partly to the subject matter of the contract, which required the delivery of cotton Ne 8/1, 12/1, 16/1, 20/1 and 30/1. [Seller] did not succeed in establishing an offer to [buyer] for the cotton that arrived at Genoa, nor did it ask the [buyer] to take delivery.
The cantonal Appellate Court concluded that the [seller] had given up fulfilling its obligations and that it could not complain of the fact that [buyer] considered the contract as not being performed. The Appellate Court referring to articles 45(1), 74 and 75 CISG, noted that [buyer] had a right to claim damages and interest for replacement purchases of substitute goods that [buyer] had made since the month of July 1994; the damage represented �IT 7,137,900 and �IT 29,840,000; thus, a total of �IT 36,977,900. Concerning the loss of profit, it was �IT 81,650,000. Nonetheless, the Appellate Court held that the [buyer] did not render proof that it had indemnified some subcontractors, or proof of loss of any clients. The damage justified was therefore �IT 118,627,900; i.e., Sf 95,720.15 at the exchange rate of the day of filing the [buyer]'s claim.
The [seller] resorted to the Federal Supreme Court by raising an appeal in public law, as well as an appeal for reversal. With regards to the appeal in public law, the [seller] sought the annulment of the judgment rendered by the cantonal Appellate Court.
The cantonal Appellate Court rejected the [seller]'s appeal for reversal, as well as to confirm the judgment challenged.
a) Pursuant to the general rule in Art. 57(5) OJ, firstly, it should be discussed whether the appeal in public law is appropriate in the present case.
b) Appealing in public law to the Federal Supreme Court may be employed against cantonal decisions that violate constitutional rights of its citizens (Art. 84(1)(a) OJ).
The judgment rendered by the cantonal Appellate Court, which is a final decision, is not subject to any other means of ruling, whether in the federal or cantonal instances, in the matter which the [seller] claims direct violation of constitutional rights. Therefore, the subsidiary rule concerning appeals in public law is respected (Arts. 84(2) and 86(1) OJ). On the other hand, if the [seller] claims a matter of applicability of federal law, then the claim should not be accepted, since such matter may be discussed by means of an appeal for reversal (Arts. 43(1) and 84(2) OJ).
The [seller] is personally affected by the judgment challenged herein, which orders the [seller] to make payment. Therefore, the [seller] has personal, legal and current interest in assuring that the judgment is not enforced in violation of its constitutional rights. In view of that, the [seller] has standing right to appeal such decision (Art. 88 OJ).
c) When considering appeals in public law, the Federal Supreme Court will solely examine the constitutional matters as claimed with sufficient grounds for appealing (Art. 90(1)(b) OJ; ATF 125 T consid. 1b and the references; cf. equally, ATF 110 Ia 1 consid. 2a).
Initially, the [seller] pleaded to the cantonal Appellate Court to refrain from proceeding an arbitrary examination of the evidence in the case.
a) aa) In accordance with the jurisprudence, an arbitrary judgment may result not only from the fact that another solution could be considered or even that such different solution is preferable. The Federal Supreme Court recognizes that a challenged judgment is obviously unsustainable when it is in clear contradiction with the facts and it seriously violates an indisputable rule or legal principle and also clashes with the ideas of justice and equality. However, in order to have a judgment annulled, it is necessary that (i) the reasoning rendered is unsustainable, as well as that (ii) the results of such judgment are found to be arbitrary (ATF 125 I 166 consid. 2a; 125 II 10 consid. 3a; 129 consid. 5b; 124 I 247 consid. 5g; 124 V 137 consid. 2b).
With regards to the evaluation of evidence, the judgment will be deemed arbitrary if (i) the judge takes in consideration evidence that clearly violates the rules of fact finding; or (ii) the judge refrains from accepting any evidence that is important to obtain the reversal of a challenged decision without sustainable reasoning; or (iii) the judge unreasonably rejects evidence raised from the fact finding (cf. ATF 120 Ia 31 consid. 4b; 118 Ia 28 consid. 1b).
bb) It shall be outlined, however, that the [seller]'s memorandum of appeal lacks the requirements of reasoning prescribed under Art. 90(1)(b) OJ [*], since the [seller] claims the arbitrary condition of the challenged judgment without providing sufficient argumentation to allow the court to recognize such arbitrary condition in the challenged decision. Thus, the acceptability of such claim is doubtful. In view of that, the disputed matter may remain undecided since no reasoning at all has been provided to support such claim.
b) The [seller] contends that the cantonal Appellate Court has taken as indisputable the contents of document No. 20, submitted by the [buyer], which suggests that the cotton in question has been resold by [buyer] for the amount of 31,000 �IT/kg. However, such document does not mention the type of cotton it relates to. Additionally, the [seller] contends that depending on the way the cotton is industrialized, the price may have been a lot less than 31,000 �IT/kg, for the same type of cotton.
The document referred to above is a contract entered into with the [buyer] on 27 April 1994. Although the specifications of the goods sold is clearly indicated thereon, the amount of 31,000 �IT/kg refers to the cotton 16/3, 8/3, and 12/3. Moreover, the [seller] has not submitted any documentation that could support its contention that the cotton could have been sold for a price lower than the amount referred to above.
Such claim is merely appellative; thus, it does not deserve deep analysis.
c) The [seller] contends that the cantonal Appellate Court arbitrarily mentioned in its judgment of the appeal for reversal that the letter issued by the [buyer] on 8 July 1994 constitutes the termination of the agreement executed by the parties on 2 March 1994, so the purchase of cotton by the [buyer] on 7 July 1994 should be considered for replacement purposes.
However, such claim by [seller] is not consistent. On one hand, the terms of the letter challenged are clear, as the [buyer] makes its point in refusing to accept the goods that are the object of the agreement of 2 March 1994. On the other hand, on 27 June 1994, the [buyer] had notified the [seller] that, among other actions, [buyer] had contacted other suppliers due to the failure of the [seller] to perform. Whatever the [seller] had concluded from such notifications, those circumstances should not prevent the [buyer] from expecting that, until 8 July 1994, the sale agreement would be performed, so that the [buyer] could make use of the cotton ordered with the [seller]. Moreover, the [buyer] should be allowed to manage its stock as it pleases.
The [seller]'s claim herein has been found to be reckless.
The [seller] contends that the cantonal Appellate Court has applied in an arbitrary manner Article 186 of the Civil Procedure Law of Geneva (LPC gen.), which regulates the burden of proof, in view of the fact that the cantonal Appellate Court has accepted the documents from 5 to 19, submitted by the [buyer], as having due evidential value, even though the [seller] challenged those documents in its memorandum dated 2 November 1995.
Although the [seller] outlines the alleged inconsistency, the [seller] has indicated neither the nature of the documents mentioned above, nor the reasons why those documents should not be given evidential value.
Nevertheless, whether this Court decides to examine the merit of such claim, it should be taken into consideration that the [seller], in its memorandum dated 2 November 1995, page 11, has challenged those documents in a general way, without specifically mentioning the reasons for taking that position.
Yet, in view of the lack of accuracy in the [seller]'s contention, it is impossible to acknowledge the facts reported thereon, whether based on Art. 186(1) of LPC gen. (cf. Bertossa/Gaillard/Guyet/Schmidt, Commentaire de la loi de procedure civile genevoise, n. 3 ad Art. 186 LPC gen.); or under Art. 126(3) LPC gen., which provides that silence or an evasive response may be considered a confession (Bertossa/Gaillard/Guyet/Schmidt, op. cit., n. 4 ad Art. 126 LPC gen.) In fact, such accuracy requirement exists primarily to enable the adversary party to submit evidence of the contrary (Bertossa/Gaillard/ Guyet/Schmidt, op. cit, n. 2 ad Art. 126 LPC gen.). In particular, the general challenge raised by the [seller], upon reviewing the documents challenged, has not enabled the [buyer] to submit further documentation, or to call witnesses in an efficient manner, once the [buyer] could not identify what were the issues challenged by the [seller] in connection with the documents.
Lastly, it should be also considered that as such documents relate to the contents of the contracts executed by the [buyer] with other companies, it is not unreasonable to accept them as evidence of existence of the aforementioned agreements. Therefore, the allegations made by [seller] are unacceptable as to allow the interpretation that such agreements do not correspond to reality, that they are fictitious, or that they have not been executed (Bertossa/ Gaillard/ Guyet/ Schmidt, op. cit., n. 4 ad art. 186 LPC gen.).
According to the [seller], the cantonal Appellate Court applied Art. 126 of LPC gen. in an arbitrary manner because it accepted that the [buyer] has contended, without contradicting itself, that [buyer]'s net profit rate, upon payment of the costs, dying, grouping into smaller quantities, packing, and transport, amounted to 17,000 �IT/kg of cotton. The [seller] refers to its memorandum in pages 2 and 4.
Once again, the contention made by the [seller] totally lacked precision. In particular, the [seller] generally alleged that the [buyer] counted in double, if not triple, or even four times certain mail indicating its claimed damages, as well as its silence resulted in the interpretation that the cotton order should be taken as a mere reservation, considering that the modifications and restrictions imposed by the Egyptian authorities have not been attended.
In view of such nebulous and improper way of reporting the circumstances, it was not been possible for the [buyer] to submit a proof of contraire, because the [buyer] was not able to determine the issues in relation to which it should submit contradicting documents, or call up witnesses in its defense. Taking into consideration item 3 above, this claim by [seller] has been rejected.
Lastly, the [seller] contended that the cantonal Appellate Court denied it justice. According to the [seller], the cantonal Appellate Court remained silent with regards to one of the pleadings made by the [seller] in connection with the existence of an impossibility of performance beyond [seller]'s control in the terms of Art. 79 CVIM [*].
Accordingly, the [seller] contends that, in fact, the reasoning of the cantonal Appellate Court challenged decision was insufficient. Since [seller] has not pleaded the violation of rules of cantonal law, such issue should be examined in light of Art. 29(2) Cst., which allows the Federal Court to examine freely whether the minimum guarantees afforded by Constitutional Law have been respected (cf. ATF 125 I 257 consid. 3a and other judgments mentioned).
a) The jurisprudence has inferred from the right to be heard that courts should provide reasoning for their decisions, in order to enable the interested party to comprehend any decision and to reasonably challenge such decision where appropriate, and to allow appellate courts to exercise their reviewing powers (ATF 126 I 15 consid. 2s/ss, 97 consid. 2b; 125 II 369 consid. 2e; 124 II 146 consid. 2a). In accordance with the jurisprudence, it is sufficient that the judge mentions, at least briefly, the reasons that guided him and those facts upon which he has based his decision. There is no need to indicate and discuss all the facts, means of evidence and pleadings made by the parties. The reasoning may be limited to those issues that appear pertinent, without being arbitrary (ATF 126 I 97 consid. 2b; 123 I 31 consid. 2c.).
b) In considering those principles, one may not seriously support that the challenged decision has not been sufficiently reasoned.
In fact, the cantonal Appellate Court did not examine the claim based on Art. 79(1) CVIM [*]. In not doing so, however, the cantonal Appellate Court has not in any way violated the [seller]'s right to be heard. In effect, in order for a supplier to be exempt from liability for a failure to perform any of its obligations in the terms of the previously mentioned provision, [seller] must prove that the failure was due to an unpredictable and inevitable impediment, which lies outside its sphere of control, or due to an overwhelming obstacle, which is not the case in situations within its sphere of control and facts could be attributed to its personally, especially events that affect the supply of the goods (cf. Neumayer/Ming, Vienna Convention on International Sales of Goods: comments, n.2 and 4 ad. Art. 79 CVIM [*]).
Thus, the facts recognized by the cantonal Appellate Court, concerning the performance of the agreements dated 2 March 1994 and 14 April 1994, whether the seller had been exposed to an impediment, which was placed outside the [seller]'s sphere of control, or that [seller] faced an overwhelming or inevitable obstacle, have resulted in nothing.
In view of these conditions, the cantonal Appellate Court is partially excluded from examining such claim, which does pertain to the case.
Considering that there are no grounds for this appeal, it is dismissed with regard to the issues examined.
As for the issues of litigation that were examined, the costs and expenses shall be borne by the [seller] (Art. 156(1) and 159(1) OJ).
Transmits the present decision in copy to the representatives of the parties and to the Civil Chamber of the cantonal Appellate Court of Geneva.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Defendant-Appellant FCF S.A., of Geneva, Switzerland, is referred to as [seller]; Plaintiff-Respondent Adriafil Commercial S.r.l., of Rimini, Italy, is referred to as [buyer]. Monetary amounts in Swiss francs are indicated by [Sf]; amounts in Italian Lira are indicated by [�IT].
Translator's note on other abbreviations: ATF = ___; CVIM = CISG [United Nations Convention on Contracts for the International Sale of Goods]; OG = Bundesgesetz über die Organisation der Bundesrechtspflege [Swiss Federal Code on Court Organization]; OJ = ___.
** Helena C.C. Mendes, Brazilian, a graduate of the University of Sao Paulo, Brazil, is currently a candidate for LL.M. in International Business and Economic Law at the University of Kyushu, Japan. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

References: v. 
 v. 
 Art. 9
 Art. 57
 Art. 90
 Art. 186
 Art. 186
 Art. 126
 Art. 126
 Art. 126
 art. 186
 Art. 126
 Art. 79
 Art. 29
 Art. 79
 Art. 79