Source: http://cisgw3.law.pace.edu/cases/070529n1.html
Timestamp: 2019-04-19 15:23:52+00:00

Document:
A Belgian company sold and delivered a machine to a Dutch company. The invoice sent by the seller indicated that "the goods remain our property until complete payment has been received". The seller utilized general conditions which also indicated that "delivered goods remain the property of the seller until full payment has been received, meaning in particular that the buyer cannot resell the goods or give them as collateral". The Dutch buyer, however, did not pay the entire purchase price and sold the machine to a third company, leasing the machine back from that company. The Belgian seller claimed that the Dutch buyer had acted tortiously towards it by selling the machine to a third party without first paying the entire purchasing price, thus violating the property reservation.
The Court of First Instance determined that the buyer -- by not protesting against the provision on the invoice reserving property to the Belgian company -- implicitly accepted the reservation of property on the basis of articles 18(3), 8 and 9 CISG. The court also determined that the buyer did commit a tort, but that it could not be determined that there existed a causal link between the damage suffered by the Belgian seller and the tortious act, and thus dismissed the claim. On appeal, the Belgian company argued this determination to be incorrect. On incidental appeal, the Dutch company argued that it did not implicitly accept the reservation of property by the Belgian company in the first place.
The Court of Appeals determined that according to article 1 CISG, the CISG applied and that the question whether a party has consented to the coming into existence of an agreement and to the applicability of related general terms and conditions falls within the ambit of the CISG. Therefore, the question whether the seller and the buyer had agreed on a reservation of property and/or whether the general terms and conditions of the Belgian company and therewith the reservation of property enshrined therein are applicable, must be answered by reference to article 14 and 19 CISG regarding offer and acceptance and to article 8 and 9 CISG regarding the interpretation of the Convention.
It was clear that both companies were in business with each other on a regular basis. It was also clear that the fronts of the invoices sent by the Belgian company to the Dutch company had always indicated that sales were subject to a reservation of property subject to payment of the full purchase price. However, the purchasing contract nowhere indicated that the purchase was subject to such a reservation of property. Article 18(1) CISG provides that neither silence nor failure to respond to an offer constitutes an acceptance as such. The seller argued that the reservation of property was not agreed on silently, but was explicitly referred to on the invoices.
The question thus is whether the Belgian company can invoke the reservation of property against the buyer, despite article 18 CISG, on the basis that they have conducted business with each other multiple times before. In light of the provisions of the CISG, this question must be answered negatively.
Since there was no evidence that the reservation of property was an established practice or usage by which the Dutch company would be bound and since the Dutch company could only have become aware of the reservation of property after receiving the invoice (regardless of whether the reference to the reservation of property was made on the front or the back thereof), it cannot be held that under articles 18, 8 and 9 CISG the buyer had consented to and thus accepted the reservation of property. Therefore, it was never agreed that the machine would be delivered subject to a reservation of property by the seller, and there is no basis for the claim of the Belgian company that the Dutch company acted tortiously towards it. Neither the use of a sale-and-lease-back construction, which is not unusual, nor the refusal by the second company to use the money obtained from the third company to reimburse the first selling company can give rise to a tort. The Court of Appeals therefore sustained the incidental appeal of the Dutch company (making a discussion of the original appeal by the Belgian Company superfluous) and confirmed the Court of First Instance's judgment, correcting the points of law concerned.
1. Supreme Court decision of 28-01-2005, CLOUT Case 831.
This appellate procedure was opened on 30 May 2005. It challenges the judgment of the Rechtbank [*] 's-Hertogenbosch of 9 March 2005 (Case no. 102471 / HA ZA 03-2263).
The Court refers to the decision named above.
With memoranda on the main claim, [Seller] filed two reasons and asked the Court to annul the judgment in the first instance. With his responding memorandum, and a memorandum on his incidental plea, [Buyer's proxy] challenged the reasoning of the [Seller]'s principal claim and forwarded two reasons concerning the incidental plea and filed a request as stated in his memorandum. [Seller], in turn, filed evidence and a responding memorandum regarding the incidental plea and, on 30 June 2006, [Seller] filed a blank invoice paper to the attention of the Court.
Afterward, the parties presented arguments on the case through their attorneys, filed further evidence and asked for a decision by the Court.
For the reasoning of the parties, the Court refers to the memoranda and responding memorandum concerning the principal claim as well as the memoranda regarding the incidental plea.
4.1 In the reasoning of the challenged judgment, the Court of First Instance stated the facts it laid down for its decision. [Buyer's proxy] disputes that [Company 1] bought the machine for which [Seller] seeks payment no more than on [date 1] from [Seller]. The Appellate Court will hand down a new summary of facts and description of the case at hand.
a. In 2000, [Seller] sold and delivered a machine to [Company 1], nowadays named �, [Buyer], for a purchase price of 951,232.39 Belgian francs [BF] [*] (431,650.44 EURO).
b. The machine was charged to [Buyer]'s account by invoice of [date 1]. The invoice contained a clause: providing that "The property in the goods does not pass on to the buyer until complete payment" (a retention of title clause). The invoice was not paid to an amount of 332,071.34 EURO.
"The property in the goods delivered passes on to the buyer after it has paid all debts in connection with the delivery, including possible costs like interest or penalties. The buyer can thus not dispose of unpaid goods, especially not pledge and/or re-alienate them."
d. [Buyer] sold the machine on [date 2] to [Company 3] and leased it back from [Company 3] (sale and lease back). The leasing-contract was entered into on behalf of [Buyer] and signed by [Buyer's proxy] as C.F.O. The [Buyer's proxy] also signed the contract as representative of [Company 4], which is a corporation connected to the [Holding of Buyer].
e. In the period between 14 April 1997 and 1 September 2001, the [Holding of Buyer] was a member of the Board of Administration of [Buyer]. The [Buyer's proxy] was, in accordance with the company's constitution, the C.E.O. of the [Holding of Buyer] until May 2001. The [Holding of Buyer] was the parent company of [Buyer's international branch], for which [Buyer's proxy] also acted as C.F.O. Since 1 September 2001, [Buyer's international branch] became a member of the Board of Administration of [Buyer].
f. [Buyer] was adjudged bankrupt by the Rechtbank Almelo by judgment of [date 3]. On the same day, the [Trustee in Bankruptcy] of [Buyer] filed an arrest in rem, which also affected the [machine]. The [Holding of Buyer] and [Buyer's international branch] were also adjudged bankrupt on [date 3].
g. At the end of October 2001, the insolvency administrator of [Buyer] recognized [Seller]'s retention of title of the [machine]. In mid-year 2002, after deposit of a bank guarantee, the [machine] was released by the [Trustee in Bankruptcy] for the benefit of [Seller]. By judgment of 30 June 2004, the Rechtbank Rotterdam held that [Seller] had stronger rights concerning the [machine] than the [Trustee in Bankruptcy]. The [Trustee in Bankruptcy] filed an appeal against this decision. The appeal was filed with the Hof 's-Gravenhage.
h. In the first instance, after modification of its claim, the [Seller] requested the Court to order [Buyer's proxy], [person 1] (a member of the Board of Administration of [Buyer's international branch]) and his spouse [person 2] to pay [Seller] the outstanding sum of 322,071.34 EURO plus interest until day of payment, as well as to calculate and award the damages and costs for the proceeding and decision. [Seller] supported its position with the reasoning that [Buyer's proxy] and/or [person 1] acted unlawfully against it, since [Buyer] sold the [machine] to [Company 3], despite the fact that a retention of title for the benefit of [Seller] had been declared. Further, [Seller] alleged that [Buyer] failed to forward the profit on that sale to [Seller], to amortize the debt.
i. The District Court held in the challenged judgment that [Buyer's proxy] had indeed acted unlawfully against [Seller], but that [Seller] failed to prove that the damages (partial non-payment of the invoice of [date 1]) were caused by [Buyer's proxy]'s behavior. The Court of First Instance rejected the [Seller]'s claim and ordered [Seller] to bear the costs of the proceeding. The Court further held that [person 1] cannot be deemed a member of the Board of Administration at the time the leasing-contract was concluded. Thus, the claim against [person 1] and, as a result, also against his wife [person 2], was rejected.
j. In the appellate proceeding, [Seller] requests the Court to grant its claim against [Buyer's proxy], plus costs for the proceeding. [Seller] challenges the judgment of the Court of First Instance alleging that it misjudged the chain of causation between the damages suffered and [Buyer's proxy]'s unlawful action.
4.3 The Court will first deal with the reasoning of the incidental plea.
4.3.1 With this reasoning [Buyer's proxy] challenges the judgment of the Rechtbank that [Buyer] accepted delivery of the [machine] subject to a retention of title. In para. 3.6 of its judgment, the Rechtbank stated that [Buyer] did not protest against the declaration that "the goods remain our property until complete payment" which was placed on the recto of the invoice of [date 1]. Thus, [Buyer] accepted the retention of title pursuant to Art. 18 (3) CISG in connection with Arts. 8 and 9 CISG. The Rechtbank did not rule on the question whether the general terms and conditions forwarded by [Seller], which were, pursuant to [Seller] printed on the verso of the invoices and contained a retention of title in Art. 6, became part of the contract. Since [Seller] based the agreement on the retention of title on its general terms and conditions, the Court will rule on the basis of this allegation.
4.3.2 First of all, the Court holds, as the District Court did, that the contract between [Seller] and [Buyer] is subject to the CISG following Art. 1 CISG. The question, whether one party has agreed to conclude a contract or to include general terms and conditions in a contract has to be ruled on the basis of the provisions of the CISG (HR [*] 28-01-2005, NJ [*] 2006, 517). The issue regarding an agreement between [Seller] and [Buyer] on a retention of title and/or applicability of [Seller]'s general terms and conditions and the retention of title included in those terms has thus to be decided pursuant to the rules about offer and acceptance (Art. 14 and Art. 19 CISG) and construction of the contract in the sense of Arts. 8 and 9 CISG.
4.3.3 It is undisputed that [Seller] and [Buyer] did business with each other for years, at least since 1998. Further, it is undisputed that the invoices sent by [Seller] to [Buyer] (and thus also the invoice sent on [date 1]) contained the information that delivery took place subject to retention of title. [Buyer's proxy] challenges that [Seller]'s general terms and conditions were written down on the verso of its invoices. It is a fact, that there was a contract in writing between the parties (which was, pursuant to [Seller], avoided). However, it was neither submitted nor proven that this contract contained a retention of title or foresaw applicability of [Seller]'s general terms and conditions.
4.3.4 Pursuant to Art. 18 (1) CISG, silence or inactivity does in itself not amount to an acceptance. [Seller] does not predominantly refer to what was expressly or implicitly concluded between [Seller] and [Buyer]. Rather, [Seller] argues with reference to the retention of title clause on (the recto and verso of) its invoices, which were sent or handed to [Buyer] after conclusion of the contract. [Seller] also relies on a practice or usage between the parties, which [Seller] alleges is binding pursuant to Art. 9 CISG.
4.3.5 The case revolves around the question, if [Seller] can, despite Art. 18 CISG, rely on a retention of title, although the parties did not expressly agree on a retention of title, but did business with each other for years. This question has to be answered by using the Articles of the CISG named above. Since it is neither certain nor proven that a retention of title as the one in the case at hand can be taken as a usage or practice binding upon [Buyer] and since, as already stated above, [Buyer] could have at the earliest taken notice of the retention of title after conclusion of contract (either on the recto or on the verso of the invoices), the Court holds that [Buyer] did not accept the retention of title pursuant to Art. 18 CISG in connection with Arts. 8 and 9 CISG.
4.3.6 Since the parties therefore did not agree upon a retention of title regarding the [machine], [Seller]'s claim against [Buyer's proxy], based on an unlawful action, is completely unfounded. The conclusion of a sale and lease back contract can further - as it is not unusual in business - not be seen as unlawful towards the vendor of a machine. [Seller] did by the way not submit, that such contract is in itself unlawful. Also the non-use of the money received by the leasing-company for payment of the purchase price towards the supplier of the machine does without further circumstances not constitute unlawful behavior. [Seller] did not submit that, either. As a result, the reasoning in the incidental plea is successful.
4.4 The reasoning against the judgment in the principal claim concerning the allegation that there was no causal chain between the damages suffered and the act of [Buyer's proxy] does not have to be discussed anymore.
4.5 As a result, the judgment challenged, as supplemented with reasons above, has to be confirmed. [Seller] bears the costs of the incidental and principal claim.
On the principal and incidental claim, the Court confirms the judgment of the Rechtbank [*] 's-Hertogenbosch of 9 March 2005 supplemented with the reasoning stated above.
- On the principal claim, the Court orders [Seller] to bear the costs of the appellate proceeding which is, on the part of [Buyer's proxy], until the day of decision 1,100.00 EURO for expenses and 9,789.00 EURO for attorney fees. The judgment is enforceable upon providing security.
This judgment was handed down by Mr. Begheyn, Mr. Riemens and Mr. Feith in public proceeding on 29 May 2007.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Belgium is referred to as [Seller]; Defendant is referred to as [Buyer]. Amounts in European currency are indicated as [EURO].
Translator's note on other abbreviations: BF = Belgian francs [former Belgian currency]; HR = Hoge Raad der Nederlanden [Dutch Supreme Court]; NJ = Nederlandse Jurisprudentie [Database of Dutch decisions]; Rechtbank = [Dutch District Court].
** Thorsten Tepasse is a law student at the University of Osnabrück, Germany and participated in the 12th Willem C. Vis Moot with the team of the University of Osnabrück.

References: Art. 18
 Art. 6
 Art. 1
 Art. 19
 Art. 18
 Art. 9
 Art. 18
 Art. 18