Source: http://www.cisg.law.pace.edu/cisg/wais/db/cases2/000424a1.html
Timestamp: 2017-12-14 22:53:04
Document Index: 173928822

Matched Legal Cases: ['Art. 1', 'Art. 1', 'Art. 1', 'Art. 7', 'Art. 35', 'Art. 35', 'Art. 35', 'Art. 1', 'Art. 1', 'art. 1', 'art. 100', 'art. 99', 'art. 1', 'art. 95', 'art. 7', 'art. 7', 'art. 7', 'art. 35', 'art. 81', 'art. 35', 'art. 78', 'art. 81', 'art. 46']

Argentina 24 April 2000 Appellate Court (Mayer Alejandro v. Onda Hofferle) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000424a1.html]
UNCITRAL abstract and Added abstract
DATE OF DECISION: 20000424 (24 April 2000)
TRIBUNAL: Cámara Nacional de Apelaciones en lo Comercial [Second Instance Court of Appeal], Courtroom "E"
JUDGE(S): Rodolfo A. Ramirez
CASE NAME: Mayer Alejandro v. Onda Hofferle GmbH & Co.
GOODS INVOLVED: Charcoal
ARGENTINA: Cámara Nacional de Apelaciones en lo Comercial
Mayer Alejandro v. Onda Hofferle GmbH & Co., 24 April 2000
Case law on UNCITRAL texts (CLOUT) abstract no. 701
This case deals with the scope of application of the CISG and the procedures that need to be followed by the buyer in order to determine the quality of the goods in view of claiming his rights for non-conformity of the goods.
The seller, whose place of business was in Argentina, entered into a contract for the sale of charcoal with a German buyer in 1988, agreeing on "FOB Buenos Aires". Later on, the seller brought an action against the buyer for breach of the obligation to pay the purchase price. The Buyer filed a counterclaim for damages, arguing that the quality of the charcoal was not in conformity with the contract and that it could not be used for the purpose for which it was bought. The lower court rejected the counterclaim and ordered the buyer to pay the sums claimed by the Seller. The buyer appealed the decision.
On appeal, the Court examined whether the contract was governed by the CISG. The CISG was not applicable by virtue of article 1(1)(a), since in Germany the CISG had entered into force only after the conclusion of the contract. The Court noted that, according to Argentine private international law, the contract is governed by the law of the place where the main obligation, i.e. the delivery of the charcoal, has to be performed. Given that the parties had agreed on "FOB Buenos Aires", the main obligation had to be performed in Argentina, leading to the application of Argentine law. Hence, the Court concluded that the CISG was applicable pursuant to Article 1(1)(b).
On the substance of the dispute, the Court stated that the CISG, while regulating the obligations of the seller with regard to the delivery of the goods as well as the rights of the buyer in case the goods are not in conformity with the contract, does not contain any provisions on the procedure to be followed by the buyer in order to determine the quality of the goods. The Court analysed this gap under Article 7(2) and, resorting to the application of Argentine private international law, concluded that the proof of the defects of the goods was governed by the Commercial Code of Argentina. Since the buyer did not determine the quality of the charcoal in accordance with the expert arbitration procedures required by Article 476 of the Argentine Commercial Code, his evidence consisting of a testimony of a German witness, the quality of the charcoal could not be determined. Moreover the Court reasoned that even if the testimony was admissible, the charcoal would still be in conformity with the contract. In fact, the charcoal could, according to the Court, still be used for "gastronomical purposes", i.e. to grill food, reason for which the charcoal was "fit for the purpose for which goods of the same description would ordinarily be used" pursuant to article 35(2)(a) and thus in conformity with the contract. Therefore the Court rejected the appeal and upheld the decision of the lower court.
ARGENTINA: Cámara Nacional en lo Comercial 24 April 2000
EDITOR: Deva Villanúa
[Buyer] appeals an adverse ruling in the lower court, alleging [seller's] breach of contract in delivering coal of bad quality.
The contract was signed in 1988 by parties whose places of business are in Argentina and Germany. It therefore cannot fall within the scope of application of Art. 1(1)(a) CISG, for although Argentina has been a Contracting State since 1 January 1988, Germany did not become a Contracting State until 1994. Nevertheless, Art. 1(1)(b) CISG is applicable, since the rules of Private International Law of Argentina establish that the applicable law relates to the place of performance of the contract. In cases of the sale of goods, this is the place of delivery. Since the contract at hand included an FOB Buenos Aires clause, the place of delivery was on board ship in Buenos Aires (Argentina). As Argentina is a Contracting State, the CISG is applicable to the case, since the requirements of Art. 1(1)(b) are met.
The CISG contains no provision governing the manner of determining the quality of the goods. In such a case, Art. 7(2) of the CISG stipulates that the rules of Private International Law are to be followed. According to which, the manner of determining whether there are defects in the goods sold has to be governed by the Argentina Commercial Code. Its rules establish that in any controversy arising out of defects in goods, expert proof has to be provided. Nevertheless, [buyer] failed to provide such proof.
The Tribunal, however, examined evidence relating to the quality of the goods bought by the [buyer]. According to [buyer], the coal was imported with the intention of selling it in German supermarkets. The Tribunal concluded that the exported coal could be used in Germany for cooking purposes.
Art. 35(2)(a) CISG provides that goods do not conform with the contract unless they are fit for the purposes for which goods of the same description would ordinarily be used. Where the goods are fit for this purpose, the seller is not liable for non-conformity of the goods, according to Art. 35(3) CISG. In applying this article, the Tribunal ruled in favor of the [seller] and dismissed [buyer's] appeal.
Key CISG provisions at issue: Articles 7(2) ; 35
7C231 [Problems governed by Convention but not expressly settle (burden of proof: evidence relating to quality of goods): gap-filling by domestic law];
35B [Conformity of goods to contract (requirements imposed by law): fitness for purpose]
Descriptors: Conformity of goods ; Burden of proof
English: Unilex database http://www.unilex.info/case.cfm?pid=1&do=case&id=820&step=Abstract
Spanish: CISG-Spain and Latin America website <http://www.uc3m.es/uc3m/dpto/PR/dppr03/cisg/rargen10.htm>
Original language (Spanish): El Derecho (12 October 2001); CISG-Spain and Latin America website <http://www.uc3m.es/uc3m/dpto/PR/dppr03/cisg/sargen10.htm>; Unilex database http://www.unilex.info/case.cfm?pid=1&do=case&id=820&step=FullText
English: Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.590, 592; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 35 para. 41; Jaime Burchianti Lopez, text presented below; Anthony J. McMahon, 44 Columbia Journal of Transnational Law (2006) 992-1032 at Section IV
Alejandro Mayer v. Onda Hofferle GmbH & Co. [24 April 2000]
Translation by Jamie Burchianti Lopez [*]
Considering the previous decision, the court must resolve the following question: Does the judgment that is being appealed from, fs.[1] 1222/1226, conform to the law?
OPINION by Rodolfo A. Ramirez:
I. The judgment found at fs. 1222/1226 - the results of which must be reviewed to consider the legal questions -- ordered the Plaintiff-Appellee [Seller] to be paid the sums he claimed under a sales contract for charcoal [2] shipped to Germany, the country where the Defendant-Appellant [Buyer] has its place of business. The [Buyer]'s counterclaim for losses and damages [3] resulting from the lack of conformity of the goods allegedly derived from the [Seller]'s breach of contract was rejected. The costs of both actions in the lower court were imputed to the [Buyer].
The judgment was appealed by the [Buyer] ...
According to the transcript of fs. 1246/1249, the [Seller] ceded its litigation rights to another party, but the court still considers the [Seller] to be a plaintiff for the purposes of this litigation.
II. The [Buyer] questions the interpretation of the acts and the evaluation of the evidence effectuated by the Court of First Instance, which is reproached for having ignored "signs and evidence that came out of the proceedings concerning the poor quality of the charcoal" that arrived at the German port. [Buyer] asserts that the merchandise "was in the worst condition" and that this had been proven by the testimony given by Gregorio Der Bedrosian. [Buyer] asserts that the charcoal had excess moisture and could not be used for the purpose for which it was bought. This assertion supports the [Buyer]'s claim that the lack of adequate performance by the [Seller] caused serious economic damage. Because of this, [Buyer] requests the revocation of the judgment.
III. The material facts that gave rise to the controversy involve an international sale of charcoal, with an FOB Buenos Aires clause, during the year 1988. The [Seller], domiciled in the Argentine Republic, brought an action against the German buyer for breach of the obligation to pay the price for the goods. The [Buyer] refused the claim and counterclaimed for damages, arguing that the charcoal that it received did not conform to the contract.
A threshold question is to determine whether the questions arising out of the contract fall within the sphere of application of the United Nations Convention for the International Sale of Goods, adopted in Vienna, 11 April 1980, adopted in Argentina by law 22.465 [EDLA 1983-83].
In accordance with the prescription of Article 1(1), the Convention applies to sales contracts between parties that have their places of business in different States (a) when these states are Contracting States, that is to say, they have subscribed to the Convention; or when (b) the rules of private international law lead to the application of the law of a Contracting State (see Carlos Gilberto Villegas, "Comercio Exterior...", Astrea, 1993, cap. 1, para. 3, pp. 30/31).
The contract at issue does not fit within the intended application of Art. 1(1)(a) because, although the Convention has been in force in Argentina since 1 January 1988 -- the same year that the parties concluded the contract -- it did not enter into force in Germany until 1 January 1994 [4] (see "A proposito de la aplicacion de la Convencion de las naciones Unidads...", by Carolina D. Iud en ED, 169-405 et al., chapter V notes 7 & 8). We therefore proceed to analyze whether the contract falls within Article 1(1)(b).
According to qualified legal doctrine, in internal international private law, the Civil Code establishes general norms for every type of contract. And in accordance with the Civil Code's articles 1209 and 1210, the characteristic that determines the location of those contracts that have some contact with Argentina -- by their celebration and completion in that territory -- is the place of performance (see Maria Susana Najurieta, "Compraventa internacional. Aportes...", en RDCP, N 121/123, June 1988, pto.2.2.1., pp. 74/75).
Consequently, we must determine the place of performance of the contract in question. In reciprocal contracts, the place of performance determines what legal system the contract falls within. And it being an international sale, the main performance of the contract is the delivery of the goods; performance by the seller does not involve the payment of money.
Remembering that the contracting parties have included the clause FOB Buenos Aires, it is clear that the fundamental part of the contract was performed with the delivery of the goods on board the ship in the agreed port (conf. en igual sentido, esta sala en autos "Esposito e Hijos,.R.L.c. Jocqueviel de Vieu", 10.10.85, and doctrine cited within, LL, 1986-D-46), which leads to the application of Argentine law.
Consequently, every time that the above-mentioned rules of private international law designate the law of the Republic of Argentina -- being treated as a Contracting State --one can conclude that the litigation in question is within the sphere of application of the Convention, by virtue of Article 1(1)(b).
It is interesting to relate here the opinion of Bernard Audit, who in studying the scope of the Convention, assigned to the cited Article 1(1)(b) considerable importance because it incorporates the rules of the Convention into the law of Contracting States, under pretext of applicable law in international relations; or also, the material dispositions of the Convention become the common law for international sales in the countries that adopt it (see La Ahora bien, la compraventa internacional de mercaderias", Zavalia Editor, 1994, ch. I , para. 21, p. 28).
The Convention regulates in detail the obligations of the seller with respect to the delivery of the goods and the rights of the buyer in case the quantity, quality and type of goods do not correspond to what was stipulated in the contract (see, among others, arts. 30, 35, 36, 39, and 45 to 52); regulations that coincide in essence with the content of Argentina's Civil Code and Commercial Code (see Exposicion de motivos de la ley 22.765 in ADLA XLIII-B-1259). But the Convention does not contain any rule -- nor general principal -- concerning the procedure to follow in order to determine the quality of goods, when the quality is questioned by the one who acquires the goods.
In the face of this omission, one should look to the solution contemplated in Article 7(2). It establishes that questions relating to matters governed by the Convention that are not expressly settled in the Convention are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law (see Villegas, op. cit., para. 4, p. 31).
That is to say that, in the latter case, the Convention refers to the national systems of private international law (see, newly, exposicion de motives de la ley 22.765).
Having presented the above formulated considerations, I conclude that the question concerning the proof of the defects attributed to the goods should be governed by the Commercial Code of Argentina.
That understood, I point out that the [Buyer] has avoided the fixed procedure, imperative under article 476 of the Commercial Code, according to which a buyer that contests the quality of goods should appeal to expert opinion (Arbitration). And that omission, seals, in my judgment, the adverse condition of the appeal, having in mind that expert opinion (Arbitration) is the road legally contemplated to settle this type of controversy in international sales matters (conf. esta sala in re Donato , Vicente c. Papelera San Justo", 27.2.90, y sus citas, ED, 140-745).
The inspection of the goods, presumably carried out by a German company, does not undermine this conclusion, accompanied opportunely by the claim (see su traduccion a fs. 414), having in mind that said inspection does not replace the judgment of the expert Arbitration. Furthermore, the diplomatic letter rogatory put into motion to verify the authenticity of the evidence, introduced as exhibit "U", has not been translated to the national language (fs. 453 and 748/762).
IV. The preceding explanations lead us to conclude that the testimony of the German witness [Der Bedrosian] in the statement of defects of the goods constitutes inadmissible proof to verify the quality of the goods. However, even if this court could consider the testimony of the witness, that would not improve the position of the appeal. Observe that if the charcoal was as Der Bedrosian said, the exported charcoal could still be used in Germany for gastronomical purposes (see respuesta a la 10a ampl., fs. 555). And according to the complaint, the primary requirement of the product was "to make widespread the practice of eating grilled foods outside" during summer.
From this perspective, the applicable provision would be Article 35(2)(a) of the Vienna Convention. It provides that goods that do not comply with the conditions indicated in its first clause will not be in conformity with the contract unless "they are fit for the purposes for which goods of the same description would ordinarily be used." If, however, the buyer knew or could not have been unaware of the lack of conformity, the seller would not be liable (third paragraph of Article 35).
V. In accordance with everything expressed, I hold that the judgment ordering the payment of the price with interest and rejecting the action for damages brought by way of the counterclaim is in accordance with Articles 28, 53, 58, 59, 61, 62, and 78 of the United Nations Convention, ratified by law 22.765, under which it should be confirmed that there has been an adversary proceeding.
VII. As a corollary, I propose the resolution: 1) affirming the appealed judgment in which there was matter of objection; 2) rejecting the appeal; and 3) finding that each party pays the cost of its own appeal, because of not having contradictory mediation.
The Chamber Judge, Doctor Arecha states: I share the reasons presented by the Proponent Judge. I concur with this proposed solution. I vote, in consequence, in the same sense. For analogous reasons, Judge Guerrero concurs with the previous votes.
By the reasons of the preceding decision, the court: 1) confirms the sentence appealed in which the matter was opposed; 2) rejects the appeal; and (3) declares the costs of both appeals to be paid by the party who brought it.
* Jamie Burchianti Lopez is an associate at Kirkpatrick & Lockhart Nicholson Graham LLP and is a graduate of the University of Pittsburgh School of Law.
1. Translator's note: The abbreviation "fs" refers to "folios", which are essentially the case files.
2. The exact translation of the goods in question is "vegetable charcoal," which is a special type of charcoal made from natural substances such as wood that burns longer and hotter than regular charcoal.
3. Includes not only the amount of the loss which may have been suffered, but also that of the profit which the creditor may have failed to realize.
4. The Spanish version of the case says 1994, but the CISG entered into force in Germany in 1991. The date in the Spanish case is more than likely a typographical error.
Cámara Nacional en lo Comercial 24 April 2000
Jaime Burchianti Lopez
(1) Applicability of the Convention
(2) Issues of Proof
(3) Underlying Claims
This case involves many interesting considerations, and has proven important as precedent for at least one other Argentine case [1] applying the United Nations Convention for the International Sale of Goods (CISG).[2] Although the court came to a reasonable result, it should have gone through its analysis of the various Convention provisions more clearly and precisely. There were four main issues under the Convention that the court had to decide: (1) the applicability of the Convention under Article 1, (2) issues of proof with respect to lack of conformity of the goods, (3) the underlying claims for breach of contract by both the buyer and seller, and especially the provisions dealing with conformity of the goods under Article 35, and (4) the remedies sought.
The Argentine court first had to determine whether the CISG was the applicable law. For a contract to fall within the scope of the Convention, it must be (1) a contract (2) for sale (3) of goods (4) between parties whose places of business are in different States.[3] This case clearly met these initial requirements as it involved a contract for the sale of charcoal, which is a tangible good, between a seller whose place of business was in Argentina and a buyer whose place of business was in Germany. However, these requirements are not enough to trigger application of the Convention. In addition to the above requirements, the CISG requires that, under Article 1(1)(a), the States where the parties have their places of business be Contracting States, or, under Article 1(1)(b), that the rules of private international law lead to the application of the law of a Contracting State.[4]
The court first determined whether the Convention would be applicable under subsection (1)(a). Although not explicitly discussed by the court, for the Convention to apply via Article 1(1)(a), the States must be Contracting States at the time the contract was entered into, in this case 1988, not just at the time of the dispute.[5] Furthermore, the effective date that a State is considered to be a Contracting State is the date the Convention enters into force, not the date of ratification, acceptance, or approval.[6] Pursuant to Article 99, after the deposit of the tenth instrument of ratification, acceptance, approval, or accession, the Convention enters into force on the first day of the month following the expiration of twelve months after the date of the deposit of a State's instrument of ratification, acceptance, approval or accession. For example, assuming there have been ten States whose instruments have been ratified or accepted, if a State ratifies on March 13 of 2001, the Convention would enter into force on April 1, 2002.
Because the Convention entered into force in Argentina on January 1, 1988, Argentina was a Contracting State at the time the contract was concluded, which was also in 1988.[7] However, Germany did not become a Contracting State until 1991.[8] Therefore, the Convention could not be applicable under Article 1(1)(a), since both States were not Contracting States at the time the parties concluded their contract.[9]
The court next turned to subsection (1)(b) of Article 1, to determine whether the rules of private international law led to the application of the law of a Contracting State. The relevant rules of private international law are those of the forum, in this case Argentina.[10] Argentina's rules of private international law regarding contracts, found in the Civil Code, provide that the law of the place of performance is to govern the contract, and that in international sales contracts, the characteristic performance of the contract is the delivery of the goods. The court came to the conclusion that delivery was performed in Argentina based on an "FOB Buenos Aires" clause in the contract. The court used the FOB term to conclude that performance was effectuated with the seller's delivery of the goods on board the ship at the port in Buenos Aires. Thus, Argentine law should govern the contract. Because Argentina was a Contracting State, the Convention is the applicable internal law for Argentina in matters concerning the international sale of goods.[11]
The CISG is applicable pursuant to Article 1(1)(b) even though Germany was not a Contracting State at the time the contract was entered. Under Article 100(2), the Convention applies to contracts concluded on or after the date when the Convention enters into force in a Contracting State referred to in Article (1)(1)(b). In this case, the Contracting State referred to is Argentina. Because the Convention entered into force in Argentina on January 1, 1988, and the contract between the parties was concluded in 1988, the contract was concluded on or after the date when the Convention entered into force. Contracting States can choose to make a reservation under Article 95 to exclude applicability under subsection (1)(b) of Article 1, but Argentina has not chosen to do so.[12]
In concluding that the CISG is the applicable internal law of Argentina, the court cited Bernard Audit, a professor of law in Paris.[13] This was an important step for the court because it showed a willingness to consider sources outside the realm of purely domestic law, and thus was in accordance with Article 7(1) of the Convention relating to interpreting the Convention with respect to its international character and the need to promote uniformity in its application.[14] It is important that courts interpret the Convention with regard to its international character and promote uniformity because their opinions may be consulted by courts from other States interpreting the CISG.[15]
Also notable, is the fact that the court considered the parties' use of the FOB term in determining the place of performance. FOB is a common trade term used in international sales meaning "free on board." When discussing the FOB term, the court did not define the risks and obligations of the parties. However, the court's conclusion indicates that the court assigned the FOB clause a similar definition to the one it has under the INCOTERMS.[16] According to the INCOTERMS' definition, the seller in an FOB contract delivers (performs) when the goods pass the ship's rail at the point of shipment.[17] Similarly, the court determined that the seller performed when it delivered the goods on board the ship in the port in Buenos Aires. The court does not make it explicitly clear how it interpreted the FOB term. However, since the court cited to an Argentine decision immediately after the discussion of the FOB term, it is likely that the court was applying a domestic definition of FOB. If the court was applying a different definition it should have done so more clearly.
Integral to the issue of non-conformity of the goods is the evidentiary issue which is at the center of the appeal. Although the CISG does govern issues relating to non-conformity of goods,[18] it does not expressly address the manner in which non-conformity must be proved. Therefore, the court first applied Article 7(2) and ultimately applied Argentina's internal domestic law to determine this question. Although this was not an incorrect result, one could argue that the court reached this result through a flawed methodology.
The court analyzed this evidentiary issue under Article 7(2), which reads:
For Article 7(2) to apply, the court must determine that the question is one that is governed by the Convention. Although the court did not explicitly state why it concluded the matter of proof was governed by the Convention, its discussion of "the general obligations of the seller with respect to the delivery of the goods and the rights of the buyer in case the quantity, quality and type of goods do not correspond to what was stipulated in the contract" lead to the conclusion that it considered the issue to be part of the broad matter of lack of conformity of goods, which is a matter governed by the Convention.
Once a court has determined that the matter is governed by the Convention, the court is to see if the matter is expressly settled therein.[19] Since there are no rules in the Convention expressly relating to the manner in which lack of conformity must be proved, the court should have gone on in accordance with Article 7 to see if there were general principles on which the Convention is based relating to that issue. Although the court concluded that there were no general principles relating to this issue, it did not go through an analysis. After stating in a conclusory manner that the Convention "does not contain any rules -- nor general principal -- concerning the procedure to follow in order to determine the quality of goods," the court turned to the rules of private international law.
Argentina's rules of private international law lead to the application of the law of the place of performance, Argentina. Thus, the Argentine Commercial Code governs how lack of conformity of goods is proved. Under the Argentine Commercial Code, a buyer who refutes the quality/conformity of the goods he receives must submit to expert arbitration. Because the buyer in this case neglected to do so, he had no admissible evidence to support his claim that the goods were non-conforming. Although, the buyer did have the testimony of a German witness, the court would not accept this testimony in place of expert arbitration. This puts a very high burden on the buyer. The buyer would have to be familiar with Argentine domestic law, and then ship the goods from Germany back to Argentina so that the goods could be subjected to expert opinion. This would lead to increased risk of the goods being further harmed in transit and additional cost.
Alternatively, the court could have held that the manner in which lack of conformity is to be proved is a procedural matter of evidence that is not governed by the CISG and gone directly to their domestic law rather than applying Article 7(2).[20] Some scholars have commented that procedural matters are not governed by the CISG.[21] However, the classification of a matter as procedural (not governed by the CISG), or substantive (is governed by the CISG), is rather uncertain.[22]
At first glance, the matter of proof seems to be more procedural than substantive because it merely outlines the manner by which a party must prove lack of conformity; it does not set any substantive standards. However, the fact that this issue was covered by the Argentine Commercial Code rather than the Code of Procedure or Process may suggest that the issue is not as much of an evidentiary/procedural issue in Argentina as it may be in the United States. Furthermore, the UNCITRAL Digest specifically includes a section on evidentiary matters relating to the conformity of goods under Article 35, the article that deals with conformity, which also supports the conclusion that evidentiary matters relating to this issue are governed by the Convention under the auspices of non-conformity.[23] This argument is strengthened by the fact that other evidentiary issues such as burden of proof have been treated as within the scope of the CISG.[24]
Regardless of which of these routes the court took, the ultimate result would be the application of the Argentine Commercial Code. However, the court could have taken a different approach and found general principles regarding proof of non-conformity under Article 7(2). One manner in which it could have done this would have been to look to what forms of proof other courts applying the CISG have accepted when parties were claiming non-conformity.
(3) UNDERLYING CLAIMS and especially lack of conformity
The main issue on appeal was whether the buyer had a rightful claim for damages based on non-conformity of the goods. The claim of non-conformity was brought as a counterclaim. The original action was brought by the seller to have the buyer pay the price for the goods.[25] The court does not make clear in its discussion whether the counterclaim for damages was meant to be a set-off against the price or whether it was in essence claiming avoidance of contract (that it would not be obligated to pay at all because the lack of conformity constituted a fundamental breach).[26] Avoidance releases both parties from their obligations under the contract.[27] A party only has the right to avoid the contract if there has been a fundamental breach.[28] It could be argued that the court simply did not reach the issue because it concluded that there was no admissible evidence of lack of conformity, and therefore no evidence of a breach of any nature by the seller. However, the court failed to thoroughly discuss the facts relating to the underlying claims.
A witness for the German company, Der Berdrosian, testified concerning the conformity of the goods, but because the testimony was not in accordance with the Argentine Commercial Code's expert arbitration procedures, the evidence was held to be inadmissible. According to his testimony, the charcoal "was in the worst condition." The seller also asserted that the charcoal had excess moisture and could not be used for the purpose for which it was bought, but the court did not say whether the testimony of Der Bedrosian was specifically to this effect. The court went on to state that even if the testimony was admissible, it would still not support a finding that the goods were non-conforming.
The court looked to Article 35 of the Convention, the Article governing conformity, in determining that the goods were non-conforming. If the goods do not meet the applicable requirements of Article 35, it generally constitutes a breach by the seller, and can rise to the level of a fundamental breach under Article 25 of the Convention, which would allow the buyer to avoid the contract.[29]
Under Article 35(1), if the parties had a contractual description of the goods as to quality then that is the standard to which the goods should be held.[30] Because the Mayer court went straight to the application of Article 35(2), it may be inferred that the parties did not include in their contract any specific requirements for the quality of the goods. Under Article 35(2)(a), goods are conforming if they are fit for the purpose for which goods of the same description would ordinarily be used, and under Article 35(2)(b), goods are conforming if they are fit for the buyer's particular purpose, so long as the seller expressly or impliedly knew of the particular purpose, except where the buyer did not rely, or it was unreasonable for him to rely, on the seller's skill and judgment.[31] The complaint asserted that the goods were to be used for grilling outside. The court used this to define the purpose for which goods of that kind are ordinarily used. Finally, the court held that even if the charcoal was in the condition that the German witness said it was in, it could still be used for gastronomical purposes, which is the purpose for which charcoal is normally used.
The court could have gone on to apply 35(2)(b), under which the goods also would have been deemed to be conforming. As per the complaint, the seller's specific purpose was to use the charcoal in grilling, and this purpose could have still been fulfilled by the goods that were received. Subsections (2)(c) and (d) of Article 35 are not applicable in this case. After determining that the goods were conforming, the court concluded that the seller would not be liable under the third paragraph of Article 35.[32]
There is no discussion of when precisely the goods were damaged. Due to the nature of the damage (being wet), it may be that the goods were damaged in transit, in which case the risk had probably already passed to the buyer.[33] This may have been another reason for the court to find that the seller was not liable.
Also absent from the court's analysis is Article 39, under which a buyer loses the right to rely on a lack of conformity of the goods if he does not give notice of the nature of the lack of conformity within a reasonable time. Since it was not discussed, it may be assumed that the buyer was in conformity with this provision, or that the court never reached the question.
The seller in the original action brought a claim for the buyer to pay the price, which is a form of specific performance.[34] The court ordered the buyer to pay the contract price plus interest, citing Articles 28 (relating to specific performance), 53 (obligation of buyer to pay the price), 58 (relating to when price is to be paid), 59 (relating to requirement to pay price on fixed date), 61 (seller's general remedies for breach), 62 (seller may require buyer to pay price), and 78 (interest). Although the court cited these various articles, it did not discuss any of them, which would have been helpful for other courts interpreting the decision. The opinion implied that the court derived the authority to grant the seller the remedy from all these articles taken together. Especially interesting is that the court cited the articles on when the price was to be paid. However, there are insufficient facts from the case to establish how late the buyer was in paying, or even when or where the price was to be paid.
Although the court awarded interest, it did not specify an interest rate, a way to determine an interest rate, or a date from when the interest was to accrue. The CISG article relating to interest that the court applied is very general.[35] Some courts and scholars have derived a general principle under Article 7(2) that an amount due under the CISG bears interest from the date it is due.[36] A more contentious issue has been what interest rate to apply. Some argue that the issue is outside the scope of the Convention and should be determined by domestic law.[37] This position is almost certainly wrong as the matter of interest is clearly within the CISG.[38] Others argue that it is a matter governed by the Convention and should be decided under Article 7(2) in accordance with the general principles underlying the Convention, namely full compensation.[39]
The buyer cross-claimed for the remedy of "damages," but the court rejected his claim. However, it was unclear whether the buyer was asking for damages to be set-off against the price he owed, or was claiming that he should not be responsible for any payment of the price, in which case he would have had to prove that he either avoided the contract or that his damages exceeded the price he was to pay. If the buyer was claiming avoidance, and thus claiming that he was released from all obligations of the contract including the obligation to pay the contract price, he would have needed to show a fundamental breach on the part of the seller, and to have complied with the procedural requirements set out to properly avoid a contract, such as notice and inspection.[40] He would also have been obligated to return the goods.[41] Alternatively, the buyer could have claimed price reduction [42] or if there was a fundamental breach, requested substitute goods.[43] Price reduction may have been the best option since it seems that the goods were still usable.
The primary weakness of the court's opinion was a lack of clear analysis regarding certain articles and a failure to describe the underlying facts of the case. Another weakness, relating to this, was the failure of the court to cite any international source aside from the opinion of Bernard Audit. There were various cases that the court could have cited to for various propositions.[44] It is very important that the judge deliver a thorough, clear analysis and that they consult international sources in effecting an international interpretation pursuant to Article 7(1).[45]
It is of note that this case was relied upon in large part in a later Argentine case.[46] That case also involved a claim by the seller for the buyer to pay the contract price. The court went through an analysis similar to the Mayer court's under Art. 1(1)(b). It also mirrored the Mayer court, almost word for word, in its determination that the there were no general principles under 7(2) or rules in the CISG regarding how to prove non-conformity. This illustrates the precedential value of the opinion, if only in Argentina, and underscores the need for the court to have gone through some of the facts and applications more clearly.
1. Decision of July 21, 2002, Cámara Nacional de Apelaciones en lo Comercial de Buenos Aires (Argentina) (Cerveceria y Malteria Paysandu S.A. v. Cerveceria Argentina, S.A) available in English at <http://cisgw3.law.pace.edu/cases/020721a1.html>.
2. United Nations Conference on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), 19 I.L.M. 668 (1980) [hereinafter "CISG" or "Convention"] (entered into force on Jan. 1, 1988), available in 15 U.S.C.A. app. at 49 (West Suppp. 1996), 52 Fed. Reg. 6262-80, 7737 (1987), U.N. Doc. A. Conf. 97/18 (1980).
3. CISG, supra note 6, art. 1(a)-(b).
4. CISG, supra note 6, art. 100(2).
5. CISG, supra note 6, art. 99; see also UNCITRAL Digest of case law on the United Nations Convention on Contracts for the International Sale of Goods, art. 1 at 11, A/CN.9/SER.C/DIGST/CISG/1 (2004), available at <http://ods-dds-ny.un.org/doc/UNDOC/GEN/V04/547/19/PDF/V0454719.pdf?OpenElement> (last visited Oct. 22, 2004) [hereinafter "Digest" (Article 99 determines when a state becomes a Contracting State).
6. UNCITRAL Status of Conventions and Model Laws, United Nations Convention on Contracts for the International Sale of Goods (Vienna 1980) available at <http://www.uncitral.org/en-index.htm> (last updated April 16, 2004).
7. Id. The Convention was signed by the former German Democratic Republic on 13 August 1981. It was not ratified until 23 February 1989. It entered into force on January 1, 1991, coinciding with the reunification of Germany. Id.
8. Note that if the contract had been entered into after January 1, 1991, the Convention would be applicable under Article 1(1)(a), since both Argentina and Germany are Contracting States.
9. Digest, supra note 9, at 12.
10. See John Honnold, The Sales Convention: Background, Status, Application, 8 J.L. & Com., 1, 7 (1988).
12. CISG, supra note 6, art. 95; see also, UNCITRAL Status of Conventions and Model Laws, supra note 10.
13. Bernard Audit, The Vienna Sales Convention and the Lex Mercatoria, Footnote * (1990), available at <http://cisgw3.law.pace.edu/cisg/biblio/audit.html>.
14. CISG, supra note 6, art. 7(1); see also Harry M. Flechtner, The Several Texts of the CISG in a Decentralized System: Observations Translations, Reservations and Other Challenges to the Uniformity Principle in Article 7(1), 17 J. of L. & Commerce 187 (1998) for a more complete discussion of the principle of uniformity in interpretation.
15. Phanesh Koneru, The International Interpretation on the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minn. J. Global Trade 105, 107 (1997) available at <http://cisgw3.law.pace.edu/cisg/biblio/koneru.html> (last visited Oct. 22, 2004).
16. The International Chamber of Commerce, INCOTERMS 2000: ICC Official Rules for the Interpretation of Trade Terms 49 (ICC Publishing 1999) [hereinafter "INCOTERMS"]. INCOTERMS are a set of commonly used trade terms published by the International Chamber of Commerce that delineate the rights and obligations of the parties in accordance with certain trade terms. Although INCOTERMS are fairly widespread, domestic laws normally also have their own definitions of trade terms and rights and obligations of the parties that flow therefrom.
17. Id. at 49.
18. CISG, supra note 6, arts. 35-37, 39-40.
19. Id. at art. 7.
20. See UNCITRAL Digest of case law on the United Nations Convention on Contracts for the International Sale of Goods, art. 7 at 4, A/CN.9/SER.C/DIGST/CISG/7 (2004), available at <http://ods-dds-ny.un.org/doc/UNDOC/GEN/V04/547/19/PDF/V0454719.pdf?OpenElement> (last visited Oct. 22, 2004); see also Zapata Hermanos Sucesores v. Hearthside Banking Co., 313 F.3d 385 (7th Cir. 2002).
21. Harry M. Flechtner, The U.N. Sales Convention (CISG) and MCC-Marble Ceramic Center Inc. v. Ceramic Nuova D'Agostino, S.p.A.: the Eleventh Circuit Weighs in on Interpretation, Subjective Intent, Procedural Limits to the Convention's Scope, and the Parol Evidence Rule, 18 J.L. & Com. 259, 276, 276 n. 109 (1999); Harry M. Flechtner & Joseph Lookofsky, Viva Zapata! American Procedure and CISG Substance in a U.S. Circuit Court of Appeal, 7 Vindobona J. Int'l Comm. L. & Arb. 93 (2003).
22. Id.; Ulrich Magnus (trans.by Lisa Haberfellner), General Principles of UN-Sales Law, 59 Rabels Zeitschrift *4 (1995), available at <http://cisgw3.law.pace.edu/cisg/text/magnus.html> (last visited Oct. 22, 2004).
23. UNCITRAL Digest of case law on the United Nations Convention on Contracts for the International Sale of Goods, art. 35 at 9-10, A/CN.9/SER.C/DIGST/CISG/35 (2004), available at <http://ods-dds-ny.un.org/doc/UNDOC/GEN/V04/547/19/PDF/V0454719.pdf?OpenElement> (last visited Oct. 22, 2004).
25. See CISG, supra note 6, arts. 28 & 53.
26. Id. at arts. 25 & 49.
27. Id. at art. 81.
28. Id. at arts. 25, 49 & 64.
29. Digest, supra note 26, at 2.
30. CISG, supra note 6, art. 35; see also Peter Schlechtriem, Uniform Sales Law-The UN Convention on Contracts for the International Sale of Goods, Conformity of the Goods (Manz 1986), available at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-35.html> (last visited Oct. 22, 2004).
31. See Digest, supra note 27.
32. It is unclear to me whether by "third paragraph " the court is talking about 35(2)(a), which is the third paragraph of Article 35, or whether the court is talking about 35(3). It appears that they are referring to 35(2)(a) simply because a reference to 35(3) would make no sense in this context.
33. The risk would have passed to the buyer under the INCOTERMS' definition of FOB, supra note 20, and also under the passage of risk provisions in the CISG (arts. 66-70).
34. CISG, supra note 6, arts. 53 & 28.
35. CISG, supra note 6, art. 78, providing: "If a party fails to pay the price of any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under Article 74."
36. Magnus, supra note 26, at 11; Koneru supra note 18, at 11; see e.g., decision of June 14, 1994, Amtsgericht Nordhorn (Germany) available at <http://cisgw3.law.pace.edu/cases/940614g1.html>; decision of March 29, 1995, Cour d'Appel de Grenoble Chambre Commerciale (France), available at <http://cisgw3.law.pace.edu/cases/950329f1.html>.
37. Koneru, supra note 19, at 7.
40. CISG, supra note 6, at arts. 25, 26 & 49.
41. Id. at art. 81(2).
42. Id. at arts. 44 & 50.
43. Id. at art. 46(2)
44. Decision of August 14, 1991, Landgericht Baden-Baden (Germany), available at <http://cisgw3.law.pace.edu/cases/910814g1.html> (finding that plaintiff failed to deliver goods fit for the purpose for which goods of the same description would ordinarily be used); decision of April 20, 1994, Oberlandesgericht Frankfurt (Germany), available at <http://cisgw3.law.pace.edu/cases/940420g1.html> (holding that mussels were still fit for eating and therefore were conforming under 35(2) and also that the applicable interest rate is the statutory rate under both German and Swiss law).
45. Korenu, supra note 19.
46. Decision of July 21, 2002, Juzgado Nacional de Primera Instancia en lo Comercial (Argentina) (Cerveceria y Malteria Paysandu S.A. v. Cerveceria Argentina, S.A) available in English at <http://cisgw3.law.pace.edu/cases/020721a1.html>.