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Matched Legal Cases: ['Art. 72', 'Art. 73', 'Art. 39', 'art 2', 'art 2', 'arts 1', 'art\n1']

Finland 30 June 1998 Helsinki Court of Appeal (Skin care products case) [translation available] [Cite as: http://cisgw3.law.pace.edu/cases/980630f5.html] Primary source(s) of information for case presentation: Case text
DATE OF DECISIONS: 19980630 (30 June 1998) JURISDICTION: Finland TRIBUNAL: Helsinki Court of Appeal JUDGE(S): Unavailable CASE NUMBER/DOCKET NUMBER: S 96/1215
CASE NAME: EP S.A.v FP Oy CASE HISTORY: Helsinki Court of First Instance (95/11481) 11 June 1995 [affirmed]
SELLER'S COUNTRY: Switzerland (plaintiff) BUYER'S COUNTRY: Finland (defendant)
GOODS INVOLVED: Products for skin care Classification of issues present
APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issues: Articles 25 ; 35 ; 38 ; 39(1) ; 49(1) and 49(2) ; 72(1) and 72(2) [Also cited: Article 73 ] Classification of issues using UNCITRAL classification code
Descriptors: Conformity of goods ; Examination of goods ; Lack of conformity notice, timeliness ; Avoidance ; Anticipatory breach Go to Case Table of Contents Editorial remarks
HELSINKI COURT OF APPEAL, S 96/1215 (30 JUNE 1998)	6.1 Classification of the issues present	6.2 Applicable law	6.3 Delivery of the goods	6.3.1 Facts of the case	6.3.2 Agreed procedure for delivery	6.3.2.1 Obligation to take delivery	6.3.2.2 Time for delivery	6.3.2.3 Interpretation of the contract	6.3.2.4 Battle of forms	6.3.3 Decision on delivery	6.4 Conformity of the goods	6.4.1 Facts of the case	6.4.2 Particular purpose of the goods	6.4.3 Sale by sample	6.4.4 Buyer's knowledge of the non-conformity	6.4.5 Fundamental breach of the contract	6.4.6 Decision on the conformity of the goods	6.4.6.1 District Court's reasoning	6.4.6.2 District Court's reasoning analysed	6.5 Examination of the goods and notice of non-conformity	6.5.1 Facts of the case	6.5.2 Obligation to examine the goods	6.5.3 Obligation to notify about the lack of conformity	6.5.4 Exemptions from giving a notice	6.5.5 Decision on the examination of the goods	6.5.5.1 District Court's reasoning	6.5.5.2 District Court's reasoning analysed	6.6 Buyer's right to declare the contract avoided	6.6.1 Facts of the case	6.6.2 Anticipatory breach	6.6.3 Anticipatory breach in instalment contracts	6.6.4 Decision on the avoidance of the contract	[...]
The case involved a sale of skincare products delivered from a Swiss Seller (the
plaintiff) to a Finnish Buyer (the defendant). The questions in dispute included:
- The time of the delivery; - The conformity of the goods;
- The proper and timely examination of the goods and notice of non-conformity; and - The Buyer's right to declare the contract avoided because of
anticipatory breach of the contract.
See below for English translation of this case by Jarno Vanto. The decision of the Court of
Appeal affirmed the decision of the District Court of Helsinki, Dept. 5, No.
19067, 95/11481 (11 June 1995) The Court of Appeal saw no reason to change the
judgment of the the District Court and thus the judgment of the District Court
The Seller stated that, due to the fact that the place of business of the Seller
who accepted the order was in Switzerland, Swiss law was applicable to the
contract. There was no agreement between the parties on applicable law. The Buyer
stated, as did the Seller, that the CISG was applicable to the case. The District Court did not make any reference as the applicable law as there was
no dispute on the issue. However, it should be noted that the application of the
CISG should have been derived from Article 1(1)(a). The CISG applies directly if
the parties to a contract of sale of goods have there places of business in
different Contracting States, independent of a different solution provided for
by the rules of private international law. In Finland the CISG came into force
on 1 January 1989, in Switzerland on 1 March 1991. Only if the CISG is not
applicable by virtue of Article 1(1)(a), are the rules of private international
law to be considered. By virtue of Article 1(1)(b), the CISG is applicable when
the rules of private international law lead to the application of the law of a
Contracting State. In Finland, the Act on the Law Applicable to the Sale of Goods of International
Character (26.6.1964/387, as amended by the Act 27 May 1988/468), provides that
in the absence of a choice of law under Section 3, the sale shall be governed by
the law of the State where the seller had his place of habitual residence when
he received the order. If the order was received by a business owned by the
seller, the sale shall be governed by the law of the State where the business is
situated (Section 4, subsection 1). Only if the buyer places the order in the
State where the buyer has his habitual residence or where he owns a business and
the seller or his agent receives the order in said State, the sale shall be
governed by the law of the buyer's State (Section 4, subsection 2). Thus, the Finnish rules of private international law lead to the application of
the Swiss law, in this case the CISG. However, the correct approach is to apply
CISG by virtue of Article 1(1)(a). Even if the rules of private international law
of the forum would lead to a non-Contracting State, the CISG applies if the
parties are from Contracting States.
It should also be noted that Finland has ratified the CISG subject to a
declaration under CISG Article 92 not to be bound by Part II of the Convention:
Formation of the Contract. However, as noted earlier, this does not mean that
Part II of the Convention would not be applied in Finland in some cases.[345] As
far as Part II of the Convention, Finland is not a Contracting State as provided
in CISG Article 1(1)(a). However, if the conflict of law rules as provided for
in CISG Article 1(1)(b) point to the law of a country which has not made a
declaration provided in CISG Article 92, Part II of the Convention would also
apply. As Switzerland has not made any reservation to the Convention and due to
the conflict of law rules the Swiss law is applicable to the case, also Part II
of the Convention applies to the case. Part II of the Convention naturally also
applies if the parties to a contract have agreed that the CISG is to be applied.
As noted above, the decision of the District Court does not discuss the issue of
the applicable law. The law applicable to the formation of the contract is
nevertheless in any case the Swiss law, i.e. the CISG.
An order for the skincare products was placed by the Buyer on 26 February 1992.
The Seller accepted the order on 5 March 1992, at the same time when the Seller
had accepted an Order #9/92 of the same proportion. According to the order, the
term of delivery was to be agreed upon at a later point in time. The terms of the
sale also stated that samples of products were to be delivered to VTT (Technical
Research Centre of Finland) for checking purposes. The order required the goods
to be produced from one and the same raw material and the acceptance of the
sample goods required that production of the goods be already finished before the
checking of the goods at VTT. After placing an order, the representative of the Buyer had confirmed by phone
that the deliveries will be received during the months of May and August 1992.
When the representative of the Seller had reminded the representative of the
Buyer of this, he had not denied that. In addition, when placing the order, the
Buyer had encouraged the Seller to expediently deliver all of the packaging
materials. The Buyer had informed the Seller that the samples had passed the VTT checking
in fax messages dated 24 April 1992, 30 April 1992 and 6 May 1992. The goods had
to be produced quickly in order to obtain sample goods. According to the contract, the Seller could reasonably assume that the Buyer,
soon after the sample goods were checked, would issue an order of shipment. Not
until 15 September 1992, the Buyer had finally notified that "the goods can be
shipped in December, so that they arrive in Finland at the earliest on 1 January
1993." The Seller argued that the Buyer knew that even though the goods in question
could have been preserved relatively long, at least thirty months, vitamins,
perfumes and some other ingredients in skin care products are under a constant
process of transformation and decomposition. These features of skin care products
are generally well known, and further the other person representing the Buyer
presumably was a chemist. Because the parties were mutually aware of these
circumstances and because they wanted to avoid maturation of the products in
Seller's warehouse, there were grounds to assume that the Buyer would soon enough
send an order of shipment to the Seller. Because the delivery of the Order #9/92
was to take place on week 18, there was no reason for the Seller to assume that
the Buyer would delay issuing of the order of shipment concerning Order #10/92
further than the end of May 1992. As a consequence of the delay in delivery, the
Seller suffered storage and other expenses. The postponement of the order of shipment from the point of time which Seller
could have seen as being a probable point of time for issuing the order --
considering all the relevant circumstances and especially the guidelines given
by the Buyer in the order -- was in itself grounds for breach of contract.
Because the Buyer on 15 September 1992 had single-handedly placed additional
terms for the time of shipment and delivery, according to which the goods were
not to be shipped before the end of December and the goods were not to arrive in
Finland before 1993, it was a question of terms contravening the terms of the
contract of 5 March 1992 and consequently Buyer's breach of contract.
The Buyer denied Seller's allegations as unfounded, alleging that Orders #9/92
and #10/92 were totally separate orders. The raw material mixture was meant to
be order-specific. In Order #10/92, the time of delivery had been purposefully
left open because Buyer's partner L was at the time unable to estimate the sale
of the goods. The hastening of packaging material on 26 February 1992 concerned only Order
#9/92. The Seller had through its own initiative, against Buyer's original aim
and without Buyer's awareness of it, manufactured goods for Order #10/92
beforehand, together with the goods for Order #9/92. The Buyer could not be
liable for these expenses under any contractual duty. It was a purpose of two
separate orders that the goods could be manufactured separately. The product for
the second order should not have been manufactured before 15 September 1992 when
an order of shipment was issued. Concerning Order #10/92, the Buyer had taken all
measures required to have the goods delivered. 6.3.2 Agreed procedure for delivery
According to Article 60 CISG, the buyer's obligation to take delivery consists
of two separate elements. Firstly, the buyer must do all acts which can
reasonably be expected of him in order to enable the seller to make delivery.
Secondly, the buyer must take over the goods, i.e. physically accept them.[346]
Obligations relating to the transmission of the goods, i.e. placing the order,
are clearly covered by Article 60. Naturally, the acts the buyer could reasonably
be expected to enable the seller to make delivery are usually specified in the
sales contract, thus there is no need to refer to Article 60.
According to Article 33 CISG, the seller must deliver the goods (a) if a date is
fixed by or determinable from the contract, on that date or (b) if a period of
time is fixed by or determinable from the contract, at any time within that
period unless circumstances indicate that the buyer is to choose a date. The date
for delivery is fixed by or determinable from the contract if it is fixed by or
determinable from a usage made applicable to the contract by Article 9.[347] If the
time for delivery is not fixed or determinable from the contract, according to
paragraph (c), the seller must deliver within a reasonable time after the
conclusion of the contract. Thus, Article 33 reinforces the general rule of the
Convention, the primacy of the contract. 6.3.2.3 Interpretation of the contract
If the parties do not agree on the terms of the contract, the problem needs to
resolved pursuant to the Convention's rules on interpretation of the contract,
Article 8, supplemented by the rules on practices and usages, Article 9, if
necessary.[348] The basic approach in Article 8 is the subjective approach.
According to Article 8(1), statements made by and other conduct of a party are
to be interpreted according to his intent where the other knew or could not have
been unaware what that intent was. However, in practice, most problems of
interpretation will be governed by the objective approach as provided for in
Article 8(2). The second paragraph of Article 8 places the burden on the one who
prepares a communication or drafts a contract to communicate it clearly to a
reasonable person in the same position as the other party.[349] Under the objective
test, the intent of the party making the statement will prevail if he can show
that this would have been the understanding of a reasonable person of the same
kind and in the same circumstances as the other party. A reasonable person in the
same circumstances must be evaluated in the light of the kind of parties involved
and their circumstances, taking into account, for example, parties' knowledge of
prior dealings and negotiations between the parties.[350]
According to the third paragraph of Article 8, all the relevant circumstances are
to be given due consideration in determining the intent of a party or the
understanding a reasonable person would have had. Those circumstances include any
practices, usages and any subsequent practice of the parties. The list in this
paragraph is not exclusive. In applying Article 8, reference is to be made to the
time that the conduct had its effect, not to the time of the dispute over its
interpretation. Any applicable practice or usage has the same effect as a contract.[351] According
to Article 9, the practices, which the parties have established between
themselves and any usage to which the parties have agreed also override the
provisions of the Convention. Further, the parties are considered to have
impliedly made applicable to their contract a usage of which they 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.[352] The facts one "ought to have known" include those facts that would
be disclosed by an investigation or inquiry that the party should make.[353]
Article 19(1) states the traditional accepted rule that a reply which purports
to accept an offer but which contains modifications "is a rejection of the offer
and constitutes a counter-offer."[354]
(1) A reply to an offer which purports to be an acceptance but contains
additions, limitations or other modifications is a rejection of the offer and
constitutes a counter-offer. (2) However, a reply to an offer which purports to be an acceptance but contains
additional or different terms which do not materially alter the terms of the
offer constitutes an acceptance, unless the offeror, without undue delay, objects
orally to the discrepancy or dispatches a notice to that effect. If he does not
so object, the terms of the contract are the terms of the offer with the
modifications contained in the acceptance. (3) Additional or different terms relating, among other things, to the price,
payment, quality and quantity of the goods, place and time of delivery, extent
of one party's liability to the other or the settlement of disputes are
considered to alter the terms of the offer materially.
However, the acceptance does not need to be exactly corresponding to the offer;
if the differences in the wording used in the acceptance will not change the
obligations of the parties, the acceptance is binding.[355] Further, according to
the second paragraph of Article 19, if a reply to an offer is expressed and
intended as an acceptance but contains additional or different terms which do not
materially alter the terms of the offer, the acceptance is binding unless offeror
objects to the changes.[356] The third paragraph of Article 19 provides that
certain terms are normally to be considered as material, one of which is the time
of delivery. It should be noted that the parties' practices or trade usage may imply an
obligation. In these situations, an acceptance containing an additional term need
not be considered to materially alter the terms of the offer.[357] If the
acceptance subjects the original offer to the parties' established practices or
the widely known and regularly observed usages, a reference to such practice or
usage does not materially alter the terms of the offer but the practice or usage
is incorporated into the contract.[358] If the acceptance does include additional or different terms which materially
alter the offer, the acceptance is merely a counter-offer. This does not mean
that a binding contract cannot be concluded. Under Article 18(3), an offeree "may
indicate assent by performing an act, such as one relating to the dispatch of the
goods or payment of the price ...", provided that he does so by virtue of the
offer or as a result of practices which the parties have established between
themselves or of usage. The terms of the contract are in this case those of the
counter-offer.[359] Further, according to Article 18(1) "a statement made by or
other conduct of the offeree indicating assent to an offer is an acceptance."
Even though Article 18(1) continues, that silence or inactivity does not in
itself amount to acceptance, the silence or inactivity coupled with other factors
which give sufficient assurance that the silence or inactivity of the offeree is
an indication of assent, the silence or inactivity can constitute acceptance.[360]
The terms of the contract are those provided by the offeror. 6.3.3 Decision on delivery First of all, the District Court analysed what was the contractually agreed time
for delivery for Order #10/92. The District Court affirmed that Orders #9/92 and
#10/92 were made using two separate documents. In Order #9/92, the time of
delivery was precisely determined ("latest week 18/92") and in Order #10/92 it
was left open ("will be agreed later on"). Furthermore -- based on the wording
used on the first page of both orders -- it was held that the Buyer had asked the
Seller to hasten the ordering of packaging material in order to facilitate a
quick delivery of the first order. The Seller's reply to both of these orders had, however, been given in the same
document. On those grounds, and considering also the correspondence between the
parties during the summer of 1992, one cannot draw a conclusion that the term
concerning time of delivery for Order #10/92 had changed from what it had been
in the order letter of 26 February 1992. In the said Seller's reply, one talks
about two separate deliveries. As far as the second delivery was concerned, there
was a mention of a point of time until which a delivery could take place with the
old price. Based on the reply, and considering the product amounts mentioned in
it, it was clear that it did not concern only Order #10/92 even if there was a
reference in the reply to that order. Consequently, the Seller's reply did not
contain any changes to the terms of delivery in relation to Order #10/92 to which
the Buyer should have reacted in some manner. On the basis of the wording of the order documents concerning manufacturing of
the products using the same ingredients, the Seller could not have drawn a
conclusion that the production of the goods for both orders should have been
finished already before the VTT tests. This is because statements concerning the
mixture of ingredients had been written down separately on both orders and, as
a consequence, it could not be interpreted as meaning more than that the goods
for the order in question had to be manufactured using a single mixture of
ingredients. Additionally, it had to be considered that the time of the tests was
not determined in the orders and consequently one could not draw a conclusion
that the tests concerning both orders should have been carried out
simultaneously. Considering that Order #10/92 was preceded by the delivery of Order #9/92, the
District Court held that the order of shipment for Order #10/92 was issued within
a reasonable time because it was issued within a year after the contract was
concluded. Thus, the Buyer was not liable for Seller's willingness to interpret
the time of delivery of Order #10/92 as being earlier than what the Buyer had
factually committed himself to or what Buyer could have reasonably been regarded
as being obliged to.
Unfortunately, the District Court did not refer to any Articles of the CISG when
analyzing the contract. The Court's conclusion that the reference to the price
alteration did not materially alter the terms of the original offer follows the
reasoning of the French Supreme Court (Cour de cassation, 92-16.993) 4 January
1995, where the Court held that, despite a reference to the adjustment of the
initial price in accordance with the market in the acceptance, the contract had
been concluded.[361] As Finland has made a reservation under Article 92 not to be
bound by Part II of the Convention, it would have been fruitful to refer to the
CISG when analyzing the formation of the contract. Now it is unclear whether the
Court applied the CISG or the Finnish Contracts Act.
According to Section 6 of the Finnish Contracts Act, a reply that purports to be
an acceptance but which, due to an addition, restriction or condition, does not
correspond to the offer, shall be deemed a rejection constituting a new offer,
unless if the offeree has considered the reply to correspond to the offer and the
offeror must have understood the same. If the offeror in that case does not wish
to accept the reply, he/she shall, without undue delay, notify the offeree
thereof; otherwise a contract shall be deemed concluded on the terms contained
in the reply. Thus there is no distinct difference between the CISG and the
Contracts Act in this respect but in order to preserve predictability and
clarity, a reference to an applicable law would have been in place.[362] The understanding of a reasonable person as provided for in Article 8 would have,
in my opinion, led to the same conclusion as the Court reached. However, it is
not clear what, if any were the practices between the parties and whether any
applicable usages govern the sale of skincare products. It is unfortunate that
the Court did not refer to the applicable law, any commentaries or other case law
when determining the meaning of the contract. 6.4 Conformity of the goods
The Seller argued that cancelling the orders and avoidance of the contract on 10
November 1992 was unfounded, firstly, because the goods subject to cancellation
were in conformity with the sample goods checked and accepted at VTT (National
Scientific Research Center) in April 1992. Secondly, the Buyer knew that even
though the goods in question could be preserved relatively long, at least thirty
months, vitamins, perfumes and some other ingredients in skin care products are
under a constant process of transformation and decomposition. These changes are
generally known in the field. And, thirdly, the seller was not liable for alleged
non-conformity of the goods of which the Buyer was aware when drafting the
contract. The Buyer had referred to its message of 21 December 1990, where it was stated
that "Shelf-life of our products is not shorter than 30 months". What was meant
by shelf-life was that the product could be preserved when kept with due care in
normal or reasonably anticipated circumstances and that, under those conditions,
the product would not cause any danger to health and at the same time would be
suitable for its original purpose. The notion did not contain any reference to
maintenance of vitamin levels for the shelf-life period, thus there was no
agreement between the Seller and the Buyer on whether the vitamin content in the
skin care products should be permanent in nature. Finally, the Seller argued that in any case, the decrease of vitamin content in
two products could not amount to a fundamental breach of the contract. The Buyer argued that, based on the results from VTT received on 8 October 1992
in relation to the goods delivered in August 1992 (Order # 9/92), it was apparent
that the vitamin A content had decreased significantly below the lowest level
agreed. The vitamin A content of the products was a central quality of the
products. Consequently, the products did not possess qualities they should have
possessed according to the Seller. The products were not fit for their purpose
if they lacked necessary vitamin A content. The Seller had to understand that the
Buyer regarded vitamin content as being the central quality of the products. Because the Seller had guaranteed that the shelf-life of the products would be
at least thirty months, the Buyer had grounds to assume that what was meant by
shelf-life was that the products would preserve their essential qualities for at
least thirty months. Vitamin A content should have been within range 1000 - 3000 IU/g. The range was
this wide because the Buyer had allowed for the fact that vitamin A content would
decrease about 20 - 30%. The non-conformity could be regarded as fundamental. 6.4.2 Particular purpose of the goods
conformity is naturally the contract between the parties. According to paragraph
(1) of Article 35, the seller must deliver goods which are of the quantity,
quality and description required by the contract. Only if the parties have not
agreed otherwise, does paragraph (2) come into play.[363]
If the buyer has made known to the seller the special use of the goods at the
time of the conclusion of the contract, according Article 35(2)(b) the seller
judgement. The particular purpose of the goods of a general description must be
known to the seller by the time of the conclusion of the contract so that the
seller can refuse to enter the contract if he is unable to furnish goods adequate
for that purpose.[364] Further, the buyer must be entitled to rely on the seller's
Professor Honnold states that, firstly, the buyer must show that the seller knew
of the buyer's particular purpose at the time of the conclusion of the contract
and that the goods were unfit for that purpose. The seller, on the other hand,
has the burden of proving that the buyer did not rely or that it was unreasonable
for him to rely on the seller's skill and judgement.[365] If the seller makes known
to the buyer that the goods ordered by the buyer would not be satisfactory for
the particular purpose for which they have been ordered and the buyer still
wishes to order the goods, he cannot claim that he relied on the seller's skill
and judgement.[366] The circumstances in which the buyer may not rely on the
seller's skill and judgement must be ascertained case by case.[367] As a general
rule it can be said that it would be unreasonable for the buyer to rely on the
seller's skill and judgement if the seller did not purport to have any special
knowledge in respect of the goods in question or if a skill and judgement
capacity is not common in the seller's trade branch.[368] 6.4.3 Sale by sample
Article 35(2)(c) provides that if the contract is negotiated on the basis of a
presented by the sample or the model. Only if the seller indicates that the
sample or model is different from the goods to be delivered in certain respects,
he is not liable for such lack of conformity.[369] Professor Bianca stresses that the submission of a sample taken from the goods
to be delivered involves by itself the seller's promise to provide goods
possessing the same qualities as those shown to the buyer as a sample and is a
concrete way for the seller to specify his offer. The submission of a sample or
a model is a factual description and, therefore, a contractual way to determine
the kind and quality of the goods the buyer is entitled to. According to
Professor Bianca, it follows that the reference to a sample or a model excludes
the application of the criteria provided for in Article 35(2)(a) -- description
and ordinary purpose -- and the criteria provided for in Article 35(2)(b) --
fitness for particular purpose.[370] 6.4.4 Buyer's knowledge of the non-conformity
Article 35(3) contains a confirmation of the principle that the buyer cannot
demand remedy for non-conformity based on qualities of the goods that he knew or
could not have been unaware of at the time of the conclusion of the contract. An
who can see.[371] In order to escape the liability, the seller must show that the
parties have agreed that the goods shall be of a different quality than that
stated explicitly in the agreement; in other words, the fact that the buyer knew
of or could not have been unaware of the defect, and that those parts of the
agreement which conflict with this cannot be relied on by the buyer.[372]
Article 35(3) does not affect those characteristics that are explicitly required
by the contract as provided for in the first paragraph of Article 35. Even if at
the time of the conclusion of the contract, the buyer knows that the seller will
not deliver conforming goods as specifically required by a contract, the buyer
can require full performance from the seller.[373] 6.4.5 Fundamental breach of the contract
The concept of fundamental breach is defined in Article 25. The basic criterion
for a breach to be fundamental is that "it results in substantial detriment to
the injured party." In addition, the relevant detriment is limited to what the
party in breach foresaw or should have foreseen.[374]
Whether the injury is substantial to the injured party must be determined on a
case-by-case basis.[375] The determination of the substantiality of the breach is
at first based on the contract itself. Professor Magnus stresses that the benefit
of the contract depends in the first place on the terms of the contract. It is
not the objective weight of the breach as such that automatically counts as
fundamental breach but the weight the parties have given it. For a breach to be
considered a fundamental breach, it must nullify or essentially depreciate the
aggrieved party's justified contract expectations, i.e. those expectations must
be supported by a contract.[376] If nothing specific has been agreed upon, then the
fundamentality of the breach is assessed against the standard of a reasonable
person.[377] Professor Honnold also suggests further that the fundamentality of the breach
must be determined in conjunction with the seller's rightful offer to cure. As
long as the cure is feasible and can be expected, a breach cannot be considered
fundamental in sense of Article 25.[378] Professor Will is, however, of a different
opinion.[379] He points out that the seller's right to cure is protected when the
fundamental breach is determined by lack of conformity only, without having
regard to cure, and the existing right to avoid the contract or require
substitute goods is merely suspended when a rightful offer to cure arrives.[380]
6.4.6.1 District Court's reasoning The Court held firstly, that it was undisputed that in its Orders #9/92 and
#10/92, the Buyer had required that the sample goods tested at VTT should possess
the vitamin A content indicated by the order documents. It was also undisputed
that the vitamin A content in the goods tested at VTT on 4 May 1992 was within
the required range in all the five products. Based on vitamin A content required in VTT tests and other evidence submitted by
the Buyer, the District Court held that the Buyer regarded vitamin A content as
a central quality of the products and that the Seller has to have become aware
of this. Further, on the basis of witness' statement and because the Seller had
not presented sufficient evidence to the contrary, the District Court held that
the declaration given in Seller's fax message of 21 December 1990 concerning
thirty-month preservation had also concerned the vitamin A content of the
products. In addition, the District Court held that it could have been possible
to manufacture product that would have preserved the minimum amount of vitamin
A throughout the shelf-life. Even the Seller had managed to manufacture such
products on the part of three products in the product series. Considering the wide range allowed, not even the fact that vitamin A decomposes
during time -- which was known by the Buyer and was also generally known in the
field -- had no significance in this case. Not even the fact, that no requirement
as to announcing the vitamin content in the list of ingredients had been made had
significance. This conclusion could be drawn on the basis of witness' statements
that the vitamin content was usually not announced but only the ingredients of
which the product was composed were announced qualitatively. The Buyer had
counted on the Seller's expertise in terms of how the Seller would reach the
required vitamin A content and how the required preservation would be carried
out. On the basis of the test results, it could be held that concerning these
products, the goods were non-conforming and that the said products had not been
fit for the special purpose as required by the Buyer, which was known by the
Seller with sufficient clarity. The level of vitamin A being under the agreed
level had not even partly been Buyer's fault, because on grounds mentioned the
Buyer could not be held as having delayed in carrying out Order #10/92 in breach
of the term concerning time of delivery. Because the vitamin A content had to do with central qualities of the products
and because the vitamin A content of the mentioned two products was significantly
below the required minimum content and because -- according to submitted evidence
-- it was a question of a product series required by drugstores to be sold
together as a single entity, the District Court held that the Seller was liable
for fundamental breach of contract. 6.4.6.2 District Court's reasoning analysed
Unfortunately, the Court chose not to refer to any specific CISG Article in its
reasoning. The basic idea. however, follows the CISG regimen. First of all, the Court concluded the vitamin A-level of the products was
explicitly required by the contract and that the Seller was aware of the
particular purpose of the goods. The Buyer and the Buyer's customer already had
sufficient selection of skin care product without the vitamin A. As a skin care
product manufacturer, the Seller ought to have the skill and judgement to fulfil
its contractual duties. The Buyer had no reason not to rely on the Seller's skill
and judgement, especially because the product passed the tests conducted by an
independent scientific research centre. Secondly, the Seller could not argue that
the Buyer could not have been unaware of the lack of vitamin A at the conclusion
of the contract, because Seller had specifically agreed to deliver goods that
would keep their characteristics for 30 months. Thirdly, the Court held that the
vitamin A-level was a central and important part of the contract. The Seller was
aware of this and thus in a position where Seller foresaw the detriment the lack
of conformity would cause to the Buyer. The original reasoning of the Court is lengthy and lacks clarity and logic. This
is partly due to the fact that the questions at stake relate mainly to valuation
of the witness statements and other evidence. However, a more concise and clear
reasoning could have been submitted if the reasoning had followed and referred
to the applicable CISG provisions. It is not always the best solution to simply
state the applicable provisions in the end of the Court's reasoning. The Court seems to cover all the aspects relating to Article 35(1) and Article
35(2)(b) and Article 35(2)(c). Firstly, the Court seems to be of the opinion that
the representation about 30 month self-life was part of the contract, i.e. the
Seller had an obligation to deliver goods which were of the description required
by the contract. Thus there would be no need to turn to Article 35(2)(b)
according to which the goods must be fit for a particular purpose expressly or
impliedly made known to the seller. The Court, however, held that the Seller was
aware of the fact that the Buyer would sell the goods to its own customer who in
part was in need for special skincare products containing vitamin A. In addition,
the Court referred to sale by sample; i.e. the goods must possess the qualities
held out to the Buyer as a sample in May 1992. However, if it is held that this
was a case of sale by sample, there would be no need to refer to particular
purpose made known to the Seller. A reference to a sample excludes the
application of the criteria in Article 35(2)(b), fitness for particular
purpose.[381]
Finally, in relation to Article 35(3) the Court simply stated that the Buyer had
a right to rely on the Seller's expertise as to how to retain the required
vitamin A level; the knowledge of the fact that the vitamin A decomposes during
time had no significance in the case. What if the Buyer, at the time of the
conclusion of the contract knew or could not have been unaware of the non-conformity relating to presumed implication from the contract as provided for in
subparagraphs (a) to (d).[382] Article 35(3) does not affect those characteristics
that are explicitly required by the contract as provided for in the first
paragraph of Article 35.[383] Summa summarum, the Seller was liable for fundamental
breach of the contract, not because the Seller failed to deliver goods that
possessed the qualities held out as a sample, nor because the Seller failed to
deliver goods that were fit for a particular purpose, but because the Seller
failed to deliver goods that were of the quality and description required by the
contract. Only this way it can be legitimately argued that the Buyer's
established and recognised knowledge of the decomposition of the vitamin level
A during time had no significance.[384]
The Seller argued that there was no basis to declare the contract avoided on
grounds that the declaration of avoidance had not taken place within a reasonable
time from the point where the Buyer should have carried out the acceptance
inspection and further a notice of the alleged non-conformity. The Buyer had not
been entitled to cancel the order based on a matter which could have been
clarified when checking the sample goods. In relation to Order #9/92, the Buyer had received the goods on 7 August 1992.
The test results from VTT were received on 8 October 1992. The Buyer had notified
on 22 October 1992 that the vitamin content had dropped below the amount where
it should have been. The Buyer stated that it had given notice of the defects
appearing from the test results as soon as the Buyer had received information of
the said defects. Buyer had also requested additional clarification concerning
the defects and on 16 October 1992 had requested a substitute delivery for the
delivery of Order #9/92. The Buyer had no grounds to assume that the quality of
the products would decrease in comparison to the test results in May. The non-conformity could not have been detected during acceptance inspection.
circumstances.[385] Article 38 is linked to Article 39, which provides that if the
"reasonable time" within which the buyer must notify the seller. Article 38
short a period as is practicable in the circumstances. ...
Under the Convention, it is irrelevant whether the buyer examines the goods
himself, through his employees or through other persons, e.g. customers.[386] The
first paragraph of Article 38 provides that the buyer must examine the goods, or
the contract, the parties are advised to agree on a neutral testing body.
Primarily, the method of examination is determined by the agreement. The parties
may lay down more precise rules in relation to the examination of the goods than
those provided for in Article 38.[387] In the absent of agreement or applicable practice or usage, the rules for
examination must be developed from the CISG itself. In general, it must be
concluded that the examination is that which is "reasonable" in the
circumstances.[388] The buyer must examine the goods in a manner which takes
account of their nature, amount, packaging and all other circumstances. For
example, when the goods are too complex or too numerous the buyer is not bound
to undertake a thorough examination of every single good nor of every single
part.[389] The examination must be such as to disclose recognisable defects, taking
into account, of course, all the circumstances of the case. The buyer is normally
not required to make an examination which would reveal every possible defect and
would involve complex technological analysis.[390]
should have been aware of them. Where the buyer has the relevant experience, he
must carry out an expert, thorough examination. Further, if the buyer is aware
that the seller has previously had problems in manufacturing the goods, he cannot
examine the goods superficially relying on the fact that the seller bears the
risk of the lack of conformity in any case. The CISG requires examination "within as short a period as is practicable in the
circumstances." The appropriate period is hard to establish with certainty. The
examination within a few days after the delivery is certainly appropriate and if
the buyer follows this rule he should be on the safe side. When determining the
duration of the period, the circumstances of the individual case and the parties'
reasonable opportunities must be considered.[391] In general, it may be said that
longer "reasonable" time to be examined.
The third paragraph of Article 38 clarifies that if the goods are redirected in
transit or redispatched, then in certain circumstances the period for examining
the goods begins only when the goods have arrived at their new destination.
However, a mere resale without additional carriage does not fall under Article
38(3). The fact that the goods are resold without the buyer having a sufficient
opportunity to examine the goods should, however, be taken into account in the
context of Article 38(1) both as regards the form of examination and, above all,
the length of the period allowed for the purpose. The goods can be contained or
packaged in such a way that normally their examination is brought about by the
consumer. The buyer does not always have a reasonable opportunity to examine the
goods before their resale.[392]
The CISG Advisory Council has assembled an overview of reported case law relating
to the extent and timeliness of examination (Article 38).[393] In general, it can
loss of the right to rely on the lack of conformity because until the buyer is
the seller.[394] 6.5.3 Obligation to notify about the lack of conformity
he "ought to have discovered" it. Under Article 39(1), any lack of conformity
which the buyer has established or should have established upon a proper
examination of the goods and any subsequent lack of conformity discovered, must
be notified to the seller. The notice must specify the nature of the lack of
conformity. Article 39
discovered it. ...
The buyer must give to the seller notice of the lack of conformity within a
reasonable time after he has discovered it or ought to have discovered it. When
determining the reasonableness of the period for giving a notice, the contract
between the parties is of course the starting point. International trade usage
and usage established between the parties are to be considered also. If the
underlying sales contract or the usages do not resolve the problem whether the
notice was given within a reasonable period, other factors can be taken into
consideration.[395]
Excessive differences in interpretation are likely to occur because of the
in the application of the CISG, a rough average has been proposed. Professor
Schwenzer proposes a period of one month as an appropriate starting point.[396] The
which represents the norm.[397] Despite this, the approach has already gained
support among courts.
"reasonable" for each case and in some circumstances adapt a period to be even
longer than a "noble month".[398] Article 39(1) provides an essentially flexible
period, which should remain as such in the interest of fairness.[399]
timely notice to the seller. 6.5.4 Exemptions from giving a notice
been unaware. No one is to benefit from his own wrongdoing. The seller has no
reasonable bases for requiring the buyer to notify him of the facts he knew of
or which he could not have been unaware of and which he did not disclose.[400]
However, the seller's awareness of the defects is not always easily proven, it
is for the buyer to prove the seller's knowledge.[401] Under Article 44, the buyer who has a reasonable excuse for his failure to give
remedies, i.e. the reduction of the price (Article 50) and recovery of damages
other than loss of profit (Article 74).[402] Although Article 44 does not refer to
Article 38, the protection afforded in cases of "reasonable excuse" is extended
to comprise the buyer's failure to inspect the goods on time.[403] A buyer's
conduct, although not in itself correct and in accordance with the required
standard, is excusable if in the circumstances of the specific case it deserves
to be accorded a degree of understanding and leniency.[404] It has also been
stressed that Article 44 needs to be understood and applied in the light of its
legislative history.[405] The use of the expression "a reasonable excuse"
indicated the applicability of more individualised considerations than would
otherwise be relevant under the main rule provided in Article 39(1). Finally, it
should be noticed that even where the late notice is excused under Article 44,
the seller retains the right to cure the defect by delivering substitute goods
or by repairing the defects. By doing so, the seller may avert a price reduction
and the buyer's damages claim.[406]
the case. If the seller unreservedly acknowledges the defect, he waives his right
to object the timeliness or correctness of the notice. However, if the seller at
the same time demands payment of the price in full, his agreement to repair the
goods does not automatically mean that he is waiving his rights.[407]
6.5.5.1 District Court's reasoning Firstly, the District Court stated that it was of utmost importance in evaluating
the acceptability of declaring the contract avoided in relation to Order #10/92
to think whether the Buyer, based on the information it had received at the end
of June 1992, i.e. that the products for both of the orders had been manufactured
using the same ingredients, should have checked the goods immediately after the
Buyer had received the second consignment of Order #9/92 and whether the Buyer
should have notified the Seller. The District Court stated that the Buyer has relied on Seller's expertise in
terms of how the Seller would reach the required vitamin content and the
preservation of that content. Furthermore, based on VTT tests of spring 1992, the
Buyer had had no reason to doubt that the vitamin content of the day crème would
drop below the agreed minimum. The Seller's task as a manufacturer of the product
was to attend to the vitamin content remaining within the agreed range. Further,
the Buyer had had to rely on Seller's ability to carry out this task one way or
the other. The District Court held that only on the basis of very low level of
vitamins in the liposome gel sample the Buyer had no reason to take random
samples right after a partial delivery of Order #9/92 on 7 August 1992. This
being the case, the District Court held that the Buyer, in a fax message of 15
October 1992, had given notice within a reasonable time because the test results
from VTT indicating the low vitamin levels only arrived on 15 October 1992. Thus,
the Buyer was entitled to declare the contract avoided in relation to Order
#10/92 and that this avoidance was not against CISG rules.
The Court based its decision on the fact, that the Buyer had a right to rely on
the Seller's ability to provide conforming goods. The fact that the goods
conformed with the contract in May was enough assurance for the Buyer. The Buyer
was not allowed to neglect the examination altogether, but was allowed to
postpone it until the goods had been delivered fully.
The question was whether the Buyer had examined the goods within as short a
period as is practicable in the circumstances and in effect given a timely notice
of the non-conformity. The UNCITRAL Digest of case law on the CISG concludes that
the analysis of the case law shows that the time period has been applied in a
strict fashion in several cases.[408] However, the Digest further states that
several decision have recognized the flexibility of the term "practicable in the
circumstances", one of these the decision of the Helsinki Court of the Appeal
(reasoning by the District Court) currently under discussion. The purpose of
Article 38, combined with the notice requirement of Article 39, is to provide the
seller with the information whether or not he has fulfilled his obligation. If
there is a discrepancy in the goods, at the earlier state the seller can
ascertain more easily whether the buyer's claim is justified and take necessary
steps to meet the buyer's complaint.[409] In my opinion, the strict application of
the period "as short as is practicable" should be promoted. If this leads to
fundamental injustice, the buyer can have recourse from Article 44. If the buyer
had a reasonable excuse not to notify the seller within a short a period, the
buyer could still reduce the price or claim damages. Thus, it is worth considering whether the Buyer would have had a reasonable
excuse for its failure to give notice of the lack of conformity in time as
provided for in Article 44,[410] even though the Buyer did not raise this issue.
The excuse provision of Article 44 does not preserve all of the buyer's remedies,
only reduction of the price (Article 50) and recovery of damages other than loss
of profit (Article 74). Thus it does not provide recourse for the buyer who
wishes to avoid the contract. Although Article 44 does not refer to Article 38,
the protection afforded in cases of "reasonable excuse" is extended to comprise
the buyer's failure to inspect the goods on time.[411] Could satisfactory test
results relating to goods be considered as a reasonable excuse not to examine the
goods and notify about the lack of conformity in time?
In I.C.C. International Court of Arbitration, 9187 (1 June 1999),[412] the Tribunal
held that due to the provisions in the contract the buyer's notice of non-conformity was timely. Before the goods were loaded for delivery, an independent
inspector, appointed jointly by both parties had issued a certificate of
analysis. The erroneous certificate of analysis gave the buyer a reasonable
excuse for the delay in notifying about the subsequently discovered non-conformity: because the certificate was the product of an independent body
appointed by both parties, the buyer was not bound by it or responsible for its
errors, and thus could invoke article 44. In general, the buyer must also bear
the consequences of the defective examination of a third party. However, if the
parties have agreed upon a neutral third party or if the seller even insisted
upon examination being effected by a particular third party, the buyer cannot
bear the risk for defective examination. Nor is the buyer generally responsible
for the consequences of a defective examination by official bodies; in any event,
the buyer ought to have a reasonable excuse for not giving a required notice
(Article 44).[413] This opinion of Professor Schlechtriem was also cited in the
above decision of the I.C.C. Tribunal.
However, in Oberlandesgericht (OLG) Jena, 8 U 166/97 (266) (26 May 1998),[414] the
German Court held that the Buyer was not entitled to rely on the certificate of
inspection issued by a veterinary surgeon before the delivery of the goods in
order to permit importation of the fish, but the Buyer had an obligation to
examine the goods or cause them to be examined even in the case of a latent
defect. The Court interpreted the buyer's duty to examine the goods as a strict
obligation. The Court held that the buyer had not presented a reasonable excuse
for its failure to give required notice. The Court also held that the
requirements of Article 40 had not been met as the buyer had not produced any
evidence that the seller could not have been unaware of the non-conformity of the
goods. The decision seems to contrary to the above approach. Not only was the
buyer late in giving the notice, but it was also held that the buyer had no
reasonable excuse for being late. In this case, the Buyer could have carried out sample test immediately after the
delivery of the goods without any difficulties. An alleged reasonable excuse
present in the form of the certificate of inspection before the delivery should
not have been used to extend the period for examination. The only reasonable way
to give significance to this certificate would have been to conclude that it was
an reasonable excuse for the Buyer not to conduct random test after delivery.
The Seller argued that it was not clear at the time when the Buyer had declared
the contract avoided that the Seller would be liable for a fundamental breach of
contract within the specified time of delivery, meaning the beginning of January
1993. If it was a question of two separate orders, an anticipated breach of
contract as defined in Article 73 was not applicable. Even if it was held that
this was a matter of delivery in instalments, the Buyer had no grounds to assume
that the forthcoming partial delivery would amount to a fundamental breach of
contract. The Seller had a right to cure the non-conformity of the goods. The Seller had
notified the Buyer on 28 October 1992 that it would do everything in its power
to satisfy the customer, i.e., the Buyer, meaning that the Seller had been
prepared to fix the products of Order #9/92 and additionally to deliver the goods
of Order #10/92. The Buyer had refused to accept the Seller's efforts to reach
an amicable solution which would have led to acceptance of the delivery. Neither was there basis to declare the contract avoided on grounds that the
declaration of avoidance had not taken place within a reasonable time from the
point where the Buyer should have carried out the acceptance inspection and to
notice the alleged non-conformity. The Buyer had not been entitled to cancel the
order based on a matter which could have been clarified when checking the sample
goods. The Buyer pointed out that the Seller had manufactured the goods for Order #10/92
already in April when Seller had manufactured the goods for Order #9/92 using the
same mixture of ingredients. After the test results from VTT came on 8 October
1992, it was clear that also the goods for the Order #10/92 were non-conforming
in a manner similar to the goods for Order #9/92. Consequently, the Buyer notified the Seller on 10 November 1992 that the Buyer
would declare the contract avoided in relation to Order #10/92. The Buyer has
given prior notice of this to the Seller, as required in Article 72(2). Through
non-conforming delivery, the Seller had given the Buyer grounds to assume that
also the forthcoming deliveries in instalments would constitute a fundamental
breach of contract. In addition, the Buyer was clearly entitled to declare the
contract avoided as defined in CISG Article 73. Giving of prior notice of
avoidance was not required in Article 73. Because the said non-conformity was a result of a lack of essential quality
features in the products, Seller's breach of contract clearly fulfilled the
preconditions for fundamental breach of contract as defined in Article 25 of the
Convention. It was also clear that the Seller understood that the goods were non-conforming on the basis of the test results. However, it was apparent that the
Seller had not seriously even aimed at manufacturing products which could fulfil
the set quality requirements. The Seller could not have been capable of fixing
the goods in a manner required by Article 37 of the Convention without causing
the Buyer excessive harm or uncertainty. It would not have been reasonable to
oblige the Buyer to accept the uncertainty connected with allowing the Seller to
fix the goods. 6.6.2 Anticipatory breach
Article 72 provides that in special circumstances the other party can immidiately
declare the contract avoided even before the date for performance. Article 72
(1) If prior to the date for performance of the contract it is clear that one of
the parties will commit a fundamental breach of contract, the other party may
declare the contract avoided. (2) If time allows, the party intending to declare the contract avoided must give
reasonable notice to the other party in order to permit him to provide adequate
assurance of his performance. (3) The requirements of the preceding paragraph do not apply if the other party
has declared that he will not perform his obligations.
In order for the other party to have a right to avoid the contract because of the
anticipatory breach of the contract, Article 72 requires that it be clear that
the fundamental breach of contract will occur. Because the avoidance of the
contract is a drastic measure, the requirements are fairly strict.[415] Complete
certainty is not required but there must be a very high probability of the
fundamental breach.[416]
If the time allows, the party indending to declare the contract avoided must give
assurance of his performance. In the modern days of communications such a notice
does not restrict the aggrieved party's freedom of choice.[417] In addition, if the
other party does not provide adequate assuarance of performance, it is more
easily concluded that in fact it is clear that a fundamental breach of contract
will be commited.[418]
Avoidance of the contract before the agreed time for performance should be
exercised with caution. If at the time of the performance no fundamental breach
would in fact occur, the declaration of avoidance itself would be void and the
party who attempted to avoid would be in breach of the contract for his own
failure to perform.[419] On the other hand, if the other party declaeres that he
will not perform his obligations, this empowers the aggrieved party to declare
the contract avoided. The aggrieved party does not need to worry whether the
other party will change his mind and perform by the due date.[420]
The provision is useful in circumstances where the suspension of performance is
not enough to protect the aggrieved party's rights. The other party may for
example be in need of goods in order to maitain his own production. The existing
contract needs to be avoided before another can be entered into.[421] Further,
where it is in fact clear that a fundamental breach of contract will occur, the
duty to mitigate the loss as provided for in Article 77 may require the party who
will rely upon that breach to take measures to reduce his loss, including loss
of profit, resulting from the breach, even prior to the contract date of
performance.[422]
Article 73 covers the avoidance of the contract because of anticipatory breach
where the contract calls for the delivery of the goods by instalments. The first
paragraph authorizes a party to declare a contract avoided in respect of a single
instalment where the other party has committed a fundamental breach in respect
of that instalment. The last and third paragraph of Article 73 provides that if
the instalments are interdependent a buyer can declare also deliveries already
made or future deliveries avoided at the same time he declares one specific
delivery avoided because of the fundamental breach of the contract. The second paragraph considers the situation where the failure of one party to
perform any of his obligations under the contract in respect of any instalment
gives the other party good grounds to conclude that a fundamental breach will
occur with respect to future instalments, i.e. a situation of an anticipatory
breach. In such a case, he may declare the contract avoided for the future,
provided only that he declares the avoidance of the future performance within a
reasonable time of the failure to perform.
(2) If one party's failure to perform any of his obligations in respect of any
instalment gives the other party good grounds to conclude that a fundamental
breach of contract will occur with respect to future instalments, he may declare
the contract avoided for the future, provided that he does so within a reasonable
It should be noted that Article 73(2) permits the avoidance of the contract in
respect of future performance of an instalment contract even though it is not
"clear" that there will be a fundamental breach of the contract in the future as
would be required by Article 72. In Schiedsgericht der Börse für
Landwirtschaftliche Produkte - Wien (Arbitral Court of the market for farm
products-Vienna), S 2/97 (10 December 1997), the Court submitted that the term
"good grounds" means a high probability of breach but need not to be as severe
as the test required by Article 72.[423] The test of the right to avoid under
article 73(2) is whether a failure to perform in respect of an instalment gives
the other party good reason to fear that there will be a fundamental breach in
respect of future instalments. The test does not look to the seriousness of the
current breach. This is of particular significance where a series of breaches,
none of which in itself is fundamental or would give good reason to fear a future
fundamental breach, taken together do give good reason for such a fear.[424] 6.6.4 Decision on the avoidance of the contract
The District Court held that neither Seller's fax of 28 October 1992 nor other
circumstances gave any guarantees to the Buyer that the Seller would be able to
deliver conforming goods within the agreed time or that the Seller would to be
able to guarantee the preservation of vitamin A within the agreed range. Due to these circumstances, the District Court held that in a manner required by
Article 72 CISG, it was clear already before the delivery of Order #10/92 that
the Seller would be liable for fundamental breach of contract. Because the fax
of 28 October 1992 had not given the Buyer any guarantees of Seller's ability to
deliver, it could not have meant an agreement between the parties. The Buyer had
notified the Seller in a reasonable manner of its intention to declare the
contract avoided, as required by Article 72. Due to this and because the Seller's
inability to deliver conforming goods was evident, it bears no significance
whether it was a question of successive deliveries as defined in Article 73 of
CISG in relation to orders 9/92 and 10/92.
In effect, the Court stated that the Buyer had a right to declare the contract
avoided because of the anticipatory breach in the single sale as provided for in
Article 72 or because of the anticipatory breach in the future instalments as
provided for in Article 73(2). Provided that the requirements for the avoidance
are fulfilled, the aggrieved party may act under either Article where the parties
have on-going relations.[425]
The reasonable time to exercise the right to avoid the contract as provided for
in Article 73(2) is not necessarily identical to the reasonable time for
notifying about the lack of conformity under Article 39. The notice of non-conformity has to be prompt so that the seller can secure evidence on the non-conformity or perhaps try to prepare the non-conformity. Avoidance of the
contract is a drastic measure which releases both parties from their contractual
obligations, subject to damages of course. The aggrieved party ought to have more
time to consider whether to demand damages or to avoid the contract. It can be
argued that this also benefit the party in breach. This approach is supported by
the above mentioned case Schiedsgericht der Börse für Landwirtschaftliche
Produkte - Wien (Arbitral Court of the market for farm products-Vienna), S 2/97
(10 December 1997).[426] The Austrian Arbitral Court held that even if the buyer
fails to give timely notice of lack of conformity with regard to the delivered
instalments, it does not lose the right to declare the contract avoided with
respect to the future instalments according to Article 73. A late notice of lack
of conformity can well be used as evidence for the probability of a similar
breach by the seller in the future. In essence, this would mean that even if the Buyer would have been held to have
been late in notifying the lack of conformity, the Buyer still would have had a
right to declare the contract avoided under Article 73(2). This would have of
course required that the Court would have stated that the two contracts were in
fact a unitary transaction as did the Austrian Arbitration Court in the case
under its scrutiny. The Arbitration Court first observed that the two separate
contracts concluded by the parties were to be considered a unitary transaction
from an economic point of view and represented therefore a contract for the
delivery of goods in instalments according to Article 73(2): the contracts had
been concluded on the same day; they provided for the delivery of the same kind
of goods in instalments during the period January to June and were subject to
similar terms. Finally, it should be noted that that Article 72 does not require, at least in
express terms, that the declaration of the contract must be made within a
reasonable time.[427] It does provide that the party intending to declare the
contract avoided must give the other party a reasonable notice in order to permit
him to provide adequate assurance of his performance. As it was held that the
Buyer had given the Seller a reasonable notice of the avoidance in order to
permit him to provide adequate assurance of his performance, it could be argued
that even if the Buyer had failed to spot and notify the Seller about the lack
of conformity in relation to Order #9, the Buyer would have still had a right to
declare Order # 10 avoided because of the clear anticipatory breach of contract. [...]
345. See further Chapter 2.2.4 CISG and the Nordic Countries. 346. See Chapter 2.3.3. Buyer's obligation to take delivery. 347. Text of Secretariat Commentary on article 31 of the 1978 Draft [draft
counterpart of CISG article 33].
348. Bianca in Bianca & Bonell 1987, p. 272; Honnold 1999, p. 256. 349. Honnold 1999, p. 118.
350. Farnsworth in Bianca & Bonell 1987, p. 99. 351. Honnold 1999, p. 131.
353. Honnold 1999, p. 260. 354. Text of Secretariat Commentary on Article 17 of the 1978 Draft [draft
counterpart of CISG article 19]; Honnold 1999, p. 184.
355. Text of Secretariat Commentary on Article 17 of the 1978 Draft [draft
counterpart of CISG article 19].
356. In Cour d'appel de Paris, 92-000 863 (22 April 1992), sustained, Cour de
Cassation, 92-16.993 (4 January 1995) A German seller claimed that the contract
had not been formed because of alteration of the initial order which had led to
disagreement between the parties, and invoked for that purpose Article 19 CISG.
A French buyer had ordered goods from the German seller. The buyer had accepted
the price previously stated by the supplier but had requested its reduction in
accordance with the drop in prices on the market. In his acceptance of the order,
the seller had replied that the prices could be adjusted upwards or downwards,
as agreed, in accordance with the market, but that various specific items could
not be delivered. Regarding the formation of the contract, the Court of Appeal
held that the contract had been validly formed by virtue of the consent of the
parties to the object at issue and the price and that it had become effective on
receipt by the buyer of the seller's acceptance of the order in accordance with
article 23 CISG. In the Supreme Court the buyer asserted that the contract had
not been formed. The Supreme Court dismissed the appeal. The Supreme Court agreed
with the ruling of the lower courts on the question of the existence of an
agreement between the parties regarding the object at issue and the price,
including the part of the agreement relating to an adjustment of the initial
price in accordance with the market and the alterations made in the content of
the order. The Supreme Court made no reference to any provisions of the CISG. 357. Honnold 1999, p. 187; 358. Farnsworth in Bianca & Bonell 1987, p. 181.
359. Honnold 1999, 188; Farnsworth in Bianca & Bonell 1987, p. 181, Illustration
360. Text of Secretariat Commentary on Article 16 [draft counterpart of CISG
article 18].
362. The most important difference between the CISG and the Contracts Act is the
time when the acceptance becomes binding even though this is not relevant in
relation to this case. According to Section 7 of the Contracts Act an offer and
an acceptance can be revoked if the revocation reaches the person to whom it is
addressed before, or at the same time as, the offer or acceptance comes to
his/her attention. Under CISG Article 23 the contract is concluded at the moment
when an acceptance of an offer becomes effective, i.e. at the moment the
indication of assent reaches the offeror (Article 18(2)). There is no need to
inform oneself as the contents of the reply; it is enough that the reply reaches
the offeror. 363. Text of Secretariat Commentary on article 33 of the 1978 Draft (draft
counterpart of CISG Article 35). See further Chapter 4.3 Conformity of the goods.
364. Text of Secretariat Commentary on article 33 of the 1978 Draft (draft
366. Text of Secretariat Commentary on article 33 of the 1978 Draft (draft
368. Text of Secretariat Commentary on article 33 of the 1978 Draft (draft
counterpart of CISG Article 35); Bianca in Bianca & Bonell 1987, p. 275-278.
369. Text of Secretariat Commentary on article 33 of the 1978 Draft (draft
counterpart of CISG Article 35); Enderlein & Maskow 1992, p. 147.
373. Text of Secretariat Commentary on article 33 of the 1978 Draft (draft
counterpart of CISG Article 35); Enderlein & Maskow 1992, p. 149; Henschel 2004,
p. 9-10; Bianca in Bianca & Bonell 1987, p.279-280. 374. Honnold 1999, p. 207. See further Chapter 2.4.3 Fundamental breach of the
375. Text of the Secretariat Commentary on article 23 of the 1978 Draft (draft
counterpart of CISG Article 25).
378. Honnold 1999, p. 210, 321. Also the Secretariat Commentary seems to suggest
this approach. Text of Secretariat Commentary on article 44 of the 1978 Draft
(draft counterpart of CISG article 48)
379. Will in Bianca & Bonell 1987, p. 356-357, see further See further Chapter
2.4.3.2 Substantial detriment. 380. Will in Bianca & Bonell 1987, p. 357-358.
382. Article 35(2), subparagraph (a): description and ordinary purpose,
subparagraph (b): particular purpose, subparagraph (c): sale by sample or model
or subparagraph (d): packaging.
383. Text of Secretariat Commentary on article 33 of the 1978 Draft (draft
p. 9-10; Bianca in Bianca & Bonell 1987, p.279-280. 384. See also brief commentary on the case in Di Matteo et al. 2004, p. 399.
387. Schwenzer in 388. Lookofsky 1996, p. 60.
390. Text of Secretariat Commentary on article 36 of the 1978 Draft (draft
392. Schwenzer in Schlechtriem & Schwenzer 2005, p. 457; Bianca in Bianca & Bonell
394. For relevant case law, see further Chapter 4.4.5 Decision on the examination
of the goods, footnote no 215.
395. Baasch Andersen 1998, section V, paragraph 3.1. 396. Schwenzer in Schlechtriem & Schwenzer 2005, p. 468. For more detailed
section II, paragraph 3. 397. Baasch Andersen 1998, section II, paragraph 3.
400. Text of the Secretariat Commentary on article 38 of the 1978 Draft (draft
401. Baasch Andersen 1998, section II, paragraph 1.4. 402. See further Chapter 4.5.10 Excuse from giving a notice.
403. Lookofsky 1996, Editorial analysis. See also Honnold 1999, p. 284. See also
405. Honnold 1999, p. 283. Also Professor Lookofsky suggests that the legislative
history should be taking into account when determining what a reasonable excuse
is. Lookofsky 1996, Editorial analyses.
408. UNCITRAL Digest 2004, Article 38, Time period for examination. For relevant
case law see especially footnote no 44. 409. Honnold 1999, p. 272. 410. See further Chapter 4.5.9 Exemption for failure to notify within reasonable
412. See also UNCITRAL Digest 2004, Article 44, "Reasonable excuse" requirement:
415. The requirements for suspend one's performance are more lenient that those
for avoidance of the contract because of the anticipated breach of contract under
Article 72. According to Article 71 a party may suspend the performance of his
obligations if it becomes apparent that the other party will not perform a
substantial part of his obligations as a result of the deficiency in his ability
to perform or in his creditworthiness or as a result of his conduct in preparing
to perform or in performing the contract. In order to suspend one's performance,
it does not have to be clear that the other party will not perform substantial
part of his obligations; it is enough that non-performance becomes apparent.
Professor Honnold stresses that subjective fear will not justify suspension but
there must be objective grounds showing substantial probability of non-performance. Secondly, a party may suspend performance where the other party's
breach, while substantial, may not be sufficiently fundamental to justify
avoidance. Finally, Article 71 enables suspension of performance without a
requirement of prior reasonable notice to the other party. According to the third
paragraph the notice of a suspension must however be given to the other party
immediately after the suspension action has been taken. If the other party
provides adequate assurance of his performance, the suspending party must
continue with performance. See further Honnold 1999, p. 429-430, 437-438; Bennett
in Bianca & Bonell 1987, p. 519. 416. UNCITRAL Digest 2004, Article 72, Preconditions for avoidance. In Landgericht
(LG) Berlin, 99 O 123/92 (30 September 1992) the German Court that the seller had
the right to declare the contract avoided under Art. 72(1) and (2) CISG, since
even before the delivery of the goods it was clear that the buyer would not pay
the purchase price and thereby commit a fundamental breach of contract. The Court
held that the probability of a future breach of contract has to be very high and
obvious to everybody, but did not require almost complete certainty. In the case
at hand, there was reason to believe that the buyer would breach the later
contract since at the time when delivery should have occurred the buyer had not
yet performed under the prior contract.
419. Text of Secretariat Commentary on article 63 of the 1978 Draft (draft
counterpart of CISG article 72). Bennett in Bianca & Bonell 1987, p. 528.
422. Text of Secretariat Commentary on article 63 of the 1978 Draft (draft
counterpart of CISG article 72).
423. The case involved a sale of barley. In analyzing Article 73(2) the Court held
that a lack of conformity of the first two instalments would amount to a
fundamental breach of the contract by the seller, rendering highly probable that
such a breach would occur with respect to future instalments, in the absence of
contrary declarations or measures on the part of the seller (such as for example
a commitment to change producer or agent). However, after examining the evidence
the Court rejected the buyer's claim that the goods were defective thus the buyer
could not rely on Article 73(2). The seller on the hand the right to declare the
contracts avoided according to Article 64(1)(b). See also Chapter 6.6.4 Decision
on the avoidance of the contract. 424. Text of Secretariat Commentary on article 64 of the 1978 Draft (draft
counterpart of CISG article 73); Bennett in Bianca & Bonell 1987, p. 534-535.
426. See Chapter 6.6.3 Anticipatory breach in instalment contracts. 427. Bennett in Bianca & Bonell 1987, p. 537. [...]
(b) Other abstracts English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=491&step=Abstract>
CITATIONS TO TEXT OF DECISION Original language (Finnish): CISG Nordic website <http://www.cisgnordic.net/980630FI.shtml>
Translation (English): Text presented below; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=491&step=FullText> CITATIONS TO COMMENTS ON DECISION English: Kuoppala, Examination of the Goods under the CISG and the Finnish Sale of Goods Act (2000) � 3.4.1 [analysis of related articles 38, 39, 40 and 44 (includes digests of relevant material in many CISG cases; also digests cases under a domestic sales code that is patterned, for the most part, after the CISG)]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) §: 4-9 n.142; CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion); Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 157
- An alternative calculation of seller's claim -	More specific grounds for seller's claims
-	Alleged delay in issuing the order -	Alleged non-conformity of the goods
The statement of claims: The [seller] has placed a demand in its statement of claims against the [buyer] that the
[buyer] should be made to pay the [seller] primarily:
2. According to an alternative calculation of damages 263,787.50 German Marks and
130,000.46 Swiss Francs with lawful interest on arrears added thereto.
Additionally the [seller] has placed a demand that the [buyer] should be made to pay the
legal fees of the [seller] added with lawful interest on arrears after six months of the
issuance of judgment onwards. [ - Seller's claims: particularized]
The specification of the primary demand; the calculation of damages and the grounds
for these damages:
1/1. Damages of 654,250.90 FIM due to unlawful avoidance of a sale of goods with
specific qualities based on order of 26 February 1992, acceptance of 5 March 1992 and
shipment order of 15 September1992.
Concerning the primary claim, the [seller] has requested the court to confirm that the
[buyer] has unlawfully cancelled an order he placed on 26 February1992, on the basis of
which the [seller] gave his acceptance on 5 March 1992 and a contract was formed, and
that because the [buyer] was not entitled to refuse to accept the delivery, the [buyer]
has to pay the purchase price and manufacturing costs totaling 671,450 FIM as agreed
and to accept the delivery and to fulfill his duty of paying damages to the [seller]. In case the [buyer] is not required to pay the agreed purchase price, the claim 1/1
consequently assumes the meaning to the [seller] of being a cancellation of an order and
respectively an unlawful avoidance of the contract resulting in damages of 654,250.90
In case the [buyer] is required to accept the goods involved in the sale, [seller] will drop
the claim concerning the expenses resulting from destroying the goods. If the goods
remain in the possession of the [seller] to his loss, the [buyer] has to be made to pay for
the expenses of destroying the goods.
The purchase price of the Order #10/92 was 604,900 FIM, as agreed in the contract
dated 5 March 1992, subject to the reservation that the price was in force until 30 June
1992. After [buyer's] inquiry concerning new prices on 11 May 1992, the [seller] had
given the [buyer] the price information on 12 May 1992 as requested. Had the delivery
been allowed to take place, the purchase price concerning Order 10/92 would have been
654,250.92 FIM.
Due to the fact that the purchase price included seller's expenses resulting from CIP-term which were saved because of the avoidance of the contract, the value of these
expenses has to be deducted from the purchase price. The [buyer] has to pay the [seller]
the remaining sum of 654,250.90 FIM.
1/2. The unilateral postponement of issuing an order of shipment, a part of buyer's
duty to contribute to the sale, resulted in a loss of 66,196 FIM. Throughout the fall of
1992 the [buyer] had been informed of the loss resulting from the postponement of the
order of shipment when the [buyer] had notified that due to "bookkeeping" the delivery
could not take place before the beginning of 1993. The loss was brought to the
attention of the [buyer] in a calculation dated 31 December 1993.
The exchange rate of the Finnish Mark in relation to the Swiss Franc developed in the
following manner according to Schweizerische Kreditanstalt: February 1992 100 FIM = CHF 33.25
The [seller] is entitled to compensation for the loss suffered by him as a result of
[buyer's] actions. It is noteworthy, that the exchange rate of the currency of payment
has decreased in relation to the currency of the [seller's] country. 1/3. A restitution covering storage costs of the seller for 41 palettes from the period 1
May 1992 - 31 December 1994, the cost for each palette being 7 CHF per month,
totaling 9,184 CHF.
1/4. Annual interest on capital mentioned in items 1 - 3 from the following periods; 7
August 1992 - 31 December 1994:10.8 %; 1 January 1993 - 31 December 1993: 9.5%;
and from 1 January 1994 until the date of the payment: 7%.
1/5. Necessary expenses resulting from arrangement of a coverage sale, collection of
outstanding claims and preparation of mediation, totaling 13,587.60 CHF added with
interest on arrears from one month after the issuance of the judgment onwards.
1/6. Expenses resulting from destruction of goods no longer eligible for sale, totaling
19,980 DM added with 7% interest on arrears one month after the issuance of judgment
has expired. - An alternative calculation of [seller's] claim 1/1
As an alternative calculation of damages concerning claim 1/1 the [seller] has demanded
The issue in this case has been goods manufactured for the buyer and packed according
to the instructions provided by the buyer. First, the [buyer] had postponed the delivery
and then later, after issuing an order of shipment, declared the contract avoided in
circumstances in which the goods had already been manufactured and samples of the
goods had been accepted. Due to the fact that the place of business of the seller who accepted the order is in
Switzerland, Swiss law is applicable to the contract. There was no agreement between
the parties on applicable law. [Buyer] had placed an Order #10/92 concerning manufacturing and acquisition of five
Avecos- product line skin care products on 26 February 1992. [Seller] had accepted the
order on 5 March 1992 at the same time when he had accepted an Order #9/92 of the
same proportion. Due to these circumstances, a binding contract had been formed
between the parties. The purchase price in the Order 10/92 was 604,900 FIM. The seller, however, had
reserved himself the right to increase the prices from 1 July1992 onwards. The term of
payment was 60 days from delivery.
According to a marking in the order, the term of delivery was to be agreed upon at a
later point in time (no more than three weeks from L's request). In a letter dated 26
February 1992 accompanying the order, the [buyer] had encouraged the [seller] to
expediently deliver all of the packaging materials. The sale assumed a nature of an order sale, where it was the duty of the seller to
manufacture the goods for the buyer. According to the terms of the sale, samples of products were to be delivered to VTT
(National Scientific Research Center) for checking purposes. After the samples had
passed the checking procedure, the buyer was supposed to give an order of shipment,
after which the seller would deliver the goods on term CIP-Vantaa. In his fax messages
dated 24 April 1992, 30 April 1992 and 6 May 1992, the [buyer] had informed the
[seller] that the samples had passed the VTT checking before shipment. The [seller] consequently had to produce and deliver the skin care products. In order
for the [seller] to be able to fulfill his duty to deliver, the buyer's duty was to inform the
seller about when the goods were allowed to be shipped. [Seller's] receipt of the
purchase price depended on the time of the delivery. There was a specific order concerning bottling and packaging of the products in
packages suitable for retail sale. It was the task of the [seller] to attach labels naming
the marketer of the products to bottles, cans and product packages serving as vessels
for the said skin care products.
- [Buyer's] breach of contract: his negligence in fulfilling buyer's duty to contribute to the sale
After the sample goods were accepted at VTT, the [buyer] did not issue an order of
shipment. In his message dated 9 July 1992, the [buyer] told the [seller] specifically not
to deliver the goods in the beginning of August 1992. At that point, the second
consignment of the Order 9/92 postponed by the [buyer] was supposed to arrive in
Finland. In his message dated 15 September1992, the [buyer] had finally notified that "the goods
can be shipped in December, so that they arrive in Finland at the earliest on 1 January
According to the contract the [seller] could reasonably assume that the buyer, soon
after the sample goods were checked, would issue an order of shipment. This state of
affairs resulted from the following circumstances:
-	After placing an order on 26 February 1992 the representative of the [buyer]
had confirmed by phone that the deliveries will be received during the months of
May and August 1992. When the representative of the [seller] had reminded the
representative of the [buyer] of this, he had not denied that. Instead, he had
stated that the term of delivery was "Auf Abrub innerhalb 1992", which was not
supported by any documents.
-	When placing the order the buyer had specifically encouraged the seller to
acquire the packaging materials as soon as possible. The packaging materials
came with product information, markings naming the manufacturer and the
marketer (H Oy L) and information on ingredients, as requested by the [buyer].
-	The goods had to be produced quickly in order to obtain sample goods;
additionally the [buyer] had requested the [seller] to pay attention to the delay
caused by the checking procedure at VTT.
-	Due to the fact that the order required the goods to be produced from one and
the same raw material, the acceptance of the sample goods required that
production of the goods be already finished before the checking of the goods at
-	Because the goods were originally not packed for retail sale, the goods had to
be bottled and packed after VTT checking. Due to the fact that the delivery
term required the delivery to take place after three weeks following L's request,
the product packages with L's name on them had to stand ready for shipment
while waiting for the order of shipment.
-	The buyer knew that the manufacturing of the goods takes a while, at least ten
weeks. The buyer also knew that even though the goods in question can be
preserved relatively long, at least thirty months, vitamins, perfumes and some
other ingredients in skin care products are under a constant process of
transformation and decomposition. As time passes the materials go through
different kinds of decomposition and maturation phenomena, which are parts of
certain maturation process of the product. Even though these features of skin
care products are generally well known, it can be said that the other person
representing the [buyer] presumably is a chemist.
-	The [buyer] had informed the [seller] on 22 January 1992 of the changes
affecting the products already after a few months. These changes could not be
avoided. Because the parties were mutually aware of these circumstances and
because they wanted to avoid maturation of the products in [seller's] warehouse,
there were grounds to assume that the [buyer] would soon enough send an
order of shipment to the seller. Because the delivery of the Order #9/92 was to
take place on week 18, there was no reason for the [seller] to assume that the
[buyer] would delay issuing of the order of shipment concerning Order #10/92
further than the end of May 1992.
-	These circumstances had forced the [seller] to quickly produce the goods in
order to fulfill his contractual duties. The sale represented a significant sum to
the [seller]. The [buyer] was aware of this. The [seller] was obliged to finance
production, bottling and packaging with a bank loan. This had caused interest
Later after issuing the shipment order on 15 September 1992, the [buyer] had not
allowed immediate shipping as defined in the terms of the sale. The [buyer] had
demanded, that the shipment of the goods should not take place until December 1992,
meaning at least three months later. According to a notice of the [buyer], the goods
were to arrive in Finland at the earliest on 1 January 1993.
As a consequence of the refusal to accept the delivery on 9 July 1992, [seller] suffered
additional storage expenses. These could not have been anticipated by the [seller] while
drafting the contract. In addition, the capital tied to the production of the goods had
needed some looking after, which caused interest expenses. The postponement of the order of shipment from the point of time which [seller] could
have seen as being a probable point of time for issuing the order, considering all the
relevant circumstances and specially the guidelines given by the [buyer] in the order,
was in itself grounds for breach of contract. Because the [buyer] on 15 September 1992 had single-handedly placed additional terms
for the time of shipment and delivery, according to which the goods were not to be
shipped before the end of December and the goods were not to arrive in Finland before
1993, it was a question of terms contravening the terms of the contract of 5 March
1992 and consequently [buyer's] breach of contract.
[Buyer's] actions were unanticipated and in breach of the contract. The following
circumstances were a direct consequence of [buyer's] actions:
-	because the term of payment was simply "60 days" and according to usage applied
by the parties this was meant to be understood as meaning 60 days from the point of
time when the seller had transferred the goods to the possession of an independent
freight liner, the interest on capital tied to production had increased because of non-payment;
Due to these circumstances the [buyer] has to compensate the [seller] for expenses and
losses caused by [buyer's] breach of contract.
Roughly two months from the date of the order of shipment, the [buyer] cancelled all
undelivered orders on 10 November 1992.
Since the middle of October 1992, the [buyer] had let it be known, that the amounts of
Vitamin A in the goods delivered on the basis of Order #9/92 had significantly
decreased in comparison to what they were in spring and below the amount of what
they had been in April when sample goods had been checked. This was shown in the
VTT study carried out on behalf of L. [Buyer] had received the goods checked in October on 7 August 1992. This was
notified by the [buyer] on 15 December 1992. The splitting in two of that delivery and
the postponement of the second delivery until August 1992 were based on [buyer's]
request. In connection with neither of the deliveries, was any notice whatsoever given
of the non-conformity of the goods with the checked sample goods. Instead, the [buyer]
had notified on 22 October 1992 about the goods received in August. The notice
concerned the results of the checking carried out on behalf of L, according to which the
vitamin content had dropped below the amount where it should have been in April 1992
when checking the goods. Cancelling the order and avoidance of the contract on 10 November 1992 was
unfounded due to following reasons:
-	The goods subject to cancellation were in conformity with the sample goods
checked and accepted at VTT in April 1992. The [buyer] had never even stated that
the goods would be non-conforming.
-	When issuing the order, the [buyer] knew that the A-vitamins would be absorbed
into liposomes. In a similar manner, the [buyer] knew about chemical and other
transformations taking place in materials with vitamin content. On the basis of the
results of tests carried out by VTT, the [buyer] knew about the vitamin content
being within the range agreed on in the contract. As mentioned before, [buyer] had
conveyed information based on L's experience that already within a few months
liposomes absorb a noticeable share of the vitamins amounting to 20 - 30% of A-vitamins. Being aware of the characteristics of the vitamins and the goods in
general, the [buyer] did not want to attach any markings on the product packages
stating the vitamin content of the products.
-	The seller is not liable for the alleged non-conformity of the goods, of which the
buyer was aware when drafting the contract. It had been clear from the beginning, that the longer the [buyer] postponed the time of
allowing the goods to arrive in Finland, the longer the liposomes would absorb vitamins
and the vitamin content of the goods would decrease. The goods had been in Germany
ready for shipment since the spring and from then on the time of delivery had been
postponed based on [buyer's] orders.
In skin care products, as in many cosmetics and health care products, chemical changes
take place as time goes by. For example, some perfumes, vitamins and chemicals may
decompose slowly. These changes are characteristic to these products and such changes
connected to the maturation process of the products, generally known in the field, do
not reduce the usability of the products to their normal purposes. Knowing that these changes cannot be prevented and that they cannot be regarded as
non-conformity, the [buyer] had requested the [seller] to increase the vitamin content in
his letter of 22 January 1992. The [seller] had complied with the request and when the
sample goods had passed VTT checking, the [buyer] had issued the order of shipment
concerning Order # 9/92. The [seller] had not committed himself to, or been aware of, the contractual terms
between the [buyer] and L Oy and this contract does not bind the [seller].
The [buyer] has not given the [seller] any reason as to why the vitamin A content
should remain on a particular level. In any case, the decrease of vitamin content in two products could not amount to a
fundamental breach of the contract. Additionally, it was not clear at the time when the [buyer] had declared the contract
avoided that the [seller] would be liable for a fundamental breach of contract within the
specified time of delivery, meaning the beginning of January 1993. If it was a question
of two separate orders, as notified by the [buyer], an anticipated breach of contract as
defined in CISG Art. 73 is not applicable. Even if it was held that this was a matter of
delivery in installments, the buyer had no grounds to assume that the forthcoming
partial delivery would amount to a fundamental breach of contract. The [buyer] should
have had to consider the chance that the non-conformity, as alleged by the [buyer],
meaning the preservation of vitamin content, could be fixed before the time of delivery
specified by the defendant. The [seller] had notified the [buyer] on 28 October 1992
that he would do everything in his power to satisfy the customer, i.e., the [buyer],
meaning that the [seller] had been prepared to fix the products of Order #9/92 and
additionally to deliver the goods of Order #10/92. The [seller] had the right to fix
concerning Order #10/92 even after the delivery of the goods. At the time the [seller]
had a method in his use with which the amount of vitamin A could be maintained on a
level requested by the [buyer]. Even if it was held that the [buyer] fulfilled his duty to give prior notice, he still was not
entitled to declare the contract avoided because the parties had reached an agreement
concerning removal of the unsatisfactory state of affairs as experienced by the [buyer]. Neither was there a basis to declare the contract avoided on grounds that the
declaration of avoidance had not taken place within a reasonable time from the point
where the [buyer] should have carried out the acceptance inspection and to notice the
alleged non-conformity. The [buyer] had not been entitled to cancel the order based on
a matter which could have been clarified when checking the sample goods.
After the [buyer] had called for a replacement delivery on 16 October 1992 and on 22
October 1992, the [seller] had replied on 28 October 1992 requesting the [buyer] to
notify L a.s.a.p. that the [seller] will make the goods to withstand oxidization. [Seller]
had been prepared for far-reaching concessions so that the sale, which was expensive
for the [seller], would not fail.
After the [seller] had on 12 November 1992 represented the said offer, the [buyer] had
repeatedly refused to accept it on 13 November 1992. It was included in the offer that
the seller would replace two product in the consignment, namely Avecos Tagescreme
and Liposomengel, with product that would maintain their vitamin A content in the best
manner possible allowed by the current state of science. [Seller's] reply on 28 October 1992 to [buyer's] request on 22 October 1992 calling for
actions to be taken was based on elimination of a defect in the products. The [buyer]
was not entitled to breach the reached agreement.
The [buyer] had refused to accept [seller's] efforts to reach an amicable solution which would have led to acceptance of the delivery.
Consumer protection laws had no relevance because it was not a question of a
consumer sale. The [buyer] had referred to his message of 21 December 1990, where it was stated that
"Shelf-life of our products is not shorter than 30 months". In his reference to the
mentioned citation, [buyer] had brought out that the [seller] had guaranteed not only
the shelf-life of the products but also the preservation of vitamin content in connection
with an order over a year later where the said content was strictly specified while
checking the sample goods. There was no agreement between the [seller] and the
[buyer] on whether the vitamin content of Avecos - skin care products should be
permanent in nature. What is meant by shelf-life is that a product can be preserved when
kept with due care in normal or reasonably anticipated circumstances and without
causing any danger to health and at the same time being suitable for its original purpose.
The notion does not contain any reference to maintenance of vitamin levels for the
shelf-life period. - Consequences of [buyer's] declaration of avoidance
The [seller] could not have anticipated [buyer's] actions declaring the contract of 5
March 1992 avoided. This course of action caused direct harm to the [seller]. The
[buyer] should have understood the consequences of his actions to the [seller].
The [buyer] has to pay damages for unlawful avoidance of the contract, including both
loss of agreed price and loss of restitution, resulting from the fact that repeated
postponements of the order of shipment in breach of the contract had caused the
payment of the sale price to take place at a time when the currency of payment, due to
floating of the currency, had devaluated seller's currency by over 20%, meaning that
this is a matter of paying damages due to a loss caused by buyer's breach of contract.
Because the seller had to attach markings to the skin care product bottles and product
packages stating that the marketer of the products is H Oy L, it was not possible to
reduce seller's losses through compensatory sales. The only way to get rid of the
products in seller's storage was to destroy them. This caused following losses:
-	sale price of the products (including but not limited to production and
manufacturing costs, selling costs including seller's coverage) less expenses of
which the seller is responsible for according to CIP-term amounting to 4,200 CHF;
-	the loss caused by devaluation of currency because of delay on buyer's side in
issuing the order of shipment;
-	the expenses caused by seller's efforts to arrange coverage sale, to collect
outstanding claims from the buyer and costs of mediation caused to the seller;
Article 35(3) of the CISG contains a confirmation of the principle that the buyer can not
demand remedy for non-conformity based on such qualities of the goods as determined
on the basis of sample goods, if at the time of the conclusion of the contract the buyer
knew or could not have been unaware of such lack of conformity. This rule does not
concern only factual information but also circumstances that the buyer could not have
been unaware of. What is meant by the addition is a situation where it is very likely that
the buyer was aware of such a circumstance but no clear evidence can be presented.
If the buyer does not notify the seller about the non-conformity within a reasonable time
after detecting it or after he should have detected it and does not specify the nature of
non-conformity, he loses his right to claim non-conformity (CISG Art. 39)
Article 53 of the Convention places two kinds of duties upon the buyer. The buyer must
pay the price for goods and take delivery of them. It may often follow from the contract
between the buyer and the seller that the buyer also has other duties. The content of
these duties is not regulated in the Convention. Instead, rules concerning buyer's breach
are also applicable to other duties which have been agreed on or which can be regarded
as agreed on. According to Article 60 CISG, the buyer's obligation to take delivery consists of doing
all the acts which could reasonably be expected of him in order to enable the seller to
make delivery. This buyer's duty to contribute to the sale also involves other
procedures he must carry out so that the goods can be delivered to him. If the terms of the sale indicate that the buyer has to give a signal or some other
indication of the time when the goods can be shipped or otherwise delivered in order to
facilitate seller's performance, this procedure initiating the shipment belongs to buyer's
duty to contribute. Other procedures included in buyer's duty to contribute can be
guidelines and acceptances the buyer has to give to the seller while manufacturing the
What is meant in Article 60 CISG is such contribution that takes place before the
delivery and which is a prerequisite to seller's ability to perform. This kind of
contribution is usually needed when the goods involved in the sale are to be
manufactured or ordered based on buyer's order. According to Article 61 CISG, the seller can claim damages based on Articles 74 - 77
when the buyer fails to fulfill his contractual duties or his duties under the Convention. If the seller has demanded the buyer to perform, according to Article 61 CISG the seller
does not lose his right to claim damages. The seller is entitled to rely on the contract
and to demand that buyer perform.
According to Article 74 CISG, the damages for breach of contract by one party consist
consequence of the breach. [Buyer's] reply
The [buyer] has denied the statement of claims in its entirety as to its grounds and to its
amount in a manner appearing below. Additionally, the [buyer] has demanded that the [seller] should be made to pay the legal
expenses of the [buyer] with interest on sums in arrears added thereto.
The [buyer] has stated, as did the [seller], that the CISG is applicable to the case. - The alleged delay in issuing the order
[Seller's] allegation that [seller] had grounds to assume that soon after checking of the
sample goods the buyer would issue an order of shipment is unfounded and the [buyer]
had not caused any delay in the delivery of the goods. Orders # 9/92 and #10/92 were totally separate orders. The [seller] has based most of
his allegations to circumstances connected to Order #9/92.
In the Order #10/92 which the [buyer] made to the [seller], the time of delivery had
been purposefully left open because [buyer's] partner L was at the time unable to
estimate the sale of the goods. Because there was no agreement whatsoever of the time
of delivery, the [buyer] could not have been liable for a delay in issuing the order of
shipment, as alleged by the [seller]. The [buyer] bears no responsibility in relation to the
[seller] for [seller's] own misjudgments and the expenses those misjudgments may have
The [seller] had through his own initiation, against [buyer's] original aim and without
[buyer's] awareness of it, manufactured goods for the Order #10/92 beforehand,
together with the goods for the Order #9/92. At that moment, the [seller] had taken a
risk concerning possible storage and capital costs resulting from his actions and
consequently is responsible for his own expenses. The [buyer] cannot be liable for these
expenses under any contractual duty. The [buyer] could not have known that the [seller] had to finance the manufacturing of
the goods by means of a bank loan. Financing of production is not a responsibility of a
contracting party; neither is it a risk such party might assume. The [buyer] did not know
that the orders had represented a significant sum to the [seller].
It was a purpose of two separate orders that the goods could be manufactured
separately. It was not clear to the [buyer] until the reception of a fax on 30 June 1992
that the [seller] had already in the summer of 1992 manufactured the product for both
orders. The product for the second order should not have been manufactured before 15
September 1992 when an order of shipment was issued.
In a phone call of 26 February 1992 there was no agreement on the exact time of
delivery on [buyer's] behalf. The hastening of packaging material concerned only Order
#9/92. The raw material mixture was naturally meant to be order-specific. The ten week
delivery time as demanded by the [buyer] concerned only Order #9/92. Not even the
circumstances in general had obliged the [seller] to manufacture goods for the Order
#10/92 quickly. Concerning Order #10/92, the [buyer] had taken all measures required
to deliver the goods. - Non-conformity of the goods
Based on the results it was apparent that vitamin A content had decreased significantly
below the lowest level agreed, that being 1000 IU/g. Of the five products, two had
qualities which did not conform with what had been agreed on in the contract. The vitamin A content of the products was a central quality of the products.
Consequently, the products did not posses qualities they should have possessed
according to the seller. The products were not fit for their purpose if they lacked
necessary vitamin A content. On the basis of order documents, correspondence and phone calls, the [seller] had to
understand that the [buyer] regarded vitamin content as being the central quality of the
Because the [seller] had guaranteed that the shelf-life of the products is at least thirty
months, the [buyer] had grounds to assume that what was meant by shelf-life was that
the products would preserve their essential qualities for at least thirty months. The [seller] had misled the [buyer] by manufacturing products which, when tested
beforehand, fulfilled the quality requirements but which quickly began losing their
qualities. The [seller] had not acted out [buyer's] requirements to add vitamin A in order
to assure necessary vitamin content. Vitamin A content should have been within range 1000 - 3000 IU/g. The range was this
wide because the [buyer] had allowed for the fact that vitamin A content would
decrease about 20 - 30%.
The ointments and gels delivered by the [seller] did not conform with what had been
agreed on in the contract. Instead the delivered goods were non-conforming because
they did not conform with the quality requirement laid down in the contract concerning
minimum vitamin content and because the said non-conformity could be regarded as
Vitamin A and E contents were the only quality features of the products specifically
agreed on in the contract.
The [seller] had manufactured the goods for the Order #10/92 already the same year in
April when he had manufactured the goods for the Order #9/92 using the same mixture
of ingredients. After the test results from VTT came on 8 October 1992, it was clear
that also the goods for the Order #10/92 were non-conforming in a manner similar to
goods for the Order #9/92. The goods were meant to be delivered to the [buyer]
towards the end of the same year, when it was already clear that vitamin A content of
the ointments would have dropped below the tested levels. Due to these circumstances
it was clear that goods for the Order #10/92 would not conform with the quality
requirements laid down in the contract. Consequently, the [buyer] notified the [seller]
on 10 November 1992 that he would declare the contract avoided in relation to Order
#10/92. The [buyer] has given prior notice of this to the [seller], as required by CISG
It is the understanding of the [buyer] that also Article 72(2) CISG is applicable in this
case. Through non-conforming delivery, the [seller] has given the [buyer] grounds to
assume that also the forthcoming deliveries in installments would constitute a
fundamental breach of contract. The [buyer] was clearly entitled to declare the contract
avoided as defined in CISG Article 73. Giving of prior notice of avoidance is not
required in Article 73. Because the said non-conformity was a result of a lack of
essential quality features in the products, [seller's] breach of contract clearly fulfils the
Convention. It is also clear that the [seller] understood that the goods are non-conforming on the basis of the test results. However, it is apparent that the [seller] had
not seriously even aimed at manufacturing products which could fulfil the set quality
requirements. The circumstances of the case did not allow the [buyer] to give the [seller] an
opportunity to fix the sale instead of declaring the contract avoided. It took years of
efforts to reach the agreed quality requirements. Still the [seller] failed to meet all the
expectations. The [buyer] had no grounds to assume that the [seller] could or seriously
would aim at fulfilling the quality requirements. The [seller] offered to alter the product
just after having received a prior notice of avoidance of the contract on 22 October
1992. The [seller] could not have been capable of fixing the goods in a manner required
by Article 37 of the Convention without causing the [buyer] excessive harm or
uncertainty. It would not have been reasonable to oblige the [buyer] to accept the
uncertainty connected with allowing the [seller] to fix the goods.
A new composition of the goods would have required new testing of at least thirty
months. The [buyer] could not have accepted untested products. The [buyer] had given notice of the defects appearing from the test results as soon as he
had received information of the said defects. He had also requested additional
clarification concerning the defects and on 16 October 1992 had requested a substitute
delivery for the delivery of Order #9/92. At this stage, the [buyer] and L had hoped that
the [seller] could be able to deliver goods which would meet the quality requirements.
At the time avoidance of the contract did not seem necessary. The [buyer] had given
prior notice of avoidance concerning the Order #10/92 on 22 October 1992. The
[buyer] had confirmed the avoidance on 10 November 1992, because avoidance of the
contract was the only reasonable way for the [buyer] to react. The parties would have
been unable to reach a mutual agreement because the [seller] had no substitute for the
non-conforming goods. In connection with the checking of the goods in April/May of
1992, the [buyer] had grounds to assume that the [seller] had managed to manufacture
conforming goods in terms of vitamin content and total wastage. Consequently, issuing
the order of shipment on 15 September 1992 was a natural act because the test in May
gave flawless results. The [buyer] had no grounds to assume that the quality of the
products would decrease in comparison to the test results in May. The non-conformity
could not have been detected during acceptance inspection. - [Buyer's] statement concerning the required sums
Concerning the sums mentioned in the statement of claims, the [buyer] represents the
-	claim 1/3 is in dispute, because no clarification has been received as to whether
expenses concerning Order 9/92 were not included and because the manner in which
the palettes were counted was not disclosed;
-	the [buyer] has disputed the claim 1/6 as to its amount, because the goods had not
been destroyed and because no clarification of the expenses has been represented;
As to the alleged negligence of the [buyer] in contributing to the sale on grounds that
the [buyer] had delayed in issuing the order of shipment for Order #10/92, the Court of
First Instance holds that the orders were made using two separate documents. In the
Order #9/92 the time of delivery was precisely determined ("latest week 18/92") and in
the Order #10/92 it was left open ("will be agreed later on"). Furthermore, it can be
stated that according to the wording used on the first page of both orders, the [buyer]
asks the [seller] to hasten the ordering of packaging material in order to facilitate a
quick delivery of the first order. The [seller's] reply to both of these orders has, however, been given in the same
concerning time of delivery for the Order #10/92 could have changed from what it had
been in the order letter of 26 February 1992. In the said [seller's] reply, one talks about
two separate deliveries. As far as the second delivery is concerned, there is a mention of
a point of time until which a delivery can take place with the old price. Based on the
reply, and considering the product amounts mentioned in it, it is clear that it did not
concern only the Order #10/92 even if there was a reference in the reply to that order.
Consequently, the [seller's] reply did not contain any changes to the terms of delivery in
relation to Order #10/92 to which the [buyer] should have reacted in some manner. On the basis of wording of the order documents concerning manufacturing of the
products using same ingredients, the [seller] could not have drawn a conclusion that the
production of the goods for both orders should have been finished already before the
VTT tests. This is because statements concerning the mixture of ingredients have been
written down separately on both orders and, as a consequence, it cannot be interpreted
as meaning more than that the goods for the order in question had to be manufactured
using a single mixture of ingredients. Additionally, it has to be considered that the time
of the tests was not determined in the orders and consequently one cannot draw a
conclusion that the tests concerning both orders should have been carried out
simultaneously. Considering the conflicting testimonies of B and R, there is no evidence that R would
have confirmed by phone to B the time of delivery for the second order as being August
1992 or other specified point of time.
Based on the statements of R, N and A, it can be held that at the time of making the
order, the [buyer] and L had been unable to estimate the sale of the products in a
manner that would have allowed the determination of an exact time of delivery for the
second order. Considering that the Order #10/92 was preceded by the delivery of Order #9/92, the
Court of First Instance holds, that the order of shipment for the Order #10/92 was
issued within a reasonable time because it was issued within a year after the contract
Based on the above mentioned circumstances, the Court of First Instance holds that the
[buyer] is not liable for [seller's] willingness to interpret the time of delivery of the
Order #10/92 as being earlier than what the [buyer] has factually committed himself to
or what he can reasonably be regarded as obliged to. - The alleged non-conformity of the goods
It is undisputed in the case, that in his Orders #9/92 and #10/92, the [buyer] had
required that the sample goods tested at VTT should possess the vitamin A content
indicated by the order documents. It is also undisputed that the vitamin A content in the
goods tested at VTT on 4 May 1992 was within the required range in all the five
The [seller] has regarded the central qualities of the products as being their suitability
for skin care and their inclusiveness of the ingredients mentioned in the list of
ingredients. The evidence submitted on behalf of the [buyer] by R, N and A supports
the view that the [buyer] had specifically wanted to order vitamin ointments and no
other skin ointments, which L already had plenty of in his product selection. Based on
the statements of the said persons and submitted documents, it is also clear that the
[seller] knew that L Oy was the final buyer and that the orders took place under its
guidance. In terms of seller's liability, the information given to consumers or drugstores
by L Oy or the [buyer] without seller's knowledge bears no significance.
Vitamin A and E content was the only quality requirement included in the order
documents. The fax message from the [seller] to the [buyer] on 13 August 1991,
concerning a delivery in 1991 and [buyer's] fax message to the [seller] on 22 January
1992, where the [buyer] has drawn [seller's] attention to both the absorption of vitamin
and the need to add vitamins, indicate that the [buyer] has already earlier drawn
[seller's] attention to the vitamin content of the products.
Based on vitamin A content required in VTT tests and other above mentioned evidence
the Court of First Instance holds that the [buyer] regarded vitamin A content as a
central quality of the products and that the [seller] has to have become aware if this.
In response to the issue whether some requirements concerning preservation of vitamin
A have become parts of contracts governing Orders 9/92 and 10/92, it can be stated,
that the [buyer] has appealed to [seller's] fifteen-part reply dated 21 December 1992
concerning [buyer's] inquiry and especially to part 2 of that reply where the [buyer] has
told that the shelf-life of his products is at least thirty months. As such, it cannot be
excluded, that all the products may have preserved some of their vitamin A content for
thirty months. It can also be held as clarified, that the products would have remained
suitable for skin care throughout the duration of their shelf-life.
The [seller] regards the term "shelf-life" as meaning that the product is preserved when
duly kept in normal or reasonably anticipated circumstances and that the product fulfils
its original purpose without causing any danger to health.
According to the [seller], announcing the shelf-life of the product did not contain
announcement of preservation of vitamin content throughout the said period. The
[buyer] has regarded that announcing the time the product stays preserved means that
the product meets the central requirements throughout the whole period of shelf-life.
No evidence has been submitted concerning the content of the notion "shelf-life" under
Swiss Law or practice.
As a witness to the [seller] M, a German citizen, has told as his view on the content of
the notion in Switzerland, that during the announced shelf-life the product may not
change in terms of its preservation or qualities. During further questioning, M has
submitted that a product meets the shelf-life requirement if it is suitable for its original
purpose even when it is supposed to contain an undetermined amount of vitamins.
Witness M has stated as his understanding that what is meant by shelf-life is the time
that all the central qualities of the product are preserved and the announcement of
which is based on tests carried out by the manufacturer. Witness A has stated as his understanding that announcing the time the product is
preserved concerns physical, microbiological and chemical preservation. Consequently,
according to A, announcing the shelf-life as being at least thirty months has also meant
that the product maintains its vitamin A content at least for the duration of the shelf-life
Furthermore, A has stated that it is typical for the trade that shelf-life announcement of
cosmetics concerns all the qualities of the products.
A is responsible for the product development of L Oy and he must have been aware of
the international content of the shelf-life concept. On the basis of A's statement and
because the [seller] has not represented sufficient evidence to the contrary, the Court of
First Instance holds that the declaration given in [seller's] fax message of 21 December
1990 concerning thirty month preservation has also concerned the vitamin A content of
Because the [seller] has not even alleged having given any other information concerning
the shelf-life of his products, the Court of First Instance holds that through the shelf-life
declaration, the [seller] had committed himself to delivering products whose vitamin A
content would remain within the range required by the [buyer] throughout the shelf-life
period. The [buyer] has alleged that also the [seller] should have understood that
preservation of vitamin A content is a central requirement to the [buyer]. The fact that
the [seller] has been unable to bring forward sufficient grounds as to why the [buyer]
would have been satisfied with vitamin A content appearing in the tests before the
deliveries and not paying attention to maintenance of vitamin A content on the same
minimum level during the time of use of the product supports [buyer's] allegation.
Statements by R, N and A bring additional support to the allegation in the sense that,
according to them, products with vitamin content are more expensive than regular skin
care products. Considering especially the statements by N and A, the Court of First Instance does not,
only on the basis of M's statement, hold that it would not have been possible to
manufacture products that would have preserved the minimum amount of vitamin A
throughout the shelf-life. Additionally, the range was so wide and even the [seller] had managed to manufacture
such products on the part of three products in the product series. Considering the range allowed, not even the fact that vitamin A decomposes during
time, which was known by the [buyer] and was also generally known in the field, bears
no significance in this case. Not even the fact, that no requirement as to announcing the
vitamin content in the list of ingredients had been made had significance, when a
conclusion can be drawn on the basis of A's and R's statements that the vitamin content
is usually not announced but only the ingredients of which the product is composed are
announced qualitatively. Based on the above and when considering the [seller's] assurances that it is able to reach
the required levels of vitamin content, it was not the business of the buyer to find out as
to how the seller will take care of the manufacturing. This being the case, it appears that
the buyer counted on the seller's expertise in terms of how the seller reaches the
required vitamin A content and how the required preservation is carried out. The vitamin content of two products subject to the contract, namely day creme and
liposome gel, had dropped according to the VTT test results of 8 October 1992 in a
manner that vitamin A content of day creme was only 750 IU/g and liposome gel had
only 340 IU/g of vitamin A. Consequently, it can be held that concerning these
products, the goods were non-conforming and that the said products had not been fit
for the special purpose as required by the [buyer], which was known by the [seller] with
sufficient clarity.
The so-called minimum rule connected to law of property is not applicable in this case
because based on what has been mentioned above there is no dispute as to what has
been agreed on in this case.
The level of vitamin A being under the agreed level has not even partly been [seller's]
fault, because on grounds mentioned above the [buyer] cannot be held as having
delayed in carrying out the Order #10/92 in breach of the term concerning time of
Because the vitamin A content had to do with central qualities of the products and
because the vitamin A content of the mentioned two products was significantly below
the required minimum content and because according to submitted evidence here it was
a question of a product series required by drugstores to be sold together as a single
entity, the Court of First Instance holds that the [seller] is liable for fundamental breach
When the test results in October 1992 indicated that the goods were in non-conformity
with what had been agreed on and when in July 1992 the [buyer] had been informed
that also the Order #10/92 had been made out of the same mixture of ingredients, the
[buyer] had concluded that under CISG Article 73 he had grounds to assume that also
the Order #10/92 would be non-conforming. Even if the said Article concerning successive deliveries was held inapplicable, the
[buyer] is of the opinion that it was clear in a manner required by Article 72 that the
[seller] would be unable to deliver goods by the beginning of January 1993 that would
conform with the order of 14 September 1992. In his fax message of 28 October 1992, the [seller] has notified the [buyer] of his ability
to reach and maintain an optimal level of vitamin A with help from H-La R and by
changing the recipe. According to M, the changing of recipe would have meant that the
product had exactly the same chemical composition with the exception of a different
form of vitamin A. Furthermore, M has stated that changes brought about by the
change of a recipe are marginal in nature. The tests required by such changes can,
according to M and B, be carried out within a few days.
However, based on what has been said above the products should have preserved the
minimum level of vitamin A throughout the whole shelf-life period. Based on the
statements of R, N and A, a conclusion can be drawn that guaranteeing the preservation
of vitamin A would have meant tests lasting almost the whole shelf-life period.
According to N, the time of testing can be shortened by testing in higher temperatures.
Even then the tests would last at least fifteen months. M's statement does not support
the view that with the time the [seller] had in his hands he would have been able to
manufacture new goods or change the old goods so that the preservation of vitamin A
would have been guaranteed. Neither [seller's] fax of 28 October 1992 nor other
circumstances gave any guarantees to the [seller] that the [seller] would be able to
deliver conforming goods at the end of the year 1992 or to be able to guarantee the
preservation of vitamin A within the agreed range. The [seller] had no reason to assume
that the [seller] would be able to deliver conforming goods within the agreed time. Due
to these circumstances, the Court of First Instance holds, that in a manner required by
Article 72 CISG, it was clear already before the delivery of the Order #10/92 that the
[seller] will be liable for fundamental breach of contract. Because the fax of 28 October
1992 has not given the [buyer] any guarantees of [seller's] ability to deliver, it could not
have meant an agreement between the parties either. - The procedure of avoidance of the contract
The submitted documents indicate, that the [buyer] had first informed the [seller] of the
results of the tests carried out by VTT during the fall. Then he had asked the [seller] for
a substituting delivery concerning the Order #9/92 and furthermore on 22 October 1992
had notified that L demands disclosing of the vitamin content of the goods intended for
the next delivery within the near future. Furthermore, in the fax of 22 October 1992 the
[buyer] has informed the [seller] that if the vitamin content of the products is not on the
required level, L will cancel the order and demand damages.
As mentioned above, based on the circumstances of the case the [seller] has been aware
of the fact that L Oy was the final buyer and that the orders were to take place under its
guidance. Taking this into consideration and the content of the fax of 22 October 1992,
the Court of First Instance holds that the [buyer] had notified the [seller] in a reasonable
manner of his intention to declare the contract avoided, as required by Article 72 of
CISG. Due to this and because the [seller's] inability to deliver conforming goods was
evident, it bears no significance whether it was a question of successive deliveries as
defined in Article 73 of CISG in relation to orders 9/92 and 10/92. - The duty to examine the goods and to give notice
It is of utmost importance in evaluating the acceptability of declaring the contract
avoided in relation to Order #10/92 to think whether the [buyer] should have taken
action already earlier in order to make sure that the goods for both of the orders would
be conforming. This is particularly important considering that in the tests that took
place in the spring, the vitamin content of the liposome gel had been 1200 IU/g and the
respective content in day-creme was 2400 IU/g and that towards the end of June it had
become clear to the [buyer] that the products for both of the orders had been
manufactured using the same ingredients. Additionally, it has to be considered that in a
fax message of 22 January 1992 the [buyer] had notified the [seller] that liposomes
absorb 20 - 30 % of the vitamins within a few months, when vitamin A becomes less
discernible in tests and that the [buyer] had also otherwise notified that vitamin A
decomposes at a rate of 20 - 30%. It is also of significance that, to the [buyer],
preservation of vitamin content was a central quality of the products. The question here
is then, whether based on the information he had received at the end of June 1992 the [buyer] should have checked the goods immediately after he had received the 2nd
consignment of the Order #9/92 and whether he should have notified the [seller].
As to this, we can state that referring to the non-conformity of the goods the buyer has
relied on seller's expertise in terms of how the seller would reach the required vitamin
content and the preservation of that content. Furthermore, based on VTT tests of spring 1992, the [buyer] had had no reason to
doubt that the vitamin content of the day creme would drop below the agreed minimum.
As far as the liposome gel is concerned, a 20 - 30% drop in vitamin content after the
tests would have meant that vitamin A content would have dropped 40 - 160 IU/g
below the agreed level. In a fax of 22 January 1992, L's request to add vitamins is
mentioned. N, who has undersigned the said fax, has witnessed that notification of 20 -30% absorption of vitamin was not based on studies but on a rule of thumb and that the
[buyer] had presumed that the [seller] knew how this was. Furthermore, the said fax
was not connected to the orders of the year 1992 but to the order in 1991. In addition,
based on what has been presented in the case, there are so-called inhibitors which slow
down the decomposition of vitamins.
On these grounds and especially because the task of the [seller] as a manufacturer of the
product was to attend to the vitamin content remaining within the agreed range and
because the [buyer] had had to rely on [seller's] ability to carry out this task one way or
the other and because the [buyer] could have presumed that the [seller] had other means
in his possession to guarantee the preservation of vitamin content than just adding
vitamins, the Court of First Instance holds, that only on the basis of very low level of
vitamins in the liposome gel sample the [buyer] had no reason to take random samples
right after a partial delivery of the Order #9/92 on 7 August 1992, because the levels
were above the allowed minimum level in the tests of the spring. This being the case,
the Court of First Instance holds that the [buyer], in a fax message of 15 October 1992,
has given notice within a reasonable time because the test results from VTT indicating
the low vitamin levels only arrived on 15 October 1992.
Based on the above mentioned grounds, the Court of First Instance holds, that the
[buyer] was entitled to declare the contract avoided in relation to the Order #10/92 and
that this avoidance was not against CISG rules.
The action is dismissed. The [seller] is ordered to pay the legal expenses of the [buyer]
amounting to 162,185.50 FIM added with interest on arrears from one month after the
issuance of the judgment onwards. The interest on legal expenses is 7% over the
currently enforced interest rate of the Bank of Finland.
The judgment on appeal: Helsinki Court of First Instance, Dept. 5. 11 June 1995 no.
19067 (95/11481)
[Seller] has renewed its statement of claims and has placed a primary demand that the
Court of Appeals confirm that [buyer] has unlawfully cancelled an order it placed on 26
February 1992 and that [buyer] be made to accept the delivery and to pay the price of
671,450 FIM.
[Seller] placed a secondary demand that if [buyer] is not directed to pay the price,
[buyer] be made to pay damages of 654,250.90 FIM; or, on the basis of an alternative
calculation of damages in Part 2 in the judgment of the Court of First Instance.
523,657.45 FIM as acquisition costs and 115,204.74 FIM as administrative costs. Additionally, [seller] has demanded that [buyer] should be made to pay the amounts
mentioned in parts 1/2 to 1/6 of the judgment of the Court of First Instance. In case that
[buyer] is required to accept the goods, [seller] is willing to give up the claim
concerning destruction costs amounting to 19,980 FIM, which was mentioned in part
1/6 of the judgment of the Court of First Instance.
Additionally, [seller] has demanded that [buyer] be required to pay [seller's] legal
expenses from the Court of First Instance, amounting to 279,740.68 FIM, and from the
Court of Appeals amounting to 24,100 FIM.
[Buyer] has replied and demanded compensation for expenses resulting from the reply,
which amount to 13,908 FIM.
[Seller] has produced two additional statements to the Court of Appeals on 17 July
1996 and on 18 July 1997. In the later letter it has requested that on oral hearing should
be carried out in order to hear witnesses. [Buyer] has replied to this and demanded 27,084 FIM for expenses resulting from the
The said additional statements have been received by the Court of Appeals after the
time limit for appeal has expired. There is no special reason to take them into account.
Therefore these statements and their attachments are disregarded, with the exclusion of
clerical errors mentioned in the letter of 17 July 1996 and carrying out of an oral
hearing mentioned in the letter of 18 July 1997.
Because no such information is available which would necessitate hearing witnesses, the
request for an oral hearing is denied.
There is no reason to change the judgment of the Court of First Instance. Therefore, the
judgment of the Court of First Instance remains unchanged.
[Buyer] is directed to pay [seller] a reasonable amount of 8,000 FIM to compensate for
the expenses resulting from the replies to the Court of Appeals. Interest on arrears is to
be paid after one month after the issuance of the judgment onwards. The annual interest
on arrears is the currently enforced interest rate of the Bank of Finland with 7% added
This judgment can be appealed to the Supreme Court if the Supreme Court grants a
writ of certiorari. FOOTNOTE
* Jarno J. Vanto holds a Bachelor of Laws-degree and a Master of Laws-degree from the University of Turku and an LL.M. degree from the New York University School of Law. He is a member of the New York Bar. Mr. Vanto has authored a number of articles on data protection law and on international commercial agreements. He is the Editor-in-Chief and co-author of the International Privacy Guide and Co-Editor and co-author of the International Contract Manual, both published by West, a Thomson-Reuters Business. All translations should be verified by cross-checking against the original text. Go to Case Table of Contents Pace Law School
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