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Timestamp: 2017-07-22 12:50:43
Document Index: 742501267

Matched Legal Cases: ['art 4', 'art 6', 'art 6', 'art 6', 'art 29', 'arts 46', 'art 6', 'art 5', 'art 14', 'art 19', 'art 19']

Australia 20 May 2009 Federal Court of Australia (Olivaylle Pty Ltd v. Flottweg GmbH & Co KGAA) Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography Search the entire CISG Database (case data + other data) CISG CASE PRESENTATION
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DATE OF DECISION: 20090520 (20 May 2009) JURISDICTION: Australia TRIBUNAL: Federal Court of Australia (Brisbane: Heard in Adelaide) JUDGE(S): Logan J CASE NUMBER/DOCKET NUMBER: [2009] FCA 522 CASE NAME: Olivaylle Pty Ltd v. Flottweg GmbH & Co KGAA CASE HISTORY: Unavailable
SELLER'S COUNTRY: Germany (defendant) BUYER'S COUNTRY: Australia (plaintiff) GOODS INVOLVED: Machinery for the processing of olive oil IHR headnote
"The CISG does not apply to an international sales contract which contains the clause
Australian law applicable under exclusion of UNCITRAL law."
AUSTRALIA: Federal Court of Australia, 20 May 2009 (Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA) Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/96],
The plaintiff, an Australian company, and the defendant, a German company, concluded a contract for
the sale of an olive oil production line. After extensive negotiations about the terms of the contract and
exchange of several preparatory documents, the defendant incorporated the plaintiff's ultimate
comments into a final sales contract which the defendant's German export manager e-mailed to its
Australian representative in New South Wales, Australia, on 8 February 2005. The latter forwarded
this electronic message to the plaintiff with place of business in Victoria, Australia, on 10 February 2005. The final contract contained a clause providing "Australian
law applicable under exclusion of UNCITRAL law."
In the contract, the seller undertook that the production line would meet certain benchmark operating
speeds and yields, warranting to make repairs, supply replacements, or make good any services not
carried out correctly within a reasonable time period; failing which, the buyer had the right to hire a
technician to carry out repairs and recover costs from the seller. Moreover, the contract gave the
plaintiff the right to claim a reduction in the purchase price or withdraw from the contract, but only after
expiry of a "reasonable period of grace," which the buyer was obligated to specify in the event of the
seller's default on its obligations.
The plaintiff claimed that it experienced several problems with the production line during the first
harvesting season. In February 2006, it notified the seller that it would withdraw from the contract,
unless the seller would remedy the alleged defects by the end of June 2006. The seller disagreed,
claiming that the failure to meet the contract benchmarks resulted from the buyer's misuse of the
machinery, but conceding that a gearbox needed to be replaced. The buyer refused to allow the seller
to carry out the repair and sued. Regarding contractual formation, the court interpreted the buyer's comments on the proposed contract
it received from the seller in late 2004 as a counteroffer and held that the seller's February 2005
electronic communication, by incorporating the buyer's comments, constituted an acceptance. In line
with Article 15 of the UNCITRAL Model Law on Electronic Commerce (which Australia had enacted
in section 14 of its Electronic Transactions Act of 1999 and which the state of Victoria had enacted in
section 13 of its Electronic Transactions Act of 2000), the court held that the place where the electronic acceptance was received should be deemed the place of contract
formation. As to the time of formation, the court noted that, strictly, and in accordance with Article 15
of the MLEC, the contract was completed when the electronic acceptance reached the buyer, i.e. when
it entered the buyer's information system on 10 February 2005. However, since both parties stipulated
in pleadings that the contract was formed on 8 February 2005 and since the issue was not material to
the dispute, the court agreed to act on the basis of that admission.
Furthermore, the court held that, by inserting the opt-out clause in the sale contract, the parties
excluded the application of the CISG pursuant to its Article 6. Establishing that "UNCITRAL Law" in
the contract referred to the CISG and that the Convention was part of Australian law, the court
reasoned from the parties' intention as evidenced in their writing that they sought their contractual
disputes to be resolved solely under Australian local law.
Proceeding to the buyer's claim that it had the right to withdraw from the contract, given the seller's
failure to repair alleged defects within the time period indicated, the court noted that the concept of
"grace periods" potentially giving buyers the right to withdraw or reduce the purchase price originated
from the civil rather than the common law. Therefore, the court looked to Section III of Chapter II of
the CISG ("Remedies for breach of contract by the seller"), in particular Articles 46 (3), 47, 48 (1),
and 50, for guidance on how such terms were to be interpreted. In referencing the CISG, the court
again pointed to the parties' intention to incorporate civil law terms in their contract. Relying on Article
48 (1) CISG, the court held that in February 2006 the buyer was not entitled to specify a grace period
ending in June of that year, because the reasonable time period for seller's repairs had not expired at
that time. According to the court, the reasonable time period for repairing defects that had materialized
during the 2005 harvesting season expired at the end of June 2006; only at that point would the buyer
have had the right to specify a grace period and threaten withdrawal. Finding the buyer's denial to allow
the seller to repair the gearboxes unreasonable, the court affirmed the seller's claim to the final
[installment] due under the contract.
APPLICATION OF CISG: No APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue: Articles 6 ; 47 ; 48 Classification of issues using UNCITRAL classification code
In [a 2009] decision by the Federal Court, the contract involved the supply of production line
equipment for olive oil production. Logan J determined [page 204] that the CISG was excluded by the
words 'Australian law applicable under exclusion of UNCITRAL law'.[446] The case is almost
chameleon-like in its approach to the CISG.
The Court reasoned that, although the CISG was 'part of the relevant Australian law', reference to
exclusion of UNCITRAL law was sufficient to evince an intention to exclude the CISG.[447] The buyer
contended that the exclusion related only to property issues, since the exclusion followed a sentence
amounting to a retention of title clause.[448] Logan J correctly pointed out, with reference to Roder Zelt,
that such a construction was unlikely to have been intended, given that the CISG does not deal with
property issues anyway, pursuant to art 4(b).[449] Unfortunately, no reference to other CISG cases was
made.[450]
The Court analysed the formation and interpretation of the choice of law clause by reference to
domestic law concepts alone. By doing so, it acted as though the CISG did not have a priori
application. In this sense, the Court fell into the same error as did the Court in Vetreria. Had application
of the CISG to the questions of formation and construction resulted in a conclusion that the CISG was
excluded, then resort to domestic law on formation and interpretation would have been entirely
appropriate. But if the same process had led to the conclusion that the CISG was not properly
excluded, recourse to domestic law would have been prohibited. The Court could only ever be in a
position to know the right course of action by proper application of the CISG, at least up to the point at
which exclusion was determined.
In fact, Logan J's application of domestic interpretive rules was rather liberal. Prior communications
were examined, as well as the written 'contract',[451] and his Honour thus determined that the parties
placed a high level of importance upon the written terms.[452] The CISG also deems such
communications relevant, but would additionally deem subsequent communications of relevance in
relation to interpretation of the parties' contractual intent.[453] Logan J took into account of the nature of
the contract, the fact that the seller was known to trade internationally, and the position and context of
the clause within the document. These would also be relevant under a CISG approach.[454] The biggest
difference in construction would be the imperative to take an internationalist approach. The Court in
Olivaylle should have looked at decisions on CISG exclusion clauses from around the world, and
scholarly material on the issue. The need to look at such material is obvious when one considers that, in
determining the question of exclusion, one is effectively interpreting art 6 of the CISG. Therefore,
language [page 205] that is dispositive under domestic law 'acquires a different meaning under the
Convention'.[455]
Obviously, the Court appreciated that a choice of Australian law would not have excluded the
CISG.[456] Express exclusion is clearly permissible pursuant to art 6. Legislative history indicates, and
most cases have held, that implicit exclusion is also possible,[457] but it requires 'clear' indications of
'real' rather than 'theoretical'[458] intent. For example, a choice of 'American law as laid down in the
UCC' would suffice.[459] Although clumsy, the words in question in Olivaylle under a CISG
construction would probably amount to implicit, if not express exclusion. Yet, without further analysis,
one cannot be certain that the sloppily chosen words even formed part of the contract, at least in CISG
The exclusion clause was contained within the seller's quotation of 8 February 2005. Logan J
conducted a purely common law analysis of formation.[460] His Honour concluded that after the buyer's
handwritten alterations to the seller's document of 1 October 2004, there were further discussions, and
then the seller's quotation of 8 February 2005, which 'took up such of [the buyer's] alterations as [the
seller] was prepared to adopt'.[461] The Court then considered various common law characterisations
of formation. However, for the purposes of determining exclusion pursuant to art 6, formation should be
analysed, at least initially, according to the CISG. There would need to be a 'sufficiently definite'
offer.[462] As for the final document containing only some of the buyer's alterations,[463] the CISG would
have had no difficulty classifying this as an acceptance if the terms omitted by the seller were immaterial,
provided that [page 206] the buyer did not object to the modification.[464] Alternatively, if they were
material omissions, it would amount to a counteroffer[465] accepted by the buyer's subsequent conduct,
a conclusion similar to Logan J's less preferred construction.[466] Further, if, as suggested by Logan J,
an earlier contract existed, possibly in October 2004,[467] then subsequent modification by agreement
would have been permissible under art 29. On a CISG analysis, the clause would have been
incorporated and the CISG excluded. Ultimately, the Court applied the correct law, although navigation
to that conclusion might have been through much safer waters. However, perhaps the Court's sensitivity to the CISG had been heightened, because later in the
judgment, Logan J returned to the CISG as an aid to interpretation of certain contractual provisions.
The welcome chameleon-like change in approach was driven by contractual provisions containing the
'civil law' concepts of 'reasonable period of grace' and 'reduction in price'.[468] Logan J sensibly
returned to the CISG as a guide to construction, and drew upon arts 46, 47, 48 and 50.[469]
Admirably, the Court looked at the concept of Nachfrist and some English scholarship on the
CISG.[470] Had the Court looked beyond English scholars to other scholars and cases decided on the
relevant CISG provisions, it would have found much greater guidance still. The usefulness of the CISG
also prompts the question: why did the parties exclude the CISG in the first place?
Beside Hannaford, Olivaylle flickers intermittently. Through the darkness, it now appears that the
Federal Court is willing and prepared to take the next step, should a case to which the CISG directly
applies come before it.
445. [2009] FCA 522 (Unreported, Logan J, 20 May 2009) ('Olivaylle') Also reported
internationally at: Pace Law School, <http://cisgw3.law.pace.edu/cases/090520a2.html>. 446. Ibid [28].
452.	Ibid [20]. See also ibid [21] (Email from Dr Paterson, Flottweg, to Mr De Moya, Olivaylle, 7
October 2004, stating that 'none of these discussions can take precedence over written
communications').
455. E Allan Farnsworth, 'Review of Standard Forms of Terms under the Vienna Convention'
(1988) 21 Cornell International Law Journal 439, 442.
456. This has been upheld in many cases. See, eg, Tinned Cucumbers Case (Oberlandesgericht
Düsseldorf, Germany, 8 January 1993) <http://cisgw3.law.pace.edu/cases/930108g1.html>.
457. For a summary of supporting cases and the minority holding to the contrary, see UNCITRAL,
Digest of Case Law, above n 15, art 6. The Drafters did not want courts jumping to the conclusion of
implied exclusion too quickly, see Official Records, above n 37, 17 (stating that the words 'such
exclusion may be express or implied' were eliminated from art 5 because they 'might encourage courts
to conclude, on insufficient grounds, that the [CISG was] excluded').
458. Honnold, Uniform Law for International Sales, above n 71, 80 (requiring 'real' and not
'theoretical' intent). See also Fritz Enderlein and Dietrich Maskow, International Sales Law: United
Nations Convention on Contracts for the International Sale of Goods: Convention on the Limitation
Period in the International Sale of Goods: Commentary (1992) 48 (stating that there must be 'clear
indications'); Franco Ferrari, 'Specific Topics of the CISG in the Light of Judicial Application and
Scholarly Writing' (1996) 15 Journal of Law and Commerce 1, 88 (fn 614).
459. Ferrari, 'Specific Topics of the CISG', above n 458, 89 (fn 626); see also Enderlein and
Maskow, above n 458, 49.
462. CISG, above n 1, art 14(1). 463. Olivaylle [2009] FCA 522 (Unreported, Logan J, 20 May 2009) [22]. In dealing with the long
period of negotiations, Logan J concludes that after the buyer's handwritten alterations to the seller's
document of 1 October 2004, there were further discussions, and then the seller's quotation of 8
February 2005, which 'took up such of [the buyer's] alterations as [the seller] was prepared to adopt'.
464. CISG, above n 1, art 19(2). Notably, art 19(3) lists changes to 'price, payment, quality and
quantity ... delivery ... liability and [dispute settlement]' as material alterations. The document dated 8
February 2005 purported to be an 'offer' rather than an 'acceptance'. This would not necessarily be
fatal, but would need to be dealt with by the Court, as indeed Logan J did in regard to common law
466. Olivaylle [2009] FCA 522 (Unreported, Logan J, 20 May 2009) [23]. The first, and least
preferred characterisation of formation was that the 8 February 2005 document was an offer, the
buyer's acceptance of which was to be 'inferred from its acquiescence' and subsequent conduct.
However, Logan J preferred the second characterisation, which was that the handwritten alterations
and subsequent discussions amounted to the buyer's counteroffer, and the 8 February 2005 document
amounted to an acceptance of the counteroffer as it had 'come to be formulated', presumably after the
intervening discussions.
467. Ibid [23]. Logan J concluded that '[t]he effect of what occurred is that, whatever acceptance
[had previously occurred] ... the parties agreed wholly to replace that agreement by an agreement set
out in the terms of the quotation of 8 February 2005'.
470. Ibid [206]-[207], citing Barry Nicholas, 'The Vienna Convention on International Sales Law'
(1989) 105 Law Quarterly Review 201; and at [204] and [209], citing Anthony G Guest (ed),
Benjamin's Sale of Goods (7th ed, 2006).
CITATIONS TO OTHER ABSTRACTS OF DECISION English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1443&step=Abstract>
CITATIONS TO TEXT OF DECISION Original language (English): Excerpt from text presented below; for entire text, go to <http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2009/522.html?query=^Olivaylle>; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1443&step=FullText>; Internationales Handelsrecht (4/2009) 160-161
Translation: Unavailable CITATIONS TO COMMENTS ON DECISION Unavailable Go to Case Table of Contents Case text [excerpt]
27. The Contract was one for the sale of goods between a party with its place of business in Victoria, Australia and a party with its place of business in Germany. The Sale of
Goods (Vienna Convention) Act 1987 (Vic) (Sale of Goods (Vienna Convention) Act) adopts
as part of the law of Victoria the United Nations Convention on Contracts for the International Sale
of Goods: see s 5. That convention was made in Vienna in 1980; hence the reference to it as "the
Vienna Convention". The terms of that convention form a schedule to that Act. Article 6 of the
Vienna Convention provides, materially, that "The parties may exclude the application of this
28. The Contract provides, "Australian law applicable under exclusion of UNCITRAL law." The
Sale of Goods (Vienna Convention) Act, being a law of a State is an "Australian law". The
contractual reference to "UNCITRAL" is reference to the United Nations Commission on
International Trade Law, the acronym for which is "UNCITRAL". In my opinion, for reasons
which follow, "UNCITRAL law" is a reference to the Vienna Convention. That the Vienna
Convention is an adopted part of the relevant Australian law does not mean that the contractual
statement "Australian law applicable under exclusion of UNCITRAL law" is to be construed as
thereby rendering applicable a convention that the parties to it sought expressly to exclude. Rather,
the Contract evidences an intention to exclude the Vienna Convention altogether from application.
So much is permitted by "Australian law"; relevantly, that convention as applied in Victoria by the
Sale of Goods (Vienna Convention) Act. 29. A conclusion that the Vienna Convention as a whole is excluded accords with the construction
of the Contract for which [Seller] contended. [Buyer] took a different view, submitting that the
"exclusion of UNCITRAL law" should be construed as referring only to "an exclusion of United
Nations Commission for International Trade Law (UNCITRAL) so far as it may affect issues of
title". The inspiration for this submission was that the reference in the Contract to the exclusion
immediately follows a sentence which reads: "[Seller] will retain ownership and title to the delivered
goods and equipment until [Seller has received payment of all amounts owned by the buyer under
the contract." Each of these sentences appear at the conclusion of the Contract under the heading
"Other Dispositions", as the excerpt reproduced below evidences. 30. UNCITRAL is an agency of the United Nations established by the General Assembly in 1966.
It has as its mandate from the General Assembly the progressive harmonisation and unification of
the law of international trade. It has fostered the development of a number of international
conventions and model laws which range in subject from the international sale of goods through to
cross-border insolvency and, as Ms Christensen's article (supra) reminds, electronic commerce.
When this fact and that the Vienna Convention "governs only the formation of the contract of sale
and the rights and obligations of the seller and buyer arising from such contract; in particular [the
Vienna Convention] is not concerned with the effect that the contract may have on the property
to the goods sold" (Roder Zelt-Und Hallenkonstruktionen GMBH v Rosedown Park Pty Ltd
& Eustace (1995) 57 FCR 216 at 222) are taken into account, it is an unlikely construction of the
Contract that the sentence referring to "UNCITRAL law" is to take its meaning from the sentence
which precedes it. Given the nature of the Contract, the fact that a party to it, [Seller], was and was
known by [Buyer] to be a company which sold its wares internationally and the reference to the
exclusion of "UNCITRAL law" appearing at its conclusion under the heading "Other dispositions",
the more likely construction of "UNCITRAL law" is that it was intended to be a reference to the
particular UNCITRAL convention that governed the international sale of goods, ie the Vienna
Convention. "Other dispositions" looks to me to be a heading which describes miscellaneous,
unrelated terms of general application to the goods sold. The positioning of the sentence at the end
of the Contract further supports a construction that it was meant to govern all of its terms.