Source: http://cisgw3.law.pace.edu/cisg/wais/db/cases2/031020s1.html
Timestamp: 2018-01-23 17:45:13
Document Index: 738755641

Matched Legal Cases: ['Art. 148', 'Art. 6', 'Art. 53', 'Art. 61', 'Art. 53', 'Art. 78', 'Art. 74', 'Art. 74']

[Cite as: http://cisgw3.law.pace.edu/cases/031020s1.html]
DATE OF DECISION: 20031020 (20 October 2003)
JUDGE(S): M. Kübler (Vorsitzende); A. Cantieni, P. Sieber (Kantonsrichter); K. Hangartner (Gerichtsschreiber)
CASE NUMBER/DOCKET NUMBER: 12/2002/108
GOODS INVOLVED: Aluminium foil film wrap
"2. If purchase price and interest according to the CISG are set off against claims due to delay in delivery and insufficient delivery, under Art. 148 para. 2 of the Swiss international private law, the set-off has to be done in accordance with the law of the asserted principal action.
The parties have conducted business relationships for several years, trading aluminium foil both as raw material and for household purposes. Plaintiff, a German Seller, delivered to Defendant, a Swiss Buyer, aluminium foil for household purposes. The German party then purchased raw material for aluminium foil from the Swiss party.
In 2001, these transactions resulted in reciprocal claims: Seller had a claim of Deutsche Mark [DM] 3,727,648.21 against Buyer, and Buyer had a claim against Seller in the amount of DM 2,530,372.67. Also setting off the costs of purchasing raw material for DM 108,603.55, Seller had a claim of DM 1,150,909.42 (i.e., Swiss francs [Sfr] 854,444) against Buyer who failed to pay the latter amount. Seller requested the Court to order Buyer to pay that amount.
The CISG was found to be applicable: Germany and Switzerland ratified the CISG which entered into force on 1 March 1991 in both States; and the parties did not exclude application of the Convention by virtue of Art. 6 CISG. The Court ruled that, in accordance with the Hague Convention of 15 June 1955, questions not governed by the CISG shall be determined by the law applicable to the contract pursuant to the conflict of laws provisions of the Swiss IPRG [*].
Art. 53 CISG provides for the buyer's obligations among which paying the purchase price is a duty of the Buyer. Buyer acknowledged in its Answer to the Claim that it indeed failed to pay and did not object to the amount requested.
A seller can rely on Art. 61(1) and (2) CISG where a buyer commits a breach of contract. An express objection to pay qualifies as disregarding an essential duty, thereby as a breach of Art. 53 CISG. It is also a special type of failure to pay which entitles the other party to interest upon the relevant sum pursuant to Art. 78 CISG, in addition to damages under Art. 74 CISG. Based on conflict of laws provisions (i.e. Swiss IPRG [*] referring to the Hague Convention [*]), German national law (BGB [*]) was used to determine the rate of interest. The Court ordered Buyer to pay Sfr [*] 854,444 and 8.25 percent interest from 24 August 2001 on.
Concerning the Buyer's set-off, the Court ruled that the law applicable to this claim shall be determined first; only then can the Court examine the exact conditions of eligibility of a set-off.
Buyer's set-off claim was based on an alleged breach of contract which was contested by Seller. However, the set-off claim is directly linked with the substance of the original contract of sale and with rights and obligations of the parties deriving from the latter. Therefore, the Court found that the law applicable to the set-off claim is the same as the law applicable to the original contract of sale, i.e., the CISG.
Pursuant to Art. 74 CISG, preconditions of receiving damages are loss, breach of contract, causality between the latter two and foreseeability. Consequently, Buyer must prove that the above-mentioned minimal requirements have been met.
Buyer stated that late delivery which was caused by Seller's fault resulting in it being short of raw material and this led to disadvantages on Buyer's side and it lost some of its customers. Yet, the Court found that the latter allegation was not sufficiently evidenced by Buyer because it only mentioned that it lost two customers but failed to indicate when and under what exact circumstances it happened. During the oral hearings, Buyer's legal representative merely mentioned that with regard to the two above-mentioned customers, late deliveries during 1999 and 2000 led to losing them as business partners but, again, failed to indicate the exact circumstances and reasons and the amount of damage that appeared on those customers' side. Therefore, the Court ruled that the causal link was missing between Seller's late delivery and Buyer losing its customers.
- Defective performance
Buyer further alleged in its Answer to the Claim that Seller started producing thinner foil which led to Seller being able to produce more foil out of the same amount of raw material. Buyer contended that Seller gained more profit because it thereby delivered less quantity and at a higher price. Seller contested this statement and stated that it always delivered within the acceptable quality/quantity limits. During the proceedings, however, Buyer added that it does not claim damages and later it also withdrew its request concerning defective performance.
Buyer had a further claim with regard to alleged breach of contract, stating that Seller breached the customer protection agreement between them. Seller contested the existence such an agreement between the parties. Not the CISG but German national law was found to be applicable to this issue, therefore the matter will not be detailed in this abstract. The Court found that there was no such agreement between the parties and even if there had been, Buyer failed to provide enough evidence of the alleged breach by Seller.
Buyer further stated that its set-off claims are subsidiarily based on the BGB [*] but the Court found, again, that Buyer failed to provide sufficient evidence concerning the latter, therefore the Court rejected the claim.
Buyer also stated that its set-off claim is based not only on alleged breach of contract by Seller but subsidiarily also on alleged breach of the rules of fair competition. In view of the lack of breach of contract by the Seller, as the Court held, this claim of the Buyer was also rejected.
CLOUT abstract no. 888
The plaintiff, whose place of business was in Germany, supplied food film wrap for household use to the Swiss defendant. Subsequently, the plaintiff sued for payment of the sale price. The defendant pleaded a right of set-off on the ground of late delivery.
The court examined the question of admissibility of set-off in principle in the light of the law determined by Swiss private international law, i.e. the law governing the debt to be met. However, since the court did not acknowledge the set-off claims asserted, it left that question outstanding.
The court considered that the existence of a claim for damages due to late delivery based on article 74 CISG was not sufficiently demonstrated. A further set-off claim asserted by the defendant concerned the infringement of an agreement that guaranteed the defendant the exclusive right to supply certain customers. The court concluded that the CISG was not applicable to that agreement and that the claim thus asserted should be examined in the light of applicable national law (German law in the present case). The court also examined in the light of applicable national law a set-off claim based on an unlawful act.
Finally, the court ruled on the question of the amount of interest on arrears, also in the light of applicable national law.
Key CISG provisions at issue: Articles 4 ; 53 ; 61 ; 74 ; 78 [Also cited: Articles 6 ; 35 ]
Descriptors: Scope of Convention ; Set-off ; Price ; Damages ; Interest
Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/957.pdf>; Internationales Handelsrecht (5/2005) 206-214