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Seller’s Obligations under the CISG
Commercial Law (6FFLK013)
King's College London
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LLB COMMERCIAL LAW
Tutorial 9: The Seller’s Obligations under the CISG (Arts 33-44)
Essential reading
P Huber and A Mullis, The CISG: A New Textbook for Students and Practitioners (Sellier-European Law Publishers 2007) 106- CISG Advisory Council Opinion No. 19, ‘Standards and Conformity of the Goods under Article 35 CISG’ <Opinion No 19 Standards and Conformity (cisgac)>
CISG Advisory Council Opinion No 2, ‘Examination of the Goods and Notice of Non-Conformity Articles 38 and 39’ <Opinion No2 Examination of the Goods and Notice of Non-Conformity Articles 38 and 39 (cisgac)>
Further reading
D Saidov, Conformity of Goods and Documents – The Vienna Sales Convention (Oxford - Portland, Oregon, Hart Publishing 2015) Arts 30-44 in I Schwenzer (ed), Schelchtriem & Schwenzer: Commentary on the UN Convention on the International Sale of Goods (CISG) (2016 4th (English) edn) H Flechtner, ‘Conformity of Goods, Third Party Claims, and Buyer's Notice of Breach under the United Nations Sales Convention ("CISG"), with Comments on the "Mussels Case," the "Stolen Automobile Case," and the "Ugandan Used Shoes Case"’ at <law.bepress/pittlwps/papers/art64/> I Schwenzer, ‘The Noble Month (Articles 38, 39 CISG): The Story Behind the Scenery’ (2005) European Journal of Law Reform, also available at: <cisg-online/cisg/Schwenzer.pdf>
Cases
Federal Supreme Court 22 December 2000 (Switzerland) (Roland Schmidt GmbH v. Textil-Werke Blumenegg AG) <628_30266431 (cisg-online)>
Facts:
B (germany) trades textile machinery. S (Switzerland) is trying to sell used textile machinery in 1998. B’s agent viewed S’ machines and B issued a purchase confirmation that the machine contained a “rapport equipment 641 mm – 1018 mm” and the machine was “complete and operating as viewed”:
After B made down payment of DM 69,900 B’s agent viewed the machine again and realized it was only equipped for a rapport length of 641 mm. B complained the stencil holders for a rapport length of 1018 mm were missing. B referred to the contract, in which a «rapport equipment 641 mm – 1018 mm» had been assured.
Because used stencil holders were not available and new holders would cost DM 99,000, B suggested:
«Alternative 1: You accept that the delivery does not correspond to the sales contract, you withdraw from the contract and reimburse the down payment in the amount of DM 69,900.
«Alternative 2: You accept a reduction in price in the amount of DM 60,000, as a contribution to the purchase of new stencil holders. This means that you bear roughly 60% of the additional costs, while the [Buyer] bears approx. 40%.»
S turned down these proposals and pointed out B said it would buy the machine «complete and operating as viewed.
B refused to accept the machine and, under OR Art. 107, refused the belated performance unless S assured that «a machine was sold conforming to the contract, which contained an operating rapport equipment between 641 mm and 1018 mm.»
S insisted on its position, B, in accordance with OR Art. 107(2) renounced further performance.
S declared the avoidance of the contract of 9 March 1999 in writing referring to contract clause 3 and that it would keep the down payment as the stipulated penalty.
Outcome:
B bears the cost of the proceedings and has to reimburse S for its costs.
- Based on Art(2) CISG, which governs the sales contract, the contract had to be viewed as normatively formed with this meaning
Supreme Court 3 April 1996 (Cobalt sulphate case) (Germany) <Cobalt sulphate case (Translation), German Supreme Court, 03 April 1996 – VIII ZR 51/95, CISG-online 135 >
Facts:
P (S’ assignee - Netherlands) requests payment from D (B - Germany) for 15,000 kg of cobalt sulphate.
S was to provide Certificate of Origin and Certificate of Analysis. The two purchase contracts of 14 January 1992 for 5,000 kg cobalt sulphate each, were concluded via phone. On 29 January 1992, S sent Certificate of Analysis of firm M, dated 2 December 1991, concerning another contract
S informed B the goods were ready for collection at a ware- house in Antwerp. S sent two invoices for DM 172,000 and DM 348,250, a Certificate of Origin of the Chamber of Commerce of Antwerp, where it stated that the goods had their origin in
S’s (netherlands) granted production licenses for certain blocks of offshore gasfields in the Netherlands and B (england) is a major international player in gas field exploration. In 1993/1994 S concluded 12 sales contracts with B for condensate. Mercury contaminated condensate. B suspended and later terminated contract with S due to mercury issue.
Issues:
the conformity of the Rijn Blend a. risks associated with changing compositions of the Rijn Blend laid with S who should have monitored composition or should have agreed to removal of the mercury or to price reduction. Since it has been established that the increased levels of mercury were to be sought before the point of delivery, the risks of any such increased levels are to be allocated to the [sellers] who had control only over its possible causes and were thus in the better position to detect the increased levels and their causes and to remedy any such quality problem. b. S did not comply with their obligations to deliver Rijn Blend conforming to the contract under article 35(2)(a) CISG as of and including the June 1998 lifting.
Whether notice of non-conformity was timely and could be given to K. ... BV a. no obligation to give a notice as required by article 39(1) CISG and that the capacity of K. ... BV in this respect does not arise.
whether B could refuse taking delivery and suspend further off-taking of Rijn Blend
the determination of the total amount of damages, if any
the allocation of damages, if any, among [sellers
in relation to the counterclaim: the alleged breach of contract by [sellers].
Non conformity:
S35(1): doesn’t apply bc there is nothing about a detailed specification about what was needed in the contract (not clear/explicit)
S35(2)a: if something isn’t merchantable quality it is a breach of conduct
o What is merchantable quality?
Under English common law: presence of mercury is not merhcnatable (effectively not conforming)
Europs doesn’t use merchantable quality, they use average quality: under expert advice, it found it was conforming.
The courts used neither: must be interpreted with an international mindset art 7(2) (interpretation of contract) = goods must be of reasonable quality, therefore the oil was not merchantable
- S35(2)b: if yu make known you want to use smth for a specific purpose, you can use this section to say it is non conforming. Doesn’t apply because B didn’t tell S about purpose or use.
Supreme Court 8 March 1995 (Germany) (New Zealand mussels case) <New Zealand mussels case (Translation), German Supreme Court, 8 March 1995 - VIII ZR 159/94, CISG-online 144 >
Facts: German buyer bought 1 t of New Zealand-mussels from Swiss Seller. Buyer discovered the non-conformity in Germany, i., after the transport.
Breach: Mussels were cadmium- contaminated.
Decision: No fundamental breach as mussels could still be used for consumption, thus they were conforming. S could not be held to know about the regulations in B’s country.
- This is very different then English law, CISG aims to promote intl trde and continue on the basis of what is fair for the upholding of contracts
Commercial Court des Kantons Aargau 5 November 2002 (Inflatable triumphal arch case) (Switzerland) <715_83482040 (cisg-online)>
Facts: German buyer purchasing inflatable triumphal arch from Swiss seller. Non- conformity was detected after installation in Hockenheim.
Breach: Triumphal arch deflates. Decision: No fundamental breach. Even if it goes to root of contrct, if B can have the original effect in some way or another then the contract will not be excused. Reasons for the decision: Repair or delivery of replacement goods was possible without unreasonable delay. The triumphal arch was to be used over a longer period of time.
District Court Frankfurt (Used shoes case) 11 April 2005 <1014_81029042 (cisg- online)>
Facts: Italian producer sells shoes to German buyer. The parties had agreed upon an ancillary duty of preserving exclusivity.
- Art 1 says the convention applies to contracts of sale of goods between parties whose places of business are in different States the facts do not state where the parties place of business is... o Art 10: if a party does not have a place of business, reference is to be made to his habitual residence. Honnold: ‘a permanent and regular place for the transacting of general business...” we are still not given one, not sure the CISG would apply...
If, on further finding of facts, it is proven the CISG would apply under art 1, then: First look at art 8 to see how CISG would interpret a contract (1) statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was (a subjective test) a. P was never told A needed a processing machine for 1A cotton so he did not explicitly know. Additionally, given that there are 4 types of cotton mainly used in the manufacturing world, P did not ought to have known A used this cotton in her manufacturing and this required a machine that would process this specific type. On the balance of probabilities, it is unlikely he ought to have known she would use this specific type when there are 3 equally viable option she could use and that his machine may be able to process. (2) If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances (an objective test) a. If for some reason the court does not find 8(1) applicable, I think objectively, a supplier of Machines would be in P’s same situation and could not have been expected to know A would use this specifc type when there are 3 other common types of cotton she could have used. (3) In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties. a. This would be subject to further fact finding Swiss Federal Supreme Court, 22 December 2000 seems relevant to these facts as in both cases B is complaining of a fact they easily could have found out and properly assured with the S, especially since not letting the S know this requirement in advance.
Conformity of goods Covered by Art 35(1): ‘The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.’
- goods do not conform with the contract unless they:
(a) are fit for the purposes for which goods of the same description would ordinarily be used;
o Ordinary purpose: Germany, 2 March 2005 Federal Supreme Court (Frozen pork) = the goods must be resaleable
(b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement; o can be inferred from a more generally stated particular purpose Germany, 27 February 2002, District Court München (Globes): Specific purpose was not communicated to S, but based on circumstances the courts implied S knew/ought to have known the purpose of B = may be applicable here: - a general particular purpose implied from A’s conduct would be that she wants to process cotton: this might not mean ALL types of cotton, but given there are 4 main types it might be reasonable that P’s machinery would be able to process these 4 main types of cotton, in which 1A is. SO, A may have a claim that P breached art 35(2)b as the goods supplied are not fit for an implied particular purpose. B did rely on S’s skill/judgment and it was reasonable for her to do so, she trusted him in making machinery for her relying on his skill, and trusted his judgment as his job was to make such machines daily so he knew the cotton business relatively well it should be assumed.
(c) possess the qualities of goods which the seller has held out to the buyer as a sample or model; (DOESN’T APPLY)
(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve/ protect the goods. (DOESN’T APPLY)
(3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the 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.
Art 36(1):‘The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time.’ (deals with latent non conformities, and S would be held liable if found) (Frozen Pork)
B conforms with art 39: gives notice to S of lack of conformity in reasonable time
- ‘The notion of reasonableness in Articles 38, 43-44 will undoubtedly give rise to a great deal of non-uniformity in the application of the Convention’.
Critically evaluate of this statement.
Best argument = it does create uniformity, not smart to replace it with some arbitrary tes because there are so many variations of contracts that a one size fit al take would not be effective due to the variable nature of international contracts. Reasonabless
Seller’s Obligations under the CISG
Module: Commercial Law (6FFLK013)
University: King's College London
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