Data

Date:: 14-02-2011
Country:: USA
Number:: 10-2612
Court:: U.S. Court of Appeals, 8th Circuit
Parties:: Dingxi Longhai Dairy, Ltd. v. Becwood Technology Group L.L.C.

Keywords

INTERPRETATION OF CISG (ART. 7 CISG) - RECOURSE TO INTERPRETATION OF ANALOGOUS PROVISIONS OF DOMESTIC LAW ADMISSIBLE

REMEDIES FOR BUYER'S BREACH (ART. 61 CISG) - SELLER ENTITLED TO DAMAGES ALSO IF IT HAD RECOVERED THE GOODS (ART. 76 CISG)

Abstract

A Chinese company (seller) and a U.S. company (buyer) concluded a contract for the sale of six hundred and twelve metric tons of a dietary fiber extract (organic inulin) to be used in food processing. Under the contract the goods were to be shipped in four instalments and delivered at the port of Londonderry, New Hampshire. The buyer received the first two shipments, paid for one, but refused to pay for the second, alleging that the goods were non-conforming due to the presence of mold on the exterior of the packaging. The seller then recalled the third and fourth shipments before they had reached their destination port, and sued the buyer for breach of contract, seeking to recover the purchase price relating to the second, third and fourth shipments.

On first instance, the seller's claims relating to the second shipment were sustained (see in particular U.S. District Court, Minnesota, 17.06.2010, in UNILEX), while those regarding the third and the fourth shipments were rejected. In so doing, the Court held that, since the seller had retained possession of the third and fourth shipments, it was only entitled to recover the difference between the current price of the goods and the price fixed by the contract (Art. 76 CISG). Having alleged no difference between the current market price and the contract price for the goods, the seller was not entitled to damages. The seller appealed.

The Appellate Court confirmed the applicability of CISG, stating that the Convention is “the "international analogue" to Article 2 of the Uniform Commercial Code” and that “case law interpreting analogous provisions of Article 2 . . . may also inform a court where the language of the relevant CISG provisions tracks that of the UCC". However, it remanded the case to the first instance Court for further proceedings because, should the seller prove that the buyer had breached the contract as to shipments three and four, it would likely be entitled to some monetary relief.

Fulltext

United States Court of Appeals for the Eight Circuit
Dingxi Longhai Dairy, Ltd., Plaintiff - Appellant v. Becwood Technology Group L.L.C., Defendant - Appellee
No. 10-2612

14 February 2011

OPINION

PER CURIAM.

[Seller] agreed to ship 612 metric tons of Inulin, a dietary fiber extract, to [Buyer], a Minnesota distributor. The contract called for four shipments from the port of Tianjin-Xingang, China, to Londonderry, New Hampshire. [Buyer] received the first two shipments, paid for one, and refused to pay for the second because of mold on the exterior of the packaging. [Seller] recalled the third and fourth shipments before they reached their destination and sued [Buyer] for breach of contract and fraudulent misrepresentation. The district court granted [Buyer]'s Rule 12(b)(6) motion and dismissed [Seller]'s claims relating to shipments three and four. Nearly two years later, the district court entered a final order granting [Seller] summary judgment on its breach-of-contract claim for shipment two. Dingxi Longhai Dairy, Ltd. v. Becwood Tech. Grp., L.L.C., 718 F. Supp. 2d 1019, 1024 (D. Minn. 2010). [Seller] now appeals the earlier order dismissing its breach-of-contract claims for shipments three and four.[1] We reverse.

It is undisputed that the contract was governed by the United Nations Convention on Contracts for the International Sale of Goods ("CISG"), the "international analogue" to Article 2 of the Uniform Commercial Code (UCC). Chicago Prime Packers, Inc. v. Northam Food Trading Co., 408 F.3d 894, 898 (7th Cir. 2005). In applying the Convention, we look to the language of its provisions and the "general principles on which it is based." CISG Art. 7(2). "Caselaw interpreting analogous provisions of Article 2 . . . may also inform a court where the language of the relevant CISG provisions tracks that of the UCC." Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024, 1028 (2d Cir. 1995). With regard to pleading requirements, "the Convention's structure confirms what common sense (and the common law) dictate as the universal elements of [a breach-of-contract] action: formation, performance, breach and damages." Magellan Int'l Corp. v. Salzgitter Handel GmbH, 76 F. Supp. 2d 919, 924 (N.D. Ill. 1999).

For its breach-of-contract claim, [Seller]'s complaint alleged that it timely delivered all four shipments "F.O.B. to Tianjin-Xingang Port, China," as specified in the signed purchase order; that [Buyer] failed to pay for the last three shipments; and that [Seller] was therefore entitled to recover $1,415,086 "together with interest, disbursement, costs, expenses and reasonable attorneys' fees." Under the UCC, this would plainly be a § 2-709 "Action for the Price" of the goods by the seller. Under the CISG, it was a claim by the seller for breach of contract subject to the remedy provisions in Articles 61-65 and 74-77. See CISG Art. 61(1).

[Buyer] moved to dismiss the claim regarding shipments three and four on the ground that a seller who recalls goods before they reach the buyer may not "recover as damages, even if you assume that there's a breach from the buyer, the very contract price of those goods that the seller retained." The district court agreed. It dismissed the claim on the ground that damages following contract avoidance are governed by CIGS Art. 76, and therefore "[Seller] has failed to assert cognizable damages on shipments 3 and 4."[2]

We can agree that it is highly unlikely -- though not inconceivable -- that an aggrieved seller in this situation would recover the full contract price for shipments three and four. But [Buyer]'s Rule 12(b)(6) motion to dismiss the breach-of-contract claim was nonetheless ill-conceived:

The sufficiency of a pleading is tested by the Rule 8(a)(2) statement of the claim for relief and the demand for judgment is not considered part of the claim for that purpose, as numerous cases have held. Thus, the selection of an improper remedy in the Rule 8(a)(3) demand for relief will not be fatal to a party's pleading if the statement of the claim indicates the pleader may be entitled to relief of some other type.

5 Wright & Miller Federal Practice and Procedure: Civil 3d § 1255 at 508-09 (3d ed. 2004); see Bontkowski v. Smith, 305 F.3d 757, 762 (7th Cir. 2002); Laird v. Integrated Resources, Inc., 897 F.2d 826, 841-42 (5th Cir. 1990); Schoonover v. Schoonover, 172 F.2d 526, 530 (10th Cir. 1949). The amount of damages to be recovered is based upon the proof, not the pleadings. See Fed. R. Civ. P. 54(c).

Under the Federal Rules of Civil Procedure, "a court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002) (emphasis added; quotation omitted). Here, [Seller]'s complaint stated a breach-of-contract claim -- performance of its contractual duty to deliver and the buyer's refusal to pay. A fact outside the pleading became part of the Rule 12 record, apparently without objection -- that [Seller] recalled shipments three and four before they reached the buyer. That fact will likely preclude recovery of the full contract price. But if [Seller] proves that [Buyer] breached the contract as to shipments three and four, it is almost certain to be entitled to some monetary relief. Accordingly, the district court erred in granting [Buyer] Rule 12(b)(6) motion to dismiss.

The order dismissing [Seller]'s breach-of-contract claims relating to shipments three and four is reversed. The case is remanded for further proceedings not inconsistent with this opinion, which may include the matter raised in [Seller]'s motion to this court for leave to ask the district court to modify its order granting summary judgment on shipment two. As the case is now remanded, that motion is denied as moot. See In re Modern Textile, Inc., 900 F.2d 1184, 1193 (8th Cir. 1990).

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FOOTNOTES

1. [Seller] did not appeal dismissal of its misrepresentation claims. Accordingly, that portion of the partial dismissal order is affirmed.

2. Article 73(2) of the CISG provides:

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 installments, he may declare the contract avoided for the future, provided that he does so within a reasonable time.

Thus, "avoidance" of a contract under Article 73(2) is analogous to "cancellation" under the UCC. See §§ 2-106(4); 2-612(3). Article 76(1) provides as to remedies:

If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74.

Article 74 provides that damages for breach of contract "consist of a sum equal to the loss, including loss of profit." Compare the seller's remedies provided in UCC §§ 2-703, 2-706, 2-708(1), and 2-708(2), which are "essentially cumulative in nature." R.E. Davis Chem. Corp. v. Diasonics, Inc., 826 F.2d 678, 681-685 (7th Cir. 1987).}}

Source

Original text in English available at:

- http://cisgw3.law.pace.edu/cases/110214u1.html}}