Data
- Date:
- 24-05-2005
- Country:
- Finland
- Number:
- S 04/1600
- Court:
- Court of Appeal of Turku
- Parties:
- --
Keywords
SELLER'S OBLIGATION TO DELIVER CONFORMING GOODS (ART. 35(1) CISG)
RECOVERABLE DAMAGES - DAMAGES DUE TO BREACH (ART. 74 CISG)
Abstract
[CLOUT Case no. 1182. Abstract prepared by Jarno J. Vanto]
This decision by the Turku Court of Appeals is primarily concerned with damages under Articles 74 and 77 CISG.
The Spanish defendant (seller) entered into a contract with the Finnish plaintiff (buyer) for the sale of 40 tons of paprika powder (“powder”) for use in various spice mixes intended for onward sale. The contract specified that the powder needed to be steam-treated to reduce any microbe levels therein. However, laboratory sample tests established that the powder had been treated with radiation instead of steam. Under a European Union directive applicable to Finland and Spain, all consumer products treated with radiation must be marked as such in the packaging of the goods. According to the buyer, Finnish consumers do not wish to purchase products treated with radiation, rendering the powder useless for the purpose for which the buyer intended it. The issues of the case were whether the buyer had given notice on time; whether the seller was in breach of contract because the powder was radiation-treated; if the seller was in breach of contract, did this cause damage to the buyer; what was the quantum of damages; and whether the seller is liable for such damage.
Vis-à-vis the conformity of the goods under Article 35(1) CISG, the court concluded that even though the contract specified steam treatment and did not specifically exclude radiation treatment, both the buyer and the seller were experienced operators in the field and the seller ought to have considered in the light of the Directive that even in the absence of a specific contractual exclusion radiation treatment was out of the question. Hence, the Court concluded that the goods were not in conformity with the contract and the seller was in breach of the contract under Article 35(1).
On the buyer’s timely notice to the seller about the non-conformity of the goods, the Court stated that because the buyer had contacted the seller immediately after having learned of the non-conformity, as established by a government test laboratory, the buyer had given notice within a reasonable time as required under Article 39(1) CISG.
On damages, the court, quoting Article 74 CISG, first concluded that in determining damages the starting point is the economic position where the aggrieved party would have been if the contract had been performed correctly. Hence, the Court stated that the amount of damages can be higher than the face value of the contract. According to the Court, the seller knew that the buyer would incorporate the powder into its own products that would be sold onwards to the buyer’s customers. Therefore, the seller must have understood at the time the contract was entered into that the buyer would not be able to deliver to its customers should the seller deliver non-conforming goods and that such a breach of the contract would cause damage to the buyer.
As damages, the buyer claimed compensation it gave to its own customers for pulling the tainted products from the market, expenses resulting from buying back the tainted products from its customers, expenses resulting from destroying the tainted goods and related inventory write-downs, and expenses relating to examining the issue including wages, travel expenses, freight costs, chemical analysis costs, and destruction costs. The court determined that each of the items claimed by the buyer is recoverable under Article 74 CISG.
The court went on to consider whether the seller’s failure to perform its obligations was due to an impediment beyond its control that the seller could not reasonably be expected to have taken into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences in the sense of Article 79 CISG. The court concluded in the negative.
Finally, the court considered whether the buyer could have mitigated its damages as required under Article 77 CISG. The Appellate Court, agreeing with the Court of First Instance and relying on the facts as established by the lower court, determined that the buyer had not failed to mitigate its damages.
As the exact amount of some of the items claimed by the buyer as damages could not be determined to a sufficient degree, the court, following the procedural rules of the forum, awarded reasonable damages to the buyer.
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