- I Aca 715/16
- Białystok Court of Appeal
TERMINATION OF CONTRACT BY AGREEMENT (ART. 29 CISG) - NO REQUIREMENT AS TO FORM UNLESS PARTIES PROVIDE OTHERWISE
RESTITUTION OF ADVANCE PAYMENTS UPON CONTRACT TERMINATION - NOT COVERED BY CISG - GOVERNED BY OTHERWISE APPLICABLE LAW
[CLOUT Case no. 1813. Abstract prepared by Maciej Zachariasiewicz, National Correspondent]
The parties – a Polish seller and a Latvian buyer – concluded a contract for the sale of table sugar. The price was to be paid in advance. A few days later, the parties entered into another contract for the delivery of raw sugar to be processed in factories in accordance with the EU Single CMO Regulation (Regulation No 1234/2007). The buyer made advance payments to the seller’s account. The seller, however, delivered only part of the contracted sugar. It did not deliver the raw sugar because it did not possess the necessary authorization for such operations, that is required under the EU Regulation. The buyer assigned its claim to a debt collection agency which sued the seller in Poland for the return of the advance payment. The court of first instance decided for the plaintiff applying the Polish Civil Code to the dispute. The seller appealed.
The Court of Appeals first noted that the case must be decided under the CISG, since the parties have their place of business in contracting states (Poland and Latvia). With regard to the merits of the case, the main issue was the question whether the parties have tacitly terminated the second contract which related to raw sugar. The court pointed out that according to Art. 29 CISG a contract may be modified or terminated by the mere agreement of the parties. It is only when the contract contains a provision that requires modification or termination to be made in writing that the termination must be carried out in such a form. The parties did agree in the contract that modification or addition of new elements to the contract must be in writing. The contract was silent, however, as to its termination. The Court observed that the mere fact that the parties concluded their contract in writing does not itself mandate the written form for the termination of the contract. Moreover, under Art. 8 CISG the parties may express their intention by conduct. It follows that the termination of the contract can also be implied with reference to the conduct of the parties.
The Court of Appeals found that, in the case at hand, there was tacit termination of the contract for the raw sugar. At the moment when it was revealed that the seller could not deliver the raw sugar (because it did not have the required authorization) the parties discontinued their contractual obligations. The buyer made no further payments, while the seller ceased to source the sugar and stopped the deliveries. Neither of the parties attempted to enforce their contractual rights nor expressed any interest in continuing their relationship. This situation lasted until the buyer assigned its claim to the plaintiff.
Since the contract was terminated, the seller was obliged to return the advance payments. The Court of Appeals then addressed the question of the law applicable to the restitution of the payments received under a contract terminated by mutual agreement of the parties. The Court found that CISG did not apply (since it only regulates the consequences of the avoidance of the contract – Articles 81–84). It then determined under Rome II and Rome I Regulations that the law applicable to the restitution of the payments is Polish law, as the law of the seller’s place of business. The advance payments thus had to be returned, as mandated by Polish Civil Code. The judgment of the court of first instance was upheld.
Original in Polish:
- available at www.orzeczenia.ms.gov.pl}}
UNCITRAL CLOUT Case no. 1813, in A/CN.9/SER.C/ABSTRACTS/198}}