VSL sodba I CPG 299/2014
High Court of Ljubljana




[CLOUT Case no. 2083. Abstract prepared by Ana Vlahek and Rok Jemec]

The parties (both with places of business in CISG Contracting States) entered into a contract for sale of water and oil pumps. Regarding the payment, they agreed that the buyer (plaintiff) was to open irrevocable letters of credit (L/Cs) to ensure payment for the pumps. After the buyer opened the L/Cs, the seller protested stating that they had not been filled out correctly. The seller then refused to deliver the goods unless they were paid for in advance. The buyer asked the seller to provide the text of the conditions for the L/Cs, which the seller failed to do. The buyer then purchased equivalent goods elsewhere and brought a claim against the seller for payment of the difference between the substitute transaction price and the contract price.

In the first set of proceedings in this case, the Supreme Court of the Republic of Slovenia overruled the decision of the courts of first and second instance and remanded the case to the first instance court. What follows is a summary of the second set of proceedings in this case.
The buyer also brought a claim for the costs of L/Cs, and for damages arising from compensation of its business partners due to a contractual breach arising from the seller’s non-performance. During the new proceedings, the court of first instance, by applying article 9 of the CISG, found that the seller had acted in contrast with practices established between the parties. It therefore condemned the seller to reimburse the costs of the L/C and compensate the consequential damages, but not the difference between the substitute transaction price and the contract price. The seller filed an appeal before the High Court of Ljubljana.

The High Court recalled that the buyer could declare the contract avoided if the seller failed to deliver the goods in the additional period of time fixed by the buyer (article 47 of the CISG), or if the seller declared that he would not deliver in the period so fixed (article 49(1)(b) of the CISG), and that the declaration of avoidance was effective only if the other party was notified (article 26 of the CISG).

The High Court noted that the buyer’s declaration was conditional (“if the seller does not deliver, the contract will be avoided”), and therefore not in accordance with the CISG as the intent and purpose of the declaration was not clearly identifiable, and ultimately not effective. The High Court explained that a memorandum stating that the contract would be avoided in the future if the other party did not fulfil certain requirements was not a valid declaration of avoidance under the CISG. Finally, the High Court confirmed that the Court of first instance had correctly applied article 74 of the CISG when ruling on the claim for damages arising from breach of contract, as article 75 represented lex specialis applicable only when the contract was declared avoided.

The High Court agreed with the Court of first instance that the seller was not obliged to pay the difference between the contract price and the price in the substitute transaction because, even though the seller had breached the contract, the buyer should not have bought replacement goods before a reasonable period of time after declaring avoidance.




[Case law on UNCITRAL Texts, A/CN.9/SER.C/ABSTRACTS/226, case no. 2083]}}