Data

Date:: 00-10-1995
Country:: Arbitral Award
Number:: 8453
Court:: ICC Court of Arbitration
Parties:: Unknown

Keywords

CONFORMITY OF GOODS - NOTICE OF LACK OF CONFORMITY - TIME OF NOTICE TWO-YEAR CUT-OFF PERIOD.

ART. 39 CISG USED FOR INTERPRETATION OF FRENCH CIVIL CODE.

NO APPLICATION OF CISG BECAUSE OF LACK OF REFERENCE TO IT BY THE PARTIES (ART. 6).

Abstract

The seller concluded a contract for the delivery of a machine for medical use. After installment, the operation of the machine was beset by problems, including breakdowns and the need to replace some parts. After commencing an action against the seller before a State court which dismissed the action due to the existence of an arbitration clause in the contract, the buyer referred to arbitration. The buyer demanded avoidance of the contract and refund of the price paid.

In the opinion of the Arbitral Tribunal the matter was not governed by CISG because the parties did not mention the UN Convention on the sale of goods (CISG). However the Arbitral Court referred to it in order to determine the meaning of the term "short period of time" used in Art. 1648 of the French civil code. According to the court, the buyer acted within the short period provided for by art. 1648 of the French Civil Code if one takes into account the complexity of the machine, the discussions which went on and rules accepted for international contracts such as Art. 39 of the CISG.

Fulltext

According to art. 17.2. of the Contract, all disputes arising from it shall be subject to arbitration. This is not contested, even by the Claimant when it sued the Respondent before the French Court. The reason given for this action was the need to act against the manufacturer as well.

It is also undisputed that the contract is subject to French law (art. 16 of the Contract). Both parties referred in their memorials and pleadings to the legal provisions applicable to sale contracts (art. 1582 et seq. of the French Civil Code). None of the parties referred to the UN Convention of 1980 on the International Sale of Goods (Vienna Convention) which is therefore considered as non applicable.

1. The parties' arguments
The Claimant's main argument is that the Respondent failed to deliver a Machine corresponding to the description made in its own documents... The object of the contract being defective from the start no maintenance or replacement of spare parts could improve its performance and the Claimant is entitled to rescission according to art. 1603 of the Civil Code. Subsidiary, the Claimant refers to art. 1641 of the Civil Code which provides for guarantee with respect to hidden defects of a delivered good.

[...]

4. The claim based on defects
The complaints made by the Claimant ... refer to failures and breakdown of the Machine which make it partly or totally unsuitable for its intended use ... Even if it is not always clear whether the Machine was totally out of order or only performing poorly during lengthy periods of time ..., reduced performance and frequent breaking down of elements which had to be replaced were frequent enough. The frequent changes in elements imply the existence of defective elements...

The extensions of warranty ... show that the Respondent was aware of the defects and did not deny their existence. Whether those defects led to the ultimate breaking down of the Machine or not is still unclear. Even if it were not so, the reported failures of the Machine would have justified an action based on art. 1641 of the Civil Code. The Respondent doubts the importance of the breakdowns but does not deny possible defects. It does not deny that, if existing, they could not be detected at the moment of the delivery It concentrates its objections on the application of art. 1648 of the Civil Code which turns out to he the main issue.

(a) What is the "short period" set by art. 1648 of the Civil Code?
Most of the cases quoted by the parties as well as the authors mentioned by them refer to a period up to at most, one year. In most cases it is limited to around 6 months... But those terms are not legal limitations, only decision taken on the basis of particular situations. What is undiscussed is that the short period (i) is left to the discretion of the judge (see Collart-Dutilleul/Delebecque, [Contrats civils et commerciaux, Paris 1993], N283, p. 219; Bénabent, Droit civil: Les contrats spéciaux, 2~' Edition, p. 148; Ducouloux-Favard, Droit de la vente, p. 126) and (ii) depends on the type of defects (see Ducouloux-Favard, op. cit. p. 126) and the behaviour of the parties (see ibid; Collart-Dutilleul/Delebecque, op. cit., N283, p. 220), though this last aspect can also be considered as influencing the starting point of the delay (see Bénabent, op. cit., p. 148). Altogether it will not be denied that the short term did not run while the parties were under negotiations.

Apart from the periods of 6 months frequently mentioned in the quoted Court decisions, terms of one year or even two years have sometimes been mentioned. One year is being considered as a time-limit in a proposed modification of the law (see Bénabent, op. cit., p. 149). Two years is the time-limit set by the UN Convention on the Sale of Goods (Vienna Convention), in art. 39, to act against the seller. Though sometimes considered as too long to he applicable for the purpose of art. 1648 of the Civil Code (see Malaurie/Aynes, Les contrats spéciaux, éd. 1993/1994, p. 242) this might in certain cases be considered as a suitable limit for international contracts (see also Ducouloux-Favard, op. cit. p.l26).

[...]

(d) Conclusion on this issue
Taking into account the complexity of the Machine, the discussions which went on throughout the execution of the contract and after the alleged ultimate breaking down of the Machine, the many interventions of persons in charge of the maintenance and the time elapsed between the letter of the Claimant of ... and the proceedings before the Court in ... which interrupted the term of limitation, as well as rules accepted for international contracts (such as art. 39 of the Vienna Convention) the Claimant should be considered as having acted within the short period provided for by art. 1648 of the Civil Code. This takes into account both the kind of defaults alleged and the usage of the place where the sale was made which should include the international nature of the sale.

The Claimant assumes that the consequence of its acting in due time is the rescission of the contract. This should be considered separately...}}

Source

Publishedin English:
ICC International Court of Arbitration Bulletin Vol. 11/No.2}}