- S 96/605
- Court of Appeal of Eastern Finland
BUYER FIXING ADDITIONAL TIME FOR PERFORMANCE BY SELLER (ART. 47(1) CISG)- BUYERS RIGHT TO AVOID (TERMINATE)CONTRACT AFTER ADDITIONAL TIME FIXED ACCORDING TO ART. 47(1) (ART. 49(1) CISG)
RIGHT TO CLAIM DAMAGES - LOSS SUFFERED DUE TO BREACH INCLUDED INTEREST CAUSED TO THE BUYER BY HAVING TO TAKE A LOAN TO PAY THE PREPAYMENT (ART. 74 CISG)
RIGHT TO INTEREST - DETERMINED BY DOMESTIC LAW OF DEBTOR'S STATE
SELLERS OBLIGATION TO PAY INTEREST ON REFUNDED PRICE (ART. 84 CISG)
A Lithuanian buyer entered into a contract for the delivery of butter with a seller company registed in the Caribbeans and with a P.O Box on Jersey Island, represented by K with his place of business in Finland. K transfered the price sum to a company in the U.S.A. When the butter was not delivered at the agreed place in Russia even after an additional time given by the buyer, it commenced action against the seller and K, who had signed the contract of sale on behalf of the seller, demanding the return of the advance payment of $45,716. Furthermore, it demanded $223,092 for interest caused to the buyer plus damages and lawful interest on arrears.
K contested the buyer's claim with reference to the fact, that according to the contract signed by him on behalf of the seller - which contract he claimed was intermediary - any dispute had to solved by arbitration. Furthermore, the claim had to be dismissed, since the Caribbean company with its place of business in the Caribbeans was the seller, and therefore the Finish court had no jurisdiction. K finally contested all the buyers claim, as there were no grounds for his liability for the buyer's financial losses and for the return of the prepaid price.
The buyer contested the claims to dismiss due to the fact that the seller through K, which was to be considered its CEO, based its operations in Finland and since the arbitration clause only covered disputes particular agreed upon or specified in the arbitration clause. Therefore, the Finish court had the jurisdiction. Furthermore, K and the seller was liable for transferring the price sum to a third party, the company in the U.S.A. and for the buyer's other financial losses.
The Court of First Instance stated that the arbitration clause only covered interpretation of the performance of the contract. As the dispute concerned the avoidance of the contract, the clause in the court's opinion did not cover the dispute at hand. Furthermore the court held, that as the true identy of the seller and the relationship of K to the company have remained unclarified in the case, K has been the seller in the case. As K's place of business is in Finland, Finnish law is applicable, and therefore also CISG is applicable as the applicable law of a Contracting State.
As the seller had still not delivered the goods after an additional period of time of reasonale lenght, Art. 47(1) CISG, the buyer had the right to avoid the contract, Art. 49(1) CISG.
According to Art. 84 CISG the seller and K jointly and severally had to refund the price and pay interest on it. Furthermore, according to Art. 74 CISG, the seller and K jointly and severally had to pay the buyer damages for lost profits and for legal fees. As to the buyers claim for interest of $223,092, the court according to Art. 74 found, that K knew that buyer had to take credit to finance the advance payment and therefore the damages also included compensation for interest loss. But, as it was not shown that K knew or should have known about the interest rates in Lithuania, namely 7% per month and 0.5% per day interest in arrears, which essentially differs from interest reates in Western Europe, the Court found, that K should have estimated a loss of about 10% of the sale price, meaning US$ 8,000. K and the seller jointly and severally had to pay this loss.
Finally, the seller and K jointly and severally had to pay interest according to Art. 78 CISG, which was determined by the interest rate of the Bank of Finland added with 7%.
K - but not the seller company - appealed the decision of the Court of First Instance. The Court of Appeal in Eastern Finland repealled the lower courts desicion and dismissed K his joint and several liability with the seller for returning the advance payment, damages and legal fees. The Appeal Court found, that the arbitration clause in the contract between buyer and K included all disputes arising out of the contract and therefore the case against K had to be solved based on the law governing Arbitration. The amounts K was made to pay, added with interest, now remained to be paid by the seller company in their totality.
First Instance (05.11.96)
Plaintiff: A., Lithuania [Buyer]. Defendant 1: K, Kuopio, Finland; Defendant 2: S Trading Limited, Turks and Caicos Islands. Issue: Damages, etc.
The plaintiff [buyer] claims that the defendants should be liable to pay the [buyer] jointly and severally a total of U.S. $268,808, consisting of U.S. $45,716 restitution of an advance payment and U.S. $223,092 for interest expenses caused to the [buyer] plus lawful interest on arrears starting from one month after the issuance of judgment onwards. Additionally, the defendants should be liable to pay the [buyer] damages of U.S. $15,960 plus lawful interest on arrears from 20 March 1995 onwards and the legal fees of the [buyer] resulting from litigation in the U.S.A. and in Finland plus interest. A deduction of U.S. $6,905 can be made from legal fees because the defendant has already paid this amount.
On 24 February 1995 [buyer] entered into a contract with [seller] for a consignment of 100,000 kilograms of butter to be delivered to Russia. [Seller] was represented by K, the CEO of [seller]. [Buyer] made an advance payment of U.S. $79,800 on 15 March 1995 for a consignment of 40,000 tons of butter. [Seller] transferred the money over to the U.S. to C Trading Group Inc. that was supposed to deliver the butter consignment to St. Petersburg, Russia. When this consignment did not arrive in St. Petersburg, [buyer] declared the contract avoided based on delay in delivery.
[Seller] has the duty to return the advance payment of the sale price.
K and [seller] are personally liable for damage caused to the [buyer] based on their negligent actions and breach of contract. K was negligent in transferring the prepaid sum and the obligations of the company he represented to the U.S. to a third party. K was negligent in handling the money given to the company led by him. K has not taken any measures in relation to returning the money from the U.S. The gross negligence of K amounts to personal liability for all the damage caused.
Additionally K is personally responsible for duties of [seller], because [seller] was established in an aim to circumvent the laws concerning minimum capital of a company and thus it cannot be regarded as a corporation. Consequently, the persons acting on behalf of such entity are personally liable for its obligations.
Before the pre-payment, [buyer] had to take a loan worth U.S. $79,800 from a bank in Lithuania. The interest rate for the loan was 7% per month. Due to defendants' actions [buyer] had been unable to repay the loan on 15 April 1995; this led to [buyer] having to pay interest on arrears at a rate of 0.5% per day.
C [Trading Group Inc.] has given [buyer] a sum total of U.S. $34,904 as a return for the advance payment. The debt of [buyer] to the bank totaled U.S. $ 268,808, consisting of U.S. $45,716 of capital, U.S. $5,586 of 7% interest and U.S. $217,506 of interest in arrears.
Because this was a matter of contractual breach, the defendants have to compensate also for [buyer's] lost profit. It amounts to 20% of the sale price, totaling U.S. $15,960. K, together with [seller], is liable for all the sums required from [seller].
This claim has to be held inadmissible. Kuopio Court of First Instance has no jurisdiction to hear the case, because this is a matter relating to the interpretation and enforcement of a contract. According to the Contract of Sale, an arbitration panel set up by the Helsinki Chamber of Commerce has the jurisdiction over disputes arising out of the aforesaid circumstances. The arbitration clause excludes other fora.
The contract referred to in the statement of claim was intermediary and it includes the said arbitration clause. By signing the contract, K became bound by it in a manner that a claim against him should also be brought before an arbitration panel.
In any event, this case can be admitted only in Turks and Caicos Island, the place of business of [seller]. This case can not be entertained in a general court in Finland because [seller] does not do business in Finland in any locale. The signing of the contract in Kuopio is accidental. Not even the claim directed at K can be admitted anywhere else but in the forum where the company has its place of business.
K is not the CEO of [seller]. He has only acted as an intermediary. K has brought the buyer and the seller together. Even the claim directed at K should be brought in the forum where the company has its place of business. K has no general authority to act on behalf of [seller]. Instead the company gives him guidelines and an authority to act for each individual situation.
[Seller] was established according to regulations of the State where the company was registered. K is not a shareholder of the company, nor is he is liable for its obligations in any other manner.
[Buyer's] reply as to the statement made by the defendant concerning the forum
As far as [seller] is concerned, the [Finnish] forum is a general court [of jurisdiction] and the arbitration clause only covers disputes particularly agreed upon or specified in the arbitration clause. Because the current dispute does not concern interpretation or carrying out of the contract, the case cannot be resolved by an arbitration panel.
The contract has been made by means of a fax and a phone in a situation where the buyer was in Lithuania and the seller was in Kuopio, Finland. The contact information of the seller referred to Kuopio, which is the only place of business of the seller known to the buyer. Jersey (the place where [seller] allegedly does business) only has a P.O. Box address and the allegation concerning Jersey as a place of business cannot be taken seriously. The burden of proof over the company being administered from somewhere else than from Finland, is on defendants.
When a company bases its operations in Kuopio, it can be called as a defendant to the Court of First Instance in Kuopio, regardless of where its actual place of business is. Additionally, Section 10:7 of The Law of Procedure provides that [seller] can be sued in Kuopio, because the lawful forum according to section 10:7 of The Law of Procedure is Kuopio.
Regardless of whether K is the CEO of [seller], by signing the contract and by acting negligently in transferring the money, he is liable for the claims.
Judgment of Court of First Instance, 21 May 1996
The Court of First Instance denied the pleadings of the defendants concerning the jurisdiction of the court and holds that the case can be tried in this court in its entirety.
The statement of claim of the [buyer] is based on the circumstances, that the Sale Contract into which the [buyer] and [seller] had entered into on 24 February1995, has been declared avoided. The claim of the [buyer] concerns the return of the advance payment, compensation for interest expenses and damages. The performance of the said sale is no longer possible. Consequently, the statement of claim does not concern the difficulty in interpreting the performance of the contract referred to in Section 8. of the said contract, disputes arising out of which should be tried by an Arbitration Panel.
The contract referred to in the statement of claim was signed on behalf of the seller by K, who has indicated his position to be that of the CEO. The contact information of the seller refers to Kuopio, which is also the hometown of K. The contract has been made using a fax and a phone in a situation, where the buyer has been in Lithuania and the seller in Kuopio. On these grounds it is apparent, that K has been the CEO of the company and that the company is doing business in Kuopio. Notwithstanding the address abroad communicated by the company and the place of registration of the company, the object of the statement of claim can be tried in this Court in its entirety.
Claims directed at different defendants can all be tried in the same Court where one of the defendants has been sued if the claims are brought simultaneously and they are based on essentially the same grounds. Because this court has jurisdiction over the claim directed at the company, the claim directed at K can also be tried in this Court.
This judgment can be appealed only in connection with the main issue
Defendants' reply in the main issue
The claim must be denied in its entirety and the [buyer] has to be made to pay the legal fees of the defendants added with interest on arrears.
The claim is directed at the wrong defendant. The contract referred to in the statement of claim was only a temporary one, and the aim was that [buyer] and C would make the actual contract on the delivery of the butter. Based on this, the claim should have been directed at C.
[Seller] has no duty to return the part of the sale price paid in advance, because [buyer] had no grounds to declare the contract avoided. After the delivery had been delayed, [buyer] should have accepted [seller's] offer concerning the delivery of a test consignment from the company warehouse in St. Petersburg or some other measure for fulfilling the contractual obligations.
There are no grounds for defendants' liability for financing costs of [buyer], the amount of which in itself is undisputed.
K is not liable for the sale price or damages in relation to [buyer].
The primary defense for K is that he was not the CEO of [seller]. K had no general authority to act on behalf of [seller]. The company gives the authority and guidelines to each individual case. In this case, K has just brought together the supplier of goods and the one ordering the goods. In this position, K is not liable for the obligations of the company. Even if it was regarded that K in fact acted as the CEO of [seller], he still is not liable for the obligations of the company.
K has acted carefully and as a prudent businessman, obeying the usages of international trade. Before the contract was made between the [buyer] and [seller], K, through his attorney, conducted background research on the existence and history of C Trading Group Inc. According to the information received, the company was reliable. K did not receive the payment made by the buyer, instead it was transferred to the account of [seller's] Finnish lawyer. The money has been wired to an account opened by C in the U.S., out of which it should have been withdrawn until the necessary freight and shipping document had been presented. For some reason, the bank in the U.S. had given the money to C in violation of the terms of the account.
Buyer's bill of legal fees is excessive and unspecified. It has been supplemented with expenses resulting from settling disputes between [buyer] and C in the U.S. A reasonable amount of legal fees of the [buyer] is FIM 50,000.
[Buyer's] response to the reply of the defendants
The contract between [buyer] and C did not cover just the delivery. [Buyer] had grounds to declare the contract avoided because the delivery was delayed. Due to the principle of identification of liability, K is liable for the obligations of [seller]. [Seller] can be regarded as a one-man company.
The contractual relationship between [buyer] and C
The Court of First Instance holds that [buyer] and C were not in a contractual relationship with one another. This being so, C would not be the correct defendant in the case, to whom demands resulting from the avoidance of the contract should be directed at.
[Seller] and [buyer] have signed the contract for delivery of butter referred to in the contract. Other contracts signed by [buyer] have not been presented to the Court.
Witness A has been an intermediary in the deal in a manner that K has been informed of the existence of the buyer, through H. After the signing of the contract, the representative of [buyer] has inquired from H, whether the sale goes through with this contract or whether there is a need for additional contracts. H assumed, that other contracts were not necessary and informed [buyer's] representative of this. Usually an intermediary does not sign contracts. H informed, that he has not made a single sale where he would be the seller or a buyer himself and the money would go through him.
As a matter of fact, the butter has been delivered by C. The former General Manager of C, namely W, has presented his view on the real parties to the contract in the document marked as Exhibit 25. W brings forth that the parties to the contract were [buyer] and C. To prove this [seller] presents a draft contract that went to K for acceptance. Document marked as Exhibit 26 is a document which has been annotated by hand, that it is a draft contract. [Buyer] has not been mentioned in the text of the document, only [seller] and C. The document has been dated 24 March 1995 and it has been signed by W and K.
Exhibit 29 brings forth that [seller] had already on 20 March 1995 wired U.S. $7,800 (unclear) to the account of [seller]. The amount the [buyer] gave was U.S. $79, 800 according to [buyer].
The defendants have presented Exhibit 35, a document which, according to the defendant, also is a draft contract between C and [buyer]. It has also been dated 24 March 1995 and it also bears signatures of W and K. The document does not indicate in any way, that it was also meant to be signed by [buyer].
In Exhibit 25, W refers to a fax message of 16 March 1995, Exhibit 17, as an indication of [buyer] and C as the parties to the contract. In the said message, P notifies about the transfer of the money and about the delivery address for the butter. The temporary agreement is mentioned in the text.
In a fax message of 18 April 1995, marked as Exhibit 18, W notifies, that it has never entered into any contract with either [buyer] or [seller], but with a company named Ha. Ha is a company of I, also examined as a witness, who has acted as an intermediary in bringing C in as a seller to the butter sale in question.
None of the documents presented in the case indicates, that [buyer] had entered or would enter into a contract with C. The final nature of the contract signed on 24 February 1995 is indicated by the circumstance that, based on the contract, [buyer] has already made a payment to [seller] and the wiring of the money was the responsibility of [seller]. Due to the fact that [buyer] had already taken the risk involved in the sale, C, who had delivered the butter, had no reason to enter any further contracts.
It is possible that [buyer] has needed the contract signed on 24 February 1995 to get credit from the bank. The wording of the contract, however, indicates that it is the actual contract on delivering the butter and the deliverer is K/[seller] and not any third party. Exhibit A, a notification by A to the General Manager P, supports this view.
The mention of temporary contract in the fax message of 16 March 1995 may be because P has been unsure of whether another contract has to be made to cover the delivery, as H has told. The statement by H supports the view, that there was no intention to make other contracts. The statement of H has not been proven as untrustworthy.
Exhibit 5 indicates that C could not have made another contract with [buyer] and has had a misconception of the name of the contracting party.
No significance can be given to W's statement, considering that it contravenes with Exhibit 5. His statement is unreliable due to reasons mentioned below in this judgment. Statements by K and other witnesses do not depart from one another concerning the coming about of the contract. Considering K's position in the case, his conception on the parties to the case can not be assigned with significance.
Through Exhibits 16, 33, 34 and 36 the defendants have wanted to show, that H and K have been in a similar intermediary position considering the butter consignment. K can be regarded as an intermediary, considering the statements made by K and witnesses. K, however, has made a contract concerning the delivery of butter, unlike, for example, H. K/[seller] has been marked as the seller in the contract and have received the sale price from the buyer. This has altered the position of the defendants into parties to the sale.
Buyer's right to declare the contract avoided
[Buyer] is entitled to declare the contract avoided based on delay on the seller's side.
CISG must be applied in the case.
[Buyer] is entitled to recover the rest of the sale price he has paid and damages, including loss of profit.
Exhibit 4 indicates that [buyer] has, on 11 April 1995, made a statement to K, saying that the seller has not fulfilled his duties. The documents involved in the sale had been late for 20 days at the time and the delivery of the goods from the factory had been late for 13 days in relation to what had been agreed.
Exhibit 19 indicates that W has refused to declare the contract avoided. According to him the delay was not unreasonable and the contract does not include the right to declare it avoided. The fax message has been directed at P and K and it was meant to be a reply to [buyer's] statement. On the other hand, Exhibit 5 indicates that W denies being in a contractual relationship with [buyer].
Exhibit 20 indicates that not even during the following day has P received the documents involved in the sale or information concerning transportation trucks. P notes that, without analysis of the quality of the butter, the freight will not be unloaded and additionally, P has to accept the butter together with the final buyer.
Exhibit 22 indicates that the butter has not been delivered on 20 April 1995. In the fax message the delivery address has been marked as a monastery in Kiev. That is not mentioned in any other documents.
The fax message marked as Exhibit 6 indicates that [buyer] declared the contract avoided for the second time because the goods had not been delivered as agreed.
The fax message marked as Exhibit 23 indicates that the Secretary of C has made an inquiry on 16 May 1995 to P concerning the address of P.
K has told that, first P gave just the delivery address, even if he had declared the contract avoided. Then, on the next day he placed additional conditions concerning inspection of the goods. C refused the inspection of the goods. The butter was already in St. Petersburg then.
The evidence indicates that due to reasons on the seller's side the delivery has been late for several weeks in relation to what had been agreed on. The buyer has not received any documents concerning the goods to be delivered. The buyer has properly declared the contract avoided.
[Buyer] can be regarded as having given up his right to declare the contract avoided when he gave the delivery address to the seller. However, not even then did the goods get delivered. The fax message from [buyer], dated 13 April 1995, does not indicate that [buyer] would have placed any additional conditions, instead the fax mentions the right to check the goods, a right normally granted to the buyer. However, despite P's fax, C seems to be presenting a delivery on 20 April 1995, to a strange address. [Buyer] has declared the contract avoided for the second time due to negligence on the seller's side.
K's statement, that C would not have been willing to allow the inspection suggested by P and thus given up on making the delivery, is untrue. Based on the evidence presented, the real reason is that C was unable to deliver the butter altogether.
According to law applicable to international sale of goods, Section 4, if the parties have not agreed on the applicable law, the law applicable to the sale is the law of that country, where the seller had its place of business when he accepted the order. The true identity of [seller] and the relationship of K to the company have remained unclarified in the case. In this situation, the Court holds that K has been the seller in the sale, K's place of business has been Kuopio in this case, so Finnish law is applicable in this case.
According to CISG Article 1, the Convention is applicable in sale contracts between parties whose places of business are in different States and when the rules of private international law lead to the application of the law of a Contracting State. On these grounds, CISG is applicable.
[Buyer] has declared the contract avoided with a notification delivered to the opposing party. The goods have remained undelivered and the seller has not delivered the goods within the additional period set by the buyer.
[Buyer] is entitled to recover the paid sale price.
The interest loss and damages
The amount of interest loss is U.S. $8,000.
The amount of lost profit is U.S. $15,960.
Calculation of damages
According to CISG Article 74, [buyer] is entitled to damages for breach of contract consisting of a sum equal to the loss, including loss of profit suffered by [buyer] as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.
The defendants have denied their duty to pay damages for interest loss caused to [buyer]. According to his own statement, K has known that [buyer] will take credit to finance the advance payment. Consequently, K may have anticipated that interest loss might be caused to [buyer] if, for some reason, the sale would not go through. On these grounds, damages include compensation of interest loss.
It has not been shown that K knew the interest rates in Lithuania, namely 7% per month and 0.5% per day interest on arrears, which essentially differs from interest rates in Western Europe. One could not even assume that he should have known it.
It is the estimate of the Court, that K should have pre-estimated that the interest loss resulting from not fulfilling the contractual obligations could be about 10% of the sale price, meaning U.S. $8,000.
The amount of lost profit announced by the seller, namely 20%, the Court sees as reasonable. The butter consignment bought by the buyer has had a buyer.
The transfer of the advance payment to the U.S.
The way K acted in transferring the money is grossly negligent.
The evidence presented by the buyer clarifies that matters decreasing the trustworthiness of the company and its general manager are connected to C and W.
K has managed to get through to C through the company of Witness I. The contact information of C's company has been solved by a translator R, who has testified as a witness in the case. Based on R's statement, the Court has found out, that the company was investigated on by calling there. R has talked with W, who has given a good and reliable picture of the company. W has told the company is financially sound and that it delivers goods to 35 countries and employs many lawyers. Based on this, they decided to ask an offer from C. R has told that he has had other foreign contacts too.
Exhibit 29 indicates that K, under the name of [seller], transferred a part of the advance payment to C's account, which was not a blocked account but a regular checking account.
Exhibit 2 indicates that the advance payment was supposed to go to seller's blocked account.
Exhibit 32 indicates that when negotiating over the declaration of avoidance, C has held the view that the advance payment had been paid by Ha.
Witness H told that advance payment is a standard procedure in sales like this. A blocked account is rarely used. About 80% of the sales take place without a guarantee. Letters of credit would be safe for both parties, but it are rarely used.
Exhibit 30 indicates that an effort has been made to obtain a power of attorney from K on behalf of [buyer] for collecting the advance payment from C. K has not signed the power of attorney.
The buyer has presented documentary evidence concerning C, based on which making a contract with the company can be seen as questionable. The accuracy of the evidence has not been denied.
K is personally responsible for the liabilities of [seller].
Exhibit 28 indicates that the capital of the [seller] company is U.S. $5,000 split into one share worth U.S. $5,000 and the company is registered. Exhibit 27 indicates that the one share of the company is owned by a company registered in the Jersey Islands.
The defendant has denied owning the company or its shares.
K has signed the contract made with [buyer] as the CEO of his company, the position which witness H regarded him as being in. Also, during the preparations for this case K has represented himself as the CEO. Not earlier than during the oral preparations did he notify that he handled the butter sale based on an assignment.
When hearing K as a witness he himself has told about the history of the butter sale, saying that H contacted him while looking for a supplier for a 100 ton butter consignment. K was informed of the supplier by Ha and notified it to H. H, as a witness, has told a similar story.
The defendants have alleged, that a prerequisite for a registration in Turks and Caicos Islands is paying of the share capita. No evidence has been presented to support this.
K's own story of the coming about of the butter sale indicates that throughout the course of the events he has acted as an independent businessman. K does not mention anything that would support his statement as to having acted on commission from [seller].
Because [seller] has been registered on a Caribbean Island and does business from an address located on Jersey Island, there is no documentary evidence of formal authority to act on behalf of the company. K has not wanted to give clarification as to the ownership of the company. Based on the evidence presented in the case, the actual authority to act on behalf of [seller] has been in the hands of K.
[Seller] can be regarded as a company established through a formal capital investment, which can be identified with the business name used by K in his business. K is liable for its obligations at least to the extent of the sale at dispute here.
The Court estimates the legal fees of the [buyer] as being FIM 70,000 added with the fee of the U.S. law firm, being FIM 11,403.28.
The expenses caused to the [buyer] in clarifying the matter over in the U.S. have been necessary in handling this case. As these measures taken have led to partial return of the advance payment, they have been for the benefit of the defendants.
The specification of the legal fee of the [buyer] is in English. It does not clarify, as required by the Law of Procedure Section 21, of what the fee consists of. Based on this, the court has estimated the amount of legal expenses.
The Court has reduced the amount of legal fees the [buyer] has the ability to recover also on grounds, that the claim for interest expenses has been only partially accepted.
In addition to assisting K, who was granted a free trial, L has also represented [seller], excluding the preparations and the main proceedings that took place on 22 October 1996. The Court has taken this into considerations in estimating the amount L will receive from the State as compensation for handling the case.
K and [seller] are obligated, jointly and severally, to pay a total of U.S. $69,676, consisting of U.S. $45,716 as a restitution of the advance payment, U.S. $8,000 as damages for interest expenses caused to the [buyer] and U.S. $15,960 for lost profit. The interest on arrears is the currently enforced interest rate of the Bank of Finland added with 7% for U.S. $53,716, beginning from one month after the issuance of judgment onwards and 16% for U.S. $15,960 beginning from 20 March 1995. The said amounts can be paid either with U.S. dollars or Finnish Marks according to the exchange rate of the date of payment.
The defendants are jointly and severally made to pay the [buyer] his legal fees of FIM 81,403.28, out of which the amount of U.S. $6,905 is reduced according to the exchange rate of the date of payment.
The legal fees are subject to an interest on arrears beginning from one month after the issuance of judgment onwards. The interest rate is the currently enforced interest rate of the Bank of Finland, added with 7%.
This judgment may be appealed to the Court of Appeals of Eastern Finland.
Court of Appeals of Eastern Finland
Judgment No. 336, 27 March 1997
The judgment appealed: Kuopio Court of First Instance 5 November 1996, No. 5477
[The Court of First Instance held seller and K, seller's CEO, jointly and severally liable. This was only an appeal by K, CEO of seller; the judgment against seller was not appealed.]
Appellant: CEO K, Kuopio [CEO of seller]; Defendant: A, Lithuania [buyer]
The demands presented in the Court of Appeals
In his appeal, K has renewed his statements appearing from the judgment of the Court of First Instance and has requested that the original claim of the [buyer] should be dismissed.
[Buyer] has replied and requested for the dismissal of K's appeal and compensation for his legal fees.
The judgment of the Court of Appeals
The contract in question is drafted in English. The content of the contract is as follows:
8. Force majeure, arbitration and rules
"8.1. This contract is governed by the rules of the Authorities of the International Chamber of Commerce. Both parties are relieved from liability of carrying out the duties under the Contract, if the said non-performance results from force majeure impediments, such as strikes, riots, decisions of governments or other authorities etc."
"If difficulties appear in interpreting the carrying out of the contract, all parties are bound to obey the decision, which has been arrived at by using the rules of the Authorities of the International Chamber of Commerce."
"If common ground is not reached, the Dispute shall be resolved under the Arbitration of the Helsinki Chamber of Commerce."
The Court of Appeals holds that the part of the contract referred to reveals that the disputes arising out of the contract are resolved through arbitration. The wording of the contract does not indicate that only some of the disputes are handled through arbitration and some in a general court.
The statement of claim places a demand of returning the advance payment, damages for financing expenses resulting from the advance payment, and damages for the breach of contract. The claim has been objected on grounds, among others, that the defendants have not breached the contract in a manner which would have justified the avoidance of the contract.
The issue in dispute is a matter which, according to Section 8 of the contract, is to be resolved through arbitration. K has referred to this circumstance before replying to the main claim. Consequently, the Court of First Instance should have dismissed the claims in relation to K.
Judgment of the Court of Appeals
The judgment of the Court of First Instance is repealed as to K's joint and several liability with [seller] for returning the advance payment, damages and legal fees. Based on the Law governing Arbitration, the statement of claim directed at K is dismissed and K is relieved of all payment obligations. The amounts K was made to pay, added with interest, now remain to be paid by [seller] in their totality.
This judgment is final.}}
Published in English:
University of Pace Website (http://cisg3.law.pace.edu/)}}