- Hof 'S-Hertogenbosch
INTERPRETATION OF U.N.CONVENTION ON INTERNATIONAL SALES CONTRACTS (CISG) – REGARD TO INTERNATIONAL ORIGIN OF CONVENTION AND NEED OF ITS UNIFORM APPLICATION (ARTICLE 7 CISG) – REGARD TO COMMON PRINCIPLES OF CONTRACTING STATES – REFERENCE TO UNIDROIT PRINCIPLES AND TO PRINCIPLES OF EUROPEAN CONTRACT LAW
APPLICABILITY OF SELLER’S STANDARD TERMS – TRADE USAGE (ARTICLE 9(2) CISG))
INCORPORATION OF SELLER’S STANDARD TERMS INTO CONTRACT - APPLICATION OF GENERAL RULES ON OFFER AND ACCEPTANCE (ARTICLE 18 CISG) - REFERENCE TO STANDARD TERMS IN OFFER NECESSARY
QUESTION AS TO WHETHER BEFORE OR AT TIME OF CONCLUSION OF CONTRACT BUYER MUST BE GIVEN OPPORTUNITY TO KNOW CONTENT OF SELLER'S STANDARD TERMS NOT EXPRESSLY REGULATED IN CISG - QUESTION LEFT OPEN IN UNIDROIT PRINCIPLES (CF. COMMENTS TO ARTICLE 2.20) – AFFIRMATIVE SOLUTION ADOPTED BY PRINCIPLES OF EUROPEAN CONTRACT LAW (ARTICLE 2.104) – SAME SOLUTION TO BE ADOPTED UNDER CISG AS IT PROMOTES GOOD FAITH IN INTERNATIONAL TRADE AND REFLECTS DOMESTIC LAW OF BOTH SELLER’S AND BUYER’S COUNTRIES (FRANCE AND THE NETHERLANDS)
A Dutch company purchased plants from a French company. After delivery of the goods buyer paid only part of the price. Seller brought an action claiming not only the payment of the outstanding amount of the price but also the payment of the penalty for delay as provided for in its standard terms which it asserted formed part of the contract of sale. Buyer rejected both claims. As to its obligation to pay the outstanding amount of the price, it set it off against seller’s obligation to pay damages for defects of the goods delivered, while the payment of the penalty was not due at all, since seller’s standard terms were not incorporated into the contract.
The court of first instance decided in favour of seller.
The contract was governed by CISG, since the two parties were situated in two different contracting States (Art. 1 (1)(a)). According to the court, while set-off was outside the scope of the Convention with the consequence that the question as to whether buyer was entitled to set-off its obligation to pay the remaining part of the price against the alleged obligation of seller to pay damages for defects of the goods had to be decided in accordance with the otherwise applicable domestic law (in the case at hand, French law as the law of the seller’s country – cf. Art. 4 of the 1980 Rome Convention on the Law Applicable to Contractual Obligations), the question as to whether or not seller’s standard terms had been incorportaed in the contract had to be decided according to CISG. The court held that, although in the case at hand the application of seller’s standard terms had not expressly been agreed upon by the parties, the standard terms nevertheless were incorporated into the contract. It is true that the invoice, on the back of which the standard terms were allegedly reproduced, was sent to buyer only upon delivery of the goods. However, buyer not only knew from previous transactions with seller that seller was used to contracting on the basis of its own standard terms, but it is well known (and buyer should have known it) that in international trade in general, and in the flower and plants trade in particular, standard terms are commonly used. According to the court the applicability of seller’s standard terms could be regarded as a usage according to Art. 9.2 CISG with the consequence that the standard terms formed part of the contract of sale concluded between the parties. Nor was it relevant that seller’s standard terms were written in French: buyer never asked for a Dutch translation nor had it asked seller’s representative for explanations.
The Court of Appeal reversed the decision of the court of first instance.
Also according to the Court of Appeal the question as to whether seller’s standard terms formed part of the contract of sale was to be decided according to CISG. However, since CISG does not have any special provisions concerning standard terms the general rules on contract formation applied with the consequence that under the Convention standard terms are binding only in so far as their applicability is stipulated by seller in its offer and accepted by buyer. What still remained to be seen was whether in order for them to be validly incorporated into the contract they have to be made available to the adhering party before or at the time of the conclusion of the contract or the adhering party has otherwise the opportunity to know their content. This posed a problem of interpretation of the Convention, which according to Art. 7 must be solved having regard to the international nature of the Convention and the need to promote its uniform application and the observance of good faith in international trade. According to the Court this implied that special attention had to be paid to how the interpretative question is dealt with in the laws of the contracting States and what may be considered common principles of those legal systems.
In this context the Court expressly referred, first of all, to the UNIDROIT Principles of International Commercial Contracts (which, it stated, expressly provide that they may assist in interpreting the Convention) and in particular to the Comments to Art. 2.20. According to the Court these Comments address the question as to whether the adhering party must know the content of the standard terms, but do not not address the other question as to whether the adhering party should have a reasonable opportunity of becoming acquainted with the content of the standard terms, and whether the principle of good faith requires that the other party take the necessary steps to make sure that the adhering party has such an opportunity, e.g. by sending it the text of the standard terms before or at the time of concluding the contract. On its part, Art. 2.104 of the Principles of European Contract Law in paragraph 1 states that “[c]ontract terms which are not individually negotiated may be invoked against a party which did not know them only if the party invoking them took reasonable steps to bring them to the other party’s attention before or when the contract was concluded”, and in paragraph 2 adds that “[t]erms are not brought appropriately to a party’s attention by a mere reference to them in a contract document, even if that party signs the document”. According to the Court this rule not only largely coincides with Dutch and French law on standard terms and hence with the law of the two countries to which the parties belong, but also promotes the observance of good faith in international trade. The Court therefore decided to apply this rule also in interpreting CISG and held that in the case at hand seller’s standard terms were not binding upon buyer since seller had not informed buyer of its standard terms in good time, i.e. before concluding the contract, so that buyer could not be said to have accepted seller’s standard terms. As to the argument initially put forward by seller that upon delivery of the goods buyer had received the invoice with seller’s standard terms printed on the back and that the invoice was also intended to be a confirmation of order to which buyer did not object at all, the Court noted that when buyer objected that it had received the original invoice with the seller’s standard terms printed on the back only about a fortnight after the delivery of the plants, whereas upon delivery of the plant it had received only a photocopy of the front page, seller did not deny these facts. Nor was seller’s further allegation that it had sent buyer already on occasion of previous transactions invoices with its standard terms reproduced on the back supported by sufficient evidence.
As to the question wheter buyer was entitled to set off its obligation to pay the remaining part of the price against seller's alleged obligation to pay damages for defects of the goods, the Court of appeal confirmed that, since CISG does not regulate set-off, the question had to be decided in accordance with the law of the country where the party rendering the most characteristic performance is situated, i.e. French law (cf. Art. 4 of the Rome Convention). According to Art. 1291 French C.C. set-off can only be asserted if both obligations are “liquide”, i.e. ascertained as to both their existence and amount. The Court found that since seller had rejected buyer’s claim for damages for seller’s breach of the contract, this condition was not fulfilled in the case at hand and therefore the seller was entitled to the payment of the outstanding amount of the price.