Data

Date:
29-04-2024
Country:
Spain
Number:
292/2024
Court:
Audiencia Provincial de Barcelona
Parties:
FERN RIDGE LTD vs. MAFRIGES S.A.

Keywords

INTERNATIONAL SALES CONTRACT - BETWEEN A NEW ZEALAND COMPANY AND A SPANISH COMPANY - FOR THE SUPPLY OF PORK MEAT - GOVERNED BY NEW ZEALAND LAW - REFERENCE TO UNIDROIT PRINCIPLES AND CISG IN ORDER TO INTERPRET AND SUPPLEMENT APPLICABLE DOMESTIC LAW

MITIGATION OF LOSSES – REFERENCE TO ARTICLE 7.4.8 UNIDROIT PRINCIPLES AND ARTICLE 77 CISG

Abstract

This judgment resolves a dispute between the New Zealand company FERN RIDGE LTD, a meat importer, and the Spanish company MAFRIGES S.A., a pork supplier. Both parties had entered into several international sales contracts for the supply of containers of pork from Spain to New Zealand. According to New Zealand regulations applicable to this type of import for direct consumption, the meat must be packaged in pieces weighing no more than three kilograms. MAFRIGES was aware of this requirement and expressly declared its compliance in the health documentation accompanying the shipments.

However, upon arrival at their destination, the containers were inspected by New Zealand biosecurity authorities, who detected pieces that exceeded the permitted weight limit. As a result, the shipments were rejected and could not be marketed. FERN RIDGE, which had prepaid for the goods, was forced to bear the storage costs, as well as other economic damages, and sued MAFRIGES for termination of the contract and compensation of €370,026.35.

The first instance judgment partially upheld the claim, recognizing MAFRIGES's breach but reducing the compensation award to € 149,243.18, finding that FERN RIDGE had breached its duty to mitigate damages. The appeal focused exclusively on this issue, as the declaration of breach of contract had been upheld.

The Court reversed this reduction and upheld the full claim for damages. The core of the argument lies in a detailed assessment of the duty to mitigate damages in light of uniform international law. Although the court does not directly apply the CISG or the Unidroit Principles, it expressly cites the case law of the Spanish Supreme Court (Supreme Court ruling of March 4, 2015 - already in Unilex), which incorporates these texts as a manifestation of the principle of good faith (Article 7 of the Civil Code) and the reasonableness required of the injured party in limiting damages.

Article 77 of the CISG establishes that the injured party must take reasonable measures to reduce the loss arising from the breach of contract, otherwise it will be unable to recover the part that could have been avoided. The same rule is reflected in Article 7.4.8 of the Unidroit Principles. The Court uses these precepts as an interpretive guideline for the general principle, emphasizing that the injured party cannot be imposed the burden of accepting disproportionate or economically harmful solutions to remedy harm caused by the other party.

In this specific case, FERN RIDGE demonstrated that it acted in good faith, notifying MAFRIGES of the situation from the outset and exploring alternative avenues to minimize losses, including selling at a reduced price. However, it legitimately conditioned this option on the seller's acceptance of the discount. Given MAFRIGES's lack of response or cooperation, the court concluded that the buyer could not be required to bear additional damages resulting from the seller's breach. In the words of the Court, allowing this would amount to "shifting the consequences of the third party's breach to the victim."

Excerpts of interest:

Citing the Supreme Court, First Chamber, of March 4, 2015 (already in Unilex), which the Provincial Court considered fully applicable to the case: "Article 77 of the Vienna Convention on the International Sale of Goods, in line with the provisions of Article 7.4.8 of the Unidroit Principles and Article 88 of the Uniform Law on the International Sale of Goods, establishes that the party invoking breach of contract must take reasonable measures, given the circumstances, to reduce the loss, including loss of profit, resulting from the breach, such that if it does not take such measures, the other party may request that the compensation for damages be reduced by the amount by which the loss should have been reduced."

English translation of the Spanish abstract written by Marina Iglesias for CISG Spain.

Fulltext

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Source

Abstract and fulltext in Spanish:
- available at the University of Carlos III website, http://www.cisgspanish.com}}