Case 1148: CISG 19(3); 26; 47; 48; [75]; 80
Slovenia: Vrhovno sodišče (Supreme Court)
III Ips 90/2008
Višje sodišče v Ljubljani (High Court of Ljubljana): VSL sodba I Cpg 1100/2005
13 September 2011

Original in Slovenian

Published in Slovenian:
http://www.sodisce.si/znanje/sodna_p...0040815258125/

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.

The court of first instance ruled for the buyer applying the CISG and awarding the
damages sought. The seller appealed, claiming that the contract had not been
avoided and that the awarded damages were inappropriate.

The appellate court dealt first with the question of whether the contract had been
amended in a way that required the buyer to pay the price for the goods in advance.
It examined the formation of the contract and stated that, under article 19(3) CISG,
additional or different terms relating to the payment are considered to materially
alter the terms of the offer. Consequently, it ruled that in situations where the
contract has already been concluded such amended payment terms would
fundamentally change the contract conditions and that consent of the parties is,
therefore, required for such amendments to be valid. Because the buyer did not
agree to the changes to the terms of payment and insisted on the seller’s
performance according to the (original) contract, the court found that the contract
had not been validly amended. According to the court, the seller was relying on a
mode of payment that had not been agreed upon in the contract.

The court further found that, even if the letters of credit were to be considered as
not in conformity with the contract, the seller cannot rely on this fact. Namely,
under article 80 CISG, a party may not rely on a failure of the other party to perform
when the failure was caused by the first party’s act or omission. The seller should
have, if it felt that the letters of credit did not conform to the contract, sent the buyer
the relevant information required to open new letters of credit. Therefore, the court
found that the seller was unable to rely on the buyer’s failure to properly fulfil its
obligations regarding the letters of credit because the seller had caused that failure.

Regarding the seller’s claim that the contract had not been avoided, the court found
that, when the seller does not perform his obligations in the additional period oftime allowed for under article 47 or when the seller remedies the failure to perform
his obligations after the date of delivery under article 48, the buyer retains a right to
claim damages regardless of whether the contract has been avoided. Here, because
the buyer had fixed an additional period of time for delivery of the goods and
because the seller had failed to perform its obligation, the court ruled that the buyer
was entitled to recovery of damages that it had suffered due to the seller’s breach of
contract.

Based on all these circumstances, the appellate court confirmed the decision of the
court of first instance. Thereupon, the seller filed a request for revision of the
decision claiming incorrect application of law.

The Supreme Court granted the request and found that the appellate court had
indeed misapplied the CISG. It stated that a claim for recovery of the difference
between the contract price and the price in the substitute transaction can only be
recovered when the contract has been avoided and that, under article 26 CISG, an
avoidance is effective only if made by notice to the other party. Because it was not
evident whether a notice had actually been given by one of the parties, the Supreme
Court overturned the decisions of the appellate court and the court of first instance
and remanded the case for retrial.


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