CISG PROJECT

Case text (English translation)

Reproduced with permission of 17 Journal of Law and Commerce (1998) 427-443

Dictamen [*] Emitido Por La Comisión Para La Protección Del Comercio Exterior A Petición De Conservas La Costeña, S.A. De C.V. [**]

with commentary

In Mexico City, Federal District, on this the twenty ninth day of the month of April, nineteen ninety-six, the Commission for the Protection of Foreign Commerce of Mexico [COMPROMEX], as provided under articles 2, section IV and 14 of its Law,[1] proceeds to analyze file number M/21/95, regarding a complaint filed by Conservas la Costeña, S.A. de C.V., against Lanin San Luis, S.A. and/or Agroindustrial Santa Adela, S.A., hereinafter referred to as the claimant and the respondent(s), respectively, so as to issue this recommendation pursuant to the following:

Procedural History

I.- On March 13, 1995, the claimant filed a statement of claims requesting the intervention of the Commission for the Protection of Foreign Commerce of Mexico, demanding from the respondent Companies the following:

1).- Payment of N$612,236.00 (six hundred and twelve thousand two hundred and thirty-six new pesos 00/100 MN) which is the price paid to LANIN SAN LUIS, S.A. (hereinafter referred to as LANIN) for the purchase of 7,900 boxes of fruit cocktail and 590 boxes of half peaches, [page 427] including importation expenses FOB/plant LA COSTEÑA. also the return of said merchandise [to LANIN] and;

2).- Payment of interests, damages and losses as well as all the expenses incurred because of the respondent companies' failure to perform.

II.- The claimant bases its claim on the following facts:

1).- In the month of December 1992, it [La Costeña] sent LANIN purchase order No. 3446, which was accepted by the latter. The purchase order was made for 100,000 boxes of half peaches and 20,000 boxes of fruit cocktail worth $ 1,177,500.00 U.S. Dollars . . .

2).- Before sending the purchase order, [La Costeña] received and approved the container and label samples that were submitted by the respondent companies. Likewise, [La Costeña] submitted samples of the cardboard packaging to LANIN so that it would ship the goods in cardboard boxes which met the sample's specifications.

3).- Notwithstanding that the order was placed with LANIN, a company domiciled in the Republic of Argentina, the goods arrived in Mexico from the Republic of Chile, shipped by the company Agroindustrial Santa Adela, S.A.; when an explanation was requested from LANIN, it informed that it had subcontracted the processing, causing serious problems [to La Costeña] because the importation was made under the Mexico-Chile Economic Complementation Accord.

4).- The price on the invoices issued by the Chilean company Agroindustrial Santa Adela, S.A. did not correspond to the value of the transaction. On numerous occasions it [La Costeña] requested from LANIN the invoices with the correct value of the transaction but the latter did not comply with this duty.

5).- Payment for the goods was made on January 13, 1993 by means of an irrevocable and confirmed letter of credit No 1-28777. It [La Costeña] attached photocopies of the bank documents through which payment was made [to the claim].

6).- On June 18, 1993, it [La Costeña] sent a letter to LANIN complaining about the defects in the goods:

a).- The cardboard boxes arrived in a damaged condition due to low cardboard resistance. The sides and corners of the boxes were either torn or wrinkled, many of them with signs of moisture and some with their corners taped together.

b).- The colors on the labels did not correspond to those on the La Costeña logo. The boxes are blue and yellow, when they should have [page 428] been yellow and red like the samples submitted to LANIN. Moreover, the shipment was incomplete with regard to the number of boxes.

c).- A large portion of the goods were rotted because of serious defects in the metal cans, such as can oxidation; the average vacuum in the fruit cans should be 4.5 in of Hg; 23% of the cans received from LANIN were less than 1 in of Hg which, as stated by the claimant, reduced the life of the contents.

d).- Sixty-three percent of the cans had corrosion near the seams. This corrosion was the result of the humidity inside the containers and the low quality of the boxes. also, the cans were not of the required consistency which resulted in many of them being damaged.

e).- The mix of the fruit cocktail was not homogenous, with an uneven relation between the pears and the peaches; the size of the grapes and cherries do not conform to specifications; additionally the mix and quality of the fruit varies from one can to another.

7.- To prove these facts the claimant presented notarial account number 33482 dated September 15, 1993, prepared by Lic. Carlos Otero Rodríguez, Notary Public No.10 of the Ecatepec district, State of Mexico, attesting the facts that were witnessed by said notary public on the date the instrument was prepared.[2]

III.- The Commission issued Official Comuniques dated March 15, 1995, reference nos. 288/95 and 287/95 notifying the respondents of the claim filed by LA COSTEÑA, and giving them a reasonable period of time in which to state whatever was favorable to their interest.

IV.- On April 7, 1995, Official Comunique No. 557/95 was received from the Trade Representative of Mexico in Santiago, Chile, informing this Commission that the Chilean company Agroindustrial Santa Adela, S.A. had been declared bankrupt and that the notice had been served to the trustee in bankruptcy.[page 429]

V.- On April 20, 1995, LANIN submitted to the Trade Representative of Mexico in Buenos Aires, Argentina, a brief in answer to the claim made against it, which is summarized as follows:

1).- It denies being the proper defendant to be subject to the claim regarding the foreign trade transaction, on the grounds that the preparation and export of the goods was made directly by Agroindustrial Santa Adela, S.A.

2).- It accepts that in mid-1992, it supplied the claimant with preserves and peaches in syrup, and that on that occasion it never received a complaint from the purchaser.

3).- It confirms that in the month of November 1992, representatives of LA COSTEÑA appeared at its offices to ensure the provision of products for the year 1993, and that it informed the claimant that it would be impossible for it to supply the goods directly. Notwithstanding the above, they offered to introduce the claimant to directors from the Chilean company Agroindustrial Santa Adela, S.A., which had the capability of supplying the goods required by LA COSTEÑA.

4).- Once the claimant approved of the transaction with Agroindustrial Santa Adela, S.A., it was agreed by the parties that LA COSTEÑA would open a letter of credit in favor of LANIN, so that the latter would make the payments for the goods to the Chilean supplier. It was agreed that the goods would be supplied from the Republic of Chile.

5).- LANIN insisted that the manufacturer and exporter of the goods was the Chilean company Agroindustrial Santa Adela, S.A. In support of this fact it listed and attached photocopies of several documents, including the following:

- Bill of lading issued by Compañia Sudamericana de Vapores, S.A., dated April 30, 1993, for 1758 boxes, mentioning Agroindustrial Santa Adela, S.A. as the exporter.

- Certificate of Origin No. 8401, issued by the Administrative Commission/Chile-Mexico Economic Complementation Accord, Latinamerican Integration Association, in which Agroindustrial Santa Adela, S.A. appears as the exporting company.

- Fitosanitary Certificate No. 8401, issued by the Ministry of Agriculture of Chile, Agriculture and Cattle Services, under the International Convention for Fitosanitary Protection of 1951, addressed to the Fitosanitary Protection Organization of Tampico, Mexico, mentioning Agroindustrial Santa Adela, S.A. as the exporting company.

- Packaging list issued by Agroindustrial Santa Adela, S.A., dated April 30, 1993, addressed to LA COSTEÑA. [page 430]

6).- In addition, LANIN stated that in spite of the fact that it is not the proper defendant against which the complaint should be brought, Agroindustrial Santa Adela, S.A. timely and properly performed its obligations, and because the claimant bought the goods under FOB contract conditions, a circumstance clearly evidenced by the documents attached [to the response], the risk was transferred to the claimant.

7).- LANIN also refused to be bound to the arbitration procedure or to the recommendation, alleging that the requirements of article 14 of the law creating the Commission had not been met, and that because of this, the Commission for the Protection of Foreign Trade of Mexico could not conduct the arbitral procedure or issue the recommendation.

8).- LANIN also argued that it had been placed in a helpless situation by the claimant, prejudicing its right to defend itself, because the claimant conducted the testing at its place of business with its own experts, to prove the supposed nonconformity of the cans received under its purchase order. LANIN also argued that said evidence lacked any legal value since it was produced by an interested party, without allowing access to the opposing party.

9).- LANIN argued that the notarial instrument submitted by the claimant constitutes a mere allegation of the claimant in notarial form.

10).- LANIN argued that the United Nations Convention on Contracts for the International Sale of Goods (The Vienna Convention) does not apply for the purposes of resolving any dispute regarding this transaction, because the Republic of Argentina made the reservations provided for in article 96.

VI.- On June 13, 1995, a conciliation meeting took place in compliance with article 12 of the Law creating COMPROMEX. For such purposes, the parties where notified in a timely and formal fashion. The opposing parties appeared at said meeting. The claimant appeared through its legal representative, while LANIN [was deemed to appear] by means of a brief that it timely submitted to the office of the Trade Representative of Mexico in Buenos Aires, Argentina. No progress was made on this matter as a result of the position held by both parties which simply ratified their earlier arguments.

VII.- On June 26, 1995, the claimant submitted to COMPROMEX a brief requesting that it issue a recommendation as provided in the Law. After having analyzed the proceedings and in accordance with articles 2, section IV and 14 of the Law creating a Commission for the Protection of Foreign Trade of Mexico, COMPROMEX resolved to issue this recommendation. [page 431]

VIII.- On October 5, 1995, COMPROMEX served notice to the parties involved informing them of this Commission's determination, allowing them a reasonable period to make arguments favorable to their interests, and allowing them to submit any additional evidence they deemed convenient.

LA COSTEÑA and LANIN submitted their closing arguments in briefs which were received by this Commission and added to the corresponding file. A letter from the trustee in bankruptcy of Santa Adela was received stating that said company had been completely liquidated under the procedures established by the laws of the Republic of Chile.

Legal Reasoning

I.- This Agency has the authority to issue an opinion on this matter, as provided in articles 2, section IV and 14 of the Law creating a Commission for the Protection of Foreign Trade of Mexico, such being pleaded by the claimant, and because it is the opinion of COMPROMEX that there is no legal impedinent to do so.

II.- The claimant claims from the respondent companies payment in the amount of N$612,236.00, as well as damages, as established in paragraph I of the procedural history. This claim is based on the facts described in said paragraph and on the documents exhibited by the claimant in support of the claims.

III.- It is this Commission's opinion, based on articles 18 and 23 of the United Nations Convention on Contracts for the International Sale of Goods adopted in Vienna, Austria, on April 11, 1989 (hereinafter the Vienna Convention), whose adhesion protocol has been signed by the governments of the Republic of Mexico and of the Republic of Argentina, that a contractual relationship has been evidenced by Lanin's letter of reply. Said letter states that it [LANIN] agreed with the claimant [La Costeña] that a letter of credit would be opened in its favor so that, acting as a conduit, it [LANIN] would pay the Chilean supplier for the goods. Also, LANIN appears as the beneficiary of the credit in various documents submitted by both parties regarding the use of the letter of credit by the claimant to pay for the merchandise.

Additionally LANIN submitted as evidence a writing dated June 21, 1993, in which among other things it states:

"We are surprised that after two years of transactions among the companies and in spite of having maintained a frequent flow of communication via telephone and fax, upon the first claim or supposed problem you have notified the Consul of our country [located] in yours, instead of notifying us [page 432] and waiting for our response. We inform you that the management of the company Santa Adela has been informed of your concerns. They shall immediatly establish contact with you and will keep us informed."

Also in the file are various communications submitted by the claimant whereby LANIN requests [La Costeña's] approval to dispatch goods and lists the various shipments which have been made, pursuant to claimant's purchase order. Said letters are dated May 17, June 11, June 15, 1993.

IV.- Because of those circumstances, LANIN, or the company with which it subcontracted, should have forwarded the goods that were the object of the transaction in the amount, quality, and of the type as agreed in the terms; as provided under articles 35 and 36 of the Vienna Convention, the containers and baling should have also conformed to the agreed terms. In the absence of a specific agreement between the parties regarding these issues, this Commission considers these legal provisions applicable.

V.- The claimant asserts that the defects in the goods, detected upon their arrival in Mexico, were due mostly to the inferior quality of the containers and baling. To prove these facts the claimant exhibited the following documents:

Public instrument number 33482, dated September 15, 1993, prepared by Notary Public No.10 of the District of Ecatepec, State of Mexico, containing a narration of the facts that said notary public witnessed on the date of that instrument, as well as an exhibit with 28 photographs showing various piles of cardboard boxes some of which were damaged. The outside of the boxes bear the La Costeña logo with blue letters on a red background. The photographs also show various cans with signs of rust and others that are bloated.

Additionally, exhibit B of said notarial instrument consists of a document dated July 16, 1993, signed by the engineers Rafael Mendoza Vega and Ricardo Gutiérrez de la Cruz from the company La Continental, Fabrica de Envases de Cartón Corrugado, S.A. de C.V., describing an inspection they made of the boxes concluding that the cardboard with which they were fabricated was suited for wrapping, and not for packing.

Also included is a document signed by LA COSTEÑA's container Production Manager, explaining that the cause of the problem was that the supplier used DR8 Lbs tinfoil, with an inadequate sealer for this type of non-reinforced material.

VI.- It is evident that a great part of the goods were damaged because of the inadequate containers and cardboard boxes that were used, especially [page 433] when taking into account that their transportation would be by sea, a fact of which the respondents were fully aware. Therefore, it was the respondents' duty to ship the goods using adequate containers and packaging to preserve and protect them [the goods] during their shipment.

The respondents had a duty to deliver the documents related to the goods at the agreed place, time and in the agreed upon form, pursuant to article 34 of the Vienna Convention.

VII.- The fact that the parties agreed as general conditions for the sale [contract] that the quoted price for the goods would be FOB, (free on board) any port in Chile, does not discharge seller from complying with each and every agreed upon term. In fact, under the sale term agreed by the parties, FOB any port in Chile, the seller complies with his duty when the goods pass over the rail of the ship at the named port, meaning that the buyer is to bear all expenses and risks of loss or damage to the goods from that moment on; however, this does not discharge the seller completely from his obligations regarding any detriment that the goods might suffer, unless he complied with all the terms and conditions agreed by the parties. The seller is responsible for any lack of conformity that exists at the moment of transferring the risk, even if the lack of conformity is discovered after such moment. If the lack of conformity results after the transfer of risk, the seller shall be responsible if it results from his failure to comply with any of his duties. In this case, the seller failed to provide adequate containers, packing and baling for the goods to protect them during their voyage up to their arrival, to the buyer's full satisfaction.

VIII.- Regarding the delivery of the documents, LANIN or the company with which it subcontracted, should have tendered each and every document stating the quantity and value of the goods paid for by the claimant. Tendering documents that do not reflect the terms of the transaction (invoices) produces serious administrative problems for the claimant; this is in addition to the economic loss suffered by claimant, because whoever subcontracts with another, has a duty to monitor the correct compliance with the obligations it assumed.

IX.- LANIN's allegation that the Vienna Convention does not apply because of the reservations entered by the Republic of Argentina under articles 96 and 12 of said Convention has no substance. From documents contained in the file, it is evident that the essential terms of the contractual relationship were established in writing, such as the quantity, characteristics, price of the goods, as well as the method of paying for said goods. [page 434]

Therefore, the conclusion of the contract of sale and its modifications were made in writing, as required under article 11 of the Vienna Convention. It would be against the general principles of this Convention to interpret said rule in the sense of requiring a formal contract.

Based on the foregoing, and pursuant to the legal reasons which have been set forth above, and on articles 2, Section IV and 14 of the Law creating a Commission for the Protection of Foreign Commerce of Mexico, the following is issued:

Recommendation

FIRST.- This claim derives from an international commercial transaction and the claimant, the importer in this case, is domiciled in the Republic of Mexico.

SECOND.- Based on the preceding findings and legal reasons, it is evident that this matter could not be settled by means of conciliation or arbitration, because the foreign respondents failed to agree. Consequently, upon a petition by the claimant and pursuant to the rules cited above, this Commission has determined that it has the authority to issue a recommendation on this dispute.

THIRD.- It is this Commission's opinion that LANIN is liable for not supervising the canning, packing and baling used by the company it subcontracted with, and for having caused damage to the goods as a result of the inadequate canning and failure to use the baling required to preserve or protect the goods. Therefore, said company [Lanin] should pay the claimant the amount of $612,236.00 (SIX HUNDRED AND TWELVE THOUSAND TWO HUNDRED AND THIRTY-SIX PESOS 00/100).

FOURTH.- LANIN is under a duty to tender a complete set of invoices stating the correct value of the transaction entered into by the parties.

FIFTH.- This Commission makes no recommendation on the issue of the damages alleged by the claimant, since the evidence on file is insufficient to render an opinion in support of either side.

SIXTH.- The rights of the parties are left intact so that they may pursue a claim in the manner that best suits their interests.

SEVENTH.- Notice to the parties shall be given.

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Case commentary

Mexico's COMPROMEX Issues Another Recommendation Applying the CISG

This case involves various issues within the scope of the United Nations Convention for the International Sale of Goods (hereinafter [page 435] "CISG" or the "Convention").[3] It is representative of the growing number of disputes being submitted to COMPROMEX, which have arisen out of Mexico's expanding international trade. Most of COMPROMEX's rulings have been issued as recommendations; recently, however, a few parties have agreed to permit COMPROMEX to act as an arbitrating body and issue enforceable awards. This, however, did not occur in the case at hand.

With over fifty signatory States,[4] the importance of the CISG cannot be understated. It includes all three North American countries: Canada, the United States and Mexico, making it the international uniform contract law of the NAFTA market place.[5] Surprisingly though, no news of a case involving CISG application in a Mexican court has appeared. This could easily be attributed to a generalized unawareness of CISG's existence among practicing attorneys and judges in Mexico. Notwithstanding, COMPROMEX's role in applying this body of uniform contract law is important because its recommendations are ultimately published in the Diario Oficial de la Federación -- Mexico's official gazette -- which is distributed nation-wide, making it the most important source for CISG opinions in Mexico.

La Costeña vs. Lanin . . . or Santa Adela?

La Costeña (Costeña), a Mexican buyer, brought a claim against Lanin (Lanin) from Argentina, and Santa Adela (Adela) from Chile. Costeña placed a purchase order with Lanin in December 1992 to ensure the supply of canned fruit cocktail and canned peaches. Prior to placing the purchase order, Costeña received and approved samples of the canned goods submitted by Lanin and Adela. Similarly, Costeña showed samples of the boxes to Lanin, so that Lanin would ship the goods to Costeña using boxes possessing the same specifications. In January 1993, Costeña paid Lanin for the goods by means of a letter of credit. According to Costeña, when the canned goods finally arrived there were several problems. First, the boxes and cans were damaged and they came in a lesser amount. Second, the labels on the cans did not bear the correct colors. Third, the goods came from Adela in Chile, instead of from [page 436] Lanin in Argentina. Fourth, the invoices did not show the correct amount paid for the goods. Costeña contacted Lanin with regard to the nonconformity of the goods and documents, but to no avail. Costeña brought a claim before COMPROMEX [6] against Lanin and Adela in the alternative.

Lanin argued COMPROMEX lacked authority to intervene

During the procedure, Lanin argued that COMPROMEX was not authorized to issue a recommendation or arbitral award since the requirements provided for in article 14 of COMPROMEX's charter had not been met. Said article provides that:

"[w]hen there has been no express submission of the parties to arbitration and there is a claim from one of them [the parties], or there being no claim the Commission must intervene because of the subject matter described in article 2,[7] the written procedure described in the preceding articles shall take place until its conclusion. The Commission shall issue a recommendation that shall immediately be delivered to the Secretariat of Economy so that it may order it be published in the Federal Official Diary and so that it may consider the convenience of applying the admistrative measures that the recommendation may suggest."

COMPROMEX had an easy time solving the issue of its own jurisdiction. All that was required was that there be a dispute resulting from an international sale of goods, that one of the parties be domiciled in Mexico, and that a claim be filed. The claim was filed on March 13, 1995. [page 437]

Argentina's Article 96 Reservation

Lanin argued that because Argentina entered a reservation under article 96 of the CISG, the Convention was inapplicable to the dispute.[8] COMPROMEX dismissed Lanin's argument and reasoned that what was required was not a formal contract (contained in a single instrument), but evidence in writing that a contract existed. Such evidence, COMPROMEX determined, could be found in the various documents on file describing the terms of the contract including the letter of credit. It also reasoned that to interpret the CISG as requiring a formal contract would undermine the Convention's general principles.[9]

COMPROMEX's analysis should have found that under an article 96 reservation, those aspects of articles 11, 29 and Part II of the CISG that abrogate any writing requirement were inapplicable. This reservation excludes matters concerning writing requirements for contract formation, modification and termination from the scope of the CISG. The question is then: Under such circumstances, what law should govern these issues? This question should have been answered using the rules of international private law, to which COMPROMEX could have resorted.[10] To determine the applicable law,[11] COMPROMEX could have followed article 13(IV) of the Mexican Civil Code which states that: "[t]he form of legal acts shall be governed by the law of the place where they are performed. . . ." [12] However, because the parties are domiciled in different [page 438] states, this traditional method of determing the applicable law fails its purpose. COMPROMEX could have relied on a points of contact method,[13] which takes into consideration elements such as: the domiciles of the seller [14] and buyer, the place where the contract was negotiated and concluded, and the place where the seller must tender the goods.[15] The applicable law would have been that of the state that had the closest relation.

Lanin: Argentinian agent or seller?

Lanin raised an interesting defense: that it acted only as an intermediary for the purpose of paying Adela for the goods. From a reading of the facts described in the recommendation, a case could be made for a sales contract with either Lanin or Adela.[16] Even if COMPROMEX had found that a contract existed with Adela, the summary of the facts still do not give a precise account of whether Lanin alleged that it was an agent of Costeña -- to pay Adela for the goods; or an agent of Adela -- to procure a contract with Costeña and/or collect payment. Notwithstanding, COMPROMEX decided for the existence of a contract between Costeña, the Mexican company, and Lanin, from Argentina. Adela's role was that of a sub-contractor for the Argentinean company.[17] COMPROMEX also stated that in any case, Lanin was under a duty to oversee Adela's [page 439] compliance with the sub-contract but failed to indicate any legal authority in support of this ruling.

Nonconforming Goods and Documents

Costeña, the Mexican buyer, stated in its claim that the goods and documents it received were nonconforming. Additionally, it argued that defects in the cans and boxes caused damage to a considerable percentage of the goods. The Mexican buyer also alleged submitting box samples to Lanin, so that Lanin would use boxes of the same kind in the shipment of the goods. Upon the goods' arrival in Mexico, Costeña detected the nonconformity. Costeña relied on a notarial account [18] describing the condition of the goods and boxes when they arrived. Costeña also submitted as evidence a letter signed by two engineers it hired, who determined that the boxes were not of the required quality. The Argentine seller argued that the manner in which the experts arrived at their conclusion on the nonconformity of goods improperly deprived it of defenses because this determination was made unilaterally.[19]

With regard to the issue concerning the quantity and quality of goods, COMPROMEX found for the Mexican buyer, but gave no clear reason in support of its decision. Under article 35(1), "[a] seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract."[20] The Buyer alleged that it did not receive the complete shipment of goods due under the contract, but the issue was hardly discussed in the published recommendation. Regarding the quality, the answer may not be so simple. Article 35(2)(c) provides: "Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: . . . possess the qualities of goods which the seller has held out to the buyer as a sample or model."[21] If Lanin and Adela submitted [page 440] samples of the goods to Costeña, and if Costeña approved of these samples, did Costeña receive goods different from the samples? If the answer is yes, we have a case of non-conforming goods. If the answer is no, article 35(3) applies, making the seller not liable for the alleged nonconformity of the goods.[22] The same can be said about the packaging issue claimed by the buyer.[23] However, because COMPROMEX did not provide a more precise account of the facts in its recommendation, we cannot know what facts helped COMPROMEX arrive at this conclusion.

Costeña also claimed that the documents were nonconforming because they mentioned Adela, a company located in Chile, as the exporter, instead of Lanin. The documents also stated a lower value than the actual contract price. The issue of the nonconforming documents brings us back to a question we have asked before: Did Costeña enter into a contract with Lanin or with Adela? Again, the outcome depended on COMPROMEX's conclusion that Costeña contracted with Lanin. Article 34 of the Convention provides that the seller has a duty to tender the documents relating to the goods at the time and place, and in the form required by the contract.[24] According to COMPROMEX's finding, the documents tendered to Lanin were nonconforming.

Passing of Risk

Lanin argued as a defense that Adela was relieved from any further duty to La Costeña when it tendered the goods FOB [25] any port in Chile, thereby shifting the risk of loss. COMPROMEX's ruling on this issue depended on the finding that the goods did not conform from the beginning. Article 36(1) of the CISG provides that "[t]he seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the tiine when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time."[26] Because COMPROMEX found that the goods that passed over [page 441] the rail in Chile were nonconforming, Costeña never bore the risk of loss on the goods, even if loss or damage occurred while the goods were in transit. Had COMPROMEX found that the goods conformed to the samples previously approved by Costeña, then Costeña would have suffered the loss under the res perit domino provision contained in article 66 of the CISG, and would have been bound to pay regardless.[27] Again, COMPROMEX found for the buyer.

An Inconsistent Recommendation

COMPROMEX recommended that Costeña should be reimbursed in the amount of $612,236.00 Pesos, as restitution for the amount it paid to Lanin for the nonconforming goods. It also held that Lanin should tender conforming documents containing the correct value of the transaction. The recommendation is inconsistent. First, Costeña in its initial brief pleaded for the said amount and in exchange undertook to return the goods to Lanin.[28] By recommending that Lanin reimburse the money and issue conforming documents to Costeña, COMPROMEX did something essentially contradictory, since the documents represent the goods, goods which Costeña had no interest in keeping. COMPROMEX completely ignored the fact that Costeña wanted to return the goods to Lanin. A recommendation consistent with Costeña's claim should have stated that Lanin should reimburse the money and Costeña return the goods and documents to Lanin concurrently.[29]

Conclusion

It is unfortunate that COMPROMEX's recommendation left so many factual questions unanswered. However, it is likely that some of the fault lay with the parties or their attorneys, who probably failed to provide clear information on the facts, aware of the recommendation's non-binding [page 442] nature. Was there a contract between Costeña and Lanin, or was the contract formed between Costeña and Adela? If Lanin's allegation that it acted as agent was true, was Lanin an agent for Costeña or for Adela?

The legal issues also could have benefitted from a more precise methodology. COMPROMEX's finding that an enforceable contract had been formed between Costeña and Lanin under the CISG in spite of Argentina's article 96 reservation is questionable though as previously indicated, it is likely that a conclusion making a different body of law applicable could have produced the same result.

There is no evidence in the recommendation that COMPROMEX consulted any commentators or foreign cases applying CISG, thus failing in one of the Convention's most important goals: to promote its uniform application.[30] However, uniform and consistent application of the CISG is not an obligation limited to adjudicating bodies or courts wherever they may be located. Practitioners in the field of international trade law also play a decisive role, since it will be their knowledge and skill which will ultimately persuade, or dissuade, judges on how they should apply the Convention. The uniformity of judgments involving the application of CISG is a co-responsibility shared among judges and practitioners throughout the international community which has adopted CISG as the uniform body of law governing contracts for the sale of goods.[Page 443]


FOOTNOTES

* Diario Oficial [D.O.] 16 julio de 1996, 12-17.

** Translation and commentary by Alejandro Osuna González, Esq. Universidad Iberoamericana Plantel Noroeste, Tijuana, Baja California, Mexico; LLM, University of Pittsburgh School of Law, 1997-1998. With thanks to Professor Alejandro Garro and Professor Vivian Curran. I would also like to thank the Alcoa Foundation and Mexico's National Council for Science and Technology for making my attendance at the University of Pittsburgh School of Law possible. All footnotes in this translation are by the Translator.

The bracket phrase page followed by a number is used to identify the page number of the original publication.

1. See "Ley que crea una Comisión para la Protección del Comercio Exterior de México," D.O., 31 de diciembre de 1956 (date of publication of the law which created the Commission for the Protection of Foreign Commerce of Mexico) [hereinafter Ley].

2. Notaries public in many, if not all, Civil Law jurisdictions are very different from their U.S. counterparts. Article 10 of the Law of Notary Public for the Federal District (Mexico City) defines Notary public as an "attorney at law invested with public faith, authorized to authenticate and formalize the instruments attesting legal acts and facts, as provided in law. Notaries shall act as an advisor to parties [appearing before them] and shall issue the testimonies, copies or certifications to the interested parties pursuant to what is established in the laws. The preparation of an instrument shall be upon the request of a party." See Ley del Notariado del Departamento de Distrito Federal, D.O., 8 de enero de 1980, as amended by D.O. Decreto que reforma, adiciona y deroga diversas disposiciones de La Ley del Notariado del Departamento del Distrito Federal, D.O., 1ro. de enero de 1994. Contracts for the sale of land above a certain value must be signed before a notary public. Notaries public also prepare incorporation charters and attest their signing. Many powers of attorney must also be contained in a document prepared and witnessed by a notary. The instruments prepared by notaries in Mexico are prima facie evidence, and are valid iuris tantum.

3. U.N. Convention on Contracts for the International Sale of Goods, Final Act, 1980, U.N. Doc. A/Conf.97/18 (1980), reprinted in S. Treaty Doc. No. 98-9, 98th Cong., 1st Sess. and in 19 I.L.M. 668 (1980) [hereinafter CISG or Convention].

4. See Journal of Law and Commerce CISG Contracting States and Declarations Table, 16 J.L. & Com. 371 (1997).

5. See Harry M. Flechtner, Another CISG Case in the U.S. Courts: Pitfalls for the Practitioner and the Potential for Regionalized Interpretations, 15 J.L. & Com. 127, 132-33 (1995).

6. The reader might ask why the claim was filed with COMPROMEX which can issue an award only if the parties agree to be bound by it, instead of in a Mexican court. Under Mexican rules, a judge's jurisdiction is contingent on the party designating as his domicile to receive judicial notices a domicile within the jurisdiction of that judge. Absent an agreement, the judge of where the obligation must be performed has jurisdiction. It is likely that Costeña took its claim to COMPROMEX because Mexican courts had no jurisdiction and Costeña was probably trying to reach either an amicable solution with Lanin, or its submission to arbitration under COMPROMEX's auspices. See Código Federal de Procedimientos Civiles [C.F.P.C.] art. 24 (Mex.) ("Será juez competente: . . . II. El del lugar convenido para el cumplimiento de la obligación"). For an analysis of direct and indirect jurisdiction under the Mexican legal system see Leonel Péreznieto Castro, Derecho Internacional Privado-Parte General 158-82 (6th ed. 1995).

7. Article 2 sections (III) and (IV) of the COMPROMEX charter state: "The Commission shall have the following functions: . . . [to] intervene under the conditions and for the effects stated in this law on complaints related to international business transactions in which importers or exporters domiciled in the Mexican Republic intervene and that are filed by them or against them . . . ; [to] issue a recommendation that shall be published, regarding the complaints mentioned in the section above whenever there has been no express submission to arbitration under the Commission, or there being such submission, resolve said complaints by issuing the corresponding award." Ley, supra note 1.

8. Article 1(1) states as follows: "This Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) When the States are Contracting States; or (b) When the rules of private international law lead to the application of the law of a Contracting State." A Contracting State may make an article 96 reservation when its laws require its international contracts to be in a writing. See John Honnold, Uniform Law for International Sales 67 (1989). This makes those aspects of article 11 (agreement by consent), article 29 (consensual termination or amendment), and Part II (articles 14-24 on contract formation) of the CISG that dispense with any requirement of a writing non applicable where a party is from such a State. Argentina, Belarus, Chile, Estonia, Hungary, Lithuania, Russian Federation and Ukraine have all made article 96 reservations.

9. See CISG, supra note 3, preamble.

10. Jorge Adame Goddard, El Contrato de Compraventa Internacional 125-26 (McGraw-Hill/Interamericana de México, S.A. de C.V. 1994) (proposing that CISG's articles 11, 29 and Part II could apply, regardless of whether one of the parties to a contract is from a State which entered an article 96 reservation, if the laws of private international law lead to the application of the laws of a non-reserving State).

11. Hans Lewald proposes that there are three categories of conflict of law rules: rules which specify the norm applicable to constitutive conditions in a given relation (i.e. contract formation); rules specifying the norm applicable to the effects or consequences of that relation (the consequences of a contract); and rules that are simultaneously applicable to the constitutive condition and to its effects (both to formation and consequence). See Pereznieto Castro, supra note 6, at 120.

12. Código Civil [Cod. Civ.] art. 12 (Arg.) (Argentinean Civil Code) ("Las formas y solemnidades de los contratos y de todo instrumento público, son regidas por las leyes del país donde se hubieren otorgado.").

13. The points of contract method previously unknown in Mexican legislation, was incorporated through article 1445 of the Código de Comercio [Cód. Com.] (Mex.) (Mexico's Commercial Code) one of the provisions of UNCITRAL's model law on arbitration adopted in 1993. It states that "[i]f the parties did not indicate the substantive law applicable to the dispute, the arbitration tribunal, taking into account the characteristics and connections of the case, shall determine the applicable law." "Decreto por el que se reforman y adicionan diversas disposiciones del Código de Comercio y del Código Federal de Procedimientos Civiles," D.O., 22 de julio de 1993. See also Péreznieto Castro, supra note 6, at 122.

14. See Péreznieto Castro, supra note 6, at 125 & n.14 ("In the conventions on the laws applicable to international sale of goods contracts (The Hague, 1995 and 1985). . . the criteria is that the applicable law is [the law] of the location where the seller has his place of business or usual residence.").

15. See Código Civil Para el Distrito Federal [C.C.D.F.] art. 13(v) (Mex.) (Civil Code for the Federal District) ("[L]os efectos jurídicos de los actos y contratos se regirán por el derecho del lugar donde deban ejecutarse, a menos que las partes hubieran designado válidamente la aplicabilidad de otro derecho.").

16. Regardless, had COMPROMEX found that an agency agreement did exist in any of the proposed alternatives, it is beyond the scope of the CISG.

17. COMPROMEX could have been persuaded to find a contract between the Mexican buyer and the Argentinean seller because of the fact that Santa Adela, S.A., the Chilean subcontractor, had been liquidated.

18. See supra note 2.

19. The Mexican buyer could have avoided the Argentine seller's disagreement on this issue had it followed a simple procedure set forth in the Commercial Code; each party appoints a merchant who will inspect the goods and attempt to arrive at a common position on the nonconformity. If they disagree, a third merchant, appointed by the first two appointees, shall have the final say on this issue. See Código de Comercio [Cód. Com.] art. 373 (Mex.) ("En caso de desavenencia entre los contratantes, dos comerciantes, nombrados uno por cada parte, y un tercero para el caso de discordia nombrado por éstos, resolverán sobre la conformidad o inconformidad de las mercancías con las muestras o calidades que sirvieron de base al contrato.").

20. CISG, supra note 3, art. 35(1).

21. Id. at art. 35(2)(c). Compare U.C.C. § 2-313(1)(c), which provides that "[a]ny sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model."

22. See CISG, supra note 3, art. 35(3).

23. Article 35(2)(d) states: "Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: . . . are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods." Id. at art. 35(2)(d). However, subsection (3) of Article 35 states that: "[t]he seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity." Id. at art. 35(3).

24. See CISG, supra note 3, art. 34.

25. See U.C.C. § 2-319 for the domestic U.S. interpretation of this term.

26. CISG, supra note 3, art. 36(1).

27. See CISG, supra note 3, art. 66.

28. If from Costenña's inspection the goods were found to be substantially defective. Costeña could have argued that the defects amounted to a fundamental breach under article 25 of the CISG. Id., art. 25. Costeña would have had the option of declaring the contract avoided. Id. arts. 49 and 51(2). It also could have reduced the price of the goods in proportion to the value that the goods actually delivered had at the time of delivery. Id., art. 51. But again, from reading the facts in the recommendation, it appears that Costeña did not raise the issue of fundamental breach per se.

29. Article 81(1) of the CISG provides that "[a]voidance of the contract releases both parties from their obligations under it, subject to any damages that may be due." Id. at art. 81(1). Under article 81(2) "[a] party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently." Id. at art. 81(2).

30. See id., art. 7(1) and preamble.

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