Go to Database Directory || Go to Bibliography

Cite as Uniform Law Review / Revue de droit uniforme (2004-2) 431-435

CISG: U.S. Court Relies on Foreign Case Law and the Internet

A note on the decision in Chicago Prime Packers v. Northam Food Trading
[21 May 2004] United States District Court, N.D. Illinois, Eastern Division

Annabel Teiling [*]

I.    Introduction
II.   Facts of the case
III. The District Court's analysis
       1. Issues
       2. Determining whether buyer made timely examination of the goods
       3. Determining whether buyer gave timely notice
IV. Reference to foreign decisions
V.   Citing to the Internet

I. INTRODUCTION

On May 21, 2004, the U.S. District Court, Northern District of Illinois, Eastern Division, made a decision in the matter of Chicago Prime Packers, Inc. v. Northam Food Trading Co., et al [1] under the United Nations Convention on Contracts for the International Sale of Goods (hereinafter "CISG"). Notably, the decision references sources available from the Internet and cites to more foreign jurisprudence than any prior American case decided under the CISG.

The CISG first entered into force in 1988 between the United States and ten other nations. Today, the CISG is the law in sixty-three nations (including the U.S.). The CISG, also known as the Vienna Convention, facilitates foreign trade of goods through a unified approach. It applies to contracts for the sale of goods between parties whose places of business are in different Contracting States. It automatically governs all international trade transactions within the scope of the CISG, unless the parties indicate an alternative applicable law. The CISG is generally consistent with the Uniform Commercial Code, which commonly governs contract disputes in the United States. However, the Convention ultimately represents a series of compromises between the concepts of common law and civil law.

II. FACTS OF THE CASE

In the case of Chicago Prime Packers, Inc. v. Northam Food Trading Co., et al, Chicago Prime Packers, Inc. ("Chicago Prime") brought a two count amended complaint for breach of contract against Northam Food Trading Co. ("Northam") and Nationwide Foods, Inc. d/b/a Brookfield Farms ("Brookfield"). Chicago Prime is a Colorado corporation with its principal place of business in Avon, Colorado and Northam is a Canadian corporation with its principal place of business in Montreal, Canada. Both companies are wholesalers of meat products. On March 30, 2001, Chicago Prime contracted to sell 40,500 pounds of government inspected fresh, blast frozen pork back ribs to Northam. Chicago Prime purchased the ribs from Brookfield, a meat processor.

On April 24, 2001, Brown Brother's Trucking Company ("Brown Brother's"), acting on behalf of Northam, picked up the goods at one of Brookfield's storage facilities. When Brown Brother's picked up the ribs, it signed a bill [page 431] of lading, acknowledging that the ribs were in apparent good order, although the bill of lading also indicated that the "contents and condition of contents of packages were unknown" at the time of receipt.

On April 25, 2001, Brown Brother's delivered the ribs to Northam's customer, Beacon Premium Meats ("Beacon"). At the time of receipt, Beacon signed a second bill of lading acknowledging receipt and stating that the ribs were "in apparent good order," except for "21 boxes [that] were gouged and [the] meat in [those boxes] show[ed] signs of freezer burn."

On May 4, 2001, Beacon began processing the shipment and noticed that the product appeared to be in an "off-condition." Beacon contacted the United States Department of Agriculture ("USDA") to inspect the goods. The inspector found that the product was spoiled and ordered Beacon to stop processing it. That same day, Beacon notified Northam and Chicago Prime of the potential problem with the delivered goods. On May 23, 2001, Dr. John Maltby, a USDA expert, inspected the goods and concluded that the product was rotten, that it arrived at Beacon in a rotten condition, and that it appeared to be assembled from different locations. He also determined that there was no opportunity for salvage and that the product should be condemned.

III. THE DISTRICT COURT'S ANALYSIS

1. Issues

The United States District Court, Northern District of Illinois, Eastern Division, determined that the transaction between Chicago Prime and Northam was governed by the CISG. The main issues to be determined by the Court were whether Northam examined the goods, or caused them to be examined, within as short a period as was practicable under the circumstances and whether Northam gave notice to Chicago Prime of the alleged lack of conformity within a reasonable time after it ought to have discovered the alleged lack of conformity.

2. Determining whether buyer made timely examination of the goods

Under article 25 of the CISG,

"[a] breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract...."

In the case at hand, the parties entered into a valid and enforceable contract for the sale and purchase of pork loin ribs. Chicago Prime transferred a shipment of pork loin ribs to a trucking company hired by Northam. Northam did not pay Chicago Prime for the ribs and Chicago Prime consequently suffered damages. Because Northam claims that the goods were spoiled at the time of transfer, on it rested the burden of establishing non-conformity. Under the CISG, when an affirmative defense is raised, the burden is on the defendant to establish its elements. Thus, the Court ruled that it was Northam's burden to establish non-conformity.

Dr. Maltby concluded that the product he inspected arrived rotten at Beacon's. Chicago Prime argued that Dr. Maltby could not confirm that the meat he inspected was in fact the meat sold to Northam by Chicago Prime. The evidence suggested that ribs inspected by Dr. Maltby were not the same ribs. For example, Beacon had purchased and received other loads of ribs originating from Brookfield prior to April 25, 2001.

Northam argued that "there were no contractual [terms] requiring inspection upon delivery." Furthermore, in the first bill of lading it was specifically stated that the contents and condition of contents of packages were unknown. When an issue is not addressed by the [page 432] contract, the provisions of the CISG govern. The CISG fills the gaps in contract language and provides answers to issues not addressed by the contract. Under article 35 of the CISG,

"[t]he seller must deliver goods which are of the quantity, quality and description required by the contract," and "the goods do not conform with the contract unless they ... are fit for the purposes for which goods of the same description would ordinarily be used."

Under article 36, the seller is liable for any lack of conformity. Article 38 requires the buyer to

"examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances."

Article 38 of the CISG, Section 3, further states that

"[i]f the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination."

The Court cited Fallini Stefano & Co. S.n.c. v. Foodic BV,[2] a case from the Netherlands that has never been translated into English. The case provided that the buyer bears the burden of proving that the goods were inspected within a reasonable time and further points out a number of foreign courts that have addressed the question of how much time a buyer has to examine goods or discover defects under the CISG. In determining the answer to the question of how much time a buyer has to examine goods or discover defects under the CISG, the U.S. District Court looked at a number of foreign courts that have addressed the question.

It first cited a German case, [3] where the buyer lost the right to rely on lack of conformity by failing to promptly inspect ham delivered by the seller or to give notice of the ham's non-conformity within a reasonable time. The German Court found that because the alleged defect was easily recognizable, the buyer should have examined the goods within three days of delivery.

The U.S. District Court also cited another German case dealing with insufficient quantity as a defect. In that particular case, the German Court held that examination of the quantity of items delivered must be done immediately at the place of performance of the obligation or at the agreed destination. The German Court held that the Swiss buyer of German clothing should have examined or caused the goods to be examined as soon as they arrived at the agreed destination. It further held that examination of the quantity of the items delivered more than a week after delivery was unreasonable under the circumstances.[4]

The Court then cited an Italian case: Alessandro Rizzieri,[5] in which the Italian Court decided that according to the CISG, goods are to be examined at the time of receipt, which will usually permit the buyer to determine quickly whether the goods are defective, and thus notify the seller of any lack of conformity shortly after delivery of the goods. In fact, the Italian Court found that, although the cheese ordered by the buyer had been delivered frozen, the buyer was not exempt from the duty to make a timely examination. The buyer could have defrosted a portion of the cheese and discovered the non-conformity.[page 433]

The District Court pointed out that Northam was only a "trading company" and that Northam owns no brick and mortar facilities or trucks. Furthermore, Northam presented no testimony or evidence as to why it could not have examined the shipment when delivered to Beacon on April 25 or within a few days thereafter. Because the goods were redirected or redispatched after receipt, in accordance with CISG article 38(3), examination of the ribs could have been deferred until after they arrived at Beacon. The Court held that Northam's inspection, nearly a month after delivery, did not satisfy its obligation to inspect the goods within a reasonable time.

In conclusion, based on foreign precedent, the CISG and the facts of this case, the District Court held that Northam failed to demonstrate that it examined the ribs, or caused them to be examined within as short a period as is practicable under the circumstances.

3. Determining whether buyer gave timely notice

Under article 39 CISG,

"[a] buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it."

Again the District Court relied on foreign decisions and held that a buyer bears the burden of showing that notice of non-conformity has been given within a reasonable time. This holding conforms to the ruling in another German case.[6]

The U.S. Court also referenced the Italian case of Sport D'Hiver di Genevieve Culet v. Ets Louys et Fils,[7] where it was held that the reasonableness of the time for a notice of non-conformity provided in article 39 of the CISG is strictly related to the duty to examine the goods within as short a period as is practicable in the circumstances set forth in article 38 of the CISG. The Italian Court further determined that when defects are easy to discover by a prompt examination of the goods, the time of notice must be reduced. In the case at hand, Dr. Maltby reported that the ribs were obviously rotten and that even the odor was foul.

Based on its analysis of foreign decisions, the District Court determined that not only did Northam fail to examine the shipment of ribs in as short a period of time as practicable, but that it also failed to give notice within a reasonable time after it should have discovered the alleged non-conformity. Northam provided notice on May 4, 2001, which was eleven days after it discovered that the ribs were spoiled. The Court found this period of time to be unreasonable under the circumstances.

IV. REFERENCE TO FOREIGN DECISIONS

As stated in the opinion of the District Court, there is virtually no American case law under the CISG. courts have looked to the CISG's language and to the "general principles" upon which it is based for answers. However, as pointed out by the District Court, citing to CISG Article 7(1), "[t]he convention directs that its interpretation be informed by its 'international character and ... the need to promote uniformity in its application and the [page 434] observance of good faith in international trade.'"[8] In Chicago Prime Packers, Inc. the Court promotes uniformity in the application of the CISG by looking to more foreign cases than any other available secondary authority. In fact, this case cites more foreign cases than any other previous American ruling on the CISG. The decision represents great progress in the development of the Convention. It is in accord with the approach recommended by the U.S. Supreme Court. Judicial decisions from other countries interpreting a treaty term are "entitled to considerable weight." [9]

V. CITING TO THE INTERNET

The Internet is an extremely useful tool, providing easy and fast access to an enormous amount of information at virtually no cost. Thus, the Internet has truly revolutionized the spread of information about the CISG. In Chicago Prime Packers, Inc., the District Court used Internet references throughout, ultimately to render a well researched and truly international decision thus paving the way for other courts in the United States to use one of the most efficient and effective tools to ensure decisions that give due weight to international precedent.

The UNILEX database ("UNILEX"),[10] is a collection of international case law and bibliography on the CISG and UNIDROIT Principles of International Commercial Contracts, two of the most important international instruments for the regulation of international commercial transactions. In Chicago Prime Packers, Inc., the Court relied upon the detailed, translated abstracts of the decisions contained in UNILEX referring to it as "an intelligent [Internet] database of international case law on the CISG."

Other Internet sites, such as the complete, detailed website of the Institute of International Commercial Law at Pace University School of Law <http://cisgw3.law.pace.edu>, which offers full-text English translations of CISG cases from foreign jurisdictions, have provided attorneys and courts with quick and easy access to a complete array of materials and information on the CISG and its interpretation.[page 435]


FOOTNOTES

* Attorney, Gallagher, Gosseen, Faller & Crowley, New York (United States of America).

1. Available at <http://cisgw3.law.pace.edu/cases040521u1.html>.

2. Case No. 900336, Arrondissementsrechtbank Roermond (19 December 1991) UNILEX 1991.

3. See (parties not reported) No. 2 C 395/93, Amtsgericht Riedlingen (21 October 1944) UNILEX 1994.

4. See (parties not reported) No. 54 O 644/94, Landgericht Landshut (5 April 1995), UNILEX 1995

5. Decision of the Tribunal of Vigevano (12 July 2000), reported in 20 Journal of Law & Commerce 209 (Spring 2001). See also F. Ferrari, "Applying the CISG in a Truly Uniform Manner: Tribunale di Vigevano (Italy) 12 July 2000", Unif. L. Rev. / Rev. dr. unif., 2001, 203.

6. See (parties not reported), No. 3/13 O 3/94 Landgericht Frankfurt/Main (13 July 1994), UNILEX 1994.

7. Case No. 45/96, Tribunale Civile di Cuneo, Sez. 1 (31 January 1996), UNILEX 1996.

8. See Chicago Prime Packers, Inc. v. Northam Food Trading Co., et al, decided 24 May 2004, United States District Court, Northern District of Illinois, Eastern Division.

9. El Al Israel Airlines, Ltd. v. Tsui, 525 U.S. 155, 176 (1999), quoting Air France v. Saks, 470 U.S. 392, 404 (1975).

10. <http://www.unlex.info>.


Pace Law School Institute of International Commercial Law - Last updated November 17, 2004
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography