CISG CASE PRESENTATION

The procurement of an individual data processing system regularly includes the delivery of standard software, which constitutes an element of a purchase contract, and the development of individual software according to the special needs of the client which includes an element of a contract of manufacture. Furthermore, the contractor must carry out all tasks arising in the course of the project and requiring specific computer knowledge which form elements of a mandate and a contract of manufacture. With regard to the nature of further possible services, the Court refers to the explanations regarding the procurement of standard software (Schluep / Amstutz, Einleitung vor Art. 184 et seq. N 279.).

The procurement of the user rights to the standard software, including the installation thereof, contributes with a quota of 45%, the training of the staff with a quota of 20% and the development of the individual software on the basis of the standard software with a quota of about 35% to the total costs of the order. The [buyer] failed to submit a rejoinder in order to rebut these contentions. Consequently, as far as the facts are concerned, these contentions of the [seller's assignee] have to be considered as acknowledged by the [buyer]. Hence, neither the work carried out, nor the performance of other ancillary services, prevail in the present contract and the contract is thus not predominately one of service.

Both Switzerland and Austria have ratified the CISG (v. Caemmerer / Schlechtriem, § 801). Accordingly, the contract in question is governed by the CISG.

      2. a) Contractual assignments of a chose in action are primarily governed by the law agreed to by the parties (Art. 145 Abs. 1 IPRG [*], Dasser, Kommentar zum IPRG, Basel und Frankfurt a. M., 1996, Art. 145 N 23). Also, the choice of law clause itself is governed by the chosen law of the contract (Art. 116(2) 2nd sentence IPRG; Amstutz / Vogt / Wang, Kommentar zum IPRG, Art. 116 N 36) and does not require specific formalities to be effective (Amstutz / Vogt / Wang, Art. 116 N 36); in other words, the choice of law clause can be introduced into the contract expressly or by implication. By referring to article 164 OR [*] in their contract, the contracting parties implicitly showed their intention to have the two assignments of 6 January and 10 March 1998 governed by Swiss law of obligations. Although the two assignments are signed only by the [seller] (assignor), existence of a valid and effective choice of law clause can be construed from the assignee's acceptance of the notifications received (see article 116(2) IPRG). The [buyer]'s statement of defense did not mention facts allowing a different interpretation.

     3. a) The [buyer] contends that the following invoices were directly paid to [seller]:

In addition, [buyer] contends that the Oracle database was directly paid to [seller].

The [seller's assignee] denies these assertions, and maintains that except for the invoice for the Oracle database, no payments were made. According to Art. 53 CISG, the payment of the price is part of the [buyer]'s obligations. Consequently, the burden to prove proper payment lies on the [buyer], who has to substantiate its assertion (§ 54(1) and § 113 ZPO [*]). Pursuant to § 55 ZPO, by Order of the Court dated 16 April 1999, the [buyer] was asked to produce evidence for the alleged payments. The court's request read:

By failing to file a rejoinder the [buyer] waived its right to substantiate its allegations. However, an evidential procedure requires the citation of relevant facts on the part of the party on which the onus of proof lies (see Frank / Sträuli / Messmer, Kommentar zur zürcherischen Zivilprozessordnung, 3d ed, Zürich 1997, § 113 N 5). Because the [buyer] failed to produce corroborating evidence as to when and how (e.g., cash, transfer by bank or post) the respective invoices were paid, no evidence of payment exists. As the [buyer] refused to comply with the Court's request to produce substantive evidence proving the payment of the invoices in question, the Court is constrained to take into account only the insufficient statement of defense when making its decision. (Frank / Sträuli / Messmer, § 113 N 14, § 55 N 12). The Court therefore comes to the conclusion that the [buyer] did not pay the invoices.

      4. a) With regard to the content of the contracts entered into between [seller] and the [buyer], the [seller's assignee] contended initially that [seller] had installed software and had trained employees of the [buyer]. However, the order of enforcement mentions only claims stemming from delivery of goods to the [buyer]. As the [seller's assignee] states, it was not possible to provide more precise information about the work done by [seller], until the filing of the present application due to missing documentation and information requested from the [buyer].

Consequently, the [seller's assignee] stated that the following services were rendered by [seller] in favour of the [buyer]:

In order to further substantiate its claim, the [seller's assignee] refers to the invoices submitted and hereby integrates them into its statement of claim. Such a reference is admissible as it allows the [buyer] to clearly assess the exact amounts of money that are claimed by the [seller's assignee] for the respective services rendered. These statements are considered contentions of the [seller's assignee]. Lacking any response to these contentions they must be deemed recognized (see Frank / Sträuli / Messmer, § 113 N 4). Hence, it is sufficiently established for the Court that the described services were rendered. The claimed amounts of the respective invoices remained uncontested. Therefore, the [seller's assignee] is entitled to payment (CISG art. 53).

      5. a) Yet, the [buyer] asserts that it informed [seller] that the services rendered were deficient. Upon this complaint, the [buyer] was requested by [seller] to replace the EU-software with a perfectly working software which was ready for instant use. Consequently, the EU-software was removed from the system. Thereby the removal of the ORACLE database, an integral part of the EU-software, caused some difficulties. On enquiry, ORACLE Switzerland AG stated that the license for the ORACLE database was not reported to ORACLE. Neither [seller] nor the [buyer] possesses original software of the ORACLE database. Therefore, both the [buyer] and ORACLE Switzerland AG assume that [seller] failed to correctly install the license of the ORACLE database. However, the aforementioned explanations do not show exactly the nature of the lack of conformity as required by CISG Art. 39(1). A non-specific and general notice to the seller that the EU-software is not working properly does not meet the specification requirement of CISG Art. 39(1) (see Herber / Czerwenka, Internationales Kaufrecht München 1991, Art. 39 N 7). The reference in the fax of 13 February 1998 attached to the memorandum of the [buyer] also does not fulfil this requirement. The [buyer] fails to explain which parts of the attached document shall be part of the claim. As a mere exhibit, this document cannot be regarded as part of the contentions of the party. The only plea inserted into the statement of defense is that the license for the ORACLE database was not registered in Switzerland. However, this plea was rendered void by the following statements of the [seller's assignee]. [Seller] acquired for the [buyer] on the occasion of the ordering of the ORACLE database in Austria, a license under the No. CSI WIN-NT. This remained uncontested. Subsequently, in accordance with Art. 12(1) URG, this license is also valid in Switzerland. Therefore, also in this respect the performance of the [seller] was not at all deficient. As already mentioned above, the Court expressly informed the [buyer] of its insufficiently substantiated plea. Nevertheless, the [buyer] failed to submit to the Court an additional statement of reply as offered. Given the express warning, the Court is obliged to base its decision only on the insufficient contention (Frank / Sträuli / Messmer, § 55 N 12). Consequently, there is no right to an evidential procedure as to the alleged deficiencies.

      6. The [seller's assignee] contended that as a result of the invoices issued by [seller], the debt has to be paid in Austrian Schillings. This remains uncontested and is evidenced by the mentioned invoices. Hence, the [seller's assignee] has also amended the claim. The [buyer] is therefore obliged to pay the [seller's assignee] the amount of [öS] 960,953.30.

      7. The overdue interest of 6 percent claimed as of 30 March 1998 remained uncontested as to the interest rate and period, and must be paid by the [buyer]. For the same reasons, the latter must bear the costs of the preliminary enforcement order totalling [Sf] 208.-.

      8. The defense raised against the preliminary enforcement order remains unfounded and must therefore be removed.

      9. According to the outcome of the present procedure, the [buyer] has to bear the general fee for the court proceedings (§ 64 et seq. ZPO [*]). The sum in dispute depends on the application of the claimant [seller's assignee] at the outset of the case and totals [Sf] 114,593.70.

Accordingly, the court decides to admit the amendment of action and orders:

1. The [buyer] is to pay the [seller's assignee] [öS] 960,953.30 plus interest of 6% as of 30 March 1998 and [Sf] 208.- for the preliminary enforcement order;
2. The defense against the preliminary enforcement order is removed;
3. The general fee of the court proceedings is determined at [Sf] 7,000.- and that the other costs amount to:
   -  [Sf] 651.- fee for the clerk
   -  [Sf] 380.- miscellaneous expenditures;
4. These fees and costs must be born by the [buyer];
5. The [buyer] is obliged to pay the [seller's assignee] the legal fees of the latter amounting to [Sf] 12,000.- (plus 7.5% VAT and [Sf] 436.- costs);
6. This decision has to be addressed to the parties in writing.
7. Against this decision:
   a.) An appeal can be lodged with the Court of Appeal of the Canton of Zurich within 30 days upon receipt of this decision according to § 288 ZPO [*];
   b.) An appeal to the Federal Supreme Court of Switzerland can be lodged at the Commercial Court of the Canton of Zurich within 30 upon receipt of this decision according to art. 43 OG [*].

Commercial Court of the Canton of Zurich
President:
Clerk:

FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Company Z of Austria is referred to as [seller], the Plaintiff is referred to as [seller's assignee], and the Defendant of Switzerland is referred to as [buyer]. Amounts in Swiss currency (Swiss francs) are indicated as [Sf]; amounts in Austrian currency (Austrian schillings) are indicated as [öS].

Translator's note on other abbreviations: GVG = [Civil Procedure Act of the Canton of Zurich]; IPRG = Bundesgesetz über das Internationale Privatrecht [Swiss Code on the Conflict of Laws]; LugÜ = Lugano Convention [EC/EFTA Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters; OG = Bundesgesetz über die Organisation der Bundesrechtspflege [Swiss Federal Code on Court Organization]; OR = Bundesgesetz betreffend di Ergänzung des Schweizerischen Zivilgesetzbuches (Fünfter Teil: Obligationenrecht [Swiss Civil Code]; URG = [Swiss Copyright Act]; ZGB = [Swiss Civil Code]; ZPO = Zivilprozessordnung [Swiss Code of Civil Procedure].

** Thomas Frey is an LL.M. candidate at Queen Mary, University of London, and a graduate of the bar in Switzerland of 2001.

*** Camilla Baasch Andersen, Fellow of the Institute of International Commercial Law of the Pace University School of Law, is a Lecturer at Queen Mary, University of London.