Queen Mary Case Translation Programme
Commercial Court (Handelsgericht) Zürich
10 February 1999 [HG 970238.1]
LEGAL REQUEST
"The [buyer] is to be ordered to pay to the [seller] an amount of [Italian Lire] ItŁ 162,329,851 plus interest on ItŁ 164,997,395 at a rate of 11.5% from 1 October 1996 to 31 December 1996, at a rate of 9.875% from 1 January 1997 to 31 May 1997 and at 9.375% from 1 June 1997 to 3 December 1997, as well as 9.375% interest on ItŁ 158,996,534 from 4 December 1997. The [buyer] is to bear the cost of the proceedings and to reimburse the [seller] for its costs."
THE COURT CONSIDERS
I. History of the proceedings
1. With the submission of its statement of claim on 13 June 1997, the [seller] initiated the current proceedings. After the receipt of the statement of defense on 9 January 1998, the Court invited the parties' representatives for a hearing and settlement negotiations. However, when the [buyer] announced that it was not in the position to accept settlement offers, the Court - with order of 23 February 1998 - withdrew the summons and ordered that the written proceedings be continued. Subsequently, the [seller]'s reply was received on 19 May 1998 and the [buyer]'s reply to [seller]'s brief was received on 22 September 1998. The main proceedings were closed by order of 22 September 1998. As the trial is ready to be decided, the Court hands down its decision.
2. It needs to be recorded that the [buyer] effected payment in the amount of [Swiss francs] Sf 5,000 (= Italian Lire [ItŁ] 5,980,861) on 3 December 1997. With respect to this amount, the Court considers the claim settled and irrelevant.
II. Procedural requirements
The [seller] is a stock corporation under Italian law, active in the printing trade, with place of business in Turin [Italy]. The [buyer], also a stock corporation, is a publishing house for art books in T. [Switzerland].
The Court possesses the local and functional jurisdiction over the dispute as well as the jurisdiction over the subject matter (No. 2 Lugano Convention [*] in connection with Art. 1(2) IPRG [*] as well as § 63(1) in connection with § 62(1) GVG [*]. Moreover, the [buyer] entered an appearance without contesting the Court's jurisdiction.
III. Parties' submissions and facts of the case
1. [Seller's claim]
During the years 1995 and 1996, the [seller] - and in part company A. S.p.A., who the [seller] merged with on 23 December 1995 - received various commissions by the [buyer], who is acting as a publishing house for art books. The orders concerned the printing, binding and delivery of art books and catalogues. With [seller]'s claim, [seller] demands payment of outstanding invoices regarding various commissions. The dates of the invoices submitted lie in the period between 24 October 1995 and 25 June 1996.
The [buyer] does not deny that the contracts were formed and deliveries were made. However, [buyer] claims that it is able to set-off various claims for damages as well as reductions in price. The background of the dispute is the [buyer]'s allegation that the [seller] repeatedly failed to deliver art books, respectively art catalogues, in time for exhibition openings or presentations. [Buyer] claims that, as a result, it lost the trust of extremely important private art patrons and consequently suffered large damages.
2. [Buyer's counterclaim]
The [buyer] seeks to set-off the following claims of damages against the [seller]'s claim:
[Buyer] claims that these art books are of inferior quality, as the [seller] did not use the agreed paper when it bound the book, but used paper of lower quality instead. While this was not visible on first sight, the books "showed an inferior quality which had to have repercussions for the [buyer]" during the course of use. The [buyer] submits that it never approved these books, it notified the [seller] of the lack of conformity in a timely manner and only refused the [seller]'s offer for remedy because a remedy would have been impossible for lack of time. [Buyer]'s "lenient conduct" towards the [seller] was founded solely on the special circumstances of the art book trade. Therefore, [buyer] now invoices the [seller] with the lower value of the delivered art books in the amount of the binding costs (ItŁ 20,000,000).
The [seller] replied to this submission that it had performed the order properly. While it was true that the bookbinder had accidentally used paper slightly different from the paper desired, the [seller] was not responsible for this matter. The [buyer] had abstained from the offer to change the paper. The book was also accepted by the customers without objections, a lower value did not exist.
[Buyer] submits that the catalogues were delivered too late to the exhibition by the Frankfurt Art Association, which had been sponsored by the B-Bank. The time and date of the opening of an exhibition formed an absolute "deadline" for the delivery of exhibition catalogues. The catalogues, however, did not arrive until 3 ˝ hours after the opening. The [seller] had been aware of the time of the exhibition opening, 29 September 1995, and it had accepted the responsibility for the timely delivery of the books. The [seller] was responsible for the transport, or at a minimum chose and commissioned a forwarding agency in its own name and on its account. The B-Bank maintains an independent photography program in the framework of its art sponsorship. [Buyer] submits that, as a reaction to the delay, the B-Bank deleted the [buyer] from its list of suppliers and no longer invited [buyer] to make any offers. Consequently, [buyer] received neither a commission for the 13 photographic exhibitions sponsored by the B-Bank in year 1996 nor an order for the 14 exhibitions in year 1997. [Buyer] argues that as one of the three European publishing houses specializing on the production of such catalogues, [buyer] would have received at least a third of the commissions, that is a total of 10. [Buyer] sets off an average loss of profit of [Deutsche Mark] DM 18,000 per commission, DM 180,000 overall.
In its statement of claim and reply to the statement of defense, the [seller] made the following pleadings and objections regarding this claim.
The parties had set intermediate deadlines. The keeping to those deadlines had been an indispensable precondition for the [seller]'s readiness to dispatch the catalogue, which had originally been set for 27 September 1995. The most important intermediate deadline had been 15 August 1995, on which date all films were supposed to be available at the printing place in Ae [Italy]. This was necessary for the printing to be effected on 30 August 1995 and the binding on 4 September 1995. However, the films had still not arrived by 11 September 1995, the last films had even been delivered only on 19, 20 and 24 September 1995. Because of the [buyer]'s delay, the parties had agreed on 13 September 1995 on a dispatch of the catalogues on 28 September 1995. The [seller] had kept to that schedule.
[Buyer] submits that the parties agreed upon an early delivery of these art books on 8 December 1995 for the artist's presentation in Frankfurt in the morning and the press conference in New York on the same day. However, the books did not arrive in time. In Frankfurt, they arrived on 8 December 1995 at 9:30 in the evening, after the last visitor had long since left the exhibition, and in New York the press conference on 8 December 1995 also had to be held without the book. Again it had been the [seller] who had commissioned the freight agency. Since the [buyer] was unable to sell the book at the exhibition opening, it suffered a loss of profit in the amount of DM 10,829.
The [seller] is of the opinion that the agreed delivery date was 15 December 1995. On 5 December 1995, the [buyer] had voiced its request to receive a small number of the books for the exhibition opening in Frankfurt and the simultaneous press conference in New York only three days later on 8 December 1995. The [seller] had tried to fulfill the request as a favor to the [buyer]. This was foiled by a strike of various couriers. The [seller]'s obligingness neither led to the agreement of an earlier delivery date, nor did the [seller] accept the cost and risk of transport.
The [buyer] argues that the [seller] delivered this work too late for a presentation date. Again, this had the result that the [buyer] was subsequently never again considered by a private sponsor, the Mn-Bank, and suffered damages in the consequence.
The [seller] objects to this submission and argues that it handed over the books in time to the forwarding agency commissioned by the [buyer], even though the [buyer] had delivered the setting copies much to late. In any case, the parties had reached a settlement regarding this commission.
In the following considerations, the Court will go into these and the further submissions made by the parties insofar as they are of importance to the legal proceedings.
IV. Considerations of the Court
1. Applicable law
It is undisputed in the case law and the relevant literature that a choice of law of the parties is still possible and admissible during the course of the proceedings with respect to such legal relations that are at the parties' disposal (Art. 116 IPRG). Nevertheless, it is questionable whether such a choice can be made by virtue of a sole statement in a party's brief, which is first and foremost directed to the Court. The [buyer] does not explicitly position itself regarding the [seller]'s suggestion, but solely states in a different context: "[...] and this is true for both Italian and Swiss law, to which the Vienna Sales Law refers in the end." However, a choice of law during the course of the proceedings may also be formed implicitly. This requires that the parties are conscious of the problem of the applicable law and that the parties' intent to make a choice of law is sufficiently evident (cf. Jagmetti, Zur Anwendung von ausländischem Rechts von Amtes wegen, in FS von Castelberg, Rechtsschutz, Zurich 1997, p. 106; BGE [*] 119 II 173 et seq.; ZR [*] 90 (1991), no. 19).
In the present case, both the [buyer]'s statement of defense and its brief replying to the [seller]'s reply show that the [buyer] was aware of the international context of the case. However, it cannot be gathered from [buyer]'s legal arguments - which are made without reference to the statutory provisions - that the [buyer] wished to choose either one of the legal regimes. Therefore, Italian law finds supplementary application next to the Vienna Sales Law by virtue of the rules of private international law.
2. [Seller]'s claims
- "Christian Voigt: In Camera"
ItŁ 51,472,225 as outstanding amount of the invoice of 29 February 1996.
- "Donigan Cumming"
The [seller] acknowledges that the [buyer] paid ItŁ 1,288,548 and - without receipt - ItŁ 19,564,878 of the total
amount of ItŁ 21,564,760 that was invoiced. This leads to a balance in favor of the [seller] in the amount of ItŁ
711,334.
- "Steven Arnold"
ItŁ 16,972,000 invoice of 29 February 1996, as the last of four invoices regarding this commission which has
allegedly not been paid.
- "100 years - 100 pictures"
ItŁ 57,102,000 (two installments at ItŁ 28,551,000 each) for the order invoiced on 24 October 1995; the
amounts currently claimed are based on the acknowledgement of indebtedness and agreement of payment by
installments of 14 June 1996.
- "vivir la muerte"
ItŁ 38,719,836 invoices of 25 June 1996.
Total: ItŁ 164,977,395.
The [seller] adds the accumulated interest in the amount of ItŁ 3,333,317 which would lead to an overall amount of ItŁ 168,310,712. The [seller] subtracts from this total a payment effected by the [buyer] on 3 December 1997, that is, after the action was brought, in the amount of Sf 5,000 (= ItŁ 5,980,861).
The agreement of a respite in payment and its effects are governed by the CISG (cf. Honsell (ed.), Kommentar zum UN-Kaufrecht, Berlin 1996, Art. 4 n. 14). The burden of proof is not explicitly provided for in the Vienna Sales Law, but it can be deduced from the Convention's rule-exception principle (v.Caemmerer/Schlechtriem, op. cit., Art. 45 n. 12 and 13; Honsell, op. cit., Art. 4 n. 10). Therefore, the [buyer] bears the onus of proof for the agreement of a respite in payment.
A hearing of evidence however presupposes that a party makes substantiated submissions of legal relevance which the other party disputes (Vogel, Grundriss des Zivilprozessrechts, 5th ed., Bern 1997, p. 253 m- 79a). A party cannot simply rely on general allegations which it intends to specify only in the hearing of evidence, even if that hearing is already possible during the main proceedings. Submissions must be clear, complete and definite (Frank/Sträuli/Messmer, 3rd ed., Zurich 1997, § 54 ZPO [*] n. 7). The [buyer] however does not make concrete submissions where and between which natural persons the parties are supposed to have agreed on a respite in payment. [Buyer] solely states that it only gave its promises of payment with the motivation of a respite in payment. [Buyer] does not give any indication how the [seller] was supposed to have become aware of [buyer]'s motives.
Failing a sufficient submission under law, the Court can therefore not take evidence regarding the agreement of a respite in payment. It follows that the Court must assume that that a respite in payment regarding the [seller]'s claims was not agreed between the parties.
Under Art. 78 CISG, interest is due on any sum in arrears based on a sales contract governed by the Convention. The [seller] claims interest on its individual claims, respectively from 90 days after issuance of the invoice at the Italian discount rate submitted by it. In doing so, [seller] refers to a letter of the Bank San Paolo in Turin [Italy] of 11 June 1997. Following established opinion, the interest rate is determined by the applicable national law, in the present case by Italian law (Honsell, op. cit., Art. 78 n. 12). Under Art. 1284(1) C.c. [*], the legal interest rate in Italy is 10%. Contractual interest is calculated at the same rate, unless the parties have agreed upon a different interest rate, which has not submitted by either party to the present dispute (Art. 1284(2) C.c.; see also v.Caemmerer/Schlechtriem, op. cit., p. 672 et seq.).
The [seller]'s claims therefore are subject to an interest rate of 10%. Following the principle of parties' disposition, only the higher interest claimed by the [seller] is to be corrected to 10%, whereas the lower interest claimed is to be granted according to the [seller]'s legal request. Therefore, the interest claimed by the [seller] for the time period between 1 October until 31 December 1996 needs to be reduced from 11.5% to 10%.
The [seller]'s invoice regarding the amount of the interest accumulated until 30 September 1996 also needs to be corrected, as [seller]'s calculation was based on an interest rate of 11.5%. Calculated with an interest rate of 10%, the reduced total of accumulated interest up until 30 September 1996 amounts to ItŁ 2,728,004.
3. Claims set off by the [buyer]
If the goods do not conform to the contract, the buyer is always entitled, by virtue of Art. 50(1) CISG, to reduce the price corresponding to the lower value of the goods. This is independent of whether or not the price has already been paid. If the seller remedies the non-conformity or the buyer refuses to accept the remedy, buyer is not entitled to reduce the price. In this case, the only option left to the buyer is to claim damages under Art. 45 CISG (Keller/Siehr, Kaufrecht, 3rd ed., Zurich 1995, p. 198).
However, the seller is only entitled to remedy the lack of conformity if the buyer can reasonably be expected to accept the belated remedy. The remedy may not cause "unreasonable delay", "unreasonable inconveniences" or "unreasonable uncertainty" regarding the compensation of expenses. An unreasonable delay will generally be caused if a failure to keep to the delivery date already constituted a fundamental breach of contract or if the further delay led to a fundamental breach (Honsell, op. cit., Art. 48 n. 22). There is a refusal to accept the offered remedy, if the buyer unequivocally and seriously declares to the seller that [buyer] will not accept a remedy (Honsell, op. cit., Art. 50 n. 24).
The [buyer] submitted that it was unable to accept the [seller]'s remedy offer because otherwise it could not have kept to the agreed date and because a request to remedy the commissioned work would only have had a negative impact on the [buyer] regarding its customers. The [seller] objected that the [buyer] consciously did without the remedy because the goods were not of inferior quality and lower value. [Seller] thereby implicitly pleads that the [buyer] lost its right to a reduction in price by refusing the offer for remedy.
Because of the following considerations, the Court does not need to assess these contradictory submissions:
Under Art. 50 CISG, the reduction in price is determined by a proportional calculation. The reduced sales price is supposed to bear to the contractual purchase price the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time (v.Caemmerer/Schlechtriem, op. cit., p. 502). This is the mandatory method of calculation and it is therefore inadmissible to instead simply use the estimated value of the delivered goods as the reduced purchase price, or to determine the reduced purchase price by subtracting the cost of repair from the contractually agreed price. The [buyer] claims damages in the amount of the binding costs without making a connection between the binding costs and the lower value of the goods. The [buyer] neither specifies the alleged lower quality of the goods, nor does it submit any indicators which would enable the Court to calculate the lower value according to the applicable proportional calculation method. The simplistic reference to the binding costs does not allow any conclusions as to the relation between the originally agreed reimbursement on the one hand and the gravity of the non-conformity on the other. The [buyer] therefore in no way managed to expound a lower value according to the respective provision of the Vienna Sales Law, which [buyer] itself referred to. Let alone did the [buyer] even come close to sufficiently substantiate the alleged lower value.
If the pleadings of one party are unclear, insufficient or undetermined, the matter of the judge's obligation to question the party under § 55 ZPO [*] is raised. However, regarding the insufficient substantiation of a claim or a set-off claim, it is supposed in case law that if a plaintiff does not present all facts necessary to support his legal right, especially in case of a representation by an attorney, these facts do not exist and because of that were not submitted by that party (cf. Frank/Sträuli/Messmer, op. cit., § 55 ZPO n. 4; ZR [*] 81 n. 118).
While it was determined that the [seller], respectively its bookbinder, used a different type of paper than was agreed, the [buyer] failed to sufficiently specify the effect upon the quality of the work and the extent of a resulting lower value. Under these circumstances, the claim for a reduction of the purchase price must be dismissed.
Even if one interpreted the [buyer]'s claim not as a reduction of the purchase price, but as a claim for damages, the [buyer]'s submissions regarding the damage with which it is allegedly setting off do not come close to a sufficient substantiation. While the "good will-damage" suggested by the [buyer] can certainly be compensated under the CISG (v.Caemmerer/Schlechtriem, op cit., Art. 74 n. 20 and 43), it also needs to be substantiated and explained concretely. However, a connection between the binding costs and a "good will-damage" was neither submitted by the [buyer], nor is it in any way evident.
Following these considerations, the [buyer]'s set-off claim is to be dismissed.
It is undisputed between the parties that the catalogues arrived in Frankfurt at least 3 hours late.
On 14 June 1996, Dr. T. signed an acknowledgement of indebtedness for the [buyer]. Referring to the agreement of 23 May 1996 and the [seller]'s fax of 27 May 1996, it committed itself to payment of three installments at ItŁ 28,551,000 each, in order to receive a credit of ItŁ 16,800,960 after the last installment had been paid.
The seller's delivery obligation therefore consists in initiating the transport of the goods: [Seller] must hand over the goods to the first carrier for transmission to the buyer (Honsell, op. cit., Art. 31 n. 44). By handing over the goods to the carrier for transmission to the buyer, the seller fulfills its delivery obligation. For this reason, the buyer may no longer hold the seller liable for non-performance under Art. 45(1)(b) CISG, if the goods are destroyed or misdirected during transport or if the handing over to the buyer is delayed. The carrier's mistakes are therefore not within the liability sphere of the seller (v.Caemmerer/Schlechtriem, op. cit., Art. 31 n. 33; Honsell, op. cit., Art. 67 n. 6 and 14). The question of whether the contract was fulfilled in time is therefore also determined by the timely dispatch and not by the time of arrival of the goods.
As was determined above, the carriage of the goods specifically does not belong to the seller's contractual obligations. Thus, by virtue of Art. 31(a) CISG, the [seller] is not liable for the mistakes of the carrier to whom he handed over the goods for transmission to the [buyer]. The [seller] fulfilled its delivery obligation by handing over the goods to the first carrier. [Seller] therefore did not engage the forwarding agent "for the performance" of its delivery obligation. In this context, the carriers are not vicarious agents in the meaning of Art. 79(2) CISG (v.Caemmerer/Schlechtriem, op. cit., Art. 31 n. 12). The [seller] is therefore not responsible for the carrier's miscellaneous mistakes.
The Court can leave open the question whether this constitutes an acknowledgement of indebtedness, as the [seller] has argued, because again there is no legal basis for the [seller]'s liability. It was explained above, that the carrier whom the [seller] handed over the works to within time, as is undisputed by the buyer, is not a third party engaged by the [seller] in the meaning of Art. 79(2) CISG (see above, "100 years - 100 pictures").
The [buyer] does also not explicitly claim with respect to this commission that the contract provided for the carriage risk to be borne by the [seller], i.e., the agreement of a specific Incoterm clause. While [buyer] does dispute the agreement of an ex-works clause as alleged by the [seller] (cf. in this regard Honsell, op. cit., Art. 67 n. 32), [buyer] solely argues that the carriage was organized by the [seller], but again does not submit that the [seller] itself was obliged to perform the delivery. It is also evident from the submitted files that the parties agreed upon an obligation to dispatch the goods. In the [seller]'s offer, the prices are referred to as "ex-works prices" and the confirmation of order describes the performance date with the term "ready for delivery."
The [buyer]'s set-off claim is therefore dismissed.
The [buyer] neither denies commissioning the order nor that the art books were printed and delivered. This also results from the files. The Court may leave undecided whether the parties, as was pleaded by the [seller], formed a settlement with a balancing clause. Based on the wording "Balance to be paid", there is a lot to indicate that the [seller]'s submission is true. Regardless, the [buyer] does not even come close to substantiating its supposed set-off claim. Neither does the [buyer] submit when, where and how much too late the delivery was effected, nor does it provide any grounds to conclude that the Mn-Bank gave it the prospect of further commissions and that this would have led to a profit (in what amount?). The [buyer] does not even state that the Mn-Bank has ever since become active as an arts sponsor in any form. It is not the Court's task to calculate like a bookkeeper the [buyer]'s possible profit chances.
Again, there is no reason to fall back upon the judge's obligation to question under § 55 ZPO [*]. This duty does not exist if the other party has already unsuccessfully pointed out the deficiency of incomplete submissions, which is what the [seller] explicitly did in its reply to the statement of defense (Frank/Sträuli/Messmer, op. cit., § 55 ZPO n. 7; ZR [*] 84 n. 52 E. 3a).
The claim with which the [buyer] was seeking to set-off was therefore dismissed.
4. Summary
It can be summarized that the [seller]'s claims are proven by the files and their existence is principally not disputed by the [buyer], which is why they are granted with the exception of a correction regarding the applicable interest rate. In contrast, the [buyer]'s set-off claims for damages and reductions in price lack a legal basis and a sufficient substantiation regarding the facts, which is why they are dismissed in their entirety.
V. Costs and reimbursement
THE COURT DECIDES:
The claim is settled with respect to an amount of ItŁ 5,980,861 because of irrelevance.
AND THEREUPON ADJUDGES:
1. The [buyer] is ordered to pay to the [seller] an amount of ItŁ 161,724,538 plus interest on ItŁ 164,997,395 at 10% from 1 October 1996 to 31 December 1996, at 9.875% from 1 January 1997 to 31 May 1997, at 9.375% from 1 June 1997 to 3 December 1997 as well as 9.375% interest on ItŁ 158,996,534 from 4 December 1997.
[…]
FOOTNOTES
* All translations should be verified by cross-checking against the original text. For purposes of this presentation, Plaintiff of Italy is referred to as [seller]; Defendant of
Switzerland is referred to as [buyer]. Amounts in Italian currency (Italian Lire) are indicated
by [ItŁ], amounts in Swiss currency (Swiss francs) are indicated by [Sf] and amounts in
German currency (Deutsche Mark) are indicated by [DM].
Translator's note on other abbreviations: BGE = Entscheidungen des Bundesgerichts [Official
Reporter of Cases of the Swiss Supreme Court]; C.c. = Codice civile [Italian Civil Code];
GVG = Gerichtsverfassungsgesetz [Swiss Code on Court Composition]; IPRG = Bundesgesetz
über das Internationale Privatrecht [Swiss Code on the Conflict of Laws]; Lugano Convention = EC EFTA Convention on Jurisdiction and the Enforcement of Judgments in
Civil and Commercial Matters - Lugano, 16 September 1988; ZPO = Zivilprozessordnung
[Swiss Code on Civil Procedure]; ZR = Blätter für zürcherische Rechtsprechung [Reporter of Case Law of the Canton Zürich].
Pace Law School Institute of International Commercial Law
- Last updated February 16, 2007
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