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Date:   24 May 2005
Court:   Turku Court of Appeal
Local case reference:   n/a
CISG Nordic ID:   050524FI
Country of decision:   Finland
Buyer's country:   Finland
Seller's country:   Spain
Goods involved:   Spices
Case history:   n/a
Original language:   Finnish
Provisions cited:   CISG articles 35, 39, 74, 77
Original court document:   n/a
Rapporteur:   Thomas Neumann
Case citations:   n/a

 

Abstract

by Vanto, Jarno, with permission from Pace Law School

 

This decision by the Turku Court of Appeals is primarily concerned with damages under Articles 74 and 77.

The defendant [Seller], a Spanish entity, entered into a contract with the plaintiff [Buyer], a Finnish entity, for the sale of 40 tons of paprika powder [“powder”] for use in various spice mixes intended for onward sale.  The contract specified that the powder needed to be steam-treated to reduce any microbe levels therein. However, laboratory sample tests established that the powder had been treated with radiation instead of steam. Under a European Union directive applicable to Finland and Spain, all consumer products treated with radiation must be marked as such in the packaging of the goods.  According to Buyer, Finnish consumers do not wish to purchase products treated with radiation, rendering the powder useless for the purpose for which Buyer intended it.

The issues were whether Buyer had given notice on time; whether Seller was in breach of the contract because the powder was radiation-treated; if Seller was in breach of the contract, did this cause damage to Buyer; what was the quantum of damages; and whether Seller is liable for such damage. 

Vis-à-vis the conformity of the goods under Article 35(1), the court concluded that even though the contract specified steam treatment and did not specifically exclude radiation treatment, both Buyer and Seller were experienced operators in the field and Seller ought to have considered in the light of the Directive that even in the absence of a specific contractual exclusion radiation treatment was out of the question. Hence, the court concluded that the goods were not in conformity with the contract and Seller was in breach of the contract under Article 35(1).

On Buyer’s timely notice to Seller about the non-conformity of the goods, the court stated that because Buyer had contacted Seller immediately after having learned of the non-conformity, as established by a government test laboratory, Buyer had given notice within a reasonable time as required under Article 39(1).

On damages the court, reciting Article 74, first concluded that in determining damages the starting point is the economic position where the aggrieved party would have been if the contract had been performed correctly. Hence, the court stated that the amount of damages can be higher than the face value of the contract. According to the court, Seller knew that Buyer would incorporate the powder into its own products that would be sold onwards to Buyer’s customers. Therefore, Seller must have understood at the time the contract was entered into that Buyer would not be able to deliver to its customers should Seller deliver non-conforming goods and that such a breach of the contract would cause damage to Buyer.

As damages Buyer claimed contractual monetary compensation given to its own customers for pulling the tainted products from the market, expenses resulting from buying back the tainted products from its customers, expenses resulting from destroying the tainted goods and related inventory write-downs, and expenses relating to examining the issue including wages, travel expenses, freight costs, chemical analysis costs, and destruction costs. The court determined that each of the items claimed by Buyer is recoverable under Article 74.

The court went on to consider whether Seller’s failure to perform its obligations was due to an impediment beyond its control that Seller could not reasonably be expected to have taken into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences in the sense of Article 79. The court concluded in the negative.

Finally, the court considered whether Buyer could have mitigated its damages as required under Article 77. The Appellate Court, agreeing with the Court of First Instance and relying on the facts as established by the lower court, determined that Buyer had not failed to mitigate its damages.

As the exact amount of some of the items claimed by Seller as damages could not be determined to a sufficient degree, the court, following the procedural rules of the forum, awarded reasonable damages to Buyer totaling 150,000 Euros.

 

Translated text

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Original text

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