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Date:   18 September 2009
Court:   The Arbitration Court of Latvian Chamber of Commerce and Industry
Local case reference:   2009/91
CISG Nordic ID:   090918LV
Country of decision:   Latvia
Buyer's country:   Latvia
Seller's country:   Germany
Goods involved:   n/a
Case history:   n/a
Original language:   Latvian
Provisions cited:   CISG articles 1, 53
Original court document:   n/a
Rapporteur:   Aleksandra Vasiljeva
Case citations:   n/a

 

Abstract

by Aleksandra Vasiljeva

On 14 June 2006, a German seller (plaintiff) entered into a sales contract with a Latvian buyer. After the Buyer had difficulties with paying the purchase price, the parties entered into a debt recognition agreement. According to the debt recognition agreement, the Buyer acknowledged his debt to the Seller. The owed debt equaled € 15,673.88 and the Buyer agreed to pay the debt in the following installments: € 6,000 on the day of conclusion of the agreement; € 4,000 by 28 February 2009; € 2,500 by 31 March 2009; € 2,500 by 30 April 2009; € 2,337.88 by 31 May 2009. The Buyer agreed to pay penalties equaling one percent of the amount of the delayed installment.
However, the Buyer paid only three installments equaling € 7,577.29. For this reason, the Seller sued the Buyer for the payment of purchase price for the amount of € 9,760.59 plus penalties for the delayed performance.
Since the parties included an arbitration clause in the contract, the case was referred to the Arbitration Court of Latvian Chamber of Commerce and Industry.
The parties stipulated in their contract that the contract should be interpreted according to the Latvian law. All issues that are not expressly settled in the contract should be settled according to the Latvian Civil Code or other relevant statutes.
The Arbitration Court held that according to Article 1(1)(a) of the UN Convention on the International Sale of Goods (CISG), the Convention applies to contracts of sale of goods between parties whose places of business are in different states, when the states are contracting states. According to Article 53 of the CISG, the Buyer must pay the price for the goods and take delivery of them as required by the contract and the Convention.
The Arbitration Court applied Latvian law in order to determine whether parties came to the mutual agreement about the terms of the contract. Moreover, the Arbitration Court stated that parties concluded a valid agreement, according to which the Buyer promised to the Seller to pay the purchase price for the received goods in installments. The Arbitration Court found that there are no reasons to undermine the fact that the Buyer did not pay for the received goods.
The Arbitration Court defined contractual penalties according to Article 1716 of the Latvian Civil Code. Parties agreed in their contract that contractual penalties should be imposed on the Buyer if he would not pay the sums stipulated in the contract in the agreed time. The Arbitration Court noted that parties did not stipulate in the contract the period for which the penalties are going to be calculated.
The Seller presented proof that the Buyer paid only three installments and all of the payments were delayed. The Seller relied on Article 1717 of the Latvian Civil Code, according to which penalties can be incorporated in every contract. The Seller claimed that parties agreed to calculate penalties for every day of delay. However, the Arbitration Court applied Article 1508 of the Latvian Civil Code according to which, the preference should be given to the interpretation that binds the debtor less. For this reason the Arbitration Court did not follow the Seller’s argument according to which penalties should be calculated for every delayed day. Instead, the Arbitration Court calculated penalties as one percent of every delayed installment.

 

 

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