SELLER’S LIABILITY FOR COMPLIANCE OF THE GOODS WITH PUBLIC LAW STANDARDS –

   IN THE LIGHT OF CISG CASE LAW



                                             PETR ŽÍDEK

         Právnická fakulta Masarykovy univerzity, Katedra mezinárodního a evropského práva



                                        NADĚŽDA ROZEHNALOVÁ

   

   

Key words

   International sale of goods, CISG, breach of contract, non-conforming goods, public law
   standards.

   

   Probably any kind of goods which may be supplied under a sales contract is subject to some
   standard imposed by public law. These “public law standards” include, for example, product
   safety regulations, sanitation and health standards applicable to foodstuffs, rules of
   packaging and technical norms. In the area of cross-border trade an important question arises
   which of the different national sets of public law standards apply to the goods exported from
   one country to another. Does the seller have to comply with the requirements to be observed in
   the buyer‘s place of business or in the place where the goods are eventually exported? Or is
   his obligation to deliver conforming goods fulfilled when the merchandise is perfect according
   to the rules effective in the seller‘s own country? The wording of the UN Convention on
   Contracts for the International Sale of Goods (hereinafter the “CISG”), more specifically Art.
   35 CISG, does not provide definite solution. The present paper, therefore, addresses the above
   problem from the point of view of case law, as required by the principle of uniform
   application of the CISG set down in Art. 7(1) thereof.

   Firstly, the case law confirms that the best way how to avoid disputes over quality of the
   goods is to stipulate all their characteristics, including applicable standards, directly in
   the sales contract. For instance, a German court held that a consignment of paprika which
   contained an amount of ethylene oxide exceeding the limit permitted under the German Food
   Safety Law did not conform with the contract because the parties were in general agreement
   that the ordered goods had to be fit to be sold under the said Laws. Similar decision was
   rendered by a court in the Chinese province of Shandong.

   The question, which public law standards apply when there is no agreement, was first dealt
   with by the German Supreme Court in so called „mussels case“. The court referred to an
   extensive list of literature alleging that the compliance with specialized public law
   provisions of the buyer's country or the country of use of the goods cannot be expected.
   Certain standards in the buyer's country can only be taken into account (i) if they exist in
   the seller's country as well, (ii) the buyer has pointed them out to the seller, or (iii) if
   the relevant provisions in the anticipated export country are known or should be known to the
   seller due to the particular circumstances of the case (because, for instance, the seller has
   a branch in that country, he has already had a business connection with the buyer for some
   time, he often exports into the buyer's country or because he has promoted his products in
   that country). Several other courts later arrived at similar conclusion as in the “mussels
   case”. A Dutch court found unjustified the buyer’s expectation that the seller would abide by
   industrial standards applicable in the buyer’s country (as those standards were not explicitly
   discussed). The Austrian Supreme Court held that the seller cannot be expected to know all
   special rules of the buyer's country or the country of usage. It is rather for the buyer to
   observe his country's public law provisions and specify these requirements in the sales
   contract. The “mussels case” was explicitly referred to in a judgment of a U.S. federal court.
   The court ruled that the case fit one of the exceptions articulated in the “mussels case” (see
   letters (i) to (iii) above) rather than the basic rule, specifically because the seller knew
   or should have known about the safety standards of the importing country (which he violated)
   due to “special circumstances”.

   On the other hand, there have been also decisions which applied the regulations of the buyer’s
   state as a matter of course. According to the opinion of a French court, the knowledge of the
   seller that the ordered cheese would be marketed in France imposed a duty on him to deliver
   the goods wrapped in the manner required by French law. Also the latest decision concerning
   the issue of public law standards seems to point this way. In the case of delivery of frozen
   pork meat suspect of contamination by dioxin and consequently seized by authorities the German
   Supreme Court first reiterated that the seller could not be generally expected to know the
   relevant provisions in the buyer's country or in the country of the ultimate consumer. Despite
   this, the court held that the goods did not conform to the contract on the grounds that the
   suspicion of dioxin contamination constituted a hidden defect which had a bearing on the
   resaleability and tradability of the goods. Put differently, the court considered actual
   merchantability of the goods to be important for the conformity of the goods with the contract
   rather than the fact whether the public law standards were observed.

   To sum up, two different approaches can be identified in the case law. Prevailing part of
   decisions apply the rule that the public law standards effective in the seller’s country
   control the quality of the goods. The regulations in force in the buyer’s place of business or
   in the country where the goods are eventually consumed or utilized are to be respected only in
   exceptional circumstances when the seller’s knowledge of such regulations can be presumed.
   However, other rulings prefer the “merchantability” approach which results in considering the
   infringement of the public law standards of the destination country as a breach of contract.
   The above majority opinion is criticised also in part of literature. We believe that one
   universally applicable formula does not exist. The right solution, in our opinion, lies in an
   ad hoc approach taking into account the particular circumstances of each case. Thus, the
   liability for compliance of the goods with detailed (e.g., technical or health) standards in
   the destination place should not be transferred to the seller when the buyer failed to specify
   respective qualities of the goods in his purchase order or during negotiation. On the other
   hand, the seller should not be allowed to rely on his country’s rules when it should be clear
   to him, on the basis of his professional experience or plain common sense, that the
   regulations in the buyer’s country, or in the place where the goods are exported, are
   different (e.g., export of foodstuffs containing pork or beef to countries in which
   consumption of such meat is prohibited due to religious reasons). We would therefore recommend
   (also in view of the principle of uniform application of the CISG) to follow the rules
   formulated in the “mussels case”, provided that the exceptions set down in this case are
   construed in a sufficiently extensive way. Still, the most secure way for the parties how to
   avoid potential disputes is to specify the qualities of the goods and applicable public law
   standards directly in the contract.

   

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