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OS BJ - 1Cb/266/2005enJUDGMENT IN THE NAME OF THE SLOVAK REPUBLIC
The District Court in Bardejov, decided by a single judge, JUDr. Jana Dubrivska, in the case of Plaintiff S.G., Z.P.M.G “ E.-I. [Seller], with its registered office in G., L. n., Republic of Poland …, represented by attorney JUDr. I.P.G., versus Defendant M. J.-N. [Buyer], with its registered office in R.N., B. [Slovak Republic] …, regarding payment of 322,641.- Slovak koruna [Sk] and appurtenances
has decided as follows:
The [Buyer] is obliged to pay the [Seller] the sum of 322,641.- Sk with interest of 16 % annually for the period from 16 March 2004 until payment, all within three days after the judgment comes into force.
The court stays the proceedings with respect to the [Buyer]’s counterclaim from 25 August 2005 because it does not have jurisdiction.
The [Buyer] must pay the [Seller] costs amounting to 51,784.- Slovak koruna [Sk] within three days of the effective date of this judgment on behalf of [Buyer]’s legal counsel, JUDr. I.P.G.
REASONING
The [Seller] asserted, by its action filed with the court on 27 June 2005, its right to payment of 322,641.- Sk with interest of 12% annually for the period from 16 March 2004 until payment and compensation costs for the proceedings and the unpaid purchase price for the goods delivered by the [Seller] to the [Buyer]. The [Seller] justified its claim by stating that it delivered the goods to the [Buyer] and subsequently claimed the right to payment of the price by drawing invoice no. 131/EX/2004/RZ of 1 March 2004 for the sum of 33,869.- Polish zloty [PLN] due on 15 March 2004. The [Buyer] failed to pay this invoice despite [Seller]’s efforts on 22 April 2005 for an out of court settlement of its claim. The [Seller] supported the asserted interest rate by referring to sec. 735 and 502 of the Slovak Commercial Code.
The [Buyer] stated in its opposition that it did not oppose the [Seller]’s claim but asserted its right to unilateral set-off of its claim for damages asserted on 30 March 2004 arising from the contract on exclusive agency from 26 February 2002. The [Buyer] further stated that it suspended the payment of the invoice because of the [Seller]’s breach of the contract on exclusive agency of company N. for sale of MDF doors in Slovakia on 26 June 2002. The [Buyer] explained in its opposition that the [Seller] agreed that the [Buyer] shall be the sole and exclusive distributor of the MDF doors in the Slovak Republic and if breached, the [Seller] agreed to pay 50,000.- Euro [EUR] as a contractual penalty. The [Buyer] further stated in its opposition that after realizing that the [Seller] was violating its obligation, the [Buyer] asserted its right to payment of the contractual penalty on 29 March 2004, as it obtained evidence that the [Seller] also sold the MDF doors to other Slovak companies and the [Buyer] considered this situation sufficient to suspend the payment of invoices amounting to 47,301.62 PLN. The [Buyer] also asked the court to dismiss the action in its entirety and bind the [Seller] to pay 50,000.- EUR with interest of 12 % annually for the period from 29 March 2004 until payment, where the court would deduct from this amount the sum of 47,301.62 PLN, as invoiced by invoices no. 35/04, 110/04, 131/04.
At the hearing held on 21 September 2006, the [Buyer] stated that it does not oppose the [Seller]’s claim but asserted a motion to set-off the [Seller]’s entire claim with its claim for damages. The [Buyer] asserted this claim by its letter of 30 March 2004, which emerges from the contract on exclusive agency of 26 February 2002. The [Buyer] further explained that it did not pay the price because of its claim for contractual penalty arising from breach of the exclusivity clause which for the first time occurred during the exhibition in A.N. in March 2003. In order to prove his allegations, the [Buyer] asked the court to interrogate witnesses Mr. J.D., company D., Mr. H. and Mr. V.P.. The [Buyer] also stated that according to its knowledge, the [Seller] is being prosecuted in Poland for illegal business in Slovakia also concerning the relationship between the parties to the proceedings. The [Buyer] argued that the breach of the exclusivity clause is clearly proved by invoice no. 00651/EX/2003/B of 27 September 2003 which evidences that the [Seller] also sold the MDF doors to other merchants from Slovakia and thereby violated the exclusivity clause prescribed in § 2 part 2.2 of the contract.
During the hearing held on 21 September 2006, the [Seller] defended the arguments it asserted in the action. The [Seller] explained that the parties created an oral contract of sale in which they agreed on the object of sale and price, as it is described in the presented invoice. The payment due date was set out in accordance with trade usages on 15 March 2004. The [Seller] stated that the parties did not agree on an interest rate in the case of default with payment, therefore the statutory rate is applied. With respect to the alleged breach of contract on exclusive agency, the [Seller] opposed the existence of such breach and asked the [Buyer] to prove its statements.
By its resolution of 4 December 2006, rec. no.: 1Cb/266/2005-63, the court allowed changing the action with respect to the claimed interest, where the [Buyer] shall be obliged to pay 322,641.- Sk with interest of 16 % annually for the period of 16 March 2004 until payment and to pay the reimbursement of costs of the proceedings. This resolution came into force on 18 December 2006.
At the hearing held on 31 January 2008 the [Seller] specified that the contract of sale was finalized upon a telefax order the [Buyer] sent a week or two before delivery of the goods sometime in March 2004. The [Buyer] confirmed this. Concerning its alleged breach of the exclusivity clause, the [Seller] referred to article 7 section 7.2 of the contract which stated that all disputes arising from this contract shall be tried by the competent court of the Republic of Poland and therefore the District Court in Bardejov does not have jurisdiction to try this claim. The [Seller] further referred to the letter from the [Buyer] represented as a cancellation of the contract on exclusive agency which stated that the [Buyer] cancels the contract on 16 January 2004 and the [Seller] accepted this act. The [Seller] argued that the parties were also dealing with each other after cancellation of the contract on exclusive agency, as they were under the contract that is the object of this proceeding. The [Seller] repeated that he was not aware of any conduct that would constitute a breach of the exclusivity clause and that no such breach was proved by the [Buyer].
The [Buyer] responded by referencing a rapid decrease in sales subsequent to the [Seller]’s breach of the exclusivity clause. The [Buyer] confirmed that it did purchase the goods and that the [Seller] invoiced the agreed purchase price, as stated in the action, but asserts that it did not pay the price because the [Seller] breached the exclusivity clause. The [Buyer] confirmed that it continued dealings with the [Seller] subsequent to the alleged breach of the exclusivity clause but these dealings were in a substantially smaller amount than prior to the breach. The [Buyer] therefore asked the court to dismiss the action and stressed that it will claim its rights under the contract on exclusive agency before the competent court.
The court gathered evidence by interrogating the [Seller], represented by its attorney, reading documents submitted to the court, i.e. invoice no. 000131/EX/2004/RZ of 1 March 2004, the contract of sale finalized by the parties to the proceedings on 26 February 2002, letter from Mr. V addressed to the [Buyer], call for payment of 50,000- Euro [EUR] from 29 March 2004, invoice no. 00651/EX/2003/B, documents submitted in the proceedings, confirmation from the mayor of municipality L., records of the parties to the proceedings from trade registers, and thereby investigated this factual situation:
The [Seller] and the [Buyer] created a contract of sale when the [Buyer] sent a purchase order via telefax and the [Seller] accepted. Pursuant to this contract, the [Seller] delivered the goods to the [Buyer] – MDF doors and other goods as specified in invoice no. 000131/EX/2004/RZ; the [Buyer] handed over the goods; this fact was not challenged by the parties. The parties also did not oppose the fact that the price of the goods delivered was included in the abovementioned invoice for the sum of 33,869.- PLN which corresponds to the sum of 322,641.- Sk. This invoice also prescribed the due date and the price, as agreed by the parties when they finalized the contract.
The [Buyer] did not oppose the [Seller]’s claims that [Buyer] did not pay the price but [Buyer] claimed that it acted so because the [Seller] breached the 26 February 2002 contract on exclusive agency. The [Buyer] counterclaimed and filed protests against the order to pay and asked the court to dismiss the action and to bind the [Seller] to pay the sum of 50,000.- EUR with interest of 12% annually for the period from 29 March 2004 until payment, deducting the sums claimed by the invoices no. 35/04, 110/04, and 131/04 (with respect to invoice no. 110/04 the separate proceedings are held before this court under no. 1Cb/270/05) amounting to 47,301.- PLN. The [Seller]’s motion, in connection with sec. 98 of the Slovak Civil Procedure Code, was qualified by the court as a counterclaim, though indefinite in its petition. Nevertheless, the court did not correct this vagueness because the court did not have jurisdiction to decide the counterclaim.
The [Seller] has its registered office in the Republic of Poland; the [Buyer] has its place of business in the Slovak Republic. This constitutes an international relationship. The court therefore had to determine whether it had jurisdiction over the [Seller]’s claim for the purchase price and whether it had jurisdiction over the [Buyer]’s related claim for contractual penalty, which had already been examined in prior proceedings, 1Cb/265/05 and 1Cb/266/05. Since the proceedings concern an international relationship, the court must also determine the law that will govern the [Seller]’s claim for the purchase price. Since both the Republic of Poland and the Slovak Republic are European Union member states, the court’s jurisdiction shall be examined under the Regulation of the Council no. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters in effect from 1 March 2002 which is binding on all EU member states and directly applicable in accordance with the Treaty on the establishment of the European Economic Community (article 76 of the Regulation). These states are not party to any bilateral treaty governing the jurisdiction of the court in commercial matters and this issue is not governed by the UN Convention on Contracts for the International Sale of Goods (hereinafter referred to as the “Convention”) published in the Collection of Acts as no. 160/1991 Coll. which shall be applied to qualify the [Seller]’s claim for purchase price.
Under article 2 part 1 of the Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State. Under article 60 part 1 of the Regulation, for the purposes of this Regulation, a company or other legal person or association of natural or legal persons is domiciled at the place where it has its statutory seat, or central administration, or principal place of business. Under article 3 part 1 of the Regulation, persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter. Under article 5 of the Regulation, a person domiciled in a Member State may, in another Member State, be sued: 1. (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question; (b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be: - in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered, - in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided, (c) if subparagraph (b) does not apply then subparagraph (a) applies; Under article 6 part 3 of the Regulation, a person domiciled in a Member State may also be sued on a counter-claim arising from the same contract or facts on which the original claim was based, in the court in which the original claim is pending. Under article 23 part 1 of the Regulation, if the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction shall be ether in writing or evidenced in writing; or in a form which accords with practices which the parties have established between themselves; or in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned. Under article 24 of the Regulation, apart from jurisdiction derived from other provisions of this Regulation, a court of a Member State before which a defendant enters an appearance shall have jurisdiction. This rule shall not apply where appearance was entered to contest the jurisdiction, or where another court has exclusive jurisdiction by virtue of Article 22.
Under article 26 part 1 of the Regulation, where a defendant domiciled in one Member State is sued in a court of another Member State and does not enter an appearance, the court shall declare of its own motion that it has no jurisdiction unless its jurisdiction is derived from the provisions of this Regulation.
Under section 103 of the Slovak Civil Procedure Code (hereinafter referred to as “CPC”) the court shall at any time investigate whether the conditions of the proceedings are met. The jurisdiction of the court is one of such conditions.
Under section 7 part 1, 2, 3 CPC, the courts shall conduct civil proceedings to hear and decide disputes and other legal matters arising from civil, labour, family, commercial and economic relationships, unless the law vests this competence in other bodies. The courts shall conduct civil proceedings to consider and revise legality of decisions of public administration authorities and legality of decisions, measures or other actions of public authorities, unless the law vests this competence in other bodies. The courts shall conduct civil proceedings to hear and decide other matters only when provided for by law.
Under section 104 part 1 CPC, in case of any deficiency in the conditions of the proceedings that cannot be removed, the court shall stay the proceedings. Where the matter does not fall within the jurisdiction of the courts or must be preceded by the proceedings before another body, the court shall transfer the matter to the competent body as soon as its resolution on staying the proceedings takes effect; legal effects of the filing of the petition to commence proceedings shall be preserved.
With reference to article 2 part 1 of the Regulation the court of the Slovak Republic has jurisdiction to try the [Seller]’s claim for payment of 111,455.20 Sk as the unpaid price for the goods delivered. Taking the [Buyer]’s place of business into account, the Bardejov District Court is competent to try this case. Nevertheless, according to article 23 part 1 and article 26 part 1 of the Regulation, the Bardejov District Court does not have jurisdiction to try the [Buyer]’s counterclaim. The abovementioned contract on exclusive agency prescribes in its § 7 part 7.2 that all disputes arising from this contract shall be resolved by the competent court of the Republic of Poland. The parties’ agreement is in complete accordance with article 23 of the Regulation. According to the second sentence of this article, the chosen jurisdiction is the exclusive one and there is no proof that the parties made any subsequent choice of jurisdiction.
Since the [Buyer] counterclaimed based on payment of the price, for which the court has jurisdiction, the court had to examine whether the requirements of article 6 part 3 of the Regulation which governs jurisdiction on counterclaim once the court has jurisdiction to decide about the claim. With reference to article 6 part 3 of the Regulation on a counter-claim arising from the same contract or facts on which the original claim was based, in the court in which the original claim is pending. In the present case, the court found that the counterclaim does not arise from the same contract, does not refer to the same facts, and therefore with respect to article 26 part 1 of the Regulation the court declared that it does not have jurisdiction to decide the counterclaim and therefore stayed the proceedings with respect to the counterclaim under sec. 104 part 1 CPC. Lack of jurisdiction of the court is a defect which cannot be repaired in the proceedings. Since courts of other states have jurisdiction to try this case, this court was not able to delegate the proceedings to another court of the Slovak Republic.
Having no jurisdiction to decide the counterclaim, the court was not allowed to decide the [Buyer]’s claim with respect to the set-off, although the [Buyer] provided evidence on breach of contract on exclusive agency from 26 February 2002.
Therefore, the court only decided the [Seller]’s claim for payment of the purchase price for the goods delivered. Each party to the proceeding has its registered office (in case of the [Buyer] its place of business) in a different state.
Under section 756 of the Slovak Commercial Code, provisions of this act shall be applied only if not otherwise provided by an international convention that is binding for the Slovak Republic and that was published in the Collection of Acts.
Contracts for sale of goods entered into by parties who have their places of business in different states, which are member states of the Convention, shall be governed by the UN Convention on Contracts for the International Sale of Goods (hereinafter referred to as the “Convention”) published in the Collection of Acts as no. 160/1991 Coll.
The [Seller] has its registered office in the Republic of Poland and this fact was obvious to the [Buyer] from the invoice, which was also written in the Polish language. The [Buyer]’s place of business is in the Slovak Republic. Both states are member states of the Convention and no opting out of the Convention was proved in the proceedings, therefore the Convention is applicable to this relationship.
- Under article 11 of the Convention, a contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.
- Under article 30 of the Convention, the seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention. The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention (article 53 of the Convention).
- Under article 59 of the Convention, the buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller.
- Under article 78 of the Convention, if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it.
- Under article 7 of the Convention, questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.
With reference to the evidence gathered, the court found that the [Seller] performed its obligation from the contract of sale and delivered the goods, as was also approved by the [Buyer]. The court also determined that the [Buyer] failed to fulfil its obligation to pay the price for the goods delivered. The [Buyer] conceded this fact and supported its position by claiming that the [Seller] breached its obligation from a separate contract on exclusive agency. Since this claim has no impact on the existence of the [Buyer]’s obligation to pay the price arising from the contract of sale and since the court does not have jurisdiction to decide the [Buyer]’s counterclaim, the court found, from the gathered evidence and by application of the Convention, that the claim asserted by the [Seller] in its action is justified and therefore the court upheld the action in its entirety and bound the [Buyer] to pay the sum of 322,641.- Sk with interest of 16 % annually for the period from 16 March 2004 until payment. The [Buyer] had the obligation to pay the purchase price for the goods delivered, as asserted by invoice no. 000131/EX/2004/RZ, until 15 March 2004. The [Buyer] failed to fulfil this obligation and therefore was in default of performance of this obligation from the day after the due date of the invoice, where the interest rate was calculated in accordance with sec. 369 of the Slovak Commercial Code.
Instruction: An appeal against this judgment must be filed via the District Court in Bardejov within fifteen days of its receipt.
JUDr. Jana Dubivska, Judge |
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