Regional Court in Bratislava

 

11 October 2005 [26CB/114/1995]

 

 

JUDGMENT

IN THE NAME OF THE SLOVAK REPUBLIC
[slovenske znenie]

 

The Regional Court in Bratislava, deciding by a single judge, Mgr. Sona Pekarcikova, in the case of Plaintiff L. & C., GmbH [Seller], with its registered office in H.M. ___. W, Republic of Austria, represented by attorney JUDr. S.U., versus Defendant V.V.D. [Buyer], with its registered office in B., ___, [Slovak Republic], represented by attorney JUDr. A.N., regarding payment of US $640., 45,600.- Slovak koruna [Sk] and 34,621.- Sk and appurtenances 

 

h a s   d e c i d e d   a s   f o l l o w s:

 

The court stays the proceedings with respect to the sum of US $25.80;

 

The court dismisses the action with respect to its residual part;

 

The [Seller] is obliged to pay to the [Buyer] a reimbursement of costs of the proceedings in sum of 55,459.20 Sk within three days after the judgment comes into force;

 

The [Seller] is obliged to pay to the State a reimbursement of its costs of the proceedings in sum of 3,600.- Sk within three days after the judgment comes into force.

 

REASONING

 

The [Seller] claimed in the proceedings its right to payment of US $6,460., 15,010.10 Austrian schillings [ATS] and 1,620 German Marks [DM] with 18 % interest. The [Seller] justified its action by stating that it concluded a contract of sale with the [Buyer] under which the [Seller] delivered goods to the [Buyer]. The [Buyer] took possession of the goods but did not pay the purchase price which was billed by the following unpaid invoices:

 

-         Invoice no. 950/91 of 3 April 1991 for the sum of US $12,270.- due immediately as a purchase price for delivered 3703 muskrat furs;

 

-         Invoice no. 967/91 of 11 April 1991 for the sum of US $14,886.40 due immediately as a purchase price for delivered 1163 red fox furs;

 

-         Invoice no. 999/91 of 13 May 1991 for the sum of US $7,411.- due Immediately as a purchase price for delivered 549 fox furs;

 

-         Invoice no. 1028/91 of 28 May 1991 for the sum of 1,620 DM due immediately as a purchase price for delivered 60 kg of waste parts from persian fox furs;

 

-         Invoice no. 1031/91 of 31 May 1991 for the sum of 6,120.50 ATS due immediately as a purchase price for delivered ancillary material; and

 

-         Invoice no. 73/91 of 16 August 1991 for the sum of 8,889.60 ATS due immediately as a purchase price for delivered ancillary material.

 

The [Seller] made a set-off of a claim of the [Buyer] amounting to US $28,106.80 against its total claim of US $34,567.40. The [Seller] subsequently called for payment of the residual part of its claim. The [Seller] stated in the action that a written response from the [Buyer] to this call contained a recognition of delivery of the goods and an unspecified notice of lack of conformity of the goods delivered. The notice of lack of conformity was accepted by the [Seller] only with respect to the delivery performed on 3 April 1991 for which the [Seller] deducted on 25 October 1991 a sum of US $2,529.40 from the purchase price by a credit note with reference to the duly noticed lack of conformity of 803 muskrat furs. Since the [Buyer] did not pay the debt, the [Seller] claimed its rights in the judicial proceedings.

 

The [Seller] changed its action at the hearing on 2 March 2001 and asked the court to oblige the [Buyer] to pay:

 

-         the sum of US $6,460.- with interest of 18 % annually on this sum for the period from 1 November 1991 until payment;

 

-         the sum of 1,620.- DM with interest of 18 % annually on this sum for the period from 7 June 1991 until payment; and

 

-         the sum of 15,010.10 ATS with interest of 18 % annually on this sum for the period from 3 August 1991 until payment.

 

As the currencies DEM and ATS terminated their validity in the course of the proceedings, the [Seller] adjusted its action with respect to the part of the claim asserted in these currencies and converted the claimed sums on 28 February 2002 from 15,010.10 ATS to 45,600.- Sk and from 1,620.- DM to 34,620.- Sk.

 

The [Seller] withdrew partially its action with respect to the sum of US $25.80 on 2 March 2001 and asked the court to stay the proceedings with respect to this part of the action. Under sec. 96 part 1 of the Slovak Civil Procedure Code (hereinafter referred to as “CPC”) a plaintiff can withdraw its action partially or in its entirety. If the action is withdrawn in its entirety, the court will stay the proceedings. If the action is withdrawn partially, the court will stay the proceedings with respect to this part of the action. Since the [Seller] withdrew its action with respect to the sum of US $25.80, the court stayed the proceedings in this part of the action.

 

On 10 July 1996, the court issued an order to pay and the [Buyer] filed a protest against it on 7 August 1996. The [Buyer] argued in its protest that it possesses none of the invoices referred to by the [Seller] in its action. The [Buyer] also argued that the [Seller] did not present any evidence of delivering the goods to the [Buyer], i.e., international bills of lading, customs declarations, etc. Furthermore, the [Buyer] invoked the expiration of the limitation period with respect to the asserted claim.

The court examined evidence by reading the submitted documents and interrogating the parties to the proceedings and witnesses. The documents consist of:

 

-         Invoice no. 950/91 of 3 April 1991 for the sum of US $12,270.- due immediately;

-         Invoice no. 967/91 of 11 April 1991 for the sum of US $14,886.40 due immediately;

-         Invoice no. 999/91 of 13 May 1991 for the sum of US $7,411.- due immediately;

-         Invoice no. 1028/91 of 28 May 1991 for the sum of 1,620 DM due immediately;

-         Invoice no. 1031/91 of 31 May 1991 for the sum of 6,120.50 ATS due immediately;

-         Invoice no. 73/91 of 16 August 1991 for the sum of 8,889.60 ATS due immediately;

-         Letter from the [Buyer] to the [Seller] of 6 December 1992;

-         Proposal for an out-of-court settlement of 7 July 1992;

-         Minutes of the meeting of the [Seller] and the [Buyer] represented by Ing. B.;

-         Customs declarations and customs invoices;

-         Accounting books of the [Buyer];

-         Bylaws of the [Buyer] of 22 March 1991;

-         Declaration of M.L. of 7 April 1999;

-         Nine invoices enclosed by certificates of delivery drawn by company S.K.D.B. to the [Buyer];

-         Invoice 4103 of 10 June 1991 for the sum of US $19,924.80; AND

-         Credit note for 803 muskrat furs for the sum of US $2,590.40.

The court interrogated witnesses: Ing. M.B., Ing. I.S., I.M., E.F., and Ing. J.M.

The [Buyer] responded to the action in written form and also by statements made at hearings. Beside the arguments presented in its protest, the [Buyer] also argued that, in the case of three invoices no. 950/91, 967/91 and 999/91, the contract of sale was concluded by acceptance of the offer made in February 1991, and the offer was made at an auction conducted in New York in January 1991. The [Buyer] argued that the UN Convention on Contracts for the International Sale of Goods cannot be applicable to this relationship, as the Convention only entered into force in the Czechoslovak Socialist Republic on 1 April 1991. The law applicable to this relationship shall therefore be the Czechoslovak Act on International Trade (hereinafter referred to as “AIT”) which prescribes a general limitation period of three years and in case of a recognized debt, a period of ten years.

 

The [Buyer] also stated that the [Seller] evidenced the delivery only by the recognition of debt, customs declarations and testimonies of the witnesses and [Buyer] does not consider such evidence to be sufficient. The [Buyer] challenged the credibility of witness Ing. B., who after leaving her employment with the [Buyer], worked for Company L. B. S.r.o. The [Buyer] stressed that a recognition of debt must always be in a written form and, with reference to its Bylaws, such acts must be signed by two members of the Board of Directors. The [Buyer] pointed out discrepancies in the declaration of recognition of 17 October 1991 which states that 2910 furs were delivered, while other documents state that 3703 furs were delivered for the same purchase price as stated in the recognition. The [Buyer] also argued that it did not have the permission to conduct business with foreign merchants which was necessary under act no. 42/1980 Coll. on Commercial Relationships with Foreign Entities, as amended, and, therefore, the [Buyer] was not eligible to import the goods from abroad on its own. The [Buyer] also argued that the invoices submitted by the [Seller] to the court were drawn by company S.B. to the [Buyer] and they cannot prove delivery of the goods from the [Seller]. The [Buyer] also opposed the list of payments elaborated by company S. B., alleging that it does not contain payments that were made by the [Buyer] from other bank accounts than its own. The [Buyer] argued that Ing. B. who signed the recognition on 17 October 1991 in the name of the [Buyer] was at that time terminating her employment with the [Buyer], which was terminated on 31 December 1991. The [Buyer] also opposed the claimed interest of 18 % and argued that the highest interest rate in this case can be 4 % annually.

With reference to the evidence gathered, the court investigated the following factual situation:

The court found that the [Seller] and the [Buyer] concluded a contract of sale in oral form in contact of the representative of the [Seller] and Ing. B. as a representative of the [Buyer]. As evidenced by the witness Ing. B. who worked at the time of concluding of the contract as a director of company V., the contract was concluded in the following manner: Mr. L., acting on behalf of the [Seller] made an offer to sell the goods to the [Buyer] for a specified purchase price. The [Buyer] accepted this offer in an oral form and the goods were subsequently delivered to the premises of the [Buyer] by its own vehicles (in case of smaller amounts of goods) or the carriage was arranged for by the [Seller]. Therefore, the concluding of the contract was informal and no applicable law was chosen by the parties.

 

The court therefore applied sec. 10 part 1 of the act. no. 97/1963 Coll. on International Private and Procedural Law which stipulates that if the parties have not made a choice of law, their contractual relationships will be governed by the law which assures their reasonable solution. Under sec. 10 part 2 a) of this act, with reference to the abovementioned, contracts of sale and work contracts will be usually governed by the law of the country of the seller’s or constructor’s registered office (domicile) at the time of concluding of the contract. With reference to these provisions, the law of the Republic of Austria shall be applicable. The court therefore applied the United Nations Convention on Contracts for the International Sale of Goods which was ratified by the Republic of Austria on 1 January 1989. Austria made no reservations to the Convention. The [Buyer] stated correctly that the Slovak Republic ratified the Convention on 1 April 1991, i.e., after the conclusion of this contract. This fact is nevertheless irrelevant, as under article 1 of the Convention, this Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State. In this case, the applicable law under sec. 10 part 2 a) of the Act on International Private and Procedural Law is the Austrian law which has included the Convention since 1 January 1989; the Convention was in force at the time of concluding of the contract.

 

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.

 

The court found to be proved that the parties to the proceedings concluded a contract of sale under which the [Seller] delivered goods to the [Buyer] and subsequently invoiced the purchase price as stated in the action. The [Seller] proved the delivery of the goods by testimony of the witnesses, since the handing over of the goods was not confirmed in a written form. The court refers to the testimony of witnesses Ing. B. and Mrs. M. who confirmed the handing over of the goods as stated by the [Seller] and the customs declarations. The court refers also to the letter of 6 October 1992 which was a direct reaction to the proposal for out-of-court settlement of 7 September 1992 and which precisely specifies the goods delivered and the purchase price. Ing. I. S. reacted to the letter of 7 July 1992 on behalf of the [Buyer] and confirmed the amount of the goods delivered to the [Buyer] but argued about the quality of the goods. Ing. I.S., as a Director, had the right to act on behalf of the [Buyer] in business matters and stated at the hearing (rec. no. 125) that when confirming the amount of the goods delivered, she was revising accountings of the [Buyer] and had consulted on these matters with Mr. T. who was a Chief of the Department on processing of the fur.

 

The first issue to be resolved was the expiration of the limitation period invoked by the [Buyer] in response to [Seller]’s claims. The [Seller] claims its right under invoices of 3 April 1991, 11 April 1991, 13 May 1991, 28 May 1991, 31 May 1991 and 16 August 1991. The court primarily had to resolve the issue of expiration of the limitation period and ruled on this issue as follows:

 

The [Seller] stated in its action that the limitation period cannot have expired with respect to the asserted claim, since it is necessary to apply notice no. 123/1988 of the Minister of Foreign Affairs on the Convention on the Limitation Period in the International Sale of Goods which prescribes a limitation period of four years and that, therefore, the limitation period cannot have expired, as it would expire on 11 April 1995 and the action was filed with the court prior to this date, on 21 March 1995.

 

Since this relationship shall be ruled upon under Austrian law, the court points out that Austria did not ratify the UN Convention on the Limitation Period in the International Sale of goods and therefore that convention is not applicable to this case. The UN Convention on Contracts for the International Sale of Goods is, however, applicable to this sales transaction.

 

Under article 7(1) of the Sales Convention, in the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

 

Under article 7(2) 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.

The Convention does not regulate the issue of limitation and therefore, under sec. 10 part 2 of act no. 97/1963 Coll., Austrian law is applicable.

 

The general provisions on the sale of goods in sections 1053 to 1066 of the Austrian General Civil Code (ABGB) regulate the issue of limitation. The current text of these provisions is enclosed (attachment /A).

 

If the claims for payment of purchase price concern claims for goods delivered or other services provided by merchants under the Trade Act or claims from agriculture, the limitation period shall be three years. The limitation period commences from the moment when it was possible for the first time to claim the right. The limitation period in case of a claim for payment of the purchase price commences from the due date of the purchase price. The deliveries concerned were made during the period from 3 April 1991 to 16 August 1991, and the invoices drawn were due at the moment of their receipt. With respect to the three-year limitation period, the action filed with the court on 21 March 1995 was filed belatedly; the limitation period had already expired.

The [Seller] also pointed out to the recognition of debt in the name of the [Buyer] on 17 October 1991 by Ing. B. and on 6 December 1992 by Ing. S. As it was concluded by the resolution of the District Court Bratislava I from 18 July 1991, rec. no. Dos37, the [Buyer] was represented when conducting legal acts by a Director or Vice-Director and by one other member of the [Buyer]’s Board of Directors and the Director had the right to act exclusively in the course of the business activities of the [Buyer]. The [Seller] stated that the recognitions of debt made on 17 October 1991 and 6 December 1992 were done in course of the business activities of the [Buyer] and argued that if these persons had the right to negotiate and conclude contracts in the name of the [Buyer], then they must be eligible also to recognize the debts emerging from such contracts, as these acts do not give rise to any new rights, they just confirm the rights and duties already accrued.

Under art. 19 of the Bylaws of the [Buyer], the Director organizes the activity of the Board of Directors and the course of business of the company. The Director is responsible for its activity to the Board of Directors and to the members of the company. The Director is also a manager of the company. Under article 19 section 5 of the Bylaws, if a particular issue is reserved for the decision of the Board of Directors and the written form of such act is required, such an act shall be signed by two members of the Board of Directors with one of them the Director or, in his absence, the Vice-Director. With reference to the abovementioned, it is clear that such acting of members of the Board of Directors is only necessary if the written form of act is strictly required. Under the Austrian General Civil Code, a recognition of debt can be performed as a declaration without any formal requirements in which the debtor states that he confirms existence of the claim of the creditor. The recognition can be also implied from behavior of the debtor if it is clear enough that it represents knowledge about its obligation. In the case of recognition of a debt, the limitation period starts to run from its beginning for a further three years.

 

Since there was no strict requirement for a written form of the recognition in this case, the court affirms the [Seller]’s argument that such recognition could have been performed solely by the Director – in the respective time by Ing. B. or Ing. S.

The court therefore determined that the [Buyer] recognized its debt on 17 October 1991 when Ing. B. recognized the debt with respect to its grounds and amount and that such recognition was valid. The limitation period therefore commenced on 17 October 1991 and ceased on 17 October 1994. Since the action was filed with the court on 21 March 1995, i.e., after expiration of the limitation period, the action was filed belatedly.

 

The [Seller] argued that under sec. 94 part 3 of the AIT, the limitation period in case of the recognized debt shall be ten years.

 

The court remarks that the AIT cannot be applied to this relationship, as under sec. 3 of AIT this act shall only be used if the parties to the contract have chosen the Czechoslovak civil law or the Czechoslovak civil law is the law applicable to their international commercial relationship, as it is defined in this act (sec. 2).

With reference to sec. 10 part 2 a) of act no. 97/1963 Coll., this relationship shall be governed by the Austrian law. Under sec. 13 part 1 of that Act, the issue of limitation shall be governed by the same law as the law applicable to the relationship in question. Therefore, the limitation shall be qualified under the Austrian law where the limitation period for this kind of relationship is prescribed as three years and in case of recognition of the debt, a new three-year period starts to run (and not a ten-year period as prescribed in the AIT).

 

The [Seller] also pointed to the letter of 6 October 1992 and claimed that Ing. I.S. as a Director of the [Buyer] recognized the debt to the [Seller] at that time. The [Seller] therefore argued that the new limitation period started to run from 6 October 1992.

With respect to this situation, the [Seller] referred to article 63(1) and (2) of the United Nations Convention on Contracts for the International Sale of Goods where under article 63(1), the seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations. Under article 63(2), unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance. The court agrees that the [Buyer] stated on 6 October 1992 that the list of the delivered goods with respect to its amount is correct. Nevertheless, the court refers to the last paragraph of the letter of 6 October 1992 which states “since the entire relationship has always been resolved without reference to legal provisions, i.e., by oral agreements between P.L. and Ing B., we recommend that you settle the dispute with Ing. B., who, acting at that time as the Director, did not inform managers about her activities and was alone deciding about the business transactions and therefore is responsible for such activities.” The court remarks that it is not possible to apply article 63(2) to this situation, since it is clear from the letter that the [Buyer] opposed the asserted claim from delivery of the goods. The court stresses that a recognition of debt must, although performed informally, meet basic requirements of recognition of the debt, i.e., it must be unequivocal with respect to the grounds of the debt and its amount. However, the declaration in question does not meet these requirements. Therefore, the letter of 6 October 1992 was not considered by the court to be a recognition of the debt by the [Buyer].

 

The [Seller]’s claim cannot be enforced if it is not asserted in the statutory prescribed period of time. The court must take into consideration the expiration of limitation period where it is invoked by the debtor. Once invoked, the court cannot uphold or enforce the claim of a creditor.

Since the [Buyer] invoked the expiration of the limitation period, the court examined this argument and concluded that the [Seller] claimed its right at the court belatedly and as the court cannot enforce such claim, the court dismissed the [Seller]’s action as unjustified in its entirety.

The court ruled on the reimbursement of the costs of judicial proceedings under sec. 142 part 1 CPC and since the [Buyer] was successful in the proceedings in defending its rights in entirety, the court granted to the [Buyer] a full reimbursement of the costs of the proceedings amounting to 55,459.20 Sk consisting of the paid court fee in amount of 10,620.- Sk and costs of the legal aid amounting to 44,839.20 Sk.

 

Instruction: An appeal against this judgment must be filed via the Regional Court in Bratislava within fifteen days of its receipt.

Regional Court in Bratislava, 11 October 2005.

Mgr. Sona Pekarcikova, Judge