Judgment of the Danish Supreme Court of 15
February 2001
Case No. 569/1997
Damstahl A/S v. A.T.I. s.r.l.
- Court composed of Hornslet, Marie-Louise Andreasen, Torben Melchior, Peter Block, Lene Pagter Kristensen.
- Appearances: Torben Bonderop, advokat, for the buyer; Thomas Højlund, advokat, for the seller.
- Appeal from the High Court, Western Division
Judgment of the Danish High Court, Western Division, chamber no. 1 of 26 November 1997:
Court composed of Lis Sejr, Lilholt, H. Pagaard (temporarily appointed).
In these proceedings, which were brought on 4 August 1995, the buyer, Damstahl A/S, claims as follows:
1. That the seller, A.T.I. s.r.l., be ordered to acknowledge that, according to a declaration of 31 July 1995, the buyer has properly indemnified its Norwegian subsidiary Damstahl AS for any sum – not including the counterclaim made by the subsidiary – that the subsidiary was ordered to pay to K. Lund AS Engros by way of damages pursuant to a judgment or court settlement relating to case no. A 199/95 in the Midthordland Herredsrett (district court) in Norway.
2. That the seller be ordered to pay to the buyer the sum that, according to a declaration of 31 July 1995, the buyer has paid to indemnify its Norwegian subsidiary Damstahl AS in connection with case no. A 199/95 plus interest at the usual rate as from the date of the buyer’s performance of the above declaration until payment is made.
The buyer’s claims concern the seller’s delivery of pipes to the buyer in May 1993 for transmission to K. Lund AS Engros via the Norwegian subsidiary. The buyer has claimed that the goods delivered do not conform with the contract.
The buyer brought proceedings before the Danish High Court, Western Division, arguing that the contractual place of delivery was Skanderborg, Denmark, relying on Article 5(1) of the EC Judgments Convention, see section 227(1) of the Danish Administration of Justice Act.
In its defence of 10 May 1996, the seller moved for dismissal of the case, arguing that delivery was effected in Italy when the pipes were handed over to an “independent carrier” and that the courts of Denmark have no jurisdiction over the seller, neither under the provisions of the EC Judgments Convention nor the Danish rules on jurisdiction.
The issue of jurisdiction was considered in separate, oral arguments, see section 253 of the Danish Administration of Justice Act.
The facts of the case relevant to the issue under consideration are:
For the purpose of a construction contract for a gas pipe installation in Norway, the contractor, Trønderrør AS, ordered acid- and rust-resistant pipes from K. Lund AS Engros, who went on to conclude a contract with the buyer’s Norwegian subsidiary, Damstahl AS, for the delivery of the pipes. At the request of Damstahl AS, the buyer sent an inquiry of 10 January 1992 to the seller concerning the delivery of, inter alia, 1500 m of pipes 30 x 2 mm of the type wst. 4436/aisi 316. The seller replied by a telex of the same day, offering to deliver, inter alia, the pipes concerned at a price stated as “31.45” per unit. Against the quoted price in the telex, the figure “31.-“ was indicated in a different handwriting.
By a telex of 14 January 1992 to the seller and referring to the seller’s telex of 10 January 1992 as well as a telephone conversation of 13 January, the buyer ordered the pipes concerned at the price of 31.00 Danish kroner per unit for delivery in March 1992. The telex includes the following information:
“….Delivery: Free delivered Skanderborg.
…..
Certificate: According to DIN 50049/3.1.b – with invoice. The date on which we have received the goods as well as certificates is deemed to constitute the date of delivery.
…..
We look forward to receiving your order confirmation.…..”
On 16 January 1992, the seller sent its order confirmation, containing a box with the pre-printed text “PORTO – PORT” in which the text “F.CO DOMIC. NON SDOG” had been typed. The order confirmation contains a pre-printed text reading: “TERMINI DI CONSEGNA NON SONO IMPEGNATIVI/THE DELIVERY TERMS ARE NOT BINDING.”
The pipes were delivered in Skanderborg as agreed and the seller sent an invoice dated 24 March 1992, containing a box with pre-printed text “PORTO – TO in which the text “F.CO DOMIC. NON SDOG” had been typed.
During the proceedings, an invoice was produced addressed to the seller by the firm of Avandero, Milan, Italy, who, according to the information available, had been signed by the seller to carry the pipes ordered from Italy to Denmark.
The invoice reads, inter alia:
“EXPORT PER 8660 SKANDERBORG
…..
RESA: DDU NON SDOGANATO.”
The buyer transmitted the pipes to Norway, where its Norwegian subsidiary delivered them to K. Lund AS Engros, who in turn delivered the pipes to the contractor, Trønderrør AS. After they had been buried, the pipes leaked and the contractor claimed Norwegian kroner 655,419 in damages from K. Lund AS Engros as well as the buyer’s Norwegian subsidiary. K. Lund AS Engros admitted liability and subsequently brought proceedings against the buyer’s Norwegian subsidiary claiming that the subsidiary be ordered to reimburse the damages paid. In a declaration of 31 July 1995 to its Norwegian subsidiary, the buyer promised to indemnify the subsidiary for any sum that the subsidiary would be ordered to pay to K. Lund AS Engros.
The buyer produced a fax of 17 November 1992 sent to the seller in which the buyer places an order for pipes and in which delivery is specified as “Delivery: free Skanderborg, packing incl.” In a fax of 1 December 1992, the seller acknowledged the order, and the fax contains the following term: “CONDITIONS AS USUAL.”
In his testimony Mr Ole Petersen, Ejer, explained that he is employed as group purchasing manager with the buyer and has been a member of the buyer’s staff since 1980. He is also in charge of purchasing for the Swedish and Norwegian subsidiaries. Cooperation with the seller began in 1981-82. Mr. Stefano Benetti phoned him and they agreed to meet in Italy. At this meeting terms of payment and delivery were discussed but prices and time of delivery were to be agreed on individually for each consignment. They agreed on the following term of delivery: free delivered Skanderborg; and the following term of payment: invoice month + 60 days. In his opinion this means that the agreed terms of delivery entail that delivery has been effected when the goods have been unloaded in Skanderborg. The negotiations were conducted in English. No supply agreement was prepared but the parties subsequently made a ”general agreement” under which the buyer acts as the seller’s representative in Scandinavia. The case at hand started when the buyer sent an inquiry to the seller, which was the usual procedure, and the seller replied by making an offer on 10 January 1992. The offer contains changes in prices made in his handwriting and these changes were made following a telephone conversation with Mr Losa, who accepted the changed prices. The order was placed on 14 January 1992 and contained the usual term of delivery: free delivered Skanderborg. The requirement of a certificate means that the goods cannot be deemed delivered until the certificate has been received. The first certificate was received by fax on 14 January 1992, which was quite acceptable. In the order the buyer had asked for a confirmation, which was sent on 16 January 1992. The confirmation states that the time of delivery is week 14 in 1992, i.e. the first week of April. The parties had originally contemplated delivery in March 1992.
Since 1982 the trading volume between the parties has ranged from 200 metric tons to 1,000 metric tons annually. In 1993 the buyer bought 390 tons of goods at a value of 7.8 million Danish kroner; 881 tons at a value of 17.4 million Danish kroner in 1994; 385 tons at a value of 12 million Danish kroner in 1995; and 76 tons at a value of 2 million Danish kroner in 1996. Occasionally goods were damaged in transit. In such cases an endorsement to that effect was made on the waybill and a request for a credit note was faxed to the seller. These were always issued without any problems and only concerned small amounts. He does not know whether the seller made any claims against the carrier. He mentioned a specific example where goods were delivered in March 1993; these goods had not been properly secured during the transport and part of the goods had been damaged. When asked the seller replied that the amount of the damage could be set off against the price of the next consignment. The damage amounted to 76,000 Danish kroner.
In his testimony Mr Ruggieri Losa Erba, Italy, explained that he has been on the seller’s staff since 1977. He has been in charge of the sale of the stainless steel produced by the seller for 15 years. Approximately 90% of the production is exported, mainly to countries in Europe. The free delivered term is a usual term for sale in Europe. In his opinion the term entails that the seller has to find a carrier, hand over the goods to the carrier, who delivers them to the customer. The seller pays the costs of transporting the goods. This term had been chosen because the seller wanted to provide the customer with the service of finding and paying the carrier. He participated in the negotiations with the buyer in the early 1980s. The seller has always used this term and has never received complaints about the term nor has it been the subject of renegotiation. It is correct that, in a few cases, the seller has issued a credit note to the buyer concerning the goods damaged in transit. The seller was under no obligation to do so but decided to issue the credit notes to keep up the good relationship between the parties. The credit notes were for small amounts of 5,000-10,000 Danish kroner. The handwritten order confirmation of 1 December 1992, in which he wrote “conditions: as usual,” was supplemented by a typewritten confirmation containing the usual term: “F.CO DOMIC. NON SDOG.” The DDU term in the invoice from the carrier Avandero to the seller concerns the relationship between the carrier and the seller. Thereby the carrier – on his own initiative – accepted the risk vis-á-vis the seller.
In support of the claim that the case should be heard on its merits, the buyer has argued primarily that the parties have agreed that delivery is to be effected in Skanderborg and accordingly, the Western Division of the Danish High Court has territorial jurisdiction over the case under Article 5(1) of the EC Judgments Convention. The UN Convention on the International Sale of Goods (CISG) may apply to the contract but Article 31(a) of the CISG, which the seller relies on for its motion for dismissal, is a non-mandatory provision (see Article 6 of the CISG), which the parties have agreed to derogate from. According to the buyer’s order of 14 January 1992 the term of delivery was free delivered Skanderborg. The seller’s order confirmation of 16 January 1992 states that the parties had agreed: “F.CO DOMIC. NON SDOG,” i.e. “franco domicile non sdognato,” which is the Italian name for the INCOTERM DDU (delivered duty unpaid). The contract between the seller and the carrier contained the same term. Under the DDU term the seller has to pay the cost and bear the risk involved and the goods are not delivered until they have been placed at the buyer’s disposal at the place of destination, in casu Skanderborg. This is also clear from the provision in the order that the goods will not be deemed delivered until the buyer has received the goods as well as the certificate. The buyer and the seller agree that the free delivered term must be interpreted as explained and that this is supported by the provision of section 65 of the Danish Sale of Goods Act.
In case the court does not agree that the free delivered term in the contract is to be interpreted as submitted, the buyer claims in the first alternative that the parties have done business in accordance with the buyer’s interpretation of the free delivered term, a practice that binds the seller, see Article 9 of the CISG. Consequently the seller cannot rely on the delivery term contained in his order confirmation. It must therefore be deemed that the parties have derogated from Article 31(a) as a result of the practices established between them.
In the second alternative, the buyer has claimed that at the time of conclusion of the contract neither party was aware that the acceptance in reality did not conform with the offer (in Danish law referred to as ‘skjult dissens’, i.e. hidden dissent) and that the seller bears the risk hereof. More specifically the buyer has argued that the contract between the parties had in reality been concluded when the buyer placed his order, that all previous dealings between the parties had been done in accordance with the buyer’s interpretation of the free delivered term, that the buyer therefore had no reason to be aware of a subsequent, different delivery term - in Italian – in the order confirmation, a term that was in effect superfluous. Consequently the term should not be taken into consideration.
In support of its motion to dismiss the seller has primarily argued that the Western Division of the Danish High Court does not have jurisdiction under Article 5(1) of the EC Judgments Convention because delivery under Article 31 of the CISG is effected when the goods are handed over to the first carrier, and this was done when the goods were handed over to the carrier Avandero s.p.a of Milan. The contract between the parties must be deemed concluded when the order confirmation was received because the buyer requested a confirmation of the order. The order confirmation contains the term “franco domicile non sdognato”, which is not the Italian name for the INCOTERM DDU term, but a term that solely specifies the allocation of costs and does not specify the passing of the risk or the place of delivery. The Italian name of the DDU term is “reso non sdognato”. The term contained in the carrier’s invoice to the seller is irrelevant for establishing the contract between the buyer and the seller. Italian law treats the free delivered term as a term allocating costs, which is the interpretation that applies in most international sales.
As to the buyer’s first alternative claim, the seller denies that previous dealings between the parties were based on the interpretation of the terms of delivery alleged by the buyer. The buyer has not proved the existence of a general agreement concerning the terms of delivery and the presented correspondence concerning a subsequent order does not prove that such practices exist. The fact that the seller has agreed to reimburse the buyer for minor damage to the goods in transit in order to keep up the good relationship between the parties is irrelevant.
As to the buyer’s second alternative claim, the seller denies that, unknown to the parties, the acceptance in reality did not conform with the offer (hidden dissent) and that the seller bears the risk hereof.
Grounds for the decision:
The buyer’s telex of 14 January 1992, in which it places the order for the pipes, states that delivery is to be made “free delivered Skanderborg”. In the same telex the buyer asked for an order confirmation from the seller. The seller’s order confirmation of 16 January 1992, which has not been disputed by the buyer and therefore forms part of the contractual basis, states that delivery is to be made “F.CO DOMIC. NON SDOG.” The buyer has argued that the term of delivery contained in the seller’s confirmation of 16 January 1992 corresponds to the INCOTERM DDU term, which entails that delivery must be effected in Skanderborg. The seller has argued that a free delivered term in international sales contracts is usually interpreted as governing solely the allocation of the costs of transporting the goods, and that this corresponds to the interpretation under Italian law; similarly the term in the order confirmation solely applies to the allocation of costs.
The parties agree that Italian law applies for the purpose of establishing the place of delivery.
On the evidence the court finds that the term contained in the seller’s order confirmation does not correspond to the INCOTERMS DDU term. Moreover, the court finds that a free delivered term in international sales contracts is usually interpreted as to apply solely to the allocation of the costs of transporting the goods. On these grounds it has not been proved to the satisfaction of the court that a contract has been concluded to the effect that the contractual place of delivery is Skanderborg. The court finds that the terms of delivery stated in the carrier’s invoice to the seller are immaterial as to the relations between the buyer and the seller.
Furthermore, the court is not satisfied that trade between the parties has been based on the buyer’s interpretation of the free delivered term, and as there is no basis for letting the seller bear the risk of any disagreement between the parties, the place of delivery has to be established in accordance with Article 31(a) of the CISG. Accordingly, delivery was effected in Italy and the Danish courts do not have jurisdiction to hear the claim for damages against the seller under Article 5(1) of the EC Judgments Convention nor under the Danish rules on jurisdiction.
The court hereby finds for the seller.
The buyer, Damstahl AS, is ordered to pay the costs, i.e. Danish kroner 25,000, to the seller, A.T.I. s.r.l.
Judgment of the Supreme Court
Appeal from the Western Division of the High Court, chamber no. 1.
The buyer Damstahl AS claims that the appeal be allowed and that the case be remitted to the Western Division of the High Court for a full trial on the merits.
The seller A.T.I. s.r.l. has moved for dismissal of the appeal.
For the purposes of these proceedings further details have been obtained and Mr Osvaldo Jatri, who is employed with the carriers Avandero, Milan, has given evidence.
The seller’s order to Avandero, dated 24 March 1992, includes the following term: “Condizioni resa: F.CO DOM. NON SDOG.”
The order of 17 November 1992 and the order confirmation of 1 December 1992 mentioned in the judgment of the High Court concern the consignment mentioned by Mr. Petersen in his testimony and which was damaged in transit; the loss is estimated to 76,000 Danish kroner. The order of 17 November 1992 stated:
“Please be very careful with packing and handling, must be without dents … the tubes are for candleholders.”
This Court has requested and received information about Italian law from the Italian Ministry of Justice. In its reply of 16 September 1999 to the Court’s questions, the Italian Ministry of Justice explained, inter alia (translated):
“Question 1:
The free delivery term used in Italian contracts for the sale of goods is a cost allocation term. The free delivered terms used in commercial contracts (for instance CIF – cost insurance freight, FOB –free on board, and DAF – delivered at frontier, which are all common in international contracts) do not change the rule that the seller is relieved of his obligations when the goods are handed over to the carrier or the rule that the buyer bears the risk of the goods being lost in transit. This interpretation is established Italian case law in respect of the most widely used free delivered terms.
These general statements do not prevent the use of free delivered terms stipulating that the seller shall bear the risk during the carriage of the goods to their destination if this follows from an agreement or usages. An ‘agreement’ is a contract concluded by the parties.
……….
Questions 2 and 3:
According to Italian law it is immaterial to the interpretation of the free delivered term whether an Italian firm contracts with a foreign firm located outside Italy, for example a Danish firm located in Denmark, or contracts with another Italian firm.”
Before this Court the buyer has not argued that the term of delivery contained in the seller’s order confirmation of 16 January 1992 is the Italian equivalent of the INCOTERMS DDU term. The buyer has maintained that the DDU term contained in the invoice from Avandero is part of the contract between the carrier and the seller. The claim made by the seller that this is not the case should be treated as a new allegation and therefore inadmissible. In the buyer’s opinion the information about the damaged goods in March 1993 shows that, according to the practices that the parties have established between themselves, any loss caused by damage in transit has been credited to the buyer and that this was not merely done in case of minor damage.
The seller has argued that its order to Avandero shows that the term of delivery is the same as that contained in the order confirmation sent to the buyer. The DDU term contained in Avandero’s invoice is not part of a contract between the seller and Avandero; moreover such a term in the contract of carriage is not part of the contract between the seller and the buyer. Those cases in which the seller has credited the buyer with amounts due to damage in transit all involve situations in which the carrier was liable. Liability for the damage amounting to Danish kroner 76,000, caused to the goods in March 1993, was either that of the carrier – careless handling of the goods - or that of the seller – insufficient packaging.
This appeal was heard on the basis of written evidence and records, see section 387 of the Danish Administration of Justice Act.
Grounds for the decision:
On the evidence, the term “F.CO DOMIC. NON SDOG” contained in the order confirmation of 16 January 1992 is an abbreviation of “franco domicile non sdognato”, which translates into “free delivered domicile, duty unpaid.” Both the buyer’s order and the seller’s confirmation contained a free delivered term. As the parties agree that Italian law governs the contract and as it appears from the information requested and received by this Court that Italian law treats a free delivered term exclusively as a cost allocation term, this Court finds that the contract between the parties does not stipulate that the place of delivery is Skanderborg.
Having regard to the seller’s order to the carrier of 24 March 1992, this Court is satisfied that the seller did not agree to the DDU term contained in the carrier’s invoice and the Court therefore finds that this term is irrelevant to these proceedings. The Court finds that the seller has not introduced a new allegation in this respect.
It has not been proved to the satisfaction of the Court that the dealings between the parties have been based on the buyer’s interpretation of the free delivered term.
This Court therefore finds that the place of delivery was in Italy, see Article 31(a) of the CISG and accordingly, the Danish courts have no jurisdiction over the buyer’s claim pursuant to Article 5(1) of the EC Judgments Convention.
On those grounds the Court hereby rules:
Appeal dismissed.
The buyer, Damstahl A/S, is ordered to pay the costs of the proceedings before this Court, i.e. Danish kroner 25,000, to the seller, A.T.I. s.r.l.
The buyer is ordered to pay the above costs within two weeks of the pronouncement of this judgment.
