Sabaté France makes wine corks that they “claim will not cause wines to be spoiled by "cork taint," a distasteful flavor that some corks produce” (Aspen Law School, n.d.). Due to this Chateau Winery believed in this claim so in February of 2000, Chateau, a Canadian winery entered into a contract with Sabaté France for the purchase of wine corks. This sale was with through Sabaté USA, a California subsidiary of the French company. Chateau placed two orders by phone agreeing to the quantity, price, payment, and shipping. According to the appellate court’s opinion posted by the Aspen Law School, “no other terms were discussed, nor did the parties have any history of prior dealings” (n.d.). The orders total 1.2 million corks in eleven shipments to be purchased and delivered to Chateau from Sabaté USA. When Sabaté sent the shipments they included an invoice which stated “Any dispute arising under the present contract is under the sole jurisdiction of the Court of Commerce of the City of Perpignan” (Schaffer, Agusti, & Earle, 2009, p. 21) Delivery was accepted and payment was remitted (Schaffer, Agusti, & Earle, 2009).
The appeals case states that CISG applies to this case due to the contract involving France, Canada, and the United States. The court stated, “there is no doubt that the CISG is valid and binding” (Schaffer, Agusti, & Earle, 2009, p 21.) The was a spoken contract over the phone in which all aspects needing to make an offer and its acceptance were fulfilled. According to CISG a contract need not be in writing to be effective and complete. The offer was made by Sabatéindicating the goods and fixing the price and quantity with an intention to be bound by the phone conversation. Chateau accepted the phone offer as spoken.
After taking delivery of the wine corks from Sabaté USA, Chateau des Charmes Wines Ltd discovered that the corks tainted the wine’s flavor. As a result, Chateau des Charmes filed a lawsuit against Sabaté for breach of contract. The suit was filed in Federal District Court in California alleging claims of breach of warranty, strict liability, false advertising, and unfair competition. Sabaté France and Sabaté USA filed a motion to dismiss the claim based on forum selection clauses.
The remedies for breach of contract are in the CISG. The CISG uses both Common Law and Civil Law to form the articles used to determine what is available to the buyer and seller. The right to remedy also depends on whether the failure to perform is considered a fundamental breach.Avoidance both the seller and buyer can avoid a contract. A buyer may declare a contract avoided where the seller’s failure to perform any obligation amounts to a fundamental breach (Article 49). A seller may avoid a contract if a buyer fails to either take delivery or pay the purchase price or otherwise commits a fundamental breach (Article 64) (Schaffer, Agusti, & Earle, 2009, p. 146).Right to remedy or cure – the CISG encourages the buyer and seller to stay in their contract by giving them additional time to perform. The UCC and CISG allows the seller the chance to remedy or cure a nonconforming shipment if it can be done in time for performance within the contract (Schaffer, Agusti, & Earle, 2009, p. 145).Additional time or extension – this is a grace period covered under Articles 47-49 of the CISG. This is based on Civil Law rules to grant an extension of time, past the date called for in the contract, for the parties to perform. The seller can request an extension of time from the buyer to cure or fix the problem. The buyer does not have to grant the extension (Schaffer, Agusti, & Earle, 2009, p. 145).Price reduction – CISG Article 50 allows a solution for the buyer of a price reduction for defective or nonconforming shipments. The options for the buyer are to ask to pay a reduced price for the goods, repair the goods to bring them up to specifications then pay a discounted amount, or ask the seller return the amount paid (Schaffer, Agusti, & Earle, 2009, p. 146). In the case of Chateau des Charmes vs. Sabaté, the only remedy for a price reduction would be on future products.Money damages – Articles 74-77 of CISG address money damages. The CISG provides that a breaching party, whether buyer or seller, shall be liable for damages in an amount sufficient to make the injured party whole in the event of a breach. This part of the CISG is recognized under English Common Law. Article 74 states that damages to an injured party shall consist of a “sum equal to the loss” (Schaffer, Agusti, Earle, 2009, p. 147).Specific performance – the court requires the party to the contract to carry out or perform its part of the bargain. This is the preferred remedy in Civil Law countries and under the CISG draws strongly on Civil Law acceptance to remedy contracts. The specific performance remedy is based on the idea that the buyer wants what was ordered and not just the right to sue for injuries that the seller may have caused from their breach. This provision of specific performance is doubtful to have any affect on this case because of its jurisdiction in the United States, a Common Law country. Article 28 of CISG puts limitations on buyer’s right to specific performance and will not grant it in a Common Law country. ReferenceSchaffer, R., Agusti, F., & Earle, B. (2009). International business law and its environment (7th ed.). Mason, OH: Cengage.
A fundamental breach occurs if the seller knew, or if it was reasonably foreseeable under the circumstances, that the shipment of less than the full quantity of goods ordered by the buyer would destroy the buyer’s fundamental benefit under the contract. In addition, the seller’s shipment of seriously defective goods that cannot be repaired or replaced on time, or that have no value to the buyer under the contract, is probably a fundamental breach. So too would be the seller’s failure or refusal to ship at all (Shaffer, Agusti, Earle, 2009, p. 145).
According to CISG articles 11, 14, 18 and 23 Sabaté is guilty of trying to add a clause in the contract through the invoice without Chateau agreeing to the terms. At no time did Chateau show any form of agreement or knowledge of the added selection clause. Therefore the resolution is that the appeal is reversed and remanded. According to Aspen Law School (n.d.), the dissmissal was an abuse of discretion because the district court had nothing to enforce. Sabaté’s invoices did not have form selection clauses in the contract this left the district court with out any evidence to enforce.
BecauseSabaté did not add make sure that Chateau was in full agreement of the selection clause this clause is not binding. So what was agreed upon in the first two phone calls should remain as the binding contract. There was no one that disagreed with the 3rd circuit courts ruling.
Chateau des Charmes Wines Ltd. V. Sabaté 328 F.3d. 528 (9th Cir. 2003) United States Court of Appeals (9th Cir.) Case Study Presentation Jo Ellen Kano International Law May 30, 2011
The Contract• Between Sabaté France and Chateau Winery, a Canadian winery• Agreed to by Telephone• Agreement included quantity, price, payment, and shipping• 2nd order also by Telephone• Eleven shipments totaling 1.2 million corks• Invoice accompany shipment
CISG as applied to the Contract• CISG is valid and binding• Sale of goods between businesses in different countries• Contract need not be in writing• An offer exists if it indicate the goods fixes or makes provision for determining price and quantity• Demonstrates intention of offeror to be bound• Concluded when offer is accepted
Breach of Contract Overview• Sabaté Companies advertises superior pure corks• Tainted corks ruins wine• One-million bottles of wine affected• Remedies of breach• Fundamental breach – CISG Article 25• Anticipatory BreachJune 28, 2012 University of Phoenix/BUS430 4
Start of Legal ProceedingsChateau des Charmes alleges breach of contract against Sabaté France & Sabaté USA Files lawsuit in Federal District Court in California Claims strict liability Breach of warranty False advertising Unfair competition
Remedies for Breach of Contract• Avoidance of the contract• Right to remedy or cure• Set additional time or extension for performance known as Nachfrist Period• Price reduction• Money and consequential damages• Specific performance
Fundamental Breach• Breach of contract committed by one party• Is a detriment to the other party• Deprives other party of what they are entitled• If breach was not foreseeable under the circumstances
Anticipatory Breach • Right to suspend performance • Right to avoid for anticipatory breach • Avoidance of installment contractsJune 28, 2012 University of Phoenix/BUS430 8
The Resolution• No evidence of Chateau agreeing to the terms of the selection clause.• Chateau performed under oral contract guidelines• The district court had nothing to enforce, the dismal was an abuse of discretion• The 3rd Circuit reverses the decision and remands the decision.
Opinions on the Case All three in the learning team were in agreement that the court made the right decision. Sabaté did not properly follow CISG guidelines when adding to the original contract. The original contract should stand
ReferencesAspen Law School. (n.d.). Chateau Des Charmes Wines Ltd. v. Sabate USA Inc. Ninth Circuit Court of Appeals . 328 F.3d 528 (2003). OPINION. PER CURIAM Retrieved from www.aspenlawschool.com/books/knapp_contracts/updatPace Law School Institute of International Commercial Law. (2007). Guide to Article 25. Retrieved from http://www.cisg.law.pace.edu/cisg/text/peclcomp25.htmlOsgoode Hall Law School York University. (2006). Chateau Des Charmes Wines Ltd. v. Sabate, USA, Inc. Retrieved from http://www.osgoode.yorku.ca/cisg/ChateauDesCharmesWinesv.Sabate.ht mSchaffer, R., Agusti, F., & Earle, B. (2009). International business law and its environment (7th ed.). Mason, OH: Cengage.June 28, 2012 University of Phoenix/BUS430 13