Charlotte Van Steenderen, Van Steenderen Mainport Lawyers, Rotterdam
Vienna Sales Convention- applicability of general terms and conditions; failure to comply with duty to investigate (Art. 38) and Duty to Complain (Art 39)
Ref: Judgment of the Den Bosch Court of Appeal dated 18 June 2024 in the appeal proceedings between Axarfruit S.L., appellant and Organto Europe B.V., respondent.
The facts
In May 2020 and July 2020, the parties entered into purchase agreements under which Organto sold and delivered avocados to Axarfruit. To that end, Organto sent an order confirmation and invoice in the amount of €6,550 to Axarfruit on 20 May 2020 (consignment 1) and an order confirmation and invoice in the amount of €19,200 (consignment 2) on 9 July 2020, respectively. Agreed transport condition was EXW (Ex Works).
Organto in turn purchased the avocados from King Fruits Company in Colombia.
The quality of the avocados, after arrival in the Netherlands, was inspected by Maas Fruit Quality Inspection (hereinafter: “Maas”) on 2 July 2020. The ‘quality score’ of the avocados is ‘reasonable’ with a score of 6 on a scale of 1 to 10, stating:
“Hass avocadoes with a fresh opening appearance, oddly affected by turning fruits, combined skin defects and occasional sunburn. Therefore Reasonable quality and condition.”.
Between 9 and 11 July 2020, the avocados (totaling 16 pallets) from the order of 9 July 2020 (consignment 2) were transported by truck from Organto’s warehouse in the Netherlands to Axarfruit in Spain.
The CMR waybill dated 9 July 2020 states in box 13, among other things:
“Keep Cool at +5 Degrees Celsius”.
By email of 13 July 2020, Axarfruit wrote to Organto regarding the second consignment:
“(…) All 15 the pallets are rejected because of poor quality, ripeness and stem rot. 5 pallets are green but although when you cut them it is internal problems. (…) All pallets are rejected because the[y] are not green and hard as ordered. (…) Sorry but we were clear to load only green and hard avocado. Record transport it is 8c degrees. We are waiting for the driver to send us the termograph record (…)”.
By email dated 13 July 2020, Organto responded with:
“(…) We sent you pictures of the avocados in advance, when they left. You approved of that. This is how the avocados were at the time of loading and then they arrive a day and a half later as you show us now. So we are very curious about the driver’s temperature logger. We think something has gone wrong there because product that leaves hard and green, cannot arrive at the right temperature as you show. It is impossible that the quality deteriorated so much at 8 degrees (…)”.
That same day, Axarfruit responded:
“This really make angry (…) Take your fruits, you already sent people to check the quality. (…) It is stem rot also! (…) The termograph will be sent asap as we have this.”
The next day, Organto wrote to Axarfruit:
“(…) Before loading you saw the pictures. You are entirely free to decide what to do. You loaded. Avocado arrived totally different from what we saw at origin. (…) In the meantime we asked for the temperature logger, and we still do not have it. We have a problem that needs to be solved The fruit needs to find a destiny, and fast. So we try to place the fruit elsewhere. Trops will take 6 pallets. (…)”
To which Axarfruit replied:
“In the pictures never was shown stem rot and too ripe avocado pieces (…). 6 pallets will load today to your customer Trops. (…) Let me know what time Trops will come to load the palle[t]s.”
Subsequently, on 14 July 2020, 6 pallets of avocados were (re)sold by Organto to Trops Import-Export for an amount of €7,132.50.
On 20 October 2021, Organto sent Axarfruit a demand for payment of the aforementioned invoices for consignments 1 and 2 as well as for extrajudicial costs. By email dated 21 October 2021, Axarfruit disputed the invoice for the second consignment, requesting a credit note, due to the poor condition of the avocados of consignment 2. Once a credit note would have been issued, Axarfruit would settle the invoice for consignment 1. Organto refused to issue a credit note. Resulting in Organto commencing legal proceedings against Axarfruit.
With its statement of defence in the court proceedings, Axarfruit submitted an expert report dated 8 March 2022, which concludes:
“The damage found by us to the goods on arrival after the 2-day road transport is related to the presence of 30% ripe and/or picked fruit and the presence of gray pulp, the percentage of which cannot be determined on the basis of the information provided. The gray pulp occurred because the fruit was exposed to a temperature lower than 4° C and/or because it was stored for more than 4 weeks. (…)
We can establish that the road transport between 9 and 11 July compared to the entire transport and storage time from the harvesting of the fruit in Colombia accounts for 10% of the total, the remaining 90% must be attributed to the transport from Colombia to the Netherlands and/or subsequent storage in The Netherlands.
The quality problems identified in terms of internal damage/grey flesh
(chilling injury) we attribute to the storage conditions in which the fruit was harvest was stored at the place of origin (…).”
Organto in turn submitted an expert report dated 27 July 2022, in which its (party’s) expert writes among other things:
“(…) These graphs clearly show that on 9 July, 10 July and 11 July the temperature in the truck varied roughly between +10 and + 14 °Celsius, instead of the prescribed temperature of +5 °Celsius.
Transportation at these temperatures must have had the inevitable effect of warming the avocados during transport from the Netherlands to Spain. These high temperatures were potentially sufficient to start and drive the ripening process of the avocados.
The 16 pallets of avocados were transported in the truck to pale along with another 3 pallets of avocado ‘s and 1 pallet of mango’s. Unripe avocados are not compatible with ripened avocados or mangoes because they can produce large amounts of ethylene. For mangoes, it is further true that they can be grown at much higher temperatures (around +9 °Celsius) to avoid cold damage. So in a groupage shipment it is very important to pay attention to compatibility of the products to be transported. A combined load of mangoes and avocados would obviously never have been allowed.”
In addition, the expert wrote that according to the thermograph sent with the cargo, the average temperature during the trip from Colombia to the Netherlands had been +5.9 C.
By statement of claim in the appeal proceedings, Axarfruit submitted an “Addendum to expert report dated 8 March 2022” prepared at Axarfruit’s request, which states among other things:
“Mangoes naturally produce ethylene, as do other fruits, such as avocados, bananas or apples. However, this is an irrelevant fact with respect to the submitted report. The vehicle carried a total of 19 pallets of avocados and one pallet of mangoes. We note that the consignment in question was only 16 pallets, and that the other 3 pallets of avocados and the pallet of mangoes were other consignments transported in the aforementioned vehicle. (..)
The amount of ethylene released from avocados is up to 10 times greater than from mangoes, so the supposed ‘ripening’ that would have occurred in the 19 pallets of avocados by that one pallet of mangoes (…) is negligible (…).”
The decision of the Court at first instance
In the judgment now contested, the court determined that Organto’s claim is admissible, and that the Vienna Sales Convention applies. The general terms and conditions of Organto do not apply between the parties. Axarfruit has not fulfilled its duty of investigation and complaint, and a further investigation into non-conformity need not take place. Axarfruit must pay the invoices, less an amount due to the resale of 6 pallets to Trops Import-Export, as a result of which there was a partial dissolution of the purchase agreement by mutual consent.
Jurisdiction and applicable law
Axarfruit is based in Spain. Thus, the dispute has international aspects. The court must therefore first examine whether the Dutch court has jurisdiction to take cognizance of the dispute. This is the case: the dispute concerns a commercial matter within the meaning of Article 1 of the recast EEX Regulation. Under Article 26 (1) of this Regulation, the Dutch court has jurisdiction, since Axarfruit has appeared before the Dutch court and does not contest this jurisdiction.
In paragraph 4.7 in conjunction with 4.18 of the contested judgment, the District Court declared the Vienna Sales Convention applicable to this dispute. That decision has not been disputed by the parties and, in the opinion of the Court of Appeal, is correct. Also correct is the court’s implicit opinion that additionally Dutch law applies.
The decision of the Court of Appeal
In accordance with Article 35 (1) in conjunction with Article 36 of the Vienna Sales Convention, the seller must deliver goods whose quantity, quality and description meet the requirements set out in the agreement at the time the risk passes to the buyer.
The Dutch law applicable to the agreement between the parties and the agreed conditions shall determine the burden of proof between the parties. As already shown, the sale of the avocados took place under the ex works condition. It is not disputed between the parties that this condition implies that the risk of the transport, as from the loading of the avocados in the Netherlands, is for the account of Axarfruit.
Since Axarfruit argues that the avocados of consignment 2 did not meet the agreed quality, it is for Axarfruit to prove that this non-conformity already existed at the time of loading, namely on 9 July 2020.
In the opinion of the Court of Appeal, Axarfruit has not provided the evidence that the avocados of consignment 2 did not comply with the agreement already before the loading on 9 July 2020, and/or that the damages it had observed would not have occurred during or been aggravated by the transport. In doing so, the Court of Appeal considers the following established or insufficiently substantiated disputed facts and circumstances, considered together:
- the average temperature of the avocados during the journey from Colombia to the Netherlands was +5.9 ºC;
- the avocados were inspected by Maas after unloading from the vessel on 2 July 2020. The temperature of the inspected lot at that time was +6.8 ºC;
- the quality of the inspected lot was rated “Reasonable” (grade: 6) by Maas. Observed was “turning fruits, combined skin defects and occasional sunburn”;
- this report and the accompanying photographs were sent by Organto to Axarfruit before the truck was loaded for transport;
- Axarfruit subsequently accepted the avocados without its own inspection and without further comments;
- on 9 July 2020, the avocados were loaded for transport to Spain;
- the waybill stated in box 13 “keep cool at +5 Degrees Celsius”;
- the truck’s temperature loggers indicated a temperature between 10-14 ºC between 9 and 11 July 2020;
- the 16 pallets of avocados were transported with 3 other pallets of avocados of unknown quality and one pallet of mangoes.
It was asserted by Axarfruit’s expert that the avocados must have been at least 4 weeks old when they were loaded for transport to Spain and that they must have been exposed to a temperature below 4 ºC during transport from Colombia. Since neither these assertions nor the conclusions drawn are supported by facts, the Court of Appeal ignores them.
The Court of Appeal’s conclusion is that Axarfruit purchased avocados on 9 July 2020, which had been inspected on 2 July 2020, and which were then rated “reasonable quality”. The inspection report and accompanying photographs were sent to Axarfruit before the passage of risk and retained by it without comment. Axarfruit also did not inspect the avocados before loading.
Thus, it has not been established in any way that the avocados did not meet the agreed quality at the time of transition of risk.
(What has been established is that the carrier, who carried out the transport for the account and risk of Axarfruit, did not comply with the temperature instructions, so it is plausible that the avocados – which were only of “reasonable quality” – started to ripen during transport. In addition, 3 pallets of avocados of unknown quality and a pallet of mangoes were also transported, and it has not been established what effect these may have had on the ripening process – initiated by the excessive temperature. The party experts contradict each other on this point.)
In addition to this, Axarfruit, by not or not timely inspecting, had lost the right to rely on the fact that the avocados did not comply with the agreement.
Article 39 (1) of the Vienna Sales Convention stipulates that the buyer loses the right to rely on the fact that the goods do not comply with the contract if he does not notify the seller within a reasonable period after he has discovered or should have discovered this, specifying the nature of the shortcoming. The time at which the buyer should have discovered the defect depends on the time at which he must inspect the goods or have them inspected. Article 38 (1) of the Vienna Sales Convention stipulates in this respect that the buyer must do so within the shortest possible time, having regard to the circumstances.
Since it has been established that the purchase agreements were concluded under application of the Incoterm/transport condition “ex works”, the Court of Appeal is of the opinion that Article 38 (1) Vienna Sales Convention must be interpreted as meaning that the avocados had to be inspected by Axarfruit before transport. The Court of Appeal rejects Axarfruit’s unsubstantiated assertion that it is “not realistic” to expect a buyer to inspect the goods before they are loaded and that in practice this never happens.
It follows from this judgment that Axarfruit is obliged to pay the invoice of consignment 2 (after deducting the revenue made by the resale of 6 pallets to Trops) and also that Axarfruit wrongly invoked suspension of its payment obligation of the invoice of consignment 1, so that this invoice must be paid in full.
Axarfruit’s grievances therefore fail.