A decision from the State of Rio Grande do Sul’s Tribunal, in the south of Brazil, adopted the Principles of International Commercial Contracts – Unidroit and the United Nations Convention on Contracts for the International Sales of Goods (CISG) as grounds for decision in a commercial litigation case.
Summary of the case: a Danish multinational company entered into an agreement with a Brazilian company, in which the later would sell 162 tons of chicken foot to the first. The value of the contract was USD 117.450,00 and the place of delivery of the products was the Hong Kong port, in China.
Due to the Brazilian Company’s breach of contract (non-delivery), the Danish Company instructed a Brazilian lawyer to litigate directly in Brazil, aiming for the contract’s rescission and the restitution of monies already paid.
The Court established, under the grounds of the international principle named ‘most closed connected’ - which states that the Court must not only analyse the legislation of one or another jurisdiction but also to the consequences arisen from each -, that the Principles of International Commercial Contracts (Unidroit) and the United Nations Convention on Contracts for the International Sales of Goods (CISG) should be considered.
It was affirmed that CISG and Unidroit’s principles are the current lex mercatoria: the set of rules applicable to international commercial transactions and thus applicable to the case.
As during proceedings the Brazilian Company could not prove the delivery of the product in the Hong Kong port, the Court understood article 30 of CISG was breached:
“Article 30 - 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.”
Further, it was indicated the non-observation of the good faith principle by the Brazilian Company, one of the well-established principles in commercial transactions, also stipulated in article 1.7 of Unidroit principles, and article 7 of CISG:
“Article 1.7 - Good Faith and Fair Dealing
(1) Each party must act in accordance with good faith and fair dealing in international trade.
(2) The parties may not exclude or limit this duty.”
“Article 7 (1) 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. (2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles”.
It is worth to mention that in accordance to the Introductory Rules to the Brazilian Law (Law n. 4.657/42), the litigation would have been occurred in a Danish Court, as the said Act establishes that the law of the place where the obligations arose will qualify and regulate such obligations (article 9). It also determines that the obligation from a contract arises in the offeror's residence (article 9, § 2).
Notwithstanding the foregoing, the Danish Company opted to submit the case to the Brazilian Court. Consequently, in this case, the foreign Party was able to cut time and costs, as if the case had successfully gone to the Danish Court, the enforcement in Brazil of any Order would have to be sought in the country, and a further legal procedure would be needed, in accordance to article 105 of the Brazilian Constitution, which states that any foreign decision, to be considered valid and enforced in Brazil, needs to receive its ‘homologation’ from the Brazilian Superior Court - Superior Tribunal de Justiça.