## Facts

- Australian transport operators R. J. and A. M. Smallmon agreed to purchase four used Volvo trucks located in New Zealand from Transport Sales Ltd. (TSL), acting as sales agent for the owner.
- The trucks had been assembled in Australia for export to New Zealand and therefore did not have Australian Design Rules (ADR) compliance plates attached at assembly.
- The written sale contract did not address Australian registration or ADR compliance.
- TSL suggested the buyers engage specialist Australian contractors to assist with importation and ADR compliance.
- After importation into Queensland, authorities refused to register the trucks due to lack of ADR compliance plates and supporting certification, limiting lawful use.
- The buyers alleged the trucks were non-conforming and not fit for their intended use as commercially operable trucks in Queensland.

## Issues

1. Under CISG art. 35(2)(a), were the trucks unfit for the ordinary purposes for which trucks are ordinarily used because they could not be registered in Australia?
2. Under CISG art. 35(2)(b), did the sellers’ knowledge that the trucks were destined for Australia create an implied warranty that they would comply with Australian regulatory requirements (ADRs) and be registrable in Queensland?
3. Were there “special circumstances” or an agreement allocating the risk such that the sellers bore responsibility for compliance with Australian public-law regulations?

## Decision

- The Court of Appeal dismissed the buyers’ appeal and affirmed the finding of no breach of CISG art. 35.
- The trucks were fit for their ordinary purpose as trucks under art. 35(2)(a); inability to obtain Australian registration was treated as a regulatory impediment, not physical unfitness for ordinary use.
- The sellers did not impliedly warrant compliance with Australian ADR requirements under art. 35(2)(b) merely because the goods were to be used in Australia.
- No “special circumstances” shifted responsibility for Australian regulatory compliance to the sellers; the buyers’ experience and the seller’s recommendation to retain Australian compliance experts supported the opposite inference.
- In the alternative, the court indicated the parties had effectively “agreed otherwise” so that art. 35(2)’s implied fitness obligations did not extend to Australian regulatory compliance on these facts.

## Legal Principles

- CISG must be interpreted with regard to its international character and the need for uniform application (CISG art. 7(1)).
- Under CISG art. 35, a seller generally is not responsible for ensuring goods comply with foreign public-law regulations or standards in the importing country, absent special circumstances or contractual allocation of that risk.
- Fitness for “ordinary purpose” under art. 35(2)(a) concerns the goods’ functional suitability for ordinary use, not their legality for use under every potential importing jurisdiction’s regulatory regime.
- For “particular purpose” under art. 35(2)(b), the buyer must show the seller undertook responsibility for that purpose; knowledge of destination alone does not typically imply a warranty of buyer-country regulatory compliance.
- Parties may, expressly or by sufficiently clear indicia in their dealings, “agree otherwise” and exclude or limit art. 35(2)’s implied fitness obligations.

## Conclusion

The Court of Appeal held that, in an international sale governed by the CISG, the seller did not breach article 35 by delivering trucks that could not be registered in the buyer’s country where the contract was silent on local regulatory compliance and no special circumstances showed the seller assumed responsibility for compliance with Australian ADR and registration requirements.


Smallmon v. Transport Sales Ltd. (CA), [2011] NZCA 340 (N.Z. Ct. App. 2011)