## Facts

- Internationale Jute Maatschappij BV, a Dutch seller, agreed to sell jute sacks to its long-time Spanish customer, Marín Palomares SL, the buyer.
- The parties’ communications and subsequent conduct reflected a concluded contract for **800,000 jute sacks** at a price of **US$ 55.90 per 100 bags**, and a first consignment was delivered.
- After the agreement, the buyer proposed a modest **price reduction** tied to changes in international currency exchange rates.
- The seller responded that it would consider the buyer’s request only if the buyer provided **special payment security**, including a **letter of credit from a Dutch bank**.
- The buyer refused to provide the requested guarantee and refused to accept delivery of the remaining sacks at the original contract price.
- The buyer ultimately did not take delivery of **724,800 sacks**.
- A few days after the buyer’s refusal, the seller made a substitute sale of the remaining sacks to a third party at a much lower price (reported as about **US$ 0.30 per sack**) and without obtaining the payment guarantees it had demanded from the buyer.
- The seller sued for **US$ 122,491.20** (about **16,710,600 pesetas**), claiming damages based on the difference between the contract price and the resale price.
- The Court of First Instance dismissed the claim, concluding it was not proven that a contract existed for the disputed 724,800 sacks; the appellate court affirmed.
- The seller brought a cassation appeal to Spain’s Supreme Court.

## Issues

1. Whether the buyer’s post-agreement proposal to reduce the price was a counter-offer under **CISG Article 19** preventing contract formation, or instead a proposed modification of an already concluded contract.
2. Whether the buyer breached a concluded CISG sales contract by refusing to accept delivery of the remaining 724,800 sacks.
3. Whether the seller could recover damages based on a substitute transaction under **CISG Articles 74 and 75**, and whether the amount had to be reduced under **CISG Article 77** because the seller’s substitute sale and related conduct were not reasonable.

## Decision

- The Supreme Court allowed the cassation appeal and reversed the lower courts’ conclusion that no contract had been proven for the remaining quantity.
- The Court held that the parties had concluded a sales contract and that the buyer’s later request for a price reduction came **after** unconditional acceptance and partial performance; it was therefore treated as a proposal to amend the existing contract rather than a counter-offer negating formation under CISG Article 19.
- The Court found the buyer in breach for refusing to accept delivery under the contract.
- The Court accepted that damages may be measured by the difference between the contract price and the substitute sale price under CISG Article 75 (with Article 74 supplying the general measure of recoverable loss).
- The Court reduced the seller’s recoverable damages because the seller did not sufficiently reduce its loss as required by CISG Article 77, pointing to the extremely low resale price and the seller’s insistence on a letter-of-credit requirement that differed from the parties’ established payment practice (payment after receipt of invoice).

## Legal Principles

- CISG applies to an international sale of goods between parties located in different Contracting States and governs contract formation and remedies.
- Under **CISG Article 19**, a reply that adds or changes terms can operate as a rejection and counter-offer, but a later price-change request made after unconditional acceptance and partial delivery is analyzed as a proposed contract modification rather than a formation defect.
- Contract existence may be assessed through interpretation of the parties’ communications and conduct; once a contract is found, CISG remedies apply to non-performance.
- Under **CISG Article 75**, after the other party’s breach, an aggrieved seller who makes a substitute sale may claim the difference between the contract price and the substitute price, along with further loss recoverable under **Article 74**, subject to CISG limits.
- Under **CISG Article 77**, the party claiming damages must take reasonable steps to reduce loss; damages are reduced to the extent loss could have been avoided by reasonable measures, including reasonable resale terms and commercially justified payment conditions consistent with the parties’ established practices.

## Conclusion

UNCITRAL CLOUT Case 395 holds that a CISG sales contract for jute sacks was concluded despite later price renegotiations, that the buyer breached by refusing delivery, and that while substitute-sale damages are available under CISG Article 75, the seller’s recovery must be reduced under Article 77 when its resale and related conduct do not reasonably limit the loss.


UNCITRAL CLOUT Case 395 (Internationale Jute Maatschappij BV v. Marín Palomares SL), No. 31/200, UNCITRAL CLOUT Case 395 (2000)