## Facts

- A Swiss buyer (plaintiff) and a German seller (defendant) entered an international sales contract for a used industrial installation described as a CNC-controlled blasting-chamber machine with rotary table (an “Anlage”), for EUR 28,740.
- The installation was delivered in Switzerland in October 2003.
- After delivery, the buyer found the installation inoperable; the equipment was heavily rusted and could not be used as intended.
- The buyer demanded that the seller repair or make the installation operational. The seller did not respond.
- The following month, the buyer invited the seller to retake possession of the installation; again, no response followed.
- Payment was secured through an irrevocable payment promise with a Swiss bank (Raiffeisenbank Naters), with EUR 29,040 blocked.
- On 29 March 2004, the buyer sued in a district court in the Canton of Valais seeking: (i) rescission/avoidance of the contract, (ii) authorization to scrap the installation as part of the unwind, (iii) cancellation of the payment promise and release of the blocked funds, and (iv) CHF 5,000 for storage and related expenses.
- The seller was served in Germany and was twice given deadlines to file a response and designate an address for service in Switzerland, with warnings about default; the seller did not appear.
- The file was forwarded to the Tribunal Cantonal du Valais (Kantonsgericht Wallis), Civil Division I, to decide the matter in default proceedings, including international jurisdiction and the merits under the CISG.

## Issues

1. Whether the courts of Valais had international jurisdiction under the Lugano/Brussels jurisdiction regime for contractual matters, based on the place of performance of obligations arising from a CISG-governed sales contract.
2. Whether the CISG applied under Article 1(1)(a), and whether the parties had excluded it under Article 6.
3. Whether delivery of an inoperable, heavily rusted used industrial installation constituted non-conformity under Article 35 and a fundamental breach under Article 25, allowing avoidance under Article 49.
4. Whether the buyer satisfied the examination and notice duties under Articles 38 and 39(1), and declared avoidance within a reasonable time under Article 49(2).
5. What consequences followed from avoidance, including restitution/unwinding under Article 81(2), release of the blocked bank amount, authority to scrap the installation, and recovery of storage-related losses under Article 74.

## Decision

- The court held that an international relationship existed (Swiss buyer, German seller) and that jurisdiction was proper in Valais under the Lugano/Brussels framework, as the dispute could be brought at the place of performance of the relevant contractual obligation.
- The court applied the CISG under Article 1(1)(a) because both parties were located in Contracting States, and there was no effective exclusion under Article 6.
- The court found that the delivered installation did not conform to the contract within Article 35; its condition (including extensive rust) made it inoperable.
- The court held that the lack of conformity was serious enough to amount to a fundamental breach under Article 25, permitting avoidance under Article 49.
- The court concluded that the buyer’s actions after delivery satisfied Articles 38 and 39(1) (timely examination and notice) and that avoidance was asserted within a reasonable time under Article 49(2).
- As a result of avoidance, the court ordered the unwind consistent with Article 81(2), including relieving the buyer from the payment mechanism and ordering release of the blocked bank amount.
- Given the condition of the installation and the practicality of unwinding, the court authorized the buyer to scrap the installation rather than requiring physical return.
- The court awarded the buyer CHF 5,000 for storage and related expenses as recoverable loss connected to the breach, applying Article 74 together with the effects of avoidance under Article 81(2).
- The judgment was rendered with the seller in default.

## Legal Principles

- Under the Lugano/Brussels jurisdiction rules, contractual claims may be brought at the place of performance of the obligation in question; in a CISG sale, the court may determine the place of performance by reference to the contract and CISG rules governing performance.
- The CISG applies to a sales contract between parties in different Contracting States (Article 1(1)(a)) unless the parties have clearly excluded it (Article 6).
- A used industrial installation is non-conforming under Article 35 when it is not fit for the contract purpose; non-functionality at delivery can qualify as a fundamental breach under Article 25 when it deprives the buyer of what it was entitled to expect.
- The buyer’s remedies for non-conformity (including avoidance under Article 49) depend on compliance with Articles 38 and 39(1) (examination and notice) and the time requirement in Article 49(2).
- After avoidance, Article 81(2) governs restitution and the unwind; where return is impractical and the goods have negligible value, a court may authorize disposal while allocating resulting costs to the breaching seller, and may award storage and handling losses as damages under Article 74.

## Conclusion

UNCITRAL CLOUT Case 905 (C1 04 162) holds that Swiss courts in Valais had jurisdiction over a CISG sale between a Swiss buyer and German seller, and that delivery of a heavily rusted, inoperable used industrial installation constituted non-conformity and a fundamental breach justifying avoidance; because the buyer examined and notified in time and acted within a reasonable time to avoid, the court ordered an unwind with release of the blocked bank payment, permitted the buyer to scrap the installation, and awarded storage-related damages.


UNCITRAL CLOUT Case 905, C1 04 162 (2005)