Not complaining in time about a defective performance often has far-reaching consequences. This was also the case in a matter dealt with by the North Holland District Court at the beginning of this year. A buyer was ordered to pay all outstanding invoices because he had lost his right to invoke the defect.

Facts

Geitonas, a company based in Greece, had been doing business with an eel trader based in the Netherlands for over 30 years. For years, the eel trade bought live eels from Geitonas, which eels were cleaned, salted, packed and frozen by the eel trade after being transported to the Netherlands. From the end of 2015/beginning of 2016, new agreements were made by the parties, according to which the eel trade had the eel cleaned, salted, packaged and frozen by Geitonas in Greece, after which the eel was transported to the eel trade in the Netherlands.

Geitonas sold and delivered five batches of frozen eels to the Dutch eel trade but the eel trade did not pay the invoices for a total amount of € 117,185.70. Geitonas initiated proceedings and claimed payment of the invoices, plus interest and costs. According to the eel trade, it was not obliged to pay the invoices because no purchase agreement had been concluded between the parties. If there had been an agreement, there would have been a question of non-conformity.

Is there a purchase agreement?

Because this case concerned the international sale of movable property and the seller Geitonas and the Dutch buyer are established in contracting states, the court assessed the case on the basis of the United Nations Convention on Contracts for the International Sale of Goods (the Vienna Sales Convention).

According to the court, there was indeed a purchase agreement. Under Article 9 (1) of the Vienna Sales Convention, the parties are bound by any custom to which they have agreed and by any practice which is customary between them. The parties had a long-standing commercial relationship of approximately 30 years, and the parties had made new agreements at the end of 2015/beginning of 2016. Both the old and the new agreements on the purchase and delivery of eel were - as is customary in this sector - made verbally, over the phone or in person. The court understood the new agreements to mean that a framework purchase agreement was concluded between the parties. Within that framework, as was customary before the new agreement, orders were placed orally (by telephone) and deliveries were made accordingly. The court assumed that the eel trade had also ordered the delivered eel. In this connection, the court attached importance to the fact that the eel trade had received the five deliveries in question and had signed the waybills for these deliveries. The eel trade should have reacted/protested immediately if Geitonas delivered eel that the eel trade had not ordered.

The eel trade did not do so during the period in which the deliveries were made. Furthermore, it had not been argued or demonstrated that Geitonas had deviated from the usual practice between the parties with regard to those five deliveries.

 Non-conformity, obligation to inspect and deadline for complaints

The second defence of the Dutch eel trade was that there was non-conformity because the batches delivered consisted of the wrong eels (wild eels instead of farmed eels), the eels were not sorted according to size and the packaging was not sufficiently vacuum packed, which caused the eels to discolour and the taste to change. The eels were also not in the right bags and boxes. This would make the eel batches unsaleable.

Geitonas argued that the eel trade had failed to comply with its duty of investigation and duty of complaint. According to Geitonas, the buyer had to inspect the goods within a short period of time after delivery; the buyer has to examine whether the purchased goods have all the agreed characteristics. In the case of frozen goods, the buyer may be expected to defrost them in order to make samples. However, the eel trade had been idle. The buyer must then report any defects to the seller within a reasonable period of time. However, the eel trade had only complained to Geitonas more than eight months after the last delivery, at the time when Geitonas visited the eel trade in the Netherlands to discuss why the five deliveries had not been paid for.

The court followed Geitonas in its argument and considered as follows:

" Pursuant to Article 38 of the Vienna Sales Convention, the buyer must inspect the goods, or have them inspected, within a period that is as short as possible having regard to the circumstances (the inspection obligation). This inspection may be postponed until after the arrival of the goods at their destination if the contract also provides for the carriage of the goods. If the defect is discovered during this inspection, a complaint must be lodged within a reasonable period of time after the inspection (the complaint period). Pursuant to Article 39 of the Vienna Sales Convention, the buyer loses the right to rely on the fact that the goods delivered are not in conformity with the contract if he does not notify the seller of this within a reasonable period of time after he has discovered or should have discovered this. The time and extent of this examination by the buyer will depend on a number of factors, such as the type of goods purchased, the buyer's reasonable expectations, the perishability and any rapid deterioration or processing of the goods.

 The deliveries of eel from Geitonas involved perishable goods. The mere fact that the eel is frozen does not mean that it should not (no longer) be considered perishable. The Court is therefore of the opinion that [defendant] should have inspected the eel immediately after receipt. It has neither been argued nor has it become evident that [the defendant] did so. The Court is further of the opinion that [the defendant] should have discovered the alleged shortcomings - both those with regard to the quality/description and those with regard to the packaging material - during an inspection. After all, with regard to the complaints about the quality/description, it could be expected from [the defendant] that it would defrost a part of the eel in order to subject it (randomly) to an inspection. The complaints about the packaging material (bags and boxes) could and should have been noticed immediately during a simple inspection. The Court therefore concludes that the defects alleged by the [defendant] - notwithstanding the answer to the question whether there is a question of non-conformity - should have come to light during a proper inspection. The complaint period therefore started immediately after receipt of the eel.

 With a view to Article 39 (1) of the Vienna Sales Convention, [the defendant] should have protested within a reasonable time after the inspection. What is a reasonable time to complain depends on the circumstances of the case, in particular on the nature of the delivered goods, the nature of the alleged defect, the situation of the parties to the agreement and relevant customs in the sector. With perishable goods, a short complaint period applies. On behalf of [the defendant], the answer given during the oral proceedings to the question when [the defendant] complained about the deliveries to Geitonas was so divergent that the Court - as Geitonas argues - assumes that [the defendant] only informed Geitonas during his visit to the Netherlands that the deliveries were not in accordance with the contract. This is therefore at least eight months after the last (fifth) delivery. The Court is of the opinion that [the defendant] has exceeded a reasonable period of time to complain with this. This implies that the Court - in the event of non-conformity - is of the opinion that [the defendant] has lost the right to rely on the fact that Geitonas' deliveries in the period from mid-November 2016 to mid-February 2017 are not in conformity with the contract.”

Conclusion

So don't sit still. Inspect products as soon as possible and raise the alarm in good time if you find that there is a defect or shortcoming. If you need advice on the duty to complain or assistance in drafting a notice of default, please feel free to contact one of our lawyers without obligation. We will be happy to assist you.