Attorney Gil Nadel, Gilad Paz
The Haifa District Court has recently deferred the prosecution of an iron importer, filed against an Israeli company who had given their assurance to purchase that same iron but went back on their word.
The court determined that they had agreed upon iron manufactured by a certain country, whereas the iron that was supplied (or was intended to be supplied) was different, and therefore, the buyer in Israel has the right to cancel the agreement and is not compelled to purchase the iron.
Simultaneously, the court accepted the cross-action filed by the Israeli buyer against the importer for damages inflicted upon him due to the failure to supply the iron as agreed.
The case and the claims of the parties
The iron importer drew up a contract with the iron buyer in Israel stating the importer's guarantee to import and sell iron manufactured by the Metchel Company in the Russia.
Due to financial difficulties encountered by the supplier in Russia and a drastic decrease of worldwide iron prices, the Russian supplier changed the terms of the deal in such a way that, according to the iron importer, the importer's ownership rights in the purchased commodity would be seriously jeopardized.
As such, the Russian supplier made the unexpected demand to receive payment in exchange for a Forwarder Certificate Receipt instead of a bill of lading which gave the importer reason to suspect that the commodity would not be transferred after the payment had been made.
In light of this situation, the iron importer made the decision to cancel the deal with the Russian supplier, and chose to purchase iron from a Chinese supplier, whom the supplier claims manufactures iron at a similar amount, standard and quality as that of the Russian manufacturer, but this decision was reached without notifying the Israeli buyer or receiving his approval.
Due to this and due to a delay in supply, the Israeli buyer refused to accept the iron and canceled the contract, and even went so far as to file a cross-action of approximately NIS 1.4 million due to damages inflicted upon him as a result of the failure to supply the iron.
The iron importer filed for NIS 2.7 million due to the Israeli buyer's refusal to accept the commodity.
Court ruling:
First of all, regarding the delay in the supply of the commodity, the contract did not state a specific supply date. Thus, the judge was required to study the evidence and retroactively interpret the intentions of the parties regarding the date of supply they had agreed upon. In this case, the judge interpreted the events in such a way as to assume that the parties had intended for the commodity to be supplied within the first half of 2008, but it had in fact arrived at the Ashdod Port in October of 2008, and so it was ruled as delayed.
In regards to the difference in the country of origin (China instead of Russia), the court ruled that, despite testimony given by professionals, this is in fact a breach of contract and the commodity is unsuitable in comparison to that which was ordered, also due to the fact that the Israeli buyer was not aware of and had not agreed to such a change.
Furthermore, the court noted that the iron had been ordered in rolls of 720-830 kg. made in Russia whereas the importer had intended to supply rolls of 1,400-1,500 kg. made in China.
The court notes that if the importer had been weary of failing in the Russian deal, he should have immediately informed the Israeli buyer of this and requested his approval to purchase iron from an alternative source, but under no circumstance was the importer allowed to make such a decision on his own and without consulting the buyer.
Therefore, the court deferred the iron importer's prosecution and accepted (in part) the Israeli buyer's prosecution of losses suffered due to the failure to supply the iron as agreed.
The iron importer was charged with recompensing the Israeli iron buyer at a sum of NIS 800,000 as well as extra legal expenses of NIS 150,000.
[Civil suite (Haifa District Court) 910/08 Lamed Investments and Trade Company Ltd. vs. A.G. Middle Eastern Iron and Screens Ltd., Judge Itzhak Cohen, verdict of May 15, 2012. Party representatives- on behalf of the iron importer- Attorney Gilad Berman. On behalf of the iron buyer- Attorney Victor Mansur].
Notes:
When dealing with an international sales contract, it is important to supply commodities which are precisely as ordered by contract. Any attempt to supply "similar" commodities instead, without the advance approval of the buyer, may cause the contract to be canceled.
This requirement for compatibility is even anchored in the provisions of the sales law (international goods), which states that any incongruence between the commodities supplied in practice and the commodities agreed upon by contract (amount, quality, manufacturer, packaging, etc.) construes a reason to cancel the contract and even to file for remedial action.
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