Finnish Supreme Court applies the CISG to determine place of performance

On 14 October 2005, the Finnish Supreme Court rendered a decision in a case regarding a log house package. The decision’s full text, originally written in Finnish, has now been translated into English by Sami Koponen, who is currently enrolled in a LL.M at the University of Eastern Finland and is a former Vis Moot participant/coach. We are very grateful for his translation that can now be accessed via the case presentation about CISG-online 1882 (see below).

The dispute underlying the decision arose from a contract for the sale of a log house construction package, concluded between a Finnish seller and a German buyer. The sales contract obliged the seller to deliver the goods in several instalments and the buyer to pay the corresponding part of the purchase price before each delivery. In addition, the parties had concluded an agency agreement according to which the buyer would act as a sales representative and market the log houses manufactured by the seller. This also entailed the use of the buyer’s log house as a model house for marketing purposes. After the buyer failed to pay the price for the last instalment, the seller initiated legal proceedings, seeking the payment of the outstanding debt.

The Finnish Supreme Court had to address the issue whether the previous instance had jurisdiction to hear the case. Upfront, the Court held that the German Buyer could not be considered as a consumer within the meaning of Arts. 13–15 Brussels Convention. Therefore, the Court applied Art. 5(1) Brussels Convention according to which a claim concerning a contract can be brought in the courts of the place of performance of the obligation in question. Consequently, the Court had to ascertain the law determining the place where the buyer had to perform his obligation to pay the purchase price. After finding that the CISG was the law applicable in this matter pursuant to Art. 1(1) CISG, the Court examined whether the CISG’s applicability was excluded by Art. 2(a) CISG. The Court held that the decisive factor under this provision is the intended purpose of the goods and not their actual use. Although the buyer had purchased the log house for residential use with his family, the Court regarded the sale of the house as strongly connected to the buyer’s business activity, since the parties had concluded an agency agreement concerning the marketing of the house. It therefore held that the log house was not considered as goods bought for personal, family and household use in the sense of Art. 2(a) CISG and that the CISG was not excluded by this provision. The Court subsequently applied Art. 57(1)(a) CISG and found that the buyer’s obligation to pay the purchase price must be performed at the seller’s place of business in Finland. Therefore, the Court reversed and remanded the previous decision by concluding that the previous instance in Finland had jurisdiction over the case at hand.