Parties to international commercial agreements often choose Swiss substantive law as a law governing their contractual relationship. Primarily due to the reputation of the law as “neutral” and of the Swiss courts – that are often designated along with the choice of Swiss law – as effective and fair, such choice is commonly regarded as a good compromise for the parties of different jurisdictions.
Not all parties that opt for Swiss law are aware of some of its important particularities. For instance, the Swiss law governing contracts for the sale of goods differs substantially from other laws including well-recognized international instruments, such as the United Nations Convention on Contracts for the International Sale of Goods (CISG).
Generally, the most important contractual provisions regulate the consequences of the lack of performance. In this regard, Swiss law governing the sales of goods contracts provides different remedies depending on the nature of the seller’s breach. The non-delivery does not exclusively occur in the case of the physical absence of the goods within the designated time of performance. It also concerns cases where the seller actually did deliver goods, but goods of another kind than those specified in the contract.
As opposed to the non-delivery, defective delivery occurs when the delivered goods are of the specified kind, but they do not conform with the warranties given earlier by the seller. Whereas such distinction between defective delivery and non-delivery can be relatively simple in terms of individually designated goods, it can become much more complex for generic goods, i.e., not specified goods of a certain kind.
It is important to correctly identify whether the particular non-performance constitutes the defective delivery or non-delivery to verify which remedies are available for the buyer. In terms of the non-delivery, the general norms regarding contractual obligations will apply. In practice, this means that the buyer may give to the seller an additional deadline for performance and after its expiration may either terminate the contract or request a specific performance keeping its right to damages (art. 107 Swiss Code of Obligation). The limitation period, in this case, is as long as 10 years (art. 127 Swiss Code of Obligation). However, the possible remedies of the buyer differ when the breach of contract constitutes only the defective delivery. In such a case, the buyer can only request the termination of the contract or a price reduction that must be notified „without delay" (art. 201 Swiss Code of Obligation). Surprisingly, it is the buyer who has to assess based on previous judicial decisions what period will fulfil the requirement of making a request „without delay” as the Swiss Code of Obligation is not specific on this matter.
Unfortunately, the notion of non-delivery and defective delivery is not defined by Swiss law. It is exclusively the judicial decisions which may help to understand the differences between them. Nevertheless, the lack of consistency in judicature over this subject causes that the interpretation of defective delivery or non-delivery may be different on case to case bases.
At Advokatur GTK we advice on all aspects of the choice of Swiss law and jurisdiction in international commercial agreements.