Contract of sale or contract of sale? ...and what if the Vienna Convention applies?
Under Italian law, for the purposes of differentiating between a contract and a sale (of a future thing), it is a general principle that prevalence or otherwise of work over the supply of matter. This means that, in principle, there is a contract of contract and not of sale whenever the performance of the subject matter constitutes a mere means for the production of the work and the work is the essential purpose of the transaction.
1. Difference between contract of sale and applato.
In the case of the sale of a future thing, i.e. whenever the object of the transaction is a good that has yet to be realised, an issue of great practical relevance and considerable legal complexity may arise as to whether the contract can be identified as a sale or, conversely, as a contract.
Under Italian law, for the purposes of differentiating between a contract of contract and a contract of sale (of a future thing), it is a general principle that the prevalence or otherwise of work over the supply of matter. This means that, in principle, there is a contract of contract and not of sale whenever the performance of the subject matter constitutes a mere means for the production of the work and the work is the essential purpose of the transaction.
Consider the classic example where the object of the transaction is a good that is part of the ordinary production of a business, but to which the principal requests that certain modifications be made. In such cases, according to case law, you will have contractedwhenever such changes, they consist not of marginal adjustments and secondary aimed at adapting them to the specific needs of the recipient of the service, but are such as to give rise to a new good, different from that of normal production. Italian jurisprudence focuses, in particular, not so much on the amount of work required to make such changes, but rather on the type of changes that have actually been made to the product. [1]
Moreover, should the contract provide for the commissioning and/or installation of the good itselfItalian jurisprudence makes a further distinction: a contract of sale (with an attached obligation of installation) is to be considered a contract of sale if
"the supply and, where appropriate, also the installation if the subcontractor of the works is the same manufacturer or usual trader of the products and materials in question, unless, of course, the contractual clauses oblige the subcontractor of the said works to carry out a quid novi with respect to the normal production series [...].
Where, on the other hand, the contractor is neither the manufacturer nor the reseller of the goods to be installed or put in place, the activity of installing a good performed by the service provider, being autonomous from that of production and sale, identifies or refers to a contract of contract, since the subject matter is considered to be the instrument for the performance of a work or the rendering of a service."[2]
2. What if the Vienna Convention applies?
A different approach occurs, on the other hand, in the event that the Vienna Conventionon the International Sale of Goods, 1980.
This Convention applies to the relationship whenever the subject matter of the contract is the sale between parties having their place of business in different states; specifically, Art. 1 of the Convention provides that it applies:
- "when these States are Contracting States; or
- "when the rules of private international law refer to the application of the law of a Contracting State."
Read also - Other articles on the Vienna Convention.
Of course, even in the case of the application of the Vienna Convention, the question still arises as to the identification of the contractual relationship and, specifically, whether the relationship can be identified as a sale (with the consequent application of the Convention itself), or whether it is a contract.
On this point, the Convention itself dictates interpretative principleswhich allow the parties to identify what is to be considered a 'sale'. L'Article 3(1) of the Conventionand, includes as a contract of sale, also
"[...] contracts for the supply of goods to be manufactured or produced shall be regarded as sales unless the party ordering them is to supply an essential part of the materials necessary for such manufacture or production."
Furthermore, the second paragraph of the aforementioned article states that:
"This Convention does not apply to contracts in which the predominant part of the obligation of the party supplying the goods consists in the provision of labour or other services."
This article also extends to the scope of the Convention contracts for which the seller, in addition to delivery of the thing and transfer of ownership, it also undertakes to offer labour or other servicesprovided that such services do not constitute the "preponderant part"(in English 'preponderant part'), of the seller's obligations.
In order to understand whether the contribution of labour/services is "predominant", a comparison must be made as to the economic value of the services offered and the value of the tangible component of the goods themselves,[3] as if they constituted two separate and distinct contracts.[4] Thus, where the obligation for the provision of labour or services exceeds 50 per cent of the seller's obligations, the Convention does not apply.[5] Some courts require that the value of the service obligation "clearly" exceed that of the goods.[6]
What essentially distinguishes the two approaches, is that the Italian Courts, tend to give less weight to the relationship between the economic value of the material and the services connected to it: the difference between a contract and a contract of sale, consists mainly in the obligation that the entrepreneur has undertaken, i.e. to identify whether he has undertaken to supply a product that is part of his normal production activity, or whether it is necessary to make substantial modifications to the (line) product, such as to give rise to a product that is different in its essence from the one normally produced by the supplier.
[1] Cass. Civ. 2001 nr. 6925; Cas. Civ. 1994 nr. 7697.
[2] Cass. Civ. 2014, no. 872.
[3] Obergericht Aargau, Switzerland, 3 March 2009; Bundesgerichtshof, 9 June 2008; Court of Arbitration of the International Chamber of Commerce, 2000.
[4] Kantonsgericht Zug, Switzerland, 14 December 2009
[5] Kantonsgericht Zug, Switzerland, 14 December 2009, available on the Internet at www.cisg-online.ch; Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russia, Award No. 5/1997, English translation availa- ble on the Internet at www.cisg.law.pace.edu;
Bundesgericht, Switzerland, 18 May 2009, English translation available on the Internet at www.cisg.law.pace.edu (applying the Convention to a purchase of a packaging machine consisting of ten individual devices as well as several transportation and interconnection systems, which also imposed upon the seller the obligation to install the packaging machine and prepare its operation at the buyer's works).
[6] Kreisgericht Bern-Laupen, Switzerland, 29 January 1999, available on the Internet at www.cisg-online.ch.
