8 CISG

[Facts]

[…] The plaintiff–appellant, MCC-Marble Ceramic, Inc. [buyer], is a Florida corporation engaged in the retail sale of tiles, and the defendant-appellee, Ceramica Nuova SpA [seller] is an Italian corporation engaged in the manufacture of ceramic tiles. In October 1990, [buyer’s] president, Juan Carlos Mo[n]zon, met representatives of [seller] at a trade fair in Bologna, Italy and negotiated an agreement to purchase ceramic tiles from [seller] based on samples he examined at the trade fair. Monzon, who spoke no Italian, communicated with Gianni Silingardi, then [seller’s] commercial director, through a translator, Gianfranco Copelli, who was himself an agent of [seller]. The parties apparently arrived at an oral agreement on the crucial terms of price, quality, quantity, delivery and payment. The parties then recorded these terms on one of [seller’s] standard, pre-printed order forms and Monzon signed the contract on [buyer’s] behalf. According to [buyer], the parties also entered into a requirements contract in February 1991, subject to which [seller] agreed to supply [buyer] with high grade ceramic tile at specific discounts as long as [buyer] purchased sufficient quantities of tile. [Buyer] completed a number of additional order forms requesting tile deliveries pursuant to that agreement.

[Buyer] brought suit against [seller] claiming a breach of the February 1991 requirements contract when [seller] failed to satisfy orders in April, May, and August of 1991. In addition to other defenses, D’Agostino responded that it was under no obligation to fill MCC’s orders because MCC had defaulted on payment for previous shipments. In support of its position, D’Agostino relied on the pre-printed terms of the contracts that MCC had executed. The executed forms were printed in Italian and contained terms and conditions on both the front and reverse. According to an English translation of the October 1990 contract, the front of the order form contained the following language directly beneath Monzon’s signature:

[T]he buyer hereby states that he is aware of the sales conditions stated on the reverse and that he expressly approves of them with special reference to those numbered 1 2 3 4 5 6 7 8. Clause 6(b), printed on the back of the form states: ‘[D]efault or delay in payment within the time agreed upon gives D’Agostino the right to … suspend or cancel the contract itself and to cancel possible other pending contracts and the buyer does not have the right to indemnification or damages.’

D’Agostino also brought a number of counterclaims against MCC, seeking damages for MCC’s alleged nonpayment for deliveries of tile that D’Agostino had made between February 28, 1991 and July 4, 1991. MCC responded that the tile it had received was of a lower quality than contracted for, and that, pursuant to the CISG, MCC was entitled to reduce payment in proportion to the defects. [Art 50] D’Agostino, however, noted that clause 4 on the reverse of the contract states, in pertinent part: ‘Possible complaints for defects of the merchandise must be made in writing by means of a certified letter within and not later than 10 days after receipt of the merchandise ….’

Although there is evidence to support MCC’s claims that it complained about the quality of the deliveries it received, MCC never submitted any written complaints.

MCC did not dispute these underlying facts before the district court, but argued that the parties never intended the terms and conditions printed on the reverse of the order form to apply to their agreements. As evidence for this assertion, MCC submitted Monzon’s affidavit, which claims that MCC had no subjective intent to be bound by those terms and that D’Agostino was aware of this intent. MCC also filed affidavits from Silingardi and Copelli, D’Agostino’s representatives at the trade fair, which support Monzon’s claim that the parties subjectively intended not to be bound by the terms on the reverse of the order form. The magistrate judge held that the affidavits, even if true, did not raise an issue of material fact regarding the interpretation or applicability of the terms of the written contracts and the district court accepted his recommendation to award summary judgment in D’Agostino’s favor. MCC then filed this timely appeal.

[Judgment]

[…] The parties to this case agree that the CISG governs their dispute because the United States, where [buyer] has its place of business, and Italy, where [seller] has its place of business, are both States Party to the Convention. See CISG, Art. 1. Article 8 of the CISG governs the interpretation of international contracts for the sale of goods and forms the basis of [buyer’s] appeal from the district court’s grant of summary judgment in [seller’s] favor. [Buyer] argues that the magistrate judge and the district court improperly ignored evidence that [buyer] submitted regarding the parties’ subjective intent when they memorialised the terms of their agreement on [seller’s] pre-printed form contract, and that the magistrate judge erred by applying the parol evidence rule in derogation of the CISG.

I. Subjective Intent under the CISG

Contrary to what is familiar practice in United States courts, the CISG appears to permit a substantial inquiry into the parties’ subjective intent, even if the parties did not engage in any objectively ascertainable means of registering this intent. Article 8(1) of the CISG instructs courts to interpret the ‘statements … and other conduct of a party … according to his intent’ as long as the other party ‘knew or could not have been unaware’ of that intent. The plain language of the Convention, therefore, requires an inquiry into a party’s subjective intent as long as the other party to the contract was aware of that intent. …

II. Parol Evidence and the CISG

Given our determination that the magistrate judge and the district court should have considered [buyer’s] affidavits regarding the parties’ subjective intentions, we must address a question of first impression in this circuit: whether the parol evidence rule, which bars evidence of an earlier oral contract that contradicts or varies the terms of a subsequent or contemporaneous written contract, plays any role in cases involving the CISG. We begin by observing that the parol evidence rule, contrary to its title, is a substantive rule of law, not a rule of evidence. […] The rule does not purport to exclude a particular type of evidence as an ‘untrustworthy or undesirable’ way of proving a fact, but prevents a litigant from attempting to show ‘the fact itself—the fact that the terms of the agreement are other than those in the writing.’ […] As such, a federal district court cannot simply apply the parol evidence rule as a procedural matter—as it might if excluding a particular type of evidence under the Federal Rules of Evidence, which apply in federal court regardless of the source of the substantive rule of decision.