ECJ: Distinction between “Sale of Goods” and “Provision of Services” in Terms of Art. 5 (1) (b) Brussels I (Car Trim)

by Veronika Gaertner on March 8, 2010

On 25 February, the ECJ delivered its judgment in case C-381/08 (Car Trim).

The Bundesgerichtshof had referred the following questions to the ECJ for a preliminary ruling:

(1)      Is Article 5(1)(b) of Council Regulation No 44/2001 to be interpreted as meaning that contracts for the supply of goods to be produced or manufactured are, notwithstanding specific requirements on the part of the customer with regard to the provision, fabrication and delivery of the components to be produced, including a guarantee of the quality of production, reliability of delivery and smooth administrative handling of the order, to be classified as a sale of goods (first indent), and not as provision of services (second indent)? What criteria are decisive for the distinction?

(2)      If a sale of goods is to be presumed: in the case of sales contracts involving carriage of goods, is the place where under the contract the goods sold were delivered or should have been delivered to be determined according to the place of physical transfer to the purchaser, or according to the place at which the goods were handed over to the first carrier for transmission to the purchaser?

Thus, the case concerns at a first level the distinction of contracts for the sale of goods and contracts for the provision of services within the meaning of Art. 5 (1) (b) Brussels I in the case of contracts for the supply of goods to be produced where the customer has specified certain requirements.  On a second level the case raises the question whether, in case of a sales contract involving carriage of goods, the place where the goods sold were delivered or should have been delivered, is to be determined by reference to the place of physical transfer to the purchaser.

With regard to the first question, the ECJ starts from the presumption that it is necessary with regard to the classification of a contract, to determine its characteristic obligation (para. 32 et seq.). In this respect the Court refers to several provisions of European Union law and international law giving some indication that the fact that the goods to be delivered are to be manufactured does not alter the classification of the contract as a sales contract (para. 34 et seq.).

Further, in favour of a classification of the contract as a contract for the sale of goods, the Court takes into consideration that the raw materials were not supplied by the purchaser (para. 40 et seq.).

Consequently, the Court held that

 Article 5(1)(b) [Brussels I] must be interpreted as meaning that where the purpose of contracts is the supply of goods to be manufactured or produced and, even though the purchaser has specified certain requirements with regard to the provision, fabrication and delivery of the components to be produced, the purchaser has not supplied the materials and the supplier is responsible for the quality of the goods and their compliance with the contract, those contracts must be classified as a ‘sale of goods’ within the meaning of the first indent of Article 5(1)(b) of that regulation. 

With regard to the second question, i.e. the question whether in case of a sales contract involving carriage of goods, the place where the goods were delivered or should have been delivered is to be determined by reference to the place of physical transfer to the purchaser, the Court held that

the first indent of Article 5(1)(b) [Brussels I]  must be interpreted as meaning that, in the case of a sale involving carriage of goods, the place where, under the contract, the goods sold were delivered or should have been delivered must be determined on the basis of the provisions of that contract. Where it is impossible to determine the place of delivery on that basis, without reference to the substantive law applicable to the contract, that place is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have obtained, actual power of disposal over those goods at the final destination of the sales transaction.

In its reasoning, the Court referred in particular to the aims and objectives of the Brussels I Regulation and held that the place where the goods were physically transferred (or should have been physically transferred) to the purchaser at their final destination was the most consistent with the Regulation since it met the criterion of predictability as well as proximity (para. 60 et seq.).

See with regard to the referring decision also our previous post which can be found here.

Many thanks to Dr. Martin Illmer and Jens Karsten for the tip-off.

{ 1 comment }

Philip Smith March 10, 2010 at 11:33 pm

I note that the answer to Question 2 renders incorrect Lord Bingham of Cornhill’s observation that “the Regulation does not purport to impose a uniform concept of delivery on all member states but leaves member states to apply whatever, under their rules of private international law, is the law properly applicable to the particular contract” (Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2008] UKHL 11, [4]). Indeed in para 53, the ECJ adopts an entirely opposite approach.

Applying this new rule to the facts in Scottish & Newcastle would, I think, have resulted in their Lordships finding that the place of delivery for the purpose of article 5(1)(b) was in Cyprus rather than England, since the invoices stated Limassol as the place of delivery (Scottish & Newcastle, [30]) (in fact the House took the view that under the applicable law (which happened to be English) the contract, although purportedly CIF Limassol, was in fact FOB Liverpool and delivery for the purposes of English law therefore occured at Liverpool rather than Limassol).

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