Question

Treibacher, an Austrian vendor of hard-metal powders, agreed to two contracts with the defendant TDY to sell specified quantities of tantalum carbide (TaC), a hard-metal powder, to TDY Industries, Inc., for delivery to consignment. TDY planned to use the TaC in manufacturing tungsten-graded carbide powders at its plant in Gurney, Alabama. After it had received some of the amount of TaC specified in the November 2000 contract, TDY refused to take delivery of the balance of the TaC specified in both contracts and, in a letter to Treibacher dated August 23, 2001, denied that it had a binding obligation to take delivery of or pay for any TaC that it did not want to use. Unbeknownst to Treibacher, TDY had purchased the TaC it needed from another vendor at lower prices than those specified in its contracts with Treibacher. Treibacher eventually sold the quantities of TaC that TDY had refused to take delivery of, but at lower prices than those specified in its contracts with TDY. Treibacher then filed suit against TDY, seeking to recover the balance of the amount Treibacher would have received if TDY had paid for all of the TaC specified in the November and December 2000 contracts. What is the appropriate remedy here for Treibacher if TDY is in breach? Does this case fall under the CISG or the UCC? Is there any significance to applying the CISG rather than the UCC? [Treibacher Industrie, A.G., Plaintiff-Appellee, v. Allegheny Technologies, Inc., a Pennsylvania Corporation et al., Defendants, TDY Industries, Inc., Defendant-Appellant, 464 F.3d 1235 (11th Cir. 2006); 2006 U.S. App. LEXIS 23252; 19 Fla. L. Weekly Fed. C 1046 (2006).]

Answer 1

Case Law: Treibacher VS TDY

Step-1: Facts of case:

• An Austrian vendor and TDY entered into contract for purchase of TaC, hard –metal powder for “consignment”. It has agreed to two contracts of purchase of Tac, For the contract preceding the contract in dispute, TDY purchased the entire quantity delivered by the Austrian vendor and sometime after TDY refused to take delivery of balance quantity specified in both the contract and denied to take delivery and to pay the amount on the facts that it was not obligatory to buy.
• Subsequently the vendor sold the refused quantity and quantity which was agreed to buy by TDY sold to another buyer at lower price and want to recover the price difference from TDY.

Step-2: Issues Involved:

• The difference of opinion between vendor and customer is with respect to consignment. According to buyer Consignment means that sale will not be done till the metal was consumed by the buyer.
• Consignment meaning from vendor point of view is that the buyer is in obligation to pay for consignment delivered even though billing will be done after consumption of metal.

Step-3: Provisions applicable:

• As US and Australia were contracting states of the convention. It will satisfy both the conditions of Article 1 and CISG. So the issue is governed by article 9 of CISG.
• Article 8, which governs the interpretation of the parties' statements and conduct, dealt separately with the situation in which the actual intent of a party is known to the other party and when the actual intent is not known. The court concluded that when actual intent is not known, article 8 imposes a reasonable person standard. Article 8(3) identifies the sources for determining a party's actual intent, "including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.
• The buyer argued that article 9 requires the express agreement of the parties for usage between the parties to prime customary usage in the industry. Specifically, it argued that article 9(2) required that the parties expressly agree not to be bound by customary usage. In support, it cited the portion of article 9(1) that obligates the parties to "any usage to which they have agreed and by any practices which they have established between themselves." The buyer also argued that when this definition is applied to article 9(2), the contract terms should "be interpreted according to customary usage" unless the parties agree to the contrary.
• All contracts were for specific quantities of compound, and were for "consignment", compound was segregated by the buyer, who provided monthly "usage reports" to the supplier. The usage reports were used to invoice the buyer for compound as it was used. All compound delivered to the buyer had been used and paid for by it for all contracts entered into prior to the two contracts in dispute.

Step-4: Conclusion

• The meaning the parties ascribe to a contractual term in their course of dealings establishes the meaning of that term in the face of a conflicting customary usage of the term. That the supplier and the buyer understood their contracts to require the buyer to purchase the entire compound specified in each contract and that the supplier took reasonable measures to mitigate its losses after the buyer's breach.
• So Vendor can get remedy through legal proceedings as specified under Article 8.