C-150/77

Since the concept of a contract of sale financing contract. However, a

on instalment credit terms varies from restrictive interpretation of the second

one Member State to another, in paragraph of Article 14 of the

accordance with the objectives pursued Convention, in conformity with the

by their respective laws, it is necessary, objectives pursued by Section 4, entails

in the context of the Convention, to the restriction of the jurisdictional consider that concept as being advantage for which provision is made

In Case 150/77

REFERENCE to the Court pursuant to Articles 1 to 3 of the Protocol of 3 June 1971 on the Interpretation by the Court of Justice of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters by the French Cour de Cassation (First Civil

1 — Language of the Case French

JUDGMENT OF 21. 6. 1978 — CASE 140­/77

Chamber) for a preliminary ruling in the action pending before that court between

Société BERTRAND­ , having its registered office at Arnage (France)

THE COURT

composed H. Kutscher, President, M. Sørensen of: and G. Bosco (Presidents Chambers), J. Mertens de Wilmars, P. of Pescatore, Lord Mackenzie Stuart and A. Touffait, Judges

Advocate General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

On 12 February 1972 Paul Ott KG, The letter by which the order was

which has its registered office in the placed had stipulated delivery in June Federal Republic of Germany, sold to 1972 and payment by two equal bills of

BERTRAND v OTT

exchange payable at 60 and 90 days (10 "Whether the sale of a machine which

August and 10 September 1972). one company agrees to make to another

company on the basis of a price to be On 10 May 1974 the Landgericht paid by way of two equal bills of (Regional Court) Stuttgart ordered exchange payable at 60 and 90 days can Bertrand in its absence to pay to Ott, be held to be a sale of goods on apart from the summ owing of DM instalment credit terms within the 7 139, 10% interest on DM 4 915 as meaning of Article 13 of the Brussels from 11 October 1972 and on DM Convention."

Rapporteur and the views of the Bertrand appealed on a point of law Advocate General, the Court decided to against that judgment upon the ground open the oral procedure without any that "a sale in which the price must be bills preparatory inquiry. paid in particular by two of

exchange constitutes a credit sale; that

it is mandatory for actions against credit II —

Summary of the written buyers to be brought before the courts observations submitted to of the State in which the buyer is the Court domiciled; and that a decision of a

foreign court which has not complied The appellant in the main action with this binding rule on jurisdiction France." (Bertrand) sets out the facts and, before cannot be made enforceable in commencing its examination of the

The Cour de Cassation (First Civil question raised directly in the judgment Chamber), finding that the solution to making the reference, emphasizes that the problem thus posed depended on the Landgericht Stuttgart necessarily the classification of the contract, felt classified the contract drawn up itself bound, pursuant to Article 3 (1) of between the panics and indeed the Protocol of 3 June 1971 on the classified it otherwise than as a "sale of

JUDGMENT OF 21. 6. 1978 — CASE 140/77

ification adopted by the German court principle is contrary to the objective of

and reviewed that court's finding on this a uniform application of the Convention point; evidence of this is the question and to the recognition of the existence

legal Classi­ put by the Cour de Cassation, and even of a Community order.

the previous classification of the said fications such as that of the sale on

contract by the Cour d'Appel, Angers, instalment credit terms, within the

any errors committed by the court into the law of each of the States. before which the dispute was first It is clear from a study of comparative brought; otherwise, there would be a law that the rules of the Member States danger that the provisions of the second concerning sales on instalment credit paragraph of Article 14 would remain terms vary from one State to another, inoperative whenever the court of first but that the objective thereof is the instance, in confirmation of its same: to protect, in certain cases, the jurisdiction, refused to classify a buyer on instalment credit terms against contract as a sale on instalment credit a contract the apparent advantages of terms. By way of analogy, mention may which are apt to hide the dangers. For be made at this point of the judgment that reason the Convention reinforced given by the Court — in the context, it the jurisdiction of the court where the is true, of a quite different classification buyer is domiciled to take cognizance — in Case 29/76 LTU v Eurocontrol, of any action brought by the seller, and where it was accepted that the court thereby permitted the application of applied to may review the classification rules dictated by a social interest at the of the subject-matter dealt with by the expense of any derogative stipulations. court of first instance. In the present The rule contained in the second case, "in view of the fact that the court paragraph of Article 14 is exclusively a applied to is empowered to classify a rule of jurisdiction, and not a rule of contract as a sale of goods on conflict of laws: it guarantees the instalment credit terms with the same jurisdiction of the courts of the State in authority as the court in which the which the buyer is domiciled whatever judgment was given, the question arises the law — even foreign — to be applied according to what law that classification to the dispute. As regards the sale on must be undertaken by those courts". instalment credit terms itself, there is no The French Cour de Cassation has extrinsic element which enables disputes raised the question of the merely it be linked engendered by to to the content of the concept "sale of goods domicile of the buyer; in this connexion on instalment credit terms". It is there is no difference between a sale on

practical difficulties caused by the tion.

application —

by foreign courts of —

In conclusion, Bertrand claims that the special rules having direct application. Court of Justice should rule that: Moreover, the Convention draws its inspiration from the fact that the courts "A sale of machines which one

of the buyer's domicile are the latter's company agrees to make to another

natural courts. company on the basis of a price to be paid by way of two equal bills of The objective of the Convention as thus exchange payable at 60 and 90 days defined in terms of the protection of the constitutes a sale of goods on instalment buyer on instalment credit terms would credit terms within the meaning of be jeopardized if classification were Convention." Article 13 of the Brussels undertaken on the basis of the lex fori, since not only protective rules but also The respondent in the main action

irrelevant in this connexion in the Molleaux) incline in favour of classi­ since, it would be too to fication which are common to the contrary case, easy abuse the Convention's protective Contracting States or Community classi­

intention. The material subject-matter fications. Moreover, the Court itself

of the transaction is likewise of no shares this inclination (judgment of 6

importance. October 1976 in Case 12/76 Tessili

One further consideration should be [1976] ECR 1473). The criterion of the "objectives" of the Convention has been added to the remarks set out above. restated in other decisions (judgments Rules regarding sales on instalment of 6 October 1976 in Case 14/76 De credit terms, in countries which have Bloos [1976] ECR 1497; 30 November adopted such rules, are one merely 1976 in Case 21/76 Bier [1976] ECR element of general economic and policy 1735). The problem, therefore, is to in particular of policy with regard to ascertain whether the concept of a sale credit, from which they cannot be on instalment credit terms "may be separated. It would be inadvisable to interpreted in a uniform manner within interfere with those rules, even in a field the Member States and constitute an as particular as that covered by the

Convention. An ill-considered inter­ independent, Community concept". vention would risk throwing the Viewed in this way, since the objective

well be impeded, since the court in If, therefore, full effect is to be given to which the judgment was given and the the second paragraph of Article 14, that

court applied to do not necessarily have is to say, if it is to be accorded a

the same conception of a sale on coherent meaning in relation to the

instalment credit terms. Not only the body of rules concerning jurisdiction free movement of judgments but also contained in the Convention, it must be equality of treatment of nationals of the held that the rule contained therein

Member States would be impeded. constitutes an exception to the rule laid

The for interpretation down in matters relating to a contract second criterion

Reischl in Case 19/76). in the second paragraph of Article 14 of

If the rules of jurisdiction contained in all practical effect. In a contractual

Section 4 of the Convention are matter as important as the sale of goods

analysed, it will be found that those disparities of interpretation would

rules are imperative in character or develop, constituting the absolute

appertain to public policy, on the basis negation of a single and uniform rule of

the contractual right on which the larism which is another aspect of

plaintiffs action is based, the Court of partitioning.

Justice has elsewhere decided that the This is particularly true of the rule of place of performance of the obligation, jurisdiction contained in the second within the meaning of Article 5 (1) of paragraph of Article 14. In connexion the Convention, is to be determined in accordance with the law which governs with the Treaty of Rome and in view of the objectives of Article 220, the the obligation in question according to conclusion must be drawn that the the rules of conflict of laws of the court Convention, the aim of which is to before which the matter is brought. The application of that case-law to the con­ achieve the objectives of the Treaty within the field of legal jurisdiction, can tractual matter of sale on instalment take full effect only if it is interpreted as credit terms therefore allows the court a separate entity, without taking before which proceedings by the buyer account of particular aspects of internal are brought to determine, in accordance law, that is without allowing those with law governing the obligation in the

question, which is not necessarily its aspects develop in contradiction to a to

own law but the law applicable under its Community principle which it has own rule of conflict of laws to the con­ expressly laid down, as is the case with in question, the second paragraph of Article 14. In tractual obligation the place this respect a reference to national law of performance of that obligation, and can only maintain particularisms and it is a necessary conclusion that the

themselves and this, in most systems of Case 21/76, paragraph 23). In fact, conflict of laws, entails the application when the Brussels Convention of 1968 of the law of autonomy, as is shown by was signed, only Belgium possessed

the national case-law. special legislation on sales on instalment "In short, it is if it were left credit terms a rule of certain that containing to the national legislatures to determine territorial jurisdiction derogating from

the concept of sale on instalment credit the normal law (Law of 9 July 1957, terms sellers in certain countries would Articles 1 and 2, together with Article

be 628-8 the Code Judiciaire 10 enabled systematically to bring of of

before the courts of the place where October 1967). Such a system was

they are domiciled their buyers on introduced, subsequent to the

activities; this, in particular, is exceptional rule of jurisdiction. The reinforced by the means of application exception, that is to say exclusive

of the French law. It is therefore evident jurisdiction, would become the rule in a that legislatures which enact special laws matter which is particularly important in the field of sales on instalment credit for the Brussels Convention, in view of terms and provide in particular for rules the frequency of disputes connected

of jurisdiction which depart from the with payment or performance in normal law in favour of buyers, are relation to transactions in international non-pro­ exclusively concerned with trade. The second paragraph of Article fessional buyers. It may well be thought 14 would supersede Article 5 (1) for all that the draftsmen of the Brussels proceedings by the seller against the Convention were possessed of the same buyer. In fact, where an international concern when they laid down the rules sale is undertaken according to the of Section 4 and that they were not normal procedures in that field and in governed by monetary considerations. accordance with common usage the

Accordingly, the rule must not exceed trade buyer has no need to claim the

transactions is effected om accordance formance of the obligation. The with special procedures and subject to Community concept of sale on

the intervention of specialized bodies. In instalment credit terms must therefore

short, the expression "sale on instalment be a concept which is restricted to the

in Section for terms"

credit used 4 of the case where the protection provided

Brussels Convention cannot cover all by the Brussels Convention is fully

meaning of Article 13 of the legal systems"

(Case 29/76 Eurocontrol, Brussels Convention must be judgment 14 October 1976 of [1976] interpreted in a uniform manner in ECR 1541; see also the Jenard Report the Member States; on the Convention). The Convention — Declare that in the case of the sale does not itself define the concept of sale goods on instalment credit terms on instalment credit terms; the Jenard of

or of loans made to Report merely states that Section 4 expressly finance the sale of and relates to the sale of goods for which goods the price is discharged by way of several repayable by instalments, entered payments or to the sale of such goods into for the requirements of a pro­

fessional or trade activity, linked to a financing agreement (hire purchase sales). jurisdiction is to be determined in accordance with the rules Credit sales, in which a product is to be contained in Section 4 of the delivered immediately, payment of the

Brussels Convention, with the price being deferred, are a very exception of that laid down in the common trade practice, in particular in second paragraph of Article 14, international commercial relations, that provision being restricted to which the legislatures of the Member the case of the non-professional States have not seen fit to regulate. buyer or borrower; On the other hand, by reason of the

— Reply to the question put by the social problems which it raises, French Cour de Cassation to the consumer credit is the subject-matter of

be a sale of goods on instalment particular features of national

credit terms within the of legislation, the Commission considers meaning Article 13 of the Brussels what criteria should be used to Convention." determine whether what is at issue is a

sale on instalment credit terms or a

Commission mere credit sale: The of the European Communities recalls the Community — With regard to the status of the

ambit of the Convention, which has contracting parties, it is perhaps

already been demonstrated by the tempting to think that the mere fact case-law of the court (judgments of 14 that the buyer is a trader is sufficient

—

The Government of the United Kingdom elaborate techniques for repayment: believes that the answer to the question

(1) payment of a deposit; referred to the Court requires an exam­

(2) payment or interest, the rate of ination of the function which Article 13

which is often regulated; performs in the context of the

Convention as a whole and its (3) the existence of bills of objectives. exchange is irrelevant; The Convention lays down as the (4) time-limits, the maximum often fundamental principle that persons being fixed by law; domiciled in a Contracting State should (5) a minimum number of be sued in the courts of that State payments. (Article 2). In the view of the United Kingdom, any departure from that The Commission then sets out the principle must be interpreted strictly in criteria which should prevent a refusal the light of underlying the purposes of the order for enforcement on the which call for a departure. grounds that there is a sale on

exclusively — for buyers who may — The contract must contain

elaborate technical broadly be classified as "consumers". sufficiently details relating to the deposit, the This concept applies to buyers who are

periodicity and number of payments, not engaged in commercial activities, the rate of charge, the time-limit for and that criterion is to be understood, payment in relation to the amount in the various systems of protective law, and the nature of the subject-matter as meaning either that the buyer is not or service. engaged in commercial activities or that

BERTRAND v OTT

the goods are bought for private intended for commercial use, it might

consumption and not for the purposes be argued that the provisions of Tide II, of the exercise of a business or Section 4, of the Convention, are not

instalment lies in The Government of the Federal credit terms the Republic of Germany would therefore relationship between the parties and the view with satisfaction an interpretation nature of the transaction at issue, and

the latter should fall into the derived from the provisions of the category Convention and would not consider a of consumer transactions, this being a

be determined restriction in matters of commercial question which must by the court before which the sale is operations as being in accordance with

litigated. the aims of the latter.

The German in The Government of the Federal Government, calling evidence the established case-law of the Republic would be inclined to answer as

Court, states that the concept of "sale follows the questions raised in the order

law sales on instalment Article 28 of the Convention on concerning credit terms is intended to protect the Jurisdiction and the Enforcement of

buyer on instalments in other Judgments in Civil and Commercial whereas, States, it also pursues objectives apper­ Matters must be drawn directly taining to credit by way of from the Convention on the basis of policy provisions to minimum deposits certain findings of comparative law. relating or to the maximum duration of credit. 2. The sale of a machine which one The German law on sales on instalment commercial company agrees to credit terms is not applicable to a sale to make to another on the basis of a a trader whose name appears on the price to be paid by way of at least commercial register. two bills of exchange falling due In the present case, involving the following delivery of the goods is to acquisition by a commercial under­ be classified as a sale of goods on

taking of a highly-priced machine instalment credit terms within the

JUDGMENT OF 21. 6. 1978 — CASE 140/77

Article 13 A 'sale instalment terms'

meaning of of the — on credit Convention." within the meaning of the said

representative of the Commission, Jean- The combined provisions of Article 13, Claude Seche, recalled that in his the second paragraph of Article 14 and opinion the exception contained in Article 15 of the Convention render Section 4 to Article 13 of the

proceedings brought by the seller Convention of 1968 must be interpreted instalments" against the buyer "on strictly, in view of the need to protect

subject to the jurisdiction of the the persons concerned. On the basis of

national courts of the defendant. that criterion and of a study of

comparative law, the Commission has That rule is prompted by the tendency arrived at the conclusion although that, to protect the said buyer because he is traders should not be excluded

generally the weaker contracting party. systematically from the protection

necessarily equal) or of the rate of those amendment to Article 13 drawn up by payments (which are not necessarily the national delegations in the context

equidistant in time). of the adjustment of the Convention, limiting the field of application of that In conclusion, the Italian Government into article to contracts entered by a

proposes the following reply: person for a purpose which may be considered extraneous to his pro­

"— The expression 'sale on instalment fessional or trade activity, that persons in Article terms'

credit referred to being designated the "consumer". 13 of the Convention of 27 September 1968 is independent and The Advocate General delivered his common to all the Member States; opinion at the hearing on 31 May 1978.

BERTRAND v OTT

4 That decision was declared to be enforceable in France, first by order of the Tribunal de Grande Instance, Le Mans, of 30 June 1975, and then by conformatory judgment of the Cour d'Appel, Angers, of 20 May 1976.

5 An appeal was made against that judgment on a point of law.

6 The Cour de Cassation held that the judgment of the Cour d'Appel, Angers, "would be valid under the third paragraph of Article 28 of the

Brussels Convention, by virtue of which the jurisdiction of the courts of the State in which the judgment was given may not be reviewed by the court before which enforcement is sought unless the sale can be held to be a sale

of goods on instalment credit terms within the meaning of Article 13 of the

Convention, in which case, under the second paragraph of Article 14 and

referred the case to the Court of Justice in order to ascertain by way of a preliminary ruling "whether the sale of a machine which one company agrees to make to another company on the basis of a price to be paid by way of two equal bills of exchange payable at 60 and 90 days can be held to be a sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention".

8 In relation to the sale of goods on instalment credit terms, the second

paragraph of Article 14 of the Convention provides that"proceedings may be brought by a seller against a buyer ... only in the courts of the State in

which the defendant is domiciled".

9 In consequence of that imperative rule of juridiction the Landgericht Stuttgart, the court in which the original judgment was given, the Tribunal de Grande Instance, Le Mans, and the Cour d'Appel, Angers, the courts in which enforcement was sought, refused, whether by implication or

expressly, in defining their jurisdiction, to classify the contract of sale in question as a contract for the sale of goods on instalment credit terms.

terms in comparison with the seller, certain of them are also based on

considerations of economic, and savings policy, which are monetary intended to control the practice of sales on instalment credit terms, in particular in relation durable goods (cars, household electrical to consumer

and audio-visual equipment, etc.), most often by the indirect expedient of

provisions relating to minimum deposits or to the maximum duration of credit or by laying down minimum or maximum values for the total sale price.

14 Since these various objectives have led to the creation of different rules in the various Member States it is necessary, for the purpose of eliminating obstacles to legal relations and to the settlement of disputes in the context

of intra-Community relations in matters of the sale of goods on instalment credit terms, to consider that concept as being independent and therefore

the Convention in matters of contract, such as may be derived in particular from Articles 2 and 5 (1), be strictly limited to the objectives proper to

Section 4 of the said Convention.

18 Those objectives, as enshrined in Articles 13 and 14 of the Convention, were inspired solely by a desire to protect certain categories of buyers who,

having been parties to contracts for the "sale of goods on instalment credit terms", may be sued by the seller only in the courts of the State on the

territory of which the said buyers are domiciled, whereas sellers domiciled on the territory of a Contracting State may be sued either in the courts of that State or in the courts of the Contracting State in which the buyer is domiciled.

JUDGMENT OF 21. 6. 1978 — CASE 140/77

conformity with the objectives pursued by Section 4, entails the restriction

of the jurisdictional advantage described above to buyers who are in need of protection, economic position being one of weakness in comparison their

with by reason of the fact that they are private final consumers and sellers

are not engaged, when buying the product acquired on instalment credit terms, in trade or professional activities.

22 The answer to be given to the national court should therefore be that the

concept of the sale of goods on instalment credit terms within the meaning of Article 13 of the Brussels Convention of 27 September 1968 is not to be understood to extend to the sale of a machine which one to company agrees make to another company on the basis of a price to be paid by way of bills of exchange spread over a period.

On those grounds,

THE COURT

in answer to the question referred to it by the French Cour de Cassation by judgment of 8 November 1977, hereby rules:

The concept of the sale of goods on instalment credit terms within the

meaning of Article 13 of the Brussels Convention of 27 September 1968 is not to be understood to extend to the sale of a machine which one

company agrees to make to another company on the basis of a price to

OPINION OF MR ADVOCATE GENERAL CAPOTORTI DELIVERED ON 31 MAY 1978 1

Mr President, the sale of a machine which one

Members of the Court, company agrees to make to another

company on the basis of a price to be 1. In the case which concerns us today paid by way of two equal bills of

the Court is required to interpret the exchange payable at 60 and 90 days can

provisions of the Brussels Convention of be held to be a sale of goods on