International Trade – Application of The International Sale of Goods Law in Israel

On January 17, 2010, the appeal of Harel Insurance Company and Nordan Energy Company against a ruling of the Tel Aviv District Court rejected the claim filed against BTR (a foreign company) following damage caused to Norden due to a welding defect of an oil filter that exploded, Harel would indemnify Norden, which was insured by it. The representatives of BTR argued that another company (VOKES) is the manufacturer of the filter, and therefore the plaintiffs have no cause for action against BTR, which was only the supplier, and in particular it was proved that the plaintiff filed its claim for damage caused by a defect in the production itself.

The court ruled that the Sales Law does not distinguish between a seller who is a manufacturer and a seller who is only a supplier!

In its determination, the Supreme Court relied on Section 1 of the Addendum to the Sale (International Sale of Goods) Law, 5731-1971, which states that:

1. (a) This Law shall apply to contracts for the sale of goods entered into by parties whose place of business is situated in the territory of different States, and in one of the following circumstances:

(1) the contract of sale is converted to goods which, when the contract is made, are transported, or are to be transported, from the territory of one State to the territory of another;

(2) The offer and the capacitance were in the territory of different countries ...

Since "Norden and BTR's" places of business "are located in the territory of different countries," and since the filters had to be transported from England to Israel or alternatively because "the offer and acceptance were in the territory of different countries" there is an international sale law.

Since the transaction was executed prior to 5.2.2000 [the effective date of the Sale (International Sale of Goods) Law, 5759-1999 (see below). The applicable law is the 1971 law ("the law") and not the 1999 law. "It is clear that the law does not distinguish between a seller who created the goods himself and a seller who is only a supplier! Moreover, the court ruled that the distinction between a seller who is only a supplier and a seller who is also a manufacturer can have other legal implications, since section 8 of the addendum to the law states: "This law regulates only the obligations of the seller and the buyer Of the sale contract "(emphasis added) This indicates that there is no impediment in principle to sue the manufacturer of the defective filter even on ordinary tortious grounds. The court quoted itself in the Pamesa ruling:

"The negligent existence of the seller's obligation under the contract will be dealt with as a general rule within the framework of the Convention, whereas the right of claim for negligent production does not derive from the sales contract, but rather from breaching the manufacturer's obligation (emphasis added) In breach of a manufacturer's Breach of Duty, it is generally possible to sue even without a direct contractual relationship between the injured party and the manufacturer - and therefore it can be assumed that it is not subject to the Convention The forgiveness itself is for sale contracts only. "

From the above, the Supreme Court determines that insofar as it appears in the present proceeding as Norden's claim for breach of contract for the supply of "goods without the qualities required for their normal or commercial use" (section 33 (a) (4) of the addendum) (In the event that the claim in respect of negligence in production is a claim for negligence in the production) is an ordinary tort claim under Israeli law (subject to the conflict of law rules) and Which remains to prove the causal relationship between the defect of the filter and Norden's damage.

The court concludes this point and determines that the facts and grounds presented to the court should be viewed by BTR as the manufacturer of the filter that failed and its supplier as one! Therefore, BTR can be sued in both of the possible claim tracks, i.e. in the claim as a contractual discrepancy as a filter supplier, and in a tort claim as the manufacturer of the filter!

It is recommended where the Israeli suppliers, if they are not producers of the goods, differentiate themselves as distinctly as possible from the producer of the goods so that on a rainy day the court will not raise the question of whether the supplier is also the manufacturer and may find himself in the trap of a contractual claim on the one hand and a tort claim on the other .