Introduction

In the landmark case of Brands International Corporation v. Reach Companies, LLC, decided on May 30, 2024, the United States Court of Appeals for the Eighth Circuit addressed significant issues surrounding international sales contracts under the United Nations Convention on Contracts for the International Sale of Goods (CISG). Brands International, a Canadian manufacturer, sued Reach Companies, a Minnesota-based retailer, over a breach of contract related to COVID-era hand sanitizer purchases. The dispute centered on Reach's failure to pay for delivered goods, invoking critical questions about applicable law and the recovery of attorney's fees under the CISG.

The parties contested whether Minnesota state law or the CISG governed the contractual obligations between them. Additionally, the case examined whether the CISG permits the awarding of attorney's fees to the prevailing party in breach of contract disputes. This commentary delves into the court's comprehensive analysis, the precedents cited, the legal reasoning applied, and the implications of the final judgment.

Summary of the Judgment

Brands International contracted with Reach Companies in 2020 to supply 1,000,000 bottles of hand sanitizer under "cash on delivery" terms. Brands delivered a portion of the order to Reach’s customer, Five Below, but Reach failed to remit payment despite goods being accepted and invoiced. Brands pursued legal action for breach of contract, seeking the contract price and attorney's fees.

At the district court level, the court determined that the CISG governed the contractual relationship and found Reach in breach for non-payment. Summary judgment was granted in favor of Brands for the unpaid amount but initially extended attorney's fees under the CISG. Upon appeal, the Eighth Circuit affirmed the summary judgment on the breach of contract but reversed the attorney's fees award, concluding that the CISG does not authorize such fees.

Analysis

Precedents Cited

The court referenced several key precedents to frame its analysis:

• Fed. Ins. Co. v. Great Am. Ins. Co., 893 F.3d 1098 (8th Cir. 2018) - Summary judgment standards.
• C.H. Robinson Worldwide, Inc. v. Traffic Tech, Inc., 60 F.4th 1144 (8th Cir. 2023) - Choice-of-law analysis.
• BP Oil International, Ltd. v. Empresa Estatal Petroleos de Ecuador, 332 F.3d 333 (5th Cir. 2003) - CISG applicability.
• Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., 313 F.3d 385 (7th Cir. 2002) - Attorney's fees under CISG.
• Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024 (2d Cir. 1995) - Scope of recoverable damages under CISG.

These cases collectively informed the court's approach to interpreting the CISG, particularly regarding jurisdiction, breach of contract implications, and the non-recoverability of attorney's fees.

Legal Reasoning

The Eighth Circuit undertook a de novo review of the district court’s decisions under the CISG framework. Key elements of the court’s reasoning included:

• Applicability of the CISG: The court affirmed that the CISG applied by default to international sales contracts between parties from Contracting States (the U.S. and Canada) unless expressly excluded, which was not the case here.
• Breach of Contract: Under CISG Articles 59 and 63, Reach was obligated to pay upon delivery without requiring additional invoicing or formalities. Reach's failure to do so constituted a breach, justifying Brands' right to declare the contract avoided and seek damages.
• Attorney's Fees: The court scrutinized Article 74 of the CISG, which outlines recoverable damages for breach. Despite Brands' argument that attorney's fees could be encompassed within "loss," the court found no explicit provision within the CISG authorizing such fees. Drawing parallels with the Uniform Commercial Code (UCC) and international interpretations, the court concluded that Article 74 does not support the recovery of attorney's fees.

The court emphasized the importance of upholding the CISG's principles of uniformity and equality between contractual parties, which would be undermined by allowing attorney's fees recovery only in specific circumstances.

Impact

This judgment reinforces the CISG's role as the governing law in international sales contracts involving Contracting States, providing clarity on the non-recovery of attorney's fees under Article 74. Future litigations involving similar international sales disputes will likely reference this case to substantiate the inapplicability of attorney's fees under the CISG, promoting uniformity and predictability in international trade law.

Additionally, the decision guides businesses in drafting contracts, emphasizing the necessity for clear terms regarding governing law and the potential exclusion of the CISG when desired. It also underscores the importance of understanding the limitations of recoverable damages under international conventions.

Complex Concepts Simplified

United Nations Convention on Contracts for the International Sale of Goods (CISG)

The CISG is an international treaty that standardizes the laws governing international sales contracts between businesses located in different countries. It eliminates uncertainties by providing a uniform framework, reducing the need to negotiate terms related to contract formation, obligations, and remedies for breach.

Summary Judgment

A summary judgment is a legal decision made by a court without a full trial. It is granted when the court determines that there are no genuine disputes regarding the material facts of the case and that the moving party is entitled to judgment as a matter of law.

Attorney's Fees under CISG

The CISG outlines the scope of damages recoverable in breach of contract cases but does not explicitly allow for the recovery of attorney's fees. This means that, unless separately provided for in the contract or under applicable domestic law, parties cannot claim the costs of legal representation as part of the damages.

Conclusion

The Eighth Circuit's decision in Brands International Corporation v. Reach Companies, LLC solidifies the CISG's authority in international sales disputes, emphasizing its application unless expressly excluded. By affirming the non-recoverability of attorney's fees under Article 74, the court aligns with the CISG's principles of maintaining uniformity and fairness between contracting parties.

This judgment serves as a crucial reference point for international trade law, guiding businesses and legal practitioners in navigating contractual obligations and understanding the limitations of recoverable damages under the CISG. It underscores the necessity for clear contractual terms and the importance of comprehensive legal strategies in international commerce.