Replacement of goods of inadequate quality supplied by the defendant with goods conforming to the delivery contract

In satisfying the claim, the court took into account not the terms of the supply contracts, but the plaintiff's link to the advertising booklet, which is only printed products to familiarize potential customers with the manufacturing capabilities of the manufacturing company, LLP "B" (hereinafter referred to as the plaintiff) filed a lawsuit against LLP "K" (hereinafter referred to as the defendant) for the replacement of goods of inadequate quality, delivered by the defendant, for the goods corresponding to the delivery contracts. The claim was satisfied by the decision of the specialized interdistrict economic Court of Mangystau region dated October 16, 2014. "K" LLP is charged with the obligation to replace goods of inadequate quality delivered under supply agreements No. Wicr 15-11/13-01 dated November 15, 2013, Wicr 21-10/13-1 and Wicr 21-10/13-2 dated October 23, 2013, for goods conforming to the contracts. The decisions of the appellate and cassation judicial boards of the Mangystau Regional Court left the decision of the court of first instance unchanged. Bulletin of the Supreme Court of the Republic of Kazakhstan No. 11/2015 23 The Supervisory Judicial Board for Civil and Administrative Cases of the Supreme Court annulled the judicial acts of local courts, issued a new decision in the case to dismiss the claim of "V" LLP. It followed from the case file that contracts no. VIKr-21-10/13-1 , VIKr number-21-10/13-2 dated October 23, 2013 and No. VIKr-15-11/13-1 dated November 15, 2013 (hereinafter referred to as the Contracts), under the terms of which the defendant undertakes to manufacture, deliver and produce on–site installation supervision the foundations of mobile buildings prepared by the plaintiff according to the technical specification in Appendix No. 1, and the plaintiff undertakes to accept the products and pay their cost under the terms of the contract. The defendant fulfilled his obligations to supply products, the plaintiff accepted them according to the act of acceptance and transfer, but subsequently, citing the identified shortcomings, filed a lawsuit to replace goods of inadequate quality with goods conforming to the contract. The local courts satisfied the claims, referring to the expert opinion and pointing out the validity of the plaintiff's arguments about the defendant's supply of products that did not meet the quality established by the Contracts. The Supervisory Judicial Board concluded that these conclusions of the courts do not correspond to the factual circumstances of the case and contradict the norms of substantive law.

In accordance with Articles 458, 466, 471 of the Civil Code, under a supply agreement, the seller (supplier), who is an entrepreneur, undertakes to transfer the goods produced or purchased by him to the buyer within a specified period for use in entrepreneurial activities or for other purposes not related to personal, family, household and other similar use. The buyer (recipient) is obliged to perform all necessary actions to ensure acceptance of the goods delivered in accordance with the delivery agreement. The goods accepted by the buyer (recipient) must be inspected by him within the time period determined by legislative acts, the delivery contract or business practices. The buyer (recipient) is obliged to check the quantity and quality of the accepted goods within the same period in accordance with the procedure established by legislative acts, contract or business practices, and immediately notify the supplier in writing of any inconsistencies or defects in the goods. The buyer, to whom the goods of inadequate quality have been delivered, has the right to submit to the supplier the requirements provided for in Article 428 of the Civil Code, namely, at his choice, to demand from the seller: 1) a proportionate reduction in the purchase price; 2) gratuitous elimination of defects in the goods within a reasonable period; 3) reimbursement of their expenses for the elimination of defects in the goods; 4) replacement of goods of inadequate quality with goods in accordance with the contract; 5) refusal to fulfill the contract and refund the amount of money paid for the goods. With the above, the delivery of goods of inadequate quality that did not comply with the terms of the contract, as well as the culpable behavior of the defendant, were subject to judicial review. However, such circumstances were not established by the courts.

According to Article 65 of the CPC, each party must prove the circumstances to which it refers as the basis of its claims and objections. The plaintiff did not provide relevant, acceptable, reliable evidence to support his claims. In satisfying the claim, the local courts took into account not the terms of the supply contracts, but the plaintiff's link to the advertising booklet, which is only printed products for familiarizing potential customers with the manufacturing capabilities of the manufacturing company. In accordance with paragraph 1 of Article 392 of the Civil Code, when interpreting the terms of a contract, the court takes into account the literal meaning of the words and expressions contained therein. The literal meaning of a contract clause, in case of ambiguity, is established by comparing it with other terms and the meaning of the contract as a whole. In accordance with clause 2.1. of the Contracts, the supplied products – four units of mobile building structures (hereinafter referred to as MOH) – must comply with the Technical Specification in Appendix No. 1 to the Contracts, as well as the current standards of the Republic of Kazakhstan. The product descriptions in the advertising booklets as a condition of its quality were not stipulated by the terms of the Contracts. Therefore, the conclusion of the courts that the supplied products do not comply with the advertising booklets contradicts the provisions of Articles 392, 393 of the Civil Code, as well as paragraph 10.6 of the Contracts, according to which the parties have come to a clear, clear agreement that each Contract exhaustively stipulates and contains all the essential and other conditions that the parties must adhere to in the performance of the Contract.

After signing the Agreement, any agreements, agreements, obligations, offers and statements of the parties, both oral and written, preceding the date of conclusion of the Agreement and related to its subject matter, are canceled if any between the parties. Due to the loss of legal force of such agreements, agreements, obligations, offers and statements, the parties are not entitled to further refer to them, including in the event of any claims in connection with the performance of the Contract. The court initially incorrectly posed questions to the expert regarding the conformity of the quality of the supplied products with the advertising booklets. Subsequently, the court, in violation of the provisions of Article 77 of the CPC, did not evaluate each piece of evidence in terms of its relevance, admissibility, reliability, and sufficiency to resolve the civil case. The court unreasonably, before making a decision on the case, at a court hearing, by ruling on October 16, 2014, contrary to the requirements of the CPC, considered expert opinion No. 1082 of September 4, 2014 as evidence having an advantage over other evidence, assessing it to be well-founded and beyond doubt.

At the same time, the court did not evaluate this evidence in conjunction with other evidence and the terms of the Contracts. Thus, according to the terms of the Contracts, the defendant is only responsible for manufacturing, delivery, and installation supervision. His duties do not include geodetic and design work, zero-cycle work and installation of foundations with blind area, assembly (installation) of mobile buildings, equipment and installation of internal and external power supply networks, water supply, sewerage, grounding, lightning protection and other work. When appointing an expert examination, the court does not exclude the possibility of a causal relationship between the quality of these works, the operating conditions and the consequences that have occurred. Meanwhile, according to the materials of the case, namely, the acts of acceptance and transfer of the Ministry of Health, the parties confirmed that the installed materials, as well as the work performed in the Ministry of Health, comply with the quality and terms of the Contracts, the parties have no complaints against each other regarding the quality and quantity of mobile buildings. The expert's conclusion did not establish the non-compliance of the Ministry of Health with the Technical Specification in Annex No. 1 to the Agreements, the current standards of the Republic of Kazakhstan, as well as the impossibility of using it in the future. Currently, the Customer uses the products for their intended purpose, and the shortcomings in the work in determining the defendant's guilt are eliminated during the warranty period.  In these circumstances, there were no legal grounds for satisfying a claim for replacing goods of inadequate quality with goods conforming to Contracts. Thus, significant violations of the law committed by local courts led to an incorrect resolution of the dispute, which, in accordance with part 3 of Article 387 of the CPC and paragraph 30 of the regulatory resolution of the Supreme Court of the Republic of Kazakhstan No. 2 dated March 20, 2003 "On the application by courts of certain norms of civil procedure legislation", was the basis for a supervisory review of the the legal force of judicial acts.

Given that the case did not require the collection and additional verification of evidence, the circumstances of the dispute were fully established, but the courts made an error in evaluating evidence, interpreting and applying substantive law, the supervisory judicial board overturned the judicial acts issued in the case and issued a new decision to dismiss the claim. 

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