Pamesa Ceramica v. Yisrael Mendelson Ltd
Facts: Pamesa Ceramica (‘Pamesa’), a Spanish company, manufactured floor tiles that were imported into Israel by companies later acquired by Yisrael Mendelson Engineering Technical Supply Ltd (‘Mendelson’). These were subsequently bought by a construction company, Yaakov and Tovi Eisenberger Building and Public Works Co. Ltd (‘Eisenberger’), and used in the construction of a residential building in Kiryat Motzkin.
After the buildings became inhabited, a defect was found in the tiles. Eisenberger replaced the tiles and sued Mendelson for reimbursement of the price of the tiles and the work involved in replacing them, and for compensation for damage to its reputation (in a total amount of NIS 1,173,100). Mendelson sent a third party notice to Pamesa claiming Pamesa was liable for any amount that it would be found liable to pay to Eisenberger.
The District Court found the importer to be fully liable for the defective tiles. It also upheld the third party notice, rejecting Pamesa’s claim it was not notified of the defect in the products within a period of two years and therefore the third party notice was prescribed under the Sale (International Sale of Goods) Law, 5731-1971. The District Court held that Pamesa had been aware that the tiles were problematic, and that the prescription period of two years in the Sale (International Sale of Goods) Law, 5731-1971, only applied to contractual claims, but not to claims in tort, and Pamesa had been negligent in the manufacture of the tiles.
All three parties appealed the judgment of the District Court to the Supreme Court. Eisenberger appealed solely on the question of quantum of damages for the damage to its goodwill. Mendelson appealed the finding that it was liable to Eisenberger. Pamesa appealed the finding that it was liable to Mendelson.
The main question in the appeal was whether the prescription period of two years in the Sale (International Sale of Goods) Law can be circumvented by a buyer who does not give notice of a defect in goods by raising a claim against the seller (manufacturer) in tort.
Held: The Supreme Court allowed Pamesa’s appeal. Even if Pamesa had been aware that the tiles were problematic, this was insufficient. Article 40 of the Hague Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods of 1964 provides that the prescription period of two years for international sales of goods will not apply if the seller knew of the defect, but the buyer needs to prove that the seller knew of the specific defect being alleged. Awareness of ‘problems’ in a certain product is insufficient. Mendelson should have given Pamesa notice within two years of receiving the goods, and since it did not do so, the action was prescribed under the Sale (International Sale of Goods) Law.
The Supreme Court held that the District Court was essentially correct when it held that a buyer may sue a seller (manufacturer) for negligence in an international sale of goods after the two year prescription period has expired. But after the two year prescription period has expired, the seller no longer has strict liability under the Sale (International Sale of Goods) Law, and the buyer is required to prove negligence. The Supreme Court held that Mendelson had not discharged the burden of proving that Pamesa had in fact been negligent.
Mendelson’s appeal was allowed solely on the question of deducting Value Added Tax from the amount awarded, a question that Eisenberger did not address in its arguments.
| Rubinstein, Elyakim | Primary Author | majority opinion |
| Grunis, Asher | majority opinion | |
| Rivlin, Eliezer | majority opinion |
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Facts: Pamesa Ceramica (‘Pamesa’), a Spanish company, manufactured floor tiles that were imported into Israel by companies later acquired by Yisrael Mendelson Engineering Technical Supply Ltd (‘Mendelson’). These were subsequently bought by a construction company, Yaakov and Tovi Eisenberger Building and Public Works Co. Ltd (‘Eisenberger’), and used in the construction of a residential building in Kiryat Motzkin.
After the buildings became inhabited, a defect was found in the tiles. Eisenberger replaced the tiles and sued Mendelson for reimbursement of the price of the tiles and the work involved in replacing them, and for compensation for damage to its reputation (in a total amount of NIS 1,173,100). Mendelson sent a third party notice to Pamesa claiming Pamesa was liable for any amount that it would be found liable to pay to Eisenberger.
The District Court found the importer to be fully liable for the defective tiles. It also upheld the third party notice, rejecting Pamesa’s claim it was not notified of the defect in the products within a period of two years and therefore the third party notice was prescribed under the Sale (International Sale of Goods) Law, 5731-1971. The District Court held that Pamesa had been aware that the tiles were problematic, and that the prescription period of two years in the Sale (International Sale of Goods) Law, 5731-1971, only applied to contractual claims, but not to claims in tort, and Pamesa had been negligent in the manufacture of the tiles.
All three parties appealed the judgment of the District Court to the Supreme Court. Eisenberger appealed solely on the question of quantum of damages for the damage to its goodwill. Mendelson appealed the finding that it was liable to Eisenberger. Pamesa appealed the finding that it was liable to Mendelson.
The main question in the appeal was whether the prescription period of two years in the Sale (International Sale of Goods) Law can be circumvented by a buyer who does not give notice of a defect in goods by raising a claim against the seller (manufacturer) in tort.
Held: The Supreme Court allowed Pamesa’s appeal. Even if Pamesa had been aware that the tiles were problematic, this was insufficient. Article 40 of the Hague Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods of 1964 provides that the prescription period of two years for international sales of goods will not apply if the seller knew of the defect, but the buyer needs to prove that the seller knew of the specific defect being alleged. Awareness of ‘problems’ in a certain product is insufficient. Mendelson should have given Pamesa notice within two years of receiving the goods, and since it did not do so, the action was prescribed under the Sale (International Sale of Goods) Law.
The Supreme Court held that the District Court was essentially correct when it held that a buyer may sue a seller (manufacturer) for negligence in an international sale of goods after the two year prescription period has expired. But after the two year prescription period has expired, the seller no longer has strict liability under the Sale (International Sale of Goods) Law, and the buyer is required to prove negligence. The Supreme Court held that Mendelson had not discharged the burden of proving that Pamesa had in fact been negligent.
Mendelson’s appeal was allowed solely on the question of deducting Value Added Tax from the amount awarded, a question that Eisenberger did not address in its arguments.
Appeal CA 7833/06 allowed. Appeal CA 8125/06 allowed in part. Appeal CA 8495/06 denied.