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Hungarian Court Decides That EXW Hungary Does Not Establish Hungarian Jurisdiction (Under Circumstances Specified Below)

Hungarian Court Decides That EXW Hungary Does Not Establish Hungarian Jurisdiction

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Ex Works (EXW) is an international trade term and is one of the 11 current Incoterms Rules, a set of standardized international trade terms that are published by the ICC (International Chamber of Commerce). EXW means that the seller fulfils his obligation to deliver when he has made the goods available at his premises (i.e., factory, warehouse, etc.) to the buyer. The buyer bears all costs and risks involved in taking the goods from the seller's premises to the desired destination.

The plaintiff, a Hungarian company entered into a framework agreement with a German entrepreneur as principal (defendant, our client) for the manufacture of furniture and other items in Hungary for defendant’s projects in Germany. The agreement contained an EXW Hungary clause. Contrary to the content of EXW, the framework agreement stated that the plaintiff is obliged to deliver the products to the place described by the defendant as well.

The Hungarian court decided at the first and second instance that referring to the Ex Works (EXW) Hungary in a framework agreement does not establish the place of performance in Hungary – and thus the Hungarian jurisdiction according to Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (hereinafter referred to as Regulation) – if the actual fulfilment of the contract is not in accordance with the content of the EXW.

The court stated that as the parties have deviated from the content of a classic EXW and they have not stated explicitly that they accept the EXW Hungary as place of performance (the clause was rather a short reference to the pricing), the place of performance is to be determined according to the actual fulfilment of the contract. However, as the defendant did not define the place of delivery, the court stated that according to the Hungarian Civil Code, legal statements shall be interpreted considering the circumstances of the case.

Since the products were made for projects in Germany, the court reasoned that the delivery had to take place in Germany so that the place of performance is in Germany. Therefore, the jurisdiction of a Hungarian court cannot be declared according to the special jurisdiction provisions as per Article 7 of the Regulation and the plaintiff-initiated lawsuit has been dismissed.

By Janos Szax, Partner, Feher Legal & TaxAlliott Global Alliance

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