I invite you to read the third review of court rulings on factoring cases - this time for the first half of 2019. This period was full of interesting rulings on factoring cases - I have selected 5 of them - 2 concerning offsets, 2 concerning disputes related to the adjustment of VAT invoices / conditional transfer of receivables, 1 concerning the calculation of factoring commissions.
I. Judgments regarding the adjustment of VAT invoices covered by factoring
The two rulings described below concerning the factoring company's adjustment of VAT invoices covered by a global assignment under factoring may shock factoring companies and should undoubtedly give food for thought in terms of the documents used for factoring transactions. In particular - both cases raise the issue of a conditional sale (and thus a conditional assignment of receivables) and the recognition that the assignment did not occur as a result of the lack of creation of the receivable itself from the VAT invoice issued by the factor. In both judgments below, the Courts emphasize that the mere fact that the factor has issued a VAT invoice does not result in an effective assignment of the receivable to the factor - which gives food for thought.
- Judgment of the Court of Appeals in Katowice dated February 15, 2019. (Ref. V AGa 280/18)
Can a VAT invoice be treated only as an offer? It turns out that yes. In this case, the factor issued a VAT invoice to the recipient in the amount of PLN 282,528 for the sale price for fertilizer. Receipt of the FV and the WZ document, sent by e-mail, was confirmed by the recipient's chief accountant, and the original FV was sent by mail. It turned out that the consignee was purchasing under a specific buyer, and according to the agreements between the factor and the consignee, the purchase of the goods was to take place as long as the consignee found buyers for the fertilizer covered by the FV. The issued FV was treated as an offer, and the recipient in fact was a kind of intermediary of the kind that a lot of in business. This type of company is always risky for the factor because sometimes their participation in the transaction is on paper and there is not even a transfer of possession and delivery of goods to them. According to the Court, a contract for the sale of goods specified only by species is a real legal transaction, which means that the coming into effect of the transaction is conditional not only on the parties' agreement, but also on the physical act of transferring possession of the goods sold.
Thus The court declared the sales contract conditional. This means that the seller's obligation to transfer ownership of the thing would arise not at the time of the conclusion of the contract, but at the time of the fulfillment of the condition, as would its correlative obligation to pay the price. At the earliest, the transfer of the claim to the factor could also occur at this time. The presented assessment is not altered by the fact that the VAT invoice was issued already at the time of the conclusion of the contract because, leaving aside its legal and tax significance, this document in itself does not create any rights or obligations, but only confirms the effects arising from the content of the declarations of intent made. Since the consignee did not find a buyer for the fertilizer - issued a correction invoice, which the Court found effectively annihilated the claim which, in the opinion of the Court, was not transferred to the factor.
- Judgment of the District Court in Lodz dated February 15, 2019. (Ref. X GC 50/18)
The factor sued the consignee for payment. The defendant consignee defended itself by issuing adjustment invoices "to zero". In the course of the case, it turned out that even before the factoring agreement was concluded, the factor and the consignee had agreed terms of cooperation providing, among other things, for the consignee's right to make returns without restrictions within about six months of the sale - which was to enable the consignee "to figure out the possibility of finding a further buyer for the goods purchased from the factor." Thus, the situation is somewhat analogous to the first judgment under discussion.
In the Court's opinion, a contract for the sale of goods was concluded between the consignee and the factor, and due to the stipulation made that the goods may be returned, it was a contract of so-called "trial sale" (Article 592 § 1 of the Civil Code) which, according to the regulations, "shall be deemed, in case of doubt, to have been concluded under the condition precedent that the buyer recognizes the object of sale as good. According to the Court in view of changing economic conditions and the expansion of the catalog of contractual bonding relationships, the analogy between a trial sale, provided the object is considered good, and a trial sale to test demand was considered acceptable. According to the court, there are no obstacles to also allow, by analogy, the conclusion of a contract bearing not only the condition of finding a further buyer of the goods, but also the definitive finalization of the transaction agreed with him, a contract therefore, which in the present case came into effect between the defendant and the factor. (...). The conditional nature of the contract, in turn, means that the condition stipulated therein concerns both the obligatory effect and the material effect of the sale. A circumstance that could prejudge any doubts in favor of the resolutive condition is not the mere fact of issuance and acceptance of VAT invoices by the defendant in connection with the sales, because in accordance with the wording of Article 106b of the Law of March 11, 2004 on tax on goods and services, the event giving rise to the obligation to issue such an invoice is the mere delivery of goods, so for the above obligation to arise it is not necessary to transfer the ownership of the goods.. Here, too, therefore, the court found that the VAT invoice does not in itself confirm the effective creation and existence of the claim.
Also surprisingly, the Court held that the statement of rescission of the sales contract should be made to the assignor. According to the Court In the case under review, we are not dealing with an attempt to terminate the contract by the defendant's agreement with the assignor. The fact that the factor accepted the defendant's position on the return of the goods purchased by him and issued invoices adjusting the defendant's receivables to zero as a result is legally irrelevant. On the other hand, the annihilation of the existing legal relationship between the debtor and the assignor occurred only as a consequence of the statement made by the defendant to the factor, for it was the latter that caused the obligation to collapse retroactively (ex tunc), causing the termination of the contract and a return to the state of affairs existing before its conclusion. This is because if the right of withdrawal is exercised, the contract is considered not concluded. Thus, effective withdrawal from the contract creates a new legal state of relations between the parties, according to which they are obliged to return their mutual benefits in accordance with the disposition of Article 494 of the Civil Code..
Personally, I take the position that this type of situation (issuance of a correction invoice, unilateral withdrawal from the contract with the approval of the factor behind the back of the factor) constitutes "another legal act" within the meaning of Article 512 of the Civil Code ineffective against the factor (assignee).
II. Judgments regarding offsets of receivables subject to factoring
- Supreme Court ruling of March 22, 2019. (Ref. I CSK 71/18)
The factoring company sued the consignee (the factoring company's client, which is a transportation company) for payment. In this case, we can trace the rules of set-off in the relationship between the debtor (recipient) and the factor (assignee). The court held that it was permissible to set off a claim stated in an invoice that became due although already after the debtor (consignee) was notified of the transfer, but earlier than the transferred claim stated in that invoice.
However, the court found ineffective the deduction of receivables by the recipient - those Which became due not only after the notification of the debtor (recipient) of the transfer, but also later than the transferred receivables. Their deduction was therefore opposed by Article 513 § 2 of the Civil Code, which allows the debtor to deduct from the transferred claim its claim against the assignor, which became due after the debtor's notification of the transfer, but only if the moment of maturity of the debtor's claim against the assignor was earlier than the moment of maturity of the transferred claim.
Complicated? Yes. In a simple way, I wrote about the rules of deduction in the THIS ARTICLE.
The Supreme Court also made some general observations about the rules on making deductions (offsets) that are worth remembering:
- The parties may not stipulate in the factoring agreement that one of them may make a unilateral offset against the other, despite the absence of the necessary statutory prerequisites for a unilateral offset.
- While unilateral deduction, the admissibility of which finds its basis in a specific statutory regulation, can only take place if certain prerequisites, provided for in that regulation, are met, contractual deduction - widely accepted both in the literature and case law (see the judgments of the Supreme Court of June 3, 1965, I CR 471/64, December 21, 1967, I CR 481/67, December 17, 1998, II CKN 849/98, January 26, 2005, V CK 404/04, December 20, 2005, V CSK 68/05, October 23, 2007, III CSK 106/07, July 25, 2013, II CSK 191/13, and the Supreme Court resolution of October 19, 2007, III CZP 58/07), and derived from the principle of freedom of contract (Article 3531 of the Civil Code) -. may take place in cases and under conditions in principle freely determined by the parties.
- The essence of any contractual set-off is the consensus of the parties to mutually redeem the designated claims at a certain moment; in the case of future claims, the decision of the parties to determine this moment is only limited insofar as this moment cannot, for obvious reasons, precede the very creation of the redeemed claims.
- In particular, the parties can make a contractual set-off for the purposes of only one specific situation - that is, to make a so-called one-off set-off. The impact of such a set-off on the transfer of the claim covered by it may be manifested in the fact that if such a set-off preceded the conclusion of the transfer agreement, the assignee would not have acquired the claim, and the debtor could invoke it against him, pursuant to Article 513 § 1 of the Civil Code; and such a set-off subsequent to the conclusion of the transfer agreement would have effect against the assignee if the party to the set-off was the assignor protected under Article 512 of the Civil Code, or if the party to the set-off was the assignee itself.
- Judgment of the Court of Appeals in Warsaw dated January 18, 2019. (Ref. VII AGa 496/18)
In this case, the factor sued for payment from the recipient - a client of the factor providing construction services. The financing related to VAT invoices confirmed by a work acceptance protocol. The defendant consignee defended itself by relying on a statement of set-off filed against the factor (assignor).
The Court is of the opinion that the debtor of a ceded claim cannot set off under Article 513 § 1 and 2 of the Civil Code its claim, which arose after receipt of the notice of assignment, against the claim that was the subject of the assignment made by the factor (assignor) to the factor (assignee). In the opinion of the Court, there are no grounds for deviating from the norm of Article 513 § 2 of the Civil Code in the case of assignment of future receivables. Thus, the debtor may present to the assignee for set-off only those claims against the assignor that he acquired by the time he became aware of the transfer, even if they are due later, but only if they become due before the future claim that is the subject of the transfer. However, the declaration of set-off itself must be made by the debtor to the assignee (factor) and not to the assignor (factor). It will be ineffective for the debtor to make such a statement to the factor.
The court also ruled on the application of the so-called factoring clause. For the inclusion of receivables from VAT invoices No. (...) in the factoring agreement, and in particular the assignment of the It is also irrelevant that the contents of these invoices delivered to the defendant did not actually expressly state that they were covered by factoring. (...) the lack of an endorsement does not relieve the defendant from the obligation to pay to the bank account indicated in the notice (k. 41). The latter wording, contained in the statement of the original creditor (...) S.A., clearly confirms that the annotation on the invoice that it was covered by the factoring agreement only had a informational, declaratory nature, and its possible absence, as in the present case, did not exclude these invoices from the application of the factoring agreement to them.
III. Verdict on factoring commission
- Judgment of the District Court of Warsaw dated May 14, 2019. (Ref. XXIII Ga 2372/18)
The case concerned the factor's settlement with the factor regarding factoring commissions in micro factoring. The factoring limit granted was PLN 50,000 and the parties made statements to each other related to the execution of the agreement electronically. The dispute in the case concerned the calculation of the minimum commission and the renewal commission.
The court of first instance held that when the factor did not purchase or finance receivables and did not provide services related to the financing and servicing of the acquired receivables, it could not therefore claim remuneration. The district court found that no provision in the contract provided for payment of remuneration for mere readiness to provide services. The court of second instance, however, was of a different opinion. In his opinion, the district court erroneously interpreted that if the defendant did not report any receivables to the factor, then the factor is not due any commission, for the readiness to provide factoring services. This follows from the definition of the minimum commission contained in the regulations - the factor is entitled to remuneration for factoring services rendered, as specified in Appendix 3 to the agreement, constituting the Table of Fees and Commissions, including in particular the minimum commission due for the factor's unused factoring limit in a given calendar month, unless the factor reports at least one VAT invoice for financing and the receivable identified by that VAT invoice is acquired and financed by the factor.
As for the factoring limit renewal commission, on the other hand, the mere fact of renewing such a limit in the further continuation of the agreement also meant that the factor was due the factoring limit renewal commission due for the subsequent years of the agreement. In the Court's view, the factor was also entitled to charge the defendant this commission as well. A different interpretation of the agreement in this regard would contradict its purpose and the very content of the agreement, as evident from the terms and conditions.
