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CISG CASE PRESENTATION

China 6 December 2000 CIETAC Arbitration proceeding (Pharmaceutical products case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/001206c1.html]

Primary source(s) of information for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISION: 20001206 (6 December 2000)

JURISDICTION: Arbitration ; China

TRIBUNAL: China International Economic & Trade Arbitration Commission [CIETAC] (PRC)

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2000/13

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Hong Kong (claimant)

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Pharmaceutical products (GUAIFENESIN USP23)


UNCITRAL case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade Arbitration
Commission (CIETAC) (now South China Branch) 6 December 2000 (Pharmaceutical products case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/112],
CLOUT abstract no. 1104

Reproduced with permission of UNCITRAL

Abstract prepared by Ge Zhang

A seller from Hong Kong and a buyer from the United States of America entered into contracts of sales of Guaiacol glyceryl ether. Following delivery of the goods by the seller, the two parties negotiated and reached an agreement to postpone payment. The buyer subsequently refused to make the payment under one of the contracts. As a result, the seller applied for arbitration, requesting the Arbitration Tribunal to order the buyer to pay for the goods, with interest, for the costs incurred during the period between the arrival of the goods at their port of destination and the payment of the money, and other costs.

The parties had not specified what law should govern the contract. However, both parties made their statements on the basis of the Law of Contract of the People's Republic of China and CISG, and further agreed unequivocally that the case would be governed by the law of Mainland China and CISG. The Tribunal respected the intention of the parties and decided that the laws governing the contract would be that of Mainland China and CISG.

The Tribunal held that the seller had provided sufficient evidence to prove that it had delivered the goods as agreed in the contract, yet the buyer had not made the payment provided for in the contract, and neither had the buyer provided any effective evidence to prove that it had paid the price for the goods under the contract. Hence the Tribunal held that the buyer had violated its obligation to take delivery of the goods and pay their price and ought to accept responsibility for breaching the contract. In accordance with Articles 61, 62, 74 and 78 of the Convention, the Tribunal ruled that the buyer must pay to the seller the sum for the goods under dispute and the relevant costs caused by its breach of contract, and interest.

On the other hand, the buyer claimed after the hearing by the Tribunal that the goods delivered by the seller had quality problems. The Tribunal held that the buyer had not made any counterclaim within the time limit provided by the rules of procedure for arbitration, and it had made clear during the hearing that it would not raise any objection against the quality of the goods. The Tribunal therefore decided that it would not consider the claim made by the buyer regarding the quality of the goods.

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Classification of issues present

APPLICATION OF CISG: Yes. The parties agreed to apply Chinese domestic law and the CISG. The tribunal respected the parties' intentions.

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 36 ; 38(1) ; 39 ; 53 ; 61 ; 62 ; 67 ; 74 ; 78

Classification of issues using UNCITRAL classification code numbers:

36A2 [Time for assessing conformity of goods (conformity determined as of time when risk passes to buyer): seller responsible when lack of conformity becomes apparent later];

38A [Buyer's obligation to examine goods: time for examining goods];

39A ; 39B [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Cut-off period of two years];

61B [Remedies for breach of contract by buyer: seller may claim damages in addition to other remedies];

62A [Seller may compel performance of any of buyer's remedies: including payment of price];

74A [General rules for measuring damages: loss suffered as consequence of breach];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Passage of risk ; Examination of goods ; Lack of conformity notice, timeliness ; Price ; Damages ; Interest

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

China International Economic & Trade Arbitration Commission
CIETAC (PRC) Arbitration Award

Pharmaceutical products (Guaifenesin) case (6 December 2000)

Translation [*] by Meihua Xu [**]

Edited by John Zhu [***]

The China International Economic and Trade Arbitration Commission Shenzhen Sub-Commission (hereafter, the "Shenzhen Sub-Commission") accepted the case according to:

   -    The arbitration clause in the contract signed by Claimant [Seller], Hong Kong H Medicine Company, and Respondent [Buyer], America A Company; and
 
   -    The written arbitration application submitted by [Seller].

The Arbitration Rules of the Arbitration Commission (hereafter, the "Arbitration Rules"), which became effective on 10 May 1998, are applicable to this case.

On 15 June 2000, the Shenzhen Sub-Commission sent the arbitration notice to the [Buyer], and forwarded the [Seller]'s arbitration application and the attached evidence, the Arbitration Rules, the list of arbitration fee, and the arbitrators' list by EMS.

The [Seller] appointed Ms. W as its arbitrator, and the [Buyer] appointed Mr. C as its arbitrator. The Chairman of the Arbitration Commission appointed Mr. L as the Presiding Arbitrator since the two parties failed to jointly appoint or ask the Chairman of the Arbitration Commission to appoint one. These three arbitrators formed the Arbitration Tribunal to hear this case on 7 August 2000.

After a consultation between the Secretariat and the Arbitration Tribunal, it was decided to hold a court session at 2 p.m. on 8 September 2000. The two parties attended the court session. The Arbitration Tribunal heard the parties' statements and arguments, verified the evidence related to this case, and made an investigation on the facts of this case.

Both parties submitted supplementary documents after the court session.

On 6 December 2000, the Arbitration Tribunal handed down this award by written document. The following are the facts, the Tribunal's opinion and award.

I. FACTS

On 13 December 1999, the [Buyer] and the [Seller] signed Contract A with the following terms:

   -    [Buyer]'s purchase order number: 7188 (hereafter, "P7188");
   -    Contract goods: Guaifenesin Usp 23 Ex. Tianjin Xinxin Pharma. 500kgs per batch;
   -    Quantity: 16 tons;
   -    Price: Unit price is US $8.52/kg CIF Sea New York, USA, totaling US $136,320.00;
   -    Shipping term: The goods should be shipped by 18 December 1999; the loading port is Tianjin, China; the destination port is New York, USA;
   -    Payment term: D/P at sight;
   -    Objection on quality/quantity of the goods: Objection on the quality of the goods shall be raised within 30 days of the arrival of the goods at the destination port; objection on the quantity of the goods shall be raised within 15 days of the arrival of the goods at the destination port; the [Seller] is not responsible for the objections for which the insurance company, or shipping company, or other related transportation company or delivery company should be liable.

On 13 December 1999, the parties signed Contract B with the following terms:

   -    [Buyer]'s purchase order number: 7189 (hereafter, "P7189");
   -    Contract goods: Guaifenesin Usp 23 Ex. Tianjin Xinxin Pharma. 500kgs per batch;
   -    Quantity: 16 tons;
   -    Price: Unit price is US $8.52/kg CIF Sea New York, USA, totaling US $136,320.00;
   -    Shipping term: The goods should be shipped by 25 December 1999; the loading port is Tianjin, China; the destination port is New York, USA;
   -    Payment term: D/P at sight;
   -    Objection on quality/quantity of the goods: Objection on the quality of the goods shall be raised within 30 days of the arrival of the goods at the destination port; objection on the quantity of the goods shall be raised within 15 of the arrival of the goods at the destination port; the [Seller] is not responsible for the objections for which the insurance company, or shipping company, or other related transportation company or delivery company should be liable.

On 18 February 2000, the [Buyer] and the [Seller] signed a payment postponement agreement regarding the payments on P7188 and P7189 (hereafter, "payment postponement agreement"), with the following contents:

"On 16 February 2000, after a friendly negotiation, the two parties reached the following agreement on the payments on P7188 for 16 tons of Guaifenesin Usp23, totaling US $136,320.00 and P7189 for 16 tons of Guaifenesin Usp23, totaling US $136,320.00:

  1. [Buyer] promises that it will make payments on P1788 and P1789 by 10 March and 1 May, respectively, and bear the entire costs incurred after the goods arrive at New York port (including port fee, demurrage charge, picking up fee, and storage charge);

  2. [Buyer] agrees to pay [Seller]'s loss of interest on the price for the goods calculated from when the goods arrive at the destination port to the [Buyer]'s actual payment day at a 0.45% monthly interest rate. The interest calculation starts when the entire documents are complete and the goods are ready to be picked up;

  3. The [Buyer] and the [Seller] have confirmed the quality and packaging of the goods before departure, and the [Buyer] accepts the quality of the goods. The [Seller] shall not be liable for quality defects caused by improper storage after the [Buyer]'s delay in taking delivery of the goods or by any other reasons;

  4. If the [Buyer] fails to make payment in accordance with this agreement, it should bear the entire losses of the [Seller]. The [Buyer] bears the entire losses and responsibilities if it fails to take delivery of the goods on time or causes the goods to be confiscated or returned by the America government;

  5. The [Buyer] allows the [Seller] to perform customs clearance from Customs or the shipping company and store the goods at a third party's warehouse. The two parties agree that as long as the original B/L and the proof of payment are provided, the goods can be delivered to whoever provides the documents, and a standard storage fee will be charged."

On 6 June 2000, the [Seller] filed the arbitration application with Shenzhen Sub-Commission based on the arbitration clause in the aforesaid contract, asking the Arbitration Commission to rule that:

  1. [Buyer] pay US $136,320.00 under P7189 to the [Seller] immediately;

  2. [Buyer] pay to the [Seller] the costs incurred from the day the goods arrived at New York port to the day of actual payment (temporarily calculated to 22 August 2000, i.e., US $11,412.56);

  3. [Buyer] pay the interest on the delayed payment calculated from the arrival date of the goods to the day of actual payment (temporarily calculated to 22 August 2000, i.e., US $6,134.00); and

  4. [Buyer] pay the entire arbitration fee (actual cost) and the attorneys' fee of US $12,000.00.

Regarding item 2, after the court session, the [Seller] calculated it until 22 October 2000, totaling US $12,198.08.

POSITION OF THE PARTIES

[Seller]'s position

(1) Contract performance

The [Seller] alleges that:

      1. In accordance with the purchase order and the contract, on 18 December 1999 and 25 December 1999, the [Seller] made two deliveries to America with 16 tons for US $136,320 in each delivery. The aforesaid goods arrived at New York port on 28 January 2000 and 4 February 2000, respectively. On 10 February 2000, the [Seller]'s bank informed the [Seller] that the [Buyer] failed to make payment by D/P at sight and take delivery of the goods in accordance with the contract, and asked the [Seller] to find out the reason. After contacting the [Buyer], the [Buyer] replied that it was unable to make payment due to financial problems and asked a postponement to May 2000.

On 16 February 2000, being invited by the [Buyer]'s Shanghai Office, the [Seller] and Mr. K, the vice-president of the [Buyer], signed a payment postponement agreement, however, the [Buyer] failed to fulfill this agreement. On 7 April 2000, being urged by the [Seller], the [Buyer] made payment under Contract A, but has not paid the price under Contract B.

The [Buyer]'s statement that it has paid the price under Contract B and has taken delivery of the goods is not true. The entire evidence alleging payment was a duplicate; the [Buyer] was unable to provide proof of payment or proof of deduction issued by the bank. The entire original documents sent by the [Seller] to the receiving bank in the United States were returned due to the [Buyer]'s refusal of payment as specified in the letter issued by the bank in the United States.

      2. [Seller] claims:

            (1) The price for the goods

            The [Buyer] failed to make payment within the time stipulated in the contract. After reaching the payment postponement agreement, the [Buyer] only paid the price under the other contract, but failed to make payment for the goods in this case; therefore, the [Buyer] should pay the price for these goods.

            (2) Costs incurred after the goods arrived at New York port

            This cost is not an anticipatory cost, but has been incurred and is still being incurred.

                  a. The second delivery arrived at the destination port on 4 February and Shipping Company A performed customs clearance at the beginning of March. The goods have been stored from that time to the present.

                  b. Based on American TSJ, Inc. (hereafter, "TSJ Company")'s proof (evidence 6), by 25 May, the goods under HBL#COSU369998135 (i.e., the goods in the second delivery) stored in its warehouse in New York had incurred US $8,359.28 plus added costs. The following are the costs in detail:

-    Trailer charge: US $750;
-    Storage charge: US $2,303.28;
-    Warehouse operation fee: US $400;
-    Tray installation fee: US $1,120;
-    COSCO demurrage charge: US $899;
-    Warehouse procedure fee: US $150;
-    Port fee and documents fee: US $1,202;
-    EMS fee: US $40;
-    Storage demurrage charge: US $1,495;
-    Extra storage fee by 25 August: US $2,303.28;
-    Extra storage demurrage charge by 25 August: US $750.
 
Above totals US $8,359.28 + 2,303.28 + 750 = US $11,412.56.

                  c. In June, the [Seller] paid US $10,000 as a deposit, and now the [Seller] is being asked for an additional charge of US $2,198.08, which indicates that by 22 October, a total of US $12,198.08 is to be incurred, and that the aforesaid costs are still being incurred before the [Buyer] makes payment and takes delivery of the goods. Since the two parties reached an agreement on the place where the goods were to be stored and the standard of charges, these are inevitable costs confirmed by the [Buyer]; therefore, since the [Seller] had paid the costs for the [Buyer], they constitute direct losses of the [Seller].

The aforesaid costs have been proved by FX Shipping Company's Shenzhen Agency, FCH International Transportation Company.

            (3) Loss of interest from the time of the arrival of the goods to the time of actual payment

            According to the payment postponement agreement, the price for the goods under Contract B, HBL#COSU369998135, should be paid by 1 May, and the [Buyer] had promised to make certain compensation to the [Seller] on the interest incurred before making payment. The loss of interest temporarily calculated to 1 October, i.e., 5 months, at a 0.45% monthly interest rate is: US $136,320 5 months 0.45% = US $3,067.20.

The [Seller] asks the [Buyer] to pay the interest calculated to the actual payment day based on the aforesaid interest rate.

The aforesaid loss were incurred because the [Buyer] failed to make payment after customs clearance, with the result, the goods could not be taken over. This was not an accidental cost; therefore, the [Buyer] shall bear it entirely.

[Buyer]'s position

The [Buyer] counter argues that:

      The [Buyer] has paid US $136,320 under P7189, which was asked by the [Seller] in the arbitration application, therefore, this claim of the [Seller] has no legal or factual basis.

On 10 December 1999, the [Buyer] sent two purchase orders, i.e., P7188 and P7189, to the [Seller]. On 13 December 1999, the parties concluded two contracts for the aforesaid two purchase orders, i.e., Contract A and Contract B. After paying the first US $136,320, the [Buyer] received the goods under Contract B, which meant that the [Buyer] had fulfilled its obligation to make payment for Contract B and had obtained the right to the goods under this contract.

The evidence proving the aforesaid facts is as follows:

      1. Written evidence 2 provided by the [Buyer], i.e., an invoice issued by [Seller]'s shipping agent in America, TSJ Company (invoice number: 005370, hereafter, "TSJ invoice") and the estimated time of departure and arrival indicated in the notice of arrival of the goods (reference number: SHENZ0100007), which proves that the [Buyer] has received the goods under Contract B;

      2. The manufacturing numbers of the goods under P7189 were from 99800 to 99812, which were also indicated in the [Seller]'s packing list provided by the [Buyer]; the goods with the same numbers were inspected, which can be seen in written evidence No. 4 provided by the [Buyer], i.e., the inspection report issued by New York Schwarzkopf Micro Analysis Laboratory (hereafter, "S Lab"). This also proves that the goods received by the [Buyer] were those under Contract B;

      3. The reference number in TSJ invoice, i.e., COSU369998135, was the same as the B/L number in the B/L issued by [Seller]'s shipping company, FX Shipping Company, and the purchase order number indicated in the B/L was No. 7189, which was sufficient to prove that the [Buyer] received the goods under Contract B after making payment;

      4. Evidence 6, the B/L for P7189 issued by FX Shipping Company, has the seal of [Buyer]'s receiving bank, HSBC Business Bank, indicating that the [Buyer] had made payment. The business number, No. 2200874, on the bank's seal was the same as that in the receiving notice and receiving list sent by the bank on 17 May 2000 and 18 May, respectively, which indicated that the payment and acceptance of goods were performed for the same transaction. This is also sufficient to prove that the goods received by the [Buyer] after making payment were the goods under Contract B.

(2) Quality problem, compensation claim period, and revocable clause alleged by the [Buyer]

The [Buyer] alleges that:

      1. After making payment, the [Buyer] received goods from the [Seller] with severe quality problems, which indicated that the performance of the [Seller] had defects, causing the [Buyer] to have to resell the goods at a discounted price and suffer a severe economic loss.

      2. Article 13 of Contract B, the quality/quantity objection clause, indicates that the compensation claim period was 30 days. However:

            First, [Buyer] was unable to perform in accordance with this clause during the actual performance of the contract. According to this clause, any quality objection shall be raised within 30 days after the goods arrive at the destination port. In other words, there are two requirements for the [Buyer] to raise quality objection, one is to get the goods, and the other is to raise objection within 30 days of the arrival of the goods, both of which are necessary.

Based on the D/P payment term, the [Buyer] can get the goods and raise quality objection only after making payment; however, due to the [Buyer]'s financial difficulties, on 18 February, the two parties reached the payment postponement agreement after friendly negotiation, by which the [Buyer] was obligated to make payment by 1 May 2000. Under this circumstance, the [Buyer] has actually lost the right to raise quality objection within 30 days of the arrival of the goods based on article 1 of the payment postponement agreement signed by the two parties on 18 February 2000. This payment postponement agreement not only modified article 13 of contract B, which stipulated that the quality objection should be raised within 30 days, but also made this clause become impossible to perform.

            Second, based on legal theory, stipulations in a contract should be in accordance with law. If there is any inconsistency between the agreement of the parties and the provisions of the law, the law shall prevail. The parties in this case are an American legal person and a legal person of Hong Kong, China. Based on the General Principles of the Civil Law of the PRC, a civil dispute involving foreign interest should apply Chinese domestic law or international treaties or conventions adopted by China or international trade usages; therefore, the United Nations Convention on Contracts for the International Sales of Goods (hereafter, the "CISG"), which has been adopted by China and America, is applicable.

Article 36(1) and (2) of the CISG clearly states that the [Seller] is liable in accordance with the contract and this Convention for any lack of conformity which exists at or after the time when the risk passes to the [Buyer].

Article 38(1) of the CISG stipulates that:

"The [Buyer] must examine the goods, cause them to be examined, within as short a period as is practicable in the circumstances."

Article 39(2) of the CISG states that:

"In any event, the [Buyer] losses the right to rely on a lack of conformity of the goods if he does not give the [Seller] notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the [Buyer], unless this time-limit is inconsistent with a contractual period of guarantee."

The aforesaid stipulations indicate that:

  1. The [Seller] is liable for any lack of conformity which exists at or after the time when the risk passes to the [Buyer];

  2. A reasonable time for the [Buyer] to examine the goods is "as short a period as is practicable in the circumstances"; and

  3. The [Buyer] shall give notice to the [Seller] for any lack of conformity within two years.

Since article 13 of Contract B was inconsistent with the related stipulations in the CISG, the period for the [Buyer] to claim lack of conformity of the goods should be based on the stipulations in the CISG.

The last page of evidence 4 provided by the [Buyer], the chemical inspection report issued by Tianjin Xinxin Medicine Company, indicted that the expiration date of these goods was on 17 January 2005.

(3) Revocability of Article 3 of the payment postponement agreement signed by the two parties on 18 February 2000

[Buyer]'s position

      The [Buyer] alleges that based on the facts in this case and the related stipulations in Contract Law of the PRC, Article 3 of the payment postponement agreement is revocable for the following reasons:

            First, based on the facts, the [Buyer] did not make payment for the goods or receive the goods, and the two parties had never inspected the goods before departure. What is the basis for the [Seller]'s conclusion that "the two parties have confirmed the quality and packaging of the goods, which were undamaged, and that the [Buyer] accepted the quality of the goods"?

            Second, according to the Contract Law of the PRC, a party is entitled to ask the People's Court or arbitration institution to modify or revoke a contract which was obviously unfair at the time of the conclusion of the contract. This indicates, to a large extent, that a revocable contract is a contract without a true meeting of the minds of the parties.

Obvious unfairness means that, under pressure or due to lack of experience, a party signed a contract which was obviously detrimental to its interest. Because of financial difficulties and under the circumstance that the payment deadline had expired, the [Buyer] had to sign the payment postponement agreement with the [Seller], which contained a detrimental clause, article 3.

      3. This was not the true intention of the [Buyer], and satisfies the requirements for an unfair clause.

Based on the aforesaid facts and provisions of law, the [Buyer] asks the Arbitration Tribunal to revoke article 3 of the payment postponement agreement for the payments on P7188 and P7189 signed by the two parties on 18 February 2000.

[Seller]'s position

The [Seller] alleges that:

      The [Buyer] was unable to take delivery of the goods because the whole set of the original B/Ls were returned by the bank; the warehouse agreed to by the two parties is still notifying the [Seller] of the current storage charges and reminding that the goods remain stored in the warehouse and cannot be released without the original B/L .The [Buyer] did not take delivery of the goods, how come there is an inspection report? In accordance with the quality objection period, the [Buyer] should have raised quality objections by 5 March 2000. If [Buyer] fails to do so, it would be considered that the [Buyer] has accepted the goods In addition, the goods delivered by the [Seller] had no defects, which was evidenced by both the Tianjin manufacturer's proof and the conclusion indicated in article 3 of the payment postponement agreement.

The [Seller] also alleges that:

      The [Buyer] is asserting that the payment postponement agreement was obviously unfair; however, an obviously unfair clause is only revocable, meaning that it remains effective before being revoked by the arbitration organization. The precondition for an arbitration organization to revoke it is that the [Buyer] must file a counterclaim, not just submit a defense.

Also, the [Buyer] quoted out of context by alleging that according to article 39(2) of the CISG, it could raise quality objection within two years. Article 39(1) stipulates that the buyer shall give notice to the seller within a reasonable time after he has discovered or ought to have discovered the lack of conformity. Since there is no clear stipulation on the "reasonable time", the stipulation in the contract agreed by the two parties is legal and effective. As to the "two years" which was alleged by the [Buyer], it is an absolute period of time, which is not applicable to this case that has an agreement on the period of time.

II. OPINION OF THE ARBITRATION TRIBUNAL

Applicable law

The parties failed to stipulate the applicable law in their contracts. However, they submitted statements and arguments based on the Contract Law of the PRC and the CISG. Moreover, the two parties have clearly agreed to apply Chinese domestic law and the CISG. The Arbitration Tribunal respects the parties' intentions, holding that Chinese domestic law and the CISG should be applied to this case.

Undisputed facts and contentions of the parties

The Arbitration Tribunal gives the following opinions by consent after considering the parties' statements and evidence that:

1. Contract B signed by the [Buyer] and the [Seller] on 13 December 1999 (see the statement of facts above for relevant provisions), and the payment postponement agreement under P7188 and P7189 signed later (see the statement of facts above for its provisions), are all legal and effective and binding on the two parties. They should be the basis for determining the rights and obligations of the parties in this case.

2. The Arbitration Tribunal notes that the two parties have no dispute on the existence and content of Contract B. The dispute is: the [Seller]'s position was that the [Buyer] failed to make payment for the goods under Contract B, while the [Buyer]'s position was that after its first payment, it received the goods under Contract B; therefore, it had paid the price for the goods under Contract B.

[Seller]'s evidence

The [Seller] provided the following evidence to prove that the [Buyer] has not make payment.

      (1) Return of bill notice issued by Nanyang Commercial Bank Shenzhen Branch to the [Seller] on 4 July 2000, attached with the entire (original) documents for this case, including No. COSU369998135 original B/L issued by FX Shipping Company (which indicated a purchase order number of 7189 and a container number of UXXU4355558/40'/Z51911), a business invoice with a number of HPCI991217A (which indicated a contract number of HPC1213B and a purchase order number of 7189), and No. 0066930 insurance bill issued by China People's Insurance Company on 25 December 1999 (with a business invoice number of HPCI991217A).

The Arbitration Tribunal deems that under the term D/P at sight payment, unless there is opposite evidence, this evidence not only proves that the [Seller] has delivered the goods in accordance with the contract, but also that the [Buyer] violated the contract by refusing to take delivery of the goods or make payment.

      (2) A letter sent by Shenzhen FCH International Transportation Company (hereafter, "FCH Company") on 30 May 2000 to the [Seller], which states that "Consignee A Company has finished procedures for taking the first delivery, and paid the corresponding storage charge and other expenses; however, it has not taken the second delivery, nor did it pay any related fees ...".

The Arbitration Tribunal deems that considering other evidence in this case, this letter is reliable.

      (3) A letter issued by TSJ Company on 1 June 2000 titled "regarding the demurrage of HBL#COSU369998135 in our New York Warehouse/Hong Kong H." This letter clearly states the arrival time of the goods under this case and the dispatch time and object of the arrival notice, indicating that on 6 April 2000, the [Buyer] provided the original B/L for HBL#COSU369998115 goods to TSJ Company, paid the storage charge and other expenses accordingly, and finished the procedure for taking delivery of the goods. In addition, it is mentioned in this letter that by 25 May 2000, the goods under HBL#COSU369998135, i.e., the goods in this case, had incurred extra expenses with the amount provided in detail.

The Arbitration Tribunal holds that considering other evidence in this case, this letter is also reliable.

      (4) A letter issued by FX Company on 13 September 2000, which explained the expenses until 22 October 2000 incurred by goods under B/L number COSU369998135 in detail.

The Arbitration Tribunal deems that this letter is reliable as well.

      (5) A letter titled "1X40 B/L COSU369998135 ARRIVED NY 02/04/00" sent by FCH Company to the [Seller] on 15 September 2000. This letter states that "by 22 October, a charge of US $12,198.08 has been incurred for your goods stored by our agent in America's TSJ warehouse." In addition, this letter confirmed that a deposit of US $10,000 paid by the [Seller] has been received, asking the [Seller] to pay the remaining US $2,198.08.

The Arbitration Tribunal deems that considering other evidence in this case, this letter is reliable.

      (6) A copy of a remittance slip issued by the bank on 21 June 2000, totaling US $10,000, which was used as "the deposit for storage charge for B/L COSU369998135 goods stored in New York warehouse."

The Arbitration Tribunal deems that this evidence not only proves the reliability of the letters indicating the extra expenses incurred by the goods remained in New York warehouse, but also proves that the [Seller] has in fact paid part of the expenses.

[Buyer]'s evidence

On the other hand, the [Buyer] submits the following evidence to prove that it has fulfilled its obligation to make payment for the goods under Contract B.

      (1) An invoice issued by TSJ Company dated 6 April 2000 (No. 005370) and arrival notice issued on 6 April 2000 (reference number: SHENZ0100007).

The Arbitration Tribunal notes that "ETD/ETA:12/25/99, 02/04/00" indicated in the aforesaid two documents means the estimate departure time and arrival time. The former is the same as the B/L date, and the latter is consistent with the time when the goods arrived in New York, indicated in other evidence. However, neither the two documents nor the aforesaid contents in them can prove either that the [Buyer] has paid the related charges or taken delivery of the goods, or that after making payment, the [Buyer] received goods under Contract B.

      (2) [Seller]'s packing list and the inspection result issued by S Lab.

The Arbitration Tribunal notes that these two documents have the same series number of the goods. Even though they could prove that the goods inspected by S Lab were the goods in the [Seller]'s packing list, they are not sufficient to prove either that the [Buyer] has legally received the goods listed in the packing list, or that the [Buyer] has paid the price for the goods under Contract B.

      (3) An invoice issued by TSJ Company (No. 005370) and the copy of the B/L issued by FX Company (B/L No. COSU369998135).

Regarding this evidence, the Arbitration Tribunal deems that even though the reference number indicated in the invoice was the same as that in the copy of the B/L and purchase order number 7189 was mentioned in both of them, this is not sufficient to prove that the [Buyer] has made any payment or that the [Buyer] received the goods under Contract B after making payment.

      (4) A copy of a B/L with a seal indicating "Copy (Not Negotiable) Our Ref. No. 2200874 WELLS FARGO HSBC TRADE BANK, N. A." and copies of two letters dated 17 May 2000 and 18 May 2000 sent by the aforesaid bank to the [Buyer].

The Arbitration Tribunal notes that the [Buyer] alleged that the aforesaid bank seal is "a seal proving that the [Buyer] has made payment;" however, this explanation has no basis and cannot be established. The Arbitration Tribunal also notes that the [Buyer] has mentioned that it had the original B/L. However, later, the [Buyer] alleged that "it had to give the original B/L to the port warehouse when it was taking delivery of the goods under this B/L." The Arbitration Tribunal notes that there should be three original B/Ls. If one was used to take delivery of the goods, the other two would be void. It is not necessary to provide the entire set of B/Ls to the carrier. In addition, among the entire evidence provided by the [Buyer], there is no direct evidence showing that it has made payment for the goods in this case. Therefore, the Arbitration Tribunal holds that the [Buyer] has never had the original B/L of the aforesaid copies, and that this evidence cannot prove that it has made payment for the goods under Contract B.

Based on above the facts, the Arbitration Tribunal concludes that the [Seller] has provided sufficient evidence to show that it has delivered the goods in accordance with the contract, but the [Buyer] failed to make payment for them, and that the [Buyer] failed to provide any effective opposite evidence showing that it has paid for the goods under the contract in this case. Especially during the investigation conducted at the court session, the [Seller] provided the entire documents returned from the collecting bank, which indicated that the entire original B/Ls are still kept by the [Seller]. Without the original B/L, the [Buyer] should be unable to take delivery of the goods legally. Therefore, the Arbitration Tribunal holds that the [Buyer] has violated the contract by failing to take delivery of the goods and make payment in accordance with the contract, and it should be liable.

Article 62 of the CISG states that:

"The seller may require the buyer to pay the price, or take delivery of the goods."

Article 61 CISG stipulates that:

"The seller is not deprived of any right he may have to claim damages by exercising his right to other remedies."

Article 74 of the CISG states that:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach."

Article 78 CISG stipulates that:

"If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74."

Therefore, the [Seller] has the right to ask the [Buyer] to pay the price for the goods under Contract B, and the related costs and interest due to the [Buyer]'s breach of contract.

3. Based on the payment postponement agreement, the [Buyer] shall bear the cost incurred after the goods arrived at New York port. Therefore, the [Buyer] shall be liable for these expenses, which should be calculated to the day of the [Buyer]'s actual payment. Based on the contents of the letters sent by TSJ Company on 30 August 2000 and by FX Company on 13 September, the [Buyer] shall pay US $12,198.08 for the expenses incurred after the goods arrived at New York port calculated to 22 October 2000.

Furthermore, based on the payment postponement agreement, the [Buyer] shall also pay the interest on late payment calculated from the day when the goods arrived at New York port to the day of actual payment, which should be calculated from 4 February 2000 to the day of the [Buyer]'s actual payment at a 0.45% monthly interest rate.

Finally, based on the Arbitration Rules, the [Buyer] shall also bear the attorneys' fee of renminbi [RMB] 99,360 and arbitration fee of RMB 66,201, which have been paid by the [Seller] in advance.

4. Regarding the quality defects, compensation claim period, and revocable clause, the Arbitration Tribunal holds that the [Buyer] should have submitted written application with the Arbitration Commission within 60 days after receiving the arbitration notice if it had a counterclaim. The arbitration notice was sent to the [Buyer] by EMS on 15 June 2000; however, it was not until 21 September 2000 that the [Buyer] submitted claims on quality defects, compensation claim period, and revocable clause (article 3 of the payment postponement agreement). Moreover, at the court session on 8 September 2000, the [Buyer] clearly indicated that it was not going to file a counterclaim on the quality problems; therefore, the Arbitration Tribunal does not process the [Buyer]'s aforesaid claims. It is also the Tribunal's position that the [Buyer]'s aforesaid allegations cannot be an effective defense to the [Seller]'s claims.

III. THE AWARD

The Arbitration Tribunal rules that:

      (1) The [Buyer] shall pay US $136,320.00 to the [Seller] for the price of the goods under P7189, i.e., Contract B;

      (2) [Buyer] shall pay the expenses incurred after the goods arrived at New York port to the day of actual payment, totaling US $12,198.08 temporarily calculated to 22 October;

      (3) [Buyer] shall pay the interest on the delayed payment based on the 0.45% monthly interest rate agreed by the two parties calculated from 4 February 2000 to the day of the [Buyer]'s actual payment;

      (4) [Buyer] shall pay the [Seller]'s attorneys' fee of RMB 99,360;

      (5) [Buyer] shall bear the entire arbitration fee.

[Buyer] shall pay the aforesaid amount to the [Seller] within twenty days of this award.

This is the final award.

Presiding Arbitrator:

Arbitrator:

6 December 2000 in Shenzhen


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Hong Kong is referred to as [Seller] and Respondent of the United Sates of America is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of a Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

*** John Zhu, LL.M. China University of Political Science and Law on a national graduate scholarship. He received his Bachelor of Law degree from Southwest University of Political Science and Law and Double Degree of English Literature from Sichuan International Studies University in Chongqing, China. His focus is on International Economic Law.

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Pace Law School Institute of International Commercial Law - Last updated January 20, 2012
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