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CISG CASE PRESENTATION

Bulgaria 28 February 2002 Arbitration Case 26/99 (Sheet iron rolls case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020228bu.html]

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

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Case identification

DATE OF DECISION: 20020228 (28 February 2002)

JURISDICTION: Arbitration ; Bulgaria

TRIBUNAL: Bulgarian Chamber of Commerce and Industry

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 26/99

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Hungry (respondent)

BUYER'S COUNTRY: Bulgaria (claimant)

GOODS INVOLVED: Sheet iron rolls


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 45(1)(b) ; 74 ; 78

Classification of issues using UNCITRAL classification code numbers:

6B [Implied agreement to apply Convention: contract silent on governing law but between parties with placed of business in Contracting States];

45B [Remedies available to buyer: including damages];

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

78B [Rate of interest]

Descriptors: Applicability ; Choice of law ; Damages ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Bulgarian): Bulgarski Zakonnik, Vol. 9 (2002) [71]

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Arbitration Tribunal of Bulgarian Chamber of Commerce & Industry

Case No. 26/99 of 28 February 2002

Translation [*] by Bojidara Borisova [**]

SUMMARY

The [buyer]'s claim is for $9,838.50, the total amount of five joinders of claims. he disputed amount results from [seller]'s failure to deliver sheet iron precisely as required by contract; advance payment (not refunded); penalty; expectation loss; demurrage damages; additional financial stimulation of [buyer]'s employees, etc.

The applicable law is the CISG.

The Arbitral Tribunal allowed the claim for the amount of $4,334.77 and disallowed the remainder. The Tribunal also allowed the claim for arbitral expenses and for interest.

FACTS OF THE CASE

Claimant "X" LTD [buyer], main office Sofia, Bulgaria, brought suit against Respondent "Y" Plc. [seller], main office Budapest, Hungary, for the amount of $9,838.50: the total amount of five joinders of claims. he dispute results from breach of contract for the delivery of 60 tons of sheet iron rolls. The contract was concluded between the parties on 29 March 1999. The claimed damages calculate as follows:

(1) $24.50 as part of the advance payment remitted by the [buyer] to the [seller] according to the stipulations of the contract, which the [seller] failed to refund;

(2) $33 in bank expenses that the [buyer] paid for the remittance of the advance payment;

(3) $1,410 as a contract penalty;

(4) $2,800 in expectation loss;

(5) $67.27 in demurrage damages;

(6) $5,041.66 to compensate [buyer] for additional financial stimulation of [buyer]'s employees;

(7) $197.40 in interest over the amount of $8,460 (advance payment, calculated from 5 April 1999 to the date when the claim was filed); and

(8) $264.66 in interest on the amount of the damages, the reliance losses and the expectation losses, calculated from 5 April 1999.

The [buyer] also claimed interest, calculated from the date when the lawsuit was brought and compensation for the arbitral expenses including attorney's fee.

The [seller] has its main office in Budapest, and its address in USA, designated in paragraph 23 of the contract. All the documents presented before the Arbitrate Tribunal were sent to the [seller]'s designated address. Part of the documents, including the claim and the applied evidence were regularly received by the [seller]. The latter was confirmed with receipt. The [seller] did not receive the other part of the documents. The Arbitral Ttribunal reclaimed the non-unsealed envelopes with the note that the postal services were not able to identify the addressee at the designated address. Bearing in mind these facts and in accordance with article 32 of the International Trade Arbitration Law (ITAL) and article 12 of the Statute of the Arbitral Tribunal (SAT) to the Bulgarian Chamber of Commerce and Industry (BCCI), the Arbitral Tribunal concluded that the [seller] was orderly summoned for all of the arbitral sessions and all the necessary documents concerning the case were send to him.

CONSTITUTION OF THE ARBITRAL TRIBUNAL

Competence and applicable law. The Arbitral Tribunal was constituted according to the provisions of article 19 of the ITAL and article 14 of the SAT to the BCCI.

In accordance with paragraph 18 of the contract concluded between the parties, the Arbitral Tribunal of the BCCI is competent to consider the claim. Paragraph 18 stipulates that when the contracting parties cannot resolve disputes that have arisen between them, either party may file a claim before the Arbitral Tribunal of the BCCI, seated at Sofia. Arbitration is mandatory for the parties. There are no provisions in the contract concerning the application of either the municipal law of one of the contracting parties or the municipal law of a third State. The parties are commercial undertakings incorporated in Contracting States to the CISG. The issue in dispute is not about goods excluded from the material sphere of application of the CISG according to the provisions of article 2. Consequently, the CISG is the applicable law for the parties.

ISSUES

After the consideration of the evidence, positions and arguments of the parties, the Arbitral Tribunal found that:

On 29 March 1999, the parties concluded a contract for delivery of 60 tons of sheet iron rolls, brand no. 2212, total value: $28,000. Implementing the contractual stipulations, the [buyer] remitted to the [seller] with invoice 724/2 April 1999 an advance payment of $8,460, which is 30% of the total amount of the goods. According to paragraph 5 of the contract, the [seller] was obligated to deliver the goods in 25 days term after the remittance of the advance payment.

The [seller] did not deliver the contractual goods. On 1 June 1999, [seller] refunded part of the advance payment - $8,435.50 - and in telephone conversation informed the [buyer] that [seller] will not perform the contract.

The legal grounds of the claim are article 45(1)(b) and article 74 f the CISG.

The [buyer] is the innocent party to the contract. He fulfilled his obligations; on the other hand, the [seller] is in default.

According to the provisions of article 74 of the CISG, the buyer acquires the right to claim damages for breach of contract, when the following requirements are fulfilled:

a) Presence of a valid contractual relationship, which provides for concrete contractual obligations of the parties;
b) Default by the seller;
c) Existence of reliance losses and expectation losses;
d) Relationship between the seller's default and the damages caused to the buyer;

What is the particular factual situation concerning these requirements?

The contractual relation is valid. The buyer is the innocent contractual party and in accordance with the contractual stipulations remitted to the seller the required advance payment in order to start the fulfillment of the contract. The seller did not perform its obligation to deliver the goods. Bearing in mind this factual situation, the following arguments must be taken into consideration:

1. Concerning the amount of $24.50: The [seller] refunded to the [buyer] $24.50 less than required. The amount of the advance payment by the [buyer] to the [seller] was $8,460, but the amount of the refund by the [seller] to the [buyer] was $8,435.50. The [seller] retained the remaining sum of $24.50 without any ground. Consequently the [seller] must be directed to restore the amount of $24.50.

2. Concerning the amount of $33: This is the bank fee for the remittance of the advance payment. Undoubtedly, this sum results from the [seller]'s default. The sum is fixed. In this part, the claim is reasonable and should be allowed.

3. Concerning the amount of $1,410: This is the penalty for breach of contract that the parties agreed upon in paragraph 10 of their contract; they specified its amount at 5% of the total amount of the contractual value. The total amount of the contractual value is $28,200; consequently 5% of the total amount of the contractual value is $1,410. In this part, the claim is also allowed.

4. Concerning the amount of $2,800: This is the amount that the [buyer] claims for expectation losses. The conclusion of the experts confirms that the amount of the expectation losses caused by the contractual breach is $2,800. In this part, the claim is also allowed.

5. Concerning the amount of $67.27: This is the amount that the [buyer] claims for reliance losses, because consequently to the breach of the contract by the [seller] and the lack of the contractual goods - sheet iron - the [buyer] had to pay 99 hours demurrage. The amount of the reliance losses is $67.27. In this part, the claim is also allowed.

6. Concerning the amount of $5,041.66: The [buyer] claims damages for the lack to pay additional financial stimulation of his employees for May 1999, because the [buyer] could not sell the goods that he had already produced.

Article 74 of the CISG clearly states that the innocent party has the right of compensation for breach of contract, which includes the expectation losses and the reliance losses which the innocent party suffered, because of the breach of the contract.

In this case, the [buyer] did not suffer expectation losses, because he was not able to pay to his employees additional financial stimulation in the amount of the claimed sum. Part of his claim is for the sum of the additional financial stimulation which he ought to have paid to his employees, but was not able to; consequently, the [buyer] did not suffer expectation losses. The [buyer]'s assets were not diminished with this amount, because he did not make this payment.

This amount cannot be considered as reliance losses, because if the [buyer] had produced the goods he would have been able to pay the additional financial stimulation. The amount of $5,041.66 would have not increased the [buyer]'s assets. Consequently, for the [buyer], the required amount would not have the nature of reliance losses. For these reasons in this part, the claim is not reasonable and should be repudiated.

The total amount of the claim that is allowed is $4,334.77.

7. Concerning the amount of $197.40: This is the interest upon the advance payment of $8,460 calculated from 5 April 1999 (date of maturity of the obligation to deliver the goods) to the date of the remittance of the advance payment - 1 June 1999.

According to the provisions of article 74 of the CISG, the buyer may claim interest for delay independently from the compensations due to him according to the stipulations of the contract.

According to the conclusion of the expert, the delay is 56 days. Calculated according to the quarterly LIBOR of the USA dollar, the interest is $197.40. For this part, the claim is allowed.

8. Concerning the amount of $264.66: This is the interest upon the total amount of $9,376.43, which includes all of the claims from point 1 to point 6. For the amount of $9,318.93, the interest claimed is calculated from 5 April 1999 to the day when the claim was brought nd for the amount of $57.50 (which includes $24.50 - the amount that the [seller] did not refund to the [buyer], and $33 - the bank fee for the remittance of the advance payment) calculated from 1 June 1999 to the day when the claim was brought.

Considering the fact that the claim for the expectation losses and reliance losses is allowed for the amount of $4,334.77 and repudiated for the rest, the amount of the interest is $122.35. The rest of the claimed interest ought to be repudiated.

The additional interest claim calculated from the date when the claim was brought to the date of the final payment of the awarded amount is also allowed.

ARBITRAL EXPENSES

According to the provision of paragraph 6 of the Bulgarian Arbitral Fees Rate for International Claims the expenses must be distributed commensurate to the allowed and repudiated parts of the claim; consequently, the [buyer] must pay $670.52 in arbitral expenses including the arbitration fee, the fee for the expert conclusion, and attorney's fee.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Claimant of Bulgaria is referred to as [buyer] and the Respondent of Hungary is referred to as [seller].

** Bojidara Borisova is a candidate for the degree of Ph.D. in Law at Sofia University "ST.Kl.Oxridski", Bulgaria. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

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Pace Law School Institute of International Commercial Law - Last updated November 18, 2004
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