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CISG CASE PRESENTATION

China 13 September 2002 CIETAC Arbitration proceeding (Velvet clothes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020913c1.html]

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Case identification

DATE OF DECISION: 20020913 (13 September 2002)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2002/07

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: People's Republic of China (claimant)

BUYER'S COUNTRY: Hungary (respondent)

GOODS INVOLVED: Velvet clothes


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 74 ; 80

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's obligation to pay price of goods];

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

80A [Failure of performance caused by other party (party causing non-performance): loss of rights]

Descriptors: Price ; Damages ; Failure of performance, other party

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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 (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

Velvet clothes case (13 September 2002)

Translation [*] by Zheng Xie [**]

Edited by John W. Zhu [***]

  1. The arbitration procedure
  2. Facts and position of the parties)
  3. Opinion of the Arbitration Tribunal
  4. Award

I. THE ARBITRATION PROCEDURE

The China International Economic and Trade Arbitration Commission (hereafter, the "Arbitration Commission") accepted this case (Case Number: G....) according to:

   -    The arbitration clause in Contract No. 97NC60011 (hereafter, the "Contract) signed by Claimant [Seller] (Respondent of the counterclaim), Nanchang __ Food Import and Export Company, and Respondent [Buyer] (Counterclaimant), Hungary __ International Trade Company on 24 July 1997; and
 
   - The written arbitration application submitted by [Seller] on 5 December 2001.

The Arbitration Rules of China's International Economic and Trade Arbitration Commission which took effective on 1 October 2000 (hereafter, the Arbitration Rules) apply to this case.

On 11 December 2001, the Secretariat of the Arbitration Commission sent the notice of arbitration and the relevant arbitration documents to the [Seller] and the [Buyer] by express mail. Because the amount in dispute is less than renminbi (RMB) 500,000, according to Article 64 of the Arbitration Rules, the summary procedure applies to this case. Accordingly, the parties shall jointly appoint or authorize the Chairman of the Arbitration Commission to appoint a sole arbitrator. However, the parties did not jointly appoint or authorize the Chairman of the Arbitration Commission to appoint a sole arbitrator. Therefore, according to Article 65 of the Arbitration Rules, the Chairman of the Arbitration Commission appointed Mr.__ as the sole arbitrator, who formed the Arbitration Tribunal to hear this case. After discussion with the Secretariat, the Arbitration Tribunal decided to hold a court session in Beijing on 8 February 2002.

On 5 January 2002, the [Buyer] submitted its response and meanwhile filed a counterclaim. Because the amount of the counterclaim exceeds RMB 500,000 and the [Buyer] expressly objected to the application of summary procedure in this case, according to Article 64 and Article 72 of the Arbitration Rules, summary procedure no longer applies to this case. The general procedure applies. Thus, the Arbitration Tribunal and the Secretariat cancelled the court session that was to be held on 8 February 2002.

The [Buyer] then appointed Professor __ as its arbitrator and the [Seller] appointed Mr.__ as its arbitrator according to the Arbitration Rules. Because the parties did not jointly appoint or authorize the Chairman of the Arbitration Commission to appoint the third arbitrator, according to Article 24 of the Arbitration Rules, the Chairman appointed __ as the Presiding Arbitrator. On 12 March 2002, these three arbitrators formed the Arbitration Tribunal to hear this case.

On 10 May 2002, the Arbitration Tribunal held a court session in Beijing. Both parties' representatives attended the court session. They made statements and arguments, and answered the Arbitration Tribunal's questions. After the court session the parties submitted supplementary documents.

This case is completed. According to the written documents and the court session, the Arbitration Tribunal handed down its award by consent within the stipulated time period according to the Arbitration Rules.

The following are the facts, the Arbitration Tribunal's opinion and the award.

II. FACTS AND POSITION OF THE PARTIES

The [Seller]'s position

The [Seller] alleges that in July 1997, Mr. __, as the [Buyer]'s representative, and the [Seller], negotiated the purchase of clothes from the [Seller] to Hungary in Nanchang (where the [Seller]'s place of business was located). The parties agreed on the price, size, style, inspection method, delivery date, etc. As to the terms of payment:

   -    The [Buyer] proposed that the [Buyer] pay 20% of the contract price in advance as a deposit (about US $13,631) and that the remaining amount, i.e., US $55,510 be paid within 90 days after the [Seller] shipped the goods, but the [Seller] did not agree.
 
   -    Then, the [Buyer] suggested that it can provide a third party's unconditional guarantee for the due and punctual payment. On this basis, the [Seller] and the [Buyer] signed the Contract on 24 July, 1997.

The Contract stipulated that the [Buyer] should provide a guarantee for the payment, and that the [Seller] would ship the goods only when it confirmed the guarantee. On August 27 1997, the [Buyer] provided to the [Seller] a certificate of guaranteed payment issued by Shanghai __ Business Development Company as the guarantor. The content of the certificate was that if the [Seller] shipped the goods within the shipping period (before 10 September, 1997) confirmed by Mr.__, and if Mr. __ did not make the payment to the [Seller] on the payment date, Shanghai __ Business Development Company would pay the [Seller] for the corresponding amount and the export tax refund within seven days.

On 24 July, 1997, the [Seller] and the [Buyer] signed Contract No. 97NC60011 in Nanchang, which included the following terms:

   - Goods: Acrylic (100%)/thin velvet children's clothes and adults' clothes;
   - Quantity: 920 sets;
   - Contract price: US $69,142.80;
   - Delivery term: CIF Hamburg;
   -    Payment: (1) The [Buyer] shall provide an unconditional payment guarantee within one week after the Contract is signed; otherwise, the [Buyer] breaches the Contract; (2) The [Buyer] shall pay US $13,631 (US $10,000 + RMB 30,000) in advance as a deposit, and the remaining amount, i.e., US $55,510 shall be paid by T/T within 90 days after the B/L is issued.

However, when the [Seller] performed its duty according to the Contract, the [Buyer] did not perform its duty under the Contract.

   -    The [Buyer] did not provide an unconditional guarantee for the payment in accordance with the Contract

         In the case of the Contract having been executed, the [Buyer] did not perform its duty under the Contract, and did not provide the guarantee stipulated in the Contract. The [Buyer] provided the certificate of payment guarantee by Ms. __, the manager of Shanghai __ Business Development Company on August 27, thirty-four days later than the date when the Contract was concluded; and then the [Seller] found Shanghai __ Business Development Company had already stopped business, and had no business place and employees at all, and its legal representative ___ had left the company on August 5. Thus, this certificate of unconditional payment guarantee was null and void.

   -    Because the [Buyer] breached the Contract and provided the guarantee thirty-four days later than the date stipulated in the Contract, the [Seller] shipped the goods in a rush

         (1) The [Seller]'s fully-authorized representative, Ms. __ completed inspecting the goods (on behalf of the [Buyer]) by September 2; (2) On September 5, the [Seller] transported the goods to Shenzhen __ Overseas Transportation Company, which issued the B/L on 9 September 1997; (3) Because it took some days to obtain the export permit, the goods were not shipped until 24 September 1997, fourteen days later than the shipping deadline of September 10.

   -    The [Buyer]'s conduct shows that the [Seller]'s delivery was valid

         At the end of October, when receiving the goods in Hamburg, Germany, the [Buyer] neither stored the goods nor raised any objection within the stipulated time (within ten days after the goods were received), but sold the goods immediately. On 10 December 1997, the deadline for the payment, the [Buyer] did not make the payment. After some negotiations, when neither the [Buyer] nor the guarantor made the payment, the [Seller] filed a lawsuit with __District Nanchang People's Court against the guarantor, Shanghai___Business Development Company on 3 June, 1998. During the litigation procedure, as the [Buyer] suggested, the [Buyer], the guarantor and the [Seller] negotiated out of court under the presiding of the judge. The result of the negotiation shows that the [Buyer] admitted the contract price; the three parties agreed that the [Seller] should compensate the [Buyer] for US $15,000; the [Buyer] agreed to pay off the remaining amount, i.e., US $ 40,510, in three installments before November 30 of the same year. The three parties signed the agreement. However, the [Buyer] did not perform its duty under the agreement. On 16 November 1999, the [Seller] filed the lawsuit again; although the court made the judgment, the upper level court reversed the judgment stating: "Because the agreement includes an arbitration clause, the court has no jurisdiction."

The [Seller]'s claims

Based on the above facts, the [Seller] files the following claims.

   -    The [Buyer] shall pay the [Seller] US $55,510;
   -    The [Buyer] shall bear the entire arbitration fee.

The [Buyer]'s position

The [Buyer] submits the following defense to the [Seller]'s claims.

   -    The [Seller] breached the Contract because it did not deliver the goods on time in accordance with the Contract

         The [Buyer] alleges that the Contract stipulated that the [Buyer] should provide the unconditional payment guarantee to the [Seller] within one week after the conclusion of the Contract, and in order to perform its duty, the [Buyer], with the [Seller]'s agreement, requested Shanghai___Business Development Company to guarantee the payment under the Contract. The certificate of payment guarantee stipulated that the latest loading date was 10 September 1997. Although the deadline stipulated in the certificate of the payment guarantee was later than the one in the Contract, the [Seller]'s conducts show that it accepted the delayed certificate of the payment guarantee provided by the [Buyer], and waived its right to declare the Contract avoided or make other claims. Accordingly, the certificate of the payment guarantee should be deemed as a conditional guarantee, and the condition was that the [Seller] should load the goods before 10 September 1997; however, the [Seller] did not perform this duty in accordance with the Contract; although the shipping date recorded in the B/L was September 9, which was before the deadline agreed by the parties, this B/L was antedated and the actual shipping date was 26 September 1997. The [seller]'s conduct was fraudulent. Because of the [Seller]'s delayed delivery, the [Buyer] missed its sales season and suffered serous damages.

   -    The goods delivered by the [Seller] had serious defects

         The [Buyer] alleged that the Contract has detailed provisions on the quality of the goods, but the goods delivered by the [Seller] did not conform to the Contract. The defects included:

   (1)  The fabric stipulated in the Contract is 280G, but after inspecting the goods, the Hungarian Commodities Inspection Bureau found that the fabric used was 271G;
 
   (2)  The fabric used was not of good quality and had some severe defects;
 
   (3)  There were more than 100 sets of children's clothes of which the color of the shirts and the color of the trousers did not match.

The parties negotiated these quality problems many times, and after the [Buyer] showed the sample of the goods, the [Seller] admitted that the goods under the Contract had serous defects.

   -    The [Seller]'s claim for US $55,510 is unreasonable

         According to the Certificate of Cargo Exportation of the PRC (the "Certificate") submitted by the [Seller] in ITS export customs declaration, the total amount which the [Seller] declared for the customs clearance was US $11,343, and this certificate is the legal evidence to prove that the [Seller] exported the goods. The [Buyer] alleged that the amount should be the price recorded in the Certificate.

   -    The [Seller]'s allegation that the [Buyer] sold the goods immediately after receiving them, which shows that the [Buyer] accepted the delayed delivery, lacks any legal basis and does not conform to the facts

         First, when finding the defects of the goods and the delayed delivery on 8 November, the [Buyer] sent a fax to the [Seller] for negotiation. Second, the goods were specially ordered for Hong Kong's return to China mainland, and this was a contract in which time was of the essence; once the time period expired, the goods completely lost value. In order to avoid enlarging the loss, the [Buyer] tried its best to sell the goods although they had defects and the delivery was delayed. The [Buyer]'s conduct did not mean that it accepted the [Seller]'s breach and waived its relevant rights.

   -    The inspector who inspected the goods was not in conformity with the law

         The inspector, Ms. __, whom the [Buyer] authorized to inspect the goods, was an employee of the [Seller]'s Import and Export 6th Department. She worked as both parties' agent at the same time. This means that the [Seller] inspected the goods which it sold to the [Buyer]; such inspection was prohibited by law and the law does not admit such an inspection. Meanwhile, the goods inspected by the [Seller] were listed as Brand __, but the name and specification of the goods in the Certificate issued by Shekou Customs shows that the goods had no brand.

Based on the above, the [Buyer] alleged that the [Seller] failed to perform its duty under the Contract, so the [Seller] has no right to request the [Buyer] perform the duty to make the payment. Accordingly, the [Buyer] request the Arbitration Tribunal not support the [Seller]'s claims but to rule that the [Seller] should be liable for the damages and the relevant expenses.

The [Buyer]'s counterclaims

When submitting its response, the [Buyer] filed counterclaims, of which the main contents were that because of the [Seller]'s delayed delivery and the defects of the goods, the [Buyer] suffered severe economic loss. The [Buyer] counterclaimed that:

1. The [Seller] should compensate the [Buyer] for damages in the amount of US $37,333: US $20,000 caused by the [Seller]'s delayed delivery, US $4,636 for three years' storage charges, and US $12,697 for loss of profits.

2. The [Seller] should compensate the [Buyer] for the loss of reduced price, US $38,547.80, which was caused by the delayed delivery and the defects of the goods,

3. The [Seller] should pay the arbitration fee, attorneys' fee and other expenses related to this arbitration.

In the document dated 14 June 2002, the [Buyer] raised the amount in counterclaim 1 to $45,188 and explained the economic loss as follows:

      1. The economic loss of US $ 45,188 includes:

(1) The damages of US $20,000 paid to ____Company due to the [Seller]'s delayed delivery;
(2) The three years' storage charges (two years' charges), i.e., US $4,636;
(3) The loss of the [Buyer]'s expected profits, i.e., US $12,697;
(4) The import duty in Hungary, i.e., US $7,849, which the [Buyer] should not have paid, but paid.

      2. Because of the [Seller]'s delayed delivery and the defects of the goods, the loss of US $38,547.80 was incurred due to the reduced sales price and the change of sales methods (including bad debts of US $12,328, incurred due to a change from direct sales to the sales on commission.) The round trip air ticket from Hungary to China was US $750; the round trip railway tickets from and to Beijing were RMB 980; the accommodation expenses were RMB 600; the attorneys' fee was RMB 15,000; the arbitration fee was US $2,656; translation expenses, notary charges and inspection charges were US $150.

The [Seller]'s position

After the court session, the [Seller] submitted its statements, response to the [Buyer]'s counterclaim and other supplementary evidence, which included [Seller]'s opinion, defense and objection to the [Buyer]'s counterclaim.

- The [Seller]'s delayed delivery was caused not only by the fact that the [Buyer] delayed in providing the unconditional payment guarantee, but also by the fact that when the [Seller] performed its duty under the Contract, the [Buyer] unreasonably intervened in the [Seller]'s production requesting the [Seller] to change the style, design and fabric, etc. The consequence of [Buyer]'s intervention was that the production was delayed and production resources were wasted. The above two facts adversely affected the [Seller]'s delivery, and eventually caused the [Seller]'s delayed delivery.

- As to the alleged defects of the goods:

First, it was at the [Buyer]'s suggestion that Ms. ___ was authorized to inspect the goods. This was at the [Buyer]'s authorization and the completed procedure reflected the [Buyer]'s true intention. Thus, Ms. ___'s inspection of the goods did not breach any law;

Second, the [Buyer]'s allegation that the goods that were inspected were Brand____ has no basis, because the manufacturer neither registered nor used this brand;

Third, the clothes as to which the [Buyer] alleged the colors of the shirts and the trousers did not match were made according to the [Buyer]'s design of the combination of orange and green for three units of Children's clothes; so the clothes were in conformity with the [Buyer]'s intention;

Fourth, the defects of the goods which the [Buyer] alleged did not exist, and the [Buyer] unilaterally sent the fabric for inspection and no evidence could prove the inspection result, and in addition, the inspection procedure was illegal.

- As to the amount of US $11,343 on the Certificate, the explanation is that, due to the negligence of the employee of the customs broker, Shenzhen __ International Transportation Company, the documents with the specific amount were not provided to the customs broker. In order not to miss the shipping period, the customs broker wrongfully wrote the amount, US $11,343. That amount, which was recorded in the Certificate, was not provided by the [Seller] to the customs broker

- The [Buyer]'s allegation that the goods were specially ordered for Hong Kong's return to China mainland, that this was a contract in which time was of the essence, and that the delayed delivery caused the sales season to be missed, was nonsense. The goods were general and had nothing to do with Hong Kong's return to China mainland. Acrylic /thin velvet clothes are general for the entire year; except summer. Spring, autumn and winter are good seasons for sales of acrylic/thin velvet clothes.

-  The [Buyer]'s conduct shows that it accepted the [Seller]'s delayed delivery. When receiving the goods, the [Buyer] could have rejected the goods or revoked the Contract, and then solved the disputes by negotiation or legal procedure, if it thought the [Seller]'s delayed delivery and the defects of the goods were fundamental breaches, which meant that the purpose of the Contract could not be realized. The [Buyer] did not need to sell the goods immediately after receiving the delivery, because the clothes were not hard to preserve. The facts are the [Buyer] received and resold the goods, but did not pay the contract price. The [Buyer] obviously breached the Contract.

The [Seller] requests the Arbitration Tribunal to dismiss the [Buyer]'s counterclaim and protect the [Seller]'s legal interests.

III. THE OPINION OF THE ARBITRATION TRIBUNAL

1. The applicable law

The parties did not stipulate the applicable law in the Contract. Because the countries where the parties' places of business are located are Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG), and the parties referred to the CISG or agreed to apply the CISG in the documents they submitted, the Arbitration Tribunal holds that the CISG applies to this case. In addition, according to the principle of proximate connection, for issues that the CISG does not resolve, the laws of the People's Republic of China shall apply.

2. The ascertained facts

Based on the evidence submitted by the parties and the information collected at the court session, the Arbitration Tribunal ascertained the following facts:

      (1) On 24 July 1997, the [Seller] and the [Buyer] signed Sales Contract No. 97NC60011 in Nanchang. The Contract includes the following terms:

   -    Goods: 280g/M2 +/-5g acrylic (100%)/thin velvet children's clothes and adults' clothes;
    Quantity: 920 sets;
   - Contract price: US $69,142.80;
   - Delivery term: CIF Hamburg;
   - Shipping period: About September 2;
   -    Payment: (1) Before the [Seller] ships the goods, the [Buyer] or its authorized representative shall inspects the goods, and if the inspection shows that the goods are conforming, the [Buyer] shall not reject the goods nor reduce the contract price by alleging quantity or quality problems.
                (2) The [Buyer] shall provide an unconditional payment guarantee to the [Seller] within one week after the Contract is executed; otherwise, the [Buyer] breaches the Contract; the [Seller] will ship the goods only when the [Seller] confirms the payment guarantee.
                (3) The [Buyer] has paid the deposit of US $10,000 on July 10, and shall pay RMB 30,000 before July 26. [Buyer] shall pay the remaining amount by T/T within 90 days after the B/L is issued.

      (2) On 24 July 1997, the [Buyer], by written document, authorized Ms. __ to inspect the goods.

      (3) The faxes between the parties on 18, 19, 22 August 1997 and other documents show the shipping period was changed to no later than September 10.

      (4) On 27 August 1997, Shanghai __ Business Development Company provided to the [Seller] the certificate of payment guarantee.

      (5) On 2 September 1997, Ms.__ inspected the goods and issued an inspection certificate stating that the goods inspected under Contract No. 97NC60011 conform to the Contract.

      (6) The Certificate No. "Shen Customs She __" that was issued on 19 December 1997 by PRC Shekou Customs shows that the [Seller] completed the export procedure on 20 September 1997 and shipped the goods on 26 September 1997.

      (7) The goods arrived at the destination port, Hamburg, Germany, at the end of October 1997 and the [Buyer] received and sold the goods.

      (8) The [Buyer] had paid US $10,000 and RMB 30,000. The remaining amount, i.e., US $55,510 was not paid.

3. Liability for breach of Contract and the arbitration claims and counterclaims

The Arbitration Tribunal finds that the [Buyer] did not pay the remaining amount of the Contract price alleging the following reasons for non-payment:

   (1)  The goods delivered by the [Seller] had defects, e.g., the fabric was not 280G as stipulated in the Contract, the fabric had severe defects, the colors of the shirts and the trousers did not match, etc.
 
   (2)   The [Seller] delivered the goods later than the time stipulated in the Contract.

As to the quality defects of the goods, the [Seller] alleged that the [Buyer]'s representative had inspected the goods before the goods were shipped and the inspection results show that that the goods were conforming, so the quality problems could not be the reason for the [Buyer]'s refusal to make the payment or for the [Buyer] to pay a reduced amount. The Arbitration Tribunal finds that the Contract states:

"Before the [Seller] ships the goods, the [Buyer] or its authorized representative shall inspect the goods, and if the inspection shows that the goods are conforming, the [Buyer] shall neither reject the goods nor reduce the contract price by alleging quantity or quality problems."

The evidence shows that on 24 July 1997, Ms. __, the [Buyer]'s authorized representative, inspected and accepted the goods, and the [Buyer] admitted this fact. No evidence shows that this authorization was made by the [Buyer] due to duress, etc. This authorization was made of the [Buyer]'s own free will, so the Arbitration Tribunal sustains Ms. __'s conduct: she was given the [Buyer]'s authorization to inspect the goods and she inspected the goods. The Arbitration Tribunal does not sustain the [Buyer]'s allegation that because Ms. __ was the [Seller]'s employee, her inspection of the goods should not be accepted.

The Arbitration Tribunal notes that the [Buyer] submitted the inspection certificates issued by the Hungary Commodities Inspection Bureau and Suzhou Textile Quality Supervision and Inspection Organization, respectively, to prove that the goods had defects. However, the Arbitration Tribunal does not accept the results reported on these inspection certificates because:

   -    They were issued upon a unilateral application for inspection by the [Buyer] which did not conform to the stipulation in the Contract and they were not agreed to by the [Seller];
 
   -    Moreover, the [Buyer] failed to prove that the goods inspected were those under the Contract and were reasonably selected;
 
   -    In addition, the inspection by Suzhou Textile Quality Supervision and Inspection Organization was conducted on 25 January 2002.

Relying on the inspection conducted by Ms. __ on 2 September, 1997, the Arbitration Tribunal does not sustain the [Buyer]'s allegation that the goods had defects. Accordingly, the [Buyer] should not refuse to make the payment or reduce the contract price by alleging quality defects of the goods.

As to the delay in delivery, the Arbitration Tribunal finds that the shipping period stipulated in the Contract was around 2 September 1997, and then the parties agreed to change it to before September 10. __ International Company issued B/L No. ALN0697 dated on 9 September 1997. However, the Certificate No. "She Guan She Zi __" issued by the PRC Shekou Customs on 19 December 1997 shows that the [Seller] completed customs procedure on 20 September, 1997, and shipped the goods on 26 September, 1997. The [Seller] did not deny that the goods were shipped later than the time stipulated in the Contract, but alleges that:

   -    Except that its employee improperly dealt with the shipping, the main reason for the delayed delivery was that the [Buyer] did not provide its unconditional payment guarantee to the [Seller] within one week after the conclusion of the Contract as the Contract stipulates, but provided it thirty-four days later; and
 
   -    Because the [Buyer] often changed its request for the goods, the manufacturing process was delayed; and so due to lack of time, the [Seller] did not obtain the export permit on time, and eventually delayed shipping.

The evidence shows that:

   -    The goods were shipped later than the time stipulated in the Contract and later than the revised shipment date;
 
   -    The [Buyer] delayed providing the payment guarantee. (The issue on the contents and the liability related to the certificate of unconditional payment guarantee issued by Shanghai __ Business Development Company is not within the scope of this arbitration, so the Arbitration Tribunal does not rule on that matter.)
 
   - The manufacturer delayed the production due to the [Buyer]'s intervention.

The Arbitration Tribunal finds that when the [Buyer] conducted the aforesaid acts, the [Seller] did not ask to have the shipping time revised once again and to prolong the delivery period. Therefore, the [Seller] is liable for the delayed delivery.

However, the Arbitration Tribunal also finds that the [Buyer] provided the certificate of unconditional payment guarantee later than the time stipulated in the Contract. The [Buyer] did not deny this fact. In addition, the faxes between the parties show that the [Buyer] often changed its requests for goods, and that these requests affected and delayed the production of the goods, so the [Seller] had to ship the goods in a rush, and failed to complete the procedure on time, and the delivery was delayed. Accordingly, the Arbitration Tribunal holds that the [Buyer] shall also be liable for the [Seller]'s delayed delivery.

Furthermore, the evidence shows that, although the [Buyer] alleged that the goods had defects and that the delivery was delayed, the [Buyer] did not reject the goods, but accepted and sold the goods. The [Buyer] alleged that the goods were ordered for Hong Kong's return to China mainland and that this was a Contract in which time was of the essence and that the goods lost value when the sales season expired. The Arbitration Tribunal does not sustain this allegation because it lacks sufficient evidence.

The Arbitration Tribunal holds that the Contract in this case was the manifestation of the parties' true intention, and in accordance with CISG and the relevant law, and was binding on the parties. Therefore, the parties are obligated to perform according to the Contract. Because the [Buyer] received and sold the goods, it should have paid for the remaining amount of the contract price, but it did not. Accordingly, the [Buyer] shall bear the main liability for the breach. The Arbitration Tribunal holds that the [Buyer] shall pay the [Seller] for the contract price, US $55,510. However, the [Seller] is also liable for the delayed delivery, so the [Seller] shall compensate the [Buyer] for the loss, i.e., US $15,000, incurred due to the delayed delivery. The Arbitration Tribunal does not sustain the [Buyer]'s other counterclaims based on the above reasons and the lack of evidence. As to the arbitration fee for this case and the counterclaim, the [Seller] shall pay 20%, and the [Buyer] shall pay 80%. The Arbitration Tribunal finds that the [Seller] raised a claim for interest at the court session, but it neither specified this claim in the written document submitted by the [Seller], nor did any procedure for the related fee (including the fee, i.e., RMB 94,316.75) for enforcing the [Seller]'s rights. Therefore, the Arbitration Tribunal does not sustain the [Seller]'s claim for interest.

IV. AWARD

   1.    The [Buyer] shall pay the [Seller] the contract price, i.e., US $55,510;
   2. The [Seller] shall compensate the [Buyer] for the loss of US $15,000 that the [Buyer] incurred due to the [Seller]'s delayed delivery;
   3. The [Seller]'s other claims are dismissed.
   4. The arbitration fee is RMB 26,126, of which the [Seller] shall pay 20% and the [Buyer] shall pay 80%. The [Seller] has prepaid the arbitration fee to the Arbitration Commission, so the [Buyer] shall pay the [Seller] RMB 20,900.80. The arbitration fee for the counterclaim is US $2,656, of which the [Seller] shall pay 20% and the [Buyer] shall pay 80%. The [Buyer] has paid to the Arbitration Commission the arbitration fee for the counterclaim, so the [Seller] shall pay the [Buyer] US $531.20 on that account.

After the amounts listed in the above items are offset, the amount which the [Buyer] shall pay the [Seller] shall be paid within 30 days after this award is handed down. If the [Buyer] fails make the payment within the stipulated time, interest shall be added at the annual rate of 6%.

This is the final award.

THE PRESIDING ARBITRATOR
THE ARBITRATOR
THE ARBITRATOR

In Beijing, 13 September 2002


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the People's Republic of China is referred to as [Seller] and Respondent of Hungary 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 (renmimbi) are indicated as [RMB].

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

*** John W. Zhu, LL.M. China University of Political Science and Law (National Graduate Scholarship); Bachelor of Law, Southwest University of Political Science and Law; Double Degree, English Literature, Sichuan International Studies University, Chongqing, China. Focus: International Economic Law.

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