Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

CISG CASE PRESENTATION

China 25 October 2002 CIETAC Arbitration proceeding (Medical laser machine case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/021025c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20021025 (25 October 2002)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2002/24

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: United States [?] (claimant)

BUYER'S COUNTRY: People's Republic of China (respondent)

GOODS INVOLVED: Medical laser machines


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 78

Classification of issues using UNCITRAL classification code numbers:

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

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

Descriptors: Price ; Interest

Go to Case Table of Contents

Editorial remarks

Go to Case Table of Contents

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

Go to Case Table of Contents
Case text (English translation)

Queen Mary Case Translation Programme

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

Medical laser machine case (25 October 2002)

Translation [*] by Zheng Xie [**]

Edited by John W. Zhu [***]

-   Particulars of the proceeding
-   Facts
-   Position of the parties
-   Opinion of the Arbitration Tribunal
-   Award

PARTICULARS OF THE PROCEEDING

The China International Economic and Trade Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case (Case number: M__) according to:

   -    The arbitration clauses in contracts No. 99LFHS/821080US and No. 99LFHS/821081US for the sale of two laser therapeutic instruments (the Contracts) signed by Claimant [Seller], ___Int'l Trading Corp., and Respondent [Buyer], China ___ Instrument Import and Export Corp. on 13 October 1999; and
 
   -    The written arbitration application submitted by the [Seller] on 21 May 2002.

The Arbitration Rules of the Arbitration Commission that took effect on 1 October 2000 (hereafter, the Arbitration Rules) apply to this case.

Because the disputed amount is less than RMB 500,000, according to Article 64 of the Arbitration Rules, the summary procedure shall apply to this case.

Because the parties neither jointly appointed nor authorized the Chairman of the Arbitration Commission to appoint a sole arbitrator within the stipulated period, the Chairman appointed Mr. Wang __ as the sole arbitrator to form the Arbitration Tribunal on 24 June 2002 to hear this case.

On 24 June 2002, the [Buyer] submitted its response.

On 28 August 2002, the Arbitration Tribunal held a court session in Beijing. Both the [Seller] and the [Buyer] sent their representatives to attend the court session. The [Seller] and the [Buyer] made oral statement and arguments on the factual and legal issues of the case, and answered the Arbitration Tribunal's questions, and cross-examined the evidence.

After the court session, the parties submitted supplementary materials. The Arbitration Tribunal solicited the parties' opinion; neither party requested another court session. Because it took time to sufficiently discover the materials, the Arbitration Tribunal could not make the award within the period stipulated in the Arbitration Rules, i.e., before 28 September 2002. The Secretary General of the Arbitration Commission approved an extension of the deadline for handing down the award to 28 October 2002.

This case has been concluded. According to the facts ascertained at the court session and the written evidence, the Arbitration Tribunal handed down this award. The following are the facts, the Arbitration Tribunal's opinion and the award.

I. FACTS

The [Seller] and the [Buyer] signed Contracts No. 99LFHS/821080US and No. 99LFHS/821081US on 13 October 1999. Under the Contracts:

   -    The [Buyer] will purchase two laser therapeutic instruments from the [Seller];
 
   -    The total contract price is US $360,000;
 
   -    The [Buyer] shall pay 65% of the contract price by L/C, and the remaining amount by T/T.

POSITION OF THE PARTIES

[Seller]'s position

The [Seller] alleged that:

After signing the Contracts, on 30 November 1999, the [Buyer] issued two L/Cs to the [Seller] for the total amount of US $234,000. After receiving the payments, the [Seller] shipped the two laser therapeutic instruments to the stipulated place and delivered them to the [Buyer] on 23 December 1999. On 7 September 2000, the [Seller] and Shanghai __ Instruments Ltd. (the Instruments Company) signed a confirmation letter on the remaining amount of the contract price. The confirmation letter stipulates that the [Seller] agrees that when the [Buyer] paid US $21,000 of the remaining contract price to the [Seller] in August 2001, the contract price would be deemed cleared; and that other arrears of the contract price should be paid to the Instruments Company as a repairing fee. The [Buyer] was informed of the above situation.

However, the [Buyer] did not perform its duty to pay the remaining amount of the contract price, although the [Seller] urged it to pay many times. Thus, according to the arbitration clauses in the Contracts, the [Seller] filed the arbitration application with the Arbitration Commission.

The [Seller] filed the following claims:

      (1) The [Buyer] should pay the [Seller] the outstanding amount of US $21,000 (equal to RMB 173,880.00 calculated at the foreign exchange rate of 1:8.28);

      (2) The [Buyer] should pay the [Seller] interest on the outstanding amount, totaling US $2,100 (equal to RMB 17,388.00 calculated at the foreign exchange rate of 1:8.28; the interest was calculated from 31 August 2001 to 30 August 2002; the interest rate was 10%, the lending interest rate applied by U.S. banks in ordinary loans);

      (3) The [Buyer] should compensate the [Seller] for its economic loss of US $2,472 (equal to RMB 20,468.16 calculated at 1:8.28);

      (4) The [Buyer] should bear the arbitration fee.

The [Seller] stated that:

1. The Contracts signed by the [Seller] and the [Buyer] are legal and valid, and the [Seller] has performed its obligations in accordance with the Contracts.

      (1) The [Seller] and the Instruments Company are long time business partners. By the Instruments Company's reference, the [Seller] signed the Contracts in this case with the [Buyer] on 13 October 1999. The Contracts specified the total contract price, methods and time for the payment.

      (2) On 30 November 1999, the [Buyer] issued two L/Cs for the total amount of US $234,000. The [Seller] delivered the goods on 23 December 1999 in accordance with the Contracts, but the [Buyer] did not pay the remaining amount of the price.

      (3) On 7 September 2000, in order to settle the contract price as soon as possible, the [Seller] signed a confirmation letter with the Instruments Company and agreed that if the [Buyer] paid the [Seller] US $21,000 before August 2001, the contract price would be deemed paid off, and that other remaining amount was for the Instruments Company's repairing fee and profits. After signing the confirmation letter, the Instruments Company informed the [Buyer] of the above, and the [Buyer] did not raise any objection.

The [Seller] and the [Buyer] are the parties to the Contracts in this case; the Contracts are the true intent of the parties and are protected by the law of the PRC. The [Seller] has delivered the goods in accordance with the Contracts; however, the [Buyer] alleged that it was not the actual payer, but only an import agent, and did not perform its contractual duty.

2. The [Seller] did not receive the remaining amount of the contract price.

      (1) The [Seller] has maintained a business relationship with the Instruments Company for many years, and the parties have cooperated on many transactions. The amount of US $30,000, which the [Buyer] alleged that the [Seller] received for these Contracts, is a payment under another transaction between the parties.

      (2) On 30 November 1999, the [Buyer] issued the L/Cs with the [Seller] as the beneficiary and the [Seller] received and did not transfer. The payment for the American manufacture of the goods has been paid by the [Seller] in advance for the [Buyer]; otherwise, the manufacturer could not have delivered the goods. So the [Buyer]'s allegation that on 4 December 1999, Ms. Lu from the Instruments Company, when attending a meeting in the U.S., paid the [Seller] US $10,000 for part of the contract price for the two therapeutic instruments, was not in accord with the facts. Moreover, the receipt did not specify that the amount was paid for the two therapeutic instruments. This payment of US $10,000 was paid by the Instruments Company to the [Seller] for another transaction.

      (3) The [Buyer] repeatedly emphasized that the [Seller] had received $30,000 from the Instruments Company, which exceeds the amount stipulated in the confirmation letter. The [Seller] alleged that the [Buyer]'s statement was not in compliance with the facts and was erroneous in logic:

            (1) The payer: It was not the Instruments Company but the [Buyer] who should pay the [Seller] US $21,000.

            (2) The payment time: The confirmation letter was signed on 7 September 2000 and confirmed that the payment should be US $21,000; however, the amount of US $10,000 which the [Buyer] alleged that the [Seller] received was paid before the confirmation letter was signed; if this is the case, the amount stipulated in the confirmation letter should have been US $11,000. The facts show that the [Buyer] owed the [Seller] US $21,000 until 4 September 1999 and that the amount of US $10,000 which the Instruments Company paid has nothing to do with this case.

The [Buyer] alleged that it made the payment by T/T to Zhuhai __ Company on 14 November 2000 which subsequently entrusted Macao __ Trade Company to pay the [Seller] by T/T, so the contracts price has been paid off. In fact, this payment was paid by the Instruments Company for another transaction, and not for the transaction in this case.

The letter sent by the [Buyer]'s attorney on 4 July 2001 replying to the [Seller]'s attorney also shows that the [Buyer] still owed the contract price to the [Seller].

3. Compensation for the [Seller]'s economic loss

The [Buyer]'s breach adversely affects the [Seller]'s business. In order to resolve the disputes, the [Seller] commuted between China and the U.S., and spent considerable time, energy and money. In order to maintain its normal business, the [Seller] had to borrow money from American banks to satisfy its working capital needs. The amount has been due for one year, but the [Buyer] did not pay. According to the lending interest rate offered by American banks and international customs, the interest rate of 10% is not high. Thus, in order to compensate for the economic loss, the [Seller] requests the [Buyer] to pay it interest at the rate of 10% and part of the traveling expenses.

[Buyer]'s position

The [Buyer] alleged:

1. The [Buyer] is only an agent for the Contracts, the actual payer of the contracts price should be the Instruments Company.

      (1) In 1999, Shanghai __ Hospital and the Instruments Company discussed to import two laser therapeutic instruments; they agreed that the Instruments Company should pay part of the contracts price in advance on behalf of Shanghai __ Hospital, and Shanghai __ Hospital should repay it the contract price within two years. On 13 October 1999, the [Buyer], as a medical instruments import and exports specialist, signed the Contracts in this case with the [Seller], the exporter of the goods as designated by the Instruments Company. The Contracts include a provision stipulating that the total contract price and the payment method should be negotiated by __ Hospital, the Instruments Company and the [Seller].

      (2) In November 1999, the Instruments Company and __ Hospital paid to the [Buyer] the equivalent amount of US $234,000 in renminbi by T/T. On 30 November, the [Buyer] issued the L/Cs for US $234,000 with the [Seller] as the beneficiary. On 10 December 1999, __ Hospital and the Instruments Company signed a written Cooperation Agreement to confirm their payment obligation above.

      (3) On 27 January 2000, the [Seller]'s representative, Liu __ sent a written notice to the [Buyer] informing, "We and our Chinese partner, Shanghai __ Instruments Company, Ltd. confirm that you should pay us US $21,000 within two years (2000-2001), and then the contract price will be deemed paid off. The difference between US $21,000 and the original contract price is to be used as repairing fee, profits and compensation for payment in advance for Shanghai __ Instruments Ltd." On 7 September 2000, the [Seller] and the Instruments Company signed the confirmation letter to confirm the above.

The process to pay the contract price of US $234,000, the [Seller]'s discretion to dispose of the remaining amount, and the decision that the remaining US $21,000 should be paid by the Instruments Company, etc., show that the [Buyer] was an import agent but not the actual payer in these Contracts.

      (4) The [Seller] used the remaining US $126,000 without informing the [Buyer]. The [Seller], as the payee of the remaining US $126,000, has the discretion to use such money and this is permitted by the PRC law. The letter sent by Liu __ and the confirmation letter discharged the [Buyer]'s duty to pay the remaining contract price. The Contracts, the supplementary agreement, and the appendix are the basis to perform the Contracts, and the evidence in the arbitration. The conclusion, revision or revocation of the Contracts shall be agreed by the parties. The parties to a contract cannot impose obligations on any third party, so the [Seller]'s request that the [Buyer] pay US $21,000 lacks basis. The confirmation letter confirms that the Instruments Company is the payer of US 21,000, and that "through the [Buyer]" it should pay it off within two years. The Instruments Company should pay "through the [Buyer]" US $21,000 to the [Seller]. Accordingly, the [Seller]'s request that the [Buyer] pay US $21,000 lacks basis.

2. The [Seller] has received all of the remaining amount due, so it should not request the [Buyer] pay US $21,000.

      (1) After receiving the L/Cs issued by the [Buyer], the [Seller] sent a letter to the Instruments Company alleging that the L/Cs must be transferred to the U.S. __ Laser Therapeutic Instruments Manufacture Company in order to ask this company to deliver the goods. The [Seller] also required the Instruments Company to pay part of the contract price to assist the [Seller] to ship the goods. On 4 December 1999, Ms. Lu of the Instruments Company, during her meeting in the U.S., paid the [Seller]'s legal representative, Mr. Chen __, US $10,000, and Mr. Chen __ immediately wrote a receipt stating, "We received US $10,000 paid by Ms. Lu __ today."

      (2) On 7 September 2000, the [Seller] and the Instruments Company signed the confirmation letter; then, on 11 August 2000, the Instruments Company paid the [Buyer] RMB 166,000 by T/T and wanted to pay the [Seller] US $20,000 through the [Buyer]. However, the [Buyer] could not make the payment in foreign currency, because the consignee, __ Hospital did not return the customs declaration certificate to the [Buyer]; on 14 November the Instruments Company through a Shanghai bank paid RMB 166,666 (equal to US $20,000) by T/T to Zhuhai __ Manufacture Ltd., and entrusted Zhuhai __ Manufacture Ltd. to pay the [Seller] through Macao Lei Fai Trading Co. After receiving the T/T certificate faxed by the Instruments Company, Zhuhai __ Manufacture Ltd. notified Macao Lei Fai Trading Co. to pay the [Seller] US $20,000 through Bank of China, Macao Branch on 15 November.

      (3) On 15 November 2000, Macao __ Trading Company transferred US $20,000 to the [Seller]. The Instruments Company checked with Chen __ from the [Seller] by phone many times, and Chen __ denied. On 12 June 2002, the [Buyer]'s representative got the written evidence provided by Zhuhai __ Manufacture Ltd proving that Zhuhai __ manufacture received RMB 166,000 from the Instruments Company and transferred the money to Macao __ Trading Company's account; after inquiring Bank of China Macao Branch, it was informed that no funds was returned and the American payee, i.e., the [Seller], had received the payment.

In conclusion, except the payment of US $234,000 by the L/C, the [Seller] received an additional US $30,000 from the Instruments Company, which exceeds the amount of US $21,000 as required as the clearance of the Contract price described in the letter by Liu __ on 27 January 2000 and the confirmation letter signed by the [Seller] and the Instruments Company. So it is unreasonable for the [Seller] to request the [Buyer] pay an additional US $21,000.

3. Calculation of the interest

Because the [Seller] is not a financial institute and its relationship with the [Buyer] is not a borrowing and lending relationship, there should be no interest. In addition, in both the U.S. and China, the annual lending interest rate is less than 10%. Accordingly, the [Seller]'s calculation of interest is unreasonable.

4. The [Seller]'s allegation that the amount of US $30,000 received is for another transaction is not true.

      (1) The payment of US $10,000 was paid to the [Seller] on 4 December 1999 after the amount of US $234,000 was paid by the L/Cs. Up to that time, it was only less than one month after the Instruments Company was formed; the [Seller] alleged that "The amount of US $10,000 was paid for another transaction with the Instruments Company," so it should prove the "other" transaction and provide evidence accordingly. "The contract price" described in the receipt issued by the [Seller] obviously refers to the contract price in the Contracts of this case, because the parties at that time had no other transactions and no other corresponding payment was due.

      (2) The confirmation letter did not show that the amount of US $10,000 was incurred by the [Seller]'s dishonesty. On 4 July 2001, the [Buyer] received the receipt as the written evidence, i.e., the letter to the [Seller]'s attorney alleging that the Instruments Company had paid the amount of US $10,000.

      (3) The [Seller] alleged that the amount of US $20,000, which the Instruments Company paid through Macao __ Company, was "for another transaction", and "the [Seller] and the Instruments Company have many transactions," so it should provide evidence.

5. Liu __'s position and authority

      (1) Liu __ is the Chairman of the board of DEirectors of Shanghai Instruments __Company (hereinafter, "Liu's __Company"), which was established and registered on 17 August 1994 in Shanghai. Liu __ is the [Seller]'s signing and business representative.

      (2) The business letters and the order, i.e., Supplementary Evidence I and II in the [Seller]'s attorney's opinion, were signed by Liu __or the employee of Liu's __Company as its agents, and their contents had nothing to do with the Instruments Company.

      (3) Supplementary Evidence III shows: first, Liu __ and the [Seller] had some transactions including "Jiu Yuan Diamond Laser Repairing Project"; the Instruments Company did not know these transactions, which should be the transactions between the [Seller] and Liu's __ Company. If the [Seller] alleged it was the Instruments Company's business, it should provide evidence; second, part of the rent, communication expenses, transportation expenses, gas fee, etc., incurred by the [Seller] in the U.S. were paid by Liu's __ Company, which paid the [Seller] commission for each transaction ... these have nothing to do with the Instruments Company. However, Liu's __ Company and the [Seller]'s "Instruments" Company have a close relationship, and they use the same letterhead. Accordingly, in the [Seller]'s attorney's opinion, "the long term business partner" should refer to Liu __ and not the Instruments Company.

      (4) The Instruments Company was registered and established in 15 November 1999; its first business was the cooperation with __Hospital by Liu __'s recommendation to import the laser therapeutic instruments which are related to the [Seller]. Liu __ provided assistance to the Instruments Company only when the Instruments Company signed the Cooperation Agreement with __ Hospital; he signed this Cooperation Agreement with the legal representative Lu__ of the Instruments Company.

The evidence in this case shows that Liu __ had two roles: one was as [Seller]'s business representative for the Contracts in this case, and the other was as the legal representative of Liu's __ Company which did business with the [Seller]. The [Seller]'s allegation, "the Instruments Company's representative, Liu __" was incorrect. "Our more than three years' cooperation" alleged by Liu __ referred to Liu's __ Company and Liu __ himself, but not the Instruments Company, because the Instruments Company had existed for less than one year at that time. Thus, the [Seller] has a long time business relationship with Liu's __Company, but not the Instruments Company; there are not lots of outstanding contract prices between the [Seller] and the Instruments Company.

The relevant issues

In the court session on 28 August 2002, the parties made the statements, arguments and cross-examination focusing on the following points:

            (1) Whether the confirmation letter signed by the [Seller] and the Instruments Company released the [Buyer] from its duty to make the payment;

            (2) Whether the amount of US $10,000 paid by Lu __ to the [Seller] in December 1999 was for the Contracts in this case;

            (3) Whether the amount of US $20,000 paid by Macao __ Trading Company on 15 November 2000 was for the Contracts in this case;

            (4) The relationship of the Instruments Company, Liu's __Company and Liu __.

After the court session, the parties submitted supplementary material and evidence related to these points.

[Seller]'s supplementary material

In its supplementary material, the [Seller] alleged:

1. After receiving the confirmation letter on 28 September 2000, the [Buyer] did not raise any objection and the confirmation letter had been performed, so the [Buyer] had admitted the validity of the confirmation letter and had the duty to make the payment.

2. After the investigation, the [Seller] found that the alleged Liu's __ Company was established in August 1994, and was invested by Liu __ and Lu __; Liu __'s investment was 60%, and Lu __'s investment was 40%. However, the Instruments Company was established by Lu __ and the other two persons in Chong Ming Economic Zone in November 1999, and Lu___was the controlling shareholder and the legal representative. These two companies shared the same accountant. Based on the above evidence, the allegation, "In fact, all transactions are my business" in the Discussion Record with Liu__ , and the statement, "Liu __ is the Instruments Company's representative", in the Attorney's letter, show that Liu's __ Company and the Instruments Company are affiliated entities. Thus, Liu's allegation that the two companies had no relationship is not true.

The above evidence shows that the amount of US $10,000 was paid by Lu __for Liu's __ Company; that is the reason why the confirmation letter did not mention this amount, because this payment had nothing to do with this case.

3. On 1 March 2000, Liu__ sent a letter to the [Seller] informing it that the Instruments Company would replace Liu's __ Company to continue the business, and Liu admitted that it would still be responsible for Liu's __ Company's business; Lu __as the shareholder of Liu's __ Company should have known this fact. On 10 August Liu __, who represented Liu's __ Company, informed the [Seller], "The amount of twenty thousand for the materials price will be paid to you (the [Seller]: Note by the Arbitration Tribunal) through China __ Instruments Import and Export Company (the [Buyer]: Note by the Arbitration Tribunal)"; this is why the [Buyer] alleged that the Instruments Company paid the amount of US $20,000 to the [Buyer]. However, because the payment in foreign currency was not approved as it was lacking some relevant material; the amount of US $20,000 was paid to the [Seller] through Macao __ Company.

The [Seller] has many transactions with these two companies, and there are still lots of outstanding contract prices; the payment made through Macao __ Company was for another transaction which Liu __ of Liu's __ Company should pay; so the [Buyer]'s allegation that the [Seller] had received the amount disputed in this case was not true.

It is unreasonable for the [Buyer] to offset the contract prices in this case by the payment under another transaction by its two affiliates, namely Liu's __Company and the Instruments Company.

[Buyer]'s supplementary statements

In its supplementary material, the [Buyer] alleged that:

1. The [Seller] and the [Buyer] are parties to the Contracts in this case. The [Buyer] bears the duty to make the payment under the Contracts. However, the [Buyer] did not negotiate on the payment of US $21,000, and did not confirm its duty to pay the amount of US $21,000.

2. Liu __ was the [Seller]'s agent, who was responsible to sign the Contracts in this case and to deal with the relevant issues; meanwhile, Liu as the legal representative of Liu's __ Company did its own business independently. All evidence submitted by the [Seller] could only prove that it had a long term business relationship with Liu's __ Company. These facts have nothing to do with this case, and could not prove that Liu's __ Company should pay the [Seller] for another transaction.

3. The Instruments Company and __ Hospital are the actual buyer and end-user. According to the Cooperation Agreement, they are the actual payers in the Contracts.

4. According to the time when the Instruments Company was established and the fact that the [Seller] has no other transactions with the Instruments Company except for the one in this case, the amount of US $10,000 paid by the Instruments Company's legal representative, Lu __ on 4 December 1999 was part of the contract price. The process for the Instruments Company to make the amount of US $20,000 shows that the Instruments Company performed the duty to make the payment described in the written notice sent by Liu __ on 27 January 2000 and the confirmation letter, which should not be deemed as a payment under "another order" or for "another transaction".

5. The confirmation letter proves that the [Seller] may dispose of the remaining US $126,000 by its own decision, and the [Buyer]'s duty to make the payment was discharged. Meanwhile, the [Seller] assigned the amount of US $105,000 as the repairing fee and the profit, which was paid for the [Seller] in advance, to the Instruments Company, and sent a written notice to the [Buyer]. The [Seller]'s above conduct was legally valid. However, since the [Buyer] was not a party to the Confirmation, the duty stipulated in the Confirmation was not binding on the [Buyer].

II. OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

The parties did not stipulate the applicable law in the Contracts. Because the places of business of the parties are in Contracting States of the United Nations Convention on Contracts for International Sales of Goods (1980) (CISG), the Arbitration Tribunal holds that the CISG applies to this case.

2. The facts

According to the evidence and the court session, the Arbitration Tribunal confirmed the following facts:

      (1) On 13 October 1999, the [Seller] and the [Buyer] signed contracts No. 99LFHS/821080US and No. 99LFHS/821081US, which stipulate that the [Buyer] purchases two laser therapeutic instruments from the [Seller] at the unit prices of US $150,000 and US $210,000, respectively; the total contract price of the Contracts is US $360,000; the payment term is that 65% of the contract price shall be paid by L/C, and the remaining amount shall be paid by T/T.

      (2) On 30 November 1999, the [Buyer] paid the [Seller] 65% of the contract price, i.e., US $234,000, by L/C.

      (3) The [Seller] delivered the two laser therapeutic instruments under the Contracts to the [Buyer] at the stipulated place.

      (4) On 7 September 2000, as to remaining contract price of the Contracts, the [Seller] and its business partner, the Instruments Company, signed a confirmation letter which stipulates:

"After negotiation, China __ Instruments Import and Exports Company (the [Buyer]: Note by the Arbitration Tribunal) will pay US $ 21,000to __ Int'l Trade Corporation (the [Seller]: Note by the Arbitration Tribunal) in August 2001, and the contract price will be deemed paid off. The remaining amount shall be paid to the Instruments Company as compensation for its payment made in advance, for the repairing fee and the profits. Shanghai __ Instruments Ltd. is responsible to maintain and repair the instruments for four years ..."

      (5) On 27 January 2000, Liu __, in the name and as the agent of the [Seller], sent a letter to the [Buyer] informing of the performance of the Contracts in this case as well as the confirmation letter, and also alleging that the confirmation letter "will take effect, when our legal representative (the [Seller]: Note by the Arbitration Tribunal) and the Instruments Company's legal representative sign it. It will be used as the Appendix to the Contracts. We will send you an official notice later."

      (6) On 28 September 2000, the [Buyer] received the confirmation letter signed on 7 September. The Arbitration Tribunal does not find any evidence to show that the [Buyer] did not admit the arrangement stipulated in the confirmation letter before this arbitration.

3. The liability for breach of contract and the arbitration claims

      (1) The Arbitration Tribunal finds that the parties focus on the following issues: first, whether the [Buyer] has the duty to pay the contract price, and whether the confirmation letter discharged the [Buyer]'s duty to make the payment; second, whether the [Seller] has received the remaining US $21,000 of the contract price.

            (1) As to the issue whether the [Buyer] has the duty to pay the contract price, and whether the confirmation letter discharged the [Buyer]'s duty to make the payment, the Arbitration Tribunal holds that the parties to the Contracts in this case are the [Buyer] and the [Seller], who signed the Contracts. The Contracts reflect the true intent of the parties and are in compliance with CISG. Therefore, the Contracts are binding on the parties. The Arbitration Tribunal notes that the Instruments Company and __ Hospital (Shanghai __ Medical Technology Developing Company), etc., are the actual users of the goods in this case; however, neither the Cooperation Agreement signed by the Instruments Company and Shanghai __ Medical Technology Developing Company, nor the payment arrangement nor the Instruments Company's payment, i.e., the actual payer, as the [Buyer] alleged, can prove that the [Buyer] does not have the duty to pay the contract price; the [Buyer] did not provide sufficient evidence for the legal and factual basis to sustain its allegation. Thus, the Arbitration Tribunal holds that the [Buyer] as the purchaser under the Contracts should make the payment when the [Seller] has already performed its duty in accordance with the Contracts.

            (2) The [Seller] alleged that the [Buyer] should pay the remaining US $21,000 in accordance with the confirmation letter; the [Buyer] alleged that the confirmation letter discharged its duty to make payment. The [Buyer]'s evidence are the letter sent by Liu __ on 27 January 2000 and the confirmation letter. The Arbitration Tribunal notes that this letter states, "We and our business partner, Shanghai __ Instruments Ltd, confirmed that you will pay US $21,000 within two years (2000-2001), and then the contract price will be deemed paid off. The remaining amount shall be paid to Shanghai __ Instruments Ltd. as the repairing fee, profits and compensation for the payment in advance." However, this letter also states, "The confirmation letter will take effect when our legal representative and Shanghai __ Instruments Ltd.'s legal representative sign it. The confirmation letter will function as Appendix to the Contracts. We will send you a formal notice." The confirmation letter stipulates, "After negotiation, China __ Instruments Import and Exports Company (the [Buyer]: Note by the Arbitration Tribunal) will pay US $ 21,000 to __ Int'l Trade Corporation (the [Seller]: Note by the Arbitration Tribunal) in August 2001, and the contract price will be deemed paid off. The remaining amount shall be paid to the Instruments Company as compensation for the payment made in advance, for the repairing fee and the profits. The Instruments Company is responsible to maintain and repair the instruments for four years ..." According to the letter sent by Liu __ on 27 January 2000 and the confirmation letter on 7 September, the Arbitration Tribunal holds that the [Buyer]'s duty to make the payment is not discharged. Meanwhile, the Arbitration Tribunal holds that although the confirmation letter was signed by the [Seller] and its partner, Shanghai __ Instruments Company, the [Seller] sent the notice to the [Buyer], and after receiving the notice, the [Buyer] did not raise any objection to the arrangement of the payment of US $21,000; and also the [Buyer] performed according to this arrangement. The above fact shows that the [Buyer] confirmed the confirmation letter. The [Buyer]'s attorney's opinion on 19 July 2002 states that "the letter sent by Liu __ and the confirmation letter have actually discharged the [Buyer]'s duty to make the payment under the Contracts," which also shows that the [Buyer] confirmed the confirmation letter. Accordingly, the Arbitration Tribunal holds that the above facts, the confirmation letter, and the actual performance show that the [Buyer]'s duty to make the payment is not discharged. Because the [Buyer] did not submit sufficient evidence to prove its allegation, the Arbitration Tribunal holds that the [Buyer] still has the duty to pay the remaining US $21,000.

            (3) As to the issue whether the [Seller] has received the remaining US $21,000, the [Buyer] alleged that the [Seller] had received all remaining amount, so the [Seller] should not request the [Buyer] to pay an additional US $21,000; the [Seller] alleged that the [Buyer] had not paid the remaining US $21,000 at all. The Arbitration Tribunal notes that the [Buyer]'s evidence to prove that the [Seller] had receive the remaining amount is that on 4 December 1999, Lu __ paid the [Seller] US $10,000, and on 15 November 2000, Macao __ Trading Company through Bank of China Macao Branch paid the [Seller] US $20,000. The [Seller] alleged that the two payments were made for another transaction, and denied the payments were related to the Contracts in this case. The Arbitration Tribunal reviewed the evidence submitted by the [Buyer] and finds that neither the receipt signed by Chen __, the [Seller]'s legal representative on 4 December 1999 (stating, "We receive US $10,000 from Lu __ today"), nor the payment which Macao __ Trading Company through Bank of China Macao Branch paid to the [Seller] on 15 November 2000, directly show that the payments are related to the Contracts in this case. In addition, the amount of US $10,000 was paid by Lu __on 4 December 1999, but the confirmation letter signed on 7 September 2000 did not confirm this; although the [Buyer] alleged that when signing the confirmation letter, neither could it find the receipt, nor the [Seller] admitted, the [Buyer] did not provide any evidence. It is hard for the Arbitration Tribunal to confirm. Although the [Buyer] made many statements on these two payments and also submitted the evidence, the evidence proves that Lu __, the Instruments Company, Liu __ and the [Seller] have business relationships, and have considerable business with Macao __Trading Company, and the Arbitration Tribunal cannot determine whether the two payments were made for the Contracts. In addition, the total amount of these two payments is US $30,000, which is more than the remaining US $21,000; accordingly, the Arbitration Tribunal cannot support the [Buyer]'s allegation that the two payments were made for the Contracts in this case. Because the [Buyer] could not prove that it had already paid the remaining US $21,000 under the Contracts in this case, the Arbitration Tribunal sustains the [Seller]'s request that the [Buyer] pay the [Buyer] US $21,000.

      (2) As to the [Seller]'s claim for interest, because the confirmation letter stipulates that the [Buyer] shall pay the amount of US $21,000 to the [Seller] in August 2001, the Arbitration Tribunal holds that the [Buyer] shall pay the interest of the above amount of US $21,000 from 1 September 2001 to the date when this award is made; the annual interest rate shall be 6%.

      (3) The [Seller] did not provide sufficient evidence to sustain its claim for the economic loss of US $2,472, so the Arbitration Tribunal does not support this claim.

The [Seller] should pay 10% of the arbitration fee, and the [Buyer] should pay 90%.

III. AWARD

1. The [Buyer] should pay the [Seller] the outstanding contract price of US $21,000;

2. The [Buyer] should pay the [Seller] interest on the amount of US $21,000 from 1 September 2001 to the date when this award is made; the annual interest rate shall be 6%;

3. The [Seller]'s other claims are dismissed;

4. The arbitration fee of this case is RMB 20,000, of which the [Seller] should bear 10%, i.e., 2,000, and the [Buyer] should bear 90%, i.e., RMB 18,000. Because the [Seller] has paid the entire arbitration fee to the Arbitration Commission in advance, the [Buyer] should pay the [Seller] RMB 18,000.

5. As to the above amount, the [Buyer] should pay it off within 30 days after this award is handed down; otherwise, interest shall be added at the annual rate of 6%.

This is the final award.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant is referred to as [Seller]; Respondent of the People's Republic of China 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].

** 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.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated February 27, 2008
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography