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CISG CASE PRESENTATION

China 9 April 2004 CIETAC Arbitration proceeding (Artworks: Italian charms case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040409c1.html]

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

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Case identification

DATE OF DECISION: 20040409 (9 April 2004)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2004/02

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Artworks: Italian charms


UNCITRAL case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade Arbitration
Commission (CIETAC) (now South China Branch) 9 April 2004 (Artworks: Italian charms case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/114],
CLOUT abstract no. 1120

Reproduced with permission of UNCITRAL

Abstract prepared by Feifei Wang

A Chinese seller and a United States buyer signed three contracts for the sale of handicraft items. The seller performed all its obligations to deliver the goods in accordance with the contract, but the buyer delayed part of the payment for the goods despite repeated reminders from the seller. The seller applied for arbitration and requested the Arbitration Tribunal to order the buyer to pay the sum owed, with interest, the arbitration fees and other related fees.

In view of the fact that the places of business of the parties were in States Parties to CISG, and the parties had not opted out of the Convention in the contract, the Tribunal held that the dispute should be governed by the Convention.

The Tribunal found that the seller had delivered to the buyer the goods covered by the contract, and that the buyer had taken delivery. The Tribunal held that, under articles 53 and 62 of the Convention, the seller had a right to demand that the buyer pay the sum owed; under article 78 of the Convention, the seller was also entitled to interest on the money owed by the buyer. The Tribunal upheld the seller's request.

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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 [Also cited: Article 62 ]

Classification of issues using UNCITRAL classification code numbers:

53A [Obligation of buyer to pay price of goods];

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

Descriptors: Price ; 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

Art work case (9 April 2004)

Translation [*] by Meihua Xu [**]

Translation edited by William Zheng [***]

The China International Trade and Economic Arbitration Commission Shenzhen Commission (hereafter, the "Shenzhen Commission") accepted the case (case number: SHEN G2003131) according to:

   -    The arbitration clause in three sales contracts (Nos. LJ030703-USA26M, LJ030910-USA48M, and LJ030925-USA69M) signed by Claimant [Seller], China __ Company, and Respondent [Buyer], America __ Company; and
 
   -    The written arbitration application submitted by the [Seller] on 25 December 2003.

This case is qualified to use the Arbitration Rules of the Arbitration Commission (hereafter, the "Arbitration Rules"), which became effective on 1 October 2000.

Since the amount in dispute in this case is less than renminbi [RMB] 500,000, pursuant to article 64 of the Arbitration Rules, this case is qualified to use summary procedure.

On 30 December 2003, the Secretariat of the Shenzhen Commission sent to the [Buyer] the arbitration notice, the Arbitration Rules, the arbitrators' name list, and the [Seller]'s arbitration application and the attachment by express mail. After confirmation made by the Secretariat of the Shenzhen Commission, the aforesaid documents were properly sent to the [Buyer] on 6 January 2004.

Since the two parties failed to jointly appoint or ask the Chairman of the Arbitration Commission to appoint the sole arbitrator within the stipulated time, the Chairman of the Arbitration Commission appointed Mr. Liu as the sole arbitrator to form the Arbitration Tribunal to hear this case on 18 February 2004.

The Secretariat of the Shenzhen Commission scheduled a court session on 10 March 2004 in Shenzhen and sent to the two parties the Arbitration Tribunal formation notice and the court session notice, however the aforesaid notices sent to the [Buyer] were returned because the [Buyer] refused to accept them.

On 10 March 2004, the Arbitration Tribunal held the court session in Shenzhen. The legal representative of the [Seller] and the agent of the [Seller] attended the court session. The [Buyer] was absent. Pursuant to article 42 of the Arbitration Rules, the Arbitration Tribunal processed this case by default. The Arbitration Tribunal heard the [Seller]'s statement and made investigations on related facts.

On 19 March 2004, the [Seller] submitted an application for modifications to its arbitration claims and the corresponding supplementary material. The Secretariat of the Shenzhen Commission forwarded the aforesaid material to the [Buyer], meanwhile, informing the [Buyer] by a letter that the [Buyer] may submit opinions or related evidence within 10 days of the receipt of this letter; however, the aforesaid documents and letter were returned due to the [Buyer]'s refusal to accept them.

This case has been concluded, and the Arbitration Tribunal handed down this award based on the facts as exhibited through existing written documents and the court session.

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

I. FACTS

The [Buyer] and the [Seller] signed three sales contracts via fax. The following are the contract formations in detail.

On 3 July 2003, the [Buyer] and the [Seller] signed Contract LJ030703-USA26M (hereafter, "No. 1 Contract") with the following terms:

Goods: The [Seller] was to sell Italian Charms to the [Buyer] based on the quantity and specifications stipulated in the contract;
Price: The total price of the contract is US $48,611.30;
Loading port: China;
Destination port: California, U.S.;
Shipping term: The goods shall be loaded within 45 days of the conclusion of the contract;
Payment terms: The [Buyer] shall pay 50% of the price by an irrevocable L/C within 45 days of the receipt of the air shipping B/L, and pay the remaining 50% by D/A (with bank as consignee) within 45 days of the receipt of the air shipping B/L

On 10 September 2003, the two parties signed another contract, i.e., no. LJ030910-USA48M (hereafter, "No. 2 Contract"), also for the sale of Italian Charms with the following terms:

Goods: The [Seller] was to sell Italian Charms to the [Buyer] based on the quantity and specifications stipulated in the contract;
Price: The total price of the contract is US $5,276.50;
Loading port: China;
Destination port: California, U.S.;
Shipment terms: Alphaber Letters 26 shall be loaded on 10 September 2003, item SEBB-101 with Chinese national flag shall be loaded on 10 October 2003, and the remaining charms shall be loaded by the end of September 2003; installment shipment is allowed;
Payment terms: The [Buyer] shall pay the entire price of the goods by T/T within 5 days after the receipt of the goods.

On 25 September 2003, the [Buyer] and the [Seller] signed a third contract for charms, i.e., no. LJ30925.USA69M (hereafter, "No. 3 Contract") with the following terms:

Goods: The [Seller] was to sell Italian Charms to the [Buyer];
Price: The total price of the contract is US $7,342.90;
Loading port: China;
Destination port: Oakland, U.S.;
Shipping terms: Installment shipment is allowed; the [Seller] shall make arrangement for shipment after receiving the [Buyer]'s payment; the [Seller] may complete loading by 18 October 2003;
Payment terms: The [Buyer] shall make payment by T/T prior to each shipment.

The arbitration clause in the three contracts stipulates that:

"Any dispute arising from the performance of or in connection with the contract shall be settled by friendly negotiation; if the negotiation fails, the dispute shall be submitted to the Arbitration Commission to settle in Beijing or Shenzhen."

The [Seller] filed the arbitration application with the Shenzhen Commission on 25 December 2003, asking the Shenzhen Commission to rule that:

  1. The [Buyer] shall pay the [Seller] the price for the goods in arrears of US $31,402;

  2. The [Buyer] shall bear the entire arbitration fee;

  3. The [Buyer] shall pay the interest on the payment in arrears for a total of US $1,100 (calculated for six months);

  4. The [Buyer] shall pay other expenses incurred by the [Seller] for processing this case, i.e., US $3,140.20.

[Seller]'s position

The [Seller] alleges that:

After the conclusion of the aforesaid three contracts, the [Seller] delivered the entire goods on 13 August, 10 September, 29 September, 5 October, and 14 October 2003, respectively, for a total price of US $63,684.70.

After the conclusion of No. 1 Contract, the [Buyer] issued L/C No. 1133952, and on 21 August 2003, the [Seller] received US $25,386.3 under the L/C through Shenzhen Development Bank Zhuhai Branch (hereafter, "S Bank"). The remaining payment of US $23,225 under this contract was supposed to be received by the bank as a consignee. After the delivery of the goods, the [Seller] entrusted S Bank to receive payment on its behalf and the [Buyer] confirmed that it would make payment, however, the aforesaid payment has not been made yet.

After the conclusion of No. 2 Contract, the [Seller] delivered goods in accord with the contract; however, the [Buyer] only paid US $1,846 with US $3,430.50 in arrears.

The [Seller] has fulfilled its obligation to deliver the goods under No. 3 Contract; however, the [Buyer] only paid US $5,050 with US $4,746.90 in arrears.

The [Seller] asked the [Buyer] to make payment via telephone, fax, and e-mails, however, the [Buyer] delayed in making payment offering various excuses, with the result that the [Seller] has suffered economic losses. The [Seller] has entrusted Guangdong DS Law Firm to send a letter to the [Buyer] requesting the [Buyer] to make clear response within 15 days after receiving that letter; however, no response has been made by the [Buyer].

On 19 March 2004, the [Seller] submitted an application for modifications to its arbitration claims, changing item 3 of its arbitration claim to provide that the [Buyer] shall pay the interest on the delayed payment, totaling RMB 14,754.35, calculated from the day of contract violation to 30 June 2004.

II. OPINION OF THE ARBITRATION TRIBUNAL

(1) Applicable law

The [Seller]'s place of business is in China, and the [Buyer]'s in the U.S. Since both China and the U.S. are Contracting States of the CISG and the parties did not exclude the application of the CISG in the three contracts, therefore, the Arbitration Tribunal deems that the CISG shall be applied to resolve the disputes in this case.

(2) The performance of the three contracts

     No. 1 Contract

     On 8 July 2003, through Bank of America, the [Buyer] issued irrevocable L/C No. 1133952 with the [Seller] as the beneficiary for a total amount of US $24,305.65. On 21 July 2003, the [Buyer] entrusted the L/C issuing bank to make some modifications to the L/C, including giving 5.5% credit points upon making payment. On 21 August 2003, the [Seller] confirmed the receipt of US $25,386.73 under the L/C.

After the [Seller] delivered the goods to the carrier, Rockwood International Freight Ltd (hereafter, "R Company"), R Company issued two air shipping B/Ls on 13 August 2003 with the [Buyer] as the consignee and notifying party, which indicated that the goods delivered were the goods under the contract. Related documents including the packing list and business invoices indicated that the goods delivered by the [Seller] were worth US $48,611.30.

The [Seller] entrusted S Bank to receive the remaining payment under this contract, and in its fax sent to Bank of America on 15 August 2003, S Bank indicated that the deadline for its entrustment receipt of payment was 26 September 2003 (45 days from AWB Date). The [Buyer] made confirmation in the fax sent on 18 August 2003; however, in the letter issued on 11 March 2004, S Bank stated that:

"We have sent the entire documents, including bill for collection … (business number: 0C050020030023; bill amount: US $23,225) to Bank of America, N.A…. , however, this payment has not been collected yet."

     No. 2 Contract

     The two business invoices provided by the [Seller] indicated that the goods delivered by the [Seller] were worth US $2,643.50. A "Signature Proof of Delivery: Detail" (series number: 2088284531) sealed and confirmed by ZD Air Express Company Limited, Zhuhai Branch (hereafter, "ZD Company") indicated that the goods under this contract were signed for and accepted by the [Buyer] on 2 October 2003. The remaining goods under this contract have been delivered to the [Buyer] together with the goods under No. 3 Contract.

The [Buyer] paid US $1,846 for the goods under this contract to the [Seller] on 24 September 2003.

     No. 3 Contract

     When faxing the No. 3 Contract back to the [Seller], the [Buyer] made modifications to the contract by handwriting, including adding to the items and quantity of the goods, i.e., adding to Item SL 12 for a quantity of 1,000 pcs, 904(A-Z)500EAC and changing the payment term to "payment by T/T within 5 days of the arrival of the goods". The [Seller] performed its obligation to deliver the goods based on the modified items and quantity; therefore, the [Seller] has in fact accepted the modifications to the contract made by the [Buyer].

The goods under this contract were delivered in two shipments. The business invoice issued by the [Seller] on 6 October 2003 indicated that the goods in the first delivery were worth US $8,550.50 (including part of the goods under No. 2 Contract). The "Proof of Delivery: Detail" (serial number: 2088284531) signed for and accepted by ZD Company indicated that this delivery of goods was received by the [Buyer] on 10 October 2003.

The business invoice issued by the [Seller] on 14 October 2003 indicated that the goods in the second delivery were worth US $3,879.40; the "Signature Proof of Delivery: Detail" (series number: 2088284520) signed for and accepted by ZD Company indicated that this delivery of goods was received by the [Buyer] on 16 October 2003.

The [Buyer] only paid US $5,050 under this contract in advance on 21 August 2003.

(3) [Seller]'s arbitration claims

The aforesaid facts indicate that the [Seller] has delivered the goods under the contracts to the [Buyer]. Since the [Buyer] has accepted the goods delivered, it should have made payments to the [Seller] based on the contract price. Article 53 of the CISG stipulates that:

"The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention."

And Article 62 of the CISG states that when the [Buyer] violates the contract, the [Seller] is entitled to remedy the contract, including requiring the [Buyer] to pay the price for the goods.

Based on the aforesaid stipulations, the Arbitration Tribunal accepts the [Seller]'s claim to have the [Buyer] pay the price for the goods in arrears. There is a payment of US $23,225 in arrears under Contract No. 1, and the total price for the goods delivered by the [Seller] under Contract No. 2 and Contract No. 3 is US $2,643.50 + US $8,550.50 + US $3,879.40 = US $15,073.40. The [Buyer] has paid US $1,846 + US $5,050 = US $6,896 with US $8,177.40 in arrears, i.e., US $15,073.40 - US $6,896 = US $8,177.40. Thus, the total amount the [Buyer] needs to pay to the [Seller] is US $31,402.40.

Article 78 of the 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 …"

Therefore, based on this article, the [Seller] is entitled to interest on the payment in arrears. Referencing the RMB bank loan interest rate of Chinese domestic commercial banks, the [Seller]'s calculating of interest at 0.021%/day after exchanging the payment in arrears into RMB is reasonable, which the Arbitration Tribunal accepts. Based on the [Seller]'s calculation, the [Buyer] shall pay the following interest by the day of the award:

Contract No. 1: US $23,225 8.26 RMB / US $ 193 days (from 29 September 2003 to 9 April 2004) 0.021% = RMB 7,775.21;

Contract No. 2: US $3,430 8.26 RMB / US $ 183 days (10 October 2003 to 9 April 2004) 0.021% = RMB 1,088.95;

Contract No. 3: US $4,746.90 8.26 RMB / US $ 167 days (25 October 2003 to 9 April 2004) 0.021% = RMB 1,375.07.

The aforesaid interest totals RMB 10,239.23. As to the [Seller]'s claim for interest calculated from the day of the award to 30 June 2004, the Arbitration Tribunal deems that since there is a possibility that the [Buyer] may make payment before 30 June 2004, therefore, the interest for that period is not definite and the Arbitration Tribunal is unable to make a decision on the interest for that period of time.

On 19 March 2004, the [Seller] submitted material, making explanations on Item 4 of its claim, which included attorneys' fee of RMB 15,150, traveling fee to Guangzhou and Shenzhen of RMB 2,683.6, attorney consultation fee and reception fee of RMB 583, and the estimated attorneys' fee and execution fee incurred in the U.S. of US $5,000.

The Arbitration Tribunal deems that based on Article 59 of the Arbitration Rules, in the award, the Arbitration Tribunal has the right to determine a reasonable amount, which the losing party shall pay to the winning party as expenses for processing the case. Considering the fact that most of the [Seller] claims are supported by the Arbitration Tribunal, the [Buyer] shall pay part of the expenses incurred by the [Seller] for processing this case, i.e., RMB 17,000.

The [Buyer] shall bear the entire arbitration fee.

III. THE AWARD

The Arbitration Tribunal rules that:

     (1) [Buyer] shall pay the price for the goods of US $31,402.40 to the [Seller] within 30 days of this award;

     (2) [Buyer] shall pay an interest of RMB 10,239.23 on the aforesaid amount within 30 days of this award;

     (3) Within 30 days of this award, the [Buyer] shall pay a reasonable part of the [Seller]'s expenses incurred for this case, i.e., RMB 17,000.

     (4) [Seller]'s other arbitration claims are dismissed.

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

This is the final award.

Sole Arbitrator:

9 April 2004 in Shenzhen


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 the United States 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.

*** William Zheng is a graduate of the Pace University School of Law. He is Special Counsel with the Shanghai office of Sheppard Mullin Richter & Hampton, LLP.

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Pace Law School Institute of International Commercial Law - Last updated January 18, 2012
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