Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography
Search the entire CISG Database (case data + other data)

CISG CASE PRESENTATION

China 2005 Guangdong High People's Court [Appellate Court] (Possehl (HK) Limited v. China Metals & Minerals Import & Export (Shenshen) Corporation) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050000c2.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20050000 (2005)

JURISDICTION: People's Republic of China

TRIBUNAL: Guangdong High People's Court [Appellate Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Possehl (HK) Limited v. China Metals & Minerals Import & Export (Shenzhen) Corporation

CASE HISTORY: 1st instance Guangdong Intermediate People's Court 2005 [affirmed]

SELLER'S COUNTRY: People's Republic of China [Mainland China] (defendant)

BUYER'S COUNTRY: Hong Kong (plaintiff)

GOODS INVOLVED: Ferromanganese and silicomanganese


Classification of issues present

APPLICATION OF CISG: No. However, Buyer pleaded CISG Articles 9, 63, 64, 73 and 74 as well as Chinese Contract Law; Seller pleaded CISG Article 80 as well as Chinese Contract Law; and the Court compared CISG Article 25 with the counterpart provision of Chinese Contract Law. The opinion includes a detailed discussion of the significance of Letters of Credit to sellers.

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 25 [Also cited: Articles 9 ; 63 ; 64 ; 73 ; 74 ; 80 ]

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.]

Descriptors: Fundamental breach ; Avoidance ; Letters of credit

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): Click here for Chinese text of case; see also CISG-China Case [HPC/06]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=95>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

Go to Case Table of Contents

Case text (English translation)

Joint translation project:
New York University School of Law
and Pace University School of Law

Guangdong High People's Court [Appellate Court]

Possehl (HK) Limited
v.
China Metals & Minerals Import & Export (Shenzhen) Corporation

[...] 2005 (cannot be determined by the original text)

Translation [*] by Jing Li [**]

Edited by Peigi Zhao [***]

Appellant (the original Plaintiff, hereinafter the "[Buyer]"), Possehl (HK) Limited refused to accept the Civil Judgment by the Guangdong Intermediate People's Court's (2005) Shen Zhong Fa Min Si Chu Zi No. 88 on the dispute arising out of three sales contracts with the Appellee, China Metals & Minerals Import & Export (Shenzhen) Corporation (the original Defendant, hereinafter the "[Seller]"), and appealed to this Appellate Court. This Appellate Court accepted the case. A collegial bench was formed according to the relevant law. This case is now closed.

FACTS OF THE CASE

On 3 March 2005, [Buyer] filed a lawsuit with the Court of First Instance against the [Seller] alleging that both parties had established business relations since August 2001 which was followed by dozens of international contracts on the sale of goods. On 17 November 2003, the [Buyer] and the [Seller] entered into three sales contracts with general contract terms that are identical (hereinafter, the "Contracts"), the main content of which include:

a)    Delivery date: Before 10 February 2004;
b)    Port of delivery: Zhanjiang, China;
c)    Port of destination: Main port of Mexico
d)    Terms of payment: In accordance with 100% of the invoice value in sight credit; letter of credit (hereinafter "L/C") is to be issued by the [Buyer] before 10 December 2003.

At the end of November 2003, Mu Zongshun, Business Manager of [Buyer]'s Representative Office in Dalian called Huang Mingyan, Business Manager of the [Seller] requesting the latter to provide information for issuance of the L/C. The [Seller] replied that the time for issuance may be postponed until the end of December, and that the information would be provided at that time. On 26 December 2003, Mu sent a facsimile to the [Seller] for the attention of Huang, requesting the latter to provide the route information for issuance of the L/C as soon as possible so that the [Buyer] can act accordingly to assure the performance of the Contracts. On 29 December 2003, the [Seller] replied denying having agreed to postpone the date of issuance of the L/C, claiming that since it had not received the L/C, it could not perform the Contracts according to the original contract price and the original delivery date. On 29 December and 31 December 2003, the [Buyer] responded twice to the [Seller]'s reply trying to negotiate concerning the issuance of the L/C. On 2 January 2004, the [Seller] sent a facsimile to the [Buyer] stating:

"Because of your company's non-issuance of the L/C according to the Contracts, our company has encountered serious loss, and our company has decided to terminate our performance of these three Contracts and cancel the Contracts."

From 6 January 2004 to 12 February 2004, both parties negotiated through facsimiles concerning the above mentioned cancellation of the Contracts.

The [Buyer]'s claims

The [Buyer] alleged that:

1. Before the conclusion of the Contracts, the parties had signed two other contracts. Under these two prior contracts, the [Buyer] issued the L/C on time. However, due to the [Seller]'s own reasons, these two contracts were not performed. After a tough negotiation, considering the parties' prior good cooperation, the [Buyer] did not hold the [Seller] responsible for these two unperformed contracts. Moreover, the [Buyer] agreed to enter into two new contracts to replace them, and an extra one for the sale of 3,000 tons of silicomanganese. This was the origin of the three contracts in dispute.

2. It was neither honest nor reasonable for the [Seller] to declare the Contracts avoided using the excuse of the [Buyer] not issuing the L/C on time. If it was an emergency, the [Seller] could have made a phone call or sent a facsimile to the [Buyer] notifying it of the route information for the L/C. The real reason why the [Seller] wished to terminate the Contracts was that the price for ferromanganese and ferrosilicon substantially increased, and the [Seller] could sell the goods to a third party for a much higher price.

3. No matter what excuse the [Seller] used to terminate the Contracts, these Contracts were valid and legally binding on the [Seller]. The end user of the goods was a large steelworks in Mexico. If the goods could not be delivered on time, the factory would be forced to close down and the loss would be exceptionally large. Therefore, the goods should have been delivered as provided in the Contracts, i.e., in February 2004.

On 1 February 2004, the parties tried to continue negotiating the performance of the Contracts in Guiyang, but could not agree on a solution. On 11 February 2004, the [Seller] sent the last response to the [Buyer] stating that it was terminating the Contracts because of the [Buyer]'s delay of issuing the L/C, and thus the Contracts were avoided.

The [Buyer] asserted that the parties entered into the Contracts on 17 November 2003. Those Contracts were legally valid. Without the agreement of one party, the other party was not allowed to terminate the Contracts unilaterally. The [Seller]'s terminating the Contracts without the agreement of the [Buyer] was a severe breach of the Contracts. Therefore, the [Seller] should compensate the [Buyer]'s entire economic loss for the following reasons:

I. The reason why the [Buyer] did not issue the L/C according to the time limit stipulated in the Contracts was that the [Seller] did not provide information for the issuance of the L/C pursuant to the established practice between the parties, which was a collateral obligation of the [Seller].

These were contracts for an international sale of goods. The parties did not agree on the applicable law of the Contracts. Under Articles 142 and 145 of the General Principles of the Civil Law of the People's Republic of China (hereinafter, "General Principles"), the applicable law for the present disputes should be the United Nations Convention on Contracts for the International Sale of Goods (1980) (hereinafter, the "CISG"). Matters not governed by the CISG should be governed by the law of the country that has the most significant relationship with the Contracts, i.e., Chinese law.

Under Article 9(1) of the CISG:

"The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves."

Among the dozens of transactions between the [Buyer] and [Seller] within the past two years, as long as the payment method was L/C, before the [Buyer] issued the L/C, the [Seller] would send the [Buyer] facsimiles notifying the [Buyer] of information such as the name and address of the bank of deposit, name, account number, and address of the beneficiary. Consequently, it had been established as a practice that the [Seller] provided information for issuance of the L/C before the [Buyer] issued the L/C. According to Article 9 of CISG, the parties were bound by this established practice.

Article 60 of the Contract Law of the People's Republic of China (hereinafter, "Chinese Contract Law") provides that:

"The parties shall perform their obligations thoroughly according to the terms of the contract. The parties shall abide by the principle of good faith and perform the obligations of notice, assistance and maintaining confidentiality, etc., according to the nature and objective of the contract."

Therefore, the obligations of notice, assistance and maintaining confidentiality are collateral obligations. Providing information for issuance of the L/C was a collateral obligation that the [Seller] was required to perform, which shall be considered the obligation of assistance and notice. Lack of the [Seller]'s performing such obligation, the [Buyer] was not able to issue the L/C.

In the present case, after the conclusion of the Contracts, the [Buyer] telephoned the [Seller] at the end of November 2003 in accordance with their practice, requesting information for the L/C. However, the [Seller] responded that the issuance could be postponed to the end of December, and that the information would be provided on the occasion. Based on the trust that both parties had built up after dozens of transactions, the [Buyer] did not require the [Seller] to issue a confirmation of the postponement in writing. However, up until 26 December 2003, when the [Buyer] sent a facsimile to the [Seller] requesting the latter to provide information for the L/C, the [Seller] denied that it had agreed to postpone the issuance, and it refused to provide any information for the L/C. The [Buyer] had demanded that the [Seller] perform its collateral obligation, i.e., to provide information for the L/C, but the [Seller] failed to perform accordingly. The [Seller] had provided information for the L/C in their prior transactions, and the parties had established the practice that before issuance of the L/C, the [Seller] would provide the most updated information for the L/C. Since the [Seller] had not provided any information for the L/C, the [Buyer] was not able to issue the L/C according to the Contracts.

II. The [Seller] fundamentally breached the Contracts when it unilaterally declared the Contracts avoided based on the excuse of the [Buyer] not issuing the L/C without performing its collateral obligation.

      (1) The [Seller] did not give any notice before declaring the Contracts avoided.

Article 63(1) of the CISG provides that:

"The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations."

Article 72(2) of the CISG provides that:

"If time allows, the party intending to declare the contract avoided must give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance."

Additionally, Article 94 of the Chinese Contract Law provides that:

"The party may terminate a contract if ... (3) [t]he other party delayed performance of its main obligations, and failed to perform within a reasonable time after receiving demand for performance."

According to the above mentioned articles, even if not issuing the L/C on time was the fault of the [Buyer], the [Seller] should have given notice urging the [Buyer] to issue the L/C and given an additional period of time for the performance. Only if a notice was given and the [Buyer] failed to perform, was the [Seller] entitled to declare the Contracts avoided. In the present case, the stipulated time of issuance of the L/C was 10 December 2003. The [Seller] had not given any notice urging the [Buyer] to issue the L/C from the conclusion of the Contracts (17 November 2003) to the [Seller]'s avoidance of the Contracts (29 December 2003). Not until 26 December 2003 when the [Buyer] requested information for the issuance through facsimile did the [Seller] respond on 29 December 2003 declaring that the Contracts were avoided.

      (2) The [Buyer]'s delayed performance did not constitute a legal condition for the [Seller] to declare the Contracts avoided. Pursuant to Article 64(1) of the CISG [Translator's note: Original text is Article 63(1), which is a typo]:

"The seller may declare the contract avoided: (a) if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed."

Moreover, under Article 94 of the Chinese Contract Law:

"The parties may terminate a contract if: (3) the other party delayed performance of its main obligations, and failed to perform within a reasonable time after receiving demand for performance; (4) the other party delayed performance or otherwise breached the contract, thereby frustrating the purpose of the contract."

The [Buyer] asserted that even if it did not issue the L/C on time, the [Seller] was not entitled to declare the Contracts avoided under the CISG or to terminate the Contracts under the Chinese Contract Law.

First, the [Buyer]'s late issuance of the L/C was due to the [Seller]'s failure to provide information for the L/C.

Second, the [Buyer] did not issue the L/C before 10 December 2003. It did not constitute a fundamental breach of the Contracts, and it did not result in "frustrating the purpose of the contract" as asserted by the [Seller]. The [Buyer] sent a facsimile to the [Seller] urging the latter to provide information for the L/C, while notifying the latter that it would issue the L/C at the end of December. The stipulated time of shipment under the Contracts was 10 February 2004. If the L/C was able to be issued before the end of December, or even before the date of shipment, it would not have any impact on the [Seller]'s negotiation of payment after the shipment. Had the [Seller] notified the [Buyer] of the information for the L/C in time after the [Buyer] urged it to do so by facsimile on 26 December 2003, the [Buyer] could have issued the L/C on time, and the parties could have continued performing the Contracts. The purpose of the Contracts could have been fulfilled.

Third, before declaring the Contracts avoided, the [Seller] did not fulfill the obligations under the CISG and the Chinese Contract Law of giving the [Buyer] notice of the avoidance and fixing an additional time period for performance.

In conclusion, the [Buyer] alleged that the [Seller] was not entitled to unilaterally declare the Contracts avoided. The Contracts signed by both parties were still valid.

      (3) The real reason why the [Seller] avoided the Contracts was that the price of the subject matter of the Contracts increased substantially. The goods under these Contracts were ferromanganese (US $455 per ton), and silicomanganese (US $485 per ton and US $ 510 per ton). After the conclusion of the Contracts, the price of these products increased substantially. For details, reference may be made to the information on the market price of various types of metal products provided by a professional institute Ryan's Notes.

III. The [Seller] unilaterally declared that the Contracts were avoided, and should be held responsible for the [Buyer]'s expected lost profits of US $449,000.

According to Article 74 of the CISG:

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

According to Article 113 of the Chinese Contract Law:

"Where a party failed to perform or rendered non-conforming performance, thereby causing loss to the other party, the amount of damages payable shall be equivalent to the other party's loss resulting from the breach, including any benefit that may be accrued from performance of the contract."

After the parties entering into the Contracts, the [Buyer]'s affiliate company [...] signed a contract with its Mexican client agreeing to sell the products under the Contracts at issue to this client at a higher price. Had these three Contracts been performed as planned, the [Buyer] would have gained the expected profits of US $449,000. The [Buyer] paid an attorneys' fee of US $44,900 in handling this case.

The [Buyer] therefore requested the Court of First Instance to:

      (1) Terminate the Contracts between the parties;

      (2) Order the [Seller] to compensate the [Buyer] the expected lost profits of US $449,000; and

      (3) Order the [Seller] to pay the [Buyer]'s attorneys' fee of US $44,900 and the litigation fee arising out of the case.

The [Seller]'s response

The [Seller] submitted the following response:

1. Applicable law

The parties agreed in the Contracts that any disputes arising out of the contract shall be submitted to arbitration institutions of the Defendant's country. However, the parties did not agree on the applicable law of the Contracts. According to the law of the possible place of arbitration, i.e., China, the arbitration agreement of the parties was not valid due to the fact that they had not agreed on a specific arbitration institution. Therefore, the [Seller] agreed with the jurisdiction of the Court of First Instance. Moreover, according to the Doctrine of Most Significant Connection, the applicable law of the present case shall be Chinese law. Pursuant to Article 142 of General Provisions:

"If any international treaty concluded or acceded to by the People's Republic of China contains provisions differing from those in the civil laws of the People's Republic of China, the provisions of the international treaty shall apply, unless the provisions are ones on which the People's Republic of China has announced reservations."

Although China is the Contracting State to the CISG, the place of business of the [Buyer] was in Hong Kong Special Administrative Zone, China (hereinafter "Hong Kong SAR"), which is not a Contracting State. Thus, the CISG should not be applied to the present dispute. The applicable law should be Chinese contract law.

2. Issuance of the Letter of Credit

The [Buyer] failed to issue the L/C on time without any legal or contractually agreed reasons, and thus was in breach of the contract. The three purchase Contracts between the parties provided that the [Buyer] shall issue the L/C before 10 December 2003. However, the [Buyer] did not require the [Seller] to provide information for issuance of the L/C until 26 December 2003. The L/C had not been issued even when the [Buyer] requested the [Seller] to provide information for issuance of the L/C and then brought this action. There were no legal or contractually agreed reasons for the non-issuance. The [Buyer]'s conduct constituted a breach of the Contracts. The [Buyer] asserted that the late issuance was because the [Seller] had agreed thereto and that the [Seller] did not provide any information for issuance. This assertion was not factually or legally correct.

First, the [Seller] had not agreed to late issuance. According to the principle of "the party who asserts must prove", the [Buyer] should be required to provide evidence showing that the [Seller] had made such an agreement. The [Buyer] had not submitted any evidence proving this assertion. On the other hand, the [Seller] had clearly stated in the facsimiles to the [Buyer] that it had never agreed to postpone the issuance of the L/C.

Second, the [Buyer]'s claim that the [Seller] had not notified it to issue the L/C lacks both factual and legal basis. Providing information for issuance is not a prerequisite to issuance of an L/C. Pursuant to Article 7(a) of the UCP 500 Rules:

"A Credit may be advised to a Beneficiary through another bank (the "Advising Bank") without engagement on the part of the Advising Bank."

Therefore, the advising bank's legal status is the agent of the issuing bank. Without special agreements in the import and export contract, the issuing bank is entitled to select an advising bank without notifying the seller. In other words, selecting an advising bank shall be the seller's right, not obligation. It is a restriction on the buyer's rights. Even if the contract stipulates that the seller is entitled to select the advising bank, when the seller fails to do so, the buyer is still be able to perform its obligation of issuing the L/C. In the present case, the Contracts did not provide for the [Seller]'s right to select the advising bank.

Considering the practice of performing the prior contracts between the parties, the [Buyer] was always able to list the bank appointed by the [Seller] as the advising bank. This demonstrated that the [Buyer] did its best to cooperate with the [Seller] to perform the contract obligation in good faith. It could be expected that the [Buyer] would respect the practice established between the parties and would render the [Seller] rights to select advising banks in future transactions. However, the obligation to select advising banks was not imposed upon the [Seller]. Therefore, the assertion by the [Buyer] that the [Seller]'s not giving notice for issuance of the L/C which led to non-issuance was unreasonable. Without the [Seller]'s selection of the advising bank, the [Buyer] could inquire of the [Seller], or go with the previously appointed advising bank. It was not the truth that the [Buyer] was not able to issue the L/C without the [Seller]'s notice. According to the [Buyer], the practice was that as long as the method of payment was L/C, the [Seller] would notify the [Buyer] that the advising bank was the [Buyer]'s bank of deposit. Since the advising bank was the same in every transaction, it could be expected that it would not be changed. Evidently, the purpose of notice was to inform the [Buyer] of the advising bank. However, if for many times in the prior transactions the advising bank selected remained the same, and the advising bank was not changed in the recent transaction in November 2003, the [Buyer] should have known of the advising bank. How could the [Buyer] assert that the [Seller] did not perform its obligation when such notice was not a contractual obligation, and had no practical significance? How could this asserted non-performance release the [Buyer] from the obligation of issuing the L/C? The parties had recently entered into a transaction in November, and the [Seller] believed that the [Buyer] should have known of the advising bank, and thus did not send the [Buyer] any notice. Hence, it cannot be argued that the [Buyer] was not aware of the advising bank and could not issue the L/C.

3. Termination of the Contract

The [Buyer] did not fulfill its obligation of issuing the L/C. The [Buyer] fundamentally breached the contract. The [Seller] was entitled to terminate the contract.

Article 94 of the Chinese Contract Law provides that:

"The parties may terminate a contract if: ... (4) the other party delayed performance or otherwise breached the contract, thereby frustrating the purpose of the contract."

Accordingly, the standard determining whether a party's conduct has constituted a fundamental breach is to consider the seriousness of the breach. In an export contract, letter of credit terms are very important. The buyer's issuance of the L/C on time is the buyer's guarantee of performance of contract to the seller. If the buyer fails to issue the L/C and the seller is not guaranteed to be paid, the seller shall be entitled to refuse to deliver the goods. In certain cases, if the buyer is late in issuing the L/C, the seller is entitled to terminate the contract. The standard is to consider whether the buyer has caused serious damages to the seller, which frustrates the purpose of the contract.

In the present case, the first fact to be taken into account is that not only did the [Buyer] fail to issue the L/C within the stipulated time in the Contracts, but also did not issue the L/C at all. Although the [Buyer] claimed that the contract was valid and not terminated, it had not issued any L/C up until it brought this action to the Court of First Instance. If the [Buyer]'s assertion was the truth, the [Seller] was entitled to the counterargument right of plea against the advance performance, and thus was entitled to refuse delivery.

Second, the [Buyer]'s conduct of non-issuance actually caused serious damages to the [Seller], which deprived the [Seller] from obtaining the expected benefits from the contract. The [Buyer] had breached the contract fundamentally. At the time of the conclusion of the contract in dispute, it was a crucial time for the production of the subject matter of the Contracts. As a professional in this industry, the [Buyer] should have been aware of the situation that many factories in this industry were requiring down payments due to the increase in price of electricity and raw materials. Because the goods involved were in large quantities and in large sum, the [Seller] needed the L/C issued by the [Buyer] to secure a loan in order to make down payments to the manufacturer. To ensure the performance of the contract, the [Seller] utilized different terms in the Contracts at issue providing that the [Buyer] shall issue the L/C by 10 December 2003. There were no terms specifying the time for issuance of the L/C in the prior contracts between the parties. To emphasize the importance of the time for issuance of L/C, the Contracts at issue included the time for issuance of the L/C and made it the prerequisite of performance of the contracts. According to the Supply Agreement between the [Seller] and Guizhou Longli Long Teng Ferroalloy LLC (hereinafter, "Long Teng LLC"), the [Seller] was obligated to make down payments of 70% of the contract price by 15 December 2003 [Translator's note: The original text is 15 December 2004, which judging by the context is in error.] Since the [Buyer] did not issue the L/C on time, the [Seller] could not make the down payment. On 23 December 2003, the manufacturer, i.e., Long Teng LLC sent a facsimile to the [Seller] notifying the [Seller] that it had to resell the subject matter under the Supply Agreement due to the fact that it was pressured by the expensive electricity and expensive raw materials and it did not receive any down payments from the [Seller] to cover the expenses. Under these circumstances, had the [Buyer] issued the L/C at the end of December 2003, the [Seller] would have received the goods and delivered them to the [Buyer] on time. Had the [Seller] purchased the goods from another manufacturer, the price on the goods would have gone up substantially and the [Seller] would not have gained the profits that it should have obtained from the original Supply Agreement with Long Teng LLC. The [Seller] could have even encountered a significant loss. The [Buyer]'s conduct frustrated the purpose of the Contracts. Therefore, the [Seller] was entitled to terminate the Contracts on 2 January 2004.

Article 96 of Chinese Contract Law provides that:

"One party to a contract shall make a notice to the other party if it advances to rescind the contract according to the provisions of Paragraph 2, Article 93 and Article 94 of the Law. The contract shall be rescinded upon the arrival of the notice at the other party."

The [Seller] notified the [Buyer] of the termination of the Contracts by facsimile on 2 January 2004. Therefore, the Contracts were terminated on 2 January 2004 according to the law.

4. Damages claimed by the [Buyer]

The termination of the Contracts by the [Seller] did not cause any lost profits. The damages claimed by the [Buyer] were not legally based.

The [Buyer] fundamentally breached the Contracts. Since the [Seller] was entitled to terminate the Contracts, it did not cause any loss of profits to the [Buyer]. The [Buyer] was not entitled to require the [Seller] to compensate the unfavorable results due to the [Buyer]'s own breach of contract. Moreover, it was unreasonable for the [Buyer] to claim that the [Seller] terminated the Contracts before notifying the [Buyer] and that it resulted in lost profits.

The signing party to the so-called resale contract with the Mexican client was not the [Buyer] because the share certificate the [Buyer] provided could not prove that the loss of the affiliate company was the loss of the [Buyer]. When the [Buyer] breached the Contracts, the [Seller] was not able to deliver the goods according to the Contracts, and thus it was not possible to perform the resale contract. Therefore, the so-called expected profits did not exist.

Pursuant to Article 67 of the Chinese Contract Law:

"Where both parties have obligations towards each other and there has been an order of priority in respect of the performance, and the party which shall render its performance first has not rendered the performance, the party which may render its performance later has the right to reject the other party's request for performance. Where the party which shall render its performance first violates the terms of a contract while fulfilling the obligations, the party which may render its performance later has the right to reject the other party's corresponding request for performance."

Under the resale contract provided by the [Buyer], the goods were to be delivered in mid-February by the [Buyer]. Because of the [Buyer]'s non-issuance of the L/C, the [Seller] was entitled to the counter-argument right of plea against the advance performance, i.e., not preparing the goods until the [Buyer] issued the L/C. Therefore, even if the [Seller] did not terminate the Contracts, it was impossible for the [Seller] to prepare the goods before the date stipulated in the Contracts to ensure the delivery in mid-February. The [Buyer]'s breach of the resale contract was definite and the profits thereof was deemed not to be able to satisfied. This loss of profits was not related to the termination of the Contracts.

Likewise, according to Article 67 of the Chinese Contract Law, the [Seller] was entitled to require the [Buyer] to bear the possible loss of preparing the goods again. In the present case, because of the [Buyer]'s non-issuance of the L/C, the [Seller] exercised its counter-argument right of plea against the advance performance based on its doubt as to whether the Contracts would be performed and the fact that it was not able to obtain a loan with the L/C as planned. Because of this situation, the [Seller] was not able to make the down payment to the manufacturer of the goods, and was not able to prepare the goods, which resulted in the manufacturer's rejection of providing the goods. The breach of contract by the [Buyer] led to the delay of the performance of the Contracts and the fact that the Contracts were not able to be performed according to the original contract price.

Article 80 of the CISG provides that:

"A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission."

According to this internationally recognized principle of law, the [Buyer] was not entitled to require the [Seller] to compensate the loss due to its own breach of the Contracts. Even if the Contracts were not terminated, the [Seller] is entitled to recover from the [Buyer] the difference between the price of the repurchased goods and the original contract price. Therefore, even if the Contracts were not terminated, the price of the goods should not be the original contract price, but the market price when the [Buyer] issued the L/C. After the termination of the Contracts, the [Buyer] must take measures to mitigate the loss and repurchase the goods at the market price in order to fulfill its resale contract. Consequently, as for the [Buyer], the [Seller]'s termination of the Contracts was economically the same with the Contacts being performed, and the [Buyer] did not encounter any loss. The [Buyer] was not entitled to require the [Seller] to perform the Contracts and not be held responsible for its own breach of the Contracts that led to the fact that the Contracts were not able to be performed according to the stipulated time and price. To sum up, the [Buyer]'s claim for the [Seller] to compensate the lost profits had no legal basis. The [Seller], therefore, requested the Court of First Instance to reject this request.

EVIDENCE AND CROSS EXAMINATION IN FIRST INSTANCE

The evidence submitted by the [Buyer]

To support its arguments, the [Buyer] had submitted the following evidence to the Court of First Instance:

(1) The three Contracts the parties signed on 17 November 2003.
 
  -    The [Buyer] alleges that this proves that the [Buyer] purchased silicomanganese and ferromanganese from the [Seller].
 
(2) The eleven facsimiles between the parties.
 
  -    The [Buyer] alleges that they prove that the [Buyer] requested the [Seller] to provide route information for the issuance of the L/C, and that the [Seller] used the excuse of the [Buyer] not issuing the L/C to unilaterally declare the Contracts avoided.
 
(3) Two contracts of prior transactions that the parties were involved in, facsimiles of the information for issuance of the L/C for these contracts, letters of credit for these contracts.
 
  -    The [Buyer] alleges that this proves that it had been established as a practice between the parties that the [Seller] would send facsimiles to the [Buyer] notifying the beneficiary's name, bank account, advising bank, etc. before the [Buyer] issued the L/C.
 
(4) The price information on silicomanganese and ferromanganese provided by Ryan's Notes, a metal transaction professional institute.
 
  -    The [Buyer] alleges that this proves that the price of these two products increased substantially between November 2003 and April 2004.
 
(5) The resale contract between the [Buyer]'s affiliate company and the Mexican client, the share structure certificate issued by Possehl (U.S.), and the e-mails the transportation company sent to the [Buyer] [Possehl (HK)].
 
  -    The [Buyer] alleges that this proves the loss caused by the [Buyer]'s breach, the relationship of the companies, and the cost of transportation.

(6) The Power of Attorney issued by the [Buyer] to its attorneys for the present case and the invoice for the attorneys' fee.
 
  -    The [Buyer] alleges that this proves that the [Buyer] paid its attorneys RMB 370,000.

Evidence submitted by the [Seller]

To support its arguments, the [Seller] provided the following evidence:

(1) The facsimiles sent by the [Seller] to the [Buyer] on 7 December 2001 and 20 August 2002 (the [Buyer] submitted these two facsimiles as evidence as well).
 
  -    The [Seller] alleges that this proves that the [Seller]'s notices to the [Buyer] were identical.
 
(2) The contract signed on 6 December 2001 by the parties without providing any time for issuance of the L/C.
 
  -    The [Seller] alleges that this proves that the Contracts at issue were different from the previous ones, because the Contracts at issue had stipulated the time for issuance, and the terms of time for issuing the L/C was significant;
 
(3) The Supply Agreement between the [Seller] and the Long Teng LLC.
 
  -    The [Seller] alleges that this proves that the [Seller] was active in preparing the products.
 
(4) The facsimile of 23 December 2003 sent by the Long Teng LLC to the [Seller] and the forwarded copy of this facsimile from the [Seller] to the Dalian Representative Office of the [Buyer].
 
  -    The [Seller] alleges that the [Seller] did not pay the contract price on time, and that the Long Teng LLC decided to resell the goods to other companies.
 
(5) The facsimile of 2 January 2004 sent by the [Seller] to the [Buyer] notifying of the termination of the Contracts by the [Seller].
 
  -    The [Seller] alleges that this proves that the [Seller] had exercised its right to terminate the Contracts.
 
(6) The Supplementary Agreement to the Power Supply Contract signed by the Long Teng LLC and Longli Power Supply Bureau on 20 December 2003, the demand note sent by the Longli Power Supply Bureau to Longli Long Teng Ferroalloy LLC on 21 December 2003, and the Notice of Adjusting the Price for Electricity in Guizhou Province issued by the Guizhou Price Bureau.
 
  -    The [Seller] alleges that this proves that the electricity price increased, and thus the cost of producing the goods increased.
 
(7) The Notice sent by the Long Teng LLC to its branch companies, notifying them of the sales contract it signed with Liuji Zhongzhai Coking Plant on 10 May 2003 and the purchase contract it signed with Guiyang Hengdong Trading Company Ltd. in January 2004.
 
  -    The [Seller] alleges that this proves that the fuel price increased tremendously.
 
(8) The Manganese Agreement between the Long Teng LLC and the Asia Minerals Ltd. (hereinafter, "AML") on 31 March 2003, the facsimile sent by the Long Teng LLC on 26 December 2003 to AML urging the shipping of the manganese, the response facsimile of AML on 28 December 2003 stating that the [Seller] was not issuing the L/C on time and that the goods were resold, and the facsimile sent on 20 February 2004 by the Long Teng LLC to AML cancelling the shipment of the goods.
 
(9) The ferroalloy price in the magazine Ferroalloy Market Information issued on 30 January 2005.
 
  -    The [Seller] alleges that this proves that the manganese price remained high.

The [Seller]'s response to the evidence submitted by the [Buyer]

In cross-examination, the [Seller]:

(1) Confirmed the authenticity of the first, second, third, and fourth evidence items submitted by the [Buyer];
 
(2) Confirmed the share structure certificate issued by Possehl Inc. (U.S.) under the fifth item of evidence, but was unable to confirm the authenticity of the resale contract and the e-mails;
 
(3) Responded that the eleven facsimiles in the second item of evidence did not prove what the [Buyer] claimed; and
 
(4) Responded that the third item of evidence does not prove that the parties had established transactional practices.

The [Buyer]'s response to the evidence submitted by the [Seller]

In cross-examination, the [Buyer]:

(1) Confirmed the authenticity of the first, second, fifth, and ninth items of evidence, but did not confirm the authenticity of the third, fourth, sixth, seventh, and eighth items of evidence, and alleged that the sixth, seventh, and eighth items evidence were not related to the present case;
 
(2) Concerning the third item of evidence, claimed that even if it is authentic, it could only prove that the Long Teng LLC had prepared the goods. But the price of the goods would not affect the performance by the [Seller];
 
(3) Responded that the facsimile in the fourth item of evidence could not prove that the goods were resold;
 
(4) Responded that the first and second items of evidence could not prove what the [Seller] claimed; and
 
(5) Responded that the fifth item of evidence proved that the [Seller] terminated the Contracts unilaterally.

RULING OF THE COURT OF FIRST INSTANCE

The Court of First Instance ascertained the following facts:

On 17 November 2003, the [Buyer] and the [Seller] concluded three contracts, agreeing that:

   -    The goods under Contract No. 03sz-004 were ferromanganese of 73% with the quantity of 4,000 tons at the price of US $455 per ton FOB Zhanjiang totaling US $1,820,000;
 
   -    The goods under Contract No.03sz-006 were silicomanganese of 65% with the quantity of 1,000 tons at the price of US $485 per ton FOB Zhanjiang totaling US $485,000; and
 
   -    The goods under Contract No.03sz-015 were silicomanganese of 65% with the quantity of 3,000 tons at the price of US $510 per ton FOB Zhanjiang totaling US $530,000.

The Contracts also recorded the address, telephone number, and fax number of the [Seller]. The payment terms under the Contracts were "L/C at sight for 100% of the invoice value, L/C will be opened by the buyers before dec 10 2003." The Contracts also agreed on the shipment date, port of shipment, port of destination, the permission of shipment installation and transshipment, and that the [Seller] shall provide clean on board bill of lading, invoice, and the attributional analysis issued by the factory or quality certificate issued by the China Exit and Entry Inspection and Quarantine Bureau (CIQ). Finally, the Contracts also provided that the parties shall negotiate in solving any disputes arising out of these Contracts, and if in vain, shall submit the disputes to final and binding arbitration under the arbitration rules by the arbitration institutions of the Defendant's.

The parties had signed a contract with L/C as the payment method in December 2001. Before the issuance of the L/C by the [Buyer], the [Seller] sent a facsimile to the [Buyer] notifying the latter of the beneficiary, the address, account number, and the bank of deposit, stating "[t]he above is our company's information for the L/C"; then the [Buyer] issued the L/C. The parties signed another contract with L/C as payment method in August 2002. Before the issuance of the L/C by the [Buyer], the [Seller] sent a facsimile to the [Buyer] notifying the latter of the beneficiary, the address, telephone number, the bank of deposit, account number, and the address of the bank, stating "[p]lease check and accept the relevant information for the L/C."

After the conclusion of the three Contracts at issue (17 November 2003) and until the last date for the issuance of the L/C (10 December 2003), the [Buyer] had not issued any L/C. On 26 December 2003, the [Buyer] sent a facsimile to the [Seller] stating that:

"Our company has notified and requested your company to provide the necessary route information for the issuance of the L/C and it was permitted by your company that the time for the issuance may be postponed to the end of December, and your company would provide the information on the occasion ... Our company requests your company to provide the route information for us to issue the L/C under the Contracts for the silicomanganese and ferromanganese as soon as possible."

On 29 December 2003, the [Seller] sent a facsimile to the [Buyer] stating that:

"Up until today, our company has not received your L/C ... As mentioned in the facsimile you sent on 26 December, our company is making the following assertion: our company has never agreed to the postponement of the L/C ... Your company is well aware of the information for the L/C."

On 2 January 2004, the [Seller] sent another facsimile to the [Buyer] stating that:

"Your company has not issued the L/C within the time limit provided in the Contracts, which results in a significant loss by our company. We decided to terminate the performance of the Contracts and declare them avoided."

The Court of First Instance found that:

Jurisdiction

The present case involves a dispute arising out of sales contracts involved with a firm from the Hong Kong SAR. All of the Contracts included arbitration clauses. However, the [Buyer] brought the current case to the Court of First Instance, and the [Seller] did not object to the Court's jurisdiction within the time limit and submitted a Statement of Defense stating that "[w]e accept the action by the [Buyer] at your Court." Therefore, the [Buyer] and the [Seller] abandoned the arbitration clauses in their Contracts. The [Seller]'s place of business was in the City of Shenzhen, China. According to Article 24 of Civil Procedure Law of the People's Republic of China (hereinafter, "Chinese Civil Procedure Law"), the Court of First Instance had jurisdiction over this case.

Applicable law

The Contracts did not stipulate the law applicable to the dispute. Article 1 of the CISG provides that "[CISG] applies to contracts of sale of goods between parties whose places of business are in different States." Therefore, CISG did not apply to the present case. Both parties agreed on the application of Chinese law. Consequently, Chinese law shall be applicable.

Issuance of the L/C

The agreed method of payment in the Contracts was clear and the [Buyer] was able to issue the L/C according to the content of the Contracts. The Contracts were in writing, stating the address of the [Seller] and that the terms of payment was "L/C at sight for 100% of the invoice value, L/C will be opened by the buyer before dec 10 2003." Besides the time for issuance of the L/C, the L/C type, and the amount, the parties also agreed that shipment installation and transshipment were permitted, and the [Seller] shall provide clean on board bill of lading, invoice, and the attributional analysis issued by the factory or quality certificate issued by the CIQ.

Therefore, the Contracts explicitly agreed on the payment method, i.e., L/C. The [Buyer] did not need more information in detail to issue the L/C. It was able to issue the L/C according to the Contracts. The [Buyer] claimed that the [Seller] did not perform its collateral obligation, i.e., to provide the route information and to make definite the route information naming the beneficiary, the bank of deposit, and the account number. The Court of First Instance found that as it was known to all that it did not need to be confirmed that the beneficiary was the seller in the L/C, and thus the [Seller] did not need to notify the [Buyer]. Moreover, whether the [Seller] notified the [Buyer] of the name, bank of deposit, and account number of the beneficiary did not affect the sharing of the risk, nor did it affect whether the [Buyer] could issue the L/C. Therefore, it was not an obligation for the [Seller] to notify the [Buyer] of the name, bank of deposit, and the account number of the beneficiary.

In addition, the Court of First Instance did not support the [Buyer]'s claim that the [Seller]'s collateral obligation arose out of the practices between the parties. In light of contracts in writing, the rights and obligations of the parties are shown in the terms of the contracts. If the parties had specific requirements for the issuance of the L/C, they would have written them down in the contracts. A transactional practice means that in a certain particular industry or particular transactions or particular type of contracts, certain terms are practices and are not required to be included into the contracts, but the parties to the contracts shall comply with them. These terms shall be necessary, and the lack of such terms would result in the non-performance or the frustration of the purpose of the contracts. Moreover, these terms shall be apparent and self-evident. In the present case, the [Buyer]'s separate notice of the name, bank of deposit, and the account number of the beneficiary is obviously not the practices of the issuance of L/C under a sales contract. On the other hand, the practice of issuance of an L/C is that the seller is the beneficiary.

Even if the parties had two transactions with the [Seller] notifying the [Buyer] of its name, address, and account number by facsimiles before the issuance of the L/C, this did not constitute a prerequisite to the issuance of the L/C. In addition, according to the [Buyer]'s evidence, both of the [Seller]'s two facsimiles of the notices with the "information for issuance of the L/C" included identical name, address, and account information of the beneficiary. The [Buyer] did not prove that there was any different "information for issuance of the L/C", nor did the [Buyer] prove that it had urged the [Seller] to provide such information before the time for issuing the L/C. Therefore, the Court of First Instance did not support the [Buyer]'s reasoning in claiming that according to the established practice, the [Buyer] did not receive any facsimile notifying of the relative information, and thus was not able to issue the L/C. In an international sale of goods, the risk of goods is difficult to control for the seller because the seller can only rely on the L/C. Therefore, in contracts for the sale of goods which have explicit terms governing the payment method, the L/C terms are extremely significant. In the present case, the [Buyer]'s failure to issue the L/C constituted a fundamental breach, and thus the [Seller] was entitled to terminate the Contracts.

To sum up, the [Buyer]'s loss was due to its own failure to issue the L/C under the Contracts. The [Buyer] shall bear this responsibility. Therefore, the Court of First Instance did not support [Buyer]'s claim of requesting the [Seller] to compensate the [Buyer]'s loss. According to Article 94(4) of the Chinese Contract Law and Article 64(1) of the Chinese Civil Procedure Law, the Court of First Instance rejected the [Buyer]'s requests, and found that the [Buyer] shall bear the litigation fee of RMB 30,507.

POSITIONS OF THE PARTIES ON APPEAL

After the above judgment was handed down, the [Buyer] refused to accept the decision as final and appealed to this Appellate Court requesting this Court to

(1)   Revoke the judgment of the first instance;
 
(2)   Terminate the three Contracts between the [Buyer] and [Seller];
 
(3)   Order the [Seller] to bear the responsibility for unilaterally avoiding the Contracts;
 
(4)   Order the [Seller] to compensate the [Buyer]'s loss of the expected profits of US $449,000 and the [Buyer]'s attorneys' fee of US $44,900; and
 
(5)   Order the [Seller] to bear the litigation fees for both instances.

[Buyer]'s position

In support of its appeal, the [Buyer] alleges that

1. The judgment that "[t]he [Buyer] did not need more information in detail to issue the L/C" and "[i]t shall be able to issue the L/C according to the Contracts" was wrong. The [Buyer] was not able to issue any L/C merely with the information in the Contracts between the parties.

With the payment of a L/C, none of the UCP 500, the Chinese Settlement Methods for Domestic Credits (People's Bank of China, 16 July 1997), or the other international usages and domestic laws, regulations, rules, or other normative documents of law has explicit regulations stipulating whether the seller needs to provide information such as the beneficiary, bank of deposit, address, account number, and contact information to the buyer for the L/C. However, just as with other payment methods such as telegraphic transfer and postal remittance, the L/C payment method requires the seller to provide its detailed information of bank of deposit, account name, account number, address, etc. to the buyer, so that the buyer will be able to transfer the money to the seller accurately and on time. In international settlement practice, if the accredited buyer only provides the name and address of the beneficiary, the issuing bank usually will not accept and issue the L/C. Even if the issuing bank accepts, the advising bank usually will require the issuing bank to submit more information when the latter tries to order the former to advise. Generally speaking, the advising bank would have a hard time notifying the beneficiary to collect the L/C and pay for the advising fee when all the information available to the bank is merely the name and address of the beneficiary. Even if the advising is successful, the fee would be expensive. Therefore, under the circumstances when the beneficiary does not have an account in the advising bank, the advising bank would not automatically perform its advising obligation if merely given the name and address of the beneficiary, but would return the documents or require the issuing bank to provide more information of the beneficiary.

In the present case, the [Buyer] and the [Seller] signed the three international sales contracts. The parties agreed on the time for issuance, the type, and the amount of the L/C. However, the parties did not stipulate in the Contracts the name, bank of deposit, account number, and contact information of the beneficiary. Since the [Buyer] needed to know the name, bank of deposit, account number, and contact information of the beneficiary, and the Contracts did not indicate this information, the [Buyer] was not able to issue any L/C, because even if the issuing bank agreed to issue the L/C, the L/C would be returned by the advising bank, unless the beneficiary has an account in the advising bank.

2. It is the [Seller]'s collateral obligation under the Contracts to provide the route information to the [Buyer] for issuance of the L/C. The Court of First Instance was wrong in finding that the [Seller] did not have such a collateral obligation.

A collateral obligation is an obligation that is not explicitly provided by law and the parties do not have express agreements in the contract governing such matter, but a party to a contract shall perform such obligation according to the nature and purpose of the contract and the transactional usage so that the purpose of the contract can be fulfilled and the other party's rights can be protected. For the performance of a collateral obligation, Article 60 of the Chinese Contract Law provides that:

"The parties shall perform their obligations thoroughly in accordance with the terms of the contract. The parties shall abide by the principle of good faith, and perform obligations of notification, assistance, and maintaining confidentiality, etc. according to the nature and objective of the contract."

Obligations such as notification, assistance, and confidentiality are collateral obligations. When telegraphic transfer is the payment method of a sales contract, the seller must notify the buyer its bank of deposit, account name, and account number so that the buyer can transfer the contract price to the seller, which is a perfect example of collateral obligation. Such collateral obligation of the seller is not provided explicitly by law, and even if the contract does not include this obligation, the seller still has to fulfill this obligation for the buyer to make payment.

In the present case, the [Buyer] and the [Seller] signed three sales contracts. The payment method chosen was not telegraphic transfer. However, just as with a telegraphic transfer, the [Seller] would have to wait for the [Buyer] to notify it of the beneficiary, the bank of deposit, address, account number, and contact information to issue the L/C. Even if it could be inferred from the Contracts that the [Seller] may be the beneficiary, it was not possible for the [Buyer] to infer from the Contracts other information such as the bank of deposit, address, account number, and contact information. This obligation was a collateral obligation, because it was not explicitly provided by the law, and was not agreed on in the Contracts, but the [Seller] was obligated to provide such information for the [Buyer] to issue the L/C.

3. It was an established practice between the parties that the [Seller] would notify the [Buyer] of the route information for the L/C. The Court of First Instance was wrong in denying it as a practice.

The [Buyer] submitted evidence to prove that in the previous transactions between the parties, the [Seller] would always notify the [Buyer] of the route information before the [Buyer] applied for the L/C. In the transaction at issue, the [Seller] failed to provide such information. Therefore, the [Buyer] was not able to issue the L/C. Under the circumstances where there was no provision in the law or the Contracts, the [Seller] should notify the [Buyer] of the information to issue the L/C; this was a transactional practice that the parties established. This practice was customary. The parties did not need to include this in the written contract, but the parties were obligated to perform it. This practice was a must. Lacking such performance, the [Buyer] was unable to perform the Contracts, and the purpose of the Contracts was frustrated.

4. The [Buyer] did not fundamentally breach the Contracts when it did not issue the L/C before the date stipulated in the Contracts, and it was impossible for the [Buyer] to frustrate the purpose of the Contracts. The Court of First Instance was wrong in finding the [Buyer] fundamentally breached the Contracts.

In the Contracts that the parties entered into, the [Seller] was to deliver the goods before 10 February 2004 and utilize the L/C to obtain the payment for the goods. An L/C is merely a promise to pay by the bank when the buyer issues the L/C to the seller. The seller is not able to negotiate and get the payment until he arranges the shipment and obtains the bill of lading and packing list. Therefore, even if the [Buyer] had issued the L/C before 10 December 2003, the [Seller] was still not able to obtain the payment. On the other hand, the [Seller] had to wait until after 10 February 2004 to have the bill of lading and packing list to negotiate. The [Buyer] sent a facsimile on 26 December 2003 to the [Seller] urging the [Seller] to provide information for the L/C and stated that it would issue the L/C at the end of December. The delivery day stipulated in the Contracts was 10 February 2004, and if the [Buyer] was able to issue the L/C at the end of December, even before the delivery, the [Seller] would have been able to arrange shipment and negotiate with the L/C. After the [Buyer] sent the facsimile to the [Seller] on 26 December 2003, the [Buyer] would have been able to issue the L/C had the [Seller] provided the relevant information for the L/C. With this prompt issuance, the Contracts could have been performed by the parties without delay, and the purpose of the Contracts would not have been frustrated. Therefore, when the [Seller] unilaterally terminated the Contracts on 2 January 2004, the situation causing the frustration of the purpose of the Contracts did not exist yet. It did not fit the requirements under Article 94(4) of the Chinese Contract Law.

Payment by L/C is a method that is absolutely safe for the seller. In an international sale of goods, if the parties agreed in the contract that the payment method would be L/C, then the risk control would be easy for the seller. The Contracts at issue stipulated that the date of shipment shall be 10 February 2004. As long as the [Seller] received the L/C before the shipment, it would be able to negotiate and obtain the payment after the delivery. If the [Seller] did not receive the L/C before the delivery, it would be entitled to refuse to ship. As long as the goods were still in its own hand, the [Seller] bore no risk. In conclusion, the [Buyer]'s proposal for issuing the L/C on 26 December 2004 did not cause any risk to the [Seller], and thus did not constitute a fundamental breach.

5. The [Seller] failed to fulfill its obligation of giving notice before terminating the Contracts.

Article 94 of the Chinese Contract Law provides that:

"The parties may terminate a contract if ... (3) the other party delayed performance of its main obligations, and failed to perform within a reasonable time after receiving demand for performance."

Even if the late issuance was the [Buyer]'s fault, the [Seller] had to first perform its obligation of giving notice to urge the [Buyer] and fixing a reasonable time for the [Buyer] to issue the L/C. Only when the [Buyer] failed to issue the L/C within this reasonable time period was the [Seller] entitled to terminate the Contracts.

In the present case, the time for issuing the L/C was 10 December 2003. The [Seller] never urged the [Buyer] to issue the L/C from the conclusion of the Contracts on 17 November 2003 to the termination of the Contracts by the [Seller] on 29 December 2003. On the other hand, the [Seller] declared the Contracts avoided on 29 December 2003 only in response to the [Buyer]'s facsimile urging the [Seller] to provide information for the L/C on 26 December 2003. Therefore, the [Buyer] did not perform its obligation of giving notice, i.e., urging the [Buyer] to issue the L/C.

6. The real reason for the [Seller] to use the excuse of the [Buyer]'s delay in issuing the L/C to terminate the Contracts was that the price of the subject matter of the Contracts substantially increased.

The evidence submitted by the [Buyer] demonstrated that from November 2003 to April 2004, the price of ferromanganese increased from US $546 to US $1,600 per ton, and the price of silicomanganese increased from US $0.31 to US $0.70 per pound. The [Seller] confirmed this increase in price in the First Instance. Under such circumstances, the [Seller] used the excuse of the [Buyer]'s late issuance of the L/C to terminate the Contracts unilaterally, so that it could resell these goods at a higher price. The [Seller] violated the principle of good faith and the principle of encouraging transactions.

[Seller]'s response

The [Seller] alleges that:

1. It was unfounded for the [Buyer] to claim that the [Buyer] could not apply for the L/C merely based on the Contracts the parties entered into.

Pursuant to Article 7(a) of the UCP 500 Rules:

"A Credit may be advised to a Beneficiary through another bank (the "Advising Bank") without engagement on the part of the Advising Bank."

The legal status of an advising bank is equal to an issuing bank. If the import and export contract lacks particular provision, the issuing bank is entitled to select an advising bank without the seller's notice. Since the L/C explicitly lists the address of the beneficiary, any notice by either the buyer or the issuing bank would satisfy the obligation of advising, i.e., to advise the L/C to the beneficiary.

The disputed contracts in the present case did not include any agreements that the [Seller] had the right or obligation to select the advising bank. In the performance of the prior contracts between the parties, the [Buyer] was always able to list the bank appointed by the [Seller] as the advising bank. This only demonstrated that the [Buyer] had fulfilled its obligation to assist the performance of the contracts. It showed the [Buyer]'s good faith in performing the contract obligations. In the transactions afterwards, the parties shall respect the practice they established and respect the [Seller]'s right to select the advising bank. However, the [Seller] did not bear any obligation to give notice of the information for its bank of deposit in the later transactions. The [Buyer] could have asked the [Seller] for the information for the L/C, used the same appointed advising bank, or chose a new advising bank even if the [Seller] did not provide such information on its own. It is not true that the [Buyer] was not able to issue the L/C without information from the [Seller].

2. There was no factual or legal basis for the [Buyer] to claim that the route information for the L/C was the [Seller]'s collateral obligation under the Contracts.

A collateral obligation is not stipulated clearly in the contract, but it originated from related legal principles. If the collateral obliation is not performed by a party, the other party is not able to perform its primary obligation under the Contracts. In international sales contracts, there are no laws or usages providing that the seller is obligated to select or notify the buyer of the advising bank. There is no such necessity, either. The seller's omission does not prevent the buyer from issuing the L/C. Notifying the buyer of the advising bank does not satisfy the requirements for constituting a collateral obligation in international sales contracts. Moreover, if the [Buyer] used the [Seller]'s bank of deposit as the advising bank due to its knowledge from the prior transactions, such notice was not necessary.

3. The established practice between the parties claimed by the [Buyer] did not exist.

A transactional practice is the binding rules arising out of the parties' habitual acts based on the nature of an industry or the transactional history of the parties which is not explicitly provided in their contract.

The [Buyer] claimed that in the past two transactions, the [Seller] notified the [Buyer] of the advising bank before the issuance of the L/C, and therefore the parties had established a binding practice. However, that is not sufficient. Individual conduct in an individual transaction does not mean that this conduct is that party's obligation. Without explicit agreement by the parties, the law only makes it an obligation according to the principle of assisting performance when one party is not able to perform its primary obligation under the contract without the other party's action.

In the present case, the [Buyer] did not need the [Seller] to appoint an advising bank or to notify the relevant information to issue an L/C because the [Buyer] could have issued it according to the Contracts. Even if the [Seller] notified such information in their prior transactions, such notices did not constitute an obligation of the [Seller]. Under the Contracts, the [Buyer]'s obligation was to issue the L/C before 10 December 2003. The [Buyer] was required to perform this obligation strictly. Before this deadline, the [Buyer] was obligated to make sure of its status in performing this obligation. Even if the [Buyer] claimed that it could not issue the L/C without knowing the advising bank, it could have inquired of the [Seller] of the advising bank before 10 December 2003. Upon such inquiry, only if the [Seller] failed to provide the information would it be impossible for the [Buyer] to perform the Contracts. The [Seller]'s not notifying of the advising bank did not relieve the [Buyer] from the obligation of issuing the L/C.

4. The [Buyer]'s breach caused the frustration of the Contracts, and the [Seller] was entitled to terminate the Contracts under the law.

The [Buyer] claimed that the purpose of the Contracts at dispute was to exchange goods for payment, and thus the [Buyer]'s delayed issuance of the L/C did not frustrate the purpose of the Contracts. If that were the case, the stipulation of Article 94(4) of the Chinese Contract Law "the other party delayed performance ... thereby frustrating the purpose of the contract" was superfluous, because it would not be applicable under any circumstances.

The purpose of a sales contract is to realize the economic benefits that the parties desire through the conclusion of the contract. If one party delays performance or otherwise breaches the contract and affects the economic benefits, the purpose of the contract will not be satisfied, and the other party is entitled to terminate the contract. The purpose of the Contracts at issue was to realize the economic benefits after the performance of the Contracts with the goods being US $12 per ton. The [Buyer] did not issue the L/C before 10 December 2003. This resulted in the [Seller]'s not being able to make and in fact not making the down payment for the goods it ordered, which caused the Long Teng LLC to refuse to deliver the goods. Under such circumstances, even if the [Buyer] issued the L/C afterwards, the [Seller]'s contractual purpose was already frustrated. Besides functioning as a payment guarantee, a L/C is a performance guarantee as well. The seller does not have to arrange the shipment until he receives the L/C. In international trade, the buyer and seller are in two different countries. If their contract is breached, even if one party is entitled to compensation, the implementation is comparatively difficult. The seller in a sales contract may require the buyer to issue the L/C in advance and leave sufficient time for himself to arrange the shipment between the issuance of the L/C and the delivery, in order to avoid the situation where the buyer fails to issue the L/C but the seller already gave the processing notification, and thus encounters loss.

The parties agreed in the Contracts that the [Buyer] shall issue the L/C before 10 December 2003, and the date of delivery for the [Seller] was 10 February 2004. The [Seller] had two months to arrange the delivery when it was assured that the L/C was issued and its performance of the Contracts was protected. If the [Buyer] did not issue the L/C on time, the [Seller] was entitled not to arrange the shipment to avoid loss arising out of the [Buyer]'s non-performance, i.e., not to make a down payment to Long Teng LLC and prevent the risk of arranging shipment in advance. Besides serving as a payment guarantee and a performance guarantee, a L/C has a more important function, i.e., to finance. In international trade, since the L/C utilizes bank credit, the L/C has become an effective means to finance. The seller in international trade usually uses the L/C issued by the buyer to finance in order to pay for the arrangement of the shipment, and to realize profits without occupying a large amount of money.

The Contracts in dispute involved more than 8,000 tons of rare metals valued at US $3.835 million. The [Seller] planed to secure a loan after it received the L/C issued by the [Buyer] in order to make a down payment that was 70% of the contract price. However, the [Buyer] did not issue any L/C according to the Contracts, and thus the [Seller] was not able to obtain the loan for the down payment. It led to Long Teng LLC's refusal to deliver the goods, which frustrated the [Seller]'s purpose under the Contracts. If the parties were able to perform the Contracts, market risk shall not be a party's excuse to refuse performing the contractual obligations unless there is rebus sic stantibus. However, when a party breaches the contract, especially under the circumstances that if this party does not breach the contract and the other party would have been free of market risk, but the breach causes the party to bear the market risk, this market change may constitute the legal reason for the other party to terminate the contract. According to the principles of contract law, the parties are bound by the performance method and performance time provided in the contract. If one party is at fault, the law shall not punish the other party by requiring the latter to compensate such loss.

In the present case, the [Seller] entered into a contract to purchase the goods from Long Teng LLC. If the [Buyer] had issued the L/C on time, the [Seller] would have been able to make the down payment of 70% of the contract price. Even if the market price increased, the [Seller] would still have been able to obtain the goods at the original price and realize a profit of US $12 per ton as expected. However, the [Buyer] failed to issue the L/C, which resulted in the [Seller]'s failure to accomplish the relevant transactions. Thus, Long Teng LLC refused to deliver the goods. After Long Teng LLC's refusal, even if the [Buyer] had issued the L/C, the [Seller] could not receive the price for the goods under the original contract. If the [Seller] was still obligated to deliver goods according to the price and time under the Contracts, the [Seller] would have been asked to bear the market risk and loss in time to arrange shipment that it would not have had to bear had the [Buyer] not breached the Contracts. This would be obviously unfair to the [Seller]. It was against the law if the [Seller] was required to deliver the good at the time and price in accordance with the original Contracts when the market changed so substantially that the [Seller] was prevented from realizing the expected profits and the [Seller] was not able to arrange shipment due to the lack of goods. Article 94(4) of the Chinese Contract Law entitles the [Seller] to terminate the Contracts, and thus the [Seller] had the right to choose to terminate the Contracts. Article 94(3) and (4) exist independently and they are clearly distinguishable. Article 94(3) is applicable to the situation that the time of performance is insignificant to the non-breaching party while Article 94(4) is applicable to the situation that the time of performance is so significant to the breaching party that it frustrates the purpose of the contract, if it is not performed on time, i.e., it constitutes a fundamental breach.

In the present case, the [Seller] was entitled by Article 94(4) of the Chinese Contract Law to terminate the Contracts due to the [Buyer]'s serious breach. Law in different countries has different standards in determining whether a breach is a fundamental breach. The standard that China adopted is to determine whether the breach has frustrated the purpose of the contract. This standard differs from the one that was adopted by Article 25 of the CISG. The CISG adopted a combined standard. The fundamental breach under the CISG is judged by the substantiality of the breach as well as whether the party in breach can foresee such a result as a reasonable person. On the other hand, the Chinese Contract Law only adopted the one that is determined by whether the substantiality of the breach can frustrate the purpose of the contract. After the conclusion of the contract, the parties shall perform their legal obligations actively in good faith. One party has no obligation to urge the other party to perform the contract. When a market undergoes a considerable change, a party may even hope that the other party fails to perform the contract, so that it may be relieved from performing its own contractual obligations. The [Seller] alleges that this is normal and does not violate the principle of good faith, since it is a person's instinct to go after profits and avoid disadvantages. The key is that if one party performs the contract thoroughly, the other party will not be entitled to terminate the contract.

Therefore, in the present case, the fact that the [Seller] was not obligated to urge the [Buyer] to issue the L/C did not mean that the time for issuing the L/C was not important. Since the [Seller] was not obligated to urge the [Buyer] to issue the L/C, and the law did not require the [Seller] to urge the [Buyer] to issue the L/C, the [Seller] was entitled to terminate the Contracts when the [Buyer] failed to issue the L/C. The fact that the [Seller] did not urge the [Buyer] did not constitute a reason for the [Buyer] not to perform the Contracts, nor did it prevent the [Seller] from exercising its rights to terminate the Contracts.

To sum up, the [Seller] claims that the Court of First Instance correctly identified the facts and applied the law. The [Seller] requests this Appellate Court to dismiss the [Buyer]'s appeal and affirm the original judgment.

FACTS ASCERTAINED BY THE APPELLATE COURT

According to the evidence submitted, the cross-examination, and the statements by the parties, this Appellate Court ascertains the facts that the Court of First Instance identified. In addition, this Appellate Court ascertains the following facts:

On 6 December 2001, the [Buyer] and the [Seller] entered into a purchase contract, agreeing to the payment terms of "L/C at sight." On 7 December 2001, the [Seller] sent a facsimile to the [Buyer] notifying it that the beneficiary was the [Seller] and its address, and that the bank of deposit was China Merchant's Bank Shenzhen Branch Dongmen Sub-Branch. On 28 December 2001, the [Buyer] issued the L/C. On 20 August 2002, the [Seller] and the [Buyer] signed another contract, agreeing to the payment terms of "L/C at sight for 100% of the invoice value, L/C will be opened by the buyers in new york before sep 12." On the same day, the [Seller] sent a facsimile to the [Buyer] notifying the latter that the beneficiary was the [Seller] and its address, and that the bank of deposit was China Merchant's Bank and its address. On 9 September 2002, the [Buyer] issued the L/C.

On 29 December 2003, the [Seller] sent a facsimile to the [Buyer] stating that:

"The three contracts signed by our companies provide that your company must issue the full-value letter of credit before 10 December 2003 ... Since the time for shipment provided in the above mentioned contracts is 10 February (2004), and the port of destination is Zhanjiang Port, the time left to arrange the shipment is very tight. Due to the power shortage in the second half of the year, the factory's Power Supply Department not only raises the price on the electricity, but also requires advance payment of the electricity bills. Other raw materials also require money to purchase before the price goes up further because of the shortage. Since your company has not issued the L/C, our company is not able to make down payment for the processing. Therefore, the above mentioned contracts cannot be performed according to the original price and time of delivery ... Your company's failure to issue the L/C is a breach of the contracts, and shall bear all of the relevant responsibility..."

On 29 December 2003, the [Buyer] sent a facsimile to the [Seller] stating that:

"Our company has received an oral approval by your company permitting us to postpone the issuance of the L/C under the Contracts to the end of this year. Our company is issuing the L/C for your company, and your bank can expect to receive it within the next few days. Please arrange the shipment of the goods according to our contracts upon receipt of the L/C to ensure the performance of the contracts."

On 31 December 2003, the [Buyer] sent another facsimile to the [Seller] stating that:

"Our company has received an oral approval by your company permitting us to postpone the issuance of the L/C under the above mentioned contracts. Our company is preparing for the issuance. Please confirm ASAP whether we are using the prior route information for the L/C."

After receiving the facsimile dated 2 January 2004 sent by the [Seller] that declared the termination of the Contracts, the [Buyer] replied by facsimile on 6 January 2004, requesting the [Seller] to arrange shipment in February as agreed in the Contracts. On 9 January 2004, the [Seller] sent a facsimile to the [Buyer] pointing out that the [Seller]'s termination of the Contracts was because of the [Buyer]'s delayed issuance of the L/C. On 11 January 2004, the [Buyer] sent a facsimile to the [Seller] claiming that the Contracts were still in force and suggested the parties to negotiate with the manufacturer. On 11 February 2004, the [Buyer] sent a facsimile to the [Seller] objecting to the new contractual terms on payment and stating that the original contracts would be considered void only after the parties signed new contracts. On 12 February 2004, the [Seller] sent a facsimile to the [Buyer] stating that:

"The new terms our companies covered in Guiyang for the contracts (Nos. 04sz-002 and 04sz-003) will not be accepted by our company and our factory because your company did not respond to the proposed terms. As for the three contracts your company mentioned, we would like to emphasize again that they are avoided due to your company's failure to issue the L/C."

The international market price reported by Ryan's Notes is shown in the following table:

  Highest average price of
ferromanganese (per ton) in USD
Highest average price of
silicomanganese (per pound) in USD

November 2003 546.429 0.31321
December 2003 608.75 0.34
January 2004 650 0.37
February 2004 976.25 0.79625
March 2004 1600 0.65
April 2004 1600 0.70

On 28 November 2003, the [Seller] and Long Teng LLC entered into a Supply Agreement providing that Long Teng LLC would supplied the [Seller] with 4,000 tons of silicomanganese and 4,000 tons of ferromanganese for the latter to satisfy the Contracts it signed with the [Buyer]. This Supply Agreement stipulates that the goods shall be delivered to the Zhanjiang Port before the shipment date (10 February 2004); the [Seller] was responsible for making a down payment of 70% of the L/C price to Long Teng LLC within five days upon receiving the L/C from the [Buyer] (i.e., before 15 December 2003), and if the down payment cannot be made on time, Long Teng LLC was entitled to refuse delivery; the [Seller] was responsible for the procedures after export, such as bank documents, negotiation of foreign exchange settlement, cancellation after verification, tax return, etc., as well as deducting US $12 per ton as the commission fee after collecting foreign exchange in order to pay Long Teng LLC.

REASONING OF THE APPELLATE COURT

The place of business of the [Buyer] is Hong Kong SAR. The [Buyer] brought the action to the People's Court with the Contracts that it signed with the [Seller] as main evidence, requesting the Court to terminate the Contracts and to order the [Seller] to compensate its loss. This is a sales contract dispute involving the Hong Kong SAR.

Jurisdiction

The [Buyer] and the [Seller] agreed in the Contracts that any disputes arising from the Contracts shall be submitted to final and binding arbitration by the arbitration institutions in the Defendant's country. However, the [Buyer] elected to bring the action to the People's Court in Mainland China, and the [Seller] responded and accepted the jurisdiction of the People's Court. Therefore, this Appellate Court finds that both parties agreed to abandon the original arbitration clause. Article 24 of the Chinese Civil Procedure Law provides that "[a] lawsuit initiated over a contract dispute shall be under the jurisdiction of the People's Court in the place of the defendant's domicile or the place where the contract is performed." Moreover, Article 4 [Translator's note: The original text is "Article 5", however, the Court appears to have intended "Article 4"] of this Appellate Court's Notice on Reaffirmation of Matters Concerning Territorial Jurisdiction and Hierarchical Jurisdiction of the Civil and Commercial Cases of First Instance in the Guangdong Province Involving Foreign, Hong Kong, Macau, or Taiwan Elements (Yue Gao Fa (2004) No. 212) provides that:

"Shenzhen Intermediate People's Court has jurisdiction over all civil and commercial cases of first instance involving foreign, Hong Kong, Macau, or Taiwan elements with the subject matter less than RMB 100 million, except for the cases that are under the jurisdiction of Shenzhen Futian People's Court, Shenzhen Luohu People's Court, Shenzhen Bao'an People's Court, or Shenzhen Longgang People's Court."

Since the Defendant [Seller]'s place of business is in the City of Shenzhen, China, the Court of First Instance had jurisdiction over this dispute.

Applicable law

The place of business of the [Buyer] is Hong Kong SAR, and the Defendant [Seller]'s place of business is in the City of Shenzhen, China. Since the parties did not agree on the applicable law of the Contracts, Chinese law shall be applied to the current case, referring to the provisions of Article 145 of the General Principles and Article 126(1) of the Chinese Contract Law:

"The parties to a contract involving foreign interests may choose the law applicable to settlement of their contractual disputes, except as otherwise stipulated by law. If the parties to a contract involving foreign interests have not made a choice, the law of the country to which the contract is most closely connected shall be applied."

Termination of the Contracts

All of the Contracts entered into by the [Buyer] and the [Seller] in the present case stipulated that the [Buyer] shall issue sight credit according to 100% of the invoice value before 10 December 2003. The Contracts did not provide that the [Seller] had to submit relevant information for issuance of the L/C, i.e., to appoint the beneficiary and the bank of deposit. The [Buyer] failed to issue the L/C according to the Contracts. Under Articles 159 and 161 of the Chinese Contract Law, which provide that the buyer shall make payments in accordance with the agreed amount and time, the [Buyer]'s conduct has constituted a breach of the Contracts. Article 94(2) and (4) provides that, if before termination of the contract, one party, by his conduct, expresses the intention not to perform the contract, or delays the performance of his obligation, or otherwise breaches the contract, to the extent that the purpose of the contract is frustrated, the other party is entitled to terminate the contract.

The first paragraph of Article 96 provides that:

"One party to a contract shall provide a notice to the other party if it advances to rescind the contract. The contract shall be rescinded upon the arrival of the notice at the other party."

The [Buyer] did not issue any L/C (its main obligation) within the time stipulated by the Contracts. Therefore, the [Seller] was entitled to terminate the Contracts according to the above mentioned articles. Consequently, the three Contracts involved in the present case were terminated by the [Seller] when the [Seller] sent the facsimile dated 2 January 2004 to the [Buyer].

Modification of the Contracts

According to the evidence submitted by the parties, the [Buyer] and the [Seller] have negotiated the performance of the Contracts, which can be proved by the facsimiles between the parties. The postponement of the issuing date for the L/C was the parties' modification of the payment terms of the Contracts. Pursuant to Article 77 of the Chinese Contract Law, "[a] contract may be amended if the parties have so agreed." If the parties had agreed to modify the Contracts, the [Buyer] should have confirmed it with the [Seller] through facsimile or other written forms in order for it to be binding. The [Buyer] claims that the parties have agreed through the telephone that the date for issuing the L/C will be postponed to the end of December 2003. The [Buyer]'s allegation lacks evidentiary support. Moreover, the [Seller] denies this allegation. Therefore, this Appellate Court does not support the [Buyer]'s allegation.

Transactional practice

The [Buyer] claims that the parties have entered dozens of sales contracts. The [Buyer] submitted two of them signed on 6 December 2001 and 20 August 2002, respectively. The [Buyer] also submitted the facsimiles indicating the information for issuance of the L/C sent by the [Seller], to prove that the parties had established a transactional practice, i.e., after conclusion of the contracts, the [Seller] would notify the [Buyer] of the relevant information for the L/C. This Appellate Court finds that the mere performance of these two contracts is not sufficient to prove that the parties had established a binding transactional practice.

The evidence of the parties performing the contracts signed on 6 December 2001 and 20 August 2002 shows that the [Seller] would send information for the issuance of the L/C to the [Buyer] through facsimiles on the day of or the day after the conclusion of the contracts. These notices made clear that the beneficiary was the [Seller], and the bank of deposit was the China Merchant's Bank. Thereafter, the [Buyer] would issue the L/C on time. If this Appellate Court finds that a transactional practice has been established, i.e., in the dozens of prior transactions between the parties, the [Buyer] has obtained the information of the beneficiary and the bank of deposit, it is unreasonable to require the [Seller] to give notice to the [Buyer] about the information for the L/C in every transaction in the future. Even if the [Seller] does not act according to the practice to give notice on the day of or the day after the conclusion of the contracts, the [Buyer] should have sent a facsimile or given a written notice through other methods to urge the [Seller] in order for the [Buyer] to issue the L/C on time. From the content of the two facsimiles sent by the [Seller] to the [Buyer] dated 29 December 2003 and 30 December 2003, even if the [Seller] did not provide information for the L/C, the [Buyer] could have issued the L/C with the information that it previously obtained from the [Seller]. Therefore, the [Buyer]'s claim that the [Seller]'s failure resulted in its delayed issuance of the L/C is not supported by sufficient evidence. This Appellate Court does not support this claim.

Fundamental breach

The correspondence between the [Buyer] and the [Seller] demonstrates that after the disputes, the parties tried to negotiate with the manufacturer of the subject matter of the Contracts. Since the main terms could not be agreed on, the negotiation did not lead to a new contract. This proves that the [Buyer] was aware of the fact that the manufacturer of the goods was not the [Seller]. Moreover, the price of the ferromanganese and the silicomanganese in international market was constantly changing during the negotiation. Therefore, the [Buyer]'s failure to issue the L/C caused the [Seller] to be unable to make the down payment of 70% of the value of the L/C to the manufacturer, and thus the manufacturer had to terminate its Supply Agreement with the [Seller]. Under the circumstances that the [Buyer] did not make payments, i.e., issue the L/C, the market price was changing, and the manufacturer could not provide goods with the original price, it was obviously unfair to require the party who did not breach the Contracts (the [Seller]) to give notice allowing the [Buyer] to issue the L/C within a fixed period of time, and at the same time, the [Seller] had to deliver the goods to the [Buyer] at the original agreed price, because the [Seller] would have to bear the risk of the market that changed substantially during the negotiation. If the [Seller] was required to perform the Contracts, it would have encountered a significant loss, which frustrated the purpose of the Contracts. Therefore, the [Buyer]'s conduct has constituted a fundamental breach of the Contracts, and the [Seller] was entitled to terminate the Contracts.

RULING OF THE APPELLATE COURT

In conclusion, the Court of First Instance clearly ascertained the facts and correctly applied the laws. In accordance with Articles 153(1) and 158 of the Chinese Civil Procedure Law, this Appellate Court:

(1)   Affirms the original judgment; and
 
(2)   Dismisses the [Buyer]'s appeal.

The [Buyer] shall pay the litigation fee of the second instance totaling RMB 30,507.

This is the final judgment.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Appellant (the original Plaintiff) Possehl (HK) Limited, is referred to as [Buyer] and Appellee (the original Defendant) China Metals & Minerals Import & Export (Shenzhen) Corporation of the People's Republic of China, is referred to as [Seller]. 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].

** Jing Li, LL.M., University of Texas at Austin, School of Law; Master of Law, Sun Yat-Sen University School of Law, China; LL.B., Sun Yat-Sen University School of Law, China.

*** Peigi Zhao, LL.M., New York University School of Law (2010).

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated May 7, 2010
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography