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CISG CASE PRESENTATION

China 28 February 2005 CIETAC Arbitration proceeding (Wool case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050228c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20050228 (28 February 2005)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2005/06

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Australia (claimant)

BUYER'S COUNTRY: Hong Kong (respondent)

GOODS INVOLVED: Wool


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 26 ; 63 ; 64 ; 74 ; 75 [Also cited: Article 76 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): agency issues];

26A1 [Effective declaration of avoidance: notice to the other party required];

63A [Notice fixing addition final period for buyer's performance];

64A1 ; 64A21 ; 64C [Seller's right to avoid contract (grounds for avoidance): fundamental breach of contract; Buyer does not pay within additional period set by seller under art. 63; Timeliness of notice of avoidance];

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

75A1 [Damages established by substitute transaction (substitute transaction after avoidance): resale by aggrieved seller]

Descriptors: Scope of Convention ; Agency issues ; Avoidance ; Nachfrist ; Damages ; Cover transactions

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

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

Wool case (28 February 2005)

Translation [*] by Du li [**]

Edited by William Zheng [***]

-   Particulars of the proceeding
-   Facts and position of the parties
-   Opinion of the Arbitration Tribunal
-   Award

PARTICULARS OF THE PROCEEDING

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

   -    The arbitration clause in Contract No. 29813 for the sale of Australian wool signed by Claimant [Seller], C___ d'Importation de Laines S.A., and [Respondent], ___ Resources Limited, on 19 February 2003; and
 
   -    The written arbitration application submitted by the [Seller] on 12 November 2003.

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

On 24 November 2003, the Secretariat of the Arbitration Commission sent the Arbitration Information, Arbitration Rules and Arbitrator Book to both parties, and sent the Arbitration Application and its attachment submitted by the Claimant [Seller] to the [Respondent].

[Seller] appointed Mr. Li ___ as arbitrator. [Respondent] appointed Mr. Kang ___ as arbitrator. The Chairman of the Arbitration Commission appointed Mr. Cheng ___ as the Presiding Arbitrator according to Article 24 of the Arbitration Rules. The above three arbitrators formed the Arbitration Tribunal on 31 December 2003 to hear this case. On the same day, the Secretariat of Arbitration Commission sent both parties the Notice of Court Formation.

On 18 March 2004, the Arbitration Tribunal opened the first court session in Beijing. Both parties sent arbitration agents to attend. The parties made oral statements, answered the Arbitration Tribunal's questions and cross-examined the evidence at the court session. After the court session, both parties submitted supplementary comments, statements and evidence. After the exchange of these materials to the other party by the Arbitration Commission, the parties again submitted supplementary comments and materials.

With the approval of the Arbitration Commission, the Secretariat decided to open the court session in Beijing again on 15 October 2004, then on 30 September 2004, the Secretary-General of the Arbitration Commission authorized the delay of the date of the award to 30 December 2004 in response to the request of the Arbitration Tribunal.

On 15 October 2004, the Arbitration Tribunal opened the second court session in Beijing. Both parties sent arbitration agents to attend. The parties made oral statements, answered the Tribunal's questions, debated and cross-examined the evidence at the court session. With the consent of both parties, the Arbitration Tribunal decided that:

   -    There would not be another court session after this second one;
 
   -    However, the two parties could submit written comments on the cross-examined evidence as well as the closing statements; and
 
   -    If either party has supplementary evidence, it should be cross-examined by the other party in written form.

After the second court session, the [Respondent] submitted supplementary comments answering and examining the evidence and the [Seller] submitted closing statements and supplementary evidence. The Secretariat of the Arbitration Commission exchanged this supplementary material between the parties. The [Respondent] then submitted written comments in response to the [Seller]'s closing statements and supplementary evidence.

To allow the members of the Arbitration Tribunal the time needed to discuss the case together, on 29 December 2004, the Secretary-General of the Arbitration Commission authorized a further delay of the date of the award to 30 March 2005 in response to the request of the Arbitration Tribunal.

This case is now completed. Based on the written materials and the facts confirmed at the court session, the Arbitration Tribunal handed down the arbitration award.

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

FACTS AND POSITION OF THE PARTIES

[Seller]'s position

In its arbitration application, [Seller] filed the following allegations.

1. On 19 February 2003, [Seller] and [Respondent] signed Contract No. 29813, under which:

   -    Goods. [Respondent] purchased Australian model T55FNF original wool 25,000 kilograms;
   -    Price: 7.52 US dollars per kilogram; the total contract amount is US $188,000.00;
   -    Delivery terms: C.I.F. Shanghai;
   -    Time of shipment: March 2003;
   -    Terms of Payment: Letter of credit at sight.

2. [Seller] had prepared the goods in accordance with the contract, and had urged [Respondent] to issue a letter of credit many times. However, [Respondent] continued to reject fulfillment of this contract obligation. In reply to [Seller]'s e-mail that was sent to [Respondent] on 31 March 2003, in which [Seller] urged [Respondent] to issue a letter of credit as soon as possible so as to enable [Seller] to comply with the time of shipment, [Respondent] said that all the applications for issuing a letter of credit had been submitted to its general headquarters in Hong Kong and were in the waiting array. [Respondent] asked [Seller] to wait for more time. After waiting nearly half a month, [Seller] sent an e-mail again to urge [Respondent] on 14 April. In answer to this e-mail, [Respondent] expressed its apology for the delay in issuing the letter of credit, and explained that at present the funds of its general headquarters were mainly centralized in chemical fabric orders, and that because of the influence of the war in Iraq, the [Respondent]'s general headquarters was faced with some difficulties in cash flow and the date on which these difficulties would be solved was uncertain. In [Respondent]'s reply, it requested again that one more period of time needs to be given so that it could solve the letter of credit problem. Despite what [Seller] has done to urge [Respondent], the [Respondent] has never issued the letter of credit.

3. In view of the fact that [Respondent] rejected the issuance of a letter of credit, offering all kinds of excuses, after many communications [Seller] had to accept the fact that [Respondent] had dismissed the contract unilaterally. Because the price of wool was dropping, [Seller] had to resell the goods for a lower price. The goods under Contract No. 29813 were resold via Contract No. 29971 on 24 May 2003. The unit price was US $5.25 per kilogram.

4. On 24 July 2003, Beijing ___ Law Firm, which was authorized by [Seller], sent notifications via fax and e-mail to [Respondent], notifying that the default of [Respondent] had led to a severe and enduring economic loss to [Seller], and that [Respondent] must compensate [Seller] for the loss caused by [Respondent]'s default. On 6 August, Xiao ___Law Firm, the representative of [Respondent], sent a fax to [Seller]'s attorney, stating that [Respondent] denies the conclusion of Contract No. 29813. In reply to this fax, [Seller]'s attorney restated the fact of the conclusion of Contract No. 29813 and attached a copy of Contract No. 29813. Subsequently, in a fax which was transmitted by Pu ___ Law Firm on 20 August, stating that the Xiao ___ Law Firm had been replaced by the Pu ___ Law Office, [Respondent] continued to deny the conclusion of Contract No. 29813, and alleged that [Respondent] has never given anyone the authority to seal Contract No. 29813 with the company's stamp and never empowered anyone to sign the contract with [Seller].

Thereupon, [Seller] submitted its arbitration application to the Arbitration Commission, requesting hold that [Respondent] be required to bear the following loss:

      (1) The loss caused by the price difference between the present contract and the resale contract

      Under the circumstance of [Respondent]'s rejection of issuance of the letter of credit, [Seller] resold the goods under Contract No. 29813 to another domestic client. The price in the resale contract was only US $5.25 per kilometer, the term of payment was letter of credit with an expiration date 90 days after the date of the B/L, and the price would be US $5.20 per kilometer if it is transferred by sight L/C. The total sum was $130,000.00. [Seller] thereby suffered a loss of $58,000.00 caused by the price difference between the contract with [Respondent] and the resale contract.

      (2) The loss of storage cost

      The extra storage cost caused by [Respondent]'s default is 0.15 Australian dollars per day, per pack.

      -    The shipment deadline for the original contract was 31 March 2003;
      -    A total of 147 days elapsed from 1 April to 25 August 2003, i.e., the actual shipment date in the resale contract.

As a result, the loss of storage cost is 4,211.55 Australian dollars which is equal to US $2,737.51.

      (3) The loss of interest

            1. [Seller]'s loss of interest caused by [Respondent]'s default is calculated at the interest rate of 4.5%. There are in total 229 days from 15 April 2003, the day the [Seller] was to receive the payment for the goods according to the original contract, to 23 November 2003, the day when [Seller] can receive the payment for goods according to the resale contract. The interest is therefore US $5,307.78 after the award.

            2. The interest on the loss caused by Resale Contract No. 29813 should be calculated from 23 November 2003, the day when the loss caused by the price difference occurred, to the actual payment date.

            3. Because [Respondent] did not perform Contract No. 29813, the loss of interest caused by the extra storage cost should be calculated from 23 November 2003 to actual payment date after the award.

      (4) Other expenditures for the case

      [Seller] requests that [Respondent] also bear the arbitration fee, which was paid by [Seller] in advance, and compensate [Seller]'s attorneys' fee caused by this case and other case expenditures

In summary, [Seller] requests that [Respondent] compensate [Seller] for its default in the amount of US $66,045.29 in total, except for the amount of payment referred to in (3) 2 and 3 and in (4), which should be paid according to the actually cost.

[Respondent]'s position

The written defense and supplement defense that [Respondent] submitted before the first court session, mainly alleges the following.

1. [Respondent] had never concluded Contract No. 29813 with [Seller] for the purchase of wool, and had never authorized anyone to sign the contract on behalf of [Respondent]. After receiving the fax transmitted by the attorney who was authorized by [Seller] in August 2003, [Respondent] had the Xiao ___Law Firm and Pu ___Law Firm state twice that [Respondent] had never authorized anyone to sign the contract. However, [Seller] went its own way, and sent an arbitration application to the Arbitration Commission. Considering the fact that [Respondent] did not sign Contract No. 29813 with [Seller], the arbitration clause in the contract is invalid. Therefore, [Respondent] requests the Arbitration Commission to dismiss [Seller]'s Arbitration Application and to protect [Respondent]'s legal property.

2. Till now, [Seller] has not submitted the original contract document, but a copy of the so-called Contract No. 29813. The stamp of the [Respondent] that is sealed on the so-called Contract No. 29813 is not the same as the stamp that [Respondent] holds. This indicates that the stamp may be fabricated. Furthermore, the signer is neither [Respondent]'s legal representative nor its senior administrator, nor an ordinary employee of [Respondent]. And the signing style is not in accord with the valid and legal style used by [Respondent]. [Respondent] has never authorized anyone to sign any contract with [Seller] involving the so-called Contract No. 29813 for the sale of wool.

3. According to the two e-mails submitted by [Seller], which were dated, respectively, 27 March 2003 and 31 March 2003, a man named C___ sent an e-mail to Mr. T___ S___ on 27 March 2003.

   -    In the e-mail, C___ said that he had not yet received the letter of credit, and requested Mr. T___ S___ to issue it as soon as possible. In reply, Mr. T___ S___ sent one of the above e-mails (via T****S***518@icqmail.com) to C___ (e-mail: C***@cil.trading.com.au on 31 March 2003, stating that he would notify C___ as soon as the letter of credit was issued. Also, [Respondent] notes that, in the e-mail, T___ S___ used the name of Shanghai Office H___ T___ Resources Limited.
 
   -    And another e-mail, which was dated at 14 April 2003, submitted by [Seller], manifested that a man named J___ L___ sent an e-mail to Terry in order to remind him that the shipping time was at the end of March. On the same day, T___ S___ sent an e-mail (via T****S***518@icqmail.com) to J___ L___ (e-mail: J****L@cil-trading.com.au) in which he apologized for not being able to issue the letter of credit in time. Again, T___ S___ replied to the e-mail using the name of Shanghai Office H___ T___ Resources Limited.

With regard to the above evidence, [Respondent] avers that it has no office or subsidiary in Shanghai, and that T___ S___ had never been employed as an employee or authorized as a business representative. Nothing mentioned in these e-mails between T___ S___, C___ and J___ L___, is relevant to [Respondent] but pertains to their personal affairs.

4. According to the statement and evidence in the Arbitration Application, [Seller] communicated with T___ S___ just via his e-mail: T****S***518@icqmail.com all of the time. Although the fax, telephone and address which are registered for [Respondent] in Hong Kong, are explicitly listed on the copy of Contract No. 29813, [Seller] has never sent an e-mail, written notice or fax to [Respondent] at any time from the beginning of the so-called contract to the appearance of the problem of the letter of credit to the occurrence of reselling. As a result, [Respondent] did not know of the existence of the contract and the problems that arose from it until [Respondent] received a written notice from the attorney authorized by [Seller] on 24 July 2003. A point that needs to be emphasized is that, in all of [Respondent]'s business transactions, all of the personnel in [Respondent]'s company use the same e-mail address: mail@h***t***.com, not T****S***518@icqmail.com. Accordingly, the purchase between [Seller] and T___ S___ has nothing to do with [Respondent].

5. The relationship between [Respondent] and T___ S___ is an ordinary business relationship. T___ S___ and [Respondent] are business friends, and had some business transactions. Information indicates that T___ S___ has been involved in the Australian wool trade for several years. [Respondent] successively bought some wool from T___ S___ in September 2002 and November 2002. The counterpart that signed a contract with [Respondent] was Shanghai __ Trade Ltd which is handled by T___ S___. According to the contract clause, [Respondent] issued the letter of credit to [Seller] directly. That is to say, T___ S___ played a role of middleman who bought goods from [Seller] then resold them to [Respondent].

6. A seller is responsible for verification of the identity of its counterpart when it signs a contract. As well, the so-called Contract No. 29813 also mentions that in its clause 10.1. Therefore, the [Seller] should bear the undesired result caused by its negligence, and not claim remediation from [Respondent] which is a totally unknowing third party. Similarly, [Respondent] is also a victim in this case, and has authorized its attorney to condemn the falsifier's actions.

7. [Respondent] has operated a business in the field of textile materials for more than twenty years and has a good reputation at home and abroad. [Respondent]'s turnover of textile material is over 200 million US dollars every year. Since 1986, the domestic investment in accumulative total has exceeded RMB 400 million, and the accumulative contribution in Mainland China and Hong Kong has exceeded RMB 15 million.

   -    Corporation Chairman Mr. Shi has the position of Vice Chairman of the All-China Federation of Industry and Commerce. He is also a member of the National Committee of CPPCC and a Justice of the Peace of Hong Kong.
 
   -    Corporation Executive Director Mr. Shi, who is in charge of the business of textile material, is a Trustee member of the China Overseas Friendship Association and a member of the Beijing Municipal Committee of the Political Consultative Conference. It is almost totally impossible for him to break a contract at the cost of loss in both company property and personal reputation.

Based on the above statements and the Contract Law of Hong Kong, Article 32 ("Where the parties enter into a contract by a memorandum of contract, the contract is formed when it is signed or sealed by the parties"), Contract No. 29813 was not formed; it is not existent. The so-called Contract No. 29813 is an agreement between [Seller] and others and is irrelevant to [Respondent]. Therefore, the arbitration clause in that contract does not have any legal constraint on [Respondent]. Accordingly, [Respondent] requests the Arbitration Commission to dismiss the [Seller]'s Arbitration Application.

After the first and second court sessions, both [Seller] and [Respondent] submitted supplementary comments, statements and evidence again and once more. The Arbitration Tribunal had those supplementary materials exchanged between the two parties through the Arbitration Committee Secretary Bureau. The parties examined the evidence and made a few rebuttals.

Supplementary comments and statements of the [Seller]

The supplementary comments and main statements of [Seller] are as follows.

1. The dispute in this case focuses on whether [Respondent] should fulfill Contract No. 29813 which was signed by T___ S___ on behalf of [Respondent]. [Seller] alleges that T___ S___ has [Respondent]'s factual authorization and, if this cannot be agreed upon, then that T___ S___'s action should be considered as an Apparent Agency, and [Respondent] should perform Contract No. 29813. On the condition of [Respondent]'s denial of fulfilling the contract, the [Respondent] has to compensate [Seller] for the loss caused by [Respondent]'s breach of contract.

2. Contract No. 29813, which [Seller] concluded with T___ S___ on behalf of [Respondent], is definitely a valid contract between [Seller] and [Respondent].

      (1) As a famous supplier in the chemical fibre industry, [Respondent] determined to develop its wool business on a large scale, and it engaged T___ S___ (Xiaoguang Song) from China ___ Import and Export Company. Everyone in that industry believes that he is an employee of [Respondent] and represents the [Respondent] in the purchasing of wool. Thus, T___ S___ acted as [Respondent]'s factual and apparent agent to do deals.

T___ S___ has [Respondent]'s commission sign. [Respondent]'s name and ID are printed on his business card. He always signs all contracts by the identity of "for and representing [Respondent]", and most of his contracts contains his seal and signature which can be verified. All letters of credit for contracts issued by T___ S___ are granted in the name of [Respondent] without any restrictions or remarks. Goods are delivered according to items of contract and [Respondent]'s order, and they have remarks of [Respondent]. [Seller] showed the duplicate of T___ S___'s business card in the court session.

      (2) Contract No. 29813 is just one of numerous contracts signed by T___ S___ representing [Respondent]. [Seller] provided the court with the preceding five copies of duly fulfilled contracts signed by [Seller] and [Respondent].

According to the evidence provided by Australian and Zelanian wool merchants who have trade relationships with [Respondent], T___ S___ signs many contracts for [Respondent]. Moreover, what [Seller] knows is just a tiny part of all deals in a long period in which T___ S___ has represented [Respondent]. Just seeing from what [Seller] knows, during the period between August and November 2002, the total number of contracts that T___ S___ presented for [Respondent] to sign is up to twenty-five with the sum of the account approaching US $4.56 million in all, about 37.75 million Yuan converted to RMB.

      (3) There are always some people in the wool industry who visit [Respondent]'s Office in Hong Kong. These visits are usually arranged by T___ S___. In the visiting processes, [Respondent]'s senior executive staff explicitly or implicitly indicated that T___ S___ was a member of their organization. In least one time of visit, T___ S___ attended and in fact joined in the entire meeting.

Detailed visit schedules were:

1) On 4 October 2002, [Seller]'s employees I___ M___ and J___ L___ met [Respondent]'s Executive Director Mr. Shi ___ in Hong Kong;

2) On 8 November 2002, [Seller]'s CEO F___ F___ arrived in Hong Kong and met [Respondent]'s Executive Director Mr. Shi ___, Administrative Director Mr. Shi and Chairman of the Board Mr. Shi;

3) 25 January 2003, CEO of J___ M___ Company, Mr. P___ C___ met [Respondent]'s Miss Yu and Miss C___ C___;

4) On 8 March 2003, Director of L___ D___ Company, Mr. J___ C___ and its employee W___ D___ arrived in Hong Kong and met [Respondent]'s Executive Director Mr. Shi; T___ S___ was on the spot.

      (4) In all related periods, [Seller] depended on the fact that [Respondent] stated that T___ S___ was a members of its organization to negotiate with and to sign contracts. Therefore, [Seller] had no reason to doubt that T___ S___ had any other relationships with [Respondent] and, actually, [Seller] never thought about or suspect this point. [Seller] once made an appointment with the [Respondent]. So if the [Respondent] wished to clarify the factual relationship between [Respondent] and T___ S___, [Respondent] was completely capable of doing this and had many opportunities to do this. However, [Respondent] did not do this. To the contrary, [Respondent] explicitly or implicitly admitted that it had a relationship with T___ S___. As a result, [Respondent] is estopped from denying this relationship.

      (5) Article 15.6 of the General Trading Terms of Buying Wool and Wool Top provides that:

"Both parties should assure that the one who represents them to sign contracts is the formal authorized representative, whose signature has powerful restriction to the party. Neither party is permitted to negate the validity of the contract or refuse to carry out the contract for the reason that the one who signed the contract is not empowered."

To sum up, considering the fact that T___ S___ has represented [Respondent], subscribing to numerous contracts and [Respondent] receives contract-related wool suppliers many times and discusses their trade relationship, this is sufficient to rebut the allegation that T___ S___ was not empowered. Even if [Respondent] did not authorize T___ S___ in writing, the fact that [Respondent] allowed T___ S___ to represent [Respondent] in the signing of contracts would cause [Seller] to believe that T___ S___ has been explicitly authorized by [Respondent]. Therefore, there is no doubt that T___ S___'s acts of signing have formed an Apparent Agency.

3. [Respondent]'s deeds have confirmed that T___ S___ is its representative. Therefore, T___ S___'s acts are binding on the [Respondent].

      (1) Application of Law. Contract No. 29813 stipulates that the United Nations Convention on Contracts for the International Sale of Goods (hereafter, "CISG") is the law applicable to the contract. However, the CISG mainly refers to the regulations of fulfillment of contract, and has no concrete regulations on the formation of agent relationships.

Where there are no explicit regulations for determination of applicable law, it has to be determined based on the principle of the closest relationship to the contract. When considering the closest relationship principle, matters generally taken into account include the party's location, where the contract is signed, and where the contract is carried out. [Seller] maintains that Australia is the place with which Contract No. 29813 has the closest relationship, so the contract should be governed by Australian law.

In fact, it does not matter which country's law is applied to resolve [Seller]'s allegation that T___ S___ had [Respondent]'s actual agency authority or that T___ S___'s act of signing created an Apparent Agency. The reason is that the countries involved have basically the same regulations on Agency and Apparent Agency.

      (2) [Seller] argues that even if the Arbitration Tribunal does not consider T___ S___ as [Respondent]'s employee, [Respondent] has held out to the public that T___ S___ was its representative in the wool trade according to the [Respondent]'s own words and deeds and [Respondent] has failed to perform the obligation of reasonable care. Meanwhile, [Seller] maintains that no phenomenon can reveal that [Seller] knew or was supposed to know that T___ S___ was not the [Respondent]'s representative.

   -    "BLACK's Law Dictionary" (Version 6), "Australian Commerce Law", and "Contract law" (Author: Treitel, Version 9, 1995) all discuss Apparent Agency Authority, as does
 
   -    The law of the Hong Kong Special Administrative Region; and
 
   -    Article 49 of the Contract Law of the PRC regulates the same with that of the Common Law.

According to the authorities, cases, and laws, the fundamental element to form an Apparent Agency can be summed up to the following circumstances:

            1. The principal has words or deeds to reveal that the person has authority. Australian and Hong Kong law contain specific regulations on this, but Australian law considers the principal's permission that acts being executed in his name be regarded as the principal's act. Actually, this kind of permission is called "inaction". Legally, one's act includes action and inaction. Inaction is also a kind of act. Thus, if the principal lets the actor proceed in the name of the principal himself, a third party can believe the actor has valid authority because of the trust. However, Mainland China has no regulations on this condition. So, it is indicated that the fact of forming an Apparent Agency has a wider range in Mainland China than in Australia and Hong Kong: Once a third party has reason to believe the actor has agent authority, the act of the agent is regarded as the act of the principal.

            2. The third party should believe the actor has agent authority, that is to say, the third party must act in good faith. If the third party is under the situation of having known that the actor has no agent authority and still makes contracts with the actor, this cannot form an Apparent Agency.

            3. The third party makes contracts with the actor on the basis of such trust.

      (3) The trade record of [Seller] and [Respondent] shows that T___ S___ has the [Respondent]'s agent authority to sign contracts.

[Seller] calls upon the Arbitration Tribunal to note that this is not an independent case carried through by strangers to make a single transaction. Both sides have had several deals with one another and a reasonable person can conclude through these deals that T___ S___ has agent authority to sign contracts on behalf of [Respondent].

During the course of the trial, [Seller] has provided copies of other contracts that [Seller] has entered into with [Respondent]. These include: Contract No. 29529 on 8 August 2002; Contracts No. 29583, No. 29854, No. 29591 on 20 September 2002; and Contract No. 29690 on 1 November 2002.

These five contracts are all signed by [Seller] and T___ S___ on behalf of [Respondent], and [Respondent] has fully performed these contracts. [Respondent] issued the letters of credit based on the clauses of these contracts. [Respondent] never limited or restricted the relationship between itself and T___ S___ in any period. T___ S___ has always used contracts and other documents which have [Respondent]'s name and style.

      (4) [Respondent] cannot deny its authorization to T___ S___ because of the fact that [Seller] visited [Respondent] in Hong Kong.

T___ S___ called the [Respondent]'s office in Hong Kong as the headquarters in the correspondence with [Seller] or in other ways and T___ S___ arranged for [Seller] and other wool suppliers to visit the [Respondent]'s headquarters. In October and November of 2002, employees of [Seller] and the CEO of its parent company in France were invited to visit [Respondent]'s office in Hong Kong. At that time, [Seller] and [Respondent] had signed five contracts, four of which had been fulfilled.

As a term of inner regulation of [Seller]'s company, it has to record its staff's agenda of external visits in written records that are kept by the company. These records were made before Contract No. 29813 was signed, when no issues were in dispute between [Seller] and [Respondent]. These are records that were created according to company regulations and completed at or after visits.

According to the trip records of two of [Seller] employees, Mrs. J___ L___ and Mr. I___ M___ (since dismissed), they visited Hong Kong in October 2002, and the CEO of [Seller]'s parent company visited [Respondent] in November 2002. It is obvious that [Respondent] had explicitly shown that T___ S___ had [Respondent]'s authorization to engage in the wool trade. [Respondent] definitely cannot deny its authorization to T___ S___.

      (5) Australian and Zelanian wool suppliers confirmed in writing that T___ S___ had the right to represent the [Respondent] in signing contracts.

The [Seller] provided following testimony from:

   -    Mr. P___ C___, CEO of J___ M___ Company, a Zelanian wool supplier;
   -    Mr. J___ C___, administrator, and staff Mr. W___ D___ of L___ D___ Australia Pty Ltd Co., an important Australian wool supplier;
   -    Mr. R___ F___ of T___ Company and Mr. S___ N___ of L___ Company.

Their testimony provided a powerful refutation of [Respondent]'s denial of its relationship with T___ S___.

      (6) [Seller] requests the Arbitration Tribunal to also take notice of following facts:

      -    T___ S___ has always revealed that he has authorization of the [Respondent], and all the evidence has demonstrated this. T___ S___ has always used business cards on which is printed [Respondent]'s name and identity, which has been confirmed by Mr. Corstorphan's testimony;
 
      -    T___ S___ also used stationery with [Respondent]'s title to communicate with the public. [Respondent] has explicitly revealed that T___ S___ is its representative and has the right to act on behalf of [Respondent].
 
      -    [Respondent]'s spokesman Mr. Shi said that he had known T___ S___ for over ten years but never saw his business card. [Seller] alleges that this is quite hard to believe and Mr. Corstorphan's testmony has verified that he had seen T___ S___'s business card.

In general, in the process of analyzing the formation of the Apparent Agency and the Authorized Agent, it is adequately concluded that T___ S___ represented [Respondent] in signing Contract No. 29813 and had factual authorization. Even though such factual agent authority is denied, T___ S___'s deeds were enough to form the Apparent Agency and [Respondent] should be restricted by the contract.

4. The reasonableness of the calculation of [Seller]'s loss

      (1) [Seller] had prepared the goods under Contract No. 29813

      The "Goods Purchase Certification" provided by [Seller] documents the fact that that it has bought a certain quantity of wool from different wool suppliers; the part which is underlined is the controversial subject of Contract No. 29813. As [Respondent] breached the contract, the goods that [Seller] prepared under the contract had to be placed continuously in storage, which resulted in the increase of the cost of the storage.

The time when [Seller] signed the resale contract is May 2003, and the shipment date of the original Contract No. 29813 was the end of March 2003. [Respondent]'s unwillingness to perform the contract forced [Seller] to resell the goods under Contract No. 29813. However, the date of the shipment, August 2003, requested by the purchaser in the resale contract is a few months later than that of the contract signed, which made the period of the goods storage several months longer. Even so, the final loss is still lower than if there had been no resale of the goods. According to the CISG, when a buyer fails to perform the contract, the seller has the responsibility to mitigate the loss. The steps [Seller] took to resell the goods show that [Seller] has fully performed its obligation to mitigate the loss.

The disaccord of the package numbers is due to the [Seller]'s miscalculation. The actual number of packages of wool for Contract No. 19813 is 190, instead of 191 in the application. Therefore, the loss of storage claimed by [Seller] should be altered to US $2,723.18. In the application, [Seller] claimed that the total amount of liquidated damages that [Respondent] should bear is US $66,030.96.

      (2) [Respondent]'s challenge of this calculation is legally indefensible; thus this challenge cannot exempt [Respondent] from liability for damages

[Respondent] attempts to question [Seller]'s loss of resale to negate the facts of [Seller]'s loss, so as to exempt [Respondent] from liability for damages. However, [Respondent]'s attempts are legally groundless and lawfully unsupported.

The applicable law for the present contract is the CISG. With regard to the calculation of damages, there are two methods for the calculation according to Articles 74 to 76 of the CISG:

I. If the party who suffers harm had purchased or resold the goods ordered under the original contract, the damages are the loss and related expense caused by the price difference between the purchase contract (or resale contract) and the original contract. In this case, the damages that [Seller] claimed were calculated in this manner.

II. If, however, the party who suffers harm did not purchase or resell the goods ordered under the original contract, the damages are the price difference between current price (total) of the goods when the contract is avoided and the total price fixed by the contract.

If the [Respondent] denies the calculation method proposed by [Seller], that is, that damages should be calculated according to Article 75 of the CISG, then, [Respondent] should be responsible for the damages that [Seller] suffered in accordance with Article 76. [Respondent] cannot be exempted from liability for damages suffered.

According to the price trend chart of wool in Australia from July 2002 to July 2003 that [Seller] submitted in May 2003: When [Seller] terminated Contract No. 29813 due to the fact that [Respondent] declined to perform this contract, the current price of wool at that time in Australia was much lower than the price fixed by Contract No. 29813. Even if the [Seller] had not resold the goods under that Contract, the [Seller] still can claim against [Respondent] for the liability for damages according to the price difference between current price and the price fixed by contract.

As [Seller] has confirmed that the goods under the present contract had been resold and has provided relevant evidence, [Seller] asks the Arbitration Tribunal to hand down its award according to the loss calculation measures under the situation of resale.

5. With regard to the commission allegation that [Respondent] raised, it is [Seller]'s position that it deviates from the truth, and is not relevant to the case.

Specific reasons of the [Seller] are as follows:

      (1) [Seller] did not pay any commission and [Respondent] could not show any valid evidence to establish that the [Seller] paid a commission to T___ S___. Without lawful evidence, the allegation of commission fails to demonstrate the facts.

      (2) If it is a personal trade between T___ S___and the [Seller], it could not be signed by T___ S___ under the name of [Respondent]. Those other wool suppliers would not have signed so many contracts with T___ S___ personally if they knew clearly that T___ S___ signed contracts in the name of [Respondent] illegally. With the fact that T___ S___ signed many contracts on behalf of [Respondent], [Respondent]'s allegation cannot be established.

      (3) Even if the so-called "commission" claimed by [Respondent] existed, the "commission" is merely a kind of gratitude fee, and totally irrelevant to whether the [Seller] knew T___ S___ had obtained authorization from [Respondent].

      (4) [Respondent] claimed that the question of commission is the key to decide whether [Respondent] would fulfill the obligations of the contract T___ S___ signed in the name of [Respondent]. This argument is legally groundless and factually unsubstantiated. Given that the commission actually existed, it could not prove that T___ S___ traded for his own benefit.

6. The contracts signed between [Respondent] and ___ Shanghai fail to support [Respondent]'s position.

To support [Respondent]'s position that there was no agency relationship between [Respondent] and T___ S___, [Respondent] provided to the Arbitration Tribunal contracts between the [Respondent] and ___ Trade Co., Ltd. Shanghai, so as to argue that the L/C [Respondent] issued to [Seller] was applied for according to the contracts between [Respondent] and ___ Shanghai, and that [Respondent] did not authorize T___ S___ to purchase wool for the [Respondent].

It is [Seller]'s position that the contracts between [Respondent] and ___ Shanghai provided by [Respondent] did not influence the formation of the Apparent Agency of T___ S___ which is claimed by [Seller]. Under an Apparent Agency, regardless of the relations between the actor and the principal, as long as the actor's acts caused the other party to believe that the actor is the agent of the principal, the principal should be liable for the acts performed by the agent. Therefore, even if [Respondent] had signed contracts with ___ Shanghai, it cannot deny the formation of the Apparent Agency. [Respondent] should be responsible for acts performed by T___ S___. The contracts between [Respondent] and ___ Shanghai are not relevant to the present case.

Furthermore, [Respondent]'s statements on the contracts with ___ Shanghai are inconsistent. [Respondent] cannot give a reasonable explanation for the signing and performance of such contracts. [Seller] holds that the contracts between [Respondent] and ___ Shanghai should be identified as unauthentic, and that the Arbitration Tribunal should deny the effectiveness of evidence of these contracts.

   -    First, the process of contract signing is inconsistent;
 
   -    Second, the contracts themselves are substantially defective. T___ S___ is neither a shareholder of ___ Shanghai, nor a manager or legal representative, thus could not sign any contract on behalf of ___ Shanghai.
 
   -    In addition, ___ Shanghai itself is a company with just a registered capital of RMB 1,000,000 Yuan, and has no relation to international transactions. With its capital and credit, ___ could not have been involved in frequent and extensive wool transactions, and no wool supplier or buyer would trade with companies like ___. As a reasonable, prudent, and rational wool merchandiser, [Respondent] could not make trades with ___.

7. [Respondent] changed its statements of the facts continually and could never justify its own stand.

On 20 August 2003, [Seller]'s attorney received a letter from the Pu ___ Law Firm, declaring that it has taken over the case from the Xiao __ Law Firm. This letter said, "Our client told us that it had never authorized anybody to seal its stamp on Contract No. 29813 … our client never authorized anyone to sign the contract." With this instruction to its attorney, [Respondent] admitted that the stamp on the contract in the present contract is actually from the [Respondent], yet the [Respondent] denied that it knew anything about the party who signed the contract.

On 17 January 2004, [Respondent] submitted its written defense to [Seller]'s arbitration claims via its third attorney, and declared in the defense that:

"[Seller] and [Respondent] had never signed Contract No. 29813 for the sale of wool, and (the [Respondent]) had never authorized anyone to seal or sign the contract."

Up to then, the defense had not raised any question on the authenticity of the seal on the contract. All the facts mentioned above had clearly shown that till the moment that this defense was sent, [Respondent] still claimed that its stamp was sealed illegally on the contract, and [Respondent] still held that it did not know who actually signed the contract.

Just before the court session, [Respondent] sent its supplementary written defense via its attorney. In the first paragraph of this defense, [Respondent] claimed that the seal of the buyer was not the [Respondent]'s seal. [Seller] here calls the Arbitration Tribunal's attention to the fact that, at this stage, [Respondent]'s statement has become considerably different from its previous claims.

[Respondent] presented its company stamp to the Arbitration Tribunal in the process of the court trial. Any reasonable person can see that there are obvious differences between the two stamps. [Seller] calls to the Arbitration Tribunal's attention, the fact that given the obvious differences between these two stamps, why did the [Respondent] never question this part, from the beginning to the end? - even when the [Respondent] read the original set of Contract No. 29813 documents and from then till [Respondent] submitted the supplementary written defense. [Seller] holds that the [Respondent]'s view, which claims that the seal on the contract is not in accordance with the seal in [Respondent]'s hand, varies greatly from all claims that [Respondent] always held, even till the moment that [Respondent] submitted its supplementary written defense.

It is [Seller]'s position that it has provided convincing evidence according to relevant laws, to support the following facts:

      (1) In the relevant time periods, T___ S___ was always authorized by [Respondent] and had the right to sign contracts on behalf of [Respondent].

      (2) If it is nevertheless held that T___ S___ was not actually authorized by [Respondent], the [Respondent]'s acts have objectively provided sufficient evidence that T___ S___ has been authorized by [Respondent], and depending on the implication of being authorized, [Seller] is entitled to sign the contract (with T___ S___) - and [Seller] actually signed the contract depending on the implication aforesaid. T___ S___, with actual or apparent authority, signed the contract on behalf of [Respondent].

      (3) In the contract signed by T___ S___, as actual or apparent agent of [Respondent], there are explicit provisions (Article 10.1 of this contract and Article 15.6 of the General Trading Terms of Buying Wool and Wool Top), that do not require [Seller] to examine the authorization of the signatory. [Respondent] should not allege that its signatory on the contract is unauthorized and for that reason claim that the contract is invalid or unenforceable. This is a legally valid contract between [Seller] and [Respondent], and there is no dispute over the fact that all items in this contract exist for both parties.

[Respondent]'s supplementary comments and statement

1. Contract No. 29813 that was entered into between [Seller] and T___ S___ is not relevant to [Respondent].

      (1) After investigation by [Respondent], it was discovered that the entire process by which T___ S___ and [Seller]'s employee J___ L___ arranged the purchase of the T55FNF wool was via e-mail.

      -    On 19 February 2003, J___ L___ (__ Liu, Ms. Liu's e-mail: J****L@cil-trading.com.au) sent T___ S___ (__ Song, his e-mail: T****S***518@1cqmail.com) the price for every wool type, including T55, T56, T54, T54P.
 
      -    At 12:05 on 19 February 2003, T___ S___ sent a counter-offer for T55 T56 T54, advancing that the payment would be by letter of credit at sight, attaching a list of goods, CIF Shanghai, 1% commission.
 
      -    19 February 2003, J___ L___ bid T___ S___ T55: US $7.52 per kilogram, T65: US $7.37 per kilogram, T54: US $7.62 per kilogram, payment by letter of credit at sight, CIF Shanghai, 1% commission.
 
      -    At 13:27 on 19 February 2003, T___ S___ confirmed the counter-offer: 25 tons of T55: US $7.25 per kilogram, 25 tons of T54: US $7.62 per kilogram.
 
      -    9 February 2003, J___ L___ informed T___ S___ via e-mail that T54 had been sold out, only 25 tons of T55 left which could be delivered in the end of March, and asked him whether this could be acceptable.
 
      -    At 15:12 on 19 February 2003, T___ S___ replied to J___ L___ that "25 tons of T55FNF clinch a deal by the end of March."
 
      -    At 23:24 on 18 February 2003 (Australia time) (Beijing time at 15:24 on 19 February), J___ L___ sent an e-mail to T___ S___, informing that she will fax the contract to T___ S___ as soon as possible.

The facts and evidence summarized above reveal that the whole process of the transaction was just between [Seller]'s staff J___ L___ and T___ S___, in which the name of the [Respondent] is not mentioned from the beginning to the end. What should be paid more special attention to is that [Seller]'s employee J___ L___ confirmed and promised that a 1% commission would be given to T___ S___.

What happened after 19 February 2003 also indicates that Contract No. 29813 was signed by [Seller] and T___ S___ individually. The e-mail reciprocation, whether between C___ and T___ S___, or J___ L___ and T___ S___, was just their own affair, and was not related to [Respondent].

      (2) [Seller]'s employee J___ L___ stated in the first court session on 18 March 2004 that she never had a commission agreement with T___ S___. However, the e-mail and fax between J___ L___ as well as her superior I___ M___ and T___ S___, proved that J___ L___ had provided dishonest evidence. Its purpose is to hide the fact that [Seller], from the beginning to the end, was aware of the party with whom it made a deal, which was T___ S___, who did not represent [Respondent], and was not with [Respondent]. This also explains why [Seller] did not send any written notification to [Respondent] in five months, i.e., since the date that Contract No. 29813 was signed till the problems occurred.

2. The copies of Contracts No. 29583, No. 29584, No. 29591, No. 29560, which were shown by [Seller] at the first court hearing on 18 March 2004, were signed by [Seller] and T___ S___ who fraudulently used the name of [Respondent]. And it was the same with the copy of Contract No. 29529 (namely 02HXX038A) which was offered later by [Seller].

      (1) Regarding the Contracts No. 29583, No. 29584, No. 2951 and No. 29560 shown by [Seller]

      Copies of these four contracts were introduced as evidence by [Seller] at the court session on 18 March 2004. After extensive investigation, [Respondent] acquired a sales confirmation fax which was sent to T___ S___ by I___ M___, the manager of the wool department of [Seller]. Its content, amount, type, price, specifications, are the same as the Contracts No. 29583 and No. 29584 provided in the court session by [Seller]. As there was no mention of the name of [Respondent] in the entire content of the fax, it can make a clear illumination that it was [Seller] who was making the deal with T___ S___ individually, and who promised T___ S___ a 1% commission. The confirming fax sent to the number: 02 - 88192484, which is a number from Sydney, Australia, not the number of [Respondent]'s office in Hong Kong; nor is it the number of the [Respondent]'s office in Shanghai (as [Seller] stated), [Respondent], in fact, does not have an office in Shanghai).

Indeed, in September and November 2002, [Respondent] signed four separate contracts for the sale of wool with the Shanghai ___ Company. However, [Respondent] did not know that T___ S___ had forged [Respondent]'s chop and pretended as its employee to sign the four contracts with the same number (Contracts No. 29583, No. 29584, No. 29591, and No. 29690) and the same contents with [Seller] on the same day that [Respondent] and the Shanghai ___ Company signed the four contracts. [Respondent] was not aware of the circumstance until [Seller] showed the four forged contracts in the court session. [Respondent] has no relation with the four contracts which were signed with the [Respondent]'s name as [Seller] claimed.

      (2) On Contract No. 29529 (namely, 02HXX038A)

      Contract No. 29529 (namely 02HXX038A), as [Seller] stated, is the earliest of six contracts that were signed by [Seller] and T___ S___ who fraudulently used the name of [Respondent]. At that time, he had not imitated [Respondent]'s stamp.

The copy of Contract No. 29529 offered by [Seller] illustrates that the date on which the contract was concluded was 8 August 2002. As it was after 4 October 2002 when [Seller]'s senior management personnel and staff visited [Respondent]'s office in Hong Kong, [Respondent] did not know how [Seller] could know and find T___ S___.

The signing of an international trade contract is a very serious matter. [Seller] should have a minimum acquaintance with T___ S___, including what company he represented, whether he was authorized by the company's signature, the credit and economic ability of the company that he represented, and then decide whether it should sign the sales contract or not. This is basic commercial knowledge that [Seller] should have.

According to the material offered by [Seller], on 7 August 2002, a man called K___ W___ L___ on behalf of ___ Agencies Pty Ltd Sydney Office faxed Ms. J___, a member of the staff of [Seller]'s company, to advise that the deal was done, the deal price was $5.25 per kilogram, the [Seller] paid commission c1, the Mark is 02HXXO38A and the buyer was [Respondent]. However, [Respondent] did not know K___ W___ L___ at all, much less to know the company he represented. It is K___ W___ L___ who fraudulently used the name of [Respondent]. This can be well demonstrated that the company, represented by K___ W___ L___, was the buyer and that it made the deal with [Seller]. Also, at that time, Ms. J___ did not know T___ S___ but K___ W___ L___.

There is a contract having the same number 02HXX038A between [Seller] and Shanghai __ Trade Company represented by T___ S__. This contract shared the same main provisions except the price item. Under the contract, [Respondent] issued a letter of credit to [Seller] for US $5.30 per kilogram. If [Respondent] is the buyer in terms of the Contract No. 29529 which [Seller] offered, then why is the letter of credit that [Respondent] issued to [Seller] not US $5.25 per kilogram but $5.30 per kilogram CIF Shanghai? From this, it can be seen that [Respondent] issued the letter of credit to [Seller] based on the 02HXX038A contract which dealt with the Shanghai ___ Trade Company. And there is no direct trade relationship between [Seller] and [Respondent].

3. T___ S___'s deeds do not constitute an Apparent Agency.

      (1) China is a civil law country. In China's legislation circle, it is widely accepted that the formation of an Apparent Agency can only be under the following circumstances:

            a. The actor's acts convince a third party that he has the power of agency; and
            b. The third party does not know and should not know that the agent does not have agency authority.

Moreover, the Apparent Agency system exists to protect the interests of contracting parties and to maintain the security of transactions. In the light of the principle of good faith, the principal should bear civil liability for an act of signing a contract performed by an actor without the power of agency, or acting beyond the scope of his power of agency or after his power of agency has expired, if the principal fails to fulfill its obligation of care.

[Respondent] was not at fault in leading [Seller] to believe that T___ S___ was [Respondent]'s agent. The so-called proof materials provided by [Seller] demonstrate that Contract No. 29529 was signed on 8 August 2002. [Seller] used the standard contract format to sign the first wool contract (02HXX038A) with T___ S___. T___ S___, who was not on the staff of [Respondent]'s company nor authorized by [Respondent], imitated the name and address of [Respondent] to conclude the contract with [Seller]. [Seller] made the deal with T___ S___ on 8 August and 20 September 2002, both dates were before 10 October 2002 when the staff of [Seller] met [Respondent] in Hong Kong. That is to say, [Respondent]'s actions should not influence [Seller] to decide whether or not to make its deal with T___ S___. Moreover, all the contracts and negotiations between the [Seller] and T___ S___ were never informed, in any form, to [Respondent].

      (2) T___ S___'s business cards or stationery having the [Respondent]'s name, address, cannot be considered as evidence of an Apparent Agency.

      Nowadays, in a society of advanced information technology, business cards can be printed freely, and it is very easy to copy [Respondent]'s stationery. Also significant is the fact that T___ S___ did not have certification files obtained from [Respondent], for example, [Respondent]'s letter of introduction, blank contract covered with contract seal or company official stamp. And [Respondent] did not send any notice or announcement about entrusting the power of agency to T___ S___, nor did [Respondent] have any relative or employer-employee relationship with T___ S___ either. The claim of [Seller] which alleged an Apparent Agency cannot be established. [Seller]'s evidence is unilateral, some of it oral or based on hearsay; [Seller]'s evidence does not have sufficient substantive content. The conclusion that T___ S___ is on [Respondent]'s staff cannot be established just based on the fact that T___ S___ contacted and arranged the employees of [Seller] to visit [Respondent]'s office in Hong Kong.

      (3) The oral testimony that [Seller] provided consists of one-sided statements. This testimony lacks supporting evidence.

      [Respondent] is willing to make friends with every good supplier; therefore, it would give a warm reception to every customer that T___ S___ asked [Respondent] to receive. But [Respondent] abides by commercial moral principles, and would never trade directly with suppliers behind T___ S___'s back. Judging from the visiting records provided by [Respondent], the visitors never discussed any concrete business. It is clear that [Respondent] only performed the duties of a host and received guests as a courtesy.

[Seller]'s employees I___ M___ and J___ L___ testified that they visited [Respondent] on 4 October 2002 in Hong Kong; F___ F___, the CEO of [Seller] testified that he visited [Respondent] in early November of 2002 in Hong Kong, and that is true. However, all the three of these individuals are advanced administrative managers or employees of [Seller]; they represented [Seller]'s interest, and their oral testimony cannot be put into use as evidence.

Referring to the testimony of P___ C___ working in J___ M___ Company of New Zealand, It is true that he visited [Respondent] in January 2002 in Hong Kong. However, [Respondent] did not sign any contract with that company. If T___ S___ fraudulently used the name of the [Respondent] to sign two contracts with that company, that is T___ S___'s own business and he cannot represent [Respondent].

Referring to the testimony of J___ C___ and William Davidson working in the L___ D___ Company of Australia, it is true that they also visited [Respondent]'s office in Hong Kong. However, their company had the similar action as this case with [Respondent], that is, having a conflict of interest, so the justice of their testimony is doubtful , and should not be accepted.

Referring to the testimony of R___ R___ working in T___ Company and S___ N___ working in L___ Company, [Respondent] does not know these two companies at all and did not have any trade relationship with them. They had never been to [Respondent]'s company, nor met [Respondent]. [Respondent] was completely unaware of the fact that T___ S___ had signed a contract with T___ using the name of [Respondent] on 18 September 2002.

      (4) [Respondent] and T___ S___ had a mere trade business relationship, the obligation fulfilled between [Respondent] and T___ S___ was carried out according to the contract or agreement between both sides.

[Seller] knew that T___ S___ bought goods from it and resold them to [Respondent] all the time; and contracted with him about paying a commission. Now, [Seller] claims that T___ S___'s act is an Apparent Agency. That is putting the cart before the horse. [Seller] promised to give T___ S___ a 1% commission from the beginning to the end during the trade process of Contract No. 29813; it can be readily inferred early in the process of trade that [Seller] knew that the one with whom [Seller] traded was T___ S___, not [Respondent]. However, the goods under Contract No. 29813 could not be resold to [Respondent] or to other buyers; as a result, this dispute occurred.

4. The evidence relating to Contract No. 29813 that [Seller] provided is not convincing, much of the content of [Seller]'s evidence has nothing to do with Contract No. 29813.

The so-called Contract No. 29813 was signed by [Seller] and T___ S___ on 19 February 2003. According to the "Commodities Purchasing Certification", provided by [Seller], the [Seller] lists 190 packages. The purchasing time of the earliest 15 packages is 4 November 2002, which means that [Seller] began purchasing the commodities 97 days before signing Contract No. 29813. At the same time, there were 102 packages of commodities already prepared before 19 February 2003. These could not be commodities purchased for Contract No. 29813.

[Seller] counted the loss of storage charge according to 191 packages, which means the commodities for the so-called Contract No. 29813 should be 191 packages. But the marine B/L of the Resale Contract No. 29971 mentioned by [Seller] refers to 190 packages. This shows that they were two entirely different groups of commodities. Meanwhile, according to the materials provided by [Seller], it signed Contract No. 27791 on 24 May 2003, the commodities were delayed to transport out until the end of August 2003, and [Seller] received payment in late November. It is hard to believe that this trade had a direct relationship with the so-called Contract No. 29813.

In addition, the monthly-paid storage receipt provided by [Seller] for the period from 1 August 2003 to 31 August 2003 which was issued to [Seller] by ___(Australian Wool H____) Storage Company on 4 September 2003 does not show the commodities storage record, which is about the 191 or 190 packages in the so-called Contract No. 29813 or Resale Contract No. 29971. However, according to [Seller]'s marine B/L for Contract No. 29971, 190 packages of commodities were transported on 25 August 2003, which means this pack of commodities should have been in the ___ storehouse before 25 August 2003.

5. [Respondent] chose T___ S___ Shanghai ___ to trade with based on its own commercial judgment, [Respondent] will undertake the risk and the responsibility of this trade. But that has nothing to do with this case.

Shanghai ___, as a supplier of [Respondent], has international trade as its major field. It is not important whether it has wool import and export authority or quotas. However, when [Respondent] resells the goods to its clients, what it cares most about is whether its buyers have import and export authorities or quotas as well as whether Shanghai ___ can fulfill the contracts it signs with [Respondent] within the specified time and with the specified quality and quantity.

6. [Seller] is using the letters between the attorneys of both sides to play word games.

[Respondent] has explicitly stated to [Seller] that it had not concluded the disputed contract in this case. However, [Seller] made use of the expression of the letters between the attorneys of both sides to illustrate that [Respondent] had signed the contract and entrusted T___ S___ as an agent to conclude wool selling contracts with the public. It is [Respondent]'s position that it is a trade business relationship that exists between T___ S___ and [Respondent]. [Respondent] has never authorized or employed or entrusted T___ S___ as the representative of its company to conclude any contract with [Seller].

In general, [Respondent] considers that [Seller] should request the one that indeed signed the contract to bear the responsibility for breach of the contract, but not [Respondent].

OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

According to Article 13 of the "China-Australia-New Zealand General Terms and Conditions of Sale of Raw Wool and Wool" referred to in the second part of the contract:

"13.1 Both parties agree, that the 'United Nations Convention on Contracts for the International Sale of Goods' ('Vienna Convention' for short) will apply the contract."

"13.2 Questions on the meaning or interpretation of any provisions of this contract, or on a problem that the contract does not stipulate, will be governed by the 'Vienna Convention'."

Therefore the Arbitration Tribunal holds that the CISG will apply as the substantive law.

As provided in the Article 12 of the standard contract, if a dispute occurs:

"It should be submitted to the China International Economic and Trade and Arbitration Commission (CIETAC for short), arbitration in Beijing and the CIETAC Arbitration Rules shall apply."

Accordingly, the Arbitration Tribunal holds that the procedural law should be decided by the law of the place of the arbitration, namely, the law of PRC; and that to recognize the qualification and agent acts of the parties concerned, the governing law should be established in light of the principle of the closest connection.

2. The validity of the contract as between [Seller] and [Respondent]

[Seller] claims that:

   -    Contract No. 29813, the contract at hand, which T___ S___ concluded with [Seller] on behalf of [Respondent], is a valid contract.
   -    [Respondent] engaged T___ S___ from China ___ Import and Export Company.
   -    People in the wool industry generally think that T___ S___ is employed by [Respondent] and purchases wool on behalf of [Respondent].
   -    T___ S___ acted as a factual and apparent agent of [Respondent] to do transacrions.

[Respondent] argues that:

   -    The present contract is signed by [Seller] and T___ S___ who has no relation to [Respondent]. It never engaged T___ S___ as an employee or entrusted him as a business representative.
   -    [Respondent] has never authorized anyone to conclude a contract for the sale of wool with [Seller] including Contract No. 29813.
   -    T___ S___'s acts do not form an Apparent Agency, legally.

The Arbitration Tribunal holds that in order to determine whether there was a valid contract between [Seller] and [Respondent], the following questions must be answered:

   -    How was the contract concluded?
   -    How was the contract to be performed?
   -    Has [Respondent] has ever engaged T___ S___ as its employee or entrusted him as its business representative?
   -    Have T___ S___'s acts formed an Apparent Agency of [Respondent]?

      (1) How was the contract concluded?

      Evaluating the evidence provided by [Seller] and [Respondent], the Arbitration Tribunal finds that J___ L___ of [Seller]'s company concluded the present contract with T___ S___ by using e-mail boxes (J****l@cil-trading.com.au and T****S***518@icqmail.com) to send e-mails to each other and to finish the trade process.

      1.  At 12:05 p.m. on 19 February 2003, T___ S___ sent an offer to J___ L___, listing the quantities of different types of wool of T55, T56, T54, L/C A/S for delivery C1 CIF Shanghai at the end of March or early April, subject to final confirmation, signed by T___ S___.
 
      2.  On that same day, J___ L___ sent a counter-offer to T___ S___:

"We can bid 25 tons T55 OML the same type, priced at $7.52 per kilogram and 25 tons T56 OML the same type, priced at $7.37 per kilogram (the biggest POBM of these two batches is 65%). For T54 FNF OML, there is no limit on the middle interruption, priced at $7.62 per kilogram. All the prices given above are L/C at sight C1 Shanghai. Subject to goods unsold out."
 

      3.  At 1:27 p.m., the same day, T___ S___ sent an offer again to J___ L___:

"We can now confirm the following deal: 25 tons T55 FNF OML the same type, priced at $7.52 per kilogram; 25 tons T54 FNF no breaks in the middle, priced at $7.62 per kilogram. All the details will be listed on the coming confirm fax", signed by "T___ S___ H___ T___ Resources Ltd."
 

      4.  On the same day, J___ L___ sent a counter-offer to T___ S___ stating:

"Good afternoon, T___, thanks for your reply. Concerning the early unsold offer, my boss I___ M___ has sold the 25 tons, so we are unable to reserve the T54FNF now. The T55 FNF, sailing date at the end of March, is available to be reserved right now. Would you mind if you could tell me whether you will order this batch? If you will respond as soon as possible, we would be grateful."
 

      5.  At 3:12 p.m. that day, T___ S___ sent an e-mail to J___ L___ for acceptance:

"Madam J___ L___,

OK! Buy 25 tons of T55 FNF, sailing date at the end of March. Thanks, T___ S___."
 

      6.  On the same day, [Seller] prepared the standard contract of the company as the present contract, faxed it to T___ S___ who signed it and faxed it back to [Seller].

The Arbitration Tribunal noted that of the e-mails provided by [Seller] which were sent by T___ S___, only one e-mail was signed by T___ S___ H___ T___ Resources Ltd. However, in the same content, the e-mail shown by [Respondent], is signed only by T___ S___ not H___ T___ Resources Ltd added. The Arbitration Tribunal holds that according to the above inspected facts:

   -    The purchasing in this case was established by the process of successively offer, counter-offer, offer again, counter-offer again and acceptance between T___ S___ and Ms. J___ L___ of [Seller]'s company;
 
   -    During this process, no evidence indicates that Ms. J___ L___ of [Seller]'s company sent any letters or faxes to the address or fax of [Respondent]'s company in Hong Kong.
 
   -    Also, no proof shows that [Respondent] or T___ S___ sent any letters or faxes to [Seller] from [Respondent]'s company in Hong Kong.

Therefore, from the analysis of the offer and acceptance correspondence, there is not enough evidence to indicate that T___ S___ was representing [Respondent] in concluding this transaction.

As for the contract text, it is clearly written that the purchaser is [Respondent] and sealed with [Respondent]'s stamp. However, [Respondent] argues that the stamp is not that of [Respondent]'s company, and has shown its company stamp in the court session. That stamp is not the same as the stamp sealed on the contract. Also, [Respondent] insisted that it never authorized T___ S___ to represent it to sign the contract. To this point, [Seller] did not provide the evidence to prove that T___ S___ had been authorized by [Respondent] to conclude the contract.

      (2) How was the contract to be performed?

      The contract stipulates that the time for shipment of goods is the end of March 2003 and the payment is L/C at sight.

The evidence provided by [Seller] indicates that after the contract was concluded, on 27 March 2003, [Seller] sent an e-mail to urge T___ S___ to issue a letter of credit (the e-mail was sent to T****S***518@icqmail.com ).

   -    As a reply to [Seller], in T___ S___'s e-mail response, he stated that, "all the applications of issuing a letter of credit had been submitted to the general headquarter in Hong Kong and have been in the waiting array", and that he hoped that [Seller] could wait for more time.
 
   -    Later, on 14 April 2003, [Seller] sent a follow-up e-mail to T___ S___ to again urge that the letter of credit be issued. In answering the e-mail, T___ S___ stated that the letter of credit had been in the waiting array and when this problem would be solved was unsure. "I do apologize for the delay in issuing the letter of credit. Please give me one more period of time to solve the letter of credit problem."

On 24 May 2003, [Seller] alleged that it concluded a contract with another party for resale of the goods under the original contract. The resale unit price was $5.25, and the delivery time was August 2003.

On 24 July 2003, [Seller] had sent to [Respondent] an Attorney's Letter about Contract No. 29813 by fax and mail, stating that the two parties had concluded their wool purchasing contract on 19 February 2003, and that although [Seller] communicated its requirements many times, [Respondent] still has not fulfilled the contract. The Attorney's Letter stated that the breach of the contract resulted in a loss, and that [Respondent] should compensate [Seller] the sum of US $63,490 in fourteen days.

On 6 August 2003, [Respondent] authorized its attorney to reply, stating that [Respondent] and [Seller] had not negotiated Contract No. 29813 at all, [Respondent] denied to bear the responsibility.

The Arbitration Tribunal also notes that Article 14 of Part 2 of this contract, the "Information" item reads as follows:

"14.1 Under this contract, the information that one party sends to the other must be: (a) in written form; (b) sent to the address of the recipient that is explicitly written on the contract, or to the changed address informed by written notice; and (c) must be sent to the address by postage prepaid registered mail, hand delivery, telegram or fax."

"14.2 Information to be sent in fax has the same legal effect as the original documents."

The Arbitration Tribunal holds that after this contract was concluded on 19 February 2003, till [Seller] sent Attorney's Letter to [Respondent] on 24 July 2003:

   -    During this period, [Seller] contacted with T___ S___ through T___ S___'s e-mail box to discuss the fulfillment of the contract including issuing the letter of credit;
 
   -    With regard to T___ S___'s statement in his e-mail that all the letters of credit had been submitted to the general headquarters in Hong Kong, the Arbitration Tribunal cannot recognize whether this is true or not under the circumstance that no other evidence of this is available.
 
   -    Although the inscriber in the two e-mails that T___ S___ sent in reply to [Seller]'s urging on L/C, T___ S___ added Shanghai Office H___ T___ Resources Ltd. behind his name, no evidence, however, shows that [Respondent] set up an office in Shanghai. So, based only on the inscriber or T___ S___'s replies representing [Respondent], it cannot be considered that [Respondent] did set up an office in Shanghai, or T___S___ was representing the [Respondent].

The [Respondent] is explicitly referred to in this contract as the buyer, and the specific address, office telephone number and fax number of [Respondent] are provided. In accordance with the provisions of the Article 14 of the second part of the contract:

   -    When the contract was concluded, the text of the contract should have been posted or faxed to [Respondent]'s office in Hong Kong. However, [Seller] does not provide evidence of having done that;
 
   -    In the fulfillment of the contract, especially the urging of issuing the L/C and the later resale of the goods under the contract, [Seller] should have sent the information in "written form" to "the address of the recipients that is explicitly written on the contract" by "postage prepaid registered mail, hand delivery, telegram or fax" under the contract, but [Seller] does not provide the evidence of that either.

Only when [Seller] had signed the resale contract with another to resell the goods under the original contract, did [Seller] send the Attorney's Letter in "written form" to "[Respondent]'s office in Hong Kong that was explicitly written on the contract" by "postage prepaid registered mail, hand delivery, telegram or fax" in accordance with the contract. This illustrates that [Seller] knows the contract at hand has the provision of the "written form" of the "information" concerning the fulfillment of the contract.

We have a situation in which, in the fulfillment of this contract, [Seller] alleges that it has considered that T___ S___ represented [Respondent] as the buyer, but [Respondent] denied it had signed the contract with [Seller] immediately after [Seller]'s Attorney's Letter was received.

The Arbitration Tribunal believes that, at time the contract was concluded, or during the fulfillment of the contract -- especially at the time of the urging of the issuance of the L/C and the reselling the goods under the contract -- if [Seller] had sent the letters or faxes to the address of the fax number of the buyer explicitly written in the contract, namely, [Respondent]'s office in Hong Kong, even if [Respondent] did not reply, it could have been seen as a retroactive recognition by [Respondent] that T___ S___ acted on behalf of [Respondent] when signing the present contract.

3. Whether [Respondent] has ever engaged T___ S___ as its employee or entrusted him as its business representative?

In the light of the materials that both parties submitted in the court session, T___ S___ was once an employee of China ___ Import and Export Company, then he left that company. However, has [Respondent] has ever engaged T___ S___ as its employee or entrusted him as its business representative after that?

   -    [Seller] claims that [Respondent] did engage T___ S___ from the China ___ Import and Export Company as its employee;
   -    [Respondent] acknowledged that it had a business relationship with T___ S___, and that, as a buyer, [Respondent] had concluded several contracts for the sale of wool with ___ Trade Co., Ltd. Shanghai represented by T___ S___, as the seller. [Respondent] provided those contracts to the Arbitration Tribunal, and showed the reserved copies in the process of examination of the evidence.

To support its allegation, [Seller] supplied T___ S___'s business card as evidence that [Respondent] had engaged him as its employee. Nevertheless, the Arbitration Tribunal observes that there are "Hong Kong" two characters added in front of the Chinese name of [Respondent]'s company on the business card, and it also lists "___ Trade Co., Ltd. Shanghai". The address, telephone number and fax number shown on the card are Shanghai's. Additionally, the business card also prints the logo of [Respondent]'s company. In the court session, however, there is no evidence to prove that [Respondent] has set up an office in Shanghai. The Arbitration Tribunal holds that a business card can be designed at a party's request and could easily be easy printed any place, and that a business card is not a valid certification of the working unit or identity of someone.

Moreover, [Seller] exhibited a sheet of paper with [Respondent]'s title on it that T___ S___ once used to contact [Seller] and shipping mark: H___ had been used in the contract. However, this evidence is not sufficient to establish that T___ S___ is an employee of [Respondent] or that he was entrusted as its business representative. No proof shows that T___ S___ was once an employee or business representative of [Respondent] before he signed the present contract.

Consequently, the Arbitration Tribunal holds that because [Seller] did not provide sufficient evidence, the claim that [Respondent] engaged T___ S___ cannot supported.

4. Have T___ S___'s acts formed an Apparent Agency of [Respondent]?

[Seller] alleges that even if the Arbitration Tribunal concludes that T___ S___ is not an employee of [Respondent] and it is considered that [Respondent] did not delegate actual authority to T___ S___, nevertheless, T___ S___ represented [Respondent] in the signing of Contract No. 29813 and had formed an Apparent Agency relationship.

However, it is [Respondent]'s position that [Seller] has provided no substantive evidence to prove the Apparent Agency of T___ S___, that which the witness and testimony that [Seller] provided is unilateral, and should not be given any legal effect. [Respondent] alleges that it had no fault in causing [Seller] to believe that T___ S___ was the agent of [Respondent].

      (1) On actual authorizing. [Seller] listed five contracts: No. 02HXX038A, No. 29583, No. 29584, No. 29591 and No. 29690. At the court session, [Seller] alleged that these five contracts were signed by T___ S___ on behalf of [Respondent]. Whereas, [Respondent] denied having authorized T___ S___ to sign the five contracts with [Seller] on behalf of the [Respondent]. In addition, [Respondent] supplied the Arbitration Tribunal with another five contracts concluded by ___ Trade Co., Ltd. Shanghai and [Respondent], which shared the same items and contract numbers except the price item. [Respondent] alleges that it issued the L/C under the contract that it signed with ___ Trade Co., Ltd. Shanghai and that there is no direct trade relationship between [Respondent] and [Seller].

During the hearings, the Arbitration Tribunal focused on the No. 02HXX038A contract of the above five contracts.

   -    In the contract document provided by [Seller], the price item is US $5.25 per kilogram CIF Shanghai, 50,000 kilograms, total price: US $262,500;
   -    However, in the contract document of that number supplied by [Respondent] which was concluded between Shanghai Trade Ltd. and [Respondent], the price item is $5.30 per kilogram CIF Shanghai, 50,000 kilograms, total price: $265,000, payment item is L/C at sight, beneficiary is [Seller]. [Seller] provided the L/C in favor of [Seller] issued by [Respondent], on which the contract number is 02HXX038A, unit price at $5.30 per kilogram CIF Shanghai, 50,000 kilograms, total price: $265,000.

Based on the facts established above the Arbitration Tribunal concludes that it was for the performance of the payment obligation under Contract No. 02HXX038A concluded between ___ Trade Co., Ltd. Shanghai and [Respondent] that [Respondent] issued the L/C, and that it was not in performance of the payment obligation under a Contract No. 02HXX038A signed by [Seller] and T___ S___ on behalf of [Respondent]. Thus, Contracts No. 02HXX038A, No. 29583, No. 29584, No. 29591 and No. 29690 and other such contracts provided by [Seller] do not sufficiently support [Seller]'s claim that T___ S___ acted as actual agent of [Respondent].

___ Trade Co., Ltd. Shanghai is a Mainland China company and [Seller] has voiced suspicions as to whether this company has the right to operate an import and export business or the financial strength which is needed to do foreign trade in China. On the one hand, [Respondent] has not supplied evidence and reasons in response to [Seller]'s suspicion; on the other hand, in the contract which is signed by [Respondent] and T___ S___ on behalf of ___ Trade Co., Ltd. Shanghai, it is explicitly stipulated that the payment is the issuance of the L/C to [Seller]. Therefore, it is impossible that [Respondent] was indifferent and ignorant about the situation that Shanghai ___ Trade Ltd. signed the contract with [Seller] on the same day that [Respondent] concluded the contract with Shanghai ___ Trade Ltd. If [Respondent] had known that T___ S___ concluded the contract with [Seller] by executing in its name, [Respondent] should have repudiated it and informed [Seller] as soon as possible to indicate that the act of T___ S___ was not authorized.

      (2) Concerning the Apparent Agency, [Respondent] and [Seller] did not have a consensus of views on the law of which county or territory should be applied. The Arbitration Tribunal holds that the applicable law should be decided in terms of the principle of the closest relationship. However, the Arbitration Tribunal observes that, as [Seller] pointed out, there would be no difference in the regulation of forming an Apparent Agency, no matter which law is applied, Australian law or Hong Kong law or the law of Mainland China.

"Australian Commercial Law" (1995 8th edition) written by Vermees & Lindgren discusses Apparent Agency as follows:

"As a general principle, where the principal indicates by its behaviour to a third party that its counterpart is its agent, or where the principal allows its counterpart to act on its behalf as its agent, and the third party has dealt with the agent out of manifest reliance upon it, agency is deemed to have been established in favour of the third party in spite of the principal's objections.

In Hong Kong, the case of Bruce Porter Baron & Ors v. Hartford Fire Insurance Company & Ors stands for the proposition that, if the principal indicates by its words or behavior that the agent has actual agent authority, and the counterparty based on such indication concludes the contract with the agent, the apparent agency authority is present.

Article 49 of the "Contract Law of Hong Kong" states that:

"Where a person lacking agency authority, acts beyond his agency authority, or whose agency authority was extinguished, concludes a contract in the name of the principal, if it was reasonable for the other party to believe that the person performing the act had agency authority, such act of agency is valid."

According to the above regulations, the Arbitration Tribunal holds that an Apparent Agency will be formed under the following circumstances:

   -    The principal indicates by its behavior to a third party that its counterpart is its agent;
   -    The third party believes that the person performing the act had agency authority and concludes a contract with him.

The Arbitration Tribunal notes that [Seller] also provided other materials, which included:

   -    Several contracts concluded by T___ S___ on behalf of [Respondent] and other staples, the L/C and B/L concerned, as evidence of the existence of an Apparent Agency in this contract; and
 
   -    [Seller] also presented the testimony of Mr. P___ C___, CEO of J___ M___ Company, a Zelanian wool supplier; Mr. J___ C___, director, and staff Mr. W___ D___ of L___ D___; Mr. R___ F___, T___ Trading Company and Mr. S___ N___, the trade manager of China, L___ Australia Company.

At the same time, the Arbitration Tribunal observed that:

   -    [Respondent] did not deny that P___ C___ from Zelanian J___ M___ Company had visited [Respondent] in January 2002; neither did [Respondent] deny that Mr. J___ C___ and Mr. W___ D___ of Australian L___ D___ Company had visited [Respondent]'s office in Hong Kong.
 
   -    But, [Respondent] alleged that, as it had economic disputes with L___ D___ Company, the testimony of that company should not be considered as evidence, that [Respondent] did not know T___ and L___, and that [Respondent] had had no business with these two companies.

The Arbitration Tribunal holds that, the contracts and copies concerned which were concluded by [Respondent] as represented by T___ S___, and with other companies that were provided by [Seller], and the testimony of members of the staff of other companies, cannot be considered as sufficient evidence that [Respondent] authorized T___ S___ to sign the present contract, because they do not have the same legal relationship with this case. However, they have indirect, not direct, effectiveness of evidence in judging whether the act of T___ S___ in signing the present contract had confirmed an Apparent Agency to [Respondent].

In this case, as [Seller] provided, before [Seller] concluded Contract No. 29813 with T___ S___ who [Seller] considered to be the representative of [Respondent] on 19 February 2003, [Seller] had already concluded five contracts with T___ S___, and the serial numbers of this five contracts had H___ and used H___ as the Shipping Mark. These five contracts were performed by [Respondent] who issued the L/C and written receptions. Whereas, [Respondent] supplied another corresponding five contracts which were signed by [Respondent] and T___ S___ on behalf of ___ Trade Co., Ltd. Shanghai. The Arbitration Tribunal holds that it was in the performance of the obligation under those other five contracts that [Respondent] issued L/Cs to [Seller] and that they were of different legal relationships than the present contract. Therefore, [Seller]'s allegation that, based on such evidence, an Apparent Agency was formed for T___ S___ on behalf of [Respondent] to sign the present contract lacks effectiveness.

At the same time, the Arbitration Tribunal also observed that in October and November 2002 before the present contract was concluded, [Seller], in an arrangement set up by T___ S___, visited [Respondent]'s office in Hong Kong. Despite [Respondent]'s allegation that that which [Seller] provided was the unilateral record of such visits given by F___ F___ the CEO of [Seller] and I___ M___, J___ L___ members of the staff of [Seller], [Respondent] did not deny in the court session that it had recognized T___ S___ for many years and that they had a business relationship. This has a certain direct effectiveness of evidence in support of the Apparent Agency claimed by [Seller].

3. [Seller]'s arbitration claims

[Seller] requests [Respondent] to compensate the loss caused by the price difference between the present contract and the resale contract, the loss of storage cost, the loss of interest, and the expenditures for the case.

The Arbitration Tribunal holds that the above claim is based on the precondition that the present contract is considered a valid contract between [Seller] and [Respondent]. According to the analysis and cognizance in part 2 of the Arbitration Tribunal's opinion shown above, owing to the following two points, the Arbitration Tribunal does not consider the present contract a valid contract between [Seller] and [Respondent].

      (1) There is not sufficient evidence to support [Seller]'s claim that T___ S___ was actually authorized by [Respondent] to sign the present contract on behalf of [Respondent] or that he was engaged to do so by [Respondent];

      (2) In the performance of the present contract, [Seller] just contacted T___ S___ all along. It was only after the resale contract, which stipulated reselling the goods under the present contract, had been concluded for two months, that [Seller] had an Attorney's Letter sent out and faxed to the address of [Respondent]'s office in Hong Kong, in response to which [Respondent] advised that it had not concluded the present contract with [Seller].

Although, considering that from an Apparent Agency perspective, the evidence provided by [Seller] has a certain effectiveness and the reasons that [Seller] stated are to a certain extent persuasive, the Arbitration Tribunal still consider that there is a lack of sufficient evidence and reasons to recognize the establishment of T___ S___ as the Apparent Agent of [Respondent] in concluding the present contract.

On the other hand, if the Arbitration Tribunal were inclined to recognize that the Apparent Agency relationship was established and the present contract signed by [Seller] and [Respondent] was a valid contract, then does the evidence support [Seller]'s claims?

In the section on "How was the present contract to be performed?" in part 2 of the Arbitration Tribunal's opinion related above, the Tribunal enumerated interrelated facts of the performance of the present contract and regulations under the "Information" item, the Article 14 item of "the General Trading Terms of Buying Wool and Wool Top". At the same time, "the "Discharge of Contract" item, Article 11 of the "General Trading Terms", provides that:

"11.1 Unless otherwise stipulated, this contract in any of the following circumstances can be terminated: (a) if the parties reach a written agreement, or (b) if one party does not fulfill its obligation due to its liability in the stipulated period of time, and after receiving a written notice sent by the non-offending party, it fails to eliminate the fall-back deed or make remedies within the reasonable time stipulated by the non-offending party. Under such circumstance, the termination of the contract is valid when the non-offending party sends written notice to the other party.

"11.2 The termination of the contract does not impair any rights of the party who terminates the contract, including but not limited to the right of claiming damages for losses caused by breach of contract."

The Arbitration Tribunal notes that the following provisions of CISG can also be regarded as relevant.

Article 63 provides:

"(1) The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations. (2) Unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance."

Article 64(1) provides:

"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."

Article 75 provides:

"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74."

According to the actual performance of this contract and the provisions quoted above, the Arbitration Tribunal holds that [Seller] should send notice by registered mail, express mail or fax, in terms of the "Information" provision of Article 14 of part 2 of the contract, to the address or fax number which is explicitly listed in the contract, namely, [Respondent]'s office in Hong Kong, within a period of time before or after the time of the letter of credit or time of shipment stipulated in the contract. However, the facts show that, from 19 February 2003 (when the contract was signed) to the resale contract, which was to resell the goods under the present contract, concluded on 24 May 2003, [Seller] never performed the obligation to send a notice by registered mail, express mail or fax, according to the "Information" provision above.

Meanwhile, based on the facts established above, the Time of Shipment stipulated is the end of March 2003; the Payment is by letter of credit at sight. On 27 March 2003, [Seller] had urged T___ S___ to issue a letter of credit by e-mail, T___ S___ replied, "hoping [Seller] to wait for more time." [Seller] sent an e-mail again to urge T___ S___ on 14 April 2003. In answer to that e-mail, T___ S___ stated, "please give one more period of time to solve the problem." Thereafter, on 24 May 2003, [Seller] resold the goods under the present contract. In the light of the provisions above, to conclude a resale contract should be based on the precondition of termination or avoidance of the original contract. However:

   -    [Seller] did not send a written notice to "fix an additional period of time for buyer to perform obligations" to T___ S___ nor to [Respondent], and T___ S___;
 
   -    Nor did [Respondent] proclaim that "it would not perform the obligation within the stipulated time";
 
   -    Nor did [Seller] deliver to T___ S___ or [Respondent] a written notice declaring the termination or avoidance of the contract.

Accordingly, since [Seller] did not follow either the terms of the contract or the CISG, the Arbitration Tribunal holds that, even if there was a loss due to the difference between the contract price and the price in the resale contract, the loss can be only borne by [Seller] but not [Respondent].

The Arbitration Tribunal also notes that, the evidence concerning the storage provided by [Seller] indicates that there had been twenty packages and ten packages, respectively, in storage from 10 December 2002 and 17 December 2002. Nevertheless, the present contract was concluded on 19 February 2003, and the Time of Shipment stipulated is the end of March 2003, so it is reasonable that the date for assembling goods to meet the order and for storage should be started after 19 February 2003. However, it is really puzzling that the goods under this contract began to meet the order and to be stored before the contract was concluded.

Furthermore, besides the thirty packages which consisted of the above listed twenty and ten packages, there were another thirty packages on 15 April 2003, and the cost of storage for the rest, 130 packages, is calculated from 8 July to 19 August 2003. This indicates that [Seller] had stocked up thirty packages before the present contract was concluded, but there was no other stocking up from the date when this contract concluded to the stipulated time of shipment, namely, the end of March 2003 or, in other words, it was after the resale contract had been concluded that [Seller] began to stock up a majority of the goods, 130 packages, under the present contract. Therefore, the Arbitration Tribunal holds that it is hard to recognize that the goods which were going to be resold under the resale contract signed by [Seller] and others on 24 May 2003 were the goods under the present contract. According to international trading customs, under this circumstance, it is impossible to resell the goods under the original contract, or it is difficult to recognize that the goods that [Seller] resold are under the original contract. Accordingly, there is a lack of factual basis for [Seller]'s claim upon [Respondent] to bear the damage which is the loss of price difference between the present contract and the resale contract.

Based on the conclusions set forth above, even if the Apparent Agency could be established, and the contract between [Seller] and [Respondent] were regarded as a valid contract, the Arbitration Tribunal still finds it difficult to support [Seller]'s claims.

Because the arbitrators have different views on the Apparent Agency relationship between [Respondent] and T___ S___ stated in the part 2 of the Arbitration Tribunal opinions, this Arbitration Award is carried out by the signatures of a majority of the arbitrators.

AWARD

In sum, the Arbitration Tribunal made the following award:

1. [Seller]'s arbitration claims are dismissed.

2. The arbitration fee is US $3,516, and shall be paid by [Seller]. This fee has been offset by the equivalent arbitration fee US $3,516 which [Seller] prepaid to the Arbitration Commission.

The award takes effect when made. The award is final.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant Australia is referred to as [Seller]; Respondent of Hong Kong is referred to as [Respondent]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of Hong Kong (renminbi) are indicated as [RMB].

** Du Li, LL.M. Candidate, Institute of International Law, Wuhan University, Wuhan, Hubei Province, P.R. China.

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

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