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CISG CASE PRESENTATION

China December 2006 CIETAC Arbitration proceeding (Rabbit skin case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/061200c2.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20061212 (December 2006)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2006/05

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Spain (respondent)

GOODS INVOLVED: Frozen fresh rabbit skins


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 49 ; 74 ; 81 [Also cited: Article 30 ]

Classification of issues using UNCITRAL classification code numbers:

25A [Effect of a fundamental breach: avoidance of contract];

49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract];

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

81C [Effect of avoidance on obligations: restitution of benefits received]

Descriptors: Avoidance ; Fundamental breach ; Damages ; Foreseeability of damages ; Restituttion

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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

Rabbit skin case (December 2006)

Translation [*] by Wang Fan [**]

Edited by Sun Chao [***]

PARTICULARS OF THE PROCEEDING

The China International Economic & Trade Arbitration Commission (hereinafter the "Arbitration Commission") accepted the case (Case number G2006____) according to:

   -    The arbitration clause in Contract No. TTZ006-05 for the sale of Frozen fresh rabbit skins (hereinafter the "Contract") which was entered into on 15 August 2005 between Claimant AAA International Trade Co. Ltd. [of the People's Republic of China] (hereinafter referred to as "[Buyer]") and Respondent BBB Co. [of Spain] (hereinafter referred to as "[Seller]"); and
 
   -    The written application for arbitration submitted to the Arbitration Commission by the [Buyer] on 11 May 2006.

The arbitration rules which came into force on 1 May 2005 (hereinafter the "Arbitration Rules") apply to this case.

On 23 May 2006, the Secretariat of Arbitration Commission (Hereinafter "Secretariat") mailed the Arbitration Notification, Arbitration Rules and the Panel of Arbitrator to both parties by EMS. The Secretariat also sent to the [Seller] the application for arbitration and evidence materials which had been submitted by the [Buyer]. The "EMS tracking certificate" provided by the post office indicated that the [Seller] signed for the aforementioned documents on 5 June 2006.

The [Buyer] selected Mr. ___ as an arbitrator of this case. As the [Seller] neither selected nor delegated the Arbitration Commission to appoint an arbitrator in the prescribed period, the Director of the Arbitration Commission appointed Mr. ___ as an arbitrator of this case according to the Arbitration Rules. Because the parties neither selected nor jointly delegated the Director of the Arbitration Commission to appoint the Presiding Arbitrator in the prescribed period, the Director of the Arbitration Commission appointed Mr. ___ as the Presiding Arbitrator of this case according to the Arbitration Rules. The three aforementioned arbitrators constituted the Arbitration Tribunal on 24 July 2006 and tried this case together.

By the instruction of the Secretariat, the Arbitration Tribunal decided to open a court hearing in Beijing on 24 August 2006. On 24 July 2006, the Secretariat separately mailed a notice of the formation of an Arbitration Tribunal and notice of trial to both parties by EMS. The "EMS tracking certificate " provided by the post office reveals that the [Seller] signed for the aforementioned documents on 2 August 2006.

The Arbitration Tribunal opened a court hearing in Beijing on 24 August 2006. The attorney for the [Buyer] appeared in court, however, no one from the [Seller]'s side appeared or made any explanation to the Arbitration Tribunal about the absence. The Arbitration Tribunal therefore conducted a trial by default according to Article 34, Section 2 of the Arbitration Rules. During the court hearing, the [Buyer] made a statement of both matters of fact and matters of law, brought forth originals of the relevant evidence, submitted supplementary evidence and answered the Arbitration Tribunal's questions.

After the court hearing, the Secretariat sent the [Seller] "Appearance Sign-in Form", "Main Points of the Court Hearing" and a copy for each item of supplementary evidence provided by the [Buyer] in the court hearing. Both parties were informed by the Secretariat that they should submit each piece in quintuplicate in written form within 15 days from the date the court hearing ended (namely, before 8 September 2006) if they had new evidence. Otherwise, unless agreed upon by both parties or deemed necessary by the Arbitration Tribunal, no more evidence provided by either party would be accepted by the Arbitration Tribunal. If any question with regard to the procedural and substantive issues of this case is raised by either party, it can be submitted to the Arbitration Commission within the same deadline mentioned above. The Secretariat faxed to the [Seller] the aforementioned documents on 28 August 2006 and mailed the originals to the [Seller] by EMS at the same time. "EMS tracking certificate" indicates that the [Seller] signed for them on 6 September 2006.

On 8 September 2006, the Secretariat received the Attorney's Arbitration Statement, including the supplementary evidence from the [Buyer], then forwarded it to and notified the [Seller] to submit written examinations within 10 days since receipt of this mail according to the requirements of the Arbitration Tribunal. If the [Seller] asked for another court hearing, the aforementioned time limit would apply too. Otherwise, examination of the evidence and supplementary evidence mentioned above would be conducted by way of forma escrita and there would be no more court hearing in this case. Especially, the Arbitration Tribunal pointed out that the name of [Seller] on the application for arbitration which was provided by the [Buyer] is BBBs Co.. After the enquiry conducted by the tribunal, the [Buyer] confirmed that the [Seller]'s name is BBB Co. in the Attorney's Arbitration Statement, including the supplementary evidence. The documents that had been mailed by the Arbitration Commission to BBBs Co. were all accompanied by the proof of delivery. The [Seller] should put forward in the aforementioned time limit if it had not received the documents mentioned above. Nevertheless, the "EMS tracking certificate" provided by the post office indicates that the [Seller] signed for the aforementioned documents on 9 October 2006.

There was neither any rejoinder nor objection from the [Seller] with regard to this case.

The consideration of this case has ended. After the panel hearing, the Arbitral Award has been handed down based on the facts which were ascertained at the court hearing and the written materials in existence. A summary of the case, the opinion of the Arbitration Tribunal and the award are as follows.

SUMMARY OF THE CASE

The [Buyer] and the [Seller] entered into Sales Contract No. TTZ006-05 on 15 August 2005. This is a contract for the sale of 160,000 pieces of Frozen fresh rabbit skins by the [Seller] to the [Buyer]:

   -    Unit price: 0.41 per piece; Total value of the goods: 65,600;
   -    Term of delivery: "CFR PRC Newport".
   -    Shipment: The goods should be shipped in two refrigerated containers. The time of shipment for the first should be no later than 4 September 2006; the time of shipment for the second should be before 11 September or 18 September 2006.
   -    Payment .The [Buyer] shall make half the payment of the goods in each container by telegraphic transfer before shipment of each container; the remainder shall be paid by sight letter of credit.

After the Contract came into effect, a dispute arose: the [Buyer] had made part of the payment according to the Contract but the [Seller] had failed to deliver the goods. After several unsuccessful attempts to resolve the dispute by negotiation, the [Buyer] applied for arbitration.

POSITION OF THE PARTIES

[Buyer]'s position

The [Buyer] alleged as follows in its application for arbitration:

After the conclusion of the Contract, the [Buyer] entered into another domestic sales contract and resold the goods under the Contract to its domestic customer, namely, the Tianjin Hua Tao International Trade Co. on 22 August 2005.

   -    The unit price stipulated in this resale contract is RMB 6 yuan per piece; and
   -    All the goods were be delivered to Daying Town, Hengshui Municipality, Hebei Province no later than 30 November 2005.

Later on, the [Buyer] paid half the value of the goods in the first container, namely, 16,400 (equivalent to RMB 163,443.93 yuan) by telegraphic transfer to the [Seller] on 24 August 2008 and one day later the [Buyer] issued an irrevocable letter of credit with the amount of 32,800 (namely half of the entire payment of goods) in favor of the [Seller].

However, the [Seller] has not delivered the goods under the Contract despite the fact that the [Buyer] has performed its obligations of payment and issuance of letter of credit. It was the fundamental breach of contract by the [Seller] that made the [Buyer] not only unable to get back the prepayment, but also suffer from the liability for breach of contract in relation to its domestic sales contract and loss of profit.

The [Buyer] applied for arbitration. The [Buyer]'s arbitration claims are:

   1.   The [Seller] should return to the [Buyer] the prepayment for goods which amounted to RMB 163,443.93 yuan;
   2.   The [Seller] should make indemnification of RMB 353,738.40 yuan for the loss to the [Buyer];
   3.   The [Seller] should provide compensation of RMB 10,000 yuan for the [Buyer]'s legal fees and expenses;
   4.   The [Seller] should reimburse to the [Buyer] for traveling expenses in the amount of RMB 261.00 yuan due to this case; and
   5.   The [Seller] should bear the arbitration fee.

The attorney for the [Buyer] declared the [Buyer]'s position from the legal point of view in the Attorney's Arbitration Statement, including the supplementary evidence as follows:

1. The United Nations Convention on Contracts for the International Sale of Goods (CISG) should be the applicable law of this case.

[Buyer] is a Chinese company; the [Seller] is a Spanish company. Both companies' home countries are Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (CISG). The United Nations Convention on Contracts for the International Sale of Goods (CISG) should therefore be the applicable law of this case.

2. Despite the fact that the [Buyer] had made all the relevant payments in time and issued the letter of credit according to the Contract, the [Seller] failed to deliver the goods. This constituted a fundamental breach of contract.

According to the facts of this case, the parties entered into the Contract by offer and acceptance of the offer which made it legally binding; thus both parties should perform their respective obligations according to the Contract. However, after the [Buyer] performed its obligation, the [Seller] did not deliver the goods according to the Contract. This led to the total inability of the [Buyer] to realize the original purpose of entering into the Contract. The [Seller]'s behavior had severely undermined the sequence of business and impaired the legal rights and interests of the [Buyer]. The [Seller]'s behavior constituted a fundamental breach of contract.

3. The [Buyer] has the right to claim for damages the total loss caused by the [Seller]'s fundamental breach of contract.

According to Article 74 of the United Nations Convention on Contracts for the International Sale of Goods (CISG):

"Damages for breach of contract by one party consist of a sum equals to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and the matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

The [Buyer] prepaid half the value of goods in the first container according to the Contract, but the [Seller] failed to deliver the goods, so the [Buyer] was entitled to ask the [Seller] to restitute this payment for the goods.

The facts of this case are that the [Buyer] bought 160,000 pieces of Rabbit skins at a price of 0.41 per piece and resold them to its domestic customer at the price of RMB 6.00 yuan per piece.

   -    The exchange rate is 1 equals RMB 9.947 yuan), thus:
   -    The gross profit per piece was that 6 minus 0.41 multiply 9.947 equals RMB 1.92 yuan;
   -    The total profit was to be RMB 307,476.80 yuan.

It is the right of the [Buyer] to choose the content of its claim: half the amount of the total profit, namely RMB 153,738 yuan, is claimed as damages. It was also known to the [Seller] that the [Buyer] would resell the goods under the Contract to a third party. Therefore, the loss for the foreseeable profit caused by the [Seller]'s breach of contract should be deemed a loss which the [Seller] was able to foresee at the time of the conclusion of the Contract.

When both parties entered into the Contract, the [Seller] was clearly told that the delivery should be on time, otherwise the [Buyer] would face liability for breach of contract in relation to its domestic customer. Thus, it was known to the [Seller] at the time of breaching the Contract that there existed the liability of the [Buyer] to its domestic customer. The [Seller] should indemnify the [Buyer] for the profit loss and the damage paid to its domestic customer for breach of contract.

Because of [Seller]'s breach of contract, the [Buyer] had to resort to arbitration for the remedy of its right. So the [Seller] should bear all the legal fees and expenses, arbitration fees and traveling fees that arose therefrom.

[Seller]'s [position]

Although the [Seller] had received all the documents from the Secretariat, the [Seller] neither rejoined nor refuted any proposition or claim of the [Buyer] throughout the whole arbitration procedure.

OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

The [Buyer] is a Chinese company with its domicile in Tianjin, PRC and the [Seller] is a Spanish company with its domicile in Spain. The Contract which the two parties entered into is a contract for international sale of goods. There was no clause in the Contract concerning the applicable law. In the light of the fact that both PRC and Spain are Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (CISG) (hereinafter "Vienna Convention"), the Arbitration Tribunal ruled that Vienna Convention is the applicable law of this case.

In addition, based on the fact that the domicile of [Buyer], place of delivery and place of arbitration are all in the PRC, the PRC is the country which has the proximate connection with this case. Therefore, for those legal issues which are not covered by the Vienna Convention, Chinese law should apply.

2. The validity of the Contract

In view of the fact that the Vienna Convention does not cover issues concerning the validity of contract, the Arbitration Tribunal will judge the validity of the Contract by applying the Contract Law of the People's Republic of China (Hereinafter "the Contract Law"). It was ascertained that every clause in the Contract was a mutual declaration of true intentions of both parties, representatives of both parties signed or affixed a seal on the Contract and there was no clause in the Contract that contradicted any mandatory provision of the PRC laws and regulations. Article 32 of the Contract Law provides that, "Where the parties conclude a contract in written form, the contract is established when both parties sign or affix a seal on it." And Article 44, Section 1 of the Contract Law states: "The contract established according to law becomes effective when it is established." The Arbitration Tribunal confirms that the Contract is valid and legally binding on both parties and that both [Buyer] and [Seller] should exercise their rights and perform their obligations according to the Contract.

3. Performance of the Contract

According to the documentary evidence submitted by the [Buyer] and the statements the [Buyer] made in the court hearing, the Arbitration Tribunal found out that the Contract had came into effect when both parties signed it on 15 August 2005. As the Contract stipulates, the [Seller] sold 160,000 pieces of Frozen fresh rabbit skins to the [Buyer], unit price is 0.41 per piece, the delivery term is "CFR PRC Newport", and the total value of the goods is 65,600. The goods should be shipped in two refrigerated containers, the time of shipment of the first one should no later than 4 September 2006 while the other's time of shipment should be before 11 September or 18 September 2006. It is stipulated as Terms of payment that [Buyer] should make half the payment of each container by telegraphic transfer before shipment of the container and the other half should be paid by sight letter of credit.

After the Contract came into effect, the [Buyer] paid 16,400 (equivalent to RMB 163,443.93 yuan) which equals half the value of the goods in the first container. This payment was made by telegraphic transfer to the specified account of the [Seller] on 24 August 2005 according to the Contract. One day later the [Buyer] issued an irrevocable sight letter of credit in the amount of 32,800 (namely, half of the entire payment of the goods) in favor of the [Seller] on 25 August 2005.

The [Buyer] submitted to the Arbitration Tribunal as evidence: the Contract, letter of credit No. LC21A0068/05, and certificates of payment foreign exchange and of outward remittance. The [Buyer] showed originals of all these items of evidence at the court hearing.

[Apparent letter of credit discrepancy and explanation]

It is necessary to point out that the letter of credit issued by the [Buyer] clearly indicates that it is issued based on Conract No.TTZ007-05 contract, not the Contract in this case the number of which is TTZ-006-05. Based on this fact, if the letter of credit issued by the [Buyer] was not for the purpose of performing the obligation under the Contract in this case, then the [Buyer] per se would have committed a breach of contract for incomplete performance of contract.

The [Buyer] provided the following explanation:

"With regard to the problem of inconsistent contract numbers, the term of payment consisted of 50 percent payment by telegraphic transfer and 50 percent payment by letter of credit, and the goods were delivered in batches. Therefore, for the convenience of cancellation after verification and other procedures, the collecting bank (sic, should be 'issuing bank', annotated by the Arbitration Tribunal) suggested that the [Buyer] submitted another pro forma invoice for the bank to collect (sic, should be "issue", annotated by the Arbitration Tribunal) the letter of credit, the contract number on the letter of credit is the contract number on the pro forma invoice (see supplementary evidence No. 28 and 29). And as the letter of credit expired on 10 October 2005, the collecting bank (sic, should be "issuing bank", annotated by the Arbitration Tribunal) revoked the letter of credit and notified the [Seller] on 1 December 2005 (see supplementary evidence No. 30)."

The [Buyer] also submitted the "representation" and "communication letter concerning letter of credit No. LC21A0068/05" provided by the Bank of China, International Clearing Department of Tianjin Binhai Branch. The main content of the "representation" states:

"Certification: AAA International Trade Co. Ltd.

With regard to letter of credit No. LC21A0068/05 issued by our bank, because the term of payment of the Contract which was provided by the applicant consists of 50 percent payment by telegraphic transfer and 50 percent payment by letter of credit, and the goods will be delivered in batches. So for the convenience of cancellation after verification and other procedures, we suggest that the [Buyer] submit another pro forma invoice to apply for the issuing of the letter of credit."

The main content of the "communication letter concerning letter of credit No. LC21A0068/05 " states:

"To: AAA International Trade Co. Ltd.

The letter of credit No. LC21A0068/05 (the amount is 32,800.00 and the beneficiary is BETA FURS, S.L.) that you instructed our bank to issue has expired on 10 October 2005. According to your application, our bank has already notified the beneficiary of your application for revocation of the letter of credit. Please contact the beneficiary as soon as possible."

The [Buyer] also submitted to the Arbitration Tribunal a pro forma invoice numbered TTZ007-05 and dated 18 August 2005, which was provided by the [Seller]. The pro forma invoice indicates that the contract number which it is based on is TTZ007-05 too, and the description of goods, unit price, total price and terms of price, etc. are all consistent with the relevant clauses in the Contract, the quantity of goods is 80,000 pieces. Besides, it indicates at the bottom of the invoice that "This P/I is be included with TTZ006-05 (namely, the number of Contract, annotated by the tribunal)." There is neither signature nor seal on the pro forma invoice.

The [Buyer] has made an adequate explanation for the reason why the contract number on the letter of credit contradicted the Contract number which has been proved by relevant evidences. For one thing, this evidence has clear and distinct contents and reasonable causal relations. For another, the [Seller] neither attended the court hearing on time nor brought forward any challenge to the evidence provided by the [Buyer] during the court hearing within the time limit, not to mention that the [Seller] did not make any refutation or explanation to the [Buyer]'s claim and the evidences Accordingly, the Arbitration Tribunal finds that the [Buyer]'s explanation is accepted. According to this judgment, the Arbitration Tribunal holds that the [Seller] is the beneficiary of the letter of credit issued by the [Buyer], there is no other contractual relationship between the [Buyer] and the [Seller], the [Buyer] has already performed its obligation of first installment of payment which is 16,400 and the issuing of the letter of credit. The aforementioned amount is equivalent to RMB 163,443.93 yuan which was proved by the remittance slip dated 24 August 2005 provided by the [Buyer].

The [Seller] neither made any refutation of the allegation the [Buyer] brought forward in the application for arbitration that the [Seller] failed to deliver the goods according to the Contract, nor did the [Seller] question the authenticity of the evidence provided by the [Buyer]. The evidence provided by the [Buyer] indicated that, under the circumstances:

   -    The [Seller] failed to deliver the goods on time;
   -    Both parties communicated with each other many times through e-mail, fax, etc.;
   -    The [Seller] was clearly told that the [Buyer] had already made half the payment of goods in the first container by telegraphic transfer and had issued the letter of credit.
   -    The [Buyer] urged the [Seller] to make the consignment as soon as possible, only to get an ignorance and a new request of advance in price from the [Seller].
   -    After the [Buyer] accepted the request of an advance in price, the [Seller] still refused to make the consignment.

That was why the [Buyer] applied for arbitration.

Article 30 of the Vienna Convention stipulates that:

"The seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention."

Article 25 of the Vienna Convention states that:

"A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result."

In this case, the fact that the [Seller] failed to deliver the goods deprived the [Buyer] of that which it is entitled to expect under the Contract and constituted a fundamental breach of contract. Thus, the [Seller] should be liable for breach of contract.

4. Issues concerning the [Buyer]'s resale contract

According to the evidence provided by the [Buyer], after signing the Contract, the [Buyer] entered into another domestic sales contract (hereinafter the "resale contract") with CCC International Trade Co. Ltd. (hereinafter "[Buyer's customer]") on 22 August 2005. Based on the resale contract, the [Buyer] resold the 160,000 pieces of Frozen fresh rabbit skins under the Contract to [Buyer's customer] for the price of RMB 6.00 yuan per piece. It is stipulated in the resale contract that the [Buyer] should reimburse [Buyer's customer] 30 percent of the payment of undelivered goods under the circumstance of non-delivery. In the e-mail which the [Buyer] sent to the [Seller] on 10 August 2005 (the date before signing the Contract, annotated by the Arbitration Tribunal), the [Seller] was clearly told about the existence of the resale contract and that all the goods under the Contract would be resold to [Buyer's customer], and that, in case of non-delivery caused by the [Seller], the [Buyer] would be liable to its customer for breach of the resale contract. On 22 August 2005, the [Seller] was told again that the resale contract had been established and that the [Buyer] would reimburse [Buyer's customer] 30 percent of the payment of the goods if the [Seller] postponed delivery. This evidence shows that before the Contract was signed with the [Seller], the [Seller] had already known that all the goods under the Contract would be resold to [Buyer's customer].

5. [Buyer]'s arbitration claims

      (1) The [Buyer] claims that the [Seller] should restitute the payment of goods, which is RMB 163,443.93 yuan, namely, half the payment for goods in the first container made by the [Buyer] by telegraphic transfer.

Article 81(2) of the Vienna Convention stipulates that:

"A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract."

As mentioned above, the [Buyer] performed its obligation of prepayment and issuing the letter of credit before the [Seller] shipped of the first container. The [Seller] should therefore restitute the payment of RMB 163,443.93 yuan to the [Buyer] for the [Seller]'s fundamental breach of contract.

      (2) The [Buyer] claims damages for the loss of RMB 353,738.40 yuan. Concerning the amount of damages, the [Buyer] explained as follows:

First, the [Buyer] bought 160,000 pieces of Frozen fresh rabbit skins at the price of 0.41 per piece, then resold all of them at the price of RMB 6.00 yuan per piece to [Buyer's customer]. According to the fact that the exchange rate is 1.00 equals RMB 9.947 yuan, the gross profit per piece is 6 minus 0.41 multiply 9.947 equals RMB 1.92 yuan, and the total profit is RMB 307,476.80 yuan. The [Buyer] claimed for damage which equals half of the total profit, namely RMB 153,738 yuan.

Second, as for being liable for the breach of the resale contract, the [Buyer] paid RMB 200,000 yuan as reimbursement to [Buyer's customer]. With regard to the amount of profit, the Tribunal finds that the calculation of the gross profit per piece was rounded down by the [Buyer]. Because if the total profit is RMB 307,476.80 yuan, then the gross profit per piece should be RMB 1.92173 yuan.

Article 74 of Vienna Convention stipulates that:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

First, the Arbitration Tribunal finds that the [Seller] knew of the resale contract and ought to have foreseen the profit margin which the [Buyer] would made from the resale of goods based on the fact that the [Seller] had been told that the goods under the Contract would be resold to [Buyer's customer], so the [Seller] should reimburse the [Buyer]'s loss.

Second, the Tribunal finds that the calculation of total profit made by the [Buyer] was correct and the [Seller] brought forward no objection about this issue. The Tribunal supports the claim that the [Buyer] only asks for damage of half of the total profit.

In respect of the RMB 200,000 yuan in damages paid by the [Buyer] to [Buyer's customer], the [Buyer] submitted the communication letters and agreement made with [Buyer's customer] as evidence to the Tribunal, according to which the [Buyer] agreed to reimburse RMB 200,000 yuan to [Buyer's customer]. It is also confirmed by the Tribunal that the certificate of telegraphic transfer of RMB 200,000 yuan to [Buyer's customer] was submitted as evidence. Because the [Seller] took full responsibility for this damage and the [Buyer] had warned the [Seller] of the possibility of this damage, the Tribunal finds that the [Seller] should be liable for this damage.

      (3) The [Buyer] claims that the [Seller] should pay RMB 10,000 yuan as the attorneys' fee for this case.

      (4) The [Buyer] claims that the [Seller] should reimburse RMB 261.00 yuan for the traveling fee in this case.

As mentioned above, the [Seller] is the party who was liable for breach of contract, and the [Buyer] submitted the invoice for the attorneys' fee and traveling fee to the tribunal as evidence, so the [Seller] should bear the fees in both (3) and (4).

      (5) The [Buyer]'s claim that the [Seller] should bear the arbitration fee for this case is also supported by the tTribunal.

AWARD

For the forging reasons, the Arbitration Tribunal renders the following decision:

1.    The [Seller] shall return to the [Buyer] the prepayment for goods which amounted RMB 163,443.93 yuan;
 
2. The [Seller] shall indemnify the [Buyer] for the loss of RMB 353,738.40 yuan incurred by the [Buyer];
 
3. The [Seller] shall reimburse the [Buyer] for the attorneys' fee, in this case in the amount of RMB 10,000 yuan;
 
4. The [Seller] shall reimburse the [Buyer] for the traveling fee, in this case in the amount of RMB 261.00 yuan;
 
5. The [Seller] shall bear all the arbitration fee of this case which is RMB 28,451.00 yuan. The RMB 28,451.00 yuan which was prepaid by the [Buyer] to the Arbitration Commission will offset this same amount of money, and the [Seller] shall reimburse the [Buyer] for the aforementioned prepaid arbitration fee in the amount of RMB 28,451 yuan.

All the fees mentioned above shall be paid by the [Seller] within 20 days of the effective date of this award.

This is the final award. It enters into effect on the date it is made.


FOOTNOTES

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

** Wang Fan, LL.B., Faculty of Law, Zhenjiang University; LL.M., Faculty of Law, Chinese University of Hong Kong <s0804390@mailserve.cuhk.edu.hk>

*** Sun Chao, LL.M Candidate, Law School, Peking University, Class of 2011.

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