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CISG CASE PRESENTATION

France Arbitration Chamber of Paris Case No. 9926 of 2007 [assumed date] (Chemical compound case) [English text]
[Cite as: http://cisgw3.law.pace.edu/cases/079926f1.html]

Primary source(s) of information for case presentation: Yearbook Comm. Arb (2008)

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Case identification

DATE OF DECISION: 20070000 (2007) [assumed date]

JURISDICTION: Arbitration ; France

TRIBUNAL: Chambre Arbitrale de Paris [Arbitration Chamber of Paris]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 9926

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Cyprus (respondent)

BUYER'S COUNTRY: France (claimant)

GOODS INVOLVED: Chemical compound


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 35 [Also cited: Articles 36 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): burden of proof ("French law which governs the contract places the burden of proof upon the party making an allegation")];

35C1 [Conformity of goods to contract (exceptions to seller's liability for non-conformity): buyer's knowledge of non-conformity at time of contracting]

Descriptors: Scope of Convention ; Burden of proof ; Conformity of goods

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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 (English): Text presented below; see also 33 Yearbook Commercial Arbitration (2008) 15-23

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text

Published at Yearbook Comm. Arb'n XXXIII, Albert Jan van den Berg, ed. (Kluwer 2008) 15-23. Copyright owner: The International Council of Commercial Arbitration (ICCA). Reprinted with permission of ICCA.

Arbitration Chamber of Paris, Case No. 9926

FACTS

The French buyer negotiated with the Cypriot seller the purchase of a certain quantity of chemical compound. The goods were stocked in a warehouse at a Ukrainian port, where company Y inspected them on behalf of the buyer. Following the inspection, in July 2005, the buyer and the seller entered into a sale and purchase contract for the compound; the buyer paid the contract price, which was about 80 percent of the market price. The contract provided for the product to be loaded unto the vessel through a sieve and for all lumps above 10 by 10 cm to be removed. It also stated that the buyer accepted the goods "without any claims regarding the quality" and further provided for the application of French law and arbitration of disputes by a sole arbitrator at the Chambre Arbitrale de Paris (Arbitration Chamber of Paris). The arbitration proceeding was to be held in Paris and conducted in English.

Four weeks later, in August 2005, the compound was loaded onto a vessel. Company Y carried out an on-board inspection and informed the buyer that there were "hard lumps in the cargo". Loading was nevertheless completed and the vessel left the Ukrainian port. The buyer then sold the compound in transit to a third company (the final buyer). [page 15]

When the vessel reached the port of arrival, the final buyer refused to take delivery because of the poor quality of the cargo. The buyer settled the final buyer's claim. In September 2006, it commenced arbitration proceedings at the Arbitration Chamber of Paris as provided for in the contract, seeking compensation for the loss suffered because of the deterioration of the cargo and arguing that the deterioration was due to the respondent's incorrect storage, handling and loading. A sole arbitrator was appointed by the Paris Chamber when the parties could not reach an agreement.

By the present award, the sole arbitrator dismissed both the buyer's claims and the seller's claim for legal and other costs.

The sole arbitrator first noted that under the applicable French law the burden of proof is on the party making an allegation. In the present case, the buyer failed to prove that the seller was in breach of it obligations under Art. 35 and Art. 36 of the 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG).

The sole arbitrator reasoned that the contract contained no specifications in respect of the compound other than the indication that lumps larger than 10 by 10 cm were to be removed. The buyer, however, made no such complaint here. Rather, it argued that when the compound was loaded onto the vessel, four weeks after inspection in the warehouse, its grain size (granulometry) had changed. The arbitrator stated that the buyer did not supply any evidence in support of its allegation. He added that the buyer accepted the cargo unconditionally after an on-board inspection had been carried out by company Y on its behalf.

Nor did the claimant prove its contention that the seller gave incomplete and misleading information in respect of the product or supplied incorrect samples. The sole arbitrator noted that the buyer, an experienced trader, was aware that it was buying a non-standard quality product for a lower price than the market price. The sole arbitrator also dismissed as proven the buyer's argument that the chemical compound had been improperly stored. As to the alleged improper loading, the arbitrator held that, lacking specific loading instructions in the contract, the goods were loaded onto the vessel according to an usual and well-known method.

Also the buyer's allegation that the cargo was unfit for its purpose failed. The arbitrator observed that no indications were given in the contract in respect of the specific purposes for which the compound would be used.

The sole arbitrator concluded that the seller was not liable under Art. 35 CISG because the buyer knew of the non-standard quality of the cargo and could have [page 16] been aware of the cargo's condition by carrying out inspections. As to Art. 36 CISG, it appeared from the file that the condition of the goods was known to the buyer prior to the signature of the contract and that the buyer had decided to ship the cargo despite warnings by company Y.

Finally, the sole arbitrator equitably denied the respondent's request to be compensated for its costs and legal fees.

Excerpt

I. THE PARTIES' POSITIONS

1. The Claimant's Position

[1] "Discussions were held between both Parties who agreed that the average granulometry of the chemical compound was to be between 8 and 12%. In July 2005, independent company Y inspected the goods in the X Terminal warehouse. The Claimant relied on the result of this inspection, and purchased from the Respondent in July 2005 a certain quantity of the compound at a certain price under the Contract. The loading operations started on a day in August 2005 and were supervised by independent company Y who informed the Claimant [later on the same day] that there were 'hard lumps in the cargo impossible to remove'.

[2] "The granulometry inspection made on board of the vessel later in August 2005, showed that the cargo contained between 12.6 and 22.5% of particles of a size lower than one millimeter called 'fines'. According to the Claimant, this granulometry of the cargo on board at loading port does not correspond to the granulometry of the product pre-inspected and purchased before shipment.

[3] "Upon arrival of the vessel at the port of destination, the cargo was inspected by Inspection Control Union Z acting on behalf of the final buyer. This inspection showed a very high content of 'fines' and consequently, the final buyer refused to take delivery of the cargo.

[4] "According to the Claimant, the deteriorated state of the cargo is due to improper storage and loading of the cargo. The Claimant therefore contends that the Respondent failed to deliver goods of the quality presented to the Claimant [page 17] prior to the conclusion of the Contract and is liable in accordance with Arts. 35 and 36 of the 1980 Vienna Convention [CISG].[1]

[5] "Pursuant to Art. 74 of the Vienna Convention,[2] the Claimant requests that the Respondent be held liable to pay damages in the amount of ... in principal as well as interests at the French legal rate from ... until full payment of the principal is made and ... for its own legal costs." [page 18]

2. The Respondent's Position

[6] "The Respondent argues that the Claimant knew, when he signed the Contract, that the chemical compound sold by the Respondent had an out-of-specifications quality, in particular with regard to its granulometry. It is the reason why (a) no technical specifications were stipulated with regard to the quality of the goods; (b) the price was at 80% of the market price for standard quality; (c) a clause excluding the seller's liability with relation to the quality of the goods was inserted and (d) no quality certificate for the product was issued by the manufacturing plant.

[7] "According to the Respondent, the Claimant had a full opportunity to inspect the goods prior to the sale, as stated in the Contract. For that purpose, the Claimant hired an independent expert, company Y, who took samples and photographs of the cargo.

[8] "The Respondent asserts that the cargo was not improperly stored and loaded. The Respondent explains that the product was in conformity with the Contract signed between both Parties and was fit for its purpose. The Respondent argues that the Claimant fails to allege a single breach by the Respondent of an express contractual obligation and shows no evidence that the cargo was deteriorated. The Respondent contends at he has not breached Arts. 35 and 36 of the Vienna Convention and any professional usages. The Claimant is solely responsible for any eventual deterioration in quality of the cargo.

[9] "The Respondent therefore requests that all of the claims of the Claimant be denied. The Respondent further requests to be awarded the totality of the costs and legal fees it has incurred for the present arbitration proceedings pursuant to Art. 42 of the rules of the Arbitration Chamber of Paris."[3]

3. Rebuttal

[10] "In his rebuttal statement the Claimant contends that information regarding the quality of the product given by the Respondent was incomplete and misleading. The Claimant further contends that (a) the loading of the cargo was carried out in violation of trade usages; (b) the Respondent presented to the [page 19] Claimant wrong samples; and (c) delivered goods which did not comply with the contract concluded with the Claimant.

[11] "In his rebuttal memorial the Respondent contends that the Claimant has to meet the burden of proof in order to prevail and that the Claimant shows no evidence to support its claims."

II. DISCUSSION

1. The Claimant's Claims

[12] "While the Claimant acknowledges that the cargo had unusual granulometry, he argues that the Respondent is in breach of its contractual obligations and is liable pursuant to Arts. 35 and 36 of the 1980 Vienna Convention for the following reasons:

(a) In July 2005, the Claimant had purchased from the Respondent a certain amount of a chemical compound for a certain price under the Contract. Article 3.7 of the Contract provides that: 'The parties have agreed that the product shall be loaded through a sieve and all lumps above 100x100 mm will be removed from the holds of the vessel. ' The granulometry inspection made on board of the vessel in August 2005, showed that the cargo contained between 12.6 and 22.5% of particles of a size lower than one millimeters called 'fines'. This granulometry of the cargo on board at loading port does not correspond anymore to the granulometry of the product pre-inspected and purchased before shipment. According to the Claimant, it was not possible at the X Terminal to unload goods once they have been loaded on a vessel;

(b) The Claimant argues that information regarding the quality of the product given by the Respondent was incomplete and misleading;

(c) The Respondent presented wrong samples to the Claimant and delivered goods which did not comply with the contract concluded with the Claimant;

(d) The deteriorated state of the cargo is due to improper storage and loading of the cargo. The loading of the cargo was carried out in violation of trade usages.

[13] "First of all, the Sole Arbitrator observes that the French law which governs the Contract places the burden of proof upon the party making an allegation.

[14] "The Contract contains no specifications for the product, apart from Article 3.7 of the Contract which provides that 'the parties have agreed that the product shall be loaded through a sieve and all lumps above 100x100 mm will be [page 20] removed from the holds of the vessel'. However, in the present case, the Claimant does not complain about lumps bigger than 10 cm .

[15] "Furthermore, the Contract provides that 'the buyer (the Claimant) has inspected the quality of this cargo at the X warehouse and accepts it without any claims regarding the quality'. Indeed, the Claimant hired an independent expert, company Y, who took samples and photographs of the cargo. Furthermore the Claimant has admitted that company Y performed the laboratory tests on non-representative samples. Company Y selected these samples alone with no intervention of the Respondent, [who] is therefore not liable for the selection of the samples.

[16] "Without technical specification, the cargo on board can only be conform to the goods inspected by the buyer in the warehouse, except if the cargo corresponds to a different product. That is what the Claimant alleges when he declares that four weeks after inspection in the X warehouse, the quality of the goods had changed and the granulometry of the cargo on board did not correspond anymore to the granulometry of the product pre-inspected before shipment. However the Claimant does not produce any evidence of his allegations.

[17] "With regard to the incomplete and misleading information given by the Respondent before the Contract, the Sole Arbitrator observes that the Claimant does not prove his allegation.

[18] "With regard to the presentation of wrong samples by the Respondent and the delivery of goods that did not comply with the Contract, the Sole Arbitrator finds that the Claimant does not prove his allegation. Furthermore, the Claimant, who is a professional, has admitted that he knew that he was buying a product with a non-standard quality. Despite such knowledge, the Claimant did not perform all appropriate investigations as to quality of the product, relied on laboratory tests performed on non-representative samples which were selected by the Claimant alone, and purchased and accepted the goods 'without any claims regarding the quality'.

[19] "Regarding the deterioration of the cargo due to the improper storage, the Claimant does not produce any evidence of his allegation. In addition, the Respondent produced several documents which state that the Claimant knew the warehouse and that the technical conditions of storage were not breached. ...

[20] "Regarding the deterioration of the cargo due to improper loading, the Sole Arbitrator finds that the Contract does not contain any specifications for the loading operations. The Claimant was aware of the techniques of manipulation of the cargo in the warehouse as he had previously purchased goods from this warehouse and he received from his inspector photographs of the loading of the [page 21] cargo with comments. The Claimant did not request any different loading procedure to be used despite the fact that he bought an out-of-specification product at his own risk. The Respondent used a front loader to take the cargo with its bucket and to place it in order to throw it through a sieve to the conveyor belt situated underneath. This method is usual and well known by professionals. The Claimant does not prove any breach of trade usages, professional rules or international standards. The Sole Arbitrator observes that witness statements of [two witnesses] explain that the photographs submitted by the Claimant ... do not demonstrate that the Respondent crushed the cargo with a 'Hanomag'.

[21] "Regarding the claim that the cargo was unfit for its purpose, the Sole Arbitrator observes that the Contract contains no indication relating to the purpose of the goods. While the Claimant knew the special specifications required by his buyer, he did not indicate these specifications in the Contract. As a consequence, the Claimant does not prove his allegation.

[22] "Regarding the breach of Art. 35 of the Vienna Convention, it is clear that according to the last paragraph of this Article the Respondent is not liable. In fact, the Claimant, who was the buyer, was aware of the cargo's out-of-specifications condition or should have been completely aware of it because of the possibility of extensive inspection.

[23] "Regarding the breach of Art. 36 of the Vienna Convention, documentation produced by both parties states that 'the lack of conformity' was both known and apparent to the Claimant prior to the signature of the Contract and at the time when the risks passed to him. Moreover, despite warnings and letters of protest issued by his inspector, the Claimant decided to ship the cargo. Consequently this Article is irrelevant in the present case.

[24] "It is therefore unnecessary for the Sole Arbitrator to assess the damages.

[25] "For these reasons the Sole Arbitrator finds that all bases of claims presented by the Claimant fail and are dismissed."

2. The Respondent's Claim

[26] "It is not inequitable to reject the request of the Respondent regarding his costs and legal fees." [page 22]

III. DECISION

[27] "For these reasons: (1) All bases of claims presented by the Claimant fail and are dismissed; (2) the Respondent's claim fails and is dismissed." [page 23]


FOOTNOTES

1. Art. 35 of the United Nations Convention on Contracts for the International Sale of Goods, Vienna 1980 (CISG) reads:

"(1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or package in the manner required by the contract.
(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used;
(b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on seller's skill and judgement;
(c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;
(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.
(3) The seller is not liable under subparagraphs a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity."

Art. 36 CISG reads:

"(1) The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time.
(2) The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics."

2. Art. 74 CISG reads:

"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."

3. Art. 42 of the Rules of Procedure of the Arbitration Chamber of Paris reads:

"In the absence of a decision to the contrary taken by an Arbitral Tribunal, all costs shall be payable by the losing party."

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Pace Law School Institute of International Commercial Law - Last updated May 1, 2009
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