Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

CISG CASE PRESENTATION

China 6 June 1991 CIETAC-Shenzhen Arbitration (Cysteine Monohydrate case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/910606c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19910606 (6 June 1991) [date arbitration claim filed]

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1991/03

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: China (respondent)

BUYER'S COUNTRY: Unavailable (claimant)

GOODS INVOLVED: L-Cysteine HCL Monohydrate USP 21


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 9 ; 77 ; 79 ; 86(1) ; 88(2)

Classification of issues using UNCITRAL classification code numbers:

9A [International usages];

77A [Obligation to take reasonable measures to mitigate damages];

79B [Impediments excusing party];

86D [Buyer's obligation to preserve goods];

88A ; 88B2 [Party obliged to preserve goods may sell them; Duty to sell where preservation involves unreasonable expense]

Descriptors: Usages and practices ; Internationality ; Mitigation of loss ; Storage ; Resale of goods ; Exemptions or impediments

Go to Case Table of Contents


Editorial remarks

Go to Case Table of Contents


Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Text of case may be located online by going to <http://www.cietac-sz.org.cn/cietac/index.htm>

Translation: (English): Text presented below; see also <http://www.sccietac.org/cietac/en/content/content.jsp?id=910>

CITATIONS TO COMMENTS ON DECISION

English: Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at 429 ("[t]he resale of goods is especially important when the goods are subject to rapid deterioration"); Dong WU, CIETAC's Practice on the CISG, at n.212, Nordic Journal of Commercial Law (2/2005); Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 157

Go to Case Table of Contents
Case text (English translation)

Queen Mary Case Translation Programme

China International Economic & Trade Arbitration Commission
CIETAC-Shenzhen Arbitration Award

Cysteine Monohydrate case (claim filed 6 June 1991)

Translation [*] by Wei Huo [**]

Translation edited by Li Huini [***]

[We do not at this time have the date of the award.
For identification, in this presentation the award was
assigned the date the claim for arbitration was filed.]

Brief introduction of the arbitration award

A. Fact of the case

On 13 March 1990, the Claimant [buyer] and the Respondent [seller] concluded a contract, Contract No. JHC9004. According to the contract, the [seller] would provide to the [buyer] 1,200 kilograms of L- Cysteine HCL Monohydrate USP 21. The delivery date was: before 30 April 1990. The delivery term was: CIF Mexico Acapulco; the price was: US $16 per kilogram; the entire price: US $19,200. The goods were to be packed 25 kilogram per iron barrel. The payment condition was: irrevocable letter of credit payable at-sight. Clause No. 6 of the contract, concerning the guaranty of quality, examination and claim, stated:

" The seller guarantees that the product he provides is made of the best material, first-class craft. The product shall be new and not used. The quality and standard are consonant with the contract. The duration of guaranty is 12 months from the date the goods arrive at the port of destination. Upon arrival at the port of destination, the goods shall be re-inspected by the local branch of the China Commodity Inspecting and Testing Bureau. If the quality or quantity of the goods is found not in conformity with the contract, the buyer has the right to claim in writing against the seller based on the China Commodity Inspecting and Testing Bureau's certificate within 90 days after the discharge of the goods (excepting the liability of the insurer or the carrier). For goods not in conformity with the contract, the seller has the obligation to exchange the goods free of charge, supplement the shortage or reduce the price. The expense and loss thereby suffered by the buyer, such as freight for arranging an additional delivery, fee of loading, fee for the warehousing, commission for inspection and interest, should be paid in cash immediately by the seller. If the inspection cannot be conducted within the fixed time, the buyer has the right to extend the claim period, provided he notifies the seller in advance."

After the conclusion of the contract, the [seller] delivered the entire 1200- kilograms of goods in time. Upon inspection of the goods after they were transported to Mexico according to the contract, [buyer's] Mexican client claimed defect of the goods, requested return of the goods, and also claimed freight to collect.

On 27 July 1990, the [buyer] faxed the [seller] and asked for resolution of the problem. On 30 July 1990, the [seller] answered that the so-called defect of the goods might have been caused by humidity during the long period of carriage by sea. If the [buyer] insisted upon return of the goods, the [seller] would only bear the freight between Shenzhen and Mexico.

On 6 September 1990, the [seller] agreed to carry back the goods. The appointed port was Shenzhen, the consignee was Shenzhen Xinhua Import and Export Co. The notice person was the [seller]. The [seller] also emphasized that he would not pay the freight.

On 14 September 1990, in a fax from the [seller] to the [buyer], the [seller] emphasized again that he agreed to carry back the goods. The [seller] said that he would share the freight from Mexico to Shenzhen with the [buyer]. He would refine the raw material and arranged the shipment again.

[Buyer's] Mexican client shipped the goods back and the goods arrived in Hong Kong in December 1990. The [buyer] stated that, after the delivery of the Bill of Lading to the consignee who had been appointed by the [seller], no one took delivery of the goods. The goods are still deposited in Hong Kong now.

The [buyer] requested the [seller] to return the payment for the goods, but the [seller] has disregarded this request.

On 6 June 1991, the [buyer] brought this arbitration application to the China International Economic & Trade Arbitration Commission, Shenzhen Commission. In the requirement of the arbitration and the later supplemental documents, the [buyer] submitted that the [seller] should:

a. Return the payment for the goods: US $19,200;
b. Pay interest on this payment: US $5,597;
c. Pay the freight for return of the goods: US $1,750;
d. Pay the storage fee: U.S. $12,618. (The fee after 1 May 1993 should be calculated and paid additionally.)

[The main points of contention]

The main points of contention are:

The [buyer] stated:

     In December 1990 the goods were transported back and arrived in Hong Kong. The carrier delivered the Bill of Lading to the consignee who had been appointed by the [seller], but no one has taken the goods. Afterwards, the [buyer] together with the [seller] learned that the consignee had gone out of business. The [buyer] has paid the warehouse fee until now. Hence, the [seller] should return the payment of the goods and remedy the [buyer's] loss.

The [seller] responded:

     After his appointment of the destination port and consignee on 6 September 1990, the consignee had never received any document from the [buyer]. Moreover, the [buyer] has not shipped the goods to Shenzhen as he has been required; on the contrary, the [buyer] just shipped the goods to Hong Kong and kept the goods there until now. In a situation in which the goods were not shipped back, the [seller] could not issue the letter of credit nor pay any expense.

     Concerning the issue that the consignee has been out of business, the [buyer] knew that only after he came to Shenzhen to investigate the problem. The abolishment of the consignee belonged to an "Act of God".

     Concerning the fact that the goods could not be returned and accepted, the [seller] argued that he had no liability and he could not accept the claim from the [buyer].

The [buyer] argued that the reason he did not ship the goods to Shenzhen was because he could not clear Customs. The clearing of Customs could only be done by the consignee appointed by the [seller]. Hence, the [buyer] was not responsible for the fact that the goods had not been shipped to Shenzhen.

B. Opinion of the arbitration tribunal

After the [seller] delivered the goods to Mexico as required by Contract JHC9004, the [buyer's] client, Mexico International Flavor Co. (IFF), inspected them and reported that they were not in conformity with the contract. The [buyer] requested the [seller] to exchange the goods accordingly. According to the contract, the seller is obligated to exchange non-conforming goods free of charge. Whereas at the same time, the contract required the buyer to raise his claim to the seller based on the China Commodity Inspecting and Testing Bureau's certificate. However, it has been determined that there was no branch of the China Commodity Inspecting and Testing Bureau at the destination port in Mexico. In this situation, according to international trade customs, the buyer should ask a third non-interested party to undertake the inspection. In this case, IFF was the client of the [buyer]. Hence, it is not appropriate for the [buyer] to raise the claim of exchanging the goods based on IFF's inspection report.

In any event, the parties had already in fact entered into an agreement for exchange of the goods, except the part of the burden of freight. The [buyer] insisted on "freight to collect", while the [seller] required "freight paid". Later on 14 September 1990, the [seller] faxed to the [buyer] and stated: "I agree to carry back the goods, but we will share the freight from Mexico to Shenzhen".

Based on the evidence provided by the parties, the goods were shipped back by the [buyer] and arrived in Hong Kong on 24 January 1991. When the goods arrived, the Hong Kong carriage agent of IFF, Votainer United Service Ltd., sent the notice to the consignee who had been entrusted by the [seller], Shenzhen Xinhua Import and Export Trade Co.

Votainer notified the [buyer] on 25 February 1991 that no one took delivery of the goods. Upon learning this, on 26 February 1991 the [buyer] notified the [seller] that the goods returned have already arrived in Hong Kong.

The evidence also shows that on 6 September 1990 in the letter from the [seller] to the [buyer], the [seller] has clearly pointed out that the destination port for the returned goods should be Shenzhen, that the consignee was Shenzhen Xinhua Import and Export Trade Co. and that the person who would be in charge of notifying was the [seller]. While in fact, on the Bill of Lading of 13 December 1990, the discharging port is listed as Hong Kong not Shenzhen, and the person listed as in charge of the notifying was Xinhua Import and Export Trade Co. not the [seller]. The destination of the trans-shipment port was blank.

[Conclusion of the arbitration tribunal]

The arbitration tribunal concludes:

     a. The [buyer] should take the main responsibility for the fact that no one took the goods and the goods are still stored in Hong Kong. The reason is:

1. The [buyer] disobeyed the [seller's] instruction about the destination port for the returned goods and about the notice person. The [buyer] shipped the goods to Hong Kong and after that, the [buyer] did not notify the [seller] timely.

2. After the arrival of the goods in Hong Kong, it was possible for the [buyer], and it was also the responsibility of the [buyer], to transfer the goods to Shenzhen which was the destination port appointed by the [seller], but the [buyer] did not take certain measures to transfer the goods. If the [buyer] had transported the goods to Shenzhen and notified the [seller], it was the responsibility of the [seller] to clear the Customs. Whereas in fact the [buyer] did not transport the goods to Shenzhen. The [buyer] cannot excuse himself by arguing that he cannot clear the Customs.

3. The CISG states that:

"If the buyer has received the goods and intends to exercise any right under the contract or this Convention to reject them, he must take such steps to preserve them as are reasonable in the circumstances." Art. 86(1).

"If the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them." Art. 88(2).

In this case, the goods that have been shipped back by the [buyer] arrived in Hong Kong on 24 January 1991 and remained there for nearly three years. According to the evidence provided by the [buyer], by 1 May 1993 the warehouse fee had amounted to US $12,618. If the cost after 1 May 1993 is included, the total fee will amount to around US $17,000 - almost the amount of the payment for the goods for the whole contract. It can be concluded that the [buyer] has not taken any reasonable measure to sell the goods. This resulted in an unreasonable increase of storage fees. At the same time, the goods have been stored in Hong Kong for such a long time, they may already have decomposed. This is a loss that might have been avoidable or reduced by the [buyer].

The tribunal does not uphold the claim of the [buyer] that the [seller] should be required to return all the payment and pay interest and bear all the cost of the storage.

      b. However, the [seller] should be held partly responsible for the fact the goods were not taken care of in time. The reason is:

The [seller] did not take certain measures together with the [buyer] after he received the notice that the goods have already arrived in Hong Kong but no one took them. The [seller] did not try to remedy that even after he found out with the [buyer] that the appointed consignee, Xinhua Import and Export Trade Co., had gone out of business. The argument of the [seller] that the going out of business of the consignee is an "Act of God" is not acceptable.

      c. The original reason for the contract dispute is the quality of the goods. Although the certificate that had been provided by the [buyer] was given by his Mexican client, IFF, the [seller] has expressly agreed to the return and exchange of the goods. So, in fact, the [seller] has recognized that defects existed in the goods.

      d. Although the [buyer] should take the main responsibility for the failure of returning the goods, considering that the [seller] has agreed to the return and exchange and his own responsibility, the parties should share the freight for the returning the goods. It is, in total, US $1,750.

In view of the analysis of aforementioned (a), returning the goods has no practical meaning. Whereas based on (b) and (c), the [seller] should provide suitable remedy to the [buyer] because of the original defect in the goods and the loss suffered by the [buyer] for failure of the return of the goods.

The arbitration tribunal considers that the US $1,750 cost of freight from Mexico to Hong Kong should be divided equally; the [seller] should bear US $875. Furthermore, the [seller] should pay US $3,000 to the [buyer] as reasonable compensation. The [buyer] is free to dispose of the goods.

Arbitration award

     a. The claim of the [buyer] that the [seller] should return the total payment for the goods of US $19,200 and interest of US $5,597 is rejected.

     b. The [seller] should, however, pay to the [buyer] US $875 as part of the freight for returning the goods and compensation in the amount of US $3,000 within 45 days after the award. Interest will be added if the [seller] does not pay in time.

     c. The goods stored in Hong Kong can be disposed of by the [buyer].

     d. The cost for the arbitration and case handling fees should be borne by the [buyer] 90% and the [seller] 10%.

The arbitration award is final.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Respondent of China is referred to as [seller] and Claimant is referred to as [buyer].

** Wei Huo, LL.M. University of Iowa College of Law, is with the law firm of Coudert Brothers in Beijing, China.

*** Li Huini is a student at Beijing University Graduate School of Law, currently studying at Kyushu University Graduate School of Law.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated June 2, 2006
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography