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CISG CASE PRESENTATION

China 20 January 1994 CIETAC Arbitration proceeding (Hydraulic press case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/940120c1.html]

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

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Case identification

DATE OF DECISION: 19940120 (20 January 1994)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1994/02

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (respondent)

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

GOODS INVOLVED: Hydraulic press


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 35

Classification of issues using UNCITRAL classification code numbers:

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

Descriptors: 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 (Chinese): Zhong Guo Guo Ji Jing Ji Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 1994 vol., pp. 649-652

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.72, 88, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

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


 

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

Hydraulic press case (20 January 1994)

Translation [*] by Fan Wei [**]

Translation edited by Meihua Xu [***]

According to the arbitration clause in Sales Contract No. 91LOCXA-40001CL between Claimants [Buyer], ___ International Rental Company (hereinafter "Rental Company") and Guangdong ___ Ceramic Industry Co., Ltd (hereinafter "Ceramic Company") and Respondent [Seller], ___ Company of Italy, and the petition for arbitration by [Buyer], on 18 November 1992, China International Economic & Trade Arbitration Commission (CIETAC) has agreed to hear this case.

[Buyer] has named Mr. A to be arbitrator, and [Seller] has named Mr. D; the Chairman of the Arbitration Commission has named Mr. P as presiding arbitrator. The three named arbitrators formed the Tribunal for the case.

The Arbitration Tribunal has carefully examined the petition and the defense submitted by [Buyer] and [Seller]. A trial was conducted on 7 September 1993, in which both parties sent representatives, and statements were made as to facts and legal issues, responses provided to the Tribunal's inquiries, and arguments presented. After the trial, both parties submitted additional written materials.

The Tribunal has decided the case based on the written materials from the parties as well as the presentations at the hearings. The facts, the opinion of the Tribunal, and the award are as follows:

I. FACTS

[Buyer] and [Seller] entered into Contract No. 91LOCXA-40001CL on 15 March 1991. The contract provided for [Buyer]'s purchase from [Seller] of a production line for 420/16 automatic polishing brick and a HYDRA1400 automatic hydraulic press, which were to be rented to Ceramic Company. The price for the hydraulic press is US $429,500 CIF. Zhanjiang, China. The hydraulic press was shipped to [Buyer]'s factory through Zhanjiang port in October 1991, and was installed for try-outs on 29 October 1991. The following problems appeared:

1.      The machine stamped at the rate of nine times per minute. This was slower than the contract requirement; the contract called for at least twelve times per minute.
 
2. The RP3 and RP4 spool spring and spring plate were broken-down;
 
3. The pressure cylinder piston was pulled from the cylinder body in a large area;
 
4. Up-sector and down-sector gears were broken up.

On 10 April 1992, Guangdong Commodity Inspection Bureau confirmed these problems in its inspection certificate and pointed out that "the hydraulic press does not meet the technical index" and stated that "the major instruments broken are mainly caused by the design and manufacture of the press." The dispute between the parties on the quality of the hydraulic press could not be resolved through friendly consultations. [Buyer] therefore applied for arbitration.

II. POSITION OF THE PARTIES

[Buyer]'s claims

1.  [Seller] should bear the cost of uninstalling and returning the hydraulic press from the [Buyer]'s factory.

2.  [Seller] should return the contract price of US $429,500 to [Buyer], plus the corresponding interest at the rate of 10% per year.

3.  [Seller] should compensate [Buyer] for the cost of storage, discharge, transportation, and inspection.

4.  [Seller] should bear the arbitration cost and other related costs for this case.

[Seller]'s position

[Seller] argued that the inspection certificate issued by Guangdong Commodity Inspection Bureau was not consistent with the facts and was inadequate evidence. The [Seller] alleged that all claims made by [Buyer] in the arbitration petition are without sound legal and factual grounds. It is [Seller]'s position that:

1.  The hydraulic press met the technical standard of thirteen times per minute for stamping; it was [Buyer] who asked [Seller] to adjust the rate to nine times per minute in order to suit [Buyer]'s drying machine.

2.  As to the broken RP3 and RP4 spool spring and spring plate, and the pressure cylinder piston which was pulled from the cylinder body in a large area, the direct reason for the problem was that the hydraulic oil used by [Buyer] did not meet the technical requirements.

3.  When the above-mentioned break happened, if the machine was not stopped to be examined and repaired, a consequent result would be the technical break-up of up-sector and down-sector gears.

4.  [The machine was installed for try-out on 29 October 1991.] On 2 April 1992, [Seller]'s technical personnel examined the machine and ascertained the problems, and the machine was stopped on 5 April. Therefore, to say that "the hydraulic press was tested [on 10 April 1992] under normal operating conditions" -- as stated on the inspection certification issued by Guangdong Commodity Inspection Bureau -- does not accord with the facts. Obviously, the inspection certification was issued after the machine had been used for months; furthermore, the machine had been under abnormal conditions already. Therefore, the certification could not identify the original condition of the hydraulic press, nor could it conclude that the breaks were attributed to the design and manufacture of the machine.

[Buyer]'s rebuttal

1.  As a support for a production line, the drying machine was completely fit for an hydraulic press of a good quality. As to this hydraulic press, the frequency of stamping could indeed be up to twelve times per minute, but it worked without pressure, which made the machine produce wasted material. In order to produce qualified products, it had to be slowed down to nine times per minute.

2.  There was no direct relationship between the break of the spool spring and spring plate and the hydraulic oil. When the same type of hydraulic press bought from [Seller] had the spring changed, it worked well with the same type of hydraulic oil.

3.  Moreover, [Buyer] did not use the hydraulic press after discovering its abnormal operation, so the [Buyer]'s operation of the machine could not have led to the breaking of the gears. [Buyer] never operated the machine to produce goods after [Seller]'s field personnel had finished their test and taken the electronic RAM chip away.

4.  [Seller] should not object to the inspection certification for the following reasons:

      (1) According to clause 15(2) of the Contract, the parties must regard the inspection certification issued by the China's official inspection institution as the final evidence.

      (2) Although the certification was issued on 10 April 1992, officials had inspected the machine all through the testing process. Therefore, the certification can identify the original quality of the hydraulic press.

5.  [Seller] should compensate [Buyer] for the loss of expected profit caused by the non-workable condition of the hydraulic press. This loss amounts to renminbi [RMB] 3,800,320. [Seller] should also compensate RMB 33,694.28 for handling fees.

III. THE TRIBUNAL'S OPINION

1.  The countries of both parties ([Buyer]'s place of business being China, [Seller]'s, Italy) are signatories of the United Nations Convention on Contracts for the International Sale of Goods (CISG), and the parties did not contract out the application of the CISG; therefore, the relevant provisions of the CISG shall apply to this case.

2.  According to the written materials from both parties as well as the presentations made in the trials, [Buyer] had purchased another hydraulic press from the [Seller] approximately one year ago. It was just the same type as the subject of this case, and there were the same problems associated with it, such as the breaking of the spring. Therefore, [Buyer] knew that the machine had these defects when concluding the sales contract for the machine involved in this case. However, [Buyer] did not put this forward in the contract for this machine, which indicated that [Buyer] accepted these defects.

Article 35(3) of the CISG states that "the seller is not liable 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." Accordingly, except as noted in 3, below. the Tribunal denies all of [Buyer]'s claims.

3.  The Tribunal notes that [Seller] has improved the springs of the hydraulic press in order to accord with the actual situation in China. To eliminate these defects of the hydraulic press sold under this contract, it is reasonable for [Seller] to provide [Buyer] a set of these improved springs without charge.

IV. THE AWARD

For the reasons stated above, this Tribunal grants the following award:

1.  [Buyer]'s claims are dismissed.

2.  [Seller] shall provide [Buyer] a set of improved springs without charge immediately to substitute for the broken springs.

3.  [Buyer] bears the arbitration fee of RMB ___ and other actual cost of RMB ___. [Buyer] has advanced the arbitration fee and other actual cost, so the amount is offset.

This is the final award.


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] and Respondent of Italy is referred to as [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Fan Wei. LL.M. Candidate, New York University School of Law; LL.B., East China University of Politics and Law.

*** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

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Pace Law School Institute of International Commercial Law - Last updated May 8, 2006
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