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CISG CASE PRESENTATION

China 11 August 1994 CIETAC Arbitration proceeding (Bicycles case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/940811c1.html]

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

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Case identification

DATE OF DECISION: 19940811 (11 August 1994)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1994/09

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: France (claimant)

GOODS INVOLVED: Bicycles


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74

Classification of issues using UNCITRAL classification code numbers:

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

Descriptors: Damages ; Foreseeability of damages

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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. 944-946

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at n.206, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

Queen Mary Case Translation Programme

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

Bicycles case (11 August 1994)

Translation [*] by Zheng Xie [**]

Translation edited by Meihua Xu [***]

China's International Trade and Economic Arbitration Commission [hereafter, the Arbitration Commission] accepted this case according to:

   -    The arbitration clauses in Contracts No. 91L3401U055 and No. 91L3401U056 signed by Claimant [Buyer], France __ Company, and Respondent [Seller], Beijing __ Import and Export Corporation, on 3 August 1991; and
 
   -    The written arbitration application submitted by [Buyer] to the Arbitration Commission on 10 November 1992.

The Chairman of the Arbitration Commission appointed Mr. P as the presiding arbitrator according to the Arbitration Rules. Mr. P, Mr. A appointed by [Buyer], and Mr. D appointed by [Seller] formed the Arbitration Tribunal and heard the case.

The Secretariat of the Arbitration Commission sent [Buyer]'s application and appendix to [Seller], and requested it to submit written defense and appoint an arbitrator. [Seller] appointed an arbitrator, but did not submit a written defense. On 7 October 1993, the Arbitration Tribunal held a court session in Beijing. Both parties attended the session. They made oral statements and arguments, and answered the Arbitration Tribunal's questions. After the session, the parties submitted supplementary materials.

The Arbitration has concluded. According to the written materials and the result of the court session, the Arbitration Tribunal handed down its award by consent.

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

FACTS

On 3 August 1991, [Buyer] and [Seller] signed Contracts No. 91L3401U055 and No. 91L3401U056 for sales of 3,185 bicycles for the total price of US $159,594.62.

   -    Contract No. 91L3401U055 was for 950 bicycles, 175 of which are MTB 26" Eighteen Speed A, 175 of which are 26" Eighteen Speed B, and 600 of which are MTB 20" Five Speed for the total contract price of US $60,237.62.
 
   -    Contract No. 91L3401U056 was for 2,235 bicycles, 532 of which are QE18 26", 533 of which are QF15 26", 620 of which are BMX871 20", and 550 of which are 92 20", for the total contract price of US $99,357.
 
   -    The price terms in the two contracts are CIF Hong Kong; the time of shipment is before 1 October 1991; the goods can be shipped by installments; the terms of payment are irrevocable L/C.

After signing the contract, [Buyer] issued the L/C with [Seller] as beneficiary on 13 September 1991. [Seller] shipped the goods. When the goods arrived at Antwerp, disputes on the quality of the goods arose. The parties negotiated, but did not reach any agreement. On 10 November 1992, [Buyer] applied for arbitration with the Arbitration Commission.

POSITION OF THE PARTIES

[Buyer]'s position

[Buyer] claims for damages 1,064,677.86 French francs and the entire arbitration fee.

[Buyer] alleges that when it received the goods, it found that there was no bedding in the packing boxes for the bicycles, and that some components were lost. On 6 December 1991, [Buyer] applied to the French High Court for inspection of the goods; the Court issued the inspection report on 18 December 1991.

According to the inspection report, the bicycles delivered by [Seller] have defects: the lamps were broken, the threads were too long, some components were lost, etc. The goods did not conform to the sample provided under the contract [Buyer] entered into with [Seller]. This caused a sole distributorship contract [Buyer] had entered into with France GIB Company to be avoided. [Buyer] notified [Seller]'s Beijing Headquarters and French office. [Seller] sent persons to inspect the bicycles and found that there were defects. After negotiation, the parties agreed to lower the price to dispose of the goods. [Buyer] then looked for clients. On 24 January 1992, [Buyer] sold the 2,908 bicycles and received 800,000 French francs for them. Among the remaining 277 bicycles, 47 could not be used, and the other 230 were sold in eleven installments from 10 March to 17 June 1992. [Buyer] received 46,859 French francs for them

[Seller]'s position

[Seller] did not submit a written defense to [Buyer]'s claims. However, in the court session, [Seller] stated that on 13 September 1991 [Buyer] issued the L/C with [Seller] as beneficiary, but then the period was prolonged many times; in addition, [Buyer] did not pay the price of the goods which were sold at reduced price.

In December 1991, [Seller] received [Buyer]'s fax, in which [Buyer] alleged that the goods had defects. In early 1992, [Seller] received the inspection report sent by [Buyer], and then sent persons to inspect the goods in April and May. They found that defects existed. The parties negotiated. [Seller] received [Buyer]'s claims, but thought the amount was too high to accept. [Seller] alleged that the defects were caused by the short time for delivery; otherwise, the goods must be conforming. In addition, the business expenses in [Buyer]'s claim are the expenses for running the company for a period, which should be divided equally among the businesses [Buyer] is running and should not be borne only by the sales of bicycles. Moreover, although [Buyer] suffered some damages, [Seller] suffered damages too. The period of the L/C has been prolonged for more than two years, and [Seller]'s price of the goods could not be returned, so [Seller] obviously suffered losses. Accordingly, [Seller] alleges [Buyer]'s claims are not reasonable, and that the Arbitration Tribunal should hand down a more justifiable award.

OPINION OF THE ARBITRATION TRIBUNAL

1. Quality of the Goods

[Buyer] and [Seller] agreed that the goods have defects.

2. Damages

[Buyer]'s claim is for US $256,893.56, (renminbi [RMB] 5.76 : US $1), which is a greater amount than the total contract price of US $159,594.62.

   -    [Seller]'s place of business and the place of performance are in China; according to the theory of proximate connection, the law of the People's Republic of China applies. China and France are parties to the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG). According to Article 74 of the CISG and Article 19 of the Law of the People's Republic of China on Economic Contracts Involving Foreign Interest, 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.
 
   -    [Buyer]'s claims exceed the total contract price, which [Seller] could not foresee when signing the contract. If the price for the goods delivered, but not paid, is added, the amount for damages is much higher. Thus, the Arbitration Tribunal does not honor [Buyer]'s claim.
 
   -    The Arbitration Tribunal notes that [Buyer] calculates the damages on the basis of [Buyer]'s agreement of sole distributorship with France GIB Company. The Arbitration Tribunal holds that this contract signed by [Buyer] and France GIB has nothing to do with this case, so it cannot be used as the basis to calculate damages.

[Buyer] does not provide any other basis for calculating damages, so its claims are not supported.

AWARD

1. [Buyer]'s claims are dismissed.

2. [Buyer] shall pay the arbitration fee, RMB __.

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 France is referred to as [Buyer]; Respondent of the People's Republic of China 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].

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

*** 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 March 20, 2006
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