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CISG CASE PRESENTATION

China 29 September 1994 CIETAC Arbitration proceeding (Umbrella case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/940929c1.html]

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

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Case identification

DATE OF DECISION: 19940729 (29 September 1994)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1994/12

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Umbrellas


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 8 ; 53 ; 78 ; 88

Classification of issues using UNCITRAL classification code numbers:

8C [Intent: interpretation in light of surrounding circumstances];

53A [Buyer's obligation to pay price of goods];

78A [Interest on delay in receiving price or any other sum in arrears];

88C [Right to retain reasonable expenses from proceeds of [re]sale of goods]

Descriptors: Intent ; Price ; Interest ; Resale 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. 1061-1063

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at n.14, 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

Umbrella case (29 September 1994)

Translation [*] by Meihua Xu [**]

Edited by John W. Zhu [***]

The China International Trade and Economic Arbitration Commission (formerly known as the Foreign Economic and Trade Arbitration Committee of China Council for the Promotion of International Trade, hereafter, the "Arbitration Commission") accepted this case regarding a dispute on the payment for a sale of umbrellas according to:

   -    The arbitration clause in Sales Contract No. WZU-228 signed by Claimant [Seller], China Wenzhou __ Traveling Products Company, and Respondent [Buyer], America __ International Trade Company, on 8 July 1992; and
 
   -    The written arbitration application submitted by [Seller] on 29 June 1994.

According to the Arbitration Rules, the Arbitration Commission sent the Arbitration Notice, the [Seller]'s arbitration application, and the Arbitration Rules to the [Buyer] on 29 June 1994. In accordance with Article 65 of the Arbitration Rules, the Arbitration Tribunal was then formed with Mr. P as the sole arbitrator.

After examining the materials submitted by the two parties, pursuant to Article 67 of the Arbitration Rules, the Arbitration Tribunal decided to process this case based on the written materials and evidence provided by both parties, and made this award.

The following are the facts, the Tribunal's opinion and award.

I. FACTS

[Seller]'s position

The [Seller] alleges that on 8 July 1992, the [Buyer] and the [Seller] signed Sales Contract WZU-228, by which the [Buyer] was to purchase 2,675 pieces of various kinds of umbrellas, totaling US $56,405.50. The contract stipulates that the payment should be made by T/T within 90 days after the delivery of the goods.

On 18 July 1992, the [Seller] delivered the goods to Los Angeles; however, the [Buyer] did not make payment within 90 days as required by the contract. After being repeatedly urged by the [Seller], the [Buyer] paid US $8,000 on 2 February 1993 with US $48,405.50 in arrears. The [Seller] entrusted the Legal Affairs Department of Zhejiang Sub-commission of China Council for the Promotion of International Trade to send letters to the [Buyer] on 13 September, 22 October, and 9 December 1993, respectively, asking the [Buyer] to negotiate the payment problem; however, the [Buyer] still delayed the payment, asserting that it was entrusted to sell the goods pursuant to a cooperative marketing agreement. The [Seller] therefore applied to arbitration, seeking to have the [Buyer] directed to pay the remaining US $48,405.50 and the interest on it plus the entire losses occurred thereof.

[Buyer]'s defense

The [Buyer] defends that the goods in this case were for a cooperative marketing arrangement by the parties, that this was not a purchase and sale transaction. The reasons were as follows:

      (1) Mr. Zhang ** had organized the delegation of the Wenzhou Trade and Economy work group to visit the U.S. in June 1992. When the delegation members were attending the Las Vegas Trade Fair, the former Wenzhou __ Umbrella Factory asked Mr. Zhang to help them send goods to the United States. Contract WZU-228 was signed at that time, with Mr. Zhang's signature affixed on behalf of the [Buyer]. However, no corresponding faxes were sent between the parties regarding the price of the goods prior to the conclusion of the contract. Moreover, Mr. Zhang was not entrusted by the [Buyer], nor did the contract contain the signature of the [Buyer]'s purchasing manager. [Buyer] alleges that the contract is, therefore, invalid.

      (2) When he arrived at Los Angeles with the delegation, Mr. Shao **, the Chairman of the Board of Directors of the former Wenzhou __ Umbrella Factory and his assistant, Mr. Zhuo **, found that the [Buyer]'s company was large and had a huge American market; therefore, they asked for the [Buyer]'s cooperation to develop the American market, and a cooperative marketing agreement was entered into for the sale of umbrellas.

      (3) [Seller]'s representative, Mr. Qu **, has lowered the price of the goods repeatedly to adjust the market price and [Seller] was responsible for the freight, which indicates that it was a collaborative sale.

The [Buyer] also alleges that the quality of the umbrellas was poor, and that the price was too high; therefore, the [Buyer] negotiated with Mr. Qu several times to ask for return of the defective goods. On 17 November 1993, the [Buyer] asked the [Seller] to clean up the account and to take back the remaining goods, but the [Seller] made no response; therefore, the [Buyer] asks the Arbitration Tribunal to rule that the contract in this case is a cooperative marketing contract which should be performed based on the cooperative agreement; that the [Seller] should send staff to clear the account and the remaining goods at the [Buyer]'s place; and that the [Seller] should bear the storage charge and management fee calculated to 17 November 1993 at US $50/per day, the entire attorneys' fee, and the arbitration fee.

On 23 August 1994, the [Seller] sent a letter to the Arbitration Tribunal, asserting that it did not sign the cooperative marketing agreement, which indicates that the agreement was invalid.

II. OPINION OF THE ARBITRATION TRIBUNAL

      (1) The Arbitration Tribunal notes that the parties did not stipulate the applicable law in the contract. Considering that the [Buyer] and the [Seller] have their places of business in the United States and the People's Republic of China, respectively, and that the two countries are Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereafter "the CISG"), the Arbitration Tribunal rules that the CISG shall be applied.

      (2) The Arbitration Tribunal also notes that the Contract WZU-228 provided by the [Seller] is two pages long, but the contract of the same number provided by the [Buyer] has three pages. The Tribunal compared them carefully and concludes that the contract should have three pages. The Arbitration Tribunal therefore points out that it is incorrect for the [Seller] to provide an incomplete document.

      (3) The Arbitration Tribunal examined the three-page Contract No. WZU-228, noting that the two parties confirmed the contract by signing it page-by-page. Since there were no signatures of the parties on the first page, it should be considered invalid. However, both parties signed on the second and the third pages; therefore, the contents on these two pages are effective. Based on the above, the Arbitration Tribunal holds that the following are the contractual goods confirmed by the two parties under Contract WZU-228:

Product number       Quantity              Unit price              Total Price [US $]
 
B023 100 doz 17.10 1,710.00
041 150 doz 30.50 4,757.00
R731 350 pcs 4.20/PC 1,470.00
611 600 pcs 4.10/PC 2,460.00
B406 200 doz 24.60 4,920.00
611 100 doz 48.80 4,880.00
501N 250 doz 22.60 5,650.00
502N 250 doz 21.18 5,295.00
503N 250 doz 22.62 5,655.00

The above totals nine product numbers, 1,300 dozens and 950 pieces, and US $36,615.

      (4) The Arbitration Tribunal examined Invoice No. 0000049 issued by the [Seller] on 1 July 1992, and compared it with Contract WZU-228, finding that the [Seller] has delivered the following goods:

(a) Five items of 450 dozens and 950 pieces, totaling US $15,135 that were "contractual goods" as mentioned in section (3);

(b) Five items of 1,650 dozens, totaling US $41,270.50 are mentioned in page one of the contract. Since the parties did not sign page one, it is invalid; therefore, these are not "contractual goods" as stated in section (3);

(c) Four items of 850 dozens, totaling US $21,480 were "contractual goods" mentioned in section (3), but the [Seller] never delivered them.

For (c), it should be deemed that the [Seller] did not deliver the goods as required by the contract. However, the [Buyer] did not raise objection to this then, nor did it claim against the [Seller] for that in this arbitration; therefore, the Arbitration Tribunal will not give an opinion on the [Seller]'s non-delivery of these goods, but only hear the aforesaid (a) and (b).

      (5) For (a), the Arbitration Tribunal notes that Mr. Zhang signed Contract WZU-228 representing the [Buyer], and that all of terms in the contract were the terms of a sales contract with no content indicating that this was a cooperative marketing agreement; therefore, the 450 dozens and 950 pieces of goods, totaling US $15,135 were for a sales contract.

The parties have no dispute on the US $8,000 paid by the [Buyer]. The Arbitration Tribunal holds that since it is a sales contract with the price of the goods clearly written in the contract, and the [Buyer] did not provide any evidence showing that the goods had defects; therefore, no matter whether the [Buyer] has sold the goods or not, it has the obligation to pay for the goods. The Arbitration Tribunal therefore concludes that the [Buyer] shall pay the remaining US $7,135 to the [Seller] and interest of US $835.09 calculated from 17 October to the day of the judgment at a 6% annual interest rate.

      (6) For (b), the Arbitration Tribunal holds that the five items of 1,650 dozens of goods, totaling US $41,270.50 were not contractual goods agreed by the two parties; therefore, the goods delivered by the [Seller] were non-conforming goods. The [Buyer] thus had the right to refuse to take delivery of those goods; however, the [Buyer] did not do so. Under the special circumstance at that time, it should be regarded that the [Buyer] was willing to help the [Seller] to sell these goods in good faith.

The Arbitration Tribunal holds that the [Seller] shall contact the [Buyer] immediately to clear the account, take back these unsold goods, and resell or make disposal of the goods by itself. If the [Seller] fails to do so within the time limit stipulated by the arbitration award, the [Buyer] has the right to make disposal of the goods, and the [Buyer] shall return the surplus amount to the [Seller] (if there is any) deducting the reasonable costs after making such disposal.

      (7) The [Buyer] and the [Seller] shall bear the arbitration fee equally.

III. THE AWARD

The Arbitration Tribunal rules that:

      (1) The [Buyer] shall pay the remaining price for the goods of US $7,135 and interest of US $835.09 to the [Seller] before 15 November 1994; otherwise, interest calculated from 16 November 1994 to the day of actual payment at an annual interest rate of 7.5% shall be added;

      (2) The [Seller] shall contact the [Buyer] before 15 November 1994, making arrangements to take back the unsold non-contract goods, clear the account, finish other closing issues and shall complete these arrangements within a reasonable time period; otherwise, the [Buyer] has the right to dispose of the remaining goods, and shall return the surplus amount to the [Seller] (if there is any) after deducting [Buyer]'s reasonable costs;

      (3) The arbitration fee totals renminbi [RMB] ___, which should be borne by the two parties equally. The [Buyer] shall pay RMB ___ to the [Seller] before 15 November; otherwise, interest calculated from 16 November 1994 to the day of actual payment at 9% annual interest rate shall be added.

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 [Seller] and Respondent of the United States of America is referred to as [Buyer]. 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];

** 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.

*** John W. Zhu, LL.M. China University of Political Science and Law (National Graduate Scholarship); Bachelor of Law, Southwest University of Political Science and Law; Double Degree, English Literature, Sichuan International Studies University, Chongqing, China. Focus: International Economic Law.

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