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CISG CASE PRESENTATION

China 12 December 1994 CIETAC Arbitration proceeding (Sunflower seeds and groundnut case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/941212c1.html]

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

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Case identification

DATE OF DECISION: 19941212 (12 December 1994)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1994/14

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Germany (respondent)

GOODS INVOLVED: Sunflower seeds and groundnuts


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 73(1)

Classification of issues using UNCITRAL classification code numbers:

73C [Installment contracts: defect in our delivery unrelated to other installments]

Descriptors: Installment contracts

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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. 1249-1253

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.75, 122, 235, 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

Sunflower seeds and groundnut case (12 December 1994)

Translation [*] by Zheng Xie [**]

Translation edited by Meihua Xu [***]

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

   -    The arbitration clauses in Contracts No. EF0393907, No. EF0393906 and No. EF0393924 signed by Claimant [Seller], Hebei __ Trade Company, and Respondent [Buyer], German __ Company, on 7, 9 and 23 September, 1993 respectively; and
 
   -    The written arbitration application submitted by [Seller] on 5 July 1994.

After accepting the case, according to the Arbitration Rules the Arbitration Commission decided to hear the case by summary procedure, and sent the notice of arbitration to the parties. Mr. P was appointed as the independent arbitrator. He formed the Arbitration Tribunal and heard the case.

The Arbitration Tribunal reviewed [Seller]'s written application and [Buyer]'s written defense. [Buyer] filed a counterclaim with its defense material. In accordance with Article 66 of the Arbitration Rules, the Arbitration Tribunal decided that because [Buyer] did not file the counterclaim within the time limit, the counterclaim was not accepted. On 17 November 1994, [Buyer] wrote to the Arbitration Commission stating that the counterclaim material could be regarded as defense material. According to Article 67 of the Arbitration Rules:

"The Arbitration Tribunal may hear the case in the way it deems appropriate. The Arbitration Tribunal has the discretion to hear the case only on the basis of the written materials and evidence submitted by the parties or to hold an oral hearing as well."

The Arbitration Tribunal decided not to hold an oral hearing, but to hear the case by written materials only. On 3 November 1994, the Arbitration Tribunal sent the written notice of the decision to the parties through the Secretariat of the Arbitration Commission. The Arbitration Tribunal then sent the notice of written review to the parties. The parties replied within the stipulated time.

The Arbitration Tribunal has concluded the case according to the materials and evidence received and handed down this award within the time limit stipulated in Article 73 of the Arbitration Rules. The following are the facts, the opinion of the Arbitration Tribunal and the award.

FACTS

[Seller] and [Buyer] signed Contracts No. EF0393907, No. EF0393906 and No. EF0393924 on 7, 9 and 23 September, 1993 respectively.

1. Contracts No. EF0393907 and No. EF0393906

Contract No. EF0393907 stipulates:

   -    [Seller] sells [Buyer] 300 tons groundnuts in shell H.P.S.10/13,
   -    Price: FOBS C2 Xinggang US $590/t;
   -    Total Price: US $177,000;
   -    Loading Port: Xingang, Tianjin;
   -    Payment Term: 90% paid by L/C and 10% paid by T/T within 10 days after the goods arrive and are inspected showing that the quality conforms to the contract.
   -    The specification under the contract was 10/13; during the performance, the parties agreed to alter it to 10/12.

Contract No. EF0393906 stipulates:

   -    [Seller] sells [Buyer] 500 tons groundnuts in shell H.P.S. 93 Crop 9/11;
   -    Price: FOBS C2 Xinggang US $600/t;
   -    Total Price: US $300,000;
   -    Loading Port: Xingang, Tianjin;
   -    Payment Term: 90% paid by L/C and 10% paid by T/T within 10 days after the goods arrive and are inspected showing that the quality conforms to the contract.

    The damages clauses in the two contracts stipulate that any claim by [Buyer] shall be made with sufficient evidence within 30 days after the goods arrive; otherwise, [Seller] can refuse.

[Seller] in December 1993, shipped 52.50 tons of goods with the invoice value of US $29,925 under Contract No. EF0393907, and 104.90 tons of goods with the invoice value of US $61,891 under Contract No. EF0393906 from Xingang, Tianjin. The total price is US $91,816. [Buyer] paid 90% of this price, but did not pay the remaining 10%, US $9,181.50.

[Seller] asserts the above goods were inspected by Tianjin Import and Export Commodity Bureau, and that the quality is conforming. [Buyer] did not provide any evidence of inspection. [Seller] alleges that there is no basis for [Buyer] to refuse paying the remaining price raising quality problems after having received the goods.

[Buyer] alleges that the quality of 104.90 tons and 52.50 tons of goods under the two contracts is severely non-conforming to the contract, and that the goods cannot be sold; and that [Buyer] is therefore justified in not paying the 10% balance. [Buyer] pointed out that on 1 April 1994 the contract goods arrived in Rotterdam, and on April 12 were sent into [Buyer]'s warehouse. Then, [Buyer] and the client of [Buyer] to whom the goods were sold inspected the goods; the result was that goods that were supposed to be 10-12 were in fact above 13, and goods that were supposed to be 9-11 were in fact near 14, which is obviously not conforming to the L/C, the contract and the inspection certificate. However, [Seller] did not admit that. [Buyer] had to apply to another inspection organization to re-inspect the goods. The results of the re-inspection support [Buyer]'s assertion. Only few of the goods delivered by [Seller] were resold at a low price; most of the goods were still in the warehouse. [Buyer] has received its client's claims for damages. Thus, it is unreasonable for [Seller] to claim the remaining price 10%. Meanwhile, [Buyer] is entitled to damages caused by the non-conforming goods delivered by [Seller].

2. Contract No. EF0393924

The contract stipulates:

   -    [Seller] sells 195 tons sun flower seeds kernels;
   -    Price: C&F Hamburger US $980/t;
   -    Total Price: US $191,100;
   -    Shipping Period: December 1993-May 1994; the goods can be shipped by installments.
   -    Loading Port: Port in China;
   -    Payment Term: Sight L/C;

    The damages clause in the contract stipulates that any claim of the [Buyer] shall be made with sufficient evidence within 30 days after the goods arrive; otherwise, [Seller] can refuse.

After signing the contract, on 20 December 1993 [Buyer] shipped the goods with gross weight 30.42 tons and net weight 30 tons, from Xingang Tianjin. The total price of the goods was US $29,940. After receiving the goods, [Buyer] did not pay the entire price.

[Seller] alleges that after signing the contract, [Seller] first shipped 30 tons of goods. In December 1993, [Seller] required [Buyer] to alter the payment term from L/C to T/T, and promised to make the payment within one week after receiving the shipping documents, and [Seller] agreed. On 19 January 1994, [Buyer] received the entire set of documents and promised to make the payment, but did not pay. [Buyer] should pay [Seller] the price US $29,940 for 30 tons of the goods and interest from 26 January 1994.

[Buyer] asserts that [Buyer] did not pay for the 30 tons of goods delivered, because [Seller] did not deliver the goods within the period and in the quantity stipulated in the contract, which caused [Buyer] severe damages. Accordingly, [Buyer] did not pay the price, so that it can offset the damages [Buyer] suffered; [Buyer] retains the right to claim further damages. [Buyer] pointed out that [Buyer] had sold the goods in five installments to a German client. [Buyer] requested to increase the price after delivering the 30 tons goods, [Buyer] agreed to increase US $12 per ton after negotiating with its German client, and altered the L/C. According to the L/C, [Seller] should deliver the remaining goods under the L/C issued in March 1994, but it refused to deliver. [Buyer]'s client claimed damages, US $62,850 (including the price of the goods, US $29,940 and other damages, US $32,910). [Buyer] suffered severe loss and is entitled to all of the damages.

[Seller]'s final arbitration claims are:

  1. [Buyer] shall pay the price of 30 tons sunflower seeds under Contract EF0393924, US $29,940, and interest;

  2. [Buyer] shall pay the price of groundnuts under Contracts EF0393906 and EF0393907, US $9,181.50 and interest;

  3. [Seller] shall retain the right to damages due to [Buyer]'s breach of the three contracts;

  4. [Buyer] shall pay the arbitration fee and [Seller]'s attorneys' fee and other expenses for this case.

OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

The contracts did not stipulate the applicable law. The Arbitration Tribunal holds that because the place of signing and performing the contract, and the place of arbitration are China, the law of the People's Republic of China applies. In addition, China and Germany are parties to the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG), so the CISG applies.

2. Contract No. EF0393924

The Arbitration Tribunal notes that the goods under the contract could be shipped by installments. According to the time of shipment stipulated in the contract, two installments shall be delivered in December 1993, three installments shall be delivered in January 1994, three installments shall be delivered in February or March, three installments shall be delivered in March or April, and two installments shall be delivered in April or May.

On 20 December 1993, [Seller] sent [Buyer] the first two installments for the price of US $29,940. On 23 November 1993 and 19 January 1994, [Buyer] sent faxes to [Seller]'s representative Mr. Liang, expressing that payment would be made.

Meanwhile, the Arbitration Tribunal notes that [Buyer] in its defense, alleges that the price for two installments, US $29,940 that was not paid offsets the damages [Buyer] suffered. The Arbitration Tribunal does not support this claim, because

      (1) Article 73(1) of CISG states:

"In the case of a contract for delivery of goods by installments, if the failure of one party to perform any of his obligations in respect of any installment constitutes a fundamental breach of contract with respect to that installment, the other party may declare the contract avoided with respect to that installment."

[Buyer] received [Seller]'s first installment, which is independent of the other installments; [Buyer] breached the contract because it did not pay for this installment.

      (2) [Buyer] did not receive other installments. Although [Buyer] has an entitlement to damages, the Arbitration Tribunal did not accept [Buyer]'s counterclaim for this case.

      (3) [Buyer] expressed that it would pay for the first installment delivered by [Seller]. According to the fax sent by [Buyer] on 19 January 1994 (Wednesday), [Buyer] promised to "pay before next week to Bank of China Hebei Branch". [Buyer] should therefore have made the payment of US $29,940 at the latest by 29 January 1994 (Saturday).

Accordingly, [Buyer] should pay the price of the goods, US $ 29,940, and interest at the monthly rate of 0.68% from 30 January 1994 to the date when the payment is made.

3. Contracts No. EF0393907 and No. EF0393906

After signing the above two contracts, on 13 December 1993 [Seller] shipped the goods of 52.5 tons (net weight) for the price of US $29,925, under Contract No. EF0393907, and goods of 104.9 tons (net weight) for the price of US $61,891 under Contract EF0393906. [Seller] received 90% of the price for the goods delivered, but not the remaining 10%, US $2,992.50, for the goods delivered under Contract No. EF0393907, nor did [Seller] receive the remaining 10% of US $6,189.10 under Contract No. EF0393906.

The Arbitration Tribunal holds that, according to the damages clauses, any claim of [Buyer] shall be made with sufficient evidence within 30 days after the goods arrive; otherwise, [Seller] can refuse. Among the inspection reports provided by [Buyer], only one inspection report (for the goods 9-11 seeds per ounce) dated 26 April 1994 was made within 30 days after the goods arrived at the destination port. The other inspection reports were made beyond the time limit, which cannot be the basis for [Buyer] to withhold payment.

According to the inspection certificate issued on 26 April 1994, the goods under Contract No. EF0393906, that were supposed to be 9-11 seeds per ounce were in fact 12-13 seeds per ounce, which did not conform to the contract. According to the damages clause and the payment clause in the contract, [Buyer] has provided sufficient evidence to prove that the quality of the goods did not conform to the contract, so [Buyer] can refuse to pay 10% of the price for these goods, US $6,189.10.

For the goods with the specification 10-12, under Contract No. EF0393907, [Buyer] did not provide evidence to show that the goods were not conforming within 30 days after the goods arrived, so [Buyer] has no right to withhold 10% of the price, US $2,992.50. [Buyer] shall pay 10% of the price for the goods delivered under Contract EF0393907, US $2,992.50, and interest at the monthly rate 0.68% from 1 April 1994 to the date when the payment is made.

4. The arbitration fee and the attorneys' fee

[Seller] seeks to have [Buyer] to pay its attorneys' fee for this case, renminbi [RMB] 17,320. Because that amount does not exceed 10% of the amount awarded, according to Article 59 of the Arbitration Rules, the Arbitration Tribunal supports this claim.

[Buyer] shall pay the arbitration fee of this case.

AWARD

1. [Buyer] shall pay the price of the goods, US $29,940, and interest at the monthly rate of 0.68% from 30 January 1994.

2. [Buyer] shall pay 10% of the price for the goods delivered under Contract EF0393907, US $2,992.50, and interest at the monthly rate 0.68% from 1 April 1994.

3. [Seller]'s claim for the remaining price under Contract No. EF0393906, US $6,189.10, and interest is dismissed.

4. [Buyer] shall pay [Seller]'s attorneys' fee, RMB 17,320, i.e., US $2,038.

5. [Buyer] shall pay the arbitration fee of this case.

[Buyer] shall pay the above amount before 31 January 1995.

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]; Respondent of Germany 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].

** 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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