China 4 January 1995 CIETAC Arbitration proceeding (Shirts case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950104c1.html]
DATE OF DECISION:
DATABASE ASSIGNED DOCKET NUMBER: CISG/1995/02
CASE HISTORY: Unavailable
SELLER'S COUNTRY: People's Republic of China (claimant)
BUYER'S COUNTRY: United States (respondent)
GOODS INVOLVED: Shirts
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
33A [Time for delivery: on date fixed by or determinable from contract]; 35A [Conformity of goods to contract: quality, quantity and description required by contract]; 39A [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time]; 58B [Time for payment: contract involving carriage]; 78A [Interest on delay in receiving price or any other sum in arrears]
33A [Time for delivery: on date fixed by or determinable from contract];
35A [Conformity of goods to contract: quality, quantity and description required by contract];
39A [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];
58B [Time for payment: contract involving carriage];
78A [Interest on delay in receiving price or any other sum in arrears]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
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) 1995 vol., pp. 1194-1197
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Dong WU, CIETAC's Practice on the CISG, at n.223, Nordic Journal of Commercial Law (2/2005)Go to Case Table of Contents
|Case text (English translation)|
Shirts case (4 January 1995)
Translation [*] by CHEN Gang [**]
Translation edited by Meihua Xu [***]
In accordance with the arbitration provisions of Purchase Confirmations SCUTC-94E327A, SCUTC-94E328A, SCUTC-94E330A between Claimant Shanghai XX Foreign Trade Company of China [Seller] and Respondent XX Silk Center of the U.S. [Buyer] of 8 March 1994 (hereinafter referred to as the "Purchase Confirmations"), and the written application for arbitration filed by the [Seller] on 22 August 1994 and the supplement thereto filed on 3 November 1994, the Shanghai Branch of the China International Economic & Trade Arbitration Commission (formerly known as "China Council for the Promotion of International Trade Foreign Economic and Trade Arbitration Sub-commission", hereinafter referred to as "the Shanghai Branch of the Arbitration Commission") accepted this arbitration case arising out of the aforesaid Purchase Confirmations.
Pursuant to the arbitration rules of the China International Economic & Trade Arbitration Commission (hereinafter referred to as "the Arbitration Rules"), the Shanghai Branch of the Arbitration Commission held that the Arbitration Tribunal should be composed of Mr. A appointed by the [Seller], Mr. D by the Shanghai Branch on behalf of the [Buyer] and Mr. P as the presiding arbitrator designated by the chairman of the Shanghai Branch of the Arbitration Commission to hear this case.
After going over the written application for arbitration, the supplement thereto and the evidence materials filed by the [Seller] and the written defense and evidence materials filed by the [Buyer], the Arbitration Tribunal held a hearing in Shanghai on 14 November 1994, which the [Seller] and his attorney and the attorney of the [Buyer] attended. At the hearing, with the approval of both sides, the Arbitration Tribunal decided to handle the supplement to the application for arbitration filed by the [Seller] together with the original application according to the arbitration provision of the SCUTC-94E322A purchase confirmation attached to the supplemental application submitted by the [Seller] on 3 November 1994. Both parties made statements on the facts of this case, answered queries from the Arbitration Tribunal and defended their statements and materials separately. With the approval of the parties, the Arbitration Tribunal tried unsuccessfully to mediate a settlement. The Arbitration Tribunal concluded this case by rendering an award in view of the verified facts and the applicable law.
The facts of the case, the opinion of the arbitrators and the award are as follows.
PART I: FACTS OF THE CASE
On 8 March 1994, the Claimant [Seller] and the Respondent [Buyer] concluded three purchase confirmations numbered SCUTC-94E327A, SCUTC-94E328A, and SCUTC-94E330A, pursuant to which:
After signing the purchase confirmations. the [Seller] fulfilled his obligation of delivering the goods on 14 April 1994 whereas the [Buyer] failed to perform the payment as required in the purchase confirmations, and thereupon a dispute arose between the two parties.
PART II: CLAIMANT [SELLER]'S POSITION
In order to ensure reliable payment, on 7 March 1994, the [Buyer] sent the [Seller] a written payment plan, in which the [Buyer] committed first, to pay US $40,000.00 on 15 March and clear the remaining money within 15 days after the arrival of the goods if any difficulties happened. On 13 March of the same year, the [Buyer] faxed the [Seller] stating that the Buyer would be responsible for the quality of the goods under the purchase confirmations and demanded delivery on 19 March. As required by the [Buyer], the [Seller] delivered most of the goods instead of the entire quantity, owing to some accidents, and on 14 April fully completed his obligation of delivery under the purchase confirmations after reaching an understanding with the [Buyer]. The total price of the goods amounted to US $130,979.80 which can be evidenced by the Bill of Lading.
Following his arrangement of payment, on 16 March 1994, the [Buyer] wrote three checks totaling US $120,400.00, only one of which was cashed with a face value of US $10,000.00; the other two checks could not be cashed. As a consequence, the [Seller] tried contacting the [Buyer] quite a few times for the settlement of the remaining balance, which ended unsuccessfully for the [Buyer] shirked his responsibility onto others. Making allowance for the difficulties of the [Buyer], the [Seller] agreed that the remaining balance for the goods could be cleared according to the payment plan made by the [Buyer] on 12 May 1993. Unexpectedly, the [Buyer] refused to perform this obligation groundlessly when the time limit fixed in the aforesaid plan of payment drew to an end on 30 May.
Subject to the United Nations Convention on Contracts for the International Sale of Goods (hereinafter referred to as the "CISG"), the Buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. However, the [Buyer] simply ignored the binding force of the purchase confirmations between the parties, refusing to pay the price for the goods after taking delivery of them, which constituted a breach of contract.
The Claimant [Seller]'s arbitration claims are:
In addition, the [Seller] supplemented his application for arbitration with the Shanghai Branch of the Arbitration Commission with the claim that the [Buyer] should also promptly pay the [Seller] the remaining balance of US $89,942.80 and interest of US $1,286.06 on this sum due to the fact that the [Seller] had delivered all the goods in two separate lots whereas till now the [Buyer] paid only US $87,080.00 leaving uncovered the remaining balance of US $ 89,942.80 provided in the SCUTC-94E322A purchase confirmation signed by the [Seller] and the [Buyer] on 18 February 1994.
PART III: RESPONDENT [BUYER]'S POSITION
The [Buyer]'s defense:
The fax by the [Buyer] to the [Seller] on 7 March 1994 indicated that both parties had reached agreements that all shirts should be tailor-made in accordance with the orders placed by the [Buyer]. Moreover, from another fax sent by the [Buyer] on 9 March, we could also find that [Seller] was aware that the goods were required to be made in compliance with the preceding orders. In light of the common practice, there must be more than eight types of colors and designs for each lot, and besides, Mr. Xu on behalf of the [Seller] assured the [Buyer] time and again that the manufacture of all three types of shirts, 10,000 each, under the contracts, had been in full compliance with the contracts and therefore, there should be no need for concern over the matter of quality. On 13 March, on the excuse that the Bureau of Commodity Inspection and Quarantine was too busy to appear on the spot whenever they were in need and particularly as the shipping date was drawing near, Mr. Xu asked Mr. Liang, the legal representative of the [Buyer], over the phone to write several written documents for him which stated that, in order to allow the clearance, it was hoped that the Buyer would take the responsibility for the quality. On account of the firm faith in the [Seller], Mr. Liang faxed the [Seller] as was required without the least hesitation. However, it turned out that the three lots from the [Seller] were not satisfactory at all: there were only two types of designs for the printed long-sleeved shirts, the sizes were in an awful mess for the printed short-sleeved shirts, and there were only three sizes and four colors for the plain short-sleeved shirts, three of which were female colors (when male colors were desired by the [Buyer]). In short, colors were beyond expectation, sizes were not complete, and out of proportion. Subject to the common practice, if there were less than eight colors or designs for a single item, the goods should be sold at a 50% discount as short of colors or sizes, but the [Seller] quoted them as quality products at the current price.
Additionally, the [Seller] had breached the contract due to failing to deliver the goods at the time and in the quantity fixed in the purchase confirmations. The [Seller] claimed that he had completely fulfilled the obligation of delivery on 14 April 1994 as required after reaching an understanding with the [Buyer] because of some accidents. In fact the, [Buyer] had never granted any understanding on the [Seller]'s delay at all because the middle and late March in 1994 was a particular period when it was said that from 1 April, a quota system would be adopted controlling the import of silk clothing in the U.S.; therefore, millions of silk garments flooded in and importers beat each other down to the bottom. At this crucial moment, the [Seller] put off the delivery. On 28 March, the [Buyer] faxed the [Seller], saying "Please take international combined transport by sea and air as soon as possible ... promptly express (1) B/L (2) Invoice (3) Packing List ...". Around that time, urging the [Seller] to ship the goods every day, the [Buyer] neither agreed to nor extended any understanding on the delivery by the [Seller] on 14 April. What matters was whether the delay in delivering goods caused serious consequence rather than whether the Seller delayed the delivery for a few days and breached the contract which was quite common in the practice of international trade.
Besides, in the light of these three purchase confirmations, there should be 10,000 shirts for each of the three lots. However, for one lot, there were only 4,320 printed long-sleeved shirts; for another one, 10,080 (actually 10,070 packed in containers) printed short-sleeved shirts, designs and sized not in proportion, for example, more than 2,446 in one design while less than 243 in another design, which went so far as to the ratio of 10 to 1; for still another one, only 3,363 plain short-sleeved shirts with the rest unshipped on the excuse of autos having broken down. As for the over 7,000 plain short-sleeved ones shipped late on 14 April, it was found that 5,000 shirts were black. Moreover, there were just three designs for those 5,000 printed long-sleeved shirts carelessly sent by the [Seller], being of completely confused sizes. It is the [Buyer] that Contract No. SCUTC-94E322A was an agency contract in essence and those goods were also in poor quality.
PART IV: OPINION OF THE ARBITRATION TRIBUNAL
In view of the statements and defenses of the [Seller] and the [Buyer], the Arbitration Tribunal concluded the following consensus through consulting together.
1. The Claimant [Seller] not only did not deliver the goods on time but also failed to deliver the goods in the quantity specified in the purchase confirmations, which constituted a breach of contract. According to Article 33 of the CISG, if a date is fixed by or determined from the contract, the seller must deliver the goods on that date. Subject to Article 35 of the CISG, the seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract except where the parties have agreed otherwise. In view of the fact that the date and quantity had been fixed by the confirmations in this case but the [Seller] failed to perform such obligation, the [Seller] should be liable for the breach. As to the quality and description of the goods, the Arbitration Tribunal dismissed the claim by the [Buyer] for defects of one kind or another in the goods because they were not fixed by or determined from the confirmations and, furthermore, the [Buyer] could not provide material documents specifying the quality and description for the goods even though he insisted that the shirts should be tailor-made according to the orders.
2. The Respondent [Buyer] did not pay the price for the goods after accepting the delivery, which also constituted a breach of contract. Pursuant to Article 58(1) of the CISG, "if the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal in accordance with the contract and this Convention ..." In this case, on 14 April 1994 the [Seller] had fulfilled his obligation of delivering the goods, whereas the [Buyer] had not paid the price for the goods till now. The [Buyer] could not be exempted from the obligation of such payment by the fact that the [Seller] failed to deliver the goods on schedule, and in addition, the [Buyer] did not make any claim for damages within a period of time of reasonable length even if he insisted that the goods from the [Seller] did not comply with the description in the confirmations. As a consequence, the [Buyer] was also bound to take the responsibility for the failure of the contract.
3. In the light of the aforesaid facts and reasons, the Arbitration Tribunal held that both the [Seller] and the [Buyer] had committed breaches of contract owing to failing to meet their own obligations provided in the purchase confirmations as required in the CISG, and therefore, take their due responsibility in share, 30% and 70% respectively.
(1) The [Seller] claimed that [Buyer] should pay the price for the goods, US $120,979.80, and the additional price indicated in the supplemented application, US $89,942.80. This amounts to US $210,922.60. The [Buyer] shall bear 70% of such total, that is, pay the [Seller] US $147,645.82.
(2) The [Seller] claimed that [Buyer] should compensate for the loss of interest on the price in arrears, US $3,228.33 and on the additional price in arrears indicated in the supplemented application, US $1,286.06. This amounts to US $4,514.39. The [Buyer] shall bear 70% of such total, that is, pay the [Seller] US $3,160.73.
(3) The arbitration fees for this case shall be borne by the [Seller] and the [Buyer] in share, 30% and 70% respectively.
PART V: AWARD
The Arbitration Tribunal hereby decides:
1. The [Buyer] shall pay the [Seller] the total price of US $147,645.82.
2. The [Buyer] shall compensate the [Seller] for the total loss of interest on the price in arrears, US $3,160.73.
3. The [Buyer] shall remit his due share of the arbitration fees to the [Seller], RMB ×××, which had been covered by the fee of RMB ××× paid by the [Seller] to the Arbitration Tribunal in advance.
4. The sums listed in the above three items payable shall be fully settled by the [Buyer] via T/T within 45 days from the first day after the conclusion of the arbitration. Interest on any sum in arrears will be paid at the annual rate of 8%.
This Award is final.
* 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 the United States 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].
** CHEN Gang LL.M. University of International Business and Economics; LL.B. Shanxi Finance and Economics University.
*** 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.Go to Case Table of Contents