China 14 February 1996 CIETAC Arbitration proceeding (Bicycles case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960214c1.html]
DATE OF DECISION:
DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/09
CASE HISTORY: Unavailable
SELLER'S COUNTRY: People's Republic of China (claimant)
BUYER'S COUNTRY: United States (respondent)
GOODS INVOLVED: Bicycles
PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission 14 February 1996 (Bicycles case)
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/84],
CLOUT abstract no. 855
Reproduced with permission of UNCITRAL
A Chinese seller (claimant) and an American buyer (respondent) negotiated a contract for the purchase of bicycles. Before concluding the contract, the buyer received and accepted the design and specifications of the bicycles sent by the seller. After the bicycles were delivered, the buyer found them not having pumps, which was customary in the U.S. The seller initially rejected the buyer's request for the pumps, but on the buyer's refusal to make the payment, the seller agreed to provide the pumps if the buyer paid half of the total amount. The buyer did not respond, nor did it respond to the seller's suggestion to return the goods. Eventually, the seller filed an application for arbitration.
The Tribunal, after considering the fact that the seller had fully performed its obligation to deliver the goods according to the contractual specifications, found the buyer to be in breach of contract for not making the payment, as per article 53 CISG. The buyer was thus sentenced to make the full payment of the contractual amount plus interest to be calculated from the day after the payment was due.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
35A ; 35B [Conformity of goods: quality, quantity and description required by contract; Requirements implied by law]; 53A [Obligation of buyer to pay price of goods]; 78B [Rate of interest]
35A ; 35B [Conformity of goods: quality, quantity and description required by contract; Requirements implied by law];
53A [Obligation of buyer to pay price of goods];
78B [Rate of interest]
CITATIONS TO OTHER ABSTRACTS OF DECISION
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) 1996 vol., pp. 912-914
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Dong WU, CIETAC's Practice on the CISG, at nn.118, 180, Nordic Journal of Commercial Law (2/2005)Go to Case Table of Contents
|Case text (English translation)|
Bicycles case (14 February 1996)
Translation [*] by Meihua Xu [**]
Edited by Liming (Anna) Lin [***]
The China's International Trade and Economic Arbitration Commission (hereafter, "the Arbitration Commission") accepted the case according to:
|-||The arbitration clause in Contract No. 93HPE14 - D325 signed by Claimant [Seller], China Hunan Province __ Company and Respondent [Buyer], America __ Company on 25 March 1993; and
|-||The written arbitration application submitted by [Seller] on 21 March 1995.|
On 25 April 1995, the Secretariat Office of the Arbitration Commission sent the arbitration notice and the [Seller]'s arbitration application to the [Buyer] by registered mail.
On 9 May 1995, the [Buyer] received the aforesaid mail, however, the [Buyer] has never submitted any arbitration defense, nor did it appoint an arbitrator within the time stipulated in the arbitration notice, therefore, following Article 26 of the Arbitration Rules, the Chairman of the Arbitration Commission appointed Mr. D as the [Buyer]'s arbitrator on behalf of the [Buyer].
According to the Arbitration Rules, the Chairman of the Arbitration Commission appointed Mr. P as the Presiding Arbitrator. M. P, Mr. D and Mr. A, the arbitrator appointed by the [Seller] formed the Arbitration Tribunal to hear this case.
On 6 July and 12 July 1995, the Secretariat Office of the Arbitration Commission sent the Arbitration Tribunal Formation notice and Court Session notice to the [Buyer] by registered mail, and on 12 July, sent the Court Session notice to the [Buyer] via fax.
On 17 July 1995, the [Buyer] received the aforesaid mail, but no response from the [Buyer] has been received.
The Arbitration Tribunal examined the [Buyer]'s arbitration application and attached documents, and on 4 September 1995, a court session was held in Beijing. The [Seller] sent representatives to the court session. They made statements on the facts and legal issues of this case, and answered the Arbitration Tribunal's questions. The [Buyer] did not present in the court session even though it had received the Court Session notice.
After the court session, the Secretariat Office of the Arbitration Commission forwarded the documents of the court session, and the [Seller]'s supplementary documents, which were received by the [Buyer], but with no response.
This case has been concluded and the Arbitration Tribunal made its judgment based on the written documents and the court session.
The following are the facts, the Tribunal's opinion and award.
At the beginning of 1993, after being introduced by a third party, the [Buyer] and the [Seller] started negotiations on a sale of bicycles. On 20 March 1993, the [Buyer] sent Moravia 001 and Moravia 002 purchase orders to the [Seller] via fax and on 22 March 1993, the [Seller] sent a BMX bicycle design to the [Buyer] via fax.
On 23 March, the [Buyer] confirmed and accepted the design, color, hanger, fender, brake, and payment, and on 25 March 1995, Sales Contract 94HPE - D325 was concluded. The following terms were stipulated in the contract.
|Goods, quantity, and price:||-||BMX 16 inches 2,000; unit price is US $24.50 CIFNET New York;|
|-||BMX 20 inches 1,200; unit price is US $26.50 CIFNET New York;|
|-||The total price is US $80,800.|
Quality clause: Color of the bicycles should be based on Moravia 001 and Moravia 002 purchase orders; Chromate plating on handles and steel loops should be same quality as those on brakes and steel loops. Other parts should be painted.
Delivery deadline: April 1993 for 16 inches and May 1993 for 20 inches;
Payment term: D/A 90 days calculated from the day the L/C is issued.
POSITION OF THE PARTIES
A. [Seller]'s position
The [Seller] alleges that:
On 3 May 1993, the [Seller] filed an inspection application with the Commodity Inspection Bureau of the People's Republic of China, and on 5 May, the goods passed the inspection by this agency.
On 30 May, the [Seller] delivered the goods to the [Buyer] by entrusting China __ Shipping Company to do the shipment.
On 19 June 1993, the [Buyer]'s bank, Bank of China New York Branch, gave notice to the [Buyer], stating that they have received from the [Seller] the documents under Contract 93HPE14 - D325.
On 21 June 1993, the [Buyer] received the documents with the agreed payment term, D/A 90 days, as stipulated in the contract; the payment day was 20 September 1993.
In July and August, the [Buyer] received the entire goods of the contract and started reselling to its customers in the U.S. At the same time, the [Buyer] claimed that because the bicycles had no pumps, the customers complained and asked the [Buyer] to provide pumps as those used in the U.S.
According to this, the [Seller] made responses on 13 July and 17 September 1993, asserting that the [Seller] delivered the goods in accordance with the quality clause stipulated in the contract, and if the [Buyer] made no special request in the contract, according to international trade usages, the [Seller] should deliver the goods following the British rule without the extra obligation to provide pumps. The [Seller] also urged the [Buyer] to make the payment.
Because the [Buyer] refused to make the payment, on 22 September 1993, the [Seller] agreed to provide air taps and pumps on the condition that the [Buyer] would pay 50% of the price first, and pay the remaining part after receiving the aforesaid goods. However, the [Buyer] did not response to this suggestion.
On 5 October and 19 November 1993, the [Seller] further stated that if the [Buyer] would not make the payment, it should return the goods to the [Seller], which was again ignored by the [Buyer].
On 19 January 1994, Bank of China New York Branch returned the two money orders, which the [Buyer] promised to pay, but did not actually pay.
Later, even though being repeatedly urged by the [Seller], the [Buyer] neither made payment, nor did it return the goods, therefore, the [Seller] asks the Arbitration Tribunal to rule that:
Regarding the [Seller]'s aforesaid claims, the [Buyer] made no defense, nor did it attend the court session.
II. OPINION OF THE ARBITRATION TRIBUNAL
1. [Buyer]'s obligation under the contract
According to Section III Article 53 of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, "the CISG"), which were adopted by China and the United States and is applicable in this case, "the [Buyer] must pay the price for the goods and take delivery of them as required by the contract and this Convention".
The Arbitration Tribunal deems that the [Buyer] accepted the money orders following the stipulation in the contract, which was D/A 90 days, and took delivery of the goods. However, the [Buyer] refused to make the payment alleging that there were defects on the goods. The [Buyer] still refused to pay the price even though the [Seller] agreed to provide air taps and pumps on the condition that the [Buyer] would pay 50% of the price first.
The [Buyer] did not pay the price, nor did it return the goods after the [Seller] gave notice that the [Buyer] should return the goods if it did not make the payment.
The Arbitration Tribunal deems that the [Seller] has fulfilled its obligation to deliver the goods, and the aforesaid facts indicate that the [Buyer] has fundamentally breached its obligation to pay, which is determined in the contract and the CISG.
The [Buyer] has in fact deprived the [Seller]'s expectation under the contract, which has constituted a fundamental breach of the contract, and the [Buyer] should take this responsibility.
2. [Buyer]'s responsibility for compensation
According to Article 61 and Article 78 in Section III, stipulating remedies for breach of contract by the [Buyer], and considering the [Seller]'s arbitration claim, the Arbitration Tribunal deems that the [Buyer] shall bear the following responsibilities.
(2) Pay the interest on the aforesaid sum at 7% annual rate calculated from 21 September 1993;
(3) Pay the arbitration fee.
The [Seller] also claims for its attorneys' fee, however, due to lacking of evidence, this claim is not acceptable.
III. THE AWARD
The Arbitration Tribunal rules that:
(2) [Buyer] shall pay the interest on the aforesaid sum at 7% annual rate calculated from 21 September 1993;
(3) The [Seller]'s other arbitration claims are dismissed;
(4) [Buyer] shall bear the entire arbitration fee;
The aforesaid (1), (2), and (4) shall be paid by the [Buyer] within 45 days after this award takes effect. Otherwise, 10% annual interest shall be added to the day the payment is made.
This is the final award.
* 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 $].
** 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.
*** Liming (Anna) Lin, J.D. candidate 2007, Pace University School of Law. She received her MBA from University of Maryland at College Park, and her Bachelor of Science from Nanjing University, China.Go to Case Table of Contents