Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography
Search the entire CISG Database (case data + other data)

CISG CASE PRESENTATION

China 15 February 1996 CIETAC Arbitration proceeding (Hot-rolled plates case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960215c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19960215 (15 February 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/10

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Austria (claimant)

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

GOODS INVOLVED: Hot-rolled plates


Case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission 15 February 1996 (Hot-rolled plates case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/84],
CLOUT abstract no. 854

Reproduced with permission of UNCITRAL

Abstract prepared by Lachmi Singh

An Austrian seller (claimant) and a Chinese buyer (respondent) entered into a contract for the sale of hot-rolled steel plates. Later the seller was refused payment for the goods due to inconsistencies between the letter of credit and the documents submitted by it. The buyer submitted a proposal to handle the goods, but the seller did not agree and sold the goods to another company. Then it filed an application for the price difference and loss of profit.

After considering the dispute at hand as to whether the inconsistencies between the required documents and the letter of credit constituted a fundamental breach of contract, the Tribunal held that since the bank's behaviour was beyond the scope of review, the Tribunal would not make any decision on whether the bank had the right to decline the payment due to the inconsistencies between the letter of credit and the documents.

The Tribunal held that even if the issuing bank had sufficient reasons to decline the payment against the letter of credit, this would not be a sufficient reason for the buyer to avoid the sale contract. Under article 49 (1) (a) CISG, the buyer would be entitled to declare the sale contract void only if the seller had committed a fundamental breach. Pursuant to article 25 CISG, a breach of contract by the seller would be fundamental only if it resulted in such a detriment to the buyer as to substantially deprive him of what it was entitled to expect under the contract. The Tribunal held that the inconsistencies on the documents submitted by the seller were too insubstantial to constitute a fundamental breach. Therefore, the buyer had no right to declare the contract void.

Since the cover transaction by the seller was a reasonable resale, the Tribunal condemned the buyer to compensate the seller for the price difference in accordance with article 75 CISG. In addition, the buyer was directed to pay interest (article 78 CISG), and condemned to pay other costs relating to the arbitration proceedings.

Go to Case Table of Contents

Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 49(1)(a) ; 75 ; 78 ; 80 [Also cited: Article 59 ]

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract];

75A1 [Damages established by substitute transaction after avoidance: resale by aggrieved seller];

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

80A [Failure of performance caused by other party (party causing non-performance): loss of rights]

Descriptors: Fundamental breach ; Avoidance ; Letters of credit ; Failure of performance, other party ; Damages ; Cover transactions; Interest

Go to Case Table of Contents

Editorial remarks

Go to Case Table of Contents

Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

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) 1996 vol., pp. 921-927

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.61, 97, 109, 146, 190, Nordic Journal of Commercial Law (2/2005)

Go to Case Table of Contents
Case text (English translation)

Queen Mary Case Translation Programme

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

Hot-rolled plates case (15 February 1996)

Translation [*] by YUAN Xiaotong [**]

Translation edited by Meihua Xu [***]

  1. Details of the Case
  2. Opinion of the Arbitration Tribunal
    1. Applicable law
    2. Identities of parties
    3. Inconsistencies between L/C and documents
    4. Performance of the contract
    5. Damages and interest
  3. The Award

In accordance with the contract (No. 93 NT-0509 G 018 CO) signed by Claimant [Seller], Austria XX Company, and Respondent [Buyer], China XX Trade General Company, on 4 May 1993 and the Application for Arbitration submitted by Claimant on 7 March 1995, the China International Economic & Trade Arbitration Commission ("CIETAC", the former Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade) accepted this arbitration case related to hot-rolled steel plates under the contract.

Claimant [Seller] appointed Mr. A as its arbitrator when submitted the application. After the case was accepted, the Secretariat sent the arbitration notice to Respondent [Buyer] on 5 April 1995 and asked it to appoint its arbitrator and submit its defense. [Buyer] appointed Ms. D as its arbitrator. The Chairman of the Arbitration Commission appointed Mr. P as the presiding arbitrator in accordance with Article 24 of the CIETAC Arbitration Rules. The presiding arbitrator and the two appointed arbitrators formed an Arbitration Tribunal to jointly hear this case.

Respondent [Buyer] submitted to the Tribunal its defense against [Seller]'s claims and relevant attachments.

On 21 September 1995, the Arbitration Tribunal held an oral hearing in Beijing. The representatives and agents of [Seller] and [Buyer] attended. Both parties addressed their statements and presented their arguments. [Seller] and [Buyer] also submitted supplemental statements and relevant evidence.

All of the arbitration procedures have been finalized. Based on the documents and the facts discovered on the hearing, the Arbitration Tribunal made its award. The details of the case, the opinion of the Arbitration Tribunal and the award are presented as follows.

I. DETAILS OF THE CASE

On 4 May 1993, [Seller] and [Buyer] signed their contract (No. 93 NT-0509 G 018 CO). It provided that [Buyer] would purchase from [Seller] 7,500 tons of hot-rolled steel plates which were produced in the Independent United ___ for the price of US $318/mt CNF Zhenjiang (a port of China), with 5% more or less allowed for shipment. The total payment for the goods would be US $2,385,000.00. The contract provided that [Buyer] should open an irrevocable letter of credit (L/C) in favor of [Seller] no later than 10 May 1993 and that [Seller] should deliver the goods for shipment no later than 15 June 1993.

After the contract was signed, the Bank of China issued an irrevocable letter of credit of US $2,385,000 in favor of [Seller] upon the application of the Shanghai Branch of Shanghai XX Import and Export Company and asked the Bank of Austria to notify [Seller]. [Buyer] later revised certain provisions of the L/C upon the requests of [Seller] including the shipment time which was changed to before 25 June 1993.

On 26 June 1993, [Seller] notified [Buyer] that the ship designated by [Seller] finished loading the goods which weighed in total 7,402 tons, an amount within the shortage scope allowed by the contract. On 23 July 1993, [Seller] was notified by the Bank of Austria that the Shanghai Branch of Bank of China declined to process the payment for the goods due to inconsistencies between the L/C and the documents submitted by [Seller]. Later on, [Seller] negotiated with [Buyer] on several occasions. On 15 September 1993, [Buyer] submitted a proposal to handle the goods but [Seller] did not agree. [Seller] consequently sold the goods to Limited Company A (a Hong Kong company). On 12 January 1995, [Seller] sent a fax to [Buyer] to claim compensations including price difference loss and profit loss. [Buyer] did not agree to [Seller]'s claims. [Seller] commenced this proceeding with the Arbitration Tribunal.

In accordance with [Seller]'s application, [Buyer]'s written defense, the statements provided by [Seller] and [Buyer] at the hearing and the supplementary statements submitted by the parties after the hearing, the disputes between the parties focused on the following issues:

A. Inconsistencies between the L/C and the required documents

The Shanghai Branch of the Bank of China reported two inconsistencies in the required documents: (1) the technical indicator recorded in the quality certificate was "S (CU):0.05 pctmax", while the one set forth in the L/C and invoice was "CU:0.05 pctmax"; and (2) as a general practice, the gross weight in the shipping invoice should not equal to the net weight.

[Seller]'s position

(1) The technical indicator provided in the contract was "S":0.05%max and "CU" 0.3%max. But [Buyer] wrote "CU" instead of "S" on the L/C when it opened the L/C and thus contravened the contract. Therefore, the quality certificate which was issued consistent with the contract showed the correct technical indicator and put the wrong code "CU" into a quotation mark, which caused the inconsistency with the L/C.

(2) Due to the minor weight of the steel strips which were used to bind the steel, no plant would show the gross weight in the certificate. Therefore, the gross weight was regarded as equal to the net weight.

(3) Any dispute or claim arising out of or in connection with the L/C should be settled in accordance with the Uniform Customs and Practice for Documentary Credits ("UCP 500") published by the International Chamber of Commerce. In accordance with Section 37 of the UCP 500, the description of goods in the commercial invoice must be consistent with the description in the letter of credit, while in other documents the description can be general and with inconsistency with the letter of credit. For this case, the wordings in the commercial invoice were identical with those in the L/C and no inconsistencies could be found. Based on the fax sent by [Buyer] on 17 February 1995, it seemed that the Bank of China had been aware of this and was willing to accept the documents. However, [Buyer] notified the bank not to make the payments under the L/C.

[Seller] alleges that Article 59 of the United Nations Convention on Contracts for the Sale of Goods ("CISG") applies. It provides that "the buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller". Therefore, even if the bank refused the payment due to inconsistencies between the L/C and the required documents, [Buyer] is not released from the obligation to accept the goods and pay for them.

[Buyer]'s response

[Buyer] cited four inconsistencies in the documents submitted by [Seller] against the L/C: (1) S (CU); (2) "SI:0.50 - 0.17 PCT"; (3) the gross weight and net weight; and (4) [Seller]'s quality certificate instead of the quality certificate of the production plant. The bank refused to accept the L/C due to the inconsistencies based on the bank's review. [Seller] disputed the bank's position as to whether there was any inconsistency between the documents and the L/C. Though [Seller] resisted, arguing that there was no inconsistency, it should be the bank that would determine the consistency between the documents and the L/C for the purpose of the rules for letters of credit. In this case, the bank made a formal explanation to [Seller] that it had confirmed the inconsistencies and determined not to accept the L/C.

[Buyer] submitted the following arguments, based on its legal status when the bank refused to accept the L/C alleging inconsistencies between the documents against the L/C:

1. The contract in dispute provides for a CNF price term. Pursuant to this term, the [Seller] bears two principal obligations: i) to deliver required documents that are consistent with the contract and the L/C; and ii) to deliver the goods as provided in the contract. These two obligations cannot be replaced by one another. Furthermore, the contract under the CNF term was a typical sales contract relying on documents, under which a seller performs a symbolic delivery and submitting qualified documents should be regarded as a strict obligation of the seller. In this case, [Seller] breached his obligation under the contract when it did not submitted qualified documents. Since all of the inconsistencies were discovered on the quality certificate and the packing list, [Buyer] therefore had every reason to doubt whether the quality and quantity of the goods complied with the provisions of the contract.

2. For the purpose of documentary credits, the condition for the absolute payment obligation of a bank and a buyer is that the seller must submit the documents which appear on their face to be strictly in compliance with the terms and conditions of the letter of credit. In respect to submitting required documents, the requirements for the L/C are substantially consistent with the nature of the CNF term in the contract.

3. It was the bank, not [Buyer], that found and called attention to the inconsistencies in the documents submitted by [Seller] and consequently refused the payment request of [Seller]. If [Seller] has reasons to believe that its argument that there was no inconsistency between the documents and the L/C was correct, [Seller] should claim its rights against the bank that made the wrong decision, but should not resist requiring [Buyer] to bear the liability for the wrong decision of the bank. According to general practices of international trade and legal principles, a seller cannot claim directly against the buyer for payment if the bank declined to pay the letter of credit due to reasons for which the seller is responsible, unless the failure of payment was not due to any fault of the beneficiary of the letter of credit (for example, insolvency of a bank). If the bank declined to pay the seller through the letter of credit due to its own reasons, [Seller] had no reason to claim payment against the buyer.

Based upon the aforesaid, [Buyer] argued that [Seller] had no legal basis to claim payment against the [Buyer] when the bank declined to pay for the L/C due to the inconsistencies on the documents submitted to the bank.

B. Terminating the contract unilaterally

[Seller]'s position

[Seller] presented following arguments.

1. After the bank declined to pay [Seller], [Buyer], in faxes and meetings, acknowledged several times that it and its end client should take responsibility for payment. At the meeting with [Buyer], Shanghai X X Import and Export Company and the end client on 12 September 1993, [Seller] learned that the end client would firmly refuse to purchase the goods due to the falling price and shortage of funds and that [Buyer] declined to buy the goods and perform the payment. [Seller] informed [Buyer] that the goods would be sold to a third party and claimed [Buyer] should be responsible. In order to execute the customs procedures for the goods in time, [Seller] signed a joint sales contract with A Company on 13 September 1993. With Annex 2 attached to this contract, [Seller] required that A Company could sign a sales contract with a third party only if it had obtained the permit from [Seller]. With such a provision, [Seller] proposed to reserve a negotiation space for [Buyer].

On 15 September 1993, [Seller] received a fax from [Buyer] proposing that Shanghai XX Import and Export Company pay 10% of the invoice amount to get the documents and [Buyer] clear the customs. It suggested that [Seller], [Buyer] and Yetdz Guolida, the agent of [Buyer], take measures jointly to resell the goods with [Seller] receiving the income from the resale. [Seller] refused to accept such an arrangement.

2. The real reason for [Buyer]'s refusal to perform payment was a new regulation enacted by the PRC government in 1993 which restricted the use of foreign currencies by import companies. However, this regulation did not entitle [Buyer] to terminate the contract unilaterally. Accordingly, [Buyer] was seeking other possibilities to avoid the performance of its obligations under the contract.

Therefore, [Seller] claimed that it was [Buyer] who unilaterally terminated the contract. After [Seller] received from the [Buyer] a proposal for an unreasonable arrangement and realized the impossibility of [Buyer]'s payment, [Seller] turned to seek a third party to sell the goods and delivered a notice to [Buyer].

[Buyer]'s response

[Buyer] stated that [Seller] unilaterally terminated the contract without justifiable reasons.

1. Though [Buyer] had the right to terminate the contract when the bank declined to pay [Seller] due to inconsistencies of documents, for the sake of friendly cooperation with [Seller], [Buyer] did not claim to terminate the contract but used its best efforts to persuade its client to perform the obligations through measures other than the letter of credit.

Thanks to the efforts of [Buyer], [Buyer]'s client finally agreed to execute the contract through bank collection before the goods arrived at the port on 16 August 1993. [Buyer] did not have any legal obligation to do this, but its behavior reflects its sincerity for cooperation and was reasonable from business practice.

2. As for the new method of payment suggested by [Buyer], [Seller], in a fax of 18 August 1993, insisted that the documents it presented to the bank had no inconsistencies and [Buyer] should perform the payment through the L/C. Though [Buyer] refused to perform the payment under the contract through the L/C, it did not refuse to pay through other payment methods. The reason for the failure of payment was the inconsistencies on the documents submitted by [Seller].

3. Even though [Seller] insisted on its improper claims, [Buyer] continued to persuade its client to find a way to perform the contract acceptable to both parties. However, [Seller] did not change its claim and, on 13 September 1993, signed a sales contract with A Company to dispose of the goods subject to the contract without any reasonable advance notice to [Buyer], at a time when [Seller] had received a confirmative reply from the Bank of Austria that the refusal of payment was reasonable. By its behavior, [Seller] unilaterally terminated the performance of the contract without justifiable reasons.

C. Compensation

[Seller]'s claims

1. Since [Seller] learned at the meeting on 12 September 1993 that [Buyer] did not have sufficient funds and was unable to perform payment to exchange for the documents, in order to avoid the customs penalties or storage costs that might be incurred, [Seller] asked A Company, its long-term business partner, to take necessary measures to purchase the goods. When [Seller] signed its resale contract with A Company, [Seller] thought the goods could be sold to a third party at a price of at least US $275 per ton. However, the price of steel in the China market kept falling from the second half of 1993 till 1994 because most of the international trade companies did not have sufficient foreign exchange due to the new regulation. Therefore, the goods under the contract could not be sold for a long time. Finally, [Seller] persuaded A Company to buy this batch of hot-rolled steel plates at a price of US $260 per ton which was higher than the market price at that time. [Seller] had made efforts to mitigate the loss.

2. In accordance with the provisions of the CISG, [Seller] claimed:

     (a) [Buyer] should pay the price difference of US $429,316.00. This amount was calculated as the difference between the original price subject to the contract (US $318.00 /ton X 7,402 tons = US $2,353,836.00) and the price under the contract with A Company (US $260.00/ton × 7,402 tons = US $1,924,520.00).

     (b) [Buyer] should pay the interest on US $2,353,836.00 since 17 July 1993 (25 June 1993, the shipment date, plus 21 days) to 30 September 1994 (the date the first payment of US $725,904 was received from A Company). At 11.5% per annum, this interest should equal US $337,085.12.

     (c) [Buyer] should pay the interest on US $1,627,922.00 (the second payment from A Company) since 1 October 1994 to 11 October 1994 (the date of receipt of the full payment). At 11.5% per annum, this interest should amount to US $5,641.97.

     (d) The sum of the above three claims is US $772,043.09. [Buyer] should pay the interest on this total amount since 12 October 1994 to the actual payment date at 11.5% per annum and all the arbitration fees.

     (e) [Seller] added two claims in its supplemental statement that [Buyer] should pay for the accommodation expenses of US $337.85 for [Seller]'s attorney to attend the hearing and the airfare of US $4,925.40.

[Buyer]'s defenses

[Buyer] stated that even if it were decided that [Buyer] was responsible for the failure of payment in a situation in which [Seller] submitted documents with inconsistencies, [Seller]'s claims for compensation are unreasonable. [Buyer]'s arguments were as follows:

1. [Seller] signed a resale contract with A on 13 September 1993 for a price of US $300 per ton, but this contract was not executed. On 6 April 1994, [Seller] signed another resale contract with the same company, namely A Company, for the very low price of US $260 per ton. However, [Seller] claimed compensation based on the price of US $260 of the later resale contract.

2. Since [Seller] did not resell the goods in time, the losses were severely enlarged. Based on the Supply and Demand Express, the price of hot-rolled steel on the international market remained at a high level of US $380 per ton (the FOB price, the freight from Europe to East Asia was US $30-40 per ton) and the price was widely going up. However, the first resale contract at the price of US $300/ton, which was a relatively low price at that time, was not executed and, on 6 April 1994, [Seller] resold the goods to the same company at the much lower price of US $260. This was not reasonable.

3. Based on the above arguments, [Buyer] alleged that the first resale contract signed by [Seller] had already disposed of the goods with legal effects. Therefore, even if [Buyer] is regarded as having breached the contract, the compensation should be calculated on the basis of the first resale contract and should equal US $133,236.00 (US $318 /ton × 7,402 tons - US $300/ton × 7,402 tons = US $133,236.00).

II. OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

The Tribunal finds that the parties did not provide the applicable law in the contract. Taking into account that China and Austria are both the parties of the CISG, the Tribunal decides that the CISG should be applied to this case.

2. The identities of X X Overseas Trade Company and Mr. Lu

[Seller] stated in its claim that X X Company (located in the Economic and Technology Development District, hereinafter "X X Company") participated in the negotiation of the contract as an intermediary before the contract was signed and began to act as the agent of [Buyer] after the contract was signed. [Buyer] did not argue against this. After the review of relevant documents, the Tribunal believes that X X Company was the agent of [Buyer] and the mail and faxes related to the contract sent by X X Company and Mr. Lu, the general manager of X X Company, were sent on behalf of [Buyer]. Therefore, the behavior of X X Company and Mr. Lu are binding on [Buyer].

3. Inconsistencies between the L/C and the required documents

     (a) The Tribunal understands that the issuing bank required strict compliance for the L/C to avoid being involved in a trade dispute. Since the behavior of the bank is beyond the scope of review in this case, the Tribunal will not make any decision on whether the bank had the right to decline the payment due to the inconsistencies between the L/C and the documents.

     (b) The Tribunal notes the two inconsistencies on the documents involved in this case: (i) "S(CU):0.05pctmax" on the quality certificate; and (ii) the gross weight and the net weight.

The Tribunal holds that although "S(CU):0.05pctmax" is an inappropriate expression, it yet indicates the actual composition of the goods and conformed with the provisions of the contract. Furthermore, in accordance with common practices, the difference between the net weight and the gross weight of the goods in such a case is slight. Such a difference only has a theoretical meaning and can be ignored in practice. Therefore, if [Buyer] had accepted the documents, its interest would not have been harmed.

4. Performance of the contract

     (a) The Tribunal holds that no matter whether the issuing bank had sufficient reasons to decline the payment for the L/C, the sales contract would not definitely become avoided.

     (b) Under Article 49(1)(a) CISG, [Buyer] would be entitled to declare the contract avoided if [Seller] had committed a fundamental breach of the contract. Yet in accordance with Article 25 of the CISG, a breach of contract committed by [Seller] would be fundamental only if it resulted in such detriment to [Buyer] as substantially to deprive him of what [Buyer] was entitled to expect under the contract. The inconsistencies on the documents submitted by [Seller] are too insubstantial to deprive [Buyer] of what it is entitled to expect under the contract, therefore, they did not constitute a fundamental breach of contract. [Buyer] had no right to declare the contract avoided.

     (c) After the issuing bank of the L/C informed of its refusal of payment on 23 July 1993, [Buyer] notified [Seller] through fax that the applicant of the L/C did not agree to pay. On 2 August 1993, [Buyer] sent another fax with the message that:

"The end user is handling the payment for 7500 mt hrs in Shanghai, and I have not connected with him, we hope you could wait for the news these day patiently, my corp. and the end user's opinion is insisting on paying for 7500 mthrs, pls do not worry abt it. One of the reasons for Kangtai Corp. refused to pay is the chemical composition in documents is different from the contract, pls correct it asap."

On 4 August 1993, [Buyer] sent a fax to [Seller] that:

"We have stressed that the payment on 7500 mt hrs must be made to you, please don't doubt us in this side."

On 20 August 1994, [Buyer] stated in a fax that:

"We insist on payment definitely. we have the same viewpoint that the reason for Shanghai Int'l Tech I/E corp. are unreasonable."

It can be found from the above messages that [Buyer] did not claim to [Seller] that the documents delivered by [Seller] were unacceptable during the period since the date when the documents were delivered to the issuing bank to 20 August. On the contrary, [Buyer] admitted that the difficulty in payment was due to the L/C applicant and the refusal of payment was unreasonable. During this period, [Buyer] suggested paying through bank collection on 16 August. Since it was not clarified how [Seller] could receive the payment in the fax, [Seller] declined to accept.

     (d) In its fax of 15 September 1993, [Buyer] raised the suggestion in the name of the end user, the L/C applicant and itself to resell the goods together with [Seller]. This suggestion was contrary to [Buyer]'s obligations under the contract and would materially alter the terms of the original contract. No matter what relationship exists among [Buyer], the end user, the L/C applicant and other persons, [Buyer] should perform his obligations under the contract.

Based on the reasons aforesaid, the Tribunal holds that the contract in this case was not performed due to [Buyer]'s failure of performance, not [Seller]'s failure of performance.

5. Damages and interest awarded

     (a) As for the market situation, the Tribunal agrees with [Seller]'s statement that there was plenty of steel in stock and the price kept going down. The Tribunal considered the Supply and Demand Express provided by [Buyer] but ruled that there is insufficient evidence to support [Buyer]'s claim that the price of hot-rolled steel on the international market was high and that the price on 14 September 1993 was US $380/ton.

     (b) The Tribunal ruled that the sales contract signed on 13 September 1993 between [Seller] and A Company did not finally dispose of the goods and Annex 2 requiring that A Company may sign a sales contract with a third party only if it has obtained the permit from [Seller] did reserve space for [Buyer] to perform the contract. The price set forth on 6 April 1994 by [Seller] and A (US $260/ton) was the actual price [Seller] received when it resold the goods under the contract. Based on the market situation at that time, it cannot be proved to be out of the ordinary.

     (c) In accordance with Article 75 of the CISG, if the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the seller has resold the goods, he can claim damages to recover the difference between the contract price and the actual price in the substitute transaction. Under the circumstances of this case, [Buyer] should compensate the damages of the price difference of US $429,316.00 (calculated as (US $318/ton - US $260/ton) × 7,402 tons).

     (d) In accordance with Article 78 of the CISG, if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it. In this case, [Buyer] should compensate the interest loss of [Seller] as follows:

     -    The total contract price of 7,402 tons of hot-rolled steel amounts to US $2,353,836.00 (US $318/ton × 7,402 tons). The interest is charged from 17 July 1995 (25 June 1993, the shipment date, plus 21 days as the reasonable time) to 30 April 1994 (the latest date for [Seller] to receive the price which was provided in the sales contract between [Seller] and A). At 9% per annum, the total interest should be US $166,574 (2,353,836 × 9% × 287 ÷ 365 = 166,574).
 
     -    The interest of US $166,574 and the price difference of US $429,316 should carry interest from 1 May 1994 to 15 February 1996. At 9% per annum, this part of the interest should amount to US $96,387 ((166,574 + 429,316) × 9% × 656 ÷ 365 = 96,387).
 
The two parts of the interest total US $262,961.

     (e) [Buyer] should pay for the accommodation expenses of US $337.85 for [Seller]'s attorney to attend the hearing and the airfare of US $4,925.40.

     (f) The arbitration fees should be borne by [Buyer].

III. THE AWARD

The Arbitration Tribunal hereby decides:

1.   [Buyer] shall pay the price difference of US $429,316;
 
2. [Buyer] shall pay interest of US $262,961;
 
3. [Buyer] shall pay for the accommodation expenses of US $337.85 for [Seller]'s attorney to attend the hearing and the airfare of US $4,925.40.
 
4. [Buyer] shall bear all of the arbitration fees.
 
5. In 45 days of the effective date of this award, [Buyer] shall pay to [Seller] the above awards. If the payment in arrears, interest will be paid at 10% per annum.

This award is final.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of Austria is referred to as [Seller]; Respondent of China is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]. Weight unit appears as mt. (metric ton) or ton.

** YUAN Xiaotong, LL.M., McGill University; LL.B., Renmin University of China.

*** 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
Pace Law School Institute of International Commercial Law - Last updated June 4, 2009
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography