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CISG CASE PRESENTATION

China 30 April 1996 CIETAC Arbitration proceeding (Jacks and bearing brackets case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960430c1.html]

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

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Case identification

DATE OF DECISION: 19960430 (30 April 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/20

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Jacks and bearing brackets


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 30 ; 53 ; 74 ; 78

Classification of issues using UNCITRAL classification code numbers:

30A [Seller's obligation to deliver the goods];

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

74A [General rules for measuring damages (loss suffered as consequence of breach): traveling expenses associated with obtaining payment];

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

Descriptors: Delivery ; Price ; Damages ; Interest

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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) 1996 vol., p. 1171-1174

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at n.180, 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

Jacks and bearing brackets case (30 April 1996)

Translation [*] by Zheng Xie [**]

Translation edited by Meihua Xu [***]

China's International Trade and Economic Arbitration Commission (hereafter, "the Arbitration Commission") accepts the present case according to:

   -    The arbitration clause in Contract Nos. 90EMA001 and 90EMA002 signed by Claimant Sichuan Chengdu XX Company [Seller] and Respondent American XX Company [Buyer], on 16 October 1990; and
 
   -    The written arbitration application submitted by [Seller] on 1 March 1995.

On 5 April 1995, the Secretariat of the Arbitration Commission sent the notice of arbitration,[Seller]'s application for arbitration, and related materials to [Buyer] by acknowledgement of receipt and registered mail according to the address provided by [Seller], and requested [Buyer] to appoint an arbitrator and submit defense materials. However, the Arbitration Commission did not receive [Buyer]'s reply until 14 June 1995.

On 14 June 1995, the Secretariat of the Arbitration Commission resent to [Buyer] materials by TNT re-requested [Buyer] to appoint an arbitrator and submit defense materials, and notified [Buyer] to contact the Secretariat, if there is any question. [Buyer] did not reply.

Article 24 of the Arbitration Rules stipulates:

"After each of the two parties has chosen one arbitrator from the Panel of Arbitrators of the Arbitration Commission or the Chairman of the Arbitration Commission has made such appointment, upon authorization by the party or parties, the Chairman of the Arbitration Commission shall immediately appoint a third arbitrator from the Panel of Arbitration Commission as the presiding arbitrator to form an Arbitration Tribunal to jointly hear the case."

Article 26 stipulates:

"If the Respondent fails to appoint or authorize the Chairman of the Arbitration Commission to appoint an arbitrator according to Article 16 of these Rules, the Chairman of the Arbitration Commission shall appoint an arbitrator for the Respondent."

In accordance with Article 24 of the Arbitration Rules, on 23 August 1995, the Chairman of the Arbitration Commission appointed Mr. P as the presiding arbitrator, and in accordance with Article 26 of the Rules, appointed Mr. D arbitrator for the [Buyer]. Arbitrators Mr. P, Mr. D and Mr. A appointed by [Seller] formed the Tribunal and heard the case. The Secretariat of the Arbitration Commission sent the parties the notice of forming the Arbitration Tribunal. The Secretariat of the Arbitration Commission sent this notice to the [Buyer] by acknowledgement of receipt and registered mail on 25 August 1995.

On 20 October 1995, after reviewing [Seller]'s application and evidence, the Arbitration Tribunal decided to hold a court session in Beijing on 30 November 1995. On the same day, the Secretariat of the Arbitration Commission sent [Seller] and [Buyer] a notice of the court session. The notice, which requested [Buyer] to attend the session on time, was sent to [Buyer] by express mail TNT. The receipt of acknowledgement shows that [Buyer] signed and received this document.

On 30 November 1995, the Arbitration Tribunal held the court session in Beijing. [Seller]'s representative attended the session. [Buyer] neither sent a representative to present at the session, nor did [Buyer] notify the Arbitration Tribunal of the reason for default or submit defense material. According to Article 42 of the Arbitration Rules, "Should one of the parties fail to appear at the hearing, the Arbitration Tribunal may proceed with the hearing and make an award by default." The Arbitration Tribunal held court session by default. At the court session, [Seller] made a brief statement on the claims in its application, and answered the Arbitration Tribunal's questions. After the session, [Seller] submitted the supplementary materials.

On 21 December 1995, the Secretariat of the Arbitration Commission sent by express mail TNT to [Buyer], the supplementary materials submitted by [Seller] after the court session, and asked [Buyer] to notify the Arbitration Tribunal whether to request a second session. In January 1996, that mail was returned, because [Buyer] had moved, and no one answered call at phone number provided by [Seller].

Due to the above problem, the Secretariat of the Arbitration Commission requested [Seller] to provide [Buyer]'s new address, but [Seller] could not find it and requested to send the arbitration materials according to the old address. On 1 March 1996, the Secretariat according to Article 77 of the Arbitration Rules authorized China XX Law Firm to send the pertinent arbitration materials to Buyer's last address, known by others and provided by [Seller], and to ask [Buyer] to notify whether to request for a second court session or not before 30 March 1996; and to invite [Buyer] to submit any questions it may have about the procedure and substantive issues within the aforesaid time limit. No response was received.

The Arbitration Tribunal concluded the case according to the facts clarified in the courts session, and by consent handed down the default award.

The following are the facts, the opinion of the Arbitration Tribunal, and the award.

FACTS

On 16 October 1990, [Seller] and [Buyer] signed the confirmations of two Contracts: No. 90 EMA001 and No. 90EMA002.

Contract No. 90 EMA001 stipulates:

   -    [Seller] sells [Buyer] 2,160 sets of 2 1/4 TON jacks each month;
 
   -    The jacks shall be supplied during the period from October 1990 to April 1991; the total quantity is 15,120 sets, and the price is US $38 per set FOB Hong Kong;
 
   -    The total price of Contract No. 90 EMA001 is US $574,560.

Contract No. 90 EMA002 stipulates:

   -    [Seller] sells [Buyer] 3 TON and 6 TON bearing brackets:

The 3 TON bearing brackets shall be supplied at the rate of 2,304 sets per month from October 1990 to April 1991 at a price of US $7.5 per set FOB Hong Kong; total price US $120,960;

The 6 TON bearing brackets shall be supplied at the rate of 1,330 sets per month from October 1990 to April 1991 at a price of US $11.50 per set FOB Hong Kong; total price: US $107,065;

   -    The total price of Contract No. 90 EMA002 is US $228,025.

The total price of these two contracts is US $802.585. The payment term for both is T/T.

On the basis of performing the two contracts, [Seller] after negotiating with [Buyer] delivered goods beyond the quantities stipulated in the contracts. The total price of the goods is US $1,365,844. After receiving the goods, [Buyer] provided a detailed list of receipt of the goods, and made a payment of US $453,687. On 16 September 1992, [Buyer] sent to [Seller] a plan for the payment of the remainder of the price of the goods. In this plan, [Buyer] promised to pay US $150,000 to [Seller] before September 1992, and to pay the remaining amount by installment before 30 December 1992. However, [Buyer] did not perform its promise to make the payments. [Seller] therefore filed the arbitration application.

[Seller]'s position

In the application, [Seller] asserts:

[Seller] has performed its obligations under the two contracts, so [Buyer] should perform its promise in the agreement of repayment made on 16 September 1992 to pay [Seller] the price of the goods. However, [Buyer] only paid US $36,288 on 25 September 1992, plus US $453,687 paid before. Therefore, [Buyer] only paid US $489,975 for the two contracts, and still owes US $875,869 (US $1,365,844 - US $489,975 = US $ 875,869). [Seller] asks the Arbitration Tribunal to require [Buyer] to pay the following amounts:

  1. The payment for the goods: US $875,869.

  2. Interest on this amount, calculated according to the following two parts:

    (1) According to the repayment plan, [Buyer] should have paid US $150,000 before 30 September 1992, but only paid US $36,288, so the remaining principle due is US $150,000 - US $36,288 = US $113,712. The monthly interest rate should be 7.5/1,000, and the period should be three months, i.e., from 1 October 1992 to the end of December. The interest should be US $113,712 x 7.5/1,000 x 3 = US $2,258.52.

    (2) According to the repayment plan, [Buyer] should have paid the remaining amount, i.e., US $875.869, which is principle. The monthly interest rate should be 7.5/1,000, and the period should be thirty-five months, i.e., from 1 January 1993 to the end of November 1995. The interest should be US $875,869 x 7.5/1,000 x 35 = US $229,915.61.

    The total interest on the above two totals US $232,474.13. The interest from 1 December 1995 to the date when the payment is made should be calculated separately at a 7.5/1,000 monthly interest rate.

  3. US $15,000 in traveling expenses for obtaining the payment.

  4. The arbitration fee of this case.

[Buyer] did not submit any defense to these claims.

THE OPINION OF THE ARBITRATION TRIBUNAL

1. The applicable law

The contract does not stipulate the applicable law in the contract. China and US are parties to the United Nations Convention on Contracts for the International Sale of Goods (CISG). The parties did not exclude the application of CISG, therefore when the contract does not stipulate the applicable law or does not stipulate it clearly, the CISG applies.

2. The payment owed

Article 30 of the CISG stipulates that the seller must deliver the goods as required by the contract and this Convention. Claimant in this case, as [Seller], performed the obligation of delivering goods according to the contract.

Article 53 of the CISG stipulates that the buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. Respondent, as [Buyer], is obligated to pay the price for the goods and take delivery of them according to Article 53. In fact, after receiving the goods and issuing the detailed list of receipt of the goods, [Buyer] only made partial payment, and then promised to pay the remaining amount in the repayment agreement negotiated with [Seller]. Under such circumstances, [Buyer] was obligated to pay the remaining amount in accordance with the repayment agreement. However, [Buyer] only paid US $36,288, and then did not pay the remaining amount US $875,869.

According to the above facts, the [Buyer] did not pay the remaining amount, US $875,869, so it breached the contract and shall pay the remaining amount. The Arbitration Tribunal supports [Seller]'s claim requiring [Buyer] to pay the remaining amount.

3. Interest

According to 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. Thus, [Seller] is entitled to interest on the remaining amount, US $875,869 at the monthly interest rate of 7.5/1,000. The calculation shall be:

  1. According to the repayment plan, [Buyer] should have paid US $150,000 before 30 September 1992, and only paid US $36,288, so the principle is US $150,000 - US $36,288 = US $113,712. The monthly interest rate shall be 7.5/1,000, and the period shall be forty-three months, i.e., from 1 October 1992 to 30 April 1996 when the award is made. The interest shall be US $113,712 x 7.5/1,000 x 43 = US $36,672.

  2. According to the repayment plan, [Buyer] should have paid US $875,869 - US $113,712 = US $762,157 before 30 December 1992. The monthly interest rate shall be 7.5/1,000, and the period shall be forty months, i.e., from 1 January 1993 to 30 April 1996 when the award is made. The interest shall be US $228,647 (US $762,157 x 7.5/1,000 x 40 = US $228,647). [Buyer] shall pay US $265,319, i.e., US $36,672 + US $228,647.

4. [Buyer] shall pay [Seller] the traveling expenses for recovering the price of the goods, because it is [Buyer] who breached the contract due to non-payment.

5. [Buyer] shall pay the entire arbitration fee.

AWARD

  1. [Buyer] shall pay US $1,141,188, i.e., the price owed US$ 875,869 + interest US $265,319.

  2. [Buyer] shall pay [Seller] the traveling expenses US $15,000.

  3. [Buyer] shall pay the entire arbitration fee. [Seller] has paid this arbitration fee in advance, so [Buyer] shall pay [Seller] the prepaid arbitration fee Renminbi (RMB) xxx.

The total amount of the above three items is US $1,156,188 and RMB 97,285, which shall be paid within forty-five days of the date of the award. If [Buyer] does not pay within this time limit, interest at the annual rate of 10% 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]; 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].

** 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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Pace Law School Institute of International Commercial Law - Last updated March 6, 2006
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