Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

CISG CASE PRESENTATION

China 2 May 1996 CIETAC Arbitration proceeding ("FeMo" alloy case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960502c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19960502 (2 May 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/21

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (claimant)

GOODS INVOLVED: "FeMo" alloy


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 74 ; 76 ; 78 ; 79

Classification of issues using UNCITRAL classification code numbers:

7A3 [Principles of interpretation: observance of good faith];

74A ; 74B [General rules for measuring damages: loss suffered as consequence of breach; Outer limits of damages: foreseeability of damages];

76B [Damages recoverable based on current price];

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

79B [Impediments excusing party from liability for damages]

Descriptors: Damages ; Foreseeability of damages ; Interest ; Exemptions or impediments ; Hardship ; General principles ; Good faith

Go to Case Table of Contents

Editorial remarks

Go to Case Table of Contents

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 Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 1996 vol., p. 1177-1185

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.144, 145, 152, 168, 245, 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

"FeMo" alloy case (2 May 1996)

Translation [*] by Zheng Xie [**]

Edited by Howard Yinghao Yang [***]

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

   -    The arbitration clauses in Contracts No. FM940922, FM9409221 and FM941205 signed by Claimant American ___ Material Company [Buyer] and Respondent Shanxi ___ Trade Company [Seller], and
 
   -    The written arbitration application submitted by [Buyer] on 18 May 1995.

On 3 August 1995, the Chairman of the Arbitration Commission according to the Arbitration Rules (effective 1 June 1994) appointed Mr. P as the presiding arbitrator. [Buyer] appointed Mr. A as arbitrator. The Chairman appointed Mr. D as arbitrator for [Seller] according to the Arbitration Rules. Mr. P, Mr. A and Mr. D formed the Arbitration Tribunal and heard the case.

The Arbitration Tribunal reviewed [Buyer]'s application materials and evidence, and [Seller]'s answer and evidence. On 26 December 1995, the Arbitration Tribunal held a hearing in Beijing and [Buyer] and [Seller] sent its representatives and counsel to attend the session. They made oral statements and arguments and answered the Arbitration Tribunal's questions. After the hearing session, [Buyer] and [Seller] submitted supplementary materials.

After the deliberation, the Arbitration Tribunal has concluded the case, and handed down the award.

The following set forth the facts, opinion and award of the case.

FACTS

[Buyer] and [Seller] executed Contracts No. FM940922, FM9409221 and FM941205 on 22 September 1994 (restated on 8 November), 3 November 1994, and 5 December 1994, respectively. A dispute arose therefrom.

[Buyer]'s position

[Buyer] applied for arbitration according to the arbitration clauses in the three contracts, and made the following requests:

1. [Seller] shall indemnify [Buyer]'s loss of profits, US $567,000 calculated in the following way:

      (1) Contract No. FM940922 (hereafter Contract 922). [Seller] shall indemnify [Buyer]'s loss of profits under Contract 922, i.e., the difference between the contract price and the international market price on 31 December, calculated as loss of profits = (international market price - the contract price) x weight x the proportion of FeMo alloy = (33- 9.7) x 18,000 x 60% = US $251,640.

      (2) Contract No. FM940921 (hereafter Contract 9221). [Seller] shall indemnify [Buyer]'s loss of profits under Contract 9221, i.e., the price difference between the contract price and the international market price on 30 December 1994 or January 31, calculated as loss of profits = (international market price - the contract price) x weight x the proportion of FeMo alloy = (31.5 - 11.8) x 18,000 x 60% = US $212,760.

      (3) Contract No. FM941205 (hereafter Contract 1205). [Seller] shall indemnify [Buyer]'s loss of profits under Contract 1205, i.e., the price difference between the contract price and the international market price on 30 December 1994, calculated as loss of profits = (international market price - the contract price) x weight x the proportion of FeMo alloy = (33 - 23.5) x 18,000 x 60% = US $102,600.

2. [Seller] shall indemnify [Buyer]'s fee to execute the L/C, US $2,192.36, calculated in the following way:

      (1) L/C 89161A executed under Contract 922. Insurance fee: US $186.84, fee of alteration: US $120.76, telecommunication cost: US $354.21.

      (2) L/C 89312A executed under Contract 9221. Insurance fee: US $254.88, fee of alteration: US $254.88, telecommunication cost: US $174.16.

      (3) L/C 89511A executed under Contract 1205. Insurance fee: US $761.40, telecommunication cost: US $85.23.

3. [Seller] shall indemnify [Buyer]'s attorneys' fee (calculated as 5% of the amount of the arbitration award).

4. [Seller] shall pay the entire arbitration cost.

5. [Seller] shall pay interest, at the international commercial loan rate, accrued from 1 January 1995 to the date when the above items are paid off.

The supporting facts and reasons, as asserted by [Buyer], are as follows:

Contract 922 signed on 22 September 1994 is for the sale of "18 MT 60% FeMo (alloy)".

   -    Price and delivery terms: CIF Rotterdam Holland US $8.65/Kg MO
   -    Time of shipment: No later than October 1994
   -    Terms of payment: Irrevocable L/C, i.e., sight L/C.

After signing the contract, on 23 September [Seller] provided to [Buyer] the English name of the remitting bank. Upon receipt of this information, [Buyer] applied to Bank of China London branch for issuance of the L/C.

   -    On 7 October 1994, Bank of China London branch executed a draft of L/C No. 89161BTB and faxed it to [Buyer], who faxed it to [Seller] for approval. On 20 October, Bank of China London branch issued L/C No. 89161BTB and faxed it to the remitting bank specified by [Seller]. To facilitate [Seller]'s performance of the contract, [Buyer] faxed the form and sample of the Bill of Lading [B/L] to [Seller] on 29 September.
 
   -    On 21 October, [Seller] informed [Buyer] by fax that the content of cuprum in the FeMo alloy was altered from less than 5% to less than 7%. On the same day, [Buyer] confirmed this modification and asked the issuing bank to alter the L/C. The issuing bank altered the L/C and notified the remitting bank on 4 November. However, [Seller] had not performed its obligation under the contract when the deadline for performance, 31 October, expired. On 1 November, [Buyer] sent an inquiry to [Seller] by fax, but [Seller] did not reply. On 2 November, [Buyer] sent an inquiry to [Seller] again by fax.
 
   -    On 3 November, [Seller] asked [Buyer] for authorization to increase the price from CIF Rotterdam US $8.65/Kg MO to CIF Rotterdam US $9.7/Kg MO, to alter the time of delivery to 30 November, and to keep the content of cuprum still as less than 5%. [Buyer] confirmed and asked the issuing bank to alter the L/C. On 9 November, the issuing bank altered the L/C and notified the remitting bank. In addition, [Buyer] and [Seller] signed the restated Contract No. 922 on 8 November.
 
   -    However, [Seller] breached the contract again after 30 November. On 7 December, [Buyer] and [Seller] reached a written agreement to extend the period of shipment to no later than 31 December. [Seller]'s general manager, Mr. Deng, and the person dealing with this transaction, Mr. Feng, promised to ship the goods before 31 December, otherwise [Seller] would indemnify [Buyer] the loss according to the current international market price. On 7 December, [Buyer] asked the issuing bank to alter the time of shipment in the L/C from 30 November to 31 December. On 8 December, the issuing bank altered the L/C and notified the issuing bank by fax. On 14 December, [Buyer] faxed to [Seller] emphasizing that the contract must be performed before 31 December. However, [Seller] neither performed the contract, nor did it indemnify [Buyer] according to the international market price.

Contract No. 9221 signed by [Buyer] and [Seller] on 3 November 1994 is for the sale of "18 MT 60% FeMo alloy".

   -    Price and delivery terms: CIF Rotterdam Holland US $11.80/Kg MO
   -    Time of shipment: No later than December 1994
   -    Terms of payment: Irrevocable L/C, i.e., sight L/C.

After signing the contract, on 7 November, [Buyer] applied to Bank of China London branch for issuance of the L/C. On 8 November, Bank of China London branch issued L/C No. 89312BTB and faxed it to the remitting bank, China Agriculture Bank Shanxi branch, specified by [Seller]. On 7 December, [Seller]'s business manager for this transaction went to Beijing and negotiated with [Buyer] about the delivery. The parties reached an agreement to change the time of shipment from 30 December 1994 to 31 January 1995. On the same day, [Buyer] asked the issuing bank to alter the L/C. On 8 December, the issuing bank altered the L/C and notified the remitting bank by fax. On 14 December, [Buyer] faxed to [Seller] emphasizing that the contract must be performed before 31 January 1995, but [Seller] missed the deadline.

Contract No. 1205 signed by [Buyer] and [Seller] on 5 December 1994 is for the sale of "18 MT 60% FeMo alloy".

   -    Price and delivery terms: CIF Rotterdam Holland US $23.50/Kg MO;
   -    Time of shipment: No later than December 30 1994;
   -    Terms of payment: Irrevocable L/C, i.e., sight L/C.

After signing the contract, on 7 December [Buyer] applied to Bank of China London branch for issuance of the L/C. On 16 December Bank of China London branch issued L/C No. 89511BTB and faxed it to the remitting bank, China Agriculture Bank Shanxi branch specified by [Seller]. On 14 December, [Buyer] faxed to [Seller] emphasizing that the contract must be performed before 31 December, but [Seller] missed the deadline.

[Buyer] asserts that it has done considerable work to cooperate with [Seller] for its performance. During the process, [Buyer] made no mistakes. [Seller]'s breach caused [Buyer] to suffer severe loss. According to the United Nations Convention on Contracts for the International Sale of Goods (CISG) and international usages of trade, [Seller] should indemnify [Buyer]'s loss and any reasonable expenses due to [Seller]'s breach.

[Seller]'s position

[Seller] does not deny that it did not deliver the goods under Contracts 922 and 9221 within the time of shipment stipulated in the contracts. However, [Seller] emphasizes that in the two or three months from the time when the parties signed the contract to the expiration of time of shipment, the international market price of the goods soared, exceeding one or two times the contract price. When the price was soaring and domestic sources were scarce, the purpose of the contract was frustrated. If the contracts had been performed as written, an unfair result would have occurred. [Seller]'s obligation should therefore be exempted because the circumstances at the time when the contract was to be performed are fundamentally different from those when the contract was executed. Although Chinese law and related international convention do not definitely describe the theory of frustration of contract, [Seller] emphasizes that in the international trade, a party should not make profits through injuring the other party's interest, because that would not comply with the principle of fairness and good faith. Neither Civil Law, Common Law, Chinese Law nor International Convention protect such an unconscionable transaction with unpredictable loss. [Seller] cites the theory of frustration of contract, but does not seek to excuse all liability due to the non-performance. If [Buyer] can prove in this case that it resold the goods at a resale price which, in accordance with the international market price at that time, is higher than the contract price, [Seller] will indemnify [Buyer] the expected profits. However, if [Buyer] insists on the amount claimed in the application, [Seller] alleges that loss in this amount could not have been foreseen when signing the contract, so it is unfair to ask [Seller] to pay such damage, which [Seller] cannot accept.

The price of the goods sold under Contract 1205 is CIF Rotterdam US $ 23.5/Kg MO. The market price increased 30%, when the goods were to be delivered. Here too, [Seller] asserts the theory of frustration of contract. However, if the Arbitration Tribunal holds that this cannot be regarded as a fundamental change of the circumstances, [Seller] will not insist on this theory. The Arbitration Tribunal must, however, take cognizance of the fact that the contract states:

"If [Seller] cannot deliver the goods within the period stipulated in the contract or it is impossible for [Seller] to deliver the goods due to force majeure, [Seller] is not liable, but it must notify [Buyer] by telegram. If [Buyer] requests, [Seller] shall by registered mail provide the certificate issued by China's International Trade and Economic Arbitration Commission or other entity to prove the event occurred. If [Seller] cannot get approval to import the goods, that is not force majeure."

After signing the contract on 17 December 1994, [Seller] notified [Buyer] that it was snowing heavily in Shanxi, so the goods could not be manufactured, and the road was closed; [Seller] asked [Buyer] to alter the time of shipment. [Seller] alleges that the fact that the goods could not be transported due to the natural climate constitutes force majeure; therefore, [Seller] is not liable for non-delivery within the period stipulated in the contract. Furthermore, [Seller] did not seek release from the duty to deliver the goods, but merely sought to postpone the delivery. However, [Buyer] neither agreed to alter the time of shipment, nor did it alter the L/C, which made it impossible for [Seller] to deliver the goods. Accordingly, [Seller] is not liable for the damage under Contract 1205.

If, however, the Arbitration Tribunal decides that the above event is not force majeure, [Seller] shall indemnify [Buyer] the difference between the contract price and the current market price at the time and place (China's market) of delivery, not the price at the international market. To [Seller]'s knowledge, the price of FeMo alloy in the China market is 150,000/ton. [Seller] asserts that if the Arbitration Tribunal holds that [Seller] shall be liable for [Buyer]'s damages, the amount should be the difference between the contract price and the price of the adjusted domestic market price (adding transportation expenses, insurance and other related fees), not the international market price that [Buyer] has asserted.

[Buyer]'s response

In response to [Seller]'s defense, [Buyer] alleges:

1. The countries in which the parties are located are Contracting States of the CISG; the CISG therefore applies to these contracts. [Buyer] does not agree to the use of the cases provided by [Seller] as precedents for this case, nor does [Buyer] agree to the application of the theory of frustration of contract. The argument that [Seller]'s obligation of delivery is exempted according to the precedents and the theory of frustration of contract is not supported by "[Seller]'s obligation," and the concept of "exemption" as set forth in the CISG..

2. [Seller] foresaw or should have foreseen the loss due to its breach when signing the contract. Accordingly, [Buyer]'s claims are in accordance with Article 74 of CISG, "Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach." In addition, such damages do not exceed the loss which [Seller] foresaw or ought to have foreseen at the time of the conclusion of the contract and supplementary agreement, in the light of the facts and matters of which it then knew or ought to have known, as a possible consequence of the breach of contract. [Buyer]'s claim for damages is reasonable and justifiable.

3. To [Seller]'s assertion of force majeure, it must be emphasized that:

   -    First, [Buyer] did not receive [Seller]'s notice of force majeure;
 
   -    Second, in the northern cities of China, especially Shanxi, it is normal to have continuous and heavy snow in December, so [Seller] foresaw or ought to have foreseen such circumstances;
 
   -    Third, there is no causal relation between snowing and production of FeMo alloy, nor between inland transportation and cargo loading on the ship;
 
   -    Fourth, the deadline of performance was 31 December 1994. According to [Seller]'s assertion, on 17 December [Seller] asserted that it could not produce the goods, so even if there had been no force majeure, [Seller] still would not perform its obligation.

Thus, the force majeure as asserted by [Seller] is groundless.

4. The loss of profits should be the price difference between the contract price and the international price at the time of delivery.

[Buyer]'s final claims are clarified as follows:

1. The loss of profits, US $552,992.36 (which should be $550,800 - noted by the Arbitration Tribunal), calculated as:

      (1) The loss of profits under Contract 922 (the price difference between the contract price and the international market price on 31 December), i.e., loss of profits = (international market price - the contract price) x weight x the proportion of FeMo alloy = (31 - 9.7) x 18,000 x 60% = US $230,040.

      (2) The loss of profits under Contract 9221 (the price difference between the contract price and the international market price on 31 January 1994 (which shall be 1995 - noted by the Arbitration Tribunal)), i.e., loss of profits = (international market price - the contract price) x weight x the proportion of FeMo alloy = (34 - 11.8) x 18,000 x 60% = US $239,760.

      (3) The loss of profits under Contract 1205 (the price difference between the contract price and the international market price on 31 December 1994), i.e., loss of profits = (international market price - the contract price) x weight x the proportion of FeMo alloy = (31 - 23.5) x 18,000 x 60% = US $81,000.

2. [Seller] shall indemnify [Buyer] for the fee to execute the L/Cs, US $2,192.36, calculated as follows:

      (1) L/C 89161A executed under Contract 922. Insurance fee: US $186.84, fee of alteration: US $120.76, fee of notice of telegram: US $354.21.

      (2) L/C 89312A executed under Contract 9221. Insurance fee: US $254.88, fee of alteration: US $254.88, fee of notice of telegram: US $174.16.

      (3) L/C 89511A executed under Contract 1205. Insurance fee: US $ 761.40, fee of notice of telegram: US $85.23.

3. [Seller] shall indemnify [Buyer] the attorneys' fee (calculated as 5% of the amount of the arbitration award).

4. [Seller] shall pay the entire arbitration fee.

5. [Seller] shall pay interest at the international commercial loan rate as accrued from 1 January 1995 and 1 February 1995 to the date when above items are paid off.

[Seller]'s response

[Seller] asserts, in its supplementary materials submitted after the hearing session, as follows:

1. The CISG applies to the contracts, and the observance of good faith described in Article 7 of CISG and international usage of trade should be considered.

2. The amount in [Buyer]'s claim exceeds the total price of the three contracts. This does not comply with CISG. Article 74 of CISG stipulates that:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach."

The CISG seeks to put the aggrieved party in the same position as that had the contract been fully performed. Article 74 also stipulates:

"Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

When Contracts 922 and 9221 were signed, [Seller] could not foresee that the market price of the goods under the contracts would increase several times in about a month's time.

3. According to the force majeure clause in the contract and Article 79 of CISG, [Seller] should not be liable for the damages under Contract 1205.

4. The place of delivery is China, so the "current price" should refer to that of China's market. Article 76 of CISG stipulates that the aggrieved party shall recover the difference between the price fixed by the contract and the current price at the time of avoidance. [Seller] obtained information from authorities in China that the market price in China was renminbi [RMB] 132,700/ton in December 1992. [Seller] alleges that if the Arbitration Tribunal decides that [Seller] is liable for damages, the amount should be calculated as the difference between the contract price and the adjusted domestic market price (adding transportation expenses, insurance and other related fees).

   -    Under Contract 922, the difference should be (the current price RMB 132.7 8.3 - the contract price US $9.7) x 18,000 x 60% = US $67,824.
 
   -    Under Contract 9221, the difference should be (the current price RMB 132.7 8.3 - the contract price US $11.8) x 18,000 x 60% = US $45,144.
 
   -    There is no price difference under Contract 1205. [Seller] should not be liable under this contract.

[Buyer]'s supplementary response

[Buyer] in its first supplementary material provided after the hearing session asserts:

1. [Seller] foresaw or ought to have foreseen the damages at the time of the conclusion of the contract, in the light of the facts and matters of which it then knew or ought to have known, as a possible consequence of the breach of contract.

2. [Seller] emphasizes that according to Article 76 of CISG, the damage under Contract 1205 shall be the difference between the contract price and the current price at the time and place of the delivery, and [Buyer] admits that the current price shall be the price at the place where the delivery shall be made, i.e., the current price for FeMo alloy in China's market. [Buyer] went to the China Ministry of Foreign Trade and Economic Cooperation, the international trade building, and to the Economics Research Organization of the Ministry of Domestic Trade, but did not obtain either the current price at the place of delivery, nor did it get the current domestic price for FeMo alloy. Similar cases in the Awards Selection edited by the Arbitration Commission in February 1993 show that the Arbitration Tribunals decided that, "the damage shall be calculated as the difference between the contract price and the international market price on the last day before the time of shipment." Thus, [Buyer] asserts that the damages should be calculated at the difference between the contract price and the international market price on the last day before the time of shipment. However, if there is evidence to show the price in Xin Gang, Tianjin, on the last day before the time of shipment, the damages shall be calculated according to that current price.

[Buyer] in its second supplementary material provided after the hearing session asserts:

1. [Seller]'s statement there must be a resale price is not in conformity with the stipulation in CISG.

2. The damages should be calculated according to the current price at the last day of period of performance specified in the contract instead of the average monthly price asserted by [Seller].

[Seller]'s supplementary response

[Seller] emphasizes in its second supplementary materials provided after the hearing session:

1. [Buyer] should provide its contract with the third party to prove its loss of profits.

2. [Buyer]'s assertion that domestic price information is unavailable should not be supported. Because both [Buyer] and [Seller] agree that the damages shall be calculated on the basis of the market price in China, if the Arbitration Tribunal decides that [Seller] shall be liable for the loss, [Seller] asks the Arbitration Tribunal to make the award according to the market price in China.

3. [Buyer]'s claim that the damages shall be calculated according to the difference between the contract price and the international market price at the last day of the time of shipment lacks legal basis.

[Buyer]'s further response

[Buyer] in its third supplementary materials provided after the hearing session asserts that the evidence of price submitted by [Seller] is inaccurate.

OPINION OF THE ARBITRATION TRIBUNAL

1. Because both [Buyer] and [Seller] agreed to resolve the dispute according to the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG), according to the principle of autonomy of the parties, the CISG applies to this case.

2. Contract 922

[Seller] does not deny that the parties extended the time of delivery to 31 December 1994 after negotiation, and that [Seller] did not perform its obligation to deliver the goods. According to the seller's obligation stipulated in CISG, [Seller] breached the contract, and [Buyer] is entitled to indemnification.

Article 74 of CISG states:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

Article 76 of CISG states:

"(1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.

"(2) For the purposes of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods"

The Arbitration Tribunal holds that there is no legal basis to support frustration of purpose theory as asserted by [Seller]. In addition, the information consultation agreement which shows the average domestic price in China's market from September 1994 to February 1995 provided by [Seller] and issued by the Ministry of Metal Industry is not authoritative; this agreement shall not be admitted because it does not provide any evidence to prove the result is accurate and scientific. Because [Seller] has not proved the current price at the place of delivery stipulated in Article 76, i.e., the market price in China, [Seller]'s assertion that the damage shall be calculated as the difference between the contract price and the adjusted domestic price cannot be supported. After signing Contract 922, [Seller] did not deliver the goods within the period stipulated in the contract, and negotiated with [Buyer] about the price, time of delivery and the proportion of cuprum contained. Although [Buyer] agreed to alter the price and the time of shipment, [Seller] neither delivered the goods, nor did it provide any justifiable reason except claiming the market price soared. Under such circumstances, the Arbitration Tribunal cannot support [Seller]'s assertion that it could not foresee the damage when signing the contract, and that it is unfair for [Seller] to indemnify all of the damages.

In conclusion, [Seller] has not proved the current price at the place of delivery, i.e., the domestic market price in China. Moreover, [Buyer] mentioned in its fax to [Seller] on 8 December 1994:

"Today, when we talked with Mr. Feng and Manager Mr. Deng by phone, Mr. Deng promised that you will deliver the goods before 31 December 1994; otherwise, you will indemnify us the loss according to the international market price."

[Seller] does not deny this. According to the price terms of the contract, the contract price includes the freight to Rotterdam, the Arbitration Tribunal therefore supports [Buyer]'s claim for the loss of profits under Contract 922, i.e., the difference between the contract price and the international market price on 31 December 1994, (31 - 9.7) x 18,000 x 60% = US $230,040. However, because the fee for issuing the L/C, US $186.84, and the telegram fee, US $95.50, were paid as costs when [Seller] performed its obligation, and because such expenses are already included in the loss of profits, the Arbitration Tribunal does not support [Buyer]'s claim for the US $186.84 fee for issuing the L/C and for the US $95.50 telegram fee. On the other hand, the fee of altering the L/C, US $120.76 and the telegram fee, US $258.71 are extra expenses paid by [Buyer] due to [Seller]'s breach. Although [Buyer] agreed to alter the L/C, [Buyer] did not give up the right to claim for extra expenses. Accordingly, the Arbitration Tribunal supports [Buyer]'s claim for the fee of altering the L/C, US $120.76 and the telegram fee, US $258.71.

3. Contract 9221

For the same reason, because [Seller] did not deliver the goods according to the time of delivery altered during the performance of the contract and breached this contract too, [Seller] shall indemnify [Buyer] the loss of profits and put [Buyer] in the same position as [Buyer] would have been in had the contract been fully performed. According to the above reasoning, the Arbitration Tribunal supports [Buyer]'s claim for the loss of profits under Contract 9221, i.e., the difference between the contract price and the international market price on 31 January 1995, (34 -11.8) x 18,000 x 60% = US $239,760. The Arbitration Tribunal does not support [Buyer]'s claim for the US $254.88 fee for issuance of the L/C and the US $125.20 telegram fee. However, the Arbitration Tribunal supports [Buyer]'s claim for the fee of altering the L/C, US $1,254.88 and the telegram fee US $48.96.

4. Contract 1205

The Arbitration Tribunal holds that there is no legal basis for the theory of frustration of contract asserted by [Seller]; moreover, [Seller] has not provided effective evidence to prove force majeure; therefore, [Seller] cannot claim an exemption from liability according to the force majeure clause. [Seller] did not deliver the goods according to the time of delivery stipulated in the contract, and it breached the contract. [Seller] shall therefore indemnify [Buyer] the loss of profits due to its breach. For the same reason as above, the Arbitration Tribunal supports [Buyer]'s claim for the loss of profits under Contract 1205, i.e., the difference between the contract price and the international market price on 31 December 1994, (31 - 23.5) x 18,000 x 60% = US $81,000. The Arbitration Tribunal does not support [Buyer]'s claim for the fee of issuing the L/C, US $761.40 and the telegram fee, US $ 85.23.

5. [Buyer]'s other claims

      (1) The Arbitration Tribunal does not support [Buyer]'s claim for the attorneys' fee (calculated as 5% of the amount of the arbitration award), because it did not provide the relevant evidence.

      (2) The Arbitration Tribunal does not support [Buyer]'s claim for interest at the international ordinary commercial loan rate from 1 January 1995 and 1 February 1995 to the date when [Seller] pays off, because, [Buyer] did not provide sufficient evidence and the amount is not definite.

6. The arbitration fee

[Buyer] shall pay 10% of the arbitration fee, and [Seller] shall pay 90%.

AWARD

  1. [Seller] shall indemnify [Buyer] the loss of profits under the three contracts, US $550,800.
  2. [Seller] shall indemnify [Buyer] the fee of altering the L/C and the telegram fee under Contracts 922 and 9221, US $683.31.
  3. [Buyer]'s other claim for the fee of issuing the L/C and the telegram fee under the three contracts is dismissed.
  4. [Buyer]'s other claims are dismissed.
  5. [Buyer] shall pay 10% of the arbitration fee, and [Seller] shall pay 90%. [Buyer] has paid the arbitration fee of US $___ in advance, so [Seller] shall pay [Buyer] the prepaid arbitration fee US $ ___.

[Seller] shall pay the above amount, US $568,994.31 within forty-five days of the date of the award. If [Seller] does not pay the amount within this time period, interest shall be accrued at the annual rate of 8%.

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 United States is referred to as [Buyer]; Respondent of the People's Republic of China is referred to as [Seller]. 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.

*** Howard Yinghao Yang, J.D. University of Michigan; Associate, Debevoise & Plimpton, LLP, New York.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated October 25, 2005
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography