China 31 May 1996 CIETAC Arbitration proceeding (Children’s jackets case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960531c1.html]
DATE OF DECISION:
DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/27
CASE HISTORY: Unavailable
SELLER'S COUNTRY: People's Republic of China (claimant)
BUYER'S COUNTRY: United States (respondent)
GOODS INVOLVED: Children’s jackets
PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission 31 May 1996 (Children’s jackets case)
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/84],
CLOUT abstract no. 853
Reproduced with permission of UNCITRAL
The seller, a Chinese company (claimant) entered into a contract with the buyer, an American company (respondent), and with the merchant middleman, another American company, for sale of children's jackets. After the shipment of goods, the seller's bank refused to cash the letter of credit due to non-compliance. The seller demanded payment from the buyer several times, but the buyer did not acknowledge these requests.
The Tribunal held that the buyer's acceptance of the goods, which follows from the buyer's letter to the seller, and the buyer's further refusal to pay for the samples and the jackets duly delivered by the seller constituted a fundamental breach of the contract.
Therefore the Tribunal ruled that the buyer, pursuant to articles 53 and 78 CISG, was obligated to pay the contract price as requested by the seller, the price for the samples and freight, plus interest on the overdue payment, as well as the arbitration fees.Go to Case Table of Contents
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
53A [Buyer's obligation to pay price of goods]; 78A [Interest on delay in receiving price or any other sum in arrears]
53A [Buyer's obligation to pay price of goods];
78A [Interest on delay in receiving price or any other sum in arrears]
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. 1300-1302
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Dong WU, CIETAC's Practice on the CISG, at n.122, Nordic Journal of Commercial Law (2/2005)Go to Case Table of Contents
|Case text (English translation)
Joint translation project:
Children's jacket case 31 May 1996
Translation by [*] by Kun Fan [**]
Translation edited by Meihua Xu [***]
China's International Trade and Economic Arbitration Commission (hereafter, "CIETAC") accepted the case, according to:
|-||The arbitration clause in Sales Confirmation No. 93SLP9188 signed by Claimant [Seller], Shanxi ___ Import & Export Company, and Respondent [Buyer], American ___ Company, on 20 September 1993; and
|-||The written arbitration application submitted by the [Seller] on 21 July 1995.|
The Secretariat of CIETAC sent to the [Buyer] the Notice of Arbitration and the Request for Arbitration by registered mail return receipt requested on 11 September 1995. The return receipt was signed and accepted by the [Buyer] and sent back to the Secretariat. It indicated that the [Seller] received the documents. However, the [Buyer] failed to appoint an arbitrator within the time limit. The Chairman of CIETAC appointed Mr. D as the arbitrator for the [Buyer] in accordance with the Arbitration Rule. As a result, Ms. P, the Presiding Arbitrator appointed by the Chairman, Mr. A, the arbitrator appointed by the [Seller] and Mr. D formed the Arbitration Tribunal to hear the case.
The Secretariat of CIETAC sent the Notice of Hearing to the [Buyer] by registered mail on 7 December 1995. The Notice of Hearing, which was returned due to being unclaimed, shall be deemed to have been duly served in accordance with Article 77 of the Arbitration Rules. An oral hearing was held on 2 February 1996. The [Buyer] failed to attend the oral hearing without any reason provided. The [Seller]'s agents who appeared at the hearing made oral statements and answered the Arbitration Tribunal's questions.
The Arbitration Tribunal has concluded the case based on the available materials and the facts found in the oral hearing, and made this award within the time limit stipulated in the Arbitration Rules.
The following are the facts, the Arbitration Tribunal's opinion and award.
On 21 September 1993, the [Seller] and the [Buyer] concluded Sales Confirmation No. 93SLPD9188 by fax. In the Sales Confirmation, it was stipulated that the [Seller] would export to the [Buyer] 100,000 children's jackets at the unit price of US $11.40, totaling US $1,140,000. The payment shall be by Letter of Credit (L/C); the time of shipment shall be stipulated in the L/C that may be issued as soon as possible; and the Price Terms shall be CIF U.S.A. BYSEA.
The [Seller] alleged that:
In May 1993, the [Buyer], together with the merchant middleman American ___ Trading Company, initialed a contract with the [Seller] for the export of 100,000 children's jackets and then conducted an on-spot inspection. American ___ Trading Company and the [Buyer] reviewed and confirmed the samples and reached an oral agreement with the [Seller], in accordance with which the [Seller] would airlift 720 samples to the [Buyer] for trial sale and the [Buyer] would bear the payment and airlift expenses totaling US $12,753.46.
On 6 July 1993, the [Seller] went through the formalities and airlifted 720 samples to the [Buyer]. On 21 September 1993, the [Buyer] and the [Seller] signed Sales Confirmation No. 93SLPD9188. After this signing, the [Buyer] and the [Seller] agreed that the [Seller] would dispatch an initial shipment of 10,200 jackets.
On 4 October, the [Buyer] informed the bank of issuance of L/C No. 501035, for 10,200 jackets for export valued at US $133,080, including payment for goods of US $116,280 and freight of US $16,800. The time of shipment was set at no later than 8 October. Since there were only four days for shipment stipulated in the L/C, the [Seller] could not complete the shipment and therefore notified the [Buyer] of the need to modify the L/C. Finally, the time of shipment was modified to be no later than 31 October and providing that the L/C would be valid till 15 November.
After the issuance of the L/C, the [Seller] examined the products with care and airlifted 10,200 children's jackets to the [Buyer] in shipments on 30 October and 31 October. The [Seller] then brought the entire set of negotiable documents to the bank for payment, but learned that the bank refused to pay US $133,080 under L/C No. 501035 due to non-compliance on 6 December. At the same time, the [Buyer] had picked up and sold out all of the goods.
After the payment was refused, the [Seller] demanded payment from the [Buyer] several times, but the [Buyer] evaded reimbursement. Therefore, the [Seller], having suffered significant economic losses applied to CIETAC for arbitration and asked the Arbitration Tribunal to order the [Buyer] to pay:
(1) US $133,080, the payment for goods and freight;
(2) US $12,753.46, the payment for samples and freight;
(3) US $16,723.51, the interest on the overdue payment for the aforesaid sums calculated from December 1993 to June 1995;
(4) The arbitration fees.
The [Buyer] did not submit any response.
II. OPINION OF THE ARBITRAL TRIBUNAL
After review of the relevant materials submitted by the [Seller], the Arbitration Tribunal ruled as follows:
(1) The applicable law
The [Buyer] and the [Seller] did not stipulate the applicable law for dispute resolution in the contract. Both China and the United States are Contracting States of the CISG, and the parties did not exclude the application of the CISG in their contract; therefore, the CISG should be applied here.
(2) Breach of contract and indemnity for losses
The parties agreed that the [Seller] would airlift 720 samples to the [Buyer] before the contract was signed and that the [Buyer] would bear the payment for samples and air freight totaling US $ 12,753.46. The [Buyer] failed to make this payment. Nevertheless the, [Seller] delivered goods to the [Buyer] valued at US $116,280 plus freight of US $16,800 in accordance with the contract. The Arbitration Tribunal noted that the [Buyer] had written to the [Seller] on 9 March 1994:
|-||"As you know, one of our clients, that had purchased a large portion of the suede jackets, is withholding payment (cancelled their LC) for the goods received and ..."|
This letter could prove that the [Buyer] had received the goods delivered by the [Seller]. However, the [Buyer] refused to pay for the goods, which constituted a fundamental breach of the contract. [Buyer] should therefore assume the liability for breach of contract: payment for the goods and to indemnification of [Seller]'s losses arising from [Buyer]'s breach.
The Arbitration Tribunal rules that the [Buyer] should pay US $133,080 for the goods and US $12,753.46 for the samples and the air freight, as well as US $25,270, in interest on the overdue payment from December 1993 to May 1996, calculated as follows (at a monthly rate of 6‰): (US $133,080 + US $12,753.46) × 0.006 × 29 = US $25,270
(3) The arbitration fee
The entire arbitration fee should be borne by the [Buyer].
The Arbitration Tribunal rules:
(1) The [Buyer] shall pay to the [Seller] US $133,080, the payment for the goods, US $12,753.46, the payment for the samples and air freight and US $16,623.01, the interest on the aforesaid overdue payment within 45 days after this award takes effect, otherwise, 6/1000 annual interest shall be added from 15 July 1996 to the date of actual payment.
(2) [Buyer] shall bear the entire arbitration fee. The [Seller] has made advance payment of RMB ___, which offsets the arbitration fee. Therefore, the [Buyer] shall pay to the [Seller] RMB___ within 45 days after this award takes effect, otherwise, 8% annual interest shall be added from 15 July 1996 to the date of actual payment.
The award is final.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the People's Republic of China is referred to as [Seller] and Respondent of the United States is referred to as [Buyer]. Amounts in the currency of the United States (US dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].
** Kun Fan, LL.M. in Corporate Law, New York University School of Law.
*** 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