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CISG CASE PRESENTATION

China 26 October 1996 CIETAC Arbitration proceeding (Cotton bath towel case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/961026c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19961026 (26 October 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/49

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Australia (claimant)

GOODS INVOLVED: Cotton bath towels


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 35(2) ; 74 ; 77 ; 88

Classification of issues using UNCITRAL classification code numbers:

35B1 [Conformity of goods to contract (requirements implied by law): fitness for purpose of goods of same description];

74A ; 74A1 ; 74B [General rules for measuring damages: loss suffered as consequence of breach; Includes loss of profit; Outer limits of damages: foreseeability of loss];

77A [Obligation to take reasonable measures to mitigate damages];

88A ; 88B [Party obliged to preserve goods may sell them; Duty to sell]

Descriptors: Conformity of goods ; Damages ; Profits, loss of ; Foreseeability of Damages ; Mitigation of loss ; Resale of goods

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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., pp. 2001-2008

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.65, 169, 171, 207, 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

Cotton bath towel case (26 October 1996)

Translation [*] by Meihua Xu [**]

Edited by John Zhu [***]

The China International Economic and Trade Arbitration Commission Shenzhen Commission (hereafter, the "Shenzhen Commission") accepted the case on 22 January 1996 according to:

   -    The arbitration clause in Sales Contract No. SSO952003 signed by Claimant [Buyer], Australia __ Company, and Respondent [Seller], China __ United Service Company on 5 January 1995; and
 
   -    The written arbitration application submitted by [Buyer].

The Arbitration Rules of the Arbitration Commission (hereafter, "the Arbitration Rules") which became effective on 1 October 1995, are applicable to this case. According to Article 64 of the Arbitration Rules, this case is qualified to use summary procedure.

Since the parties failed to jointly appoint or ask the Chairman of the Arbitration Commission to appoint the sole arbitrator within the stipulated time, the Chairman of the Arbitration Commission appointed Ms. P as the sole arbitrator, who formed the Arbitration Tribunal to hear this case on 2 May 1996.

The Arbitration Tribunal examined the arbitration application, arbitration defense, and evidence, and held a court session on 26 July 1996. The agents of the two parties attended the court session. The Arbitration Tribunal heard the two parties' statements and arguments, and made investigation on related facts.

After the court session, the parties submitted supplementary documents.

According to Article 73 of the Arbitration Rules, this case should have been concluded within 30 days of the court session, however, because the Arbitration Tribunal had to investigate certain issues, it twice asked for postponement on making its decision. Because these requests were reasonable, the Secretary General of the Arbitration Commission approved the postponement of the deadline for making the decision to 26 October 1996.

The Arbitration Tribunal handed down this award on 26 October 1996. The following are the facts, the Tribunal's opinion and the award.

I. FACTS

On 5 January 1995, the [Buyer] and the [Seller] signed Contract No. SSO- 952003 with the following terms.

   -    Products and pricing:
 
Cotton bath towel
Item No. 5008: 30" 60"; 590 dozen; unit price US $16.5/doz;
Item No. 9169: 30" 60"; 435 dozen; unit price US $25.2/doz;
Item No. TB4518: 27" 54"; 208 dozen; unit price US $16.8/doz;
 
Cotton dish towel
Item No. 3536-1: 13" 13"; 75 dozen; unit price US $1.31/doz;
Item No. 3518: 17" 26"; 1820 dozen; unit price US $2.60/doz;
 
   -    Total price and net price: The total contract price was US $29,021.65; the net price was US $28,441.22;
 
   -    Delivery term: All of the goods were under FOB Guangzhou/Shenzhen, C2 term;
 
   -    Shipping term: 10% more or less loading was allowed; the shipping mark was: "To: Seagood P/L Sydney"; loading port: Guangzhou/Shenzhen; destination port: Sydney, Australia; loading date: 20 January 1995;
 
   -    Payment term: [Buyer] shall pay US $20,000 to the [Seller]'s account, No. 8091237 Bank of China, Guangdong Branch, before 14 January 1995, and the remaining amount shall be paid within three days after the goods were loaded;
 
   -    Insurance: The [Buyer] shall arrange for insurance or entrust the [Seller] to do so, and the insurance fee shall be borne by the [Buyer];
 
   -    Claims: Objection to the quality of the goods shall be raised within two months after the goods arrived at the destination port; objection to the quantity of the goods shall be raised within fifteen days after the goods arrived at the destination port. [Seller] is not liable for objections caused by the shipping company, other transportation agencies, or delivery agencies;
 
   -    Arbitration: Any dispute arising from the contract performance or in connection with this contract shall be settled by negotiation. If no agreement can be reached through negotiation, the dispute shall be submitted to Shenzhen Sub-commission. The Shenzhen Sub-commission shall arbitrate this case based on the Arbitration Rules, and its decision is final and has binding effect on the parties.

On 14 January 1995, the [Seller] issued an invoice with the following contents:

   -   Item No. 5008, 590 dozen;
   -   Item No. 9169, 440 dozen;
   -   Item No. TB4518, 210 dozen;
   -   Item No. 3536-1, 150 dozen;
   -   Item No. 3518, 1820 dozen;

The above totaled US $29,279.50. After deducting a 2% commission of US $585.59, the FOB G.Z. net price was US $28,693.91, plus an insurance fee and transportation fee of US $2,035.32, the total price listed in this invoice was US $30,729.23.

On 17 January 1995, Laigang Company issued a B/L. It reported Mark No. Seagood P/L Sydney, 181 packages, cotton towel 38,520 pieces, gross weight 8,330 kg, cubage 27.68 CBM;

The goods arrived at Sydney port in Australia on 6 February 1995. Because the [Buyer] discovered that the goods were not in conformity with the contract, it asked SGS Australia Pty Ltd (hereafter, "SGS") to inspect the goods, and on 17 February 1995, SGS conducted a sampling inspection of the goods of five item numbers, with the following result:

   -    Item No. 3518: eight packages, 100% not conforming;
   -    Item No. TB4518: eight packages, 100% not conforming;
   -    Item No. 9169: four packages, 100% not conforming;
   -    Item No. 5008: three packages, 50% not conforming;
   -    Item No. 3536: three packages, 80% not conforming;

On 22 February 1995, SGS issued its inspection certificate.

Later, the [Buyer] mailed the inspection certificate to the [Seller], and on 6 March, the [Buyer] urged the [Seller] to give its opinion on how to resolve the problem; however, the [Seller] made no response. On 9 March, the [Buyer] sent a fax to the [Seller], stating that:

"Due to the non-conformity of the goods, we ask a compensation of US $65,000. Because your company violated the contract and refused to consider our compensation claim, we have to resell the goods at a lower price to mitigate the loss. The goods are to be sold within twenty-four hours of this fax unless you confirm your liability and agree to pay US $65,000 to us by written document."

The [Seller] sent a fax to the [Buyer] on 11 March 1995, asserting that the goods under Item No. 5008 had been inspected and confirmed by the [Buyer], and that it was the [Buyer] that had asked the [Seller] to export the goods on behalf of the [Buyer]; therefore, the [Buyer] should bear the losses and expenses under this item number. In order to inspect the quality of the goods, the [Seller] suggested that, except for the goods under Item No. 5008, the [Buyer] should return the goods to have them inspected by the China Commodity Inspection Bureau (hereafter, "CCIB"); meanwhile, the [Buyer] should advise of the expenses incurred in detail for further negotiation.

On the same day, the [Buyer] replied by fax with the following contents:

   (1)    The [Buyer] will accept the goods under Item No. 5008, but refuses to accept the remaining goods;
 
   (2)    It is an international trade usage that goods should be inspected at the destination port by a local inspection agency. SGS is well-known for its authority. If you wish to have the goods inspected by a Chinese agency, you should arrange and bear the cost for returning the goods to China;
 
   (3)    We have never received any response from you denying the non-conformity of the goods;
 
   (4)    We need a list for damages;
 
   (5)    You can send an employee here to inspect the goods, and make payment before 15 March 1995 for the cost of returning the goods to China, i.e., US $2,700, and for the aforesaid losses of US $38,168.30; otherwise, after 9 o'clock on the morning of 15 March 1995, without further notification to you, the goods will be resold for whatever price we can obtain for them.

The [Seller] submitted to the Tribunal a letter that [Seller] alleges that it sent to the [Buyer] on 13 March 1995. However, the [Buyer] denied receiving this letter, and the [Seller] cannot provide evidence showing that it had faxed that letter to the [Buyer].

On 16 March 1995, the [Buyer] resold the goods. The goods under Item No.5008 were resold for Australia dollars [AU $] 4,302, and the remaining four items of goods were resold for AU $13,698. The [Buyer] received a payment of AU $18,000 on 20 March.

On 3 April 1995, the [Buyer] faxed to the [Seller], informing that the goods had been resold entirely, and that except for Item No. 5008, the other goods were resold for AU $13,000.

It was not until 19 April 1995 that the [Seller] made response alleging that

"The SGS inspection certificate did not mention the packaging of the goods; therefore, it could not be excluded that the quality problem on the goods was caused by sea water erosion or by rough loading or unloading. Our supplier doubts the reliability of the inspection certificate. In addition, since you have resold the goods, it is impossible to have the goods re-inspected or to have the inspection certificated re-issued by SGS. In order to remedy the insufficiency of this document, please send the photos taken on the inspection site to add the power of persuasion."

Later, the two parties failed to settle the dispute over the compensation issue by negotiation, and the [Buyer] filed its arbitration application with the Shenzhen Sub-commission.

The [Buyer] claims in its arbitration application that:

   (1)    [Seller] shall pay the damages of the [Buyer], totaling US $59,000;
   (2)    [Seller] shall bear the entire arbitration fee.

[POSITION OF THE PARTIES]

[Buyer]'s position

The [Buyer] alleges that:

      After the conclusion of the contract, the goods arrived at Sydney port on 6 February 1995. The [Buyer] discovered that the goods delivered by the [Seller] had severe defects, such as opened lines, holes, uneven length, oil stains, and blots. The [Buyer] contacted the [Seller] repeatedly regarding the defects, hoping the [Seller] could resolve the issue as soon as possible. However, the [Seller] put off this issue, and with the time passing, the sales season for the goods nearly ended. Moreover, the storage fee was increasing day by day, which caused financial difficulties to the [Buyer]. In order to mitigate the loss, the [Buyer] faxed to the [Seller] twice, urging it to come over to make disposal of the goods, otherwise, the goods had to be resold at a discounted price. Not receiving a response from the [Seller] within the stipulated time, the [Buyer] had to resell the goods in order to mitigate the loss.

The goods delivered by the [Seller] were of inferior grade, and this was a fundamental breach of the contract and caused severe economic loss to the [Buyer]. The [Buyer] had signed a contract with its client, Attalla Company, according to which the [Buyer] was to receive AU $76,920 (US $56,536.20) profit. However, the [Buyer] had to resell the goods at a discounted price with great losses. In addition, due to the [Seller]'s breach of contract, the [Buyer]'s reputation was damaged and the business relationship the [Buyer] had built with its client ended. The [Buyer] claims US $59,000 for the aforesaid two losses.

[Seller]'s defense

The [Seller] counter argues in its defense of 15 March 1996 that:

(1) The 590 dozen towels under Item No. 5008 were chosen and inspected by the [Buyer], and the [Buyer] had asked the [Seller]'s help to export those goods. The goods under the other item numbers were inspected by sampling by the [Seller]. These samples were later sent to the [Buyer], and the [Buyer] confirmed and decided to order them.

(2) After receiving US $22,311.49 paid by the [Buyer], the [Seller] loaded and exported the goods, however, the [Buyer] failed to pay the remaining US $8,417.83 to the [Seller] according to the contract.

(3) On 13 February 1995, the [Buyer] raised quality objection without providing any valid evidence, asking to return the goods and have the [Seller] pay the entire costs and import tax. The [Seller] sent a fax to the [Buyer] on the next day, asking the [Buyer] to investigate the facts and clarify the responsibility, and after that, the [Seller] was to bear the cost incurred thereof. However, the [Buyer] made no response.

(4) On 22 February 1995, the [Buyer] faxed the inspection certificate issued by SGS in Australia, in which there were no shipping marks, contract numbers, container numbers, or even an identification of the quantity of the goods inspected; therefore, one is unable to determine whether the goods inspected were the contract goods.

(5) The [Seller] contacted the [Buyer] via fax and telephone, asking it to send back the goods in dispute, which would be helpful for confirming the facts and clarifying the responsibility; however, the [Buyer] made no response to this, but alleged that it was to resell the goods at a discounted price and that the [Seller] shall bear the losses incurred thereby. The [Seller] replied immediately, but the [Buyer] resold the entire goods in a hurry ignoring [Seller]'s opinion, and afterwards alleged that it suffered losses due to the discounted price. This violated common sense and is not understandable.

(6) The compensation amounts claimed by the [Buyer] conflict with each other. The [Buyer] refused to perform the contract entirely for more than one year after the goods were exported, with the result, the [Seller] suffered severe losses.

[Buyer]'s supplementary statements

On 12 August 1996, the [Buyer] submitted supplementary opinions and made explanations on the claimed amount as follows:

      1. Loss of price for the goods: the price that has been paid for the goods is US $22,311.49; the price obtained in the resale of the goods is AU$18,000, i.e., US $13,140 (1AU $ = US $0.73, same proportion for the funds reported below); the loss of price for the goods is US $22,311.49 - US $13,140 = US $9,171.49;

      2. Loss of profit: the price at which the goods should have been sold is AU $76,920, i.e., US $56,151.60, loss of profit is US $56,151.60 - US $30,729.23 = US $25,422.37;

      3. Loss of expenses: import tax: US $9,944.08; custom agency fee: US $424.56; inspection fee: US $238.37; transportation fee: US $380.64; storage fee: US $366; interest: US $498.05, totaling US $11,851.70;

      4. Influence on cooperation relationship: US $12,554.44.

The above totals US $59,000.

On 15 October 1996, the [Buyer] modified the aforesaid claim No. 3. The [Buyer] alleges in its modified supplementary opinions that:

(1) The [Seller] shall be liable for the defective, damaged, and non-conforming goods it delivered. On 19 May 1995, SGS described clearly in the supplementary opinions regarding the packaging of the goods during inspection and the reason for the defects in the goods as the entire packages of the goods were complete and un-damaged, and that the defects on the towels were not caused by transportation or storage. There is no basis for the [Seller] to doubt whether the goods inspected by SGS were the contract goods. First, five items of the goods were clearly indicated in the inspection certificate issued by SGS; second, for one year and one month from being notified of the defects on the goods to receiving inspection certificate from SGS, and to the making of its arbitration defense, the [Seller] had never raised objection on the towels inspected.

(2) It was the [Seller] who caused the [Buyer] to resell the goods at a discounted price, and the [Buyer] had to do so to mitigate the loss.

      - A. For more than one month after the [Buyer] raised objection to the quality of the goods, the [Seller] did not agree on returning the goods, but put off the issue by making unreasonable suggestions. The [Seller] alleged that its supplier, Lingnan Company, had an office in Sydney, and that it was going to send staff to check the goods; however, even after being urged, the [Seller] never sent any staff, with the result, the [Buyer] missed the chance especially the timing to resolve the problem.

      - B. The [Buyer] had to breach the contract it entered into with its client due to the [Seller]'s breach of contract. The [Buyer]'s client asked to terminate its contract, and the [Buyer] was unable to receive the contract price and the profit.

      - C. On 10 March, the loan for the performance of this contract expired, the [Buyer] could not circulate the fund.

      - D. The market season was changing, and another chance would be missed if [Buyer] did not make disposal of the goods.

      - E. The storage fee for the goods was increasing day by day.

      - F. The [Buyer] was unable to pay for returning the goods. In order to avoid enlargement of the losses, on 11 March, the [Buyer] re-stated the condition for returning the goods, suggesting making disposal of the goods at a decreased price and asking the [Seller] to make response before 9 a.m. of 15 March. However, the [Seller] failed to reply.

As the [Buyer] informed the [Seller] of the situation of reselling the goods without receiving any response from the [Seller], it could therefore be concluded that the [Seller] impliedly accepted the resale of the goods at a lower price. The [Buyer] has never received the fax of 13 March that the [Seller] submitted to the Arbitration Tribunal;

(3) [Seller]'s contract violation caused severe economic loss to the [Buyer]. The [Buyer] was unable to earn the expected profit, and this affected its long time business cooperation.

[Seller]'s supplementary statement

On 12 August 1996, the [Seller] submitted "supplementary statement on [96] Shen Guo Zhong Zi No. 04 arbitration case" alleging that:

(1) As to the packaging of the goods, the supplier proved that there were five broken packages under Item No. 5008 during loading; however, SGS did not discover the broken packages, and the [Buyer] also alleged that the entire packages had no problem. In addition, SGS did not find the mark number on the packages; therefore, there were two possibilities: either the goods were not those delivered by the [Seller], or the goods and the packages had been replaced, for which the [Seller] should not take responsibility;

(2) According to the material provided by the shipping company, the ship arrived at the destination port on 5 February; the goods were unloaded on 5 February, customs application was completed on 9 February; and the goods were accepted on 10 February. The [Buyer] should have paid the remaining price. i.e., US $8,417.83, within three days after the arrival of the goods, which was 8 February; however, the [Buyer] did not pay, which was a fundamental breach of the contract;

(3) The [Buyer] was unable to sell the goods under Item No. 5008 which were chosen and confirmed by the [Buyer] itself. This indicated that there was no quality problem and that the [Buyer] failed to piece out the market situation in Australia and made the wrong business decision, for which the [Seller] should not be held liable.

II. OPINION OF THE ARBITRATION TRIBUNAL

(1) The two parties did not stipulate the applicable law in the contract. The Arbitration Tribunal deems that the applicable law shall be decided based on the principle of proximate connection. The contract in this case was signed in Guangzhou, and the place of business of the [Seller] is also in Guangzhou, China, therefore, Chinese law shall be applied.

In addition, China and Australia are Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, the "CISG"), therefore, the CISG shall also be applied.

(2) The main disputes in this case are whether the goods under the contract were conforming and whether the goods inspected by SGS were the goods under the contract.

The Arbitration Tribunal confirms the following facts:

      1. It was discover at the court session that the quantity of the goods delivered and the price for the goods should be based on Invoice No. 952003A issued by the [Seller] on 14 January 1995. The quantity of the goods was 3,210 dozen, totaling 38,520 pieces; the net price for the goods was US $28,693.91 FOB G. Z.; in addition, the [Seller] paid the transportation fee and the insurance fee for the [Buyer], totaling US $2,035.32. The total amount in the invoice was US $30,729.23.

      2. It was also discovered at the court session that on 18 January 1995, the [Seller] received part of the payment of US $22,311.40 from the [Buyer] by telegraph transfer. The [Buyer] has not paid the remaining US $8,417.83.

      3. The [Buyer] admitted that the goods under Item No. 5008 were chosen and inspected by the [Buyer] itself and the [Buyer] had entrusted the [Seller] to export the goods.

      4. The goods arrived at the destination port on 2 February 1995; customs application was completed on 9 February; the goods were taken on 10 February, and the [Buyer] discovered the problems on the goods on the same day and informed the [Seller] immediately. On 13 February, the [Buyer] informed the [Seller] of the situation in detail and mailed eight defective towels to the [Seller], asking for response. After receiving the fax, the [Seller] did not deny the quality problem, but asked the [Buyer] to find out how many towels had stains, what kind of color, specification, and design they were, and the packaging. The [Seller] also asked the [Buyer] to issue a certificate from the Consular Office for compensation claim.

      5. The [Seller] promised the [Buyer] that the Sydney Office of its supplier, Lingnan Company, would send staff to take care of this matter, however, nobody has ever come.

      6. The [Buyer] therefore asked for inspection by SGS on 16 February 1995, and on 22 February, SGS issued the inspection certificate.

The [Seller] asserted in its defense that, in the SGS inspection certificate, there were no shipping marks, contract numbers, container numbers, or indications of the quantity of the goods inspected; therefore, it was unable to determine whether the goods inspected were the contract goods. The [Seller] also denied the effectiveness of the SGS inspection certificate in the material submitted after the court session by alleging that five packages of goods were broken by loaders and that there was error on the container number of the SGS inspection certificate.

The Arbitration Tribunal examined the SGS's inspection certificate and some of their letters, concluding that mark number, contract number, container number, and the quantity of the goods inspected are not required contents in an inspection certificate. Even though there were no marks on the SGS inspection certificate, it identified five item numbers, which can be found on the packages of the goods. In addition, the [Seller] had not claimed that the goods inspected by SGS were not the contract goods within more than one year from March 1995 to the receipt of SGS inspection certificate; therefore, the SGS inspection certificate is regarded as reliable.

SGS conducted a sampling inspection of five item numbers of the goods, with the following result:

   -    Item numbers 3518, TB4518, 9169 were 100% defective;
   -    Item No. 5008 was 50% non-conforming;
   -    Item No. 3536 was 80% non-conforming.

SGS states that the packages of the goods were perfect during inspection, and that the defects on the towels were not caused by damages or rough loading and unloading during transportation or storage.

The Arbitration Tribunal notes that the two parties did not stipulate the quality requirement in their contract, and that there were only stipulations on item number and specifications. During the court session, the parties admitted that the goods were to be delivered based on samples; however, the parties failed to jointly seal the sample, and each party had its own sample. The Arbitration Tribunal therefore holds that it is improper to inspect the goods based on samples without two parties' jointly sealed samples.

With no stipulation on quality of the goods, the Arbitration Tribunal deems that Article 35(2) of the United Nations Conventions on Contracts for the International Sales of Goods (hereafter, "the CISG") shall be applied. It stipulates that:

"Except where the parties have agreed otherwise, the goods do not conform with the contract unless they (a) are fit for the purpose for which goods of the same description would ordinarily be used ..."

Taking eight packages of goods under Item No. 3518 as samples, the SGS inspection certificate indicated that 40% of the towels had oily stains, 30% of the creases of the towels had dirt, 10% of the towels had other stains, 10% of the towels had broken lines, no fold, or uneven length, with the result, 100% of the towels were non-conforming.

The Arbitration Tribunal notes that towels are used daily, that the towels delivered by the [Seller] obviously were not fit for the purpose for which goods of the same description would ordinarily be used, and that there were defects on the goods which made them unable to be sold for this purpose. The Arbitration Tribunal concludes that these were non-confirming goods and that the [Seller] shall be liable for this.

Article 22 of the Law of the PRC on Economic Contracts Involving Foreign Interests stipulates that "a party who suffers losses due to the other party's breach of contract should take reasonable measures to mitigate the loss ..." The Arbitration Tribunal holds that after the inspection of the goods, the [Buyer] was trying to settle the dispute with the [Seller], but with no result; therefore, its reselling the goods to mitigate the loss was not improper.

Article 74 of the 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. 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."

The Arbitration Tribunal notes that after the [Buyer] and the [Seller] signed their contract, the [Buyer]'s client, Attalla International Trade Pty Ltd, placed an order to the [Buyer], and that the type of goods, item number, quantity, and size on this order were the same as those in the invoice. The total amount in the order was AU $76,920. When the two parties were negotiating the defects on the goods, the [Buyer] faxed the aforesaid order to the [Seller], indicating its responsibility to its client, and the [Seller] did not deny this; therefore, the Arbitration Tribunal holds that the [Seller] is liable for the [Buyer]'s loss of profit.

Since the source of the goods under Item No. 5008 was found and inspected by the [Buyer] itself, and the [Buyer] had agreed to accept the goods under this item number in its fax sent to the [Seller], therefore, the [Buyer] shall be liable for the costs and losses incurred under item No. 5008.

[Buyer]'s losses confirmed by the Arbitration Tribunal are as follows:

(1) Losses for making disposal of the goods

The total amount in the invoice issued by the [Seller] was US $30,729.23, in which the price for the goods under Item No. 5008 was US $9,540.30, insurance and sea transportation fee was US $676.70. The [Buyer] actually paid US $22,311.40 to the [Seller]. Deducting the expenses under Item No. 5008 which should be borne by the [Buyer], the [Buyer] has only paid US $12,094.40 for the other four items. The [Buyer] received AU $13,698 for resale of the goods under the other four items (i.e., US $10,000 based on 1AU $ = 0.73 US $), therefore, the loss suffered by the [Buyer] due to quality defects is US $12,094.40 - US $10,000 = US $2,094.40.

(2) Loss of profit

[Buyer]'s loss of profit is the price difference between the contract price and the price in the order made by Attalla International Trade Pty Ltd. Since the Arbitration Tribunal holds that the [Buyer] itself shall be liable for the losses under item No. 5008, therefore, the loss of profit under Item No. 5008 will not be considered. Except for Item No. 5008, the price for other four items in the order was AU $50,016 (i.e., US $36,511.68), and the contract price for the four items was US $20,512.23 with a price difference of US $36,511.68 - US $20,512.23 = US $15,999.45. The [Buyer] owes the [Seller] the price for the contract goods of US $8,417.83, which shall be deducted from the price difference, therefore, the [Buyer]'s loss of profit is US $15,999.45 - US $8,417.83 = US $7,581.62.

(3) Other losses

The Arbitration Tribunal deems that import tax, customs agency fee, and transportation fee claimed by the [Buyer] should be included in the [Buyer]'s cost, however, inspection fee and storage fee can be considered as losses with the cost incurred under Item No. 5008 being deducted. After deduction, the Arbitration Tribunal holds that the inspection fee and storage fee is US $348.21. As to loss of interest of US $498.05 claimed by the [Buyer], the Arbitration Tribunal deems that it was a loan interest which enabled the [Buyer] to pay the price for the goods, and that together with the loss incurred due to loss of business cooperation, i.e., US $12,554.44, these two losses were not ones that the [Seller] foresaw or ought have foreseen at the conclusion of the contract as a consequence of the breach; therefore, they are not acceptable.

[Buyer]'s aforesaid losses total US $10.024.23.

The [Buyer] and the [Seller] shall bear the arbitration fee at 30% and 70%, respectively.

III. THE AWARD

The Arbitration Tribunal rules that:

(1) [Seller] shall pay US $10,024.23 to the [Buyer] within 30 days of this award; otherwise, 8% annual interest shall be added;

(2) The arbitration fee and case processing fee is renminbi [RMB]__, which shall be

borne by the [Buyer] and the [Seller] at 30% and 70% respectively. The [Buyer] shall bear RMB __, and the [Seller] shall bear RMB __; the [Buyer] has paid RMB __ in advance; therefore, the [Seller] shall pay back RMB __ within 30 days of this award.

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 Australia is referred to as [Buyer] and Respondent of the Peoples' 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]; amounts in the currency of Australia (dollars) are indicated as [AU $].

** 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 a 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.

*** John Zhu, LL.M. China University of Political Science and Law (National Graduate Scholarship); Bachelor of Law, Southwest University of Political Science and Law; Double Degree, English Literature, Sichuan International Studies University, Chongqing, China. Focus: International Economic Law.

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Pace Law School Institute of International Commercial Law - Last updated April 23, 2007
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