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CISG CASE PRESENTATION

China 11 November 1996 CIETAC Arbitration proceeding (Rubber overshoes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/961111c1.html]

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

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Case identification

DATE OF DECISION: 19961111 (11 November 1996)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/51

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Respondent (Hungary)

GOODS INVOLVED: Rubber overshoes


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 78

Classification of issues using UNCITRAL classification code numbers:

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

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

Descriptors: Price ; 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., pp. 2076-2080

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at n.192, 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

Rubber overshoes case (11 November 1996)

Translation [*] by Meihua Xu [**]

Edited by John W. Zhu [***]

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

   -    The arbitration clause in Sales Confirmation No. 93KDS-010 and 93KDS -011 signed by Claimant [Seller], China Shijiazhuang __ Shoes Company and Respondent [Buyer], Hungary __ Industrial Company on 4 August 1993 and Sales Confirmation No. 93KDS-012 signed by them on 10 August 1993; and
 
   -    The written arbitration application submitted by [Seller] on 28 November 1995.

According to the Arbitration Rules, on 18 April 1996, the Arbitration Commission sent the Arbitration Notice and the [Seller]'s arbitration application via TNT Skypak International Express Company (hereafter, the "Express Company"), asking the [Buyer] to appoint an arbitrator within the designated time limit and to submit its defense. However, the [Buyer] neither appointed an arbitrator, nor did it submit an answer.

The [Seller] appointed Mr. A as its arbitrator, and because the [Buyer] did not appoint an arbitrator, based on Article 26 of the Arbitration Rules, the Director of the Arbitration Commission appointed Mr. D as the arbitrator on behalf of the [Buyer].

According to Article 24 of the Arbitration Rules, the Director of the Arbitration Commission appointed Mr. P as the Presiding Arbitrator because the two parties failed to jointly appoint the Presiding Arbitrator within the stipulated time limit.

On 11 June 1996, Mr. P, Mr. A, and Mr. D formed Arbitration Tribunal to hear this case.

On 13 June 1996, the Secretariat Office of the Arbitration Commission scheduled the court session on 1 August 1996, and sent the Arbitration Tribunal Formation notice and the Court Session notice to the [Buyer] via Express Company, asking the [Buyer] to attend the court session.

On 1 August 1996, the court session was held in Beijing. The [Seller]'s agent attended the court session. They presented their statement and answered the Arbitration Tribunal's questions, but the [Buyer] did not present at the court session.

After the court session, on 5 August 1996, the Arbitration Commission instructed the Secretariat Office of the Arbitration Commission to send a notice to the [Buyer] by registered mail via the Express Company, informing the [Buyer] of the court session and asking it to send a written application to the Arbitration Tribunal before 31 August 1996 if it wanted a second court session, or if it wanted to present a defense, or if it had any opinions on this case, otherwise, the Arbitration Tribunal would decide this case based on the materials available.

The acknowledgement of receipt signed by the [Buyer] showed that [Buyer] received the aforesaid notice on 14 August 1996, but [Buyer] made no response within the stipulated time limit.

The Arbitration Tribunal examined the [Seller]'s arbitration application and the supplementary documents submitted after the court session, and made this judgment based on the court session and the existing evidence.

The following are the facts, the Tribunal's opinion and award.

I. FACTS

On 6 August 1993, the [Seller] sent to the [Buyer] by fax Sales Confirmations 93KDS-010 and 93KDS-011 dated 4 August 1993. After receiving the Sales Confirmations, the [Buyer] made some changes to the content and resent them to the [Seller] on the same day.

On 7 August 1993, the [Seller] confirmed the two Sales Confirmations via fax and sent to the [Buyer] the first draft of another Sales Confirmation, 93KDS-012. On 10 August 1993, the [Buyer] confirmed Sales Confirmation 93KDS-012.

Therefore, three sales contracts were concluded.

   -    Contract 93KDS-010 involved the sale of Models KD901, KD902, KD903, KD904, KD906, KD907, KD910, KD912, and KD913 rubber overshoes:

23,760 pairs, in 660 packages for a total price of US $101,550.24. The delivery date was by the end of September 1993. On 11 September, all of the goods under this contract had been delivered to the [Buyer].
 

   -    Contract 93KDS-011 involved the sale of Item No. 91-7, size 39-45 rubber overshoes:

3, 840 pairs, in 160 packages at a unit price of US $4.10 CIF TATA Hungary; and Item No. 9282, size 39-45 rubber shoes 24 pairs at a unit price of US $3.76 CIF TATA Hungary. The total price was US $37,852.80 and the delivery date was by the end of September 1993.

The aforesaid contract was modified after negotiation by the two parties. The [Seller] delivered the goods following the modified contract and the following are the goods actually delivered.

    Product number:   91-73:
    Quantity:      840 pairs, totaling 160 packages;
    Unit Price:    US $3.76 CIF TATA Hungary;
    Total price:   US $14,438.40; and

    Product number:   9282:
    Quantity:      2, 688 pairs, totaling 112 packages;
    Unit Price:    US $4.10;
    Total price:   US $23,812.80

    The total price for this contract was US $38,251.20;
    The delivery date was 11 September 1993.

   -    Contract 93KDS-012 involved Item No. C016-3, size 18-22 rubber overshoes 21,000 pairs at a unit price of US $1.91 CIF TATA Hungary, totaling US $43,050. The delivery date was by the end of September 1993.

The aforesaid contract was modified by the two parties and the [Seller] delivered the goods based on the modified contract. The following are the goods actually delivered.

    Product number:   C106-3:
    Quantity:      16,550 pairs, totaling 331 packages;
    Unit Price:    US $1.91 CIF TATA Hungary;
    Total price:   US $31,610; and

    Product number:   C86-8:
    Quantity:      4,000 pairs, totaling 80 packages;
    Unit Price:    US $2.24 TATA Hungary;
    Total price:   US $8,960; and

    Product number:   86-4
    Quantity:      4,000 pairs, totaling 200 packages;
    Unit Price:    US $3.74 TATA Hungary;
    Total price:   US $14,960.

    The total price for the aforesaid contract was US $55,530.50

On 11 September 1993, the [Seller] delivered all of the goods involved in all three contracts in one delivery. On 5 November 1993, the [Buyer] sent a fax to the [Seller], saying that it had received the goods, but nine packages were missing.

POSITION OF THE PARTIES

A. [Seller]'s position

[Seller] alleges that:

The [Seller] has delivered the goods to the [Buyer] following the contract, and the [Buyer] has stated that nine packages of goods were missing, but with no sufficient evidence. By contrast, the [Buyer] provided its payment plan after being urged by the [Seller], in which the [Buyer] promised that it was going to make the payment on time and the price in the payment plan was close to the price for the quantity the [Seller] delivered, which proved that the [Seller] has performed its obligation to deliver the entire goods.

On 6 April 1994, the [Buyer] sent a fax to the sales manager of the [Seller], Mr. Chen, claiming that Shijiazhuang __ Rubber Shoes Factory, as the domestic partner of the [Seller]'s joint venture company, violated the agreement on the [Buyer]'s exclusive right to sell rubber shoes in Hungary signed by Hebei __ Group Company, which Shijiazhuang __ Rubber Shoes Factory belonged to, and the [Buyer], with the result, that the [Buyer] suffered severe economic loss. Therefore, until the [Seller] responded on this issue, the [Buyer] was not going to answer any questions on this case.

The [Seller] asserts that the contract in this case is totally different from the agreement between the [Buyer] and Hebei __ Group Company. One is a sales contract, and the other is a business cooperation agreement, which cannot be discussed together.

The [Seller] alleges that after receiving the goods, the [Buyer] only paid US $20,000 on 5 January 1994 without paying the remaining US $170,000, therefore, the [Seller] seeks in its arbitration application to have it adjudged that:

  1. [Buyer] shall pay the price in arrear of US $175,331.94;
  2. [Buyer] shall pay the interest of a total of US $30,326.95;
  3. [Buyer] shall compensate the [Seller]'s economic loss of US $22,513.19; and
  4. [Buyer] shall bear the arbitration fee.

On 12 August 1996, the [Seller] modified its claim in the supplementary document (which has been forwarded to the [Buyer]) as follows:

  1. [Buyer] shall pay the price in arrear of US $175,331.94;
  2. [Buyer] shall pay interest of US $37,066.27; (from November 1993 to August 1996 at the 7.6875% annual interest rate for US dollar loans in November 1995 of the Bank of China);
  3. According to Article 59 of the Arbitration Rules, the [Buyer] shall compensate the [Seller]'s economic loss of US $15,000;
  4. [Buyer] shall bear the arbitration fee.

The [Buyer] did not submit any defense or counter argument to the [Seller]'s claim.

II. OPINION OF THE ARBITRATION TRIBUNAL

(1) Applicable law

Because China and Hungary are the Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, "the CISG"), the CISG should be applied here.

(2) [Buyer] shall pay the entire price

Article 53 of the CISG provides that, "the [Buyer] must pay the price for the goods and take delivery of them as required by the contract and this Convention". The [Seller] in this case has delivered the entire goods to the [Buyer], and the [Buyer] received them without raising objections on the quality of the goods. The [Buyer] did claim that nine packages of goods had been missing, however, it relinquished this claim in the payment plan it provided afterwards; therefore, the [Buyer] should have made the payment according to the contract and the CISG.

In addition, on 24 January 1994, the [Buyer] provided a repayment plan to the [Seller], promising that it was going to make the first payment of US $50,000 by the end of March, the second payment of US $50,000 by the end of April 1994, and the third one of US $75,000 by the end of May 1994, which indicated that the [Buyer] admitted that it was obligated to pay the price.

The Arbitration Tribunal also notes that the contract confirmations were concluded by the [Buyer] and the [Seller]. The person in charge of the contract was Mr. Chen acting for the [Seller] and Mr. Wang acting for the [Buyer]. Shijiazhuang __ Rubber Shoes Factory was repeatedly mentioned in the documents between the [Buyer] and the [Seller], which indicated that Shijiazhuang __ Rubber Shoes Factory had a close relationship with the [Seller] as the [Seller]'s domestic partner.

However, from the legal point of view, the contract in this case was performed by the [Buyer] and the [Seller], Shijiazhuang __ Shoes Company; and the rights and obligations in the contract should be performed by the [Buyer] and the [Seller]. During the performance of making payment, the [Buyer] wrongfully treated the [Seller] and another separate company as if they were the same, which is not acceptable.

The [Buyer] could not refuse payment raising its contractual dispute with a third party as an excuse. The dispute between the [Buyer] and Shijiazhuang __ Rubber Shoes Factory shall be settled separately. In addition, the [Buyer] did not provide any convincing evidence to show that the [Seller] had done any thing wrong with the [Buyer]'s exclusive sales right, therefore, the [Buyer] shall pay the price of US $175,331.94.

(3) Compensation for interest on the payment

According to Article 78 of the CISG, the [Buyer] shall pay interest on the payment due to its delay in payment. The interest shall be calculated from the payment deadline in the [Buyer]'s repayment plan to August 1996, which was requested by the [Seller], and the interest shall be at the rate of 7.6875% of November 1995 of the Bank of China.

The interest on the first payment of US $50,000 is:
US $50,000 × 7.6875% × 29 months ÷ 12 months = US $9,289.06;

The interest on the second payment of US $50,000 is:
US $50,000 × 7.6875% × 28 months ÷ 12 months = US $8,968.75;

The interest on the third payment of US $75,331.94 is:
US $75,331.94 × 7.6875% × 27 months ÷ 12 months = US $13,030.07.

The above totals US $31,287.88.

(4) [Seller]'s loss of cost for arbitration

The [Buyer] is the party that breached the contract in this case, therefore, the Arbitration Tribunal rules that the [Buyer] shall compensate the [Seller]'s cost of the arbitration, totaling US $15, 000.

(5) Arbitration fee

The [Buyer] shall bear the entire arbitration fee of renminbi [RMB] 76,815.

III. THE AWARD

(1) [Buyer] shall pay the price in arrear of US $175,331.94;

(2) [Buyer] shall pay the interest on the payment of US $31,287.88;

(3) [Buyer] shall pay the [Seller]'s attorneys' fee and other costs for arbitration, totaling US $15,000;

(4) [Buyer] shall bear the entire arbitration fee, which has been paid by the [Seller] in advance; therefore, the [Buyer] shall pay back RMB __ to the [Seller].

The aforesaid sum shall be paid by the [Buyer] within 45 days after this award takes effect.

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] and Respondent of Hungary 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].

** 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.

*** John W. 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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