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CISG CASE PRESENTATION

China 23 April 1997 CIETAC Arbitration proceeding (Peanuts case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/970423c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19970423 (23 April 1997)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1997/07

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: Indonesia (claimant)

GOODS INVOLVED: Peanuts


Case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission 23 April 1997 (Peanuts case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/84],
CLOUT abstract no. 851

Reproduced with permission of UNCITRAL

Abstract prepared by Wei Xia YANG

A Chinese seller and an Indonesian buyer signed a contract for the sale of hand-selected peanuts. The buyer asserted that as the seller did not perform its duty to deliver the goods, it suffered a foreseeable loss of profit and exempted custom duty. The seller defended that the buyer did not issue the Letter of Credit (hereinafter "L/C") in accordance with the contract and breached the contract first. As to the L/C's issuing date, the English description and the Chinese description were different. The wording was "the L/C shall arrive to the seller 15 days before the month of the loading time" in Chinese. The English description was "the L/C must reach the seller 15 days before the commencement of the shipping period", which means that the L/C had to arrive 15 days before the loading date.

The Arbitration Tribunal observed that the English description and the Chinese description have the same force. It was more reasonable, though, that the issuing date was the one expressed in the English version. According to the Tribunal the contract was a standard contract provided by the seller, which should be liable for the consistency of the English and Chinese version pursuant to article 8 CISG. The Tribunal further held that the seller did not deliver the goods during the shipping period, in accordance with the contract, as the letter of credit did not reach it in the stipulated period. In this respect the buyer breached the contract, since it did not issue the L/C as per the agreement with the seller. The Arbitration Tribunal finally noted that the buyer did not prove it actually suffered any loss from the seller's breach of contract. According to the Tribunal there was no evidence that the seller knew or should have known that the buyer would incur an exempted custom-duty loss when it signed the contract (article 74 CISG). Therefore, the Tribunal dismissed the buyer's claim for losses, but ordered the seller to compensate the buyer for the cost of issuing and confirming the L/C.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 8 ; 74

Classification of issues using UNCITRAL classification code numbers:

8A [Interpretation of party's statement or other conduct: contra proferentum rule applied (interpretation against the party who supplied the language)];

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

Descriptors: Intent ; Damages ; Foreseeability of damages

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

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) 1997 vol., pp. 1733-1740

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.57, 95, 153, 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

Peanut case (23 April 1997)

Translation [*] by Zheng Xie [**]

Translation edited by Meihua Xu [***]

China's International Trade and Economic Arbitration Commission [hereafter, the Arbitration Commission] accepted this case according to:

   -    The arbitration clause in the contract of 11 November 1995, signed by Claimant [Buyer], Indonesia ___ Company, and Respondent [Seller], Henan___ Corporation of China; and
 
   -    The written arbitration application submitted by [Buyer] to the Arbitration Commission on 20 May 1996.

[Buyer] appointed Mr. A as arbitrator; [Seller] appointed Ms. D as arbitrator; the Chairman of the Arbitration Commission appointed Mr. P as the presiding arbitrator according to the Arbitration Rules. On 20 August 1996. the three arbitrators formed the Arbitration Tribunal to hear this case.

On 23 October 1996, the court session was held in Beijing. Both [Buyer] and [Seller] attended the court session. They presented statements and arguments and answered the Arbitration Tribunal's questions. After the court session, both parties submitted supplementary materials.

Considering the parties' opinions, the written materials and the court session, the Arbitration Tribunal has concluded the case and handed down its award by consent.

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

FACTS

[Buyer]'s position

On 11 November 1995, [Buyer] and [Seller] signed Contract No.YS19-008 for the sale of 500 tons of hand-selected peanuts. The contract states that:

   -    [Seller] shall ship the goods from China to Jacarta;
   -    [Buyer] shall issue the L/C 15 days before the shipment date;
   -    The shipment date is 15 December 1995.

The parties agreed that the L/C, for which [Buyer] applied and which was issued by Bank of China Qingdao Branch, can be used in this transaction, and the beneficiary shall be changed from ___Import and Export Group to [Seller]. The sequence of events that followed was:

   -    On 14 November 1995, [Buyer] faxed to [Seller] notifying that the beneficiary of the L/C was changed, and sent a copy of the L/C to [Seller]. [Seller] asked [Buyer] to revise the clause which stipulates that the B/L should be sent directly to [Buyer].
 
   -    On 20 November 1995, [Buyer] faxed a copy of the revised L/C to [Seller].
 
   -    On 30 November 1995, [Seller] faxed to [Buyer] stating that [Seller] did not receive the copy of the revised L/C; and that, if [Seller] could not receive it on the second day, the goods could not be sent by the ship of 10-15 December. On the same day, [Buyer] faxed to [Seller] notifying [Seller] that the Bank of Singapore had sent the revised L/C to Bank of China Qingdao Branch on 22 November by DHL.
 
   -    Meanwhile, [Buyer] suggested that [Seller] send the goods to Tanggu warehouse for drying.
 
   -    On 4 December 1995, [Seller] alleged that [Seller] did not receive the revised L/C on 30 November, and requested [Buyer] to issue a new L/C. [Seller] also asked to postpone the delivery date to 20 January 1996, and to revise the way of packing.
 
   -    On 5 December 1995, [Buyer] faxed to [Seller] notifying [Seller] that the revised L/C arrived at Bank of China Qingdao Branch on November 27 and that, if [Seller] did not perform its duty, [Buyer] would claim for compensation 10% of the contract price.
 
   -    On 8 December 1995, [Seller] faxed to [Buyer] still requesting issuance of a new L/C, and to revise the loading date to the end of January 1996, and [Seller] agreed to compensate [Buyer] 5% of the contract price. On the same day, [Buyer] faxed to [Seller] stating that [Buyer] did not agree to issue a new L/C.
 
   -    On 11 December 1995, [Buyer] faxed to [Seller] notifying [Seller] that 10% of the contract price should be reduced as compensation, and that the delivery date was postponed to 5 January 1996, and that [Buyer] agreed that the U.S. BCA bank would be the confirming bank. On the same day, [Seller] faxed to [Buyer] agreeing to compensate 8% of the contract price, to revise the loading date to 10 January 1996, and stating that the revised L/C should be sent to Bank of China Qingdao Branch before 15 December 1995.
 
   -    On 12 December 1995, [Buyer] sent two faxes to [Seller] rejecting [Seller]'s request to send the revised L/C to Bank of China Qingdao Branch within four days, and stating that [Buyer] reserves the right to claim for damages due to [Seller]'s non-delivery.
 
   -    On 14 December 1995, [Seller] notified [Buyer] that the goods were prepared well, and hoped that the revised L/C or the original L/C confirmed by the US BCA bank could be sent to [Seller] on 17 December.
 
   -    On 12 December 1995, [Buyer] revised and confirmed the L/C; it took three days to send the L/C to Bank of China Qingdao Branch.
 
   -    On December 18, the copy of the L/C was sent to [Seller]. [Seller] did not perform its duty. On 19, 25 and 27 December, [Buyer] sent three faxes to urge [Seller] to perform as required.
 
   -    On 28 December, [Seller] replied that [Seller] could not deliver the goods on time and requested to postpone to the end of January, 1996; and that [Seller] could deliver only 300 tons. However, at the latest time of loading period, 15 January 1996, [Seller] did not load the promised 300 tons of goods. On 15 January 1996, [Buyer] faxed to [Seller] claiming for damages.

Because [Seller] did not perform its duty, [Buyer] filed this application for arbitration, and makes the following claims:

     1. [Seller] breached the contract, so [Seller] should bear the liability;

     2. [Seller] should compensate [Buyer] the exempted customs duty in [Buyer]'s country for the goods under the contract, US $109,656.25;

     3. [Seller] should compensate [Buyer] the loss from the contract with another company for resale of the goods in this case, US $59,812.50;

     4. [Seller] should pay the issuing and confirming fee of the L/C, US $1,273.62. And [Seller] should pay the entire fee of this arbitration.

[Buyer] revised its claims in the supplementary materials submitted after the court session, alleging:

Article 74 of the United Nations Convention on Contracts for the International Sale of Goods stipulates:

"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."

[Buyer] requests:

     1. [Seller] should compensate [Buyer] the exempted customs duty in [Buyer]'s country for the goods under the contract, US $109,656.25;

     2. [Seller] should compensate [Buyer] the loss from the contract with another company for resale of the goods in this case, US $80,850, and the anticipated profits, US $28,000;

     3. [Seller] should pay the issuing and confirming fee of the L/C, US $1,273.62. And [Seller] should pay the entire fee of this arbitration.

          (1) As to the first claim, [Buyer] signed the contract for resale of the peanuts with Indonesia Makw Jaya Utama Company. This Indonesian company got a 27.5% tax waiver with the approval of the Indonesia Ministry of Finance. According to the parties' agreement, [Buyer] was to import 500 tons peanut before 10 January 1996; if [Buyer] breached the contract for reasons other than force majeure, [Buyer] was obligated to compensate the Indonesian company 27.5% of the contract price, i.e., US $725.00 x 550 tons x 27.5% = US $109,656.25. Accordingly, [Seller] should compensate [Buyer] rupiah [RP] 231,773,438, i.e., US $109,656.25, which [Buyer] paid to that Indonesia company due to [Seller]'s breach.

          (2) [Buyer] resold the goods under the contract in this case to Pt. Mirapermata Perkasa Company; [Seller] should compensate US $80,850 for the [Buyer]'s loss resulting from the resale, and [Buyer]'s anticipated profits, US $28,000 that were not fulfilled.

[Seller]'s position

In his defense and supplementary materials after the court session, [Seller] asserts:

     1. [Buyer]'s statement of facts is false

[Buyer] asserts that the contract stipulates that the L/C shall be issued to [Seller] 15 days before 15 December 1995, and that the parties agreed to use [Buyer]'s old L/C issued by Bank of China Qingdao Branch. This assertion does not accord with the facts. The fact is that Article 10 of the contract states, "The L/C must reach the [Seller] 15 days before the commencement of the shipping period." The loading date stipulated in the contract is 15 December 1995; therefore, [Buyer] shall issue the L/C on 15 November 1995. When signing the contract, [Buyer] did not say to transfer the L/C, and two days later [Buyer] requested to transfer the L/C.

     2. [Buyer]'s claims are not supported, and [Buyer] should be held liable for the breach

[Buyer] breached the contract first, because:

          a. The L/C was not confirmed.

          b. The L/C was issued 22 days late. The contract stipulates that the L/C must reach the [Seller] 15 days before the commencement of the shipping period, and the L/C shall be issued to Bank of China Henan Branch. Thus, [Buyer] should issue the L/C to [Seller] on 15 November 1995, but on 14 November 1995, [Seller] received the fax of [Buyer]'s L/C which states that the L/C exceeding 1/3 of the contract shall be sent directly to [Buyer]; [Buyer] did not properly execute the contract. On 15 November 1995, [Seller] requested [Buyer] to amend the L/C. [Seller] did not receive the original L/C on November 23; then [Seller] notified [Buyer] that [Seller] could not run the business if [Seller] could not receive the original L/C before November 24. On November 29, [Seller] received the original L/C, but the 1/3 B/L was not revised. [Seller] immediately notified [Buyer] to revise the L/C and stated that if [Seller] could not receive the L/C, the goods could not be sent on the ship of 10-15 December. On 4 December 1995, [Seller] had not received the L/C, and the contract could not be performed. Then, [Seller] sent a new offer to [Buyer] requesting issuance of a new L/C, and to revise the shipping date to 20 January 1996, and to amend the package to 50 kg per gunny bag. On 7 December 1995, [Seller] received the revised L/C, which was 22 days later than the time stipulated in the contract. At that time, it was impossible to ship the goods in accordance with the original contract; when Bank of China Henan Branch received the L/C, it requested confirmation of the L/C, because it had been transferred and revised many times.

          c. It was [Buyer]'s delay in handling of the L/C which caused [Seller] not to perform the contract.

   -    On 7 December 1995, [Seller] received the L/C. Because [Seller] could not deliver the goods in accordance with the contract, [Seller] faxed to [Buyer] requesting [Buyer] to issue a new L/C with the shipping date of the end of January 1996, and price term of CIF US $688/MT Jakarta.
 
   -    On the same day, [Buyer] wrote to [Seller] stating that [Buyer] did not agree to amend the L/C, and that the goods should be delivered in accordance with the original date.
 
   -    On 11 December 1995, [Buyer] wrote to [Seller] requesting [Seller] to compensate 10% of the contract price, and stating that the latest loading date was 5 January 1996, and that the L/C should be confirmed by the US BCA bank.
 
   -    On the same day, [Seller] replied stating that the price was 8% off, and that the shipping date was no later than 10 January 1995, and agreeing that the L/C was confirmed, but advising that the L/C must arrive at Bank of China Qingdao Branch before 15 December.
 
   -    On 12 December, [Buyer] faxed twice to [Seller] expressing disagreement with [Seller]'s request. The facts show that when the contract could not be performed, the parties revised the contract by amending the L/C. The parties did not reach an agreement on the issuing time of the L/C.
 
   -    On 14 December, in order to perform the contract, [Seller] requested that the revised L/C or the original L/C confirmed by the US bank should arrive to [Seller] before 19 December; otherwise, [Seller] could not perform the contract. [Buyer] did not reply.
 
   -    On 18 December 1995, [Seller] did not receive the L/C. Then, [Buyer] faxed an original revised L/C; the parties negotiated about the quantity of the goods and delivery date by fax.
 
   -    On 26 December 1995, the L/C arrived at Bank of China Henan Branch. It was eight days later than 18 December 1996, the date when the original L/C should arrive to [Seller]. Due to the bank's working day custom and vacation, [Seller] did not receive the revised L/C before 1 January 1996. [Buyer] issued the L/C late, which is a substantial breach, and led to [Seller]'s inability to perform the contract.
 
   -    On 27 December 1995, [Buyer] faxed to [Seller] stating that the goods could be loaded by installments. According to [Buyer]'s instruction and the contract stipulation that the goods could be shipped by installments and were transhippable, [Seller] would load the goods by installments.
 
   -    On 28 December 1995, [Seller] faxed to [Buyer] notifying that 300 tons of goods would be shipped and requesting [Buyer] send the revised L/C for 300 tons to [Seller] as soon as possible. [Seller] alleges that according to [Buyer]'s request and the contract, [Seller] has the right to agree on [Buyer]'s instruction of loading the goods by installments, but [Buyer] must amend the clause, "the goods shall neither be shipped by installments nor be transshipped" in the L/C. Otherwise, there would be a sharp difference between the L/C and the documents. However, [Buyer] neither replied nor revised the L/C, which caused that [Seller] could not ship the goods. [Buyer] breached the contract, so [Buyer]'s claims could not be supported.

[Seller] alleged that [Buyer]'s claims are also not be supported because:

     1. As to [Buyer]'s claim that [Seller] should compensate [Buyer] the exempted custom duty in [Buyer]'s country for the goods under the contract, US $109,656.25, [Seller] asserts that the claim cannot be supported, because [Seller] could not foresee that loss when signing the contract, [Buyer] did not disclose that [Buyer] had signed a contract for resale of the peanuts, and that 27.5% of the custom duty was exempted, and that if [Buyer] breached the contract, he should compensate his client 27.5% of the contract price.

     2. As to [Buyer]'s claim that [Seller] should compensate [Buyer] the loss from the contract with another company for resale of the goods in this case, US $80,850, and the anticipated profits, US $28,000, [Seller] alleges that the loss did not actually incur, and the calculation is incorrect, and [Buyer] did not provide the exchange rate between RP and US dollars.

In sum, it is [Seller]'s position that [Buyer] breached the contract, and that he should bear the liability and pay the entire arbitration fee.

     3. [Seller]'s agreement on compensation. On 5 December 1995, [Buyer] faxed to [Seller] requesting [Seller] to compensate for 10% of the contract price. Before [Seller] received the original revised L/C, it was unreasonable for [Buyer] to make such request. On 8 December 1995, [Seller] replied to [Buyer] stating that [Seller] would like to perform the contract and agreed to compensate 5% of the contract price. On 11 December 1995, although [Seller] agreed to compensate 8% of the contract price, [Seller] stated that the liability was not caused by [Seller].

[Seller] did not claim for damages when [Buyer] breached the contract; when [Buyer] made the unreasonable claim for compensation, [Seller] still was willing to reduce the price, because at that time, [Seller] was in a dilemma. If [Seller] did not ship the goods, [Seller] could not perform the contract with ___ Import and Export Company, and [Seller] would lose the payment in advance, RMB 150,000; in addition, even if the price was reduced by 5% or 8%, [Seller] could still make a profit. Accordingly, [Seller] wanted to perform this contract. The compensation [Seller] agreed on was a price cut, which revised the price term of the L/C. [Seller] did not breach the contract, and should not be held liable. On 4 December 1995, [Seller] wrote to [Buyer] stating, "It is not [Seller]'s fault that the goods could not be delivered on time."

     4. [Buyer] breached the contract, which caused [Seller] to suffer severe damages. After signing this contract, [Seller] prepared 500 tons of peanuts well before 1 December 1995. Because [Buyer] breached the contract, the prepared goods could not be shipped, which caused [Seller] to suffer a loss of RMB 60,000, of which the court should award RMB 45,000 for damages, RMB 7,000 for business traveling expenses, and RMB 8,000 for interest.

[Buyer]'s response

As to [Seller]'s defense, [Buyer] makes the following defense:

As to issuing the L/C, [Buyer] alleges:

     1. The time for issuing the L/C stipulated in the contract should have been 30 November, 1995, because:

          a. Article 10 of the contract in English is "the L/C must reach the [Seller] 15 days before the commencement of the shipping period", which is different than the expression in Chinese, "the L/C must reach the [Seller] 15 days before the month of shipping period". On the night of 11 November 1995, the parties signed the contract in Tianjin, China. On 15 November 1995, it was impossible for [Buyer] to send the original L/C from Indonesia to [Seller] through Singapore.

          b. During the performance of the contract, [Seller] did not assert that 15 November 1995 was the last day to issued the L/C. In [Seller]'s faxes of 29 November 1995 and 4 December 1995, [Seller] confirmed the issuing date was November 30, which is the same as [Buyer]'s understanding. Thus, it is the parties' real intent that the L/C should arrive at Bank of China Qingdao Branch on November 30.

     2. When performing the contract, the parties revised the terms of the L/C. On 14 November 1995, [Buyer] faxed the L/C to [Seller]; [Seller] only requested [Buyer] to revise the 1/3 B/L clause, and did not object to any other clause, which shows that:

          a. [Seller] agreed to use the L/C originally issued to another company;

          b. [Buyer] denies some standard clauses in the L/C, such as the clause which stipulates that the L/C is at sight and irrevocable.

     3. The negotiating bank is Bank of China Qingdao Branch. [Seller] intentionally confuses the concepts, and asserts that the time when the L/C arrived at Bank of China Henan Branch as the time of receiving the L/C in order to avoid [Seller]'s liability for breach of the contract. In fact, [Seller] knows that the negotiating bank which the parties agreed on is Bank of China Qingdao Branch, which is shown by the facts that:

          a. On 4 December 1995, [Seller] faxed to [Buyer] asserting that [Seller] would send someone to Bank of China Qingdao Branch to take the L/C in order not to miss the shipping date;

          b. On 11 December 1995, [Seller] requested [Buyer] to revise the L/C asserting that the revised L/C should arrive at Bank of China Qingdao Branch before the 15th of this month.

[Buyer] asserts that [Buyer] issued and revised the L/C as [Seller] requested, and fully performed its duty under the contract. However, [Seller] refused to deliver the goods on time raising excuses such as "this transaction was low profit and high risk," and "because the supplier did not want to reduce the price, [Seller] did not want to suffer loss." [Buyer] did not receive the goods although [Buyer] notified [Seller] about the last shipping date. [Seller] substantially breached the contract, which caused [Buyer] to suffer severe damages.

Accordingly, [Seller] shall bear liability.

THE OPINION OF THE ARBITRATION TRIBUNAL

     1. The applicable law

The parties did not specify the applicable law. In the application materials, [Buyer] asserts that the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG) shall be applied to this case; [Seller] did not object. In addition, [Seller]'s business place is in China, and China is a party of CISG, therefore the Arbitration Tribunal holds that CISG applies.

     2. The issuing date of the L/C and liability

Article 10 of the contract stipulates a confirmed, irrevocable at sight L/C without recourse. The negotiating period is prolonged to 15 days after the goods are loaded in China. The L/C shall arrive to [Seller] 15 days before the month of the loading time. The L/C shall be issued to Bank of China Henan Branch, and noted with the sales confirmation No.

As to the L/C's issuing date, the English description and the Chinese description are different. The English description is "the L/C must reach the [Seller] 15 days before the commencement of the shipping period", which means the L/C must arrive 15 days before the loading date.

The loading date stipulated in this contract is 15 December 1995. Thus, according to the Chinese description, [Buyer] should issue the L/C before 30 November 1995 (including 30) to Bank of China Henan Branch. The English description is in conflict with the Chinese Description.

Because the English description and the Chinese description have the same force, the two descriptions are in conflict, and the parties cannot reach an agreement. The Arbitration Tribunal holds that it is more reasonable that the issuing date is before 30 November 1995 by considering the following factors:

          1. This contract is a standard contract provided by [Seller]. [Seller] shall be liable for the consistency of the English version and Chinese version. Because the English description is different from the Chinese description of the L/C issuance date, the dispute arose. [Seller] shall be liable for the consequences.

          2. The parties' correspondence shows that [Seller] did not deliver the goods during the shipping period in accordance with the contract, because the revised L/C did not reach [Seller] before 30 November. In addition, the correspondence does not mention November 15 as the final date to issue the L/C. Before 15 November, the parties reviewed the L/C issued to another company, and [Seller] requested [Buyer] to revise the 1/3 B/L clause in the L/C. Accordingly, it shows that [Seller] agreed that 15 November was the final date to issue the L/C.

In sum, the Arbitration Tribunal holds that the L/C's issuing date shall be before 30 November 1995. The L/C issued by [Buyer] reached [Seller] on 29 November 1995, but the 1/3 B/L clause in the L/C was not in compliance with the contract. As to this, on 15 November, [Seller] wrote to [Buyer] requesting [Buyer] to revise the L/C, but the revised L/C did not reach [Seller] in the stipulated period. Accordingly, the Arbitration Tribunal holds that [Buyer] did not issue the L/C in accordance with the stipulation, so [Buyer] breached the contract and shall be liable for the breach.

     3. Revision of the L/C and performance

On 7 December 1995, the revised L/C reached Bank of China Henan Branch. [Seller] asserts that the L/C arrived late, which made it difficult to ship the goods on about December 15. The parties negotiated about some of the terms in the contract.

The Arbitration Tribunal holds that on 12 December 1995, the parties reached the following agreement:

           (1) The price of the goods shall be reduced by 8%;

           (2) The revised shipping date shall be 10 January 1996;

           (3) The L/C shall be confirmed by the US BCA bank.

The parties failed to reach an agreement only on the date of the L/C reaching [Seller].

On 14 December 1995, [Seller] wrote to [Buyer] stating that the original revised L/C or the original L/C confirmed by the US BCA bank would reach [Seller] before 18 December, which [Buyer] did not object to. The Arbitration Tribunal notes that on 11 December 1995, [Seller] wrote to [Buyer] requesting that the revised L/C should reach Bank of China Qingdao Branch before the 15th of this month (including the 15th). On 12 December, [Buyer] raised objection stating that it was too short and unreasonable. However, [Buyer] revised the L/C on 12 December and on 18 December [Buyer] faxed the copy of the revised L/C to [Seller]. Accordingly, the Arbitration Tribunal holds that although [Buyer] did not object to [Seller]'s request that the revised L/C should reach [Seller] before 18 December, and the revised and confirmed L/C did not reach [Seller], before 18 December, [Buyer] revised the L/C after reaching an agreement on the substantial terms of the contract with [Seller]. [Buyer] is not liable for the L/C not reaching [Seller] before 18 December.

     4. Shipping the goods by installments and liability for breach

On 27 December 1995, [Buyer] wrote to [Seller] stating the goods can be shipped by installments. On December 28, [Seller] replied stating that it was hard to catch the ship at the end of this month or at the beginning of the next month, even if [Seller] tried its best; it was more reliable to catch the ship in the middle of the month, but only 300 tons could be shipped; the supplier did not want to reduce the price, and [Seller] did not want to suffer loss, so [Seller] requested revising the L/C to 300 tons. [Buyer] did not reply.

The Arbitration Tribunal notes that the parties reached an agreement on the substantial terms of the contract, and [Buyer] revised the L/C in time and faxed a copy of the revised L/C to [Seller] on December 18, and the L/C reached Bank of China Henan Branch on 26 December. [Seller] asserted that the supplier did not want to reduce the price, and [Seller] did not want to suffer loss, so it could only supply 300 tons of goods. The Arbitration Tribunal holds that [Seller] breached the contract and shall be liable for the breach. After notifying [Seller] that the goods were transhippable, [Buyer] did not reply when receiving [Seller]'s correspondence, so [Buyer] has some fault and should bear some liability.

     5. [Buyer]'s claims

[Buyer] added to its claims in the supplementary materials, but did not follow the corresponding procedure. Thus, the Arbitration Tribunal only heard the claims in the application.

          (1) As to [Buyer]'s claim that [Seller] should compensate [Buyer] the exempted custom duty in [Buyer]'s country for the goods under the contract, US $109,656.25, the Arbitration Tribunal holds that according to 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. 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."

There is no evidence to show that [Seller] knew or should have known [Buyer] would incur such a loss when signing the contract. Accordingly, the Arbitration Tribunal cannot support this claim of the [Buyer].

          (2) As to [Buyer]'s claim that [Seller] should compensate [Buyer] the loss from the contract with another company for reselling the goods in this case, US $59,812.50, the Arbitration Tribunal holds that because [Buyer] did not issue the L/C in accordance with the contract first, [Buyer] breached the contract. Although [Seller] did not claim for damages, [Seller] raised it as a defense. Thus, [Buyer] shall bear some of the liabilities for the loss. The Arbitration Tribunal also notes that although [Buyer] submitted its contract with another company, [Buyer] did not provide the evidence to show the loss was actually incurred. Thus, the Arbitration Tribunal cannot support this claim of the [Buyer].

          (3) As to [Buyer]'s claim that [Seller] should pay the issuing and confirming fee of the L/C, US $1,273.62, the Arbitration Tribunal holds that although there are defects in issuing the L/C, [Buyer] revised and confirmed the L/C according to [Seller]'s request when the parties agreed to continue performing the contract, [Buyer] revised and confirmed the L/C according to [Buyer]'s request; accordingly, [Seller] shall bear some of liabilities for not delivering the goods. Thus, [Seller] should compensate [Buyer] for some of the above fee.

          (4) [Buyer] shall pay 40% of the arbitration fee, and [Seller] shall pay 60%.

AWARD

The Arbitration Tribunal makes the following award:

     1. [Seller] shall compensate [Buyer] the cost of issuing and confirming of the L/C, US $1,273.62;

     2. [Buyer] shall pay 40% of the arbitration fee, and [Seller] shall pay 60%. [Buyer] has paid the arbitration fee RMB ___ in advance, so [Seller] shall pay [Buyer] RMB___.

     3. [Buyer]'s other claims are dismissed.

[Seller] shall pay [Buyer] US $1,273.62 and RMB 37,600.20. [Seller] shall pay this amount within 30 days after this award takes effect. Otherwise, interest shall be added at the annual rate of 8% on both US $ and RMB.

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 Indonesia 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 Indonesia (rupiah) are indicated as [RP]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

*** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

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Pace Law School Institute of International Commercial Law - Last updated June 4, 2009
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