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CISG CASE PRESENTATION

China 8 October 1997 CIETAC Arbitration proceeding (Industrial tallow case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/971008c1.html]

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

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Case identification

DATE OF DECISION: 19971008 (8 October 1997)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1997/29

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Australia (claimant)

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

GOODS INVOLVED: Industrial tallow


Case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission 8 October 1997 (Industrial tallow case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/85],
CLOUT abstract no. 860

Reproduced with permission of UNCITRAL

Abstract prepared by Meihua Xu

On 14 February 1995, the buyer, a Chinese company, entered into a contract with the seller, an Australian company, for the purchase of industrial tallow. The contract contained clauses on price, time of shipment and terms of payment. In particular, article 17 of the contract stated that: "besides the signature by the buyer and the seller, this contract shall come into force under the seller's special seal for contracting." The seller did not stamp its seal on the contract.

After conclusion of the contract, the seller prepared the goods according to the terms of the contract, and informed the buyer that a ship had been chartered. The buyer informed the seller that the payment term was unacceptable and terminated the contract. Despite the seller's urging, the buyer refused to pay and to accept the goods. The seller notified the buyer that its behavior constituted a breach of contract, which caused severe economic loss to the seller.

The Arbitral Tribunal observed that the seller and the buyer had negotiated several times the performance of the contract, including time of shipment and method of payment; however, the issues of the case at hand concerned whether or not the contract of 14 February 1995 had been formed and if it had come into force.

The Arbitral Tribunal noted that the provision requiring the contract to be "under the special seal of the seller" was a condition for the contract to enter into force and not a clause on which requirements were needed for the formation of the contract. The Arbitral Tribunal concluded that the contract met the conditions set under article 7 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest, and that the contract had been formed.

As to whether or not the contract had come into force, the Arbitral Tribunal found that even though the seller had not stamped its seal on the contract, the practices and the meaning attributed to them by the parties indicated that they had confirmed the validity of the contract, and both of them had performed it. Pursuant to article 25 CISG, the Arbitral Tribunal ruled that the buyer's unilateral avoidance of the contract constituted a fundamental breach. Therefore, in accordance to article 75 and article 78 CISG, the buyer shall compensate the seller for the price difference between the original contract price and the resale price, as well as interests accrued on it.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 8 ; 25 ; 64 ; 75 ; 78 [Also possibly relevant: 11 ; 72 ]

Classification of issues using UNCITRAL classification code numbers:

8C [Interpretation of party's statements or other conduct: interpretation in light of surrounding circumstances];

25A [Effect of a fundamental breach: avoidance of contract];

64A1 [Seller's right to avoid contract (grounds for avoidance): fundamental breach of contract];

75A1 [Damages established by substitute transaction (substitute transaction after avoidance): resale by aggrieved seller];

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

Descriptors: Intent ; Fundamental breach ; Avoidance ; Damages ; Cover transactions ; Interest

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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., p. 2572-2579

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.146, 160, 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

Industrial tallow case (8 October 1997)

Translation [*] by Zizheng Tang [**]

Translation edited by Meihua Xu [***]

China International Economic and Trade Arbitration Commission (hereinafter, "the Arbitration Commission") accepts the case according to:

   -    The arbitration clause in Contract CAF-A-0001 signed by Claimant (hereinafter, the "[Seller]"), Australia XXX Food Company, and Respondent (hereinafter, the "[Buyer]"), China XXX Hotel Supplementary Company; and
 
   -    The written arbitration application submitted by the [Seller] on 17 June 1996.

Mr. P, appointed by the Chairman of the Arbitration Commission as presiding arbitrator, Mr. A, appointed by [Seller] and Mr. D, appointed by [Buyer], formed the Arbitration Tribunal and heard the case.

The Arbitration Tribunal reviewed [Seller]'s arbitration application, [Buyer]'s defense, and the attached evidence. On 28 February 1997, the Arbitration Tribunal held a court session in Beijing. The representatives of the [Seller] and the [Buyer] attended, made oral statements, answered the Arbitration Tribunal's questions, and presented arguments. After the session, both parties submitted supplementary materials.

During the arbitration process, although the [Buyer] did not challenge the Arbitration Commission’s jurisdiction, it mentioned many times in its defense and supplementary material submitted after the court session that the Contract in this case and the arbitration clause of the Contract had not been formed.

After examination, the Arbitration Tribunal concluded that the Contract had been formed and that the arbitration clause in the Contract is valid. The Arbitration Tribunal sent a report to the Arbitration Commission on this issue. The Arbitration Commission confirmed the Tribunal’s decision on the validity of the arbitration clause and held that the Arbitration commission has jurisdiction on this case. On 26 September, the Secretariat of the Arbitration Commission sent No. ___ notice to the parties regarding the aforesaid decision.

The Arbitration Tribunal has concluded the case and decided as follows based on the court session and the written material clarified by the Arbitration Tribunal.

FACTS

On 14 February 1995, the [Seller] and the [Buyer] entered into Contract No. CAF-A-0001 (hereinafter the "Contract") which provided that the [Seller] would sell to the [Buyer] 2,000 tons of industrial tallow on the following terms:

   -    Price term: CNF Tianjin, $607/ton
   -    Total Contract price: US $1,214,000
   -    Time of shipment: From the end of March to April 1995
   -    Term of payment: D/P at sight, seven days before shipment the [Buyer] should pay 25% of the total price as down payment; China XXX Export and Import Company vouches for the payment of the Contract.

A dispute arose over the performance of the Contract by the parties. The [Seller] brought this arbitral application to the Arbitration Commission.

[POSITION OF THE PARTIES]

[Seller]'s claims

[Seller]'s claims are:

  1. The [Buyer] shall compensate the [Seller] for the price difference loss of US $184,000 and interest accrued on it.
  2. The [Buyer] shall bear the arbitration fee and the attorneys' fee of the [Seller].
  3. The [Buyer] shall bear other reasonable fees that will be recognized by the Arbitration Commission.

The [Seller]'s position

After conclusion of the Contract, the [Seller] prepared the goods promptly, and informed the [Buyer] by fax of all details on carriage of the goods. By fax dated 17 February, the [Buyer] advised the [Seller] to charter a ship.

By fax dated 28 February 1995, the [Seller] notified the [Buyer] that a ship had been chartered. But when the [Seller] was preparing to ship the cargo, the [Buyer] informed the [Seller] by fax that [Buyer] was rescinding [avoiding] the Contract on the ground that the payment terms on which both parties were going to negotiate was unacceptable. The [Seller] promptly replied to this fax, stating that the [Buyer]'s unilateral rescission of the Contract was unacceptable. Ignoring [Seller]'s urgings, the [Buyer] refused to accept or pay for the goods. By fax dated 26 April 1995, the [Seller] stated to [Buyer] that the [Buyer]'s non-performance constituted a fundamental breach of the contract, and that [Buyer] should compensate the total loss suffered by the [Seller]. However, [Buyer] made no response and raised unsupported excuses to defend its breach of contract. To mitigate the loss, the [Seller] resold the goods to Qing Dao Hai Run Trade Ltd. at a lower price. The price difference was $184,000, which should be compensated by the [Buyer].

[Buyer]'s response

[Buyer] states that there is no basis for [Seller]'s arbitration claim. When the parties were negotiating the Contract, the [Buyer] emphasized that the contract involved seasonal goods, that the delivery time should be from the end of March to April 1995, that late delivery would cause trouble to [Buyer]'s end users, and that the market price of the goods would fluctuate dramatically. The [Seller] was aware of this, but after the Contract was signed, the [Seller]'s acts indicated that the [Seller] had not prepared the goods promptly and that the goods could not be delivered on time. In addition, there were also some problems with the chartered ship. The [Buyer] tolerated all of this, confirmed the time of charter and emphasized that the shipping space should be 3,000 tons. But, again, the ship that was chartered did not satisfy this request of the [Buyer].

The parties agreed that they would negotiate an Agreement on the Method of Payment. But [Seller]'s fax concerning the method of payment was inconsistent with the Contract.

The [Seller]'s performance failed to satisfy the terms of the Contract, which not only increased the cost of the [Buyer], but also held up the demand of the [Buyer] for the goods. The misbehavior of the [Seller] constituted an anticipatory breach of the contract. Under these circumstances, the [Buyer] was justified in rescinding [avoiding] the Contract in [Buyer]'s fax of 27 March 1995. The [Buyer] also asserts that there is no issue of non-payment by the [Buyer].

[Buyer]'s further assertions

1. Formation of the Contract

The Contract and the fax dated 14 February 1995 submitted by the [Buyer] demonstrate that the Contract was drafted by the [Seller] then sent to the [Buyer] for signature. Article 17 of the Contract provides: "besides the signature of both parties, this contract shall come into force under the [Seller]'s special seal for contracting." The [Seller] faxed the [Buyer] about its preparation for performing the Contract, but never sent to the [Buyer] the Contract with the [Seller]'s special seal for contracting, nor did [Seller] give notice to the [Buyer] that the Contract had been confirmed and sealed. The Contract submitted to the Arbitration Tribunal does not bear the [Seller]'s seal; this means that the Contract has not yet been formed.

2. Evidence presented

     a) The Contract without the seal of [Seller] illustrates that the [Seller] did not confirm the contract. Affixing the seal afterward does not have legal effect and cannot prove the establishment of the Contract.

     b) The only evidence to show that the [Buyer] would perform the contract obligation is a fax dated 27 February 1995, purporting to be from [Buyer], that was submitted by [Seller], which advised the [Seller] to charter a ship. In this fax, where it states "the time of delivery no later than 15 May", the word "May" was rewritten from "March"; also, the date of the fax was rewritten several times. The [Buyer] believes that this is false evidence, that it should not be taken as a basis for ascertaining that the [Buyer] had really intend to perform the contract. The [Seller] has the duty to verify the genuineness of the evidence, that is to say, the [Seller] has the duty to submit the original copy to the Arbitration Tribunal to verify. If the [Seller] fails to do so, the controversial evidence ought not to have any legal effect.

     c) There is no direct evidence on the matter of chartering of the ship, the goods' arrival at the port of destination, price-cutting, or resale of the goods at lower price. The sales contract between the [Seller] and Qing Dao Hai Run Trade Ltd. could not alone demonstrate that the [Seller] has suffered loss of price differences.

3. Time of shipment

The Contract and the offer made by the [Seller] provide that the time of shipment was from the end of March to April 1995. Due to his limited understanding of English, the representative of the [Buyer] thought the delivery time was the arrival time, which was from March to April. The delivery time requested by [Buyer] was 15 March; the representative of [Buyer] materially misunderstood Article 7 of the Contract.

4. Agreement on the method of payment

Before signed the Contract, both parties understood that an Agreement on Method of Payment was an integral part of the Contract, and that the Contract should not come into force before the Agreement on Method of Payment was signed.

As mentioned above, according to Article 7 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest [1] which both parties agreed to apply in this case, the Contract has not been formed; as a result, no arbitration agreement has been formed either. Under this circumstance, if the [Seller] performed the contract; the [Seller] is liable for the damage himself. The [Buyer] did not breach the contract. [Buyer] requests the Arbitration Tribunal to rule that:

   -    The Contract has not been formed, so there was no arbitration agreement;
   -    The [Seller]'s arbitration request should be dismissed; and
   -    The [Seller] should bear the arbitration fee and the attorney fee of the [Buyer].

[Seller]'s response

1. Formation of the Contract

The [Buyer] never denied the effectiveness of the Contract after signed the Contract until the [Buyer] rescinded [avoided] the Contract on 27 March 1995. And the reason [Buyer] rescinded the contract was that [Buyer] could not accept the Agreement on the Method of the Payment, rather than because the [Seller]'s seal had not been affixed to the Contract. From the corresponding faxes between the two parties, there is no evidence to show that the [Buyer] had ever objected to the effectiveness of the Contract. Whether the Contract did or did not have the [Seller]'s seal is not important for the formation of the Contract, the key point here is that neither the [Buyer], nor the [Seller] denied the effectiveness of the Contract. The [Buyer] asked the [Seller] to perform obligations of the Contract, the [Seller] performed accordingly. There is therefore no doubt about the formation of the Contract.

2. Evidence presented

     a) The [Seller]'s representative who signed the Contract was a foreigner, who was used to signing contracts rather then affixing seals to contracts. Although the [Seller] did not affix its seal to this Contract, the [Seller] did not intend to deny the effectiveness of the Contract later.

     b) The [Buyer] alleged that the fax that asked the [Seller] to charter a ship was rewritten and was not genuine. The [Seller] assures the Arbitral Tribunal that the [Seller] never counterfeited any fax or altered any fax. The original fax should be in the hands of the [Buyer], so the [Buyer] has the burden to submit the evidence to prove the authenticity of the fax.

3. Time of shipment

The [Buyer] asserts that its representative seriously misunderstood Article 7 of the Contract due to his limited understanding of English. This assertion is absurd in terms of common sense. If the [Buyer] employed an incapable employee to conduct [Buyer]'s business, the [Buyer] is liable for the damage himself. Furthermore, the documents involved in the case showed that the representative of the [Buyer] can fully understand the meaning of the time-of-shipment clause in the Contract and was well capable of conducting [Buyer]'s business.

4. Agreement on the method of payment

The Agreement on the Method of Payment was not signed by both parties, so it was not formed. There was no requirement in the Contract or elsewhere that the Contract was not effective until both parties signed the Agreement on Method of Payment. It was a breach of contract for [Buyer] to rescind the Contract unilaterally on the ground that the Agreement on Method of Payment had not been signed.

OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

Article 16 of the Contract provides that the applicable law of the case concerning the performance, effectiveness, interpretation, or dispute settlement is Chinese law. Based on that, the Law of People Republic of China is applied in this case.

Australia and China are Contracting States of the United Nation Convention on Contracts for International Sale of Goods (Vienna Convention 1980, hereinafter "CISG"). The CISG will prevail when there is a conflict between the CISG and Chinese law.

2. The Contract has been formed

The [Seller] brought this arbitral application to the Arbitration Commission pursuant to the arbitration clause in the Contract. The [Buyer] asserted that neither the Contract nor the arbitration clause has been formed. But the [Buyer] responded to the claim of the [Seller] rather than challenge the authority of the Arbitration Commission.

Article 17 of the Contract stipulates: "besides the signature by the buyer and the seller, this contract shall come into force under the seller's special seal for contracting." And the [Seller] never sent the Contract under the [Seller]'s special seal for contracting. Based on those facts and according to Article 7 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest, the [Buyer] asserted that the Contract has not been formed.

The Arbitration Tribunal finds that Article 17 of the Contract does stipulate that: "besides the signature by the buyer and the seller, this contract shall come into force under the seller's special seal for contracting." And it is also a fact that the [Seller] did not affix its seal to the contract. However, Article 7 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest provides: "A contract shall be formed as soon as the parties to it have reached a written agreement on terms and have signed the contract."

The Arbitration Tribunal believes:

     a) Article 17 of the Contract is clear and cannot be misunderstood. It means that the contract under the special seal of the [Seller] is a condition on which the contract was to come into force rather than that the contract was formed.

     b) According to article 7 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest, the conditions of the formation of the contract are: i) there must be a written agreement; ii) the parties must reach agreement on the terms; and iii) signature of both parties

This case satisfies all of these conditions for the formation of the contract. According to Article 7 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest, both the Contract and the arbitration clause have been formed.

Thus, the Arbitration Tribunal concludes that [Buyer]'s assertion that the Contract and the arbitration clause were not formed has no factual or legal basis. The contract in this case has been formed.

3. The Contract has come into force

Even though the [Seller] did not affix its seal to the contract, the [Seller] performed the contract promptly; sent a fax to the [Buyer] on the ninth day and thirteenth day, i.e., 23 and 27 February 1995; notified the [Buyer] of the chartering of a ship and its shipping space; and asked for [Buyer]'s confirmation. If the [Buyer] thought the Contract had not come into force, the [Buyer] would have rejected the confirmation request of the [Seller]. In fact, the [Buyer] confirmed the [Seller]'s fax in the fax of 27 February 1995 which was signed by Mr. Huang on behalf of the [Buyer].

The Arbitration Tribunal notes that the [Buyer] asserted in its response on 16 June 1997 that the fax of 27 February 1995 signed by Mr. Huang was counterfeit. [Buyer] asserted that "May" and "27 February" were rewritten, and that the burden of proof was upon the [Seller]. The Arbitration Tribunal is of the view that this is [Buyer]'s proposition, and, according to Article 64 of the Civil Procedure Law of the People Republic of China, "A party shall have the responsibility to provide evidence in support of its own proposition." The [Buyer] has the burden of proof. The original fax should be in the hands of the [Buyer]. That the [Buyer] refused to provide the evidence to prove the lack of authenticity of the fax illustrates that the [Buyer] has no evidence to support its own proposition. Therefore, the Arbitration Tribunal concludes that the [Buyer]'s allegation cannot be accepted.

In fact, the [Seller] and the [Buyer] negotiated several times about the performance of the contract, including time of shipment and method of payment, for nearly a month's time, during the period 27 February when [Seller] received Mr. Huang's fax to 27 March 1995 when [Buyer] avoided the contract.

The Arbitration Tribunal notes that in the fax of 21 March 1995, signed by Mr. Huang, faxed to [Buyer] on 27 March 1995, concerning the Contract CAF-A-0001 of this case (and a Contract CAF-A-0005 which is not involved in this case) read as follows: "We now declare that these two contracts become invalid." The tense of the word "become" indicates that the two contracts were to become invalid at the time of the declaration. In other words, the Contract had been valid before the declaration.

Furthermore, the [Buyer] never declared that the Contract was invalid on the ground that the [Seller] had not affixed its seal to it.

Based on the above analysis, even though the [Seller] did not affix its seal to the Contract, the practices and the real meaning of the parties indicated that they had confirmed the validity of the Contract, and both parties had performed the Contract.

The [Buyer] asserts that "before signing the Contract, both parties understood that the Agreement on Method of Payment was an integral part of the Contract, and that the Contract should not come into force until the Agreement on Method of Payment was signed." [Buyer] also emphasized this in the faxes sent afterward. Whereas the [Seller] contended that "there was no requirement in the Contract or elsewhere that the Contract was not effective until the both parties signed the Agreement on Method of Payment."

The Arbitration Tribunal has examined all documents and faxes submitted by the parties. The only evidence concerning the Agreement on Method of Payment was a fax of [Buyer] dated 21 May 1995 that was sent two months after the [Buyer] rescinded the contract. In the fax, the [Buyer] tried to explain the reasons for rescinding the Contract: "before signing the contract, we put forward formally that the Agreement on Method of Payment is an integral part of the contract, and that the Contract shall not come into force before the Agreement on Method of Payment was signed." The Arbitration Tribunal also learns that, ten days later, i.e., on 31 May 1995, [Seller] in its fax, refuted [Buyer]'s position, stating that "our company could not accept your opinion that the contract shall not come into force before the Agreement on Method of Payment was signed."

There is no written material, not in or out of the Contract, not before or after the Contract was signed by the parties, that demonstrates that both parties consented to the term that the Agreement on Method of Payment is an integral part of the Contract or that the Contract should not come into force before the Agreement on Method of Payment was signed. Based on this, the [Buyer]'s assertion cannot be accepted by the Arbitration Tribunal. The Arbitration Tribunal is of the view that the Contract has come into force.

4. The [Buyer]'s unilateral rescission of the Contract constituted a fundamental breach of contract

After examining the [Buyer]'s fax that declared the Contract had become invalid, which was signed by Mr. Huang, The Arbitration Tribunal notes the words that follow: "Thank you for your terms of payment in Chinese … After the consideration careful (sic.), we are sorry to announce that our company cannot accept your terms… We now declare that these contracts become invalid."

Obviously, the reason and the only reason for which the [Buyer] declared the Contract invalid was that the [Buyer] did not accept the payment terms put forward by the [Seller].

The Arbitration Tribunal finds that Article 9 of the Contract had provided clear and executable terms of payment. The terms of payment in the Contract do not rule out the right of both parties to negotiate on the term again and reach an agreement on a term different from the Contract. If they could not reach an agreement, at issue is whether the [Buyer] has the right to rescind the contract on the ground that the [Buyer] could not accept the terms of payment put forward later by the [Seller].

Article 29 of the Law of the People's Republic of China on Economic Contracts Involving Foreign Interest provides that one party can notify the other party that the contract is rescinded in four situations The first one is relevant to this case and permits this "if the other party has breached the contract, thus adversely affecting the economic benefits the aggrieved party expected to receive at the time of conclusion of the contract."

However, for the [Seller] to have put forward the term of payment later was not a breach of contract in any sense. Whether these proposed terms of payment were accepted by the [Buyer] or not, whether the Agreement on Method of Payment was reached or not, it could not adversely affect the economic benefits the [Buyer] expected to receive at the time of conclusion of the contract. Even if the Agreement on Method of Payment could not be negotiated, the parties can in any event perform the Contract according to Article 9 of the Contract. The [Seller] did not agree to rescind the contract and so notified the [Buyer] by fax dated on 27 March 1995. In the fax of 26 April 1995, the [Seller] indicated again that the conduct of the [Buyer] had fundamentally breached the contract. The [Buyer] responded by fax of 27 April 1995, and asserted the [Seller]'s failure to deliver the goods on time required by the Contract as another reason to rescind the contract.

As far as the time of shipment is concerned, the [Buyer] asserts in its response that its representative seriously misunderstood Article 7 of the Contract due to the limitation of his English capacity and that this was a serious misunderstanding of the [Buyer]. Therefore, the [Buyer] cannot allege that the practices of the [Seller], adversely affected the economic benefits the [Buyer] expected to receive at the time of conclusion of the contract. This could not be an acceptable reason for [Buyer] to rescind the contract.

Pursuant to Article 29 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest, the [Buyer] was not entitled to rescind the Contract. But in fact, the [Buyer] stopped performing any obligations of the Contract, and thereby substantially deprived the [Seller] of what it was entitled to expect under the Contract. Pursuant to Article 25 of the CISG,[2] the [Buyer]'s unilateral rescission the Contract was a fundamental breach of the contract for which [Buyer] should be liable.

5. The claims of the [Seller] are supported

Because the [Buyer] was in fundamentally breach of the contract, the claims of the [Seller] are supported.

     1. The first claim of the [Seller] is that the [Buyer] shall indemnify the loss of the [Seller] for the price differences between the original contract price and resale price, which is US $184,000 and interest accrued on it.

According to Article 75 [3] and Article 78 of CISG,[4] the [Seller] is entitle to:

     2. The second claim of the [Seller] is to require that the [Buyer] shall bear the arbitration fee and the attorneys' fee of the [Seller]. The [Buyer] should bear the entire arbitration fee of the case. The attorneys' fee of the [Seller] will be considered with the third claim of the [Seller].

     3. The third claim of the [Seller] is other reasonable fees that are recognized by the Arbitration Commission. As the [Seller] did not submit any evidence to show that any other fees were incurred or the amount of the fee, the Arbitration Tribunal rejects this claim.

AWARD

Based on the above facts and analysis, the Arbitration Tribunal awards as follows:

1. The [Buyer] should pay the [Seller] US $228,549.75 for the price difference and interest caused by the breach of the contract of the [Buyer].

2. [Seller]'s Claim No. 3 and the part of Claim No. 2 concerning [Seller]'s attorneys' fee are dismissed.

3. The [Buyer] should bear the entire arbitration fee of the case. The [Seller] has paid the whole arbitration fee in advance; the [Buyer] should therefore compensate the amount to the [Seller].

The [Buyer] should pay the above to the [Seller] within 45 days from the day on which this award is made. Interest at the rate of 9% annually shall be imposed on any arrears.

This award is final.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For the purposes of this translation, the Claimant of Australia is referred to as the [Seller]; the Respondent of the P.R. China is referred to as [Buyer].

** Zizheng Tang, LL.M. Golden Gate University.

*** 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.

1. Article 7 of the Law of People's Republic of China on Economic Contracts Involving Foreign Interest reads:

"A contract shall be formed as soon as the parties to it have reached a written agreement on terms and have signed the contract."

2. Article 25 of CISG reads:

"A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result."

3. Article 75 of CISG reads:

"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74."

4. Article 78 of CISG reads:

"If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74."

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Pace Law School Institute of International Commercial Law - Last updated July 22, 2009
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