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CISG CASE PRESENTATION

China 30 June 1999 CIETAC Arbitration proceeding (Bearings case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/990630c2.html]

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

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Case identification

DATE OF DECISION: 19990630 (30 June 1999)

JURISDICTION: Arbitration ; China

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

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1999/31

CASE NAME: Unavailable

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Bearings


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 62 ; 78 [Also cited: Article 61 ]

Classification of issues using UNCITRAL classification code numbers:

62A [Seller may compel performance of any of buyer's obligations: payment of price];

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) 1999 vol., pp. 2133-2138

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.51, 123, 158, 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

Bearings case (30 June 1999)

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 Contract No. M64960910YZL signed on 10 October 1996, by Claimant [Seller], China Beijing ___ Company, and Respondent [Buyer], US ___ Company; and
 
   -    The written arbitration application submitted by [Seller] to the Arbitration Commission on 18 November 1998.

On 1 December 1998, the Secretariat of the Arbitration Commission sent the notice of the arbitration, [Seller]'s application, the Arbitration Rules of China International Economic and Trade Arbitration Commission (taking effective on 10 May 1998, hereafter, the Arbitration Rules) and the list of arbitrators by express mail to [Buyer] requesting him to submit his defense and written materials.

On 8 January 1999, the Secretariat of the Arbitration Commission received [Buyer]'s correspondence dated 5 January 1999 and the documents attached thereto. In his correspondence, [Buyer] appointed Professor D as the arbitrator, and filed a counterclaim.

In the documents [Buyer] submitted, he states that in September 1996, [Seller] and [Buyer] negotiated on the disputes over the quality of the goods and late delivery, and that [Seller] promised to compensate [Buyer] for the loss, US $28,000. On 10 October 1996, Wallance Ting of [Buyer]'s company had been back to Los Angeles, and was not in Shanghai, and he did not signed the contract in this case with [Seller]; this contract actually was signed on 10 September 1996. It seems there are two versions of Contract No. M64960910YZL, which contain conflicting contents. It is [Buyer]'s position that neither the contract signed on 10 September 1996 nor the contract signed on 10 October 1996 is binding. It is [Buyer]'s position that they are forged and that the Arbitration Tribunal will find that [Seller]'s objection to [Buyer]'s assertion is not established. Meanwhile, [Buyer] field counterclaims requesting [Seller] to return the extra amount of US $2,000 which [Buyer] paid.

According to the Arbitration Rules, on 18 January 1999, the Secretariat of the Arbitration Commission requested [Buyer] to pay in advance for the traveling expenses of his foreign arbitrator, Mr. D, and the arbitration fee for the counterclaims. On 1 February 1999, [Buyer] replied by fax expressing that because he is not claimant, he will not pay any fee for arbitration, and he withdrew the counterclaims.

On 2 February 1999, the Secretariat of the Arbitration Tribunal informed [Buyer] that because he did not pay in advance the expenses for the foreign arbitrator, Mr. D, whom he appointed, his appointment cannot be realized; [Buyer] should therefore appoint another arbitrator who is in Beijing; because [Buyer] gave up his counterclaims, he need not pay the arbitration fee for the counterclaims.

[Seller] appointed Mr. A as the arbitrator. Because [Buyer] did not appoint his arbitrator within the stipulated time, according to Article 26 of the Arbitration Rules, the Chairman of the Arbitration Tribunal appointed Ms. Z as the arbitrator for [Buyer]; the Chairman appointed Mr. P as the presiding arbitrator according to Article 24. On 1 March 1999, the above three arbitrator formed the Arbitration Tribunal to hear this case. The Secretariat sent the notice of formation of the Arbitration Tribunal to [Seller] and [Buyer] by both express mail and fax.

The Arbitration Tribunal reviewed the application materials submitted by [Seller] and the documents submitted by [Buyer] on 8 February 1999, and after discussing with the Secretariat of the Arbitration Commission, decided to hold the court session in Beijing on 20 April 1999. On 3 March 1999, the Secretariat sent the notice of the court session to [Seller] and [Buyer] by express mail and fax.

On 20 April 1999, the Arbitration Tribunal held the court session in Beijing. [Seller] sent his representative to the court session; [Buyer] did not send anyone to attend it. In accordance with Article 42 of the Arbitration Rules, the Arbitration Tribunal held the court session by default. [Seller]'s representative made statements and answered the Arbitration Tribunal's questions. In accordance with the Arbitration Tribunal's request, [Seller] presented the fax of the original contract to the Arbitration Tribunal; on 14 May 1999, after the court session, [Seller] sent his written statements and evidence.

On 14 May 1999, the Arbitration Tribunal sent to [Buyer] the information about the court session and the supplementary materials [Seller] submitted after the court session, requested [Buyer] to submit written materials before 10 June 1999, inquiring if he had any objection, and notified [Buyer] that if he wanted to have the Arbitration Tribunal hold a second court session, he should submit a written request within the above period; and that if he did not file the request within the stipulated time, the Arbitration Tribunal would not accept, and would continue the proceeding.

On 8 June 1999, [Buyer] faxed to the Arbitration Tribunal stating that [Buyer]'s documents had been sent by express mail. On 14 June 1999, the Secretariat received [Buyer]'s documents, and on the same day, transferred the documents to the Arbitration Tribunal and [Seller].

Considering 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

[Seller]'s position

On 10 October 1996, [Seller] and [Buyer] signed Contract No. M64960910YZL in Shanghai for export of 608UCZ bearings. The total contract price is US $84,000. The parties agreed that the payment was to be made within 45 days when the goods are loaded. On 13 October 1996, the goods were shipped. [Seller] did not receive any objection to the quality of the goods. On 29 January 1997, [Buyer] remitted US $30,000 to [Seller], but this was later than the date (27 November 1996) stipulated in the contract. In addition, although [Seller] urged [Buyer] many times, [Buyer] did not pay the remaining amount, US $54,000.

In sum, [Seller] asserts that [Buyer] substantially breached the contract, which caused [Seller] to suffer severe loss. [Seller] therefore files the following claims:

1. [Buyer] should immediately pay [Seller]:

   -    The remaining amount of the contract price, US $54,000;
 
   -    Interest on this amount from December 1996 to March 1999, US $9,283.70. [(54,000 X (7.1511% X 1/12 + 7.5366 + 7.2938 + 7.0625 X 3/12) = US $9,283.70], and
 
   -    Interest on the late payment, US $30,000, from 1996 December to 1997 January, US $404.90 [30,000 X (7.1511% X 1/12 + 7.5366% X 1/12) = US $404.90];

2. [Buyer] should pay for [Seller]'s attorneys' fee;

3. [Buyer] should bear the entire arbitration fee.

Then, [Seller] submitted the supplementary materials after the court session, addressing the following subjects:

1. The signing and performance of Contract No. M64960910YZL

On 9 September 1996, [Buyer]'s representatives, Ding __ and the manager of __ Bearing Factory, Wang __ drafted an order, the third item of which stipulates the September 1996 purchase by [Buyer] of 400,000 sets of 608UGZ bearings for a total contract price of US $102,000. According to this order, on 10 September 1996, [Seller] and [Buyer] signed Contract No. M64960910YZL in Shanghai. The contract stipulates that [Seller] exports 400,000 sets of 608UGZ bearings to [Buyer] for the contract price of US $102,000 and that the shipping date is at the end of September.

In the performance of the contact, [Seller] prepared to ship the goods. Due to [Seller]'s negligence, Contract No. M64960910YZL in the documents lacks the letter "I". Because the manufacturer of the goods ___ Bearing Factory did not prepare the goods well, [Seller] could not ship the goods on time. At the end of September 1996, [Buyer]'s representative Ding __went to Shanghai, and negotiated with [Seller] and ___ Bearing Factory about the late delivery; [Buyer] asked [Seller] to reduce the price from US $0.255 per set to US $0.21, i.e., from the contract price of US $102,000 to US $84,000, and to change the shipping date to 30 October 1996, and also to revise the payment term. [Seller] did not reply, and Ding __returned to the US.

In order to mitigate damages, after negotiating with __Bearing Factory, [Seller] agreed to the above requests of the [Buyer], and mailed the revised Contract No. 64I960910YZL to [Buyer], and shipped the goods on 30 October 1996.

After receiving the goods, [Buyer] did not make the payment. [Seller] sent many faxes to [Buyer] requesting him to make the payment, or return the goods. [Seller] requested for [Buyer]'s confirmed contract which can be used as evidence for urging [Buyer] to make the payment. On 2 January 1997, [Buyer] faxed Contract 64960910YZL dated 10 October 1996, and remitted US $30,000 to [Seller] on 29 January 1997.

2. [Seller]'s opinions about [Buyer]'s documents of 5 January 1999

     (1) Because the contract in this case is independent, the performance of this contract is not affected by the performance of other trade contracts; furthermore, this contract stipulates that the objection to the quality of the goods shall be raised within 30 days when the goods arrive at the destination port. [Buyer] did not raise the objection to the quality of the goods within the stipulated period. Meanwhile, the parties negotiated on [Seller]'s late delivery, so the late delivery cannot be the basis for [Buyer]'s nonpayment. Thus, [Buyer]'s assertion that he refused to make payment because the goods had defects and [Seller] delivered the goods late, cannot be upheld.

     (2) [Seller] has never signed any agreements about the liabilities of the contract with [Buyer] and the manufacturer of the goods under the contract.

     (3) [Buyer] mentioned Contract No. M64960910YZL many times in his document of 5 January 1999. It may be [Buyer]'s typing mistake, and [Seller] and [Buyer] have never signed the contract. In this document, [Buyer] states that there are two versions of Contract No. M64960910YZL, and that [Seller] held [Buyer]'s 300SD cars which are under the contract signed on 10 September 1996. [Buyer] also stated that neither of the two contracts is binding, because they were forged. The basis for [Seller] to file this arbitration is Contract No. M64960910YZL signed on 10 October 1996; [Buyer] knows that the contract that was signed on 10 September is No.M64I960910YZL, and that Contract No. 64960910YZL signed on 10 October 1996 was admitted by [Buyer]'s fax on 2 January 1997.

[Seller] also asserts that the average annual interest rates for calculating the interest rate [Seller] claims for are 7.1511% (1996), 7.5366% (1997), 7.2938% (1998) and 7.0626% (1999).

[Buyer]'s defense

Except the above opinions in his document of 5 January 1999, [Buyer] repeated the above opinions in his defense submitted to the Arbitration Commission on 14 June 1999. It is [Buyer]'s position that:

1. [Seller] and [Buyer] did not sign any documents on 10 October 1996 in Shanghai

     (1) [Buyer]'s CEO, Mr. Ding, was not in Shanghai on 10 October 1996, so it is impossible the contract was signed by such persons at such time and place;

     (2) [Seller] did not provide the original documents for verification;

     (3) [Seller] provided a copy or fax of the document dated on 2 January 1997 with the words "Destination USA", which is not the original document, and may be forged or combined, or revised. The fax is not the original documents and cannot be verified.

     (4) Ding __ did not singly meet alone with Ye __ of [Seller] whenever he went to Shanghai. He was always with accompanying persons, but [Seller] did not provide any witness for signing the contract.

2. Contract No. M64I960910YZL submitted by [Seller] signed by Ye __ and Ding __ in Shanghai is a true business contract, which is part of the contract for exporting bearings in 1996, signed by [Seller] and [Buyer].

3. From 1995, [Buyer]'s bearing purchase has been run by his joint venture; [Seller] is only a window for trade and executes the formalities of export agency and the exchange and settlement of the payment; [Seller] has no right to decide the manufacturer, and is not liable for the inspection of the goods and the product development expenses. Thus, [Seller] could not suffer any economic loss in the transaction with [Buyer]. Moreover, [Seller] does not provide any evidence to prove its economic loss. [Buyer] requests the Arbitration Tribunal to decide that [Seller]'s economic loss does not exist.

THE OPINION OF THE ARBITRATION TRIBUNAL

1. Applicable law

The contract does not stipulate the applicable law. Because [Seller]'s business place is in China, and [Buyer]'s business place is in the US, and these two countries are parties of the United Nations Convention on Contracts for the International Sale of Goods (1980) (CISG), and the two parties did not exclude the application of the CISG, therefore, the Arbitration Tribunal holds that CISG is applied to this case.

2. The contract on which the arbitration is based

[Seller] filed this arbitration application on the basis of Contract No. M6496910YZL (hereafter, the contract), which was signed by [Seller] and [Buyer] by fax and dated on 10 October 1996, and provided a fax of this contract. Meanwhile, in both his statements in the court session and written statement after the court session [Seller] asserts that the contract dated 10 October 1996 is the revised version of the contract signed on 10 September 1996 with the amendment of the price, shipping period and payment term; the contract was formed when [Buyer] faxed back to [Seller] who urged [Buyer] many times; however, [Buyer] alleges that the contract signed by [Seller] and [Buyer] has two discrepant versions, which are dated 10 September 1996 and 10 October 1996, but on 10 October 1996 [Buyer]'s manager was not in Shanghai and could not have signed the contract, and that the contract dated on 10 October 1996 was forged or revised, and that the fax is not the original document and cannot be verified.

The Arbitration Tribunal holds that [Buyer]'s assertion that his representative, Ding __ was not in Shanghai on 10 October 1996 does not prove that Ding __ could not have signed the contract by fax. In any event, [Seller] did not send representative to attend the court session to cross-examine the genuineness of the fax. Then, under the Arbitration Tribunal's instruction, [Buyer] did not request the Arbitration Tribunal to hold a second court session for cross-examination, but denied the genuineness of the fax submitted by [Seller] by asserting, "The fax of the contract is not the original one, and cannot be authenticated." [Buyer]'s assertion is not sufficient. The Arbitration Tribunal cannot uphold [Buyer]'s assertion that Contract No. M64960910YZL dated 10 October 1996 is forged and invalid. The Arbitration Tribunal heard this case on the basis of this contract.

3. [Seller]'s claims

[Seller] asserts that he shipped the goods on 30 October 1996 when he mailed the contract to [Buyer], but [Buyer] did not make the payment after receiving the goods. On 2 January 1997, [Buyer] faxed the contract to [Seller] after [Seller] urged him many times. On 29 January 1997 [Buyer] remitted US $30,000 to [Seller]. [Buyer] does not deny that he has received the goods, and [Buyer] has mentioned that he paid [Seller] US $30,000, but [Buyer] asserts that [Seller], the manufacturer and [Buyer] have reached an agreement, and that [Seller] agreed to compensate [Buyer] for part of the loss due to the late delivery and defects of the goods. [Buyer] also asserts that [Seller] did not submit any evidence to show his actual economic loss.

After reviewing the shipping documents, B/L and the parties' correspondence, the Arbitration Tribunal holds that:

     1. The Arbitration Tribunal's jurisdiction on this case comes from the arbitration clause in the contract; other disputes of the parties that arose not from this contract do not fall within the scope of this arbitration;

     2. [Buyer] asserts that he has reached an agreement with [Seller] and the manufacturer for compensation, but he neither provided evidence nor proved this agreement has legal relationship with the contract in this case, which means that [Buyer] did not prove the contract was revised according to this agreement;

     3. [Seller] shipped the goods with the total value of US $84,000. [Buyer] received the goods, and did not raise any objection to the quality or quantity of the goods, but he only made the late payment of US $30,000.

Accordingly, the Arbitration Tribunal does not hear the agreement or other contracts which are not related to the contract in this case. The Arbitration Tribunal decides the parties' right and duty according to the contract in this case. [Seller] fulfilled his duty to deliver the goods, but [Buyer] only made partial payment after receiving the goods, which constitutes a breach of contract. The unpaid part of the contract price is [Seller]'s loss.

According to the contract and Articles 61 and 62 of CISG, "If the [Buyer] fails to perform any of his obligations under the contract ...", "The [Seller] may require the [Buyer] to pay the price ..." and Article 78, "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 ...", the Arbitration Tribunal upholds [Seller]'s claim for the unpaid part of the contract price, US $54,000, and interest on this amount, and interest on the late payment, US $30,000. Because [Buyer] does not object to [Seller]'s assertion of the date due, closing date and rate for calculating the interest, and the Arbitration Tribunal holds that [Seller]'s assertion is reasonable, the Arbitration Tribunal upholds [Seller]'s claim for the unpaid part of the contract price, US $54,000 and interest of US $9,283.7, and interest on the late payment of US $30,000 in the amount of US $404.90.

As to [Seller]'s claim for attorneys' fee, because his claim is not specific, the Arbitration Tribunal cannot uphold it.

4. The arbitration fee

Because the dispute in this case arose due to [Buyer]'s breach, and most of [Seller]'s claims are upheld, [Buyer] shall bear the entire arbitration fee.

AWARD

The Arbitration Tribunal makes the following award:

1. [Buyer] shall pay [Seller] the unpaid part of the contract price, US $54,000 and interest US $9,688.60;

2. [Buyer] shall bear the entire arbitration fee;

3. [Buyer] shall pay [Seller] the above total amount, US $63,688.60 and RMB 30,179 within 30 days after the date of this award; otherwise, interest shall be added at the annual rate of 7%.

4. [Seller]'s claim for attorneys' fee is dismissed.

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]; Respondent of the United States 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].

** 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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