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CISG CASE PRESENTATION

ICC Arbitration Case No. 9474 of February 1999 (Printed banknotes case) [English text]
[Cite as: http://cisgw3.law.pace.edu/cases/999474i1.html]

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

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Case identification

DATE OF DECISION: 19990200 (February 1999)

JURISDICTION: Arbitration ; ICC

TRIBUNAL: Court of Arbitration of the International Chamber of Commerce

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 9947 of February 1999

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Unavailable

BUYER'S COUNTRY: Unavailable

GOODS INVOLVED: Contract for printing and delivery of banknotes


UNCITRAL case abstract

ICC ARBITRATION: Court of Arbitration of the International Chamber of Commerce February 1999
(Dulces Luisi, S.A. de C.V. v. Seoul International Co. Ltd. y Seoulia Confectionery Co.)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/122]
CLOUT abstract no. 1185

Reproduced with permission of UNCITRAL

The National Bank of Country […] (i.e. the buyer) entered into a contract for the printing of bank notes from the seller (“the Original Contract”). When the seller supplied bank notes which did not conform with the quality standards set out in the Original Contract, the parties agreed to enter into another agreement (“Second Agreement”) under which the seller would supply a new batch of bank notes at its own expense and, should that batch meet the standards set out in the Original Contract, the buyer would place an order for further bank notes.

The buyer was not satisfied with the second batch of bank notes either and did not place another order. The seller insisted that the buyer place an additional order as stipulated in the Second Agreement. Instead, the buyer sought relief for non-performance from the ICC International Court of Arbitration requesting damages for the consequences of the seller’s non-performance.

The relevant arbitration clauses provided that the Arbitral Tribunal should decide “fairly”. In determining what this term meant, the parties accepted the arbitral Tribunal’s suggestion to apply “the general standards and rules of international contracts”, which the Tribunal said did not exist in any specific international convention; however, it pointed to the Principles of European Contract Law and the UNIDROIT Principles of Commercial Contracts as recent expressions of this law.

Commenting on the relevance of the CISG, the Tribunal noted that the Convention embodies universal principles applicable to international contracts and that both parties were located in countries that were parties to the CISG. However, the Tribunal also noted that many of the circumstances of the arbitration pre-dated the ratification of the Convention by the claimant’s state. Further, the Tribunal noted that if the parties had wanted the CISG to apply they would have expressed that in the contract and that the Second Agreement was not purely a sales contract, rather it contained elements of a settlement agreement. Therefore, the Tribunal used a combination of principles from the above-mentioned conventions to reach its conclusions.

The buyer claimed that the Second Agreement was null and void because one of its former employees was paid a generous fee by the seller to promote the agreement. The buyer argued that this fee should have been disclosed according to the reasonable standards of good faith, and referred specifically to the UNIDROIT Principles of International Commercial Contracts, Articles 3.5 and 3.8, and the Principles of European Contract Law 1997, Article 4.107. The Tribunal found that the buyer had not provided sufficient evidence and rejected its claim. The Tribunal explained that the evidence did not prove that the seller had any fraudulent intent and, furthermore, that the extent and effects of the influence of the former employee, including his influence over the buyer’s decision to enter into the Second Agreement, was not clearly established.

The seller claimed that the buyer did not give notification within a reasonable time that the banknotes were not of the agreed quality and that the general principles of waiver and estoppel should preclude the buyer from asserting its claims of non-performance. The seller sought to rely on Articles 38 and 39 CISG.

The buyer argued in the first instance that it had given timely notice of its concerns about the quality of the goods in a letter. Referring to Art. 7.3.2 UNIDROIT Principles, which imposes an obligation of “reasonable time of a notice”, the buyer noted that the article “is meant to prevent any harm due to uncertainty…” as to whether the aggrieved party would accept the performance. Given the nature of the Second Agreement and other circumstances, the buyer argued that it had acted within the meaning of “a reasonable time” so that any loss from the part of the seller could be prevented.

The buyer also argued that should Articles 38 and 39 CISG be applicable to the Second Agreement and the buyer was found to be in breach of these articles, Article 40 of the Convention would defeat the seller’s right to rely on the buyer’s failure to give notice. Article 40 CISG does not allow a seller to rely on Articles 38 and 39 if the seller had knowledge of the lack of conformity of the goods. The buyer further stated that it could rely on Article 44 CISG which would allow it to claim damages if it had “a reasonable excuse for its failure to give the required notice.”

According to the Tribunal, the party alleging waiver or estoppel bears the burden of proof and, in the case at hand, the seller had not submitted such evidence. Furthermore, the Tribunal stated that the seller could not rely on the buyer’s failure to inspect the goods and to give timely notice of defects when it knew or ought to have known of the defects in the goods. The Tribunal explicitly referred to Article 40 CISG to support this conclusion. Given to these and other considerations, such as the nature of the Second Agreement and the general attitude of the defendant, the Tribunal upheld the buyer’s claim for damages due to the seller’s failure to perform.

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Classification of issues present

APPLICATION OF CISG: No, not as such. Contract stated that it shall be governed by "general standards and rules of international contracts." The following CISG provisions were discussed by anology.

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 29 ; 39 ; 40 ; 44

Classification of issues using UNCITRAL classification code numbers:

29A [Parties by agreement may modify or terminate the contract: consideration unnecessary];

39A [Buyer must notify seller of lack of conformity within reasonable time];

40B [Seller's knowledge of non-conformity: seller fails to disclose known non-conformity: seller loses right to rely on articles 38 and 39];

44A [Excuse for failure to notify pursuant to art. 39(1)]

Descriptors: Modification of contract ; Lack of conformity notice, timeliness ; Lack of conformity known to seller ; Excuse

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=716&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (English): ICC International Court of Arbitration Bulletin, Vol. 12/No.2, 64; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=716&step=FullText>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.168; CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (cases cited in addendum to opinion)

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Pace Law School Institute of International Commercial Law - Last updated December 5, 2012
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