CISG CASE PRESENTATION

Case identification

DATE OF DECISION: 19940000 (1994)

JURISDICTION: Arbitration ; ICC

TRIBUNAL: Court of Arbitration of the International Chamber of Commerce

JUDGE(S): Case report does not identify presiding arbitrator(s)

CASE NUMBER/DOCKET NUMBER: 7531 of 1994

CASE NAME: Case report does not identify parties to proceedings

CASE HISTORY: Unavailable

SELLER'S COUNTRY: China (defendant)

BUYER'S COUNTRY: Austria (claimant)

GOODS INVOLVED: Scaffold fittings

Editorial remarks

EDITOR: Albert H. Kritzer

CISG issues ruled upon:

Applicability/Internationality. The contract was concluded between a seller from China and a buyer from Austria at a time when the CISG was in effect in both countries. The internationality requirement of Article 1(1) was deemed satisfied (contracting parties with their relevant places of business in different States) notwithstanding the fact that buyer's liaison office in China may have been involved in the negotiating process. The CISG was held applicable pursuant to Article 1(1)(a).

Conformity of goods. The contract involved 80,000 scaffold fittings delivered to buyer's customer in England. The tribunal found there was a lack of conformity of an important part of the goods. The tribunal stated: "Under Article 35(1) of the Convention the seller must deliver goods which are of the quality required by the contract. According to Article 35(2) the goods do not conform with the contract unless they are fit for the purposes for which goods of the same description would ordinarily be used and possess the qualities of goods which the seller has held out to the buyer as a sample."

Fundamental breach. The tribunal stated: "The lack of conformity of an important part of the goods supplied amounts to a breach of the contract which, under Article 25, is fundamental since the buyer is deprived of substantially what he was entitled to expect under the contract."

Avoidance. The tribunal stated: "According to Articles 49(1)(a) and 51(2) of the Convention [buyer] may declare the contract avoided."

Two possible defenses to avoidance were raised and rejected. They had to do with:

• Substitute goods, seller's right to provide. Subject to Article 49, Article 48(1) permits a seller to cure, if he can do so without unreasonable delay, unreasonable inconvenience to the buyer or uncertainty of reimbursement of expenses incurred by the buyer. On the facts of this case (declaration of avoidance pursuant to Article 49(1)(a)), the tribunal stated that "[seller] is not entitled to supply substitute items after the delivery date specified in the contract without the consent of [buyer]."
• Inspection. The background facts were: The tribunal stated that "[a]s allowed under the contract, an independent inspection company was engaged on the buyer's side to carry out examination and testing of the goods supplied." Evidently there were many problems detected. The tribunal elaborated: "[Buyer] has estimated the cost of sorting out bad fittings at USD 17,000, which may be compared with the invoiced price of the supplies, USD 46,397. The estimate has been communicated to [seller] and has not been disputed."
• A complaint of seller was that "[buyer] did not allow a [seller] representative to inspect the goods after delivery or to have the technical inspection repeated by a 'reference notary organisation". The tribunal held that "there is no obligation on [buyer] to do so (unless the inspection arranged by the buyer's side was flawed, which has not been disputed)."

Preservation of the goods. The tribunal stated: "Under Article 86 the buyer is entitled to have his reasonable expenses for preservation of the goods reimbursed by the seller; he may deposit the goods in a warehouse at the expense of the seller if the expense is not unreasonable (Article 87); and he may sell the goods by appropriate means if there has been an unreasonable delay by the seller in taking possession of the goods (Article 88(1))."

Without elaborating on the manner in which these provisions apply to the facts (other than to indicate that buyer was able to resell part of the goods: at a lower price), the tribunal appears to have allowed as damages costs, expenses and losses associated with the above, commenting further:

Damages, foreseeability of. Citing Article 45(1), the tribunal stated that "under Article 75 [buyer] becomes entitled to damages equal to the loss, including loss of profit, to the extent the loss was, or ought to have been, foreseen by the seller." Although Article 75 is the provision so cited, Article 74 appears to have been the provision intended, as Article 75 applies to the purchase of replacement goods by buyer and the opinion does not refer to any such replacement purchase by buyer.

Only one item of damages claimed by buyer was disallowed. The tribunal stated: "I cannot find that the amount claimed for the travel costs of Mr. X -- an employee of [buyer's] customer -- are such as could reasonably have been foreseen and accordingly [seller] should not be liable therefor."

Interest (right to, accrual of, rate of). In assessing interest under the CISG, support for a creditor's right to interest is encountered under several provisions of the Chapter on Provisions common to the obligations of the seller and the buyer:

• Under Article 74, a provision of the section entitled Damages. This article has to do with damages in general. It provides for recovery of the loss suffered as a consequence of a breach of contract.
• Under Article 78, the provision of the section entitled Interest. This article has to do with the situation in which a party fails to pay a "sum that is in arrears". In this situation, "the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under Article 74."
• Under Article 84(1), a provision of the section on Effects of avoidance. This article has to do with a situation in which "the seller is bound to return the price". In this situation, "he must also pay interest on it, from the date on which the price was paid."

Referring only to Article 74, the tribunal stated: "The damages suffered by [buyer] includes the cost of credit which has been stated by [buyer], undisputedly, at 11% per annum and which should be compensated at that rate as an element of the damages due according to Article 74."

The tribunal also stated: "The Convention is silent on the question of the maturity date of damage claims. . . . [Buyer] claims interest from the date when it communicated the amount of its claim to [seller] by telex. . . . [Since] this particular aspect of the claim is . . . undisputed, interest should be granted from the date claimed by [buyer]."

Citations to other abstracts, case texts and commentaries