China 5 February 1996 CIETAC Arbitration proceeding (Antimony ingot case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960205c2.html]
DATE OF DECISION:
JURISDICTION:
TRIBUNAL:
JUDGE(S):
DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/07
CASE NAME:
CASE HISTORY: Unavailable
SELLER'S COUNTRY: People's Republic of China (claimant)
BUYER'S COUNTRY: Hong Kong (respondent)
GOODS INVOLVED: Antimony ingots
PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission 5 February 1996 (Antimony ingot case)
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/84],
CLOUT abstract no. 857
Reproduced with permission of UNCITRAL
A mainland Chinese seller and a Hong Kong buyer entered into a contract for the purchase of antimony ingots. The contract stipulated the deadline of the loading and the issuance date for the letter of credit. The seller sent a fax to the buyer stating a date of shipment and asked the issuing of the letter of credit through a different payment bank than the one agreed to in the contract. A few days afterwards, the buyer faxed the seller to cancel the contract.
The seller nevertheless shipped some of the antimony ingots to the designated port on the contract. Negotiations between the two parties on reselling the goods ended with no results. The seller resold the goods at a lower price and filed the arbitration application, claiming loss in price difference.
The Arbitration Tribunal ruled that fulfilling the loading obligation ahead of time was not a breach of contract as the buyer had asked for the shipment to be arranged as soon as possible. With respect to the letter of credit, the tribunal argued that the seller had the right to ask for an amendment of the contract, and since the buyer had not accepted the change, they must revert back to the original contract which the buyer had failed to do. This was to be considered a fundamental breach of contract by the buyer. However, citing article 77 CISG, the Tribunal reasoned that the seller should take the main responsibility for the delay in disposing of the goods and in increasing the loss of profit. Therefore, the Tribunal condemned the buyer to compensate the seller only for the loss in the price difference and interest, as well as the various costs relating to the arbitration proceedings.
Go to Case Table of ContentsAPPLICATION OF CISG: Yes, agreement of the parties
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
6B [Agreements to apply Convention: choice of parties]; 8A [Intent of party making statement or engaging in conduct]; 25B [Definition of fundamental breach: substantial deprivation of expectation]; 52A [Early delivery: buyer may either take or refuse delivery]; 72A [Avoidance prior to date for performance: when clear that party will commit fundamental breach]; 74A [General rules for measuring damages: loss suffered as consequence of breach]; 75A1 [Damages established by substitute transaction after avoidance: resale by aggrieved seller]; 77A [Obligation to take reasonable measures to mitigate damages]; 78B [Rate of interest]
Descriptors:
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) 1996 vol., pp. 868-874
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Dong WU, CIETAC's Practice on the CISG, at nn.23, 215, Nordic Journal of Commercial Law (2/2005); Fan Yang, The Application of the CISG in the Current PRC Law and CIETAC Arbitration Practice (December 2006) n. 82
Go to Case Table of Contents| Case text (English translation) | |
Antimony ingot case (5 February 1996)
Translation [*] by Meihua Xu [**]
Edited by Liming (Anna) Lin [***]
China's International Trade and Economic Arbitration Commission (hereafter, "the Arbitration Commission") accepted the case, according to:
| - | The Arbitration clause in Sales Contract No. HCB010195 signed by Claimant [Seller], China Guangxi Hechi District ___ Trade Company Beihai Office and Respondent [Buyer], Hong Kong ___ Chemical Medicine Material Company on 12 January 1995; and |
| - | The written arbitration application submitted by the [Seller] on 21 March 1995. |
Mr. A, the arbitrator appointed by the [Seller], Mr. D, the arbitrator appointed by the [Buyer], and Mr. P, the Presiding Arbitrator appointed by the Chairman of the Arbitration Commission formed the Arbitration Tribunal following the Arbitration Rules.
The Arbitration Tribunal examined the [Seller]'s arbitration application and its attachment and the [Seller]'s defense and its attachment. On 7 November 1995, a court session was held in Beijing. The legal representative of the [Seller] and its arbitration representative together with the [Buyer]'s arbitration representative presented at the court sessions. They made oral statements, answered the Arbitration Tribunal's questions, and presented arguments.
During the court session, the [Seller] submitted a change to its arbitration claim application. After the court session, the [Seller] sent a letter to the Arbitration Tribunal to withdraw the aforesaid application. Both the [Buyer] and the [Seller] submitted supplementary materials after the court session.
This case has been concluded. The Arbitration Tribunal made this judgment based on the materials submitted by both parties and the court sessions.
The following are the facts, the Arbitration Tribunal's opinion and award.
I. FACTS
On 12 January 1995, the [Seller] and the [Buyer] concluded Sales Contract No. HCB010195 (hereafter, the "Contract") via fax, in which it was stipulated that the [Seller] would sell 100 tons of antimony ingots to the [Buyer]. The price was US $4,650/ton, CNF Rotterdam, and the total price was US $465,000. The loading ports were in China, the destination port was Rotterdam, and the loading date was 15 February 1995.
It was stipulated in the Contract that, "the [Buyer] should issue an irrevocable L/C with the [Seller] as the beneficiary, which can be cashed by providing the Bill of Lading at the Bank of China", and that, "the L/C should be issued to [Seller] before 17 January 1995, and should be valid within 15 days after the delivery date (including the fifteenth day).
On 13 January 1995, the [Buyer] sent a fax to the [Seller] confirming that both parties had reached an agreement during the phone conversation, which was that the [Buyer] should issue a L/C on 17 or 18 January 1995. The [Buyer] also mentioned in the fax that "we want you to arrange for the shipment as soon as possible".
On 17 January 1995, the [Seller] sent a fax to the [Buyer] stating:
"...our S/C No. HCB010195 100MT of antimony ingots, because of the Chinese New Year, we have received a notice from the port saying that there was no ship from 20 this month to 15 February. We have prepared the goods, and will ship them by the last ship (20 January) of this month. Please cooperate to issue the L/C on 18 to The People's Construction Bank of China, Beihai Branch, Sichuan Road South Beihai Guangxi China. If we don't receive it on 18, we cannot deliver the goods on time, and will suffer a severe loss. Therefore, we need your understanding and cooperation".
On 21 January 1995, the [Buyer] sent a fax to the [Seller] saying it had decided to cancel the contract based on the following reasons:
(1) The [Buyer] cannot issue the L/C within the time required by the [Seller];
(2) The [Seller] changed the payment bank suddenly, which put the [Buyer] at a loss what to do;
(3) The [Buyer] cannot tolerate the [Seller]'s changing the Contract repeatedly.
On 23 January 1995, the [Seller] sent a fax to the [Buyer] insisting the Contract was still valid and agreed to postpone the date for issuing the L/C to 24 January 1995. The [Seller] also alleged that if the [Buyer] did not issue the L/C before 24 January, the [Buyer] should bear the responsibility for all the losses.
On the same day, the [Buyer] rejected the [Seller]'s allegation saying it should not take any responsibility.
Later, the [Seller] shipped the 100 tons of goods in HCB010195 contract to Rotterdam. The [Buyer] and the [Seller] had negotiated the issue about reselling the goods until 16 March 1995, but with no result.
On 9 May 1995, the [Seller] sold 60 tons of the goods to an American buyer at US $2,400/ton, and on 17 May 1995, sold 40 tons to a Singapore buyer at US $2,400/ton.
On 21 March 1995, after the goods had been delivered to Rotterdam, but had not been resold to a third party, the [Seller] filed an arbitration claim to this Arbitration Commission claiming:
(1) The [Buyer] should compensate the [Seller]'s loss resulting from the [Buyer]'s failing to issue the L/C.
(2) The [Buyer] should bear the cost of the [Seller]'s attorneys' fee and the cost of traveling fee of renminbi [RMB] 47,000, which is US $5,575.33 (exchange rate: 8.43).
The total of (1) and (2) is US $81,735.33.
(3) The [Buyer] should bear the arbitration fee of this case.
On 7 November 1995, during the court session, the [Seller] submitted a change to its Arbitration Claim Application, in which it claims
(US $4,650/ton - US $2,400/ton) × 60 tons = US $135,000.
(US $4,650/ton - US $2,400/ton) × 40 tons = US $90,000.
US $4,650/ton × 100 tons × 12/1000 × 4 = US $23,200.
The total loss by the [Seller] to be compensated by the [Buyer] under 1, 2 and 3 is US $253,575.33.
On 29 November 1995, the [Seller] sent a letter to the Arbitration Tribunal announcing the withdrawal of its changed arbitration claim application submitted on 7 November 1995. However, the documents would be provided to the Arbitration Tribunal as evidence of the [Seller]'s loss. Therefore, the [Seller]'s arbitration claim remains the same as the one submitted on 21 March 1995.
The [Seller] alleged in its arbitration claim that:
(1) The reason the Contract could not be performed was the [Buyer]'s failure to issue the L/C, which constitutes a violation of the contract, and that the [Buyer] should bear the responsibility for contract violation and for all the losses resulting from it.
(2) The [Seller] suffered a huge economic loss due to the [Buyer]'s violation of the contract. According to Article 11 of the Contract, Articles 7, 16, 18, 19, and 37 of the Law of the People's Republic of China on Economic Contracts Involving Foreign Interest, and Articles 19, 25, 53, 54, 61, and 78 of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, the "CISG"), the [Seller]'s claim for damages is lawful.
The [Buyer] counter argues the [Seller]'s assertion saying its termination of the contract was because the [Seller] violated the Contract first, which is evidenced by:
The [Buyer] asserts that
The [Buyer] also argues that according to the related articles under the CISG, a fundamental breach by one party gives the other party the right to terminate the contract. In the instant case, when the [Seller] has fundamentally breached the contract, the [Buyer] not only has the right to terminate the contract and discharge its obligation to issue the L/C, it also has the right to claim damages. The [Buyer] asks the tribunal to order that:
The [Seller] counter argued orally in the court session on 7 November 1995, and by written document in its supplementary representation statement submitted on 29 November 1995, saying that:
The [Buyer] made further statements about its assertion that the [Seller] has violated the contract.
The [Buyer] alleges that it was determined in the Contract that the loading date was 15 February 1995 that day, but not any day before 15 February; therefore, the [Seller] could only load the goods on 15 February, and could never bring forward the loading date to one month earlier.
The [Buyer] also alleges that as long as the loading date is determined, it becomes an important element of the Contract. According to Article 52(1) of the CISG, "if the [Seller] delivers the goods before the date fixed, the [Buyer] may take delivery or refuse to take delivery." Therefore, the [Buyer] could refuse to take delivery, and if the delivery date is an essential part of the Contract, the [Buyer] even has the right to terminate the contract.
In addition, the [Buyer] pointed out that according to Article 72(1) of the CISG, "if prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided". The [Seller] stated in its fax sent to the [Buyer] on 17 January 1995 that there was no ship from 20 to 15 February", which meant the [Buyer] avoided the Contract lawfully after it had known that the Contract could not be performed within the time stipulated in the Contract.
III. OPINION OF THE ARBITRATION TRIBUNAL
(1) The applicable law
The Arbitration Tribunal noted that the parties did not stipulate the applicable law in the Contract. However, in the [Seller]'s arbitration application and the [Buyer]'s defenses, the CISG was mentioned as a basis for each party's assertion. Therefore, the Arbitration Tribunal deems that the parties have reached an agreement on the applicable law during the arbitration process, therefore, the CISG should be applied here.
(2) Loading date
The Arbitration Tribunal notes that the essential dispute of this case is the parties disagreement on the loading date and the content of the fax sent by the [Seller] on 17 January 1995. The Arbitration Tribunal deems that "the deadline of loading date is 15 February 1995" should be understood to mean that 15 February 1995 is the last day for loading; this means that as long as the [Seller] loads the goods before 15 February 1995, the loading obligation has been performed.
In addition, the Arbitration Tribunal notes that the [Buyer] mentioned in its fax sent to the [Seller] on 13 January 1995 asking the [Seller] to arrange for shipment as soon as possible; therefore, the Arbitration Tribunal deems that the loading date in the Contract does not mean 15 February that day. The [Buyer]'s real understanding of the loading date is the hope that the [Seller] would load the goods between 13 January 1995 to 15 February 1995, and the sooner the better. Therefore, the [Seller]'s stating in the fax sent to the [Buyer] on 17 January 1995 that "we have prepared the goods, and will ship them by the last ship in this month" did not violate the loading date in the contract; rather, it satisfied the [Buyer]'s understanding and expectation of the loading date. Therefore, the [Buyer]'s assertion that the [Seller]'s saying that "we have prepared the goods, and will ship them by the last ship in this month meant the [Buyer] brought forward the loading date by itself, which constitutes a fundamental breach of the Contract" is not acceptable.
Also unacceptable is the [Buyer]'s assertion that the [Seller]'s stating "there is no ship from 20 January to 15 February" meant the loading could not be performed as determined in the Contract, which gave right to the [Buyer] to terminate the Contract.
(3) Issuing the L/C and changing the payment bank
The parties reached an agreement on 13 January 1995 that the [Buyer] should issue a L/C between 17 and 18 January 1995. On 17 January 1995, before the [Buyer] issued the L/C, the [Seller] sought to change the payment bank, and asked the [Buyer] to issue the L/C to the new bank on 18 January 1995, which the [Buyer] did not agree nor did it object to. The [Buyer] did not issue the L/C as determined in the original Contract either.
The Arbitration Tribunal deems that the [Seller] in this case has the right to ask the [Buyer] to change the payment bank or the issuing date. If the [Buyer] agrees with the aforesaid demand, the parties would reach a new agreement, and if the [Buyer] does not agree, then it should inform the [Seller] and perform its obligation under the original Contract.
In this case, the [Buyer] did not respond to [Seller]'s request to change the payment bank and the L/C issuing date, nor did [Buyer] perform to satisfy the [Seller]'s requirement. The [Buyer] did not issue the L/C as determined in the original Contract; therefore, it did not fulfill its obligation to issue the L/C.
(4) Responsibility for non-performance of the Contract
The Arbitration Tribunal notes that after the Contract was concluded, the [Seller] prepared the goods and was going to ship the goods within the time stipulated in the Contract. However, the [Buyer] did not issue the L/C within the stipulated time (17 January to 18 January 1995), and declared to terminate the Contract on 21 January 1995.
The Arbitration Tribunal deems that the [Buyer]'s aforesaid behavior has violated the Contract, and according to Article 74 of the CISG, the [Buyer] shall bear the responsibility for the loss to the [Seller] by its violation of the Contract.
(5) The [Seller]'s arbitration claim
After the [Buyer] declared that the contract has been avoided, the [Seller] sent a fax to the [Buyer] on 23 January 1995 insisting the contract was still valid and asking the [Buyer] to perform the Contract. After being rejected by the [Buyer], the [Seller] delivered the goods to Rotterdam. Later, the parties negotiated the issue of disposing of the goods, but with no result.
In May 1995, the [Seller] resold the goods at US $2,400/ton. The [Seller] claims the loss caused by the price difference of US $65,000 and its interest, and the cost for attorneys' fee and traveling fee.
The Arbitration Tribunal holds that:
1. After the [Buyer] declared the avoidance of the Contract, the [Seller] had made efforts to resell the goods, and resold them in May 1995. Even though the [Buyer] questioned whether the [Seller] has in fact delivered the goods to Rotterdam, it has no evidence to support its question. On the contrary, the [Seller] has provided sufficient evidence to show that it has delivered the goods to Rotterdam and sold them to other customers at US $2,400/ton.
The Arbitration Tribunal also holds that after the [Buyer] declared the avoidance of the Contract, the market price for antimony ingot decreased. The [Seller] should have taken actions to remedy the loss. However, it was not until May 1995 that the [Seller] sold the goods at as low a price as US $2,400/ton, with the result the price difference is as high as US $2,250/ton, which is a total of US $225,000 loss. Therefore, the Arbitration Tribunal deems that the [Seller] should take the main responsibility for the delay in disposing the goods and the increasing of the loss. As a party who violated the contract, the [Buyer] should also take certain responsibility.
According to Articles 75 and 77 of the CISG, the [Seller]'s claim that the [Buyer] should pay US $65,000 of the total price difference is reasonable and should be accepted.
2. The [Seller]'s claim for loss of interest of the price for two months with a 12/1000 interest rate is also reasonable and should be accepted. The [Buyer] shall pay:
3. The [Buyer] shall pay RMB 20,000 for the [Seller]'s cost of attorneys' fee and traveling fee.
4. The [Buyer] shall bear the entire cost of the arbitration fee.
IV. THE AWARD
The Arbitration Tribunal rules:
1. [Buyer] shall pay the price difference resulting from the [Buyer]'s violation of the Contract of US $65,000.
2. [Buyer] shall pay the [Buyer]'s loss of bank interest resulting from the [Buyer]'s violation of the Contract.
3. [Buyer] shall pay the part of the [Buyer]'s attorneys' and traveling fee.
4. [Buyer] shall bear the entire arbitration fee.
The total is US $76,160 and RMB 43,159. [Buyer] shall pay the aforesaid sum to the [Seller] within 45 days after this award takes effect. Otherwise, a 7/1000 monthly interest will be added.
This award is final.
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] and Respondent of Hong Kong 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].
** 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.
*** Liming (Anna) Lin, J.D. candidate 2007, Pace University School of Law. She received her MBA from University of Maryland at College Park, and her Bachelor of Science from Nanjing University, China.
Go to Case Table of Contents
Pace Law School
Institute of International Commercial Law - Last updated June 4, 2009