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| Abstract | ||||||||||||||||||
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| A Swedish buyer and a Chinese seller entered into negotiations for the sale of 10,000 metric tons of rapeseed dregs FOB China. When the seller faxed the contract and the letter of credit terms to the buyer for signing, the buyer changed two of the contract provisions. First, it removed a clause requiring the shipping vessel to be no older than twenty years; secondly, it replaced the words "carriage paid" with "carriage shall be paid according to the charter-party." Some days after the buyer had returned the signed contract to the seller, the latter notified the buyer that it did not consider the contract neither concluded nor valid because the buyer had unilaterally made changes to it; as a result, it would not perform its obligations under the contract. Then, in order to fulfill its obligation towards a third party to whom part of the goods were to be resold, the buyer entered into a cover sale at a price higher than that provided for in the original contract. Any attempt to solve the dispute through conciliation failed and the buyer commenced arbitral proceedings.
The Arbitral Tribunal held that the CISG was applicable because both parties were situated in Contracting States (Art. 1(1)(a) CISG). As to the merits, the Tribunal found that the contract had been validly concluded, since the modifications made by the buyer did not materially alter the terms of the contract under Art. 19 CISG. In fact, since in accordance with INCOTERMS 2000 a FOB sale requires the buyer to pay for shipment at its own expenses, the new terms regarding the age of the vessel and the payment of freight did not affect the seller's obligations under the contract. Moreover, the seller's objection to the modifications were not made promptly as required by Art. 19(2) CISG and, thus, it had not prevented the contract to come into existence. Furthermore, the Arbitral Tribunal found the buyer entitled to recover the difference between the price agreed in the contract and the price paid for the goods in replacement (Art. 75 CISG). Finally, the Tribunal held the buyer entitled to interest (3%) under Art. 78 CISG. |