A Chinese buyer and a Brazilian seller entered into a contract for pressure sensors. The seller would supply the sensors to the buyer and licensed it on a non-exclusive basis to use and integrate the pressure sensors with its new products. After delivery, problems occurred which the buyer immediately notified the seller. After both parties’ engineers conducted several tests they found that some of the sensors did not perform in compliance with certain warranted technical specifications set out in the contract. Consequently, the buyer demanded the seller to take back the goods delivered and to be compensated for the losses incurred thereby. The seller refused these requests and failed to cure the defects within a reasonable period of time resulting in the buyer declaring the contract terminated and filed a motion for arbitral proceedings. The buyer claimed damages before the Arbitral Institute of the Stockholm Chamber of Commerce, which had jurisdiction over the case pursuant to a forum selection clause agreed upon by the parties.
At the beginning of the arbitral proceedings, the parties agreed on the applicability of CISG.
The arbitrator found that, as the buyer had failed to prove that the goods delivered by the seller did not comply with the quality or description required by the contract, it had no right to terminate the contract, nor had any right to claim damages on the grounds of Art. 35(1) CISG. In the opinion of the arbitrator, in order to provide adequate evidence, the buyer should have submitted the sensors to tests performed by an independent expert. The arbitrator further examined the question whether the implied warranties as to the fitness for purpose set out in Art. 35(2) CISG had been breached. The arbitrator concluded that, even if the goods were defective, the defects themselves were minor and could be easily avoided by an end user. Finally, since no fundamental breach of the contract (according to Art. 25 CISG) had been proved by the buyer, it had no right to rely on Art. 49(1) CISG to avoid the contract.
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