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| An Estonian seller and an Austrian buyer entered into a contract for the sale of goods produced by a Russian factory. The seller delivered the goods but the buyer, after expert examination, discovered them not to be conforming with the contract and therefore paid a lower price. The seller sued the buyer claiming, inter alia, payment of the entire price and the penalty agreed upon by the parties in case of payment delay.
The parties had chosen the contract to be regulated by Russian law. However, since the Russian Federation and Austria are Contracting States of CISG, the Court held the Convention to be applicable to the merits of the dispute (Art. 1(1)(a) CISG) and Russian law to be applicable to solve matters not expressly settled by CISG (Art. 7(2) CISG). As to the merits, the Tribunal rejected both the seller's argument that the buyer had lost its right to rely on lack of conformity and the expert examination was not reliable, holding the buyer entitled to a reduction of price according to Art. 50 CISG. The Tribunal also ordered the buyer to pay the penalty, though reduced in amount as provided by the Russian Civil Code. |