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| A US seller and a Romanian buyer entered into a contract governed by CISG for the sale of a certain quantity of chicken parts to be delivered in Romania. The seller failed to deliver approximately half of the goods within the contract delivery date. Few days later, the Romanian Government issued a new regulation requiring certification of all chicken meat entering the country. The seller failed to ship the remainder of the goods before the regulation came into force. On its side, the buyer offered to have the goods delivered in Georgia, but the seller refused. The buyer then filed a suit for arbitration proceedings against the seller alleging breach of contract plus damages.
The seller contended that its failure to perform should be excused on account of force majeure as the ban of importing the meat without certification intervened within the period of flexibility for shipment provided by industry informal standards. While the arbitrator, uphelding the seller's argument, found that the delay did not amount to fundamental breach of the contract under Art. 25 CISG, it held that the seller’s defence did not meet the requirements set out in Art. 79 CISG for excuse: the seller could have reasonably overcome the governmental regulations by delivering the goods to Georgia. The arbitrator ruled in favor of the buyer and awarded damages calculated on the basis of the Romanian market price, basing its decision on the principles of CISG supplemented by the UCC (see American Arbitration Association, 12 December 2007, abstract and fulltext in Unilex). The buyer filed a request for confirmation of the arbitral award. The seller filed for a vacation of the award arguing that the arbitrator misapplied the UCC and miscalculated the amount of damages. With regard to this latter issue, the seller argued that if it was liable for breach of contract, it was by having failed to ship to Georgia not to Romania. Thus, damages should have been calculated according to the Georgian market price. The court found that the arbitrator had correctly applied the UCC and properly calculated the loss of profits. It held that, due to the breach of contract by seller, Art. 74 CISG was to be applied, which provides that the loss of profits can not exceed the amount foreseeable at the time of contract conclusion. Therefore, since Romania was to be the intended place where the contract had to be performed, such a loss had to be determined on the basis of the Romanian market price. |