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| Abstract | ||||||||||||||||||
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| An Italian seller and a Finnish buyer entered into a contract for the sale of a production line of foamed boards. As to the modes of payment, the parties agreed that after the inspection of the machine the buyer would open a documentary credit (letter of credit) in favor of the seller. The buyer failed to open the documentary credit at the agreed time. After three and an half months the seller declared the contract avoided and asked for damages in addition to the payment of a 'compensation fee' equivalent to 30% of the contract price, as provided for by the contract.
The sole arbitrator held that, although a delay in opening the documentary credit in itself does not necessarily amount to a fundamental breach, in the case at hand the seller was entitled to avoid the contract. In the arbitrator's opinion, the fact that the seller waited several months before declaring the contract avoided was to be considered as equivalent to the fixing of an 'additional period of time' for performance pursuant to Art. 63 CISG, with the result that the failure by the buyer to perform within that period of time entitled the seller to avoid the contract pursuant to Art. 64(1)(b) CISG. Moreover, the seller was entitled to both payment of the contractually agreed 'compensation fee' and damages. According to the sole arbitrator the fact that the contract provided that 'If the agreement is terminated by fault or request of the purchaser - including force majeure - the supplier is entitled to a compensation fee of 30% of the price' had nothing to do with damages and therefore did not impair the seller's right to ask, in addition to the payment of that fee, damages for any losses it may have suffered. The sole arbitrator awarded to the seller the expenses it had incurred from depositing the goods. The seller was also awarded the difference between the contract price and the price at which it resold the machinery to a third person. As to interest the sole arbitrator expressly rejected the view according to which the applicable rate should be the rate in force in the State whose law is the law governing the contract or the rate in force at the place of business of the creditor. In his opinion, the rate of interest is linked to a precise currency, while it would be rather illogical to base interest for delayed payment of a price agreed in strong currency on the legal rate in force at a place of business located in a country which has a high inflation figure and, consequently, a high rate of interest. In the case at hand the contract price had to be paid in a currency other than that of the seller's place of business (German Marks), and the applicable rate of interest was therefore the German one. |