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| A US seller and a Romanian buyer entered into several contracts for the sale of chicken leg quarters. The contracts provided that the chicken would be delivered no later than May 29, 2006. An avian flu outbreak prompted the Romanian government to bar all chicken imports not certified as of June 7, 2006. The seller was late to ship, and failed to certify all of the chicken on time. The buyer suggested that the seller ship the balance to a port outside Romania, but the seller refused, arguing that the Romanian government’s ban constituted a force majeure event which rendered the contract void. Ultimately, the seller sold the undelivered goods to another buyer at a substantial profit.
In the interim award, the sole Arbitrator found that the initial delay in delivery did not amount to fundamental breach under Art. 49 CISG. This was so because both the parties’ prior course of dealing and industry practice tolerated some flexibility in delivery, and the parties seemed to have agreed on modifying the contracts with respect to the delivery date (art. 29 CISG). In fact, the buyer tolerated a shipment delay for some time, despite having pressured the seller to deliver the goods as soon as possible. However, the sole Arbitrator found that the seller’s ultimate refusal to deliver the goods amounted to fundamental breach. In determining whether such a failure to perform by seller could be exempted under Art. 79 CISG, the Arbitrator found that the Romanian government's decision was beyond the seller's control and that it could not have been reasonably contemplated at the time of conclusion of the contract. However, according to the Arbitrator the seller could have reasonably avoided the ban by shipping to the alternative port proposed by the buyer. For this reason, the Arbitrator concluded that the seller could not rely on Art. 79 CISG and that the buyer was entitled to damages. In reaching this conclusion, the Arbitrator looked to the provision on excuse in the U.S. Uniform Commercial Code (§ 2-615) and related case law as a means for interpreting the notion of “commercially reasonable substitute” under Art. 79 CISG, since the UCC and CISG take a similar approach on this matter. Finally, the Arbitrator held the buyer entitled to lost profits caused by the seller’s breach that were foreseeable at the time of contract conclusion (Art. 74 CISG). In the final award, the Arbitrator incorporated the interim award in its entirety and applied domestic law in granting the buyer post award interest under Art. 78 CISG. |