Date: 26.05.2009
Country: USA
Number: 08-2255-cv
Court: U.S. Court of Appeals, Second Circuit
Parties: Macromex S.r.l. v. Globex International Inc.
After having entered into a contract for the sale of chicken parts to be delivered to a Romania buyer, a U.S. seller failed to tender half of the goods within the agreed date of performance. The breaching party contended that its non-performance was justified by a recent Romanian regulation requiring certification of all chicken meat entering the country. When the seller, upon request of the buyer, refused to deliver the remaining goods to Georgia, the counterpart requested arbitration proceedings.

The arbitrator recognized that the seller’s delay did not amount to fundamental breach under Art. 25 CISG. However, its non-performance could not be justified under Art. 79 CISG, since the seller could have reasonably performed by delivering the goods to Georgia. The arbitrator, basing its decision upon CISG and the UCC provisions, ruled in favor of the buyer and awarded damages according to the Romanian market price. When the seller filed a lawsuit in federal District Court requesting the arbitration award to be vacated, the judges confirmed the arbitrator’s ruling. The seller’s contention that the buyer’s damages should have been calculated in accordance with the market price of Georgia was rejected. The court, in view of Art. 74 CISG, noted that the loss of profits cannot exceed the amount foreseeable at the time of the contract formation. Thus, as Romania was the place where the contract had to be performed, the Court affirmed the arbitrator’s determination of damages based upon the market price of Romania (see U.S. District Court, Southern District of New York, 16.04.2008, full text and abstract available in UNILEX).

The seller appealed the District Court decision to the Second Circuit, and requested the initial arbitration award to be vacated. As to the appellant’s defense of impossibility of performance, the Court, applying § 2-614(1) UCC, found that the seller had a duty to tender commercially reasonable substitute performance (in this case, by shipping to Georgia) once the Romanian importation ban made delivery to Romania impossible. As to damages, the Court rejected the seller’s argument that the arbitrator should have not awarded damages in full, as Art. 74 CISG imposes liability for damages suffered as a consequence of the particularly identified breach and that damages may not exceed the loss which the party in breach foresaw at the time of the conclusion of the contract.

Accordingly, the Second Circuit, finding that the arbitrator did not manifestly disregard the law, affirmed the District Court judgment.