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| Abstract | ||||||||||||||||||
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| Two parties concluded a contract for the sale of crude metal. The contract provided for the payment of a penalty in case of a delay of more than fifteen (15) days in shipment. The time of shipment (September 30th) was fixed in a letter of credit issued by the seller's bank. Afterwards, the parties decided to extend the expiration date of the letter of credit, but disagreed on whether such an extension of the letter of credit entailed an extension of the contractual date of shipment. The seller shipped the goods on October 29th and its bank delivered the documents after mid-November. On November 27th, the buyer's bank informed the seller's bank that the documents did not conform to the agreement between the parties. The buyer, in view of the delay in shipment and the wrong indications written on the documents, declared the contract terminated. The seller filed an arbitration suit to recover the contractual price, arguing that the contract had not been rightfully terminated.
The Arbitral Tribunal found that the contract contained a choice of law clause in favor of Austrian law as the law governing the contract. The Arbitral Tribunal therefore decided to apply the CISG, which is embodied in Austrian law because Austria is a Contracting State (Art. l (1)(b) CISG). In reaching this conclusion, the Tribunal noted that Austria had not entered any reservations pursuant to Arts. 92 and 95 of CISG. Furthermore, the Arbitral Tribunal found that the contract contained a reference to the clause CFR - Cost and Freight (named port of destination) of the INCOTERMS 1990. In holding that such clause was binding upon the parties, the Tribunal recalled that according to Article 9(1) CISG the parties are bound by any usage to which they have agreed. The Tribunal concluded that the CFR clause had become part of the agreement and would be taken into account to interpret the wording of the contract, pursuant to Article 8(3) CISG. Before examining the merits of the case, the Arbitral Tribunal stressed that according to Article 7(2) CISG, questions concerning matters governed by the CISG which are not expressly settled in it are to be settled in conformity with the general principles underlying it, and that recourse to the applicable domestic law can be made only in the absence of such principles. With respect to the merits of the case, the Arbitral Tribunal held that the fact that the seller had not abided by the date of shipment did not constitute a fundamental breach of contract entitling the buyer to immediately avoid (terminate) the contract (Art. 49(1)(a) CISG). The Arbitral Tribunal explained that the provision whereby the penalty for late delivery would become due only after the expiration of a period of fiftheen (15) days after the contract |