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| A Rumanian seller and a German buyer entered into a contract for the sale of a chemical substance, to be delivered in instalments over a period of several months. After receiving complaints over the poor quality of the product, the buyer rejected the delivered goods. The seller refused to take them back and the buyer refused to sell them to anyone else. The seller commenced arbitral proceedings asking for payment, while the buyer rejected such claim on grounds of late delivery, non-conformity of the goods and non delivery of further shipments.
As to the applicable law, The Arbitral Tribunal held that under the new Rules of Arbitration of the International Chamber of Commerce it was not bound to make use of any national law (including conflict of law rules) and was free to apply instead recognized international legal standards. It then held CISG applicable, considering the strong recognition of CISG in the arbitration practice "as a set of rules reflecting the evolution of international law in the field of international sale of goods". Furthermore it pointed out that CISG would be applicable to the case at hand also under general principles of international private law, since the requirements of Art. 1(1)(a) CISG were met. As to the merits, the Arbitral Tribunal firstly held that the seller had violated its obligations under Art. 33 CISG, because it had not delivered in time, and therefore the buyer was entitled to exercise the remedies provided for in Arts. 45-52 CISG. On the other hand, the buyer was not released from paying the price of the delivered goods, because it should have fixed an additional period of time for the performance, in order to declare the contract avoided (Art. 47(1) CISG and Art. 49 CISG). As to the alleged non conformity of the goods, the Arbitral Tribunal held that the buyer brought sufficient evidence that the goods did not comply with the contract, it examined the goods within the time provided for in Art. 38 CISG and it gave timely notice according to Art. 39 CISG, since a first notice was given 12 days after delivery to the forwarding agent and a more detailed notice was given after analysis by an assayer some twenty days later. However, the buyer did not declare the contract avoided, so that it was not released from paying for the delivered goods (Art. 49(2)(b)(i) CISG). Moreover, the seller had the right to declare the whole contract avoided because the buyer failed to pay and the seller had good grounds to conclude that a fundamental breach of contract would occur also with respect to future installments (Art. 73(2( CISG). Though the notion of fundamental breach under Art. 25 CISG should be interpreted narrowly, in the present case the Tribunal held that the refusal to pay the price constituted fundamental breach. Consequently, under Art. 81 (1) CISG the Arbitral Tribunal held that both parties were released from their obligations. |