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| Abstract | ||||||||||||||||||
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| In 1990 an Austrian seller and a German buyer concluded a contract for the sale of rolled metal sheets. The goods were to be delivered in installments 'FOB Rostock', specially packaged for export. Immediately after receiving the first two deliveries, the buyer sold the goods on to a Belgian company which shipped them to a Portuguese manufacturer. The manufacturer found that the goods were defective and refused to accept the rest of them. After receiving notice of the non conformity by the German buyer, the Austrian seller refused to pay damages, alleging that the notice was not timely. The buyer commenced arbitral proceedings pursuant to an arbitration clause in the contract.
The sole arbitrator held that since the parties had chosen Austrian law, the contract was governed by CISG as the international sales law of Austria, a contracting State (Art. 1(1)(b) CISG). The sole arbitrator found that the buyer had not complied with the particular requirements as to the examination of the goods and notice of non conformity as contractually stipulated in derogation from Arts. 38 and 39 CISG. The buyer had sent to the seller written notice of the defects, together with an expert statement by an internationally recognized company, only six months after delivery, while, according to the contract, it should have done so immediately after delivery of the goods (or at the latest within two months from delivery). According to the buyer, the seller had waived its right to set up the defense that notice of non conformity was not timely given. The sole arbitrator held that the intention of a party to waive this right must be clearly established and that in the case at hand, there was insufficient evidence of such an actual intention. The sole arbitrator held, however, that the seller was estopped from setting up the defense that the notice given by the buyer was not timely. This question is not expressly settled by CISG. The arbitrator applied Art. 7(2) CISG, and - referring to Arts. 16(2)(b) and 29(2) CISG - held that estoppel ('venire contra factum proprium') is a general principle underlying CISG. In the case at hand, the seller had behaved in such a way that the other party was led to believe the seller would not raise the defense (e.g., after receiving the notice the seller had continued to ask the buyer information on the status of the complaints and had pursued negotiations with a view to reach a settlement agreement). The buyer was awarded damages for non conformity. As far as interest is concerned, the sole arbitrator held that the interest rate is a matter governed but not expressly settled by CISG. Therefore, it must be determined according to the general principles on which CISG is based (Art. 7(2) CISG). Referring to Arts. 78 and 74 CISG, the arbitrator found that full compensation is one of the general principles underlying CISG. In relations between merchants, it is expected that the creditor, due to the delayed payment, resorts to bank credit at the interest commonly practiced in its country with respect to the currency of payment (the currency of the creditor's country or any other foreign currency agreed upon by the parties). The arbitrator observed that this solution is stated also in Art. 7.4.9 of the UNIDROIT Principles of International Commercial Contracts. The interest rate awarded in the case at hand, therefore, was the average prime rate in the buyer's country (Germany) with respect to the currency of payment (US Dollars). |