- Arbitral Award
- ICC Court of Arbitration - Paris
PLACE OF BUSINESS IN DIFFERENT STATES (ART. 1(1)(A) CISG) - CONTRACT NEGOTIATED BY A PARTY THROUGH ITS LIAISON OFFICE LOCATED IN THE OTHER PARTY'S COUNTRY
CURE BY SELLER AFTER DATE FOR DELIVERY (ART. 48(1) CISG) - CONSENT OF BUYER NECESSARY
INTEREST RATE (ART. 78 CISG) - BANK LENDING RATE PAID BY CREDITOR
An Austrian buyer and a Chinese seller entered into a contract for the purchase of scaffold fittings. After delivery of the goods the buyer discovered serious defects and declared the contract avoided. The buyer claimed damages suffered because it had been able to resell only part of the goods at a lower price.
The sole arbitrator held that the contract was governed by CISG, since the parties had their places of business in two different Contracting States (Art. 1(1)(a) CISG), and the fact that the buyer had conducted part of the negotiations through its liaison office situated in the seller's country was of no relevance in this respect.
In view of the fundamental character of the breach by the seller the buyer was entitled to avoid the contract (Art. 49(1) CISG). The seller was not entitled to remedy by supplying substitute goods in accordance with Art. 48(1) CISG, since in the opinion of the sole arbitrator the seller's right to cure after the date for delivery is dependent on the consent of the buyer.
As to the rate of interest the sole arbitrator applied the bank lending rate paid by the buyer.
APPLICABLE LEGAL FRAMEWORK
The parties have not expressly agreed on the law applicable to the substance of the contract. Neither party has expressly argued what national law should be held applicable; Claimant bases its argument directly on the United Nations Convention on Contracts for the International Sale of Goods. The Convention entered into force for the People's Republic of China on 1 January 1988 (with reservations in respect of Articles 1.1 (b) and Article 11 and provisions relating to Article 11, none of which is relevant here) and in respect of Austria on 1 January 1989. The respective place of business of each party, as stated in the contract, was in a State which is a Contracting State at the time when the contract was concluded (cf. Article l(l)(a) of the Convention);
In the light hereof - and notwithstanding that Claimant's liaison office in Beijing may have been involved in the negotiation process - the Convention therefore applies to the contract and governs the rights and obligations of the parties arising from the contract, and I intend so to apply it without going further into determining any national law which might be applicable in the dispute.
CONFORMITY OF THE GOODS. BREACH OF THE AGREEMENT?
As allowed under the contract, an independent inspection company was engaged on the buyer's side to carry out examination and testing of the goods supplied.
Defendant has complained in its letter of (...) that Claimant did not allow a Defendant representative to inspect the goods after delivery or to have the technical inspection repeated by a 'reference notary organisation,' but there is no obligation on Claimant to do so (unless the inspection arranged by the buyer's side was flawed, which has not been proven). (...) Claimant has estimated the cost of sorting out bad fittings at USD 17,000, which may be compared with the invoiced price of the supplies, USD 46,397. The estimate has been communicated to Defendant and has not been disputed.
Under Article 35.1 of the Convention the seller must deliver goods which are of the quality required by the contract. According to Article 35.2 the goods do not conform with the contract unless they are fit for the purposes for which goods of the same description would ordinarily be used and possess the qualities of goods which the seller has held out to the buyer as a sample. The lack of conformity of an important part of the goods supplied amounts to a breach of the contract which, under Article 25, is fundamental since the buyer is deprived of substantially what he was entitled to expect under the contract. Defendant is not entitled to supply substitute items after the delivery date specified in the contract without the consent of Claimant.
The breach of contract committed by Defendant entitles Claimant to remedies under the Convention (Article 45(1)). According to Articles 49(1)(a) and 51(2) of the Convention Claimant may declare the contract avoided, and under Article 75 Claimant becomes entitled to damages equal to the loss including loss of profit, to the extent the loss was, or ought to have been, foreseen by the seller. Under Article 86 the buyer is entitled to have his reasonable expenses for preservation of the goods reimbursed by the seller; he may deposit the goods in a warehouse at the expense of the seller if the expense is not unreasonable (Article 87); and he may sell the goods by appropriate means if there has been an unreasonable delay by the seller in taking possession of the goods (Article 88.1).
Claimant has declared the contract avoided and, as appears from its claim, has sold the goods. The individual items claimed in damages are set out above and have not been disputed by Defendant. However, I cannot find that the amount claimed for the travel costs of Mr. X--an employee of Claimant's customer-- are such as could reasonably have been foreseen and accordingly Defendant should not be liable therefor. The remaining items of damages claimed, which have been justified by invoices, should be granted.
The damage suffered by Claimant includes the cost of credit which has been stated by Claimant, undisputedly, at 11% per annum and which should be compensated at that rate as an element of the damages due according to Article 74. Claimant claims interest from the date when it communicated the amount of its claim to Defendant by telex. The Convention is silent on the question of the maturity date of damage claims; since this particular aspect of the claim is also undisputed, interest should be granted from the date claimed by Claimant. '}}
Published in English:
- The ICC International Court of Arbitration Bulletin Vol.6/N.2 - November 1995, 67-68}}