Data
- Date:
- 03-10-1995
- Country:
- Egypt
- Number:
- 50/1994
- Court:
- CRCICA, Cairo
- Parties:
- Unknown
Keywords
BREACH OF CONTRACT BY SELLER - SELLER'S REFUSAL TO EXTEND BANK GUARANTEE - BUYER'S RIGHTS (ART. 45 CISG)
DAMAGES (ART.74 CISG)
Abstract
A seller from an African country and a US buyer concluded a contract for the sale of a certain amount of apparatuses. The contract contained a choice of law in favour of CISG and of "the law of the African State" (Egypt). A dispute arose between the parties, concerning the lack of conformity of the goods and the extension of the bank guarantee of each unit released by the seller.
Without referring to CISG, the sole arbitrator rejected the allegations made by the buyer regarding the lack of conformity of the goods.
On the other hand, making express reference to Art. 45 CISG, the arbitrator held that the seller had breached its contractual duties by refusing to extend the bank guarantee in favour of the buyer.
Therefore the arbitrator awarded damages to the buyer, according both to the applicable domestic law and CISG (Art. 74).
Fulltext
[…]
Facts
The parties had entered into a contract with subsequent amendments under which the Respondent had supplied 88 sets of apparatuses to the Claimant. The Claimant slummed that several technical problems had arisen with the units supplied by the Respondent and it was discovered that some of title units had not been in conformity with the technical specifications agreed upon.
The Claimant brought proceedings against the Respondent under Article _ of the contract:
Any dispute arising between the employer and the contractor in relation to the interpretation of this contract or the performance of different obligations which can not be settled amicably, shall de settled by the provision of Cairo Regional Centre for Commercial Arbitration, Cairo, CRCICA. The seat of arbitration is Cairo.
The Claimant claimed for payment of $ _, which had been the price of fifteen defective apparatuses supplied to it, for the breach of the commitment of maintenance, the refusal by the Respondent to extend the validity of the bank guarantee, damages for prejudice, lost profit as a result of the Respondent's breach of contract and legal expenses incurred by the Claimant.
The Respondent requested the dismissal of all claims raised by the Claimant and did not submit a counterclaim.
According to the Claimant, the damage had occurred due to the failure of the Respondent to establish surveying maps and other activities for which the units had been imported and which had been linked to a time schedule for aspects of state activities in economic, social and political matters. Fifteen sets had been returned to the Respondent and the retraining 73 sets did not perform adequately due to the interruption of electric current along with defects existing in the units. This had led to the loss of the entire data in the computers of the Claimant. The Claimant further argued that it had not been able to obtain services for maintenance.
The parties had amended the contract which had been contained in another agreement dated.
The amendment had provided for a period of guarantee from the date of acceptance of each unit in the African capital.
The Respondent argued that the units had not been defective. The real cause of complaint by the Claimant had been the inefficiency on behalf of the employees of the Claimant as they had made internal changes to the units, which had been unknown to the manufacturers and they had failed to inform the maintenance centre in the African capital about such changes. Tests had been conducted on the units, which had not been agreed upon between the parties and the Respondent had not been informed of such tests.
Award
The Sole arbitrator rejected the allegations made by the Claimant regarding the fifteen allegedly defective units The contract had provided for a certificate from the consulting engineer of the government body attesting to the inspection of the units. The certificate had been issued and had been found to be in conformity with contract specifications and documents annexed to the contract. The certificate contained inter alia that the units had been capable of performance of more than 66 % of the agreed capacity. The consulting engineer had recommended that the units be accepted, that the period of guarantee for batteries be extended to three years and the bank guarantee be extended for more than one year. The consulting engineer had objected to only five units.
The Arbitrator held that as the letter of guarantee had not been confiscated before the expiration of its validity, it meant that the said units had been accepted and no claims relating thereto existed. This was also confirmed by the fact that five units had already been paid for.
The Arbitrator also rejected the allegation that the defects in the units had occurred during the period of the guarantee. The guarantee had not encompassed ordinary wear and tear and a fortiori, had not guaranteed the improper of the units. The Arbitrator upheld the Respondent's argument that the Claimant's technicians had made changes to the units and damaged them as this had gone unchallenged by the Claimant. Moreover there was evidence that the Claimant had admitted that most of the units conformed to the maintenance books and technical drawings previously delivered to it and also admitted the existence of a maintenance agent.
The arbitrator further held that the Respondent's refusal to extend the bank guarantee had been an error. The Respondent claimed that it had extended it upon request for a further period, but after the extension it had not received any more requests for extension. Article 23(3) of the contract provided for all issues to be interpreted according to the following roles:
1. conditions of contract;
2. the Convention of the United Nations relating to the international sale of goods dated 11/4/1980; and
3. the law of the African State.
Article 45 of the International Sales Convention stipulates that where the seller does not implement an obligation under the contract, the purchaser could use the rights conferred upon him by Article 46 through 52 of the Convention or he could request damages provided for in Article 74 to 77 of the same Convention. These articles hold damages equivalent to the loss sustained by the other party and to the profit lost as a result of the breach.
These terms did not differ from the conditions of the contract and from the laws of the African State. It was admitted that failure to implement one of the contractual obligations by the debtor was considered per se the basis of his contractual liability which could not have been avoided except by force majeure or if the creditor had committed tort.
In this respect the Court of Cassation had ruled that the evidence of breach in contractual responsibility was subject of objective estimation of the substantive court within the limits of its power of appreciation so long as it gave a logical deduction. The same court decided that where a penalty clause was inserted in a contract, it meant that as soon as the condition occurred, the prejudice existed ipso facto. The debtor had, in such a case, to prove that either breach or prejudice did not occur. The court also decided that the judge may control the valuation of damages, even if a certain amount for them was provided for in the contract.
From these rules the arbitrator decided that the Respondent had not performed one of its contractual obligations for the following reasons: the Respondent had accepted to provide a guarantee for a year for each unit. Such guarantee would have been effective from the time of acceptance of each unit in the African capital. That stipulation had been contained in an amendment in _ and it meant that the guarantee had taken effect on a date after the said date.
As the letter of guarantee had expired three months before the amendment, it appeared from the dates that the obligation for providing a guarantee had been breached by the Respondent and damages for the prejudice resulting from the amount in breach amounted to $ _.
Costs of the arbitration were allocated in equal portions between the two parties.
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Source
Original in Arabic:
- Not yet available
Published in German:
- Schweizer Juristen Zeitung 94 (1998) n. 23, 515-518}}