- Arbitral Award
- CIETAC China International Economic and Trade Arbitration Commission
- - -
NON PAYMENT OF PRICE - AMOUNTS TO FUNDAMENTAL BREACH OF CONTRACT (ART. 25)
BUYER'S OBLIGATION TO PAY THE PRICE (ART. 53 CISG)
RIGHT TO INTEREST (ART. 78 CISG)
A Chinese seller and a US buyer entered into 14 contracts for the sale of hats. A dispute arose between the parties, concerning the payment of the price, which, according to the seller, had not been fully paid.
The Arbitral Tribunal held that, lacking both an agreement on the applicable law, and an express exclusion of CISG, the contract was governed by CISG since both parties had their place of business in two contracting States (Art. 1(1)(a) CISG).
As to merits, the Court considered that the seller had a right to obtain payment of the price because it had performed the contract, while the buyer (according to Arts. 25 and 53 CISG ) had not fulfilled its contractual obligations. Therefore the Arbitral Tribunal stated that the seller was entitled to the outstanding payments pursuant to Art. 74 and Art. 78 CISG, awarding interests at the rate claimed by the seller, while the buyer should be liable for all the costs of the arbitration proceedings.
China International Economic & Trade Arbitration Commission
CIETAC Arbitration Award
Hat case [No. G20010386] 10 May 2005
[Translation by Fan YANG, Provided for by Pace University, to be found at http://www.cisg.law.pace.edu]
In the period between August 2000 and January 2002, Claimant [Seller], a Chinese company, has entered into fourteen contracts (No. 20128, etc.) for the sale of hats to the Respondent [Buyer], an American company. In accordance with the arbitration clauses in their contracts, the [Seller] applied for arbitration on 4 December 2001 and CIETAC accepted jurisdiction.
The CIETAC Arbitration Rules of 1 October 2000 apply to this case.
On 7 December 2001, the Secretariat of the Arbitration Commission sent the Notice of Arbitration to the [Buyer] by express mail service together with the [Seller]'s Application for Arbitration and its attachments as well as the Arbitration Rules, and the Panel of Arbitrators for appointments. Accordingly, the [Buyer] was required to appoint arbitrators and submit defense. The [Buyer] signed for receipt of all the arbitration documents on 17 December 2001.
The [Seller] authorized the Chairman of the Arbitration Commission to appoint Mr Liu Wenjie the Arbitrator for the [Seller]. The [Buyer] failed to appoint or to authorize the Chairman to appoint an arbitrator within time limit, therefore, the Chairman appointed Ms Zhou Xiaoyan the Arbitrator for the [Buyer] according to Rule 26.
The parties did not jointly appoint or jointly authorize the Chairman to appoint a third arbitrator within the time limit, thus according to Rule 24, the Chairman appointed Mr Wang Shengchang to act as the Presiding Arbitrator in this case. The three arbitrators formed the Arbitration Tribunal to hear the case on 15 January 2002.
The [Seller]'s arbitration representative appeared at the open session hearing of the case which took place on 28 February 2002 in Beijing. Since the [Buyer] failed to appear at the hearing, the Arbitration Tribunal proceeded with the hearing and made an award by default according to Rule 42. The [Seller]'s arbitration representative submitted the facts and answered questions by the Tribunal. After the hearing, the [Seller] submitted further supplementary materials, which was sent to the [Buyer] by the Secretariat of the Arbitration Commission. The [Buyer] was again informed of the right to submit a written defense, but did not make any submission throughout.
The Arbitration Tribunal, which examined all the written materials and heard the case in an open session, has decided the case and rendered the following arbitral award.
The [Seller] claimed:
Since 1992, the [Seller] has sold products to the [Buyer] through Chinese Company C, which is in charge of all of the [Buyer]'s purchasing business in China, including paying freight, ORC, customs duty, etc. The [Seller] manufactured the goods and provided the export certificate and quota certificate for the [Buyer]. Payment was made to the C Company's account in Hong Kong and then was transferred to the [Seller]'s account. In 1999, the parties agreed to change the payment method from OA/30 days to OA/90 days. Outstanding payments have emerged since the year 2000. Till 30 April 2001, payments in arrears have accumulated to US $244,880.77 under the fourteen contracts. The [Seller] sent numerous faxes asking for payment. Although Mr Chris, CEO of the [Buyer], promised to pay off the debts within the year 2001, the [Buyer] has not yet paid off the debts to date.
On 19 February 2001, the [Seller] and the [Buyer] reached another agreement, Contract No. 21041. Before entered into this agreement, in his e-mail, Mr. Chris promised to pay off the debts once again. Without giving any plan or timetable for paying off the debts, the [Buyer] paid only US $9,900.00 as a token payment. The [Seller] believed that the [Buyer] would not be able to fulfil its payment obligation under Contract No. 21041, so the [Seller], the [Buyer] and Company C negotiated and agreed to cancel Contract No. 21041. On 17 April 2001, the [Seller] entered into a new Contract No. 21041A directly with the ultimate customer, the American Company D, who agreed to pay the [Seller] US $100,080.00 including US $29,700.00 which should be paid to the [Buyer] as the agent of Company D to arrange shipment and deal with customs duty, etc. The [Seller] withheld the amount of US $ 29,700.00 on its account to date.
Therefore, the [Seller] claims that the [Buyer] should be held liable for:
1. Payment in arrears of US $244,880.77 under the fourteen contracts, including US $24,874.60 for Company C's shipping freight and commission;
2. Interest on the payment in arrears in the amount of US $15,228.23; and
3. Costs of the arbitration proceedings.
The [Seller]'s Supplemental Claims after the hearing
After the hearing on 28 February 2002, the [Seller] submitted an application on 6 March 2002 to revise its claims to the following:
The [Buyer] should be held liable for:
1. The payment in arrears under the fourteen contracts in the amount of US $205,280.77. (The total contract price for the fourteen contracts is US $244,880.77. The [Buyer] has made a token payment of US $9,900.00. The payment under the contract No. 21041A of US $29,700.00 that was withheld by the [Seller] should be deducted, of which US $24,874.60 should be paid to Company C for shipping freight and commission.);
2. Interest on the payment in arrears in the amount of US $12,109.73; and
3. Costs of the arbitration proceedings.
The Tribunal's opinion
1. The applicable law
There is no agreement on the applicable law of the contracts of sale of goods, which are between parties whose places of business are in different Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (1980) [CISG]. Neither have the parties excluded the application of the CISG. Therefore, the CISG applies to this case.
2. The performance of the fourteen contracts and the breach
The [Seller] claimed that it had fulfilled its contractual obligation under the fourteen contracts (No. 20128, etc.). The [Buyer] has never made any contrary comment nor raise any defense.
The Tribunal examined and evaluated the following evidence submitted by the [Seller]:
a. The fourteen contracts of sale, exports customs declarations, exports foreign currencies exchange declarations, bills of lading and textile products export certificate, commercial invoices, etc;
b. The Audit Confirmation produced by Hong Kong Wang Zheng Bang Accounting Firm on behalf of Company C;
c. Company C's letter dated on 22 November 2001 to the [Seller] demanding the outstanding payment;
d. Communications between parties on the issue of outstanding payments since 6 July 2000;
e. A fax informing that the amount of US $29,700.00 payable to the [Buyer] under Contract No. 21041A was withheld by the [Seller];
f. Other evidence.
The Tribunal found that this evidence is objective, relevant, valid and consistent, thus should be accepted. The fact that the [Buyer] did not submit any evidence or raise any defense would not affect the Tribunal's deciding on the evidence available. The Tribunal accepted that the [Seller] fulfilled its contractual obligations under the fourteen contracts of sales while the [Buyer] took the contractual goods without paying the contract price on time. Therefore, according to Article 25 and Article 53 of the CISG, the [Buyer] is in breach of the contracts. Further, the [Seller] is entitled to the outstanding payments and interest pursuant to Article 74 and Article 78 of the CISG.
3. [Seller]'s claims
Firstly, the [Seller]'s claim for the outstanding payment of US $205,280.77 is reasonable and valid, given that the payment of US $9,900.00 by the [Buyer] and the amount of US $29,700.00 withheld by the [Seller] have been deducted from the total contract price for the fourteen contracts: US $244,880.77. The amount of US $24,874.60 which should be paid to Company C for shipping freight and commission was included in the full contract price. Given the fact that the contract was entered between the [Seller] and the [Buyer], the [Seller]'s claim for the full amount of the contract price was not affected by the fact that part of the payment should be paid to Company C. Therefore, the Tribunal supports the [Seller]'s first claim.
Secondly, the [Seller] claimed interest on the payment in arrears in the amount of US $12,109.73. The [Seller] submitted detailed particulars on the interests. The Tribunal concurs with the [Seller]'s calculation of the interest till 30 November 2001 at the rate of 7.875% and 6.8125% per annum accords with relevant provisions of the CISG, thus the Tribunal decides for the [Seller].
4. Costs of the arbitration proceedings
The Tribunal decides that the [Buyer] should be liable for all the costs of the arbitration proceedings.
On the above facts and analysis, the Tribunal rules:
1. The [Buyer] shall pay the [Seller] the outstanding payments of US $205,280.77;
2. The [Buyer] shall pay the interest in the amount of US $12,109.73.
3. The cost of this arbitration, renminbi [RMB] 73,973 is ordered against the [Buyer]. The [Seller] has paid the arbitration fee of RMB 73,973 in advance to the Arbitration Commission, therefore, the [Buyer] shall reimburse RMB 73,973 to the [Seller];
4. The execution of the above decision shall be completed within 45 days from the day on which this award becomes effective.
This decision is final.}}
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