- Russian Federation
- Tribunal of Int'l Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry
BUYER'S OBLIGATION - PAYMENT OF PRICE (ART. 53 CISG) - REMEDIES FOR BUYER'S BREACH (ART. 61 CISG)
SELLER'S RIGHT TO REQUIRE PAYMENT (ART. 62 CISG)
CONTRACT INTERPRETATION (ART. 8 CISG) – ACCORDING TO PRINCIPLE OF REASONABLENESS UNDERLYING CISG
A Russian entreprise and an Australian company entered into a contract for the sale of goods according to which the buyer would pay for the goods within a fixed deadline and the goods would be delivered to the buyer on FCA Moscow terms. The contract provided also a penalty in case of delay in payment, amounting to 0,1% of the total cost of the delivered goods for each day of delay (in any case, not exceeding 10% of that sum). The buyer made only a partial payment of the goods and the seller brought an action before the arbitral tribunal claiming payment of the full contract price plus the contractual penalty and interest.
The Arbitral Tribunal held that CISG was applicable to the case at hand by virtue of its Art. 1(1)(a) and that matters not settled by the Convention were to be resolved according to the otherwise applicable law (Art. 7(2) CISG), i.e. Russian law.
As to the merits of the case, the Tribunal found that under Arts. 53, 61 and 62 CISG the seller was entitled to claim payment and the buyer was obliged to pay the outstanding price.
With respect to the seller’s claim for recovery of the penalty, relying on Art. 8 CISG and the general principle of reasonableness on which the Convention is based, the Arbitral Tribunal concluded that the penalty was recoverable only in relation to the delayed sum and not, as contended by the seller, to the total cost of the delivered goods and that the amount of the penalty could not exceed the limit set out in the contract.
Finally, the Tribunal dismissed the seller’s claim concerning interest, holding that the parties – by setting a limit to the amount of the penalty – had intended to confine the seller’s compensation for breach of contract by the buyer within such a limit.
Original in Russian:
- published in Muranov (ed.), Text on the CISG, Wolters Kluwer (2007), pp. 214 - 222.
- available at the University of Pace website, http://www.cisg.law.pace.edu/}}