- Arbitral Award
- CIETAC China International Economic and Trade Arbitration Commission
LACK OF CONFORMITY OF GOODS – BUYER'S RIGHT TO REDUCE PRICE (ART. 50 CISG)
DAMAGES (ART. 74 CISG) - DELIVERY OF NON-CONFORMING GOODS - LOST PROFITS - RECOVERABLE
A Chinese company (seller) and a Romanian company (buyer) concluded a contract for the sale of children's sport shoes. The buyer paid the contractual advance payment but refused to pay the full purchase price, alleging that the goods delivered did not conform to the sample, were not adequately packaged and that the seller had failed to provide the buyer with the necessary documents. Moreover, the seller's delay in delivery, together with the existence of defects in the goods, had prevented the buyer from reselling the goods to a third party.
Since China and Romania are Contracting States, the Arbitral Tribunal found that CISG was applicable (Art. 1(1)(a) CISG).
As to the merits, the Arbitral Tribunal held that the buyer was allowed to re-inspect the goods at the destination port (Art. 38(2) CISG) since the inspection conducted in China before delivery was invalid.
However, since the buyer had accepted the goods, it was not entitled to reject them but only to have the contract price reduced by 20% (Art. 50 CISG).
Furthermore, the Arbitral Tribunal found the buyer entitled to recover lost profits, for it was unable to enter into the resale contract with its final customer due to the seller's breach of contract.
Finally, the Arbitral Tribunal held that the buyer had to pay the seller the difference between the reduced contract price and the loss of profits, plus interest at the statutory interest rate (Art. 78 CISG).
Published in Chinese:
- Zhong Guo Guo Ji Jing Ji Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 1996 vol., pp. 1591-1596
- available at the Pace University website, http://www. cisg.law.pace.edu}}