- Ad hoc Arbitration
CONTRACT FOR SUPPLY OF GOODS AND SERVICES - SUPPLY OF LABOUR OR OTHER SERVICES NON CONSTITUTING PREPONDERANT PART OF SELLER'S OBLIGATIONS - CISG APPLICABLE (ART. 3 (2) CISG)
RIGHT TO DAMAGES (ART. 74 CISG) - DETERMINATION OF AMOUNT OF DAMAGES - REFERENCE TO ART. 7.4.3 UNIDROIT PRINCIPLES (CERTAINTY OF HARM)
A German producer of industrial plants and a Spanish buyer concluded a contract for the manufacturing and supply of some equipment. According to the agreement, the goods had to be delivered in the seller’s country under an FCA clause. In addition, the agreement provided that the seller, subject to a negotiation of the price and the conclusion of a subcontract, would provide certain services such as supervision and training of workers, installation, commissioning, and start-up of the equipment.
A dispute arose between the parties. The buyer alleged that the seller had breached the contract as, inter alia, part of the delivered goods was defective, while the seller contended that the buyer had failed to pay the contractual price. Moreover, the parties disagreed as to the applicable law: whereas the seller invoked the application of CISG, the buyer insisted on the application of its own law, claiming that the contract at hand could not be qualified as a sales contract.
As to the applicable law, the sole arbitrator established that the Convention should apply (Art. 1(1)(a) CISG)). Relying on Art. 3 CISG and CISG-AC Opinion no. 4 (Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts), the sole arbitrator considered that the Convention applies both to contracts for the supply of goods to be manufactured and produced and to mixed contracts, provided that, in this latter case, the services performed by the seller does not constitute the preponderant part of the obligations it assumed under the contract. The sole arbitrator found that such requirement was satisfied in the present case, all the more so because the clause regarding the performance of additional services by the seller did not establish any price for them, but left it to be determined in the future and upon the conclusion of a specific sub-contract.
The sole arbitrator also considered other principles to apply such as, inter alia, the principle of good faith in the interpretation and performance of the contract (Art. 7(1) CISG); the principle of ne venire contra factum proprium (Art. 29 CISG); the principle of preservation of the contract (Arts. 19(2) and 21(2) CISG); the principle of full compensation (Art. 74 CISG) and the principle of mitigation of loss (Art. 77).
As to the proof of damage, the sole arbitrator also referred to the principles of reasonableness and proportionality, as well as to the principle of certainty of harm. In doing so, it noted that, even when the loss cannot be established with a sufficient degree of certainty, it is at the discretion of the arbitral tribunal or the court to determine the amount of damages and, in this respect, it also referred to Art. 7.4.3 of the UNIDROIT Principles (2016).
Abstract in English:
- available at the University of Carlos III website, http://www.cisgspanish.com}}