- Russian Federation
- Tribunal of Int'l Commercial Arbitration at the Russian Federation Chamber of Commerce
EFFECTS OF AVOIDANCE OF CONTRACT - RIGHT TO CLAIM DAMAGES UNDER ART. 81(1) CISG - APPLICABLE ONLY IN CASE OF UNILATER AVOIDANCE
In November 1994 the buyer, a production enterprise in Russia, concluded with the seller, a US company, two contracts: the first one for the delivery of food mixtures and spices required for production of chips and the second one for delivery of 500 rolls of chips packing. Since the previous arbitration award no. 272/1995 held non-conformity of the goods delivered according to the first contract with specification and purposes for which the goods of the same description would have ordinarily be used, the buyer alleged that he was no more interested in receiving the chips packing under the second contract. Earlier the buyer had remitted an advance payment for the packing and the expenses borne by the seller for designing and research.
The buyer filed a claim asking for partial return of his prepayment for the packing and recovery of damages incurred under reference to Art. 81 CISG releasing both parties from their obligations under the contract, subject to any damages which may be due. In response the seller cited on the buyer's delay in handing over packing design under the term of the contract alleging that in order to provide a reasonable performance he had placed an order for the packing with a Taiwanian contractor. The seller returned to the buyer part of his advance payment having deducted as a compensation his expenses, including lost profits and service payment to the contractor from Taiwan.
The arbitration tribunal held that the parties had reached an agreement determining the effect of the contract's avoidance, including that the expenses confirmed by documents would be completely compensated by the other party as well as general compensation amounts.
The arbitrators considered that Art. 81 CISG could not be applicable to the effect of mutual avoidance as it was in the case, being applied only in cases relating to avoidance declared by one of the parties. The tribunal emphasized that the terms of the contract prevail over provisions of the CISG.
On the ground that the parties decided to compensate only the expenses caused by performance of the contract, the tribunal denied the seller's plea for lost profit and obliged him to return the buyer part of his advance payment, having confirmed at the same time the right of the seller to deduct from this sum his documentary proved expenses.
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Original in Russian:
- Alexej G. Doudko}}