Name - vijay partap singh , roll no.

- 50
Case 1169: CISG [1; 35]; 53; 74; [78]
Peoples Republic of China: China International Economic & Trade Arbitration
Commission [CIETAC]
26 November 1998
Original in Chinese
Published in English: http://cisgw3.law.pace.edu/cases/981126cl.html
Abstract prepared by Aaron Bogatin
A German buyer and a Chinese seller entered into a contract for the purchase of
leather gloves. The contract stated the way the goods were to be packaged,
including number and weight of the boxes, and their delivery CIF (cost, insurance,
freight) Hamburg, Germany.
The China International Economic and Trade Arbitration Commission (formerly
known as the Foreign Economic and Trade Arbitration Committee of China Council
for the Promotion of International Trade, hereafter, the "Arbitration Commission")
accepted the case according to:
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The arbitration clause in the sales contract signed by Claimant [Seller], China
Wuhan __ Import & Export Company, and Respondent [Buyer], Germany __
Company, on 12 January 1995; and

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The written arbitration application submitted by [Seller] on 16 September 1997.
Since the amount in dispute in this case is less than renminbi [RMB] 500,000,
according to Article 64 of the Arbitration Rules (effective 1 October 1995), the
summary procedure is applicable.
Because the parties failed to jointly appoint or ask the Director of the Arbitration
Tribunal to appoint the sole arbitrator, pursuant to Article 65 of the Arbitration Rules,
the Director of the Arbitration Commission appointed Mr. P as the sole arbitrator to
form the Arbitration Tribunal to hear this case.
The Arbitration Tribunal held a court session in Beijing on 26 August 1998. The
[Seller] sent an arbitration agent to the court session who made a statement on the
case and answered the Arbitration Tribunal's questions. The [Buyer] did not attend
the court session.
After the court session, the Secretariat of the Arbitration Commission notified the
[Buyer] of the court session and forwarded the [Seller]'s supplementary statement
and evidence, asking the [Buyer] whether it needed a second court session,
informing that the [Buyer] could still make a statement or present its opinions. And on
19 October 1998, the [Buyer] submitted a defense.
Pursuant to Article 73 of the Arbitration Rules, this case should have been concluded
on 26 September 1998; however, due to special reasons, the Arbitration Tribunal
asked the Secretary-General of the Arbitration Commission for a two-month
postponement of making judgment, which was approved. This case has now been
concluded. The Arbitration Tribunal handed down its award within the aforesaid time
limit.
The following are the facts, the Tribunal's opinion and award.
I. FACTS
On 12 January 1995, the [Buyer] and the [Seller] signed the aforesaid contract by
which the [Buyer] purchased gloves on the following terms:
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Products: 2,500 dozen 88-PASA leather gloves and 2,500 dozen 88-PBSA
leather gloves, totaling 5,000 dozen;
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Price: The total price is US $45,375;
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Packaging: The goods shall be packaged in paper boxes with 10 dozen in each
box; each box should weigh 16kg;
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Shipping term: CIF Hamburg.
On 5 February 1995, the [Buyer] issued an irrevocable sight L/C with the [Seller] as
the beneficiary.
During the performance of the contract, the parties had disputes on modification of
the contract, thickness of leather, weight of the box, and on payment for the goods.
The parties failed to resolve the disputes after negotiations and having been
mediated by Wuhan Mediation Center and Hamburg Mediation Center; therefore, the
[Seller] filed this arbitration application.
[POSITION OF THE PARTIES]
[Seller] 's position
The [Seller] alleges that:
After the [Buyer] issued the L/C, the parties reached an agreement on decreasing
the weight of each box, modifying the L/C, and for the [Seller] to provide sample
goods as the basis for delivery.
On 25 March 1995, the [Buyer] went to Wuhan to inspect the sample goods, and the
two parties confirmed the samples by signing on them. The samples were kept by
the [Buyer]. On 25 March 1995, the [Seller] shipped the contract goods from
Shanghai to Hamburg. When the [Seller] negotiated the payment, the Bank of
Germany rejected the payment, raising that there was an inconsistency between the
documents and the L/C.
On 29 April 1995, the goods arrived at Hamburg, the [Buyer] urged the [Seller] to ask
the notifying bank to release the documents, promising that the [Buyer] would make
payment within 24 hours after receiving the goods.
On 30 May 1995, after the [Seller] completed the bank procedure for releasing the
documents, the [Buyer] received the goods. On the same day, the [Buyer] declared
that it could not accept the goods because of defects on thickness of leather and the
weight of each box. The [Buyer] did not return the goods, instead unilaterally sold the
goods at a discount price in spite of the [Seller]'s objection, and appropriated the
[Seller]'s entire contract price.
The [Seller] asserts that:
1. The [Seller] has been performing honestly and has fulfilled its contract
obligation by delivering the goods on the basis of the confirmed samples and
the modified contract. The [Buyer] resold the goods, and rejected the [Seller]'s
offer to exchange the goods or to take other measures to mitigate the loss,
and has not make any payment;
2. The [Buyer] has never provided any legal and effective inspection certificate
showing that there were defects on the goods delivered by the [Seller], nor did
it provide a "price evaluation on inferior goods" issued by the Customs in
Germany. In fact, the [Buyer] has sold all the goods that were called "trash" by
the [Buyer], which indicates that opinions given by a person who was not
authorized to perform inspection could not be the basis for determining the
defects on the goods.
The following are the [Seller]'s claims:
1. [Buyer] should pay the price for the goods of US $45,375 immediately;
2. [Buyer] should pay the interest on the aforesaid sum of RMB 126,315 (RMB
92,872 + RMB 33,443);
3. [Buyer] should bear the arbitration fee and related costs of RMB 30,000.
[Buyer]'s defense
The [Buyer] counter argues that:
The [Buyer] and the [Seller] have had a long business relationship. On 12 December
1994, (which should be 2 December 1994 instead - noted by the Arbitration
Tribunal), the [Seller] sent an offer to the [Buyer], and later the two parties signed the
contract in this case, confirming that the goods should be A grade, and that each box
should weigh not less than 16kg.
On 14 February 1995, the [Seller] asked to modify the box weight to 13 ~ 14 kg/box,
which was rejected by the [Buyer]. The [Buyer] could only accept 15kg/box.
Later the two parties confirmed the samples, and the [Seller] agreed to deliver the
goods.
After receiving the goods, the [Buyer] discovered that the leather of the gloves was
very thin, and each box weighed less than 11kg. On 30 May 1995, the [Buyer]
notified the [Seller] of these problems.
Later, the [Buyer] came to China again to negotiate the resolution of the dispute;
however, the negotiation failed because the [Seller] had no intention to resolve the
problem. The [Buyer] had to resell the goods at a discount price and paid US
$1,975.90 to the [Seller] through Bank of China.
The [Buyer] alleges that:
1. The [Buyer] has fulfilled its contract obligations;
2. The [Seller] and the carrier ignored their contract obligations, and should bear
the responsibilities accordingly;
3. The [Seller] and the carrier should bear the entire loss.
The [Buyer] asks the Arbitration Tribunal to:
1. Dismiss the [Seller]'s arbitration claims; and
2. Rule that the [Seller] is obligated to bear the arbitration fee.
II. OPINION OF THE ARBITRATION TRIBUNAL
1. The applicable law
The parties in this case did not stipulate the applicable law in their contract.
Considering the fact that the places of business and registration places of the [Seller]
and [Buyer], China and Germany, are Contracting States of the United Nations
Convention on Contracts for the International Sales of Goods (hereafter, the
"CISG"), therefore, the CISG should be applied.
2. [Buyer]'s responsibility for contract violation
After investigation, it was found that on 25 March 1995, the [Seller] delivered the
goods from Shanghai, and on 30 May 1995, the goods were received by the [Buyer].
On the same day, the [Buyer] raised objection to the quality of the goods. The parties
have no dispute on the aforesaid facts.
According to Article 53 of the CISG, "the [Buyer] must pay the price for the goods
and take delivery of them as required by the contract and this Convention." The
[Buyer] asserts that it has paid US $1,975.90 to the [Seller]. However, the [Seller]
denied this assertion of the [Buyer] and the [Buyer] failed to provide any evidence
proving it had made payment on the goods; therefore, the Arbitration Tribunal does
not accept this assertion. The [Buyer] has accepted the goods without making
payment; therefore, according to the CISG, the [Buyer] has fundamentally breached
the contract.
The Arbitration Tribunal notes that even though the [Buyer] failed to provide an
inspection certificate showing the defects on the goods, the [Seller] had agreed to
exchange the goods and promised to bear the cost. In addition, from the statements
made by the two parties, the Arbitration Tribunal deems that there are defects on the
goods; therefore, it was reasonable to resell the goods at a 30% discount.
3. Resolution of the [Seller]'s arbitration claim
(1) Price for the goods: Considering the [Buyer]'s contract violation and the
quality of the goods: the Arbitration Tribunal holds that [Buyer] shall pay 70% of the
contract price to the [Seller], i.e., US $45,375 70% = US $31,762.50;
(2) Bank interest: The Arbitration Tribunal notes that loss of bank interest was not
foreseeable by the [Buyer]; therefore, the [Seller] shall bear it on its own;
(3) [Buyer] shall bear the [Seller]'s actual cost for processing this case, which is
US $1,200;
(4) [Seller] shall bear 40% of the arbitration fee, and [Buyer] shall bear 60%.