Data

Date:: 25-08-2022
Country:: China
Number:
Court:: Intermediate People's Court Ningbo, Zhejiang Province
Parties:: MaRa Medical-Technical-Aid GmbH v. Ningbo Laida Automotive Technology Co. Ltd

Keywords

UNIFORM INTERPRETATION AND APPLICATION OF CISG (ART. 7(1) CISG) – RECOURSE TO CISG A.C. OPINIONS

LACK OF CONFORMITY OF THE GOODS - CONFORMITY TO PUBLIC LAW REQUIREMENTS IN THE BUYER’S COUNTRY (ART. 35)

AVOIDANCE OF CONTRACT - PARTIAL AVOIDANCE (ARTS. 49(1)(a) AND 51(1) CISG) - IMPLIED DECLARATION OF AVOIDANCE

REFUND OF PRICE PAID (ART. 84 CISG) - INTEREST - INTEREST RATE - MATTER GOVERNED BUT NOT EXPRESSLY SETTLED BY CISG (ART. 7(2) CISG) - RECOURSE TO CISG A.C. OPINION NO. 9 AND 14

Abstract

[Draft abstract prepared by Xu Zimen, Tan Wenxi and Song Ruoyu, ZUEL-ZUR School of Law and Economics, Wuhan]

In April 2020, a Chinese seller sent a proforma invoice to a German buyer via email, which provided for the sale of 10.5 million disposable masks and FFP2 masks for a total price of USD 5,295,000. The terms of the invoice required for 50% advance payment and 50% payment by letter of credit, with a delivery date 12 days after the deposit confirmation “CIF Frankfurt”.
Whereas the buyer made all the required payments, the seller failed to deliver the entire ordered quantity of the goods within the agreed-upon date due to prolonged customs inspection. As a result, the buyer demanded the seller stop delivery of the remaining masks and asked for a refund of the price. Subsequently, the seller proposed that it could provide the buyer with KN95 masks produced by another manufacturer, yet the buyer refused. As the seller repaid only part of the overpayment, the buyer started a lawsuit against it.

As to the applicable law, the Court found that, as both parties' places of business were in two contracting States and the parties had not excluded the application of the Convention, CISG should apply (Art. 1(1)(1)(a) CISG).

As to the merits, the Court found that the pro forma invoice incorporated the sales agreement between the parties and was binding upon them.

As to the seller’s liability for its failure to deliver the whole quantity of the ordered masks, the Court considered in the first place that the buyer had expressly required the masks to conform with the EU import standards. Moreover, according to the relevant Chinese regulations adopted on 1 April 2020, exporters of medical masks had to ensure that the products had been registered as medical devices in China and comply with the quality standards of the importing country. In the present case, as the seller’s masks had been seized and fined after inspection for failing to comply with the required quality standards, it was clear that the failure to deliver the remaining masks was exclusively due to the seller’s fault.

Further, the Court determined that the buyer was entitled to request the seller to refund the overpaid amount of the price. Indeed, the buyer asked the seller to stop delivering the goods and return the payment, thus implying that it declared termination of the contract for the missing part under Art. 51(1) CISG.

Concerning the issue of whether the seller should pay interest on the sum in arrears, the Court noted that, according to Art. 84 CISG, if the seller is required to return the price, it must also pay interest on it. In this case, although the seller did not fully deliver the goods, it had partially fulfilled its delivery obligation, so the interest should start to run from June 1, 2020. Regarding the applicable interest rate, as CISG does not prescribe a specific interest rate, the Court stressed the importance of the guidance offered by the CISG Advisory Council to promote uniform application and interpretation of the Convention. More specifically, the Court considered that while the buyer, relying on CISG A.C. Opinion no. 9, proposed to calculate the interest rate according to the commercial rate prevailing at the seller’s place of business, the seller argued for the application of the rate which the Court at the creditor’s place of business would grant in a similar sales contract not governed by the Convention. Then, the Court recalled that while Art. 84 CISG aims at restoring the status quo ante and preventing unjust enrichment, Art. 78 CISG's aim is to compensate the creditor for the loss it had suffered. Therefore, the Court found that in the case at hand it would be more reasonable to refer to Opinion No. 9, given that it is concerned with contract termination; however, considering the buyer’s consensus on the application of the annual interest rate of 4.12% as proposed by the seller, the Court determined the interest rate accordingly.

Finally, as to the buyer’s claim that the seller should bear the attorneys and notary fees, starting from the premise that Art. 74 CISG does not regulate this point, the Court referred to the CISG A.C. Opinion No. 6 to corroborate the conclusion that the buyer could not claim compensation for the costs associated with litigation. All the more so as the parties had not agreed that the party in breach of contract should bear the other party’s attorney fees and other related costs. Therefore, the Court held that the buyer’s s claim for attorney fees and notary fees was unfounded.

Fulltext

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Source

Original in Chinese and English Translation:
- available at www.cisg-online.ch}}