Data
- Date:
- 15-08-2019
- Country:
- China
- Number:
- (2018) Xiang 01 Min Chu No. 3578
- Court:
- Hunan Changsha Tianxin District People’s Court
- Parties:
- Suministros industriales diversos, S.A. v. Hunan Pulaili Pipe Co., Ltd.
Keywords
TERMINATION OF CONTRACT - CONTRACT TO BE PERFORMED BY INSTALLMENTS - FAILURE BY SELLER TO DELIVER INSTALLMENT GIVING GOOD GROUNDS FOR AVOIDANCE (ART. 25 & ART. 73(2) CISG)
DAMAGES (ART. 74 CISG) - SUBSTITUTE TRANSACTION - DIFFERENCE BETWEEN CONTRACT PRICE AND PRICE IN THE SUBSTITUTE TRANSACTION (ART. 75 CISG)
Abstract
[Draft abstract prepared by Chen Ziye, Yu Shuhuan, Min Zixuan, ZUEL-SUR School of Law and Economics, Wuhan]
A Spanish company and a Chinese company entered a contract for the sale of welded carbon steel pipes. The agreement required a 10% down payment and the remaining 90% through a letter of credit. Delivery was to be executed in six installments. The buyer paid the down payment and issued the letter of credit as agreed, while the seller delivered only two batches, alleging that an increase in the raw material cost did not allow him to sell the remaining batches at the same price. As the efforts to renegotiate the price failed, the plaintiff cancelled the contract and purchased pipes from another supplier. Additionally, some of the delivered pipes were found to be damaged. The buyer then filed a lawsuit, seeking compensation for the losses incurred.
The court determined that the contract was governed by the Convention (Art. 1(1)(a) CISG).
As to the merits, the Court found that the seller had breached the contract by failing to deliver the remaining batches of carbon steel pipes. The reasons adduced by the defendant for non-delivery were not considered sufficient to excuse the breach. In particular, the Court noted that the contract contained a clause stating that the price was to be fixed at the completion of the order. Failing an agreement by the parties to adjust the price according to market fluctuations, the price established at the time of order was to be considered final, and no subsequent increase in market steel prices during contract execution could be relevant.
Concerning the claim of delivery of non-conforming goods, the Court found that the contract included a FOB (Free on Board) term. That means that the seller performed its delivery obligation when the goods were handed over to the buyer’s nominated carrier, loaded onto the ship, and a clean bill of lading was issued. The buyer submitted an inspection report from its end customer, indicating defects in the goods. However, as the report was provided by the buyer’s end customer and not issued by a third-party inspection agency, its authenticity was uncertain. Moreover, the images in the report did not permit the identification of the container numbers or the name of the supplier. Therefore, it could not be established that those batches of goods were shipped by the seller, nor that the damage to the goods was caused by it. Due to a lack of evidence, the Court rejected the buyer’s claim.
Further, the Court noted that, according to Art. 73 CISG, in contracts involving installment deliveries, if the failure of one party to perform any of his obligations in respect of any instalment constitutes a fundamental breach of contract with respect to that instalment, the other party can declare the contract terminated with respect of that installment. In this case, the seller's failure to deliver the remaining four batches made it impossible to achieve the contract's intended purpose, justifying its termination (Art. 25 CISG).
Finally, based on Art. 74 CISG, the Court ordered the seller to compensate the buyer for the costs incurred due to non-delivery, calculated based on the price difference between the contract price and the price in the substitute transaction.
Fulltext
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Source
Original in Chinese:
- available at www.cisg-online.ch}}