Data

Date:: 21-02-1997
Country:: Russian Federation
Number:: 373/1995
Court:: Tribunal of Int'l Commercial Arbitration at the Russian Federation Chamber of Commerce
Parties:: Unknown

Keywords

INTERPRETATION OF STATEMENTS AND CONDUCT OF THE PARTIES (ART.8(1) CISG - ACCORDING TO PARTY'S OWN INTENT WHERE OTHER PARTY KNEW OF SUCH INTENT - RELEVANT CIRCUMSTANCES

Abstract

The seller, a Russian enterprise, filed a claim asking for recovery of main debt and interest for crude oil shipped to the buyer, a trading firm in Gibraltar. According to the contract the seller undertook to effect deliveries up to 2,000,000 mt of crude oil within May-December 1993 under the shipping program to be agreed upon between the parties. Instead of reaching an agreement upon the shipping program, the parties decided to determine volumes and shipment dates in separate supplements to the contract. In all the parties concluded 18 supplements for every delivery. In December 1993 the seller suspended oil deliveries on the ground of the buyer's delay in payment for 3 last lots. The total quantity of the goods shipped to the buyer by the seller to the early 1994 amounted to 835.000 mt. of crude oil. The buyer submitted a counterclaim for damages requiring, in particular, for compensation of lost profit caused by the seller's failure to deliver 2,000,000 mt of crude oil under the terms of the contract.

The arbitration tribunal noted that the parties held different viewpoints on what quantity should be delivered under the contract, while the parties refused to determine the quantity and dates of delivery in the shipping program per month having fixed them in 18 separate supplements. The buyer alleged that since the parties agreed upon delivery of a quantity up to 2,000,000 mt of the goods, therefore they concluded a "frame" contract without fixing definite quantities and delivery dates, which were to be determined later on in respective supplements.

With reference to the former practice established by the parties, the buyer pointed out that if the parties had intended to deliver a definite quantity of oil they would have specified the certain figures in the contract and stipulated for admissible quantity options (plus, minus). The seller furthermore underlined that the parties had not incidentally incorporated the clause "up to" in the contract taking into account that the quantity would be based on specific lots of oil deliveries. The buyer argued the seller's understanding of the term "up to" having confirmed that before this contract the parties had established practice according to which the actually delivered quantity could fluctuate plus/minus 10% from the ascertained quantity. The buyer stated that the modification of the practice established between the parties as well as the way of quantity determination in the contract was initiated by the seller, who had emphasized that the considerable quantity of the oil to be delivered under the contract could hardly be more than 2,000,000 mt and most likely would be less. The term "up to" incorporated in the contract meant that the general quantity of the oil would be close to 2,000,000 mt.

The buyer submitted to the tribunal the letter of the officials from the Russian Ministry of Foreign Trade that represented point of view on the interpretation of the clause "up to" according to which this term could not be regarded as a ground for non-delivery of the oil quantity stipulated by the contract. The arbitration tribunal considered the Russian Federation law to be applicable in this case. The tribunal did not concur with the diametrically opposed opinions of the third persons interpreting the clause "up to 2,000,000 mt", regarding that they were not based on law and usages of oil trade.

The arbitrators rejected the buyer's reference on Art. 59 of the Fundamental Principles of Civil Legislation of the USSR 1991 (Principles) and on Art. 8(3) CISG as a ground for his allegations, having considered it unjustified. The tribunal noted inter alia that Art. 59 of the Principles contemplated that the rules of the interpretation of the terms of a contract according to the "real common will of the parties, taking into account the purpose of the contract" could be applied only referring to the literal meaning of a term of a contract. The contract term "up to 2.000.000 mt" therefore must be understood literally and the court could not construe it at will.

Art. 8(1) CISG stipulated that "statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what the intent was". The arbitration tribunal held that the buyer had earlier cited on the fact that the determination of the quantity by the term "up to 2,000,000 mt" was proposed by the seller. Making this offer the seller explained that the considerable quantity of oil that he had to deliver to the buyer would be most likely less than 2,000,000 mt. The tribunal concluded that at the time of the contract conclusion the buyer was aware of the seller's intent to deliver the oil in the quantity less than 2,000,000 mt.

The tribunal considered the practice established between the parties in contracts by fixing quantity at option "plus-minus 10%" and the fact that in this long-term contract the parties refused to determine quantity in a usual manner, to be another evidence of the seller's intent to deliver the oil in the quantity less than 2,000,000 mt.

The arbitration tribunal held that the seller was bound to deliver the oil not in the quantity of 2,000,000 mt but the quantity up to 2,000,000 mt and that the parties had fixed in separate supplements the quantities to be delivered, that were qualified moreover by the buyer as a "purchase of a usual oil lot". On this ground the tribunal rejected the buyer's counterclaim for damages including lost profit and satisfied the plea of the seller for recovery of the price for the oil delivered to the buyer and interest.

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Source

Original in Russian:
- Unpublished

Abstract:
- Alexej G. Doudko}}