Data

Date:: 00-08-1998
Country:: Arbitral Award
Number:: 9574
Court:: ICC Court of Arbitration
Parties:: Unknown

Keywords

CONTRACT OF SALE WITH RETENTION OF TITLE IN FAVOR OF SELLER UNTIL FULL PAYMENT BY BUYER - BUYER'S FAILURE TO PAY THE PRICE - SELLER'S RIGHT TO ASK EITHER FOR AVOIDANCE (TERMINATION) OF CONTRACT AND RETENTION OF GOODS OR FOR SPECIFIC PERFORMANCE (PAYMENT)

Abstract

A seller and a buyer concluded a contract for the sale of equipment and spare parts. According to the terms of the contract, the buyer had to pay the 20% of the agreed price in advance, and the rest by bank transfer within ten days from the date of receipt of the shipping documents sent by the seller. The contract contained also a retention of title clause in favor of the seller. Because of financial difficulties, the buyer was unable to pay the balance of the price after receiving the shipping documents, and sought termination of the contract. The seller objected to it and claimed payment of damages for non-performance. Furthermore, the goods had to be stored at the seller's expense since the buyer refused to take delivery. The seller's attempts to resell the equipment failed. Thus the seller commenced arbitral proceedings to recover the purchase price and damages. The buyer objected that the seller was not entitled to claim payment, as the latter retained the goods for himself until the payment had been received.

The Arbitral Tribunal, firstly considering the matter of the applicable law, stated that in the arbitral hearing the parties had agreed upon the application of Austrian law. According to the Tribunal, the question of the applicability of Austrian domestic law or instead of CISG needed not be addressed, as the solution of the dispute would be the same under either law.

The Tribunal held that the retention of title is a means of securing payment of the purchase price. In case of non-performance of the buyer, the seller can choose between retaining the goods and declaring the contract avoided or asking for payment of the price. The seller was considered to have chosen the latter option and to have requested fulfilment of the contract. This solution, based on Austrian domestic law, was considered to be consistent with the system of the seller's remedies in CISG, and in particular with its Art. 62, which allows the seller to demand fulfilment of the contract.
Thus, the residual amount of the agreed price had to be paid by the buyer, since the seller had performed its obligation. The seller was also entitled to claim interest on the remaining purchase price at the rate of 5% according to either Austrian domestic law or Art. 78 CISG. The seller was finally awarded storage and transportation costs for the goods on the grounds of torts law.

Fulltext

a)Applicable law

The Contract signed by Plaintiff and Defendant is silent on the issue of applicable substantive law. It merely provides that any dispute, controversy or claim that cannot be settled by the parties shall be submitted to arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce in Paris.

Neither party has made an argument as to the law applicable to the present dispute. In the Terms of Reference the parties authorized the Arbitrator to determine the applicable law in the present dispute preliminarily by way of a simple procedural order.

In the arbitral hearing ... both parties expressly agreed to the application of Austrian law by the Arbitrator. The question of whether the United Nations Convention on the International Sale of Goods (UN-Sales Convention) apples in the present case needs not to he addressed because the result reached by the Arbitrator would be same if the UN Sales Convention applied (see below under b) and e)).
According to the provisions of Annex No 7 to the Contract, Defendant shall pay to Plaintiff 20% of the total contract value in advance. 80% of the contract value shall be paid by bank transfer within 10 days from the date of receipt by Defendant of shipping documents sent by courier service Plaintiff received the advance payment by Defendant in the amount of... and submitted to Defendant the shipping documents. Defendant, however, did not effect payment of the balance in the amount of... In light of this, Plaintiff has, in principle, a contractual claim for payment of the remaining purchase price against Defendant in the amount of...

In case of transactions subject to the Austrian Commercial Code, for defaults in making money payments the debtor must pay interest at the rate of 5% p.a. (section 352 Austrian Commercial Code; Article 78 UN Sales Convention). Since the parties are both businessmen and the present contract is thus subject to the Austrian Commercial Code, the Plaintiff is, in principle, also entitled to claim interest on the remaining purchase price. Furthermore, since Defendant failed to take delivery of the Contract goods, Plaintiff is also entitled to claim storage and transportation costs for the goods based on the principles of tort.

b) Counter-Arguments by Defendant
Retention of Title
Defendant argued that Plaintiff was not entitled to demand payment of the purchase price and transfer ownership of the Contract goods to Defendant, which he retained for himself. Defendant thereby implicitly refers to point 2 of Annex No 7 to the Contract which provides that the equipment will remain the exclusive property of Plaintiff until payment has been received by Plaintiff and title to the equipment stored at the freight forwarder will pass to Defendant upon receipt of payment by Plaintiff on his account. Since Plaintiff has not yet received payment from Defendant and is thus still the owner of the Contract goods not yet sold, the question arises as to whether Plaintiff is entitled to claim the contract value.

The retention of title is a means of securing payment of the purchase price. Should the buyer default with the payment then the seller can either rescind the contract and take possession of the contract goods or the seller can stick to the contract and demand payment of the purchase price (Koziol/Welser, GrundriI~ des Burgerlichen Rechts 11152; Aicher in Rummel, ABGB § 1063 Rz 51 et seq.; see also Articles 62 to 65 UN Sales Convention and Schlechtriem, Internationales UN-Kaufrecht 132 et seq.). In the present case, Plaintiff chose the latter option and requested fulfillment of the Contract, which means that Defendant must pay the purchase price and take delivery of the Contract goods. Under these circumstances, the fact that Plaintiff retained title for the Contract goods does not affect his claim for payment of the purchase price.}}

Source

Published in English (excerpt):
ICC International Court of Arbitration Bulletin, Vol.11, n.2, Fall 2000, 93-103.}}