Air Conditioning Equipment Dispute with China: Remedies When Seller Fails to Deliver Under CISG

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	1999-04-05
Docket No.	CISG/1999/19
Parties	Chinese Buyer (Claimant) v. Hong Kong ( Seller (Respondent)
Goods/Sector	Air conditioner equipment
Key Issues	Conformity of goods; Examination of goods; Lack of conformity notice, timeliness; Installment contracts; Fundamental breach; Avoidance; Interest; Failure of performance, other party
CISG Articles	Art. 35, 38, 39, 73, 78, 80, 81

Facts

Air conditioner equipment case (5 April 1999) The China International Trade and Economic Arbitration Commission (formerly known as "the Foreign Trade Arbitration Committee of the China Council for the Promotion of International Trade ", renamed as "the Foreign Economic and Trade Arbitration Committee of the China Council for the Promotion of International Trade ", and renamed as the present name, hereafter, the "Arbitration Commission") accepted the case according to:

Legal Issues

This case raised the following questions under the CISG:

• Did the breach constitute a "fundamental breach" under CISG Art. 25? The tribunal assessed whether the non-performance substantially deprived the injured party of its contractual expectations — the threshold for invoking avoidance remedies.

• Was the injured party entitled to avoid the contract? Under CISG Art. 49/64, avoidance requires both a fundamental breach and proper notice under Art. 26. The tribunal examined whether these preconditions were met.

• Did the goods conform to the contract? The tribunal examined whether the delivered goods met the contractual specifications, quality standards, and fitness requirements under CISG Art. 35.

• Is the injured party entitled to interest on sums in arrears? Under CISG Art. 78, a party who fails to pay the price or any other sum in arrears is liable for interest, without prejudice to any claim for damages.

Practical Takeaways for International Businesses

1. Define breach thresholds in your contract. CIETAC applies the Art. 25 "fundamental breach" test strictly. Explicit remedies and termination triggers reduce ambiguity and protect both parties.

2. Avoidance requires proper notice. Under CISG Art. 26, a declaration of avoidance must be communicated to the other party. Failing to give timely notice can forfeit your right to terminate, even if the breach is fundamental.