Food Export Dispute: How International Sales Law Handles Non-Conforming Canned Goods from China

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	1997-11-30
Docket No.	CISG/1997/33
Parties	Chinese Seller (Respondent) v. Germany ( Buyer (Claimant)
Goods/Sector	Canned oranges
Key Issues	Damages; Profits, loss of; Foreseeability of damages; Cover transactions; Substitute goods; Mitigation of loss; Exemptions or impediments
CISG Articles	Art. 74, 75, 76, 77, 79, 72

Facts

The China International Economic and Trade Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case according to: - The arbitration clauses in Sales Contracts No. 94AF001 (hereafter, "Contract No. 1") and No. HA-Y95001 (hereafter, "Contract No. 2") signed by Claimant [Buyer], Germany __ Company, and Respondent [Seller], China Hunan Province __ Import & Export Company on 18 October 1994 and in December 1994, respectively; and - The written arbitration application subm...

Legal Issues

This case raised the following questions under the CISG:

• How should damages be calculated? The tribunal considered the concrete method (Art. 75, based on cover transactions) and the abstract method (Art. 76, based on current market price) to determine the appropriate measure of compensation.

• Were the claimed losses foreseeable at the time of contracting? Under CISG Art. 74, damages are limited to losses that the breaching party foresaw or ought to have foreseen as a possible consequence of the breach.

• Can the injured party recover lost profits? CISG Art. 74 expressly includes loss of profit in recoverable damages, subject to the foreseeability limitation.

• Did the injured party fulfill its duty to mitigate? Under CISG Art. 77, the injured party must take reasonable measures to reduce its losses. Failure to mitigate can reduce the damage award.

Practical Takeaways for International Businesses

1. Document your losses from day one. CIETAC's ability to award appropriate damages depends on the quality of evidence. Maintain contemporaneous records of all communications, market prices, and cover transactions.

2. Foreseeability limits your recovery. Under CISG Art. 74, you can only recover losses that were foreseeable at the time of contracting. Make sure your contract clearly allocates risk for consequential damages.