The Chilling Press Case: Defective Machinery and the Limits of Avoidance

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	2006-08-00
Docket No.	CISG/2006/13
Parties	Chinese Buyer (Claimant) v. U.S. Seller (Respondent)
Goods/Sector	Chilling press
Key Issues	Fundamental breach; Avoidance; Conformity of goods; Lack of conformity notice, timelines; Installment contracts; Restitution
CISG Articles	Art. 25, Art. 35, Art. 39, Art. 49, Art. 73, Art. 81, Art. 74, Art. 84

Facts

In 2006, a Chinese buyer entered into Contract No. JISH-200211 with a U.S. seller for the purchase of chilling press. The contract established specific terms regarding delivery, pricing, and quality requirements.

Following delivery, the Chinese buyer discovered that the chilling press did not conform to the contractual specifications. The non-conformity was significant enough to affect the intended commercial use of the goods, causing substantial losses.

The aggrieved party submitted a written arbitration application to the China International Economic and Trade Arbitration Commission (CIETAC) on 20 September 2005, invoking the arbitration clause in the sales contract. The claimant sought damages for the losses suffered as a result of the breach, including compensation for the commercial losses incurred.

Legal Issues

1. Did the breach constitute a "fundamental breach" under CISG Art. 25?

CISG Article 25 defines a fundamental breach as one that results in such detriment to the other party as substantially to deprive it of what it is entitled to expect under the contract. The key test is whether the non-breaching party's contractual expectations were substantially defeated. The delivery of non-conforming goods raised the question of whether the defects were severe enough to cross this threshold. [1]

2. Was the buyer entitled to avoid the contract?

Under CISG Article 49(1)(a), the buyer may declare the contract avoided if the other party's failure to perform amounts to a fundamental breach. Because the breach was found to be fundamental, the right to avoid the contract was confirmed. [2]

Tribunal Reasoning

The tribunal determined that the U.S. seller's delivery of chilling press that failed to meet the contractual specifications constituted a fundamental breach within the meaning of CISG Article 25. The breach was not a minor or technical shortfall — it went to the core of the contractual bargain and substantially deprived the Chinese buyer of its legitimate commercial expectations.

Having established fundamental breach, the tribunal confirmed the buyer's right to avoid the contract under Article 49(1)(a). The tribunal then turned to the assessment of damages.

Practical Takeaways for International Businesses

1. Specify quality standards with measurable precision. When the contract involves goods like chilling press, include detailed technical specifications, acceptable tolerance ranges, and testing protocols. CIETAC applies the Art. 25 "fundamental breach" standard rigorously — whether a quality defect crosses that threshold depends largely on how precisely the contract defines conformity requirements.

2. Preserve all evidence from the moment performance issues arise. CIETAC tribunals rely heavily on contemporaneous documentary evidence. Keep records of all communications, inspection reports, shipping documents, and market price data. The party with better documentation typically prevails on quantum of damages.

---

Footnotes

[1] CISG Art. 25 — fundamental breach. Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[2] CISG Art. 35 — conformity of goods. Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[3] CISG Art. 39 — notice of non-conformity. Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[4] CISG Art. 49 — buyer's right to avoid the contract. Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[5] CISG Art. 73 — obligations under Art. 73. Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[6] CISG Art. 81 — effects of avoidance. Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[7] CISG Art. 74 — damages (general measure). Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[8] CISG Art. 84 — restitution obligations. Paraphrased from the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). Full text available at uncitral.un.org.

[*] Case data sourced from the Pace-IICL CISG Database (iicl.law.pace.edu).

───────────────────────────────────────────────────────────────

This case insight is published by China Legal Hub (www.chinalegalhub.com) for informational purposes only and does not constitute legal advice.

Source: Pace-IICL CISG Database | CISG/2006/13

© 2026 China Legal Hub. All rights reserved.

www.chinalegalhub.com

───────────────────────────────────────────────────────────────

This case insight is published by China Legal Hub (www.chinalegalhub.com). China Legal Hub provides fixed-fee contract review services for international businesses dealing with China.