The Down Jacket and Winter Coat Case: Non-Conforming Goods and Buyer Remedies

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	1995-03-22
Docket No.	CISG/1995/05
Parties	Chinese Seller (Respondent) v. Czech Republic ( Buyer (Claimant)
Goods/Sector	Down jackets and winter coats
Key Issues	Intent; Conformity of goods; Fundamental breach; Avoidance; Reduction of price, remedy of; Damages; Foreseeability of damages; Mitigation of loss
CISG Articles	Art. 8, 25, 26, 35, 50, 74, 77, 49

Facts

Down jacket and winter coat case (22 March 1995) China's International Trade and Economic Arbitration Commission (hereafter referred to as "the Arbitration Commission", "the Commission", or "CIETAC") accepts the present case according to the arbitration agreement found in Contract No. GF930706A and Contract No. GF930706B, entered into by Claimant [Buyer] XX Company of the Czech Republic and Respondent [Seller] YY Textile and Clothing LLC of Beijing, China. The Arbitration Commission accepted ...

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.

• 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.

• 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.

• 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.

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.