Metal Alloy Supply Dispute with China: Rules on Non-Conforming Goods Under International Sales Law

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	1996-05-02
Docket No.	CISG/1996/21
Parties	Chinese Seller (Respondent) v. United States ( Buyer (Claimant)
Goods/Sector	"FeMo" alloy
Key Issues	Damages; Foreseeability of damages; Interest; Exemptions or impediments; Hardship; General principles; Good faith
CISG Articles	Art. 7, 74, 76, 78, 79

Facts

China's International Trade and Economic Arbitration Commission (hereafter, "the Arbitration Commission") accepts the present case according to On 3 August 1995, the Chairman of the Arbitration Commission according to the Arbitration Rules (effective 1 June 1994) appointed Mr. P as the presiding arbitrator. [Buyer] appointed Mr. A as arbitrator. The Chairman appointed Mr. D as arbitrator for [Seller] according to the Arbitration Rules. Mr. P, Mr. A and Mr. D formed the Arbitration Tribunal an...

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.

• 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. 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.