Molybdenum Alloy Dispute with Chinese Seller: Avoidance…

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	1996-07-30
Docket No.	CISG/1996/33
Parties	Chinese Seller (Respondent) v. United States ( Buyer (Claimant)
Goods/Sector	Ferro-molybdenum alloy
Key Issues	Avoidance; Nachfrist; Damages; Cover transactions; Substitute goods; Interest; Exemptions or impediments
CISG Articles	Art. 25, 47, 75, 76, 78, 79, 74

Facts

The China's International Trade and Economic Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case according to: - The arbitration clause in Sales Contract No. 94YCHB-015 signed by Claimant [Buyer], America __ Resource Company, and Respondent [Seller], China Import & Export Company Hebei Branch; and - The written arbitration application submitted by [Buyer] on 29 November 1995.

Legal Issues

This case raised the following questions under the CISG:

• 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.

• Was a Nachfrist notice properly issued? The CISG allows the buyer to fix an additional period of time for the seller to perform. The tribunal examined whether this procedure was correctly followed.

• 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. Review your contract before signing. Many disputes in China arise from unclear terms. A professional contract review can identify risks before they become costly arbitration cases.

2. Understand your CISG remedies. If both your country and China are CISG signatories, the CISG may automatically apply. Know your rights to avoidance, damages, and specific performance before a dispute arises.