Agricultural Goods Import Dispute: What Foreign Buyers Can Claim When Chinese Seller Breaches

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	1997-06-27
Docket No.	CISG/1997/18
Parties	Chinese Seller (Respondent) v. Hong Kong ( Buyer (Claimant)
Goods/Sector	Kidney beans
Key Issues	Avoidance; Fundamental breach; Damages; Profits, loss of; Foreseeability of damages
CISG Articles	Art. 25, 49, 74, 64

Facts

The China's International Trade and Economic Arbitration Commission, Shenzhen Sub-Commission (hereafter, " Shenzhen Commission") accepted the case on 20 March 1997 according to - The arbitration clause in Sales Contract No. GG/LH9608 (D) signed by Claimant [Buyer], Hong Kong ___ Grain Company and Respondent [Seller], China Liaoning ___ Import & Export Company on 15 May 1996; - The written arbitration application submitted by [Buyer].

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.

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

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.