Industrial Equipment Dispute with Chinese Seller: CISG…

Tribunal	CIETAC (China International Economic and Trade Arbitration Commission)
Date of Award	1993-02-25
Docket No.	CISG/1993/05
Parties	Chinese Buyer (Claimant) v. United States ( Seller (Respondent)
Goods/Sector	Terylene texturing machine
Key Issues	Fundamental breach; Damages; Foreseeability of damages; Interest
CISG Articles	Art. 25, 74, 84

Facts

Terylene texturing machine case (25 February 1993) In accordance with the arbitration provisions of Contract NTRECL-(91)001 concluded between Claimant Ningbo XX Feather & Down Ltd. Co. of China [Buyer] and Respondent XX Father & Son Co. of the U.S. [Seller] on 1 March 1991 (hereinafter referred to as the ontract , and the written application for arbitration filed by the [Buyer] on 24 December 1991, the China International Economic & Trade Arbitration Commission (formerly known as hina Council...

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.

• 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.