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Matched Legal Cases: ['Art. 79', 'Art. 75', 'Art. 79', 'Art. 75', 'Art. 79', 'Art. 79']

Russia 16 March 1995 Arbitration proceeding 155/1994 (Metallic sodium case) [translation available] Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography Search the entire CISG Database (case data + other data) CISG CASE PRESENTATION Russia 16 March 1995 Arbitration proceeding 155/1994 (Metallic sodium case) [translation available] [Cite as: http://cisgw3.law.pace.edu/cases/950316r1.html] Primary source(s) for case presentation: Case text Case Table of Contents Case identification UNCITRAL abstract Classification of issues present Editorial remarks Citations to case abstracts, texts, and commentaries Case text (English translation) Guide to links contained in case presentations Case identification DATE OF DECISION: 19950316 (16 March 1995) JURISDICTION: Arbitration ; Russian Federation TRIBUNAL:	Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry JUDGE(S): Unavailable CASE NUMBER/DOCKET NUMBER: 155/1994 CASE NAME: Unavailable CASE HISTORY: Unavailable SELLER'S COUNTRY: Russian Federation (respondent) BUYER'S COUNTRY: Germany (claimant) GOODS INVOLVED: Chemical products (metallic sodium) Case abstract RUSSIAN FEDERATION: Arbitration at Russian Federation Chamber of Commerce and Industry [No. 155/1994 of 16 March 1995] Case law on UNCITRAL texts (CLOUT) abstract no. 140 Reproduced with permission from UNCITRAL A contract was concluded between a Russian seller and a German buyer for the supply of a specific quantity of chemical products within a period of time specified in the contract (fourth quarter of 1992). The goods were not delivered to the buyer within the specified period. From January to May 1993, the buyer repeatedly informed the seller that it insisted on the goods being delivered in accordance with the contract concluded and was ready to extend the time-limit for delivery. In May 1993, the buyer informed the seller that, as a result of the latter's breach of its contractual obligations, the buyer had purchased the goods specified in the contract from a third party. In May 1994, the buyer sued the seller for breach of contract, such damages consisting in the difference between the price of the goods established in the contract and the price at which the buyer was obliged to purchase the goods from the third party. In its reply to the claim, the seller maintained that it should be discharged from liability on the grounds that it had been unable to deliver the goods for reasons beyond its control, namely because of an emergency production stoppage at the plant manufacturing the goods specified in the contract. Referring to article 79 CISG, the tribunal decided that the seller (respondent) was unable to prove the facts that would have discharged it from its liability for non-performance of its obligations since refusal on the part of the manufacturer of the goods to supply them to the [seller] could not be deemed sufficient grounds for such discharge from liability. The [seller] should bear liability for failure to fulfill its obligations on the additional grounds that it was unable to establish that it could not reasonably be expected to take account, in concluding the contract, of the obstacle preventing its compliance with the contract or to avoid or surmount that obstacle or its consequences. With regard to the amount of compensation for the damages, the tribunal considered that establishing the extent of damages on the basis of the difference between the contract price and the replacement purchase price was consistent in this instance with the provisions laid down in article 74 CISG for determining the amount of damages. In addition, account was taken of the fact that the respondent (seller) was not able to establish that the buyer would have been able to purchase the goods at a lower price when making the second purchase in replacement of the first. Go to Case Table of Contents Classification of issues present APPLICATION OF CISG: Yes [Article 1(1)(a)] APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue: Articles 74 ; 75 ; 78 ; 79 [Also cited: Articles 6 ; 7(2) ] [Also relevant: Articles 45 ; 76 ] Classification of issues using UNCITRAL classification code numbers: 74A [General rules for measuring damages: loss suffered as consequence of breach];
79B1 ; 79C [Exemptions: impediment excusing party from damages; Non-performance attributable to third-party contractor] Descriptors: Damages ; Foreseeability of damages ; Cover transactions ; Exemptions or impediments ; Interest Go to Case Table of Contents Editorial remarks Unavailable Go to Case Table of Contents Citations to other abstracts, case texts and commentaries CITATIONS TO OTHER ABSTRACTS OF DECISION English: Unilex database [CLOUT abstract] French: Van den hole, [1998] Revue trimestrielle de droit (RDC/TBH) 356 [356 n.120]
Italian: Diritto del Commercio Internazionale (1997) 733-734 No. 145 Polish: Hermanowski/Jastrzebski, [1997] Narodów Zjednoczonych o umowach miedzynarodowej sprzedazy towarów. Konwencja wiedenska. Komentarz [CISG commentary],Warszawa: ABC 280-281
CITATIONS TO TEXT OF DECISION Original language (Russian): Rozenberg, Praktika Mezhdunarodnogo kommercheskogo arbitrazhnogo suda. Nauchno-prakticheskyi kommentaryi [Practice of the International Commercial Arbitration Court: Scientific - Practical Comments] (Moscow 1997) No. 24 [63-65] Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION English: Baker, 32 Vanderbilt Journal of Transnational Law (1999) 347-390 [381 n.145 (Art. 79 in Y2K context)]; Honnold, Uniform Law for International Sales (1999) 450 [Art. 75] 489 [Art. 79(2)]; Southerington, Impossibility of performance and other excuses in international trade (2001) n.148; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.797; [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 142; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 75 para. 5 Art. 79 para. 29; Carla Spivack, 27 Pennsylvania Journal of International Economic Law (Fall 2006) nn. 170, 191 [commentary on Art. 79 issues]
On 6 February 1995 the Tribunal consisting of the Chairman of the Arbitral Panel and
arbiters reviewed the claim brought by a German buyer against a Russian seller to recover
US $205,000.00.
On 20 May 1994, the Tribunal received a complaint filed by the German firm to recover
US $205,000.00 plus annual interest and arbitration and legal fees from the Russian firm.
On 28 April 1992, the [Buyer] and [Seller] entered into the Contract and Appendix No. 1
to it. The terms of the Contract included the Standard Terms of Sale.
According to the Contract and Appendix to it, the [Seller] was to deliver metallic sodium
in the following quantity: - 500 tons (the first lot under the Contract) at US $830.00 per ton; and
an additional 500 tons (the second lot under the Contract) at US $820.00 per ton.
The [Seller] delivered the first lot and the [Buyer] paid for it in a due manner. There was
no delivery of the second lot.
The shipment of the second lot was to be made at the [Buyer]'s option by 30 April 1992. The [Buyer] exercised his option right by signing Appendix No. 1 to the Contract with the
[Seller]. The shipment of the second lot was supposed to take place within the forth
quarter of 1992 on the terms set forth in the contract.
Since during the performance of the Contract it became clear that the [Seller] did not
fulfill his obligations in connection with delivery of the second lot, the [Buyer] took steps
to assist the [Seller] in fulfilling his obligations as the [Buyer]'s customers had been
awaiting the goods for a long time. Notwithstanding the fact that the [Buyer] made
numerous demands that delivery be made and expressed his bewilderment in connection
with the delay in delivery -- see telexes of 5 February 1993, 1 February 1993, 18 February
1993, 15 March 1993 and 17 May 1993, -- the [Seller] neither responded to these letters
nor made delivery.
In his letter of 27 May 1993, the [Buyer] informed the [Seller] that, due to the delay of
delivery by the [Seller], he had to purchase metallic sodium from other suppliers at
significantly higher prices. As a result, he suffered a loss in the amount of US $245,978.00
representing the difference in prices of the sodium purchased by the [Buyer] -- the
difference between the price of 400 tons purchased at US $1,280.00 per ton plus the price
of 100 tons purchased at US $1,350.00 per ton, that amounted to US $237,000.00, and
the price of US $820.00 per ton under the Contract -- as well as US $8,978 of expenses in
connection with extending the Letter of Credit due to the [Seller]'s delay in delivery as
well as expenses incurred in connection with a business trip to Moscow made by a
[Buyer]'s representative to negotiate the dates of delivery with the [Seller]. The [Buyer]
requested either the payment of his losses or, alternatively, delivery of the 500 tons of
metallic sodium as set forth in Appendix No. 1.
In his reply to the claim of 5 January 1995, the [Seller] explained that his failure to fulfill
his obligations in connection with delivery of the rest of the goods was due to
impediments beyond his control, i.e., his supplier's emergency stopping of any metallic
sodium production.
On the merits of the claim, the [Seller] stated that the [Buyer] failed to present evidence of
the amount of the losses suffered and failed to meet the two-months period within which
the claim should have been brought in accordance with the Standard Terms of Sale under
the Contract. Missing this two-months period of time deprives the party of his right to
begin an arbitration proceeding.
The [Seller] also argued that it was impossible to make delivery due to circumstances
beyond his control, i.e., cancellation of his export license.
In addition to the contentions in connection with the claim of 5 January 1995, in his letter
of 3 February 1995 the [Seller] stated that, in his opinion, Appendix No. 1 to the Contract
signed by the parties on the same day with the Contract, under which he was required to
deliver additional 500 tons of metallic sodium, was not a contract; it represented only a
verification of a new price for the second lot and the terms of delivery.
When explaining his position in connection with the [Seller]'s arguments, the [Buyer]
- As stated in Chapter 3 of [Buyer]'s claim, the [Seller] was to make shipments in the
fourth quarter of 1992. The first claim was sent by the [Buyer] on 1 February 1993. However, the [Seller] failed to respond to it. The following claims were sent on 5
February 1993 and 18 February 1993. All those claims were sent within the two-months
period. These and the following claims demonstrate that the [Buyer] demanded that the
promised delivery be made and reserved a right to claim losses, if such delivery was not
made. The fact that the [Seller] understood the claims is evidenced by his own reply in
which he pointed out that "from January 1993 to August 1993 the [Buyer] insisted that
the delivery of 500 tons of metallic sodium be made."
Even if the [Buyer] failed to file a claim within the first two months after the [Seller]'s
breach, the language of the Contract demonstrates that the two-months limitation set forth
in clause 6 of the Standard Terms was supposed to apply only to claims regarding the
quality of goods and not in connection with one's failure to deliver. In this connection,
clause 5 of the Standard Terms sets forth the procedure of filing claims regarding the
quality of goods delivered under the Contract. Clause 6 only adds that claims should be
filed "within two months from the date of delivery."
The reason for the two-months limitation was to guarantee to the Seller that the goods,
which he delivered, were accepted, if the Buyer did not file a claim within two months.
If the Seller breached the Contract by failing to deliver the goods, then there was no "date of delivery." In such case it would be reasonable to expect that the Buyer substitute the goods not received with the equivalent goods purchased from other suppliers.
The letters containing inquiries as well as the letters containing the preliminary claims were mailed without any delay. However, the letter containing the final claim and a threat to arbitrate, was sent only after the Buyer realized that the Seller did not wish to make up for his breach as well after the Buyer made a computation of his losses based on the price that he had to pay to purchase goods in substitute of the goods not delivered by the breaching Seller. It was unreasonable to expect that this all would take place within two months.
The [Buyer] noted that Russia law regards as invalid any provisions in contracts or in any
other agreements of parties which limit the period of time during which the parties should
file their claims in connection with a breach of contract. In this connection, Article 80 of
the Russian Federation Civil Code states that "no modification of either the statute of
limitation or the procedure for its determination is allowed." The same rule is reflected in
Article 198 of the new Civil Code. Thus, the Civil Code guaranties to the [Buyer] the full
three-year period of statute of limitation to file his claims, notwithstanding any contrary
After reviewing the materials of the case and after hearing the arguments of the parties,
the Tribunal finds the following.
1. The Contract of 28 April 1992, which was submitted by the [Buyer] along with the
claim of 19 May 1994, contains the Standard Terms of Sale (Article 9) and provides for
the arbitration of disputes between the parties by the International Trade Arbitration
Commission at the USSR Chamber of Commerce and Industry in accordance with the
rules of the said Commission. The Commission was later reorganized into the Arbitration
Court at the Russian Federation Chamber of Commerce and Industry. By the Resolution
of the Russian Federation Supreme Council of 7 July 1993 "On entering into force the
Russian Federation Law "On International Commercial Arbitration"" (clause 2) the
Arbitration Court at the Russian Federation Chamber of Commerce and Industry was
renamed the International Commercial Arbitral Tribunal at the Russian Federation
Chamber of Commerce and Industry ("the Tribunal"). Thus, in accordance with the
arbitation clause in the Contract, the Tribunal is the arbitral tribunal in whose competence
it is to arbitrate the present dispute.
2. Turning to the issue of law applicable to the relationships under the contract, the
Tribunal concludes that, pursuant to article 166 of the USSR Principles of Civil Law 1991, the said relationships are governed by the law of the Seller's State. For the above reasons,
the Russian Federation law shall apply since the transaction was made in Moscow and
since the Seller was a legal entity incorporated and carrying out its activities under the law
At the time when the contract was made, both the Russian Federation and the German Federative Republic had been CISG Contracting States. Article 1(1)(a) CISG sets
forth that this Convention applies to the relationships between parties whose commercial
enterprises are located in Contracting States. Pursuant to Article 15 of the Russian
Federation Constitution, international treaties of the Russian Federation are a component
part of the Russian Federation legal system. Pursuant to Articles 6 and 7(2) CISG,
questions, which are not expressly settled in this Convention and which cannot be settled
in conformity with the general principles on which it is based, shall be settled in conformity
with Russia domestic civil law. 3. Turning to the issue of legal enforceability of Appendix to the Contract of 28 April
1992, the Tribunal finds that the [Seller]'s position cannot be found reasonable. The
[Seller] argues that no agreement was formed as a result of signing of Appendix to the
Contract of 28 April 1992 which set forth the [Seller]'s obligation to make delivery of
additional 500 tons of metallic sodium. However, this document directly states that it is
nothing else but an appendix to the contract. It sets forth a new price of goods and a new
date of delivery of the second shipment of goods ("the second lot"). As stated in the
Appendix, other terms of delivery are reflected in the main Contract.
For the above reasons, the Appendix to the Contract of 28 April 1992 regarding delivery
of the second lot of 500 tons of metallic sodium should be recognized as a binding
separate sales contract between the parties.
4. Regarding the legal consequences of missing the period of time within which the claims
should have been brought as it was required by clause 6 of the Standard Terms of Sale,
which is a component part of the Contract, the Tribunal finds that such provision cannot
limit the [Buyer]'s lawful right to commence an action due to the [Seller]'s breach of
contract. 5. Regarding the issue of the [Seller]'s failure to fulfill his obligations to deliver the second
lot of 500 tons of metallic sodium, as set forth in Appendix to the Contract of 28 April
1992, after reviewing the documents presented and after hearing the parties' arguments,
the Tribunal finds that there was a breach of the [Seller]'s obligations following from the
Appendix to the Contract. By so finding, the Tribunal applied Article 79 CISG.
Article 79 CISG "(1) A party is not liable for a failure to perform any of his obligations if he proves that
"(2) If the party's failure is due to the failure by a third person whom he has engaged to
perform the whole or a part of the contract, that party is exempt from liability only if:
the person whom he has so engaged would be so exempt if the provisions of
that paragraph were applied to him.
"(3) The exemption provided by this article has effect for the period during which the
"(4) The party who fails to perform must give notice to the other party of the
" (5) Nothing in this article prevents either party from exercising any right other than
to claim damages under this Convention." The [Seller] was unable to prove the existence of impediments which would excuse him
from liability for his failure to fulfill his obligations, since the manufacturer's refusal to
supply the said goods to the [Seller] cannot be found an impediment releasing one's
obligations. The [Seller] should bear responsibility for his failure to fulfill his obligations
also because he did not prove that it could not be reasonably expected either that he would
take such an impediment into account, when entering into the contract, or that he would
avoid or overcome such an impediment and its consequenses.
After reviewing the [Buyer]'s claim regarding the losses he claimed, the Tribunal finds that
the amount of losses should be determined in accordance with Article 74 CISG. Article
74 CISG sets forth that damages for breach of contract by one party consist of a sum
equal to the loss, including loss of profit, suffered by the other party as a consequence of
the breach. In the Tribunal's opinion, the difference between the price stated in Appendix
No. 1 to the Contract and the price of the goods purchased in February 1993 in substitute
of the goods not delivered by the [Seller] under the above mentioned contract represents
sufficient evidence of the amount of losses suffered by the [Buyer] due to the [Seller]'s
breach. Besides, the Tribunal is of the opinion that in this case the [Seller] must pay such
amount of damages also because at the time when the contract was made he should have
foreseen any possible unfavorable consequences of not fulfilling [Seller]'s obligations. For
example, he should have foreseen the increase of the world prices of the goods sold.
At the same time, the Tribunal took into account that the [Seller] presented no evidence
that [at the time of his breach] it was possible to purchase the goods at lower prices.
The Tribunal also sustained the [Buyer]'s claim to recover 5% annual interest on the sum
of the award beginning from 1 February 1993 in accordance with Article 66 of the USSR
Principles of Civil Law 1991.
6. Pursuant to the Regulations on Arbitration Fees and Expenses of the Parties, which in the absence of an agreement to the contrary places the arbitration fee on the party against
whom the award was made, the Tribunal finds that the [Seller] should pay the arbitration
fee. As to the [Buyer]'s claims to recover legal fees, the Tribunal finds it possible to allow
their recovery from the [Seller] in the amount of 5% of the main sum of debt.
For the above stated reasons, the Tribunal HOLDS:
Losses suffered due to the failure to fulfill obligations to deliver 500 tons of metallic
sodium in the amount of US $205,000.00;
5% annual interest on the said amount from 1 February 1993 to the factual date of
The present award is made and signed in three originals, one of which shall be kept by
each the Tribunal, the [Buyer] and the [Seller].
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