Alleged contract for the sale of shoes between Swiss buyer and USA seller

United Nations Convention on Contracts for the International Sale of Goods, Vienna (1980) / Application of the Convention, yes, Art. 1 / Application of the Convention to the question of whether or not a contract has been validly made, yes, by reference to Chapter I, Part II of the Convention / Determination by the arbitrator of a state law (California law) for any other substantive matter falling outside the ambit of the Convention

Claimant is a Company incorporated under Swiss law and having its principal seat in Switzerland. Respondent is a Limited Liability Company incorporated under the laws of California and having its principal seat in California, USA.

By memorandum of 18 April 1991, the Respondent's representative, proposed the sale by it to the Claimant of a quantity of sports shoes at a price of $5.25 per pair, "F.O.B. N. Carolina, (U.S.A.)". By letter dated 21 April 1991, the Claimant's representative, proposed to the Respondent the purchase of the same quantity at the same price, also F.O.B. North Carolina. Sizes and colours were indicated in an annexe and the period of delivery was stated as May 1991. The offer was open for confirmation the following day. By `Performa Invoice' dated 22 April 1991, the Respondent confirmed the sale of the stipulated quantity as $5.25 per pair.

Further negotiations followed, however, and by letter of 16 May 1991, signed on behalf of both parties, an order was agreed for the sale of 22,789 pairs of shoes, at a price of $5.90 per pair C.I.F. Le Havre, shipment to be by 15 June.

In the result no shoes have been delivered by the Respondent to the Claimant and the present arbitration, in which the Claimant alleges breach of contract by the Respondent and claims damages, is the consequence.

'The parties are in dispute, inter alia, as to the existence of a binding contract, whether there has been a breach thereof and, if so, the nature and extent of any damages payable. By the Terms of Reference in the present arbitration, however, the first issue to be determined is that of which law should be held to be applicable to the merits of the dispute between the parties.

The Claimant maintains that the applicable law is that embodied in the United Nations Convention on Contracts for the International Sale of Goods (1980), to which both Switzerland and the United States of America are signatories and which entered into force as regards the United States on 1 January 1988 and, as regards Switzerland, on 1 March 1991. The Respondent maintains that the applicable law is the law of California.

In my opinion the applicable law for the purposes of deciding whether or not a valid and binding contract was entered into between the parties, whether or not one party has been in breach of such a contract and, if what damages are recoverable, is that embodied in the Convention. The Convention was in force at the time of the transactions between the parties. By Article 1 of the Convention it is provided that the Convention applies to contracts of sale of goods between parties whose places of business are in different Contracting States. That condition is here fulfilled. That the Convention applies not only to completed contracts but also to the question whether or not a contract has been validly made is apparent from the fact that the Convention contains a section (Chapter 1, Part II) entitled "Formation of the Contract". The contract also includes rules relating to the obligations of, respectively, the seller and the buyer, the remedies for breach of contract and the extent of damages, including the duty of an aggrieved party to mitigate loss. That is to say, the majority of the problems in the present arbitration which arise for decision, as defined by the Terms of Reference, are included within the scope of the Convention. For the sake of completeness, however, I should add that I am of the opinion that any other substantive matter relating to the issues to be determined as contained in the Terms of Reference which falls outside the ambit of the Convention is governed by the law of the State of California. This in my opinion is the legal system with which the putative contract has the closest connection. The goods were to be furnished by a company carrying on business in the State of California; payment of the purchase price was to be made in US dollars in the State of California; the language of negotiation was English.

Accordingly, as sole Arbitrator, I decide:

That for the purposes of the present arbitration the questions of whether or not the parties entered into a valid and binding contract, whether or not there has been a breach of such a contract and, if so, the extent of any damages to be paid are governed by the 1980 United Nations Convention on Contracts for the International Sale of Goods. Any other substantive matter covered by the Terms of Reference is governed by the law of the State of California.'