1988 ICC Rules of Arbitration

CISG Art. 78

Claimant agreed to sell to Defendant equipment, spare parts and services defined in the contract between them. By mutual agreement, the price originally set was increased and the payment conditions changed. Defendant found itself unable to finance the purchase, owing to its own financial difficulties arising from the withdrawal of credit and loss of a major client. It sought the cancellation of the contract, to which Claimant objected, claiming damages for non-fulfilment. Defendant refused to take delivery of the goods, which thus had to be stored at Claimant's expense. Claimant's attempts to sell the equipment were unsuccessful. In his award, the sole arbitrator began his consideration of the legal issues with the question of the applicable law.

'a) Applicable law

The Contract signed by Plaintiff and Defendant is silent on the issue of applicable substantive law. It merely provides that any dispute, controversy or claim that cannot be settled by the parties shall be submitted to arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce in Paris.

Neither party has made an argument as to the law applicable to the present dispute. In the Terms of Reference the parties authorized the Arbitrator to determine the applicable law in the present dispute preliminarily by way of a simple procedural order.

In the arbitral hearing . . . both parties expressly agreed to the application of Austrian law by the Arbitrator. The question of whether the United Nations Convention on the International Sale of Goods ("UN-Sales Convention") apples in the present case needs not to be addressed because the result reached by the Arbitrator would be same if the UN Sales Convention applied (see below under b) and c)).

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b) Basis for Plaintiff's Claim

According to the provisions of Annex No 7 to the Contract, Defendant shall pay to Plaintiff 20% of the total contract value in advance. 80% of the contract value shall be paid by bank transfer within 10 days from the date of receipt by Defendant of shipping documents sent by courier service. . . . Plaintiff received the advance payment by Defendant in the amount of . . . and . . . submitted to Defendant the shipping documents. Defendant, however, did not effect payment of the balance in the amount of . . . In light of this, Plaintiff has, in principle, a contractual claim for payment of the remaining purchase price against Defendant in the amount of . . .

In case of transactions subject to the Austrian Commercial Code, for defaults in making money payments the debtor must pay interest at the rate of 5% p.a. (section 352 Austrian Commercial Code; Article 78 UN Sales Convention). Since the parties are both businessmen and the present contract is thus subject to the Austrian Commercial Code, the Plaintiff is, in principle, also entitled to claim interest on the remaining purchase price. Furthermore, since Defendant failed to take delivery of the Contract goods, Plaintiff is also entitled to claim storage and transportation costs for the goods based on the principles of tort.

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c) Counter-Arguments by Defendant

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Retention of Title

Defendant argued that Plaintiff was not entitled to demand payment of the purchase price and transfer ownership of the Contract goods to Defendant, which he retained for himself. Defendant thereby implicitly refers to point 2 of Annex No 7 to the Contract which provides that the equipment will remain the exclusive property of Plaintiff until payment has been received by Plaintiff and title to the equipment stored at the freight forwarder will pass to Defendant upon receipt of payment by Plaintiff on his account. Since Plaintiff has not yet received payment from Defendant and is thus still the owner of the Contract goods not yet sold, the question arises as to whether Plaintiff is entitled to claim the contract value.

The retention of title is a means of securing payment of the purchase price. Should the buyer default with the payment then the seller can either rescind the contract and take possession of the contract goods or the seller can stick to the contract and demand payment of the purchase price (Koziol/Welser, Grundriß des Bürgerlichen Rechts II 152; Aicher in Rummel, ABGB § 1063 Rz 51 et seq.; see also Articles 62 to 65 UN Sales Convention and Schlechtriem, Internationales UN-Kaufrecht 132 et seq.). In the present case, Plaintiff chose the latter option and requested fulfillment of the Contract, which means that Defendant must pay the purchase price and take delivery of the Contract goods. Under these circumstances, the fact that Plaintiff retained title for the Contract goods does not affect his claim for payment of the purchase price.'