V. LEGAL CONSIDERATIONS

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2. Applicable Law to Claimant’s Claim and to Respondent’s Counterclaim

41. Claim and counterclaim, both originate from the Contract. Since the Parties, during the hearing, have agreed that the Contract should be governed by [X] law … the claim and the counterclaim as well as the question of whether Respondent is entitled to set-off his claim for damages against Claimant’s claim for restitution of the advance payment are governed by [X] law.

42. Concerning the rights and obligations of the Parties arising from the Contract the United Nations Convention on Contracts for the International Sale of Goods (CISG) is not applicable. It is true that the CISG is applicable to the dispute by virtue of Article 1(1)(a) CISG because [the parties’ countries] ratified the CISG. The Parties, however, have excluded the application of the CISG in accordance with Article 6 CISG by their agreement on [X] law.

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3. Claimant’s Claim

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bb) Claimant’s Entitlement to Dissolution

50. Claimant, however, was neither on 25 August [year X] nor on 4 October [year X] entitled to declare the Contract dissolved because the requirements of ORGALIME paras. 40 and 41 were not met. In this regard, it is to be noted that the Parties, by incorporating the ORGALIME provisions, modified the requirements under [a provision of the applicable law] for setting aside the Contract in case of delay in delivery of the machine. 1

51. ORGALIME para. 40 states that

[t]he Contractor [= Respondent] is in delay when the Works are not completed at the time for completion as defined in Clauses 36, 37 and 39. Contractor’s delay entitles the Purchaser [= Claimant] to liquidated damages from the date on which the Works should have been completed. The liquidated damages shall be payable at a rate of 0.5 percent of the Contract Price for each completed week of delay. The liquidated damages shall not exceed 7.5 percent of the Contract Price.

ORGALIME para. 41 further provides:

41. If the Contractor’s delay is such that the Purchaser has become entitled to the maximum liquidated damages under Clause 40 and the Works are still not completed, the Purchaser may demand In Writing completion within a final reasonable period which shall not be less than one week.

If the Contractor does not complete the Works within such final period and this is not due to any circumstance for which the Purchaser is responsible, then the Purchaser may by notice In Writing to the Contractor terminate the Contract in respect of such part of the Works which, due to the Contractor’s failure, cannot be used as intended by the parties.

If the Purchaser terminates the Contract he shall be entitled to compensation for the loss he has suffered as a result of the Contractor’s delay. The total compensation, including the liquidated damages which are payable under Clause 40, shall not exceed 15 percent of that part of the Contract Price which is attributable to the part of the Works in respect of which the Contract is terminated.

The Purchaser shall also have the right to terminate the Contract by notice In Writing to the Contractor, if it is clear from the circumstances that there will occur a delay in completion of the Works which under Clause 40 would entitle the Purchaser to maximum liquidated damages.

In case of termination on this ground, the Purchaser shall be entitled to maximum liquidated damages and compensation under the third paragraph of this Clause 41.

52. Pursuant to ORGALIME para. 40 Respondent was in default in delivery the machine.

According to the Contract, delivery was to be effected "6 months after date of order". The date of order is synonymous with the date of the conclusion of the Contract, i.e. 18 October [year X-1]. Respondent was therefore obligated to have delivered the production line by 18 April [year X]. ORGALIME para. 36 and 37 are not applicable since the Parties, on the one hand, had specified the date for completion and, on the other hand, had not agreed on taking-over tests.

53. Respondent cannot rely on the protocol of the meeting which took place at Claimant’s premises on 18 January [year X] according to which the "Machines will be ready for dispatch in our factory end of week 25" (Respondents exhibit No. 14). Claimant contested that such an agreement was made, and Respondent failed to present any evidence that Claimant has consented to that extension of the delivery terms.

54. The Tribunal does not follow Respondent’s view that he was entitled to suspend performance, since ORGALIME para. 39 only entitles the Contractor [= Respondent] "to an extension of the time of completion if delay occurs: … d) as a result of suspension under Clauses 16, 47 or 70 ..."

ORGALIME para 70 provides that

[E]ach party shall be entitled to suspend the performance of his obligations under the Contract, where it is clear from the circumstances that the other party will not be able to perform his obligations. A party suspending his performance of the Contract shall forthwith notify the other party thereof In Writing.

It is uncontested that Respondent never made any notification of suspension to Claimant and therefore had no right to suspend delivery. ORGALIME para. 16 and 47 are not applicable.

55. Claimant, despite Respondent’s default, was not entitled to dissolve the Contract since the requirements of ORGALIME para. 41 are not met. The Tribunal does not share Claimant’s view that his right to termination of the Contract follows from ORGALIME para. 41 subpara. 4. From the wording of that provision ("it is clear from the circumstances that there will occur a delay") and the reference to ORGALIME para. 40, the Tribunal understands first that subpara. 4 only applies to (anticipatory breach) situations where prior to the date of performance it is clear that there will occur a delay which would entitle the purchaser to maximum liquidated damages. Since the maximum damages should not exceed 7.5 percent and the damages should be payable at the rate of 0.5 per cent, the purchaser would be entitled to termination in case of an anticipatory delay of at least 15 weeks. Second, the scope of ORGALIME para. 41 subpara. 4 needs to be distinguished from ORGALIME para. 41 subpara. 2, which deals with the situation that a delay that would entitle the purchaser to maximum liquidated damages has actually occurred. In such situation, the purchaser is only entitled to terminate the contract if he demanded completion within a reasonable period of at least one week and the contractor failed to complete the works within that period.

56. In the pertinent case, Claimant’s request for restitution of the advance payment was first made on 25 August [year X]. At that time, Respondent was already 18 weeks in delay with the delivery. Claimant’s right to terminate the Contract due to Respondent’s delay therefore was not subject to subpara. 4 but subpara. 2 of ORGALIME para. 41. Since it is uncontested that Claimant never demanded in writing the completion of the production line, he thus wrongfully and without effect declared the Contract dissolved in his letters dated 25 August [year X] and 4 October [year X].

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b) Dissolution of Contract by Respondent

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bb) Respondent’s Entitlement to Dissolution

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62. First, it is to be noted that the ORGALIME provisions only deal with and provide for termination if the purchaser is in default in fulfilling preparatory work (ORGALIME paras. 10-17) and in case of late payment (ORGALIME paras. 43-47). Claimant, however, was not in default in fulfilling preparatory work nor did he fail to pay the second instalment by the stipulated date. Since the ORGALIME provisions are not conclusive with regard to the Parties’ right to dissolution, the question of whether or not Respondent was entitled to declare the Contract dissolved is therefore subject to [the supplier’s domestic law].

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ee) Respondent’s Claim is not Excluded by ORGALIME para. 71

94. Respondent’s claim for damages is not excluded by ORGALIME para. 71 according to which:

[S]ave as otherwise stated in these General Conditions there shall be no liability for either party towards the other party for loss of production, loss of profit, loss of use, loss of contracts or for any other consequential or indirect loss whatsoever.

The meaning of this clause was subject to an extensive discussion between the Tribunal and the Parties’ attorneys at the hearing. The Tribunal pointed out that from the plain wording of that clause it seemed plausible to conclude that Respondent would not be entitled to loss of profit and other costs incurred except for the manufacturing costs. Respondent argued that, ORGALIME para. 71 "is not applicable to those kind of situations" but only applied "for a situation when you are too late". Claimant’s attorney, in his direct response, only replied that "that was exactly the situation because the producer was too late with the production". Claimant, however, did not react when Respondent later argued that Claimant never argued that ORGALIME para. 71 would prevent Respondent from claiming damages for loss of profit.

95. In order to clarify the meaning and the scope of that provision, the Tribunal, in Procedural Order No. 3, invited both Parties to comment on "whether or not ORGALIME para. 71 prevents Respondent from requesting consequential losses". Respondent, in his comments on Procedural Order No. 3, argued that it followed from the context with another ORGALIME provision that he would be entitled to damages for any loss suffered up to the amount of the contract price. Claimant, in his reaction to Procedural Order No. 3, did not make any comment on ORGALIME para 71. Nor did Claimant reject Respondent’s comments on Procedural Order No. 3 in his rebuttal.

96. In light of Claimant’s silence on Respondent’s submissions during the hearing, on the express question of the Tribunal in Procedural Order No. 3 and on Respondent’s submissions in the post hearing briefs, the Tribunal arrives at the conclusion that there was a mutual understanding between the Parties, at the time of the conclusion of the contract, that claims for damages based on breaches not covered by the ORGALIME provisions are not subject to the limitations under ORGALIME para. 71. The Tribunal views Respondent submissions as statements of facts regarding the true intentions of both Parties at the time of the conclusion of the Contract. Since Claimant did not contest the submissions, the Tribunal thus regards Respondent’s submissions as conceded by Claimant.

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Article 265 book 6 DCC is non-peremptory law (ius dispositivum, see Asser-Hartkamp, Verbintenissenrecht, Part 4-IT, 10th ed., W.E.J.Tjeenk Willink Deventer 1997, no. 517.