盛盼盼 Russian coal case(damages)

1、ICC Arbitration Case No. 8740 of October 1996 (Russian coal case) 盛盼盼 DAMAGESContents12345FACTSAPPLICABLE LAWISSUE 1ISSUE 3ISSUE 2FactsClaimant seller and Respondent buyer entered into contracts for the sale of quantities of Russian coal. Upon delivery of the final shipment, buyer failed to make pay

2、ment for that portion. Buyer claimed that seller owed funds to buyer well in excess of the invoiced amount of the final shipment and requested that its own claims serve to off-set those of the seller and thatthe seller be ordered to pay the excess in buyers favor.v 1The coal delivered in one of the

3、shipments had a volatility of only 20.4%. The difference ，and the buyer accepted these coal. buyers used the coal after expending some expense in order to make it usable.32The sellers conceded that only 13,758 mt of coal were delivered under the contract and the balance remained in default. The sell

4、ers contended that the default was only 36,242 mt; the buyer contended the default to be 46,242 mt. Russian suppliers is notorious of being unreliable, as a result the seller failed in delivering coal on time, which cause damage to the buyer.FactsBoth parties agreed to be bound by Swiss LawAccording

5、 to statements made by each at a hearing, namely the United Nations Convention on Contracts for the International Sale of Goods.Yes. Although from the same Scandinavian country, at the hearing the parties agreed to have the CISG apply (the CISG is also the domestic sales law of Norway).Application o

6、f CISG？Applicable LawApplicable CISG Provisions and Issues Key CISG provisions at issue: Articles 35 ; 73 ; 74 ; 75 ; 76 ; 77 ; 78 35A Obligations of the seller (conformity of the goods to contract): quality, quantity and description required by contract; 73A ; 73A1 Avoidance in installment contract

7、s: fundamental breach with respect to installment; 74A General rules for measuring damages: loss suffered as consequence of breach; 75A Damages established by substitute transaction: substitute transaction after avoidance; 76A Damages based on current price: abvoidance without purchase or resale und

8、er article 75; 77A Obligation to take reasonable measures to mitigate damages Installment contractsAvoidanceCover transactionDamagesConformity of goodsMitigation of lossInterest Descriptors Descriptors damages for low volatile coalClaimant 1Claimant 3Claimant 2damages for late delivery Issuesdamages

9、 for non-delivery buyers first counterclaim: damages for low volatile coal (Article 74 of the CISG)Buyers position: Although buyer admits that the shipments were made, it denies that it owes any liability to the seller as it has claims under three headings against the seller which far exceed any mon

10、eys owed by it to the seller. According to the buyer, the coal delivered in one of the shipments had a volatility of only 20.4%. The difference is so substantial that the buyers asserted that surely they would have had the right to reject this delivery. In lieu thereof, buyers used the coal after ex

11、pending considerable expense in order to make it usable. Such expense would have been avoided if coal of the proper volatility had been delivered. Sellers position: In principle, the buyer is not entitled to set-offany amount, however, even if the buyer were allowed to set-off an amount, such set-of

12、f would still result in a claim favorable to the seller. Although the seller admits the deficiency in the volatility of the coal delivered, this deficiency would not result in the amount of damages asserted by the buyer. The seller asserted that the coal provided was technically possible to use and,

13、 therefore, no penalty was due. Where there are no economical quality influences, this isreflected by a penalty clause. Some users do not wish to recover too many volatiles. Users blend different coals to suit their specific needs. Lower volatiles may not have any impact, but seller has no knowledge

14、 of this. . The seller concludes this argument asserting that the contractcontains no penalty clause for volatiles, and surely had this addition been included, it would have not been accepted by the seller. buyers first counterclaim: damages for low volatile coal (Article 74 of the CISG)相关法条：第七十四条一方

15、当事人违反合同应负的损害赔偿额，应与另一方当事人因他违反合同而遭受的包括利润在内的损失额相等。这种损害赔偿不得超过违反合同一方在订立合同时，依照他当时已知道或理应知道的事实和情况，对违反合同预料到或理应预料到的可能损失。第三十五条（1）卖方交付的货物必须与合同所规定的数量、质量和规格相符，并须按照合同所规定的方式装箱或包装。（2）除双方当事人业已另有协议外，货物除非符合以下规定，否则即为与合同不符： （a）货物适用于同一规格货物通常使用的目的； （b）货物适用于订立合同时曾明示或默示地通知卖方的任何特定目的，除非情况表明买方并不依赖卖方的技能和判断力，或者这种依赖对他是不合理的； （c）货物的

16、质量与卖方向买方提供的货物样品或样式相同；（d）货物按照同类货物通用的方式装箱或包装，如果没有此种通用方式，则按照足以保全和保护货物的方式装箱或包装。（3）如果买方在订立合同时知道或者不可能不知道货物不符合同，卖方就无须按上一款（a）项至（d）项负有此种不符合同的责任。Arbitral Tribunals decision. The issue facing that Arbitral Tribunal was whether the buyer had a valid claim for low volatility in the subject shipment and, if so, h

17、ow this claim would be measured. To resolve this issue, the Arbitral Tribunal applied Article 35 of the CISG which provides that: The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by th

18、e contract. Since the seller conceded that it did not do so, the buyer had a claim. The Arbitral Tribunal rejected the argument of the seller regarding the lack of a penalty clause in the contract, holding that the buyer was not seeking a penalty but damages. Seller does not question the quantum wit

19、h reasonable particularity and does not say which figure would be correct in its view. Speculation as to specific needs of uses is irrelevant. The Arbitral Tribunal must presume that commercial parties bargain for what they need, not something else. The Arbitral Tribunal determined that the method o

20、f computation of damages by the buyer, i.e., the costs incurred by the buyer to make the less volatile coal usable, was reasonable. This measure represented the “difference between the value of sound goods and the value of the defective goods.“ And the seller did not argue that this measure was unre

21、asonable or unnecessary. As such, it awarded this entire claim of the buyer to set-off the claim of the seller. Arbitral Tribunals decision. buyers second counterclaim: damages for late delivery(Articles 74 and 77 CISG) The seller contended that the buyer should have maintained a higher buffer stock

22、 given the notoriety of Russian suppliers for being unreliable, and that there was no proof of loss. 相关法条：第七十四条一方当事人违反合同应负的损害赔偿额，应与另一方当事人因他违反合同而遭受的包括利润在内的损失额相等。这种损害赔偿不得超过违反合同一方在订立合同时，依照他当时已知道或理应知道的事实和情况，对违反合同预料到或理应预料到的可能损失。第七十七条声称另一方违反合同的一方，必须按情况采取合理措施，减轻由于该另一方违反合同而引起的损失，包括利润方面的损失。如果他不采取这种措施，违反合同一方可

23、以要求从损害赔偿中扣除原可以减轻的损失数额。Arbitral Tribunals decision. The issues presented to the Arbitral Tribunal to determine this counterclaim were: In contracts . is buyer entitled to damages for late delivery? If so, how many metric tons were late in delivery? Is buyer entitled to moving charges? What were the m

24、oving charges per metric ton?Since it was clear to the Tribunal that no deliveries were made in a timely fashion pursuant to either of the subject contracts, the sellers were in breach of a term in each. Thus, the only real issue presented was what losses the buyer suffered as a result of this breac

25、h. Initially, the Tribunal addressed the issue of mitigation of damages. According to the Tribunal, the buyers use of coal from its security stock was the most cost-effective means it could have used to mitigate its losses caused by the breach . It was the Tribunals conclusion that had the buyer fai

26、led to react to the situation as it developed in this manner, its losses would have been substantially higher. With regard to the first contention of the seller, the Tribunal indicated that whether or not the unreliable nature of Russian suppliers is accurate, this was sellers risk to absorb and not

27、 the buyers. With regard to the second contention, the Tribunal concluded that the cost of moving the replacement coal from stockpiles was substantiated in the invoices provided and represented the loss claimed in the buyers counterclaim. The Tribunal concluded that these contentions were entirely w

28、ithout merit. Accordingly, the Tribunal awarded to the buyer the entire cost claimed in this counterclaim, as well as interest running from 8 August, 1994, set-off against the main claim. Arbitral Tribunals decision. buyers third counterclaim: damages for non-delivery(Articles 73, 74, 75 and 76 CISG

29、) The sellers conceded that only 13,758 mt of coal were delivered under the contract and the balance remained in default. Their claim that they could rely on the force majeure clause of the contract was abandoned at the hearing. The only remaining issue, therefore, was the amount of the default. The

30、 sellers contended that the default was only 36,242 mt; the buyer contended the default to be 46,242 mt. The determining factor was whether the contract quantity had been effectively reduced to 50,000 mt from the original contracted quantity of 60,000 mt. 相关法条第七十三条（1）对于分批交付货物的合同，如果一方当事人不履行对任何一批货物的义务

31、，便对该批货物构成根本违反合同，则另一方当事人可以宣告合同对该批货物无效。（2）如果一方当事人不履行对任何一批货物的义务，使另一方当事人有充分理由断定对今后各批货物将会发生根本违反合同，该另一方当事人可以在一段合理时间内宣告合同今后无效。（3）买方宣告合同对任何一批货物的交付为无效时，可以同时宣告合同对已交付的或今后交付的各批货物均为无效，如果各批货物是互相依存的，不能单独用于双方当事人在订立合同时所设想的目的。第七十五条如果合同被宣告无效，而在宣告无效后一段合理时间内，买方已以合理方式购买替代货物，或者卖方已以合理方式把货物转卖，则要求损害赔偿的一方可以取得合同价格和替代货物交易价格之间的差

32、额以及按照第七十四条规定可以取得的任何其它损害赔偿。v第七十六条（1）如果合同被宣告无效，而货物又有时价，要求损害赔偿的一方，如果没有根据第七十五条规定进行购买或转卖，则可以取得合同规定的价格和宣告合同无效时的时价之间的差额以及按照第七十四条规定可以取得的任何其它损害赔偿。但是，如果要求损害赔偿的一方在接收货物之后宣告合同无效，则应适用接收货物时的时价，而不适用宣告合同无效时的时价。（2）为上一款的目的，时价指原应交付货物地点的现行价格，如果该地点没有时价，则指另一合理替代地点的价格，但应适当地考虑货物运费的差额。相关法条Arbitral Tribunals decision. The iss

33、ues presented in this counterclaim are: In contract . does buyer have a claim for damages for non-performance? What was sellers option and under which circumstances could it be exercised? How should the damages, if any, be measured? On the basis of the offer of . the contract that buyer made with .,

34、 or in another way?“ The Tribunal found that the aforementioned reduction had occurred. The correspondence, however, shows that buyer first confirmed 60,000 mt with a particular delivery schedule . and that then seller specified a quantity of 50,000-60,000 mt in sellers option (with an unchanged del

35、ivery schedule) . . . and that finally buyer made it a condition that any quantity supplied below 60,000 mt would be deducted from the December delivery . This suggests that buyers accepted a minimum quantity of 50,000 mt, and that they only insisted that the deliveries due in July/August, September

36、, October and November of 10,000 mt each would not be shortened. Arbitral Tribunals decision.Substitute Purchase Despite the conclusion reached by the Tribunal that the contract quantity had been reduced to 50,000 mt, it indicated that the buyer was only entitled to recovery for actual damages measu

37、red by its substitute purchase of only 10,000 mt. Furthermore, the buyers claim based on the default quantity failed for the absence of a current price as required by Art. 76 Vienna Convention. The Tribunal determined that the contract had been properly avoided pursuant to Art. 73 Vienna Convention

38、pursuant to a letter by the buyer declaring as such. The Tribunal first addressed the issue of damages pursuant to Art. 76 Vienna Convention based on the difference between the contract price and the estimated market value of the goods on the date of default.the seller argued: There is no such thing

39、 as uniform coal since the content of various elements in coal differs from one type to the other. Furthermore, even volatility is not a consistent assessment of value since volatility determine caloric yield and, depending on the type of equipment, the user has it may not want coal with the highest

40、 caloric yield. Additionally, coal is bulky and shipping costs differ from one port to the next. Thus, there is no one determinative market value for coal, therefore, the buyer can only recover if it can establish that it bought in substitute goods. Buyer countered the argument of the sellers indica

41、ting that those involved in the sale and purchase of coal know about the industry prices as they are published on a regular basis. Thus, an experienced trader would be capable of establishing a price for a particular quality of coal to be delivered at a certain time to a certain place. Substitute Pu

42、rchase the Tribunal focused on the inability of the buyer to state a market price for coal in general or for coal of a particular quality. 1.the buyer dispute that there is no commodity exchange and thus no commodity exchange price for coal. 2.the buyer itself pointed out that coal has quite differe

43、nt specifications and that requirements of consumers vary.(volatile content, ash fusion temprature, particular quality elements )3.coal from different origins also has different heating values. This leads to the conclusion that the prices that are paid cannot be ascertained merely on objective groun

44、dsSubstitute Purchase The Tribunal concluded that the buyer was not able to show that there is a market price within the meaning of Art. 76 Vienna Convention. The Tribunal ruled based on the consideration that the basis for allowing recovery for market or current price is that such can be determined

45、 with some amount of certainty.“The Arbitral Tribunal is also of the opinion that Art. 76 Vienna Convention cannot be applied as there is in this trade no market institution which could be compared to a stock or commodity exchange and which would guarantee that a market price could be established, w

46、hich is also required by the Uniform Law on the International Sale of Goods ULISSubstitute Purchase The Tribunal summarized its determination of this issue of damages as follows: Generally, only a party that went out into the market to make a cover purchase has a credible case that it suffered damag

47、e. There is an exception to this a commodity that has not just a market price but a regular market with many purchasers and sellers actively engaged in regular trading. The reason is that where there is a market of that nature it becomes easily believable that the aggrieved partys damages may be measured with reference to the market price, and it becomes unimportant to be able to pinpoint a particular cover purchase. The Arbitral Tribunal however does not find that there is a m