Award No 9978/1999,
CISG-online 708176


A dispute arose as a result of non-delivery of the goods for the subject matter of the contract of sale between Claimant (purchaser) and Respondent (seller). The contract contained a special clause providing that, in the event of non-delivery, seller would be liable to a penalty of 2% of the contract value in full and final settlement. The goods were to be paid for by letter of credit (L/C) upon presentation of certain documents, including a forwarder’s certificate of receipt specifying that the goods had been taken over for the free disposal of the beneficiary (i.e. Respondent). The documents were presented and payment made, but the goods were never delivered to Claimant. Negotiations were undertaken for the sum paid to be refunded. An initial amount was repaid and an agreement made for the transfer to Claimant of sums purported to be owed to Respondent by a third party. Claimant subsequently initiated arbitration proceedings asking for the refund of amounts paid under the L/C (plus interests), bank interest paid in connection with the L/C, detention charges, deadfreight and a 2% penalty for non-delivery. Claimant based its claim for damages on Art 45(1)(b) CISG in conjunction with Art 74, invoking Articles 78 and 84(1) in support of its request for interest. Alternatively, it claimed repayment under Articles 49 and 81(2), maintaining that it had avoided the contract in accordance with Articles 26 and 49(1)(a) CISG and arguing that this too entitled it to damages. It considered its claim for damages was not barred by the special condition for non-delivery contained in the contract, since the damages were claimed not for non-delivery, but for breach by Respondent of an obligation arising at law under the Convention. Respondent rejected these claims, maintaining that it did not own the goods when they were sold to Claimant and invoking force majeure to disclaim liability for detention charges and deadfreight. It further claimed exemption from any liability in excess of the 2% contractual penalty.


With respect to Claimant’s claim for damages under Articles 45(1)(b) and 74 CISG

‘Claimant has no claim for damages against Respondent. Damage claims for non performance arising out of the contract in dispute are governed by the “UN-Convention on Contracts for the International Sale of Goods” (CISG). The CISG applies to the contract as part of the applicable German law according to its Art 1(1)(b). Pursuant to Art 6 CISG the parties to an international sales contract may derogate from the provisions on damages in Art 45(1)(b) CISG through inclusion of a penalty/liquidated damages (pld) clause. This is what the parties have done in the case before the Tribunal with the inclusion of the special conditions for non-delivery.

This pld-clause is valid under the applicable German law and precludes any further damage claims for non-performance which the Claimant may have against Respondent.

The validity of this clause is not governed by the CISG but by German law as the law governing the contract … Art 4(a) CISG provides that the Convention is not concerned with the validity of individual provisions contained in the contract. This also applies to pld-clauses.’

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