A Chinese trading company (the Buyer) entered a co...
A Chinese trading company (the Buyer) entered a contract with a Japanese manufacturer (the Seller) of precision machinery and testing equipment for purchasing 15 sets of production lines. The total value of the contract is 400,000 US dollars. Price terms: CFR Shanghai; Time of shipment: the end of September 2017; Payment terms: Buyer opens an irrevocable negotiable letter of credit in full amount two months prior to the date of shipment. In the sales contract, the place of arbitration is China. On July 29, 2017, the buyer opened a letter of credit through a bank in favour of the seller and no deposit was made. The seller, on September 8, shipped the production lines, and negotiated the payment to the negotiating bank. On September 19, the 15 sets of production lines arrived at the port of destination – Shanghai. The regional commodity inspection authority inspected the production lines. The inspection report issued by the authority showed that: 4 out of 15 sets of the production lines are not in conformity with the quality terms stipulated in the sales contract. These 4 sets of production lines cannot be used to manufacture standard-conforming products at all. The buyer insisted that the 15 sets of production lines should be used together. Since 4 sets of the production lines were of no use, the remaining 11 sets of qualified production lines should be rejected as well. Therefore, on September 29, 2017, the buyer sent a memo to the Japanese manufacturer, which requested that all 15 sets of production lines should be sent back to Japan. However, the Japanese seller neither signed the memo nor replied to the Chinese buyer’s request. The buyer finally brought the case to the CIETAC, the arbitration institution specified in the sales contract. The demands of the buyer were: 1). Return the 15 sets of the production lines. The seller should fully refund the payment and bear the costs and expenses associated with the return. 2). The buyer signed a contract with another Chinese company for renting out all 15 sets of the production lines. Because the 4 sets of faulty production lines, the buyer had already paid compensation of 15,000 US dollars to the leasing Chinese company. The buyer demanded that the seller should bear the loss and pay the buyer 15,000 US dollars. Questions: 1. Other than the discrepancy and claim clauses, what kind of clause regarding dispute resolution should be included in the sales contract of this case? (1’) Why? (1’) 2. What could be the arbitration awards the arbitration court gives in terms of the demands of the buyer? (1’+1’) Give your answers for the following subjects a. Return of 15 sets of production lines b. economic loss to the Chinese buyer which rented out the equipment 3. Since the Japanese manufacturer did not sign the memo and respond to the Chinese buyer, could the buyer bring the case to a court in China and sue the Japanese seller for damage and loss first before arbitration? Why? (2’+2’) After the arbitration award was made, if the Japanese manufacturer refused to honour the award, what could the Chinese buyer do? (2’) Total 10 points