Chapter 6 Inspection,Claim,Force
Majeure and Arbitration
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Learning Objectives
? 1.To learn the three ways of stipulating the place
and time of inspection in the contract
? 2.To understand the liabilities of breach of contract
? 3.To learn the ways of stipulating the claim clause
in the contract
? 4.To learn the consequences of force majeure
? 5.To understand the concept of arbitration
? 6.To learn the importance and contents of
arbitration agreement( or clause)
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Section 1 Commodity Inspection
? 1.1 Importance of commodity inspection
? 1.2 Time and places of inspection
? 1.3 Inspection body
? 1.4 Inspection standards
? 1.5 An example of inspection clause in contract.
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1.1 Importance of commodity inspection
? In in ternational trade,the quality and quantity of
the goods delivered by the seller should be in
conformity with the terms of the contract and
should be packed in the manner required by the
contract,In this sense,inspection are necessary
steps in the transfer of the goods.
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? Delivery of goods ?Receipt of goods ?Inspection
of goods ?Acceptance of goods (Or Rejection of
goods)
? Notice of acceptance
? Notice of claim
? Notice of rejection
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1.2 Time and places of inspection
? (1).Provisions in the CISG
CISG provides that except where the parties have
agreed otherwise,the buyer has the right to inspect the
goods.And the time and place of inspection have been
stipulated in detail,CISG Article 38 states:
? a.The buyer must examine the goods,or cause them to
be examined,within as short a period as is practicable in
the circumstances.
? b.If the contract involves carriage of the goods,
examination may be deferred until after the goods have
arrived at their destination.
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(1) Provisions in the CISG
? If the goods are redirected in transit or re-
dispatched by the buyer without a reasonable
opportunity for examination by him and at
the time of the conclusion of the contract the
seller knew or ought to have known of the
possibility of such redirection or re-dispatch,
examination may be deferred until after the
goods have arrived at the new destination.
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(2) Three ways of stipulating the place and time
of inspection in the contract.
? a.Shipping quality and weight
This means that inspection at the seller’s factory or at
the port of shipment is final.Buyer can re-inspect the
goods at the port of destination,but normally he cannot
claim for compensation,Thus it is favorable to the
seller.
? b.Landed quality and weight
This means inspection carried out at the port of
destination is final.This arrangement is favorable to the
buyer.
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? c.Inspection at the port of shipment and re-
inspection at the port of destination.
It means after inspection at the port of
shipment,the buyer retains the right to re-
inspect and claim for compensation.Thus it is
favorable to the seller.
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1.3 Inspection body
? There are mainly two types of inspection body,governmental
and non-governmental,The governmental inspection body such
as the Food and Drugs Administration(FDA) in the USA
specialize in inspection of particular merchandise
(grain,drug,etc.).The international inspection of commodity is
mainly undertaken by nongovernmetal bodies which have the
same legal status as notary organizations.The notable bodies
are Societe General De Surveillance S.A,( SGS) in
Geneva,Swiss,Underwriters Laboratory(UL) in the
USA,Lloyd Surveyor,B.V,in Britain and Japan Marine
Surveyor & Sworn Measurer’s Association.
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1.4 Inspection standards
? The commodity inspection authorities shall conduct
inspection according to the following standards:
(1) If the compulsory standards or other inspection
standards which must be complied with are
specified by laws or administrative regulations,the
inspection shall be performed according to the
standards as specified by laws and administrative
regulations;
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(2) In the absence of the compulsory standards or
other inspection standards which must be
complied with as specified by laws or
administrative regulations,the inspection shall
be performed according to the standards agreed
upon in the international trade contracts.If the
trade is conducted against the sample,the
inspection shall be performed simultaneously
according to the sample provided.
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? (3) In cases the compulsory standards or other
inspection standards which must be complied with
as specified by laws or administrative regulations
are lower than the standards agreed upon in the
international trade contract,the inspection shall be
conducted according to the standards agreed upon
in the international trade contract.If the trade is
conducted against the sample,the inspection shall
be performed simultaneously according to the
sample provided;and
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? (4) In the absence of compulsory standards or other
inspection standards which must be complied with
as specified by laws and administrative regulations,
and in case inspection standards are either not
agreed upon or agreed upon unclearly in the
contract,the inspection shall be conducted
according to the standards of the manufacturing
country,or relevant international standards of the
standards designated by the state inspection agency.
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1.5 An example of inspection clause in
contract
?,It is mutually agreed that the Inspection Certificate of
Quality and Quantity (weight) issued by the Manufacturer(or
XXX Survey or ) at the port of shipment shall be part of the
documents to be presented for negotiation under the relevant
L/C,The Buyers shall have the right to re-inspect the quality
and quantity (weight) of the cargo.The re-inspection fee
shall be borne by the Buyers,Should the quality and/ or
quantity (weight) be found not in conformity with that of the
contract,the Buyers are entitled to lodge with the Sellers a
claim which should be supported by survey reports issued
by a recognized surveyor approved by the Sellers,The
claim,if any,shall be lodged within X X days after arrival
of the cargo at the port of destination.
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Section 2 Claim
? 2.1 Liabilities of breach of contract
? 2.2 Claim clause in contract
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Liabilities of breach of contract
? 1,Breach of contract
? (1) Breach of contract committed by the seller
Breach of contract committed by the seller mainly
covers,a,The seller fails to deliver the goods; b,
The documents relating to goods are incomplete; c,
The goods do not conform with the contract,etc;
? (2) Breach of contract committed by the buyer
Breach of contract committed by the buyer mainly
covers,a,The buyer fails to pay the price; b,The
buyer fails to take delivery of the goods,etc.
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? (1) CISG Article 25 provides that
“A breach of contract committed by one of the parties is
fundamental if it results in such detriment to the other
party as substantially to deprive him of what he is
entitles to expect under the contract,unless the party in
breach did not foresee an a reasonable person of the
same kind in the same circumstances would not have
foreseen such a result.” The injured party may declare
the contract avoided and claim damages.
If,however,the breach of contract is non-fundamental,
the injured party can only claim damages but cannot
declare the contract avoided.
2,Liabilities of breach of contract
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? (2) The British law divides the breach of contract
into Breach of Condition and Breach of
Warranty.
? Breach of Condition refers to the breach of the
major terms of the contract,the injured party may
declare the contract avoided and claim damages,
Breach of Warranty means breach of the minor
terms of the contract,the breach of which gives
rise to a claim for damages,but not to a tight to
reject the goods and treat the contract as repudiated.
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Claim clause in contract
? (1) Discrepancy and claim clause
? This is the commonly adopted claim clause in a sales
contract,The clause includes:
? a,Basis for claim,evidences to be provided.
? b,Term of validity of claim:
The following is an example of claim clause in a sales
contract:
“Claim,Any claim by the Buyers regarding the goods
shipped shall be filed within 30 days after arrival of the
goods at the port of destination specified in the relative Bill
of Lading an supported by a survey report issued by a
surveyor approved by the Sellers.”
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? (2) Penalty clause
? Sometimes a penalty clause should be
included in the contract in case the buyer fail
to delay in opening of L/C,or the seller fails
to deliver the goods on time,Under this
clause,the party who fails to fulfill the
contract must pay a fine,a certain percentage
of total contractual value.
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? The following are two examples of penalty
clause:
?A,Penalty clause regarding the Seller’s
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Section 3 Force Majeure
? 3.1 Definition of force majeure
? 3.2 Force majeure clause
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Definition of force majeure
? Force majeure (French:,superior force”) is an
event or effect that cannot be reasonably anticipated
nor controlled,A party is not liable for any damage
resulting from his failure to perform the contract is
he can show (a) that his failure was,due to an
impediment beyond his control,” (b) that the
impediment was not something he could have
reasonable taken into account at the time of
contracting,and (c) that he remains unable to
overcome the impediment or its consequences.
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? Force majeure is not only narrowly defined,but also
limited in its application,It applies to situations-such
as natural disasters,war,embargoes,strikes,
breakdowns,and the bankruptcy of a supplier-that
frustrate both the party attempting to perform and the
party expecting performance,Because neither party is
really at fault,the breaching party is excused from
paying damages,He is not,however,exempted from
the application of any other appropriate remedy (such
as suspension of performance or avoidance).
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? There are usually two consequences of force
majeure,termination of the contract and
postponement of the contract,Whether terminating
the contract or postponing the performance of the
contract depends on what degree the force majeure
event has affected the performance of the contract,
or on the detailed stipulations in the contract,
Generally speaking,the contract can be avoided
only if the occurrence of the force majeure event
makes it impossible to perform the contract,such as
the loss of or damage to specifically designated
goods,or the event is so serious that it is impossible
to recover within a short period of time,Otherwise,
the suffering party can only make amendments to
the contract to reduce the possible losses to the
other party.
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Force majeure clause
? The force majeure clause usually contains:
? 1,The scope of force majeure events,Since there is
still no definite explanation as to which events
should be regarded as froce majeure,the seller and
the buyer usually stipulate in their contract the
scope of force majeure events,Force majeure
events include certain natural disasters such as fire,
flood,storm,heavy snow,earthquake,etc,and
social disturbances like war,strike,sanction,etc
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? 2,Time limit of notifying the other party,In
case of a force majeure event,the party
seeking to use the clause of force majeure
has a duty to promptly notify the other party
of,the impediment and its effect on his
ability of perform”
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? 3,The issuer of the certificate,A force majeure event should
be verified by a certificate that attests such an event,The
issuer of the certificate should be mentioned in the clause,
? The following is an example of force majeure clause:
?,Force majeure,If the shipment of the contracted goods is
prevented or delayed in whole or in part by reason of war,
earthquake,flood,fire,storm,heavy snow or other causes of
Force Majeure,the seller shall not be liable for non-shipment
or late shipment of the goods or non-performance of this
contract,However,the seller shall notify the buyer by cable or
telex and furnish the latter by registered airmail with a
certificate issued by the China Council for the Promotion of
International Trade attesting such event or events.”
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Section 4 Arbitration
? 4.1 The ways of settlement of disputes
? 4.2 The concept of arbitration
? 4.3 Arbitration procedures
? 4.4 Arbitration agreement
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4.1 The ways of settlement of disputes
? When disputes arise between exporter and importer,
they can be settled through friendly consultation,
arbitration,or litigation.Friendly negotiation is an
important tool in the process of dispute settlement,
and undoubtedly the one most commonly relied on,
The majority of the disputes are settled this way and
friendly business relations are thus maintained
between exporters and importers.
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4.1 The ways of settlement of disputes
? Arbitration is the next best alternative,It is a means
of settlement between two parties through the
medium of a third party who is not partial to either
of the parties to the dispute.Litigation means
lawsuit,a process in law institued by one party to
compel another to do him justice,It is usually costly
and time-consuming,This section will focus on
arbitration.
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4.2 The Concept of Arbitration
? a.voluntarily
? b.an arbitration agreement
? c.more simple in procedures,less costly and
time-consuming than litigation.
? d.The award is final and binding on both
parties.
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a.voluntarily
? The litigants submit themselves voluntarily
to an arbitrator.
? The arbitrator is a private,disinterested
person,or nonofficial government
organization chosen by the parties to a
disputed question.
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b.an arbitration agreement
? It in written form between the parties
concerned is prerequisite for arbitration,An
arbitration agreement is a contract between
two or more parties whereby they agree to
refer the subject in dispute to others and to be
bound by their award.
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c.more simple in procedures,less costly and
time-consuming than litigation.
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d.The award is final and binding on both
parties.
? Neither party may bring a suit before a law
court or make a request to any other
organization for revising the arbitral award,
The characteristic of finality of arbitral
awards is the basic element of the modern
commercial arbitration recognized all over
the world.
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4.3 Arbitration procedures
? a.Application for arbitration
? b.Composition of arbitration tribunal
? c.Hearing
? d.Award
? e.Setting aside an award
? f.Enforcement of an award
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a.Application for arbitration
? (1) Procedure of applying for arbitration,When
applying for arbitration,the claimant must submit
to the Secretariat of the Arbitration Commission an
arbitration agreement,an application for arbitration
in writing,and the facts and evidence on which his
claim is based,and the claimant shall pay an
arbitration fee in advance to the arbitration
Commission according to the Arbitration Fee
Schedule of the Arbitration Commission.
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(2)The application for arbitration:
? The application for arbitration and relevant
documentary evidence should be submitted in the
same copies as the total number of the respondent
and arbitrations plus the Secretariat as a separate
party.The following shall be specified in the
Application for Arbitration:
? a) the name end address of the claimant and those
of the respondent,including the zip code,telephone
number,telex number,fax number and cable
number,if any
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? b) the Arbitration agreement relied upon by
the claimant;
? c) the facts of the case and the main points of
dispute;
?d) the claimant’s claim and the facts and
evidence on which his claim is based.
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(3) Arbitration costs,When applying
for arbitration,
? The parties shall pay certain fees in advance,
which include:
? a) The arbitration fee
? b) the actual costs
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b.Composition of arbitration tribunal
? (1) Panel of arbitrators:The Arbitration Commission has
its Panel of Arbitrators.The arbitrators are selected and
appointed from among Chinese and foreign personages
with special knowledge and practical experience in
trade and economics,science and technology,law and
other fields.The Arbitration Commission adopts the
panel system,that is,the parties can only appoint
arbitrators from among the panel of arbitrators.Any
arbitrator either jointly nominated by both parties or
appointed by the Chairman of the Arbitration
Commission shall remain independent.
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(2) Composition of tribunal:
? According to the Arbitration Rules of the arbitration
Commission,there are two types of arbitral
tribunal,i.e,sole-arbitrator tribunal composed of
one arbitrator and collegiate tribunal with three
arbitrators.The parties may agree on the ways to
form the tribunal.However,pursuant to the
Arbitration Rules,summary procedure shall,unless
otherwise agreed by the parties,automatically apply
to any case in dispute where the amount of claim
totals not more than RMB 500,00 yuan,
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? Summary procedure may also be applied to any
case in dispute where the amount of claim totals
more than RMB 500,000 yuan provided that both
parties agree in writing.The cases to which the
summary procedure applies shall be examined and
heard by a sole-arbitrator trinbunal.Most cases to
which the normal procedure applies shall be
examined and heard by a collegiate tribunal with
three arbitrators unless otherwise agreed by the
parties.
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c.Hearing
? (1) Method of hearing,Generally,oral hearings are
conducted in the course of arbitration,However,the
arbitration tribunal may examine the case and make
an award on the basis of documents only at the
request of the parties or with their consent,and with
the arbitration tribunal’s confirmation that oral
hearings are unnecessary,or in case of Summary
Procedure
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(2) Date of hearing:
? The date of oral hearing shall be fixed by the
arbitration tribunal after consultation with the
Secretariat of the Arbitration Commission,and shall
be communicated to the parties 30 days( in foreign-
related economic cases and maritime cases) or 15
days ( in domestic economic cases and in Summary
procedure) before the date of the Hearing so that
they may have sufficient time to make necessary
arrangements,However,the notice of the date of
hearing subsequent to the first hearing is not subject
to the 30-day or 15-day time limit.
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d.Award
? (1) Time limit for making awards,In the ordinary
Arbitration Procedures,the arbitration tribunal shall
render an arbitral award within 9 months ( in foreign-
related economic cases and maritime cases) or 6 months
(in domestic economic cases) as form the date on the
arbitration tribunal is formed if there is no oral
hearing.At the request of the arbitration tribunal and
with the approval of the Secretary-General of the
Arbitration Commission,the time limit for rendering an
arbitral award may be extended.
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(2) Effect of the award
? The date on which the arbitral award is made is the
date on which the arbitral award comes into
effect.The arbitral award is final and binding upon
both parties.Neither party may bring a suit before a
law court or make a request to any other
organization for revising the arbitral award.
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e.Setting aside an award
? (1) The competent court,The party may,if it deems
that there are matters not in conformity with the
statutory procedure in the award,after receipt of the
arbitral award,apply for setting aside the arbitral
award to the International People’s Court in the
place where the Arbitration Commission is located.
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(2) Circumstances for setting aside an
award:
? When applying for setting aside a foreign-
related arbitral award,the party must present
evidence which proves that the arbitral award
involves one of the following circumstances:
? a) The parties have neither included an
arbitration clause in their contract nor
subsequently concluded a written arbitration
agreement;
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? (b) The party against whom the enforcement
is sought was not notified to appoint an
arbitrator or to take part in the arbitration
proceedings or the party against whom the
enforcement is sought was unable to state his
opinions due to reasons for which he is not
responsible;
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? (c) The formation of the arbitration tribunal or the
arbitration procedure was not in conformity with
the Arbitration Rules;
? (d) The Court,which after examination and
verification,is convinced that there exists one of the
above circumstances,or considers that the award is
in violation of public interest,shall rule to set aside
the award.
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f.Enforcement of an award
? The parties must automatically execute the arbitral
award within the time limit specified in the arbitral
award,In case one party fails to execute the arbitral
award,the other party may apply to the competent
court for enforcement,If the residence or the
properties of the losing party is located within the
territory of China,the other party may apply to the
Intermediate People’s Court in the place where the
residence of the losing party or the property of
Majeure and Arbitration
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Learning Objectives
? 1.To learn the three ways of stipulating the place
and time of inspection in the contract
? 2.To understand the liabilities of breach of contract
? 3.To learn the ways of stipulating the claim clause
in the contract
? 4.To learn the consequences of force majeure
? 5.To understand the concept of arbitration
? 6.To learn the importance and contents of
arbitration agreement( or clause)
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Section 1 Commodity Inspection
? 1.1 Importance of commodity inspection
? 1.2 Time and places of inspection
? 1.3 Inspection body
? 1.4 Inspection standards
? 1.5 An example of inspection clause in contract.
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1.1 Importance of commodity inspection
? In in ternational trade,the quality and quantity of
the goods delivered by the seller should be in
conformity with the terms of the contract and
should be packed in the manner required by the
contract,In this sense,inspection are necessary
steps in the transfer of the goods.
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? Delivery of goods ?Receipt of goods ?Inspection
of goods ?Acceptance of goods (Or Rejection of
goods)
? Notice of acceptance
? Notice of claim
? Notice of rejection
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1.2 Time and places of inspection
? (1).Provisions in the CISG
CISG provides that except where the parties have
agreed otherwise,the buyer has the right to inspect the
goods.And the time and place of inspection have been
stipulated in detail,CISG Article 38 states:
? a.The buyer must examine the goods,or cause them to
be examined,within as short a period as is practicable in
the circumstances.
? b.If the contract involves carriage of the goods,
examination may be deferred until after the goods have
arrived at their destination.
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(1) Provisions in the CISG
? If the goods are redirected in transit or re-
dispatched by the buyer without a reasonable
opportunity for examination by him and at
the time of the conclusion of the contract the
seller knew or ought to have known of the
possibility of such redirection or re-dispatch,
examination may be deferred until after the
goods have arrived at the new destination.
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(2) Three ways of stipulating the place and time
of inspection in the contract.
? a.Shipping quality and weight
This means that inspection at the seller’s factory or at
the port of shipment is final.Buyer can re-inspect the
goods at the port of destination,but normally he cannot
claim for compensation,Thus it is favorable to the
seller.
? b.Landed quality and weight
This means inspection carried out at the port of
destination is final.This arrangement is favorable to the
buyer.
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? c.Inspection at the port of shipment and re-
inspection at the port of destination.
It means after inspection at the port of
shipment,the buyer retains the right to re-
inspect and claim for compensation.Thus it is
favorable to the seller.
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1.3 Inspection body
? There are mainly two types of inspection body,governmental
and non-governmental,The governmental inspection body such
as the Food and Drugs Administration(FDA) in the USA
specialize in inspection of particular merchandise
(grain,drug,etc.).The international inspection of commodity is
mainly undertaken by nongovernmetal bodies which have the
same legal status as notary organizations.The notable bodies
are Societe General De Surveillance S.A,( SGS) in
Geneva,Swiss,Underwriters Laboratory(UL) in the
USA,Lloyd Surveyor,B.V,in Britain and Japan Marine
Surveyor & Sworn Measurer’s Association.
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1.4 Inspection standards
? The commodity inspection authorities shall conduct
inspection according to the following standards:
(1) If the compulsory standards or other inspection
standards which must be complied with are
specified by laws or administrative regulations,the
inspection shall be performed according to the
standards as specified by laws and administrative
regulations;
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(2) In the absence of the compulsory standards or
other inspection standards which must be
complied with as specified by laws or
administrative regulations,the inspection shall
be performed according to the standards agreed
upon in the international trade contracts.If the
trade is conducted against the sample,the
inspection shall be performed simultaneously
according to the sample provided.
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? (3) In cases the compulsory standards or other
inspection standards which must be complied with
as specified by laws or administrative regulations
are lower than the standards agreed upon in the
international trade contract,the inspection shall be
conducted according to the standards agreed upon
in the international trade contract.If the trade is
conducted against the sample,the inspection shall
be performed simultaneously according to the
sample provided;and
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? (4) In the absence of compulsory standards or other
inspection standards which must be complied with
as specified by laws and administrative regulations,
and in case inspection standards are either not
agreed upon or agreed upon unclearly in the
contract,the inspection shall be conducted
according to the standards of the manufacturing
country,or relevant international standards of the
standards designated by the state inspection agency.
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1.5 An example of inspection clause in
contract
?,It is mutually agreed that the Inspection Certificate of
Quality and Quantity (weight) issued by the Manufacturer(or
XXX Survey or ) at the port of shipment shall be part of the
documents to be presented for negotiation under the relevant
L/C,The Buyers shall have the right to re-inspect the quality
and quantity (weight) of the cargo.The re-inspection fee
shall be borne by the Buyers,Should the quality and/ or
quantity (weight) be found not in conformity with that of the
contract,the Buyers are entitled to lodge with the Sellers a
claim which should be supported by survey reports issued
by a recognized surveyor approved by the Sellers,The
claim,if any,shall be lodged within X X days after arrival
of the cargo at the port of destination.
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Section 2 Claim
? 2.1 Liabilities of breach of contract
? 2.2 Claim clause in contract
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Liabilities of breach of contract
? 1,Breach of contract
? (1) Breach of contract committed by the seller
Breach of contract committed by the seller mainly
covers,a,The seller fails to deliver the goods; b,
The documents relating to goods are incomplete; c,
The goods do not conform with the contract,etc;
? (2) Breach of contract committed by the buyer
Breach of contract committed by the buyer mainly
covers,a,The buyer fails to pay the price; b,The
buyer fails to take delivery of the goods,etc.
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? (1) CISG Article 25 provides that
“A breach of contract committed by one of the parties is
fundamental if it results in such detriment to the other
party as substantially to deprive him of what he is
entitles to expect under the contract,unless the party in
breach did not foresee an a reasonable person of the
same kind in the same circumstances would not have
foreseen such a result.” The injured party may declare
the contract avoided and claim damages.
If,however,the breach of contract is non-fundamental,
the injured party can only claim damages but cannot
declare the contract avoided.
2,Liabilities of breach of contract
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? (2) The British law divides the breach of contract
into Breach of Condition and Breach of
Warranty.
? Breach of Condition refers to the breach of the
major terms of the contract,the injured party may
declare the contract avoided and claim damages,
Breach of Warranty means breach of the minor
terms of the contract,the breach of which gives
rise to a claim for damages,but not to a tight to
reject the goods and treat the contract as repudiated.
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Claim clause in contract
? (1) Discrepancy and claim clause
? This is the commonly adopted claim clause in a sales
contract,The clause includes:
? a,Basis for claim,evidences to be provided.
? b,Term of validity of claim:
The following is an example of claim clause in a sales
contract:
“Claim,Any claim by the Buyers regarding the goods
shipped shall be filed within 30 days after arrival of the
goods at the port of destination specified in the relative Bill
of Lading an supported by a survey report issued by a
surveyor approved by the Sellers.”
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? (2) Penalty clause
? Sometimes a penalty clause should be
included in the contract in case the buyer fail
to delay in opening of L/C,or the seller fails
to deliver the goods on time,Under this
clause,the party who fails to fulfill the
contract must pay a fine,a certain percentage
of total contractual value.
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? The following are two examples of penalty
clause:
?A,Penalty clause regarding the Seller’s
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Section 3 Force Majeure
? 3.1 Definition of force majeure
? 3.2 Force majeure clause
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Definition of force majeure
? Force majeure (French:,superior force”) is an
event or effect that cannot be reasonably anticipated
nor controlled,A party is not liable for any damage
resulting from his failure to perform the contract is
he can show (a) that his failure was,due to an
impediment beyond his control,” (b) that the
impediment was not something he could have
reasonable taken into account at the time of
contracting,and (c) that he remains unable to
overcome the impediment or its consequences.
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? Force majeure is not only narrowly defined,but also
limited in its application,It applies to situations-such
as natural disasters,war,embargoes,strikes,
breakdowns,and the bankruptcy of a supplier-that
frustrate both the party attempting to perform and the
party expecting performance,Because neither party is
really at fault,the breaching party is excused from
paying damages,He is not,however,exempted from
the application of any other appropriate remedy (such
as suspension of performance or avoidance).
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? There are usually two consequences of force
majeure,termination of the contract and
postponement of the contract,Whether terminating
the contract or postponing the performance of the
contract depends on what degree the force majeure
event has affected the performance of the contract,
or on the detailed stipulations in the contract,
Generally speaking,the contract can be avoided
only if the occurrence of the force majeure event
makes it impossible to perform the contract,such as
the loss of or damage to specifically designated
goods,or the event is so serious that it is impossible
to recover within a short period of time,Otherwise,
the suffering party can only make amendments to
the contract to reduce the possible losses to the
other party.
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Force majeure clause
? The force majeure clause usually contains:
? 1,The scope of force majeure events,Since there is
still no definite explanation as to which events
should be regarded as froce majeure,the seller and
the buyer usually stipulate in their contract the
scope of force majeure events,Force majeure
events include certain natural disasters such as fire,
flood,storm,heavy snow,earthquake,etc,and
social disturbances like war,strike,sanction,etc
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? 2,Time limit of notifying the other party,In
case of a force majeure event,the party
seeking to use the clause of force majeure
has a duty to promptly notify the other party
of,the impediment and its effect on his
ability of perform”
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? 3,The issuer of the certificate,A force majeure event should
be verified by a certificate that attests such an event,The
issuer of the certificate should be mentioned in the clause,
? The following is an example of force majeure clause:
?,Force majeure,If the shipment of the contracted goods is
prevented or delayed in whole or in part by reason of war,
earthquake,flood,fire,storm,heavy snow or other causes of
Force Majeure,the seller shall not be liable for non-shipment
or late shipment of the goods or non-performance of this
contract,However,the seller shall notify the buyer by cable or
telex and furnish the latter by registered airmail with a
certificate issued by the China Council for the Promotion of
International Trade attesting such event or events.”
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Section 4 Arbitration
? 4.1 The ways of settlement of disputes
? 4.2 The concept of arbitration
? 4.3 Arbitration procedures
? 4.4 Arbitration agreement
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4.1 The ways of settlement of disputes
? When disputes arise between exporter and importer,
they can be settled through friendly consultation,
arbitration,or litigation.Friendly negotiation is an
important tool in the process of dispute settlement,
and undoubtedly the one most commonly relied on,
The majority of the disputes are settled this way and
friendly business relations are thus maintained
between exporters and importers.
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4.1 The ways of settlement of disputes
? Arbitration is the next best alternative,It is a means
of settlement between two parties through the
medium of a third party who is not partial to either
of the parties to the dispute.Litigation means
lawsuit,a process in law institued by one party to
compel another to do him justice,It is usually costly
and time-consuming,This section will focus on
arbitration.
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4.2 The Concept of Arbitration
? a.voluntarily
? b.an arbitration agreement
? c.more simple in procedures,less costly and
time-consuming than litigation.
? d.The award is final and binding on both
parties.
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a.voluntarily
? The litigants submit themselves voluntarily
to an arbitrator.
? The arbitrator is a private,disinterested
person,or nonofficial government
organization chosen by the parties to a
disputed question.
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b.an arbitration agreement
? It in written form between the parties
concerned is prerequisite for arbitration,An
arbitration agreement is a contract between
two or more parties whereby they agree to
refer the subject in dispute to others and to be
bound by their award.
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c.more simple in procedures,less costly and
time-consuming than litigation.
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d.The award is final and binding on both
parties.
? Neither party may bring a suit before a law
court or make a request to any other
organization for revising the arbitral award,
The characteristic of finality of arbitral
awards is the basic element of the modern
commercial arbitration recognized all over
the world.
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4.3 Arbitration procedures
? a.Application for arbitration
? b.Composition of arbitration tribunal
? c.Hearing
? d.Award
? e.Setting aside an award
? f.Enforcement of an award
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a.Application for arbitration
? (1) Procedure of applying for arbitration,When
applying for arbitration,the claimant must submit
to the Secretariat of the Arbitration Commission an
arbitration agreement,an application for arbitration
in writing,and the facts and evidence on which his
claim is based,and the claimant shall pay an
arbitration fee in advance to the arbitration
Commission according to the Arbitration Fee
Schedule of the Arbitration Commission.
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(2)The application for arbitration:
? The application for arbitration and relevant
documentary evidence should be submitted in the
same copies as the total number of the respondent
and arbitrations plus the Secretariat as a separate
party.The following shall be specified in the
Application for Arbitration:
? a) the name end address of the claimant and those
of the respondent,including the zip code,telephone
number,telex number,fax number and cable
number,if any
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? b) the Arbitration agreement relied upon by
the claimant;
? c) the facts of the case and the main points of
dispute;
?d) the claimant’s claim and the facts and
evidence on which his claim is based.
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(3) Arbitration costs,When applying
for arbitration,
? The parties shall pay certain fees in advance,
which include:
? a) The arbitration fee
? b) the actual costs
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b.Composition of arbitration tribunal
? (1) Panel of arbitrators:The Arbitration Commission has
its Panel of Arbitrators.The arbitrators are selected and
appointed from among Chinese and foreign personages
with special knowledge and practical experience in
trade and economics,science and technology,law and
other fields.The Arbitration Commission adopts the
panel system,that is,the parties can only appoint
arbitrators from among the panel of arbitrators.Any
arbitrator either jointly nominated by both parties or
appointed by the Chairman of the Arbitration
Commission shall remain independent.
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(2) Composition of tribunal:
? According to the Arbitration Rules of the arbitration
Commission,there are two types of arbitral
tribunal,i.e,sole-arbitrator tribunal composed of
one arbitrator and collegiate tribunal with three
arbitrators.The parties may agree on the ways to
form the tribunal.However,pursuant to the
Arbitration Rules,summary procedure shall,unless
otherwise agreed by the parties,automatically apply
to any case in dispute where the amount of claim
totals not more than RMB 500,00 yuan,
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? Summary procedure may also be applied to any
case in dispute where the amount of claim totals
more than RMB 500,000 yuan provided that both
parties agree in writing.The cases to which the
summary procedure applies shall be examined and
heard by a sole-arbitrator trinbunal.Most cases to
which the normal procedure applies shall be
examined and heard by a collegiate tribunal with
three arbitrators unless otherwise agreed by the
parties.
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c.Hearing
? (1) Method of hearing,Generally,oral hearings are
conducted in the course of arbitration,However,the
arbitration tribunal may examine the case and make
an award on the basis of documents only at the
request of the parties or with their consent,and with
the arbitration tribunal’s confirmation that oral
hearings are unnecessary,or in case of Summary
Procedure
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(2) Date of hearing:
? The date of oral hearing shall be fixed by the
arbitration tribunal after consultation with the
Secretariat of the Arbitration Commission,and shall
be communicated to the parties 30 days( in foreign-
related economic cases and maritime cases) or 15
days ( in domestic economic cases and in Summary
procedure) before the date of the Hearing so that
they may have sufficient time to make necessary
arrangements,However,the notice of the date of
hearing subsequent to the first hearing is not subject
to the 30-day or 15-day time limit.
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d.Award
? (1) Time limit for making awards,In the ordinary
Arbitration Procedures,the arbitration tribunal shall
render an arbitral award within 9 months ( in foreign-
related economic cases and maritime cases) or 6 months
(in domestic economic cases) as form the date on the
arbitration tribunal is formed if there is no oral
hearing.At the request of the arbitration tribunal and
with the approval of the Secretary-General of the
Arbitration Commission,the time limit for rendering an
arbitral award may be extended.
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(2) Effect of the award
? The date on which the arbitral award is made is the
date on which the arbitral award comes into
effect.The arbitral award is final and binding upon
both parties.Neither party may bring a suit before a
law court or make a request to any other
organization for revising the arbitral award.
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e.Setting aside an award
? (1) The competent court,The party may,if it deems
that there are matters not in conformity with the
statutory procedure in the award,after receipt of the
arbitral award,apply for setting aside the arbitral
award to the International People’s Court in the
place where the Arbitration Commission is located.
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(2) Circumstances for setting aside an
award:
? When applying for setting aside a foreign-
related arbitral award,the party must present
evidence which proves that the arbitral award
involves one of the following circumstances:
? a) The parties have neither included an
arbitration clause in their contract nor
subsequently concluded a written arbitration
agreement;
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? (b) The party against whom the enforcement
is sought was not notified to appoint an
arbitrator or to take part in the arbitration
proceedings or the party against whom the
enforcement is sought was unable to state his
opinions due to reasons for which he is not
responsible;
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? (c) The formation of the arbitration tribunal or the
arbitration procedure was not in conformity with
the Arbitration Rules;
? (d) The Court,which after examination and
verification,is convinced that there exists one of the
above circumstances,or considers that the award is
in violation of public interest,shall rule to set aside
the award.
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f.Enforcement of an award
? The parties must automatically execute the arbitral
award within the time limit specified in the arbitral
award,In case one party fails to execute the arbitral
award,the other party may apply to the competent
court for enforcement,If the residence or the
properties of the losing party is located within the
territory of China,the other party may apply to the
Intermediate People’s Court in the place where the
residence of the losing party or the property of
