Case Fact:

From February to June in 2006, A Company and B Company concluded 6 sales contracts with a term of FOB Zhongshan (before this period, these two companies concluded another 7 sales contracts for the same products and with the same trading terms, but the warranty period of the goods subject to these 7 contracts were expired.). B Company took delivery of all the products at Zhongshan Port, transshipped to Singapore and finally sold to C Company in Samoa. C company found quality defects in the products in the course of sales and then got evidence of defects issued by the Sanitary Authorities of Samoa. C company, via B Company, required A Company to compensate its loss, but it failed. Later C Company destroyed all the remaining defected goods by witness of the Sanitary Authorities of Samoa but without presence of B Company. Subsequently, in consideration of the compensation that he had to paid to C company in the near future, B company applied with the CIETAC for an arbitration against A company with the cause of quality defects claiming for loss of goods, transportation fee and attorney fee etc. A Company retained me as its attorney in this arbitration. After seriously studying the case, I advised Company A to file counterclaims for price unpaid and the attorney fee.

Legal Analysis:

I think the disadvantages to A Company in this case are: [1] the defect certificate issued by the authorities of the place where C Company is located; [2] the quality defects incurred within the warranty period; [3] the sanitary authorities witnessed the whole process of destroying the goods. It seems that B Company has a relatively strong argument on the defects of goods. So it is better for us to put forwards rebuts from other viewpoints: [1] B Company said the defected goods were subject to the 6 contracts concluded later and the warranty term of which were still valid. But the goods sold under the later 6 contracts and the earlier 7 contract were completely identical. How can B Company prove the goods destroyed were not subject to the earlier 7 contracts which warranty term had expired? [2] Attack the effectiveness and authority of the defect certificate. A Company shall try its best to pick up flaws in the defect certificate issued by the sanitary official of Samoan government and let the arbitrators believe that the defect certificates are not so reliable. [3] B Company has not suffered from any loss. B Company bought the goods from A Company independently but not on behalf of C Company. That is, B Company is not the sales agent or representative of C Company. So B Company can not claim for damages against A Company on behalf of C Company. B Company can only get back to A Company for its loss if it has actually paid compensation to C Company due to the defects goods provided by A company.

Finally, the arbitral tribunal nearly accepted all my legal points, supported our counterclaims and refused all claims of B Company by the reasons that the B Company has not suffered from any actual loss and did not examine the goods in time.