## Facts

- An Austrian seller and a German buyer concluded a contract for the sale of cold-rolled metal sheets, to be delivered in installments, FOB Rostock, with special export packaging.
- The contract contained an arbitration arrangement providing for arbitration in Vienna (VIAC) and a choice-of-law clause selecting Austrian law.
- The buyer received the first deliveries and resold the goods to a Belgian company, which shipped them onward to a Portuguese manufacturer.
- The Portuguese manufacturer asserted that the goods were defective and refused to accept further goods.
- The buyer notified the seller of the alleged non-conformity and supplied an expert statement from an internationally recognized company.
- The notice was sent about six months after delivery, while the contract required examination and written notice of defects immediately after delivery, or at the latest within two months (a contractual regime departing from CISG arts. 38 and 39).
- The seller rejected liability and relied on the buyer’s failure to comply with the contractual notice requirements.
- After receiving the late notice and documentation, the seller continued to request information about the complaints and engaged in settlement discussions.
- The buyer commenced arbitration seeking damages for non-conforming goods and interest.

## Issues

1. Whether the arbitration arrangement satisfied the “agreement in writing” requirement under Article II(2) of the New York Convention in light of acceptance by correspondence and references to the contract document.
2. Whether the parties’ choice of Austrian law resulted in application of the CISG as Austria’s international sales law under CISG art. 1(1)(b).
3. Whether the buyer failed to meet contractually agreed inspection and notice requirements that modified the CISG notice framework (CISG arts. 38 and 39, as varied by agreement).
4. Whether the seller waived, or was precluded (estopped) from asserting, the late-notice defense based on its post-notice conduct.
5. Whether estoppel (venire contra factum proprium) is a general principle to be used via CISG art. 7(2), including by reference to CISG arts. 16(2)(b) and 29(2).
6. What damages and interest were recoverable for non-conformity (CISG arts. 74 and 78), including the method for selecting an interest rate.

## Decision

- The sole arbitrator treated the arbitration arrangement as meeting the writing requirement of Article II(2) of the New York Convention, including acceptance shown through written responses and later written references to the contractual documentation containing the clause.
- The arbitrator held that the CISG governed because the parties chose Austrian law and Austria is a Contracting State (CISG art. 1(1)(b)).
- The arbitrator found that the buyer did not comply with the contract’s stricter notice requirements: the buyer’s written notice of defects (with an expert statement) came about six months after delivery, beyond the contract’s “immediately, or at the latest within two months” deadline.
- The arbitrator rejected the buyer’s waiver argument, holding that an intention to waive a right must be clearly shown and was not established on the facts.
- Despite the late notice, the arbitrator held that the seller was estopped from relying on the late-notice defense because its conduct after receiving the notice—requesting further information and pursuing settlement talks—reasonably led the buyer to believe the defense would not be invoked.
- The arbitrator treated estoppel (venire contra factum proprium) as a general principle within the CISG, applied through CISG art. 7(2), with support drawn from CISG arts. 16(2)(b) and 29(2).
- The arbitrator awarded the buyer damages for lack of conformity (CISG art. 74) and granted interest (CISG art. 78), setting the interest rate at the average prime rate in the buyer’s country (Germany).

## Legal Principles

- A choice-of-law clause selecting the law of a CISG Contracting State generally leads to application of the CISG as that state’s sales law unless the parties exclude it (CISG art. 1(1)(b)).
- Parties may modify the CISG’s inspection and notice rules by contract; failure to follow the agreed notice regime can bar remedies for non-conformity.
- Waiver of a right requires a clearly demonstrated intention; mere post-breach communications may be insufficient to prove waiver.
- A party may be precluded (estopped) from asserting a defense when its conduct reasonably induces the other party to rely on the expectation that the defense will not be raised; this may operate within CISG gap-filling through art. 7(2).
- Estoppel (venire contra factum proprium) can be treated as a CISG general principle, consistent with reliance-based rules reflected in CISG arts. 16(2)(b) and 29(2).
- Damages for non-conformity are governed by CISG art. 74, and interest on sums due is available under CISG art. 78; when the CISG does not specify an interest rate, tribunals may select a commercially based rate, here the average prime rate in the creditor’s country.

## Conclusion

In this unpublished VIAC award (SCH-4318), the sole arbitrator applied the CISG through the parties’ Austrian-law clause, found the buyer’s defect notice untimely under a contractually tightened notice regime, but held the seller precluded from invoking late notice because its subsequent conduct led the buyer to believe the defense would not be used; the buyer therefore recovered damages for non-conformity plus interest calculated at the average prime rate in Germany.


Award, Vienna Int’l Arb. Ctr. (VIAC), Case No. SCH-4318 (June 15, 1994).