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The Vienna Convention on the International Sale of Goods 1980 (CISG) |
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of 1 August 2011, UNCITRAL reports that seventy-seven states have adopted |
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the CISG.1 |
2â Structure and scope
When the Convention is ratified by a Contracting State, this results in the CISG taking precedence over domestic law and choice of law rules with regard to international sale of goods. The CISG has 101 Articles and is divided into four principal parts. Part I deals with the Convention’s scope and contains general provisions applicable to the rest of the Convention. Part II is concerned with rules for the formation of contracts of sale, and Part III with the rules governing the seller’s and buyer’s substantive obligations. Part IV contains the final provisions on adherence to and ratification of the Convention by Contracting States, including the reservations that may be made at one of several stages to the Convention’s applicability to a Contracting State.
Under Article 1(1)(a), the Convention applies to contracts of sale of goods between parties whose places of business are in different states. The CISG will also apply when the rules of private international law lead to the application of the law of a Contracting State.2
It is important to note that the CISG is a set of rules for business not consumer transactions. In addition to this, certain types of contracts are specifically excluded under the Convention.3 Questions involving the validity of the contract are also outside the Convention, as is the effect which the contract may have on property in the goods sold,4 and any liability of the seller for defective goods causing death or personal injury to any person.5 One of the notable features of the Convention is that it allows contracting parties the ability to derogate from6 or exclude its provisions altogether.7
Q1 Describe the scope and purpose of the CISG. When will it apply?
(a)â Trade usages
CISG, Article 9 addresses the relevance of trade usages under the Convention. It provides:
(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.
1See www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html.
2CISG, Art. 1(1)(b).
3Ibid. Art. 2 provides that contracts involving the sale of securities, ships, vessels, hovercraft or aircraft, and electricity are not governed by the Convention.
4Ibid. Art. 4.â 5â Ibid. Art. 5.
6Under CISG, Art. 6 derogation under the Convention is permitted, with the one exception of CISG, Art. 12.
7Ibid.
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(2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.
Usages have long been a part of the lex mercatoria, and are commonly made up of uncodified customs and general principles of commercial law. International trade usages gain normative force though their use by parties who believe it falls within their obligations to follow the meaning attached to the usage. Throughout the course of history, usages have played an important role in trade, for example, the ‘law merchant’ system used customs and practice to protect the expectations of parties. Under the law merchant system, merchants from a particular mercantile community would employ a set of principles and regulations which were customary practice to resolve disputes. However, when this system was superseded by the common law, the role of usages declined and tradesmen sought to use their own dispute mechanisms instead of those used by the courts.
CISG, Article 9(1) refers to those usages which the parties have agreed; this can include actions and types of behaviour and can exist even though they are not widely known in international trade. Therefore, under the provisions of Article 9(1), local, regional and national usages will be applicable in accordance with the party’s agreement. However, these patterns of conduct can only be established as ‘practices’ when they have been carried out over a certain length of time and have resulted in a number of contracts. In a case involving a Swiss seller and an Italian buyer for the sale of white urea, the courts held that the seller’s contention that there was an established practice between the parties under which the buyer was bound to pay at the seller’s bank was unfounded. In the court’s decision it stated that, under Article 9(1), two previous contractual relationships were not sufficient to establish a practice between the parties.8
CISG, Article 9(2) concerns usages which the parties have impliedly made applicable to their contract. These usages can be invoked in two different ways. The first is when the parties knew or ought to have known of the usage in question, and the second is when the usage is one which is widely in international trade and is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. In Libyan Arab Foreign Bank v. Bankers Trust Co.9 the plaintiffs kept a Eurodollar call account in a London branch of the defendant’s bank and a demand account in an American branch of the defendant’s bank. The US government imposed a freeze order on all Libyan property in the United States. When the plaintiffs called for their money, the defendants tried to argue that it was a usage of the Eurodollar deposit market that transfers from outside the United States in US currency
8 Civil Court, Basel, 3 December 1997.â 9â [1989] QB 728.
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could only be made through a CHIPS or Fedwire system which was located in New York and therefore they could not process the order because of the government ban. However, this argument failed on the grounds that while it may have been regular practice in this market for Eurodollars to be transferred through either of these two systems, this did not amount to a usage as it was not the only option available to the plaintiff.
Therefore, the usage must be one which is regularly observed in the type of trade the parties are involved in; the usage must be regularly observed in the relevant type of contract for that trade, and the usage must be one which is widely known in international trade. It will be for the party who is alleging that the usage exists to prove that it meets the burden of proof set out in Article 9(2). In a case heard by the German Appellate Court, it was decided that the buyer had not proved that an international trade usage existed under which silence in response to a commercial letter of confirmation was sufficient for the contract to be concluded.10
Q2 What is the position of the CISG on trade usage? When will a usage be implied?
(b)â Interpretation
CISG, Article 7 provides:
(1)In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.
(2)Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.
CISG, Article 7(1) requires regard to be had to:
(a)the Convention’s international character;
(b)the need to promote uniformity in its application; and
(c)the observance of good faith in international trade.
The solution to the problem of filling in any gaps which may be evident in the Convention was provided for in Article 7(2), which creates a hierarchical system for judges and arbitrators to adhere to. In order to resolve gaps in matters governed by the Convention but not expressly settled in it, one must first look to its internal principles, and only when this method is exhausted can external principles, such as laws applicable by virtue of private international law, be looked to as a last resort.
10 Appellate Court, Dresden, 9 July 1998.
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Given the language in Article 7(1) regarding how interpretation should |
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be carried out, judges should as far as possible abstain from resorting to a |
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domestic definition of a provision or term which could be in conflict with |
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the CISG. Instead, decision-makers should strive to keep in mind the pur- |
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pose for which the Convention came into existence, thus any deviation from |
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its ‘international character’ would undermine its legitimacy. One example of |
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a court using domestic concepts to interpret the CISG can be seen in Beijing |
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Metals v. American Business Center,11 in which it was stated obiter that the |
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parole evidence rule would apply even if that case was governed by the |
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CISG.12 No further explanation or analysis is given as to why this conclusion |
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was reached by the court even though a contrary decision was reached in an |
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earlier case.13 |
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The Convention stresses the need to promote uniformity when interpreting |
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its provisions. The Preamble to the Convention raises the issue of uniformity as |
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one of its aims is stated to be that, ‘the adoption of uniform rules which govern |
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contracts for the international sale of goods and take into account the different |
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social, economic and legal systems would contribute to the removal of legal bar- |
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riers in international trade and promote the development of international trade’. |
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The treatment of the concept of ‘good faith’ in the Convention is a reflection |
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of the tension amongst countries of varying social, legal and economic back- |
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grounds. The extent to which commercial law should emulate and uphold |
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standards of morality is a subject of much debate. The reconciling of morality |
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with the law has been approached in opposing ways by civil and common law |
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systems. The common law contingent appears to have ‘won’ from the fact that |
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in the CISG good faith was not imposed as a legal obligation on contracting |
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parties. Instead, good faith was shifted to the interpretation of the Convention, |
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which requires that the observance of good faith in international trade be taken |
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into account. |
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Q3 Critically analyse the role of good faith in the CISG. How does this concept |
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lead to uncertainty? |
(c)â Obligations of the seller
CISG, Article 30 provides:
The seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention.
11 US Federal Appellate Court (5th Circuit), 15 June 1993.
12 This case, whilst cited in MCC-Marble Ceramic Center v. Ceramica Nuova D’Agostino, US Federal Appellate Court (11th Circuit), 29 June 1998, was not followed and instead Filanto SpA v. Chilewich International Corp. below n. 13 was confirmed as the correct decision with regard to the parole evidence question.
13 Filanto SpA v. Chilewich International Corp. US Federal District Court (New York), 14 April 1992.
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The seller may also be required to perform additional duties to complete his contractual obligations, for example, the seller’s duty to hand over the goods could be qualified by the use of trade terms such as INCOTERMS.14 The seller is also responsible for handing over documents to the buyer; the Convention is silent as to the nature of these documents, however they can include transport documents, quality certificates as well as insurance policies.
CISG, Article 34 sets out the seller’s obligations in relation to the documents:
If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. If the seller has handed over documents before that time, he may, up to that time, cure any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.
While the seller is bound to hand over documents relating to the goods he is not bound to arrange for them to be issued, unless expressly stated in the contract or implied by trade usage. The Convention does not cover matters relating to the property in the goods and such matters are left to be decided by the rules of private international law.
CISG, Article 31 deals with the obligation to deliver:
If the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists:
(a)if the contract of sale involves carriage of the goods– in handing the goods over to the first carrier for transmission to the buyer;
(b)if, in cases not within the preceding subparagraph, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place– in placing the goods at the buyer’s disposal at that place;
(c)in other cases– in placing the goods at the buyer’s disposal at the place where the seller had his place of business at the time of the conclusion of the contract.
CISG, Article 31 addresses three different situations in which different rules apply. If the contract involves carriage of the goods, delivery obligations are fulfilled when the goods are handed over to the first carrier. In a case involving a Swiss buyer and an Italian seller for the supply of art books which were to be sold at an exhibition, in order to have the catalogues available on time, the seller commissioned a forwarding company which guaranteed timely delivery of the goods. Nevertheless, the catalogues arrived too late. The court held that pursuant to CISG, Article 31, the seller was only obliged to arrange for transport, i.e., to hand the goods over to the first carrier to have them transmitted to the buyer. Therefore the seller had duly performed his obligations and was not liable for
14 Laborall v. Matis Appellate Court, Paris, 4 March 1998.
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the carrier’s lateness in delivery.15 If the conditions of Article 31(b) are met, the |
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seller is required to place the goods at the buyer’s disposal at the particular place |
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the goods are produced.16 Where Article 31(c) applies, the seller must put the |
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goods at the buyer’s disposal at the place where the seller had his place of busi- |
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ness when the contract was concluded. |
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Q4 What are the seller’s obligations with respect to documents? |
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CISG, Article 35(1) deals with conformity of the goods. It provides that the |
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seller is required to deliver goods that are of the quantity, quality and descrip- |
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tion prescribed in the contract, and that any breach of these duties represents a |
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breach of contract. Except where the parties have agreed otherwise, goods do |
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not conform to the contract if they are not fit for ordinary use, or for the par- |
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ticular use by the buyer which the seller knew or should have known of; or do |
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not conform to samples; or finally are not properly packaged in a manner usual |
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for such goods. |
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Q5 Discuss the CISG’s requirement as to the conformity of the goods. Does this |
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provide equal protection to the buyer and seller? |
(d)â Obligations of the buyer
CISG, Article 53 provides:
The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.
The buyer has two main obligations under the Convention, namely, to take delivery of the goods and pay the price for the goods. The latter part of the wording of this provision would indicate that the party’s intentions and express stipulations in the contract will prevail over the Convention. This would be consistent with the provisions of CISG, Article 6, which allow for party autonomy and derogation under the Convention. The contract may stipulate other duties which the buyer must perform, which may include such things as supplying the seller with contractual specifications for goods being produced.
Under CISG, Article 60:
The buyer’s obligation to take delivery consists:
(a)in doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery; and
(b)in taking over the goods.
15Art Books case, Commercial Court, Zürich, 10 February 1999.
16Electronic Hearing Aid case, District Court, Aachen, 14 May 1993.
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The buyer is expected to co-operate with the seller to ensure delivery of the goods; this could mean, for example, letting the seller enter the buyer’s premises to deliver the goods. Article 60(b) provides that the buyer has to take over the goods when they are delivered by the seller. In a case involving a German seller and Italian buyer for the sale of electronic hearing aids, the buyer was liable for damages for breach of contract when he failed to take delivery despite the additional period of time set by the seller for the buyer to take delivery.17
The buyer is entitled to reject the goods if the seller makes delivery before the fixed date18 and if the seller delivers a greater quantity of goods than was stipulated in the contract.19 The buyer also has the right to reject the goods if the seller commits a fundamental breach of contract.20
CISG, Article 38 deals with the buyer’s obligation to examine the goods. It provides:
(1)The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.
(2)If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination.
(3)If the goods are redirected in transit or redispatched 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 redispatch, examination may be deferred until after the goods have arrived at the new destination.
Article 38 provides that the buyer must make examination of the goods within a short period of time, however if the contract involves carriage of goods then he can wait until the goods are delivered to their final destination. If the goods are found to be defective, CISG, Article 39 requires the buyer to give notice of the defect to the seller. Under the provision of Article 39(1), the buyer loses the right to rely on a lack of conformity if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he discovered it or ought to have discovered it. The period for examination of the goods under Article 38 and the period for giving notice under Article 39 must be distinguished and kept separate, even when the facts of the case would permit them to be combined into a single period for giving notice.21 The CISG Advisory Council suggests that the reasonable time for giving notice after the buyer discovered or ought to have discovered the lack of conformity will differ depending on the relevant factors. In some cases, notice should be given within a few days; in other cases, a longer time-frame may be suitable. No fixed period should be regarded as reasonable without taking into consideration the
17 |
Ibid.â 18â CISG, Art. 52(1). |
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Ibid. Art. 52(2).â 20â Ibid. Art. 25. |
21CISG Advisory Council, ‘Examination of the Goods and Notice of Non-Conformity Articles 38 and 39 Opinion No. 2’, available at www.cisg.law.pace.edu/cisg/CISG-AC-op2.html.
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circumstances of the case. These can include the nature of the goods, the nature |
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of the defect, the situation of the parties and relevant trade usages. Article 39(2) |
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specifies |
that, in any event, the buyer must give the seller notice of the lack |
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of conformity within two years of the date on which the goods were actually |
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handed over to the buyer, unless this time limit is inconsistent with a contrac- |
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tual period of guarantee. |
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Q6 What are the rules as regards the buyer’s obligation to pay the price? |
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Where must the buyer make payment? |
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(e)â Passing of risk
CISG, Article 67 deals with the passing of risk. It provides:
(1) If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.
(2) Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise.
Under the provisions of Article 67, risk passes either when the goods are handed over to the carrier for delivery to the buyer, or if the contract expressly stipulates, at a particular place. Although this rule is in accordance with most other international rules on the passing of risk, the parties can still override this provision by opting for trade usages under CISG, Article 9. Thus, in a case involving a French seller and a German buyer for the sale of frozen chickens, the court held that although the goods were handed over to the carrier for transmission to the buyer, the use of the term ‘free delivery’22 meant that the seller was bound to deliver the goods at the buyer’s place of business and concurrently risk would then pass to the buyer.23 If the seller retains the documents relating to the goods this does not affect the passing of risk.
Article 67(2) requires that the goods be clearly identified to the contract before risk is passed to the buyer. This requirement can be fulfilled by the description of the goods in the shipping documents. CISG, Article 68 deals with
22 The court noted that the term ‘free delivery’ had to be interpreted under German law, as the seller had used a clause common in German commerce, drafted in German and with a German buyer. The German doctrine and the jurisprudence show that this clause is generally interpreted as a rule dealing with costs as well as with the passing of risks.
23 Frozen Chicken case, Appellate Court, Karlsruhe, 20 November 1992.
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goods that are sold while in transit. In this case risk will pass on conclusion of the sale; alternatively, if circumstances indicate, risk could also pass on delivery to the carrier, however the seller is prevented from doing so if he knew that the goods were lost or damaged at the time of contracting.
(f)â Remedies
There are a number of remedies available to the parties in the event a breach occurs.
(i)â Avoidance
One of the most important remedies available to the buyer and seller is the remedy of avoidance. CISG, Article 64 deals with the seller’s right to avoid the contract. It provides:
(1) The seller may declare the contract avoided:
(a)if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or
(b)if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed.
(2) However, in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so:
(a)in respect of late performance by the buyer, before the seller has become aware that performance has been rendered; or
(b)in respect of any breach other than late performance by the buyer, within a reasonable time:
(i)after the seller knew or ought to have known of the breach; or
(ii)after the expiration of any additional period of time fixed by the seller in accordance with paragraph (1) of Article 63, or after the buyer has declared that he will not perform his obligations within such an additional period.
The buyer’s right of avoidance can be found in CISG, Article 49, which provides:
(1) The buyer may declare the contract avoided:
(a)if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or
(b)in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph
(1)of article 47 or declares that he will not deliver within the period so fixed.
(2) However, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so:
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(a)in respect of late delivery, within a reasonable time after he has become aware that delivery has been made;
(b)in respect of any breach other than late delivery, within a reasonable time:
(i)after he knew or ought to have known of the breach;
(ii)after the expiration of any additional period of time fixed by the buyer in accordance with paragraph (1) of article 47, or after the seller has declared that he will not perform his obligations within such an additional period; or
(iii)after the expiration of any additional period of time indicated by the seller in accordance with paragraph (2) of article 48, or after the buyer has declared that he will not accept performance.
The primary mechanism necessary to trigger avoidance in both provisions is the occurrence of a fundamental breach.24 CISG, Article 25 defines fundamental breach as follows:
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 entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.
In order for a breach to be ‘fundamental,’ the breach must cause a ‘detriment’ that substantially deprives the non-breaching party of its expectations. The CISG, however, does not define the term ‘detriment’. The purpose of including the requirement of detriment is to exclude those breaches where they may have occurred but caused no harm to the buyer. For example, taking the case of an ante-dated bill of lading, although the seller would be committing a fundamental breach of his obligations, if the breach does not cause the buyer any injury, it can be argued that detriment does not occur. The remedy of avoidance is not suited to minor breaches and it is applied as such by the courts. In a case involving an Italian seller and a German buyer for the sale of shoes,25 the seller demanded partial payment against the quantity of goods that were delivered even though the quantity was less than contractually agreed. The buyer sought to claim damages for non-performance and the right to suspend payment until delivery of the missing quantity was made. The court held in favour of the seller, the reason being that the buyer had no grounds to avoid the contract,26 and the partial delivery of goods by the seller in this case did not amount to a fundamental breach within the meaning of Article 49(1)(a).
The test of foreseeability as set out in Article 25 is meant to preclude a fundamental breach where the substantial detriment occurs unforeseeably; it is a mechanism which allows the party in breach to evade avoidance of the Âcontract. Since it is improbable that the party in breach will acknowledge that
24CISG, Arts. 64(1)(a), 49(1)(a).
25Appellate Court, Düsseldorf, 24 April 1997.
26This is a right essential to a claim of damages.
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they foresaw the detriment in question, the ‘reasonable person standard’ was established. Thus, where substantial detriment is deemed to exist, the party in breach, in order to escape avoidance, has to show that he did not foresee the negative result, nor would a reasonable person have foreseen it. Foreseeability would also need to be determined within the meaning of CISG, Article 74, as this is the provision dealing with damages, providing that:
damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.
The burden of proving unforeseeability rests with the party in breach.
Q7 Discuss the problems inherent in the concept of fundamental breach.
Q8 Why is it important to determine when the time of foreseeability should apply?
(ii)â Additional time
CISG, Article 47 gives the buyer the right to fix an additional time for performance. It states:
(1)The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations.
(2)Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance.
The seller has a corresponding right under CISG, Article 63.
CISG, Articles 64(1)(b) and 49(1)(b), respectively, allows the parties to fix an ‘additional time’ for performance. Under the Convention the parties do not have to fix an additional time; however, given the strict criterion of establishing a fundamental breach, it may be in their best interests to do so. It is important to note that whereas under the CISG’s predecessor, the ULIS, the buyer could convert any breach of contract, however minor, into a fundamental breach by allowing an additional time for performance, under the CISG, only in cases of non-delivery or non-payment can the time-fixing mechanism be used to make a non-fundamental breach into a fundamental breach. Under the Convention, the additional time must be determined by indicating a given date or a period of time; this helps to bring certainty with regard to the party’s interest in performance of the contract, in addition to a possibility of avoiding the contract. Thus, in order to determine an additional period of reasonable length, considerations such as the extent and the cost of the delay have to be taken into account. In one case, the courts decided that an additional period of two weeks was not suitable
209 2â Structure and scope
for a delivery of three printing machines from Germany to Egypt and an additional period of seven weeks would have been more appropriate.27
Articles 64(2) and 49(2) deal with the circumstances under which parties may lose the right to avoid the contract. Paragraph (2)(a) of each Article deals with the issue of late payment or late delivery, respectively. A party must declare the contract avoided within a reasonable time after he has discovered that performance has been rendered; the breach must be a fundamental breach of contract, as in the case where time is of the essence, or a delivery after the additional period set by the other party has expired. For any breach other than late delivery, paragraph (2)(b) of each Article stipulates that avoidance must be carried out within a reasonable time.
(iii)â Cure
Under the CISG, the seller has the right to cure any defects in his performance. Article 37 states that the seller has the right to cure defects in the quality or quantity of the goods before the date of delivery. It further stipulates that the seller may, up until the end of an agreed period of time for performance:
deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense.
The Convention offers no guidance on what is meant by the term ‘unreasonable’. However, the expenses incurred by the buyer may not play a role in whether the seller should be allowed to cure any defects in performance. If the buyer can reclaim the expenses under the damages provision in the Convention, then arguably a request to cure should not be unreasonable. It should be noted while it is the seller who bears the expense of curing the defect, and it is for him to decide whether it is worth the expense, he cannot insist that the buyer present the sum of money necessary to cure the defect, up front, then proceed to repay that amount in damages.
Another point worth noting is that under CISG, Article 52(1) the buyer is not required to take delivery of the goods prior to the delivery date. The extent to which refusal of early delivery will be limited by the observance of good faith and trade usages remains to be seen as there are no reported cases on this issue.
CISG, Article 48 contains the more controversial provision on curing defects. This Article addresses the seller’s right to cure defects in the quality or quantity of the goods after the date of delivery. It provides:
(1) Subject to Article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience
27 Appellate Court, Celle, 24 May 1995.
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or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention.
(2)If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.
(3)A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision.
(4)A request or notice by the seller under paragraph (2) or (3) of this Article is not effective unless received by the buyer.
Article 48 states that it is subject to Article 49, the buyer’s right to avoid the contract. However, in many cases the seller’s right to cure prevails over the buyer’s right to avoid the contract. Thus, if a replacement can be made without undue delay even after the date for performance has passed there cannot be any substantial detriment to the buyer such as is required to produce a fundamental breach. In one decision of a Swiss court it was held that:
According to this Article [CISG, Article 25], the condition for a fundamental breach of contract is an especially weighty impairment of the buyer’s interest in the performance. Yet, besides the objective weight or importance of a defect, it is decisive of the substantiality of a breach of contract, whether the defect can be removed by subsequent repair or substitute delivery. The UN Sales Law proceeds from the fundamental precedence of preservation of the contract, even in case of an objective fundamental defect. When in doubt, the contract is to be maintained even in case of fundamental defects, and an immediate contract avoidance should stay exceptional. Because, as long as and so far as (even) a fundamental defect can still be removed by remedy or replacement, the fulfilment of the contract by the seller is still possible and the buyer’s essential interest in the performance is not yet definitively at risk.28
When a seller does not deliver the goods in a timely manner or presents non-conforming goods, Article 48 permits the seller to cure the defective performance if it does not result in unreasonable delay, unreasonable inconvenience or unreasonable uncertainty of reimbursement by the seller of expenses advanced by the buyer. Article 48(2) states that if the seller requests the buyer to communicate whether he will agree to a cure and the buyer does not respond within a reasonable time, the seller may carry out performance within the time-line specified in his request. The buyer cannot, during this time, decide to choose another remedy which would affect performance by the seller. There are numerous circumstances which can hinder or delay the buyer’s
28 Commercial Court des Kantons, Aargau, 5 November 2002.
211 2â Structure and scope
ability to respond to a request to cure defects: for example, it may depend on the nature of the goods in question, or the buyer may need to weigh his options to decide whether curing is advantageous to his situation. Therefore, if the buyer is silent on the issue and this period constitutes an unreasonable amount of time, then the seller’s right to cure the defect takes precedence and the buyer cannot resort to any other remedies under the Convention. This can be seen in a decision of a German court where the buyer failed to reply to the seller’s request to cure– in this case to make an additional delivery; therefore, the seller was entitled to perform the contract and the buyer could not resort to avoidance.29 Furthermore, it is worth noting that CISG, Article 50 precludes the buyer from declaring a reduction of price if he refuses to have the defect cured by the seller. This was illustrated in one case where the buyer refused to allow the seller to cure the defect in a delivery of blankets, of which five were missing, and the court held that the buyer was not entitled to a reduction in price in accordance with Article 50.30
Q9 Discuss how the seller’s right to cure defects in performance may create uncertainty in international trade.
(iv)â Specific performance
CISG, Article 46 deals with the buyer’s right to demand specific performance of the contractual obligations. It provides:
(1)The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement.
(2)If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under Article 39 or within a reasonable time thereafter.
(3)If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under Article 39 or within a reasonable time thereafter.
The seller’s corresponding right can be found in CISG, Article 62, which provides:
the seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.
29Lower Court, Nordhorn, 14 June 1994.
30Appellate Court, Koblenz, 31 January 1997.