Fundamental Breach under the CISG

Alexander Lorenz
copy @ cisgw3.law.pace.edu/
CISG Database, Pace Institute of International Commercial Law. Reproduced with
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Contents
Contents
Fundamental Breach under the CISG,
Alexander Lorenz, Germany/Canterbury, England 1
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Importance of Distinguishing between Fundamental and Non-fundamental
Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Reduction of price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
C. Contract Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Repair and delivery of substitute goods . . . . . . . . . . . . . . . . 4
E. Passing of risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
F. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
G. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
III. [...] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. Detriment/expectation component . . . . . . . . . . . . . . . . . . . 7
B. Foreseeability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
IV. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Metadata 12
SiSU Metadata, document information . . . . . . . . . . . . . . . . . . . . . . 12
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Fundamental Breach under the CISG
Fundamental Breach under the CISG, 1
Alexander Lorenz,
*
Germany/Canterbury, England
I. Introduction 2
The U.N. Convention on Contracts for the International Sale of Goods was adopted 3
on April 11, 1980 in Vienna and came into force on January 1, 1988. It sets out rules
that govern international sales contracts and in particular determines the formation of
contract and the rights and obligations of buyers and seller to an international sales
contract.
1
Since its predecessors ULIS
2
and ULF
3
adopted at The Hague in 1964 did
not gain widespread acceptance
4
, the Vienna Convention 1980 was intended to su-
persede these two Conventions.
5
In Article 25 the Vienna Convention 1980 defines fundamental breach of contract and 4
is a prerequisite of powerful remedies like the avoidance of contract
6
or the buyer's right
to require delivery of substitute goods.
7
It sets out the conditions under which the ag-
grieved party can make use of these remedies. Therefore, the concept of fundamental
breach is a central concept in the Convention's system of remedies.
8
II. Importance of Distinguishing between Fundamental and Non-fundamental 5
Breach
To illustrate the importance of distinguishing between fundamental and non-fundamental 6
breach, I propose to consider first a breach of contract and its consequences under the
Convention in general.
While chapter II of Part III of the Convention deals with the obligation of the seller and 7
provides remedies for the buyer, chapter III is concerned with the obligations of the
buyer and provides remedies of the seller.
The seller is under the obligation to deliver the goods, hand over any documents relat- 8
ing to themand transfer the property in the goods.
9
He must do so within a reasonable
time after the conclusion of the contract.
10
If a date or a period of time is fixed the de-
1
LEE, Robert The UN Convention on Contracts for the International Sale of Goods: OK for the
UK?(1993) Journal of Business Law, p. 131, at p. 133.
2
Uniform Law on International Sales (1964).
3
Uniform Law on the Formation of Contracts for the International Sale of Goods (1964).
4
Only Belgium, Gambia, West Germany, Israel, Italy, Luxembourg, Netherlands, San Marino and the
UK were parties.
5
NICOLAS, Barry The Vienna Convention on International Sales Law (1989), p. 201.
6
Article 49(1)(a), 51(2), 64(1)(c), 72 (1), 73(1).
7
Article 46(2).
8
NICOLAS, supra Note 5, at p. 218; see also HONSELL, Heinrich Kommentar zum UN-Kaufrecht:
Uebereinkommen der Vereinten Nationen Ueber Vertraege ueber den internationalen
Warenkauf(1997) Berlin-Heidelberg-New York, at Article 25 - 1.
9
Article 30.
10
Article 33(c).
*
Pace essay submission, June 1998.
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Fundamental Breach under the CISG
livery must take place on that date
11
or within that period.
12
The seller is required to deliver goods which are of the quantity, quality and description 9
required by the contract and which are contained or packaged in the manner required
by the contract.
13
In particular the goods must be fit for the ordinary or particular pur-
pose known to the seller
14
, possess the quality of a sample or model held out to the
buyer
15
and be contained in a usual manner or adequate to protect and preserve the
goods.
16
If the seller does not comply with one of these requirements he is in breach of the 10
contract.
17
Also the buyer has certain obligations; the most important are to pay the price for 11
the goods and take delivery of them.
18
If the buyer fails to do so he is in breach of
contract.
19
Several remedies are available for a breach of contract.
20
This is where the distinction 12
between a fundamental and a non-fundamental breach becomes crucially important
since certain remedies are only available in cases of a fundamental breach. The most
important remedies of the Convention are:
A. Damages 13
If one of the parties fails to perform his contractual obligations Article 45(1)(b) gives the 14
buyer and Article 61(1)(b) the seller the right to claim damages under Article 74. The
latter sets out the rules for the calculation of damages as well as further conditions for
liability. In addition to a breach of contract, two further conditions have to be satisfied:
a foreseeable loss must be suffered by the injured party and there must be a causal
link between the breach of contract and the suffered loss.
21
Damages can be claimed for any failure of buyer or seller to perform the contractual 15
obligations.
22
Accordingly, the aggrieved party can recover damages from the party in
breach even though the breach has not been fundamental.
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Fundamental Breach under the CISG
B. Reduction of price 16
In case of non-conformity of the goods, the buyer may also reduce the price under 17
Article 50 pursuant to Article 45(1)(a).
The remedy of price reduction can be applicable where the seller has delivered non- 18
conforming goods and the buyer elects to accept them in spite of the non-conformity.
23
The remedy of price reduction is not available in types of breach other than non-
conformity of goods. Other types of breach contained in Articles 31-34 such as late
delivery, handing over documents, etc. do not fall within the range of Article 50, and
price reduction is not available.
24
As with the remedy of damages, the remedy of price reduction does not require a fun- 19
damental breach but is available in any case of non-conformity of goods.
C. Contract Avoidance 20
Under Article 49
25
the buyer may declare the contract avoided if the seller fails to per- 21
form his obligations. The same applies to the seller under Article 64.
26
Pursuant to
Article 81 avoidance of the contract releases both parties from their obligations under
it, subject to any damages which may be due. Accordingly, once a contract has been
declared avoided, the contract is terminated and the parties are released from their
obligations for the future. The buyer loses the right to claim the delivery of goods and
the seller cannot claim payment of the price anymore. However, the injured party does
not lose the right to claim damages he suffered as a consequence of the breach.
27
For
the past, the parties may claim restitution and be required to return the supplied goods
or the paid price.
28
11
Article 33(a).
12
Article 33(b).
13
Article 35(1).
14
Article 35(2)(a)(b).
15
Article 35(2)(c).
16
Article 35(2)(d).
17
von CAEMMERER, E. / SCHLECHTRIEM, Peter Kommentar zum Einheitlichen UN-Kaufrecht
(1995), 2
nd
edition, Munich, at Article 25 - 7.
18
Article 53.
19
LEE, supra note 1, at p. 140.
20
Article 45(1); 61(1).
21
BIANCA, C.M. / BONELL, M. J. Commentary on the International Sales Law - The 1980 Vienna
Sales Convention (1987) Milan, at Article 74, 2.2. (Knapp).
22
Ibid, at Article 45, 2.1.1 (Will) and at Article 61, 2.2. (Knapp).
23
Ibid, at Article 50, 2.1. (Will)
24
HONNOLD, John Uniform Law for International Sales under the 1980 United Nations
Convention(1991) 2
nd
edition, Deventer-Boston , at 313.1.
25
See Article 45(1)(a).
26
See Article 61(1)(a).
27
BIANCA/BONELL, supra note 21, at Article 81, 2.2. (Tallon).
28
Article 81(2).
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Contract avoidance is a drastic remedy
29
since world-wide commercial trade normally 22
involves large quantities of goods and therefore involves expensive transport and stor-
age. Consequently, the remedy of contract avoidance is not available for just any
breach of contract; at this point the distinction between non-fundamental and funda-
mental breach, as defined in Article 25, becomes of major importance. The avoidance
of contract may only be declared if the failure of the seller to perform any of his obli-
gations . . . amounts to a fundamental breach
30
or if the seller does not deliver the
goods within the additional period of time fixed in accordance with the Nachfrist-type
rule in Article 47.
31
The same applies to the buyer if he does not perform his obligation
to pay the price or take delivery of the goods.
32
Other than in the limited Nachfrist situation, a non-fundamental breach of contract 23
does not give the parties the right to avoid the contract.
The prerequisite of a fundamental breach is meant to save the contract and conse- 24
quently to avoid expensive and wasteful reshipment where either the defect of goods is
immaterial or the deprivations from the contract are insubstantial.
33
This makes it clear
that one has to carefully analyze whether a breach is fundamental or not and what
exactly amounts to a fundamental breach within the meaning of Article 25.
D. Repair and delivery of substitute goods 25
In case goods do not conform with the contract, the buyer may require the seller to 26
repair the goods
34
or to deliver substitute goods.
35
The buyer's right to repair is subject to the condition that the repair is not unreason- 27
able having regard to all the circumstances.
36
The unreasonableness depends on the
nature of the goods and other circumstances such as the distance of the respective
countries of the parties or the extent of the defect of the goods, but does not depend
on the character of the breach.
37
However, the right to require delivery of substitute goods depends very much on the 28
character of the breach; substitute goods may only be requested in case of a fun-
damental breach. The prerequisite of a fundamental breach was introduced in this
provision to avoid expensive transports of substitute goods in cases in which the defect
of the goods is trivial and the deprivation of contract is unsubstantial.
This, again, stresses the importance of the distinction between a fundamental and a 29
29
BIANCA/BONELL, supra note 21, at Article 49, 1.1.(Will).
30
Article 49(1)(a), 64(1)(a).
31
Article 49(1)(b).
32
Article.64 (1)(b).
33
HONNOLD, supra note 24, at 182.2; MICHIDA, Shinichiro Cancellation of Contract (1979) The
American Journal of Comparative Law, p. 279, at p. 281.
34
Article 46(3).
35
Article 46(2).
36
Article 46(3).
37
HONNOLD, supra note 24, at 284; BIANCA/BONELL, supra note 21, at Article 46, 2.2.2.2. (Will).
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Fundamental Breach under the CISG
non-fundamental breach. While in the former case the buyer may require substitute
goods the buyer, in the latter case, has to content himself with a request for repair or
with claiming damages or price reduction.
E. Passing of risk 30
Apart from different available remedies, the distinction between fundamental and 31
non-fundamental breach becomes equally important in chapter IV of the Convention
dealing with the passing of risk. Pursuant to Article 70, articles 67, 68 and 69 do not
impair the remedies available to the buyer on account of the breach, if the seller has
committed a fundamental breach of contract.
Articles 67-69 are concerned with the time when the risk of loss or damage to the goods 32
passes to the buyer. Once the risk passes to the buyer the seller is entitled to payment
regardless of any damage or loss to the goods.
38
Article 67 deals with the passing of risk in sales that involve the carriage of goods. 33
In that case the risk passes to the buyer when the goods are handed over to the first
carrier.
Pursuant to Article 68 the risk in respect of goods sold in transit passes to the buyer 34
from the time of the conclusion of the contract.
Article 69 is concerned with the buyer's failing to take delivery. If the buyer does not 35
take over the goods in due time, the risk of damage or loss passes to him.
Article 70 deals with passing of risk in the case of a breach of contract of the seller 36
and situations in which such a breach may prevent the risk from passing to the buyer.
39
In cases of non-conformity of goods that constitute a fundamental breach, the buyer
does not lose his remedies although the risk of damage or loss has passed to him.
Therefore the buyer may declare the contract avoided if the non-conformity of goods
already amounted to a fundamental breach at the time the risk passed to the buyer but
the goods suffered further damage after the passing of risk.
40
If the non-conformity of
goods did not amount to a fundamental breach before the risk has passed, contract
avoidance is not available to the buyer since he has to bear the risk.
F. Miscellaneous 37
Furthermore the distinction between fundamental and non-fundamental breach be- 38
comes important where a contract avoidance may be declared for the reason of an
anticipatory breach of contract.
41
Finally, the parties may declare an instalment contract avoided in case of a fundamen- 39
38
Article 66.
39
HONNOLD, supra note 24, at 379.
40
BIANCA/BONELL, supra note 21, at Article 70, 2.3. (Nicholas).
41
Article 72.
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Fundamental Breach under the CISG
tal breach.
42
G. Conclusion 40
As seen above, the distinction between fundamental and non-fundamental breach is 41
crucial to determine the different remedies available to the aggrieved party. In case of
a fundamental breach, the injured party cannot only claim damages, price reduction
or the repair of non-conforming goods but may also declare the contract avoided or
request the delivery of substitute goods. Also the question whether remedies are still
available in case the risk passed to the buyer depends on the nature of the breach of
contract.
The distinction between fundamental and non-fundamental breach may lead to dif- 42
ferent legal consequences and is therefore of major importance in the Convention.
Having illustrated the importance to distinguish between fundamental and non-fundamental 43
breach, I will now focus on the definition of a fundamental breach in detail and raise
the question whether the definition of a fundamental breach provided in Article 25 is
the best that can be devised.
Article 25 defines a fundamental breach as a breach of contract that results in such 44
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.
The concept of fundamental breach is already to be found in Article 10 ULIS but was 45
criticised for being too subjective.
43
The definition in Article 25 introduced more objec-
tive criteria and can be seen as a compromise between a strict subjective test and a
strict objective test.
44
The hypothetical will in Article 10 ULIS was eliminated and in-
stead a material test was adopted in Article 25 of the 1980 Vienna Convention.
45
However, a fundamental breach had to be drafted in general terms since such a con- 46
cept cannot specify all possible circumstances.
46
Therefore, the present definition in
Article 25 has generated much controversy and difficulties in interpreting it.
It is even asserted that it is impossible to define a fundamental breach at all and that 47
only practice in the form of case law is capable to shape such a general concept.
47
At
the 1977 UNCITRAL conference it was proposed to delete any definition of fundamental
breach but these suggestions were met with opposition.
48
42
Article 73.
43
ZIEGLER, Ulrich Leistungsstoerungsrecht nach dem UN-Kaufrecht (1995) Baden-Baden, at p. 40;
ERSI, Guyla A propos the 1980 Vienna Convention on Contracts for the International Sale of Goods
(1983) The American Journal of Comparative Law, p. 333, at p. 337.
44
ZIEGLER, supra note 43, at p. 41.
45
BIANCA/BONELL, s upra note 21, at Article 25, 1.2. (Will).
46
HONNOLD, supra note 24, at 181.2.
47
ERSI, supra note 43, at p. 336-337.
48
Ibid, at p. 336 n.7.
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The definition in Article 25 can be divided in two elements: first, a detriment such as 48
substantially to deprive the other party of what he is entitled to expect under the con-
tract -- the detriment/expectation component -- and second, the foreseeability of the
detriment -- the foreseeability component.
49
III. [...] 49
A. Detriment/expectation component 50
The word detriment is not defined in the Convention. However, a definition of detriment 51
cannot be confined to an actual material loss or damage but has to be interpreted in a
broader sense including also immaterial detriments such as losing a customer, losing
resale possibilities or being brought into disrepute etc.
50
Detriment . . . (just) . . .
fills the modest function of filtering out certain cases, as for example where breach of
a fundamental obligation has occurred but not caused injury.
51
The major emphasis is laid upon the contractual expectation of the injured party: of 52
what he is entitled to expect under the contract.
52
The expectation of a party under a
contract is a central criterion to the determination whether a breach of contract is detri-
mental.
53
The expectation interest adds an objective criterion to the definition since it
is the contract that determines the party's obligations and it is also the contract that
determines the importance of these duties.
54
Consequently, it is not the personal and
subjective interest of the injured party that matters but the expectation that can be as-
sessed by looking at the contract itself.
55
Furthermore, detriment must substantially deprive the injured part of what he is enti- 53
tled to expect under the contract.
56
Determining substantiality causes major problems
because it is open to various interpretations.
57
It was even argued that to define funda-
mental by substantial is an idem per idem definition and therefore mere tautology.
58
Thus, determining substantiality in terms of quantity -- how big may a deficit of the
delivered goods be not to be substantial? Does late delivery substantially deprive
the injured party of what he is entitled to expect under the contract? Do other crite-
ria such as a reasonable offer to cure or the reasonable possibility to resell or use
49
BABIAK, Andrew Defining Fundamental Breach under the United Nations Convention on
Contracts for the International Sale of Goods' (1992) Temple International Law Journal, p. 113, at p.
118; HONNOLD, supra Note 24, at 183.
50
BIANCA/BONELL, supra note 21, at Article 25, 2.1.1.2. (Will); HONSELL, supra note 8, at Article 25
- 14.
51
BIANCA/BONELL, supra note 21, at Article 25, 2.1.1.2. (Will).
52
Article 25.
53
BABIAK, supra note 49, at p. 120; von CAEMMERER/SCHLECHTRIEM, supra note 17, at Article 25
- 9.
54
von CAEMMERER/SCHLECHTRIEM, supra note 17, at Article 25 - 9.
55
HONSELL, supra note 8, at Article 25 - 16.
56
Article 25.
57
BIANCA/BONELL, supra note 21, at Article 25, 2. (Will).
58
Ibid, at Article 25, 2.1.2. (Will); EORSI, supra note 43, at p. 336-337.
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Fundamental Breach under the CISG
the non-conforming goods elsewhere have to be taken into account? Article 25 does
not given an explicit answer to these questions. The question for instance whether a
breach amounts to substantial detriment even if an offer to cure is made and a repair
of the deficient goods is possible and does not cause unreasonable inconvenience can
be dealt with in different ways. This becomes important where a contract is declared
avoided and the seller has made an offer to cure pursuant to Article 48.
It is suggested that this question must be answered in the light of the effect of a rightful 54
offer to cure, for otherwise seller's exercise of this right would be futile.
59
It implies that
substantiality of the detriment depends on whether the breach can be cured without
causing unreasonable inconvenience and delay.
60
Otherwise, the seller's right to cure
stipulated in Article 48 consequently ceases to exist by the time the contract is declared
avoided which would render Article 48 meaningless.
On the other hand, Article 48 expressly states that the right of the seller to cure is 55
subject to Article 49; this can suggest that contract avoidance has priority over an offer
to cure. If an offer to cure would prevent a fundamental breach, Article 49 would be
subject to Article 48 and Article 48 would have priority over Article 49. This would twist
the provisions to mean just the opposite. Moreover, the injured buyer finds himself in
a position of uncertainty. Will the seller make an offer to cure and when? The change
of the nature of the breach would just depend on the seller making an offer to cure. All
this would result in a weakening of Article 25.
Furthermore, in cases of contract avoidance national courts
61
have even held that non- 56
conformity of goods does not result in substantial detriment if the goods reasonably
can be used for another purpose or can be resold elsewhere. In this case, the buyer
may claim damages or use other remedies but may not declare the contract avoided
for the reason that the Convention aims at saving contracts. This interpretation leaves
the buyer and the seller in uncertainty. In case an action is brought before a court
concerning a fundamental breach, the buyer faces a dilemma: on the one hand, he has
to keep the non-conforming goods in order not to lose the right to avoid the contract;
62
on the other hand, the buyer might have to resell the goods or make other use of them
in order to mitigate the loss.
63
All this goes to show that the term substantial detriment is open to various interpreta- 57
tions and that each interpretation may conflict with certain provisions in the Convention
or render them meaningless. Accordingly, there is no interpretation that can be claimed
to be the right one. The term substantial detriment therefore is not sufficiently clear
and eventually it is for the courts to develop rules in their case law that can be relied on
by the parties.
59
HONNOLD, supra note 24, at 184.
60
Ibid, at 296; von CAEMMERER/SCHLECHTRIEM, supra note 17, at Article 25 - 20; NICOLAS,
supra note 5, at p. 224.
61
Appeal Court in Frankfurt a.M., Germany, 18 January 1994, RIW 1994 p. 240,
http://cisgw3.law.pace.edu/cases/940118g1.html; Federal Court of Justice, Germany, BGH-Urteil-VIII ZR
51/95 3 April 96, http://cisgw3.law.pace.edu/cases/960403g1.html
62
Pursuant to Article 82.
63
Pursuant to Article 77.
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B. Foreseeability 58
As far as foreseeability of a substantial detriment is concerned, a breach is not funda- 59
mental 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.
64
This second
part of Article 25 is composed of a subjective and an objective test of foreseeability; it
is meant to eliminate a fundamental breach where the substantial detriment occurs
unexpectedly.
65
The party in breach may claim that he was not able to foresee such a detriment with the 60
consequence that the breach of contract does not amount to a fundamental one within
the meaning of Article 25. Accordingly unforeseeability may depend on the party's
knowledge and evaluation of the relevant facts, his experience, his perception of the
circumstances, etc.
66
However, as parties in breach are not likely to admit that they foresaw the detrimental 61
result, the objective criterion of a reasonable person standard was introduced.
67
Here
the question has to be asked whether a reasonable person of the same kind in the
same circumstances would not have foreseen the result.
68
Although this test is meant
to add objectivity to the definition, it remains rather vague since numerous characteristic
features have to be taken into account to determine a person of the same kind and it
is suggested that the whole socio-economic background including religion, language,
etc. must be taken into consideration.
69
Courts therefore face the difficult task to assess
what exactly is a person of the same kind. The parties to the contract in question may
be unable to predict the outcome of the litigation.
The same applies to the term in the same circumstances. The whole range of facts 62
such as conditions on world and regional markets, national legislation, prior trade usage
between the parties, etc. must be taken into account to determine whether a reasonable
person would have foreseen a detrimental result.
70
Moreover, it is important to mention that the burden to prove unforeseeability lies with 63
the breaching party.
71
However, the main problem of foreseeability rests with the time at which the detrimental 64
result must be foreseen. Article 25 does not answer this question and it remains un-
certain whether the time of the contract conclusion is crucial to assess foreseeability or
whether foreseeability of a detrimental result occurring after the conclusion of contract
also has to be taken into consideration.
72
64
Article 25.
65
BIANCA/BONELL, supra note 21, at Article 25, 2.2. (Will).
66
Ibid, at Article 25, 2.2.2.1. (Will).
67
Ibid, at Article 25, 2.2.2.1. and 2.2.1. (Will).
68
Article 25.
69
BIANCA/BONELL, supra note 21, at Article 25, 2.2.2.2.1. (Will).
70
Ibid, at Article 25, 2.2.2.2.2. (Will).
71
BABIAK, supra note 49, at p. 121.
72
NICOLAS, s upra note 5, at p. 219.
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Fundamental Breach under the CISG
Again, Article 25 is open for interpretation on this point and has generated much con- 65
troversy.
It has been suggested that if a detrimental result was not foreseeable at the time of 66
the conclusion of contract, and becomes foreseeable after that, the party in breach
cannot claim that the detrimental result was unforeseeable. According to this view any
foreseeability of a substantial detriment before the time of breach but after the time
of conclusion is to be taken into consideration.
73
Others suggest that foreseeability of
detrimental results after the conclusion of contract can only be taken into consideration
in exceptional cases and only up to the time when the preparations for performance of
the contract performance started.
74
These views consider the overall situation of the contract and leave room for a more 67
individual evaluation of the circumstances. The relevant information often might be
passed on to the party in breach after the conclusion of the contract and it is argued that
the drafters of the Convention meant to provide courts with a rather flexible provision.
75
On the other hand, it is suggested that foreseeability can only be taken into account if
the substantial detriment was foreseeable at the time the contract was concluded.
76
It
is argued that it is the contract that determines the importance of buyer's and seller's
duties and obligations. Therefore the time of the contract formation must be the crucial
time for foreseeability; otherwise one party could make substantial a certain interest
that was not mentioned by the time of the contract formation interest and change a
non-fundamental breach into a fundamental breach simply by providing the other
party with further information.
There are good reasons for both solutions. Which solution is the one the court will 68
apply? Seller and buyer are left in uncertainty until further reliable case law has devel-
oped.
IV. Conclusion 69
What conclusion can be drawn from all this? As seen in the first part of the essay, 70
the distinction between fundamental and non-fundamental breach is of major impor-
tance since different remedies are available.
Unfortunately, the definition in Article 25 is not sufficiently clear and open to various 71
interpretations. In particular the interpretation of a substantial detriment and the crucial
time of foreseeability leave the buyer and seller in uncertainty.
At the end of the day the definition in Article 25 at least provides rough guidelines for 72
merchants, lawyers and courts; it stipulates that it is not the subjective interest of the
aggrieved party that matters but the expectation under the contract that specifies the
73
HONNOLD, supra note 24, at 213.
74
BIANCA/BONELL, supra note 21, at Article 25, 2.2.2.2.5. (Will).
75
BABIAK, supra note 49, at p. 123; ZIEGLER, supra note 43, at p. 43.
76
von CAEMMERER/SCHLECHTRIEM, supra note 17, at Article 25 - 15.
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Fundamental Breach under the CISG
detriment. It adds more objectivity to the definition. Furthermore, the question of fore-
seeability is addressed and Article 25 sets out that the detriment has to be foreseeable
which provides further important guidelines.
Unfortunately, the time of foreseeability of the detriment is left out and, as seen above, 73
can generate many difficulties. On this point, the drafters of the Conventions could have
made the definition clearer by specifying the time of foreseeability.
Eventually there remains the question of substantiality. The definition of fundamental 74
breach is meant to define a very serious breach; to achieve this the word substantial
is used. As also seen above, this is said to be mere tautology since it is a n idem per
idem definition. But how can one make substantiality more specific? Of course, one
can add more description or examples to the definition but they will hardly be capable
of covering all possible situations that might occur and probably generate even more
problems to interpret a definition of fundamental breach -- more words call for more
interpretation.
In my view, it is not possible to draft a more specific definition of a fundamental breach 75
since it is simply meant to describe a very serious breach and has to be drafted in
general terms. However, it is for the courts to develop criteria and guidelines in their
case law. But there remains the problem that courts in different countries might have
different views on these problems with the consequence that no uniform interpretation
of Article 25 will be established.
The parties to an international sales contract are therefore well advised to include spe- 76
cific provisions concerning a reasonable offer to cure or the crucial time of foreseeability,
etc. into their contract. The more specific these provisions are, the narrower becomes
the scope of possible interpretations.
All in all, it seems that the notion of a fundamental breach itself is very important and 77
necessary to satisfy the needs of international trade. On the other hand, the notion of a
fundamental breach is very difficult to determine in detail and, until a uniform case law
has been established, may cause uncertainties to the parties to an international sales
contract. But, by including specific provisions in their contracts, parties to international
sales contracts can easily avoid many of these uncertainties.
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Fundamental Breach under the CISG
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http://www.jus.uio.no/pace/fundamental_breach_under_the_cisg.alexander_lorenz/sisu_manifest.html
Title: Fundamental Breach under the CISG
Creator: Alexander Lorenz
Rights: CISG Database, Pace Institute of International Commercial Law. Reproduced with permission of the author.;
Publisher: SiSU on behalf of CISG Database, Pace Institute of International Commercial Law
Date available: 1998-09-21
Date: 1998
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