Professional Documents
Culture Documents
Martin Davies and David V. Snyder
International Transactions in Goods: Global Sales in
Comparative Context, Remedies pp. 67‐125
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The rule of article 75 is a necessary implication of the principle in article 74. If the
buyer
avoids the contract—and thus has no goods—it might choose to cover. If it has to
pay
more for the substitute goods, the difference between the cover price and the
contract
price will be part of its loss. It may also have other loss under article 74 (e.g.,
delay
damages, brokerage fees incident to the cover transaction). Similarly, if the buyer
breaches and the seller avoids the contract, the seller may resell the goods to
someone
else. If the price they bring is less than the contract price, the seller can recover
the
difference under article 75, as well as any other damages under article 74.
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Synonim: full repair
The principle of ‘full compensation’ sets the benchmark/measure for
compensation:
the aggrieved party should receive neither less (subject to Arts 79, 80 CISG)
nor more than the loss it suffered as a consequence of the breach.
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A crucial policy of contract law: reliability of the contract, i.e. security of
transactions.
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According to the traditional view, in order for the loss to be recoverable under
the
CISG, it must have a financial impact on the aggrieved party.
The CISG allows an aggrieved buyer or an aggrieved seller to recover incidental
and consequential damages.
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The difference between the market price and the contract price:
If the buyer was to receive wheat worth $150,000 in return for a payment of
$130,000, then the buyer has suffered damages of
$20,000—the loss of its bargain. On the other side, if the buyer repudiates in a
sale
where the price was $270,000 and the value of the goods at the time of delivery
was
$240 000 the seller has suffered damages of $30 000
$240,000, the seller has suffered damages of $30,000.
If the buyer has already paid the price, then it would be entitled to a
return of the price along with its loss of bargain. Recall the wheat example and
suppose
the buyer had already paid the entire price before the seller’s breach and the
buyer’s
consequent avoidance. Recovery of the price plus the $20,000 loss of bargain
would
make the buyer whole. If the buyer had not paid the whole price but only a
$10,000
deposit, it would be entitled to recover the $10,000 deposit plus the $20,000 loss
of
bargain.
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Although it is hard to define incidental damages in a way that clearly
distinguishes them from consequential damages, incidentals generally have to do
with
dealing with the breached contract itself, the goods associated with it, and the
transaction
or transactions to substitute for it.
‘Incidental’ damages are, for example, additional costs incurred after the breach
in a reasonable
in a reasonable
attempt to avoid further loss.
“Expenses incurred because of the contract can be recoverable if it is determined
that they would not have been incurred were
it not for reliance on performance of the contract and that they lost their
purpose through
the breach of contract.” Oberster Gerichtshof (Austria), 14 January 2002, CISG‐
online 643
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In essence, consequential damages are those damages incurred because of
losses with respect to other contracts but on account of
the breach of the contract in suit.
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The CISG implicitly allows a special measure of recovery for the lost‐volume
seller.
The CISG rule is embedded in its general principle, as the case law has
recognized.
To illustrate, consider two simple hypotheticals,
one that does not involve a lost‐volume seller and one that does.
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Assume that you have an old bike you no longer want. You post an ad that you
will sell it for $200. I see your ad
and agree to buy it for $200, delivery and payment one week later. The day after
our
agreement, however, I repudiate. You post your ad again. A different buyer
responds,
this one considerably more trustworthy than I have been. He agrees to buy the
bike for
bike for
$200, and the two of you go through with the transaction. You have no damages,
aside
from some incidentals, perhaps; you may have had to pay a fee to post the
second ad, for
instance. If the second buyer had paid only $190, then your damages would
include the
$10 price difference. You have only one bike, and you are not in the business of
buying
or selling bikes. This amount would make you whole.
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Consider now a seller that is a bike dealer, for whom a different result is
necessary. As
before, I agree to buy a bike for $200, then breach. The next day, the dealer sells
the
bike that I was going to buy to the more trustworthy buyer for $200, who follows
through. If we use the same concept and formula as in your case, the dealer will
receive
no damages (except perhaps some minor incidentals) But this would be wrong
no damages (except perhaps some minor incidentals). But this would be wrong,
assuming
the dealer has or can timely obtain as many bikes as it can sell, which is probably
true.
But for my breach, the dealer would have had another sale and another profit. It
would
have sold a bike to me and to the trustworthy buyer. If the dealer makes a 10
percent
($20) profit on each bike it sells, it should collect that foregone profit in damages
from me.
Only then would it be whole. This result differs from the first case, because the
test is not
satisfied there. It is not true that but for my breach, you would have had another
sale
and another profit. You had only one bike.
The lost‐volume seller’s damages are the profits the seller would have made
from full performance by the buyer.
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Interest may be recovered “[i]f a party fails to
pay the price or any other sum that is in arrears.” Art. 78. So much we know from
the
treaty. The case law has made it reasonably clear that damages are subject to
interest
once they are due.
Damages, the reasoning goes, are a “sum that is in arrears” if not paid when due.
Less clear is whether any particular notice is necessary for interest
Less clear is whether any particular notice is necessary for interest
to be recoverable and to start accruing.
A couple of CISG decisions hold that notice must be given in order for interest to
begin to accrue. Other
cases hold that the treaty allows for interest without regard to notice.
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