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    Seller's Remedies 7

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    sanchi
    CISG

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    Excerpt from Allison E. Butler, “A PRACTICAL GUIDE TO THE CISG: NEGOTIATIONS ‘THROUGH LITIGATION,” Aspen Publishers (2007 Supplement 2). © Author. Reproduced with permission. For full text, see . Chapter 7 SELLER'S REMEDIES §7.01__Infroduction §7.02 Overview of Remedies Available to Seller §7.03 _A Seller's Right to Elect Remedy IA] Specific Performance 1B] _ Right to Payment of Contract Price §7.04 Avoidance IA] Notice [B] Fundamental Breach—Article 64(1)(a) [1] Detriment Under a Fundamental Breach 2} Substantially Deprive Seller Under a Fundamental Breach 13] Application by the Courts (4) Foreseeability Under a Fundamental Breach IC] Nachfrist Notice [ID] Avoidance for Non-Performance—Article 64(1)(b) [E]) Avoidance After Payment by Buyer §7.01 INTRODUCTIO’ ‘A “breach of contract” under the CISG is a term used to describe a party's non-performance of an obligation under a contract. The remedies available for a seller aro set forth in Patt Ill, Section IU: Remedies for Breach of Contract by the Buyer, Articles 61-65. See Chapter 6 for a discussion of a buyer's remedies. Overall, the CISG permits several remedies, which include (1) specific performance (Asticle 62); (2) right to avoid the contract because ofa fundamental breach of contact (Article 64(1)(a)); G) right to avoid the contract efter giving additional time to perform; (4) right to damages (Article 61(1)(b) in connection with Articles 74-77), Specific performance is permitted provided domestic law recognizes the relief. As to other remedies, itis important to observe thatthe preservation of a contract is highly regarded under the ISG, and as a direct consequence the remedy of rescission, or “avoidance” ofa contrac, is only permitted upon a finding ofa material breach (or “fundamental breach”). Ifthe breach is not fundamental, a seller may still void the contract provided it first gives notice to the buyer and sets forth an additional time limit for the buyer to perform—Nachfirst notice. A seller may still bbe able to avoid the contract after payment if certain time limitations are met by the seller. Unlike avoidance by a buyer under Article 49, the requirements to achieve this remedy are less restrictive as illustrated by case law. The remedy asserted by the seller will dictate the damages available to the seller. Similar to domestic application of contract Jaw, commercial issues, particularly in the international arena, are subjective and counsel should seek a remedy in accordance with the facts as presented by his or her client. Practical Application: Counsel should consult Table 4—Commercial ‘Transactions Comparative Chart in Appendix A. §7.02 OVERVIEW OF REMEDIES AVAILABLE TO SELLER Amicle 61 et seg. sets forth the remedies available to a seller in the event that a buyer fails to perform any of his or her obligations under a contractor the C1SG." These rules run parallel to those in Article 45 et seg. of the CISG governing a buyers remedies for breach of contract by the seller? See Chapter 6, Similar to obligations, th terms of the contract with regard to remedies also take precedence over the C1SG? In case of a buyer's noncompliance with contract or CISG obligation, in principle the following legal remedies are atthe seller's disposal (1) Right to performance, including payment and specific performance (Article 62); (2) Right to avoid the contract because ofa fundamental breach of contract (Article 63(1))s (@) Right to avoid the contract provided Nachjfist notice is given tothe buyer (Article 64(1)(b)); @) Restitution (Article 81(2)); (5) Right to damages (Art. 61(1}() in connection with Articles 74-77). In addition to prescribing the remedies, Article 61(1)(b) defines the calculation of the amount of damages by referencing Articles 74 to 77.? Therefore, a seller can rely on Article 61(1) and Article 61(2) when a buyer commits a breach of contract. An express objection to pay qualifies as disregarding an essential duty, thereby a breach of Article $3. It is also a special type of failure to pay which entitles the other party to interest upon the relevant sum pursuant to Article 78, in addition to damages under Article 174." Therefore, a claim to pay the price of the goods is not the same as a claim to recover damages. A seller may seek damages under other theories as well as other provisions of the CISG when seeking remedies. “[T]he right to claim damages exists either as an exclusive right or as a supplementary right, "Article 61(1). Switzerland 29 April 2004 Commercial Court St. Gallen, available at Iitp:/cisgw3 Jaw pace.edweases/040429s1 tml; Russia 17 September 2003 Arbitration proceeding 24/2003, available at hitp:/icisgw3 Jaw pace.edulcases/03091 751 hte aly 14 January 1993 District Court Monza (Nuova Fucinati v. Fondmetall International), available at tp:/cisgw3 Jaw pace.edu/cases/930114i3,html. *Germany 21 March 2003 District Court Berlin, available at http//cisgw3 law. ppace.edu/cases/030321g] htm (buyer in default for failure to pay purchase price within 45 days after receipt and delivery of the goods as agreed between the parties). “Article 61(1)@). “Article 61(1)(b); Germany 22 Fuly 2004 Appellate Court Disseldorf, available at hhup/cisgw3.law.pace.edu/cases/040722g1.html; Switzerland 12 March 2004 County Court Willisau, available at http//cisgw3.law.pace edu/cases/040312s1 html; France 12 June 2001 Appellate Court Colmar (Société Romay AG v, SARL Behr France), available at http://cisgw3 law_pace.edu/cases/010612f1 him; China 6 January 1999 CIETAC Arbitration proceeding (Australian raw wool case), available at bttp:/cisgw3.law pace. edu/cases/990106cl html; Germany 11 July 1996 Appellate Court Dusseldorf, available at http://cisgw3.law.pace.edu/cases/960711g1 tml; Germany 21 June 1996 Hamburg Arbitration proceeding, available at htp:/Icisgw3 law pace.edu/cases/96062 1g1 html; Germany 8 February 1995 Appellate Court Minchen {7 U 172094], available at http://cisgw3.law-pace edu/cases/950208g1 html; Germany 20 July 1995 District Court Aachen, available at bpz/cisgw3.law pace.edw/cases/950720g1 html; China 14 February 1996 CIETAC Arbitration proceeding (Bicycles case), available at http:/cisgw3.law-pace.edu/cases/9602 | 4c1 html; China 14 May 1996 CIETAC Atbitration proceeding (Down coat case), available at http:/cisgw3.law-pace.edu/cases/9605 14cl tra, “Belarus 6 March 2003 Economic Court of the Gomel Region (Agropodderzhka Trade House LLC v. Sozh State Farm Complex), available at http//cisgw3.law.pace.edu/eases/03030605.html; Russia 29 ‘September 1997 Arbitration proceeding 470/1996, available tpz/cisgw3.law pace.edu/cases/970929r1. htm, ‘Switzerland 20 October 2003 District Court Schafthausen, available at htps/icisgw3, law pace-edulcases/031020%1 him ‘Russia 1 December 1995 Arbitration proceeding 369/1994, available at httpd//cisgw3. law,pace.cdwcases/95120171 html. besides the right to require performance, to reduce the price or to avoid the contract."® Therefore, for ‘example, a declaration of avoidance would not preclude a seller from any claim for damages except for specific performance." “No period of grace may be granted to the buyer by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract.”"' Consequently, a court or tribunal cannot grant a buyer a period of grace for payment of the price or authorize partial payments. §7.03 A SELLER'S RIGHT TO ELECT REMEDY ‘The seller may requice 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." However, “Article 61 does not preclude the possibility of filing a claim to recover the loases along with Selle’ elaim to recover the price based on Article 62," [A] Specific Performance Performance of all contractual'® obligations imposed by the CISG"” is enforceable by courts and twibunals. If the parties agree to terms as to performance of a contract, then courts will enforce said obligations provided domestic law permits specific performance pursuant to Article 28."* Therefore, °See Fritz Enderlein, Rights and Obligations of the Seller Under the UN Convention on Contracts for the International Sale of Goods, International Sale of Goods, Dubrovnik Lectures 195, Oceana (Petar arcevic and Paul Volken, eds, 1996), Ch. 5, 133-201, also available at ‘sping law pace.cducispPiblivenderleinl html; China 25 November 1996 CIETAC Arbitration proceeding (Chromium ore case), available at htp//cisgw3 law. pace.edleases/961125e1 hil "Switzerland 20 February 1997 District Court Saane, avaiable at htp//cisew3. law.pace.edulcases970220s1 html; China 9 Tanuary 1993 CIETAC Arbitration proceeding (Sesame seed cake case), available at hp:/cisaw3 law-pace.edu/eases/930109e1. ml “Article 61(3). Helen Kaminski v. Marketing Australian Products, 1997 U.S. (SDNY. 1997), available at htp//cisgw3 Jaw-pace.edwieaseo97072 1. html. "Belgium 25 February 2004 District Court Hasselt (I v. NV P), available at Ihttp://cisgw3 law.pace.edu/cases/040225b2,html; Belgium 2 June 1999 District Court Hasselt (Isocab France v. ECB.8), available at hp/cisgw3.Jaw-pace.edu/eaes/990602b1 him Ng witzerland 19 February 2004 Supreme Court, available at http://cisgw3.law. pace.edulcases(040219s1 html; Russia 17 February 2003 Arbitration proceeding; 168/201, available at hntpi/icisaw3 Jaw:pace.eduleases/030217r1,biml; Belarus 6 March 2003 Economic Court ofthe Gomel Region (Agropodiderzhka Trade House LLC v. Sozh State Farm Complex), available at Inp//isgw3 law pace.edu/cases/030306b5 hua; Russia 7 June 2002 Arbitration proceeding 116/200], available at hiips/cisgw3.law. pace.edwleases/020607r1 html; Russia 25 May 2001 Arbitration proceeding 191/2000, available at htp/cisew3.law-pace.edu/cases(010525r1 html article 62. Russia 30 May 2001 Arbitration proceeding 185/2000, available at http://cisgw3. law pace.eduleases!01053012 htm \See generally Article 6. "See Articles $3-60. Article 28 states the following: LEXIS 10603 1 in accordance with the provisions of this Convention, one party is entitled to requite performance of any obligation by the other party, a court is not bound to center a judgment for specific performance unless the court would do so under its ‘ovm law in respect of similar contracts of sale not governed by this Convention ‘Note: There is a contrasting opinion as to the form of specific performance, e.g, domestic application vorsus international uniformity interpretation, See John Honnold, Uniform Law for International Seles ‘under the 1980 United Nations Convention (Kluwer 1980); in contrast, see Farnsworth, Damages and ‘Specific Relief in symposium, Unification of International Trade Law: UNITRAL: First Decade, 27 Am. Comp. Law 247 (1979). It is the sole opinion of the author that application of specific performance would contracts requiring procurement of nance as well as other contractual terms will be enforced by a court.” However, ifa seller seeks an inconsistent remedy, such as avoidance, the remedy of specific performance is denied under the CISG.” ‘A seller's right to compel performance may be impeded by its duty to mitigate. Under Article 62, there is no express obligation for the seller to attempt to try to resell goods prior to seeking specific performance for failure of the buyer to perform the contract, to pay the price, or to take delivery." However, opinion exists that a seller may have such an obligation to sell the goods in case the buyer is in breach due to the seller’s obligation to mitigate the loss under Article 77, or its obligation to take reasonable steps to preserve goods under Articles 85 through 88.” See generally Chapter 8. Practical Application: Based on the legal analysis adopted by U.S. courts, it would appear adherence to legislative history would prevail over scholarly opinion, although this point has not been expressly proven. [B] Right to Payment of Contract Price When determining a seller's right to enforce payment on a buyer, courts often encounter defense arguments by the buyer with regard to the conformity of the goods. See Chapter 8. Although a seller has an, obligation to deliver goods which conform in quantity and quality and to contractual specifications according to trade practices, differences in quantity and contractual requirements can only be regarded as, nonconforming goods under Article 35 if the defects reach a certain level of seriousness, and the buyer must raise timely objections as required by Article 39, Moreover, the buyer must still perform by taking delivery and paying for the goods and follow the legal procedure.” defense of late delivery may also be given provided Nachfrist notice is given in accordance with Articles 47 and 49(1)(b) or 49(1}(8). Absent ‘evidence meeting these criteria or other circumstances, a court will generally find a breach in accordance depend on the factual scenario and counsel's representation tothe court or tibunal, For example, Geneva Pharm, Tech. Comp v. Bar Labs. ic. 201 F. Supp.26 236, 2002 US. Dist. LEXIS 8411, also available at Intp/eisev3 Jaw pace edu/cases/020310u1 tml (holding that some promissory estoppel claims might be preempted ifthe plaintiff were bringing te state Iaw claim in an attempt to circumvent the CISG's “firm fffer” requirement forthe formation ofa contract); but see Caterpillar v. Usinor Industel, 305 F. Supp.24 {659; 2005 WL 736550, 2005 USS, Dist, LEXIS 6355 (ND. II), also available at Inp/ciggw3Jaw-pace.eduwcases/050330ut html (promissory estoppel not preempted by CISG). "ICC Cour of Arbitration—Paris (Case No, 7197), 00.00.1992 available at tipo nile infolease.cfin?pid=1&udo=case@id=37 step~Abstract (holding the seller was ented 0 ‘demand performance without losing its right to request damages since no force majeure was involved), China 16 May 1995 CIETAC Arbitration proceeding (Leather bags cast), available at Iitpicisgd. aw pace edu/cases/950S 16c1 hit (seer entitled to enforcement of all obligations). See Joseph Lookofsky, Understanding the C1SG in the USA, 2d ed, (Kluwer Law 2003), p. 131, stating “{)he right to require specific performance .. s not compatible with the exercise ofthe right to avoid, but there is no mutual exclusivity as between the right to demand ether specific performance or termination... and th right to demand damages...” 25o¢ Secretariat Commentary on Article 73 of the 1978 Drait (draft counterpart of CISG Art. 77}: Comment 3, available at hitpil/wwwe.cis.aw.pace.edu/cise/textsecomam/secom-77 html, stating that a claim forthe price by the seller pursuant to Article 62 is not affected even by te seller's obligation 0 mitgate the loss under Astle 77 *See Peter Schlechtriem, Uniform Sales Law—The UN Convention on Contracts for the International Sale of Goods, excerpt available at htp//www.csg law.pace.edulcisgbiblio/schlechtiem-62 html (Manz, Vienna 1986). China 31 January 2000 CIETAC Arbitration proceeding (Clothes case), available at httpcisgw3.lawpace edu/cases/00013 lel hi. *Germany 15 September 2003 Appellate Court Rostock, available at http://cisgw3. lav. pace edu/cases/0309151 html; Germany 27 February 2002 District Court Miinchen, available at Inip.Teisgw3 Jaw pace edu/cases/020227gI.Itml (buyer granted a reduction in price); Switzerland 26 September 1997 Commercis] Court Aargau, available at itp//eisgw3 law. pace.edulcases/970926s1 html ‘with Article 53 and grant the seller the price of the contract pursuant to Article 62 as well as other damages. Issues of set-off” and other defenses,” including reasonable excuse under Article 44,” are also relevant with regard to Article 62. See generally Chapter 8 for further discussion. Germany 15 July 2003 District Court Monchengladbach, available at htp:/icisew3. law-pace.edu/eases/0307 Sel html “austria 15 June 2000 Appellate Court Graz, available at Iup/feisgw3 law pace.eduleases/00061 53 html (decision eversed and remanded to lower court duo to procedural and legal misinterpretations of law); Russia 6 October 1998 Arbitration proceeding 269/1997, available at hsp:/ciggw’ law-pace.edulcases/981006r1 html (rejecting buyer's Article 79 due toa bank’ bankruptcy); ICC Court of Asbitration—Paris (Case No. 7197), 00.00.1992, available at hup:/svwrv-unilex.info (holding the seller was entitled to demand performance without losing its right to request damages since no force majeure was involved) Germany 15 August 2003 District Court Bielefeld, available at htp2/cisgw3.taw. pace.edu/ceses/030815g1.htm. Germany 21 April 2004 Appellate Court Disseldorf [15 U 222/02, available at http//eisgw3 law. pace.edu/eases/040421g2.html; Switzerland 19 February 2004 Supreme Court, available at http//eisgw3 law-pace.edwicases/0402i9s! html; Germany 12 December 2003 District Court Bielefeld, available at http:/icisgw3.law.pace.edu/cases/031212g1 htm (discussion of domestic set-off); Germany 27 Cctober 2003 Appellate Court Rostock, available a htp/cisgw3 aw.pace.edweases/031027g1 tak; Russia 17 September 2003 Arbitration proceeding 24/2003, available at bpi//eisgw3.lew.pace.edu/cases/030917r1 tml; Germany 15 July 2003 District Court Ménchengladbach, available at mtp:/cisgw3.law. pace.edu/cases/030715g1 html; Germany 15 August 2003 District Court Bielefeld, available at htp:/cisgw3 Jaw pace.edu/cases/0308 gl tml; Russia 2 December 2002 Arbitration proceeding 18/2002, available at http/cisgw3.law pace.edu/eases/021202r1 mls Argentina 21 July 2002 Appellate Court (Cerveceria y Malteria Paysandi S.A. v. Cerveceria Argentina S.A.) available at htip?/cisgw3.law.pace.edu/cases/020721a html; Russia 16 April 2002 Arbitration proceeding 22/2001, available at hitp//cisgw3. law pace.edu/cases/0204 6r1html; Russia 22 March 2002 Arbitration proceeding, 225/2000, availabe at hitp//cisgw3.law.pace.edu/cases/02032r1 html, Russia 25 September 2001 High “Arbitration Court or Presidium of Supreme Arbitration Court) of the Russian Federation, available at hxpu/eisgw3.law.pave.edu/cases/010925r1.html; Russia 17 Jaly 2001 Arbitration proceeding 419/1995, available at http//cisgw3.law. pace.edu/cases/010717rl.html; Italy 29 December 1999 District Court Pavia (Tessie v. Ixela), available at htp:/cisgw3.lawpace.edu/cases/991229%3,html; Switzerland 11 June 1999 ‘Commercial Court Aargau, available at http:/cisgw3 law pace edwlcases/99061 1s1.btml; Switzerland 30 ‘November 1998 Commercial Court Zitich, available at hitp:/cisgw3.lew.pace.edu/cases/981130s1. html; Russia 6 October 1998 Arbitration proceeding 269/1997, available at Inupilieisgw3. law pace.edu/cases/981006r1 html; Germany 29 July 1998 District Court Erfurt, available at |hnpicisgw3.law pace.edwoases/980729g1 html; Russia 10 January 1998 Arbitration proceeding 65/1997, available at http: /icisqw3.law.pace.edu/cases/9801 10r1 html; Germany 9 July 1997 Appellate Court Miinchen (7 U 2070197), available at htp://cisew3 law pace.edu/cases/970709qI html; Mexico 4 May 1993, Compromex Arbitration proceeding M/66/92 (Jose Luis Morales v. Nez Marketing) available at Ittp/cisgw3.law.pace.edu/cases/930S04m1 html; Germany 8 March 1995 Appellate Court Miichen, available at http//cisgw3.law.pace.edu/cases/950308g1 html; Switzerland 11 March 1996 Appellate Court ‘Vaud {01 93 1061), available at hitp:/cisgw3 Jaw pace.edu/cases!960311s2.himl; China 16 May 1996 CIETAC Arbitration proceeding (Cashmere sweater case), available at ‘nspzlcisgw3.law pace edufcases/9605116c1 html; China 30 August 1996 CIETAC Arbitration proceeding (Brake pads case), available at ttp//eisgw3 law.pace.edu/cases/960830e! html; Russia 19 March 1996 Arbitration proceeding 88/1995, available at http: /cisgw3.law pace edu/eases/960319r1 him. Bu see Hungary 25 May 1999 Budapest Arbitration proceeding Vb 97142, available at Itprifeisgw3.law.pace edu/cases/990525h html (seller claim denied for partial delivery). §7.04 AVOIDANCE A seller has right to avoid a contract under Article 64. The seller may declare the contract avoided if the failure by the buyer to perform any of his obligations under the contractor the CISG amounts to a fundamental breach of contract." The declaration of avoidance hus the consequence that both patie shal be released from any contractual obligations, subject to any damages which may be due and payable, and that they are vested in with claims for restitution in respect of any performances in par previously rendered (cclationship for restitution) under Article 81(1)(2). See Chapter 8, Furthermore, the avoiding party may also claim compensation for any loss and expenditures, including any loss of profit suffered as a consequence of the other partys breach of contract.” The party claiming damages has a duty to mitigate any loss under Article 77. A party is not Fable for a filure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and ability to influence and that he could not reasonably be expected to have taken the impediment into account atthe time ofthe conclusion of the sales contract or to have avoided or overcome itor its consequences.”! Mere lack of financial wherewithal and capital is generally irelevant; this general rule is even mote applicable ifthe lack of financial ability is ‘based on mismanagement.” For farther explanation see Chapter 8 A seller can avoid a contract under two circumstances priot to payment: if the breach amounts to @ fundamental breach in accordance with Article 25 under Article 64(1Xa) or he may fix an additional period (o-called “Nachjrist”) for performance by the buyer of his obligations according to Article 63.” A seller must elect a form of avoidance or forfeit its right to rely on the remedy. In the event the buyer has paid the price, Article 64(2) provides in part (1) 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: (afer the seller knew or ought fo have known of the breach; or Gi) 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. [A] Notice A seller who petitions for the avoidance of the sales contract must, as a precondition to recovery, declare the agreement avoided by notice to the opposite party so that there are not any remaining doubts ‘upon the incentive of the petitioning party."* There has been suggestion of an implied declaration of article 64(1)(2). SAantcle 74, See, ¢g., TeeVee Tunes, Inc. etal. v. Gerhard Schubert GmsbH, 2006 WL 2463537 (S.DN.Y)), also available at hutp://cisgw3.law.pace.edu/cases/060823u1 html Article 79, By virtue of Article 79(5), Article 79 relief from liability is limited to relief from liability for damages *gwitzerland 3 December 2002 Commercial Court St. Gallen, available at hitps/cisgw3.Jaw.pace.eduicases/021203s1 html, iting Magnus, Kommentar zum UN-Kaufrecht {Commentary on the CISG], Art. 79 CISG, note 13 et seq. Santicle 64(1)(b). ¥ICC Arbitration Case No. 8574 of September 1996, available at hitp//cisgw3.Jaw. ppace,edu/cases/968574i1 him. Article 26, Germany 22 fuly 2004 Appellate Court Dusseldorf, abstract available at bttp://eisgw3 law-pace.edu/cases/040722¢I html (seller denied avoidance for lack of notice). Jn contrast, avoidance with cours questioning whether the secipient of this declaration was in the position to ‘undoubtedly realize the buyer's obvious will not to be bound any Tonger under the sales contract." Notably, notice of avoidance is unnecessary where obligor clearly and conclusively refuses to perform.” While a declaration under Article 64 on the avoidance of the contract is not subject to any form requirements or time limits, it should leave no doubt as to the avoidance of the contract.* ‘A declaration of avoidance must be explicitly recognizable and realizable to the other party.” “Indeed, the CISG does not provide any obligation concerning the form of the avoidance of sale contracts" however, explicit language should clearly indicate immediate termination. Cours have held that fare threat of termination or request for delivery or retum of goods without further explanation insuicient 10 constitute notice ** One tribunal noted the following: see China 8 April 1999 CIETAC Arbitration proceeding (New Zealand raw wool case), available at hnnpijoisgw3.lawpace edu/cases/990408cl hima (seller properly declated avoidance based on notice). Germany 14 October 2002 Appellate Court Kéln, avilable at http/cisgw3 Jaw.pace. ceduicases!021014gI tml; Germany 16 September 199% District Court Frankfurt, availble at hnpscisgw3 Jaw.pace.edweases/910916p1 html, citing Leser, in Schlechtriem, Kommentar zum cinkeillichen UN-Kaufreoks, Minchen 1990 {German Commentary on the CISG, Munich 1990], Ast. 26 No. 10 CISG); in contrast, see Herber/Czerwenka, Intemational Law on Sales Contracts, Munich 1991, ‘Art. 26No. 2, Art. 49 No, 1] CSG; Enderlein’Maskow/Sargart, Art, 26 No. 2 et seg. CISG; see also Switzerland 15 September 2000 Supreme Court [4C.105/2000] (FCF S.A. v. Adriafil Commerciale S.r1), availabe at htpsleisgw3 law pace edulcases/000915s. htm. Germany 15 September 2004 Appellate Court Minchen, available at htps/Iisgw3. lawepace.edu/cases/04091522.himl. Austria 28 April 2000 Supreme Court, available athitp//eisgw3 Jaw.pace edulcases/00042823.himl (holding doubt as avoidance ofthe contract was replaced by the subsequent lawsuit Switzerland 20 February 1997 District Court Saane, available at hips lcisgw3 law. pace.edu/cases/970220s! html; Germany 19 Deceraber 2002 Appellate Court Karlsruhe, available at Inipzlcisgw3.law.pace.edu/cases/021219gl. html; bur see Denmark 10 November 1999 Western Appellate Court, available at htp/eisgw3.law pace eduleases!991110d1 html (denying adequate notice of avoidance). “Switzerland 15 September 2000 Supreme Court [4C.105/2000} (FCF S.A. v. Adriafit Commerciale Sut.) available at http:/cisgw3.law pace edvleases!000915s2.him, citing Neumayet/Ming, op. cit, n. 1 ad art 11 CISG. *\Germany 13 January 1999 Appellate Court Bamberg, available at tp//eisgw’3.law. pace edulcases/9901 13g1. html; Germany 2 March 1994 Appellate Court Milnchen, availabe at hitp/cisgw3 Jaw.pace edu/cases/940302z html; Germany 31 January 1997 Appellate Court Koblenz, available at hitp:/cisgw3 law-pace.edu/cases/970131g\ il; Germany 16 September 1991 District Court Frankfurt, available at htp//eisgw3.Jaw, pace.eduleases/910916e1 html (rejecting explicit and implicit avoidance); China 1 March 1999 CIETAC Arbitration proceeding (Canned mandarin oranges case), available at hitp/cisgw3.law,pace edu/cases/99030 lel btm; but see the following cases upholding notice ICC Arbitration Case No, 8786 of January 1997, available at htp/eisgw3.av. pace edu/cases/978786i1 html; China 22 March 1995 CIETAC Arbitration proceeding (Down jacket and ‘winter coat case), available at htp//eisgw3.law-pace.edu/cases/950322c1.himl; Germany 25 June 1997 Supreme Cour, available at htip/cisgw3.law. pace.edulcases/970625g2.html (buyer's notice that it could not use a certain quantity ofthe goods and was placing them at the disposal ofthe seller regarded as effective notice of avoidance); Belgium 4 June 2004 District Court Kortrifk(Steinbock-Bjonustan BHF v. NY Duns), available at hrip/eisgw3.law-pace edulcases/040604b1. tal (upholding unilateral avoidance); Switzerland 27 January 2004 District Court Schaffhausen, availble at Iniipy/eisew3 Jaw.pece.cc/cases/040127s1 html; Netherlands 23 April 2003 Appellate Court's- Graverhagel, available at http:/cisgw3 Jaw pace edwieases/030423n1 hn; IOC Arbitration Case No. 7645 ‘of March 1995, available at hitp//isgw3.Jaw-pace.edu/eases/957645iL html; Russia 7 June 1999 “Arbitration proceeding 238/1998, available at hip//isgw3.law-pacc.edu/cases/990607r1 html; Rusia 11 May 1997 Arbitration proceeding 2/1995, available at hp:/cisgw3.law pace.edu/cases/97051 it1.btra; ICC Arbitration Case No, 9978 of March 1999, available at hitp:/cisgw3 law pace.edaleases/999978I html (holding buyer's declaration of avoidance was validly [tho interpret the [avoidance] declarations and the conduct of a party there is need to establish its real inten if the other party knew it at all. The guide for this intenpretation isthe manner in which a reasonable person would have understood this declaration or this conduct in the same circumstances. * All notices must be sent within a reasonable period of time. Parties that come from Contracting States that have filed reservations under Articles 12 and 96 should also adhere to all writing requirements for notice. A contract is avoided when a declaration of avoidance is dispatched to the party. Article 64{1) does not prescribe any time limitation for giving notice. Under ‘Article 64(2), 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 bas 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 (i) 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.” [B] Fundamental Breach—Article 64(1)(@) ‘The key term for avoidance as set forth in Article 64(1)(a) is defining what constitutes a “fundamental breach.” Fundamental breach is a common term consistently interwoven throughout the CISG. and establishes remedies available to buyers and sellers as well as certain aspects of the passing of risks." See Chapter 6. Article 25 defines a “fundamental breach” as follows: [A breach of contract committed by one of the partes is fundamental ifit results in such detriment to the other party as substantially to deprive hira 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 hhave foreseen such a result (emphasis added). ‘The two Key criteria of Article 25 is that (1) the breach must result in a detriment to the innocent party and (2) the breach must substantially deprive the innocent party of what he is entitled to expect under the expressed according to Article 26 CISG by sending a fax in which the buyer asked for restitution of price); Germany 29 December 1998 Hamburg Arbitration proceeding, available at ttp://cisgw3. law.pace.edu/eases/981229g1 html; Italy 20 March 1998 Appellate Court Milan (Italdecor v. Yiu's Industries), available at htp://cisgw3.lawpace.edw/cases/98032013 html (cancellation of purchase order sufficient for avoidance notice}; Russia 5 March 1998 Arbitration proceeding 160/197, available at hitp:/eisgw3-law.pace.cdweases/980305r2.html; Germany 21 March 1996 Hamburg, Arbitration proceeding, available at htt://cisgw3 Jaw. pace.edu/cases/960321 1 html ‘ICC Arbitration Case No, 8128 of 1995, available at hitp://cisgw3.law.pace.edu/cases/958 128iI him. “Fyance 14 June 2001 Appellate Court Paris (Aluminium and Light Industries Company v. Saint Bemard Mioiterie Vitter), available at http://cisgw3 law pace edu/cases/010614f1 him “article 27. Changwei Lui, Comparison of CISG Article 27 and Counterpart Notice Provisions of the UNIDROIT Principles and PECL, evailable at htp://www.cisg law. pace edulcisg/textipecloomp27 html, referencing scholars acknowledgment of dispatch rule under Part IIT of the CISG with exception of Articles 47(2), 48(4), 63(2), 65(1), 65 (2) and 79(4) that are tied to the moment of receipt. See also Russia 3 April 1995 Arbitration Court of Moscow City, available at http://cisgw3-law pace.eduicases/950403r1 tml; Germany 17 September 1991 Appellate Court Frankfurt, available at httpd//cisw3.low. ‘pace.edu/cases/910917g1 html anticle 64(2)(2). “Article 64(2)(0)() Anticle 64(2)(0M). “Articles 46(2), 49(1Xa), $12), 64(1){@), 70, 72), 73(1) and (2). contract” However, the last sentence of Article 25 provides an escape clause for a buyer provided the buyer can prove that the breach was not foresceable, The seller bears the burden of proving the elements of 1 fundamental breach when asserting avoidance.”” Failure to assert avoidance under either Article 64(1)(2) ‘or (b) will result in forfeiture ofthe remedy by the seller.” [1] Detriment Under a Fundamental Breach The term “detriment” is not defined by the convention nor does it give any example of detriment that rises to the level of a fundamental broach.” Legislative history reveals that the drafter accepted an objective test for determining the fundamental of the breach.” The Secretariat Commentary states that “['Jhe determination whether the injury is substantial must be made in the light ofthe circumstances of each case, fe, the monetary valve of the contract, the monetary harm caused by the breach, or the extent to which the breach interferes with other activities of the injured party.** It is conclusive from this comment that the rafters intended the word detriment” to be synonymous with “injury” and “harm,” and it ean also be exemplified by monetary harm end interference with the other activities. {2] Substantially Deprive Seller Under a Fundamental Breach ‘The second clement of a fundamental breach is that the detriment caused by the breach must substantially deprive the seller of what he or she is entitled to expect under the contract. Despite the controversy surrounding the adoption of this standard, the drafters concluded that for a breach 10 be fundamental, it must result in guch detriment as substantially to deprive the victim of breach of what he is entitled to expect under the contract Such terms can be proven by the express language of the contract as well as by the implied agreement of the parties atthe time it was made.” [3] Application by the Courts ‘The terms of a contract establish the requirements and/or standards of the goods and obligations ‘expected of the parties:® Whether failure to adhere to a term amounts to a fandamental breach may be “ australia 17 November 2000 Supreme Court of Queensland (Downs Investments v, Perwaje Steel), available at hitpy/eisgw3.law-pace.edu/cases/00111722,html, Germany 22 July 2004 Appellate Court Dilsseldorf, abstract available at lntp:/icisgw3.law-pace.edweases/040722g1 html. Si qustralia 28 April 1995 Federal Dist. Ct, Adelaide (Roder v. Rosedown), available at bitp:/cisgw3.law-pace.edu/cases/950428a2 html. "Andrew Babiak, Defining “Fundamental Breach" Under the United Nations Convention on Contracts for the International Sale of Goods, 6 Temple Int & Comp. LJ. 113 at 119. See UNCITRAL, Yearbook, VI (1975). Historically, the Article 25 objective test developed out of the debate over the weakness of the ULIS, which had adopted a subjectivity test. Commentary on the Draft Convention on Contracts forthe International Sale of Goods, prepared by the Secretariat Commentary, at (2, art 23 of the 1978 Draft Convention, See Mirghasem Jafarzadeh, Buyer's Right 1o Withhold Performance and Termination of Contract: A Comparative Study Under English Law, Vienna Convention on Contracts for the International Sale of Goods 1980, Iranian and Shi'th Law, Shahid Beheshti University, Tehran, Iran (December 2001), available at hip/eisgu3 lar pace.educisg/bibliojjaerzadeh] te " See Robert Koch, The Concept of Fundamental Breach of Contract Under the United Nations Convention on Contracts for the International Sale of Goods (CISG), Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Ktawer Law International (1999) 263, also available at http://cisgw3.law. pace edu/cisg/biblio/koch. htm *ttaly 20 March 1998 Appellate Court Milan (Italdecor v. Yiu's Industries), available at hitps/cisgw3 Jaw pace,edwicases/980320%3.html; Switzerland 15 September 2000 Supreme Court [4P.75/2000] (FCF S.A. v. Adriafil Commerciale Sr.) available at tp: /cisgw3 law pace.edu/cases/000915s1 html; ICC Arbitration Case No. 9978 of March 1999, available 9 dependent on a tribunal employing Article 8 of 9 to determine whether the terms goes tothe “essence” of the agseement.” See Chapters 3 and 4 for discussion of Articles 8 and 9. Application of Article 8 or 9 has bbeen employed to determine whether a fundamental breach has occurred for failure t0 pay the purchase price, particularly in future installments” or to take delivery of the goods." “Article 64 is specifically worded to imply that non-payment of the purchase price isthe most significant form of a fundamental breach by a buyer, since, as to a serious non-payment, no additional notifications are required for avoidance of the contract." A bayer’s failure to adhere to contractual obligations, such as opening a letter of credit at htpeisgw3 law pace edulase/99997SiL mal; Germany 19 December 2002 Appetat Court Karlgruhe, avalable at htps/isp3v3 aw pace edulcases!021219g1 im See CISG-AC Opinion no. 5, The Buyer's Right to Avoid the Contract in Case of Non-Conforming Goods or Documents? May 2005, Badenweiler (Germany), Rapporteur: Professor Dr. Ingeborg Schwenzet, LLM, Professor of Private Law, Unversity of Basel, available at tp isla pace.edulcisg/CISG-AC-opS tml, See also Germany 12 March 2001 Appellate Court Shigarty available at pig 3 law:pace edevensexi01032g{ tl China 30 October 1991 CIETAC

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