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Remedies for Non-performance:

Perspectives from CISG, UNIDROIT Principles & PECL

Chengwei, Liu [*]
September 2003

[...]

CHAPTER 4. NACHFRIST FOR LATE PERFORMANCE

  4.1 General Considerations
  4.2 Rationale Underlying the Optional Approach
        4.2.1 Optional Approach under the Studied Instruments
        4.2.2 Underlying Rationale
        4.2.3 Granting Additional Period in Two Situations
  4.3 Setting of a Nachfrist Notice
        4.3.1 Transmission of the Intention
    4.3.1.1 Form of the notice
    4.3.1.2 Risk in transmission
        4.3.2 Fixing of the Time-limit
    4.3.2.1 Fixed period
    4.3.2.2 Reasonable length
  4.4 Effects of Serving a Nachfrist Notice
        4.4.1 Remedies Available/Suspended during the Period
        4.4.2 Early End of the Existing Uncertainty upon Rejecting Notice
        4.4.3 Termination upon Expiry of the Extension
    4.4.3.1 In general
    4.4.3.2 CISG approach
    4.4.3.3 UPICC/PECL approach

     This [...] [Chapter] deals with the situation where one party performs late and the other party is willing to give extra time for performance. It is inspired by the German concept of Nachfrist although similar results are obtained by different conceptual means in other legal systems.[1] The purpose behind the flexible remedy of Nachfrist is [...] to keep the contract afoot as long as there is a possibility to perform contractual obligations. This is in line with the attempt to overcome some of the problems of distance, expense and time in having an international contract terminated where, operating under another general principle [...], namely good faith, remedial action could have been possible, resulting in a win-win situation.[2]

4.1 GENERAL CONSIDERATIONS

When the non-performance arises, a practical occasion arises for the aggrieved party to relate to it. He can do so by abstractly insisting on his right to performance as discussed in Chapter 3. The aggrieved party can, however, ascertain his right to obtain performance also with an option of serving a notice on the non-performing party which sets an extra time of reasonable length for the performance of his obligations. This concept is commonly known as a Nachfrist (literally translated "prolonged deadline") because of its similarity to the German remedy of the same name.[3]

Similar legal concepts exist in other national commercial laws of civil law countries. Of similar intent and consequence to the German concept of Nachfrist are the French Civil Code's mise en demeure and kindred provisions to those of Germany and France in other national civil and commercial codes. On the other hand, Common Law attorneys may find the concept of Nachfrist foreign as this term has no direct common-law counterpart. Common law in general holds parties strictly to their time commitments. Nonetheless, it is said that the doctrine of Nachfrist resembles the doctrines of waiver and estoppel in common law. The fact that the aggrieved party may not resort to any other remedy during the period of the Nachfrist is equivalent to the aggrieved party being estopped from relying on his strict contractual rights as the result of a representation made to the non-performing party. In addition, both the remedy of Nachfrist and the doctrine of promissory estoppel have the effect of suspending performance as opposed to extinguishing contractual rights.[4]

Nachfrist is also a concept incorporated in many instruments applicable to the international commercial contracts. Under the CISG, for instance, Arts. 47 and 49(1)(b) / Arts. 63 and 64(1)(b) are provisions which span both remedies of termination and damages, through the principle of Nachfrist which is the granting of additional time for late performance. "The principle has been mainly borrowed from German domestic law as well as from the French procedure of mise en demeure. However there are significant differences between the German and French treatment of Nachfrist and the one accorded to in the CISG. This is a good point to remind ourselves of the mandate of article 7(1) where uniformity of application demands the autonomous interpretation of the CISG, that is, without relying on principles founded in domestic law. In other words, German and French treatment of Nachfrist and mise en demeure must be ignored and cannot be used to explain the principle within the CISG despite significant similarities in doctrine and jurisprudence."[5]

Even, the actual legal import of the same term Nachfrist from German law under descriptions of the various international rules such as the CISG, UPICC and PECL differs -- to a lesser degree -- among themselves. Generally, the UPICC and the PECL also contain such a Nachfrist procedure respectively in Art. 7.1.5 and Art. 8:106, which both fairly closely mirror the CISG in effect. The provisions in both the CISG and the PECL can be viewed as operating on a similar basis, subject to two main exceptions which are to be given more details below. First, unlike the CISG, the innocent party under the PECL is not limited to cases of non-delivery or failure to pay the price or take delivery before it can rescind the contract. Second, instead of having a separate provision dealing with avoidance (Arts. 49(1)(b) and 64(1)(b) in the CISG), the PECL includes the avoidance provisions within the Nachfrist article. Likewise, Art. 7.1.5 of the UNIDROIT Principles contains a very similar provision to the PECL with some variance.

Anyway, despite of these slight differences among international rules themselves, in a case of non-performance of international commercial contracts the aggrieved party may generally by notice to the other party allow an additional period of time for performance. The fact that the concept of Nachfrist has been included in various international laws indicates that certainty now has a brother, namely flexibility. Globalization requires that legal rules must be flexible in order to be applicable to changing circumstances and avoid costly disputes in circumstances, which could have been solved by an instrument like Nachfrist.[6] However, it is to be borne in mind the significant differences between the German and French treatment of Nachfrist and the one accorded to in the three instruments, one of such differences is the different approach adopted, namely by contrast with the autonomic extension in domestic laws an optional approach is adopted under each of the three instruments

4.2 RATIONALE UNDERLYING THE OPTIONAL APPROACH

4.2.1 Optional Approach under the Studied Instruments

The CISG deals with the Nachfrist remedy separately under Arts. 47 and 63. Art. 47(1), tying in with Art. 33 which fixes the time when the seller must deliver the goods, deals specifically with the buyer's options and states: "The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations." A similar remedy in favour of the seller is set forth in Art. 63, which is connected with timing obligations of the buyer in such provisions as Art. 38(1) (examination) and Art. 59 (payment of the price). Art. 63(1) is concerned with the options of the seller and provides: "The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations."

As stated above, the CISG incorporated, among other elements, the notion of Nachfrist from German law. However, unlike German law, the CISG does not require a party to offer an additional period of time under which a prospectively defaulting party may perform under the contract. The substantive difference between the two approaches is both obvious and important. Under German law, for instance, if the buyer requests a Nachfrist, the seller is obligated to respond to the request. Failure to do so results in an automatic grant of additional time.[7] To the contrary, Knapp submits when discussing Art. 63 CISG that: "Fixing an additional period of time under Article 63(1) is the seller's right, but not his obligation . . . the seller may sue for enforcement of his right without granting the buyer any additional term for performance. Similarly, if the failure by the buyer to perform his obligation amounts to a fundamental breach of contract, the seller is authorized to declare the contract avoided under Article 64(1)(a) without having any obligation to fix first an additional term of performance for the buyer. In this respect the procedure envisaged by Article 63(1) differs from the Nachfrist of the law of the Federal Republic of Germany and the mise en demeure under French law."[8]

In fact, the wording "may" used both in CISG Arts. 47(1) and 63(1) shows that the procedure envisaged under the CISG is not mandatory. It merely permits a party to offer such an additional period of time. Both provide identical obligations for the buyer and the seller with regards adherence, notice, and reasonable length of time. In other words, Arts. 47 and 63 each creates the possibility that a buyer or seller may -- but need not -- set a Nachfrist with the main consequence being that the buyer or seller, during that period, must generally adhere to its contractual obligations while retaining its rights to subsequently claim damages. This optional approach is adopted both in UPICC and PECL. Art. 7.1.5(1) UPICC reads: "In a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance." Art. 8:106(1) PECL reads: "In any case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance." Under these provisions, it is for the aggrieved party among their options, not obligated to allow an additional period for performance.

In other words, none of the three instruments requires, as under the German law, an automatic extension of time for performance and delegate such option to the discretion of the parties involved. As a result, the procedural device of granting additional time does not have the same function under German and international commercial law, respectively. In this point, different function actually derives from the particular rationale of Nachfrist in the context of international commercial law.

4.2.2 Underlying Rationale

The idea behind Nachfrist in the three instruments is that the aggrieved party should not be able to avoid the contract merely because the obligations are not performed on time. While details of the question of termination are not dealt with in this Chapter, it is to be shown (with the detailed discussion in PART III) that each of the three instruments specifically rejects the idea that in an international commercial contract the aggrieved party may, as a general rule, avoid the contract once the contract date for performance has passed and the other party has not yet performed one or more of his obligations. In these circumstances termination of a contract is primarily to be justified on the basis of the doctrine of "fundamental breach/non-performance".

Under this requirement, termination can be a thorny problem, for in any case the aggrieved party must be sure that the breach is fundamental. Under certain circumstances, such as when time is of the essence, late performance may become a fundamental non-performance. But it is not necessarily always the case when time is not clearly of essence. In this respect, Nachfrist clarifies a situation which otherwise would be unclear. It means that Nachfrist in the three instruments in itself is not a remedy, or is not really a stand-alone remedy in the traditional sense. It fits very closely with other remedies, particularly those allowing the parties to terminate the contract when it is meant to fit into the concept of fundamental non-performance. Thus, if the aggrieved party is in a situation where there is uncertainty as to the existence of a reason to avoid the contract, he can overcome this by fixing a Nachfrist.

On the one hand, as discussed previously in Chapter 3, the right of the aggrieved party to require specific performance by the other party anticipates the aid of a court or arbitral tribunal in enforcing that right. However, in case of delayed performance, the use of judicial procedures for enforcement may not seem feasible or may require more time than the aggrieved party can afford to wait. It may consequently be to the aggrieved party's advantage to avoid the contract and make a substitute purchase from a different supplier.[9] On the other hand, however, at that time the aggrieved party may not be certain that the breaching party's delay constitutes a fundamental breach of contract justifying the avoidance of the contract. This is particularly because of the special characteristics of late performance, which is significantly different from other forms of defective performance: "Late performance can never be remedied since once the date for performance has passed it will not occur again, but nevertheless in many cases the party who is entitled to performance will much prefer even a late performance to no performance at all. Secondly, at the moment when a party fails to perform on time it is often unclear how late performance will in fact be. The commercial interest of the party receiving performance may often therefore be that a reasonably speedy completion, although late, will be perfectly acceptable but that a long delayed completion will not."[10]

One way to circumvent the above problems is by use of the Nachfrist procedure. It appears that the primary purpose of a Nachfrist procedure is to protect the aggrieved party who is waiting for a delayed performance. While waiting, the aggrieved party might have to determine at what point the delay constitutes such a fundamental breach that he becomes entitled to terminate the contract. In any event, unlike in the case of fixed-term contracts,[11] a delay in performance is not automatically a fundamental breach of contract. Hence, the Nachfrist procedure is established where it is not clear from the contract itself or the surrounding circumstances whether failure to make timely performance amounts to a fundamental breach, and thus "enables that party to give the performing party a second chance without prejudicing its other remedies".[12] Indeed, the procedure would apply regardless of whether the breach would otherwise have been considered fundamental. In other words, failure of the other to meet such a reasonable deadline is then grounds for termination whether the breach is fundamental or not.

In short, the granting of additional time can be advantageous since, in case of delayed performance, the innocent party may, inter alia, employ this device in order to relieve himself of the risk of wrongful termination, which results from a peculiarity of the three instruments, namely the fact that it can be difficult to determine when the failure to promptly perform amounts to a fundamental non-performance.[13]

4.2.3 Granting Additional Period in Two Situations

Following the optional approach and its underlying idea under the three instruments, when there has been a non-performance by one party (the debtor), the other (the aggrieved party) may always fix an additional period of time for performance.

The Nachfrist procedure under CISG Arts. 47 and 49(1)(b)/Arts. 63 and 64(1)(b), UPICC Art. 7.1.5 or PECL Art. 8:106 in effect contains two rules: (a) Even where the aggrieved party has an immediate right to terminate because of the other's non-performance, if the aggrieved party has indicated that it is still prepared to accept performance, it may not change its mind without warning.[14] (b) Where there has been a delay in performance but the delay is not fundamental (because time was not of the essence and the delay has not yet had serious consequences for the aggrieved party) the aggrieved party may terminate the contract after having given the non-performing party reasonable notice. In this point, two preliminary points need to be borne in mind: (a) Under the three instruments there is no need for the aggrieved party to serve a notice on the non-performing party in order to put the latter into breach; (b) Under the three instruments termination is an act of the aggrieved party, not an act of a court or arbitrator. Provided there has been a fundamental non-performance or the other conditions for termination are met the aggrieved party may terminate by giving notice of termination to the non-performing party.[15]

As stated above, not every delay in performance will constitute a fundamental non-performance and thus the aggrieved party will not necessarily have the right to terminate immediately merely because the date for performance has passed. It will only have this right if time was "of the essence". In cases of non-fundamental delay, however, the Nachfrist procedure allows the creditor to fix an additional period of time of reasonable length for performance by the debtor. If upon expiry of that period of time performance has not been made, the aggrieved party may terminate the contract. This case is probably the one in which the notice procedure will be used most frequently. The notice procedure can also be used when it is the aggrieved party who is to perform a service but the other party has refused to accept or to allow performance. It should be noted that the Nachfrist procedure applies even if the non-performance is excused because of a temporary impediment (see Chapter 20).[16]

In other cases the notice procedure does not give the aggrieved party any additional rights but is nonetheless useful. Even where the delay or other non-performance is fundamental, and thus the aggrieved party has the right to terminate immediately, it may not wish to do so: it may be prepared to accept a proper performance by the debtor provided it is rendered within a certain period. The procedure permits it to give the debtor a final chance to perform (or to correct a defective performance), without the aggrieved party losing the right to seek specific performance or to terminate if by the end of the period of notice the debtor has still not performed in accordance with the contract. At the same time, however, the rule that the aggrieved party may not seek specific performance or terminate during the period of notice protects the debtor from a sudden change of mind by the aggrieved party. The debtor may have relied on having the period set in the notice in which to perform.[17]

The notice procedure may also be used when a performance is prompt but defective in a way which is not fundamental. In such a case the aggrieved party will not have the right to terminate and serving a notice fixing an additional time for performance will not give it that right, because the Nachfrist procedure applies only to delayed performance, not to defective performance. Nonetheless, serving a notice may still perform the useful functions of informing the debtor that the aggrieved party still wants proper performance and of giving the debtor a last chance before the aggrieved party seeks specific performance. In these respects the notice serves the same function as a mise en demeure in French law or Mahnung in German law, though under the CISG, UPICC or PECL the aggrieved party is not required to serve a notice before exercising a remedy except in the case of termination for non-fundamental delay.[18]

In sum, the aggrieved party may serve a Nachfrist notice informing the other party to continue performing in case of non-fundamental delay or where he is in doubt whether the other party has committed a fundamental breach. After the expiry of this period the aggrieved party can consider a fundamental breach to have occurred and avoid the contract. Thus the breach is "upgraded" by the expiration of the Nachfrist. On the other hand, even in the case of a fundamental breach where the aggrieved party is entitled to avoid the contract immediately, termination may not be necessarily the best solution for him. The aggrieved party may be prepared to accept a proper performance by the debtor provided it is rendered within a certain period. The Nachfrist procedure permits it to give the debtor a final chance to perform. Clearly, the Nachfrist procedure under the three instruments has advantages for both parties, although its principal purpose is to provide additional latitude and protection to the innocent party in case of uncertainty. The advantage for the non-performing party in this situation, apart from the fact that he now has more time to perform (although he may still be subject to a claim for damages in respect of any delay), is that he can rely on the fact that the aggrieved party is bound by that period, during which the latter may not resort to termination or specific performance.

4.3 SETTING OF A NACHFRIST NOTICE

4.3.1 Transmission of the Intention

The aggrieved party must set an additional period, i.e. inform the non-performing party accordingly with an appropriate notice to make his intention clear, once he makes decision to invoke the Nachfrist procedure so as to give the non-performing party a second chance. In this respect, two issues should be examined: form of the notice; risk in communication (see also the discussion in Chapter 11 on the notice of a declaration of termination).

4.3.1.1 Form of the notice

As for the form of the notice, the CISG is silent on whether the notice must be in writing or can be presented orally. However, a broad interpretation of CISG Art. 11 (A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.) will lead to the conclusion that the notice granting an additional period for performance under Art. 47/63 need not be made in writing and that it may be transmitted by any means.

Under the UNIDROIT Principles, the Official Comment to Art. 1.9(1) (Where notice is required it may be given by any means appropriate to the circumstances.) clearly states: "This article first lays down the principle that notice or any other kind of communication of intention (declarations, demands, requests, etc.) required by individual provisions of the Principles are not subject to any particular requirement as to form, but may be given by any means appropriate in the circumstances. Which means are appropriate will depend on the actual circumstances of the case, in particular on the availability and the reliability of the various modes of communication, and the importance and/or urgency of the message to be delivered."[19] Under the European Principles, the Official Comment to Art. 1:303(1) (Any notice may be given by any means, whether in writing or otherwise, appropriate to the circumstances.) similarly indicates that "notices may be made in any form - orally, in writing, by telex, by fax or by electronic mail, for example - provided that the form of notice used is appropriate to the circumstances. It would not be consistent with good faith and fair dealing (see Article 1:201) for a party to rely on, for instance, a purely casual remark made to the other party. For notices of major importance written form may be appropriate."[20]

It can therefore be concluded that no form is prescribed for the notice; it can be oral or in writing but, according to its character of the Nachfrist notice and as to be supported by the discussion infra. 4.3.2, it cannot be given by other conduct, i.e. conduct implying an intent. Given this, there will be no lengthy discussion here as to the type or form of the notice that must be furnished by the aggrieved party to invoke the Nachfrist procedure.

4.3.1.2 Risk in transmission

As to the communication to the non-performing party, under the CISG the general rule of Art. 27 reflects the "dispatch principle", it is expressly stated that: "Unless otherwise expressly provided in this Part of the Convention, if any notice, request or other communication is given or made by a party in accordance with this Part and by means appropriate in the circumstances, a delay or error in the transmission of the communication or its failure to arrive does not deprive that party of the right to rely on the communication." Following this rule, the risk in transmission of a Nachfrist notice is fairly burdened on the side of the non-performing party. However, it seems unpractical that a Nachfrist notice will be effective once it is dispatched because only if such intention is transmitted to the non-performing party it brings fruits.

By contrast, both the UNIDROIT Principles and the PECL adopt the receipt principle as a general rule. Art. 1.9(2) UPICC stipulates that "[a] notice is effective when it reaches the person to whom it is given", whose purpose is to "indicate that the same will also be true in the absence of an express statement to this effect: see Arts. 2.9, 2.11, 3.13, 3.14, 6.1.16, 6.2.3, 7.1.5, 7.1.7, 7.2.1, 7.2.2, 7.3.2 and 7.3.4."[21] Similarly, Art. 1:303(2) PECL states that "any notice becomes effective when it reaches the addressee." It is important in relation to the receipt principle to determine precisely when the communications in question "reach" the addressee. In an attempt to define the concept, Art. 1.9(3) UPICC draws a distinction between oral and other communications: "For the purpose of paragraph (2) a notice "reaches" a person when given to that person orally or delivered at that person's place of business or mailing address." The former "reaches" the addressee if they are made personally to it or to another person authorised by it to receive them. The latter "reaches" the addressee as soon as they are delivered either to the addressee personally or to its place of business or mailing address. The particular communication in question need not come into the hands of the addressee. It is sufficient that it be handed over to an employee of the addressee authorised to accept it, or that it be placed in the addressee's mailbox, or received by the addressee's fax, telex or computer.[22]

A plain understanding of the receipt principle is that a party cannot rely on a notice sent to the other party unless and until the notice reaches that party. Although it is not necessary that the notice should actually have come to the addressee's attention provided that it has been delivered to him in the normal way, the risk of errors in the communication is normally placed upon the sender under the receipt principle. However, many of the situations in which one party giving a notice to the other are situations in which the party to be notified is in default, or it appears that a default is likely. Here it seems appropriate to put the risk of loss, mistake or delay in the transmission of the message on the defaulting party rather than on the aggrieved party.[23] While under the UNIDROIT Principles, no appropriate solution could be found as to this concern either in Art. 1.9 or Art. 7.1.5; a persuasive solution has been found in the PECL in conjunction with the reference of "Subject to paragraphs (4) and (5)" at the outset of Art. 1:303(2) PECL. Under the PECL, Art. 1:303 adopts the receipt principle as a general rule, at the same time it links this general rule to two qualifications for the operative effect of communications, one of which is set out in PECL Art. 1:303(4) reading pertinently: "If one party gives notice to the other because of the other's non-performance or because such non-performance is reasonably anticipated by the first party, and the notice is properly dispatched or given, a delay or inaccuracy in the transmission of the notice or its failure to arrive does not prevent it from having effect. The notice shall have effect from the time at which it would have arrived in normal circumstances."

In sum, on the one hand, the so-called "receipt principle" seems appropriately applicable to the Nachfrist notice since decisive is that the notice reaches the addressee so that the non-performing party would be well aware of his situation; on the other hand, the rule following from the dispatch principle that the risk of loss, mistake or delay in the transmission of the message should be put on the defaulting party rather than on the aggrieved party, suits for the case of a Nachfrist notice. Therefore, the solution found in PECL Art. 1:303(4) best accords with the case of a Nachfrist notice: Generally, the Nachfrist notice is effective when it reaches the non-performing party. In a case of the risk in transmission, a delay or inaccuracy in the transmission of the Nachfrist notice or its failure to arrive does not prevent it from having effect; the notice shall have effect from the time at which it would have arrived in normal circumstances. The idea underlying the principle and the exceptions is that the risk for transmitting a message should be carried by the one who, as a result of his deviation from normal performance, caused the statement to be sent.

4.3.2 Fixing of the Time-limit

As discussed above, the CISG, UPICC and PECL recognize, on the one hand, the difference between non-performance which amounts to a fundamental breach and non-performance which is not serious enough to constitute a fundamental breach; and each allows, on the other hand, the aggrieved party who is not sure whether the non-performance amounts to a fundamental breach the ability to avoid the contract by allowing him to set an additional period of time to perform the contract. Therefore, they all require that two conditions must be met: Firstly, the period must be fixed. Secondly, the period so fixed must be reasonable. In other words, when a notice fixing an additional period for performance is served after a non-fundamental delay, it will only give the aggrieved party the right to terminate if, first, it is for a fixed period of time, and secondly, if the period is a reasonable one.

4.3.2.1 Fixed period

With regard to the first condition, it is to be noted that an effective Nachfrist notice should make clear that the additional period sets a fixed limit on the date for performance. It must be clear from the communication that it is an additional period of time for performance, i.e. fulfilment after expiration of that period is rejected.

This period may be fixed either by specifying the date by which performance must be made (e.g. 30 September) or by specifying a time period (e.g. "within one month from today"). A general demand by the entitled party that the other party perform or that he perform "promptly" or the like is not a "fixing" of a period of time.[24] In other words, this time will have to be fixed or be fixable according to the calendar (O.R., 49). The mere invitation to perform "as soon as possible", "promptly", "immediately" or within a similarly vaguely defined period of time is not sufficient because that would merely have to be considered as abstract reliance on the right to obtain performance. It is confirmed by the Official Comment on PECL Art. 8:106 which states: "If the notice is not for a fixed period of time it may give the defaulting party the impression that it is free to postpone performance indefinitely. It will not suffice to ask for performance 'as soon as possible'. It must be a request for performance 'within a week' or 'not later than July 1'. The request must not be couched in ambiguous terms; it is not sufficient to say that 'we hope very much that performance can be made by July 1'."[25]

However, a questionable issue arising from the fixing of the time-limit is whether a Nachfrist notice should be considered as final and/or the non-performing party be warned by the entitled party that he will declare the contract avoided. Honnold submits that an effective Nachfrist notice should make clear that the additional period sets a fixed and final limit on the date for performance; e.g., "The last date when we can accept delivery will be July 1." To the contrary, Enderlein & Maskow hold that the Nachfrist must not be considered as final and/or the non-performing party must not be warned by the entitled party that he will declare the contract avoided. A formulation like "We set an additional period of time for payment on your part until May 31 ..." is sufficient. The setting of a Nachfrist for performance gives the entitled party an option to either stick to the contract, e.g. when non-payment is caused by foreseeable temporary difficulties of transfer, or make it subject to avoidance. The aggrieved party would be forced into too strict a scheme if in setting a Nachfrist he had to threaten the other party with avoidance of the contract.[26] However, the authors in favour of this left open what would happen if the non-performing party does not carry out his threat. One should not get too near to the scheme of the ipso facto avoidance. Of course, on the other hand, the entitled party in setting the Nachfrist may declare the contract at the same time avoided in case it is not kept to by the non-performing party (see the discussion infra. 4.4.2 on automatic termination).

In my opinion, Zeller stands more persuasively in submitting that, as far as the non-performing party is concerned the additional period is a final period, however, the entitled party is not barred from fixing additional periods if he so wishes or if he wants to respond to the non-performing party's request for additional time.[27] In setting an additional period of time, the entitled party expresses his continuing interest in contract performance and offers the non-performing party a chance to fulfil the contract nonetheless. If the non-performing party does not perform within the additional period, the entitled party may set another (or more) additional period(s) of time, or avoid the contract. Neither does the contract end automatically upon the expiration of the additional period (unless it is expressly stated in the notice, see the discussion infra. 4.4.2) nor has the entitled party an obligation to avoid the contract.[28]

4.3.2.2 Reasonable length

In considering the Nachfrist procedure would have the danger turning an inconsequential delay which would not justify declaring the contract avoided for fundamental breach into a basis for declaring the contract avoided, which means in cases of non-fundamental delay the notice procedure is conferring an additional right on the aggrieved party, the period of notice must be reasonable. Determining the additional period of "reasonable length" one should fix in the notice perhaps is perhaps the most significant issue in drafting a Nachfrist notice

What is reasonable can only be decided with regard to specific cases. Enderlein & Maskow suggest the following, non-exhaustive, list of factors for determining a reasonable length: "In calculating the additional period, factors have to be taken into account which concern both parties. On the seller's part, these are: possibilities and costs for storage of the goods (compare also Article 88, paragraph 2) and price developments, e.g. the Nachfrist will be shortened in the event of a rapid decline in prices because the proceeds from a substitute transaction under Article 75, which presupposes an avoidance of the contract, would be reduced as a result. On the buyer's part, it is the difficulties which he is confronted with during performance that are of relevance, e.g. when he needs more time than expected for complying with the so-called formalities in preparing the payment (Article 54) or also in importing the goods. The seller can take such factors into consideration only when the buyer informs him thereof. In the setting of a Nachfrist, the postal handling time needed for the information to reach the buyer has to be considered because the latter must have time to undertake the relevant activities during that Nachfrist."[29]

In other words, the question of what exactly should be considered a reasonable length of time, depends on the particular circumstances for each case. Among the elements to be taken into account are the nature, extent and consequences of the delay, the non-performing party's possibilities of and time needed for performance, and the aggrieved party's special interest in speedy performance. In the light of the fact that there is a breach of contract by a party (the debtor), the interests of the other party (the aggrieved party) should be decisive. Within this leeway the choice is given to the innocent party who faces breach by the other. Indeed, respect must be given to the aggrieved party's discretion in setting the "reasonable" period if the notice-avoidance procedure is to serve its purpose -- reducing uncertainty concerning the right to avoid the contract.

However, it follows from the flexible reasonableness that different periods of time could be reasonable: "The vague term of reasonableness leaves some room to act at one's own discretion which can be used by the party who is entitled to set the Nachfrist, i.e. in this case the seller. If he fixes too short a period, the competent deciding body could determine the minimum Nachfrist."[30] PECL in its Comment therefore states as follows:[31]

"The determination of which period of time is reasonable must ultimately be left to the court. Regard should be had to several factors such as:

-    the period of time originally set for performance. If the period is short, the additional period of time may also be short;

-    the need of the aggrieved party for quick performance, provided that this is apparent to the defaulting party;

-    the nature of the goods, services or rights to be performed or conveyed. A complicated performance may require a longer period of time than a simple one;

-    the event which caused the delay. A party which has been prevented from performance by bad weather should be granted a longer respite than a party which merely forgot its duties."

In a word, the question to what amounts to a reasonable time is a question of fact and is left to the courts to decide.[32] While the setting of a reasonable time under the European Principles is handled much as it is under German law by designating the courts as the final word on a reasonable time, the CISG presents a more ambiguous dilemma than under German law. As far as the CISG is concerned, no jurisprudence has solved this issue. Under the UNIDROIT Principles, Art. 7.14(3) provides for the allowance of a reasonable amount of time in which to complete performance of the contract. If the additional amount of time is not of a reasonable length, the UNIDROIT Principles provide for an additional extension in order to comply with the mandate in the Article. However, the UNIDROIT Principles and its Official Comment do not specifically address the method to be incorporated in determining what is a reasonable amount of time and who decides when and if an additional extension of time is warranted. Nonetheless, it can be argued that a court would invoke good faith, which is a principle in the CISG or the UPICC, and could set a date which fulfills the requirements of the principle of reasonableness. In any event, the Nachfrist must not serve the aggrieved party as a pretext upon its expiration to declare the contract avoided.

Finally, one should recall that it is because in cases of non-fundamental delay the notice procedure is conferring an additional right on the aggrieved party, that the period of notice must be reasonable. "In cases other than non-fundamental delay the aggrieved party is granting a concession to the debtor. Here the aggrieved party can give the debtor as long or as short a period as it chooses, though having done so it will not be able to resort to termination or specific performance within that period. It may serve a notice which fixes an ambiguous deadline for example, 'Please perform as soon as possible'. In this case it may not terminate or seek specific performance unless the non-performance has continued for long enough that it would be consistent with good faith for the aggrieved party to terminate despite its earlier notice."[33]

4.4 EFFECTS OF SERVING A NACHFRIST NOTICE

Generally, the serving of a Nachfrist notice which grants additional time has two kinds of effects. First of all, during the fixed period, limited remedies are available but the others are suspended. Hence the other party gets another chance at performance. Secondly, if the other party does not make use of this opportunity prior to the expiring of the additional period, the party serving the notice is entitled to declare the contract avoided upon the expiry. In other words, a Nachfrist notice has the main consequences that the aggrieved party, during the additional period specified in the notice, in general has to stick to the contract while retaining his limited rights. After that Nachfrist has elapsed fruitlessly, he has the right to avoid the contract.

4.4.1 Remedies Available/Suspended during the Period

Understandably, in order to protect the non-performing party who may be preparing to perform the contract as requested by the aggrieved party who has sent a Nachfrist notice, perhaps at considerable expense, during the additional period specified in the notice the latter may not resort to some remedies for breach of contract, unless he has received notice from the former that he will not comply with the notice.

In this respect, a point well worth noting is the different wording used in the three instruments. Under the CISG, Art. 47(2) reads pertinently that "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." Similarly, Art. 63(2) stipulates in part that "the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance." By contrast, under the UNIDROIT Principles, the first sentence of Art. 7.1.5(2) reads: "During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages but may not resort to any other remedy." An identical rule is found in the first sentence of PECL Art. 8:106(2): "During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages, but it may not resort to any other remedy." According to the three texts, the right to recover damages arising from late performance is in any event, even when the non-performing party has performed within the Nachfrist, not affected. However, one area of uncertainty within the CISG has been removed under UPICC Art. 7.1.5(2) or under PECL Art. 8:106(2) by clearly stating that the aggrieved party "may withhold performance of its own reciprocal obligations" while an additional period of time is fixed. With these remedies unaffected, the party who grants the extension of time, on the other hand, cannot terminate or seek specific performance during the extension time.[34]

On the one hand, the setting of an additional period of time for performance at first has a disadvantageous effect on the party who set such an extension. Firstly, among the rights granted by the three instruments this refers to the right to early termination of the contract and/or such which practically amount to it. Even if the non-performance was a priori a fundamental breach of contract, the aggrieved party is not in a position to declare the contract avoided; he has to wait until the period of time has expired. He cannot require performance and at the same time avoid the contract. This does not have to be expressly laid down here; it would follow from the general principles, like waiver or estoppel.[35] Secondly, the aggrieved party can within the additional period of time not seek specific performance. This is acceptable because the right to require performance and the right to set an additional period of time for performance are basically variants of the right to obtain performance between which the aggrieved party can choose from the outset.[36]

The wording of the rule, on the other hand, is not completely exact. It is nevertheless indeed problematic when the aggrieved party must not exercise other rights ensuing from a breach of contract either, but rather has to wait and see whether the buyer performs within the Nachfrist. For example, under the CISG, if the seller delivers within the Nachfrist and a lack in quality becomes apparent the buyer may well invoke his rights under non-conforming delivery before the period set has expired. However, if the buyer has required repair within a fixed period of time, he cannot request delivery of substitute goods before that period has expired, even if there was originally the possibility to do so.[37]

In short, as stated in the Official Comment to PECL: "During the period fixed the aggrieved party may not take further action against the debtor; it may withhold its own performance and it may claim damages for the delay in performance or other losses caused by the non-performance, but it may not seek specific performance or terminate the contract during the period of notice."[38]

4.4.2 Early End of the Existing Uncertainty upon Rejecting Notice

The aggrieved party does not need to wait until the Nachfrist has expired, only when the non-performing party has declared that he will not perform within the additional period of time because such a declaration on the non-performing party's part will mean "an early end of the existing uncertainty".[39]

In this respect, under the CISG, the aforementioned Art. 47(2) is clearly limited at the outset to the situation "[u]nless the buyer has received notice from the seller that he will not perform within the period so fixed, [...]"; similarly, Art 63(2) reads that "[u]nless the seller has received notice from the buyer that he will not perform within the period so fixed, [...]". In more general terms, the second sentence of UPICC Art. 7.1.5(2) provides in part: "If it receives notice from the other party that the latter will not perform within that period, [...], the aggrieved party may resort to any of the remedies that maybe available under this Chapter." Similarly, the second sentence of PECL Art. 8:106(2) reads in part: "If it receives notice from the other party that the latter will not perform within that period, [...], the aggrieved party may resort to any of the remedies that may be available under chapter 9."

Since the rejecting notice has to refer to that there will be no performance also during the Nachfrist it can only be given after the Nachfrist has been set and the non-performing party has received the respective information. When the non-performing party has named before a date of performance later than the expiry of the Nachfrist, the aggrieved party cannot rely on it because it is very well possible that the setting of an additional period of time inspires the non-performing party to make exceptional efforts to keep to the period granted. The situation is different when performance is rejected definitely and once and for all. It is not sufficient in this case (by contrast to anticipatory non-performance, see the discussion in Chapter 9) that it becomes apparent or is clear that the non-performing party will not keep to the Nachfrist. If, however, the notice is given, the contract can be avoided at once (according to, e.g., CISG ArtS. 49(1)(b) / 64(1)(b)), even when the delay does not yet constitute a fundamental breach of contract.[40]

4.4.3 Termination upon Expiry of the Extension

4.4.3.1 In general

Once the additional period specified in the Nachfrist notice is expired, the second sentence of UPICC Art. 7.1.5(2) provides in part that "if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that maybe available under this Chapter." Similarly, the second sentence of PECL Art. 8:106(2) stipulates that "if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that may be available under chapter 9." In this respect, although no counterpart rule is found in the CISG, the Secretariat Commentary makes it clear that once the additional period of time has expired without performance by the seller/buyer, the buyer/seller may not only avoid the contract under Art.49(1)(b)/64(1)(b) but may resort to any other remedy he may have. In particular, the buyer/seller may claim any damages he may have suffered because of the delay in performance. Such damages may arise even though the seller/buyer has performed his obligations within the additional period of time fixed by the buyer/seller.[41]

Nonetheless, it is to be recalled that the most advantageous aspect of a Nachfrist procedure is that, in contrast to the general rule of termination, the requirements of fundamental non-performance need not be fulfilled, because "[t]he Nachfrist procedure, [...], makes performance of basic contractual obligations within the period fixed in the notice 'of the essence' of the contract. It makes non-performance within the time so fixed the equivalent of a fundamental breach of contract and thus allows a party awaiting performance to eliminate uncertainty concerning the amount of delay that is serious enough to justify avoiding the contract."[42] By granting an additional period of time, that party can therefore relieve himself of the risk that, eventually, the breach might be held not to have been fundamental. Therefore, the most frequently occurring consequence upon the expiry is perhaps the termination of the contracts. In this respect, different (nevertheless similar in substance) approaches are found in the three instruments.

4.4.3.2 CISG approach

As stated earlier, unlike the including of the avoidance provisions within the Nachfrist article under UPICC 7.1.5 or PECL Art. 8:106, the CISG provides for a separate provision dealing with avoidance by the side of the Nachfrist procedure envisaged elsewhere. In this respect, the buyer's ability to avoid the contract after the serving of a Nachfrist notice is outlined in Art. 49(1)(b), and the seller's in Art. 64(1)(b).

Another point well worth noting is that the CISG in its jurisprudence indicates that only in the context of seller's non-delivery or buyer's failure to pay the price or take delivery of the goods does the expiration of a Nachfrist give rise to a right to avoid the contract. In this respect, the wording of Art. 47(1) appears to cover the whole range of obligations arising under the contract and the Convention, such as delivery of all or part of the goods, the remedy of any lack of conformity by repair of the goods or by delivery of substitute goods or performance of any other act which would constitute performance of the seller's obligations. However, Art. 49(1)(b) only authorizes the buyer to declare the contract avoided: "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." Thus, only in the event of non-delivery does the expiry without performance of the Nachfrist entail the right of the buyer to avoid the contract.[43] In any other situation, the setting of a nachfrist does not provide a basis for avoidance for the buyer.[44] Similarly, Art. 64(1)(b) authorizes the seller to declare the contract avoided: "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." Unlike the general term in Art. 62, Art. 64(1)(b) also presumes a restricted case through being limited to the event of failure to pay the price or take delivery.

Flechtner analyses the underlying considerations behind such limitations envisaged in CISG ArtS. 49(1)(b) / 64(1)(b) as follows: "Despite the drafters' failure to provide clear guidance, the Nachfrist provisions of the Convention can and should be interpreted in a manner that does not undermine the fundamental breach standard for avoidance. Under Article 7(2), questions not expressly settled in the Convention must be answered 'in conformity with the general principles upon which it is based.' One such principle is that avoidance of the contract is proper only where the other side has committed a serious breach. Article 7(1), furthermore, requires that the Convention be interpreted 'to promote ... observance of good faith in international trade.' In light of these considerations, Articles 49(1)(b) and 64(1)(b) should be construed to permit avoidance only where there has been a failure to perform a material portion of the specified obligations within the time fixed in a Nachfrist notice."[45]

Despite these limitations, neither the limitation to non-delivery in Art. 49(1)(b) nor the limitation to failure to pay the price or take delivery in Art. 64(1)(b) does in any way preclude that a breach of other obligations, whose non-performance does not yet constitute a fundamental breach of contract at the time for performance, becomes such as more time passes. This may be emphasized by fixing a Nachfrist as well. However, in this event, it will not suffice to prove that a Nachfrist of reasonable length was fixed and performance was not made nevertheless, but it must be proved that the conditions for the existence of a fundamental breach of contract are given. This is true, for instance, of the fixing of a Nachfrist for the performance of the obligation to participate in the manufacture of the goods, which is not to be considered as part of the obligation to take delivery.[46] By contrast, non-performances during the Nachfrist of those most essential obligations such as seller's delivering the goods or buyer's paying the price or taking delivery, constitute according to Arts. 49(1)(b) and 64(1)(b) immediately, after the expiry of the Nachfrist, a fundamental breach of contract, without having to prove that the conditions for the existence of a fundamental breach of contract are given.[47]

Finally, it is to be noted that the buyer's obligation to pay the price, pursuant to Art. 54 CISG, includes taking such steps and complying with such formalities which may be required by the contract and by any relevant laws and regulations to enable payment to be made, such as registering the contract with a government office or with a bank, procuring the necessary foreign exchange, as well as applying for a letter of credit or a bank guarantee to facilitate the payment of the price. Therefore, the Secretariat Commentary states that the buyer's failure to take any of these steps within an additional period of time fixed by the seller in accordance with Art. 63 CISG would authorize the seller to declare the contract avoided under Art. 64(1)(b).[48] However, Enderlein & Maskow have their reservations here because the buyer insofar is granted several options and he cannot be forced by the seller to choose one. Furthermore, not even a general date is fixed in regard to most of these steps vis-à-vis the seller so that there is neither a connecting point for the setting of a Nachfrist. To put it briefly, the relevant obligations of the buyer are not feasible enough so that such a far-reaching interpretation of the obligation to pay the price could lead to abuse by the seller.[49]

4.4.3.3 UNIDROIT Principles / PECL approach

Art. 7.3.1(3) UPICC follows the approach adopted under the CISG and provides: "In the case of delay the aggrieved party may also terminate the contract if the other party fails to perform before the time allowed it under Article 7.1.5 has expired." Similarly, PECL Art. 9:301(2) also provides as: "In the case of delay the aggrieved party may also terminate the contract under Article 8.106 (3)." Thus, the two Principles contain a very similar termination situation through the Nachfrist procedure, but with some variance due to the delicate difference over the Nachfrist procedure itself between them.

As mentioned above, the two Principles also include the avoidance provisions within the Nachfrist article under UPICC 7.1.5 and PECL Art. 8:106, respectively. In this respect, UPICC 7.1.5(3) reads: "Where in a case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period. If the additional period allowed is not of reasonable length it shall be extended to a reasonable length. The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate." PECL Art. 8:106 provides similarly: "If in a case of delay in performance which is not fundamental the aggrieved party has given a notice fixing an additional period of time of reasonable length, it may terminate the contract at the end of the period of notice. The aggrieved party may in its notice provide that if the other party does not perform within the period fixed by the notice the contract shall terminate automatically. If the period stated is too short, the aggrieved party may terminate, or, as the case may be, the contract shall terminate automatically, only after a reasonable period from the time of the notice."

As indicated in the aforementioned two texts, the position at the end of the period of extension depends on whether the late performance was already fundamental at the time when the extension was granted. In this situation, if the contract is not completely performed during the extension, the right to terminate for fundamental non-performance simply springs into life again as soon as the extension period expires. On the other hand, if the late performance was not yet fundamental, termination would only be possible at the end of extension if the extension was reasonable in length.[50] One should note, however, if the aggrieved party serves a notice of less than a reasonable period it need not serve a second notice; it may terminate after a reasonable time has elapsed from the date of the notice.[51]

On the other hand, both texts indicate that the aggrieved party may provide for automatic termination. It may say in its notice that the contract shall terminate without further notice if the defaulting party fails to perform within the period of the notice. Although no similar rule is found under the CISG, such an automatic termination may be included in a CISG Nachfrist notice under the general party autonomy doctrine. Once such an automatic termination is expressly provided for in the notice, if the defaulting party in fact tenders performance after the date set in the notice, the aggrieved party may simply refuse to accept it. However, if the aggrieved party actually knows that the defaulter is still attempting to perform after the date, good faith requires it to warn the defaulter that the performance will not be accepted. If the defaulting party asks the aggrieved party whether it will accept performance after the date set, good faith requires the aggrieved party to give an answer within a reasonable time.[52] One should note, however, PECL Art. 8:106(3) expressly states that: "If the period stated is too short, [...] as the case may be, the contract shall terminate automatically, only after a reasonable period from the time of the notice." Although no similar rule is found in UPICC 7.1.5(3), it appears that such a slight distinction bears technical manner rather than a substantial difference.

Finally, it is to be noted that an additional paragraph which is not found in the PECL is added to UPICC Art. 7.1.5(3), which reads: "Paragraph (3) does not apply where the obligation which has not been performed is only a minor part of the contractual obligation of the non-performing party." (Art. 7.1.5(4)) In this respect, it is said that the UNIDROIT Principles include a de minimus threshold such that a Nachfrist notice does not allow avoidance of the contract where the unperformed obligation is minor. In this regard, the UNIDROIT Principles mirror more closely the CISG. As with the threshold under the UNIDROIT Principles, the CISG's limitation of avoidance to, for instance, cases of non-delivery can also be viewed as a de minimus threshold, since the rest of the seller's obligations can be viewed as less important (or more compensable by damages) than the delivery obligation.[53]

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FOOTNOTES: Chapter 4

* Chengwei, Liu. LL.M. of Law School of Renmin University of China, P.O. Box 9-01 No. 1 (International Law), Law School of Renmin University of China, 59 Zhongguancun Street, Beijing 100872, China. E-mail: Genes@263.net.

1. See Comment on Art. 7.1.5 UPICC.

2. See Bruno Zeller in "Buyer’s notice fixing additional final period for performance: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 47 and 49(1)(b) CISG". (2001) Available online at <http://www.cisg.law.pace.edu/cisg/text/peclcomp47.html#er>; also in "Seller’s notice fixing additional final period for performance: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 63 and 64(1)(b) CISG". (2001) Available online at <http://www.cisg.law.pace.edu/cisg/text/peclcomp63.html#er>.

3. See Alison E. Williams in "Forecasting the Potential Impact of the Vienna Sales Convention on International Sales Law in the United Kingdom": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001); pp. 9-57. Available online at <http://www.cisg.law.pace.edu/cisg/biblio/williams.html>.

4. Ibid.

5. Supra. note 2.

6. Ibid.

7. Providing an automatic extension of time for the parties to a commercial contract to fulfill their obligations is mandated under German law. Such automatic extension, and its mechanics, is known in German as Nachfrist. The Nachfrist obligation is articulated in Section 326 of the German Civil Code (Bürgerliches Gesetzbuch ("BGB")) Loosely translated, the Section reads in English as, "The Creditor must, as a general rule, reasonably extend the original term for performance unless such contractual performance is of no further interest to the Creditor due to delay or unless the final deadline is apparently, for some other reason, superfluous. When the grace period has elapsed without completion of the contractual obligation, the Creditor may choose between damages for non-performance and avoidance of the contract. A claim for performance is, however, excluded." (See Maryellen DiPalma in "Nachfrist under National Law, the CISG, and the UNIDROIT and European Principles: A Comparison": International Contract Adviser (Kluwer), Vol. 5, No. 1 (Winter 1999); pp. 28-38. Available online at <http://www.cisg.law.pace.edu/cisg/biblio/DiPalma.html>.) In view of the significant differences as regards the function of the Nachfrist, it is therefore submitted that Section 326 of the BGB may, at the very most, have served as an inspiration not a model provision for the international rules. (See Anette Gärtner in "Britain and the CISG: The Case for Ratification - A Comparative Analysis with Special Reference to German Law": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001); pp. 59-81. Available online at <http://www.cisg.law.pace.edu/cisg/biblio/gartner.html>.)

8. See Knapp , Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds. (1987) [hereinafter Bianca & Bonell]; p. 460.

9. See Secretariat Commentary on Art. 43 of the 1978 Draft [draft counterpart of CISG Art. 47], Comment 2. Available online at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-47.html>; Secretariat Commentary on Art. 59 of the 1978 Draft [draft counterpart of CISG Art. 63], Comment 2. Available online at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-63.html>. (The match-ups indicate: CISG Art. 47 is identical to 1978 Draft Art. 43 except for a reference to "delay in performance" rather than "delay in the performance": see the match-up available online at <http://www.cisg.law.pace.edu/cisg/text/matchup/matchup-d-47.html>; CISG Art. 63 is identical to 1978 Draft Art. 59 except for the concluding reference to "delay in performance" rather than "delay in the performance": see the match-up available online at <http://www.cisg.law.pace.edu/cisg/text/matchup/matchup-d-63.html>. The Secretariat Commentary on 1978 Draft Arts. 43, 59 should therefore be relevant to the interpretation of CISG Arts. 47, 63.)

10. See Comment 1 on Art. 7.1.5 UPICC.

11. In the case of fixed-time contracts, the date of delivery may be so essential to the buyer that non-compliance with it may constitute a fundamental breach of contract. (See Enderlein & Maskow, infra. note 26, p. 137.)

12. Supra. note 10.

13. By contrast, Section 326 of the BGB does not have anything to do with reducing the risk of wrongful termination or securing the right to avoidance. Partly, this is due to the fact that, unlike the three instruments, the BGB does not differentiate between simple and fundamental breaches of contract. More importantly, according to German law, the right to terminate a contract only arises in a rather limited number of situations. Whereas the three instruments allow the creditor to avoid the contract for any fundamental breach, the BGB starts from the notion that, in principle, a contract may only be unilaterally terminated if the agreement provides for a contractual right to avoidance. As one of the exceptions to this general rule, this provision under German law, instead, in many cases, enables the aggrieved party to declare the contract avoided.

14. The first situation, the case of the aggrieved party who indicates that he will still accept tender of performance or the cure of a defective performance but then changes his mind, gives rise to little problem in systems such as the FRENCH or SPANISH where a court order is needed for termination (French CC art. 1184(3); Spanish CC art. 1124(3)): instead of terminating the contract at once the court can simply grant a further delay for performance. Systems such as the COMMON LAW which allow termination by simple notice without prior warning have often developed rules to prevent a sudden change of mind by the aggrieved party; e.g. the Common law rule that if the aggrieved party has "waived" his right to terminate for the time being he can only withdraw the waiver by giving reasonable notice: Charles Rickards Ltd v. Oppenhaim [1950] 1 K.B. 616 (C.A.). CIVIL LAW systems also recognise that the aggrieved party should not be allowed to terminate during the period in which he indicated that he would still accept performance: e.g. AUSTRIAN law, e.g. OGH 21 December 1987, SZ 60/287; 12.3.1991 JBI 1992, 318; FINNISH and SWEDISH Sale of Goods Acts, 25(3), 54(3) and 55(3); GREEK law (Michaelides Nouaros Erm.AK vol.II/1 art. 383 nos. 17-18 (1949). The aggrieved party may also be barred from seeking performance in natura, as, for example, in ITALIAN law (cc art. 1454(3)). It is often recognised that the aggrieved party may resort to termination immediately, however, if the other party indicates that he will not perform within the time allowed. (Infra. note 15, Note 1.)

15. See Comment and Notes to the PECL: Art. 8:106. Comment A. Available online at <http://www.cisg.law.pace.edu/cisg/text/peclcomp47.html>.

16. Ibid., Comment B.

17. Supra. note 15, Comment C.

18. Ibid.

19. See Comment 1 on Art. 1.9 UPICC.

20. See Comment and Notes to the PECL: Art. 1:303. Comment B. Available online at <http://www.cisg.law.pace.edu/cisg/text/peclcomp27.html>.

21. See Comment 2 on Art. 1.9 UPICC.

22. See Comment 4 on Art. 1.9 UPICC.

23. Supra. note 20, Comment D.

24. Supra. note 9, Comments 7 on Draft Art. 43 and 59.

25. Supra. note 15, Comment D.

26. See Fritz Enderlein, Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Oceana Publication (1992); p. 238. Available online at <http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html>.

27. Supra. note 2.

28. Supra. note 26, p. 182.

29. Supra. note 26, pp. 238-239.

30. Supra. note 26.

31. Supra. note 15, Comment E.

32. In this point, since it is usually advised an inclusion of an arbitration clause in international commercial contracts and it is expressly provided that the "court" "includes an arbitral tribunal" under UPICC Art. 1.10 or PECL Art. 1:301, one can assume that the appropriate length of time can be determined by an arbitrator as well.

33. Supra. note 25.

34. See Comment 2 on Art. 7.1.5 UPICC.

35. Supra. note 26, p. 183.

36. Supra. note 26, p. 240.

37. Supra. note 26, pp. 183-184.

38. Supra. note 15.

39. Supra. note 26, p. 184.

40. Supra. note 26, pp. 241-242.

41. Supra. note 9, Comments 9, 10 on Draft 43 and 59.

42. See Harry M. Flechtner in "Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C.": 8 Journal of Law and Commerce (1988) 53-108. Available online at <http://www.cisg.law.pace.edu/cisg/text/flecht47,63.html>.

43. Supra. note 26, p. 193. Enderlein & Maskow note that it would seem reasonable to apply this rule analogously to the expiry of a Nachfrist where there was no performance, in the case of curing a non-conformity. But this was rejected repeatedly and for good reasons at the diplomatic conference.

44. For example, in the case of defective goods, if the contract is breached, the Buyer may compel performance and set an additional time for performance. On the expiration of that period, the Buyer must again decide whether to avoid the contract or not, and this decision will still depend on whether the breach is fundamental. The only change in the situation is that the Buyer once again has the possibility of giving a notice of avoidance within a "reasonable time" to the Seller. (Supra. note 3.)

45. Supra. note 42.

46. Supra. note 26, p. 245.

47. In this point, Schlechtriem submits it is a consequence of the expiry of time limits and not of the setting of a Nachfrist, that a delay during the Nachfrist can turn the original delay into a fundamental breach. Enderlein & Maskow submit differently: We believe that it is an academic dispute to find out whether it is the setting of a Nachfrist in itself during which there is no performance of obligations, or the expiry of the time limit which turns the breach of contract into a fundamental one. (Supra. note 43.)

48. See Secretariat Commentary on Art. 60 of the 1978 Draft [draft counterpart of CISG article 64], Comment 7. Available online at <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-64.html>.

49. Supra. note 46.

50. See Comment 2 on Art. 7.1.5 UPICC.

51. Supra. note 25.

52. Supra. note 15, Comment F.

53. See Peter A. Piliounis in "The Remedies of Specific Performance, Price Reduction and Additional Time (Nachfrist) under the CISG: Are these worthwhile changes or additions to English Sales Law?"(1999). Available online at <http://www.cisg.law.pace.edu/cisg/biblio/piliounis.html>.


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