Unlike in the case of fixed-term contracts (c. Article 33, note 6), a delay in performance is not automatically a fundamental breach of contract (c. also Will/BB, 343). The buyer would in the case of a fundamental breach be entitled to avoid the contract immediately (c. Article 49, paragraph 1, subpara. (a)), but for him this is not necessarily the best solution. Hence, the buyer has the right to give the seller an additional period of time, irrespective of whether or not the lack of conformity constitutes a fundamental breach of contract. [page 181]
In setting an additional period of time, the buyer expresses his continuing interest in contract performance and offers the seller a chance to fulfil the contract nonetheless. If the seller does not perform within the additional period, the buyer 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 nor has the buyer an obligation to avoid the contract.
Under ULIS an additional period of time had a different function: its expiration automatically lead to avoidance (Famsworth/Lausanne, 105).
The legal institute of Nachfrist is considered as an essential contribution of the German sales law to the uniform sales laws (Huber/Freiburg, 201 fol). It is not translated into English. Under 326 BGB the setting of a Nachfrist was meant to announce that upon its expiration, performance would be rejected. Farnsworth (Lausanne, 105) referring to the Nachfrist said: "We don't understand it, we never heard of it, but we like it." That the Common Law never heard of it is not true. The commentary on sec. 2-309 of the United States Uniform Commercial Code recommends use of the Nachfrist to bring certainty into the relations between the parties (Honnold, 307). The setting of a Nachfrist not only brings certainty with regard to the buyer's interest in fulfilment of the contract, but also in respect of the possibility to avoid the contract. (It may be risky for the buyer to avoid the contract if there is a dispute whether the non-performance constitutes a fundamental breach of contract.)
Nachfrist must be determined by indicating a given date or a period of time (c. Article 33); vague terms like "soon" or "promptly" do not suffice (O.R., 39; also Honnold, 306).
[2] [buyer may fix additional period of time of reasonable length]
What is reasonable can only be decided with regard to specific cases. The Nachfrist must not be too short and must
not serve the buyer as a pretext upon its expiration to declare the contract avoided under Article 49, paragraph 1,
subpara. (b). In determining an additional period of reasonable length, such elements as the extent and the
consequences of the delay have to be taken into account just like the possibilities of the seller and the interest of the
buyer (Will/BB, 345). [page 182]
Referring to Article 27 ULIS Huber (Dölle, 235) (among others, included the following elements in calculating what
is a reasonable length of a Nachfrist: the length of the contractual period for delivery; nature of the seller's
performance, e.g. delivery of complicated equipment out of his own production; and nature of the obstacle in the way
of delivery.
[3] [Nachfrist leading to right to avoid pertains only to obligation to deliver]
What matters most in setting a Nachfrist is the obligation to deliver. Honnold (304 fol) exclusively speaks of
delivery. This would follow from Article 49, paragraph 1, subpara. (b). The possibility to fix a Nachfrist was rejected
in the case of defects so as to avoid that by way of the additional period, trivial defects could be converted into
fundamental breaches (also Schlechtriem, 67). A Nachfrist can, however, be set if parts are missing in a delivery (c.
Article 51, paragraph 2).
The buyer may set additional periods in regard to the fulfilment of other obligations, such as delivery of substitute
goods or repair under Article 46. But in such cases, the expiration of the additional periods does not give the buyer
the right to avoid the contract. In contrast to ULIS, there is no longer a possibility for a Nachfrist if the goods are
defective. This situation has created uncertainties (see Schlechtriem/Doralt, 139).
Persistent refusal to repair defective goods may, however, turn out to be a fundamental breach of contract and
thus entail the right to declare the contract avoided (Will/BB, 346).
[4] [setting additional period: informing the seller]
The buyer must set an additional period, i.e. inform the seller accordingly either orally or in writing. No form
is prescribed for that. 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. The seller should be well aware of his
situation (Honnold, 306). As to the communication to the seller, Article 27 (O.R., 338) applies, and the risk of
transmission lies with the seller. The buyer may draw his conclusions when the Nachfrist has expired, even when
the seller has not perceived the communication.
[5] [when buyer sets additional period, cannot avoid during that period]
Even if the non-fulfilment was a priori a fundamental breach of contract, the buyer 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 (Honnold, 308). The wording of the rule, on the other hand, is not completely
exact. If the seller delivers within the Nachfrist and a lack in quality becomes [page 183] apparent the buyer may well
invoke his rights under non-conform[ing] delivery before the period set has expired (Leser/Freiburg, 236).
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. The setting of an additional period of
time for performance at first has a disadvantageous effect on the buyer (Welser/Doralt, 119). On the other hand,
the buyer has the right to declare the contract avoided in the case of a delay in delivery upon the expiration of the
additional period, even if the delay did not constitute a fundamental breach of contract (Welser/Doralt, 120).
[6] [unless seller has declared he will not perform during that period]
The buyer does not need to wait until the Nachfrist has expired, only when the seller has declared that he will not
perform within the additional period of time because such a declaration on the seller's part will mean an early end of
the existing uncertainty (Welser/Doralt, 119).
[7] [exercise of Nachfrist right: buyer can still claim
damages for delay in performance]
The buyer will, in any event, even when the seller has performed within the Nachfrist, retain the right to claim
compensation for damages sustained because of the delay. If the seller does not perform, the buyer has the right to
claim damages because of non-performance (c. Article 45). [page 184]
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Institute of International Commercial Law - Last updated August 14, 2002
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