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Reproduced with the permission of Oceana Publications

excerpt from

INTERNATIONAL SALES LAW

United Nations Convention on Contracts for the International Sale of Goods

Convention on the Limitation Period in the International Sale of Goods

Commentary by
Prof. Dr. jur. Dr. sc. oec. Fritz Enderlein
Prof. Dr. jur. Dr. sc. oec. Dietrich Maskow

Oceana Publications, 1992

Article 73 [Avoidance of instalment contracts]

[TEXT OF THE UNIFORM LAW]

(1) In the case of a contract for delivery of goods by instalments [1], if the failure of one party [2] to perform any of his obligations in respect of any instalment constitutes a fundamental breach of contract [3] with respect to that instalment, the other party may declare [6] the contract avoided [4] with respect to that instalment [5].

(2) If one party's failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude [7] that a fundamental breach of contract will occur with respect to future instalments [8], he may declare [6] the contract avoided for the future [10], provided that he does so within a reasonable time [9].

(3) A buyer who declares the contract avoided in respect of any delivery may, at the same time [11], declare [6] it avoided in respect of deliveries already made or of future deliveries [12] if, by reason of their interdependence [13], those deliveries could not be used for the purpose contemplated by the parties [14] at the time of the conclusion of the contract [15].

[WORDS AND PHRASES, CONCEPTS

1. instalment contracts
2. if the failure of one party
3. fundamental breach of contract; cross-reference: articles 25 and 51
4. cross-reference: articles 49 and 64
5. suspension of performance
6. the other party may declare the contract avoided
7. if one party's failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude
8. that a fundamental breach will occur with respect to future instalments
9. he may declare the contract avoided provided that he does so within a reasonable time
10. he may declare the contract avoided for the future
11. a buyer who declares the contract avoided
12. may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries
13. if, by reason of their interdependence
14. those deliveries could not be used for the purpose contemplated by the parties
15. at the time of the conclusion of the contract ]

[COMMENTARY]

[1] [instalment contracts]

It is a condition for the avoidance of a contract under Article 73 that the contract provides for the delivery of goods by instalments. If a party commits a breach of contract, and the obligee wishes to draw conclusions for other contracts, he may probably do so on the basis of Article 72.

A contract on the delivery of goods by instalments does not require delivery of similar goods at all times, or agreement of fixed dates. Deliveries may include different goods or partial deliveries, e.g. for production facilities, (Bennett/BB, 534). Instead of setting dates for delivery, there might be agreement in that deliveries can be asked for when needed.

The basic problem here, on the one hand, is to make the rules governing avoidance of contract (Articles 49 and 64) applicable to each and every partial delivery and, on the other, to punish the violation of obligations in regard to a partial delivery only in regard to that partial delivery. Under certain circumstances, however, there will be consequences for the contract as a whole. In this regard, the provisions [page 294] of Article 73 are similar to those of Article 51. Vilus (Dubrovnik, 245) believes that Article 73 represents application of the rule of Article 72. This is true, however, only in respect of paragraphs 2 and 3. For Article 73, paragraph 1, to be applied, a fundamental breach of contract has to have occurred, whereas under Article 72 a breach of contract is to be anticipated.

[2] [ if the failure of one party ]

Article 73 is not limited to the obligations of the seller. The buyer, too, can breach a contract in regard to some of the partial deliveries, either by not taking delivery of the goods or not paying for them (e.g. advance payment may have been agreed in respect to each instalment, Bennett/BB, 534). The rule is applied here directly and not merely by analogy (as says the 1985 CISG Commentary; c. also Honnold, 404; Bennett/BB, 533). Article 73 is not applied to cases where the buyer of a delivery, as a whole, has the right to pay in instalments (Knapp/BB, 447, wants to have Article 73 applied here analogously.) In this context, non-fulfilment of the obligation to pay in instalments may lead to avoidance of contract under Articles 64 or 72.

[3] [fundamental breach of contract; cross-reference: articles 25 and 51]

As to the characteristics of a fundamental breach of contract, compare Article 25. Whether or not non-performance of an obligation relating to an instalment constitutes a fundamental breach of contract, will in the first place have to be clarified in regard to that instalment itself. Only from the context of the contract as a whole can it be judged whether conclusions will have to be drawn for future (paragraph 2) and earlier (paragraph 3) instalments (O.R., 54).

If the buyer is not sure whether a fundamental breach of contract occurred he can proceed following Article 51 and set the seller a Nachfrist to perform his obligations. If the latter does not do so within the additional period so set, the former will have the right to avoid the contract (Bennett/BB, 536).

[4] [cross-reference: articles 49 and 64]

Regarding the consequences of an avoided contract compare Articles 49 and 64.

[5] [suspension of performance]

The obligee can, as a rule, suspend performance of the contract only in respect to the instalment in question, which would amount to a modification of contract (a reduction of the quantity and the price of the goods) (Bennett/BB, 534).

[6] [ the other party may declare the contract avoided ]

The declaration to avoid a contract is subject to Article 27. No prior notice is required (as in Article 72). Neither is there under paragraphs 1 and 3 a time limit for making the declaration, whereas a reasonable time is required under paragraph 2 (note 9). [page 295]

[7] [if one party's failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude ]

Unlike in paragraph 1, the failure by one party to perform any of his obligations in respect of any instalment need not be a fundamental breach of contract. Also a simple breach of contract may lead to the conclusion that a fundamental breach might be committed in the future (Bennett/BB, 535).

The grounds for this assumption are similar to the circumstances explained in the context of Articles 71 and 72. However, neither a deterioration of the creditworthiness nor a declaration of an intention not to perform are sufficient; there must be an actual breach of contract (Bennett/BB, 536 fol).

[8] [ that a fundamental breach will occur with respect to future instalments ]

Since the breach of contract in regard to former instalments does not necessarily have had to be fundamental in character, the contract cannot be avoided in respect of instalments already delivered.

[9] [ he may declare the contract avoided provided that he does so within a reasonable time ]

What time is reasonable depends, among other things, on the length of the interval between the latest and the next instalment and/or its reception and payment.

[10] [ he may declare the contract avoided for the future ]

Reference is made here, like in Article 72, to a fundamental breach of contract to occur in the future. While under the preceding article the entire contract may be avoided, it can here only be an avoidance for the future (Bennett/BB, 536).

[11] [a buyer who declares the contract avoided ]

Unlike paragraphs 1 and 2 which grant both parties the right to avoid the contract, paragraph 3 refers exclusively to the rights of the buyer.

If the buyer wants to avoid the contract not only in regard to the latest, but also to earlier and future instalments, he has to declare so at the same time.

[12] [may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries ]

Earlier deliveries may well have been faultless, and a fundamental breach of contract does not necessarily have to be expected in regard to future deliveries (Bennett/BB, 535).

[13] [ if, by reason of their interdependence ]

Honnold (406 fol) mentions, as an example, the delivery of several machines which were designed to perform a series of interrelated production operations, the second of which was so defective that the defect could neither be cured nor repaired, not even by a machine of another manufacturer.

The Secretariat's Commentary (O.R., 54) notes that the purpose for which the goods are to be used may require that all instalments of raw materials, colouring, semi-finished products, etc. come from the same source. [page 296]

[14] [ those deliveries could not be used for the purpose contemplated by the parties ]

It is not sufficient that the buyer alone knew of the interdependence; the seller, too, has to be aware of that interdependence. If the interdependence of the instalments is not clear from itself, the buyer has to inform the seller accordingly.

[15] [ at the time of the conclusion of the contract]

It does not suffice that the buyer informs the seller of the interdependence of the instalments during performance; he should rather reveal the purpose of the goods to the seller already at the conclusion of the contract (c. here Article 35, paragraph 2, subpara. (b)). [page 297]

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Pace Law School Institute of International Commercial Law - Last updated September 25, 2002
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