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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 75 [Damages in case of avoidance and substitute transactions]

[TEXT OF THE UNIFORM LAW]

If the contract is avoided [1] and if, in a reasonable manner [2] and within a reasonable time [3] after avoidance, the buyer has bought goods in replacement or the seller has resold [4] the goods, the party claiming damages may recover the difference [5] between the contract price and the price in the substitute transaction as well as any further [6] damages recoverable under article 74.

[WORDS AND PHRASES, CONCEPTS

1. if the contract is avoided
2. and if in a reasonable manner
3. and within a reasonable time after avoidance
4. the buyer has bought goods in replacement or the seller has resold the goods
5. the party claiming damages may receive the difference between the contract price and the price in the substitute transaction
6. as well as any further damages
7. recoverable under article 74 ]

[COMMENTARY]

[1] [if the contract is avoided ]

It is a condition for the calculation of damages under Article 75 that the contract has been avoided (before) (c. Articles 49; 61 and 72; 73; and 81). Otherwise, if the seller has declared the contract avoided, he can sell the goods and if the buyer has declared the contract avoided, he can procure the goods.

[2] [ and if in a reasonable manner ]

It is to be interpreted in such a way that the party who is true to the contract must try to effect the substitute transaction either as the buyer at the lowest possible price or as the seller at the highest possible price (Vilus/Dubrovnik, 248). Other contractual stipulations may have to be taken into account, e.g. the duration of the period of guarantee. An unreasonable substitute transaction cannot be considered to measure the damages. This follows, inter alia, from the obligation under Article 77 to mitigate losses. Jurisdiction in regard to Article 85 ULIS, which contains a relevant rule, in respect of the reasonable manner, called for a cautious and circumspect businessman (Schlechtriem/Magnus, 454 fol).

[3] [ and within a reasonable time after avoidance ]

The substitute transaction has to be effected within a reasonable time. This is to prevent the loss from further increasing under worsening market conditions. ULIS made no mention of a reasonable time. It was probably assumed that the reasonable time followed from the condition of a reasonable manner (Knapp/BB, 549).

[4] [ the buyer has bought goods in replacement or the seller has resold the goods ]

It is not at issue here which substitute transaction could be carried out. This is provided for in Article 76. The claim for damages on the basis of Article 75 presupposes a substitute transaction or a substitute sale to have taken place. Mere offers are not considered (also in regard to the reasonableness of the substitute transaction; c. Schlechtriem/Magnus, 455).

The party who is true to the contract does not always have an obligation to effect a substitute transaction, unless the loss can be mitigated in comparison to the calculation under Article 76. [page 303]

[5] [ the party claiming damages may receive the difference between the contract price and the price in the substitute transaction ]

The difference between the price of the substitute transaction and the price of the avoided original contract is the loss to be recovered. Here we are dealing with a concrete calculation of damages (in contrast to the abstract way of Article 76) as is preferred in many legal systems, including the UCC (2-706 and 2-712) (Honnold, 413).

If the party who is true to the contract can carry out the substitute transaction according to the original terms, he does not suffer losses (but compare Article 74, note 5). If the terms he can agree are even better, he may keep the difference and need not hand it over, for instance to the party in breach.

The difference in price between the avoided contract and the contract which was newly concluded can, however, be the result of different terms, e.g. guarantee, or of different auxiliary costs, e.g. packaging, transportation). Due account has to be taken of this situation, i.e. the price difference has to be adjusted accordingly (Knapp/BB, 550).

[6] [ as well as any further damages ]

To carry out a substitute transaction requires additional costs which are not covered and compensated for by the difference in price. If the substitute transaction had been possible without avoidance of the original contract, the seller would suffer further losses in regard to the profit he missed.

[7] [ recoverable under article 74]

Further damages are recoverable under the general rule of Article 74. This means, however, that any further damage is limited as to its foreseeability. In this case, too, it is a prerequisite that the injured party claims damages and proves the loss. [page 304]

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