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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 81 [Release from obligations; contract provisions for settlement of disputes; restitution] [1]

[TEXT OF THE UNIFORM LAW]

(1) Avoidance of the contract releases both parties from their obligations [2] under it, subject to any damages [3] which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes [4] or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract [5].

(2) A party who has performed the contract either wholly or in part may claim [6] restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound [7] to make restitution, they must do so concurrently [8].

[WORDS AND PHRASES, CONCEPTS

1. avoidance of the contract
2. releases both parties from their obligations under it
3. subject to any damages which may be due
4. avoidance does not affect any provision of the contract for the settlement of disputes
5. or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract
6. a party who has performed the contract either wholly or in part may claim
7. may claim restitution from the other party of whatever the first party has supplied or paid under the contract
8. if both parties are bound to make restitution, they must do so concurrently ]

[COMMENTARY]

[1] [avoidance of the contract ]

This article clearly shows that the avoidance of the contract does not nullify the latter and clarifies which are the obligations that are terminated or returned, respectively, and which remain in existence. It does not meet the character of the provision that there is a dispute on whether the avoidance has the effect of ex nunc or ex tunc. While Kahn (978) stresses that the parties are, to the extent possible, in the same situation as they were at the conclusion of the contract, insofar alludes more to an ex tunc effect; Schlechtriem (102) attaches importance on that the contract schedule is only reprogrammed but the contract is not destroyed ex nunc (similarly already Weitnauer/Dölle, 504; in favour of an ex nunc effect also Vischer/Lausanne, 181). But the contract is not terminated, neither ex nunc nor ex tunc; it remains in existence as long as there are still claims of the parties under it, including claims for returning the goods or the price (in this spirit also Leser/Freiburg, 238 fol). The latter under the Convention are thus contractual claims and not claims for unjust enrichment under national law. The obligations which characterize the contract as a sales contract and which are stipulated in Articles 30 and 53 end or have to be returned in goods or in price so that a situation is achieved which is similar to the original one. This is at the centre of efforts when there is talk of the ex tunc effect of an early termination of the contract. The right to avoid the contract is insofar nearer a right to withdraw from the contract than a right to terminate the contract. On the other hand, a partial avoidance under Article 51, paragraph 1 in regard to non-delivery [page 341] of goods, or under, Article 71 in regard to partial deliveries due, can entail the effects of a termination. In detail, the rule is casuistic, on the one hand, but not very precise in their general formulations, on the other, and leaves important problems unsolved.

[2] [ releases both parties from their obligations under it ]

What matters in particular are the obligations of the seller to deliver the goods and to transfer property in them as well as to hand over the documents (Article 30), and those of the buyer to pay the price and to take delivery of the goods (Article 53). Insofar as they are not fulfilled at the time of the avoidance of the contract (notice to the other party -Article 26), they will not have to be fulfilled later, i.e. the other party could refuse to accept performance.

[3] [ subject to any damages which may be due]

This refers in particular to claims for damages which have arisen in connection with the obligations from which he is now released. Damages, for instance, have to be paid because of delay, even if the contract is later avoided because of that delay and even if damages arise because of avoidance, which in our view come under sentence 2 (note 5). Articles 45 and 61 have already made it clear that claims for damages can be asserted apart from other legal consequences of breaches of contract, thus also apart from avoidance. The term "damages which may be due" is in this context conceived as a bit tight, for the same should apply to obligations to pay penalties under the contract in their different manifestations.

[4] [avoidance does not affect any provision of the contract for the settlement of disputes ]

Hereby a widely recognized rule is repeated (Convention on the Law Applicable to Contracts for the International Sale of Goods, note 6 of Article 5).

The rule does not remedy deficiencies which lead to non-validity of an arbitral clause under national law, including that based on other conventions (Article 4, subpara. (a) - O.R., 57). This is true by analogy of the rights and obligations discussed in note 5.

[5] [ or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract]

This formulation is not very fortunate, for what is referred to here is not only those rights and obligations which are ancillary to an avoidance of the contract, like a respective penalty, but such which are to help solve a conflict between the parties (Tallon/BB, 603 fol) and which, of course, are of special importance when that conflict aggravates so that the contract is terminated early. The Secretariat's Commentary (O.R., 57) makes an attempt to reach this result in that it declares non-exhaustive the two named conditions which continue in existence. This is not convincing because the second condition actually is a description of general features. [page 342]

The surviving conditions can be multifaceted (Leser/Freiburg, 239). They relate to general questions of cooperation between the parties, like agreement of general business terms whose individual elements again have to be examined according to that criterion, agreements on the form of declarations, a general obligation to cooperate, obligations to maintain secrecy, a reservation of title up to restitution, limitation of claims, and the applicable law (on the latter c. Vilus/Dubrovnik, 256). Another group of conditions refers to the modalities of performance, i.e. commercial terms, risk bearing, packaging, procurement of licenses, which can play a role where the return of the goods or of the price is concerned. Of particular practical relevance are those agreements which deal with liability, such as penalties, liquidated damages and damage clauses, including possibilities of exemption and restrictions, the amount of interest, etc.

Concurring with the majority of authors who have expressed themselves on the subject (Honnold, 447; Vilus/Dubrovnik, 256; van der Velden, Koopvertrag, 331), we believe that the provisions regarding the obligation to reserve the goods have to be enumerated here. In part, they even proceed from an avoidance (this refers to certain cases of Article 86, paragraph 2) so that Tallon's doubts (BB, 604) in regard to applicability are not convincing. The remark that it is useless because all legal systems provide for this problem questions the sense of the unification of law all the more so when one takes into consideration the detailed manner in which some of the provisions of Section V are drafted.

[6] [a party who has avoided the contract either wholly or in pary may claim ]

      [6.1] In the case of a partial avoidance this, naturally, applies only insofar as the performance already made is concerned.

      [6.2] It is, therefore, a condition for the claim to return what has been supplied or paid that the right to such return is asserted. This is justified because the parties may wish to leave what has been supplied or paid, respectively, with the other party.

When the contract has been legally avoided, the goods delivered or the price paid have to be returned, subject to sentence 2, within a reasonable period after the receipt of a respective claim (for goods Article 33, subpara. (c) by analogy). Since the subject of the performance is generally available, such period will usually be a short one. Normally, the party who declares the contract avoided will at the same time claim the return of what has been supplied or paid. Where the other party agrees with the avoidance, he will on his part demand the return of what has been supplied or paid when he is interested in it. This might not be the case when the contract is [page 343] avoided because of non-conformity and the seller himself does not know what to do with the goods delivered either.

      [6.3] As regards the modalities of the above-mentioned return, the provisions governing the respective performance can be applied analogously (Schlechtriem, 103; Leser/Freiburg, 342). Where a party is responsible for the breach of contract which gave rise to the avoidance, in our view, the other party may require as damages that he pay the costs he incurs returning what has been supplied or paid.

      [6.4] The right to demand return of the goods delivered or the price paid is irrelevant insofar as the conditions of Article 82, paragraph 2 apply.

[7] [ may claim restitution from the other party of whatever the first party has supplied or paid under the contract]

      [7.1] This is not the case where the other party has not asserted the right to such return (note 6.2.) or where it is irrelevant (note 6.4.).

      [7.2] It is concluded from this rule that the seller cannot make a delivery of substitute goods dependent on whether the buyer returns the delivered goods. A Norwegian proposal, which aimed towards this goal, was rejected by a large majority (O.R., 136). It has to be admitted that the restitution of the replaced goods is insufficiently provided for in the CISG, but it does not necessarily belong in this context. It is problematic that in Article 82 (note 3 of that Article) an aspect of the delivery of substitute goods is taken up in isolation. As to the substance, a concurrent performance is insofar unusual and, from a technical point of view, it would be much more difficult to effect it than the usual transaction goods in exchange for money.

[8] [if both parties are bound to make restitution, they must do so concurrently]

As convincing as this rule may sound, it will be difficult to implement it. Since in international trade concurrence does not mean a direct change from one hand into the other, there can be several forms in which this requirement is to be fulfilled. Article 58 can provide an orientation for it. We believe, however, that in choosing the forms of concurrence, it has to play a role whether a party is liable for a breach of contract. The concrete form to be applied would then have to be chosen to the disadvantage of that party. When the contract is avoided because the seller has delivered grossly non-conforming goods, the buyer may demand that a letter of credit be opened up as a condition for the restitution. Where the avoidance, however, is caused by the buyer who stops paying instalments, the seller will at best be willing to repay the refundable part of the price on the condition of cash against documents, and require the granting of an opportunity to examine the goods to be restituted. This means that arrangements will in any event have to be made between the parties. When they do not succeed, the competent deciding [page 344] organ should proceed according to the principles mentioned above.

The situation, however, is further complicated because it will in most cases not be clear in which amount the performance in money will have to be restituted. In this regard, the CISG offers little help to clarify the situation. Every party will, of course, be interested in having the sum of money to which he will be entitled or which he will have to pay under Article 84 and refundable expenses related to the restitution included in the concurrent restitution as either surcharges or reductions. In general, this has to be considered as justified since restitution relates to the claims as they actually stand. The parties, therefore, have to agree the sums and/or obtain a decision on them before the concurrent restitution takes place. [page 345]

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