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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 88 [Sale of the preserved goods]

[TEXT OF THE UNIFORM LAW]

(1) A party who is bound to preserve the goods in accordance with article 85 or 86 may sell them by any appropriate means [1] if there has been an unreasonable delay [2] by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation, provided that reasonable notice of the intention to sell has been given to the other party [3].

(2) If the goods are subject to rapid deterioration [4] or their preservation would involve unreasonable expense [5], a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them [6]. To the extent possible he must give notice to the other party of his intention to sell [7].

(3) A party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them [8]. He must account to the other party for the balance [9].

[WORDS AND PHRASES, CONCEPTS

1. a party who is bound to preserve the goods in accordance with article 85 or article 86 may sell them by any appropriate means
2. if there has been an unreasonable delay by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation
3. provided that reasonable notice of the intention to sell has been given to the other party
4. if the goods are subject to rapid deterioration
5. or their preservation would involve unreasonable expense
6. a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them
7. to the extent possible he must give notice to the other party of his intention to sell
8. a party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them
9. he must account to the other party for the balance ]

[COMMENTARY]

[1] [a party who is bound to preserve the goods in accordance with article 85 or article 86 may sell them by any appropriate means ]

      [1.1] The resale to which paragraph 1 refers is to prevent the disturbed contractual relationship from being blocked permanently. The resale is not bound to particular requirements, it only has to be done by any appropriate means. It is in our view inappropriate to measure the appropriateness against the yardstick of national laws, as does the Secretariat's Commentary (O.R., 63) and also a number of subsequent authors (Schlechtriem, 105; Barrera Graf/BB, 628). We believe that the wording of the provision clearly indicates that there shall be exemption from particular requirements which the national laws indeed provide for in the event of resale, e.g. resale by certain persons, by specific procedure, Eberstein/Dölle, 595 fol. As appropriate will have to be regarded here as what a reasonable person of the same kind as the party obligated to preserve the goods would consider as appropriate in the same circumstances. It will thus have to be a method which promises appropriate proceeds. Appropriateness follows more from commercial than legal criteria. The resale can be made by the obligated party and not only by a neutral third party (of a similar view Eberstein/Dölle, 594; Vischer/Lausanne, 184). [page 359]

      [1.2] Whether or not the resale is justified can be inferred from the CISG. The consequences which follow where the party was not entitled to resell the goods, in particular to what extent an acquisition in good faith was possible, will be guided by the national law as determined by the conflict-of-law rules (O.R., 63) (even where the CISG, which does not cover such cases, applies to the resale, too).

[2] [ by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation ]

      [2.1] The right to resell the goods will arise for the seller when the buyer has unduly delayed the taking possession of the goods, the payment of the price, or the cost of preservation.

Where the right to reject the goods is based on that the buyer has avoided the contract and the price has already been paid in full or in part, the buyer may make the restitution of the goods dependent on the repayment of the price. This applies also, in our view, when he has taken possession of the goods on behalf of the seller (Article 86, paragraph 2). When the right to reject the goods has emerged because the buyer has required delivery of substitute goods, he may make the restitution dependent on the delivery of such substitute goods. One can assume that the seller being the party in breach has the obligation to perform first (note 7.2. of Article 81). The buyer will have the right to resell the goods when the seller causes an undue delay in the repayment of the price, its tendering, and/or the substitute performance, by way of analogy as the equivalent of the price.

The mentioned conditions may be fulfilled partly or completely.

      [2.2] Where the right is clear and undisputed the required measures have to be performed in the orderly course of transaction. And a delay is undue when it exceeds this time frame plus a Nachfrist. In the event of disputes between the parties it will have to be delayed, however, until the most essential arguments have been exchanged and the confrontation has come to a deadlock, but not until it is decided.

      [2.3] Whether or not resale leads to performance, according to the situation this is only possible when the seller is the one to resell the goods, would have to be deduced from the applicable subsidiary law whose possible, additional requirements will then have to taken into account. [page 360]

[3] [ provided that reasonable notice of the intention to sell has been given to the other party]

      [3.1] This additional condition in regard to the resale is to point out to the other party the consequences of its conduct, and give him a chance to remedy the delay. Less important seems to us, the aspect of giving him an opportunity to send a representative to attend the sale (but see O.R., 400) because this would presuppose a public sale, which under the CISG seldom takes place.

Given this situation, it will now have to be determined what is to be understood by "reasonable notice". We believe that from this wording, requirements can be deduced in regard to the time and content of the notice. It has to be given so early that the other party, in reacting speedily, still can remedy his fault. As the discussion at the diplomatic, conference (O.R., 400 fol) has proved, it is possible for the notice to be given before the conditions for the resale are fulfilled (also Schlechtriem, 105); in that event, it is to be conceived as a warning for possible conduct. The party entitled to resell the goods should not have to wait twice. In regard of the content, it is relevant, above all, to indicate how long the entitled party wants to wait. The notice is not bound to any form requirement and need not be received (Article 27).

      [3.2] Where the obligation to give notice is not fulfilled, the resale is not justified. The consequences of that transaction will follow from the applicable law for which the CISG can only create the facts (of a different opinion Eberstein/Dölle, 594). There might by claims for damages in the relationship between the parties when the resale is considered as valid even though it was not justified.

      [3.3] An objection by the other party does not hinder the resale when the conditions are fulfilled (Eberstein/Dölle, 594), but the arguments voiced can make it clear whether this was indeed the case.

[4] [if the goods are subject to rapid deterioration ]

This condition is fulfilled in the case of easily perishable goods. But the view is held that a rapid loss of the economic value of the goods can also be subsumed hereunder (Schlechtriem, 105, who unjustly relies on the Secretariat's Commentary , O.R., 63, because the latter is based on another text). We are of the opinion that from the debates in the plenary of the diplomatic conference (O.R., 227 fol) which led to the deletion of the word "loss", the conclusion can rightly be drawn that there is no obligation to sell in that event (Vischer/Lallsanne, 184). It may often be difficult for the obligated party to foresee a price decline, certainly less in the case of highly fashionable bathing clothes at the end of the season than in the case of raw materials, so that he cannot be burdened by this additional risk. All the more so, since the remaining conditions which have led to the situation of resale will frequently be disputable. It would be appropriate, however, to substantiate a right of the owner to sell [page 361] the goods. This can to a certain extent be done within the framework of paragraph 1 interpreting correspondingly the undue delay and the obligation to give notice. The seller who actually should have the greatest interest in it, could then rapidly resell the goods. He could also authorize the buyer to do so or the latter could act accordingly in the presumed interest of the seller. But this would be legal constructions that lie outside the CISG.

[5] [ or their preservation would involve unreasonable expense ]

This can be the case where the feeding and care of living animals, cooling, air-conditioning, etc. are required. This rule should, in our view, apply in the cases of Article 86, paragraph 2, not only when it becomes apparent that the preservation of the goods would involve excessive costs after possession of the goods has been acquired, as believes Barrera Graf (BB, 631), but when the relevant goods are tendered and the remaining conditions are fulfilled (see also note 10.3. of Article 86). This, however, presupposes chances to sell the goods.

[6] [ a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them]

The conditions commented on in paragraphs 4 and 5 characterize the urgent necessity to sell, which makes it an emergency sale. The party who has the responsibility to preserve the goods is obligated not necessarily to carry out such a sale, but to make the relevant efforts for it. His obligation is not geared toward being successful but toward engaging in the respective measures.

The seller will have to be required to include the goods in his customary sales transactions attributing them their due rank; the buyer also when he is a trader in the branch. Where the buyer acts as the final purchaser and lacks sales opportunities of his own, he must probably be regarded as having the obligation to engage a third party. If he is to act himself, he cannot be measured by the yardstick used for a professional businessman when the relevant branch is not his usual branch.

When the owner of the goods breaches this obligation and when, for this reason, there is no sale or only one on very unfavourable terms, i.e. dumping, he has the obligation to pay damages to the other party.

As to the consequences of an emergency sale for which the conditions have not been fulfilled, compare note 1.2.

[7] [to the extent possible he must give notice to the other party of his intention to sell]

The possibility of giving notice has arisen when its function (note 3) can be fulfilled before the sale has been performed. [page 362]

[8] [a party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them]

If the party has stored the goods himself or sold them, he can demand reasonable payment for them (Huber, 517, therefore rightly considers the accounting for a resale more favourable than for a substitute transaction; Schlechtriem, 105) just as he can charge services provided to him by third parties.

[9] [he must account to the other party for the balance]

This does in no way exclude that the balance is set-off against other claims as Barrera Graf (BB, 631) apparently believes, even when or because the setting off is regulated neither in this place nor elsewhere in the CISG and therefore has to be taken from national law. Since the obligation to preserve the goods presupposes that the other party has committed a breach of contract, there will regularly be such claims. Payment of at least part of the balance will, however, be made for instance when the buyer, who himself has not paid the price yet, has sold the goods. [page 363]

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