Cite as Barrera Graf, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 613-619. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.
Jorge Barrera Graf
1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision
Preservation of the goods.
If the buyer is in delay in taking delivery of the goods or, where payment of the price and delivery of the goods are to be made concurrently, if he fails to pay the price, and the seller is either in possession of the goods or otherwise able to control their disposition, the seller must take such steps as are reasonable in the circumstances to preserve them. He is entitled to retain them until he has been reimbursed his reasonable expenses by the buyer.
1. History of the provision
1.1. - The remote antecedent of this provision is Article 103 of the 1963 Draft. This precursor differed, however, in that: (i) it required that the purchaser be «guilty in delay in accepting the goods»; (ii) in relation to the payment of the purchase price (Article 103 also envisaged the guilt of the purchaser but did not condition the price as does Article 85 of the Convention upon the fact that payment and delivery of the goods were made concurrently); (iii) both Articles 85 and 103 grant the right of retention of the goods to the seller; in Article 103 this right was effective only to the extent that the seller had received from the purchaser the cost of preserving them, while in Article 85 this right is limited to payment of the reasonable expenses incurred by the seller in conserving the goods; and finally (iv) whereas Article 85 imposes upon the seller the obligation to «take such steps as are reasonable in the circumstances to preserve the goods», Article 103 was again silent on this point, stating only that «the seller shall be bound to preserve the goods». [page 613]
1.2. - The immediate predecessor of Article 85 is Article 91 of ULIS, which read:
Where the buyer is in delay in taking delivery of the goods or in paying the price, the seller shall take reasonable steps to preserve the goods; he shall have the right to retain them until he has been reimbursed his reasonable expenses by the buyer.
2. Meaning and purpose of the provision
2.1. - Article 53 of the Convention imposes two obligations on the buyer, to pay the price and to take delivery of the goods. Article 85 contemplates that the buyer is in delay in fulfilling the latter obligation, or else that he fails to pay the price when payment is to be made concurrently with delivery of the goods by the seller. In both these situations of default; the seller who is either in possession of the goods or otherwise able to control their disposition must take measures, reasonable in the circumstances, to preserve them. And he has the right to retain them until the buyer has reimbursed him for the reasonable expenses incurred.
2.2. - The delay in taking delivery of the goods (mora accipiendi) presupposes that the seller has complied with his own obligations with respect to the goods and any documents under the provisions of Articles 31 (in relation to the place of delivery), 33 (with respect to time), and 34 (with respect to documents). If any of the requirements set forth in these four articles is not fulfilled by the seller (or if, the goods have, not been identified) one premise of Article 85 is not satisfied, to wit that the buyer be in delay in taking delivery. In this situation one of the parties may consider that the other party is in default and therefore may avail himself of the remedies referred to him in Articles 45 and 61, but Article 85 does not apply.
2.2.1. - The obligation to the buyer to take delivery of the goods consists, as provided in Article 60, in doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery, and in taking over the goods. Under this article the buyer must make it possible for the seller to fulfil his [page 614] obligation to deliver the goods, and must receive the goods. The assumption of Article 85 implies that the buyer fails to take over the goods, independently of whether he has or has not carried out all those steps expected of him so that the seller could effect delivery.
2.3. - When it has been agreed that the purchase price is to be paid concurrently with delivery of the goods, Article 85 considers the buyer to have failed to pay the price if such payment is not made when the seller is ready to make delivery. In this situation the obligation of the seller to deliver is suspended, and his obligation then becomes to take reasonable measures to preserve the goods. The seller may require the buyer to receive the goods and pay the price (Article 60), along with reimbursement of his reasonable expenses incurred (Article 85 last sentence). Or, the seller may instead declare the contract avoided (Article 64(1)), and claim damages (Article 61(1)(b), (2)).
What happens if it has not been provided that the obligation to pay the purchase price is concurrent with delivery? If it were agreed that the price would be paid prior to delivery and payment is not made, the seller is not obliged to deliver the goods; he may declare the contract avoided (Article 65(1)) or suspend delivery (Article 71).
The purchase price must be paid in the manner specified in Articles 55 and 56, at the place indicated in Article 57 and at the time established in Articles 58 and 59. If any of the requisites of these five articles is not satisfied the situation falls within Article 85: «if [the buyer] fails to pay the price».
2.3.1. - The obligation of the buyer to pay the purchase price «includes taking such steps and complying with such elements as may be required under the contract, or any law or regulations, to enable payment to be made» (Article 54). That is, the buyer has the responsibility of carrying out all those steps contemplated in the contract to make payment of the purchase price (namely, intervention of banks, or payment by a third party, or by check; or the requirements established by the internal laws and regulations to make payment to the seller (situations of exchange control); or authorization to make payment in foreign currency). «[E]nable payment to be made» means the seller or [page 615] the person whom he may designate, or the person to whom he may transfer his right to receive payment, is in fact able to receive the payment.
2.4. - A condition of the obligation of preservation and of the right of retention of the goods that Article 85 imposes or grants upon the seller, is that such goods be in his control or that he is still able to dispose of the goods; in other words, the right of disposition may not have passed to the buyer (pour retenir il faut d'abord tenir). Possession signifies physical control of the goods by the seller; whereas, control of their disposition does not always imply physical possession since it may also occur by virtue of a legal right as, for instance, when the seller delivers the goods to his agent, to a depositary, or to the carrier entrusted with the transportation of the goods to the domicile of the buyer. In international commerce, delivery of the goods by the seller is usually accompanied by delivery of the documents which are issued by the carrier and delivered to the seller who endorses them to the buyer or to the person whom he may designate. Upon doing this the seller loses the right to dispose of the goods. It passes then to the buyer, together with the corresponding risks (Articles 67 and 68).
Article 85 requires physical possession of the goods by the seller or else that the right to dispose of the goods had not been transmitted by him. In such cases, if the buyer refuses to take delivery the seller must take such steps as are reasonable in the circumstances to preserve the goods and has the right to retain them until he has been reimbursed his reasonable expenses by the buyer. The following examples taken from the Secretariat's Commentary (Official Records, I, 62), serve to illustrate the scope of the rule.
Example A: The contract provided that Buyer was to take delivery of the goods at Seller's warehouse during the month of October. Seller made delivery on October 1 by placing goods at Buyer's disposal. On November 1, Buyer, was in breach of this obligation to take delivery and the risk of loss passed to him. On the same day Seller shifted the goods to a portion of the warehouse less appropriate for the storage of such goods. On November 15 Buyer took delivery of the goods which at that time were damaged because of the inadequacies of the portion of the [page 616] warehouse to which they had been shifted. In spite of the passing of the risk of loss to Buyer on November 1, Seller is liable for damage to the goods which occurred between. November 1 and November 15 by reason of the breach of his obligation to preserve them.
Example B: The contract called for delivery on C.I.F. terms and Buyer wrongfully dishonoured the bill of exchange when it was presented to him. As a result, the bill of lading and other documents relating to the goods were not handed over to the Buyer. In this case Seller, who is in a position to control the disposition of the goods through his possession of the bill of lading, is obliged to preserve the goods when they are discharged at the port of destination.
2.5. - The obligation of the seller to preserve the goods corresponds to the buyer's duty in case of non-conforming goods which he intends to reject (Article 88(1)) (HONNOLD, Uniform Law, 132 states that Articles 85 and 88 together with Article 77 set forth a general principle of the Convention: to mitigate the loss resulting of the breach). The duty to preserve imposes on the seller an obligation foreign to the contract of sale (see Articles 30 and 35). It is in fact a legal consequence of default by the buyer in obligations vested in him (see Articles 53 and 60). If default occurs and the seller has not yet surrendered control over the goods, that is, if he retained possession or in any other manner is able to dispose of the goods, he is obliged to care for and preserve them. Nevertheless, it follows by analogy from Article 61(3) that here the seller is not deprived of any of the remedies granted to him by Articles 62 to 65. The seller maintains his rights of action against the buyer to fulfil his obligations to pay the price and to take delivery of the goods (Article 61), or to rescind the contract (Article 64), or to seek damages according to the provisions of Articles 71 to 78.
The seller has the right to retain the goods until he has obtained from the buyer reimbursement of his reasonable expenses incurred for the care and preservation of the goods. These rights of lien or retention and to reimbursement of expenses incurred do not have their origin in the contract of sale but rather in the law. They have the effect of guaranteeing the seller that the [page 617] buyer will pay the agreed upon price as well as the damages that his default may have caused the seller, together with the «reasonable expenses» incurred in the care and preservation of the goods.
Retention, therefore, is a right granted to the seller in Article 85 («he is entitled to retain»). He may elect not to exercise it, or he may exercise it by depositing the goods in the warehouse of a third party (Article 87), or by selling the retained goods (whose care and preservation are his responsibility) subject to the conditions specified in Article 88.
2.6. - The right of retention of the goods by the seller (and by the buyer under Article 86(1) and (2)) exists until he is reimbursed by the other party for the reasonable expenses incurred. What these may be, depends on the specific situations, but they may include the costs of unloading the goods from the vehicle in which they were transported and their transfer to the site of storage, the cost of storage (at the seller's own premises or the warehouse of a third party (Article 87)), expenses of preservation of the goods, avoiding deterioration (e.g., refrigeration, feeding of cattle, avoidance of humidity, light, sun), or the expenses of sale in the situations provided for in Article 88. The criterion for determining the acceptability and the amount of the expenses which may be claimed is reasonableness. That is, as provided in Article 8(3), account must be taken of what a reasonable person would have done in the given circumstances, and in accordance with the negotiations between and the conduct of the parties, custom and the behaviour of the parties (on the «reasonableness» test in general see also commentary on Article 7, supra).
3. Problems concerning the provision
3.1. - The Convention does not provide, nor did ULIS, that the right of retention ceases along with the obligation to care for and preserve the goods, if the buyer provides adequate guarantee embracing all of the expenses incurred by the seller in the preservation of the goods, in addition to the purchase price if this is still due. [page 618]
The granting of a guarantee would tend to diminish the expenses and therefore Article 77 could be invoked. The seller who claims a violation of the contract by the buyer must adopt all reasonable measures in the circumstances to mitigate the loss including loss of profit, the amount of which, duly computed, would be included in the amount of the guarantee issued by the buyer. This solution might be supported by Article 7(1) which imposes the observance of good faith in international trade. [page 619]