Cite as Barrera Graf, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 627-632. 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
(1) A party who is bound to preserve the goods in accordance with articles 85 or 86 may sell them by any appropriate means 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, provided that reasonable notice of the intention to sell has been given to the other party.
(2) If the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, a party who is bound to preserve the goods in accordance with articles 85 or 86 must take reasonable measures to sell them. To the extent possible he must give notice to the other party of his intention to sell.
(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. He must account to the other party for the balance.
1. History of the provision
1.1. - This article is equivalent to Articles 94(1), (2) and 95 of ULIS. It departs, however, from these two provisions in the following.
1.1.1. - Article 94(1) of ULIS provided that the notice to be given to the other party of the intention to sell, be «due», and not as Article 88(1) of the Convention requires, be «reasonable».
1.1.2. - Article 94(2) of ULIS imposed on the party selling the goods the obligation to transmit to the other party the balance of the proceeds of sale, whereas Article 88(3) of the [page 627] Convention requires only that the former «account to the other party for the balance».
1.1.3. - Article 95 of ULIS granted the right to sell the goods not only in cases where the latter were subject to rapid deterioration or where their preservation would involve unreasonable expenses, as Article 88(2) of the Convention provides, but also in a case of loss of the goods.
2. Meaning and purpose of the provision
2.1. - The sale may be effected «by any appropriate means» (Article 88(1)) that is, he who wishes to sell must do so pursuant to a method recognized by the domestic law applicable in the place of sale, and which the selling party considers the most convenient and adequate in relation not only to the nature of the goods but also to the interests and rights of the contracting parties. According to the Secretariat's Commentary (Official Records, I, 63):
The Convention does not specify what are appropriate means because conditions vary in different countries. To determine whether the means used are appropriate, reference should be made to the means required for sales under similar circumstances under the law of the country where the sale takes place.
2.2. - The right to sell is granted in Article 88(1) to the party obliged to preserve the goods, that is, to the party who has physical possession of them (the seller, in the case of Article 85, and the buyer in the case of Article 86(1)), or has the right to dispose of them (Article 86(2)).
This right of sale is conditioned by Article 88(1) upon the other party's unreasonable delay in doing any of the following: a) taking possession of the goods; b) accepting their return; c) paying the price; and d) paying the expenses of preservation. Also, in any of the foregoing situations, the party wishing to sell must give reasonable notice to the other party of his intention to do so.
2.3. - The obligation to take delivery of the goods is vested in the buyer (Articles 53 and 60). A delay in taking delivery grants the [page 628] seller who wishes to fulfil his obligation to deliver pursuant to the terms of the contract of sale and the provisions of the Convention the right to retain the goods and imposes the obligation to preserve them (Article 85). When the delay by the buyer in receiving the goods in unreasonable, the seller may sell the goods by any appropriate means according to Article 88(1). (On the buyer's delay in receiving the goods, see commentary on Article 85, supra, §§ 2.2., 2.2.1.).
2.4. - Delay in accepting return of the goods occurs when the buyer who rejects or intends to reject the goods has received them (Article 86(1)), or the goods have been placed at his disposal (Article (2)), and he offers to return the goods to the seller, who delays unreasonably in taking possession of them. The buyer may then sell them as provided in Article 88(1).
2.5. - The right to sell the goods in the case of delay by the buyer in payment of the price, which was not provided for in the UNCITRAL Draft Convention (Article 77) (nor was it in art. 94 of ULIS), was added at the Vienna Conference (Official Records, II, 140). It only applies in the case referred to in Article 85 (see commentary on Article 85 supra, § 2.3.). The right to sell the goods if the buyer delays unreasonably in taking delivery of the goods and paying the purchase price, is granted by Article 88(1).
2.6. - Expenses of preservation fall on the contracting party who has the right of retention of the goods; that is, on the seller in the situation provided for by Article 85, and on the buyer in the situation covered by Article 86.
2.7. - The final part of Article 88(1) requires the party wishing to sell to give the other party reasonable notice of his intention. The sale is thus conditioned upon the giving of reasonable notice.
Such notice should be given in accordance with the circumstances and in a manner that a reasonable person would do (Article 8(3)), so that the person to whom the notice is addressed knows or ought to have known of the intent to sell, and may take steps to avoid the sale or to be present (directly or through a person that the appoints). The Convention does not require that [page 629] such notice be given in writing, but merely «by means appropriate under the circumstances». Given the general principle laid down in Article 27, sale may proceed after dispatch of appropriate notice.
2.8. - Article 88(2) obliges the contracting party who has the right to retain the goods according to Articles 85 and 86, to take reasonable measures to sell the goods if they are subject to rapid deterioration or if their preservation would involve unreasonable expense.
A difference exists between paragraph (1) which grants the right to sell, and paragraph (2) which imposes the duty to take reasonable measures to sell the goods. This difference is due to the fact that the goods are subject to, or are in the process of rapid deterioration.
The two precedents of Article 88(2), Article 95 of ULIS and 77(2) of the UNCITRAL Draft Convention extend this obligation to the loss as well as the deterioration of the goods. The obligation to sell the goods is also more clearly established in Articles 94 and 95 of ULIS.
The Vienna Conference sought to dlstinguish the two situations of loss and rapid deterioration. The Secretariat of UNCITRAL stated:
The concept of "loss" is not limited to physical deterioration or loss of the goods but includes situations in which the goods threaten to decline rapidly in value because of changes in the market (Secretariat's Commentary, Official Records, I, 63).
Yet, when this article was discussed, the reference to loss was eliminated and only the concept of «rapid deterioration» remained (Official Records, II, 227). By interpreting the concept of rapid deterioration broadly, Article 88(2) also applies in the case of loss.
Regarding the «reasonable efforts» to be made to sell the goods, it was stated at the Vienna Conference:
This is so because goods which are subject to loss or rapid deterioration may be difficult or impossible to sell
If the party bound to sell the goods under this article does not do so, he is liable for any loss or deterioration arising out of his failure to act. (Secretariat's Commentary, Official Records, I, 63).
2.9. - The obligation to take reasonable measures to sell the goods referred to in Article 88(2) also includes situations where a party is bound to preserve the goods under Articles 85 or 86 but their preservation would involve unreasonable expense. Article 86(2) excuses the buyer from taking possession of the goods if unreasonable inconvenience or expenses are involved; but it may well be that he acquires possession of the goods and only later ascertains that this preservation would involve excessive expenses. In this situation, Article 88(2) applies.
2.10. - The party who sells has according to Article 88(3), the right to retain from the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them. He must account to the other party for the balance.
This principle refers to the party who sells, which according to Articles 85 and 86, would be the seller in the situation provided for in Article 85, and the buyer in the cases covered by Article 86(1), (2), since they are the parties who have the obligation to preserve the goods by reason of physical possession, or the right to control their disposition pursuant to Article 85.
The right to retain the price obtained from the sale refers only to the «costs»; and then only to the costs incurred in the preservation of the goods (e.g., those of care and feeding of cattle, those of storage in the case covered by Article 87), and costs connected with the sale (e.g., fees or commissions paid to a broker who handles the sale, the freight paid to the carrier when the goods must be shipped to the place of sale or to the domicile of the purchaser; notices and public offers of the goods which may be made; the judicial or administrative expenses incident to the proceedings of sale).
Hence, this right of retention does not include any amount of the purchase price which the buyer in the original contract of sale has not yet paid, that is, the buyer in the situation envisaged in Article 85. This means that if the seller is the one who sells, he must, as provided in Article 88(3), account to the other party for the balance. [page 631]
3. Problems concerning the provision
3.1. - According to Article 88(2), the party who wishes to sell must give notice to the other party of such intention, to the extent possible. The purpose of this is to permit the other party to avoid the sale or to be present at it to protect his rights and establish that the best possible price was paid. Contrary to Article 88(1), it is not provided that the notice be reasonable, but there is no justification for this omission. Paragraph (2) should therefore also be interpreted to require reasonable notice.
As to the formula of «to the extent possible» (which does not exclude the reasonableness of the notice), the Secretariat's Commentary stated:
The obligation to give notice of the intent to sell exists only to the extent to which such notice is possible. If the goods are rapidly deteriorating, there may be no sufficient time to give notice prior to sale (Official Records, I, 63).
Nevertheless, although this formula may be justified by reason of rapid deterioration of the goods, it is difficult to justify it when the intent to sell is based upon the preservation of the goods imposing unreasonable expenses. In this case, the obligation to give reasonable notice of the intent to sell should be absolute and unconditional. [page 632]