Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 213-215 Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§ 187 The discussion of Article 25 referred to the right of either party to avoid the contract in the circumstances defined in Articles 49, 51, 64, 72, and 73. Article 26, applicable to all of the provisions on avoidance, marks one of the significant advances of the 1980 Convention over the 1964 Hague Convention.
"A declaration of avoidance of the contract is effective only if made by notice to the other party."
§ 187.1 A. Departure from ULIS; Need for Notification
At various points ULIS provided a remedy called ipso facto avoidance; this type of avoidance (unlike a second type of avoidance which required a "declaration") occurred automatically; the party who relied on this remedy need not have notified the other (ULIS 25, 26(1)). Consequently, a party might be led to perform in ignorance of the other party’s decision to refuse the performance.
At the 1964 Hague Conference attempts were made to eliminate ipso facto avoidance but this concept was such an integral part of the structure of the draft that the necessary changes were not feasible.
In the UNCITRAL proceedings, it was possible to remove the complex and elusive doctrine of ipso facto avoidance; the result was the above simple rule of Article 26. Requiring that notice be given of a remedy as drastic as avoidance is strongly supported by domestic law. See (U.S.A.) UCC 2-602(1) (notice of rejection), 2-608(2) (notice of revocation of acceptance); Treitel, Remedies (Int. Enc.) §148 (requirement in [page 213] French law of a formal notice—sommation—even when the contract states that it shall terminate by operation of law).
A careful student of the 1964 Sales Convention has noted that ipso facto avoidance was useful to prevent a party from claiming specific performance after a price rise and thereby speculate at the other party’s expense. Such conduct is clearly intolerable, but ipso facto avoidance proved to be an awkward and overbroad remedy; resources in the 1980 Convention for dealing with the problem of taking advantage of market changes after a delay are explored elsewhere in this Commentary. See Art. 7, supra at §95, Art. 28, infra at §193, Art. 46, infra at §285, Art. 77, infra at §416.
§187.2 B. The Notice: Content, Transmission
What must a notice say to constitute an effective "declaration of avoidance" under Article 26? As we shall see, under Article 39(1), §§254–259, a buyer who wishes "to rely on a lack of conformity of the goods" must "give notice to the seller specifying the lack of conformity". A notice specifying a "lack of conformity" in accordance with Article 39 would not, without more, constitute a "declaration of avoidance" under Article 26. A buyer who specifies nonconformity (Art. 39) may, and often does, choose to retain the goods and claim a reduction in the price or other damages to compensate for the deficiency. Avoidance of the contract is a different and much more drastic remedy. In the setting of the tender or delivery of defective goods "avoidance of the contract" by the buyer means that the buyer will not accept or keep the goods, and that the seller has the responsibility to take over their disposition. A buyer’s declaration of avoidance, to be effective under Article 26, must inform the seller that the buyer will not accept or keep the goods. Conversely, a seller’s declaration of avoidance must inform the buyer that the seller will not deliver the goods or, if the goods have been delivered, that [page 214] the seller demands their return. See Article 81(2) and 84, §§439–444, 450–452, infra.
The notice required by Article 26 is effective if it is properly "dispatched" pursuant to Article 27. As we shall see, the principle underlying this rule and its exceptions is that transmission risks should fall on the party in breach rather than on an aggrieved party who, in this setting, is exercising a right to avoid the contract.
Notice Adequate: (1) ARB. ICC (Paris), 8128/1995. S did not deliver an installment of goods within the time specified in contract. B, in writing, demanded that S specify when S would deliver; if S failed to do so the contract would be avoided. S did not give the assurance requested. B’s communication, above, was an effective avoidance of the contract. (Other issues in this case, e.g., interest under Art. 78, are noted infra.) UNILEX D. 1995–34. (2) See also GER. LG Berlin 52 S 247/94, 15 September 1994. UNILEX 1994–22.1.
Notice Not Adequate: (1) GER. AG Zweibrücken, 1 C 216/92, 14 October 1992. B’s notice in the alternative was not effective. UNILEX D. 1992–23. (2) GER. LG Frankfurt a.M., 3/11 O 3/91, 16 September 1991. CLOUT 6, UNILEX 1991-8. See: Schlechtriem, Com. (1998) 188–192.
Article 26 does not require that the notice be given in writing but to avoid dispute a prompt written confirmation of an oral declaration seems advisable.
Requirement of Writing. Eight States, including China, made declarations under Article 96 rejecting provisions of CISG that allowed effective notification in form other than writing—e.g. Articles 11, 12, 96. (See lists of adherences and reservations in Appendix.) Note, on Chinese rules, Tanner, 16 JLC 166 & n.65 (1996).[page 215]
FOOTNOTES: Chapter on Article 26
1. This article is the same as Art. 24 of the 1978 Draft Convention. As is explained more fully infra, ULIS had no comparable notice requirement.
2. II Records, 1964 Conference 236; Honnold, ULIS: The Hague Convention of 1964, 30 Law & Contemp. Pr. 326, 348 (1965).
3. For the studies and discussion on which this decision was based see Rep. S-G. "Ipso Facto Avoidance in ULIS". III Yearbook 41–46, Docy. Hist. 83–88; W/G/I paras. 92–104, I Yearbook 184–185, Docy. Hist.22–23.
4. Hellner, Ipso Facto Avoidance, in Weitnauer Festgabe 85.
5. General rules on the effects of avoidance are set forth in Articles 81–84, §§439–444, infra. For the situation where rejected goods face rapid deterioration or spoilage, a buyer who has avoided the contract may have the responsibility to take reasonable measures to prevent loss. See Arts. 86–88, §§455–457, infra.
6. Limits on the time for avoidance are set in Articles 49(2) (avoidance by buyer) and 64(2) (avoidance by seller). See §§306–308, 355–356, infra. A buyer who fails to give the notice "specifying the nature of the lack of conformity" required by Article 39(1) may "lose the right to rely" on the lack of conformity, and thereby lose the right to avoid the contract for non-conformity of the goods. See §§259–261, infra.
7. See §190, infra; UNCITRAL, Tenth Session (1977), VIII Yearbook 32, para. 98–99, 101, Docy. Hist. 325.
8. For unsuccessful attempts to require that the notice be in writing see UNCITRAL, Eighth Session (1977), VIII Yearbook 32, para. 102, Docy. Hist. 325; Date-Bah, B-B Commentary 224, para. 3.1.