Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 218-228. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§191 A. Introduction
Article 28 brings to the foreground the basic distinction between (I) the obligation (or duty) that one party (D) owes to the other party (C) and (II) the remedy given to C for D’s breach. The Convention is built around this distinction. The seller’s obligations to the buyer are set forth in Chapter II Sections I & II (arts. 31–44); remedies given the buyer for the seller’s breach of its obligations appear in Section III (Arts. 45–52). Following the same structure, the buyer’s obligations to the seller are set forth in Chapter III, Sections I & II (Arts. 53–60); remedies given the seller for the buyer’s breach of its obligations appear in Section II (Arts. 61–65). Supplemental rules on remedies applicable to both parties are stated in Chapter V (Arts. 71–84).
Examination of the above provisions will show that here, as elsewhere in the law, stating D’s duties to C is simpler than stating C’s remedies when D fails to perform. In most situations there is only one right way for D to perform its contract; on the other hand, D’s deviations from the contract can occur in a wide variety of circumstances and degrees of harm to C and therefore call for alternative remedial provisions: avoidance of the contract (Arts. 25, 49, 64, 72), damages (Arts. 50, 74–78), and judicial "requirement" of performance (Arts. 28, 46, 62), a type of remedy that in "common law" may be implemented by a judicial decree ordering "specific" performance.
The scope of the remedy "requiring" (specific) performance was one of the most stubborn issues encountered in the preparation of the uniform rules. Article 28—a compromise that was developed in 1964 at the Hague—relaxes general rules on coerced performance that appear later in the Convention; before examining the compromise we need to look quickly at the general rules which Article 28 modifies. (Art. 28 is quoted infra at §194.)[page 218]
§ 192 B. The Convention’s Basic Rules on Requiring Performance
The Convention’s system of remedies includes general rules that a party in breach may be compelled to perform its obligations. When the seller deviates from any of his contractual duties (Art. 45(1)), "the buyer may require performance by the seller of his obligations" (Art. 46(1)). Similarly, when the buyer fails to perform any of his obligations, "the seller may require the buyer to pay the price, take delivery or perform his other obligations..." (Art. 62).
The Convention does not specify the measures that courts shall employ to enforce remedies. Remedial provisions that establish claims for damages (e.g. Arts. 74–78) do not specify measures for (e.g.) the seizure and sale of the defendant’s assets to satisfy a money judgment. Similarly, the Convention does not specify what measures courts shall employ to "require" the performance of the contract. All such matters, without detailed discussion, are necessarily left to the general procedures of the forum.
In framing the Convention, Article 28 was accepted as a legacy from 1964 Hague Sales Convention (Art. VII(1), ULIS 16). In preparing the 1964 Convention, without discussing the extent and means whereby various civil law procedural systems coerced performance, deference to procedural rules of the forum was usually regarded as a concession to the special procedural approach of legal systems based on English law. However, comparative law studies have shown that on this point the supposed contrast between common law and civil law and the homogeneity of "civil law" procedures are not as great as had been supposed.
It is true that systems that stem from English law have special restrictions and procedures that other systems do not share. Competition between the "common-law" courts and the separate Courts of Chancery (or [page 219] "Equity") led to a compromise whereby the "Equity" courts would not intervene unless the remedy "at law" was not adequate. The "Equity" courts, drawing on their ecclesiastical background, issued their decisions in the form of "decrees" ordering a defendant to do (or to refrain from doing) specified acts; to enforce these decrees the court could commit a recalcitrant defendant to prison for "contempt of court" until he obeyed the court’s decree.
Other legal systems did not inherit these procedures for enforcement or the restrictions on "requiring" (specific) performance. However, comparative studies show that there are significant differences among civil law approaches to enforcing contractual promises. Thus, in some civil law systems "requiring" performance in some situations means that substitute performance will be purchased at the expense of the debtor—a remedy that to common-law eyes resembles an action concretely to fix the defendant’s damages.
As we shall see, the divergent domestic approaches to requiring performance raise important questions concerning the application of Article 28 of the Convention.
Article 46(1), in providing that the buyer "may require performance by the seller of his obligations," immediately provides exceptions from this general rule: When goods have been delivered that do not conform with the contract, the buyer "may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract" (Art. 46(2)), and may require the seller to repair the goods "unless this is unreasonable, having regard to all the circumstances" (Art. 46(3)).[page 220] On the other hand, the rule of Article 62 that the seller may "require" the buyer to perform his obligations does not include any exceptions; it is unclear that the seller’s right (Art. 62) to "require the buyer to pay the price" calls for remedial measures that are different from the enforcement of money judgments such as the right "to claim damages" (Arts. 45(1)(b), 61(1)(b)). See the discussion of Article 62, §345 infra. The relationship between Article 28 and the specific rules on requiring performance in Articles 46(2) and (3) is discussed at §285.1, infra.
Exceptions applicable to both parties do result indirectly from rules in Articles 85, 86, and 88 that, in some circumstances, place the burden of disposing of unwanted goods on the party who is in a better position to perform this function—even when this lightens the duties of a party in breach. For example, when "the buyer is in delay in taking delivery" the seller may be required not only to take steps "to preserve" the goods (Art. 85) but also, if the goods "are subject to rapid deterioration or their preservation would involve unreasonable expense," the seller "must take reasonable measures to sell them" (Art. 88(2)). In practical effect, these provisions limit the power of the seller under Article 62 to "require the buyer to pay the price" for the significant feature of the remedy of price recovery (as contrasted with damages) is to force the buyer to take possession of the goods.
The power to compel performance may also be curtailed by Article 77 which states that "a party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss...." In examining this provision, infra at §416, we shall need to consider questions such as these: If a buyer notifies the seller that he cannot use the goods he has ordered may the seller thereafter lay out labor and materials in manufacturing goods to the buyer’s specifications or incur heavy expenses by shipping the goods to the buyer? If not, the seller’s remedy must be damages rather than an action for the full price.
Finally, if a party may choose to compel performance after a change in the market he may be in a position to speculate at the defendant’s expense. This abuse may be controlled by application of the above requirement of mitigation, construed (as Article 7(1) requires) in order to promote the "observance of good faith in international trade" or by concluding that the action to "require performance" was not taken with the required promptness. See Arts. 49(2), 64(2) §§306–307, 355, infra.[page 221]
In many settings "requiring" performance involves more than procedure; important functional and practical consequences are at stake.
When a buyer has received the goods and fails to pay for them there will usually be little or no practical difference between "requiring" the buyer to pay the price (Art. 62) and recovering damages for breach (Arts. 61(b), 74, 78). However, when the buyer has not received the goods, requiring the buyer to pay the full price (see §193 supra) in effect compels the buyer to continue with the transaction. Sometimes such coerced performance involves heavy costs for the buyer without corresponding gains to the seller.
Example 28A. Seller, a Stockholm furniture manufacturer, and Buyer, a furniture distributor in Buenos Aires, made a contract for Seller to ship 500 of its standard coffee-tables to Buyer. Before Seller shipped, Buyer learned that customers in Buyer’s area did not care for these items. Buyer telexed these facts to Seller, requested cancellation of the shipment, and offered to compensate Seller for any loss on the transaction. Seller replied, "Shipping as ordered. Require you to pay the agreed price".
As we shall note (§199, infra), Seller’s reaction seems abnormal. Seller, the manufacturer, is regularly engaged in selling this item in large quantities and can resell the item more efficiently than Buyer. Moreover, continuing with the transaction requires substantial costs in shipping the goods to an area where they are not wanted. Unnecessary waste may also result from forcing the consummation of a transaction (as contrasted with payment of damages) when a seller encounters production difficulties that fall short of exemption under Art. 79, §§423–435, infra, cf. force majeure. In this and similar situations the substantial transportation costs common in international sales can augment the waste involved in forcing the completion of an unwanted transaction.[page 222]
§ 194 C. General Concession to the Domestic Law: Article 28
Even with the restrictions just mentioned, the Convention grants specific performance on a wider scale than does the common law, which works from the premise that performance will be compelled only when damages do not provide an adequate remedy. (See infra at §196.) In response to the differences among domestic approaches to "requiring" performance, the Convention includes the following:
"If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention."
Under Article 28, rules of domestic law on requiring performance can prevail over the rules of the Convention. In multistate transactions, which jurisdiction will supply the applicable rule?
Questions that fall outside the scope of the Convention normally would be governed by the domestic rules of the jurisdiction that is selected by principles of private international law. See, e.g., Arts. 4 and 7(2), supra at §§61 and 85. However, Article 28 refers the court to "its own law in respect of similar contracts of sale not governed by this Convention." Does this language invoke the domestic law of the forum on requiring performance or does it call for the rules applicable under rules of private international law?
The question may be illustrated as follows: When a domestic sale in State A is litigated in State F, assume that the forum in State F would consider [page 223] that a request for specific performance was a matter of "substance" to be decided in accordance with the proper law of the contract—the law of State A. Bearing in mind this rule of State F, suppose that State F provides the forum for an international sale between parties in States A and F, both of which have adhered to the Convention. If the plaintiff demands specific performance, does Article 28 refer to the whole law of State F, including its rules of private international law that might invoke the rules on specific performance of State A? The diplomatic conference of 1980 did not focus its attention on the question but an answer can be found in the legislative history of the comparable provision in the 1964 Hague Convention.
Article 28 of the 1980 Convention was based on substantially identical provisions in the 1964 Sales Convention. The 1964 Convention was clearly understood to invoke the rules on specific performance of the forum. The 1956 Draft, on which this action at the 1964 Conference was based, provided (Art. 27) that the buyer’s right to specific performance depended on whether this was "possible and permitted by the municipal law of the Court in which the action is brought." Article 72 used similar language with respect to price recovery by the seller. The Special Commission that prepared this draft, in responding to comments by governments, emphasized that the draft referred to lex fori—the rules in force in the country "where performance is sought." The virtual identity on this point of the 1964 and 1980 Conventions indicates that the reference in Article 28 to what the court "would do...under it’s own law" refers, as indeed the language suggests, to the domestic rules of the forum.
Article 28 states that a court "is not bound to enter a judgment for specific performance unless the court would do so under its own law." The phrase "is not bound" indicates that a court that would not "require" performance under its own law is free either to "require" performance or to apply other remedies provided by the Convention such as awarding damages under Article 74, §§403–408, infra. Professor Kastely suggests (n. 5, supra, 639–640) that such a court may "require performance" to effectuate [page 224] the reasonable expectations of the foreign party (Arts. 6, 8) or to promote uniformity in the application of the Convention. (Cf. §233 supra). Response to these suggestions, although not required by the Convention, would be consistent with the view that domestic law should be sensitive to the special needs of international transactions. See C. Schmitthoff, Selected Essays on International Trade Law 25–29, and passim (1988).
As we shall see more fully in connection with Art. 46, infra, Article 28 permits deviation only from rules of the Convention that "require performance of any obligation of the other party" and does not affect the Convention’s restrictions on specific performance. See §193 supra, and §§282–285, infra.
The most that can be done here is to provide a brief introduction to some of the domestic rules on specific performance; references to more thorough studies can be found in the notes.
§ 197 (a) Common Law and the UCC
Buyer’s Action to Compel Delivery of Goods. The (U.K.) Sale of Goods Act (1893), widely followed in the common law world, provides that a court "if it thinks fit" may enter a judgment or decree for the specific performance of contracts "to deliver specific or ascertained goods." It is difficult to conclude that goods are "specific or ascertained" when a seller promises to manufacture or procure (or set aside) generic goods and fails to do so. The Ontario Law Reform Commission found this rule inadequate and proposed that these technical restrictions be removed, but that specific performance remain discretionary.
Seller’s Action to Recover the Price. When the buyer has not received and accepted the goods, giving the seller the right to recover the full price (as contrasted with damages) provides, in substance, for the specific performance of the contract. The provisions of the (U.K.) Sale of Goods Act on recovery of the price are complicated by the "property" concept and [page 225] in other respects are technical and inadequate; the Ontario Law Reform Commission proposed substantial revision.
Buyer’s Action to Compel Delivery. The UCC (unlike the SGA, supra) does not restrict specific performance to contracts that call for "specific or ascertained" goods. UCC 2-716 addresses two remedies for the recovery of goods: (1) Specific performance, which may lead to a coercive decree enforcible by punishment for contempt and (2) Replevin (in some jurisdictions called "detinue" or "claim and delivery") which authorizes a sheriff to seize the goods and deliver them to the plaintiff:
"(1) Specific performance may be decreed where the goods are unique or in other proper circumstances.
"(2) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
"(3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered."
N.B. The UCC Sales Article (2A) is in a late stage of revision.
Neither remedy is automatically available for breach of contract but the right to decree specific performance in "proper circumstances" is sufficiently flexible to permit courts to grant this remedy in cases of need. Whether specific performance should be available as a matter of course recently has become a subject for debate. The most significant argument for limiting the remedy is that this permits a party who is in breach of contract to escape from overly-rigid advance planning and to reallocate resources for maximum productivity.
Seller’s Action to Recover the Price. As has been mentioned, seller’s recovery of the full price for goods the buyer has not received, in effect, compels full performance of the contract. The UCC (§2-709) of course calls for the recovery of the full price when the buyer has "accepted" the goods. However, the Code’s restrained approach to this remedy is illustrated by the provision of UCC 2-709(1)(b) that the seller may recover [page 226] the price "of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing."
UCC 2-716 and 2-709 will be applicable when a party to a sale governed by the Convention sues in court in the United States to compel delivery of the goods or to recover the full price for goods the buyer has not received.
§ 199 (b) Civil Law Systems
Articles 46 and 62 of the Convention provide that each party may "require performance" by the other. These broad rules reflected the delegates’ understanding of the remedies provided by some civil law systems. It is not feasible to probe the extent to which these general rules accurately reflect the actual operation of those systems; it must suffice to refer to studies that suggest that the concession to the common law provided by Article 28 of the Convention may also permit civil law tribunals to continue a nuanced and realistic approach of their domestic law on the extent to which courts will "require performance" of contracts. In view of the uncertainties inherent in this delicate compromise, it is fortunate that attempts to compel performance play a minor role in the life of commerce. Legal action to coerce performance takes time even when the breach is admitted. But the defendant often will be able to present evidence and argument to justify non-performance by alleging a breach by the plaintiff or impediments that provide an excuse. (See Art. 79, infra.) During the protracted course of litigation the buyer’s commercial needs for the goods are not met; and a seller who insists on compelling acceptance of goods must hold the goods until the buyer can be [page 227] compelled to pay the full price. Usually it is more efficient for an aggrieved buyer promptly to purchase substitute goods or for an aggrieved seller to resell rejected goods; in this manner productive activity can continue while an aggrieved party pursues a claim for damages. In both the common law and civil law worlds, the parties are more interested in efficiency than in legal theory. In civil law settings (as at common law) remedies to coerce performance are seldom employed even in domestic commerce. One might be tempted to dismiss this area as a non-problem except for the (possibly remote) possibility that in a setting of commercial ill-will a party might be tempted to demand a remedy that is wasteful to the other party as a negotiating weapon to exact a settlement out of proportion to the loss resulting from the breach. See Art. 7(1) ("good faith") §§94–95, supra.
Articles 46 and 62 of the Convention provide that each party may "require performance" by the other. These broad rules reflected the delegates’ understanding of the remedies provided by some civil law systems. It is not feasible to probe the extent to which these general rules accurately reflect the actual operation of those systems; it must suffice to refer to studies that suggest that the concession to the common law provided by Article 28 of the Convention may also permit civil law tribunals to continue a nuanced and realistic approach of their domestic law on the extent to which courts will "require performance" of contracts.
In view of the uncertainties inherent in this delicate compromise, it is fortunate that attempts to compel performance play a minor role in the life of commerce. Legal action to coerce performance takes time even when the breach is admitted. But the defendant often will be able to present evidence and argument to justify non-performance by alleging a breach by the plaintiff or impediments that provide an excuse. (See Art. 79, infra.) During the protracted course of litigation the buyer’s commercial needs for the goods are not met; and a seller who insists on compelling acceptance of goods must hold the goods until the buyer can be [page 227] compelled to pay the full price. Usually it is more efficient for an aggrieved buyer promptly to purchase substitute goods or for an aggrieved seller to resell rejected goods; in this manner productive activity can continue while an aggrieved party pursues a claim for damages. In both the common law and civil law worlds, the parties are more interested in efficiency than in legal theory. In civil law settings (as at common law) remedies to coerce performance are seldom employed even in domestic commerce.
One might be tempted to dismiss this area as a non-problem except for the (possibly remote) possibility that in a setting of commercial ill-will a party might be tempted to demand a remedy that is wasteful to the other party as a negotiating weapon to exact a settlement out of proportion to the loss resulting from the breach. See Art. 7(1) ("good faith") §§94–95, supra.
Article 28, properly understood in the setting of domestic procedural systems, can mitigate the appearance of rigidity of the Convention’s general rules on "requiring performance". Certainly it would be wrong to assume that there are only two rules: (1) Rigid rules of the civil law world, embodied in Articles 46(1) and 62, that call for coerced performance; (2) A more flexible approach under Article 28 applicable only to actions before "common-law" courts. The flexibility permitted under Article 28 is not confined to the procedural approach of one legal system. As Professor Treitel has shown, remedial law in many legal systems is less rigid than the "require performance" rule of the Convention. In sum, domestic rules mitigating the harshness and the dangers of abuse from demands for coerced performance are available in any forum where the Convention is in force.[page 228]
FOOTNOTES: Chapter on Article 28
1. For the 1964 background see Records 1964 Conf., Vol. II, 27, 33 (Comm. Rep. on 1956 Draft); Rabel, The Draft of a Uniform Law (ULIS) in UNIFICATION OF LAW 57, 63 (1948); Honnold, Uniform Law for International Sales, 107 U. Pa. L. Rev. 209, 327–328 (1959).
For the 1980 Convention see WG 2d Sess. (1970), IIYB 61–62, Docy. Hist. 67; WG 6th Sess. (1975), VIYB 54, Docy. Hist. 245; Sec. Comm., O.R. 27, Docy. Hist. 417; 1st Cee, O.R. 304, Docy. Hist. 525–526 (comment by delegate of Greece that draft article 26, (CISG 28) would be useful in a civil law setting).
2. See F. Maitland, Equity 1–10 (1909) reprinted in J. Honnold, The Life of the Law 30–37 (1964).
3. Compare UCC2-706 (resale by seller fixing damages) and UCC2-706 (damages fixed by buyer’s purchase of substitute goods) with comparable provisions in CISG 75.
For requiring performance in various legal systems see Treitel, Remedies (Int. Enc.) §9; Treitel, Remedies (1988) Ch III, 43–74. See also: Zweigert & Kötz II (1987), Ch. 12, part II, p. 163–169. Under German procedure (§887 CCP), where an act need not be performed by the defendant personally the court may authorize a third party to perform the act at the expense of the debtor (vertretbar); Zweigert & Kötz, id., p. 165: "French law generally admits the issuance of judgments for performance in kind but enforces them in a very grudging manner". But see id. 165–169: the astreinte (daily monetary penalties).
4. See Art. 7, supra at §95, Art. 28, infra at §193, Art. 46, infra at §279, Art. 77, infra at §416. Zweigert & Kötz II (1978) 162–163 (rules of German law controlling such abuses).
5. See Lando in B-B Commentary 234–238. Farnsworth, Damages and Specific Relief, AJCL UNCITRAL Symposium, 247, 250–251, makes a broader argument for limiting specific performance based on the economic efficiency of the parties’ freedom to reallocate their resources; R. Posner, Economic Analysis of Law, 105, 117 (3d ed. 1986). Contra: Kastely, The Right to Require Performance in International Sales, 63 Wash. L. Rev. 607, 630–633 (1988); Schwartz, The Case for Specific Performance, 89 Yale L. J. 271 (1979); Friedmann, The Efficient Breach Fallacy, 18 J. Leg. Stud. 1 (1989).
6. Art. 28 is the same as Art. 26 of the 1978 Draft, with a small but significant change: "could" was changed to "would." With this change, Art. 28 corresponds to the 1964 Hague Convention on Sales. See Art. VII(1) of the Convention and Art. 16 of the annexed uniform law (ULIS). Provisions in ULIS 25 and 61(2) that further restricted specific performance do not appear in the 1980 Convention. See Arts. 46 and 62, infra at §§279 and 345.
7. Rules of private intentional law have varied as to whether the right to specific performance should be regarded as "substance" or "procedure." Cf. Restatement, Second of Conflict of Laws §§130, 131 (1969); Dicey & Morris 1175–78 (1980 10th ed.).
8. At the 1980 Conference one representative remarked that the court’s "own law" under Article 28 included the rules of private international law. The Conference was not debating this issue; little weight can be given to the fact there was no reply to this comment. See Art. 7, supra at §91.
9. II Records 1964 Conf. 11, 18 (Secs. 27 and 72 of the 1956 Draft), 179 (Comments by the Commission that prepared the draft). Accord (ULIS): Zweigert & Drobnig, 29 Rabels Z 146, 165. On the legislative history, Riese, 29 id. 1, 28–29. For additional reasons for reference to the domestic law of the forum and not to its choice of law rules see Kastely, 63 Wash. L. Rev. 607, 637–638 (1988).
10. (U.K.) SGA (1893) 52 on this point was not modified by SGA (1979) 52. Ont. L. Ref. Com. II Sale 436–444. See also Atiyah 437, Benjamin §§1417–1421 (modifications in 1979), Treitel, Contract 785.
11. (U.K.) SGA (1893) 49; Ont. L. Ref. Com. II Sales 415–418. Cf. Atiyah 365–371; Benjamin §§1257, 1777, 1901.
12. Farnsworth, Damages and Specific Relief, 27 Am. J. Comp. L. 247 (1979). Contra: Kastely, n. 5, supra; Schwartz, The Case for Specific Performance, 89 Yale L. J. 271 (1979). Atiyah, Freedom of Contract 111, 131 refers to the uneconomic effect at early common law of powerful enforcement of future "estates" in land.
13. UCC 2–709 authorizes price recovery in other limited circumstances. See White & Summers §§7–3—7–5.
14. The right to require performance is said to be an axiom of the German legal system. Sweigert & Kötz II (1987) 159. The German Civil Code in the very first article of the provisions on obligations (§241) seems to reflect such an axiom: "The effect of an obligation is that a creditor is entitled to claim performance from the debtor." Zweigert in Comp. Sales (I.C.L.Q.) 1.5.
15. Treitel, Remedies (Int. Enc.) §§10, 12–14, 18; Treitel, Remedies 51 et seq.; Dawson, Specific Performance in France and Germany, 57 Mich. L. Rev. 495, 523–525 (France), 530 (Germany) 1959; Von Mehren, A Comparative View of the Remedies Available to a Party Aggrieved by Non-performance of a Contractual Obligation in Festschrift für Pan J. Zepos, 434, 444, 450, 457 (Athens: Katsikalis, 1973.); Hellner, The Draft of a New Swedish Sale of Goods Act, 22 Scan. Stud. 55, 66 (1978) (buyer may not require specific performance that would impose sacrifices which are disproportionate to the buyer’s interest in obtaining performance).
16. See Treitel, Remedies (1988) Ch. III, 47 et seq.