Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 267-270. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§ 244 Destruction of contract rights involves hardship and economic waste. Suppose that the seller has manufactured a complex machine to meet the buyer’s special requirements and there is a minor or correctable defect in the goods: May the buyer "avoid" the contract? In the Commentary to Article 25, supra at §181, we saw that in most situations "avoidance of the contract" (Arts. 49, 51, 64) must be based on a "fundamental breach." "Avoidance" may also be prevented by curing a defect in performance. The Convention has two "cure" provisions. Article 37 permits cure until the date for delivery; Article 48, infra at §292, in limited circumstances authorizes cure after the date for delivery.
"If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention."
§ 245 A. Types of Non-Conformity Subject to Cure
As we have seen, Article 34, §220, in language similar to Article 37, gives the seller the right to cure any lack of conformity in documents.
Article 37 applies to various types of non-conformity in the goods. For example, the seller may supply missing goods, including a missing part [page 267] of a machine. Non-conformity of the goods may be cured by "replacement" or by "remedying" the lack of conformity by repairing a defective part. None of these measures is available when cure would "cause the buyer unreasonable inconvenience or unreasonable expense." For example, the buyer should be able to reject a proposal to repair a machine in its place in the buyer’s assembly line when that would seriously interfere with assembly operations; in these circumstances only a prompt replacement of the machine might be permitted. Of course, when the buyer has immediately reshipped an early delivery, cure under Article 37 would usually be impractical; however, under these circumstances it may be possible to cure pursuant to Article 48, §292 infra.
"Date for Delivery". Contracts often provide a period (e.g., "during June") within which the seller may deliver. Suppose the seller delivers on June 10: Does Article 37 permit cure (e.g.) on June 20 if (as Article 37 requires) this "does not cause the buyer unreasonable inconvenience or unreasonable expense"? The answer should be Yes: In Article 37 "date for delivery" refers to the date after which delivery becomes a breach of contract—in this case, June 30. The more strict rules of Article 48 governing cure "even after the date for delivery," with liability for damages, refer to cure after (e.g.) June 30. There must, of course, be no gap in the periods covered by these two interlocking provisions.
There are situations in addition to those specified in Articles 34, 37 or 48 in which cure may be useful. In connection with Article 41, §226 infra, attention is drawn to the awkward problems that may arise in an international sale when a third party claims an ownership interest in the goods. Similar problems may arise under Article 42, §§267–270 infra, from a third-party claim based on intellectual property such as a patent, copyright or trademark. When the buyer notifies the seller of the claim (Art. 43(a)) the seller may be able promptly to solve the problem by satisfying an outstanding lien or other security interest, by settling with a patent or trademark claimant, or by obtaining an injunction against pressing a groundless claim.
There is no indication that providing for cure of defective documents (Art. 34) and non-conforming goods (Arts. 37 and 48) was intended to foreclose the seller’s opportunity to use this efficient remedy in analogous situations. If such a gap had been suggested during the legislative process it is unlikely that the framers would have chosen either to (1) reject [page 268] the possibility of cure or (2) remit the problem to the vagaries of domestic law. See the provision in Article 7(2) for settling matters "in conformity with the general principles on which [the Convention] is based...", §§96–102, supra. This approach is supported not only by the provision for cure in Articles 34, 37 and 48, but also by the emphasis in the Convention’s remedial provisions on avoiding the waste that results from needless destruction of the contract. See Art. 25, §§181–186: definition of "fundamental breach"; Arts. 49 and 64, §§301-308, 353-356: avoidance of contract by buyer and seller; Art. 77, §§416-419; mitigation of damages; and Chapter VI, Preservation of the goods, Arts. 85–88, §§453-457.
§246 B. Effect of Cure on Avoidance
The above-mentioned provision concerning unreasonable inconvenience or expense is the only restriction on the seller’s right to cure defects before the date for delivery. The right to cure extends to serious deficiencies or defects that (in the absence of cure) would constitute a "fundamental breach." Consequently, unless it is clear that the seller will not cure, the buyer may not effectively avoid the contract until the date for delivery has passed. (This question will be explored more fully in connection with Article 48 in the more complex situation in which the buyer, after the date for delivery, notifies the buyer of avoidance. See §296, infra.)
Does the right to "deliver goods in replacement of any nonconforming goods" depend on perfect conformity of the second delivery? This question [page 269] may arise in any of the various types of cure envisaged by Article 37; the basic issue may be illustrated as follows:
Example 37A. A contract called for the delivery by June 1 of 100 bags of No. 1 white, granulated sugar. On May 15 Seller delivered to Buyer, a sugar dealer, 100 bags of sugar that had been so contaminated by mildew that it could not be resold. Buyer immediately notified Seller; on May 25 Seller tendered to Buyer a second delivery of 100 bags in exchange for the 100 bags delivered 10 days earlier. In the second delivery, 99 bags complied fully with the contract; one bag graded No. 2 and could be resold by Buyer but at a 15% discount. Buyer refused to accept any of the sugar tendered on May 25 on the ground that it did not comply perfectly with the contract.
On the assumption that the non-conformity of the one bag was not a "fundamental" breach Buyer could not have rejected the entire shipment ("avoided the contract" under Art. 49) if this had been the initial tender. See Art. 51(2) §317, infra. On the other hand, if the May 25 delivery could have been rejected (the contract "avoided") as an initial tender there would be no doubt as to Buyer’s right to reject such goods when delivered as a "cure."
The language of Article 37 and its legislative history do not clearly answer the question whether the cure must be perfect. However, the sweeping language of the Article allowing the seller to remedy "any" deficiency or lack of conformity unless this causes "unreasonable" inconvenience or expense, and the last sentence of the Article preserving the buyer’s right to claim damages, indicate that perfection with respect to the second tender may not be required.
Any inconvenience in receiving the May 15 delivery and in exchanging that shipment for the May 20 delivery and any burden of disposing of (or rejecting) the one bag of No. 2 sugar will be relevant in determining whether the cure will "cause the buyer unreasonable inconvenience or unreasonable expense." But if this restriction does not apply, it seems that Article 37 empowers Seller to make the second delivery described in Example 37A. Of course, Buyer has the right to recover damages for any expense in making the exchange and for the non-conformity of the one bag of sugar. See also: Schlechtriem, Com. (1998) 295–299 (Schwenzer).[page 270]
FOOTNOTES: Chapter on Article 37
1. This article is the same as Art. 35 of the 1978 Draft and, in substance, is the same as ULIS 37. See WG III YB 81, S-G, IV YB 46, WG V1 YB 65–66, Docy. Hist. 98, 123, 143–144; UNCITRAL (1977) VIII YB 38–39, Docy. Hist. 331–332; O.R., 33–34, 309–340, 105–106, 159, 208, Docy. Hist. 423–424, 530–531, 677–678, 718, 743.
2. See accord, Enderlein, Rights and Obligations of the Seller. Dubrovnik Lectures 133, 164–165.
3. Under Art. 52(1) the buyer need not take delivery prior to the contract date. Cf. Art. 86(2). The seller’s right to cure pursuant to Art. 37 also restricts avoidance under Art. 72 for anticipatory breach, since Art. 72 provides for avoidance only when "it is clear" that a party will commit a fundamental breach. This restriction would be satisfied by a refusal to cure; on the effect of a seller’s failure to respond to a buyer’s inquiry as to whether he would cure see Art. 7, supra at §85. See also Art. 48, infra at §296.
4. But cf. Bianca in B-B Commentary §2.6, p. 293.
5. The significance of an offer by the seller to make a price adjustment to compensate for the buyer’s damages is discussed under Art. 25, supra at §185.