Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 313-317. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§ 287 A. Relationship to Rules on Avoidance of Contract
As we shall see more fully in examining Article 49, infra at §301, that article provides two grounds for avoiding the contract—(1) when the seller commits a "fundamental breach of contract" (Art. 25, supra at §181) and (2) when the seller fails to deliver the goods "within the additional period of time fixed by the buyer in accordance with paragraph (1) of Article 47...." The provision for fixing an additional final period for delivery is as follows:
"(1) The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations.
"(2) Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance."
§ 288 B. Notice as a Step Toward Avoidance
Article 47(1), read in isolation, seems to empower the buyer to fix an additional final period for the seller to perform any of its obligations. However, the only teeth for the provision are those provided by Article 49(1)(b): "(b) in case of non-delivery, if the seller does not deliver the goods ..." within the time fixed by the buyer under Article 47, the buyer may declare the contract avoided. The notice-avoidance procedure thus applies only to non-delivery.[page 313]
In UNCITRAL and at the Diplomatic Conference proposals were made to extend the notice-avoidance procedure to cases where the seller delivers goods that fail to conform to the contract. UNCITRAL rejected these proposals on the ground that the notice-avoidance procedure could be abused to convert a trivial breach into a ground for avoidance. For instance, a buyer who wishes to escape from his contractual obligations—e.g., after a price-collapse—might notify the seller that it has a specified time to correct specified minor defects in the goods although the distance separating the parties makes it impractical for the seller to comply with the notice. This understanding of the decisions taken by UNCITRAL was confirmed at the Diplomatic Conference by the rejection of proposals to broaden the scope of notice-avoidance to include non-conformity; in addition, to avoid any possible misunderstanding, the Diplomatic Conference added the words "in case of non-delivery" at the beginning of the notice-avoidance provision in Article 49(1)(b).
What type of notice will provide a basis for avoidance of the contract?
Example 47A. A contract called for Seller to manufacture and deliver a complex stamping machine to Buyer by June 1. Seller was late in making delivery and on June 2 Buyer wired Seller: "We are anxious to receive machine. Hope very much that it can arrive by July 1." Seller delivered the machine on July 3, but Buyer refused the machine and declared that the contract was avoided for failure to comply with the July 1 delivery date set forth in its wire of June 2. Buyer was not prepared to show that the delay in delivery from June 1 to July 3 constituted a "fundamental breach" (Art. 25) and relied solely on the notice-avoidance rules of Articles 47(1) and 49(1)(b).[page 314]
A notice like that sent by Buyer on June 2 should not be held to "fix an additional period of time...for performance," and should not provide the basis of avoidance under Article 49(1)(b). Such a notice gives no warning that a deadline has been "fixed." Indeed, a communication that invites performance without making clear that a final deadline has been set could mislead the seller into an attempt at substantial performance. An effective notice under Article 47(1) should make clear that the additional period sets a fixed and final limit on the date for delivery: E.g., "The last date when we can accept delivery will be July 1."
Suppose that the buyer sends the seller the following ominous notice: "Your delivery is late. We shall be forced to reject the goods and avoid the contract if they do not arrive promptly." This notice does not comply with Article 47(1) since it does not "fix" a "period." The consequences of the notice avoidance remedy are serious; unless the buyer sends a notice of the clarity required by Article 47(1) avoidance must be based on fundamental breach.
The notice under Article 47(1) must fix an additional period "of reasonable length." The Convention uses flexible language; different periods of time could be "reasonable." Within this leeway the choice is given to the buyer—the innocent party who faces breach by the seller. Indeed, respect must be given to the buyer’s discretion in setting the "reasonable" period if the notice-avoidance procedure is to serve its purpose—reducing uncertainty concerning the right to avoid the contract. (The risk of delay or loss of the notice is discussed under Article 63 at §352, n. 2, infra.)
In determining whether the period the buyer fixes is "reasonable" the dominant consideration is the buyer’s need for delivery of the goods without further delay. (Impediments that prevent or delay performance are dealt with in Article 79, infra §§423, 435: temporary impediment.) On the other hand, since the seller’s failure to comply with the period fixed by the buyer empowers the buyer to avoid the contract (Art. 49(1)(a), §305 infra), the reasonableness of this period should be considered in the light of the basic policy decision, embodied in Articles 25, 49 and 64, that contracts should not be avoided on insubstantial grounds.[page 315]
Relation between "Nachfrist" Notice and Avoidance: GER. OLG Celle. 20 U 76/94, 24 May 1995. S delivered only 3 of 6 contracted items of printing machinery. After the expiration date for delivery of these items, B fixed an additional period of eleven days for delivery of the missing machines. On S’s failure to comply with this "Nachfrist" notice made under Art. 47(1), B declared the balance of the contract avoided, pursuant to Art. 49(1)(b). The court sustained B’s action. CLOUT 136, UNILEX D.1995-16. See: Schlechtriem, Com. (1998) 394–400 (Huber).
Query: Have some courts overlooked the independence of the two grounds for avoidance under Article 49? E.g.: (I) Avoidance under Article 49(1)(a) for fundamental breach, as defined in Article 25, supra; and (II) Avoidance under Article 49(1)(b) for failure to comply with the "Nachfrist" notice provided in Article 47(1).
§290 C. The Role of Notice-Avoidance: Analogies in Domestic Law
Domestic legal systems have not developed clear or uniform rules on whether a delay in performance empowers the other party to reject performance. (The issue is expressed in many different ways—rescission, repudiation, cancellation, avoidance.) Sometimes the rule is put in terms of whether time is "of the essence." The (U.K.) Sale of Goods Act states that unless a different intention appears, the time of payment is not "of the essence"; as concerns delay in delivery: "Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract."
The notice-avoidance approach of Articles 47 and 49(1)(b) of the Convention was inspired by a provision of German law that, on default by one party:
If performance is not made in due time, the person who gave the above notice (often termed a Nachfrist) may "withdraw from the contract."[page 316]
Other aspects of the German Nachfrist were not employed in the Convention. As has been noted, under the Convention when the seller commits a breach that is fundamental the buyer may declare the contract avoided (Art. 49(1)(b)) without giving the seller an "additional period of time of reasonable length." However, the opportunity by advance notice to clarify the situation for both parties has received widespread international approval; the basic utility of this legal tool was never seriously questioned in the UNCITRAL proceeding or at the Diplomatic Conference.
§291 D. Obligation to Accept Requested Performance
Paragraph (2) of Article 47 reflects a principle that might have "gone without saying": A party may not refuse performance that he has invited. The other party can be expected to rely on the invitation; domestic law would bind a party to accept the requested performance by doctrines such as waiver, estoppel or election. Paragraph (2) avoids the uncertainties of recourse to domestic law. (In addition, paragraph (2) may provide an instance of a "general principle" that, by virtue of Art. 7, could be applicable in other similar situations. See supra at §96.)
Paragraph (2) also provides that the buyer’s demand that the seller perform within a fixed period does not relieve the seller of responsibility for damage resulting from the late performance, including damages resulting from delay during the "additional period" fixed in the notice. This result is consistent with the general rule of Article 45(2), supra at §275, that preserves the buyer’s right to recover damages when (for example) he compels performance under Article 46. (The scope of the "election" principle was discussed under Article 45 supra at §277.) Thus, a notice under Article 47(1) can foreclose an argument that the buyer has agreed to a modification of the contract or has waived or otherwise forfeited a claim for damages resulting from late delivery.
These modest consequences based solely on Article 47 apply generally to a notice fixing an additional period for the seller’s performance "of his obligations". On the other hand, the more serious consequence of avoidance under Article 49(1)(b) based on an Article 47 notice is restricted to cases of "non-delivery" (§§288, 305).[page 317]
FOOTNOTES: Chapter on Article 47
1. Art. 47 is the same as Art. 43 of the 1978 Draft Convention. Cf. ULIS 27(2), 31(2), 44(2), 45, 51.
2. The Art. 47 notice followed by avoidance under Art. 49(1)(b) can be used with respect to a failure to deliver only a part of the goods. See Art. 51, infra at §314. (Under Art. 51(2) avoidance of the entire contract based on delivery of only a part may only be based on "fundamental breach.")
3. WG: VI YB 69–71, 77, Docy. Hist. 147–148, 155; UNCITRAL: VIII YB 46, Docy. Hist. 339; DIP. CONF.: O.R. 9–10, 78–79 41 (para. 8), 354–56, 427, 116–17, 160; Docy. Hist. 386–87, 399–340, 431 (para. 8), 575–77, 648, 688–89, 719. This decision rejected the contrary approach embodied in ULIS 44(2). Some domestic legal systems have developed the concept that the delivery of goods basically different from those required under the contract was a delivery of a "something else"— aliud —and hence equivalent to complete non-delivery. This concept has proved difficult to apply. Fortunately, delivery of totally different goods is a delivery of non-conforming goods (Art. 35) and, of course, is a fundamental breach empowering the buyer to avoid the contract under Art. 49(1)(a), §304, infra . See also §256.1, supra (rejection of aliud concept).
4. Quebec Civ. Code Rev’n. Obligations: A notice putting a debtor "in default" need not indicate "the right [the creditor] intends to exercise" (Art. 247, pp. 320–321), but if the creditor "wishes to avail himself of resolution " he "must so advise his debtor." See also German (F.R.G.) Civil Code 326, quoted infra at §290.
5. Secretariat Commentary Art. 43, para 7, O.R. 39, Docy. Hist. 429; VIII YB 44, Docy. Hist. 337.
6. For analysis of factors bearing on the reasonableness of the time see Dölle, Kommentar (Huber), Art. 26 at 34, p. 235. On respect for decisions of the aggrieved party Cf. Farnsworth, Contracts §12.12, p. 867.
7. (U.K.) SGA (1893) 10 (1). For the case law see Benjamin §588; Atiyah 88. The (U.S.A.) UCC is discussed under Art. 49, infra at §301.
8. German (F.R.G.) Civil Code 326. Treitel, Remedies (Int. Enc.) §§149–151, on which the present discussions relies, helpfully discusses the above provision and similar provisions in other legal systems—See also: Treitel, Remedies (1988) Ch. IX, pp. 318–410; Zweigert & Kötz (1987) 187–188; Treitel, Remedies (1988) 327–334, 338–339 (Nachfrist notice under CISG). The (U.S.A.) UCC does not explicitly establish an additional time notice comparable to Nachfrist, but the official Comments to UCC 2-309 commend the use of such notices to add certainty to the relationship between the parties. (Comments 3 and 5.)
Pace Law School Institute of International Commercial Law - Last updated February 25, 2005
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