Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 351-352. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§323 The Convention at many points responds to the fact that consummating an international sale calls for cooperation; each party must take steps that are related to corresponding steps by the other. The present article reflects the importance of preliminary steps by the buyer that are necessary for timely payment of the price, such as arranging for the issuance of a letter of credit and applying for governmental authorization to transmit funds to the seller.
"The buyer’s obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made."
The above steps are a part of the buyer’s "obligation to pay the price." This language is important. Under Article 63(1), infra at §350, the seller "may fix an additional period of time of reasonable length for performance by the buyer of his obligations"—the seller’s corollary of the buyer’s Nachfrist notice (Art. 47(1), supra at §288). Under Article 64(1)(b), infra at §353, if the buyer does not "perform his obligation to pay the price" within the additional period fixed by the seller’s notice the seller may declare the contract avoided. Consequently, if the seller gives the buyer an appropriate notice providing a final additional period for taking one of the required steps for price payment such as obtaining the issuance of a letter of credit by a specified date (Art. 54), avoidance by [page 351] the seller need not be based on proof that the buyer’s failure to comply is a "fundamental breach" (Arts. 25 and 64 (1)(a)).
In addition, the failure to take one of the required steps "to enable payment to be made" (Art. 54) itself constitutes a breach of contract (Arts. 53 and 54). If the seller can show that this breach is "fundamental" he may declare the contract avoided (Arts. 25 and 64(1)(a)) without first giving a Nachfrist notice fixing "an additional period of time."
Article 71, infra at §385, authorizes a party under some circumstances to suspend performance if "it becomes apparent that the other party will not perform a substantial part of his obligations." This authorization applies even when the other party has not yet committed a breach of contract; consequently the grounds for suspension are circumscribed. (See the discussion under Art. 71, infra at §385.) Under Article 71, "a serious deficiency" in the buyer’s "ability to perform" may, in some circumstances, authorize the seller to "suspend" his own performance. In contrast, as we have seen, the buyer’s failure to take one of the steps required by Article 54 is a breach; the seller need not rely on the "suspension" provisions of Article 71 and may employ the remedies provided for breach of contract—the Nachfrist-avoidance remedy (Arts. 63(1) and 64(1)(b)) and avoidance for fundamental breach (Arts. 25 and 64(1)(a)). These remedies respond to the expenses a seller may need to incur in preparation for delivery (e.g., producing, procuring or packing the goods)—expenses that, as a practical matter, the seller may not be able to recoup or recover when the buyer is derelict in making arrangements for payment.
Decision: Steps to Assure Payment. RUSS. FED. Arb., Trib. of Internat. Comm, 123/1992, 17 October 1995. S delivered equipment to B, who failed to pay because of bank’s lack of convertible currency. Held: B was obligated to pay since, inter alia, under Art. 54 B should have taken measures to assure payment. CLOUT 142, UNILEX D. 1995–28.1. (See also cases under Arts. 64(1)(b), 71, 72, and 73: B’s failure to provide security for payment, by bank guarantee or letter of credit, and Art. 79 (claims for excuse because of lack of convertible currency). See: Schlechtriem, Com. (1998) 456–459 (Hager).[page 352]
FOOTNOTES: Chapter on Article 54
1. E.g., Arts. 19(2), 21(2), 32(2) & (3), 48(2), 58(3), 60(a), 65, 71, 73(2), 79(4), and 85–88. It may add a bit of romance to commercial law to suggest that the parties’ inter-related steps resemble old-fashioned ballroom dancing.
2. This article is the same as Art. 50 of the 1978 Draft Convention. ULIS 69 is similar but somewhat more detailed.
3. Accord: Huber, 43 RablsZ 413, 511 (1979). Cf. Hellner, Dubrovnik Lectures 352–353.