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Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 509-512. Reproduced with permission of the publisher, Kluwer Law International, The Hague.

Article 82

Buyer's Inability to Return Goods in Same Condition

A. The Factual Setting for Article 82
B. Effect of Article 82 Deterioration of Goods
      (1) The General Rule Barring Avoidance or Compulsory Substitution
      (2) Exceptions to the General Rule
            (a) "Act or omission"
            (b) "Avoidance" When the Goods Are Gone

§445 A. The Factual Setting for Article 82

The present article addresses the following situation: a buyer receives goods which he discovers are subject to serious defects and elects to avoid the contract (Art. 49(1)(a)) or to require the seller to deliver substitute goods (Art. 46(2)). In either event, the buyer is obliged to return the goods he has received (Art. 81(2)). But suppose that before the buyer avoids the contract, a part (or even all) of the goods have been damaged or have disappeared. Paragraph (1) of Article 82 states the general rule that the two remedies mentioned above are not available if the buyer cannot return the goods "substantially in the condition in which he received them." Paragraph (2) states three exceptions that make deep inroads on this general rule.[1]

§446 B. Effect of Article 82 Deterioration of Goods

Article 82 [2]

"(1) The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them.

"(2) The preceding paragraph does not apply:

(a) If the impossibility of making restitution of the goods or of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission;[page 509]

(b) if the goods or part of the goods have perished or deteriorated as a result of the examination provided for in article 38; or

(c) if the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity."

§447 (1) The General Rule Barring Avoidance or Compulsory Substitution

Paragraph (1) embodies a principle, generally accepted in domestic law, that a transaction may only be "avoided" if assets received under the transaction can be returned in substantially the same condition.[3] This restriction does not lead to serious injustice to an aggrieved buyer:  Even if the buyer may not avoid the contract or require the seller to deliver substitute goods the buyer may recover damages resulting from the seller’s breach of contract (Arts. 74–76).

§ 448 (2) Exceptions to the General Rule

Paragraph (2) is designed to preserve the remedies of buyers who have received seriously defective goods even when the buyer can not return the goods in "substantially" the same condition. Under subparagraph (2)(b) the buyer’s remedies are preserved if a major part (or even all) of the goods have perished as a result of the examination required by Article 38. Sub-paragraph (2)(c) preserves the buyer’s remedies when the buyer has sold or consumed the goods—a result that may seem surprising since the buyer may have received benefits from the goods. However, under Article 84(2), infra at §450, the buyer "must account to the seller" for the benefits it has received.

Discussion of Article 82(2)(a) has been deferred since it is more complex. As we have seen, under Article 82(1) the buyer may not avoid the contract or require the seller to deliver substitute goods if the buyer cannot return the goods in "substantially" the same condition. Under Article 82(2)(a) this restriction on the buyer’s remedies does not apply when the change in the condition of the goods is not due to the buyer’s "act or omission"—a phrase that calls for close attention.[page 510]

§ 448.1 (a) "Act or omission"

This phrase also appears in Articles 66 and 80 and in each setting poses this question: What standard governs whether an "act or omission" is wrongful?

Violations of obligations imposed by the contract and the Convention clearly make one responsible for the consequences. In the setting of Article 82, when a buyer has received seriously defective goods does the "act or omission" standard make the seller responsible whenever the goods (e.g.) are stolen or are damaged by fire or storm? Can the answer be developed from inferences drawn from the Convention or does domestic tort law apply?

Invoking domestic law can undermine choices that are implicit in Article 82. Suppose, for example, that domestic tort law makes one absolutely responsible for damage to goods while in one’s custody or possession. This result may be appropriate for commercial warehouses or operators of motor vehicles but would be inconsistent with decisions of the Convention on the rights of a buyer who has received seriously defective goods. As we have seen, subparagraphs (2)(b) and (2)(c) are based on the premise that the aggrieved buyer’s remedies should be strongly protected. This concern is also suggested by the nuanced language of sub-paragraph (2)(a); if the buyer’s remedies were to be foreclosed whenever the defective goods are subject to casualty this sweeping result could have been stated simply and clearly. A less strict standard with respect to a buyer’s responsibility for defective goods is also evidenced by the closely comparable provision of Article 86(1): "If the buyer has received the goods and intends to exercise any right under the contract or the Convention to reject them, he must take such steps to preserve them as are reasonable in the circumstances"—a duty of reasonable care but not a standard of absolute liability for loss.

On the other hand, suppose that domestic tort law imposes little or no responsibility for care. This approach may be appropriate when one is asked gratuitously to hold another’s goods but is not appropriate to the duties owed to the other party to a consensual transaction—especially in an international sale when the party whose goods are at risk is in another country.[4]

Basing the standard on provisions of the Convention rather than domestic tort law supports these values: (1) The solution is more likely to be appropriate to the needs of international sales. (2) In addition, this approach conforms to Article 7(1)’s mandate to interpret the Convention [page 511] with regard "to its international character and to the need to promote uniformity in its application", and responds to Article 7(2)’s invitation to settle questions not expressly settled in the Convention "in conformity with the general principles on which it is based...". (§§85-102, supra).

Decision:  GER. BGH ("Sup. Ct.") VIII ZR 300/96, 25 June 1997.  S (Ger.) and B (Swiss) contracted for the sale to B of stainless wire. B notified S that part of the wire was defective ("splinters") and effectively avoided part of the contract. B’s processing to ascertain the quality of the wire prevented return of the defective goods. Pursuant to CISG 82(2)(b), this did not bar avoidance by B. UNILEX D. 1997-9. See: Schlechtriem, Com. (1998) 642–651 (Leser).

§448.2 (b) "Avoidance" when the Goods are Gone

In unusual circumstances, paragraph (2) may permit a buyer to "avoid" a contract when the buyer has nothing to return. The major practical justification for avoidance (and similar remedies under domestic law) is to shift the burden of disposing of defective goods to the party who is in breach of contract. When the buyer no longer has the goods in question, one may ask why he would elect to choose "avoidance" rather than recovery of damages (Arts. 74–76)

The answer lies in the fact that under Article 81, supra at §439, avoidance releases the buyer from his obligation to pay the price and entitles him to recover any payments on the price. Recovery of the price may relieve the buyer of the burden of proving the scope of his damages—a justifiable protection for the aggrieved party. But in some cases choosing avoidance may be prompted by the fact that the market level has fallen; in this setting the recovery of the agreed price (or freedom paying the price) shifts to the seller the loss of the market decline, although the contract contemplated that this loss would fall on the buyer in exchange for the chance of gain from a rise in price. To minimize speculation by the buyer at the seller’s expense it will be important to give full effect to the limits on the time for avoidance set in Article 49(2)—an interpretation that would be consistent with the mandate of Article 7(1) that the Convention is to be interpreted with regard to "the need to promote...the observance of good faith in international trade" (see Art. 49, supra at §308).[page 512]

FOOTNOTES: Chapter on Article 82

1. As has been noted under Art. 47 at §288 and under Art. 49 at §305, when the seller has delivered the goods the buyer may avoid only in the event of a fundamental breach; avoidance based on failure to comply with a Nachfrist notice applies only to non-delivery. Similarly, the buyer may compel the seller to deliver substitute goods (Art. 46(2)) only "if the lack of conformity constitutes a fundamental breach of contract."

2. This article is the same as Art. 67 of the 1978 Draft and is similar to ULIS 79.

3. Treitel, Remedies (Int. Enc.) §181; (U.S.A.) UCC 2–608(2) (revocation of acceptance).

4. Tallon, B-B Commentary 608, stales that if the goods "disappear owing to the buyer’s negligence" the buyer can not avoid the contract.

Pace Law School Institute of International Commercial Law - Last updated March 1, 2005
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