Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 527-528. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§457 Placing goods in a warehouse (Art. 87) may not be adequate to "preserve" goods that are perishable. Warehouse charges for an extended period may seriously impair or exceed the value of the goods; in some cases the bailor may not be able to recoup these charges from the other party to the sales contract. Consequently, the bailor may need to liquidate the transactions by selling the goods.
"(1) A party who is bound to preserve the goods in accordance with article 85 or 86 may sell them by any appropriate means if there has been an unreasonable delay by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation, provided that reasonable notice of the intention to sell has been given to the other party.
"(2) If the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them. To the extent possible he must give notice to the other party of his intention to sell.
"(3) A party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them. He must account to the other party for the balance."
Option to Sell. Paragraph (1) provides authority (not an obligation) to sell. In view of the optional character of this paragraph, the standard is flexible: "unreasonable delay" by the other party in taking appropriate action.
Duty to Sell. Paragraph (2) imposes a duty to sell when "the goods are subject to rapid deterioration or their preservation would involve unreasonable expense."[page 527]
The present article applies to any party who is "bound to preserve the goods"—a seller in possession of goods when the buyer fails to pay (Art. 85) or a buyer who receives goods which he has the right to reject (Art. 86). And, as has been noted, paragraph (1) of Article 88 grants a privilege to sell while paragraph (2) imposes a duty to sell.
A seller’s duty to sell goods in its possession (Art. 88(2)) needs to be considered in relationship to the seller’s right under Article 62 to "require the buyer to pay the price." In discussing Article 62 (§§346, 348, supra) we saw that requiring payment by one who has not received the goods is subject under Article 28 to the remedial approach of fora in many States where such "specific performance" is compelled only if damages do not provides an adequate remedy (§§194-199, supra). In discussing Article 62 we also noted (§349) that Article 88(2), by requiring the seller to resell goods held for the buyer, in substance creates an exception to the rule (Art. 62) that the seller may force acceptance of goods by requiring the buyer to pay the price. However, this exception under Article 88(2), is limited to cases under 85 where the seller is "either in possession of the goods or otherwise able to control their disposition" and, unhappily, does not solve the disputed issue whether a seller may engage in wasteful production, free of the loss-mitigation rule of Article 77, if the seller sues for the price (Art. 62) rather than damages.
Decision: IRAN-US CLAIMS TRIBUNAL, 370 (429-370-1), 28 July 1989. Iran contracted to buy electronic equipment from the US (S), but failed to pay for the equipment. The Tribunal sustained S’s resale of the equipment to third parties to mitigate damages, as provided in CISG Art. 88. The Tribunal noted that the Convention did not directly govern this case, but that its provisions were "consistent with recognized international law of commercial contracts". UNILEX D.1989-3. See: Schlechtriem, Com. (1998) 679–684 (Eberstein).[page 528]
FOOTNOTES: Chapter on Article 88
1. This article is closely based on Art. 77 of the 1978 Draft. In paragraph (1) "the price or" was inserted to conform to the addition of a reference to the price in Art. 85, supra at §454. In addition, in paragraph (1) "reasonable" was inserted before "notice." O.R. 413–414, Docy. Hist. 634–635. Cf. ULIS 94, 95.
2. The language just quoted limits the scope of the seller’s obligation under Article 85 to take steps to preserve the goods and thereby also limits the situations in which Article 88(2) requires the seller to take reasonable measures to sell the goods.