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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]

excerpt from

The 1980 United Nations Convention on Contracts
for the International Sale of Goods

Joseph Lookofsky

Article 25
Avoidance and Fundamental Breach

A.  Fundamental Breach Defined
B.  Substantial Detriment

A. Fundamental Breach Defined

136. The first - and certainly the most important - general provision in Chapter 1 of Part III relates to the rules which permit an injured party to 'put an end to the contract,' i.e. the remedy of avoidance.

In most cases the relevant CISG rules (set forth in Chapters II and III of Part III) require that a breach be 'fundamental' before an injured party will be permitted to avoid.[1] Article 25 supplements these rules by providing the necessary definition of the term 'fundamental breach':

'A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.'

1. Regarding Article 49 (avoidance for seller's breach) see infra No. 224 et seq.; regarding Article 64 (avoidance for buyer's breach) see infra No. 259 et seq. [page 78]

B. Substantial Detriment

137. Article 25 defines fundamental breach in terms of (foreseeable) 'substantial detriment.' For example, as regards the buyer's right to avoid upon seller's late delivery, the Convention requires that the delay in question amount to a fundamental breach. [1] Therefore, in order to avoid in such a case, the buyer (the injured party) must allege and prove that he has suffered a detriment which substantially (perhaps even more than 'materially') deprives him of what he is entitled to expect under the contract.[2] In addition, the detriment must also be one which the breaching party (in this example: the seller) reasonably ought to foresee.

Whether the injured party suffers a 'substantial' detriment as a result of a given breach and whether such detriment is 'foreseeable' by the other party requires a concrete evaluation of the circumstances of the particular case, and even the breach of a 'secondary' obligation can amount to a fundamental breach.[3] On the other hand, it should also be noted that avoidance is generally regarded as an exceptional CISG remedy, to be exercised restrictively.

A closer examination of the right to avoid will be undertaken in connection with the more specific rules regarding seller's and buyer's breach.[4] For the present, it may be noted that the uncertainty which may sometimes surround the elastic fundamental breach standard has been counterbalanced to some degree by the establishment of a supplementary 'Nachfrist' avoidance rule, in that the issuance of a (reasonable) Nachfrist warning may obviate the injured party's need to demonstrate a 'fundamental' breach.[5] It may also be noted that the buyer's right to avoid by reason of the delivery of non-conforming goods is restricted by the seller's right to cure.[6] [page 79]

1. Article 49: see infra No. 224 et seq.
2. It has been suggested that a 'substantial' deprivation may be more than what Common lawyers would consider as 'material' under their corresponding domestic law. See Ziegel, J., 'The Remedial Provisions of the Vienna Sales Convention,' in International Sales (Galston and Smit ed., New York 1984) 9.03[2] [a], [b] [available at <http://www.cisg.law.pace.edu/cisg/biblio/ziegel6.html>] and Flechtner, H., 'Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C.' Vol. 8 Journal of Law and Commerce 53, 75 (1998) [available at <http://www.cisg.law.pace.edu/cisg/biblio/flecht.html>]. The application of similar terminology in the Convention provisions dealing with anticipatory breach tends to support this argument: see Flechtner at id. and infra No. 280 et seq.
3. See, e.g. the decision of Oberlandesgericht a.M. (5 U 164/90) of 17 September 1991 (CLOUT Case No. 2 [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>]): fundamental breach of duty to preserve exclusivity.
4. Regarding avoidance for seller's fundamental breach under Article 49, see infra No. 224. Regarding Article 64 (avoidance for buyer's breach) see infra No. 259 et seq.
5. The CISG rule owes its nickname to the corresponding, but substantially different rule in German domestic law: regarding seller's non-delivery and Articles 47(1) and 49(1) (b), see infra Nos. 219 and 225. Regarding buyer's non-payment and Articles 63(1) and 64(1)(b), see infra Nos. 258 and 259.
6. Regarding Article 48, see infra No. 220 et seq.

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