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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 41
Obligation to Delivery Goods Free of Third Party Claims

1.  Introduction
2.  Third Party Rights Distinguished

1. Introduction; Article 41

197. According to Article 30, the CISG seller must 'transfer the property in the goods.' Elaborating this theme, the first sentence of Article 41 provides: 'The seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim.'

198. A seller who sells goods which she does not own (and is not authorized to sell) commits a clear breach of the obligation laid down in Article 41; the same is true where the goods delivered are encumbered by a non-disclosed security interest held by a third party. In either case, the seller's knowledge regarding the third party claim at the time of contracting is irrelevant.[1] Beyond this, the Convention protects the buyer even against third party claims, in that the mere assertion by a third party of such a claim constitutes a breach by the seller and entitles the buyer to exercise the remedies which the Convention provides.[2] If the claim is frivolous, and/or if the seller quickly and effectively disposes of an asserted claim, the buyer who suffers no substantial detriment will be unable to avoid the contract by virtue of a fundamental breach.[3] On the other hand, depending on the forum jurisdiction concerned, the buyer may be able to require that the seller actually perform her Convention obligation to supply unencumbered goods by taking appropriate legal action (instituting or defending a lawsuit).[4] Damages for breach will be available in either event.[5]

In one application of the Article 41 rule, an Austrian court held that a seller does not comply with the obligation to deliver goods which are free from any right or claim by third parties if, after the formation of the contract, the delivery of the goods is made subject to a restriction of export limitations; under these circumstances, the buyer was held entitled to damages.[6]

1. Regarding the somewhat different rule in Article 42, see infra No. 200.
2. Regarding Articles 45-52, see infra No. 208 et seq.
3. See Honnold, Uniform Law (1999) pp. 288-289 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>]. Regarding Article 49, see infra No. 224 et seq.
4. Regarding specific performance, see Article 46(1) (infra No. 213 et seq.) and 28 (supra No. 140 et seq.).
5. Assuming a loss suffered in consequence. Regarding Articles 74 et seq., see infra No. 289 et seq.
6. See the decision of Oberster Gerichtshof, 6 February 1996, RdW 1996, 203-205, also reported [at <http://cisgw3.law.pace.edu/cases/960206a3.html> and] in UNILEX.

2. Third Party Rights Distinguished

199. The Convention governs only the rights and obligations of the seller and buyer; it is 'not concerned with the effect which the contract may have on the property in the goods sold.'[1] In accordance with this principle, Article 41 makes the seller liable for claims which third parties may assert against the buyer, but the [page 110] question of whether a third party's rights are cut off by virtue of a buyer's good-faith purchase from a seller under a contract otherwise regulated by the CISG lies outside the Convention scope.

1. Regarding Article 4, see supra No. 62 et seq. [page 111]

Pace Law School Institute of International Commercial Law - Last updated April 5, 2005
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