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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 50
Proportionate Reduction in Price

231. In cases involving the delivery of non-conforming goods, the buyer may be entitled to a restitution measure of monetary relief even where he is not entitled to avoid. Article 50 provides, inter alia:

'If the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time.'

The proportionate price reduction (actio quanti minoris) is a remedy well-known in Civilian, but not in Common law systems. The proportionate price reduction constitutes an alternative to avoidance for non-conformity under Article 49, though it is also available in cases where the buyer would not be entitled to avoid.

In the case of avoidance, the buyer who returns (seriously) non-conforming goods is entitled to full restitution of the contract price, if previously paid;[1] in the case of a proportionate price reduction, where the buyer keeps the non-conforming goods (either because he cannot or will not avoid), the buyer is compensated for the 'quality-gap': he receives a reduction in the contract price proportional to the reduced value of the goods due to the defect.[2]

Note that if the seller successfully (and fully) remedies a given non-conformity in accordance with Article 37 or 48, the buyer may not reduce the price.[3]

It is also important to note that the proportionate reduction will often constitute an alternative to an award of damages for breach (non-conforming delivery),[4] and since the Convention basis of liability is essentially strict in either case,[5] the (potentially more extensive) damages remedy will often be preferred.[6]

1. Regarding Article 81(2), see infra No. 312.
2. See, e.g., the decision of OLG Graz (Austria), 9 November 1995, 6 R 194/95, reported [at <http://cisgw3.law.pace.edu/cases/951109a3.html> and] in UNILEX. See also Lookofsky, J., Consequential Damages in Comparative Context (1989) pp. 134-136.
3. The same applies if the buyer refuses to accept performance by the seller in accordance with Article 37 or 48: see Article 50, second sentence, and supra Nos. 182 and 220.
4. Regarding Articles 74 et seq., see infra No. 289 et seq. Note, however, that it may be possible to combine proportionate price reduction and damages claims, provided the claimant does not thereby claim 'double compensation' for the same items of loss: see Huber in Schlechtriem, Commentary (1998) at 444. [page 126]
5. See supra No. 210. Regarding exemptions for defects under Article 79, see infra No. 298. For an imaginative example of a defect attributable to a force majeure-type performance impediment (thus precluding an award of damages but not a proportionate reduction), see Honnold, J., Uniform, Law (1999) at pp. 391-392.
6. Apart from the fact that consequential damages are only available as damages (under Article 74), the Article 50 formula may prove advantageous in cases where the buyer accepts delivery in a falling market: see generally Bergsten & Miller, 'The Remedy of Reduction in Price,' 27 Am. J. Comp. L. 255 (1979).

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