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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 58

F.  Time of Payment
G.  Contracts Involving Carriage
H.  Buyer’s Right to Inspect Before Payment

F. Time of Payment

243. The buyer is obligated to pay at the time designated in the contract.[l] For cases where the contract is silent, Article 58(1) provides the general gap-filling rule:

'If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents.'

1. See Articles 53 (supra No. 237) and 59 (infra No. 248).

244. In a bilateral contract, unless otherwise agreed, the parties are to exchange their performance obligations at the same point in time: i.e., payment and delivery are constructive conditions concurrent.[l] The seller has no obligation to extend credit, so the buyer must pay when the seller makes the goods available, either by placing the goods or the documents controlling them at the buyer's disposal. Conversely, the buyer need not pay until the goods actually are made available.[2]

1. Compare, e.g. sect. 28 of the Sale of Goods Act (UK).
2. Regarding inspection of the goods, see paragraph (3) infra No. 247.
[page 131]

G. Contracts Involving Carriage

245. In an international sales context, the contract will ordinarily involve carriage of the goods.[1] For these cases, where the parties deal at a distance, Article 58(2) provides the necessary modification to the 'construction conditions concurrent' rule in paragraph (1):

'If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price.'

Where the contract involves 'carriage' (by an independent carrier), Article 58(2) permits the seller to protect its interests while proceeding to dispatch the goods: absent contrary contractual provision, and at seller's election, the terms of carriage may provide that an exchange of goods (or documents) against payment will take place when the goods are handed over to the buyer.

1. Regarding seller's obligation to deliver under Article 31, see supra No. 153 et seq.

246. Article 58 deals with the time, not the place for exchange. In the paragraph (2) situation, when the seller elects to ship under terms whereby the goods (or documents) are to be handed over to the buyer against payment, the CISG default rule calls for payment to be made where the handing over takes place.[1] On the other hand, the seller may not wish to ship under such terms without some assurance that the ultimate exchange will proceed as planned.[2] In practice, the contract will often require the buyer to arrange for the issuance of a letter of credit in the seller's favour; in this case, payment will be made - in exchange for documents - in the seller's locale, by the local (confirming) bank concerned.[3]

1. See Article 57(1)(b), supra No. 242.
2. Paragraph (2) protects the seller against having to deliver without receiving payment; it does not protect, e.g. against the risk of buyer's insolvency which may first become apparent when the goods arrive in buyer's State.
3. The CISG does not deal with letters of credit. As to whether the seller may require buyer to pay by letter of credit absent agreement, see Honnold, Uniform Law (1999) pp. 365-366 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>].

H. Buyer's Right to Inspect Before Payment

247. The buyer has no obligation to make (full) payment for goods which do not conform to the contract.[l] Before making payment, and before accepting delivery, the buyer is entitled (though not obligated) to examine the goods.[2] Article 58(3) provides:

'The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity.' [page 132]

In the Article 58(2) situation, when the seller elects to ship under terms whereby the goods (or documents) are to be handed over to the buyer against payment, the seller must preserve the buyer's right to inspect, e.g., by arranging for buyer's access to the goods at the point of destination.

The right of inspection under Article 58(3) is only a gap-filling rule, so (it goes without saying that) the buyer has no right to inspect if the parties agree on other delivery or payment procedures. The quotation of the price on CIF terms is a common example of an agreement inconsistent with inspection prior to payment.[3]

1. See, e.g. Article 50, supra No. 231.
2. Contrast the obligation of the buyer to inspect within as short a period as possible as practicable following delivery under Article 38: see supra No. 186 et seq.
3. INCOTERMS, CIF, provides that the buyer must pay the price and accept the documents tendered by the seller if they are in conformity with the contract of sale.
[page 133]

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