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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 64
Avoidance by Seller

  1. Seller’s Right to Avoid for Buyer’s Breach
  2. Declaration of Avoidance
  3. Avoidance for Non-Compliance with Nachfrist Notice
  4. Limitations Regarding Goods Delivered
  5. Consequences of Avoidance

1. Seller's Right to Avoid for Buyer's Breach

259. The general Convention rule applies to sellers and buyers alike: avoidance requires a showing of a fundamental breach.[1] According to Article 64(I)(a):

'The seller may declare the contract avoided:
a) if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract ...' [page 137]

Under some domestic statutes of sale, time is automatically deemed' of the essence,' in that any delay in performance (however insignificant) entitles the injured party to 'avoid' the contract, and the delay need not even relate to the buyer's main obligation to pay the price.[2] In international sales, however, Article 64(l)(a) follows the general Convention rule: seller can avoid only if buyer's failure to perform amounts to a fundamental breach. This applies to all of buyer's obligations under the contract and the Convention, not only to the obligation to pay, but also, e.g. to an obligation to apply for a letter of credit or a bank guarantee to facilitate the payment of the price.[3

The seller is, of course, entitled to expect payment on time.[4] If, however, the buyer tenders payment one or two days later than the contract date, it is far from certain that the seller has thereby suffered a 'substantial' deprivation under Article 25. And even if he has, the seller will only be entitled to avoid if the buyer (or a 'reasonable' buyer) had reason to know that such a breach would have this 'substantial' effect.[5]

On the other hand, it should be emphasized that even the breach of an 'ancillary' duty will sometimes be regarded as fundamental, i.e., sufficiently serious to provide the seller with grounds to avoid.[6]

A seller who would require greater certainty than that provided by the CISG gap-filling regime (which generally conditions avoidance on a 'fundamental' breach) is well advised to insist on a contract term which spells out the remedial rights of the seller in the event the buyer, e.g. fails to make payment on or before the date required by the contract.

1. Regarding buyer's avoidance for seller's breach under Article 49, see supra No. 224 et seq.
2. Regarding English law, see, e.g. Lookofsky, J., Consequential Damages in Comparative Context (1989), p. 126 with note 105.
3. Regarding Article 54, see supra No. 239.
4. See Articles 53 (supra No. 237) and 58-59 (No. 243 et seq.).
5. Regarding this Article 25 requirement, see supra No. 136 et seq.
6. See, e.g., the decision of the French Court of Appeal (Grenoble), 22 February 1955, CLOUT Case 154, also reported in UNILEX (French seller sold jeans to American buyer with contract stipulating that jeans would be re-sold in South America; buyer's re-sale of goods in Spain and refusal to reveal true destination was fundamental breach giving seller right to avoid).

2. Declaration of Avoidance

260. Article 64(1)(a) entitles the seller to 'declare' the contract avoided. Such a declaration of avoidance is effective only if made by notice to the buyer.[l]

1. See Article 26, supra No. 138. Regarding the risk of transmission under Article 27, and the related question of whether a declaration of avoidance may be revoked, see supra No. 139.

3. Avoidance for Non-Compliance with Nachfrist Notice

261. As regards cases involving non-payment or a failure to take delivery, the Convention provides an injured seller with an alternative avoidance by reason of to fundamental breach. Article 64(1)(1) provides that the seller may declare the contract avoided: [page 138]

'if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed.'

The seller may have reason to doubt (1) whether the buyer in breach will ever pay or take delivery and (2) whether a given breach is 'fundamental' under Article 64(1)(a). For these reasons, CISG Article 63(1) gives the seller the right to fix an additional period of time, after which the seller may avoid without having to consider whether the total delay has reached 'fundamental' proportions.[1] And if the buyer does not make payment or take delivery within the additional period of time so fixed (or if buyer declares that she will not comply),[2] Article 64(1)(b) gives the seller the right to avoid [3]

1. See supra No. 136.
2. Regarding anticipatory breach generally, see infra No. 279 et seq.
3. See, e.g., the award by the ICC Court of Arbitration (Paris), No. 7197/1992, reported [at <http://cisgw3.law.pace.edu/cases/927197i1.html> and] in UNILEX (buyer did not fulfil its obligation to open documentary credit within additional period of time granted by seller; seller would then have been entitled to avoid under Art. 64(I)(b) if it had given notice of avoidance pursuant to Art. 26). Note that a seller who has received the price will rarely face irreparable loss from buyer's delay in taking delivery: see Honnold, Uniform Law (1999) at pp. 387-388 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>].

4. Limitations Regarding Goods Delivered

262. If the seller first elects to avoid after the buyer has paid the price, he must do so (as regards late performance) within a reasonable time after learning that performance has been made or (in other cases) within a reasonable time after learning of the breach.[1]

1. See Article 64, subparagraphs (2)(a) and (2)(b)(i). As regards the time for avoidance after a Nachfrist notice, see subparagraph 64(2)(b)(ii).

5. Consequences of Avoidance

263. If the seller avoids the contract with justification, both parties are released from their obligations under it, subject to any damages which may be due. In addition, each party may claim restitution from the other party of whatever has been supplied or paid under the contract.[1]

1. Regarding Article 81, see infra No. 310 et seq. [page 139]

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