[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
Joseph Lookofsky
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):
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.
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]
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]
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]
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]
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]
Pace Law School
Institute of International Commercial Law - Last updated April 5, 2005