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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 71

A.  Introduction
B.  Right to Suspend Performance: Generally
C.  Goods Dispatched: Stoppage in Transit
D.  Notice. Adequate Assurance of Performance

A. Introduction

279. The Convention defines the point in time at which the seller and buyer are to perform their respective obligations.[l] Prior to this time, there can be no breach, and thus no remedy for breach in the usual sense.

On the other hand, when one party clearly repudiates his obligation to perform, the other party can no longer be expected to remain ready to perform a one-sided deal; therefore, in domestic law, such injured party's duties are, at the minimum, considered discharged.[2] Even short of an outright repudiation, the serious possibility of one party's non-performance and the accompanying threat of injury to the other will, in certain circumstances, necessitate legal protection.[3]

Articles 71-73, collected in Section I of Chapter V under the heading 'Anticipatory breach and instalment contracts,' are designed to deal with this same problem in the international sales context, and the CISG solutions indeed resemble those of many domestic contract and sales laws. Depending on the circumstances, a party faced with prospective non-performance, the real possibility of a serious breach, may be entitled either to suspend his own performance (Article 71) and/or to avoid his own obligations altogether (Article 72). In addition, Article 73 provides a special (instalment contract) application of the avoidance rule.

1. Regarding Article 33, see supra No. 158; regarding Article 58, see supra No. 243.
2. Compare, e.g. Farnsworth, E.A., Contracts (1999) 8.20. A more difficult question is whether such a 'breach by anticipatory repudiation' gives the injured party an immediate action for damages. The CISG provides no clear answer: see infra No. 284. Regarding American law, see Farnsworth at id.
3. Regarding domestic solutions, see generally Treitel, Remedies for Breach of Contract, pp. 79-381.
[page 147]

B. Right to Suspend Performance: Generally

280. Article 71(1) sets forth the general rule which entitles a party to suspend his performance when faced with an anticipatory breach:

'A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of:
a) a serious deficiency in his ability to perform or in his creditworthiness; or b) his conduct in preparing to perform or in performing the contract.'

As regards a (potentially injured) party's right to suspend performance, Article 71(1) requires that it become 'apparent' (il apparait) that the other party will not perform a 'substantial part' (une partie essentielle) of his obligations. Although these terms cannot be measured with anything approaching mathematical precision, a comparison with the rules set forth in Article 72 indicates that the Convention makes it somewhat easier to suspend than avoid: as regards the nature of the non-performance, a promisee's prospective failure to perform a 'substantial part' of its obligations, although obviously significant, is presumably intended to denote something less than a 'fundamental breach';[1] as regards the degree of certainty, an 'apparent' non-performance is designed to indicate a slightly lesser probability than one which is 'clear.'[2]

Beyond this, Article 71(1) requires that the prospect of non-performance be the result of either (a) a serious deficiency in the promisor's performance-ability or creditworthiness, or (b) his conduct in preparing to perform or in performing the contract. The buyer's late payments in respect of other contracts might provide evidence as regards the first criterion; the seller's continued use of defective raw materials in other contracts might provide evidence of the second.[3]

1. See generally Leser in Schlechtriem, Commentary (1998) at p. 524. See, e.g., the decision of LG Berlin, 15 September 1994, No. 52 S 247/94, reported in UNILEX (buyer could suspend performance when it became apparent that seller would not deliver conforming goods; non-performance under Art. 71(1) need not necessarily amount to a fundamental breach).
2. Accord: Honnold, Uniform Law (1999) at p. 429 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>]. Regarding the Article 72 requirements, see infra No. 283 et seq.
3. See A/CONF./97/5, para. 6 of Secretariat's Commentary to Article 62 of the 1978 Draft Convention. See also the decision of Rechtbank van Koophandel, Hasselt (Belgium), 1 March 1995, AR 3641/94, reported in UNILEX (seller could suspend delivery of second order by reason of buyer's serious (7-month) delay in payment of first order).

C. Goods Dispatched: Stoppage in Transit

281. Under principles generally applicable under domestic law, a seller's rights in respect of buyer's prospective inability to perform include the right to stop goods already shipped.[1] Article 71(2) contains the CISG version of this rule:

'2. If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing [page 148] over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them.'

Paragraph (2) extends the general protection against potential injury provided by paragraph (1), but paragraph (2) is concerned with the special problem of the seller who has dispatched the goods before the indications of prospective non-performance become manifest. The provision applies not only where the buyer holds a bill of lading or similar instrument, but also where the sales contract extends credit until some time after buyer's receipt of the goods.[2]

In line with the general CISG principle that the Convention is concerned with the inter partes sales relationship,[3] Article 71(2) relates only to the rights in the goods as between the buyer and the seller.[4] The seller's right to effectuate stoppage vis-à-vis carriers and warehousemen will depend on the contract of carriage or bailment (and on the relevant domestic law), just as the rights which creditors or good-faith purchasers may have under the applicable domestic law remain unaffected by this Convention rule.[5]

1. See, e.g. Article 39 of the Danish Sale of Goods Act, cited by Leser in Schlechtriem, Commentary (1998) at 529.
2. See A/CONF./97/5, para. 10 of Secretariat's Commentary to Article 62 of the 1978 Draft Convention.
3. Regarding Article 4, see supra No. 64.
4. Article 71(2), second sentence.
5. See generally Honnold, Uniform Law (1999) pp. 432-434 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>].

D. Notice. Adequate Assurance of Performance

282. A party suspending performance, whether before or after dispatch of the goods, i.e. under paragraph (1) or (2), must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance.[l]

1. Article 71(3). See also the decision of Amtsgericht Frankfurt am Main (Germany), 31 January 1991, IPRax 1991, 345, also reported [at <http://cisgw3.law.pace.edu/cases/910131g1.html> and] in UNILEX (seller's failure to give notice of suspension gave buyer right to recover damages). [page 149]

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