[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).]
309. Section V of Chapter V provides a series of rules regarding the effects of avoidance. The provisions of this section are common to the obligations of both parties.
B. Release from Obligation
310. The primary effect of (total) avoidance is to relieve both parties of their obligations to perform; i.e. the seller need not deliver the goods, and the buyer need not pay.
Partial avoidance of the contract, for example where the buyer avoids with respect to a portion of the goods not delivered, releases both parties from their obligations as to the part of the contract avoided: (in the example) the seller is released from his obligation to deliver the portion concerned, and the buyer need not pay for that portion.
C. Damages for Breach, Arbitration Clauses, etc.
311. Although avoidance of the contract releases both parties from their performance obligations, it does not eliminate all rights and obligations which arose out of the contract.
For one thing, avoidance does not affect claims for any damages which may be due. Thus, though the party in breach need not deliver or pay, that party remains liable for any loss suffered by the other party as a consequence of the breach.
Nor does avoidance affect any provision of the contract for the settlement of disputes, such as an arbitration clause, choice-of-forum clause or a contractual provision governing the applicable law. The same applies as regards any other provision of the contract governing the rights and obligations of the parties upon the avoidance of the contract, e.g. a clause providing for liquidated damages in the event of [page 167] non-performance. On the other hand, the question of whether such clauses remain binding will also depend on their validity, and validity is always a question for the applicable domestic law.
Article 81 provides a non-exhaustive list of contractual and Convention obligations which continue even after avoidance. The duty of the buyer to take steps to preserve goods which he intends to reject constitutes another example of the kind of obligation not extinguished by avoidance.
312. Restitution is another effect of avoidance. According to Article 81(2), a party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently.[l]
In principle, the party in breach will bear the reasonable expenses which both parties incur in relation to the making of restitution for goods or sums received prior to avoidance; as regards the non-breaching party's expenses, the breaching party is liable in damages for such losses as a consequence of the breach.
The Convention rules on restitution regulate only inter partes rights. In a bankruptcy situation, however, the Convention rules may be thwarted by local rules which create property rights or priorities in goods or sums delivered, etc.