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Published by Manz, Vienna: 1986. Reproduced with their permission.

excerpt from

Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods

Univ. Prof. Dr. Peter Schlechtriem [*]

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1. The Obligation to Pay the Price (Articles 54-59)

The buyer must pay the price either as fixed in the contract or as determined according to contractual terms. The provision on determination of the price renewed the argument concerning the need for a definite price term, a discussion which had already arisen in conjunction with Article 14(1) sentence 2. The version finally adopted is based on a compromise proposed by a working group.[318] [page 80]

The argument in favor of wide-ranging judicial authority to fix a price where the price term is left open was accommodated by the assumption, recorded in Article 55, that, in the absence of a fixed price, the parties implicitly made reference to the "price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned." The concern, voiced by some states, that a definite price term was needed, is reflected in the text of Article 55, which applies only in the case that a valid contract is formed, which represents, in turn, a reference to Article 14. Because a restrictive interpretation and application of the provisions on contract formation would require a definite or determinable price, a contradiction remains between the requirement of a determinate price at the conclusion of the contract on the one hand and the possibility of fixing the price after the contract is concluded on the other.[319]

[For further comments on this subject, go to Prof. Schlechtriem's review of Article 14.]

Under Article 54, the buyer's obligation to pay includes all of the measures agreed upon in the contract to enable payment to be made, such as the duties to provide a letter of credit [319a] and to comply with relevant (domestic) laws, in particular currency-exchange regulations. The parties may specify the currency in which the payment is to be made.[320] If the price is to be determined on the basis of the weight of the goods, Article 56 provides that, in case of doubt, the net weight should be used.

Articles 57 and 58 govern the place and time of payment. In the absence of agreement, payment must be made at the seller's place of business (Article 57(1)(a)).[321] Where there is an agreement for immediate payment - "cash against documents" - payment is to be made at the place where the goods or the documents are transferred (Article 57(1)(b)).[322] In a sale involving carriage, if [page 81] immediate payment has not been agreed upon, the seller's place of business remains the place of payment.[323]

Under domestic rules of procedure, jurisdiction and venue for an action for the purchase price are often at the place of payment, with the result - much regretted in regard to ULIS Article 59(1) - that the place of business or habitual residence of the seller, being the place of payment, automatically fixes the forum for an action for payment of the purchase price.[324] Unfortunately, the CISG may produce the same result. Buyers are thus well advised to seek a more favorable choice-of-forum clause in the contract.[325]

As a rule, the risk and costs of a delayed or lost payment are carried by the buyer. Article 57(2) provides one exception to this rule: the seller must bear the increased cost that is caused by a subsequent change of his place of business. Furthermore, the grounds for exemption listed in Article 79(1) and (2) also apply to damage claims based on lost or delayed payment.[326]

According to Article 58, the time for payment is primarily determined by the contract, and the seller need not send any advance reminder or other formal request for payment (Article 59). Article 58 regulates the due date and the other requirements of the obligation to pay the price as well as the reciprocal relationship between delivery and payment. In principle, the seller may demand immediate payment upon delivery. Thus, as long as the contract does not obligate the seller to perform first, the seller can make payment a condition precedent to a transfer of the goods or documents controlling their disposition (Article 58(1) sentence 2 and 58(2)).[327] [page 82]

The payment-in-exchange-for-goods principle also operates to the advantage of the buyer. The buyer is not obligated to pay until the seller has delivered goods or documents in conformity with the contract, either by placing them at the buyer's disposal (Article 58(1), cf. Article 31 concerning where goods must be placed at the buyer's disposal) or by dispatching them (Article 58(2), cf. Article 31(a)).

The buyer is not obligated to pay the price, however, before he has had an opportunity to inspect the goods (Article 58(3)), unless inspection has been excluded by agreement, such as in cases where payment is to be made against documents.[328] For inspection to be excluded, the parties must agree on a means of performance which does not permit inspection. The seller's right to retain the goods or documents until payment has been made is not inconsistent with the buyer's right to inspect.

The seller must accept partial payment or payment made before the due date only if he is required to do so by contract. If there is no such agreement, he may return the payment without breaching the contract.[329] There is no express provision for the seller to withhold delivery where the buyer has failed to fulfill obligations other than payment. Acceptance of a bill of exchange or provision of a letter of credit can, however, be considered part of the contractual obligation to pay under Article 54 as qualified by the contract. It is consequently covered by the rule in Article 58.[330] In addition, it follows from Article 71 that even the buyer's failure to perform duties which do not fall directly under Article 54 must give the seller the right to withhold delivery, as long as these duties are substantial. If a party may suspend performance under Article 71 because of the danger of the non-performance of a substantial duty, then actual non-performance must also give the seller the right to withhold delivery. There is then no need to resort to domestic law to decide the question. [page 83]

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FOOTNOTES

* The author of this book participated at the Conference as a member of the delegation from the Federal Republic of Germany. The views expressed here are personal to the author and do not necessarily represent the position of the F.R.G. or its delegation.

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318. A/Conf. 97/C.1/L.232 (= O.R. 120).

319. This method of price determination is above all important for states that will not enact Part II of the Convention. But, in the case of a contract that falls within CISG's sphere of application but, due to the lack of a sufficiently definite offer (and counter-offer by the offeree), was not effectively concluded, I am hesitant about referring to a domestic law that might permit the contract to be considered as concluded. Cf. A/Conf. 97/C.1/SR.29 at 10 § 57 (= O.R. 392) (position of the Greek delegate); Huber at 449-50. Even though it would certainly not be acceptable to all states, one might follow Honnold's interpretation that the term "validity" in Article 55 relates only to requirements of validity other than the determination of price. An offer that is indefinite with respect to the price could then be interpreted in the light of Article 55, i.e., as an implied reference to the price generally charged for such goods. See Honnold, Commentary § 137. Most writers, however, disagree. See Farnsworth, Formation at 3-9 and the references in note 6. Stoffel, Lausanner Kolloquium at 63 tries to help with an implied derogation of the requirements of Article 14 by the parties.

319a. Accord Honnold, Commentary § 354.

320. A joint proposal by Argentina, Spain, and Portugal to permit substitute payment in the party's domestic currency when it is impossible to pay in the currency agreed upon (A/Conf. 97/C.1/201= O.R. 120) found no support. An agreement between the parties or usages can, of course, provide this option.

321. If the seller has more than one place of business or none at all, reference must be made to Article 10.

322. See Huber at 510 (criticism about the lack of a subsidiary rule for the case that the place for handing over the documents has not been determined); see also Huber at 511-12 (the possible modalities of handing over goods or documents and their effect on the place of payment, when the parties have agreed upon immediate payment in exchange for goods).

323. Cf. Judgment of April 4, 1979, BGH, 72 BGHZ 137, 141-42 (regarding ULIS Article 59(1).

324. Cf. Dölle (von Caemmerer) Article 59 § 20.

325. A proposal by the F.R.G. (A/Conf. 97/C.1/L.182= O.R. 122) that would have made the place of payment irrelevant under Article 57 for determining jurisdiction found no support because it was perceived as an interference with domestic jurisdictional rules. See A/Conf. 97/C.1/SR.25 at 6 (= O.R. 368 et seq.). It is doubtful, at least on the international level, whether the desirable interpretation of domestic jurisdictional rules that refer to the place of performance can be achieved, as Huber suggested, by limiting the meaning of the term "place of performance" to the place where the acts are undertaken which are necessary for the debtor's performance.

326. See also Huber at 512.

327. The uncertaintly as to what was meant by "documents controlling [the] disposition [of the goods]" which Huber noted, see Huber at 514, was not clarified in Vienna. The expression concerns chiefly negotiable documents of title and is therefore unsuitable for its function in Article 58. The reference in the Secretariat's Commentary to Articles 30 and 34 can be of some help. See Secretariat's Commentary at 139 note 4. It is not just a matter of delivery of the goods (and the documents controlling them), but rather of performance of the seller's principal obligations. Insurance policies, certificates of origin, etc. relate to the goods and, when in doubt, their delivery must be part of the seller's performance even when they are not always necessary for the further disposition of the goods. The fact that Article 58 is designed to regulate the time of payment and to give the seller the right to withhold the goods until they are paid for justifies the view that "controlling" documents should be interpreted in the sense of Articles 30 and 34. Therefore, even if an insurance policy, for example, is not required for the disposition of the goods, nevertheless, the seller has not placed the goods at the buyer's disposal, according to Article 58(1) sentence 1, until he tenders the policy together with the goods. Moreover, under Article 58(2), the seller has the right to withhold the insurance policy until the buyer pays. For the application of Article 58(1) and (2) to the insurance policy, one need only imagine the case in which the purchased goods are destroyed after the contract has been concluded and the risk of loss has passed to the buyer. For unimportant documents that nevertheless relate to the goods, Article 58(1) and (2), interpreted in the light of Article 7(1), would permit Article 71(1) - concerning the suspension of performance where one party has failed to perform "a substantial part of his obligations" - to be used as a yardstick: If unimportant documents are missing or withheld, the buyer must pay, but he can sue for damages or specific performance. In the end, the solution should correspond to § 320(2) of the German Civil Code.

328. See ULIS Article 72(2); Secretary's Commentary at 141 § 7.

329. While a motion (A/Conf. 97/C.1/L.206= O.R. 123) to clarify this point was rejected, it was nevertheless generally assumed that the seller could decline premature or partial payments. It was believed that only the question of whether the seller must return the money at once needed negotiation. See A/Conf. 97/C./SR.25 at 9 (= O.R. 370).

330. Cf. ULIS Article 69; Secretariat's Commentary at 135 § 5.

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Pace Law School Institute of International Commercial Law - Last updated June 14, 2000
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