Reproduced with permission from Suomalainen Lakimiesten Yhdistys: - Tidskrift utgiven av Juridiska Föreningen i Finland [Finnish Law Society] 126 (1990) 327-343
Leif Sevón, Director General, jur.lic.
The UN Convention on Contracts for the International Sale of Goods was adopted on April 11, 1980. The Convention had up till June, 1990 entered into force in respect of 19 States. It has been ratified by, or acceded to, seven more States. Still others are in the process of preparing the legislation necessary for ratification or accession. It is beyond doubt that the Convention will be the predominant instrument governing the rights and obligations of sellers and buyers in the international sale of goods.
The Convention consists of four parts. Part I (Articles 1-13) deals with the sphere of application and general provisions. In Part II (Articles 14-24) one may find provisions on formation of contracts on the international sale of goods. Part III (Articles 25-88) deals with sale of goods, while the Final Provisions of the Convention are included in Part IV (Articles 89-101).[page 327]
Part III is composed of five chapters dealing with general provisions, obligations of the seller, obligations of the buyer, and provisions common to the obligations of the seller and the buyer.
The two chapters dealing with the obligations of the seller and the buyer respectively are structured in the same manner. First the different obligations of the respective party are identified. Chapter II thus contains provisions on delivery of the goods and handing over of documents. These provisions are followed by provisions on conformity of the goods and third party claims. Next follow provisions on remedies for breach of contract by the seller.
The provisions on the obligations of the buyer and on the seller's remedies for breach of those obligations are mainly included in Articles 53-65. They form a mirror of the provisions dealing with the seller. First, the obligations are set out, then remedies for breach of the obligations.
In addition to these provisions there are other provisions in the Convention relevant to the obligations of the buyer. This is, of course, the case with the general provisions of Part I of the Convention as well as with the general provisions in Part III on Sale of Goods. Further, the provisions common to the obligations of the seller and the buyer are relevant. Among these provisions one may find, i.a., provisions on anticipatory breach of contract, on damages and interest, on exemptions and on preservation of the goods.
There are still other provisions on what the buyer shall or may do under the Convention. According to Article 38 the buyer must examine the goods or cause them to be examined. Article 39 sets out that the buyer loses his right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he discovered it or ought to have discovered it. Another rule on notice is to be found in Article 43. However, these rules as well as those on the choice by the buyer of different remedies and notice to the seller of such choice do not specify obligations of the buyer in the sense that the seller may resort to remedies for noncompliance by the buyer. They rather have the effect that the buyer must comply with them in order to retain his rights under the Convention.[page 328]
2. The obligations
In Article 53 two sets of obligations of the buyer are identified. First, the buyer must pay the price. This may be described as his main obligation. Secondly, the buyer must take delivery of the goods. In addition, the Convention envisages that the buyer may have other obligations. The Convention does not identify or describe these obligations. Lastly, the Convention contains provisions on remedies for breach of contract by the buyer. These provisions are general in nature and are applicable to all kinds of breach of contract, also to breach of obligations not specified in the Convention.
The part of the Convention devoted to the obligations of the buyer is relatively short: it covers only eight of the 101 Articles while the remedies for breach of contract by the buyer are dealt with in five articles. However, the possible impression that the obligations of the buyer would not be adequately dealt with in the Convention is misleading. As stated above other provisions than those found in this Chapter are relevant to the obligations of the buyer. In addition, the need for, and the possibility to provide for, extensive provisions on the obligations of the buyer is diminished by two factors. First, in most cases the important issues relating to the price and its payment are almost invariably dealt with in the contract. Secondly, many of the problems relating to the payment of the price are not peculiar to sales contracts but are of a more general nature. It might for that reason not be appropriate to deal with them in the somewhat limited context of the international sale of goods.
3. Payment of the price
The Convention deals with three sets of questions arising in the context payment of the price
- what shall the buyer pay,
- where shall he pay, and
- when shall he pay.
The Conventions contains two provisions on the calculation of the [page 329] price. According to Article 56, if the price is fixed according to the weight of the goods, it shall, in case of doubt, be determined by the net weight. This Article seems to cause few difficulties.
The provision does not answer the question whether the buyer shall pay for packaging. According to Article 35(2)(d) the goods do not conform to the contract unless they are contained or packaged in a manner usual for such goods. It is thus up to the seller to provide such packaging. It would seem that the seller cannot charge separately for packaging which he is required to provide but would have to include the calculated cost for such packaging into his price.
Article 55 caused considerable difficulties during the elaboration of the Convention and still seems to do so. Article 55 deals with the problem how to calculate the price if a validly concluded contract does not fix the price or make provisions for determining it. In such cases the parties are considered to have impliedly 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.
Article 55 causes particular difficulties in relation to Article 14. Article 14 deals with offers. According to it a proposal for concluding a contract of sale constitutes an offer only if it fixes or makes provisions for determining the price. One may ask, how can one envisage a contract of sale if there has been no proposal sufficiently definite to constitute an offer.
Obviously, a contract can be concluded through other mechanisms than those indicated in Part II of the Convention on formation of contracts. Accordingly, one may distinguish between the requirements for an offer and those for a contract.
First, let's have a look at the situations, in which the relation between Article 55 and Article 14 may cause problems. This is certainly not the case in the vast majority of large contracts. In those, the question on price is usually dealt with in detail. This is also the case with most contracts in writing. A large majority of the oral contracts do also contain provisions on the price. Even if the parties have not explicitly agreed on the price there would seem to be a strong presumption in favour of the buyer's accepting the price appearing from the seller's price list.
Nevertheless, there seem to be some contracts where this is not the case. If goods are ordered urgently, e.g. spare parts for a machine [page 330] which has broken down, the price may have been left totally open. Let's assume that a ship has lost its propeller during a voyage and that a new one is urgently ordered from a nearby shipyard without any discussion whatsoever on the price. In such a case a rule according to which there is no contract if it does not at least provide a method for determining the price, may lead to odd results. In the example mentioned above there seems to have been no offer of the kind envisaged in Article 14. Nevertheless, the seller manufactured and delivered the propeller, the buyer took delivery of it, installed it and used it. Both parties would be surprised if told that there never was a contract.
It is not conceivable that a buyer who has taken delivery of the goods should be in the position to invoke the inexistence of the contract even if he would no longer need the goods. This would seem to apply also to any other such conduct of the buyer subsequent to the ordering of the goods, which would give the seller an impression of consent. This would seem to follow not only from good sense but also from the requirement of loyalty between the parties and from the need to promote good faith in international trade.
The problem would thus be reduced to the question whether the buyer could invoke the non-existence of a contract if doing so before expressing or indicating a consent to the existence of the contract, whether by taking delivery or in some other manner.
One way of resolving the problem would be by means of a fiction that there is some kind of understanding on what the buyer shall pay. But if you manage to construe a solution on the basis of such a fiction in a case where there have been no previous dealings between the parties, no price list on propellers exist etc., then you may have overcome even greater problems of construction than those provided by Article 55.
From a practical point of view, the problem might be solved in the following way. When dealing with buyers from countries requiring the price to be settled in, or determinable from the contract, sellers ought to be careful not to start production of the goods or dispatching them until the price has been agreed upon. Buyers, on the other hand, should be certain that the price has been agreed upon in order not to find themselves lacking remedies in case of delay in delivery by the seller. From a Nordic point of view the problem would be resolved [page 331] by making the law of one of the Nordic countries applicable to the question whether a contract has been concluded or not. This would seem to follow from making Nordic law applicable to the contract as a whole. As the Nordic countries have made a reservation in respect of Part II of the Convention Article 14 would not govern the conclusion of the contract, which in this respect would be governed by Nordic contract law. As a contract could validly be concluded without fixing or making provision for determining the price Article 55 would not cause problems of the kind referred to above.
Under Article 55 the buyer shall pay the price generally charged at the time of the conclusion of the contract. The seller is thus not entitled to claim the higher price of the time of delivery, unless he has ensured himself such a right under the contract. The price is to be determined on the basis of comparable contracts in terms of i.a. place of delivery and conditions of payment. The provision does not refer to the prices generally charged by the seller. It was felt important to eliminate the possibility of the seller charging excessive prices. If he does not, due account can also be taken of the prices charged by the seller.
The Convention does not deal with the currency in which payment is to be made. One may conclude from Article 53 that the price shall be paid for as provided in the contract. It is debatable whether this rules out the application of provisions of national law, according to which payment may be made in another currency than that of the contract.
The Convention extends the buyer's obligation to pay the price beyond the traditional handing over to the seller of an amount of money corresponding to the price. According to Article 54 the buyer's obligation includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made. The provision provides that the buyer must bear the costs for these measures. In addition, it follows from the provision that the seller may resort to remedies for breach of contract by the buyer if such steps are not taken and formalities complied with in time.
The provision clearly covers an obligation under the contract to procure securities for payment such as letters of credit or guarantees. The buyer may thus be under an obligation to enter into the necessary [page 332] contracts with a bank. If he does not, this amounts to a breach of the obligation to pay the price, and not only to an anticipatory breach of that obligation. He may also be under an obligation to seek governmental authorisation to transfer the amount abroad. Presumably lack of success in this respect does not amount to a breach of contract if he has taken all necessary measures to obtain authorisation. Here Article 79 on exemptions may come into the picture.
Under Article 57, if the buyer is not bound to pay the price at any other particular place, he must pay it to the seller at the seller's place of business. If payment is to be made against the handing over of the goods or of documents, the buyer must pay the price at the place where the handing over takes place.
The rule set out in Article 57 applies only if the buyer is not bound to pay the price at any particular place. An obligation of the kind envisaged in the provision can follow from the contract or from previous dealings between the parties. According to Article 54 the obligation to pay the price includes, i.a., taking such steps as may be required under the contract to enable payment to be made. The place where such measures shall be taken may often be agreed upon, e.g. by a reference to a trade term. Such an agreement may thus extend only to parts of the obligation to pay the price. It is not necessary that this obligation in toto is to be performed at one single place.
The relevant passage of the provision only speaks of the situation where the buyer is bound to pay at a particular place. This would seem to have a bearing on a clause in the seller's invoice stating that payment is to be made to the seller's account in a certain bank. If such a clause is not based on the contract it may be interpreted as a statement by the seller that he will accept payment to have been adequately made if made in time to that account. It is clear that the seller cannot unilaterally impose on the buyer an obligation to make payment in such a manner. Article 57 is thus applicable irrespective of such a clause in the invoice.
Under Article 57, the buyer has to bear the costs and the risk for the transfer of an amount corresponding to the price to the seller's place of business at the time of conclusion of the contract. If the seller [page 333] has more than one place of business, the relevant place of business according to Article 10 is the one which has the closest relationship with the contract and its performance, not only in regard to payment of the price. The uncertainty inherent in this provision is unlikely to cause problems in practice as the place of payment is often stated in the contract or in an invoice enabling the buyer to make payment in accordance with that clause. In spite of such a reference, the buyer may pay the price at the seller's place of business which has the closest relationship with the contract.
In conjunction with Article 58, Article 57 states that if there is a delay in the transfer of the amount to the place where payment is to be made, e.g. due to lack of the authorization of transfer by the appropriate authorities or to a mistake by the buyer's bank, having the effect that the amount is not available at the place of payment in time, there is a breach of contract on part of the buyer.
Under Article 57(2) the seller must bear any increase in expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract. The provision only deals with the distribution of costs. The fact that there is a change in the sellers's relevant place of business does not seem to alter the buyer's obligation to pay the price at the right moment at the new place of business. If this is the case, the question arises, but remains unanswered in the Convention, whether a delay in payment caused by late information by the seller of the new place of payment is to be considered a breach of contract by the buyer and whether that would also be the case if the buyer could offer payment at the seller's original place of business in time. It would seem that the answer may be negative in both cases in view of the provision in Article 79(1).
Article 57(1)(b) deals with the place of payment when payment is to be made against the handing over of the goods or of documents. If the contract provides that payment is to be made against a bill of lading or on CAD or COD terms, the provision settles the problem of errors or delay in transmission of the payment. If the documents are to be tendered at the seller's place of business, there is a delay in payment if payment is not made when the documents are presented in accordance with the contract. If there is a delay or an error in the transmission of the amount to the seller from the place where the [page 334] buyer has paid upon presentation of the documents, this is no longer any concern of the buyer.
The provision on the place of payment seems to have caused problems in some jurisdictions because under national law a party may be entitled to bring suit at the place where payment is to be made. However, this result does not follow from the Convention. During the Vienna Conference an attempt was made to clarify that the Convention did not settle the question of jurisdiction and that it was thought inappropriate to solve this problem in the Convention. If the result is deemed inappropriate, it can be altered by amending national law.
Article 58 deals with the time for payment. The basic rule is that the goods should be exchanged for payment of the price. The seller is not obliged to extend credit to the buyer and the buyer is not required to pay until he receives the goods or documents controlling their disposition.
The expression "documents controlling their disposition" clearly covers the situation where the goods are to be delivered only against surrender of the documents. This would be the case with a bill of lading where the carrier may only deliver the goods to the person presenting the bill of lading.
The expression would also seem to cover a warehouse receipt entitling the holder to claim the goods.
It is uncertain whether the expression covers international way bills issued under the CMR and CIM Conventions governing carriage by road and rail respectively. Under these documents the carrier is required to deliver the goods to the consignee named in the document. The sender may appoint another consignee. However, he may do so only if he can produce the relevant copy of the way bill. Having acquired the way bill, the consignee/buyer is thus protected against dispositions by the sender/seller. As the handing over of the relevant copy of the way bill has the effect that the consignor can no longer alter the consignee to whom the goods are to be handed over, the holder of that copy controls the disposition of the goods in a manner which would seem sufficient for the purposes of Article 58(1).[page 335]
Article 58 (2) deals with the situation where the contract involves carriage of the goods. This expression covers cases where the seller is required or authorized to ship the goods. The contract does not involve carriage if the buyer takes delivery at the seller's place of business and is to make arrangements for the goods to be shipped.
Where the contract involves carriage, the seller must dispatch the goods but he may do so on terms according to which the goods or documents controlling their disposition will not be handed over to the buyer except against payment of the price. The impact of the provision with reference to the time of payment seems to be that the seller may not, unless agreed upon in the contract, make dispatch dependant on previous receipt of payment. On the other hand, the provision states that an arrangement whereby the seller dispatches the goods but does so on terms enabling him to retain control over them until payment is made, does not amount to a breach of contract.
Under Article 58 (1) and (2) the seller may retain control over the goods until payment is made. Article 58 (3) states that the buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon are inconsistent with his having such an opportunity.
Normally, goods which have arrived at their destination, cannot be sold there to another buyer at a price corresponding to the contract price. Some buyers may use this fact as a means to force the seller to accept a reduction of the price by refraining from taking delivery of the goods on the alleged ground of non-conformity. The seller may protect himself against such claims by a provision in the contract specifying a procedure for delivery according to which the buyer may not inspect the goods until payment has been made.
An agreement according to which payment is to be made against transport documents while the goods are in transit would normally be inconsistent with an opportunity to inspect the goods at the place of destination before payment is made. This means that if payment is to be made in this manner, the buyer runs the risk of having to pay although the goods do not conform to the contract. This risk is to some extent diminished by the rules in transport law on the duty of the carrier to insert a reservation in the transport document if the goods do not conform to the description in the document. In addition, the [page 336] buyer may improve his position by requiring a certificate of quality in order to guarantee that he receives what he pays for.
Article 59 states that the buyer must pay the price on the date fixed by or determinable from the contract or the Convention without the need for any request or compliance with any formality on the part of the seller. This provision makes it clear that payment is not subject to any formal demand by the seller in order to become due.
4. Taking delivery
In the Convention a distinction is made between the buyer's obligation to take delivery and his obligation to take over the goods. Of these expressions "take delivery" is the broader one. According to Article 60, the obligation to take delivery consists on one hand in performing all the acts which could reasonably be expected of the buyer in order to enable the seller to make delivery and, on the other hand, in taking over the goods. The latter expression is related to the physical possession of the goods.
The Convention does not deal at any great length with the buyer's obligation to take delivery of the goods.
The obligation to take delivery clearly covers obligations relating to the transmission of the goods from the seller to the buyer. It is less clear whether this obligation also covers the duty to provide information relevant to the production of the goods or to perform other acts at an earlier stage than the actual transmission of the goods. This issue, which is partially covered by Article 65, is relevant with respect to the remedies available to the seller in cases of breach of obligation.
Where the contract of sale involves carriage of the goods and the buyer participates in the arrangements for the carriage, the extent of the buyer's obligation depends on the type of arrangements. The obligation covers the duty to enter into a contract of carriage. It might also cover obligations relating to the loading of the goods and their storage during carriage or at the destination.
The duty to take over the goods relates to the physical possession of them. Since references in the Convention to the buyer also cover [page 337] persons acting on his behalf, it would seem that the obligation referred to in Article 60(b) also covers cases where the carrier refuses to accept the goods for carriage, e.g., because of their dangerous nature, if the buyer should have informed the carrier of the nature of the goods in advance. This obligation also covers the late arrival of a carrier engaged by the buyer at the place where the buyer is to take over the goods. Lastly, it covers the obligation of the buyer himself to take over the goods after carriage arranged by the seller as well as in cases where the contract calls for the seller to make delivery of the goods by placing them at the buyer's disposal at the seller's place of business or at another particular place.
Under Article 86 (2), if goods dispatched to the buyer have been placed at his disposal at their destination and the buyer exercises the right to reject them, he must in certain situations take possession of the goods on behalf of the seller. Here one does not speak of taking delivery and the remedies for failure to take delivery do not apply to failure to take possession.
5. Other obligations of the buyer
The buyer may also have other obligations under the contract. These obligations are not defined in the Convention. On occasion the question may obviously arise whether such obligations are part of the obligation to take delivery, as described in Article 60, or whether they are to be separated from that obligation.
6. Remedies for breach of contract by the buyer
The remedies for breach of contract by the buyer are described in Articles 61-65. In addition, the provisions on damages in Articles 74-77 and on interest in Article 78 are also applicable to breach of contract by the buyer.
The provision on avoidance in Article 64 is supplemented by Article 72 on avoidance prior to the date for performance and by Articles 81-84 on the effects of avoidance. In addition, under Article 71 the seller may suspend his performance in certain cases. The provisions [page 338] on preservation of the goods are also important in an evaluation of the system of remedies.
Some of the remedies described in Articles 61-65 are available to the seller irrespective of the kind of breach by the buyer. Other remedies are available only for breach of a certain obligation. This Section of the Convention actually contains three sets of remedies consolidated into a single text.
The Convention does not describe in detail the relation between the different remedies available to the seller.
Irrespective of whether the seller declares the contract avoided or requires performance, he may claim damages. This is explicitly stated in Article 61(2).
In case of breach by the buyer of the obligation to pay the price, the seller may require performance by the buyer or avoid the contract. In either case, he may claim damages and/or interest.
If payment is not made in time, the seller may require the buyer to pay the price. Even if the delay amounts to a fundamental breach of contract, the seller may still choose to require payment.
The right to require payment is subject to a limitation following from Article 28 on specific performance. I shall not discuss that Article here.
Under Article 64 (1) the seller may declare the contract avoided if the failure to pay the price amounts to a fundamental breach of contract. Alternatively, the seller may fix an additional period of time for payment and declare the contract avoided if the buyer does not pay within that period of time.
By fixing such a period of time the seller can avoid the uncertainty arising from the vagueness of the concept of fundamental breach. The length of the period must be defined. This is the case if the seller has either specified the date on which he may resort to declaring the contract avoided in case payment has not been made or if he has specified the number of days after which he will do so. Secondly, the seller must make it clear that he is fixing the period for the purpose of being able to declare the contract avoided.[page 339]
The additional period must be of a reasonable length. What is reasonable in this context must be ascertained in the light of the circumstances of the case. One may assume, that a reasonable period of time for payment may be quite short and normally shorter than a period that the buyer may fix for the seller's performance of his obligations.
In case of the buyer's delay to take steps to enable payment to be made, the seller may fix a period of time for taking such steps and avoid the contract if the steps have not been taken within that period.
During the period thus fixed the seller may not resort to any remedy for breach of contract. This provision clearly covers a situation where the seller declares the contract avoided for the same reason which made him fix the period. Fixing a period means that the seller accepts not to declare the contract avoided on that ground during the period. However, during that period some other ground for avoidance may arise. A situation could be imagined where the buyer, during the additional period, refuses to take delivery of the goods and this refusal amounts to a fundamental breach of contract. It would not seem necessary to read the Convention in such a way that the contract could not be avoided because of a fundamental breach in taking delivery only because the seller has fixed an additional period for payment of the price.
Under the Convention the contract may be declared avoided for delay in payment irrespective of whether or not the buyer has already taken delivery of the goods. This rule differs from the corresponding rules of the national sale of goods laws in a number of countries. The rule may cause concern to other creditors of the buyer who may see such of the buyer's assets vanish on which they have based their decision to grant the buyer credit. This may, in particular, be the case as the Convention does not require the seller to declare the contract avoided within any specific period of time. He may obviously resort to this remedy as long as payment is not made. Under Article 64(2)(a) the seller cannot declare the contract avoided owing to late payment after having become aware that payment has been made.
Article 72 gives the seller the right to declare the contract avoided because of an anticipatory breach by the buyer.
It follows from Article 61(1)(b) that the seller is entitled to damages if the buyer fails to perform any of his obligations. Article [page 340] 78 seems to indicate that the seller is entitled to damages to the extent his losses are not covered by interest.
If, in cases where the buyer does not pay the price, the seller declares the contract avoided and resells the goods within a reasonable time after avoidance, Article 75 provides that the seller may recover the difference between the contract price and the price in the substitute transaction. If, as usually seems to be the case, the price in the substitute transaction is lower than the contract price, the difference is recoverable under the heading of damages. Alternatively, the seller may choose not to reveal the price of the substitute transaction but to claim damages under Article 76 for the difference between the contract price and the current price of such goods.
If the buyer fails to pay the price, under Article 78 the seller is entitled to interest on the sum in arrears. The Convention establishes only the right to interest but deals neither with the rate of interest nor with the time for which interest may be calculated. Thus these matters must be decided according to the law applicable to the contract.
If the buyer fails to take delivery of the goods, the seller may require him to do so, declare the contract avoided and claim damages.
The seller may require the buyer to take delivery of the goods as long as he has not resorted to a remedy which is inconsistent with this requirement.
If the buyer has neither paid the price nor taken delivery, the remedy may be used together with, or separately from, a requirement for payment. Situations can be envisaged where the seller is more anxious to receive payment than to force the buyer to take delivery of the goods.
In cases where the buyer has paid the price but fails to take delivery, the seller may require him to take delivery. The use of the remedy is limited by Article 28 on specific performance.
The provisions on avoidance of the contract upon the buyer's failure to take delivery of the goods start at the same point as those in respect of failure to pay the price.
First, let us assume that the buyer has neither paid the price nor taken delivery of the goods. In cases where the seller has granted the [page 341] buyer a credit, failure to take delivery may serve as an indication of an anticipatory breach of the obligation to pay the price. It might possibly cause the seller to suspend his performance in accordance with Article 71(1)(b). On the other hand, avoidance due to the failure to take delivery also serves as an independent remedy. The seller should, however, be careful in resorting to avoidance in these cases. The situations where the mere failure to take delivery would amount to a fundamental breach are presumably few.
Secondly, one may consider the case where the buyer has paid the price but fails to take delivery of the goods. Again, the remedy of avoidance for failure to take delivery would hardly be frequently available. As in the previous case, situations can be imagined where the seller necessarily needs to dispose of the goods.
If the buyer has paid the price but not yet taken delivery of the goods the seller must, according to article 64(2)(a), exercise his right to declare the contract avoided before he has become aware that the buyer has taken delivery.
In both cases it might be wiser to resort to the provisions on preservation of the goods. These provisions may be sufficient in dealing with the problems that the seller may have. This is the case if the seller is still in possession of the goods or otherwise able to control the disposition of them, e.g., by means of a transport document or a warehouse receipt in his possession.
Instead of awaiting the time at which the breach in taking delivery amounts to a fundamental breach of contract, the seller may fix an additional period of time for taking delivery. It would seem that this period cannot normally be as short as that which might be envisaged in the case of late payment. If the buyer does not take delivery of the goods within the fixed period, the seller may avoid the contract.
The seller is also entitled to compensation for loss caused by the buyer's failure to take delivery of the goods. The amount of compensation is to be calculated on the basis of Article 74. Under that Article damages consist of a sum equal to the loss, including loss of profit suffered by the seller as a result of the breach. If the seller has resold the goods, the proceeds from the resale are to be taken into account in calculating the difference between the contract price and the price in the substitute transaction. On the other hand, the seller would seem to be entitled to compensation for loss of profit even if he resells the [page 342] goods. The resale would indicate that the seller has lost a market and thus suffered loss of profit in one sale. However, one could also envisage cases where he would not be entitled to compensation for loss of profit.
Although the Convention does not deal with other obligations of the buyer, the provisions on remedies for failure to perform them are applicable. The seller may require performance of these obligations. He may fix an additional period of time for their performance and he may declare the contract avoided in case the failure to perform them amounts to a fundamental breach of contract. However, even if the seller has fixed an additional period of time, he is in this case not entitled to avoid the contract merely on the grounds that the period has lapsed. He may only avoid the contract if the breach is fundamental. Further, the right to declare the contract avoided is limited by the fact that this right must be exercised within a reasonable time after the seller knew or ought to have known of the breach. In addition, the seller may claim damages for the loss caused by the failure to perform the obligation.
* This Article is based on a lecture delivered at a seminar arranged by Association Internationale des Jeunes Avocats in Rome on April 27, 1990.
The bracket phrase page followed by a number is used to identify the page number of the original publication.
1. Argentine, Australia. Austria, China, Denmark, Egypt, Finland, France, German Democratic Republic, Hungary, Italy, Lesotho, Mexico, Norway, Sweden, Syria, United States, Yugoslavia and Zambia. 2. Belorussia, Chile, Czeckslovakia, Federal Republic of Germany, Iraq, Switzerland and Ukraine.
Pace Law School Institute of International Commercial Law - Last updated January 27, 2000
1. Argentine, Australia. Austria, China, Denmark, Egypt, Finland, France, German Democratic Republic, Hungary, Italy, Lesotho, Mexico, Norway, Sweden, Syria, United States, Yugoslavia and Zambia.
2. Belorussia, Chile, Czeckslovakia, Federal Republic of Germany, Iraq, Switzerland and Ukraine.
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