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Cite as Tallon in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 601-606. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 81

Denis Tallon

1. History of the provision
2. Meaning and purpose of the provision


(1) Avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract.

(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.

1. History of the provision

     1.1. - Article 81 is almost an exact copy of Article 78 of ULIS although the latter failed to specify that the avoidance did not affect any provisions of the contract relating to the settlement of disputes or governing the respective rights of the parties consequent upon the said avoidance. It differs only in a few formal details from Article 66 of the UNCITRAL Draft Convention.

2. Meaning and purpose of the provision

     2.1. - Article 81 is the first of a section of four articles of unequal importance dealing with the consequences which result from a declaration of avoidance accomplished by a party in accordance with the conditions set forth in Articles 49, 51, 64, 72 and 73 of the Convention. [page 601]

The wording of the English version, which uses the term avoidance to designate both the termination of the contract as a consequence of the non-performance imputable to the debtor and the disappearance of a contract which follows from an impossibility of performance (which term is used also in reference to nullity), and that of the French version which, as in French law, uses the word résolution in regard to both situations, lack precision. The two cases are indeed distinguishable, as noted above concerning Article 79. In case of impossibility the disappearance of the contract takes place by operation of the law whereas in case of non-performance imputable to the debtor a prior declaration by the creditor is needed (see commentary on Article 79, supra, § 3.4.4.). Certain provisions of this section nevertheless apply, by analogy, to cases of impossibility (see commentary on Article 79, supra, § 3.4.).

     2.2. - The provision sets forth the two consequences which result from the avoidance of the contract. As to the future, the parties are released from their obligations. As to the past, they must return what has been supplied or paid under it. These provisions are effective only between the parties. They do not affect the consequences with regard to third parties, namely those which may follow from contracts entered into by the buyer prior to the avoidance (resale, rental, etc.). This issue is governed by the applicable law.

Once a contract has been (validly) declared avoided by one of the parties, both parties, as a rule, are released from all their obligations for the future. The seller is not allowed to claim the price and the buyer cannot claim the delivery of the goods. Performance in kind under any form, is henceforth impossible. If the contract is partially avoided, the parties are released from their obligations only as to that part of the contract which has been avoided.

The article specifies, however, that this disappearance takes place «subject to any damages which may be due». As opposed to the situation in which a contract is avoided because it has become impossible to perform (Article 79), avoidance, in the instant case, does not prevent the injured party from claiming damages on account of the non-performance by the other party of one of his obligations. This rule prevails in many legal systems. [page 602] However, some of them, e.g., the law of Federal Republic of Germany, do not permit a plurality of remedies. The latter solution is expressly condemned by the Convention.

Thus a buyer compelled to avoid the sale of a recreation vehicle a few days before leaving on vacation owing to the lack of conformity of the vehicle may claim damages covering the expenses he had to incur to rent another car.

     2.3. - The second sentence of Article 81(1) states a restriction: the avoidance «does not affect any provisions of the contract for the settlement of disputes or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract». This rule aims at bypassing the basic argument according to which when a contract is terminated, those provisions which are ancillary to it become, in consequence, void. This solution would entail absurd results since it is precisely when a contract cannot be performed and is thus subject to avoidance that such provisions are especially useful. Clauses relating to the «settlement of dispute» include mainly arbitration and renegotiation clauses -- designed to resolve conflicts resulting from unforeseeable changes in circumstances -- and forum selection clauses. Domestic laws generally recognize the validity of such clauses despite the avoidance of the contract.

The second category of clauses to which the text refers are those which spell out the consequences of the non-performance of the contract: penalties, liquidated damages, clauses restricting or excluding liability. Provided that these clauses are valid according to the applicable law (which may not always be the case, namely concerning penalties), they must also be deemed effective notwithstanding the avoidance of the contract. A literal interpretation of the text could, however, lead to a paradoxical result. If, for example, a penalty is stipulated in case of delay in the delivery and the contract is finally avoided on the ground of lack of conformity, one could argue that payment of the said penalty is not an obligation «consequent upon the avoidance of the contract» since the avoidance is not declared as a result of the delay. But two arguments condemn this interpretation: the spirit of the text, the aim of which is to prevent the disappearance of clauses which may prove useful in resolving a conflict between [page 603] the parties and the fact that a penalty is a substitute to damages and that the latter subsist notwithstanding the avoidance (Article 81(1), first sentence). Once again, the solutions set forth in the Convention are in harmony with the various domestic laws.

     2.4. - Are there any other exceptions? In other words, can obligations that are not expressly mentioned in Article 81(1) be deemed not affected by the avoidance? According to the Secretariat's Commentary (Official Records, I, 57) and to HONNOLD, Uniform Law, 447, the obligation of the seller «to take such steps as are reasonable ... to preserve (the goods)» if the buyer is in delay in taking delivery (Article 85), or if the buyer has received the goods and intends to exercise any right under the contract or the Convention to reject them (Article 86), should not be jeopardized by the avoidance of the contract. This opinion is debatable as it extends beyond the terms of Article 81 -- even widely construed. Moreover, it is useless because all legal systems acknowledge that when a contract is terminated the possessor is under an obligation to preserve the goods with due care until they are restituted.

     2.5. - Article 81(2) deals with the consequences which follow from the avoidance of the contract when it has been performed either wholly or in part. The provision is concerned only with the past. It provides that each party may claim whatever he has supplied (the goods or something ancillary to them) or paid (the price). This rule, however, is not recognized similarly in all legal systems. In effect, some of them only allow restitution to the injured party. At common law, the goods do not have to be physically returned: a restitution, as a rule, takes the form of compensation in money (the same attitude of distrust exists in relation to specific performance and restitution in kind).

Article 81(2) does not pose the problem in abstract terms of retroactivity. Its wording, however, implies the retrospective disappearance of the contract. By undermining the juridical basis (some systems would refer to the notion of cause) of the contract, i.e., that on which the parties have performed their obligations, the avoidance renders any act accomplished prior to it void. This situation entails the application of the rules known in French law as répétition de l'indû (condictio indebiti) or, more widely, those of unjust enrichment or quasi-contracts. [page 604]

     2.6. - Each party must give up that which he has received under the contract, except when restitution has become impossible (see Article 82(2)(a)). The parties' actions are governed by the applicable law. Where such provisions exist, a daily fine for delay in restitution (astreinte) will most likely be ordered. Where, however, specific performance is limited, restitution in natura will be difficult to obtain. Certain modes of restitution are set forth in the following articles, but occasional reference to the applicable law may be necessary.

As noted by the Secretariat's Commentary (Official Records, I, 57) the parties may come to an agreement concerning the modes of restitution. They may even decide that no restitution will be made. Thus, in the case of a contract for the delivery and payment of goods by instalments, they may agree to both retain what they received prior to the avoidance.

The non-performing party is liable for all the expenses consequent to the restitutions. Although the text does not specify it, this solution results from the principle that damages are designed to compensate the injured party for the entire loss he has suffered owing to the breach. The expenses for which the party in breach is liable are, in effect, damages. If, however, the contract has become impossible to perform, each party is liable for his own expenses in carrying out the restitution of the goods or money. As noted by the Commentary of the Secretariat (Official Records, I, 57) the party who relies on the breach must «take such measures as are reasonable in the circumstances to mitigate the loss» (Article 77) (i.e., the seller must act so as to limit the expenses the buyer will have to incur in order to return the goods). The same result might be attained by applying the rules governing tortious liability.

Finally, the text specifies that the restitutions must be made «concurrently». In a bilateral contract, avoidance constitutes the reverse of performance. The similarity of the rules governing restitutionary actions and specific performance has already been noted. The same comparison applies in regard to the concurrence of the restitutions. The rules governing the suspension of the performance (Article 71) are applicable by analogy. The buyer can refuse to restore the goods if the seller does not offer to restitute the price and vice-versa by virtue of the principle that «a party may suspend the performance of his obligations if ... it becomes [page 605] apparent that the other party will not perform a substantial part of his obligations» (exceptio non adimpleti contractus).

     2.7. - Finally, it must be noted that restitution may be thwarted by the bankruptcy of the party who is under a duty to return the goods or the price, i.e., by all the procedures which may alter the relationships between debtors and creditors. These procedures are governed by the applicable domestic laws. Various techniques have been adopted by legal systems to meet this situation. As a general rule, they all allow extra-time to the debtor, reduce the amount of the debt in money, and refuse restitution in kind. [page 606]

Pace Law School Institute of International Commercial Law - Last updated February 10, 2005
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