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Source: Doc. B(1) Reproduced from UNCITRAL Yearbook VIII (1977), A/32/17, pages 25-64

EXCERPT FROM ANNEX I

Report of Committee of the Whole I relating to the
draft Convention on the International Sale of Goods

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CISG
number
Art. 78

Article 58

492. The text of article 58, as adopted by the Working Group on the International Sale of Goods, is as follows:

"If the breach of contract consists of delay in the payment of the price, the seller is in any event entitled to interest on such sum as is in arrears at a rate equal to the official discount rate in the country where he has his place of business, plus 1 percent, but his entitlement is not to be lower than the rate applied to unsecured short-term commercial credits in the country where the seller has his place of business."

Place at which interest should be calculated

493. The Committee considered a proposal that the place at which interest should be calculated should be the buyer's country. It was stated that if the rate of interest in the seller's country was significantly lower than the rate of interest in the buyer's country, the buyer might be tempted to delay payment so as to take advantage of this favourable rate. Alternatively, it was suggested that the rate might be based upon the average of the rate in the buyer's country and the rate in the seller's country.

494. In opposition to this proposal it was stated that, if the buyer did not pay the price when due and the seller had to borrow money because of the late payment, he would normally have to borrow in his own country at the prevailing rates there. Even if he did not have to borrow money as a result of the late payment, he would have less money on deposit in his own country gaining interest. If the prevailing rate of interest in his country was 15 percent but it was only 6 percent in the buyer's country, it would not be appropriate for him to be limited to the lower interest rate in the buyer's country.

Proposals to delete article 58 or to make a declaration or reservation

495. The discussions in respect of the place at which the interest should be calculated brought forth a number of proposals whose objective was the deletion of article 58 or the possibility of rendering it inoperative in relation to individual States, either by means of reservation or by means of declaration.

496. These proposals arose from the fact that many countries had mandatory rules of public policy prohibiting interest rates to exceed a specified maximum, frequently of the order of 6 to 7 percent. Furthermore, some countries prohibited the charging of any interest whatsoever. A provision along the lines of article 58, which would require the charging of interest and its calculation at a rate which might be far in excess of the usual or allowed in the buyer's country, the place at which any judicial procedure for late payment would normally take place, would make it difficult for some countries to adhere to the Convention.

497. There was general sympathy expressed for those countries whose national laws set maximum rates of interest which could conflict with the rate produced by the formula in article 58. It was noted that article 58 contained a particular. method of assessing damages which, although it was convenient in practice, was not essential. Loss suffered by a seller due to delay in payment of the price could be recovered under the general formula for recovery of damages expressed in article 55.

498. In addition, apart from many drafting problems, the following matters would require clarification if the article was retained:

(a) Article 58 referred to an "official discount rate" but many countries did not have an "official discount rate;"

(b) Article 58 referred to "the rate applied to unsecured short-term commercial credits" but there was usually no one such rate since the rate would vary depending on the parties or the nature of the sale;

(c) The addition of "one percent" to the "official discount rate" was considered by some representatives to be unjust.

499. In view of these difficulties, coupled with the fact that the article was, in any version, inherently unacceptable to a number of representatives, particularly those of developing countries, the Committee, after considerable deliberation, decided to delete article 58.

Decision

500. The Committee recommends that the Commission should delete article 58. [page 60]

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Pace Law School Institute of International Commercial Law - Last updated July 27, 2007
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