unidroit48 Go to Database Directory || Go to CISG Table of Contents

GUIDE TO THIS ARTICLE

Use of the UNIDROIT Principles to help interpret CISG Article 48


Match-up of CISG Article 48 with counterpart provisions of UNIDROIT Principles


UNIDROIT Principles
Article 7.1.4 - Cure by Non-Performing Party

CISG
Article 48

(1) The non-performing party may, at its own expense, cure any non-performance, provided that

(a) without undue delay, it gives notice indicating the proposed manner and timing of the cure;

(b) cure is appropriate in the circumstances;

(c) the aggrieved party has no legitimate interest in refusing cure; and

(d) cure is effected promptly.

(2) The right to cure is not precluded by notice of termination.

(3) Upon effective notice of cure, rights of the aggrieved party that are inconsistent with the non-performing party’s performance are suspended until the time for cure has expired.

(4) The aggrieved party may withhold performance pending cure.

(5) Notwithstanding cure, the aggrieved party retains the right to claim damages for delay as well as for any harm caused or not prevented by the cure.

1. Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention.

2. If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.

3. A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision.

4. A request or notice by the seller under paragraph (2) or (3) of this article is not effective unless received by the buyer.

[The UNIDROIT article displayed above is to be read in conjunction with the Official Comments on it as "the comments on the articles are to be seen as an integral part of the Principles" (UNIDROIT).]


To examine CISG provisions displayed above in their context, go to the full text of the CISG || To examine UNIDROIT Principles displayed above in their context, go to the full text of the UNIDROIT Principles


Editorial remarks

Commentary on the Manner in which the UNIDROIT Principles
May Be Used to Interpret or Supplement Article 48 of the CISG

Christopher Kee [*]
July 2004

I.   Introduction
II.  Literal and Structural Differences
III. Commentary
IV. Conclusion

I. Introduction

Article 48 is the middle of a trinity of articles that are arguably among the most significant provisions in the Convention. The other two provisions are Articles 47 and 49.

Article 48 is in many ways an unremarkable article. The basic premise of the provision is simple - a seller can remedy any of its obligations even after the time of delivery provided he does so without unreasonable delay or inconvenience to the buyer. The philosophy of this article fits neatly within the broader intentions of the CISG to keep contracts "on-foot."

Article 7.1.4 of the UNIDROIT Principles (UNIDROIT) is grounded in the same philosophy. As Bertram Keller notes in his editorial remarks to CSIG Article 37, the civil law tradition has been generally less familiar with the notion of a right to cure,[1] and its inclusion in UNIDROIT does indeed "encourage the world wide acceptance of a general right to cure."[2]

However, there are some critical differences in the approach and effect of CISG Article 48 and UNIDROIT Article 7.1.4. These editorial remarks concentrate principally on the literal and structural differences between CISG Article 48 and UNIDROIT Article 7.1.4.

II. Literal and Structural Differences

As mentioned in the introduction, CISG Article 48 is a simply worded article.[3] There are very few form requirements a seller must comply with before exercising the right provided to seller by this article. Under Article 48(1) a seller can rectify any defect in its performance, provided the contract has not been avoided by the buyer pursuant to Article 49,[4] and it is not unreasonable to do so - that is, there will not be an unreasonable delay in performing the remedy and it will not put the buyer to unreasonable inconvenience or any uncertainty of reimbursement. The seller does not need to provide notice to the buyer of its intention to cure subject to the conditions just mentioned. The seller has a right to cure per se and does not need to activate in any way. However, the seller is left in a position of uncertainty because that right can be overridden if the buyer avoids the contract pursuant to Article 49. Therefore Article 48(2) and Article 48(3) allow the seller to send a request or notice respectively requiring the buyer to indicate whether it intends to terminate the contract. If the buyer indicates that it is prepared to allow the time requested by a seller to cure its breach, then the buyer is precluded from taking advantage of any remedy inconsistent with that allowance - principally the buyer cannot avoid the contract. Similarly, if the buyer fails to respond to the request or notice within a reasonable time, the buyer is deemed to be allowing the seller an opportunity to cure in accordance with the terms of the request or notice. Conceptually, therefore, Articles 48(2) and 48(3) can be likened or viewed as a mechanism to force a Nachfirst notice from a buyer.[5]

Article 7.1.4 UNIDROIT adopts a very different approach. An immediate difference is that it operates for the benefit of any non-performing party, whereas CISG Article 48 is for the benefit of the seller only. This difference has more to do with the overall structure of the UNIDROIT Principles rather than a reflection on the CISG. With this in mind, these editorial remarks will continue to use the language of buyer and seller, as it will enable a more meaningful comparison.

There are two other differences that are significant and deserve comment. The first is that under Article 7.1.4(1)(a) a seller must give the buyer a notice of cure before the right to cure arises. The second difference is that notwithstanding the buyer might have issued a notice of termination, the effects of that purported termination are suspended if the seller issues a valid notice of cure.

In most other respects the counterpart articles are the same. Although expressed differently, the principal effect and purpose of the remaining parts of Article 7.1.4 are that it must be reasonable for the seller to cure.[6]

III. Commentary

As noted above, in the CISG the right to cure exists per se whereas under UNIDROIT it must be invoked by a valid notice to the buyer. In both instruments the purpose of the request or notice as the case be may serves to eliminate any uncertainty. Whilst at one level it might be simply said that the failure of UNIDROIT to recognize the right to cure as a right per se is merely a reflection of the civil law not fully embracing this concept, a notice requirement would serve to avoid another tension that exists in the CISG. Reference was made in the introduction to a trinity of CISG articles. Article 48 is clearly expressed to be subject to Article 49, but what is its relationship to Article 47? There is undoubtedly a potential conflict between these two articles as both refer to reasonableness. The concept of reasonableness is one that appears frequently throughout the CISG. Much has been written on this concept.[7] Anything that is not unreasonable must be reasonable. So whilst it might be reasonable for a seller to offer to cure within eight weeks under Article 48, it may also be reasonable for the buyer to require the cure within six weeks. The buyer's right in Article 47, like Article 48 is a per se right. Although this is perhaps an unlikely tension, it is one that has on occasion been judicially decided.[8] The UNIDROIT position prevents this potential confusion; the first to send an effective notice prevails.

The second difference referred to above was the consequence a notice to cure has on a buyer's attempt to avoid the contract. The "rights of the [buyer] that are inconsistent with the [seller's] performance are suspended until the time for cure has expired" including the effects of any notice of termination. This can only be in interpreted to mean that if the breach is capable of cure it cannot be a "fundamental non-performance";[9] to do otherwise would mean that it was possible to do the impossible and breath new life into a terminated contract.[10] As a result, the UNIDROIT provision has be rightly criticized for the uncertain position in which it places the buyer,[11] and implicit in that criticism is a preference for the CISG Article 48 approach.

The final issue to be noted by way of commentary is the similarity between the articles. Both CISG Article 48 and UNIDROIT Article 7.1.4 require the buyer to receive the relevant communication (request or notice) before the provision becomes effective. While UNIDROIT does generally require receipt,[12] the CISG on the other hand generally prefers to refer to dispatch pursuant to Article 27.[13]

IV. Conclusion

A comparative analysis between CISG Article 48 and UNIDROIT Article 7.1.4 is a useful exercise in the task of understanding each provision better. Often one learns more from understanding what something is not rather than simply trying to interpret what it is. In this instance, besides some common features, it cannot be said that the counterpart provisions in the CISG and the UNIDROIT Principles are 'on all fours' because there contain some important structural differences, which have been identified in these comments and are worthy of further debate.

[See also commentary by the author on this subject in: John Felemegas ed., An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press (2006) 189-192.]


FOOTNOTES

* Christopher Kee is an Associate Lecturer in Law at Deakin University and is a Partner with Keelins, Melbourne Australia (ckee@keelins.com).

1. See Keller, B. Editorial Remarks, in guide to CISG Article 37, available online at <http://www.cisg.law.pace.edu/cisg/principles/uni37.html#er> at para. (b).

2. Ibid.

3. Although not strictly part of the structure of Article 48, it should also be noted that both CISG Article 49(2)(b)(iii) and Article 50 specifically refer to Article 48.

4. On the priority issue between Articles 48 and 49, see X. GmbH v. Y. e.V., Switzerland 5 November 2002 Commercial Court des Kantons Aargau [available at <http://cisgw3.law.pace.edu/cases/021105s1.html>], which suggests that "when the seller notifies the buyer of his readiness for performance, the buyer may not within a reasonable period of time 'resort to any remedy which is inconsistence with performance by the seller.' For this reason, the buyer does not have the right to avoid the contract even in case of an objective fundamental defect as long as and as far as the seller comes up with a remedy (subsequent cure of the defect) and such is still possible" at 4(b)(aa). This case in turn refers to Germany 31 January 1997 Appellate Court [Oberlandesgericht] Koblenz , 2 U 31/96 = CISG Online 256 [available at <http://cisgw3.law.pace.edu/cases/970131g1.html>]. The rationale of these cases is that if the potential exists for the seller to cure then the breach itself cannot be a fundamental one, and therefore the buyer cannot avail itself of Article 49 in any event. Contrast this view with Koch, R. "The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG)" of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999) 177-354 at p.322.

5. It is particularly interesting to use this conceptualization when debating the priority between CISG Article 47 and CISG Article 48, see the "Commentary" section below. For an explanation of a Nachfrist notice and commentary on CISG Article 47 generally, see the 'Annotated Text of CISG Article 47' and associated links available at <http://www.cisg.law.pace.edu/cisg/text/e-text-47.html>.

6. Although the drafters of the UNIDROIT provisions choose to avoid the use of the word 'reasonable' in the provisions themselves, they do imbue that word into the meaning of Article 7.1.4 through the Official Comments where the word is frequently used. "[T]he comments on the articles are to be seen as an integral part of the Principles" (UNIDROIT).]

7. See in particular Anderson, C.B. "Reasonable Time in Article 39(1) of the CISG - Is Article 39(1) Truly a Uniform Provision" Part I, para. 2.3, at <http://www.cisg.law.pace.edu/cisg/biblio/andersen.html>. Reasonableness is regarded as one of the general principles of the Convention, see Albert H. Kritzer, Overview Comments on Reasonableness, at <http://cisgw3.law.pace.edu/cisg/text/reason.html#over>.

8. See for example Germany 24 September 1998 District Court Regensburg, available online at <http://cisgw3.law.pace.edu/cases/980924g1.html> where it was found that a buyer's purported avoidance following the allowance of a further fourteen day period for delivery was considered to "thwart" the sellers right to cure under Article 48. To simply extract and refer to an issue such as this does run the risk of decontextualizing the decision, however, it would certainly seem that the Court was of the view that the seller's right to cure took precedence to the buyer's right to set an additional period for performance. A better interpretation of the facts in that case may have been that the period allowed by the seller was unreasonable and therefore declaration of avoidance premature.

9. UNIDROIT Article 7.3.1; see general discussion of this point in note 3 above.

10. However, see Janse van Vuuren, E. "Termination Of International Commercial Contracts For Breach Of Contract: The Provisions Of The UNIDROIT Principles Of International Commercial Contracts, 15 Ariz. J. Int'l & Comp. Law 583 at 633, who takes the view that non-performing party may be able to suspend the effects of termination notwithstanding a valid termination by the aggrieved party.

11. Koch, R. "The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG)" of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999) 177-354 at p.324

12. See UNIDROIT Article 1.9

13. "Th[e] general rule [of the CISG] making notices effective on dispatch is subject to specific exceptions in Articles 47(2), 48(4), 63(2), 65(1)&(2) and 79(4). Nearly all of these provisions involve a communication by a party who is in breach of contract; the 'receipt' principle was used so that a mishap in transmission would not add to the burdens of the aggrieved party." John O. Honnold, "Uniform Law for International Sales", 3d ed., Kluwer Law International (1999) at p. 217, citing the legislative history of CISG Article 27 at the 1980 Vienna Diplomatic Conference. On this issue generally see Chengwei Liu, "Remedies for Non-performance: Perspectives from CISG, UNIDROIT Principles & PECL" available online at <http://www.cisg.law.pace.edu/cisg/biblio/chengwei.html#fulltext>.


Official Comments on Articles of the UNIDROIT Principles cited

Comments reprinted with permission from UNIDROIT

 

ARTICLE 7.1.4

(Cure by non-performing party)

(1) The non-performing party may, at its own expense, cure any non-performance, provided that

(a) without undue delay, it gives notice indicating the proposed manner and timing of the cure;

(b) cure is appropriate in the circumstances;

(c) the aggrieved party has no legitimate interest in refusing cure; and

(d) cure is effected promptly.

(2) The right to cure is not precluded by notice of termination.

(3) Upon effective notice of cure, rights of the aggrieved party that are inconsistent with the non-performing party's performance are suspended until the time for cure has expired.

(4) The aggrieved party may withhold performance pending cure.

(5) Notwithstanding cure, the aggrieved party retains the right to claim damages for delay as well as for any harm caused or not prevented by the cure.

COMMENT

1. General principle

Para. (1) of this article provides that, if certain conditions are met, the non-performing party may cure by correcting the non-performance. In effect, by meeting these conditions, the non-performing party is able to extend the time for performance for a brief period beyond that stipulated in the contract, unless timely performance is required by the agreement or the circumstances. This article thus favours the preservation of the contract. It also reflects the policy of minimising economic waste, as incorporated in Art. 7.4.8 (Mitigation of harm), and the basic principle of good faith stated in Art. 1.7. This article is related to the cure provisions contained in Arts. 37 and 48 CISG and in some domestic laws governing contracts and sales. Even many of those legal systems that do not have a rule permitting cure would normally take a reasonable offer of cure into account in assessing damages.

2. Notice of cure

Cure may be effected only after the non-performing party gives notice of cure. The notice must be reasonable with regard to its timing and content as well as to the manner in which it is communicated. Notice of cure must be given without undue delay after the non-performing party learns of the non-performance. To the extent information is then available, the notice must indicate how cure is to be effected and when. Notice must also be communicated to the aggrieved party in a manner that is reasonable in the circumstances.

Notice of cure is considered to be "effective" when the requirements of para. (l)(a) - (c) have been met.

3. Appropriateness of cure

Whether cure is appropriate in the circumstances depends on whether it is reasonable, given the nature of the contract, to permit the non-performing party to make another attempt at performance. As indicated in para. (2), cure is not precluded merely because the failure to perform amounts to a fundamental non-performance. The factors to be considered in determining the appropriateness of cure include whether the proposed cure promises to be successful in resolving the problem and whether the necessary or probable delay in effecting cure would be unreasonable or would itself constitute a fundamental non-performance. However, the right to cure is not defeated by the fact that the aggrieved party subsequently changes its position. If the non-performing party gives effective notice of cure, the aggrieved party's right to change position is suspended. Nonetheless, the situation may be different if the aggrieved party has changed position before receiving notice of cure.

4. The aggrieved party's interest

The non-performing party may not cure if the aggrieved party can demonstrate a legitimate interest in refusing cure. However, if notice of cure is properly given and if cure is appropriate in the circumstances, it is presumed that the non-performing party should be permitted to cure. A legitimate interest may arise, for example, if it is likely that, when attempting cure, the non-performing party will cause damage to person or property. On the other hand, a legitimate interest is not present if, on the basis of the non-performance, the aggrieved party has simply decided that it does not wish to continue contractual relations.

Illustration

1. A agrees to construct a road on B's property. When the road is complete, B discovers that the road grade is steeper than the contract permits. B also discovers that, during construction, A's trucks caused damage to B's timber. A gives notice of cure to regrade the road. Even if cure would otherwise be appropriate in the circumstances, B's desire to prevent further damage to the timber may provide a legitimate interest for refusing cure.

5. Timing of cure

Cure must be effected promptly after notice of cure is given. Time is of the essence in the exercise of the right to cure. The non-performing party is not permitted to lock the aggrieved party into an extended waiting period. The lack of inconvenience on the part of the aggrieved party does not justify the non-performing party in delaying cure.

6. Proper forms of cure

Cure may include repair and replacement as well as any other activities that remedy the non-performance and give to the aggrieved party all that it is entitled to expect under the contract. Repairs constitute cure only when they leave no evidence of the prior non-performance and do not threaten the value or the quality of the product as a whole. It is left to the courts to determine the number of times the non-performing party may attempt a cure.

Illustration

2. A agrees to install an assembly line for high temperature enamel painting in B's factory. The motors are installed with insufficient lubricant and as a result "lock up" after a few hours of operation. A replaces the motors in a timely fashion, but refuses to examine and test the rest of the equipment to ensure that other parts of the line have not been damaged. A has not effectively cured.

7. Suspension of other remedies

When the non-performing party has given effective notice of cure, the aggrieved party may, in accordance with para. (4), withhold its own performance but, pursuant to para. (3), may not exercise any remedies inconsistent with the non-performing party's right to cure until it becomes clear that a timely and proper cure has not been or will not be effected. Inconsistent remedies include giving notice of termination, entering into replacement transactions and seeking damages or restitution.

8. Effect of a notice of termination

If the aggrieved party has rightfully terminated the contract pursuant to Arts. 7.3.1(1) and 7.3.2(1), the effects of termination (Art.7.3.5) are also suspended by an effective notice of cure. If the non-performance is cured, the notice of termination is inoperative. On the other hand, termination takes effect if the time for cure has expired and any fundamental non-performance has not been cured.

9. Right of aggrieved party to damages

Under para. (5) of this article, even a non-performing party who successfully cures is liable for any harm that, before cure, was occasioned by the non-performance, as well as for any additional harm caused by the cure itself or by the delay or for any harm which the cure does not prevent. The principle of full compensation for damage suffered, as provided in Art. 7.4.2, is fundamental to these Principles.

10.The aggrieved party's obligations

The decision to invoke this article rests on the non-performing party. Once the aggrieved party receives effective notice of cure, it must permit cure and, as provided in Art. 5.3, cooperate with the non-performing party. For example, the aggrieved party must permit any inspection that is reasonably necessary for the non-performing party to effect cure. If the aggrieved party refuses to permit cure when required to do so, any notice of termination is ineffective. Moreover, the aggrieved party may not seek remedies for any non-performance that could have been cured.

Illustration

3. A agrees to construct a shed on B's property in order to protect B's machinery from the weather. The roof is constructed in a defective manner. During a storm, water leaks into the shed and B's machinery is damaged. B gives notice of termination. A gives timely notice of cure. B does not wish to deal further with A and refuses the cure. If cure is appropriate in the circumstances and the other conditions for cure are met, B cannot invoke remedies for the faulty construction but can recover for damage caused to the machinery before the cure was to be effected. If cure is inappropriate in the circumstances, or if the proposed cure could not have solved the problem, the contract is terminated by B's notice.


Pace Law School Institute of International Commercial Law - Last updated January 5, 2007
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Table of Contents of the UNIDROIT Principles