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Article 73. Avoidance in Installment Contracts

TEXT OF ARTICLE 73

(1) In the case of a contract for delivery of goods by instalments, if the failure of one party to perform any of his obligations in respect of any instalment constitutes a fundamental breach of contract with respect to that instalment, the other party may declare the contract avoided with respect to that instalment.

(2) If one party's failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude that a fundamental breach of contract will occur with respect to future instalments, he may declare the contract avoided for the future, provided that he does so within a reasonable time.

(3) A buyer who declares the contract avoided in respect of any delivery may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries if, by reason of their interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract.


OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

73A Fundamental breach with respect to installment (art. 73(1))

73A1 Declaration of avoidance with respect to defective installment

73B Refusal of future installments (art. 73(2))

73B1 When breach in one installment gives grounds to expect:

73B12 Fundamental breach with respect to future installments

73B2 Declaration of avoidance for future within reasonable time

73C Defect in one delivery prevents use of other deliveries

73C1 Avoidance for both past and future installments (art. 73(3))

73D Other problems


DESCRIPTORS

Avoidance ; Installment contracts


CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

UNCITRAL has identified relevant cases in Digests containing case annotations for each article of the CISG. UNCITRAL cites 19 cases in its Digest of Art. 73 case law:

Austria      2           Germany      3           Spain         1          
China      1 Hungary 2 Switzerland   3
Finland      1 ICC 4 United States        1
France      1 TOTAL:   19

Presented below is a composite list of Art. 73 cases reporting UNCITRAL Digest cases and other Art. 73 cases. All cases are listed in chronological sequence, commencing with the most recent. Asterisks identify the UNCITRAL Digest cases, commencing with the 17 December 2001 citation reported below. Cases are coded to the UNCITRAL Thesaurus.

English texts and full-text English translations of cases are provided as indicated. In most instances researchers can also access UNCITRAL abstracts and link to Unilex abstracts and full-text original-language case texts sourced from Internet websites and other data, including commentaries by scholars to the extent available.
 

Netherlands 29 July 2009 Rechtbank [District Court] Arnhem (___ v. Omnibus Trading B.V.)
 

Denmark 1 December 2008 Sø-og Handelsrets [Maritime and Commercial Court] (Bonansea S.p.A. v. Bombardier Transportation Denmark A/s)

Germany 18 November 2008 Oberlandesgericht [Appellate Court] Brandenburg (Beer case) 73B12 [translation available]

United States 1 July 2008 U.S. District Court [Minnesota] (Dingxi Longhai Dairy, Ltd v. Becwood Technology Group, L.L.C.)
 

Denmark 17 October 2007 Højesteret [Supreme Court] (Motorcycle case)

China October 2007 CIETAC Arbitration Award [CISG 2007/03] (CD-R and DVD-R production line systems case) 73A [translation available]

Ukraine 13 April 2007 Commercial Court of Donetz Region (Crucible press case) [translation available]
 

China August 2006 CIETAC Arbitration Award [CISG 2006/13] (Chilling press case) 73B12 [translation available]

Spain 22 May 2006 Court of First Instance of Badalona (Bermuda shorts case) 73B [translation available]

Denmark 20 January 2006 Sø-og Handelsrets Domme [Maritime and Commercial Court] Copenhagen (Motorcycle case)
 

Netherlands 31 August 2005 Gerechtshof [Appellate Court] Leeuwarden (Auto-Moto Styl S.R.O. v. Pedro Boat B.V.) [translation available]

China 7 April 2005 CIETAC Arbitration Award [CISG/2005/01] (Cotton gin motes case) 73C [translation available]

Austria 1 February 2005 Oberlandesgericht [Appellate Court] Innsbruck (Powdered tantalum case) 73B [translation available]

Italy 11 January 2005 Tribunale [District Court] Padova (Rabbit case) [translation available]
 

Germany 6 October 2004 Oberlandesgericht [Appellate Court] Frankfurt 73A [translation available]

Netherlands 27 July 2004 Gerechtshof [Appellate Court] Arnhem

Germany 22 July 2004 Oberlandesgericht [Appellate Court] Düsseldorf [translation available]

Austria 9 July 2004 Landesgericht [District Court] Innsbruck

Ukraine 15 April 2004 Tribunal of International Commercial Arbitration, Ukrainian Chamber of Commerce & Trade [translation available]
 

Austria 17 December 2003 Oberster Gerichtshof [Supreme Court] 73A ; 73B12 [translation available]

ICC 2003 International Court of Arbitration, Case 11849 (Fashion products case) 73B [English text]
 

China 27 November 2002 Higher People’s Court of Ningxia Hui [translation available]

Netherlands 15 October 2002 Netherlands Arbitration Institute Case No. 2319 73A ; 73B ; 73C [English text]

Switzerland 11 April 2002 Tribunal Cantonal [Appellate Court] Vaud
 

* United States 17 December 2001 U.S. District Court [Michigan] (Shuttle Packaging Systems v. Tsonakis)

Italy 28 September 2001 Milan Arbitration proceeding (Steel wire case) [English text]

Germany 29 May 2001 Landgericht [District Court] Darmstadt 73A1 [translation available]
 

Belgium 26 April 2000 Hof van Beroep [Appellate Court] Gent 73A [translation available]

China 31 January 2000 CIETAC Arbitration Award [CISG/2000/09] (Clothes case) 73C [translation available]
 

China 10 August 1999 CIETAC Arbitration Award [CISG 1999/35] (Raincoat case) 73A1 [translation available]

* ICC August 1999 International Court of Arbitration, Case 9887 [English text]

* ICC July 1999 International Court of Arbitration, Case 9448 [English text]

* Hungary 25 May 1999 Budapest Arbitration proceeding Vb 97142 73B

China 5 April 1999 CIETAC Arbitration Award [CISG/1999/19] (Air conditioner equipment case) 73A1 [translation available]

China 29 March 1999 CIETAC Arbitration Award [CISG/1999/14] (Flanges case) 73A1 [translation available]

ICC 1999 International Court of Arbitration, Case 10274 73A1 ; 73B12 [English text]
 

* Germany 29 December 1998 Hamburg Arbitration award 73A ; 73B [translation available]

* Switzerland 30 November 1998 Handelsgericht [Commercial Court] Zürich 73A [translation available]

* Finland 30 June 1998 Helsingin hovioikeus [Appellate Court] Helsinki [translation available]

China 22 June 1998 Shanghai Second Intermediate People's Court [District Court] (China Yitou Group Company. v. Germany Gerhard Freyso LTD GmbH & Co.) 73B [translation available]

* Austria 12 February 1998 Oberster Gerichtshof [Supreme Court] 73B [translation available]
 

* Austria 10 December 1997 Vienna Arbitration award S 2/97 73B12 [translation available]

* Spain 3 November 1997 Audiencia Provincial [Appellate Court] Barcelona 73B12

China 29 September 1997 CIETAC Arbitration Award [CISG/1997/28] (Aluminum oxide case) 73C1 [translation available]

China 26 June 1997 CIETAC Arbitration Award [CISG/1997/17] (Monohydrate zinc sulphate case) 73C [translation available]

* Switzerland 5 February 1997 Handelsgericht [Commercial Court] Zürich 73A ; 73B12 [translation available]
 

Austria 25 October 1996 Oberlandesgericht [Appellate Court] Wien (Vienna) [3 R 167/96t-33]

* ICC October 1996 International Court of Arbitration, Case 8740 73A ; 73A1 [English text]

China 18 September 1996 CIETAC Arbitration Award 73A [translation available]

China 8 August 1996 CIETAC Arbitration Award [CISG/1996/36] (Diaper machine case) 73C1 [translation available

* Switzerland 31 May 1996 Arbitration ZHK 273/1995 [Zürich Chamber of Commerce] 73A ; 73A1 ; 73B2 [English text]

* Germany 21 March 1996 Hamburg Arbitration award [translation available]

Austria 6 February 1996 Oberster Gerichtshof [Supreme Court] [translation available]
 

* Hungary 17 November 1995 Budapest Arbitration award Vb 94124 73B12

Germany 21 September 1995 Landgericht [District Court] Kassel 73A [translation available]

* China 18 September 1995 Chansha Intermediate People's Court Economic Chamber (Skandinaviska v. Hunan Co) 73A [translation available]

* Germany 21 August 1995 Landgericht [District Court] Ellwangen 73B12 [translation available]

Russia 25 April 1995 Arbitration award 161/1994 73C1 [translation available]

Belgium 1 March 1995 Rechtbank van Koophandel [District Court] Hasselt

* France 22 February 1995 Cour d'appel [Appellate Court] Grenoble 73B12 [translation available]

* ICC 1995 International Court of Arbitration, Case 8128 73A ; 73B [translation available]
 

CHINA 12 December 1994 CIETAC Arbitration Award [CISG/1994/14] (Sunflower seeds and groundnut case) 73C [translation available]
 

Germany 23 March 1992 Landgericht [District Court] Saarbrücken


CASE DIGEST AND ANALYSIS
-   UNCITRAL's case law digest; and
-   An analysis of CISG jurisprudence

The UNCITRAL Digest of case law on the United
Nations Convention on the International Sale of Goods
[*]

A/CN.9/SER.C/DIGEST/CISG/73 [8 June 2004]
Reproduced with the permission of UNCITRAL

[Text of Article 73
Digest of Article 73 case law
-    What constitutes an instalment contract
-    Avoidance of a single instalment
-    Avoidance of contract as to future instalments
-    Avoidance of contract as a whole]
ARTICLE 73

     (1) In the case of a contract for delivery of goods by instalments, if the failure of one party to perform any of his obligations in respect of any instalment constitutes a fundamental breach of contract with respect to that instalment, the other party may declare the contract avoided with respect to that instalment. 

     (2) If one party's failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude that a fundamental breach of contract will occur with respect to future instalments, he may declare the contract avoided for the future, provided that he does so within a reasonable time.

     (3)  A buyer who declares the contract avoided in respect of any delivery may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries if, by reason of their interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract.

DIGEST OF ARTICLE 73 CASE LAW

1. This article provides special rules for instalment contracts. These rules set out when a seller or a buyer is entitled to declare the contract avoided with respect to a single instalment, future instalments, or the contract as a whole.[1] In accordance with article 26 a declaration of avoidance is effective only if the aggrieved party gives notice to the other party.

2. Article 73 does not preclude application of other articles of the Convention. When a party fails to deliver the goods or to pay for an instalment, the aggrieved party is entitled under article 47 or 64 to give the breaching party an additional period of time and to avoid the instalment when that party fails to perform within the additional time.[2] When some but not all instalments are delivered article 51 on partial delivery and article 73 may be applicable.[3] An aggrieved party may have the right to suspend its performance under article 71(1) or to avoid the contract as to future instalments under article 73(2).[4] An aggrieved party may be able to avoid its contractual obligations to make further deliveries under either article 72 or article 73.[5]

What constitutes an instalment contract

3. An instalment contract is one that provides for delivery of goods in separate lots.[6] The goods do not have to be fungible so that an instalment contract may cover delivery of different kinds of goods in each instalment (e.g., men's lambskin coats and women's lambskin coats).[7] One decision states that an instalment contract need not determine the quantity of individual instalments under article 73 as precisely as partial deliveries under article 51.[8]

4. Several decisions have characterized separate contracts between parties that have an on-going relationship as an instalment contract governed by article 73[9] or have concluded that the aggrieved party might act under either article 73 or another article, such as article 71[10] or 72.[11] One decision also applies article 73 to separate yearly supply contracts between same parties for the supply of aluminium.[12] Another decision, however, distinguishes an instalment contract from a distribution or framework agreement, which may provide for non-sales matters such as exclusive representation in a geographical area or an agreement without any determinable quantity.[13]

Avoidance of a single instalment

5. Paragraph (1) entitles a party to declare a contract avoided as to a single instalment if the other party commits a fundamental breach (see art. 25) with respect to that instalment. The same standards for determining whether a party commits a fundamental breach apply both to a contract that requires a single delivery and to a contract that requires delivery by instalments. The aggrieved party was found to be entitled to avoid the instalment in the following cases: when the seller failed to deliver the promised goods;[14] when the seller conditioned delivery of an instalment on satisfaction of new demands.[15] On the other hand, the aggrieved party was found not to be entitled to avoid the instalment where the buyer had not paid the price for an instalment.[16]

Avoidance of contract as to future instalments

6. Paragraph (2) of article 73 entitles an aggrieved party to avoid the contract as to future instalments if the party has good grounds to conclude that the other party will commit a fundamental breach (see art. 25) of contract with respect to future instalments.

7. An aggrieved buyer was found to be entitled to avoid the contract as to future instalments in the following cases: the seller made no delivery despite taking payment;[17] the seller failed to deliver first instalment;[18] when the seller stated that it would not make further deliveries;[19] when the seller refused to deliver further cherries because of dramatic increase in market price for the cherries;[20] late delivery of three instalments caused disruption of buyer's production;[21] delivery of poor quality goods;[22] the buyer had good grounds to believe that seller would be unable to deliver peppers that satisfied food safety regulations.[23]

8. In the following cases it was found that the seller had good grounds to avoid the contract: failure to open letter of credit gave good grounds to conclude that the buyer would not pay;[24] the buyer would continue to breach a contract term that prohibited the buyer from reselling the goods in specified markets.[25]

9. If a party declares the contract avoided as to future instalments under paragraph (2), it must notify the other party of the avoidance within a reasonable time. A buyer who was entitled to avoid the contract as to future instalments effectively avoided the contract when it gave notice to the seller within 48 hours of the third late delivery.[26]

Avoidance of contract as a whole

10. Paragraph (3) sets out rules for the avoidance of past or future instalments when the instalments are so interdependent that the purpose contemplated by the parties at the time the contract was concluded is frustrated. A party may avoid the contract as to these instalments only if it has avoided the contract as to a present instalment under paragraph (1). If a party avoids the contract as to these instalments under paragraph (3), it must notify the other party at the same time as it notifies the party of the avoidance of the present instalment. There are no reported cases applying this paragraph.


FOOTNOTES

* The present text was prepared using the full text of the decisions cited in the Case Law on UNCITRAL Texts (CLOUT) abstracts and other citations listed in the footnotes. The abstracts are intended to serve only as summaries of the underlying decisions and may not reflect all the points made in the digest. Readers are advised to consult the full texts of the listed court and arbitral decisions rather than relying solely on the CLOUT abstracts.

[Citations to cisgw3 case presentations have been substituted [in brackets] for the case citations provided in the UNCITRAL Digest. This substitution has been made to facilitate online access to CLOUT abstracts, original texts of court and arbitral decisions, and full text English translations of these texts (available in most but not all cases). For citations UNCITRAL had used, go to <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.]

1. See also [ICC International Court of Arbitration case No. 8740 of October 1996, available online at <http://cisgw3.law.pace.edu/cases/968740i1.html>] (buyer duly avoided last instalment when total delivery of coal was less than contract amount).

2. [AUSTRIA Arbitration Award case No. S-2/97, Schiedsgericht der Börse für Landwirtschaftlicher Produkte - Wien 10 December 1997, available online at <http://cisgw3.law.pace.edu/cases/971210a3.html>]; CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997, available online at <http://cisgw3.law.pace.edu/cases/970205s1.html>]; [SWITZERLAND Arbitration Award case No. 273/95, Zürich Handelskammer 31 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960531s1.html>] (buyer's failure to pay for instalment); [GERMANY Landgericht [District Court] Ellwangen 21 August 1995, available online at <http://cisgw3.law.pace.edu/cases/950821g2.html>] (seller's failure to deliver to third party as agreed).

3. [ICC International Court of Arbitration case No. 9448 of July 1999, available online at <http://cisgw3.law.pace.edu/cases/999448i1.html >] (both arts. 51 and 73 applicable but buyer did not establish right to withhold payments); [ICC International Court of Arbitration case No. 8128 of 1995, available online at <http://cisgw3.law.pace.edu/cases/958128i1.html>].

4. [UNITED STATES Shuttle Packaging Systems v. Tsonakis, Federal District Court (Western Dist. Michigan) 17 December 2001, available online at <http://cisgw3.law.pace.edu/cases/011217u1.html>] (citing arts. 71-73 for remedies available in instalment transaction); [ICC International Court of Arbitration case No. 9448 of July 1999, available online at <http://cisgw3.law.pace.edu/cases/999448i1.html>] (buyer not entitled to suspend because had taken partial delivery of goods); CLOUT case No. 238 [AUSTRIA Oberster Gerichtshof [Supreme Court] 12 February 1998, available online at <http://cisgw3.law.pace.edu/cases/980212a3.html>] (in addition to right to avoid instalments under art. 73, seller has right to suspend under art. 71(1) but seller failed to establish its right in this case).

5. EP S.A. v. FP Oy [FINLAND Helsingfors hovrätt [Appellate Court] Helsinki 30 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980630f5.html>] (where two separate orders for skincare ointment made from same mixture the aggrieved buyer could avoid second contract under either article 72 or under article 73(2)); [SWITZERLAND Arbitration Award case No. 273/95, Zürich Handelskammer 31 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960531s1.html>] (fundamental breach as to future instalments is covered by both articles 72 and 73).

6. [ICC International Court of Arbitration case No. 9887 of August 1999, available online at <http://cisgw3.law.pace.edu/cases/999887i1.html>] (chemical substance); CLOUT case No. 251 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 30 November 1998, available online at <http://cisgw3.law.pace.edu/cases/981130s1.html>] (lambskin coats); CLOUT case No. 293 [GERMANY Arbitration Award, Schiedsgericht der Hamburger freundschlaftlichen 29 December 1998, available online at <http://cisgw3.law.pace.edu/cases/981229g1.html> (cheese); CLOUT case No. 238 [AUSTRIA Oberster Gerichtshof [Supreme Court] 12 February 1998, available online at <http://cisgw3.law.pace.edu/cases/980212a3.html>] (umbrellas); CLOUT case No. 246 [SPAIN Audiencia Provincial [Appellate Court] Barcelona 3 November 1997, available online at <http://cisgw3.law.pace.edu/cases/971103s4.html>] (manufactured springs); CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997, available online at <http://cisgw3.law.pace.edu/cases/970205s1.html>] (sunflower oil); CLOUT case No. 154 [FRANCE Cour d'appel [Appellate Court] Grenoble 22 February 1995, available online at <http://cisgw3.law.pace.edu/cases/950222f1.html>] (jeans); [HUNGARY Budapest Arbitration Award case No. Vb 94124 of 17 November 1995, available online at <http://cisgw3.law.pace.edu/cases/951117h1.html>] (mushrooms); [CHINA Skandinaviska v. Hunan Co., Chansha Intermediate People's Court 18 September 1995, available online at <http://cisgw3.law.pace.edu/cases/950918c1.html>] (molybdenum iron alloy); [GERMANY Landgericht [District Court] Ellwangen 21 August 1995, available online at <http://cisgw3.law.pace.edu/cases/950821g2.html>] (peppers); [ICC International Court of Arbitration case No. 8128 of 1995, available online at <http://cisgw3.law.pace.edu/cases/958128i1.html>] (chemical fertilizer).

7. CLOUT case No. 251 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 30 November 1998, available online at <http://cisgw3.law.pace.edu/cases/981130s1.html>] (see full text of the decision).

8. CLOUT case No. 166 [GERMANY Arbitration Award, Schiedsgericht der Handedlskammer Hamburg 21 March / 21 June 1996, available online at <http://cisgw3.law.pace.edu/cases/960321g1.html> / <http://cisgw3.law.pace.edu/cases/960621g1.html>] (see full text of the decision).

9. [AUSTRIA Arbitration Award, Schiedsgericht der Börse für Landwirtschaftliche Produkte - Wein 10 December 1997, available online at <http://cisgw3.law.pace.edu/cases/971210a3.html>] (from economic perspective two instalment contracts for barley concluded same day to be delivered during same time period are part of same transaction and therefore governed by art.73).

10. CLOUT case No. 238 [AUSTRIA Oberster Gerichtshof [Supreme Court] 12 February 1998, available online at <http://cisgw3.law.pace.edu/cases/980212a3.html> (attempted suspension under art. 73 rather than art. 71).

11. EP S.A. v. FP Oy [FINLAND Helsingfors hovrätt [Appellate Court] Helsinki 30 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980630f5.html>] (where two separate orders for skincare ointment made from same mixture the aggrieved buyer could avoid second contract under either article 72 or under article 73(2)); [SWITZERLAND Arbitration Award case No. 273/95 Zürich Handelskammer 31 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960531s1.html>] (fundamental breach as to future instalments is covered by both articles 72 and 73).

12. [SWITZERLAND Arbitration Award case No. 273/95 Zürich Handelskammer 31 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960531s1.html>] (fundamental breach as to future instalments is covered by both articles 72 and 73).

13. CLOUT case No. 166 [GERMANY Arbitration Award, Schiedsgericht der Handelskammer Hamburg 21 March / 21 June 1996, available online at <http://cisgw3.law.pace.edu/cases/960321g1.html> / <http://cisgw3.law.pace.edu/cases/960621g1.html>] (leaving open whether contract in case before the court is an instalment contract) (see full text of the decision).

14. CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997, available online at <http://cisgw3.law.pace.edu/cases/970205s1.html>].

15. CLOUT case No. 293 [GERMANY Arbitration Award, Schiedsgericht der Hamburger freundschaftlichen Arbitrage 29 December 1998, available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>].

16. [SWITZERLAND Arbitration Award case No. 273/95 Zürich Handelskammer 31 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960531s1.html>].

17. CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997, available online at <http://cisgw3.law.pace.edu/cases/970205s1.html >].

18. [SWITZERLAND Arbitration Award case 273/95 Zürich Handelskammer 31 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960531s1.html>] (failure to deliver first instalment good grounds for concluding later instalments would not be delivered).

19. CLOUT case No. 293 [GERMANY Arbitration Award, Schiedsgericht der Hamburger 5 February 1997, available online at <http://cisgw3.law.pace.edu/cases/970205g1.html>].

20. CLOUT case No. 265 [HUNGARY Budapest Arbitration Award case No. Vb 99142 of 25 May 1999, available online at <http://cisgw3.law.pace.edu/cases/970525h1.html>

21. CLOUT case No. 246 [SPAIN Audiencia Provincial [Appellate Court] Barcelona 3 November 1997, available online at <http://cisgw3.law.pace.edu/cases/971103s4.html>].

22. [ICC International Court of Arbitration case No. 9887 of August 1999, available online at <http://cisgw3.law.pace.edu/cases/999887i1.html>].

23. [GERMANY Landgericht [District Court] Ellwangen 21 August 1995, available online at <http://cisgw3.law.pace.edu/cases/950821g2.html>].

24. [HUNGARY Budapest Arbitration Award case No. Vb 99142 of 25 May 1999, available online at <http://cisgw3.law.pace.edu/cases/990525h1.html>].

25. CLOUT case No. 154 [FRANCE Cour d'appel [Appellate Court] Grenoble 22 February 1995, available online at <http://cisgw3.law.pace.edu/cases/950222f1.html>] (resale of jeans in Africa and South America; also citing art. 64(1)).

26. CLOUT case No. 246 [SPAIN Audiencia Provincial [Appellate Court] Barcelona 3 November 1997, available online at <http://cisgw3.law.pace.edu/cases/971103s4.html>].


ANALYSIS OF CISG CASE LAW

Reprinted by special permission of Northwestern University School of Law. 34 Northwestern Journal of International Law and Business (Winter 2004) 299-440.[*]

excerpt from

The Interpretive Turn in International Sales Law:
An Analysis of Fifteen Years of CISG Jurisprudence

Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene,
Virginia Maurer and Marisa Pagnattaro

[...]

[Articles 71, 72 and 73]

The CISG provisions set a high threshold before a party anticipates a breach and can suspend performance.[687] Anticipatory breach under Articles 71, 72, and 73 can occur in various contexts in the performance of a contract.[688] These Articles aim to provide a remedy while keeping the contract intact. A party may suspend the performance of his obligations if it becomes apparent that the other party will not substantially perform because of a serious deficiency in its ability to perform, such as poor creditworthiness, or in its failure to prepare to perform.[689] If these preconditions exist, a party can suspend performance. Alternatively, if a seller has dispatched the goods, he may prevent the goods from being handed over to the buyer.[690] Article 72 allows the suspending party to terminate the contract by electing the remedy of avoidance.[691]

The narrowness of the preconditions for suspension of performance is designed to prevent abuse of anticipatory breach. Another limitation on suspension of performance is that the party suspending performance must immediately give notice of suspension to the other party.[692] "Reasonable notice" to the other party enables the opportunity to provide adequate assurance of his performance. [693] If a party declares that he will not perform his obligations, notice need not be given. [694] Finally, a party's right to suspend performance is limited by the reciprocal right of the other party to provide adequate assurance that it will perform. If the party provides such assurance, then the party is prohibited from continuing the suspension.[695]

The final context in which the CISG addresses common obligations of [page 411] buyers and sellers for anticipatory breach is Article 73. Article 73 provides the threshold for fundamental breach in the context of installment contracts.[696] If one party's failure to perform any of his obligations constitutes a fundamental breach of contract with respect to that installment, the other party may declare the contract avoided only with respect to that installment.[697] However, if the failure to perform with respect to one installment gives the non-breaching party reasonable grounds to believe that the breaching party will not deliver a future installment, the anticipation of future breaches equates to a fundamental breach allowing the non-breaching party to declare the contract avoided.[698] The issues of fundamental breach as they pertain to installment contracts will be explored more fully below in Part VI.B.2. [page 412]

[...]

2. Anticipatory Breach, Adequate Assurance, and Installment Contracts: Articles 71-73 and the Importance of Notice

The concept of fundamental breach is also a determining factor in the context of anticipatory breach. The CISG affords both buyers and sellers the right to suspend or avoid a contract due to a fundamental breach under Articles 71-73.[717] If a fundamental breach occurs or is likely to occur, the non-breaching party may seek to suspend performance under Article 71 or to avoid the contract under Article 72. Although there is no bright-line standard for determining the degree of certainty needed to anticipate fundamental breach, there should be a very high degree of probability that the breach will occur.[718] [page 415]

The installment contract requires a more complicated analysis. A breach of an installment must be analyzed to determine if the breach is to be considered fundamental within the installment and the contract as a whole. Article 73(1) implies that as a general rule, a breach of an installment performance gives the other party the right to declare the contract avoided only with respect to the installment.[719] If, however, it is determined to be fundamental to the whole, then the non-breaching party may avoid obligations in connection with future deliveries.[720] A stronger case for fundamental breach is made when there are a series of defective installment performances. This occurred in the Spanish case of T. SA v. E.[721] Here, the seller delivered three installments four and eight weeks past the agreed upon dates, causing disruption to the buyer's production process. The court ruled that avoidance was proper and canceled the remaining installments due under the contract.[722]

In addition to fundamental breach, a second issue that often arises in connection with anticipatory breach is the sufficiency of notice. In many instances, notice is improperly made or given too late. It should be noted that consistent with Article 27, if any notice is made by "means appropriate in the circumstances," a delay or error in the transmission of the communication or its failure to arrive does not deprive that party of the right to rely on the communication.[723] Under Article 71, a party suspending performance must "immediately" give notice of the suspension to the other party. [724] Such notice is to be given as soon as the party makes the decision to suspend performance. [725] For example, simply failing to pay the purchase price does not replace the notification that payment of the purchase price is being suspended until the other party properly fulfills the contract or [page 416] provides adequate assurance.

The importance of notice is a general theme found throughout the CISG.[726] It is particularly evident in Article 71(2). Failure to give proper notice under Article 71(2) results in the revocation of an otherwise reasonable suspension of performance. A German court held that reasonable doubts about the buyer's creditworthiness were not sufficient to overcome the seller's failure to give notice pursuant to Article 71(3).[727] The court reasoned that if the seller wanted to exercise his right of suspension, he was obligated to inform the buyer about any doubts regarding her creditworthiness or ability to perform her duties and liabilities under the sales contract. Inasmuch as the seller did not demonstrate that he gave any such notice and information to the buyer, he was not permitted to suspend performance. Hence, notification is an absolutely necessary prerequisite for exercising the right of suspension for anticipatory breach.[728]

Proper notice must also be given for a party to avail itself of the avoidance provisions in Article 72, except that the standard is slightly different.[729] Under Article 72, the party intending to declare the contract avoided must give "reasonable notice" to the other party to allow that party the opportunity to provide adequate assurance of performance.[730] The substance of the notice is just as important as the timing; notice must be given prior to the date of performance.[731] After the parties have performed the contract, neither party is entitled to declare the contract avoided under Article 72. [page 417]

[...]


FOOTNOTES

* For a subsequent text on this subject by these authors, see Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene, Virginia Maurer & Marisa Pagnattaro, "International Sales Law: A Critical Analysis of CISG Jurisprudence", Cambridge University Press (2005) 241 p.

[...]

687. Jelena Vilus, Provisions Common to the Obligations of the Seller and the Buyer, in International Sale of Goods; Dubrovnik Lectures, supra note 512 [available at <http://cisgw3.law.pace.edu/cisg/biblio/vilus.html>].

688. See generally, Seig Eiselen, Remarks on the Manner in Which the UNIDROIT Principles of International Commercial Contracts may be Used to Interpret or Supplement Articles 71 and 72 of the CISG (Sept. 2002) available at <http://cisgw3.law.pace.edu/cisg/principles/uni71,72.html> (using the UNIDROIT principles as an aid to the interpretation of Articles 71-71 of the CISG); Seig Eiselen, Remarks on the Manner In Which The Principles of European Contact Law May Be Used to Interpret or Supplement Articles 71 and 72 of the CISG (Sept. 2002) available at <http://cisgw3.law.pace.edu/cisg/text/peclcomp71,72.html> (using the European Union legal principles as an aid to the interpretation of Articles 71-71 of the CISG).

689. CISG, supra note 4, at arts. 71(1)(a) and (b).

690. Id. at art. 71(2).

691. Id. at art. 72.

692. Id. at art. 71(3).

693. Id. at art. 72(2).

694. Id. at art. 71(3).

695. Id.

696. Id. at art. 73.

697. Id. at art. 73(1).

698. Id. at art. 73(2). As is the case in other instances of avoidance, however, notice must be provided to the other party within a reasonable time. Id. Note that a buyer who declares the contract avoided in respect to any delivery may, at the same time, declare it avoided in respect to deliveries already made or of future deliveries if, by reason of interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract. Id. at art. 73(3).

[...]

717. CISG supra note 4, at arts. 71-73. See Shuttle Packaging Sys., LLC, 2001 WL 34046276.

718. LG Berlin 99 O 123/92, Sept. 30, 1992 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/920930g1.html>. The chance of a breach should be "clear" or obvious to anyone. In German, the standard is defined by the words "it is clear" or offensichtlich. Id. For example, in a German case, a seller delivered the goods to a third-party's warehouse; after the third-party declared bankruptcy and the goods disappeared, the seller attempted to collect the alleged outstanding purchase price from the buyer. The court held that the buyer was not obligated to pay the purchase price, because the seller did not prove that the goods were lost after the risk passed to the buyer. OLG Hamm 19 U 127/97, Jun. 23, 1998, supra note 544. Parties are generally allowed to avoid a contract under similar circumstances under Article 72. For example, a buyer was entitled to terminate a contract concerning non-delivered goods where the seller only made a partial delivery after the price of the goods rose significantly. Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, Vb/97142, May 25, 1999 (Hung.), CLOUT Case No. 265, available at [<http://cisgw3.law.pace.edu/cases/990525h1.html>]. In another case, a seller was entitled to avoid a contract after the buyer failed to settle other bills with the seller. The buyer ordered 140 pairs of winter shoes from the seller; after the shoes were manufactured, seller demanded security for the sales price as the buyer still had other unsettled bills with the seller. Because the buyer did not pay and did not furnish security, the court held that the seller had the right to avoid the contract. OLG Düsseldorf 17 U 146/93, Jan. 14, 1994 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/940114g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen].

719. CISG, supra note 4, at art. 73(1). See, e.g., Schiedsgericht der Hamburger freundschaftlichen Arbitrage [Arbitral Award], Dec. 29, 1998 (F.R.G.), CLOUT Case No. 293, available at [<http://cisgw3.law.pace.edu/cases/981229g1.html>] [English translation by Todd Fox, translation edited by Dr. Loukas Mistelis].

720. S.A.R.L. Bri Production "Bonaventure" v. Société Pan Africa Export, supra note 713.

721. T. SA v. E., Audiencia Provincial [Appellate Court] de Barcelona, sección 16a, Nov. 3, 1997 (Spain), CLOUT Case No. 246, available at [<http://cisgw3.law.pace.edu/cases/971103s4.html>].

722. Id. In order to protect the right of avoidance, the avoiding party must give "reasonable notice" that a fundamental breach will occur with respect to future installments. CISG, supra note 4, at art. 73(2). See generally HG Zürich, HG 930634, Nov. 30, 1998, supra note 339.

723. CISG, supra note 4, at art. 27; See LG Stendal 22 S 234/94, Oct. 12, 2000 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/001012g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen].

724. CISG, supra note 4, at art. 71(3).

725. This was particularly true in a case in which the parties agreed upon a modification of the contract by reducing the purchase price. LG Stendal 22 S 234/94, Oct. 12, 2000, supra note 723.

726. See, e.g., CISG, supra note 4, at arts. 18(3), 19(2), 21, 26, 27, 39, 43(1), 46(2), 47(1), 48, 63(2), 65(2), 71(3), 72(2), 73(2), 79(4), and 88(1).

727. AG Frankfurt 32 C 1074/90-41, Jan. 31, 1991, supra note 618.

728. Id. See generally Hof van Beroep Gent, 1997/AR/2235, Apr. 26, 2000 (Belg.), available at <http://cisgw3.law.pace.edu/cases/000426b1.html> [English translation by Benoit Samyn, translation edited by Sieg Eiselen]; Netherlands Arbitration Institute 2319, Oct. 15, 2002.

729. CISG, supra note 4, at art. 72.

730. Id. at art. 72(2). The plain language of Article 72 reveals that a party needs to "simply allege (1) that the defendant intended to breach the contract before the contract's performance date and (2) that such breach was fundamental." Magellan Int'l Corp. v. Salzgitter Handel GmbH, 76 F.Supp.2d 919, 925-26 (N.D. Ill. 1999).

731. See generally BGH VIII ZR 18/94, Feb. 15, 1995, supra note 654. One way that reasonable notice is given is when goods are examined upon receipt and a message is promptly faxed noting the non-conformity. See generally HO Helsinki, S 96/1215, Jun. 30, 1998 (Fin.), available at <http://cisgw3.law.pace.edu/cases/980630f5.html> [English translation by Jarno Vanto].

[...]

Go to complete text of Analysis of Fifteen Years of CISG Jurisprudence


CASE ANNOTATED COMPARATIVES
-  PECL comparative

Remedies for breach of contract where only part of the contract has been
performed: Comparison between provisions of CISG (Articles 51, 73) and
counterpart provisions of the Principles of European Contract Law

Christopher Kee [*]
July 2002

1. Introduction
2. Scheme of CISG Articles 51, 73 and PECL Article 9.302
3. Advantages and disadvantages of the different phrases
4. Conclusion

1. Introduction

CISG Articles 51 and 73 are often considered concurrently as they both deal with the scenario where only part of a contract has been performed. However, by doing so, some very important distinctions between the two articles may be overlooked. Article 51, which appears under the heading Remedies for Breach of Contract by the Seller, does as one would expect provide rights only exercisable by the buyer. The first two sub-articles of Article 73, on the other hand, are provisions common to both the seller and the buyer.[1]

A further crucial distinction within the subject matter of the two articles is the type of contract considered by each. Article 51 applies where there has been a failure to deliver part of a contract intended to be delivered as a whole. Article 73 applies to [page 281] * instalment contracts and the failure to perform an obligation in respect to an instalment.[2] Further, while in both scenarios the buyer may ultimately obtain the same remedy, the two articles follow different paths to that result.[3]

The PECL does not draw a distinction between rights of the seller and buyer in the same manner as the CISG. Nor is the PECL intended to relate solely to contracts for the sale of goods. As a consequence of the latter difference the term "delivery" makes way for "performance". At first glance, PECL Article 9:302 is most comparable to CISG Article 73 as it considers a failure of performance in the situation where "… the contract is to be performed in separate parts and in relation to a part to which counter performance can be apportioned …" However, as shall be discussed, this language does not exclude those circumstances contemplated by CISG Article 51. Further, despite wording which may initially indicate the contrary, and arguably unlike CISG Article 73(3),[4] PECL Article 9:302 does not release an aggrieved party of any obligations that may have accrued at the time of the failure.

2. Scheme of CISG Articles 51, 73 and PECL Article 9.302

Leser describes CISG Article 51 as creating a "de facto division" in the contract.[5] This artificialdichotomy was created to promote one of the fundamental tenets of the CISG - to keep contracts "on foot." An unintended consequence has been competition with CISG Article 73. From a buyer's perspective, Article 51 offers a considerably more certain method of avoiding the offending part of the contract. [page 282]

By providing recourse to the Nachfrist provisions in CISG Articles 47 and 49(1)(b),[6] there are circumstances in which the buyer does not need to show the fundamental breach required by CISG Article 73.[7] CISG Article 51(2) also offers the buyer the ability to avoid the entire contract in instances where failure as to a part amounts to a fundamental breach of the whole contract.[8] CISG Article 73(3) would instead appear to take the curious position of forcing the buyer to elect between avoiding future or previous deliveries, although this distinction has been dismissed.[9] [page 283]

As is the case with all of buyer's remedies under the CISG, Articles 51 and 73 are both subject to the examination and notice regimes of Articles 38 and 39 (examination of the goods "within as short a period as is practicable under the circumstances" and "notice to the seller specifying the nature of [any] lack of conformity within a reasonable time after [the buyer] has discovered it or ought to have discovered it"). If buyer elects the remedy of avoidance where the goods have been delivered, Article 49(2) also requires the buyer to declare the contract avoided "within a reasonable time." Article 51 states that "articles 46 to 50 apply" to it; hence this further reasonable-time requirement is an element of an avoidance proceeding pursuant to Article 51. There is no reference to that in Article 73(1).[10] Even so, the general consensus of scholarly opinion tends to favor the buyer applying the CISG Article 51 approach in the absence of a very clearly defined instalment contract.[11]

The drafters of the PECL have avoided the competition between CISG Articles 51 and 73 by not including a specific provision that explicitly directs the parties to act in the same manner as CISG Article 51. Although using the same language of CISG Article 51, i.e., "parts", a plain reading of PECL Article 9:302 does only allow termination [12] as to the part where there has been fundamental non-performance.[13] Therefore, with the exclusion of this linguistic argument, PECL Article 9:302 does represent a shorter restatement of CISG Article 73. [page 284] However, it is important not to immediately assume that the PECL promotes the rights and remedies afforded by CISG Article 73 and by its silence condemns the approach of CISG Article 51.

3. Advantages and disadvantages of the differences of phrases

There are a number of opposing conclusions that may be drawn from using the PECL to help interpret the CISG when considering these particular articles. Those familiar with arguing around the common law doctrine of precedent will appreciate that in this instance the omission of the PECL to explicitly address a CISG Article 51 scenario does not in and of itself suggest a criticism of the approach. Whilst that view could be taken, it is suggested that the better view is that the combined PECL articles promote the CISG Article 51 position in two ways - by providing a restrictive definition of termination, and by requiring fundamental non-performance.

As was foreshadowed in the introduction to this piece, PECL Article 9:302 allows termination of the "contract as a whole" where non-performance is fundamental to the contract as a whole. However, "contract as a whole" does not, as it might initially appear, mean the entire contract. PECL Article 9:305 describes the effect of termination as it applies to all references to this word within the PECL. With two exceptions, termination of a contract as a whole will only relieve the parties of their future obligations. The article specifically leaves intact the rights and liabilities that have accrued at the date of termination. The two exceptions are where the value of property already delivered has been fundamentally reduced (PECL Article 9:306) and where recovery of property already delivered can be made (PECL Article 9:308).

It must also be remembered that PECL Article 9:302 only allows termination in instances where there has been fundamental non-performance, or to use the CISG terminology a fundamental breach. In doing so, the PECL is similarly promoting the notion of keeping contracts "on foot." Where the failure to perform, or non-performance, is not fundamental, there are a variety of other remedies available to the innocent party. One such remedy is PECL Article 8:106, a Nachfrist - type notice. Whilst this remedy is consistent with the CISG, its applicability in this instance may not be. It is important to be mindful of the rationale that guides PECL Article 9:302 and CISG Articles 51 and 73 - where the failure to [page 285] perform or deliver a part of the contract does not compromise the purpose of the entire contract, it is would be unreasonable to allow the entire contract to be ended.[14] If one cannot find a similar theme to CISG Article 51 in the PECL generally, then this rationale may be circumvented by PECL Article 8:106. An extremely unfortunate consequence when apportioning counter-performance is frequently the relatively simple matter of identifying a monetary value.[15]

Therefore, when considering PECL Articles 9:302, 9:305 and 9:306 together and in context, it is possible to see that the same philosophy that drives CISG Article 51 emerges. Recourse is first given to what might be described as "non-drastic" remedies. If the failure to perform a part of the contract amounts to fundamental non-performance of the entire contract, then with the assistance of PECL Article 9:306, all obligations including those previously accrued can be avoided.

4. Conclusion

The PECL endorses and promotes many of the principles outlined in the CISG. Although, in this instance, the articles are not drafted in an identical or substantially similar manner, it is nonetheless possible to identify support for the notion of restricting a party's ability to unreasonably end an entire contract. [page 286]


FOOTNOTES

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

This comparative is also published at 6 Vindobona Journal of International Commercial Law and Arbitration (2002-2) 281-286. Pagination to that publication is provided to facilitate citation to the Vindobona text.

A match-up is available setting CISG Articles 51 and 73 alongside PECL Article 9:302 [Contract to be performed in parts]; see also PECL Articles 9:301 [Right to terminate the contract] and 9:306 [Property reduced in value] <http://cisgw3.law.pace.edu/cisg/text/peclcomp51.html>. The match-up is accompanied by:

-   Comments on these PECL provisions authored by the European Commission describing and illustrating the manner in which they are to be applied; and
-   Notes that compare them with continental and common law domestic rules, doctrine and jurisprudence.

1. Both CISG Articles 51 and 73 belong to the Convention's Part III: Sale of Goods. Article 51 is listed in Chapter II: Obligations of the Seller, Section III: Remedies for breach of contract by the seller. Article 73 is listed in Chapter V: Provisions Common to the Obligations of the Seller and of the Buyer, Section I: Anticipatory breach and instalment contracts.

Schlechtriem, commenting on the operation of CISG Art. 73 states that "this provision is concerned with successive deliveries, not instalment payments. By analogy, however, Article 73(2) can also apply to missed payments if they coincide with instalment deliveries. Otherwise, the entire contract may be avoided under Article 72. Article 73(2) is also applicable to other breaches by the buyer, such as not taking delivery of an instalment." P. Schlechtriem, Uniform Sales Law - The U.N. Convention on Contracts for the International Sale of Goods, (1986) at p. 96 [relevant excerpt also available on-line at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-73.html>].

2. Cf. Karollus, Martin. Judicial Interpretation and Application of the CISG in Germany 1988-1994, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 51-94 [also available at <http://cisgw3.law.pace.edu/cisg/biblio/karollus.html>]. Karollus provides a critique of the German Baden-Baden Landgericht [District Court] case of 14 August 1991 [translation available at: <http://cisgw3.law.pace.edu/cases/910814g1.html>]. This was a case where the German buyer placed an order for two tile sets A & B with an Italian seller. Both sets contained basic and decorative tiles. The basic tiles belonging to set A were non-confirming and the buyer sought to avoid the contract in respect of the entirety of set A. In a step that appears to be inconsistent with Article 51, the German Court accepted avoidance of that set, based on the rationale that without the appropriate basic tiles, the decorative tiles in set A were useless. Had Article 51 been followed strictly the only two remedies available would have been either avoidance as to the whole contract, i.e., set A and B, or avoidance as to the basic tiles of set A only. Karollus supports the court's decision as such a remedy is contemplated by Article 73, and he argues there is no reason why it should not apply to non-instalment contracts as well.

3. Cf. CISG Article 64 for seller's rights and remedies for a breach of contract by the buyer.

4. See note 9 infra.

5. Leser, Hans G., in: Schlechtriem, P. (ed.) Commentary on the UN Convention on the International Sale of Goods (CISG), 2nd edition. Clarendon Press, Oxford, 1998 at p. 545.

6. See Zeller, B. Editorial Remarks, in Guide to Articles 47 and 49(1)(b) <http://cisgw3.law.pace.edu/cisg/text/peclcomp47.html#er>.

7. See further Honnold, J., Uniform Law for International Sales under the 1980 United Nations Convention 2nd Edition. Kluwer Law and Taxation Publishers, Deventer, Boston 1991 at p. 501, where he notes that the idea of a Nachfrist notice cannot be compatible with CISG Articles 73(2) and 73(3). Honnold does, however, suggest that, in certain circumstances, for example delivery of an instalment or the failure to establish a letter of credit, it is not repugnant to all scenarios contemplated by CISG Article 73(1).

8. "The approach in CISG Art. 51 follows logically from its linkage of the right of avoidance to the gravity of the breach". Jacob S. Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods, (July 1981) [available on-line at <http://cisgw3.law.pace.edu/cisg/text/ziegel51.html>]. That approach has been widely recognized in the case law; see, e.g., Germany 24 May 1995, Oberlandesgericht [Appellate Court] Celle [translation available at: <http://cisgw3.law.pace.edu/cases/950524g1.html>], where the court reiterated that regarding a delivery or conformity of only part of goods, the rules of CISG Articles 46 to 50 apply to the part which is missing or non-conforming under Art. 51(1) and, further, that if the seller's offer to deliver conformed with the contract, the buyer would not have the right to avoid the contract unless he could show that a partial delivery was a fundamental breach and therefore the missing part [a used printing press] entitled him to avoid the entire contract under CISG Art. 51(2).

See also, Germany 3 July 1992, Landgericht [District Court] Heidelberg [translation available on-line at <http://cisgw3.law.pace.edu/cases/920703g1.html>]. In that case, a German buyer concluded a contract for the sale of computer components with a U.S. seller, but after delivery of 5 parts had been carried out, the buyer refused payment and declared the contract avoided on the grounds that the delivery of 11 parts had been agreed. The German court held that even if delivery of 11 parts had been agreed the dispatch of only 5 parts would not entitle the buyer to declare the contract in its entirety avoided according to CISG Art. 51(2). See further, R. Koch, "The Concept of Fundamental Breach of Contract Under the U.N. Convention on Contracts for the International Sale of Goods", Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999) 177-354 [also available on-line at <http://cisgw3.law.pace.edu/cisg/biblio/koch.html>].

See also, ICC Arbitration Case No. 7660 of 1994 [available at: <http://cisgw3.law.pace.edu/cases/947660i1.html>], where the arbitral tribunal noted that article 51(1) CISG provided for a partial avoidance of the contract as declared by the buyer, and that under article 51(2) CISG such partial avoidance was the rule rather than the exception in cases of partial non-performance amounting to a non-fundamental breach of the contract (article 49(1)(a) CISG). In that case, the arbitral tribunal determined that a partial avoidance under article 51(1) CISG was permissible where the defective piece of machinery formed an independent part of the contracted goods as it was in the case at issue. However, the arbitral tribunal further determined that the buyer's partial avoidance was barred by the 18-month time limit contained in the contract.

9. See further Leser, supra note 5 at p. 551. He states that often in these situations as it will be not possible to achieve the purpose of the contract as a whole, there must be a fundamental breach allowing avoidance of the entire contract despite this wording. It is, however, interesting to note that ULIS Article 75 on which CISG Article 73 is modelled did specifically refer to deliveries already made or future deliveries or both.

Cf. Schlechtriem, commenting on the operation of Art. 73(3). He states: "If, due to the interdependence of the instalments, the defective or failed performance makes past or future instalments worthless, those instalments can be avoided as well. However, this is true only if the purpose of the entire contract was clear to both parties at the conclusion of the contract (Article 73(3)). The buyer's interest in receiving complete performance must, therefore, have been recognizable to the seller." P. Schlechtriem, Uniform Sales Law - The U.N. Convention on Contracts for the International Sale of Goods, (1986) [relevant excerpt also available on-line at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-73.html>].

See, e.g., Switzerland 30 November 1998, [Commercial Court] Zürich [CLOUT abstract no. 251, also available at: <http://cisgw3.law.pace.edu/cases/981130s1.html>], where that court stated that regarding avoidance in installment contracts under CISG Art. 73, installment deliveries do not have to be of the same type of goods.

10. Though CISG Article 73(2) provides that in respect of refusal of future instalments, a buyer may declare the contract avoided for the future, provided he does so within a reasonable time. See, e.g., Switzerland 5 February 1997, Handelsgericht [Commercial Court] Zürich [CLOUT no. 214, also available at <http://cisgw3.law.pace.edu/cases/970205s1.html>]. In that case, a German buyer had entered into a contract with a French seller for the delivery to Romania of 2 to 4 million liters of sunflower oil per month at a specified price. Although the buyer had paid a timely instalment for the first delivery, the seller did not ship the goods to Romania. The buyer declared the contract avoided and sued the seller for restitution of the first instalment and for damages. The Swiss court held that the buyer had a right to declare the contract avoided as the seller did not deliver the goods and this failure to perform its obligation gave reason to believe that a fundamental breach of contract was to be expected for further instalments (article 49(1)(b), 73(1) and (2) CISG).

11. Leser, supra note 5 at p. 551 and authorities cited at his n.24.

12. "Termination" is the PECL's counterpart to the CISG's term "avoidance."

13. About the terminology adopted, the PECL Comments to Article 9:302, state: " 'Termination in relation to a part' of the contract is a slightly awkward phrase, as the contract is not terminated, but it has the advantage that the general rules on termination (such as the need to give notice under Article 9:303) applies. CISG Article 73 takes the same approach." Comment B, also available on-line at <http://cisgw3.law.pace.edu/cisg/text/peclcomp51.html#9:302>.

14. See further PECL Comments to Article 9:302, Comment A [available on-line at <http://cisgw3.law.pace.edu/cisg/text/peclcomp51.html#mu>].

15. The PECL Comments to Article 9:302 make it clear that where one party's obligations consists of distinct parts and the non-performance affects only one of those parts, PECL Article 9:302 is still applicable even though payment is not made separately. See Comment C [available on-line at <http://cisgw3.law.pace.edu/cisg/text/peclcomp51.html#mu>].

Cf. Ziegel who, commenting on the operation of CISG Art. 51, points out: "Read literally, art. 51(1) suggest that the non-conforming goods may be subject to the remedy of avoidance regardless of the commercial viability of the rejected goods. UCC 2-601, by way of contrast, provides that only a 'commercial unit' may be accepted or rejected by the buyer. Presumably the Convention did not intend a different result." Jacob S. Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods, (July 1981) [available on-line at <http://cisgw3.law.pace.edu/cisg/text/ziegel51.html>].


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