CROSS-REFERENCES AND EDITORIAL ANALYSIS

Article 46


Editor:

Vivian Grosswald Curran[*]


Specific performance is attended to under the Convention in Articles 46, 62 and 28.

BUYER'S RIGHT TO COMPEL PERFORMANCE

Article 46(1)

The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with such requirement.

Article 46(2)

If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter.

Article 46(3)

If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under article 39 or within a reasonable time thereafter.

SELLER'S RIGHT TO COMPEL PERFORMANCE

Article 62 [a parallel to Article 46(1)]

The seller may require the buyer to . . . perform his . . . obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement (see footnote 1).

RULES OF THE FORUM

Article 28

If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention (see footnote 2).


Article 46/62 has civilian overtones (see footnote 3). Article 28 is a compromise provision (see footnote 4). It reads rules of the forum into a court's obligation to compel specific performance (see footnote 5)


COMPARISON WITH OTHER REMEDIES

Contrary to avoidance, and to a degree other remedies, Article 46(1) is not expressly conditioned upon substantiality. The Convention's express attention to exemptions (Article 79) is specifically made applicable only to damages, not performance. And by virtue of its second sentence, the Convention's express provision on mitigation (Article 77) can be said to be similarly restricted. Notwithstanding these restrictions, in the proper context the substantiality, exemption or mitigation defenses applicable to other remedies (and other defenses as well) can also apply to a proceeding to compel performance pursuant to Article 46 -- via Article 28 and perhaps also Article 7.

On the one hand . . .

Substantiality. To qualify for the remedy of avoidance, a breach of contract must "substantially" deprive the other party of what he is entitled to expect under the contract (Article 25). The degree of substantiality of the breach can also impact upon the amount of a price reduction or the damages that will be awarded. By way of contrast, it has been said that the degree of substantiality of a breach has no impact upon a buyer's right to proceed under Article 46(1) (cf. Article 46(2) and (3), each of which has its own preconditions). The Secretariat Commentary states: "[Article 46(1)] does not allow the seller to refuse to perform on the grounds that the non-conformity was not substantial or that performance of the contract would cost the seller more than it would benefit the buyer" (see footnote 6). This conclusion, if not otherwise restricted, would encompass even a de minimis breach.

Exemptions. The right to damages is specifically made subject to the Convention's counterpart to force majeure (Article 79), whereas the right to compel performance, like avoidance and price reduction, is not. "Nothing in [Article 79] prevents either party from exercising any right other than to claim damages under the Convention" (Article 79(5)). Thus, Article 79 per se does not preclude the right to compel performance even where this seems extreme in comparison with other available remedies -- literally, even where performance is impossible.

Mitigation. Article 77 (sentence one) states: "A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss . . . resulting from the breach." Standing alone, this sentence would appear to encompass all remedies. However, Article 77 (sentence two) states: "If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated." The following colloquy at the Vienna Diplomatic Conference explains the impact of sentence two upon sentence one: Mr. ALKIN (Ireland) asked whether the first sentence did not proclaim a principle generally applicable to the various remedies provided for in the Convention. Mr. HONNOLD (United States of America) replied: "Matters would be simpler [if this were so]. But he doubted whether the second sentence would be interpreted as furnishing the means for implementing that principle" (see footnote 7).

On the other hand . . .

There is Article 28. Where the rules of the forum accept a substantiality defense, an exemption defense, a mitigation defense, or any other defense to an action for specific performance of a similar contract not governed by the Convention, pursuant to Article 28 such a defense can apply to a proceeding under Article 46 (see footnote 8).

And perhaps also Article 7. To prevent untoward applications of Article 46, commentators have also cited Article 7 (good faith or general principles of the Convention, e.g., "loyalty to the other party to the contract") as a defense to such proceedings (see footnote 9).


Inconsistent remedies

The right to avoid the contract (Article 49) is inconsistent with preserving the contract by compelling performance, and the right to retain nonconforming goods and reduce the price (Article 50) is inconsistent with compelling delivery of goods as contracted. A claim for damages (Article 45/74-76) can, however, be combined with an action to compel performance (see footnote 10).

When a claim for damages is combined with an action to compel performance, customary defenses to the damages aspect of the proceeding, of course, continue to apply in accordance with the various articles of the Convention that bear on such claims, e.g., Articles 77 and 79.


OTHER CROSS-REFERENCES

There is virtually no limit to the number of cross-references to Article 46(1) as this provision permits the buyer to require the seller to perform any of his obligations under the Convention and the contract (see footnote 11). Only several cross-references are reviewed.

Article 4

"The Convention does not specifically address the issue of the buyer's rights on the seller's insolvency . . . [T]he Convention is concerned only with the rights of the seller and the buyer so that the priority of third-party claims is left to other law [Article 4]" (see footnote 12). "If creditors of the seller have acquired rights in the goods to be delivered or if the seller has entered into bankruptcy or similar proceedings, the questions of the priority of the buyer's claim for performance will be governed by applicable non-Convention law. If such law does not give the buyer's claim for performance priority, the buyer's attempt to compel performance may be defeated" (see footnote 13).

Articles 8 and 9

"[T]he provisions of Article 8 on the interpretation of contracts apply to . . . a remarkably wide variety of situations . . . [S]ince Article 8 is broadly applicable to 'statements made by and other conduct of a party', it reaches post-contract communications and actions" (see footnote 14). Clearly, Article 8 is relevant to implementations of Article 46 (all of its provisions) as well as a host of other provisions of the CISG. And Article 9 as well. For example, "[s]eller may . . . be entitled to rely on trade usage under Article 9(1) of the Convention to resist a claim for specific performance" (see footnote 15).

Article 51

As with other remedial provisions of the Convention, "[i]f the seller delivers only a part of the goods or if only a part of the goods delivered is in conformity with the contract", Article 46 applies "in respect of the part which is missing or which does not conform". Article 51(1).


ARTICLE 46(2) AND (3): ANALYSIS OF SELECTED ISSUES

Issues considered are timeliness, reasonableness, and specific provisions of the Convention that bear on duties owed to the party in breach.

Timeliness

Timeliness of request for substitute goods or for repair of the goods. A buyer's request for substitute goods (Article 46(2)) or for repair (Article 46(3)) must be made either in conjunction with notice given under Article 39 or within "a reasonable time" thereafter. For this purpose, a reasonable time is said to be a short period of time (see footnote 16).

Another timeliness issue. There will be times when it can be deemed helpful for buyer to fix "a period of time of reasonable length for performance by the seller" of the obligation that arises when buyer requests substitute goods or repair of the goods. The quoted language is from Article 47(1), a provision that is in other ways associated with facilitating avoidance if deemed appropriate in the event of noncompliance.

Reasonableness

Elements of reasonableness built into Article 46(2) and (3). Buyer may not require the seller to remedy a lack of conformity by repair pursuant to Article 46(3) when "this is unreasonable having regard to all the circumstances" (see footnote 17). And buyer may only require delivery of substitute goods pursuant to Article 46(2) when there is a lack of conformity that constitutes a fundamental breach of contract (see footnote 18).

Another reasonableness issue. Also to be considered is seller's right to cure (Article 48) and whether it prevails over buyer's right to require delivery of substitute goods. In an avoidance, seller's right to cure is expressly made "subject to article 49"; on the other hand, it is expressly stated that seller's right to cure prevails over Article 50 (buyer's right to reduce the price). However, the interplay between Article 46(2) and Article 48 is not accompanied by either type of express language (see footnote 19). A solution is to handle this according to the formula recited in Article 46(3): in a manner that is not regarded as unreasonable having regard to the circumstances of each case.

Duty owed to the party in breach

Preservation and restitution of non-conforming goods. When Article 46(2) is applied, Articles 86 through 88 obligate the buyer to preserve the goods for which a substitution is to be made (see footnote 20); and, subject to exceptions recited in Article 82(2), Article 82(1) sets forth the general rule that "[t]he buyer loses the right to . . . require the seller to deliver substitute goods if it is impossible for him to make restitution of the [non-conforming] goods [he received] substantially in the condition in which he received them".


FOOTNOTES

*Assistant Professor of Law, University of Pittsburgh

1. For data on Article 62, see the Cross-reference editorial analysis of Article 62 [not yet available].

2. Certain aspects of Article 28 are discussed below. For further data on Article 28, see the Cross-reference editorial analysis of Article 28 [not yet available].

3. "[T]he remedy of obtaining an order from a court that a party perform the contract" can be either "a limited remedy, which in many circumstances is available only at the discretion of the court"; or "a remedy, available at the discretion of the other party". Secretariat Commentary on Article 26 of the CISG, Official Records, p. 27.

- Section 7-216(1) of the U.S. Uniform Commercial Code illustrates the former approach ("Specific performance may be decreed where the goods are unique or in other proper circumstances"). For similar common law reasoning, see the rules of the forum in effect in Australia; they preclude specific performance unless damages is deemed to be an inadequate remedy. Graham Corney, "Obligations and Remedies Under the 1980 Vienna Sales Convention", Queensland Law Society Journal (Feb. 1993) 45.

- Article 46(1), where not restricted, illustrates the latter approach. It falls within the civil law tradition of enforcing the original promise, rather than the common law tradition of preferring damages to equitable relief. It is an expression of the maxim pacta sunt servanda. "Its purpose is to see to it that the obligations of the seller are performed as laid down in the contract and th[e] Convention." Michael R. Will, Commentary on the International Sales Law, Cesare M. Bianca & Michael Joachim Bonell eds. (Milan 1987) 334. For further comments on civil law contract theory, see Richard M. Hyland, "Pacta sunt servanda: a meditation", 82 Cal. L. Rev. 410-419 (1994).

Article 46(1) is subject to an important restriction: Article 28. See also the restrictions on a buyer's right to require repair or substitute goods that are recited in Article 46(2) and (3).

4. Article 28 is a common law/civil law, market-economy/planned economy compromise. For relevant citations, see the Roadmap to the legislative history of Article 28. Article 28 links the right to obtain a judgment for specific performance to the rules of the forum. It has been said this may have the potential for mischief: "parties will be encouraged to forum-shop for a national court system that will or will not grant specific performance". Amy Kastely, "Rhetorical Analysis of the Convention", 8 NW J. Int'l L. 615 (1988). However, except perhaps when contracting with persons from planned economies, this would seem unlikely.

- Where it is the most practical alternative available, the rulings on a request to enter a judgment for specific performance are apt to be similar in both common law and civil law jurisdictions (Steven Walt, "For Specific Performance Under the United Nations Sales Convention", 26 Texas Int'l L. J. 233 (1991)); and in any event

- In practice, the difference in the manner in which civil law and common rules of the forum on specific performance are implemented has been less of a common law/civil law dichotomy than a market-economy/planned-economy dichotomy:

"In the market-economy countries, an aggrieved party, especially in commercial relations, usually will not bother with bringing a claim for performance, waiting to obtain judgment and then attempting to levy execution. This would be much too expensive in terms of time, effort and money. Rather, the aggrieved party will procure a substitute performance and then claim damages. In practice [the market-economy civilian] thus will act like his brother in England or the United States.

"By contrast, the socialist principle of 'real performance' [has been] taken seriously in the Eastern European countries with strictly planned economies. For this, there are both political and economic reasons: since in a planned economy contracts serve to implement plans, both the aggrieved party and the nonperforming party would deviate from their planned tasks if the one does not perform and the other does not insist on performance. Moreover, there is usually no functioning market at which the aggrieved party can procure a substitute performance." Ulrich Drobnig, "General Principles of European Contract Law", International Sale of Goods [Dubrovnik Lectures], Petar Sarcevic & Paul Volken eds. (Oceana 1986) 320-321.

Such reasoning on the part of delegates to the 1980 Vienna Diplomatic Conference from Socialist countries (combined with civilian "pacta sunt servanda" traditions) led to a reluctance to express the Conventions' performance remedy in a common law manner. However, today with the shifts from planned-economy regimes to market-economy regimes that have occurred in Eastern Europe and elsewhere, to a common lawyer the practical consequences of living with a specific performance text that is couched in a civilian manner is less significant. Caveat: There remain important markets of the type described by Drobnig in which, for the reasons he states, the performance remedy can be preferred over damages. For an analysis of Chinese law and practice, see Jianming Shen, "The Remedy of Requiring Performance Under the CISG and the Relevance of Domestic Rules", 13 Ariz. J. Int'l & Comp. L. 282-302.

Where there is a concern over the possible scope of the remedy of specific performance under the Convention, a response is to restrict the right to compel performance by a suitable contract clause as permitted by Article 6, or to include an appropriate forum selection clause in one's contract.

5. The phrase "unless the court would do so under its own law" is said to refer to "the domestic law of the forum and not its choice of law rules". Amy Kastely, "Requiring Performance in International Sales", 63 Wash. L.R. 638 (1988); see also Peter Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods (Vienna 1986); and John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 2d ed. (Kluwer 1991) 273.

Related issues have to do with the nature of Article 28, and whether it impacts upon Article 46(2) and (3) as well as Article 46(1).

- Treitel, Ziegel and Lookofsky are of the view that Article 28 also impacts upon Article 46(2) and (3); Kastely and Honnold state that it does not. G. Treitel, Remedies for Breach of Contract (Clarendon Press 1988) 44-45; Jacob Ziegel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods (1981) 105; Joseph Lookofsky, "The 1980 United Nations Convention on Contracts for the International Sale of Goods", International Encyclopaedia of Laws, Blainpain, gen. ed. (Kluwer 1993) 92; Amy Kastely, op. cit. at 635-637; John O. Honnold, op. cit. at 366.

- Article 28 makes the granting of specific performance a matter of discretion for judges in States whose national laws would not require specific performance. It should be noted, however, that a judge in such a State may order specific performance, since the language of Article 28 merely provides that "a court is not bound to enter a judgement of specific performance unless the court would do so under its own law . . ." (emphasis added). "Article 28 does not require a court to apply its law to a contract governed by the Convention; it simply allows the court to follow domestic law if it so chooses." Amy Kastely, op. cit. at 638. Referring to the need "to give effect to the international character of the contract and the need for uniformity in the law governing international sales", Kastely would not regard Article 28 as justifying the rejection of a claim for repair merely because it is unknown as a remedy under domestic law, nor would Schlechtriem. Amy Kastely, id. at 607; Peter Schlechtriem, op. cit. at 63, 76 n.293.

6. Secretariat Commentary on Article 42 of the 1978 Draft of the CISG, Official Records, p. 38.

7. Official Records, pp. 396-397. Explanations for this statement by Professor Honnold at the Diplomatic Conference are:

- The Secretariat Commentary that accompanied the provisions the delegates considered at this Conference states: "The sanction provided by [Article 77] against a party who fails to mitigate his loss only enables the other party to claim a reduction in the damages". Secretariat Commentary on Article 73 of the 1978 Draft of the CISG, Official Records, p. 61.

- Efforts had been made to change this conclusion prior to the Diplomatic Conference. These efforts were unsuccessful. See UNCITRAL Yearbook VII, A/CN.9/SER.A/1997, p. 9, commented on by E. Allan Farnsworth, "Damages and Specific Relief", 27 Am. J. Comp. L. 250 (1949).

Professor Honnold's statement accompanied a further effort at the Vienna Diplomatic Conference to get this conclusion changed. That effort was also unsuccessful. Official Records, p. 332.

8. Domestic rules mitigating the right to compel performance are present in many forums. As an example, in a forum in which the UCC is the domestic law, it is highly unlikely that a court would enter a judgment for specific performance in a situation in which the buyer could readily purchase replacement goods elsewhere. Article 28 can in this manner "mitigate the appearance of rigidity of the Convention's general rules on 'requiring performance'." John O. Honnold, supra note 5 at 102-103. For further references to relief from rigidity under national law via Article 28, see J.D. Feltham, "The United Nations Convention on Contracts for the International Sale of Goods", 1981 J. Bus. L. 359; and Peter Schlechtriem, supra note 5 at 102-103 (German rules of the forum would relieve the inequities he cites).

9. As an example, it has been said: "[T]he 'good faith' principle of Article 7 . . . may call for a restrained interpretation of the Convention's provisions on compelling performance when a party seeks this remedy only after a delay that permits him to speculate at the expense of the other party -- as when a buyer seeks to compel delivery (rather than damages) only after a sharp rise in the market . . ." John O. Honnold, supra note 5 at 365. "Such abus de droit would be blocked under the rule of Article 7(1) that the Convention shall be interpreted 'to promote the observance of good faith in international trade' . . ." John O. Honnold, "Uniform Words and Uniform Application. The 1980 Sales Convention and International Juridical Practice", Einheitliches Kaufrecht und Nationales Obligationenrecht, Peter Schlechtriem ed. (Baden-Baden 1987); see also Amy Kastely for other applications of the principle of good faith (supra note 5 at 619-621); and Treitel who states that the right to compel performance under the CISG "may be affected by failure to mitigate on the ground that such a result follows from the principle that the Convention is to be interpreted 'to promote . . . the observance of good faith in international trade'". G. Treitel, Remedies for Breach of Contract: A Comparative Account (Oxford 1988) 73-74. See as well the reference to "loyalty to the other party to the contract" in Peter Schlechtriem, "Recent Developments in International Sales Law", 28 Israel L.R. 320-321 (1983) and by Lief Sevón in Honnold, "Uniform Words", op. cit. at 139.

10. "In order for the buyer to exercise the right to require performance of the contract, he must not have resorted to a remedy which is inconsistent with that right, e.g. by declaring the contract avoided under [Article 49] or by declaring a reduction of the price under [Article 50] . . . [However] [i]n addition to the right to require performance of the contract . . the buyer can recover any damages he may have suffered as a result of the delay in the seller's performance." Secretariat Commentary on Article 42 of the 1978 Draft of the CISG, Official Records, p. 38.

11. "Article 46(1) refers to 'performance by the seller of his obligations'. Since 'his obligations' is unrestricted and general, it necessarily refers to all of his obligations . . ." Michael R. Will, supra note 3 at 339.

12. Peter Winship, "Domesticating International Commercial Law: Revising UCC Article 2 in Light of the UN Sales Convention", 37 Loyola L.R. 68 (1991).

13. Harry M. Flechtner, "Remedies Under the New International Sales Convention", 8 J.L. & Com. 60-61 (1988).

14. John O. Honnold, supra note 5 at 163.

15. Jacob Ziegel, "The Remedial Provisions in the Vienna Sales Convention: Some Common Law Perspectives", International Sales: The United Nations Convention on Contracts for the International Sales of Goods, Nina M. Galston & Hans Smit eds. (Matthew Bender 1984) Ch. 9 at 11-12. Cf. "Mr. ROGNLIEN (Norway) [who] questioned whether existing 'usages' were in themselves sufficient to be of assistance in that connection since the question was not so much one of the buyer having the right to buy [comparable goods elsewhere in lieu of compelling performance by seller], but rather of his duty to do so rather than make an unreasonable demand for specific performance." Official Records, p. 331.

16. Fritz Enderlein & Dietrich Maskow, International Sales Law (Oceana 1992) 180.

17. Commentators' views on "circumstances that ought to be considered":

"[I]t would be unreasonable to compel the seller to repair if repair is technically unfeasible or if the cost of repair exceeds the diminution in value to the buyer . . . caused by the defect . . . If the defect is not substantial and repair is unreasonable, the buyer retains the right under Article 50 to reduce the price to reflect any diminution in value . . These limitations on the buyer's right to performance are designed to avoid economic waste where the seller has substantially performed or where the cost of repair exceeds the benefit to be gained." Amy Kastely, supra note 5 at 618-619.

"The unreasonableness of repair does not depend on the character of the breach, but rather on the nature of the goods delivered and all the other circumstances. Certain goods by their very nature do not allow any repair at all or, if they do, would require expenditure out of all proportion. When it comes to all the other circumstances, regard must be given to both the seller's and the buyer's interests . . . As for the buyer's circumstances, a typical example of a circumstance to be considered would be the availability of qualified repair locally. Where qualified personnel is particularly scarce, as may be the case in some developing countries, the seller's inconvenience may have to give way to the interests of the buyer". Michael R. Will, supra note 3 at 338-339.

"A claim for repair may be unreasonable if there is no reasonable ratio between the costs involved and the price of the goods or if the seller is a dealer who does not have the means for repair . . ." Fritz Enderlein & Dietrich Mascow, supra note 16.

18. For the definition of "fundamental breach" one must look to Article 25. The concept of fundamental breach is applied to the right to request delivery of the goods "to avoid hardship on the seller. He finds himself in the same economic position as if the buyer had chosen avoidance of the contract under Article 49. That is, the seller bears the risk of being unable to deliver substitute goods or to dispose of the goods returned and of all transport costs involved. Such a risk would hardly be justified as long as the defects are only of minor importance . . ." Michael R. Will, supra note 3 at 337-338. See also, the Secretariat Commentary on Article 42 of the 1978 Draft of the CISG, Official Records, pp. 38-39, para. 12.

The Article 46(2) restriction on the buyer's right to obtain substitute goods like the restriction recited in Article 46(3), represents a concession to efficiency concerns and a departure from the pacta sunt servanda ethos that permeates the civil law conception of contract rights. See Karl-Heinz Neumayer & Catherine Ming, Convention de Vienne sur les contrats de vente interntionale de marchandises: Commentaire (1993) at 331, and in particular n.6, citing critics of this restriction. On the other hand, where such ethos can apply consistent with the wording of Article 46(2), there are those who would apply it at the expense of a possible efficiency concern -- for example, it has been said that where there is a lack of conformity of the goods that constitutes a fundamental breach of contract, seller's ability to repair the goods does not preclude the buyer's right to substitute goods ([la] possibilité de réparer le défaut n'exclut pas non plus le droit au remplacement.") See id. n.9, citing Lüderitz to this effect. This is consistent with the statement in the Secretariat Commentary that where the wording of the Convention's performance requirement is not restricted, it "does not allow the seller to refuse to perform on the grounds that . . . performance . . . would cost the seller more than it would benefit the buyer". Secretariat Commentary on Article 42 of the 1978 Draft of the CISG, Official Records, p. 38.

19. An effort to make Article 46(2) expressly subordinate to Article 48 was defeated at the Vienna Diplomatic Conference. This proposed amendment "was rejected by 10 votes in favour and 10 votes against." Official Records, p. 116. Nevertheless, it has been said: "The question of whether the CISG places a serious limit on the seller's right to cure by giving the buyer the right to dictate the terms of the cure under Article 48 with a demand for substitute goods is still open to debate." Eric C. Schneider, "The Seller's Right to Cure Under the Uniform Commercial Code and the United Nations Convention on Contracts for the International Sale of Goods", 7 Ariz. J. Int'l Comp. L. 82 (1989).

- There are those who take the view that the Convention prefers to prevent the additional economic burdens involved in the restitution of previously delivered goods and conclude that the seller's right to repair should prevail over the buyer's right to require substitution, provided that the other conditions of Article 48(1) are met. See Karl-Heinz Neumayer & Catherine Ming, supra note 18 at 322, and id. n.12, and sources cited therein.

- Those more committed to the maxim of pacta sunt servanda believe that the buyer's right to require substitution should prevail. An additional argument has been to the effect that the Convention seeks to improve the buyer's situation. See Michael R. Will, supra note 3 at 340, noting in particular the difficulties of buyers in developing countries. See also comments recited in note 18.

20. See the Secretariat Commentary on Article 42 of the 1978 Draft of the CISG. Official Records, p. 39, para. 14.


Pace Law School Institute of International Commercial Law - June 1997