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2012 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods

Digest of Article 46 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
General requirements
The general right to require performance (art. 46(1))
Delivery of substitute goods (art. 46(2))
Repair (art. 46(3)]

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 this requirement.

(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.

(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.

OVERVIEW

1. Article 46 gives the buyer a general right to require the seller to perform its contractual obligations in kind. Paragraphs 2 and 3 deal with replacement and repair of non-conforming goods (in the sense of article 35), and articulate some restrictions on these specific remedies; paragraph 1 applies to all other cases.

2. The right to require performance is subject to the restriction regarding specific performance set forth in article 28. If the seized court would not, on the facts of the case before, grant such remedy under its own national law, it will not be bound to do so under the Convention.[1] Therefore the courts of those jurisdictions that restrict the availability of specific performance may refuse to grant specific performance of the obligation in dispute, except in circumstances where the court would grant the remedy under its own domestic law, and may award only damages.

3. The fact that the right to performance is provided for first among the remedies described in articles 46-52 reflects that, under the Convention, the contractual bond should be preserved as far as possible; avoidance of the contract should be available only as a last resort (ultima ratio),[2] and only if the continuation of the contract would no longer be tolerable because of a severe breach of contract by the seller (see article 49). The same approach applies when the buyer has breached the contract (articles 62 and 64).

4. Despite its importance, the right to require performance has not often been invoked in reported decisions. In practice, aggrieved parties have generally preferred to pursue other remedies — in particular the right to claim damages. The parties can contract out the remedy of specific performance.[3]

General Requirements

5. The right to require performance of an obligation presupposes that the obligation exists and has thus far not been fulfilled. With the exceptions stated in articles 40 and 44, the buyer must also comply with the notice requirement in articles 38 and 39.[4]

6. Furthermore, to invoke his rights under article 46 the buyer must "require" performance. This calls for a clear demand that the disputed obligation should be fulfilled.[5] Article 46(2) and (3) specify that notice of a "request" for the remedies they describe must be given within a reasonable time. The buyer is also entitled to set an additional period of time for performance in accordance with article 47.

The General Right to Require Performance (Article 46(1))

7. Except in cases governed by article 46(2) and (3), the buyer has a general right under article 46(1) to require the seller's performance, in kind, of any obligation that is due. Thus the buyer is entitled to request that the goods be delivered, that the seller procure a stipulated bank guaranty, or that the seller respect an exclusive sales obligation.[6] The buyer could demand and, subject to the restrictions imposed by article 28, employ the assistance of the courts to obtain performance of these and other seller obligations.

8. If performance in kind is impossible — e.g., the contract covers a unique good that is destroyed before delivery — then the buyer's right to require performance is also extinguished.[7]

9. Article 46(1) restricts the right to compel performance when the buyer has already resorted to a remedy inconsistent with requiring performance. Such inconsistency exists when the buyer has avoided the contract, and also when the buyer has reduced the price pursuant to article 50.[8] The buyer can, however, combine a request for performance and a claim for any remaining damage — e.g., damage caused by delayed performance.[9] The buyer having once requested performance can still opt for a different remedy, e.g., can declare the contract avoided if all the requirements for avoidance are met. Only if the buyer has fixed an additional period of time for performance under article 47 is the buyer for that period excluded from requesting other remedies (although the buyer retains the right to recover damages for delayed performance by the seller) — see article 47(2).

10. The general right to require performance under article 46(1) need not be asserted within a particular period of time apart from the normal period of limitation imposed by applicable national law[10] or, so far as it applies, by the Convention on the Limitation Period in the International Sale of Goods. Article 46(2) and (3), in contrast, limit the time within which the buyer must make a request for the remedies provided in these provisions; article 46(1) requires a clear declaration that the buyer requests the performance of a contractual obligation,[11] but it does not limit the time for such notice. One tribunal held that this gap should be filled by redress to the UNIDROIT Principles (article 7.2.2), which require the request to be made within reasonable time.[12]

Delivery of Substitute Goods (Article 46(2))

11. Article 46(2) applies if (a) the seller has delivered non-conforming goods; (b) the non-conformity constitutes a fundamental breach of contract; and (c) the buyer has requested replacement of the non-conforming goods "either in conjunction with notice given under article 39 or within a reasonable time thereafter." If these conditions are met, article 46(2) entitles the buyer to require delivery of substitute goods.[13]

12. Whether the goods are non-conforming must be determined by reference to article 35; a lack of conformity exists if the goods are defective, different from the goods required by the contract (aliud), improperly packaged, or deficient in quantity.[14]

13. A seller commits a fundamental breach by delivering non-conforming goods if the non-conformity substantially deprives the buyer of what the buyer is entitled to expect under the contract (article 25). A fundamental breach for purposes of article 46(2) must be determined in the same way as it for purposes of avoidance of contract under article 49(1) (a), and in accordance with the general definition in article 25. Leading court decisions on what constitutes a fundamental breach (although rendered in respect of article 49) have held that a non-conformity concerning quality is not a fundamental breach of contract if the buyer can, without unreasonable inconvenience, use the goods or resell them, even with a rebate.[15] Thus, e.g., the delivery of frozen meat that contained too much fat and water — and which therefore, according to expert opinion, was worth 25.5 per cent less than meat of the contracted for quality — was deemed not to constitute a fundamental breach of contract because the buyer could resell the meat at a lower price or could process it in an alternative manner.[16] If non-conforming goods cannot be used or resold with reasonable effort, however, there is a fundamental breach.[17] The same is true where the goods suffer from a serious defect, even though they can still be used to some extent (e.g. flowers that should have flourished the whole summer but in fact did so only for a small part of the season),[18] or where the goods have major defects and the buyer requires the goods for its manufacturing processes.[19] Similarly, where the non-conformity resulted from the adulteration of the goods in a fashion that was illegal in the states of both the seller and the buyer, a fundamental breach was found.[20] However, it was held not to be a fundamental breach that delivered tractor-trailers exceeded the agreed height of 4 m by 10 cm.[21]

14. Special problems arise with the fundamental breach standard when the goods are defective — even seriouslydefective — but reparable. Several courts have found that, if the defects are easily repaired, the lack of conformity is not a fundamental breach.[22] At least where the seller offers and effects speedy repair without any inconvenience to the buyer, courts will not find that the non-conformity is a fundamental breach.[23] This is in line with seller's right to cure as provided for in article 48 of the Convention. A tribunal also referred to the proportionality of the costs and efforts a replacement would entail.[24]

15. Article 46(2) requires the buyer to give the seller notice requesting substitute goods, and to do so within a limited time. The request for substitute goods can be coupled with the notice of lack of conformity under article 39, in which case the time limits under that provision apply;[25] it can, however, also be given within a reasonable time after the article 39 notice.

16. The right to require delivery of substitute goods is subject to the buyer's obligation to return the delivered goods in substantially the condition in which he received them, pursuant to article 82(1). Article 82(2), however, provides for substantial exceptions to this restitutionary obligation.

17. Where the seller offered replacement of defective goods free of charge, and the buyer rejected this offer (and used the goods in a non-suitable way), a court has reduced the buyer's damages claim.[26]

Repair (Article 46(3))

18. Article 46(3) provides the buyer with a right to demand repair if the delivered goods do not conform to the contract under the standards of article 35. The remedy is available, however, only if it is reasonable in light of all the circumstances. The buyer must also request repair within the same time limits as those applicable to notice under article 46(2) — i.e., "in conjunction with notice given under article 39 or within a reasonable time thereafter."[27]

19. Article 46(3) applies only if the lack of conformity can be cured by repair. A request for repair would be unreasonable if the buyer could easily repair the goods himself, but the seller remains liable for the costs of such repair.[28]

20. Repair is effectively provided if after repair the goods can be used as agreed.[29] If the repaired goods subsequently become defective the buyer must give notice of the defects.[30] It has been held that the time limits of article 39 apply to this notice,[31] but a request to repair the new defects can be given within a reasonable time thereafter.[32] A first notice within two weeks, a second notice after a month, and further notices after six and eleven months have been regarded as notices within a reasonable time.[33]

21. After due notice of a lack of conformity, according to article 45(1) (b), the buyer can claim damages (see also article 48(1), second sentence), and is not obliged to request repair, although a court has held that the buyer is entitled to damages only after having given the seller a chance to remedy any non-conformity.[34]


NOTES

* This presentation of the UNCITRAL Digest is a slightly modified version of the original UNCITRAL text at <http://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf>. The following modifications were made by the Institute of International Commercial Law of the Pace University School of Law:

   -    To enhance access to contents by computer search engines, we present in html rather than pdf;
 
   -    To facilitate direct focus on aspects of the Digests of most immediate interest, we inserted linked tables of contents at the outset of most presentations;
 
   -    To support UNCITRAL's recommendation to read more on the cases reported in the Digests, we provide mouse-click access to (i) CLOUT abstracts published by UNCITRAL (and to UNILEX case abstracts and other case abstracts); and also (ii) to full-text English translations of cases with links to original texts of cases, where available, in [bracketed citations] that we have added to UNCITRAL's footnotes; and
 
   -    To enable researchers to themselves keep the case citations provided in the Digests constantly current, we have created a series of tandem documents, UNCITRAL Digest Cases + Added Cases. The new cases and other cases that are cited in these updates are coded in accordance with UNCITRAL's Thesaurus.

1. See the Digest for article 28.

2. See CLOUT case No. 428 [AUSTRIA Oberster Gerichtshof, 7 September 2000].

3. [ICC Arbitration Court of the International Chamber of Commerce, France, 2004 (Arbitral award No. 12173)].

4. See, e.g., CLOUT case No. 346 [GERMANY Landgericht Mainz 26 November 1998]; [FRANCE Cour d'appel de Poitiers 26 October 2004].

5. See CLOUT case No. 594 [GERMANY Oberlandesgericht Karlsruhe 19 December 2002] (buyer's refusal to further perform and its request for repayment of prepaid price regarded as sufficient). The commentary on the draft Convention prepared by the UNCITRAL secretariat contained an example of an ambiguous request that could be interpreted as either a demand for performance or a modification of the delivery date:

"Example 42A: When the goods were not delivered on the contract date, 1 July, Buyer wrote Seller ‘Your failure to deliver on 1 July as promised may not be too serious for us but we certainly will need the goods by 15 July.' Seller subsequently delivered the goods by 15 July."

Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March-11 April 1980 (United Nations publication, Sales No. E.81.IV.3), 38.

6. See the following cases (where, however, the buyers had resorted to other remedies — namely damages or (as far as possible) avoidance): [ICC Court of Arbitration of the International Chamber of Commerce, January 1997 (Arbitral award No. 8786)] (late delivery); [EGYPT Cairo Regional Centre for Commercial Arbitration (CRCICA) 3 October 1995] (extension of bank guaranty); CLOUT case No. 2 [GERMANY Oberlandesgericht Frankfurt a.M. 17 September 1991] (breach of exclusive sales agreement).

7. This was also the result in [UNITED STATES U.S. District Court, Southern District of New York, 20 August 2008 (Hilaturas Miel, S.L. v. Republic of Iraq, 573 F.Supp.2d 781)] (because of the hostilities in the Iraq war the seller could no longer perform the contract).

8. See Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March-11 April 1980 (United Nations publication, Sales No. E.81.IV.3), 38, at paragraph 7.

9. Ibid. at paragraph 4.

10. See, for example, CLOUT case No. 346 [GERMANY Landgericht Mainz 26 November 1998].

11. See Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March-11 April 1980 (United Nations publication, Sales No. E.81.IV.3), 38, at paragraphs 4-5.

12. [RUSSIA International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation 30 January 2007].

13. See, e.g., [FRANCE Cour d'appel de Poitiers 26 October 2004]; [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 24 July 2007]. See also [POLAND Supreme Court 11 May 2007].

14. See the Digest for article 35.

15. CLOUT case No. 171 [GERMANY Bundesgerichtshof 3 April 1996]; CLOUT case No. 248 [SWITZERLAND Bundesgericht 28 October 1998].

16. CLOUT case No. 248 [SWITZERLAND Bundesgericht 28 October 1998] .

17. CLOUT case No. 150 [FRANCE Cour de Cassation 23 January 1996] (artificially sugared wine); CLOUT case No. 79 [GERMANY Oberlandesgericht Frankfurt a.M. 18 January 1994] (shoes with cracks in leather); [GERMANY Landgericht Landshut 5 April 1995 (Sport clothing case)] (T-shirts which shrunk by two sizes after first washing).

18. CLOUT case No. 107 [AUSTRIA Oberlandesgericht Innsbruck 1 July 1994].

19. See CLOUT case No. 138 [UNITED STATES U.S. Court of Appeals for the Second Circuit 6 December 1995] (compressors with lower cooling capacity and higher power consumption than those contracted for, needed by the buyer to manufacture air conditioners); CLOUT case No.150 [FRANCE Cour de Cassation 23 January 1996] (artificially sugared wine); CLOUT case No. 315 [FRANCE Cour de Cassation 26 May 1999] (metal sheets unfit for the anticipated use by the buyer's customer) (see full text of the decision).

20. CLOUT case No. 150 [FRANCE Cour de Cassation 23 January 1996] (artificially sugared wine, which is forbidden under EU law and national laws); CLOUT case No. 170 [GERMANY Landgericht Trier 12 October 1995] (artificially sugared wine).

21. [BELGIUM Hof Gent 30 June 2004].

22. CLOUT case No. 196 [SWITZERLAND Handelsgericht des Kantons Zürich 26 April 1995].

23. CLOUT case No. 152 [FRANCE Cour d'appel, Grenoble 26 April 1995]; CLOUT case No. 282 [GERMANY Oberlandesgericht Koblenz 31 January 1997].

24. [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 11 November 2002].

25. See the Digest for article 39, paragraphs 19-26.

26. CLOUT case No. 553 [SPAIN Audiencia Provincial de Barcelona 28 April 2004] (reduction by 50 per cent).

27. See CLOUT case No. 225 [FRANCE Cour d'appel, Versailles 29 January 1998]. See also paragraph 15 supra.

28. CLOUT case No. 125 [GERMANY Oberlandesgericht Hamm 9 June 1995] (see full text of the decision).

29. CLOUT case No. 152 [FRANCE Cour d'appel, Grenoble 26 April 1995].

30. [GERMANY Landgericht Oldenburg 9 November 1994].

31. Ibid.

32. CLOUT case No. 225 [FRANCE Cour d'appel, Versailles 29 January 1998] (see full text of the decision).

33. Ibid.

34. [GERMANY Landgericht Köln 25 March 2003].


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