Go to Database Directory|| See also UNCITRAL Digest Cases + Added Cases
Search the entire CISG Database (case data + other data)

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

Digest of Article 54 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Introduction
Scope of the buyer's obligations
Currency of payment
Allocation of payments]

Article 54

The buyer's obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.

INTRODUCTION

1. This provision deals with actions preparatory to payment of the price, which are specified in the contract or in applicable laws and regulations. For example, the contract may provide for the opening of a letter of credit, the establishment of security to guarantee payment, or the acceptance of a bill of exchange. Preparatory actions required by applicable laws or regulations might involve, for example, an administrative authorization needed for the transfer of funds to enable payment to be made.

2. Article 54 is frequently cited by the courts. Although the provision is concerned solely with actions preparatory to payment of the price, many decisions nevertheless cite article 54 in cases of non-payment of the price by the buyer where the dispute did not specifically relate to steps or formalities required to enable payment to be made. In those cases, article 54 was referred to by the courts either in conjunction with article 53[1] or in isolation.[2] Conversely, a series of decisions rely exclusively on article 54 where the buyer has not taken such steps or complied with such formalities as might be required to enable payment to be made.[3] However, the precise textual basis for the judgment against a breaching buyer is immaterial. Violation of the obligation to pay the price in accordance with article 53 and non-performance of the obligation to take steps and comply with formalities required to enable payment to be made in accordance with article 54 lead to the same outcome.[4]

3. Article 54 has a double effect. First, unless otherwise provided for in the contract, article 54 imposes these obligations on the buyer, who must thus bear the costs thereof.[5] Secondly, the steps for which the buyer is responsible under article 54 are obligations whose violation permits the seller to resort to the remedies specified in articles 61 et seq.; they do not merely relate to "conduct in preparing to perform or in performing the contract", as stated in article 71(1). Thus, failure to perform those steps constitutes a breach and not merely an anticipatory breach of contract.[6]

Scope of the Buyer's Obligations

4. The question arises whether article 54 merely obliges the buyer to perform the steps necessary to satisfy the preconditions for payment, but does not automatically make the buyer responsible for the result, or whether the buyer breaches its obligations if the measures implemented prove unsuccessful.[7] Many decisions have adopted the second interpretation, which is harsher for the buyer. The obligation to take steps and comply with formalities required to enable payment to be made is in all respects comparable to the obligation to pay the price. For the most part those decisions are concerned with the buyer's undertaking to issue a letter of credit or to provide a bank guarantee. A buyer who fails to issue a contractually stipulated letter of credit within the agreed period and for the agreed amount violates its obligations by that fact alone.[8] The same is true if a buyer does not furnish a contractually agreed bank guarantee.[9] It is also true if a buyer who gives instructions to its bank to make a transfer does not ensure that payment can be effected in convertible currency.[10] On the other hand, it could be held that mere prior bank confirmation (as stipulated in the contract) of the opening of a letter of credit to be issued after inspection of each delivery was not a step required to enable payment to be made within the meaning of article 54.[11]

5. Article 54 gives rise to particular difficulties with regard to administrative measures imposed by applicable laws or regulations in order that payment can be effected. Under one possible interpretation of article 54, a distinction is made between measures of a commercial nature, in respect of which the buyer assumes a commitment to achieve the result stated in the contract, and administrative measures, with regard to which the buyer takes on only an obligation to employ its best efforts without being answerable for the outcome. The rationale for the distinction is that the buyer cannot guarantee, for example, that administrative authorities will authorize a transfer of funds, so that the buyer should only be obliged to carry out the steps needed to obtain the relevant administrative authorization. A possible argument against this distinction is that, under article 54, the buyer is automatically responsible if a prerequisite to payment, whatever its nature, is not satisfied, subject to the possibility of exemption under article 79 of the Convention.[12]

Currency of Payment

6. Article 54 says nothing about the currency of payment. Most often the parties indicate the currency when fixing the price. As several court decisions have stated, such an agreement is binding on the parties pursuant to article 6.[13] Where the price is not contractually stipulated, reference has to be made to commercial usages (article 9(2)) or to practices which the parties have established between themselves (article 9(1)). In cases where the currency of payment cannot be established by these means, the method for fixing the price is unclear. There have been few court decisions which have ruled on this issue.

7. Most courts adopt the premise that the question of determining the currency of payment is governed by the Vienna Convention and not domestic law.[14] Consequently, the currency has to be determined by a general principle on which the Convention is based, within the meaning of article 7(2). Several courts have accordingly relied on article 57, which determines the place of payment of the price, and this has led them to rule in favour of the currency where the seller's place of business is located (article 57(1) (a)).[15] Conversely, one court on several occasions ruled in favour of the national law applicable by virtue of the rules of private international law, which led it to apply the domestic law governing the contract of sale on matters not covered by the Vienna Convention.[16]

8. The Vienna Convention does not provide for the buyer's right to discharge its debt in the currency of the place of payment if the price has been contractually specified in a different currency. Various courts have been faced with the question whether domestic laws which establish such an entitlement in the debtor's favour can nonetheless be applied under choice-of-law rules. One supreme court refused to allow this on the ground that no entitlement of the buyer to pay the price in a currency other than the currency of the contract could be derived from the Convention, since payment in an alternative currency would require an agreement of the parties to that effect.[17] Conversely, lower courts in other countries have, without giving any specific grounds, implicitly allowed the applicability, in principle, of domestic law provisions which recognize the debtor's right to discharge its debt in the currency of the place of payment.[18]

9. Nor does the Vienna Convention establish the seller's right to request payment of the price in the currency of the place of payment. Nevertheless, various courts have accepted the applicability of national laws which authorize or require the seller to request payment of the price in the currency of the place of payment.[19]

Allocation of Payments

10. Where a buyer has several debts to the seller, the buyer will generally indicate the debt which it intends to settle when effecting payment.[20] The Vienna Convention does not provide for a system of appropriation by law that can be applied in the absence of any indication by the buyer as to the assignment of the funds paid or any agreement of the parties. Since the Convention says nothing about this question, and there appears to be no relevant general principle on which the Convention is based, one court has applied domestic law as determined by the rules of private international law, pursuant to article 7(2).[21]


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, in particular, [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 28 September 2004]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 30 December 2003]; [GERMANY Oberlandesgericht Karlsruhe 10 December 2003]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 22 October 2003]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 17 September 2003]; [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 7 July 2003]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 10 December 2002]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 17 January 2000]; [GERMANY Oberlandesgericht Dresden 27 December 1999]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 25 June 1998]; CLOUT case No. 236 [GERMANY Bundesgerichtshof 23 July 1997]; [ICC Arbitration Court of the International Chamber of Commerce, February 1997 (Arbitral award No. 8716)]; CLOUT case No. 5 [GERMANY Landgericht Hamburg (Federal Republic) 26 September 1990].

2. [GERMANY Amtsgericht Freiburg 6 July 2007]; [FRANCE Tribunal de grande instance, Strasbourg, 22 December 2006]; [SLOVAKIA Okresný súd Nitra 27 June 2006]; [SLOVAKIA Krajský súd Nitra 23 June 2006] (the fact that the invoice was also sent to a third party does not exempt the buyer from its obligation to pay the price); [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 25 May 2005]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 23 March 2005 (Arbitral award No. 126/2004)]; [SERBIA Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce, 21 February 2005]; CLOUT case No. 904 [SWITZERLAND Tribunal cantonal du Jura 3 November 2004]; [UKRAINE International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry 19 October 2004]; [AUSTRIA Oberlandesgericht Graz 31 May 2002]; [GERMANY Oberlandesgericht Hamm 12 November 2001]; [SERBIA Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce, 24 September 2001]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 30 May 2001]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 30 May 2001]; [AUSTRIA Oberlandesgericht Graz 24 January 2001]; CLOUT case No. 429 [GERMANY OLG Frankfurt 30 August 2000]; CLOUT case No. 397 [SPAIN Audiencia Provincial de Pamplona, seccion 3, 27 March 2000]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 10 February 2000]; CLOUT case No. 333 [SWITZERLAND Handelsgericht des Kantons Aargau 11 June 1999]; [GERMANY Hamburger Freundschaftliche Arbitrage 29 December 1998]; [GERMANY Landgericht Hamburg 17 June 1996].

3. See, in particular, [ICC Arbitration Court of the International Chamber of Commerce, 2003 (Arbitral award No. 11849) (Fashion products case)]; CLOUT case No. 631 [AUSTRALIA Supreme Court of Queensland 17 November 2000 (Down Investments Pty Ltd. v. Perjawa Steel SDN BHD)]; CLOUT case No. 261 [SWITZERLAND Bezirksgericht der Saane 20 February 1997]; [HUNGARY Arbitration Court attached to the Hungarian Chamber of Commerce and Industry 17 November 1995 (Arbitral award No. VB/94124)]; CLOUT case No. 142 [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 17 October 1995 (Arbitral award No. 123/1992)].

4. See paragraphs 3 and 4 infra.

5. [GERMANY Landgericht Duisburg 17 April 1996] (concerning costs associated with payment of the price by cheque).

6. Secretariat Commentary to draft article 50, paragraph 5, and the decisions cited in paragraphs 4 and 5 infra.

7. Secretariat Commentary to draft article 50, paragraph 3.

8. [ICC Arbitration Court of the International Chamber of Commerce, 2003 (Arbitral award No. 11849) (Fashion products case)]; CLOUT case No. 986 [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 4 February 2002]; CLOUT case No. 631 [AUSTRALIA Supreme Court of Queensland 17 November 2000 (Down Investments Pty Ltd. v. Perjawa Steel SDN BHD)]; CLOUT case No. 717 [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 6 January 1999]; CLOUT case No. 261 [SWITZERLAND Bezirksgericht der Saane 20 February 1997]; CLOUT case No. 176 [AUSTRIA Oberster Gerichtshof 6 February 1996] (the buyer was, however, not deemed in breach of its obligations since the seller had omitted to indicate the port of embarkation, and that fact was necessary, under the contract, for establishing the letter of credit); [HUNGARY Arbitration Court attached to the Hungarian Chamber of Commerce and Industry 17 November 1995 (Arbitral award No. VB/94124)] , (referring to article 73(2)); CLOUT case No. 301 [ICC Court of Arbitration of the International Chamber of Commerce, 1992 (Arbitral award No. 7585)].

9. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 25 June 1998].

10. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 17 October 1995 (Arbitral award No. 123/1992)].

11. [GERMANY Landgericht Kassel 21 September 1995] (failure to furnish such a bank confirmation, therefore, subjected the buyer to penalty under article 71 only and not under article 54).

12. See CLOUT case No. 142 [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry 17 October 1995 (Arbitral award No. 123/1992)].

13. CLOUT case No. 934 [SWITZERLAND Tribunal Cantonal Valais 27 April 2007]; [SWITZERLAND Tribunal cantonal du Valais 27 October 2006]; CLOUT case No. 930 [SWITZERLAND Tribunal cantonal du Valais 23 May 2006]; CLOUT case No. 907 [SWITZERLAND Tribunal cantonal du Valais 27 May 2005]; CLOUT case No. 215 [SWITZERLAND Bezirksgericht St. Gallen 3 July 1997]; CLOUT case No. 80 [GERMANY Kammergericht Berlin 24 January 1994]. See, however, [ARGENTINA Cámara Nacional de Apelaciones en lo Comercial de Buenos Aires 31 May 2007] (national law as determined by private international law rules was applied by the court to the agreement between the parties).

14. CLOUT case No. 80 [GERMANY Kammergericht Berlin 24 January 1994]; [SWITZERLAND Bezirksgericht St. Gallen 3 July 1997]; CLOUT case No. 52 [HUNGARY Fovárosi Biróság, Budapest 24 March 1992].

15. CLOUT case No. 80 [GERMANY Kammergericht Berlin 24 January 1994], [SWITZERLAND Bezirksgericht St. Gallen 3 July 1997] (see full text of the decision) (in cases of doubt, the currency of payment is the currency of the place of payment); CLOUT case No. 281 [GERMANY Oberlandesgericht Koblenz 17 September 1993] (the currency of the seller's place of business is the currency in which the price should be paid); CLOUT case No. 52 [HUNGARY Fovárosi Biróság, Budapest 24 March 1992] (without stating a reason, the court ordered the buyer to pay the price to the seller in the latter's currency).

16. CLOUT case No. 934 [SWITZERLAND Tribunal Cantonal Valais 27 April 2007]; [SWITZERLAND Tribunal cantonal du Valais 27 October 2006]; CLOUT case No. 930 [SWITZERLAND Tribunal cantonal du Valais 23 May 2006]; CLOUT case No. 907 [SWITZERLAND Tribunal cantonal du Valais 27 May 2005]; [SWITZERLAND Tribunal cantonal du Valais 19 August 2003]; CLOUT case No. 255 [SWITZERLAND Tribunal cantonal du Valais 30 June 1998].

17. [AUSTRIA Oberster Gerichtshof 22 October 2001].

18. [SWITZERLAND Handelsgericht des Kantons Aargau 25 January 2005] (the court, however, rejected the applicability of article 84(2) of the Swiss Code of Obligations since that provision confers the right of conversion solely on the debtor, i.e., in this case, the buyer, and not on the creditor, who sought to rely on it); CLOUT case No. 281 [GERMANY Oberlandesgericht Koblenz 17 September 1993] (the court held that section 244 of the German Civil Code (BGB) was not applicable in favour of the buyer, who wished to discharge its debt in Deutschmarks (DM), since payment of the price, which was expressed in French Francs, had to be effected in France and not in Germany).

19. CLOUT case No. 255 [SWITZERLAND Tribunal cantonal du Valais 30 June 1998] (the court applied the Italian Civil Code (article 1277), which required the creditor to denominate the debt in Italian Lire, whereas the creditor had taken legal action seeking payment of the price in Swiss Francs); CLOUT case No. 106 [AUSTRIA Oberster Gerichtshof 10 November 1994] (it can be seen from the judgment that the appeal court had allowed the seller to claim payment of the price in Schillings on the basis of Austrian law, whereas the agreed price had been expressed in DM); cf. [SWITZERLAND Tribunal cantonal du Valais 27 October 2006] (default judgment ordering the buyer, whose place of business was in France, to pay the price in Swiss Francs although the price on the invoices had been denominated in Euros, on the grounds that the seller's judicial claim, which made reference to Swiss Francs, constituted a modification of the contract by reason of the buyer's silence).

20. See the following decision, which opposed a lower-court decision that had referred to article 59 in connection with the allocation of payments: CLOUT case No. 911 [SWITZERLAND Cour de Justice de Genève 12 May 2006].

21. [NETHERLANDS Gerechtshof 's-Hertogenbosch 2 January 2007].


©Pace Law School Institute of International Commercial Law - Last updated July 30, 2012
Go to Database Directory || Go to Information on other available case data
Comments/Contributions