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

Digest of Article 58 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Introduction
Simultaneous payment of the price and handing over of the goods or documents (Article 58(1))
Documents controlling the disposition of the goods (Article 58(1) and (2))
Right of retention (Article 58(1) and (2))
Buyer's right to examine the goods in advance (Article 58(3))]

Article 58

(1) If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents.

(2) If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price.

(3) The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity.

INTRODUCTION

1. Article 58 defines the time when the price becomes due in the absence of any particular contractual stipulation on the matter.[1] Where it fixes the time at which the price is payable, article 58 also determines the moment at which interest based on article 78 of the Convention begins to accrue, as has been observed in many decisions.[2]

Simultaneous Payment of the Price and Handing over of the Goods or Documents (Article 58(1))

2. The Convention does not require the seller, in the absence of a particular agreement on the subject, to grant credit to the buyer. Article 58(1) establishes a default rule of simultaneous handover of the goods (or of documents controlling their disposition) and payment of the price:[3] the buyer must pay the price when the seller places either the goods or documents controlling their disposition at its disposal (article 58(1) first sentence). This main rule is accompanied by two complementary rules. First, article 58(3) grants the buyer the right to examine the goods prior to payment unless the delivery or payment terms agreed on by the parties do not afford the buyer that right. Secondly, the handover of the goods or documents controlling their disposition to the buyer may be refused if the buyer does not pay the price at the time fixed by the Convention (article 58(1), second sentence, and article 58(2)). The seller thus has the right to retain the goods (or documents controlling their disposition) in these circumstances.

3. Contract terms, commercial usages and practices established between the parties (article 9)[4] may give rise to derogation from the rule of simultaneous exchange of goods and price, a principle which, according to article 58(1), applies only "[i]f the buyer is not bound to pay the price at any other specific time." The primacy of party autonomy has been emphasized by various courts.[5] Account also has to be taken of any contract modifications made by the parties (article 29).[6]

4. As reflected in case law, it often happens that the parties to an international sale covered by the Convention expressly or impliedly agree on the time for payment of the price. Contractual stipulations may take very varied forms. The courts have accordingly given effect to clauses that provide for payment of the price upon the issuance of notice from the seller that the goods are ready for delivery [7] or that stipulate that the price is payable upon receipt of the invoice [8] or within a specific period from issuance or receipt of the invoice [9] or on a calendar day [10] or within a specific period from delivery of the goods [11] or from receipt of the documents referred to in the contract [12] or within a time limit preceding takeover of the goods by the buyer [13] or within a specific period after delivery of the goods on board the vessel.[14] Some decisions have also given effect to a clause which provides for payment of the price within a specific period from the buyer's acceptance of seasonal order confirmation [15] or within a specific period from payment by a subbuyer.[16] Similarly, one decision gave effect, in connection with a consignment sale, to a clause which had made payment of the price of goods consigned and stored at a separate location conditional on their withdrawal from stock by the buyer.[17] The time of payment can very often be determined from a payment clause contained in the contract, such as clauses providing for "cash on delivery",[18] "cash before delivery", "payment on invoice" or "cash against documents". The Incoterms (2000 and 2010) stipulate solely that "the buyer must pay the price of the goods as provided in the contract of sale" without directly determining the time for payment of the price. By specifying the place of delivery of the goods, the Incoterms can nevertheless influence the time for payment of the price.[19] Contractual provisions relating to payment due dates can also include settlement by instalments, under different modalities. In a dispute heard by the Swiss Higher Federal Court, the contract stipulated that 30 percent of the price was to be paid at the time when an industrial plant was ordered, 30 percent at the commencement of assembly and 30 percent on completion of installation, the final 10 percent being due after successful start-up of the facility.[20] The court observed that the parties had thus derogated from the principle of simultaneous performance as embodied in CISG article 58. It has similarly been held that a seller who had granted credit to the buyer could not rely on the principle of simultaneous performance in CISG article 58.[21] Also, the parties derogate from the principle of simultaneous performance if they decide to postpone the payment date by arranging, after delivery of the goods, for settlement by bill of exchange.[22]

5. The place for handing over the goods or documents depends on the rules set forth in the Convention. Article 31 acknowledges the primacy of party autonomy, which is often expressed, in contract practice, by reference to trade terms, such as the Incoterms. For the sale of goods at a particular place, the price becomes payable when the goods are at the buyer's disposal at the place agreed on by the parties (article 31) or, failing that, at the place of manufacture or production of the goods (article 31 (b)) or at the seller's place of business (article 31 (c)). If the seller has to deliver the goods at the buyer's place of business or at any other place (article 31), the price becomes payable when the goods are placed at the buyer's disposal at that place.[23] If the sale involves carriage of the goods, the seller fulfils its obligation to deliver by handing the goods over to the first carrier for transmission to the buyer (article 31 (a)). In accordance with the general rule set forth in article 58(1), the buyer is not bound to pay for the goods until they are placed at the buyer's disposal by the last carrier. In the absence of a particular contractual provision, the seller is thus not entitled to make handover of the goods to the first carrier conditional on advance payment of the price by the buyer.

Documents Controlling the Disposition of the Goods (Article 58(1) and (2))

6. Article 58(1) imposes on the buyer the obligation to pay the price only when the seller has placed "either the goods or documents controlling their disposition" at the buyer's disposal. This provision, like article 58(2),[24] thus puts delivery of the goods and handing over of documents controlling their disposition on the same level. The difficulty, in the absence of any contractual stipulation,[25] is determining what is meant by "documents controlling the disposition of the goods". According to the predominant view, this concept is narrower than that in article 34, which refers to the obligation to hand over "documents relating to the goods".[26] It has been held that certificates of origin and quality,[27] as well as customs documents,[28] do not constitute documents controlling the disposition of the goods within the meaning of article 58(1), and that their nondelivery could therefore not justify a buyer's refusal to pay the price.

Right of Retention (Article 58(1) and (2))

7. Unless otherwise agreed by the parties, "[t]he seller may make such payment a condition for handing over the goods or documents" (article 58(1), second sentence). In other words, unless otherwise agreed the seller has the right to retain the goods until the buyer has paid their price. A seller who decides to exercise that right is nevertheless required to grant the buyer an opportunity to examine the goods (article 58(3)).[29] Unless otherwise agreed by the parties, the buyer has a corresponding right to refuse to pay the price until the seller has placed the goods or documents controlling their disposition at the buyer's disposal and granted the buyer the right to examine them.[30] Article 58(2) also establishes a right of retention in the seller's favour in the case of a sale involving carriage of the goods within the meaning of article 31 (a): the seller may dispatch the goods on terms whereby the goods or documents controlling their disposition will not be handed over to the buyer except against payment of the price. The implementation of the seller's right of retention entails the cooperation of the carrier. In this case also, a seller who decides to exercise that right is required to grant the buyer an opportunity to examine the goods (article 58(3)).[31]

Buyer's Right to Examine the Goods in Advance (Article 58(3))

8. In accordance with article 58(3), the buyer is not, in principle, bound to pay the price until afforded an opportunity to examine the goods. The right to prior examination of the goods may be excluded by a contractual stipulation or by procedures for delivery or payment that are incompatible with such examination, such as clauses specifying "payment against handing over of documents" or "payment against handing over of the delivery slip". The buyer's right is limited to a brief and superficial examination of the goods, unlike the obligation established in article 38.[32]

9. Article 58(3) says nothing about whether the buyer is entitled to suspend payment of the price if the examination of the goods reveals that the goods are not in conformity with the contract. The question of suspension of payment of the price by the buyer can also arise subsequently in a situation where notice of a lack of conformity is given under article 39 and all or part of the price is still due. The Supreme Court of Austria has ruled that the buyer was entitled to suspend payment of the price, as a general principle within the meaning of article 7(2) of the Convention.[33] The Court observed, inter alia, that the principle of simultaneous performance underlay the Convention, being expressed in CISG articles 71 and 58(3), and that the right to examine the goods, as recognized by article 58(3), would be meaningless if a buyer was bound to pay the price immediately in a case where the buyer had been able to establish non-conformity and demanded substitute goods or the repair of the goods.


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;
 
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   -    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, [SWITZERLAND Handelsgericht des Kantons Bern 17 August 2009]; [GERMANY Landgericht Mönchengladbach 15 July 2003]; [SWITZERLAND Kantonsgericht Schaffhausen 25 February 2002] (the general rules in article 58 are applicable since the parties, by their conduct, waived application of the contractual conditions concerning payment as stated in the contract); CLOUT case No. 197 [SWITZERLAND Tribunal cantonal du Valais 20 December 1994]; see also the decisions cited in note 5 infra.

2. [SWITZERLAND Handelsgericht des Kantons Bern 17 August 2009]; [SWITZERLAND Tribunal cantonal du Valais 28 January 2009]; [SWITZERLAND Appellationsgericht Basel-Stadt 26 November 2008]; [SLOVAKIA Okresný súd Dolný Kubín, 17 June 2008]; [GREECE Monomeles Protodikio Thessalonikis 2008 (docket No. 43945/2007)]; [SWITZERLAND Kantonsgericht von Appenzell-Ausserrhoden 6 September 2007]; [SWITZERLAND Tribunal cantonal du Valais 27 October 2006]; [SWITZERLAND Handelsgericht Aargau 25 January 2005]; [SWITZERLAND Tribunal cantonal du Valais 19 August 2003]; [GERMANY Landgericht Mönchengladbach 15 July 2003]; [GERMANY Amtsgericht Viechtach 11 April 2002]; [GERMANY Landgericht Berlin 25 May 1999]; CLOUT case No. 228 [GERMANY Oberlandesgericht Rostock 27 July 1995]; CLOUT case No. 123 [GERMANY Bundesgerichtshof 8 March 1995] (see full text of the decision); CLOUT case No. 79 [GERMANY Oberlandesgericht Frankfurt am Main 18 January 1994] (see full text of the decision); CLOUT case No. 1 [GERMANY Oberlandesgericht Frankfurt am Main 13 June 1991] (see full text of the decision).

3. CLOUT case No. 933 [SWITZERLAND Bundesgericht 20 December 2006]; CLOUT case No. 907 [SWITZERLAND Tribunal cantonal du Valais 27 May 2005]; [ITALY Tribunale di Padova 25 February 2004]; CLOUT case No. 255 [SWITZERLAND Tribunal cantonal du Valais 30 June 1998].

4. [GERMANY Landgericht München 20 February 2002] (the court noted that a commercial usage relied on by one party, according to which the price was not payable until 60 days after the invoice date, was not proven, and it stated that such a usage would be contrary to article 58).

5. [SWITZERLAND Handelsgericht des Kantons Bern 17 August 2009]; [SLOVAKIA Najvyšší súd Slovenskej republiky 19 June 2008]; [SWITZERLAND Appellationsgericht Basel-Stadt 26 November 2008]; CLOUT case No. 930 [SWITZERLAND Tribunal cantonal du Valais 23 May 2006]; [SWITZERLAND Kantonsgericht Zug 2 December 2004]; CLOUT case No. 893 [SWITZERLAND Amtsgericht Willisau 12 March 2004]; [ITALY Tribunale di Padova 25 February 2004]; [SWITZERLAND Tribunal cantonal du Valais 19 August 2003]; [GERMANY Landgericht Mönchengladbach 15 July 2003]; [SWITZERLAND Kantonsgericht Schaffhausen 25 February 2002] (the general rules in article 58 are applicable since the parties, by their conduct, waived application of the contractual conditions concerning payment as stated in the contract); [AUSTRIA Oberlandesgericht Graz 11 March 1998]; CLOUT case No. 197 [SWITZERLAND Tribunal cantonal du Valais 20 December 1994].

6. CLOUT case No. 649 [ITALY Tribunale di Padova 31 March 2004] (the court observed that the essential condition in CISG article 29, i.e. the agreement of the parties, was not fulfilled in this case, and then relied on the principle of venire contra factum proprium to give effect to an invoice entry specifying a payment date subsequent to delivery of the goods, since the seller could not, under that principle, claim immediate payment of the price); [SWITZERLAND Tribunal cantonal du Valais 19 August 2003] (the court relied on the payment date specified by the seller in its legal action, which was subsequent to the date resulting from application of CISG article 58); CLOUT case No. 882 [SWITZERLAND Handelsgericht Aargau 5 November 2002] (the court construed the invoice entry "20 days net" as a deferment of the payment date, but did not give any further details); [SWITZERLAND Kantonsgericht Schaffhausen 25 February 2002] (the general rules in article 58 were applicable since the parties, by their conduct, waived application of the contractual conditions concerning payment as stated in the contract).

7. CLOUT case No. 826 [GERMANY Oberlandesgericht München 19 October 2006] (in connection with the sale of a series of motor vehicles, payment of the price would become due when notice announcing that the vehicles were ready for delivery was given and the chassis numbers were specified).

8. [GERMANY Oberlandesgericht Braunschweig 28 October 1999] (immediate payment on receipt of the invoice); CLOUT case No. 217 [SWITZERLAND Handelsgericht des Kantons Aargau 26 September 1997] (immediate payment on receipt of the invoice, in accordance with a clause inserted in the invoice).

9. [SWITZERLAND Kantonsgericht Zug 27 November 2008] (90 days from the invoicing date); CLOUT case No. 934 [SWITZERLAND Tribunal Cantonal Valais 27 April 2007] (invoice payable within 60 days); CLOUT case No. 909 [SWITZERLAND Kantonsgericht Appenzell-Ausserhoden 9 March 2006] (invoice payable within 30 days); [SWITZERLAND Handelsgericht des Kantons Bern 22 December 2004] (price due 60 days after invoicing); [SWITZERLAND Kantonsgericht Zug 2 December 2004] (payment within 14 days following issuance of the invoice); CLOUT case No. 649 [ITALY Tribunale di Padova 31 March 2004] (30 days after expiry of the month of issue of the invoice, this payment term having been entered on the invoice; see, on this decision, footnote 6 supra); [SWITZERLAND Tribunal cantonal du Valais 19 August 2003] ("payment at 30 days", according to an invoice entry); [SWITZERLAND Tribunal cantonal du Valais 30 April 2003] (payment deadline of 30 days, according to an invoice entry); CLOUT case No. 882 [SWITZERLAND Handelsgericht Aargau 5 November 2002] (payment "20 days net", according to an invoice entry). See also the following decisions, which refused to give effect to invoice entries relating to payment due dates: [SLOVAKIA Najvyšší súd Slovenskej republik 30 April 2008] (the invoice entry "payment 80 days" does not in itself constitute an agreement of the parties concerning the date of payment); for a similar observation, [SLOVAKIA Najvyšší súd Slovenskej republiky 27 June 2007].

10. CLOUT case No. 360 [GERMANY Amtsgericht Duisburg 13 April 2000] (calendar day indicated on the invoice).

11. [UNITED STATES United States District Court, Southern District of New York 29 May 2009 (Doolim Corp. v. R Doll, LLC et al.)] (payment within 15 days from receipt of the garments); CLOUT case No. 1020 [SERBIA Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce 28 January 2009], (45 days after delivery); CLOUT case No. 591 [GERMANY Oberlandesgericht Düsselodorf 28 May 2004] (five days after delivery); [SWITZERLAND Handelsgericht St. Gallen 29 April 2004] (30 percent of the price prior to delivery, 70 percent within 30 days of delivery); CLOUT case No. 882 [SWITZERLAND Handelsgericht Aargau 5 November 2002] (payment 20 days net, this invoice entry having been construed by the court as a deferment of the due date).

12. [FINLAND Hovioikeus / hovrätt Helsinki 31 May 2004 (Crudex Chemicals Oy v. Landmark Chemicals S.A.)] (seven days after receipt of the documents).

13. CLOUT case No. 883 [SWITZERLAND Kantonsgericht Appenzell Ausserrhoden 10 March 2003] (price payable 14 days before delivery to the buyer).

14. [GERMANY Landgericht Krefeld 20 September 2006] (price payable 85 days after delivery of the goods on board the vessel in a CFR sale).

15. [ICC Arbitration Court of the International Chamber of Commerce, 2003 (Arbitral award No. 11849) (Fashion products case)].

16. [CHINA International Economic and Trade Arbitration Commission, People's Republic of China, 21 February 2005].

17. [UNITED STATES U.S. District Court, Northern District of Alabama, 27 April 2005 (Treibacher Industrie A.G. v. TDY Industries, Inc.)] (following withdrawal of the goods from stock, the buyer had to report such withdrawal to the seller, the price then being payable on receipt of the invoice).

18. [GERMANY Landgericht Nürnberg-Fürth 27 February 2003].

19. [SERBIA Foreign Trade Court of Arbitration at the Serbian Chamber of Commerce 28 January 2009] (the time limit of 45 days following delivery, as provided for in the contract, was computed from when the goods were delivered on board the vessel, in accordance with the CIP Tirana clause); [GERMANY Landgericht Krefeld 20 September 2006] (price payable 85 days after delivery of the goods on board the vessel under a CFR sale).

20. CLOUT case No. 194 [SWITZERLAND Tribunal fédéral 18 January 1996] (see full text of the decision); see also [GREECE Polimeles Protodikio Athinon 2009 (docket no. 4505/2009)] (40 percent of the price in advance, the balance being payable 30 days after receipt of the invoice for each of the instalment deliveries); [GERMANY Oberlandesgericht Köln 3 April 2006] (25 percent on conclusion of the contract and 75 percent two weeks before the first delivery); [AUSTRIA Oberster Gerichtshof 8 November 2005] (20 percent as an advance payment, 60 percent on delivery or on notice of delivery and 20 percent on start-up of the equipment); [SWITZERLAND Handelsgericht St. Gallen 11 February 2003] (50 percent of the price payable 60 days after receipt of the goods and 50 percent of the price payable 90 days after issuance of the invoice by the buyer to its customer); CLOUT case No. 882 [SWITZERLAND Handelsgericht Aargau 5 November 2002] (payment 20 days net).

21. CLOUT case No. 297 [GERMANY Oberlandesgericht München 21 January 1998].

22. CLOUT case No. 5 [GERMANY Landgericht Hamburg 26 September 1990].

23. CLOUT case No. 591 [GERMANY Oberlandesgericht Düsselodorf 28 May 2004].

24. See paragraph 7 infra.

25. [FINLAND Hovioikeus / hovrätt Helsinki 31 May 2004 (Crudex Chemicals Oy v. Landmark Chemicals S.A.)].

26. See the Digest for article 34.

27. CLOUT case No. 171 [GERMANY Bundesgerichtshof 3 April 1996].

28. CLOUT case No. 216 [SWITZERLAND Kantonsgericht St. Gallen 12 August 1997].

29. See paragraphs 8 and 9 infra.

30. CLOUT case No. 432 [GERMANY Landgericht Stendal 12 October 2000].

31. See paragraphs 8 and 9 infra.

32. See, however, CLOUT case No. 432 [GERMANY Landgericht Stendal 12 October 2000] (ruling, in connection with article 58, by reference to article 38, that a two-month period for examination was reasonable).

33. [AUSTRIA Oberster Gerichtshof 8 November 2005].


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