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2008 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods

Digest of Article 45 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Introduction
Non-performance of an obligation as a prerequisite for remedies
Rights under articles 46-52
Claim of damages
Cumulation of remedies (art 45(2))
No grace period (art. 45(3)
Further questions
Burden of proof]

Article 45

(1) If the seller fails to perform any of his obligations under the contract or this Convention, the buyer may:
(a) exercise the rights provided in articles 46 to 52;
(b) claim damages as provided in articles 74 to 77.
(2) The buyer is not deprived of any right he may have to claim damages by exercising his right to other remedies.
(3) No period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract.

INTRODUCTION

1. This provision gives an overview of the remedies available to the buyer when the seller has committed a breach by non-performance of any of its duties under the contract or the Convention.[1] In its paragraph (1)(a), the provision simply refers to other provisions, namely articles 46-52, which specify the conditions under which the rights provided by those provisions may be exercised. On the other hand, article 45(1)(b) constitutes the basis for the buyer's right to claim damages and as such has great practical importance.[2] As far as the amount of damages is concerned, it is to be adjudicated according to articles 74-76. Article 45(2) allows the combination of the right to damages with other remedies. Article 45(3) limits the ability of courts and arbitral tribunals to grant periods of grace; such grace periods would interfere with the remedial system of the Convention.

2. Article 45 does not enumerate the buyer's remedies exhaustively. The Convention provides for further remedies, e.g., in articles 71-73 or 84(1). Nevertheless, article 45 is exhaustive in the sense that it preempts the buyer from invoking remedies for breach of contract otherwise available under the applicable domestic law, since the Convention excludes recourse to domestic law where the Convention provides a solution.[3]

Non-performance of an obligation as a prerequisite for remedies

3. The availability of any remedy to the buyer presupposes that the seller has failed to perform an obligation deriving either from the contract, from trade usages, from practices between the parties or from the Convention. Even if an additional duty not specifically addressed in the Convention -- for instance, the duty to extend a bank guaranty in favour of the buyer [4] -- has been breached, the buyer is entitled to the remedies available under the Convention. The extent of the seller's failure to perform is irrelevant for the purposes of deciding whether the buyer is entitled to remedies. Of course, some remedies are available to the buyer only where the breach is fundamental. Generally, the reasons for the seller's breach are irrelevant, except to the extent the seller can claim an exemption under article 79(5). In particular, article 45(1) does not require that the seller have acted with negligence, fault or intent in order for the buyer to claim the remedies mentioned in the provision.

4. However, if the seller's responsibility for a remedy for a breach depends on further conditions -- in particular, on a timely and proper notice by the buyer (see articles 38, 39, 43) -- then the additional conditions must be satisfied in order for the buyer to preserve its right to the remedy.

Rights under articles 46-52

5. Article 45(1)(a) merely refers to articles 46-52. Although all the remedies provided for in these articles require that a breach of an obligation has occurred, the provisions make distinctions as to the kind of breach. Thus articles 46(2), 49(1)(a) and 51(2) require a fundamental breach. Article 49(1)(b) applies only in case of non-delivery, and it is doubtful whether article 50 applies to cases other than delivery of non-conforming goods. Article 51 addresses partial non-performance; article 52 deals with early delivery and excess delivery.

Claim of damages

6. Article 45(1)(b) lays down the substantive conditions for a claim to damages by the buyer.[5] In case of breach of a contractual obligation of any sort by the seller, the buyer who has suffered loss as a result of that breach can claim damages. Thus, for example, the buyer can claim damages for losses caused by the delivery of defective goods.[6] A buyer can also claim damages for an ensuing loss when the seller declares in advance that it will be unable to deliver on time, thereby committing an anticipatory breach of contract in the sense of article 71.[7] however, if the contract or the Convention imposes further conditions on the buyer's entitlement to damages -- such as the requirement of notice under articles 38, 39, and 43 -- these conditions must also be satisfied.[8]

7. In contrast to many national systems, the right to claim damages under the Convention does not depend on any kind of fault, breach of express promise, or the like; it presupposes merely an objective failure of performance.[9] Only under the conditions described in article 79 or in a case falling within article 80 is the seller exempted from liability for damages.[10]

8. Articles 74-77 to which article 45(1)(b) refers provide rules for the calculation of the amount of damages, but those provisions do not form a basis for a claim of damages.[11]

9. The decisions that have applied article 45(1)(b) evidence no difficulty with the application of this provision as such.[12] Problems may arise as to the existence and extent of an obligation of the seller or to the amount of damages, but since both aspects are dealt with by other provisions (articles 30-44 and 74-77 respectively), article 45(1)(b) is merely referred to in these cases, without being discussed in detail.[13]

Cumulation of remedies (45(2))

10. The right to claim damages is the remedy that is always available to the buyer if a breach of contract has caused the buyer any damage. This right can be invoked along with any other remedy in order to compensate for losses that occur despite the other remedy.[14] The amount of damages, however, depends on the other remedy to which the buyer has resorted.[15]

No grace periods (45(3))

11. Article 45(3) limits the ability of courts and arbitral tribunals to grant a period of grace and to extend the time for performance when the buyer holds the seller liable for a breach of contract.[16] Although this possibility could be regarded as a matter of procedural law and therefore outside the Convention's scope of application, article 45(3) nevertheless explicitly excludes it. The provision is addressed to courts and arbitral tribunals. The parties themselves are free to extend or otherwise modify the period for performance at any time.

Further questions

12. The place of performance for all rights and claims under article 45 follows the place of performance of the primary obligation -- to deliver, to hand over documents, et cetera -- which has been breached.[17] Therefore it is important to determine the place of performance of the primary obligation.

13. The Convention does not deal with the statute of limitations.[18] The prescription period applicable to the rights and claims provided for in article 45 must thus be determined by reference to the applicable national law or -- where it governs -- to the United Nations Convention on the Limitation Period in the International Sale of Goods.

Burden of proof

14. Because the other parts of article 45 do not grant concrete rights on the basis of which the buyer can sue, the question of the burden of proof under the provision is only relevant for a claim to damages under article 45(1)(b). For damage claims the burden is on the buyer, who must prove a breach of an obligation by the seller as well as the losses caused by that breach. According to article 79, the burden is on the seller to prove any exempting circumstances.[19]


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_second_edition.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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In addition, this presentation introduces each section of the UNCITRAL Digest with a Google search button. This is to help you access doctrine (relevant material from the over 1,200 commentaries, monographs and books on the CISG and related subjects that we present on this database) as well as the texts of the cases that UNCITRAL cites in its Digests and that we present in our updates to UNCITRAL's Digests.

1. 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), 37(index to the remedies available to the buyer).

2. See, e.g., [UNITED STATES Federal District Court, Northern District of New York 9 September 1994 (Delchi Carrier, S.p.A. v. Rotorex Corp.)] (appellate decision: [UNITED STATES Federal Court of Appeals for the Second Circuit 6 December 1995 (Delchi Carrier, S.p.A. v. Rotorex Corp.)]); [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 155/1994 of 16 March 1995 (Metallic sodium case)]; [EGYPT CRCICA Arbitration Cairo 3 October 1995 (Electrical apparatus case)]; [GERMANY Arbitration-Schiedsgericht der Handelskammer Hamburg, 21 March 1996 and 21 June 1996 (Chinese goods case)] (see full text of the decision); [ICC International Court of Arbitration, Award 8247 of June 1996 (Chemical compound case)]; [GERMANY Bundesgerichtshof 23 July 1997 (Benetton II fashion textiles case)]; [SWITZERLAND Bundesgericht 28 October 1998 (Meat case)] (see full text of the decision). See also the Digest for art. 74, para 9.

3. [UNITED STATES Federal District Court, Southern District of New York 10 May 2002 (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc.)].

4. See [EGYPT CRCICA Arbitration Cairo 3 October 1995 (Electrical apparatus case)].

5. A parallel provision, article 61(1)(b), entitles the seller to claim damages for any breach of contract by the buyer.

6. [GERMANY Oberlandesgericht Hamm 9 June 1995 (Window elements case)] (seller who had delivered and installed defective windows was held liable to compensate buyer's costs of replacing the defective windows).

7. [ICC International Court of Arbitration, Award 8786 of January 1997 (Clothing case)].

8. See, e.g., [ICC International Court of Arbitration, Award 8247 of June 1996 (Chemical compound case)] [GERMANY Landgericht Köln 30 November 1999 (Facade stones case)]; see also 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), 34-36.

9. 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), 37.

10. For an instance in which the article 79 exemption was found not inapplicable, see [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 155/1994 of 16 March 1995 (Metallic sodium case)].

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), 37. See also the Digest for art. 74, para 9.

12. See, e.g., the decisions cited above in footnote 2.

13. See as examples: [GERMANY Oberlandesgericht Düsseldorf 10 February 1994 (Fabrics case)] (see full text of the decision); [GERMANY Oberlandesgericht München 2 March 1994 (Coke case)] (see full text of the decision); [GERMANY Oberlandesgericht Köln 21 May 1996 (Used car case)] (see full text of the decision); [ICC International Court of Arbitration, Award 8247 of June 1996 (Chemical compound case)]; [SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997 (Sunflower oil case)[]; [SWITZERLAND Tribunal Cantonal du Valais 28 October 1997 (Second hand bulldozer case)]; [GERMANY Schiedsgericht der Hamburger freundschatlichen Arbitrage 29 December 1998 (Cheese case)]; [GERMANY Oberlandesgericht Hamburg 26 November 1999 (Jeans case)].

14. See the Digest for article 46, para. 9.

15. See the Digests for articles 74-76.

16. Granting such grace periods is possible, e.g., under art. 1184 para. 3 and art. 1244 of the French Code Civil and in legal systems which have been influenced by the French Civil Code.

17. [GERMANY Bundesgerichtshof 11 December 1996 (Marzipan case)]; [NETHERLANDS Gerechtshof 's-Hertogenbosch 9 October 1995 (Cloth case)]; [FRANCE Cour d'appel, Paris 4 March 1998 (Industrial machines case)]; [FRANCE Cour d'appel, Paris 4 March 1998 (Industrial machines case)]; [FRANCE Cour d'appel, Paris 18 March 1998 (Clothes case)].

18. See the Digest for article 4, para. 13.

19. See the Digest for article 79, para. 20.


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