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

Digest of Article 50 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
Prerequisites for price reduction
Calculation of price reduction
Place of performance]

Article 50

If the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price.

OVERVIEW

1. Article 50 provides for the remedy of price reduction when the seller has delivered goods that do not conform with the contract. In these circumstances, the buyer then may reduce the price in proportion to the reduced value of the goods. The remedy is, however, not available if the seller has cured the defects in the goods under articles 37 or 48, or if the buyer has refused the seller the opportunity for such cure.

Prerequisites for price reduction

2. Article 50 applies when goods that have been delivered do not conform with the contract.[1] Non-conformity is to be understood in the sense of article 35, i.e., defects as to quantity,[2] quality, description (aliud) and packaging. In addition, defects in documents relating to the goods can be treated as a case of non-conformity.[3] The remedy of price reduction is, however, not available if the breach of contract is based upon late delivery [4] or the violation of any obligation of the seller other than the obligation to deliver conforming goods.

3. Price reduction applies whether the non-conformity constitutes a fundamental or a simple breach of contract, whether or not the seller acted negligently, and whether or not the seller was exempted from liability under article 79. The remedy does not depend on whether the buyer has paid the price.[5]

4. Price reduction presupposes, however, that the buyer has given notice of the lack of conformity of the goods in accordance with article 39 (or 43).[6] Without due notice the buyer is not allowed to rely on the lack of conformity and loses all remedies.[7] Article 44 establishes an exception where the buyer can reasonably excuse its failure to give notice of defects, in which case the buyer retains the right to reduce the price under article 50 (or to claim damages other than damages for loss of profit).[8]

5. It has been observed that article 50 requires that the buyer express its intention to reduce the price.[9]

6. The second sentence of Article 50 states the more or less self-evident rule that the remedy of price reduction is not available if the seller has remedied any lack of conformity either under article 37 (cure in case of early delivery) or under article 48 (cure after date for delivery). The same result obtains if the buyer refuses to accept performance when the seller has offered cure in accordance with articles 37 or 48.[10]

7. As provided in article 45(2), an aggrieved buyer can combine different remedies; consequently, the buyer can claim price reduction along with a damages claim. However, where damages are claimed in combination with price reduction, damages can only be awarded for loss other than the reduced value of the goods, since this loss is already reflected in the price reduction.[11]

Calculation of price reduction

8. The amount of price reduction must be calculated as a proportion: the contract price is reduced in the same proportion as the value that the non-conforming delivered goods bears to the value that conforming goods would have. The relevant value is determined as of the date of actual delivery at the place of delivery.[12]

Place of performance

9. The place of performance of the remedy of price reduction is where the goods were delivered.[13]


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;
 
   -    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.

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. [UNITED STATES Federal District Court, Southern District of New York, 6 April 1994 (Braun v. Alitalia)], [GERMANY Landgericht Flensburg 24 March 1999 (Vine wax case)] (see full text of the decision).

2. Including the weight of the goods; see [UNITED STATES Federal District Court, Southern District of New York, 6 April 1994 (Brawn v. Alitalia)].

3. Article 48, to which article 50 refers, covers the cure of non-conforming documents; see Digest of art. 48, para. 2.

4. [GERMANY Landgericht Düsseldorf 5 March 1996 (Shoes case)].

5. 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), 42, para. 5.

6. [SWITZERLAND Canton of Ticino Pretore di Locarno Campagna 27 April 1992 (Furniture case)].

7. [GERMANY Oberlandesgericht Düsseldorf 8 January 1993 (Tinned cucumbers case)]; [GERMANY Oberlandesgericht München 9 July 1997 (Leather goods case)]; [ICC International Court of Arbitration, Award 7331 of 1994 (Cowhides case)]; [GERMANY Landgericht Darmstadt 9 May 2000 (Video recorders case)] (see full text of the decision).

8. In this respect, see, e.g., [ICC International Court of Arbitration, Award 7331 of 1994 (Cowhides case)]; [GERMANY Oberlandesgericht München 9 July 1997 (Leather goods case)]

9. [GERMANY Oberlandesgericht München 2 March 1994 (Coke case)].

10. [GERMANY Oberlandesgericht Koblenz 31 January 1997 (Acrylic blankets case)].

11. [SWITZERLAND Bundesgericht 28 October 1998 (Meat case)] (see full text of the decision).

12. [SWITZERLAND Canton of Ticino Pretore di Locarno Campagna 27 April 1992 (Furniture case)]; [AUSTRIA Oberlandesgericht Graz 9 November 1995 (Marble slabs case)] (see full text of the decision).

13. [GERMANY Oberlandesgericht Hamm 5 November 1997 (In-line skates case)].


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