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2008 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 (Art. 58(1))
Sales involving a contract of carriage (art. 58(1))
The buyer's right to examine the goods in advance (art. 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 question.[1] Where it fixes the time at which payment of the price may be demanded, article 58 also determines the point in time at which interest based on article 78 of the Convention starts to accrue, as has been noted in a number of 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 handing over of the goods (or of documents controlling their disposition) and payment of the price: the buyer must pay the price when the seller places either the goods or documents controlling their disposition at his disposal. As stated in the second sentence of article 58(1), the seller may refuse to hand over the goods or documents controlling their disposition to the buyer if the latter does not pay the price at that time. The seller thus has the right to retain the goods (or the documents controlling their disposition) in these circumstances.

3. The inverse of the principle established in article 58(1) also applies: unless otherwise agreed, the buyer is not bound to pay the price until the goods or documents controlling their disposition have been handed over. Article 58(3) grants the buyer the complementary right to examine the goods prior to payment, although only to the extent that contractual provisions concerning delivery and the modalities of payment are consistent with the right.[3]

4. Contract terms, international usages and practices established between the parties may all result in derogation from the rule of simultaneous exchange of goods and price, a rule that applies (according to article 58(1)) only "if the buyer is not bound to pay the price at any other specific time." One court found that the parties had derogated from the principle of simultaneous performance in a case where they had agreed on payment of 30 per cent of the price upon ordering of the goods, 30 per cent at the beginning of assembly, 30 per cent upon completion of installation, and the final 10 per cent due after successful start-up of the facility.[4]

5. The place for handing over the goods or documents depends on the relevant terms of the contract and, where no such terms exist, on the rules established by the Convention (article 31). For the sale of goods at the place specified in article 31(b) or (c)), the price becomes payable when the seller has placed the goods at the disposal of the buyer in the agreed place or at the seller's place of business, and has given the buyer the opportunity to examine the goods. Article 58(2) covers the case of sales involving a contract of carriage.[5]

6. Article 58(1), like article 58(2), places delivery of the goods and handing over of documents controlling their disposition on an equal level, on the grounds that they will have the same effect. One court found that handing documents controlling the disposition of the goods over to the buyer caused the price to become due, as provided in article 58(1).[6] The difficulty is determining exactly what is meant by "documents controlling the disposition of the goods." It has been held that certificates of origin and quality,[7] as well as customs documents,[8] do not constitute documents controlling the disposition of the goods within the meaning of article 58(1), and that their non-delivery therefore did not justify a buyer's refusal to pay the price.

Sales involving a contract of carriage (article 58(2))

7. Article 58(2) deals with a sale involving a contract with a third party to transport the goods. Under the provision, the seller may dispatch the goods on terms whereby the goods, or the documents controlling their disposition, will not be handed over to the buyer except against payment of the price. Thus, article 58(2) does not entitle the seller to condition handing over the goods on advance payment of the price by the buyer, in the absence of a particular contractual provision to that effect. Thus absent an agreement otherwise, the buyer is not required to pay the price until the moment when the goods or documents controlling their disposition are handed over to him by the carrier.

The buyer's right to examine the goods in advance (article 58(3))

8. In principle, unless the buyer agrees to payment in advance it is not bound to pay the price until afforded an opportunity to examine the goods. The right to prior examination may be excluded by a contractual stipulation to that effect or by modalities of delivery or payment that are incompatible with such examination, such as clauses involving "payment against handing over of documents" or "payment against handing over of the delivery slip".

9. Article 58(3) says nothing about whether the buyer is entitled to suspend payment of the price if examination reveals that the goods are not in conformity with the contract. No court decisions have yet addressed this issue.


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.

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. [GERMANY Landgericht Münchengladbach 15 July 2003 (Filters case)]; [SWITZERLAND Kantonsgericht Schaffhausen 25 February 2002 (Machines, devices and replacement parts case)]; [SWITZERLAND Tribunal cantonal du Valais 20 December 1994 (Stone blocks case)].

2. See [GERMANY Landgericht Münchengladbach 15 July 2003 (Filters case)]; [GERMANY Amtsgericht Viechtach 11 April 2002 (Pallets case)]; [GERMANY Oberlandesgericht Rostock 27 July 1995 (Plants case)]; [GERMANY Bundesgerichtshof 8 March 1995 (New Zealand mussels case)] (see full text of the decision); GERMANY Oberlandesgericht Frankfurt a.M. 18 January 1994 (Shoes case)] (see full text of the decision); [GERMANY Oberlandesgericht Frankfurt a.M. 13 June 1991 (Textiles case)] (see full text of the decision).

3. See infra, para. 8 et seq.

4. [SWITZERLAND Bundesgericht 18 January 1996 (Waste gas cleansing installation case)] (see full text of the decision). See also [SWITZERLAND Handelsgericht Aargau 5 November 2002 (Inflatable triumphal arch case)].

5. See infra, para. 7.

6. [SWITZERLAND Kantonsgericht St. Gallen 12 August 1997 (Clothes case)].

7. [GERMANY Bundesgerichtshof 3 April 1996 (Cobalt sulphate case)].

8. [SWITZERLAND Kantonsgericht St. Gallen 12 August 1997 (Clothes case)].


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