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

Digest of Article 76 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
Relation to other articles
Conditions for application of article 76
Calculation of damages
Burden of proof]

Article 76

(1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.
(2) For the purposes of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods.

OVERVIEW

1. Article 76 provides that an aggrieved party may recover damages measured by the difference between the contract price and the current price for the goods if the contract has been avoided, if there is a current price for the goods, and if the aggrieved party has not entered into a substitute transaction.[1] The article designates when and where the current price is to be determined. The last clause of the first sentence of paragraph (1) also provides that an aggrieved party may recover further damages under the general damage formula set out in article 74. The article 76 formula is a familiar one.[2]

[See also the overview comments UNCITRAL has prepared to introduce the provisions of the CISG dealing with Damages (articles 74 through 77). They discuss Relation to Other Articles, Burden of Proof, Set-off, Jurisdiction, and Place of Payment of Damages.]

Relation to other articles

2. Article 76 is the second of two damage formulas applicable if the contract is avoided. Whereas article 75 calculates damages concretely by reference to the price in an actual substitute transaction, article 76 calculates damages abstractly by reference to the current market price. Under the Convention, a concrete calculation of damages is preferred.[3] Paragraph (1) of article 76 provides that its damage formula is not available if an aggrieved party has concluded a substitute transaction.[4] Where an aggrieved seller resold fewer goods than the contract quantity, one court calculated damages as to the resold goods under article 75 and damages as to the unsold goods under article 76.[5] Another court calculated damages under article 76 rather than article 75 where an aggrieved seller resold the goods to a third party at significantly less than both the contract and market price.[6]

3. The final clause of the first sentence of article 76(1) provides that an aggrieved party may recover additional damages under the general damage formula set out in article 74. It has been held that an aggrieved party may choose to recover damages under article 74 even when it might recover under article 76.[7] If the conditions for recovery under article 76 are not satisfied, damages may nevertheless be recovered under article 74.

4. Damages recoverable under article 76 are reduced if it is established that the aggrieved party failed to mitigate these damages as provided in article 77. The reduction is the amount by which the loss should have been mitigated. See paragraphs 10-11 below.

5. Pursuant to article 6, the seller and buyer may agree to derogate from or vary the formula set out in article 76. One tribunal has stated that a post-breach agreement settling a dispute with respect to a party's non-performance displaces the aggrieved party's right to recover damages under the damage provisions of the Convention.[8]

Conditions for application of Article 76

6. Article 76 applies if the contract is avoided (see paragraph 7 below), if there is a current price for the goods (see paragraph 8 below), and if the aggrieved party has not concluded a substitute transaction (see paragraph 9 below).

7. Article 76 is not applicable if the contract has not been avoided.[9] Thus, the article will not apply if the aggrieved party has not declared the contract avoided when entitled to do so [10] or if the aggrieved party has not made an effective declaration of avoidance.[11]

8. The formula of article 76 can only be applied if there is a current price. The current price is the price generally charged in the market for goods of the same kind under comparable circumstances.[12] One tribunal declined to use published quotations in a trade magazine because the reported quotations were for a different market from that where the goods were to be delivered under the contract and adjustment of that price was not possible.[13] The same tribunal accepted as the current price a price negotiated by the aggrieved seller in a substitute contract that was not ultimately concluded.[14] Another tribunal found that the aggrieved party was unable to establish the current price for coal generally or for coal of a particular quality because the requirements of buyers vary and there is no commodity exchange.[15] Another court suggested that the "auction realisation" value of goods held by an insolvent buyer might be relevant if the aggrieved seller were to seek to recover under article 76.[16] Stating that the seller's lost profit was to be established under article 76, a court affirmed an award of damages to an aggrieved seller in the amount of 10 per cent of the contract price because the market for the goods (frozen venison) was declining and the seller set its profit margin at 10 per cent, which was the lowest possible rate.[17] It has also been held that a current price for purposes of Article 76 can be established using the methodology in article 55 for determining the price under a contract that does not expressly or implicitly fix or make provision for determining the price.[18]

9. Damages may not be recovered under article 76 if the aggrieved party has purchased substitute goods. Where a seller failed to deliver the goods and the aggrieved buyer bought no substitute goods, the buyer's damages were to be calculated under article 76.[19]

Calculation of damages

10. An aggrieved party is entitled to recover the difference between the contract price and the current price at the time and place indicated by article 76.[20] The time at which the current price is to be determined is the date of effective avoidance of the contract; if the aggrieved party has taken over the goods before avoidance, however, the relevant time is this earlier date.[21] It has been held that, if notice of avoidance is unnecessary because a seller has "unambiguously and definitely" declared that it will not perform its obligations, the time of avoidance for purposes of article 76 is determined by the date of the obligor's declaration of the intention not to perform.[22] For cases determining what constitutes evidence of a current price, see paragraph 8 above.

11. Paragraph (2) of article 76 indicates the relevant place for determining the current price. There are no reported cases construing this provision.

Burden of proof

12. Although article 76 is silent on which party has the burden of establishing the elements of that provision, decisions have placed this burden on the party claiming damages.[23]


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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   -    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. Articles 45(1)(b) and 61(1)(b) provide that an aggrieved buyer and an aggrieved seller, respectively, may recover damages as provided in articles 74 to 77 if the other party fails to perform as required by the contract or the Convention.

2. [ICC International Court of Arbitration, Award 8502 of November 1996 (Rice case)] (reference to both article 76 of the Convention and article 7.4.6 of Unidroit Principles of International Commercial Contracts).

3. [GERMANY Arbitration-Schiedsgericht der Handelskammer Hamburg, 21 March 1996 and 21 June 1996 (Chinese goods case)] (Convention favor concrete calculation of damages) (see full text of the decision).

4. See [ICC International Court of Arbitration, Award 8574 of September 1996 (Metal concentrate case)] (no recovery under article 76 because aggrieved party concluded substitute transactions, although it did so before it avoided the contract and hence the substitute transactions could not be used to measure damages under article 75). See also [GERMANY Oberlandesgericht Hamburg 26 November 1999 (Jeans case)] (damages not calculated under article 76 because damages could be calculated by reference to actual transactions).

5. [GERMANY Oberlandesgericht Düsseldorf 14 January 1994 (Shoes case)] (see full text of the decision). See also [ICC International Court of Arbitration, Award 8740 of October 1996 (Russian coal case)] (aggrieved buyer unable to establish market price was not entitled to recover under article 76, and only entitled to recover under article 75 to the extent it had made substitute purchases); but compare [CHINA CIETAC Arbitration Award of 30 October 1991 (Roll aluminum and aluminum parts case)] (aggrieved buyer who had made purchases for only part of the contract quantity nevertheless awarded damages under article 75 for contract quantity times the difference between the unit contract price and the unit price in the substitute transaction).

6. [GERMANY Oberlandesgericht Hamm 22 September 1992 (Frozen bacon case)].

7. [AUSTRIA Oberster Gerichtshof 28 April 2000 (Jewelry case)] (aggrieved party may claim under article 74 unless party regularly concludes similar transactions and has designated one as a substitute within article 75); [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)] (citing article 74 but determining damages as difference between contract price and price in substitute transaction).

8. [CHINA CIETAC Arbitration Award of 1 April 1993 (Steel products case)].

9. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 54/1999 of 24 January 2000] (article 76 not applicable when the contract had not been avoided).

10. [AUSTRIA Oberster Gerichtshof 6 February 1996 (Propane case)] (no avoidance) (see full text of the decision).

11. [AUSTRIA Oberster Gerichtshof 12 February 1998 (Umbrella case)] (declaration of avoidance too early) (see full text of the decision).

12. [GERMANY Oberlandesgericht Celle 2 September 1998 (Vacuum cleaners case)] (evidence did not establish current price). But see [GERMANY Oberlandesgericht Braunschweig 28 October 1999 (Frozen meat case) (calculation by reference not to market price but to seller's profit margin, which was lowest possible rate).

13. [CHINA CIETAC Arbitration Award of 18 April 1991 (Silicate-iron case)] (evidence did not reflect contract delivery terms).

14. Id.

15. [ICC International Court of Arbitration, Award 8740 of October 1996 (Russian coal case)] (value of coal was subjective because it depends on buyer's needs and shipping terms; aggrieved party, who made no claim under article 74, could recover under article 75 only to the extent it had entered into substitute transactions).

16. [AUSTRALIA Federal Court of Adelaide 28 April 1995 (Roder v. Rosedown)] (valuation arranged by insolvency administrator) (see full text of the decision).

17. [GERMANY Oberlandesgericht Braunschweig 28 October 1999 (Frozen meat case)].

18. [GERMANY Oberlandesgericht München 15 September 2004 (Ink jet printers case)].

19. [SWITZERLAND Kantonsgericht des Kantons Zug 21 October 1999 (PVC and other synthetic materials case)].

20. [GERMANY Oberlandesgericht Hamburg 4 July 1997 (Tomato concentrate case)].

21. [CHINA CIETAC Arbitration Award of 18 April 1991 (Silicate-iron case)] (disagreeing with date claimed by aggrieved party).

22. [GERMANY Oberlandesgericht München 15 September 2004 (Ink jet printers case)].

23. See, e.g., [GERMANY Oberlandesgericht Celle 2 September 1998 (Vacuum cleaners case)] (aggrieved buyer failed to establish current price).


©Pace Law School Institute of International Commercial Law - Last updated June 18, 2009
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