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

Digest of Article 82 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
Article 82 in general
   -    Article 82(1)
   -    Article 82(2)(a)
   -    Article 82(2)(b)
   -    Article 82(2)(c)]

Article 82

(1) The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them.
(2) The preceding paragraph does not apply:
(a) if the impossibility of making restitution of the goods or of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission;
(b) if the goods or part of the goods have perished or deteriorated as a result of the examination provided for in article 38; or
(c) if the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity.

OVERVIEW

1. Article 81(2) of the Convention requires the parties to an avoided contract to make restitution of whatever has been "supplied or paid under the contract"; article 82 deals with the effect of an aggrieved buyer's inability to make restitution of goods substantially in the condition in which they were delivered. Specifically, article 82(1) conditions an aggrieved buyer's right to declare the contract avoided (or to require that the seller deliver substitute goods) on the buyer's ability to return whatever goods have already been delivered under the contract substantially in the condition in which he received them.[1] Article 82(2), however, creates three very broad exceptions to the rule of article 82(1): a buyer is not precluded from avoiding the contract or demanding substitute goods if his inability to return the goods to the seller substantially in their original condition was not the result of the buyer's own act or omission (article 82(2)(a)), if it occurred as a consequence of the examination of the goods provided for in article 38(article 82(2)(b)), or if it arose from buyer's resale, consumption or transformation of the goods in the normal course and "before he discovered or ought to have discovered the lack of conformity" (article 82(2)(c)).

Article 82 in general

2. The provisions in Chapter V, Section V of Part III of the CISG, which include article 82, have been cited in support of the proposition that avoidance of contract is a constitutive right of the buyer, which changes the contractual relationship into a restitutional relationship.[2] Article 82 has also been characterized as part of the Convention's "risk distribution mechanism" for avoided contracts, under which "the seller alone bears the risk of chance accidents and force majeure.[3] This decision found that a buyer is not liable for loss or damage to the goods that occurred while they were being transported back to the seller following the buyer's justified avoidance of the contract.[4] The court reasoned that this one-sided or predominant burdening of the seller with the risks of restitution of the goods is explained by the fact that the seller caused these risks by breaching the contract.[5]

Article 82(1)

3. Article 82(1) states that, in order to preserve its right to avoid the contract or require the seller to deliver substitute goods, an aggrieved buyer must have the ability to make restitution of goods that the buyer received under the contract substantially in the condition in which he received them. Several decisions have denied a buyer the right to avoid the contract because he could not meet this requirement. Thus, where a buyer attempted to avoid a contract for the sale of flower plants because the delivered plants allegedly were defective in appearance and colour, a court noted that the buyer had lost the right to avoid under article 82(1) because it had discarded some plants and resold others.[6] A buyer of textiles, some of which did not conform to a pattern specified in the contract, was also found to have lost the right to avoid because he resold the goods.[7] And another buyer lost the right to avoid the contract because, after he discovered that marble slabs delivered by the seller were stuck together and broken, he cut and processed the slabs, thus making it impossible to return them substantially in the condition in which they were received.[8]

4. On the other hand, a decision has noted that article 82 does not prevent a buyer from avoiding the contract where the seller did not claim that that the requirements of article 82 were not met [9] -- suggesting that a seller who is resisting avoidance bears the burden of going forward with evidence that the buyer cannot return the goods substantially in the condition in which he received them. The same decision also indicates that article 82 only encompasses loss of or deterioration in the goods that occurs before the declaration of avoidance is made.[10] It has also been found that a buyer did not lose the right to avoid under article 82 merely by announcing, prior to trial, that he was attempting to resell the goods (an attempt that the court characterized as an effort to mitigate damages): the court indicated that article 82 would prevent the buyer from avoiding only if he had actually resold the goods before declaring the contract avoided.[11] Another decision found that article 82(1) did not deprive a buyer of the right to avoid the contract when delivered goods suffered damage as they were being transported back to the seller (as the seller had agreed) provided the buyer did not bear risk of loss during such transport.[12] Several other decisions have refused to deny a buyer the right to avoid, even though the buyer could not make restitution of the goods substantially in the condition in which they were received, because the requirements of one or more of the exceptions in article 82(2) were satisfied.[13]

Article 82(2)(a)

5. Even if a buyer is unable to give restitution of previously delivered goods substantially in the condition in which they were received, article 82(2)(a) provides that the buyer retains the right to avoid the contract or to require the seller to deliver substitute goods if the buyer's inability to make restitution is not due its own act or omission. This provision was cited by a court in holding that a buyer was not liable for damage to goods that occurred while they were being transported back to the seller following the buyer's justified avoidance of contract: the seller itself conceded that the damage occurred while the goods were in the hands of the carrier, and thus could not have been caused by the buyer's act or omission.[14] On the other hand, article 82(2)(a) did not preserve the avoidance rights of a buyer who cut and processed non-conforming marble slabs before avoiding the contract, because the buyer's inability to make restitution of the goods substantially in the condition in which they were received was indeed due to its own acts.[15]

Article 82(2)(b)

6. Article 82(2)(b) preserves an aggrieved buyer's right to avoid the contract or to demand substitute goods where the buyer's inability to make restitution of the goods substantially in the condition in which they were received arose as a result of the examination of the goods provided for in article 38. This provision has been invoked to preserve the avoidance rights of a buyer that processed wire before discovering that it did not conform to the contract: the court found that defects in the wire could not be detected until it was processed.[16] The court also determined that the rule of article 82(2)(b), which by its terms applies if the goods have perished or deteriorated because of the article 38 examination, applied even though the processing of the wire actually enhanced its value.[17] On the other hand, a court has held that the substantial change in condition of marble slabs that occurred when the buyer cut and processed them did not result from the article 38 examination, and thus the buyer's avoidance rights were not preserved under article 82(2)(b).[18]

Article 82(2)(c)

7. Under article 82(2)(c), a buyer retains the right to avoid the contract or to demand that the seller deliver substitute goods even though he is unable to make restitution of the goods substantially in their delivered condition, provided that the goods were "sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity." Under this provision, a buyer who resold paprika in the ordinary course of business before discovering that the goods contained ethylene oxide in amounts that exceeded domestic legal limits retained his right to avoid the contract.[19] On the other hand, the requirements for this exception were not satisfied when a buyer resold textiles that were, in part, of a different pattern than that called for in the contract, and the buyer lost the right to avoid because it could not make restitution of the goods as required by article 82(1).[20] And a buyer that cut and processed marble slabs after discovering that they were non-conforming did not meet the requirements of article 82(2)(c) and did not have the right to avoid the contract.[21] It has also been suggested that a buyer's resale of the goods after declaring the contract avoided is beyond the scope of article 82.[22]


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:

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1. Thus, although it is located in the part of the CISG entitled Effects of avoidance (Part III, Chapter V, Section V), article 82 is not limited to situations where a buyer seeks to avoid the contract (or some part thereof) under articles 49, 51, 72 or 73: it also applies when a buyer does not avoid the contract and instead invokes the substitute goods remedy in article 46(2). Whereas article 81(2) clearly requires an avoiding buyer to make restitution of goods delivered under the avoided contract, article 46(2) does not expressly state that a buyer who wishes to require the seller to deliver substitute goods must return the original goods, except insofar as use of the term substitute goods suggests such an obligation. Article 82, however, indicates that a buyer seeking substitute goods must in fact give back the originals substantially in the condition in which it received them, unless one of the exceptions in article 82(2) applies.

2. [GERMANY Landgericht Düsseldorf 11 October 1995 (Generator case)].

3. [AUSTRIA Oberster Gerichtshof 29 June 1999 (Dividing wall panels case)].

4. Id.

5. Id.

6. [NETHERLANDS Rechtbank Rotterdam 21 November 1996 (Flowers / bush daisies case)]. Presumably the resale occurred after the buyer discovered or ought to have discovered the alleged lack of conformity.

7. [GERMANY Oberlandesgericht Düsseldorf 10 February 1994 (Fabrics case)]. Again, the resale presumably occurred after the buyer discovered or ought to have discovered the alleged lack of conformity.

8. [GERMANY Oberlandesgericht Koblenz 27 September 1991 (Marble slabs case)].

9. [GERMANY Oberlandesgericht Frankfurt am Main 17 September 1991 (Shoes case)] (see full text of the decision).

10. Id.

11. [GERMANY Amtsgericht Charlottenburg 4 May 1994 (Shoes case)]. The court also indicated that the buyer would lose the right to avoid only if the resale occurred before the buyer discovered the lack of conformity. Article 82(2)(c), however, preserves the buyer's right to avoid unless the resale (or other ordinary course consumption or transformation of the goods by the buyer) occurs after the buyer discovers or ought to have discovered the lack of conformity.

12. [GERMANY Oberlandesgericht Karlsruhe 19 December 2002 (Machine case)].

13. [GERMANY Bundesgerichtshof 25 June 1997 (Stainless steel wire case)] (article 82(2)(b) satisfied); [GERMANY Landgericht Ellwangen 21 August 1995 (Paprika case)] (article 82(2)(c) satisfied). For discussion of the exceptions in article 82(2), see infra paras. 5-7.

14. [AUSTRIA Oberster Gerichtshof 29 June 1999 (Dividing wall panels case)].

15. [GERMANY Oberlandesgericht Koblenz 27 September 1991 (Marble slabs case)].

16. [GERMANY Bundesgerichtshof 25 June 1997 (Stainless steel wire case)].

17. Id. (see full text of the decision).

18. [GERMANY Oberlandesgericht Koblenz 27 September 1991 (Marble slabs case)].

19. [GERMANY Landgericht Ellwangen 21 August 1995 (Paprika case)].

20. [GERMANY Oberlandesgericht Düsseldorf 10 February 1994 (Fabrics case)].

21. [GERMANY Oberlandesgericht Koblenz 27 September 1991 (Marble slabs case)].

22. [GERMANY Amtsgericht Charlottenburg 4 May 1994 (Shoes case)], where the court stated that the buyer would have lost the right to avoid the contract under article 82(1) only if it had resold by the time of the letter declaring the contract avoided. The court also indicated that the buyer would retain the right to avoid unless the resale occurred before the buyer discovered the lack of conformity. Article 82(2)(c), however, preserves the buyer's right to avoid unless the resale (or other ordinary course consumption or transformation of the goods by the buyer) occurs after the buyer discovers or ought to have discovered the lack of conformity.


©Pace Law School Institute of International Commercial Law - Last updated June 19, 2009
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