Go to Database Directory || See also UNCITRAL Digest Cases + Added Cases
Search the entire CISG Database (case data + other data)

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

Digest of Article 84 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
When interest is due under article 84(1)
Rate of interest under article 84(1)
Time periods for which interest is awarded under article
     84(1); currency and exchange rate considerations
Article 84(2)]

Article 84

(1) If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid.
(2) The buyer must account to the seller for all benefits which he has derived from the goods or part of them:
(a) if he must make restitution of the goods or part of them; or
(b) if it is impossible for him to make restitution of all or part of the goods or to make restitution of all or part of the goods substantially in the condition in which he received them, but he has nevertheless declared the contract avoided or required the seller to deliver substitute goods.

OVERVIEW

1. Article 84 elaborates on the restitutionary obligations imposed on parties to a contract that has been validly avoided, as well as on the restitutionary obligations of a buyer that invokes its rights under article 46(2) to require the seller to deliver substitute goods.

When interest is due under Article 84(1)

2. Many decisions have awarded interest under article 84(1) on payments that a seller must refund to a buyer.[1] Such awards have frequently been made against a breaching seller in favour of a buyer that has avoided the contract.[2] Interest under article 84 has also been awarded to a breaching buyer who became entitled to a refund of payments when the aggrieved seller avoided the contract.[3] Article 84(1) has also been found to govern a buyer's claim for repayment of funds that a seller obtained under a bank guarantee for part of the price of goods covered by a cancelled contract, even though the buyer's claim was based on principles of applicable national law (because it arose from the seller's dealing with the bank rather than the buyer) and not on restitutionary obligations under the Convention: the court reasoned that the buyer's claim, while not based on the CISG, was nevertheless a claim for a refund of the price in a transaction governed by the CISG, and thus came within the terms of article 84(1).[4] A court has also determined that a buyer is entitled to interest under article 84 even though it had not made a formal request for such interest in its pleadings.[5]

Rate of interest under Article 84(1)

3. Like article 78, article 84(1) does not specify the rate of interest applicable to awards made under its authority. Many decisions have set the interest rate according to the dictates of national law, resulting in the imposition of a domestic statutory rate of interest.[6] Such decisions often invoke choice of law principles to determine the applicable national law,[7] and they frequently cite the directive in article 7(2) that issues within the scope of the CISG which are settled neither by its express provisions nor by the general principles on which it is based should be determined "in conformity with the law applicable by virtue of the rules of private international law."[8] On the other hand, interest has been awarded at the rate prevailing at the seller's place of business because this is where sellers are likely to have invested the payments they must refund.[9] And an arbitral tribunal has awarded interest under article 84(1) on the basis of the rate used in international trade with respect to the currency of the transaction (Euro-dollars), leading to the application of London Inter-Bank Offered Rate (LIBOR);[10] this aspect of the arbitration award, however, was reversed on appeal because the parties had not been given sufficient opportunity to be heard on the question of the proper interest rate.[11] In lieu of interest under article 84, some courts appear to have awarded avoiding buyers damages under article 74 in the amount of foreseeable finance charges that the buyer incurred in order to finance payment for the goods.[12]

Time periods for which interest is awarded under Article 84(1); currency and exchange rate considerations

4. Article 84(1) specifies that, when the seller must refund payments made by the buyer, it must pay interest "from the date on which the price was paid." Many decisions have in fact awarded interest from this date.[13] Where payment was made on behalf of the buyer by a guarantor bank and the buyer reimbursed the bank, the buyer was awarded interest from the date that the guarantor made payment.[14] In the case of partial contract avoidance, it has been determined that interest is due from the time that the buyer paid for goods covered by the avoided portion of the contract.[15] Article 84(1) does not state the date as of which interest should cease to accrue, but it has been determined that interest accrues until the time that the price is in fact refunded.[16] It has also been determined that an avoiding buyer's refund, including interest thereon, was due in the same currency as that in which the price was duly paid (even though the contract price was valued in a different currency), and at the exchange rate that was specified in the contract for payment of the price to seller.[17]

Article 84(2)

5. Article 84(2) requires a buyer to account to the seller for benefits derived from goods that were delivered under a contract that was avoided, or from goods that the buyer is requiring the seller to replace pursuant to article 46(2). In both situations, the buyer is subject to the seller's claim for restitution of delivered goods. Thus, under article 81(2), a buyer who is party to a contract that has been avoided (whether by the buyer or the seller) must make restitution of goods received under the contract. Under article 82, furthermore, if a buyer wishes either to avoid the contract or to require the seller to deliver substitute goods pursuant to article 46(2), the buyer must make restitution of goods already delivered "substantially in the condition in which he received them", unless one of the exceptions in article 82(2) applies. Article 84(2), in turn, requires the buyer to "account to the seller for all benefits which he has derived from the goods or part of them" in two situations: whenever the buyer is obligated to make restitution of the goods (article 84(2)(a)); and whenever the buyer successfully avoids the contract or requires the seller to deliver substitute goods despite being unable to make restitution of the original goods substantially in the condition in which they were received (i.e., when one of the article 82(2) exceptions from the requirement to make restitution applies).

6. Article 84(2) has been the subject of considerably fewer decisions than article 84(1). Article 84(2) has been characterized in general as requiring that the buyer "account to the seller the exchange value of all benefits which the [buyer] has derived from the goods or part of them".[18] It has been stated that the burden of proving the amount of benefits for which the buyer must account under article 84(2) falls to the seller.[19] In line with this principle, the seller was found not to have carried its burden, and thus a lower court's award to the seller under article 84(2) was reversed, where it had only been shown that the buyer's own customer might in the future avoid its contract to purchase of the goods in question (furniture that proved non-conforming): proof of the possibility that the buyer might obtain benefits from its customer's rescission, the court reasoned, was not sufficient to trigger the obligation to account for benefits under article 84(2), particularly where the amount of the possible benefits was also uncertain.[20] The court therefore found no proof that the buyer obtained benefits from the goods "because the use of defective furniture is not a measurable monetary benefit and would thus have to be considered as an imposed benefit".[21] Another decision indicated, in passing, that if a buyer had succeeded in reselling shoes received under a contract that it avoided, the buyer "would have had to account to the seller for any profit under article 84(2) CISG"; this suggested to the court that the buyer's attempt to resell the shoes was merely an effort to mitigate the "negative effect for both sides" of the shoes' lack of conformity, and should not be deemed an "acceptance" of the shoes as conforming.[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:

   -    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. [ICC International Court of Arbitration, Award 6653 of 26 March 1993 (Steel bars case)]; [FRANCE Cour d'appel de Paris 6 April 1995 (Steel bars case)]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 1/1993 of 15 April 1994]; [FRANCE Cour d'appel Aix-en-Provence 21 November 1996 (Laminated sheet metal case)]; [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)] (see full text of the decision); [SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997 (Sunflower oil case)]; [ICC International Court of Arbitration, Award 7660 of 23 August 1994 (Battery machinery case)]; [GERMANY Landgericht Landshut 5 April 1995 (Sport clothing case)]; [ICC International Court of Arbitration, Award 9978 of March 1999 (Goods case)]; [GERMANY Oberlandesgericht Celle 24 May 1995 (Used printing press case)]; [GERMANY Oberlandesgericht Hamm 8 February 1995 (Socks case)]; [SWITZERLAND Berzirksgericht der Sanne, 20 February 1997 (Spirits case)]; [GERMANY Arbitration-Schiedsgericht der Hamburger freundschaftlichen Arbitrage, 29 December 1998 (Cheese case)]; [CHINA CIETAC Arbitration Award of 30 October 1991 (Roll aluminum and aluminum parts case)]; [FRANCE Cour d'appel, Grenoble 21 October 1999 (Footwear case)] (indicating that an avoiding buyer was entitled to interest, under article 84, on the price to be refunded by the breaching seller, but then declining jurisdiction over case). On the other hand, in lieu of interest under article 84 some courts appear to have awarded avoiding buyer's damages under article 74 in the amount of foreseeable finance charges that the buyer incurred in order to finance payment for the goods. See [ICC International Court of Arbitration, Award 7531 of 1994 (Scaffold fittings case)]; [FINLAND Käräjäoikeus of Kuopio 5 November 1996 (Butter case)].

2. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 1/1993 of 15 April 1994]; [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)] (see full text of the decision); [SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997 (Sunflower oil case)]; [GERMANY Landgericht Landshut 5 April 1995 (Sport clothing case)]; [ICC International Court of Arbitration, Award 9978 of March 1999 (Goods case)]; [GERMANY Arbitration-Schiedsgericht der Hamburger freundschatlichen Arbitrage 29 December 1998 (Cheese case)]; [CHINA CIETAC Arbitration Award of 30 October 1991 (Roll aluminum and aluminum parts case)]; [ICC International Court of Arbitration, Award 6653 of 26 March 1993 (Steel bars case)]; [FRANCE Cour d'appel de Paris 6 April 1995 (Steel bars case)]. See also [FINLAND Käräjäoikeus of Kuopio 5 November 1996 (Butter case)] (apparently awarding buyer's actual finance charges as damages under article 74, not as interest under article 84); [ITALY Pretura circondariale di Parma 24 November 1989 (Knapsacks, bags, wallets case)] (court applied CISG to transaction and held that buyer was entitled to avoid and recover payments from seller; it also awarded interest, but without citing article 84 and perhaps on the basis of national law); [ICC International Court of Arbitration, Award 7660 of 23 August 1994 (Battery machinery case)] (court allowed interest on buyer's partial refund claim for undelivered spare part parts, but did not specifically discuss whether buyer avoided this part of the contract).

3. [SWITZERLAND Bezirksgericht der Sanne 20 February 1997 (Spirits case)].

4. [GERMANY Oberlandesgericht München 8 February 1995 (Automobile case)].

5. [ICC International Court of Arbitration, Award 6653 of 26 March 1993 (Steel bars case)], where the court noted that article 84(1) is not clear on whether such a formal request for interest is necessary, but that the provision would be construed not to require such a request; the tribunal noted that the domestic law that would apply under article 7(2) to resolve matters not settled by the provisions of the CISG or its general principles did not require a formal request for interest. This portion of the decision was affirmed in [FRANCE Cour d'appel de Paris 6 April 1995 (Steel bars case)].

6. [GERMANY Oberlandesgericht Karlsruhe 19 December 2002 (Machine case)] (see full text of the decision); [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)] (see full text of the decision); [ICC International Court of Arbitration, Award 7660 of 23 August 1994 (Battery machinery case)]; [GERMANY Landgericht Landshut 5 April 1995 (Sport clothing case)]; [GERMANY Oberlandesgericht Celle 24 May 1995 (Used printing press case)]; [SWITZERLAND Berzirksgericht der Sanne, 20 February 1997 (Spirits case)]; [GERMANY Arbitration-Schiedsgericht der Hamburger freundschaftlichen Arbitrage, 29 December 1998 (Cheese case)]; [GERMANY Oberlandesgericht München 8 February 1995 (Automobile case)]; [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 1/1993 of 15 April 1994]; [FRANCE Cour d'appel Aix-en-Provence 21 November 1996 (Laminated sheet metal case)]; [ICC International Court of Arbitration, Award 9978 of March 1999 (Goods case)]. See also [ITALY Pretura circondariale di Parma 24 November 1989 (Knapsacks, bags, wallets case)] (the court applied the CISG to the transaction and held that buyer was entitled to avoid and recover payments from seller; it also awarded interest at the domestic law statutory rate, but without citing article 84 and perhaps on the basis of national law); [CHINA CIETAC Arbitration Award of 30 October 1991 (Roll aluminum and aluminum parts case)] (tribunal awarded 8 per cent interest on payments that seller had to refund to avoiding buyer, but did not specify how it determined the rate).

7. [GERMANY Oberlandesgericht Karlsruhe 19 December 2002 (Machine case)] (see full text of the decision); [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)] (see full text of the decision); [ICC International Court of Arbitration, Award 7660 of 23 August 1994 (Battery machinery case)]; [GERMANY Landgericht Landshut 5 April 1995 (Sport clothing case)]; [GERMANY Oberlandesgericht Celle 24 May 1995 (Used printing press case)]; [ICC International Court of Arbitration, Award 9978 of March 1999 (Goods case)]; [SWITZERLAND Bezirksgericht der Sanne 20 February 1997 (Spirits case)]; [GERMANY Arbitration-Schiedsgericht der Hamburger freundschatlichen Arbitrage, 29 December 1998 (Cheese case)]; [GERMANY Oberlandesgericht München 8 February 1995 (Automobile case)].

8. [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)] (see full text of the decision); [SWITZERLAND Bezirksgericht der Sanne 20 February 1997 (Spirits case)]; [GERMANY Arbitration-Schiedsgericht der Hamburger freundschatlichen Arbitrage, 29 December 1998 (Cheese case)] (see full text of the decision).

9. [SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997 (Sunflower oil case)] (see full text of the decision).

10. [ICC International Court of Arbitration, Award 6653 of 26 March 1993 (Steel bars case)].

11. [FRANCE Cour d'appel de Paris 6 April 1995 (Steel bars case)].

12. See [ICC International Court of Arbitration, Award 7531 of 1994 (Scaffold fittings case)]; [FINLAND Käräjäoikeus of Kuopio 5 November 1996 (Butter case)].

13. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 1/1993 of 15 April 1994]; [SWITZERLAND Cantone del Ticino Tribunale d'appello 15 January 1998 (Cocoa beans case)] (see full text of the decision); [SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997 (Sunflower oil case)] (advance payment); [ICC International Court of Arbitration, Award 7660 of 23 August 1994 (Battery machinery case)]; [GERMANY Landgericht Landshut 5 April 1995 (Sport clothing case)]; [GERMANY Oberlandesgericht Celle 24 May 1995 (Used printing press case)]; [SWITZERLAND Bezirksgericht der Sanne 20 February 1997 (Spirits case)] (award of interest to breaching buyer on refund from avoiding seller); [GERMANY Arbitration-Schiedsgericht der Hamburger freundschatlichen Arbitrage, 29 December 1998 (Cheese case)]; [CHINA CIETAC Arbitration Award of 30 October 1991 (Roll aluminum and aluminum parts case)]; [FRANCE Cour d'appel Paris 14 January 1998 (Two elephants case)] (see full text of the decision). But see [ITALY Pretura circondariale di Parma 24 November 1989 (Knapsacks, bags, wallets case)] (court applied CISG to transaction and held that buyer was entitled to avoid and recover payments from seller; it awarded interest from the date of avoidance, but without citing article 84 and perhaps on the basis of national law).

14. [FRANCE Cour d'appel Aix-en-Provence 21 November 1996 (Laminated sheet metal case)]; [FRANCE Cour de cassation 26 May 1999 (Laminated sheet metal case)].

15. [ICC International Court of Arbitration, Award 6653 of 26 March 1993 (Steel bars case)]; [FRANCE Cour d'appel de Paris 6 April 1995 (Steel bars case)].

16. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 1/1993 of 15 April 1994].

17. [ICC International Court of Arbitration, Award 7660 of 23 August 1994 (Battery machinery case)].

18. [GERMANY Oberlandesgericht Oldenburg 1 February 1995 (Furniture case)] (see full text of the decision).

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

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

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

22. [GERMANY Amtsgericht Charlottenburg 4 May 1994 (Shoes case)].


©Pace Law School Institute of International Commercial Law - Last updated June 19, 2009
Go to Database Directory || Go to Bibliography
Comments/Contributions