2008 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods
Digest of Article 87 case law [reproduced with permission of UNCITRAL] [*]
A party who is bound to take steps to preserve the goods may deposit them in a warehouse of a third person at the expense of the other party provided that the expense incurred is not unreasonable.
1. In certain circumstances, the CISG imposes upon sellers (article 85) and buyers (article 86) an obligation to take reasonable steps to preserve goods that are within the party's possession or control, along with a right to retain the goods until the party is reimbursed its expenses of preservation. Article 87 specifies one means by which a party can fulfil its obligation to preserve goods: it can store the goods in a third party's warehouse "at the expense of the other party provided that the expense incurred is not unreasonable".
2. Only a small number of decisions, generally involving a party's claim for reimbursement of the costs of storing goods in a warehouse, have applied article 87. Thus where a buyer refused to take delivery of trucks and the seller deposited them in a warehouse (before eventually reselling them to another buyer), an arbitral tribunal found that the seller's actions were justified under articles 85 and 87; after determining that the warehousing costs were reasonable, it awarded seller compensation for those expenses. Similarly, article 87 has been cited as part of the basis for a buyer's recovery of the cost of storing delivered goods in a warehouse after the buyer justifiably avoided the contract. In another decision, an arbitral tribunal held a breaching buyer liable for the seller's costs of storing the goods in a warehouse, but the tribunal denied the seller's claim for damage to the goods resulting from prolonged storage because risk of loss had not passed to the buyer under applicable rules. Where the buyer had properly avoided the contract, a tribunal denied the seller's claim under article 87 (and article 85) for reimbursement of the expenses of warehousing the goods because the buyer did not breach its obligations. An avoiding buyer's costs of warehousing rejected air conditioner compressors have also been treated as damages recoverable under article 74 without citation of article 87. And where a buyer sought interim relief to prevent re-sale of a key component of industrial machinery that the seller had retained after the buyer failed to make full payment, the court held that the seller could move the component to a warehouse but, because the proceeding involved interim remedies, the seller could not rely on article 87 and would itself have to advance the expenses of depositing the component in the warehouse.
* 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. Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, award in case No. 142/1994 of 25 April 1995 (Trucks case)].
2. [ICC International Court of Arbitration, Award 7531 of 1994 (Scaffold fittings case)] (see full text of the decision).
3. [ICC International Court of Arbitration, Award 7197 of 1992 (Failure to open letter of credit and penalty clause case)] (see full text of the decision).
4. [GERMANY Arbitration-Schiedsgericht der Hamburger freundschaftlichen Arbitrage, 29 December 1998 (Cheese case)] (see full text of the decision).
5. [UNITED STATES Federal District Court, Northern District of New York, 9 September 1994 (Delchi Carrier, S.p.A. v. Rotorex Corp.)] (characterizing recovery of preservation costs as consequential damages recoverable under article 74) (see full text of the decision), affirmed in relevant part in [UNITED STATES Federal Court of Appeals for the Second Circuit 6 December 1995 (Delchi Carrier, S.p.A. v. Rotorex Corp.)] (characterizing recovery of preservation costs as incidental damages) (see full text of the decision).
6. [SWITZERLAND Tribunal Cantonal Vaud 17 May 1994 (Industrial machinery case)] (see full text of the decision).