UNCITRAL Digest of Article 87 case law

DIGEST OF ARTICLE 87 CASE LAW

Overview and applications

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 fulfill 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 involved 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 and, after determining that the warehousing costs were reasonable, it awarded seller compensation for those expenses.[1] 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.[2] 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.[3] Where the buyer properly avoided the contract, it was found that the prerequisites for the seller to claim, under articles 85 and 87, reimbursement for its expenses of warehousing the goods were not met because the buyer did not breach its obligations; the seller's claim was therefore denied.[4] 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.[5] 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.[6]

FOOTNOTES

* The present text was prepared using the full text of the decisions cited in the Case Law on UNCITRAL Texts (CLOUT) abstracts and other citations listed in the footnotes. The abstracts are intended to serve only as summaries of the underlying decisions and may not reflect all the points made in the digest. Readers are advised to consult the full texts of the listed court and arbitral decisions rather than relying solely on the CLOUT abstracts.

[Citations to cisgw3 case presentations have been substituted [in brackets] for the case citations provided in the UNCITRAL Digest. This substitution has been made to facilitate online access to CLOUT abstracts, original texts of court and arbitral decisions, and full text English translations of these texts (available in most but not all cases). For citations UNCITRAL had used, go to <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.]

1. [RUSSIA Arbitration Award case No. 200/1994 of 25 April 1995; available online at <http://cisgw3.law.pace.edu/cases/950425r1.html>].

2. CLOUT case No. 304 [ICC Court of Arbitration, case No. 7531 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947531i1.html>] (see full text of the decision).

3. CLOUT case No. 104 [ICC Court of Arbitration, case No. 7197 of 1992, available online at <http://cisgw3.law.pace.edu/cases/927197i1.html>] (see full text of the decision).

4. CLOUT case No. 293 [GERMANY Hamburg Arbitration award of 29 December 1998 available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>] (see full text of the decision).

5. CLOUT case No. 85 [UNITED STATES Delchi Carrier v. Rotorex Federal District Court [New York] 9 September 1994 available online at <http://cisgw3.law.pace.edu/cases/940909u1.html>] (characterizing recovery of preservation costs as "consequential damages" recoverable under article 74) (see full text of the decision), affirmed in relevant part in CLOUT case No. 138 [UNITED STATES Delchi Carrier v. Rotorex, Federal Appellate Court [2nd Circuit] 6 December 1995, available online at <http://cisgw3.law.pace.edu/cases/951206u1.html>] (characterizing recovery of preservation costs as "incidental damages") (see full text of the decision).

6. CLOUT case No. 96 and No. 200 [SWITZERLAND Tribunal [Appellate Court] Vaud 17 May 1994, available online at <http://cisgw3.law.pace.edu/cases/940517s1.html>] (both abstracts dealing with the same case) (see full text of the decision).