(2) Unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance.
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For a Doctoral thesis on "Reasonableness" in International Commercial Law, go to Guillaume Weiszberg, Le "Raisonnable" en Droit du Commerce International [pour le doctorat en droit de l’Université Panthéon-Assas (Paris II), 7 novembre 2003]
In the context of comparable notices under Article 47, Will states: "In order to serve its purpose and to constitute a valid basis for so serious a remedy as avoidance, the notice must warn [the buyer] that a deadline has been 'fixed'. ... The warning will have to be as unequivocal as the deadline. Strong invitations expressing something like 'hope to receive [payment] soon' would certainly not suffice. The warning has to be expressed so clearly that no reasonable [buyer] would need any interpretation or explication in order to realize that the date indicated constitutes his final chance to [pay], and that the [seller] is not prepared to go beyond this deadline. ..." Michael R. Will, Bianca-Bonell Commentary, Giuffrè: Milan (1987), p. 315.
Similarly, Honnold states: "An effective [Nachfrist] notice ... should make clear that the additional period sets a fixed and final limit on the date for delivery ..." John O. Honnold, "Uniform Law for International Sales under the 1980 United Nations Convention" [Honnold Text] 2d ed., Kluwer Law International (1991) p. 370; see also Lief Sevón, in Sarcevic & Volken ed., The Vienna Sales Convention: History and Perspective" [Dubrovnik Lectures], Oceana (1986), p. 224.
Knapp, however, states:"In fixing the additional period of time under Article 63 the seller need not warn the buyer that he will declare the contract avoided if the buyer has not performed within the additional period of time fixed." V. Knapp, Bianca-Bonell Commentary, p. 461.
And Enderlein & Maskow state: "Like Knapp ... and differing from Honnold ... and Sevón ... we hold that the Nachfrist [need not] be considered as final [nor is it essential that the buyer] be warned by the seller that he will declare the contract avoided. A formulation like 'We set an additional period of time for payment on your part until May 31' is in our view sufficient.... [W]e also are of the opinion that the Nachfrist can be extended, and upon its expiry a new one may be granted. The setting of a Nachfrist for performance of the most important obligations ... gives the seller an option to either stick to the contract, e.g. when non-payment is caused by foreseeable temporary difficulties of transfer or make it void. The seller would be forced into too strict a scheme if in setting a Nachfrist he had to threaten the buyer with avoidance of the contract. ..." Fritz Enderlein & Dietrich Maskow, "International Sales Law" [Enderlein & Maskow Commentary], Oceana (1992), p. 238.
Will states: "In fixing an additional period of. time the [seller] must choose one of reasonable length.... But what precisely is a 'reasonable length'? The answer depends on the particular circumstances of each case. ..." Bianca-Bonell Commentary, p. 315.
Enderlein & Maskow state: "The vague term of reasonableness leaves some room to act at one's own discretion which can be used by the party who is entitled to set the Nachfrist, i.e. in this case the seller. If he fixes too short a period, the competent deciding body could determine the minimum Nachfrist. [*]
"In calculating the additional period, factors have to be taken into account which concern both parties. On the seller's part, these are: possibilities and costs for storage of the goods (compare also Article 88, paragraph 2) and price developments, e.g. the Nachfrist will be shortened in the event of a rapid decline in prices because the proceeds from a substitute transaction under Article 75, which presupposes an avoidance of the contract, would be reduced as a result. On the buyer's part it is the difficulties which he is confronted with during performance that are of relevance, e.g. when he needs more time than expected for complying with the so-called formalities in preparing the payment (Article 54) or also in importing the goods. The seller can take such factors into consideration only when the buyer informs him thereof.
"In the setting of a Nachfrist the postal handling time needed for the information to reach the buyer has to be considered because the latter must have time to undertake the relevant activities during that Nachfrist. In the light of the fact that there is a breach of contract by the buyer here, we believe that the interests of the seller should be decisive. The reasonable period of time should in general be rather short in such cases. Sevón [Dubrovnik Lectures, p. 225] stresses this, in particular in regard to the obligation to pay the price. [**]
"In interpreting the term of a reasonable Nachfrist, conformity should be established with the interpretation of the formulation 'unreasonable delay' in Article 88, paragraph 1 ... namely in such a way that an unreasonable delay [exists] when the reasonable Nachfrist has expired. Such conformity is required because the right to resell the goods under Article 88 will produce results that are similar to those of a substitute transaction under Article 75, so that the conditions in both cases will have to be aligned so as not to create unfounded alternatives. A substitute transaction presupposes avoidance of the contract and the latter again presupposes frequently the setting of an additional period of time for performance." Enderlein & Maskow Commentary, pp. 238-239.
* For a similar view, see van der Velden who states that if a period of time is set that is too short and therefore not "of reasonable length" as required, and German Nachfrist precedent is followed, as he recommends, courts can de jure enlarge the period of time to a reasonable period where that appears appropriate . "Indications of the Interpretation by Dutch Courts of the United Nations Convention on Contracts for the International Sale of Goods 1980" Netherlands Reports to the Twelfth International Congress of Comparative Law-SydneylMelbourne 1986, Gerver, Hondius & Steenhoff eds., T.M.C. Asser Instituut, The Hague), p. 34. Cf. Audit who states "Where a Convention rule is directly inspired by domestic law, as in the case of ... the concept of Nachfrist in German law ... the court should not fall back on its domestic law, but interpret the rule by reference to the Convention." Bernard Audit, "The Vienna Sales Convention and the Lex Mercatoria", Lex Mercatoria and Arbitration, T. Carbonneau ed., Transnational (1990) p. 154.)
** Cf. Honnold who calls attention to good faith and other factors that may preclude the setting of too short a period of time. He states "[I]t is conceivable that a sharp increase in the value of the goods might tempt a seller to try to escape from the contract by sending the buyer a Nachfrist notice fixing a short, final period for taking delivery. The Convention is not without resources to deal with this problem. Article 63(1) (like Article 47(1)) requires that the Nachfrist notice fix 'an additional period of time of reasonable length' ... [T]he reasonableness of the period set in the notice should be decided in conformity with the Convention's general policy against the avoidance of the contract on insubstantial grounds. A seller who has received the price would seldom face irreparable loss from the buyer's delay in taking delivery. The buyer would be responsible for the seller's expenses, such as storage, and the seller (Article 85 ...) 'is entitled to retain [the goods] until he has been reimbursed his reasonable expenses by the buyer'. Moreover, in situations where there is danger of abuse, the requirement that the period fixed by the seller be of 'reasonable length' (Art. 63(l)) should be construed (Article 7(1)) 'to promote ... the observance of good faith in international trade' ..." Honnold Text, 2d ed., p. 444.
Knapp states: "Given the purpose of this notice, it should be assumed, contrary to the general rule of Article 27, that the notice fixing an additional period of time for performance by the buyer does not become effective until it reaches the buyer. ... The reasonableness of the additional period of time should be measured from the time at which the buyer receives the notice fixing the period. If, for instance, the additional period of time has been specified by the seller as 'within one month from today', the reasonableness of the period so fixed will ... be measured from the time at which the notice reached the buyer. Hence, if the notice never reaches him, the additional period of time under Article 63 never starts to run." Bianca-Bonell Commentary, pp. 460, 461-462.
Although it makes sense to consider the anticipated postal handling time needed for the information to reach the buyer in determining whether the period of time recited in the Nachfrist is reasonable (see Enderlein & Maskow, op. cit.), Knapp's view that Article 27 does not apply to seller's Nachfrist notice appears to be in error. At the Vienna Conference it was observed that "The word 'fix' [as used in Article 47(1) (buyer's counterpart to Article 63(l))] presupposed a written or oral notice, which was governed by the provisions of [article 27]" (OFFICIAL RECORDS, p. 339). Article 27 states "Unless otherwise expressly provided in this Part of the Convention" it applies to "any notice ... made by a party in accordance with this Part ..." (emphasis added). Elsewhere where there is an intent to depart from Article 27 by applying a receipt test, the Convention expressly so states-see for example, Articles 47(2), 48(4), 65 and 79(4) and also the second part of this same article.
* The legislative history evidences an intent to apply a receipt test to Article 63(2) (UNCITRAL Yearbook VIII, A/CN.9/SER.A./1977, p. 52, paras. 378-379), but no such intent with respect to Article 63(1). Accord: Honnold Text, 2d ed., p. 441, n. 2; Will, Bianca-Bonell Commentary, p. 345; Enderlein & Maskow Commentary, p. 237.
Knapp states: "[T]he additional period of time for performance of the buyer's obligation can be granted to the buyer by the seller only after the latter's failure to perform by the date specified in the contract, that is, after the buyer has fallen into delay in performing." Bianca-Bonell Commentary, p. 459.
Enderlein & Maskow, however, state: "By contrast to Knapp ... we believe that a Nachfrist can be set before there is a delay (see also the comparable case of Article 88, paragraph 1 [under which it is possible for the notice to be given before the conditions for the resale are fulfilled]), e.g. when it can be anticipated and the buyer signals difficulties. This is not a one-sided modification of the contract, as Knapp believes. The buyer can still deliver at the time for delivery, and the reasonable time is to be counted starting at the end of the time for performance." Enderlein & Maskow Commentary, pp. 237-238.
The Secretariat Commentary states: "9. In order to protect the buyer who may be preparing to perform the contract as requested by the seller, perhaps at considerable expense, during the additional period of time of reasonable length the seller may not resort to any remedy for breach of contract, unless the seller has received notice from the buyer that he will not comply with the request. Once the additional period of time has expired without performance by the buyer, the seller may not only avoid the contract under [article 64(1)(b)] but may resort to any other remedy he may have.
"10. In particular, the seller may claim any damages he may have suffered because of the delay in performance. Such damages may arise event though the buyer has performed his obligations within the additional period of time fixed by the seller." OFFICIAL RECORDS, pp. 49-50.
Right to avoid the contract
Article 63(2) indicates that, during the pendency of the Nachfrist, seller is precluded from avoiding the contract unless buyer indicates that he will not perform during that period.* Sevón states:
"This provision clearly covers a situation where the seller declares the contract avoided for the same reason which made him fix a period. ... However, during that period some other ground for avoidance may arise. A situation could be imagined where the buyer, during the additional period, refuses to take delivery of the goods and this refusal amounts to a fundamental breach of contract. It would not seem necessary to read the Convention in such a way that the contract could not be avoided because of a fundamental breach in taking delivery only because the seller has fixed an additional period for payment of the price".**
* Enderlein & Maskow apply a similar interpretation to seller's right to resell the goods on account of "unreasonable delay" by the buyer in taking possession of the goods, as provided in Article 88(1). They state: "These are ... rights to early termination of the contract and/or such which practically amount to it. But this does not refer to the emergency transaction under Article 88, paragraph 2, which has to be carried out as an obligation of the party obliged to preserve the goods." Enderlein & Maskow Commentary, p. 239.
** Lief Sevón, "Obligations of the Buyer under Convention on the International Sale of Goods", 106 Juridisk Tidskrift (Suomen Lainopillinen Yhdistys) 340 (1990).
Other rights of seller
Enderlein & Maskow state: "It is nevertheless indeed problematic when the seller must not exercise other rights ensuing from a breach of contract ... but rather has to wait and see whether the buyer performs within the Nachfrist." Enderlein & Maskow Commentary,p. 239.
Right to require buyer to perform
There is a conflict on this subject. Enderlein & Maskow state: "[Within the additional period of time] the seller cannot require the buyer to perform under Article 62 (so believes also Plantard [*]). This is acceptable because the right to require performance and the right to set an additional period of time for performance are basically variants of the right to obtain performance between which the seller can choose from the outset." Id. at 239-240.**
Hellner, however, notes that it seems odd that where a seller who has not been paid sets a Nachfrist, he is thereby barred from an action to compel payment of the price pursuant to Article 62 during the pendency of the Nachfrist;*** and
Schlechtriem states: "The demand for payment of the purchase price during an additional period of time surely seems to be possible; art. 63(2) is only meant to prevent the seller from avoiding the contract during that additional period." Peter Schlechtriem, "Recent Developments in International Sales Law", 18 Israel L. R. 321 (1993).
* Jean-Pierre Plantard, "Wiener Übereinkommen von 1980 über den internationalen Warenkauf', Lausanne Colloquium, Schulthess: Zurich (1985), p. 116.
** Enderlein & Maskow are also of the opinion that the "specification made by the seller himself as a specific legal consequence of the non-fulfillment of the obligation of the buyer for specification under Article 65 cannot be made during the additional period of time ..." Enderlein & Maskow Commentary, p. 240.
*** Jan Hellner, "The UN Convention on International Sale of Goods-An Outsider's view", Ius Inter Nationes, Festschrift für Stefan Riesenfeld, Jayme, Kegel & Lutter eds., C.F. Miller Juristischer Verlag: Heidelberg (1983), p. 90.
Right to damages vs. other rights to compensation
Enderlein & Maskow state: "Only the right to claim damages is expressly not blocked. [However] the same should apply to the right to reimbursement of expenses under Article 85. Since the rights because of breach of contract are excluded in their entirety, but the right to compensation of expenses is granted specifically under Article 85, it has to be regarded as still existent when a Nachfrist is set. Apart from this formal deduction, there is also a functional interpretation which is orientated towards the objective of the rule. It would be absurd not to grant the seller the right to reimbursement of expenses in commercial practice -- preservation of the goods may even be a condition for the setting of an additional period of time. This would also contradict the basic idea recognizable in the retention of the rights to claim damages that losses in the property of the seller should be compensated by the buyer also when a Nachfrist is set, with certain modifications, expenses can be considered as a specific form of damage in the meaning of Article 74.
"For similar substantive and formal reasons we believe that the entitlement to interest under Article 78 is also not excluded when a Nachfrist is set. In this case it also has to be considered that otherwise reimbursement of the damage exceeding the interests could be required, but that there would be no entitlement to the interests themselves. And finally, we hold that a right to penalty/liquidated damages, e.g. because of late performance of participatory obligations in the manufacture of the goods, provided that there is no provision to the contrary in the contract, would not be excluded by setting an additional period of time. The considerations made so far also speak in favour of this, with one modification: depending on the agreement or the applicable law the penalty/liquidated damages constitute(s) either a standard damage or a standard minimum damage, less frequently a standard maximum damage. Hence, penalty/liquidated damages do(es) in any case constitute a form of damages for which the same exemptions apply. Therefore, there seems to be a clear possibility of subsumption under sentence 2.
"Expenses, interests and penalties/liquidated damages can often be claimed as damages, but not in all cases and sometimes only under additional conditions. But why should the seller be penalized in such a way when he accommodates the buyer by setting a Nachfrist. Specific discounts that would be granted for advance payment, immediate payment or similar reasons should certainly be lost in case of setting a Nachfrist. It becomes evident as a result of this discussion that only comparable rights and comparable claims are excluded, not however claims for compensation. But the rule is not formulated very fortunately ..." Enderlein & Maskow Commentary, pp. 240-241.
Avoidance for another fundamental breach; right to rely on failure caused by buyer
Enderlein & Maskow state: "When a Nachfrist is set for the fulfillment of a specific obligation under the contract, e.g. taking delivery of the goods, avoidance of the contract is not excluded during that Nachfrist because of another fundamental breach of contract, e.g. the cheque handed over for payment is not honoured (Sevón [Dubrovnik Lectures, p. 226]).
"[Also] the option to rely on a failure caused by the other party under Article 80 is not excluded by the setting of an additional period of time ... This may assume practical relevance among others when a Nachfrist is set for the fulfillment of obligations to participate in the manufacture of the goods or for the procurement of guarantees for payment." Id. at 241.