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Reproduced with permission from 23 International Lawyer (1989) 443-483

excerpt from

Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods

Alejandro M. Garro [*]


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Buyer's Notification of Non-conformity

Although there are both buyers and sellers in developed and developing countries, buyers in developing countries tend, by and large, to import technically complex machinery whose defects may not be readily ascertainable. Professor Date-Bah, an active participant in the negotiations on behalf of Ghana, articulated the concern of many developing countries with the imposition of strict notification requirements on account of non-conformity of the goods. He explained that his country has numerous important tradesmen who are illiterate, and that it often becomes necessary to call in foreign experts in order to carry out tests on imported, complicated machinery. Not infrequently, delivered goods remain in the port of arrival for more than two years and delivery to their final destination is frequently delayed.[117] This is why the representatives of some developing countries were wary about the consequences of their failure to notify the seller as to the non-conformity of the goods in a timely fashion and why they argued so strenuously against a strict requirement of notification of defects.

One of the longest and most dramatic debates at the UNCITRAL round of negotiations on international sales concerned the procedure to follow in cases of non-conformity.[118] The most controversial issues centered around the period of time within which the buyer is required to discover a non-conformity, the nature and timing of the buyer's obligation to give notice of non-conformity, and the consequences for the buyer's failure to give said notice. Those issues created a division between the delegates from the industrialized and developing countries.

Article 38(1) of the Convention requires the buyer to "examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances." This language seems to acknowledge that the shortest applicable period to inspect complex machinery received by a buyer in an isolated town of a developing country may be different from the shortest applicable period to inspect other types of goods by a sophisticated buyer in a big industrial city.[119] In order to preserve buyer's remedies for non-conformity, article 39(1) requires him to give notice to the seller, "specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it."[120] Thus, articles 38 and 39 work in tandem to require buyers to examine the goods within the shortest practicable period and to give notice to the seller within a reasonable time after the buyer discovered or "ought to have discovered" a non-conformity.[121] The buyer's failure to give adequate and timely notice results in the loss of remedies for non-conformity.

The delegate from Ghana sought unsuccessfully to introduce an amendment that would have eliminated the provision requiring notice within a reasonable time and the sanction for the buyer's failure to give notice.[122] However, the basic objection from other developing countries did not go so far. Their main point of contention was that the sanction for failure to notify, i.e., buyer's loss of the right to rely on non-conformity of the goods, was too harsh.[123] A second proposal introduced by the representative of Ghana was to retain the requirement of notice within a reasonable time, but softening the sanction for failing to comply by equating such failure with a failure to mitigate loss, thereby reducing the amount of damages recoverable from the seller rather than precluding recovery altogether. This proposal met with wider acceptance but was unable to muster sufficient support for its adoption.[124] This precipitated a crisis at the Conference, because some delegates feared that the failure to give some deference to the objections over notification of defects might result in the developing nations refusing to ratify the Convention.[125] Obviously, the issue attracted sufficient attention to force the delegates to search for a compromise solution between the views of the representatives of some industrialized countries, who were convinced that eliminating all of the buyer's rights to recover would effectively ensure strict compliance with the notice requirements, and those espoused by some representatives of developing countries, who would have been satisfied with a rule that required notice but objected to the loss of all of the buyer's remedies as a result of failure to provide timely notification.[126]

This compromise retained the general requirement of notice within a reasonable time and the total bar of claims as the result of failure to give timely notification. After a flurry of debate, however, the delegates adopted article 44, which allows a buyer to deduct the value of the defect from the price despite the lack of timely notice, if he has "a reasonable excuse" for his failure to give the notice required under article 38(1). Thus, according to article 44, if the buyer has a "reasonable excuse" for not complying with the notice requirement, the sanction for untimely or inadequate notice is limited to whatever damages the seller would suffer as a result of the buyer's non-compliance.[127]

Professor Schlechtriem has criticized the compromise reached in article 44 for its lack of clarity as to what constitutes a "reasonable excuse."[128] In contrast, Professor Date-Bah finds that article 44 is most useful in order to avoid an unfair total loss of buyers' remedies whenever an examination of the goods has been done within a reasonable period of time that cannot strictly qualify as "short."[129] In view of the uncertainties raised by this uneasy compromise, Professor Farnsworth recommends sellers to vary by agreement the Convention's provision on notice of non-conformity.[130] Although this is one of those compromises that can be properly characterized as "uneasy," it embodies a fair accommodation of the competing interests of buyers and sellers of complex machinery. It retains the core requirement of timely notice and the penalty of absolute bar to recovery, yet it acknowledges the possibility of a "reasonable excuse" justifying the failure. The extent to which this delicate balance can be maintained in practice will depend on how broadly or narrowly courts will interpret the expression "reasonable excuse."[131]

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Go to entire text of Garro commentary


FOOTNOTES

* Alejandro M. Garro, Lecturer in Law, Columbia University. This paper was submitted to the 81st Annual Meeting of the American Association of Law Libraries, June 26-29, 1988.

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117. Report of Professor Date-Bah at the August 1979 Potsdam colloquium of the International Association of Legal Science on the Convention, cited by Eörsi, supra note 4, at 350 n. 58 and accompanying text.

118. See Eörsi, supra note 4, at 350-52 (recalling that the debate on arts. 39, 40, and 44 of the Convention (arts. 37-38 of the Draft Convention of 1977) lasted for three days and covered a very wide range of issues). "Eight modifying texts were presented and no less than 111 interventions were made at sessions 16, 17, and 21." Id. at 350; see also Farnsworth, The Vienna Convention: An International Law for the Sale of Goods, in Private Investors Abroad - - Problems and Solutions in International Business in 1983 127, 134 (M. Landwehr ed. 1983); Patterson, supra note 112.

119. Instead of speaking of the shortest practicable period under the circumstances, art. 38 of ULIS requires the buyer to examine the goods "promptly." Referring to this provision of ULIS, Professor Date-Bah states that

"promptitude is too exacting a standard for the usual pace of things in third world countries. Apart from the slower pace of life, there is the problem that the examination of technologically sophisticated goods may not be capable of being done promptly at particular destinations because of the absence locally of people with the requisite skills to carry out such examination."

Date-Bah, supra note 88, at 29. He illustrates this point by offering the example of a buyer in a developing country who must rely upon the opinion of a foreign expert to examine a computer with complex technological features. He argues that even though the computer's defects may be readily discovered upon examination by one familiar with the equipment, a considerable amount of time may have to elapse before an expert can be found and flown in to inspect the computer. Date-Bah persuasively argues that "such inspection by imported personnel may not be achieved within a 'prompt' period of time, as required by art. 38 of ULIS." Id. at 30. Accordingly, Date-Bah considers that the formula adopted in the Convention is more realistic, for it speaks of examination "within as short a period as is practicable in the circumstances." Convention, supra note 3, art. 38(1). He then concludes: "[Q]uite often the shortest practicable period in Accra will differ markedly from the shortest applicable period in New York or Genoa. The fact that sufficient relativity is built into the present formula makes it more satisfactory and acceptable to countries of different social and economic systems." Date-Bah, supra note 73, at 29. See also Patterson, supra note 112, at 300 n. 169 (observing that to determine the timeliness of any notice by applying a standard appropriate in a country where such expertise is readily available would entail the application of commercial standards of a developed country, not the "practicability" standard adopted in art. 38(1) of the Convention).

120. Whereas the first section of art. 39 is concerned with the failure to notify the seller of a defect which was discovered or should have been discovered, the second section deals with the situation where the defect could not have been discovered because it was latent, hence there was no breach of duty to notify of the non-conformity. Art. 39 also establishes a two-year cut-off period, so that the buyer cannot complain if the latent defect manifests itself after two years.

121. See Date-Bah supra note 88, at 30, noting that in order to ascertain when a buyer "ought to have discovered a lack of conformity" under art. 39(1), the interpreter must first determine the shortest applicable period within which the buyer could have examined the goods under art. 38(1).

122. Summary Records of the Sixteenth Meeting of the First Committee, U.N. Doc. A/Conf..97/C.1/Sr. 16, 32 (1980), reprinted in Conference on Contracts, supra note 1; see Patterson, supra note 112, at 289-90.

123. Eörsi, supra note 4, at 350; Farnsworth, supra note 118, at 134.

124. The representatives of Kenya, Pakistan, China, Nigeria, the United Kingdom, Mexico, Singapore, and Libya argued for Date-Bah's proposal. The representatives of the Netherlands, Korea, Switzerland, Sweden, Bulgaria, Denmark, Austria, Australia, Japan, Belgium, the Federal Republic of Germany, and Spain opposed it. For a well-documented account of the debates, see Patterson, supra note 112, at 290.

125. The Asian-African Legal Consultative Committee considered the Ghanaian proposal of crucial importance for their continued support of the Convention. See Kastely, Unification and Community, supra note 74, at 619 (referring to the efforts of Mr. Hjerner, the Swedish delegate, to find a compromise solution which would be satisfactory for the delegations from developing countries). See also Patterson, supra note 112, at 292 n. 128 (quoting Mr. Sevón, the Finnish delegate, cautioning the other delegates that unless a compromise solution was found, UNCITRAL might "regret having adopted a stand which would prevent some states from acceding to the Convention"). A joint proposal was submitted by delegates from Sweden, Finland, Ghana, Nigeria, and Pakistan that eventually became arts. 39 and 44 of the Convention. Kastely, Id.

126. See J. Honnold, Uniform Law, supra note 13, at 261; Date-Bah, supra note 94, at 30; Eörsi, supra note 4, at 350-51; Farnsworth, supra note 118, at 134-35.

127. Article 44 also represents a compromise as to the maximum period within which the buyer may assert a claim for latent or hidden defects. The sponsors of the amendment introduced in art. 44 agreed to accept the text of art. 39(2), whereby the buyer's claims are precluded after two years from the date on which the goods were actually handed over to the buyer. When some delegates proposed a longer limitation period, the representative from Austria explained that in his country the buyer had only eight days to give notice of non-conformity, and that, therefore, it was already a compromise on his part to accept the two years. See Eörsi, supra note 4, at 350. Professor Date-Bah is of the opinion that this two-year cut-off period is too short to take care of sales of complicated machinery in which latent defects may show up well after two years. Accordingly, he recommends those buyers either obtain a guarantee which will override the two-year limitation period or simply "derogate from the rule laid down in Art. 39(2)." Date-Bah, supra note 79, at 33. Professor Farnsworth recommends sellers to do likewise, but in order to reduce the two-year period. See Farnsworth, supra note 118, at 135.

128. Schlechtriem, Recent Developments in International Law, 18 Israel L. Rev. 309, 325 (1983). Professor Date-Bah easily visualizes a "reasonable excuse" in cases of complex machinery where the person who examines the goods is not an expert. See also Date-Bah, supra note 79, at 32, where he furnishes the following example of "reasonable excuse." A schoolmaster examines a new copying machine, finds that it does not work but is unable to specify the nature of the non-conformity. Should the schoolmaster hire an expert in order to identify the defect? Professor Date-Bah does not think so, for it would be too onerous. Thus, he concludes:

"The seller is the one in breach and it should be good enough that he is told that his goods are defective. It should be his responsibility to detect the specific nature of the lack of conformity. Assuming that, in the stated hypothetical, the headmaster's notice failing to specify the cause of the non-functioning of the Xerox machine is held by a court to be insufficient notice under art. 39(1), it is considered that art. 44 should be used to provide the headmaster with a defense. In other words, the headmaster should be regarded as having a "reasonable excuse for his failure to give the required notice." because he could not reasonably have been expected to ascertain the exact cause why the machine would not work."

Honnold agrees with Date-Bah in that the difficulty of making a specification of non-conformity could constitute a reasonable excuse under art. 44 of the Convention. J. Honnold, Uniform Law, supra note 13, at 261. While discussing art. 39 of the Draft ULIS, providing for the buyer's obligation to specify the nature of the lack of conformity as required by art. 39(1) of the Convention, Professor Honnold, who was a member of the U.S. delegation to the Hague Conference, suggested that the buyer should not be required to state the exact nature of any lack of conformity and that the rules relating to the content of the notice should not be "too strict." This suggestion did not prevail, however. See 1 Diplomatic Conference on the Unification of Law Governing the International Sale of Goods, The Hague, 2-25 April 1964, at 72 (Ministry of Justice of the Netherlands ed. 1966), cited in Patterson, supra note 112, at 286 n. 103.

129. Professor Date-bah foresees the advantages of a provision such as art. 44 in case of a world shortage of experts of certain machinery, preventing a buyer from undertaking a thorough examination of the machinery within a year of its delivery. Under those circumstances, the buyer's obligation under art. 38(1) would have been breached, because notice of non-conformity could not have been given within a reasonable time after the non-conformity "ought to have been discovered" pursuant to art. 39(1). A liberal construction of the examination provisions of art. 38 may lead a court to conclude that in this particular case a delay of a year was the shortest "practicable in the circumstances." Yet the seller may make the strong case that a delay of one year for examining the goods cannot be properly called "short." Arguably, art. 44 would preclude a total loss of remedies for buyers on account of a "reasonable excuse" for their failure to examine the goods within a "short" period and to send the required notice. Date-Bah, supra note 88, at 31-32.

130. Farnsworth, supra note 118, at 135.

131. See Kastely, Unification and Community, supra note 74, at 619 (noting that the compromise also provides an economic disincentive to use the "reasonable excuse" device by denying recovery for lost profits even if a legitimate excuse is found); see also J. Honnold, Uniform Law, supra note 13, at 278-84; Patterson, supra note 112, at 302:

"[I]f some national courts base their interpretations of terms and their analysis of elements on parochial principles rather than on the compromise, then other national courts may make "retaliatory" interpretations, parties may begin selective use of the "opt-out" provision, and the goal of unification will remain as elusive as ever."

Patterson concludes a comprehensive discussion of this topic with an optimistic note, observing that "[c]ourts in West Germany, applying article 39 of ULIS, and courts in the United States, applying section 2-607(3)(a) of the U.C.C., have demonstrated the flexibility that the art. 44 compromise requires." Id. (footnotes omitted).

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Pace Law School Institute of International Commercial Law - Last updated August 16, 1999
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