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CISG
number
76


LEGISLATIVE HISTORY
1980 Vienna Diplomatic Conference

Summary Records of Meetings of the Plenary Meetings

10th plenary meeting

Thursday, 10 April 1980, at 10 a.m.

President: Mr. EÖRSI (Hungary)

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Article 72 [became CISG article 76]
(A/CONF.97/11/Add.2, p. 13; A/CONF.97/L.11)

[Australia, Greece, Norway, Republic of Korea (A/CONF.97/C.1/L.245):

Revise paragraph (1) of article 72 [became CISG article 76 ] to read as follows:" (l) If the contract is avoided and there is a current price for goods, the party claiming damages may, if he has not made a purchase or resale under article 71 [became CISG article 75], recover the difference between the contract price and the current price at the time of avoidance and any further damages under article 70 [became CISG article 74 ]. If, however, the party claiming damages has avoided the contract after receiving the goods or the payment, as the case may be, the current price at the time of such receipt shall be applied instead of the current price at the time of avoidance.]

38. Mr. BENNETT (Australia), introducing on behalf of the sponsors (Australia, Greece, Mexico, Norway and Turkey) an amendment to article 72(1) [became CISG article 76(1) ] (A/CONF.97/L.11), said that it was very similar to the amendment that had been submitted to the First Committee under the symbol A/CONF.97/C.1/L.245. The earlier proposal had referred to the time of receipt of payment, but there was no such reference in the new proposal, which was thus a simpler one.

39. The purpose of article 72 [became CISG article 76 ] was to provide a formula for assessing the amount due if the contract was declared avoided, in addition to any further damages recoverable under article 70 [became CISG article 74 ]. The formula proposed (A/CONF.97/11/Add.2) was based on two factors: the price fixed by the contract, which did not create any difficulty, and the current price "at the time [the party] first had the right to declare the contract avoided". It was the second factor that was not satisfactory, first, because its application was uncertain and secondly because it would encourage the parties to be too precipitate in declaring the contract avoided. The formula envisaged in article 72 [became CISG article 76 ] should undoubtedly be such as to prevent speculation on the price, but the need to do so did not arise until the goods had been taken over, and its was at that stage that the problem of speculation could be settled, in a more limited fashion than was done in the proposed text. It would be preferable to approach the problem in that more restrictive way and to refrain from establishing a generally applicable provision that was not wholly satisfactory. In the case of goods taken over before the contract was declared avoided, in order to reduce the risk of speculation that would then exist, the price applicable should be the current price at the time they were taken over. However, if the goods had not been delivered at the time the contract was declared avoided, it was not essential to reduce the risk of speculation and the most satisfactory method would then be to take the current price at the time of the actual declaration of avoidance. In such a situation, the application of that formula would be less uncertain and would not make for unduly hasty avoidance of the contract.

40. Mr. ROGNLIEN (Norway), speaking as a cosponsor of the amendment to article 72(1) [became CISG article 76(1) ] (A/CONF.97/L.11), explained that its main purpose was to remedy the present provision under which the price to be assessed would be the price prevailing at the time when the party who declared the contract avoided had for the first time had the right to do so. That would be difficult to apply and would open the door to a great deal of litigation which it was the very purpose of article 72 [became CISG article 76 ] to avoid by providing for abstract damages. A party would in many cases have the right to avoid the contract some time before it would have become clear that the right existed. Particular difficulties would arise in cases of anticipatory breach. It was important not to forget that, in practice, parties would not readily be precipitate in avoiding a contract which they had entered into in good faith, and they should not be encouraged to do so. In the event of non-delivery of goods, for example, the buyer undoubtedly had the right to declare the contract avoided, but he would usually wait quite some time before doing so because he would be interested in obtaining the goods. In such a case, it was incumbent upon the seller to inform the buyer that he would not perform his obligations. After being so informed the buyer would under article 73 [became CISG article 77 ] have the duty to mitigate the loss by taking appropriate measures, and would consequently have nothing to gain by speculating in price movements thereafter. In cases of non-delivery, therefore, it seemed reasonable, for the purposes of article 72 [became CISG article 76 ], to take the time when the contract was actually avoided and not the time when the buyer had first had the right to declare it avoided. Where the goods delivered did not conform, it was proposed to assess the abstract damages in accordance with article 72 [became CISG article 76 ] on the basis of the price prevailing at the time when the goods had been taken over. Any further loss would be covered by article 70 [became CISG article 74 ], either as an alternative or additional remedy.

41. Mr. LOEWE (Austria) called attention to a typographical error in the second line of the French text of article 72(1) [became CISG article 76(1) ] (A/CONF.97/11/Add.2). There should be a comma rather than a hyphen between the words "petit" and "si".

42. Furthermore, he was not convinced that the amendment (A/CONF.97/L.11) would eliminate all possibility of speculation. Under the text prepared by the Drafting Committee, a dispute might in fact arise as to the date on which a party would be able to declare the contract avoided, but it would be settled by a tribunal. The amendment proposed, on the other hand, introduced a subjective criterion, and the date of taking over of goods, while an objective criterion, could be completely arbitrary.

43. Mr. HONNOLD (United States of America) said that he wished to congratulate the authors of the amendment, which it appeared to him would considerably improve the text of the Convention. The text would gain in clarity because the essential date was that of avoidance of the contract, of which the aggrieved party was compelled to notify the other party. It was also more equitable because it discouraged speculation. The worst abuse would be to allow a purchaser of raw materials, which were subject to sharp price fluctuations, to wait until prices had fallen before declaring the contract avoided.

44. Mr. FOKKEMA (Netherlands) said that he was opposed to the amendment. In ULIS, the decisive date was the time of avoidance of the contract. In addition, two methods were provided for to combat speculation. One was ipso facto avoidance, and the other the short period of time allowed a party to declare the contract avoided. With regard to the draft amendment, where there had actually been speculation, the court might consider that there had been no fundamental breach of the contract, and that the period of time allowed was not reasonable The period of time would then be shorter than the one provided for by ULIS.

45. Mr. PLANTARD (France) said that he was not convinced of the justification for the draft amendment, especially where avoidance of the contract was declared on the basis of lack of conformity arising out of an inherent defect. For example, in the case of spare parts supplied to the purchaser which, when installed, proved defective, the defect would constitute a fundamental breach of the contract, and the amount of damages to be paid would not be calculated on the basis of the price at the time of delivery, but on that at the time when the purchaser became aware of the inherent defect, and was therefore in a position to declare avoidance of the contract. Article 72 [became CISG article 76 ] as submitted by the Drafting Committee thus appeared preferable.

46. Mr. ZIEGEL (Canada) explained that his delegation would abstain from voting on the draft amendment, which had already been submitted twice and rejected, because it considered that, at the current stage, the decision of the majority should be accepted. In addition, there was not a great difference between article 72 [became CISG article 76 ] and the draft amendment. He recalled that articles 45 and 60 [became CISG article 48 and CISG article 64 ] provided that the aggrieved party must act within a reasonable period of time, and that article 73 [became CISG article 77 ] provided that measures must be taken to limit the loss. Taking into account all those provisions, the aggrieved party was not allowed much time to reach a decision.

47. Mr. KUCHIBHOTLA (India) said he supported the draft amendment, which limited the risk of speculation, fixed a precise date and reduced the number of sources of dispute.

48. The PRESIDENT put draft amendment A/CONF.97/L.11 to the vote.

49. Draft amendment A/CONF.97/L.11 was adopted by 24 votes to 10, with 11 abstentions.

50. Article 72 [became CISG article 76 ], as amended, was adopted by 39 votes to 2, with 8 abstentions.

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