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CISG Article 74
Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages
may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then
knew or ought to have known, as a possible consequence of the breach of contract.
ULIS Article 82
Where the contract is not avoided, damages for a breach of contract by one party shall consist of a sum equal to the loss, including loss of profit, suffered by the other party. Such
damages shall not exceed the loss which the party in breach ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters which then were known
or ought to have been known to him, as a possible consequence of the breach of the contract.
Comments on the match-up
"The Convention differs from ULIS in that it summarizes in one basic rule the main elements of, and limits to, the liability to pay damages pursuant to other provisions of the Convention. This basic rule is placed directly before just two supplementary rules which apply in particular cases (Articles 75 and 76). However, the basic rule conforms to the principles underlying the damages rules in ULIS (Articles 82-89).
"Article 82 ULIS provides -- in almost the same terms as Article 74 CISG -- that, where the contract has not been avoided, liability to pay damages extends to the loss, including loss of profit, suffered (first sentence) and confines liability to the loss which the party in breach ought to have foreseen at the time of the conclusion of the contract as a possible consequence of the breach of the contract (second sentence). [emphasis added]
"Articles 86 and 87 ULIS then supplement those principles in cases where the contract has been avoided. In contrast, the basic rule in Article 74 CISG applies to all cases of loss, whether or not the contract has been avoided. . . ." Stoll in Commentary on the UN Convention on the International Sale of Goods, Peter Schlechtriem ed. (Oxford 1998) 553 [citations omitted].
Go to views on citing ULIS or ULF cases in CISG proceedings
Illustrative ULIS case precedents that can aid in the interpretation of CISG Article 74
ULIS case law referred to below comes from the chapter on CISG Article 74 in Commentary on the UN Convention on the International Sale of Goods, Peter Schlechtriem ed. (Clarendon Press: Oxford 1998)
The author of this chapter is Hans Stoll, Emeritus Professor, University of Freiburg. ULIS case annotations provided are his. [Bracketed] material following each case citation identifies the page of his chapter and the footnote he provides. Click here for schedule of abbreviations contained in his case citations.
Interpretation and ULIS case support
The material we have excerpted pertains only to case law under the Uniform Law that preceded the CISG -- jurisprudence that parties have regarded as relevant because the CISG drafting process commenced with that Law. See the cited chapter of the Schlechtriem Commentary for a comprehensive analysis of CISG Article 74.
- Where it can be proved that if the materially motivated contract had been fulfilled the promisee would have suffered a financial loss, he must bring the avoidance of that loss into account as an advantage and give credit for it when calculating his loss.
- BGH 10 December 1986, BGHZ 99, 182 [554 n.10]
- BGH 19 April 1991, BGHZ 114, 12 [554 n.10]
- Delivery of defective goods, buyer's loss of profit to be compensated.
- OLG Hamm 6 July 1981 in Schlechtriem/Magnus, International Rechtsprechung zu EKG und EAG [International case law on ULIS and ULF], Baden-Baden: Nomos (1987) Art. 40 [ULIS] No. 3 [555 n.20]
- It is sufficient that an obligation due is unperformed, not performed in time, or badly performed; the promisor does not first need to be put in default, for example, by the receipt of a warning that damages will be claimed if performance is not made within an additional period of time.
- LG Heidelberg 23 September 1982 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 24 [556 n.24]
- B has ordered goods from S which are to be delivered upon a fixed date. Delivery is made but is late. B fails to declare the contract avoided within a reasonable period after becoming aware of delivery. His right to declare the contract avoided is thereby lost (Article 49(2)(a)), but that does not affect his right to damages. However, B can claim damages only for delay and cannot, alleging his right to indemnification, reject the goods and claim damages for non-performance of the whole contract. Damages for delay may include B's loss of profit if his opportunity to resell the goods was prevented by the delay and S ought to have foreseen this at the time of the conclusion of the contract.
- However, in that case B must give credit for benefits received as a result of the continuance of the contract, in particular any rise in the value of the goods; cf. BGHZ 77, 151 [556-557 n.21]
- If he is selling in the course of a business, a seller is in principle entitled to take out a bridging loan at the buyer's cost if the buyer is late in making payment.
- OLG Hamm 14 November 1983 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 27 [560 n.54]
- OLG Frankfurt, ibid, 17 April 1984, Art. 82 [ULIS] No. 32 [560 n.54]
- However, the taking out of that loan must be specifically proved.
- LG Konstanz, 14 July 1980 in Schlechtriem/Magnus, Art 82 [ULIS] No. 18 [560 n. 55]
- OLG Hamm 14 November 1993, ibid, Art. 82 [ULIS] No. 27
[560 n. 55]
- OLG Frankfurt, ibid, Art. 82 [ULIS] No. 32 [560 n.55]
- Doubts must be expressed regarding the OLG Hamburg's decision on ULIS holding that a foreign creditor of a sum to be paid in DM could claim, as damages for delay, the average cost of a foreign loan in his home country, without actually proving the fact and the conditions of such a loan.
- OLG Hamburg 3 March 1991 in Schlechtriem/Magnus, Art. 6 [ULIS No. 12 = Art. 83 [ULIS] No. 12 [560 n.58]
- Examples of compensable incidental loss are the additional costs incurred by one party as a result of the other party's unjustified refusal to perform.
- OLG Hamm 23 March 1978 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 8 = Art. 83 [ULIS] No. 4 [560 n.61]
- The case of a buyer under an instalment contract who breaches the contract by refusing to call off deliveries also belongs in this category, BGH 10 December 1986, NJW-RR 1987 = MDR 1987, 491 [560 n.61]
- Examples of compensable incidental loss also include the additional costs of preserving and storing the goods if the buyer rejects them without justification or refuses to make payment upon delivery of the goods as agreed in the contract.
- OLG Hamm 6 April 1978 in Schlechtriem/Magnus, Art. 6 [ULF] No. 4 = Art. 82 [ULIS] No. 9 [560 n.62]
- The seller is entitled to claim as damages the costs arising from the buyer's failure to honor a bill of exchange or cheque given in payment.
- LG Konstanz 1976 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 3 [561 n.64]
- OLG Hamm 14 November 1983, ibid, Art. 82 [ULIS] No. 27 [561 n.64]
- For his part, the buyer can claim the expense of storing goods which have been delivered late and which he returns after avoiding the contract.
- OLG Koblenz 11 November 1982 in Schlechtriem/Magnus, Art. 86 [ULIS] No. 7 [561 n.65]
- The buyer can also claim reimbursement of the additional expense of loading and unloading goods caused by the seller's failure to pack the goods in the manner required by the contract.
- OLG Hamm 29 January 1979 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 13 [561 n.66]
- Expenses that would have occurred even if the contract had been performed correctly are recoverable only where the promisee is entitled to withdraw from the contract.
- LG Hamburg 14 November 1975, Schlechtriem/Magnus, in Art. 86 [ULIS] No. 2 = Art. 85 [ULIS] No. 2 [561 n.68]
- The employment of debt-collecting agencies, sometimes even before the debt becomes due, should not be considered to be a general, normal reaction to a breach of contract.
- If a buyer has not received a delivery from the seller or only defective goods have been supplied and he has agreed to resell those goods, he may then be held liable by his customer for non-performance or for defective performance.
- OLG Hamm 29 January 1979 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 13 (loss to a buyer as a result of his being held liable under a guarantee given to a customer) [562 n.76]
- The promisee may suffer a loss as a result of a delay in payment owing to the fact that the rate of exchange or purchasing power of the currency owed has fallen during the period of delay. German case law on ULIS has been concerned in particular with the question whether Italian sellers could claim damages for a fall in the exchange rate where there had been a delay in paying the purchase price, which had been payable in lire. The promisee's damages claim should be recognized only in so far as he proves that, if payment had been made at the proper time, he could have obtained a higher monetary value than had been possible as a result of the delay in payment.
- The CISG does not lay down what degree of probability a judge must apply when appraising whether a profit would have been made or which is the relevant time for his appraisal. In the absence of a specific provision, it must be required that the judge be convinced that the profit would actually have been made. The general law of evidence of the lex fori is relevant in that regard.
- OLG Frankfurt 15 May 1985 in Schlechtriem/Magnus Art. 82 [ULIS] No. 35 [563 n.85]]
- Damages are a monetary remedy. The CISG does not give any right to restitution in kind. . . . The exclusion of restitution in kind basically also tends to suggest that a release from an obligation cannot be required as compensation in a situation where it was foreseeable that as a result of the breach the promisee would become liable to a third party . . . or if the expenditure for which the promisee is entitled to compensation consists precisely in the undertaking of a commitment from which the promisee is not yet released.
- Rb Alkmaar (Netherlands) 13 May 1985 in Schlechtriem/Magnus, Art. 17 [ULIS] No. 13 [564 n.89]
- The CISG contains no justification for presuming that a merchant would actually have resold goods at a favourable price if market conditions had provided such an opportunity. . . . Instead the buyer must specifically prove that he would have made a profit from a sub-sale and that he was not in a position to cover himself by making a timely substitute transaction.
- OLG Frankfurt 15 May 1985 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 35 [565 n.98]
- The Supreme Court of Israel correctly held, with regard to ULIS, that the fact that a seller had sold the goods to a third party at a higher price than that agreed with the buyer did not of itself prove that the buyer had suffered a loss of the corresponding amount.
- OG 10 October 1981 (Harlow & John's LTD v. Adras) in Schlechtriem/Magnus, Art. 84 [ULIS] No. 1 [566 n.106]
- In a later judgment in the same case the Supreme Court ordered the seller to disgorge the profit he had made from that sale, but it did so on the basis of unjustified enrichment, a remedy which the court held to be governed by the applicable domestic law and not by uniform sales law.
- OG 11 February 1988, Rest. LR 1988, p. 235; discussed by Friedmann in 104 Law Quarterly Review (1988) 383-388 [566 n.107]
- Assume that dessert apples delivered by the seller are affected by scald. However, the disease only becomes apparent when brown patches on the skin of the apples become visible after being stored for several days by the customer. The seller cannot defeat a claim for damages by arguing that he could not have identified the defect upon delivery and the loss was therefore not foreseeable in the sense of CISG Article 74.
- But see LG Duisburg 16 July 1976 in Schlechtriem/Magnus, Art. 43 [ULIS] No. 2 [568 n.121]
- A reasonable interpretation of the contract may show that the parties did not intend the protective purpose of the contract to cover certain losses, in which case, even if they were actually foreseen by the party in breach or were at least subjectively foreseeable, those losses fall outside his sphere of responsibility. For example, it may be foreseeable for the seller that under current competitive conditions a delivery of defective goods to a wholesaler may result in a large proportion of his customers taking their custom elsewhere and thus cause considerable additional loss.
- BGH 24 October 1979 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 1 [568 n.123]
- There are doubts regarding whether the question of what is "foreseeable" should depend solely upon evidence from the trade sectors involved.
- But see BGH 24 October 1979 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 1 [568 n.125]
- As a rule, the seller is obliged to compensate a loss of profit which the buyer could have made on a resale of the goods if the seller had properly performed his obligations, only where he should have reckoned with the resale.
- LG Dortmund 23 September 1981 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 22 [570 n.136]
- Even where there are no positive indications of a resale, such indications will always be the case where tradable goods are sold to a merchant.
- OLG Hamburg 30 December 1980 in Schlechtriem/Magnus, Art. 86 [ULIS] No. 5 [570 n.137]
- Where tradable goods are sold to a commercial business, the seller must reckon with the possibility that a delivery of non-conforming goods may cause the buyer to incur liability to his customers or at least cause him to incur the cost of taking back the goods.
- OLG Hamburg 30 December 1980 in Schlechtriem/Magnus, Art. 86 [ULIS] no. 5 [570 n.140]
- However, if the buyer's liability depends on special circumstance, for example, on an agreement to accept liability under a liquidated damages clause which exceeds the norm in the trade sector concerned, on a guarantee or an obligation to the buyer to redeliver the goods immediately to his customers, then the seller is liable for the unusual loss arising out of those particular circumstances only if he knew or ought to have known of them.
- OLG Hamm 29 January 1979 in Schlechtriem/Magnus, Art. 82 [ULIS] No. 13 [571 n.141]
- LG Bonn 21 April 1982, ibid, Art. 3 [ULIS] No. 27 [571 n.141]
Pace Law School Institute of
International Commercial Law
- Last updated June 12, 1998
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