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Reproduced with permission from Juridisk Tidskrift (1991/92) 1-28

excerpt from

Uniform Sales Law - The Experience with Uniform Sales Laws in the Federal Republic of Germany

Peter Schlechtriem [*]

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One of the central concepts of the Convention which is of great importance for remedies in case of breach of an obligation is the fundamental breach defined in Art. 25. First, if there is a fundamental breach, no passing of risk will occur, Art. 70. Second. the buyer's remedy to claim the delivery of substitute goods is dependent on the qualification of the non-conformity as a fundamental breach. Finally, and most important of all, is the concept of fundamental breach as a requirement for the avoidance of the contract. The claim of the buyer for substitute goods as well as avoidance of contract means in practice that the rejected goods have to be returned to the seller or stored. This causes additional costs and may expose the goods to additional risks of deterioration. The concept of fundamental breach and its function is therefore easily understood. Only in the case of a very serious breach of contract should this costly and risky remedy be granted. In addition, the avoidance of a contract means an exception to the principle of pacta sunt servanda. This principle -- that contracts have to be kept and correctly performed -- is a principle which someone who deals whith world economic problems recently described as the key to the economic success of the western economies.[62] The precise definition of what constitutes this threshold for avoiding a contract was very difficult.[63] Particularly, it was contested whether the gravity of the breach should be measured on the basis of the ensuing damages of the other party, or whether the importance of the obligation and the creditor's interest alone should be the decisive factor. The final formulation of Art. 25 has to be understood, in my opinion, not as relying on the amount of actual damages, but rather as meaning that the special interests of the creditor should be the yardstick to measure the seriousness of the breach. If, for example, the seller does not deliver in time, whether the buyer can immediately avoid the contract or must first set an additional period of time for performance by the seller, depends on the importance of the date of delivery agreed upon by the parties. If the date was of the essence for the contract, however, the buyer need not prove whether and how much damages he suffered from the delay. For example, if a buyer of steel makes it known that the quality of the steel to be delivered must under all circumstances conform to certain standards, the respective promise of the seller, i.e., his warranty, will give enough importance to this term of the contract so that its breach amounts to a fundamental breach allowing avoidance.

The purported vagueness of the concept of fundamental breach is often criticized and given as a reason to exclude the Uniform Sales Law.[64] But if I may draw from the German experience with the corresponding provision of ULIS, I dare say that the courts will not have problems in applying the concept of fundamental breach. A great number of cases decided by German courts concerned the issue of delay in delivery. Only in a few cases were the courts convinced that the date was of the essence for the buyer, e.g., if certain fashionable goods were bought to be resold in the next season.[65] In most cases, however, the buyers had set an additional period of time and avoidance was granted because this additional period of time had elapsed.[66] In other cases, where the buyer had not set an additional period of time, and the time of delivery was not of the essence, the remedy of avoidance was not granted. Non-payment was almost never regarded as a fundamental breach.[67] Only in one case, where the buyer denied to be bound at all by the contract and therefore did not pay, was his behaviour regarded as a fundamental breach. Other cases where the concept of fundamental breach was applied, concerned part delivery -- when the buyer at the conclusion of the contract had made it clear that only delivery of the total of the goods would satisfy his interests.[68] An important group of decisions consists of cases of non-conformity. However. non-conformity as such was never regarded as a fundamental breach. Only in the case of a forgery of the goods did the German Supreme Court find that this non-conformity amounted to a fundamental breach.[69]

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* Dr. jur. ord. Professor Albert-Ludwigs-Universität Freiburg i. Breisgau, Director of the Institute of Foreign and Private International Law, Freiburg. President of the German Association of Comparative Law. The following article is based on a paper read to the Law Faculty of the University of Stockholm on Jan. 25, 1991. I have added footnotes and some remarks, but in general preserved the text of the oral lecture.

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62. See Barbier, Was uns reich macht, FAZ 31.12.1990.

63. See the amusing report by Eörsi, A Propos the 1980 Vienna Convention on Contracts for the International Sale of Goods, 31 Am. J. Comp. L. 333, at 340, 344-345 (1983); Schlechtriem in: v. Caemmerer/Schlechtriem, supra note 7, Art. 25 2-3.

64. See VDMA, Abteilung Recht und Wettbewerbsordnung, Das UN-Kaufrecht und seine Bedeutung für Auslandsgeschäfte (Frankfurt 1991).

65. See OLG Hamm 8.12.1980 in: Schlechtriem/Magnus, supra note 5, Art. 26 EKG no. 3 (fashion dresses); OLG Düsseldorf 14.5.1981 in: Schlechtriem/Magnus, supra note 5, Art. 26 EKG no. 4 (shoes and handbags).

66. See OLG Koblenz 10.5.1985 in: Schlechtriem/Magnus, supra note 5, Art. 26 EKG no. 7 (spectacles).

67. See OLG Düsseldorf 20.1.1983 in: Schlechtriem/Magnus, supra note 5, Art. 10 EKG no. 6.

68. See LG Dortmund 23.9.1981 in: Schlechtriem/Magnus, supra note 5, Art. 10 EKG no.4.

69. BGH NJW 82, 2730: The German seller, who acted only as a front for the real seller, had sold 7,000 tons of a chemical product under a certain trade mark. When he had delivered it turned out that the product was forged.

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

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