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GUIDE TO CISG ARTICLE 57

Secretariat Commentary (closest counterpart to an Official Commentary)


Guide to the use of this commentary

The Secretariat Commentary is on the 1978 Draft of the CISG, not the Official Text, which re-numbered most of the articles of the 1978 Draft. The Secretariat Commentary on article 53 of the 1978 Draft is quoted below with the article references contained in this commentary conformed to the numerical sequence of the Official Text, e.g., article 53 [draft counterpart of CISG article 57].

To the extent it is relevant to the Official Text, the Secretariat Commentary on the 1978 Draft is perhaps the most authoritative source one can cite. It is the closest counterpart to an Official Commentary on the CISG. A match-up of this article of the 1978 Draft with the version adopted for the Official Text is necessary to document the relevancy of the Secretariat Commentary on this article. See the match-up for this article for a validation of citations to this Secretariat Commentary. This match-up indicates that article 53 of the 1978 Draft and CISG article 57 are substantively identical.


Text of Secretariat Commentary on article 53 of the 1978 Draft
[draft counterpart of CISG article 57]   [Place of payment]

PRIOR UNIFORM LAW

ULIS, article 59.

COMMENTARY

1. Article 53 [draft counterpart of CISG article 57] provides a rule for the place at which payment of the price is to be made. Because of the importance of the question, the contract will usually contain specific provisions on the mode and place of payment. Accordingly, the rule in article 53 [draft counterpart of CISG article 57] is expressly stated to apply only if "the buyer is not bound to pay the price at any other particular place" [see footnote 1].

2. It is important that the place of payment be clearly established when the contract is for the international sale of goods. The existence of exchange controls may make it particularly desirable for the buyer to pay the price in his country whereas it may be of equal interest to the seller to be paid in his own country or in a third country where he can freely use the proceeds of the sale.

3. This Convention does not govern the extent to which exchange control regulations or other rules of economic public order may modify the obligations of the buyer to pay the seller at a particular time or place or by a particular means. The buyer's obligations to take the steps which are necessary to enable the price to be paid are set forth in article 50 [draft counterpart of CISG article 54]. The extent to which the buyer may be relieved of liability for damages for his failure to pay as agreed because of exchange control regulations or the like is governed by article 65 [draft counterpart of CISG article 79] [see footnote 2].

Place of Payment, Paragraph (1)

4. Article 53(1)(a) [draft counterpart of CISG article 57(1)(a)] provides the primary rule that the buyer must pay the price at the seller's place of business. If the seller has more than one place of business, the place of business at which payment must be made "is that which has the closest relationship to the contract and its performance" [see footnote 3].

[The obligation of the buyer to pay at the seller's place of business "requires buyer to 'export' the funds to seller, which is a critical issue when buyer is from a country with a 'soft' currency, or with other restrictions on the transfer of funds." Folsom, Gordon & Spanogle, International Business Transactions in a Nut Shell, 3d ed.,West (1988), p. 98. Maskow states: "The obligation of the buyer to pay at the seller's place of business has four major consequences. FIRST, the buyer has to initiate the payment so that it will be at the seller's place at the time due. In other words, the buyer bears the risk for delays, unless he can rely on the exemptions of Articles 79 and 80. SECOND, the buyer has to comply with the formal requirements not only of the country from which payment is to be effected, but also of the country where payment to be made ... THIRD, the buyer pays the costs of transmission to the seller's place of business. FOURTH, the buyer bears the risk of transmission to the place of payment. When a check is lost before reaching that place, the buyer must send a new one. If a bank engaged in the transfer process, other than the seller's bank, goes bankrupt, the buyer has to repeat the process". Dietrich Maskow, Bianca-Bonell Commentary, Milan: Guiffrè (1987) p. 415.]

5. If payment is to be made against the handing over of the goods or of documents, article 53(1)(b) [draft counterpart of CISG article 57(1)(b)] provides that payment must be made at the place where the handing over takes place. This rule will be applied most often in the case of a contract stipulation for payment against documents [see footnote 4]. The documents may be handed over directly to the buyer, but they are often handed over to a bank which represents the buyer in the transaction. The "handing over" may take place in either the buyer's or the seller's country or even in a third country.

Example 53A: The contract of sale between Seller with his place of business in State X and Buyer with his place of business in State Y called for payment against documents. The documents were to be handed over to Buyer's bank in State Z for the account of Buyer. Under article 53(1)(b) [draft counterpart of CISG article 57(1)(b)] Buyer must pay the price at his bank in State Z.

["When payment is to be made by a letter of credit the contract may (and the letter of credit almost certainly will) refer to the ICC Uniform Customs and Practice for Documentary Credits (ICC Brochure No. 400, 1984); where payment is to be made through banks the contract may refer to the ICC Uniform Rules for Collections. ..." John O. Honnold, "Uniform Law for International Sales under the 1980 United Nations Convention", 2d ed., Kluwer Law International (1991) p. 417.]

[Enderlein & Maskow state: "The institutions such as banks, which the buyer uses to fulfil his payment obligations are third parties in the meaning of Article 79, paragraph 2 ... This means, and it can be inferred from this Article in its reverse conclusion, that the buyer is responsible for them, as far as he cannot be exempted. Such liability stops with the receipt of the payment by the seller and/or the first institution used by him, i.e. in particular the bank named by him for the transfer. Huber ... expressed himself similarly on the draft but differs from the view explained here only in that he doubts whether the buyer is also liable for the engaged intermediaries. We do not share this doubt for when there is a party of the contract who can exert an influence, it is the buyer, e.g. in instructing his bank to avoid certain ways of transfer, etc. The situation is different, however, when specific wishes of the seller have to be taken into consideration." Fritz Enderlein & Dietrich Maskow, "International Sales Law", Oceana (1992), p. 215.]

Change of Seller's Place of Business, Paragraph (2)

6. If the seller changes his place of business at which the buyer is to make payment subsequent to the conclusion of the contract, the buyer must make payment at the seller's new place of business. However, any increase in expenses incidental to payment must be borne by the seller (OFFICIAL RECORDS, pp. 45-46).

[Enderlein & Maskow state: "The documents mentioned here are obviously the same as under Article 58, i.e. the documents which entitle to dispose of the goods. Articles 30 and 34, however, refer to documents which relate to the goods. An extended version of the term 'documents' is used there which may include certificates relating to quality and analysis, operating manuals, technical descriptions and drawings. Schlechtriem [Peter Schlechtriem, "Uniform Sales Law", Vienna: Manz (1986), p. 82, n. 327, citing note 4 of the Secretariat Commentary] wants to interpret the documents referred to in Article 58 in the meaning of Articles 30 and 34 because the right of the seller to refuse performance' is at stake. We, too, are in favour of a functional interpretation and not of a limitation of the relevant documents to mere documents of title ..." Fritz Enderlein & Dietrich Maskow, "International Sales Law", Oceana (1992), p. 219).]


FOOTNOTES

1. This result is also reached through the operation of article 5 [draft counterpart of CISG article 6]. However, the express reiteration of the principle emphasizes the importance that the contract will usually attach to the place of payment of the price.

2. For the extent to which the seller may be relieved of the duty to deliver the goods if the buyer does not pay as agreed, see articles 54(1), 60, 62, 63 and 64 [draft counterpart of CISG articles 58(1), 64, 71, 72 and 73].

3. Article 9(a) [draft counterpart of CISG article 10(a)]. But see also article 53(2) [draft counterpart CISG article 57(2)] and paragraph 6 below.

4. The documents referred to in article 53(1)(b) [draft counterpart of CISG article 57(2)(b)] are those which the seller is required to hand over by virtue of articles 28 and 32 [draft counterpart of CISG articles 30 and 34].

[Sevón recaps the essence of Article 57 as follows:

"Under [this article], if the buyer is not bound to pay the price at any other particular place, he must pay it to the seller at the seller's place of business. If payment is to be made against the handing over of the goods or of documents, the buyer must pay the price at the place where the handing over takes place.

"The rule set out in Article 57 applies only if the buyer is NOT BOUND TO PAY THE PRICE AT ANY PARTICULAR PLACE. An obligation of the kind envisaged in the provision can follow from the contract or from previous dealings between the parties. According to Article 54 the obligation to pay the price includes, [for example], taking such steps as may be required under the contract to enable payment to be made. The place where such measures shall be taken may often be agreed upon, e.g. by a reference to a trade term. Such an agreement may thus extend only to parts of the obligation to pay the price. It is not necessary that this obligation in toto is to be performed at one single place.

"The relevant passage of the provision only speaks of the situation where the buyer is [not] bound to pay at a particular place. This would seem to have a bearing on a clause in the seller's invoice stating that payment is to be made to the seller's account in a certain bank. If such a clause is not based on the contract it may be interpreted as a statement by the seller that he will accept payment to have been adequately made if made in time to that account. It is clear that the seller cannot unilaterally impose on the buyer an obligation to make payment in such a manner. Article 57 is thus applicable irrespective of such a clause in the invoice.

"Under Article 57, the buyer has to bear the costs and the RISK FOR THE TRANSFER of an amount corresponding to the price to the seller's place of business at the time of conclusion of the contract. If the seller has more than one place of business, the relevant place of business according to Article 10 is the one which has the closest relationship with the contract and its performance, not only in regard to payment of the price. The uncertainty inherent in this provision is unlikely to cause problems in practice as the place of payment is often stated in the contract or in an invoice enabling the buyer to make payment in accordance with that clause. In spite of such a reference, the buyer may pay the price at the seller's place of business which has the closest relationship with the contract.

"In conjunction with Article 58, Article 57 states that if there is a delay in the transfer of the amount to the place where payment is to be made, e.g. due to lack of the authorization of transfer by the appropriate authorities or to a mistake by the buyer's bank, having the effect that the amount is not available at the place of payment in time, there is a breach of contract on part of the buyer.

"Under Article 57(2) the seller must bear any increase in expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract. The provision only deals with the distribution of costs. The fact that there is a change in the seller's relevant place of business does not seem to alter the buyer's obligation to pay the price at the right moment at the new place of business. If this is the case, the question arises, but remains unanswered in the Convention, whether a delay in payment caused by late information by the seller of the new place of payment is to be considered a breach of contract by the buyer and whether that would also be the case if the buyer could offer payment at the seller's original place of business in time. It would seem that the answer may be negative in both cases in view of the provision in Article 79(1).

"Article 57(1) deals with the place of payment when PAYMENT IS TO BE MADE AGAINST THE HANDING OVER OF THE GOODS OR OF DOCUMENTS. If the contract provides that payment is to be made against a bill of lading or on CAD or COD terms, the provision settles the problem of errors or delay in transmission of the payment. If the documents are to be tendered at the seller's place of business, there is a delay in payment if payment is not made when the documents are presented in accordance with the contract. If there is a delay or an error in the transmission of the amount to the seller from the place where the buyer has paid upon presentation of the documents, this is no longer any concern of the buyer." Lief Sevón, "Obligations of the Buyer under the Vienna Convention on the International Sale of Goods", 106 Juridisk Tidskrift (Suomen Lainopillinen Yhdistys) 333-335 (1990).]


Pace Law School Institute of International Commercial Law - Last updated August 30, 2006
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