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GUIDE TO CISG ARTICLE 58

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 54 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 54 [draft counterpart of CISG article 58].

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 paragraphs (2) and (3) of article 54 of the 1978 Draft and CISG article 58 are identical. Paragraph (1) is substantively identical.


Text of Secretariat Commentary on article 54 of the 1978 Draft
[draft counterpart of CISG article 58]   [Time of payment; payment as condition for handing over; examination before payment]

PRIOR UNIFORM LAW

ULIS, articles 71 and 72.

COMMENTARY

1. Article 54 [draft counterpart of CISG article 58] governs the time for the buyer's payment in relation to performance by the seller.

General Rule, Paragraph (1)

2. Article 54(1) [draft counterpart of CISG article 58(1)] recognizes that, in the absence of an agreement, the seller is not required to extend credit to the buyer. Therefore, the general rule stated in paragraph (1) is that [unless otherwise bound] the buyer is required to pay the price at the time the seller makes the goods available to the buyer, by placing either the goods or documents controlling their disposition at the buyer's disposal. If the buyer does not pay at that time, the seller may refuse to hand over the goods or documents.

3. The converse of this rule is that, unless otherwise agreed, the buyer is not bound to pay the price until the seller places either the goods or documents controlling their disposition at the buyer's disposal. Furthermore, under article 54(3) [draft counterpart of CISG article 58(3)], which is discussed below, the buyer is not bound to pay the price until he has had an opportunity to examine the goods.

[Sevón states: "Article 58 deals with the time for payment. The basic rule is that the goods should be exchanged for payment of the price. The seller is not obliged to extend credit to the buyer and the buyer is not required to pay until he receives the goods or documents controlling their disposition. The expression 'documents controlling their disposition' clearly covers the situation where the goods are to be delivered only against surrender of the documents. This would be the case with a bill of lading where the carrier may only deliver the goods to the person presenting the bill of lading. The expression would also seem to cover a warehouse receipt entitling the holder to claim the goods. It is uncertain whether the expression covers international way bills issued under the CMR and CIM Conventions governing carriage by road and rail respectively. Under these documents the carrier is required to deliver the goods to the consignee named in the document. The sender may appoint another consignee. However, he may do so only if he can produce the relevant copy of the way bill. Having acquired the way bill, the consignee/buyer is thus protected against dispositions by the sender/seller. As the handing over of the relevant copy of the way bill has the effect that the consignor can no longer alter the consignee to whom the goods are to be handed over, the holder of that copy controls the disposition of the goods in a manner which would seem sufficient for the purposes of Article 58(1)." Lief Sevón, "Obligations of the Buyer under the Vienna Convention on the International Sale of Goods", 106 Juridisk Tidskrift (Suomen Lainopillinen Yhdistys) 335 (1990).]

Where the Contract Involves Carriage of the Goods, Paragraph (2)

4. Paragraph (2) states a specific rule in implementation of paragraph (1) where the contract of sale involves carriage of the goods. In such a case "the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price". The goods may be so dispatched unless there is a clause in the contract providing otherwise, in particular by providing for credit.

[Sevón states "Article 58(2) deals with the situation where the contract involves carriage of the goods. This expression covers cases where the seller is required or authorized to ship the goods. The contract does not involve carriage if the buyer takes delivery at the seller's place of business and is to make arrangements for the goods to be shipped. Where the contract involves carriage, the seller must dispatch the goods but he may do so on terms according to which the goods or documents controlling their disposition will not be handed over to the buyer except against payment of the price. The impact of the provision with reference to the time of payment seems to be that the seller may not, unless agreed upon in the contract, make dispatch dependant on previous receipt of payment. On the other hand, the provision states that an arrangement whereby the seller dispatches the goods but does so on terms enabling him to retain control over them until payment is made, does not amount to a breach of contract." Id. at 336.]

Payment and Examination of the Goods, Paragraph (3)

5. Paragraph (3) states the general rule that the buyer is not required to pay the price unless he has had an opportunity to examine the goods. It is the seller's obligation to provide a means for the buyer's examination prior to payment and handing over.

[Enderlein & Maskow state: "This right to examine the goods in substance is not identical to the obligation of examination under Article 38. Even when the buyer pays the price after having examined the goods for the first time, he does not lose the possibility to examine the goods more carefully under Article 38 and to possibly claim a lack of conformity." Fritz Enderlein & Dietrich Maskow, "International Sales Law", Oceana (1992), p. 226).]

6. Where the contract of sale involves carriage of the goods and the seller wishes to exercise his right under article 54(2) [draft counterpart of CISG article 58(2)] to ship the goods on terms whereby neither the goods nor the documents will be handed over to the buyer prior to payment, the seller must preserve the buyer's right to examine the goods. Since the buyer normally examines the goods at the place of destination [see footnote 1], the seller may be required to make special arrangements with the carrier to allow the buyer access to the goods at the destination prior to the time the goods or documents are handed over in order to allow for the buyer's examination.

7. The buyer loses the right to examine the goods prior to payment where the procedures for delivery or payment agreed upon by the parties are inconsistent with the buyer having had such an opportunity. This Convention does not set forth which procedures for delivery or payment are inconsistent with the buyer's right to examine the goods prior to payment. However, the most common example is the agreement that payment of the price is due against the handing over of the documents controlling the disposition of the goods whether or not the goods have arrived. The quotation of the price on CIF terms contains such an agreement [see footnote 2].

8. It should be noted that since the buyer loses the right to examine the goods prior to payment of the price only if the procedures for payment or delivery "agreed upon by the parties" are inconsistent with such right, he does not lose his right to examine the goods prior to payment where the contract provides that he must pay the price against the handing over of the documents after the arrival of the goods. Since payment is to take place after the arrival of the goods, the procedure for payment and delivery are consistent with the right of examination prior to payment. Similarly, the buyer does not lose his right to examine the goods prior to payment where the seller exercises his right under article 54(2) [draft counterpart of CISG article 58(2)] to dispatch the goods on terms whereby the documents controlling the disposition of the goods will be handed over to the buyer only upon the payment of the price.

9. The buyer's right to examine the goods where the contract of sale involves the carriage of the goods is illustrated by the following examples:

Example 54A: The contract of sale quoted the price on CIF terms. Therefore, it was anticipated that payment would be made in the following manner. Seller would draw a bill of exchange on Buyer for the amount of the purchase price. Seller would forward the bill of exchange accompanied by the bill of lading (along with other documents enumerated in the contract) to a collecting bank in Buyer's city. The contract provided that the bill of lading (and other documents) would be handed over to Buyer by the bank only upon the payment of the bill of exchange. Since this agreed-upon procedure for payment requires payment to be made at the time the bill of exchange is presented, often at a time the goods are still in transit, the means of payment is inconsistent with Buyer's right to examine the goods prior to payment. Therefore, Buyer did not have such a right in this case.

Example 54B: The contract of sale was not on CIF terms and made no other provision for the time or place of payment. Therefore, pursuant to the authority in article 54(2) [draft counterpart of CISG article 58(2)] Seller took the same actions as in Example 54A. Seller drew a bill of exchange on Buyer for the purchase price and forwarded it accompanied by the bill of lading through his bank to a collecting bank in the Buyer's city. Seller gave the collecting bank instructions that it should not hand over the bill of lading to Buyer until Buyer had paid the bill of exchange. In this example the means of payment, though authorized by article 54(2) [draft counterpart of CISG article 58(2)], were not "agreed upon by the parties" as is required by article 54(3) [draft counterpart of CISG article 58(3)]. Therefore, Buyer does not lose his right to examine the goods prior to paying the price, i.e., prior to paying the bill of exchange. It is Seller's obligation to assure Buyer of the possibility of examination prior to payment.

Example 54C: The contract of sale provided for payment of the price on presentation of the documents at the point of arrival of the goods but only after the arrival of the goods. In this case the procedures for delivery and payment expressly stipulated by the parties are not inconsistent with the right of Buyer to examine the goods prior to payment even though the price was to be paid against the presentation of the documents (OFFICIAL RECORDS, pp. 46-47).

[Sevón states: "Under Article 58(1) and (2) the seller may retain control over the goods until payment is made. Article 58(3) states that the buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon are inconsistent with his having such an opportunity. Normally, goods which have arrived at their destination cannot be sold there to another buyer at a price corresponding to the contract price. Some buyers may use this fact as a means to force the seller to accept a reduction of the price by refraining from taking delivery of the goods on the alleged ground of non-conformity. The seller may protect himself against such claims by a provision in the contract specifying a procedure for delivery according to which the buyer may not inspect the goods until payment has been made." Id.]


FOOTNOTES

1. See article 36(2) [draft counterpart of CISG article 38(2)].

2. Incoterms [1976]. CIF condition B.1, provides that the buyer must accept the documents when tendered by the seller, if they are in conformity with the contract of sale, and pay the price as provided in the contract.


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