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GUIDE TO CISG ARTICLE 70

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 82 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 82 [draft counterpart of CISG article 70].

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 82 of the 1978 Draft and CISG article 70 are substantively identical.


Text of Secretariat Commentary on article 82 of the 1978 Draft
[draft counterpart of CISG article 70]   [Effect of fundamental breach on passing of risk]

PRIOR UNIFORM LAW

ULIS, article 97(2).

COMMENTARY

1. Article 82 [draft counterpart of CISG article 70] provides that the passage of the risk of loss under articles 70, 80 and 81 [draft counterpart of CISG articles 67, 68 and 69] does not impair any remedies which the buyer may have which arise out of a fundamental breach of contract by the seller.

[Enderlein & Maskow state: "Claims for reduction of the price (Article 50) will also continue to exist because they are aimed at re-establishing the disturbed equivalence." Fritz Enderlein & Dietrich Maskow, "International Sales Law' [Enderlein & Maskow Commentary], Oceana (1992), p. 281.]

2. The primary significance of article 82 [draft counterpart of CISG article 70] is that the buyer may be able to insist on the delivery of substitute goods under article 42 or 43 [draft counterpart of CISG article 46 or 47] or to declare the contract avoided under article 45(1)(a) or (b) [draft counterpart of CISG article 49(1)(a) or (b)] even though the goods have been lost or damaged after the passage of the risk of loss under article 79, 80 or 81 [draft counterpart of CISG article 67, 68 or 69]. In this respect article 82 [draft counterpart of CISG article 70] constitutes an exception to article 67(1) [draft counterpart of CISG article 82(1)] as well as to articles 79, 80 and 81 [draft counterpart of CISG articles 67, 68 and 69] in that, subject to three exceptions enumerated in article 67(2) [draft counterpart of CISG article 82(2)], "the buyer loses his right [the right] to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them".

3. Article 82 [draft counterpart of CISG article 70] must be read in connection with articles 37 and 45(2) [draft counterpart of CISG articles 39 and 49(2)] because in some examples the buyer will lose his right to declare the contract avoided or to require the seller to deliver substitute goods because he did not act within the time-limits required by those articles.

Example 82A: The contract was the same as in Example 81A. Buyer was to take delivery of 100 cartons of transistors at Seller's warehouse during the month of July. On 1 July Seller marked 100 cartons with Buyer's name and placed them in the portion of the warehouse reserved for goods ready for pick-up or shipment. On 20 July Buyer took delivery of the 100 cartons at which time he paid the price. Therefore, under article 81(1) [draft counterpart of CISG article 69(1)] the risk of loss passed to Buyer on 20 July. On 21 July, before Buyer could make the examination required under article 36 [draft counterpart of CISG article 38], 50 of the cartons were destroyed in a fire. When Buyer examined the contents of the remaining 50 cartons, the transistors were found not to conform to the contract to such a degree that the lack of conformity constituted a fundamental breach of the contract. In spite of Buyer's inability to return all 100 cartons because of the fire which had occurred after the passage of the risk of loss, Buyer could avoid the contract and recover the price he had paid.

Example 82B: The facts are the same as in Example 82A except that Buyer did not examine the remaining 50 cartons of transistors for six months after he received them. In such a case he could probably not avoid the contract because it would probably be held under article 37(1) [draft counterpart of CISG article 39(1)] that he had not given notice of the lack of conformity "within a reasonable time after he . . . ought to have discovered it" and under article 45(2)(b) [draft counterpart of CISG article 49(2)(b)] that he has not declared the contract avoided "within a reasonable time . . . after he . . . ought to have known of such a breach [the breach]".

Example 82C: In partial fulfillment of his obligations under the contract in Example 82A on 1 July Seller identified to the contract 50 cartons of transistors rather than the 100 cartons called for in the contract. On 5 August, before Buyer took delivery of the goods, the 50 cartons were destroyed in a fire in Seller's warehouse. Even though the risk of loss in respect of the 50 cartons had passed to Buyer at the close of business on 31 July [see footnote 1], if identifying to the contract only 50 cartons instead of 100 cartons constituted a fundamental breach of contract, Buyer could still declare the contract avoided by reason of article 82 [draft counterpart of CISG article 70]. However, he must do so "within a reasonable time . . . after he knew or ought to have known" of the shortage or he will lose the right to declare the contract avoided by virtue of article 45(2)(b) [draft counterpart of CISG article 49(2)(b)].

Example 82D: Although Seller in the contract described in Example 82A should have had the 100 cartons ready for Buyer to take delivery at any time during the month of July, no cartons were marked with Buyer's name of otherwise identified to the contract until 15 September. Buyer took delivery on 20 September. As was stated in Example 81C, the risk of loss passed to the Buyer on 20 September, the time when Buyer took delivery of the goods. On 23 September the goods were damaged through no fault of Buyer. If Seller's delay in putting the goods at Buyer's disposal amounted to a fundamental breach, article 82 [draft counterpart of CISG article 70] provides that the damage to the goods after the passage of the risk of article 45(2)(a) [draft counterpart of CISG article 49(2)(a)], it is likely that it would be held that once Buyer had taken delivery of the goods by picking them up at Seller's warehouse, he had lost the right to declare the contract avoided for not having "done so within a reasonable time . . . after he [became] aware that delivery has been made".

[Similarly, Honnold states: "Because of practical problems that result from divorcing risk from possession, the 'reasonable' period [for an article 49(2)(a) avoidance declaration] should not be long." John O. Honnold. "Uniform Law for International Sales under the 1980 United Nations Convention", 2d ed., Kluwer Law International (1991), p. 482) and Enderlein & Maskow state: "A reasonable time in [the case of article 49(2)(a)] more or less means immediately. The time limit ... always has to be a short one because otherwise additional costs and risks would be incurred..." Enderlein & Maskow Commentary, p. 193. NB: Article 49(2)(a) is different from article 49(2)(b). The "reasonable time" allotted for an avoidance declaration under article 49(2)(b) may be longer than that allotted under article 49(2)(a). Thus if the facts of Example 82A are married with those of Example 82D and buyer had an independent basis for avoidance under article 49(2)(b) -- evidence acquired by an inspection after the fire that indicated that the transistors delivered had not conformed to the contract to such a degree that the lack of conformity constituted a fundamental breach -- it could have been reasonable for buyer to have needed more time than the period between September 20 and September 23 to assemble the equipment needed to test for the non-conformity.]

Example 82E: The contract was similar to that in Example 82A except that Seller was to ship the goods on FOB terms during the month of July. The goods were shipped late on 15 September. Under article 79(1) [draft counterpart of CISG article 67(1)] the risk of loss passed on 15 September. On 17 September the goods were damaged while in transit. On 19 September both the fact that the goods had been shipped on 15 September and that they were damaged on 17 September were communicated to Buyer. Under these facts, if the late delivery constituted a fundamental breach, Buyer could avoid the contract if he did so "within a reasonable time . . . after he has become aware that delivery has been made" [see footnote 2], a time which would undoubtedly be very short under the circumstances (OFFICIAL RECORDS, p. 66).

[In essence, article 70 provides that where goods are damaged while in storage or transit and the buyer bears the risk of such damage, the buyer may, nevertheless, avoid the contract if, prior to such damage, there was a deficiency in the goods sufficiently serious to amount to a fundamental breach of contract. In this situation, "the sense of the words used in article 70 is ... that the risk's having passed to the buyer under article 67, 68 or 69 is no obstacle to its being retrospectively passed back by the remedy of avoidance." Barry Nicholas, Bianca-Bonell Commentary, Guiffrè: Milan (1987), p. 510. However, where the prior deficiency was not so serious as to amount to a fundamental breach of contract, the buyer cannot shift back responsibility for damage while in storage or transit by avoiding the contract.]


FOOTNOTES

1. See Example 81B [with Secretariat Commentary on article 81 [draft counterpart of CISG article 69, supra]].

2. Article 45(2)(a) [draft counterpart of CISG article 49(2)(a)].


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