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GUIDE TO CISG ARTICLE 76

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 72 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 72 [draft counterpart of CISG article 76].

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 elements of article 72 of the 1978 Draft and CISG article 76 are significantly different.


Text of Secretariat Commentary on article 72 of the 1978 Draft
[draft counterpart of CISG article 76]   [Damages in case of avoidance and no substitute transactions]

PRIOR UNIFORM LAW

ULIS, article 84.

COMMENTARY

1. Article 72 [draft counterpart of CISG article 76] sets forth an alternative means of measuring damages where the contract has been avoided but no substitute transaction was entered into under article 71 [draft counterpart of CISG article 75].

Basic Formula

2. Where the contract has been avoided, both parties are released from any future performance of their obligations [see footnote 1] and restitution of that which has already been delivered may be required [see footnote 2]. Therefore, the buyer would normally be expected to purchase substitute goods or the seller to resell the goods to a different purchaser. In such a case the measure of damages could normally be expected to be the difference between the contract price and the resale or repurchase price as is provided under article 71 [draft counterpart of CISG article 75].

2. Article 72 [draft counterpart of CISG article 76] permits the use of such a formula even though no resale or cover purchase took place in fact or where it is impossible to determine which was the resale or purchase contract in replacement of the contract which was breached [see footnote 3] or where the resale or purchase was not made in a reasonable manner and within a reasonable time after avoidance, as is required by article 71 [draft counterpart of CISG article 75].

4. Pursuant to article 72(2) [draft counterpart of CISG article 76(2)], the price to be used in the calculation of damages under article 72(1) [draft counterpart of CISG article 76(1)] is the current price prevailing at the place where delivery of the goods should have been made. Article 72(1) [draft counterpart of CISG article 76(1)] provides that the relevant date for determining the current price is the date on which the contract could first have been declared avoided.

[Because of the modifications that were made to article 72(1) of the 1978 Draft, a corrected version of the preceding sentence would read, article 76(1) of the Official Text provides that the relevant date for determining the current price is the date on which the contract was avoided. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.]

5. The place where delivery should have been made is determined by the application of article 29 [draft counterpart of CISG article 31]. In particular, where the contract of sale involves carriage of the goods, delivery is made at the place the goods are handed over to the first carrier for transmission to the buyer whereas in destination contracts delivery is made at the named destination.

6. The "current price" is that for goods of the contract description in the contract amount. Although the concept of a "current price" does not require the existence of official or unofficial market quotations, the lack of such quotations raises the question whether there is a "current price" for the goods.

[The phrase "current price" should be interpreted to mean the market price -- at least in capitalist economic systems. Barry Nicholas, "The Vienna Convention on International Sales", 105 L. Quarterly Rev. 230, n. 30 (1989).]

7. "If there is no current price" at the place where delivery of the goods should have been made, the price to be used is that "at another place which serves as [at such other place as serves as] a reasonable substitute, making due allowance for differences in the cost of transporting the goods". If no such price exists, damages must be calculated under article 70 [draft counterpart of CISG article 74].

[As an example, Enderlein & Maskow refer to "goods which are made under special order by the buyer and for which damages would have to be calculated under article 74 and not article 76." Fritz Enderlein & Dietrich Maskow, "International Sales Law", Oceana (1992), p. 305.]

Additional Damages

8. Article 72 [draft counterpart of CISG article 76] recognizes that the injured party may incur additional losses, including loss of profit, which would not be compensated by the basic formula. In such a case the additional losses may be recovered under article 70 [draft counterpart of CISG article 74], provided, of course, the conditions of article 70 [draft counterpart of CISG article 74] are satisfied.

Example 72A: The contract price was $50,000 CIF. Seller avoided the contract [prior to taking over the goods] because of Buyer's fundamental breach. The current price on the date on which the contract could first have been avoided [at the time of avoidance] for goods of the contract description at the place where the goods were to be handed over to the first carrier was $45,000. Seller's damages under article 72 [draft counterpart of CISG article 76] were $5,000.

Example 72B: The contract price was $50,000 CIF. Buyer avoided the contract because of Seller's non-delivery of the goods. The current price on the date on which the contract could first have been avoided [at the time of avoidance] for goods of the contract description at the place the goods were to be handed over to the first carrier was $53,000. Buyer's extra expenses caused by the Seller's breach were $2,500. Buyer's damages under article 70 and 72 [draft counterpart of CISG articles 74 and 76] were $5,500 (OFFICIAL RECORDS, pp. 60-61).


FOOTNOTES

1. Article 66(1) [draft counterpart of CISG article 81(1)].

2. Article 66(2) [draft counterpart of CISG article 81(2)]. If the contract calls for delivery by instalments, article 64(3) [draft counterpart of CISG article 73(3)] allows avoidance of the contract and a demand for restitution in respect of deliveries already made only "if, by reason of their interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract."

3. If the seller has a finite supply of the goods in question or the buyer has a finite need for such goods, it may be clear that the seller has resold or that the buyer has made a cover purchase, as the case may be. However, if the injured party is constantly in the market for goods of the type in question, it may be difficult or impossible to determine which of the many contracts of purchase or sale was the one in replacement of the contract which was breached. In such a case the use of article 71 [draft counterpart of CISG article 75] may be impossible.


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