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GUIDE TO CISG ARTICLE 84

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 69 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 69 [draft counterpart of CISG article 84].

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 69 of the 1978 Draft and CISG article 84 are substantively identical.


Text of Secretariat Commentary on article 69 of the 1978 Draft
[draft counterpart of CISG article 84]   [Accounting for benefits in case of restitution]

PRIOR UNIFORM LAW

ULIS, article 81.

COMMENTARY

1. Article 69 [draft counterpart of CISG article 84] reflects the principle that a party who is required to refund the price or return the goods because the contract has been avoided or because of a request for the delivery of substitute goods must account for any benefit which he has received by virtue of having had possession of the money or goods. Where the obligation arises because of the avoidance of the contract, it is irrelevant which party's failure gave rise to the avoidance of the contract or who demanded restitution [see footnote 1].

2. Where the seller is under an obligation to refund the price, he must pay interest from the date of payment to the date of refund. The obligation to pay interest is automatic because it is assumed that the seller has benefited from being in possession of the purchase price during this period. Since the obligation to pay interest partakes of the seller's obligation to make restitution and not of the buyer's right to claim damages, the rate of interest payable would be based on that current at the seller's place of business.

[Tallon states: "This view [on rate of interest] is debatable. The determination of the law applicable to the rate of interest is, in effect, much more complex. ..." Denis Talon, Bianca-Bonell Commentary, Guiffrè: Milan (1987), p. 612.]

[Schlechtriem states: "The Secretariat's Commentary assumed that the seller would be required to pay interest at the rate that is customary where his place of business is located, since that is what is where he made use of the purchase price. ... This should be the result, even if (as an exception to the rule) domestic law, invoked subsidiarily, refers to the creditor's loss to determine the nature and extent of the claim stemming from avoidance." Peter Schlechtriem, "Uniform Sales Law", Manz: Vienna (1986), p. 107 n. 449. However, he goes on to say: "When there is a delay in the repayment for which the seller is responsible, the damage claim should, nevertheless, still be available from the time the duty to repay arises, and the obligee should be permitted to calculate his damages based on his own credit costs. ... " Id. at 107-108.]

[Honnold concurs that different situations can produce different results. He states:

"Example 84A. Pursuant to the contract Buyer paid for the goods shortly prior to delivery but Seller failed to deliver. Buyer declared the contract avoided and sued to recover the price plus (art. 84(1)) 'interest on it from the date on which the price was paid'. ... How should the tribunal compute the interest owed to the buyer? ...

"A seller's obligation to refund the price usually (as in Example 84A) results from its breach of contract -- i.e., when the buyer avoids the contract because seller fails to deliver or (more frequently) when the seller delivers goods that are seriously defective. In these cases it seems appropriate to base interest on the loss suffered by the aggrieved buyer rather than on a restitutionary approach to prevent unjust enrichment by the seller. ..." John O. Honnold, "Uniform Law for International sales under the 1980 United Nations Convention" [Honnold Text], 2d ed., Kluwer Law International (1991), pp. 572-573. Accord: Lookofsky who states: "[In such cases] it may be more appropriate to calculate interest on the basis of buyer's loss (article 74) rather than on the restitutionary approach set forth in article 84(1) ..." Joseph Lookofsky, "The 1980 United Nations Convention on Contracts for the International Sale of Goods", International Encyclopaedia of Laws, Blanpain, gen. ed. ,Kluwer (1993), p. 136, n. 3.]

"Example 84C. On 1 June Buyer paid one-half of the price for a machine which Seller, in accordance with the contract, delivered on 1 July. The balance of the price was due thirty days after delivery but Buyer failed to pay. Seller promptly avoided the contract for fundamental breach and obtained a court order impounding the machine for delivery to Seller. Buyer, invoking article 81, noted that on avoidance both parties must make concurrent restitution of whatever they have received; consequently, Seller must refund the payment Buyer made on 1 June. In addition, Buyer noted that under Article 84(1) Buyer was entitled to interest 'from the date on which the price was paid.'

"How should the interest on Buyer's payment be measured? In Example 84A ... a buyer claimed interest on a payment from a seller who had committed a fundamental breach by failing to deliver the goods. In that setting it was suggested that interest should be allowed, by analogy to articles 74, 75 and 76, on the basis of the loss to the aggrieved party. That approach would not be appropriate here since interest is claimed by the party in breach. In this case a restitutionary approach seems more appropriate; recovery should be based on the benefit Seller received from the use of the money. (Of course, Buyer's claim may be reduced or cancelled by Seller's right to recover damages resulting from Buyer's breach.)" Honnold Text, 2d ed., at 574.]

3. Where the buyer must return the goods, it is less obvious that he has benefited from having had possession of the goods. Therefore, paragraph (2) specifies that the buyer is liable to the seller for all benefits which he has derived from the goods only if (1) he is under an obligation to return them or (2) it is impossible for him to make restitution of the goods or part of them but he has nevertheless exercised his right to declare the contract avoided or to require the seller to deliver substitute goods (OFFICIAL RECORDS, p. 58).


FOOTNOTE

1. See article 66(2) [draft counterpart of CISG article 81(2)] and para. 9 of the commentary thereon.


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