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Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods

Professor Jacob S. Ziegel, University of Toronto
July 1981

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Article 71

(1) A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of:

(a) a serious deficiency in his ability to perform or in his creditworthiness; or

(b) his conduct in preparing to perform or in performing the contract.

(2) If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller.

(3) A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance.

COMMENT

1. Art. 71 and 72 deal with related but different aspects of future non-performance by a party of his contractual obligations. Art. 71 is concerned with the situation where "it becomes apparent" that the other party will not perform a substantial part of his obligations whereas art. 72 applies where "it is clear" that one of the parties will commit a fundamental breach of contract. Art. 71 is therefore wider than art. 72 and, in concept at least, was intended to be more easily invokable.

2. The consequences are also different. Under art. 71 the party seeking assurance of performance is only entitled to suspend his own performance pending the provision of the sought assurance; it is only if adequate assurance is not furnished that he is entitled to avoid the contract. Under art. 72, the aggrieved party may immediately avoid the contract if he can discharge the substantially heavier burden of proof incumbent on him and the other party has declared that he will not perform his obligations.

3. Except with respect to the seller's right of stoppage in transitu (OSGA, s.42), the provincial Acts contain no counterpart to art. 71. As a result, under existing Canadian law a party is required to continue with performance of his obligations even though he has reasonable grounds for apprehending that the other party may not be able to meet his obligations at the relevant time. UCC 2-609 is more sympathetic to the performing party's dilemma and entitles him to suspend performance and to seek adequate assurance of performance from the other party where the circumstances are similar to those prescribed in art. 71. The OLRC Sales Report regarded UCC 2-609 as "one of the most useful innovations in the performance provisions of Article 2" (p. 529) and recommended the incorporation of a similar provision in the revised Ontario Sale of Goods Act. In view of these common law developments there is no reason to fear untoward consequences from the adoption of such a principle in international sale contracts.

4. Art. 71 was substantially amended at Vienna. It originally provided that a party could suspend performance of his obligations if the prescribed circumstances gave "good grounds to conclude" that the other party would not be able to perform a substantial part of his obligations. Some delegates thought this test too subjective and, after lengthy deliberations, the more objective "it becomes apparent" was adopted in art. 71(1). The compromise may have been achieved at a substantial cost in clarity.

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Pace Law School Institute of International Commercial Law - Last updated April 23, 1999
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