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LECTURE 7 REMEDIES OF BUYER AND SELLER 7.1 BUYER’S REMEDIES : art 45 Buyer may : a) exercise rights found in art 46-52 and b) claim damages (art74-77)

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Presentation on theme: "LECTURE 7 REMEDIES OF BUYER AND SELLER 7.1 BUYER’S REMEDIES : art 45 Buyer may : a) exercise rights found in art 46-52 and b) claim damages (art74-77)"— Presentation transcript:

1 LECTURE 7 REMEDIES OF BUYER AND SELLER 7.1 BUYER’S REMEDIES : art 45 Buyer may : a) exercise rights found in art and b) claim damages (art74-77)

2 7.2 Seller’s breaches Breach can apply to both documents and goods. Examples: Non – delivery Late delivery Wrong quantity Non-conformity Q: Is there a fundamental breach?

3 7.3 Request performance: art46(1) Seller’s obligations: to deliver goods, hand over documents and transfer property:art 30 Buyer may request performance unless buyer has resorted to a remedy which is inconsistent with this requirement eg avoidance of contract. NB Can still sue for damages. Specific performance not available unless court would, under its own law, grant order: art 28 In common law countries, specific performance granted for rare or unique item, or when damages would not be sufficient compensation. Eg vintage car, antique chair

4 7.4 Request substitute goods: art46(2) When non-conformity amounts to fundamental breach, buyer may request for substitute goods by giving notice. This right may be used instead of avoiding the contract. Refer to art 35, 25 art 46(2) subject to art 28 Request must be made in conjunction with notice to be given under art 39 or within a reasonable time thereafter Buyer loses right to substitute goods if it is impossible to make restitution substantially in same condition in which they were received: art 82

5 7.5 Request for repair: art 46(3) When non-conformity does not amount to fundamental breach, buyer may require seller to repair item unless this is unreasonable. Request must be made in conjunction with notice given under art 39 or within a reasonable time thereafter.

6 7.6 Giving of additional time (Nachfrist): art 47 Buyer may fix additional time for seller’s performance. Moral duty? Unless buyer has received notice from seller that he will not perform, buyer may not resort to any remedy for breach of contract. Buyer still entitled to claim damages for delay in performance.

7 7.7 Buyer’s objection to Seller’s self- cure: art 48 Under art 48, seller has right to remedy any failure to perform his obligation, if he can do so without unreasonable delay and without causing buyer unreasonable inconvenience or uncertainty of reimbursement by seller of expenses advanced by buyer.

8 7.8 Avoidance of contract: art 49 Other provisions that are relevant: art 25,26,51,81,82,84 Art 49 contains two paragraphs (1)The buyer may declare the contract avoided: (a) if the failure amounts to a fundamental breach; or (b) in the case of non-delivery, if the seller does not deliver the goods within additional time fixed by buyer under art 47 or declares that he will not deliver within the fixed period.

9 49(2) Where seller has delivered goods, buyer loses right to avoid contract unless he does so: (a)In respect of late delivery, within a reasonable time after he has become aware that delivery has been made; (b)In respect of any breach other than late delivery, within a reasonable time: (i) after he knew or ought to have known of the breach; (ii) after the expiration of additional time under art47, or after seller has declared that he will not perform; or (iii) after the expiration of any additional period indicated by the seller under art 48(2), or after buyer has declared he will not accept performance

10 7.9 Reduction of the price: art 50 Buyer plans to retain goods or buyer is unable to reject goods eg there is no fundamental breach. If goods do not conform with contract, buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. Reduced price = Contract price X (Value of delivered goods/ Value of conforming goods) Reduced Price = 30,000 X ( 10,000/ 50,000) = 6,000

11 If the seller remedies any failure to perform under art 37 or art 48 or if buyer refuses to accept performance by the seller, buyer may not reduce the price. Right is to offer reduced sum to seller.

12 7.10 Partial delivery or partial non-conformity: art 51 Art apply in respect of the part which is missing or which does not conform: art 51(1) Buyer may declare contract avoided in its entirety only if the failure to make delivery completely or in conformity with the contract amounts to a fundamental breach: art 51(2)

13 7.11 Early delivery or excess delivery: art 52 If there is early delivery, buyer may accept or refuse delivery: art 52(1) If there is excess delivery, buyer may accept or refuse delivery of excess. If buyer takes all or part of excess, he must pay for it at the contract rate: art 52(2)

14 7.12 Provisions common to the both parties NB Art 71onwards apply to both parties. Art 71 (1) A party may suspend performance if it becomes apparent that the other party will not perform a substantial part of his obligation 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. Notice of suspension must be issued and party must continue to perform if the other party provides adequate assurance of his performance: art 71(3) Eg guarantee by third party.

15 7.13 Avoid contract for anticipatory breach: art 72 If prior to performance date, it is clear that one party will commit a fundamental breach, the other party may declare contract avoided: art 72(1) Reasonable notice must given to permit other party to provide adequate assurance of his performance: art 72(2)

16 Refusal to establish a timely letter of credit amounted to a fundamental breach: Downs Investments v Perwaja Steel [2000]402 QSC 421 Co placed under voluntary administration: Roder Zelt- und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd [1995]FCA 1221

17 7.14 Avoidance in instalment contract: art 73 Fundamental breach of one instalment entitles avoidance of that instalment: art 73(1) If one party’s failure to perform one instalment gives the other party good grounds to conclude that a fundamental breach will occur with respect to future instalments, he may declare the contract avoided for the future: art 73(2)

18 Special right for buyer under art 73(3) A buyer who declares the contract avoided in respect of any delivery may, declare the contract avoided in respect of deliveries already made or of future deliveries 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.

19 7.15 Claim for damages Independent of other rights: art 45(1)(b) Damages consist of sum equal to foreseeable loss suffered as a consequence of the breach, including loss of profits: art 74 Loss of profits = Value of conforming goods – Value of goods delivered. Other types of damage: transportation costs, damage to other goods.

20 Art 75 provides as follows: If contract is avoided and buyer has bought goods or seller has resold goods, damages equal difference between contract price and price in substitute transaction, plus any further damages recoverable under art 74

21 Art 76 provides as follows: (1)If party has not made purchase or resale, damages is difference between contract price and current price at time of avoidance plus any further damages. If party has avoided 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. (2)Current price is price prevailing at place of delivery or if there is no current price, price at some other place making due allowance for differences in cost of transporting goods

22 Party who relies on breach must mitigate loss. Failure to mitigate may result in a reduction in damages to reflect loss which should have been mitigated : art 77 Downs Investments Pty Ltd v Perwaja Steel Sdn Bhd [2000]402 QSC 421 In order to fulfil sale contract which required transporting goods, seller had agreed with third party to charter vessel to be used for loading goods. Buyer reneged on deal. Mitigation did not require seller to put at risk its commercial reputation by using technical points to avoid its obligation under the agreement to charter a vessel. Seller mitigated by re-chartering vessel. Loss to be borne by buyer.

23 7.16 Claims may be made outside VC. Ginza Pte Ltd v Vista Corp Pty Ltd (2003) WASC11 (Unreported) Claim in tort of negligence available for supply of goods that were not sterile. Other claims include action for negligent misrepresentation, fraud or under a statute.

24 7.17 Seller’s Remedies: art 61 Rights under art 62 to 65 Claim damages: art 61(1)(b) Rights are similar to those available to buyer. Buyer’s breaches relate to payment of price and taking delivery.

25 Request performance : art 62, 28 No need to request for payment of price: art 59 Duty to give additional time (Nachfrist): art 63 Avoid contract: art 64, 25

26 7.18 Avoidance of contract S64(1) The seller may declare the contract avoided: (a) if there is a fundamental breach; or (b) if the buyer does not within additional time under art 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period fixed.

27 Art 64 (2) In cases where the buyer has paid the price, the seller loses the right to avoid the contract unless he does so: (a) in respect of late performance by buyer, before the seller has become aware that performance has been rendered; or (b) in respect of any breach other than late performance by the buyer, within a reasonable time: (i) after the seller knew or ought to have known of the breach; or (ii) after the expiration of any additional period fixed under art 63, or after the buyer has declared he will not perform within such additional period.

28 Seller’s right to supply own specification when buyer fails to do so, based on information at hand. Seller informs buyer and if buyer fails to respond, seller’s specification is binding: art 65

29 Rights under art Special right to stop goods in transit: art 71(2). Covers rights as between the buyer and seller. Right may be exercised even if title has passed to buyer.


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