” “ International Trade Law CISG 1980(Lecture 4) Remedies Prof.ssa M.E. de Leeuw, Ph.D., Dr., Università di Ferrara

” “ Liability for loss and damage- Duty to pay the price  “Loss or damage to the goods after the risk has passed to the buyer does not discharge him from his obligations to pay the price, unless the loss or damage is due to an act or omission of the seller.” (art. 66)  Exceptions:  Art. 79 CISG: “ A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences”.

” “ Liability for loss and damage/Passing of risk  When does the risk pass to the buyer?  Determined in terms contract or by insertion trade terms (e.g. Incoterms) which are applicable on the basis of art. 9 (1);  If not, Convention applies:  Art. 67: when goods are handed over to the first carrier (or at particular place);  Art. 68: sale during transit, risk will pass when contract is concluded;  Art. 69: if not art. 67/68 then risk passes when goods are taken over by the buyer (general rule).

” “ Remedies in general  Starting point of Convention: preservation of the contract, enable performance by parties;  Art. 45: Remedies avaliable to buyer for SELLER’s breach:  (a) exercise the rights provided for in art (performance, avoidance);  (b) claim damages as provided in articles (damages).  Art. 61:Remedies available to seller for BUYER’s breach.

” “ Avoidance  Declaration of avoidance by seller or buyer (art. 49, art. 64); Article 49(1) a) If the failure to perform any of its obligations under the contract or Convention constitutes a FUNDAMENTAL BREACH (art. 25/35); b) In case of NON-DELIVERY by the seller; if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with art. 47(1) or declares that he will NOT DELIVER within the period so fixed; (or NON-PAYMENT of the price or FAILURE TO TAKE DELIVERY by the buyer within the additional period of time fixed by the seller in accordance with art. 63(1) or when he declares that HE WILL NOT DO SO within the period fixed.)  Formality: seller/buyer has to send a notice of avoidance to other party (art. 26/27)  Legal effect: terminates the rights and duties of both parties to proceed further with performance (art. 81(1), subject to any damages which may be due (art. 45(1)(b) and 61(1)(b))  Burden of proof on party that relies upon avoidance, show that other party’s breach is fundamental …...

” “ Fundamental breach  Art. 25: a fundamental breach exists when:  Breach causes detriment;  Detriment is substiantial, and;  Detriment is foreseeable: when detriment is foreseeble at the moment of conclusion of the contract or at the time of the breach.

” “ Additional period of time for performance Art. 47 (buyer) and art. 63 (seller): Buyer and seller may fix an additional period of time for performance by the other party. They do not loose the right to claim damages for the delay.

” “ Effects of avoidance  Art. 81(a): “Avoidance of the contract releases both parties from their obligation under it, subject to any damages which may due”.  Art. 818b): Restitution may be claimed by the party(s) that has performed, for example restitution of the price paid or return of the goods delivered.  Art. 82 regulates when the buyer’s right to declare the contract avoided or to require the seller to deliver substitute goods is lost due to the impossibility of restitution of the goods….  Art. 85/88 both seller and buyer need to preserve the goods in their possession.

” “ Fundamental breach and right to cure: relationship  Existence FB depends on circumstances (e.g. contract terms);  Take into account the effect of seller’s rightful offer to cure a non-conforming delivery by repair/replacing! (art. 48(2))

” “ Seller’s “right to cure”: Art. 48  “Subject to art. 49, seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However the buyer retains any rights to claim damages as provided for in this Convention” (par. 1)  Seller may request acceptance by buyer- if buyer does not reply within reasonable time, then seller may perform (parl. 2);  Notice by seller of performance, includes request for acceptance by buyer (par. (3))  Request and notice of performance must be received in order to be effective (par. (3) and (4)).

” “ Effect of rejection of seller’s “offer to cure”  If buyer rejects an offer of the seller to cure (art. 48), this might have negative effect on the remedies open to the buyer.  Examples->  “A rightful offer to cure by the seller” could take away the substantial detriment of the (fundamental) breach of contract by seller. Implying that there exists no fundamental breach anymore, hence no reliance on avoidance (art. 49(1)); but request for damages is still possible.  In case of delivery of goods within additional period of time (art. 47/48), no right to avoid either (art. 49(1)(b)).  Goods do not conform, seller offers to remedy, but buyer refuses to accept performance; buyer may not reduce the price (art. 50).

” “ Require specific performance  Buyer may require performance of the seller’s obligations, unless the buyer has resorted to a remedy which is inconsistent with this requirement (art. 46(1));  If the goods do not conform, art. 46:  Par. (1) No delivery at all by seller;- ask performance;  Par. (2) buyer may require delivery of SUBSTITUTE goods only if the lack of conformity constituted a FUNDAMENTAL breach and NOTICE is given under art. 39 at time of request or within a reasonable time;  Par. (3) buyer may require REPAIR, unless this is unreasonable given all the circumstances; notice required.  Article 28: The buyer has no independent right to specific performance. The court does not have to order specific performance, unless it would do so under its own law in respect of similar contracts of sale not governed by the Convention.

” “ Partial delivery or parts of goods conform  CASE type machines.  Art. 51:  Par.1- partial delivery or part of goods conform with the contract  buyer may invoke remedies of art  Par. 2- the buyer may declare the CONTRACT AVOIDED IN ITS ENTIRETY only if the failure to make the order completely or in conformity with the contracts amounts to a FUNDAMENTAL BREACH of the contract.

” “ Reduce price, unless…..  Art. 50: buyer may reduce price when goods do not conform;  unless, seller remedies the failure in accordance with art. 37 (before delivery date) or art. 48 (after delivery date), or buyer refuses to accept his performance.

” “ Delivery before date fixed  Art. 52:  Par.1: buyer may take delivery or refuse it;  Par. 2: greater amount of goods delivered: buyer may take or refuse extra amount (if he takes it or only part of the excess, he must pay price at contract rate)

” “ Damages Art. 45(1)/61(1): right to claim damages. Art. 74 CISG: “Damages for breach of contract by one party consists of a sum equal to losss, including loss of profit, suffered by the other party as a consequence of the breach. Such damage may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as possible consequences of the breach of contract.”

” “ Damages Article 74:  “damage by breach of contract by one party consists of a sum equal to the loss, including loss of profits (…)”. Article 75:  When contract has been avoided: Buyer purchases substitute goods or the seller has resold the goods  the damage recovered may be the difference between the contract price and the price of the substitute transaction plus further damages (contract/cover differential).  A party cannot demand compensation for any loss which could have been prevented by cover (e.g. buyer purchases substitute goods or seller resells goods). Art. 76: no coverage, then contract/market price differential). Article 77:  Party who relies on breach of contract, must take measures to mitigate loss resulting from breach.

” “ Exemptions I  Question: is the party that fails to perform liable for damages?  Answer: Yes, on the basis of art. 45/61, unless art. 79 applies: “A party is not liable (in damages) for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment to account at the time of the conclusion of the contract (“foreseeability”: inserted by Mdl) or to have avoided or overcome it or its consequences.” (art. 79(1))  Burden of proof on the non-performing party- he must show that the conditions are fulfilled.

” “ Exemptions II Force majeure, acts of God…  “Force majeure” events are, for example:  War, embargo and other governmental prohibitions, breakdown of transport facilities (e.g., the closing of the Suez Canal), strikes, the shutdown or bankruptcy of a supplier, destruction of specific goods.  Besides physical and legal obstacles, article 79(1) also seems to include economic difficulties (exceptional cases)

” “ Exemptions III  Party’s failure to perform is due to failure of a third party. Party is not liable when he is exempt under par. 1 and third person would be exempt if par. 1 were applied to him (art. 79(2));  The exemption has effect for the period which the exemption exists (art. 79(3));  Duty to give notice of the impediment and its effect on the ability to perform; party is liable for damages resulting from non-receipt by the other party- if receipt could have overcome loss (art. 79(4)).  Other remedies than claiming damages remain open to either party (art. 79(5).