Price reduction as an instrument to adapt commercial sales contracts and its importance for SMEs IACL Conference, Amsterdam, 1 July 2015 dr. Sanne Jansen, KU Leuven

Relevance Price reduction in the CISG Price reduction in consumer sales (D. 1999/44) (esp. impl. in Belgium) Which system is more protective for SMEs?

Content A comparison of the price reduction in the CISG and in the Consumer Sales Directive (CSD as implemented in Belgium) I.Definitions II.Conditions of application III.Role of the parties – role of the judges IV.Calculation method Not: price reduction in the withdrawn CESL-proposal.

I. Definitions Article 50 CISG: “If the goods do not conform with the contract and whether or not the price has already been paid, the 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. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price.” Article 3, 2 CSD: “In the case of a lack of conformity, the consumer shall be entitled to have the goods brought into conformity free of charge by repair or replacement, in accordance with paragraph 3, or to have an appropriate reduction made in the price or the contract rescinded with regard to those goods, in accordance with paragraphs 5 and 6.” Article 3, 5 CSD: “The consumer may require an appropriate reduction of the price or have the contract rescinded: - if the consumer is entitled to neither repair nor replacement, or - if the seller has not completed the remedy within a reasonable time, or - if the seller has not completed the remedy without significant inconvenience to the consumer.”

I. Definitions Article 50 CISG: “If the goods do not conform with the contract and whether or not the price has already been paid, the 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. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price.” Article 3, 2 CSD: “In the case of a lack of conformity, the consumer shall be entitled to have the goods brought into conformity free of charge by repair or replacement, in accordance with paragraph 3, or to have an appropriate reduction made in the price or the contract rescinded with regard to those goods, in accordance with paragraphs 5 and 6.” Article 3, 5 CSD: “The consumer may require an appropriate reduction of the price or have the contract rescinded: - if the consumer is entitled to neither repair nor replacement, or - if the seller has not completed the remedy within a reasonable time, or - if the seller has not completed the remedy without significant inconvenience to the consumer.”

I. Definitions Article 50 CISG: “If the goods do not conform with the contract and whether or not the price has already been paid, the 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. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price.” Article 3, 2 CSD: “In the case of a lack of conformity, the consumer shall be entitled to have the goods brought into conformity free of charge by repair or replacement, in accordance with paragraph 3, or to have an appropriate reduction made in the price or the contract rescinded with regard to those goods, in accordance with paragraphs 5 and 6.” Article 3, 5 CSD: “The consumer may require an appropriate reduction of the price or have the contract rescinded: - if the consumer is entitled to neither repair nor replacement, or - if the seller has not completed the remedy within a reasonable time, or - if the seller has not completed the remedy without significant inconvenience to the consumer.”

II. Conditions of application CISGCSD (as implemented in B) 1) CONDITIONS OF APPLICATION Scope of applicationInternational sale of moveable goods Consumer sales contracts Non-conformityQuality, quantity, description and packaging, aliud-delivery, hidden defects Not: legal defects, late delivery, … Non-conformity and hidden defects Not: legal defects, late delivery Excused and unexcused non-performances X? (at least in Belgium with a res perit domino rule) Hierarchy of remediesRight to cure of the sellerPrice reduction as a secondary remedy Seriousness of breachNot important Cumulation with damagesXX

III. Role of the parties and of the judge CISGCSD (as implemented in B) 2) ROLE OF THE PARTIES Right to chooseX ! Right to cureX ! Secondary remedy Notification dutyArtt. 38 and 39 CISG: examination and notification duty (within reasonable time) Art. 5, 2 CSD 3) ROLE OF THE JUDGE Judicial / extrajudicialX (in principle extrajudicial) X (in principle judicial) Power of the judgeConditions of application Observance of good faith (Calculation of PR) Conditions of application Abuse of rights (B) (Calculation of PR) Price reduction declaration (extrajudicial price reduction) X (intention and motivation) ?

IV. Calculation method CISGCSD (as implemented in B) 4) METHOD OF CALCULATION ProportionalityXX (in Belgium, but some countries ≠ implementation of ‘appropriate’ price reduction: e.g. UK) Moment of calculationMoment of delivery (art. 50 CISG, PECL, DCFR, CESL) (  Conclusion of the contract: § 441 BGB, art. 46 ULIS, réfaction, AQM 1644 C.civ.) ?

Conclusion Price reduction in the CISG Price reduction in consumer sales (D. 1999/44)  Many similarities, but some differences

Questions?