Source: http://www.cisg.law.pace.edu/cisg/biblio/koch-46.html
Timestamp: 2019-04-24 04:28:21+00:00

Document:
Reproduced with permission from Pace ed., Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999) 177 - 354.
Article 46(2) specifically addresses the buyer�s right to demand specific performance. It gives the buyer the right to substitute delivery [page 311] where the lack of conformity constitutes a fundamental breach of contract.
Since this remedy applies only to the delivery of non-conforming goods and requires that delivery actually have occurred, article 46(2) does not apply when the seller has not delivered at all. In such a case the buyer has �only� the general right to demand specific performance under article 46(1). Consequently, the approach focusing on one party�s (in)ability or (un)willingness to perform as relevant factors in the determination of fundamental breach cannot be employed. Neither can the no-reliance approach be employed under article 46(2) since, as under articles 49(1)(a), 51(2) and 64(1)(a), no future performance is due other than the remedying of the non-conforming goods.
The approach of the UNIDROIT Principles, which focuses on whether the breaching party will suffer disproportionate loss as a result of the preparation for performance if the contract is avoided, has not been introduced into the Convention. The rationale for that approach, namely to regard non-performance after the preparation as a factor in favor of fundamental breach (as opposed to non-performance before such preparation), has not been reported as a subject of deliberations within UNCITRAL or at the Vienna Diplomatic Conference.
As for the buyer�s right to substitute delivery, however, consideration was given to limit the exercise of this right to avoid hardship on the seller. Since the seller is in the same economic position as when the buyer chose avoidance of the contract, it seems useful to examine the legislative history [page 312]of Article 46(2) and decide whether it can support the application of the UNIDROIT Principles approach.
During the preparatory work for the Convention there was some controversy as to whether or not the buyer�s right to demand cure should be made explicit in the text, and whether there should be any limitations on the exercise of the buyer�s rights to demand cure and substitute delivery. Under one view, the right to require cure should be limited to cases of fundamental breach and, if the goods have been delivered, the cure should not cause the seller unreasonable inconvenience or unreasonable expense. Another view was that there should be no limitations on the right of the �innocent� party to require that the party in breach perform the contract. A Special Working Group then proposed the following limitations on the buyer�s right to demand cure and substitute delivery.
"(2)�The buyer may require the seller to remedy a lack of conformity in the goods by repairing them only if the seller can do so without unreasonable inconvenience or unreasonable expense."
In support of the proposed text, it was stated, inter alia, that if the costs to the seller of curing defects or supplying substitute goods were prohibitive, then the buyer should be compelled to accept damages. This rule would coincide with the principle of mitigation of damages set forth in article 59 [antecedent to article 77 of the Convention]. Those who opposed the proposed [page 313] text reiterated that the right to demand performance should not be subject to any pre-conditions. UNCITRAL did not retain the proposal  and accordingly no limitation on the exercise of the buyer�s right to substitute delivery was introduced in the text of the 1978 Draft Convention.
Only the proposal made by the Federal Republic of Germany  purported to limit the buyer�s right. It was to a large extent identical with the Scandinavian proposals and their approach to the buyer�s right to require the seller to repair the goods. There was a difference, however, in that the buyer�s right to require substitute goods did not depend on whether the lack of conformity constituted a fundamental breach of contract The German delegation took the view that this right should be excluded only if it was not reasonably practicable for the seller to deliver the substitute goods.
An ad hoc Working Group was established to prepare a common text. A compromise, however, was reached only in respect to the buyer�s right to demand repair, the exercise of which was made subject to the condition that repair be reasonably practicable for the seller.
"If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair unless this is not reasonable, taking account of all the circumstances. A request for repair must be made either in conjunction with notice given under [Draft] article 37 or within a reasonable time thereafter."
The German representative argued that his delegation�s proposal would allow the courts to consider the circumstances of each particular case, including the difficulties of both the seller and the buyer. This proposal was criticized by several delegations, primarily on the grounds that the delivery of substitute goods and avoidance were, from an economic perspective, very similar situations, and that the delivery of substitute goods might turn out to be even more onerous to the seller than simple avoidance. For these reasons, it was argued, the requirement of fundamental breach should be kept. In the light of that criticism the German proposal was rejected.
Neither UNCITRAL nor the delegates at the Vienna Diplomatic Conference adopted proposals that took account of consequences arising out of the buyer�s exercise of his right to demand substitute delivery. It seems that the delegates viewed the seller�s interests as sufficiently protected by the fundamental breach requirement, and wanted the interests of the buyer in [page 318] exercising his right to substitute delivery to prevail over those of the seller.
Such an interpretation is confirmed by the drafting history of the disposition governing the buyer�s right to demand repair, which does not require a fundamental breach but may be limited in view of the consequences to the seller. In this context, it should also be noted that the delegates adopted an amendment to the effect that the buyer�s right to repair is not automatically barred by the fact that repair would significantly inconvenience the seller.
* Dr. jur., Georg-August University G�ttingen (Germany), 1994; associate in the law firm Graf von Westphalen, Fritze & Modest, Cologne (Germany); LL.M. (Dean�s Honor List) McGill University, Montr�al (Canada), 1996/97; Visiting Lecturer at Ural State Law Academy in Yekaterinburg (Russian Federation) 1997/98.
481. Art. 46(2) provides: "If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter."
482. See Enderlein & Maskow, supra note 106, at Art. 46, 3.
483. See UNIDROIT Principles, supra note 68, at art. 7.3.1, comment e (stating that �[n]on performance is less likely to be treated as fundamental if it occurs late, after the preparation of performance, than if it occurs early before such preparation�).
484. For a similar statement, see Will, supra note 16, at Art. 46, 2.2.1.2. Where the buyer asks for substitute delivery the seller has to cover not only the costs of disposing of the non-conforming goods, as is the case when the buyer avoided the contract, but also for shipping a second lot of goods to the buyer. The costs to the seller arising out of the exercise of the remedy of substitute delivery thus might be considerably higher than of the avoidance remedy.
485. See UNCITRAL Yearbook VIII (1977), at 43 (� 247); Documentary History, supra note 52, at 336.
486. See id. at 43 (� 248).
487. See id. at 43 (� 251).
488. See id. at 44 (� 254).
489. See id. at 42 (� 254); Documentary History, supra note 52, at 335.
Likewise, the United States proposed amending Draft art. 73 (antecedent to art. 77 of the Official Text) to reduce a claim against the party in breach if the injured party failed to mitigate damages. As presented, the proposal would have applied to any form of relief. The proposal was defeated. See U.N. DOC. A/CONF.97/C.1/L.288, Official Records, supra note 52, at 133; Documentary History, supra note 52, at 705; see also Secretariat Commentary on Draft art. 73, supra note 16, at � 3, Official Records, supra note 52, at 61; Documentary History, supra note 52, at 451 (mitigation applies only to damage awards).
490. See UNCITRAL Yearbook VIII (1977), at 42 (� 256); Documentary History, supra note 52, at 335.
491. See id. at 42 (� 257).
492. Draft art. 42 provides (see Official Records, supra note 52, at 9; Documentary History, supra note 52, at 386): "(1)�The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with such requirements.
"(2)�If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach and a request for substitute goods is made either in conjunction with [Draft] article 37 or within a reasonable time thereafter."
"(2)�Where the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair unless this is not reasonably practicable for the seller, or if the lack of conformity constitutes a fundamental breach, to deliver substitute goods.
"(3)�Any request for repair or substitute goods may be made only in conjunction with notice given under [Draft] article 37 or within a reasonable time thereafter."
"(2)�Where the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair if such a repair does not cause the seller unreasonable costs or harm. If the lack of conformity constitutes a fundamental breach, the buyer may require the seller to deliver substitute goods.
"(3)�Any request for repair or substitute goods may be made only in conjunction with notice given under article 37 or within a reasonable time thereafter."
"(3)�The buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach and it is reasonably practicable for the seller to supply substitute goods."
497. See comments of the Finnish delegation (Sevón, � 74), Official Records, supra note 52, at 332; Documentary History, supra note 52, at 553.
498. See comments of the Norwegian (Rognlien, � 77) and Swedish delegation (Hjerner, � 81), Official Records, supra note 52, at 333; Documentary History, supra note 52, at 554.
"If the goods do not conform with the contract, the buyer may require the seller to remedy a lack of conformity in the goods by repairing them or to deliver substitute goods unless it is reasonably not practicable for the seller to repair the goods or to deliver substitute goods. Any request to repair the goods or to deliver substitute goods may be made only in conjunction with notice given under [Draft] article 37 or within a reasonable time thereafter."
500. See comments of the German delegation (Klingsporn, � 76), Official Records, supra note 52, at 333; Documentary History, supra note 52, at 554.
501. The ad hoc working group was composed of the representatives of Finland, the Federal Republic of Germany, Norway and Sweden.
503. The French delegation proposed the addition of the words �due account being taken of the legitimate interests of the buyer� at the end of the first sentence. See Official Records, supra note 52, at 335 (Ghestin, � 15); Documentary History, supra note 52, at 556.
504. The Soviet delegation proposed the deleting the words �for the seller� at the end of the first sentence of the new � 3. See Official Records, supra note 52, at 336 (Medvedev, � 24); Documentary History, supra note 52, at 557.
505. The U.S. delegation suggested introducing a phrase such as �taking account of the circumstances of the seller and the buyer.� See Official Records, supra note 52, at 336 (Farnsworth, � 28); Documentary History, supra note 52, at 557.
506. See comments by the French (Ghestin, � 15), Russian (Medvedev, � 24) and U.S. delegations (Farnsworth, � 28), Official Records, supra note 52, at 335-36; Documentary History, supra note 52, at 556-57.
507. See Official Records, supra note 52, at 336 (� 38); Documentary History, supra note 52, at 557.
508. See Official Records, supra note 52, at 336 (� 37); Documentary History, supra note 52, at 557.
509. See the comments by the German delegation (Landfermann, � 47), Official Records, supra note 52, at 337; Documentary History, supra note 52, at 558.
510. Id. The proposal was welcomed by the Italian delegation whose representative pointed out that �� 2 and 3 dealt only with specific cases and that the general right was set out in � 1. The choice between the two possible remedies described in �� 2 and 3, basically depended on the nature of the goods and not, as the existing text of � 3 provided, on the nature of the breach. See Official Records, supra note 52, at 337 (Bonell, � 51); Documentary History, supra note 52, at 558.
See, on the other hand, the comments of the Swedish delegation, Official Records, supra note 52, at 337 (Hjerner, � 52); Documentary History, supra note 52, at 558, which criticized the German proposal for confusing the situation, since it collapsed two ideas, substitution and repair.
511. See comments of the Bulgarian delegation (Stalev, � 49), Official Records, supra note 52, at 337; Documentary History, supra note 52, at 558.
513. See Official Records, supra note 52, at 337 (�� 54, 55); Documentary History, supra note 52, at 558.
514. For a similar conclusion, see Vivian Curran Grosswald, Cross Reference and Editorial Analysis of CISG Article 46, at Pace University database, "http://www.cisg.law.pace.edu/cisg/text/cross/cross-46.html" (stating that elements of reasonableness are built into art. 46(2) and (3) in that the buyer may not require the seller to remedy a lack of conformity by repair pursuant to art. 46(3) when �this is unreasonable having regard to all the circumstances� and in that the buyer may only require delivery of substitute goods pursuant to art. 46(2) when there is a lack of conformity that constitutes a fundamental breach of contract.

References: Art. 46
 Art. 46
 art. 7
 Art. 46
 art. 73
 art. 77
 art. 73
 art. 42
 art. 46
 art. 46
 art. 46