Source: http://www.cisg.law.pace.edu/cisg/biblio/liu9.html
Timestamp: 2019-04-25 15:55:38+00:00

Document:
4.2 Prerequisite a): "prior to the date for performance"
4.3 Prerequisite b): "the parties will commit a fundamental breach of contract"
4.4 Prerequisite c): "it is clear"
In regard to anticipatory breach of contract, the basic question is whether the party that doubts the performance of the other party has the right to suspend or avoid the contract prior to the date for performance. Depending on the circumstances, a party faced with prospective non-performance [or anticipatory breach or repudiation], the real possibility of a serious breach may be entitled either to suspend his own performance ([CISG] Article 71) and/or to avoid [contract] obligations altogether ([CISG] Article 72).
A typical example of anticipatory non-performance is the case where one party declares that it will not perform the contract; however, the circumstances also may indicate that there will be a (fundamental) non-performance. Briefly, anticipatory breach denotes situations where: 1) objective facts indicate, prior to the performance date, that one of the parties will not or will not be able to perform the contract at the date due; or 2) a party has declared that he will not perform a substantial part or all of his obligations within the time for performance.
Provisions to deal with anticipatory breaches of contract give rise to conflicting considerations. It is undesirable that a party to a contract should be released from his obligations whenever he suspects that the other party might be about to commit some breach. However, there is a need for the law to provide for situations in which there is a real likelihood that a substantial breach will occur. When that is so it would be inappropriate for the other party to be required to continue with his performance of the contract, which could result in his suffering an irrevocable loss. To provide for these conflicting considerations the law needs to be delicately balanced. We share the opinion that the appropriate legal rules "should be designed to minimize the unfairness, futility, and (in some circumstances) economic waste of requiring one side to wait upon the other side's performance when it is clear that such performance will not occur." Thus, the usual remedy for anticipatory breach under some legal systems is temporary "suspension" of performance by the innocent party, subject to certain conditions or limitations. Yet, if the anticipatory breach amounts to a "fundamental" breach, an additional remedy: early avoidance of the contract is necessary.
Most legal systems of the world have the concept of "anticipatory breach of contract." This doctrine has its roots in common law, while the civil law countries supports it indirectly; and it rests on the notion that a party to a contract cannot reasonably be expected to continue to be bound by the contract once it is anticipated (to some certain extent) that the other party cannot or will not perform at the due date, because if, before a debtor's performance deadline, the debtor refuses to perform explicitly or implicitly, a creditor can consider such a behavior as a breach of contract. But legal systems differ widely in their treatment of the consequences of anticipatory repudiation. Some legal systems recognize only a very limited right for suspension or avoidance due to anticipatory breach, while there are broader provisions in other systems such as BGB (German Civil Code) and UCC.
Various domestic solutions, no doubt persuaded the draftsmen of the United Nations Convention on Contracts for the International Sale of Goods (1980; "CISG" or "Convention") to walk cautiously in this difficult area. As the Convention's legislative history indicates, considerable efforts were expended in endeavoring to prepare and adopt the relevant rules dealing with anticipatory breach in the international sales context. The final version of CISG can be termed a result of numerous compromises based on the conflicting interests. In any event, the modern status of our world economy (affected by such things as the unpredictability of fluctuations in finance and trade turnover, and the insecurity of some developing markets) causes the need for a reliable legal foundation that will allow contracting parties to escape such economical difficulties in their business relations. Therefore, it is difficult to overestimate the role of the anticipatory breach of contract regulations in the Convention.
In general, the Convention defines the point in time at which the seller and buyer are to perform their respective obligations. Prior to this (performance) time, there can be no breach, and thus no remedy for breach in the usual sense. On the other hand, when one party clearly repudiates his obligation to perform, the other party can no longer be expected to remain ready to perform a one-sided deal; therefore, in domestic law, such injured party's duties are, at the minimum, considered discharged. Even short of an outright repudiation, the serious possibility of one party's non-performance and the accompanying threat of injury to the other will, in certain circumstances, necessitate legal protection (such as suspension of performance to allow the possible assurance by the threatening party).
Such protection or remedies are also found in the Convention, two main articles of which are distinguished out under the heading "Anticipatory breach and instalment contracts," i.e., Arts. 71 and 72 to specify the grounds and conditions for invoking suspension or avoidance in case of an anticipatory breach. Additionally, CISG Art. 73 addresses anticipatory breach in respect of installment contracts (but issues of anticipatory breach pertaining to installment contracts are not the topic here and they will be explored more fully in another separate analysis of the Author). These Articles, somewhat resembling some domestic contract and sales laws, aim to provide remedies to deal with the situation where it becomes apparent or clear that one of the parties to an agreement will or may not perform a substantial part or all of its obligations in terms of the agreement.
- In neither case, could an anticipatory minor breach of contract by the other party be sufficient for a party to either suspend performance or avoid the contract. Only if the anticipatory breach is of a serious nature so as to contradict a substantial part of his obligations or to amount to a fundamental breach of contract, could the threatened party invoke his right to suspend performance under Art. 71 or to avoid the entire contract according to Art. 72.
- Both Arts. 71 and 72 of the CISG require some standard of certainty concerning a future breach before one can suspend the performance or declare the contract avoided. The suspending or avoiding party bears the risk of presuming wrongly.
CISG Arts. 49 and 64 govern the right of an aggrieved party to avoid the contract when the other party has committed a fundamental breach of contract. In contrast, CISG Arts. 71 and 72 are concerned with situations where breach by the other party is threatened prior to the date for performance. But in invoking either Art. 71 or 72, there must be "the real possibility of a serious breach" facing the invoking party. Details in this respect will be given below, but before that an overview of the two articles is provided.
This Article enables either party to suspend his performance of a contract because of an anticipatory breach of the contract by the other. The need for a right to suspend performance of a contract for international sales of goods was generally accepted in relation to ULIS and in the discussions which led to the adoption of Art. 71. Throughout those discussions, however, there was concern to ensure that the grounds for exercising the right should be as objective as possible. A number of amendments were made to the provision at various stages of its development to make its operation as objective and as certain as possible. Nevertheless, as CISG Art. 71 makes provision mainly for situations in which breaches of contract are anticipatory, its operation will inevitably involve some subjective assessment on the part of a suspending party. Such objective and subjective elements will be discussed in next section.
CISG Art. 71 set "a high threshold" before a party can suspend performance for anticipatory breach. The narrowness of the preconditions for suspension of performance is designed "to prevent abuse of anticipatory breach." Despite this, Art. 71 expressly authorizes a seller or a buyer to suspend performance of its own obligations under the sales contract if it is unlikely to receive the substantial benefit of the counter-performance promised by the other party. However, it may not be sufficient in some circumstances for a party to suspend the performance of his obligations. There may be, for example, a need to avoid the existing contract so that another contract can be expeditiously entered into, or so that uncertainty with respect to financial commitments can be removed. When the contract has been avoided, action will be possible for the recovery of damages (Arts. 74 to 76).. Therefore, CISG Art. 72 follows to allow the threatened (perhaps suspending) party to terminate the contract by electing the remedy of avoidance.
This Article provides for the special case where prior to the date for performance it is clear that one of the parties will commit a fundamental breach, i.e., an anticipatory fundamental breach. In such a case, the other party may declare the contract avoided. It thus complements the suspension of performance provisions in CISG Art. 71 and the provisions in CISG Arts. 49 and 64 which enable the buyer and the seller to avoid the contract for breaches which have actually occurred. But a party who intends to declare the contract avoided pursuant to CISG Art. 72 should do so with caution. If at the time performance was due no fundamental breach would have occurred in fact, the original expectation may not have been "clear" and the declaration of avoidance itself be void. In such a case, the party who attempted to avoid would be in breach of the contract for his own failure to perform.
CISG Art. 72 recognizes that the remedy of avoiding the contract based on an anticipatory fundamental breach needs to be tightly circumscribed. It requires that it be "clear" that "a fundamental breach of contract" will be committed, and in this respect arguably requires a greater certainty than is required for the application of Art. 71.
- As regards the degree of certainty, an "apparent" (in Art. 71) non-performance is designed to indicate a slightly lesser probability than one which is "clear" (in Art. 72).
- The notification requirements of the two differ: Art. 72(2) requires "reasonable" prior notice only if time allows and excuses the notice if the other party has declared that it will not perform, while Art. 71(3) requires immediate notice of suspension with no exceptions.
- Another difference is that there is no requirement in Art. 72 that, as is the case in Art. 71, the anticipatory breach be clear as a result of any particular conduct or circumstances. It is sufficient in Art. 72 that it is clear whatever the clarity results from.
"avoidance of the contract by one party because of prospective failure of performance by the other as envisaged under CISG Art. 72 is subject to standards that are more strict than the standards that CISG Art. 71 applies to suspension of performance."
"The co-existence of two remedies for anticipatory breaches - suspension of performance under Article 71 and avoidance of the contract under Article 72 - will mean that in practice a party wishing to take some action in respect of such a breach may need to consider whether he should invoke one of the provisions, the other or both."
There is a particular need to mention, however, that in certain circumstances, a party may be entitled to rely on either CISG Art. 71 or 72. In certain cases, it is likely that both provisions will be applicable, for example, where the anticipatory breach is of a fundamental character. If the expected non-performance were at the same time a fundamental breach of contract, the threatened (potentially aggrieved) party would have a choice between a suspension of performance under Art. 71, or avoidance of the contract under Art. 72.
In substance, both Art. 71 and Art. 72 are concerned with predicting whether there will be a breach though the preconditions for the more drastic remedy of avoidance are more stringent than those for suspension, both as to the seriousness of the predicted breach and the probability that the breach will occur. Of most significance, however, is to notice that the remedy in Art. 71 is aimed at keeping the contract intact, whereas the remedy in Art. 72 is aimed at avoiding the contract. It is for this reason that these articles contain different requirements for the exercising of the respective remedies. These different requirements are discussed in details below.
"If there is any doubt on whether, due to the conduct of the other party or the prevailing circumstances, there is an anticipatory [fundamental] breach objectively speaking, a party should rather exercise the right to suspend performance under Article 71 CISG and require an adequate assurance from the other party than issue a notice of avoidance under Article 72(2). It is the safer option because the giving of a notice of avoidance in terms of Article 72(2) under circumstances where it is not warranted may in itself constitute an anticipatory breach entitling the other party to [suspend or] avoid the contract."
As will be shown below, in applying either CISG Art. 71 or Art. 72, there are a number of interpretation issues, both under commentators' views and in CISG case decisions on which there is a divergence of opinion. Thus, the construction and provisions of the counterpart rules of the UNIDROIT Principles of International Commercial Contracts (1994; "UNIDROIT Principles") or of the Principles of European Contract Law (1998; "PECL") may be helpful for a better understanding of these issues.
This Article protects the interest of a party who has reason to believe that the other will be unable or unwilling to perform the contract at the due date but who cannot invoke Art. 7.3.3 since there is still a possibility that the other party will or can perform. In the absence of the rule laid down in the above Art. 7.3.4, the former party would often be in a dilemma. If he were to wait until the due date of performance, and this did not take place, he might incur loss. If, on the other hand, he were to terminate the contract, and it then became apparent that the contract would have been performed by the other party, his action will amount to non-performance of the contract, and he will be liable in damages. Consequently, UNIDROIT Principles Art. 7.3.4 enables a party who reasonably believes that there will be a fundamental non-performance by the other party to demand an assurance of performance from the other party and in the meantime to withhold his own performance.
Additionally, it is noted that, although "quite a close connection" has been established between them, there is "a clearly formulated difference" in the requirements of Arts. 7.3.3 and 7.3.4 of the UNIDROIT Principles: In terms of Art. 7.3.3, it is required that it must be clear that there will be a fundamental non-performance, whereas in terms of Art. 7.3.4 there need only be a reasonable belief on the part of the innocent party that there will be a fundamental non-performance.
As regards the relationship between the UNIDROIT Principles approach and the CISG approach, it is noted that although at first blush there seems to be "a slight difference" between the provisions of CISG Art. 72(1) and UNIDROIT Principles Art. 7.3.3, this difference is "more apparent than real." On the contrary, both CISG Art. 72(1) and UNIDROIT Principles Art. 7.3.3 require a clear indication of an anticipatory fundamental breach or non-performance, and the measure of certainty within both is exactly the same, namely, it is required that it must be "clear" that there will be a fundamental non-performance.
A more significant difference between the two approaches seems to be that either Art. 7.3.3 or Art. 7.3.4 of the UNIDROIT Principles is pertinent to the anticipation of future fundamental non-performance, which is dealt with in CISG Art. 72; whereas CISG Art. 71 has a wider scope in that it deals with anticipatory breach in general, not limited to anticipatory fundamental breach. In this respect, it is noted that UNIDROIT Principles Art. 7.3.3 is dedicated under the general heading "Anticipatory non-performance," and it is also noted that UNIDROIT Principles Art. 7.3.4 ("reasonably believes") places a lower level of prospective certainty as opposed to Art. 7.3.3 ("clear"), hence resembling the CISG structure where a different measure of certainty is also contemplated (i.e., Art. 72 ("clear") requires a higher standard of prospective certainty than Article 71 ("apparent")); but neither UNIDROIT Principles Art. 7.3.3 nor Art. 7.3.4 deals with anticipatory non-performance other than a fundamental non-performance. Furthermore, particularly inferring from the wording of CISG Art. 71 "a substantial part," it is argued that CISG Art. 71 deals with anticipatory breach as well as incomplete performance.
That is to say, the distinction between UNIDROIT Principles Arts. 7.3.3 and 7.3.4 is made in substance only depending on the standard of prospective certainty, whereas the one made between CISG Arts. 71 and 72 depends also on the nature of anticipatory breach, i.e., fundamental or not. In other words, both UNIDROIT Principles Arts. 7.3.3 and 7.3.4 deal with anticipatory fundamental non-performance, though a distinction made depending on the measure of certainty of the threaten; whereas CISG Art. 71, broader than Art. 72 which only deals with anticipatory fundamental breach, applies to anticipatory breach in general, hence covering a wider scope than either UNIDROIT Principles Art. 7.3.3 or 7.3.4. Following this line of understanding, it may be said that it is CISG Art. 72 instead of Art. 71 or Arts. 71 and 72, that is paralleled by UNIDROIT Principles Arts. 7.3.3 and 7.3.4 as a whole. Therefore, unfortunately, either UNIDROIT Principles Art. 7.3.3 or Art. 7.3.4 will be of little assistance in interpreting the suspension remedy under CISG Art. 71, although they are both helpful when the matter concerned is an anticipatory fundamental breach within CISG Art. 72.
Where prior to the time for performance by a party it is clear that there will be a fundamental non-performance by it, the other party may terminate the contract.
This Article entitles the aggrieved party to terminate the contract for "anticipatory non-performance," by which is meant an obvious unwillingness or inability to perform where the failure in performance would be fundamental within PECL Art. 8:103. The right to terminate for anticipatory non-performance rests on the notion that a party to a contract cannot reasonably be expected to continue to be bound by it once it has become clear that the other party cannot or will not perform at the due date. The effect of PECL Art. 9:304 is that for the purpose of the remedy of termination, an anticipatory fundamental non-performance is equated with a fundamental non-performance after performance has become due.
A party which reasonably believes that there will be a fundamental non-performance by the other party may demand adequate assurance of due performance and meanwhile may withhold performance of its own obligations so long as such reasonable belief continues.
Where this assurance is not provided within a reasonable time, the party demanding it may terminate the contract if it still reasonably believes that there will be a fundamental non-performance by the other party and gives notice of termination without delay.
This Article is intended to protect the interests of a party which believes on reasonable grounds that the other party will be unable or unwilling to perform the contract at the due date but which may be reluctant to invoke PECL Art. 9:304 in case it transpires that the other party would after all have performed. In the absence of a rule along the lines of PECL Art. 8:105, the potentially aggrieved party will be in a dilemma. If it waits until the due date for performance and performance does not take place it may incur heavy losses. If on the other hand it terminates the contract under PECL Art. 9.304 but it is later found that it was not clear that the other party would commit a fundamental non-performance, it itself will have failed to perform the contract, with a consequent liability for damages. PECL Art. 8:105 enables it to obtain an assurance of performance, in default of which it can terminate the contract, with the result that the other party will be considered guilty of a fundamental non-performance.
Clearly, like the interplay between UNIDROIT Principles Arts. 7.3.3 and 7.3.4, there is as well "quite a close connection" between the provisions of PECL Arts. 9:304 and 8:105. Indeed, not only the interplay between PECL Arts. 9:304 and 8:105, but also the contents of each, are almost identical to those between or of UNIDROIT Principles Arts. 7.3.3 and 7.3.4. Thus, the above analysis (section 2.3) regarding the comparison between UNIDROIT Principles Arts. 7.3.3 and 7.3.4, as well as that between the UNIDROIT Principles approach and the CISG approach, is also applicable to the comparison between PECL Arts. 9:304 and 8:105, as well as that between the PECL approach and the CISG approach.
Many systems allow a party to suspend his performance where there is a real and manifest danger that the other party will not perform his obligation when it falls due. At the international level, the provision which comes closest is CISG Art. 71, which in details provides the grounds and conditions for suspending performance by any party due to the other party's anticipatory breach, and resembles the domestic rules of numerous countries.
"This article [CISG Art. 71], however, gives a party the right to withhold its performance corresponding to future anticipated breach (emphasis added). For example, a buyer may suspend performance of a prepayment [already due for the buyer], when he anticipates that no delivery [not yet due for the seller] can be made (citation omitted). In the case at bar, the buyer has already received his deliveries and must pay for the amount received. If he had not received these deliveries on time or if these deliveries did not comprise the amount that had been ordered, he could assert separate claims claiming damages or fulfillment [specific performance]. The applicable law, however, does not give him the right to withhold [due] payment for deliveries already occurred (citation omitted)."
The above proposition stands as a logical one in most cases since CISG Art. 71 is mainly designed to deal with "anticipatory breach." In certain other cases, however, it seems that under CISG Art. 71, what are required are not only acts in performance of the contract, but also those in preparation of performance which, therefore, can also be suspended. Thus, it is argued that even in cases of failure to take "preliminary steps leading to final performance" such as shipping arrangements (Art. 32), handing over of documents (Art. 34), establishing a letter of credit (Art. 54), or supplying specifications for goods (Art. 65), if the aggrieved party is hopeful of obtaining performance or if grounds for avoidance are not clear, the aggrieved party will prefer a less drastic approach such as the suspension under CISG Art. 71; although such a failure may constitute "a breach of contract, not merely a portent of a future breach," and in some cases the breach may be sufficiently serious to justify avoidance in general (Arts. 49(1)(a), 64(1)(a)). But I would rather believe that the reason for subjecting such preparatory steps to the application of CISG Art. 71, rests on the idea that such a failure makes it apparent that the other party will not perform "a substantial part" of the contract.
"The entitlement to suspend performance remains until the [anticipatory or preparatory] breach ceases to exist, until the other party commits a fundamental breach of contract, or until the other party provides adequate assurance of performance under Art. 71(3) CISG (citation omitted)."
In any event, from the wording "a substantial part" used in CISG Art. 71, it seems that partial performance is not completely excluded from the application of CISG Art. 71. If an anticipatory breach occurs, the innocent party may want to enforce specific performance in which case it would make use of its right to suspend performance under Art. 71 rather than to avoid the contract under Art. 72 even if it is entitled to do so. However, in the case of part performance a party may apparently only rely on Art. 51 in conjunction with Art. 45/61 where Art. 51 applies or on Art. 71 (if it wants to enforce full performance) or Art. 49/64 (if wants to avoid the contract), but not on Art. 72. CISG Art. 72 is a remedy that is only to be used in true circumstances of anticipatory breach and not where an actual breach has already taken place. In short, whereas Art 72 is aimed at the phenomenon of anticipatory breach of contract, i.e., a breach of contract that takes place before the performance is due for the threatening party, Art. 71 has a wider scope in that it deals with anticipatory breach as well as incomplete performance. Furthermore, the right to suspend under CISG Art. 71 applies both to contracts of sale for a single performance and to installment contracts governed by CISG Art. 73. When the preconditions of both articles are satisfied, the aggrieved party may choose between suspending performance and avoiding the contract with respect to future installments under Art. 73(2). If a party chooses to suspend performance with respect to future installments it must give a notice in accordance with CISG Art. 71(3).
Needless to say, in many cases application of the provisions of CISG Art. 71 may prove to be difficult and may even lead to abuse since the provisions give rather broad power. A decision to suspend performance may entirely depend on one party's subjective evaluation of the other's ability to perform. Although risks of this kind cannot be fully avoided in international trade, considerable efforts have been expended in endeavoring to make the operation of CISG Art. 71's operation as objective and as certain as possible. As a result, CISG Art. 71, while devoted to the right to suspend the performance, specifies the enumerated conditions which must be satisfied to justify a suspension and they will be discussed below.
"Given the prerequisites of Art. 71(1), the suspension of [the threatened party's] performance does not constitute a breach of contract, but expresses the right to unilaterally modify the time of performance due to the surrounding circumstances (citation omitted)."
Above all, for applying CISG Art. 71, it is to be made clear what particular non-performance extends to "a substantial part" of a party's obligations. But the Convention does not provide express guidance in this regard.
Recalling that the standard in Art. 71 is non-performance of "a substantial part" of a party's obligations, whereas Art. 72 requires a threat of "a fundamental breach of contract," it is thus argued, the drafters would not have used two different phrases, and in particular, two different adjectives describing the seriousness of the breach, had they not intended to distinguish the seriousness of the threatened breach that would satisfy the standards of the respective articles. Therefore, the obligations that are not going to be performed will need to be of some significance but it seems clear that their non-performance will not have to constitute a fundamental breach as defined by CISG Art. 25 (compare in this regard the express reference to a fundamental breach in Art. 72). Thus, regarding "a substantial part," a broad view will have to be taken in light of all the circumstances.
Generally speaking, if either the willingness or the ability of a party to perform declines materially between the time of contracting and the time for performance, the other party is threatened with the loss of a substantial part of what he has bargained for. However, it is not sufficient that this is anticipatory on the basis of a subjective evaluation of one of the parties and may also be the ground for an abuse. Therefore, CISG Art. 71(1) insists on two additional conditions which the party intending to suspend must place on the part of the other party: "(a) a serious deficiency in his ability to perform or in his credit-worthiness; or (b) his conduct in preparing to perform or in performing the contract." By these two additional conditions, CISG Art. 71 limits the suspension of performance to a limited circumstances, and thus adds some objective test to its operation.
In the process of analysis for a determination whether the grounds of insecurity fall under 71(1)(a) or (1)(b), when there arises the likelihood of a promisor's breach, the first step is to determine whether the conduct in question is directly related to the current contract. As "directly related" is strictly construed, even the promisor's conduct performing previous contracts between the same parties may not meet the requirements of CISG Art. 71(1)(b). If the conduct is not directly related, then the promisee can only rely on CISG 71(1)(a), which requires that the promisor's conduct be indicative of the promisor's loss of performance ability or creditworthiness. The reported cases so far show that the situations held to satisfy this requirement are extremely rare.
As a rule, under Art. 71(1) subjective fear will not justify suspension; there must be objective grounds showing substantial probability of non-performance. But actually speaking, these additional conditions are more inclusive than the standards for suspension in some domestic sales regimes, and may be interpreted in a broad way. According to Art. 71 CISG, all "serious" circumstances that put the orderly performance at risk may be considered as indicators that the performance is jeopardized, as well as economic difficulties including a lack of creditworthiness (Art. 71(1)(a) CISG). Furthermore, a risk may result from the debtor's conduct in performing or preparing to perform the contract (Art. 71(1)(b) CISG). Indeed, as CISG Art. 71 makes provision for situations in which breaches of contract are anticipatory only, its operation will inevitably involve some subjective assessment on the part of a suspending party.
Unlike the ordinary breach of contract after the date for performance where it is not too complicated to find out this fact because of its objectivity, in the case of anticipatory breach of contract, we face a hypothetical future breach situation. The party will estimate the ensuing events on the basis of his subjective view influenced by an objective test. Thus, it should be emphasized that it indeed may prove difficult to determine what is to be regarded as "a serious deficiency" in performance ability and what kind of conduct "in preparing or in the performing of a contract" will be sufficient as a ground for the other party to suspend his obligations. Therefore, in order to protect the other party, CISG Art. 71 further requires some standard of certainty concerning a future breach before one can suspend the performance. The suspecting party bears the risk of presuming wrongly. This standard is what is to be discussed below.
A more basic problem concerns the degree of certainty required for deciding that the other party "will not" perform "a substantial part" of his obligations. As has been mentioned, considerable effort was put into drafting the provision so that its applicability would depend on objective considerations, notwithstanding that in many cases it will not be possible to do more than predict that a non-performance is likely to occur.
In order to protect the other party, the text emphasizes that suspension of obligations is possible only if there are adequate grounds to conclude that the other party will not perform a substantial part of his obligation. Namely, the suspending party must proves that the non-performance "becomes apparent" to him after the conclusion of contract. Thus, decisive is not just the relevant information, but whether the party wishing to suspend performance could hold it to be true. It is disputed, however, who shall be the one to bear the risk of a wrong assessment; the party wishing to suspend or the other party. In this regard, it may be generally argued, if the party suspending performance could hold the information available to him to be true, the risk falls to the other party. If the first party, however, refuses to perform his obligations unfoundedly, he himself commits a fundamental breach of contract.
"An objective measure should be used to judge the reasons which would give rise to a suspension of performance; subjective fear by one party will not be sufficient. There must be a high degree of probability (emphasis added) of non-performance (citation omitted). The reasons must become apparent to a reasonable person in the same circumstances (citations omitted)."
In practice, however, this will call for a judgment on the part of the party proposing to suspend performance. His judgment will to some extent be subjective although it will need to be based on appropriate facts. The judgment will not be final in its operation because the suspension action may lead to the other party providing an adequate assurance of his performance. Thus, it is likely that disputes as to the availability of the right to suspend performance will focus on whether such assurances provided by the other party are adequate. This will be given details below in section 5.
Another test conditioning the measure of certainty in CISG Art. 71, is that it must become apparent "after the conclusion of the contract." Arguably, the right to suspend performance must not lead to a situation where contracts are thoughtlessly concluded. It follows, for instance, a deficiency in the creditworthiness of the buyer is no reason for suspending performance when the financial situation of the buyer has not changed since the conclusion of the contract. On the other hand, however, a party would have the right to suspend performance if he was aware of the bad economic situation of the other party at the conclusion of the contract but can prove that the other party's economic situation considerably worsened. In this consideration, a worsening of the economic situation of the other party has to be feared by a reasonable obligee, but no absolute certainty is required.
In any event, CISG Art. 71 requires the prospective non-performance to become apparent after the conclusion of the contract. This prevents a party from relying on the provision if he were aware before he entered into the contract of the circumstances standing in the way of performance by the other party. If those circumstances were generally apparent but not in fact known by the party wishing to suspend performance, it is not clear whether the article would be held to be applicable, but probably it would be held not to be. It is, however, not a condition that those reasons emerge only after the conclusion of the contract. It will suffice that they become apparent only after the conclusion of the contract.
Under CISG Art. 71, paragraph (2) continues the policy of paragraph (1) in favor of a seller who has already shipped the goods. Art. 71(2) provides that in specified circumstances the seller may prevent the carrier from handing over the goods to the buyer.
Unlike Art. 71(1) which is available to both parties, Art. 71(2) addresses a special problem that is of concern only to sellers - a threat to payment that becomes evident after the goods have been dispatched. One could have imagined that the buyer, too, should have been granted such a right, i.e., that he should have had the opportunity to revoke a money transfer order. A relevant proposal was rejected, however, during the drafting of the CISG because there was fear of a serious impairment of the international payment transactions and because in many countries the non-payment of a cheque constitutes a criminal act. No such protection is needed in the case of the opening of a letter of credit because the seller usually cannot have access to the letter of credit before having delivered.
This right is available without regard to whether risk of loss has passed to the buyer. Similarly, domestic rules that "property" or "title" has passed to the buyer may not undermine the narrow and specific rights conferred by Art. 71(2). But apart from CISG Art. 71(2), Art. 58(2) enables a seller to dispatch goods on terms providing for them not to be handed over to the buyer except against payment of the price. Presumably, therefore, Art. 71(2) will be resorted to only where the goods have not been dispatched on those terms. That is to say, Art. 71(2) will be useful only in an unusual combination of circumstances: (1) The threat of non-payment is discovered after the goods are dispatched and before they are handed over, and (2) The seller has not retained control over the goods, as by the retention of a negotiable bill of lading (Art. 58(2)).
Art. 71(2) also needs to be read in conjunction with the statement in Art. 4(b) that the Convention is not concerned with "the effect which the contract may have on the property in the goods sold." A third person may therefore acquire title to the goods from the buyer under the applicable domestic law which would then govern the question whether those rights were subject to the seller's right to prevent the handing over of the goods to the buyer. As a rule, the seller loses his right to order the carrier not to hand over the goods if the buyer has transferred the document to a third party who has taken it for value and in good faith. But it should be stressed that whether a third person has acquired rights in the goods that would override the seller's right to prevent delivery to the buyer would depend on applicable domestic law, akin to the rules protecting the property rights of good faith purchasers.
Of most concern, Art. 71(2) (last sentence) expressly limits its operation "only to the rights in the goods as between the buyer and the seller." The carrier is accordingly not bound to comply with a direction of the seller not to hand over the goods to the buyer, and indeed where the buyer holds a document which entitles him to obtain the goods, the carrier may be precluded from withholding them from him by his obligations under municipal and international law. In such circumstances the effective operation of the paragraph could therefore be quite limited.
No doubt there are no obligations for the carrier under the CISG to respect the seller's request for stoppage. If he voluntarily stops the goods in transit he exposes himself to a claim for damages on the part of the buyer. But, regarding the relationship between carrier and seller, the real world seems more complex. Indeed, the rules governing the carrier's obligation to follow the consignor's orders to withhold delivery from the consignee differ between modes of transportation and between various international conventions and national laws. Thus, it may only be generally concluded that the question whether the carrier must or is permitted to follow the instructions of the seller where the buyer has a document which entitles him to obtain them is governed by the appropriate law of the form of transport in question.
"True, the Convention does not state that when Article 71(2) applies the carrier must deliver the goods to the seller; the carrier needs protection lest some third party in good faith might have purchased the goods (or documents representing them) and thereby acquired rights to the goods that are protected by applicable domestic law. On the other hand, Article 71(2) states that the seller may stop delivery 'even though the buyer holds a document that entitles him to obtain them'; under this language the seller may stop delivery even though the buyer holds a negotiable bill of lading or other document controlling delivery. In this case, to protect the carrier, the seller by an appropriate proceeding should require the buyer to deliver the documents to the seller or to the carrier (emphasis added)."
In any event, CISG Art. 71(2) extends the general protection against potential injury provided by Art. 71(1), but Art. 71(2) is concerned with the special problem of the seller who has dispatched the goods before the indications of prospective non-performance become manifest. The provision applies not only where the buyer holds a bill of lading or similar instrument, but also where the sales contract extends credit until some time after buyer's receipt of the goods. However, in line with the general CISG principle that the Convention is concerned with the inter partes sales relationship, Art. 71(2) relates only to the rights in the goods as between the buyer and the seller. The seller's right to effectuate stoppage vis-à-vis carriers and warehousemen will depend on the contract of carriage or bailment (and on the relevant domestic law), just as the rights which creditors or good-faith purchasers may have under the applicable domestic law remain unaffected by this Convention rule.
Unfortunately, UNIDROIT Principles Art. 7.1.3 does not explicitly address the question which arises where one party performs in part but does not perform completely. In such a case the party entitled to receive performance may be entitled to withhold performance but only where in normal circumstances this is consonant with good faith.
A party which is to perform simultaneously with or after the other party may withhold performance until the other has tendered performance or has performed. The first party may withhold the whole of its performance or a part of it as may be reasonable in the circumstances.
"Where under a synallagmatic (that is, a bilateral or multilateral) contract one party is to perform first but has not yet done so, or is to perform simultaneously with the other but is not able or willing to do so (on the order of performance see Article 7:104), it is both just and commercially convenient for the other party to have the right to withhold or suspend its own performance. This both protects the withholding party from having to advance credit to the non-performer and gives the latter an incentive to perform, since until it does so it will not receive the counter-performance. The well-known exceptio non adimpleti contractus is an expression of this idea. Performance of one obligation may be withheld so long as the other is not fully performed."
Clearly, UNIDROIT Principles Art. 7.1.3 and PECL Art. 9:201(1) should be read together with rules on order of performance (UNIDROIT Principles Art. 6.1.4, PECL Art. 7:104). And it is "the party that is to perform later" has a right to withhold performance under UNIDROIT Principles Art. 7.1.3 or PECL Art. 9:201(1). It is obvious that a party which is obliged to tender performance first is not entitled to withhold performance merely because the other is not willing to perform its part at that stage.
A party may similarly withhold performance for as long as it is clear that there will be a non-performance by the other party when the other party's performance becomes due.
Anticipatory breach (there will be) is expressly dealt with in PECL Art. 9:201(2). It is further stated in the Comment that, a party which is to perform first should have the right to suspend its performance if it is clear that there will be a fundamental non-performance by the other when the other's performance is due, and PECL Art. 9:201(2) so provides. In such case the first party has the right to terminate for anticipatory non-performance under Art. 9:304, but it may prefer to hold the contract open for performance. But it is to be pointed out that, although not so denoted in the text of PECL Art. 9:201(2), the Comment thereon seems to indicate that what is dealt with is anticipatory fundamental non-performance, hence narrower than CISG Art. 71 and more like CISG Art. 72. In that case, the first party has the right to terminate for anticipatory breach and this is what is to be discussed below.
CISG Art. 72 provides, based on the Anglo-American doctrine of anticipatory breach, for a special remedy which allows the innocent party to avoid the contract when it is clear that the other party will not perform at all or will commit a fundamental breach.
Although Art. 72 is a logical continuation of the preceding article, its consequences are quite different. Whereas under Art. 71 the contract continues to exist while only its performance has been suspended, the provisions of Art. 72 permit avoidance of the contract "if prior to the date for performance it is clear that one of the parties will commit a fundamental breach of contract." Honnold has noted some advantages of early avoidance under Art. 72: Where an innocent party (A)'s avoidance responds to the other party (B)'s wrongful repudiation and therefore is clearly justified (Art. 72(3)), A's declaration of avoidance makes it possible for A to resell (or repurchase) the goods called for by the initial contract; A need not be concerned lest B change its mind and tender performance. In addition, by virtue of Art. 75, a reasonably prompt resale or repurchase (even prior to the date for performance) may fix the damages for which the repudiating party will be liable. May A bring legal action before the date for B's performance? Such haste in instituting legal proceedings is seldom of practical value but Arts. 75 and 76 seem to authorize action immediately on avoidance.
It is implicit that a party which exercises a right to terminate the contract for anticipatory non-performance has the same rights as on termination for actual non-performance and is therefore entitled to exercise any of the remedies available, including damages, except that damages are not recoverable where the non-performance at the due date would be excused (due to force majeure). However, while Art. 72(1) clearly gives the injured party the right to avoid in the face of a prospective fundamental breach, the Convention contains no specific rule as regards an immediate action for damages in this situation. Lookofsky sheds some light on this regard: Although it has been suggested that Arts. 75 and 76 may authorize such an action immediately upon avoidance, Section II of Chapter V of the Convention deals with damages for breach, and CISG damages are based on the failure of a party "to perform ... his obligations under the contract or this Convention." Therefore, if an action for damages under Arts. 74-76 is to be based upon a "breach by anticipatory repudiation," we might say that a CISG promise to perform in the future "by implication includes an engagement not deliberately to compromise the probability of performance � ." The CISG protects the expectation interest of the promisee in general, and the promisee should be entitled that his performance expectation be protected against anticipatory repudiation as well. Such a flexible interpretation of the rules on damages would also require that the promisee take steps to mitigate the loss occasioned by a promisor's prospective failure to perform.
Thus, one other consideration that needs to be kept in mind is the possible relationship between Arts. 72 and 77. Art. 77 requires a party who relies on a breach of contract to take measures to mitigate the loss resulting from the breach. It is arguable, for example, that if it is clear that a non-delivery of goods amounting to a fundamental breach is going to occur and that the amount of the losses expected to result from the breach will be greater if prompt action is not taken to make alternative arrangements for the supply of the goods, the obligation to mitigate losses requires avoidance action under Art. 71 even before the breach has occurred. In this regard, it is particularly recalled that, if the expected non-performance were at the same time a fundamental breach of contract, the threatened (potentially aggrieved) party would have a choice between a suspension of performance under Art. 71, or avoidance of the contract under Art. 72. In that case, while a party may be entitled to declare the contract avoided under the prerequisites of Art. 72, he may, however, under Art. 71 also suspend performance of his obligations and wait until the time for performance has expired. But in this context, CISG Art. 77 should be taken into consideration. A contract should definitely be avoided where an immediate avoidance would mitigate the losses.
Indeed, depending on the circumstances, where it is clear that the threatened breach is already fundamental, in its interest the innocent part may need to immediately avoid the contract under Art. 72 without first recourse to suspension under Art. 71. In any event, even if there is no obligation to mitigate losses, clarity can be obtained by avoiding the contract and the way could be opened up for new contracts. When a contract has been declared avoided, the entitled party can immediately claim damages. In any event, where it is in fact clear that a fundamental breach of contract will occur, the duty to mitigate the loss enunciated in Art. 77 may require the party who will rely upon that breach to take measures to reduce his loss, including loss of profit, resulting from the breach, even prior to the contract date of performance. But, on the other hand, it is advisable for the entitled party to decide to wait and first suspend the performance, especially when there are still doubts as to the seriousness of the conditions impeding performance.
(c)	It must be "clear" that a fundamental breach will be committed. The original innocent party's wrongful declaration of avoidance may constitute a repudiation giving the other party the right to avoid the contract under Art. 72(1).
It is true that, according to CISG Art. 72, the other party may declare the contract avoided if, prior to the date of performance of the contract, it is apparent that one of the parties will commit a fundamental breach of contract. The purpose of this provision, however, is only to protect a party against a future breach of contract, and it therefore takes place before the performance, even though the performance was defective.
CISG Art. 72 expressly grants the threatened party to avoid the contract only if it is clear "prior to the date for performance" that the other party will commit a fundamental breach. As held in [7 December 1999 U.S. Federal District Court [Illinois] (Magellan International v. Salzgitter Handel)], the plain language of CISG Art. 72 reveals that, under the Convention an anticipatory repudiation pleader need allege, besides that such breach was fundamental, that "the defendant intended to breach the contract before the contract's performance date." Therefore, an application of Art. 72 CISG is held not possible in [Germany 3 April 1996 Bundesgerichtshof [Federal Supreme Court]], "because the [seller] complied with his contractual obligation to store the goods in a warehouse in Antwerp and to notify the [buyer] that she could pick up the goods, while at the same time sending the documents. With this, the [seller] performed his delivery obligation, even though this performance was defective. Thus, there is no room to assume only an imminent future breach of contract, which is required for the preventive avoidance of contract under Art. 72 (emphasis added)."
It follows, after the parties have performed the contract, neither party is entitled to declare the contract avoided under Art. 72. With respect to breaches of contract that occur only after the obligation has become due, the ordinary provisions applicable thereto remain in force. Especially, Art. 49/64 rather than Art. 72 applies if, at or after the date for performance, a party's failure to perform or nonconforming performance amounts to a fundamental breach. Put it another way, CISG Art. 72 applies only where future performance is still due. Where the non-performance occurred after the performance had become due, the right to declare the contract avoided would be governed by Art. 49/64.
In a word, CISG Art. 72 is a remedy that is only to be used in true circumstances of anticipatory breach and not where an actual breach has already taken place. But it should be stressed that, there is no time limit for such a declaration under CISG Art. 72. If the entitled party first decided to wait, he may avoid the contract at any time before the period for performance expires. This is advisable also when there are still doubts as to the seriousness of the conditions impeding performance. That is to say, the party faced with an anticipatory (fundamental) non-performance may terminate the contract at any time while it remains clear that there will be a fundamental non-performance by the other party.
In addition to the assertion that "the defendant intended to breach the contract before the contract's performance date," an anticipatory repudiation pleader under the Convention need further allege that "such breach was fundamental."
As in the case of avoidance for an actual breach, Art. 72 requires an anticipated breach to be of fundamental character (as to which see Art. 25). Thus, besides actual fundamental breach of contract and failure to comply with a Nachfrist notification under Arts. 49 and 64 of the Convention, "anticipatory" fundamental breach constitutes another ground for avoidance of the contract under CISG Art. 72 (as well as under 73(2)). But the text of CISG Art. 72(1), which "sets out the principal precondition for a rightful [anticipatory] avoidance," itself does not offer much assistance in the determination of fundamental breach. The same standards for determining whether a party commits a fundamental breach apply both to an actual breach and to an anticipatory breach. That is to say, for the purpose of the remedy of termination, an anticipatory fundamental non-performance is equated with a fundamental non-performance after performance has become due.
A typical example of anticipatory (fundamental) non-performance is the case where one party declares that it will not perform the contract. That is to say, a party that declares that it will not perform its obligations satisfies this second precondition. In the context of CISG Art. 72(3), it is possible to conclude that those cases where it is clear that the promisor will not perform his future obligations are envisaged by the reference to fundamental breach under Art. 72(1). Thus, for instance, in [7 December 1999 U.S. Federal District Court [Illinois] (Magellan International v. Salzgitter Handel)], where the seller stated it would "no longer feel obligated" to perform and would "sell the material elsewhere," the Court holds that this would entitle the buyer to avoid the contract. However, if a party indicates that it will perform but that its performance will be late, this does not constitute an anticipatory fundamental non-performance except where time of performance is of the essence of the contract or the threatened delay is so serious as to constitute a fundamental non-performance.
It is clear that a fundamental breach of contract will be committed when the other party declares that he will not perform his obligations. In other cases, the circumstances also may indicate that there will be a fundamental non-performance. In this context, an example that is given quite often is bankruptcy. Most of the laws deal with the situation where the other party becomes insolvent. Enderlein & Maskow believe, however, that a distinction has to be made of whether it is the seller or the buyer who goes bankrupt since, depending on the circumstances, his receiver may still perform the contract. CISG Art. 72 includes, but is not limited to, cases of insolvency. According to the Tribunal in [Germany 29 December 1998 Hamburg Arbitration award], conditioning delivery on new demands beyond those agreed upon is an anticipatory repudiation of the contract. Still, it is noted in the UNCITRAL Digest, the fundamentality of breach within CISG Art. 72(1) has been found to be satisfied in the following circumstances: the buyer's failure to pay for prior shipments; the buyer's failure to open a letter of credit; the seller's failure to reduce price and to commit to deliver fashion goods on time; the seller's deliberate termination of delivery of goods. However, in the following circumstances it is found not satisfied: where the seller had held back the goods; where the seller expressed an interest in stopping deliveries but also agreed to continue negotiations; the buyer's failure to pay one installment.
In sum, an anticipatory, fundamental breach of contract is, except when there is an express statement by the obligor, a presumption which is based on objective factors. Art. 72 thus combines in one rule the refusal to perform and an anticipated objective impossibility to perform. In any event, termination in the context of an anticipatory breach is permitted only where the obligation of which non-performance is threatened is of such kind that its breach would entitle the aggrieved party to terminate the contract. At the same time, it is important to emphasize that whatever may be construed as a fundamental breach, this factor does not create the foundation to apply Art. 72 itself; application must be interpreted in connection with the rest of the criteria (above section 4.2 and below sections 4.3, 5) and take into account all of the circumstances of the case.
The most difficult aspect of interpreting CISG Art. 72, is to establish what measure of certainty is required that a fundamental breach will occur. A right to avoid an agreement on the basis of anticipatory breach requires in the language of Art. 72(1) CISG that it is clear that the other party will commit a fundamental breach of contract.
The majority opinion seems to be that Art. 72 requires "a higher standard of prospective certainty" than Art. 71. In this regard, while Art. 71 says "it becomes apparent" that the other party will not perform a substantial part of his obligations, Art. 72 mentions that "it is clear" that the other parties will commit a fundamental breach of contract. According to Schlechtriem, however, this is a linguistically somewhat lower ceiling but not to a fundamental difference. Schlechtriem submits that the different formulations do not require different degrees of certainty - such a requirement would hardly be practicable anyway. In Art. 73(2), the same wording originally used in Art. 71(1) - "good grounds to conclude" - was retained for the case where a fundamental breach is anticipated with regard to installment contracts. The decisive factor in all three provisions - Arts. 71(1), 72(1) and 73(2) - is whether a reasonable person would be convinced that a breach of contract is certain to occur. Moreover, another reason for not requiring a higher degree of certainty under Art. 72(1) is that otherwise, a serious refusal to perform would never be "certain" enough under Art. 72(3) since an obligor can always change his intentions until the time for performance.
But it also appears that the drafters would not have used two different phrases, and in particular, two different adjectives describing the certainty of the prospective breach, had they not intended to distinguish the certainty of the threatened breach that would satisfy the standards of the respective articles. In summary, it is necessary to emphasize that the barrier between the standard of "apparency" used in Article 71 and "clearness," determining the right to declare a contract avoided is very fragile. However, it is reasonable to state that Art. 71 "requires less certainty concerning a future breach than avoidance under Article 72." Of course, in application of the "freedom of contract" principle in line with CISG Art. 6, both parties may provide some other criterion to distinguish "apparency" (in Art. 71) and "clearness" (in Art. 72) of non-performance.
Although there is no bright-line standard for determining the degree of certainty needed to anticipate fundamental breach, there should be a very high degree of probability that the breach will occur. In any event, "a suspicion, even a well-founded one, is not sufficient." Indeed, the party avoiding the contract will need in his own interest to ensure that it is clear that the breach is going to occur; otherwise his action may be invalid and lead to the result that his own subsequent non-performance amounts to a breach and possible liability for damages. There need not, however, be absolute certainty. Since paragraph 2 envisages the possibility that adequate assurance be provided and the contract be performed in the end, there need not be a fundamental breach of contract. Of course, this does not mean a probability almost reaching certainty. In this regard, "a 'common assumption' or 'plausible reasons' are generally mentioned." Thus, the general held view is that very high probability that there will be a fundamental breach rather than complete certainty is required.
Some particular examples of these criteria could be helpful in this regard. What circumstances make it "clear" that a party "will commit a fundamental breach of contract"? The typical case is where the other party has declared that he will not perform his obligations; such a "repudiation" would, in itself, make the prospect of a forthcoming fundamental breach (abundantly) "clear." Of particular relevance, Art. 72(3) shows that a party's declaration "that he will not perform his obligations" empowers the aggrieved party to declare the contract avoided, even though such a declaration does not make it absolutely "clear" that the repudiating party will not change his mind and perform by the due date. There is the same clarity when the other party denies the very existence of a sales contract. It is also clear that a fundamental breach of contract will be committed when the seller resells to a third party the goods that he had contracted to deliver to the buyer, or when he sells the machines with which he had agreed to produce the goods for the buyer. A breach of contract is also clear in the case of insolvency and the initiation of bankruptcy proceedings. In addition, when the particular reasons specified in Art. 71(1) becomes so serious that it is clear that a fundamental breach of contract will be committed, the threatened party will also have grounds for avoidance.
Generally speaking, the future fundamental breach may be clear either because of the words or actions of the party which constitute a repudiation of the contract or because of an objective fact, such as the destruction of the seller's plant by fire or the imposition of an embargo or monetary controls which will render impossible future performance. Among other things, difficulties in this regard are unlikely to arise when the other party has made a statement repudiating the contract, but care will be needed when no such statement has been made and the avoidance is to be based on objective facts from which the anticipated breach is to be inferred. In any event, if a party declares the contract avoided without a fundamental breach of contract by the other party being anticipated, the former commits a fundamental breach of contract. Therefore, a party who intends to declare the contract avoided pursuant to Art. 72 should do so with caution.
In order for the anticipatory termination to be justified, "it must be clear that a party is not willing or able to perform at the due date. If its behavior merely engenders doubt as to its willingness or ability to perform the other party's remedy is to demand an assurance of performance." In this regard, the failure by a party to give adequate assurances that he will perform when properly requested to do so under CISG Art. 71(3) may help make it "clear" that he will commit a fundamental breach. Furthermore, the notification procedure in Art. 72(2) could be helpful in this regard to the party proposing to avoid the contract. The absence of an assurance of performance in response to a notice under that paragraph would normally tend to make it clear that a breach is going to occur. On the other hand, if the notice results in the provision of an assurance of performance, the party proposing to avoid the contract will have an opportunity to assess the adequacy of that assurance.
These notification and adequate assurance procedures will be discussed below. As to be shown below, as regards an anticipatory breach, "it seems plausible to argue that, except for cases where the promisor is unable or unwilling to perform or where the circumstances would not allow for reasonable notice, avoidance may only be based on the failure of the promisor to provide adequate assurance in compliance with a reasonable notice."
Under the Convention, Art. 71(3) provides that the party suspending performance pursuant to Art. 71(1) or stopping the goods in transit pursuant to Art. 71(2) must immediately notify the other party of that fact. As in the case of suspension of performance under Art. 71, the party intending to declare the contract avoided under Art. 72 must, if time permits, give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance (Art. 72(2)).
- But at the same time, it is also noted that, the circumstances in which time would not allow for reasonable notice to be given under Art. 72(2) seem unlikely to arise frequently. Modern methods of communication would normally permit such a notice without unduly hampering the aggrieved party's freedom of action.
In practice, the notice of an intended avoidance of contract is frequently linked with the notice of the suspension of performance. In many cases it is likely that both Arts. 71 and 72 will be applicable, for example, where the anticipated breach is of a fundamental character. Suspension of performance is the less drastic remedy and it has the advantage that it can be effected without delay because prior notification of intention to the other party is not required. However, a notice to the other party is required immediately after performance has been suspended, and if both the articles are applicable, it might be desirable that the notice comply with the requirements of both - by informing the other party that performance by the party giving the notice has been suspended and that he intends to declare the contract avoided.
"Such a right of suspension is associated with a concurrent obligation (emphasis added) of notification and information pursuant to Art. 71(3) CISG. If the [seller] wanted to exercise his right of suspension, the [seller] was obligated to inform the [buyer] about any existing or arisen doubts with regards to her creditworthiness or ability to perform her duties and liabilities under the sales contract. The [seller] has not demonstrated or given evidence that he gave any such notice and information to the [buyer]. Such a notification would have been an absolutely necessary prerequisite (emphasis added) for exercising [seller]'s right of suspension for anticipatory breach."
"The party suspending performance must immediately give notice of the suspension to the other party (Art. 71(3) CISG). As soon as she has made the decision to suspend her performance, she is bound to inform the other party without delay, which regularly requires an appropriate sending of the notice as stipulated by Art. 27 CISG (citations omitted). The [buyer] did not give any such notice.
"Simply failing to pay the purchase price does not replace the notification that payment of the purchase price is being suspended until the other party properly fulfils the contract. Such a suspension of performance would furthermore contradict [buyer's] own submission, according to which the parties had agreed on a modification of contract by reducing the purchase price. Following the submission, a suspension of performance until a substitute delivery was effected was thus not the [buyer's] intent. Since the [buyer] did not notify the [seller] of the suspension, she was not entitled to suspend her performance (citation omitted [referring to Germany 31 January 1991 Amtsgericht [Lower Court] Frankfurt]). The declaration was issued for the first time in the brief arguing the appeal on 2 December 1999 (after three years) and was thus belated. The [buyer] is therefore not entitled to rely on Art. 71(1) CISG."
According to Art. 72(2), "reasonable notice" must also be given for a party to avail itself of the avoidance provisions in Art. 72. It is conceivable that reasonable notice for that purpose might involve a delay which would be prejudicial to the interests of the party giving the notice, and in that event it may be possible to place reliance on the words "if time allows." Generally, however, the giving of notice under Art. 72(2) will be in the interests of the party proposing to declare the contract avoided because its effect will be to establish whether it is in fact "clear" that the fundamental breach will be committed, thereby removing the risk of liability arising in consequence of an invalid declaration. In any event, advance notice "if time allows" would be consistent with good faith and normal commercial practice and, indeed, would reduce the hazards of making a declaration of avoidance.
But, as expressly stated in Art. 72(3), if a party declares that he will not perform his obligations, notice need not be given; in that such a "repudiation" would, in itself, make the prospect of a forthcoming fundamental breach (abundantly) "clear." However, it is not clear whether such a "repudiation" may relieve the notification requirement for suspension under Art. 71. The answer seems to be no, otherwise the notice requirement of Art. 71 is senseless because the case where a party declares that he will not perform his obligations, may be just one ground justifying invoking Art. 71 but not yet a fundamental breach; hence Art. 72 would be inapplicable. In a word, Art. 71(3) requires immediate notice of suspension with no exceptions. In contrast, Art. 72(2) requires "reasonable" prior notice only if time allows and excuses the notice if the other party has declared that it will not perform. According to Art. 72(3), there is no need to give notice in advance of the intention to avoid the contract. But also in this case, the other party has a right and no obligation (except in regard to mitigation of losses) to declare the contract avoided. If the entitled party does not avoid the contract, and if the obligor changes his mind, the latter may still fulfil the contract. On the other hand, the obligee does not have to wait and see whether the obligor changes his mind; he can avoid the contract immediately. In such a case, the declaration of an intended non-performance of the contract is irrevocable.
One should always keep in mind that CISG does not recognize the concept of ipso facto avoidance: The contract is avoided as a result of the breach only if the aggrieved party declares the contract avoided. Automatic or ipso facto avoidance was deleted from the remedial system in this Convention because it led to uncertainty as to whether the contract was still in force or whether it had been ipso facto avoided. Under CISG Art. 26, the contract is still in force unless the aggrieved party has affirmatively declared it avoided. So, except for the case of Art. 72(3), it has been incumbent upon the Claimant (according to Art. 72 (2)) of CISG to give notice to the Respondent regarding its intent to declare the Agreement avoided and to issue a subsequent declaration of avoidance. In this regard, it is to be particularly noted that the notice within CISG Art. 72(2) is different from the declaration of avoidance which is a prerequisite for termination according to CISG Art. 26. So, except for the case of Art. 72(3), it has been incumbent upon the Claimant (according to Art. 72(2)) of CISG to give notice to the Respondent regarding its intent to declare the Agreement avoided and to issue a subsequent declaration of avoidance.
"With respect to anticipatory breach, CISG invests the potentially prejudiced Party with a right of suspending (Article 71) or terminating, avoiding in the parlance of CISG (Article 72) the contract. However, in order for the Party to suspend or terminate his performance, he must give immediate or reasonable, respectively, notice of the suspension or termination. The only situation where this may be dispensed is (according to Article 72) in the event where the other Party has declared that he will not perform his obligations. These requisites which are a reflection of the rule of positive Vertragsverletzung of German customary law is obviously motivated by a concern that the other Party is made clear of the position of its counter party, placing him in a position to provide assurance that he will in fact perform (emphasis added) and thereby defeating the assumption of anticipatory breach and the concomitant threat to the orderly fulfillment of the contract."
As discussed above, the notification requirement plays a significant role in the operation of both Art. 71 and Art. 72, for the benefits of both parties. In respect of this requirement, what is to be firstly clarified is: The notice of intention under both CISG Arts. 71 and 72 is subject to Art. 27 and, when properly sent, need not, therefore, be received. The risk of transmission is borne by the addressee. If it is lost, the party entitled to suspend performance or avoid the contract does not lose that right. It should, however, be in his own interest to make sure that the notice reaches the other party.
An issue that remains to be clarified is: What is the effect following a failure to give a notice of intention as required under Art. 71(3) or 72(2)? In this regard, although Art. 71(3) does not state expressly the sanction for failing to give immediate notice of suspension, decisions (e.g., the cases keyed to supra. nn. 207, 208) uniformly conclude that in the absence of due notice, the aggrieved party may not rely on its right to suspend performance. This follows in substance from the reading of Art. 71(3) that a party suspending performance "must immediately give notice of the suspension." Hence, where such necessary notification and information is not provided, the other party who is to receive the notice of the suspended performance is entitled to claim for damages.
On the other hand, however, there are different opinions on whether the obligation to give advance notice is a condition precedent for the valid exercising of the right to avoid under CISG Art. 72. It is submitted that in interpreting the duty to inform, a court should follow a stricter approach towards the necessity to inform if regard is had to the approach followed under the UNIDROIT Principles. If there is doubt on whether the innocent party should have informed or not, the court ought to rule in favor of the innocent party, i.e., that there was no duty to inform. In terms of Art. 7.3.3 of the UNIDROIT Principles, a party is not obliged to inform the other party, but may as a precaution require an adequate assurance of due performance under UNIDROIT Principles Art. 7.3.4, failing which that party is entitled to terminate the agreement. In the very interest of the obligee, it should be reasonable in most cases to give notice of an avoidance of contract. This is contradicted by circumstances only where there is absolute certainty of future fundamental breaches of contract (Art. 72(3)).
In any event, the main object of the notice requirement is to enable the other party to provide adequate assurance of his performance. Therefore, it is further required in Art. 72(2) that the notice must be "reasonable" in order to permit the other party time to provide adequate assurance of his performance. On the other hand, although Art. 71(3) does not expressly require a notice of suspension to state the ground upon which the suspension has been based, in practice it would also be most desirable that the ground be stated so that the party receiving the notice is placed in a position in which he can decide what action on his part is needed to provide adequate assurance of his performance. The need to observe good faith in international trade would be relevant in this connection.
Of course, in light the purpose thereunder, a notice within Art. 71 or 72 is reasonable whenever there is a chance that the other party will provide assurance of performance. But what constitutes an adequate assurance will depend upon the circumstances. In some cases the other party's declaration that it will perform will suffice, while in others a request for security or for a guarantee from a third person may be justified.
As indicated above, the party intending to suspend the performance or to avoid the contract must give, with limited exceptions but in most cases in the very interest of the intending party, notice of his intent, the object of which is to enable the other party to provide adequate assurance that the latter will perform.
As clearly indicated in Art. 71(3), if the other party responds by providing adequate assurance of performance, the party giving the notice "must continue with performance," and thus refrain from declaring the contract avoided. In this sense, a party's right to suspend performance is limited by the reciprocal right of the other party to provide adequate assurance that it will perform. If the party provides such assurance, then the party is prohibited from continuing the suspension. In light that the other party can reinstate the first party's obligation to continue performance by giving the first party adequate assurance that he will perform; for such an assurance to be "adequate," it must give reasonable security to the promisee that either the promisor will perform in fact, or that the promisee will be compensated for all losses incurred in executing his own performance.
"The question whether an assurance is adequate will depend on the circumstances which gave rise to the threat of non-performance. The assurance will need to be such as to remove that threat. Generally this will call for more than a mere statement of intention and ability to perform. Where, for example, the threat of non-performance by a purchaser was based on the fact that he was not paying his debts as they fell due, an assurance would not be adequate unless it indicated that he had re-established current payments. Where the basis of a suspension of performance had been an apprehended inability to supply due to a strike of workers in the seller's factory, an assurance would need to indicate that the strike had been settled or that an alternative source of supply was available. On the other hand, where a suspension of performance had been based on a mere statement by the other party that he did not intend to perform his obligations, a later statement that he would now be performing as required by the contract may be adequate. A party who had suspended his performance would not be entitled to insist upon an assurance which would provide him with security for performance of a kind that was not provided for in the contract. Nor, it seems, would he be entitled to insist on 'perfect' performance by the other party. An assistance would be sufficient to oblige the suspending party to continue with performance if any performance which is not assured does not amount to a substantial part of the obligations of the party giving the assurance. Of course a non-performance of that order may, nevertheless, give rise to a right to damages (see Article 74)."
"Suppose that the assurance shows that full performance will occur but after a slight delay. Continued suspension of performance is closely akin to avoidance of the contract; the answer to the above question should be consistent with the principles on avoidance in Article 25, 49, 64 and with the rule of Article 71(1) authorizing suspension only when there is a threat of non-performance by the other party of 'a substantial part of his obligations.' An assurance under Article 71(3) should be 'adequate' even if it involves an insubstantial non-conformity in performance. [Annotation omitted.] Of course, a party in breach must compensate the other party for damages (Art. 74); the likelihood of even minor damages may well call for adequate assurance for the payment of the damages."
Presumably, the same principle should apply under Art. 72(2). Thus an assurance of imperfect performance should preclude avoidance under Art. 72 as long as the performance that is assured would not constitute a fundamental breach. If the assured performance would involve a "substantial" but not fundamental breach, therefore, the aggrieved party could not avoid but could apparently continue to suspend performance under Art. 71. In this context, however, reference should be made to assurance in the sense of security for damage claims in case of non-performance  If the party suspending performance suffers damages because the other party did not provide adequate assurances as required by this Art. 71, he may recover any damages he may have suffered, whether or not he declares the contract avoided. Of course, if that party did not declare the contract avoided, the measure of damages would be only calculated according to Art. 74, because the application of either Art. 75 or 76 is preconditioned by a declaration of avoidance.
In any event, where a party who has suspended performance receives an adequate assurance from the other party, he is required by the article to continue with performance. He should, however, inform the other party that he has accepted the adequacy of the assurance and is continuing with performance, although there is no express requirement to this effect in Art. 71. When the other party provides adequate assurance, such assurance may cover two events: (a) the grounds which led to the suspension of performance have been overcome; and (b) the grounds were not existent at all. In the latter case, the suspending party may already have committed a breach of contract including all the consequences ensuing from it. Suspension of performance may, therefore, also entail a certain risk. The other party might, in certain circumstances, not only claim damages because of the delay but also because of the costs incurred in providing additional assurances.
There is a difference of opinion, however, among commentators on whether a failure or a refusal to produce adequate security where it has been demanded is in itself a fundamental breach or whether it may only be a clear indication that the other party will commit a fundamental breach. According to Bennett, suspension of performance under Art. 71 has been kept separate from avoidance under Art. 72 and it follows that the contract continues in existence unless and until it is avoided. Frequently, however, a failure to provide an adequate assurance will justify a conclusion that a fundamental breach will be committed and avoidance for anticipatory breach will be possible.
In this regard, Art. 7.3.4 UNIDROIT Principles or PECL Art. 8:105 may be of assistance in interpreting the interplay between CISG Arts. 72 and 71 as Art. 7.3.4 UNIDROIT Principles or PECL Art. 8:105 makes express provision for the innocent party to demand an adequate assurance where it reasonably suspects that there will be a fundamental non-performance. In terms of Art. 7.3.4 UNIDROIT Principles or PECL Art. 8:105, it is clearly stipulated that a failure to provide this assurance within a reasonable period of time entitles the other party to terminate (avoid) the agreement. It is even stated in the PECL Comment that, the other party's failure to give the assurance requested is itself treated as a fundamental non-performance, giving the aggrieved party the right to terminate the contract and also a right to damages where the deemed non-performance is not excused.
In any event, if the other party provides no assurance, this can be at least seen as an indication of an anticipatory, fundamental breach of contract, and the party empowered to suspend performance of his obligations can avoid the contract under Art. 72. He may, however, also wait until the time for performance has passed and, in the case of non-performance, avoid the contract under Art. 49 or 64.
1. See Jelena Vilus in "Provisions Common to the Obligations of the Seller and the Buyer": Petar Sarcevic & Paul Volken eds., International Sale of Goods: Dubrovnik Lectures, Oceana (1986); p. 241; available at: <http://www.cisg.law.pace.edu/cisg/biblio/vilus.html>.
2. See Joseph Lookofsky in "The 1980 United Nations Convention on Contracts for the International Sale of Goods": J. Herbots editor/R. Blanpain general editor, Suppl. 29 International Encyclopaedia of Laws - Contracts, Kluwer Law International (December 2000), p. 147; available at: <http://www.cisg.law.pace.edu/cisg/biblio/loo71.html>.
3. See Comment on Art. 7.3.3 UNIDROIT Principles; available at: <http://www.cisg.law.pace.edu/cisg/principles/uni71,72.html>.
4. See Bennett in Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds., Milan (1987), p. 518; available at: <http://www.cisg.law.pace.edu/cisg/biblio/bennett-bb71.html>.
5. See Tatsiana Seliazniova in "Prospective Non-Performance or Anticipatory Breach of Contract (Comparison of the Belarusian Approach to CISG Application and Foreign Experience)": 24 Journal of Law and Commerce (Fall 2004) 111-140; available at: <http://www.cisg.law.pace.edu/cisg/biblio/seliazniova.html>. (Citing at fn. 7 John E. Murray & Harry M. Flechtner, Sales, Leases and Electronic Commerce: Problems and Materials on National and International Transactions 300 (2nd edition, 2003).).
6. See Jianming Shen in "Declaring the Contract Avoided: The U.N. Sales Convention in the Chinese Context": New York International Law Review, Vol. 10, No. 1, New York State Bar Association (Winter 1997); pp. 20-21; available at: <http://www.cisg.law.pace.edu/cisg/biblio/shen.html>.
7. See Tatsiana Seliazniova; supra. n. 5.
8. See Comment and Notes to PECL Art. 9:304: Note 1; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp72.html>.
9. See Tatsiana Seliazniova; supra. n. 5.
10. Comment A on PECL Art. 9:304; supra. n. 8.
11. See S. G. Estrin, Breach of the Contract as a Ground for Compensation of Damages (2000), available at: <http://www.LawyersUkraine.com> (quoted at fn. 3 in Tatsiana Seliazniova; supra. n. 5).
12. See Jacob S. Ziegel in Galston & Smit ed., International Sales: The United Nations Convention on Contracts for the International Sale of Goods, Juris Publishing, Matthew Bender (1984), Ch. 9, p. 9-35; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ziegel6.html>.
13. See Bennett, supra. n. 4; p. 518.
14. For a brief survey of domestic solutions, see Notes 1 to 3 to PECL Art. 9:304; supra. n. 8.
15. See Jacob S. Ziegel, supra. n. 12; p. 9-35.
17. See Tatsiana Seliazniova; supra. n. 5.
18. See Joseph Lookofsky, supra. n. 2; p. 147.
19. Ibid; see also Jianming Shen; supra. n. 6; p. 21.
20. See Harry M. Flechtner in "Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C.": 8 Journal of Law and Commerce (1988) 53-108; available at: <http://www.cisg.law.pace.edu/cisg/text/flecht71,72.html>.
21. See Tatsiana Seliazniova; supra. n. 5.
22. See John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Kluwer Law International, The Hague (1999), p. 437; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ho72.html>.
23. See Joseph Lookofsky, supra. n. 2; p. 147.
24. See Bennett, supra. n. 4; p. 514.
25. See Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene,Virginia Maurer and Marisa Pagnattaro in "The Interpretive Turn in International Sales Law: An Analysis of Fifteen Years of CISG Jurisprudence": 34 Northwestern Journal of International Law and Business (Winter 2004); p. 411; available at: <http://www.cisg.law.pace.edu/cisg/text/anno-art-71.html>.
26. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/71: Digest 1; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.
28. See Larry A. DiMatteo, etc.; supra. n. 25; p. 411.
29. See Bennett, supra. n. 4; p. 519.
30. See Bennett, supra. n. 27; p. 527.
31. See Secretariat Commentary on 1978 Draft Art. 63 [draft counterpart of CISG Art. 72]: Comment 1; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-72.html>.
32. See Bennett, supra. n. 27; p. 528.
34. See Bennett, supra. n. 27; p. 528.
35. See Joseph Lookofsky, supra. n. 2; p. 148.
36. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/72: Digest 2; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.
37. See Bennett, supra. n. 27; p. 528.
38. See Jacob S. Ziegel, supra. n. 12; p. 9-34.
39. See Sieg Eiselen in "Remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Articles 71 and 72 of the CISG" (September 2002); available at: <http://www.cisg.law.pace.edu/cisg/principles/uni71,72.html#er>; also in "Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 71 and 72 of the CISG" (September 2002); available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp71,72.html#er>.
40. See John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Kluwer Law International, The Hague (1999), p. 428; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ho71.html>.
41. UNICITRAL Digest 2 on CISG Art. 72; supra. n. 36.
42. See Harry M. Flechtner; supra. n. 20.
43. See Bennett, supra. n. 4; p. 519.
44. See Bennett, supra. n. 27; p. 529.
45. See Sieg Eiselen; supra. n. 39.
46. See Bennett, supra. n. 27; p. 529.
47. See Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Oceana Publication (1992), p. 286; available at: <http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html>.
48. UNICITRAL Digest 2 on CISG Art. 72; supra. n. 36.
49. See Sieg Eiselen; supra. n. 39.
50. See Joseph Lookofsky in "The 1980 United Nations Convention on Contracts for the International Sale of Goods": J. Herbots editor/R. Blanpain general editor, Suppl. 29 International Encyclopaedia of Laws - Contracts, Kluwer Law International (December 2000), p. 150; available at: <http://www.cisg.law.pace.edu/cisg/biblio/loo72.html>.
51. See Sieg Eiselen; supra. n. 39.
52. Comment on Art. 7.3.3 UNIDROIT Principles; supra. n. 3.
53. See Sieg Eiselen; supra. n. 39.
54. See Comment on Art. 7.3.4 UNIDROIT Principles: Comments 1, 2; available at: <http://www.cisg.law.pace.edu/cisg/principles/uni71,72.html>.
55. See Sieg Eiselen; supra. n. 39.
57. See Sieg Eiselen; supra. n. 39.
58. Comment A on PECL Art. 9:304; supra. n. 8.
59. Comment C on PECL Art. 9:304; supra. n. 8.
60. See Comment and Notes to PECL Art. 8:105: Comment A; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp71.html>.
61. See Sieg Eiselen; supra. n. 39.
62. Note 1 to PECL Art. 8:105; supra. n. 60.
63. See Jianming Shen; supra. n. 6; p. 21.
64. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 284.
65. UNICITRAL Digest 1 on CISG Art. 71; supra. n. 26.
67. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 284.
68. See John O. Honnold, supra. n. 40; p. 427.
69. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 284.
70. See Judgment by Landgericht [District Court] Stendal; Germany, 12 October, 2000; No. 22 S 234/94. English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen; available at: <http://www.cisg.law.pace.edu/cases/001012g1.html>. See also Secretariat Commentary on 1978 Draft Art. 62 [draft counterpart of CISG Art. 71]: Comment 14; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-71.html>; where it is stated: "The first party's obligation to perform remains suspended until either (1) the other party performs his obligations, (2) adequate assurances are given, (3) the first party declares the contract avoided, or (4) the period of limitation applicable to the contract has expired [under the Convention on the Limitation Period in the International Sale of Goods, Art. 8, this period would be four years. That Convention does not prescribe as to whether the rights under the contract are terminated or whether it is the right of a party to commence an action to enforce such a right which is terminated]."
71. See Sieg Eiselen; supra. n. 39.
72. See Jelena Vilus; supra. n. 1; p. 243.
74. UNICITRAL Digest 1 on CISG Art. 71; supra. n. 26.
75. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 284.
76. See Judgment by Landgericht [District Court] Stendal; Germany, 12 October, 2000; supra. n. 70.
77. See Bennett, supra. n. 4; p. 521.
78. See Harry M. Flechtner in "The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1)": 17 Journal of Law and Commerce (1998) 187-217; available at: <http://www.cisg.law.pace.edu/cisg/text/flechtner71,72.html>.
79. < See Bennett, supra. n. 4; p. 521.
80. See Comment 1 on UCC Sec. 2-609: Uniform Commercial Code 2000 Official Text with Comments included in "Selected Commercial Statutes", West Group, 2000.
81. See Jelena Vilus; supra. n. 1; p. 242.
82. Bennett (supra. n. 4; pp. 519-520) gives the following examples of when suspension of performance would be possible under Art. 71(1): "Deficiency in seller's ability to perform: Production at the seller's factories may have been held up by a strike, which is likely to continue for some time. By suspending performance the buyer will render it, unnecessary to make a prepayment, to establish a letter of credit to cover the price of future deliveries or to take preliminary steps such as the making of shipping arrangements or the handing over of documents. However, suspension of performance does not involve authority to take other action such as disposing of goods held for the buyer or purchasing replacement goods." "Deficiency in buyer's credit-worthiness: A buyer may fall behind in his payments to a seller in respect of other contracts. This could indicate a serious deficiency in the buyer's credit-worthiness. If it also becomes apparent that as a result of that deficiency the buyer will not pay for goods that the seller is to procure and supply under the contract in question, the seller will be entitled to cease procuring and supplying those goods." "Conduct in performing the contract: A buyer who has contracted for precision parts, which he intends to use immediately upon delivery, may discover that, although there has been no deterioration in the seller's ability to perform and deliver parts of the quality required, defective deliveries are being made to buyers with similar needs. If the reason for these defective deliveries is that the seller has been using raw material from a particular source and if the seller is proposing to use material from that source for the contract in question, the buyer will be entitled to suspend his performance."
84. See John O. Honnold, supra. n. 40; p. 430.
85. See Harry M. Flechtner; supra. n. 20; p. 96.
88. See Bennett, supra. n. 4; p. 514.
89. See Tatsiana Seliazniova; supra. n. 5.
90. See Jelena Vilus; supra. n. 1; p. 242.
91. See Tatsiana Seliazniova; supra. n. 5.
92. See Bennett, supra. n. 4; pp. 521-522.
93. See Jelena Vilus; supra. n. 1; p. 242.
94. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 285.
95. See Alejandro M. Garro in "Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods": 23 International Lawyer (1989); pp. 443-483; available at: <http://www.cisg.law.pace.edu/cisg/biblio/garro1.html>.
96. See Harry M. Flechtner; supra. n. 20.
97. See Bennett, supra. n. 4; p. 522.
98. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 285.
99. See Bennett, supra. n. 4; p. 522.
100. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 285.
101. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; pp. 285-287.
102. See Bennett, supra. n. 4; p. 524.
103. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 285.
105. See John O. Honnold, supra. n. 40; p. 432.
106. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 287.
107. See John O. Honnold, supra. n. 40; p. 432.
108. See Bennett, supra. n. 4; p. 520.
109. See John O. Honnold, supra. n. 40; p. 432.
110. See Bennett, supra. n. 4; p. 521.
111. Comment 11 of Secretariat Commentary on 1978 Draft Art. 62 [draft counterpart of CISG Art. 71]; supra. n. 70.
112. See John O. Honnold, supra. n. 40; p. 433.
113. See Bennett, supra. n. 4; pp. 520-521.
114. Comment 12 of Secretariat Commentary on 1978 Draft Art. 62 [draft counterpart of CISG Art. 71]; supra. n. 70.
115. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 288.
116. See John O. Honnold, supra. n. 40; p. 433.
117. See Jelena Vilus; supra. n. 1; pp. 243-244.
119. See Joseph Lookofsky, supra. n. 2; p. 149.
120. See Comment on UNIDROIT Principles Art. 7.1.3.
122. See Comment and Notes to PECL Art. 9:201: Comment A; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp71.html>.
123. Comment C on PECL Art. 9:201; supra. n. 122.
124. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 284.
125. Comment C on PECL Art. 9:201; supra. n. 122.
126. See Sieg Eiselen; supra. n. 39.
127. See Jelena Vilus; supra. n. 1; p. 245.
128. See John O. Honnold, supra. n. 22; p. 439.
129. Comment D on PECL Art. 9:304; supra. n. 8.
130. See Joseph Lookofsky, supra. n. 50; p. 150. Cf. Stoll, according to whom there would be an immediate right to claim damages in the case of a refusal to perform, whereas in other cases there would not be such a claim before the performance is due and/or there would be no such claim at all if the obligor is not liable under Arts. 79 or 80 (cited in Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291).
131. See Bennett, supra. n. 27; pp. 528-529.
132. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 286.
133. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 292.
135. Comment 4 of Secretariat Commentary on 1978 Draft Art. 63 [draft counterpart of CISG Art. 72]; supra. n. 31.
136. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 292.
137. See Sieg Eiselen; supra. n. 39.
138. See Bennett, supra. n. 27; p. 528.
139. See Larry A. DiMatteo, etc.; supra. n. 25; p. 415.
140. See John O. Honnold, supra. n. 22; p. 438.
141. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany 15 February 1995. No. VIII ZR 18/94. Translation by Walter, Conston, Alexander & Green, P.C., translation edited by William M. Barron, Esq.; Birgit Kurtz, Esq.; available at: <http://www.cisg.law.pace.edu/cases/950215g1.html>.
142. See Magellan International v. Salzgitter Handel: Judgment by U.S. District Court, Northern District of Illinois, 7 December 1999; No. 99 C 5153; available at: <http://www.cisg.law.pace.edu/cases/991207u1.html>.
143. See Judgment by Bundesgerichtshof [Federal Supreme Court]; Germany 3 April 1996. No. VIII ZR 51/95. Translation by Dr. Peter Feuerstein, translation edited by Ruth M.Janal; available at: <http://www.cisg.law.pace.edu/cases/960403g1.html>.
144. See Larry A. DiMatteo, etc.; supra. n. 25; p. 417.
145. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany 15 February 1995; supra. n. 141.
146. UNICITRAL Digest 1 on CISG Art. 72; supra. n. 36.
147. See Abstract by Robert Koch on the Judgment of Oberlandesgericht [Appellate Court] Düsseldorf; Germany 18 November 1993. No. 6 U 228/92; available at: <http://www.cisg.law.pace.edu/cases/931118g1.html>.
1487. See Sieg Eiselen; supra. n. 39.
149. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 292.
150. Comment E on PECL Art. 9:304; supra. n. 8.
151. See Magellan International v. Salzgitter Handel, 7 December 1999; supra. n. 142.
152. See Bennett, supra. n. 27; p. 528.
153. See Jianming Shen; supra. n. 6; p. 20.
154. UNICITRAL Digest 4 on CISG Art. 72; supra. n. 36.
155. See Robert Koch in "The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG)": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999), p. 303; available at: <http://www.cisg.law.pace.edu/cisg/biblio/koch.html>.
156. Comment A on PECL Art. 9:304; supra. n. 8.
157. Comment on Art. 7.3.3 UNIDROIT Principles; supra. n. 3.
158. UNICITRAL Digest 5 on CISG Art. 72; supra. n. 36.
159. See Robert Koch, supra. n. 155; p. 303.
160. See Magellan International v. Salzgitter Handel, 7 December 1999; supra. n. 142.
161. Comment B on PECL Art. 9:304; supra. n. 8.
162. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291.
163. Comment on Art. 7.3.3 UNIDROIT Principles; supra. n. 3.
164. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291.
165. Note 1 to PECL Art. 8:105; supra. n. 60.
166. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291.
167. See Judgment by Schiedsgericht Hamburger Freundschaftliche Arbitrage [Arbitral Tribunal], Germany 19 December 1998. Translation by Todd Fox, translation edited by Dr Loukas Mistelis; available at: <http://www.cisg.law.pace.edu/cases/981229g1.html>.
168. UNICITRAL Digests 6, 7 on CISG Art. 72; supra. n. 36.
169. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291.
170. Comment B on PECL Art. 9:304; supra. n. 8.
171. See Tatsiana Seliazniova; supra. n. 5.
172. See Judgment of ICC Arbitration Case No. 8574 of September 1996; available at: <http://www.unilex.info/case.cfm?pid=1&do=case&id=521&step=FullText>.
173. See Sieg Eiselen, supra. n. 39.
174. See Peter Schlechtriem, Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods, Manz, Vienna (1986); p. 96; available at: <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem-72.html>. Cf. Judgment by Schiedsgericht der Börse für landwirtschaftliche in Wien [Arbitral Tribunal - Vienna]; Austria 10 December 1997, No. S 2/97; English translation by Tobias Koppitz; available at: <http://www.cisg.law.pace.edu/cases/971210a3.html>, where the standards of CISG Art. 72 and 73 are compared as: "According to the dominant opinion in the literature concerning the CISG, a less strict standard is to be applied [in Art. 73(2)] to the level of probability with which equal fundamental breaches of contract are to be expected on future installments after the breaches of duty so far, as is demanded in the case of Art. 72 CISG (Honsell, Art. 73 No. 50) which governs the anticipated breach of contracts which are not contracts for delivery of goods by installments. In that regard, a 'common assumption' or 'plausible reasons' are generally mentioned, sometimes also the opinion that the future breach of contract had to be 'sure to expect' (cf. in detail the references listed in Honsell, id. no. 50)." "Honsell (id. No. 51) is of the opinion, that the term 'good grounds' in Art. 73(2) presupposes the least level of probability for the assumption of a future breach of contract, it suffices when for the reasons ascertained a defect in the performance of the future installments will occur with 'predominant probability'. The court of decision is of the same opinion; it thereby takes into consideration the buyer's regular impairment of confidence - due to the defective deliveries so far - in the seller's correct performance of contract, whose task it would be to weaken this apprehension of his contractual partner by sufficient explanations and measures, for example, through the proof that the goods to be delivered in the future would come from a different source (different producer, different trader, different silo-filling, etc.), so that equal defects are then not to be feared."
175. See Tatsiana Seliazniova; supra. n. 5.
176. See Harry M. Flechtner; supra. n. 20.
177. See Tatsiana Seliazniova; supra. n. 5.
178. See Larry A. DiMatteo, etc.; supra. n. 25; p. 415.
179. Comment on Art. 7.3.3 UNIDROIT Principles; supra. n. 3.
180. See Bennett, supra. n. 27; p. 528.
181. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291.
182. See Sieg Eiselen, supra. n. 39.
183. See Judgment by Schiedsgericht der Börse für landwirtschaftliche in Wien [Arbitral Tribunal - Vienna]; Austria 10 December 1997, No. S 2/97; English translation by Tobias Koppitz; available at: <http://www.cisg.law.pace.edu/cases/971210a3.html>.
184. UNICITRAL Digest 4 on CISG Art. 72; supra. n. 36.
185. See Joseph Lookofsky, supra. n. 50; p. 151.
186. See John O. Honnold, supra. n. 22; p. 438.
187. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291.
188. See Anna Kazimierska in "The Remedy of Avoidance under the Vienna Convention on the International Sale of Goods": Pace Review of the Convention on Contracts for the International Sale of Goods, Kluwer (1999-2000), p. 97; available at: <http://www.cisg.law.pace.edu/cisg/biblio/kazimierska.html>.
190. See Bennett, supra. n. 27; p. 528.
191. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 291.
192. Comment 3 of Secretariat Commentary on 1978 Draft Art. 63 [draft counterpart of CISG Art. 72]; supra. n. 31.
193. Comment C on PECL Art. 9:304; supra. n. 8.
194. Comment 2 of Secretariat Commentary on 1978 Draft Art. 63 [draft counterpart of CISG Art. 72]; supra. n. 31.
195. See Bennett, supra. n. 27; p. 528.
196. See Robert Koch, supra. n. 155; pp. 308-309.
197. Comment 13 of Secretariat Commentary on 1978 Draft Art. 62 [draft counterpart of CISG Art. 71]; supra. n. 70.
198. See Larry A. DiMatteo, etc.; supra. n. 25; p. 417.
199. UNICITRAL Digest 2 on CISG Art. 72; supra. n. 36.
200. See Bennett, supra. n. 4; p. 519.
201. See Sieg Eiselen, supra. n. 39.
202. See Bennett, supra. n. 27; p. 529.
203. See John O. Honnold, supra. n. 22; p. 440.
204. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 293.
205. See Bennett, supra. n. 27; p. 529.
206. See Larry A. DiMatteo, etc.; supra. n. 25; p. 417.
207. See Judgment by Amtsgericht [Lower Court] Frankfurt, Germany, 31 January 1991; No. 32 C 1074/90-41; English translation by Stefan Kuhm, translation edited by Camilla Baasch Andersen; available at: <http://www.cisg.law.pace.edu/cases/910131g1.html>.
208. See Judgment by Landgericht [District Court] Stendal; Germany, 12 October, 2000; supra. n. 70.
209. See Bennett, supra. n. 27; p. 530.
210. See John O. Honnold, supra. n. 22; p. 440.
211. See Joseph Lookofsky, supra. n. 50; p. 151.
212. UNICITRAL Digest 2 on CISG Art. 72; supra. n. 36.
213. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 293.
214. See Judgment of ICC Arbitration Case No. 8574 of September 1996; supra. n. 172.
215. UNICITRAL Digest 18 on CISG Art. 72; supra. n. 36.
216. See Judgment of ICC Arbitration Case No. 8574 of September 1996; supra. n. 172.
218. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; pp. 288, 293.
219. UNICITRAL Digest 11 on CISG Art. 71; supra. n. 26.
220. See Judgment by Amtsgericht [Lower Court] Frankfurt, Germany, 31 January 1991; supra. n. 207.
221. See Sieg Eiselen, supra. n. 39.
2221. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 293.
223. See Bennett, supra. n. 27; pp. 529-530.
224. See Bennett, supra. n. 4; p. 521.
225. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 293.
226. Comment 2 on Art. 7.3.4 UNIDROIT Principles; supra. n. 54.
227. See Bennett, supra. n. 27; p. 529.
228. See Larry A. DiMatteo, etc.; supra. n. 25; p. 411.
229. Comment 13 of Secretariat Commentary on 1978 Draft Art. 62 [draft counterpart of CISG Art. 71]; supra. n. 70.
230. See Bennett, supra. n. 4; p. 522.
231. See John O. Honnold, supra. n. 22; p. 434.
232. See Bennett, supra. n. 4; pp. 522-523.
233. Comment D on PECL Art. 8:105; supra. n. 60; also Comment 2 on Art. 7.3.4 UNIDROIT Principles; supra. n. 54.
234. See Tatsiana Seliazniova; supra. n. 5.
235. See John O. Honnold, supra. n. 22; pp. 434-435.
236. See Harry M. Flechtner; supra. n. 20 at fn. 194.
237. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 289.
238. Comment 16 of Secretariat Commentary on 1978 Draft Art. 62 [draft counterpart of CISG Art. 71]; supra. n. 70.
239. See Bennett, supra. n. 4; p. 523.
240. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; pp. 289-290.
242. See Bennett, supra. n. 4; p. 524.
243. See Sieg Eiselen, supra. n. 39.
244. Comment C on PECL Art. 8:105; supra. n. 60.
245. See Fritz Enderlein & Dietrich Maskow, supra. n. 47; p. 290.

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