Source: http://www.cisg.law.pace.edu/cisg/biblio/enderlein1.html
Timestamp: 2019-04-20 02:17:23+00:00

Document:
Petar Sarcevic & Paul Volken eds., International Sale of Goods: Dubrovnik Lectures, Oceana (1996), Ch. 5, 133-201. Reproduced with permission of Oceana Publications.
This paper deals with the rights and obligations of the seller under the UN Convention on Contracts for the International Sale of Goods  (referred to hereinafter as the Sales Convention or merely the Convention).
Sales laws do not usually expressly define the rights and obligations of both parties because the rights of the buyer are at the same time the obligations of the seller and vice versa. Under a sales contract the seller has the obligation to deliver the goods and transfer the property in the goods. And these are exactly the rights of the buyer: demanding delivery and transferring property. Whereas the buyer is obliged to take delivery and pay the price, it is the seller's right to demand that delivery be taken by the buyer and that the price be paid.
Therefore, sales laws usually deal only with the obligations of the parties, which is the case [page 134] in the Sales Convention. It contains chapters on the obligations of the seller and those of the buyer, but not on their rights. These are implied in the obligations of the other party. Thus, one finds the rights of the buyer implied in the obligations of the seller in Articles 30-44 and the rights of the seller implied in the obligations of the buyer in Articles 53-60.
But these are only what I call the original rights and obligations under a sales contract. In case of breach of contract, additional rights and obligations arise which may be referred to as secondary rights and obligations. In the Sales Convention they appear under the heading "Remedies for breach of contract." Here again, the remedies for breach of contract by the seller found in Articles 45-52 contain the secondary rights of the buyer and the secondary obligations of the seller. In the same token, the remedies for breach of contract by the buyer found in Articles 61-65 contain his additional obligations and the secondary rights of the seller.
Chapter V: Provisions Common to the Obligations of the Seller and of the Buyer.
Under the rules of the final provisions of the Sales Convention, States becoming parties to the [page 135] Convention may exclude Part II on Formation of the Contract or Part II on the Sale of Goods. Art. 92 provides that a Contracting State may declare at the time of signature, ratification, acceptance, approval or accession that it will not be bound by Part II of the Convention or that it will not be bound by Part III of the Convention.
During preparation of the Sales Convention and at the discussions of the diplomatic conference, there were some indications that several States, e.g., the Scandinavian States, would like to exclude Part II of the Convention. On the other hand, I could not imagine that a State would accede to the Convention only for Part II and exclude Part III.
Looking at the provisions in Part III, one finds in general not only that the solutions in regard to the rights and obligations of both parties are very balanced but also that these provisions are in accordance with commercial practice and the requirements of contemporary international trade relations.
"regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."
If the judges applying the Convention are to develop good will, they will have to regard the observance of good faith not only when interpreting the Convention but even more so when interpreting the contract and activities of the parties.
The rules of the Convention will come into play only if the parties did not stipulate the necessary provisions themselves. The basis for the relations between the parties is their contract. In practice there are very different types of sales contracts. Here I am not referring to the different types of goods to be sold but to very short contracts, which merely state the kind of goods, their quantity and price or, on the other hand, very long contracts, which are very detailed with elaborate descriptions of the quality [page 137] of the goods, the manner of inspecting the goods, the various dates and time- limits for single steps to be taken by the parties in performing the contract, etc.
When I speak of the contract, I include, of course, the General Business Conditions of the parties, provided they have become part of the contract, or standard forms or general conditions for specific goods referred to by the parties. This means that there are sales contracts which hardly need to be complemented by the law and, on the other hand, others which have to be complemented to a varying degree by the provisions of the Convention.
One more point has to be kept in mind regarding the connection between Part III and Part I of the Convention. According to Art. 9, the parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. Furthermore, the parties are considered to have impliedly made applicable to their contract usages of international trade. Since this is the subject matter of [page 138] Professor Goldstajn's paper, I need not go into detail here. Instead, I would like to stress that the contract of the parties will not be complemented immediately by the provisions of Part III of the Convention. It will first be complemented by usages and established practices, and thereafter, only those questions which remain open will be answered by the rules of the Convention.
This order -- contract, usage, Convention -- is sometimes made clear in the text of the Convention. Some articles refer expressly to the contract and provide solutions if there is no agreement between the parties. Other articles refer to the contract and stipulate the consequence if there is a certain agreement. But whenever there is a reference to the provisions of the Convention, this is automatically -- via Art. 9 -- also a reference to usages and practices.
Another common feature of Part III to which I would like to refer in my introduction is the frequent use of language such as "reasonable," "usual," "adequate," "appropriate." These are likewise references to international usages and permit the court or arbitration -- if necessary -- to construe the agreement between the parties according to the specific circumstances of each individual case.
The Sales Convention is not the only uniform law on the international level. There was its predecessor, the Hague Convention or ULIS. Usually, in commentaries to the UN Sales Convention, there are frequent references to ULIS and to the history of its drafting. I do not deny the usefulness of comparing the two documents. Some of the provisions of ULIS are identical to those of the Sales Convention, while others are only slightly modified. Therefore, many ideas, [page 139] comments and decisions concerning ULIS could also be helpful in applying and interpreting the Sales Convention. This is especially true for countries that were members to ULIS and have now become members to the Sales Convention. I do not come from such a country. The German Democratic Republic (GDR) was not a member to the Hague Conventions; however, it is a member to the Council for Mutual Economic Assistance (CMEA, in Western publications sometimes referred to as Comecon) and participated actively in the elaboration and development of the General Conditions of Delivery of Goods between Organizations of the Member Countries of the Council for Mutual Economic Assistance, which are at present in force as GCD CMEA 1968/1975, version of 1979.
In spite of their somewhat misleading name, these General Conditions are also an internationally unified sales law and contain, contrary to the Sales Convention, mandatory rules to a large extent. The GCD, which entered into force as a multilaterally agreed legal regulation as early as 1958, and were preceded by bilaterally agreed GCD since 1951, were in fact the first successful international unification of sales law. These GCD are now applied to all sales between the CMEA member countries on three continents. I stress "on three continents" since the GCD are often referred to as the uniform sales law of the Eastern European countries. However, there are also members of the CMEA in America and Asia, i.e., Cuba, Mongolia, and Vietnam. In regard to Vietnam it should be pointed out that Vietnam does not apply the GCD version of 1979 but rather a version signed by Vietnam with each of the other CMEA member countries on a bilateral basis.
I already mentioned that the GCD have a somewhat [page 140] misleading name. It is true that in internal relations socialist countries also distinguish between sales contracts and contracts of delivery because in the former there is a transfer of property but in contracts of delivery there is none. (Of course, in a contract of delivery there is also transfer of possession, the transfer of quasi-property rights which we call operational administration.) But this distinction between sales and deliveries was certainly not the reason for naming the GCD as such, for there is also transfer of property in international trade between socialist countries (I shall come back to this later).
What I consider misleading is not the Deliveries but rather the notion "General Conditions" instead of "Uniform Law."
The reason for the name GCD is simple and can be found in the history of the document. The GCD began as GC in the proper sense of general conditions which, elaborated by other national or international bodies, became part of the contract only by agreement if the parties so wished. In the course of time the GCD were prescribed by the socialist States for all transactions between their foreign trade organizations, first on a bilateral and later on a multilateral basis. Thus, they changed their nature from GC proper into law, but the old name remained.
There are, of course, many differences between sales among CMEA countries, which we refer to as intrasystemic relations, and sales between socialist and non-socialist countries, which are usually designated as intersystemic relations. Trade between CMEA member countries is conducted on the basis of intergovernmental trade agreements creating rights and obligations between the States themselves. This trade is performed on the [page 141] basis of State planning and joint State measures concerning the specialization and cooperation of production and the development of the socialist economic integration.
Therefore, some of the provisions of the GCD are quite unique and cannot be found in the Sales Convention. On the other hand, there are also certain common features in intrasystemary and intersystemary sales, and -- as a result -- some provisions of the GCD correspond with those of the Sales Convention.
When UNCITRAL started to work on the Sales Convention, the GCD were even mentioned as one of the preparatory documents. For this reason, it might be appropriate to compare the Sales Convention not only with ULIS, as has been done many times, but also with the GCD.
Besides the GCD/CMEA, there is another document which should be of interest to us. This is, I shall give you the full title: the General Conditions of Delivery of Goods from the Member Countries of the Council for Mutual Economic Assistance to the Republic of Finland and from the Republic of Finland to the Member Countries of the Council for Mutual Economic Assistance. These GCD CMEA-Finland were approved by the Commission on Cooperation between CMEA and the Republic of Finland in November 1978, that is, before the Sales Convention was adopted at the Vienna Conference.
It is especially interesting to note that it was agreed that these GCD apply to the mutual sales between non-socialist and socialist countries. In contrast to the other GCD/CMEA, however, they have to be agreed in the commercial contracts; otherwise, they are not law. Nevertheless, I shall refer to them as well.
In addition, it is quite common to draw comparisons [page 142] between the Sales Convention and one's own national law. Such comparisons are, of course, useful for governments that are preparing ratification of or accession to the Sales Convention. Moreover, they are useful for business circles of a given country that have to adapt their contracts and general business conditions to the new law. And, finally, they are of interest to students and scholars of comparative law.
In a recently published commentary (in German) to the Sales Convention which was written by my colleagues Professor Dietrich Maskow, Associate Professor Monika Stargardt and myself, we compared the Sales Convention to our national law quite extensively, finding a lot of similarities and even identities. I attribute this to the fact that whereas in most countries there is only one civil law or even if there is a special commercial law, there is only one legal regulation governing commercial contracts of sale, in my country we have three different laws of sale: one for internal relations between socialist enterprises which we call Vertragsgesetz or Contract Act, one for relations where citizens are parties (mainly consumer sales) which is our Civil Code and a third one for international relations which is the Code on International Commercial Contracts of 5 February 1976 (referred to as GIW, according to the German abbreviation).
As far as I know, there are only two countries having comprehensive special codes for international trade contracts: the GDR and Czechoslovakia, which as early as 1963 enacted its Act Number 101/1963 on legal relations in international trade.
Therefore, a comparison between the Sales Convention and these two special codes of the GDR [page 143] and Czechoslovakia may be justified especially because both the codes and the Sales Convention took into account international business practices, international usages and, in general, the requirements of the economic relations on the basis of the peaceful co-existence of States having different political, economic and legal systems.
Section III Remedies for breach of contract by the seller.
Emphasis is placed on the requirements of the contract, while those of the Convention are only supplementary.
The main obligations of the seller, i.e., delivering the goods and transferring the property in the goods, are essential in all legal systems, [page 144] whereas what is done to "deliver" the goods and how the transfer of property occurs may be different. But there is no sale without delivery and transfer of property.
The obligations of the seller referred to in Art. 30 are dealt with in greater detail in the following articles. Art. 31 defines delivery, and Art. 34 deals with the documents. The Convention does not go into detail, however, in regard to the transfer of the property. Whereas in the GCD several articles deal with the problem when the right of property passes from the seller to the buyer (Articles 5-9), the Sales Convention keeps silent. It does not designate when the property passes, nor what has to be done in order to let the property pass. The effect of the contract in relation to the property in the sold goods is, according to Art. 4, outside the scope of the Convention. This is left to national law.
"If the seller is not bound to deliver the goods at any other particular place �"
Parties quite seldom fail to agree on the place of delivery because this place is decisive for several other topics, e.g., usually the passing of risk.
Often parties agree on the place of delivery by referring to clauses of the Incoterms.
" (a) if the contract of sale involves carriage of the goods -- in handing the goods over to the first carrier for transmission to the buyer ..."
If the seller has handed over the goods to the first carrier, he has fulfilled his obligation to deliver. (His obligation to deliver also includes an element of time. He has performed the delivery only if he has delivered the goods to a certain place and at a certain time. The time of delivery is specified in Art. 33).
The seller has already effected delivery in handing over the goods to the first carrier, for instance, the railway taking the goods to the harbour for the next carrier. Delivery is not effected at a later time, for instance, when the goods pass the frontier. In the GCD, there is a difference when the carriage is by rail, the place of delivery then being the border station where the goods are transferred from the railway of the seller's country to the railway receiving [page 146] the goods (e.g., buyer's country or transit country).
In any case, handing the goods over to a carrier means handing them over to an independent organization. If the seller himself operates trucks, he is not the carrier. This also has significance for possible exemptions from liability on the part of the seller.
The place of destination is significant in view of the buyer's obligation to examine the goods (see Art. 38 para. 2).
Sometimes, the place of delivery and the place of destination are identical, as in the case of an "ex ship" delivery clause.
"(b) if ... the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place - in [page 147] placing the goods at the buyer's disposal at that place ..."
The place where the goods have to be placed at the buyer's disposal could be, for instance, a factory, a mill, a plantation, a warehouse etc. This is exactly the ex works clause of Incoterms.
"(c) in placing the goods at the buyer's disposal at the place where the seller had his place of business at the time of the conclusion of the contract."
Turning to our national law, we see that the whole of Art. 31 is in principle the same as Art. 43 GIW, but in a reversed order. In addition, the GIW defines the obligation of the seller to deliver as performing all acts that are required to give the other party the right of disposition of the goods to be delivered (Art. 51 para. 1).
Art. 31 of the Sales Convention differs significantly from ULIS. Under Art. 19 para. 1 ULIS, delivery meant the "handing over of goods which conform with the contract." Defective goods, therefore, could not be delivered. This connection with the quality of the goods has been omitted in the Sales Convention. The delivery of non-conforming goods is nevertheless a delivery, but, of course, the buyer has recourse to several remedies.
A similar detailed provision is also found in the GCD CMEA-Finland where, moreover, "it is recommended to the parties to provide in the contract ... for the application of the Rules for the Interpretation of Trade Terms prepared by the International Chamber of Commerce -- Incoterms 1953, as amended in 1967 and 1976 [the 1980 amendment could not yet be mentioned in 1978, F.E.] when interpreting individual provisions on the basic terms of delivery."
"If the seller is bound to arrange for carriage of the goods, he must make such contracts as are necessary for carriage to the place fixed by means of transportation appropriate in the circumstances and according to the usual terms for such transportation."
Here again, the contract is important. The seller is not obliged to arrange carriage in all cases. Such an obligation will therefore follow from the contract or from usage. However, if the seller is bound to arrange carriage, para. 2 of Art. 32 applies. If such an agreement exists, it should also include the place of destination, "the place fixed" by the contract.
The means of transportation to be chosen by the seller have to be "appropriate in the circumstances." The circumstances which have to be taken into account include the kind and quantity of the goods, their packing as well as the distance [page 149] between seller and buyer, the season, the available means of transport, existing transport relations etc. In the case of perishable goods, refrigerated wagons would be appropriate or, depending on the nature of the goods, a fast means of transport such as airplane or express railway.
"If the seller, in accordance with the contract or this Convention, hands the goods over to a carrier and if the goods are not clearly identified to the contract by markings on the goods, by shipping documents or otherwise, the seller must give the buyer notice of the consignment specifying the goods."
In commercial practice, the seller usually gives the buyer notice of the consignment in any case. Also, according to Articles 43 and 44 GCD or Art. 52 lit.a GIW, the seller always has to give notice in time. Since notice is an important item in commercial practice, the GCD CMEA-Finland deal with this question very extensively. Chapter 10 contains four articles consisting of 10 paragraphs with detailed instructions on notices of the seller to the buyer pertaining not only to the handing over or shipping of goods but also to certain situations when the goods will be ready for shipment a given period in advance.
The obligation of the seller to give the buyer notice of having loaded or delivered the goods into the custody of the railway or on board the vessel is also contained in several clauses of the Incoterms, e.g., FOR/FOT, or FOB.
Under the Convention, a buyer should not forget to ask the seller to give notice of the [page 150] consignment if this is necessary to make the required arrangements for taking over the goods in view of their nature and the means of transport. In this respect, Art. 23 of GCD contains very detailed provisions on the markings of the goods.
Another problem connected with the transport of the goods is their insurance during shipment. In general, the seller is not obliged to insure the goods during carriage. Such an obligation can follow from the contract or from the chosen delivery clause, e.g., Incoterms CIF.
"If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer's request, provide him with all available information necessary to enable him to effect such insurance."
We find a similar provision in Art. 52 lit. d GIW which, in addition, requires the seller to also send the buyer those documents or particulars that are required for the buyer to bring a claim against the carrier.
(a)	if a date is fixed by or determinable from the contract, on that date ..."
(b) if a period of time is fixed by or determinable from the contract, at any time within that period unless circumstances indicate that the buyer is to choose a date ..."
If the parties, for example, agree on June as the time of delivery, the seller may deliver on the first of June as well as on the thirtieth. Agreement on a period of time often gives him the necessary flexibility to prepare the goods for delivery and arrange the transport.
On the other hand, if the buyer himself has to arrange the carriage of the goods, if he has, as in the FOB clause, to charter a vessel or reserve the necessary space on board a vessel, this should be taken as an indication that the buyer may choose a date of delivery within the agreed period.
If, for other reasons, e.g., the capacity of his warehouse, the buyer is interested in fixing an exact date for receipt of the goods, he should reserve the right to choose the date of delivery. In this case, the buyer has to send the seller the necessary shipping instructions in due time.
The GCD provide shipping instructions and notices of delivery in a very detailed manner (Art. 39-48). "If there is no agreement between the parties and no date or period is determinable from the contract or from practices or usages, the seller must deliver the goods (c) ... within a reasonable time after the conclusion of the contract."
As far as early or partial delivery is concerned, the Convention contains a provision to that regard later under the remedies of the buyer. In all cases early or partial delivery are [page 152] regarded as breach of contract (see Articles 51 and 52). However, as far as partial delivery at an early date is concerned, an answer can be found in Art. 37.
Under some laws, consent of the buyer is required, as is provided, e.g., by Art. 12 GCD.
According to Art. 44 GIW, if the buyer consents to early delivery, he has the corresponding duty to perform his obligations earlier. If the seller delivers early without the consent of the buyer, the buyer may reject the goods; however, if he does not do so forthwith, he must keep them.
A topic not covered by the Convention is the agreement to deliver at a fixed time. Provisions on fixed-time contracts can be found in the GCD (Art. 11 A) as well as in the GCD CMEA-Finland I (Art. 8.3.1.).
"If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract."
Here again, the contract is dominant. The seller is not bound to hand over documents in all cases; the Convention does not oblige the seller to hand over documents at all. But if the seller is bound by the contract directly, by the chosen clause of Incoterms, or by usages, then, again, he must do what the contract, the clause, the usage, etc. says in regard to the kind of documents, their form, the time and the place.
Which are those documents relating to the goods? In the first place, these could be documents [page 153] of title, i.e. documents that control delivery of the goods such as bills of lading, warehouse receipts etc.
Other relevant documents could include the insurance policy, invoice, certificate of origin, certificate of control or quality, etc. In addition, there can also be technical documentation related to the goods. Especially in the case of plants and machinery, the seller usually provides the buyer with documents concerning maintenance and repair of the goods. Provisions on the handing over of technical documents are contained in Art. 24 et seq. GCD, where reference is made to drawings, specifications, instructions for maintenance, operation, assemblage. etc. as well as the existing practice in the corresponding branch of industry in the seller's country. Under this provision, the seller shall make the technical documentation available to the buyer within time limits that ensure normal use of the machinery and effecting operation of the equipment as well as its maintenance and repair. The required form of the documents will include the number of copies, the language, and, as the case may be, the manner of multiplication (printed, typed, photocopied).
In contrast to the Convention, which keeps silent on the question of confidentiality or trade secrecy, the GCD specifies in Art. 25 the extent to which the technical documentation may be used by the buyer, or by the seller if he manufactures the goods according to the technical documentation of the buyer. Technical documentation transferred in accordance with the contract shall in no case be published. And Art. 5.2.1 of the GCD CMEA-Finland provides in this respect: "The party who received technical documentation ... shall have no right to use [page 154] it without the written consent of the other party, for purposes other than those provided for in the contract, to copy or multiply it, to transfer or otherwise give information of its content to third persons."
"If the seller has handed over documents before that time [the time agreed between the parties], he may, up to that time, cure any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention."
It appears to be self-evident that the seller could cure any lack of conformity before the agreed date for handing over the documents. For instance, he could supplement the documents if copies were missing, exchange documents if they were delivered in the wrong language, etc. It is up to the seller to choose the method for curing the non-conformity.
This provision was not contained in the draft prepared by UNCITRAL but was proposed by the Canadian delegation during the diplomatic conference. In content it is similar to the curing of defects in the goods themselves as specified in Art. 37.
The next section of this part of the Convention is entitled "conformity of the goods and [page 155] third party claims." Articles 35 and 36 define the seller's obligations with respect to the quality of the goods; Articles 41 and 42 contain the seller's obligations with respect to delivering goods which are free from rights of third parties. This section also contains obligations of the buyer such as his obligation to examine the goods (Art. 38) and to notify the seller of a non-conformity (Art. 39) or a third party claim (Art. 43).
"(1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract."
It is quite obvious that also under national law the seller must deliver goods in accordance with the contract. Art. 35 differs from some national laws in its combination of quantity, quality, and description with respect to non-conformity. The obligation of the buyer to give notice of any non-conformity relates therefore not only to quality but to quantity and description as well.
Under GDR law, if only part of the goods are delivered, the missing part is treated as delay (Articles 278, 280) and not as non-conformity. This also holds true for the delivery of wrong goods, i.e., goods which do not conform to the description, goods which we call "an aliud."
Litera (b) on any particular purpose made known to the seller and (c) on samples or models could already be included under para. 1, the agreement of the parties. Nevertheless, it is useful to clarify the issue. The particular purpose must not be an express part of the contract; it is sufficient that this purpose has been made known to the seller. If the goods are not suitable for the particular purpose which the buyer has in mind, the seller should advise him accordingly. Thus it follows that it does not suffice for the buyer to indicate his intentions at the time of delivery. The seller should be aware of the particular purpose at the time of the conclusion of the contract, instead of being informed of it later. Otherwise the seller is not in a position to react, to give advice or to refuse conclusion of the contract.
It may be more difficult to detect when a [page 157] particular purpose is impliedly made known to the seller. In any case, the buyer will not and may not always rely on the seller's skill and judgment. If the buyer uses the goods himself in his factory, he may well be better informed than a seller who is a trader and not a producer.
If the buyer did not rely on the seller's judgment, then it is irrelevant whether the seller did give judgment or not. It could well be that the buyer informed the seller about a particular purpose and at the same time ordered goods with clear and detailed technical specifications. As was already mentioned, the seller will be obliged to counsel the buyer, but the seller will not be responsible if the buyer insists on his order and shows that he does not rely on the seller's judgment.
In the case of a sample or model, a problem might arise if the contract described the quality of the goods in a different manner than is shown by the sample or model. Only if there is not a different description in the contract will the sample or model prevail. Otherwise, I do not think that the sample should prevail in any case if the description in the contract was clear and unambiguous.
The most common requirement for the quality of the goods is given under (a): The goods should be "fit for the purposes for which goods of the same description would ordinarily be used."
The Act 101/1963 of Czechoslovakia also requires [page 158] that the goods be fit for their customary use (Art. 297).
Art. 15 of GCD speaks of "goods of usual average quality existing in the seller's country for the delivery of the given type of goods" and of "goods of usual average quality corresponding to the usual purpose of these goods in the seller's country." Compared with the Convention, the GCD clarifies matters in two important aspects. Firstly, there may be several degrees of different quality which all could and would ordinarily be used for a certain purpose; here the GCD ask for average quality. Secondly, the usual purpose for which the goods would be used might not be the same in all countries. Therefore, proceeding on the basis of his experience in his country, the seller would be obliged to deliver goods of a quality fitting the usual purpose in the seller's country.
Included in the definition of the quality of the goods in Art. 35 is their packaging. Indeed, it is sometimes difficult to decide whether the packaging is part of the goods or whether it is separate, as, e.g., in the case of a nice box for a bottle of perfume.
It is therefore justified to treat packaging as an aspect of the quality of the goods. Another reason is the function of the packaging to preserve and protect the goods. Defects and short-comings of the packaging will result in defects of the goods themselves.
The manner of packaging required by the Convention, i.e., adequate to preserve and protect the goods, has to be decided on the basis of the kind of goods concerned and their quantity, and foremost on the type and duration of the carriage, the course of the transport, the climate [page 159] in the country of destination (whether hot or cold, dry or humid).
Finally, para. 3 of Art. 35 contains an exception to the seller's liability.
"(3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity."
It seems to be a general rule of law in many legal systems that the buyer's knowledge of any defects of the goods excludes the liability of the seller, except when the buyer requested and the seller promised to cure the defects before delivery.
Para. 3 refers only to para. 2. It does not refer to para. 1, which besides quality also refers to quantity and description. Indeed, it is hardly imaginable that, at the time of the formation of the contract, the buyer knew of any later non-conformity in regard to differences of quantity or false deliveries with respect to the description of the goods. Should such a case nevertheless occur, quantity and description could be incorporated into para. 3 by way of analogy.
Whereas in Art. 285 of GIW the buyer's knowledge of a defect of the goods also excludes the liability of the seller, it is real knowledge, definitive knowledge that is required. It is not sufficient that the buyer ought to have known or that he "could not have been unaware." The Convention does not specify the criteria by which the buyer's supposed knowledge is to be determined. Mere negligence, in my opinion, would not suffice. There is certainly no obligation on the [page 160] part of the buyer to inspect the goods before placing an order with the seller or accepting an offer.
"(1) The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time."
The time for determining whether conformity exists or not is traditionally the time of passing of the risk. The same provision is found in many national laws. The Convention deals with the passing of risk in Articles 66 to 70. In the practice of international trade, there is considerable difficulty regarding evidence connected with the time of passing of the risk.
Risk usually passes when the seller hands over the goods to the first carrier (Art. 67). Under the FOB clause, the risk passes when the goods have effectively passed the ship's rail. Who is going to inspect the goods at that very moment? Only in rare cases does the carrier detect irregularities or defects of the packaging or discover, when counting the consignments, that items are missing. Thus he is seldom able to make an entry into the documents accompanying or representing the goods.
In most cases, the buyer will detect apparent [page 161] defects only at the time of taking over the goods. And he will detect latent defect only after a thorough examination of the goods or not until after the goods have been used.
The situation in which the lack of conformity becomes apparent only after the risk has passed to the buyer is covered by Art. 36. Nevertheless, even in these cases the buyer must prove that the lack of conformity already existed at the time of passing of the risk.
"(2) The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics."
This paragraph contains two different cases. In case (i), the seller has given a guarantee. This could be part of the contract or a promise made by the seller. In any case, there is no automatic guarantee and the Convention does not oblige the seller to grant a guarantee. If there is a guarantee, the seller remains liable for the quality of the goods for the specified period of guarantee. In no case, however, is the seller liable for all later defects. If the buyer does not observe maintenance instructions, if he uses incorrect feedstuffs, if he operates a machine incorrectly. etc. the seller will not be liable. The defects, even if they occur at a later time, must be caused by a fault of the seller. In guarantee clauses, sellers usually restrict their [page 162] liability to defects in material, poor workmanship or construction.
In case (ii), without having issued a guarantee, the seller has committed a breach of one of his obligations, for instance, failure to package the goods in a manner which preserves and protects them. If the packaging is defective, the goods may well have been damaged during transport but also after the passing of the risk. Whereas it did not rain before, bad weather conditions thereafter may have caused the poorly protected goods to spoil.
"If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention."
As we have seen in discussing Art. 33, the date for delivery may be at the very beginning or within a period of time. If the seller has chosen a date for delivery at the beginning of the [page 163] period, he may cure any non-conformity up to the end of the period. It seems that the seller has the same right even if the buyer has chosen a date within the agreed period. The buyer's choice of a specific date does not change the originally agreed period of time for delivery by the seller.
If the buyer has chosen a date because the ship he ordered under a FOB clause will call at the port at that date, it may be difficult for him to provide another ship at a later date. This is an example of the inconvenience mentioned in Art. 37. The seller's right to cure defects does not mean that expenses connected therewith will be borne by the buyer.
Of course, the seller may cure non-conformities not only up to the date of delivery. Under certain circumstances, as we will discuss in connection with Art. 48, he also has such a right after the date for delivery (and under Art. 46 an obligation as well).
The right of the seller to cure the non-conformity of the goods presupposes his knowledge of the non-conformity. In cases involving missing parts or short deliveries, the seller may be aware of this himself or he will be made aware of it through information of the carrier. In other cases he should be notified by the buyer. The buyer is responsible for examining the goods (Art. 38) and giving notice to the seller (Art. 39). This obligation of the buyer arises immediately after receipt of the goods. It does not depend on the date for delivery in the contract. On the other hand, the rights of the buyer under Art. 45 et seq. of the Convention will arise only after the date for delivery, as agreed between the parties, because the premature delivery will not change the date for delivery.
Another question, which will be discussed [page 164] later in connection with Art. 52, concerns whether the buyer, in case of a premature delivery, also has to pay for the goods earlier than originally agreed. This question may be answered differently in different situations. The right to cure non-conformity under Art. 37 comprises four different possibilities which could appear singly as well as combined.
The seller may deliver any missing part, for instance, of a machine. He may also make up any deficiency in the quantity of the goods delivered, for instance, if he originally delivered only 80 of 100 contracted bottles of a certain liquid. Art. 37 also applies in this regard to the case of delivery in parts. In other words, whereas some national laws require agreement between the parties or permission by the buyer for delivery in parts or installments, under the Convention the seller who did not ship the complete consignment in the first case may supplement his delivery up to the date for delivery even without such permission, provided, however, it does not cause the buyer unreasonable inconvenience or unreasonable expenses, a topic that will be discussed shortly.
A third method of the seller's curing of non-conformities is for him to deliver goods in replacement of the non-conforming goods delivered earlier. Whether the goods conform or not has to be judged in accordance with Art. 35.
Does Art. 37 also apply in regard to Articles 41 and 42? I would say yes. I admit, Articles 41 and 42 do not use the term "conform" or "conformity" and the heading of Section II speaks of conformity of the goods and third party claims, which could give the impression that these are different things. Nevertheless, goods with defects in title can also be replaced. The only [page 165] difference is that third party claims will usually not arise during the time period between the early delivery and the date of delivery as envisaged in the contract. But if the buyer himself detects the defect, he should inform the seller and the seller should be able to replace the non-conforming goods.
If the seller replaces goods, he, of course, has to bear all connected expenses.
The fourth method of curing non-conformities is to remedy any lack of conformity in the goods delivered. To remedy means to repair the defective goods or part of the goods either at the seller's place or at the place of the buyer, whichever is more convenient, more effective and less expensive.
In any case, we have to keep in mind that curing non-conformities should never cause the buyer inconveniences or expenses that are unreasonable. It is questionable what the seller can demand from the buyer. As for the reasonability, in general each case is different and can be decided only in the light of the individual circumstances. There is, however, a difference between inconvenience and expense. Whereas the Convention does not permit unreasonable inconvenience and unreasonable expense for the buyer, consistently using the notion "unreasonable" in both cases, the inconvenience rests with the buyer but the expenses, even the reasonable ones, may be claimed from the seller as damages.
Upon receipt of the goods the buyer wants to know whether they conform with the contract, and, therefore, he examines the goods. The seller, on the other hand, is also interested in knowing [page 166] whether the buyer is satisfied or whether there will be claims. Therefore, he obliges the buyer to examine the goods.
"The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances."
As mentioned earlier, this obligation of the buyer could also have been placed in another section of the Convention that deals with the remedies of the buyer. If the buyer does not examine the goods, he may lose his rights under Art. 45 et seq.
However, it is not the examination itself that determines whether he keeps his rights arising from non-conformity of the goods or whether he loses them, but rather the notice to the seller (Art. 39). The examination is carried out only in preparation of the notice. If the buyer discovers a non-conformity without examining the goods, he may and has to notify the seller.
The goods need not be examined personally by the buyer or his own staff. The buyer may also order third persons, for instance, specialized and impartial control organizations, to examine the goods. The purpose of the examination is to decide whether the goods conform with the contract or not. In any case, it has to be carried out with due care.
The manner and extent of the examination will often be agreed upon by the parties, especially in the case of machines and equipment (for instance, the parties will agree on a cold run or a mathematical performance test or both). The methods of examination depend largely on the type of [page 167] goods. The parties may also agree on a mathematical-statistical control of quality or on the application of specific control or analytical procedures. It is possible that established practices have already been developed between the parties (Art. 9). Furthermore, in certain branches usages may have been developed regarding methods of control which have to be taken into account, e.g., the examination of each single item or spot-checks.
In general, the examination will show only patent defects. Admittedly, the Convention does not use the terms "patent" and "latent," or "apparent" and "hidden" defects. Nevertheless, the distinction is present, as is shown by the provision of Art. 39.
The length of the period for examination depends on the circumstances, and therefore, no fixed period has been designated. As was mentioned in connection with Art. 37, the period for examination commences after receipt of the goods. There may be cases where this is not practicable and where the buyer may be justified in waiting till the end of the period or the original date for delivery.
"(2) If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination."
An examination of the goods at the frontier or when passing the rail of a ship is hardly imaginable, and, in general, is neither possible nor necessary. Therefore, it seems to be natural to defer the examination until after the goods have arrived at their destination.
In case, however, there are frequent disputes, as to whether defects detected after arrival have been caused during carriage and thus before or after passing of the risk, it is to be recommended that a control organization examine the goods at the place and time of passing of the risk.
The last possibility is dealt with in Art. 38, i.e., the buyer does not keep the goods.
"(3) If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination."
This provision covers two different cases: (A) The buyer himself is competent for further carriage of the goods from the place of delivery to the place of destination; and [page 169] (B) The buyer resells the goods without taking them over in the first place.
But even if the buyer takes over the goods, for instance, 1000 television sets, and resells them from his warehouse, he is not obliged to open each and every box to examine the set. In such cases it is quite normal to make spot-checks.
It is necessary that the seller knew of the possibility of redispatch or "ought to have known" since, by deferring the examination, he has to expect notices at a much later date. On the other hand, in international trade, whenever the buyer is a trader, the seller must take into account the possibility of redirection or redispatch.
Was it at all necessary to oblige the buyer to examine the goods? Would the necessity of the notice as stipulated by Art. 39 not have been sufficient? Obviously, some legal systems can do without the duty to examine the goods; at any event, the duty to give notice implies that the goods must first be examined.
"(1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it."
The Convention not only mentions the time when the buyer has discovered the lack of conformity but also the time when he ought to have discovered it. This is the time, at least as far as [page 170] apparent defects are concerned, when the buyer was obliged to examine the goods in accordance with Art. 38.
The right of a buyer to rely on a lack of conformity of the goods lapses if he does not give notice within reasonable time. Here lack of conformity relates to quality, quantity and description, as provided by Art. 35. Notification of third party rights and claims has been dealt with separately in Art. 43.
(v)	to reduce the price (Art. 50).
After having lost his above-mentioned rights, the buyer has to retain the non-conforming goods and pay the price in spite of the non-conformity, provided Art. 40 or Art. 44 does not apply.
At the diplomatic conference, many delegations from developing countries spoke against the content of Art. 39 and the loss of the buyer's rights. According to their views, such a consequence would be unknown in many countries; moreover, it would be much too harsh and would unjustifiably favour the seller.
However, other delegations asked why a buyer should not be interested in discovering non-conformities and if he detected them, why he should not notify the seller. The sooner the better for him because otherwise the seller would not be able to remedy the defect. As long as the [page 171] seller is not aware of the defect, he is not able to discover its cause. This discussion resulted in a new Article 44 which was not contained in the draft.
The reasonable time mentioned in Art. 39 is in any case a short period. It is in the interest of the buyer himself to inform the seller if he is interested in having the goods replaced or repaired. Reasonable, in many cases, will mean giving notice immediately.
The reasonable time commences at the time of discovery of the non-conformity. In the case of apparent defects this will usually be the time of the taking over and examination of the goods. In regard to latent defects, the time of discovery of the non-conformity will be the time of commencement of the use of the goods, the time of putting them into operation or even later.
If the buyer already discovers defects before taking over the goods, the reasonable time also commences at the time of the discovery, i.e., before taking delivery (Art. 60).
The buyer's notice should enable the seller to take the necessary steps to remedy the non-conformity. For this reason, an exact description of the non-conformity is required. The notice should relate the essential result of the examination of the goods.
The parties may agree on the means of evidence in which have to be attached to the notice.
It is recommended that the buyer specify his claims at the time of giving notice. Whether he requests substitute goods or repair, he has to do so in conjunction with his notice or within a reasonable time thereafter (Art. 46 paras. 2 and 3).
"(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period or two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee."
The maximum period is two years. This period does not cease to run when the seller is repairing the goods, as is the case in a period of prescription. Nor does the period commence anew after the non-conformity has been cured by substituting a defective part.
This exclusive period was greatly disputed during preparation of the Convention since it is shorter in many national laws. However, in the light of and under the conditions of international trade, the length of the two-year period has been considered justifiable. Moreover, it may be modified by the parties.
The GIW prescribes different periods for different kinds of non-conformity, as do the GCD. Notices in regard to non-conformity of quality have to be given within six months, notices in regard to quantity within three months (Art. 285 para. 3 GIW, resp. Art. 72 para. 1 GCD). Indeed, non-conformity in regard to quantity should be discovered by the buyer in a relatively short time. In addition, non-conformity in regard to quantity may be caused by the carrier and the [page 173] difficulties of settling matters increase as time passes.
The two-year period commences when the goods are actually handed over to the buyer, not at the time when the risk passes or when the goods are handed over to the first carrier. According to the GIW, the period commences when the goods arrive at the place of destination (Art. 285 para. 3), and that is often but not always identical with the handing over of the goods to the buyer. In contrast, according to Art. 72 para. 1 GCD, the maximum period already commences with the date of delivery.
Of course, if a contractual guarantee has been granted by the seller, the buyer is still obliged to examine the goods within a reasonable period of time and to give notice of any discovered non-conformity within reasonable time. He may not wait till the very end of the period of guarantee to give notice of apparent defects.
What happens if the period of guarantee is shorter than two years? Here it has to be decided whether the contractual guarantee is given in addition to the remedies of the Convention or whether the guarantee shall replace the Convention's remedies. In the first case -- guarantee in addition -- the period of two years remains valid. In the second case -- guarantee replacing the remedial rights under the Convention -- the [page 174] period for giving notice will be shortened.
"Unless otherwise expressly provided in this Part of the Convention, if any notice, request or other communication is given or made by a party in accordance with this Part and by means appropriate in the circumstances, a delay or error in the transmission of the communication or its failure to arrive does not deprive that party of the right to rely on the communication."
The risk of transmission is carried by the seller. The GIW contains a similar provision in para. 7 of Art. 285. Here also the dispatch of the notice is decisive. The buyer may rely on the communication only if, within three months after the first notification of the defect, he sends a reminder that notice was given or gives fresh notice.
The buyer who fails to give notice does not lose all of his rights in any event. There is an exception which we shall point out when discussing Art. 44.
"The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been [page 175] unaware and which he did not disclose to the buyer."
In other words, the buyer retains his rights even if he did not examine the goods and did not give notice. It follows that under the Convention the seller is obliged to disclose any defects of the goods to the buyer. And, if the seller could not have been unaware of the defects, he cannot use the excuse that he did not know of the defects. Thus he is also obliged to examine his goods himself, to make sure that his goods conform with the contract.
"Before the goods are shipped, the seller shall be obliged to submit at his own expense the quality of the goods to verification (test, analysis, inspection, etc., depending on the type of the goods in accordance with the conditions agreed upon with the buyer; in case agreed upon conditions are lacking, then in accordance with the usual verification conditions existing in the seller's country with respect to the given goods."
And the GCD go on to provide rules for mass-produced industrial and agricultural goods, consumer goods and food products, where only samples are taken at random, machinery and equipment and finally for large complete sets of equipment.
So far we have spoken only about quality. But the same applies to quantity as well. Here I refer back to Art. 35 where, as we have seen, lack of conformity relates to quantity as well, whereas many national laws treat short or partial delivery as delay with different legal consequences.
If the seller ships 80 bicycles instead of [page 176] 100, there are two possibilities. Either he will enter the correct figure of the actual shipment into the documents accompanying the goods or he will write the figure stipulated by the contract. If the way bill shows 80, it is clear that he is aware of the lack of conformity with the contract, and therefore, no notice is necessary on the part of the buyer. If the way bill shows 100, he thinks he has shipped the whole lot, and thus notice should be given.
Here one could point out that the seller would have seen the difference if he had counted the bicycles before shipment. But maybe he did count them, and there were 100. And 20 disappeared during carriage. The buyer does not yet know what happened; he does not know why only part of the goods arrived, and thus he cannot know whether the seller could not have been unaware of the non-conformity. Therefore, notice is necessary in order for the buyer to retain his rights.
In Art. 40, it could certainly not be the same time. The goods may be all right at the time of the conclusion of the contract but have deteriorated later on. In such a case, the seller may not ship them. It seems that the knowledge or better the absence of knowledge of any defects in the goods is required when the seller performs the contract, that is, when he ships the goods.
In cases of differences in quantity, he may become aware of the non-conformity even after shipment by information which he receives from [page 177] the carrier. This should suffice for Art. 40 to apply. The seller may not rely on the absence of notice from the buyer if he, even after delivery, knew of the fact of his short delivery.
As already mentioned earlier, non-conformity of the goods in regard to their being free from third party rights is dealt with separately in the Convention. Whereas the Hague Convention contained only one article dealing with this question, the Sales Convention has two separate articles, Art. 41 concerning third party rights in relation to title, and Art. 42 concerning third party rights in relation to intellectual property.
"The seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim. However, if such right or claim is based on industrial property or other intellectual property, the seller's obligation is governed by article 42."
The Convention regulates only the relations between the seller and the buyer, not those between the buyer and the third person. Whether it is possible or not to acquire title as a bona fide purchaser is outside the scope of the Convention (cf. Art. 4).
As far as the decisive time is concerned, the goods must be free from third party rights or claims at the time of delivery and not at the time of the conclusion of the contract for reasons [page 178] which we have already discussed in regard to quality.
Rights and claims under Art. 41 may be rights of title, for instance, the not uncommon reservation of title. A third party who has sold goods to the seller under the condition that the title to the goods shall pass only on full payment of price and who has not been fully paid, may demand the return of the goods under some legal systems, e.g., Art. 233 GIW.
Another right of title might be a pledge. Some legal systems permit not only possessory but also non-possessory pledges so that the seller could deliver goods to the buyer which are pledged to a third person.
The rights or claims of a third party mentioned in Art. 41 could extend to obligatory claims if under certain agreements, like rent or lease, a third party may claim possession of the goods.
Whether the claim of the third party is justified or not and how the third party may pursue his rights is likewise outside the scope of the Convention. The right or claim of the third party, however, must be able to affect the buyer.
The buyer, of course, can agree to take the goods subject to third party rights or claims as he can agree to take goods with other defects. This agreement need not be given expressly by the buyer. It could also be construed if the buyer definitely knows (and not only should know) of the rights or claims of the third party and nevertheless takes the goods without any reservation.
The Convention speaks not only of rights of third parties, as is usual in many legal systems, but also includes claims of third parties and does not distinguish whether such claims are justified or not. The reason is that unjustified claims may also hinder the buyer in the use of the goods or at least may cause expenses, for instance, to defend a case in court even if the third party claimant has no chance of winning.
I already mentioned the decisive time for the existence of third party rights or claims, namely the time of the delivery of the goods. This time is very important especially in connection with unjustified claims. The seller must know of the claim. His obligation consists in refusing and contesting the claim and if necessary in defending a case. If, at a later time, a third party unjustly claims anything from the buyer, the seller cannot be held responsible.
I already mentioned that ULIS did not have a separate article on intellectual property rights. Opinion is divided whether Art. 52 of ULIS included such rights or not. Honnold, relying on Tunc, does not think so, whereas, according to Dölle, ULIS extended to intellectual property rights as well.
Be it as it may, the reason why UNCITRAL decided to draft a separate article was to restrict the liability of the seller  in accordance with the principle of territoriality which governs most of intellectual property rights. In the light of this principle, the restriction of the liability of the seller is justified. The restriction relates to time and place as well as to knowledge of the seller and of the buyer and [page 180] to special demands of the buyer.
Art. 42 speaks of industrial property or other intellectual property. The notion intellectual property includes industrial property and is used more and more to denote patents, trade marks, models, denomination of origin, copy rights and others.
"(1) The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property of which at the time of the conclusion of the contract the seller knew or could not have been unaware ..."
As in Art. 41, it is not only rights but also claims and, as we have assumed, also false or invalid, unjustified claims. In contrast, it is not the time of delivery of the goods which counts, but the right or claim must have already existed at the time of the conclusion of the contract; otherwise, the seller could not have known it.
The time of the conclusion of the contract has been chosen because, between that time and the date of delivery, third parties could acquire rights that the seller could not have foreseen or prevented and which he could not have taken into consideration. This risk falls on the buyer.
The seller could not have been unaware of the third party's right if he had been careful in examining the existing patent situation. It would be impossible, however, to conduct patent researches on a world-wide scale.
(b) in any other case, under the law of the State where the buyer has his place of business."
The seller's responsibility to deliver goods which are free from third party rights or claims based on industrial property or other intellectual property rights always applies only to one country, either the country of the buyer or, if the goods would be resold or used in another country, to that country.
The parties must not necessarily have agreed on this third country, but it must have been contemplated by them, that is, they must have taken this possibility into account, and not only the buyer but also the seller.
In any case, their contemplation must have been directed toward a specific country; theoretically, of course, the goods could be resold to any country, unless there is a clause in the contract which does not permit re-export.
In contrast to rights of title (Art. 41) where the buyer must agree to take goods subject to third party rights, here under Art. 42 in respect to intellectual property rights, it is sufficient that the buyer knew of the third party right or even that he should have known. Another difference is the time. The buyer must agree to rights of title at the time of delivery, but he must have known of intellectual property rights at the time of the conclusion of the contract.
When could the buyer not have been unaware? Is he obliged to conduct research regarding the patent situation in his country or the country of destination? I don't think so. There are, however, contracts, where the parties agree that the buyer has to examine the patent situation in his or another agreed country and, accordingly, notify the seller about any existing industrial property rights. Such an agreement is based on the fact that in some countries it might not be easy for foreigners to find out whether third party rights exist within a reasonable time and at reasonable expense. On the other hand, there are countries which do not have a patent system at all and which do not participate in corresponding international agreements. If goods are delivered to those countries, there is no danger of third party rights for either the buyer or the seller.
Here, the buyer's knowledge of third party rights is not required; he may be absolutely ignorant in this regard. If he gives specific instructions to the seller, he has to bear the consequences. On the other hand, if the seller knows of third party rights, under general rules of good faith, he should call the buyer's attention to them. If then the buyer nevertheless insists on his order, the seller will not be liable to the buyer. Whether the seller is liable to the third party is a different matter which cannot be discussed here.
"(1) The buyer loses the right to rely on the provisions of article 41 or article 42 if he does not give notice to the seller specifying the nature of the right or claim of the third party within a reasonable time after he has become aware or ought to have become aware of the right or claim."
If the buyer does not notify the seller, he loses his rights under the Convention (i) to claim damages (Art. 45), (ii) to demand goods not affected by third party rights (Art. 46), (iii) to fix an additional period of time for performance by the seller (Art. 47), (iv) to declare the contract avoided (Art. 49).
However, whereas Art. 39 specifies a maximum period of two years for giving notice, here there is no such limit. National laws usually contain time-limits for all kinds of notices whether they concern quality, quantity or third party rights.
The Convention does not require immediate notice. The buyer, as provided under Art. 39, has to give notice within a reasonable time. A reasonable time may include a certain period for contemplation by the buyer, for inquiry into the legal situation by consulting his lawyer. The buyer should not delay the notice beyond a time that could no longer be regarded as reasonable. The buyer must not wait. The reasonable time already commences when the buyer ought to have become aware of the third party right or claim. The buyer may not carelessly neglect rights or claims of third parties of which he receives knowledge.
The buyer not only has to give notice, he also has to specify the nature of the right or claim, the steps that the third party has undertaken or intends to undertake. The notification of the buyer will enable the seller to take immediate measures defending his (and the buyer's) rights against the third party. If the buyer fails to give notice in time, this may also have consequences as far as his ability to claim damages is concerned. According to Art. 77, a party who relies on a breach of contract must take measures to mitigate the loss.
Here we find a parallel to Art. 40 with some differences. Here definite knowledge of third party rights is required on the part of the seller, whereas, in regard to non-conformity of the goods, it was sufficient that the seller could not have been unaware. In the case of non-conformity, there is the additional requirement that the seller did not disclose the non-conformity to the buyer.
The meaning of "and the nature of it" at the end of Art. 43 is not quite clear. Is the nature of the right of the third party a separate item which the seller has to know? And may he rely on the buyer's failure to give notice if he knew of the right of the third party but not of its nature? I don't think so. If the seller is already aware of the right or claim of the third party, no notice is required on the part of the buyer.
The last article in Section II of Chapter II of Part III is one which cannot be found in any national law. I have already mentioned in connection with Art. 39 that failure to give notice does not deprive the buyer of his rights in all cases.
" 'Excuse' may also apply when the buyer notifies the seller that the goods are non-conforming but fails to 'specify the nature' of the lack of conformity, as required by Article 39(1), because of the difficulty of making such a specification."
On this last point I disagree with Honnold. I don't believe that the buyer would lose his rights under para. 1 of Art. 39 so quickly.
We turn now to the last section of Chapter II; this is Section III: Remedies for breach of contract by the seller. Under the Convention the notion "breach of contract" covers all failures of a party to perform any of his obligations. There is no distinction between main obligations and auxiliary obligations. And it does not matter whether the obligation had its origin in the contract, in a usage or in the Convention itself. Under certain conditions a breach of contract is considered to be fundamental.
The consequences of fundamental breaches are more severe than those of ordinary breaches. Some remedies are available only for fundamental breaches.
(b) claim damages as provided in articles 74 to 77."
Whereas the specific rights and their necessary [page 188] preconditions are dealt with in Articles 46 to 52, Art. 45 is the general basis for claiming damages. Articles 74 to 77 deal only with the definition and the calculation of damages, their limitation and mitigation.
Comparing Section III of the Convention with the GCD, we see that the most important differences between the two documents are contained in this section. The GCD do not have a provision similar to para. 1 litera (b) of Art. 45. Instead, the GCD provide different remedies for different breaches of contract and penalties (liquidated damages) for the main categories of non-fulfilment of a contract. These penalties provide maximum compensation; the parties are precluded to claim damages in excess of the stipulated penalties.
The remedies of Section III of Chapter II are parallel to those of Section III of Chapter III. In addition to the remedies contained in these two Chapters of Section III, there are more remedies available in Articles 71 to 73 in regard to anticipatory breach and installment contracts.
Under certain conditions the seller may be exempted from certain consequences of a failure to perform his obligations. If the conditions described in Art. 79 are present, he does not have to pay damages. And there are no remedies for the buyer at all, if the seller's failure to perform was caused by the buyer's act or omission (Art. 80).
It should be mentioned here that not only the obligations of the seller but also the remedies of the buyer may be changed by the parties in their contract.
"(2) The buyer is not deprived of any right he may have to claim damages by exercising his right to other remedies."
Therefore, the right to claim damages exists either as an exclusive right or as a supplementary right besides the right to require performance, to reduce the price or to avoid the contract.
"(3) No period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract."
This provision demonstrates that the buyer's remedies for breach of contract by the seller should be taken exclusively from the Convention and not from any national law. In case of a breach of contract, the rights of the buyer arise, immediately at the time of the breach (or in case of an anticipatory breach even before) and no court or arbitration may defer them.
"(1) The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement."
Thus, the buyer may not require performance if he has chosen to reduce the price or avoid the contract. The buyer may require performance by the seller in regard to any obligation of the latter, under the condition, of course, he did not ignore the period for giving notice as required under Articles 39 and 43.
"� a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention."
The right to require performance includes the delivery of the goods, or of any missing part thereof, the handing over of documents, the curing of defects or the performance of all other acts necessary to fulfill the contract as originally agreed.
"(2) If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter."
This provision concerns goods which "do not conform with the contract"; in Art. 35 we have seen what this means. I would not hesitate, however, to also include goods which are not free from rights of third parties. The delivery of substitute goods is, of course, significant above all in regard to defective goods. But depending on the circumstances and the kind of third party right, it is conceivable that goods affected by such a right could be replaced by substitute goods not affected by rights of third parties.
The buyer may require delivery of substitute goods only in case of a fundamental breach of contract, and, furthermore, only if he is able to make restitution of the goods in essentially the condition in which he received them. This [page 191] requirement, as well as exceptions thereto, is provided in Art. 82.
It is doubtful whether the requirement of a fundamental breach is justified. The choice between delivery of substitute goods and repair of the defective goods depends much more on the kind of goods, the nature of the defect, and the possibilities of the seller.
Thus under Art. 281 of the GIW, if the buyer demands the elimination of the defect, the seller is bound to chose between repair or replacement of the defective goods. Similar rules are contained in Art. 75 GCD. Paras. 2 and 3 state: "In presenting a claim for quality, the buyer shall have the right to demand either remedy of the discovered defects or reduction in the price of the goods. If the buyer demands remedy of defects, the seller shall remedy the defect without delay at his own expense or replace the defective goods."
Criteria for determining what constitutes a fundamental breach in regard to the quality of the goods are not found in the Convention. One aspect would be the ability of the seller to remedy the defect within a reasonable period.
"(3) If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under article 39 or within a reasonable time thereafter."
The right of the buyer to demand repair is not to be found in all national laws. Therefore, there was a certain amount of opposition against [page 192] the inclusion of such a provision. On the other hand, this is the most common remedy in international trade as far as technical goods are concerned.
Whether the repair is unreasonable may depend on technical difficulties or the amount of expense required. Repair could even be impossible due to technical reasons.
As was already mentioned, I would not hesitate to include the remedying of third party rights. The seller could free the goods from third party rights, for instance, by taking a license or buying a patent.
The buyer may fix an additional period of time for performance by the seller; however, he is not obliged to do so. Fixing an additional period of time "is not a prerequisite for avoiding the contract, if there is already a fundamental breach. After expiration of the additional period, the buyer is still entitled to require performance by the seller.
By fixing an additional period of time, the [page 193] buyer demonstrates his interest in the performance. Even if there is a fundamental breach, avoiding the contract is not always the best solution for the buyer. The additional period has to be specified -- it does not suffice to ask for prompt delivery -- and has to be made known to the seller.
"(1) Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention."
The right of the seller to remedy any failure to perform his obligations relates to all his obligations. Thus, he may deliver missing goods, repair goods, deliver substitute goods, or spare parts.
The right of the buyer, however, to avoid the contract according to Art. 49 has priority. Therefore, the seller has no right to remedy his failure to perform if the buyer avoids the contract. On the other hand, the seller may remedy his failure to perform as long as the buyer did not declare the contract avoided.
"(2) If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply [page 194] with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller."
If the buyer has the right to declare the contract avoided and has not done so, the seller is in a state of uncertainty. He may end this uncertainty by requesting the buyer to make known whether he will accept performance.
If the buyer demanded substitute goods according to Art. 46 para. 2, the seller may not remedy the non-conformity by repairing the goods.
Here, we find a deviation from the general rule in Art. 27 where it suffices to dispatch the notice. In this specific case, the notice must have been received by the buyer. "Received" could perhaps be defined in the same manner as "reached" under Art. 24.
"(1) The buyer may declare the contract avoided: (a) if the failure by the seller to perform any of his obligations under the contract [page 195] or this Convention amounts to a fundamental breach of contract; or (b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed."
There is no automatic avoidance. The buyer, even in a case of fundamental breach, may have an interest in keeping his right to demand performance. But he may also avoid the contract and does so by a mere declaration. No other steps are necessary and no activity of a court is required.
Avoidance may comprise national concepts of rescission as well as termination. In case of a contract for delivery of goods by installments, it can be avoided in respect of deliveries already made or of future deliveries (Art. 73 para. 3). The effects of the avoidance are governed by Articles 81 to 84. Both parties are released from their main obligations under the contract.
The buyer may declare the contract avoided only under certain conditions: the possibility to return the received goods in their original condition (Art. 82 para. 1), or in case of non-conformity or of third party rights, the giving of notice as required under Articles 39 and 43. If the buyer did not reply to a request of the seller under Art. 48, he may also not avoid the contract during the period of time specified by the seller.
(iii)	after the expiration of any additional period of time indicated by the seller in accordance	with paragraph (2) of article 48, or after the buyer has declared that he will not accept performance."
As long as the buyer does not declare the contract avoided, he has to reckon with performance by the seller. In general, there is no period of time within which the buyer must declare the contract avoided. However, under certain conditions, when the seller has delivered the goods, the buyer loses the right to declare the contract avoided if he does not do so within a reasonable time.
"If the goods do not conform with the contract and whether or not the price has already been paid, the buyer may [page 197] reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price."
The reduction of the price is a right of the buyer which he may exercise by unilateral declaration. The price may not be reduced if the seller remedies any failure in accordance with Art. 37 or Art. 48 or if the buyer refused to let the seller remedy the non-conformity.
The decisive time for the calculation of the price difference between proper goods and non-conforming ones is not, as in some national legal systems, the time of the conclusion of the contract but the time of the delivery of the goods. The Convention does not stipulate at which place or market the prices have to be compared; however, in view of the close relationship between date and place of delivery, this place should be decisive. It is not excluded, however, that buyers may consider the place of destination.
"(1) If the seller delivers only a part of the goods or if only a part of the goods delivered is in conformity with the contract, articles 46 to 50 apply [page 198] in respect of the part which is missing or which does not conform.
"(2) The buyer may declare the contract avoided in its entirety only if the failure to make delivery completely or in conformity with the contract amounts to a fundamental breach of the contract."
"(1) If the seller delivers the goods before the date fixed, the buyer may take delivery or refuse to take delivery."
It is up to the discretion of the buyer whether he accepts early delivery or not. If he refuses to take delivery, he, in any event, has to take steps to preserve the goods (Art. 86). If the buyer takes early delivery, as a rule he likewise has to fulfill his own obligations earlier, that is, examine the goods, give notice of non-conformities, pay the price.
Similar provisions are contained in Art. 12 para. 1 and Art. 51 GCD or in Art. 44 para. 2 GIW.
As far as the obligation of the buyer to examine the goods under Art. 38 is concerned, in case of early delivery it has to be taken into account that the buyer might not yet be ready and that due to this circumstance the period ''as short as is practicable" might be somewhat longer.
By taking early delivery, the buyer may incur additional expenses or even losses. These may be claimed by the buyer only if he makes such an indication at the time of taking delivery. Otherwise, early delivery and its acceptance will be [page 199] considered as a change of contract and in this case no damages may be claimed.
"(2) If the seller delivers a quantity of goods greater than that provided for in the contract, the buyer may take delivery or refuse to take delivery of the excess quantity. If the buyer takes delivery of all or part of the excess quantity, he must pay for it at the contract rate."
In this case as well, the buyer has to preserve the goods if he refuses to take delivery.
1. United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March to 11 April 1980, Official Records (New York 1981) p. 179 et seq.
2. The elaboration of the Convention by UNCITRAL and its working group has been reported and analysed in great detail in the German Democratic Republic. See F. Enderlein, "Vorbereitung einer Konvention über den internationalen Warenkauf" 31 AWID (1975) 5. Beilage Recht im Aussenhandel;F. Enderlein and J. Völter, "Ergebnisse der Arbeit der UNCITRAL für ein einheitliches Recht über den internationalen Warenkauf" 51 AWID (1977) 31. Beilage Recht im Aussenhandel; F. Enderlein, "Zur Ausarbeitung einer Konvention über den Abschluss internationaler Kaufverträge durch die UNCITRAL" 52 AWID (1977) 32. Beilage Recht im Aussenhandel; F. Enderlein and H. Wagner, "Die XI. Tagung der UNCITRAL" 40 AWID (1978) 38. Beilage Recht im Aussenhandel.
3. J. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (Deventer 1982).
4. Allgemeine Bedingungen für die Warenlieferung zwischen den Organisationen der Mitgliedsländer des RGW (ALB/RGW 1968/1975 i.d.F. 1979) Bekanntmachung vom 12.10.1979, GB1. II 6/1979 p. 81 et seq.
5. See report of the second session of UNCITRAL Yearbook vol. I: 1968-1970 (New York 1971) p. 98.
6. For the GCD see also Manfred Kemper, Heinz Strohbach, Hellmut Wagner, Die Allqemeinen Lieferbedinqunqen des RGW 1968 Spruchpraxis sozialistischer Aussenhandelsschiedsqerichte -- Kommentar (Berlin 1975).
7. See G. Willma, "Zu einigen Problemen der Anwendung der ALB RGW-Finnland" 44 AWID (1981), 55. Beilage Recht im Aussenhandel p. 8.
8. See Fritz Enderlein, Dietrich Maskow, Monika Stargardt, Konvention der Vereinten Nationen über die Verträge für den internationalen Warenkauf, Konvention über Verjährung beim internationalen Warenkauf, Protokoll zu ändern der Konvention über die Verjährung beim internationalen Warenkauf -- Kommentar (Berlin 1985).
9. See Fritz Enderlein, "La réglementation de la vente internationale de marchandises dans le droit de la R.D.A. (Une comparison avec le projet d'une convention sur la vente internationale de marchandises)" 2 D.P.C.I. (avril 1977), tome 3, pp. 123-138.
10. See Dietrich Maskow, Hellmut Wagner, Kommentar zum Gesetz über internationale Wirtschaftsverträqe - GIW - vom 5. Februar 1976, 2nd ed. (Berlin 1983). This Code is published in English in the series Commercial, Business and Trade Laws, "German Democratic Republic" (Dobbs Ferry, New York 1984).
11. A German translation of this Code was published in 1974 by the Czechoslovakian Chamber of Commerce in Prague.
12. See the commentary to the 1980 edition of the Incoterms by Frédéric Eisemann and Werner Melis (Vienna 1982).
13. J. Honnold, supra n. 3, at p. 290.
14. André Tunc, Commentary of the Hague Conventions on the 1st July 1964 on the International Sale of Goods and on the Formation of Contracts of Sale, published by the Ministerie van Justitie (The Hague).
15. Dölle and Neumayer, Einheitskaufrecht (München 1976). Art. 52 ERG marginal No. 6 refers to Art. 333 of the Czechoslovakian Code which was drafted according to Art. 52 of ULIS.
16. Rolf Herber, Wiener UNCITRAL-Übereinkommen über internationalen Warenkaufverträge vom 11. April 1980 (Köln 1983) p. 26.
17. J. Honnold, supra n. 3, at p. 284.

References: Art. 92
 Art. 9
 Art. 9
 Art. 30
 Art. 31
 Art. 34
 Art. 4
 Art. 33
 Art. 38
 Art. 31
 Art. 43

Art. 31
 Art. 19
 Art. 32
 Art. 52
 Art. 23
 Art. 52
 Art. 37
 Art. 12
 Art. 44
 Art. 24
 Art. 25
 Art. 5
 Art. 37
 Art. 35

Art. 15
 Art. 35
 Art. 35
 Art. 285
 Art. 36
 Art. 33
 Art. 37
 Art. 48
 Art. 46
 Art. 45
 Art. 52
 Art. 37
 Art. 37
 Art. 35
 Art. 37
 Art. 45
 Art. 39
 Art. 37
 Art. 38
 Art. 39
 Art. 38
 Art. 35
 Art. 43
 Art. 40
 Art. 44
 Art. 39
 Art. 39
 Art. 72
 Art. 72
 Art. 285
 Art. 44
 Art. 35
 Art. 40
 Art. 40
 Art. 41
 Art. 42
 Art. 4
 Art. 41
 Art. 233
 Art. 41
 Art. 52

Art. 42
 Art. 41
 Art. 42
 Art. 39
 Art. 39
 Art. 77
 Art. 40
 Art. 43
 Art. 39
 Art. 39
 Art. 45
 Art. 45
 Art. 79
 Art. 35
 Art. 82
 Art. 281
 Art. 75
 Art. 49
 Art. 46
 Art. 27
 Art. 24
 Art. 48
 Art. 37
 Art. 48
 Art. 12
 Art. 51
 Art. 44
 Art. 38
 Art. 52
 Art. 333
 Art. 52