Source: http://www.cisg.law.pace.edu/cisg/biblio/ho40.html
Timestamp: 2019-04-19 04:55:06+00:00

Document:
Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 275-286. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
E.	Time Limits for Legal Proceedings - Statutes of "Limitation" or "Prescription"
We now face a complex problem of organization and presentation. Perhaps a brief preview will help.
In preparing the Convention attention (and policy conflicts) centered on the first type of notification�lack of conformity of the goods. Articles 39, 40 and 44 dealing with this question are so interrelated that they need to be examined as a group. However, one of these three provisions�Article 44, granting a limited "excuse" for failing to notify�also applies to notification of the second type: third-party claims.
In presenting these interlocking provisions we shall first examine Articles 39, 40 and 44 requiring buyers to give notice of non-conformity in the goods.
These three articles embody a delicate compromise of views that were vigorously pressed during the UNCITRAL proceedings and at the 1980 Diplomatic Conference. Indeed, this is one of the few points where perceptions of differing regional and economic interests came to the fore. Representatives of several industrial States, primarily of the Continent of Europe, stressed the importance of maintaining the strict notice requirements embodied in their domestic rules. This position was opposed primarily by representatives of developing States. This opposition reflected fears that defects in heavy machinery might appear long after the machinery is delivered and put into use and that purchasers might be unaware of the drastic effects of delay in giving notice. The evolution of provisions designed to reconcile these views will be described infra at ��256�261.
We need to distinguish two types of rules that relate to delay: (1) Rules, like Articles 39, 40 and 44, requiring timely notice to the other party, and (2) Rules setting time limits for bringing legal action. Rules of the second type are not included in the Sales Convention and are the subject of a closely-related Convention on the Limitation Period in the International Sale of Goods (1974 and 1980 Protocol of amendment). The Limitation Convention will be introduced at �261.1, infra.
Following are the three articles (Arts. 39, 40, 44) of the first type�rules requiring notice to the other party of lack of conformity of the goods.
"The seller is not entitled to rely on the provisions of article 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.
"Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1) of article 43, the buyer may reduce the price in accordance with article 50 or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the required notice."
Let us assume that the buyer receives goods and, without objection, retains the goods and uses or resells them, but later declines to pay or claims damages on the ground that the goods were defective. If the seller learns of the claim after the goods have been used or after a period during which the goods could have deteriorated, it will be difficult to ascertain whether the buyer�s claim is just. The seller�s responsibility was to provide goods that conformed to the contract when the risk of loss passed to the buyer (Art. 36(1), supra �normally when the seller shipped or when the buyer received the goods. Art. 66�70, infra at ��360-383). If the buyer notifies the seller promptly, the seller can inspect and test the goods to ascertain whether a claim is justified. Moreover, when the inspection shows that the goods are defective, the seller may be able to exercise [page 277] its right to cure the defect (Art. 37, supra at �244; Art. 48, infra at �292).
The buyer must notify the seller of "lack of conformity." The area embraced by this concept is defined in Article 35, and includes quantity, quality, description and packaging.
Article 39(1) states that the buyer must give notice " specifying the nature of the lack of conformity". Questions as to what the notice must say should be answered with regard for the functions served by the notice. As was noted at �255, the principal functions are to give the seller an opportunity to obtain and preserve evidence of the condition of the goods and [page 278] to cure the deficiency (Arts. 37 and 48). See the Secretariat Commentary on draft Art. 37 (para. 4), O.R. 35, Docy. Hist. 425. A notice that said no more than "goods defective" usually would not give the seller all the information the seller needs for the above purposes and (as Article 39(1) requires) would not specify " the nature of the lack of conformity". (In an age of electronic communication, a seller who wanted to know more might be expected to inquire.
Decisions on Specificity: Inadequate: (1) GER. OLG Frankfurt a M., 5 U 261/90, 13 June 1991: Failure to specify precise defects in textiles. CLOUT 1, UNILEX 1991-5. (2) GER. LG München, 17 HK 03726/89, 3 July 1989. B�s notice: shoes had bad fit and workmanship, was not sufficiently detailed. CLOUT 3, UNILEX D.1989-2. (3) GER. OLG München, 7 U 2070/97, 9 July 1997. Notice that the goods "did not conform to our specifications and cannot be sold to customers" and "250 items were badly stamped" were not sufficiently specific under CISG 39(1). UNILEX D. 1997-11. (Other German decisions to similar effect.) (4) Cf. Switz. T. Can. Valais, CI 97-167, 28 October 1997. Inadequate notice. CLOUT 219.
Query. Do the decisions give adequate weight to the language of Article 39(1) which calls for "specifying the nature of the lack of conformity"? If S is in doubt about the precise nature of B�s complaint, would S normally ask B for more details? See: Bonell/Ligouri, ULR (1997-3) 595 n. 14�16; Schlechtriem, Com. (1998) 314�316.
Suppose that in a contract calling for cans of soybean oil the buyer discovers that the cans contain mineral oil or fish oil or some other liquid quite different from that specified in the contract. Does Article 39 require the buyer to notify the seller of "a lack of conformity of the goods"?
This question would only occur to one whose domestic law draws a distinction between "non-conforming" goods and "different" goods (sometimes called an " aliud "). The Convention does not draw this distinction. As has been noted, ��222�223, supra, Article 35 deals with the question of non-conformity in broad terms: The issue is whether the seller�s delivery conforms to the contract. Article 35(1) states: "The seller must deliver goods which are of the quantity, quality and description required by the contract...".
In short, the delivery of goods that are totally different from the "description required by the contract" is a breach of Article 35 on conformity of the goods and invokes the requirement of Article 39 that the [page 279] buyer notify the seller of "a lack of conformity of the goods" as a foundation for the remedies afforded the buyer (Arts. 45�52) for breach of contract.
The German Bundesgerichtshof (Sup. Ct.) rejected the "aliud" concept in the setting of the Sales Convention. VIII ZR 51/95, 3 April 1996. UNILEX D.1996-4.
Article 39(1) requires that notice be given "within a reasonable time after [the buyer] has discovered [a lack of conformity] or ought to have discovered it." Article 38, in fixing the time when the buyer must inspect the goods, is useful in determining when the buyer "ought to" discover a non-conformity. Of course, the buyer is bound only to discover those defects that a normal examination would reveal. (See Art. 38 and Example 38A, supra at �252.) Thus, examination at the point of destination would normally show the number of containers and the apparent condition of goods that are open to inspection, but the contents of sealed containers and the inner workings of machinery may not be discoverable until later. The determination of the "reasonable period" for notice following the time when the buyer discovers (or ought to have discovered) the non-conformity would be influenced by a wide range of factors. Considerations indicating the need for speed include the perishable nature of the goods, the need for impartial sampling or testing, and the possibility of cure by the seller.
See also: Bonell/Ligouiri, ULR (1996�2) 362�363, (1997�3) 593-594 (citing cases); Schlechtriem, Com. (1998) 319.
Some legal systems simply require notice within a "reasonable time" and do not specify an outer time-limit. (See (U.S.A.) UCC 2-607(3), Art. 38, supra at �253.) Others specify cut-off periods of one year or less. ULIS 49(1) set a cut-off limit of one year. The two-year period in paragraph (2) Article 39 was part of an overall compromise.
Paragraph (2) opens with the phrase "in any event"; the notice must be given within the two-year period even though a defect is discovered subsequent to that period, and even though a later notice would satisfy the general standards of Article 39(1) and Article 44.
The exception at the end of paragraph (2), for cases where the two-year limit "is inconsistent with a contractual period of guarantee", meets a problem that could arise, in rare instances, when the contract guarantees performance for a period of two years or longer. (See Art. 36(2), supra at �243). Suppose that a contract guarantees performance for a period of two years, and the goods break down at the very end of the two-year period. In this situation the two-year cut-off could be "inconsistent with [the] contractual period of guarantee" so that a later notice would be effective.
Article 39 states that if the buyer fails to notify the seller within the prescribed period he "loses the right to rely" on the non-conformity. This language, standing alone (but see Art. 44, �261 infra), would bar the full range of remedies: a claim for damages (Art. 45(1)(b) and 74�77), requiring performance by the seller (Art. 46), avoidance of the contract (Art. 49) and reduction of the price (Art. 50). Under this language a seller�s action to recover the price would not be subject to a set-off or counterclaim based on a defect which the buyer knew or ought to have discovered if the buyer fails to notify the seller within the periods stated in Article 39. However this rigorous rule is subject to exceptions, to which we now turn.
Article 40, quoted supra at �254, relieves the buyer of these notice requirements when a lack of conformity relates to facts of which the seller "knew or could not have been unaware." Such a rule appears in ULIS (Art. 38) and calls for little comment.
Decision on Knowledge; See, e.g., GER. LG Trier, 7 HO 78/95, 12 October 1995. S could not object to B�s delay in giving notice since S "could not have been unaware" of watering of wine. UNILEX D.1993-28. See: Schlechtriem, Com. (1998) 321�323.
There was no provision like Article 44 in the 1978 Draft Convention that was submitted to the Diplomatic Conference. Efforts to relax the notice requirements of Article 39 had failed by narrow margins and it seemed that the question [page 282] had been resolved. Thereafter, informal discussions revealed that some developing countries were seriously dissatisfied by this result; representatives of industrial countries that had strongly resisted relaxation of the notice requirements proposed that the issue be reopened so that a compromise solution could be developed. This led to the addition of Article 44, quoted supra at �254.
The "reasonable excuse" for a failure to give notice in conformity with Article 39(1) needs to be understood and applied in the light of its legislative history. At the Diplomatic Conference several representatives, primarily from developing States, objected that consequences imposed by Article 39(1) were too drastic: The provision that "the buyer loses the right to rely on a lack of conformity of the goods" means (inter alia) that one could be required to pay the full price for defective goods. Concern was also expressed that it would be especially difficult to ascertain defects in complex industrial machinery typical of imports to developing areas, and that their importers might be unaware of the Convention�s notice requirement and the drastic consequences of failure to comply.
Against this background the use of the expression "reasonable excuse " indicates the applicability of more individualized considerations than would otherwise be relevant under Article 39(1). Thus, Article 44 might countenance difficulties encountered by the individual importer, or at least by importers of the region, that might not be relevant under the more objective standard of Article 39(1).
The "excuse" provisions of Article 44 do not preserve all of the buyer�s remedies�only reduction of the price (Art. 50) and recovery of [page 283] damages other than loss of profit (Art. 74). Consequently, a buyer who fails to give notice within a "reasonable time" (Art. 39(1)) may not require performance (Art. 46), avoid the contract (Arts. 49 and 73; cf. Arts. 75�76) or rely on the non-conformity as a basis for delaying the passage of risk of loss (Art. 70).
Professor Schlechtriem raises interesting questions concerning problems that may arise when a buyer qualifies for the limited "excuse" provided by Article 44. Suppose that the seller would have been able to cure the lack of conformity (Arts. 37, 48) and thereby avoid damages if the buyer had notified the seller of the non-conformity within the "reasonable time" required by Article 39(1). Under these circumstances may the seller invoke Article 77 calling for measures to mitigate loss (��416-419) infra) and thereby reduce the buyer�s claim for damages? A second query: Article 44 states that the buyer may "claim damages" when excused from the notice requirement of Article 39(1) but provides no excuse from Article 38 regarding timely inspection; failure to comply with Article 39(1) might give the seller a damage claim.
This writer sees force in the suggestion concerning mitigation of avoidable damages based on Article 77 but is concerned lest other suggestions undermine the hard-fought "excuse" provided by Article 44. Surely the seller may not claim damages for the lack of notice that Article 44 excuses. Suppose that a buyer does not inspect within the period specified in Article 38 but by some other means learns that the goods are defective and notifies the seller within the "reasonable time" specified in Article 39; only unusual circumstances would justify a claim against the buyer for breach of an independent duty to inspect.
The "excuse" provision of Article 44 was drafted hastily at a late stage of the Diplomatic Conference and consequently is not well integrated with the notice provisions developed in UNCITRAL, but the problems it poses for sellers can easily be overstated. The sanction imposed by Article 39(1) that the "buyer loses the right to rely on a lack of conformity of the goods" is severe and significant sanctions are preserved against even a buyer who qualifies for "excuse" under Article 44. Consequently buyers are not likely to refrain from making a prompt complaint when they [page 284] receive defective goods. In any event, an undue delay in asserting a defect will continue to militate against the credibility of the claim. Moreover, even in areas with stern rules like Article 39(1), contracts often include precise rules on timely notification of defects; as we have seen (Art. 6, �74-81, supra) the Convention does not interfere with the parties� freedom to make their own rules.
Decisions on Excuse: (1) GER. OLG München, 7 U 3758/94, 8 February 1995. B delayed 2 months in notifying S of defects in chemicals. B�s claim for excuse under Art. 44 was rejected. The court noted that the normal limit for durable goods was 8 days. B�s business was fast-paced; it would be easier to allow excuse to a "single trader or artison". UNILEX D. 1995�4. (2) Cf. ARB. ICC (Paris) 7331/1994 (1994). B delayed 30 or more days in notifying S of defect. B�s plea for excuse under Article 44 was rejected. UNILEX D. 1994�33. On excuse (Art. 44): Schlechtriem, Com. (1998) 348�354.
� 261.1 E. Time Limits for Legal Proceedings�Statutes of "Limitation" or "Prescription"
Technically distinct from notice requirements are limits on the time for instituting legal proceedings. Such domestic rules on "Limitation" or "Prescription" very widely on the length of time limits for legal action and also on whether these limits are rules of "procedure" or of "substantive" law�a difference in theory that leads to divergent rules of private international law. These difficulties led to an early decision by UNCITRAL to prepare uniform rules that were finalized in the Convention on the Limitation Period in the International Sale of Goods (New York, [page 285] 1974). The Convention entered into force on August 1, 1988 and (as of writing) is in force in twenty-three States.
The 1974 Convention sets a general limitation period of four years (Art. 8) from "the date on which the claim accrues" (Art. 9�1). A claim for lack of conformity of goods accrues when "the goods are actually handed over to, or their tender is refused by, the buyer" (Art. 10�2).
1. Arts. 39 and 40 of the Convention are the same as Arts. 37 and 38 of the 1978 Draft and are similar to ULIS 39 and 40. Art. 44 was added during the 1980 Diplomatic Conference. The legislative history of Article 39 is extensive and deserves noting: WG: 1 YB 181, 202, Docy. Hist. 19, 40; S-G: 1 YB 195, Docy. Hist. 33; WG: III YB 81, 87, Docy. Hist. 98, 104; S-G IV YB 47�49, Docy. Hist. 124�126; WG: V1 YB 66�67, 76, V YB 54, Docy. Hist. 144�145, 154, 200; S-G: VI YB 99�101, Docy. Hist. 224�226; WG: VI YB 55, Docy. Hist. 246. UNCITRAL : VIII YB 25�26, 40; Docy. Hist. 318�319, 333. DIPL. CONF. : O.R. 77, 34�35 (Secretariat Comm�y), 320�324, 427, 107�108, 159, 208; Docy. Hist. 398, 424�425, 541�545, 648, 679�680, 718, 743.
Article 40 did not attract significant discussion.
Article 44 emerged only at the Diplomatic Conference: O.R. 108, 323, 427, 159, 170, 208, Docy. Hist. 680, 544, 648, 718, 728, 743.
2. The notice requirements of Arts. 39, 40 and 44 have special significance when the buyer retains or resells the goods. If the buyer rejects the goods ("avoids the contract"), the special rules applicable to avoidance require that avoidance (and notice) occur within a "reasonable time" (Arts. 26 & 49(2)).
Some of the domestic rules requiring notice of defects were mentioned under Art. 38, supra at �249; others will be noted in connection with specific aspects of the present group of three articles. As we shall see, Arts. 39, 40 and 44 are an amalgam and do not reproduce the provisions of any single legal system.
3. Problems of prolonged delay in notification can seldom arise with respect to defects in documents, for when the buyer receives the goods from the carrier the documents will usually become irrelevant. When the buyer rejects the seller�s tender because of defects in documents the rules on "avoidance" (Arts. 26, 49(2)) require the buyer to notify the seller within a "reasonable time." See n. 2, supra.
4. Analysis of factors bearing on the need for speedy notice under comparable domestic rules may be useful in applying the Convention. See White & Summers �11�10.
5. Proposals at the Diplomatic Conference to make the period start on "delivery" were defeated. Com. I O.R. 349 paras. 54�65. O.R. 107�108, Docy. Hist. 570, 679�680. On the ambiguities of the concept of "delivery" see Art. 31, supra at �210.
6. See the Secretariat Commentary on the Limitation Convention (A/CONF. 63/17), Art. 10, paras. 3�5, p. 27, X YB 145, 156.
7. UCC 2-607(3): the buyer is "barred from any remedy," quoted under Art. 38, supra at �253. Cf. the domestic rules cited in n. 5, supra.
8. The phrase "could not have been unaware" is discussed under Art. 35, supra at �229. The notice required by Art. 43(1) (right or claim of a third party) is not applicable when the seller knew of the fact in question. See Art. 43(2), infra at �271. When the seller knew of a non-conformity in the goods, domestic rules governing fraud may be applicable. See the rules of Switzerland, Germany, and Sweden, cited in n. 5, supra.
9. The move for a compromise was led by Sweden and Finland. These two were joined by Ghana, Kenya, Nigeria, and Pakistan in developing a joint compromise proposal. This was drafted as a third paragraph of Art. 39, but became a separate article (Art. 44) so that it could also apply to the notice requirements in Art. 43(1). O.R. 108, 323, Docy. Hist. 680, 544; see also �254, n. 1, supra. As has been noted (�154, supra ) "excuse" under Art. 44 also applies to Article 43, infra. See Date-Bah, Problems of Developing Countries, in Potsdam Colloq. 39 et. seq., and Date-Bah in 11 Rev. Ghanaian Law 50 (1979).
10. Courts in the United States have given consideration to the problems of the buyer in question in applying a notice provision (UCC 2-607(3)(a)) similar to Article 39(1), even in the absence of an "excuse" provision like Article 44. White & Summers �11�10, notes 2 & 10.
11. Barring the buyer from avoiding the contract when he fails to give notice within a "reasonable time" is important to prevent the buyer from speculating� e.g., by invoking the breach and avoiding the contract after a drop in the market. SR. 16 para. 57. O.R. 322, Docy. Hist. 543.
12. Schlechtriem, 1986 Commentary 71 and n. 271.
13. Under the many sales laws that follow the (U.K.) Sale of Goods Act a failure to give timely notice may bar the buyer from rejecting the goods but does not foreclose a claim for damages. The USA Uniform Sales Act (1906), however, deviated from the UK model by inserting a provision (�49) that was similar to CISG 39(1); this rule was preserved in UCC 2-607(3)(a). The Ontario Law Reform Commission, in its three-volume study recommending a revised Uniform Sales Act based in large measures on the UCC, recommended that UCC 2-607(3)(a) should be rejected. Ont. L. Ref. Com. Sales, Vol. II p. 481. See the Uniform Sale of Goods Act adopted by the Uniform Law Conference of Canada, Report No. 38, Inst. of L. Res. & Ref., Edmonton (1982) �8.2, pp. 294�295. For an intensive study of "cut-off" rules in their historical and comparative context see J. Reitz, 36 Am. J. Comp. L. 437 (1988) (Part I: CISG), 37 id. 247 (1989) (Part II).
14. Contract clauses containing unreasonably short notice periods may be held invalid under domestic law. See Art. 4(a), �64 supra.
15. United Nations Conference on Prescription (Limitation) in the International Sale of Goods, Official Records (U.N. Doc. A/CONF. 63/16; UN Pubn. E. 74.V.8). See Smit, Convention on the Limitation Period: UNCITRAL�s First Born, 23 Am. J. Comp. L. 337 (1975) (text of the Convention at 356); Knapp, 19 J. World Tr. L. 343 (1985); Sono, 35 La. L. Rev. 1127 (1975); Hill, 25 Texas Int. L. J. 1 (1990). Landfermann, 39 Rabels Z 253 (1975), Giardina, 1975 Riv. Dir. Int. Pr. & Proc. 465; Secretariat Commentary on the 1974 Convention, UNCITRAL Yearbook Vol. 10 pp. 145�173.
16. The ten initial adoptions were by Argentina, Czechoslovakia*, Dominican Republic, Egypt, Ghana, Hungary, Mexico, Norway, Yugoslavia and Zambia. Additional adoption include: Belarus, Bosnia & Herzegovina, Cuba, Czech Republic*, Guinea, Moldova, Poland, Romania, Slovakia, Slovenia, Uganda, Ukraine, USA, Uruguay.

References: Art. 66
 Art. 48
 Art. 37
 Art. 38
 Art. 38
 Art. 36
 Art. 44
 Art. 44
 Art. 44
 Art. 38
 Art. 31
 Art. 10
 Art. 38
 Art. 35
 Art. 43
 Art. 43
 Art. 39
 Art. 43
 Art. 44
 Art. 4