Source: http://cisgw3.law.pace.edu/cisg/biblio/hillman1.html
Timestamp: 2018-01-24 00:06:40
Document Index: 561103173

Matched Legal Cases: ['art. 7', 'art. 7', 'art. 78', 'art. 16', 'art. 28', 'art. 54', 'Art. 7', 'art. 4', 'art. 7', 'art.4', 'art. 4', '§ 1', '§ 1', 'art. 7', 'art. 6', 'art. 96', 'art. 19', 'art. 8', 'art. 8', 'art. 9', 'art. 60', 'art. 32', 'art. 19', 'art. 39', 'art. 16', 'art. 29', 'art. 47', '§ 1', 'art. 19', 'art. 68', 'art. 79', 'art. 49', 'art. 64', 'art. 25', 'art. 48', 'art. 71', 'art. 71', 'art. 77', 'art. 74', 'art. 77', 'art. 75', 'art. 86', 'art. 74', 'art. 81', 'art. 84', 'art. 29', 'art. 14', 'art. 8', 'art. 18', 'art. 18', '§ 22', 'art. 4']

Reproduced with permission from the Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 21-49
Applying the United Nations Convention on Contracts for the
International Sale of Goods: The Elusive Goal of Uniformity
Robert A. Hillman [*]
The General Principles of the Convention
Supporting the Parties' Intentions
Ensuring That Each Party Receives the Fruits of the Exchange
Awarding Damages To Compensate Aggrieved Parties and Not To Punish Breaching Parties
Restitution in Favor of a Buyer
One of the principal aims of the United Nations Convention on Contracts for the International Sale of Goods (Convention) [1] is to achieve uniformity in the application of the law of international sales.[2] In fact, the need to achieve predictability and certainty in the sales law of an increasingly global commercial community precipitated the creation of the Convention.[3] Yet, the nature of an international commercial convention may make uniformity an elusive goal. The text of the Convention reflects the many compromises necessary to achieve agreement among widely diverse states with language and cultural differences, civil and common law traditions, capitalist and socialist political philosophies, and developed and developing economies.[4] Many of these accords are intentionally broad,[5] vague,[6] or even contradictory [7] in order to achieve consensus, to avoid conflicting local meanings, or to make the provisions comprehensible to people of different legal heritages.[8] The result, however, provides inadequate guidance to decision-makers applying the Convention.[9] The possibility that signatory states will develop distinct positions on the meaning of the Convention is, of course, very real.[10]
The subject matter of the Convention creates additional challenges of application. Rules must be sufficiently broad in order to apply to diverse [page 21] sales transactions and to avoid obsolescence as business practices and technology evolve.[11] Nevertheless, extensive changes in business methods inevitably lead to gaps in coverage.[12] A manifest danger is that tribunals from diverse states, familiar and comfortable with domestic law, will supply conflicting gap-filling rules.[13]
This Article focuses on the problem of achieving uniformity in the application of the Convention. Article 7 sets forth the Convention's approach to the issue.[14] Article 7(1) guides the Convention's interpreters: "In the interpretation of this Convention, 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." The first two criteria, paying attention to the Convention's "international character"[15] and promoting uniformity, require courts and arbitrators to avoid local interpretations of the language, which would likely lead to the accumulation of conflicting glosses on the Convention's rules.[16] In theory, tribunals should interpret particular language with an eye towards its purposes and policies and the more general principles of the Convention.[17] This approach is not extraordinary; courts should consider the purpose of a rule when construing any statute.[18] The third criterion, promoting good faith, supplies one explicit principle in seeking a uniform interpretation of the Convention.[19]
Article 7(2) focuses on gap-filling when the Convention governs a matter but does not expressly speak to it.[20] The line between interpretation and gap-filling is, of course, not always easy to draw.[21] Not surprisingly, the subsection also leads the decision-maker primarily to the Convention's principles:
Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.[22]
Article 7(2) is itself a product of compromise.[23] On the one hand, legislators from civil law traditions believed that courts could fill gaps by applying both the Convention's general principles and, either directly or [page 22] by analogy, the more specific principles embedded in particular provisions.[24] This approach has sometimes been called "true code" methodology.[25] A "true code" is "a pre-emptive, systematic, and comprehensive enactment of a whole field of law."[26] There are no gaps in a "true code" because principles and policies supply answers when the text gives out.[27] As Grant Gilmore stated,
A 'code' ... is a legislative enactment which entirely pre-empts the field and which is assumed to carry within it the answers to all possible questions: thus when a court comes to a gap or an unforeseen situation, its duty is to find, by extrapolation and analogy, a solution consistent with the policy of the codifying law. ...[28]
Drafters from common law countries, however, questioned whether ample principles could be found in the Convention and, if so, doubted their clarity and certainty.[29] Skeptics were especially concerned that tribunals from diverse countries might ascribe conflicting meanings to the principles.[30] Skeptics of "true code" methodology therefore preferred to utilize domestic law when the Convention did not expressly point the way.
Instead of attempting to resolve this conflict, the Convention's legislators opted for a compromise that includes both methodologies.[31] They created a priority system in which the Convention's principles, when available, trump domestic rules, but the drafters offered no guidance on when principles give out. They left to judges and arbitrators in individual cases the question of how to find principles and how hard to look for them. Individual tribunals would therefore determine the extent to which the Convention would be treated as a "true code."
The problem of achieving uniformity in the interpretation of a set of rules designed to govern diverse transactions between parties in distinct political divisions is not novel. In the United States, for example, the drafters of uniform state laws confront the problem of nonuniform state judicial interpretation and gap-filling.[32] The drafters of the Uniform Commercial Code (UCC) attempted to resolve this question by creating a dichotomy similar to that present in Article 7(2) of the Convention. [page 23]
Section 1-102 of the UCC reflects the "true Code" tradition of the civil law, directing courts to construe the Code "liberally ... to promote its underlying purposes and policies."[33] According to one commentator, "[t]he effect of this language is that the [C]ode not only has the force of law, but is itself a source of law."[34] However, Section 1-103 also looks to outside law. It provides that "[u]nless displaced by the particular provisions of this Act, the principles of law and equity ... shall supplement its provisions."[35] Judges must decide the question of when particular provisions "displace" outside law.
Although the UCC is considered by many to be successful,[36] its record is a disappointment if measured by the extent to which courts treat it as a "true code" and by the degree of uniformity achieved.[37] Today, a lawyer representing firms that do business in more than one state must research the myriad, often contradictory, cases from each state construing the pertinent provisions. In fact, most of the UCC is now under revision, partly as an attempt to recapture uniformity in the application of commercial law.[38]
The goal of uniformity is even more critical in the international arena because, unlike US law, the domestic law of diverse countries often lacks common roots.[39] In addition, these countries often lack a preexisting body of recognized commercial international law.[40] Reliance on domestic law will likely lead to diverse, contradictory, and ultimately confusing rules.[41] Can the Convention avoid this problem and achieve uniformity? In Part I of this Article, I analyze the Convention's principles. I conclude that the Convention supplies many principles to aid in interpretation and gap-filling. Unfortunately, the plethora of principles does not ensure uniform application of the Convention. Some principles are vague, overly broad, or conflict with each other. In addition, the principles do not cover all of the gaps in the Convention.[42] Such problems obviously raise the question of whether "true-code" methodology is superior to reliance on domestic rules.[43]
Notwithstanding its shortcomings, I believe that courts and arbitrators should lean towards the "true-code" model rather than resort to domestic law, which would create even more confusion. This position is [page 24] not controversial. Commentators on Article 7 unanimously agree that the Convention cannot succeed without heavy reliance on its principles.[44] For example, Professor Honnold has written: "The rules of private international law were neither clear nor uniform; hence there would be doubt and dispute over which law was applicable. In addition, the domestic law would be foreign to one of the parties, and in most cases would be unsuited to the problems of international trade."[45] Another commentator points out the difficulty in finding and translating case decisions.[46]
Most analyses of Article 7, however, speak generally of the Convention's principles or unsystematically list a grab-bag of principles.[47] Commentators also advocate the accumulation of a body of case law to explain the principles and to guide tribunals on their use.[48] The purpose of this Article is to sort out the Convention's principles in a manner that establishes a coherent approach to their application and to express reservations about reliance on case law. As to the latter, I argue that it is inconsistent to argue on the one hand that the Convention's principles are an important source of law and that tribunals should prefer "true-code" methodology and on the other hand to call for the collection of a body of case law to resolve issues arising under the Convention.
In Part I, I show that the Convention's principles can be organized around four instrumental policies. Part II applies these policies to two illustrative problems. I conclude that, although uniformity is elusive, tribunals are more likely to achieve it by taking the "true-code" approach.
I. THE GENERAL PRINCIPLES OF THE CONVENTION
Achieving uniformity in the application of the Convention through the use of its principles depends on whether the Convention supplies ample principles, whether they are sufficiently distinct and coherent, and whether they are consistent. The Convention has no official commentary,[49] an ample source of principles for the Uniform Commercial Code. Moreover, although the Convention's legislative history is a source of [page 25] principles, commentators correctly point out the difficulty and potential unreliability of its use.[50] For example, individual statements of position about the meaning of an end-product compromise are often misleading.[51]
As with the Uniform Commercial Code, the text of the Convention expressly supplies general principles. Some articles or portions thereof are nothing more than broad pronouncements of principle. For example, I have already mentioned Article 7(1)'s declaration of the importance of "good faith in international trade" and of the Convention's "international character."[52] In addition, Article 6 declares the Convention's allegiance to the principle of freedom of contract.[53]
Critics of the Uniform Commercial Code asserted that its general purposes and policies -- simplification, clarification, modernization and uniformity -- were too broad and often conflicted.[54] For example, reasonable minds may differ on what will "simplify" commercial law. The Convention's general principles may suffer from similar difficulties. What is the meaning of good faith and when does it apply? Precisely what are the attributes of an "international" convention and how should they affect individual disputes? [55] These are especially thorny problems when the parties come from countries with different political, legal, economic, and social systems.
More coherent and distinct principles can be found in the Convention, however. Many articles, although reciting a particular rule, reflect an overarching principle or policy.[56] Article 29(1), for example, dispenses with the consideration requirement for a contract modification, suggesting a more general policy to facilitate the enforcement of the parties' intentions by eliminating cumbersome formalities. Article 48(2) entitles the seller to cure a failure to perform on time under some circumstances and suggests a general policy to encourage the completion of deals without litigation.
To apply the principles coherently and to promote uniform application, it is not enough simply to recite the hodge-podge of Convention principles and hope that tribunals select appropriate ones in a given case. Rather, the principles must be organized into a coherent framework.[57] In fact, the Convention's principles can be usefully organized around four [page 26] instrumental policies. One set of principles ensures the enforcement of the parties' intentions. Another set helps the parties to realize the fruits of their exchange by avoiding disputes. A third group of principles works to "keep the deal together" even after a problem surfaces. The final set of principles seeks to make aggrieved parties whole when an agreement ultimately breaks down. I do not claim that these principles supply answers to every issue unresolved by the Convention's express language. I argue only that reference to the principles provides the best hope for achieving an acceptable amount of uniformity in application of the Convention.
A. Supporting the Parties' Intentions
Article 6 of the Convention authorizes the parties to "exclude the application of this Convention or ... derogate from or vary the effect of any of its provisions."[58] Obviously, the Convention's framers chose freedom of contract over the regulation of private international behavior.[59] Article 6 demonstrates the drafters' respect for individual freedom, including the right to employ one's economic resources.[60] In theory, freedom of contract increases social welfare because people left to their own devices enter exchanges that improve their positions.[61] Free contracting therefore enables goods and services to move "from less to more valuable uses."[62] To operate efficiently, an expanding international market system with diverse transactions requires self-regulation by parties who know their interests better than regulators do.[63]
In conjunction with Article 6, several provisions eliminate formalities that might impede the parties from freely achieving their goals. For example, Article 11 abolishes the statute of frauds, and Article 29(1) dispenses with both the writing and consideration requirements for enforceable modifications.[64] Article 19(2) eliminates in part the "mirror image rule" of contract formation.[65] Under the provision, acceptances containing immaterial additional or different terms still form a contract.
The rules for interpreting contracts also support enforcement of the parties' intentions. Under Article 8, if one party knows the other's meaning, then that meaning prevails.[66] Otherwise, courts must interpret statements [page 27] and conduct based on the meaning that would be ascribed to them by a reasonable person, which is likely to be the meaning the parties intended.[67] Article 9's enforcement of "widely known" and "regularly observed" international usages (unless the parties agreed otherwise) binds the parties to the meaning of the language they likely intended or "ought to have known" would be ascribed to their language.[68]
B. Ensuring That Each Party Receives the Fruits of the Exchange
Voluntary exchange occurs in free markets because the parties, seeking to improve their position,[69] trade less valuable resources for more valuable ones.[70] A party who enters an international sales contract expects cooperation and reasonable conduct by its counterpart in order to achieve this goal. In addition, a party anticipates being able to rely on its partner's communications and actions. A party does not expect the other party to attempt to achieve gains beyond what were agreed to in the contract.
Several articles of the Convention support these goals.[71] The Convention requires cooperation [72] and reasonable conduct.[73] For example, the buyer must cooperate in facilitating the seller's delivery.[74] Conversely, the seller must cooperate in protecting the buyer's interests.[75] For example, when the seller does not have to insure goods in transit, it must provide information so that the buyer can obtain insurance for the goods.[76]
The duty to act reasonably may be the Convention's most pervasive general principle. For example, the Convention measures its various notice requirements by their reasonableness as to content [77] and time.[78] These and many other references to reasonableness [79] demonstrate that "under the Convention the reasonableness test constitutes a general criterion for evaluating the parties' behaviour."[80] The focus on reasonableness should help ensure that the Convention's rules do not overly favor parties from more developed economies.[81] [page 28]
Several provisions of the Convention safeguard a party's reasonable reliance on the other party's communications. An offer cannot be revoked if the offeree reasonably relies.[82] A party cannot assert a "no oral modification" clause if the other party has reasonably relied on an oral modification agreement.[83] A seller may rely on a buyer's grant of extra time for performance.[84] Finally, a party can withdraw a communication by sending a new one that reaches the other party first, thereby protecting the receiving party from relying on the original message.[85]
The drafters disagreed over whether the Convention should include a duty to perform in good faith. Some feared that the standard was too vague and that it could not be interpreted uniformly because it takes on too many different meanings in different legal systems.[86] For example, good faith may or may not be limited to the performance of the contract,[87] or may or may not be tied to an objective test of reasonableness.[88] Others supported the use of a broad standard to police conduct.[89] The resulting compromise seems to support the latter approach, although it does so indirectly.[90] In interpreting the Convention, courts and arbitrators must consider the goal of promoting "the observance of good faith in international trade." Good faith is therefore an instrumental policy that courts must seek to advance when they interpret the Convention.
How can courts promote good faith? Their interpretation of a provision of the Convention must discourage bad faith. Consistent with Article 7, courts should not look to domestic law to determine when a party is acting in bad faith because the Convention's principles suggest a relatively determinate meaning of good faith. First, a party acts in bad faith when its conduct is inconsistent with any of the Convention's requirements, such as the duty to notify or to act reasonably.[91] Second, a party acts in bad faith by taking advantage of the other party to extract gains not due it under the contract. This principle ensures that the parties achieve the fruits of their exchange.
As an illustration of the latter use of good faith, Article 29(1) requires a "mere agreement" to modify a contract. Nevertheless, to promote good faith, tribunals should interpret that provision to bar enforcement of modification agreements formed when one party takes advantage of the [page 29] other's dependence on the contract to extract price or other concessions.[92] In other words, the Convention's instrumental approach to good faith achieves indirectly what the drafters could not agree to directly: Parties have a duty to act in good faith under the Convention.[93]
C. Keeping the Deal Together
Several provisions of the Convention facilitate the successful completion of an exchange by discouraging breakdowns even when something goes awry. For example, many articles encourage or require communication between the parties to resolve problems before a total contract breakdown.[94] An offeror must affirmatively object to immaterial additional or different terms, or else they become part of the contract.[95] A buyer must notify the seller of a defect in the goods or of a refusal to accept performance after the seller has failed to perform on time, or else the buyer loses the right to rely on the nonconformity or delay.[96] A seller must disclose the loss of or damage to the goods while in transit, or else assume the risk of loss otherwise already on the buyer.[97] A party must give notice of suspension of performance when it "becomes apparent" that the other party will not perform.[98]
The right to avoid a contract accrues to a party only when the other party commits a "fundamental breach."[99] [This rule is subject to only a limited exception.] [99a] Moreover, the Convention limits the concept of fundamental breach. It is not enough if the breach substantially deprives the other party "of what he is entitled to expect under the contract."[100] If the breaching party actually and reasonably did not foresee that a breach would have this effect, the breach is not "fundamental," and the opportunity to save the deal arises.[101]
The Convention includes additional rights or duties contributing to the successful completion of an exchange after a misstart. For example, the seller may cure a failure to perform on time if it is done "without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement. ..."[102] A party may "suspend" but not repudiate a prospective performance if "it becomes apparent that the other party will not" substantially perform due to inability, financial [page 30] difficulties, or inappropriate preparation.[103] If the other party provides "adequate assurance of his performance," then an aggrieved party must perform.[104] Generally, an aggrieved party must act reasonably to mitigate damages.[105] The injured party's duty to minimize loss may require it to accept new offers from the breaching party, possibly even after a "fundamental" breach.[106]
The Convention's goal of saving deals promotes important international values pertinent to the contracting process. It supports important non-economic motives for performing, encourages planning, and reduces costs. By encouraging performance, the Convention fosters the parties' trust and cooperation, thereby encouraging future exchanges and helping to unite the international trading community.[107] It is also consistent with the moral claim that people should keep their promises.[108] The Convention's approach also supports "cultural processes that take the edge off [a party's] selfishness."[109] For example, a party may be willing to forgo financial gain for the self-esteem that would accompany a decision to honor appropriate contractual behavior."[110]
Promoting performance also enables the parties to plan, firm in the knowledge of what they are to receive and to give up. By helping to ensure that parties can rely on their agreements, the Convention reduces the costs of securing performance. Otherwise, a party might "turn to other more costly and less efficient means (for example, becoming a self supplier or vertically integrating with his supplier) to gain greater assurance that he will get what he seeks."[111]
The successful completion of sales also avoids the costs of post-breakdown negotiations between the parties and other expensive strategies. Some costs may be economically irrational but still very real, such as expenses of litigation initiated out of spite or as a strategy to induce a favorable settlement. The parties may also incur costs in negotiating a settlement because of uncertainty over the amount of a party's damages.[112]
The Convention also encourages performance to avoid the uncertainties of the Convention's remedial provisions. In principle, the Convention's remedies compensate the injured party.[113] In fact, several provisions potentially frustrate the goal of full compensation. Rules [page 31] limiting damages to those which are reasonably foreseeable and unavoidable, for example, sometimes create difficult hurdles for the injured party.[114] It is preferable for the parties to complete their deals rather than rely on the Convention's legal apparatus to make them whole.
D. Awarding Damages To Compensate Aggrieved Parties and Not To Punish Breaching Parties
Article 74 sets forth the goal of damages under the Convention: "Damages for breach of contract ... consist of a sum equal to the loss, including loss of profit ... as a consequence of the breach."[115] According to Professor Honnold, this provision places the injured party in the position it would have been in had there been no breach.[116] Article 74 focuses on how to make the injured party whole, not on punishing the breaching party. This approach, common to many legal systems, seeks to encourage the making of contracts by assuring the injured party the value of performance and by eliminating the prospect of penalties for nonperformance.[117]
Several other articles of the Convention further the goal of compensation. An aggrieved party must act reasonably to minimize damages.[118] Otherwise the damages are caused by the aggrieved party's unreasonable conduct and not by the breach. For example, a party's substitute purchase or resale after the other's default must be reasonable.[119] Under this rule, a buyer cannot purchase more expensive goods after a breach and claim the difference between the contract price and the substitute price if goods were available at the contract rate. In addition, a buyer must take reasonable steps to preserve goods that it intends to reject.[120]
To support other principles of the Convention, some rules actually may impede making the injured party whole. For example, a breaching party is liable only for the damages it foresaw or that were foreseeable.[121] This rule encourages the injured party to disclose any special circumstances and is therefore consistent with the cooperation and communication goals.[122] It is also consistent with the purpose of not penalizing a breaching party who did not know of special circumstances and could not take special precautions. [page 32]
The Convention recognizes a limited right to restitution of benefits conferred on the breacher. A party who rightfully avoids the contract can recover whatever it has "supplied or paid under the contract."[123] A seller is also entitled to recover the "benefits" that a breaching buyer "has derived from the goods."[124] Thus, if a breaching buyer resells goods to a third party for a profit, the seller can recover the profit.[125] The Convention includes no equivalent provision in favor of an injured buyer who seeks to recover the seller's gains from a sale to a third party. Nevertheless, the next section illustrates that such a recovery should be granted under the Convention's general principles.[126]
This section discusses two problems that illustrate the potential use of the Convention's principles to resolve questions not specifically addressed by the text. Few reported cases involve Article 7.[127] I base the first illustration on one of them, a recent case involving the formation of a termination agreement. I then turn to a problem likely to arise under the Convention, inspired by a case decided under its predecessor.[128] The problem involves a buyer's right to restitution when the seller fails to deliver but, instead, sells to a third party for more than the contract price.
Suppose a German buyer agrees to purchase wood from a Nigerian seller. The buyer seeks to avoid the contract, claiming that the wood did not conform to the contract and was delivered late. The seller responds with two messages sent by fax. The first declares that the seller will come to Germany and resell the wood. The second informs the buyer that the seller located a firm in the Netherlands willing to resell the wood for the seller. The buyer does not respond to either message, nor does it request a delivery of conforming wood or claim damages. The seller ultimately [page 33] seeks damages from the buyer for breach of contract, claiming that the buyer should have accepted the wood. The buyer defends in part by asserting that the parties had agreed to terminate the agreement for the sale of the wood.[129] Did the parties enter an enforceable termination agreement?
Article 29(1) requires a "mere agreement" to terminate a contract.[130] Under the Convention's provisions for forming an agreement, an offer must be definite and indicate the offeror's intention to be bound upon an acceptance.[131] As previously discussed, the Convention enforces a party's subjective intention when the "other party knew" or "could not have been unaware" of that intention.[132] Otherwise, the Convention bases intention on what a "reasonable person" would believe, taking into account all of the circumstances.[133] Under these provisions, a court entertaining similar facts treated the seller's faxes as an offer to terminate even though the seller did not specifically state that it intended to terminate the wood contract and release the buyer from all claims [OLG Köln (Germany) 22 February 1994].[134]
Did the buyer accept the seller's offer? Under Article 18(1), a statement or conduct of an offeree "indicating assent to an offer" constitutes an acceptance.[135] However, "[s]ilence or inactivity does not in itself amount to acceptance."[136] The court nevertheless held that the buyer's silence, including its failure to request redelivery of the wood or claim another remedy, coupled with its earlier effort to avoid the contract, constituted an acceptance of the seller's offer of termination.[137]
In a comment on the case, Professor Schlechtriem criticized the finding that the buyer's inactivity alone constituted an acceptance of an offer to terminate.[138] Nevertheless, he found support for the court's decision in the Convention's general principles. Schlechtriem argued that although the parties did not follow the course of a typical offer and acceptance, a court should enforce a termination agreement if the parties intended to end their contract.[139]
I agree that, in light of the Convention's general principles of enforcing the parties' intentions and preserving the fruits of an exchange (here the fruits of the termination agreement), tribunals should not have to isolate a technical offer and acceptance in order to enforce an agreement.[140] [page 34]
Otherwise the formalities of offer and acceptance would impede enforcing many informal deals "formed without identifiable sequence of offer and acceptance."[141] Negotiations between large international companies often do not conclude with a formal offer and acceptance. Instead, the parties form a flexible working relationship and reach more agreements as time progresses.[142] In such continuing relationships there may be less need for advance commitments to shift the risk of market fluctuations.[143] If the parties do not sign a formal contract or engage in traditional offer and acceptance activity, but rather perform as if a contract existed, courts should support the parties' intentions.
Despite acknowledging the potential of the Convention's principles to supply an alternative contract-forming route, the court was probably correct in attempting to find an offer and acceptance in the wood-sale problem. To determine these parties' intentions, a careful analysis requires determining in sequence whether a reasonable person would believe the seller intended to settle the matter by making arrangements to resell the wood (that is, did the seller make an offer to terminate?) and whether a reasonable person would believe the buyer agreed to that arrangement (did the buyer accept the offer?). In other words, assuming the parties intended to terminate, a sequence of offer and acceptance probably existed in this case. This does not mean that the court necessarily reached the correct conclusion on the facts. The seller may have intended only to minimize its loss, while preserving its right to damages.
B. Restitution in Favor of a Buyer
Suppose a German seller agrees to sell steel to an Israeli buyer, but before the agreed time for performance sells the steel to a German buyer at a higher price. The Israeli buyer was not damaged by the breach because the contract and Israeli market prices were the same. Can the buyer recover the seller's gains from breaching on a theory of restitution? [144]
As already noted, the Convention recognizes the principle of restitution and specifically entitles a seller to recover a breaching buyer's profit in reselling goods to a third party.[145] The Convention does not speak [page 35] expressly to the converse issue of whether a buyer can recover the breaching seller's profits in selling to a third party. Do the Convention's general principles supply an answer?
A buyer in these circumstances merely has a contract expectancy. But restitutionary principles do not have to be confined to cases in which the injured party has a property right,[146] a concept omitted from the Convention.[147] In fact, questions of property and contract camouflage the real issue: Is requiring the seller to disgorge the gains of resale consistent with the Convention's principles?
Under the theory of efficient breach, legal economists encourage a seller in this position to break the contract if it can compensate the buyer for the loss and still achieve a net gain by selling the steel to the third party.[148] The seller did not break the contract merely to extract concessions from the buyer concerning the price or otherwise to improve its contract position. Such conduct would not result in a net gain, it merely would increase the seller's wealth at the buyer's expense. Instead, the seller wants to break the contract because its gains from doing so will exceed its liability to the buyer. The strategy would therefore result in a net gain.[149] In order to encourage breach, of course, the law would have to deny the buyer the right to restitution of the seller's additional gains from selling to the third party. Otherwise the seller would have little incentive to break the contract and would have to engage in costly negotiations with the buyer to be excused from it.
Should tribunals applying the Convention deny the buyer the seller's gains from selling to a third party in order to support the efficient breach rationale? On the contrary, the Convention's principles support the buyer's restitutionary claim. Part I demonstrated that the Convention seeks to encourage the completion of deals to promote trust and cooperation, support planning, and reduce costs.[150] Encouraging breach, on the other hand, would defeat these goals, and would destabilize the "regime of exchange ... [so that] no one would occupy a sufficiently stable position to know what he had to offer or what he could count on receiving from another."[151] The efficient breach theorem wrongly focuses on purely economic motivations such as the temptation to break a contract in the [page 36] belief that monetary gains exceed liabilities. The buyer's restitution claim should therefore succeed in discouraging the seller's breach.
Requiring the seller to disgorge its gains does not penalize the seller and therefore is also consistent with the Convention's remedial policy of avoiding penalties. The seller did not have enough steel to sell to both the Israeli and German buyers and promised to sell the steel to the Israeli.[152] On moral and ethical, if not legal, grounds the steel and any benefit it brings belongs to the buyer. The buyer is therefore entitled to the net gain of selling the steel to the German buyer.
The best way to achieve uniformity in international sales law is to develop a "systematic methodology" for applying the UN Convention.[153] In this article, I have shown that the Convention's principles form a series of coherent instrumental policies that should guide tribunals when the Convention's text does not expressly point the way. Judges and arbitrators applying the Convention should be guided by these policies. I do not argue that this approach will resolve all issues, but only that this path is superior to applying domestic law reflexively if the goal of the Convention is to achieve uniform international sales law.
Most authorities have called for the publication of cases construing the Convention, in order to increase the potential for its uniform application.[154] Reliance on cases would be necessary and helpful if the Convention's principles offered inadequate guidance and cases were likely to be easily accessible, well-reasoned, and consistent. Moreover, the use of case law would be helpful only if tribunals resisted the temptation to turn to it before searching for applicable principles in the Convention. Finally, case law would be helpful if the Convention instructed tribunals in its use.
I have argued, however, that the principles should provide direction on most issues. Moreover, there is some doubt as to whether decisions [page 37] from around the world will be accessible, despite efforts already in place to supply them.[155] Most important, the lesson of the UCC is that the use of case law is a two-edged sword. Although cases can provide insight and direction, they also can conflict, confuse, and ultimately decrease uniform application. In fact, the heavy reliance on case law has contributed to the need for the current overhaul of the UCC. The absence in many signatory states of a tradition of referring to and relying on case decisions and the lack of guidance in the Convention on case law usage compounds the uncertainty.[156]
Despite these problems, I do not oppose the publication of cases construing the Convention. I simply urge caution. I fear that the current clamor for compiling cases helps create the impression that case law is the primary source of international sales law and that the Convention's principles are inadequate. Such an environment may encourage tribunals not only to take their eyes off the principles but to engage in distinguishing, overruling, and even manipulating precedent. Lawyers from common law states may feel comfortable with these activities, but they do not offer much promise if the goal is to achieve uniformity and certainty in international sales law. In fact, the call for case law may demonstrate a bias for common law methods, which conflicts with the Convention's mandate to avoid local orientations. Perhaps most worrisome, deemphasizing principles may encourage tribunals facilely to turn to domestic law, expressly or implicitly, when interpreting and gap-filling under Article 7.
The call of the Convention's commentators for tribunals to apply "true-code" methodology but, at the same time, to appeal for the publication of judicial decisions, is, therefore, inconsistent. Analysts should urge tribunals to try to find answers within the four corners of the Convention and to look to cases only in the unusual situation where the Convention does not supply adequate guidance. [page 38]
* Associate Dean for Academic Affairs and Professor of Law, Cornell Law School. Thanks to Clay Gillette for reading and commenting on a draft and to Albert H. Kritzer for supplying many sources.
1. United Nations Convention on Contracts for the International Sale of Goods, United Nations Conference on Contracts for the International Sale of Goods, at 178, U.N. Doc. A/CONF.97/18, Annex I (1981) (opened for signature Apr. 11, 1980) [hereinafter CISG or Convention]. For a very helpful guide to researching the Convention, see Claire Germain, Germain's Transnational Law Research (Transnational Juris Publications) IV 275-82 (1992). For a bibliography on the Convention, see Peter Winship, The U.N. Sales Convention: A Bibliography of English-Language Publications, 28 Int'l Law. 401 (1994).
2. According to the Convention's preamble, one of its goals is to "contribute to the removal of legal barriers in international trade. ..." CISG, supra note 1, preamble. Article 7(1) of the Convention states in part: "Specifically, [in] the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application. ..." Id. art. 7.
See E. Allan Farnsworth, Formation of International Sales Contracts: Three Attempts at Unification, 110 U. Pa. L. Rev. 305 (1962); Robert A. Hillman, Article 29(2) of the United Nations Convention On Contracts For The International Sale of Goods: A New Effort At Clarifying the Legal Effect of "No Oral Modification" Clauses, 21 Cornell Int'l L.J. 449, 457-58 (1988).
3. See Arthur Rosett, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L.J. 265, 266-67 (1984). For a history of the Convention, see E. Allan Farnsworth, The Vienna Convention: History and Scope, 18 Int'l Law. 17 (1984); Franco Ferrari, Uniform Interpretation of the 1980 Uniform Sales Law, 24 Ga. J. Int'l & Comp. L. 183 (1994).
Recent free trade agreements such as the Gatt Uruguay Round (approved by the United States in 1994) testify to sweeping global economic integration. See John J. Barceló, Cornell Law School in Paris, Cornell Law Forum, Mar. 1995, at 9-11.
4. Commentary on the International Sales Law 74 (C.M. Bianca & M.J. Bonell eds., 1987) [hereinafter Bianca & Bonell]; Rosett, supra note 3, at 268.
5. Article 7 contains references to the broad concepts of "international character" and "good faith." CISG, supra note 1, art. 7. Similarly, Article 78 lacks any indication of how and when to pay interest to a party. Id. art. 78. Finally, Article 79 indicates that parties are exempt from meeting their obligations if they suffer from an "impediment beyond [their] control." Id.
6. For example, the Convention does not define all of the terms that it employs such as "seller," "buyer," or "goods." Moreover, the concept of "place of business" in Article 1(2) is vague. See Rosett, supra note 3, at 279.
7. See, e.g., CISG, supra note 1, arts. 39(1), 44 (buyer must notify the seller of defects within a reasonable time; buyer does not have to notify the seller if the buyer has a "reasonable excuse" for not doing so); arts.14(1), 55 (Convention's position on definiteness contradictory).
8. Rosett, supra note 3, at 270.
9. See id. at 270, 282-93. For example, does the Convention's use of "seller" and "buyer" mean that the Convention requires privity of contract? The answer is unclear because the Convention does not define these terms. Is a manufacturer who provides a written warranty to be passed on by the dealer to the buyer a "seller"? See John O. Honnold et al., Law of Sales and Secured Financing 213 n.4 (1993) (mentioning that Honnold changed his views on this issue in the second edition of his treatise on the CISG). See also CISG, supra note 1, art. 16 (failing to clearly state whether providing a fixed time for acceptance always makes an offer irrevocable).
Some provisions of the Convention defer to local law. See, e.g., CISG, supra note 1, art. 28 (allowing specific performance limitations under local law).
10. See Bianca & Bonell, supra note 4, at 90; John Honnold, Uniform Law for International Sales 142 (2d ed. 1991).
11. See Honnold, supra note 10, at 160. For example, although Article 54 requires the buyer to "take[ ] such steps and comply [ ] with such formalities as may be required under the contract or any laws and regulations to enable payment to be made," the Convention does not otherwise speak to the manner of a buyer's payment. CISG, supra note 1, art. 54. See also Rosett, supra note 3, at 277 ("[O]ver the centuries a great variety of forms of intermediaries have developed to connect buyers and sellers in different countries.").
12. See William D. Hawkland, Uniform Commercial "Code" Methodology, 1962 U. Ill. L.F. 291, 301 (1962). For example, the Convention supplies no rules concerning the currency of payment, where and when a seller must surrender documents dealing with the goods, assignment and delegation to third parties, and third-party beneficiaries. For additional examples, see Jan Hellner, Gap-Filling by Analogy: Art. 7 of the U.N. Sales Convention in Its Historical Context, in Studies in International Law: Festskrift Till Lars Hjerner 219, 220-21 (Jan Ramberg ed., 1990).
13. Honnold, supra note 10, at 151.
14. For a history of Article 7, see Bianca & Bonell, supra note 4, at 65-71.
15. According to Professor Honnold, elaboration on the precise ramifications of focusing on the international character of the Convention awaits the publication of decisions construing the Convention and a body of writing on the Convention. See Honnold, supra note 10, at 136.
16. Bianca & Bonell, supra note 4, at 72-73.
17. Id. at 78.
18. Felix Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527, 538-40 (1947). See also Paul Brest, Processes of Constitutional Decisionmaking 36-43 (1975).
19. For a discussion of good faith, see infra notes 86-93 and accompanying text.
20. The Convention applies to issues of formation and performance; questions of validity, capacity, and property rights are excluded. CISG, supra note 1, art. 4(a). See Bianca & Bonell, supra note 4, at 75-76.
21. See, e.g., Ferrari, supra note 3, at 216-17. For example, when a seller makes a statement about the quality of goods after delivery, is the statement a modification under Article 29(1)? This depends on the meaning of "mere agreement" under that Article, a question of interpretation. On the other hand, perhaps the legislators did not contemplate this issue, in which case the court must fill the gap.
22. CISG, supra note 1, art. 7(2). The reference to "rules of private international law" in Article 7(2) means the choice-of-law rules that determine the governing domestic law. Id. Note that Article 7(2) applies only to matters governed by the Convention. Gaps with respect to issues specifically excluded by the Convention, such as questions of validity ["except as otherwise expressly provided in this Convention" (art.4)], are to be settled by outside law. Bianca & Bonell, supra note 4, at 75-76; CISG, supra note 1, art. 4(a).
23. Bianca & Bonell, supra note 4, at 67-71.
24. This was the approach of Article 17 of the Uniform Law on the International Sale of Goods (ULIS), the Convention's predecessor. Id. at 66-67; Hellner, supra note 12, at 220-21.
25. See Hawkland, supra note 12, at 292.
28. Grant Gilmore, Legal Realism: Its Cause and Cure, 70 Yale L.J. 1037, 1043 (1961).
29. Bianca & Bonell, supra note 4, at 67.
30. Id. at 88-89.
31. The vote to approve Article 7 was 17 in favor, 14 opposed, and 11 abstentions. Id. at 71.
32. The uniform laws that preceded the Uniform Commercial Code were not successful. For example, the Negotiable Instruments Law "produced splits of authority in over eighty of its one hundred ninety-eight sections." Hawkland, supra note 12, at 298.
33. UCC § 1-102(1) (1972).
34. Mitchell Franklin, On the Legal Method of the Uniform Commercial Code, 16 Law & Contemp. Probs. 330, 333 (1951).
35. UCC § 1-103 (1972).
36. James J. White & Robert S. Summers, Uniform Commercial Code 21-22 (3d ed. 1988).
37. Id. at 20-21.
38. See generally Robert A. Hillman, Standards for Revising Article 2 of the U.C.C.: The NOM Clause Model, 35 Wm. & Mary L. Rev. 1509 (1994).
39. Honnold, supra note 10, at 156-57.
40. Honnold et al., supra note 9, at 33.
41. To cite just a few examples, member states disagree on the effect of additional or different terms in a purported acceptance, on the meaning and application of good faith, on the applicability of the statute of frauds, and on the need for consideration to support contract modifications. See Bianca & Bonell, supra note 4, at 86-88.
42. For example, the Convention says nothing about the assignment of rights to third parties. No principle of the Convention appears to fill the gap. See Honnold et al., supra note 9, at 214.
43. Hellner, supra note 12, at 229.
44. Bianca & Bonell, supra note 4, at 82-83; Honnold, supra note 10, at 96-102; Ferrari, supra note 3, at 47-49.
45. Honnold, supra note 10, at 150.
46. Ferrari, supra note 3, at 27.
47. Id. at 49-53.
48. E.g., Honnold, supra note 10, at 142-45.
49. But there is a rich legislative history of the Convention. See id. at 136-37.
50. Bianca & Bonell, supra note 4, at 90; Honnold, supra note 10, at 137, 141 - 42.
51. Honnold, supra note 10, at 141. Another source of principles is the Unidroit Principles of International Commercial Contracts. See Silvia N. Martínez Cazón, A Practitioner's View of the Applicability of the Unidroit Principles of International Commercial Contracts in Interpreting International Uniform Law (Oct. 11, 1994) (International Bar Association, Section on Business Law, Committee M). See also Joseph M. Perillo, Unidroit Principles of International Commercial Contracts: The Black Letter Text and a Review, 63 Fordham L. Rev. 281 (1994). The UNIDROIT principles are "a restatement of the commercial contract law of the world" and "could be employed as a supplement for decisions under ... CISG." Id. at 283.
52. CISG, supra note 1, art. 7. See supra notes 15-19 and accompanying text.
53. See infra notes 58-68 and accompanying text.
54. See, e.g., Frederick K. Beutel, Interpretation, Construction, and Revision of the Commercial Code: The Presumption of Holding in Due Course, 1966 Wash. U. L.Q. 381, 391 n.56 (1966); Donald E. King, The New Conceptualism of the Uniform Commercial Code 11 (1968).
55. Honnold et al., supra note 9, at 136.
56. Bianca & Bonell, supra note 4, at 78.
57. See Hawkland, supra note 12, at 299-300 (arguing that a successful code must be logically organized).
58. CISG, supra note 1, art. 6.
59. Honnold, Law of Sales, supra note 9, at 35.
60. See John Dalzell, Duress by Economic Pressure I, 20 N.C. L. Rev. 237, 237 (1942).
61. P. S. Atiyah, The Rise and Fall of Freedom of Contract 292-330 (1979).
62. Richard A. Posner, Economic Analysis of Law 79 (3d ed. 1986).
63. Lucian A. Bebchuk, Limiting Contractual Freedom in Corporate Law: The Desirable Constraints on Charter Amendments, 102 Harv. L. Rev. 1820, 1827 (1989).
64. But ratifying countries can exclude the effect of these articles. CISG, supra note 1, art. 96.
65. Id. art. 19(2).
66. Id. art. 8(1).
67. Id. art. 8(2).
68. Id. art. 9(2). See Juzgado Nacional de Primera Instancia en lo Comercial No. 7 [20 May 1991], CLOUT Case No. 21, U.N. Doc. A/CN.9/SER.C/Abstracts/2 (Nov. 4, 1993) (Arg.) (seller entitled to interest on amount due in part because interest payments are a "widely known usage in international trade").
69. See, e.g., E. Allan Farnsworth, Contracts 846 (2d ed. 1990) (noting that traditional economic theory "presupposes people who are rational and who strive to maximize their own welfare.").
70. Id.; Richard A. Posner, Economic Analysis of Law 10-11 (4th ed. 1992).
71. See Bianca & Bonell, supra note 4, at 80-81.
72. See Honnold, supra note 10, at 430 n.2. For additional examples, see Bianca & Bonell, supra note 4, at 81.
73. See Honnold, supra note 10, at 148 n.28 for a list of articles referring to "reasonableness."
74. CISG, supra note 1, art. 60(a).
75. See id. arts. 30-34.
76. Id. art. 32(3).
77. Id. art. 19(2) (requiring offeror to alert offeree of objections to immaterial alterations in offeree's acceptance); id. art. 39(1) (requiring notice of defects in the goods).
78. Id. arts. 18(2), 39(1), 47(1), 63(1), 65(1).
79. See Honnold, supra note 10, at 148 n.28.
80. Bianca & Bonell, supra note 4, at 81.
81. Cf. Rosett, supra note 3, at 285.
82. CISG, supra note 1, art. 16(2)(b).
83. Id. art. 29(2). See Hillman, supra note 38.
84. CISG, supra note 1, art. 47(2).
85. Id. arts. 15 and 22.
86. Bianca & Bonell, supra note 4, at 68-69, 85-86; Ferrari, supra note 3, at 33-36.
87. Ferrari, supra note 3, at 212-13.
88. Compare UCC §§ 1-201(19) and 2-103(1)(b).
89. Bianca & Bonell, supra note 4, at 83-84.
90. See Ferrari, supra note 3, at 210 ("The question that one has to raise is how does one interpret the result of the compromise: is good faith relevant only with reference to the interpretation of the Convention or is it also relevant as far as the parties' behavior is concerned?"); Perillo, supra note 51, at 287 (scholars disagree on whether Article 7 requires the parties to act in good faith).
91. Honnold, supra note 10, at 147-48; Rosett, supra note 3, at 290.
92. Whether this is a question of validity and therefore excluded from the Convention is unclear. See Rosett, supra note 3, at 290.
93. See Ferrari, supra note 3, at 213-14 and sources cited therein.
94. Honnold, supra note 10, at 154.
95. CISG, supra note 1, art. 19(2).
96. Id. arts. 39(1), 48(2).
97. Id. art. 68.
98. Id. arts. 71(1), 71(3). See also id. art. 79(4).
99. Id. art. 49(1)(a) [see also art. 64(1)(a)]; Hellner, supra note 12, at 231.
99a. Article 49(1)(b) states that the buyer may also declare the contract avoided "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", and Article 64(1)(b) accords seller a somewhat comparable right.]
100. CISG, supra note 1, art. 25.
102. Id. art. 48(1).
103. Id. art. 71(1).
104. Id. art. 71(3).
105. Id. art. 77.
106. See Robert A. Hillman, Keeping the Deal Together After Material Breach -- Common Law Mitigation Rules, The UCC, and the Restatement (Second) of Contracts, 47 U. Col. L. Rev. 553 (1976).
107. See, e.g., Perillo, supra note 51, at 314.
108. Charles Fried, Contract As Promise (1981).
109. Robert C. Ellickson, Bringing Culture and Human Frailty to Rational Actors: A Critique of Classical Law and Economics, 65 Chi.-Kent L.Rev. 23, 45 (1989).
110. Id. at 48. "In one well-documented historical case, Standard Oil of California responded to a severe shortage of gas by rationing its product rather than by raising price when it could have." Id. at 49 (citing Alan L.Olmstead & Paul Rhode, Rationing Without Government: The West Coast Gas Famine of 1920, 75 Am. Econ. Rev. 1044 (1985)).
111. Daniel Friedmann, The Efficient Breach Fallacy, 18 J. Legal Stud. 1, 7 (1989).
112. As Ian Macneil points out:
The whole thrust of the [efficient breach] analysis is breach first, talk afterwards. ... And this is so despite the fact that "talking after a breach" may be one of the more expensive forms of conversation to be found, involving as it so often does, engaging high-priced lawyers and gambits like starting litigation, engaging in discovery, and even trying and appealing cases.
... Cooperative behavior postulates relations. A model assuming away relations slips with the greatest of ease at any stage into favoring uncooperative and -- ironically enough -- highly inefficient human behavior.
Ian R. Macneil, Efficient Breach of Contract: Circles in the Sky, 68 Va. L. Rev. 947, 968-69 (1982).
113. See infra text accompanying notes 115-20.
114. CISG, supra note 1, arts. 77, 86(1).
115. Id. art. 74.
116. Honnold, supra note 10, at 503.
117. See, e.g., Farnsworth, supra note 69, at 840-41, 874.
118. CISG, supra note 1, art. 77.
119. Id. art. 75.
120. Id. art. 86(1).
121. Id. art. 74.
122. See, e.g., Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J. 87 (1989).
123. CISG, supra note 1, art. 81(2).
124. Id. art. 84(2).
125. Honnold, supra note 10, at 573.
126. See infra notes 144-52 and accompanying text.
127. Commentary on a few decisions, however, suggests Article 7's applicability. See, e.g., Juzgado Nacional de Primera Instancia en lo Comercial No. 7 [20 May 1991], CLOUT Case No. 21, U.N. Doc. A/CN.9/SER.C/Abstracts/2 (Nov. 4, 1993) (Arg.); Judgment of July 2, 1993, OLG Düsseldorf, 1993 RIW 845, 1993 EWiR 1075 cmt. P. Schlechtriem (the principle that, in the absence of an agreement, a buyer must pay at the seller's place of business, suggests that the seller must pay damages at the buyer's place of business); Adras Ltd. v. Harlow & Jones GmbH, 42 Piskei-Din Shel Beth Din Ha'Elyon L'Israel [P.D.] 221 (1988) (Isr. Sup. Ct.) (discussed infra notes 144-52 and accompanying text). For further cases and commentary, see Joseph Lookofsky, Understanding the CISG in The USA 20-23 (1995); Institute of International Commercial Law, PACE University School of Law, Briefing Book (1994) (on file with author).
For a discussion of cases applying Article 17 of the Hague Convention on the Uniform Law for the International Sale of Goods, see Hellner, supra note 12, at 228-29.
128. Hague Convention Providing a Uniform Law on the International Sale of Goods, opened for signature on July 1, 1964, 834 U.N.T.S. 107.
129. The problem is loosely based on Judgment of Feb. 22, 1994, OLG Köln, 1994 RIW 972, 1994 EWiR 867 cmt. P. Schlechtriem.
130. CISG, supra note 1, art. 29(1).
132. Id. art. 14.
133. Id. art. 8(3); see supra note 67 and accompanying text.
134. Judgment of Feb. 22, 1994, OLG Köln, 1994 RIW 972, 1994 EWiR 867 cmt. P. Schlechtriem.
135. CISG, supra note 1, art. 18(1).
137. Judgment of Feb. 22, 1994, OLG Köln, 1994 RIW 972, 1994 EWiR 867 cmt. P. Schlechtriem.
138. See Peter Schlechtriem, Kurzkommentar, 1994 EWiR 867.
140. Such a conclusion does not conflict with express language of the Convention. Article 18(1) states that silence "does not in itself amount to acceptance," suggesting that the Convention recognizes nontraditional routes of contract formation when the context supports them. CISG, supra note 1, art. 18(1); see also Perillo, supra note 51, at 284 (UNIDROIT principles do not require an offer and acceptance); Rosett, supra note 3, at 292 (criticizing the Convention's apparent "retention of the abstract structural formalism of the concepts of offer and acceptance" ).
141. Rudolph B. Schlesinger, Manifestation of Assent Without Identifiable Sequence of Offer and Acceptance, II Formation of Contracts 1583-87, 1591-92 (1968). On the informality of many international transactions, see Honnold, supra note 10, at 155.
142. See, e.g., Robert A. Hillman, Court Adjustment of Long-Term Contracts: An Analysis Under Modern Contract Law, 1987 Duke L.J. 1, 4-8 (1987).
143. Restatement (Second) Contracts § 22, cmt. b (1979).
144. The problem is loosely based on Adras Ltd. v. Harlow & Jones GmbH, 42 P.D. 221 (1988) (Isr. Sup. Ct.), discussed in Daniel Friedmann, Restitution of Profits Gained by Party in Breach of Contract, 104 L.Q.R. 384 (1988).
145. Honnold, supra note 10, at 573. See supra notes 123-26 and accompanying text.
146. Friedmann, supra note 144, at 384.
147. See CISG, supra note 1, art. 4(b).
148. See generally Friedmann, supra note 111.
149. Id. at 3-40. The result is "pareto superior" because the seller is better off and the buyer is no worse off. The result also satisfies the Kaldor-Hicks measure because of the net social gain.
150. See supra notes 94-114 and accompanying text.
151. See Lon L. Fuller, The Morality of Law 28 (Rev. ed. 1969).
152. See generally Friedmann, supra note 144. As a result, the seller profited only because of the breach.
153. Hawkland, supra note 12, at 309.
154. Bianca & Bonell, supra note 4, at 90-92; Honnold, supra note 10, at 142-45; Perillo, supra note 51, at 317.
155. Rosett, supra note 3, at 272.
Pace Law School Institute of International Commercial Law - Last updated October 9, 2008