Source: http://www.cisg.law.pace.edu/cisg/biblio/ziegel6.html
Timestamp: 2019-04-20 03:11:09
Document Index: 65003513

Matched Legal Cases: ['§ 9', '§ 9', '§ 9', '§ 9', '§ 9', 'art. 44', 'art. 52', 'art. 16', 'art. 61', 'art. 25', 'art. 23', 'art. 46', 'art. 46', 'art. 49', 'art. 49', 'art. 49', 'art. 44', 'art. 47', 'art. 9', 'art. 23', 'art. 74', 'art. 48', 'Art. 38', 'Art. 39', 'Art. 39', 'art. 44', 'art. 39', 'Art. 49', 'art. 40', 'art. 82', 'art. 84', 'Art. 66', 'art. 73', 'Art. 62', 'art. 71', '§ 321', '§ 12', '§ 12', '§ 69', 'Art. 76', 'art. 77']

Published in Galston & Smit ed., International Sales: The United Nations Convention on Contracts for the International Sale of Goods, Matthew Bender (1984), Ch. 9, pages 9-1 to 9-43. Reproduction authorized by Juris Publishing.
The Remedial Provisions in the Vienna Sales Convention: Some Common Law Perspectives
by Jacob S. Ziegel
§ 9.02 General Structure of Remedial Provisions
§ 9.03 Buyer's Remedies
[1] Specific Performance
[2] Avoidance of Contract
[a] Why "Fundamental Breach"?
[b] The Definition of Fundamental Breach
[c] How Much Assistance Will Article 47 Give the Buyer?
[d] Foreseeability of Consequences of Breach
[3] Seller's Right to Cure
[4] Omission of the Concept of Acceptance
§ 9.04 Seller's Remedies Against Buyer
[1] Seller's Entitlement to Specific Performance
[2] Avoidance of the Contract by the Seller
§ 9.05 Remedial Provisions Common to Seller and Buyer
[1] Anticipatory Repudiation
[2] Damages Provisions
§ 9.06 Conclusions
In the time at my disposal I cannot hope to present a systematic and detailed analysis of the remedial provisions in the Vienna Convention, nor would it be a useful exercise since the task has already been accomplished by distinguished scholars who have a much more intimate and deeper knowledge of the provisions than I have.[1] Instead I should like to focus my attention on some of the key concepts in the Convention, to discuss some important exegetical problems, and to indicate generally how the Convention's approaches and solutions compare with those in British and American sales law.
Before turning to this task, it may be helpful to begin with some preliminary remarks about the formidable challenges that faced the draftsmen of the Vienna Convention and those of ULIS before them. The draftsmen of the remedial provisions in any modern sales code must address themselves to a common set of questions -- when should an injured party be entitled to seek specific performance of the other's obligations, when should he be entitled to avoid the contract because of breach by the other or have to be satisfied with a claim in damages, and if damages are to be allowed, on what basis are they to be computed, and so forth. The draftsmen of the Vienna Convention, like their predecessors at The Hague, obviously also faced these questions but in answering them they had to surmount constraints and special difficulties not experienced by draftsmen at the national level.
The domestic draftsmen of a modern sales code -- at least if they are located in a developed society -- work within the [page 9-2] context of a mature and comprehensive legal system. Its sales law is often only an extrapolation from, and particularized application of, general contract and, to a lesser extent, personal property principles. The draftsmen have a rich storehouse of experience to fall back upon, both based on their own legal system and culled from other legal systems which, in the case of sales law, goes back as far as the Roman texts. If they are comparatively minded, the draftsmen are free to borrow from other sales codes but are not obliged to do so, and they may be eclectic in their choices without ruffling international feathers.
The draftsmen of the Vienna Convention traveled a much more difficult road. There is no international code of contract law (or of any other branch of private law for that matter) and the Convention must stand on its own feet supported only, in those cases where the parties' contract or the Convention fails to provide a solution to a particular question, by the untested and uncertain signposts of article 7 of the Convention. No less important, the draftsmen were drawn from countries with widely differing legal, social, and economic environments and their express mandate was [2] to revise the Hague Uniform Law so as to make the new Convention acceptable to the widest possible international constituency.
Inevitably, therefore, the overriding task of the draftsmen was one of synthesis, to find a common denominator wherever possible, and, where none could be found, to agree upon an acceptable compromise. The remedial provisions in the Convention contain many examples [3] of this exercise in international legal statesmanship. It seems to me important to bear these considerations in mind in examining the remedial provisions and in comparing them with the principles of the common law, or any other legal system for that [page 9-3] matter. The question, I would suggest, is not whether the Vienna provisions are always as clear, as coherent, or as consistent and "efficient" in their economic effect as we might wish them to be, but whether they are workable and whether the new international sales convention is an improvement on the existing position and on the provisions of the Hague Uniform Laws which they supersede. [page 9-4]
The Vienna Convention is rich in remedial provisions. They encompass not only the obvious articles on buyer's and seller's remedies [4] and the provisions common to the exercise of remedies by either party,[5] but also several basic provisions in Part I of the Convention.[6] In short, there is an interdependency between the different parts of the Convention which belies the simplicity of the headings in chapters II, III and V of Part III. There are many differences in detail between the ULIS remedial provisions and those in the Vienna Convention but relatively few of principle. The two most important differences are that the Vienna Convention abolishes the concept of ipso facto avoidance found in ULIS, and that it substitutes [7] an integrated regime of buyer's and seller's remedies for the repetitious and fragmented provisions in ULIS. Both these improvements have been widely acclaimed and I will comment no further on them.
The general drafting style of the Vienna provisions follows the familiar civilian models in its succinctness and brevity, and in its emphasis on broad statements of principle and general lack of situational settings. To those familiar with the baroque style of Article 2 of the Uniform Commercial Code the contrast will be striking (but less so to lawyers in the United Kingdom and other parts of the Commonwealth who have long been accustomed to Chalmers' much terser style in the British Sale of Goods Act). Striking perhaps but not necessarily regrettable. The complex Code provisions do not always make for greater clarity and sometimes prove counterproductive.[8] In any event, the [page 9-5] UNCITRAL draftsmen had no option. Had they attempted to draft in Code-like detail they would almost certainly have become bogged down in interminable debates and the completion of their job would have been much delayed.
It is true that the laconic style of the Vienna provisions results in many detailed, and sometimes obvious, questions being left unanswered.[9] Civilians have for a long time accepted and successfully overcome a similar challenge in the interpretation of their domestic codes, and I share Professor Honnold's optimism [10] that international scholars will prove themselves equal to the test if given the opportunity to meet it. Perhaps more disconcerting is the absence of an international appellate tribunal to resolve the differences in opinion between national courts that are bound to arise in the exegesis of the Vienna provisions, but this unhappily is a problem common to many private law Conventions in the international arena.[11]
Although rich in remedial provisions, various types of remedial claims are expressly or impliedly excluded from the Convention. Claims against the seller for death or personal injury caused by the goods are excluded by article [5]. Again, since the Convention is only concerned with rights and remedies arising out of the contract of sale,[12] non-contractual actions -- such as actions for innocent or fraudulent misrepresentations or, more debatably,[13] actions in tort for negligent manufacture or supply of defective goods by the seller -- are presumably also excluded. A third category of exclusions involves proprietary claims such as actions in [page 9-6] replevin or conversion (but not, of course, actions for specific performance) since the Convention does not regulate the property effects of the contract of sale. All of these exclusions raise some difficult questions of exegesis and policy which I will not pursue here since they will have been covered in an earlier paper in this symposium.[14]
A small but not unimportant interpretational issue worthy at least of passing notice is the extent to which the Convention's remedial provisions apply to breaches of the seller's documentary obligations. Article 45(1), which contains an index of the buyer's remedies, applies where the seller fails to perform "any" of his obligations under the contract or the Convention. Clearly this includes breaches of his documentary obligations. The difficulties arise from two sources: First, article 52, which is one of the remedial provisions expressly referred to in article 45(1)(a) and which deals with the effect of an early delivery by the seller, only refers to a delivery of goods. Secondly, a similar omission occurs in articles 38(1) and 39(1) involving the buyer's important duties to examine the goods after delivery and to give notice of any defect. While these duties admittedly play their most significant roles in relation to the goods themselves, they seem equally appropriate in relation to the seller's documentary obligations.[15] The same observation may be made with respect to the scope of article 52, especially in view of the right-to-cure provisions in articles 34 and 37.[16] Presumably [page 9-7] the short answer to these drafting oversights (if oversights they were) is that they must be made good with the aid of the gap-filling provisions in article 7. [page 9-8]
As I have already mentioned, article 45(1) indexes the buyer's remedies for breach of the seller's obligations. The three most important remedies are his right to seek specific performance, to avoid the contract, and to recover damages. Article 61 contains a parallel index of the buyer's remedies. However, since the rights to specific performance and of avoidance have a different practical effect in the seller's context than they do in the buyer's (at least as seen from a common law perspective) it will be convenient to treat them separately under each of these headings. I will deal with the question of damages under the general heading of provisions common to the buyer's and seller's remedies.
Article 46 of the Convention confers on the buyer a strong right to demand specific performance of the seller's obligations subject only to the following qualifications: (i) the buyer is not entitled to demand it where he has resorted to a remedy inconsistent with the remedy of specific performance; (ii) where the seller has delivered non-conforming goods, the buyer may only require the delivery of substitute goods if the lack of conformity constitutes a fundamental breach of contract; (iii) the buyer may not require the seller to remedy a non-conformity by repair if this would be unreasonable having regard to all the circumstances; and (iv) pursuant to article 28, the buyer is not entitled to specific performance at all "unless the court would do so under its own law in respect of similar contracts of sale not governed by [the] Convention." Article 28, of course, carries forward the ULIS compromise solution [17] to the divergent common law and civil law perceptions of the proper role of specific performance in sales contracts of [page 9-9] movables, and ensures that common law courts will not have to abandon their traditional position.
To a common law mind it may seem puzzling that civilians are still so attached to a remedy that is inefficient economically, at any rate in those cases where damages would adequately compensate the buyer.[18] I am not sure the civilians are as strongly committed to it as we think -- it may be more a case of unwillingness to renounce a long familiar remedy simply because it is uncongenial to common law lawyers.[19] In any event, the common law is less than consistent in its own position. Commonwealth courts at any rate regularly enforce specifically contracts for the sale of commercial realty even where damages would be an adequate substitute.[20] Still more significant is the action for the price permitted the unpaid seller under section 49(1) of the British Sale of Goods Act even where the buyer has refused to accept the goods. This is surely an action for specific performance in all but name even if it can be rationalized on historical and somewhat dubious conceptual grounds.[21] Again, for what it is worth, economists are not all agreed that specific enforcement involves a misallocation of economic resources,[22] and there is evidence that the remedy is gaining ground among judges in the sales as well as non-sales [page 9-10] areas.[23]
It may be, as Professor Honnold observes,[24] that the debate is largely academic since practical businessmen will not waste their time and money in expensive litigation to enforce international sales contracts. To the extent that this prediction is not entirely accurate, several exegetical points may be noted about the Vienna provisions. First, since the rules of specific performance differ widely even among civil law jurisdictions,[25] the results of such an action will depend on the geographical location of the court before which the action is being brought.[26] This seems regrettable even if it is unavoidable. Second, when article 28 invites a tribunal to consider whether a "similar" contract would be specifically enforceable under its own law, presumably it is not the contract alone but all the surrounding circumstances, including the subject matter of the contract and the identity of the parties, that the court is entitled to take into consideration.
A third point concerns the effect of the absence from the Convention of a provision comparable to article 25 of ULIS.[27] This provided that the buyer was not entitled to require performance by the seller if it was "in conformity with usage and reasonably possible" for the buyer to obtain equivalent goods elsewhere. At least one observer appears to be of the view [28] that the omission is not fatal and that the seller may still be entitled to rely on trade usage under [page 9-11] article 9(1) of the Convention to resist a claim far specific performance. Paradoxically, if the seller can establish such a usage (no mean task) he may be in a stronger position than he would be under ULIS since it will not be necessary far him to show that it was also reasonably possible far the buyer to procure the goods elsewhere. However, it is difficult to conceive of a usage that would lead to such an anomalous result.
[2] A voidance of Contract
The circumstances in which a buyer should be entitled to cancel a contract ("avoid" in Convention terminology) for breach by the seller has long been a matter far vigorous debate among common law scholars as well as among common law courts and legal practitioners. The Convention, reaffirming ULIS's position,[29] has firmly thrown its support behind a uniformly applied test of "fundamental breach,"[30] regardless of when the breach occurs, and it applies the same test to breaches of the buyer's as well as the seller's obligations There is only one important exception to this key concept.[31] It is safe to predict that the Convention's seemingly simple and surprisingly little -- debated solution will not put to rest the scholarly controversies.
The basic issue is simple to state. It is a matter of balancing the buyer's concern far predictability and certainty against the seller's need far protection against contracts canceled on minor or capricious grounds, particularly where the goods have already been tendered to the buyer and there is no readily available alternative market or they could only be disposed of at great cost to the seller. Although the question is easy to frame, the common law sales acts provide only complex and widely divergent answers. The British Sale [page 9-12] of Goods Act still adheres to a system of a priori classification into conditions and warranties of the seller's implied obligations of title, description, merchantability, fitness for purpose and sale by sample, in which the conditions strongly predominate.[32] So far as breaches of express terms of the contract are concerned, an earlier tendency towards an equivalent system of a priori classification has now been modestly leavened by a judicially added regime of innominate terms.[33] A recent House of Lords decision [34] makes it clear however that the a priori system of classification is far from dead.
The Uniform Commercial Code, as we know, ostensibly begins its provisions on the buyer's rights of rejection by embracing a "perfect tender" rule [35] but then dilutes it with a substantial breach test in several important provisions [36] and with an overriding, albeit uncertain, right-to-cure section.[37] Curiously, with one exception, this leavening hand is totally absent in the Code's treatment of the consequences of the buyer's breach.[38]
Given the divided voices within the common law world,[39] [page 9-13] the application of the Convention's avoidance provisions will, I am sure, be followed with particularly keen interest. Some questions and potential difficulties readily suggest themselves. Let me list a few:
This test of the buyer's right to avoid the contract carries some ominous overtones to a common law ear.[40] It suggests not merely a substantial or material breach of contract, or one which substantially impairs the value of the contract to the injured party, but a breach which goes "to the root" of the contract. This latter test is reminiscent of the test which for many years British and other Commonwealth courts applied to determine whether or not a disclaimer clause survived particular breaches of contract.[41] Whatever the value of a fundamental breach test in the latter context, its translation into the realm of the buyer's right to reject non-conforming goods would appear to impose too heavy a burden [page 9-14] on the buyer. Happily, one may safely assert that the draftsmen of the Convention did not intend to adopt the British doctrine of fundamental breach; nevertheless, the exact meaning of the definition of fundamental breach, now found in article 25 of the Convention, remains open for debate.
The terminological and definitional apprehensions are reinforced by the checkered career of the definition of fundamental breach. Not surprisingly, the much criticized and agonizingly hypothetical test in article 10 of ULIS [42] was quickly jettisoned by the UNCITRAL Working Group. The test ultimately approved at the plenary session of UNCITRAL and incorporated into the draft Convention [43] was both simple and, I think, commensurate with striking a reasonable balance between the parties. Article 23 of the draft Convention read:
A breach committed by one of the parties is fundamental if it results in substantial detriment to the other party unless the party in breach did not foresee and had no reason to foresee such a result.
Despite the misleading title, it will be seen that the test adopted was really a material or substantial breach test. For reasons that do not emerge clearly from the Vienna proceedings,[44] article 23 was revised in favor of what I may call a quasi-fundamental breach test. The test now is whether the breach "results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract ... " (emphasis added). I fear that this [page 9-15] seemingly stricter test may add considerably to the difficulties of lawyers seeking to advise their clients on the implications of particular breaches, and to the task facing arbitrators and courts in seeking to determine whether the buyer was justified in avoiding the contract because of the seller's breach. If, for example, a seller delivers 10 per cent less of a quantity of goods than he had agreed to deliver there can be little doubt that the buyer has suffered a "substantial detriment." Would we be equally confident that the buyer has been "substantially deprived" of what he was entitled to expect under the contract? It may be argued that the latter test must have a quantitative as well as a qualitative meaning, otherwise there would have been no point in changing the test of fundamental breach in the draft Convention. On the other hand, the suggestion that the buyer must have been deprived by fifty percent or more of what he was entitled to receive before it can be said that there has been a "fundamental breach" is not justified etymologically and would lead to startling results that could not have been intended by the delegates voting in support of the amendment to article 23.
Absent contractual provisions that relieve the uncertainties, the buyer's unease may be compounded because the Convention does not entitle him to avoid the contract if the seller cannot or will not remedy the non-conformity. Nor will articles 46(2) and 46(3), to which reference has already been made, assist the buyer in enabling him to obtain a court order requiring the seller to remedy the defect. This is because in a common law jurisdiction such a request for an order for specific performance will presumably be subject to the restraining provisions of article 28. Moreover, even in a civil law jurisdiction, an order under article 46(2) will only lie (in a case where the buyer seeks the delivery of [page 9-16] substitute goods) where the non-conformity amounts to a fundamental breach of contract.[45]
On a first reading, article 47(1) of the Convention,[46] which contains the well known Nachfrist provision, may appear to offer the buyer a source of relief but closer examination of the Convention shows that this is not so. First, it is very doubtful whether the provision applies to breaches other than those arising from the seller's delayed performance. (The origin of the provision in the German Nachfrist concept strongly suggests the contrary.)[47] Second, whatever the true reach of article 47(1), it is clear from article 49(1)(b) that only the seller's failure to deliver in response to the Nachfrist notice will entitle him to avoid the contract.[48] It is not in fact obvious what purpose article 47(1) serves other than to enable the buyer to fix a terminal date for the delivery of the goods where the contract has failed to make the time of delivery an essential condition of the seller's obligations.[49] [page 9-17]
As will have been noted from article 25, a seller can reduce the otherwise serious consequences of his breach if he can show that he did not foresee and that "a reasonable person of the same kind in the same circumstances" would not have foreseen such a result. This aspect of the definition of fundamental breach attracted considerable discussion both within UNCITRAL and at the diplomatic conference in Vienna. Two issues in particular deserve notice here: the first was eventually put to rest to the general satisfaction of the Vienna delegates; the second, regrettably, was left in limbo.
The 1976 draft of the Convention [50] put the onus on the aggrieved party both to show that the breach of contract resulted in a substantial detriment to him and that the party in breach foresaw or had reason to foresee such a result. The Philippines delegate to UNCITRAL [51] subsequently objected that this formulation was unfair to the injured party and that the burden should not rest on him to show that the breaching party ought to have foreseen the result of his conduct. In the light of this objection, the wording of the definition was amended at the 1977 session of UNCITRAL so as to require the breaching party to show that he could not reasonably have foreseen the consequences of his [page 9-18] breach. At the Vienna diplomatic conference [52] the "unless" part of the definition was further amended by eliminating what some delegates felt was its excessively subjective character.
The other issue that was raised intermittently but never resolved was the correct time for determining the breaching party's foreseeability of the consequences of his breach.[53] Was the relevant time when the contract was concluded or was it when the breach was committed, or did it depend on the circumstances of each case? Article 10 of ULIS was quite clear on the point and settled on "the time of the conclusion of the contract." The draft convention, on the other hand, was silent, thus leading the Secretariat's Commentary to note unhelpfully that "[i]n case of dispute, that decision must be made by the Tribunal."[54] At Vienna the U.K. delegation introduced an amendment [55] adopting the ULIS solution but subsequently withdrew it when it ran into opposition. Although the other delegates were not unanimous, a substantial number [56] favored leaving the question at large to be decided by the adjudicating body on a case by case basis.
In the light of this uncertainty it is not surprising that Professors Honnold and Schlechtriem reach different conclusions.[57] For my own part, I am puzzled to know why [page 9-19] the UNCITRAL and Vienna delegates thought it unwise to tie the hands of an adjudicator, particularly since he is given no guidance on the principles that should inform his decision. Equally puzzling is the fact that in all of the discussions there is little or no reference to what is now article 74 of the Convention. This important article contains the foreseeability test for the recovery of damages and provides that the damages may not exceed the loss which the party in breach foresaw or ought to have foreseen "at the time of the conclusion of the contract" as a possible consequence of the breach of contract. It would surely be anomalous if a buyer were able to avoid the contract for breach by the seller if the grounds justifying avoidance were regarded as too remote for the recovery of damages under article 74.
Given the significant burden involved for the buyer in proving a fundamental breach justifying his right to avoid the contract, it may seem surprising that the seller needs a right to cure at all. Conversely, it may be argued that if the breach is so serious as "substantially to deprive [the buyer] of what he is entitled to expect under the contract," the seller should not be entitled to a right to cure. Yet there can be little doubt that the Convention does recognize such a right, and rightly so in my opinion. To take a simple example, suppose the seller delivers a machine that fails to work at all. This probably amounts to a fundamental breach [page 9-20] as defined in article 25 and the buyer should be entitled to avoid the contract. It may be however that the non-conformity can be easily remedied, e.g., by some modest adjustments or the replacement of a minor part. In these circumstances the avoidance of economic waste would seem to indicate that the seller should have an opportunity to cure.[58] Such reasoning underlies the Convention's cure provisions; nevertheless, the exact scope of the provisions remains disturbingly unclear.
To begin with, it is clear that if there is an early tender of documents or goods by the seller he may, up to the end of the contractual time for delivery, cure any lack of conformity provided the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense.[59] It is also clear, I think, that these provisions (in articles 34 and 37 respectively) apply whatever the gravity of the seller's breach and whether or not it meets the test of a fundamental breach.
The difficulty arises with respect to article 48(1). The preceding provision in the draft Convention (art. 44(1)) reads:
"(1) Unless the buyer has declared the contract avoided in accordance with article 45, 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 such delay as will amount to a fundamental breach of contract and [page 9-21] without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. The buyer retains any right to claim damages as provided for in this Convention."
There is some equivocation on the point in the Commentary of the Secretariat [60] but I venture to think most lawyers would have read paragraph 1 as meaning that no right to cure survived avoidance of the contract by the buyer. Many delegates at the Vienna Conference apparently also read it this way since several amendments were submitted by a large number of delegations to delete the opening words of article 44(1), "unless the buyer has declared the contract avoided in accordance with article 45."[61] An ad hoc working group was struck to review the various proposals and this group presented three alternative proposals for consideration by the First Committee. It is the second of the Working Group's alternatives that was ultimately adopted and that appears in the Convention as article 48(1).[62]
The opening words now read, "(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" (emphasis added). Article 49 deals with the buyer's right to avoid the contract. It would appear, therefore, giving the opening words of article 48(1) their ordinary and plain meaning, that no material difference exists between the opening words of old article 44(1) and their successors in the Convention. Professor Honnold takes a very different position.[63] He argues vigorously that the amendment to article 48(1) "leaves little room for doubt" that the right to cure is the paramount provision and that the cure provisions of article 48(1) could be frustrated "by an unqualified application of article 49(1)." I confess I am not convinced [page 9-22] that a person not as familiar with the Vienna proceedings as Professor Honnold would be as ready to add such a generous gloss to the opening words of article 48(1).
In view of this ambiguity, it may be asked whether the same goal could not be achieved by requiring the seriousness of a breach for the purposes of article 25 to be determined in the light of any offer to cure made by the breaching party. An amendment along these lines was in fact proposed by Professor Honnold during the UNCITRAL discussions but did not unfortunately win majority approval.[64] This does not mean, in my view, that an offer to cure is not relevant in determining whether or not a fundamental breach has occurred. However, it would seem that the offer to cure must be made before the injured party exercises the right to avoid the contract. This result follows because there is no requirement in the Convention requiring an injured party to give the breaching party an opportunity to cure before exercising his right of avoidance. Conceivably, a tribunal could find that the injured party was acting in bad faith if he precipitously exercised his right of avoidance for the very purpose of denying the breaching party an opportunity to cure, but this avenue provides too slender a basis on which to found a solid right to cure. An express provision is still a necessary vehicle.
Returning then to article 48 and assuming the seller has a right to cure even when he has committed a fundamental breach, the questions arise regarding what amounts to an acceptable cure and what limitations there are on the exercise of the right. Article 48(1) offers no guidance on the first question and only a limited amount on the second. The requirements are that the seller must be able to cure "without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement [page 9-23] by the seller of expenses advanced by the buyer." The importance attached to the buyer's reimbursement of expenses is puzzling since in practice this is not what is likely to bother the buyer most; leaving this factor aside, there is enough flexibility in the three limitations to enable an adjudicator to determine on commercially acceptable grounds whether a buyer should have accepted the seller's offer to cure.[65]
The restrictions imposed by the Convention on the buyer's right to reject non-conforming goods because of the requirements for the existence of a fundamental breach are offset by the omission from the Convention of a concept of acceptance and the Convention's generous restitutionary provisions. The differences here from the rules familiar to common law lawyers are marked and need to be followed in stages in order to capture their full flavor.
Under the British Sale of Goods Act the buyer loses his right to reject (and therefore to avoid the contract) if he fails to do so within a reasonable time following delivery of the goods.[66] Reasonable time here is measured not in terms of the difficulty of discovering the defects in the goods (assuming the buyer is complaining of physical defects) but of the time reasonably necessary to enable him to examine the goods.[67] It is no defense under the British Act that the [page 9-24] defects were not readily discoverable because of their latent character. The buyer will also lose his right to reject if he has done some act inconsistent with the seller's ownership of the goods or because he can no longer make substantial restitution of the goods.[68]
The Uniform Commercial Code provisions generally follow the British provisions with respect to what amounts to a deemed acceptance of the goods.[69] UCC 2-608, however, permits the buyer to revoke his acceptance where, inter alia, his acceptance was reasonably induced by the difficulty of discovery of the non-conformity or because of the seller's assurances. As at common law in the case of rejection, the buyer must still revoke his acceptance before any substantial change in the condition of the goods not caused by their own defects.
The Convention's provisions are generally much more generous to the buyer than either the British or the Code provisions. To enable the buyer to reject defective goods, he must (i) examine the goods within as short a period as is practicable in the circumstances [70] (a test which is much more liberal than that traditionally applied by British courts); (ii) notify the seller of the non-conformity within a reasonable time after discovery of the defect [71] and in any event not later than 2 years after their delivery;[72] and (iii) establish that the [page 9-25] defect amounted to a fundamental breach.[73] The one limiting feature in this three-step requirement is the near absolute cut-off period of 2 years,[74] a prescriptive rule which is all the more serious because it governs all claims for non-conforming goods and not merely the right to avoid the contract. Subject to this restriction, there is no inhibition on the buyer's right to reject for latent defects even where he has had the goods for a substantial period of time.
The buyer benefits moreover from the surprisingly generous restitutionary provisions in articles 81 and 82. Where a contract has been avoided, article 81(2) obliges each party to make restitution of what he has received from the other. Under article 82(1) the buyer loses the right to declare the contract avoided if it is impossible for him to make restitution of the goods substantially in the condition in which he received them. This familiar requirement is heavily diluted by the exceptions which follow. Of these the exception in article 82(2)(c) is the most striking. Clause (c) excuses the buyer from having to make restitution,
"(c) [i]f the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity."
Clause (c) apparently has a counterpart in German law.[75] It should also be noted that the restitutionary provisions in the Convention apply whenever the contract of sale has been avoided, whether because of a breach by one of the parties or because performance has become impossible because of a frustrating event. So far-reaching a restitutionary remedy is [page 9-26] understandable where the contract is discharged by frustration but is more difficult to justify where the buyer is only complaining of a breach and damages might be expected to be a sufficient remedy. In any event, article 82(2)(c) goes well beyond anything known to the common law in respect of defective goods.[76]
In the light of the foregoing review, it seems to me that by avoiding the concept of "acceptance" the Convention has wisely spared itself much of the complexity and metaphysics of the common law. It would also appear that the Convention's generally generous right to reject in point of time is offset by a fairly stringent gravity of breach test justifying the exercise of the right. The British position is almost exactly the reverse, but probably less realistic. In practice, the parties are well advised to design their own right of rejection provisions. Finally, the overall two year limitations period, while obviously designed to protect the seller against stale claims, may create difficulties in the case of durable and other types of manufactured goods where the goods pass through a succession of hands before reaching the ultimate consumer. Here again, however, standard manufacturers' warranties may be expected to ensure that the importer will [page 9-27] not be saddled with the loss arising from a case where a domestic buyer avoids the contract within two years from the time that the goods were delivered to him but more than two years after they were received by the importer. [page 9-28]
Articles 61 to 64 of the Convention deal with the seller's remedies for breach of the buyer's obligations. These provisions, as I have previously indicated, parallel the remedial provisions available to the buyer for breach of the seller's obligations. For obvious reasons, however, the two remedial regimes are not identical. There is no need, for example, for a provision allowing the seller to sue for substitutional performance or requiring the buyer to cure a defect in his performance, and none is to be found in the Convention. Nor does the Convention confer on the buyer a right to remedy a defect or omission in his performance, the very debatable rationale presumably being that there is no functional need for such a right.
These omissions merely reflect the wider reality that there are pervasive differences between the nature and impact of a buyer's breach and those resulting from the seller's defaults. To list a few of the important differences: the buyer's obligations are typically fewer and easier to comply with than in the reverse situation, and, no less important, the buyer usually has much better control over them. Failure by the buyer to make payment, to open a letter of credit by an agreed date, or to give shipping instructions are not ordinarily due to an oversight. In a similar vein, it is not usually difficult to determine whether a delay in payment will cause the seller minor or major inconvenience; and again, most Western legal systems do not appear to experience much difficulty in determining the "real" and "personal" rights of an unpaid seller,[77] at least while the goods are still in his possession or subject to his control.
Having regard to these considerations, it is arguable that the Convention should have focused more specifically on the [page 9-29] functional differences between breaches by a buyer and breaches by a seller, and on the differences between breach by the buyer before he has received the goods and breach occurring after delivery. Two examples will illustrate some of the difficulties caused by the absence of such distinctions.
Article 62 entitles the seller to require the buyer to pay the price and to take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this remedy. Several commentators have conjectured [78] how this provision would be applied in a common law jurisdiction and have reached conflicting conclusions. To appreciate the nature of the problem in actions for the price, we must recall the divergent rules on this question obtaining under the British Sale of Goods Act and under the Uniform Commercial Code. Under the British Act [79] the seller is entitled to sue for the price if the property in the goods has passed to the buyer and payment has become due, or if the buyer has agreed to make payment on a fixed date irrespective of delivery. The Uniform Commercial Code, on the other hand, has abandoned these common law rules and has opted for a regime that Karl Llewellyn, the chief architect of Article 2, deemed economically less wasteful.[80] Pursuant to UCC 2-709, the seller is only entitled to recover the price in the following circumstances: (a) where the buyer has accepted the goods or where the goods were lost or damaged within a commercially reasonable time after the risk of loss passed to the buyer, and (b) where goods have been identified to the contract, if the seller is unable to resell them at a reasonable price or the circumstances [page 9-30] reasonably indicate that such an effort would be fruitless.
How would the British and American rules be applied in the Convention's context? The answer would appear to depend on the true construction of article 28. Professor Honnold argues [81] that an action for the price is a form of specific performance and that the availability of the price remedy will therefore depend on the domestic law of the forum. Professor Farnsworth, on the other hand,[82] contends that historically an action for the price was not regarded as an action for specific performance and that article 28 should be construed so as to respect the forum's classification.
I find Professor Honnold's reasoning more persuasive, particularly in the light of the history of article 28 which he cites in support of his position and its location among the general provisions of Part III of the Convention. Nevertheless, it seems even more troubling than it does in the case of an action for specific performance against the seller that the outcome of the seller's action for the price should depend on the vagaries of the forum's law. Suppose an action for the price is brought in the United Kingdom or in one of the Commonwealth countries that has copied the British Act. It is difficult to see what important public policy militates against the court giving judgment in the seller's favor if it has become payable under the Convention, or why the court should be required to superimpose on an international contract the precise rules of its domestic law to determine whether the action can be maintained. Similar considerations would arise if an action for the price were to be brought by a foreign seller in one of the states of the United States against a recalcitrant buyer. It may be said that these difficulties are not of the Convention's making and that they arise from the divergent views of national legal systems about the proper scope of actions for specific performance. [page 9-31] All this may be conceded and yet it may be regretted that at least in actions for the price, the Convention's draftsmen were unable to agree on a uniform substantive rule.
There is no difficulty in justifying the unpaid seller's right to avoid the contract while the goods are still in the seller's possession or under his control. The problem arises when it is sought to extend the right once the goods have been handed over to the buyer and the seller has not reserved a security interest in the goods. British and American sales and restitutionary doctrines have long set their faces against allowing the seller to recover the goods involuntarily from the defaulting buyer. The reason for the opposition is either that the restitutionary remedy is not available once the seller has fully performed his obligations and earned the price, or that recovery of the goods would be prejudicial to the buyer's creditors.[83] Consequently, the well established practice for sellers in common law jurisdictions is to reserve a security interest in the goods and to comply with any applicable registration requirements.[84] [page 9-32]
The Convention's rules appear to lead to a different conclusion. Article 64(1), which establishes the seller's avoidance rights, does not distinguish between his right to avoid the contract before or after the goods have been delivered. The only express limitation is the one in article 64(2)(b)(i), and this merely deprives the seller of the right to avoid the contract if, in respect of any breach other than late performance, he fails to do so within a reasonable time after he knew or ought to have known of the breach. Even this limitation only applies where the buyer has paid the price.
It will be seen therefore that there are apparently no legal restrictions on the seller avoiding the contract even after the buyer has held the goods for a substantial time. And if the seller does so, article 81(2) entitles him to seek restitution of the goods from the buyer. It has been suggested that paragraph 2 merely confers a personal right and was not intended to prejudice the position of the buyer's creditors or interfere with the bankruptcy rules of the buyer's jurisdiction.[85] The difficulty about this construction is that it does not much help the buyer's creditors since execution and bankruptcy rules in common law jurisdiction do not normally regulate an unpaid seller's avoidance rights.[86] In the light of the Convention's provisions these jurisdictions may well find it advisable to do so in the future. [page 9-33]
Chapter V of Part III of the Convention contains an important group of remedies common to the seller and buyer, all of which warrant careful examination. Time however does not allow me this luxury and I will therefore limit myself to some cursory remarks on the provisions governing the right to suspend performance and the effects of anticipatory breach before turning to the articles dealing with the assessment of damages.
Article 71 essentially recapitulates the ULIS provision [87] on a party's right to suspend performance when he has grounds to feel insecure about the other party's willingness or ability to perform. The drafting history of the article [88] is a good example of how the Vienna Conference intermittently became bogged down in what must seem to an outside observer to have been a minor issue. The touchstone adopted in the draft Convention [89] to determine whether or not the right to suspend performance was justified is whether the conduct of the other party gave" good grounds to conclude" that the other party would not perform a substantial part of his obligations.
Some delegates felt this test was too subjective and so, after extended discussion, the wording was changed so as to allow a party only to suspend performance when "it becomes apparent" that the other party will not perform.[90] The new test is supposed to inject a higher degree of objectivity; I am not convinced that it does. Leaving aside this surely minor verbal issue, the right to suspend conferred by article 71 is a very broad one -- much broader, for [page 9-34] example, than the right obtaining under German law [91] or under the British Act [92] -- but no broader than the right provided for in the Uniform Commercial Code.[93] One significant difference between article 71 and UCC 2-609 is that article 71 does not tell us the consequences of the other party's failure to provide adequate assurance of his performance. Obviously the first party may continue to suspend his own performance, but will it also entitle him to treat the contract as repudiated (as is true under the Code [94]) after 30 days have elapsed? Professor Honnold is of the view [95] that he may then be able to invoke the provisions on anticipatory repudiation in article 72. I am not convinced that he is right, given the fact that article 72(1) only comes into play when "it is clear" that one of the parties will commit a fundamental breach of contract. A party's failure to provide an assurance of performance is surely not unequivocal evidence of his unwillingness to perform, particularly when he may question the validity of the requesting party's feeling of insecurity to begin with.
Legal systems differ widely in their treatment of the consequences of anticipatory repudiation, and this no doubt persuaded the draftsmen of the Convention to walk cautiously in this difficult area. The one rule that emerges clearly from article 72 is that the injured party "may" avoid the contract in the described circumstances. This analysis however leaves many questions unanswered. Will the injured party be obliged to elect between avoidance and [page 9-35] affirmation of the contract, and if so how soon must he make his election? If he is not required to elect, may he avoid the contract at any time? Is he obliged to mitigate his damages (as is generally required under article 77),[96] and does mitigation here involve the purchase of substitutional goods (in the case of an injured buyer) or the resale of the goods (in the case of an injured seller) as well as the avoidance of unnecessary post-repudiation expenditures? Readers will recognize in these questions issues that have long absorbed the attention of, and generated disagreement among, courts and scholars on both sides of the Atlantic.[97] It is not surprising therefore that the draftsmen of the Convention were not anxious to renew some very controversial fires. This is not to say that the questions can be ignored. Some of the answers will no doubt be found in article 77 and others willl probably be extracted from other provisions in the convention in the light of the gap-filling directive in article 7(2).
Articles 74 through 77 deal with the crucially important issue of damages while article 78 confers a right on the injured party to claim interest on the unpaid price or any other sum that is in arrears. Article 50 contains the provision, very familiar to civilians but unfamiliar to the common law, entitling the buyer to reduce the price in lieu of bringing an action for damages.[98] It must seem surprising at first sight that the Convention was able to encapsulate so complex a branch of the law of sales into four brief articles until one recalls that the provisions in the British Sale of Goods Act [99] [page 9-36] are just as few. Admittedly, those in the Uniform Commerical Code [100] are substantially larger in number.
I venture to think that most common lawyers will feel quite comfortable with the Convention's provisions even though some may regret the absence of greater detail.[101] Article 74 strikes the keynote and informs us that the injured party is entitled to recover by way of damages the loss suffered by him as a result of the breach of contract by the other party provided the damages are not too remote. It is clear that the article covers consequential as well as direct losses, and that it is intended to protect the injured party's expectancy as well as reliance and restitutionary claims, all subject to the overriding limits of remoteness familiar to us as the rule in Hadley v. Baxendale.[102]
The soundness of the propositions enshrined in article 74 will seem self-evident to most common lawyers, used as we are to the similar provisions in our own sales laws. Some civilians however may find them bold and innovative if they have become accustomed to a regime of fragmentary and complex damage rules, and the notion that damages are generally not recoverable at all unless the other party has been guilty of "fault."[103] Viewed from this perspective article 74 represents a remarkable triumph for international uniformity.
In saying this I do not mean to suggest that article 74 is problem-free, either in the policy sense or from an exegetical point of view, and I will mention quickly a few examples of both types. It is clear to begin with that a good deal of spade work will be necessary to explore the parameters of article [page 9-37] 74,[104] but here legal advisors and courts will find assistance in the rich corpus of jurisprudence in the civilian as well as the common law worlds. Another difficulty is to know whether the test of remoteness adopted in the article is more generous than the rule in Hadley v. Baxendale as recently reinterpreted by the House of Lords in "The Heron II."[105]
The Convention's test is whether the breaching party foresaw or ought to have foreseen the (type of?) loss suffered by the injured party as a "possible" consequence of the breach of contract. "Possible" is a very broad word. To borrow from Lord Reid's example in The Heron II,[106] if one takes a well-shuffled pack of cards it is quite possible, though not likely, that the top card will prove to be the nine of diamonds even though the odds are 51 to 1 against. Presumably therefore the literal words of article 74 will have to be read down somewhat to prevent the injured party being saddled with extravagant damage claims.
Another, and still more formidable, set of questions is how courts will construe disclaimer and exemption clauses in the face of article 74, and the extent to which their validity will be impaired by proscriptive national legislation. It is only stating the obvious to point out that it is a rare agreement, national or international, that will not exclude or severely curtail claims for consequential damages. Until very recently British and other Commonwealth courts responded with much hostility to such attempts by sellers to limit their liability and made much use of the doctrine of fundamental breach, as it came to be known, to blunt their [page 9-38] effectiveness.[107] Will disclaimer clauses in international agreements in the post-Convention era be greeted in common law jurisdictions with similar scepticism, or will courts and arbitrators be more deferential to the parties' express right to exclude or vary the Convention's damage rules? Will it depend on the status of the parties and whether or not they were bargaining at arm's length? I confess I have no sure answers to these questions except to suggest that courts do not readily change established habits of thought because a contract has a foreign element in it.
If national (and otherwise applicable) legislation regulates the validity of disclaimer clauses, then article 4(a) of the Convention appears to oblige adjudicators to give effect to it unless international agreements are expressly excluded from the scope of the legislation.[108] An increasingly popular legislative technique is to allow national courts to refuse to enforce "unconscionable" disclaimer clauses rather than to disallow disclaimer clauses altogether in commercial transactions.[109] It will surely not be easy for an arbitrator in Paris or Geneva to predict how an American court would react to a disclaimer clause in a contract generally governed by the Convention but subject, with respect to its validity, to the screening language of UCC 2-302 because American law governs this aspect of the contract. These questions suggest to me an unfortunate, if inevitable, conflict between the philosophy of freedom of contract generally enshrined in the Convention and a restriction on that freedom, governed by national law, which may proceed from much more protectionist sentiments.
Articles 75 and 76 of the Convention are particularized applications of article 74 and deal respectively with two [page 9-39] familiar methods of measuring an injured party's direct loss where a contract has been avoided. Article 75 validates the "concrete" method by entitling the seller or buyer, as the case may be, to base his claim on the results of a resale of the goods or a covering purchase.[110] Article 76 recognizes the abstract "current price" or "market price" test where there is a current price for the goods. Article 75 has its established counterparts in the Uniform Commercial Code [111] though not in the British Act.[112] Even so, I would expect its inherent sensibleness to commend itself also to Commonwealth lawyers. In one important respect article 75 is superior to the Code provisions since it is clear [113] that a person. who resells or covers will be bound by his election whereas this issue is apparently still unresolved under the Code.[114] There may be some doubts about how in practice the breaching party will know that the injured party has chosen the concrete remedy since the injured party is not required to give him advance notice of his election. This evidentiary question may prove particularly troublesome where the injured party is regularly engaged in the buying or selling of goods of the same kind and there is no clear link between a post-breach purchase or sale by the injured party and the contract which has been breached.
One question common to articles 75 and 76 is whether a [page 9-40] "lost volume" seller is entitled to recover further damages where the damages recoverable under these articles is inadequate to put the seller in as good a position as performance would have done. Unlike UCC 2-708(2), the Convention does not explicitly address itself to this issue but both article 75 and article 76 make it clear that the injured party may recover "any further damages ... under article 74" apart from the damages quantified under these later articles. Despite Professor Hellner's lingering doubts,[115] I agree with Professor Honnold [116] that the quoted words adequately cover a lost volume claim. Even if the words were not there, I would have expected an informed tribunal to find that articles 75 and 76 are only particularized applications of the principies enshrined in article 74 and that any unresolved questions must be answered in the light of its dominant provisions.
The Convention's provisions in article 77 on the injured party's duty to mitigate his damages provide a logical counterpoint to the principles governing the recoverability of damages in article 74. Once again much fine tuning will be necessary to apply the skeletal language of the article to the myriad circumstances likely to arise in practice. One challenging area for the prospective operation of the duty to mitigate I have already mentioned in relation to anticipatory breach, and here my sympathies are very much with Professor Honnold's response.[117] I am much less persuaded by his reasoning that article 77 can be used to resist a claim for the price by the seller on the grounds that he should have mitigated his damages by disposing of the goods elsewhere. As Professor Honnold himself recognizes,[118] several important hurdles lie in the path of this attempted use of the article. One is that article 77 only applies to a party who relies on a "breach of contract" and that, like articles 74 to [page 9-41] 76, it is only concerned with the measurement of damages. Whatever else it is, an action for the price is not an action for damages.[119] A second hurdle is related to the fact that the Convention contains no counterpart to article 61(2) of ULIS, which specifically circumscribes the seller's right to sue for the price if it is in conformity with usage and reasonably possible for the seller to resell the goods. This is an omission that can hardly be regarded as accidental.[120] No less significant is the fact that a proposal by Professor Honnold at the Vienna Conference to engraft an amendment onto article 77 to make it applicable to a wider range of remedies was defeated.[121] In adducing this historical data I do not mean to suggest that a court may not be able to work its way around the restrictive language of article 77, particularly where the seller has proceeded with performance after the buyer has repudiated the contract; clearly however it will be a difficult uphill struggle.[page 9-42]
From this sampling of the remedial provisions in the Vienna Convention it will be clear that they are not free from difficulty and that they present some substantial problems. Some of the difficulties arise from differences of opinion on questions of principle, some because of a commendable effort to reach an accommodation between divergent points of view, and a distressingly large number because of last minute efforts to refine the language of the draft Convention prepared by UNCITRAL. "Distressingly," because the efforts were not always successful.
Where then do we go from here? It would be most unfortunate, in my view, if the Convention were to fail to receive widespread support because it is not as good as many of us might wish it to be. We must accept the fact that drafting on so complex a topic in an international forum whose members differ so widely in background and legal perceptions is extraordinarily difficult, and that a renewed attempt to resolve the drafting difficulties would almost certainly fare no better.
My own hope is that the Convention will come into force soon, and that it will be given a fair trial. We owe this much surely to the two generations of scholars who have devoted many years of their careers to the promotion of a uniform international sales law. It may be that some of the exegetical problems will prove to be more theoretical than practical, and that others will be avoided by the terms of the contract adopted by the parties. If the difficulties persist in the light of operating experience with the Convention, then I would hope too that another diplomatic conference will be convened with a view to adopting any necessary amendments.[page 9-43]
1. See John O. Honnold, UNIFORM LAW FOR INTERNATIONAL SALES UNDER THE 1980 UNITED NATIONS CONVENTION (Kluwer 1980) (hereafter cited as "Honnold"), and P. Schlechtriem, EINHEITLICHES UN-KAUFRECHT (Tübingen:Mohr, 1981). Very helpful also on the general comparative background is Guenther H. Treitel, Remedies for Breach of Contract (Courses of Action Open to a Party Aggrieved), in VII INTERNATIONAL ENCYCLOPEDIA OF COMPARATIVE LAW, Ch. 16 (J.C.B. Mohr, 1976).
2. Honnold, The Draft Convention on Contracts for the International Sale of Goods: An Overview, 27 Am. J. Comp. L. 223, 225-26 (1979).
3. E.g., articles 28, 44, 50, 68, 71, 78, 79.
4. Articles 45-65.
5. Articles 71-88.
6. Viz. articles 4-7 and 9.
7. Cf. Honnold, supra n. 1, para. 26.
8. To an outside observer this is particularly true of the provisions in UCC 2-601.to 2-608 dealing with rejection, acceptance, and revocation of acceptance.
9. Cf. Hellner, "The UN Convention on International Sales of GoodsAn Outsider's View" in IUS INTER NATIONES: FESTSCHRIFT FÜR STEFAN RIESENFELD, pp. 71, 86 et seq. (Berkeley-Kolner Rechtsstudien, 1983).
10. Honnold, supra n. 1, sec. 34.
11. O.C. Giles, UNIFORM COMMERCIAL LAW, pp. 21-24 (Sijthoff, 1970).
12. Article 4, first sentence.
13. Cf. Honnold, supra n. 1, sec. 73.
14. See supra Chap. 1.
15. Cf. Panchaud Frères S.A. v. Etab. General Grain Co., [1970] 1 Lloyd's L. R. 53 (C.A.).
16. 1 appreciate that to the extent that a document tendered by the seller (e.g. a bill of lading) indicates an early shipment the buyer may be able to reject the tender under art. 52 without having to rely on a separate right to reject documents tendered prematurely. However, not all documents relate to the shipment of goods and in any event it is well settled that in overseas sales the tender of documents and the tender of goods constitute two separate juristic acts. Cf. BENJAMIN'S SALE OF GOODS, 2nd ed., para. 1722 (London, Sweet & Maxwell, 1981).
17. ULIS, art. 16, and 1964 Convention, art. VII (1).
18. Cf. Farnsworth, Damages and Specific Relief in SYMPOSIUM, UNIFICATION OF INTERNATIONAL TRADE LAW: UNCITRAL: FIRST DECADE (hereafter "UNCITRAL Symposium"), 27 Am. J. Comp. Law 247 (1979).
19. For the various approaches in civil law systems see Treitel, supra n. 1, sees. 12-29.
20. G.H. Treitel, THE LAW OF CONTRACT, 5th ed., p. 753 (London, Stevens & Sons, 1979). Although in recent years some American courts have challenged "the traditional view that land contracts are generally specifically enforceable," the general rule still appears to predominate in the U.S: as well. See E. Allan Farnsworth, CONTRACTS, pp. 829-830 (Little, Brown & Co., 1982).
21. The conceptual ground is that the seller has performed his part of the bargain and has therefore earned the right to the price.
22. Schwartz, The Case for Specific Performance, 89 Yale L.J. 271 (1979).
23. Cf. Richard M. Brown, Specific Performance in a Planned Economy in Jacob S. Ziegel (ed.), PAPERS AND COMMENTS DELIVERED AT THE EIGHTH ANNUAL WORKSHOP ON COMMERCIAL AND CONSUMER LAW, p. 35 (Butterworths 1980). See also van Heeke, Changing Emphasis in Specific Performance, 40 N.C.L. Rev. 1 (1961).
24. Honnold, supra n. 1, sec. 199.
25. Treitel, supra n. 1, sees. 12 et seq.
26. But not, according to Professor Honnold, on the conflict of laws rules applied by the forum since in his view article 28 only refers to its domestic law. Honnold, supra n. 1, sec. 195.
27. A corresponding provision appears in art. 61(2) of ULIS dealing with the seller's right to enforce the buyer's obligation to pay the price.
28. Rolf Herber, The Rules of the Convention relating to the Buyer's Remedies in Cases of Breach of Contract in PROBLEMS OF UNIFICATION OF INTERNATIONAL SALES LAW, pp. 104, 116 (Oceana Publications, 1980).
29. Arts. 26(1), 30(1), 43, 62(1), 70(1).
30. Arts. 49(1)(a), 64(1)(a).
31. Viz. the "Nachfrist" provision in arts. 49(1)(b) and 61(1)(b).
32. Ontario Law Reform Commission, REPORT ON SALE OF GOODS, vol. 1, pp. 145-50 (Toronto 1979). A recent Working Paper of the English and Scottish Law Commissions recommends some important modifications to this scheme. See The Law Commission, W.P. No. 83, 1983 and The Scottish Law Commission, C.M. No. 58, SALE AND SUPPLY OF GOODS, especially pp. 68-84 [H.M.S.O., London, 1983].
33. Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. ("The Hansa Nord"), [1976] 1 Q.B. 44 (C.A. 1975), appvd. in Reardon Smith Line Ltd. v. Hansen-Tangen ("The Diana Prosperity"), [1976] :3 All E.R. 570 (H.L.).
34. Bunge Corp. v. Tradax Export S.A., [1981] 2 Lloyd's L.R.l (H.L.).
35. U.C.C. 2-601.
36. U.C.C. 2-608, 2-612, and 2-504.
37. U.C.C. 2-508. See, further, REPORT ON SALE OF GOODS, supra n. 32, pp. 451-456.
38. Cf. REPORT ON SALE OF GOODS, supra n. 32, pp. 411-412.
39. The British Sale of Goods Act, 1893 has been adopted more or less verbatim by all the common law Provinces in Canada. The Ontario Law Reform Commission, in its REPORT ON SALE OF GOODS, favored a substantial breach doctrine for breaches by seller or buyer coupled with a right to cure when the seller is in breach. Op. cit., pp. 145-150 and pp. 45-65. A committee of the Uniform Law Conference of Canada, on the other hand, which reviewed the OLRC Report and recommended the adoption by the Canadian common law Provinces of a new Uniform Sale of Goods Act based on the Ontario draft" Act, preferred a strict performance rule with a generous right to cure. See Uniform Law Conference of Canada, PROC. 63RD ANN. MEETING, pp. 34, and Append. S., pp. 193-194 (Aug. 1981). The Committee's recommendations were adopted by the Conference but no Province has so far enacted the new Uniform Sale of Goods Act.
40. But perhaps less so to a French civilian's ear. In the French version of art. 25 "fundamental breach" appears as "contravention. essentielle. "
41. See G.H. Treitel, THE LAW OF CONTRACT, 5th ed., pp. 160 et seq. (Stevens & Sons, London, 1979); BENJAMIN'S SALE OF GOODS, 2nd ed., paras. 983 et seq. (Sweet & Maxwell, London, 1981). After a period of confusion following an earlier decision by it in 1967 the House of Lords firmly repudiated the doctrine in Photo Production Ltd. v. Securicor Transport Ltd., [1980] 1 All E.R. 556. See also George Mitchell (Chesterhall) Ltd. V. Finney Lock Seeds Ltd., [1982] 3 W.L.R. 1036 (C.A.), aff'd [1983] 2 All E.R. 737 (H.L.).
42. Honnold, supra n. 1, sec. 182.
43. UN Doc. A/Conf./97/5, 14 March 1979, art. 23.
44. UN CONFERENCE ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS, VIENNA; 10 March-11 April, 1980, OFFICIAL RECORDS, pp. 295-303 (United Nations, New York 1981), and REPORT OF THE FIRST COMMITTEE, UN Doc. A/Conf./97/11, 7 April 1980, pp. 47-49.
45. However, if the buyer merely seeks repair of the non-conforming goods under art. 46(3), he can only be met by the defense that the request is unreasonable "having regard to all the circumstances." Presumably, the severity of the defect, the prejudice to the buyer, and the cost to the seller of repairing goods that may be a long distance from the seller's place of business will all be relevant considerations. Note futher that if a buyer seeks his remedy under art. 46(2) or (3) he will lose the right to avoid under art. 49(1) because of the restrictions on the right to avoid in art. 49(2).
46. For text, see Appendix I.
47. See Treitel, supra n. 1, sec. 149 et seq.
48. For text, see Appendix. An attempt was made at Vienna to extend the scope of art. 49(1)(b) but it did not succeed. See OFFICIAL RECORDS, supra n. 44, pp. 354-356. Cf. ULIS art. 44(2), which entitled the buyer to avoid the contract if the seller failed to remedy a defect after having been given a reasonable opportunity to do so, without distinguishing between different types of breach.
49. Seen from this perspective, art. 47(1) merely corresponds to a principle well established in equity in contracts for the sale of land enabling either party to make time of the essence (where the contract does not itself so provide) "by a notice given after the time fixed for performance to complete within a reasonable time." Treitel, supra n. 20, pp. 624-625; Stickney v. Keeble, [1915] A.C. 386 (P.C.); Ajit v. Sammy, [1967] A.C. 255 (P.C.). The British Sale of Goods Act, s. 48(3), as explained in R.Y. Ward Ltd. v. Bignall, [1967] 1 Q.B. 534 (C.A.), also makes use of this technique.in enabling an unpaid seller to terminate the contract of sale and to resell the goods. Treitel, op. ct., p. 625,. n. 83.
50. VII Yearbook 90 (1976), art. 9. This reads as follows:
"A breach committed by one of the parties to the contract is fundamental if it results in substantial detriment to the other party and the party in breach foresaw or had reason to foresee such a result."
51 See the discussion by Michida, Cancellation of Contract, 27 Am.J. Comp. L. 279,284-286 (1979).
52. OFFICIAL RECORDS, supra n. 44, pp. 295-301 and 329-330, and REPORT OF THE FIRST COMMITTEE, supra n. 44, pp. 47-49.
53. See the full discussion of the issue by Richard E. Speidel, Book Review 5 Nw.J.Int. Law & Bus. 432, 439-445. I am indebted to Prof. Farnsworth for drawing my attention to this source.
54. Commentary on the Draft Convention on Contracts for the International Sale of Goods, Prepared by the Secretariat, in OFFICIAL RECORDS, supra n. 44, p. 26 art. 23, para. 5.
55. OFFICIAL RECORDS, supra n. 44, p. 302, para. 1.
56. E.g., Messrs. Wagner, Throenning, Bennett, Szasz, Shafik.
57. Prof. Honnold's position is not entirely clear but I interpret it to mean that the breaching party's foreseeability at the time of breach will be relevant at least in those cases where the breach is wilful. Honnold, supra n. 1, sec. 183. Prof. Schlechtriem's view is that the time of the conclusion of the contract is the correct time and he relies on the fact that the definition of fundamental breach adopted at Vienna focused on the injured party's expectations under the contract. Schlechtriem, supra n. 1, p. 49. Prof. Honnold does not explain why the wilfulness of a breach should affect the time of foreseeability. I can only conjecture that it rests on a ground analogous to an American court's power to award punitive damages. The difficulty about this approach is that art. 74 makes no provision for punitive damages and claims for punitive damages for breach of contract have so far been resisted by other common law courts. See further infra, pp. 9-36 et. seq.
58. Contracts for the sale of durable and similar goods regularly make provision for such a right to cure. See REPORT ON SALE OF GOODS, supra n. 32, p. 462, Table 1. For a contrary view on the desirability of a legislative right to cure, see Schwartz, Cure and Revocation for Quality Defects: The Utility of Bargains, 16 B.C. Indus. & Com. L.Rev. 543 (1975).
59. The common law also recognized such a right (Borrowman, Phillips & Co. v. Free & Hollis, (1878) 4 Q.B.D. 500) and it is now given statutory expression in UCC 2-508(1). The conceptual basis of the common law right was never properly articulated nor was it subject to the same restrictions as those appearing in the Convention. The Convention restrictions strike me as both justifiable and sensible.
60. OFFICIAL RECORDS, supra n. 44, p. 40, para. 2.
61. OFFICIAL RECORDS, supra n. 44, pp. 341-344 and 351-353, and REPORT OF THE FIRST COMMITTEE, supra n. 44, pp. 94-99.
62. REPORT OF THE FIRST COMMITTEE, pp. 98-99.
63. Honnold, supra n. 1, sec. 296.
64. Michida, supra n. 51, at pp. 286-288. Paradoxically, one of the grounds on which this proposal was rejected was that the right to cure was already adequately covered in other provisions of the Convention. The error in this reasoning is exposed by Prof. Michida at p. 288.
65. The British Sale of Goods Act contains no right to cure by the seller, whether before or after the time for performance has expired; but see supra n. 59 with respect to the common law position. The Code's cure provision in UCC 2-508(2) is more narrowly worded than art. 48(1) but the American courts have interpreted it quite liberally. See REPORT ON SALE OF GOODS, supra n. 32, pp. 453-45,6, and Priest, Breach and Remedy for the Tender of Nonconforming Goods under the Uniform Commerical Code: An Economic Approach, 91 Harv. L. Rev. 960 (1978).
66. SGA, ss. 34-35 and 11(4).
67. Leaf v. International Galleries, [1950] 2 K.B. 86 (C.A.); BENJAMIN'S SALE OF GOODS, 2nd ed., paras. 916-917. Curiously, Benjamin's discussion does not clearly cover the case of latent defects. One reason may be that prior to the amendment of the Act in 1967, an act by the buyer inconsistent with the seller's ownership of the goods would have been sufficient to amount to acceptance even if the buyer had not had a reasonable opportunity to examine the goods. See also infra n. 68.
68. Hardy & Co. v. Hillerns & Fowler, [1923] 2 K.B. 490 (C.A.); REPORT ON SALE OF GOODS, supra n. 32, pp. 469-470.
69. See Dee 2-606.
70. Art. 38.
71. Arts. 39(1), 43(1), 49(2)(b)(i).
72. Art. 39(2). Art. 39(2) is subject to the qualification in art. 44. The latter is a compromise provision that was inserted at Vienna to accommodate the concerns of third world countries who were troubled by the severity of art. 39(1). Honnold, supra n. 1, sec. 261. As Prof. Honnold indicates, it will not be easy to predict what a tribunal will accept as a "reasonable excuse" for the buyer's failure to give notice of the non-conformity within a reasonable time.
73. Art. 49(l)(a).
74. "Near absolute" because the two year period is subject to the exception in art. 40 where the seller knew or ought to have known of the non-conformity and failed to disclose it to the buyer.
75. Treitel, supra n. 1, secs. 181-182.
76. The British Sale of Goods Act has no express provision dealing with the buyer's restitutionary rights after avoidance of the contract. However, the well established rule is that the buyer can only avoid the contract and recover the price if there has been a total failure of consideration. See REPORT ON SALE OF GOODS, supra n. 32, p. 505, n. 309. For the American position see UCC 2-608(2), 1 G.E. Palmer, LAW OF RESTITUTION, sec. 4.14 (1978), and RESTATEMENT (SECOND) OF CONTRACTS, sec. 384 (1981).
Professor Honnold, supra n. 1, sec. 448, p. 452, recognizes that art. 82(2)(c) may seem surprising but nevertheless justifies it on the ground that under art. 84(2) the buyer must "account to the seller for all benefits which he has derived from the goods." The reasoning is not very persuasive. As Prof. Honnold himself recognizes, buyers complaining of defective goods will be most tempted to prefer the restitutionary remedy over a claim in damages where there has been a substantial drop in the market price of the goods, thus forcing the seller to absorb a loss which the contract had allocated to the buyer.
77. The distinction between the seller's real and personal remedies is frequently adopted in Commonwealth textbooks on the law of sales. "Real" remedies are those remedies which the seller has in respect of the goods; "personal" remedies are those which he has against the buyer.
78. Honnold, supra n. 1, sec. 348; Farnsworth, supra n. 18, pp. 249-250; Hellner, supra n. 9, p. 88 and n. 55.
79. S.G.A., s. 49(1) and (2).
80. Llewellyn, Through Title to Contract and a Bit Beyond, 15 N.Y.U.L.Q.Rev. 159, 175 (1938).
81. Honnold, supra n. 1, sec. 348.
82. Farnsworth, supra n. 18, pp. 249-250.
83. See RESTATEMENT (SECOND) OF CONTRACTS, sec. 373(2) (1981); 1 G.E. Palmer, LAW OF RESTITUTION, sec. 4.16 (1978). The right to recover goods in the buyer's hands is not included in the index of seller's remedies in UCC 2-703. However, UCC 2-702 recognizes a limited exception to the basic rule.
84. The preferred purchase money security interest among sellers is the conditional sale agreement, and this is valid at common law without registration. McEntire v. Crossley Bros., Ltd. [1895] A.C. 457 (H.L.). In the U.K., for historical reasons, the hire-purchase agreement is the preferred vehicle. Registration or other perfection requirements are imposed in Article 9 of the Uniform Commercial Code and in the common law Provinces and Territories of Canada. The United Kingdom still has no registration requirements for conditional sale or hire-purchase agreements. However, Part III ofthe Hire-Purchase Act 1964 enables the hirer or conditional buyer of a motor vehicle in prescribed circumstances to pass a good title to a third party. See R.M. Goode and Jacob S. Ziegel, HIRE-PURCHASE AND CONDITIONAL SALE: A COMPARATIVE SURVEY OF COMMONWEALTH AND AMERICAN LAW, ch. I (Brit.lnst.lnt. & Comp. Law, 1965); BENJAMIN'S SALE OF GOODS, 2nd ed., para. 543 et seq.
85. Honnold, supra n. 1, sec. 444; SECRETARIAT COMMENTARY, supra n. 44, Commentary to Art. 66, para. 10.
86. The Swedish position appears to be the same. Hellner, supra n. 9, at p. 95, n. 81. Prof. Hellner describes as "remarkable" the Convention rule allowing the seller to recover his goods even after they have been delivered. Ibid., at p. 94.
87. ULIS, art. 73.
88. See Honnold, supra n. 1, sec. 386.
89. Art. 62(1).
90. Convention, art. 71(1).
91. BOB § 321 ("significant deterioration in the financial position of the other party"), cited in Honnold, supra n. 1, sec. 389.
92. S0A 41(1)(c) (unpaid seller's right to retain goods limited to cases where the buyer becomes insolvent).
93. UCC 2-609(1) ("when reasonable grounds for insecurity arise").
94. UCC 2-609(4).
95. Honnold, supra n. 1, at sec. 394.
96. See infra text at n. 118.
97. See the comparative analysis in REPORT ON SALE OF GOODS, supra n. 32, ch. XVII(A), pp. 532 et seq., and compare E. Allan Farnsworth, CONTRACTS, § 12.12 (Little, Brown & Co., 1982).
98. See Eric E. Bergsten and Anthony J. Miller, The Remedy of Reduction of Price, 27 Am. J. Comp. L. 255 (1979).
99. SGA, ss. 50-51, 53,54.
100. UCC 2-706, -708, -712 to -715, 717-724.
101. Cf. Hellner, supra n. 9, at pp. 98-100.
102. (1854) 9 Exch. 341.
103. See Treitel, supra n. 1, sec. 75, and compare Hellner, The Limits of Contractual Damages in the Scandinavian Law of Sales, 10 Scan. Legal Studies 37 (1966).
104. As, for example, with respect to the buyer's obligation to elect between the recovery of reliance and expectancy damages; the recovery of punitive damages; and the status of liquidated damages clauses. See further REPORT ON SALE OF GOODS, supra n. 32, pp. 503-504, and 423-426, and Farnsworth, supra n. 97, §§ 12.16-12.18.
105. Koufos v. C. Czarnikow Ltd. ("The Heron II"), [1969] 1 A.C. 350 (H.L.).
106. Ibid., at 390.
107. See supra n. 41.
108. As is true for example of the provisions of the British Unfair Contract Terms Act, 1977. See U.K. Acts 1977, c. 50, s. 26.
109. See REPORT ON SALE OF GOODS, supra n. 32, ch. 7(A), and Symposium on Unconscionability in Contract Law, 4 Can.Bus.L.J. 383 (1979-80).
110. As Prof. Honnold points out (supra n. 1, sec. 410, citing Treitel, supra n. 1, § 69), in many legal systems this approach constitutes the preferred basis for recovery.
111. UCC 2-706, 2-712.
112. Section 48(3) of the British Act allows the unpaid seller to resell the goods and to recover damages from the original buyer for any loss occasioned by his breach of contract. Subs. (3) does not indicate whether such damages may be based on the resale price or whether they are governed by the market price test in s. 50(3). "The consensus appears to be in favor of the market price test. See BENJAMIN'S SALE OF GOODS, 2nd ed., para. 1256, and REPORT ON SALE OF GOODS, supra n. 32, vol. 2, p. 402.
113. Art. 76(1).
114. REPORT ON SALE OF GOODS, supra n. 32, pp. 409-410.
115. Hellner, supra n. 9, at pp. 99-100.
116. Honnold, supra n. 1, sec. 415.
117. Ibid., sec. 418.
118. Ibid., sec. 419, pp. 420-421.
119. Cf. Hellner, supra n. 9, at p. 98, and Farnsworth, supra n.18, at pp. 249-50. Prof. Hellner elaborates in detail some of the important consequences that flow from this basic limitation in art. 77.
120. Prof. Farnsworth is particularly critical of the omission. Farnsworth, supra n. 18, at p. 251.
121. Honnold, supra n. 1, sec. 419, p. 421.