Source: http://www.cisg.law.pace.edu/cisg/biblio/offermanns.html
Timestamp: 2017-12-16 08:56:28
Document Index: 31314432

Matched Legal Cases: ['Art. 74', 'Art. 74', 'Art. 74', 'Art. 77', 'Art. 75', 'Art. 76', 'Art. 77', 'Art. 7', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 76', 'Art. 77', 'Art. 76', 'Art. 76', 'Art. 71', 'Art. 75', 'Art. 72', 'Art. 76', 'Art. 76', 'Art. 76', 'Art. 76', 'Art. 76', 'Art. 77', 'Art. 77', 'Art. 76', 'Art. 77', 'Art. 77', 'Art. 76', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 76', 'Art. 76', 'Art. 76', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 76', 'Art. 77', 'Art. 75', 'Art. 75', 'Art. 76', 'Art. 75', 'Art. 76', 'Art. 75', 'Art. 75', 'Art. 76', 'Art. 77', 'Art. 72', 'Art. 76', 'Art. 75', 'Art. 74', 'Art. 77', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 77', 'Art. 74', 'Art. 74', 'Art. 7', 'Arts 16', 'Art. 80', 'Art. 7', 'Art. 74', 'Art. 74', 'Art. 47', 'Art. 77', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 75', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 75', 'Art. 74', 'Art. 76', 'Art. 75', 'Art. 75', 'Art. 76', 'Art. 76', 'Art. 76', 'Art. 76', 'Art. 76', 'Art. 7', 'Art. 77', 'Art. 77', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 76', 'Art. 57', 'Art. 57', 'Art. 76', 'Art. 76', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 76', 'Art. 76', 'Art. 77', 'Art. 77', 'Art. 77', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 76', 'Art. 76', 'Art. 74', 'Art. 75', 'Art. 72', 'Art. 75', 'Art. 75', 'Art. 75', 'Art. 77', 'Art. 77', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 74', 'Art. 7', 'Art.7', 'Art. 7', 'Art. 77']

Reproduced with permission of 10 Vindobona Journal of International Commercial Law & Arbitration (1/2006) 1-14
Damages Arising Out of a Cover Purchase within
the Framework of Articles 74 to 77 CISG
Jennifer Offermanns [a1]
The importance of clarity in the regulation of damages under the CISG
Damage provisions in the CISG: An overview of Articles 74 to 77
Damages and Contract Avoidance: Articles 75 and 76
3.1 Cover purchase is conducted prior to avoidance
3.1.1 Drafting history of Article 76
3.1.2 Further considerations: The influence of Article 77
3.1.1.1 Price increase after cover transaction
3.1.1.2 Price decrease after cover transaction
3.2 Cover purchase is conducted after avoidance
3.2.1 Cover purchase is conducted in an unreasonable manner
3.2.2 Cover purchase contains an open price clause
4.1 Cover purchase is conducted before the breach of contract
4.2 Cover purchase is conducted after the breach of contract
4.2.1 Concrete calculation of damages under Article 74
4.2.2 Effect on the buyer's right to demand contract performance
4.2.3 Effect on the seller's right to perform the contract
4.2.4 Consequences regarding the calculation of damages
1. THE IMPORTANCE OF CLARITY IN THE REGULATION OF DAMAGES UNDER THE CISG
At first sight, the damages provisions contained within the 1980 United Nations Convention on the International Sale of Goods (CISG) seem to regulate claims for performance interest arising out of cover transactions sufficiently and clearly. Practice in international trade law, nevertheless, shows that a wide variety of difficulties can arise in relation to this issue. Since certainty and predictability are the essential elements in effecting the trends of dispute regulation in international sales transactions, clarification in this exceptionally important field of the CISG is necessary. By analysis of the applicable provisions in light of the interpretations given by Courts and legal authorities, a more transparent meaning can be achieved.
2. DAMAGES PROVISIONS IN THE CISG: AN OVERVIEW OF ARTICLES 74 TO 77 CISG
Pursuant to Art. 74 CISG, every loss suffered as a consequence of a breach of contract can be recovered,[1] (including indemnity and expectation interest) to the extent that the [page 1] losses were foreseeable by the breaching party at the time of contract conclusion.[2] Article 74 CISG is thus the prime embodiment of the full compensation principle, seeking to place the injured party in the same position as though the contract had been properly fulfilled.[3] Articles 75 and 76 CISG are lex specialis to Art. 74 CISG and apply where an aggrieved party has avoided the contract and claims damages rather than performance. These provisions are supplemented by Art. 74 CISG in regard to any further damages.[4]
Article 75 CISG provides for the concrete calculation of damages where a cover purchase has been made in a reasonable manner and within reasonable time after avoidance of the contract. It allows the injured party to rely on the difference between the contract price and the price of the substitute transaction.[5] Substitute transactions are reasonable as long as the non-breaching party aims at the lowest possible price under the circumstances, thereby acting in accordance with its duty to mitigate losses pursuant to Art. 77 CISG.[6] Available prices on the market may be relevant to determine whether or not a cover transaction was concluded in accordance with the requirements of this provision.[7]
In cases where a resale or cover purchase did not take place or was not made in accordance with Art. 75 CISG, Art. 76 CISG provides for damages to be calculated abstractly [8] according to the difference between the contract price for certain goods and their market value at the time of contract avoidance.[9] The actual loss suffered under a cover purchase is thereby substituted by its hypothetical equivalent,[10] as the lack of a cover purchase does not change the aggrieved party's need to be compensated for the [page 2] breaching party's non-compliance with its contractual duties.[11]
Finally, Art. 77 CISG establishes the principle of prevention, providing that a party in danger of suffering a loss is expected to undertake all necessary steps, which a creditor acting in good faith pursuant to Art. 7(2) CISG would take,[12] in order to achieve its mitigation.[13] The failure to observe such an incidental obligation leads to a legal detriment for the aggrieved party,[14] providing for a reduction of damages by the amount the loss could have been mitigated.[15]
3. DAMAGES AND CONTRACT AVOIDANCE: ARTICLES 75 AND 76 CISG
Within the context of Arts. 75 and 76 CISG, two particularly difficult situations -- demanding further clarification -- can arise. First, an aggrieved party covers prior to avoidance. Although the requirements of Art. 75 CISG have, strictly speaking, not been met, the aggrieved party has suffered a concrete loss which must be recovered. Second, the substitute is purchased after avoidance, but the cover contract contains an open price clause, depending on the market price developments. Although a party has complied with all requirements set forth by Art. 75 CISG, the loss cannot be calculated concretely.
When dealing in a market with strongly fluctuating prices, it may be appropriate for an aggrieved party to immediately cover the goods it is missing from a late or non-delivery by the contracting partner, before declaring avoidance of the contract. In such cases, calculation of the party's compensation for its losses is uncertain. Article 75 CISG does not provide for the recovery of performance interest whenever avoidance has not been declared prior to the substitute purchase.[16] Article 76 CISG -- although applicable where no cover purchase under Art. 75 CISG has been made -- recalculates the concretely occurred damages abstractly, by referencing the current market price at the time of avoidance.[17] Where the market price has risen, the party claiming [page 3] performance interest would be awarded damages that it never actually suffered. Where the price has unexpectedly decreased, it would be awarded lower damages than the actual loss resulting from the breach. To determine whether Art. 76 CISG can be interpreted more broadly, its drafting history as well as the influence of Art. 77 CISG on its application must be considered.
3.1.1 Drafting history of Article 76 CISG
Article 84(1) Uniform Law on the International Sale of Goods (ULIS) -- the predecessor of Art. 76 CISG -- did not differentiate between 'concrete' and 'abstract' calculation of damages. Whenever the goods had a current market price, the aggrieved party could choose between the methods of calculation.[18] The following Geneva Draft Convention on the International Sale of Goods (Geneva Draft) maintained this position.[19] It allowed abstract calculation where concrete losses had occurred, however with the restriction that a party could 'not rely upon the provisions of Articles 55 Geneva Draft, predecessor of Article 74 CISG, or 56 Geneva Draft, predecessor of Article 75 CISG.[20] This restriction was confirmed in 1977, at the tenth session of the United Nations Commission on International Trade Law (UNCITRAL) in Vienna.[21] Article 72 (draft counterpart of Art. 76 CISG) was thereafter to apply only if the party claiming damages had not made a purchase or resale under Art. 71 (draft counterpart of Art. 75 CISG).[22] Concrete damage calculation was to prevail over abstract calculation, since the latter was more likely to lead to speculative conduct and result in a recovery of loss that had not occurred.[23]
UNCITRAL further modified Art. 72(1) (draft counterpart of Art. 76(1) CISG) on this occasion, providing for recovery of the difference between the original contract price and the current market price at the time the party claiming damages first 'had the right to declare the contract avoided'. It thereby specified a prerequisite to prevent speculation by the aggrieved party at the other party's cost.[24] The CISG Committee later adapted the rule because it considered its application 'uncertain' and wanted to [page 4] prevent the parties from being 'too precipitate in declaring the contract avoided'.[25] Moreover, courts were given too much competence to decide under the wording of the rule,[26] as the decisive point in time was very difficult to determine.[27] Aiming at further prevention and restriction of the risk of speculation by the aggrieved party, the agreed upon new version thus made reference to 'the current market price at the time of avoidance'.
3.1.2 Further considerations: The influence of Article 77 CISG
Even the present wording of Art. 76 CISG is not devoid of the risk of speculative conduct, as the aggrieved party remains capable of choosing the date of avoidance depending on the predicted development of the market price.[28] A delay of avoidance, despite an earlier entitlement to declare it, may for example result in an increased amount of abstractly calculated damages under Art. 76 CISG, if the current market price rose between the time the party was first entitled to avoid the contract and the date it declared avoidance. Similar speculative conduct can arise in case of a decrease in the market price.
In applying Art. 76 CISG, careful consideration must be given to a party's obligation to mitigate losses, as well as the point in time at which mitigating steps could be expected. Mitigation of loss is always obligatory, where such measures are obviously available and reasonable under the circumstances.[29] The appropriate point in time to mitigate losses is generally as soon as it has become possible for a party to foresee a danger of breach and its consequential losses.[30]
3.1.2.1 Price increase after cover transaction
In light of the risks of speculation described above, the development of Art. 76 CISG reveals two positions in regard to how damages should be calculated where the market price increases after the contract is covered prior to avoidance.
First, it has been argued that, although the rule was revised to refer to the market price at the time of avoidance, under certain circumstances the date at which the party could [page 5] first have avoided the contract remains relevant.[31] Second, a cover transaction at a lower price than the current market price at the time of avoidance can be regarded as a reasonable precautionary step towards the mitigation of damages under Art. 77 CISG. Any concrete damages arising out of such transactions must therefore be taken into account, even though the cover purchase was made prior to avoidance.[32]
Although a resale of goods or a substitute purchase after contract avoidance are the most typical measure to mitigate the loss under Art. 77 CISG, other actions may be reasonable, as long as they are appropriate to reduce the damages expected to occur under the breach.[33] It must further be considered that if more effective actions are subsequently found to have been available, the aggrieved party will be held responsible for not having undertaken these steps.[34]
Art. 76 CISG should consequently be calculated concretely, by reference to the actual cover transaction, as long as it is found to have been a mean for the aggrieved party to act in accordance with its duty under Art. 77 CISG.[35] As Professor Peter Schlechtriem has stated: 'Not only the potentially more favorable cover contract, but also -- even more so -- the cover transaction actually concluded under more favorable conditions must be decisive'.[36]
If it can be proven that the aggrieved party deliberately delayed declaration of avoidance in order to increase losses, however, this should be considered a violation of the duty to mitigate losses [37] and must in consequence restrict the loss to the amount of damages which would have occurred if avoidance had been declared earlier.[38] An abstract calculation of damages with reference to the current market price at the date when avoidance was first possible grants an appropriate calculation and results in the entitlement for damages which would have occurred if the aggrieved party had acted in accordance with its duty under Art. 77 CISG.
Such exceptional calculation under Art. 76 CISG is advantageous and appropriate for both parties: any compensation is automatically limited to the amount that a party claiming damages has actually suffered, or would have suffered, if it had acted in accordance with Art. 77 CISG. If measuring abstractly, by reference to the point of time when avoidance could first have been declared, any speculative conduct in regard [page 6] to the most advantageous avoidance date is precluded. Taking concrete losses arising out of an actual cover purchase into account, as long as the transaction was a mean to mitigate the loss, furthermore corresponds with the duty under Art. 77 CISG and allows the aggrieved party to take all appropriate steps to reduce damages. The compliance with Art. 77 CISG thereby influences the claim and not only the quantum of damages. Inconveniences for both parties can be reduced, even though the appropriate action was required and necessary before the contract was avoided.
3.1.2.2 Price decrease after cover transaction
A precautionary cover transaction may be disadvantageous, whenever the market price of the goods unexpectedly decreases. Such substitute purchase cannot, generally, be regarded as a measure to mitigate the loss under Art. 77 CISG. The exceptional concrete calculation according to Art. 76 CISG is therefore inappropriate. Nevertheless, Art. 76 CISG remains applicable, calculating the damages resulting out of the cover transaction abstractly by referencing the lower standard market price at the time of avoidance.[39] Pursuant to the principle of full compensation, granting such damages despite the lack of success of the action to mitigate the loss is appropriate, as long as it was reasonable under the circumstances.[40] Where damages are suffered in consequence of another party's breach, they are thus recoverable under Art. 76(1) sentence 1 CISG.[41]
A mitigation of loss can exceptionally be achieved in case of a decrease in the market price, where the hypothetical damages -- suffered if no substitute goods had been purchased -- would have exceeded the loss resulting out of the cover purchase concluded at a higher price. This can be the case where the non-breaching party would -- had it not conducted the substitute purchase at the specific point in time -- have suffered production cessation and loss of customers and reputation, leading to immense consequential damages. In such cases, an immediately conducted cover transaction is reasonable and mitigating, despite an anticipated price decrease on the market.[42]
Where a cover purchase is conducted after avoidance of the contract has been [page 7] declared, the time requirement of Art. 75 CISG is fulfilled. Nevertheless, problems regarding the applicable damages provision can particularly arise where a cover purchase was conducted at a price largely exceeding the current market price, or where the cover contract contained an open price clause.
Whereas conducting a substitute transaction in a reasonable manner pursuant to Art. 75 CISG does not require the covering party to carry out extensive investigations with regard to available prices, it is nevertheless expected to close the most advantageous deal possible under the circumstances. In any case, it should not cover at a price greatly differentiating from the current market price,[43] as such a purchase is justifiable only under exceptional circumstances.[44] Though an aggrieved party who unsuccessfully tries to comply with Art. 75 CISG should not completely lose its right to recover damages, it cannot be entitled to compensation for avoidable losses that occurred unreasonably.[45]
In such cases, the reasonable manner requirement of Art. 75 CISG might be found not to have been fulfilled, rendering this provision inapplicable.[46] Damages must then be based on the 'current price' formula provided by Art. 76 CISG.[47] A different opinion assumes that the unreasonableness of the cover transaction is compensated by the will to mitigate losses under Art. 77 CISG, and proposes the application of Art. 75 CISG.[48] According to this view, the awarded damages are to be proportionately reduced by the amount which could have been saved by purchasing at an appropriate price, e.g. the current market price. As both methods of calculation lead to the same result, and the wording of Art. 75 CISG strictly precludes its application in cases of an unreasonable cover purchase, calculation under Art. 76 CISG is favourable.[49]
The applicability of Art. 75 CISG is further questionable, where the price of a cover purchase conducted within reasonable time after avoidance is measured according to the current market price at a later point in time, e.g. when delivery takes place. In such cases, the arguments raised by the parties will again depend on the upward or [page 8] downward trend of the market price. Whenever the price for the commodities has increased, the party in breach will refer the aggrieved party to Art. 76 CISG and the lower current market price at the time of avoidance. The aggrieved party will rely on Art. 75 CISG, on the basis of the higher concrete loss it has suffered. Opposite arguments will be used, whenever the prices have decreased after the contract has been avoided. An open price clause therefore creates space for speculative conduct and uncertainty as to how the damages that might arise out of it can be recovered. As the covering party chooses the kind of substitute transaction it enters into, and can therefore limit the risk of price increases by covering at a fixed price, the danger of increasing damages must be carried by this party.[50] If it decides to take the risk, the party may gain or lose from the fluctuating market prices.
Whenever the open price is determined at a point in time where the current market price has unexpectedly risen, Art. 75 CISG is inapplicable as the cover purchase is conducted at a higher price than necessary and thus not in a 'reasonable manner'.[51] Under these circumstances, abstract calculation according to Art. 76 CISG prevails, referring to the current market price at the time of avoidance.[52] The aggrieved party will not be compensated for the additional loss suffered through its risky behavior, since these damages did not occur in consequence of the breach by the other party.[53] On the other hand, if the market price decreases until the open price is determined, a party may profit from its speculations.[54] Such behavior does not violate Art. 77 CISG, since this provision does not include an obligation to speculate on lower prices at a later point of time, rather aiming at a most advantageous price at the time of covering the contract.[55]
When a party declares avoidance of contract, it clarifies that it no longer wishes to be bound by the contract and intends to seek an alternatives.[56] However, when a party has not declared avoidance and thus continues to desire contractual fulfillment, it is uncertain whether and when it is able to recover damages for performance interest at all. Two situations will be examined, distinguished by whether or not the breach of contract has occurred at the time of the substitute transaction. [page 9]
Conducting a cover purchase before a contract has been breached may be a reasonable precautionary step [57] where prices are increasing and the party anticipates a breach by its contracting partner, even if the probability of a breach is insufficient for an anticipatory one in relation to Art. 72 (1) CISG. Depending on the development of market prices and the circumstances regarding the breach, undertaking the cover transaction might even turn out advantageous for the aggrieved party. If the precaution turns out to be needless because the other party fulfills its contractual obligations as promised, the costs of the cover transaction cannot be recovered under the CISG. However, if the party indeed fails to perform the contract, the aggrieved party may profit from its precaution and - after avoiding the contract - claim damages abstractly under Art. 76 CISG at a higher market price. It could also claim damages for a cover purchase concluded at a higher, but current market price after avoiding the contract under Art. 75 CISG.[58] The party in breach may not count on a precautionary step of its contractual partner, who took over the risk of loss, and thereby mitigate the amount of damages it has caused by the non- or late performance.[59]
An aggrieved party may face the need to conduct a cover purchase, even where a breach lacks fundamentality, and the party is not entitled to declare avoidance. Such a situation may arise, where an additional period of time set by the buyer has not expired, but the duty and will to mitigate losses demands an immediate cover purchase. It must be determined whether concrete damages arising out of such transactions are recoverable, although avoidance has not been declared and performance can still take place.
4.2.1 Concrete calculation of damages under Article 74 CISG
Article 75 CISG -- generally exclusively applicable to concrete losses arising out of cover transactions -- is inapplicable due to the lack of avoidance.[60] For several reasons, damages must instead be recoverable under Art. 74 CISG. First, a prudent and careful businessperson cannot be expected to refrain from making a cover purchase until a breach becomes fundamental if it is in danger of suffering substantial losses before this point, e.g. through the cessation of its entire production. Second, a cover purchase may be a reasonable step to mitigate arising damages in the sense of Art. 77 CISG.[61] [page 10] Liability is naturally restricted to loss which the party in breach foresaw, or ought to have foreseen, at the time of contract conclusion.[62] Third, awarding damages under Art. 74 CISG would grant an appropriate recovery for expectation interest in accordance with the principle of full compensation. This was found in particular by the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry on 16 March 199, holding the difference between the contract price and the substitute purchase price to be recoverable under Art. 74 CISG, although avoidance had not been declared.[63] Other courts applied Art. 74 CISG similarly, although without specifically referring to the term 'damages for performance interest' and rather applying the concrete calculation under this provision impliedly.[64] Similar application is recommended by a large number of legal authorities.[65] Consequently, damages arising out of a cover purchase can be concretely calculated under Art. 74 CISG.
Although awarding damages under Art. 74 CISG without prior avoidance circumvents the requirements of Arts. 49(1), 26 and 81 CISG, avoidance as an essential prerequisite of Arts. 75, 76 CISG is not undermined. Granted the possibility to claim performance interest without prior avoidance, an aggrieved party is given more freedom to act in accordance with its duty under Art. 77 CISG. This should be advantageous for both parties, since risks of production cessation or the inability to fulfill contracts with third parties can be mitigated at an earlier point in time. Furthermore, the high threshold for avoidance is not intended to complicate the process of mitigating losses, but rather to prevent costly acts of unwinding contracts, e.g. restitution of delivered goods.[66] Where damages are claimed under Art. 74 CISG, rather than performance, the parties have no interest in the protection offered by an avoidance threshold. Rather than relieving the parties, proceedings would be complicated and resolution delayed. Consequently, damages arising out of a cover purchase are recoverable under Art. 74 CISG, even where the breach has not yet become fundamental and avoidance has not been declared.
Article 74 CISG -- as well as allowing a claiming party to recover its performance interest without prior avoidance of the contract -- theoretically enables the party to demand further fulfillment of the contract afterwards. Exercising this right would, however, lead to double reimbursement and thereby defy the principle of full [page 11] compensation. As the CISG itself does not provide any solutions in this regard, recourse must be had to 'the general principles on which it is based' pursuant to Art. 7(2) CISG.
According to Professor Schlechtriem, one such general principle can be derived from Arts 16(2)(b) and 29(2) CISG.[67] Both provisions refer to circumstances where one party has relied on the conduct or declarations of the other party. Article 16(2)(b) CISG protects the offeree from a revocation of an offer whenever it has reasonably relied on it being irrevocable. Article 29(2) CISG precludes a party, by its conduct, from asserting a provision, to the extent that the other party has relied on that conduct.
The same underlying premise can be found in Arts. 46(1) and 62 CISG, which bar the parties from requiring performance whenever they have 'resorted to a remedy which is inconsistent with this requirement'. Further examples are Arts. 47, 50 sentence 2 CISG and more generally Art. 80 CISG.
These provisions prevent a party from contradicting previous conduct on which the contracting partner has reasonably relied. Thereby, they establish the principle of prohibition of venire contra factum proprium, generally derived from Art. 7(1) CISG.[68] Courts have treated non-observance of this principle as a violation of the principle of good faith.[69] The problem arising out of the specific application of Art. 74 CISG should be resolved in a similar way. Where an aggrieved party claims damages instead of performance, it must be barred from insisting on specific performance afterwards whenever the party in breach has relied on the aggrieved party's first demand. Allowing a claim for specific performance would be in contradiction to the aggrieved party's earlier conduct and therefore violate the principle of prohibition of contradictory behavior.[70]
It is further to be determined how a cover purchase itself -- without an immediate claim for performance interest under Art. 74 CISG -- affects the right of the seller to perform the contract. Where a cover purchase is conducted before the expiry of an additional period of time set by the buyer according to Art. 47 CISG, the seller cannot be deprived of its right to fulfill the contract. The buyer has not declared a loss of interest in performance, neither by avoiding the contract nor by claiming damages. In contrast to a claim for performance interest, a cover contract does not have any impact on the seller's right to deliver the goods, since the buyer remains bound by its duty to take delivery and pay the agreed upon price under Arts. 53, 60 CISG.[71] The buyer may [page 12] also be obligated to use the goods for its production [72] or resell the excess goods at the best possible price [73] in order to mitigate its losses under Art. 77 CISG. Nevertheless, if the cover transaction was necessary and reasonable at the particular point in time it was conducted, the buyer may claim the damages arising out of it. Such damages are consequential to the other party's breach [74] and therefore constitute damages in addition to, and not instead of, performance, so long as they were foreseeable (Art. 74(2) CISG).
When calculating damages under Art. 74 CISG, any performance that has already taken must be considered in order to find a fair and appropriate solution for both parties. If, for example, the aggrieved party has already paid the price and the other party has not delivered until damages are claimed, the party in breach must keep the money paid and compensate the buyer in the amount of the price paid for the cover transaction.
If the price has not yet been paid, the aggrieved party may only recover the difference between the contract price and the price paid for the cover transaction. The value of goods already delivered by the party in breach, for example resulting out of resale or utilisation, must in consequence also be taken into account.[75] The calculation of damages under Art. 74 CISG, without avoidance of the contract, is therefore similar to the calculation under Art. 75 CISG and results in an easier, reasonable and fair recovery of damages in cases where a party is forced to cover the contract immediately.
In order to cover the wide variety of situations that can arise in international business transactions, the provisions of the CISG must sometimes be applied in the broadest way possible and in connection with general principles of law. Cover purchases conducted without prior declarations of avoidance or even fundamentality of a breach are just some of the problems that can arise in uncountable varieties. Although such situations are not all expressly covered by Arts. 74 to 77 CISG, the CISG can nevertheless deal with them in justifiable, alternative ways.
Where a party acts in a reasonable, unspeculative and professional manner, especially undertaking all reasonable measures to mitigate any potential losses at all times, it must be able to rely on the provisions and concepts of the CISG to prevent it from suffering a disadvantage in a potential dispute and enable it to recover its performance interest. Although the damages provisions within the CISG are not fully developed in [page 13] this regard, they contain the potential to provide for a fair resolution of disputes in a great variety of cases. [page 14]
a1. Jennifer Offermanns participated in the 2005 Vis Moot Competitions as part of the Ludwig Maximilians-Universitat, Munich team.
1. Secretariat Commentary, Art. 74 � 3, available at: <www.cisgonline.ch/cisg/materials/commentary.html>; Knapp, V. in Bianca, C. and Bonell, M. J., Commentary on the International Sales Law. The 1980 Vienna Sales Convention, 1987, Giuffré, Milan, Art. 74 � 3.14; Honnold, J., Uniform Law for International Sales under the 1980 United Nations Convention, 1999, Kluwer, Netherlands, Art. 74 � 403; Magnus, U. in Staudinger, J., Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen. Wiener UN-Kaufrecht (CISG) (BGB Commentary), 1999, de Gruyter, Berlin, Art. 74 � 16.
2. Magnus, U., supra fn 1, Art. 74 � 20; Stoll, H. in Schlechtriem, P., Commentary on the UN Convention on the International Sale of Goods, 1998, C. H. Beck, Munich, Art. 74 � 2; Karollus, M., UN-Kaufrecht. Eine systematische Darstellung für Studium und Praxis (UN Sales Law), 1991, Springer, Wien et. al., at p. 214.
3. Stoll, H. supra fn 2, Art. 74 � 2; Karollus, M., supra fn 2 at p. 213.
4. Magnus, U. supra fn 1, Art. 75 � 5; Lüderitz, A. and Dettmeier, M. in Soergel, H. T., Bürgerliches Gesetzbuch: Mit Einführungsgesetz und Nebengesetzen (CISG) (BGB Commentary), 2000, Kohlhammer, Stuttgart et al., before. Art. 74 � 1; Stoll, H. and Gruber, G. in Schlechtriem, P. and Schwenzer, I., Kommentar zum Einheitichen UN-Kaufrecht (CISG Commentary), 2004, C. H. Beck, Munich, Art. 76 � 1.
5. Honnold, J., supra fn 1, � 410; Karollus, supra fn 2, at p. 218; Stoll supra fn 2, Art. 75 � 2.
6. Lüderitz, A. and Dettmeier, supra fn 4, Art. 75 � 5.
7. Honnold, J., supra fn 1, � 410.
8. Knapp, V., supra fn 1, Art. 76 � 2.3.
9. Karollus, M., supra fn 2, at p. 221.
10. Chengwei, L., Remedies for Non-performance: Perspectives from CISG, Unidroit Principles & PECL, 2003, Pace Database, available at: <http:// www.cisg.law.pace.edu/cisg/biblio/chengwei.html#fulltext>; � 15.3.1; Schlechtriem, P., The UN-Convention on Contracts for the International Sale of Goods, 1986, Manz, Vienna, Arts. 74-76, at p. 98.
11. Magnus, U., supra fn 1, Art. 76 �� 1, 6; Stoll, H. and Gruber, G. supra fn 4, Art. 76 � 1; Schönle, K. in Honsell, H., Kommentar zum UN-Kaufrecht. Übereinkommen der Vereinten Nationen über Vertäge über den Internationalen Warenkauf (CISG Commentary), Art. 76 � 2; Knapp, V. supra fn 1, Art. 76 � 2.1.
12. OGH 6 February 1996 (Austria); Ryffel, G., Schadensersatzhaftung des Verkäufers nach dem Wiener Übereinkommen über internationale Warenkaufverträge vom 11. April 1980 (Damages under the CISG), 1992, Peter Lang, Bern et al., � 9� I; Honnold, J., supra fn 1, Art. 7 �101.
13. Knapp, V., supra fn 1, Art. 77 � 2.1.
14. Magnus, U. supra fn 1, Art. 77 � 5.
15. Piltz, B., Internationales Kaufrecht. Das UN-Kaufrecht in Praxisorientierter Darstellung (CISG), 1993, C. H. Beck, Munich, � 5 � 455.
16. Schönle, K. supra fn 11, Art. 75 � 4; Magnus, U. supra fn 1, Art. 75 � 6; Stoll, H. supra fn 1, Art. 75 � 2.
17. Knapp, V., supra fn 1, Art. 76 � 2.3.
18. Dölle, H., Kommentar zum Einheitlichen Kaufrecht. Die Haager Kaufrechtsübereinkommen vom 1. Juli 1964 (Hague Convention), 1976, C. H. Beck, Munich, before Arts. 84-87 � 11; Tunc, A., Commentary on the Hague Conventions of the 1st of July 1964 on International Sale of Goods and the Formation of the Contract of Sale, � IV B, available at: http:// www.cisg.law.pace.edu/cisg/biblio/tunc.html.
19. Commentary on the Draft Convention on the International Sale of Goods, p.136 Art. 57 � 3, available at: http:// www.uncitral.org/english/yearbooks/yb-1976-e/vol7-p96-142-e-pdf.
20. Draft Convention on the International Sale of Goods, p. 95 Art. 57, available at: <http://www.uncitral.org/english/yearbooks/yb-1976-e/vol7-p89-96-e.pdf>.
21. Schlechtriem, P., Damages, Avoidance of the Contract and Performance Interest under the CISG, at p. 9, � II 1, available at: <http://www.cisg-online.ch/cisg/Schlechtriem_Damages_Avoidance.pdf>.
22. Secretariat Commentary Art. 76 � 3.
23. Secretariat Commentary Art. 76 � 3.
24. Schlechtriem, P., supra fn 10, Arts. 74-76, at p. 98.
25. Summary Records of the Plenary Meetings, 10th meeting �� 38, 39, available at: <http://www.cisg.law.pace.edu/cisg/plenarycommittee/summary10.html>.
26. Schlechtriem, P., supra fn 10, Arts. 74-76 p. 98.
27. Summary Records of Meetings of the First Committee, 30th meeting � 28, available at: <http://www.cisg.law.pace.edu/cisg/firstcommittee/Meeting30.html>.
28. Ryffel, G., supra fn 12, � 8 � I 1.
29. ICSID Arbitration Case SCH-4366; OLG Celle 2 September 1998 (Germany); OLG Düsseldorf 13 September 1996 (Germany); OLG Hamm 22 September 1992 (Germany); OLG Munich 8 February 1995 (Germany); Stoll, H. and Gruber, G supra fn 4, Art. 77 � 9; Piltz, B., CISG, � 5 � 428; Lüderitz, A. and Dettmeier, M. in Soergel, H. T., supra fn 4, Art. 77 � 4; Magnus U. supra fn 1, Art. 77 � 11; Secretariat Commentary Art. 77 � 4.
30. Honnold, J., supra fn 1, � 419.
31. Summary Records of Meetings of the First Committee, 30th meeting � 48.
32. Schlechtriem, P., supra fn 21, at p. 9 � II 1.
33. Nova Tool & Mold Inc. v. London Industries Inc. (Canada); Knapp, V. supra fn 1, Art. 77 �� 2.2 et seq.; Magnus, U. supra fn 1, Art. 77 �1.
34. OGH 6 February 1996 (Austria); OLG Braunschweig 28 October 1999 (Germany); LG Darmstadt 9 May 2000 (Germany); ICC 7585; Stoll, H. and Gruber, G. supra fn 4, Art. 77 � 2; Piltz, B., CISG, � 5 � 459.
35. OLG Hamm 22 September 1992 (Germany).
36. Schlechtriem, P., supra fn 21, at p. 12 � II. 3; see also: Summary Records of Meetings of the First Committee, 30th meeting � 48.
37. Ryffel, G., supra fn 12, �8 � I 1.
38. Knapp, V., supra fn 1, Art. 77 � 3.10; Karollus, M., supra fn 2, at p. 225; Stoll, H. and Gruber, G. supra fn 4, Art. 77 � 9; Piltz, B., supra fn 15, �5 � 457.
39. Chengwei, L., supra fn 10, � 15.3.1; Enderlein, F. and Maskow, D., International Sales Law. United Nations Convention for the International Sale of Goods, Art. 76 ��1 et seq., available at: www.cisg.law.pace.edu/cisg/biblio/enderlein.html; Lookofsky, J., The 1980 United Nations Convention on Contracts fort he International Sale of Goods, 2000, Kluwer Law International, The Hague, Art. 76 � 293.
40. Knapp, V., supra fn 1, Art. 77 � 2.6.
41. Schlechtriem, P., supra fn 21, at pp. 12, 13 � II 3.
42. OLG Hamburg 28 February 1997 (Germany); LG Berlin 30 September 1992 (Germany); ICARFCCI 9 September 1999; see generally: BGH 25 June 1997 (Germany); Knapp, V. supra fn 1, Art. 77 � 2.2; Witz, W. and Salger, H. C. and Lorenz, M., Internationales Einheitliches Kaufrecht. Praktiker-Kommentar und Vertragsgestaltung zum CISG (CISG Commentary), 2000, Recht und Wirtschaft, Heidelberg, Art. 77 � 8.
43. Lüderitz, A. and Dettmeier, M. supra fn 4, Art. 75 �� 7, 11.
44. Stoll, H. supra fn 2, Art. 75 � 7.
45. Honnold, J., supra fn 4, Arts. 75, 76 � 414.
46. Knapp, V. supra fn 1, Art. 75 � 2.1; Stoll, H. supra fn 2, Art. 75 � 2; Secretariat Commentary Art. 75 � 6; Enderlein, F. and Maskow, D., supra fn 39, Art. 75 � 2.
47. ICC 6281; Lüderitz, A. and Dettmeier, M. supra fn 4, Art. 75 � 8; Honnold, J., supra fn 1, Arts. 75, 76 � 414; Piltz, B. supra fn 15, � 5 � 432; Sutton � III B 3; Witz, W. and Salger, H. C. and Lorenz, M, CISG Commentary, Article 75 � 3; Magnus, U. supra fn 1, Article 75 � 20.
48. Schönle, K. supra fn 16, Art. 75 � 15; Stoll, H. and Gruber, G. supra fn 4, Art. 75 � 9.
49. OLG Hamm 22 September 1992 (Germany).
50. Schlechtriem, P., supra fn 21, at p. 16 � IV b.
51. See generally: Lookofsky, J., supra fn 4, Art. 75 � 291; Secretariat Commentary Art. 75 � 4.
52. Knapp, V. supra fn 1, Art. 76 � 2.3; Enderlein, F. and Maskow, D., International Sales Law, Art. 76 � 3; Piltz, B., CISG, � 5 � 432.
53. Secretariat Commentary Art. 74 � 3.
54. Schlechtriem, P., supra fn 21, p. 16 � IV b.
55. Knapp, V. supra fn 1, Art. 75 � 2.4.
56. Piltz, B., supra fn 15, � 5 � 428.
57. Knapp, V. supra fn 1, Art. 72 � 2.2.
58. Schönle, K. supra fn 11, Art. 75 � 4, 5.
59. Schlechtriem, P., supra fn 21, at p. 15 � II. 5.
60. Schönle, K. supra fn 11, Art. 75 � 4; Stoll, H. supra fn 2, Art. 75 � 2.
61. Stoll, H. and Gruber, G. supra fn 2, Art. 77 � 1; Knapp, V. supra fn 1, Art. 77 � 2.1.
62. Ryffel, G., Damages under the CISG, �7 � I; Piltz, B., supra fn 15, � 5 �425.
63. ICARFCCI 16 March 1995.
64. Xiamen Intermediate People's Court 31 December 1992; OGH 06 February 1996 (Austria).
65. Magnus, U. supra fn 1, Art. 74 � 20; Karollus, M., supra fn 2, at p. 214; Schönle, K. supra fn 11, Art. 74 � 14; Witz, W. and Salger, H. C. und Lorenz, M., CISG Commentary, Art. 74 � 12; Knapp, V. supra fn 1, Art. 74 � 3.1.
66. Schlechtriem, P., Decisions of the Bundesgerichtshof, �III 1, available at: <http://cisgw3.law.pacce.edu/cisg/biblio/schlechtriem3.html>.
67. Schlechtriem, P., supra fn 21, at p. 4 � I.b.
68. Piltz, B., supra fn 15, � 2 �170; Magnus, U. supra fn 1, Art. 7 � 25; Honnold, J., supra fn 1, Art.7 � 99; Ferrari, F. in Schlechtriem, P. and Schwenzer, I., CISG Commentary, Art. 7 �50.
69. ICSID Arbitration Case SCH-4366; ICC 8786.
70. Schlechtriem, P., supra fn 21, at p. 4 � I. b.
71. Sevón, L, 'Obligations of the Buyer under the UN Convention on Contracts for the International Sale of Goods', �3.1, available at: <http://www.cisg.law.pace.edu/cisg/biblio/sevon1.html>.
72. Stoll, H. and Gruber, G. supra fn 4, Art. 77 � 7, Ryffel, G., supra fn 52, � 9 � II.
73. Iran-United States Claims Tribunal 28 July 1989.
74. Schlechtriem, P., supra fn 21, at p.4 � I. a.
75. Schlechtriem, P., supra fn 21, p.6 � I.e.