Abstract:

The object of this essay is to study the legal regime of "defective performance", comparing the contexts of the Brazilian Law and the Convention on Contracts for the International Sale of Goods, in order to identify how each of these legal frameworks deals with the issue of performance's non-conformity -- in regard to both its general applicability and buyer's remedies -- considering the Convention's applicability in Brazilian Courts.

Outline:

1. Introduction
2. Characterizing defective performance in contracts for the sale of goods: a breach of contract category
   2.1. Categories of defective performance
          2.1.1. Violation of the principle of punctuality
          2.1.2. Other categories of defective performance
   2.2 Defective performance under the Brazilian Civil Code
          2.2.1. Characterizing defective performance under the Civil Code
          2.2.2. Redhibitory defects: a special defectiveperformance category
          2.2.3. Liability arising out of defective performance
3. Characterizing defective performance in the 1980 United Nations Convention on Contracts for the International Sale of Goods
   3.1. The Convenion's defective performance legal model
           3.1.1. Defective performance as breach of contract
           3.1.2. Autonomy and specificity in the treatment of defective performance: scope
           3.1.3. Creditor's options in the case of breach of contract resulting from defective performance
   3.2. Aspects that liken the Convention's model to Brazilian law
           3.2.1. Comparing legal models
           3.2.2. Justifying the possibility of reception of the Convention's model
4. Conclusion
5. Bibliography

INTRODUCTION

"Ninguna nación puede ser tãn vanidosa que pretenda
poseer toda la sabiduría y toda la excelsitud.
Ninguna nación es tan humilde como para que sus costumbres,
sus leyes e sus normas no ofrezcam muchas
cosas instructivas, y algo digno de imitación."
(Joseph Story) [1]

The present essay [2] aims at analyzing the concept of defective performance in contracts for the international sale of goods. The paradigm to carry out this analysis is the United Nations Convention on Contracts for the International Sale of Goods, signed in Vienna on April 11, 1980.[3] This important Convention is deemed to be the uniform law on the matter.[4]

The election of the Vienna Convention as a paradigm for the comparative analysis as to Brazilian law derives from the fact that this Convention provides for several categories of lack of performance of obligations under contracts for the sale of goods, including defective performance. Moreover, the Convention is "an effective legal instrument in the process of harmonization of economic transactions among different countries"[5].

The defective performance categoryis deemed to be an intermediary category (tertius genus) in the breach of contract doctrine, and most part of civil law codifications are limited to providing for, or distinguishing between, only two breach of contract categories: non-performance and late performance. In Brazil both the 1916 Civil Code and the 1850 Commercial Code, though strongly influenced by the 18th century legal ideas that did not consider such breach of contract category, provided for defective performance.[6] The new Civil Code [7] modifies the treatment given to the matter by reformulating the language of art. 1.056 of the 1916 Civil Code without excluding, however, the possibility of that breach category as far as performance contracts are concerned.

The Vienna Convention expressly provides for the availability of a defective performance claim. The claim derives from obligations imposed on the parties and particularly the duty to preserve the goods (an issue that will be dealt with later on). Such framework appears to be an important tool for our analysis, in part because the Convention aims at achieving wide applicability. The Convention has a mechanism that may render it applicable, even though the contracting parties are based on States that have not ratified it: Art. 1(1)(b)[8] provides for its applicability when the rules of private international law lead to the application of the law of a Contracting State.[9]

Brazil has not adhered to the 1980 Vienna Convention yet.[10] Nonetheless, pursuant to rules on applicable law as to obligations and contracts provided for in the Introduction to the Civil Code Act (art. 9 and 9(2)),[11] the Convention may be applicable in Brazil because either the contract was concluded in a Contracting State or the party proposing the contract has his place of business in a Contracting State.[12]

Art. 2 of Brazil's Arbitration Act also allows such possibility. That article, moreover, when providing for the criteria to be used by arbitrators in dispute references -- which may be settled either at law or in equity -- determines that the parties may freely elect the rules applicable to the case, provided that the elected rules are no contrary to good morals and public policy.[13]

In the light of such application possibility, the matter gains particular relevance, as one considers that Brazil is taking part in the integration process established by the Asunción Treaty, and that Argentina, Uruguay and Chile (the former two countries being members of, and the latter an associate to, MERCOSUR)[14] are signatories to the Vienna Convention (which is currently in force in the respective legal systems).[15]

The Buenos Aires, July 23, 1998 Agreement on International Commercial Arbitration (Council Decision 3/1998)[16] is already effective as within the economic area created by the Asunción Treaty. That agreement deals exclusively with international arbitration between private parties. It allows the parties to elect the law applicable to dispute settlements based on private international law as well as international trade law. If the parties remain silent as to the issue, the arbitrator has to decide in accordance with those principles (art. 10). From this another possibility for the Vienna Convention's applicability in Brazil ensues.

The possibility of application [17] is reinforced by the fact that Brazil has signed the Inter-American Convention on the Law Applicable to International Contracts, developed in the Fifth Inter-American Conference on Private International Law, held in Mexico in 1994. That Convention provides for the parties' election of the law applicable to their contract, unless they have their places of business in one of the signatory States.

Moreover, according to recommendation issued by the Fourth Inter-American Conference on Private International Law (Resolution 2/1989), the adherence to the Vienna Convention by States parties to the Organization of American States could, as recited by one commentator,[18] "be a factor of harmonization and prevention of antinomies not only within MERCOSUR's scope, but also in relation to other countries and economic integration areas with which Brazil currently negotiates."[19]

Finally, it is important to point out that Brazil recently adhered to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, June 10, 1958) through Decree 4.311 of July 23, 2002, enacting the Convention with no reservations. The adherence to that important Convention allows the enforcement of an arbitral award entered against a contracting party whose place of business is in Brazil. This fact also stresses the need for a better understanding of the Uniform Law on international sale of goods by the Brazilian business and legal community.

In the light of such considerations, the comparative analysis of the defective performance legal doctrine as treated in both the Convention and Brazilian law may lead to the appreciation of how each one of these schemes deals with the issue of a non-conforming performance, particularly in relation to the cases to which it applies and its legal effects.[20]

The analysis may, therefore, enable us to verify comparatively the advantages that each scheme may offer, as well as the language employed in each one of them and the respective scope of application. It should be considered that one and the same concept may be presented in different standards, conceived in distinct times in history, and the principles underlying each scheme may operate each in a particular way.

Emerging as an intermediary category in the breach of contract doctrine, the defective performance affirms its autonomy and comprises a number of cases that have one treatment under the Convention and another under Brazilian law.

The Convention, pursuing an enhanced legal scheme (that, in a sense, evolves from the 1964 Hague Conventions) is in line with current trends in including defective performance cases within the wider notion that is conveyed by the word conformity (art. 35).

In Brazilian law, the new Civil Code regulates the matter only in specific rules relating to redhibitory defects as far as bilateral contracts are concerned (art. 441 et seq.) and relating to eviction as to contracts that involve transfer of ownership, possession or use of property (art. 447 et seq.).[21]

But even if the delivery of goods that are not free from rights of third parties could be deemed as a case of defective performance, this issue will not be included within the scope of this essay; it is regulated specifically in art. 447 et seq.

Before the Civil Code of 1916 was enacted, the Commercial Code of 1850 included provisions on redhibitory defects in commercial sale contracts (arts. 210 & 211). The rules established by such provisions are not much different from those included in the 1916 and 2002 Civil Codes.[22]

It is convenient, at this point, to define defective performance, and to point out its constitutive elements.

Karl LARENZ [23] defines it as the contractual obligation that was performed in a neglectful, inadequate manner that caused damage to the creditor. On the other hand, the scholar considers the scope of the defective performance doctrine to be limited to cases in which the main obligation is "mis-performed", excluding from its scope "mis-performances" relating to obligations that are incidental to the duty of care (or duty of protection, as named by Heinrich STOLL).[24]

As an example of defective performance, LARENZ alludes to a case where a contractor executes the renovation of a roof in such a terrible way that, as the first rain comes, considerable damage to the creditor's furniture are caused by the water. As an example of a breach of ancillary duties resulting from the contractual relation, the scholar comes up with the well-known incident where the constructor restores a wooden roof as contracted, performing fully and exactly the obligation. However, stepping down from the roof, he lights up a matchstick and, due to carelessness, ends up burning up the just renovated roof.

Mário J. de ALMEIDA COSTA conceives defective performance as an inexact performance, whose "damages do not arise out of omission or delay in fulfilling the obligation, rather of defects and deficiencies in the performance itself -- performance which is carried out but not in the way it should have been".[25]

Differently from LARENZ, ALMEIDA COSTA understands that the defective performance doctrine is not limited only to the main obligation, but encompasses also ancillary duties. He adds that the performance is defective where there occur a particular type of damage to the creditor -- damage which "he would not sustain had the debtor not performed the promise; in other words, non-performance or late performance would not cause such damages."[26]

PONTES DE MIRANDA asserts that "the promise may not be rendered or may lack conformity when rendered, then the act of rendering constituting bad performance."[27]

Orlando GOMES, discussing the positive violation of credit doctrine, states that: "the defective performance doctrine, as ZITELMANN conceives it to be, is applicable in a situation in which the debtor does not perform at the place and in the way contracted for. One performs badly the obligation as she does not abide by agreed-on terms and conditions concerning the manner of performance. Those who so act violate at once credit."[28]

Pursuant to Véra FRADERA, "a bad, unsatisfactory, or defective, performance is that in which there was lack of attention as to the ancillary duties deriving from the principle of good faith, duties which are part of the object devised by the contract, which are a 'plus' to which such object relates to."[29]

An important definition is suggested by Ruy Rosado de AGUIAR JÚNIOR, when defining defective performance as an "imperfect performance". The scholar states that "the imperfect performance doctrine encompasses all contractual breaches relating to unsatisfactory or incomplete performance that gives rise to a ranging degree of dissatisfaction on the creditor's part. It presupposes that the performance is carried out, but not as agreed."[30]

He also, in opposition to LARENZ, thinks that the defective performance doctrine encompasses not only the main obligation but also ancillary duties, affecting indirectly the main obligation.[31]

Araken de ASSIS, as PONTES DE MIRANDA, calls defective performance bad performance, affirming that "the designation itself makes it evident that the obligor did perform, but -- and this defines the problem -- did so incorrectly."[32]

Following ALMEIDA COSTA, ASSIS asserts that the lack of conformity between the conduct effectuated and the proper conduct does not lie on the identity or quantity of performance, because, if so, it would be characterized as a partial breach of the contract. However, from the proposition that the "breach of the contract encompasses, in the case, collateral and ancillary duties",[33] it seems that the doctrine is only applicable to duties ancillary to the main obligation, excluding from its scope the main obligation.[34]

Pedro R. MARTINEZ offers a complete notion; to him, every time the debtor performs her obligation in disagreement with the principles that govern the obligation's performance, she performs it defectively.[35] That is to say, the obligation shall be fully and timely performed, when the debtor acts as the principle of good faith requires of her.

The Portuguese scholar also says, in a wide interpretation, that "defective performance corresponds to a lack of conformity between the proper performance and the one actually carried out."[36] Criticizing the doctrine that considers it to be relative only to the performance's lack of quality, he teaches that "defective performance comprises lack of quality as well as defects. The latter has to do with non-conformity to a standard; the former, with non-conformity to agreed aspects."[37]

Hence, "every time the debtor fulfills what she was bound to do, but her performance does not correspond to the proper one, the contractual violation may be characterized as defective performance."[38] In one expression, "defective performance is a disorder in the contract reciprocity balance."[39] This commentator concludes that "defective performance is not an autonomous contract guarantee, rather a form of violation of contract duties, be they primary, ancillary or collateral",[40] in disagreement with LARENZ as to its scope.

Obligations considered as a process should be analyzed in their entirety, according to the teaching of Clóvis V. do COUTO E SILVA.[41] Consequently, it seems that MARTINEZ [42] proposes under such perspective the observance of four conditions for the characterization of defective performance, which are: (a) violation of the principle of punctuality; (b) acceptance of the rendered performance by the creditor in ignorance of the lack of conformity or, if knowing it, opposing a reserve; (c) materiality of the defect; and (d) defective performance's causation of damages to the creditor.

Briefly, it is stated how such conditions may be satisfied:

Having discussed the notion of defective performance and the importance of its study in the ambit of the Convention of Vienna of 1980 and of the Brazilian law, we pass now to the characterization of the doctrine and the legislative treatment provided by this legal framework and that conventional instrument.

But, before we move on, one last remark. As far as Brazilian law is concerned, the analysis on defective performance will not consider the legal treatment afforded by the Act 8.078 of 1990 (Consumers Protection Code), since it is a comparative study and the Convention excludes from its scope of application sales of goods bought for personal, family or household use.[47] So the analysis shall be legislatively equivalent and done on the basis of both civil and commercial treatment given to the subject. Furthermore, it is a problem to which would apply very specific rules and principles that, if added to this approach, would change its nature.[48]

2. CHARACTERIZING DEFECTIVE PERFORMANCE IN CONTRACTS FOR THE SALE OF GOODS: A BREACH OF CONTRACT CATEGORY

In the first part of this essay, it will be attempted to characterize the defective performance doctrine as a type of contract breach, considering some cases of defective performance (2.1) and the legal treatment given to the matter by Brazilian law (2.2).

2.1. Categories of defective performance

Before analyzing some defective performance categories (2.1.2.), we will study the problem of violation as a basic principle that determines the character of the defective performance category (2.1.1.).

2.1.1. Violation of the principle of punctuality

As shown, defective performance shall be characterized when the following conditions are present: non-punctuality of performance; its acceptance by the creditor due to ignorance of the defect or, knowing it, through opposing a reserve claim; the materiality of the defect; and the causation of typical damages. Indeed, it is through the breach of the principle of punctuality that it will be possible to devise the many existing cases of defective performance, as identified by scholars.

As ALMEIDA COSTA says, the principle of punctuality expresses "the basic rule that actual performance shall be in conformity with the one contracted for, and that the obligor shall perform point by point and in all respects, a timely performance being not enough".[49] However, he emphasizes that the lack of exactitude in the performance of a obligation "does not involve a lack of identity or quantity", because in such cases we would be facing a "quantitative breach", governed in Portuguese law by the rule of completeness of performance (art. 763(1) of the Portuguese Civil Code).[50] [51]

Notwithstanding, PONTES DE MIRANDA[52]observes that, when the identity of the realized performance comes to be different from the proper one, but is of the same type, then one will have a bad performance. The scholar also refers to the extension and quantity of the performance, once decisive to the configuration of the expected quantity.

MARTINEZ,[53] in turn, teaches that the lack of identity and quality will also matter in a defective performance case.

In any event, one should remember that performance, be it of a primary or ancillary obligation, should be carried out as contracted. If the contract does not provide for a specific way of performance or is limited to establishing it generically, the obligor cannot not just perform as she thinks more convenient; the obligor may well be bound to statutory provisions as well as to the duties deriving from the principle of good faith and the purpose devised by the parties in the transaction.[54]

2.1.2. Other categories of defective performance

As stated before, it is through the breach of the principle of punctuality that we will be able to devise the many existing cases or categories of defective performance. MARTINEZ [55] identifies, in a synthesis of the law, nine cases or categories of defective performance:

The above mentioned cases compose the framework of imperfections to which a promise may be subjected, being, each in its own way, a specific disturbance to the obligational relation that shocks the very basis on which it is sustained, which is: that of the equivalence of the promises. From these specific disturbances there will appear also specific effects, but all turning on reestablishing the balance of reciprocity as between the contract's promises.

Having considered the cases of defective performance pointed out by the doctrine, we shall now verify the treatment given to the matter by the new Civil Code.

2.2. Defective Performance under the Brazilian Civil Code

After studying the general provisions governing such breach of contract category under the Brazilian Civil Code (2.2.1.), we will address the specific treatment of defects of goods given by the Code (2.2.2.).

2.2.1. Characterizing defective performance under the Civil Code

The Brazilian legislator of the Code of 1916, inspired by the German obligations law framework,[61] established, like the BGB, only two categories of breach of contract: absolute or definite breach and culpable delay, intending to regulate this way all possible types of violation of duties involved in contractual relations, of which the contract is only one of the sources.

LARENZ [62] says, in relation to the BGB authors, that this belief soon was held to be inexact, in asserting that the obligor is not only simply obliged to perform the promise due, but also to fulfill it diligently, as it can be reasonably expected of a careful store manager, craftsman or businessman.

Notwithstanding the apparent gap in the language of the 1916 Code, we observe that the national legislator has admitted, in different occasions, the tri-partition of types of breaches.

The legislator admitted it initially when he determined in art. 1.056 (present in the Chapter which deals with the effects of non-performance) that obligations are to be performed in the manner and time due.[63] [64]

Therefore, the legislator has adopted the principle of punctuality and has distinguished the unsatisfactory manner of performance from absolute breach (non-performance) and culpable delay (late performance). Thus, the legislator provided for the possibility of performance to be carried out in a different manner than or antecipatedly to one contracted for.

It seems that AGUIAR JÚNIOR [65] is in agreement with us when he, after reading the mentioned art. 1056 of the former Civil Code, states that it will mean breach or defective performance all show disregard for what is due at law, by contract or under the principle of good faith.

In agreement with Congress' intention and the most reliable scholars,[66] the Superior Court of Justice (the highest court in Brazil dealing with non-constitutional matters) case law has ratified the precision of the defective performance category of the then effective art. 1.056 of the Civil Code, holding that it is the obligation of the parties to fulfill the contract in its entirety.[67] According to that Court, the non-observance of the provision in art. 1.056 gives rise to a damages claim in favor of the injured party, provided the obligor's fault for the unsatisfactory performance is proved.[68]

Following our line of reasoning, the legislator of the Code of 1916 has regulated, secondly, the defective performance category specifically in relation to bilateral contracts, in the form of redhibitory defects (art. 1.101 et seq.), and in relation to defects at law, under the eviction's provisions (art. 1.107 et seq.). Such regulation, nevertheless, does not comprise a unitary disposition of the concept.

The legislator, instead of establishing a unitary rule about defective performancein the general obligations section of the Code -- as has been done with non-performance and late performance -- has chosen to make there just a brief reference and to regulate the case only as far as bilateral contracts are concerned, as opposed to doing so in such wide terms as the Vienna Convention does, but in a specific way, dealing only with hidden defects of goods and defects at law that go with them.[69]

As for the new Civil Code of 2002, it is with sadness that we notice the retrogressive treatment it affords the matter. The language of the provision supposedly to be the counterpart of art. 1.056 of the former Code -- art. 389 [70] -- does not make any reference to defective performance of an obligation, dealing only with non-performance. As the Draft [71] was approved without altering the former provision, the specific cases already provided for in the former Code remain in effect without substantial changes in its rules.

In fact, this situation is made worse to the extent that we find in the definition of late performance that is given by art. 394 of the new Code a projection of the concept of unsatisfactory performance. That provision reads that the obligor who does not perform and the obligee who does not take delivery at the time, place and manner agreed on are in default.[72]

Nevertheless, we do not believe that the legislator, in so phrasing the provision, has intended to regulate, through the late performance doctrine, the possibility of the obligor performing unsatisfactorily an obligation, in the strict meaning of this expression. And this, we have already sustained under the former Code, when the wording of the provision relating to late performance was the same as the current one and was in harmony with the admitted non-performance tri-partition, to the extent that the Code of 1916 provided, in wide and specific terms, for defective performance.

About this point, it is relevant to point out that AGUIAR JÚNIOR [73] when, in his study about the extinction of contracts for the obligor's breach, he identifies late performance as being possible, in our system, only when there is an imputable fact to the obligor, while the defect in performance may be due to an unimputable act of the obligor.

Based on that, we can identify the principle of good faith, understood in its objective sense, as an important landmark in this subject, since this principle is, along with that of punctuality, a source of the duty to perform well an obligation.

Since there is no culpability requirement, one should not talk about late performance when a defect in performance is verified -- except in the hypothesis of culpable delay. Rather, one should talk about defective performance, since this category contains an idea different from the one underlying culpable delay, as well as a different contractual liability, seen progressively under the objective aspect.

Let us add to this the fact that, as it is stressed by AGUIAR JÚNIOR, "the current terminology uses the term 'culpable delay' to designate non-performance at the time due."[74]

Like non-performance, culpable delay comes from, according to MARTINEZ,[75] an obligor's omission, while, in a defective performance, there is a conduct, an irregular one, though.[76] We want to say thereby that the breach of contract categories are independent, to the extent that defective performance presupposes the existence of some performance, but not conforming with the agreed performance, having, from the moment it is accepted, a complete autonomy in relation to the two other categories of breach.

It is due to what was provided in art. 955 of the former Code that scholars have sustained that the rules relating to late performance were applicable to defective performance.[77] This does not seem exact to us, since, apart from the fact that the legislator has provided specifically for it in the form of redhibitory defects [78] -- what is to be taken into account in a systematic interpretation and, if possible, applied through analogy -- it is verifiable whether or not the defect is imputable to the obligor.[79]

Along with the BGB (§ 286, after the reform), the Portuguese Civil Code (art. 804, n° 2) and the very Vienna Convention (art. 31 et seq.), most legislations deal with late performance only as a delay in performance, since it is imputable to the obligor.[80]

In any event, it is through the legislative treatment given to redhibitory defects and defects at law that the subject was specifically regulated, both in the former and in the current Code. The treatment of those cases will be the subject of the next section.

2.2.2. Redhibitory defects -- a special defective performance category

Art. 441 of the new Civil Code provides that if in a bilateral contract the purchased goods have hidden defects or defects at-law (undeclared encumbrances), the goods may be restituted to the seller, since such defects render it improper for the use it was made for, or reduce its value.[81] [82]

According to some commentators, such as Miguel M. de SERPA LOPES,[83] the provisions relating to redhibitory defects, as well as those concerning eviction, are, in fact, a way of guarantee, constituting an obligation which results from a natural element of bilateral contracts, and may de-abrogated by the parties.

Hence, since the Brazilian legislature did not set forth a unitary regime for the defective performance of contracts, the autonomy of such regime is challenged in the sense that this regime is seen as a mere guarantee for the equilibrium of contractual obligations (this is the position of the author mentioned above).

The defective performance doctrine consists of a third kind of breach of an obligation. The autonomy of that obligation is verified at the moment the subject of the obligation is performed, that is, at the point at which it factually occurs: when it becomes an irrefutable evidence of contractual liability due to the lack of punctuality. Moreover, it seems that the idea of guarantee does not fit in the breach of contract doctrine. After all, the rules relating to defective performance of certain contracts, despite of being lex specialis, are part of the contractual liability context -- both strict and general liability.[84]

Consequently, the Brazilian legislature appears to have intended to broaden the scope of defective performance [85] when it regulated the case of defects and lack of conformity or quality of goods. For MARTINEZ,[86] these two characterize the broad concept of defective performance, where the first one concerns the standard of that trade, and the second, the terms specifically agreed by the parties for a given contract. This expansive notion of defective performance can be noticed in the final part of the provision: "... that render the goods improper for the use they were made for, or that reduce their value".

Before due consideration is given to matters concerning the defective performance provision of the Brazilian Civil Code (Art. 441), one should look at the scholars' positions on redhibitory defects.

BEVILÁQUA states that the "redhibitory defects are unknown defects, which render the goods inadequate for the use they were meant for, or which would render it, in this sense, a hurdle for the parties to enter the contract, in the case these defects were indeed known in advance. So, the defective goods can be rejected."[87]

For Orlando GOMES,[88] redhibitory defects are those that are hidden, which render the purchased goods not as worthy and useful as they would otherwise be.

Also, Caio Mário da S. PEREIRA asserts that "redhibitory defects consist of unknown defects in goods agreed on in a bilateral contract, rendering the goods improper for the use for which they were made, or reducing their value". Further, he adds that "not all defects can serve as a basis for this principle to be verified, but only those that exist to the detriment of the utility of the goods, of the aims, or economic value of the goods."[89]

Washington MONTEIRO argues that redhibitory defects "can be defined as if they were hidden, rendering the goods inadequate to fulfill their function, or diminishing their value so that the contract would not be celebrated were these defects known by the parties."[90]

This commentator states that there are many other theories that try to show the legal rationale behind the treatment accorded redhibitory defects. In this sense, he says that the breach of contract doctrine is the one that best fits the contractual liability doctrine whereby the obligor has the duty to carry out a fair performance when she performs the contract obligations. So, the obligor "is obliged to guarantee the state of the goods, their safety, their qualities, their adequacy as to their proposed goals. She cannot escape, therefore, liability where the goods have defects or imperfections that render them improper for their destination, or that reduce their value."[91]

Now it is important to turn to the requirements regarding the characterization of a defect as regulated by the Brazilian Civil Code. Scholars [92] make clear that the Civil Code provisions set forth the necessary conditions for the occurrence of redhibitory defects which are: the goods must (a) be under a bilateral contract or of a gift accompanied by an encumbrance; (b) present hidden, (c) relevant, and (d) existent defects at the time the parties entered the contract.

As for these requirements, further explanation is given:

From the assessment of the legal requirements discussed above one could conclude that they are adequate to the conditions of defective performance pointed out by MARTINEZ and discussed on section 1 of the present essay.

In this regard, the bundle of conditions for the characterization of the defects set forth by art. 441 of the Brazilian Civil Code makes clear a want regarding the punctuality principle. As far as the breach of contract doctrine is concerned, the existence of these defects turns on an inadequate performance of that which was agreed, where the obligor's obligation is that of delivering the transacted goods without any defects that could reduce their utility or value.

Furthermore, the remaining conditions set forth by Art. 441 are identical to those alluded in the beginning of this section of the essay. As for unknown defects, these conditions are verifiable when the buyer has no knowledge of the defect, or when the buyer knowingly them adds a reservation to the contract, according to art. 445 of the Brazilian Civil Code. As for the materiality of the defect, the conditions are satisfied when the defect affects the goods' expected utility or value; and, finally, as for typical damages -- as to the utility and value of the goods -- when they relate to the defects verified at the time of performance - actual handover of the good; recording, in case of real estate property; sampling; or passing of risk.

At the end of the day, the existence of hidden defects in a bilateral contract -- defects that are material up to a point where they could affect the utility or value of the negotiated goods -- are the ones that characterize a defective performance by the obligor.

Given due regard to these requirements, the cases of defective performance covered by the redhibitory defects are also to be considered.

By saying that the Brazilian Civil Code gave a special treatment to defective performance through the provisions concerning redhibitory defects (and others on eviction for defects at law) this scholar intends to identify the circumstances in which a defective performance by the obligor could be verified.

In so doing, the cases set forth in the Brazilian Civil Code provisions relate to the quality, quantity (extension, size and weight), and to the identity of the goods sold. These provisions are analyzed from the guidelines regarding the defectiveness of an obligation stated in this Code, which are: the destination for which the goods were obtained, and the value for which they were negotiated.[98]

The quality defect lies on the fact that the goods do not fulfill the purpose of the contract because, as states PONTES DE MIRANDA, "the one who receives the goods - the subject of a bilateral contract -- receives the goods with all their qualities and size. It is not possible to say that the contract intention relates only to the goods as they are, regardless of their qualities; nor that a specific contract clause would be necessary in order to make the quality enforceable. No one wants the goods per se, irrespective of their qualities."[99]

As for the defect of quantity (extension, size and weight), it turns on the civil provisions that define the quality of the goods, as far as defective performance is concerned,[100] which is treated differently from partial performance.

As to a lack of identity of the goods, it occurs when the inadequacy refers to the genre, class, or species of the goods, and to their quality.

As far as this last possibility is concerned, PONTES DE MIRANDA makes an allusion to the following examples: "when one buys a tie, it is known that it is commonly used around the neck; however, this person did not choose just any kind of tie. In case the seller sends or delivers the wrong tie, or a tie made of a different silk from the one the buyer saw at the shop window, or from the one she tried on, the mistake or the defect of the goods is clear. The same occurs when a person buys a ring made of gold, and she receives a golden ring only. Indeed, it is crucial that the goods delivered to the buyer be the same and of the same value as agreed."[101]

On one hand, it is true that, besides the case of defective performance above-mentioned, the Brazilian Civil Code of 1916 regulated other cases of defective performance - even all of them -- as its art. 1.056 expressly provided for the punctuality principle,[102] that is, that the contract must be performed in its entirety, clause by clause. This reveals a broad notion of defective performance. On the other hand, there is still the question of whether the New Civil Code admits the other cases addressed before, taking into account art. 389. These cases relate to inadequate performance as well as to the agreement; anticipatory performance; and a performance made in a different quantity, in a placedifferent from the one agreed on; and generally regulated in arts. 441 and 447 of the Civil Code.[103]

The answer for this is not so clear. Nevertheless, one can use three arguments in order to assert that, in spite of the omission by the Code, the punctuality principle remains as a corollary principle of the law of obligations and continues in force in Brazilian law and therefore is still applicable by analogy, as understood from art. 4 of the Introduction to the Civil Code Act.[104]

Finally, the force of the case law as source of law will be evident and determinant in maintaining the application of the punctuality principle, as has been repeatedly applied by the Superior Court of Justice in decisions previously mentioned. As a matter of fact, the case law had a determinant role not only in affirming that principle, as well as so many others,[105] but also in developing them on the basis of guidelines established by the new Code,[106] as well as the present needs of commerce.[107]

2.2.3. Liability arising out of defective performance

In the face of the defects provided for in the rule of art. 441 of the new Civil Code, the obligee is given means to avoid suffering damages, as far as the goods' utility and value are concerned, unless she expressly undertakes the risks of the defects that might exist.[108] The Code provides the obligee withtwo alternative remedies against the obligor: the redhibitory and estimatory actions. In the latter case, the obligor seeks price reduction, while in the former, the goods' restitution -- art. 442.[109]

Therefore, through the redhibitory action, the obligee rejects the goods due to the existence of hidden defects, whose main effect is the avoidance of the contract which, once declared, gives her the right to restitution of the amount paid and reimbursement of the expenses, as well as to compensation for losses and damages suffered, provided that the obligor was aware of the defect (art. 443).

Regarding the price reduction action, PONTES DE MIRANDA,[110] in a commentary to the Code of 1916, stresses that the Code did not specify how one should proceed: should the aggrieved party be granted a reduction in relation to the value of the goods as determined by the price, or a discount in relation to the value of the goods according to an appraisal of the goods' value, regardless of the price agreed by the parties?

Since the new Code also does not establish the criteria for determining a price reduction in the aforementioned case, the problem remains unaddressed. Consider the treatment given to the matter by a learned scholar, who views as a possibility the following solutions:

PONTES DE MIRANDA states that the third solution must not prevail, since no provision tells experts how to proceed. The scholar adds, moreover, that the first solution is unfair, because, "if, e.g., the goods were worth more than ten percent of what the consideration received was worth, nothing would be subtracted. If the goods were worth less than ten percent of what the consideration received was worth and the result of the goods' defect was twenty percent, the claimant receives more than twenty percent of the value: receives twenty percent of the consideration".[112]

The scholar thinks the second solution is fair, where the reduction is effected in relation to the consideration, subtracting the loss in value due to the defect. He provides us with the following example: "if the goods were worth 10 and the claimant purchased them for 15, the reduction of 2 in the sum 10 corresponds to the fifth part of 15, thus 3. If the goods were worth 15 and the claimant acquired them for 10, the reduction of 5 in the amount 15 corresponds to the third part of 10, thus, to 3,33...". [113] [114]

With respect to limitation periods for filing the redhibitory or the estimatory actions, art. 445 of the new Code establishes that they are preclusive, no longer prescriptive, as they were treated by the former Code. These limitation periods start running as of delivery, i.e., "of the effective delivery" and vary whether the item containing the defect is a chattel or real estate [115] and whether or not the item was in the possession of the buyer.[116] Thus the limitation period is of thirty days for chattel and of one year for real estate, unless the parties agree otherwise. Such periods, however, will be cut in half, counting the time of the shipment, if the buyer was already in possession of the item sold.[117]

Further, the new Code fills in a gap that existed under the former Code, adding that when a defect, by its very nature, can only be known later on, time runs as of when the buyer becomes aware of it until a maximum term of one hundred and eighty days, if it is chattel; or of one year, if it is real estate (art. 445(1)). The Code innovates in dealing with the sale of animals, establishing that the limitation period for the guarantee for hidden defects will be the ones established in a specific statute, or, in the lack thereof, by local usages, applying art. 445(1) in the lack of any other applicable provision (art. 455(2)). The Code innovates as well when it provides for the possibility of suspension of the limitation periods provided in article 455; the period of effectiveness of the guarantee clause, the buyer being obliged, however, to give notice of the defect to the seller in thirty days following its discovery, and being precluded from taking advantage of the limitation periods to which the law alternatively entitles her (art. 446).

However, it will not be possible for the buyer to choose which action to file in the case of destruction of the goods due to hidden defects. Only the redhibitory action would be available, along with the right to recover the amount paid as well as damages, considering that the estimatory action presupposes that the obligee wishes to keep the goods in her possession.

As for goods sold together, a redhibitory defect found in one does not authorize the rejection of the other (art. 503), as the goods do not constitute an indivisible whole.

Concerning the possibility of the obligor resorting to the redhibitory action or to the estimatory one when the defective goods are acquired in public auctions, we have the following: while earlier the obligor was expressly precluded from taking advantage of such actions (art. 1.106 of the former Code), now such prohibition no longer exists. And no longer expressly replicating such prohibition, we ask whether it still remains, taking into account the nature and the conditions in which sales in public auctions take place. Maybe we can find a hint in the language of art. 447 of the new Civil Code,[118] that rewrites the former provision on the seller's liability for eviction (art. 1.107 of the former Code),[119] that provides nothing about goods being acquired in public auctions.

Thus, in establishing that in bilateral contracts the seller is liable for eviction, even if the acquisition has taken place in a public auction, the new Code provides for the possibility, earlier inexistent, that in this form of acquisition the seller remains liable for defects at law that encumber the goods. If we make a systematic and analogical interpretation, fully justifiable and pertinent in the case, we can conclude that the new Code, through article 447, provides also a possibility, earlier prohibited, for holding the obligor liable for redhibitory defects in acquisitions made in public auctions.

As for the remaining cases of defective performance, in particular those covered by art. 1.056 of the former Civil Code,[120] whose limitation period is of ten years, we can say that the effects, when triggered, are the following:[121]

Concerning the obligor's right to declare the contract avoided for defective performance, being no longer interested in the contract's fulfillment, the right is only available where a substantial breach has been found. AGUIAR JÚNIOR states that, "a defective performance that amounts to a substantial fulfillment of the contract, gives the obligee a right to damages but not to avoidance."[123]

Having established the notion and characterization of defective performance and the legal treatment that Brazilian Law gives to it, it is proper to verify next the treatment given to matter by the Convention, taking into account the legal model adopted there, and finally, to consider the possibility of Brazilian domestic law adopting such model.

3. CHARACTERIZING DEFECTIVE PERFORMANCE UNDER THE 1980 UNITED NATIONS NATIONS CONVENTION ON CONTRACTS FOR INTERNATIONAL SALE OF GOODS

In this chapter we will attempt to characterize a defective performance under the 1980 Vienna Convention, to identify the legal model adopted by the Convention (3.1) and to compare both models and consider the possibility of adopting the Convention's model in Brazil (3.2).

3.1. The Convention's defective performance legal model

The model of breach of contract adopted by the Convention regulates three forms of non-performance, dealing only with defective performance, with regard to its characterization and options of remedies.

On the other hand, in Part III, Chapter II, Section II -- namely "Conformity of the goods and third party claims", the Convention works on the amplitude of meanings of the word conformity in order to characterize the non-performance of an obligation by the seller and considering her liable whenever a lack of conformity is found.

This wide notion is the result of the search for a unique and specific regulation on the idea of defective performance adopted by the Convention, in an attempt to reach all situations where conformity or non-conformity could be used. The use of this unique concept by the Convention is, according to MARTINEZ, a direct influence of the Common law system, in which the idea of defective performance is closer to the idea of breach of contract.[124]

Furthermore, according to Harriet C. ZITSCHER, Common law systems do not distinguish between non-performance, bad performance and undue delay, bearing in mind that in that system a contract is characterized as a promise and guarantee of performance, and any failure in such performance is considered a breach of contract.[125]

However, the Convention adopts a distinction (3.1.1.) and dismisses a divided regulation for each one of the three forms of non-performance (3.1.2.) and offers a series of remedies to the non-breaching party (3.1.3.).

3.1.1. Defective performance as breach of contract

As far as contract breach is concerned, the Convention regulates specifically breaches relating to the conformity of goods and those relating to any other rights or claims. The latter are regulated by article 41 and following articles, and the former are regulated by articles 35 to 40. Sometimes some dispositions of the Convention apply to both kinds of breaches, but the liability that arises out of rights or claims of a third party are not the within the scope of this essay.

Regarding the conformity of goods, the Convention establishes in article 35 the seller's duty to deliver the goods in conformity to the contract, as well as the criteria or parameters to analyze the conformity of those goods.[126]

According to Vincent HEUZE, goods can be expressly characterized as conforming goods when they correspond, for one side, to the descriptions in the contract, and for the other, when they meet the expectations of a reasonable person with the same qualities of the buyer and in the same situation.[127]

In paragraph (1), the Convention expresses the criteria for quantity, quality and description, as well as the packaging to verify the conformity with the contract. According to Maria Ângela Bento SOARES e Rui Manoel Moura RAMOS [128] those criteria shall be met according to the terms of the contract.

Concerning the conformity of the goods, the Convention on article 35, paragraph (2), establishes that, except where the parties have agreed otherwise, the goods will be in conformity when they:

Luiz Olavo BAPTISTA and Aníbal Sierralta RÍOS call attention to "the necessity of an introductory clause in international contracts which indicates the motive, cause, and reason which led the parties to the contract", in order to rely on the international commercial practice in the event of a delivery of non-conforming goods.[129]

The third paragraph of article 35 expresses that the seller is not liable for any of the above mentioned failures if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.

By the reading of the mentioned articles, we can conclude that the elements that characterize the lack of performance of a contract are: the undue delay, the acceptance of the goods by the buyer with no knowledge of a breach, or with the knowledge of the breach giving notice specifying the lack of conformity, the cause of lack of conformity and the damages occurred by the lack of conformity.

The undue delay as a form of lack of performance is stated in article 35, paragraph (1) of the Convention. This norm is an expression of the principle of punctuality in establishing the seller's obligation to deliver the goods, with correct quantity, quality, description and packaging at the time agreed in the contract.

The acceptance of the goods by the buyer with no knowledge of a breach as a characteristic of a lack of performance is brought by article 35, paragraph (3), that following the good faith principle stated in article 7, paragraph (1), states that "the seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity".

On the other hand, if the buyer has knowledge of the non-conformity of the goods, the buyer must send a notice to the seller in order to keep the right to claim his rights, according to article 39 of the Convention.[130]

Damages are present in any of the situations of article 35, paragraph (2), as the value of the non-conforming goods will not reflect the economic value agreed by the parties to the contract, since the goods will not serve the specific utilization the buyer would need or would not satisfy the quantity or quality required and this means that there is a breach in the terms agreed on the contract and deprived the buyer of what he was entitled to expect.

In order to verify damages and lack of conformity, it is expected to be read together and in accordance with article 25 of the Convention that establishes the idea of a fundamental breach. The breach of a contract will be fundamental according to article 25 "if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract."[131]

FADERA explains that a breach will be fundamental where it affects the fundamental obligation of the contract and causes as substantial loss to the non-breaching party.[132] AGUIAR JUNIOR, confronting the same issue in the same way, affirms that non-performance of the main obligation is not a cause, per se, to extinguish the obligation; the breach must deprive the non-breaching party of what she could reasonably expect under the contract.[133]

The understanding of the content and the reach of article 25 is quite important since the facts will grant the non-breaching party the right to avoid the contract without any judicial interference as stated by article 26.[134] However if not under the rule of article 25, the non-breaching party in order to seek damages or to avoid the contract must seek a judicial solution.[135]

Keeping in mind that the basic idea to show a fundamental breach is the existence of a loss that would deprive the non-breaching party of something that she was expecting under the contract, it is very important to determine its scope.

According to the Commentaries to the Convention's Project prepared by the UNCITRAL Secretariat, this determination should be made on the facts of each case, using as a base the monetary value of the contract, or the loss suffered by the party or the loss of other activities by the non-breaching party.[136]

FRADERA, quoting the German Professor Michael Will, highlights that the orientation of the commentaries is not exhaustive, but "represents a direction", leaving the interpretation in the hands of the courts, that should keep in mind the expectation of the parties and the terms of the contract.[137]

With those considerations on the idea of a fundamental breach, we must now consider the autonomy and specificity of the rules of the Convention concerning lack of performance, determining its amplitude, and then identify the options of the non-breaching party in order to have obligations fulfilled.

3.1.2. Autonomy and specificity in the treatment of defective performance -- scope

Under the former international rules on contracts for sale of goods, the Hague Convention of 1964 (articles 33 and 36), the buyer could not deem the seller's obligations fulfilled if the goods are not in accordance with specifications of quality, quantity and description set forth under the contract.

In this aspect, according to the UNCITRAL Secretariat, article 35 of the Vienna Convention is different from the former Convention, because the obligation can be deemed fulfilled when the seller delivers the goods, or when it leaves the goods at the buyer's disposal, in accordance with the general conditions of the contract, even if they do not correspond entirely in quality or quantity to the contract specifications.[138]

It seems to us that it cannot be disputed, however, the autonomy given to defective performance under the Vienna Convention, especially if considered that the application of rules relating to the non-conformity of goods will only be possible from the moment there is an inadequate performance, that is, from the time at which the goods are delivered or are made available to the buyer.

But even on the face of such autonomy and unitary concept of the aforementioned art. 35, the international legislator still did not encompass all cases of defective performance, such as, e.g., the delivery of goods in a place different from that agreed upon or the breach of accessory duties.[139]

Moreover, we believe that the rule of art. 30 of the Convention, where it is established that the seller is supposed to, in the conditions determined in the contract and in the Convention, deliver the goods, transfer property in them and, if such is the case, to send the documents that concern them, supports, as in art. 35, the well-known rule according to which the contract must be accomplished in every point, that is, attending to the principle of punctuality, the breach of which, according to MARTINEZ, may give reason to several situations of unsatisfactory performance, due to the amplitude of its concept.[140]

Indeed, one can find throughout Chapter II -- "Obligations of the Seller", where the aforementioned art. 30 is inserted, a series of provisions referring to defective performance that offer the exact dimension of its comprehension under the Convention.

Its manifestation is also present in the rule of article 34, that refers to the handing over of documents relating to the goods, in providing for the possibility that the seller cures any lack of conformity in them, when the handing over has occurred early.

Following, it is specifically regulated as to the lack of conformity of the goods, in the wide notion of the word conformity borrowed from art. 35 of the Convention. It is indeed true that paragraphs (1) and (2) of this article bring, after all, the criteria or parameters through which the goods delivered by the seller will be considered in or out of conformity, at the point of RAMOS and SOARES affirming that, out of such criteria, non-conformity lacks relevancy under the Convention.[141] We believe however that by the supplementary character of the rule contained in art. 35 paragraph (2) the possibilities of verification of a lack of conformity of goods are widened, due even to what the parties agree upon.

Undoubtedly, also article 36 of the Convention is quite expressive as to the determination of the scope of defectiveperformance, as it makes the seller liable, according to what is agreed under the contract and the Convention, for any lack of conformity which exists at the time the risk passes to the buyer, even if such lack only appears afterwards, or it arises from a breach of any of its obligations, including the unsatisfactory guarantee.

Last, we find under the scope of defective performance the defects at law that encumber the goods, as regulated specifically in articles 41 et seq. of the Convention.

Before such a picture, we can say that, within the Convention's scope, the treatment given to defective performance comprehends all obligations derived from the contract, the Convention and the general rule of good faith, reaching the main obligation (art. 30) as it reaches the accessory ones (arts. 32 and 34), as they must be performed in conformity with the contract, or, in its silence, with what the Convention provides on that respect.

Therefore, the seller will be liable, under article 36, for each and every imperfection verified in the performance of any of the obligations undertaken, except, on this concern, the case of art. 35 paragraph (3) and those of art. 39, provided that, as far as the latter are concerned, the circumstances provided for in art. 40 are not found.[142] [143]

It is relevant to ask from what point there must be a judgment of conformity or lack of it of the goods as to the seller's liability. To this purpose, art. 36 provides that such point coincides with that of passing the risk to the buyer,[144] and it is possible to verify at such point the lack of conformity. From this point on, every failure or non-conformity that arises is under the buyer's responsibility, except for the one that, although coming up later on, was already in the product at the time of transfer.

The liability of the seller will remain, even after the risk passes, in respect of any non-conformity that is found and is due to the breach of any of its obligations, including the guarantee that for some time the goods will remain fit for their normal use or certain special use, or that they will retain certain specified qualities or characteristics (art. 36(2)).

The examination of the goods, in turn, will be done by the buyer, as stated in art. 38 of the Convention,[145] in the shortest possible period in the circumstances.

BAPTISTA and RÍOS point out that such rule may lead to discussions as to what is "within as short as a period as is practicable in the circumstances". According to these scholars, such period "must be counted from the time at which the buyer has the goods at her disposal, and the circumstances that will determine the wideness of the term are the contract references (probably the introductory clauses), the commercial uses and practices, the nature of the goods, the period or time at which the goods have been acquired, and the quality or nature of the parties."[146]

Certainly the period must be counted from the point at which the buyer has the goods within its power. Article 38, paragraphs (2) and (3) precise the content of this rule towards two particular situations: one in which the contract implies the transportation of the goods and another one in which the buyer changes the destination of the goods in transit or re-sends them before having a reasonable chance to examine them. In the latter, the examination may be postponed until the arrival of the goods to their new destination, since at the time the contract is concluded the seller has or should have known of the possibility of route change or re-sending. In the former the examination may be postponed until the arrival of the goods to their destination.

SOARES and RAMOS highlight that "in any of these cases what is sought is to determine the moment of examination by reference to the buyer's actual possession of the goods."[147]

Once the goods are examined and a non-conformity is found, the buyer shall notify the seller thereof, specifying its nature, in a reasonable period from the time at which she has or should have noticed, so as to be entitled to assert a defective performance claim under article 39, para. (1), losing in any case such right if it is not exercised within two years, counted from the date at which the goods were effectively put at the buyer's disposal, unless such time-limit is incompatible with the contractual period of guarantee (art. 39(2)).

BAPTISTA and RÍOS in analyzing the notice of lack of conformity in international contracts assert that it is essential that an actual and effective delivery of goods take place, because the only way through which the buyer may notice a non-conformity of the goods is through physical contact, adding to its comment that the time-limit set is imperative to the safety and stability of international economic transactions, once it would be harmful to both parties if the buyer indefinitely withheld the right to claim a lack of conformity against the seller.[148]

It is to be observed that the seller will not be able to invoke the provisions of articles 38 and 39 if the non-conformity refers to facts that were known to him or that could not have been ignored and were not revealed to the buyer, since permitting it would imply admitting in the framework of the Convention an incurable contradiction as to the provision of art. 7, paragraph (1) -- with respect to the good faith principle. The recognition, therefore, of the seller's silence in respect of a lack of conformity of the goods may not be admitted in any case.

Section III of Chapter II of the Third Part of the Convention provides for cumulative (art. 45(2)) means available to the obligee in case of breach of contract by the obligor, establishing in art. 45(1) the rights assisting her.

3.1.3.Creditor's options in the case of breach of contract resulting from defective performance

The regulation of such rights is found in Section III -- articles 46-52, as well as in articles 74-77, concerning the right to claim damages.[149]

The buyer has the following options, once the contract is breached for defective performance and a non-conformity discovered. In such circumstances the buyer may:

Having identified the autonomy and scope of the rules relating to defective performance under the Convention's framework, as well as the obligor's liability for contract breach for defective performance and yet the means available for the obligee to prevail in such cases, we have left the analysis of the possibility of reception of the legal model adopted by the international legislator in Brazilian law, given its characteristics and compatibilities.

3.2. Aspects that liken the Convention's model to Brazilian law

In the search for a justification of the possibility of reception of the Convention's legal model by the Brazilian legal system (3.2.2.), it is appropriate to examine beforehand the two contract regulatory schemes (3.2.1).

3.2.1. Comparing legal models

As a starting point, we may assert that the defective performance doctrine is admitted both under the Convention and Brazilian law as an autonomous breach of contract category, distinguishable from non-performance and late performance.

This distinct and specific treatment afforded by both regulatory schemes comes from the precise understanding of its setting and dimension within the breach of contract doctrine and the verification of the characteristic elements.

In effect, although it may seem, at first glance, that such regulatory schemes give them a limited scope of application, due to the specific treatment given to certain cases (art. 441 of the Brazilian Civil Code and art. 35 of the Vienna Convention), we sustain that its applicability extends beyond and reaches each and every lack of conformity between the obligation as agreed and as performed.

This wide scope is enabled by the principle of punctuality, that in Brazilian law is admitted as a general principle of obligations law (see 2.2.2 supra) and, by the Convention, in some of the principles derived [150] from it, and by the wide notion attributed to it by the word conformity, associated with the rule of article 35(2) and the duties listed in articles 30 and 32.

Accordingly, the two regulatory schemes are compatible as far as the concept, autonomy and scope of defective performance is concerned.

However, given the existence of such similarity, one cannot deny that in the scope of the Convention, the extent and legal model of defective performance is more suitable to the solution of problems arising out of breach of contract than in Brazilian Law, considering the principles adopted by the former and particularly the enlargement of the obligations and options that the obligee has in the case of non-performance.

The main obligation of the seller in contracts of sale consists obviously in the delivery of the goods sold. That obligation is of the essence of such contracts and as far as it is concerned there is no distinction as between both sources. While in the Convention one can find an enlargement of the obligations concerning the delivery of goods, in Brazilian Law one can find certain legal restrictions in this respect.

Thus, in the Convention, the seller has the duty, in addition to the delivery of the goods on the terms and conditions agreed on the contract and provided for by the Convention, to pass the legal property in them and, as the case may be, forward the required documents (art. 30), and hand them over at the time, place and manner provided on the contract (art. 34).

To such set of obligations, additional ones are imposed by article 32, which are: to specify the goods where they are not clearly identified; to notify the buyer of the shipment of the goods; to procure the contracts necessary for shipment of the goods to the agreed destination by means of transportation appropriate and usual in the circumstances, if so agreed; to provide the buyer with all the information necessary for the execution of an insurance policy, if it is not up to the seller to contract insurance.

On the other hand, the Convention, stressing the contract's bilateral character, imposes three important conditions on the buyer's right to rely on a lack of conformity of the goods - which are, the duty to inspect the goods upon delivery -- art. 38(1); to notify the seller of any lack of conformity that the buyer discovers upon inspection -- art. 39(1); and, if the buyer knew of the lack of conformity at the time the contract was executed, the seller can advance a mental reservation defense, in accordance with the purpose of the provision in article 39.

Such obligations, apart from any other the parties may have agreed, are a manifestation of the Convention's innovative and expanding character in comparison to many national legal systems, particularly the Brazilian system, which does not treat the parties' obligations in the same way.

In Brazilian Law, the seller's obligations are exhaustively specified in the Civil Code, the main one consisting in the delivery of the goods accompanied by the passage of title, pursuant to article 481.[151] The new Civil Code is silent as to the time, manner and to whom the purchased goods are to be handed over.[152] In turn, it provides that the goods must be handed over at the place where they are found when sold, unless the parties agree otherwise (art. 493).[153] The costs of delivery are borne by the seller, while those of executing the deed and recording (as in the case of conveyance of land) are borne by buyer, unless otherwise agreed (art. 490).[154]

Analyzing the seller's obligations in contracts of sale, Orlando GOMES states that the seller, unless otherwise agreed, has to hand the goods over to the buyer or his agent, immediately after the contract is concluded and at the place the goods are found at the time of the sale.[155]

As for the obligation to tender the documents, BAPTISTA and RÍOS, commenting on article 32 of the Convention, stress how far such provision is from Latin-American law, since tender of documents is not usual in the latter, though it may be deemed a secondary obligation.[156] Nevertheless, Orlando GOMES asserts that the tender of documents is necessary for the buyer to acquire possession or disposition of the goods.[157]

The secondary obligations, attendant to the main obligation, as seen, were not codified in as broad a way in Brazilian law; such obligations, nevertheless, may be derived from the contract itself or from the principles applicable thereto, namely the principles of good faith, probity, contract economy, and practices and usages of trade,[158] as a basis for the assertion of liability for defectiveperformance.

As for the means that the buyer has at her disposal where an obligation is unsatisfactorily performed, the Convention offers her many options and advantages which, under Brazilian law, are limited to the cases already specified in section 2.2.3 above. One of the options, for example, is that the creditor in the case of fundamental breach of contract may declare the contract avoided without judicial intervention, through a simple notice sent to the debtor (art. 26). Such procedure is possible under Brazilian law only if there be an express resolutive (escape) clause, otherwise the contract can be declared avoided only by a judicial decree (art. 474 of the new Civil Code).[159]

While under Brazilian law we verify that if the obligee has no interest in taking delivery of the goods because they are damaged, she may declare the contract avoided (art. 475, CC),[160] or reject the goods (art. 441, CC), and, if she is interested in preserving the contract, she may seek either defective performance with reduction in price, or the monetary equivalent, in addition to damages, in the Convention, we have an enlargement of such options, the buyer being entitled to elect, cumulatively (art. 45 of the Convention), compensation for damages and the rights provided for in articles 46 to 52, such as the replacement of goods [161] and the grant of additional time for performance of the obligation.

According to BAPTISTA and RÍOS, "such advantages in favor of the buyer present some technical difficulties. And they are related to presence of the concept of 'fundamental breach', previously explained when commenting on Art. 25 of the Convention; thus attempting to harmonize the action that seeks specific performance and the action for reduction in price (quanti minoris), of Latin origin, the grant of a grace period of German origin, and the action that seeks specific performance with the action for compensation for damages that prevails in the Anglo-Saxon system."[162]

What we see, therefore, is that, although there exist the difficulties pointed out by BAPTISTA and RÍOS and an enlargement of obligations and remedies or options given to the buyer by the Convention, we must make the observation that the reception of its model by the Brazilian legal system will not go along with what commentators and case law have been sustaining as far as such obligations and duties of the seller for her perfect performance are concerned.

Furthermore, one should point out that Brazil is a country that imports legal models, being quite flexible in this respect, notwithstanding the need and responsibility we have to build our own legal system; one could say that such receptions lead always to the modification and, not rarely, evolution of domestic law.[163]

3.2.2. Justifying the possibility of reception of the Convention's Model

The Vienna Convention of 1980, being a means of uniformity as to contracts of sale of goods in the international level, aims not only at securing a uniform legal regime applicable to such contracts but also at providing rules that fit the peculiarities of international trade.

Actually, the Convention, to the extent that it is a regulation of international sales -- in contrast to the preceding Hague Conventions on international sales -- is designed to regulate the contract of sale as a whole, despite the existence of gaps,[164] adopting, therefore, a scheme that is compatible with the more diverse legal systems, even though some may be Civil Law while others, Common Law.

In view of such objectives, the Convention's provisions and innovative solutions strike a balance between the two systems by which it was influenced: Civil Law and Common Law.

For the purpose of this essay, one could point out as innovative examples in the Common Law system that the Convention does not distinguish between conditions and warranties, as expressed in the provision of art. 35, and the possibility provided for art. 50 that the buyer may seek reduction in price in the case of lack of conformity of the good purchased, possibility which is not available in Common Law. As an innovative example in the Civil Law system, one could draw attention to art. 25's fundamental breach, whose expression, according to BAPTISTA and RÍOS, "is foreign to Latin-American doctrine (scholars) and statutory law, which is more acquainted with the principle of 'damages' or 'injury'."[165]

As far as the balance struck by its provisions is concerned, the Convention has a great deal of value to the dynamic character that commerce among nations has acquired after World War Two, to the extent that, governing in a single instrument [166] the rights and duties of the seller and the buyer as well as the formation and interpretation of contracts for the international sale of goods, it offers the contracting parties solutions to issues that, in many municipal legal systems, are regulated in a plurality of legal instruments: on the one hand, in special legislation on sales and, on the other hand, under the general treatment -- whether codified or not -- of obligations and contracts in general.[167]

Likewise, as the Vienna Convention was built on the idea of facilitating and enabling a development in globalized trade, by means of its uniforming technique, it has "the value of ensuring a better balance in the regulation of international sales, avoiding the situation in which one of the parties is subjected to a municipal legal system that in most cases is unfamiliar, unknown or even unfavorable to him."[168]

Accordingly, one should not see as negative the reception of its model by the Brazilian legal system, as the Convention translates well and expresses well, through its principles, the international community's desire to have uniform rules that warrant a maximum of certainty in the field of international trade. Irineu STRENGER points out that, among other factors, the economic players, for having no legal education, "would rather contract, as far as possible, on the basis of standardized definitions and formulas, whose precise meaning derive from typified rules and practices and, therefore, entirely cognizable without having to go over them each time."[169]

Moreover, applying Brazilian law to international contracts one could find it difficult for its provisions to secure the fulfillment of contract ends, in view of some of the limitations presented above.

As an example thereof, we avail ourselves of VIEIRA's reference to the French commentators MALAURIE and AYNÈS who, stressing the originality of the contract of sale, point out a difficulty found in the applicability, to contracts of an international nature, of all rules on sales belonging to a national legal system, particularly as far as the unity of the seller's obligations (linked to the obligation of conformity) is concerned.[170]

According to VIEIRA, those commentators believe that "the Vienna Convention on international sale of goods will probably alter indirectly the domestic law: 'there could be for the one contract a considerable difference between domestic and international rules, whatever may the respective particularism be (law of maximal difference between domestic and international law)."[171]

Patrícia GALINDO DA FONSECA sustains that same position that "the influence exerted by the United Nations Convention on national legal systems should not be ignored. It is a recent legal phenomenon that tends to open up national legal systems in order to strengthen the participation of the respective country in the globalized market, attracting economic partners by means of a smaller number of uncertainties in international trade. The Scandinavian countries greatly resorted to the Vienna Convention as they codified their sales law in 1980. The Obligations and Property Act of the new German 'Bürgerliches Gesetzbuch' (Civil Code) was likewise strongly influenced by the Convention. The Argentine Civil Code Bill, in the provisions governing contract formation, reflects the convenience of compatibilizing domestic rules with international ones."[172]

Given such considerations, the possibility of the reception by Brazilian law of the legal model on unsatisfactory performance adopted by the Vienna Convention, particularly as far as the contracting parties' obligations and non-performance are concerned, appear to be justified.

4. CONCLUSION

As a conclusion, we could point out the relevance and need for studies on the Vienna Convention in light of the fact that, although Brazil did not adhere to it, it may become applicable given its self-applicability -- art. 1(1)(a), as provided for by the Introduction to the Civil Code Act, the Arbitration Act, the MERCOSUR International Commercial Arbitration Agreement, and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, celebrated in New York, in June 10, 1958.

The study of the Convention is equally important in the light of its treatment of an obligation's defective performance, since, affording it maximal scope, without distinguishing whether the obligation is primary or secondary, it offers the injured party a number of options in those cases that, in contrast to Brazilian law, promotes an enhanced balance between the contracting parties; it also aims at contract preservation and limits the right to avoid the contract to cases of fundamental breach that cause such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract.

That concept -- that of fundamental breach -- by the way, foreign to Brazilian statutory law, would introduce considerable modifications in the structure of Obligations Law, whose acceptance among scholars and judges are already perceptible, in spite of the fact that Brazil has not adhered to the Convention so far.

One could say, in addition, that the Convention, adopting concepts coming from distinct legal systems, enables the reception of its concepts and legal structures by national legal systems in a relatively easy and flexible way. The full understanding of the Convention's mechanisms is the task of practitioners in the field of international trade and arbitration law. The great number of countries that adhered to the Convention demonstrates its elevated acceptance level and the possibility of its acceptance by countries whose legal systems are not always identical. As Jean-Paul BERAUDO points out, the Vienna Convention's wide acceptance "means that the legal rules it adopted are compatible with diversified, Civil and Common Law, legal traditions, and, in any case, that they are economically neutral."[173]

Given the aspects that characterize and bring the Convention's legal model closer to Brazilian law, its reception would result in the following effects, among others:

-	Translate into statutory provisions principles already accepted by scholars and case law;
-	Expansion of the contracting parties' obligations, today basically limited under Brazilian law to the delivery of goods and payment of price;
-	Expansion of the remedies placed at the creditor's disposal in the event of non-performance, today limited to specific performance and avoidance, that in most cases requires judicial intervention and is costly and time-consuming, in way that is incompatible with the speed and efficiency required in international trade;
-	The contract preservation principle's provision in statutory law, necessary to the contract economy and economic relations continuity;
-	Damages mitigation duty's provision in statutory law;
-	Extension to civil and commercial contracts of the replacement and unsatisfactory performance reparation obligations, whose existence today is limited to commercial contracts only, to which apply only the first one, and consumer contracts, to which both apply; and
-	The statutory maintenance in civil law of the unsatisfactory obligation performance concept, as provided for by art. 1.056 of the Civil Code of 1916 and the Convention, in light of the fact that it was omitted from counterpart art. 389 of the new Civil Code.[174]

Finally, one could state that the Vienna Convention is a valuable harmonization instrument in light of the accelerated and unavoidable process of globalization of markets, whose effects are perceptible in member countries of Mercosur that have internalized it, as recommended by the V Inter-American Conference Specialized in Private International Law - also referred to as CIDIP V.

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FOOTNOTES

* This essay is based on a paper presented to the specialization course named The New International Law – Specialization in International Law of the School of Law of the Federal University of Rio Grande do Sul, in August 7, 2001, as partial requirement for the diploma of 'Specialist in International Law', under the coordination of the Professor Véra Maria Jacob de Fradera. This article was recently published in its Portuguese version as Chapter in the Book O Novo Direito Internacional – Estudos em homenagem a Erik Jaime, under the direction of the Professors Cláudia L. Marques and Nádia de Araujo, Rio de Janeiro, Renovar, 2005, pp. 497-548.

** Doctoral studies jointly coordinated by Robert Schuman University -- Strasbourg III, France, and University of São Paulo – USP; D.E.A. (LL.M) in International Law; (Robert Schuman University -- Strasbourg III); Master in International Law and Law of Integration (Federal University of Rio Grande do Sul -- UFRGS). Diploma of 1st and 2nd Grade at the Faculté International de Droit Comparé (Association International de Droit Comparé); Brazilian attorney at the Porto Alegre and Vitória Bars Associations.

1. Quoted by Professor Kurt H. NADELMANN in the Prologue to the Mexican edition of André TUNC e Suzanne TUNC book: El Derecho de los Estados Unidos de América: Instituciones judiciales, fuentes y técnicas, 2 ed., México, D. F.: Imprenta Universitaria, 1957.

2. This essay was translated by Ana Gerdau de Borja, Diego Fraga Lerner, Eduardo Guimarães Wanderley, Fernando Lusa Bordin, Filipe Scherer Oliveira, Lucas Lixinski, Mariana Furlanetto Somensi, Miguel Augustin Kreling, Rafael Pellegrini Ribeiro. The translation work was organized, and the translated version was revised, by Miguel Augustin Kreling and Felipe Francisco Ballvé Alice (LL.M. University of Texas at Austin). All these people are students at the School of Law of the Federal University of Rio Grande do Sul.

3. Hereinafter Convention or Vienna Convention, as it is commonly known.

4. This expression, widely accepted by European scholars, is used to demonstrate the high level of acceptance of the Vienna Convention, today ratified and adhered to by 62 States, among them: Germany, Argentina, Australia, Bulgaria, Canada, Chile, China, Cuba, Ecuador, United States of America, Finland, France, Greece, Italy, England, Iraq, Luxembourg, Mexico, Norway, New Zealand, Peru, Russia, Uruguay and Venezuela. According to Professor Claude WITZ, Le champ d'application de la Convention de Vienne, in: La vente éclatée, p. 79: "Un droit mondial de la vente internationale de marchandises se met progressivement en place". In 1989, an arbitrator designated the Vienna Convention as a universal rule, bearing in mind the number of possible ratifications and adherences in the near future (Decision given in Arbitral Award CCI n° 6281, JDI, 1989, p. 1114). These assertions have been confirmed mainly because of the actual number of ratifications and adherences. However, the Convention's vocation to become a universal rule on the subject results from its own making-process; the treaty-making, by opening the opportunity of its application through the rules of private international law, created a way to gather a larger number of States.

5. Patrícia Bezerra de M. GALINDO DA FONSECA, O Brasil perante uma Nova Perspectiva de Direito Mercantil Internacional. (Brazil before a new perspective of international commercial law), inRevista Forense, vol. 341, abril 1998, p. 193. As the author emphasizes, (op. cit., p. 193), the Convention "was written under the goal of facilitating the international trade. The analysis of the text reveals itsdegree of commitment through the promotion of a normative body that aims at regulating, whenever possible, the inevitable conflicts arisen from the commercial and legal relations progressively intensified."

6. In the same way as the BGB (Bürgerliches Gesetzbuch -- German Civil Code).

7. Act 10.406 of January 10, 2002, effective since January, 11 2003.

8. "Art. 1° -- This Convention applies to contracts of sale of goods between parties whose places of business are in different States: (...);

9. However, one should note that the Convention's application due to this rule is possible only if the Contracting State did not present the reservation established in article 95, which provides that any State may "declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph (1) (b) of article 1 of this Convention."

10. Opened to signature during the closing session of the Conference, only 5 countries, from a group of 62 States (including Brazil) signed the Convention: Austria, Chile, Gana, Hungary and Yugoslavia (XII Plenary Session held in Vienna on April 11, 1980) (A/CONF.97/SR12). In A/CONF.97/19 - Conferencia de las Naciones Unidas sobre los Contratos de Compraventa Internacional de Mercaderias -- Documentos Oficiales. Nueva York: Naciones Unidas, 1981. According to article 91, the Convention was opened was opened to signatures at the Headquarters of the United Nations until September 30, 1981 and opened to accession by any State which is not a signatory party from April 11, 1980 onwards.

11. Act 4.657 of September 4, 1942.

12. "Art. 9°. The obligations are governed by the law of the country where they are incurred (...);

13. "Art. 2°At the parties' discretion, arbitration may be conducted under the rule of law or in equity.

14. See: Economic Agreement Mercosur -- Chile enacted in June 25, 1996.

15. The Convention entered in force in Argentina through the Act 22.765 of May 24, 1983. In Chile, through Act 544 of December 3, 1990 and in Uruguay through Act 16.879 of January 2, 2000.

16. Promulgated by Decree 4.719 of May 4, 2003. The content of this Agreement is identical to the Agreement on International Commercial Arbitration signed by Mercosur, Bolivia and Chile. (Council Decision 4/98). For a better understanding of these and other agreements on international arbitration, see María Blanca NOODT TAQUELA, Arbitraje internacional en el Mercosur, Buenos Aires, Ciudad Argentina, 1999.

17. About the Vienna Convention's applicability in Brazil, see the recent PhD. paper : Iacyr de Aguilar VIEIRA, La Convetion des Nations Unies sur les contrats de vente internationale de marchandises et son applicabilté au Brésil, Thèse, Strasbourg, 2003.

18. Luis Renato FERREIRA DA SILVA, Das regras contratuais no MERCOSUL: as normas conflituais e as normas de Direito Material. In: MERCOSUL -- Seus efeitos jurídicos, econômicos e políticos nos Estados-Membros. Maristela Basso (org.) Livraria do Advogado Editora: Porto Alegre, 1997, pp. 189-208, specially p. 205. Alejandro M. GARRO, Armonización y unificación del derecho privado en América latina: esfuerzos, tendencias y realidades. In Direito e Comércio Internacional -- Tendências e Perspectivas. Estudos em homengam a Irineu Strenger, São Paulo: LTr, 1994.

19. Iacyr de Aguilar VIEIRA, O interesse na utilização de um Direito Uniforme sobre a venda internacional, como é o caso da "Convenção das Nações Unidas sobre Contratos de Compra e Venda Internacional de Mercadorias": o equilíbrio das suas regras, a sua compreensão e seu caráter incompleto. In Direito internacional privado. Luis Fernando FRANCESCHINI e Marcos WACHOWICZ (organizers), Curitiba, Juruá, 2001, p. 187.

20. It is important to note, however, that it will be inevitable to constantly refer to statutes repealed by the new Code because of the treatment and conflicting solutions sometimes admitted in these acts and that the reform wrongly, in our view, did not consider improvements, specially those embodied in the case law of the Superior Court of Justice, as will be shown.

21. The subject matter was regulated by the Civil Code of 1916 in different parts. The defective performance category was admitted in art. 1.056, that provided that any obligation had to be fulfilled at the time and manner agreed; in the redhibitory defects specific provisions (arts. 1.101 et seq.); in the eviction provisions (art. 1.107 et seq.); in other provisions on defects in general, including defects at law (claims of third parties).

22. Although repealed by the new Civil Code, that entirely