Go to Database Directory || Go to Bibliography

Cure by Non-Conforming Party:
Perspectives from the CISG, UNIDROIT Principles, PECL and Case Law

[2nd edition: Case annotated update (March 2005)]

Chengwei Liu
LL.M. of Renmin University of China; e-mail: <lexway@mail.com>.

  1. Introduction
  2. Overview of the Relevant Rules
  3. Cure in Relation to Avoidance
    3.1  Introduction
    3.2  The relationship in general
    3.3  Cure depending on the absence of a declaration of avoidance
    3.4  Cure allowed if no avoidance declared, regardless of a fundamental breach
    3.5  Cure not allowed in case time for performance is of essence, even if no avoidance declared
  4. Conditions for Invoking Cure
    4.1  In general
    4.2  Without unreasonable delay
    4.3  No unreasonable inconvenience caused
    4.4  No uncertainty of reimbursement of expenses
    4.5  Appropriate in the circumstances  and with no legitimate interest in refusing cure
  5. Notice of Cure
  6. Effects of the Notice
    6.1  Obligation of the aggrieved party to permit cure
    6.2  Suspension of inconsistent remedies
    6.3  The right retained to claim damages
  7. Concluding Remarks

Key provisions at issue

1. Introduction

At the outset, it is to be made clear that the "cure" to be discussed here is distinguished from the case where "cure" is used as a form of performance as required by the aggrieved party under the remedy of specific performance. The decision to invoke the "cure" to be discussed here rests on the non-performing party; whereas the right to require cure in the sense of specific performance is vested in the aggrieved party.

A sales transaction may be regarded (at the extremes) either as a duel fought with deadly weapons or as a relationship calling for cooperation and accommodation. The latter, of course, is the attitude of persons engaged in commerce.[2] This approach is reflected in the cure provisions, especially Art. 48 of the United Nations Convention on Contracts for the International Sale of Goods (1980; "CISG" or "Convention"). Contrary to the remedy of price reduction under CISG Art. 50 which was drafted from the perspective of the aggrieved buyer, the cure under CISG Art. 48 was drafted from the perspective of the seller, precisely, the non-performing seller. It is here recalled that CISG Art. 50 contains the remedy of price reduction but clearly limits it if the seller has a right to cure. It is made expressly clear in the text of CISG Art. 50 that the right to cure (both Art. 37 and Art. 48) prevails over the right to reduce the price, just as it prevails over all other remedies.[3] It seems very reasonable that the seller can opt to cure the defect rather than being obligated to receive less money.[4] This deserves to balance the position between buyer and seller so that the seller has an opportunity to have some input into the resulting remedy pursued by the buyer. The combination of these two remedies (price reduction and cure) can be viewed in light of the CISG's purpose to preserve the parties' bargain wherever possible.[5]

The right to cure is not new in international trade and had been recognized, in some form or other, by the national legislation of several countries.[6] Indeed, most national laws recognize in some form a defaulting party's right to cure a non-performance.[7] Even many of those legal systems that do not have a rule permitting cure would normally take a reasonable offer of cure into account in assessing damages.[8] Two stages are covered under this right of the non-performing party: one is to make a new and conforming tender where the time for performance has not yet arrived; and the other is to remedy, even after the date for performance, any failure to perform one's obligations. The former is not, however, a "true" right against non-performance; since, as a matter of law, no breach of contract or non-performance could have been triggered had the performance not become due. Thus, rules such as those expressed in UCC 2-508 or CISG Art. 37 which deal with cure where the time for performance has not yet expired,[9] will not be the focus in the following discussions; the discussions will instead be focused on the case where the non-performing party is granted, even after the date for performance, a right (an opportunity) to cure its non-performance.

Time that has passed, of course, cannot be recalled; "remedy" is intrinsically impossible.[10] For instance, if the seller has not delivered by the contract delivery date of 1 June but delivers on 15 June, he has cured his failure to deliver but he has not and cannot cure his failure to deliver by 1 June. Nevertheless, CISG Art. 48 authorizes him to remedy his failure in this manner if he can do so before the delay amounts to a fundamental breach.[11] A similar right isgranted to the non-performing party under both Art. 7.1.4 of the UNIDROIT Principles of International Commercial Contracts (1994; "UNIDROIT Principles") and Art. 8:104 of the Principles of European Contract Law (1998; "PECL"). Thus, the non-performing party may not only be required to, but also may be entitled to cure its non-performance. In the latter situation, the aggrieved party's remedies are limited to the extent that the aggrieved party may not resort, during the cure period, to any remedy inconsistent with that cure except for the claim for damages. The following presents a detailed discussion of this right of the non-performing party to render cure.

2. Overview of the Relevant Rules

CISG Art. 48 provides a general right for the seller to cure even after the date for delivery. It states in detail that:

(1) Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention.

(2) If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.

(3) A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision.

(4) A request or notice by the seller under paragraph (2) or (3) of this article is not effective unless received by the buyer.

The above Article, though in many ways an unremarkable article,[12] is a companion to CISG Art. 37 which regulates the right of the seller to remedy any failure to perform his obligations prior to the date for delivery, to CISG Art. 46 which regulates the buyer's right to require performance, and to CISG Art. 47 which regulates the buyer's right to grant an additional period of time (Nachfrist) for late performance.[13]

The cure under CISG Art. 48 is a strong right in that it goes against the terms of the contract.[14] Especially, it "limits the rights of the buyer insofar as he may not draw all consequences from a breach of contract as long as the seller has the right to remedy a failure."[15] This strong right has been basically followed under UNIDROIT Principles Art. 7.1.4, which further "encourages the worldwide acceptance of a general right to cure."[16] UNIDROIT Principles Art. 7.1.4 provides the following details regarding Cure by Non-performing Party:

(1) The non-performing party may, at its own expense, cure any non-performance, provided that

(a) without undue delay, it gives notice indicating the proposed manner and timing of the cure;
(b) cure is appropriate in the circumstances;
(c) the aggrieved party has no legitimate interest in refusing cure; and
(d) cure is effected promptly.

(2) The right to cure is not precluded by notice of termination.

(3) Upon effective notice of cure, rights of the aggrieved party that are inconsistent with the non-performing party's performance are suspended until the time for cure has expired.

(4) The aggrieved party may withhold performance pending cure.

(5) Notwithstanding cure, the aggrieved party retains the right to claim damages for delay as well as for any harm caused or not prevented by the cure.

The UNIDROIT Principles, unlike the CISG which separately deals with cure before the date for delivery in CISG Art. 37 and with cure after the delivery date in CISG Art. 48, "stipulate one general right to cure in Art. 7.1.4 regardless of object or time."[17] Moreover, unlike CISG Art. 48 (nor like Art. 37) which limits the right to cure to the seller, UNIDROIT Principles Art. 7.1.4 vests a right to invoke cure in any non-performing party. Nevertheless, they offer "a solid normative basis for cross-interpretation and gap-filling."[18]

In substance, UNIDROIT Principles Art. 7.1.4 is grounded in the same philosophy as CISG Art. 48.[19] As is made clear in the Comment on Art. 7.1.4 of the UNIDROIT Principles, the cure by non-performing party,[20]

"favours the preservation of the contract. It also reflects the policy of minimising economic waste, as incorporated in Art. 7.4.8 (Mitigation of harm), and the basic principle of good faith stated in Art. 1.7."

A general right to cure has also been envisaged in PECL Art. 8:104, again encouraging the worldwide acceptance of the right of the non-performing party to render cure. PECL Art. 8:104, though simpler than either CISG Art. 48 or UNIDROIT Principles Art. 7.1.4, grants the right to cure a non-confirming tender in the way that:

A party whose tender of performance is not accepted by the other party because it does not conform to the contract may make a new and conforming tender where the time for performance has not yet arrived or the delay would not be such as to constitute a fundamental non-performance.

Arguably, the CISG, UNIDROIT Principles and PECL each supports the principle of maintaining the contract (favor contractus). This principle is particularly evidenced by the existence of a right for the non-performing party to render cure in accordance with CISG Art. 48, UNIDROIT Principles Art. 7.1.4, or PECL Art. 8:104. As a starting point, however, it is to be stressed that the availability of cure as a right of the non-performing party, among other things, "will depend on whether time is of the essence or has become of the essence. In either of these cases there is no right to cure."[21] (This condition will be further discussed below in section 3.5.)

3. Cure in Relation to Avoidance

      3.1 Introduction

As expressly stated in Art. 48(1) CISG, the non-performing seller's right to render cure is subject to CISG Art. 49, which stipulates the buyer's right to declare avoidance. As a consequence, a question arises concerning the relationship between the non-performing seller's right to cure (according to Art. 48 CISG) and the aggrieved buyer's right to avoid the contract (according to Art. 49 CISG).

The opening phrase "Subject to article 49" in CISG Art. 48 is less than clear in itself. On the one hand, under CISG Art. 48(1) the seller is empowered to cure at his own expense "any failure" to perform his obligations. It is a general provision, which covers fundamental and non-fundamental breaches. On the other hand, by virtue of CISG Art. 49(1) the buyer is given an option to avoid the contract where the seller's failure amounts to a fundamental breach, whether the seller offers to cure or not.[22]

Thus, with the availability of the right to terminate the contract, on the one hand, and the liberty to cure, on the other, controversy arises regarding which right shall prevail, the non-performing party's right to render cure or the aggrieved party's right to declare avoidance?

      3.2 The relationship in general

During the draft of the CISG, the relationship between avoidance and cure was already a highly controversial issue throughout the UNCITRAL Working Group's sessions. The issue again became the subject of considerable debate at the Vienna Conference.[23] Even under the present Convention, the relationship between the seller's right to cure and the buyer's right to avoid the contract has often been discussed. This would be of particular interest in a situation where the buyer could avoid the contract under Art. 49 but has not done so yet, and the seller has offered to cure the defect.[24]

According to Honnold, there was widespread agreement (during the CISG drafting) that whether a breach is fundamental should be decided in the light of all the circumstances including the seller's rightful offer to cure and that the buyer's right to avoid the contract (Art. 49(1)) should not nullify the seller's right to cure (Art. 48(1)).[25] On the contrary, Jafarzadeh believes that, "the legislative history of the provision clearly shows that the majority of delegations at the Conference were opposed to the approach which sought to give absolute priority to the seller's right to cure over the buyer's right to avoid the contract under Art. 49(1)(a). The opening words of Art. 48 were adopted upon this general understanding."[26]

Indeed, since opinions remained divided, the present cross-reference to Art. 49 was adopted to embrace both of the conflicting provisions (O.R., I, 115). The relationship of cure and avoidance thus remains open to interpretation (O.R., II, 352). It has to be noted, however, that a breach is rarely fundamental when the failure of performance could easily be remedied.[27] In practice, the willingness of the non-performing party to cure a failure of performance has often been taken into account as a factor in determining a fundamental breach of contract. For instance, in [Germany 31 January 1997 [Appellate Court] Koblenz], it is held that, in order to determine the occurrence of a fundamental breach regard is to be had not only to the nature of the lack of conformity but also to the readiness of the seller to remedy the non-conformity without unreasonable delay and unreasonable inconvenience to the buyer (Art. 48 CISG).[28] Especially, it is arguable that:[29]

"Where the failure to meet a deadline in itself does not constitute a fundamental breach - in other words, when time is not of the essence - the seller's cure within a reasonable time after the due date will normally prevent the delay from constituting a 'fundamental breach of contract' such as to permit the buyer to avoid the contract."

But this rule should not be misunderstood to mean that in each case the seller must first be offered an opportunity to cure.[30] In this respect, it is properly noted in the UNCITRAL Digest:[31]

"Generally, it has been determined that it is for the [entitled] buyer to decide whether or not the contract should be avoided. If a right to avoidance is established the buyer may exercise it without being restricted by the seller's right to cure."

Therefore the buyer who is entitled to avoid the contract need not wait first for cure but may declare the contract avoided at once.[32] At least, as explicit from the opening words of CISG Art. 48, the aggrieved buyer would be able to exercise his right under Art. 49(1) where the seller does not show his ability and willingness to cure the breach, since the buyer should not be deprived of his right for the mere possibility of curing the breach by the seller. This is because the buyer is not under any duty under the Convention to discover the possibility of cure by the seller and to give him an opportunity to cure.[33]

      3.3 Cure depending on the absence of a declaration of avoidance

Undoubtedly, the words "Subject to article 49" opening CISG Art. 48, are somewhat ambiguous and have generated much controversy, and remain open to interpretation. By contrast, a clearer guidance in this respect has been introduced under the UNIDROIT Principles. But, in this respect, UNIDROIT Principles has gone too much in the other direction when it expressly states in Art. 7.1.4(2) that: "The right to cure is not precluded by notice of termination." It is further stated in the Comment to the Principles:[34]

"If the aggrieved party has rightfully terminated the contract pursuant to Arts. 7.3.1(1) and 7.3.2(1), the effects of termination (Art.7.3.5) are also suspended by an effective notice of cure. If the non-performance is cured, the notice of termination is inoperative. On the other hand, termination takes effect if the time for cure has expired and any fundamental non-performance has not been cured."

According to Kee, the above Art. 7.1.4(2) of UNIDROIT Principles can only be interpreted to mean that if the breach is capable of cure it cannot be a "fundamental non-performance"; to do otherwise would mean that it was possible to do the impossible and breath new life into a terminated contract. As a result, the UNIDROIT provision has been rightly criticized for the uncertain position in which it places the buyer, and implicit in that criticism is a preference for the CISG Art. 48 approach.[35]

In my point of view, although the seller may also be left under CISG Art. 48 in a position of uncertainty because his right to cure may be overridden if the buyer avoids the contract pursuant to Art. 49, it seems more justifiable to place the risk of such uncertainty on the part of the non-performing party rather than on the aggrieved party. Another ground supporting the criticism over the approach of UNIDROIT Principles Art. 7.1.4(2), is the fact that no equivalent provision has been followed in the counterpart PECL Art. 8:104.

Thus, with the fact kept in mind that the relationship of cure and avoidance remains open to interpretation,[36] it may be generally submitted here:

On the one hand, no absolute priority to the non-performing party's right to cure should be given over the aggrieved party's right to avoid the contract, since the aggrieved party should in no event be deprived of his right for the mere possibility of cure.

On the other hand, nor can a justified avoidance which has already been declared with a notice, be suspended by a subsequent notice of cure; for no remedy, even for the sake of preserving the bargain between parties, should be allowed to breath new life into a contract already terminated; otherwise the aggrieved party would be unjustifiably placed in a position of uncertainty.

In any event, the seller's right to cure depends, among other things, on the buyer not having rightfully avoided the contract.[37] However, it cannot be generally argued from the opening phrase "Subject to article 49" that avoidance of the contract therefore excludes the seller's right to cure. What is decisive in shaping a persuasive relationship between the two remedies, in light of the basic underpinning to preserve the parties' bargain wherever possible, is the clear distinction to be made between the right to avoidance and the declaration of avoidance: on the one hand, as already noted above, the seller's right to cure depends on the absence of a declaration of avoidance by the entitled party; on the other hand, "cure is not precluded merely because the failure to perform amounts to a fundamental non-performance."[38] This latter case will be given details below.

      3.4 Cure allowed if no avoidance declared, regardless of a fundamental breach occurred

Arguably, as the Court in [Switzerland 5 November 2002 Handelsgericht [Commercial Court] des Kantons Aargau] notes, the Convention,[39]

"proceeds from the fundamental precedence of preservation of the contract, even in case of an objective fundamental defect (emphasis added). When in doubt, the contract is to be maintained even in case of fundamental defects, and an immediate contract avoidance should stay exceptional (emphasis added). Because, as long as and so far as (even) a fundamental defect can still be removed by remedy or replacement, the fulfillment of the contract by the seller is still possible and the buyer's essential interest in the performance is not yet definitively at risk."

However, I do not think it is a rule adopted by "doctrine as well as jurisprudence of the UN Sales Law," when this Court states that "an objective fundamental defect does not mean a fundamental breach of contract when the defect is removable and the seller agrees to remedy this defect without creating unreasonable delay or burden on the buyer." It seems that this Court in submitting such an interpretation misses the point, particularly when it further concludes that, "the buyer does not have the right to avoid the contract even in case of an objective fundamental defect as long as and as far as the seller comes up with a remedy (subsequent cure of the defect) and such is still possible."[40] In my view, the aggrieved party is always entitled to avoid the contract so long as a fundamental breach is established; but he is in no event obligated to do so. Thus, in the absence of a declaration of avoidance, even if a fundamental breach occurred and thereby justifying such a declaration, "cure is not precluded merely because the failure to perform amounts to a fundamental non-performance."[41]

In the absence of a declaration of avoidance, cure should be allowed. This is supported by such basic ideas as the preservation of the contract and good faith. On the other hand, of substantial relevance, it follows from the general rule that under the CISG (as well as under UNIDROIT Principles or PECL), avoidance requires a unilateral declaration of the party loyal to the contract made to the other party.[42] That is to say, a fundamental breach of contract never leads automatically to the avoidance of such a contract by operation of law. To the contrary, it is always mandatory to declare the avoidance of the contract.[43] Thus, so long as no declaration has been made to the effect of bringing the contract to an end, the contract remains binding on both the aggrieved party and the non-performing party.

Therefore, in the absence of a declaration of avoidance, an opportunity for cure should be offered to the non-performing party, provided that no unreasonable delay or inconvenience would be caused to the aggrieved party. In line with this understanding, it seems the Secretariat Commentary is more prudent in precisely stating that:[44]

"The seller may remedy his failure to perform under this article [CISG Art. 48] even though the failure to perform amounts to a fundamental breach, so long as that fundamental breach was not a delay in performance (emphasis added). Thus, even if the failure of the goods to operate at the time of delivery constituted a fundamental breach of contract, the seller would have the right to remedy the non-conformity in the goods by repairing or replacing them, unless the buyer terminated the seller's right by declaring the contract avoided (emphasis added)."

Of course, at the same time, the aggrieved party who was entitled to declare avoidance, may be placed at the risk of losing the opportunity to such a declaration after the breach is cured. That is to say, "[o]nce the seller has remedied his failure to perform or has remedied it to the extent that it no longer constitutes a fundamental breach of contract, the buyer may no longer declare the contract avoided."[45] Nevertheless, it costs for the aggrieved party to be subjected to such a risk, particularly in view of the economic waste minimized and the bargain stabilized with the preservation of the contract without unreasonable delay or any unreasonable inconvenience caused to the aggrieved party. Such a solution, functionally similar to Nachfrist, is,[46]

"in line with the attempt to overcome some of the problems of distance, expense and time in having an international contract terminated where, operating under another general principle of the CISG, namely good faith, remedial action could have been possible, resulting in a win-win situation."

      3.5 Cure not allowed in case time for performance is of essence, even if no avoidance declared

As discussed above, the non-performing seller may remedy his failure to perform under CISG Art. 48 even though that failure amounts to a fundamental breach, provided that no avoidance has been declared. However, it is to be noted that this remedy is limited to the case where "fundamental breach was not a delay in performance."[47] In respect of this condition, it is further noted in the Secretariat Commentary that:[48]

"The rule that the seller may remedy his failure to perform only if he can do so without such delay as would amount to a fundamental breach of contract applies to two different situations: where there is a complete or substantial failure to deliver the goods and where the goods as delivered, have such a non-conformity that either at the moment of delivery, or at some later time, the condition of those goods, if not remedied, would constitute a fundamental breach of contract. The seller no longer has the right to remedy the failure to perform after the delay amounts to a fundamental breach even if the buyer has not as yet declared the contract avoided (emphasis added)."

Similarly, it is also noted that the non-performing party is not entitled to cure under UNIDROIT Principles Art. 7.1.4, if "timely performance is required by the agreement or the circumstances."[49] More expressly, PECL Art. 8:104 specifically states that the right to cure a non-confirming tender is granted only "where the time for performance has not yet arrived or the delay would not be such as to constitute a fundamental non-performance." According to the companying Comment on PECL Art. 8:104:[50]

"This will depend on whether time is of the essence or has become of the essence, e.g. by the giving and expiry of a notice under Article 8:106 [Nachfrist]. In either of these cases there is no right to cure under this Article."

4. Conditions for Invoking Cure

      4.1 In general

Generally speaking, the non-performing party is only entitled to cure his non-performance if the other party can reasonably be expected to accept the belated remedy.[51] Therefore, only when certain conditions are met, could the non-performing party be allowed to invoke his right to cure. Nevertheless, it is to be made clear at the outset that, even if the non-performing party no longer has the right to remedy his failure to perform for the failure to satisfy the required conditions, the parties can agree to his doing so.

In respect of these conditions, CISG Art. 48(1) provides that the exercise of the right to cure should be taken "without unreasonable delay", and should not cause the aggrieved buyer "unreasonable inconvenience" or "uncertainty of reimbursement by the seller of expenses advanced by the buyer". Similarly, notice of cure under the UNIDROIT Principles is considered to be "effective" only when the requirements of para. (l)(a) - (c) of Art. 7.1.4 have been met.[52] For the purpose of invoking the cure under PECL Art. 8:104, it is also a rule that the party making the non-conforming tender will still be in time to cure the defect if he makes a new tender either before the due date for performance or where the delay is not such as to constitute a fundamental non-performance.[53]

The principal effect and purpose of these conditions is the same, namely that there must not be unreasonable inconvenience caused to the aggrieved party for the non-performing party to exercise its right to render cure and it must be reasonable for the aggrieved party to accept such a cure.

      4.2 Without unreasonable delay

Among other things, CISG Art. 48(1) states that the breaching seller may cure only if he can do so without unreasonable delay. Similarly, Art. 7.1.4(1)(d) of the UNIDROIT Principles requires that "cure is effected promptly".

Generally speaking, there are three kinds of delay caused by curing: a delay which constitutes a fundamental breach of contract and is dealt with by Art. 49(1)(a); a delay which does not amount to a fundamental breach but still appears unreasonable; and finally a delay which is not unreasonable. Only the last opens the way for the right to cure.[54]

As a rule, unreasonableness depends on the circumstances of each case, including the nature of the goods and their intended use.[55] Despite such a broad interpretation, the following ruling found in [Switzerland 10 February 1999 Handelsgericht [Commercial Court] Zürich] is of particular notice:[56]

"An unreasonable delay will generally be caused if a failure to keep to the delivery date already constituted a fundamental breach of contract or if the further delay led to a fundamental breach (citation omitted)."

In any event, cure must be effected promptly after notice of cure is given. Time is of the essence in the exercise of the right to cure. The non-performing party is not permitted to lock the aggrieved party into an extended waiting period.[57] Furthermore, it is to be noted that even the lack of inconvenience (another condition to be shown below) on the part of the aggrieved party does not justify the non-performing party in delaying cure.[58]

      4.3 No unreasonable inconvenience caused

Even if the cure were effected promptly, cure would not be available if the cure would cause the aggrieved party "unreasonable inconvenience." In this respect, the Secretariat Commentary mentions the case of resold goods of which the buyer has declared a price reduction:[59]

"At some point of time the buyer must be able to use or resell the goods free of the spectre that the seller will claim the right to remedy his failure to perform. It is clear from the text of article 44(1) [draft counterpart of CISG article 48(1)] that the simple fact that the buyer has declared the price reduced or claimed damages is not enough to cut off the seller's right to remedy his failure to perform. However, the fact that the buyer has declared the price reduced or claimed damages may be a factor in determining whether it would now be unreasonably inconvenient to the buyer for the seller to remedy his failure to perform."

According to the Secretariat Commentary: "It might also be unreasonably inconvenient to the buyer if the seller needed extensive access to the buyer's place of business in order to remedy the failure to perform."[60]

Again, what constitutes "unreasonable inconvenience" cannot be finally determined in general terms. It varies from case to case, depending on the circumstances.[61] That it to say, what unreasonable inconvenience means can only be decided on a case-by-case basis.[62]

      4.4 No uncertainty of reimbursement of expenses advanced by the buyer

At first it seems quite natural that the seller must bear the costs involved in remedying a failure to perform. However, the buyer may also incur expenses, for instance when he has to send back exchanged goods.[63]

Therefore, CISG Art. 48(1) further conditions the cure that it should not cause "uncertainty of reimbursement by the seller of expenses advanced by the buyer." It implies that the seller has to bear the costs which the buyer incurs when the seller remedies defects of the delivered goods.[64] In respect of this condition, it is generally believed that the amount of the expense is not considered. However small the amount, what counts is the uncertainty of its recovery. As noted by Will, the uncertainty concerns not only the danger of bankruptcy or insolvency, but also any serious doubt as to the ability or even the willingness of the seller to reimburse expenditures when due. The seller must be able to cure without giving rise to any uncertainty in this respect.[65]

However, the amount of expenses incurred prior to reimbursement by the seller may constitute an unreasonable inconvenience. This is pertinently noted in the Secretariat Commentary, which further indicates that the test would rather be whether the uncertainty creates unreasonable inconvenience. The Secretariat Commentary states:[66]

"Article 44(1) [draft counterpart of CISG article 48(1)] recognizes that the buyer may have to incur certain expenses in order for the seller to remedy his failure to perform. This in itself does not give the buyer a reason to refuse to allow the seller to remedy his failure to perform. However, if the amount of expenses incurred prior to reimbursement by the seller would be an unreasonable inconvenience to the buyer or if there was an unreasonable uncertainty that the buyer would be reimbursed for those expenses, the buyer may refuse to allow the seller to remedy his failure to perform."

Indeed, as Will thoughtfully noted:[67]

"The wording of Article 48(1) seems to suggest three different conditions (delay, inconvenience, and uncertainty of reimbursement), but in fact inconvenience is the only condition. Delay and uncertainty of reimbursement are but the two most common examples of inconvenience to the buyer."

In this view, Will generally states that: "Unreasonable inconvenience is a catch-all notion below the level of fundamental breach."[68] Thus, it has been generally stipulated in UNIDROIT Principles Art. 7.1.4(1)(b) as a condition to cure that "cure is appropriate in the circumstances." This will be furthered below.

      4.5 Appropriate in the circumstances and with no legitimate interest in refusing cure

UNIDROIT Principles Art. 7.1.4(1)(b) generally states as a condition to cure, somewhat summing up the above conditions of the CISG, that "cure is appropriate in the circumstances." According to the Comment:[69]

"Whether cure is appropriate in the circumstances depends on whether it is reasonable, given the nature of the contract, to permit the non-performing party to make another attempt at performance. As indicated in para. (2), cure is not precluded merely because the failure to perform amounts to a fundamental non-performance. The factors to be considered in determining the appropriateness of cure include whether the proposed cure promises to be successful in resolving the problem and whether the necessary or probable delay in effecting cure would be unreasonable or would itself constitute a fundamental non-performance. However, the right to cure is not defeated by the fact that the aggrieved party subsequently changes its position. If the non-performing party gives effective notice of cure, the aggrieved party's right to change position is suspended. Nonetheless, the situation may be different if the aggrieved party has changed position before receiving notice of cure."

Additionally, it is provided in Art. 7.1.4(1)(c) of the UNIDROIT Principles that the cure is allowed only when "the aggrieved party has no legitimate interest in refusing cure." Indeed, it has also been noted that the little interest of the buyer could constitute a problem of CISG Art. 48 when the seller of his own accord offers repair.[70] In this respect, it is further interpreted in the UNIDROIT Principles Comment:[71]

"The non-performing party may not cure if the aggrieved party can demonstrate a legitimate interest in refusing cure. However, if notice of cure is properly given and if cure is appropriate in the circumstances, it is presumed that the non-performing party should be permitted to cure. A legitimate interest may arise, for example, if it is likely that, when attempting cure, the non-performing party will cause damage to person or property. On the other hand, a legitimate interest is not present if, on the basis of the non-performance, the aggrieved party has simply decided that it does not wish to continue contractual relations."

In any event, it may be generally concluded that the right to cure is available "only if there are no circumstances which could be summed up under the notion unreasonable inconvenience."[72] And, "reasonable", as always, depends on the circumstances.[73]

On the other hand, if all conditions are fulfilled, how the seller will exercise his right to cure depends on the type of his failure to perform and on the nature of the goods. Usually he will cure by repairing or replacing deficient goods or by delivering missing quantities. However, repair and replacement should be considered to remedy the seller's failure only when they fundamentally satisfy the buyer as being conforming in the sense of CISG Art. 35. Slight variations must be tolerated within the framework of a reasonable and flexible approach as used under CISG Art. 46.[74]

5. Notice of Cure

The right to cure must be invoked by a valid notice to the aggrieved party. As it is stated in Art. 7.1.4(1)(a) of the UNIDROIT Principles, the breaching party invoking the right to cure must give, without undue delay, notice indicating the proposed manner and timing of the cure. It is further stated in the Comment:[75]

"Cure may be effected only after the non-performing party gives notice of cure. The notice must be reasonable with regard to its timing and content as well as to the manner in which it is communicated. Notice of cure must be given without undue delay after the non-performing party learns of the non-performance. To the extent information is then available, the notice must indicate how cure is to be effected and when. Notice must also be communicated to the aggrieved party in a manner that is reasonable in the circumstances."

Indeed, it is also noted in the Secretariat Commentary that: "If the seller intends to cure the non-conformity he will normally so notify the buyer. He will also often inquire whether the buyer intends to exercise his remedies of avoiding the contract or declaring the price to be reduced or whether he wishes, or will accept, cure by the seller."[76] Moreover, it does not suffice that the seller states his readiness to deliver or to cure only in general terms. He has to indicate an envisaged period of time, which is a condition for the buyer to take his decision or to be obligated to accept performance if he keeps silence.[77] Of particular relevance are the provisions of CISG Arts. 48(2) and 48(3), which both require the seller to indicate the time period within which the proposed cure will be effected. If there is no indication of this period but merely an offer to cure, the seller can draw no conclusions nor derive any rights from a failure by the buyer to respond.[78]

In addition, according to CISG Art. 48(4), a request or notice concerning seller's cure, which may be served to eliminate any uncertainty,[79] is not effective unless received by the buyer. Thus, as an exception to the dispatch principle in CISG Art. 27, the buyer under Art. 48 must receive the request or notice of the seller, otherwise the request or notice will be ineffective. Although no counterpart of CISG Art. 48(4) is found in UNIDROIT Principles Art. 7.1.4 or PECL Art. 8:104, both the UNIDROIT Principles and the PECL adopt, as a rule, the receipt principle. UNIDROIT Principles Art. 1.9(2) stipulates: "A notice is effective when it reaches the person to whom it is given." Similarly, PECL Art. 1:303(2) states that "any notice becomes effective when it reaches the addressee."

The general rule is that a party cannot rely on a notice sent to the other party unless and until the notice reaches that party, thereby placing the risk of transmission always on the party which has committed a breach of contract. However, it is to be noted that the reply by the buyer under CISG Art. 48(3) is governed by the rule in CISG Art. 27, i.e., if it is given or made by means appropriate in the circumstances it is effective, even if it does not arrive or is delayed or contains errors in transmission.[80]

6. Effects of the Notice

      6.1 Obligation of the aggrieved party to permit cure

Insofar as the non-performing party has the right to cure, there should be no need to request information as to whether the buyer will accept performance. The aggrieved party is in that case obligated to accept the cure.[81] Once the aggrieved party receives effective notice of cure, it must permit cure and cooperate with the non-performing party.[82]

In particular, in accordance with CISG Arts. 48(2) and 48(3), if the buyer indicates that it is prepared to allow the time requested by a seller to cure its breach, then the buyer is precluded from taking advantage of any remedy inconsistent with that allowance - principally the buyer cannot avoid the contract. Similarly, if the buyer fails to respond to the request or notice within a reasonable time, the buyer is deemed to be allowing the seller an opportunity to cure in accordance with the terms of the request or notice.[83] Even if the seller's notice said only that he would perform the contract within a specific period of time, paragraph (3) of CISG Art. 48 provides that the buyer must make known his decision or else he will be bound by the terms of the seller's notice unless he can show that for some reason the seller's notice should not be treated as including a request to the buyer to respond.[84]

In short, the seller may give notice of its willingness to perform. If the buyer consents or does not react within a reasonable time the seller may cure; the buyer must then accept performance and is barred from resorting to remedies inconsistent with performance. In general, the seller who has failed to perform its obligation cannot force the buyer to accept a later performance. Arts. 48(2) and (3) offer, however, a mechanism that can eventually lead to almost that result.[85] Thus, paragraphs (2) and (3), dealing with the good faith obligations of the buyer while the seller attempts to cure, extend the seller's right somewhat further to certain instances where the buyer's cooperation is necessary.[86]

Indeed, the courts have been quite clear on the seller's right to cure and the buyer's obligation to let the seller cure.[87] Even where the conditions of paragraph (1) of CISG Art. 48 are not met, paragraphs (2) to (4) of CISG Art. 48 open a second door for the seller willing to cure. Their underlying idea is that the buyer deserves protection only when he is cooperative and gives the seller a fair chance. The seller thus may offer cure, indicating dates and, if the buyer fails to react, perform within the time he indicated; the silent buyer will be barred from invoking either unreasonable delay or inconvenience and may not avoid the contract nor reduce the price, he must accept performance.[88] On the other hand, however, where the buyer clearly refuses the seller's request or notice to cure, such request or notice does not have the effects provided for paragraphs (2) and (3); rather, the buyer remains free to resort to any remedy available to him.[89]

      6.2 Suspension of inconsistent remedies

The aggrieved party is barred from resorting to any inconsistent remedies during the period for cure. It is clearly stated in the second sentence of Art. 48(2) CISG: "The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller." Similarly, UNIDROIT Principles Art. 7.1.4(3) stipulates: "Upon effective notice of cure, rights of the aggrieved party that are inconsistent with the non-performing party's performance are suspended until the time for cure has expired." (No counterpart is found in the simpler PECL Art. 8:104, however.)

Thus, when a notice of cure from the non-performing party has been given and becomes effective upon reaching the addressee, the aggrieved party during the period specified in the notice for cure, "may not exercise any remedies inconsistent with the non-performing party's right to cure until it becomes clear that a timely and proper cure has not been or will not be effected. Inconsistent remedies include giving notice of termination, entering into replacement transactions and seeking damages or restitution."[90]

This rule, similar to the same condition in claiming specific performance or serving a Nachfrist notice, clearly shows the underlying concept to keep to the contract, if possible.[91]

      6.3 The right retained to claim damages

The second sentence of CISG Art. 48(1) clearly stipulates that "the buyer retains any right to claim damages as provided for in this Convention." Similarly, Art. 7.1.4(5) of the UNIDROIT Principles states: "Notwithstanding cure, the aggrieved party retains the right to claim damages for delay as well as for any harm caused or not prevented by the cure." Although no counterpart is found in the simpler PECL Art. 8:104, it is generally stated in PECL Art. 8:102 (second sentence) that, "a party is not deprived of its right to damages by exercising its right to any other remedy."

By virtue of the above provisions, the aggrieved party retains his right to claim damages despite the cure done by the non-performing party at his own expense. That is to say,[92]

"even a non-performing party who successfully cures is liable for any harm that, before cure, was occasioned by the non-performance, as well as for any additional harm caused by the cure itself or by the delay or for any harm which the cure does not prevent."

Indeed, it is a general rule that the right to claim damages, e.g., as a result of delay, does not lapse on the ground that the non-performing party has performed in the end. But the curing of a failure to perform may have an influence on the amount of the damage claimed.[93]

7. Concluding Remarks

Generally speaking, the aggrieved party must act reasonably to mitigate damages. It is therefore required to accept new offers from the breaching party, even after a fundamental breach.[94] One should not fail to notice, however, only where certain conditions are met, could the non-performing party invoke his right to render cure. Among them are that no justified avoidance has been declared, and that the contractual date of performance is not of essence - in other words, the fundamental breach justifying an avoidance (even not declared) was not a delay in performance.

In any event, although cure is permitted outside the contract period to accommodate the non-performing party's interests, the vendor cannot rely on this unique right to the detriment of the aggrieved party.[95]


FOOTNOTES

1. See Christopher Kee in "Commentary on the Manner in which the UNIDROIT Principles May Be Used to Interpret or Supplement Article 48 of the CISG"; July 2004; available at: <http://www.cisg.law.pace.edu/cisg/principles/uni48.html>.

2. See John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Kluwer Law International, The Hague (1999), p. 318; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ho48.html>.

3. See Will in Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds., Milan (1987), p. 369; available at: <http://www.cisg.law.pace.edu/cisg/biblio/will-bb50.html>.

4. See Arnau Muriá Tuñón in "The Actio Quanti Minoris and Sales of Goods Between Mexico and the U.S.: An Analysis of the Remedy of Reduction of the Price in the UN Sales Convention, CISG Article 50 and its Civil Law Antecedents" (1998); available at: <http://www.cisg.law.pace.edu/cisg/biblio/muria.html>.

5. See Peter A. Piliounis in "The Remedies of Specific Performance, Price Reduction and Additional Time (Nachfrist) under the CISG: Are these worthwhile changes or additions to English Sales Law?": 12 Pace International Law Review 1 (2000); available at: <http://www.cisg.law.pace.edu/cisg/biblio/piliounis.html>.

6. See Will in Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds., Milan (1987), p. 347; available at: <http://www.cisg.law.pace.edu/cisg/biblio/will-bb48.html>.

7. See Comment and Notes on PECL Art. 8:104: Note 1; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp48.html>.

8. See Comment on Art. 7.1.4 UNIDROIT Principles: Comment 1; available at: <http://www.cisg.law.pace.edu/cisg/principles/uni48.html>.

9. UCC 2-508 reads in para. (1) under the heading Cure by Seller of Improper Tender or Delivery that: "Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may reasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery."

CISG Art. 37 states similarly: "If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention."

10. See John O. Honnold, supra. n. 2; p. 319.

11. See Secretariat Commentary on Art. 44 of the 1978 Draft [draft counterpart of CISG Art. 48]: Comment 12; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-48.html>.

12. See Christopher Kee, supra. n. 1.

13. Comment 1, supra. n. 11.

14. Comment 12, supra. n. 11.

15. See Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Oceana Publication (1992), p. 186; available at: <http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html>.

16. See Bertram Keller in "Early Delivery and Seller's Right to Cure Lack of Conformity: Article 37 CISG and UNIDROIT Principles Comparative", June 2004; available at: <http://www.cisg.law.pace.edu/cisg/principles/uni37.html>.

17. Ibid.

18. Ibid.

19. See Christopher Kee, supra. n. 1.

20. Comment 1, supra. n. 8.

21. Comment, supra. n. 7.

22. See Mirghasem Jafarzadeh in "Buyer's Right to Withhold Performance and Termination of Contract: A Comparative Study Under English Law, Vienna Convention on Contracts for the International Sale of Goods 1980, Iranian and Shi'ah Law" (2001); available online at <http://www.cisg.law.pace.edu/cisg/biblio/jafarzadeh1.html>.

23. Three alternatives were proposed: Alternative I: Delete the words "Unless the buyer has declared the contract avoided in accordance with [CISG article 49]." Alternative II: Delete these words and substitute the words "Subject to [CISG article 49]". Alternative III: Qualify seller's right to avoid by adding to CISG Art. 49(1)(a) the words "... and the seller does not remedy the failure in accordance with [CISG article 48]" (said to be a clarification of alternative I and that, in fact, the two constitute a single proposal). Alternatives I and III were rejected. Alternative II was accepted with minimal discussion (O. R. p. 352), which opens with the words "Subject to Art. 49, the seller may ... remedy ..." The match-up of the present Art. 48 CISG with its predecessor (Art. 44 of 1978 Draft) indicates that paras. (2) and (4) of CISG Art. 48 and 1978 Draft Art. 44 are identical; para. (3) is substantively identical (the only difference being a substitution of "under the preceding paragraph" for "under paragraph (2) of this article"). With respect to paragraph (1), one of the two changes is: The substitution of "Subject to article 49" for "Unless the buyer has declared the contract avoided in accordance with article 45 [1978 Draft counterpart to CISG article 49]." (See the match-up, available at: <http://www.cisg.law.pace.edu/cisg/text/matchup/matchup-d-48.html>.)

24. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 185.

25. See John O. Honnold, supra. n. 2; pp. 320-321.

26. See Mirghasem Jafarzadeh, supra. n. 22.

27. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/48: Digest 2; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

28. See UNILEX Abstract of the Judgment by Oberlandesgericht [Appellate Court] Koblenz, Germany 31 January 1997; No.: 2 U 31/96; available at: <http://www.unilex.info/case.cfm?pid=1&do=case&id=223&step=Abstract>.

29. See Peter Schlechtriem, Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods Manz, Vienna (1986); p. 78; available at: <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem-48.html>.

30. Digest 2, supra. n. 27.

31. Ibid.

32. Ibid.

33. See Mirghasem Jafarzadeh, supra. n. 22.

34. Comment 8, supra. n. 8.

35. See Christopher Kee, supra. n. 1.

36. See Will, supra. n. 6; p. 348.

37. See Will, supra. n. 6; p. 349.

38. Comment 3, supra. n. 8.

39. See Judgment by Handelsgericht [Commercial Court] Aargau, Switzerland 5 November 2002; No.: OR.2001.00029. English translation by Martin F. Koehler; available at: <http://www.cisg.law.pace.edu/cases/021105s1.html>.

40. Ibid.

41. Comment 3, supra. n. 8.

42. See Judgment by Oberster Gerichtshof [Supreme Court], Austria 9 March 2000; No. 6 Ob 311/99z. Translation by Marko Maljevac, translation edited by Ruth M. Janal; available at: <http://www.cisg.law.pace.edu/cases/000309a3.html>.

43. See Judgment by Landgericht [District Court] Frankfurt am Main, Germany 16 September 1991; No. 3/11 O 3/91. English translation by Stefan Kuhm; available at: <http://www.cisg.law.pace.edu/cases/910916g1.html>.

44. Comment 3, supra. n. 11.

45. Comment 4, supra. n. 11.

46. See Bruno Zeller in "Buyer's notice fixing additional final period for performance: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 47 and 49(1)(b) CISG" (2001); available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp47.html>; see also Bruno Zeller in "Seller's notice fixing additional final period for performance: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 63 and 64(1)(b) CISG" (2001); available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp63.html>.

47. Comment 3, supra. n. 11.

48. Comment 6, supra. n. 11.

49. Comment 1, supra. n. 8.

50. Comment, supra. n. 7.

51. See Judgment by Handelsgericht [Commercial Court] Zürich, Switzerland 10 February 1999; No. HG 970238.1; available at: <http://www.cisg.law.pace.edu/cases/990210s1.html>.

52. Comment 2, supra. n. 8.

53. Comment, supra. n. 7.

54. See Will, supra. n. 6; p. 352.

55. Ibid.

56. Supra. n. 51.

57. Comment 5, supra. n. 8.

58. Comment 5, supra. n. 8.

59. Comment 9, supra. n. 11.

60. Comment 10, supra. n. 11.

61. See Will, supra. n. 6; p. 352.

62. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 187.

63. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 187.

64. Digest 4, supra. n. 27.

65. See Will, supra. n. 6; p. 353.

66. Comment 11, supra. n. 11.

67. See Will, supra. n. 6; p. 352.

68. Ibid.

69. Comment 5, supra. n. 8.

70. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 181.

71. Comment 4, supra. n. 8.

72. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 187.

73. See Will, supra. n. 6; p. 355.

74. See Will, supra. n. 6; p. 353.

75. Comment 2, supra. n. 8.

76. Comment 13, supra. n. 11.

77. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 188.

78. Comment 14, supra. n. 11.

79. See Christopher Kee, supra. n. 1.

80. Comment 15, supra. n. 11.

81. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 187.

82. Comment 10, supra. n. 8.

83. See Christopher Kee, supra. n. 1.

84. Comment 16, supra. n. 11.

85. Digest 7, supra. n. 27.

86. See Will, supra. n. 6; pp. 348, 349.

87. See Arnau Muriá Tuñón, supra. n. 4.

88. See Will, supra. n. 6; p. 354.

89. Digest 7, supra. n. 27.

90. Comment 7, supra. n. 8.

91. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 189.

92. Comment 9, supra. n. 8.

93. See Fritz Enderlein & Dietrich Maskow, supra. n. 15; p. 187.

94. See Robert A. Hillman in "Applying the United Nations Convention on Contracts for the International Sale of Goods: The Elusive Goal of Uniformity": Cornell Review of the Convention on Contracts for the International Sale of Goods (1995); pp. 21-49; available at: <http://www.cisg.law.pace.edu/cisg/biblio/hillman1.html>.

95. See Anette Gärtner in "Britain and the CISG: The Case for Ratification - A Comparative Analysis with Special Reference to German Law": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001), 59-81; available at: <http://www.cisg.law.pace.edu/cisg/biblio/gartner.html>.


Pace Law School Institute of International Commercial Law - Last updated April 6, 2005
Go to Database Directory || Go to Bibliography
Comments/Contributions