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Published in 7 Edinburgh Law Review, Issue 1 (January 2003) 5-26 and Issue 2 (May 2003) 194-217. Reproduced with permission of the author.

Specific Performance: a Comparative Analysis

Shael Herman [*]

A. Prologue
B. Risks Inherent in Generalisation
C. Values Underlying Civilian Preference for Performance over Damages
(1) Effect of the victim's option to seek performance or damages from the breaching party
(2) Spanish doctrine favours specific performance (ejecución forzosa) over damages (resarcimiento)
(3) The embargo
D. The United States Approach to Remedies for Contract Breach
(1) Extrajudicial constraints condition reflexes of American merchants
(2) American judicial attitudes discourage demands for specific performance
(3) "Tough love" therapy for a stubborn plaintiff
(4) Other deterrents to demands for specific performance
E. United States and Spanish Regulation of Specific Performance Compared
(1) Effects of judgments compared
(2) Are there possible convergences between American and Spanish approaches on specific performance?
(3) In a legal duel over a contract breach, which legal actor chooses the enforcement weapon?
F. Incompatibility of CISG Remedies
(1) Scope of specific performance under CISG
(2) Both CISG and uncontrollable circumstances may hinder an order of specific performance
      (a) The Convention's duty of mitigation hinders specific performance
      (b) A hypothetical case
      (c) Resale by a seller limits a buyer's duty to pay the purchase price
      (d) Commercial realities also hinder compelling issuance of bank guarantee as payment
            (i) Compelling issuance of a letter of credit
            (ii) Compelling a seller to hand over a document of title
            (iii) International documentary sales and compulsory orders
G. United States Jurisprudence Interpreting CISG
(1) "Unless the Court would [could?] do so under its own law"
(2) Implicit assumptions in the reasoning of U.S. commercial cases
H. Epilogue

     This paper explores the regulation of specific performance of sales by reference to Spain and the USA, two jurisdictions which are exemplars of their respective legal families. It contrasts provisions under the Spanish Civil Code, Spain's Ley de Enjuiciamiento Civil, and under the American Uniform Commercial Code, and speculates on the interaction of these municipal laws with the regulation of specific performance under the United Nations Convention on Contracts for the International Sale of Goods (CISG). The study is split into two parts ... In th[e] first part section B outlines method, while section C explores the modern Spanish doctrine on performance and damages in light of the Romano-Germanic preference for performance. Section D examines the preference for damages over performance in US commercial law. By comparing Spanish and United States approaches to specific performance, Section E identifies points of possible convergence between the two systems as well as some noteworthy differences between them. In the second part of the study, Section F will explore the CISG's approach to specific performance, with the goal of inquiring, on one hand, whether the drafters have successfully accounted for both the Anglo-American and the Romano-Germanic preferences, or, on the other hand, whether the CISG's synthesis of the preferences is faulty and manifests incompatible goals that may be difficult to harmonise. Recent US decisions on specific performance under the CISG will be sampled in section G, which will make explicit some assumptions underlying the reasoning processes of US courts in commercial cases. Section H, an epilogue, will speculate on reasons for the intensity of the rivalry between proponents of specific performance as a primary remedy and those favouring damages as a primary remedy. [page 5]

A. PROLOGUE

On the judicial enforcement of promises, the scholarly studies are legion.[1] Their number seems to be growing apace, thanks partly to wide adoption of the United Nations Convention on Contracts for the International Sale of Goods.[2] In principle, the CISG authorises judicial compulsion of contractual performance in a variety of circumstances. Yet, the judicial willingness under the CISG to order specific performance may vary dramatically in accordance with the lex fori, the substantive law of the forum in which an aggrieved party seeks legal enforcement of the contract.[3] Despite the avowed purpose of the CISG's drafters to unify sale law among the signatory states, jurisprudence on specific performance arising under the CISG seems destined to be fragmented and to focus upon the particular.[4] [page 6]

This fragmentation could be produced by an ambivalence among the drafters, or even a duality of policies embedded in the CISG's remedial scheme. On one hand, some CISG provisions, such as arts 46 and 62,[5] require performance of sellers and buyers in respect of several different duties. On the other hand, art 28 of the CISG seems to hollow out the compulsory character of these articles by excusing a court from entering "judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by the Convention". Harmonising the exemption language of art 28 with articles of the Convention favouring specific performance is likely to tax one's interpretive powers. Other CISG provisions, such as art 77, could confound an interpreter altogether by pointing away from specific performance. By imposing on both buyers and sellers a duty of mitigation, art 77 invites the parties to engage in self-help, even if this non-judicial exercise required a party to renounce its claim to specific performance by disregarding the original contract. Furthermore, although arts 46 and 62 hold out a promise of specific performance, at least to plaintiffs in jurisdictions unexempted by art 28, they contain limitations that could dilute a right to such compulsory performance in all but the gravest circumstances.

For jurisdictions in which damages are standard relief and specific performance is exceptional, a broad mitigation duty under the CISG imposes upon the victim of a contractual breach a duty to repair its damages extra-judicially in advance of filing suit. A victim's assessment of these mitigation prospects in turn may call into question the good sense of suit for specific performance; if it unwisely overestimates prospects for obtaining a specific performance order, it may be second-guessed by the court and shunned by its own disappointed customers. While a breach victim cannot be barred from seeking specific performance or compelled to mitigate its damages on breach by its co-contracting party, failure to mitigate before suit could result in a reduction of the claim to the extent that it could have unilaterally reduced its loss before suit. In a jurisdiction in which the primary remedy is damages and specific performance constitutes exceptional, discretionary relief, reduction of a plaintiff's claim, as envisioned in art 77, would be a permanent risk. [page 7]

In a forum favouring specific performance as the primary remedy, a plaintiff might try to sidestep the mitigation issue altogether by suggesting that it was insisting upon the defendant's performance, not relying on a breach of contract, as art 77 provides. But this approach might turn out to be ill-considered, for mitigation duties, in other terms, fairly bristle from CISG provisions such as arts 46, 62, and 88. Even if these articles did not address the plaintiff's specific claims, an overriding duty of good faith under art 7 might bar its route to specific performance if its refusal to mitigate appeared vindictive or unreasonable. In such a forum, a determined plaintiff might succeed in demanding performance, but the chances are good that a tribunal, via one of the articles mentioned above, could find a way to derail the demand. After derailment, the plaintiff could find that passage of time had made mitigation efforts more difficult than they would have been if it had acted promptly after notice of the promisor's default.

If the phrasing of art 28 is taken literally, then the CISG's approach to specific performance should be appraised in light of the domestic legal systems of the signatory states. But since there are today fifty-six signatory states, there may be benefit in exploring the contrasting approaches of representative or prototype jurisdictions that follow traditional doctrinal positions of the legal families to which they belong. According to debates predating the approval of the Convention, art 28 represented a compromise between a Civilian or Romano-Germanic orientation and an Anglo-American or Common Law orientation. Civilian participants favoured specific performance as a primary remedy, while Anglo-American delegates preferred damages as a primary remedy and specific performance only in exceptional situations.[6] We therefore propose to inquire here into the CISG's regulation of these remedies by reference to Spain and the USA, two jurisdictions that are exemplars of their respective legal families.

B. RISKS INHERENT IN GENERALISATION

By generalising from exemplar jurisdictions, this study risks charges of reductionism and oversimplification. Yet in a study of this length, there seems no reasonable alternative to relying on prototype jurisdictions to explore the CISG's remedial scheme. There is also justification for a measure of confidence in an approach based upon prototypes: the debates leading up to the adoption of the Convention revealed sharp divisions among the delegates based on traditional Civilian and Common Law [page 8] positions. In discussing the CISG's remedial scheme, a considerable body of scholarly writing contemplates "Civilian " and "Common Law" or "Anglo-American" orbits, although one might have hoped for subtler differentiation by scholars treating jurisdictions that travel in these orbits.[7]

Moreover, such analysis may promote confusion or superficial thinking. For example, writing about the CISG, some scholars have referred to "Anglo-American" preferences without noting that the UK, the "Anglo" side of the hyphenate, participated at the drafting stage but has not become a signatory to the CISG. This fact renders speculative any discussion of the "reception" of the CISG by English courts.[8] Even if we correctly predicted how English courts would interpret the Convention, note must be taken of the Scots courts' very different stance on specific implement.[9]

Focusing now on the other side of the Anglo-American hypenate, there are also pitfalls in speaking lapidarily of American law: "United States commercial law" is a misnomer. Our commercial law is not a national law; rather, it is a patchwork sewn together state by state. The patchwork character of US federalism helps to explain why the national government has no programme for displacing Louisiana's Romanesque civil code or interfering with the Louisiana bar's reliance upon it. Acting practically autonomously in the domain of commercial law, the courts of each state of the union, including Louisiana, seem consciously to strive for a uniform approach rather intermittently, as for example, when a constitutional issue of national proportions arises.

Facile generalisation about contract remedies may also be hazardous in discussion of jurisdictions that travel in a Civilian or Romano-Germanic orbit. Because Civilian jurisdictions (at least some we typically think of as such) have usually elaborated and interpreted their civil and commercial legislation independently of one another, they disclose a range of attitudes toward specific relief. Spanish law for example, thanks to its own traditions, seems decisively committed to specific performance, and provides strong procedural safeguards for achieving it. Both Germany and France [page 9] may have a commitment to specific performance exceeding that of New York, but neither country seems as dedicated to specific relief as Spain. Furthermore, as between France and Germany, the intensity of their respective commitments to specific relief seems to vary.[10] From these European jurisdictions, we could go on to other prominent systems. For example, Italy presents a case rather different from those of Germany and France. Of more recent vintage than the codes of France and Germany, Italy's civil codification and her doctrine seem more inclined than French and German counterparts to prefer damages over specific performance in a wide range of cases.[11]

C. VALUES UNDERLYING CIVILIAN PREFERENCE FOR PERFORMANCE OVER DAMAGES[12]

As an heir to the Romano-Germanic tradition, a Spanish lawyer might argue that the responses of Spanish judges to contractual non-performance mirror bedrock principles of the Spanish legal order. These judicial responses resonate with familiar maxims such as pacta sunt servanda. A fondness for German law might lead him to [page 10] invoke Kant's categorical imperative, according to which a promise would be idle chatter and not a promise at all if it were not in principle to be kept. The distinguished comparative scholar, Ernst Rabel, seems to have embraced a Kantian view of the sanctity of promises when he wrote that the duty to perform [was] "the backbone of the obligation."[13] In stating the axiom in this form, Rabel presumably would have been less enthusiastic for the proposition that the backbone of the obligation consisted in a duty to pay damages upon breach.

Following Rabel's suggestion, if the meaning of pacta sunt servanda[14] is not to be hollowed out, then a solemn undertaking should offer the contract violator no alternative obligation. In other words, a legal regime should not grant a breaching promisor an option either to perform or to pay damages. As Schlechtriem has remarked, the party in breach should not be allowed to buy itself free of a contract that it has violated.[15] On the contrary, so argue proponents of pacta sunt servanda, the victim of the breach, not the contract violator, should be afforded an opportunity to decide whether it prefers the breaching party's performance or a judgment against the latter for damages consequent upon non-performance. [page 11]

(1) Effect of the victim's option to seek performance or damages from the breaching party

By reserving this remedial option for the victim, a legal regime excuses it from having to mitigate its losses. Although the victim may ultimately mitigate its losses, its failure to do so should entail no penalty, such as a reduction of the claim by an amount which reasonable mitigation would have saved. In a classical Civilian perspective committed to the ideal of pacta sunt servanda, a buyer in breach should not compel the seller to seek a substitute sale, nor should the breaching seller force the buyer to enter into a substitute purchase.[16] At the moment of a breach, so goes the conventional wisdom, the aggrieved party has the moral high ground. If an innocent party's conduct vis-a-vis the co-contracting party has been above reproach, then it should stand on its contract, confident that a court will protect its interest in the contract. As if to underscore the correctness of this position and the sanctity of the contract, the victim's legal regime could ordinarily require a judicial decree to dissolve the original contract and excuse the parties from its fulfillment. Never mind that a judicial termination of the contract represents for the aggrieved party considerable cost in time and money. At a stressful moment when the disappointed party is fretting about meeting obligations to its own customers, it is loath to spend time and money on his lawyer and the courts. Yet, absent a special clause that would automatically dissolve the contract, the moral force of pacta sunt servanda may bar even the victim of a breach from confecting a replacement contract before it obtains a judicial dissolution of the initial agreement.[17]

(2) Spanish doctrine favours specific performance (ejecución forzosa) over damages (resarcimiento)[18]

How does a general preference for specific performance over damages figure in the Spanish regulation of remedies for contract breach? In determining the appropriate [page 12] recourse for the disappointed party, Spanish jurists start with a classical Romanist distinction among duties to give, to do, and not to do.[19] Spanish law classifies a seller's duty to deliver an object as a duty to give. If a seller has failed to deliver movable items, the doctrine requires delivery as a primary remedy.[20] As a subordinate remedy, compensating an aggrieved buyer becomes appropriate upon failure of all efforts -- both judicial and extra-judicial -- to extract delivery from the seller. If the item is certain and determined (e.g., an art work, a rare book), then the tribunal, on application of the aggrieved buyer, will order the buyer to be put into possession of it. When a recalcitrant seller tries to frustrate the order by concealing the thing, the court may open the suspected hiding place, remove the item, and turn it over to the purchaser.

Compensating an aggrieved buyer may also be appropriate if the item cannot be located, no longer exists, or is found in possession of a third party from whom it cannot be revindicated. Such third parties could include an acquirer in good faith and a pledgee of the goods. In determining the feasibility of forcing the seller to deliver the object, Spanish doctrine asks if the object can be put within the buyer's grasp. According to Spanish law's formulation, the thing must be "habida" ("haber" means to have); and this condition is not legally feasible if the item has been destroyed or acquired definitively by a third party through a valid juridical act not subject to revocation. If the object of the obligation is indeterminate or generic (i.e. a fungible, a commodity, or merchandise commercially available in a market) the buyer nonetheless has two routes to ejecución forzosa: an order either putting it in possession of the thing at the seller's expense or granting monetary compensation to buy [page 13] substitute items together with an embargo on enough of the debtor's bank accounts to make the purchase.[21] If the buyer no longer needs the contractual object, then it may seek compensation instead of performance.

For an aggrieved promisee, mitigation of damages is not a pre-condition to an order of compensation. Notably, even when an aggrieved party seeks compensation, it may avail itself of the court's protective shield by having the court block enough of the seller's assets to assure the availability of funds necessary to buy the substitute goods.[22] In obtaining a judicial imprimatur for its legal position, an aggrieved Spanish buyer, unlike his American counterpart, would not open itself to self-doubt about the appropriateness of its decision against mitigation after it had learned of the seller's repudiation. Nor could a defaulting seller legitimately reproach the buyer for inflicting unjustified losses upon it by failing to make adequate mitigation efforts.

(3) The Embargo [23]

Evocative of the artisanry of Moorish filigree, the refined craftsmanship devoted to the embargo by the Spanish legislator reinforces the conviction that Spanish lawyers mean business when they demand performance from a recalcitrant obligor.[24] Tens of articles on execution and embargo equip an aggrieved party with the tools needed to compel this performance. To assure a defaulter's compliance with court orders to give or to do, Spanish embargo provisions provide a procedural apparatus with precision and seemingly draconian reach: extracting delivery or payment from an [page 14] obligor appears more important than assuring that a breach victim has efficiently reallocated its resources through mitigation.

According to art 634 of the Ley de Enjuiciamiento Civil (LEC), the tribunal must deliver directly to a creditor the goods covered in the judgment ("executory title"). Remarkable for American lawyers unaccustomed to specific performance of a duty to pay money, art 571 of the LEC authorises a financial embargo (embargo dinerario) that contemplates a forced execution of such a duty. To assure the debtor's full payment, the embargo blocks the debtor's assets including rents, cash, stock shares, and partnership interests. If a creditor alleges that the assets in question are under the control of a third party, then the court is empowered to investigate their true ownership among entities believed to have specific knowledge of them (LEC art 593).[25] When interrogated by a tribunal regarding these assets, an uncooperative entity may be fined.[26] Under LEC art 701, if the debtor does not put the creditor in possession of the items specified in the judgment, then the court may rely upon official pressure to have them delivered. Helped by public officers, the court may open locked spaces where goods are suspected of being concealed. When the asset cannot be put into the creditor's possession ("no pudiere ser habida la cosa") the court may order compensation by money award for the non-delivery. Unlike a typical US judgment, a Spanish judgment can embargo a debtor's funds to assure payment. Although this rule applies to specifically identified items, LEC art 702 also makes the embargo applicable in principle to generic goods.

D. THE UNITED STATES APPROACH TO REMEDIES FOR CONTRACT BREACH

As a result of a conditioning process dating back to his or her pragmatic law training, an American lawyer would probably react with amusement (or alarm) to our narrative of Spanish enforcement rules. He or she would likely say that performance orders and embargos make sense if one finds it helpful to moralise about a defaulter's conduct. But the complexity and velocity of business transactions usually make moralising impractical. People default on their obligations every day, sometimes intentionally and in bad faith, but more often unintentionally and in good faith. We cannot condemn all of these defaulters to Dante's Inferno for their contractual transgressions.

Failed transactions may be the stuff of tragedy, but while litigation may heighten the sense of tragedy, mitigation may turn the affair into comedy or farce. Ideally, mitigation should also permit the aggrieved party to reallocate his assets efficiently [page 15] with minimal judicial intervention.[27] In a US lawyer's view, efficient reallocation is a by-product of bedrock principles, for American law qualifies the principle of pacta sunt servanda by inverting the preference for performance over compensatory damages. More than a century ago, Judge Oliver Wendell Holmes captured the American preference for damages in case of breach in a famous (and provocative) law review comment: "The duty to keep a contract means a prediction that you must pay damages if you do not keep it - and nothing else. Such a mode of looking at the matter stinks in the nostrils of those who think it advantageous to get as much ethics into the law as they can."[28] Perhaps Holmes's pronouncements on contract breach were tinged with too much moral agnosticism; he would not have deemed a contract breaker a sinner whose conduct warranted casting him into the inferno. Unlike proponents of pacta sunt servanda, who grant the breach victim the benefit of an alternative obligation, Holmes seems to have granted such an alternative to the breaching promisor. His vision has endured. Today, a US court would be extremely reluctant to compel a breacher to perform in the usual situation when the goods in question are not unique and the loss is reparable in damages.

(1) Extrajudicial constraints condition reflexes of American merchants

A century of American case-law has vindicated Holmes's dictum on the appropriate consequences of a contract breach. Commercial realities have conspired with US [page 16] jurisprudence to instill in merchants certain conditioned reflexes upon breach by their counterparts. Typically, an aggrieved buyer or seller, after cancelling the contract, seeks damages rather than specific performance. Even before the victim of the breach seeks damages, it will routinely try to minimise the loss by seeking a suitable replacement contract, or by buying replacement goods on a spot market.[29]

The Uniform Commercial Code calls this mitigation effort "cover" when it refers to a buyer's locating a substitute transaction for the one that has been repudiated. In a line of commerce populated by numerous sellers and buyers, an obligation of good faith requires a buyer to make reasonable efforts to cover from another source of comparable goods. If the market discloses an adequate supply of substitute goods not exceeding by too much the original contract price, then an aggrieved party will likely absorb modest losses.

A breach victim knows today that no rule of natural law prevents it from defaulting tomorrow, and thus incurring the wrath of the very co-contracting party who disappointed it yesterday. If the aggrieved party is particularly upset, it may vow never to deal with the breacher again, or even complain to the local chamber of commerce. A merchant is unlikely to sue someone with whom he needs to continue dealing, and the law does not grant a disappointed trader damages for emotional upset resulting from a contract breach, unless the breach has been malicious. (The Spanish formulation is de dolo y malo.) Such malice is exceedingly difficult to prove in a commercial affair.[30] As a result of these disincentives, lawsuits are reserved for grave situations, and most such suits would seek damages rather than performance.

(2) American judicial attitudes discourage demands for specific performance

To cure a routine default in a contract for readily available merchandise, a suit for specific performance is unappealing and ill-advised for several reasons. The merchant realises that his demand for specific performance may profit his lawyers more than himself. In many cases, the litigation cost may exceed the concrete losses likely to be suffered if he mitigates promptly and reasonably (the phrase of UCC 2-706 is "commercially reasonable manner"). Beyond the immediate litigation costs, a specific performance claim may entail logistical difficulties. During protracted litigation, an aggrieved seller would have to risk the vagaries of the market by holding the goods [page 17] at the buyer's disposition. Storing the goods can result in a log jam of obsolescent inventory, which can sink a retailer financially. Considerable storage costs can impel many merchants to minimise the inventory on hand. Pioneered years ago by Japanese enterprises, "just in time" techniques of inventory maintenance would probably lead many sellers to prefer mitigation by resale over specific performance.[31] So strong is the UCC's preference for mitigation as a means to preserving the utility of the contractual object, that a seller may sell the goods to a third party, even after obtaining judgment for the purchase price against a defaulting buyer.[32] But an aggrieved merchant would likely reflect a long time before pursuing a claim under UCC 2-709 that could ultimately result in a judgment rendered moot by a later resale of the goods.

Although a lawyer may sometimes file a demand for specific performance on behalf of an aggrieved client, the lawyer knows that the claim is unlikely to impress the judge or threaten the breacher. The US legal system does not shame breachers into silence. On the contrary, upon receiving a demand for performance, the breacher will likely bombard the plaintiff with a fusillade of defences including the following: the injury is reparable in money, and thus a demand for performance is inappropriate; the merchandise is not unique and thus cover in the marketplace is feasible; the contract does not explicitly authorise specific performance as a remedy;[33] judicial supervision of the seller's performance would be time-consuming and cumbersome for a court overburdened by a heavy docket. Because mitigation was commercially feasible, the court will likely make it clear that the plaintiff's damage claim could be reduced by the amount that could have been saved by prompt mitigation. Furthermore, the judge will probably credit the defendant's argument that specific performance represents undue interference with personal liberty. An order of specific performance might be seen as overkill.

Behind the judge's resistance to the plaintiff's demand for performance lies a conviction that an appeal court is unlikely to overturn a denial of specific performance. This confidence is borne of knowledge that specific performance is equitable, discretionary, and justified only in rare cases when the object is unique and damages will not repair the injury. Although the UCC does not explicitly make this [page 18] irreparability criterion a condition of specific performance, the standard is deeply imbedded in judicial practice. The judge probably realises that by the time his denial of performance reached the appellate court, passage of time should have begun to heal the injuries from the breach.[34] A judge's reluctance to grant a performance decree may also result from his belief that his contempt power, though in principle an available tool, should be saved for rare situations, not routinely tested in a dispute between merchants.

In principle, a defendant who does not perform can be ordered to do so. If the order is resisted, the defendant can be remanded to the marshal to spend time in jail until the duty is fulfilled.[35] Inherent in a contempt order, this heavy-handed interference with the businessman's liberty would ordinarily be seen as a draconian remedy to be avoided in a case that seemed trivial alongside more reprehensible and contumacious forms of conduct.

(3) "Tough love" therapy for a stubborn plaintiff

In pursuit of a breacher, a disappointed client can occasionally be extremely stubborn. In addition to asking for specific performance in a final judgment, the client's petition may seek provisional relief, such as a restraining order pending the proceeding, to prevent the seller from negotiating with a third party. Facing a request for such provisional remedies, the judge may require the claimant to post security or an indemnity bond to cover eventual losses of the breacher rather than the losses of the breach victim. The prospect of such business losses for the breacher may be veiled behind a judicial reservation, usually prompted by the breacher's assertions, that an "improvidently granted" injunction or restraining order may unduly interfere with the breacher's business.[36] Thus, instead of obtaining satisfaction from the defendant, [page 19] there is now a suggestion that the plaintiff himself will be open to a damage claim from the very person who should be compelled to compensate him. To the plaintiff's chagrin, the plaintiff may be transformed from the victim of the piece into its villain.

(4) Other deterrents to demands for specific performance

Besides being tactically unappealing, specific performance is financially unattractive. Seeking replacement goods on a spot market, a buyer will often discover that his demand for specific performance can derail his planning. Waging battle on two fronts - the court and the marketplace - requires both dexterity and persistence from an aggrieved party. Inevitably, there is also tension between specific performance and mitigation, for a nagging concern about whether and how to mitigate will weigh upon the breach victim's decision to seek performance. In a great number of situations, mitigation, however burdensome, is feasible. But, mitigation efforts can retard the victim's decision to seek legal counsel. Once fulfilled, a duty to mitigate will usually blunt a demand for specific performance or render it pointless. This is so because a buyer cannot readily seek an order compelling a seller to deliver a contractual object in exchange for the seller's payment, and at the same time mitigate by spending the price to acquire substitute goods. If an aggrieved buyer succeeds in mitigating its loss by cover, then the utility of an order forcing a seller to hold the goods at the buyer's disposition tends to evaporate. By suing for specific performance, a buyer signifies that it has not acquiesced in its opponent's repudiation or default, usually because the contractual object is unique or otherwise unavailable in the market. A buyer's mitigation effort concedes tacitly the opposite point: namely, it will acquiesce in the repudiation and, after successful mitigation, it will take its chances by limiting its recourse to damages.

Specific performance is no more financially appealing for the aggrieved seller than for the aggrieved buyer: if the seller demands the price from the buyer,[37] then the seller will likely have to hold the goods pending the litigation in anticipation of a favorable result. If the seller meanwhile sells the goods to a third party to cut the loss associated with stockpiling them, then it may have mooted or collapsed its claim for the price.[38] Rarely will the facts allow a US claimant to have it both ways. [page 20]

E. UNITED STATES AND SPANISH REGULATION OF SPECIFIC PERFORMANCE COMPARED

(1) Effects of judgments compared

In terms of juridical effects, a judgment under US practice may differ significantly from a Spanish judgment. To an extent, these differences result from a Spanish preference for specific performance on the one hand, and an American preference for damages on the other. Execution of a specific performance order would seem to require a more elaborate judicial mechanism than would a damage award. As every state in the US, to a great extent, may independently develop its own private law subject to constitutional standards, it is difficult to generalise securely about the form and effect of judgments across the country. According to a prevailing pattern of judgment in the US, the successful breach victim, normally after mitigation efforts, secures a money judgment against the breacher and then registers the judgment as a lien or judicial mortgage in the public records of the jurisdiction where the defendant, now the victim's judgment debtor, owns immovable property. Although the judgment commands the defendant to pay a certain sum, the judgment is "merely declaratory of a fact of liability and the amount of liability", but it does not order the defendant to pay any money "or indeed do anything".[39] The judgment creditor has the responsibility of starting collection proceedings, and the judgment itself does not identify any assets which may be appropriate targets.

Because a US judgment, unlike its Spanish counterpart, cannot block a judgment debtor's accounts by an embargo, it would not guarantee the plaintiff the funds necessary to purchase substitute merchandise. In accordance with rules of ranking and priority, the US plaintiff would compete with the debtor's other creditors for a fraction of the debtor's patrimony. If the time of filing the judgment, or another specific rule not dependent upon chronology of filing, made the judgment inferior to other liens and judgments against the debtor's estate, the judgment creditor could end up realising nothing from his debtor's estate. The author's experience suggests that a recalcitrant judgment debtor can frustrate enforcement of the judgment by several techniques, including concealment of assets, simulations, and [page 21] the like, and a judgment can easily prescribe without any collection by the judgment creditor.[40]

While a US creditor will ordinarily begin efforts to collect the judgment by filing it in a public office of a district where the debtor owns real property, merely recording the judgment does not itself result in its satisfaction. A judgment may literally command the defendant to pay over a certain sum, but it invokes no procedural mechanism for forcing the debtor to do so. A US judgment has teeth, but they are not much in evidence as a result of registry alone. Since it is ordinarily a money award, the judgment typically does not affect any specific property. Rather, it operates against all of the debtor's immovable property situated within the county or district where the judgment has been filed. Generally, the recorded judgment constitutes an impediment to a sale or mortgage of all of the judgment debtor's real property. Hence the judgment's effects are largely dormant until either the debtor decides to alienate or encumber property or another judgment creditor executes upon the debtor's property, thus provoking a contest among creditors.

A US judgment may be made to bare its teeth in a post-judgment phase when the judgment is made executory. This executory phase entails locating and seizing the judgment debtor's available assets through ancillary processes, such as garnishment, judgment debtor motions, writs and discovery procedures.[41] Unlike the Spanish embargo, which forms part of an executory judgment and is constructed to coerce the debtor to turn over the precise goods promised, the US judgment's main purpose is to compensate the victim of the breach in cash for damages resulting from the unfulfilled promises. If a US buyer eventually ends up acquiring the goods that the breaching seller has promised, the acquisition is largely a coincidence resulting from seizure and sale at public auction. There is no necessary connection between the amounts owed by the debtor and the merchandise or real estate the creditor eventually obtains. In contrast with Spanish practice, the US judgment contains no judicial order extracting the merchandise directly from the debtor's estate and transferring it immediately into the creditor's hands. Rather, to acquire the property, the creditor must be the high bidder at an auction scheduled and carried out on the creditor's motion. The creditor is not the high bidder at the auction will never acquire the debtor's property at all. The creditor's claim will in those circumstances be satisfied by a cash payment made by the high bidder to the official who has conducted the auction. [page 22]

(2) Are there possible convergences between American and Spanish approaches on specific performance?

There seems no simple answer to this question. Verdera has exhibited ambivalence toward Spanish law's avowed preference for specific performance and has alerted us to the fact that Spanish doctrine frames the remedial issues differently from US doctrine.[42] Treating ejecución forzosa generically across a wide range of nominate contracts, the author, in Civilian fashion, regards a sale as a subspecies of obligations to give rather than as a category distinct from other contracts. Furthermore, the study contains no systematic treatment of mitigation as either a right or a duty of the breach victim.[43] For a US lawyer, the missing ingredient of mitigation is important, for as we have already suggested, mitigation, anchored in an overriding duty of good faith, can be decisive in determining the plaintiff's strategy, the merits of the eventual claim, and even the formulation of the plaintiff's allegations.

Despite the commitment of Spanish law to forced performance as a primary remedy, Verdera expresses doubts about both the wisdom and inevitability of this remedy for breaches of sale agreements. According to Verdera, nothing in the commercial arena seems to foreordain specific performance as the preferred remedy in case of breach: "Anglo-Saxon experience and certain features of Roman law demonstrate that forced execution does not constitute a necessary institutional principle of the law of obligations."[44] Verdera recalls a remark by the American scholars, Fuller and Perdue, that although a contract can make law for the parties, the contract does not necessarily specify the consequences for the parties upon breach by one of them.[45] Reacting rather like an American lawyer, Verdera also seems to doubt the wisdom of specific performance when a cash payment would suffice to repair the harm resulting from some breaches: "One can question the practical utility of a forced execution of a generic or fungible obligation because it would suffice to grant the creditor the necessary funds so that he could obtain the goods in the market."[46] Unfortunately, notes Verdera, Spanish law fails to deal comprehensively with this last hypothesis.[47] According to Verdera, a recent line of cases justified a decree of specific performance when the breacher's repudiation was wilful, or arose de dolo y malo. In these cases, the obligation to be enforced was one to do rather than to give. Yet, one could [page 23] reasonably conclude that if Spanish courts favour specific performance when a party must perform a personal act (i.e. an obligation to do), then a fortiori a performance decree would be warranted in a sale because it imports obligations to give.

According to Verdera, Spain's preference for specific performance may be instructively compared with that of German law, which in theory also considers performance a primary remedy and backs up the preference with a number of procedural vehicles favouring contract fulfilment by performance. Yet, notes Verdera, German breach victims, like their American counterparts, often content themselves with seeking damages even when, in principle, they could have sought performance. Based on Verdera's discussion,[48] an American reader could conclude that the German rule of performance is being gobbled up by exceptions preferring damages.[49] French regulation of the issue of forced performance is no more decisive than its German counterpart. According to some commentators, the French legal order seems ambivalent toward performance as a primary remedy[50] though other treatises seem to regard this preference for specific performance as a foregone conclusion.[51]

(3) In a legal duel over a contract breach, which legal actor chooses the enforcement weapon?

A noteworthy difference between Spanish regulation of specific performance and its American counterpart results from the relative power of the parties and the court to [page 24] select the remedy, i.e. the enforcement weapon. Although the choice of remedy belongs initially to the plaintiff in a US context, it ultimately rests with the judge. By contrast, the criteria for decision confided to the Spanish tribunal seem considerably to limit the judge's latitude in dictating the remedy once the plaintiff has announced his choice.

As we have noted, a US court could grant or reject a demand for performance after considering several questions: Are the goods unique? Did the claimant mitigate? Would damages suffice to repair the harm? Did the contract stipulate specific performance as the primary relief? Would an order of specific performance unduly interfere with the defendant's liberty or require unusual court supervision? By contrast, once a plaintiff demands specific performance in a Spanish tribunal, the tribunal seems pretty much bound to acquiesce in the plaintiff's choice. The Spanish judge, instead of addressing the victim's mitigation efforts and the other concerns of interest in a US court, would make rather narrow and objectively verifiable inquiries: Does the defendant have the item? Has the performance become impossible? Is the defendant still capable of performing the contract? These are important questions, and a US judge, like his Spanish counterpart, would expect answers to them. But while these answers might conclude the Spanish judge's inquiry, they would likely mark the beginning of the US court's more extensive analysis of the conduct and motivation of the parties.

Familiar with the dictum that parties make contracts while judges interpret them, a US lawyer is accustomed to thinking that contract litigants benefit from a liberal, hands-off, policy on the part of the court. A US lawyer might be surprised to discover that the questions posed by a Spanish judge facing a demand for performance give a Spanish claimant a freer hand in selecting and maintaining the enforcement weapon than a US counterpart would have. Perhaps the Spanish plaintiff's advantage grows naturally out of an ideal of pacta sunt servanda; perhaps it is a reward for occupying the moral high ground. In the US context, the victim's moral high ground, such as it is, is no guarantee that the court will honor the remedy of choice. The spirit of Holmes' maxim invites the contract breacher to deflect the victim's demand for performance with evidence that damages will repair the harm. If only the victim would mitigate, so goes the breacher's claim, the matter would be set right. The court would be spared inquiries into the uniqueness of the goods and the feasibility of supervising the requested specific relief. Then the breacher would settle with the claimant in cash.

Preferring compensation in the usual case, a US judge is the final arbiter of the relative merits of the parties' contentions regarding suitability of performance or damages. In US regulation of specific performance, mitigation duties and reparability in damages tend to give the breacher a large hand in the judge's evaluation, leaving the judge as referee of the ultimate option. This judicial trump card seems to make a [page 25] US judge a spokesman for society, at least for the breach at hand. To the court is confided the task of deciding whether society's advantage lies in forcing the breacher to perform or to pay. It is true that the breach victim in an American setting can state his preference for performance, but this preference is less decisive than it would be for a breach victim in a Spanish setting. As the master of its utilitarian calculus, the Spanish victim can demand performance with little risk of the tribunal's refusing the request in response to the breacher's arguments. Spanish doctrine seems to regard the victim, not the judge, as best situated to know its own interest. As Verdera says, "the scheme of our law discloses a liberal ideology that views the judge as an organ" of an "estado-gendarme" presiding over the execution process through formal direction, leaving the "ejecutante" to his own devices.[52] On this view, if the Spanish victim demands performance, and performance is a possibility, then the breacher should not be able to defeat the victim's choice by buying itself free of the contract.[53] [page 26]

[Commentary continued in Volume 7, Issue 2 of Edinburgh Law Review (May 2003) 194-217. Continuation of text presented below.]

F. INCOMPATIBILITY OF CISG REMEDIES

As outlined in the first part of this article, drafters of the CISG split into two camps on the issue of relief for contractual breach. Originating mainly in the Romano-Germanic tradition, proponents of performance as the primary remedy for breach could have found themselves on a collision course with those who preferred damages as a primary remedy. This collision was apparently averted by a drafting compromise embodied in art 28 of the CISG and described by Schlechtriem:

"Right from the beginning of discussions on Uniform Sales Law, there seemed no prospect of bridging the different approaches adopted by the different legal systems. Rabel had said that the conflicting basic approaches could not be eradicated or fused. ... The problem was therefore solved by means of a compromise: a court is to treat an action for specific performance as it would under its own law (lex fori). Courts of contracting states which grant specific performance only as an exceptional remedy [page 194] are not required to alter fundamental principles of their judicial procedure. It is a matter of judicial procedure and substantive law."[54]

A question posed in this part is whether art 28 has fairly balanced the interests of the rival camps. The record of deliberations on the Convention suggests that many delegates believed a fair compromise was achieved. Nevertheless, it seems worthwhile to ask if proponents of damages as a primary remedy, having located in art 28 a safe harbor from the effect of other CISG performance norms, could claim a victory masked by the rhetoric of compromise.

(1) Scope of Specific Performance Under CISG

The CISG recognises a universal feature of sale contracts: a seller's essential performance consists of delivery of the goods (art 46), and a buyer's essential performance consists of payment of the purchase price (arts 60-62). In addition to these essential duties, the CISG authorises compulsory fulfilment of several others. Besides delivery of the merchandise, the buyer may require the seller to hand over documents (art 34); transfer property in the goods (art 30); deliver substitute goods (art 46); or in some circumstances repair non-conforming goods (art 46). Performance may include even a seller's assembly of the items.

The breadth and force of these compulsory remedies, however, may be more apparent than real. In a number of likely circumstances, a seller's duty to perform is qualified by specific criteria. For example, an aggrieved buyer who "has resorted to a remedy inconsistent with the seller's duty to perform" may lose his right to compel delivery of the goods.[55] According to art 46, the buyer may demand substitute goods only if the lack of conformity in the original merchandise constitutes a fundamental breach. Assuming a deficiency in the goods is not serious enough to constitute a fundamental breach, a buyer may then invoke a right to require the seller to repair the non-conformity. But the buyer may lose the right to compel the seller's repair if this remedy would be "unreasonable having regard to all circumstances".

Although the CISG does not explicitly so provide, the purchaser's payment duty may take several forms that may be compelled by specific performance. According [page 195] to Schlechtriem,[56] the CISG would authorise a court, on a seller's demand, to order the buyer to open a letter of credit or provide a bank guarantee if these modes of payment are contemplated by the sale agreement.[57] But, as we shall see, the buyer's duty to perform is also qualified by both specific CISG criteria and the force of commercial realities.

In principle, a proponent of specific performance as a primary remedy could conclude that the CISG drafters were true to their word in implementing the norm of pacta sunt servanda. Unless there are unusual handicaps, parties ideally should do what they have promised. Ideally, a seller is fully justified in requiring a buyer to pay and take delivery precisely in accordance with the contract, and the seller ideally should be made to deliver substitute goods if the initial delivery is non-conforming. The seller should also repair goods that do not work properly or otherwise fall below the marketplace standard. As for the buyer, if it is obliged to make payment by a letter of credit, then ideally it should be compelled to provide the credit as well. But room for manoeuvre is provided in the preceding sentences by the word "ideally" because it is hard to see how in practice a tribunal, even a tribunal whose municipal laws favored performance over damages, would compel a breacher to perform some of these acts.

(2) Both CISG and uncontrollable circumstances may hinder an order of specific performance

(a) The Convention's duty of mitigation hinders specific performance

Certain provisions of the CISG could militate against specific performance as a primary remedy. Prominent among such provisions is art 77, which could constitute a brake on specific performance, for an aggrieved party would be ill-advised to launch a suit for specific performance without first seeing if self-help measures would solve the problem.[58] Applicable to sellers and buyers alike, art 77 provides:

"A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit resulting from the [page 196] breach. If he fails to take such measures, the party in breach may claim a reduction in damages in the amount by which the loss should have been mitigated."

Consistently with the mitigation principle of art 77 of the Convention, art 88 details measures required of a seller in a self-help sale:

"A party who is bound to preserve the goods ... may sell them by any appropriate means if there has been an unreasonable delay by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation, provided that reasonable notice of the intention to sell has been given to the other party."

For goods that are subject to rapid deterioration or whose preservation would involve unreasonable expense, resale is mandatory, not optional:

"A party who is bound to preserve the goods ... must take reasonable measures to sell them. To the extent possible he must give notice to the other party of his intention to sell."

American commercial lawyers would find arts 77 and 88 compatible with the policies of the Uniform Commercial Code. UCC jurisprudence practically commands mitigation by means of self-help sales as an efficient way of reallocating resources.[59] Accustomed to a powerful mitigation requirement under domestic law,[60] a United States court, facing a suit under the CISG, could be expected to rely upon art 77 if a claimant sought specific performance without first showing that it had tried to minimise the harm by mitigation. A United States court would likely show little sympathy for a party who had not tried to salvage or resell deteriorating goods under art 88. It remains to be seen if a court in a jurisdiction whose domestic law lacked a mitigation principle would react similarly to a requirement of mitigation, but art 77 and several other CISG provisions would seem to invite these courts to follow the behaviour of a United States court applying its domestic law.

Our brief overview of Spanish law suggests that such an invitation could be problematic for a Spanish tribunal. The judge's analysis would need to account for several provisions of the CISG, and the purchaser's mitigation efforts, though [page 197] irrelevant in Spanish municipal law, could figure in the Spanish court's decision under the CISG.

(b) A hypothetical case

Assume that a Spanish motorbike manufacturer has promised to deliver to a Miami retailer on 1 July five motorbikes, equipped with various combinations of flashy, deluxe chrome hardware. On 1 July, the bikes arrive at the purchaser's dock. Upon inspecting them, the purchaser discovers they are non-conforming because they are not equipped with the promised hardware. Wishing to have the deficiencies corrected, the Miami buyer gives a notice to the seller, and the seller responds that the bikes are marketable without correction of the deficiencies. "Marketable" perhaps at some unknown price and to unidentified customers, replies the purchaser, but not exactly what he was promised. While the bikes are not unique, they are unusual, and correcting them would tax unjustly the purchaser's staff and purse. The purchaser knows that a suit in Miami would be unlikely to yield an order of performance. Via the UCC, made relevant under art 28, he would first have to mitigate; damages are the usual relief; and specific performance is exceptional.

Exasperated, the Miami purchaser sues in a Spanish court to compel the Spanish seller to deliver substitute conforming bikes in accordance with art 46. As is the purchaser's right under Spanish law, he also has sought an embargo of the seller's assets along with court-supervised interrogations of third parties as to the status and whereabouts of the seller's inventory. As the contract is regulated by the CISG, might we expect the Spanish tribunal to reject the purchaser's requests, short-circuit its procedural mechanisms and, relying upon art 77, press the purchaser for proof that he had taken all reasonable steps to mitigate before he filed suit for performance?

In reaction to the Spanish court's inquiry about his self-help efforts, the Miami purchaser argues that art 77 is irrelevant to his demand for specific performance. By not suing for damages, he would not, in the formulation of art 77, "be relying upon a breach of contract." Hence, he would not be opening himself to a damage reduction as provided in art 77. His reading of art 77 would seem correct, and the historical record of CISG deliberations would support him.[61] At the time the Convention was debated the relationship between mitigation and specific performance was discussed vigorously. Convention delegates repeatedly rejected US amendments to require mitigation as a precondition to performance under arts 46 and 62. Although the US delegation's proposed amendments were rejected, we may still ask if the mitigation duty, in a narrower targeted form, might still be embedded in the CISG where it could hamper a demand for performance even in jurisdictions unaffected by art 28. [page 198]

To obtain an order of specific performance under art 46, the Miami purchaser cannot merely demand the relief; he must also show that the non-conformity constitutes a fundamental breach, as defined by art 25:

"A breach of contract committed by one of the parties [Spanish seller] is fundamental if it results in such detriment to the other party [Miami buyer] as substantially to deprive him of what he is entitled to expect under the contract, unless the party [Spanish seller] did not foresee, and a reasonable person of the same kind in the same circumstances could not have foreseen, such a result."

Having filed a suit for ejecución forzosa, the purchaser soon realises that several hurdles could impede his progress toward an order against the defendant to deliver conforming bikes. Getting over the hurdles could be impossible in all but the gravest cases of non-conformity.

To assess the buyer's prospects for an order of performance, we must first ask if the breach was "fundamental" (art 25) and hence deprives him of his expectation interest in his contract. Because the CISG does not regulate sales of merchandise for personal or family use - the bikes likely have been ordered for resale to retail customers - the purchaser's expectation is financial gain upon resale rather than psychological gratification that he might derive from personal use of the bikes. As a precondition to demanding performance, the purchaser has already notified the manufacturer to correct the deficiencies (art 46), and the latter has refused to do so. Even though the purchaser seems unjustified in not mitigating, he pursues specific performance on the ground that his facts fit art 25 (i.e. he is substantially deprived of his expectation). In compliance with art 25, the burden of proof then shifts to the seller who may still defeat the buyer's demand for performance by showing he did not foresee, and another merchant would not have foreseen, the deprivation of his expectation interest.

Assuming that a performance order is denied, the purchaser, wishing to avoid disrupting his contracts with his own customers, could then mitigate by acquiring substantially similar products elsewhere in the market and demanding an indemnity from the seller for the additional expense of acquisition. Alternatively, the purchaser could resell the bikes on hand at a discount, in recognition of the non-conformities. As a further alternative, the purchaser could have the non-conformities corrected with hardware shipped from Spain to Miami and then installed by an independent shop. If the buyer succeeds in acquiring substitute bikes, or resells the bikes on hand at discount, he will have mitigated, which is a "remedy inconsistent with performance". Thus, his demand for specific performance will collapse.

At a minimum, compliance with the tests in arts 25 and 46 would require a complex, time-consuming trial on the merits. The trial would require expert testimony about the plaintiff's mitigation efforts, the parties' psychological states of mind at the time of contracting as well as expert testimony by other merchants in a position to know if the seller ought to have realised the extent of the buyer's prejudice. Given the cost [page 199] and time involved and the unlikelihood of prevailing on the merits, many purchasers, even Floridians filing suit in Spain, would likely mitigate under art 77 by seeking comparable goods in the market, by reducing the resale price of the bikes on hand, or by paying to have the non-conformity corrected, and, in any of these events, then seeking compensation against the seller for the expenses of correction and lost profits. Because any of these self-help measures constitutes mitigation, a measure inconsistent with a demand for performance, the purchaser would have foregone his specific performance claim. Even if the purchaser ultimately obtained an order of specific performance, the order would result not from his independent election of remedy, but from the court's exercise of its discretion after fully evaluating the contribution of both parties to the loss. One may wonder if the order to perform would include an embargo on the seller's assets and interrogation of entities familiar with the whereabouts of the seller's assets.

Let us assume now that the bikes in question need repair, not correction of a non-conformity. Obstacles to specific performance here would also be significant, for the buyer would have to show that his own refusal to mitigate by repair was "reasonable in all the circumstances". Akin to "good faith", the phrase "reasonable in the circumstances" establishes a flexible standard, subject to considerable judicial discretion, and the buyer might be denied specific performance if mitigation by the purchaser were a reasonable alternative. At any rate, a purchaser's mitigation efforts would be examined carefully in a protracted trial. Given the time and cost associated with a trial on the merits under this flexible standard, a sensible purchaser would likely abandon a specific performance claim, mitigate his injuries, and seek compensation against the seller. In these instances, art 46, by authorising the court to evaluate the gravity of the breach, would reverse the approach of Spanish law which accords an aggrieved party the election of remedy. Based on this evaluation, the court would then decide on the appropriate remedy. The CISG could thus lead a Spanish judge into a familiar American balancing inquiry in which the court, viewing both parties as necessary agents for achieving a loss-reduction, substitutes its own utilitarian calculus for that of the aggrieved party.[62] [page 200]

If the above speculation is accurate, then the qualifiers in art 46, coupled with art 77's mitigation duty, would likely cut down the number of successful demands for specific performance under CISG even in Spain, a jurisdiction having no mitigation duty and thus outside the scope of the exemption in art 28. Even if art 28 did not figure in an aggrieved buyer's strategy against the seller, the former would realise that a thicket of hurdles, expressed in terms such as "mitigation", "seller's foreseeability", "good faith", and "reasonableness of circumstances," could frustrate a demand for specific performance that he assumed was his for the asking.

(c) Resale by a seller limits a buyer's duty to pay the purchase price

If a mitigation duty can qualify a buyer's prospects of demanding performance from the seller, then a fortiori, a mitigation duty can also limit a seller's prospects for specific performance against a buyer. A seller's mitigation duty may be explicit, as in art 77, or it may be concealed within another formulation such as that in art 62, which parallels art 46: "The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement." Assuming that the Miami purchaser has repudiated the sale, the Spanish seller could conceivably demand specific performance of the duty to pay the price.[63] If the seller demanded the relief in Miami, however, art 28 would stand in his way. The seller's recourse would likely be a re-sale, even at a lower price than that stipulated in the original contract. Having mitigated by resale, and thus resorted to a remedy inconsistent with a demand for performance, he could not demand payment of the price. Now excused from paying the price as a result of the seller's own actions, the purchaser would still owe damages calculated in terms of lost profits. This duty, nevertheless, would not be enforceable by specific performance.

According to Schlechtriem, a self-help sale under art 88 is incompatible with compelling the buyer to take delivery of the goods. Yet, Schlechtriem suggests, a seller's reliance on a self-help sale would be consistent with the buyer's subsisting duty to pay the price. Curiously, Schlechtriem qualifies a buyer's duty to pay the price by noting that the seller can claim only the difference, if any, between the contract price and the proceeds of the re-sale. Hence, in practice the seller's obligation to make such a sale would limit recovery in an action for the price.[64] Perhaps this is [page 201] only a quibble over terminology, but under the UCC, the seller's right to claim the difference between the contract price and the proceeds of a self-help sale would constitute a damages claim, not an action for the price.

Schlechtriem's analysis of a seller's action for the price may be symptomatic of a duality of policies embedded in the CISG. In his analysis, the principles of pacta sunt servanda and mitigation seem on a collision course. In principle, an aggrieved seller may have against a buyer a right to specific performance for the payment of the price. But in reality the seller's pronounced tendency to mitigate his loss may erode this right to the vanishing point, leaving the seller at best with a damage claim.

Despite the CISG drafters' avowed preference for specific performance, they seem to have set up a rivalry between the mitigation principle and the remedy of performance. Perhaps, as Schlechtriem's remarks imply, the drafters hoped that the two principles could operate in separate spheres. This hope may inform Schlechtriem's observation that the mitigation duty restricts the victim's right to damages, but that it should not qualify the right to demand performance or other remedies besides damages.[65]

In view of the CISG drafters' avowed commitment to specific performance as the primary remedy, it seems reasonable to conclude that Schlechtriem's analysis of the specific performance right would likely receive broad approval among the delegates responsible for drafting the CISG. Yet, we may still ask whether this right, durable though it may seem, can be isolated so decisively from the mitigation duty of art 77, the standards of art 46 and 62, and the overriding obligation of good faith. If, as Schlechtriem has assumed, the promisee does not have even an indirect obligation to surrender a right to performance in order to relieve the promisor of a burden, then the reader may be puzzled by Schlechtriem's remark that the mitigation duty may impose on the aggrieved party a duty not to exercise "contractual rights or sometimes a positive duty to exercise certain rights, such as the right to avoid the contract".[66] Thus, notes Schlechtriem, a mitigation duty implies that an aggrieved seller may be expected to make a substitute transaction and abandon his right to require performance. It may also be "appropriate," according the Schlechtriem, for a buyer entitled to delivery on credit terms to accept delivery of the goods on cash terms, reserving his right to damages where rejection of the goods would increase the loss.[67] [page 202]

We may wonder how to reconcile Schlechtriem's last remark about the buyer's duty to mitigate with his observation that "there is not even an indirect obligation to surrender a right to performance in order to relieve the promisor". Leaving aside the question why transforming a credit sale into a cash sale would not constitute an actionable breach by the seller, a buyer's mitigation duty would seem to weaken the right to stand fast on the contract. Weakening this right by a mitigation duty would seem contrary to Schlechtriem's suggestion that the victim has no duty to abandon a contract right even if this would alleviate prejudice for the breacher. ("The promisee's insistence on performance of the contract cannot be criticized as a failure to mitigate loss, even if he subsequently avoids the contract and claims damages.")[68]

There are also psychological factors to be accounted for in the parties' decision-making: a buyer who refused to mitigate could be plagued by doubts that a court in hindsight would second-guess it, refusing to order performance by the seller, and reducing the buyer's damage claim under art 77.[69] As we have indicated, the parties in a US forum would be unlikely to reach these issues because of the strong preference for damages over performance and the court's willingness to second-guess the decision against mitigation.

Matters would not be so simple in a Spanish court either. If the buyer in a Spanish forum insisted on performance and refused to mitigate under art 77, it might still be impeded by the conditions in art 46 and the good faith principle of art 7. These risks for the buyer are implied in Schlechtriem's analysis of conditions warranting the abandonment of a claim for specific performance. Though an aggrieved party's duty of mitigation and the right to specific performance may not be at war with each other, these remedial measures seem to have potential for operating at cross purposes in a number of situations. Proponents of specific performance as a primary recourse [page 203] might wonder if CISG arts 28, 46, and 62 represented the best truce in the circumstances.

(d) Commercial realities also hinder compelling; issuance of bank guarantee as payment

Aside from the tensions embedded in the Convention text, business realities may also frustrate the application of CISG performance remedies. For example, we may wonder whether a court could be readily persuaded to compel a buyer to deliver a bank guarantee[70] if, as is usually the case, the guarantor bank were not a party to the sale contract, and thus not amenable to suit at the seller's instance. Presumably, the buyer, as the bank's customer, could have a direct claim against a bank that has underwritten the purchase, but the claim could involve protracted litigation whose outcome the unpaid seller would be under no duty to await. Ultimately, even the buyer could have difficulty compelling its bank to issue a guarantee if, in the usual situation, the bank's commitment letter for the guarantee stipulated a buyer's fulfilment of a number of conditions precedent to issuing the guarantee, including the bank's continuing satisfaction with the buyer's creditworthiness and its furnishing of adequate collateral.

(i) Compelling issuance of a letter of credit

The obstacles to compelling issuance of a bank guarantee could also impede a court-ordered issuance of a letter of credit. If the issuing bank, having found that the buyer's financial situation had deteriorated since the time of the bank's original commitment, refused to issue the letter of credit, then the sale transaction would likely abort because of the buyer's non-payment. It is difficult to imagine a court in any jurisdiction compelling the bank to issue a letter of credit against its better judgment and its internal regulatory standards. If the bank had previously issued the letter of credit and then refused unjustifiably to pay on it, then the bank could be sued for dishonouring a draft, but this remedy against the bank would consist of damages, not performance.[71] In any case, remedies against the bank would arise by virtue of the lex fori, not the CISG. [page 204]

(ii) Compelling a seller to hand over a document of title

As in the cases requiring payment of the price by a bank guarantee or a letter of credit, compelling a seller to hand over title documents might also call for delicate judicial manoeuvering in a considerable number of instances. Impediments to the buyer's enforcement efforts could arise from the fact that the CISG's scope is limited to obligations of buyers and sellers and does not extend to other key actors in documentary sales. According to art 4 of the CISG, "[the] Convention governs only ... the rights and obligations of the seller and the buyer arising from the contract". Furthermore, to the extent that a buyer has sought a document of title to assure property rights in the goods, the CISG may be unhelpful, for art 4 also stipulates that the "Convention is not concerned with ... the effect which the contract may have on the property in the goods sold."

Trading over great distances, international buyers and sellers must count for the success of their contracts on the voluntary cooperation of a number of other commercial actors such as banks, cargo carriers, freight forwarders and insurers. Against such actors, however, a judicial order compelling delivery of title documents could be impractical. It is true that art 34 of the Convention authorises forcing a seller to hand over a bill of lading and other documents relating to the goods. But art 34 seems insensitive to the nuance and complexity of an international documentary transaction. While under art 34 the seller may be the target of the buyer's demand, the seller might be only briefly in possession of title documents that the buyer needs to gain control of the cargo at the destination point. At different moments in the transaction, these documents could be under the control of a freight forwarder, a carrier, or a confirming bank. None of these actors is regulated expressly by the CISG.

Joined in a suit under the CISG, a confirming bank, a forwarder and a carrier could prove to be elusive defendants. For while they may control issuance and transmission of title documents, they would be under no duty to deliver them to the buyer under the CISG. The buyer is not usually the proper person to make such a demand, as it would normally depend upon the transmission of title documents through banking channels. Furthermore, it would be futile to pursue a confirming bank that had not received promised title documents. Although a carrier and a confirming bank could properly claim the documents in some circumstances, the CISG does not grant these actors such rights. If the bank acquired such rights from the buyer via delegation or assignment, its realisation of the rights could be too tedious and protracted to be useful. [page 205]

(iii) International documentary sales and compulsory orders

In a routine international documentary transaction,[72] the carrier, not the seller, has power to issue a title document in the form of a bill of lading, although the precise form of the document, either straight or negotiable, depends upon the buyer's and the seller's agreement. Of course, the seller has indirect power over the bill of lading, for as contemplated by art 67, the carrier's duty to issue the bill of lading to the seller is triggered by the seller's handing over the goods for loading aboard the vessel. But handing over the cargo to the carrier does not guarantee that a carrier will punctually issue the bill of lading. There are no guarantees against a carrier's failure to issue a bill of lading that complies strictly with the relevant letter of credit.[73]

If the transaction is to be successful, a carrier's issuance of the bill of lading is not the only hurdle for the parties; the confirming bank's cooperation is also crucial. To obtain payment under the letter of credit issued by the purchaser's bank, the seller, assuming that the carrier has issued the bill of lading in exchange for the cargo, should deliver the document to the confirming bank, which exercises independent judgment over the precise and timely fulfilment of all requirements specified in the transaction documents. Yet, as noted above, the CISG does not regulate the confirming bank's obligations. Furthermore, the confirming bank's decision to hand over the documents to the buyer and the issuing bank lies within its sound discretion; these discretionary acts are not subject to compulsory court orders. Indeed, despite the language of CISG, a purchaser may have no direct right against the seller for delivery of the bill of lading because the confirming bank's discretion and the carrier's prompt cooperation stand in its way.

Nor would the confirming bank find it easy to compel the seller to comply with an obligation to turn over a title document, although logically the bank appears the proper party to make such a claim. Because the confirming bank's payment to the seller is conditioned on the seller's delivery of the bill of lading and satisfaction of other conditions spelled out in the letter of credit, the confirming bank, not the buyer, would normally be the appropriate party to require delivery of the bill of lading from the seller. But, the CISG does not regulate the confirming bank's right [page 206] to demand the bill of lading. Instead of suing for the documents, the bank would likely prefer to obtain the documents extrajudicially (and inexpensively) by withholding payment under the letter of credit.

Assuming that the seller has delivered the goods to the carrier in exchange for a bill of lading, a buyer's suit against the seller would have to be timed precisely and managed deftly to produce an effective decree for specific performance. If the transmission or issuance of the bill of lading depends upon a third party, such as the carrier or the confirming bank, then the path to specific performance against these parties could prove exiguous. Frustrated in its attempts to compel issuance or delivery of sale documents by commercial actors not covered by the CISG, a purchaser in a documentary transaction would easily decide that the most appealing remedy consisted of damages or avoidance of the contract.

It is difficult to imagine all the hypothetical situations in which a buyer might owe a title document whose delivery would not be compellable by suit, and there is no point in multiplying such situations. My purpose here has been to suggest that demands for specific performance could face both commercial and procedural obstacles, thus making damages and avoidance the practical alternatives for breach of contract. Despite the drafters' avowed commitment to specific performance as a primary remedy, the Convention regulates little of the choreography of a documentary transaction.

G. UNITED STATES JURISPRUDENCE INTERPRETING CISG [74]

It is too early to evaluate confidently American courts' reaction to the CISG's preference for specific performance. As of this writing, only a handful of US cases [page 207] have interpreted the Convention. Although CISG art 28 has not become crucial in the reasoning of US cases, some commentators have foreshadowed likely judicial tendencies in the interpretation of the article by identifying parallels between the CISG's remedial scheme and that of the UCC.[75] Taking a cue from these commentators, United States courts might easily find in the CISG's remedial scheme a suitable basis for awarding damages and denying performance requests in all but the most exceptional circumstances.

This is not to say that United States courts have altogether ignored art 28, or the preference for performance embodied in arts 46 and 62. For instance, a United States court has acknowledged a buyer's right to specific performance of the seller's duty to repair; but the acknowledgment, made in passing, was not crucial for the ruling. In Delchi Carrier S.p.A. v Rotorex Corporation,[76] the purchaser, having already mitigated before suing the seller, demanded exclusively damages for the seller's breach. Delchi, an Italian fabricator of air conditioners, had ordered a large number of air conditioning compressors it planned to incorporate into a line of portable room air conditioners. The compressors seriously malfunctioned by failing to cool in accordance with the seller's representations and specifications. Delchi notified Rotorex of the deficiencies and requested their correction. After Rotorex attempted unsuccessfully to correct the deficiencies, Delchi rejected the compressors. Delchi also sought substitute compressors from other suppliers. Its inability to secure replacement compressors resulted in its claim for damages. Invoking art 25, Delchi cancelled the contract on the basis of a fundamental breach. Though the court noted the existence of Delchi's right (under art 46)[77] to require Rotorex to correct the deficiencies, Delchi evidently saw no use in judicially requiring Rotorex to fulfil the repair duty. Deprived of the compressors needed for its approaching selling season, Delchi recovered damages, including lost profits, resulting from reduced sales of its products. It also recovered costs incurred in trying itself to correct the non-conformities in the Rotorex compressors.

In a more recent case, a United States district court went further than the Delchi court in acknowledging an aggrieved buyer's right to an order compelling his seller to perform, in this case by delivering promised merchandise. In Magellan International Corporation v Salzgitter Handl GmbH,[78] Magellan had negotiated with the defendant a contract for several deliveries of steel bars to be specially manufactured by a Ukrainian steel mill. Acting as a middleman, Salzgitter was supposed to take orders based on Magellan's specifications, and then transmit the [page 208] orders to the Ukrainian factory for manufacture. Magellan was to pay the price by a letter of credit.

After the parties had exchanged a number of communications regarding the transactions, Magellan directed its bank to issue a letter of credit in accordance with Salzgitter's request. When Magellan requested modifications of the order after the steel was partly manufactured, the relationship between the parties soured. Claiming that the defendant had repudiated the contract, Magellan withdrew the letter of credit.[79] Magellan's suit claimed that the defendant had breached the contract by refusing to modify the order, followed by its notice of repudiation. Magellan sought specific performance of the seller's duty, relying upon a standard allegation for obtaining performance, i.e. that the steel was unique and thus unobtainable elsewhere in the marketplace. Salzgitter sought to dismiss Magellan's claim for performance on a standard basis that specific performance constituted exceptional relief, and that damages would suffice to repair the loss. According to the Illinois federal court, CISG art 46 permitted a buyer to require a seller to perform unless the buyer resorted to a remedy inconsistent with that requirement; and, noted the court, "[art 46] would appear to make specific performance routinely available under the CISG".

But, as the Magellan court also noted, art 28 qualifies the plaintiff's right to specific performance. While the court did not have to reach the issue of ordering or denying performance because proceedings were still at a preliminary stage, it concluded that it would be inappropriate to dismiss the plaintiff's claim for specific performance in light of its alleged inability to cover reasonably.

The Magellan court's refusal to dismiss the purchaser's demand was consistent with UCC 2-716, the provision most relevant to a suit for specific performance. According to the official commentary under UCC 2-716, an aggrieved party's inability to cover is strong evidence of "other proper circumstances" justifying an order of specific performance. Other factors militated against dismissal of plaintiff's claim before trial: first, Magellan had already paid the price by sending its letter of credit;[80] and, second, as the goods were to be specially manufactured, replacement goods would have been difficult to secure in the open market. [page 209]

These two cases seem to represent a modest reception of the CISG's remedial policy. It is true that these two courts have noted the CISG preference for specific performance, but US courts generally have not so far had to grant or deny specific relief either because it was not procedurally appropriate or because the plaintiff did not demand this relief.

(1) "Unless the Court would [could?] do so under its own law"

The Magellan and Delchi decisions mark the beginning of a US judicial dialogue that was foreshadowed by debate among Convention delegates over the quoted phrase. Addressing the policy of art 28, delegates wondered which formulation -- "would do so" or "could do so" -- more appropriately captured the proper standard for an order of performance. The precise choice of conditional phrasing seems to have been especially vexing for the American delegates. Farnsworth, for example, argued that the phrase "would do so" represented a "sham compromise" between the rival camps. For Farnsworth, the phrase "would do so" conceded a US court more discretion in granting specific performance, than the phrase "could do so."

" ... Even as to a buyer's suit against the seller for what is unmistakably "specific performance", a Common Law court is not relieved of the obligation to render such a judgment if "it could do so" under its own law in respect to similar contracts of sale. This is a very different test from that permitted under a reservation of ULIS (Uniform Law of International Sales) (art VII) which relieves a court from the obligation to render such a judgment "except in cases in which it would do so under its own law in respect of similar contracts of sale". The law relating to equitable relief in any Common Law system is sufficiently discretionary that, given appropriate facts, a court could render a judgment of specific performance in respect of many types of contracts although it would render such a judgment in respect of very few. The rewording of the language has produced at best a sham compromise."[81]

Given the Spanish preference for performance, debate over the appropriate conditional tense may be unimportant for Spanish lawyers.[82] In the US context, however, the phrase "could do so" in art 28 may conceal a thicket of complications discoverable gradually by looking to the laws of the several states. At this point we can only conjecture about the possible reactions of the state courts. But, a valuable source of tools for forecasting these judicial reactions appears in extensive collections of [page 210] domestic US cases on specific performance. The next section explores assumptions implicit in the US courts' reasoning processes.[83]

(2) Implicit assumptions in the reasoning of US commercial cases

The reasoning processes of US courts rest on a number of factors that are widely known but too rarely articulated. First, given the fact that US commercial law is largely a creature of individual states, the phrase "American Uniform Commercial Code" is a misnomer; for convenience this paper has used the phrase to contrast it with the Spanish Civil Code. There is no body of legislation titled "American Uniform Commercial Code". Each state in the US independently has enacted its own version of the Uniform Commercial Code; and each state's UCC enactment, along with other state and federal enactments and case-law, constitutes the particular state's domestic law. Principles of US federalism do not require two states' versions of the UCC to be alike.[84] Although many states' UCC enactments bear strong resemblances to one another, the details of two state UCC enactments can be dramatically different. These variations complicate generalisation across state lines.

Even if two sister states' UCC enactments are identical, nothing obliges the courts of the two states to interpret their enactments in the same way. By enacting its version of the UCC, a state assembly has not displaced that state's pre-existing case law. Courts freely interpret the UCC against the backdrop of a state law jurisprudence that may predate the UCC or arise outside of it. Interpretive uncertainty (or flexibility?) is also enhanced by the drafting style of the UCC which confides to a court a great interpretive latitude.

The porous and open-ended terms of UCC 2-716 on specific performance embody the essence of judicial discretion.[85] It provides:

"(1) Specific performance may be decreed where the goods are unique or in other proper circumstances. (2) The decree for specific performance may include such terms and conditions as to the payment of the price, damages, or other relief as the court may deem just." (emphasis added)

As a leading commercial law treatise notes, a court has wide latitude to decide when goods are "unique";[86] when the circumstances of the case are "proper"; and [page 211] when the relief is "just".[87] (Unlike a Spanish tribunal, a US court would not conclude that a plaintiff deserved specific performance because the plaintiff requested it and the relief was physically possible.) In exercise of its discretion, a court, as in Magellan, would ask whether mitigation was possible. If so, then the contractual goods are not "unique", and specific performance is inappropriate. If a buyer wishes to show that the merchandise is unique, it bears the burden of proving that there is no relevant market for substitute goods, not even at elevated prices.[88] What is the result if the breaching seller itself refuses to deliver the goods at the contract price but would be willing to deliver at a higher price? Assume that the seller has intentionally breached the contract because it seeks to extract a better price from the buyer than that stipulated in the contract. Surprisingly, some US decisions, even on these surprising facts, instruct the buyer to mitigate and seek damages afterwards. In US commercial doctrine, mitigation, perhaps remarkably for a Spanish lawyer, can mean even that a buyer should deal with his own breaching seller and later sue for damages. A quirky doctrine, perhaps, but it illustrates the quasi-religious power of the market, and thus of the mitigation requirement, to compel the buyer to pay off the breaching seller [page 212] and then sue for damages in respect of the breach.[89] The doctrine entails imponderables. For example, if a seller has been forceful enough to hold out on the buyer in the face of certain litigation, why could the seller not also demand a compromise of all the buyer's claims, including damages, resulting from the seller's repudiation? Such a compromise would likely have the effect of res judicata, thus foreclosing litigation over the damage issue.

H. EPILOGUE

Behind the talk of cash and goods among market actors we may find a dialogue of quasi-religious dimensions in the rivalry between adherents of pacta sunt servanda and those favouring Holmes's pragmatic (unethical?) view of contract remedies. Although the rival views concern material goods, not salvation, their adherents seem to advance them as articles of faith. As such, the views are not easily dislodged by rational argument or empirical evidence. Decades ago, Rabel forecast an irreconcilable and intense competition between proponents of the rival views.[90] More recently, the rivals' fervour has prompted John Honnold, a senior United States delegate to the drafting sessions for the Vienna Convention, to remark:

"One bred in the Common Law remains puzzled at the Civil Law's insistence on a remedy (specific performance) that is rarely useful while a scion of the Civil Law must be dismayed by an attitude that seems to subvert the sanctity of obligations."[91]

English legal historians remind us that the English Chancellor, keeper of the conscience of the realm, ordered specific performance against a defaulter to help him redeem his soul. For this senior royal figure, who was also an archbishop and adviser to the monarch, oath-breaking was a serious offence akin to perjury.[92] Locking away a defaulting oath-taker was seen as a fitting inducement to having him assure his salvation. If we look back over centuries of judicial decisions ordering specific performance, the claim of economic inefficiency of specific performance seems a [page 213] modern gloss, perhaps even an ahistorical reformulation of a venerable remedy anchored in ideas of piety and spiritual healing.

Not surprisingly, heirs of the Romano-Germanic tradition, influenced to a considerable extent by canonical ideas, display a quasi-religious faith in pacta sunt servanda as a principle of social cohesion.[93] (This faith may explain a general resistance in the world community to recent US proposals to renounce unilaterally a number of our long-standing treaty obligations.)[94] The principle of pacta sunt servanda is a cornerstone of Spanish contract regulation, though a Spanish jurist may rightly wonder if the principle is sometimes ignored in practice.[95] According to Spanish doctrine, while impossibility might excuse from performance, a promisor should not escape his or her duties on flimsier grounds than this. Nor should the breacher be heard to claim that the breach, by permitting efficient reallocation of assets, has enhanced social welfare.

Holmes boldly characterised as unethical the view that a promisor did not have to perform a promise just because he or she had promised to do so. If the contract was breached, the breacher would pay damages; in Schlechtriem's phrase, the breacher could buy him or herself free of the contract. Holmes evidently did not mean that a breacher, immediately upon repudiation, should write the promisee a certified cheque to cover the damages. Indeed, the breacher would not write any cheque at all unless pushed to do so. When the victim complained, the breacher would likely shift the burden to the victim, demanding first that the victim mitigate damages which the victim had not caused. If the breacher was not lucky enough substantially to reduce damages via mitigation, then a lawyer's services could be engaged to recover what was lost. In many cases a patient and persistent promisee might get a judgment, plus a large lawyer's invoice. But winning a judgment after a long period of anxiety and struggle was not tantamount to receiving a certified cheque on the date of repudiation, let alone delivery of the merchandise.

Following Holmes's view, considerations of efficiency allow a breacher to put the victim at risk with respect to forward customers. In seeking to make himself whole, a victim faced a number of challenges. Would customers forgive delays not of the victim's making? Would substitute goods be found promptly in the necessary quantities? Would the witnesses remember events properly? Would a court be sympathetic to the victim's mitigation efforts, even if largely unsuccessful? Could a judgment against the breacher be collected? Would the currency in which the judgment was to be paid remain stable enough fully to compensate the victim? The [page 214] answers to these questions were not assured, even if the breacher belonged to the beati possidentis.[96] In view of the frustrations for the breach victim, we may wonder why the jurisprudence did not evolve to impose on the breacher a trust protecting the promised goods for the victim's benefit. Alternatively, if the seller had resold the merchandise at a higher price than the original contract provided, perhaps the cases could have forced the seller as trustee to disgorge any profit without allowing a defence based upon a victim's mitigation and foreseeability of the damages.

These challenges for an innocent victim make it easy to sympathise with proponents of pacta sunt servanda; for a breach victim, performance seems an ideal way of assuring the benefit of the bargain. Spanish procedure would grant the victim the choice of remedy. If a victim mitigated, though without a duty to do so, then damages would be sought. But deciding against mitigation would not hurt a claim for performance.

Holmes's vision seems to have been anchored in a fundamental faith, though a faith of a different kind than that underlying pacta sunt servanda. Associated with efficient markets and the invisible hand, this faith was described by Farnsworth: "In a market economy it is supposed that with rare exceptions for such 'unique' items and heirlooms and objects of art, substantially similar goods were available elsewhere."[97] Advising a breach victim to mitigate may sometimes seem like tough love therapy, but prompt effort can earn grace at least among customers and the tribunals. Manipulated by an invisible hand, an omniscient market promises the victim that prompt and virtuous efforts to mitigate will make everything come out for the best. If we do not impede the function of efficient markets, so goes the argument, everybody seems pretty much able to do what suits his or her own interest. An invisible hand is counted on for social utility.

Given the intensity of the rival positions regarding specific performance as a primary remedy, we might have anticipated the CISG drafters' ambivalence toward the question of remedies. Convictions about the power of efficient markets seem first to have collided with and then diluted the drafters' avowed commitment to the principle of pacta sunt servanda. The volume and velocity of transactions probably impelled proponents of pacta sunt servanda to recognise the difficulties inherent in [page 216] a too strict adherence to the principle. This recognition seems to have figured importantly in the thinking of the drafters of the Unidroit Principles of International Commercial Contracts. Applicable to all sorts of contracts, not only sales, the Unidroit principles are said to "embody what are perceived to be the best solutions even if still not generally adopted".[98]

A Spanish jurist would likely be pleased to find in the Unidroit principles an avowed commitment to pacta sunt servanda: according to art 7.2.1, "where a party who is obliged to pay money does not do so, the other party may require payment". And art 6.2.1 stipulates that "where the performance of a contract becomes more onerous for one of the parties, that party is nevertheless bound to perform its obligations". The comments underscore the sanctity of the obligation:

"The purpose of this article is to make it clear that as a consequence of the general principle of the binding character of the contract ... performance must be rendered as long as it is possible and regardless of the burden it may impose on the performing party."

But these provisions do not tell the whole story, and what is given by arts 6.2.1 and 7.2.1 is taken away by others. According to art 7.2.2, for example,

"Where a party who owes an obligation other than one to pay money does not perform, the other party may require performance, unless a) performance is impossible in law or in fact; b) performance or, where relevant, enforcement is unreasonably burdensome or expensive; c) the party entitled to performance may reasonably obtain performance from another source."[99]

To a Spanish jurist, exception a) would be a familiar basis for excusing a party from performance. He might also find in exception b) an approximation of the doctrine of onerosidad excesiva.[100] But a proponent of damages as a primary remedy [page 216] would probably find in exception b), and surely in exception c), the language of efficient markets, and thus a tempering of a commitment to pacta sunt servanda. Such a viewpoint would be fortified by art 7.4.8, "Mitigation of harm", which provides:

"The non-performing party is not liable for harm suffered by the aggrieved party to the extent that the harm could have been reduced by the latter party's taking reasonable steps."[101]

Unlike art 77 of CISG, which burdens a party with a mitigation duty only if it has relied upon the breach, Unidroit provision 7.4.8, generally applicable to all kinds of agreements, could be broadly effective even in cases in which the aggrieved party had not relied upon the breach. Judging from these few texts, the Unidroit principles seem to exhibit an ambivalence toward contract remedies akin to that noted in the CISG. For students interested in the intersection between black-letter commercial rules and deeply-felt values of legal cultures, a detailed treatment of this ambivalence would be a fascinating subject for another day. [page 217]


FOOTNOTES

* John Minor Wisdom Professor of Civil Law, Tulane University. This article is the revised and expanded text of the seventh W A Wilson Memorial Lecture given at the University of Edinburgh on 12 March 2002. Grateful acknowledgment is made to Professor Antoni Vaquer, University of Lleida, Spain, for his constructive comments on a draft of this article as well as for supplying copies of many of the Spanish texts cited herein.

1. G Treitel, Remedies for Breach of Contract (1988); P Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, 2nd edn (1998) (translated by G Thomas); E A Farnsworth, "Damages and specific relief" (1979) 27 Am J Comp L 247; H M Flechtner, "Remedies under the new International Sales Convention: the perspective from article 2 of the UCC" (1988) 8 J Law & Com 53; A Smith, "Specific Implement", in K Reid and R Zimmermann (eds), A History of Private Law in Scotland (2000), vol 1, 195. A H Kastely, "The right to require performance in international sales: towards an international interpretation of the Vienna Convention" (1988) 63 Wash L Rev 607; J M Catalano, "More fiction than fact: the perceived differences in the application of specific performance under the United Nations Convention on Contracts for the International Sale of Goods", (1997) 71 Tul L Rev 1807; Comment, "The Convention on Contracts for the International Sale of Goods and the General Conditions for the Sale of Goods" (1982) 12 Ga J Int'l & Comp L 451; O Gonzalez, "Remedies under the UN Convention for the International Sale of Goods" (1984) 2 Int'l Tax & Bus Law 79; S Walt, "For specific performance under the United Nations Sales Convention" (1991) 26 Tex Int'l Law J 211; A Schwartz, "The case for specific performance" (1979) 89 Yale LJ 271; A Kronman, "Specific performance" (1978) 45 U Chi L Rev 351; J Dawson (1959) "Specific performance in France and Germany" (1959) 57 Mich L Rev 495; R Verdera Server, El Cumplimiento Forzoso de las Obligaciones (1995); O Lando, "Non-performance (breach) of contracts", in A Hartkamp et al, Towards a European Civil Code, 2nd edn (1998) 333; E Zamir, "Toward a general concept of conformity in the performance of contracts" (1991) 52 La L Rev 1; R Hyland, "Pacta sunt servanda: a meditation" (1994) 34 Va J Int'l L 405; J Fitzgerald, "CISG, specific performance, and the Civil Law of Louisiana and Quebec" (1997) 16 J Law and Commerce 291; N Boghossian, "A comparative study of specific performance provisions in the United Nations Convention on Contracts for the International Sale of Goods" (1999-2000) Pace Review of the Convention on Contracts for International Sale of Goods, 3-78. A list of scholarly articles on the CISG appears at the Pace University website, <http://cisgw3.law.pace.edu>. For German research, see <http://www.jura.uni-freiburg.de/ipr1/cisg/>.

2. 15 USCA Appendix at 332 (West Group, 1998).

3. One may ask if the term lex fori includes the forum's choice-of-law rules as well as its domestic contract law. For the present study, the question is pertinent because some legal systems regard specific performance as "substantive and thus governed by the proper law of the contract, as determined by rules of private international law. Other systems consider the issue to be procedural and thus governed solely by the law of the forum." (Kastely, "The right to require performance", note 1 above, 637. For simplicity we assume here that the rationale of art 28 requires that the issue of specific performance under the CISG be governed by the domestic law of the forum without regard to the forum's choice-of-law rules. According to, A M Garro and A L Zuppi, Compraventa Internacional de Mercaderías (1990) at 144: "The goal of article [28] is to provide specific performance when the court can do so in conformity with its internal law."

4. A risk of fragmentation was signalled almost twenty years ago: "Since the rules of specific performance differ widely even among Civil Law jurisdictions, the results of such an action will depend on the geographical location of the court before which the action is being brought. This seems regrettable even if it is unavoidable." (J Ziegel, "The remedial provisions of the Vienna Sales Convention: Common Law perspectives", in N Galston and H Smit (eds), International Sales (1984) paras 9-9 - 9-12. According to Ziegel, the Common Law jurisdictions are hardly univocal on the issue of specific performance: "Commonwealth courts ... regularly enforce specifically contracts for the sale of commercial realty even where damages would be an adequate substitute." For an account of Scotland's judicial commitment to specific implement, see Smith, "Specific Implement", note 1 above; W W McBryde, The Law of Contract in Scotland, 2nd edn (2001), paras 23-08 - 23.10. The risk of fragmentation, despite a compelling goal of uniformity, was also noted by Garro and Zuppi, Compraventa Internacional de Mercaderías, note 3 above, 143.

5. For the full text of CISG articles see the CISG website, <http://cisgw3.law.pace.edu>

6. The delegates' positions seem to have hardened along traditional Civilian and Common Law lines. According to J Honnold, "one bred in the Common Law remains puzzled at the Civil lawyer's insistence on a remedy that is rarely useful, while a scion of the Civil Law must be dismayed by an attitude that seems to subvert the sanctity of obligations." (J O Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (1982), 286 at 303.

7. For example, Kastely speaks of the "Civil Law system" as though it were an undifferentiated monolith (Kastely, "The right to require performance", note 1 above, at 640). Even the domestic United States "system" is not monolithic. Authors of treatises on United States commercial law must often content themselves with identifying dominant trends in judicial decisions and analysing "minority" and "majority" positions among the states. Meanwhile these treatise writers tend to elide contrasts among different nations of the "Civil Law," suggesting, for example, that "the Civil Law generally allows specific performance ... whenever the aggrieved party chooses." See J White and R Summers, The Uniform Commercial Code, 5th edn (2000) at 234: earlier editions of White and Summers' treatise usually omitted references to the Civil Law altogether,

8. Such speculation appears in English texts such as M Bridge, The International Sale of Goods: Law and Practice (1999).

9. See McBryde, Contract, para 23.09; H L MacQueen and L J Macgregor, "Specific implement, interdict and contractual performance" (1999) 3 EdinLR 239.

10. On the position of German law, see note 48 below. A brief look at a French treatise on obligations suggests the perils of generalisation about specific relief in French tribunals. First, the sovereign role of the French courts may dissuade a breach victim from any non-judicial measure, other than suspending his own performance, unless the breacher is willing to settle with him: "In principle resolution takes on a judicial character ... but since it is the source of delay and expense, such judicial intervention is sometimes excluded by agreement between the parties." (F Terré, P Simler, Y Lequette, Droit Civil: Les Obligations, 6th edn (1996), 509.) Terré has identified other hazards for a party bent on seeking specific performance (at 512): "Exécution forcée is long and costly; furthermore, it is not always possible and the plaintiff could end up by satisfying itself with damages and meanwhile remain bound to perform its own obligation." French law endows a judge with a wide pouvoir d'appréciation. In exercise of his powers of grace, the judge also, may permit a breacher to perform tardily by specially tailoring for him a mésure intermédiaire. This permission could be granted even when an exasperated breach victim has first sought performance and then relented and sought only a resolution of the contract (at 517). A plaintiff who insists on standing on its contract may find sobering the institution of réfaction, by which a commercial judge may rewrite price terms to salvage the utility of the contract (at 518): "It would not be contrary to a more dynamic vision of the role of the judge ... to extend the domain of this mechanism." The foregoing narrative confirms the correctness of a French colleague's response to questioning on the wisdom of a suit for performance, "I would not know what to do," he said, "I would counsel extreme prudence." For an English discussion, see J Beardsley, "Compelling Contract Performance in France" (1977) 1 Hastings Int'l & Comp L Rev 93; D Tallon, "Remedies", French Report in D Harris and D Tallon (eds), Contract Law Today: Anglo-French Comparisons (1989) 263.

11. The Italian Civil Code contains a number of rules (e.g. arts 1227 and 1914) on mitigation of damages, and there seems to be a burgeoning Italian literature on damage mitigation in a familiar (to Americans) law and economics context heavily seasoned with financial outcomes based on hypothetical variables. See, e.g., C Rossello, Il Danno Evitabile; La Misura Della Responsabilità Tra Diligenza E Efficienza (1990). The author thanks Professor Michele Graziadei, University of Alessandria, for calling his attention to Rosello's study.

12. See R Zimmermann, The Law of Obligations (1990, reprinted 1996) 770-782, in whose view, at 781, the attitude towards specific performance "remains one of the fundamental differences between continental legal systems and the Common Law".

13. Schlechtriem, Commentary on the UN Convention, note 1 above, at 199, note 2 ("Rückgrat der Obligation"). Some Spanish writers seem to echo Rabel's neo-Kantian views on the ethical basis of promises. According to Doral Garcia, quoted by Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, at 102, note 34: "Obligations are born to be performed, whether by spontaneous performance or performance under compulsion."

14. See Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, at 103. For a collection of articles on pacta sunt servanda in several legal systems, see Hyland, "Pacta sunt servanda: a meditation", note 1 above. According to Hyland, even great Roman jurists such as Cicero disagreed on the universal application of the maxim (at 414, citing Cicero, De Officiis). The maxim seems to have been broadly elaborated by medieval canonists (see 417-418), and Samuel Pufendorf gave the maxim its concise modern formulation (see 424-425).

15. Schlechtriem, Commentary on the UN Convention, note 1 above, 199, note 3 (citing Dölle/von CaemmererCHECK CHECK CHECK). Some Spanish scholars share Schlechtriem's view. According to Albaladejo, a monetary indemnity is usually warranted only when there is no possibility of performance in natura. The defaulter has no option to pay or perform as he chooses (M Albaladejo, Derecho Civil, 10th edn (1997) vol 2, 195). According to Antoni Vaquer, Spain, the only exception to this last statement may arise if a debtor has signed a "cláusula penal de desistimiento," akin to a penal bond. According to art 1153, Spanish Civil Code, "The debtor may not be excused from performing the obligation by paying a penalty except in the case when he has expressly reserved this right". Verdera resists as immoral the idea of turning a contractual duty into cash: for him this venality bespeaks a merely quantitative vision of contractual rights and negates their qualitative character. Furthermore, he suggests that transforming a contractual duty into cash does violence to the character of the Civil Law, may mark a return to certain postulates of Roman law, and represents a blow to the meaning of the contract. According to Verdera, allowing a breacher to pay an indemnity is unjust because it allows debtors with considerable economic resources (beati possidentes) to perform or pay at their option. Thus, like Holmes' contract breaker, see text at note 28 below, a contract violator can buy himself free of the contract he has breached. It should also be said, however, that one's suitability as a contracting party initially depends largely on one's being among the beati possidentes; for few would wish to deal with a party who was not a person of means. As we shall see, Verdera is ambivalent about rewarding the beati possidentes, for elsewhere in his study he notes that there may be good reason to allow a breacher to pay damages for breaching a sale. See below notes 42-44.

16. This perspective seems to have dominated some CISG drafting sessions. On several occasions, US delegates proposed to limit the victim's right to performance from a breacher. A chorus of delegates from Japan, Sweden, and France expressed opposition to the limitation on the ground that a breach victim should not be put to the trouble of investigating a market for replacement goods. See Summary Records of the First Committee (18th meeting) UN Doc A/Conf 97/C.1/SR.18 (1980), reprinted in Official Records at 321, 328-332.

17. For example, classical French doctrine requires a judicial declaration of the contract resolution unless one of several exceptions is satisfied. According to one exception, the parties may dispense with judicial intervention if their contract stipulates a résolution de plein droit in certain events. The clause is called technically a "clause résolutoire" or "pacte commissoire expres". But nothing can keep a party from claiming that the clause was abusive or was invoked in bad faith. (F Terré, Droit Civil, note 10 above, 518.)

18. For regulation of Ejecuciòn Forzosa, see Spanish Civil Code arts 1094-1099 and Ley de Enjuiciamiento Civil (LEC) arts 99 et seq. The Spanish rules on performance are forceful and concise: according to Civil Code art 1096, "when what should be delivered is a determinate thing, the creditor ... can compel the debtor to perform the delivery ... "; and art 1098: " ... if the obligor does not do something, be will be ordered to execute it at his cost ... " References herein to the Spanish Civil Code are to Código Civil in Aranzadi Colección Códigos Básicos, 11th edn (2001). The narrative of Spanish law is based upon L Díez-Picazo, Fundamentos del Derecho Civil Patrimonial (1993) 678-681.

19. F Badosa Coll, Dret D'Obligacions (1990) 391; M Albaladejo, II Derecho de Obligaciones (1997) 197. Although the tripartite classification was known in classical Roman law, it flourished in the debates of medieval doctors, (see Zimmermann, Obligations, note 12 above, 773-774), and was carried into modern civil codes such as those of Spain, France, and Louisiana. See Spanish Civil Code art 1088 and LEC art 925. Spanish Civil Code art 1088 provides: "Every obligation consists in giving, doing, or not doing something." Louisiana Civil Code art 1756 is substantively identical: "Performance [of an obligation] may consist of giving, doing, or not doing something."

20. Rather rarely, a Spanish judge may deny a request for performance if the performance is "exceedingly onerous" for the debtor (excesiva onerosidad del cumplimiento) and thus disproportionate to the creditor's ultimate benefit. See, e.g., the cases cited in Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, 171, note 94. But the standard of onerosidad excesiva seems stringent: the performance must "desequilibrar profundamente las reglas contractuales originales". The cases cited by Verdera concern economic waste where the cost of performance for a debtor would greatly exceed the damages recoverable by the creditor (note 1 above, 169-172). For analogous American cases see Groves v G Wunder Co, 286 NW 235 (1939); Peevyhouse v Garland Coal & Mining Co, 382 P 2d 109 (1963); Jacobs & Youngs v Kent, 129 NE 889 (1921). On the Scots courts' discretion to refuse implement where this is inequitable see McBryde, Contract, para 23-22.

21. J Montero Aroca, J L Gomez Colomer, A Montón Redondo, S Barona Vilar, Derecho Jurisdiccional, 9th edn (2000), vol 2, 515.

22. According to Verdera, forced execution of a generic obligation occurs by substituting for delivery of the promised item a judicial extraction from the debtor's patrimony of a sum of cash sufficient to acquire the same kind of goods. Ejecución forzosa may also require replacing a defective item with a merchantable undefective one, (El Cumplimiento Forzoso de las Obligaciones, note 1 above, 258).

23. The right of embargo is said to flow from Spanish Civil Code art 1911: "For the performance of his obligation the debtor responds with all of his assets present and future." Despite this all inclusive language, a number of assets are exempt from embargo. See Montero Aroca, Derecho Jurisdiccional, note 21 above, 585-588. Embargo is defined as "a procedural activity carried out in the execution process, aimed at choosing the assets of the debtor to be subjected to execution and to be concretely affected by it, engendering in the executing creditor a merely procedural ability to receive the products yielded by realising on the affected assets without limiting legally or taking away the debtor's power of disposition over the assets." (At 583-84). This discussion of embargo is based upon Badosa Coll, Dret D'Obligacions, note 19 above, 391. See also L Diez-Picazo, Fundamentos del Derecho Civil Patrimonial (1993) 678-681; Montero Aroca, Derecho Jurisdiccional, note 21 above, 583-590.

24. The conviction is perhaps also reinforced by modern doctrinal identification of the origins of ejecucion forzosa in the Siete Partidas, which was based on Roman and canon law, and the Lex Toletana, issued by the Catholic Kings in 1480 at the height of the inquisition (see Montero Aroca, Derecho Jurisdiccional, note 21 above, 554-555). A popular treatise on forced execution analyses enforcement of judgments by ecclesiastical tribunals alongside enforcement of purely civil judgments (Montero Aroca, Derecho Jurisdiccional, note 21 above, 535 ff).

25. Montero Aroca, Derecho Jurisdiccional, note 21 above, 583-590.

26. Montero Aroca, Derecho Jurisdiccional, note 21 above at 589-590.

27. Some US scholars have argued that specific performance cripples market actors' ability to reallocate resources efficiently. See Farnsworth, "Damages and specific relief", note 1 above, 102; Kronman, "Specific performance", note 1 above. But there are a number of dissenters. On the efficiency or inefficiency of specific performance, evidence is inconclusive, and empirical studies testing these propositions are rare. Factors worth considering in such a study might include the difficulty and expense of enforcement mechanisms, as well as the volatility or unreliability of the currency in which payment would be made if a creditor sought damages. In their evaluation of specific performance, scholars should guard against assuming the universal appeal of the approach of their own national system. An ideal of efficiency should also be weighed against considerations of fairness. Proponents of specific performance as a primary remedy argue that damage remedies are likely to undercompensate aggrieved parties because a court cannot account for costs of uncertainty, unrecoverable litigation costs, volatility of currencies in which a damage judgment may be granted etc. For arguments against specific performance because it is an inefficient remedy, see Kronman, "Specific performance", note 1 above. For a useful discussion of the debate concerning the efficiency of specific performance, see White and Summers, The Uniform Commercial Code, note 7 above, 231-234. White and Summers, at 234, seemingly side with the proponents of specific performance as a primary remedy: "We doubt that granting specific performance would cause any significant inefficiencies, and like the law-and-economics advocates of specific performance, we suspect that specific performance might even promote efficiency." One may wonder if specific performance could become a preferred remedy in US law without a reconceptualisation of the declarative character of a US judgment and its enforcement mechanisms. On differences between the United States judgment and that prevailing in Spain, see below Section E.

28. O W Holmes, "Path of the Law" (1897) 10 Harvard LR 457, 469. Also indicative of Holmes's viewpoint was the following dictum: "The only universal consequence of a legally binding promise is that the law makes the promisor pay damages if the promised event does not come to pass. In every case it leaves him free from interference until the time for fulfillment has gone by and therefore free to break the contract if he chooses." (O W Holmes, The Common Law, (1881) 236.)

29. See UCC  2-711.

30. For discussion of the burden of proof for mental distress resulting from malicious breach, see Valentine v General American Credit Inc, 362 NW 2d 628 (1984): "The courts have not, despite 'make whole' generalisations regarding the damages recoverable, attempted to provide compensation for all losses." The Valentine decision denied recovery for mental distress damages resulting from breach of an employment contract, but recovery for mental distress resulting from a breach of sale logically should be no easier.

31. But tragic events since September 11, 2001 and the use of the mails as a weapon of terrorism may persuade some merchants to reconsider the virtues of stockpiling inventory.

32. See UCC Section 2-709.

33. In the current proposed revision of UCC art 2-716: "in a contract other than a consumer contract, specific performance may be decreed if the parties have agreed to that remedy" (draft Revision, Sept 2001, 138). According to a comment under the proposed revision, "the parties' agreement to specific performance can be enforced even if legal remedies are entirely adequate" (at 140). In the past, a stipulation for specific performance has not usually assured the result contemplated by the proposed version of UCC 2-716. The author thanks Professor Henry Gabriel, Loyola University Law School, reporter for the revision of art 2 of the UCC, for providing the current (2001) draft.

34. The judge may also encounter procedural stumbling blocks to obtaining a defendant's immediate compliance even in the face of an order to perform. Once ordered to perform, the defendant in a federal proceeding may promptly appeal the order, and thus suspend the effect of the trial court's order along with a contempt citation for refusing to comply, J Friedenthal, M Kane, and A Miller, Civil Procedure, 3rd edn (1999) 731-735. Commercial cases fall dominantly to the state courts rather than the federal courts, and state court procedures on contempt are so diverse as to be insusceptible of generalisation beyond a basic level.

35. On the contempt process and judicial contempt powers, see Friedenthal et al, Civil Procedure at 733. References here are to civil contempt rather than criminal contempt. For civil contempt, the aggrieved plaintiff must demand that the defendant be cited for contempt. Even in that unusual case, the presiding judge, instead of ordering incarceration of the debtor, may impose fines, rather like the French astreintes. The fines are payable to the aggrieved plaintiff, not the state. On the coercive aspect of specific performance as a reason for its limited use, see E A Farnsworth, "Legal Remedies for Breach of Contract" (1970) 70 Colum L Rev 1145, 1152-1156.

36. The prejudice resulting to a debtor from a provisional order has also pre-occupied the Spanish lawmaker. The new procedural law (LEC arts 524-534) authorises a procedure for opposing provisional orders of execution such as an embargo. The basic criterion for opposition to a provisional order is the likely irreversibility of the provisional order's effects and impossibility of compensating the debtor once the order is revoked (LEC "Exposición de Motivos", Boletín Oficial del Estado No 7, 589 (8 Jan 2000)). According to LEC art 534, on revocation of a provisional order of execution, the creditor must restore the affected asset to the debtor together with fruits and rents, or the value of the use of the asset (Montero Aroca, Derecho Jurisdiccional, note 21 above, 593).

37. By tradition, US law does not view an action for the price as a suit for specific performance, even though its similarity with specific performance has been stressed. The proper classification of an action for the price is important because CISG Art 28 speaks in terms of a judgment for specific performance, and there is reliable evidence for the view that art 28 should also apply to an action for the price (Schlechtriem, Commentary on the UN Convention, note 1 above, 484).

38. See text at note 32 above.

39. Friedenthal, Civil Procedure, note 34 above, 730. The declaratory character of a United States judgment may be instructively compared with the more instrumental view of a Spanish judgment: "Whether or not preceded by a jurisdictional declaration of law, the process of execution is one in which, beginning with the executing party's claim, there is realised by a jurisdictional organ a physical behavior productive of a real change in the external world to accommodate it to that established in the judgment which serves as a basis for the party's claim and to the jurisdictional action. The power of a court to sell the debtor's assets to liquidate a judgment proceeds from the fact that 'in our legal order the judgment debtor's exercise of power over his patrimony is considered juridically fungible' ... The [debtor's] personal, private acts may be replaced by exercise of the public power vested in the tribunal." (Montero Aroca, Derecho Jurisdiccional, note 21 above, vol 2, 502-503 (author's translation).)

40. According to Vaquer, judgment debtors in the United States have no monopoly on these evasive techniques. Spanish debtors also employ them routinely, and, as in Louisiana, a Spanish creditor's remedies for retrieving the debtor's assets include the revocatory or Paulian action (Montero Aroca, Derecho Jurisdiccional, note 21 above, 591-592).

41. For background on these ancillary processes of execution, see Friedenthal, Civil Procedure, note 34 above, 724-731.

42. Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above.

43. At first glance, the doctrine of onerosidad excesiva, discussed by Verdera, note 20 above, seems to perform a function akin to mitigation, but it is hard to envision a role for onerosidad excesiva in the usual sale of movables, which should feature a rough equivalence between the purchase price and the merchandise.

44. Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, 103.

45. Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, at note 40.

46. Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, at 259.

47. But it should be noted that Verdera's monograph predates LEC 2000, and the new law may permit a more comprehensive treatment.

48. Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, 122.

49. To a German lawyer this conclusion might seem sketchy and simplistic, and a comprehensive reading of Verdera's analysis would not warrant it. German law regards specific performance (Erfüllung) as the primary relief for contract breach and damages (Schadenersatz) as secondary relief. No legal provision bars a creditor from immediately demanding performance upon the debtor's default. Articles 883-898 of the ZivilProzessOrdnung (ZPO) regulate procedures for obtaining specific performance. If an aggrieved party seeks performance from a breacher, the principle of Parteiengrundsatz keeps the judge from unilaterally converting a demand for performance into one for damages. In a sequence familiar to merchants, when a debtor does not perform on time, the creditor can send a notice to perform and set a period of time in which to do so. Under BGB art 284, this notice puts the debtor into delay (Verzug). BGB art 286 authorises the creditor to demand delay damages, but not compensatory damages, for added expense resulting from the debtor's delay. Under BGB art 326, the creditor may give the debtor yet another notice to perform (Nachfristsetzung mit Ablehnungsandrohung). After expiration of the period stipulated in the Nachfrist notice, BGB art 326, (1) excludes specific performance and instead authorises a demand for compensatory damages. The foregoing narrative makes clear that under German law, a creditor could end up recovering damages for a contract breach, but the steps leading to a judgment for damages would be notably different from those taken by a US creditor. It seems that a creditor's notice to perform is a precondition to a damage award. The notice would be senseless if German law did not view specific performance as primary relief. The author is grateful to Astrid Wallow, a German lawyer, for her explanation of these remedies.

50. Audit, for example, suggests that French commercial practice recognises in the aggrieved buyer a "faculté de remplacement." After a fruitless notice of default served on the seller, the buyer has a right to locate the merchandise elsewhere in the market. B Audit, La Vente Internationale de Marchandises (1990) 122, note 1.

51. On the difficulties of obtaining a specific performance decree under French law, see note 10 above.

52. Verdera, El Cumplimiento Forzoso de las Obligaciones, note 1 above, 172.

53. According to Vaquer, the breacher can not buy itself free of the contract unless it has specifically stipulated for this escape via a penal clause authorised by Spanish Civil Code art 1153. For the text of the article, see note 15 above.

54. P Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, 2nd edn (1998) (tr G Thomas) at 200. For details of the negotiations leading up to the compromise, see N Boghossian, "A comparative study of specific performance provisions in the United Nations Convention on Contracts for the International Sale of Goods" (1999-2000) Pace Review of the Convention on Contracts for International Sale of Goods, 3. Article 28 reads: "If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention."

55. In turn, the buyer's relief hinges upon whether the seller has committed a fundamental breach (art 25) or the request for repair of nonconforming goods is unreasonable (art 46).

56. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, 203. According to Audit, these payment obligations were contemplated in the Hague conventions: B Audit, La Vente Internationale de Marchandise: Conventional des Nations Unies du 11 Avril 1980 (1990) 140.

57. Schlechtriem's observation is confirmed by a commentary on the Draft Convention: "the seller must deliver the goods or any missing part, cure any defects or do any other act necessary for the contract to be performed as originally agreed", (emphasis added), Commentary on the Draft Convention on Contracts for the International Sale of Goods Prepared by the Secretariat, art 42(3), UN Doc A/Conf 97/5 (1979), reprinted in United Nations Conference on Contracts for the International Sale of Goods, Official Records, UN Doc A/Conf 97/19, UN Sales No E 81. IV. 3 (1981).

58. This would likely be so in English courts, assuming the United Kingdom had ratified the CISG. See J D Feltham, "The United Nations convention on contracts for the international sale of goods" 1981 J Business Law 346, 355.

59. E A Farnsworth, "Damages and specific relief" (1979) 27 Am J Comp L 247.

60. The Uniform Commercial Code 2-712 provides that "(1) After a breach ... the buyer may 'cover' by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. 2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages ... 3) Failure of the buyer to effect cover within this section does not bar him from any other remedy." Notably, according to the official comments under this section, the buyer must effect cover without reasonable delay, while the section itself seems to view this self-help exercise as facultative for the buyer. But there is probably no inconsistency; a buyer who refuses to mitigate does so at his peril. True, the buyer may not be compelled to mitigate, but failure to do so risks having a claim reduced by the amount that mitigation efforts would have cut its loss and thus saved the other party.

61. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, 587.

62. Notably, the UCC test for breach by nonconformity seems less stringent than the standard in art 46, UCC  2-612 provides: "(2) the buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be cured; (3) whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract, there is a breach of the whole". Unlike CISG art 25,  2-612 imposes no test of foreseeability on the part of the seller and similar merchants. The seller's subjective state of mind seems to play no role in the UCC's evaluation of breach by non-conformity, but a "course of dealing" between the parties or a trade usage could require a court to assess a seller's expectations. These differences between the CISG and the UCC might be explained in terms of the UCC's policy; for it favors mitigation and would not authorise compelling the seller to correct a deficiency, no matter how serious. A demarcation line between serious deficiencies and trivial ones seems unimportant if, as the UCC provides, the buyer's recourse would not include specific performance.

63. Technically, a suit for the price is not a suit for specific performance under the UCC, but the official commentary of the CISG and the "scheme of the convention point in the other direction", Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, 484. Schlechtriem argues (at 585) that art 28 should apply to an action for the price. A tendency to lump together a price claim with a demand for damages may be noted in the US proposal in 1977 to insert the words "including any claim for the price" into the second sentence of art 77 after the words "may claim a reduction in the damages".

64. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, 485.

65. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, 587

66. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, 586.

67. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, at 586

68. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, at 587.

69. Mirroring this process under the CISG, French judicial tendencies might encourage second-guessing the victim's choice and could discourage its well-intentioned efforts to mitigate without court intervention. According to Bell et al: "An injured party is not entitled to go into the market and obtain a substitute performance on his own authority, but must first seek the court's approval for performance by a third party at the other party's expense, though no approval is required in commercial sales nor cases of urgency, as long as it is done as cheaply as possible. What this means in practice is that an injured party may without authorisation obtain substitute performance, but if he does so he risks a later court telling him that he should have asked first and or that the price at which the substitute performance was obtained was too high." ( J Bell, S Boyron and S Whittaker, Principles of French Law (1998) 357.) Such a judicial approach would discourage self-help. If there were a slight risk of being judged wrong, an aggrieved party could readily insist upon fulfillment of the original obligation to reserve its rights under the contract. According to Lando and Beale, the French faculté de remplacement, i.e. power to cover, seems available to an aggrieved buyer in a commercial transaction even without judicial authority, O Lando and H Beale, Principles of European Contract Law (1995) 210. See also Audit, note 56 above.

70. According to Dolan, in many banking systems there may be no material difference between a bank guarantee and a stand-by letter of credit: J Dolan, The Law of Letters of Credit I-30, 31 (1998). Our study makes the distinction because we are concerned with bank guarantees and commercial letters of credit as direct payment instruments. In the future, handling of stand-by letters and guarantees may be streamlined by a UN Convention on Independent Guarantees and Stand-by Letters of Credit, but this Convention has been signed by only four states as of this writing, and the Convention by its terms would not automatically apply to commercial letters of credit utilised as direct payment devices. Dolan, Law of Letters of Credit, 4-6, 8.

71. In the US setting, a "beneficiary (under a letter of credit) sues for default of the issuer's engagement to honor a draft or a demand for payment ... courts call that default a 'breach' and generally invoke contract damage rules", Dolan, Law of Letters of Credit, note 70 above , 9-1. Notably, Dolan's treatise does not list specific performance as a remedy against the issuer. To the extent that compulsory orders are granted, these seem to be prohibitory injunctions to prevent an issuer from honouring a draft. Ordinarily, even a prohibitory injunction might not be granted absent a showing of irreparable harm. Dolan, Law of Letters of Credit, at 9-60.

72. Helpful descriptions of international documentary transactions appear in E A Farnsworth, et al, Cases and Materials on Commercial Law (1993); and J Spanogle and P Winship, International Sales Law (2000) 28-39. CISG arts 67, 68, and 71 contemplate a sale involving carriage of goods.

73. The carrier's failure may be due to its intentional refusal, or weak crew discipline that might degenerate into a mutiny. See Voest Alpine International Corp v Chase Manhattan Bank, 707 F 2d 680 (2d Cir 1983) (during loading of cargo, crew mutinied, resulting in discrepancy between the date of a bill of lading and the issuance date of weight and inspection certificates). Strict compliance between the documents and the original contract is the applicable standard for documentary transactions. Even slight fault on the part of a carrier may result in a non-conforming bill of lading. Any technical deviation from the original purchase agreement could be enough to justify an issuing bank's refusal of the bill of lading. A tardily signed bill of lading could be tantamount to no bill of lading at all, even if the contract goods are properly identified in the bill.

74. Due to the scarcity of Spanish decisions, the following depends upon general doctrine. Three decisions have been rendered by Audiencias Provinciales, an intermediate appellate court, but none of these appears to bear directly upon the remedy of specific performance under CISG. In Bertex SA v Wensum Corporate Company, Aranzadi Civil 2000/1131 Audiencia Provincial, Barcelona, 7 June 1999, the court was concerned principally with the law applicable to an international sale of goods. It concluded that Spanish law governed the contract in question. The applicable Spanish law was the Vienna Convention which regulated the rights of an English company even though the UK was not a signatory to the Vienna Convention. To reach this result, the Spanish court relied upon art 1(b) of the Convention authorising the Convention's application by virtue of norms of international law and the Brussels Convention of 27 September 1968. In Gamma Due SL v SMAC SPA, Aranzadi Civil 2000/1348, Audiencia Provincial, Castellón, 16 June 2000, the court dealt briefly with the CISG, although the parties had not claimed its applicability in circumstances in which they could have. The case was also interesting for its blend of Spanish commercial law, procedures including embargo, and traditional Civilian/Romanic doctrine. In Elkay Manufacturing Co v Cía de Aguas Belvature SL, Aranzadi Civil 2000/1123, Audiencia Provincial de Navarra, 27 March 2000, an action involving damages for a defective products, the court also blended provisions of CISG with the Spanish Civil and Commercial Codes as well as the Fuero Nuevo de Navarra. In passing, the court noted that art 46 CISG authorises a buyer to require repair of defective merchandise, but the court ordered relief in damages, not ejecución forzosa.

75. H M Flechtner, "Remedies under the new International Sales Convention: the perspective from article 2 of the UCC" (1988) 8 J Law & Com 53.

76. 71 F 3d 1024 (1995).

77. For the full text of CISG art 46, see the CISG website, <http://cisgw3.law.pace.edu>.

78. 1999 US Dist Lexis 19386.

79. According to a trial court version of the case, 76 F Supp 2d 919, the terms of the letter of credit were still in negotiation when the transaction soured. Salzgitter demanded insertion of a clause in the letter of credit that would have permitted payment on Salzgitter's presentation of a forwarder's receipt rather than a clean on-board bill of lading. Salzgitter threatened to sell the goods elsewhere if it did not get this clause in the letter of credit. Evidently, Magellan resisted this relaxation of Salzgitter's duty to deliver because it wished to avoid a risk that the goods might not arrive in good condition on board the carrier. Perhaps Magellan could have avoided this risk by relying on an independent inspector before loading the cargo, but the inspection would have added expense to the transaction.

80. It may be asked whether issuance of a letter of credit in which some terms were still to be negotiated is tantamount to payment of the price, especially if no drafts have been submitted or honoured.

81. Farnsworth, "Damages and specific relief", note 59 above. Farnsworth's plea for respecting Common Law discretion seems to have registered with the Convention representatives: art 28 now provides that "a court is not bound to enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts" (emphasis added).

82. For practical reasons why the choice of conditional tense should not count for too much see A M Garro and A L Zuppi, Compraventa Internacional de Mercaderías (1990) 144. Decisions from elsewhere confirm that even when a plaintiff has demanded specific performance, a court could still instruct him that his proper recourse should be damages: Zürich Arb Proceeding <http://cisgw3.law.page.edu/cases/960531s1.html>.

83. For analysis of the case-law, see J White and R Summers, The Uniform Commercial Code, 5th edn (2000), 315-325; some case types are summarised in notes 87-89 below.

84. Some commercial treatises include a large binder setting forth legislative differences among the various states. Anderson's binder now approaches 1000 pages. See R Anderson and L Lawrence, Anderson on the Uniform Commercial Code, 3rd edn (2001) (Finding Aids)

85. " ... the Code drafters did not write on a tabula rasa here but upon a slate already crowded with centuries of judicial and legislative markings". White and Summers, The Universal Commercial Code, note 83 above, 228.

86. See White and Summers, The Universal Commercial Code, note 83 above, 315. The wide discretion to determine the appropriate remedy is also noted in A H Kastely, "The right to require performance in international sales: towards an international interpretation of the Vienna Convention" (1988) 63 Wash L Rev 607, 611 note 24. In view of the number of cases granting specific performance, argues Kastely, "one wonders whether the UNCITRAL members representing the Common Law nations actually overestimated the degree to which Common Law courts refuse specific performance". Perhaps Kastely's remark is correct; but the incidence of cases granting or denying specific performance is not the only relevant issue. The operative concept is "discretion," an attribute that American courts will not surrender, even to appease a seriously aggrieved buyer or seller. A US court can be expected to guard jealously its power as the final arbiter of a contract's utility. This role as arbiter may be compared instructively with a Spanish court's role as agent of an "estado-gendarme" normally unwilling to second-guess the victim's assessment of the contract for itself. (R Verdera Server, El Cumplimiento Forzoso de las Obligaciones (1995))

87. UCC doctrine has developed several categories of cases warranting specific performance. An illustrative listing follows: output or requirement contracts involving a peculiarly available source or market (Eastern Rolling Mill Co v Michlovitz 145 A 378 (1928)); sale of custom-made merchandise by definition unavailable in a market (Fast v Southern Offshore Yachts 587 F Supp 1354 (D Conn 1984)); sales in which the buyer has already paid for the goods, and is unable to raise money to buy a replacement when original merchandise malfunctions (Stephans Machine & Tool Inc v D & H Machinery Consultants Inc 417 NE 2d 579 (1979)); long-term contract for supply of fuel during an energy crisis where buyer was unlikely to find another seller willing to enter a similar long-term contract (Laclede Gas Co v Amoco Oil Co 522 F 2d 33 (8th Cir 1975)); (Eastern Air Lines Inc v Gulf Oil Corp 415 F Supp 429 (S D Fla 1975)); specific performance decreed for sale of a trucking concern requiring a governmental permit to continue in business (13 Pa D & C 2d 464 (1958)); a narrow set of cases in which the buyer already has a special property interest in the goods and has paid the first instalment of the price, but the purchaser's right to the goods by specific performance is limited to the situation in which the seller becomes insolvent "within ten days after receipt of the first installment of the price" (UCC 2-502).

88. In the same vein, a very low price of goods does not make them unique. Even if a buyer shows that he cannot find replacement goods at an equally favorable price, a decree of specific performance may be denied because the replacement is objectively obtainable. See Hilmor Sales Co v Helen Neushaefer Division of Supronics Corp, 1969 WL 11054 (NY Supp 1969); Duval & Co v Malcom, 214 SE 2d 356 (1975).

89. Although the case may be aberrational, the leading commercial treatise offers the widely-cited Fortner v Wilson 216 P 2d 299 (1950) to underscore the breadth of the standard test of unavailability of substitute goods: "not only must the buyer prove that a market did not exist ... he must also convince the court that a breaching seller who is willing to sell to the buyer at a price over the contract price should not be considered an available source for cover" (White and Summers, The Universal Commercial Code, note 83 above, 318).

90. Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, note 54 above, 200

91. J O Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (1982) 286 at 303.

92. This view is consistent with Civilian and Canonical learning. According to Hyland, Pufendorf, who gave the maxim pacta sunt servanda its current form, invoked Augustine's view that breaking a promise "is equivalent to deceit", R Hyland, "Pacta sunt servanda: a meditation" (1994) 34 Va J Int'l L 405 at 426.

93. This view is consistent with Pufendorf's argument that broken promises can give rise to war, Hyland, "Pacta sunt servanda" note 92 above.

94. Indeed, the maxim pacta sunt servanda was codified in the heading of art 26 of the Vienna Convention on the Law of Treaties.

95. Spanish Civil Code art 1091.

96. On the beati possidentes see part 1 of this article, 2003(7) EdinLR 5 at 11, note 15.

97. E A Farnsworth, Farnsworth on Contracts, 2nd edn (1998) vol XXX 176. The key words in the quotations are "supposed," and "substantially similar", for modern merchandising techniques aim at variety and product differentiation, both antithetical to substitution of precise equivalents. As Kastely notes, "purchases from alternative suppliers may come with reduced warranties, less brand name recognition, or diminished quality in value caused by these differences is difficult to prove with certainty and difficult for a court to evaluate." ("The right to require performance in international sales", note 86 above, 616.) In deep markets there is also a chance that replacement goods will be qualitatively better (and more costly) than the contract goods, but efficient markets often require buyers to settle for something else, either better or worse than the item promised.

98. E A Farnsworth & M F Young, Selections for Contracts (2001) 190.

99. This article may be profitably compared with art 4.102 of the Principles of European Contract Law, published in Lando and Beale, note 69 above, 155:

Article 4.102: Non-Monetary Obligations
  1. The aggrieved party is entitled to specific performance of an obligation other than one to pay money, including the remedying of a defective performance.
  2. Specific performance cannot, however, be obtained where:
    (a) performance would be unlawful or impossible; or
    (b) performance would cause the obligor unreasonable effort or expense; or
    (c) the performance consists in the provision of services or work of a personal character or depends upon a personal relationship; or
    (d) the aggrieved party may reasonably obtain performance from another source.
  3. The aggrieved party will lose the right to specific performance if he fails to seek it within a reasonable time after he has or ought to have become aware of the non-performance.

According to Lando and Beale, this article represents a "compromise: a claim for performance is admitted in general (paragraph (1)), but excluded in several special situations (paragraphs (2) and (3))".

100. See part 1 of this article, 2003(7) EdinLR 5 at 13, note 20.

101. Article 4.504 of the Principles of European Contract Law, ("Loss Attributable to Aggrieved Party") closely resembles art 7.4.8 of the Unidroit Principles:

Article 4.504: Loss Attributable to Aggrieved Party
  1. The non-performing party is not liable for loss suffered by the aggrieved party to the extent that:
    (a) the aggrieved party contributed to the non-performance or its effects;
    or
    (b) his loss could have been reduced by his taking reasonable steps.
  2. The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the loss.


Pace Law School Institute of International Commercial Law - Last updated September 18, 2003
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