II. Remedy of Renouncement in the Polish Civil Code

III. The Buyer's Right to Avoid the Contract

IV. The Seller's Right to Avoid the Contract

V. Effect of Avoidance

VI. Conclusions

VII. The General Provisions of the CISG and the Remedy of Avoidance

ABBREVIATIONS

Introduction

"Pacta sunt servanda" is one of the commonly accepted principles in international trade. Parties are obliged to perform a contract in a way that complies to its terms, even if the performance becomes unfavourable for one of the parties or excessively difficult. This is a basic rule of "lex mercatoria". It ensures the safety of the trade turnover. Another principle, which results from "pacta sunt servanda" substantiates that the characteristic performance under the contract should be rendered "in natura". Thus, the debtor cannot -- without the consent of the creditor -- perform something different, from that which was agreed to under the contract. He also cannot unilaterally terminate the contract or render substitute performance by payment of a given sum of money. This principle has been recognized in both the continental and common law and it contributes to the safety and certainty of trade turnover. Nowadays, the above principles do not have an absolute character. Their scope is limited by exceptions, which are provided for by law; for example, legal or physical impossibility of performance and unjust enrichment. The right of a party to withdraw from the contract is contradictory to the principle of sanctity of contracts. The foremost interest of the parties, at the time the contract is concluded, is that it must be honored. However, it may happen that despite the good faith with which the parties had upon entering into the contract, it is nevertheless performed defectively or, in some instances not performed at all. In such a situation, the party aggrieved by non-performance is equipped in law with a battery of remedies. The most drastic remedy, which reflects the gravity of the negative effects of non-performance or performance not complying with the terms of contract, is avoidance.

The right to avoidance functions as a far-reaching sanction for non-performance under the 1980 United Nations Convention on Contracts for the International Sale of Goods,[1] as well as under Polish law. It signals the breakdown of the sales contract and excludes belated approximate performance. The advantages of early avoidance are clearly justified under [page 81] the Convention. Avoidance makes it possible for the aggrieved party to clarify his situation by reselling or repurchasing the goods required by the initial contract. The aggrieved party may not mind in such a detrimental situation, whether the non-performing party changes his mind and fulfils the contract. The aggrieved party is entitled to exercise the right vested in him and claim damages if the compensation for damages provide adequate protection.

Under Polish Law, the remedy vested in the party to a synallagmatic contract is justified by the need for stronger protection of the aggrieved party, by the character of this type of contract, and by the purpose of such contracts - to stimulate economic turnover. The party who withdraws from the contract with an unreliable trader may, by concluding another contract, attain his purpose without forcing the party in default to perform by commencing a legal action in a court or arbitral tribunal.

In the present dissertation I compare the remedy of avoidance under the 1980 United Nations Convention on Contracts for the International Sale of Goods with its counterpart remedy in the Polish Civil Code. The purpose of the comparison is to ascertain possible concurrences and differences in the regulation of the remedy of avoidance under a sale contract which include the norms created as a result of international legislation with the regulation which is contained in the norms of Polish national law.

Regarding terminology, I have had a little doubt about the choice of the proper term denoting the Polish law counterpart of the remedy of avoidance that is regulated under the Convention. I hesitated between the terms "rescission" and "termination," as the meanings of the terms in the English language do not reflect the real nature of the remedy under the Polish law. "Rescission" of the contract ab initio is in principle retrospective, "termination" is not retrospective and may be exercised when the party is guilty of breach of contract.[2] Under Polish law, the discussed remedy has a retrospective effect and is, in principle, available when the party in breach is liable for the circumstances which caused the non-performance or defective performance of the contract. On the basis of the reasons mentioned above, I have chosen a third alternative: for the purposes of this dissertation, I have adopted the term "renouncement of the contract."

I focus attention on the questions: What are the legal grounds giving rise to the right to avoidance? Is liability for breach of contract a necessary [page 82] element? When and in what form can the right be exercised? What are the restrictions imposed on the entitled right holder to limit the exercise of his right? What situation will appear after the sale contract has been avoided?

The formal limits imposed on the dissertation have not allowed discussion of other interesting problems inherently connected with the remedy of avoidance, such as obligations of the parties to preserve the goods after the right has been exercised or the methods for measuring damages in the case of avoidance.

The dissertation commences with an overview of the regulation of avoidance under the 1964 Hague Convention relating to a Uniform Law on International Sale [3] and the 1978 Draft Convention on Contracts for the International Sale of Goods.[4] This background allows us to ascertain changes that took place with regard to the remedy of avoidance during its legislative history. The final part of the work focuses on the influence of the general provisions of the 1980 United Nations Convention on Contracts for the International Sale of Goods on the remedy of avoidance of the sales contract as regulated in the Convention's specific provisions.

I. Legislative History of Avoidance in International Sale of Goods

A. Problems concerning terminology

Starting with the considerations on avoidance it is necessary to describe the concept and the terminology most often used in relation to it. Avoidance is the legal remedy under contract law, which takes effect in situations when a party to a contract aggrieved as a result of not obtaining the performance for which he bargained, wishes to put an end to further [page 83] performance of the contract and to put matters into the position, as far as it is possible, in which they were before performance by the other party had begun.[5]

Generally speaking, there are three courses of actions open to a party that suffers from the other party's failure to perform a contract. Other remedies, such as the claim for specific relief, that is, actual performance of the defaulting party's undertaking, and a claim for substitutionary relief, usually meaning monetary compensation for not having received the promised performance are also available to an aggrieved party.[6] These forms of relief are recognized by all legal systems.[7] They can be combined in various ways and the form of monetary relief can be given in conjunction with either a requirement of performance of the contract or its avoidance.

The effect of avoidance may be reached by different mechanisms in various legal systems. The consequence of this is a different terminology used. Common law uses the terms "rescission of a contract," "repudiation," "cancellation," "termination" and "rejection of the goods."[8] The Polish Civil Code [9] uses the term "to renounce a contract."[10] The 1964 Hague Convention relating to a Uniform Law on International Sale [11] and the 1980 United Nations Convention on Contracts for the International Sale of Goods [12] adopts the term "to avoid a contract." "Avoidance" under the Vienna Convention denotes an early end to the contract [13] and comprises national [page 84] concepts of rescission as well as termination.[14] "Avoidance of the contract" is an example of a term used in the Convention whose wording or expression in other languages does not always have the same definite legal significance attributed to it.[15] Such terms are non-technical in a legal sense and become legal terms by the Convention only. The question of terminology, is closely connected to the problem of which interpretation should be applied under the Convention. The interpretation of the terminology used should be based on its contents, having regard to the international character of the Convention,[16] without referring to the meaning of the terms in national legal systems.[17] The precise and detailed legal significance of terms such as "avoidance" will be defined autonomously [18] in the process of the application [page 85] under the Convention, taking into account the context and function they have. Such a compromise [19] on terminology accepted by the legislators during the Vienna Conference,[20] including the term "avoidance", emphasizes a very special function of the Convention and a goal to be achieved through its provisions -- to replace diverse domestic rules with uniform international law.

B. Avoidance under the 1964 Convention on the International Sale of Goods

The remedy of avoidance was already contained in the 1964 Hague Convention relating to a Uniform Law on International Sales (ULIS). The ULIS provisions on avoidance are spread among many articles.[21] The system adopted in the 1964 Hague Convention differs from the 1980 Vienna Convention.

Avoidance under the ULIS was in principle justified for a fundamental breach of contract.[22] The regulation provided for two forms of avoiding the contract: 1) avoidance declared by the buyer; and 2) ipso facto avoidance.[page 86] The right to declare a contract avoided could be exercised by the aggrieved party when the breach of the contract was fundamental [23] as well as when it was not fundamental.[24] It depended on the will of the injured party.

Ipso facto avoidance was automatic by virtue of law.[25] It followed a fundamental breach of the contract when:[26]

In these cases ipso facto avoidance took place without any preliminary formal steps and it was not at the option of the aggrieved party. As opposed to the provisions under the ULIS for the instances wherein the defaulting party did not perform at all, the provisions which concerned cases in which the seller performed defectively, (late delivery [31] or delivery of non-conforming goods)[32] authorized the aggrieved party to avoid the contract by a declaration.

When the breach was not fundamental, the aggrieved party could give a notice requiring performance and stating an additional period of time.[page 87] Failure to perform at the end of the period so fixed might result in: (a) ipso facto avoidance if the seller did not perform at all;[33] or (b) avoidance by declaration of the aggrieved party if it was a seller performing defectively [34] or a buyer failing to pay the price.[35] The prerequisite to avoidance in the case of delivery of non-conforming goods under the ULIS was an obligation imposed on the buyer to give a notice of non-conformity.[36]

In cases of partial default in which the performance was rendered not in accordance with the contract as to the required quantity or quality of goods, ULIS allowed partial avoidance.[37] Avoidance of the whole contract could take place when the defect in performance constituted a fundamental breach of the contract as a whole.[38]

The meaning of avoidance under the ULIS was defined under article 78, that stated its effect. In principle, neither party could claim performance from the other [39] however, the right to claim damages still remained at the aggrieved party's disposal. Moreover, each party might require the other party to return whatever he had supplied or paid prior to the avoidance of the contract. In addition, the buyer had to account to the seller for all benefits derived from the goods and the seller had to pay interest on the price.[40]

The function of the institution of ipso facto avoidance, as it was underlined in the legal doctrine,[41] was to fix at an early date the time with reference to which damages were to be assessed - usually occurred at the [page 88] time of avoidance under ULIS.[42] Ipso facto avoidance also functioned as a means to force or encourage the buyer to make an election between two remedies,[43] accessible to him by virtue of the ULIS article 26(1), and to exclude, in this way, the buyer's claim for specific performance when he did not inform the seller of his decision as to which of the remedies he had chosen. This protected the defaulting party against the burden of being ordered to make specific performance after a long delay, especially when the prices of the goods fluctuated.[44] Such a regulation could thus place the defaulting party in a better position in cases of fundamental rather than of non-fundamental breach.[45]

Fault was not mentioned in the ULIS as a requirement of the remedy of avoidance.[46] However, in cases of excused non-performance [47] although the provisions of the ULIS protected the party who has not performed from liability for damages, they did not take away from the aggrieved party the possibility to avoid the contract if other provisions of ULIS gave grounds for it.[48]

The regulation of avoidance contained in the ULIS was frequently criticized in legal literature as evincing complexity [49] and entailing some uncertainty [50] over the fate of the contract. This was particularly true when the contract was avoided,[51] thereby creating the danger that the party could be [page 89] unaware that certain conduct of the other (or lack of conduct) party justifies avoidance of the contract by law. This could, for example, make salvaging and re-disposing of rejected goods complicated for the seller when the goods have left his custody, thus contributing to the waste of resources.

ULIS adopted a rule that avoidance in case of non-conformity and non-delivery at the date fixed was allowed only if such a defect in performance constituted a fundamental breach of the contract. In all other situations of non-performance of the seller's obligations, the buyer had to fix an additional period of time and wait for the remedy of automatic avoidance after the additional time expired. As immediate avoidance was an exception under this rule, the remedy seemed to be a slow remedy.[52]

Ipso facto avoidance under the ULIS was broad in its scope. First, under article 25, (the right to require specific performance),[53] where the contract would be automatically avoided for a fundamental or even a non-fundamental breach, if it was in conformity with customary trade usage and it was reasonably possible for the buyer to purchase goods to replace those to which the contract related, since this option was often taken by traders.[54] Second, the buyer could transform any insignificant breach of contract into a fundamental breach by fixing an additional period of time for performance and thereafter release himself from the contract, especially when the prices on the market fell.[55] Ipso facto avoidance under ULIS was a remedy of a subsidiary character for a fundamental breach of the contract (with the exception of article 25 and article 61). This character evinced in cases where the injured party failed to choose from remedies available to [page 90] him upon other party's fundamental breach within a reasonable time [56] or failed to comply promptly with the request of the breaching party to inform about the choice of the remedy despite the fact that such request was made.[57]

The concept of ipso facto avoidance was abstract and very controversial,[58] arousing debate [59] over the question if the effect of this remedy could be achieved through regulation, which would adopt avoidance based only on an explicit declaration by the party, according to his wish and specific interest.

C. Avoidance under the 1978 Draft Convention on Contracts for the International Sale of Goods

The 1964 Hague Convention relating to a Uniform Law on the International Sale of Goods together with the second 1964 Hague Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods, did not receive widespread acceptance. There were many different reasons for this.[60] One reason was the fact that ULIS contained abstract and complex concepts, which could constitute a basis for ambiguity and error and could be easily misunderstood by traders. Ipso facto avoidance is a prime example.[61] The result of works undertaken by the United Nations Commission on International Trade Law was the Draft Convention on Contracts for International Sale of Goods.[62] It was [page 91] unanimously approved on 16 June 1978 by UNCITRAL. The text of the 1978 Draft Convention involved structural changes for clarity, simplicity and practicality in order to win approval of the States.

Under the 1978 Draft Convention avoidance occurred only by declaration. The concept of ipso facto avoidance was eliminated. The formulation that a declaration of avoidance must be communicated by "notice to the other party" in order to become effective in all cases of avoidance, was inserted in a general provision of article 24 of the 1978 Draft.

Under the 1978 Draft, as under ULIS, a party might declare the contract avoided if the other party committed a fundamental breach of contract or failed to fulfill his obligations within a reasonable time.[63] The definition of fundamental breach however was changed under the Draft.[64] Additionally, the provision that failure to deliver the goods at the date fixed is a fundamental breach if the price of the goods is quoted on a market, where the buyer can obtain them, was not included in the Draft, although present under ULIS.[65]

As far as effects of avoidance are concerned, the principles expressed in ULIS were maintained in the 1978 Draft.[66] Avoidance of the contract released the parties from their obligations under the contract, subject to any damages that might be due. However, it was stressed in the 1978 Draft [67] that avoidance did not affect any provisions of the contract regarding settlement of disputes or the rights and obligations of the parties if the contract was avoided. This provision did not exist in ULIS. The Draft [68] and ULIS [69] stated the same reason that could justify the loss of the buyer's right to avoidance: where it was impossible for him to make restitution of the goods in the condition in which he received them. However, even in such a situation, the buyer could still exercise his right in the cases enumerated in both regulations.[70] Although both regulations were concurrent on that point, ULIS did [page 92] not give the buyer a possibility to require delivery of substitute goods while the Draft did.[71] Provisions in both regulations [72] clearly stated that even if the right to declare the contract avoided was lost by the buyer, he still retained all other remedies at his disposal. Provisions of the 1978 Draft [73] as well as ULIS [74] laid down the rule that when restitution was to be made, the party had to return that which was received in course of performance of the contract and to account to the other party for all benefits.

In general, the provisions of the 1978 Draft Convention dealing with the remedy of avoidance correspond to the concept of ULIS, however they took into account practical needs of trade.[75] The Draft Convention formed the basis of the 1980 UN Sales Convention. The provisions of the Draft on avoidance were in their majority substantively identical to the final version of the regulation on avoidance adopted during the Vienna Conference in 1980. The difference occurred in wording of some provisions and in numbering of the articles. Some minor, legislative changes took place.

II. Remedy of Renouncement in the Polish Civil Code

The remedy of renouncement in the Polish Civil Code is one of the remedies available to the aggrieved party under the regime of contractual liability of a party for non-performance of the contract. Provisions concerning renouncement are included in the several articles of Book III on obligations, in its Title VII regulating the performance of obligations and effects of their non-performance. The right is referred to mainly in section II on effects of non-performance of obligations in article 477, and in section III dealing with performance and effects of non-performance of obligations in [page 93] synallagmatic contracts in articles 491-495. Particular regulations on renouncement are also included as one of the named agreements in special provisions relating to a contract of sale, which concern warranty and guarantee liability of a seller in articles 560, 562, and 566.

Performance of synallagmatic contracts,[76] because of their special character in relation to the performance of contracts in general, are regulated in a particular way. Provisions in which renouncement is included constitute lex specialis towards provisions concerning the performance of contracts in general. However, article 487, paragraph 1 states that questions not answered in lex specialis should be solved in accordance with the latter. The right to renounce a contract is an exception to the principle of "pacta sunt servanda," according to which parties who have concluded a contract are bound by it and cannot cease to perform without consent of the other [77] under Polish legal doctrine.[78] A legally binding contract cannot be terminated by a unilateral decision of a party via renouncement, unless this right is vested in him by the law.

As a statutory right, it is allowed in the rare cases mentioned above, when the defect in performance is due to the delay caused by the party, or in the cases of impossibility of performance. In addition, as provided in article 395, paragraph 1, the parties may stipulate at the moment of the conclusion of the contract, or after its conclusion, that one or both of them may be entitled to unilateral renouncement of the contract within a defined period of time.[79] Insertion of such a stipulation in the contract impairs the legal relationship resulting from it and introduces doubt as to whether the contract will be maintained. The limitation on these disadvantageous [page 94] consequences is the period of time the parties have to define during which the right can be exercised.

The right to stipulate in the contract that either of the parties may unilaterally renounce a contract by paying a given amount of money is the special type of the contractual right to renouncement provided for in article 396 CC. Such a clause decreases to some extent, the impairment of the legal relationship ensuing from the plain stipulation of renouncement, because it imposes on the party availing himself of this right the duty to pay the money at the moment of renouncement.[80] The money paid is considered to be compensation for the contract not having materialized.[81]

Parties are also allowed to take advantage of the lex commissoria and stipulate in the contract that a party may renounce the contract if the other party does not perform or performs improperly. This right is usually foreseen in cases of non-performance of the contract at the date fixed,[82] however, it can be a remedy for all cases of non-performance or defective performance irrespective of the reason causing it.[83] The right to renouncement provided for in the CC, as well as the right stipulated in the agreement must always be exercised in the form of a declaration communicated to the other party.

Having written this brief summary of the remedy of renouncement adopted in the Polish CC, I will discuss the regulation in more detail while making analysis of the provisions on avoidance included in the Vienna Convention on the International Sale of Goods.

III. The Buyer's Right to Avoid the Contract

The remedy of avoidance is one of the listed remedies available to the buyer when the seller breaches the contract under article 45 of the Vienna Convention.[page 95]

A. Grounds for avoidance by the buyer

1. Grounds for avoidance under the Vienna Convention

The grounds for avoidance are provided in article 49(1) of the Vienna Convention. The buyer may exercise his right in two different situations; (a) when the seller fails to perform any of his obligations under the contract and the Convention, and the failure constitutes a fundamental breach of the contract; or (b) in the case of non-delivery, if the seller does not deliver the goods within an additional period of time fixed by a buyer's notice made in compliance with article 47 of the Convention or where the seller declares that he will not deliver within the fixed period. These are the specific conditions under which the buyer has the right to avoid a contract. If they are fulfilled, the buyer can declare the contract avoided, however, he does not have to do this. He may wish to insist on performance of the contract as provided for in article 46 of the Convention.

Article 49 refers to situations where the failure to perform by the seller concerns the contract as a whole. However, when in performance of the contract, the seller delivers only a part of the goods or it appears that only part of the goods are in conformity with the contract, the buyer may, if the conditions included in article 49 are met, avoid the contract with respect to that missing or non-conforming part. This principle is stated in article 51(1) of the Convention.[84] Paragraph 2 of this article clearly provides that in cases of partial performance, the buyer may declare the contract avoided in its entirety, only if the seller, by making incomplete delivery or by delivering goods that do not conform with the contract, commits a fundamental breach which causes a substantial detriment to the buyer with respect to [page 96] the whole contract. Paragraph 2 of article 51 constitutes an exception to the general rule included in paragraph 1 of this article.[85] Such a function can be induced from the use of the word "only" in the provision. If the delivery of goods in excessive quantity, foreseen by the Convention in article 52(2) constitutes substantial burden for the buyer, this amounts to a fundamental breach of contract and may entitle him to avoid the whole contract.[86] Thus, article 52(2) makes it legally possible for the buyer to reject the goods delivered in excessive quantity.

2. Other situations

The Convention, under article 72, provides the buyer with the possibility to avoid the contract if it is clear, prior to the date of performance, that the seller will commit a fundamental breach of contract. The buyer can declare avoidance before the performance is due; however, he should refrain from exercising this right, if the seller gives adequate assurance of his performance, unless the seller declares that he will not perform. A high degree of certainty about occurrence of the breach and its fundamental character is required. This certainty will arise when the seller resells to a third party the goods he was to deliver to the buyer, or when he sells machines necessary for the production of goods contracted for by the buyer,[87] or in the case of seller's insolvency and initiation of bankruptcy proceeding.[88] When a deficiency in the seller's ability to perform, usually a deficiency in his creditworthiness, becomes so serious that it is clear that a fundamental breach of contract will be committed, the buyer also will have grounds for avoidance.[89] The buyer is not required to be absolutely certain about the grounds for avoidance because adequate assurance of the performance may be given by the seller. However, the buyer should act prudently in this situation under article 72 since his avoidance without the ground for his action[page 97] may result in his fundamental breach of the contract committed subsequently.[90] The notice of the buyer demanding that the seller provide adequate assurance of the performance, as article 72(2) allows in such a case, seems to be the best solution to relieve the buyer from doubts about occurrence of the seller's breach and reduces the risk the buyer would otherwise be taking. Legal doctrine however, differs on the question if the refusal of the party to provide assurance makes it clear that the breach will occur.[91] Despite the absence of the uniform treatment of this question, the seller's adequate assurance of performance will be the signal for the buyer that he has to proceed with his own performance.

When the contract provides for the delivery of goods by installments, the Vienna Convention makes it possible for the buyer, according to article 73:

As mentioned above, the Convention entitles the buyer to avoid the contract when it provides for the installment of goods which are usable or resalable independently of the other installments and when individual installments constitute an integrated entirety.

Article 73 enables the buyer to avoid a given installment. However, it may under certain circumstances, lead to avoidance of a contract as a whole,[94] especially when under the principle in paragraph (3), the breach affects only a part of the contract directly, but has an impact on the performance of the entire contract.[95]

The goods for delivery by installments do not have to be similar in every installment [96] to make avoidance possible. The contract may provide for deliveries of different goods or partial deliveries [97] in a given installment. The contract also does not have to provide for fixed dates of deliveries; what is more, agreement may be reached on deliveries called for when they are necessary.

Application of article 73 may concur with article 51 (read in conjunction with article 49) which provides a buyer with a right to avoid a part of a contract and such a part could be an installment. Then the buyer has a choice between article 51 and article 73 of the Convention.[98] The provision included in article 73 is intended specifically for installment deliveries and [page 99] for avoidance not only of the installment with respect to which a breach has occurred but also future and interdependent installments. However, under article 73(1) the breach must be fundamental as far as the failed installment is concerned; whereas under article 51, the buyer is allowed to fix an additional period of time to enable the seller to perform his obligations.[99] If the seller does not effect such a partial delivery within the period so set, the buyer is free to avoid the contract as regards this installment, irrespective of whether the failure constitutes a fundamental breach of the part of the contract in question. So, by acting under article 51 the buyer will not have to ascertain if the breach has been fundamental.

The buyer is not deprived of the right to avoidance of the contract where the risk of accidental loss or damage to the goods during transport has passed to him in a manner regulated under articles 67, 68, and 69 of the CISG.[100] Article 70 of the Convention does not exclude such avoidance when the seller has committed a fundamental breach. When non-conforming goods are delivered and the non-conformity constitutes a fundamental deficiency, the buyer can require the avoidance of the whole contract, even when the defective goods accidentally perished or are damaged after passage of the risk.[101]

In light of article 70, the contract can be avoided if the delay constitutes a fundamental breach of contract, as it is provided in article 49(1)(a), after the goods have been delivered. The destruction or damage of the goods after the passing of the risk does not exclude the buyer's right to avoidance. When the seller delivers only after the expiration of an additional period set by the buyer, according to article 49(1)(b), the contract can be avoided without a fundamental breach of contract having been committed.[102] The possibility given by the Convention to avoid the contract where the goods perished or are damaged by accident after the passing of the risk may stongly tempt the buyer to avail himself of this remedy. However, to prevent the abuse of his right, it will have to be carefully examined, [page 100] if a fundamental breach of contract already existed before the event took place, in order to ascertain whether he could have claimed avoidance at that moment.[103]

Pursuant to article 79(5), the claim to avoid the contract is not eliminated [104] in situations which are regulated in the Convention under the section titled "Exemptions," if other provisions of the Convention give rise to it. When the failure to perform was due to an impediment beyond the seller's control and he could not reasonably be expected to have taken the impediment into account at the time of conclusion of the contract or to have avoided or overcome it or its consequences after the conclusion of the contract, he is not liable for damages. However, the exemption from liability is confined only to damages and the right to avoidance remains unimpaired, justified above all when there is a fundamental breach ascribed to the seller. Under this regulation the objective character of breach of contract is not affected by the presence of impediments which exempt the breaching party from only certain legal consequences, leaving others untouched.[105]

3. Grounds for renouncement in Polish Law

The remedy of renouncement may be exercised when one of the parties is in delay due to the circumstances for which the party is liable.[106] This [page 101] is one of the particular cases of non-performance or defective performance of synallagmatic contracts regulated within the general regime of contractual liability for non-performance or defective performance of obligations.

The case where the performance was not fulfilled at the time it was due falls under performance not complying to the contractual requirements concerning the time for it. The performance is assumed to be possible, but not rendered on time when it was expected under the terms of the contract. The aggrieved party may, according to article 491, paragraph 1 CC, renounce the contract after setting additional, adequate time for the party in delay along with a stipulation that after the inefficient expiration of this time, he will be authorized to renounce the contract. However, pursuant to article 492, second sentence, the aggrieved party may renounce the contract without setting an additional period of time when performance after the original time set in the contract does not have any significance for the aggrieved party, either because of the nature of the obligation or the intended purpose of the contract which was known to the party who delayed.[107] The same applies when, under the contract, the performance is to be made at a date fixed and the parties stipulated the remedy of renouncement in a case of non-performance.[108] [page 102]

Article 491, paragraph 2 CC regulates the remedy of renouncement when the party fulfills his obligations only in part, or the performance of both parties under the contract is divisible. When one of the parties is in delay to part of the performance, the other party has an option. He may, according to his choice, renounce the contract with respect to this relevant part of the contract, or to this part as well as the part that is to be performed in the future. The aggrieved party may renounce the whole contract only when the partial performance does not have any significance for him due to the nature of the obligation or the intended purpose of the contract, which was known to the party in delay. The rules for setting an additional period of time with the exceptions mentioned above, as provided in article 492, are applicable in this case.

Another situation, where the grounds for renouncement may arise, is impossibility of performance.[109] Besides delay this is another case of non-performance, which is regulated in detail in the CC. The impossibility must be permanent, otherwise when it ceases to exist and the performance can be made, the situation is treated as delay in performance.[110] When the impossibility is caused by circumstances for which one of the parties is liable, the aggrieved party may under article 493 CC, at his choice, either renounce the contract or claim damages based upon general contract liability principles. The claim may also be accompanied by a demand for a substitute performance. If he chooses renouncement, he may also assert a claim for damages which he suffered with regard to the non-performance of contract. This applies even if the performance of the part of the contract cannot be rendered with regard to that part on grounds of the impossibility. However, if performance of another part does not have any significance to the aggrieved party because of the nature of the obligation or its purpose, which was known to the party in breach, the aggrieved party may renounce the whole contract.[page 103]

Under the regulation of article 495, paragraph 1 CC, the impossibility of performance by one party, in circumstances where neither the parties is liable has an impact on the situation of both parties.They are released from obligation to perform. If the performance of one party has already been rendered, he may claim restitution of what he has performed in accordance with the provisions on unjust enrichment. Then the whole contract is terminated. However, the aggrieved party may demand substitute performance from the party whose performance has become impossible. When the performance is only partially impossible, the rule in article 495, paragraph 2, allows for the reduction of reciprocal performance. The aggrieved party may, nonetheless, renounce the whole contract, if partial performance is of no significance to him due to the nature of the obligation or the intended purpose of the contract, known to the party whose performance has become partially impossible.

Additionally, other grounds concerning exclusively the buyer's right to renounce the contract are provided in the regulation of the sales contract in the CC. Under the CC, the buyer's right to renouncement results from the seller's warranty liability for physical [111] and legal defects [112] of goods. Under article 560 CC, the buyer may renounce the contract if the goods have defects and the seller does not exchange, without delay, these goods for conforming goods, or does not remove the defects. The buyer is authorized by article 561, paragraph 2 CC to exercise his remedy of renouncement if the contract of sale concerns specific goods and the seller who is a producer of the goods, has not repaired them within the additional time set by the buyer for repair. However, the buyer is free to renounce the contract without setting additional time for repair.[113] The seller on his part, may refuse to repair [page 104] if it involves high costs.[114] If the goods, according to the sales contract, are to be delivered in parts and the seller has not delivered conforming goods due to the buyer's demand, the buyer may under article 562 renounce the contract with regard also to the parts which are to be delivered in future.

B. Fundamental breach of contract

1. Regulation under the Vienna Convention

As mentioned, fundamental breach of contract is one of the decisive prerequisites for the buyer's right to avoidance. It is indispensable to get closer to the meaning of the term in order to understand properly the mechanism of avoidance under the Vienna Convention.

The notion of breach of contract under the CISG comprises any non-fulfillment of contractual obligations originating in the contract between the parties, in the Convention, established practices and usages. A breach of contract constitutes an objective fact irrespective of whether the party who commits the breach is at fault or not.[115] Fault is not mentioned as a requirement of any remedy in the Convention,[116] including the remedy of avoidance. This is true whether avoidance is as a result of non-payment, non-delivery of generic goods, or if the goods are defective. Furthermore, as for the defects themselves, the Convention does not distinguish between liability for breach of contract and guarantee liability. On the other hand, the party may be exempted from certain consequences of failure to perform his obligations, if, for example he has not been able to prevent the breach, and the breach is caused by the conduct of the other party. The objective character of the breach of contract is visible in cases of anticipatory breach when avoidance may be exercised, irrespective of whether the performance is prevented by objective circumstances [117] or whether anticipated non-performance by the seller is intentional.[118] [page 105]

The Convention distinguishes between fundamental breach of contract and other breaches of contract in article 25 and links a fundamental breach with more severe consequences than those associated with an ordinary breach of contract. Article 25 of the Convention defines fundamental breach as one that results in such detriment to the other party so as to substantially deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. The fundamental breach is characterized by reference to the results of the breach.

An important element in the definition is the degree of seriousness of the detriment resulting from the breach; it must be such as to deprive the buyer of what the contract entitles him to expect.[119] It should be considered as having quantitative as well as qualitative meaning.[120] The substantiality of the detriment will be considered in each case on the basis of such circumstances as the monetary value of the contract, the monetary harm caused by the breach, or the extent to which the breach influences other activities of the injured party.[121]

The aim of defining the term "fundamental breach" is to classify the situation wherein the injured party, the buyer, has no further interest in the performance of the contract because the purpose for the contract no longer exists,[122] and to allow the buyer to take advantage of avoidance (among [page 106] other remedies) put at his disposal by the Convention.[123] The interest of the buyer will be defined according to the terms of the given contract, which may state that the time of delivery, the conformity of goods, the packaging or insurance of the goods, is of special interest to the buyer.[124]

Representatives of the legal doctrine of avoidance consider other cases where the breach may appear to be fundamental. For instance, in cases where the delivered goods are non-conforming, that is, they are not fit for their intended use [125] and are not reparable; or the goods are not free from claims of a third party; or claims based upon industrial or other intellectual property, if these claims are not removed and impede buyer's use of the goods.[126]

According to article 49(1)(a), the fundamental breach is the test for immediate avoidance of the contract in all cases, irrespective of when it [page 107] takes place,[127] before or after the acceptance of the goods by the buyer.[128] However, in order to give basis for avoidance, it must be undoubtful. Sometimes, a fundamental breach of contract may become obvious when it persists. Then, time may constitute a decisive element as its lapse may convert a non-fundamental (simple) breach of contract into a fundamental breach. For example, in the case of a delivery of non-conforming goods which have a reparable lack of conformity. If the time for delivery has been essential in a contract, such a reparable lack of conformity will be considered a fundamental breach of contract. If this is not the case, a non-conforming delivery can become a fundamental breach when the lack of conformity is not repaired. Delivery of an aliud may entail a right to require performance and if such a further delivery is a violation of the time for performance, it can be characterized as a fundamental breach.[129] In the case of partial delivery of the goods, a fundamental breach is necessary to avoid the contract as to the part of the goods that do not conform to the contract. However, if such a failure in delivery causes a substantial detriment to the buyer and it concerns the entire contract, he may, according to article 51, avoid the whole contract. A close examination of the facts of the case in relation to the function of the remedy of avoidance is necessary in order to justify its exercise in this situation.[130] [page 108]

The estimation whether the failure to perform a part of an installment contract constitutes a fundamental breach of contract will have to take place with respect to a given installment first. On the basis of the contractual terms, as a whole conclusions can be drawn for future and earlier installments.[131]

The onus of proof is vested in the party in breach, the seller. If he shows that he did not foresee and that a reasonable person in the same circumstances would not have foreseen such a detrimental result, he can relieve himself from the serious consequences of his breach. These two premises: lack of anticipation by the seller of the substantial detriment caused and lack of anticipation by a reasonable person in the same circumstances, must be proved at the same time. The test of a reasonable person is an objective [132] element in the definition of a fundamental breach. The time in which the seller should have foreseen the detrimental consequences to the buyer is not indicated in the definition provided in article 25. Legal doctrine asserts that it is the moment of the conclusion of the contract [133] or the time until the moment of the breach.[134]

2. Regulation in Polish Law

The remedy of renouncement based on the grounds indicated in the Polish CC may be available to the aggrieved party both if the non-performance has resulted from the circumstances for which the party in breach is liable, and circumstances for which he is not liable. The remedy is also available within the scope of the warranty liability of the seller.

According to the general principle provided for in article 471 CC, the debtor is obliged to redress damages resulting from non-performance or defective performance under the contract, unless the non-performance or defective performance results from circumstances for which he is not liable.[page 109] The Code does not define the meaning of "circumstances for which the party is liable" but it is accepted [135] that the notion embraces:

The onus of proof, according to the general evidence rule [139] under article 471, is placed upon the creditor, who must prove the existence and extent of damage; the fact that the damage resulted from non-performance or defective performance by the debtor; and the causal nexus between the non-performance and the damage. The creditor is not obliged to prove anything more. In particular, he is not obliged to prove that the non-performance or defective performance resulted from circumstances for [page 110] which the debtor is liable.[140] The legal presumption adopted from the provision of article 471, is that the non-performance or defective performance is just the effect of these circumstances.[141] The debtor should prove the opposite. If he does not indicate the reasons releasing him from the liability, he will have to pay damages.

The adoption of such a presumption is based on the needs of turnover. The creditor usually does not know, and often cannot know, what were the reasons that caused the non-complying performance. Those reasons must or, at least, should be known to the debtor. The practical effect of this is that if the cause of non-performance remains unascertained, the debtor will have to redress the damage incurred by the creditor.

The warranty liability of the seller for physical or legal defects of the goods foreseen under the Polish law is stricter than the liability based on general principles of article 471 CC. The warranty liability is absolute in its character. It does not depend on the fault of the seller or on an indication of a loss resulting from the delivery of defective goods.[142] Moreover, the liability exists irrespective of the seller's knowledge of the defect, because deceitful concealment of the defect by the seller increases his liability. The warranty liability of the seller can be expanded, limited or excluded by the will of the parties in a contract. Nonetheless, the exclusion or limitation of this liability is ineffective if the seller has concealed the defect deceitfully.[143]

C. The seller's delay in performance

1. The seller's delay in performance under the Vienna Convention

When the seller is late with the performance of the contract [144] and the contract does not have the character of a fixed-time contract, the buyer is not entitled to declare it avoided immediately. First, he must proceed pursuant to the provisions of article 47(1). He should send the seller a notice in [page 111] which he fixes an additional period of time of reasonable length for performance by the seller of his obligations.[145] Such a notice is termed Nachfrist, for it is related to a concept originating in the German legal system.[146] It constitutes, on one hand, an assurance of the buyer's continuous interest in the fulfillment of the contract [147] and, on the other hand, it is a warning about the possibility of its avoidance after lapse of the time set. The notice must state clearly a given date or period of time, otherwise it is not sufficient.[148]

The determination of the length of the period for performance has been left to the discretion of the buyer, the aggrieved party, with the indication that the time must be reasonable. It should be appropriate to the interests of the buyer in the performance of the contract and the possibilities of the seller in realization of the delivery. The notice may be communicated orally or in writing to the seller. According to article 27 of the CISG, risk of its transmission is placed with the seller. Thus the buyer may avail himself of his right after inefficient expiration of the Nachfrist, even when the seller has not received the notice.[149]

The expiration of the additional period of time without delivery being effected gives the buyer the right to declare the contract avoided even if the breach is not fundamental.[150] However, he remains free to set a second or [page 112] further additional period of time for performance, if he has a purpose to save the contract. The buyer may also follow the described procedure if the delay constitutes a fundamental breach, as he may have reasons to obtain performance. Moreover, he may apply the Nachfrist when he is uncertain whether the non-delivery amounts to a fundamental breach in order not to risk his right.

A notice setting an additional period of time may be sent to the seller in case of partial non-performance if some parts are missing in a delivery. According to the provision of article 51, the seller's non-delivery of the missing part within this additional period of time entitles the buyer to avoid the contract with respect to this part of the goods.[151] A Nachfrist notice can be useful when the buyer is not sure, as in an installment contract, whether a breach which occurred, is in fact fundamental. He may, like under article 51, set an additional time and if the seller does not perform with its expiration, the buyer may avoid the contract.[152]

2. The delay in performance in Polish Law

The delay is assumed to be a non-performance of a temporary character. However, it may transform into total non-performance. The party who does not perform at the time due may still objectively perform and if he does, his obligations will be fulfilled, although not in a proper way.[153] The legal effect connected with the delay arises when the performance has not been rendered at the time which has been indicated in the contract or which resulted from the nature of the obligation or, if the two cases are not applicable, immediately after the performance has been called for. The Code treats differently obligations which are to be performed at the date fixed and "simple" obligations to be performed in due time,[154]where the aggrieved party is not deprived of his interest in receiving the performance after the delay.[page 113]

If the performance under the contract is to be made on a fixed date, or if performance after the delay does not have any significance to the aggrieved party due to the special nature of the obligations and the intended purpose of the contract, which was known to the party in breach, then the aggrieved party may renounce the contract without setting an additional period of time.[155] In the event of delay in performance of simple obligations to be fulfilled in due time, the aggrieved party may renounce the contract but only after adequate additional time, set by the buyer, for the other party to perform, has expired inefficiently.

The setting of a Nachfrist means, under the Polish law, a unilateral postponement of the original time set in the contract for performance.[156] It also constitutes a necessary warning for the party in delay.[157] The additional time required by the CC regulation should be adequate. That is, it should be long enough to give the party in breach real possibility to perform. What time is adequate will be considered on the basis of all the circumstances of the case, the nature of the performance and the particular obligations arising under the contract.

The CC does not provide for the form in which setting of the Nachfrist should take place; therefore, it may be oral or written. It is effective according to article 61 CC, when the notice setting the Nachfrist has reached the other party in such a way that he could have known its content; the receipt principle is applied.[158] As the party sending the notice is burdened with the risk of its transmission, he should take the proper care in choosing the means of its communication.

The Code does not regulate the cases when the initial delay turns into impossibility. The provisions on renouncement in case of delay are not concurrent with those applicable to renouncement in the case of impossibility. In such a case, the provisions concerning the remedies for delay in [page 114] performance are said to be applicable until the moment of impossibility.[159] The remedies accessible in a situation of impossibility become available after the moment the impossibility occurred. So, the effects of the remedies available for delay in performance, which had been exercised until the moment of impossibility, will have to be respected.[160]

D. Declaration of avoidance

1. Declaration of avoidance under the Vienna Convention

A declaration of avoidance is a right of the buyer, which can be exercised by him under the authorization of the provisions of the Vienna Convention or under the terms of the contract agreed to by the parties. It is a unilateral right. Article 26 of the Convention requires it to be done in the form of a notice [161] sent to the other party. The notice can be oral or in writing but it should state clearly an intent of avoidance.[162] Other conduct implying an intent to avoid a contract is not recognized under the Convention's regulation [163] (for example, the goods are sent back to [page 115] the seller).[164] The declaration of avoidance is subject to the provisions of article 27 of the Convention. It should be made with the means appropriate under the circumstances, as the dispatch is decisive.[165] Particular care will have to be taken when choosing the means for communication of such an important decision like avoidance.[166] The buyer may rely on the notice, although it is not necessary that the communication reach the seller. It may happen that he will continue performance of the avoided contract, not having received the notice.[167] In such a situation it is a question of good faith [168] or mitigation of loss [169] for the buyer to draw the seller's attention in the content of the notice if the buyer becomes aware from the conduct of the seller that he did not receive the communication.[170] [page 116]

On the other hand, one may admit that the transmission risk in communication of a notice of avoidance should be borne by the seller, if he caused the notice to be sent in a manner not fitting to the contract terms.[171] Such an approach however, would not be justified in situations exempted under the Convention, such as when the avoidance does not result from defective performance attributable to the seller. The declaration of avoidance cannot be conditional, nor can it be revoked unilaterally.[172]

2. Declaration of renouncement in Polish Law

The right to renouncement in cases of delay in performance, impossibility and in other situations provided for in the CC is required to be exercised by a declaration.[173]

This conclusion might be drawn from article 61 CC, which refers generally to declarations made to the other party and that the transmission risk in communication of the declaration of renouncement is borne by the aggrieved party. The aggrieved party becomes bound by the declaration upon its formal receipt. The declaration of renouncement is the prerequisite of the effectiveness of the exercise of the right.[174] It cannot be revoked without the consent of the other party unless the revocation has reached the addressee at the same moment as the formal receipt of the declaration of renouncement or before this moment; nor can the declaration of renouncement be conditional.[175] The form in which it should be exercised is not defined, so it may be oral or written. However, if the contract has been made in a written form, the declaration of renouncement should be in the same form.[176] [page 117]

E. Time for exercising the right to avoidance by the buyer

1. Time for avoidance under the Vienna Convention

Generally speaking, there is no provision in the Convention that precisely defines the time for the buyer to declare the contract avoided. Under article 49(1)(a), when there is a fundamental breach of any obligation, not only the obligation to deliver, the buyer can avoid the contract immediately [177] without referring the matter to the court or arbitral tribunal.[178]

When the buyer has set a Nachfrist in the case of non-delivery, according to article 49(1)(b), he has to wait until the fixed period inefficiently expires and cannot declare the contract avoided before that moment, because it is not possible to require performance and at the same time to avoid the contract.[179] Only when the seller has declared that he will not perform within the additional period of time does the buyer not have to wait until the expiration of the Nachfrist period. Such a seller's declaration ends uncertainty on the buyer's part about whether the seller will perform or not within the additional period of time. However, when the buyer anticipates a fundamental breach of contract will be committed by the seller prior to the date performance is due, the buyer may avoid the contract at any time before the period for the performance expires because article 72 prescribes no time limit for such a declaration.[180] Nonetheless, the two cases can be distinguished in order to define the time for exercising the right to avoidance under this article:[page 118]

As far as installment contracts are concerned, there are no time limits for making the avoidance declaration under article 73(1), referring to avoidance of a given installment, and 73(3), which allows avoidance of future installments and installments already made. Nonetheless, under article 73(3), the buyer wishing to avoid the contract with regard to the latest as well as earlier and future installments, has to do it at the same time. However, the requirement to declare the contract avoided within a reasonable time is imposed on the buyer under the provision of article 73(2), if he has good grounds to conclude on the basis of the seller's failure to perform his obligations under any installment, that a fundamental breach will occur with respect to future installments. What time is reasonable in the installment contract depends, among other things, on the length of the interval between the latest and the next installment and its reception and payment.[183] The time runs since the occurrence of the failure.

Avoidance of the contract has significant results as far as care and disposition of the goods are concerned. Delay in declaring the contract avoided by the buyer may contribute to higher demurrage and warehouse costs, it may expose the goods to additional unnecessary risks of damage or loss, and, in the meantime, market prices may change. Deferring the declaration of avoidance creates expenses and risk for both parties to the contract. [page 119] In order to protect them against the undesirable effects of the postponement of the buyer's right, the Convention lays down, under article 49(2), rules setting a time limit for the hesitant buyer.

The regulation included in article 49(2)(a) refers to cases where the seller has delivered the goods following delay in delivery, not only when it constitutes a fundamental breach, but also when the late delivery is effected after the deadline set in a Nachfrist. In such a situation the buyer has to avail himself of his right within a reasonable time which begins to run when he has become aware that the delivery has been made.[184] The term "a reasonable time" is not defined under the provision. Such a formulation of the time limit within the exercise of the right to avoidance enables a flexible application of the provision to many different international sales contracts. The time limit will vary with respect to the nature of the goods according to the market conditions in which the transaction will be pursued or other factors such as, usages developed within a trade, or a course of dealing between parties to a contract.[185] So, the time limit would have to be evaluated pursuant to the circumstances of a given case.[186]

All cases of non-performance, other than the late delivery of the goods provided that a fundamental breach of the contract occurs, are regulated under article 49(2)(b). It embraces delivery of non-conforming goods as well as delivery of goods not free from claims of a third party. The general rule is that the buyer has to exercise his right within a reasonable time. The time may differ in particular situations. It starts to run:[page 120]

The period for declaring avoidance does not begin to run as long as the buyer requests delivery of substitute goods under article 46(2).

The rules of the Convention governing the time for avoidance have a very significant role. First, in the case of delay under article 49(2)(a), the aggrieved buyer does not have to take the risk of deciding how much delay will amount to a fundamental breach, but may wait to declare avoidance until the delayed performance is made.[190] Second, their most important function is to provide a sanction for contravening the time limits laid down to declare the contract avoided, namely, under article 49(2), the loss of the right to declare avoidance, notwithstanding the presence of substantive grounds for it.

In addition to the rules on the time limits for avoidance, the Convention clearly states in article 45(3) that no period of grace can be granted by a State court or arbitral tribunal. This rule applies to the remedy of avoidance.[191] As the Convention does not foresee any procedure for applying to a court for avoidance of the contract, such an additional period cannot be maintained in the Convention's regulation. Such a procedure would be inappropriate in international trade as it could be expensive and take time for a judge to decide to allow immediate avoidance or to grant a period of grace. The situation is different when the buyer is equipped with the right to grant the seller a reasonable additional period. It would be highly undesirable to leave the matter to judicial discretion. In the case of a fundamental breach of contract, the right of the buyer to avoid the contract arises immediately at the time of the breach (or in case of an anticipatory breach even before), and it cannot be deferred by any court or arbitral tribunal.[page 122]

2. Time for renouncement in Polish Law

According to the regulation in the Polish CC, if a Nachfrist has been set for delayed performance, the aggrieved party has to wait to exercise his right until the expiration of the Nachfrist. Then, he is entitled to renounce the contract starting from the day following the last day of the additional period of time fixed (if there are still grounds for it). Immediate renouncement in the case of delay, may take place without setting a Nachfrist according to the provisions of article 492 CC when: (a) performance after the time due would not have any significance for the aggrieved party because of the nature of the obligation or the intended purpose of the contract, known to the party in delay; or when, (b) the right to immediate renouncement has been stipulated in the contract for performance at the date fixed (lex commissoria). Immediate renouncement means that the right can be exercised starting from the day following the day the performance became due.

In cases of renouncement for physical defects, the buyer may renounce the contract: (a) after he notifies the seller of the defects and the seller does not, without delay, either exchange the defective goods for non-defective goods, or remove the defects;[192] or (b) after inefficient expiration of a Nachfrist which the buyer set for the seller (a producer) to remove the defects, or after the seller's refusal to fulfil the buyer's demand, before the Nachfrist expires.[193] The notification requirement will be observed for the time purpose if the buyer sends the notice by registered mail as soon as possible after the defect has been ascertained.[194] Thus, the dispatch principle is effective.

Regarding legal defects, the buyer will be entitled to exercise the right to renouncement after he has become aware of the defect. He may learn about the defect due to a third party's initiation of judicial proceedings against the buyer or in another way.[195] The notification requirement is not explicitly stipulated in the Code's provisions as a prerequisite to exercise the right in case of legal defects with one exception. Under article 573, when the [page 123] third party claims his rights against the buyer, the buyer is obliged to notify the seller about it.[196]

The Code does not precisely define the time for renouncement of the contract if impossibility constitutes the legal ground for it. This question is also not answered in the publications. However, it may be assumed that the buyer can exercise his right immediately after he knows about impossibility of performance. I will consider the question of time limits imposed on the exercise of the buyer's right to renouncement under the Polish law in the section on loss and suspension of the remedy.

F. Loss or suspension of the buyer's right to avoid the contract

1. Loss or suspension of the right to avoidance under the Vienna Convention

The provisions of the Convention directly or indirectly restrict the exercise of the remedy of avoidance by the buyer although he would otherwise have grounds to take advantage of his right. The purpose of the restrictions, which primarily serve the interests of the seller, is to prevent the buyer from abusing his right. One of the limitations imposed on the buyer's right to exercise the remedy of avoidance is provided in the provisions governing the time for avoidance under article 49(2), discussed above. Suffice it to add here that under these provisions the buyer does not lose his right to declare the contract avoided until all the goods have been delivered, irrespective of the type of the breach giving grounds for the avoidance. Under these provisions all the installments in an installment contract must be delivered before the buyer loses the right to declare the contract avoided.

The restrictions upon the remedy of avoidance result not only from the second paragraph of article 49 but also from other articles scattered through the text of the Convention. The buyer loses his right to declare the [page 124] contract avoided under article 39 on the basis of non-conformity of the goods amounting to fundamental breach of contract, if he has failed to give timely notice to the seller, specifying the nature of the lack of conformity.[197] Such a notice must be given by the buyer within a reasonable time after he has discovered the lack of conformity or ought to have discovered it, at the latest within two years from the date of the physical handing over of the goods (unless the period of the guarantee is longer). The time limits set in article 39 are said [198] to prevail over those indicated in article 49(2)(b), although they both begin to run simultaneously: at the moment the buyer discovered (knew) or ought to have discovered (have known) of the defect. However, the buyer retains his right to avoidance devolving from a lack of conformity of the goods, even if he fails to examine the goods delivered and fails to give notice, if the lack of conformity relates to facts of which the seller knew or could not have been unaware and which he did not disclose to the buyer.[199] This exception laid down in article 40 of the Convention applies also to the maximum period of two years.[200] [page 125]

The buyer also forfeits his right to avoid the contract on the ground that the goods received are not free from claims of a third party (including claims based on industrial or intellectual property rights) when it amounts to a fundamental breach, if, according to article 43, the buyer has not notified the seller about the defect specifying the nature of the third-party right or claim. The buyer is obliged to send the notice within a reasonable time after he has become aware or ought to have become aware of the right or claim. The buyer will retain his right in spite of his failure to give the notice if, pursuant to article 43(2), the seller knew of the third-party right or claim and the nature of it at the time of delivery.[201] The buyer will also retain this right with regard to third-party claims based on industrial or intellectual property where the seller knew of it at time of the conclusion of the contract.[202]

Where the seller knew of the facts, the Convention creates a favourable situation for the buyer. He may still exercise his right to avoidance, under the regulation of articles 40 and 43, even if he has failed, having an excuse, to give the notice of non-conformity of the goods, based also on the third-party claims.

Article 82 of the Convention provides another restriction on the buyer's right to avoid the contract. The remedy is lost if it is impossible for [page 126] the buyer to make restitution of the goods substantially in the condition in which he received them, and he cannot rely on three exceptions stated in paragraph (2) of this article:

These restrictions on the exercise of the existing buyer's right to avoidance apply when the restitution of the goods is impossible before the buyer has declared the contract avoided,[203] as well as when the restitution becomes impossible after the declaration.[204] There is an opinion that the realization of the buyer's right to avoidance is blocked when concurrent restitution cannot be made, that is, when the price cannot be refunded.[205] The buyer may also be prevented from making restitution because of foreign trade rules.[206] [page 127]

The above mentioned restrictions imposed on the buyer's right to avoidance do not entirely impair his position because he may still claim damages resulting from the seller's breach of contract.[207]

The buyer, who has not received performance because he contributed to the seller's failure by his own act or omission, cannot, under article 80, retain the right to avoidance.[208] Moreover, under article 79 such buyer's conduct may constitute an exemption for damage claims against the seller. This solution is justified, because the buyer cannot have rights based on his wrongful action.

The suspension of the buyer's remedy of avoidance is provided in articles 46, 47 and 48 of the Convention. If the buyer chooses to require performance under article 46, he cannot exercise the avoidance remedy, which immediately releases the seller from his further obligations. The right to require performance, however, does not hinder the buyer from resorting to a claim for avoidance later on, if there are still grounds for it. This refers also to the case in which the buyer requires the delivery of substitute goods, if the lack of conformity constitutes a fundamental breach of contract.[209] It seems also to apply to a right to claim delivery of substitute goods free from third party rights [210] and to remedy the lack of conformity by repair.[211]

Under article 47(2), the buyer's resort to the remedy of avoidance for breach of contract is restricted if he fixed an additional period of time for performance of the seller's obligation. The buyer cannot avoid within this [page 128] period, even if non-fulfillment of an obligation was from the outset a fundamental breach of contract.

The suspension of the remedy of avoidance takes place also in a situation where the buyer could avoid the contract after the date for delivery, having good grounds for it under article 49, but has not yet done so, and the seller has offered to cure the defect as article 48 allows him. If the buyer does not respond to the seller's request whether the performance will be accepted, the avoidance cannot be exercised before the date indicated in the seller's request by which he intends to fulfil his duties. The relationship between article 49 giving the buyer the right to avoid the contract and article 48 referring to the seller's right to cure the defects of performance, remains controversial among scholars. On one hand, it is said that the right to avoidance prevails over the seller's right to cure [212] and the seller has no right to remedy his failure to perform if the buyer avoids the contract. On the other hand, it is said that the offer to cure prevents the breach from being fundamental and takes priority over the right to avoidance.[213] This opinion is strengthen by the argument that in international sales, preservation of the contract is preferred over avoidance; upon breach by the seller he should be required to or encouraged to cure.[214] In practice, however, to answer this question each case will have to be considered on the basis of all the circumstances.[215] The right to avoid, which could cancel the right to cure, may only be exercised if the breach is fundamental -- which may appear only after ascertainment whether the breach can be cured according to article 48 laying down the limits for it.[216]

In any event, the exercise of the remedy of avoidance is inconsistent with other remedies. Thus, the suspension of the buyer's remedy of avoidance protects the maintenance of the contract and realization of the principle [page 129] "pacta sunt servanda."[217] Since every avoidance of contract entails additional expenses and risks for the parties, the ceiling for exercising this right should be high.

2. Loss or suspension of the right to renounce the contract in Polish Law

When a contract is governed by the CISG, the periods of limitation are those contained in the gap-filling law applicable by virtue of the rules of private international law. Under the general rule included in article 117 of the Polish CC,[218] claims are subject to a period of limitation. This period, according to article 118, amounts to three years for claims connected with the professional activity of the parties.[219] This rule is exclusively applicable to claims whereby the entitled party has the right to demand defined conduct from the party obliged to perform.[220] The right to renouncement is not classified as a claim in the Polish legal system. According to legal doctrine, it is called "a shaping right," which means that the party entitled to the right has a competence to change or to end an existing legal relation due to a unilateral legal action.[221] Thus, the right does not fall within the scope of articles dealing with limitation periods and is not limited in time.[222] [page 130]

The above consideration refers to the remedy of renouncement on the grounds of delay or impossibility. It cannot be said, however, that the aggrieved creditor, in this case the buyer, will be completely free to delay the avoidance and to exercise his right at the moment he wishes whenever the market situation is favourable for him. It is accepted in the legal literature that, despite the fact that the exercise of some rights is not limited by the legislator in the Polish CC with respect to time, a legal relation as a whole related to this right may require such a time limitation considering justified interests of other persons.[223] Therefore, if someone exercises his right with excessive delay to the detriment of another party, he abuses his right and thereby he does not deserve legal protection.[224] The source of such a limitation of the right is the provision of article 5 CC, according to which one cannot exercise his right in a way that would be inconsistent with the socio-economic purpose of the right or principles of social coexistence.[225] Such an act or omission of the entitled rightholder is not considered as an exercise of the right and is not legally protected.[226]

Apart from this indirect limitation imposed on the right to avoidance, there is also a period of limitation applicable to mutual claims of the parties for restitution of what has been performed.[227] The obligations of parties to return the performance are stipulated in article 494 CC. They arise after the [page 131] right is exercised and they constitute the effect of avoidance of the contract.[228] Claims to return the performance are subject to periods of limitation foreseen in the Code. The period of limitation with respect to the restitution claim of the buyer (the creditor) commences on the day the right to avoidance might have been exercised by him at the earliest possible time (due to the grounds that have arisen).[229] Having this in mind, the buyer will be restrained to delay the avoidance, at least intentionally.

If the right to renounce the contract is based on warranty liability of the seller for physical or legal defects of the goods, the Polish CC provides for different restrictions imposed on exercise of the buyer's right. According to article 563 paragraph 2, which concerns sales in professional activity of the parties, the buyer loses his right to renounce the contract if he has not examined the goods within the time and in the way adopted in the trade usage established for goods of that kind, and he fails to notify the seller immediately about the defects. When the defect has been revealed later, the right is lost, if he has not notified the seller immediately after that.

The notice can be oral or written, and the time will be observed if, before its expiration, the buyer sends the notice by registered mail, so the dispatch principle is effective.[230] However, the right of the buyer to renounce the contract in the case of physical defects, expires definitively one year after the goods were handed over [231] to him and, in the case of legal defects, after one [page 132] year once he was aware of the defect. If the buyer first learned of the legal defect due to the legal action of a third party, the period of one year is counted starting from the day on which the court order became legally valid.[232]

The purpose of the time restrictions imposed on the buyer is not to excessively extend the warranty liability of the seller, which is stricter than the liability, based on the general principles of article 471 CC. The buyer is released from the obligation to observe the above time limits and his right will be still preserved if the seller has concealed the defect deceitfully.[233]

The loss of the buyer's right occurs also when the seller is exempted from the warranty liability. If the buyer knew about the defects at the moment of the conclusion of the contract, and, in a case of goods in kind, at the moment the goods were handed over to him. Pursuant to article 559, the seller is not liable for physical defects which occurred after the risk of loss had passed to the buyer, unless the defects resulted from a cause existing then in the goods sold.

The Polish CC regulates the relation between the remedy of renouncement and other remedies available to the aggrieved party in the provisions on performance of synallagmatic contracts and in provisions concerning renouncement in the light of the warranty liability of the seller. Under article 493, paragraph 1, the remedy of renouncement is excluded if, in a case of impossibility due to the circumstances for which the party is liable, the aggrieved party chooses the right to claim damages for non-performance or requires substitute performance (in this case he is obliged to proceed with his own performance).[234] The renouncement is also excluded under article 491, paragraph 1, if in a case of delay, the buyer chooses the right to [page 133] require performance and claims for damages after expiration of a Nachfrist instead of resorting to renouncement. However, the Code does not solve the question, if the aggrieved party, opting for a remedy other than renouncement in the above mentioned cases, may still exercise his right provided the required performance is not rendered. If the answer to this question is positive, as the case seems to be, the remedy of renouncement will only be suspended but not completely excluded.

According to the provisions on warranty liability of the seller, the right to require the reduction of price in article 560, paragraph 1, or the right to require delivery of conforming goods under article 561, paragraph 1, excludes the remedy of renouncement. Moreover, the Code states clearly that the right is excluded if the seller exchanges the defective goods for conforming goods or repairs them without delay.[235] However, under article 561, paragraph 2, (discussed in the section dealing with grounds for avoidance under the CC), the buyer should suspend his right to renounce until the inefficient expiration of the additional time he set for repair, even if he is entitled to exercise his right without fixing the Nachfrist.[236] Only the persistent refusal of the seller to repair defective goods or to reduce the price or to deliver conforming goods seems to restore the buyer's freedom to exercise his remedy of renouncement.

IV. The Seller's Right to Avoid the Contract

The remedy of avoidance is indexed as one of remedies available to the seller for a breach of contract by the buyer under article 61 of the Vienna Convention.

A. Grounds for avoidance by the seller

1. Grounds for avoidance under the Vienna Convention

The grounds for avoidance by the seller are provided in article 64(1) of the Vienna Convention. According to it, he may exercise his right:[page 134]

Under article 72 the seller may avoid the contract if prior to the date for performance of the contract it is clear that the buyer will commit a fundamental breach of contract, unless the buyer provides adequate assurance of his performance. Suffice it to say that the serious worsening of creditworthiness of the buyer to such an extent that a fundamental breach of contract will be committed may play a role if he is the one to perform first (for example, in the case of advance payment or if it is clear that the buyer will not be in a position at the time of delivery to open a letter of credit).[237] [page 135]

The seller may avoid the contract in a case of an installment contract, according to article 73, because the buyer may breach a contract with respect to a particular installment, either by not taking delivery of the goods [238] or not paying for them if prior payment for that installment is required.[239] The provisions of article 73(1) and (2) are said to apply to the buyer directly, [240] although, according to another opinion, by analogy;[241] in situations in which the buyer has the right to pay in installments for one delivery, the provisions of article 73 should not be applied, because if the buyer does not fulfil his obligations to pay in installments, the seller may exercise the right to avoid the contract under article 64 or article 72 of the Convention.[242]

Under article 79(5), the remedy of avoidance may be exercised, even if the situation, described in preceding paragraphs of the article, justifies exemption of the buyer for damage claims. The provision applies indifferently to either party to the contract. Even though the failure to perform is attributable to an impediment which was beyond the buyer's control, it is possible that this failure to perform will constitute a fundamental breach of contract, and the seller's right to avoid the contract will not be precluded.

3. Regulation in Polish Law

The provisions in the Polish CC regulating the grounds for renouncement of the contract due to delay and impossibility, which I considered in the previous chapter, are applicable to the buyer and seller with the exceptions to those grounds which are characteristic only of the buyer's [page 136] right to renouncement resulting from the seller's warranty liability. The remarks concerning other elements, like the liability of the party for non-performance, time for exercising the remedy of renouncement, the declaration of renouncement and grounds justifying the loss of the remedy are fully valid with regard to the seller's right [243] and I will refrain from repeating them in this chapter.

In addition to the grounds for renouncement applicable to both parties, the Polish CC gives the seller other possibilities that are included in the regulation concerning exclusively the contract of sale. According to article 552, if the buyer is late [244] with the payment for a part of the goods sold, or, if due to his financial standing it is doubtful whether the payment for the goods which are to be delivered in the future will take place in time, the seller is authorized to suspend the delivery of the next parts of the goods, setting the buyer an adequate additional time for the assurance of the payment. The seller may renounce the whole contract after the time has expired inefficiently.

When the price is to be paid in installments under an installment contract, the seller may, pursuant to article 586 CC, renounce the contract because of non-payment only when the buyer is in delay [245] with the payment of two installments and their joint sum exceeds one fifth of the total price. However, in this case the seller should fix an additional time for the payment with the stipulation that after its inefficient expiration, he is entitled to renounce the contract.

B. Fundamental breach by the buyer

The legal character of fundamental breach of contract under the Vienna Convention, discussed under the previous chapter referring to the buyer's remedy of avoidance, is applicable also to the seller's right. Taking this into account, I would like to consider the fundamental breach of [page 137] contract committed by the buyer in the particular aspect of his obligations under the contract.

As far as the most important obligations of the buyer are concerned, for example, payment of the price and taking delivery, the possibility of avoidance by the seller can be reached by using the Nachfrist procedure provided in article 64(1)(b). In the event of other buyer obligations under the contract or the Convention, avoidance is possible only when, according to article 64(1)(a), the non-fulfillment is a fundamental breach. To what extent a non-fulfillment of an obligation is a fundamental breach will depend on the purpose of the contract for the achievement of which the given obligation is relevant.[246] A non-fulfillment can be ascertained in many cases only after the awaiting for fulfillment of obligations.

If payment is to be made at the fixed date or taking the delivery should occur at the date specified in the contract, and where time is of the essence, non-performance at the time indicated for performance will constitute a fundamental breach of contract. In other cases the late payment can amount to a fundamental breach of contract if there is a rapid decline in currency,[247] and taking late delivery can be a fundamental breach of contract when the goods cannot be stored.[248] The longer the delay in payment or in taking the delivery, the more a breach becomes fundamental, so that the seller will always be entitled to avail himself of a right to avoid the contract in the event of non-payment [249] or not taking [page 138] delivery.[250] Cases where the fundamental breach takes place can also include non-supply by the buyer of agreed drawings or of part of the materials.[251]

The requirement of a fundamental breach of contract as a basis for avoidance is less formal and thus less clear than avoidance after the expiration of a Nachfrist. Therefore, it is better for the seller, having a doubt as to whether the buyer's delay in making payment or taking delivery constitutes a fundamental breach, to fix an additional period of time for the buyer to perform. When the buyer continues not to pay the price or take the delivery of the goods, the seller, by fixing a Nachfrist, always has the option to avoid the contract, as a non-performance of these essential obligations also within the Nachfrist is said to constitute a fundamental breach of contract.[252] In case of other obligations whose non-performance becomes fundamental when the time passes (for example, the obligation to participate in the manufacture of the goods) setting a Nachfrist also may be helpful for the seller. However, it will not be sufficient for the avoidance of the contract to prove that the Nachfrist expired and performance was not made. The seller will have to show that a breach of a fundamental character exists. Otherwise, the contract is avoided without justification and the seller's non-performance resulting from it will be considered a breach of contract.[page 139]

C. The buyer's delay in performance

The typical breach by the buyer of an obligation under the contract is a delay. In a case of a delay in payment or in taking the delivery, the seller is entitled to decide how long he intends to wait. This is the advantage of lack of strict prescription of the period during which the right to avoidance must be exercised. However, the seller will not be allowed to speculate at the cost of the buyer, because he would have to make up his mind within a reasonable time, at least at the inquiry of the buyer.[253]

If the seller wishes to avoid the contract when the buyer breaches his obligations to pay the price or to take the delivery and the breach is not fundamental, he may declare the contract avoided after following the procedure described in article 64(1)(b). He should fix an additional time of reasonable length for the buyer to pay the price or, as the case may be, to take delivery.

The nature of a Nachfrist set by the seller is the same as in the case of the buyer's right to avoidance. The fixing of an additional period of time must be done by a written or oral notice addressed to the buyer. Its transmission which may be done by any means is subject to article 27 and the seller can rely on the dispatched notice.[254] Determination of the additional time is left to the reasonable discretion of the seller, according to his commercial needs. However, he is expected to state it unequivocally by indicating the date by which performance must be made or a period of time.

The expiration of the Nachfrist without expected performance from the buyer, entitles the seller to resort to the remedy of avoidance. However, the first Nachfrist is not final and the seller can set another one, as the expiration of the Nachfrist gives the seller an option to stick to the contract or to avoid it.[255] Moreover, the seller is entitled to take advantage of his right to [page 140] avoidance without waiting for the expiration of the Nachfrist, if he receives the buyer's declaration that he will not pay or he will not take the goods within the additional time.[256]

The seller is allowed under the Convention to avoid the contract for delay in payment irrespective of whether the buyer has already taken the delivery of the goods.[257] The obligation to pay the price includes steps and formalities required under article 54 of the Convention. In case of the buyer's delay to take such steps, the procedure of a Nachfrist provided in article 64(1) is applicable,[258] unless the failure to make the necessary preparations for payment in itself constitutes a fundamental breach of contract.[259]

Apart from non-payment and not taking delivery, the procedure of fixing an additional period of time may be applied by the seller in cases of delay in performance of the buyer's other obligations (for example: delay in examination of the goods). However, the fixing of an additional period of time for performance of obligations other than payment and taking delivery, mentioned in article 64(1)(b), has only the consequences provided in article 63(2), sentence 1, namely, that the seller cannot resort to the remedy of avoidance for the breach during the fixed period. It would be inconsistent with the requirement to perform. Only when the passing of time makes the delay in performance a fundamental breach of contract can the seller exercise his right to avoidance.

D. Declaration of avoidance

As in the chapter dealing with the buyer's remedy of avoidance, it should be stated that the declaration of avoidance is a unilateral right vested in the seller if the conditions provided under the Convention are satisfied. [page 141] The declaration of avoidance should be made by a written or oral notice, which according to article 26, has to be communicated to the other party.[260] The wording of the declaration should be unequivocal. Conduct of the seller implying an intent is not sufficient to constitute a declaration of avoidance.[261] Prior notice of the seller's intention to declare the contract avoided in the case of a fundamental breach is not necessary. Pursuant to article 27, the declaration of avoidance is effective after dispatch. Accordingly, the seller may rely on the notice even if it does not reach the buyer.[262]

E. Time for exercising the right to avoidance by the seller

The Convention does not include strict rules prescribing the moment for exercising the right to avoidance by the seller, similar to the case of the buyer. This may result from the assumption that the exercise of the right to avoidance, even if there are grounds for it, is left to the decision of the aggrieved seller. The seller should not be forced by strict rules on time, to avoid the contract. On the other hand, the Convention does not leave the choice of time for avoidance completely to the discretion of the seller.

The seller is entitled to avoid the contract immediately for a fundamental breach of the contract. The rule of article 64(1)(a) assumes that the breach is committed under the conditions in which the seller's right is effective at once, starting from the day the non-fulfilled obligation became due. Immediate avoidance is also at the seller's option when the buyer [page 142] declares that he will not pay the price or take delivery of the goods within the additional period of time set by the seller according to article 64(1)(b),[264] or if the seller otherwise receives a notice from the buyer that he will not perform, even if the delay in performance has not amounted to a fundamental breach of contract. When the seller has set a Nachfrist in the case of non-payment or not taking delivery by the buyer, as provided in article 64(1)(b), he may avoid the contract after inefficient expiration of the additional time.

Time for avoidance in the event of anticipatory breach of contract or in case of an installment contract has been discussed under the previous chapter on the right to avoidance by the buyer. The same remarks are relevant for the time of the seller's avoidance in these situations, however, one should take into consideration the specific obligations of the buyer.

The time when the seller exercises his right to avoidance is significant for the buyer, a party in breach. The situation when the seller waits and watches the market developments before making his decision to avoid the contract, would constitute an abuse of the seller's right and he should be prevented from speculating at the buyer's cost. Once the buyer has paid the price (in full), the seller must exercise his right to avoidance within the time limits set by the Convention.

The seller may, according to article 64(2)(a), avoid the contract with respect to the late buyer's performance, before the seller has become aware that the performance has been rendered. The late performance under this rule covers late payment and/or late performance of other obligations.[264] This will embrace situations where the performance was not performed at the time it was due or it was refused due to lack of conformity with the contract (place of performance was different than that stipulated in the contract or in the law) or performance was partially performed, where this was not allowed by the contract.

In the case of breaches other than late performance, if the breach gives grounds for avoidance according to the Convention, the seller may exercise [page 143] his right, under the rule in article 64(2)(b), within a reasonable time and the time begins to run: (a) after the seller knew or ought to have known of the breach; [265] or (b) after expiration of any additional period of time set under the Convention for performance, or after the buyer has declared that he will not perform within this period.[266] The "reasonable time" limit is not defined under the Convention; it will depend on all circumstances of a case.[267] The rule refers to cases like sub-supply of defective materials, breaches of the prohibition to re-export goods, pledging of goods which were not sold under a reservation of title.[268] The time limits imposed on the seller have a disciplining character. In the event he exceeds them, he loses his right to declare the contract avoided.

The Convention provides in article 61(3) (similar to article 45(3)) that no period of grace may be granted to the buyer by a court or arbitral tribunal when the seller resorts to a remedy for breach of contract. This includes the remedy of avoidance. The seller's right to avoidance cannot be deferred by any judge or arbitral tribunal either before, at the same time as, or after the seller has resorted to the remedy for breach of contract by the buyer.

F. Loss or suspension of the seller's right to avoid the contract

The rules of the Convention governing the right to avoid the contract by the seller also provide for restrictions upon its exercise even if there are substantive grounds authorizing its existence. The main purpose is not to allow the seller to abuse his right to the disadvantage of the buyer. The restrictions on the seller's right to exercise the remedy of avoidance are regulated in the provisions governing the time limits for avoidance under article 64(2), discussed above. It is worth remembering that under paragraph 2(a) of this article, the seller's right to avoid the contract lapses when the obligation on whose breach it is based has been fulfilled and the seller has known about its fulfillment.[269] Under paragraph (2)(b) of article 64 the right is lost [page 144] when the seller has not exercised his right within a reasonable time, which has run from the moment indicated in the provision for its commencement.

The Convention does not describe in detail the relation between the remedy of avoidance and other remedies available to the seller. The relation is not as complex and controversial as in the cases of the buyer's remedy of avoidance for a breach of contract by the seller. Generally speaking, the seller cannot exercise the remedy of avoidance when he resorted to other remedies inconsistent with it, namely the remedy to require performance.

Under article 63(2), if the seller fixes an additional period of time for performance of the buyer's obligations, the breach of which is already fundamental, he cannot resort to his remedy of avoidance, which is suspended during this period. However, if the seller has fixed an additional period of time for payment, avoidance is not excluded during this period, because of the occurrence of another fundamental breach, for example, not taking the delivery.[270] In addition, if the seller has set a Nachfrist in accordance with article 64(1)(b), avoidance of the contract is suspended under article 63(2) as long as the Nachfrist runs and the performance is not refused. To reassure the seller that his right to avoidance is retained after the inefficient expiration of that period, he is granted an additional reasonable time [271] for its exercise.

The realization of the seller's right to avoidance is said to be blocked when concurrent restitution cannot be made (when the price cannot be refunded or goods returned, because of the party's bankruptcy).[272] The seller may also be prevented from making restitution because of foreign trade rules,[273] that may result in the suspension of avoidance.

If the seller has not received performance because he contributed to the buyer's failure by his own act or omission, he has, under article 80, no right to avoidance.[274] Moreover, under article 79, such conduct may constitute [page 145] an exemption for the buyer for damage claims. This solution is justified, because the seller cannot have rights based on his wrongful action.

V. Effect of Avoidance

A. Effect of avoidance under the Vienna Convention

The consequences of avoidance are governed by article 81 and following it other articles of the Convention. According to article 81, avoidance of the contract releases both parties from their obligations under it subject to any damages which may be due. The most important obligations are generally: a) the obligations of the seller to deliver the goods, to transfer title to the goods and to hand over the documents; and b) the obligations of the buyer to pay the price and to take delivery of the goods. If the obligations have not been fulfilled by the moment of the avoidance of the contract, the parties do not have to fulfill them later. Apart from the avoidance of the contract, claims for damages which have arisen in connection with the non-performance of the obligations can be asserted by the aggrieved party.

Avoidance, pursuant to article 81, does not affect any provision of the contract for the settlement of disputes. It also does not influence any other provision of the contract governing the rights and obligations of the parties that arise due to the avoidance of the contract. This concerns rights and obligations which are ancillary to the avoidance of the contract, for example, penalty provisions, but also provisions for the purpose of helping to resolve a conflict between the parties (especially in a situation in which the contract is avoided),[275] such as arbitration and renegotiation clauses and forum selection clauses. Other rights and obligations not affected by avoidance are the obligation of the party to preserve the goods,[276] and rights based on the provisions governing the amount of damages.[277]

Under the provisions of article 81, a party who has performed the contract either entirely or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. Thus, the parties are free to claim restitution as they may wish to leave what has been [page 146] supplied or paid with the other party.[278] In the case of a contract for delivery and payment of goods by installment, they may agree to retain what they received prior to the avoidance.[279] Usually, the avoidance of the contract is at the same time accompanied by a claim to return that which has been supplied or paid.[280] The buyer, however, will be freed from his obligation to return the goods when the contract is avoided insofar as such restitution is made impossible because of an event for which he already bears the risk,[281] such as avoidance, under the provision of article 70, which does not influence the rules on passage of risk.[282]

If both parties are bound to make restitution, they must do so concurrently.[283] Moreover, the non-performing party may be required by the other party to cover all costs incurred to return that which has been supplied or paid. This rule, although not provided in the Convention, is acknowledged by the doctrine.[284] If the contract is partially avoided, the rules governing its effects are relevant to that part of the contract, which has been avoided.

The Convention, under article 84, provides for additional rules requiring restitution of benefits received by the parties. If the seller is obliged to refund the price, he is accountable for interest on it which he will have to reimburse from the date on which the price was paid.[285] This obligation is [page 147] irrespective of the grounds for the avoidance and is based on the assumption that the seller has acquired a benefit from the price since it was at his disposal. The buyer, if he is expected to make restitution of the goods or part of them or if it is impossible for him to make restitution of the goods at all or substantially in the condition in which he received them (because the goods were destroyed), must account to the seller for all benefits he has derived from the goods or part of them (also those which accrued before the goods were destroyed).[286] The benefits gained by the use of the goods usually will be returned in money. This will enable the parties to set off against each other the claims they might have under this article.[287]

It should be concluded that the contract is not nullified upon the exercise of the remedy of avoidance.[288] Some obligations of the parties are terminated and some remain in existence. The specific obligations characteristic of the sales contract end or performance already made in fulfilling these obligations has to be returned in goods or in price so that a situation is achieved as from before the conclusion of the contract. However, the contract remains in force as long as there are still claims of the parties under it, including claims for returning the goods or the price.[289]

On these grounds, the contract cannot be considered as terminated either ex nunc or ex tunc,[290], although legal doctrine does not adopt unified opinion on that question.[291] The discussion, whether the avoidance operates retrospectively or prospectively is said [292] to be of little help as [page 148] avoidance always releases the parties from future characteristic obligations and, at the same time, imposes on the parties reciprocal duties of restoration having retrospective effect. The buyer who avoids the contract because of non-conformity of the goods is released from the obligation to pay the price but, if he has already paid, he is entitled to restitution.

Avoidance does not have the effect of termination. The right to avoid the contract is narrower in its scope than the right to terminate the contract [293] because avoidance does not release a party whose breach leads to avoidance from his contractual obligation to compensate the aggrieved party for the loss.[294] In the case of a contract for delivery by installment the avoidance might be said to have the effect of a termination of the contract.[295]

B. Effect of renouncement in Polish Law

The exercise of the remedy of renouncement in all cases of defective performance or non-performance of the contract provided by the CC (i.e., delay, impossibility of performance due to the circumstances for which the party is liable, impossibility of partial performance due to the circumstances for which the party is not liable, and physical or legal defects of the goods) has the same effect as if the contract has never been concluded.[296] This is the special status, which arises after contract renouncement. The renouncement results ex tunc.[297] The parties are released from their obligations to perform and they are entitled to claim restitution of whatever has been performed under the contract.[298] If parties are bound to make restitution, each of them may, pursuant to article 496, suspend restitution until the other party offers the received performance. The provision confirms the [page 149] principle that the restitution should be made concurrently. In this way, the CC protects the interests of the aggrieved party against insolvency or dishonesty of the other.

The parties are bound by the provisions on preservation of the goods.[299] The party who is obliged to return the goods should indemnify the other party for the use of the goods which cannot be returned in kind.[300] However, the buyer who has renounced the contract due to physical defects of the goods is not obliged to indemnify the seller for usual wear of the goods which took place in the course of their normal use up to the moment of renouncement. He is obliged, however, to indemnify the seller if the impairment of the value of the goods results from the circumstances the buyer is liable for, or if the goods are used after the declaration of renouncement has been made.[301]

The party renouncing the contract may, under article 494, claim damages resulting from non-performance of the contract.[302] The damages cannot be claimed when the right to renounce the contract has been exercised on the grounds of impossibility to perform a part of the contract by the party in circumstances for which he is not liable [303] if the performance of the remaining part has lost any significance to the aggrieved party.[page 150]

The contract, after renouncement under the Polish CC is not void, but is considered as if it has never been concluded. This is the special status with the effect ex tunc. It differentiates the unilateral renouncement of a synallagmatic contract because of non-performance or defective performance from the termination of the contract by the parties who are always free to decide the ex nunc or ex tunc effect of the termination depending on the reasons causing it.[304]

VI. Conclusions

The remedy of avoidance regulated under the provisions of the 1980 Vienna Convention and the remedy of renouncement, which is its counterpart in the Polish civil law are remedies of a particular character. They may be defined as last resort remedies, due to the drastic effects, which result from their exercise. The substantive grounds constituting the basis of their existence under both regulations prove that situations that arise under the contract between the parties must be exceptionally disadvantageous for the interests of the aggrieved party when he decides to avail himself of this right. The alternative accessibility of other remedies at the disposal of the aggrieved party in the case of non-performance or defective performance of the contract or the possibility to avoid only the part of the contract, is evidence that the legislators of both Codes support the idea of maintenance of the contract, assuming that it better serves the interests of the parties. This argument is strengthened by the fact that in both regulations the remedy is the right of the party and not an obligation.

The method of regulation of the remedy of avoidance adopted in the Vienna Convention is different than in the Polish Civil Code. Under the legislative solutions of the Convention, the grounds for the remedy of avoidance are regulated separately for the buyer and seller. The regulation on the buyer's right to avoidance is included in the provisions of the Convention dealing exclusively with the remedies for breach of contract by the seller, which follow the norms on his obligations defined under the sales contract. The same method is adopted as far as the seller's right to avoidance is concerned. On the other hand, the articles, where the remedy of avoidance is taken under consideration, are included in other parts of the Convention, [page 151] which contain norms common to both parties to the sales contract. Under the Polish CC, the remedy of renouncement of contract is subject to the provisions on performance of synallagmatic contracts, which constitute lex specialis towards general principles of contractual liability and refer to both parties of the sales contract. The regulation of the remedy is, to a narrow extent, included in the provisions concerning the sales contract under the regime of the warranty liability of the seller for defects of goods. The substantive provisions on the remedy of avoidance under the Convention and the remedy of renouncement in the Polish law evince many common features. Nonetheless, there are visible differences between both regulations. The differences seem to result mainly from the specific needs of the parties in international trade and conditions in which contracts are concluded and performed.

The general approach of the legislators in formulating the grounds giving rise to the remedy of avoidance under the Convention and Polish law is quite similar. The right is available in cases of delay in performance of the contract and, other than delay, in situations, in which the performance does not comply with the contract terms agreed to by the parties. However, the concept of avoidance in the Convention is not based on liability of the party for non-performance or defective performance of the contract. The remedy is available due to the objective fact of the breach of contract irrespective of the reasons behind this. The fundamental character of the breach by either of the parties is the basic notion underlying the concept of avoidance of the contract and is important in determining the consequences ensuing from non-performance by the buyer or seller. Such a concept allows the aggrieved party to avoid the contract in the situations of exemption for damage claims. However, the party in breach, who may be affected by the changes under the provisions concerning exemptions, does not have the right to avoid the contract. This seems to be an insufficiency of the Convention.

Generally, the Polish CC makes the remedy of renouncement subject to the liability of the party for circumstances which led to the non-performance of the contract (cases of delay and impossibility). What is more, the Code adopts the presumption that the party breaching the contract bears the liability; this party is burdened with the proof that the non-performance has resulted from circumstances for which he is not liable. Only uniquely to this regulation, the Code equips the aggrieved party with the right to renounce the whole contract when the opposite party does not [page 152] bear the liability for non-performance of part of the contract. Namely, when the performance of what has been left under the contract would not have any significance to the aggrieved party (if impossibility of performance not based on the party's liability touches the whole contract, the contract is terminated). As regards the buyer's right to renouncement, the Polish CC subjects it to a second regime. This is the regime of the seller's warranty liability which is absolute in its character, irrespective of the liability of the seller or another party he employs to perform the sales contract. This liability does not depend on a proof of loss resulting from defective performance of the goods, nor on the knowledge of the seller about the defects.

As far as the time for exercise of the right is concerned, both regulations allow the aggrieved party to avoid the contract as soon as the legal grounds giving rise to it come to existence. The Convention, as well as the CC, lays down the possibility of setting an additional period of time by the aggrieved party and awaiting the performance to be rendered. The main differences in regulations refer to the time limits imposed on the exercise of avoidance. The Convention indicates when the reasonable time for exercise of the remedy commences. Opposite to this, the CC does not limit expressly the exercise of the right in time in cases of delay or impossibility. However, it provides for precise ceilings for the expiration of time, namely the periods of limitation for claims of restitution of the performance already made. This indirectly influences the unlimited-in-time possibility to exercise the right in these cases. Moreover, there are special periods of limitation foreseen for the remedy of renouncement under the regime of the seller's warranty liability for defects of goods.

The form in which the remedy of avoidance is exercised under both regulations is concurrent. Avoidance is not automatic even upon the expiration of an additional period of time set by the aggrieved party. The declaration of avoidance communicated to the other party is the necessary requirement imposed on the entitled party if he wants to give rise to the effects of his right.

The right to avoid the contract is not an absolute one. It is subject not only to substantive requirements, but also to restrictions imposed on its exercise. The Convention regulates explicitly and comprehensively the relation between the remedy of avoidance and other remedies available for breach of contract. Although the Polish Civil Code underlines that the remedy of renouncement can be exercised alternatively with other remedies for [page 153] breach of contract (and together with damages as under the Convention), it does not solve all the questions concerning the loss of the right and its suspension.

Damages can always be claimed with the exercise of the remedy of avoidance under the Convention and the remedy of renouncement under Polish law. However, there are cases where the party is released from the obligation to pay damages, for example, the exemption situation under the Convention, where non-performance results from the circumstances which are behind the control of the party and, under Polish law, non-performance due to an impossibility for which the party does not bear liability.

The effects of the exercise of the remedy of avoidance are the same under the regime of the Convention and Polish law. Parties are released from their obligations under the contract of sale and are obliged to make concurrent restitution. The debate over the question whether the avoidance has retrospective or prospective effects is of more abstract than practical character. However, according to unequivocal opinions of the representatives of the Polish legal doctrine, the remedy of renouncement has the effects ex tunc. The commentators of the Vienna Convention differ in their views on that point. Under the Vienna Convention as well as under Polish law the interests of both parties seem to be equally protected. This is made clear in:

VII. The General Provisions of the CISG and the Remedy of Avoidance

The remedy of avoidance should not be analysed without taking into account the general provisions of the Convention, as the grounds for the remedy and its effects may be influenced by the operation of these provisions. The Convention constitutes one whole [305] and its general provisions [306] are of the utmost importance while considering particular issues regulated under it. The general provisions of the Convention can affect the rights and obligations of the seller and the buyer arising from a contract of international sale. The general provisions that seem to have the most significant impact on the remedy of avoidance in Part III of the CISG are articles 4(a), 7(1), 7(2), 8 and 9. They deal with the interpretation of the Convention, [page 155] with the substantial problems of the applicable law and the interpretation of a contract.

A. Problems excluded from the scope of the Convention and avoidance of contract

Article 4 might be called "the table of contents of the Convention." It indicates which questions are and are not covered by the Convention. The first sentence of this article describes in a positive way the regime of the Convention; it covers the formation of the contract and rights and obligations of the parties agreed to by them in a contract. The second sentence defines in a negative way the scope of the Convention. It enumerates issues excluded from the regime of the Convention, namely, "except as otherwise expressly provided in this Convention," the validity of the contract, its provisions and usages and questions of property in the goods sold. On one hand, one of these definitions would be enough to express the coverage of the Convention; on the other hand, it is said that the sentences reinforce each other, clarifying the meaning of the Convention as a whole.[307] Moreover, they underline the interplay between the Convention and national law.[308]

The terms which describe in article 4 the substantive scope of the Convention have to be identified under it without reference to domestic law or to other conventions,[309] but the text of the Convention itself does not provide guidance on how to determine whether a question is one of validity. The main function of article 4(a) is to set aside the operation of the [page 156] provisions of the CISG from cases involving issues that were not susceptible to unification within the framework of the Convention. This happened due to enormous differentiation in the regulation of avoidance under national laws of various countries [310] that uphold the interest in maintaining a uniform policy on problems related to a valid contract and to curb the parties' autonomy in this field.[311] Moreover, the term "validity" has a different meaning in each national legal system. This causes difficulty in interpretation of the term itself - the difficulty that results from the exclusion of validity questions within the scope of the Convention.[312]

The examination of article 4(a) of the Convention suggests that issues falling under the term "validity" can be related to the question of avoidance of the contract in the broad meaning of the term "avoidance." The issues which arise in avoidance problems may according to various countries be [page 157] considered as an obstacle to the creation of a valid contract or in the case of its conclusion, constitute the reason to avoid (cancel, rescind, nullify) the contract.[313] The reasons for avoidance may be classified [314] as validity issues either formally and/or substantively. Substantive validity arguments for avoidance, inter alia, lack of capacity to enter a contract, defects of consent, and illegality. Defects for consent include mistake, misrepresentation, fraud, duress, undue influence and mental incapacity.[315] Reasons concerning the form of a contract, which under domestic law may influence the validity of a contract, are defined by the Convention itself in article 11 [316] and supplemented in articles 12 [317] and 29;[318] matters of form constitute an exception to the article 4(a) referral of issues of validity to national law.[319] [page 158]

As far as so-called substantive validity is concerned, issues of contractual capacity are beyond the scope of the Convention. However, it is said that they rarely occur in international transactions.[320] If a person not having capacity to enter a contract concludes it, this might be a basis to avoid the contract under national law [321] as is authorized by article 4(a). It is also accepted [322] that domestic rules defining defects like duress, threat,[323] fraud,[324] or deceit [325] which create the basis for avoidance of a contract under national law, are applicable to contracts for international sale of goods. A situation where a contract is obtained by fraud and characterized by domestic law as voidable, gives an innocent party a possibility to avoid the contract under the domestic law (due to article 4 CISG). This right is not forfeited under the Convention.

Application of domestic rules on mistake and misrepresentation (especially innocent misrepresentation) to a contract for the international sale [page 159] of goods gives rise to debate among scholars. It is said that rules on misrepresentation and mistake are of great practical importance under the Convention because they refer to the question of warranty as to the quality of the goods. At the same time the problems they raise are the most difficult to deal with under the CISG.[326] The problem concerns the concurrent availability of two systems of remedies that may be applied under domestic law based upon reasons of contract validity (avoidance of a contract) and under the Convention (for instance, avoidance in case of a fundamental breach of contract). This may happen if one party invokes mistake [327] or innocent misrepresentation concerning the quality of the goods or claims non-conformity of the goods. Can the buyer resort to remedies invalidating the contract under national law on the basis of mistake when he has at his disposal remedies for lack of conformity available under the Convention?

The choice has to be made as to whether to support 1) a broad [328] interpretation of the terms under article 4(a) and give priority to domestic rules that would result in a strict basis under which one could avoid the contract; 2) a narrow interpretation of article 4(a) to make application of the Convention as wide as possible; or 3) to look for a compromise between competing remedial systems of the Convention and national law. It is said [329] that a balanced approach to article 4 (a) is desirable. This means that in each case the domestic policy of a State, whose law would be applicable to the issue, should be examined and considered against the needs of international trade.[330] The question remains controversial.

There is an opinion accepting the rule that when the provisions of the [page 160] Convention could be applied to the situation which might also be the basis for the application of a domestic law, then remedies foreseen in the domestic law (in that case, for innocent misrepresentation or mistake) should be displaced by the remedies provided by the Convention.[331] On the other hand, it is argued that the provisions of the Convention which regulate the matters arising out of the conformity of the goods do not in any way refer to the validity of the contract, so these are two different issues that should be treated under separate legal regimes as article 4(a) indicates. The voices which support the interpretation that questions of mistake, together with mistake concerning the quality of the goods, constitute a validity case are numerous.[332] The conclusion which might be drawn from the competing sets of remedies is that under article 4(a), parties will try to take advantage to exercise all the rights they are entitled to, irrespective of whether they are available pursuant to domestic law or the Convention.[333] That is why parties would seek to justify handling the avoidance of a contract under [page 161] domestic law in case of mistake,[334] an approach that clearly acts against the goals of creation of a uniform law.

Initial impossibility in contract performance, which may evince in perished goods or lost goods at the time of contracting, might be another ground under domestic rules to avoid a contract.[335] The existence of goods that are the subject matter of the seller's performance is the essential part of the obligation undertaken. Goods which do not exist at the time of contracting create a controversy as to whether the issue is one of validity to be ruled on under domestic law, or an issue that should be solved under the provisions of the Convention (for example article 68 [336] and art. 79).[337] Moreover, whether the provisions of the Convention override the provisions of national law in order to solve the problem.[338] According to some opinions,[339] the non-existence of goods at the time of contracting is an issue of validity and due to article 4 (a) is taken out of the scope of the Convention.[340] There are other authors who contend that such a contract of sale [page 162] would be valid [341 and in this situation the matter would entail the question of liability of a party. Thus the provisions of the Convention, not domestic law, should apply to the case.[342] Some represent a moderate approach concluding that a court or a domestic tribunal, which may apply domestic rules regulating the validity of a contract, should balance the result of their application pursuant to the international background in which the case of initial impossibility exists.[343]

Illegality and immorality are other grounds to invalidate a contract that are left to the discretion of the domestic law by virtue of article 4(a). This solution is rather obvious among authors and does not cause controversy.[344] Article 4 preserves domestic public policy in this area together with mandatory rules of public policy (in the meaning of special protective or other market regulatory legislation) [345] as applicable to contracts for the international sale of goods.[346]

The next validity issue which appears under article 4 can play a significant role in light of considerations of the right to avoidance as defined under the Vienna Convention. Domestic rules controlling unfair, unreasonable or unconscionable terms apply, due to article 4, to contracts for the international sale of goods. The opinion exists that contractual fairness may be controlled at two levels: (a) the control may be pursued in order to [page 163] detect procedural defects in the bargaining process (what often happens in the case of standard forms); or (b) in order to check the substantive allocation of risks/advantages in the concluded contract.[347] Such control is aimed at the protection of the party who has a weak bargaining position and the effects of the control are defined in domestic law.[348]

Allocation of risks will be controlled through examination of exculpatory clauses when a contract for the international sale of goods contains so called "disclaimers." Examples include clauses modifying, limiting or excluding the liability of a party for the breach of contract, or clauses limiting or excluding the remedies that would otherwise be available to the parties.[349] Such exclusion refers to the remedy of avoidance which might be directly influenced by the clause. Exculpatory clauses are of great importance in international commerce. The Convention does not have provisions restricting the parties' freedom to limit or exclude their liability under contracts within its scope. Moreover, article 6 allows parties to derogate from the Convention as a whole or from any of its provisions. The article permits the exclusion of obligations imposed under the Convention and permission to make such contractual changes confirms the precedence of the contract over the Convention.

The Convention is said [350] to contain default-type rules,[351] which means that they start to operate to the extent that the parties to the contract have not agreed otherwise. The rules of the Convention on remedies in case of a breach are among the provisions which parties may tend to amend or [page 164] displace. Parties, according to their will, are free to change the grounds giving rise to the remedy of avoidance.[352]

The content of the contract in this sphere may depend on the positions of the parties in the given case; on whether the buyer or the seller enjoys superior bargaining power. For instance, a clause requiring a notice to be given "at latest" by a specified, agreed date may have the effect that any delay in performance gives the right to avoid a contract, even in the case of minor, non-fundamental breach.[353] Another example would be a clause, which permits the buyer to reject goods which fail to conform "in any respect." Such clauses would make the liability of the party stricter than under the Convention.

On the other hand, sellers may seek to limit or disclaim liability by softening the grounds for avoidance of the contract (or any other remedy provided). Thus a liability limitation or a disclaimer may at the same time serve as a limitation or exclusion [354] of a remedy. This use would embrace the remedy of avoidance of the contract. The consequence of constructing a clause effectively disclaiming a given obligation is elimination of the breach of contract in this scope. Examples of clauses having this effect would be disclaimers of liability for "any loss" or any "indirect or consequential loss" and/or limiting liability to the selling price of the goods. However, if the seller obligates himself in the clause to "repair or replace" non-conforming goods with a view to limiting the buyer's options under the CISG rules which allow the avoidance of the contract in case of a fundamental breach, such a term will be construed narrowly [355] and be restricted to cases wherein the seller can cure the defect within a period of time which is reasonable.

In the context of article 4(a) certain questions are raised by commentators: Would the disclaimer of a basic obligation be unconscionable and [page 165] would municipal law making it unenforceable be applicable? Would this be an issue of validity within article 4 or would article 6 take priority? The opinion, which is expressed in this respect, is that domestic rules giving grounds to control unfair, unreasonable or unconscionable contracts (or clauses) regulate the sphere of validity and apply to contracts in accordance to article 4(a).[356] The right given under article 6 is limited by the applicable domestic law, which will be the proper law to estimate whether the derogation from any of the Convention provisions are valid.[357]

On the other hand, there are opinions opposite to the view that exculpatory clauses in contracts for international sale of goods are subject to domestic law. The debate concerns the standards for evaluating an exculpatory clause limiting a party's obligations. Article 35 of the Convention requires that the seller must deliver goods of a certain quality, if the parties did not express their will in another way in the agreement. The point of disagreement [358] is whether such clauses have to be valued on the basis of domestic rules of validity or rules of interpretation provided for by the Convention, namely article 8.[359] According to one commentator, the rules [page 166] of domestic law imposing restrictions on warranty disclaimers, which would result in the ineffectiveness or invalidity of a given disclaimer clause, do not constitute a question of validity in the meaning of article 4(a) of the Convention. Thus, such rules cannot be referred to in the intention of avoiding a given clause (or a contract).[360] Otherwise, it might collide with the Convention's rules on interpretation.

The questions of validity, which are governed and solved under the Convention, should not be looked to under domestic law for solution, especially since, according to the rule inserted in article 6 and strengthened by article 35(2), the parties may define in different ways the seller's obligation concerning the quality of the goods.[361] The answer quoted in the literature for this interpretation is that the validity of most exculpatory clauses, and thus their legal effect, will be influenced by the domestic law applicable to the contract apart from the provisions of the Convention.[362] This issue will not be left only to international standards represented by the provisions of the Convention.

Similarly, the Convention does not embrace within its scope questions of validity of standard terms disclaiming obligations or limiting liability in case of a breach. Thus the remedy of avoidance may effectively be eliminated when validity of contract is questioned.[363] This issue will be solved according to applicable contract law, indicated by the rules of private international law of the forum.[364] Disclaimers, which are put among other standard [page 167] terms in a contract, are subject to control of domestic law because usually they are non-negotiated and possibly unfair (or unusual).[365] The national law may treat in different ways the validity of standard terms which incorporate disclaimers, sometimes may treat them even stricter than the disclaimer clauses that are the result of individual negotiations.[366] Or in the most extreme case their legal effect may be refused. Hence, the Convention is said [367] to produce a balanced system of contractual obligations and remedial measures with fair access to both of them which [page 168] includes the remedy of avoidance. The parties can provide for an optional regime within the context of the contract which may be good as well (different allocation of risk).[368] However, the parties should not forget that each is entitled to have at his disposal an adequate range of remedies without exclusion of the strongest of them, namely the remedy of avoidance if a situation justifies it.

B. Interpretation of the Convention and avoidance of contract

Article 7 is another general provision of the Convention that attracts interest when considering the remedy of avoidance. This article contains guidance on how the provisions of the Convention should be interpreted. The main rule of its provision is included in article 7(1). The provision indicates that in the interpretation of the Convention attention should be drawn to its international character, to the need to promote uniformity in its application and the observance of good faith in international trade.

Scholars, in majority, confirm the great role of the principle of good faith in the interpretation of the Convention and interdependence between the application of this principle in the interpretation of the Convention and the interpretation of a contract. It is suggested that the good faith principle, applied in the interpretation of the provisions of the Convention, has at the same time an effect on the contract between the parties to which the Convention is applied.[369] This would have significance not only for the conclusion [page 169] and realization of the contract but would also influence negative effects of non-performance.

Application of the good faith principle to the process of interpreting the Convention's provisions evinces an observance that the international character of the Convention imposes on the courts and arbitral tribunals, and on the parties as well, an obligation to refrain from interpreting its terms and legal institutes from a national perspective. The terms and rules in the Convention, which form legal institutes should be construed in accordance with the common will of the Contracting States, as expressed in the text of the Convention, taking into account the context and the function they have. The meaning of this approach, with reference to the remedy of avoidance, is that when the institute of avoidance has been defined under the Convention, there is no possibility to apply national rules defining the functional equivalent of this remedy irrespective of how it is construed, in accordance with or different from the Convention's provisions.[370]

The obligation of observance of the principle of good faith in application of the provisions of the Convention to the agreement of the parties [371] [page 170] constitutes a guidance that the Convention's provisions should be interpreted in such a way that when the behavior recommended by the Convention does not coincide with conduct based on the principle of good faith, then it must be regarded as unlawful.[372] The existence of this recommendation makes it clear to the parties and courts that high standards of conduct are expected in international trade transactions. This may render the criteria for evaluation of the conduct of the party, who does not perform or performs defectively, more stringent. Moreover, the requirement of good faith, as one of the general principles underlying the Convention, may impose on the parties additional obligations in the course of performance of the contract. These obligations will be defined, if a question arises for which any specific provision cannot be found in the Convention, through application of the principle of good faith.[373] Even the exercise of the remedy of avoidance should not contradict conduct based on the principle of good faith, otherwise it should not be approved.[374]

Paragraph (2) of article 7 contains another rule guiding on how to fill gaps in the regulation of the Convention. According to the suggestion in the provision, the answers for issues, which fall within the scope of the Convention but are not solved under it, should be based on general principles which constitute the background of the Convention. The exception to this premise is the suggestion (contained in this paragraph) that where a general principle cannot be derived from the text of the Convention,[375] the question at hand should be dealt with under the law applicable to the contract [page 171] indicated by the rules of private international law. This general guidance is expanded upon by scholars. Before the reference to the proper domestic law is made, one may follow two methods seeking the solution for the issue at hand, which are complementary to each other. The first is the analogical application of specific provisions of the Convention. The second is the reference to general principles which are explicitly stated in the Convention or are to be derived from the set of the Convention's provisions. The analysis of these helps to extract a more general rule likely to be applied to situations different from those regulated by the Convention's provisions.[376]

The methods recommended to fill the gaps are also to be applied in situations of avoidance as one may find issues related with this legal institute which are not regulated explicitly by the provisions of the Convention. An analogical application of specific provisions must be pursued with care. In interpreting the analogous provisions, it may appear that the provision is of such a character that its application is restricted to a given situation only. Thus, any trial to apply it to other situations, not described in the provision, would be against the will of the legislators or the intended purpose to be achieved by the provision.[377]

An example is article 49(1)(b), which sets forth grounds for avoidance in case of non-delivery of the goods. The lack of delivery within the additional [page 172] period of time fixed in accordance with article 47(1), or a declaration of the seller that he will not deliver within the period so fixed, gives the buyer right to avoid the contract, even if the non-delivery does not constitute the fundamental breach of contract. It is stated,[378] that this provision cannot be extended to other cases of non-performance, as when the goods delivered do not conform to the contract terms or are burdened with the rights of a third party, because the provision in paragraph (1)(b) of article 49 constitutes an exception to the rule included in paragraph (1)(a). There were reasons for limiting this exception to cases of non-delivery only. In the avoidance situation, the analogous application of the Convention's provisions might affect the issue of the place where the seller has to make restitution of the price already paid by the buyer. This question is not explicitly settled by the Convention, however, it falls within its scope. Proposed solutions are: (a) the seller has to pay back the price at his own place of business; (b) or at the buyer's place of business; or (c) somewhere else.

One commentator argues for [379] the buyer's place of business. The proposed reasoning is as follows: according to the rule in article 57(1)(a), the buyer has to make payment of the price at the seller's place of business. The provision could be applied per analogy to the obligation of the seller to make restitution of the price when avoidance of the contract has been declared. The seller, as an obligor in this situation, would be treated in the same way as the buyer when he was obliged to fulfil his duty to pay the price to the seller. The provision would be applied accordingly.[380] If the buyer also has to make restitution of the goods already received, the way to achieve the solution, in the opinion of this commentator,[381] would be different. The parties are obliged to make restitution concurrently under article 81(2). The suggested article, which might come into play, would be article 31(c) stating that the seller is obliged to place the goods at the buyer's [page 173] disposal where, at the time of the conclusion of the contract, the seller has his place of business.[382] So, the buyer would hand over the goods back to the seller at the buyer's place of business, applying by analogy article 31(c).[383] An additional argument that might be invoked is that it is the place where the seller would be under an obligation to make restitution of the price. Moreover, analogical application of the Convention's provision is indicated to define the time within which the goods should be tendered due to the restitution claims.[384] By analogy from article 33(c), the period should be reasonable after the receipt of the claim to make restitution.

General principles used as a means of interpretation can be applied on a wider scale, because of their general character. This is what differentiates them from the reasoning to achieve solutions based on provisions applied per analogy. Some of these principles are expressly stated in the text of the Convention's provisions.[385] These principles would be applied in the situation of avoidance (to the declaration of avoidance made to the other party), like the one stating that any notice made after the conclusion of the contract is effective after dispatch.[386] However, depending on the situation that might arise, the principles would also have to be derived from the provisions of the Convention regulating the given particular issue. The commentators of the Convention extracted some such principles, which were the effect of an analysis of a set of rules considered by them as an expression of a more general rule.[387] An example would be the principle requiring the [page 174] reasonableness test with reference to the conduct of a party or to other situations where a specific provision cannot be found.[388] This test has to be applied with regard to the situation of avoidance on the basis of the provisions of articles 47, 49, 63, 64 and 72(2).

It is interesting to make a brief overview of general principles relating to the remedy of avoidance of a contract. One principle contradicts the remedy of avoidance and draws the most attention. It is the principle favouring the continuation of a contract which demands that solutions furthering the existence of a contract should be adopted instead of its premature termination.[389] The aim of the application of this principle is to prevent occasional decisions to exercise the right. The principle can be extracted [390] from articles 34, 37, 48, 49, 51, 64, 71 and 72 of the CISG. The rule imposing on a party, who relies on the breach of contract, the duty to mitigate the loss resulting from the breach and which is extracted from the set of articles 77, 85-88, ought not to be forget in the situation of avoidance.[391]

There is the duty to communicate the information necessary to the other party, which results from the wider principle of cooperation between the parties. Such a duty is evinced in article 26, providing for the notice of avoidance communicated to the other party. In various situations, the [page 175] non-observance of the duty to communicate may result in aggravation of the position of a party obliged to send a notice. One example is article 39, which states the consequences of non-compliance with the notice requirement. The lack of the communication in the situation described in article 39 [392] may influence the buyer's right to avoidance, in that it may threaten the existence of this right. Next, article 65(1) provides that, if a buyer, who is expected to communicate his specifications fails to do so within a reasonable time, the seller can make the specifications himself. This makes it impossible for the buyer to avoid a contract (in bad faith) by deliberate failure to communicate specification information significant for the seller's performance.[393]

Another example of the requirement of communication is provided in article 72, which concerns anticipatory breach of contract. In this case, the communication prevents surprises in the form of an announcement that the contract is avoided. Besides, it protects the party who gives the communication against accusations of unjustified avoidance of the contract.[394]

The general principle of predictability of effects will have its importance while assessing the scope of the legal consequences resulting from non-conformity of the goods or another failure of a party in performance.[395] It is manifested in articles. 25, 35(2)(b), 42(1)(a), 74, and to a lesser extent in article 79(1).

The requirement of good faith is one of the general principles that deserves special attention. This is the basic principle mentioned already, which underlies the whole Convention and which is written in the text of the Convention, in a specific provision, namely article 7(1).[396] The principle [page 176] of good faith would have to be further specified in order to be applicable in a particular avoidance situation.[397] The method of specification is recommended according to the criteria indicated in article 7(1). The solution would have to be found autonomously, according to the standards of the Convention or standards that can be specified at a comparative level.[398] Reasonableness would be the criterion used to evaluate whether a party, during the performance of a contract in a particular situation which might lead to its avoidance, or in every avoidance circumstance, acted with due diligence.[399] Making this test, one should restrain from instant reference to the standards of care and professional skills required from traders in domestic conditions (for example, in a highly industrialized country).[400]

The interpretative methods indicated in article 7(2) embrace the last significant rule that should be applied when the above described endeavors fail to bring about a positive result. The last step to be done is to invoke a national law in order to find a solution if the case does not fall within the regulation of the Convention or its general principles. This rule is valid for the [page 177] problems relating to the avoidance situation, and the reference to national law provisions will take place in accordance with the relevant conflict of law rules.[401] Instances of issues not explicitly regulated by the Convention which evince close connection with the problem of contract avoidance and arouse discussion among scholars, as far as their solution is concerned, are the hardship situation, and the method of setting interest rates on sums in arrears.

The Convention does not regulate the influence of changed economic circumstances on a contract. Commentators of the Convention represent divergent approaches. They propose different methods of interpretation to deal with the case and offer different solutions. Some support the view that the hardship situation does not represent a gap to be filled by solutions derived from national law. In their view, the matter can be solved under the Convention's regulation without damage to the unification of sales law.[402] According to their opinion, the hardship situation constitutes ground for the trading partner of a party affected by the changed circumstances to avoid the contract and deprives him at the same time of the right to claim the performance as agreed to in the contract.[403] On the other hand, as these authors see it, the party influenced by the changes would not have the right to avoid the contract.[404] Generally speaking, the change of circumstances could be considered, in the view of these authors, as an impediment and the case could be viewed in the context of article 79 of the Convention.[405] [page 178]

It is claimed by some authors [406] that application of article 79 to the situation of an extreme and unforeseeable change in economic circumstances, which could be qualified under this article as an impediment, is not excluded by the legislative history of the Convention. The mentioned authors are proponents of the analogy looking for the solutions in a case of changed economic circumstances.[407] This might result in generating the situations falling within the scope of conditions underlying the grounds for avoidance of the sales contract according to the provisions of the Convention.

On the other hand, there is another quite different approach to search for a mode to solve the question. There is strong opinion against analogous application of article 79 to the situation where the performance can be rendered, even if it is difficult to do so. The opinion is supported by the argument that the article does not cover such situations and, at the same time it creates in reference to the cases it covers a balance between contractual justice and security of the transaction.[408] Moreover, the good faith notion and justification of its application as a basis for a prospective solution is also questioned. It would facilitate reference to solutions existing in a judge's [page 179] national legal system.[409] This would destroy the harmony of solutions that the Convention seeks to achieve. In words of the author representing the opinion, "the principle of good faith must not be used to bypass explicit provisions of the Convention."[410] The author also negates reference to national law on the basis of conflict of law rules, which might happen as a result of reasoning that the case of changed circumstances is governed, but not expressly settled by the Convention.[411] Such an approach would jeopardize the uniformity the Convention is designed to achieve. In the author's opinion, the issue of changed economic circumstances is set aside by the Convention. Therefore, the solutions should be reached on the basis of a comparative law approach.[412] The recommended solution should represent the balance between the two fundamental principles that govern the issue of exemption from liability in international commercial law, namely, security of a transaction and contractual justice.[413] Although the approach proposed above surpasses the proposal of the Convention concerning interpretative methods included in article 7 to the case discussed, avoidance may come into play as a remedy here as well, depending on the circumstances of a particular situation.

Another problem related to avoidance requiring application of interpretative rules written in article 7 is the issue of amount of interest rates payable on any sum which is in arrears.[414] The problem of the obligation to pay interest may appear in case of avoidance and this could concern different sums. Among other obligations, the seller is bound to refund the price to the buyer if restitution of the goods takes place; additionally, he is obliged to pay interest from the date on which the price was paid.[415] As the [page 180] Convention stipulates only the right to interest (commentators admit the lack of a provision on rate of interest), how the rate should be determined or over what period of time it is payable constitutes a gap in the Convention.[416] Under the guidance of article 7, however, a diversity of proposed solutions exists. Some authors argue for a uniform approach in solving the issue without reference to domestic law.[417] Others claim the justification of applicability of national law is indicated by the rules of private international law.[418] [page 181]

These are not the only gaps in the regulation of problems referring to the remedy of avoidance under the Convention. Unsolved questions within the scope of the effects of avoidance might be pointed out.[419] In such situations, article 7 and its role must not be forgotten in order to support the superior aims of the Convention.

C. Interpretation of contract and the remedy of avoidance

From the set of articles included in the general provisions of the Convention, article 8 deserves attention when speaking about grounds for avoidance, exercise of the right and its effects on the situation of the parties. This is so, because, for the purposes of the Convention, article 8 consists of rules governing the interpretation of statements and other conduct of a party.[420] It is commonly accepted in literature, that it pertains not only to statements and conduct of the parties which took place before the conclusion of a contract, but also to the statements and conduct displayed after its conclusion, in order to verify how the rights of the parties, defined under the contract, have been influenced by this conduct.[421] Moreover, the rules prescribed in article 8 are applied to acts such as a notification [page 182] that the goods are defective,[422] setting of an additional period for delivery,[423] the act of avoidance of a contract,[424] the restitution of supplies and expenses in a case of avoidance of a contract,[425] if parties in derogation from the Convention [426] provided for the acts in a different way in their contract.[427]

Some acts, defined in the Convention, are assumed by its provisions to be interpreted in a given way. Article 48(3) contains such an assumption, namely, that in circumstances described under paragraph (1) of the article,[428] the notice sent by the seller to the buyer, that he will perform within a specified period of time, requests the buyer to make known whether he will accept the performance. Such provisions are said [429] to constitute dispositive rules, which produce an effect when parties did not express in a separate statement an intent different than the one adopted in the provision. [page 183] Otherwise, the party making the statement required under the Convention, could not intend differently than it is assumed and the addressee of the statement could not have interpreted it in another way.[430]

The first of the interpretative rules of article 8 recommends the subjective test to the statements and conduct of a party. In the wording of paragraph (1), the acts ought to be interpreted in accordance with the party's intent where the other party knew or could not have been unaware what that intent was. Another rule suggests that, if the subjective test does not work, the objective test is to be applied. It means that acts of a party and other conduct are to be interpreted in such a manner that a reasonable person of the same kind as the other party would understand it in the same circumstances.[431]

Thus, the entitlement to contract avoidance would require the evaluation of the rights of a party vested in her within the scope of the existing contractual obligation, taking into account statements written in a contract, statements and other conduct made during the performance of the contract,[432] or acts made when the performance has failed.[433] It is worth [page 184] underlining that, in a moment of exposition to the danger of a dispute over the interpretation of the contract and other acts of the parties, the relevant time will be the time the acts took place and the meaning attached to them by each party at that time.[434] The party who makes the statements bears the burden of proof that the other party knew or could not have been unaware of the first party's intent. As the case may be, the party would have to prove that a reasonable person of the same kind as the other party, in the same circumstances, would have an understanding conforming to the first party's intent.[435] Possible failure to prove this may effectively influence the entitlement to exercise any right under the contract, including the right to avoidance.

D. Usages and contract avoidance

The Convention defines the criteria that make it possible to determine which usages are binding on the parties to a contract. It also helps to establish the position of usages in reference to the contract and uniform law in case the contract or the Convention contains provisions conflicting with the rule of a usage. The Convention allows the parties, under article 9(1), to be bound by any usages to which they have agreed and by any practices which they have established between themselves.[436] A usage may be referred to in the parties' agreement explicitly or the agreement on it may be implied.[437] [page 185]

Article 9(2) is the basis for the assumption that a usage supplements the contract independently of the parties intentions, unless the parties decided on the priority of a contract and expressly excluded the usage. This paragraph defines precisely the requirements for a usage to allow its implicit application, although the concept of a usage is not defined under the Convention regulation.[438] A usage, applied to an international sales contract in international trade, has to be widely known and regularly observed in the particular trade concerned by the parties to a given type of contract, so that it becomes one of the contractual expectations of the parties.[439] However, the question of validity of a usage is not dealt with under the Convention regulation as it is stated within the reservation made under article 4(a). Thus, the issue will be referred for solution to domestic law applicable to a contract as indicated by the rules of private international law of the forum.[440]

The Convention acknowledges two roles to be fulfilled by a usage, which are important in the light of consideration of the remedy of avoidance, its grounds and effects. A usage, as recognized in article 8(3), serves [page 186] the interpretation of the statements of the parties and their other conduct during the performance of the contract.[441] It also plays a normative role supplementing the provisions of a contract and constituting an additional source of the rules of conduct, as provided under article 9 of the Convention. A given practice of conduct established in business relations of the parties is automatically applicable fulfilling the same role as a usage, namely supplementing the terms of a contract (according to article 9) and assisting in determination of the parties intent (article 8(3)).[442] The practice refers to individual aspects of the contract which are not expressly regulated, and to matters which the practice may refer, embracing such questions as how documents are presented, the regulation of non-conformity, regulation of certain tolerance for non-observance of statutory or contractual time requirements, for quantitative or qualitative defects of delivered goods, the granting of a price reduction, or notice procedures.[443]

When one of the trade terms from INCOTERMS [444] is invoked by the parties to a contract, for instance FOB,[445] it will be treated as a special term and it will have priority over the Convention and the applicable national [page 187] law [446] as to the matters regulated within the scope of this usage. As a rule, such a commercial term defines: a) time, place and mode of delivery (transportation); b) the division of costs related with performance of the contract (freight, costs of various certificates which have to be taken into account in price calculation); c) the division of risk connected with the loss or damage of the goods (this is related indirectly with insurance costs which influence price calculation) and; d) issuance and delivery of various documents without which goods or payment cannot be transferred across the border. The term includes only rules determining the conduct of parties to the international sales contract in usual (normal) trade conditions and good (normal) state of relations between the parties. INCOTERMS do not define liability of parties for breach of contract. Therefore, the Convention regulation will not be excluded completely and its application will be indispensable when a dispute arises as to the non-performance of obligations resulting from the concluded contract.

Thus, usages may impose on the parties duties different from these foreseen by the Convention's provisions or impose auxiliary duties. The conduct of the parties (affected by usages) would have to be evaluated in the light of these duties in order to decide whether the performance was duly made, or whether there is non-performance of the contract, which would justify the operation of the Convention's provisions on remedies, including the avoidance of the sales contract.

E. Conclusions

Regulation of the remedy of avoidance under CISG, including its grounds, exercise and effects are subject to the general provisions of the Convention. The remedy has to be viewed in the light of these provisions; they should not be omitted in any particular case where avoidance is considered as the applicable remedy to protect the interest of a party.

Article 4(a), in conjunction with the issue of the remedy of avoidance regulated in another part of the Convention, reveals some problems. After analysis of the article displayed in scholarly writings (in the English [page 188] language), and consideration of the remedy as regulated under the Vienna Convention, one may be tempted to conclude that two meanings can be attached to the term "avoidance" - narrow and broad. In its narrow meaning, the term would pertain to an "early end" of a (valid) contract as an effect of the disturbances of a fundamental character in its performance. Avoidance in this meaning would imply a remedy exercised in case of liability of a party for breach of obligations arising from the contract. The Convention's regulation, with reference to the term understood in this way, determines the grounds for the remedy, effects of the exercise of the right and its limitations. The only exception would be those issues related to the remedy which are not regulated under the Convention and cannot be solved in accordance with interpretative guidance provided in article 7, but have to be referred to national law for solution (for instance, detailed questions concerning interest rates).

In its broad interpretation, the term additionally would embrace the effects of a party's behavior at the stage of contract formation (such as fraud, duress, etc.), and the effects of other objective obstacles which occur at this stage, for which the Convention explicitly refers to national law for evaluation under the general heading "validity" in article 4(a). Leaving out scholars' dispute over the interpretation of the term "validity," the effects of a contract concluded in such circumstances under national law are termed in different ways depending on the system, such as: contract void, voidable, annulled, invalid, invalidated, rescinded, revoked, unenforceable. Commentators of article 4(a) use the term "contract avoided"[447] also in this context. The term is more general ("avoidance" is an "overly-abstract" concept) [448] and impliedly embraces all the mentioned remedies irrespective of whether the contract comes to an end due to the operation of national law or due to an act of a party entitled under the law.

In both meanings, the narrow and the broad one, the remedy would denote an end to a contract and have retrospective effects. The main difference concerns the grounds for its operation and this is undeniably related to the various functions it serves. First, it serves as a remedy protecting the interests of the aggrieved party in case of a fundamental breach of contract by the other. Second, it serves as a remedy whose operation is justified by [page 189] "validity reasons" defined in applicable national law in order to protect, for the most part, interests and values reflected in public policy standards of a given State. This functional difference is so profound that it might even act against making any trial to construe the broad meaning of the remedy.

However, for those authors who are proponents of the idea that the CISG, together with its regime on remedies, replaces in particular the national validity regulations stating effects of the error and misrepresentation concerning the quality of the goods, this divergence of functions does not have so enormous a significance. It gives way to the aims that the Convention is to serve in international commerce and the role with which it is burdened to fulfill. Depending on the situation, the authors' approach would result in the replacement of the competing remedy of avoidance defined under national law on the grounds of validity reasons by the remedy of avoidance operating on the CISG grounds for fundamental breach of contract. The commentators of the Convention are not unanimous in the question of priority of its provisions and system of remedies, including avoidance, over the provisions of applicable national law on validity issues. The formulation of article 4(a) in any way clarifies the problem. On the other hand, it allows a tribunal to chose for application a national rule of validity which would compete with a remedy of avoidance provided by the Convention as a rule on which a solution of a case could be based, the more that parties to the contract may be interested in a wide range of remedies. That is why H. E. Hartnell's standpoint on the existing requirement of balancing the needs of a state's public policy and the needs of international legal commerce by adjudicators is extremely justified, especially in a case where contract avoidance is a prospective remedy to be applied for its solution.

Article 4(a) brings one more problem in the light of the consideration of the remedy of avoidance. It influences the remedy of avoidance in a significant way, namely by authorizing the application of domestic rules controlling unfair (negotiated and non-negotiated) disclaimers of liability or disclaimers of remedies. The Convention formally allows parties to extend or to narrow the grounds for the application of the right to avoidance and to introduce other limitations imposed on the right. However, the clauses which would be the basis for extremely disadvantageous position of one party within the system of remedies under the contract are subject to the domestic validity provisions.

The interpretation of operative provisions of the Convention ruling the grounds, exercise and various limits imposed on the right to avoidance [page 190] has to be pursued in the light of the general duty of observance of good faith expressed in article 7 CISG. This means that the remedy of avoidance under the Convention has to be perceived in an autonomous way without attaching to it the meaning of a counterpart remedy existing in a given national law, keeping in mind the international character of the regulation and the need to promote uniformity in its application. Since many questions concerning the remedy of avoidance are not answered explicitly in the Convention's regulation, the article contains helpful guidance indicating that the questions should be settled, first in conformity with the general principles on which the Convention's regulation is based and, in the absence of such principles, in conformity with the national law indicated by the rules of private international law. The principles extracted by commentators of the Convention which might be applied in order to fill gaps in the regulation of avoidance or support its mechanism are numerous. Among them, the principle of good faith plays a special role in contributing to a more precise definition of standards of expectations towards the conduct of the parties in international trade where a particular case will be submitted for evaluation under CISG provisions on avoidance. Paradoxically, interpretation of issues related with contract avoidance which are not solved explicitly under the Convention and have to be referred to applicable national law present a rather difficult task, especially in the light of the Convention's aim to strive towards predictability of solutions under it and to achieve uniformity in its application. This might be supported by diversity of opinions of CISG commentators in the solution of particular related-with-avoidance issues which are not solved in its regulation and cannot be solved on the basis of its general principles.

The impact of articles 8 and 9 of the Convention on the right to avoidance cannot be overlooked either. Article 8 would have to be taken into account to verify how the right under the contract has been influenced by the statements and other conduct of the parties made also after conclusion of the contract. The article also serves the interpretation of those provisions of the contract which define in a different way the rights and obligations of the parties (including contractual provisions on the remedy in case of the breach of contract) than the Convention does. The exercise of the right to avoidance by the entitled party would have to be viewed in the light of all the statements and conduct of the parties interpreted in accordance with recommendations included in the provisions of article 8. The applicability of usages to the contractual relationship of the parties by power of article 9 CISG may also result in change of the position of a party under the contract [page 191] as far as his duties and obligations are concerned, thus affecting the exercise of any right under it, including the right to avoidance.

The impact of the general provisions of the Convention on avoidance testifies that solving particular cases under the Convention's regulation requires getting acquainted with the full text of the regulation, to know the spirit behind it and its particular provisions. This shows complexity of the whole mechanism of the regulation of one of the remedies provided under the Convention.[page 192]

ABBREVIATIONS

Am. J. Comp. L.	American Journal of Comparative Law
CC	Polish Civil Code
Convention	United Nations Convention on Contracts for the International Sale of Goods (Vienna, 11 April 1980)
1978 Draft	Draft Convention on Contracts for the International Sale of Goods approved by the UNCITRAL
Georgia L. R.	Georgia Law Review
Harvard L. R.	Harvard Law Review
I.L.M.	International Legal Materials
INCOTERMS	International Commercial Terms
Int'l & Comp. L. Q.	International and Comparative Law Quarterly
Int'l Tax & Bus. Law.	International Tax and Business Lawyer
J. Bus. L.	Journal of Business Law
J. Con. L.	Journal of Contract Law
L. Q. R.	Law Quarterly Review
Liverpool L. R.	Liverpool Law Review
OSNCP	Zbior Orzeczen Sadu Najwyzszego, Orzecznictwo Izby Cywilnej Sadu Najwyzszego (The Judgements of the Highest Court in Poland)
P.P.	Panstwo i Prawo
ULIS	Convention Relating to a Uniform Law on the International Sale of Goods with the annex (The Hague, 1964)
UNCITRAL	United Nations Commission on International Trade Law
Vanderbilt J. Trans, L.	Vanderbilt Journal of Transnational Law
Yale J. Int'l L.	The Yale Journal of International Law

* LL.M. Pallas Programme 1996/1997 on European Business Law organized within the framework of cooperation between the Universities of Barcelona (Spain), Bologna (Italy), LUISS (Italy), Lyon 3 (France), Essex (Great Britain), Konstanz (Germany) and Nijmegen (Netherlands). This article is dedicated to Ms. Ineke Wackers. The author would like to thank Mr. Albert Kritzer for his valuable comments which contributed to the present version of the work.

1. United Nations Convention on Contracts, April 11, 1980, U.N. Doc.A/CONF. 97/18, Annex I, reprinted in 19 I.L.M. 668 [hereinafter CISG, Vienna Convention or the Convention].

2. P S. Atiyah, An introduction to the law of contract 339 (1995).

3. Uniform Law on the International Sale of Goods (1964), reprinted in 3 I.L.M. 855 (1964) [hereinafter ULIS].

4. See Draft Convention on the International Sale of Goods, VII UNCITRAL 1976, 89, 91, U.N. Doc.A/CN.9/116, Annex I (United Nations, New York 1977), (before the formation of contracts on international sale was incorporated into the Convention) reprinted in John Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, (2^nd Ed. 1991) at Appendix C. [hereinafter referred to as the 1978 Draft].

5. G. H. Treitel, Remedies for Breach of Contract 318 (1991).

6. See 7 G. H. Treitel, International Encyclopaedia of Comparative Law, ch. 16, at 3 (1976); E. E. Bergsten, The Law Of Sales In Comparative Law, in Les Ventes Internationales de Marchandises, Economica Collection 7 (1981).

7. See id.

8. For the critical discussion of terminology, see Treitel, Remedies for Breach of Contract, supra note 5, at 319-320; see Atiyah, supra note 1, at 398-403; R. Goode, Commercial Law 84 n.61 (1995); see also S. Michida, Cancellation of Contract, 27 Am. J. Comp. L. 279 (1979); F. A. Miniter, Buyer's Right Of Rejection Under The Uniform Commercial Code And Recent International Developments, 13 Georgia L. Rev. 838 (1979).

9. Kodeks Cywilny, Ustawa z dnia 23 kwietnia 1964 r., Dz. U. Nr 16, poz. 93 z pozn.zm. [The Polish Civil Code of 23 of April 1964 - The Journal of Laws of the Republic of Poland 1964 with later amendments] [hereinafter referred to as CC].

10. CC art. 491.

11. ULIS arts. 43 and 62.

12. CISG arts. 49 and 64.

13. Fritz Enderlein & Dietrich Maskow, International Sales Law, United Nations Convention on Contracts for the International Sale of Goods - Convention on the Limitation Period in the International Sale of Goods 340 (1992).

14. See Fritz Enderlein, Rights and Obligations of the Seller Under the UN Convention on Contracts for the International Sale of Goods, in International Sale of Goods - Dubrovnik Lectures 195 (Petar Šarcevic and Paul Volken eds. 1996); Denis Tallon, Effects of Avoidance, in Commentary on the International Sales Law, The 1980 Vienna Sales Convention 602 (C. M. Bianca & M. J. Bonell eds., 1987) [hereinafter Commentary on the International Sales Law].

15. Enderlein & Maskow, supra note 13, at 15; other terms of this nature are "to deliver", "to take delivery," "to take over." See id.

16. Such an interpretation is called "original" by the international legal doctrine. Id. See also John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention 60 (1987) [hereinafter Honnold, Uniform Law]; M. J. Bonell explains that content and formal presentation of the Convention is the result of considerations between lawyers representing different cultural and legal backgrounds. Drafting the particular provisions they had to adopt such neutral language upon which they could reach an agreement. See Michael .J. Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 74.

17. It is rightfully admitted "That in view of the high differentiation in national legal languages, this goal could not consistently be reached as new adequate terms may not be found for all legal problems or the originality obtained be lost again with the translation." See Enderlein & Maskow, supra note 13, at 15. An example is the text of the Convention in the Polish language where the term "avoidance" sticks to the Polish terminology maintained in the Civil Code -- "odstapienie od umowy". The Journal of Laws of the Republic of Poland, no. 45, 1997, item 286. For the purposes of this dissertation, I will use the term "avoidance" considering provisions of the Convention and the term "renouncement" while discussing regulation included in the Polish Civil Code.

18. See Enderlein & Maskow, supra note 13, at 15; Michael .J. Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 74.

19. Franco Ferrari, Specific Topics Of The CISG in light of judicial application and scholarly writing, in: 10 Preadviezen, uitgebracht voor de Vereniging voor Burgerlijk Recht 86 (1995). Compromise is one of the two types of legislative agreements, which embraces the technical formulation of a text, concerns the language of the rule. Consensus, another one, is achieved on the meaning of a rule -- on a practice or norm or a principle underlying different national rules. Unification and Certainty: The United Nations Convention on Contracts for the International Sale of Goods, 97 Harvard L. R. 1986 (1983-84).

20. The United Nations Conference on Contracts for the International Sale of Goods was held in Vienna, from 10 March to 11 April 1980. It approved the UN Convention on Contracts for the International Sale of Goods. See supra note 1.

21. ULIS Arts. 25, 26(1),(2), 30(1),(2), 61(1),(2) and 62(1).

22. Art. 10 ULIS defines a fundamental breach in terms whether the party knew, or ought to have known, that a reasonable person in the same situation as the other would not have entered into the contract if he had foreseen the breach and its effects. For a thorough discussion of the concept of fundamental breach under ULIS regulation, see Treitel, Remedies for Breach of Contract, supra note 5, at 365-366; Ipso Facto Avoidance In The Uniform Law On The International Sale Of Goods (ULIS): Report of the Secretary-General A/CN.9/WG.2/WP.9), in J. O. Honnold, Documentary History of the Uniform Law for International Sales 88-90 (1989) [hereinafter Documentary History].

23. ULIS arts. 26(1), 30(1), 62(1) and 66(1).

24. ULIS arts. 26(3), 30(3), 44(2) and 62(2).

25. During the works of UNCITRAL on ipso facto avoidance, the system of Anglo-American law was meant to apply, according to the buyer's normal remedies, when the seller fails to deliver the goods in time or there is a claim for damages. As far as a right to specific performance is concerned, it is granted only under special circumstances which was intended to be reflected under ULIS, art. 25. J. Hellner, Ipso facto Avoidance, in Privatautonomie, Eigentum und Verantwortung, Festgabe für Hermann Weitnauer zum 70 Geburstag 89 (1980).

26. With the exception of ULIS arts. 25 and 61 which apply in cases of fundamental as well as non-fundamental breach of contract.

27. ULIS art. 26(1).

28. ULIS art. 30(1).

29. ULIS art. 27(2).

30. ULIS art. 62(1).

31. ULIS arts. 26(3) and 30(3).

32. ULIS art. 43.

33. ULIS arts. 27(2) and 31(2). Failure to deliver in such a case constituted a fundamental breach of the contract (transformation of a non-fundamental breach into a fundamental one). According to F. A Miniter, in this way the buyer's right of avoidance under ULIS was limited to fundamental breaches. See Miniter, supra note 8, at 839. However such a transformation of not serious default into a serious one seems to be artificial and not justified in all situations.

34. ULIS arts. 26(3), 30(3), and 44(2).

35. ULIS art. 62(2).

36. ULIS art. 39.

37. ULIS art. 45(1).

38. ULIS art. 45(2).

39. Avoidance did not result in a nullity of the contract, which did not cease to be in force. See Hellner, supra note 26, at 92.

40. ULIS art. 81.

41. See Treitel, Remedies for Breach of Contract, supra note 5, at 382.

42. ULIS art. 84.

43. A right to require performance and a right to declare the contract avoided. Art. 26(1) ULIS.

44. ULIS art. 25.

45. See Treitel, Remedies for Breach of Contract, supra note 5, at 382.

46. Treitel thinks that requirement of fault is not justified in order to exercise the right of avoidance as it is in case of a claim for damages, because these remedies differ not only in their consequences, but also in the grounds on which they can be claimed. Treitel, Remedies for breach of contract, supra note 5, at 348-349.

47. ULIS art. 74.

48. ULIS art. 74(3).

49. F. A. Miniter considered the regulation concerning avoidance under ULIS not flexible and creating sophistication . See Miniter, supra note 8.

50. See Enderlein & Maskow, supra note 13, at 191; Victor Knapp, Right to Avoid Contract, in Commentary On The International Sales Law, supra note 14, at 466.

51. The case, in which the seller having not received any request for performance from the buyer nevertheless performs the contract after the time, when the contract was avoided ipso facto, would be regulated by the provisions of art. 26(1) and (3) ULIS which seemed to be contradictory. However Hellner considered, that the result they produced according to the literal interpretation (ipso facto avoidance occurs only when the buyer has not made known his decision - paragraph. (1); the buyer has to declare the contract avoided if he does not want to accept goods that have been delivered, even late, in fulfillment of the contract - para. (3)) did not contradict the definition of avoidance in ULIS. Hellner, supra note 26, at 93.

52. See Michael Will, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 360.

53. ULIS art. 61 was a counterpart of it.

54. Ipso facto avoidance in the Uniform Law on the International Sale of Goods (ULIS): Report of the Secretary-General (A/CN.9/WG.2/WP.9), in Honnold, Documentary History, supra note 22 at 90.

55. See Michael Will, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 361.

56. ULIS art. 26 (1), art. 30 (1), art. 62 (1).

57. ULIS art. 26 (2), art. 30 (2).

58. It was described also as "troublesome". See E. Allan Farnsworth, Problems of the Unification of Sales Law From the Standpoint of the Common Law Countries, in 7 Digest of Commercial laws of the world, 16 (1980).

59. Arguments for and against ipso facto avoidance were considered in Ipso Facto Avoidance in the Uniform Law on the International Sale of Goods (ULIS): Report Of The Secretary-General (A/CN.9/WG.2/WP.9) in Honnold, Documentary History, supra note 22, at 85-86.

60. Political and other reasons - Muna Ndulo, The Vienna Sales Convention 1980 And The Hague Uniform Laws On International Sale Of Goods 1964: A Comparative Analysis 38 Int'l & Comp. L. Q. 33-34 (1988).

61. John O. Honnold, The Draft Convention on Contracts for the International Sale of Goods: An Overview, 27 Am. J. Comp. L. 223, 228-229 (1979).

62. See 1978 Draft, supra note 4.

63. 1978 Draft, supra note 4, arts. 45(1)(a),(b), and 60(a),(b).

64. Art. 23 of the 1978 Draft provides that the breach is fundamental if it results in substantial detriment to the other party, unless the party in breach did not foresee and had no reason to foresee such a result.

65. ULIS art. 28.

66. 1978 Draft, supra note 4, art. 66(1).

67. 1978 Draft, supra note 4, art. 66(1).

68. 1978 Draft, supra note 4, art. 67(1).

69. ULIS art. 79(1).

70. 1978 Draft, supra note 4, art. 67(2); ULIS art. 79(2).

71. 1978 Draft, supra note 4, art. 67.

72. 1978 Draft, supra note 4, art. 68; ULIS art. 80.

73. 1978 Draft, supra note 4, arts. 66(2) and 69(2).

74. ULIS arts. 78(2) and 81(2).

75. R. Herber contends that the 1978 Draft enlarged the possibility of the buyer to declare the contract avoided in case of delivery of non-conforming goods, even if the lack of conformity did not constitute a fundamental breach of contract, after having fixed an additional period for cure. For the reasoning of the author, see R. Herber, The Rules of the Convention Relating to the Buyer's Remedies in Cases of Breach of Contract, in 7 Digest of Commercial Laws of the World 122-124 (1980).

76. CC art. 487, para. 2, defines a synallagmatic contract as one in which both parties are obliged in such a way, that the performance of one party is the equivalent of another.

77. A. Szumaski, Renegocjacja Umów w Midzynarodowym Obrocie Gospodarczym [Renegotiation of Contracts in International Economic Turnover] 51-60 (1994).

78. W. Czachórski, Zobowizania - zarys wykadu [Obligations - Outline of Lectures] 128 (1994); J. Rajski, Prawo o Kontraktach W obrocie Gospodarczym [Law of Contract in economic turnover] 159 (1994).

79. The parties are free to stipulate that the right may be exercised within a given time before the contract has been performed or after its performance, for instance, within a week after taking the delivery of the goods and payment of the price. See Rajski, supra note 76, at 160; Czachórski, supra note 76, at 129.

80. In professional practice such a stipulation happens more often than the plain renouncement stipulation. See Rajski, supra note 76, at 161.

81. See Czachórski, supra note 76, at 130; Rajski, supra note 76, 162.

82. G. Bieniek, H. Ciepla, St. Dmowski, Komentarz do Kodeksu Cywilnego, Zobowizania, [Commentary on Civil Code, Obligations] Tom I, 463 (1996).

83. See Czachórski, supra note 76, at 130.

84. See ICC Ct. of Arb. [7660] (1994), wherein the Tribunal stated that, when the goods are machinery, partial avoidance of the contract (art. 51(1)) can be granted when the lack of conformity relates to an independent part of the goods sold. This requirement was fulfilled in the case at hand as the non-conforming part was a piece of equipment replaceable without prejudice to the workability of the machinery as a whole and to the continuation of the contract. See the UNILEX Database on International Case Law & Bibliography on the UN Convention on Contracts for the International Sale of Goods, edited by Professor M. J. Bonell, from the Italian National Research Council [hereinafter UNILEX]; see also the Pace University School of Law CISG Database [hereinafter (PACE)] (last modified, September 21, 1999) <http://cisgw3.law.pace.edu> at <http://cisgw3.law.pace.edu/cases/947660i1.html> (PACE).

85. See Michael Will, Partial Non-Performance, in Commentary on the International Sales Law, supra note 14, at 378.

86. See Enderlein & Maskow, supra note 13, at 201; Honnold, Uniform Law, supra note 59, at 332; Barry Nicholas, The Vienna Convention on International Sales Law 105 L. Q. R. 228 (1989); Michael Will, Early Delivery and Excess Quantity, in Commentary on the International Sales Law, supra note 14, at 381.

87. See Honnold, Uniform Law, supra note 16, at 402.

88. See Enderlein & Maskow, supra note 13, at 291.

89. See id.; see examples of insufficient ability to perform. Id. at 286.

90. See id. at 291.

91. According to H. T. Bennett, the lack of assurance of performance in response to a notice makes it clear that the breach will occur. Trevor Bennett, Avoidance for Anticipatory Breach, in Commentary on the International Sales Law, supra note 14, at 528. P. Schlechtriem is of the opposite opinion. P. Schlechtriem, Uniform Sales Law, The UN-Convention on Contracts for the International Sale of Goods 96 (1986) [hereinafter Schlechtriem, Uniform Sales Law].

92. See Enderlein & Maskow, supra note 13, at 296.

93. See Trevor Bennett, Avoidance of Instalment Contracts, in Commentary on the International Sales Law, supra note 14, at 536.

94. See id.

95. See P. Schlechtriem, Some Observations On The United Nations Convention on Contracts for the International Sale of Goods, in 2 The Frontiers of Liability 32 (1994) [hereinafter Schlechtriem, Some Observations].

96. See Enderlein & Maskow, supra note 13, at 295.

97. See id.

98. See id. at 199; Trevor Bennett, Avoidance of Instalment Contracts, in Commentary on the International Sales Law, supra note 14.

99. See Trevor Bennett, Avoidance of Instalment Contracts, in Commentary on the International Sales Law, supra note 14, at 537. However, some authors admit that in case of art. 73(1) the setting of a Nachfrist in respect of an installment is also possible. This would blur the difference between the two articles. See Enderlein & Maskow, supra note 13, at 295.

100. The passing of risk may also be regulated by trade usages like INCOTERMS.

101. See Enderlein & Maskow, supra note 13, at 279.

102. See id. at 281.

103. In other words, conclusive for the exercise of the right will be the assertion of the fact whether the serious defect in delivery, which does not influence the passing of risk, can be attributed to the seller.

104. See Honnold, Uniform Law, supra note 16, at 427; Enderlein & Maskow, supra note 13, at 332; Denis Tallon, however, has critical remarks about justification to claim avoidance in different variants of the situation (definitive non-performance of the contract, partial non-performance). Denis Tallon, Exemptions, in Commentary on the International Sales Law, supra note14, 588-89.

105. See Enderlein & Maskow, supra note 13, at 318.

106. The Polish Civil Code differentiates accessibility of remedies and also the remedy of renouncement, with regard to the fact if the non-performance was or was not caused by the party in breach. The delay due to the circumstances not caused by the party in breach, termed "opóznienie" (simple delay), does not lead to special legal effects. The party in delay is still obliged to perform after the reasons of delay, for which he is not liable, are extinguished; additionally, the buyer has to pay interest accrued during delay on the sum due. The parties may, however, agree in the contract on special effects connected with the simple delay related, for example, with the obligation to perform at the date fixed. The remedy of renouncement can be exercised only in a case of delay for which the party is responsible. Such delay is termed "zwloka" (grave delay) under CC art. 476. The right on this ground is available only in synallagmatic contracts as, according to the general principle of contract performance, the delay does not authorise a party to renounce a contract. Czachórski, supra note 76, at 245.

107. The contract is said to be of timely character, so the aggrieved party is justifiably equipped with the immediate right to renounce. Rajski, supra note 76, at 241; T. Pajor, Odpowiedzialno dlunika za niewykonanie zobowizania [Liability of Debtor for Non-performance of Obligations] 94 (1982).

108. CC Art. 492 sentence 1. According to J. Rajski, the fixing of time for performance in the contract is not sufficient to make it timely in its character and allow renouncement; additionally the stipulation of the remedy in case of non-performance at the date fixed is required. Rajski, supra note 76, at 241; T. Pajor, for whom the performance at the date fixed has timely character, does not underline the renouncement stipulation to justify its exercise for non-performance. T. Pajor, supra note 105, at 94. In the sale contract, when the performance is to be made at the date fixed and the right of renouncement has not been stipulated in the contract, the aggrieved party seems to be allowed to invoke the nature of the obligation or the purpose of the contract, whose significance is evinced in the fixed date for performance, to justify its renouncement under art. 492 second sentence (previous note). The floating market prices of the goods to be delivered always make the performance at the date fixed timely in its character.

109. It refers to the impossibility of performance which arises after the conclusion of the contract, the impossibility must be objective -- the contract is not possible to be performed by anybody. Insolvency of the party is not embraced by the definition of impossibility as the contract still exists and the party is liable for its performance with its present and future assets. The contract is null, if the impossibility of performance has existed before its conclusion . See Czachórski, supra note 76,at 53, 242.

110. See Rajski, supra note 76, at 230; K. Kruczalak, Skutki niemoliwoci wiadczenia wedlug prawa cywilnego, [Effects of Impossiblity of Performance under Civil Law] 65 (1983).

111. CC art. 556, para. 1 - the physical defects of goods exist when they impair the value of the goods or their usefulness (with regard to a purpose defined in the contract or resulting from circumstances or from the nature of the goods), when the goods do not have the values of which the seller assured the buyer (dicta et promissa), or the goods are handed over in incomplete state. This refers mainly to the quality. Non-conformity with regard to the quantity of the goods is not considered as a physical defect according to CC art. 556, so the buyer in such a case is entitled to claims based on the general principles for non-performance of the contract.

112. CC art. 556, para. 2. The legal defects exist when the goods do not constitute the property of the seller, or when the goods are not free from third-party rights.

113. CC art. 561, para. 3.

114. CC art. 561, para. 2.

115. See Enderlein & Maskow, supra note 13, at 174.

116. See Treitel, Remedies for Breach of Contract, supra note 5, at 23.

117. See Schlechtriem, Uniform Sales Law, supra note 89, at 89.

118. CISG art. 72(3).

119. According to J. O. Honnold, it may happen that in the light of the wording of the definition, a trivial deviation from the contract can produce serious consequences. Honnold, Uniform Law, supra note 16, at 212.

120. J. Ziegel, The Remedial Provisions In The Vienna Sales Convention: Some Common Law Perspectives, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods 9-16 (N. Galston & H. Smit eds., 1984).

121. Commentary on the Draft Convention on Contracts for the International Sale of Goods prepared by the Secretariat (Document A/CONF.97/5), in Honnold, Documentary History, supra note 22, at 416.

122. See OLG Frankfurt, 17 September 1991, [5 U 164/90] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/910917g1.html> (PACE) where the Court held that a breach of a secondary obligation under the contract may amount to a fundamental breach giving a right to avoid the contract if it so seriously jeopardizes the purpose of the contract that the aggrieved party has no more interest in it.

123. P. Schlechtriem says that seriousness of breach in the concept of fundamental breach functions as the "threshold for avoidance". Schlechtriem, Some Observations, supra note 93, at 41.

124. See Schlechtriem, Uniform Sales Law, supra note 89, at 59. See SARL BRI Production "Bonaventure" v. Société Pan African Export, CA de Grebnoble, 22 February 1995 [93/3275] (France) (UNILEX) <http://cisgw3.law.pace.edu/cases/950222f1.html> (PACE) where the party's breach of the contract in respect of the final destination of the goods was considered by the Court a fundamental breach of contract under CISG art. 25. The contract was avoided under CISG art. 73(2). See id.

125. See OLG Frankfurt, 18 January 1994 [5 U 15/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940118g1.html> (PACE) where the Court stated that the lack of conformity entitles the buyer to declare the contract avoided only when it amounts to a fundamental breach of the contract. Such a requirement is not met when, for instance the defects do not prevent the buyer from making a reasonable use of the goods. In the case at hand the goods had been made with a material different from the material agreed upon by the parties and the buyer did not prove that the goods (shoes) could not be reasonably used because of their "defects". Id. See also OLG Düsseldorf, 10 February 1994 [6 U 119/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940210g2.html> (PACE). In LG Landshut, 5 April 1995 [54 O 644/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950405g1.html> (PACE) where the Court held that the seller had not delivered goods of the quantity, quality and description required by the contract and, particularly "by delivering clothes that shrank about 10-15 %", the seller had fundamentally breached the contract, as the buyer had been deprived of what he was entitled to expect under the contract.

126. See Enderlein & Maskow, supra note 13, at 114-115.

127. See Ziegel, supra note 118, at 9-12.

128. See O. Gonzales, Remedies Under The U.N. Convention For The International Sale Of Goods 2 Int'l Tax & Bus. Law. 87 (1984).

129. Enderlein & Maskow, supra note 13, at 114-115; However, according to the authors, delivery of an aliud may be also considered as a fundamental breach from the outset. Id. at 114, 191.

130. See e.g., Foliopack AG v. Saniplast S.p.A., Pretura circondariale di Parma 24 November 1989 [77/89] (Italy) (UNILEX) <http://cisgw3.law.pace.edu/cases/891124i3.html> (PACE), where the Court held that the delay by the seller in delivering the goods together with the fact that after two months from the conclusion of the contract the seller had delivered only one-third of the goods sold amounted to a fundamental breach of the contract according to art. 49(1)(a) CISG (the goods were to be delivered within 10 to 15 days but almost two months after paying the price, the buyer had not received the goods). Therefore the buyer was entitled to avoid the contract and to recover the full purchase price already paid to the seller. See id. From the abstract of the case, it cannot be concluded that the time for delivery of the goods (plastic knapsacks, wallets and bags) was essential to the buyer but only that the delivery was to be made in a short time. See id. The buyer reacted two months after payment of the price. See id. The Court did not consider CISG art. 51 as a basis for avoidance of the contract. In LG Heidelberg, 3 July 1992 [O 42/92] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/920703g1.html> (PACE) the seller delivered five out of the ordered eleven computer components. The Court held that the purpose of the contract could be fulfilled by the buyer by obtaining substitute goods, so there was no fundamental breach of the contract. See id.

131. SeeEnderlein & Maskow, supra note 13, at 295.

132. See Michael Will, Fundamental Breach, in Commentary on the International Sales Law, supra note 14, at 218-19.

133. See Schlechtriem, Uniform Sales Law, supra note 89, at 60.

134. See J. Feltham, The United Nations Convention on Contracts for the International Sale of Goods, J. Bus. L. 353 (1981); O. Gonzales, concludes that such an interpretation does not prejudice the purposes of the Convention. Gonzales, supra note 126, at 87.

135. See Czachórski, supra note 76, at 231.

136. CC art. 474.

137. See Czachórski, supra note 76, at 230-231.

138. CC art. 355, para. 2.

139. CC art. 6. The burden of proof of a given fact belongs to a person, who infers from it legal effects.

140. See Czachórski, supra note 76, at 237.

141. See id.; Bieniek, Ciepla & Dmowski, supra note 80, at 433.

142. See Czachórski, supra note 76, at 289.

143. CC art. 558.

144. The seller has not delivered the goods or transferred documents of title. Schlechtriem, Uniform Sales Law, supra note 89, at 78.

145. See OLG Frankfurt, 18 January 1994 [5 U 15/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940118g1.html> (PACE), where the Court held that the buyer had not validly declared the contract avoided for late delivery as he had not fixed an additional period of time for performance by the seller (the buyer was found not to have given evidence of fixing such an additional period of time). See also Amtsgericht Oldenburg, 24 April 1990 [5 C 73/89] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/900424g1.html> (PACE), where the Court held that even accepting the buyer's contention that the seller had not delivered on time, the buyer did not effectively avoid the contract by refusing acceptance and returning the invoice. In order to avoid the contract as provided in art. 49(1)(b), the buyer had to fix an additional period of time for performance. See id. As he did not fix the time, the seller was entitled to the full purchase price. See id.

146. See Treitel, Remedies for Breach of Contract, supra note 5, at 327.

147. See Enderlein & Maskow, supra note 13, at 182.

148. See id.; Honnold, Uniform Law, supra note 16, at 306.

149. See Enderlein & Maskow, supra note 13, at 183.

150. According to J. O. Honnold, on the one hand, setting the additional time by the buyer makes the time an essential element of the contract. On the other hand, any delay in delivery can become fundamental in a given circumstances, when for example prices for the goods fluctuate sharply on the market, thus allowing the buyer to avoid the contract immediately without fixing the additional time. Honnold, Uniform Law, supra note 16, at 319. The ineffective lapse of time is a signal for the buyer that the contract is "gravely in danger." See Schlechtriem, Some Observations, supra note 93, at 41.

151. The buyer does not have to consider if the breach is fundamental. See Honnold, Uniform Law, supra note 16, at 330; OLG Celle, 24 May 1995 [20 U 76/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950524g1.html> (PACE).

152. See Enderlein & Maskow, supra note 13, at 295.

153. See Rajski, supra note 76, at 233.

154. See Pajor, supra note 105, at 93.

155. See CC art. 492, with the reservation that the remedy of renouncement has been stipulated in the contract with regard to the non-performance at the date fixed.

156. SeeRajski, supra note 76, at 240.

157. See Czachórski, supra note 76, at 246.

158. Art. 61 CC refers to all declarations of will made to the other party. The party who makes a declaration should take care to communicate it in such a way to ensure that it reaches the other party formally. Because the sender is only required to show that it was formally sent, and the receiver is responsible for knowing its content. The question of whether the addressee has actual knowledge of the content of the notice, and when it took place does not have any legal significance, nor does the date of the notice or of sending it by mail. See Z. Radwaski, Prawo cywilne - cz ogólna [Civil law] 187 (1997).

159. See Czachórski, supra note 76, at 247; L. Stecki, Opónienie w wykonaniu zobowiaza pieninych, Pozna [Delay in Performance of Moneary Obligaations] 40 (1970).

160. See Czachórski, supra note 76, at 248.

161. See e.g., LG Frankfurt, 16 September 1991 [3/11 O 3/91] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/910916g1.html> (PACE), where the Court held that the buyer had not validly avoided the contract in accordance with art. 49(1)(a) as he failed to give express notice of avoidance (the buyer sent the majority of the goods back to the seller).

162. See OLG Frankfurt, 17 September 1991[5 U 164/90] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/910917g1.html> (PACE), where the Court held that although the buyer had not given express notice of avoidance, it had impliedly avoided the contract by notifying the seller of its intention to discontinue their relationship.

163. See Amtsgericht Zweibrücken, 14 October 1992 [1 C 216/92] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/921014g1.html> (PACE), where the Court confirmed that, according to CISG art. 26, the buyer's notice of declaration of avoidance must represent his clear intention to avoid the contract, which in this case neither the buyer's request for a price reduction nor that the goods be taken back could represent. See also Amtsgericht Oldenburg, 24 April 1990 [5 C 73/89] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/900424g1.html> (PACE), where the Court held that the buyer had not effectively avoided the contract by refusing acceptance and returning the invoice.

164. See Enderlein & Maskow, supra note 13, at 117. See Amtsgericht Nordhorn, 14 June 1994 [3 C 75/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940614g1.html> (PACE), where the Court held that the fact that the defective goods were sent back to the seller amounted to a valid declaration of lack of conformity.

165. CISG Art. 27 concerns mainly risk in transportation of the communication, but, according to some authors, the receipt seems to be necessary for the binding effect of the declaration on the seller. See Enderlein & Maskow, supra note 13, at 121. The same concerns the seller's declaration of avoidance and its binding effect on the buyer. See id. at 243; V. Knapp, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 468.

166. See LG Frankfurt, 9 December 1992 [3/3 O 37/92] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/921209g1.html> (PACE), where the Court confirmed that the buyer's notice of avoidance given by telephone was valid.

167. See Enderlein & Maskow, supra note 13, at 117.

168. See CISG art. 7.

169. See CISG art. 77.

170. See Enderlein & Maskow supra note 13, at 120. See OLG Hamm, 8 February 1995 [11 U 206/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950208g3.html> (PACE), where the Court held that the mere fact that a notice was given in a language that was not the same language as that of the contract, nor that of the addressee, did not cause the notice to be ineffective. The foreign language could be the language normally used in the respective trade sector, to which the parties may be considered to have agreed upon. See id. If that was not the case, the notice would be effective if the addressee could have reasonably been expected to request from the sender of the notice explanations or a translation. See id. The court decided the matter taking into account the understanding of a reasonable person, giving due consideration to usages and practices observed in international trade according to art. 8(2) and art. 8(3). See id. (The notice did not embrace the declaration of avoidance but the approach can apply to the notice embodying the declaration of avoidance as well). See id.

171. See Schlechtriem, Uniform Sales Law, supra note 89, at 61.

172. See Enderlein & Maskow, supra note 13, at 191.

173. The obligation of declaration provided for in this article concerns the contractual remedy of renouncement. However, it is applicable when the remedy of renouncement is exercised on the grounds regulated in the CC. CC Art. 395, para.1.

174. In the Polish legal theory, it is a unilateral declaration of will of "a right-shaping" character. This means that the party exercising the right has a competence to change or to end a legal relation due to the unilateral legal action. See Radwaski, Prawo cywilne [Civil law], supra note 156, at 90; Czachórski, supra note 76, at 246.

175. See Czachórski, supra note 76,at 129.

176. See CC art. 77; written form for evidential purposes should be observed also if special form (ad solemnitatem) has been stipulated for the validity of the contract. See Rajski, supra note 76, at 240.

177. See Enderlein & Maskow, supra note 13, at 192; O. Gonzales, supra note 126, at 87.

178. See CISG art. 45(3).

179. See Enderlein & Maskow, supra note 13, at 192; the same applies also if the breach of the seller's obligations was fundamental from the outset. Id.; but see Michael Will Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 363 (if non-delivery turns into a fundamental breach during the Nachfrist, the buyer does not have to wait until its expiration but, may avoid pursuant to art. 49(1)(a).

180. See BGHZ, 15 February 1995 [VIII ZR 18/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950215g1.html> (PACE), where the Supreme Court held that since the buyer declared the contract avoided after having taken delivery of the goods (after performance of the contract), CISG art. 72 which is intended to protect against future failures to perform was no longer applicable and could not be a ground for avoidance of the contract.

181. See CISG art. 72(3).

182. Another question which appears in this context is the length of time between the giving of notice and the expiration of the time for performance. See Enderlein & Maskow, supra note 13, at 292.

183. See id. at 196.

184. See id. at 193. Pursuant to J. O. Honnold's opinion, the time starts to run when the seller has delivered the goods. See Honnold, Uniform Law, supra note 16, at 320; Nicholas, supra note 84, at 226. The points in time when the goods are delivered and when the buyer learns about it do not have to be convergent.

185. See Michael Will, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 364. Some authors are inclined to interpret the term "reasonable time" as a call for immediate avoidance -- "immediate" treated in categories of a short time limit. See Enderlein & Maskow, supra note 13, at 193.

186. See BGHZ, 15 February 1995 [VIII ZR 18/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950215g1.html> (PACE), where the Supreme Court held that the buyer had lost the right to avoid the contract as he declared the contract avoided five months after the late delivery of the goods (a key-making machine). See also LG Stuttgart, 13 August 1991 [16 S 40/91] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/910813g1.html> (PACE), where the Court considered six weeks not to be a reasonable time for a declaration of avoidance in case of late delivery of textiles.

187. See OLG Frankfurt, 20 April 1994 [13 U 51/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940420g1.html> (PACE), where the Appellate Court decided that if there is a non-conformity of the packaging claimed by the buyer (art. 35(2)(c) CISG), he must declare the intention to avoid the contract within reasonable time after the discovery of the unsuitable packaging. As the buyer's declaration occurred two months after the delivery of the goods, which the Court held was not within a reasonable time (the case concerned the sale of mussels), the buyer was not entitled to avoid the contract. See id. See also BGH, 8 March 1995 [VIII ZR 159/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950308g3.html> (PACE), where the Supreme Court of Germany confirmed that the buyer was not entitled to avoid the contract because of the non-conformity of the packaging but, in the Court's opinion, the decisive fact was that the buyer did not give notice of the alleged non-conformity of the packaging in time (two months after delivery) rather than the fact he delayed (infringed the "reasonable time" rule) in declaring the contract avoided. Both Courts found that there was no fundamental breach of the contract. In OLG Frankfurt, 17 September 1991[5 U 164/90] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/910917g1.html> (PACE), where the Court acknowledged one day after a trade fair as a reasonable time for avoidance of the contract. The seller infringed the buyer's exclusive right to distribute the shoes produced by the seller according to the buyer's design. See id. He displayed the shoes at the trade fair without the buyer's consent and refused to remove them after receipt of a notice to do so from the buyer. See id. In OLG München, 2 March 1994 [7 U 4419/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940302g1.html> (PACE), four months was considered as not reasonable time for avoidance of the contract of sale of coal.

188. See Enderlein & Maskow, supra note 13, at 194.

189. See id. at 195.

190. See Honnold, Uniform Law, supra note 16, at 320; Nicholas, supra note 84, at 226.

191. See Enderlein & Maskow, supra note 13, at 176; Michael Will, Buyer's Remedy in General, in Commentary on the International Sales Law, supra note 14, at 332.

192. A conclusion from CC art. 563, para. 2 in conjunction with CC art. 560, para. 1.

193. See CC art. 561, para. 2.

194. See CC art. 563, para. 2 and 3.

195. Due to CC art. 572, the buyer may exercise his rights in case of legal defects of the goods even if the third party has not claimed rights concerning the goods against the buyer.

196. The sanction for the lack of notification in this case is exemption of the seller from liability for legal defects of the goods if the seller's participation in the judicial proceedings was necessary to prove that third party's claims were entirely or in part unjustified. See CC art. 573. The notification requirement can be inferred from CC art. 576, para. 3 which provides the notification of the seller about the legal defects may improve the buyer's standing as regards time limits for the exercise of the right. See id.

197. It refers to quality, quantity and false deliveries as well as to a lack of conformity of documents. See Enderlein & Maskow, supra note 13, at 158-159. See Pretore dela Giurisdizione di Locarno-Campagna, 27 April 1992 [6252] (Switzerland) (UNILEX) <http://cisgw3.law.pace.edu/cases/920427s1.html> (PACE), where the Court held that the buyer was not entitled to declare the contract avoided because he had not examined the goods and given notice of the non-conformity in accordance with arts. 38 and 39 CISG (the buyer did so only following customer complaints).

198. See Michael Will, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 364-65.

199. It refers to the seller's deceit and gross negligence as well. See Schlechtriem, Uniform Sales Law, supra note 89, at 70. It is sufficient that the seller could not have ignored the lack of conformity. See Enderlein & Maskow, supra note 13, at 163.

200. Id. at 163; see also Stockholm Chamber of Commerce Arbitration Award, 5 June 1998 <http://cisgw3.law.pace.edu/cases/980605s5.html> (PACE) (regarding a non-conformity related to the installation of a part, a lockplate, of a 4,000 ton rail press.) The Tribunal was of the opinion that the requisite state of awareness -- the threshold criterion for the application of art. 40 -- must amount to at least a conscious disregard of facts that meet the eyes and are of evident relevance to the non-conformity. See id. According to the Tribunal, the seller failed to instruct on or supervise installation of the lockplate. See id. Improper installation of this part of the machine led to failure of the entire machine. See id. The Tribunal held that, in this case, to disclose in the sense of art. 40 means, not only advice as to installation but also instruction as to the risk that can result from non-conformity. See id. Moreover, the Tribunal confirmed that CISG art. 40 [can] alleviate the burden of proof on the buyer in respect of seller's awareness of the non-conformity. See Stockholm Chamber of Commerce Arbitration Award, 5 June 1998 <http://cisgw3.law.pace.edu/cases/980605s5.html> (PACE). If the evidence or undisputed facts on which the buyer has established the basis for his claim under art. 40 show that it is more likely than not that the seller is conscious of the facts that relate to the non-conformity, it is up to the seller to show that he did not reach the requisite state of awareness. See id. This will be the case despite the fact that a considerable time may have passed since manufacture or delivery of the goods and that the evidentiary situation may be difficult; the absence of any document or witness showing seller's internal deliberations when replacing the part does not prevent the application of art. 40. See id. Under CISG art. 40, the seller assumes the risk of not being able to counterbalance the basis for the buyer's claim with evidence on his own design and manufacturing process, which he is in a better position to secure than the buyer. See id.

The Tribunal confirmed that art. 40 is a "safety valve" for preserving the buyer's claims for remedies for non-conformity of the goods in cases in which the seller has himself forfeited the right of protection against such claims granted by provisions of the CISG that require buyer's timely examination and notice. See id.

201. See CISG art. 41.

202. See CISG art. 42(1).

203. See OLG Koblenz, 27 September 1991 [2 U 1899/89] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/910927g1.html> (PACE), where the Court held that the buyer was not entitled to avoid the contract because the impossibility of restitution of the goods in the condition in which they were received was due to the buyer's act and, furthermore, arose after the discovery of lack of conformity (the buyer had started to work on and with the marble plates after discovery of lack of conformity of the goods). See also OLG Düsselldorf, 10 February 1994 [6 U 119/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940210g2.html> (PACE), where the Court denied the buyer's right to avoid the contract because the buyer, having resold part of the conforming textiles, was unable to make restitution of the goods as required by CISG art. 82(1).

204. See Enderlein & Maskow, supra note 13, at 346.

205. See id. at 347.

206. See id.

207. See CISG arts. 74-76.

208. See Honnold, Uniform Law , supra note 16, at 444; Enderlein & Maskow, supra note 13; Schlechtriem, Uniform Sales Law, supra note 89, at 105.

209. Such interpretation is possible under art. 46(1) - Enderlein & Maskow, supra note 13, at 179. Whereas according to M. Will, it results from art. 47. Michael Will, Right to Require Performance, in Commentary on the International Sales Law, supra note 14, at 338.

210. See Michael Will, Right to Require Performance, in Commentary on the International Sales Law, supra note 14, at 339.

211. See M. Marques Roque Joachim v. La Sarl Holding Manin Riviere, CA de Grenoble, 26 April 1995 [RG 93/4879] (France) (UNILEX) <http://cisgw3.law.pace.edu/cases/950426f2.html> (PACE), where the Court held that since the seller had been able to repair the defective elements of the goods in compliance with CISG art. 46(3), the lack of conformity did not constitute a fundamental breach of contract: the buyer had not been deprived of what he was entitled to expect under the contract. See id. The breach did not justify avoidance of the contract. See id.

212. See Enderlein & Maskow, supra note 13, at 187.

213. See Honnold, Uniform Law, supra note 16, at 312.

214. See R. E. Speidel, Buyer's Remedies Of Rejection And Cancellation Under The UCC And The Convention, 6 J. Con. L. 138 (1993).

215. See ICC Ct. of Arb. [7531] (1994) (UNILEX) <http://cisgw3.law.pace.edu/cases/947531i1.html> (PACE) where it was stated that in view of the fundamental character of the breach by the seller the buyer was entitled to avoid the contract on the basis of CISG art. 49(1)(a). The seller was not entitled to remedy by supplying substitute goods in accordance with art. 48(1), since in the opinion of the arbitrator the seller's right to cure after the date for delivery is dependent on the consent of the buyer. See id.

216. See Nicholas, supra note 84, at 224.

217. The same applies in the anticipatory breach case. The buyer has to refrain from declaring the contract avoided and he has to continue with his performance if the seller responds to the buyer's notice and gives adequate assurance of his performance.

218. The provisions of the Polish CC regulating limitation periods are not applicable if the limitation periods are regulated differently by the ratified international convention. Poland is a member to the Convention on the Limitation Period in the International Sale of Goods of 1974 (The Journal of Laws of the Republic of Poland 1997, No. 45, item 282, 283) which has been changed by the Vienna Protocol of 1980 (The Journal of Laws of the Republic of Poland 1997, No. 45, item 284).

219. The detailed regulation on periods of limitation is provided in CC arts. 117-125.

220. Generally, a claim under the Polish law serves to protect relating to property rights. Such rights pertain to property interest or a property purpose of a person.

221. Radwaski, Prawo cywilne [Civil law] supra note 156, at 90. This right is not related to any obligation of the other party to perform. The other party has only to acknowledge the new legal situation and adjust to it her further conduct. See id.

222. See A. Klein, Ustawowe prawo odstpienia od umowy wzajemnej [Statutory right to renounce synallagmatic contract] 126, 127 (1964); Z. Radwaski, Prawo cywilne [Civil law] 293; K. Pietrzykowski, Kodeks cywilny [Civil code, commentary] v.1, 277 (1997). In the pre-war literature, the authors considered it justifiable to limit the right to renounce the contract by applying the concept of a limitation period. The argument put forward for this solution was that "the exercise of the right cannot be delayed in a way that would infringe the principle of good faith and customs of fair trade turnover". In the authors' opinion, the unlimited in time right to renouncement would constitute an unjustified privilege of a creditor and this would entail the worsening of the debtor's situation (already difficult) - instead of others. See, A. Klein, supra note 220, at 127 n.9, 10.

223. See J. Ignatowicz, Terminy prawa materialnego, in System Prawa cywilnego [Periods of Limitation in Substantive Law, in System of Civil Law] 794, vol. 1, Cz ogólna, General Part (1985).

224. See id at 795.

225. The principle of socio-economic purpose of the right and the principle of social coexistence are general rules; they embrace such principles as: the principle of good faith, the principle of public order, the principle of fair dealing and usages adopted in the turnover. St. Dmowski, St. Rudnicki, Komentarz do Kodeksu cywilnego, Ksiga Pierwsza, Cz ogólna, [Commentary on Civil Code, First Book, General Part] 17 (1998).

226. Art. CC 5 serves to protect an obligor but it is not the basis for the loss of the right of the entitled party. The provision only confines the right - J. Ignatowicz, supra note 223, at 272.

227. See A. Klein, supra note 220, at 177.

228. The obligations to return that which has been performed are two independent obligations; they come into being due to the provision of art. 494 of the Code. See A. Klein, supra note 220, at 178; J. Dbrowa, Wykonanie zobowizán in System Prawa Cywilnego [Performance of Obligations, in System of Civil Law] W. Czachórski, Prawo Zobowizán - Cz Ogólna [Law of Obligations - General Part ] v. 3, p. 825, n.167 (Zb. Radwaski, ed., 1981).

229. See A. Klein, supra note, 220 at 178. CC art. 120, para. 1 sentence 2, provides that when assertion of a claim depends on a defined act undertaken by the entitled rightholder, the period of limitation with respect to the claim commences on the date on which the claim would have been asserted if the rightholder had undertaken the action at the earliest possible term. Regarding the period of limitation concerning the other party's (the seller's) claim for restitution, it commences on the day on which the obligation to return the performance arises, namely the day on which the buyer exercised the remedy of avoidance. Id.at 178. This reasoning refers to provision of CC art. 120, para. 1 sentence 1, according to which the limitation period commences on the date on which the claim accrues.

230. See CC art. 563, para. 3.

231. This right can also be invoked (exceptio), if before the expiration of this time, the buyer notified the seller about the legal and physical defects of the goods. See Art. 568, para. 3, art. 576, para. 3 CC.

232. See CC art. 576, para. 1 sentence 2.

233. See CC art. 568, para. 2 with regard to physical defects. See also CC art. 576, para. 2 in case of legal defects. CC art. 564 provides that the time limit for examination of the goods and notification does not influence the buyer's right if the seller concealed the defects deceitfully or assured the buyer that defects did not exist.

234. Czachórski, supra note 76, at 241; Z. Radwaski, Zobowizania - Cz Ogólna [Obligations - General Part] 262 (1995) (when the party renounces the contract he may claim damages for non-performance of the contract as well). However, in this case, as it is emphasized by the Polish legal doctrine, the damages are to be counted taking into account the fact that the renouncing party "has not performed" either because, as a consequence of renouncement, he has been released form the duty to perform. See Radwaski, id. at 262.

235. The Polish Code underlines the priority of the seller's right to cure over the buyer's right to renounce the contract provided that the seller exercises the right without delay. CC art. 560, para. 1, sentence 2.

236. The right to renounce under CC art. 560, para. 1 is concurrent with this right under CC art. 561, para. 2; See Czachórski, supra note 76, at 291.

237. See Enderlein & Maskow, supra note 13, at 287. See LG Krefeld, 28 April 1993 [11 O 210/92] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/930428g1.html> (PACE), where the Court of first instance held that the seller had the right to declare the second contract avoided under CISG art. 72(1),(2), since even before the delivery of the goods it was clear that the buyer would not pay the purchase price and would thereby commit a fundamental breach of contract. The buyer had not performed under the prior contract although the seller had requested it several times and had even commenced a legal action. See id. The Appellate Court affirmed. See OLG Düsseldorf, 14 January 1994 [17 U 146/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940114g1.html> (PACE).

238. See Enderlein & Maskow, supra note 13, at 295.

239. See Trevor Bennett, Avoidance of Instalment Contracts, in Commentary on the International Sales Law, supra note 14., at 534; see also Enderlein & Maskow, supra note 13, at 295; Schlechtriem, Uniform Sales Law, supra note 89, at 96.

240. See Enderlein & Maskow, supra note 13, at 295.

241. See Victor Knapp, Seller's Remedies in General, in Commentary on the International Sales Law, supra note 14, at 447.

242. See Enderlein & Maskow, supra note 13, at 295; Schlechtriem, Uniform Sales Law, supra note 89, at 96. But see V. Knapp, Seller's Remedies in General, in Commentary on the International Sales Law, supra note 14.

243. The general period of limitation for claims connected with the professional activity of the seller amounts to two years. CC art. 554. As far as the loss of the seller's right to renouncement due to the lapse of time is concerned, the remarks concerning the buyer's situation are applicable here as well.

244. Delay is due to the circumstances for which the party is liable.

245. The same as in the note above.

246. See SARL Bri Production "Bonaventure" v. Société Pan African Export, CA de Gronoble, 22 February 1995 [93/3275] (France) (UNILEX) <http://cisgw3.law.pace.edu/cases/950222f1.html> (PACE), where the buyer's breach of the contract in respect of the final destination of the goods was considered by the Court a fundamental breach of contract under art. 25 CISG. The fact that the goods were to be delivered to South America was of essential importance for the seller. See id. He had emphasized this during negotiations. See id. Instead, the goods were sold by the buyer to a distributor in Spain and the sale of seller's products in Spain was seriously hampered by the parallel distribution made by the final customer of the buyer. See id. The contract was avoided under CISG art. 73(2). See id.

247. See Enderlein & Maskow, supra note 13, at 224.

248. See id.

249. See ICC Ct. of Arb. [7585] (1992) (UNILEX) <http://cisgw3.law.pace.edu/cases/927585i1.html> (PACE), where the arbitrator held that, although a delay in opening the documentary credit in itself does not necessarily amount to a fundamental breach, in the case at hand the seller was entitled to avoid the contract. In the arbitrator's opinion, the fact that the seller waited several months before declaring the contract avoided was to be considered as equivalent to the fixing of "an additional period of time" for performance according to art. 63 CISG, with the result that the failure by the buyer to perform within that period of time entitled the seller to avoid the contract pursuant to CISG art. 64(1)(b). See id. The arbitrator qualified the fact that the buyer did not notify the letters of credit which were foreseen in the contract at the given date as falling within the broad definition of price payment under the Convention. See id. In this case, the arbitrator did not apply art. 64(1)(a), although the lapse of time which turned a non-fundamental breach into a fundamental one gave the basis for such an application of this article. See id. Instead he applied article 64(1)(b) in a rather discretionary manner. See id.

250. In OLG Hamm, 22 September 1992 [19 U 97/91] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/920922g1.html> (PACE), where the seller, according to the Court was entitled to avoid the contract on the basis of CISG art. 64(1)(a) because the buyer's failure to take delivery of more than half of the goods constituted a fundamental breach of contract (the buyer after taking delivery of the first 4 out of 10 installments, refused to take delivery of the remaining 6 installments). CISG art. 73 is not mentioned in abstracts of the case as a basis for avoidance.

251. See Enderlein & Maskow supra note 13, at 115.

252. See id. at 245.

253. This may be inferred from the principle of good faith. See Enderlein & Maskow, supra note 13, at 243.

254. See id. at 237. But see V. Knapp, Additonal Period for Performance, in Commentary on the International Sales Law, supra note 14, at 460 (the notice is not effective until it reaches the buyer).

255. See Enderlein & Maskow, supra note 13, at 238. In L. Sevón's opinion a notice is an announcement of avoidance and is final. L. Sevón, Obligations of the Buyer Under the UN Convention on Contracts for the International Sale of Goods, in International Sale of Goods - Dubrovnik Lectures, 224-5 (Petar Sarcevic & Paul Volken eds., 1986). Similarly J. O. Honnold maintains that notice is a basis for avoidance only if it includes final period for performance. See Honnold, Uniform Law, supra note 16, at 361.

256. The receipt principle applies here as in art. 63(2). See also Enderlein & Maskow, supra note 13, at 246.

257. See Sevón, supra note 253, at 227.

258. See Honnold, Uniform Law, supra note 16, at 363; V. Knapp, Additional Period for Performance, in Commentary on the International Sales Law, supra note 14, at 469-70; Enderlein & Maskow, supra note 13, at 245. This applies only to such preparatory measures which have direct effect on the seller, e.g., a letter of credit. See id.

259. Then the contract may be avoided immediately. See Sevón, supra note 253, at 225.

260. See ICC Ct. of Arb. [7197] (1992) (UNILEX) <http://cisgw3.law.pace.edu/cases/927197i1.html> (PACE).

261. See OLG München, 2 March 1994 [7 U 4419/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940302g1.html> (PACE), where the Court held that the seller's threat of avoidance did not constitute a declaration of avoidance pursuant to CISG art. 64(1) (the seller warned the buyer that if the price is not paid the seller would avoid the contract).

262. But see V. Knapp, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 468. Knapp expressed an opinion that the receipt of the notice by the buyer is necessary to make the declaration effective and that it becomes irrevocable, when the notice reaches the other party; Enderlein & Maskow admit the possibility for the buyer to dispute the avoidance to clear the situation on his part. The buyer might do so by reminding performance within a reasonable time after he received the declaration of avoidance sent by the seller because of an overdue advance payment. See Enderlein & Maskow, supra note 13, at 243.

263. As soon as the declaration of non-performance by the buyer reaches the seller. See V. Knapp, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 467.

264. Difficulties of the interpretation connected with the wording of the provision explained by Knapp. V. Knapp, Right to Avoid Contract, Seller's Remedies in General, in Commentary on the International Sales Law, supra note 14, at 472. See Enderlein & Maskow, supra note 13, at 246.

265. See CISG art. 64(2)(b)(i).

266. See CISG art. 64(2)(b)(ii).

267. See V. Knapp, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 473.

268. See Enderlein & Maskow, supra note 13, at 247.

269. See id.

270. See Sevón, supra note 253, at 226; see also Enderlein and Dietriech Maskow, supra note 13, at 241.

271. See Enderlein & Maskow, supra note 13, at 248; an example: a breach of contractually agreed export prohibition by the buyer after he has paid the price, a Nachfrist is fixed by the seller to stop this. The seller may avoid the contract after the inefficient expiration of the Nachfrist, even if he has been aware of the breach for some time already. See id.

272. See Enderlein & Maskow, supra note 13, at 347.

273. See id.

274. See Honnold, Uniform Law, supra note 16, at 444; Enderlein & Maskow, supra note 13, at 336. Schlechtriem, Uniform Sales Law, supra note 89, at 105.

275. See Enderlein & Maskow, supra note 13, at 342.

276. See CISG arts. 85-88.

277. The Convention provides detailed rules on accounting of damages in the case of avoidance with or without substitute transaction in art. 75 and art. 76.

278. See Enderlein & Maskow, supra note 13, at 342.

279. See Denis Tallon, Effects of Avoidance, in Commentary on the International Sales Law, supra note 14, 605.

280. See Enderlein & Maskow, supra note 13, at 343; See OLG Celle, 24 May 1995 [20 U 76/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950524g1.html> (PACE).

281. See id. at 280.

282. See id. See also Honnold, Uniform Law, supra note 16, at 382; but see B. Nicholas, Risk When Seller is in Breach, in Commentary on the International Sales Law, The 1980 Vienna Sales Convention 509-11 (C. M. Bianca & M. J. Bonell eds., 1987) (Under art. 70 the exercise of the remedy of avoidance makes the risk retrospectively pass back to the seller). The problem considered by P. Schlechtriem is seen only as a question of terminology. See Schlechtriem, Uniform Sales Law, supra note 89, at 87, note 347. Irrespective of above varied opinions, the objective of art. 70 is also covered by art. 82(2). See Enderlein & Maskow, supra note 13, at 279.

283. See LG Landshut, 5 April 1995 [54 O 644/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950405g1.html> (PACE).

284. See Denis Tallon, Effects of Avoidance, in Commentary on the International Sales Law, supra note 14, at 605; Enderlein & Maskow, supra note 13, at 344.

285. See ICC Ct. of Arb. [7660] (1994) (UNILEX) http://cisgw3.law.pace.edu/cases/947660i1.html (PACE); LG Landshut, 5 April 1995 [54 O 644/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950405g1.html> (PACE). In ICC Ct. of Arb. [6653] (1993) (UNILEX) <http://cisgw3.law.pace.edu/cases/936653i1.html> (PACE), the buyer was awarded interest on the price to be refunded, accruing from the date of payment for each non-conforming lot of goods. Moreover, the Court held that art. 84 does not require a formal request for payment of interest, but even if art. 84 were considered not to settle this issue, the same result would be reached applying national law (French law) as "the subsidiary law of the contract". Id.

286. See CISG art. 84(2).

287. See Enderlein & Maskow, supra note 13, at 349.

288. See id. at 341.

289. See id.

290. See id.

291. According to one opinion, avoidance does not void the contract ab initio. See Schlechtriem, Uniform Sales Law, supra note 89, at 107. But see, Denis Tallon, Effects of Avoidance, in Commentary on the International Sales Law, supra note 14, at 604 (avoidance renders any act made prior to it void). Under J. O.Honnold's view, "avoidance does not destroy the contract." See Honnold, Uniform Law, supra note 16, at 329.

292. See Treitel, Remedies for Breach of Contract, supra note 5, at 382-383.

293. See Enderlein & Maskow, supra note 13, at 341; Honnold, Uniform Law, supra note 16, at 443.

294. See Enderlein & Maskow, supra note 13, at 329, 443.

295. See id. at 190 and 342.

296. See CC art. 395(2).

297. See Czachórski, supra note 76, at 129, 246; Radwaski, Zobowizania, supra note 232, at. 262, 267; Rajski, supra note 76, at 160, 242; A. Szpunar, Recenzja ksiki A. Klejna: Ustawowe prawo odstapienia od umowy wzajemnej [The review of A. Klein's book: "Statutory Right to Renounce Synallagmatic Contract] vol. 7, 147 (1964).

298. CC arts. 395, para. 2 and 494.

299. CC art. 567.

300. CC art. 395, para. 2.

301. Zbior Orzeczen Sadu Najwyzszego, Orzecznictwo Izby Cywilnej Sadu Najwyzszego (1981), vol. 1-18, p. 55 [hereinafter OSNCP]. The OSNCP is the judgments of the highest court in Poland.

302. The liability for damages will be ascertained under the general principle of contractual liability in art. 471. According to the principle established by the Highest Court, if the buyer renounces the contract because of defects in the goods, the claim for damages will include damages in the scope of the positive interest of the contract and the loss the buyer suffered due to the rise in price during the period from the day of payment until the day of the cover purchase. OSNCP 1987, vol. 12-189, p. 7.

303. This also applies if the whole contract cannot be performed due to those grounds. Then, however, under art. 495, the whole contract is terminated with effect ex nunc at the moment the performance became impossible. The obligations and rights due to the factual state are also extinguished at that moment. If a party has made his performance, it has to be returned on the grounds of articles dealing with unjust enrichment. See Czachórski, supra note 76, at 242; Radwaski, Zobowizania, supra note 232, at 261; Rajski, supra note 76, at 230. The party cannot claim either performance, which has become objectively impossible, or damages because of lack of legal grounds for such a claim provided in art. 471 CC (the impossibility caused by circumstances for which the party is liable).

304. See Czachórski, supra note 76, at 262.

305. The Convention is one whole even if a country has made a reservation under art. 92 that it is not bound by Part II of the Convention.

306. A. Goldstajn explains that inclusion into the text of the Convention of provisions which in domestic legislation belong to the general part of the law of contract enabled it to function in the field of international trade which departs from the municipal law for reasons such as: a) municipal rules rely on traditional concepts with regard to general principles and regulation of individual kinds of transactions; b) international business practice develops within the framework of specialized branches; c) while domestic legislation does not take international elements into account, the law of international trade respects the recognized principles created by business practice; d) statutes are more difficult to change and thus to adjust to the needs of international trade. See A. Goldstajn, Usages of Trade and Other Autonomous Rules of International Trade According to the UN (1980) Sales Convention, in International Sale of Goods - Dubrovnik lectures, 55-67 (Petar Sarcevic and Paul Volken eds. 1986).

307. See Warren Khoo, Questions to be Covered by Convention, in Commentary on the International Sales Law, supra note 14, at 45.

308. Guidance on interpreting art. 4 is provided in an article by H. E. Hartnell in Rousing the Sleeping Dog: The validity exception to the Convention on Contracts for the International Sale of Goods 18 Yale J. Int'l L. 1 (1993); see also <http://www.cisg.law.pace.edu/cisg/biblio/hartnell.html#1> (PACE). Article 4 cannot be excluded by agreement of the parties under Article 6 of the Convention. See Michael J. Bonell, Parties' Autonomy, in Commentary on the International Sales Law, supra note 14, at 466. Enderlein & Maskow, International Sales Law, United Nations Convention on Contracts for the International Sale of Goods - Convention on the Limitation Period in the International Sale of Goods 50 (1992).

309. See Enderlein & Maskow, supra note 13, at 40; C. R. Heiz, Validity of Contracts under the United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, and Swiss Contract Law, 20 Vanderbilt J. Transnation'l L. 663 (1987).

310. The detailed history of drafting art. 4 is presented by Hartnell, supra note 306, at 22-41.

311. According to Hartnell, article 4(a) mediates the tension between the international and domestic legal orders. It indicates that diversity sets limits to the goal of unification, nevertheless the provision assures the elasticity in interpretation of the exception provided for under it, which is what makes it possible to adapt the CISG to the changes in States' notions of public policy in international trade practice. See Hartnell, supra note 306, at 20, 41.

312. Based on her analysis of the approaches taken by various representatives of international legal doctrine, H. E. Hartnell demonstrates in her article how the different methods of interpretation of article 4(a) each call for a conflict of laws analysis. She outlines the interpretation of article 4(a) according to postulates of article 7(1) who call for an autonomous interpretation of the provision by developing (through comparative analysis) a uniform definition of the term "validity". Hartnell, supra note 306, at 19. The second interpretation of article 4(a) presented is according to the "displacement argument" - where the Convention displaces domestic rules on validity insofar as its provisions solve the issue based on the same facts that are subject to the domestic law solutions; the next method is the "mandatory law approach" -- where any applicable domestic law considered "mandatory" by a Contracting forum State will raise an issue of validity. See id. at 20-22. Having discussed the arguments for and contra each of the interpretations, the author presents and supports an approach that requires the interpreter to ascertain whether the issue is one of validity in the sense of article 4(a) and to apply the domestic rule on validity if this meets the spirit and the letter of this article. See id. at 46-50. The author concludes that the domestic validity rule would have to be examined in light of developing international trade backgrounds in order to balance the tension between domestic public policy and the needs of an uniform international legal order. This would involve case-by-case analysis of the issues taking into account development of concepts of public policy as well as jurisprudence under the Convention. See id. at 56-62.

313. Questions concerning the reasons to apply the term "avoidance" which has been adopted by the drafters of the Convention and the meaning of the term have been discussed in chapter I of the present work. The term is applied in the context of article 4 explicitly. See Hartnell, supra note 306, at 72, 76, 79; see also Honnold, Uniform Law, supra note 16, at 33.

314. See Enderlein & Maskow, supra note 13, at 43, 44; Hartnell supra note 306, at 63, 64.

315. See Hartnell, supra note 306, at 64. Under the Polish CC the defects of the declaration of will embrace the following vices: state excluding conscious or free decision making and expression of will (art. 82), appearance (art. 83), mistake (art. 84), deceit (art. 86) and threat (art. 87).

316. According to CISG art. 11 a contract of sale is not subject to any requirement as to form; it may be concluded in oral form.

317. CISG art. 12 states the binding effects of a declaration made by a Contracting State under CISG art. 96. CISG art. 96 allows a State to make reservation concerning the requirement of written form to the conclusion of a contract, its modification or termination and to any offer, an acceptance or other indication of intention -- if the party to a contract has its place of business in that State and the legislation of that State requires contracts of sale to be concluded and evidenced in writing. Then, any other article which makes possible other than written form cannot be applied and the effect of CISG art. 12 cannot be derogated by the will of parties to the contract. Thus, the provision influences not only the validity of a contract but also concerns the validity of any other act undertaken by the parties exercising their rights under the Convention as, for example, the agreed avoidance of the contract. See Enderlein & Maskow, supra note 13, at 74.

318. CISG art. 29 states in para. (1) that a contract may be modified or terminated by the mere agreement of the parties. In para. (2) the article provides for an exception to the above rule. It indicates that a written contract cannot be modified or terminated by mere agreement if it contains a requirement that any modification or termination by agreement should be in writing. This refers as well to agreed avoidance of a contract. See id.

319. Hartnell admits that article 14(1) is another example of the Convention which stipulates that the absence of certain provisions in a contract (including the definition of price for goods to be delivered) renders a contract invalid. See Hartnell, supra note 306, at 69. For detailed analysis of article 14(1) in juxtaposition with art. 55 concerning an open price contract, see Hartnell, supra note 306, at 67-69.

320. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 59; Hartnell, supra note 306, at 64.

321. If the Polish law were applicable to evaluate legal capacity, then the legal capacity of physical persons would be subject to the regulation of CC arts. 8-22. The legal capacity of legal persons should be evaluated in accordance with CC arts. 33-43 supplemented by regulation of commercial code, the bill on state companies, the bill on banks and other statutes.

322. See Hartnell, supra note 306, at 70.

323. According to CC art. 87, if a person declares his will under influence of illegal threat of a party (to a contract) or a third person, he may avoid the legal effects of his declaration, if it is clear from the circumstances that he might have feared that serious personal or property danger threatened him or another person.

324. See Schlechtriem, Uniform Sales Law, supra note 89, at 34. J. O. Honnold states that the Convention does not solve the issue of fraud and domestic protection against international fraud remains under art. 4 of the CISG. See Honnold, Uniform Law, supra note 16, at 96, 263; C. R. Heiz, supra note 307, at 654; Hartnell, supra note 306, at 70.

325. Under Polish law CC art. 86, if mistake is caused by another party deceitfully, the effects of the declaration of will made due to the mistake may be avoided even if the mistake is not essential as well as when it does not concern the substance of a legal act. According to the Polish legal doctrine, a deceitful deed is the conscious misleading of a person or strengthening her misconception (about something) in order to make her declare her will. A case where one consciously conceals information if there is a duty to reveal is also treated as a deceitful deed. See Radwaski, Prawo cywilne [Civil law] supra note 156, at 227.

326. See Hartnell, supra note 306, at 72; Honnold, Uniform Law, supra note 16, at 263.

327. According to the Polish legal doctrine, mistake can be defined as incompatibility between the objective reality and its reflection in a person's consciousness. It is a defect of declaration of will only if the mistake concerns the substance of a legal act as provided by CC art. 84, para. 1 and if it is essential, which due to CC art. 84, para. 2 justifies a presumption that if a person making a declaration of will had not acted under influence of mistake (criterion of individualized knowledge) and had evaluated the matter reasonably (objective criterion) he would not have declared the will of that substance. The abrogation of effect of such a declaration of will takes place through another written declaration of will within one year since the mistake was discovered. CC art. 88.

328. Enderlein and Maskow are proponents of a broad interpretation of this article as it is more favourable to the Convention. See Enderlein & Maskow, supra note 13, at 40, 58.

329. See Hartnell, supra note 306, at 73.

330. See id.

331. See Honnold, Uniform Law, supra note 16, at 97, 265-266; confirmed by P. Schlechtriem, who additionally emphasizes that in the case of error about the quality of the goods, provisions of the CISG regulate the matter exclusively without reference to a domestic law regime. Schlechtriem, Uniform Sales Law, supra note 89, at 32-33. C. R. Heiz contends that despite the fact that art. 4(a) CISG refers issues of validity to domestic law, a factual situation including a question of error under domestic law may not be a question of validity under the Convention. The example given by the author is the question of the quality of the goods, which under the Convention, is exclusively and specifically dealt with as an issue of conformity and any domestic law (for instance Swiss law) may treat it under its provisions on error on a basic fact. Heiz, supra note 307, at 662, 663. In LG Aachen, 14 May 1993 [43 O 136/92] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/930514g1.html> (PACE), where the Court held that the application of CISG precluded recourse to domestic law regarding mistake as to the quality of the goods as the matter is exhaustively covered by CISG.

332. See Warren Khoo, Questions to be Covered by the Convention, in Commentary on the International Sales Law, supra note 14, at 48; E. Allan Farnsworth, Interpretation of Contract, in Commentary on the International Sales Law, supra note 14, at 102; Gyula Eörsi, When Offer Becomes Effective, in Commentary on the International Sales Law, supra note 14, at 140; Denis Tallon, Exemptions, in Commentary on the International Sales Law, supra note 14, at 578.

333. W. Khoo says that it depends on what remedy the party seeks on a basis of given facts, if the buyer does not seek to annul the contract the question is not one of validity and is embraced by the regulation of the Convention. See Warren Khoo, Questions to be Covered by the Convention, in Commentary on the International Sales Law supra note 14, at 48.

334. See Hartnell, supra note 306, at 77. The author gives the example of the situation where the domestic remedy would be justified - a buyer who is precluded from exercising the remedies under the Convention because he has failed to give timely notice as required by CISG art. 39. Id.

335. See Denis Tallon, Exemptions, in Commentary on the International Sales Law, supra note 14, at 577-78.

336. CISG art. 68 regulates the risk of loss in the special situation in which the goods were lost or damaged at the time the contract was made.

337. CISG art. 79 concerns the case in which a party is excused from an obligation to perform if, according to one of the reasons enumerated in the provision, an impediment which was beyond the control of the party caused the failure in performance. The party aggrieved by the non-performance is not deprived of the right to avoid the contract.

338. See Hartnell, supra note 306, at 78.

339. See Denis Tallon, Exemptions, in Commentary on the International Sales Law, supra note 14, Tallon states that it is the validity case irrespective of the fact whether it is a question of initial impossibility or a mistake. He underlines that there is a difference between contracts void ab initio and contracts avoided because they are impossible to perform, not only in the modes of termination, but also in the retrospective effect the termination brings about. He admits however, that in international trade practice the difference is not raised.

340. Under Polish law, CC art. 387, para. 1, a contract for impossible performance is invalid and, due to the opinion of the legal doctrine, the obligation does not come into being. The impossibility has to have an objective character, the performance cannot be fulfilled by anyone. The factual or legal character of impossibility is of no importance; one of the scholarly examples of such impossibility is the sale of a specific goods which do not exist or have been destroyed. Czachórski, supra note 76, at 53, 115; K. Kruczalak, Niemoliwo wiadczenia w prawie zobowizán, Zeszyty naukowe [Impossibility of Performance in Law of Obligations] v. 31, 10-18, 107 (1981); see Rajski, supra note 76, at 45.

341. Barry Nicholas, Residual Rules on Risk, in Commentary on the International Sales Law, supra note 14, at 501.

342. See Schlechtriem, Uniform Sales Law, supra note 89, at 33.

343. See Hartnell, supra note 306, at 78, 79.

344. See Honnold, Uniform Law, supra note 16, at 96; Schlechtriem, Uniform Sales Law, supra note 89, at 33; Hartnell, supra note 306, at 79. Examples of types of illegal contracts are: wagering agreements, agreements made on Sundays and holidays, bargains obstructing administration of justice, agreements tending to corruption. See id. at 79, n.372.

345. Examples of such legislation would be a national law defining maximum interest rates, domestic rules prohibiting restraints of trade, import-export, boycott, regulations, foreign exchange control laws. See Hartnell, supra note 306, at 80. The term "mandatory rules" can also be used to include the meaning of any rule of law restricting the parties' autonomy or can incorporate both meanings. The broadest definition of mandatory law embraces domestic rules on formation and validity of contract, and rules that form the basis of the so-called ordre public (public policy). See id. at 55.

346. See id. at 79, 80.

347. See id. at 81.

348. Domestic rules concerning unconscionable contracts or clauses operate under the authorization of art. 4. They constitute rules of validity and may render legally ineffective a contract or a contract clause, even if the provision was clearly expressed. See Honnold, Uniform Law, supra note 16, at 260. The Polish CC in art. 388, para. 1, provides that if one of the parties to the contract, exploiting a coercive situation, physical or mental unfitness, inexperience of the other party, accepts or stipulates in the agreement the performance, the value of which at the moment of the conclusion of the contract exceeds grossly the performance of the other party, the exploited party may claim to decrease his own performance or to increase the performance he is to receive. If such claims were difficult to effect he may claim the cancellation of the agreement.

349. See Hartnell, supra note 306, at 82.

350. See H. Bernstein & J. Lookofsky, Understanding the CISG in Europe 125 (1997).

351. However, it will govern many international sales transactions by design as well.

352. The contract clause may indirectly influence the ground for the remedy of avoidance, as in LG Stuttgart, 13 August 1991 [No. 16 S 40/91] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/910813g1.html> (PACE). According to the abstracts of the case, the seller's standard sale conditions provided that complaints had to be made within eight days by registered mail. See id. The buyer maintained that he had given notice of the late arrival of the goods six weeks after the delivery. See id. In the opinion of Appellate Court, this considerably affected the buyer's right to avoidance. See id.

353. See Bernstein & Lookofsky, supra note 348, at 125.

354. See id. at 125 n.3.

355. See id. at 132.

356. See Hartnell, supra note 306, at 83; This opinion is supported by the view that when the contractual terms on which the parties have agreed in derogation of some specific provisions of the Convention must be denied legal effect because they are inconsistent with the mandatory rules of the law governing the validity of the contract, the issue of the liability of the seller for his failure to perform any of his obligations should be governed by the same domestic law not by the Convention. It would be ascertained, according to the law applicable to the contract of sale, whether the agreement is affected by a defect of consent and whether the contractual clauses written in derogation of the Convention, due to art. 6, are consistent with the limitations imposed by mandatory rules of that law on the parties' freedom of contract. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 60-61.

357. Under Polish law, pursuant to CC art.473, para. 1, a debtor may, by agreement, assume liability for non-performance or defective performance of the contract due to certain circumstances, for which he is not liable according to the provisions of law. A conclusion drawn from the article indicates that the debtor may as well limit his liability. See Czachórski, supra note 76, at 222. Nonetheless, parties cannot stipulate in the agreement that the debtor will not be liable for loss he may cause intentionally. Such a stipulation will be invalid. CC art. 473, para. 2.

358. See Honnold, Uniform Law, supra note 102, at 98.

359. CISG art. 8 contains rules of interpretation of the statements of the parties under the contract and of other conduct.

360. The argument for this is as follows: the contract takes precedence over the provisions of the Convention. This results from CISG art. 6 which emphasizes that parties may derogate from or change the effect of any of its provisions. The first sentence of art. 35(1) confirms the same. The domestic rules which impose obligation on the seller to deliver the goods of a given quality (merchantable goods as under the UCC in American law) and rules on warranty disclaimers will be supplanted by art. 35(2) of the Convention. See Honnold, Uniform Law, supra note 16, at 258-259.

361. See id. at 259. At the same time the author differentiates between domestic rules concerning unconscionable contracts which are "clearly a rule of validity" and rules on warranty disclaimers which do not concern the sphere of validity. Id. at 260.

362. See Hartnell, supra note 306, at 86.

363. The above consideration was referred to in individually negotiated disclaimers of liability and modifications in a contract.

364. See J. Hellner, The Vienna Convention and Standard Form Contracts, in International Sale of Goods - Dubrovnik lectures 355 (Petar Sarcevic, Paul Volken eds. 1986). According to H. Bernstein and J. Lookofsky, it is a validity issue whether a standard term, which disclaims, for instance, obligations set forth in art. 35(2) or limits liability in the event of a breach, is enforceable. See Bernstein & Lookofsky, supra note 348, at 133. It is said, that if a domestic rule, which controls the insertion of standard clauses in a contract is a validity clause and is applicable to all sales including sales between merchants, then it might be applicable to sales regulated under the Convention. However, if the rule is confined to the protection of consumers, then it cannot be referred to. See id. at 129, 128; See Honnold, Uniform Law, supra note 16, at 260. Pursuant to art. 3852, para. 1, of the Polish CC, if general terms of agreement, standardized forms or regulations reserve for the party who has employed them, grossly unjustified profits, the other party may claim before a court to recognize their insertion as ineffective. As paragraph 2 of this article lays down, this right is not vested in a party who concluded a contract within the scope of his professional economic activity.

365. The procedure of control to determine if a given standard term in a contract involving an international sale of goods is non-negotiated and possibly unfair and therefore, whether it may be relied on in the case of conflict between the parties, is demonstrated by H. Bernstein and J. Lookofsky. The authors propose three tests applied one by one: a) the test of incorporation, b) the test of interpretation and c) the test of validity. The incorporation test is aimed to determine if a standard term is a part of the bargain. Under the test of interpretation, the inquiry is whether the clause incorporated in an agreement limits excessively the remedies of the party, or tends to exclude or limit liability for negligence (the author's opinion is that the liability disclaimers should be construed narrowly without their application to negligent conduct). The purpose of the validity test is to determine if the clause is enforceable under the applicable national law. See Bernstein & Lookofsky, supra note 348, at 128-135.

366. For a brief overview of the English, German and Austrian contract law approach to such clauses, see Bernstein & Lookofsky, supra note at 348, at 134-135. The authors propose two options in treatment under CISG of standard or individually negotiated clauses, which unreasonably or unconscionably limit or exclude some obligations or remedies for breach of contract. One is complete invalidation of such a clause; the second is moderation of the clause, such that it is made enforceable. See id. Similarly, Enderlein and Maskow admit that grossly unjust clauses can be interpreted restrictively under arts. 7, 8, 9 of the Convention and its preamble. See Enderlein & Maskow, supra note 13, at 51. They can be declared void as well but under domestic law as it is provided under art. 4(a), however, without excessive abuse of the possibilities given by this provision. See id.

367. See Bernstein & Lookofsky, supra note 348, at 135.

368. See Amtsgericht Nordhorn, 14 June 1994 [3 C 75/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940614g1.html> (PACE), where the Court found that the buyer's declaration of avoidance was not made according to a provision contained in the seller's general conditions of contract which the Court found to have been incorporated in the contract. The Court invoked CISG art. 4(a) and evaluated the validity of the seller's general conditions on the basis of Italian law as the law governing the contract according to German rules of private international law. See id. As the seller's clause was valid under Italian law, the buyer's declaration of avoidance was without effect because he had failed to declare the contract avoided according to the contractually established procedure. See id.

369. Fritz Enderlein, Rights and Obligations of the Seller under the UN Convention on Contracts for the International Sale of Goods, in International Sale of Goods 54 (Dubrovnik lectures, Petar Sarcevic & Paul Volken eds., 1986); Schlechtriem, Uniform Sales Law, supra note 89, at 39; see Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 84-85. Others confirm that the distinction between obligations of parties and the interpretation of the Convention is apparent. See Bernstein & Lookofsky, supra note 348, at 22; G. Eörsi states that art. 7(1) is addressed both to the courts delivering judgments and to the parties, because they have to comply with the Convention . Gyula Eörsi, General Provisions, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods, supra note 118, at 2-9. J. Klein claims that art. 7 is limited to the interpretation of the provisions of the Convention and is not applicable to the interpretation of the contract itself. See J. Klein, Good Faith in International Transactions, 15 Liverpool L. R. 121, 123-124 (1993); see also <http://www.cisg.law.pace.edu/cisg/biblio/Klein.html> (PACE). On one hand, J. Klein considers that article 7 imposes an obligation to interpret the Convention in good faith as it relates to the contract and this obligation is imposed not only on judges and arbitrators but also on parties. See id. On the other hand, the author admits that while the explicit reference in the article is made to good faith in the interpretation of the Convention only, some of the Convention's provisions are addressed directly to the parties and the provisions would be meaningless, if the general obligation to act in good faith in contract performance was not recognized as applying to parties as well. See id.

370. See Enderlein & Maskow, supra note 13, at 55-56.

371. M. J. Bonell refers to the debate among scholars concerning the question whether the principle of good faith is addressed to the judges or arbitrators in the interpretation of the provisions of the Convention, or is also directed to the parties to a given contract of sale. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 84.

372. See Enderlein & Maskow, supra note 13, at 57. Under such guidance unjust clauses are to be construed in favour of a party who is aggrieved by such conduct, what is important in the context of considerations on art. 4(a). See id.

373. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 85. Bonell mentions art. 45(2), art. 60(2), arts. 74 to 77, among others, as examples of articles which evince in their formulation the principle of good faith. It is said, that the good faith obligations of the parties in the Convention relate to interpretation of the Convention's requirements by the parties with regard to their relations towards each other, whereas the good faith duties of the parties in performance of their contract remain implicit obligations. See Klein, supra note 367, at 124.

374. See Honnold, Uniform Law, supra note 16, at 125. The example would be avoidance of a contract after a market change in order to speculate at the other party's expense, a situation that may be considered inconsistent with the provisions governing the remedy when it is construed in the light of the principle of good faith. See id.

375. This is the situation where the potential principle is not written in the Convention's provisions or cannot be formulated by the interpreter taking into account the spirit of the Convention and using new methods of interpretation under the international uniform law.

376. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 78; Enderlein & Maskow, supra note 13, at 58. The Convention's interpretation requires a liberal and flexible approach that is connected with the need to consider the underlying purposes and policies of an individual provision as well as the Convention as a whole. This conclusion is based on the assumption that in order to facilitate interpretation according to the international character of the Convention, which is the result of legislation on the international level, the Convention should be treated as autonomous law despite the formal incorporation into different legal systems. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 72.

377. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 78. J. O. Honnold expressed the same conclusion: the case should be clearly analogous to those that fall within the Convention's specific provisions and the extension of a provision by analogy cannot conflict with another policy embodied in the Convention. What is more, one should assure himself whether the Convention deliberately rejects the extension of the specific provision or the lack of a specific provision to solve a given case is the effect of a failure to regulate this issue by the legislators. See Honnold, Uniform Law, supra note 16, at 132.

378. See Michael J. Bonell, Interpretation of the Convention, supra note 14, at 79; Michael Will, Right to Avoid Contract, in Commentary on the International Sales Law, supra note 14, at 361.

379. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 79.

380. Id. See OLG Düsseldorf, 2 July 1993 [17 U 73/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/930702g1.html> (PACE), where the Court invoking CISG art. 7(2) held that CISG art. 57(1)(a) is an expression of the general principle that obligations to pay are to be performed at the place of business of the creditor.

381. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 79.

382. Para. (c) of art. 31 is applied to cases other than those described under para. (a) - the contract involves carriage of goods, and para. (b) - the contract relates to specific goods or unidentified goods to be drawn from a specific stock or to be manufactured or produced.

383. Another suggested provision for analogical application is art. 57(1)(b). It requires the buyer to make payment of the price at the place where the documents are to be handed over, if the payment should be made against documents. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 80. P. Schlechtriem admits that the place of performance for transactions following declaration of avoidance should be determined in accordance with provisions regulating the performance of contract obligations under the Convention. See Schlechtriem, Uniform Sales Law, supra note 89, at 108.

384. See Enderlein & Maskow, supra note 13, at 343.

385. Examples are: the principle of good faith (art. 7(1)), the principle of party autonomy (art. 6), the principle that any agreement of the parties does not require observance of formalities (arts. 11 and 29(1)); See Enderlein & Maskow, supra note 13, at 59.

386. See CISG art. 27.

387. G. Eörsi expressed his fear that tribunals and parties may not find the same general principles and if different jurisdictions find different general principles or interpret them in a different way, following local practice, unification will be endangered. Gyula Eörsi, General Provisions, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods, supra note 118, at 2-12.

388. The reasonableness test refers to other notions like "time", "inconvenience" or "excuse"; it is foreseen by: art. 8(2) and (3), art. 18(2), art. 25, art. 33(c), art. 34, art. 35(2)(b), art. 37, art. 39(1), art. 43(1), art. 47, art. 48, art. 49, art. 60, art. 63, art. 64, art. 65, art. 72(2), art. 73(2), art. 75, art. 77, art. 79(1), art. 85, art. 86, art. 87, art. 88(2) and (3) . See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 80-81; Enderlein & Maskow, supra note 13, at 59.

389. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 81.

390. See id.

391. This principle is referred by J. O. Honnold as the principle "to take steps to avoid deterioration of goods and thus avoid unnecessary hardship on the other party, even when that party has sent defective goods or otherwise has failed to perform the contract." Honnold, Uniform Law, supra note 16, at 132. There might be extracted other rules referring to the conduct of parties in the performance of the contract, such as the rule requiring the cooperation in order to make it possible for the other party to perform his contractual obligations in a proper way. The rule can be deduced from art. 32(3), art. 48(2), art. 60, art. 65. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 81.

392. CISG article 39(1) provides that if the buyer does not give notice to the seller, in which he specifies the nature of non-conformity, within a reasonable time after he has discovered it or ought to have discovered it, he loses the right to rely on this lack of conformity. Para. (2) of the article defines an ultimate two-year period for giving the notice by the buyer.

393. See Klein, supra note 367, at 127.

394. See Enderlein & Maskow, supra note 13, at 292.

395. The principle is referred to by Enderlein & Maskow, supra note 13, at 59.

396. According to J. Klein, the duties of the parties stemming from the principle of good faith are implicit. Their source is not art. 7 which refers only to the interpretation of the Convention, but the domestic law of member states and the provisions of the Convention which inherently contain the requirement to act in good faith. He groups the provisions according to three goals of good faith: a) to promote full and frank exchange of relevant information; b) to prevent parties from benefiting from conduct undertaken to frustrate their contract; and c) to salvage an agreement and minimize damages resulting from failed transaction. In the author's opinion, the good faith principle is the basis of the principles mentioned in the text above, which other authors extract as separate principles. See Klein, supra note 367, at 124-126.

397. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 81.

398. See id. at 82.

399. Such national standards can be taken into account provided and to the extent that they are commonly confirmed at a comparative level. In the context of the Convention, the principle of good faith has to be approached from the point of special necessities and conditions of international trade, thus, imposing special standards on the parties involved. In other words, national requirements for the behaviour based on the principle of good faith would be applicable if they can be relevant for international trade. See Michael J.Bonell, Interpretation of the Convention, in Commentary on the International Sales Law, supra note 14, at 82.

400. Good faith requires one to state grounds for suspension of performance in the notice given under art. 71(3) to make it possible for the party receiving the notice to decide what action on his part is needed to provide adequate assurance of his performance. The same might be said for the notice required in art. 72(2) (regulating the situation of anticipatory breach of contract and avoidance prior to the date of performance). It is said that in practice the communication of intended avoidance of the contract is often connected with the notice of suspension of performance. See Trevor Bennett, Avoidance for Anticipatory Breach, in Commentary on the International Sales Law, supra note 14, at 521, 579.

401. See LG Landshut, 5 April 1995 [54 O 644/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950405g1.html> (PACE), where the Court held that the contract had been validly avoided and both parties were bound to make restitution concurrently. Although the buyer had placed the goods at the seller's disposal for restitution, the seller had failed to take delivery of the goods and to refund the price. See id. The Court found that the CISG did not cover the seller's failure to take back the goods and art. 31 et seq. of the Convention were not applicable by analogy, nor could this matter be settled on the basis of the general principles of the Convention (art. 7(2)). See id. Thus, the Court referred to national law -- German law, applicable by virtue of the rules of private international law. See id. The court found the seller bound to take back the goods. See id.

402. See Enderlein & Maskow, supra note 13, at 317.

403. The situation entitles him to enter into a renegotiation process alternatively and it would be the basis to exempt the other party from damages due to the non-performance of the contract. See Enderlein & Maskow, supra note 13, at 317.

404. See id. at 317.

405. The justification of recognition of exemption in the case of hardship would be the limit of efforts which can reasonably be expected to continue with the performance. Imbalance of 100 percent between performance and counter-performance allows one to treat the situation as an impediment but numbers should be evaluated differently depending on a trade branch . See Enderlein & Maskow, supra note 13, at 317-318, 324-325.

406. In this opinion, it is asserted that art. 79 generally concerns the exemption caused by difficulties in performance and prevents reference to national law, which would allow exemption under different terminology used in this regard. See Honnold, Uniform Law, supra note 16, at 443. The opinion is shared as well by P. Schlechtriem. See Schlechtriem, Uniform Sales Law, supra note 89, at 102 n. 425. Furthermore, B. Nicholas expresses the same opinion. See B. Nicholas, Impracticability and Impossibility in The U.N. Covention on Contracts for the International Sale of Goods, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods, supra note 118, at 5-18; Moreover, in J. O. Honnold's view, art. 6 of the Convention permits regulation in a contract of a situation of changed circumstances. Moreover, art. 8 does not exclude, in relation to the individual contract, flexible interpretation in the light of surrounding circumstances and a conclusion, that the contract did not contemplate performance under radically changed circumstances that came to existence. See Honnold, Uniform Law, supra note 16, at 443.

407. B. Nicholas derives such interpretation directly from the wording of art. 79, mainly para. (3) CISG. See Nicholas, Impracticability and Impossibility in the U.N. Covention on Contracts for the International Sale of Goods, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods, supra note 118, at 5-18.

408. See Denis Tallon, Exemptions, in Commentary on the International Sales Law, supra note 14, at 593-94.

409. See id. at 594.

410. See id.

411. See id.

412. See id. at 595.

413. See Denis Tallon, Exemptions, in Commentary on the International Sales Law, supra note 14, at 595.

414. See Art. 78 CISG. The main sum on which this article allows interest rates to accrue is the price failed to be paid by a party. This article sets forth the entitlement to interest. See Enderlein & Maskow, supra note 13, at 311.

415. See Art. 84(1) CISG. The obligation to pay interest exists also when the situation described under art. 79 CISG would exempt the party from the duty to pay damages and the party entitled to avoidance terminates the contract. See Enderlein & Maskow, supra note 13, at 311; Schlechtriem, Uniform Sales Law, supra note 89, at 100; B. Nicholas, Interest, in Commentary on the International Sales Law, supra note 14, at 571. Denis Tallon is of the opinion that exemption from damages should be interpreted broadly and should embrace interest on damages. See Denis Tallon, Exemptions, in Commentary on the International Sales Law, supra note 14, at 589.

416. See F. Ferrari, Specific Topics of the CISG in Light of Judicial Application and Scholarly Writing, in 10 Preadviezen, Uitgebracht Voor de Vereniging Voor Burgerlijk Recht 169 (1995); Enderlein & Maskow, supra note 13, at 312.

417. It is indicated that the opinion finds its justification in the legislative history of art. 78. Honnold, Uniform Law, supra note 16, at 423, 424. See ICC Ct. of Arb. [6653] (1993) (UNILEX) <http://cisgw3.law.pace.edu/cases/936653i1.html> (PACE), where the Tribunal held that as the CISG does not determine the rate of interest (in the case the rate of interest accrued on the price to be refunded due to avoidance), the applicable rate was to be the one currently used in international trade with respect to eurodollars, the currency in which payment had to be made. The Court applied the annual London International Bank Offered Rate (LIBOR). See id.

418. See Schlechtriem, Uniform Sales Law, supra note 89, at 100. Some commentators generally claim that it will be the subsidiary law applicable to sale's contract. Enderlein & Maskow, supra note 13, at 312, 349; Nevertheless, different connecting factors are taken into consideration, for example, the creditor's place of business. See B. Nicholas, Interest, in Commentary on the International Sales Law, supra note 14, at 570; or the seller's place of business in reference to art. 84(1). See Honnold, Uniform law, supra note 16, at 455; or the debtor's place of business. See Ferrari, supra note 19, 171, n.869. The author discusses in detail the issue of the interest rates also in judicial applications. Id. at 167-174. See ICC Ct. of Arb. [7660/JK] (1994) (UNILEX) <http://cisgw3.law.pace.edu/cases/947660i1.html> (PACE), where Austrian law was applied while settling the matter of amount of interest rates accrued on the price to be refunded as an effect of the partial avoidance of the contract. Parties had chosen the law as applicable to the merits of the prospective dispute. See id. The Tribunal held that the contract was governed by CISG, the international sales law of Austria, a Contracting State because the applicability of the rules of international private law referred to in art. 1(1)(b) CISG included choice of law by the parties. See id. Since the choice of the law of the Contracting State embraced choice of the CISG, substantial domestic Austrian law was applicable only to questions concerning matters governed by the Convention but not expressly settled in it and that cannot be settled in conformity with the general principles on which the Convention is based. See id.

419. These unsolved questions are: a) the place where the restitution is to take place, b) the buyer's liability when the goods, which are subject to restitution, has been destroyed after the date of the declaration of avoidance, and c) the treatment of claims, based on failure by the buyer to derive benefits from the goods to be restituted. See Schlechtriem, Uniform Sales Law, supra note 89, at 108. The author suggests that answers to the issues should be based, first, on the regulation of the Convention, in accordance with the guidance of art. 7 CISG that they are governed but not completely solved by the Convention. Id.

420. In order to be embraced by the scope of art. 8, a statement and other conduct are to express intent of a party (to cause legal effects), as opposed to the communication of an informational character. As far as other conduct is concerned, it embraces acts which express legal intent and acts of performance which require interpretation. See Enderlein & Maskow, supra note 13, at 62.

421. See E. Allan Farnsworth, Interpretation of Contract, in Commentary on the International Sales Law, supra note 14, at 98; Enderlein & Maskow, supra note 13, at 61, 62; see also Gyula Eörsi, General Provisions, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods, supra note 118, at 2-16

422. CISG art. 39 (1).

423. CISG arts. 47(1) and 63(1).

424. CISG arts. 49(1), 64(1), 72(1) and 73. See OLG Frankfurt, 20 April 1994 [13 U 51/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940420g1.html> (PACE), where the buyer gave the seller notice of the non-conformity and asked the seller to take back the goods. The Court held that the buyer's notice was an unmistakable declaration of its intention to avoid the contract. See id.

425. CISG art. 81(2).

426. CISG art. 6 allows parties to make such derogation and define the liability of a party for breach of contract in a different way, otherwise the regime of the Convention is applicable. See Enterprise Alain Veyron v. Société E. Ambrosio, CA de Grenoble, 26 April 1995 [93/1613] (France) (UNILEX) <http://cisgw3.law.pace.edu/cases/950426f1.html> (PACE), where the Court observed that the contract expressly granted the seller the right to end the contract. The clause was that in case of successive sales transactions, the seller could interrupt the relationship at any time provided it did not hinder the execution of a previous order. See id. Such a clause was not forbidden under CISG.

427. The rules of CISG art. 8 are applicable to the interpretation of a contract. See Gyula Eörsi, General Provisions, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods, supra note 118, at 2-16; Honnold, Uniform Law, supra note 16, at 136, 137; see E. Allan Farnsworth, Interpretation of Contract, in Commentary on the International Sales Law, supra note 14. at 101; Enderlein & Maskow, supra note 13, at 63; Bernstein & Lookofsky, supra note 348, at 28.

428. CISG art. 48(1) stipulates the seller's right to cure failure in performance after the date of delivery, if he can do so without unreasonable delay, without causing the buyer unreasonable inconvenience or uncertainty of reimbursement of expenses advanced by the buyer. The seller's right to cure is subject to the buyer's right to avoidance.

429. See Enderlein & Maskow, supra note 13, at 64.

430. Id.

431. The objective "reasonable person" test is individualized due to the circumstances the other party is in. The criteria of the "type-related objectivization" process are explained in detail by Enderlein & Maskow, supra note 13, at 65. The precept included in art. 8(3) to pay attention to negotiations, any practices between the parties, usages and any subsequent conduct is a helpful indication in interpretation of acts of a party.

432. See OLG Hamm, 8 February 1995 [11 U 206/93] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/950208g3.html> (PACE), where the Court held that the mere fact that a notice was given in a language which was not that of the contract or that of the addressee was not an obstacle for the notice to be effective. See id. The foreign language could be the language normally used in the respective trade sector, to which the parties may be considered to have agreed upon. See id. If that was not the case, the notice would be effective if the addressee could have reasonably been expected to request from the sender of the notice explanations or a translation. See id. The court decided the matter taking into account the understanding of a reasonable person, giving due consideration to usages and practices observed in international trade according to CISG arts. 8(2) and art. 8(3). See id.

433. See Amtsgericht Nordhorn, 14 June 1994 [3 C 75/94] (Germany) (UNILEX) <http://cisgw3.law.pace.edu/cases/940614g1.html> (PACE), where the Court interpreted the act of sending defective goods back to the seller as amounting to a valid declaration of lack of conformity. However, from the abstracts of the case it is not clear if the interpretation of the act was made due to the guidance of CISG art. 8.

434. See E. Allan Farnsworth, Interpretation of Contract, in Commentary on the International Sales Law, supra note 14, at 98; Enderlein & Maskow, supra note 14, at 64.

435. See E. Allan Farnsworth, Interpretation of Contract, in Commentary on the International Sales Law, supra note 14, at 99.

436. The principle of party autonomy confirmed in art. 6 of CISG also makes it possible for the parties to be bound by usages. See Michael J. Bonell, Usages and Practices, in Commentary on the International Sales Law, supra note 14, at 107; Goldstajn, supra note 304 at 98. According to other commentators, the fact that usages and practice developed between the parties should be taken into account is derived furthermore from the principle of good faith (art. 7). See Enderlein & Maskow, supra note 13, at 57.

437. The express agreement may concern a usage that is international in its character and a usage that is local but if the agreement is implied, a usage has to be of the characteristic adopted by art. 9(2) CISG. See Michael J.Bonell, Usages and Practices, in Commentary on the International Sales Law, supra note 14, at 107.

438. According to the commentators, this concept of a usage has to be determined in an autonomous and internationally uniform way. As an example, they enumerate usages, such as registered and not registered, accepted by an authoritative institution or not, observed within particular trade sector or at a given market place. See Michael J.Bonell, Usages and Practices, in Commentary on the International Sales Law, supra note 14, at 111; Enderlein & Maskow, supra note 13, at 69.

439. Under CISG art. 9(2) it is assumed that the characteristic features of a usage, stated in the paragraph, make the usage of a type of which the parties knew or ought to have known.

440. See Goldstajn, supra note 304, at 97; Honnold, Uniform Law, supra note 16, at 149; Michael J.Bonell, Usages and Practices, in Commentary on the International Sales Law, supra note 14, at 112; Following J. O. Honnold, it is worth noticing, that this reference to domestic law does not encourage the application of domestic rules defining the conditions which allow an application of a usage to international sale of goods. Honnold, Uniform Law, supra note 16, at 149. The Convention in this case is the basis for applicability of a usage; the rules of domestic law, which are to be invoked, should be rules of mandatory character, which concern the validity of a contract and particular statements under it. Thus a usage can be declared invalid, if the consent of the parties to apply it (under art. 9(1)) was defective or when a usage (applicable on the assumption derived from art. 9(2)) is contrary to public policy rules or legal prohibitions. See Michael J.Bonell, Usages and Practices, in Commentary on the International Sales Law, supra note 14, at 112; Gyula Eörsi, Contracts for the International Sale of Goods, supra note 118, at 2-23.

441. See Enderlein & Maskow, supra note 13, at 69.

442. It is said that course of dealing takes priority before a usage. See Usages and Practices, in Commentary on the International Sales Law, supra note 14, at 106.

443. See Michael J. Bonell, Usages and Practices, in Commentary on the International Sales Law, supra note 14, at 106. When a course of dealing embraces adoption of certain general conditions contained in a separate writing in the course of the parties' previous transactions, the course of dealing may influence the entire content of the contract. In future contracts, such conditions could be binding despite lack of any express reference to them. Id.

444. INCOTERMS - International Rules for the Interpretation of Trade Terms, the set of trade terms (usages) containing their customary interpretation, which was standardized under the auspices of International Chamber of Commerce in Paris in 1936. INCOTERMS 1936 were verified several times, in: 1953, 1967, 1976, 1980. The last verification took place in 1990 in order to conform the terms with current practice in international trade due to the unification, and changes in trade methods and international transport, and to adapt them to the new techniques of commercial communication with assistance of electronic data processing systems.

445. The abbreviation of a commercial term the full wording of which is: Free on Board . . . (named port of shipment). According to the customary interpretation "Free on Board" means that the seller fulfills his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point. The term requires the seller to clear the goods for export. The interpretation is adopted in INCOTERMS 1990, Polish version, The Polish Chamber of Commerce ed.

446. See Goldstajn, supra note 304, at 98.

447. See Honnold, Uniform Law, supra note 16, at 97; Hartnell, supra note 306, at 72, 76, 79; Schlechtriem, Uniform Sales Law, supra note 89, at 33.

448. Honnold, Uniform Law, supra note 16, at 329.

Pace Law School Institute of International Commercial Law - Last updated May 9, 2001

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