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Reproduced with permission from 18 Journal of Law and Commerce (1999) 301-331

Nachfrist Notice and Avoidance under the CISG

Ericson P. Kimbel [*]

I. Introduction
II. Advice to KLI

A. Drafting the Nachfrist notice
B. Reliance on dispatch
C. UB's possible responses
III. Receiving a Nachfrist notice
IV. Installment contracts, partial performance and Nachfrist
A. Installment contracts and Nachfrist
B. Partial performance and Nachfrist
V. Prospective Nachfrist
VI. Conclusion

I. Introduction

One of your largest clients, Kentucky Logging, Inc. ("KLI"), seeks your advice. Today is March 4th, three days after the March 1st delivery date of a PRX2000 crane attachment which cuts, strips and saws timber on site. The seller, Uberbauholz Berlin ("UB"), has refused to discuss the delay, or the contract, despite repeated attempts by KLI over the last three days. There were no prior indications of non-performance, but the market price of the PRX2000 and similar equipment sold by other manufacturers has tripled since the contract was signed two months ago. The failed delivery is causing KLI to lose 50% of its projected revenue. The new equipment will double its output, and KLI has contracted to harvest several thousand acres within the next three months in reliance on the increased output. Within one week, KLI will be too far behind schedule to comply with the harvest contracts, which will, at a minimum, cut profits, increase costs and could result in litigation. The CEO insists you do everything legally possible to have the equipment on the worksite within the week.

Under the United Nations Convention on Contracts for the International Sale of Goods, KLI may pursue either of two broad categories of remedies.[1] Under Article 45, [2] KLI may choose either the avoidance [or other] remedies [page 301] available in Articles 46 through 52, [3] or the damage remedies available in Articles 74 through 77.[4] The Nachfrist notice procedure, contained in Article 47 for buyers, [5] should provide KLI with the best outcome under the circumstances: delivery within the week, or the certainty to pursue other legal action.[6] [page 302]

To provide a practical understanding of the Nachfrist notice procedure under the CISG, this article uses a problems approach with KLI's facts utilized in analysis of the drafting, sending and probable responses to a Nachfrist notice. The reverse of KLI's situation, when your client is delayed in performance and receives a Nachfrist notice, is considered in section three under a second set of hypothetical facts. This section also includes three basic ways to defend against Nachfrist notice and subsequent avoidance. Section four examines the difficulties of applying Nachfrist in installment contracts and when facing a partial performance. Section five addresses a disagreement among the Commentators to conclude that prospective Nachfrist, despite some Civilian Commentary to the contrary, is not a valid procedure under the Convention.

Through this examination by application to hypothetical situations, the reader will find that the Nachfrist procedure can provide certainty and assurance when facing a delay in performance. The discussion concludes by recommending that the Nachfrist procedure be applied when delay in performance of a primary contractual duty has occurred under the Convention because the Nachfrist procedure provides certainty, clarity and predictability in an otherwise uncertain situation.

II. Advice to KLI

Since the Convention does not contain a Perfect Tender Rule,[7] [and] time was not made of the essence in the contract terms [8] and UB was not [page 303] aware that KLI's harvest contracts were dependent upon prompt delivery of the PRX2000, [9] it would be difficult to avoid [10] the contract for fundamental breach based solely on the current delay of three days.[11] A delay of ten days, when the harvest contracts are delayed too much for completion, provides a stronger argument for fundamental breach due to the additional losses KLI will begin to sustain as of March 11th. However, your client does not wish to avoid the contract, if possible, and requires the PRX2000 before its profit margin begins to tumble in seven days. Therefore, avoidance based on fundamental breach may not be legally actionable at this point, or on March 11th, is not what your client desires, and should not be pursued as a first option for KLI.

Non-avoidance remedies "contemplate completion of the basic exchange," [12] are not based on a fundamental breach of contract and, therefore, do not require satisfaction of the substantial deprivation standard in [page 304] Article 25.[13] A non-avoidance remedy, such as reduction in price under Article 50 to compensate for the late delivery, [14] preserves the contract and KLI may still claim damages subject to the foreseeability limitation of Article 74.[15] In many situations where performance is delayed, but the client still requires performance, non-avoidance remedies would be the best alternative.

However, UB's refusal to discuss the delay makes it impossible to negotiate a reduction in price, other non-avoidance remedies, or delivery. Furthermore, if UB's failure to perform is intentional and prompted by an efficient breach analysis, UB will not be willing to adjust the price below the contract price to compensate for the delay, make other compensation for the delay, or deliver the PRX2000 (UB may also refuse to deliver based on this reasoning after a Nachfrist notice has been dispatched and the period has expired). Even if UB did agree to negotiate an adjustment and delivery, the time necessary for the negotiation process will probably be longer than a week and your client will not have the PRX2000 by the 11th.

Nachfrist may be unfamiliar [16] to most common law practitioners [17] [page 305] and is the Convention's only route to avoidance without an initial fundamental breach.[18] This procedure provides KLI with the best possibility for delivery within the week by informing UB of future avoidance through the procedure, providing UB with an incentive to deliver, while still allowing UB the opportunity to complete performance prior to the 11th.[19]

To avoid via the Nachfrist procedure, two notices and an interim period of reasonable length [20] are required.[21] Upon expiration of the fixed period without performance, or a declaration by the defaulting party that he will not perform during the period, the aggrieved party may declare avoidance via notification pursuant to Article 26.[22]

Article 47 gives KLI the option to send a Nachfrist notice upon failed delivery which fixes "an additional period of time of reasonable length for performance by the seller of his obligations."[23] If UB does not deliver, or declares that it will not deliver, within the time fixed, KLI may avoid the contract.[24] KLI has the right to send a Nachfrist notice, [page 306] but still has the option to forego Nachfrist notice and pursue other avoidance or non-avoidance remedies as indicated above.[25]

You phone KLI's CEO, briefly explain the options and advise him that Nachfrist notice will provide the best opportunity for delivery within the week. You also inform him that the Nachfrist procedure will preserve future avoidance remedies and damages, [26] and that KLI may rely on the Nachfrist notice to pursue cover, if UB does not perform within the period fixed in the notice.[27] [page 307]

The CEO asks if this Nachfrist notice will make UB change its position on delivery, or apply any significant pressure for UB to make delivery before the 11th. You explain that the notice will be drafted strategically with the clear intention that avoidance remedies will be pursued after the Nachfrist period, which may spur UB to make delivery. Furthermore, you will notify UB that substitute equipment will be procured on the 11th, and a claim for market price differential (currently 200% of the original contract price) and other damages will also be pursued.[28] This additional information may persuade UB to deliver because of the actions contingent upon failure to comply with the notice, the costs involved in litigation and a possible judgment for significant damages due to non-delivery of the PRX2000.[29] [page 308]

However, you explain that the Nachfrist notice will not necessarily force UB to deliver, and UB may still refuse to perform and defend in litigation.[30] You also explain that by using the Nachfrist notice strategically, KLI's future options will be limited in two ways. First, the Nachfrist notice invites performance during the period; KLI is bound to accept such performance, and it may not pursue inconsistent remedies during the period.[31] Second, by including the intention to avoid and sue in the notice [page 309], KLI is foregoing the option of not avoiding at the end of the Nachfrist period if no delivery occurs.[32] The CEO tells you to invoke the Nachfrist procedure, draft it as you suggest, [33] fax the notice by the end of the business day and have the PRX2000, or substitute equipment, at the site as quickly and inexpensively as legally possible.

A. Drafting the Nachfrist Notice

The most significant issue in drafting a Nachfrist notice is determining the "additional period of reasonable length" [34] one should fix in the notice.[35] KLI's harvest contracts make the length of delay critical, and [page 310] the only reasonable period of time from KLI's point of view is one week, or less.[36] However, the drafter must also consider the other side of the transaction and all the factors a court would ultimately consider in determining whether or not a reasonable period was fixed by the notice.

Enderlein and Maskow suggest the following, non-exhaustive, list of factors for determining a reasonable length: "the length of the contractual period for delivery; nature of the seller's performance, e.g. delivery of complicated equipment out of his own production; and nature of the obstacle in the way of delivery."[37] However, KLI has no information from UB as to the reason(s) for delay in delivery and UB refuses to discuss the delay, or contract. Faced with these circumstances, it is quite difficult to consider UB's factors in determining the reasonable length of time. If this information was known and the lines of communication open, KLI could pursue renegotiation to reach an agreement without employing the [page 311] Nachfrist procedure.[38]

Honnold describes a more amorphous test for reasonableness, which is applicable in KLI's circumstances:

"[I]n determining whether the period the buyer fixes is 'reasonable' the dominant consideration is the buyer's need for delivery of the goods without further delay. . . . On the other hand, since the seller's failure to comply with the period fixed by the buyer empowers the buyer to avoid the contract . . . the reasonableness of this period should be considered in the light of the basic policy decision, embodied in Articles 25, 49 and 64, that contracts should not be avoided on insubstantial grounds."[39]

KLI's additional period of one week, ten days from the original contract performance date, appears to be reasonable under Honnold's framework. The loss of projected revenue and probable litigation between KLI and its customers creates a dire need for delivery of the PRX2000, and appears to be a substantial ground for avoidance.[40] The Nachfrist period should satisfy Honnold's standard and KLI may rely on the reasonableness of its Nachfrist period.[41]

The reasonableness standard in Nachfrist provides for flexibility in international sales under the CISG, but also creates a point of contention in a procedure designed to provide certainty.[42] Though it appears that KLI's Nachfrist period is reasonable, in many other situations this period may be found unreasonable.[43]

B. Reliance on Dispatch

When you fax the notice and receive a confirmation, the notice is immediately effective under Article 27's dispatch rule.[44] However, disagreement [page 312] exists on this issue as to whether the Convention requires receipt of the notice by the defaulting party for the aggrieved party to rely on its effectiveness. Knapp reasons that "given the purpose of this notice, it should be assumed, contrary to the general rule of Article 27, that the notice fixing the additional period of time for performance by the buyer [or seller] does not become effective until it reaches the buyer [or seller]. . . ."[45] Knapp concludes that the notice is not effective until receipt by the defaulting party (UB in KLI's circumstances) because the notice grants the defaulting party a benefit.[46]

Enderlein, Maskow, Honnold and others disagree. Enderlein and Maskow explain, "the setting of a Nachfrist is governed by the general rule of Article 27, i.e. the seller [or buyer] can rely on a Nachfrist, even if the relevant communication is received belatedly, contains errors or is not received at all."[47]

Honnold reaches the same conclusion through a statutory analysis of Article 27's operation within the Convention:

" '[U]nless otherwise expressly provided' in the Convention, a communication that is dispatched by appropriate means is effective in spite of 'delay or error' in transmission. . . . [T]he Convention provides 'express' exceptions from Article 27 in several situations, but not here. Moreover, most of these exceptions deprive a party in breach of the benefit of the dispatch rule, while the one who sends the Nachfrist notice is a party aggrieved [page 313] by the other party's delay."[48]

There is no exception in either the Nachfrist notice provisions, or the related avoidance provisions, requiring receipt of the notice for effectiveness.[49] The underlying purpose of Nachfrist is to provide certainty and assistance to an aggrieved party who has not received performance by the contract date.[50] If KLI was unable to rely on dispatch of the notice, it would be uncertain whether it may suspend its own performance during the period, avoid the contract at the expiration of the Nachfrist period, seek cover, or pursue other remedies under the Convention. If the Convention required receipt and UB still refuses to discuss the contract with KLI, then KLI will be faced indefinitely with the identical uncertainty it now faces. The Nachfrist procedure would, thus, be useless. Therefore, the only way Nachfrist may achieve the certainty for which it was designed is through operation under the dispatch rule of Article 27.

Additionally, Articles 47(2) and 63(2) require that a defaulting party's statement of future non-performance be received by the aggrieved party in order to be effective.[51] This receipt requirement supports the application of the dispatch rule in at least two ways. First, it provides further protection for the aggrieved party when the defaulting party will not perform during the period. The aggrieved party is certain upon receipt of the statement of future non-performance, that she may immediately resort to other remedies. Second, if the drafters intended to make the Nachfrist notice effective only upon receipt by the defaulting party, they could have included a similar statement within the language of Articles 47(1) and 63(1). This additional protection and the negative statutory inference, though rebuttable, both confirm that the Nachfrist procedure operates under Article 27's dispatch rule. Therefore, KLI may rely on immediate effectiveness of its Nachfrist notice when the fax machine has confirmed transmission.

C. UB's Possible Responses

There are a limited number of ways UB may respond to KLI's Nachfrist notice. Prediction of these responses allows a party to prepare future steps regarding the contract and the possible remedies available [page 314] upon expiration of the Nachfrist period.[52]

First, the defaulting party may respond by performing during the period, which is the best outcome KLI may hope for under these circumstances. KLI will have the PRX2000 in hand prior to, or on, the 11th at the contract price and will still have a claim for delay damages under Article 47 [53] This response does not offer a choice for KLI. KLI, or any party sending a Nachfrist notice, is bound by the offer of additional time and must accept performance during the period.[54]

Second, the defaulting party may declare that he will not perform during the period. If KLI receives this notification, it should promptly avoid the contract by declaration of avoidance under Article 26.[55] Though not the best outcome for KLI, notice of non-performance allows KLI to mitigate the damages accruing due to the PRX2000's delay. KLI may now immediately pursue cover via Article 75 and attempt to comply with the harvest contracts, if substitute equipment can be purchased within the week. [56] Even if an appropriate substitute is not found prior to the 11th, KLI will be able to mitigate future damages by initiating cover earlier. KLI will still have its claim for the damages caused by the delay, including loss of profits [57] so long as it complies with the affirmative duty to mitigate under Article 77.[58] [page 315]

Third, the defaulting party may not perform by the end of the Nachfrist period and the aggrieved party may then avoid the contract.[59] Notice of avoidance is required [60] by Article 26 [61] and opens the path to avoidance remedies.[62] With proper notice of avoidance under Article 26, the party is released from its contractual obligations under Article 81, [63] but still retains a right to damages caused by the delay under Articles 47(2) and 81(1) and may also claim restitution, if applicable, under Article 81(2).[64] Notice of the declaration of avoidance is effective upon dispatch [page 316] under Article 27.[65]

The fourth outcome, which the Convention does not expressly address, is an offer made during the Nachfrist period for a cure which will occur after the period expires.[66] The aggrieved party could treat this offer to cure as having no effect on the Nachfrist procedure since it is not performance prior to the expiration, and could justifiably avoid [67] upon expiration of the period if the other requirements of Nachfrist have been satisfied.[68]

Alternatively, the offer to cure could be accepted, which may be interpreted as either an extension of the original Nachfrist period, or a second Nachfrist period. Neither of these interpretations are precluded by the Convention because of the discretionary nature of the Nachfrist procedure and its related avoidance provisions.[69] The categorization as either an extension or a second Nachfrist period may not matter as the parties must have good relations to initially negotiate the cure and its implementation.[70]

III. Receiving a Nachfrlst Notice

Another of your clients, Florida Furniture Inc. ("FFI"), calls to request an emergency meeting regarding some documents received from a buyer, Italian Desk Distributors of Italy ("IDD").[71] The contract in question is for the sale of 500 corner desks, model CDU001, and they were [page 317] to be delivered on February 25th. Today is March 4th, and FFI has yet to deliver the desks. FFI is late in many of its contracts because finished timber is currently in short supply (apparently, the timber shortage is being caused by a shortage of logging equipment which cuts, strips and saws timber on the worksite). FFI faxes you a copy of the documents and requests a meeting in four hours. After briefly pondering the likelihood that two of your clients would present you with Nachfrist issues in the same day, you schedule the meeting and begin examining the documents.

The first document is, apparently, a Nachfrist notice faxed on February 25th and it states in relevant part, "IDD expects immediate delivery of the desks. If they are not received, the contract will be avoided on March 4th." The second document is a declaration of avoidance faxed to FFI today. It states in relevant part, "pursuant to the Nachfrist notice fixing an additional period of reasonable length for performance of your obligations, faxed to you on February 25th, IDD declares avoidance of the Contract for Sale of 500 desks model # CDU001 effective March 4th. You will be notified of further legal actions as they are initiated."

FFI wishes to keep the contract intact without making any adjustments for the delay, which is quite a difficult task for counsel to achieve under these circumstances. It is the company's position that the delay was not foreseeable and could not be avoided. Therefore, FFI does not wish to be penalized, by losing this profitable contract, for something they could neither anticipate, nor prevent.

There are at least three ways to defend against IDD's avoidance of the contract through the Nachfrist procedure. First is by attacking the written instruments, second is by challenging the reasonableness of the period and third is through an argument of good faith.[72]

The two writings appear to satisfy the requirements of Articles 47 and 26. Although the Nachfrist notice does not explicitly state that one week has been fixed, which should be argued if litigation occurs, it does clearly indicate a deadline of March 4th for completion of performance and that avoidance will be forthcoming if no performance has been rendered by that date.[73] The declaration of avoidance is more complete than the notice and there is, apparently, no way to make a technical attack on [page 318] this language. Therefore, despite the shortcomings of the Nachfrist notice, it appears that IDD has satisfied both writing requirements for avoidance through the Nachfrist procedure, and an argument based on the written instruments should not succeed.

However, FFI's strongest argument is that one week is an unreasonable additional period of time under these circumstances. Barring any trade usages or prior dealings of the parties to the contrary, one week under these circumstances appears to be unreasonable. Not only is the entire desk manufacturing industry experiencing shortages of timber, which IDD should know as a wholesale distributor of desks, but this shortage has been occurring for approximately six weeks, and the relevant trade journals are reporting contract delays of three to five weeks by all desk manufacturers.

In contrast to KLI's circumstances, IDD's Nachfrist period of one week should be found unreasonable if the dispute is litigated. The period of one week during the timber shortage does not appear to satisfy necessary factors [74] in determining the length of the period, and appears to be an attempt by IDD to avoid the contract on an insubstantial ground. [75]

Furthermore, if the market price of FFI's desks has dropped significantly since the contract was concluded (though unlikely because of the shortage of desks in the market), the unreasonableness of the period could become the basis for an argument that IDD is acting in bad faith. Article 7 provides, "in the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.[76] In litigation, FF7 should argue that facts such as these point to a Nachfrist made in bad faith because of the market shift, and the Convention mandates observance of good faith in international trade in its interpretation. Therefore, the court should invalidate IDD's bad faith motives in fixing the short Nachfrist period by finding the short period unreasonable under these circumstances. [page 319]

IV. Installment Contracts, Partial Performances and Nachfrist

A. Installment Contracts and Nachfrist

Another of your clients, Computer Mail Order Company of Nevada ("CMOC"), faces delay in an installment contract (the supply contract) comprising five, equal-sized deliveries of circuit boards to occur at two week intervals. The seller, Computer Component Corporation of China ("CCCC"), delivered the first installment on time and without error.[77] The second installment was delayed by one week, the third installment arrived today two weeks late, and the fourth installment is due today. [78] There has been no communication between the parties since the delays began, and the goods were not originally time-sensitive.

However, any further delay in delivery will force CMOC to incur penalties for late deliveries to its customers. CMOC is obligated under other contracts (the re-sale contracts) to deliver the circuit boards in installments on certain dates. Until now, CMOC has been able to perform the re-sale contracts despite the delays by filling the re-sale contracts with circuit boards from existing inventory. The inventory is now depleted, and CMOC will not be able to satisfy the re-sale contracts unless the third and fourth installments arrive today.

The first issue to determine in CMOC's circumstances is whether the delays individually, or cumulatively, constitute a fundamental breach of the entire contract under Article 25 for avoidance under Article 49(1)(a).[79] If not, may a Nachfrist notice be used to clarify the delay and fix a deadline for performance, and, if so, when should the notice(s) be (or have been) dispatched? These are difficult questions which must be answered in installment delays prior to invocation of the Nachfrist procedure.[80]

The delay of 20% of the goods (installment two) for one week combined with the delay of 20% of the goods (installment three) for two [page 320] weeks may be a fundamental breach.[81] The contract was to be performed in equal increments of two weeks over a period of 10 weeks. Even though CMOC has been able to fill the re-sale contracts from inventory with no loss of sales or volume, the cumulative delay may substantially deprive CMOC of its bargained for exchange and, thus, constitute a fundamental breach under Article 25.[82]

However, if the delays do not constitute a fundamental breach, the Nachfrist procedure may be employed and should require only one notice. This notice should either fix one additional period for complete performance, or fix individual deadlines for the completion of each installment.[83]

Though it appears Nachfrist may be used under CMOC's circumstances, the procedure is subject to the general limitation placed on avoidance of installment contracts by Article 73(1) .[84] This provision limits avoidance to only the effected installment, unless that single failed installment is a fundamental breach of the entire contract .[85] Flechtner comments, "the purpose of Article 73(1) . . . is to permit a party to treat each installment of an installment contract as a severable contract for [page 321] purposes of avoidance."[86]

This severability reinforces the Convention's policy of avoidance only for substantial breaches by limiting the circumstances under which a party may avoid based on failed installments. Article 73 limits Nachfrist avoidance in installment contracts in the same fashion. A Nachfrist notice may not be used to create a fundamental breach from an insignificant, or trivial, initial delay.[87] Instead, Nachfrist under the Convention is limited [page 322] to either clarifying whether a party may avoid a single installment via the Nachfrist procedure, or providing an alternative route to avoidance of the entire contract when the Nachfrist period expires and the initial breach is significant, but not, in itself, fundamental.[88]

The Nachfrist procedure should be employed in an attempt to avoid the entire contract in circumstances similar to CMOC's, assuming this is what the client desires. The delays may not constitute a fundamental breach, but they do comprise a significant portion of the contract. The cumulative delay in time and amount of goods should become the equivalent of a fundamental breach for purposes of avoidance upon the expiration of a properly administered Nachfrist procedure.[89]

As in non-installment Nachfrist, CMOC's period of reasonable length is of primary concern and there is limited guidance in the reported decisions. In the Judgment of May 24, 1995, the court held that a single Nachfrist notice fixing a period of 11 days for complete performance of a delayed, two shipment installment contract was reasonable.[90] Avoidance of the entire contract was justified when no performance was forthcoming within that period.[91] However, the buyer was facing a delay of 50% (3 of 6 units) of the first installment and 100% of the second installment (3 of 3 units) constituting a delay of 67% of the total goods bargained for in the exchange.[92] This is a much more significant delay in goods than CMOC is facing, but CMOC also has the additional uncertainty as to the performance of future installments.

However, in the Judgment of April 24, 1990, the court held that for avoidance of a three installment contract of seasonal clothing, [93] the buyer [page 323] was required to dispatch a Nachfrist notice when each shipment was delayed.[94] Since the buyer did not send each notice, it was unjustified in its avoidance of the contract for delay and the court held in favor of the seller.[95] If this is the appropriate application of the Nachfrist procedure in installment contracts, CMOC is precluded from using the procedure to avoid installments two and three since it did not send notice immediately upon delay, nor may it rely upon their cumulative effect for Nachfrist purposes.[96]

These inconsistent decisions illuminate the difficulty of determining the reasonable period and the procedure required for application of Nachfrist in an installment contract under the Convention. However, the practitioner should rely on the Judgments of August 21, 1995 and May 24, 1995 to the exclusion of the Judgment of April 24, 1990 for insight into the procedure. The latter is inefficient and defeats the certainty principle of Nachfrist by requiring multiple notices on each installment for later avoidance based on delay. Furthermore, its outcome is also questionable on the basis of the fact that the seller did not attempt to make the first delivery until the 85th day of a 90 day contract, but the court still held that buyer could not avoid the contract for delay.[97]

The Nachfrist procedure may be invoked in installment contracts, but it is of limited and somewhat difficult application. When a fundamental breach of the contract, or of a single installment, exists, Nachfrist is unnecessary for avoidance of the contract, or that individual installment.[98] The Nachfrist procedure is applicable when facing a single installment delay, which is not a fundamental breach of that installment, and may be used to avoid that installment.[99] The use of Nachfrist to avoid the entire contract when a delay of one or multiple installments comprises a large or significant part of performance, but not a fundamental breach of the entire contract, is of untested application and may be [page 324] precluded by the language of Article 73(1).[100] However application under these circumstances should be attempted if avoidance is favorable for the client.[101]

B. Partial Performances and Nachfrist

Similar to Article 73's limitation of avoidance, Article 51 limits avoidance of the entire contract based on a partial performance to circumstances where "the failure to make delivery completely or in conformity with the contract amounts to a fundamental breach of the contract."[102] The Secretariat Commentary addresses Nachfrist and partial deliveries, concluding that Article 51 negates the implication:

"that the entire contract could have been avoided on the grounds that the seller failed to deliver a part of the goods within the additional period of time fixed by the buyer in accordance with Article 47 even though such failure to deliver did not in itself amount to a fundamental breach of the entire contract."[103]

However, Article 51's limitation on Nachfrist causes inconsistency within the Convention. Flechtner comments that Article 51 "applies only to buyers," and, secondly, "deprives buyers of the Nachfrist procedure in situations where its use would be appropriate."[104]

Though inequitable, it appears that this is the only conclusion available from the text and commentary of the Convention regarding Nachfrist and partial performances. Perhaps the location of the goods at the time a partial performance is discovered and the burden of future transport cost is a justification for this unbalanced treatment of the parties. The buyer will not discover the lack of full performance until the goods are in her country under most delivery terms. The additional transport burden placed on the seller, if the contract is avoided at that time, provides some justification for the preclusion of buyers' Nachfrist in partial [page 325] performances. However, Article 51's preclusion of buyer's Nachfrist still seems extremely detrimental to buyers and they must wait, while the seller may use Nachfrist under similar circumstances of partial performance.[105]

V. Prospective Nachfrist

Consider the circumstances where a Nachfrist notice arrives fixing an additional week for performance of the contractual obligation, but the date for performance has yet to arrive. There is no immediately apparent limitation in the language of the Nachfrist provisions to prevent such a procedure, and Enderlein & Maskow comment that prospective Nachfrist is available "when [a delay in performance] can be anticipated and the [party] signals difficulties."[106] However, a thorough statutory analysis of Nachfrist under the Convention yields the conclusion that prospective Nachfrist is not a valid procedure. Though not an express limitation, the word "additional" implies that at least one period of time has already elapsed.[107]

Furthermore, additional does constitute an express limitation of Nachfrist to breaches (delay in one of the three primary obligations of delivery, payment of price, or taking of delivery) which are already in existence.[108] The breach by delay must occur prior to the offer of an "additional" period for performance of the delayed duty.[109] The interdependence of the Nachfrist provisions with their corresponding avoidance provisions confirms this statutory preclusion of prospective Nachfrist.[110] Articles 49 and 64 provide the only grounds for avoidance through Nachfrist, and one of the three delays must occur before the Nachfrist notice is dispatched to provide a substantial ground for later avoidance through [page 326] either Article 49 or 64.[111]

However, Enderlein & Maskow contend that the delay referenced in a prospective Nachfrist notice will have occurred by the time avoidance is declared, and, therefore, prospective Nachfrist has the same effect as non-prospective Nachfrist notice.[112] However, this argument fails to account for the statutory limits above, and fails to account for the effect a prospective Nachfrist notice will have upon a party's preparation for performance.[113] The procedure cannot be invoked without an initial failure of performance due to both an implicit and explicit statutory limit, and because the Nachfrist triggering event, delay in one of the three basic contractual obligations, has not occurred.[114]

Additionally, Articles 71 and 72 are specifically designed to address the anticipatory delay circumstance when a party "signals difficulties" as Enderlein & Maskow describe the basis for invocation of prospective Nachfrist. [115] These articles are not limited in application to the three primary obligations as is Nachfrist, and have distinct advantages for resolving the difficulties of anticipatory breach.[116] From the perspective of statutory compatibility alone, it is evident that the drafters intended Articles 71 and 72 to govern anticipatory delays to the exclusion of the Nachfrist provisions.[117]

A party in receipt of a prospective Nachfrist notice should, arguably, be able to respond with an adequate assurance under the theory that prospective Nachfrist derives its invocation from the same circumstances as would a request for adequate assurances.[118] Furthermore, when the adequate [page 327] assurance is received, the effect of the prospective Nachfrist should be nullified.[119] There is no longer the signaled difficulty, nor the anticipated delay, which forms the basis for the prospective Nachfrist, since it has been addressed by the assurance.

Additionally, Knapp reasons that prospective Nachfrist has the effect of unilateral modification of the contract and concludes that prior to the date of contract performance, "no party to the contract is authorized to modify unilaterally the clauses of the contract."[120]

If the Convention allowed invocation of prospective Nachfrist, the contract would, arguably, be unilaterally modified in at least two ways. First, by extending the period for performance with the prospective Nachfrist notice, a party is unilaterally changing the original performance date. In most circumstances, this will not have a serious effect on either party because it allows both parties a longer time in which to perform.[121] Second, the use of prospective Nachfrist modifies the contract by incorporating, essentially, a time of the essence term.[122] A contract which was not originally time-sensitive suddenly becomes avoidable on the basis of time through a delay in performance. This unilaterally alters the nature of the contract and imputes a time of the essence term which was not negotiated.[123]

Furthermore, time-sensitivity is imputed through the prospective Nachfrist notice without consideration. Savvy parties could negotiate a [page 328] non-time-essential contract and the contract would be formed on that premise. A prospective Nachfrist notice could then be dispatched which sets a later date for performance, creating a contract which is now time of the essence without negotiation, nor compensation.[124]

However, Enderlein and Maskow argue that prospective Nachfrist is not a "one-sided modification" because the buyer may still perform on the original performance date.[125]

Nachfrist is by nature unilateral.[126] The procedure is designed to be invoked when a party faces uncertainty due to a delay in performance.[127] KLI's circumstances provide the perfect example to realize the benefits of the procedure's unilateral nature since UB will not discuss the delayed performance. Only through unilateral application can Nachfrist achieve its purpose and provide KLI with the certainty it requires to conduct its business. This unilateral nature combined with the change in the date of performance seems to be a one-sided modification of the contract as Knapp concludes, despite Enderlein and Maskow's statement to the contrary.[128]

However, statutory preservation of the claim for damages would, presumably, apply in prospective Nachfrist as well.[129] This distinguishes the application of prospective Nachfrist from a unilateral modification of the contract, despite their similarities. However, this does not validate employment of prospective Nachfrist.

Furthermore, if the buyer can actually perform on the contract date, as Enderlein & Maskow suggest, [130] then the basis for invocation of prospective Nachfrist should not have occurred, except in limited circumstances, [131] and the prospective Nachfrist notice would have never been [page 329] drafted, nor dispatched.

However, most detrimental to the application of a prospective Nachfrist notice is the impossibility of determining "an additional period of time of reasonable length" when drafting the notice.[132] Enderlein and Maskow state that, "the reasonable time is to be counted starting at the end of the time for performance.[133]

As indicated above and argued by Enderlein and Maskow themselves, one must take into consideration the factors causing the delay when determining the reasonable length of time to fix in a Nachfrist notice.[134] Since a prospective Nachfrist notice would be drafted and dispatched prior to any delay in performance and is based on an anticipated delay, or signaled difficulty, the factors causing an actual delay would not be known and cannot be considered in determination of a prospective reasonable period. Hence, the prospective Nachfrist notice is unreasonable because it is drafted at a point in time when the delay and its surrounding circumstances are not known, and the reasonable period cannot be determined through an appropriate balancing of the factors causing such delay.

VI. Conclusion

Despite its civil law origin and sometimes confusing application, the Nachfrist procedure is an extremely useful and somewhat flexible tool which may provide the result a client desires when facing a delay in performance under the Convention. If properly invoked and applied, the procedure provides certainty when there is delay and the aggrieved party is uncertain on how to proceed regarding the contract and possible remedies. The procedure, as shown in KLI's circumstances, may be used somewhat strategically and may provide for earlier mitigation, which should be less costly for both parties.

However, the procedure contains intricacies which must be known and analyzed in relation to the client's circumstances and the desired future outcomes. The aggrieved client will usually desire immediate performance of the contractual duty, and this may be achieved in some instances by drafting and dispatching an appropriate Nachfrist notice. On the other hand, when a client is in receipt of a Nachfrist notice, there are plausible defenses against subsequent avoidance of the contract, in certain [page 330] circumstances, and negotiation may also become an option.[135] The application of Nachfrist in installment contracts and partial performance is complex and uncertain, even for the German courts which have addressed the issue, and prospective Nachfrist should not be employed. Nonetheless, the Nachfrist procedure provides a functional device which is necessary in the Convention's remedial scheme to provide clarity, certainty and predictability for a party facing delay of a primary contractual obligation.[136] [page 331]


FOOTNOTES

* B.A. 1992, Methodist College: J.D. 1999, University of Pittsburgh School of Law; M.P.I.A. 1999, University of Pittsburgh Graduate School of Public and International Affairs. The author wishes to thank Maria C. Kimbel for her support and assistance during the writing of this article, and also wishes to thank Professor Harry M. Flechtner of the University of Pittsburgh School of Law for his insightful suggestions and comments on this article.

1. United Nations Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), 19 I.L.M. 668 (1980) [hereinafter "CISG" or "Convention"] (entered into force Jan. 1, 1988), available in 15 U.S.C.A. app. at 49 (West Supp. 1996), 52 Fed. Reg. 6262-80, 7737 (1987), U.N. Doc. A./Conf. 97/18 (1980). The contract is governed by the CISG under Article 1 since the United States and Germany are both signatories to the Convention.

2. Article 45 provides:

"(1) If the seller fails to perform any of his obligations under the contract or this Convention, the buyer may: (a) exercise the rights provided in articles 46 to 52; (b) claim damages as provided in articles 74 to 77.

"(2) The buyer is not deprived of any right he may have to claim damages by exercising his right to other remedies.

"(3) No period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract." Id. art. 45.

3. See Harry M. Flechtner, Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C., 8 J.L. & Com. 53, 56 (1988) (explaining:

"Under the Convention, avoidance (or nonavoidance) of the contract performs the function that acceptance (or non-acceptance) of the goods performs under [U.C.C.] Article 2. Avoidance is the process through which an aggrieved party, by notice to the other side, terminates the contractual obligations of the parties. If the contract is not avoided, the Convention contemplates that the basic exchange of goods and price will be completed despite a breach, with damages or other remedies to compensate for defects in the exchange. (footnotes omitted)).

4. Avoidance and non-avoidance remedies are not fully exclusive, but avoidance is excluded when damages are pursued as a first remedy. The damage claim keeps the contract intact with compensation as noted by Flechtner, and the party cannot pursue avoidance simultaneously. However, when a party pursues avoidance as a first alternative, the Convention preserves the damage claim for the losses caused by non-performance, even though the contractual duties of the parties have been terminated. See infra text accompanying notes 52-63 for discussion of damages available in the Nachfrist procedure and responses to a Nachfrist notice; see also CISG, supra note 1, arts. 47(2), 63(2), 46 (statutory consistency requirements).

5. Article 47 provides:

"(1) The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations. (2) Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during the period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance." Seller's Nachfrist is provided in Article 63 which states: "(1) The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations. (2) Unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance." CISG, supra note 1, arts. 47, 63.

6. See Commentary on the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat, art. 43 U.N. Doc. A/Conf. 97/5 (1979) (draft counterpart of art. 47), available at Pace Law School Institute of International Commercial Law, Guide to C.I.S.G. Article 47 "http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-47.html" (visited March 3, 1999) [hereinafter Secretariat Commentary] (stating that Nachfrist provides an answer to circumstances where "it may not be certain that the seller's [or buyer's] delay constitutes a fundamental breach of contract. . . ."). The Nachfrist procedure alleviates this uncertainty by fixing an additional period for performance after which, or during which, if notice of non-performance is received, the aggrieved party may resort to avoidance remedies. Cf. Comment One to Uniform Commercial Code 2-609 (1996) [hereinafter U.C.C. or the Code] (Right to Adequate Assurance of Performance) (providing, "the essential purpose of a contract between commercial men is actual performance . . . [and a] continuing sense of reliance and security . . . is an important feature of the bargain."); Comment Three to U.C.C. 2-309 (Absence of Specific Time Provisions; Notice of Termination) (stating that "[t]he applicable principles . . . make it clear that surprise is to be avoided, good faith judgment is to be protected, and notice of negotiation to reduce the uncertainty to certainty is to be favored.") (emphasis added).

7. See U.C.C. 2-601 (1996) (Buyer's Rights on Improper Delivery); see also Joseph M. Perillo, Essay: Unidroit Principles of International Commercial Contracts: The Black Letter Text and a Review, 63 Fordham L. Rev. 281, 303 (1994) (explaining that the Perfect Tender Rule makes Nachfrist unnecessary under the Code because "time [is] of the essence as a matter of law, unless the parties stipulate to the contrary.").

Under Code 2-601, a party facing delay in a single delivery contract may resort to remedies "if the goods or the tender of the delivery fail in any respect to conform to the contract." U.C.C. 2-601 (emphasis added). However, the Convention:

"permits avoidance only if there has been a breach that substantially deprived the aggrieved party of its bargain (fundamental breach), or involved a delay in performing certain material obligations beyond the time made "of the essence of the contract" through the Nachfrist procedure. Article 2 of the U.C.C., in contrast, may or may not condition avoidance-type remedies on the materiality of a breach, depending on the type of contract, the party in breach, the kind of breach, and whether the goods have been accepted." Flechtner, supra note 3, at 73.

8. Contract clauses could be negotiated which would set the length of the Nachfrist period in case a delay arises (which has problems similar to prospective Nachfrist as considered infra at notes 106 and following), exclude Nachfrist application by prohibiting use of the procedure (which would result in a contract avoidable for delay only if that delay constitutes a fundamental breach), or exclude Nachfrist through a time of the essence provision (which would justify avoidance for any delay similar to the U.C.C.'s Perfect Tender Rule). But see Larry A. DiMatteo, The CISG and the Presumption of Enforceability: Unintended Contractual Liability in International Business Dealings, 22 Yale J. Int'l L. 111, 122 (1997) (concluding that time of the essence provisions will not protect against the use of the Nachfrist procedure under the CISG) [hereinafter DiMatteo, The CISG]. Larry A. DiMatteo, An International Contract Law Formula: The Informality of International Business Transactions Plus the Internationalization of Contract Law Equals Unexpected Contractual Liability, 23 Syracuse J. Int'l L. & Com. 67, 77 (1997) (also concluding that "the existence of an express 'time of the essence' clause is unlikely to provide a party any further protection from the use of Nachfrist notice.").

It is difficult to see how a contract clause could not be used to exclude or alter Nachfrist application. Under Article 6, parties may negotiate into or out of provisions within the Convention. CISG, supra note 1, art. 6. A negotiated contract clause excluding, or altering, the application of the Nachfrist procedure should be enforced in litigation because it was the intent of the parties to form the contract based on the Nachfrist clause and that clause becomes part of the basis of the bargain.

9. There were no relevant communications between the parties after the conclusion of the contract.

10. Article 49(1) provides:

"(1) The buyer may declare the contract avoided: (a) if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed." CISG, supra note 1, art. 49(1).

11. Article 25 provides:

"A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, 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." Id. art. 25.

12. Flechtner, supra note 3, at 58.

13. CISG, supra note 1, art. 25; see supra note 11 for text of Article 25.

14. Article 50 provides in relevant portion, "[i]f the goods do not conform . . . the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. . . ." Id. art. 50.

15. Article 74 provides:

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract." Id. art. 74.

16. See Mark B. Wessman, Gabriel's Global Guide to Goods, 70 Tul. L. Rev. 1783, 1791 (1996) (reviewing Henry Gabriel, Practitioner's Guide to the Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code (1994)) (commenting that Nachfrist is a "distinctively European concept," which is a "potential danger point" for the common law practitioner). See also DiMatteo, The CISG, supra note 8, at 122 (explaining that American business people "may face unintended liabilities" when in receipt of a Nachfrist notice); Alejandro M. Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods, 23 Int'l Law, 443, 461 (1989).

17. See John Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention 290, at 371 (2d ed. 1991) (commenting that Nachfrist "was inspired by a provision of German law that, on default by one party: 'the other party may give him a reasonable period within which to perform his part with a declaration that he will refuse to accept the performance after the expiration of the period.'" (quoting Bürgerliches Gesetzbuch [BGB] (German Civil Code) art. 326)).

As discussed infra at note 25 and accompanying text, Nachfrist under the CISG is more discretionary than German domestic Nachfrist in both the choice of invocation and the choice of alternatives at the end of a Nachfrist period.

18. See Flechtner, supra note 3, at 71 (explaining that Nachfrist "makes non-performance within the time so fixed the equivalent of a fundamental breach of contract and thus allows a party awaiting performance to eliminate uncertainty concerning the amount of delay that is serious enough to justify avoidance of the contract." (footnote omitted)).

19. The corresponding avoidance provisions limit Nachfrist avoidance to three basic situations. Under Article 49(1)(b), the buyer may declare the contract avoided only after the expiration of the Nachfrist period in cases of non-delivery. The seller may avoid via the Nachfrist procedure under Article 64(1)(b) only in cases of failure to make payment, or failure to take delivery. Though a party could send a Nachfrist notice fixing an additional period of time for any failure of performance, the expiration of a Nachfrist period without performance triggers avoidance rights in only these three circumstances. See Honnold, supra note 17, 288, at 368 (stating, "the only teeth for the provision [Article 47] are those provided by Article 49(1)(b). . . ." Accordingly, Article 63 only has teeth when the buyer has not made payment, or taken delivery).

20. See Exhibit 1 for timeline showing the procedural steps and a compilation of possibilities which may occur during application of the Nachfrist procedure.

21. See CISG, supra note 1, arts. 47, 49, 63, 64.

22. Article 26 provides:

"A declaration of avoidance of the contract is effective only if made by notice to the other party." Id. art. 26.

23. Id. art. 47.

24. See LG Aachen, UNILEX, No. 43 O 136/92 (May 14, 1993) (published summary in Italian available in Diritto del Commercio Internationale July-September, 1993, 651) (excerpts published in German available in Recht der Internationalen Wirtschaft (RIW) 1993, 760) (holding that the seller had properly applied the Nachfrist procedure under Article 63, which allowed the seller to declare avoidance and receive damages after the buyer did not take delivery of the goods within the fixed Nachfrist period). See also LG Ellwangen, UNILEX, No. 1 KfH O 32/95 (August 21, 1995) (unpublished) [hereinafter Judgment of August 21, 1995] (holding that the buyer had properly applied the Nachfrist procedure under Article 47 in an installment contract, which allowed avoidance of all installments when the seller did not deliver conforming goods within the additional period of time). See infra note 83 and following text for further discussion of this case in relation to Nachfrist and installment contracts. Unfortunately, neither of these abstracts contain the length of the periods used, but both indicate that the periods were of reasonable length.

German cases are referenced by the date of judgment, the level of the court, i.e., Landergericht (LG), its geographic location, i.e., Aachen, and the case number. The general structure of the German commercial court system begins with the Amtsgericht (small claims), then the Landgericht ("the general court of first instance"), then the Oberlandesgericht (which has exclusive appeals from the Landgericht) and the highest court is the Bundesgerichtshof. See generally Charles Szladits' Guide to Foreign Legal Materials: German 17-19 (Timothy Kearley & Wolfram Fischer eds., 1990).

25. Nachfrist under the Convention is discretionary, using "may fix" in the language of Articles 47 and 63. See Honnold, supra note 17, 301, at 381 ("[T]he Convention borrows the Nachfrist idea not as a barrier to avoidance [as in French and German domestic law], but as an alternative ground for avoidance. . . . " (emphasis added)). Compare German domestic law where "the creditor [aggrieved party] as a general rule cannot claim damages for non-performance until the expiry of a Nachfrist," Guenter H. Treitel, Remedies for Breach of Contract: A Comparative Account 42, at 58 (1988); see also Guenter H. Treitel, Remedies for Breach of Contract: Courses of Action Open to a Party Aggrieved, in Int'l Encyclopedia of Comparative Law 16 (Arthur von Mehren ed., 1976) (explaining that Swiss domestic law employs discretionary Nachfrist, while French mise en demur requires court intervention in setting an additional period of time for performance).

It seems that the court in the Judgment of January 18, 1994, OLGZ Frankfurt am Main, UNILEX, No. 5 U 15/93 (1994) (translated in 14 J.L. & Com. 201) was influenced by its domestic law when it held that a party may not avoid for delay unless the Nachfrist procedure was employed. The court held, "insofar as the defendant maintains that the shoes had not been delivered within the stipulated time period, the defendant does not have any right to avoid the contract, since it is not established that the plaintiff failed to perform within a fixed additional period of time" (citing CISG, supra note 1, arts. 49(1)(b), 47(1)). The UNILEX abstract reads on this point:

"the court held that the buyer had not validly declared the contract avoided. In the court's opinion, the buyer, in order to declare the contract avoided for late delivery, has to fix an additional period of time for performance by the seller; moreover, such period has to elapse without the seller performing its obligation." (citing CISG, supra note 1, arts. 49(1)(b), 47(1)).

The holding implies that avoidance may not be based on late delivery unless a Nachfrist period has been fixed and expired without performance. This implication could be interpreted as an effort by the court to preserve the contract by requiring use of Nachfrist before any avoidance based on delay, which is not an appropriate interpretation of the discretionary nature of Nachfrist under the CISG. Alternatively, the court's holding could be interpreted to require the setting and expiration of a Nachfrist period before avoidance based on a delay which is not, in itself, a fundamental breach. The latter seems to be a more appropriate interpretation of the holding, and is within the nature of Nachfrist under the CISG.

26. The damage claims may include loss of profit pursuant to Article 74, see infra text accompanying notes 52-63 for discussion of Nachfrist damage claims. See supra note 15 for text of Article 74 which delineates what damages may be claimed for breach of contract.

27. As indicated above, Nachfrist is designed to provide certainty. KLI needs this certainty immediately to be sure it may cover since there is no apparent fundamental breach. The quickest way to attain this knowledge, or the PRX2000, under these circumstances is through use of the Nachfrist procedure.

28. Although drafting with indication of avoidance is beneficial for strategic reasons, it also limits its KLI's options on March 11th. Nachfrist under the CISG allows the aggrieved party to choose upon expiration of the Nachfrist period whether to avoid, to not avoid, to offer another reasonable period, or to extend the period. The operative verb, "may" in Article 49, see supra note 10, provides latitude upon expiration of a properly executed Nachfrist period, see infra text at note 52 and following for post-expiration procedures. See also Fritz Enderlein & Dietrich Maskow, Int'l Sales Law 238 (1992) (explaining that Nachfrist under the Convention allows post-expiration choices in contrast to German domestic Nachfrist). But see Victor Knapp, Article 63 Commentary, Commentary on the International Sales Law: The 1980 Vienna Sales Convention 456, 461 (Lesale M. Bianca & Michael J. Bonell eds., 1987) (concluding that the aggrieved party, as in German domestic Nachfrist, must avoid at the end of the period).

Language indicating avoidance at the end of the period is not required to be in the Nachfrist notice. Knapp explains, "the [party] need not warn . . . that he will declare the contract avoided if the party has not performed within the additional period of time fixed." Id. at 461.

However, one must remember that parties to a CISG governed contract may not be fully aware of the effects of the Nachfrist procedure, especially if one party is in a common law jurisdiction and unfamiliar with the Nachfrist procedure. It may seem like overkill to warn the other party that avoidance is an option at the end of the period, and the parties should know of the procedure and its operation since the contract is governed by the CISG. However, by including a statement that the contract will be avoided upon expiration of the Nachfrist period, the notice is serving at least two purposes. First, the party is operating in good faith and with full communication by informing the other party of the possible outcome. Second, by making the statement, the party may persuade performance, as is the intent for including the avoidance statement in KLI's notice. Though there is no definitive statement on this issue in the Convention, the omission of such a requirement in the Nachfrist provisions confirms Knapp's conclusion that a Nachfrist notice need not contain a statement of the available future actions to be effective.

29. See Celia R. Taylor, Self-Help in Contract Law: An Exploration and Proposal, 33 Wake Forest L. Rev. 839, 906 (1998) (proposing inclusion of a Nachfrist provision in the current revision of U.C.C. Article 2 and stating that a Nachfrist notice may cause parties to "re-open dialogue" since they know they have "a finite time to resolve the problem without third party interference. When Nachfrist leads to this result it shows its real value as a tool to enhance communications and to preserve the organic solidarity of the contract.").

30. The inclusion of this information may prompt UB to complete a further financial analysis on the costs of delivery and non-delivery. As suggested above, UB may already be operating under an efficient breach analysis because of the market conditions, but now must also consider the effects of a properly executed Nachfrist procedure in this efficiency analysis. The expense of non-performance, including litigation and market price differential, may outweigh the additional income UB has projected by breaching and, if so, UB should deliver under the efficient breach analysis, or renegotiate. See id. However, if it is still more profitable to breach the contract and litigate, UB will not deliver at any point, despite the effects of Nachfrist notice and avoidance.

31. All parties who invoke Nachfrist are bound to accept completion of performance during the period, see CISG, supra note 1, arts. 47(2), 63(2). See also supra note 4 and accompanying text for general discussion of inconsistent remedies.

However, it is consistent to suspend one's own performance when the Nachfrist procedure is invoked. Under Article 71(1), "a party may suspend performance of his obligations if . . . it becomes apparent that the other party will not perform a substantial part of his obligations. . . ." CISG, supra note 1, art. 71. Clearly, failure to deliver, pay the price, or take delivery satisfies the substantial part requirement and a party may suspend its performance during the Nachfrist period. But see Taylor, supra note 29, at 903 (concluding that Nachfrist requires continued performance during the additional period granted in the notice to further "the underlying goal of keeping contracts together.").

However, there is difficulty in applying Nachfrist and Article 71 together. First, Article 71 is designed for circumstances of anticipatory breach prior to the performance date. See CISG, supra note 1, art. 71. These are not the same circumstances under which one may invoke Nachfrist. By combining the two provisions in application, one is mixing a provision which operates on the basis of a breach already in existence and after the date for performance with a provision which operates when no breach has occurred and prior to the date of performance. This combination leads to confusion and reduces the certainty provided by the Nachfrist procedure. See also infra text at note 106 and following for similar difficulties when attempting to apply Nachfrist prospectively.

For example, by using Article 71 to suspend performance, the aggrieved party is, ostensibly, also granting the defaulting party the right to send adequate assurances during the Nachfrist period. See id., art. 71(3). If an assurance is received, then the aggrieved party must continue performance despite the application of Nachfrist and the existing failure of performance. See id. Clearly, this is not the intent of the Nachfrist provisions. However, these circumstances may lead to negotiation and achieve contract performance through agreement without completing the entire Nachfrist avoidance procedure. That is, the party in delay has assured that performance is forthcoming, providing a lower level of certainty than actual performance within the period. The aggrieved party could accept this assurance and not declare avoidance upon expiration of the Nachfrist period since the uncertainty has been clarified through the assurance.

However, if the future performance fails (which has its own set of issues concerning how the aggrieved party should respond to a further failure of performance since it has accepted the assurance and, arguably, nullified its Nachfrist notice by such acceptance) and litigation occurs, a court will be hard-pressed to determine which provision, if any, controls since the provisions are distinctly separate in timing, formality and application -- all of which have been collapsed by applying Articles 47 and 71 together. This outcome would injure the aggrieved party even further because of the extended delay through the adequate assurance procedure and subsequent failed performance.

To add to the confusion, and point out the difficulty of applying the provisions together, consider the situation where both parties are in delay, both have dispatched Nachfrist notices and both have suspended their own performance. Without subsequent agreement or litigation, the parties could, theoretically, continue the stand-off indefinitely and may be justified in this stand-off under the combination of Article 71 and the respective Nachfrist provisions. However, at some point the stand-off becomes absurd as both parties have yet to receive the bargained for exchange.

Additionally, the timing of a Nachfrist notice can prevent an aggrieved party from suspending its own performance because its performance may be complete on the contract date, depending on the form and time for performance. Under a Delivery Duty Paid ("DDP") INCOTERM, Int'l Chamber of Commerce, INCOTERMS 92-93 (1990), the seller is unable to invoke the Nachfrist procedure until the goods have arrived at the buyer's location, in fulfillment of the seller's obligation under the DDP term, and the buyer has failed to take delivery, or pay the contract price. In this and similar circumstances, suspension of performance is not an option for an aggrieved party, which makes the combination of Article 71 and Nachfrist non-uniform and inequitable.

Notwithstanding these difficulties, it appears that a party could meet the substantial part standard in Article 71 when facing a delay in delivery, payment of price or taking of delivery, and would be justified in suspending its own performance during the Nachfrist period. To do so would require sufficient notice of suspension under Article 71(3) in addition to the Nachfrist notice. If the defaulting party sends an adequate assurance based on Article 71, it is this writer's recommendation that the aggrieved party either refuse such assurance and execute the Nachfrist procedure as originally intended, or negotiate an agreement which fixes a final deadline for performance, after which delay becomes a fundamental breach. However, one must be aware that the first option is in direct contradiction to Article 71(3) which requires a party to continue performance upon receipt of adequate assurance, as discussed above.

32. See supra note 25 and accompanying text discussing the discretionary nature of Nachfrist under the CISG.

33. Language for the strategic warning and statement of future legal action should appear as something similar to:

"If the PRX2000 has not been delivered before the expiration of this fixed additional period of reasonable length, KLI will pursue, but is not limited to, declarations of avoidance and suit for avoidance remedies under the CISG including, but not limited to: cover, market price differential and loss of profit."

This statement will follow the language which fixes the additional period of reasonable length, see infra note 41 for this language.

34. CISG, supra note 1, art. 47.

35. A secondary issue in drafting the notice is the "fixing" of the period; see generally Honnold, supra note 17, 289, at 370 (explaining that language such as "promptly" does not fix the Nachfrist period). See also Michael Will, Article 47 Commentary, Commentary on the International Sales Law: The 1980 Vienna Sales Convention 342, 345 (Lesale M. Bianca & Michael J. Bonell eds., 1987) ("In order to serve its purpose and to constitute a valid basis for so serious a remedy as avoidance, the notice must warn the seller that a deadline has been 'fixed'. . . . Strong invitations expressing something like 'hope to receive the good soon' would certainly not suffice."); Albert H. Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods 395 (explaining that the period may be fixed by specifying either a date by which performance must be made, or a time period for completion of performance); David G. Fagan, The Remedial Provisions of the Vienna Convention on the International Sale of Goods 1980: A Small Business Perspective, 2 J. Small & Emerging Bus. L. 317, 342 (1998) (explaining that notification which uses language such as "looking forward to receiving the unit and would be grateful if it could arrive by March 1, 1998" fails to meet the requirements of a Nachfrist notice) (citations omitted).

36. See OLGZ Celle, UNILEX No. 20 U 76/94 (May 24, 1995) (unpublished) (holding that 11 days was a reasonable Nachfrist period in a two installment contract, see infra note 83 and accompanying text for further discussion of this case) [hereinafter Judgment of May 24, 1995]. See also International Court of Arbitration of the International Chamber of Commerce, UNILEX No. 7585/1992 (1992) (unpublished) (implicitly holding that 3 months was a reasonable 'Nachfrist' period); Albert H. Kritzer, CISG Case Presentations: ICC, UNILEX, No. 7585/1992, Editorial Remarks "http://www.cisg.law.pace.edu/cisg/wais/db/cases2/927585i1.html" (visited May 21, 1999).

The arbitrator was incorrect in holding that the period of time elapsed prior to the declaration of avoidance was the equivalent of an expired Nachfrist period. A Nachfrist notice was never drafted, yet the arbitrator found that the 3 month period was equivalent to fixing a reasonable 'Nachfrist' period of 3 months. The seller's wait, "entitled the seller to avoid the contract pursuant to Art. 64(1)(b) CISG." Id.

This decision is in direct conflict with the statutory requirements of Nachfrist under the Convention and should not be relied upon for procedural insight. It is also of questionable worth in determining the reasonableness of a Nachfrist period because of the procedural failure. However, this decision is one of only two reported cases which indicates the length of a reasonable Nachfrist period under the Convention, and may be of some guidance in determining an outer parameter when fixing the length of a Nachfrist period.

37. Enderlein & Maskow, supra note 28, at 183. Enderlein and Maskow suggest the following factors from the seller's point of view: "possibilities and costs for storage of the goods . . . and price developments. . . ." Id.

38. See Taylor, supra note 29, at 906.

39. Honnold, supra note 17, 289, at 370-71 (citations omitted).

40. See Judgment of May 24, 1995, supra note 36 (holding that 11 days was a reasonable Nachfrist period).

41. Language fixing the Nachfrist period should read something similar to:

"KLI fixes an additional period of time of reasonable length of ten days (seven days from dispatch of this notice), commencing on the original performance date of March 1st and concluding on March 11th, for delivery of the PRX2000."

The inclusion of the statutory language from Article 47 is intentional. By using the Convention's language, KLI can be certain that UB and a court, if litigation ensues, recognize this instrument as a Nachfrist notice. This language would be immediately followed by the language at supra note 33 indicating the actions on the 11th if no performance is forthcoming.

42. See Secretariat Commentary, supra note 6 (regarding certainty).

43. See infra notes 72-76 and accompanying text for discussion of circumstances where the same period may be found unreasonable.

44. Article 27 provides:

"Unless otherwise expressly provided in this Part of the Convention, if any notice, request or other communication is given or made by a party in accordance with this Part and by means appropriate in the circumstances, a delay or error in the transmission of the communication or its failure to arrive does not deprive that party of the right to rely on the communication." CISG, supra note 1, art. 27.

See generally Honnold, supra note 17, 189, at 265 (discussing further the application of Article 27 within the Convention). Often, this rule is referred to as either the dispatch, or mailbox rule. KLI could also rely on the notice's effectiveness when the notice is mailed, if KLI used the postal service instead of the fax machine. However, if KLI was to mail instead of faxing the notice, the notice would arrive much later and may make the reasonable period fixed in the notice unreasonable.

45. Knapp, supra note 28, at 460 (citations omitted); see also Fagan, supra note 35, at 343 (concluding that Nachfrist operates under the receipt rule and citing Knapp for that proposition).

46. Knapp, supra note 28, at 460.

47. Enderlein & Maskow, supra note 28, at 237. See also Kritzer, supra note 35, at 399 (confirming the majority view and explaining, "pursuant to Article 27, if the Nachfrist notice is made by 'means appropriate in the circumstances,' it is effective even if it does not arrive or is delayed or contains errors in transmission."). See also Will, supra note 35, at 345 examining the legislative history to find that:

"a proposal to require that the seller receive notice was rejected on the ground that the additional period of time was a privilege which the buyer accorded the seller. No better fared the proposal requiring dispatch of the notice. The majority thought that the term 'fix' was perfectly clear in itself and implied written or oral communication as governed by Article 27."

However, intentional errors in transmission of a notice would preclude reliance on the notice and it would not be effective.

48. Honnold, supra note 17, 351, at 441 n.2 (emphasis added) (citations omitted). Honnold's comments are a direct response to Knapp's position that Nachfrist requires receipt by the defaulting party to be effective.

49. See CISG, supra note 1, arts. 47, 49, 63, 64.

50. See Secretariat Commentary, supra note 6.

51. CISG, supra note 1, arts. 47, 63.

52. As discussed supra in text and accompanying notes 28-31, inclusion of the intent to avoid and cover in KLI's Nachfrist notice should bind KLI to that course of action upon expiration of the period, if no performance has occurred. Even though this statement was included for strategic purposes, it actually provides KLI with more certainty than a typical Nachfrist notice which only fixes the period without indication of later actions. KLI's choices have been made and its course determined by dispatching the first notice with inclusion of the intent to avoid and cover if the PRX2000 is not delivered.

However, one could plausibly argue that the discretionary nature of Nachfrist under the CISG and the Convention's emphasis on preservation of the contract should be interpreted to allow KLI the freedom to choose from the courses of action open to an aggrieved party at the end of a Nachfrist period, despite the inclusion of the intent to avoid and cover in the notice.

53. CISG, supra note 1, art. 47(2).

54. See Kritzer, supra note 35, at 414; Honnold, supra note 17, 291, at 372.

55. Article 47(2) requires receipt of this declaration of non-performance to the exclusion of Article 27's dispatch rule.

56. Article 75 provides:

"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74." CISG, supra note 1, art. 75.

57. Article 74 sets forth the damages available to the non-breaching party as "as sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach" subject to a foreseeability limitation. Id. art. 74. See supra note 15 for the full text of Article 74.

58. Article 77 provides:

"A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated." Id. art. 77.

59. Id. arts. 49(2), 63(2).

60. See ICC, UNILEX, No. 7197/1992 (1992) (unpublished) [hereinafter ICC Case No. 7197]. The abstract states, "the seller would have been entitled to avoid the contract under Article 64(1)(b) C.I.S.G. only if it had declared its intention to do so and had given notice to the buyer pursuant to Article 26 C.I.S.G." Id. The seller lost the ability to avoid after an appropriate Nachfrist notice had been dispatched and expired because no notification of avoidance was made pursuant to Article 26.

61. See supra note 22 for the text of Article 26 which requires notice for avoidance to be effective.

62. Articles 49(2)(b)(ii) and 63(2)(b)(ii) both require prompt declaration of avoidance pursuant to the Nachfrist procedure, but do not add clarification to the procedure. Article 49 provides in relevant part:

"(2) however, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so: * * * (b) in respect of any breach other than late delivery, within a reasonable time: * * * (ii) after the expiration of any additional period of time fixed by the buyer in accordance with paragraph (1) of article 47, or after the seller has declared that he will not perform his obligations within such an additional period." CISG, supra note 1, art. 49(2)(b)(ii).

See also Will, supra note 35, at 369 (describing Article 49(2)(b)(ii) and (iii) as "mere applications of Articles 47(2) and 48(2), [which] seem redundant and ungracefully inflate Article 49."); Honnold, supra note 17, 308, at 387 (stating that the language of 49(2)(b)(ii), "perhaps unnecessarily, spells out the effect of certain important communications between the parties.").

The practical effect of this provision is a loss of the Nachfrist avoidance right if the aggrieved party does not avoid within a reasonable time after expiration of the Nachfrist period, or after receiving a declaration of non-performance. See also Kritzer, supra note 35, at 414; ICC Case No. 7197, supra note 60.

63. Article 81 provides in relevant part:

"(1) Avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract. (2) A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently." CISG, supra note 1, art. 81.

64. Id.

65. See supra notes 44-51 and accompanying text for discussion of Article 27's dispatch rule in relation to the Nachfrist procedure. See generally Honnold, supra note 17, 354, at 443 (explaining that declaration of avoidance is effective upon dispatch).

66. A "cure" during the period is essentially compliance with the Nachfrist notice which is considered as the first possible outcome, and will not be considered here. However, partial cure during the period, which may or may not be compliance with the Nachfrist notice, is considered infra at notes 102-05 and accompanying text with partial performances.

67. However, some courts may be receptive to an argument that the defaulting party is operating in good faith and preservation of the contract with the offer to cure. Hence, the aggrieved party should not avoid at the expiration of the Nachfrist period and should accept the offer to cure. However, this is an attenuated argument and appropriate application of the procedure in this circumstance should defeat this argument of good faith. Moreover, the aggrieved party has already invited completion of the contract by sending the Nachfrist notice and extending an additional period for performance, which could, in itself, be construed as an act of good faith and preservation of the contract.

68. See supra note 31 and accompanying text for similar tension with adequate assurances and suspension of performance during the Nachfrist period.

69. See supra note 28 for discussion of an aggrieved party's options upon the expiration of a Nachfrist period.

70. However, a court may hold, based on the certainty principle, that a second Nachfrist notice is required to invoke a second Nachfrist period in order to maintain procedural integrity.

71. The contract is governed by the CISG under Article 1 as the United States and Italy are both signatories to the Convention.

72. A custom or usage between the parties, or an international trade usage, which provides lengths of reasonable Nachfrist periods under these circumstances would be binding. See CISG, supra note 1, art. 9.

73. See supra note 41 for proposed language fixing the reasonable period of additional length under KLI's circumstances.

74. See supra note 37 and accompanying text for Enderlein and Maskow's suggested factors to determine the reasonable length of the period. From IDD's perspective, there may be circumstances similar to KLI's which could justify the short period of reasonable length.

75. See supra note 39 and accompanying text for Honnold's interpretation that the Convention requires a substantial ground for avoidance generally, and in Nachfrist application. If IDD was obligated by time-sensitive re-sale contracts, then a short Nachfrist period may be found reasonable under Honnold's standard.

76. CISG, supra note 1, art. 7.

77. The CISG would apply under Article 1 as the United States and China are both signatories.

78. The beginning of the Nachfrist period for the fourth installment may not occur until tomorrow as CCCC has until the end of the business day to complete a performance of the fourth installment.

79. As discussed supra at notes 11-13 and accompanying text, a fundamental breach occurs when a party is substantially deprived "of what he is entitled to expect under the contract. . . ." Id. art. 25.

80. Similar questions must be determined when a party is facing a partial performance in a single delivery contract and is considering Nachfrist for the remaining portion. However, like installment delays and Nachfrist, see infra notes 84-86 and accompanying text, the application of the Nachfrist procedure in partial performances is limited statutorily, see infra notes 102-05 and accompanying text.

81. See Exhibit 2 for general guidelines regarding the invocation of Nachfrist under combinations of time and percentage of delivery delayed.

82. See CISG, supra note 1, art. 25.

83. See Judgment of May 24, 1995, supra note 36 (holding that one Nachfrist notice was sufficient in setting one deadline for performance of the uncompleted portion of installment one and full performance of installment two. The Nachfrist period of 11 days was reasonable and avoidance was justified when the seller did not complete performance prior to expiration of the period); see also Judgment of August 21, 1995, supra note 24 (holding that one notice was sufficient in a two installment contract, and the expiration of the Nachfrist period justified avoidance of the entire contract); but see Amtsgericht Oldenburg in Holstein, UNILEX, No. 20 U 76/94 (Apr. 24, 1990) [hereinafter Judgment of April 24, 1990] (holding that a Nachfrist notice must be sent for each delayed installment to later avoid the contract on the basis of delay).

84. Article 73 provides:

"(1) In the case of a contract for delivery of goods by instalments, if the failure of one party to perform any of his obligations in respect of any instalment constitutes a fundamental breach of contract with respect to that instalment, the other party may declare the contract avoided with respect to that instalment. (2) If one party's failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude that a fundamental breach of contract will occur with respect to future instalments, he may declare the contract avoided for the future, provided that he does so within a reasonable time. (3) A buyer who declares the contract avoided in respect of any delivery may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries if, by reason of their interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract." CISG, supra note 1, art. 73 (spelling is as appears in original).

85. See id.

86. Flechtner, supra note 3, at 89. See also Honnold, supra note 17, 400, at 501 n.3 (concluding that Article 73(2) and (3) exclude the application of Nachfrist, but stating "[i]t is not so clear that Art. 73(1) excludes the Nachfrist notice when (e.g.) delivery of an installment or the establishment of a letter of credit is overdue.") (citing Flechtner).

87. However, if the delay is significant, yet not fundamental, Nachfrist may offer an alternative route to avoidance, despite the limitations of Article 73.

Nachfrist is designed to provide certainty when an aggrieved party is unsure if the delay constitutes a fundamental breach by making the delay equivalent to a fundamental breach for avoidance purposes. See supra note 18 and accompanying text. This purpose and Article 73's limitations on avoidance of installment contracts combine to provide the following five general applications of Nachfrist in installment contracts.

First, if the delay of a single installment is a fundamental breach of the contract, Nachfrist could be used to set an additional period and to avoid upon expiration when no performance occurs. The aggrieved party could also immediately avoid on the basis of fundamental breach, and the Nachfrist procedure is unnecessary to create an alternative ground for avoidance. But, the procedure should be used if the aggrieved party wishes to extend the opportunity to perform while still controlling the date when it may avoid if no performance is rendered.

Second, if the delay of a single installment is not a fundamental breach of the entire contract, then Nachfrist could be used to avoid that single installment. Nachfrist could not be used to avoid the entire contract under these circumstances according to Article 73(1). However, this limitation is inconsistent with Nachfrist which is designed to alleviate uncertainty when the initial breach is not fundamental, and provides an alternative route to avoidance after expiration. Article 73, apparently, precludes this route of avoidance of the entire contract, but does not preclude application of the Nachfrist procedure to the outstanding installment(s).

To rebut this apparent preclusion of application to the entire contract, one could argue that Nachfrist creates the equivalent of a fundamental breach from an initial and significant breach of one of the three primary contractual obligations. See supra note 19 and accompanying text. When the installment is not delivered within the additional period fixed, the failure of this primary contractual obligation becomes equivalent to a fundamental breach and, thus, justifies avoidance of the entire contract. This argument would only be viable with an initial delay which is close to satisfaction of the substantial deprivation standard in Article 25, but not clearly fundamental.

Third, if the delay of the installment is a fundamental breach of only that installment, then Nachfrist could be used to avoid that installment. Similar to the first instance, Nachfrist is unnecessary, as the party may avoid this installment on the basis of fundamental breach without using the Nachfrist procedure, but may wish to use Nachfrist to provide an additional period for performance. See Article 73(1).

Fourth, if the delay is not a fundamental breach of the installment, nor of the contract, then Nachfrist can be used to set a deadline for completion of that installment's performance. Using the concept of severability to isolate the delayed installment, one can see how this situation is similar to Nachfrist in a single delivery contract. However, upon expiration, only the single installment can be avoided.

Fifth, if a party is facing delay of multiple installments, Nachfrist should allow an initial, significant, but not fundamental, cumulative delay to become the equivalent of a fundamental breach for purposes of avoidance. See Judgment of May 24, 1995, supra note 36. The cumulative delay faced by CMOC is significant, but not clearly fundamental. Using this delay as the basis for invocation of Nachfrist, expiration with no performance should become the equivalent of a fundamental breach for avoidance purposes of the entire contract. However, if the initial delay was something less than significant, this application would be precluded by 73(1). Furthermore, Article 73's restrictive language could be interpreted to preclude this argument in circumstances similar to those of CMOC.

88. However, this application is open to criticism and may be precluded by Article 73. See supra notes 83-87 and accompanying text.

89. See Exhibit 2 for general guidance on the decision to invoke Nachfrist when faced with these types of circumstances.

90. See Judgment of May 24, 1995, supra note 36.

91. Id.

92. Id.

93. See Judgment of April 24, 1990, supra note 83. The contract in this dispute contained an ambiguous term which provided, "to be delivered July, August, September / -." Id. The first delivery was attempted on September 26th (the 85th day of a 90 day term), the buyer refused to accept the goods, and avoided based on the delay. The seller initiated action against the buyer and the buyer defended that the seller had not delivered on time. The court found, despite the extremely late first delivery attempt, that the buyer was required to fix a Nachfrist period for each delayed installment.

94. In contrast to one notice setting a final period for performance of all installments, or one notice setting individual periods for each delayed installment, as recommended above, multiple notices would leave a party with multiple, successive period expiration dates after which the aggrieved party would be justified in resorting to avoidance of each installment. Would this court then also require multiple avoidance declarations as each Nachfrist period expires?

The Nachfrist procedure is designed to benefit the aggrieved party and this decision places an unrealistic and inefficient burden on aggrieved parties who wish to use the Nachfrist procedure in installment contracts. It also confuses the application of a procedure designed to eliminate confusion and provide certainty.

95. See id.

96. See id.

97. Id.

98. See CISG, supra note 1, arts. 49, 64, 73.

99. See id. art. 73.

100. See id.

101. However, one must remember that a court may find unjustified avoidance if it does not agree that the aggrieved party had sufficient grounds to avoid after the expiration of the Nachfrist notice, because the initial delay was not substantial enough to employ Nachfrist and then avoid at the end of the additional period.

102. Id. art. 51(2).

103. Secretariat Commentary, supra note 6, art. 47(2) [draft counterpart of art. 51(2)]. See also Honnold, supra note 17, 288, at 369 n.2; Enderlein & Maskow, supra note 28, at 183 ("The possibility to fix a Nachfrist was rejected in the case of . . . trivial defects [to avoid situations where trivial defects] could be converted into fundamental breaches. A Nachfrist can however be set if parts are missing in a delivery.").

104. Flechtner, supra note 3, at 72-73.

105. Id. at 88 (explaining, "[i]f a seller fails to deliver an immaterial portion of the goods, the buyer cannot use the Nachfrist procedure to create grounds for avoiding the contract in its entirety. . . . Under Article 51(2), the partial delivery deprives the buyer of the advantages of the Nachfrist procedure. The buyer must wait until it is sure that the seller's delay in completing delivery amounts to a fundamental breach before it can avoid the contract. Nachfrist was designed to eliminate such uncertainty.") (emphasis added).

106. Enderlein & Maskow, supra note 28, at 237.

107. To have an additional period, one must necessarily have a first period due to the linear nature of time. The contract period for performance is the first period, and the Nachfrist period is the second, or additional, period.

108. The related avoidance provisions, Articles 49 & 64, limit Nachfrist avoidance to these three circumstances. See CISG, supra note 1, arts. 49, 64. See also supra note 19.

109. See CISG, supra note 1, arts. 47, 63.

110. See id. arts. 47, 49, 63, 64.

111. See id.

112. Enderlein & Maskow, supra note 28, at 237.

113. Additionally, prospective Nachfrist is not a valid procedure in German domestic law, from which Nachfrist under the CISG originated. See Manfred Pieck, A Study of the Significant Aspects of German Contract Law, 3 Ann. Surv. Int'l & Comp. L. 111, 122 (1996) (explaining that in domestic German law Nachfrist is allowed "only after the debtor is already Verzug." Verzug is the state of non-performance where "the debtor's fault is responsible for the delayed performance.").

Although Nachfrist under the CISG is different than German domestic Nachfrist in many aspects, the timing of invocation is identical because both procedures serve the same purpose: to provide certainty when a party is facing delay. See supra note 6. Nachfrist under the CISG, like German domestic Nachfrist, is available only after non-performance of one of the three basic duties because this uncertainty exists only after a delay in performance. Therefore, prospective Nachfrist is not an appropriate procedure under German domestic law, nor under the CISG.

114. See Knapp, supra note 28, at 459 (concluding that Nachfrist is available "only after the failure to perform by the date in the contract.").

115. Enderlein & Maskow, supra note 28, at 237.

116. See supra note 31 and accompanying text for a discussion of anticipatory breach circumstances and Nachfrist.

117. Compare CISG, supra note 1, arts. 47, 49, 63, 64 with arts. 71, 72.

118. See supra note 31 and accompanying text.

119. See supra note 31 and accompanying text.

120. Knapp, supra note 28, at 459.

121. However, if a party requires performance on the contract date, and that performance date is made later by a prospective Nachfrist, then the party will not receive timely delivery as negotiated in the bargained for exchange. Furthermore, if one party is facing a rapidly diminishing re-sale market, then the later date for performance will decrease its profits upon re-sale. If a practitioner receives a prospective Nachfrist, she should immediately reject this notice and deny all effects of the notice in writing through immediate notice to the dispatching party.

Furthermore, if prospective Nachfrist is valid under the Convention, then a party who foresees its own delay in performance could send a Nachfrist notice fixing an additional period for performance of the other party's duties, thereby, extending the original contract date to its own advantage. Upon receipt of this prospective notice, the practitioner should also immediately reject the notice and deny all effects through notice to the dispatching party.

However, if this prospective Nachfrist also benefits the party receiving the notice, one may not want to deny the extension of the date for performance. Immediate notice should be dispatched that the prospective Nachfrist will be treated as an offer to modify the terms of the contract, which is accepted as a modification of terms, and has no effect as a Nachfrist notice. A statement to this effect will protect against later misinterpretation of intent and provides clear indication that this notice was not accepted as a prospective Nachfrist, but as a modification of contract.

122. See supra note 7 for discussion comparing the Nachfrist procedure and common law time of the essence provisions.

123. However, a court may remedy this problem by requiring an extended period of reasonable time for performance, if the issue is litigated.

124. Since an appropriate determination of reasonableness in prospective Nachfrist is logically impossible because it is drafted prior to delay and the factors of delay are unknown, see text accompanying infra note 132 and following, it would appear that a party may send a prospective Nachfrist setting an additional period of one day. Thereby imputing a time of the essence term and sacrificing only 24 hours in possible delay, while reaping the advantage of a time-sensitive contract which can be avoided immediately for delay in one of the three primary obligations covered by Nachfrist. However, a court should find that the 24 hour period is not reasonable, especially considering this is prospective Nachfrist, and should not validate this procedure under these circumstances.

125. Enderlein & Maskow, supra note 28, at 237-38.

126. See CISG, supra note 1, arts. 47, 63.

127. See supra note 6 and accompanying text for Secretariat Commentary regarding the certainty function of Nachfrist.

128. See supra text accompanying notes 120, 125.

129. See CISG, supra note 1, arts. 47(2), 63(2).

130. Enderlein & Maskow, supra note 28, at 237-238.

131. Circumstances may arise where a party signals possible non-performance and then remedies the difficulty prior to the date for performance. This is the exact situation to suspend performance, or request an adequate assurance, not to invoke Nachfrist. See CISG, supra note 1, arts. 71, 72.

132. Id. arts. 47(1), 63(1).

133. Enderlein & Maskow, supra note 28, at 238.

134. See supra note 37 and accompanying text.

135. See Taylor, supra note 29, at 906.

136. The usefulness and functionality of Nachfrist has led some scholars to suggest that the U.C.C. may benefit from a Nachfrist provision. See E. Allan Farnsworth, The American Provenance of the Unidroit Principles, 72 Tul. L. Rev. 1985, 1994 n.46 (1998) (concluding that the Nachfrist procedures under the CISG and the UNIDROIT Principles deserve "serious consideration in any revision of our domestic law."); Taylor, supra note 29, at 907 (recommending inclusion of a Nachfrist provision in Article 2 of the U.C.C. because it "would increase availability of information about a party's expectations, encourage rational and efficient contract behavior, and comport with the efforts of the current revision of that article").


Pace Law School Institute of International Commercial Law - Last updated October 9, 2000
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