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Cite as Knapp, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 456-464. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 63

Victor Knapp

1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision

ARTICLE 63

(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.

1. History of the provision

     1.1. - Provisions analogous to Article 63 are found in Article 62(2) and Article 66(2) of ULIS, which read, respectively:

Article 62(2):

Where the failure to pay the price at the date fixed does not amount to a fundamental breach of contract, the seller may grant to the buyer an additional period of time of reasonable length. If buyer has not paid the price at the expiration of the additional period, the seller may either require the payment of the price by the buyer or, provided that he does so promptly, declare the contract avoided.

Article 66(2):

Where the failure to take delivery of the goods does not amount to a fundamental breach of the contract, the seller may grant to the buyer an additional period of time of reasonable length. If the buyer has not taken delivery of the goods at the expiration of the additional period, the seller may declare the contract avoided, provided that he does so promptly.

     1.2. - Article 63 of the Convention differs substantially from Articles 62(2) and 66(2) of ULIS. The main differences are the following. [page 456]

  1. Article 63 of the Convention concerns all kinds of the buyer's breach of contract (but see §§ 3.1. et seq., infra). Article 62(2) and 66(2) of ULIS distinguished expressly between failure to pay the price and failure to take delivery and limited the seller's right to grant the buyer an additional period of time to breaches involving failure to pay and failure to take delivery only.

  2. Under Articles 62(2) and 66(2) of ULIS the seller had the right to grant the buyer an additional period of time only if the buyer's breach of contract did not amount to a fundamental breach. There is no such limitation of the seller's right in the Convention.

  3. ULIS did not provide for notice by the buyer that he will not perform the additional period of time.

  4. In contradistinction to Article 63 of the Convention, neither Article 62(2) nor Article 66(2) of ULIS expressly declares any inconsistency with other remendies during the additional period of time. Such an inconsistency tacitly flows, however, from the second sentence of Article 62(2) and from Article 66(2).

  5. Article 66 of the Convention does not require the seller to declare the contract avoided promptly. This limitation of the seller's right to avoid the contract after the expiration of the additional period of time granted the buyer is found in Article 64(2)(b)(ii) of the Convention.

     1.3. - The text of the present article corresponds to that of Article 58 of the UNCITRAL Draft Convention. The Vienna Conference adopted the draft provision without any amendment. The solution regarding the right of the seller to avoid contract because of the buyer's failure to pay the price or perform his other obligations on the date specified in the contract differs from that adopted in many national legal systems. In some legal systems, the buyer's failure to perform on the contract date authorizes the seller, without any other condition, to avoid the contract. However, in a given case the judge or arbitrator may annul the seller's avoidance of the contract or decide that the seller may not avoid the contract at the time because the failure to perform on the contract date was either not sufficiently serious or the seller had waived his right to prompt performance. In some legal systems the contract cannot be avoided at all by a [page 457] declaration of the parties; a declaration or decision of a tribunal is needed to allow avoidance. In other systems the buyer can request a delay of grace from a court or arbitral tribunal which, in effect, establishes a new performance date. In still other legal systems the general rule is that late performance does not authorize the seller to avoid the contract unless after the buyer's breach, the seller specifically fixed a time period within which the buyer had to perform.

     1.4. - This Convention specifically rejects the idea that in a commercial contract of sale of goods the seller may, as a general rule, avoid the contract if the contract date for performance has passed and the buyer has not yet performed one or more of his obligations. In these circumstances the seller may do so if, and only if, the failure to perform on the contract date amounts to a fundamental breach of contract (see Article 25), when the buyer does not perform his obligation within an additional period of time, and when buyer notifies the seller that he will not perform within the period so fixed.

2. Meaning and purpose of the provision

     2.1. - The buyer's failure to perform the contract does not, even in case of a fundamental breach of contract, cause an ipso facto avoidance of the contract. Still, the seller has the right to require the buyer to fulfil his obligation (see Article 62) and, of course, to sue for enforcement of his right. However, judicial procedures for enforcement may not seem infeasible or may require more time than the seller can afford to wait. This may be the case particularly if the buyer's failure to perform consists of delay in procuring the issuance of documents assuring payment, such as a letter of credit or a banker's guarantee, or of securmg the permission to import the goods or pay for them in restricted foreign exchange. It may be to the seller's advantage to avoid the contract and make a substitute sale to a different purchaser. However, it may be that at the time for performance specified in the contract, the buyer's failure to perform does not constitute a fundamental breach of contract justifying avoidance of the contract under Article 64(1)(b), or it may not be quite certain as to [page 458] whether it does. Therefore, the Convention gives the seller the choice between the recourse to judicial procedures and the remedy provided in Article 63 which will eventually enable him to avoid the contract without necessarily making recourse to a court.

     2.2. Article 63 is a companion to both Article 62 and 64: the former is its point of departure and the latter (as in subparagrah (1)(b)) its aim. Article 63 allows the seller to postpone unilaterally the date for performance of the buyer's obligations and yet preserve the legal consequences of the buyer's delay. Thus, if the seller resorts to the remedy provided in Article 63(1), the date of performance of the given obligation of the buyer is postponed, but the buyer remains in delay starting from the original date for performance.

     2.3. - Although the seller can declare the contract avoided in any case in which the delay in performance constitutes a fundamental breach, this will not always be a satisfactory solution for him. Once the buyer is late in performing, the seller may be legitimately doubtful that the buyer will perform at the time that performance becomes essential for the seller. This situation is similar to the problems raised by an anticipatory breach under Articles 71, 72 and 73. Furthermore, in most contracts for the sale of goods it would be difficult to determine the point at which the detriment to the seller becomes sufficiently substantial to constitute a fundamental breach. Therefore, Article 63(1) authorizes the seller to fix an additional period of time of reasonable length for performance by the buyer of his obligations.

     2.4. - Certainly, the additional period of time for performance of the buyer's obligation can be granted to the buyer by the seller only after the latter's failure to perform by the date specified in the contract, that is, after the buyer has fallen into delay in performing. Prior to this date, no part to the contract is authorized to modify unilaterally the clauses of the contract. Hence, a unilateral postponement by the seller of the date of the performance of a contractual obligation by the buyer will not deprive the latter of this right to perform it at the date fixed in the contract. [page 459]

     2.5. - The additional term of performance under Article 63 does not change the buyer's obligation to perform on the date initially specified in the contract. It means only that the seller may not within the additional period resort to any other remedy for breach of contract nor sue for enforcement of his right to performance. However, his right to claim damages (and, when appropriate, interest) remains intact, and the seller is authorized to sue even for damages which occur during the additional period of time fixed for the buyer's performance.

     2.6. - The buyer may perform his obligation at any time prior to the expiration of the additional period of time fixed under Article 63.

     2.7. - Fixing an additional period of time under Article 63(1) is the seller's right, but not his obligation. As already discussed, the seller may sue for enforcement of his right without granting the buyer any additional term for performance. Similarly, if the failure by the buyer to perform his obligation amounts to a fundamental breach of contract, the seller is authorized to declare the contract avoided under Article 64(1)(a) without having any obligation to fix first an additional term of performance for the buyer. In this respect the procedure envisaged by Article 63(1) differs from the Nachfrist of the law of the Federal Republic of Germany and the mise en demeure under French law.

     2.8. - If the seller wishes to fix an additional period of time, he must do so by a notice addressed to the buyer. This notice can be written or oral and can be transmitted by any means. Given the purpose of this notice, it should be assumed, contrary to the general rule of Article 27, that the notice fixing an additional period of time for performance by the buyer does not become effective until it reaches the buyer (see § 2.11., infra).

     2.9. - The additional period of time for performance of the obligation by the buyer may be specified in the notice by the seller in different ways. It must, however, unequivocally state when the period of time so fixed expires. Thus, the additional period of time may be fixed either by specifying the date by which performance must be made (e.g., «September 30» or «by the [page 460] end of the next month» or «by the end of the 3rd quarter of this year») or by specifying a period of time (e.g., «within a month from today»).

     2.10. - A general demand by the seller that the buyer perform, or an uncertain demand that the buyer perform «promptly» or «as soon as possible», or a demand under an uncertain condition (incertus an or quando) as for example a demand that the buyer perform «at his discretion» or «as soon as he will have obtained the price for goods sold by him», will not constitute fixing an addition! period of time under Article 63(1). In such cases, the buyer's subsequent inaction will not give the seller the right to declare the contract avoided.

In fixing the additional period of time under Article 63 the seller need not warn the buyer that he will declare the contract avoided if the buyer has not performed within the additional period of time fixed.

     2.11. - The additional period of time under Article 63(1) must be of « reasonable length». Whether the additional period of time is reasonable is to be evaluated objectively with regard given to the commercial interests of both parties. That means that the seller will not be expected to grant the buyer an additional period of time longer than he could reasonably wait for performance. On the other hand, the additional period of time granted the buyer must not make it a priori impossible for him to perform his obligation within that period. So short a period of time will not be considered as an additional period of time under Article 63(1) and will not have the legal effect provided in Article 64(1)(b). Yet, it flows from the general principle of autonomy of the will of the parties that the seller may grant the buyer a longer than reasonable period of time for the performance of his obligation and that such a period of time will nevertheless be considered as an additional period of time under Article 63(1).

     2.12. - The reasonableness of the additional period of time should be measured from the time at which the buyer receives the notice fixing the period. If, for instance, the additional period of time has been specified by the seller as «within one [page 461] month from today», the reasonableness of the period so fixed will nevertheless be measured from the time at which the notice reached the buyer. Hence, if the notice never reaches him, the additional period of time under Article 63 never starts to run.

     2.13. - In order to protect the buyer who may be preparing to perform the contract as requested by the seller, perhaps at considerable expense, the seller may not resort to any remedy for breach of contract during the additional period of time. This is true unless he received notice from the buyer that he will not comply with the request. This suspension of other available remedies does not, however, concern the seller's right to claim damages for delay in performance (Article 63(2)) or his right to claim other damages under Article 74: These claims and their enforcement do not prevent the buyer from preparing to perform his obligations and there is no need, therefore, to protect him, during the additional period of time, against these claims. That means that the seller is authorized to claim damages at any time, even during the additional period of time under Article 63 and irrespectively of the notice of the buyer that he will not perform.

3. Problems concerning the provision

     3.1. - The question arises as to whether this remedy is available to the seller with respect to any of the buyer's obligations (see Article 63(1) «of his obligations») or exclusively as to the obligations to pay the price or to take delivery (see Article 64(1)(b)). It seems to follow from the general principle of autonomy of the will of the parties (see Article 6) that the seller may postpone the date of performance of any obligation of the buyer. Nonetheless, he may resort to the remedy provided in Article 64(1)(b) only if the obligations to pay the price or to take delivery are concerned.

     3.2. - For example, the seller is free to extend the period for examination of the goods by the buyer under Article 38(1), but he has no right to declare the contract avoided merely for the buyer's failure to perform this obligation within the additional period of time, unless it constitutes a fundamental breach of contract. [page 462] See also Article 65(2), in accordance with which the seller may fix a reasonable additional period of time within which the buyer may take a different specification. However, if the buyer fails to do so the seller has no right to declare the contract avoided. The only legal consequence of this failure is that the specification made by the seller will be binding (see commentary on Article 65, infra).

     3.3. - The additional period of time fixed by the seller can be extended by him before it expires, either with or without the buyer's request. If extended, non-performance within the additional period of time produces the legal effects provided for in Article 63(2) and especially in Article 64(1)(b).

     3.4. - Can the additional period of time be extended after it expires? Extension of any period already expired is impossibile. However, the seller may have the right to grant another additional period of time after the expiration of the previous one. The new additional period of time will have the same legal effects as the first one.

     3.5. - Notice under Article 63(2) of the buyer's intention not to perform must be addressed to the seller. It's effective when it reaches him. The question is whether the notice must be made in written form or may it also be made orally. A broad interpretation of Article 11 will lead to the conclusion that the notice under Article 63(2) need not be made in writing and that it may be transmitted by any means.

     3.6. - Another question is whether the notice under Article 63(2) must expressly state that the buyer will not perform within the additional period of time, or whether any notice will be sufficient if it can reasonably be interpreted as expressing such an intention. In accordance with the general rules of interpretation provided in Article 8, such an implicit notice should have the same legal effects as an explicit one. Thus, an express declaration by the buyer that he will not perform or that he will be unable to perform should produce the same legal effects as a vague declaration that he has lost the interest in the given contract. On the other hand, declarations by the buyer that he probably will not [page 463] perform, or that it is uncertain whether he will be able to perform, will not produce the effects provided in Article 63(2). A mere request of the buyer to prolong the additional period of time will also fail to produce such effects.

     3.7. - The notice concerns exclusively performance within the additional period of time fixed in accordance with Article 63(2). A similar notice from the buyer prior to the date of performance fixed in the contract, for example a notice that the buyer will not perform his obligation by that date and that there is no use granting him an additional term of performance, will not be considered as a notice under Article 63(2). It could, however, constitute an anticipatory breach under Articles 71 et seq. [page 464]


Pace Law School Institute of International Commercial Law - Last updated February 4, 2005
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