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Cite as Knapp, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 549-551. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 75

Victor Knapp

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

ARTICLE 75

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.

1. History of the provision

     1.1. - Article 75 of the Convention corresponds to Article 85 of ULIS which was placed under the heading «Damages where the contract is avoided». Article 85 of ULIS read:

If the buyer has bought goods in replacement or the seller has resold the goods in a reasonable manner, he may recover the difference between the contract price and the price paid for the goods bought in replacement or that obtained by the resale.

     1.2. - The wording of Article 75 of the Convention is similar to that of Article 85 of ULIS; however there are two distinctions which merit mention. First, Article 85 of ULIS did not require the substitute transaction to be made within a reasonable time nor did it mention the recover of «any further damages». There is, however, no real difference here between the two provisions. The condition that the substitute transaction should be made within a reasonable time was apparently considered to be self-evident, as following from the condition of a reasonable manner. The right of the injured party to claim «any further damages» followed from Article 86 of ULIS, even if not expressly mentioned in Article 85.

2. Meaning and purpose of the provision

     2.1. - If the contract is declared avoided for breach by the buyer, the seller is free to resell the goods. As a rule, it will be in his [page 549] interest to do so. Analogously, if the contract is avoided for breach by the seller, the buyer will be interested in purchasing the same goods from another seller if possible. If the non-breaching party succeeds in reselling or replacing the goods, his effective loss will thereby be diminished. Article 75 takes this into account and sets forth special rules for calculating damages in such cases.

     2.2. - In cases covered by Article 75 the injured party may recover only the difference between the contract price and the price in the substitute transaction (except for further damages recoverable under Article 74). In other words, the seller may recover the difference between the contract price and the price obtained for the resold goods, provided that this price is lower than the price under the contract; the buyer may, recover the difference between the contract price and the price paid for the replacement goods, provided that the latter is higher than the price under the contract.

     2.3. - If the substitute transaction occurs in a place different from that of the original transaction or is on different terms, the amount of damages must be adjusted to compensate for any increase in costs (such as increased transportation) less any expenses saved as a consequence of the breach.

     2.4. - Article 75 provides that the injured party can rely on the difference between the contract price and the price in the substitute transaction only if the resale or cover purchase was made in a reasonable manner. For the substitute transaction to have been made in a reasonable manner within the context of Article 75, it must have been made in such a manner as would be likely to bring the highest price on resale reasonably possible in the circumstances or a cover purchase at the lowest price reasonably possible. Therefore, the substitute transaction need not be on identical terms of sale in respect of such matters as quantity, credit or time of delivery as long as the transaction that was in fact in substitution for the transaction was avoided.

     2.5. - It should also be noted that, in order to be the basis for calculating damages under Article 74, the resale or the cover purchase must be made within a reasonable time after avoidance. [page 550] Hence, the reasonableness of the period of time for the resale or the cover purchase will not begin until the injured party has in fact declared the contract avoided.

     2.6. - If the resale or cover purchase is not made in a reasonable manner or within a reasonable time after the contract is avoided, damages would be calculated as though no substitute transaction has taken place. Therefore, resort would be made to Article 76 and, if applicable, to Article 74.

     2.7. - Article 75 recognizes that the injured party may incur further damages which would not be compensated under the basic formula. These further damages are recoverable under Article 74 (see commentary on Article 74, supra, § 3.1.).

3. Problems concerning the provision

     3.1. - Article 75 applies only if the seller has in fact resold the goods or if the buyer in fact purchased replacement goods. The possibility of reselling the goods or of purchasing replacement goods will not justify the application of Article 75. However, if the seller or the buyer fails to avail himself of such an opportunity, it could be considered as a failure to take measures to mitigate the loss, as required by Article 77 (see commentary on Article 77, infra).

     3.2. - Neither the seller nor the buyer is obliged to await the reasonable period of time under Article 75 in order to claim damages. They are entitled to claim damages immediately after they have accrued. Such a claim will be considered, respectively, under Article 74 or Article 76. However, if the seller resells the goods or the buyer purchases the replacement goods during the course of the lawsuit, the claim for these damages will then be considered under Article 75, provided that a reasonable time thereunder has not yet elapsed. [page 551]


Pace Law School Institute of International Commercial Law - Last updated February 9, 2005
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