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Additional Period (Nachfrist) for Late Performance:
Perspectives from the CISG, UNIDROIT Principles, PECL and Case Law

[2nd edition: Case annotated update (March 2005)]

Chengwei Liu
LL.M. of Renmin University of China; E-mail: <lexway@mail.com>.

  1. Introduction
  2. The Nachfrist under CISG, UNIDROIT Principles and PECL
    2.1  A remedy of discretionary nature as opposed to domestic systems
    2.2  A remedy designed to remove a double uncertainty
    2.3  A remedy especially useful in eliminating uncertainties concerning the fundamental nature of a delay
    2.4  A remedy useful in many other cases
  3. Nachfrist Used to Pave the Way for Termination
    3.1  Making possible a termination for non-fundamental breach but only in a limited area
    3.2  The application of Nachfrist as a tool triggering avoidance
  4. The Service of a Nachfrist Notice
    4.1  A definite request for performance with a period fixed
    4.2  A period of reasonable length
    4.3  Termination in case of a period not of reasonable length
  5. Effects Following the Service
    5.1  Remedies suspended during the additional period
    5.2  Rights retained during the additional period
    5.3  Early end of the uncertainty in case of an express rejecting notice
    5.4  Termination upon the expiration
  6. Concluding Remarks

Key provisions at issue

The purpose behind the flexible remedy of Nachfrist is that the CISG, as one of its principles, attempts to keep the contract afoot as long as there is a possibility to perform contractual obligations. This is in line with the attempt to overcome some of the problems of distance, expense and time in having an international contract terminated where, operating under another general principle of the CISG, namely good faith, remedial action could have been possible, resulting in a win-win situation.[1]

1. Introduction

Various multilateral/international organizations have developed legal standards applicable to international sales contracts which have incorporated (or purported to incorporate) the concept of Nachfrist.[2] Among such standards are the United Nations Convention on Contracts for the International Sale of Goods (1980; "CISG" or "Convention"), UNIDROIT Principles of International Commercial Contracts (1994; "UNIDROIT Principles") and Principles of European Contract Law (1998; "PECL").

Briefly speaking, the Nachfrist procedure allows an additional period for performance by the party who did not perform at the date due under the contract. It is a companion of the remedy of specific performance which states the right to require performance of the contract by the non-performing party and which anticipates the aid of a court or arbitral tribunal in enforcing that right. If one party delays performing the contract, however, the judicial procedure for enforcement may not seem feasible or may require more time than the other party can afford to wait. It may consequently be to the aggrieved party's advantage to avoid the contract and make a cover transaction with a third party. However, at that time it may not be certain that the delay in performance constitutes a fundamental breach of contract justifying the avoidance of the contract.[3] Thus, the Nachfrist procedure is established in favor of the aggrieved party to relieve concerns arising in waiting for performance or to eliminate uncertainties concerning avoidance.

Among the three standards mentioned above, reference of Nachfrist can be above all made to CISG Art. 47/63 which generally defines the Nachfrist concept under the Convention. More importantly, CISG Art. 49(1)(b)/64(1)(b) authorizes the aggrieved buyer/seller to avoid the contract by the expiration of a Nachfrist, regardless whether or not a fundamental breach has occurred (in this context, it is usually discussed under the term "notice-avoidance"). These relevant rules state, respectively:

CISG Article 47

(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 that 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.

CISG Article 49(1)(b)

The buyer may declare the contract avoided [. . .] in the 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 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.

CISG Article 64(1)(b)

The seller may declare the contract avoided [. . .] if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed.

Arts. 47 and 49(1)(b), or Arts. 63 and 64(1)(b), are provisions which span both remedies through the principle of "Nachfrist", a principle that has been mainly borrowed from the German concept of Nachfrist (Section 326 of the German Civil Code (BGB)) as well as from the French procedure of mise en demeure.[4]

The two remedies spanned under Arts. 47 and 49(1)(b), or Arts. 63 and 64(1)(b) of the CISG are combined in UNIDROIT Principles Art. 7.1.5, which, "inspired by the German concept of Nachfrist although similar results are obtained by different conceptual means in other legal systems," deals with the situation "where one party performs late and the other party is willing to give extra time for performance."[5] It reads:

UNIDROIT Principles Article 7.1.5 (Additional Period for Performance)

(1) In a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance.

(2) During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages but may not resort to any other remedy. If it receives notice from the other party that the latter will not perform within that period, or if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that maybe available under this Chapter.

(3) Where in a case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period. If the additional period allowed is not of reasonable length it shall be extended to a reasonable length. The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate.

(4) Paragraph (3) does not apply where the obligation which has not been performed is only a minor part of the contractual obligation of the non-performing party.

Not only the UNIDROIT principles but also the PECL, has adopted a Nachfrist procedure in basically the same way as under the CISG. Of particular relevance, PECL Art. 8:106 is almost identical to UNIDROIT Principles Art. 7.1.5. It prescribes that:

PECL Article 8:106 (Notice Fixing Additional Period for Performance)

(1) In any case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance.

(2) During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages, but it may not resort to any other remedy. If it receives notice from the other party that the latter will not perform within that period, or if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that may be available under chapter 9.

(3) If in a case of delay in performance which is not fundamental the aggrieved party has given a notice fixing an additional period of time of reasonable length, it may terminate the contract at the end of the period of notice. The aggrieved party may in its notice provide that if the other party does not perform within the period fixed by the notice the contract shall terminate automatically. If the period stated is too short, the aggrieved party may terminate, or, as the case may be, the contract shall terminate automatically, only after a reasonable period from the time of the notice.

Thus, Zeller argues that the principle of Nachfrist must be viewed in two ways, firstly as a mandate within the CISG but secondly also as another example of the "sea change in the landscape of international trade." Not only is the concept of an "additional period of time" contained in basically the same form in PECL but also in the UNIDROIT Principles. In this context, it seems that it is the domestic systems of law and specifically the common law that is out of step with international developments. In view of the fact that the concept of Nachfrist has been included in various international laws, particularly in uniform international law, the CISG, and in international "Restatements" of the law, the PECL and UNIDROIT Principles, common law attorneys, writers or businessmen are well advised to become aware of the existence and basic content of the Nachfrist contained in such international laws, because they in a subtle way will be shaping the rules for contractual dealings in the future.[6] Thus, the following section 2 will firstly review some basic characteristics or functions of that concept.

2. The Nachfrist under CISG, UNIDROIT Principles and PECL

      2.1 A remedy of discretionary nature as opposed to domestic systems

Although it is noted that the CISG approach has been mainly borrowed from the German concept of Nachfrist as well as from the French procedure of mise en demeure, there are "significant differences between the German and French treatment of Nachfrist and the one accorded to in the CISG."[7]

Among other things, while the concept of Nachfrist in national commercial laws of civil law countries (especially German law) provides "an automatic extension" of time for the parties to a commercial contract to fulfill their obligations, neither CISG Art. 47 nor Art. 63 has mandatory application.[8] Similarly, nor has UNIDROIT Principles Art. 7.1.5 or PECL Art. 8:106 provided for an automatic application of Nachfrist; this may be inferred from the word "may" used in either article.

Two preliminary points are to be kept in mind in regard to the Nachfrist procedure contemplated under the CISG, UNIDROIT Principles or PECL:

  -   On the one hand, the aggrieved party may sue for enforcement (under the Convention, subject to Art. 28) of his right to require performance by claiming specific performance, with no obligation to grant first to the non-performing party any additional term for performance by a Nachfrist procedure; although the Nachfrist procedure has been designed to be a companion to the specific performance.
 
  -   On the other hand, of particular notice, termination is an act of the aggrieved party, not an act of a court or arbitrator. Provided there has been a fundamental non-performance or the other conditions for termination are met, the aggrieved party may terminate by giving notice of termination to the non-performing party;[9] also without having to first grant an additional period of performance for the breaching party.

In substance, it is a right falling within the discretion of the aggrieved party and thereby no automatic or mandatory extension has been contemplated. Knapp, for instance, states regarding the seller's right that: "Fixing an additional period of time under Article 63(1) is the seller's right, but not his obligation. [...], 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."[10] This understanding applies as well to the buyer's right under CISG Art. 47.

As already noted in the Secretariat Commentary, although the procedure envisaged by CISG Art. 47(1)/63(1) has a certain parentage in the German procedure of "Nachfrist" and the French procedure of a "mise en demeure," in its current form it does not partake of either one. In particular, the procedure envisaged by CISG Art. 47(1)/63(1) is not mandatory and need not be used in order to declare the contract avoided if the delay in performance amounts to a fundamental breach.[11] In view of the significant differences as regards the function of the Nachfrist, it is therefore submitted that paragraph 326 of the BGB [German Civil Code] may, at the very most, have served as an inspiration for the CISG. However, it certainly does not represent the provision upon which Arts. 47 and 63 of the CISG were modeled.[12] In this respect, both the UNIDROIT Principles and the PECL follow basically the CISG approach, and thus also differ from that adopted in national systems where automatic extension or mandatory grace is possible.

In any event, so far as the three instruments are concerned, "there is no need for the aggrieved party to serve a [Nachfrist] notice on the non-performing party in order to put the latter into breach."[13] Especially, unlike in some domestic systems, the aggrieved party is not obligated to serve a Nachfrist notice before exercising a remedy except in the case of termination for non-fundamental delay.[14] (This exception will be given details below in section 3.)

      2.2 A remedy designed to remove a double uncertainty

The Nachfrist procedure contemplated under the CISG, UNIDROIT Principles or PECL, recognizes, among other things, that late performance is significantly different from other forms of defective performance:[15]

"Late performance can never be remedied since once the date for performance has passed it will not occur again, but nevertheless in many cases the party who is entitled to performance will much prefer even a late performance to no performance at all. Secondly, at the moment when a party fails to perform on time it is often unclear how late performance will in fact be. The commercial interest of the party receiving performance may often therefore be that a reasonably speedy completion, although late, will be perfectly acceptable but that a long delayed completion will not. The procedure enables that party to give the performing party a second chance without prejudicing its other remedies (emphasis added)."

In view of the special characteristics of late performance, the Nachfrist procedure has been designed "to remove a double uncertainty": First, it removes the uncertainty about whether and when the belated performance will be rendered. If the aggrieved party could not fix a time limit, his right to claim performance would remain open-ended indefinitely. Second, it removes the uncertainty about whether the breach amounts to a fundamental breach. Without this certainty, it would be entirely at the aggrieved party's own risk if he declared the contract avoided by invoking the general rule (e.g., CISG Art. 49(1)(a)/64(1)(a)). Fear that his evaluation of a difficult situation might not be shared would make a cautious party (although a victim of non-performance) hesitate to avoid the contract. The Nachfrist procedure offers relief from that risk, leaving the aggrieved party with only the uncertainty of how to determine the "reasonable length" of the additional period (for details on this only "uncertainty", see section 4.2 below).[16]

Thus, it may be argued that the Nachfrist procedure is a companion to both specific performance (cf. CISG Art. 46/62) and avoidance (cf. CISG Art. 49/64): the former is its point of departure and the latter (so-called "notice-avoidance"as in Art. 49(1)(b)/64(1)(b)) its aim.[17] Indeed, "the opportunity by advance notice to clarify the situation for both parties has received widespread international approval; the basic utility of this legal tool was never seriously questioned in the UNCITRAL proceeding or at the Diplomatic Conference."[18]

      2.3 A remedy especially useful in eliminating uncertainties concerning the fundamental nature of a delay

Since every avoidance of contract can entail additional expenses and risks, the ceiling for exercising this right should be raised high.[19] Thus, the Convention (basically the same idea underlying the UNIDROIT Principles or PECL) specifically rejects the idea that in a commercial contract the aggrieved party may, as a general rule, avoid the contract once the contract date for performance has passed and the other party has not yet performed one or more of his obligations. In these circumstances the aggrieved party may do so if, and only if, the failure to perform on the contract date constitutes a fundamental breach.[20]

However, at the moment when a party fails to perform on time it is often unclear to the aggrieved party how late performance will in fact be;[21] especially, it is uncertain whether the breach would constitute a fundamental breach to justify the termination. As the Secretariat Commentary notes in this respect, although the aggrieved party 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 other party is late in performing, the aggrieved party may be legitimately doubtful that the other party will be able to perform by the time that performance will be essential for him. This situation is similar to the problems raised by an anticipatory breach (cf. CISG Arts. 71, 72 and 73). Furthermore, in most contracts for the sale of goods, the point of time at which the detriment to the aggrieved party would become sufficiently substantial to constitute a fundamental breach would be somewhat imprecise.[22]

Such uncertainties, however, can be solved by an instrument like Nachfrist. Specifically under the Convention, Art. 47(1) entitles the buyer to fix an additional period of time within which the seller is requested finally to perform its obligations. The provision thus complements the right to require performance under Art. 46, but it is particularly relevant to the right to terminate the contract under Art. 49. In fact, the provision has practical importance only under the latter provision since Art. 49(1)(b) provides that once the additional period of time fixed in accordance with Art. 47 expires, the buyer can declare the contract avoided. Thus the fixing of an additional period of time paves the way for the termination of the contract.[23] Similarly, in granting the seller the right to fix an additional period of time, Art. 63 is in fact giving him the same right as that granted to the buyer under Art. 47: the two provisions are conceived in the same fashion and worded in comparable terms. The principal purpose of Art. 63, as of Art. 47, is to clarify the situation that arises when the buyer does not perform its obligation to pay the price or take delivery of the goods in time: if the additional period of time elapses without result, the seller is entitled to declare the contract avoided even if the buyer has not been responsible for a fundamental breach of contract (Art. 64(1)(b)). Art. 63 is especially useful in cases where it is doubtful whether the buyer's delay in performance constitutes a fundamental breach of contract.[24]

In short, the Nachfrist procedure is especially useful in paving the way for the termination; albeit it has also been designed as a companion to specific performance "to keep the contract afoot" as long as there is a possibility to perform.[25] CISG Art. 47(1)/63(1), read in isolation, seems to empower the aggrieved party to fix an additional final period for the other party to perform any of its obligations. However, the only teeth for the provision are the notice-avoidance procedure provided by CISG Art. 49(1)(b)/64(1)(b).[26] Through the latter, the breach is "upgraded" by the expiration of the Nachfrist.[27] At this juncture, however, it is to be noted that under the relevant rules, only the "breach" of some basic contractual obligations -- non-delivery under CISG Art. 49(1)(b), failure to pay the price or take delivery of the goods under CISG Art. 64(1)(b) (or late performance under UNIDROIT Principles Art. 7.1.5(3) or PECL Art. 8:106(3)) - would be "upgraded". Despite such restrictions (for details, see section 3.1 below), it may be generally concluded here:[28]

"The Nachfrist procedure, [...], makes performance of basic contractual obligations within the period fixed in the notice 'of the essence' of the contract. It 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 avoiding the contract."

Practically speaking, the case in which this device will be used most frequently is probably for the aggrieved party, by serving a Nachfrist notice, to pave the way for a termination for non-fundamental delay in performance. This will be further developed in section 3 below. In general, however, the Nachfrist procedure envisaged by CISG Art. 47(1)/63(1), UNIDROIT Principles Art. 7.1.5(1) or PECL Art. 8:106(1), empowers the aggrieved party to fix an additional final period for the other party to perform any of its obligations. This will be shown below.

      2.4 A remedy useful in many other cases

In other cases the notice procedure does not give the aggrieved party any additional rights but is nonetheless useful.[29] For instance, when the delay does constitute a fundamental breach, the aggrieved may still have reasons to prefer, and is by no means prevented from fixing an additional period for performance.[30]

In this respect, two particular situations have been mentioned in the PECL Comment (which may favor the understanding of the Nachfrist under UNIDROIT Principles or CISG):[31]

  -   Even where the delay or other non-performance is fundamental, and thus the aggrieved party has the right to terminate immediately, it may not wish to do so: it may be prepared to accept a proper performance by the debtor provided it is rendered within a certain period. The Nachfrist procedure permits it to give the debtor a final chance to perform (or to correct a defective performance), without the aggrieved party losing the right to seek specific performance or to terminate if by the end of the period of notice the debtor has still not performed in accordance with the contract.
 
  -   The notice procedure may also be used when a performance is prompt but defective in a way which is not fundamental. In such a case, the aggrieved party will not have the right to terminate and serving a notice fixing an additional time for performance will not give it that right, because a notice-avoidance procedure applies only to delayed performance, not to defective performance. Nonetheless, serving a notice may still perform the useful functions of informing the debtor that the aggrieved party still wants proper performance and of giving the debtor a last chance before the aggrieved party seeks specific performance.

Indeed, CISG Art. 47(1)/63(1) generally states that the buyer/seller may fix an additional period for the other party's performance "of his obligations"; that is to say, the Nachfrist procedure in CISG Art. 47(1)/63(1) refers to all obligations the non-performing party has agreed to fulfill.[32] Similarly, UNIDROIT Principles Art. 7.1.5(1) generally refers the Nachfrist procedure to "a case of non-performance." Furthermore, PECL Art. 8:106(1) expressly refers to "any case of non-performance." Thus, the PECL Comment states:[33]

"When there has been a non-performance by one party (the debtor), the other (the aggrieved party) may always fix an additional period of time for performance."

In these respects the notice serves the same function as a mise en demeure in French law or Mahnung in German law, though, as already discussed, under the CISG, UNIDROIT Principles or PECL the aggrieved party is not required to serve a notice before exercising a remedy except in the case of termination for non-fundamental delay.[34] In this larger area, however, the notice may be given only with respect to defaults that do not invoke the notice-avoidance remedy.[35] Moreover, the Nachfrist notice in such other cases equally has the consequences expressly stated in CISG Art. 47(2)/63(3), UNIDROIT Principles Art. 7.1.5(2) or PECL Art. 8:106(2) (for details, see section 5 below).

3. Nachfrist Used to Pave the Way for Termination

      3.1 Making possible a termination for non-fundamental breach but only in a limited area

As a rule, once there is a fundamental breach of contract - of any obligation - the aggrieved party can immediately declare the contract avoided. He is not obligated, as some domestic systems do, to grant the non-performing party a Nachfrist before that declaration nor must this be done by a court or arbitral tribunal.[36]

However, not every delay in performance will constitute a fundamental non-performance and thus the aggrieved party will not necessarily have the right to terminate immediately merely because the date for performance has passed. It will only have this right if time was "of the essence."[37] Thus, the notice-avoidance procedure by serving a Nachfrist notice of reasonable length, has been introduced under CISG Art. 49(1)(b)/64(1)(b), UNIDROIT Principles Art. 7.1.5(3), and PECL Art. 8:106(3) to allow the creditor to fix an additional period of time of reasonable length for performance by the debtor. If, upon expiry of that period of time, performance has not been made, the aggrieved party may terminate the contract. This case is probably the one in which the notice procedure will be used most frequently. Moreover, it is noted that this notice-avoidance procedure applies even if the non-performance is excused because of a temporary impediment (force majeure).[38]

It is to be stressed, however, the notice-avoidance procedure under PECL Art. 8:106(3) or UNIDROIT Principles Art. 7.1.5(3), applies only to delayed performance, not to defective performance.[39] Also, the procedure under CISG Art. 49(1)(b) is specifically limited to "non-delivery." Regarding this limitation, it is further to be noted that Art. 49(1)(b) CISG is applicable to cases of late delivery of substitute goods requested by the buyer under CISG Art. 46(2), because the substitute delivery is to be regarded as delivery under CISG Arts. 30-34.[40] In any event, from CISG Arts. 47 and 49(1)(b) it follows that the buyer's Nachfrist notice provides a basis for avoidance only in a limited area - failure by the seller to deliver the goods.[41]

Similarly, the seller's Nachfrist notice under CISG Art. 63 provides a basis for avoidance under Art. 64(1)(b) only when the buyer fails, within the specified period, to perform his obligation to "pay the price or take delivery of the goods." In this respect, it is to be noted that according to CISG Art. 54, the buyer's obligation to "pay the price" includes all of the measures agreed upon in the contract "to enable payment to be made," such as registering the contract with a government office or with a bank, procuring the necessary foreign change, as well as applying for a letter of credit or a bank guarantee to facilitate the payment; on the other hand, it is to be noted that the buyer's obligation to "take delivery" which is subject to Art. 60 CISG includes both that the buyer must perform all of the acts which could reasonably be expected of him in order to enable the seller to make delivery and that the buyer must take over the goods. Thus, failure to take any of such enabling steps or acts within an additional period fixed by the seller in accordance with CISG Art. 63 would also provide the basis for a notice-avoidance in the sense of Art. 64(1)(b). In any event, as under Art. 49(1)(b), the notice-avoidance remedy under 64(1)(b) applies only to the most important of the buyer's obligations; his failure in other areas (such as specifying features of the goods, CISG Art. 65) constitutes a breach but the seller may avoid the contract only if the breach is fundamental (CISG Arts. 25, 49(1)(a)/64(1)(a)).[42]

Such above restrictions, either in Art. 49(1)(b) applicable to non-delivery or in Art. 64(1)(b) applicable to failure to pay the price or take delivery, have been adopted "on the ground that the notice-avoidance procedure could [otherwise] be abused to convert a trival breach into a ground for avoidance."[43] For instance, a buyer who wishes to escape from his contractual obligations - e.g., after a price-collapse - might notify the seller that it has a specified time to correct specified minor defects in the goods although the distance separating the parties makes it impractical for the seller to comply with the notice. Thus, in respect of the restriction in Art. 49(1)(b), it has been stated that: "Obviously it is the seller who benefits from the Convention's restricting the use of the remedy of avoidance to non-delivery. Minor defects need no longer make him fear the worst (emphasis added). The buyer, on the other hand, appears sufficiently well protected by other remedies at his disposal."[44]

Probably following a similar line of understanding, UNIDROIT Principles expressly includes "a de minimus threshold", such that a Nachfrist notice does not allow avoidance of the contract where the unperformed obligation is minor.[45] Of particular relevance, UNIDROIT Principles Art. 7.1.5(4) adds that Art. 7.1.5(3) "does not apply where the obligation which has not been performed is only a minor part of the contractual obligation of the non-performing party." It follows, the aggrieved party cannot declare termination according to UNIDROIT Principles Art. 7.1.5(3), if the non-performance which remains after the expiration relates to "only a minor part of the contractual obligation of the non-conforming party." In this way, the UNIDROIT Principles mirrors more closely the CISG. As with the threshold under the UNIDROIT Principles, the CISG's limitation of avoidance to cases of non-delivery (Art. 49(1)(b)) or to cases of failure to pay the price or take delivery (Art. 64(1)(b)) can also be viewed as a de minimus threshold, since the rest of the seller's/buyer's obligations can be viewed as less important (or more compensable by damages).[46]

In no event, however, can it be inferred, as already discussed above (section 2.4), that the Nachfrist procedure may not be used in the cases of failure to perform any other obligations. Generally, pursuant to CISG Art. 47(1)/63(1), UNIDROIT Principles Art. 7.1.5(1) or PECL Art. 8:106(1), the aggrieved party may set the other party a Nachfrist in regard to any obligation the latter failed to perform. Nonetheless, he may resort to the notice-avoidance only if the specified obligations have been breached - "non-delivery" under CISG Art. 49(1)(b), failure "to pay the price or take deliver" under CISG Art. 64(1)(b), or "delay in performance" under UNIDROIT Principles 7.1.5(3) or PECL Art. 8:106(3). In all other cases of non-performance, it is a general rule that the aggrieved party can resort to avoidance only if the breach is a fundamental one. Without a fundamental breach, there is no other way leading to avoidance, unless the other party had definitely declared that he will not perform within the specified period (for this latter situation, see section 5.4 below).

That is to say, in cases other than late performance or those specified in CISG Art. 49(1)(b)/64(1)(b), for the aggrieved party to declare the contract avoided, "it will not suffice to prove that a Nachfrist of reasonable length was fixed and performance was not made nevertheless, but it must be proved that the conditions for the existence of a fundamental breach of contract are given."[47] By contrast, in case of a breach specified in CISG Art. 49(1)(b)/64(1)(b), UNIDROIT Principles Art. 7.1.5(3) or PECL Art. 8:106(3), there will be no need in justifying a termination for the aggrieved party to establish the existence of a fundamental breach, provided that the additional period expired without result. In respect of those specified cases, the Nachfrist procedure makes performance within the period fixed in the notice "of the essence" of the contract.[48]

      3.2 The application of Nachfrist as a tool triggering avoidance

In practice, several CISG courts hold that where the aggrieved parties did not grant an additional period, they have no right to avoid the contract. For instance, the Court in [Germany 27 April 1999 Oberlandesgericht [Appellate Court] Naumburg] rules: "While Article 47(1) only states that the buyer may fix an additional period of time of reasonable length for the performance by the seller, the setting of the time frame is a prerequisite for avoiding the contract."[49] Thus, probably following the same understanding, the Court in [Germany 12 October 2000 Landgericht [District Court] Stendal] holds: "The [buyer] is barred from declaring the contract avoided because she failed to fix an additional period of time under Art. 47(1) CISG."[50] Similarly, the Court in [Germany 1 July 2002 Oberlandesgericht [Appellate Court] München] states: "While Art. 47(1) CISG is a may-do provision, it follows from the reference in Art. 49(2)(b) and also from Art. 47(2) sentence one CISG that the fixing of an additional period of time is an indispensable requirement for the buyer's exercise of remedies for breach of contract by the [seller], unless the seller has declared that he will not deliver under any circumstance (there is no such statement on the part of the [seller] in the present case)."[51]

It seems that the above holdings are influenced by their domestic law (especially German law). They imply that avoidance may not be based on late performance unless a Nachfrist period has been fixed and expired without performance. According to Kimbel, this implication could be interpreted as an effort by courts to preserve the contract by requiring use of Nachfrist before any avoidance based on delay, which is however not an appropriate interpretation of the discretionary nature of Nachfrist under the CISG. Alternatively, it 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, and is within the nature of Nachfrist under the CISG.[52]

Thus, the Court in [France 4 February 1999 Cour d'appel [Appellate Court] Grenoble] seems to present a better understanding of the procedure, holding that, "in the absence of a fundamental breach on the part of [buyer], [seller] had to grant [buyer] an additional period of time to take delivery of the goods; whereas by not doing so [seller] committed a fault by breaking the contract."[53] Essentially, as already made clear above, only in the absence of a fundamental breach does the aggrieved party, for the purpose of declaring avoidance, have to first grant the breaching party an additional period of time for performance.

4. The Service of a Nachfrist Notice

      4.1 A definite request for performance with a period fixed

Regarding the exercise of a Nachfrist procedure, controversies exist among scholars, especially as to whether the fixing of an additional period by the aggrieved party must be done in such a way as to make it clear to the breaching party that the additional period sets a fixed and final limit on the date for performance (e.g., Will, Honnold) or whether no such unequivocal warning is necessary (e.g., Knapp, Enderlein & Maskow).[54]

Conflicting opinions exist in case law, too. For instance, the Court in [Spain 3 November 1997 Audiencia Provincial [Appellate Court] Barcelona] appears to support the latter view, holding that the aggrieved buyer's tolerance of the late delivery of the three initial installments is equivalent to the granting of an "additional period of time" to the non-performing seller, in accordance with CISG Art. 47.[55] On the contrary, other rulings seem to support views that a mere reminder demanding prompt performance does not suffice. For instance, it is held in [Germany 24 April 1997 Oberlandesgericht [Appellate Court] Düsseldorf] that, an understandable and conclusive submission regarding the fixing of a deadline is not established, even when the aggrieved party has reminded the other party "with the fixing of a final deadline to deliver promptly." This, according to the Court, does not suffice as it merely constitutes an urgent request to perform but does not contain a sufficiently specific time limit.[56]

Indeed, a communication that invites performance without making clear that a final deadline has been set could mislead the addressee into an attempt at substantial performance.[57] Thus, it must be a request for performance such as "within a week" or "not later than July 1." Moreover, the request must not be couched in ambiguous terms; it is not sufficient to say that "we hope very much that performance can be made by July 1." Otherwise, "it may give the defaulting party the impression that it is free to postpone performance indefinitely."[58] Similarly, the mere invitation to perform "as soon as possible," "immediately" or within a similarly vaguely defined period of time is not sufficient because that would merely have to be considered as abstract reliance on the right to obtain performance under the remedy of specific performance.[59] In this respect, Will submits:[60]

"In order to serve its purpose and to constitute a valid basis for so serious a remedy as avoidance, the notice must warn the [addressee (non-conforming party)] that a deadline has been 'fixed' (annotation omitted). The warning will have to be as unequivocal as the deadline (emphasis added). Strong invitations expressing something like 'hope to receive the goods soon' would certainly not suffice. The warning has to be expressed so clearly that no reasonable [addressee] would need any further interpretation or explication in order to realize that the date indicated constitutes his final chance to [perform], and that the [noticing party] is not prepared to go beyond this deadline.

"Likewise, the deadline must be clearly determined by indicating either a period of time (four weeks from today, six weeks before Easter) or a given date (March 17, Christmas). Vague terms (soon, promptly, immediately, without delay) would not be proper 'fixing' and therefore would not trigger the notice-avoidance remedy."

However, it is to be noted that the requirement for an unequivocal warning would withstand scrutiny only when a notice fixing an additional period for performance is served for termination for a non-fundamental delay. In cases other than termination for non-fundamental delay the aggrieved party is granting a concession to the debtor. Therefore, it may serve a notice which fixes an ambiguous deadline for example, "Please perform as soon as possible." Nevertheless, having done so it will not be able to resort to termination or specific performance within that period. In this case it may not terminate or seek specific performance unless the non-performance has continued for long enough that it would be consistent with good faith for the aggrieved party to terminate or seek specific performance despite its earlier notice.[61]

On the other hand, one must also note that, only as far as the non-performing party is concerned, is the additional period a final period.[62] In no event is it a final period for the aggrieved party; especially, "when in fact he would have been better served by, and ready to consent to, a second and even third additional time for performance."[63] In any event, the aggrieved party is not barred from fixing additional periods if he so wishes or if he wants to respond to the non-performing party's request for additional time.[64] Even if the non-performing party still failed to perform by the expiration of the additional period, the aggrieved party already fixing an additional period, "may set another (or more) additional period(s) of time"; he has no obligation to avoid the contract upon the expiration of the additional period.[65]

In substance, it is a right for the aggrieved party to resort to at his own discretion. In this respect, Will presents a persuasive argument:[66]

"Additional does not necessarily mean final. The [non-performing party], it is true, must take the period accorded to him as a final one; he faces avoidance when it lapses and cannot expect an additional extension. Avoidance, however, is neither automatic nor obligatory. The [noticing party] always remains free to set a second, third and further additional period for performance to save the contract, for him additional does not equal final."

Thus, although as a matter of fact extension of any period already expired is impossible, the aggrieved party may have the right to grant another additional period of time after the expiration of the previous one. On the other hand, it seems to follow from the general principle of autonomy of the will of the parties that the additional period of time fixed by the aggrieved party can also be extended by him before it expires, either with or without the other party's request.[67] In either case, the new or extended additional period of time will have the same legal effects as the first one: after the period expires the noticing party may (but need not) avoid; but before it expires, he cannot turn to other remedies, except for the right to claim damages.[68] Details on such effects will be given in section 5 below. What is to be noted here is in respect of the former effect, i.e. avoidance upon expiration. Such an effect would be available to the noticing party only provided that the fixed period is of a reasonable length. This condition will be discussed below.

      4.2 A period of reasonable length

Because in cases of non-fundamental delay the notice procedure is conferring an additional right on the aggrieved party, the period of notice must be reasonable.[69] It is the requirement under either CISG Art. 49(1)(b)/64(1)(b), UNIDROIT Principles Art. 7.1.5(3) or PECL Art. 8:106(3). However, none of these rules contains a definition on the reasonableness.

Thus, variations have always existed in both case law and legal writings. For instance, in [Germany 24 May 1995 Oberlandesgericht [Appellate Court] Celle], a period which required shipment of three printing machines from Germany to Egypt "within eleven days," is deemed to be "possibly too short to organize carriage by sea from [X] to [Y], given that the [seller] was dependent on the schedule of the ship and the existence of free space for freight."[70] In [Germany 27 April 1999 Oberlandesgericht [Appellate Court] Naumburg], a period of three to four weeks was found to be reasonable.[71]

Indeed, framing the time for notice in terms of a reasonable time is designed to promote flexibility, and the period varies with the facts of each case.[72] It cannot be generally or abstractly said what constitutes a reasonable time. Among the circumstances to be taken into account, are such matters as "the extent and the consequences of the delay,"[73] "the situation of the parties and relevant trade usages."[74] Also, the postal handling time needed for the information to reach the non-performing party has to be considered because the latter must have time to undertake the relevant activities during that Nachfrist.[75]

Moreover, 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 aggrieved party will not be expected to grant the other party an additional period of time longer than he could reasonably wait for performance. On the other hand, the additional period of time granted to the other party must not make it a priori impossible for him to perform his obligation within that period. So short a period of time will not have the legal effect of granting the noticing party the right to declare avoidance upon the expiration.[76] Despite this, in the light of the fact that there is a breach of contract by the party to receive the notice here, it is believed that the interests of the aggrieved party should be decisive.[77]

Generally speaking, in the absence of an express agreement between the parties, the determination of whether the Nachfrist is "reasonable" must be made in light of the circumstances of the case at hand.[78] What is a "reasonable time" is, of course, a question that depends on the circumstances of each case.[79] Such time is a relative time.[80] No fixed period, whether fourteen days, one month or otherwise, should be considered as reasonable in the abstract without taking into account the circumstances of the case.[81]

In this respect, special consideration may be given, according to the Comment companying PECL Art. 8:106, to several factors such as:[82]

"- the period of time originally set for performance. If the period is short, the additional period of time may also be short;

"- the need of the aggrieved party for quick performance, provided that this is apparent to the defaulting party;

"- the nature of the goods, services or rights to be performed or conveyed. A complicated performance may require a longer period of time than a simple one;

"- the event which caused the delay. A party which has been prevented from performance by bad weather should be granted a longer respite than a party which merely forgot its duties."

In any event, the vague term of reasonableness leaves some room to act at one's own discretion which can be used by the party who is entitled to set the Nachfrist.[83] As Honnold notes, the Convention (also the UNIDROIT Principles or PECL) uses flexible language; different periods of time could be "reasonable." Within this leeway the choice is given to the innocent party who faces breach by the other party. Indeed, respect must be given to the innocent party's discretion in setting the "reasonable" period if the notice-avoidance procedure is to serve its purpose--reducing uncertainty concerning the right to avoid the contract.[84] If disputed, however, the determination of which period of time is reasonable must ultimately be left to the court (or other competent deciding body such as an arbitral tribunal).[85]

In respect of the "reasonable length" of a Nachfrist notice, it is additionally noted that Knapp has suggested that such a notice does not become effective until it reaches the addressee.[86] However, by virtue of the general dispatch rule of CISG Art. 27, the majority of scholars are of the contrary view. For instance, Honnold points out in this regard: "However the 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 by the other party's delay."[87]

Undoubtedly, it is justifiable for the aggrieved party, particularly here the party who serviced a Nachfrist noice, to enjoy the benefit of the dispatch rule. Under this line of understanding, the Nachfrist notice becomes effective upon its dispatch from the aggrieved party who is entitled to serving such a notice; and, therefore, the error or risks in communication shall be placed on the part of the breaching party, i.e., the addressee to whom such a notice is sent. However, in joining in such arguments, it seems that I should further emphasize that I do not necessarily view the following outcome of Knapp as absolutely "inappropriate":[88]

"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 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."

The persuasiveness of the above argument lies in the consideration that, by serving a Nachfrist notice of reasonable length, a drastic right is conferred on the aggrieved party, i.e., the right to avoidance even in cases of non-fundamental delay. In this consideration, the reasonableness of a Nachfrist notice should be measured from the time at which it reaches the addressee, although the notice in itself became effective upon its dispatch. However, I, while upholding Knapp to some extent, cannot conceal my disagreement with Knapp's above conclusion that "if the notice never reaches him, the additional period of time under Article 63 never starts to run." As to be further shown in section 4.3 below, even a Nachfrist not of reasonable length does not make the notice ineffective but initiates a period of reasonable length. Similarly, even if a Nachfrist notice never reached the addressee, the additional period of time fixed in that notice started to run since its dispatch. And the aggrieved party may terminate the contract after a reasonable time has elapsed from the dispatch date of the Nachfrist notice, as such a notice has already become effective as of that date.

In any event, however, the persuasiveness of Knapp's argument should be read in conjunction with the emphasis on the other side. It is to be stressed that the length of the additional period, is not a consideration unless it is attempted, in case of a non-fundamental delay, to make that delay "of the essence" for the purpose of justifying an avoidance by the expiration of that period. That is to say, it is not a consideration for the additional period to be of reasonable length, if the aggrieved party resorts to the Nachfrist procedure in cases "where the delay or other non-performance is fundamental, and thus the aggrieved party has the right to terminate immediately."[89] Following this understanding, it seems that the reasonableness required in CISG Art. 47(1)/63(1), without considering its being referred to in CISG Art. 49(1)(b)/64(1)(b), is unadvisable as opposed to the approach followed by UNIDROIT Principles Art. 7.1.5 or PECL Art. 8:106. Neither UNIDROIT Principles Art. 7.1.5(1) nor PECL Art. 8:106(1), either dealing with the Nachfrist procedure in general, requires that the additional period be of reasonable length. It only takes the reasonable length of the additional period into account when using the Nachfrist procedure for termination for non-fundamental delay under UNIDROIT Principles Art. 7.1.5(3) or PECL Art. 8:106(3).

In substance, in cases other than non-fundamental delay the aggrieved party is granting a concession to the debtor. Here the aggrieved party can give the debtor as long or as short a period as it chooses, though having done so it will not be able to resort to termination or specific performance within that period.[90] Thus, the "reasonableness length" referred to in CISG Art. 47/63 may be interpreted as a means to eliminate any temptation for the aggrieved party to use an insignificant delay as a means to avoid the contract under Art. 49(1)(b)/64(1)(b) which he could not have done under Art. 49(1)(a)/64(1)(a).[91] (Cf. texts above keyed to fn. 45, 46.)

      4.3 Termination in case of a period not of reasonable length

As noted above, it is a rule that, "if the late performance was not yet fundamental, termination would only be possible at the end of the period of extension if the extension was reasonable in length."[92] Court practice shows, however, that the Nachfrist fixed often is not of reasonable length, namely too short. Fixing of a period that is too short triggers the question about the consequences to the Nachfrist notice. The prevailing opinion among scholars is that it should be interpreted so that a Nachfrist of unreasonable length does not make the notice ineffective but initiates a period of reasonable length. This view is confirmed by case law.[93]

In CISG case law, where the aggrieved party fixed an unreasonably short period, courts found the reasonability requirement satisfied if the party having previously fixed an unreasonably short period then waits with its notice of avoidance until a reasonable period time has expired.[94] For instance, in [Germany 24 May 1995 Oberlandesgericht [Appellate Court] Celle], the buyer fixed a period from the time of the notice on 4 December 1992 to the time fixed in the notice of 16 December 1992, a period which required shipment within eleven days. According to the Court, this period was possibly too short to organize carriage by sea from [X] to [Y], given that the [seller] was dependent on the schedule of the ship and the existence of free space for freight. Nevertheless, it is held on the other hand, this does not make the notice ineffective where the notice has merely extended a period of time. In any case, when the [buyer] gave notice that the contract was avoided on 26 January 1993, a sufficiently long time (seven weeks) had elapsed.[95]

Also, the Court in [Germany 21 August 1995 Landgericht [District Court] Ellwangen] rules: "The additional period of time fixed for performance under Art. 47 CISG and the further time created by the waiting period can together be rated (emphasis added) as a 'period of reasonable length' in the meaning of Art. 47(1) CISG (citations omitted)."[96] Similarly, according to the Court in [Germany 27 April 1999 Oberlandesgericht [Appellate Court] Naumburg], it does not need to decide whether the additional period of time set by the [buyer] until 24 March 1997 was too short, as in that instance a reasonable period of time would have started to run. Such a reasonable period of time would have elapsed at the latest by 11 April 1997, the day on which the [buyer] sent a further communication to the [seller].[97]

In short, the aggrieved party may terminate "after a reasonable time has elapsed from the date of the [Nachfrist] notice."[98] This is the approach expressly adopted under PECL Art. 8:106(3), which states in the pertinent part: "If the period stated is too short, the aggrieved party may terminate, [...], only after a reasonable period from the time of the notice." Alternatively, if the aggrieved party has fixed too short a period, the competent deciding body could determine the minimum Nachfrist.[99] This point has been expressly stipulated in UNIDROIT Principles Art. 7.1.5(3), stating: "If the additional period allowed is not of reasonable length it shall be extended to a reasonable length." In either way, if the aggrieved party serves a notice of less than a reasonable period it need not (but could of his own accord) serve a second notice.[100]

5. Effects Following the Service

      5.1 Remedies suspended during the additional period

Since the debtor may have relied on having the period set in the Nachfrist notice in which to perform, it should be protected from a sudden change of mind by the aggrieved party.[101] Thus, the fixing of an additional period of time for performance assists at first the non-performing party who has been granted an additional period for performance;[102] or, to put it another way, it at first has a disadvantageous effect on the aggrieved party.[103]

Of particular relevance, CISG Art. 47(2)/63(2), UNIDROIT Principles Art. 7.1.5(2) or PECL Art. 8:106(2) each makes it clear: Before the additional period of time has lapsed the aggrieved party may not avail himself of any other remedy for breach of contract. By fixing an additional period he binds himself for the period fixed.[104] The reason behind the rule is to afford temporary protection to the non-performing party who has been granted an additional period for performance and who may thereafter be preparing to perform the contract as requested by the other party, perhaps at considerable expense.[105]

Among other things, the aggrieved party within the granted extension cannot seek specific performance. Before the additional period has expired, the aggrieved party cannot require the breaching party to perform even if there was originally the possibility to do so. This effect reflects a principle that might have "gone without saying": A party may not refuse performance that he has invited. The other party can be expected to rely on the invitation.[106] This is acceptable because the right to require performance and the right to set an additional period of time for performance are basically variants of the right to obtain performance between which the aggrieved party can choose from the outset.[107] However, it is a different situation if the defaulting party performs within the Nachfrist but a subsequent defect occurs in the performance. In such a case, the aggrieved party may well invoke his right to require, even before the expiration of the fixed period, the cure of such a subsequent defect.

Also, the aggrieved party cannot require performance and at the same time avoid the contract. This does not have to be expressly laid down here; it would follow from the general principles, like waiver or estoppel.[108] Of particular notice, even where the aggrieved party has an immediate right to terminate because of the other's (fundamental) non-performance, if the aggrieved party has indicated that he is still prepared to accept performance, he may not change its mind without warning.[109] Once the aggrieved party has opted to serve a Nachfrist notice, it is also the rule that he may not terminate during the period of notice. That is to say, even if the non-fulfillment was a priori a fundamental breach of contract, the aggrieved party who has serviced a Nachfrist notice is not in a position to declare the contract avoided; he has to wait until the period of time has expired.[110] Despite this, one should note: "When a Nachfrist is set for the fulfillment of a specific obligation under the contract, e.g., taking delivery of the goods, avoidance of the contract is not excluded during that Nachfrist because of another fundamental breach of contract, e.g., the cheque handed over for payment is not honoured (annotation omitted)."[111]

In short, the party who grants the extension of time cannot terminate or seek specific performance during the extension time.[112] This rule protects the debtor "who may prepare the performance - even at considerable expense - and should be entitled to expect that the [aggrieved party] will accept the requested performance if it is not otherwise defective,"[113] from a sudden change of mind by the aggrieved party.[114] This suspension of other available remedies does not, however, concern the aggrieved party's right to claim damages for delay in performance or his right to claim other damages under the general rule (e.g., CISG Art. 74): These claims and their enforcement do not prevent the debtor from preparing to perform his obligations and there is no need, therefore, to protect him, during the additional period of time, against these claims.[115] As to be shown in section 5.2 below, the aggrieved party's right to claim damages remains intact, and he is authorized to sue even for damages which occur during the additional period of time fixed for the belated performance.[116] Moreover, as to be furthered in section 5.3 below, if the non-performing party informs the aggrieved party that it will not perform during the additional period the latter will be free to resort to any other available remedy since, in that case, the former needs no protection against such change.[117]

      5.2 Rights retained during the additional period

It would be somewhat unfair if the aggrieved party could not exercise any of his rights ensuing from a breach of contract, but rather has to wait and see whether the breaching party performs within the Nachfrist. Thus, it is made clear in the relevant rules that, "only comparable rights and comparable claims are excluded, not however claims for compensation."[118]

CISG Art. 47(2)/63(2) each expressly states that during the additional period the aggrieved buyer/seller "is not deprived thereby of any right he may have to claim damages for delay in performance." That means that the aggrieved party is authorized to claim damages at any time, even during the additional period of time and irrespectively of the notice of the other party that he will not perform.[119] Thus, an argument that the aggrieved party, by serving a Nachfrist notice, has agreed to a modification of the contract or has waived or otherwise forfeited a claim for damages can be foreclosed. This result is consistent with the general rule of CISG Art. 45(2)/61(2) that preserves the aggrieved party's right to recover damages when (for example) he compels performance under Art. 46.[120] According to Enderlein & Maskow, the same should apply to the right to expenses, interest and penalties/liquidated damages which can often be claimed as damages.[121]

Indeed, as a rule, the aggrieved party will always retain its right to claim compensation for damages. Even when the non-performing party has performed within the Nachfrist, the aggrieved party may claims its damages suffered as a result of the delay. Not to mention, if the non-performing party made no performance during that period, or has made its performance dependant of conditions not stipulated in the contract, the aggrieved party has a general right to claim damages because of non-performance. Also, UNIDROIT Principles Art. 7.1.5(2) and PECL Art. 8:106(2) both state that during the additional period the aggrieved party "may claim damages".

Furthermore, UNIDROIT Principles Art. 7.1.5(2) and PECL Art. 8:106(2) both expressly stipulate that the aggrieved party during the additional period "may withhold performance of its own reciprocal obligations." Thus, except for the right to withhold performance, UNIDROIT Principles Art. 7.1.5(2) and PECL Art. 8:106(2) are substantively identical to Art. 47(2)/63(2) CISG. According to Koch, the right to withhold performance of one's own reciprocal obligations during the Nachfrist, however, follows under the Convention from Art. 58 CISG. According to Art. 58(1) CISG the buyer, in the absent of any stipulation to the contrary, is not obliged to pay the price until the seller places the goods at the buyer's disposal. Moreover, according to Art. 58(3) CISG, the buyer in general is not bound to pay the price until he has had an opportunity to examine the goods. If the buyer has agreed to pay before receiving in the goods but, prior to the time for payment, it becomes apparent that the seller will not deliver the goods, the buyer is entitled to suspend payment pursuant to Art. 71(1) CISG.[122]

      5.3 Early end of the uncertainty in case of an express rejecting notice

When there has been a non-performance by one party (the debtor), the other (the aggrieved party) may always fix an additional period of time for performance. During the period fixed the aggrieved party may not, as discussed above, take further action against the debtor; it may withhold its own performance and it may claim damages for the delay in performance or other losses caused by the non-performance, but it may not seek specific performance or terminate the contract during the period of notice.[123]

Sometimes, however, the aggrieved party does not need to wait until the Nachfrist has expired, if the non-performing party has declared that he will not perform within the additional period of time because such a declaration on the non-performing party's part will mean an early end of the existing uncertainty.[124] This situation has been expressly envisaged in CISG Art. 47(2)/63(2) (also in UNIDROIT Principles Art. 7.1.5(2) or PECL Art. 8:106(2)). Thus, the Court in [Germany 4 July 1997 Oberlandesgericht [Appellate Court] Hamburg] holds that the aggrieved buyer is not obliged to fix an additional time for performance, having received notice from the breaching seller that it does not intend to perform.[125] Similarly, the Court in [Germany 20 September 2002 [District Court] Göttingen] rules: "Under Art. 63(1) CISG, a seller may fix an additional period of grace of reasonable length for performance by the buyer of her obligations. In fact, the [seller] did not set such an additional period of grace. However, under the special circumstances of this case, [seller] was not obliged to set such an additional time for acceptance of the goods. Such a further period of grace would have been absolutely redundant, since [buyer] had already seriously and conclusively refused to accept all of the goods (emphasis added) set out in invoice No. 36 of [seller]'s statement of claim."[126]

Indeed, a declaration of refusal to fulfill an obligation constitutes a fundamental breach of contract.[127] However, one should note that it is not sufficient (by contrast to CISG Art. 71(1), and/or Art. 72(1)) that it becomes apparent or is clear that the non-performing party (addressee of the Nachfrist notice) will not keep to the Nachfrist. If, however, the (rejecting) notice is given, the contract can be avoided at once, even when the delay does not yet constitute a fundamental breach of contract.[128] That is to say, the fixing of a deadline was not dispensable for the fact that the (non-performing party) would have refused to fulfill the remaining obligations under the contract of sale. A substantiated submission of a refusal to fulfill an obligation which would conclusively suggest that the (non-performing party) had seriously and finally refused to fulfill the remaining obligations under the contract, is required. Only such a refusal could render the fixing of a final deadline dispensable.[129] Similarly, declarations by the non-performing party that he probably will not perform, or that it is uncertain whether he will be able to perform, will not produce the effects of the said early end of uncertainties. A mere request of the non-performing party to prolong the additional period of time will also fail to produce such effects.[130]

In addition, it is to be noted that since the rejecting notice in the sense of CISG Art. 47(2)/63(2) has to refer to that there will be no performance also during the Nachfrist it can only be given after the Nachfrist has been set and the aggrieved party has received the respective information.[131] Thus, the non-performing party's rejecting notice concerns exclusively performance within the additional period of time fixed in the Nachfrist notice. A similar notice from the non-performing party prior to the date of performance fixed in the contract, for example a notice that he 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 rejecting notice under CISG Art. 47(2)/63(2). It could, however, constitute an anticipatory breach under CISG Arts. 71 et seq.[132] Similarly, when the non-performing party has before named a date of performance that is later than the expiry of the Nachfrist, the aggrieved party cannot rely on it because it is very well possible that the setting of an additional period of time inspires the breaching party to make exceptional efforts to keep to the period granted. However, the situation is different when performance is rejected definitely and once and for all.[133]

      5.4 Termination upon the expiration

As discussed above, where the performance is rejected definitely and once and for all, the contract can be avoided at once, even if before the expiration of the Nachfrist and regardless the fact that the delay did not yet constitute a fundamental breach of contract. However, of more frequency in practice is for the aggrieved party to declare the contract avoided upon the expiration of the additional period.

Generally speaking, in fixing the additional period of time under CISG Art. 47/63 the aggrieved buyer/seller need not warn the other party that he will declare the contract avoided if the latter has not performed within the additional period of time fixed.[134] Yet, it follows from the general principle of autonomy of the will of the parties that the aggrieved party may provide for automatic termination (in the Nachfrist notice). In this respect, UNIDROIT Principles Art. 7.1.5(3) expressly provides that: "The aggrieved party may in its notice provide that if the other party does not perform within the period fixed by the notice the contract shall terminate automatically." PECL Art. 8:106(3) is worded in almost the same terms: "The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate." At the same time, however, one should be prudent in relying on such a provision of automatic termination: "If the defaulting party in fact tenders performance after the date set in the notice, the aggrieved party may simply refuse to accept it. However, if the aggrieved party actually knows that the defaulter is still attempting to perform after the date, good faith requires it to warn the defaulter that the performance will not be accepted. If the defaulting party asks the aggrieved party whether it will accept performance after the date set, good faith requires the aggrieved party to give an answer within a reasonable time ([...])."[135]

In other cases, the position at the end of the period of extension depends on whether the late performance was already fundamental at the time when the extension was granted. In this situation, if the contract is not completely performed during the extension, the right to terminate for fundamental non-performance simply springs into life again as soon as the extension period expires. On the other hand, if the late performance was not yet fundamental, termination would only be possible at the end of the period of extension if the extension was reasonable in length.[136] Indeed, in respect of the former situation, it is also to be noted that, even a fundamental breach of contract, never leads automatically to the avoidance of such a contract by operation of law. To the contrary, it is always mandatory to declare the avoidance of the contract.[137] Under the CISG (as well as under the UNIDROIT Principles or PECL), avoidance requires a unilateral declaration of the party loyal to the contract made to the other party.[138]

6. Concluding Remarks

Since in case of late performance it is often hard to determine when delay may amount to fundamental breach, it is often advisable that the parties fix an additional term for performance (the so-called Nachfrist).[139] Especially in case of a delay in the performance, but only in that case, the lapse of that additional period turns a non-fundamental breach into a fundamental one.[140] In that case, if the party in breach fails to perform during that period, the aggrieved party thereupon may declare the contract avoided, even if there is no fundamental breach (the so-called "notice-avoidance"). Moreover, through a Nachfrist procedure, the aggrieved party expresses his continuing interest in contract performance and offers the other party a chance to fulfill the contract nonetheless.[141]

In any event, however, one should note that the additional period of time for performance under the Nachfrist procedure can be granted to the non-performing party by the aggrieved party only after the former's failure to perform by the date specified in the contract, that is, after it has fallen into delay in performing. Prior to this date, no party to the contract is authorized to postpone unilaterally the date of the performance of a contractual obligation.[142]


FOOTNOTES

1. See Bruno Zeller in "Buyer's notice fixing additional final period for performance: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 47 and 49(1)(b) CISG" (2001); available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp47.html>; see also Bruno Zeller in "Seller's notice fixing additional final period for performance: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 63 and 64(1)(b) CISG" (2001); available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp63.html>.

2. See Maryellen DiPalma in "Nachfrist under National Law, the CISG, and the UNIDROIT and European Principles: A Comparison": Vol. 5, No. 1 International Contract Adviser, Kluwer (Winter 1999), pp. 28-38; available at: <http://www.cisg.law.pace.edu/cisg/biblio/DiPalma.html>.

3. See Secretariat Commentary on Art. 43 of the 1978 Draft [draft counterpart of CISG Art. 47]: Comment 2; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-47.html>; see also Secretariat Commentary on Art. 59 of the 1978 Draft [draft counterpart of CISG Art. 63]: Comment 2; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-63.html>.

4. See Bruno Zeller, supra. n. 1.

5. See Comment on UNIDROIT Principles Art. 7.1.5; available at: <http://www.cisg.law.pace.edu/cisg/principles/uni47,49.html>.

6. See Bruno Zeller, supra. n. 1.

7. Ibid.

8. See Maryellen DiPalma, supra. n. 2.

9. See Comment and Notes on PECL Art. 8:106: Comment A; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp47.html>.

10. See Knapp in Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds., Milan (1987), p. 460; available at: <http://www.cisg.law.pace.edu/cisg/biblio/knapp-bb63.html>.

11. Comment 8 on Art. 43 of the 1978 Draft, and Comment 8 on Art. 59 of the 1978 Draft; supra. n. 3.

12. See Anette Gärtner in "Britain and the CISG: The Case for Ratification - A Comparative Analysis with Special Reference to German Law": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001), pp. 59-81; available at: <http://www.cisg.law.pace.edu/cisg/biblio/gartner.html>.

13. Supra. n. 9.

14. Comment C, supra. n. 9. Comment 1, supra. n. 5.

16. See Will in Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds., Milan (1987), p. 344; available at: <http://www.cisg.law.pace.edu/cisg/biblio/will-bb47.html>.

17. See Knapp, supra. n. 10; p. 459.

18. See John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Kluwer Law International, The Hague (1999), p. 317; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ho47.html>.

19. See Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Oceana Publication (1992), p. 192; available at: <http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html>.

20. Comment 4 on Art. 43 of the 1978 Draft, and Comment 4 on Art. 59 of the 1978 Draft; supra. n. 3.

21. Supra. n. 15.

22. Comment 6 on Art. 43 of the 1978 Draft, and Comment 6 on Art. 59 of the 1978 Draft; supra. n. 3.

23. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/47: Digest 1; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

24. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/63: Digest 1; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

25. See Bruno Zeller, supra. n. 1.

26. See John O. Honnold, supra. n. 18; p. 313.

27. See Alison E. Williams in "Forecasting the Potential Impact of the Vienna Sales Convention on International Sales Law in the United Kingdom": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001), pp. 9-57; available at: <http://www.cisg.law.pace.edu/cisg/biblio/williams.html>.

28. See Harry M. Flechtner in "Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C.": 8 Journal of Law and Commerce (1988), 53-108; available at: <http://www.cisg.law.pace.edu/cisg/text/flecht47,63.html>.

29. Supra. n. 14.

30. See Will, supra. n. 16.

31. Supra. n. 14.

32. Digest 3, supra. n. 23.

33. Supra. n. 9.

34. Supra. n. 14.

35. See John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Kluwer Law International, The Hague (1999), p. 385; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ho63.html>.

36. For instance, CISG Art. 45(3)/61(3) expressly states that, no period of grace may be granted to the seller/buyer by a court or arbitral tribunal when the aggrieved party resorts to a remedy for breach of contract.

37. Comment B, supra. n. 9.

38. Ibid.

39. Supra. n. 14.

40. See Robert Koch in "Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Articles 47 and 49 of the CISG", (December 2004); available at: <http://www.cisg.law.pace.edu/cisg/biblio/koch2.html>.

41. See John O. Honnold, supra. n. 35; p. 384.

42. Ibid.

43. See John O. Honnold, supra. n. 18; p. 314.

44. See Will, supra. n. 16; p. 343.

45. See Peter A. Piliounis in "The Remedies of Specific Performance, Price Reduction and Additional Time (Nachfrist) under the CISG: Are these worthwhile changes or additions to English Sales Law?": 12 Pace International Law Review (Spring 2000), pp. 1-46; available at: <http://www.cisg.law.pace.edu/cisg/biblio/piliounis.html>.

46. Ibid.

47. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 245.

48. See Harry M. Flechtner, supra. n. 28.

49. See Judgment by Oberlandesgericht [Provincial Court of Appeal] Naumburg, Germany 27 April 1999; No. 9 U 146/98. English translation by Jarno Vanto, translation edited by Ruth M. Janal; available at: <http://www.cisg.law.pace.edu/cases/990427g1.html>.

50. See Judgment by Landgericht [District Court] Stendal, Germany 12 October 2000; No. 22 S 234/94. English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen; available at: <http://www.cisg.law.pace.edu/cases/001012g1.html>.

51. See Judgment by Oberlandesgericht [Provincial Court of Appeal] München, Germany 1 February 2002; No. 10 O 5423/01. English translation by Ruth M. Janal; available at: <http://www.cisg.law.pace.edu/cases/020701g1.html>.

52. See Ericson P. Kimbel in "Nachfrist Notice and Avoidance under the CISG": 18 Journal of Law and Commerce (1999); fn. 25; available at: <http://www.cisg.law.pace.edu/cisg/biblio/kimbel.html>.

53. See Judgment by Cour d'appel [Appellate Court] Grenoble, France 4 February 1999; No. RG 98/0270 (appeal of decision RG 97008146). Translation by Gary F. Bell; available at: <http://www.cisg.law.pace.edu/cases/990204f1.html>.

54. See Albert H. Kritzer, Editorial Remarks on ICC Arbitration Case No. 7585 of 1992; available at: <http://www.cisg.law.pace.edu/cases/927585i1.html>. For the views of Will, Knapp, Enderlein & Maskow, and Honnold, see <http://www.cisg.law.pace.edu/cisg/biblio/will-bb47.html>, <http://www.cisg.law.pace.edu/cisg/biblio/knapp-bb63.html>, <http://www.cisg.law.pace.edu/cisg/biblio/enderlein-art63.html> and <http://www.cisg.law.pace.edu/cisg/biblio/ho47.html>, respectively.

55. See CLOUT Abstract No. 246 [Audiencia Provincial de Barcelona Spain 3 November 1997]; available at: <http://www.cisg.law.pace.edu/cases/971103s4.html>.

56. See Judgment by Oberlandesgericht [Provincial Court of Appeal] Düsseldorf, Germany 24 April 1997; No. 6 U 87/96. English translation by Julian Waiblinger; available at: <http://www.cisg.law.pace.edu/cases/970424g1.html>.

57. See John O. Honnold, supra. n. 18; p. 315.

58. Comment D, supra. n. 9.

59. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 239 (so believes also Honnold; Sevón; Knapp, etc.).

60. See Will, supra. n. 16; p. 345.

61. Supra. n. 58.

62. See Bruno Zeller, supra. n. 1.

63. Supra. n. 44.

64. See Bruno Zeller, supra. n. 1.

65. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 182.

66. Supra. n. 16.

67. See Knapp, supra. n. 10; p. 463.

68. Supra. n. 60.

69. Supra. n. 58.

70. See Judgment by Oberlandesgericht [Provincial Court of Appeal] Celle, Germany 24 May 1995; No. 20 U 76/94. English translation of this part from Spanogle/Winship, International Sales Law: A Problem Oriented Coursebook (West 2000) [257-259]; available at: <http://www.cisg.law.pace.edu/cases/950524g1.html>.

71. Supra. n. 49.

72. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/39: Digest 15; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

73. Supra. n. 65.

74. See CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39, 7 June 2004; available at: <http://www.cisg.law.pace.edu/cisg/CISG-AC-op2.html>.

75. Supra. n. 59.

76. See Knapp, supra. n. 10; p. 461.

77. Supra. n. 59.

78. See Robert Koch, supra. n. 40.

79. See 3rd Session of the Working Group on the International Sale of Goods (held in Geneva from 17 to 28 January 1972), Annex II, para. 78, A/CN.9/62, Add 2.

80. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 159.

81. Supra. n. 74.

82. Comment E, supra. n. 9.

83. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 238.

84. Supra. n. 57.

85. Supra. n. 82.

86. In this respect, Knapp states: "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 Knapp, supra. n. 10; p. 460.)

87. See John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Kluwer Law International, The Hague (1999), fn. 2; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ho63.html>. (Similar disagreements with Knapp have also been expressed in Kritzer's "Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods".)

88. See Knapp, supra. n. 10; pp. 461-462.

89. Supra. n. 14.

90. Supra. n. 58.

91. Supra. n. 60.

92. Comment 2, supra. n. 5.

93. See Robert Koch, supra. n. 40.

94. Digest 5, supra. n. 23.

95. Supra. n. 70.

96. See Judgment by Landgericht [District Court] Ellwangen, Germany 21 August 1995; No. 1 KfH O 32/95. English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen; available at: <http://www.cisg.law.pace.edu/cases/950821g2.html>.

97. Supra. n. 49.

98. Supra. n. 58. (Regarding the starting point, compare texts above keyed to fn. 88.)

99. Supra. n. 83.

100. Supra. n. 58.

101. Supra. n. 14.

102. Digest 8, supra. n. 23.

103. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 184.

104. See Will, supra. n. 16; p. 346.

105. Comment 9 on Art. 43 of the 1978 Draft, and Comment 9 on Art. 59 of the 1978 Draft; supra. n. 3.

106. Supra. n. 18.

107. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 240.

108. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 183. (For instance, Williams states: "The doctrine resembles the doctrines of waiver and estoppel in English law. The fact that the Buyer may not resort to any other remedy during the period of the Nachfrist is equivalent to the buyer being estopped from relying on his strict contractual rights as the result of a representation made to the seller. In addition, both the remedy of Nachfrist and the doctrine of promissory estoppel have the effect of suspending performance as opposed to extinguishing contractual rights." (See Alison E. Williams, supra. n. 27.))

109. Supra. n. 9.

110. Supra. n. 107.

111. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 241.

112. Supra. n. 91.

113. Digest 2, supra. n. 23.

114. Supra. n. 14.

115. See Knapp, supra. n. 10; p. 462.

116. See Knapp, supra. n. 10.

117. Supra. n. 113.

118. Supra. n. 111.

119. Supra. n. 115.

120. Supra. n. 18.

121. Supra. n. 111.

122. See Robert Koch, supra. n. 40.

123. Supra. n. 9.

124. Supra. n. 103.

125. See UNILEX Case Abstract of the Judgment by Oberlandesgericht [Provincial Court of Appeal] Hamburg, Germany 4 July 1997; No. 1 U 143/95 and 410 O 21/95; available at: <http://www.unilex.info/case.cfm?pid=1&do=case&id=438&step=Abstract>.

126. See Judgment by Landgericht District Court] München, Germany 20 September 2002; No. 7 O 43/01. English translation by Stefan Kuhm, translation edited by Ruth M. Janal; available at: <http://www.cisg.law.pace.edu/cases/020920g1.html>.

127. Supra. n. 56.

128. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 242.

129. Supra. n. 56.

130. See Knapp, supra. n. 10; pp. 463-464.

131. Supra. n. 111.

132. See Knapp, supra. n. 10; p. 464.

133. Supra. n. 111.

134. Supra. n. 76.

135. Comment F, supra. n. 9.

136. Supra. n. 92.

137. See Judgment by District Court (Landgericht) Frankfurt am Main, Germany 16 September 1991; No. 3/11 O 3/91. English translation by Stefan Kuhm; available at: <http://www.cisg.law.pace.edu/cases/910916g1.html>.

138. See Judgment by Oberster Gerichtshof [Supreme Court], Austria 9 March 2000; No. 6 Ob 311/99z. Translation by Marko Maljevac, translation edited by Ruth M. Janal; available at: <http://www.cisg.law.pace.edu/cases/000309a3.html>.

139. See Leonardo Graffi in "Case Law on the Concept of 'Fundamental Breach' in the Vienna Sales Convention": Revue de droit des affaires internationales / International Business Law Journal (2003) No. 3, 338-349 (Forum Europeén de la Communication) Paris; p. 342. Available at: <http://cisgw3.law.pace.edu/cisg/biblio/graffi.html>.

140. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/25: Digest 6; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

141. See Fritz Enderlein & Dietrich Maskow, supra. n. 19; p. 182.

142. Supra. n. 17.


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