[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]
Absolute (Two-Year) Cut-Off Rule
Application of Two-Year Rule to 'Latent' Defects
Express Contractual Cut-Offs and Periods of Guarantee
Relation to Prescription Convention and Other Statutes of Limitation
1. The General Rule
189. Against the background of Article 38, which provides a general (short-as-practicable) time frame for the inspection of delivered goods, Article 39 sets forth the general rule regarding the consequences of buyer's failure to give notice of a 'discoverable' defect.
Paragraph (1) of Article 39 provides the general rule:
2. Notice of 'Discoverable' Defects & Consequences of Failure to Notify
190. Under Article 38, and as previously discussed, the buyer must undertake a reasonable examination of the goods as soon as practicable after delivery. Then, if such (reasonable and timely) examination reveals that the goods do not conform in [page 104] some specific respect, Article 39(1) requires that the buyer provide the seller with specific notice of such non-conformity within a reasonable time.
Just as some courts have taken an unusually demanding (i.e. seller-friendly) stance with respect to the nature (intensity) and timeliness of the examination required by Article 38(1), the same is true as regards the nature (specificity) and timeliness of the notice with respect to any non-conformity which the requisite examination reveals.
As regards the requirement that the buyer 'specify' the non-conformity, a German court has held that a buyer of certain wearing apparel was held to have lost all remedial rights, since the notifications allegedly sent to the seller/manufacturer re. 'poor workmanship and improper fitting' did not specify the nature of the alleged non-conformities with sufficient precision.
As regards the requirement that the requisite notice be given within a 'reasonable time' it should first be emphasized that what is reasonable will often depend on the nature of the goods in question and the custom regarding notice in that particular trade. So, just as it may be reasonable to require that the buyer of perishable goods examine them immediately, it may also be reasonable to require immediate notice of the examination results.
Custom notwithstanding, some courts have taken a seemingly rigid view in defining what constitutes a 'reasonable' time under Article 39(1). In one German case, it was found that the buyer could have processed a sample of the (non-perishable) goods immediately upon their delivery and (therefore) could have discovered and given notice of defects within 10 to 11 days after delivery. For this reason, notice given 24 days after delivery was deemed too late, thus depriving the buyer of all remedial rights.
Other courts, who see no real need to put (all) buyers of (non-perishable) non-conforming goods in a remedial 'straightjacket', have sought to find a compromise solution to the Article 39(1) conundrum, one which takes account of the wide range of corresponding (timely notice) conceptions under domestic law. Thus, a Swiss court has held notice of non-conformity to be timely if given within one month after delivery, describing this period as a good compromise between the German and the (far more lenient) American views. This seems at least to be a step in the right (Article 7) direction, although one might question whether the Convention provides national courts with the authority to reduce the inherently flexible Article 39(1) standard to a single mathematical formula, even if such a formula might be said to advance 'certainty' (i.e. 'uniform application' in the mathematical sense).
According to Article 39(1), and as already indicated, if the buyer does not provide the seller with the requisite notice within the allowable time, he loses 'the right to rely' on the lack of conformity. In other words, the starting point of the Convention is that the buyer loses the right to assert any and all of the various remedies otherwise provided under the Convention for seller's breach (the right to require performance, to avoid, to claim damages or a proportionate reduction, etc.).
This starting point is, however, modified by two other CISG rules. The first of these 'safety valves' is set forth in Article 40 which provides that a seller who is (or should be) aware of given non-conformity (which the buyer has been unable to detect) cannot enjoy the protection which Articles 38 and 39 provide. Moreover, [page 105] pursuant to Article 44, a buyer may seek to provide the court or arbitral tribunal with a 'reasonable excuse' for his failure to notify, thereby seeking (partial) refuge from the severity of the Article 39(1) rule.
3. Latent Defects Under Article 39(1)
191. A buyer who fails to discover (and give timely notice regarding) a discoverable defect loses the right to rely thereon. In other words, a buyer who, 'ought to have discovered' a defect (i.e., could have done so during the course of a 'reasonable' examination), but did not, is treated the same as a buyer who actually discovers a defect, but fails to notify the seller of same defect (on time).[l]
There is, on the other hand, no Article 39 obligation upon the buyer to discover 'latent' defects, (defined for present purposes as) defects which are so well-hidden that they are not discoverable by ordinary means (the 'reasonable' inspection always required by Article 38). Therefore, if a buyer conducts a reasonable inspection, but first discovers a 'latent' defect at some later point in time - perhaps even several months after delivery - he is then required to provide the seller with the necessary Article 39 notice within a reasonable time after that, i.e., after the [page 106] discovery of the latent non-conformity is actually made.
M. Absolute (Two- Year) Cut-Off Rule
192. Paragraph (2) of Article 39 supplements the general (reasonable time) rule in paragraph (1) by providing an absolute cut-off rule, i.e., a maximum time period after which no buyer may assert a claim in respect of non-conformity. Paragraph (2) provides:
N. Application of Two-Year Rule to 'Latent' Defects
193. Because Articles 38 and 39(1) require timely inspection and notification as regards 'discoverable' defects, Article 39(2) has particular significance for 'latent' defects, i.e., defects not reasonably discoverable upon delivery pursuant to Article 38. Although a buyer, as a starting point, retains the right to rely on latent defects which first become evident after the passage of some time, Article 39(2) helps protect the seller against stale claims which may be of doubtful validity.[l]
The CISG two-year period begins to run as soon as the goods are actually handed over to the buyer, and a buyer who fails to give notice of a non-conformity before the expiration of this period loses the right to rely thereon. Therefore, a buyer who first discovers and gives notice of a latent defect after the expiration of this period (and who has not secured a guarantee which effectively extends the period) can claim no remedy, however 'undiscoverable' the non-conformity in question might have been. [page 107]
The severity of the rule may be tempered if the seller has' guaranteed' the goods for a period longer that 2 years; if not, a disappointed buyer may, in exceptional cases, be able seek refuge in the 'safety-valve' provision set forth in Article 40.
The 2-year period adopted by the Convention drafters might seem seller-friendly to some, but it actually represents an international compromise when seen against the background of some domestic solutions.
O. Express Contractual Cut-Offs and Periods of Guarantee
194. Express contract provisions, agreed to by the parties, (always) take precedence over the CISG (supplementary) rules. Therefore, the two-year time limit ordinarily applicable by virtue of the default rule in Article 39(2) will not apply if the parties' contract expressly - and validly - lay down a different notice rule in their contract, e.g., a so-called 'cut-off' period which would require that the buyer give notice within a shorter period oftime.
The special proviso in the last part of Article 39(2) relates (not to 'cut-off' clauses, but rather) to contractual periods of guarantee, i.e. a clause whereby the seller guarantees conformity of the goods for a one-year period or three-year period. The problem of whether a given guarantee clause is 'inconsistent with - and thus overrides - the gap-filling two-year period in Article 39(2) is a question of (CISG) contract interpretation to be decided by the court or arbitral tribunal concerned in accordance with Article 8.
P. Relation to Prescription Convention and Other Statutes of Limitation
195. A buyer who gives notice within the time period defined in Article 39(2) may also be required to take additional steps to preserve his rights. Under Articles 8 and 10 of the United Nations Prescription Convention, the buyer must commence judicial proceedings against the seller within four years of the date when the goods [page 108] were actually handed over. Nations not (yet) bound by the Prescription Convention will apply the relevant limitation period (statute of limitations) period dictated by the applicable rules of private international law. [page 109]