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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

[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).]

excerpt from

The 1980 United Nations Convention on Contracts
for the International Sale of Goods

Joseph Lookofsky

Article 49
Buyer’s Right to Avoid for Seller’s Breach

  1. Avoidance for Fundamental Breach
  2. Declaration of Avoidance
  3. Relationship to Cure; Avoidance as to Part
  4. Avoidance for Non-Compliance with Nachfrist Notice
  5. Limitations Regarding Goods Delivered
  6. Consequences of Avoidance

224. Article 49 provides an injured buyer with the right to avoid and thus terminate the contract, i.e., put an end to the performance obligations of both parties.[1]

1. See Article 81, infra No. 310.

1. Avoidance for Fundamental Breach

225. Under some domestic statutes of sale, a 'perfect tender' rule prevails, whereby any breach (however insignificant) entitles the 'injured' party to 'avoid' the contract.[1]

In international sales, however, particularly far-reaching consequences and extensive waste may follow in the wake of contract avoidance (termination), and so the general Convention rule is that avoidance requires a showing of a particularly serious breach. According to Article 49(1)(a), the buyer may declare the contract avoided: 'if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract ...'

Under paragraph (1)(a) the buyer needs to establish a fundamental breach, which in CISG parlance translates as a 'substantial deprivation.'[2]

For example, a seller who delivers goods unfit for ordinary purposes (or for the buyer's particular purpose, if known to the seller) will not only have breached his obligation to deliver conforming goods; he will - at least in the case of an 'incurable' defect - also have committed a fundamental breach.[3]

To take another example, involving the CISG seller's obligation to deliver on time,[4] suppose the contract provides for the delivery of certain highly specialized goods (not easily obtainable elsewhere) on a clearly specified date, e.g., January 31st. If the seller delivers two weeks later than the contract date, and if the buyer is thereby prevented from performing an existing obligation to (re)sell the same goods to a designated third party, the buyer has almost surely suffered a substantial deprivation under Article 25. The buyer will then be entitled to avoid, provided that the original seller (or a 'reasonable' seller) had reason to know that the contract breach would have this 'substantial' effect.[5]

It must, however, be emphasized that avoidance in an international sales context is regarded as a particular severe - and therefore 'exceptional' - remedy, and many courts have indeed showed great reluctance to allow a buyer injured by a breach to avoid and thus put an end to the whole CISG contractual relationship.[6]

If the buyer requires more certainty than that provided by the flexible, gap-filling rule in Article 49(1), then that buyer would be well-advised to insist on a contractual term which expressly conditions the duty to pay for goods received upon punctual and/or conforming delivery.

Finally, it should be noted that a buyer not otherwise entitled to avoid the sales contract due to non-conformity pursuant to CISG Article 49(1)(a) might, at least in exceptional circumstances, be held entitled to 'rescind' the contract pursuant to the applicable domestic law regarding the effects of misrepresentation, fraud, duress and the like.[7] [page 123]

1. Regarding, e.g. English and American law, see Lookofsky, J., Consequential Damages in Comparative Context (1989), Part 4.3.1.=
2. Regarding Article 25, see supra No. 136 et seq.
3. See, e.g., the decision of Cour d'Appel de Versailles (France), 29 January 1998, No. 56, reported [at <http://cisgw3.law.pace.edu/cases/980129f1.html> and] in UNILEX (buyer who could not use defective machines as expected entitled to avoid). See also the decision of LG Ellwangen, 21 August 1995, reported [at <http://cisgw3.law.pace.edu/cases/950821g2.html> and] in UNILEX (paprika not meeting minimum standards of German food law). Regarding Article 35(2)(a)-(b) see supra Nos. 164 et seq. Regarding the relationship between Article 49(1)(a) and 'curable' defects under Article 48 see supra No. 222 and, e.g., the decision of Pretura di Locarno Campagna (Switzerland), 27 April 1992, No. 6252, reported [at <http://cisgw3.law.pace.edu/cases/920427s1.html> and] in UNILEX where a Swiss buyer re-sold living-room furniture to a local customer who then complained that the goods were defective (sitting on sofas caused cushions to slide forward); the Swiss buyer was held not entitled to avoid, inter alia, because he had refused to accept an offer by his Italian seller to cure the non-conformity by replacing the upholstery.
4. Article 33: see infra No. 158 et seq.
5. Regarding this Article 25 requirement, see supra No. 136 et seq. See, e.g., the award of the ICC Court of Arbitration (Paris), No. 8128/1995, reported [at <http://cisgw3.law.pace.edu/cases/958128i1.html> and] in UNILEX (CISG seller knew buyer was obligated to deliver goods to third party and that, in case of late delivery, buyer had to pay a contractual penalty).
6. See, e.g., the decision of the German Supreme Court (Bundesgerichtshof), 3 April 1996, NJW 1996, 2364, CLOUT Case 171, also reported [at <http://cisgw3.law.pace.edu/cases/960403g1.html> and] in UNILEX (avoidance is remedy of 'last resort'; breach not fundamental since buyer failed to show resale of non-conforming cobalt sulfate would be unreasonably difficult). See also, e.g., the decision of the Swiss Supreme Court (Schweizerisches Bundesgericht), 28 October 1998, CLOUT Case 248 [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>] (German sellers delivered frozen meat containing excessive fat and worth 25 per cent less than conforming goods to Swiss buyer/wholesaler; considering buyer's ability to process or re-sell goods at lower price, court held non-conformity not significant enough to entitle buyer to avoid).
7. Regarding the potential for overlap between the Convention and domestic validity rules, see generally supra No. 63; but see, e.g., the decision of LG Aachen (Germany), 14 May 1993, RIW 1993, 760-761, also reported [at <http://cisgw3.law.pace.edu/cases/930514g1.html> and] in UNILEX (application of CISG precluded recourse to domestic law regarding mistake as to the quality of the goods). Under American domestic law, avoidance might be allowed for a fraudulent misrepresentation without concern for its materiality, (see Farnsworth, Contracts at 252), whereas under CISG Article 49(1)(a), a fundamental breach is the sine qua non for avoidance (Huber in Schlechtriem, Commentary n. 5 at 416). The Hague Sales Conventions of 1964, which preceded the CISG, expressly excluded the buyer's right of recourse to domestic law in the case of non-conforming goods (ULIS Article 53), except in cases of fraud (ULIS Article 89), but the CISG contains no similar provision: see Huber op. cit. at 370 with n. 86.

2. Declaration of Avoidance

226. Article 49(1)(a) entitles the buyer to 'declare' the contract avoided. Such a declaration of avoidance is effective only if made by notice to the seller. While there are no specific requirements as to form or content, the buyer's declaration must at least make it clear that the seller no longer can count on buyer's performance in respect of the sales contract concerned.[l]

1. Accord Huber in Schlechtriem, Commentary (1998) at 425. Regarding Article 26, see supra No. 138. Regarding the risk of transmission under Article 27, and the related question of whether a declaration of avoidance may be revoked, see supra No. 139. [page 124]

3. Relationship to Cure; Avoidance as to Part

227. As discussed previously, a seller who effectively exercises his right to cure a non-conforming delivery can steer clear of the potential (avoidance) effects of an otherwise fundamental breach.[1] On the other hand, the Convention also contains rules which extend the buyer's right to avoid in cases where the seller delivers only a part of the goods or where only a part of the goods delivered conform with the contract: in such cases, the buyer may avoid as to such part if the breach is fundamental with respect to the part.[2]

1. Supra Nos. 182 et seq. and 220 et seq.
2. Regarding Article 51(1), see infra No. 232.

4. Avoidance for Non-Compliance with Nachfrist Notice

228. In the case of non-delivery by the seller, the Convention provides injured buyers with an alternative to fundamental breach. Article 49(1)(b) provides that the buyer may declare the contract avoided:

'in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed.'

The buyer may have reason to doubt (1) whether a delayed delivery will ever arrive and (2) whether a given breach is 'fundamental' under Article 49(1)(a); for these reasons, CISG Article 47(1) gives the buyer the right to fix an additional period of time, after which the buyer may avoid without having to consider whether the total delay has reached 'fundamental' proportions.[1] And if the seller does not then deliver the goods within the additional period of time so fixed (or if seller declares that he will not comply),[2] Article 49(1)(b) gives the buyer the right to avoid.

Note that, unlike the rule in Article 49(1)(a), which permits avoidance by the buyer for (any) fundamental breach by the seller, the rule in Article 49(1)(b) applies only 'in case of non-delivery'.

1. See supra No. 219.
2. Regarding anticipatory breach, see generally infra No. 279 et seq.

5. Limitations Regarding Goods Delivered

229. If the buyer first elects to avoid after the goods have been delivered, he must do so (as regards late delivery) within a reasonable time after learning that delivery has been made or (in other cases) within a reasonable time after learning of the breach.[l]

1. See Article 49, subparagraphs (2)(a) and (2)(b)(i). As regards the time for avoidance after a Nachfrist notice or a seller's request under Article 48(2), see subparagraphs 49(2)(b)(ii)-(iii). See also supra No. 219. [page 125]

6. Consequences of Avoidance

230. If the buyer avoids the contract with justification, both parties are released from their obligations under it, subject to any damages which may be due. In addition, each party may claim restitution from the other party of whatever has been supplied or paid under the contract.[l]

1. Regarding Article 81, see infra No. 310 et seq. Regarding the buyer's right to revoke a declaration of avoidance see supra No. 139. [page 126]

Pace Law School Institute of International Commercial Law - Last updated April 5, 2005
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