[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).]
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. 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.
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.'
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.
To take another example, involving the CISG seller's obligation to deliver on time, 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.
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.
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. [page 123]
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]
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. 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.
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:
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. 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), 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'.
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]
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]