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Cite as Maskow, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 412-419. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 57

Dietrich Maskow

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

ARTICLE 57

(1) If the buyer is not bound to pay the price at any other particular place, he must pay it to the seller:
(a) at the seller's place of business; or
(b) if the payment is to be made against the handing over of the goods or of documents, at the place where the handing over takes place.

(2) The seller must bear any increase in the expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract.

1. History of the provision

     1.1. - Article 57 corresponds to Article 59 of ULIS. Besides some structural drafting changes, two modifications of the ULIS should be mentioned. The Convention makes express reference to agreements between the parties concerning the place of payment, which very frequently occur in practice. Also, in the present article there was no need to consider the case of a seller with no place of business, since Article 10 covers this problem, as well as the case of a party with more than one place of business.

     1.2. - During the Vienna Conference one delegation proposed that the provision of paragraph (1)(a) should be drafted so as not to be read as granting jurisdiction to the courts of the seller's place of business. The proposal was rejected without a vote (see Official Records, I, 122), mainly since it was felt that rules of jurisdiction were beyond the purview of the Convention and that the proposed rule might impinge on important national rules (see Official Records, II, 368 et seq.). Moreover, this amendment would not necessarily have succeeded in blocking jurisdiction of the courts of the seller's country in proceedings for payment of the price. In many countries criteria other than the place of [page 412] performance are used which also can lead to the jurisdiction of the courts of the seller's country in matters of payment. Agreements of the parties concerning the place of payment or those concerning the competence of arbitral tribunals for disputes in international trade matters commonly reduce the importance of this problem considerably.

2. Meaning and purpose of the provision

     2.1. - Article 57 deals with the place of payment. Despite the general effect of Article 6, the basic rule is reiterated in the introductory clause of Article 57(1) which states that payment is to be made at the place agreed upon by the parties, either expressly or implicitly (i.e., derived from the contract).

Where such a stipulation is missing, two possibilities are distinguished. When the parties have agreed that payment is to be made against the handing over of the goods or of documents, the place where this is to happen according to the contract or the Convention (Articles 31, 34) is the place of payment. When the parties have not agreed to even this, the place of payment is the seller's place of business.

The latter case shall be analysed first. Payment at the seller's place of business occurs in international trade mainly (a) in cases of advance payment (although it would be rather unusual for the whole sales price to be paid in advance, this happens rather frequently for parts of the price); (b) when the agreed-upon conditions of payment are «cash after receipt of the goods», «cash against open invoice», or «cash a certain period after receipt of the goods» (if the goods are handed over against evidence for payment, such as an irrevocable order to the bank to pay, payment likewise has to be made at the seller's place of business), and (c) when damages, penalties and the like have to be paid and expenses reimbursed (application by analogy).

     2.2. - The relevant place of business of the seller has to be specified in two dimensions. First, it must be determined geographically. If several places of business exist, the place which has the closest relationship to the contract is chosen (Article 10(a)). If no place of business exists at all, then habitual residence is [page 413] decisive (Article 10(b)). Second, the place of business may change over time. Under Article 57(2) the relevant place of business is that at the time of payment.

The buyer can pay only at the seller's place of business if he knows it. Generally, each party knows the other's place of business at the time of the making of the contract. If the seller later changes his place of business; this can bear on the place of payment only if it is communicated to the buyer reasonably in advance of payment so that the buyer can comply with the formalities related to the new place of business.

The seller in general is not deprived of the right to rely on a communication, if a delay or error in its transmission occurs or if it fails to arrive (Article 27). But does he obtain the right to demand payment at his new place of business, if the other party has no reason to suspect other than that he has to pay at the former place of business? It seems that Article 27 should not be applicable to such cases.

If the buyer receives such a communication after he has in due course irrevocably initiated all steps necessary to pay at the seller's former place of business, he has fulfilled his duty to pay. If he is still able to change the place of payment and he does so (although he should not be obliged to do so), the consequences of delay in payment are borne by the seller (Article 80). This view has also been expressed by SEVÓN (in SARCEVIC-VOLKEN, International Sale of Goods, 213, 214), but he relies on Article 79(1), which seems to be a less specific base than Article 80.

     2.3. - Only in exceptional cases in modern international trade is payment made by handing over cash. When a direct payment to the seller takes place at all, the handing over of cheques predominates. Nevertheless, absent a stipulation to the contrary, the seller is entitled to refuse a cheque, but he must do so immediately after it is offered. A cheque is taken as discharge by performance. The payment is effected on the date the cheque is handed over, provided that it is paid on presentation. If not, payment is held not to be effected at all (see, for details and literature, VAN CAEMMERER, in DÖLLE, Einheitliches Kaufrecht, 363).

     2.4. - The most important form of payment not connected with documents is the transfer of money, mainly by banks. The [page 414] buyer here does not send the money to the seller's office, but pays it to the seller's bank account. If the seller has communicated his account number to the buyer, even on a prior occasion, absent an express or implied stipulation, according to Article 9 this would generally indicate that payment, to the account is acceptable as covered by usages or practices. This is true even where the respective bank or branch has its place of business at a different location from that of the seller. When the seller his several accounts, he is entitled to indicate the account to which the money should be transferred. Where the account is at a place remote from the seller's place of business, Article 57(2) might be applied by analogy. Nevertheless, as a rule the seller is not entitled to ask for payment in a different country without changing his place of business. This follows from the principle of good faith (Article 7 (1)). If the seller gives several account numbers, the buyer may choose at his discretion.

     2.5. - The obligation of the buyer to pay at the seller's place of business has four major consequences.

First, the buyer has to initiate the payment so that it will be at the seller's place at the time due. In other words, the buyer bears the risk for delays, unless he can rely on the exemptions of Articles 79 and 80.

Second, the buyer has to comply with the formal requirements not only of the country from which payment is to be effected, but also of the country where payment is to be made (see commentary on Article 54, supra, § 2.7.).

Third, the buyer pays the costs of transmission to the seller's place of business.

Fourth, the buyer bears the risk of transmissIon to the place of payment. When a cheque is lost before reaching that place, the buyer must send a new one. If a bank engaged in the transfer process, other than the seller's bank, goes bankrupt, the buyer has to repeat the transfer.

     2.6. - Payment is to be made against the handing over of the goods or of documents that may result from Article 58 and a corresponding behaviour of the seller or directly from the contract.

The most important forms of payment against documents are «cash against documents» or«payment according to letter of credit». [page 415] When the former condition is agreed upon, payment normally is collected by the banks. For these operations the Uniform Rules for Collections Publication no. 322 of the International Chamber of Commerce, play an important role, whether they are agreed upon by the parties or are included in the conditions of the banks engaged in the operation.

Collection of money is brought about in the following way. The documents are handed over by the seller to his bank. The documents referred to in Article 57(b) and in Article 58(1)(2) are commercial paper in the sense of the Uniform Rules for Collections (B.1., ii, b) or as the Convention says «documents controlling disposition of the goods» (see commentary on Article 58, infra, § 3.l.). Such documents mainly are shipping documents, like bills of lading, combined transport documents and other transport documents and commercial invoices. Depending on the terms of the contract insurance policies or certificates, certificates of origin and other documents may also be called for (see Uniform Customs and Practices for Documentary Credits, Publication no. 400 of the International Chamber of Commerce, D)).

The seller's bank sends these documents either directly or via intermediary banks to the collecting bank. Where nothing special is agreed the seller must have the documents presented at the buyer's place of business (see also Article 8 of the Uniform Rules for Collections).

In this case the place of business of the buyer is the place of payment. There the buyer has to make available the money (pay cash, transfer the money to the collecting bank, allow payment from his account with this bank). He has fulfilled his obligation to pay when he has done such activity at that place. The costs of collection are borne by the seller (see Article 22 of the Uniform Rules for Collections). The risk of transfer of the money from the collecting bank to the seller is also on the seller.

A problem arises in respect of compliance with the formalities of transfer. The banks engaged in the collection assume no responsibility with regard to such compliance. On the contrary, the principal bears the responsibility for such compliance (Article 3, ii, last sentence of the Uniform Rules for Collections, Publication no. 322 of the International Chamber of Commerce). But, the seller, as the principal of the collection order, in many cases will not be in a position to comply with formalities in the buyer's country. Therefore [page 416] it seems justifiable to interpret the obligation of the buyer to pay so as to make possible the transfer abroad of the amount to be paid. This would place on the buyer the onus of complying with the formalities of the country of the place of payment. This interpretation is also consistent with Article 54 of the Convention (see commentary on Article 54, supra, § 2.7.), and follows from Articles 11 and 12 of the Uniform Rules for Collections.

     2.7. - The condition of payment «cash against documents» can be handled not only by bank collection but also by forwarding agent's collection. In principle the same rules apply in the latter case as in the former one. But, in practice, this form of collection frequently is carried out by handing over both the goods and the documents relating thereto to the buyer, if he provides evidence that he has paid (e.g., irrevocable transfer of the price).

     2.8. - Where payment is effected by a letter of credit the buyer has to order his bank to issue the letter of credit. For such operations the Uniform Customs and Practice for Documentary Credits, Publication no. 400 of the International Chamber of Commerce play the same role as the Uniform Rules of Collections for the corresponding operations. The issuing bank, commonly a bank in the buyer's country, gives the order to a bank in the country where the documents are to be presented, usually in the country of the seller. The order is either to inform the seller 6f the issuance of the letter of credit or to confirm it. The issuing bank thereby assumes an obligation to fulfil the bank's obligations arising out of the letter of credit. In any case the banks act on behalf of the buyer. They take up the documents for the buyer. Therefore the handing over of the documents takes place where the first bank takes them. This is the place of payment, which frequently coincides with the place of business of the seller. The bank informing the seller of the opening of the letter of credit normally is entitled to pay according to the prescribed conditions (see Article 11(d) of the Uniform Customs and Practice for Documentary Credits). If this bank pays when the seller submits the documents required, the buyer has fulfilled his obligation to pay. The buyer's obligation here includes paying the costs connected with the letter of credit (see Article 20(a) of the Uniform Customs and Practice for Documentary Credits) complying with formalities (see Article 20(c) of [page 417] the Uniform Customs and Practice for Documentary Credits), and taking the risk of payment. The bank which paid the seller is entitled to ask for reimbursement from the opening bank, and it may have paid the seller under the condition of such reimbursement. If this should fail, the bank will claim the money already paid to the seller. Since the buyer bears the risk of payment, he must in this case pay at the place of the bank, where the documents had been handed over by the seller. He is responsible for the delay in payment. The same applies when a revocable letter of credit is opened and it is revoked before payment.

The principles just discussed are applicable where payment is to be made within certain periods after submitting the documents. But, they may be modified where the letter of credit does not foresee cash payment but rather the acceptance of bills of exchange or some other forms for guaranteeing the payment (see Article 2 of the Uniform Customs and Practice for Documentary Credits, Publication no. 400 of the International Chamber of Commerce). In this case place and date of payment and other consequences connected therewith may be derived from the corresponding instruments (e.g., bills of exchange) and the conventions, laws and rules governing them.

     2.9. - Article 57(2) only applies when the place of business of the seller is the place of payment (see § 2.1., supra). The provision foresees that the place of payment changes when the place of business of the seller changes. In other words, it establishes the principle that the actual place of business at the time of payment is decisive (see § 2.2., supra). All consequences connected with such a change in the buyer's obligation to pay are to be borne by the buyer, except «any increase in the expenses incidental to payment». That means, assuming conditions unfavourable for the buyer, the buyer must initiate payment earlier in order to pay in due time, must hear difficulties in his own country and in the seller's country in complying with the appropriate regulations, and also any increase in his risk. Some of these disadvantages may result in increased expenses borne by the seller. Where, for instance, the buyer loses interest since he has to initiate payment earlier, such losses might be deemed part of his additional expenses. The buyer is entitled to deduct the expenses from the amount to be paid.

Nevertheless, according to this provision, the seller may make the performance of an important duty of the buyer more burdensome. [page 418] Therefore the question arises whether there are any limitations on the seller's right to demand payment at his new place of business. Such limitations might be found in the principle of good faith (Article 7(1)), prohibiting the seller from relying on the right granted by Article 57(2) if he changes his place of business to a remote place, to another continent or to a place where the payment (leaving aside the matter of expense) is substantially more burdensome and risky.

3. Problems concerning the provision

     3.1. - When the assignment of claims is not excluded the creditor as a rule is entitled to assign the claim for the price without consent of the debtor. This practice is of growing importance in international trade (e.g., forfeiting). Would an assignment change the place of payment? In respect of Article 59 of ULIS the view has been expressed that it does (VAN CAEMMERER, in DÖLLE, Einheitliches Kaufrecht, 362). In the light of the foregoing remarks (see §. 2.9., supra), the place of payment should not change under the present Convention. In contracts assigning a claim, the original creditor commonly transfers his claim to the new creditor, but his claim is transferred «as is» i.e., without changing the place of payment. Therefore the debtor should be entitled to pay at the original place of payment although, assuming the conditions established by the applicable law are fulfilled, for the benefit of the new creditor. The original creditor is not allowed to agree with a third party to the disadvantage of the debtor. Although the debtor should be entitled to pay at the place of business of the new creditor, he cannot be obliged to do so. The question may become important, where payment at the place of business of the new creditor is substantially more burdensome for the debtor.

     3.2. - Article 57, in particular sub-paragraph (1)(a), might be applied by analogy to other payments resulting from the contract, e.g. damages, interest (see for details ENDERLEIN-MASKOW-STARGARDT, Kommentar, 114). [page 419]


Pace Law School Institute of International Commercial Law - Last updated February 3, 2005
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