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Cite as Nicholas, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 508-512. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 70

Barry Nicholas

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

ARTICLE 70

If the seller has committed a fundamental breach of contract, articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the breach.

1. History of the provision

     1.1. - A remote antecedent is found in Article 97(2) of ULIS, but the recasting of the system of remedies and of the passing of risk led to a recasting of this provision also (see Yearbook, V (1974), 49, 94; Yearbook, VI (1975), 69, 110; Yearbook, VIII (1977), 64). The alterations made at the Vienna Conference were of a purely drafting character.

2. Meaning and purpose of the provision

     2.1. - The effect which a breach of contract by the buyer may have on the passing of risk is dealt with in Article 69 (see commentary on Article 69, supra, § 3.4.). Article 70 deals with the effect of a breach by the seller on the passing of risk. The wording is rather elliptical, for it is not immediately obvious in what sense Articles 67, 68 and 69 could, but for this provision, impair the buyer's remedies for fundamental breach. Nor is it clear what the implication is for situations in which the seller's breach is not fundamental. It will be useful to deal with these two situations separately.

     2.2. - We consider first the situation in which the breach of contract is not fundamental, and since the case of late delivery presents a special difficulty (see § 2.4., infra), we take the most common other instance of breach, non-conformity. Since the remedy of enforced performance by delivery of substitute goods is [page 508] excluded where the non-conformity does not constitute a fundamental breach (see Article 46(2)), the remedies in question are those of repair, where this is not unreasonable (Article 46(3)), reduction of price (Article 50) and damages (Articles 74 to 77).

The relationship of those remedies to the incidence of risk may be illustrated by the following example. The contract is for Seller to ship 500 refrigerator-compressors to Buyer, risk passing on their being handed over to the first carrier. On receiving the compressors from the carrier, Buyer finds that 200 have been damaged by sea-water and that, of the remaining 300, five suffer from a manufacturing defect. We assume that the non-conformity of these five does not constitute a fundamental breach. Buyer has no claim against Seller in respect of those damaged by sea-water, since the risk had passed before the damage occurred and liability for non-conformity ends with the passing of the risk (Article 36(1)). The passing of risk does not, however, affect his right either to require Seller to repair the defective five (if this is not unreasonable) or to reduce the price or claim damages.

     2.3. - We now consider situations to which Article 70 expressly applies: those in which the breach is fundamental. A variant of the example in § 2.2. will serve. The terms of the contract are the same, but on receiving the compressors Buyer finds that 200, as before, have been damaged by sea-water, but also that half of the remaining 300 suffer from a manufacturing defect. We assume that this non-conformity constitutes a fundamental breach. In addition therefore to the remedies available in the previous example, Buyer may, unless there is some other obstacle, either require Seller to deliver substitute goods,or declare the contract avoided. And avoidance will have the drastic result that risk reverts to Seller, who will be unable to claim (or will have to return) the price not only in respect of the 300, but also in respect of the 200 which were damaged by sea-water. (For a contrary view see GOODFRIEND, United Nations Convention, 601-602). The only obstacle to avoidance (assuming that Buyer has satisfied the requirement of Article 49(2) as to notice) lies in Article 82(1), which excludes this remedy if he cannot return the goods «substantially in the condition in which he received them». However, when Buyer received the 200 they were already damaged; and in any event Buyer is protected by the exception [page 509] in Article 82(2) which excludes from Article 82(1) cases in which the buyer's inability to return the goods as above is not due to his act or omission.

The sense of the words used in Article 70 is therefore, in this context, that the risk's having passed to the buyer under Articles 67, 68 or 69 is no obstacle to its being retrospectively passed back by the remedy of avoidance.

We have said that, in the example just considered, Buyer may, as an alternative to the remedy of avoidance, require Seller to deliver substitute goods. This will, however, have the disadvantage that the loss of the 200 compressors damaged by seawater will continue to fall on Buyer. This seems necessarily to follow from the wording of Article 70, which does not say that in cases of fundamental breach the risk remains with the seller, but that the buyer's remedies are unimpaired. And the only remedy for fundamental breach which will have the effect of returning the risk to seller is the remedy of declaring the contract avoided. A buyer therefore who might otherwise have been willing to salvage what he could from a damaged consignment will be advised not to do so but to exercise his right to avoid the contract. A proposal was indeed made at the Vienna Conference to amend the article so as to leave the risk of damage in transit on the seller in such circumstances, but was not accepted (see Official Records, II, 407-408).

     2.4. - The case of late delivery (consideration of which was deferred in § 2.2., supra) presents a similar problem to that just considered if the late delivery does not constitute a fundamental breach. The problem may be illustrated by the following example. Seller agrees to supply 500 compressors and to arrange shipment so that they arrive in the last week of July, but he ships them so late that they cannot arrive in time. When Buyer inquires about their non-arrival, Seller tells him that they will arrive on August 10. When they do arrive; 200 compressors are found to have been damaged by sea-water. If the delay constitutes a fundamental breach, Buyer may avoid the contract (Article 49(1)(a)), with the consequences already considered. If it does not constitute a fundamental breach, he may «fix an additional period of time of reasonable length for performance» (Article 47(1)). He will no doubt be taken to have done so if, when he inquired [page 510] about the non-arrival of the goods, he said he would accept delivery up to August 10, but no later. If the goods do not arrive until August 12, Article 49(1)(b) allows Buyer to avoid the contract. It might be thought therefore that the consequences would be the same as in the other cases of avoidance and that the risk of the sea-water damage would be placed retrospectively on Seller. However, the formulation of Article 49(1) makes a distinction between avoidance after the fixing of an additional period of time and avoidance for fundamental breach, and since Article 70 applies only in case of fundamental breach, it would seem that Buyer is left to his remedy in damages for the late delivery. It is curious, however, that in its consideration of the draft of Article 70 (then Article 67), the Commission is recorded (see Yearbook, VIII (1977), 64) as having adopted a proposal to deal with precisely this problem by extending the operation of the article to all cases of fundamental breach; and yet the text remained unchanged (see ROTH, Passing of Risk, 305).

     2.5. - The effect of Article 70 is not confined to reversing the incidence of risk in respect of damage or loss while the goods are in transit. The seller's risk may extend to damage or loss occurring after the buyer has received the goods. Suppose, for example, that Seller is bound to deliver to Buyer fifty tons of cocoa by March 31; on that date he delivers only twenty tons and this consignment is destroyed a few hours after its arrival by a fire in Buyer's warehouse which is not due to his act or omission. If the delivery by the due date of only twenty tons constitutes a fundamental breach, Buyer may declare the contract avoided, since his right to do so is preserved by Article 82(2)(a) (see § 2.3., supra). The same will be true if Seller's delivery of non-conforming goods constitutes a fundamental breach and the goods are subsequentely destroyed in similar circumstances.

In circumstances such as these there is an evident conflict with the policy of Article 69 which calls for the risk to be borne by the party who has control of the goods (or the immediate power to obtain control). This conflict is limited by Article 49(2), which requires the buyer, if he wishes to exercise his right to avoid the contract, to do so within a reasonable time. The existence of the conflict must be taken into account in determining what length of time is reasonable. [page 511]

3. Problems concerning the provision

Given the particular nature of this article, it was inevitable that the main problems involved would be discussed, as they have been, in the preceding section concerning the meaning and purpose of the provision. [page 512]


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