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Reproduced with permission of 24 Journal of Law and Commerce (Fall 2004) 111-140

Prospective Non-Performance or Anticipatory
Breach of Contract (Comparison of the Belarusian
Approach to CISG Application and Foreign Experience)

Tatsiana Seliazniova [*] [**]

ABSTRACT

Legal systems of Post-Soviet countries coming through a transitional period are the subject of numerous fundamental changes. These changes embrace all the fields of legal reality. However, the most radical and important transformations may be observed in the field of commercial law. Since 1991-1993, Post-Soviet commercial law has effectively absorbed and transformed crucial innovations proposed by Western legal systems. This article is devoted to the study of one such example - the institution of prospective non-performance or anticipatory breach.

The purpose of the present research is: 1) to examine the history of the rules governing anticipatory breach of contract; 2) to analyze the relative provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG); 3) to review different approaches to interpreting the Convention (including the Belarusian approach to the application of CISG on issues of anticipatory breach of contract); and 4) to identify aspects in the international legal experience that can enrich the Belarusian legal approach and fill in some gaps arising in practice.

This research uses a method to apply comparative legal analysis supported by a case study of the decision of the International Court of Arbitration of the Belarusian Chamber of Commerce and Trade applying CISG Article 71. The translation of the case from Russian (one of the official languages in Belarus) is made by the author. Some comments about the main difficulties and misunderstandings that arose concerning the translation are mentioned in this article.

The result of the research is a summary of the legal experience with anticipatory breach of contract regulations and provides a possible contractual solution for important difficulties that might arise.

  1. Introduction
  2. Historical Background and General Review of CISG Provisions on Anticipatory Breach of Contract
  3. Case Study "ATT v. Armco": A Belarusian Approach to CISG Application in the Field of Anticipatory Breach
  4. Comments on "ATT v. Armco" and on the Most Significant Potential Problems in the Application of CISG Articles 71-72
    1. Clarity of anticipatory breach of contract
    2. Threatened non-performance in substantial part
        or foresight of the fundamental breach
    3. Immediate notification of suspension
    4. Adequate assurance of performance
    5. Correlation and consistency between the notifications
        of suspension and avoidance
    6. Final remarks on "ATT v. Armco"
  5. Conclusion

I. INTRODUCTION

Non-performance of a contract, in international sales practice, entails a variety of legal consequences for the parties involved. Sometimes legal theorists call these consequences "legal defense remedies."[1] These include, first of all, the general right of an aggrieved party to avoid the contract and to claim damages (for example, in accordance with Article 45 or Article 61 of CISG).

Avoidance, however, is applied only when a counter-party has already failed to perform an obligation (e.g., after the performance deadline). A declaration of contract avoidance cannot, by itself, protect the expected (positive) interest of the party who was aiming to profit from the contract performance (loss of profit), nor can it completely protect negative contract interests (disadvantageous consequences or damages, which the aggrieved party who acted in good faith has borne on the assumption that the contract would be duly performed). The only way for the aggrieved party to recover is to sue the negligent party. This approach has a passive and a retroactive character. The preliminary mechanism of the described actions in a case of ordinary non-performance is illustrated by the following Scheme I:

Scheme I: Ordinary non-performance

[Diagram omitted]

There is another approach as well. We can imagine a situation where Party A has some reasonable doubts that Party B will fulfill its obligations properly and on time. Can "A" do something defensive if it anticipates a breach by the counter-party? According to Scheme I, an aggrieved party is supposed to wait until non-performance itself takes place and cannot undertake any actions to protect itself and reduce or even escape disproportionate damages in advance.

Following a sense of justice and logical thinking, the law (as a system of social regulations reflecting the demands of society) is obliged to regulate this gap. Does the law provide the appropriate preventive remedies (preventing the occurrence of damages or reducing the amount of damages) to protect a bona fide contractor who has reasonable doubts before the date of performance whether his opponent will perform his/her obligations on time? Does it provide details about preventive mechanisms for such protection? It is important to answer these questions to get a clearer understanding of international legal practice in the regulation of anticipatory breach of contract.

The purpose of the present research is:

  1. to examine the history of the rules governing anticipatory breach of contract;
  2. to analyze the relative provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG);
  3. to review different approaches to interpreting the Convention (including the Belarusian approach to the application of CISG on issues of anticipatory breach of contract);
  4. to identify aspects in the international legal experience that can enrich the Belarusian legal approach and fill in some gaps arising in practice.

This research uses a method to apply comparative legal analysis supported by a case study of the decision of the International Court of Arbitration of the Belarusian Chamber of Commerce and Trade applying CISG Article 71. The translation of the case from Russian (one of the official languages in the Republic of Belarus) is made by the author. Some comments about the main difficulties and misunderstandings that arose concerning the translation are mentioned in Chapter IV (see Section 6).

The result of the research is a summary of the legal experience with anticipatory breach of contract regulations and provides a possible contractual solution for important difficulties that might arise.

II. HISTORICAL BACKGROUND AND GENERAL REVIEW OF CISG PROVISIONS ON ANTICIPATORY BREACH OF CONTRACT

Most legal systems of the world have the concept of "anticipatory breach of contract." This doctrine (widely criticized by some scholars of the post-Soviet legal tradition) [2] has its roots in English law and is based on the idea that if, before a debtor's performance deadline, the debtor refuses to perform explicitly or implicitly, a creditor can consider such a behavior as a breach of contract.[3] Modified, modernized and improved, this doctrine was absorbed by the United States legal system in the UCC provisions (Article 2 - Section 2-610).[4]

On other hand, the civil law countries supported the anticipatory breach of contract doctrine indirectly (as a rule there is no special regulation in the laws of these countries, but some legal norms are analogous to the above-mentioned common law provisions). For example, relying on scholars' research, French law allows the possibility of considering a contract as cancelled by a creditor without a formal procedural application, if the debtor expressly declares his refusal to perform the contractual obligation.[5] A similar approach can be found in §§ 325, 326 BGB (German Civil Code), and it intersects with the German law doctrine of positive breach of contract (Positive Forderungsverletzung).[6]

The modern status of our world economy (affected by such things as the unpredictability of fluctuations in finance and trade turnover, and the insecurity of some developing markets) causes the need for a reliable legal foundation that will allow contracting parties to escape the above-mentioned economical difficulties in their business relations. We can imagine a situation when, for instance, a buyer - expecting the delivery of 200 tons of potatoes from his permanent supplier - knows that, due to weather conditions, most of the harvest has been lost; moreover, that the supplier has already sold to another buyer the portion of the harvest that was saved. Should the first buyer have to wait for the non-performance deadline to declare such a contract avoided? We share the opinion that the appropriate legal rules "should be designed to minimize the unfairness, futility, and (in some circumstances) economic waste of requiring one side to wait upon the other side's performance when it is clear that such performance will not occur."[7]

Therefore, it is difficult to overestimate the role of the anticipatory breach of contract regulations in the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention 1980).

Generally, the sense of these regulations is illustrated with the following schemes:

Scheme II: Suspension of performance

[Diagram omitted]

In the first situation, when "Party A" has some reasonable doubts about the performance of "Party B", it is entitled to suspend its own performance and ask the counter-party to provide assurance that he/she will perform the obligation. If this assurance is given, both parties will continue to perform the contract, and damages can be prevented almost completely.

Scheme III: Declaration of contact avoidance

[Diagram omitted]

In a situation where it is clear to Party A that Party B will commit a fundamental breach of contract and Party B has failed to provide adequate assurance of its performance, Party A may declare the contract avoided. In such a situation, Party A's damages can at least be reduced in comparison with damages expected in the case of real non-performance.

Subsequently, we can distinguish two main articles dealing with the anticipatory breach of contract topic (or anticipatory breach, if we shall use CISG terminology [8]):

The third remaining article in Chapter V of CISG is Article 73. It deals with avoidance of installment contracts.

Anticipatory breach of contract regulation under CISG has a long history. Since 1935, the appropriate rules on anticipatory breach of contract have been included in different international documents and can be found with some deviations in text:[11]

CISG (1980) New York Draft (1978) Vienna Draft (1977) Geneva Draft (1976) ULIS (1964) UNIDROIT Draft (1956-1963)
 
Article 71 Article 62 Article 48 Article 47 Article 73 Art. 82,83
Article 72 Article 63 Article 49 Article 49 Article 76 Article 87

The final version of CISG can be termed a result of numerous compromises based on the conflicting interests. Alejandro M. Garro grouped the mentioned interests into three conflict lines:

  1. conflicts between the civil and common law tradition;
  2. conflicts between the socialist and western legal systems (East -West);
  3. conflicts between the industrialized and developing countries (North - South).[12]

The provisions of CISG on anticipatory breach of contract (in particular, on the suspension of performance) were an arena for long debates between the representatives of the North-South:

"Some delegates from developing countries were fearful of abuses of the power to suspend performance. [...] Accordingly they pleaded for limiting suspension of performance to situations where difficulties arose beyond doubt, e.g., where the other party went bankrupt. Delegates from Western, developed countries, in contrast, wanted to decrease the risk of performance and advocated that the probability of troubles should suffice."[13]

The representatives of the Southern "alliance" (for instance, Professor Shafik of Egypt)[14] were eloquent when criticizing the danger of excessive subjective estimation of the grounds for suspension. Thus, unlike the 1978 Draft that formulates the reason to suspend the performance as "good grounds to conclude that the other party will not perform the substantial part of his obligation",[15] CISG Article 71(1) uses the words "if it becomes apparent."[16] The latter meets a more striking and objective standard. On the contrary, Article 72(1) is almost the same in comparison with its predecessors. But paragraphs (2) and (3) were added at the Diplomatic Conference in March 1980 and brought some internal conflicts and ambiguity to the regulation of anticipatory breach. Many scholars have already criticized the results of the work at the Diplomatic Conference in the field of our research. In particular, Harry Flechtner remarks that some serious problems arising under Articles 71 and 72(2) can be explained by a "clumsy fit between Articles 71 and 72, which were the subject of last-minute debates and tinkering at the Vienna Diplomatic Conference."[17]

In concluding this chapter, it is worth remarking that neither the Civil Law nor the Commercial Law of Russia or Belarus (or other countries that have adopted the Model Civil Code for CIS members) regulates anticipatory breach of contract situations within the provisions of their civil codes. Formally, we cannot declare a breach of the contract until the time, when the performance was supposed to take place, has passed. However, according to our law, if the obligations of the parties have a reciprocal character (under a mutual bilateral contract when both parties bear the material rights to claim the performance of the particular legal action and both have the material obligations to perform another legal action in response), these obligations have to be performed simultaneously. Consequently, non-performance from one party's side gives the right to the other party for "counter-non-performance."

The legal notion described above is the closest phenomenon to the anticipatory breach doctrine that can be found in the post-Soviet legal systems. Unfortunately, until now the legislators on the post-Soviet legal space have not yet implemented the positive experience of foreign and international law practice. The gaps in our written law on the issue of anticipatory breach of contract can effect the serious problems that the courts face when applying the relevant CISG provisions because these courts may not be experienced enough to construe the specific provisions of the CISG properly.

III. CASE STUDY

ATT v. Armco: A Belarusian Approach to CISG
Application in the Field of Anticipatory Breach [18]

RESOLUTION

In two hearings on 28 September 1995 and 5 October 1995 in Minsk after examination of Case No. 24/13-95 based on the lawsuit filed by the Plaintiff Belarusian joint-stock company "ATT" [hereafter, Seller] against the Bulgarian firm "Armco" [hereafter, Buyer] with the purpose to recover a debt for a total amount of US $306,759.52, the Belarusian Chamber of Commerce and Industry International Court of Arbitration has found the following:

The [Seller] asserts that the parties made the contract on 18 May 1992 and, according to the provisions of the contract, the [Seller] delivered to the [Buyer] 11,841 units of contractual goods (refrigerators and deep-freezers in different models). The [Buyer] paid for part of the delivered goods and ran into debt. The [Seller] claims to collect from the [Buyer] the amount of the basic debt - $258,618.60 plus interest of $48,176.92 on the amount of the debt in arrears. The total amount of the claim is $306,759.52. The [Seller] asks also to recover his arbitration expenses, $7,168.

The [Buyer] in his response motion, and in addition to it, alleges that this dispute is out of the jurisdiction of the Belarusian Chamber on Commerce and Trade. However, if the arbitration court does not agree with the [Buyer]'s opinion on jurisdiction, the [Buyer] contests the claim on both issues of amount and grounds. In the [Buyer]'s opinion, the claim is not supposed to be subject to recovery because the [Seller] acted in bad faith. First, he groundlessly and unilaterally terminated the delivery of the necessary quantity of refrigerators and deep-freezers provided for in the contact. Second, [Seller] delivered the goods with a number of mechanical and latent defects. Meanwhile, the groundless termination of the delivery of the goods and their defects caused damages to the [Buyer] in an amount that significantly exceeds the amount of the [Seller]'s claim. For the determination of the amount of real damages, the [Buyer] asked to hire an economic expert. [Buyer] also claimed that he reserved for himself the right to submit a counterclaim.

On 28 September, at a court hearing the representative of the [Seller]'s interests was a deputy director of the [Seller]'s firm, Mr. S.S. Anatolyev (a letter from the attorney was issued on 21 July 1995 and attached to the case file). Mr. Anatolyev supported all of the declared claims completely and produced supplementary proofs.

The [Buyer]'s interests were presented by the director and owner of the [Buyer]'s firm, Mr. K. Stoichkov and the specialized legal advice office of the Minsk City Bar attorney, Ms. O.S. Zabolotnaya (a letter from the attorney is attached to the case file). Ms. Zabalotnaya also retained their primary objections against the claim in support of which they referred to new facts and evidence.

Since the claims and objections of the parties were to be made concrete as applied to their separate constituents and because they needed time for the analysis of new materials presented at the hearing itself, the court (with the parties' consent) postponed the case examination and appointed a new hearing on 5 October 1995.

At the hearing on 5 October 1995, the interests of the parties were presented by the same counsel - S.S. Anatolyev (on the [Seller]'s side), K. Stoichkov and O.S. Zabolotnaya (on the [Buyer]'s side). The parties' claims and objections were without changes on the whole. However, in their affidavits and oral arguments the parties explained in detail and defined more exactly some of their arguments which were presented earlier. The [Buyer]'s representative waived a right to file a counterclaim. He did not insist on having an economic expert in the case.

As a result of the parties' explanations and on the basis of the presented evidence assessment, the Court states the following:

1. In connection with the [Buyer]'s statements that the instant case is beyond the jurisdiction of the Belarusian Chamber of Commerce and Industry International Court of Arbitration, this issue was considered by the Presidium of this Court on 22 September 1995. As a result of the study of the case materials and on the basis of the Regulations of the Belarusian Chamber of Commerce and Industry International Court of Arbitration (Article 26), the Presidium recognized that the consideration of case ¹ 24/13-95 at the suit of [Seller] JSC "ATT" vs. [Buyer] "Armco" is subject to the authority of the Belarusian Chamber of Commerce and Industry International Court of Arbitration (in other words, it is within its competence).

Sharing the Presidium's opinion in full, the Court states that the contract of delivery of the refrigerators and deep-freezers was signed by the parties on 18 May 1992 (i.e., after the collapse of the former USSR) when the common and widespread earlier indication in the arbitration clause of the Court of Arbitration at the USSR Chamber of Commerce and Trade became impossible. Therefore, it was reasonable to change the arbitration clause and mention in it the International Court of Arbitration of the Belarusian Chamber of Commerce and Trade (the establishment of which was only a matter of time in the independent Belarusian state).[19]

Such content in the arbitration clause as a part of the whole contract is in complete compliance with the principle of freedom of contract and with the current Belarusian law. Moreover, as it follows from the FAX testimony of Mr. V. Chernov, who signed the contract on behalf of the [Seller], Mr. K. Stoichkov's allegations against the false representation were groundless. No one attempted to mislead him; he did not express any objections against the proposed edits to the arbitration clause which his signature on the contract proves. There is no essential issue of fact concerning whether the [Seller] included the arguable clause later in the text of the additional agreement project. It had already happened after the International Court of Arbitration of the Belarusian Chamber of Commerce and Trade was established. Even more important, explaining his motivation not to sign the mentioned project, Mr. Stoichkov did not say anything concerning the arbitration clause (see his letter on 2 February 1995 about the project of agreement from 1 December 1994).

2. The contracting parties did not reach an agreement on choice of law. Therefore, the Court considering the rules of the Article 561-1 of the Civil Code of the Republic of Belarus [20] (hereafter - BCC) maintains that the rights and obligations of the parties in the international transaction are determined by the law of the place where the contract was made (lex loci contractus), unless otherwise agreed upon in the contract. Since the parties made the contract No. 745/100-2851 in Minsk (Belarus), this dispute has to be settled according to Belarusian Law.[21]

On the basis of Article 564 of BCC directions, the applicable law on this issue will be the UN Convention on International Sales of Goods (Vienna, 1980), ratified by the Republic of Belarus on 9 October 1989 (hereafter, Vienna Convention).

3. The rights and obligations of the parties are determined by the above-mentioned contract No. 745/100-2851 of 18 May 1992. The Protocol of 9 November 1992 fixed the agreement between the parties to prolong the mentioned contract through the year 1993 until the moment of the joint enterprise creation planned by the parties. As far as Sophia City Court registered this enterprise (for the [Buyer]'s firm) on 7 May 1993, this date has to be the day when contract No. 745/100-2851 expires. However, relations connected with the performance under this contract lasted longer. In particular, the contractual term for the payment against the last delivery of the goods elapsed in December 1993.

In compliance with the contract, the [Seller] was obliged to deliver to the [Buyer] 31,000 units of different models of the goods, and the [Buyer] was obliged to pay for these goods in the form of a documented collection. The documents were to be paid for on sight, and no later than 60 days from the date of delivery. Both parties performed their obligations partially.

In the above-mentioned conditions, the [Seller] claims payment for the delivered goods, and the [Buyer], recognizing that he must pay for the delivered goods, asks to reject the claim because of the [Seller]'s violation of the essential conditions of the contract (essentialia negotti) and alleges that damages to the [Buyer]'s interests exceeded the amount of the claim many times.

4. The representative of the [Buyer] alleged that if his firm had received 19,859 units of the goods that were not delivered by the [Seller], he would have profited by $853,937. The [Buyer] believes that incomplete delivery was the most important reason which caused his firm's non-performance. Simultaneously, the inability to receive the profit led to the loss of interest on the profit (27% annually) which was to be used for the development of shops, offices and warehouses infrastructure. It led to an additional loss on the blocked account in the amount of $53,604. In the final analysis, the [Buyer] deems that the lost profit for his firm is about $907,541, and he sets this amount against the claim amount.

This Court cannot agree with the [Buyer]'s arguments. Since 1993, the [Buyer] has been obliged to pay the price for every part of the goods promised no later than 60 days from the date of delivery. This price does not depend, and cannot depend, on the profit of the [Buyer]. It seems impossible to pay the contract price from the profit received from the sale of delivered goods, because the estimated profit that was expected for one sold unit is 25% to 33% of the contractual price of the unit. In his business correspondence, the [Buyer] has never referred to the loss of profit as a reason for non-payment. Moreover, in his letter dated 2 February 1995, the [Buyer] explained the delay of the payment as due to the overstocking of the refrigerators (not as incomplete delivery). He writes to the [Seller]'s general director: "Imagine, how it might be possible to pay you in time, if for the period from January to July 1993, I had on average 3,500 units of goods monthly in my warehouses, and sales of products were approximately 350 units per month."

The Court does not accept the [Buyer]'s reference to the oral agreement about cooperation on the consignment basis. By virtue of contract clause No. 11, such an agreement cannot be made orally.[22]

5. The Court deems that the termination of the delivery from the [Seller]'s side was a response measure (counter-measure), and the [Seller] was forced to undertake the above-mentioned actions because of systematic non-payment for the delivered goods. In his letter of 29 July 1993 addressed to Mr. Stoichkov, [Seller]'s general director stated that the [Buyer]'s arrears on payment against the collections were $884,975.42 (in comparison with the contractual price per one unit of goods from $125 to $165). In the same letter, [Seller]'s director notified Mr. K. Stoichkov that there would be a suspension of delivery until the complete offset of debt under Contract No. 745/100-2851.

Up until 12 October 1993 (when the parties made their first agreement on the terms for the offset of debt), the amount of the debt had changed insignificantly and amounted to $844,335.29. In accordance with this agreement, the [Buyer] chose to pay off $784,599.94 in equal monthly payments until February 1994. Because the mentioned agreement was performed only partially, the parties have since made new agreements, which, in their turn, were not performed either partially or in full. A letter dated 2 February 1995 is the last evidence on this issue submitted to the case materials. In this letter, Mr. Stoichkov once again informed the [Seller]'s director that "he always recognized his debt for payment for all the delivered production" and promised to pay $273,184.72 in monthly payments within the February-March period. These payments, however, were not made. Until the contract was terminated the [Buyer] built up a huge debt, and in the two following years (until May 1995 when the lawsuit was filed), he had not offset the debt completely.

Consequently, the [Seller] has a right to suspend delivery until the debt is paid off completely. However, the [Seller] refers to the wrong law (article 261 BCC in edition of 1994), as the debt and suspension of the performance took place in 1993. Therefore, the applicable law will be Article 564 of BCC which stipulates, "if the international agreement of the Republic of Belarus determines other rules than those which are contained in the civil legislation of the republic, the rules of the international agreement have to be applied." In this case, these are the rules of the Vienna Convention that has been in force in Belarus since 1 November 1990.

In compliance with Article 80 of Vienna Convention "a party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission". In other words, the [Buyer] cannot refer to the incomplete delivery of the goods by the [Seller], if this non-delivery was caused by the [Buyer]'s refusal to pay for a significant part of the goods which have already been delivered.

Article 80 of the CISG closely interconnects with article 71 of the same Convention that gives the right to a contracting party in an international sale contract to "suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of: (a) a serious deficiency in his ability of perform or in his creditworthiness; or (b) his conduct in preparing to perform or in performing the contract."

In this case, there is the presence of both conditions mentioned in Article 71: the amount of the basic debt of the [Buyer] and his behavior concerning paying off the debt. The requirements of Article 71 were executed by the [Seller]. He informed the [Buyer] by letter on 29 July 1993 about the suspension of the performance "until the complete paying off the debt." On the other hand, this Article requires the continuation of contract performance even after the notification if the other party provides adequate assurance of his performance. However, no evidence was provided by the [Buyer], the arrears are still not liquidated at the present time.

6. The [Buyer] in his arguments mentioned the damages ($205,175) caused by the low quality of the delivered goods. However, this amount cannot contradict the [Seller]'s claims. In compliance with contract provisions, a claim of lack of conformity of the goods has to be filed by registered letter within twelve months from the date of delivery. This letter must be accompanied with the necessary documents including the certification issued by a neutral competent organization. No claims on the quality were filed by the [Buyer] either within twelve-month term, or later.

The [Buyer] alleges that the parties modified the meaning of contract clause No. 8, and that modification allows managing without the act of the neutral competent organization. However, according to clause No. 11.3 of the contract, "all amendments and modifications to the contract will be valid only if they are made in written form and signed by both parties." Hence, as such a document was not produced by the parties; the Court cannot accept the reference to the contract modification.[23]

Under the present conditions, the Court in its judgment on the issue of the [Seller]'s responsibility for the production quality can rely only on the contract and the documents signed by both parties. The [Seller] testifies to the absence of the proper registration of the expenses incurred by the [Buyer] in connection with defects of the delivered goods. For instance, it is evident from the checking list on service expenses in 1993-1994 (drawn up in Sophia, dated on 25-28 April 1994, and signed by Mr. Stoichkov and Mr. Namonov, representative of [Seller]) that in Sophia 122 customer service calls were registered, but in the column "Execution of order and the work done" only nine cases are marked. As a result of checking and analyzing of facts, the parties concluded: "The data on registration and account of the customer service operations does not allow us to determine definitely the real volume of work that was done and to calculate the real expenses."

At the same time, the [Seller] does not reject that among the delivered goods there could be defective units. Appendix 1 to the contract stipulates a warranty discount at the amount of 2% of the price of the delivered defective goods. The amount of the mentioned discount for the goods delivered in 1993 is $20,151.62. The latter is recognized by the [Seller].

7. The Court finds that the claim of the [Buyer] to deduct from the [Seller]'s claim the amount of $10,142.50 has legal grounds because of the discount on 114 defective units of the goods. Reduction of the debt to the extent of the mentioned amount is proved by the agreement of 23 February 1994. The [Seller]'s allegation that the [Buyer] has been already released of this amount on 31 May 1994 was found groundless by the Court because of absence of due evidence.

8. Among the objections against the claim, the [Buyer] indicated also errors in the documents for customs: wrong address, price and delivery conditions. All these actions caused damage to the [Buyer] in the amount of $13,871. The last allegation of the [Buyer] is considered by the court to be proven by the invoices as well as recognized by the representative of the [Seller] in the court hearing.

Thus, the [Buyer] justified an offset of the following sums due to him by the [Seller]: $10,142.50 (the amount of the discount on the defective goods) and $13,871 (expenses caused by the wrong custom documents registration), totaling $24,013.50.

In this connection, the callable amount that must be paid by the [Buyer] for the delivered goods is $234, 605.10 ($258,618.60 minus $24,013.50). In view of the basic debt amount reduction, it is necessary to reduce the interest on the delay of payment to the extent of $43,688.10. Respectively, the expenses incurrent by the [Seller] on the arbitration expenses have to be reduced.

On the basis mentioned above and governed by articles 256-258, 564 BCC, Articles 71 and 80 of the CISG and Articles 3, 5, 26, 49-50, 70 of the Belarusian Chamber of Commerce and Trade International Court of Arbitration Regulations the Court

DECIDED

The claim has to be recovered partially. The amount of $278,293.20 of the basic debt and interest as well as the amount of $6,883 in return for the arbitration duty has to be recovered from the [Buyer] in the favor of the [Seller]. The rest of the claim has to be denied.

The signatures of the arbiters.

We confirm that the present Resolution is issued by the Court, organized in compliance with the requirements of the Belarusian Chamber of Commerce and Trade International Court of Arbitration Regulations. The signatures of the arbiters are authentic. The Court Resolution is final and comes into force from the moment of its pronouncement.

Chairman of the Court of Arbitration, Professor N.G. Yurkevich

Secretary of the Court of Arbitration, S.I. Rak

IV. COMMENTS ON ATT V. ARMCO CASE AND ON THE MOST SIGNIFICANT POTENTIAL PROBLEMS IN THE APPLICATION OF CISG ARTICLES 71-72

The following is a summary of the main facts of this case:

The Seller sued to collect the amount of the basic debt and interest on it. The Buyer alleged that: the groundless termination of delivery committed by the Seller caused the non-performance from the Buyer's side; the parties made an additional oral agreement to work under consignment conditions (under which Buyer had to pay for the delivered goods only after their resale in Bulgaria); the Seller unilaterally breached the contract.

The issue before the court was formulated as: Did the Seller duly suspend the performance and was it entitled to recover? The Court's holding is: Yes, and Seller was awarded damages.

Prima facie analysis of the Court's decision could convince the researcher that the decision to award the Seller in this case was properly and completely justified. Truly, the Court's reasoning meets some basic criteria required by Article 71 to give a party the right to suspend performance. These criteria have been enumerated in Chapter II.

1. Clarity of anticipatory breach of contract

Unlike the ordinary breach of contract after the date for performance where it is not too complicated to find out this fact because of its objectivity, in the case of anticipatory breach of contract, we face a hypothetical future breach situation. The party will estimate the ensuing events on the basis of his subjective view influenced by an objective test. As a rule, for the seller this is inability to perform the delivery; or for the buyer it is lack of creditworthiness; it can also be grounded on a party's misconduct in preparing to perform or in performing the contract.

According to court practice in post-Soviet countries, the fact of improper performance committed by the counter-party in his previous relations with the other business partner does not provide one grounds to assume the anticipatory breach of contract in the instant case. This approach confirms the criterion according to which the grounds have to be based on the events which took place after the conclusion of the contract and therefore connected with it. Serious grounds can be some kind of suspension of production at the seller's plant caused by strike, or regular non-payment on another contract with this party.[24]

In ATT v. Armco, we can find the presence of both conditions mentioned in Article 71 (the amount of the basic debt of the Buyer and his negligence in paying off the debt). The Buyer owed a significant amount and had not paid it for more than two years. He just kept promising to pay and asked for postponements.

A similar approach was followed by a Belgian Court (Rechtbank van Koophandel, Hasselt) in the case of J.P.S. BVBA v. Kabri Mode BV (1995) where

"[a] Belgian buyer ordered fashion goods (winter clothes) from a Dutch seller. After the delivery of the goods and partial payment, the buyer placed a second order for summer clothes. The seller replied that it would deliver the summer clothes only upon full payment of the invoices sent for the first order which were unpaid. The buyer commenced an action asking for damages caused by the failure to deliver the ordered goods. The seller counterclaimed. ... In the Court's opinion, ... the seller had the right to suspend its performance, i.e., delivery of the second order, until full payment of the first delivery, especially taking into account that the buyer's serious delay in payment (over seven months) could reasonably lead to the suspicion that it would not perform in the future."[25]

In 1998, the Austrian Supreme Court (Oberster Gerichtshof), however, judged that the failure by a seller to pay single installments, as in the case before it, is not in itself sufficient to justify a serious financial difficulty, or a loss of creditworthiness, as required under Art. 71(1)(a) CISG.[26] In this Court's opinion, such loss of creditworthiness may only be shown if one of the parties becomes subject to an insolvency procedure, or if a party has completely stopped payment for goods delivered under the contract.[27]

We cannot support the Austrian Court's position because it construes the CISG provision too narrowly. But an explanation for the described approach can be found in Austrian domestic law. In the Germanic legal family, it is common that a claim for damages due to late performance can be brought only if the debtor is in default (Verzung).[28] International practice, however, does not recognize this approach as a universal principle. Thus, the threat of non-payment can be justified even if the debtor is not insolvent.

In concluding this section, it is necessary to emphasize that the barrier between the standard of "apparency" used in Article 71 and "clearness", determining the right to declare a contract avoided is very fragile. However, it is reasonable to state that Article 71 "requires less certainty concerning a future breach than avoidance under Article 72."[29]

Thus, the first difficult or potentially misleading factor for parties dealing with anticipatory breach of contract is clarity of anticipatory breach of contract: What is the difference between "it becomes apparent that" and "it is clear that"? Articles 71-72 of CISG require some standard of certainty concerning a future breach before you can suspend the performance or declare the contract avoided. The suspecting party bears the risk of presuming wrongly. What if the party was mistaken in its assumptions about the impossibility to fulfill the obligations by the counter-party? Does it mean that this party initiated and caused the breach of the contract and should pay damages? How is it possible to avoid this risk?

First approach: Farnsworth refers to Article 71 as having been inspired by Section 2-609 of the U.S. Uniform Commercial Code.[30] Applying the UCC model would unify the standard of seriousness of threatened non-performance in both situations (in favor of a "reasonable grounds" test). UCC 2-609 states:

"When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.[31] After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract."[32]

Thus, the parties to the contract can add explanatory aspects borrowed from UCC Section 2-609 in the text of their particular contract when they draft the contract or (but it is advisable only if at least one of the parties is connected in some way with the US law jurisdiction) they can derogate from CISG Articles 71-73 and apply the UCC provisions.

Second approach: In application of the "freedom of contract" principle, both the parties have to state all the particular regulations in the text of the contract. They may provide some other criterion to distinguish "apparency" and "clearness" of non-performance. Some examples of these criteria will be given in the conclusion.[33]

2. Threatened non-performance in substantial part or foresight of the fundamental breach

Undoubtedly, a systematic non-payment situation that took place in the business relations of the contracting parties can prove the "substantiality" of anticipatory breach of contract because the "payment clause" forms the essential part of a buyer's obligation. On the other hand, there are grounds to consider the breach of the duty to pay as a serious violation giving reason to be construed as a threat of fundamental breach. This assumption does not conflict with the concept of fundamental breach provided by CISG Article 25 as the first benefit expected by the seller is payment for the delivered goods. Likewise, for the buyer the following action can be considered as equivalent to the seller's repudiation: "the wrongful resale to a third party of the goods that seller had contracted to deliver to the buyer, or the sale of the manufacturing plant at which the seller had agreed to produce the goods for the buyer".[34]

Most of the CISG cases consider delay of payment as a ground to suspend performance, but not necessarily to declare the contract avoided. Our assumption that non-payment (especially lasting over a long period) can be estimated as "the first call" for upcoming fundamental breach found practical support in a 1993 case judged by a German Court (Landgericht Krefeld).[35] A German buyer ordered shoes from an Italian company, at a time when the buyer was two months overdue with payment under a prior contract between the parties.[36] According to the facts of the case,

"[t]hree months later, the seller requested the buyer to complete payment under the first contract within a week and to secure the payment of the price of the later contract, announcing that otherwise it would exercise its right to declare the contract avoided. Since the buyer did not react, the seller, having commenced an action for payment under the first contract, declared the second contract avoided and resold a part of the goods to a third party at a loss. ... The Court stated that the seller had the right to declare the second contract avoided under Art. 72(1) and (2) CISG, since even before the delivery of the shoes it was clear that the buyer would not pay the purchase price and would thereby commit a fundamental breach of contract."[37]

We are inclined to share the point of view that lasting non-payment may be construed as a precursor for fundamental breach. At the same time, it is important to emphasize that this factor does not create the foundation to apply Article 72 itself (application must be interpreted in connection with the rest of the criteria and take into account all of the circumstances of the case).

Thus, the second potentially misleading factor for anticipatory breach of contract regulations is the nature of the threatened non-performance. What is "substantiality of non-performance" and what is "fundamental breach"? Even considering the general definition given in Article 25 of the CISG, it is almost impossible to define this idea completely. Therefore, it is reasonable to specify the mentioned concepts in the contract. For example, it seems logical to advise the contracting parties to include the necessary provisions specifying the preliminary list of grounds for fundamental breach in the text of their contract, which can simplify the interpretation of the contract in the future. Some concrete practical recommendations for the contracting parties on this issue are given in the conclusions to this article.

3. Immediate notification on suspension

The Convention does not state any requirements as to the contents of the notice of the suspension (however, it would be reasonable to oblige the suspending party to describe the motives and factual grounds for his/her suspension in the text of the notification). The time criterion for notification is obviously non-disputable. According to CISG Article 71(3), the notification to the counter-party of the suspension has to follow exactly after the actions have been undertaken to suspend the performance.

In ATT v. Armco, the Seller suspended the delivery before the date when contract expired (May 7, 1993). The notice of the suspension was made in a letter dated July 29, 1993. It is obvious that Seller failed to send the notice immediately and had no right to suspend the performance. We assume the Belarusian Court erred in its decision to award for the Seller.

For confirmation of this position, it is possible to refer to a German case (considered by Amtsgericht Frankfurt am Main in 1991) where the Court dismissed the claim of the seller who suspended his performance in response to non-payment.[38] It held (in accordance with Art. 71(3) CISG) that when a party suspends performance, it must immediately give notice of the suspension to the other party.[39] In this case, the seller had never given a notice to the buyer of its suspension and as such the buyer was entitled to recover damages pursuant to Art. 45(1)(b) CISG.[40]

4. Adequate assurance of performance

It is necessary to investigate some remaining problems in the CISG regulation on anticipatory breach of contract. Article 71(3) as well as Article 72(2) gives to the party "accused" of anticipatory breach of contract the right to provide adequate assurance of his performance in response to the counter-party's notification to suspend performance or to declare the contract avoided. If the accused party provides such assurance, the counter-party must continue the performance.

But what is "adequate assurance"? The post-Soviet court's practice implies that such an assurance should have a character that secures a reasonable degree of certainty (bones pater familias standard) that the counter-party will perform his obligations and compensate for all the damages caused to the other party connecting with continuation of the contract performance.[41] For example, for a non-payment case, it could be completely setting off the debt. Sometimes it could require the additional pledging of security in the form of a bank guarantee or a standby letter of credit. It meets the "perfect tender" rule in connection with the assurance nature (the foregoing obligation has to be performed "perfectly" to assure the creditor in the potential performance of the next obligations).

However, the strict-sense analysis of Articles 71-72 does not create a foundation to allege that "adequate assurance" is the assurance of perfect performance. On this point, we are inclined to share Professor Honnold's and Professor Flechtner's opinion both of whom argued that "assurance of less than perfect performance should be considered 'adequate assurance' provided the imperfection is not substantial."[42] Thus, analogous to Nachfrist notice consequences, "assurance of imperfect performance should preclude avoidance under Article 72 as long as the performance that is assured would not constitute a fundamental breach."[43]

Thus, the third potentially misleading factor can be found in what is an adequate assurance: either assurance of any performance, even imperfect, or assurance of perfect performance? Despite the fact that the literal analysis of CISG supports the "imperfect performance" standard, it is reasonable for the parties to clarify this difference in the text of their contract aiming to avoid interference with the violation of the principle of "good faith."

5. Correlation and consistency between notices of suspension and avoidance

The next issue connected with assurance of performance is: If the other party fails to provide adequate assurance after the demand made under Article 71 and his counter-party intends to declare the contract avoided, must the latter issue a second demand for adequate assurance under Article 72?

Unfortunately, Article 71 of CISG does not specify any concrete rules on this potential conflict. On the contrary, under Section 2-609(4) of the UCC, a party's failure to provide adequate assurance entitles the other party to treat the contract as repudiated after thirty days have elapsed. Professor Honnold agrees with this approach and concluded when there is a failure to provide adequate assurance of performance, it entitles the other party to invoke the provisions on anticipatory breach in Article 72(1):[44]

Scheme IV: Honnold's approach to correlation of notifications

Notification
on suspension
of performance
  >>>>   Failure to provide
adequate assurance
  >>>>   Application
of Article 72 automatically
(without the repeated
notification on avoidance)

But Professor Ziegel reasonably states that anticipatory repudiation only comes into play when "it is clear" that one of the parties will commit a fundamental breach of the contract, and a party's failure to provide adequate assurance "is surely not unequivocal evidence of his unwillingness to perform, particularly when he may question the validity of the requesting party's feeling of insecurity to begin with."[45] Professor Date-Bah supports Ziegel's opinion confirming that anticipatory breach under art. 72(1) "requires proof by the person seeking to avoid the contract of facts from which a conclusion can logically and rationally be reached by induction that the other party is likely to commit a fundamental breach. Mere appearances are not good enough."[46] The last approach corresponds to the following scheme:

Scheme V: Ziegel's approach to correlation of notifications

Notification
of suspension
  >>>>   Absence of
adequate assurance
  >>>>   Notification
of avoidance
  >>>>   Absence of
adquate assurance

However, this approach seems somewhat absurd because the parties have to do twice as much work and waste time during waiting periods. Therefore, if the parties to the international sale contract aim to avoid misunderstandings on the issue of the anticipatory breach notification, they are strongly recommended to specify and solve all the uncertainties in the text of the contract (as it allows CISG Article 6). Some examples of such a clause can be found in the Section V.

Finally, there is one more issue closely connected with the previous problem. If adequate assurance is not received by the aggrieved party, how long can he continue the suspension of performance?

Scheme VI: Continuation of the suspension of performance

Notification
of suspension
  >>>>   Absence of
adequate assurance
  >>>>   Notification
of avoidance
  >>>>   Absence of
adquate assurance

Professor Flechtner believes that it cannot be continued indefinitely.[47] Professor Honnold makes clear the similarity of indefinite suspension and the avoidance of contract.[48]

The Convention did not propose any decision on the above-mentioned problem. The author supports the idea of Professor Flechtner assuming two possible solutions:

"1) Article 71 could be construed to require that the suspending party either avoid the contract or end its suspension within a reasonable time after demanding adequate assurances;
" 2) the standards for the seriousness of the threatened breach in Articles 71 and 72 could be treated as equivalent."[49]

It is advisable for the parties to vary the effect of CISG Articles 71-72 by implementing into the text of their contract one of the proposed solutions.

6. Final comments on the ATT v. Armco case

Concluding our analysis of anticipatory breach of contract regulations under the CISG provisions which focused on the case ATT v. Armco, it seems appropriate to undertake an independent review of the criteria required by the Convention in connection with the factual circumstances of the case and examine the Court of Arbitration's reasoning in conformity with the legal requirements:

Requirements
Conformity
Case facts
 
Apparency of anticipatory breach of contract
Yes
Non-payment within 3 years
Threatened non-performance concerns the substantial part of the debtor’s obligation
Yes
Payment is the main obligation of the buyer
Apparency is based on the events which took place after the conclusion of the contract
Yes
Seller performed some part of his obligations before to suspect the anticipatory breach of contract
Serious deficiency in the buyer’s creditworthiness
Yes
Lasting and unexplained non-payment
Immediate notification of counter-party about the suspension of delivery
No, the Court erred on this criterion
Suspension took place after the first non-payment in 1992, meanwhile the notification was sent in July 1993.

Thus, we can see that the Court did not remark upon the Seller's violation of the term to send notification on suspension of the performance committed by the Seller. This notification has to be sent immediately after the suspension. Otherwise, it denies the right of the Seller to justify his suspension of the performance and the Buyer has to be awarded damages, caused by this suspension, pursuant to Article 45(1)(b) CISG.

It seems also more reasonable to consider the situation described in ATT v. Armco through the prism of Article 73 regulations. The first installment delivered by the Seller to the Buyer was not paid completely. This can be seen as a failure to perform the Buyer's important obligation in respect of the first installment. The mentioned failure would give the other party (Seller) "good grounds" to conclude that a fundamental breach of contract will occur with respect to future installments. Therefore, the Seller could declare the contract avoided for the future (Article 73(2) CISG), if he did it within a reasonable time. He could also sue the Buyer to recover damages for a real breach of the contract committed by the Buyer (non-payment of the first installment).

According to the case, the Belarusian Court attempted to determine the applicable law and did not refer to Article 1(1)(a) of the CISG directly. Instead, the Court cited domestic law - the BCC rule of lex loci contractus (place of contract formation - Minsk, Belarus). The Court then explained that the CISG is applicable because it is a part of Belarusian law. This reasoning could be mistaken if the parties, for example, chose London as a place for contract formation.

The Court omitted also the reference to the CISG (reservation of Articles 12, 96 or Article 29) solving the validity of additional oral agreement on the consignment issue. It referred only to the contract provisions requiring the obligatory written form for any modification. However, the Republic of Belarus ratified the Convention with the following reservation:

"In accordance with Articles 12 and 96 of the Convention, ... any provision of Article 11, Article 29 or Part II of the Convention that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indications of intention to be made in any form other than in writing, would not apply where any party had his place of business in its territory."[50]

Finally, some terminology used in the decision is unclear and must be construed only in the whole context of the case. For instance, the Seller "ATT" sends to the Buyer "Armco" notification that he intends to stop the performance (in Russian - "npekpamumb"). This word can be explained in Russian in two senses:

  1. to stop - in the meaning "to suspend"; or
  2. to stop - in the meaning "to avoid a contract."

Unfortunately, the Court did not pay attention to this potential misunderstanding and did not interpret it clearly. The real intentions of the Seller can be derived only from an analysis of all the facts. Thus, we can clearly state that the absence in Belarusian law of a legal institution that is similar to the anticipatory breach of contract regulations causes some significant problem in law enforcement for the rules of CISG. Therefore, it is obvious that for the Belarusian judiciary, which concentrates too much on national law application even in the sphere of international trade, a good way to eliminate and prevent the most widespread mistakes in CISG application is to develop international cooperation in this field as well as to study and analyze foreign experience with CISG application.

V. CONCLUSION

It is universally recognized that theoretical scientific research is incomplete and useless unless it supports the practical aspects of a problem. Therefore, the main outcome of the instant research aims to design an appropriate improved model which can be made by dealing with some essential misunderstandings found in the text of the CISG on the anticipatory breach of contract regulation issue. The author does not want to position herself as a naive and short-sighted researcher. She clearly understands the practical inability of the idea to amend the CISG and does not insist upon this complicated and time-consuming process. However, according to the mechanism of relative flexibility laid out in CISG which under Article 6 the parties can vary the effect of any of its provisions, the contracting parties can negotiate their own unique regulations on anticipatory breach of contract in the texts of their sales contract. This implements the positive aspects of CISG approach, while making a reasonable interpretation of some vague and ambiguous provisions of the CISG.

Usually, contract provisions have the purpose of facilitating the fair allocation of risks between counterparties. As applied to this legal area, the interests which conflict are attached to the intersection of two risks:

  1. the risk of anticipatory breach of contract (a party can disregard any threatened circumstances but it will lose when the contract is not performed by the other party);
  2. the risk of subjective prognosis (if a party erred in its predictions and the other party was able to perform the contract, the first party breached the contract and is liable for all the damages occurred).

How to allocate these risks?

As a result of the present research and on the basis of the comments issued by sophisticated representatives of modern legal science, we propose the following recommendations which can be used by parties conducting international trade as preliminary contractual provisions:

1. We advise the parties to clarify the events and circumstances that might be estimated as providing the grounds for apparent and clear non-performance. It seems logical to introduce two criteria:

  1. Grounds criterion - when the parties enumerate in the contract the preliminary list of the grounds (in addition to the grounds listed in Article 71(1) which are too abstract and need to be explained with the concrete examples).

    For instance:

    "It can be considered as apparent that the party will not perform their obligations under the instant contract if:

    1. it has already committed a similar violation under another contract made with the same counter-party which had to be performed within the time of the instant contract performance;
    2. after the contract formation it has expressed explicitly and systematically in business correspondence with the counter-party that it faces serious impediments affecting its contract performance ..."

      This list can be continued and depends on the result of the negotiations. In compliance with the UCC experience, it is also recommended to determine the reasonableness of the grounds according to commercial standards existing in the trade practice. But the described approach has one serious disadvantage: it is often too complicated to remember all the potential threatened grounds; and very important circumstances could be negligently omitted.

  2. Time criterion - when the parties settle one period for the lasting threat of non-performance considering as apparent and another period for clear non-performance. For example: "If a party commits a delay in payment exceeding 60 days from the final date of payment without any explanation sent to its counter-party and without the excuse received from him in response, it can be considered as an apparent threat of non-performance; if this delay continues more than 120 days then a clear threat of non-performance takes place".

Scheme VII: Time criterion on clarity of anticipatory breach of contract

Date when threat occurred
Apparent threat
60 days
Clear threat
120 days

However, the parties can also apply a third criterion combining both conditions respectively to the nature of the non-performance threat. They can also apply the UCC "reasonable grounds" model (as explained in detail in Chapter IV) and form a contract clause in compliance with the UCC Section 2-609.

2. It might be useful for the parties to determine what non-performance of substantial part of obligations is and what fundamental breach of contract is.

Even considering the general definition given in Article 25 of CISG, it is almost impossible to define this notion unambiguously. Such an attempt can be undertaken within the text of the contract. For example, the contract may include the following provision:

"1. Repeated delay (more than once) in payment or delivery of goods can be considered as non-performance of the substantial part of obligations; systematic delay (more than twice) will be construed as fundamental breach.

"2. Wrongful resale to a third party of the goods that seller had contracted to deliver to the buyer, or the sale of the manufacturing plant at which the seller had agreed to produce the goods for the buyer will be considered as a fundamental breach conducted by the seller."

3. During the negotiations, the parties are strongly recommended to discuss what they mean under the concept "adequate assurance of performance." According to the principle of good faith in international trade, it is more appropriate to claim the assurance in perfect performance (even if the CISG does not require it directly). The parties can implement into the contract an additional requirement of perfect performance assurance as well as agree on the concrete remedies which can be used by the party accused in anticipatory breach of contract to confirm the assurance of performance - bank guarantee, guarantee of the third party, deposit, and any other security.

4. Finally, expecting to escape the most problematic issue in the field of anticipatory breach of contract regulation, the parties have to stipulate contractual provisions establishing the accurate correlation and consistency between the notifications on suspension of performance and on declaring the contract avoided.

Despite the fact that the CISG does not require that the reasons which caused the suspension or avoidance be explained in the notification, it would be more just to fix in the contract the suspending party's obligation to ground such reasons. It could help the other party to change its behavior more properly and rapidly if it knows why the claims occurred.

Obviously, it is useful to state in the contract that the failure to provide the necessary assurance in performance committed by the party accused of anticipatory breach of contract (if this failure lasts a specific period stated in the contract) can give grounds for the innocent party to declare the contract avoided without sending repeated notifications. Moreover, the parties may agree that the absence of any response to notification (in silence of the counter-party) will be deemed as refusal to provide adequate assurance and entail the same consequences (the right to declare the contract avoided without repeated notifications).

Such are the recommendations synthesizing the results of our research. The author in no way considers her proposals as universal remedies or claims that they are a "panacea" in this field of CISG regulation. On the contrary, we intended just to discover the most problematic aspects of anticipatory breach of contract regulation rendering to the parties a right to find the most appropriate solution in accordance with the concrete situation and in compliance with the principle of freedom of contract.


FOOTNOTES

* Tatsiana Seliazniova (Tatiana Selezneva), Master in Law, LL.M. University of Pittsburgh School of Law, is a Ph.D. in Law Candidate, Belarusian State University, Minsk.

The author gratefully acknowledges support of all the people who helped in conduct of the research and in preparation of this article: Professor H. Flechtner (University of Pittsburgh) who inspired the author with an interesting theme and kindly supervised the course of this research, Professor R. Brand (University of Pittsburgh) and Professor M. Walter (University of Pittsburgh) who gave their valuable comments on this article; and Professor A. Kritzer (Pace University) who assisted in the redaction of the text.

She also thanks Edmund S. Muskie/Freedom Support Act (FSA) Graduate Fellowship (program of the Bureau of Educational and Cultural Affairs of the United States Department of State) which provided her with the opportunity to conduct this research in the USA and the Centre of International Legal Studies (CILE) of the School of Law, University of Pittsburgh which hosted her study in the USA.

All footnotes included in the translation have been provided by the translator.

** The Journal of Law and Commerce adheres The Bluebook Uniform System of Citation, but the Journal of Law and Commerce has created uniform citations for certain sources not addressed by The Bluebook. Moreover, with respect to foreign language sources for which the Journal of Law and Commerce was not provided an English translation, the editors have relied on the author for the veracity of the statement drawn from such sources.

1. A.V. Zharsky. Correlation of the Legal Defense Remedies for the Breach of International Sales Contract, 10 Law and Democracy: Collected Scientific Articles 81, 81-83 (1999).

2. S. G. Estrin, Breach of the Contract as a Ground for Compensation of Damages (2000), at <http://www.LawyersUkraine.com> (discussing the criticism of anticipatory breach doctrine).

3. See, id.

4. Harry M. Flechtner, Remedies under the New International Sales Convention: the Perspective from Article 2 of the UCC. 8 Journal of Law and Commerce 53, 53-108 (1988).

5. See Estrin, supra note 2, at 2.

6. Konrad Zweigert & Hein Kötz, Introduction to Comparative Law 494 (3rd edition, 1998)

7. John E. Murray & Harry M. Flechtner, Sales, Leases and Electronic Commerce: Problems and Materials on National and International Transactions 300 (2nd edition, 2003).

8. See United Nations Convention on Contracts for the Int'l Sale of Goods, April 11, 1980, ch. V. § 1, 1489 U.N.T.S. 3, S. Treaty Doc. No. 98-99 (1993). The title of section 1 of Chapter V is the only place where the concept "anticipatory breach" is specifically mentioned.

9. United Nations Convention on Contracts for the Int'l Sale of goods, supra note 8, art. 71(1).

10. See United Nations Convention on Contracts for the Int'l Sale of Goods, supra note 8, art. 72(3).

11. Under the materials of John Honnold, Documentary History of the Uniform Law for International Sales, 11 (1989).

12. Alejandro M. Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods, 8 The International Lawyer, ABA 23 (1989).

13. See Honnold, supra note 11, at 25.

14. John Honnold, Uniform Law for International Sales 428 (3rd edition, 2000).

15. Id.

16. Id. at 429.

17. See Flechtner, supra note 4, at 64.

18. Translated from Russian by the author: extracts from: Practice of the Belarusian Chamber of Commerce and Trade International Court of Arbitration, 3 Industrial and Trade Law Magazine, 97 (2002).

For purposes of this translation, Plaintiff Belarusian joint-stock company "ATT" is referred to as [Seller] and Defendant Bulgarian firm "Armco" is referred to as [Buyer]. Dollar amounts indicated are in all instances U.S. dollars.

19. The Belarusian Chamber of Commerce and Industry International Court of Arbitration was established on 12 April 1994 in Minsk (the capital of the Republic of Belarus) and acts under the provisions of Law on International Court of Arbitration (9 July 1999) and its own Regulations..

20. At the time when the instant resolution was judged in Belarus there was BCC of 1964 (with amendments of 1994 year) in legal force. Since 1999, a new BCC (adopted in 1998) has entered in force, but it still uses the same rule to determine the choice of law in contractual relations.

21. See the translator's dissenting comments on this issue in comments to the case, infra § IV, ¶ 6.

22. Id.

23. Id.

24. Comments on Vienna Convention on the Contracts for International Sale of Goods, 167 (1994) [hereinafter COMMENTS.

25. Abstract of J.P.S. BVBA v. Kabri Mode BV, Case A.R. 3541/94, Rechtbank van Koophandel, Hasselt [Belgium] [District Court (Jan. 3, 1995) available at <http://www.unilex.info/case.cfm?pid=1&do=case&id=269&step=Abstract>.

26. Abstract of Case 2 Ob 328/97t, Oberster Gerichtshof [Austria] [Supreme Court] (Feb. 12, 1998), available at <http://cisgw3.law.pace.edu/cases/980212a3.html>.

27. Id.

28. See Zweigert & Kötz, supra note 6, at 492.

29. See Flechtner, supra note 4, at 65.

30. E. Allan Farnsworth, The Vienna Convention: An International Law for the Sale of Goods, in Landweher ed., Private Investors Abroad, New York: Mathew Bender (1983) 121-139 at 135.

31. U.C.C. § 2-609(1) (1998).

32. U.C.C. § 2-609(4) (1998).

33. See infra Section V.

34. Honnold, supra note 14, 438.

35. Abstract of Case 11 O 210/92, LG Krwefeld [Germany] (Apr. 28, 1993, available at <http://cisgw3.law.pace.edu/cases/930428g1.html>.

36. Id.

37. Id.

38. Abstract of Case 32 C 1074/90-41, AG Franfurt [Germany] [Lower Court] (Jan. 31, 1991), available at <http://cisgw3.law.pace.edu/cases/910131g1.html>.

39. Id.

40. Id.

41. See Comments, supra note 22, at 168.

42. See Flechtner, supra note 4, at 91.

43. See id.

44. See Honnold, supra note 14, 394.

45. Jacob S. Ziegel, The Remedial Provisions in the Vienna Sales Convention: Some Common Law Perspectives, INTERNATIONAL SALES, 9-35 (Nina M. Galston & Hans Smit eds.,1984).

46. S.K. Date-Bah, The Convention on the International Sale of Goods from the Perspective of the Developing Countries, LA VENDITA INTERNAZIONALE, 28 (1980).

47. See Flechtner, supra note 4, at 91.

48. See Honnold, supra note 14, at 398.

49. See Flechtner, supra note 4, at 91.

50. United Nations Commission on International Trade Law (UNCITRAL), Status of Convention and Model Laws (Apr. 16, 2004), available at <http://www.uncitral.org/english/status/status-e.htm>. United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980).


Pace Law School Institute of International Commercial Law - Last updated May 16, 2005
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