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Petar Sarcevic & Paul Voken eds. Intenational Sale of Goods: Dubrovnik Lectures, Oceana (1986), Ch. 6, 203-238. Reproduced with permission of Oceana Publications.

Obligations of the Buyer under the UN Convention on Contracts for the
International Sale of Goods

Leif Sevón
Ministry of Justice, Helsinki

1. General remarks
2. Payment of the price
      2.1. Problems arising in relation to the price
      2.2. Calculation of the price

2.2.1. Net weight
2.2.2. Open price
2.2.3. Other issues
      2.3. Place of payment
2.3.1. Effects of the rule on place of payment
      2.4. Time for payment
2.4.1. Documents controlling disposition
2.4.2. Exchange of goods for price
2.4.3. Payment without request
      2.5. Extension of the obligation
2.5.1. Price generally charged
2.5.2. Other issues
      2.6. Remedies for breach of obligation to pay the price
2.6.1. Claim for the price
2.6.2. Avoidance
2.6.3. Interest
3. Taking delivery
      3.1. Obligation to take delivery
      3.2. Remedies for failure to take delivery
3.2.1. Requirement to take delivery
3.2.2. Avoidance
3.2.3. Damages
4. Other obligations of the buyer

1. General remarks

      1.1. A first glance at the UN Convention on Contracts for the International Sale of Goods supports the view that the obligations of the buyer and the remedies for breach of those obligations are fairly simple issues in international sales of goods. Of the 101 Articles of the Convention only 13 appear under the heading "Obligations of the Buyer." These provisions form part of Part III of the Convention dealing with the rights and duties of the seller and the buyer under a contract of sale.

As in many other cases, the first glance is misleading. Problems relating to payment in international sales are both frequent and severe. This does not necessarily mean that these problems are complex from a legislative point of view. With a few exceptions, they are dealt with in the contract. Compared to the great variety of obligations of the seller and the different kinds of breach of contract by the seller, the obligations of the buyer are relatively simple. For [page 204] that reason less text is needed to describe the obligations of the buyer.

In addition, many provisions of the Convention other than those found in Articles 53-65 affect, directly or indirectly, the obligations of the buyer and the remedies for breach of contract by the buyer. In Part I of the Convention (Articles 1-13) dealing with the sphere of application and general provisions, the non-mandatory character of the Convention is stated (Article 6). In this part of the Convention there is also a provision on usages (Article 9) and on the choice of the relevant place of business in cases where a party has several places of business (Article 10). These provisions are relevant for the understanding of Articles 53 to 65. In Part II of the Convention (Articles 14-24), which concerns the formation of contracts for the international sale of goods, one may find a definition of "offer" (Article 14) describing when a proposal for concluding a contract is sufficiently definite. This provision is relevant when interpreting Article 55. In Part III of the Convention dealing with the Sale of Goods (Articles 25-88), the general provisions (Articles 25-29) and the provisions common to the obligations of the seller and the buyer (Articles 71-88) are directly applicable to the obligations of the buyer.

This proves that the provisions on the obligations of the buyer in Articles 53-65 cannot be studied isolated from the rest of the Convention. They can be properly understood only as part of a whole set of provisions dealing with the cooperation or lack of cooperation between the seller and the buyer. [page 205]

      1.2. In order to understand the provisions on the obligations of the buyer, it is also useful to recall some of the features of the elaboration of the Convention. The starting point was the 1964 Hague Conventions relating to a uniform law on the international sale of goods (ULIS) and to a uniform law on the formation of contracts for the international sale of goods. These Conventions did not seem to meet with international approval. After the United Nation's Commission on International Trade Law (UNCITRAL) was established, the Commission set up a Working Group to consider the comments and suggestions by States on the Hague Conventions in order to "ascertain which modifications of the existing texts might render them capable of wider acceptance by countries of different legal, social and economic systems, or whether it [would] be necessary to elaborate a new text for the same purpose ..."[1]

The UNCITRAL Working Group started its analysis of ULIS from the beginning of the Convention and soon reached the provisions on the seller's obligations. Many of the solutions on structure as well as on drafting were discussed thoroughly in that context. Later, the same solutions were adopted in relation to the obligations of the buyer and the remedies for breach of contract by the buyer. It was suggested that the same reasoning on which the Working Group had based its decisions in relation to the obligations of the seller also apply to those of the buyer, i.e., that a unified structure avoids gaps, cross references and inconsistencies, that it makes it possible to place all provisions on what the buyer shall do together and that repetitive and overlapping provisions can be avoided.[2]

It was also deemed useful to cast the Provisions on the obligations of the buyer in the [page 206] same form as those dealing with the obligations of the seller. The parallelism between the two sets of provisions has been referred to on several occasions during the preparation of the draft.[3]

The similar drafting of provisions dealing with different realities may cause reactions similar to those of Pavlov's dogs: Reference to a period of time of reasonable length (Articles 47 and 63) or to an impediment beyond a party's control (Article 79) may be a signal calling for identical reactions by the judge or arbitrators, or by the parties, irrespective of whether the problems arise in the context of late performance of the seller or of the buyer. The consolidated system of remedies for breach of contract may hide the fact that the situations differ and that one should not treat a delay on the part of the buyer on similar grounds as in cases where the seller has delivered goods which do not conform with the contract. However, this risk can be overcome by educating readers of the Convention and is mitigated by the fact that it is easier to see the differences when one is confronted with a specific problem.

      1.3. In Article 53, which describes the obligations of the buyer, reference is made to two sets of obligations. First, the buyer must pay the price. This may be described as his main obligation. Secondly, the buyer must take delivery of the goods. The Convention contains provisions describing the contents of these two obligations of the buyer in case the parties have not defined them in their contract. In addition, the Convention envisages that the buyer may have other obligations. As far as these are concerned, no attempt is made to specify or describe them in [page 207] the Convention, which only contains provisions on remedies for breach of such obligations.

In this paper, the different obligations of the buyer and the remedies for breach of these obligations will be discussed separately. The discussion will mainly be limited to the buyer's obligation to pay the price.

2. Payment of the price

      2.1. Problems arising in relation to the price. The problems arising in relation to the price are at least those of "what?", "where?" and "when?".

Normally the parties agree on the price as well as on the time and place for payment. It follows from the non-mandatory character of the Convention that the parties may derogate from the Convention on these points. On the other hand, the Convention does not deal with the validity, in other respects, of the agreed provisions on the price under national law. They may be in conflict, e.g., with rules on the regulation of prices or on foreign exchange. Nor does the Convention provide an answer to the question what effect such rules of law would have if invoked in a court outside the country where the provisions have been enacted. The fact that one of the parties has concluded a contract containing provisions on the price which are in conflict, e.g., with that party's national law on foreign exchange does not necessarily preclude a court in another country from deciding in accordance with the provisions of the contract.

      2.2. Calculation of the price. The Convention contains two provisions on the calculation of the price when this issue has not been settled in the contract.[page 208]

2.2.1. Net weight. Under Article 56, if the price is fixed according to the weight of the goods, in case of doubt it is to be determined by the net weight. This is only a rule for interpretation of an unclear contract. Another result may follow from the contract itself or from practices established between the parties or from usage.

The provision in Article 56 does not purport to answer the question of whether the buyer is entitled to keep the packaging. This would normally seem to be the case. A different result may follow from the contract, usage or practices established between the parties.

2.2.2. Open price. Article 55 deals with the question of how the price is to be calculated if the contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price.

This provision was a problem throughout the preparation of the Convention. Attention was already drawn to it in the replies and comments by governments to UNCITRAL on the Hague Conventions of 1964.[4] Differences of opinion persisted until the issue was settled in Committee I of the Vienna Conference.[5] The difficulties were due to the fact that under the law of some States, a contract of sale must necessarily set forth the price or provide a mechanism for determining the price. This seems to be the case under Austrian, Belgian, Dutch, French and Soviet Law. For these countries and others having a similar rule, the Convention represents a philosophy different than that on which their national law is based.

Article 55 must be read together with Article 14. Under Article 14 a proposal for concluding [page 209] a contract constitutes an offer only if it is sufficiently definite. This is the case if the proposal indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. The question then arises whether there is a conflict between Articles 14 and 55 or whether the latter provision lacks meaning.

This question is interesting from a theoretical point of view. It might, however, also be interesting to ascertain its practical importance. The situation envisaged in Article 55 is unlikely to arise in large contracts. It is unlikely that the parties would not fix the price of the goods or a method for determining the price when concluding a contract in writing. Such a situation would thus hardly arise in regard to a State which has made a declaration under Article 96: A written contract not containing any such provision on the price would certainly be a rare bird.

It is sufficient under Article 14 that the proposal implicitly fixes or makes provision for determining the price. The relation between the two Articles would not seem to pose any problems when the parties have agreed, explicitly or implicitly, that the price may be fixed by a third party. Whether it would also be sufficient to provide that the buyer shall pay the price generally charged for such goods at the time of delivery seems to be uncertain, at least in some legal systems. Recent French case law seems to indicate that a reference to the price usually charged for similar goods at the same place might not be sufficient even if explicitly made.[7]

On the other hand, in cases where a practice has been established between the parties as to the price, the parties would, under Article 9, [page 210] be bound by this practice. In these cases there would be little doubt that the parties have implicitly referred to a price to be determined according to previous practice.

The main reason for opposition to the proposals requiring that the contract must set forth the price or a method for determining the price was that this requirement might lead to strange results in situations where a buyer has an urgent need for goods, e.g., spare parts for a machine, and orders them by phone, no reference being made by either party to the price. A rule under which no contract is considered to have been validly concluded unless it provides at least for a method of determining the price, would then cover not only a situation where the buyer immediately after ordering the goods informs the seller that he actually does not need them, but also situations where the seller ships the goods and the buyer takes delivery of and uses the goods. The result would not seem to be totally unacceptable in the first case. On the other hand, one may consider the possibility that the seller has started production and incurred costs in an effort to assist the buyer. The result would seem quite unacceptable in cases where the goods have been used up by the buyer, who then informs the seller that no contract was ever concluded and that he therefore need not pay for the goods.

It seems unlikely that any legal system would leave the matter there. One would probably find a way out by resorting to other constructions to reach an acceptable result. One could imagine a great variety of methods. The judge might probably find -- to the surprise of the parties -- that they had indeed agreed implicitly on a price. One could also apply different doctrines on unjust enrichment or other similar [page 211] methods in order to oblige the buyer to compensate the seller for the value of the goods. These solutions bring the problem outside the scope of the Convention and thus outside the scope of unification.

When dealing with buyers from countries requiring the price to be settled in or determinable from the contract, sellers ought to be careful not to start production of the goods or dispatch them until agreement on the price has been reached. If it is possible for the seller to determine the price at that stage, not knowing what the actual cost of production and shipment will be, it might be possible for him to invoice the buyer and, if the invoice is not protested, maintain that the buyer must have accepted the price indicated therein.

On the other hand, a rule requiring that the price be determined in or determinable from the contract might be inconvenient to buyers as well. A buyer who has ordered goods without settling the price may find that no goods are delivered and that he has no remedies for such a delay as no contract of sale has been concluded.

2.2.3. Other issues. The Convention does not contain detailed provisions on what is considered to be included in the price and what costs the seller may charge separately. Some conclusions can, however, be drawn from different provisions.

Under Article 35(2)(d) the goods do not conform with the contract unless they are contained or packaged in the manner usual for such goods. It follows from this provision that packaging is part of the seller's obligation and that the cost for packaging must be calculated in setting the price. Again, an agreement, usage, or [page 212] practice established between the parties may lead to a different result.

One may also assume that the costs for transportation and other measures to bring the goods to the place of delivery must be taken into account when calculating the price and may not be charged separately.

      2.3. Place of payment. Under Article 57, if the buyer is not bound to pay the price at any other particular place, he must pay it to the seller at the seller's place of business. If payment is to be made against the handing over of the goods or of document, the buyer must pay the price at the place where the handing over takes place.

2.3.1. Effects of the rule on place of payment. Under Article 57, the buyer has to bear the costs and risk for the transfer of an amount corresponding to the price to the seller's place of business at the time of conclusion of the contract. If the seller has more than one place of business, the relevant place of business is the one which has the closest relationship with the contract and its performance, not only in regard to payment of the price. The uncertainty inherent in this provision is unlikely to cause problems in practice as the place of payment is often stated in the contract. In addition, payment is usually made only after the seller has received an invoice. The invoice may indicate which place of business the seller considers to be relevant, and such a statement may be interpreted as acceptance of payment being made at that place. On the other hand, the buyer is not bound by such an indication. It may well be that the seller, for his own convenience, wishes payment to be made at a particular place. The buyer may, in spite of [page 213] such a reference, pay the price at the seller's place of business which has the closest relationship with the contract.

A reference to a bank account in an invoice may normally also be interpreted as the buyer's declaration of acceptance to make payment at the bank instead of at the seller's place of business. In regard to this point it may readily be assumed that practices have been established between the parties.

Read together with Article 58, Article 57 states that if there is a delay in the transfer of the amount, e.g., due to lack of the authorization of transfer by the appropriate authorities or to a mistake by the buyer's bank, thus having the effect that the amount is not available at the place of payment in time, there is a breach of contract on the part of the buyer. As was noted above, the provision also has a bearing on the distribution of costs between the parties.

Under Article 57(2) the seller must bear any increase in expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract. The provision only deals with the distribution of costs. The fact that there is a change in the seller's relevant place of business does not seem to alter the buyer's obligation to pay the price at the right moment at the new place of business. If this is the case, the question arises, but remains unanswered in the Convention, whether a delay in payment caused by late information by the seller of the new place of payment is to be considered a breach of contract by the buyer and whether that would also be the case if the buyer can offer payment at the original place of business in time. It would seem [page 214] that the answer may be negative in both cases in view of the provision in Article 79(1).

Article 57(1)(b) deals with the place of payment when payment is to be made against the handing over of the goods or of documents. If the contract provides that payment is to be made against a bill of lading or on CAD or COD terms, the provision settles the problem of errors or delay in transmission of the payment. If the documents are to be presented at the seller's place of business, there is a delay in payment if payment is not made when the documents are presented in accordance with the contract. If there is a delay in the transmission of the amount which the buyer has paid upon presentation of the documents at his place of business, this is no longer any concern of the buyer.

The provision on place of payment seems to have caused problems in some jurisdictions because under national law a party may be entitled to bring suit at the place where payment is to be made.[8] However, this result does not follow from the Convention. During the Vienna Conference an attempt was made to clarify that the Convention did not settle the question of jurisdiction and that it was thought inappropriate to solve this problem in the Convention. If the result is deemed inappropriate, it can be altered by amending national law.

      2.4. Time for payment. Article 58 deals with the time for payment. The basic rule is that the goods should be exchanged for payment of the price. The seller is not obliged to extend credit to the buyer and the buyer is not required to pay until he receives the goods or documents controlling their disposition.[page 215]

2.4.1. Documents controlling disposition. The expression "documents controlling their disposition" clearly covers the situation where the goods are to be delivered only against surrender of the documents. This would be the case with a bill of lading where, at least under the applicable legal rules, the carrier may only deliver the goods to the person presenting the bill of lading.[9] However, this does not correspond to current reality. Since the goods often arrive at the port of destination prior to arrival of the bill of lading, they are often handed over to the consignee although he cannot present the bill of lading.

The expression would also seem to cover a warehouse receipt entitling the holder to claim the goods.

It is uncertain whether the expression covers international way bills issued under the CMR and CIM Conventions governing carriage by road and rail respectively. Under these documents the carrier is required to deliver the goods to the consignee named in the document. The sender may appoint another consignee, but he may do so only if he can produce the relevant copy of the way bill. Having acquired the way bill, the consignee/buyer is thus protected against dispositions by the seller/sender.[10] It is to this extent that the holder of the way bill controls the disposition of the goods, which would seem sufficient for the purposes of Article 58(1).

Article 58(2) deals with the situation where the contract involves the carriage of goods. This expression covers cases where the seller is required or authorized to ship the goods. The contract does not involve carriage if the buyer takes delivery at the seller's place of [page 216] business or if the buyer makes arrangements for the goods to be shipped.[11]

Where the contract involves carriage, the seller may dispatch the goods on terms according to which the goods or documents controlling their disposition will not be handed over to the buyer except against payment of the price. The impact of the provision with reference to the time of payment seems to be that the seller may not, unless agreed upon in the contract, require payment before dispatching the goods. On the other hand, the provision states that an arrangement whereby the seller dispatches the goods but does so on terms enabling him to retain control over them until payment is made, does not amount to a breach of contract.

2.4.2. Exchange of goods for price. Under Article 58(1) and (2) the seller may retain control over the goods until payment is made. Article 58(3) states that the buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon are inconsistent with his having such an opportunity.

The reason for the exception at the end of the provision is that buyers sometimes put pressure on the seller by refraining from taking delivery of the goods on the alleged ground of non-conformity. When the goods have arrived at the port of destination, the seller has incurred costs of transportation. Normally the goods cannot be sold to another buyer at the port of destination at a price corresponding to the contract price. If that would be possible, the buyer would be likely to take delivery of the goods. The seller may protect himself against such claims for reduction of the price by having a [page 217] provision included in the contract specifying a procedure for delivery according to which the buyer may not inspect the goods until payment has been made.

If the provision is included for this reason, there would seem to be no ground for objecting to a demand by the buyer to inspect the goods before they are dispatched even if the procedures for delivery or payment would be inconsistent with an inspection at the place of destination.

An agreement according to which payment is to be made against transport documents while the goods are in transit would normally be inconsistent with an opportunity to inspect the goods at the place of destination before payment is made. It is doubtful whether the buyer has the right to inspect the goods at the place of destination if payment is to be made against documents after arrival of the goods.[12] At least under Scandinavian law, payment against transport documents would probably be considered a procedure inconsistent with such a right of inspection. If the buyer has not used the possibility to inspect the goods before they are dispatched, as envisaged above, he would not be in the position to defer payment until he has had an opportunity to inspect them.

This means that the buyer runs the risk of having to pay although the seller has delivered goods which do not conform to the contract. This risk is to some extent, but not completely, diminished by the rules in transport law on the duty of the carrier to insert a reservation in the transport document if the goods do not conform to the description in the document. In addition, the buyer may improve his position by requiring [page 218] a certificate of quality in order to guarantee that he receives what he pays for.

2.4.3. Payment without request. Article 59 states that the buyer must pay the price on the date fixed by or determinable from the contract or the Convention without the need for any request or compliance with any formality on the part of the seller. This provision makes it clear that payment is not subject to any formal demand by the seller in order to become due. Such rules exist at least in some European legal systems.[13] The provision is not designed to deal with the question whether the buyer is required to pay before he has received an invoice. In cases where the buyer does not know the price until he receives an invoice, he cannot pay the price earlier. In other cases usage may call for an invoice in order to trigger the buyer's obligation to pay the price.

      2.5. Extension of the obligation

2.5.1. Price generally charged. The Convention answers few questions relating to the amount that the buyer is obligated to pay. In Article 55 dealing with a situation in which the contract does not expressly or implicitly fix the price, it is stated that in such cases the buyer shall pay the price generally charged at the time of conclusion of the contract for such goods sold under comparable circumstances in the trade concerned. The provision does not refer to the prices charged by the seller. It was felt important to eliminate the possibility of the seller charging excessive prices.[14] The rule adopted achieves this result. It has the flexibility needed in cases where the quality of the seller's [page 219] goods is higher than that of other sellers in that it refers to the price generally charged for "such goods." However, the provision does not lead to an appropriate result in cases where the prices charged by the seller are lower than those generally charged. In order to deal with such cases, one would have to construct an implicit reference to the price charged by the seller.

2.5.2. Other issues. The Convention does not deal with questions such as the currency in which payment shall be made. National law would thus apply on this point. At the Vienna Conference a proposal was made to provide for situations where payment in the currency stipulated by the contract is not possible. According to the proposed rule, the seller would be entitled to require equivalent payment in the currency of the buyer's place of business. However, it was thought that these problems were much too complex to be dealt with in this way. The proposal was therefore rejected.[15]

Nor does the Convention deal with the question of whether the seller is obliged to accept partial payment. A proposal making it clear that this is not the case was rejected on the grounds that this problem was not practical.[16]

Traditionally, the buyer's obligation to pay the price consisted of handing over the seller an amount of money corresponding to the price. Today, this is an unusual method of payment. More often the buyer arranges for the seller to receive payment in the form of a claim against the bank to which the buyer transfers the amount or where he has an account, or which otherwise has agreed to pay the seller an amount corresponding to the price. The Convention does [page 220] not deal with the manner in which payment is to be made. Whether the buyer may pay the amount to the seller's bank or has to transfer the amount to the seller's place of business is left to national law. The issue may arise in cases where there is a banking strike at the seller's place of business.

The Convention extends the obligation to pay the price beyond the traditional handing over of money. According to Article 54, the buyer's obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.

As pointed out above, this provision indicates that the buyer must bear the costs for measures necessary to enable him to pay the price. In addition, the provision enables the seller to resort to remedies for breach of obligation to pay the price if such steps are not taken or formalities complied with in time.

If the contract provides that the buyer shall arrange for the issuance of a letter of credit or a guarantee for payment by a certain date, the seller may resort not only to measures available to him in case of an anticipatory breach by the buyer but also to remedies for breach of contract by the buyer, if the letter of credit or guarantee has not been issued by that date.

Application for a license to transfer money abroad is, no doubt, a formality that may be required under the relevant national law. Nevertheless, the fact that such an application has not been filed by the date normally necessary in order to obtain such a license in time can hardly be treated as more than an anticipatory breach of contract. There is always the possibility [page 221] that the authorities may surprise everyone by a speedy handling of the application so that payment may be made in time.

      2.6. Remedies for breach of obligation to pay the price. The remedies for breach of contract by the buyer are described in Articles 61-65. The provision on avoidance in Article 64 is supplemented by Article 72 on avoidance prior to date for performance and by Articles 81-84 on effects of avoidance. In addition, under Article 71 the seller may suspend his performance in certain cases. The provisions on preservation of the goods are also important in an evaluation of the system of remedies.

Some of the remedies described in Articles 61-65 are available to the seller irrespective of the kind of breach by the buyer. Other remedies are available only for breach of a certain obligation. This Section of the Convention actually contains three sets of remedies consolidated into a single text.

The Convention does not describe in detail the relation between the different remedies available to the seller. The relation is not as complex as in cases of breach of contract by the seller.

In some cases the seller may choose between requiring performance by the buyer or declaring the contract avoided, e.g., if the breach by the buyer is fundamental. If it is uncertain whether this is the case, the seller may fix an additional period of time for performance by the buyer and declare the contract avoided if performance is not rendered within that period. In certain cases this choice is open to the seller only for a limited time. In still other cases the seller may not declare the contract avoided but [page 222] has to adhere to a requirement for performance. This remedy is not available to him if he has resorted to a remedy which is inconsistent with a requirement for performance. Once the seller has declared the contract avoided, he cannot change his mind and require performance.

Irrespective of whether the seller declares the contract avoided or requires performance, he may claim damages. This is explicitly stated in Article 61(2).

In case of breach of the obligation to pay the price, the seller may require performance by the buyer, avoid the contract, and claim damages.

2.6.1. Claim for the price. If payment is not made in time, the seller may require the buyer to pay the price. Such a requirement may be presented irrespective of an extension of the delay. Even if the delay amounts to a fundamental breach of contract, the seller may choose to require payment. He may do so even if he has the right to sell the goods under the provisions on preservation of the goods in Article 88. If he chooses to sell the goods or is under an obligation to do so, thereafter he may claim the balance between the price and the proceeds from the sale.

If the seller has fixed an additional period of time for payment, during this period he may not, under Article 63(2), resort to any remedy for breach of contract. It may be asked whether he still may require the price to be paid during this period. It seems that fixing an additional period of time for payment of the price is one way of requiring payment. It is difficult to see any reason why such a requirement may not be repeated during the fixed period.

Under Article 54 the buyer's obligation to [page 223] pay the price includes taking such steps and complying with such formalities as may be required under the contractor any laws and regulations. The right to require the buyer to pay the price thus includes the right to require him to take such steps as, e.g., arranging for a letter of credit to be issued or applying for a license to transmit exchange abroad.

Under Article 79(1) a party is not liable for failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control. According to Article 79(5), nothing in that Article prevents either party from exercising any right other than to claim damages. It would seem that the seller is entitled to require payment even if the buyer is exempted from damages. The implications of this are not all that clear. Presenting such a requirement may affect the seller's right to interest on the price if under national law such a demand is necessary. Since interest, according to the Convention, does not fall under the heading of damages, the provision in Article 79(5) would also apply to interest.

The main problem that may arise in regard to the right to require payment follows from the relation between Articles 62 and 28 on specific performance. This issue seems to be important in trading with the United States. The question of whether an action for the price is to be regarded as an action for specific performance in all cases has been discussed at length, and there seems to be little to be added by someone not familiar with the Uniform Commercial Code.[17] Since a court might, pursuant to the Uniform Commercial Code, award the price in cases where the buyer has accepted the goods or the goods were lost or damaged within a commercially reasonable [page 224] time after the risk of loss passed to the buyer, the problem would presumably not arise in those cases. In other situations it seems uncertain how the question would be solved under the UCC. In case it is feared that the seller would not be entitled to recover the price if the goods are still in his possession, he would be well advised to resell the goods and claim the balance from the buyer.

2.6.2. Avoidance. Under Article 64(1) the seller may declare the contract avoided if the failure to pay the price amounts to a fundamental breach of contract or if the buyer does not pay the price within the additional period of time fixed by the seller. If the buyer declares that he will not pay the price during the additional period, the seller may, however, declare the contract avoided even before the additional period of time lapses.

The provision on avoidance after lapse of the additional period of time is supplemented by Article 63. From that provision it may be concluded that the seller can avoid the uncertainty arising from the concept of a fundamental breach by fixing an additional period for payment. In order to serve that purpose the length of the period must be defined. It is not sufficient that the seller expresses his wish to receive payment as soon as possible without delay or uses other similar terms. Instead he would have to specify either the date on which he may resort to declaring the contract avoided in case payment has not been made or specify the number of days after which he will do so. Secondly, the seller must make it clear that he is fixing the period for the purpose of being able to declare the contract avoided. This requirement would not be met if he [page 225] indicates that it would be nice to receive payment by a certain date.

The additional period must be of reasonable length. In cases of payment it may be preferable to measure this period in days, and a fairly limited number of days at that, or in the case of goods, the price of which is subject to rapid changes, even in hours. This would certainly be the case if the buyer has already received the goods in his possession. But a similar rule might apply in other cases too, as it may be deemed unnecessary to consider the possibility that the buyer has not arranged for the financing of the transaction at this stage when payment should actually have already been made.

The provision on the additional period is based on the assumption that payment has already been delayed when the period is fixed. Nothing would seem to prohibit an arrangement according to which the contract states that the seller is entitled to declare the contract avoided if payment is not effected within a fixed period.

In case of the buyer's delay to take steps to enable payment to be made, the Convention clearly accepts the possibility of the seller acknowledging that he shall declare the contract avoided if the steps in question have not been taken within a fixed period. On the other hand, it would not seem possible for the seller to require that contractual measures other than those already delayed be speeded up in relation to what the contract requires. If the buyer has not taken steps in order to arrange for a letter of credit to be issued, the seller may fix an additional period for that arrangement, but not for receiving the money unless there is an anticipatory breach on the part of the buyer in that respect.[page 226]

During the period thus fixed the seller may not resort to any remedy for breach of contract. This provision clearly covers a situation where the seller declares the contract avoided for the same reason which made him fix the period. Fixing a period means that the seller accepts not to declare the contract avoided on that ground during the period. However, during that period some other ground for avoidance may arise. A situation could be imagined where the buyer, during the additional period, refuses to take delivery of the goods and this refusal amounts to a fundamental breach of contract. It would not seem necessary to read the Convention in such a way that the contract could not be avoided because of a fundamental breach in taking delivery only because the seller has fixed an additional period for payment of the price.

Article 63(2) of the Convention deals with a situation where the seller may declare the contract avoided although he has fixed an additional period of time. If the buyer declares that he will not pay within that period, or if the seller otherwise receives notice from the buyer that he will not do so, the seller may resort to other remedies. This provision seems to entitle the seller to declare the contract avoided immediately even if the delay has not amounted to a fundamental breach of contract. Under this provision avoidance is possible upon such a declaration by the buyer.

If the delay in effecting payment amounts to a fundamental breach of contract, the seller may declare the contract avoided without having to fix an additional period of time. The seller runs the risk that his estimation of what constitutes a fundamental breach will not be shared by others. However, he would be wise to act on the [page 227] assumption that there not be too much tolerance with respect to delay in payment.

Under the Convention the contract may be declared avoided for delay in payment irrespective of whether or not the buyer has already taken delivery of the goods. This rule, which runs contrary to at least both the existing and proposed Scandinavian law [18] and to German and Anglo-American law,[19] may cause concern to other creditors of the buyer who may see assets vanish on which they have based their decision to grant credits to the buyer. This may, in particular, be the case as the Convention does not require the seller to declare the contract avoided within any specific period of time. He may obviously resort to this remedy as long as payment is not made. Under Article 64(2)(a) the seller cannot declare the contract avoided owing to late payment after having become aware that payment has been made.

Under Article 64(1) the seller may declare the contract avoided if the buyer's failure to perform amounts to a fundamental breach of contract or if the buyer does not pay the price within the additional period fixed by the seller. It follows from Article 72 that the seller may declare the contract avoided at an earlier stage if it is clear that the buyer will commit a fundamental breach of contract. If the buyer cancels his order for the goods, the seller may assume that the buyer has also declared that he does not intend to pay the price and may thus declare the contract avoided. If, under Article 71, the seller has been entitled to suspend performance of the contract and the buyer's conditions deteriorate further, the seller may also be entitled to declare the contract avoided. When the seller cannot base his actions on a declaration of the buyer, he always runs the risk that [page 228] his estimation of the situation is not shared by others. It may be held that he himself has failed to perform his obligations and that the buyer is entitled to declare the contract avoided. In any case, the seller would be well advised to inform the buyer of his intention to declare the contract avoided before doing so.

Article 72 gives the seller the right to declare the contract avoided because of an anticipatory breach by the buyer. It does not obligate him to take such a step. The provision serves the purpose of protecting the aggrieved party. As the seller may even resort to a requirement for performance after the buyer's breach has amounted to a fundamental breach, it can hardly be assumed that the buyer could, at this stage, require the seller to take steps to mitigate his damage. In this context attention may be drawn to a provision in the proposed Nordic Sale of Goods Acts. Under Sec. 58(2), if the buyer cancels an order for goods to be manufactured on his account, the seller is obliged to suspend manufacture, provided that this would not cause him substantial inconvenience or that he would not run the risk of the buyer refusing to compensate him for the loss incurred as a result of the cancellation.

In view of the description of the obligation to pay the price in Article 54, it may be assumed that anticipatory breach of the obligation to pay the price will be of limited use.

2.6.3. Damages. It follows from Article 61(1)(b) that the seller is entitled to damages if the buyer fails to perform any of his obligations. Article 78 seems to indicate that the seller is entitled to damages to the extent his losses are not covered by interest.[page 229]

If, in cases where the buyer does not pay the price, the seller declares the contract avoided and resells the goods within a reasonable time after avoidance, Article 75 provides that the seller may recover the difference between the contract price and the price in the substitute transaction. If, as usually seems to be the case, the price in the substitute transaction is lower than the contract price, the difference is recoverable under the heading of damages. Alternatively, the seller may choose not to reveal the price of the substitute transaction but to claim damages under Article 76 for the difference between the contract price and the current price of such goods.

The costs for preservation of the goods in cases where the buyer does not pay the price and the seller, for that reason, does not hand over the goods to the buyer, do not fall under the heading of damages but are recoverable under Articles 85 and 88(3). The seller is entitled to recover these costs, to the extent they are reasonable, from the proceeds of the sale, obviously irrespective of the reason for the buyer's failure to perform his obligations. If no such obligation exists, e.g., because the goods do not conform with the contract, these costs are, of course, not recoverable.

If the price in the substitute transaction is higher than the contract price, the seller may withhold from the proceeds an amount corresponding to the cost for preservation.

2.6.4. Interest. If the buyer fails to pay the price, under Article 78 the seller is entitled to interest on the sum in arrears. The Convention establishes only the right to interest but deals neither with the rate of interest nor with the [page 230] time for which interest may be calculated. Thus these matters must be decided according to the law applicable to the contract.

3. Taking delivery

      3.1. Obligation to take delivery. The Convention does not deal at any great length with the buyer's obligation to take delivery of the goods, which is defined in Article 60. According to this provision, the obligation to take delivery consists of doing all the acts which could reasonably be expected of the buyer in order to enable the seller to make delivery and, on his part, in taking over the goods.

The extent of the obligation to take delivery is not defined in great detail. It clearly covers obligations relating to the transmission of the goods from the seller to the buyer. It is less clear whether this obligation also covers the duty to provide information relevant to the production of the goods. This issue, which is partially covered by Article 65, is relevant with respect to the remedies available to the seller in cases of breach of obligation. It may be assumed that the obligation to enable the seller to make delivery covers these situations too.[20]

As can be seen from the situation just discussed, the extent of the obligation to do all the acts which could reasonably be expected of the buyer in order to enable the seller to make delivery, depends heavily on the contract. If the buyer is obliged to provide information during the production or to participate otherwise in it, e.g., by delivering components for the ultimate product, Article 60(a) might be applicable and the remedies for failure to take delivery would thus apply. This would, however, be modified to [page 231] the extent another result would follow from Article 65.

Where the contract of sale involves carriage of the goods and the buyer participates in the arrangements for the carriage, the extent of the buyer's obligation depends on the type of arrangements. The obligation covers the duty to enter into a contract of carriage. It might also cover obligations relating to the loading of the goods and their storage during carriage or at the destination.

The duty to take over the goods relates to the physical possession of them. Since references in the Convention to the buyer also cover persons acting on his behalf, it would seem that the obligation referred to in Article 60(b) also covers cases where the carrier refuses to accept the goods for carriage, e.g., because of their dangerous nature, if the buyer should have informed the carrier of the nature of the goods in advance. This obligation also covers the late arrival of a carrier engaged by the buyer at the place where the buyer is to take over the goods. Lastly, it covers the obligation of the buyer himself to take over the goods after carriage arranged by the seller as well as in cases where the contract calls for the seller to make delivery of the goods by placing them at the buyer's disposal at the seller's place of business or' at another particular place.

Under Article 86(2), if goods dispatched to the buyer have been placed at his disposal at their destination and the buyer exercises the right to reject them, in certain situations he must take possession of the goods on behalf of the seller. Here one does not speak of taking delivery and it is doubtful whether the remedies [page 232] for failure to take delivery apply in a case such as failure to take possession.

      3.2. Remedies for failure to take delivery. If the buyer fails to take delivery of the goods, the seller may require him to do so, declare the contract avoided and claim damages.

3.2.1. Requirement to take delivery. The seller may require the buyer to take delivery of the goods as long as he has not resorted to a remedy which is inconsistent with this requirement. Again, what is covered by the reference to an inconsistent remedy, is avoidance. The ground for declaring the contract avoided is irrelevant: It is the remedy, not the reason for resorting to it, that is inconsistent with a requirement for taking delivery.

If the buyer has neither paid the price nor taken delivery, the remedy may be used together with, or separately from, a requirement for payment. Situations can be envisaged where the seller is more anxious to receive payment than to force the buyer to take delivery of the goods. He may therefore present these requirements simultaneously or separately.

In cases where the buyer has paid the price but fails to take delivery, the seller may require him to take delivery.

The use of the remedy is limited by Article 28 on specific performance. When dealing with buyers from countries where the legal system limits the resort to specific performance, a seller should have a closer look into that system in order to find a suitable remedy before requiring the buyer to take delivery of the goods.[page 233]

3.2.2. Avoidance. The provisions on avoidance of the contract upon the buyer's failure to take delivery of the goods start at the same point as those in respect of failure to pay the price. This does not necessarily mean that the remedy of avoidance operates in the same manner in these two situations.

First, let us assume that the buyer has neither paid the price nor taken delivery of the goods. In cases where the seller has granted the buyer a credit, failure to take delivery may serve as an indication of an anticipatory breach of the obligation to pay the price. It might possibly cause the seller to suspend his performance in accordance with Article 71(1)(b). On the other hand, avoidance due to the failure to take delivery also serves as an independent remedy. The seller should, however, be careful in resorting to avoidance in these cases. The situations where the mere failure to take delivery would amount to a fundamental breach are presumably few.

Secondly, one may consider the case where the buyer has paid the price but fails to take delivery of the goods. Again, it is hard to envisage a great number of cases where the remedy of avoidance for failure to take delivery would be available. As in the previous case, situations can be imagined where the seller necessarily needs to dispose of the goods.

If the buyer has paid the price but not yet taken delivery of the goods, according to article 64(2)(a) the seller must exercise his right to declare the contract avoided before he has become aware that the buyer has taken delivery.

In both cases it might be wiser to resort to the provisions on preservation of the goods.[page 234] These provisions may be sufficient in dealing with the problems that the seller may have. This is the case if the seller is still in possession of the goods or otherwise able to control the disposition of them, e.g., by means of a transport document or a warehouse receipt in his possession.

Instead of awaiting the time at which the breach in taking delivery amounts to a fundamental breach of contract, the seller may fix an additional period of time for taking delivery. It would seem that this period cannot normally be as short as that which might be envisaged in the case of late payment. During this period the seller may not resort to any remedy for breach of contract. As was mentioned above, this provision would probably not prohibit the seller from requiring the buyer to take delivery, but it would prohibit him from avoiding the contract for the reason that the buyer has not taken delivery. On the other hand, if the seller has fixed a period for taking delivery, this would probably not restrain his right to declare the contract avoided because of a delay in payment occurring during the given period.

If the buyer does not take delivery of the goods within the fixed period, the seller may avoid the contract. This right of avoidance is subject to the provision in Article 64(2)(b). If the buyer has paid the price, the seller must exercise his right of avoidance within a reasonable time after the expiration of the fixed period or after the buyer has declared that he will not take delivery of the goods. This provision, which is designed to prevent speculation on the part of the seller, leads to the result that if the contract is not avoided within that time, it cannot be avoided at all. Still, the seller may [page 235] sell the goods under the provisions on preservation of the goods. In that case, he is entitled to compensation for the cost of preservation. In addition, he is presumably also entitled to claim the balance between the contract price and the proceeds from the substitute transaction. This seems to be the case even if Article 75 only deals with situations where the contract has been avoided. Otherwise, the provision would lead to the result that the seller would have to preserve the goods until their value is entirely consumed by the costs of preservation.

3.2.3. Damages. The seller is also entitled to compensation for loss caused by the buyer's failure to take delivery of the goods. The amount of compensation is to be calculated on the basis of Article 74. Under that Article damages consist of a sum equal to the loss, including loss of profit suffered by the seller as a result of the breach. If the seller has resold the goods, the proceeds from the resale are to be taken into account in calculating the difference between the contract price and the price in the substitute transaction. On the other hand, the seller would seem to be entitled to compensation for loss of profit even if he resells the goods. The resale would indicate that the seller has lost a market and thus suffered loss of profit in one sale. However, one could also envisage cases where he would not be entitled to compensation for loss of profit.

4. Other obligations of the buyer

The buyer may also have other obligations under the contract; however, no effort has been made to describe them in the Convention. On occasion [page 236] the question may obviously arise whether such obligations are part of the obligation to take delivery, as described in Article 60, or whether they are to be separated from that obligation.

Although the Convention does not deal with the obligations themselves, it provides for remedies for failure to perform them. The seller may require performance of these obligations; he may fix an additional period of time for their performance; and he may declare the contract avoided in case the failure to perform them amounts to a fundamental breach of contract. However, even if the seller has fixed an additional period of time, the conclusion of that period of time does not entitle the seller to declare the contract avoided. The requirement of a fundamental breach prevails in these cases too. The right to declare the contract avoided is limited by the fact that this right must be exercised within a reasonable time after the seller knew or ought to have known of the breach. In addition, the seller may claim damages for the loss caused by the failure to perform the obligation.


FOOTNOTES

1. Report of the United Nations Commission on International Trade Law on the work of its second session (1969), at para. 38, UNCITRAL I Yearbook, p. 99.

2. Report of the Secretary General: Issues presented by chapters IV to VI of the Uniform Law on the International Sale of Goods, at para. 22-35, UNCITRAL V Yearbook, pp. 83-85, and Progress report of the Working Group on the International Sale of Goods on the work of its fifth session, at para. 37-41, UNCITRAL V Yearbook, p. 33.

3. See, e.g., Progress report, supra n. 2, para. 42, and criticism at para. 56, and note by the Secretary General: Analysis of comments and proposals by Governments relating to Articles 56 to 70 of the Uniform Law on the International Sale of Goods, at para. 28, UNCITRAL IV Yearbook, p. 34.

4. Analysis of replies and comments by Governments on the Hague Conventions of 1964: Report of the Secretary General, at para. 125-126, UNCITRAL I Yearbook, pp. 173-174, where two Governments criticized the corresponding provision of the Hague Convention on the ground that the law should not permit the conclusion of a contract without a price or at least a clear indication as to the means for determining the price.

5. United Nations Conference on Contracts for the International Sale of Goods. Official Records, pp. 363-364. The Article was adopted in the plenary after a vote, Official Records, p. 211.

6. Denis Tallon, "The Buyer's Obligations under the Convention on Contracts for the International Sale of Goods," in N.M. Galston and H. Smit, eds., International Sales: The United Nations Convention on Contracts for the International Sale of Goods (New York 1984), pp. 7-11.

7. Ibid.

8. Ulrich Huber, "Der UNCITRAL-Entwurf eines Übereinkommens über internationale Warenkaufverträge," 43 RabelsZ (1979) pp. 512-513; J. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (Boston 1982), p. 343.

9. Report of the Secretary General, supra n.2, at para. 14.

10. Selvig, Fra kjopsrettens og transportrettens grenseland [The Functions of Transport Documents in Sales] (Oslo 1975), p. 55.

11. Commentary of the Draft Convention on Contracts for the International Sale of Goods, prepared by the Secretariat, Official Records p.64.

12. Ibid., p. 47 at para. 8.

13. J. Honnold, supra n. 8, at p. 350; D. Tallon, supra n. 6, at pp. 7-14 - 7-16.

14. Report of the first committee, Official Records pp. 120-121, and Summary Records, Official Records, pp. 363-367.

15. Report of the first committee, Official Records, p. 120, and Summary Records, Official Records, pp. 362-363.

16. Official Records, p. 370.

17. Allan Farnsworth, "Damages and Specific Relief," 27 Am.J.Comp.L. (1979) pp. 249-250; J. Honnold, supra n. 8, at pp. 355-359; Jan Hellner, "The UN Convention on International Sales of Goods," in Ius Inter Nationes, Festschrift für Stefan Riesenfeld, Berkeley-Kölner Rechtsstudien (1983), at pp. 87-88; Jacob S. Ziegel, "The Remedial Provisions in the Vienna Sales Convention: Some Common Law Perspectives," in N.M. Galston and H. Smit, supra n. 6, at pp. 9-30 - 9-32.

18. Scandinavian Sale of Goods Acts Sec. 28(2). It is proposed that this rule be retained in the new Acts, Nordiska Köplagar. Förslag av den nordiska arbetsgruppen för köp. NU 1984:5, Sec.60(3). [Nordic Sale of Goods Acts. Proposal by the Nordic Working Group for Legislation on Sale of Goods].

19. J. Hellner, supra n. 15, at pp. 94-95; J.S. Ziegler, supra n. 15, at p. 9-32.

20. U. Huber, supra n. 8, at p. 515.


Pace Law School Institute of International Commercial Law - Last updated September 20, 2002
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