Cite as Sono, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 303-313. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.
1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision
(1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.
(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee.
1. History of the provision
1.1. - This article provides the duty of the buyer to give notice of a lack of conformity of the goods where non-conforming goods are handed over, and the effect to be given to the buyer's right to rely on the lack of conformity if the buyer fails to give such notice. It further provides a cut-off period beyond which the buyer's right to rely on a lack of conformity will be terminated unless the contract itself provides otherwise. The provisions is, however, subject to the important modifications by Articles 40 and 44.
1.2. - This article is derived from Article 39 of ULIS, which provides:
"(1) The buyer shall lose the right to rely on a lack of conformity of the goods if he has not given the seller notice thereof promptly after he has discovered the lack of conformity or ought to have discovered it. If a defect which could not have been revealed by the examination of the goods provided for in Article 38 is found later, the buyer may nonetheless rely on that defect, provided that he gives the seller notice thereof promptly after its discovery. In any event, the buyer shall lose the right to rely on a lack of conformity of the goods if he has not given notice thereof to the seller [page 303] within a period of two years from the date on which the goods were handed over, unless the lack of conformity costituted a breach of a guarantee covering a longer period.
"(2) In giving notice to the seller of any lack of conformity, the buyer shall specify its nature and invite the seller to examine the goods or to cause them to be examined by his agent.
"(3) Where any notice referred to in paragraph 1 of this Article. has been sent by letter, telegram or other appropriate means, the fact that such notice is delayed or fails to arrive at its destination shall not deprive the buyer of the right to rely thereon."
1.3. - The basic underlying policies contained in Article 39 of ULIS have been retained in the Vienna Convention but with significant improvements both in the drafting and in balancing the interests of both buyers and sellers. The second sentence of Article 39(1) of ULIS was deleted because it was superfluous and its absence did not affect the provision of Articles 38 and 39. Thus, the first sentence of ULIS Article 39(1) and the first part of ULIS Article 39(2) were combined to form a new Article 39(1) and the last sentence of ULIS Article 39(1) became a new Article 39(2). A general provision in Article 27 of the Vienna Convention now covers the ambit of ULIS Article 39(3). Therefore it does not appear in Article 39 of the Convention. The present text of Article 39 is essentially the same as the text of the UNCITRAL Draft Convention. However, Article 44 was added at the Vienna Conference as a compromise to those who considered that the loss of right due to the failure to give a required notice was too harsh a solution.
1.4. - The concluding phrase in ULIS Article 39(2), «and invite the seller to examine the goods or to cause them to be examined by his agent», has been deleted. Such a de facto invitation is certainly implied in every notice of non-conformity. However, requiring such an «invitation» in each notice of non-conformity might serve as a technical trap leading to the loss of substantial rights. The Working Group further noted that such an «invitation, as a necessary and invariable part of a notice of non-conformity, was not supported by commercial practice. Merchants often send notices of non-conformity informally, and without legal advice concerning applicable formalities» (Yearbook, III (1972), 87 and Yearbook, IV (1973), 49). [page 304]
1.5. - The term «promptly» in ULIS Article 39(1) was thought to set too rigorous a standard and to be inflexible. These were the same reasons that caused the omission of the word «promptly» in Article 38(1) of the Vienna Convention. The requirement of promptness might result in depriving the buyer of all remedies if he does not notify the seller within the shortest possible time. In this regard, a distinction was drawn between two cases: (1) where the buyer is seeking to avoid the contract and to reject the non-conforming goods, and (2) where he decides to keep the same goods and to claim damages or reduction in the price. While the short notification period established by the word «promptly» might be suitable in the first case, it is not appropriate in the second. The Working Group therefore concluded that the expression «within a reasonable time» is sufficiently flexible to adapt to the varying circumstances in which inspection might be required (Yearbook, III (1972), 87).
1.6. - The word «actually» was inserted before the phrase «handing over» to clarify that the two-year time-limit commences from the time of actual handing over of the goods. The addition also reflects the policy of the drafters of the Vienna Convention to move away from the somewhat rigid and purely legal concept of «delivery» and toward a less formal approach (Yearbook, VI (1975), 55 and Yearbook, VIII (1977), 40).
1.7. - Under the provision of the third sentence of ULIS Article 39(1), the two-year period is subject to a qualification, i.e., «unless the lack of conformity constituted a breach of a guarantee covering a longer period». As a matter of drafting, the above provision seemed inadequate, since it failed to specify the period for notice applicable to a breach of such a guarantee. Under one view, the language would seem to make the cut-off period completely inapplicable; under another reading, the two-year period would be extended to the end of the guarantee period. Some suggested that the words «longer period» should be replaced by the words «different period». It therefore followed that the liability of the seller should depend on whether notice of the lack of conformity was given within the period covered by the guarantee, irrespective of whether that period were shorter or longer than the cut-off period of two years. However, the ambiguities noted [page 305] above would also be present even if the word «different» replaced the word «longer». At the same time, others were of the opinion that in the absence of a contrary provision in the contract, the mere fact that the parties had agreed on a shorter period of guarantee should not be construed automatically to deprive the buyer of the right to rely on the two-year period. Accordingly the change of the word to «longer» was inappropriate even from this view point.
1.8. - It was further noted that one should consider various categories of guarantees or undertakings in dealing with the problem of guarantee. It is possible for the parties to derogate from the provisions of the Convention by agreement. The Convention should not unduly impose an interpretation on various contractual guarantees. Thus, it was finally concluded that any rule of interpretation of a contractual guarantee in the Convention in this respect would likely be inappropriate, and that the «unless» clause in Article 39(2) should take a neutral position in this regard. The present «unless» clause in Article 39(2) reflects this policy and it merely provides that the two-year period as provided in Article 39(2) will not apply where «this time-limit is inconsistent with a contractual period of guarantee». The manner in which a contractual guarantee affects the operation of this statutory period is now therefore left to the interpretation of the agreement beween the parties. (Yearbook, IV (1973), 48, 66 and Yearbook, VI (1975), 55, 100; see also § 2.6., infra).
1.9. - Unless the buyer gives the seller notice of a lack of conformity before the expiration of the two-year period, the buyer loses his right to rely on the lack of conformity. On the other hand, under the Convention on the Limitation Period in the International Sale of Goods (New York, 1974) (hereinafter referred to as the Prescription Convention), a claim arising from a defect or other lack of conformity will be subject to the four-year limitation (prescription) period after the goods are actually handed over to the buyer (Prescription Convention, Articles 8 and 10(2)). The rule on prescription sets out limits for instituting a legal proceeding before a tribunal and is therefore technically distinct from the time-limit as stipulated in Article 39(2) of the Vienna Convention. The Prescription Convention itself [page 306] provides that the Convention will not affect time-limits within which a party was required to give notice to the other party as a condition for the acquisition or exercise of his claim (Prescription Convention, Article 1 (2)).
1.10. - However, it was noted that it might be difficult to reconcile the policies underlying these Conventions. For example, let us assume that a defect in a machine comes to light for the first time three years after delivery. The Prescription Convention expresses the policy that the buyer should have an opportunity to exercise his claim. However, the buyer's opportunity to exercise his claim would be illusory, since he cannot give the required notice to the seller within the two-year period and, consequently cannot rely on the lack of conformity.
1.11. - There was however considerable support to the view that the two-year cut-off period of giving such notice was important: claims notified to the seller more than two years after the handing over of goods would be of doubtful validity and when the seller received his first notice of such a contention at such a late date, it would be difficult to obtain evidence as to the condition of the goods at the time of delivery, or to invoke the liability of a supplier from whom the seller may have obtained the goods or the materials for their manufacture. Furthermore, according to this view, the requirement that the buyer give notice of the lack of conformity «within a reasonable time after he has discovered the lack of conformity or ought to have discovered it» would in rare case permit the giving of notice after the expiration of two years. In the view of others, the clash of policies underlying the four-year prescription period and two-year timelimit for giving notice of the non-conformity was not yet satisfactorily solved (Yearbook, IV (1973), 13, 48, 49, 66-67 and Yearbook, VI (1975), 99-100).
1.12. - Furthermore, those who emphasized the clash of policies between the length of the time-limit under Article 39(2) and that of the limitation period under the Prescription Convention also took the view that the consequences of failure to give notice as required by Article 39 of ULIS were too drastic: the buyer lost the right to rely on the failure of the goods to conform [page 307] with the contract, i.e., he had to pay the full price for defective goods and had no claim for damages. They advocated on the strength of a recommendation by the Asian-African Legal Consultative Committee that Article 39 should establish a presumption that, if the seller did not receive notice within a reasonable time that the goods were defective, the seller was entitled to assume that the goods had been handed over to the buyer in conformity with the contract. They referred in this connection to a similar provision in Article 19(1) of the United Nations Convention on the Carriage of Goods by Sea, Hamburg (1978) (Official Records, II, 345).
1.13. - At the Vienna Conference a break-through or a compromise solution was found between these conflicting views, by means of the addition of Article 44 to the Vienna Convention. At the Conference Articles 39 and 44 were voted upon jointly. At the Plenary both articles were adopted by 43 votes to none, with 4 abstentions (Official Records, I, 108 and II, 208). The meaning and implication of Article 44 are discussed fully at Article 44.
2. Meaning and purpose of the provision
2.1. - Article 39(1) states the consequences of the buyer's failure to give notice of non-conformity of the goods to the seller within a reasonable time. A similar consequence of the buyer's failure to give notice of rights or claims of a third party over the goods is dealt with in Article 43(1). The existence of Article 44 as an important modification to Article 39(1) has already been noted.
2.2. - Under Article 39(1) the buyer must send the notice to the seller within a reasonable time after he has discovered the lack of conformity or ought to have discovered it. The failure to do so will result in the loss of his right to rely on the lack of non-conformity. The buyer consequently can no longer require the seller to cure the lack of conformity under Article 46, avoid the contract under Article 49, claim for damages under Articles 74 to 76, nor reduce the price under Article 50. In this [page 308] connection, however, the following point would have to be kept in mind at the outset: i.e., under Article 36(1), the seller is liable, in the absence of a special contractual stipulation such as a guarantee of fitness for a certain period, only for those non-conformities which did exist at the time when the risk passed to the buyer although it is not necessary that they were apparent at that time (as to when the risk passes, see Articles 66-69).
2.3. - The notice required under Article 39 would serve various purposes: it would provide the seller with the basis to conduct his own examination of the goods; it would afford the seller of an opportunity to substitute conforming goods or otherwise to cure the defect; and in general prompt the seller to gather or preserve evidence for use in any possible dispute with the buyer over the alleged lack of conformity. Therefore, the notice must not only be given to the seller within a reasonable time but it must specify the nature of the lack of conformity (Yearbook, IV (1973), 48; Official Records, I, 35).
2.4. - It has already been noted in § 1.5., above, that the word «promptly» in ULIS has been replaced by the phrase «within a reasonable time». The reasonableness of the time depends on the circumstances of each case. Where the buyer is rejecting the goods, a prompt communication to the seller is important so that he can have an opportunity to make a tender of conforming goods within the required period. In such cases, a prompt communication might also be important to give the seller an opportunity to care for or redispose of the rejected goods and thus reduce the chance for loss or damage to the goods or the incurring of unnecessary expense. On the other hand, where the buyer decides to keep the defective goods, subject to a claim for damages, the above reasons for prompt notification may not be applicable.
2.5. - The reasonable time will be calculated from the time the buyer has actually discovered the non-conformity or «ought to have discovered it ». Whether the buyer ought to have discovered the non-conformity depends on the circumstances and in particular on who the buyer is. There may be buyers who are at a particular disadvantage in respect to expert buyers when it [page 309] comes to examining a technologically complicated machinery. In this situation, the buyer may need to employ a skilled examiner from a distant venue and therefore require a longer time period for the process. The standard against which this necessity is judged will be that of «a reasonable person of the same kind» (see Articles 7(2) and 8(2)) (Yearbook, III (1972), 87 and Yearbook, VIII (1977), 39). For a discussion of the extent to which the buyer ought to have discovered the non-conformity, see also commentary to UNCITRAL Draft Convention Article 36(3) in Official Records, I, 34.
2.6. - In the absence of a contrary contractual arrangement, Article 39(2) provides a cut-off period of two years beyond which the buyer can no longer give notice of non-conformity of the goods. Accordingly, although Article 39(1) provides that, in order to assert a lack of conformity against the seller, notice of the non-conformity must be given within a reasonable time after the buyer has discovered it or ought to have discovered it, such assertion will practically be precluded if the time of the discovery of the non-conformity is after the two-year time-limit.
2.7. - The two-year period will be calculated from the date on which the goods were actually handed over to the buyer. Under Article 38 the buyer is required to examine the goods within as short a period as is practicable in the circumstances, which, in the case where the contract involves the carriage of goods, is after the goods have arrived at their place of destination. Where the goods are redispatched by the buyer without a reasonable opportunity for examination by him, the examination may be deferred, in certain circumstances, until after the goods have arrived at the new destination. However, under Article 39(2), the two-year time-limit for giving notice commences to run from the date when the goods «were actually handed over to the buyer». As noted earlier in § 1.6., this means the date of physical handing over of the goods and not the date of the receipt of documents of title relating to the goods.
2.8. - This date has been chosen as the most easily ascertainable date for the calculation of the time-limit. It should be noted, therefore, that, in those cases where the goods have been [page 310] redispatched, this date may be as much as several months prior to the date on which examination of the goods becomes practicable or required under Article 38. It may further be recalled that, as described in § 1.9., above, the Prescription Convention also provides that the limitation period of four years will commence to run from the date when the goods are actually handed over to the buyer (Yearbook, VIII (1977), 40; OffiCial Records, II, 349).
2.9. - Under Article 6 of the Vienna Convention, the parties are permitted to derogate from or vary the effect or provisions of the Convention including Article 39. Therefore, if the time-limit of two years as provided in Article 39(1) is inconsistent with a contractual period of guarantee, the two-year period will not apply. There are various kinds of contractual guarantees which may one way or another affect the operation of this time-limit. The question whether a particular contractual agreement is inconsistent with the main sentence of Article 39(2) and how that agreement affects the operation of the two-year period are matters left for the interpretation of the agreement (see § § 3.1. to 3.5., infra).
3. Problems concerning the provision
3.1. - Since the «unless» clause in Article 39(2) takes a neutral position as to how the two-years time-limit will be affected by a contractual agreement and leaves the answer to the interpretation of the agreement, the importance of drafting a contract clause adequately in order to avoid unnecessary disputes in this regard has increased.
3.2. - There may be a guarantee which is in fact a limitation on the seller's obligations: e.g., a «guarantee» providing that the seller's obligation is limited to replacing any defective part if the buyer notifies the seller within 30 days after he receives the goods. Such a short guarantee may often be present in case of the sale of perishable goods and it will practically shorten the time-limit to 30 days. There may be a guarantee which states that at the time of delivery the goods had the quality stipulated in that contract (i.e., guarantee against original lack of conformity). This [page 311] kind of «guarantee», which does not add much to the provisions of Article 35, will not affect the time-limit for notice, unless combined with an agreement on the period within which complaints may be advanced (Yearbook, VI (1975), 55, 80, 100).
3.3. - Complicated machinery may often be accompanied by a guarantee and agreement as to servicing for a specified period of time which is longer than two years in order to solve the problem of defects coming to light within that period. If a defect appears as soon as the machine is delivered, should the notice be given (a) within a reasonable time after discovery of the non-conformity or (b) any time within the guarantee period? Or, (c) does the guarantee merely guarantee performance throughout the specified period and leaves the rest of the questions to the law? Although result (a) seems probable, this may be a matter preferably to be expressed in the contract. Other points which require clarification are whether the notice of non-conformity must be given at the latest within the specified period or whether the notice may be given within a reasonable time even after the expiry of the period where the defect could not have been discovered until shortly before the expiry of the guarantee period (Yearbook, IV (1973), 48).
3.4. - Where a guarantee period is longer than two years, it seems reasonable to presume that the guarantee also covers an original lack of conformity and the two-year period thereof is also extended to the guarantee period. However, where the guarantee period is shorter than two years and where it particularly guarantees a certain standard of performance for the short period, it may be difficult to justify a conclusion that claims for any original lack of conformity will also be barred by that short period unless the contract expressly so provides. In such cases, the guarantee of certain standards of performance may expire after the short period but claims for the original non-conformity will probably not expire until after the expiry of the two-year period.
3.5. - In this connection, it should be emphasized that it is important to distinguish clearly between guarantees relating to the original lack of conformity (see Article 36(1)) and guarantees which assure that for a period of time the goods will remain, fit [page 312] for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics (see Article 36(2)). If the expected standard of the goods cannot be maintained within a shorter guarantee period, the buyer can easily rely on that guarantee. At the same time, if the buyer can prove that the poor performance is the result of the original lack of conformity of the machinery of the contract, he should also be able to base his claim on the original non-conformity for two years even if the shorter guarantee period has already expired (see Yearbook, VI (1975), 80). [page 313]