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Reproduced from the CISG-Australia website. Reproduced with permission of 6 The Journal of Contract Law (1993) 131-140

Buyer's Remedies of Rejection and Cancellation under the UCC and the Convention [*]

Richard E. Speidel

Introduction
The UCC rejection rule and its limitations
--   Rejection and cancellation
--   Limitations upon rejection remedy
--   Good faith
--   Seller's right to 'cure' and buyer's right to cancel
Cure and avoidance under the Convention
--   Buyer's remedial options
--   Seller's right to cure
Should UCC Article 2 be revised to conform to CISG?

Introduction

J. W. Carter's interesting paper compares the remedies of rejection and 'termination' under the sale of goods legislation in England, Australia and Canada with the remedial scheme of the Convention (CISG). Since Art. 2 of the Uniform Commercial Code was drafted to escape from the formalism of the Uniform Sales Act,[1] which was influenced by the Sale of Goods Act of 1893, I will not compare the UCC with that body of law. Rather, I will elaborate somewhat upon Professor Carter's brief treatment of Art. 2, Sales and compare it with the Convention.

The current version of Art. 2, Sales of the Uniform Commercial Code is only 35 years old. Nevertheless, Art. 2, like other Articles of the UCC, is being revised and updated.[2] One of the prime candidates for possible revision is the buyer's self-help remedies of rejection and cancellation and the group of sections involved when those remedies are exercised.[3] [page 131]

One question is whether Art. 2 should be revised to conform to the Convention's articles on specific performance, cure and avoidance. Professor Carter has suggested that the answer depends upon the balance to be achieved between the seller's interest, which would prefer rules that discourage avoidance and, generally, require the buyer to accept goods at a price discount, and the buyer's interest, which would prefer rules that facilitate rejection and permit avoidance or cancellation when the goods do not conform to the contract. The balancing principles, according to Professor Carter, are derived from the broader community concerns for promoting the efficient allocation of resources and discouraging the manufacture and sale of substandard or defective goods. The resulting balance is a set of 'default' rules which govern international sales. In other words, the Convention is a conditional limitation upon private autonomy, since most of the law of sales, whether international or domestic, can be varied by agreement.[4]

The UCC Rejection Rule and its Limitations

Rejection and Cancellation

Article 2 provides a buyer with two self-help remedies when the seller makes a non-conforming tender, rejection and cancellation.[5] Under the former, the buyer simply rejects the tender as a prelude to cure by the seller, mutual adjustment or cancellation by the buyer. Without more, rejection is not a cancellation for breach. Under the later, the buyer cancels or 'puts an end to' the contract for breach and retains any remedy for breach of the whole contract or any unperformed balance.[6] Article 2, however, provides no process for cancellation and requires no notice to cancel.[7]

The starting point is UCC § 2-601, which provides, in part, that 'if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may (a) reject the whole, or (b) accept the whole; or (c) accept any commercial unit or units and reject the rest'. The [page 132] assumptions are that the seller has tendered delivery,[8] the buyer has inspected the goods [9] and documents, and the buyer has discovered that the goods or other parts of the seller's performance fail to 'conform' to the contract, that is, are not 'in accordance with the obligations under the contract.'[10] At this point, an informed buyer, may 'reject the whole' without regard to the materiality of the non-conformity if notice with reasons for the rejection is given to the seller within a reasonable time.[11]

Limitations upon rejection remedy

There are some obvious and not so obvious limitations on the so-called 'perfect tender' rule.

Unless Otherwise Agreed: The first, stated in UCC § 2-601, is that the parties may agree otherwise. Put in the modern jargon, the 'perfect tender' rule is a 'default' rule, the effect of which can be varied by agreement.[12] Thus, agreement to dispense with 'perfect tender' can be found in the express agreement of the parties or implied from trade usage, a prior course of dealing or a current course of performance.[13]

lnstalment Contracts: The second limitation, also stated in UCC § 2-601, is that the 'perfect tender' rule does not apply in instalment contracts, as defined in UCC § 2-612.[14] A single instalment cannot be rejected unless the non-conformity 'substantially impairs the value of that instalment and cannot be cured'. Moreover, if that non-conformity, alone or in conjunction with others, does not constitute a breach of the whole contract,[15] the buyer must accept the instalment if the seller offers adequate assurance of its cure.

Good Faith: The third is that rejection by the buyer must be in good faith. UCC § 1-203 provides that 'every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement'. Where the buyer is a merchant, as defined in UCC § 2-104(1), good faith is defined as 'honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade'. Thus, the potential for a bad faith rejection exists in cases where the buyer seizes upon a minor [page 133] non-conformity with which it is not honestly dissatisfied to avoid a bargain which, for other reasons, has become unprofitable.[16]

The Risk the Buyer Will Accept the Goods: The fourth, a practical limitation, is that the buyer, after a reasonable opportunity to inspect, may inadvertently accept the goods without discovering the non-conformity.[17] There are a number of legal consequences that flow from acceptance.[18] For purposes of this discussion, the buyer cannot now reject the goods under UCC § 2-601 [19] but may 'revoke' the acceptance only if the 'non-conformity substantially impairs its value to him' [20] and other conditions stated in UCC § 2-608 are satisfied.[21]

In sum, the right to reject for a non-conforming tender exists in instalment contracts and contracts where delivery is in a single lot. The 'perfect tender' rule, however, is limited to single lot deliveries.[22] In instalment contracts, rejection depends upon satisfying a 'substantial impairment' test. Thus, to the extent that contracts are for instalments or that the buyer has accepted the goods without discovering a nonconformity, the perfect tender rule does not apply.

Seller's Right to 'Cure' and Buyer's Right to Cancel

A final limitation on the buyer's remedy of rejection is the seller's right to 'cure' under UCC § 2-508. Assume that the buyer, whether under an instalment contract or not, has grounds for a rejection of the tender. In the absence of an agreement, the buyer has no explicit right to require a cure by the seller. Furthermore, the remedy of specific performance is normally invoked where the seller has failed to deliver, not where the seller has made a non-conforming tender.[23]

If the buyer has properly rejected the goods by prompt notice to the seller, the rejection is both 'rightful' and effective. The power to cancel, however, is determined by whether there was an instalment contract or not. Under UCC § 2-711(1), where the 'buyer rightfully rejects . . . then with respect to any good involved, and with respect to the whole if the breach goes to the whole contract (§ 2-612), the buyer may cancel. . . .'[24] Thus, there is a correlation between the grounds for rejection and cancellation in 'single lot' and instalment contracts. But in either case, [page 134] the remedial step from 'rightful' rejection to cancellation is limited because the seller has, unless otherwise agreed, a statutory right to 'cure' the non-conforming tender under UCC 2-508.

The seller's power to cure under UCC 2-508 [25] applies to a rejection of a non-conforming tender but apparently not to a revocation of acceptance under UCC 2-608.[26] The scope of the cure power depends upon whether the buyer's rejection notice is received before or after the time for performance has expired. If received before, the power to cure is broad: the 'seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery'.[27] If the time for delivery has expired, the power to cure is more limited. The seller can have more time to substitute a conforming tender only where the buyer has rejected a non-conforming tender 'which the seller had reasonable grounds to believe would be acceptable with or without money allowances'.[28] Within this rather sticky legal framework, the parties, courts and commentators have struggled to manage the problems of timing and scope.[29]

Against this background, the proper exercise of the cancellation remedy depends upon how the 'cure' process turns out. Three conclusions can be drawn: (1) Where the buyer has rightfully rejected and the seller has cured under UCC 2-508, cancellation is not available. The buyer must accept the cure whether he likes it or not. (2) If the buyer has rightfully rejected and attempted to cancel without giving the seller an opportunity to cure, the cancellation may be a repudiation by the buyer. The buyer cannot deprive the seller of its opportunity to cure under UCC § 2-508.[30] (3) If, after rightful rejection, the seller has no right to cure under UCC § 2-508 or chooses not to, the buyer's power to cancel depends upon whether the goods were to be delivered in a single lot or in instalments. If the former, the buyer can cancel without regard to whether the non-conformity substantially impaired the value of the contract. If the latter, there must be a breach of the 'whole' contract to cancel, that is, the non-conformity in one or more instalment must 'substantially impair . . . the value of the whole contract'.[31] [page 135]

Cure and Avoidance Under the Convention

Buyer's Remedial Options

Assume that the parties have entered a contract for the international sale of goods.[32] Suppose, after tender and examination,[33] that the buyer concludes that the tendered goods do not conform to the quantity, quality and description required by the contract [34] and gives the seller timely notice of the non-conformity.[35] What are the buyer's remedial options?

It is clear that the buyer has no power to reject the goods under CISG . It is possible, however, to avoid (cancel) the contract if the seller has committed a fundamental breach. Under Art. 25, a breach is 'fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result'.[36]

Getting from a non-conformity to avoidance, however, involves a rather intricate interplay between two other remedial choices given to the buyer in lieu of rejection [37] and the seller's right to cure.

Mandatory Cure: Article 46(1) provides that the 'buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement'. Thus, if the seller fails to deliver the goods or documents, the buyer can obtain specific performance without showing that special circumstances exist.[38]

Where tendered goods fail to conform, however, the buyer has limited power to require cure by the seller. The buyer 'may require delivery of [page 136] substitute goods only if the lack of conformity constitutes a fundamental breach of contract' and the request is timely made [39] but may 'require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances'.[40] Under the UCC, the buyer has no power to require cure by the seller, unless authorised by the agreement.[41] To the extent that CISG authorises mandatory cure as a matter of buyer choice, the incentive to avoid (cancel) the contract and replace the goods from another source is reduced.[42]

Buyer's Option to Fix an Additional Period of Time: If the seller is late or has made a non-conforming tender, the buyer 'may fix an additional period of time of reasonable length for performance by the seller of his obligation'.[43] This option permits the buyer unilaterally to modify the time for performance. Once the time is fixed and so long as the seller has not stated that it 'will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract'.[44] Even so, the buyer is 'not deprived thereby of any right he may have to claim damages for delay in performance'.[45]

Avoidance for Fundamental Breach: Article 49 states two grounds for which the buyer may declare the contract avoided and imposes additional conditions where the seller has delivered the goods.[46] The grounds are: (1) where the 'failure of the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract',[47] as that concept is defined in Art. 25; and (2) in the case of non-delivery, where the seller 'does not deliver the goods within the additional period of time fixed by the buyer in accordance with para. (1) of Art. 47 or declares that he will not deliver within the period so fixed'.[48] Thus, unless an Art. 47 breakdown has occurred, the buyer under CISG cannot 'avoid' or cancel the contract unless there is a fundamental breach. This impediment to avoidance, which resembles the UCC's substantial impairment test, keeps the contract afloat in all but the most serious cases of non-conformity.[page 137]

Seller's Right to Cure

If the seller has handed over documents or delivered goods before the time for performance, Arts. 34 and 37 grant a broad right to cure, provided 'that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense'. For example, if goods are delivered early, the seller may up to the date of delivery 'deliver any missing part, or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods'.[49] This presumably forecloses the exercise by the buyer of the remedies of specific performance or avoidance and complements the extension of time option granted by Art. 47.

The seller's right to cure 'after the date for delivery' is stated in Art. 48. Although this remedy is subject to the buyer's avoidance remedy in Art. 49, it is broadly put: '[T]he seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer'.[50] According to Professor Honnold and others, if, after delivery, the buyer gives prompt notice of a non-conformity and the seller promptly states that it will make a feasible cure, the buyer cannot avoid the contract even though the breach otherwise appears to be fundamental. The reasoning is that no breach can be fundamental where the seller can and will effect a proper cure.[51]

In sum, the seller's right under Art. 48(1) to cure after delivery is broader than that of a seller under UCC § 2-508(2) and cannot be undercut by a hasty avoidance of the contract by the buyer. As with the UCC, the 'cure' base must be touched before avoidance (cancellation). Further, the seller's statutory power to cure is supplemented where the buyer seeks a mandatory cure or grants the seller additional time for performance under Art. 47. Except for avoidance as a last resort, the overall policy of CISG is clear: In international sales, it is preferable to preserve rather than to avoid the contract upon breach by the seller and to require or to encourage the seller to cure rather than to permit third parties to supply replacement goods.[52] [page 138]

Should Article 2 Be Revised to Conform to CISG?

To the extent that CISG is a compromise among legal traditions rather than a systematic response to the realities of international trade,[53] care should be taken in conforming domestic sales law to its provisions. This is especially true for Art. 2, since it is part of an integrated and uniform commercial code and is reasonably well adapted to modern domestic contracts for the sale of goods.

Nevertheless, the differences between CISG on the important remedies of rejection, cure, and avoidance (cancellation) are significant, especially where no instalment contract is involved. At the very least, those differences should be justified, if not resolved.[54]

Professor John Honnold has stated that CISG's approach is based upon a recognition that in international sales the cost of transporting goods to a distant buyer is high and that there are special difficulties created when goods are rejected and disposed of in a foreign country. 'These factors led to agreement on rules that can save the contract from destruction on technical and trivial grounds.'[55] Put differently, the drafters of the Convention concluded either that these were the best rules for the transaction type or that these were the rules that parties to international sales transaction were mostly likely to choose. Either way, the parties to particular transactions are free to agree to more stringent standards of enforcement.

Outside of instalment contracts, Art. 2's controversial approach - rejection for any non-conformity, limited cure, cancellation without regard to substantial impairment - seems to respond to a different transaction type. According to Professor Robert Scott, this set of default rules assumes that buyers prefer to pay only for conforming goods, that adequate substitutes are available in the market and that sellers are in the best position to handle rejected goods which can be repaired and resold at the market price or sold immediately at a price that reflects their non-conformity.[56] Thus, in contrast to CISG, stringent enforcement standards are assumed to be the default rules that most sellers and buyers would agree to and particular parties remain free to negotiate toward and agree upon more lenient standards.[57]

With one possible exception, there are several reasons why the gap between CISG and Art. 2 should be closed.[page 139]

First, Art. 2's approach in instalment contracts is already consistent with CISG. Both rejection and cancellation depend upon a non-conformity that substantially impairs the value of the instalment or the 'whole' contract. Moreover, instalment contracts are more likely to be of a longer duration, where the need to preserve the relationship is greater than in more discrete exchanges.[58]

Second, not all non-instalment contracts fit the model of discrete sales made in competitive markets. Differences in the type of goods, distance between the parties and circumstances at the point of destination may cast doubt on the assumption that most commercial parties would agree to a perfect tender rule for all sales. These differences, when manifested in particular cases, also put strains upon the operation of the rule in the courts.

Third, even if the 'perfect tender' rule is the remedy that most commercial parties would bargain for, it may create perverse incentives in bargaining. Buyers may neglect to communicate important information about special needs and requirements to the seller at the time of contracting and use the strict enforcement standards as an exploitive device after the non-conformity. What may be needed here is a 'penalty default' rule that creates an incentive for the buyer to reveal information about special requirements and needs.[59] A substantial impairment default rule could fit this bill. To achieve the protection contained in a 'perfect tender' standard, the buyer must reveal special needs that justify protection in bargaining from the relaxed to the more stringent standard.[60]

Finally, buyers in consumer sales may need the protection of a 'perfect tender' rule more than commercial buyers. A strict standard of enforcement provides needed self-help leverage to obtain adequate repairs, substitute goods or restitution in cases of non-conforming goods. A different test for different parties is plausible under a statute that governs both commercial and consumer sales.[61]

In conclusion, the 'perfect tender' rule was criticised at the creation of Art. 2 and that criticism has not abated. With CISG as an influential model, there is a golden opportunity in the forthcoming revision of Art. 2 to still the critics once and for all and, in one area at least, reduce the gap between domestic and international sales law.[page 140]

[Go to companion commentaries: J. W. Carter, "Article 2B: International Perspectives" and Jacob S. Ziegel, "Party Autonomy and Statutory Regulation: Sale of Goods"]


FOOTNOTES

* A commentary to J W Carter, 'Party Autonomy and Statutory Regulation: Sale of Goods', a paper delivered at the Third Annual Journal of Contract Law Conference, Toronto, 20 October, 1992, on Commercial Contract Law sponsored by Freehill Hollindale and Page, Solicitors and Tory Tory DesLauriers & Binnington, Barristers and Solicitors, Toronto. The published version of the paper, in (1993) 6 JCL 93 does not deal with the Uniform Commercial Code.

1. Grant Gilmore described the Uniform Sales Act as a 'scholarly reconstruction of 19th Century law' which, when drafted by Samuel Williston in 1906, 'failed to move the law much closer to us than 1850'. Gilmore, 'On the Difficulties of Codifying Commercial Law' (1948) 57 Yale LJ 1341 at 1341-2.

2. A Study Group appointed by the Permanent Editorial Board of the Uniform Commercial Code (PED) and the American Law Institute prepared a Report on the possible revision of Art. 2 in 1990, which was circulated for comment. That Report, along with an Appraisal prepared by a Task Force of the ABA Subcommittee on General Provisions, Sales, Bulk Transfers, and Documents of Title, Committee on the Uniform Commercial Code, was published under the title of Article , 'An Appraisal of the March 1, 1990, Preliminary Report of the Uniform Commercial Code Art. 2 Study Group' (1991) 16 Del J Corp Law 981 (hereafter called Appraisal). An Executive Summary, prepared by the Study Group for the PEB, was published as Report, 'PEB Study Group: Uniform Commercial Code, Art. 2 Executive Summary' (1991) 46 Bus Lawyer 1869 (hereafter called Executive Summary). The revision project is now in the hands of a Drafting Committee, appointed by the National Conference of Commissioners on Uniform State Laws (NCCUSL), with a projected completion date of August 1995. I serve as Reporter to the Drafting Committee. The views expressed in this comment are mine and do not necessarily represent those of NCCUSL or anyone else associated with the drafting project.

3. See Appraisal at 1135-49, 1157-70; Executive Summary at 1872-3, 1881. See also, Sebert, 'Rejection, Revocation and Cure Under Art. 2 of the UCC' (1990) 84 NW U L Rev 375; Honnold, 'Buyer's Right of Rejection - A Study of the Impact of Codification Upon a Commercial Problem' (1949) 97 U Pa L Rev 1123. The legislative history of these sections is discussed in Wiseman, 'The Limits of Vision: Karl Llewellyn and the Merchant Rules' (1987) 100 Harv L Rev 465 at 510-21. For an overview, see Winship, 'Domesticating International Commercial Law: Revising UCC Art. 2 in Light of the United Nations Sales Convention' (1991) 37 Loyola L Rev 43.

4. 'Default' rules, which are alienable rather than immutable, supply terms to fill gaps in the agreement and provide the legal framework for issues of formation, performance, liability and remedy. They provide a 'hypothetical bargain' for the parties, and the debate, in the United States at least, is over the terms of that hypothetical bargain. For an illustrative analysis, see Charny, 'Hypothetical Bargains: The Normative Structure of Contract Interpretation' (1991) 89 Mich L Rev 1815.

5. A third is the buyer's right to make a written demand for adequate assurance of due performance under UCC 2-609. See Robertson, 'The Right to Demand Adequate Assurance of Due Performance: UCC 2-609 and Restatement, Second, Contracts 251' (1988) 38 Drake L Rev 305.

6. UCC 2-106(4). Compare 'termination' where one party 'pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach.' UCC 2-106(3).

7. Notice is required to terminate a contract for other than breach. See UCC 2-309(3).

8. See UCC 2-503 and 2-504.

9. See UCC 2-513(1), stating the buyer's right to inspect the goods.

10. UCC 2-106(2). In short, a non-conformity is treated as a breach of contract rather than a failure of a condition. Art. 2 does not deal with the distinction between promises or conditions or the effect of a failure of condition that is not part of the agreed exchange.

11. See UCC 2-602(1) and 2-605(1). The failure to make an effective rejection is an acceptance of the goods, UCC 2-606(1)(b), which makes the buyer liable for the price. UCC 2-709(1)(a). A 'wrongful' rejection by the buyer is a breach of contract. UCC 2-703. Upon rejection, UCC 2-602 to 2-605 impose various responsibilities on the buyer to preserve and return goods of the seller in his possession.

12. See UCC 2-719(1)(a).

13. See UCC 1-201(3) (definition of agreement).

14. An instalment contract is 'one which requires or authorizes the delivery of goods in separate lots to be separately accepted.' UCC 2-612(2). In the absence of such an agreement, goods are to be delivered in a single lot. UCC 2-307.

15. If the non-conformity or default 'with respect to one or more instalments substantially impairs the value of the whole contract there is a breach of the whole.' UCC 2-612(3). A buyer may cancel an instalment contract for a breach of the whole. See UCC 2-711(1).

16. See Neumiller Farms, Inc v. Cornett, 368 So 2d 272 (Ala 1979) (rejection of tender in bad faith).

17. See UCC 2-606(1)(b).

18. See UCC 2-607.

19. See UCC 2-607(2).

20. UCC 2-608(1).

21. Another not so obvious limitation is found in UCC 2-504, dealing with shipment of the goods by the seller. Deviations from these requirements are grounds for rejection 'only if material delay or loss ensues.'

22. Delivery in a single lot is the default rule in Art. 2. See 2-307.

23. Under UCC 2-716(1), specific performance 'may be decreed where the goods are unique or in other proper circumstances.' The remedy is usually invoked where the seller has failed to deliver on time and other legal remedies, such as damages or 'cover' are inadequate.

24. According to UCC 2-106(4), cancellation occurs 'when either party puts an end to the contract for breach by the other.' See UCC 2-106(3) for a definition of 'termination.'

25. Although not explicitly stated, the seller's right to cure under UCC 2-508 can be expanded or contracted by agreement. See UCC 1-102(3) and 2-719(1).

26. This is a dubious distinction. See Foss, 'The Seller's Right to Cure When the Buyer Revokes Acceptance: Erase the Line in the Sand' (1991) 16 S Ill LJ 1.

27. UCC 2-508(1).

28. UCC 2-508(2).

29. The thoughtful articles by Professor William Lawrence illuminate this struggle. See Lawrence, 'Cure Under Art. 2 of the UCC: Practices and Prescriptions' (1988) 21 UCC LJ 138; 'Cure in Contracts for the Sale of Goods: Looking Beyond Section 2-508' (1989) 21 UCC LJ 333. See also, Whaley, 'Tender, Acceptance, Rejection and Revocation - The UCC's "TARR" Baby' (1974) 24 Drake L Rev 52.

30. Presumably, the same result follows if the buyer did not reject and the seller would have had an opportunity to cure under UCC 2-508.

31. UCC 2-612(3). The 'substantial impairment' test replaces the 'material breach' test in 45 of the Uniform Sales Act.

32. A leading treatise is John Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention, 2nd ed., 1991 (hereafter cited as Honnold). See also, Nicholas, The Vienna Convention on International Sales Law (1989) 105 LQR 201 for an overview from the British perspective.

33. In a contract for the international sale of goods, the seller must, at an agreed or reasonable time or place, 'deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract' and the Convention Art. 30. The mechanics of delivering goods and 'handing over' documents are treated in Arts. 31-4. Art. 38(1) provides that the buyer 'must examine the goods, or cause them to be examined within as short a period as is practicable in the circumstances', but permits examination where the contract involves carriage of the goods 'after [they] have arrived at their destination.' Art. 38(2).

34. The seller's warranty obligation is stated in Arts. 35 and 36. Arts. 41-4 deal with liability for third party claims to the goods.

35. See Art. 39.

36. The phrase before the 'unless' clause resembles the so-called subjective substantial impairment test in UCC 2-608(1), where the buyer may revoke acceptance when a 'non-conformity substantially impairs its value to him . . .' See also, UCC 2-610. The phrase after the 'unless' clause resembles the limitation imposed upon the recovery of consequential damages by UCC 2-715(2)(a). See Honnold, pp 253-61. the origins and possible meaning of the 'unless' clauses are explored in Speidel, 'Book Review' (1983) 5 NW J Int'l Law & Bus 432 at 438-45.

37. These options are found in Arts. 46-52. See Art. 45(1)(a). They have been called one of the 'thorniest problems' in the law of sales. Honnold, pp 27-8.

38. Compare UCC 2-716(1).

39. Art. 46(2).

40. Art. 46(3). The request for repair must also be timely.

41. Whether the Convention's remedy of mandatory cure is available in the courts of signatory states depends upon the operation of Art. 28, which provides that 'a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention'. Since the specific performance remedy granted by Art. 46 exceeds that granted by UCC 2-716, Art. 28 would permit a United States court to refuse to enter a judgment for specific performance. See Honnold, pp 272-7. See also, Walt, 'For Specific Performance Under the United Nations Sales Convention' (1991) 26 Tex Int'l LJ 211.

42. See Art. 75.

43. Art. 47(1).

44. Art. 47(2).

45. Art. 47(2). See Honnold pp 368-72.

46. Art. 49(2). This subsection imposes reasonable time limitations on the right to avoid and states the point at which they begin to run.

47. Art. 49(1)(a).

48. Art. 49(1)(b).

49. Art. 37.

50. Art. 48(1). The seller must communicate notice of or a request to cure to the buyer. The objective is to secure buyer's consent to the cure, during which the buyer's remedial rights are limited. See Art. 48(2), (3).

51. Honnold, pp 374-7. See also Schneider, 'The Seller's Right to Cure Under the Uniform Commercial Code and the United Nations Convention on Contracts for the International Sale of Goods' (1989) 7 Ariz J Int'l Comp L 69 at 83-9.

52. After a contract is avoided, the buyer may buy 'goods in replacement' and recover as damages 'the difference between the contract price and the price in the substitute transaction . . .' Art. 75.

53. See Garro, 'Reconciliation of Legal Traditions in the United Nations Convention for International Sale of Goods' (1989) 23 Int'l Law 443.

54. See Winship, above, n 3 at 48.

55. Honnold, p 65.

56. See Goetz and Scott, 'The Mitigation Principle: Toward a General Theory of Contractual Obligation' (1983) 69 Va L Rev 967 at 1009-11. See also, Priest, 'Breach and Remedy for the Tender of Non-Conforming Goods Under the UCC: An Economic Approach' (1978) 91 Harv L Rev 960, who blesses this approach as 'efficient.'

57. But see Schwartz, 'Cure and Revocation for Quality Defects: The Utility of Bargains' (1975) 16 Bost Coll Indus & Comm L Rev 543, who examines the potential for opportunistic conduct by the buyer in enforcing or negotiating around the 'perfect tender' rule.

58. See generally Scott, 'Conflict and Cooperation in Long-Term Contracts' (1987) 75 Cal L Rev 2005.

59. The phrase 'penalty default rule' was coined and developed in Ayres & Gertner, 'Filing Gaps in Incomplete Contracts: An Economic Theory of Default Rules' (1989) 99 Yale LJ 87 at 95. Their thesis is that gaps in the agreement can result from 'strategic behaviour by relatively informed parties'. This possibility leads them to 'suggest that efficiency-minded lawmakers should sometimes choose penalty defaults that induce knowledgeable parties to reveal information by contracting around the default penalty' at 94'.

60. See UCC 2-315 & 2-715(2)(a), where what the seller knows or has reason to know at the time of contracting about the buyer's particular needs and requirements is important.

61. See Executive Summary at 1881. See also Rice, 'Lessons About the Realities of Contract for UCC Revision and A Future Software Contract Statute' (1992) 18 Rutgers Comp & Tech LJ 499 (arguing that smaller commercial sellers and buyers also need protection).


Pace Law School Institute of International Commercial Law - Last updated July 11, 2001
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