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GUIDE TO THIS ARTICLE

Use of the UNIDROIT Principles to help interpret CISG Article 37


Match-up of CISG Article 37 with counterpart provisions of UNIDROIT Principles


UNIDROIT Principles
Article 7.1.4 - Cure by Non-Performing Party

CISG
Article 37

(1) The non-performing party may, at its own expense, cure any non-performance, provided that

(a) without undue delay, it gives notice indicating the proposed manner and timing of the cure;

(b) cure is appropriate in the circumstances;

(c) the aggrieved party has no legitimate interest in refusing cure; and

(d) cure is effective promptly.

(2) The right to cure is not precluded by notice of termination.

(3) Upon effective notice of cure, rights of the aggrieved party that are inconsistent with the nonperforming party's performances are suspended until the time for cure has expired.

(4) The aggrieved party may withhold performance pending cure.

(5) Notwithstanding cure, the aggrieved party retains the right to claim damages for delay as well as for any harm caused or not prevented by the cure.

If the seller has delivered goods before the date for delivery, he may, up to that date, 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 delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.

[CISG Article 48 is also a counterpart to UNIDROIT Principles Article 7.1.4]

CISG
Article 48

1. Subject to article 49, the 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. However, the buyer retains any right to claim damages as provided for in this Convention.

2. If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.

3. A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision.

4. A request or notice by the seller under paragraph (2) or (3) of this article is not effective unless received by the buyer.

[The UNIDROIT article displayed above is to be read in conjunction with the Official Comments on it as "the comments on the articles are to be seen as an integral part of the Principles" (UNIDROIT).]


To examine CISG provisions displayed above in their context, go to the full text of the CISG || To examine UNIDROIT Principles displayed above in their context, go to the full text of the UNIDROIT Principles


Editorial remarks

Early Delivery and Seller's Right to Cure Lack of Conformity:
Article 37 CISG and UNIDROIT Principles Comparative

Bertram Keller [*]
June 2004

a. In the words of Art. 37 CISG, the seller may cure a "lack of conformity" "before the date for delivery." Once the date of delivery has passed, the limitations of Art. 48 CISG apply. For documents, Art. 34 CISG applies as lex specialis. Unlike the CISG, the UNIDROIT Principles (UP) stipulate one general right to cure in Art. 7.1.4 regardless of object or time.[1] Any interpretation of Art. 37 CISG in light of Art. 7.1.4 UP must take into consideration that the norm is only one part of the curing constructions provided by the CISG.

b. The legal history of Art. 37 CISG stretches from the nearly equivalent Art. 37 ULIS to the first codified right to cure in sec. 2-508 UCC.[2] Especially the Civil Law tradition is less familiar with the seller's right to "tender a second time" as the seller gave the goods autonomously outside his disposal power.[3] However, the stated aim of CISG and UNIDROIT Principles is to find concepts which transcend legal traditions. As part of an "International Restatement of Contract Law"[4] Art. 7.1.4 UP encourages the worldwide acceptance of a general right to cure.[5]

c. Comparing the legal context of Art. 37, the provisions in Art. 52(1) and Art. 72 CISG are relevant for the system of early performance. Whereas under Art. 52(1) CISG the buyer may deliberately refuse to take any early delivery, Art. 6.1.5 UP restricts this right, if he "has no legitimate interest in so doing." However, the difference diminishes if one considers that the option to refuse early delivery under the CISG is limited by "the observance of good faith" under Art. 7(1) and the obligation "to preserve" the goods under Art. 86.[6] The provision of anticipatory non-performance in Art. 72 CISG is very similar to the corresponding Art. 7.3.3 and 7.3.4 UP.[7]

d. Even more common ground is offered by the ratio legis of the cure provisions. The CISG and the UNIDROIT Principles support the principle of maintaining contracts (favor contractus).[8] The possibility of cure in Art. 37 CISG and Art. 7.1.4 UP stabilizes the relations between the parties even after a defect has occurred with the effect of preserving their deal.[9] A second common principle underlying the cure provisions is the mitigation of damages, which is reflected in Art. 77 CISG and Art. 7.4.8 UP.[10] Curing a defect minimizes economic waste. Notwithstanding the slight systematic differences, these two principles offer a solid normative basis for cross-interpretation and gap-filling.[11]

e. The phrase "before the date for delivery" in Art. 37 CISG raises the question whether the seller may cure up to the beginning or to the end of an agreed period of time (Art. 33(b),(c) CISG). Considering the leading idea to maintain the contract and the justified expectations of the other party, most scholars are in favor of the latter alternative.[12] Unfortunately, Art. 7.1.4 UP is of no help in the interpretation as it enables cure before and after the time of performance.

f. The wording "lack of conformity" in Art. 37 CISG seems to exclude the legal defects set forth by Art. 41, 42 CISG. Notwithstanding the different structure of the right to cure in the CISG, the wording "any non-performance" in Art. 7.1.4(1) UP backs a wider interpretation.[13] The literal evaluation from Art. 37 ULIS "any defect in the goods" to Art. 37 CISG "any lack of conformity" supports this view. Considering such a more general right to cure, the next question that arises is whether the seller should then also be allowed to cure a higher quality, i.e., change the delivered goods.[14] Even if the wording of Art. 7.1.4 UP ("any non-performance") allows such an extensive interpretation, this issue is systematically closer to the excess in quantity under Art. 52(2) CISG.[15]

g. Whereas under Arts. 37 and 48 CISG only the "seller" is allowed to cure, Art. 7.1.4 UP neutrally refers to the "non-performing party". The restrictive wording of Arts. 37, 48 CISG is a function of their systematic place under Chapter II "Obligations of the Seller". In corresponding constellations where the buyer breaches the contract before the date of performance (e.g., opening a wrong letter of credit), the occurring gap might be filled by analogy to Art. 37 CISG in light of Art. 7.1.4 UP.[16]

h. Under Art. 37 CISG, the right to cure is limited by "unreasonable inconvenience or unreasonable expense" of the buyer. The identical formula is only used in Arts. 34 and 86(2). The objective standard "reasonable", however, is the general and therefore most indefinite weighing tool of the CISG.[17] In contrary, the UNIDROIT Principles provide a set of differentiated limits in Art. 7.1.4(1)(a)-(d). The key formula "legitimate interest" in subparagraph (c) sets a subjective standard, which is presumed [18] and limited by the objective elements of a notice (a), appropriateness (b) and prompt effect (d). The objective "reasonableness" aims to protect the buyer if the right to cure unduly tilts the balance in favor of the seller. Nonetheless, reasonableness always includes an inter-subjective element when it is applied to a special case. This personal "appropriateness" can only be determined by examining the concrete circumstances of the individual case.[19] The subjective element "legitimate interest" in Art. 7.1.4(1)(c) UP might therefore offer a helpful additional formula.

i. Even if not specifically required by Art. 37 CISG, an attempt to cure without notice is likely to cause unreasonable inconvenience.[20] In Art. 7.1.4(1)(a) UP, the notice is an essential prerequisite for cure regardless of the time of performance. As cure is inherently uncertain,[21] the buyer needs a clue to rely on. Also if delivery is too early, he has to adjust his dispositions to the situation. To enable reasonable business transactions, the seller has to "seasonably" (sec. 2-508 UCC) notify the buyer of his intent to cure.[22] It is therefore considered unreasonable under Art. 37 CISG, if seller "surprises" the buyer by curing the defect without notice.[23] Bearing in mind the adjusted dispositions of the buyer, the cure must additionally be effected promptly as provided in Art. 7.1.4(1)(d) UP even before the agreed date of delivery.

j. Considering the forms of cure available under Art. 37 CISG, the seller is free to choose any method of cure regardless of the buyer's consent.[24] However, replacement or repair might be inadequate as far as goods which are already in the buyer's possession are concerned.[25] The corresponding Art. 7.1.4(1)(b) UP requires the cure to be "appropriate in the circumstances". Appropriateness depends on the nature of the contract and takes into account whether or not the proposed cure promises to be successful.[26] These elements also provide for a more distinct formula to determine the possible number of attempts to cure. Even though each new attempt increases the inconvenience,[27] the reasonable number may vary with the prospect of success.

k. Closely connected is the question of a slightly imperfect cure. The seller has to restore the goods to a fully sound condition.[28] Under Art. 7.1.4(1)(b) UP, repairing is only "appropriate" if there is no evidence left.[29] Nevertheless, the language and idea of Art. 37 CISG indicate that perfection is not required, unless "unreasonable inconvenience" is caused.[30] In this context, the subjective standard of the buyer's "legitimate interest" as provided in Art. 7.1.4(1)(c) UP might help. The buyer has a legitimate interest in refusing, "if it is likely that, when attempting cure, the non-performing party will cause damage to person or property."[31] In light of the "legitimate interest", immaterial impacts might also cast doubt on the reasonableness of cure.[32] However, every such indication is limited by the basic principles of Art. 37 CISG. Where the seller is seriously seeking to maintain the contract and minimize the damage, the buyer may have to accept a cure that is even more than slightly imperfect.[33]

l. A separate issue is whether partial delivery causes "unreasonable inconvenience" under Art. 37 CISG. As fractioned delivery always constitutes an inconvenience for the buyer, his approval might generally be considered necessary.[34] However, the buyer has no remedies for fractioned early performance since both Art. 51 CISG (reference to Arts. 46 to 50) and Art. 6.1.3 UP presuppose that the time for performance is due. As a result at this systematic structure, the seller may complete partial delivery before the consigned date of delivery without the permission of the buyer.[35] Once again the subjective standard of the buyer's "legitimate interest" provided not only in Art. 7.1.4(1)(c) but also in Art. 6.1.3(1) UP may serve as an adequate limit.

m. The seller has to cure the non-performance at his own expense. His corresponding obligation under Art. 48 CISG is a fortiori effective under Art. 37 CISG and stipulated in Art. 7.1.4 (1) UP. The limit of "unreasonable expense" addresses further financial disadvantages for the buyer arising out of the cure (e.g., storage costs). Although the buyer may claim these expenses as damages under Art. 37 CISG, he has to pre-finance the costs and bears the risk of insolvency. The cure might be unreasonable if the seller offers no safety or pre-payment of the costs.[36] A possible solution is a "right of retention"[37] which fits the concept of "legitimate interest" in Art. 7.1.4(1)(c) UP.

n. In general, early delivery very seldom amounts to a fundamental breach as the buyer may refuse it.[38] Nevertheless, as a consequence of the pending cure, remedies under Art. 45 et seq. are excluded.[39] In line with Art. 7.1.4(3) UP, the rights under Art. 72 CISG are also suspended upon an effective notice of cure. There might be some rare cases where a right of the buyer to withhold his own performance as provided in Art. 7.1.4(4) UP is helpful even before the consigned time of performance is due. Corresponding to Art. 7.1.4(5) UP, Art. 37 CISG covers not only unreasonable but also reasonable expenses caused by the cure [40] in line with the principle of full compensation underlying Art. 74 CISG and stipulated in Art. 7.4.2 UP.

o. If the buyer refuses cure under Art. 37 or Art. 48 CISG, only the right to price reduction is expressly excluded in Art. 50. The duty of cooperation in Art. 5.3 UP requires the buyer to cooperate and permit cure under Art. 7.1.4 UP.[41] Consequently, the buyer loses his remedies for non-performance if he refuses groundlessly to accept cure under Art. 37 CISG.[42] Moreover, the buyer is obliged to examine the goods under Art. 38 CISG and to give notice under Art. 39 specifying the nature of the lack of conformity to enable cure.[43] However, it is not clear whether the duty of examination under Art. 38 CISG arises only with the date of delivery. Without knowledge of the non-conformity, the seller would be deprived of his right to repair. In line with the general principle of cooperation in Art. 5.3 UP, the obligation of the buyer in Arts. 38, 39 CISG is therefore not dependent on the date of delivery.[44]

[See also commentary by the author on this subject in: John Felemegas ed., An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press (2006) 174-179]


FOOTNOTES

* The Author studied law and philosophy in Heidelberg, Cambridge (U.K.), Paris and Vienna and is now writing a Ph.D. thesis on the theoretical foundations of contract law at Munich University.

1. UNIDROIT, Principles of International Commercial Contracts (1994), Comment to Art. 7.1.4, no. 1, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni37.html#official>.

2. Ulrich Magnus in Heinrich Honsell (ed.) Kommentar zum UN-Kaufrecht (1997), Art. 37, no. 1; Jacob S. Ziegel, Report to the Uniform Law Conference of Canada on CISG, available online at <http://cisgw3.law.pace.edu/cisg/text/ziegel37.html>.

3. Herbert Stumpf in Hans Dölle (ed.), Kommentar zum Einheitlichen Kaufrecht. (1976); C.M. Bianca in C.M. Bianca/ M.J. Bonell (eds.), Commentary on the International Sales Law (1987), Art. 37, no. 1.3; Karl H. Neumayer/ Catharine Ming, Convention de Vienne sur les contrats de vente internationale de marchandise (1993) Art. 37, p. 292. Cf. also Ingeborg H. Schwenzer in Peter Schlechtriem (ed.), Commentary on the UN Convention on the International Sale of Goods. English Translation (1998), Art. 37, no.2. (the right to cure was unknown in Roman Law).

4. M.J. Bonell, An International Restatement of Contract Law. The UNIDROIT Principles of International Commercial Contracts (1997); E.A. Farnsworth, An International Restatement: the UNIDROIT Principles of International Commercial Contracts (1997) 26 University of Baltimore Law Review 1-7.

5. E.g., the recent German reform of contract law newly introduced a right to cure after delivery for sale contracts in 437, 439 BGB.

6. Fritz Enderlein/ Dietrich Maskow, International Sales Law (1992), Art. 52, no.2, available online at <http://cisgw3.law.pace.edu/cisg/biblio/enderlein.html>; Secretariat Commentary on Art. 48, no. 3 and 4; available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-48.html>; M. Will in Bianca/Bonell, Art. 52, no. 2.1.3; Ulrich Huber in Schlechtriem, Art. 52, no. 3; Neumayer/Ming, Art. 52, no. 1. But criticized by Vincent Heuzé, La vente internationale de merchandises (2000), no. 244; John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (1999), Art. 52, no. 319 ("the buyer could gain little by an unreasonable refusal to take an early delivery").

7. Cf. Sieg Eiselen, Editorial remarks on the manner in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement Articles 71 and 72 of the CISG; available online at <http://cisgw3.law.pace.edu/cisg/principles/uni71,72.html#er>.

8. CISG: M.J. Bonell in Bianca/Bonell, Art. 7, 2.3.2.2; Ulrich Magnus, Die allgemeinen Grundsätze im UN-Kaufrechts, 59 Rabels Zeitung (1995) 469 (477), in English: General Principles of UN-Sales Law; available online at <http://cisgw3.law.pace.edu/cisg/biblio/magnus.html>; Bernard Audit, La vente internationale de marchandise (1990) 51; Schlechtriem/Huber, Art. 45; reflected also in German Bundesgerichtshof (3.4.1996), Zeitschrift für Wirtschaftsrecht 1996, 1044.

UNIDROIT Principles: UNIDROIT Comment to Art. 1.3 and Art. 6.2.1.; M.J. Bonell, The UNIDROIT Principles of International Commercial Contracts, Nature, Purposes and First Experiences in Practice, available online at <http://www.unidroit.org/english/principles/pr-exper.htm>; cf. also Klaus-Peter Berger, The Creeping Codification of the Lex Mercatoria (1999).

9. Art. 37 CISG: A.E. Farnsworth in Swiss Institute of Comparative Law, The 1980 Vienna Convention on the International Sale of Goods, Lausanne Colloquium (1985) 84 et seq.; Hans van Houtte/ Patrick Wautelet, The Duties of Parties and the Sanctions for Non-Performance under the CISG, 3-4 International Business Law Journal (2001) 293 (302); Schlechtriem/Schwenzer, Art. 37; Ulrich Magnus in M. Martinek (ed.), J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch: Wiener UN-Kaufrecht (1999 Berlin), Art. 37, no. 3. Art. 7.1.4 UP: UNIDROIT Comment to Art. 7.1.4, no. 1.

10. UNIDROIT Comment to Art. 7.1.4, no. 1; Honnold, no. 244 and 245.1; Rex J. Ahdar, Seller cure in the sale of goods, Lloyd's Maritime and Commercial Law Quarterly 1990, 370.

11. Alejandro M. Garro, The Gap-Filling Role of the UNIDROIT Principles in Internationational Sales Law: Some Comments on the Interplay between the Principles and the CISG, 69 Tulane Law Review (1995) 1149 (1185).

12. For a right to cure under Art. 37 CISG up to the end of the period of time, cf. Fritz Enderlein, Rights and Obligations of the Seller under the UN Convention on Contracts for the International Sale of Goods, in Petar Sarcevic / Paul Volken (eds.), International Sale of Goods, Dubrovnik Lectures (1996) 163; also available online at <http://cisgw3.law.pace.edu/cisg/biblio/enderlein1.html>; Honnold, no. 245; Schlechtriem/Schwenzer, Art. 37, no. 5; Heuzé (2000) 263. Different Rolf Herber/ Beate Czerwenka, Internationales Kaufrecht (1991) Art. 37, no. 3; cf. also Uta Gutknecht, Das Nacherfüllungsrecht des Verkäufers bei Kauf- und Werklieferungsverträgen. Rechtsvergleichende Untersuchung zum CISG, zum US-amerikanischen Uniform Commercial Code, zum deutschen Recht und zu dem Vorschlag der Kommission zur Überarbeitung des deutschen Schuldrechts (1997) 44 et seq.

13. For a wide interpretation, cf. Staudinger/Magnus, Art. 37, no. 13; H. Ercüment Erdem, La livraison des merchandises selon la convention de Vienne (1990) 161; for a corresponding "global concept of conformity", cf. Houtte/Wautelet (2001) 306. Cf. also Honnold, no. 245.1; Schlechtriem/Schwenzer, Art. 37, no. 6; Enderlein (1996) 164.

14. Heiko Lehmkuhl, Das Nacherfüllungsrecht des Verkäufers im UN-Kaufrecht (2001) 115 et seq. favors a solution under the right to cure (Arts. 37, 48 CISG).

15. For an analogy to Art. 52(2) CISG in case of "higher quality", cf. Staudinger/Magnus, Art. 48, no. 9 and Art. 52, no. 27 et seq; Herber/Czerwenka, Art. 39, no. 15; Amin Dawwas, Die Gültigkeit des Vertrages und das UN-Kaufrecht (1998) 83 et seq. Different Schlechtriem/Huber (1998) Art. 52, no. 11 (CISG not applicable).

16. Cf. Lehmkuhl (2001) 81 for Art. 48 CISG in light of Art. 7.1.4 UP. For general reflections on the right to cure for the buyer based on English Law, cf. Antonia Apps, The Right to cure defective performance, Lloyd's Maritime and Commercial Law Quarterly (1994) 525 (527); cf. also Enrico Frust & Co v. W.E. Fischer Ltd. (1960) 2 Lloyd's List Law Reports 340; Kronman & Co v. Steinberger (1922) 10 Lloyd's List Law Reports 39.

17. For a general definition of the standard, cf. Albert H. Kritzer, Resonableness, available online at <http://cisgw3.law.pace.edu/cisg/text/reason.html#over>.

18. UNIDROIT Comment to Art. 7.1.4, no. 4.

19. For the determination in the individual case, cf. Schlechtriem/Schwenzer, Art. 37, no. 13; Staudinger/Magnus, Art. 37, no. 16. Cf. also Bianca/Bonell, Art. 37, 2.5 ("Unreasonable is an inconvenience exceeding in an intolerable way the normal prejudice brought about to the buyer by the replacement or repair of the goods.").

20. Henry Gabriel, Practitioner's Guide to the CISG and UCC (1994) 113; Olga Gonzalez, Remedies Under the UN Convention for the International Sale of Goods, 2 International Tax & Business Lawyer (1984) 89; Enderlein/Maskow, Art. 37, no. 6. Different Neumayer/Ming, Convention de Vienne, Art. 37, 292.

21. Michael Bridge, The International Sale of Goods. Law and Practice (1999) no. 3.32 and 3.34.

22. Eric C. Schneider, The Seller's Right to Cure, in 7 Arizona Journal of International and Comparative Law (1989) 76 (under reference to sec. 2-508(1) UCC); William A. Hancock (ed.), Guide to the International Sale of Goods Convention, UCC/CISG Case Comparisons on the Right to Cure: A Comparison of CISG Articles 37 and 48 with UCC 2-508 (1999) 103.503, analysing E.L.E.S.C.O. v. Northern States Power Co. (Minnesota Court of Appeal, 1985) in light of Art. 37 CISG; cf. also James M. Klotz/ John A. Barrett, International Sales Agreements. An Annotated Drafting and Negotiating Guide (1998) 169 et seq.

23. Schlechtriem/Schwenzer, Art. 37, no. 13; Staudinger/Magnus, Art. 37, no. 16.

24. Dölle/Stumpf, Art. 37 ULIS, no. 5; Staudinger/Magnus, Art. 37, no. 12; Schlechtriem/Huber, Art. 48, no. 9 and Schlechtriem/Schwenzer , Art. 37, no. 11; Ahdar (1990) 375; Neumayer/Ming Convention de Vienne, Art. 37, p. 291. Cf. Hancock (1999) 103.502, analysing Allied Semi-Conductors International Limited v. Pulsar Components International, Inc (E.D.N.Y., 1993) in light of Art. 37 CISG.

25. Bianca/Bonell, Art. 37, 2.6 and 2.1; Enderlein/Maskow, Art. 37, no. 5.

26. UNIDROIT Comment to Art. 7.1.4, no. 3.

27. Schlechtriem/Schwenzer, Art. 37, no. 11. Cf. also Hancock (1999) 103.501, analysing Traynor v. Walters (M.D.Pa., 1972) in light of Art. 37 CISG.

28. Binaca/Bonell, Art. 37, 2.6. For corresponding comments on the "perfect tender rule" (sec. 2-601 UCC) cf. James J. White/ Robert S. Summers, Uniform Commercial Code (2000) 8-3b; William H. Lawrence, Cure under Article 2 of the Uniform Commercial Code: Practices and Prescriptions, 21 U.C.C. Law Journal (1988) 138 (167).

29. UNIDROIT Comment to Art. 7.1.4, no. 6.

30. Honnold, no. 247.

31. UNIDROIT Comment to Art. 7.1.4, no. 4.

32. Schlechtriem/Huber, Art. 48, no. 8. Cf. also the "shaken-faith" doctrine under the UCC: White/Summers (2000) 323; Ahdar (1990) 375 with reference to the leading case Zabriskie Chevrolet Inc. v. Alfred J. Smith (Superior Court of New Jersey, 1968). Lehmkuhl (2001) 44 et seq. applies the "shaken-faith" doctrine directly to the CISG.

33. Cf. Bridge (1999) no. 3.37.

34. Enderlein/Maskow, Art. 37, no. 3.

35. Enderlein (1996) 164; similar Staudinger/Magnus, Art. 37, no. 16.

36. Audit (1990) no. 132; Erdem (1990) 164.

37. Schlechtriem/Schwenzer, Art. 37, no. 10; Bianca/Bonell, Art. 37, 3.1 ("right to refuse the handing back"); Herber/Czerwenka, Art. 37, no. 7 (idea of Art. 86(1) CISG). Different Staudinger/Magnus, Art. 37, no. 17; Ahdar (1990) 378.

38. Cf. Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (25 April 1995) CLOUT abstract no. 141, available online at <http://cisgw3.law.pace.edu/cases/950425r1.html>.

39. Schlechtriem/Schwenzer, Art. 37, no. 15; Staudinger/Magnus, Art. 37, no. 19; Enderlein (1996) 163; Herbert Bernstein/ Joseph Lookofsky, Understanding the CISG in Europe (1997) 6-9; Heuzé (2000) 263. Different but without any reasons, Gonzalez (1984) 89.

40. Ahmad H. Al-Rushoud, The Right to Cure Defects in Goods and Documents, Lloyd's Maritime and Commercial Law Quarterly 1999, 458; Enderlein (1996) 165. Cf. also UNIDROIT Comment to Art. 7.1.4, no. 9.

41. UNIDROIT Comment to Art. 7.1.4, no. 10; cf. also M. Darin Hammond, When a Buyer Refuses the Seller's Right to Cure, 27 Idaho Law Review (1990/91) 562.

42. Bianca/Bonell, Art. 37, 3.2; Schlechtriem/Schwenzer, Art. 37, no, 17 (general principle underlying Art. 80 CISG); Heuzé (2000) 264 (also recurring on Art. 80 CISG); Neumayer/Ming, Art. 37, 294. Cf. also Hancock (1999) 103.503, analysing Uchitel v. F. R. Trippler & Co (New York Supreme Court, 1980) in light of Art. 37 CISG.

43. Secretariat Commentary, Art. 35 (draft counterpart of CISG Article 37), footnote 2, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-37.html>; Neumayer/ Ming, Art. 37, 292; Bridge (1999) no. 3.38. Cf. also Arbitration Court of the Chamber of Commerce and Industry of Budapest, Hungary (5 December 1995), CLOUT no. 164, available online at <http://cisgw3.law.pace.edu/cases/951205h1.html>.

44. Houtte/Wautelet (2001) 293 (302); Enderlein (1996) 163. Different Staudinger/Magnus, Art. 38, no. 21, 37; Herber/Czerwenka, Art. 38, no. 8; Gutknecht (1997) 46.


Official Comments on Articles of the UNIDROIT Principles cited

Comments reprinted with permission from UNIDROIT

 

ARTICLE 7.1.4

(Cure by non-performing party)

(1) The non-performing party may, at its own expense, cure any non-performance, provided that

(a) without undue delay, it gives notice indicating the proposed manner and timing of the cure;

(b) cure is appropriate in the circumstances;

(c) the aggrieved party has no legitimate interest in refusing cure; and

(d) cure is effected promptly.

(2) The right to cure is not precluded by notice of termination.

(3) Upon effective notice of cure, rights of the aggrieved party that are inconsistent with the non-performing party's performance are suspended until the time for cure has expired.

(4) The aggrieved party may withhold performance pending cure.

(5) Notwithstanding cure, the aggrieved party retains the right to claim damages for delay as well as for any harm caused or not prevented by the cure.

COMMENT

1. General principle

Para. (1) of this article provides that, if certain conditions are met, the non-performing party may cure by correcting the non-performance. In effect, by meeting these conditions, the non-performing party is able to extend the time for performance for a brief period beyond that stipulated in the contract, unless timely performance is required by the agreement or the circumstances. This article thus favours the preservation of the contract. It also reflects the policy of minimising economic waste, as incorporated in Art. 7.4.8 (Mitigation of harm), and the basic principle of good faith stated in Art. 1.7. This article is related to the cure provisions contained in Arts. 37 and 48 CISG and in some domestic laws governing contracts and sales. Even many of those legal systems that do not have a rule permitting cure would normally take a reasonable offer of cure into account in assessing damages.

2. Notice of cure

Cure may be effected only after the non-performing party gives notice of cure. The notice must be reasonable with regard to its timing and content as well as to the manner in which it is communicated. Notice of cure must be given without undue delay after the non-performing party learns of the non-performance. To the extent information is then available, the notice must indicate how cure is to be effected and when. Notice must also be communicated to the aggrieved party in a manner that is reasonable in the circumstances.

Notice of cure is considered to be "effective" when the requirements of para. (l)(a) - (c) have been met.

3. Appropriateness of cure

Whether cure is appropriate in the circumstances depends on whether it is reasonable, given the nature of the contract, to permit the non-performing party to make another attempt at performance. As indicated in para. (2), cure is not precluded merely because the failure to perform amounts to a fundamental non-performance. The factors to be considered in determining the appropriateness of cure include whether the proposed cure promises to be successful in resolving the problem and whether the necessary or probable delay in effecting cure would be unreasonable or would itself constitute a fundamental non-performance. However, the right to cure is not defeated by the fact that the aggrieved party subsequently changes its position. If the non-performing party gives effective notice of cure, the aggrieved party's right to change position is suspended. Nonetheless, the situation may be different if the aggrieved party has changed position before receiving notice of cure.

4. The aggrieved party's interest

The non-performing party may not cure if the aggrieved party can demonstrate a legitimate interest in refusing cure. However, if notice of cure is properly given and if cure is appropriate in the circumstances, it is presumed that the non-performing party should be permitted to cure. A legitimate interest may arise, for example, if it is likely that, when attempting cure, the non-performing party will cause damage to person or property. On the other hand, a legitimate interest is not present if, on the basis of the non-performance, the aggrieved party has simply decided that it does not wish to continue contractual relations.

Illustration

1. A agrees to construct a road on B's property. When the road is complete, B discovers that the road grade is steeper than the contract permits. B also discovers that, during construction, A's trucks caused damage to B's timber. A gives notice of cure to regrade the road. Even if cure would otherwise be appropriate in the circumstances, B's desire to prevent further damage to the timber may provide a legitimate interest for refusing cure.

5. Timing of cure

Cure must be effected promptly after notice of cure is given. Time is of the essence in the exercise of the right to cure. The non-performing party is not permitted to lock the aggrieved party into an extended waiting period. The lack of inconvenience on the part of the aggrieved party does not justify the non-performing party in delaying cure.

6. Proper forms of cure

Cure may include repair and replacement as well as any other activities that remedy the non-performance and give to the aggrieved party all that it is entitled to expect under the contract. Repairs constitute cure only when they leave no evidence of the prior non-performance and do not threaten the value or the quality of the product as a whole. It is left to the courts to determine the number of times the non-performing party may attempt a cure.

Illustration

2. A agrees to install an assembly line for high temperature enamel painting in B's factory. The motors are installed with insufficient lubricant and as a result "lock up" after a few hours of operation. A replaces the motors in a timely fashion, but refuses to examine and test the rest of the equipment to ensure that other parts of the line have not been damaged. A has not effectively cured.

7. Suspension of other remedies

When the non-performing party has given effective notice of cure, the aggrieved party may, in accordance with para. (4), withhold its own performance but, pursuant to para. (3), may not exercise any remedies inconsistent with the non-performing party's right to cure until it becomes clear that a timely and proper cure has not been or will not be effected. Inconsistent remedies include giving notice of termination, entering into replacement transactions and seeking damages or restitution.

8. Effect of a notice of termination

If the aggrieved party has rightfully terminated the contract pursuant to Arts. 7.3.1(1) and 7.3.2(1), the effects of termination (Art.7.3.5) are also suspended by an effective notice of cure. If the non-performance is cured, the notice of termination is inoperative. On the other hand, termination takes effect if the time for cure has expired and any fundamental non-performance has not been cured.

9. Right of aggrieved party to damages

Under para. (5) of this article, even a non-performing party who successfully cures is liable for any harm that, before cure, was occasioned by the non-performance, as well as for any additional harm caused by the cure itself or by the delay or for any harm which the cure does not prevent. The principle of full compensation for damage suffered, as provided in Art. 7.4.2, is fundamental to these Principles.

10.The aggrieved party's obligations

The decision to invoke this article rests on the non-performing party. Once the aggrieved party receives effective notice of cure, it must permit cure and, as provided in Art. 5.3, cooperate with the non-performing party. For example, the aggrieved party must permit any inspection that is reasonably necessary for the non-performing party to effect cure. If the aggrieved party refuses to permit cure when required to do so, any notice of termination is ineffective. Moreover, the aggrieved party may not seek remedies for any non-performance that could have been cured.

Illustration

3. A agrees to construct a shed on B's property in order to protect B's machinery from the weather. The roof is constructed in a defective manner. During a storm, water leaks into the shed and B's machinery is damaged. B gives notice of termination. A gives timely notice of cure. B does not wish to deal further with A and refuses the cure. If cure is appropriate in the circumstances and the other conditions for cure are met, B cannot invoke remedies for the faulty construction but can recover for damage caused to the machinery before the cure was to be effected. If cure is inappropriate in the circumstances, or if the proposed cure could not have solved the problem, the contract is terminated by B's notice.


Pace Law School Institute of International Commercial Law - Last updated January 5, 2007
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