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Use of the UNIDROIT Principles to help interpret CISG Articles 47 and 49


Match-up of CISG Article 47 with counterpart provisions of UNIDROIT Principles


UNIDROIT Principles
Article 7.1.5 - Additional Period for Performance

CISG
Article 47

(1) In a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance.

(2) During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages but may not resort to any other remedy. If it receives notice from the other party that the latter will not perform within that period, or if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that may be available under this Chapter.

(3) Where in a case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period. If the additional period allowed is not of reasonable length it shall be extended to a reasonable length. The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate.

(4) Paragraph (3) does not apply where the obligation which has not been performed is only a minor part of the contractual obligation of the non-performing party.

1. The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations.

2. Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance.

CISG Article 49

1. The buyer may declare the contract avoided: (. . .) (b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph 1 of article 47 or declares that he will not deliver within the period so fixed.

2. However, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so: (a) in respect of late delivery, within a reasonable time after he has become aware that delivery has been made; (b) in respect of any breach other than late delivery, within a reasonable time: (. . .) (ii) after the expiration of any additional period of time fixed by the buyer in accordance with paragraph (1) of Article 47, or after the seller has declared that he will perform his obligations within such an additional period (. . .)

[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

Commentary on Whether the UNIDROIT Principles
of International Commercial Contracts May Be
Used to Interpret or Supplement Articles 47 and 49 of the CISG

Robert Koch [*]
December 2004

I.   Introduction
II.  Avoidance Based on Non-Compliance with a Nachfrist
     1. Scope of Article 47 and 49(1)(b) CISG/Article 7.1.5 of the UNIDROIT Principles
          a. Restriction to Non-Delivery
 aa. Article 47 and 49(1)(b) CISG
 bb. Article 7.1.5 of the UNIDROIT Principles
          b. No Extension to Cases of Non-Conformity by Analogy
          c. Qualification of Aliud-Delivery
     2. Requirements for an Effective Nachfrist Notice
          a. Content of the Notice
          b. Determination of Nachfrist's reasonable length
          c. Consequences in Case of Unreasonable Length
 aa. Article 47(1) and 49(1)(b) CISG
 bb. Article 7.1.5(3) of the UNIDROIT Principles
     3. Effects of a Nachfrist
          a. Article 47(2) CISG
          b. Article 7.1.5(2) UNIDROIT Principles
     4. Seller's Non-Compliance with the Buyer's Nachfrist Ultimatum
          a. Article 49(1)(b) CISG
          b. Article 7.1.5(3) of the UNIDROIT Principles
III. Time Limitations on the Right of Avoidance
     1. Article 49(2) CISG
          a. Late Delivery
          b. Other Types of Breach
 aa. Article 49(2)(b)(i) CISG
 bb. Article 49(2)(b)(ii) CISG
 cc. Article 49(2)(b)(iii) CISG
     2. Article 7.3.2 of the UNIDROIT Principles
IV. Conclusions

I. Introduction

Article 49 CISG regulates a buyer's right of avoidance in case of breach of contract by the seller. While paragraph (1) lays down the conditions under which the buyer is entitled to declare the contract avoided, paragraph (2) provides for situations where he loses the remedy of avoidance. Due to the harsh consequences of this remedy for the seller,[1] the remedy is limited to two situations. Subparagraph (1)(a) gives the buyer the right to avoid the contract where seller's breach amounts to a fundamental breach of the contract in terms of Article 25 CISG. Subparagraph (1)(b) deals with late delivery and cases where the seller does not deliver the goods at all. Even if late delivery or non-delivery does not per se qualify for fundamental breach but only if timely delivery is of the essence of the contract,[2] the buyer can declare the contract avoided, where the seller fails to deliver the goods within an additional period ("Nachfrist") set by the buyer in accordance with Article 47(1) CISG.[3] The avoidance regime under the UNIDROIT Principles too distinguishes between termination based on fundamental non-performance (Article 7.3.1 of the UNIDROIT Principles), the UNIDROIT Principles counterpart to fundamental breach, and a termination in case of late delivery due to non-compliance with a Nachfrist (Article 7.1.5 of the UNIDROIT Principles). In the following, only the latter ground for avoidance/termination under both instruments will be compared since the concept of fundamental breach, including the relationship between seller's right to cure under Article 48 CISG and the avoidance remedy, has been discussed in detail in the present writer's remarks on the manner in which the UNIDROIT Principles may be used to interpret or supplement Article 25 CISG.[4]

II. Avoidance Based on Non-Compliance with a Nachfrist

    1. Scope of Article 47 and 49(1)(b) CISG/Article 7.1.5 of the UNIDROIT Principles

        a. Restriction to Non-Delivery

            aa. Article 47 and 49(1)(b) CISG

Article 47(1) CISG provides that

"[t]he buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations."

By its terms, Article 47(1) CISG is not limited to non-delivery but also applies to cases of non-conforming delivery, when the buyer notifies the seller of the defect and demands for repair within the Nachfrist pursuant to Articles 46(3) CISG. In context with Article 49(1)(b) CISG, however, it becomes clear that fixing of a Nachfrist is only of relevance in cases of non-delivery, and where the buyer wants to provide the basis for avoidance without proof that the delay constitutes a fundamental breach should the seller fail to comply with a Nachfrist. Non-delivery thus needs to be distinguished from the delivery of non-conforming goods. While delivery is not defined under the Convention, it follows from Articles 30-34 CISG that delivery consists in the act which the seller is obliged to perform in order to give the buyer possession of the goods.[5] Therefore, not only the seller's failure to hand over the goods in question but also his failure to deliver documents is to be considered as non-delivery if documents of title are concerned, such as bills of lading or warehouse receipts.[6] On the other hand, the delivery of a faulty Certificate of Origin or of Quality cannot be regarded as non-delivery. If they are faulty, to such documents the same principles apply which apply to the goods themselves: once the documents have been handed over to the buyer, they are "delivered" with the consequence that neither Article 47(1) nor Article 49(1)(b) CISG applies.[7]

            bb. Article 7.1.5 of the UNIDROIT Principles

Article 7.1.5(1) of the UNIDROIT Principles, the counterpart to Article 47(1) CISG, provides that

"[i]n a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance."

While Article 7.1.1 of the UNIDROIT Principles defines non-performance as a "failure by a party to perform any of its obligations under the contract, including defective performance or late performance", it follows from the reference to "a case of delay" in the opening phrase of sentence 1 of Article 7.1.5(3) of the UNIDROIT Principles [8] that the UNIDROIT Principles Nachfrist, too, is only of relevance in situations where the seller performs late or not at all.

        b. No Extension to Cases of Non-Conformity by Analogy

There has been some scholarly discussion of whether Article 49(1)(b) CISG could/should be applied by analogy to cases of lack of conformity of the goods where the seller did not fulfill buyer's request to repair the goods under Article 46(3) CISG within the Nachfrist.[9] It was argued that the buyer should have some recourse when the seller does not fulfill his obligation to repair the goods in question.[10] Leaving aside the question of whether such interpretative technique is admitted under the CISG, from the present writer's Civil Law perspective, in order to apply a rule of law by analogy there must a gap to be filled. Legislative history shows, however, that it was the conscious decision of the drafters not to broaden the scope of Article 49(1)(b) CISG to defective performance.[11] There is thus no room under the CISG for an analogy.[12] In such cases, the remedies of the buyer are limited to reduce the price or to utilize the non-conforming goods as well as possible and liquidate the resulting damages.

        c. Qualification of Aliud-Delivery

From a factual perspective, the delivery of an aliud (delivery of the wrong goods) is to be distinguished from the delivery of a peius (delivery of non-conforming goods). This distinction gives rise to the question of whether the aliud-delivery can be qualified as non-delivery. The Convention does not specifically address this problem. The very fact, however, that the relevant CISG provisions dealing with seller's obligations do not differentiate between the delivery of an aliud or peius allows the conclusion that both have to be treated equally. Consequently, scholars take the view that the delivery of an aliud cannot be qualified as non-delivery but as delivery of defective goods.[13] Recent German[14] and Austrian[15] case law confirm this view. According to the German Supreme Court, non-delivery could only be assumed in very blatant and obvious cases of divergence between the goods agreed upon and the goods delivered.[16] In such situations, however, in the present writer's view, no distinction would be necessary since they qualify for fundamental breach.[17] It is further to be noted that Article 49(1)(b) CSIG is applicable to cases of late delivery of substitute goods requested by the buyer under Article 46(2) CISG, because the substitute delivery is to be regarded as delivery under Articles 30-34 CISG.[18]

    2. Requirements for an Effective Nachfrist Notice

        a. Content of the Notice

The Nachfrist notice does not have to meet any formal requirements. While in theory, even an oral notice suffices,[19] from the practitioner's viewpoint a written notice is more than advisable since in case of a dispute it is up to the buyer to prove that seller has received the notice.[20] The notice must contain a specific demand for performance[21] and a fixed (given date) or determinable (e.g., four weeks from today) deadline when performance will be accepted at the latest.[22] A general demand by the buyer that the seller perform or that he perform "promptly" or the like is not a fixing of a period of time under Article 47(1) CISG.[23]

        b. Determination of Nachfrist's reasonable length

The Nachfrist must be "of reasonable length". In the absence of an express agreement between the parties, the determination of whether the Nachfrist is "reasonable" must be made in light of the circumstances of the case at hand. Special consideration may be given to the period of time originally set for delivery, the buyer's need for quick delivery of the goods, the nature of the goods to be delivered, and the event which caused the delay.[24]

        c. Consequences in Case of Unreasonable Length

aa. Article 47(1) and 49(1)(b) CISG

Court practice shows that the Nachfrist fixed by the buyer often is not of reasonable length, namely too short. Fixing of a period that is too short triggers the question about the consequences to the Nachfrist notice. The prevailing opinion among scholars is that Article 47(1) and 49(1)(b) CISG should be interpreted so that a Nachfrist of unreasonable length does not make the notice ineffective but initiates a period of reasonable length.[25] This view is confirmed by case law.[26] Some commentators take a different view. They argue that Article 47(1) and 49(1)(b) CISG (by reference to Article 47(1) CISG) require a period of reasonable length and conclude from that language that an unreasonable period - either too short or too long - makes the notice ineffective. Consequently, the buyer would not be entitled to declare the contract avoided after the Nachfrist had expired but would have to serve a new notice and to fix a new Nachfrist of reasonable length.[27] The latter view lacks of persuasion since it cannot be supported by the rules of interpretation under Article 7(1) CISG. Neither the language of Article 47(1) and 49(1)(b) CISG nor legislative history, their context within the CISG's remedial system or their objectives preclude the extension of an unreasonable Nachfrist.[28]

Moreover, this view does not seem to give appropriate account to the "observance of good faith in international trade" as an aid to statutory interpretation.[29] In this regard, it is to be noted that reasonableness is not only to be considered as general principle in terms of Article 7(2) CISG but also as concretization of the good faith requirement under Article 7(1) CISG.[30] In light of the negative consequences of an ineffective notice for both parties, a narrow interpretation of Article 47(1) and 49(1)(b) CISG seems unreasonable. An ineffective notice would not only impose on the buyer the extra burden of fixing a new Nachfrist but also allow him to resort to other remedies since the restriction of Article 47(2) CISG would not apply. Such a consequence is not in the interests of the seller because it would frustrate his efforts to effect delivery. His expenses incurred in attempting to perform would be wasted, and even if one qualified the declaration of avoidance upon the expiration of a too short Nachfrist as breach of contract,[31] not necessarily (fully) recoverable under Article 74 CISG.

bb. Article 7.1.5(3) of the UNIDROIT Principles

Sentence 2 of Article 7.1.5(3) of the UNIDROIT Principles expressly states that

"[i]f the additional period allowed is not of reasonable length it shall be extended to a reasonable length."

The UNIDROIT Principles, therefore, follow a slightly different approach than the CISG. Unlike Article 47(1) CISG, they do not require from the buyer to fix a Nachfrist of reasonable length, but they limit his right to exercise the avoidance remedy if the Nachfrist is of unreasonable length. Notwithstanding that difference, the approach taken by the UNIDROIT Principles confirms the present writer's view that only an extension to a reasonable length is in itself reasonable. Sentence 2 of Article 7.1.5(3) of the UNIDROIT Principles thus can be seen as exemplification of the principle of reasonableness in international trade. As pointed out before, reasonableness is also a general principle under the CISG. Even if one is not willing to follow the present writer's conclusion that the observance of good faith requires to interpret Article 47(1) and 49(1)(b) CISG in the sense of sentence 2 of Article 7.1.5(3) of the UNIDROIT Principles, such interpretation would therefore follow from Article 7(2) CISG. According to that provision "[q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which is based…".[32]

    3. Effects of a Nachfrist

        a. Article 47(2) CISG

The effects of a Nachfrist are described in Article 47(2) CISG. It provides that

"[u]nless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance."

According to Article 47(2) CISG, during the Nachfrist the buyer may not resort to any remedy for breach of contract (except for damages for delay in performance). As a consequence, even if the late delivery qualifies for fundamental breach under Article 49(1)(a) CISG, the buyer cannot avoid the contract if he fixed a Nachfrist.[33] The purpose of Article 47(2) CISG is to protect the seller, who is relying on the buyer's declaration when trying to cure the defect, possibly at considerable expense.[34] The only situation in which avoidance is possible before the expiry of the Nachfrist is the case where the seller declares an ultimate refusal to perform within the period fixed.[35]

        b. Article 7.1.5(2) UNIDROIT Principles

Article 7.1.5(2) UNIDROIT Principles states that

"[d]uring the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages but may not resort to any other remedy. If it receives notice from the other party that the latter will not perform within that period, or if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that may be available under this Chapter."

Except for the right to withhold performance, Article 7.1.5(2) UNIDROIT Principles is substantively identical to Article 47(2) CISG. The right to withhold performance of its own reciprocal obligations during the Nachfrist, however, follows under the Convention from Article 58 CISG. According to Article 58(1) CISG the buyer, in the absent of any stipulation to the contrary, is not obliged to pay the price until the seller places the goods at the buyer's disposal.[36] Moreover, according to Article 58(3) CISG, the buyer in general is not bound to pay the price until he has had an opportunity to examine the goods. If the buyer has agreed to pay before receiving in the goods but, prior to the time for payment, it becomes apparent that the seller will not deliver the goods, the buyer is entitled to suspend payment pursuant to Article 71(1) CISG.[37]

    4. Seller's Non-Compliance with the Buyer's Nachfrist Ultimatum

        a. Article 49(1)(b) CISG

Article 49(1)(b) CISG provides that if the seller fails to perform within the Nachfrist, the buyer may declare the contract avoided. Article 49(1)(b) CISG also provides an alternative condition under which the buyer may avoid the contract, which is a declaration or indication by the seller that he will ignore the Nachfrist notice. The buyer may already in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically avoid.[38]

        b. Article 7.1.5(3) of the UNIDROIT Principles

Sentence 1 of Article 7.1.5(3) of the UNIDROIT Principles is substantively identical with Article 49(1)(b) CISG.[39] Sentence 3 expressly states that "[t]he aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate."

III. Time Limitations on the Right of Avoidance

    1. Article 49(2) CISG

Article 49(2) CISG provides for certain circumstances, under which the buyer may lose his right to avoid the contract. Subparagraph (a) deals with late delivery, whereas subparagraph (b) applies to other cases of breach of contract.

        a. Late Delivery

In the case of late delivery, Article 49(2)(a) CISG states that

"[w]here the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so: (a) in respect of late delivery, within a reasonable time after he has become aware that delivery has been made […]"

It is to be noted that Article 49(2)(a) CISG is only applicable to late delivery (even if late delivery qualifies for fundamental breach [40]) but not to non-delivery. Before delivery has been effected the buyer may, without limits on time, avoid the contract. Once the goods have been delivered he must avoid the contract within a reasonable time. What is "reasonable" depends upon the circumstances. Has the buyer already obtained substitute goods from another source, in the present writer's view, he must declare the avoidance of the contract without unnecessary delay. If the goods are perishable or subject to price fluctuations (e.g., oil), notice must be given almost instantaneously. Where the buyer has not made a substitute purchase and must make enquiries as to whether he can obtain substitute performance from other sources the reasonable period of time will be longer.[41]

        b. Other Types of Breach

In cases of fundamental breach of any of the seller's obligations other than delivery, Article 49(2)(b) CISG provides that the buyer loses the right to avoid the contract if he fails to do so

"within a reasonable time
(i) after he knew or ought to have known of the breach;
(ii) after the expiration of any additional period of time fixed by the buyer in accordance with paragraph (1) of article 47, or after the seller has declared that he will not perform his obligations within such an additional period; or
(iii) after the expiration of any additional period of time indicated by the seller in accordance with paragraph (2) of article 48, or after the buyer has declared that he will not accept performance."

aa. Article 49(2)(b)(i) CISG

Generally, the buyer must declare the avoidance of the contract in accordance with Article 49(2)(b)(i) CISG, that is, within a reasonable time after he knew of the breach or could have been aware of it. In case of the delivery of non-conforming goods, the time limit begin to run at the moment when the buyer discovered or ought to have discovered the lack of conformity on examination of the goods in accordance with Article 38 CISG.[42] As with Article 49(2)(a) CISG, the length of "reasonable time" under Article 49(2)(b)(i) CISG in particular depends on the nature of the goods. In cases of delivery of non-conforming goods, however, the reasonable period of time, in general, will be longer than in case of late delivery since the determination of whether a given defect qualifies for fundamental breach requires extra time (e.g., for seeking legal advice).[43] For the latter reason, it is true that the time limits for notice of avoidance and notice of the defect under Article 39(1) CISG begin to run simultaneously, but only in exceptional cases coincide in length.[44]

bb. Article 49(2)(b)(ii) CISG

Article 49(2)(b)(ii) CISG deals with the situation where the buyer fixed a Nachfrist for remedying the defective performance in accordance with Article 47(1) CISG. The time for avoidance starts to run when the seller does not perform within the Nachfrist (including a second and any further Nachfrist [45]), or when the buyer has received seller's declaration that he will not perform within that period.

cc. Article 49(2)(b)(iii) CISG

Article 49(2)(b)(iii) CISG deals with the situation where an additional period of time has not been fixed by the buyer but has instead been proposed by the seller under Article 48(2) CISG. The time for avoidance starts to run when the seller has not remedied his defective performance within that period or when the buyer has declared that he will not accept performance.

    2. Article 7.3.2(2) of the UNIDROIT Principles

The counterpart to Article 49(2) CISG can be found in Article 7.3.2(2) of the UNIDROIT Principles. The latter states that

"[i]f performance has been offered late or otherwise does not conform to the contract the aggrieved party will lose its right to terminate the contract unless it gives notice to the other party within a reasonable time after it has or ought to have become aware of the offer or of the non-conforming performance."

Article 7.3.2 of the UNIDROIT Principles covers late delivery as well as defective performance. It is substantively identical to Article 49(2)(a) and Article 49(2)(b)(i) CISG.

IV. Conclusions

The requirements for avoidance for non-delivery or late delivery under the CISG and the UNIDROIT Principles do not differ in substance. With regard to the effect of a Nachfrist of unreasonable length, the solution provided in sentence 2 of Article 7.1.5(3) of the UNIDROIT Principles may be used to supplement Article 47(1) and 49(1)(b) CISG.

[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) 179-189.]


FOOTNOTES

* Professor in Commercial Law, Corporate Law and International Trade Law, Institute of Business Law, Nürtingen University (Germany).

1. See, e.g., Schlechtriem, Uniform Sales Law in the Decisions of the Bundesgerichtshof, in: 50 Years of the Bundesgerichtshof [Federal Supreme Court of Germany], A Celebration Anthology from the Academic Community [English translation of this text] (2001), at III.1, online available at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem3.html> (emphasizing that avoidance of the contract, with the necessary return shipment of the goods, regularly entails storage and transport costs in addition to the associated risks for the goods).

2. See relevant case law:

    -     Germany 20 February 2002 Landgericht [District Court] München, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/020220g1.html> (stating that "[t]he failure to meet a delivery deadline cannot, as a rule, be regarded as a fundamental breach of contract within the meaning of Art. 25 CISG; reasons for an exception such as the stipulation of a transaction for which time is of the essence were not put forward");
    -     Germany 24 April 1997 Oberlandesgericht [Appellate Court] Düsseldorf, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/970424g1.html> (stating that "[t]he particular importance of the date of delivery can result from the contract itself, as for example in the case of a transaction where time is of the essence, as well as from the circumstances, e.g., in the case of delivery of seasonal items").

3. This requirement is inspired by the German concept of Nachfrist although similar results are obtained by different conceptual means in other legal systems. See Treitel, "Remedies for Breach of Contract", in: Int´l Encyclopedia of Comparative Law , Chapter 16 (Tübingen, Mouton, The Hague, Paris: J.C.B. Mohr, 1976) § § 149-151 (discusses the Nachfrist provision in German law and similar provisions in other legal systems).

4. See Koch, Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Article 25 CISG, available online at <http://cisgw3.law.pace.edu/cisg/text/e-text-25.html>.

5. For a similar statement see Huber, U., in: Schlechtriem ed., Commentary on the U.N. Convention on the International Sale of Goods (Oxford: Clarendon Press: 1998), Art. 30 Comment 5; Plate, "The Buyer's Remedy of Avoidance under the CISG: Acceptable from a Common Law Perspective?", 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 57, at 67, available online at <http://cisgw3.law.pace.edu/cisg/biblio/plate.html>.

6. See Schlechtriem, Uniform Sales Law: the UN Convention on Contracts for the International Sale of Goods (Vienna: Manz 1986), at 77 (stating that "by analogy, the provision [Art. 49(1)(b) CISG) also applies to the failure to transfer documents of title"), available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem.html>; Schnyder/Straub, in: Honsell ed., Kommentar zum UN-Kaufrecht [CISG article by article commentary] (Berlin/Heidelberg/New York: Springer 1997), Art. 49, Comment 100; Jafarzadeh, Buyer's Right to Withhold Performance and Termination of Contract: A Comparative Study Under English Law, Vienna Convention on Contracts for the International Sale of Goods 1980, Iranian and Shi'ah Law, at Part Two, 2.2.2.2, available online at <http://cisgw3.law.pace.edu/cases/960403g1.html>.

7. For such a statement, see Germany 3 April 1996 Bundesgerichtshof [Federal Supreme Court); case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/960403g1.html>.

8. See infra II.4.b.

9. See Transcript of a Workshop on the Sales Convention: Leading CISG scholars discuss Contract Formation, Validity, Excuse for Hardship, Avoidance, Nachfrist, Contract Interpretation, Parol Evidence, Analogical Application, and much more, 18 Journal of Law & Commerce (1999) 191, at 201 et seq.; available at <http://cisgw3.law.pace.edu/cisg/biblio/workshop.html>.

10. See Yoshino, in: Transcript of a Workshop on the Sales Convention, supra note 9, at 213.

11. For an overview see Jafarzadeh, supra note 6, at Part Two, 2.2.2.

12. See Schlechtriem and Flechtner, in: Transcript of a Workshop on the Sales Convention, supra note 9, at 251 (the former stressing that there was a conscious decision by the drafters of the CISG to limit the availability of avoidance using the so-called Nachfrist procedure and emphasizing that in the predecessor Hague Sales Convention, the additional-period-of-time procedure for avoidance was allowed in cases of non-conformity).

13. See Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (3rd ed., The Hague: Kluwer 1999), at § 256.1; Karollus, Judicial Interpretation and Application of the CISG in Germany 1988-1994, Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 51-94, at Article 49, available online at <http://cisgw3.law.pace.edu/cisg/biblio/karollus.html>; Schlechtriem, supra note 1; Plate, supra note 5, at 67.

14. See relevant case law:

    -     Germany 3 April 1996 Bundesgerichtshof [Federal Supreme Court], case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/960403g1.html> (stating an aliud delivery, at least generally, does not constitute a non-delivery);
    -     Germany 12 March 2001 Oberlandesgericht [Appellate Court] Stuttgart, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/010312g1.html> (stating that the delivery of an aliud in any case does not constitute a non-delivery in the meaning of Art. 49(1)(b) CISG);
    -     Germany 11 April 2002 Amtsgericht [Lower Court] Viechtach, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/020411g1.html> (stating that Art. 35(1) CISG intentionally affords parity treatment to a defect and the delivery of an aliud in order to avoid difficulties in distinguishing between the two and that this aim would be foiled if one chose to e x tend the sphere of non-delivery, because the difficulty in distinguishing between aliud and defect would be shifted to the distinction between delivery and non-delivery).

For a different view, see

    -     Germany 10 February 1994 Oberlandesgericht [Appellate Court] Düsseldorf, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/940210g2.html> (stating that [i]nsofar as the [seller] delivered textiles in a color not ordered by the [buyer], [seller] effected the delivery of an aliud, which led to a partial non-performance).

15. See Austria 29 June 1999 Oberster Gerichtshof [Supreme Court], case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/990629a3.html>.

16. See Germany 3 April 1996 Bundesgerichtshof [Federal Supreme Court), case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/960403g1.html> (stating an aliud delivery does, at least generally, not constitute a non-delivery, leaving the question open for the case of an especially blatant deviation of the goods from the qualities required by the contract).

17. For a similar view see Schlechtriem, supra note 1 (emphasizing that "[t]he more extreme the deviation, the easier it will be to classify it as a fundamental breach of contract").

18. See Karollus, supra note 13. In contrast, see, Jafarzadeh, supra note 6 (overlooking that Art. 46(2) CISG is a request for substitute delivery).

19. See, e.g., Müller-Chen, in: Schlechtriem/Schwentzer eds., Kommentar zum Einheitlichen UN-Kaufrecht, (4th ed., München: Beck 2004), Art. 47, Comment 13.

20. See Plate, supra note 5, at 67.

21. This requirement has been stressed, e. g., by Honnold, supra note 13, at § 289.

22. See relevant case law:

    -     Germany 24 April 1997 Oberlandesgericht [Appellate Court] Düsseldorf, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/970424g1.html> (stating that a Nachfrist notice "must contain a precise request for performance that is combined with the fixing of a specific deadline");
    -     Germany 11 October 1995 Landgericht [District Court] Düsseldorf, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/951011g1.html> (stating that "[i]nsofar as the [buyer] has contended that [buyer] had reminded the [seller] several times about the delivery, it cannot be gathered from this general statement that the [buyer] has also fixed a deadline for the [seller]").

23. See Secretariat Commentary on Article 43(1) of the 1978 Draft [draft counterpart of Article 47(1)], Comment 7, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-47.html>.

24. See e.g., Will in: Bianca & Bonell eds., Commentary on the International Sales Law, The 1980 Vienna Sales Convention (Milan: Giuffrè 1987), Art. 47, Comment 2.1.3.2.

25. For this view see Plate, supra note 5, at 68. Müller-Chen, supra note 19, Art. 47, Comment 9; Herber/Czerwenka, Internationales Kaufrecht [International Sales Law, article by article commentary on the CISG - in German] (München: Beck 1991), Art. 47, Comment 4; Magnus, "UN-Kaufrecht "[UN-Sales Law, article-by-article commentary - in German], in: Staudinger, Julius von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen (13th ed., Berlin: Sellier/de Gruyter 1995), Article 47, Comment 20; Huber, P., in: Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 3, Chapter on CISG [article-by-article commentary - in German] (4th ed., München: Beck 2004), Art. 47, Comment 11.

26. See relevant case law:

    -     Germany 27 April 1999 Oberlandesgericht [Appellate Court] Naumburg, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/990427g1.html> (stating that the Court does not need to decide whether the additional period of time set by the buyer was too short, as in that instance a reasonable period of time would have started to run);
    -     Germany 24 May 1995 Oberlandesgericht [Appellate Court] Celle, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/950524g1.html> (stating that a possibly too short Nachfrist does not make the notice ineffective where the notice has merely extended a period of time);
    -     ICC Arbitration Case No. 7645 of March 1995, case presentation available online at <http://cisgw3.law.pace.edu/cases/957645i1.html> (stating in obiter dictum that "irrespectively of these circumstances and of the delay of shipment of five days [buyer] could not have declared avoided the contract based on the delay of shipment alone, because the shipment occurred within the hypothetical additional period of time for performance which [buyer] would have had to fix to [seller]") [emphasis added].

27. See, e.g ., Schnyder/Straub, in: Honsell ed., Kommentar zum UN-Kaufrecht [CISG commentary] (Berlin/Heidelberg/New York: Springer, 1997), Art. 47, Comment 24, and Art. 49 Comment 102).

28. For an overview of the CISG's rules on interpretation with further references to scholarly writings, see, e.g., Koch, "The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG)", Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999), at 189 et seq.; also available online at <http://cisgw3.law.pace.edu/cisg/biblio/koch.html>.

29. For a concise and thorough analysis of the meaning of "good faith" as an instrument of interpretation, see Felemegas, "The United Nations Convention on Contracts for the International Sale of Goods: Article 7 and Uniform Interpretation", in Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001) 115-265, at Chapter 3, 5(a), also available online at <http://cisgw3.law.pace.edu/cisg/biblio/felemegas.html#ch3>.

30. For the relationship between reasonableness and good faith, see Schlechtriem, supra note 6, at 39; Honnold, supra note 13, at § 95; for the relevance of the standard of reasonableness in determining good faith, see Kritzer's editorial remarks on "reasonableness", which include further citations and references, at <http://cisgw3.law.pace.edu/cisg/text/reason.html> (stating that "… regarding reasonableness as a fund a mental principle of the CISG and reading reasonableness into every article of the CISG, whether specifically mentioned in the article or not... is required by virtue of the good-faith and uniform-law mandate recited in Article 7(1) of the CISG."); Bonell, in: Bianca & Bonell eds., supra note 24, Art. 7, Comment 2.3.2.2 (sta t ing that "just as in interpreting specific terms and concepts adopted in the text of the Convention, also in specifying 'general principles' courts should, in accordance with the basic criteria of Article 7(1)...") and F e lemegas, supra note 29, at chapter 4, 5(a) (thoroughly and accurately analyzing Bonell's statement in that Bonell relies on the premise that, although there are principles, such as that of party autonomy and the dispatch rule, which can be directly applied, others, such as the principle of good faith and the concept of "re a sonableness", need further specification in order to offer a solution for a particular case).

31. See Plate, supra note 5, at 68-69; Müller-Chen, supra note 19, Art. 47, Comment 9 (both stating that if the buyer has fixed too short a period and accordingly declares the avoidance of the contract upon the expiration of that period, this constitutes a breach of contract itself).

32. Emphasis added.

33. See Plate, supra note 5, at 69; Müller-Chen, supra note 19, Article 47, Comment 14.

34. See Secretariat Commentary on Article 43(1) of the 1978 Draft [draft counterpart of Article 47(1)], supra note 22, Comment 9.

35. See Secretariat Commentary on Article 43(1) of the 1978 Draft [draft counterpart of Article 47(1)], supra note 22, Comment 9.

36. See relevant case law:

    -     Bundesgerichtshof [German Supreme Court), 3 April 1996, case presentation including English transl a tion available online at <http://cisgw3.law.pace.edu/cases/960403g1.html> (denying buyer's right of retention according to Art. 58(1) CISG, since the scope of this provision is limited to "so-called true transfer documents", besides this, also similar documents granting the buyer a right of disposition to the goods);
    -     ICC Arbitration Case No. 7645 of March 1995, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/957645i1.html> (stating with regard to Article 58(1) CISG that the purchaser is not bound to pay the purchase price as long as the seller has not performed or at least adequately tendered correct performance);

See also Jafarzadeh, supra note 6, at Part Two, 1.2.2.

37. See, e.g., Germany 6 April 2000 Landgericht [District Court] München, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/000406g1.html> (stating that buyer "had the right to stop payment of her cheque and to temporarily refuse the payment of the purchase price (Art. 71(1)(b) CISG), because [seller] did not deliver furniture in a material mix and combination in compliance with the terms set out in their sales contract), see also Kimbel, " Nachfrist Notice and Avoidance under the CISG", 18 Journal of Law and Commerce (1999) 301-331, at fn. 31 (stating failure to deliver satisfies the substantial part requirement under Article 71(1) CISG, and a party may suspend its performance during the Nachfrist period), available at <http://cisgw3.law.pace.edu/cisg/biblio/kimbel.html>; Jafarzadeh, supra note 6, at Part Two, 1.2.1.

38. See Müller-Chen, supra note 19, Art. 49, Comment 22; Plate, supra note 5, at 72; Herber/Czerwenka, supra note 25, Article 49, Comment 11; Magnus, supra note 25, Article 49, Comment 26; see also Austria 28 April 2000 Oberster Gerichtshof [Supreme Court], case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/000428a3.html> (stating that it is a question of interpretation of seller's Nachfrist notice [under Article 63(1) CISG] if the contract will be terminated upon expiration of the Nachfrist without further notice).

39. Sentence 1 of Article 7.1.5(3) of the UNIDROIT Principles reads as follows:

"Where in a case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period."

40. See Plate, supra note 5, at 69; Müller-Chen, supra note 19, Art. 49, Comment 27.

41. See Plate, supra note 5, at 69; Müller-Chen, supra note 19, Art. 49, Comment 29.

42. For a similar statement see Honnold, supra note 13, § 308; Will, supra note 24, Art. 49, Comment 2.2.2.1.

43. For a similar statement see Germany Oberlandesgericht [Appellate Court] Koblenz 31 January 1997, text of the decision [in German] available online at <http://www.cisg-online.ch/cisg/urteile/256.htm>; Plate, supra note 5, at 70; Huber, P., supra note 25, Art. 49, Comment 65.

44. For a similar statement see Will, supra note 24, Art. 49, Comment 2.2.2.1.

There is a controversial discussion among scholars whether or not seller's knowledge of a defect in the goods removes "reasonable time" limit on avoidance. For the different views see Honnold, supra note 13, § 308.1 (contra), and Will, supra note 24, Art. 49, Comment 2.2.2.2 (pro).

45. For a similar statement see Will, supra note 24, Art. 49, Comment 2.2.1.2.


Official Comments on Articles of the UNIDROIT Principles cited

Comments reprinted with permission from UNIDROIT

 

ARTICLE 7.1.5

(Additional period for performance)

(1) In a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance.

(2) During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages but may not resort to any other remedy. If it receives notice from the other party that the latter will not perform within that period, or if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that maybe available under this Chapter.

(3) Where in a case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period. If the additional period allowed is not of reasonable length it shall be extended to a reasonable length. The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate.

(4) Paragraph (3) does not apply where the obligation which has not been performed is only a minor part of the contractual obligation of the non-performing party.

COMMENT

This article deals with the situation where one party performs late and the other party is willing to give extra time for performance. It is inspired by the German concept of Nachfrist although similar results are obtained by different conceptual means in other legal systems.

1. Special characteristics of late performance

The article recognises that late performance is significantly different from other forms of defective performance. Late performance can never be remedied since once the date for performance has passed it will not occur again, but nevertheless in many cases the party who is entitled to performance will much prefer even a late performance to no performance at all. Secondly, at the moment when a party fails to perform on time it is often unclear how late performance will in fact be. The commercial interest of the party receiving performance may often therefore be that a reasonably speedy completion, although late, will be perfectly acceptable but that a long delayed completion will not. The procedure enables that party to give the performing party a second chance without prejudicing its other remedies.

2. Effects of granting extension of time for performance

The party who grants the extension of time cannot terminate or seek specific performance during the extension time. The right to recover damages arising from late performance is not affected.

The position at the end of the period of extension depends on whether the late performance was already fundamental at the time when the extension was granted. In this situation, if the contract is not completely performed during the extension, the right to terminate for fundamental non-performance simply springs into life again as soon as the extension period expires. On the other hand, if the late performance was not yet fundamental, termination would only be possible at the end of the period of extension if the extension was reasonable in length.

Illustrations

1. A agrees to construct a special bullet-proof body for B's Rolls Royce. The contract provides that the body is to be finished by 1 February so that the car can be shipped to B's country of residence. On 31 January the car is needed but not yet quite finished. A assures B that it will be able to complete the work if given another week and B agrees to a week's extension of time. If the car is finished within the week B must accept it but may recover any damages, for example extra shipping charges. If the work is not finished within the week, B may refuse to accept delivery and terminate the contract.

2. A, a company in country X, concludes a contract with B, a company in country Y, to build 100 km. of motorway in the latter country. The contract provides that the motorway will be finished within two years from the start of the work. After two years, A has in fact built 85 km. and it is clear that it will take at least three more months to finish the motorway. B gives A notice to complete within a further month. B is not entitled to terminate at the end of the month because the additional period of time is not reasonable; it shall be extended to the reasonable period of three months.


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