unidroit81 Go to Database Directory || Go to CISG Table of Contents

GUIDE TO THIS ARTICLE

Use of the UNIDROIT Principles to help interpret CISG Articles 81 and 82


Match-up of CISG Articles 81 and 82 with counterpart provisions of UNIDROIT Principles


UNIDROIT Principles
Article 7.3.5 - Effects of Termination in General

CISG
Article 81

(1) Termination of the contract releases both parties from their obligation to effect and to receive future performance.

(2) Termination does not preclude a claim for damages for non-performance.

(3) Termination does not affect any provision in the contract for the settlement of disputes or any other term of the contract which is to operate even after termination.

Article 7.3.6 - Restitution

(1) Termination of the contract releases both parties from their obligation to effect and to receive future performance.

(2) Termination does not preclude a claim for damages for non-performance.

(3) Termination does not affect any provision in the contract for the settlement of disputes or any other term of the contract which is to operate even after termination.

1. Avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes or any other provisions of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract.

2. A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must
do so concurrently.

CISG Article 82

1. The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them.

2. The preceding paragraph does not apply: (a) if the impossibility of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission; (b) if the goods or part of the goods have perished or deteriorated as a result of the examination provided for in article 38; or (c) if the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity.

[The UNIDROIT articles displayed above are to be read in conjunction with the Official Comments on them 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 on the manner in which the UNIDROIT Principles may be used to interpret or supplement CISG Articles 81 and 82

EDITOR:

[not yet available]


Official Comments on Articles of the UNIDROIT Principles cited

Comments reprinted with permission from UNIDROIT

 

ARTICLE 7.3.5

(Ejects of termination in general)

(1) Termination of the contract releases both parties from their obligation to effect and to receive future performance.

(2) Termination does not preclude a claim for damages for non-performance.

(3)Termination does not affect any provision in the contract for the settlement of disputes or any other term of the contract which is to operate even after termination.

COMMENT

1. Termination extinguishes future obligations

Para. (1) of this article states the general rule that termination has effects for the future in that it releases both parties from their duty to effect and to receive future performance.

2. Claim for damages not affected

The fact that, by virtue of termination, the contract is brought to an end, does not deprive the aggrieved party of its right to claim damages for non-performance in accordance with the rules laid down in section 4 of this Chapter (Arts. 7.4.1 . et seq.).

Illustration

1. A sells B specified production machinery. After B has begun to operate the machinery serious defects in it lead to a shutdown of B's assembly plant. B declares the contract terminated but may still claim damages (Art. 7.3.5(2)).

3. Contract provisions not affected by termination

Notwithstanding the general rule laid down in para. (1), there may be provisions in the contract which survive its termination. This is the case in particular with provisions relating to dispute settlement but there may be others which by their very nature are intended to operate even after termination.

Illustration

2. The facts are the same as in Illustration 1, the difference being that A discloses to B confidential information which is necessary for the production and which B agrees not to divulge for as long as it does not become public knowledge. The contract further contains a clause referring disputes to the courts of A's country. Even after termination of the contract by B, B remains under a duty not to divulge the confidential information, and any dispute relating to the contract and its effects are to be settled by the courts of A's country (Art. 7.3.5(3)).

ARTICLE 7.3.6

(Restitution)

(1) On termination of the contract either party may claim restitution of whatever it has supplied, provided that such party concurrently makes restitution of whatever it has received. If restitution in kind is not possible or appropriate allowance should be made in money whenever reasonable.

(2) However, if performance of the contract has extended over a period of time and the contract is divisible, such restitution can only be claimed for the period after termination has taken effect.

COMMENT

1. Entitlement of parties to restitution on termination

Para. (1) of this article provides for a right for each party to claim the return of whatever it has supplied under the contract provided that it concurrently makes restitution of whatever it has received.

Illustration

1. A sells a Renoir painting to B for US $2,000,000. B does not pay for the picture when it is delivered. A can claim back the picture.

If the non-performing party cannot make restitution it must make allowance in money for the value it has received. Thus, in the case described in Illustration 1, B has to make allowance for the value of the picture if B has sold and delivered it to a purchaser from whom it cannot be reclaimed.

The rule also applies when the aggrieved party has made a bad bargain. If in the case mentioned in Illustration 1 the true value of the picture is US $3,000,000, A may still require the return of the picture and, if it cannot be returned, claim the true value of US $3,000,000.

The present article also applies to the situation where the aggrieved party has supplied money in exchange for property, services etc. which it has not received or which are defective.

Illustration

2. The "Renoir" painting for which B has paid US $2,000,000 was not a Renoir but a copy. B can claim back the money and must return the copy to A.

Money returned for services or work which have not been performed or for property which has been rejected should be repaid to the party who paid for it and the same principle applies to custody of goods and to rent and leases of property.

2. Restitution not possible or appropriate

There are instances where instead of restitution in kind, allowance in money should be made. This is the case first of all where restitution in kind is not possible.

Illustration

3. A, who has contracted to excavate B's site, leaves it after only half the work has been performed. B, who then terminates the contract, will have to pay A a reasonable sum for the work done, measured by the value that work has for B.

Allowance in money is further envisaged by para. (1) of this article whenever restitution in kind would not be "appropriate". This is so in particular when the aggrieved party has received part of the performance and wants to retain that part.

The purpose of specifying that allowance should be made in money "whenever reasonable" is to make it clear that allowance should only be made if, and to the extent that, the performance received has conferred a benefit on the party claiming restitution.

Illustration

4. A, who has undertaken to decorate a bedroom suite for B, a furniture maker, abandons the work after having completed about half of the decorations. B can claim back the advance payments, but as the decorations made have no value for B, B does not have to pay for the work which has been done.

3. Contracts to be performed over a period of time

If the performance has extended over a period of time, restitution can, in accordance with para. (2) of this article, only be claimed in respect of the period after termination.

Illustration

5. A contracts to service B's computer hardware and software for a period of five years. After three years of regular service A is obliged by illness to discontinue the services and the contract is terminated. B, who has paid A for the fourth year, can claim return of the advance payment for that year but not the money paid for the three years of regular service.

This rule only applies if the contract is divisible.

Illustration

6. A undertakes to paint ten pictures depicting a historical event for B's festival hall. After delivering and having been paid for five paintings, A abandons the work. B can claim return of the advances paid to A and must return the five paintings to A.

4. Other rules applicable to restitution

Both the rule in Art. 7.1.3 on the right to withhold performance and Art. 7.2.2 on specific performance of non-monetary obligations apply with appropriate adaptations to a claim for the restitution of property. Thus the aggrieved party cannot claim the return of goods when this has become impossible or would put the non-performing party to unreasonable effort or expense (see Art. 7.2.2 (a) and (b)). In such cases the non-performing party must make allowance for the value of the property. See Art. 7.3.6(1).

5. Rights of third persons not affected

In common with other articles of the Principles, Art. 7.3.6 deals with the relationship between the parties and not with any rights which third persons may have acquired on the goods concerned. Whether, for instance, an obligee of the buyer, the buyer's receivers in bankruptcy, or a purchaser in good faith may oppose the restitution of goods sold is to be determined by the applicable national law.


Pace Law School Institute of International Commercial Law - Last updated November 26, 1997
Comments/Contributions

Go to Database Directory || Go to CISG Table of Contents || Go to Table of Contents of the UNIDROIT Principles