Article 63. Seller's Notice Fixing Additional Final Period for Performance

• Text of Article 63
• Cross-reference
• Outline of issues
• Descriptors
• Coded case annotations
  -  Guide to case codes
• UNCITRAL case digest
• Annotated comparatives
  -  UNIDROIT Principles
  -  PECL comparative

TEXT OF ARTICLE 63

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

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

OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

[See comparable provisions in article 47]

63A Additional final period for buyer's performance (art. 63(1))

63B Seller's remedies during period (art. 63(2))

CROSS-REFERENCE

For the parallel counterpart remedy for buyers (buyer's notice fixing additional final period for performance), go to the Annotated text of Article 47 CISG.

DESCRIPTORS

Nachfrist

CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

Germany 18 November 2008 Oberlandesgericht [Appellate Court] Brandenburg (Beer case) 63A [translation available]

Serbia 15 July 2008 Foreign Trade Court of Arbitration, Serbian Chamber of Commerce (Milk packaging equipment case) 63A [translation available]

Germany 14 February 2008 Oberlandesgericht [Appellate Court] Karlsruhe (Antique Jaguar sport car case) 63A [translation available]
 

China October 2007 CIETAC Arbitration Award [CISG 2007/03] (CD-R and DVD-R production line systems case) [translation available]
 

France 22 December 2006 Tribunal de grande instance [District Court] Strasbourg (Cathode ray tube case) 63A [translation available]

Switzerland 20 December 2006 Bundesgericht [Federal Supreme Court] (Machines case) [translation available]

Germany 19 October 2006 Oberlandesgericht [Appellate Court] München (Auto case) 63A [translation available]

Russia 7 March 2006 Arbitration Award 37/2005 [translation in process]
 

Slovak Republic 11 October 2005 Regional Court Bratislava (Fur case) [translation available]

Ukraine 19 September 2005 Arbitration Award (Iron ore case) 63A [translation available]

China 28 February 2005 CIETAC Arbitration Award [CISG 2005/06] (Wool case) 63A [translation available]

China 24 February 2005 CIETAC Arbitration Award [CISG 2005/08] (Second pork case) 63B [translation available]
 

Germany 10 December 2004 Landgericht [District Court] Bayreuth (Tiles case) [translation available]

Germany 22 July 2004 Oberlandesgericht [Appellate Court] Düsseldorf (Shoes case) [translation available]

Russia 28 June 2004 Arbitration Award 167/2003 [translation available]

Switzerland 29 April 2004 Handelsgericht [Commercial Court] St. Gallen 63A [translation available]

Italy 31 March 2004 Tribunale [District Court] Padova [translation available]

Italy 25 February 2004 Tribunale [District Court] Padova [translation available]
 

Russia 17 February 2003 Arbitration Award No. 168/2001 63A [translation available]

Denmark 1 November 2000 Højesterets [Supreme Court] (Gastrolux GmbH v. Pyrolux Production A/S)

Switzerland 11 February 2003 Handelsgericht [Commercial Court] St. Gallen 63A [translation available]

ICC 2003 International Court of Arbitration, Case 11849 (Fashion products case) 63A [English text]
 

Switzerland 12 December 2002 Kantonsgericht [District Court] Zug 63A [translation available]

Germany 20 September 2002 Landgericht [District Court] Göttingen [translation available]

China 4 February 2002 CIETAC Arbitration Award [CISG/2002/03] (Styrene monomer case) 63A [translation available]

Austria 24 January 2002 Oberlandesgericht [Appellate Court] Graz 63A [translation available]
 

China 22 March 2001 CIETAC Arbitration Award [CISG/2001/02] (Mung bean case) 63A [translation available]

Australia 12 October 2001 Supreme Court of Queensland, Court of Appeal (Downs Investments v. Perwaja Steel)
 

* Australia 17 November 2000 Supreme Court of Queensland (Downs Investments v. Perwaja Steel) 63A

* Austria 28 April 2000 Oberster Gerichtshof [Supreme Court] 63A [translation available]

China 1 February 2000 CIETAC Arbitration award [translation available]
 

Switzerland 11 June 1999 Handelsgericht [Commercial Court] Aargau [translation available]

Belgium 5 May 1999 Rechtbank van Koophandel [District Court] Hasselt

China 8 April 1999 CIETAC Arbitration Award [CISG/1999/21] (New Zealand raw wool case) [translation available]

China 1 March 1999 CIETAC Arbitration Award [CISG/1999/12] (Canned mandarin oranges case) 63A [translation available]

* France 4 February 1999 Cour d'appel [Appellate Court] Grenoble 63A [translation available]
 

Germany 29 December 1998 Hamburg Arbitration award [translation available]

* Italy 11 December 1998 Corte di Appello [Appellate Court] Milano 63A [translation available]
 

Austria 10 December 1997 Vienna Arbitration award, Case S-2/97 63A [translation available]

Switzerland 26 September 1997 Handelsgericht [Commercial Court] Aargau (Cutlery case) [translation available]

Austria 11 September 1997 Oberster Gerichtshof [Supreme Court] 63A [translation available]

* United States 21 July 1997 Federal District Court [New York] (Helen Kaminski v. Marketing Australian Products)

China 26 June 1997 CIETAC Arbitration Award [CISG/1997/17] (Monohydrate zinc sulphate case) [translation available]

* Switzerland 20 February 1997 Bezirksgericht [District Court] Saane 63A [translation available]
 

ICC September 1996 International Court of Arbitration, Case 8574 63A [English text]

Germany 21 June 1996 Hamburg Arbitration award [translation available]

Switzerland 31 May 1996 Zürich Chamber of Commerce, Arbitration ZHK 273/1995 [English text]
 

Russia 1 December 1995 Arbitration award 22/1995 63A [translation available]

Germany 21 September 1995 Landgericht [District Court] Kassel 63A [translation available]

Australia 28 April 1995 Federal District Court, Adelaide (Roder v. Rosedown) 63A

Germany 8 February 1995 Oberlandesgericht [Appellate Court] München [7 U 1720/94] 63A [translation available]
 

Germany 17 September 1993 Oberlandesgericht [Appellate Court] Koblenz [translation available]

* Germany 14 May 1993 Landgericht [District Court] Aachen 63A [translation available]

China 9 January 1993 CIETAC Arbitration Award [CISG/1993/03] (Linseed cake case) 63A [translation available]
 

ICC 1992 International Court of Arbitration, Case 7197

* ICC 1992 International Court of Arbitration, Case 7585 63A [English text]
 

Germany 18 January 1991 Landgericht [District Court] Bielefeld

UNCITRAL CASE DIGEST

A/CN.9/SER.C/DIGEST/CISG/63 [8 June 2004]. Reproduced with the permission of UNCITRAL.

DIGEST OF ARTICLE 63 CASE LAW

Usefulness of granting an additional period of time

1. In granting the seller the right to fix an additional period of time, article 63 is in fact giving him the same right as that granted to the buyer under article 47: the two provisions are conceived in the same fashion and worded in comparable terms. The principal purpose of article 63, as of article 47, is to clarify the situation that arises when the buyer does not perform its obligation to pay the price or take delivery of the goods in time: if the additional period of time elapses without result, the seller is entitled to declare the contract avoided even if the buyer has not been responsible for a fundamental breach of contract (art. 64(1)(b)). Article 63 is especially useful in cases where it is doubtful whether the buyer's delay in performance constitutes a fundamental breach of contract.[1]

2. The additional period of time has to be of reasonable length. Decisions about what a reasonable length is are rare.[2]

Illustrations of recourse to an additional period of time

3. In practice sellers tend to grant an additional period of time, thereby giving judges the opportunity to apply article 63. Illustrations in case law are connected with the grant of an additional period to pay the price,[3] to secure the issuance of a letter of credit [4] and to take delivery of the goods.[5]

FOOTNOTES

* The present text was prepared using the full text of the decisions cited in the Case Law on UNCITRAL Texts (CLOUT) abstracts and other citations listed in the footnotes. The abstracts are intended to serve only as summaries of the underlying decisions and may not reflect all the points made in the digest. Readers are advised to consult the full texts of the listed court and arbitral decisions rather than relying solely on the CLOUT abstracts.

[Citations to cisgw3 case presentations have been substituted [in brackets] for the case citations provided in the UNCITRAL Digest. This substitution has been made to facilitate online access to CLOUT abstracts, original texts of court and arbitral decisions, and full text English translations of these texts (available in most but not all cases). For citations UNCITRAL had used, go to <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.]

1. CLOUT case No. 243 [FRANCE Cour d'appel [Appellate Court] Grenoble 4 February 1999, available online at <http://cisgw3.law.pace.edu/cases/990204f1.html>].

2. [ITALY Corte di Appello [Appellate Court] Milano 11 December 1998, available online at <http://cisgw3.law.pace.edu/cases/981211i3.html>].

3. [AUSTRIA Oberster Gerichtshof [Supreme Court] 28 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000428a3.html>].

4. CLOUT case No. 261 [SWITZERLAND Berzirksgericht [District Court] Sanne 20 February 1997, available online at <http://cisgw3.law.pace.edu/cases/970220s1.html>]; CLOUT case No. 301 [ICC International Court of Arbitration, case No. 7585 of 1992, available online at <http://cisgw3.law.pace.edu/cases/927585i1.html>]; [AUSTRALIA Downs Investments v. Perwaja Steel [Supreme Court] Queensland 17 November 2000, available online at <http://cisgw3.law.pace.edu/cases/001117a2.html>]. However, in this case the court did not attach any particular consequences to the additional period of time fixed by the buyer since it found that a fundamental breach of contract had occurred; in this context, compare the granting of an additional period of time for the opening of a letter of credit required under a distribution agreement, CLOUT case No. 187 [UNITED STATES Helen Kaminski v. Marketing Australian Products Federal District Court [New York] 21 July 1997, available online at <http://cisgw3.law.pace.edu/cases/970721u1.html>].

5. CLOUT case No. 47 [GERMANY Landgericht [District Court] Aachen 14 May 1993; available at <http://cisgw3.law.pace.edu/cases/930514g1.html>].

COMPARATIVES
-  UNIDROIT Principles
-  PECL comparative

I. Introduction

Article 64 CISG deals with a seller's right of avoidance in case of breach of contract by the buyer. It is the counterpart provision to the buyer's right to avoid the contract under Article 49 CISG. While paragraph (1) lays down the conditions under which the seller is entitled to declare the contract avoided, paragraph (2) provides for situations where he loses the right to the remedy of avoidance. The avoidance remedy is limited to two situations. Subparagraph (1)(a) gives the seller the right to avoid the contract where buyer's breach amounts to a fundamental breach of the contract in terms of Article 25 CISG. Subparagraph (1)(b) deals with non-payment and/or non-taking delivery of the goods. Even if non-payment and/or non-taking delivery does not per se qualify for fundamental breach but only if timely payment and/or timely taking delivery is of the essence of the contract,[1] the seller can declare the contract avoided, where the buyer fails to pay and/or take delivery of the goods within an additional period ("Nachfrist") set by the seller in accordance with Article 63(1) CISG.[2] The avoidance regime under the UNIDROIT Principles similarly 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 payment or late taking delivery due to non-compliance with a Nachfrist (Article 7.1.5 of the UNIDROIT Principles). In the following, only the latter grounds for avoidance/termination under both instruments will be compared since the concept of fundamental breach 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.[3]

II. Avoidance Based on Non-Compliance with a Nachfrist

1. Scope of Articles 63 and 64(1)(b) CISG/Article 7.1.5 of the UNIDROIT Principles

a. Articles 63 and 64(1)(b) CISG

Article 63(1) CISG provides that:

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

By its terms, Article 63(1) CISG is not limited to non-payment and/or non-taking delivery, but is also applicable, e.g., to buyer's failure to specify goods in accordance with Art. 65 CISG [4] or his non-compliance with the obligation not to re-export the goods [5] when the seller notifies the buyer of the non-performance and demands performance within the Nachfrist. In context with Article 64(1)(b) CISG, however, it becomes clear that fixing of a Nachfrist is only of relevance in cases of non-payment and/or non taking delivery, and where the seller 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.[6]

aa. Non-Payment

The buyer's obligation to pay the price is set forth in Article 53 CISG. Article 54 CISG identifies enabling steps that are a part of this obligation. According to the latter provision, the buyer's obligation to pay includes all of the measures agreed upon in the contract "to enable payment to be made", such as registering the contract with a government office or with a bank, procuring the necessary foreign exchange, as well as applying for a letter of credit or a bank guarantee to facilitate the payment of the price.[7] Buyer's failure to take any of these steps within an additional period of time fixed by the seller in accordance with Article 63 would authorize the seller to declare the contract avoided under Article 64(1)(b) CISG.

bb. Non-Taking Delivery

The buyer's obligation to take delivery is subject to Article 60 CISG. First, he must perform all of the acts which could reasonably be expected of him in order to enable the seller to make delivery. For example, if under the contract of sale the buyer is to arrange for the carriage of the goods, he must make the necessary contracts of carriage so as to permit the seller to hand the goods over to the first carrier for transmission to the buyer.[8] Second, the buyer must take over the goods. The latter obligation is of importance where the contract calls for the seller to make delivery by placing the goods at the buyer's disposal at a particular place or at the seller's place of business.[9] In such case, the buyer must physically remove the goods from that place in order to fulfil his obligation to take delivery.[10]

b. Article 7.1.5 of the UNIDROIT Principles

Article 7.1.5(1) of the UNIDROIT Principles, the counterpart to Article 63(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 that the UNIDROIT Principles Nachfrist, too, is only of relevance in situations where the buyer performs late or not at all.

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,[11] from the practitioner's viewpoint a written notice is more than advisable since in case of a dispute it is up to the seller to prove that buyer has received the notice.[12] The notice must contain a specific demand for performance[13] and a fixed (given date) or determinable (e.g., "one week from today") deadline when performance will be accepted at the latest.[14] A general demand by the seller that the buyer performs or that he performs "promptly" or the like is not a fixing of a period of time under Article 63(1) CISG.[15]

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 payment, the seller's need for quick payment of the goods, currency and market price fluctuations, the nature of the goods, the event which caused the delay, and with regard to buyer's obligation to take delivery, seller's need to clear his warehouse.[16]

c. Consequences in Case of Unreasonable Length

aa. Articles 63(1) and 64(1)(b) CISG

Fixing of a Nachfrist of unreasonable length triggers the question regarding the consequences to the Nachfrist notice. The prevailing opinion among scholars is that Articles 63(1) and 64(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.[17] This view is confirmed by case law.[18] Some commentators take a different view. They argue that Articles 63(1) and 64(1)(b) CISG (by reference to Article 63(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 seller 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.[19] 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 63(1) and Article 64(1)(b) CISG nor their legislative history, their context within the CISG's remedial system or their objectives preclude the extension of an unreasonable Nachfrist.[20]

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.[21] In this regard, it is to be noted that the concept of "reasonableness" is not only to be considered as a general principle in terms of Article 7(2) CISG but also as concretization of the good faith requirement under Article 7(1) CISG.[22] In light of the negative consequences of an ineffective notice for both parties, a narrow interpretation of Articles 63(1) and 64(1)(b) CISG seems unreasonable. An ineffective notice would not only impose on the seller the extra burden of fixing a new Nachfrist but also allow him to resort to other remedies since the restriction of Article 63(2) CISG would not apply. Such a consequence is not in the interest of the buyer because it would frustrate his efforts to effect payment or taking 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,[23] 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 63(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 of 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 Articles 63(1) and 64(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...".[24]

3. Effects of a Nachfrist

a. Article 63(2) CISG

The effects of a Nachfrist are described in Article 63(2) CISG. It provides that:

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

According to Article 63(2) CISG, during the Nachfrist period the seller may not resort to any remedy for breach of contract (except for damages for delay in performance). As a consequence, even if the non/late payment and/or non/late taking delivery qualifies for fundamental breach under Article 64(1)(a) CISG, the seller cannot avoid the contract if he fixed a Nachfrist. [25] The purpose of Article 63(2) CISG is to protect the buyer, who is relying on the seller's declaration when trying to effect payment or to make necessary preparations for taking delivery, possibly at considerable expense.[26] The only situation in which avoidance is possible before the expiry of the Nachfrist is the case where the buyer declares an ultimate refusal to perform within the period fixed.[27] With regard to the latter situation, it is to be noted that the seller is entitled to declare the contract avoided without fixing of a Nachfrist when the buyer unequivocally declared his unwillingness to perform before seller has fixed a Nachfrist.[28]

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 63(2) CISG. The aggrieved party's 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) in sentence 2, and Article 58(2) of the CISG the seller, in the absence of any stipulation to the contrary, may make payment a condition for handing over the goods or documents.[29] If the seller has agreed to deliver the goods before being paid but, prior to the time of taking delivery, it becomes apparent that the buyer will not pay for the goods, the seller is entitled to prevent the handing over of the goods to the buyer pursuant to Article 71(2) CISG.[30]

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

a. Article 64(1)(b) CISG

Article 64(1)(b) CISG provides that if the buyer fails to perform within the Nachfrist, the seller may declare the contract avoided. Article 64(1)(b) CISG also provides an alternative condition under which the seller may avoid the contract, which is a declaration or indication by the buyer that he will not perform within the Nachfrist. The seller may already in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall be automatically avoided.[31]

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 64(1)(b) CISG.[32] 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 64(2) CISG

a. Scope of Article 64(2) CISG

Article 64(2) CISG sets time limits for seller's right to avoid the contract in cases where the buyer has paid the price. Subparagraph (a) deals with late performance, whereas subparagraph (b) applies to other cases of breach of contract. In the case of late performance, according to Article 64(2)(a) CISG:

"the seller loses the right to declare the contract avoided unless he does so [...] before the seller has become aware the performance has been rendered [...]"

It is to be noted that before the price has been fully paid the seller may, without limits on time, avoid the contract.[33]

b. Relationship between Article 64(2)(a) and Article 64(2)(b) CISG

There is ongoing debate regarding the scope of Article 64(2)(a) CISG and its relationship to Article 64(2)(b) CISG. By its terms, Article 64(2)(a) CISG is not limited to late payment or late taking delivery but it is also applicable to other obligations such as the obligation not to re-export the goods. Such reading, however, would leave Article 64(2)(b) CISG meaningless according to which, in cases other than late performance, the seller 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; or
(ii) after the expiration of any additional period of time fixed by [him] in accordance with paragraph (1) of article 63, or after the buyer has declared that he will not perform his obligations within such an additional period."

In the present writer's view, it follows from Article 64(2)(b)(ii) CISG that Article 64(2)(a) CISG applies only to late payment and late taking delivery (even if it qualifies for fundamental breach [34]).[35] With regard to these obligations of the buyer, Article 64(2)(a) CISG determines the latest point in time when the seller loses his right to avoidance. For example, if the buyer delays payment and the seller has fixed a Nachfrist which has expired, the seller loses the right to avoid the contract within a reasonable time or even earlier, if the buyer effects payment and informs the seller accordingly. The same is true with regard to delivery taken late by the buyer.[36] If the buyer is in delay in taking over the goods but has duly paid the price for them, the seller loses his right to avoid the contract if the buyer takes over the goods and informs the seller accordingly. The seller cannot argue that Article 64(2)(b)(ii) CISG allows a declaration of avoidance simply "within a reasonable time". Where the buyer is in breach of an obligation other than late performance and this breach amounts to a fundamental one, e.g., buyer's non-compliance with the obligation not to re-export the goods,[37] seller's right of avoidance is subject to Article 64(2)(b)(i) CISG.

c. Determination of Reasonable Time

What is "reasonable" in terms of Article 64(2)(b) CISG depends upon the circumstances of each case. Where avoidance is based on late payment and/or late taking delivery (Article 64(2)(b)(ii) CISG), the length of "reasonable time" in particular depends on the nature of the goods. If the goods are perishable or subject to price fluctuations (e.g., oil), notice must be given almost instantaneously. In other situations (Article 64(2)(b)(i) CISG), the reasonable period of time, in general, will be longer since the determination of whether a given breach qualifies for fundamental breach requires extra time (e.g., for seeking legal advice).

2. Article 7.3.2(2) of the UNIDROIT Principles

The counterpart to Article 64(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 payment as well as late taking delivery. It is substantively identical to Article 64(2)(a) and Article 64(2)(b)(i) CISG.

IV. Conclusions

The requirements for avoidance for non-payment or non taking delivery under the CISG and the UNIDROIT Principles do not differ in substance. With regard to the effect of a Nachfrist of unreasonable length, it makes sense to use the solution provided in sentence 2 of Article 7.1.5(3) of the UNIDROIT Principles to supplement Article 63(1) and 64(1)(b) CISG.

FOOTNOTES

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

1. See relevant case law:

-	France 4 February 1999 Cour d'appel [Appellate Court] Grenoble, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/990204f1.html> (stating that "in order to determine whether the breach of not taking delivery at the end of August is fundamental, [the court] must look at the context in which this timing was agreed to");
-	ICC Arbitration Case No. 7585 of 1992, CLOUT abstract no. 301, with editorial remarks by Kritzer, both available online at <http://cisgw3.law.pace.edu/cases/927585i1.html> (the tribunal stated that delay in payment [failure to obtain the required letter of credit] is not always in itself a fundamental breach);
-	Switzerland 12 December 2002 Kantongericht [District Court] Zug, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/021212s1.html> (finding for fundamental breach after the buyer failed to take delivery of the goods within an additional period fixed by the seller).

2. 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).

3. 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/biblio/koch1.html>.

4. See Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (3rd ed., The Hague: Kluwer 1999), at § 351.

5. See France 22 February 1995 Cour d'appel [Appellate Court] Grenoble (BRI Production "Bonaventure" v. Pan African Export), case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/950222f1.html> (the court did not have to decide the applicability of Article 64(1)(b) CISG since it considered the buyer's disregard of the seller's destination requirement as fundamental breach).

6. For the same conclusion, see Honnold, supra note 4, at § 351; Hager, in: Schlechtriem/Schwenzer eds., Kommentar zum Einheitlichen UN-Kaufrecht, (4th ed., München: Beck 2004), Art. 64, Comment 8; P. Huber, in: Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 3, Chapter on CISG [article-by-article commentary - in German] (4th ed., München: Beck 2004), Art. 63, Comment 2; Liu, "Remedies for Non-Performance: Perspectives from CISG, UNIDROIT & PECL", at 4.4.3.2, available online at <http://cisgw3.law.pace.edu/cisg/biblio/chengwei-47.html#04-3>.

7. See Secretariat Commentary on Article 50 of the 1978 Draft [draft counterpart of CISG Article 54], Comment 2, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-54.html>.

For a similar statement see case law:

-

Switzerland 20 February 1997 Bezirksgericht [District Court] Saane, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/970220s1.html>;

-

ICC Arbitration Case No. 7197 of 1992, CLOUT abstract no. 104, available online at <http://www.unilex.info/case.cfm?pid=1&do=case&id=37&step=Abstract> (stating that the obligation to pay the price under Article 54 CISG involves the obligation to take all measures and comply with all contractual and legal formalities required for payment of the price, such as the opening of a documentary credit or a bank guarantee or even the authorisation to transfer currency).

8. See Secretariat Commentary on Article 56 of the 1978 Draft [draft counterpart of CISG Article 60], Comment 2, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-60.html>.

9. See Article 31(b)(c) CISG.

10. See Secretariat Commentary, supra note 8. Comment 4.

11. See, e.g., P. Huber, supra note 6, Art. 63, Comment 7.

12. See e.g., Müller-Chen, in: Schlechtriem/Schwenzer eds., supra note 6, Art. 47 Comment 13 (regarding the counterpart provision on buyer's right to avoidance in Article 47(2) CISG).

13. This requirement has been stressed, e.g., by Honnold, supra note 4, at § 289 (regarding the counterpart provision on buyer's right to avoidance in Article 47(2) CISG).

14. See relevant case law (regarding the counterpart provision on buyer's right to avoidance in Article 47(2) CISG):

-

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");

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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]").

15. See, e.g., Knapp in: Bianca & Bonell eds., Commentary on the International Sales Law, The 1980 Vienna Sales Convention (Milan: Giuffrè 1987), Art. 63, Comment 2.10.

16. See, e.g., Hager, supra note 6, Art. 63, Comment 13; Enderlein/Maskow/Strohbach, Internationales Kaufrecht [article-by-article commentary - in German] (Berlin: Haufe 1991), Art. 63, comment 3.

17. For this view see Hager, supra note 6, Art. 63, Comment 3; 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), Art. 63, Comment 16; P. Huber, supra note 6, Art. 63, Comment 10.

18. See relevant case law on Article 64(1)(b):

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Germany 21 September 1995 Landgericht [District Court] Kassel, text of the decision [in German] available online at <http://www.cisg-online.ch/cisg/urteile/192.htm>(stating in obiter - with regard to Article 64(1)(b) - that even if the additional period of time set by the buyer was too short, a reasonable period of time would have started to run).

See relevant case law on Article 49(1)(b), the counterpart provision on buyer's right to avoidance:

19. See, e.g., Schnyder/Straub, in: Honsell ed., Kommentar zum UN-Kaufrecht [CISG commentary] (Berlin/Heidelberg/New York: Springer, 1997), Art. 63, Comment 19, and Art. 64, Comment 73.

20. 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>.

21. 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>.

22. For the relationship between reasonableness and good faith, see Schlechtriem, Uniform Sales Law: the UN Convention on Contracts for the International Sale of Goods (Vienna: Manz 1986), at 39; Honnold, supra note 4, 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 fundamental 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 15, Art. 7, Comment 2.3.2.2 (stating 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 Felemegas, supra note 21, at chapter 4, 5(a) (thoroughly and accurately analysing 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 "reasonableness", need further specification in order to offer a solution for a particular case).

23. See 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 68-69, available online at <http://cisgw3.law.pace.edu/cisg/biblio/plate.html>; Müller-Chen, supra note 6, Art. 47, Comment 9 (both stating with regard to the counterpart provision on buyer's right of fixing a Nachfrist 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).

24. Emphasis added.

25. For the same conclusion, see Hager, supra note 6, Art. 63, Comment 4.

26. See Secretariat Commentary on article 59 of the 1978 Draft [draft counterpart of CISG article 63], Comment 9, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-63.html>.

27. See Secretariat Commentary, supra note 26.

28. See Austria 10 December 1997 Vienna Arbitration proceeding S 2/97, case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/971210a3.html (stating that the seller does not have to fix an additional time for the buyer, if the buyer had declared that she did not want to perform the contract anymore since the fixing of an additional period would make no sense in such a case).
For the same conclusion with regard to the counterpart provisions on buyer’s right of avoidance see Huber, in: Schlechtriem ed., Commentary on the U.N. Convention on the International Sale of Goods (Clarendon Press: Oxford 1998), Art. 49 Comment 22; see also Treitel, supra note 2, § 150 (stating with regard to the Nachfrist requirement under German, Austrian and Swiss law that the main purpose of the requirement of a Nachfrist is to protect the promisor by giving him a further period of grace within which to perform, but that in case of the seller’s refusal, "no useful purpose would be served by the Nachfrist").

29. See, e.g., Schlechtriem, supra note 22, at 81 (stating that "as long as the contract does not obligate the seller to perform first, the seller can make payment a condition precedent to a transfer of the goods or documents controlling their disposition (Article 58(1) sentence 2 and 58(2)"), available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem.html.

30. For further details on stoppage of goods in transit see, e.g., Honnold, supra note 4, at 390.

31. See relevant case law:

-

Austria 28 April 2000 Oberster Gerichtshof [Austrian 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).

-

Switzerland 20 February 1997 Bezirksgericht [District Court] Saane case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/970220s1.html (stating that seller ex-pressly declared the avoidance of the sales contract by virtue of denying any further performance and acceptance under the sales contract, if the buyer did not meet the requirements as set out his final re-quest to the buyer to perform).

32. 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."

33. For a similar view see Secretariat Commentary on Article 60 of the 1978 Draft [draft counterpart of CISG Article 64], Comment 9, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-64.html; Enderlein/Maskow, International Sales Law [Commentary on the CISG] (New York: Oceana Publications 1992), Art. 64, Comment 6, also available online at <http://cisgw3.law.pace.edu/cisg/biblio/enderlein.html#art64-4a; Knapp, supra note 15, Art. 64, Comment 3.7.

34. See Hager, supra note 6, Art. 64, Comment 19.

35. For a different view see Magnus, supra note 17, Art. 64 Comment 41-43; P. Huber, supra note 6, Art. 64, Comment 23.

36. For a similar view see Hager, supra note 6, Art. 64, Comment 16; P. Huber, supra note 6, Art. 64 Comment 22; Neumayer/Ming, Convention de Vienne sur les contrats de vente internationale de marchandises. Com-mentaire [Commentary on the CISG - in French] (Lausanne: CEDIDAC, Vol. 24, 1993), Art. 64, Comment 7.

37. See case law cited supra note 5.

-- Scheme of CISG articles 63 and 64(1)(b)

CISG articles 63 and 64(1)(b) are part of the regime of remedies of breach of contract within the CISG, which in general can be divided into two categories. Firstly, remedies where the contract can be terminated or avoided such as fundamental breach and secondly, remedies where the contract is still in force such as damages.

Articles 63 and 64(1)(b) are provisions which span both remedies through the principle of "Nachfrist" which is the granting of additional time by the seller to the buyer to perform his obligation to pay the price or take delivery of the goods. The principle has been mainly borrowed from German domestic law as well as from the French procedure of mise en demeure. However there are significant differences between the German and French treatment of Nachfrist and the one accorded to in the CISG. This is a good point to remind ourselves of the mandate of article 7(1) where uniformity of application demands the autonomous interpretation of the CISG, that is, without relying on principles founded in domestic law. In other words, German and French treatment of Nachfrist and mise en demeure must be ignored and cannot be used to explain the principle within the CISG despite significant similarities in doctrine and jurisprudence.

Common law attorneys may find the concept of Nachfrist foreign as it has no direct common-law counterpart. In brief, the various Sale of Goods Acts do not rely on the principle of "fundamental breach". They rather approach avoidance of contract through the breach of contractual terms, that is, breach of a major term or a condition. For remedies of breach of contract by the seller, see the editorial remarks on article 47 and 49(1)(b). However, under the Sale of Goods Acts the remedies available for a breach of contract are not the same when the buyer is in breach. The seller cannot treat the breach as a cause to repudiate the contract. He can only recover the price of the goods as an ordinary debt. Where ownership has not passed and the buyer refuses to accept the goods, the buyer again can only sue for damages. The seller additionally has also a right against the goods namely lien and stoppage in transitu.

It is therefore of importance that common law attorneys have a good grasp of the concept of Nachfrist as in the CISG both buyer and seller can terminate the contract under the principle of fundamental breach. Nachfrist gives the buyer additional time to perform his part of the bargain. If he fails to do so the seller can avoid the contract in accordance with article 64(1)(b).

The purpose behind the flexible remedy of Nachfrist is that the CISG, as one of its principles, attempts to keep the contract afoot as long as there is a possibility to perform contractual obligations. This is in line with the attempt to overcome some of the problems of distance, expense and time in having an international contract terminated where, operating under another general principle of the CISG, namely good faith, remedial action could have been possible, resulting in a win-win situation.

-- Meaning and purpose of Nachfrist

The idea behind Nachfrist is that the seller should not be able to avoid the contract merely because the goods are not accepted or payment is not made on time. A contract can be avoided under the principle of fundamental breach as defined in CISG article 25. Under certain circumstances, such as when time is of the essence, late payment or refusal to accept goods may become a fundamental breach. Article 63 in itself is not a remedy, it clarifies a situation which otherwise would be unclear. If the seller is in a situation where there is uncertainty as to the existence of a reason to avoid the contract, he can overcome this by fixing a Nachfrist. As far as the buyer is concerned the additional period is a final period, however, the seller is not barred from fixing additional periods if he so wishes or if he wants to respond to the buyer's request for additional time.

The importance the CISG places in reading provisions within the context of the Convention is clearly demonstrated in this instance. Article 63 is closely linked to article 64(1). In article 64(1)(a) the seller is entitled to avoid the contract if the failure of the buyer amounts to a fundamental breach. Late payment or refusal to accept delivery unless time is of the essence does not amount to a fundamental breach. A seller may not be certain whether late payment may be construed as a fundamental breach but by fixing a Nachfrist this problem is overcome as the seller now can rely on article 64(1)(b) which takes away the uncertainty. The only uncertainty is the question of "reasonable length" of the additional period of time fixed by the seller. The seller will have assistance in such a definition through article 9 (customary practices) or article 6 (definition of additional time is a clause in the contract) as well as article 8 (previous conduct or statements made by parties). Most importantly, the seller will rely on the general principle of reasonableness as well as the principle of good faith, which is contained in article 7. An Austrian case can be used to illustrate the above. The seller declared the contract avoided after the buyer failed to pay the price without fixing a Nachfrist. The court found that there was no need to fix such a period as the buyer implicitly agreed to the avoidance of the contract.

While the additional period is in existence the seller can only rely on damages for late payment or refusal to accept delivery but most importantly, the buyer is protected while he is making efforts to remedy the situation.

-- Comparison of PECL article 8:106 with CISG articles 63 and 64(1)(b)

At first glance the two systems have a remarkable similarity but are also subtly different. The first point to note is that PECL also introduced Nachfrist as an important concept in contractual relations. The mere inclusion indicates that the CISG was correct in its assessment that the concept of Nachfrist is important in an international contractual relationship. The second point is a confirmation of the foresight of the CISG because PECL did not introduce major changes but as indicated above only subtle differences. From this we can deduce that the concept of Nachfrist as introduced by the CISG was correct and is of importance in international sales.

The CISG as well as PECL recognize the difference between non-performance which amounts to a fundamental breach and a non-performance which is not serious enough to constitute a fundamental breach. PECL like the CISG allows the seller who is not sure whether non-performance amounts to a fundamental breach the ability to avoid the contract by allowing him to set an additional period of time to perform the contract. In SARL Ego Fruits v. Ste La Verja Begastri the court held that the buyer would not have understood that a delay of a few days in taking delivery would amount to a fundamental breach. As the seller did not allow for a Nachfrist, his unilateral avoidance was a wrongful termination of the contract.

Both the CISG and PECL recognize that two conditions must be met. Firstly, the period must be fixed. Secondly, the period so fixed must be reasonable. What amounts to a reasonable time is a question of fact and is left to the courts to decide. An ICC Arbitration Case provides an interesting example of how a period can be fixed. A. Kritzer in his commentary pointed out that commentators have a conflicting view as to the fixing of additional period. The debate is whether it must be done "in such a way as to make it clear to the buyer that the additional period sets a fixed and final limit on the date for performance or whether no such unequivocal warning is necessary." The ICC tribunal declared that the period between the buyer's default and the declaration of avoidance after several months by the seller was "an additional period" pursuant to article 63. In effect, an implied Nachfrist can be construed in some circumstances as being sufficient to satisfy the requirements of article 63.

In any event, good faith which is a principle in both the CISG and PECL, will also influence the court in its decision. However, PECL in its commentary makes it clear that if less than reasonable time was fixed, the aggrieved party "need not serve a second notice; it may terminate after a reasonable time has elapsed from the date of the notice." As far as the CISG is concerned, no jurisprudence has solved this issue, however, it can be argued that a court would invoke good faith and could set a date which fulfills the requirements of the principle of reasonableness.

One area of uncertainty within the CISG has been removed in PECL by clearly stating that the buyer may withhold his own performance while an additional period of time is fixed. Another point well worth noting is the different terms used. In the CISG it is the seller who may fix a time whereas in PECL it is the aggrieved party, which can be buyer or seller depending on the circumstances. Such a variance makes sense as unlike the CISG, PECL also covers contracts of service. Furthermore PECL has managed to cover in one article substance which in the CISG is contained in articles 47, 49(1)(b), 63 and 64(1)(b). In the CISG the former articles cover the remedies open to the buyer and are reviewed in this database in the discussions on that subject.

-- Conclusion

The principle of Nachfrist must be viewed in two ways, firstly as a mandate within the CISG but secondly also as another example of the "sea change in the landscape of international trade." Not only is "additional period of time" contained in basically the same form in PECL but also in the UNIDROIT principles. It is the domestic systems of law and specifically the common law, which is out of step with international developments. The reality is that there is a drastic change in the market place for legal services. PECL in a subtle way will be shaping English common law practices and it will not be too far in the future when English courts need to deal with concepts such as Nachfrist. The fact that the concept of Nachfrist has been included in various international laws indicates that certainty now has a brother, namely flexibility.

Globalization requires that legal rules must be flexible in order to be applicable to changing circumstances and avoid costly disputes in circumstances, which could have been solved by an instrument like Nachfrist. Common law attorneys must become aware of the existence and basic content of different concepts contained in uniform international law, the CISG, an in international "Restatements" of the law, the PECL and UNIDROIT Principles, because they will be shaping the rules for contractual dealings in the future.

FOOTNOTE

* A match-up of CISG Articles 63 and 64(1)(b) and PECL Article 8:106 [Notice fixing additional period for performance] is available at <http://cisgw3.law.pace.edu/cisg/text/peclcomp63.html>. The match-up is accompanied by: