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Article 76. Avoidance: Damages Based on Current Price

TEXT OF ARTICLE 76

(1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.

(2) For the purposes of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods.


OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

76A Avoidance without purchase or resale under article 75

76B Damages recoverable based on current price

76B1 At time of avoidance (art. 76(1))

76B11 Avoidance after taking over goods:

76B111 Current price at time of taking over the goods

76C Reference-point as to place (art. 76(2))

76C1 Place where delivery should have been made (see art. 31)

76C2 Other place as reasonable substitute

76C21 Allowance for differences in cost of transportation

76D Other damages under article 74; loss of profit

76E Other problems


DESCRIPTORS

Avoidance ; Damages


CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

UNCITRAL has identified relevant cases in Digests containing case annotations for each article of the CISG. UNCITRAL cites 20 cases in its Digest of Art. 76 case law:

Australia      1           Germany      7           Russian Federation        2          
Austria       3 ICC 3 Switzerland   1
China      3 TOTAL:   20

Presented below is a composite list of Art. 76 cases reporting UNCITRAL Digest cases and other Art. 76 cases. All cases are listed in chronological sequence, commencing with the most recent. Asterisks identify the UNCITRAL Digest cases, commencing with the 28 April 2000 citation reported below. Cases are coded to the UNCITRAL Thesaurus.

English texts and full-text English translations of cases are provided as indicated. In most instances researchers can also access UNCITRAL abstracts and link to Unilex abstracts and full-text original-language case texts sourced from Internet websites and other data, including commentaries by scholars to the extent available.

For a case annotated analysis of issues associated with Calculation of Damages under CISG Articles 75 and 76, go to CISG-Advisory Council Opinion No. 8, dated 15 November 2008. Rapporteur: Professor John Y. Gotanda. Opinion unanimously adopted by the CISG-AC: Eric E. Bergsten (Chair); Michael Joachim Bonell, Michael G. Bridge, Alejandro M. Garro, Roy M. Goode, John Y. Gotanda, Sergei N. Lebedev, Pilar Perales Viscasillas, Jan Ramberg, Ingeborg Schwenzer, Hiroo Sono, Claude Witz (Members); Sieg Eiselen (Secretary)

There are scholars who believe that there are circumstances in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement this Article of the CISG. See match-up of this Article with counterpart provisions of the Principles and commentary on this subject. To the extent this reasoning fits, cases on the counterpart provisions of the UNIDROIT Principles may be relevant. To the extent available, such cases may be found on the Unilex website.
 

United States 29 May 2009 Federal District Court [New York] (Doolim Corp. v. R Doll LLC et al.) 76B
 

United States 1 July 2008 U.S. District Court [Minnesota] (Dingxi Longhai Dairy, Ltd v. Becwood Technology Group, L.L.C.)

United States 16 April 2008 U.S. District Court [New York] (Macromex Srl. v. Globex International, Inc.)

Germany 14 February 2008 Oberlandesgericht [Appellate Court] Karlsruhe (Antique Jaguar sport car case) 76B [translation available]
 

Serbia 1 October 2007 Foreign Trade Court of Arbitration, Serbian Chamber of Commerce (Timber case) 76A ; 76B [translation available]

China October 2007 CIETAC Arbitration Award [CISG 2007/03] (CD-R and DVD-R production line systems case) 76B [translation available]
 

China May 2006 CIETAC Arbitration Award [CISG 2006/06] (Canned oranges case) 76B [translation available]
 

China 15 September 2005 CIETAC Arbitration Award [CISG 2005/15] (Wool and Wooltop case) 76B [translation available]

China 22 August 2005 CIETAC Arbitration Award [CISG 2005/13] (Valve case) [translation available]

Mexico 26 May 2005 Distrito Federal. Acuerdo del Quinto Tribunal Colegiado en Materia Civil del Primer Circuito (Agrofrut Rengo, S.A. v. Levadura Azteca, S.A. de C.V) [Amparo proceeding No. 292/2005 (2915/2005). Appellant: Agrofrut Rengo]

China 25 May 2005 CIETAC Arbitration Award [CISG 2005/09] (Iron ore case) 76B [translation available]

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

China 29 September 2004 CIETAC Arbitration Award [CISG 2004/05] (India rapeseed meal case) 76B [translation available]

Germany 15 September 2004 Oberlandesgericht [Appellate Court] München 76B [translation available]

China September 2004 CIETAC Arbitration Award [CISG 2004/07] (Steel products case) 76B [English text]

Austria 29 July 2004 Oberlandesgericht [Appellate Court] Graz (Construction equipment case) [translation available]

Ukraine 15 April 2004 Tribunal of International Commercial Arbitration, Ukrainian Chamber of Commerce & Trade [translation available]

Estonia 19 February 2004 Ringkonnakohus [Appellate Court] Tallinn 76B [translation available]
 

Spain 5 November 2003 Audiencia Provincial [Appellate Court] Vizcaya

China 26 June 2003 CIETAC Arbitration Award [CISG 2003/10] (Alumina case) 76B [translation available]

Hungary 2003 Szegedi Itelotabla [Appellate Court] (Spray pump case) [translation available]
 

Switzerland 5 November 2002 Handelsgericht [Commercial Court] des Kantons Aargau [translation available]

Austria 11 July 2002 Oberster Gerichtshof [Supreme Court]

Germany 1 July 2002 Oberlandesgericht [Appellate Court] München [translation available]

Switzerland 25 February 2002 Kantonsgericht [District Court] Schaffhausen [translation available]

Germany 20 February 2002 Landgericht [District Court] München 76A [translation available]

Austria 24 January 2002 Oberlandesgericht [Appellate Court] Graz 76B [translation available]
 

Switzerland 15 September 2000 Bundesgericht [Federal Supreme Court] [4C.105/2000] [translation available]

Russia 6 June 2000 Arbitration award 406/1998 76B [translation available]

* Austria 28 April 2000 Oberster Gerichtshof [Supreme Court] 76D [translation available]

Germany 6 April 2000 Landgericht [District Court] München 76B [translation available]

China 11 February 2000 CIETAC Arbitration award 76B ; 76C [translation available]

China 1 February 2000 CIETAC Arbitration award 76A ; 76B ; 76C ; 76D [translation available]

* Russia 24 January 2000 Arbitration award 54/1999 [translation available]
 

* Germany 26 November 1999 Oberlandesgericht [Appellate Court] Hamburg [translation available]

Denmark 10 November 1999 Veste Landsret [Western High Court]

* Germany 28 October 1999 Oberlandesgericht [Appellate Court] Braunschweig [translation available]

* Switzerland 21 October 1999 Kantonsgericht [District Court] Zug 76B1 [translation available]

ICC August 1999 International Court of Arbitration, Case 9083 [translation available]

ICC July 1999 International Court of Arbitration, Case 9448 [English text]

China 30 June 1999 CIETAC Arbitration Award [CISG/1999/30] (Peppermint oil case) 76B [translation available]

China June 1999 PRC Arbitration award 76B [translation available]

China 28 May 1999 CIETAC Arbitration award 76B [translation available]

China 12 April 1999 CIETAC Arbitration Award [CISG/1999/22] (Bud rice dregs case) [translation available]

China 8 April 1999 CIETAC Arbitration Award [CISG/1999/21] (New Zealand raw wool case) 76A [translation available]

China 1 March 1999 CIETAC Arbitration Award [CISG/1999/12] (Canned mandarin oranges case) 76B [translation available]

China 6 January 1999 CIETAC Arbitration Award [CISG/1999/04] (Australian raw wool case) 76A [translation available]
 

China 25 December 1998 CIETAC Arbitration Award [CISG/1998/10] (Basic pig iron case) 76B ; 76C [translation available]

Russia 22 October 1998 Arbitration award 196/1997

* Germany 2 September 1998 Oberlandesgericht [Appellate Court] Celle 76B [translation available]

Russia 5 March 1998 Arbitration award 160/1997 76B [translation available]

* Austria 12 February 1998 Oberster Gerichtshof [Supreme Court] [translation available]
 

China 30 November 1997 CIETAC Arbitration Award [CISG/1997/33] (Canned oranges case) 76B ; 76C [translation available]

Switzerland 28 October 1997 Tribunal Cantonal [Appellate Court] Valais

China 18 August 1997 CIETAC Arbitration Award [CISG/1997/26] (Vitamin C case) 76B ; 76C [translation available]

China 5 August 1997 CIETAC Arbitration Award [CISG/1997/25] (Cold-rolled coils case) 76B [translation available]

Germany 9 July 1997 Oberlandesgericht [Appellate Court] München [7 U 2070/97] [translation available]

* Germany 4 July 1997 Oberlandesgericht [Appellate Court] Hamburg 76B1 [translation available]

Netherlands 22 May 1997 Arrondissementsrechtbank [District Court] Rotterdam

China 24 April 1997 CIETAC Arbitration Award [CISG/1997/09] (Oxidized aluminum case) 76B [translation available]

China 4 April 1997 CIETAC Arbitration Award [CISG/1997/04] (Black melon seeds case) 76B [translation available]

Germany 31 January 1997 Oberlandesgericht [Appellate Court] Koblenz [translation available]

ICC January 1997 International Court of Arbitration, Case 8786 [English text]

ICC 1997 International Court of Arbitration, Case 8782 [English text]
 

Belgium 16 December 1996 Rechtbank van Koophandel [District Court] Kortrijk 76B

* ICC November 1996 International Court of Arbitration, Case 8502 76B ; 76C1 [English text]

* ICC October 1996 International Court of Arbitration, Case 8740 76A [English text]

China 4 September 1996 CIETAC Arbitration Award [CISG/1996/41] (Natural rubber case) 76A [translation available]

* ICC September 1996 International Court of Arbitration, Case 8574 76A [English text]

China 30 July 1996 CIETAC Arbitration Award [CISG/1996/32] (Molybdenum iron case) 76B [translation available]

China 30 July 1996 CIETAC Arbitration Award [CISG/1996/33] (Ferro-molybdenum alloy case) 76B [translation available]

Netherlands 15 May 1996 Arrondissementsrechtbank [District Court] Amsterdam

China 2 May 1996 CIETAC Arbitration Award [CISG/1996/21] ("FeMo" alloy case) 76B [translation available]

China 29 March 1996 CIETAC Arbitration Award [CISG/1996/15] (Caffeine case) 76B1 [translation available]

* Germany 21 March 1996 Hamburg Arbitration award [translation available]

China 14 March 1996 CIETAC Arbitration Award [CISG/1996/14] (Dried sweet potatoes case) 76B [translation available]

Russia 12 March 1996 Arbitration award 218/1995

* Austria 6 February 1996 Oberster Gerichtshof [Supreme Court] [translation available]

China 5 February 1996 CIETAC Arbitration Award [CISG/1996/06] (Peanut case) 76B [translation available]

China 30 January 1996 CIETAC Arbitration Award [CISG/1996/05] (Compound fertilizer case) 76B [translation available]

China 12 January 1996 CIETAC Arbitration Award [CISG/1996/03] (Scrap copper case) 76B [translation available]
 

Russia 19 December 1995 Arbitration award 133/1994 76B [translation available]

Austria 9 November 1995 Oberlandesgericht [Appellate Court] Graz 76B [translation available]

Egypt 3 October 1995 Arbitration award (Cairo Chamber of Commerce & Industry) [translation available]

Austria 28 June 1995 Landesgericht [District Court] Graz

Austria 23 May 1995 Oberlandesgericht [Appellate Court] Linz

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

China 23 April 1995 CIETAC Arbitration Award [CISG/1995/07] (Australian raw wool case) 76B [translation available]

Russia 3 April 1995 Arbitration Court of Moscow City 76B1 [translation available]

* Russia 16 March 1995 Arbitration award 155/1994 [translation available]

Russia 3 March 1995 Arbitration award 304/1993 [commentary available]

Russia 3 March 1995 Arbitration award 309/1993
 

China 25 October 1994 CIETAC Arbitration Award [CISG/1994/13] (High tensile steel bars case) [translation available]

China 19 September 1994 CIETAC Arbitration Award [CISG/1994/11] (Steel case) 76B [translation available]

China 20 February 1994 CIETAC Arbitration Award [CISG/1994/03] (Cysteine case) 76A1 [translation available]

* Germany 14 January 1994 Oberlandesgericht [Appellate Court] Düsseldorf 76B

ICC 1994 International Court of Arbitration, Case 7565 [English text]
 

China 26 October 1993 CIETAC Arbitration Award [CISG/1993/12] (Frozen beef case) 76A [translation available]

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

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

Germany 28 April 1993 Landgericht [District Court] Krefeld 76B

* China 1 April 1993 CIETAC Arbitration award 76B [translation available]

China 20 January 1993 CIETAC Arbitration Award [CISG/1993/04] (Ferrosilicon case) 76B1 [translation available]

Germany 13 January 1993 Oberlandesgericht [Appellate Court] Saarbrücken (Doors case) [translation available]
 

* Germany 22 September 1992 Oberlandesgericht [Appellate Court] Hamm (Frozen bacon case) 76B [translation available]

China 1992 CIETAC Arbitration award
 

* China 30 October 1991 CIETAC Arbitration award [translation available]

Germany 2 September 1991 Oberlandesgericht [Appellate Court] Celle 76B

* China 18 April 1991 [date claim filed] Shenzhen CIETAC Arbitration award 76B [translation available]

Germany 18 January 1991 Landgericht [District Court] Bielefeld
 

China 13 June 1989 CIETAC Arbitration award [translation available]


UNCITRAL CASE DIGEST

The UNCITRAL Digest of case law on the United
Nations Convention on the International Sale of Goods
[*]

A/CN.9/SER.C/DIGEST/CISG/76 [8 June 2004]
Reproduced with the permission of UNCITRAL

[Text of Article 76
Digest of Article 76 case law
-    Relation to other articles
-    Conditions on application of Article 76
-    Calculation of damages
-    Burden of proof; consideration of evidence]
ARTICLE 76

     (1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.

     (2) For the purposes of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods.

DIGEST OF ARTICLE 76 CASE LAW

1. Article 76 provides that an aggrieved party may claim recovery of the difference between the contract price and the current price for the goods if the contract has been avoided, if there is a current price for the goods and if the aggrieved party has not entered into a substitute transaction.[1] The article designates when and where the current price is to be determined. The last clause of the first sentence of paragraph (1) also provides that an aggrieved party may recover further damages under the general damage formula set out in article 74. The article 76 formula is a familiar one.[2]

Relation to other articles

2. Article 76 is the second of two damage formulas applicable if the contract is avoided. Whereas article 75 calculates damages concretely by reference to the price in a substitute transaction, article 76 calculates damages abstractly by reference to the current market price. The Convention prefers concrete calculation of damages.[3] Paragraph (1) of article 76 provides that its damage formula is not available if an aggrieved party has concluded a substitute transaction.[4] If an aggrieved party seller resold fewer goods than the contract quantity, one court calculated damages as to the resold goods under article 75 and damages as to the unsold goods under article 76.[5] Another court calculated damages under article 76 rather than article 75 where an aggrieved seller resold the goods to a third party at significantly less than both the contract and market price.[6]

3. The final clause of the first sentence of article 76(1) provides that an aggrieved party may recover additional damages under the general damage formula set out in article 74. An aggrieved party may also choose to recover damages under article 74 even when it might recover under article 76.[7] If the conditions for recovery under article 76 are not satisfied, damages may nevertheless be recovered under article 74.

4. Damages recoverable under article 76 are reduced if it is established that the aggrieved party failed to mitigate these damages as provided in article 77. The reduction is the amount by which the loss should have been mitigated. See "calculation of damages" below.

5. Pursuant to article 6, the seller and buyer may agree to derogate from or vary the formulas set out in article 76. One tribunal has stated that a post-breach agreement settling a dispute with respect to a party's nonperformance displaces the aggrieved party's right to recover damages under the damage provisions of the Convention.[8]

Conditions on application of Article 76

6. Article 76 applies if the contract is avoided (see para. 7 below), if there is a current price for the goods (see para. 8 below), and if the aggrieved party has not concluded a substitute transaction (see para. 9 below).

7. Article 76 is not applicable if the contract has not been avoided.[9] Thus, the article will not apply if the aggrieved party has not declared the contract avoided when entitled to do so [10] or if the aggrieved party has not made an effective declaration of avoidance.[11]

8. The formula of article 76 can only be applied if there is a current price. The current price is the price generally charged on the market for goods of the same kind under comparable circumstances.[12] One tribunal declined to use published quotations in a trade magazine because the reported quotations were for a different market from that where the goods were to be delivered under the contract and adjustment to that price was not possible.[13] The same tribunal accepted as the current price a price negotiated by the aggrieved seller in a substitute contract that was not ultimately concluded.[14] Another tribunal found that the aggrieved party was unable to establish the current price for coal generally or for coal of a particular quality because the requirements of buyers vary and there is no commodity exchange.[15] Another court suggested that the "auction realisation" value of goods held by an insolvent buyer might be relevant if the aggrieved seller were to seek to recover under article 76.[16] Stating that the seller's lost profit was to be established under article 76, a court affirmed an award of damages to an aggrieved seller in the amount of ten per cent of the contract price because the market for the goods (frozen venison) was declining and the seller set its profit margin at ten per cent, which was the lowest possible rate.[17]

9. Damages may not be recovered under article 76 if the aggrieved party has purchased substitute goods. Where a seller had failed to deliver the goods and the aggrieved buyer bought no substitute goods, the buyer's damages are to be calculated under article 76.[18]

Calculation of damages

10. An aggrieved party is entitled to recover the difference between the contract price and the current price at the time and place indicated by article 76.[19] The time at which the current price is to be determined is the date of the effective avoidance of the contract or, if the aggrieved party has taken over the goods before avoidance, then it is this earlier time instead.[20] For cases determining what constitutes evidence of a current price, see paragraph 8 above.

11. Paragraph (2) of article 76 indicates the relevant place for determining the current price. There are no reported cases construing this provision.

Burden of proof; consideration of evidence

12. Although article 76 is silent on which party has the burden of establishing loss, decisions have placed this burden on the aggrieved party.[21]


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. Articles 45(1)(b) and 61(1)(b) provide that the aggrieved buyer and the aggrieved seller, respectively, may recover damages as provided in articles 74 to 77 of the listed court and arbitral decisions rather than relying solely on the CLOUT abstracts.

2. [ICC International Court of Arbitration, case No. 8502 of November 1996, available online at <http://cisgw3.law.pace.edu/cases/968502i1.html> (reference to both art. 76 and art. 7.46 of Unidroit Principles of International Commercial Contracts).

3. CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June 1996, available online at <http://cisgw3.law.pace.edu/cases/960321g1.html> / <http://cisgw3.law.pace.edu/cases/960361g1.html> (Convention prefers concrete calculation of damages) (see full text of the decision).

4. See [ICC International Court of Arbitration, case No. 8574 of September 1996, available online at <http://cisgw3.law.pace.edu/cases/968574i1.html> (no recovery under art. 75 because aggrieved party concluded substitute transactions before it avoided the contract). See also CLOUT case No. 348 [GERMANY Oberlandesgericht [Appellate Court] 26 November 1999, available online at <http://cisgw3.law.pace.edu/cases/991126g1.html> (damages not calculated under art. 76 because damages could be calculated by reference to actual transactions).

5. CLOUT case No. 130 [GERMANY Oberlandesgericht [Appellate Court] Düsseldorf 14 January 1994, available online at <http://cisgw3.law.pace.edu/cases/940114g1.html> (see full text of the decision). See also ICC International Court of Arbitration, case No. 8740 of 1996, available online at <http://cisgw3.law.pace.edu/cases/968740i1.html> (aggrieved buyer unable to establish market price not entitled to recover under art. 76 and entitled to recover under art. 75 only to the extent it had made substitute purchases); but compare [CHINA Arbitration Award of 30 October 1991, available online at <http://cisgw3.law.pace.edu/cases/911030c1.html> (aggrieved buyer who had made purchases for only part of the contract quantity nevertheless awarded damages under art. 75 for contract quantity times the difference between the contract price and the price in the substitute transaction).

6. CLOUT case No. 227 [GERMANY Oberlandesgericht [Appellate Court] Hamm 22 September 1992, available online at <http://cisgw3.law.pace.edu/cases/920922g1.html>.

7. CLOUT case No. 427 [AUSTRIA Oberster Gerichtshof [Supreme Court] 28 April 2000, available online at <http://cisgw3.law.pace.edu/cases/000428a3.html> (aggrieved party may claim under art. 74 unless party regularly concludes similar transactions and has designated one as a substitute within art. 75); CLOUT case No. 140 [RUSSIA Arbitration Award, case No. 155/1994 of 16 March 1995, available online at <http://cisgw3.law.pace.edu/cases/950316r1.html> (citing art. 74 but determining damages as difference between contract price and price in substitute transaction).

8. [CHINA CIETAC Arbitration Award of 1 April 1993, available online at <http://cisgw3.law.pace.edu/cases/930401c1.html>.

9. CLOUT case No. 474 [RUSSIA Arbitration Awared, case No. 54/1999 of 24 January 2000, available online at <http://cisgw3.law.pace.edu/cases/000124r1.html> (art. 76 not applicable when the contract had not been avoided).

10. CLOUT case No. 176 [AUSTRIA Oberster Gerichtshof [Supreme Court] 6 February 1996, available online at <http://cisgw3.law.pace.edu/cases/960206a3.html> (no avoidance) (see full text of the decision).

11. CLOUT case No. 238 [AUSTRIA Oberster Gerichtshof [Supreme Court] 12 February 1998, available online at <http://cisgw3.law.pace.edu/cases/980212a3.html> (declaration of avoidance too early) (see full text of the decision).

12. CLOUT case No. 318 [GERMANY Oberlandesgericht [Appellate Court] Celle 2 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980902g1.html> (evidence did not establish current price). But see [GERMANY Oberlandesgericht [Appellate Court] Braunschweig 28 October 1999, available online at <http://cisgw3.law.pace.edu/cases/991028g1.html> (calculation by reference not to market price but to seller's profit margin, which was lowest possible rate).

13. [CHINA Arbitration Award of 18 April 1991, available online at <http://cisgw3.law.pace.edu/cases/910418c1.html> (evidence did not reflect contract delivery terms).

14. Id.

15. [ICC International Court of Arbitration, case No. 8740 of October 1996, available online at <http://cisgw3.law.pace.edu/cases/968740i1.html> (value of coal subjective because depends on buyer's needs and shipping terms; aggrieved party, who made no claim under art. 74, could recover under art. 75 only to the extent it had entered into substitute transactions).

16. CLOUT case No. 308 [AUSTRALIA Roder v. Rosedown, Federal District Court, Adelaide 28 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950428a2.html> (valuation arranged by insolvency administrator) (see full text of the decision).

17. [GERMANY Oberlandesgericht [Appellate Court] Braunschweig 28 October 1999, available online at <http://cisgw3.law.pace.edu/cases/991028g1.html>.

18. CLOUT case No. 328 [SWITZERLAND Kantonsgericht [District Court] Zug 21 October 1999, available online at <http://cisgw3.law.pace.edu/cases/991021s1.html>.

19. [GERMANY Oberlandesgericht [Appellate Court] Hamburg 4 July 1997, available online at <http://cisgw3.law.pace.edu/cases/970704g1.html>.

20. [CHINA Arbitration Award of 18 April 1991, available online at <http://cisgw3.law.pace.edu/cases/910418c1.html> (disagreeing with date claimed by suggested party).

21. See, e.g., CLOUT case No. 318 [GERMANY Oberlandesgericht [Appellate Court] Celle 2 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980902g1.html> (aggrieved buyer failed to establish current price).


CASE ANNOTATED COMPARATIVES
  -  UNIDROIT Principles
  -  PECL comparative

Remarks on the manner in which the UNIDROIT Principles
may be used to interpret or supplement Article 76 of the CISG

Bruno Zeller [*]
October 2003

1. Introduction
2. Avoidance
3. Calculation of Damages
4. Current Price
5. Timing of Calculation of damages
6. Conclusion

1. Introduction

It is true to say that both the UNIDROIT Principles and the Convention are instruments which can be used to assist in the interpretation of contracts if they address the same issues. Indeed the Principles in the preamble state that they may be used to interpret or supplement international uniform law instruments.[1] The ICC Court of Arbitration in Paris took advantage of this possibility in a case where no express choice of law clause was included in the contract. They referred to both article 76 CISG and article 7.4.6 of the UNIDROIT Principles as being relevant to assist in their deliberations.[2] Arguably the tribunal was guided by the Official Comments on the UNIDROIT Principles which included a direct reference to CISG article 76:

"The purpose of this article, which corresponds in substance to Art. 76 CISG, is to facilitate proof of harm where no replacement transaction has been made ..."[3]

However, it must also be remembered that the CISG is part of municipal law, that is, courts are obliged to use it when applicable. At best, the UNIDROIT Principles can be used by courts to assist where the provisions of the CISG are not clear. Furthermore, such assistance can only be considered if CISG articles 7 or 8 have not produced a solution. It can be argued that if there is a gap in the CISG then the UNIDROIT Principles should be consulted if possible to fill the gap before recourse to domestic law is taken.[4]

A set of rules and principles is placed in a fairly simple-looking formula.[5] The drafters of the Convention purposefully used earthy words devoid of municipal meaning and it must also be understood that articles within the CISG cannot be read in isolation. CISG Articles 7 and 8 clearly demand that all interpretation and application of any principle contained in the Convention must be undertaken within the four corners of the CISG.[6] All principles and therefore all articles are an interlocking construct regulating the interactions of international contracting parties with the aim to maintain business relations as long as possible and afford compensation to parties without unduly disadvantaging the breaching party.

2. Avoidance

CISG Article 76 is no exception. The first criterion is that this article only applies if the contract has been avoided pursuant to CISG article 25 and hence CISG articles 49 or 64. This is confirmed by the District Court of München, where the court indicated that compensation of damages for non-performance cannot be claimed if the contract has not been avoided.[7] The court added that otherwise the rules pertaining to the avoidance of contract would be superfluous.[8]

The UNIDROIT Principles do not use the word "avoidance" but "termination" when referring to such a situation. Arguably the different terminology of "avoidance" or "termination" is of little significance. In either case the parties do not intend to fulfil their contractual obligations. It can also be further argued that CISG article 76 as well as the counterpart UNIDROIT Principle is merely an addition to CISG article 74, namely, fully compensating [9] the innocent party for a loss suffered due to a breach of contract. It attempts to clarify situations where despite the avoidance of the contract the party seeks to demand damages if they purchased goods from another source.

3. Calculation of Damages

CISG Article 76 and the counterpart UNIDROIT Principle in essence establish a formula whereby the injured party can calculate damages where the contract has been avoided and no substitute transaction has been entered into.[10] It is established that CISG article 76 and hence UNIDROIT article 7.4.6 are only to be used if a concrete calculation of damages pursuant to CISG article 75 is not possible.[11]

The formula allows calculating damages "abstractly", that is, without having made a clearly definable cover transaction. The purpose of both instruments is to prescribe a method by which the market price can be calculated. The ICC Court of Arbitration reached its conclusion by analyzing both instruments. As they yielded the same result, it can be argued that there is no significant difference between CISG article 76 and UNIDROIT article 7.4.6.

Nevertheless, differences between the two provisions are observable. The CISG distinguishes between situations where there was no substitute purchase or resale and situations where goods have been taken over. The Principles, on the other hand, merely point to the fact that no replacement transaction has taken place. It is true to say that the situation where goods have been taken over only applies to the buyer.[12] There are really only two situations which could reasonably be contemplated, namely, the buyer avoided the contract after taking over the goods, or in relation to subsection (2) of CISG article 76, by fixing an earlier time to prevent the buyer from speculating.[13] The Principles arguably may be lacking in taking these situations into consideration and the CISG would need to be used to clarify and help interpreting the Principles.

4. Current Price

CISG Article 76(2) and UNIDROIT Principle 7.4.6 (2) attempt to clarify the current price by tying it to the prevailing place where delivery of the goods should have been made. In general, UNIDROIT article 7.4.6 uses simpler language and condenses parts of CISG article 76 into a more readable form. It can be argued therefore that it would be advantageous if the Principle were read before the counterpart provision of the CISG is applied. It would allow the court or arbitral tribunal to get a "feeling" of what the CISG attempts to achieve.

CISG article 76 and UNIDROIT article 7.4.6 attempt to give solutions to two problems, namely, the determining of the date when the contract has been declared avoided and, secondly, the place where the current price has to be determined.

The problem of timing has been addressed and clarified at the 10th plenary meeting of the Diplomatic Conference at which the CISG was promulgated.[14] The meeting minutes clearly state that the time is not the time when the party who "declared the contract avoided had for the first time the right to do so."[15] Instead the crucial time is the "time of avoidance". This phrase was taken over by the CISG as well as the UNIDROIT Principles. Both instruments use the same phraseology and therefore the clarification has been provided and the time is definitely not when a "Nachfrist" was granted pursuant to CISG articles 49 or 64.

5. Timing of calculation of damages

CISG article 76 also adds to the timing the "taking over of goods". UNIDROIT article 7.4.6 does not do so, as mentioned above. Arguably the promoters of the Principles took note of Schlechtriem who argues that the "taking over of goods" as a trigger point is difficult to justify. Schlechtriem notes:

"In the event of a delayed or non-conforming performance, the buyer who can neither undertake nor prove a definite cover transaction under article 75 uses the reasonable [16] time period permitted by article 49(2) at his own risk. In the case of article 49(2)(b)(i), the reference point actually precedes the moment when the buyer could avoid the contract because the buyer, at the that time, still did not know of the breach."[17]

In this situation, as pointed out above, the UNIDROIT Principles are of little help to overcome this problem. It appears though that Schlechtriem foresaw a problem which technically can cause problems but jurisprudence on this point has not revealed any disputes.

6. Conclusion

The question of how to determine the "current price" does not appear to pose any problems. That is the case as CISG article 76 and UNIDROIT Principles article 7.4.6 are essentially identical and the ICC Court also in its determination did not distinguish between the two counterpart provisions. The court's decision simply confirmed that the market price is to be determined pursuant to the place of delivery of goods.[18] Arguably, if the promoters of the Principles had seen or anticipated problems in the application of CISG article 76 they would have worded UNIDROIT article 7.4.5 differently to overcome the perceived problem. This has been done on other occasions such as UNIDROIT article 7.3.1, which can be used for a better understanding of CISG article 25.

The time of avoidance or the time the contract is terminated is not always an uncontroversial point of reference. The problem still remains that a party can delay avoidance in order to gain an advantage, However the problem is that the party may be held to have violated the duty to mitigate as well as being in breach of CISG article 7, namely disregarding the principle of good faith.[19]


FOOTNOTES

* Dr. Bruno Zeller is Lecturer of Law, Victoria University of Technology, Melbourne. For pdf law journal text of this comparative, go to the Nordic Journal of Commercial Law of the University of Turku, Finland, Issue 2003 # 1 <http://www.njcl.utu.fi>.

1. See Kritzer, A. "General observations on use of the UNIDROIT Principles to help interpret the CISG", available at <http://www.cisg.law.pace.edu/cisg/text/matchup/general-observations.html>

2. ICC Court of Arbitration, Case No. 8502, November 1996, available at <http://cisgw3.law.pace.edu/cases/968502i1.html>.

3. See the Official Comments on Article 7.4.6 of the UNIDROIT Principles, Comment 1, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni76.html#official>.

4. For further elaboration see Kritzer, A., supra note 1.

5. See Eiselen. S, "Remarks on the Manner in which the UNIDROIT Principles of International
Commercial Contracts May Be Used to Interpret or Supplement Article 74 of the CISG", para. a.; available online at <http://cisgw3.law.pace.edu/cisg/principles/uni74.html#editorial>

6. See Zeller, B., Four Corners - The Methodology for Interpretation and Application of the UN Convention on Contracts for the International Sale of Goods, available online at <http://cisgw3.law.pace.edu/cisg/biblio/4corners.html>.

7. Germany, Landgericht [District Court] München 12 HKO 4174/99; case presentation including English translation available online at <http://cisg3.law.pace.edu/cases/000406g1.html>.

8. Ibid.

9. For a treatment of article 74 and the concept of full compensation see also Sieg Eiselen on

<http://cisgw3.law.pace.edu/cisg/text/anno-art-74.html>.

10. The Secretarial Commentary is the closest counterpart to an Official Commentary on the CISG; see <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-76.html>.

11. Germany, Oberlandesgericht [Appellate Court] Hamm, 19. Zivilsenat, 22 September 1992, 19 U 97/91, <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-76.html>.

12. Enderlein, F., and Maskow, D., International Sales Law, Oceana 1992, at 307, also available online at <http://cisgw3.law.pace.edu/cisg/biblio/enderlein.html>.

13. Enderlein, op. cit, at 307.

14. Legislative History, 1980 Vienna Diplomatic Conference, Summary Records of Meetings of the Plenary Meetings, para. 38 et seq. (A/CONF.97/C.L.245).

15. Ibid, para. 40.

16. Reasonableness is a general principle of he CISG and is directly mentioned in 37 provisions of the Convention. For further comments on the definition and operation of this concept see A.H. Kritzer, "Reasonableness: Overview Comments", available at <http://cisgw3.law.pace.edu/cisg/text/reason>.

17. Schlechtriem, P. "Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods (1986), at 98, also available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem.html>

18. ICC Court of Arbitration, Case No. 8502, see supra note 2.

19. The concept of good faith has generated a lively debate. Felemegas in his editorial on CISG Art. 7, available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp7.html#er> states that it is "circumscribed to the interpretation of the law and should not be allowed to impose additional duties of a positive nature to the parties." The present writer is of the opinion that good faith in addition also imposes a duty on the behavior or the parties (see "Four Corners - the Methodology for the Interpretation and Application of the UN Convention on Contracts for the International Sale of Goods, supra note 6) See also the remarks by Ulrich Magnus, available online at <http://cisgw3.law.pace.edu/cisg/principles/uni7.html#um>.


PECL COMPARATIVE

Comparison between provisions of the CISG (Measurement of Damages when Contract Avoided: Article 76) and the counterpart provisions of the PECL (Article 9:507)

Jonathan Yovel [*]

March 2005

Commentary: Current Price Damages under the CISG and PECL

1. General

Both the CISG and the PECL distinguish between two mutually-exclusive types of situations following breach ("non-performance" in the context of the PECL) of contract and avoidance ("termination" in the context of the PECL) by either party.

     1.1 In one type of situations, the aggrieved party engages in an alternative transaction that substitutes for the performance expected from the original, now avoided (terminated) contract (so-called "cover" transactions). Such cases fall under CISG Art. 75 and PECL Art. 9:506, respectively. In the other type of situations, the aggrieved party does not resort to a substitute transaction. In such cases, market price-based damages may become available to the aggrieved party under so called "current price" clauses, CISG Art. 76 and PECL Art. 9:507, respectively (note, that under perfect market conditions, the two types of situations converge).[1] This commentary commences by exploring the general logic of current price damages shared by the CISG and PECL, and subsequently identifies and analyzes the differences in approach between the two instruments.

     1.2 Monetarily speaking, current price damages are a compensation for devaluation or increase of price in terms of a theoretical substitute transaction. They represent the difference between the contractual price of goods (or, in the case of the PECL, also services, etc.) and their price at a certain later time, whether higher or lower (how this later time is determined is discussed below). Thus, an aggrieved seller may demand such damages if, in consequence of buyer's breach, the goods left at her disposal have a lower market value than the contractual price.[2]

     1.3 An aggrieved buyer is entitled to such compensation if the available current price is higher than the contractual price, even without proof of intentions to resell or otherwise transact in the goods under such conditions.[3] As -- had the contract been performed -- the aggrieved buyer would have been in a position to capitalize on the price increase, this premium -- held by the breaching seller - should be transferred to the buyer. Seen from this perspective, current price damages are rather a measure of restitution following unjust enrichment than a kind of expectation damages; they share a distinct family relation with recovery of gains made in breach from a substitute transaction. Thus, current price damages require no proof of expectation, nor foreseeability or any actual loss, beyond the change in actual current price.[4] Consequently, current price damages do not exclude, either in the CISG or in the PECL, other kinds of damages for breach of contract, in particular expectation or consequential damages, such as under CISG Art. 74 or PECL Art. 9:501.[5]

     1.4 Although not universal,[6] current price clauses exist in many national systems, and especially so in the case of sales.[7] Note, that a condition for a claim of current price damages is that the contract had been avoided (terminated), i.e. no forthcoming performance is expected.[8] In that it differs from both expectation and reliance damages, claims to which are indifferent to the theoretical possibility of further performance. Likewise, current price damages can obviously not be claimed together with enforcement of performance ("specific performance"), which would result in double compensation.

2. Current Price and Risk

The current price against which the contractual price is measured must be general and reliably verifiable, given to "fair determination."[9] Because current price damages do not apply in cases of alternative transactions, they are not measured against an actual, idiosyncratic price paid. Although the terminology is that of "damages," the issue can be seen as a matter of the exposure to risk born by the breaching party. The breaching party is not exposed to the risk that an idiosyncratic transaction might become available to the aggrieved party, but only to a risk determined by a generally verifiable standard. Therefore, although "current price" and "market price" are not identical, and although in principle current price damages are available not only under market conditions, market prices obviously provide a good indication for determining both the availability of current price damages and their amount.[10] Courts have occasionally recognized standards other than market price to determine current price damages.[11] Conceivably, however, aggrieved parties will fail to prove the existence of either market-based or other verifiable ways of determining prevailing current prices, resulting in disallowance of current price damages altogether.[12]

3. No Substitute Transaction

A problem arising from the functional "division of labor" between the substitute transaction and current price provisions is the determination, necessary for the application of the latter, whether a substitute transaction did not, in fact, take place. The problem is especially acute in cases of large turns of business: it would not be obvious whether unspecified goods later sold (or any equivalent non-sales transaction) should be dealt with as a substitute transaction or an independent one.[13] The structure of CISG Art. 75 may assist in determining this, requiring substitute transactions to stand in some relation of reasonableness to the original transaction, namely be performed "in a reasonable manner and within a reasonable time after avoidance" of the contract. As Art. 76 grants the price differential between the contractual price and that prevailing at the time of avoidance (or of tender, in cases of delivery -- see below), Art. 76 leaves little room to manipulation of time: if an alternative transaction was not performed within a reasonable time, Art. 75 damages would no longer be available, but Art. 76 damages would be. Such would be the case of, e.g., a seller who attempts a substitute transaction but eventually fails; current price damages will still be available as a fall-back option.[14]

Due to obvious considerations, courts prefer to grant "actual" rather than "abstract" price differentials - namely those resulting from a substitute transaction rather than market price.[15] The choice, however, is in the hands of the aggrieved party, but so is the burden of proof to show that no substitute transaction has in fact taken place.[16] Professor Schlechtriem argues that this burden is easily met in cases of "constant dealing" where it is "difficult or impossible" to determine which particular transaction should be considered the cover for the breached contract.[17] However, this may cut the other way: that in such situations, there is high probability that a cover transaction in fact occurred, even if it were difficult to identify a single, specific substitute. The fact that any of a number of transactions may have been the substitute transaction does not amount to the conclusion that there was no substitute transaction. The breaching party opposing the allowance of current price damages need not point to a distinct cover transaction if he can point to a number of them, of which one (or more) function as the cover transaction, even if it is impossible to differentiate it from the commercial aggregate. Thus, as current price provisions state lack of substitute transaction as a condition for recovering current price damages, the burden of proof -- carried by the aggrieved party seeking current price damages [18] -- may, in many instances, determine this point.

4. Relevant Place

CISG Art. 76(2) determines that current price is the price prevailing at the place where delivery should have taken place (see CISG Art. 31 for determination of place of delivery), but allows for a "reasonable substitute" in case there is no current price at the designated place of delivery. Prices for goods may vary considerably among some markets, and evidence regarding a prevalent price in one market may be rejected as not amounting to a "reasonable substitute" for the originally intended market.[19] The reasonable substitute structure does not allow the plaintiff to engage in "current price shopping." Such behavior will fail to constitute a "reasonable substitute" as well as run counter to standards of good faith.[20] The PECL is silent on the question of place according to which current place is to be determined. One may reasonably apply the CISG's criterion there, unless there were good reasons to diverge from it. Performances that are easily transferable from one place to another may attempt to command the current price of an emerging or other market more lucrative than the original contract entailed, and thus jumble the ex-ante assessment of risk involved with current price damages. Such a manipulation may or may not be considered legitimate under the "reasonable substitute" principle as applied to various types of transactions, but the burden of proof that the substitute market is indeed a "reasonable" substitution lies with the aggrieved party requiring it. The measure in which the original performance was in any significant way geographically entrenched may serve as a criterion for the "reasonableness" of different current price determinations.

Art. 76(2) adds a clause that is seemingly out of synch with the general logic of current price damages and is furthermore not expressed in PECL 9:507: namely, that when calculating current price differentials according to a price prevalent in a place other than the designated place of delivery, the cost of transporting the goods is to be taken into account. One may reasonably object that when no actual transaction is involved current price is based on a "virtual" or "abstract" or "imagined" transaction, recall -- it is irrelevant to internalize transportation costs into the price differential. However, the existence of this clause expresses the strong ties of current price damages to those resulting from an actual substitute transaction (such as under CISG Art. 75). The clause assumes that commerce, production and other activities go on, and that current price damages need be such as to in fact allow the aggrieved party to engage in some future transaction, even when that will no longer fall under the "reasonable time" requirement of Art. 75.[21] Hence the two mutually-exclusive mechanisms truly attempt to approach identical concerns, making current-price damages appear less "abstract" than the authors cited above take them to be.

5. Relevant Time

As current price damages are determined ex-post, the question of the time of their determination is significant . The CISG and PECL differ somewhat on this point. PECL determines that the current price against which the contractual price is determined is the current price at time of the contract's termination. This gives the aggrieved party -- who terminates the contract -- an ex-ante measure of control in determining the current price damages. One could theoretically consider -- and indeed national courts have at times recognized -- other standards: the time of breach, the time when the breach became known or should have become known to the aggrieved party, the time when avoidance (termination) first became available, or the time of any number of notices exchanged between the parties.

6. Current Price Damages After Goods were Delivered

Regarding the time according to which current price damages are calculated, there is an apparent difference between the PECL and CISG regarding one special category of cases in which such damages may become available. Dealing as it does with the special risks associated with international sales of goods, the CISG is consistently sensitive to situations in which contracts are avoided pursuant to delivery.[22] As current price damages become available only following avoidance of the contract, Art. 76(1) makes a special provision for such damages in cases where the aggrieved party has avoided the contract pursuant to taking the goods (e.g., for failure of conformity or any other fundamental breach, or following a Nachfrist period). In such cases, the current price is determined according to the time of the taking of the goods, instead of the time of avoidance of the contract. Thus aggrieved parties who have taken the goods may not benefit from deferring avoidance tactically or speculatively, until such time as a more favorable current price emerges.[23] The PECL, dealing as it does with all contractual situations, includes no such provision. This apparent shortcoming is mitigated by two factors. One is the PECL's more overt imposition of good faith obligations, that would presumably disallow such tactical behavior. The other, more specific factor considers that under both CISG and PECL, avoidance (termination) of the contract pursuant to delivery is restricted to a "reasonable time,"[24] a determination germane to both the availability as well as the amount of current price damages. As also under PECL current price damages become available only upon avoidance of the contract, the "reasonable time" restricting the latter -- in cases in which tender was assumed - also limits the timeframe of the former. This does not make for an absolute congruence between the two systems, as aggrieved parties under PECL are allowed to defer termination of the contract -- and thus to an extent determine the amount of current price damages -- under the reasonable time restriction. Under CISG, the aggrieved party has no such power, and current price damages under conditions of tender will be determined according to the time of tender.

[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) 480-486.]


FOOTNOTES

* Senior Lecturer in Law and Jurisprudence, Faculty of Law, University of Haifa, Israel. The author gratefully acknowledges the hospitality of the Max Planck Institute for Comparative Private and Private International Law in Hamburg, under whose auspices this commentary was prepared, with particular gratitude to the Institute's director, Professor Reinhard Zimmermann, as well as to its fellows and staff.

1. In one case at least, the court calculated damages according to Art. 76 although a substitute transaction did in fact take place. However, as the actual price collected by the aggrieved seller on the substitute transaction was only about 25% of the contract price, the court deemed the transaction not "in a reasonable manner" as required by Art. 75 CISG and instead invoked the formula of Art. 76. Note, that the goods in question (lots of bacon) were perishable, and that the seller acted according to his general duty to mitigate the loss (CISG Art. 77). Germany 22 September 1992 Oberlandesgericht [Appellate Court] Hamm, 19 U 97/91, CLOUT abstract no. 227, available online at <http://cisgw3.law.pace.edu/cases/920922g1.html>.

2. For usage of the formula calculating the price differential between the contractual price and a generally-verifiable standard such as market price see Switzerland 21 October 1999 Kantonsgericht [District Court] Zug, A3 1997 61, available online at <http://cisgw3.law.pace.edu/cases/991021s1.html>.

3. Current Price clauses are subject to parties' general power to derogate under CISG Art. 6. Post-breach agreements such as settlement agreements may be construed to include waiver of current price damages (as well as other remedies available according to the governing law). See China 1 April 1993 CIETAC Arbitration proceeding, available online at <http://cisgw3.law.pace.edu/cases/930401c1.html>.

4. Consequently, Lando and Beale refer to the assessment of current price damages as "abstract," see Ole Lando and Hugh Beale (eds.), Principles of European Contract Law: Parts I and II (Kluwer Law International (2000) (hereinafter "Lando and Beale") p. 211. See also Joseph Lookofsky and Herbert Bernstein, Understanding the CISG in Europe, Deventer, Kluwer 1997 (henceforth "Lookofsky and Bernstein") p. 102. Yet other authors term current price damages as "virtual," although to both those who pay them and those who collect them they must seem real indeed (the transaction they represent is virtual, or rather imaginary), see D. Busch, EH. Hondius, HJ Van Kooten, HN Schelhaas, WM Schrama, eds., The Principles of European Contract Law and Dutch Law: A Commentary (Kluwer 2002) (Henceforth "Busch et al"), p. 420. Some courts seem to have caught up with the terminology, see Germany 2 September 1998 Oberlandesgericht [Appellate Court] Celle, 3 U 246/97, available online at <http://cisgw3.law.pace.edu/cases/980902g1.html>.

5. See Grant R. Ackerman (ed.) U.N. Convention on Contracts for the International Sale of Goods, Annotated, Boston, 1993, Commentary on Article 76, p. 76-2 - 76-3.

6. Busch et al, p. 420-1.

7. Lando and Beale, Notes to Article 4.506, p. 211.

Provisions may be found in Danish, Dutch, German, Italian codes as well as the UK Sale of Goods Act 1979 law and Israel's Contract Law (Remedies for Breach of Contract) 1970, Art. 11. Judicial allowance for current price damages exists in France, Belgium, and the Netherlands (see Lando and Beale) as well as in Spain and Greece with respect to commercial transactions. For further comparative information see Hugo Treitel, "Remedies for Breach of Contract", in: International Encyclopedia of Comparative Law (Tübingen, Mouton, The Hague, Paris: J.C.B. Mohr, 1976) §§ 102 ff, and John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (The Hague: Kluwer, 1999) (henceforth "Honnold") §§ 409-15.

8. This condition has been stressed by courts; see Germany 6 April 2000 Landgericht [District Court] München 12 HKO 4174/99; case presentation including English translation available online at <http://cisgw3.law.pace.edu/cases/000406g1.html>.

9. See Busch et al 420.

10. For case law see supra note 2, infra note 19.

11. See Germany 28 October 1999 Oberlandesgericht [Appellate Court] Braunschweig, 2 U 27/99, available online at <http://cisgw3.law.pace.edu/cases/991028g1.html>, where the court calculated Art. 76 damages based on the seller's relevant margin of profit -- at the time, the lowest available standard (set at 10%).

12. See Germany 2 September 1998 Oberlandesgericht [Appellate Court] Celle, 3 U 246/97, available online at <http://cisgw3.law.pace.edu/cases/980902g1.html>, where plaintiff failed to prove current price for generic, "no-name vacuum cleaners." An instance of an important, more general case was expressed in ICC award No. 8740, of 1996, Unilex, available online at <http://cisgw3.law.pace.edu/cases/968740i1.html>. The question was whether current price may be established for quantities of coal, seller arguing that the determinative factors were too volatile for any accurate estimate, and buyer claiming that "an experienced trader would be capable of establishing a price for a particular quality of coal to be delivered at a certain time to a certain place." Analyzing the various factors, the tribunal ruled that "the value of coal is primarily subjective in nature and dependent on the specific needs of the consumer and, therefore, there is no market value on which to award damages." The aggrieved buyer was unable to establish current price and thus not entitled to recover under Art. 76. This raises the general question whether volatile commodity markets are ever appropriate standards for Art. 76 damages, and furthermore the broader question of the applicability of the CISG -- designed chiefly for international transactions in goods as its prototype -- to transactions in commodities. For discussions see Michael Bridge, The International Sale of Goods: Law and Practice (Oxford University Press 1999) note 2.41; also Peter Schlechtriem, "Interpretation, gap-filling and further development of the UN Sales Convention" available online at <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem6.html>.

13. 13. The Secretariat Commentary acknowledges this difficulty, commenting that "If the seller has a finite supply of the goods in question or the buyer has a finite need for such goods, it may be clear that the seller has resold or that the buyer has made a cover purchase, as the case may be. However, if the injured party is constantly in the market for goods of the type in question, it may be difficult or impossible to determine which of the many contracts of purchase or sale was the one in replacement of the contract which was breached." Secretariat Commentary to CISG Art. 76, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-76.html#3>.

14. See Honnold, pp. 452-3.

15. Every rational system would assume preference for a substitute transaction over one in which goods are "lost," transaction-wise. See Germany 22 September 1992 Oberlandesgericht [Appellate Court] Hamm, 19 U 97/91, available online at <http://cisgw3.law.pace.edu/cases/920922g1.html>. See also Germany 26 November 1999 Hanseatisches Oberlandesgericht [Appellate Court] Hamburg, 1 U 31/99, CLOUT Abstract No. 348, available online at <http://cisgw3.law.pace.edu/cases/991126g1.html> where the court ruled for a preference of Art. 75 over Art. 76 damages in cases where either could conceivably be claimed.

16. Parties will fail to meet this requirement if courts deem a pursuant transaction to be a substitute one; see Germany 26 November 1999 Hanseatisches Oberlandesgericht [Appellate Court] Hamburg, available online at <http://cisgw3.law.pace.edu/cases/991126g1.html>.

17. See Peter Schlechtriem, Uniform Sales Law: the UN Convention on Contracts for the International Sale of Goods (Vienna: Manz 1986) pp. 97-8.

18. Plaintiff carries onus of proof as to all the constituents of the claim for damages. In the context of Art. 76 see Germany 2 September 1998 Oberlandesgericht [Appellate Court] Celle, 3 U 246/97, available online at <http://cisgw3.law.pace.edu/cases/980902g1.html>.

19. See China 18 April 1991 CIETAC-Shenzhen Arbitration, available online at <http://cisgw3.law.pace.edu/cases/910418c1.html>. The tribunal rejected steel prices published in a trade journal as a basis for Art. 76 damages, even though the aggrieved buyer had them adjusted from US prices to Chinese prices; the tribunal ruled that no dependable formula for adjusting the price from a foreign market was available, and that under an POB (Chinese port) contract, a local price could and should be used. The current price damages were thus determined according to a price negotiated in the context of a substitute transaction that was not ultimately concluded whose details were similar to the original contract and were presented to the court without a specific claim of representing a "market price."

20. See CISG Art. 7, PECL Art. 1:201.

21. For the close relation between an actual substitute transaction and an "imagined" one in the context of internalizing shipment to/from other regions as well as other factors that require adjusting the imagined transaction to a real one see CIETAC-Shenzhen Arbitration case, supra note 19.

22. See CISG Art. 49, 64.

23. See Lookofsky and Bernstein, p. 102 f141; also B. Audit, La vente internationale de marchandises, Paris: LGDJ, 1990, p. 178; also Burghard Piltz, Internationales Kaufrecht, München 1993, § 5 Rd.Nr. 439.

24. See CISG Art. 49(2), PECL Arts. 9:303(2) and (3)(a). See commentaries on CISG Arts. 46 and 64. Some legal systems insist on shorter times for declarations of avoidance or rescission, such as the German "unverzüglich," "without undue delay", BGB §121 (controlling all acts of rescission, including HGB §377) or the French "interpellation suffisante" prevalent in the Code Civil. German courts acknowledged a discrepancy between the two criteria, even when the facts satisfied both; see

   -    17 September 1991 Oberlandesgericht Frankfurt, 5 U 164/90, available online at <http://cisgw3.law.pace.edu/cases/910917g1.html> (in which a one-day delay in sending an avoidance telex was judged both reasonable and unverzüglich);
 
   -    22 August 2002 Landgericht Freiburg, 8 O 75/02, available online at <http://cisgw3.law.pace.edu/cases/020822g1.html> (in which an Italian buyer of a used car was allowed to avoid the contract as late as three months after she discovered the car was previously stolen and title cannot be transferred; the court accepted the time as pertinent to the various inspections required).


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