Article 84. Restitution of Benefits Received

• Text of Article 84
• Outline of issues
• Descriptors
• Coded case annotations
  -  Guide to case codes
• Case digest and analysis
     -  UNCITRAL's case law digest; and
     -  An analysis of CISG jurisprudence

TEXT OF ARTICLE 84

(1) If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid.

(2) The buyer must account to the seller for all benefits which he has derived from the goods or part of them:

(a) if he must make restitution of the goods or part of them; or

(b) if it is impossible for him to make restitution of all or part of the goods or to make restitution of all or part of the goods substantially in the condition in which he received them, but he has nevertheless declared the contract avoided or required the seller to deliver substitute goods.

OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

84A Seller bound to refund price must pay interest (art. 84(1))

84B Buyer must account to seller for benefits from goods (art. 84(2))

DESCRIPTORS

Restitution

CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

Netherlands 29 July 2009 Rechtbank [District Court] Arnhem (___ v. Omnibus Trading B.V.)

Switzerland 18 May 2009 Bundesgerichtshof [Federal Supreme Court] (Packaging machine case)

Austria 2 April 2009 Oberster Gerichtshof [Supreme Court] (Boiler case)
 

Italy 11 December 2008 Tribunale di Forli [District Court] (Mitias v. Solidea S.r.l.) 84A [translation available]

Switzerland 12 September 2008 Amtsgericht [District Court] Sursee (Second-hand tractor case)

Germany 14 February 2008 Oberlandesgericht [Appellate Court] Karlsruhe (Antique Jaguar sport car case) 84B [translation available]
 

Denmark 19 October 2007 Rettin i Københaven [District Court] (Pony case)

Slovak Republic 10 October 2007 Regional Court Bratislava (Spare parts case) [translation available]

Serbia 1 October 2007 Foreign Trade Court of Arbitration, Serbian Chamber of Commerce (Timber case) 84A [translation available]

China October 2007 CIETAC Arbitration Award [CISG 2007/03] (CD-R and DVD-R production line systems case) 84A [translation available]

Slovak Republic 27 June 2007 Supreme Court Zilina (Elastic fitness clothing case) 84A [translation available]
 

Russia 15 November 2006 Arbitration Award 98/2006

Switzerland 8 November 2006 Zivilgericht [Civil Court] Basel-Stadt (Packaging machine case)

China August 2006 CIETAC Arbitration Award [CISG 2006/13] (Chilling press case) [translation available]

Germany 21 June 2006 Amtsgericht [Lower Court] Landsberg (Dust ventilator case) 84A [translation available]

Spain 22 May 2006 Court of First Instance of Badalona (Bermuda shorts case) 84A [translation available]
 

Russia 27 October 2005 Arbitration Award 132/2004 84A [translation available]

China 12 September 2005 CIETAC Arbitration Award [CISG 2005/18] (Hydraulic pressure geologic equipment case) 84B2 [translation available]

Finland 31 May 2005 Hovioikeus / hovrätt [Appellate Court] Helsinki (Crudex Chemicals Oy v. Landmark Chemicals S.A.)

Germany 11 April 2005 Landgericht [District Court] Frankfurt [translation available]

Spain 29 March 2005 Juzgado de Primera Instancia [Court of First Instance] Tudela 84A [translation available]

Russia 24 January 2005 Arbitration Award 68/2004
 

Russia 25 June 2004 Arbitration Award 120/2003 [translation available]

Belgium 4 June 2004 Rechtbank van Koophandel [District Court] Kortrijk 84A [translation available]

Germany 28 May 2004 Oberlandesgericht [Appellate Court] Düsseldorf [translation available]

Russia 28 May 2004 Arbitration Award 175/2003 84A [translation available]

Russia 19 May 2004 Arbitration Award 100/2002 84A [translation available]

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

Switzerland 27 January 2004 Kantonsgericht [District Court] Schaffhausen 84A [translation available]
 

Belgium 11 September 2003 Hof van Beroep [Appellate Court] Gent

Russia 16 June 2003 Arbitration Award No. 135/2002 84A [translation available]

Germany 15 July 2003 Landgericht [District Court] Mönchengladbach [translation available]

Russia 16 April 2003 Arbitration Award No. 99/2002 84A [translation available]

Netherlands 22 January 2003 Rechtbank [District Court] Zwolle
 

Germany 19 December 2002 Oberlandesgericht [Appellate Court] Karlsruhe 84A [translation available]

Switzerland 2 December 2002 Tribunal Cantonal [Appellate Court] Valais 84A ; 84B [translation available]

Canada 20 September 2002 Manitoba Court of Queen's Bench (Brown & Root v. Aerotech) 84A

Germany 22 August 2002 Landgericht [District Court] Freiburg 84A ; 84B [translation available]

Belgium 15 May 2002 Hof van Beroep [Appellate Court] Gent 84B [translation available]

Spain 12 February 2002 Audiencia Provincial [Appellate Court] Barcelona 84A [translation available]

Austria 14 January 2002 Oberster Gerichtshof [Supreme Court] [translation available]
 

China 27 July 2000 CIETAC Arbitration award 84A [translation available]

Belarus 31 May 2000 International Court of Arbitration of the Chamber of Commerce and Industry of the Belarus Republic 84A

Russia 11 February 2000 Arbitration award 226/1999 [translation available]

China 19 January 2000 CIETAC Arbitration Award [CISG/2000/08] (Steel cylinders case) 84A [translation available]
 

China 17 December 1999 Rizho Intermediate People's Court 84A [translation available]

* France 21 October 1999 Cour d’appel [Appellate Court] Grenoble [translation available]

Austria 29 June 1999 Oberster Gerichtshof [Supreme Court] [translation available]

China 28 May 1999 CIETAC Arbitration award 84A [translation available]

China 30 March 1999 CIETAC Arbitration Award [CISG/1999/15] (Electric heaters case) 84A [translation available]

China 30 March 1999 CIETAC Arbitration Award [CISG/1999/17] (Electric heater case) 84A [translation available]

* ICC March 1999 International Court of Arbitration, Case 9978 [English text]
 

* Germany 29 December 1998 Hamburg Arbitration award 84A [translation available]

China 30 November 1998 CIETAC Arbitration Award [CISG/1998/08] (Glassware case) 84A [translation available]

Russia 9 June 1998 Arbitration award 263/1997 84A [translation available]

* Switzerland 15 January 1998 Tribunale d'appello [Appellate Court] Lugano [translation available]

* France 14 January 1998 Cour d'appel [Appellate Court] Paris

Russia 12 January 1998 Arbitration award 152/1996 84A [translation available]
 

Russia 25 December 1997 Arbitration award 53/1997 [translation available]

China 31 July 1997 CIETAC Arbitration Award [CISG/1997/24]

Switzerland 12 June 1997 Pretore [District Court] Lugano

Russia 29 May 1997 Arbitration award 439/1995 84A [translation available]

China 23 April 1997 CIETAC Arbitration Award [CISG/1997/08] (Automobile case) 84A [translation available]

China 11 April 1997 CIETAC Arbitration Award [CISG/1997/05] (Silicon metal case) 84A [translation available]

* Switzerland 20 February 1997 Bezirksgericht [District Court] Saane 84A [translation available]

* Switzerland 5 February 1997 Handelsgericht [Commercial Court] Zürich 84A [translation available]
 

China 23 December 1996 CIETAC Arbitration Award [CISG/1996/57] (Carbazole case) 84A [translation available]

* France 21 November 1996 Cour d'appel [Appellate Court] Aix-en-Provence 84A [translation available]

* Finland 5 November 1996 [District Court] Kuopio 84A [translation available]

China 22 May 1996 CIETAC Arbitration Award [CISG/1996/25] (Broadcasting equipment case) 84A [translation available]

Russia 25 April 1996 Arbitration award 72/1995 84A [translation available]
 

Germany 19 December 1995 Landgericht [District Court] Krefeld

Russia 19 December 1995 Arbitration award 133/1994 84A [translation available]

Russia 1 December 1995 Arbitration award 22/1995 84A [translation available]

Germany 11 October 1995 Landgericht [District Court] Düsseldorf [translation available]

* Germany 24 May 1995 Oberlandesgericht [Appellate Court] Celle 84C [translation available]

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

* France 6 April 1995 Cour d'appel [Appellate Court] Paris 84A [translation available]

* Germany 5 April 1995 Landgericht [District Court] Landshut 84A [translation available]

China 10 March 1995 CIETAC Arbitration Award [CISG/1995/03] (Polyethylene film case) 84A [translation available]

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

* Germany 1 February 1995 Oberlandesgericht [Appellate Court] Oldenburg 84b [translation available]
 

China 5 September 1994 CIETAC Arbitration Award [CISG/1994/10] (Weaving machines, tools and accessories case) 84A [translation available]

Germany 6 July 1994 Landgericht [District Court] Oldenburg

* Germany 4 May 1994 Amtsgericht [Lower Court] Charlottenburg 84B1 [translation available]

* Russia 15 April 1994 Arbitration award 1/1993 84A

China 11 April 1994 CIETAC Arbitration Award [CISG/1994/06] (Old paper case) 84A [translation available]

China 6 April 1994 CIETAC Arbitration Award [CISG/1994/05] (Printing machine case) 84A [translation available]

Germany 18 January 1994 Oberlandesgericht [Appellate Court] Frankfurt [translation available]

* ICC 1994 International Court of Arbitration, Case 7531 84A [English text]

* ICC 1994 International Court of Arbitration, Case 7660 84A [English text]
 

China 20 July 1993 CIETAC Arbitration Award [CISG/1993/10] (Shaping machine case) 84A [translation available]

China 25 February 1993 CIETAC Arbitration Award [CISG/1993/05] (Terylene texturing machine case) 84A [translation available]

* ICC 1993 International Court of Arbitration, Case 6653 84A [translation available]
 

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

* China 30 October 1991 CIETAC Arbitration award 85A [translation available]
 

* Italy 24 November 1989 Pretura circondariale [District Court] Parma 84A [translation available]
 

Israel 11 March 1981 Supreme Court (Kalanit HaSharon v. Horwitz)

CASE DIGEST AND ANALYSIS
-   UNCITRAL's case law digest; and
-   An analysis of CISG jurisprudence

DIGEST OF ARTICLE 84 CASE LAW

Article 84: when it applies

1. Article 84 elaborates on the restitutionary obligations imposed on parties to a contract that has been validly avoided, as well as on the restitutionary obligations of a buyer that invokes its rights under article 46(2) to require the seller to deliver substitute goods.

2. Many decisions have awarded interest under article 84(1) on payments that a seller must refund to a buyer.[1] Such awards have frequently been made against a breaching seller in favor of a buyer that has avoided the contract.[2] Interest under article 84 has also been awarded to a breaching buyer who became entitled to a refund of payments when the aggrieved seller avoided the contract.[3] Article 84(1) has also been found to govern a buyer's claim for repayment of funds that a seller obtained under a bank guaranty for part of the price of goods covered by a canceled contract, even though the buyer's claim was based on principles of applicable national law (because it arose from the seller's dealing with the bank rather than the buyer) and not on restitutionary obligations under the Convention: the court reasoned that the buyer's claim, while not based on the CISG, was nevertheless a claim for a refund of the price in a transaction governed by the CISG, and thus came within the terms of article 84(1).[4] A court has also determined that a buyer is entitled to interest under article 84 even though it had not made a formal request for such interest in its pleadings.[5]

Rate of interest for awards under Article 84(1)

3. Like article 78, article 84(1) does not specify the rate of interest applicable to awards made under its authority. Many decisions have set the interest rate according to the dictates of national law, resulting in the imposition of a domestic statutory rate of interest.[6] Such decisions often invoke choice of law principles to determine the applicable national law,[7] and they frequently cite the directive in article 7(2) that issues within the scope of the CISG which are settled neither by its express provisions nor by the general principles on which it is based should be determined "in conformity with the law applicable by virtue of the rules of private international law."[8] On the other hand, interest has been awarded at the rate prevailing at the seller's place of business, for the reason that this is where sellers are likely to have invested the payments they must refund.[9] And an arbitral tribunal has awarded interest under article 84(1) on the basis of the rate used in international trade with respect to the currency of the transaction (eurodollars), leading to the application of London Inter-Bank Offered Rate (LIBOR),[10] although this aspect of the arbitration award was reversed on appeal because the parties had not been given sufficient opportunity to be heard on the question of the proper interest rate.[11] Some courts appear to have awarded avoiding buyers damages under article 74 in the amount of foreseeable finance charges that the buyer incurred in order to finance payment for the goods, in lieu of interest under article 84.[12]

Time periods for which interest is awarded under Article 84(1); currency and exchange rate considerations

4. Article 84(1) specifies that, when the seller must refund payments made by the buyer, it must pay interest "from the date on which the price was paid." Many decisions have in fact awarded interest from this date.[13] Where payment was made on behalf of the buyer by a guarantor bank and the buyer reimbursed the bank, the buyer was awarded interest from the date that the guarantor made payment.[14] In the case of partial contract avoidance, it has been determined that interest is due from the time that the buyer paid for goods covered by the avoided portion of the contract.[15] Article 84(1) does not state the date as of which interest should cease accruing, but it has been determined that interest accrues until the time that the price is in fact refunded.[16] It has also been determined that an avoiding buyer's refund, including interest thereon, was due in the same currency as that in which the price was duly paid (even though the contract price was valued in a different currency), and at the exchange rate that was specified in the contract for payment of the price to seller.[17]

Article 84(2)

5. Article 84(2) requires a buyer to account to the seller for benefits derived from goods that were delivered under a contract that was avoided, or from goods that the buyer is requiring the seller to replace pursuant to article 46(2). In both situations, the buyer is subject to the seller's claim for restitution of delivered goods. Thus under article 81(2), a buyer who is party to a contract that has been avoided (whether by the buyer or the seller) must make restitution of goods received under the contract. Under article 82, furthermore, if a buyer wishes either to avoid the contract or to require the seller to deliver substitute goods pursuant to article 46(2), the buyer must make restitution of goods already delivered "substantially in the condition in which he received them," unless one of the exceptions in article 82(2) applies. Article 84(2), in turn, requires the buyer to "account to the seller for all benefits which he has derived from the goods or part of them" whenever the buyer is obligated to make restitution of the goods (art. 84(2)(a)), and whenever the buyer successfully avoids the contract or requires the seller to deliver substitute goods despite being unable to make restitution of the original goods substantially in the condition in which they were received (i.e., when, under art. 82(2), an exception from the restitutionary requirement in art. 82(1) applies).

8. Article 84(2) appears to have been subject to considerably fewer decisions than article 84(1). Article 84(2) has been characterized in general as requiring, when it applies, that the buyer "account to the seller the exchange value of all benefits which the [buyer] has derived from the goods or part of them."[18] It has been stated that the burden of proving the amount of benefits for which the buyer must account under article 84(2) falls to the seller.[19] In line with this principle, the seller was found not to have carried its burden, and thus a lower court's award to the seller under article 84(2) was reversed, where it had only been shown that the buyer's own customer might in the future avoid its purchase of the goods in question (furniture that proved non-conforming): the court reasoned that proof of the possibility the buyer might obtain benefits from its customer's rescission was not sufficient to trigger the obligation to account for benefits under article 84(2), particularly where the extent of such possible benefits was also uncertain.[20] The court therefore found no proof that the buyer obtained benefits from the goods "because the use of defective furniture is not a measurable monetary benefit and would thus have to be considered as an imposed benefit."[21] Another decision indicated, in passing, that if a buyer had sold shoes received under a contract that it avoided, the buyer "would have had to account to the seller for any profit under article 84(2) CISG," which indicated to the court that the buyer's attempt to sell the shoes was merely an effort to mitigate the "negative effect for both sides" of the shoes lack of conformity, and should not be deemed an "acceptance" of the shoes as conforming.[22]

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. 103 [ICC Court of Arbitration, case No. 6653 of 26 March 1993, available online at <http://cisgw3.law.pace.edu/cases/936653i1.html>]; [FRANCE Cour d'appel [Appellate Court] Paris 6 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950406f1.html>]; [RUSSIA Arbitration Award case No. 1/1993 of 15 April 1994; available online at <http://cisgw3.law.pace.edu/cases/940415r1.html>]; [FRANCE Cour d'appel [Appellate Court] Aix-en-Provence 21 November 1996, available online at <http://cisgw3.law.pace.edu/cases/961121f1.html>]; CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] (see full text of the decision); CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997; available at <http://cisgw3.law.pace.edu/cases/970205s1.html>]; CLOUT case No. 302 [ICC Court of Arbitration, case No. 7660 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947660i1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>]; [ICC Court of Arbitration, case No. 9978 of March 1999, available online at <http://cisgw3.law.pace.edu/cases/999978i1.html>]; CLOUT case No. 136 [GERMANY Oberlandesgericht [Appellate Court] Celle 24 May 1995, available online at <http://cisgw3.law.pace.edu/cases/950524g1.html>]; CLOUT case No. 133 [GERMANY Oberlandesgericht [Appellate Court] München 8 February 1995, available online at <http://cisgw3.law.pace.edu/cases/950208g1.html>]; CLOUT case No. 261 [SWITZERLAND Bezirksgericht [District Court] Sanne 20 February 1997; available at <http://cisgw3.law.pace.edu/cases/970220s1.html>]; CLOUT case No. 293 [GERMANY Hamburg Arbitration award of 29 December 1998 available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>]; [CHINA CIETAC Arbitration Award of 30 October 1991; available online at <http://cisgw3.law.pace.edu/cases/911030c1.html>]; see also CLOUT case No. 313 [FRANCE Cour d'appel [Appellate Court] Grenoble 21 October 1999, available online at <http://cisgw3.law.pace.edu/cases/991021f1.html>] (indicating that avoiding buyer was entitled to interest under article 84 on the price to be refunded by breaching seller, but then declining jurisdiction over case). On the other hand, some courts appear to have awarded avoiding buyers damages under article 74 in the amount of foreseeable finance charges that the buyer incurred in order to finance payment for the goods, in lieu of interest under article 84; see CLOUT case No. 304 [ICC Court of Arbitration, case No. 7531 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947531i1.html>]; [FINLAND Käräjäoikeus [District Court] Kuopio 5 November 1996, available online at <http://cisgw3.law.pace.edu/cases/961105f5.html>].

2. [RUSSIA Arbitration Award case No. 1/1993 of 15 April 1994; available online at <http://cisgw3.law.pace.edu/cases/940415r1.html>]; CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] (see full text of the decision); CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997; available at <http://cisgw3.law.pace.edu/cases/970205s1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>]; [ICC Court of Arbitration, case No. 9978 of March 1999, available online at <http://cisgw3.law.pace.edu/cases/999978i1.html>]; CLOUT case No. 293 [GERMANY Hamburg Arbitration award of 29 December 1998 available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>]; [CHINA CIETAC Arbitration Award of 30 October 1991; available online at <http://cisgw3.law.pace.edu/cases/911030c1.html>]; CLOUT case No. 103 [ICC Court of Arbitration, case No. 6653 of 26 March 1993, available online at <http://cisgw3.law.pace.edu/cases/936653i1.html>]; [FRANCE Cour d'appel [Appellate Court] Paris 6 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950406f1.html>]. See also [FINLAND Käräjäoikeus [District Court] Kuopio 5 November 1996, available online at <http://cisgw3.law.pace.edu/cases/961105f5.html>] (apparently awarding buyer's actual finance charges as damages under article 74, not as interest under article 84); CLOUT case No. 90 [ITALY Pretura circondariale [Court of First Instance] Parma 24 November 1989, available online at <http://cisgw3.law.pace.edu/cases/891124i3.html>] (court applied CISG to transaction and held that buyer was entitled to avoid and recover payments from seller; it also awarded interest, but without citing article 84 and perhaps on the basis of national law); CLOUT case No. 302 [ICC Court of Arbitration, case No. 7660 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947660i1.html>] (court allows interest on buyer's partial refund claim for undelivered spare part parts, but does not specifically discuss whether buyer avoided this part of the contract).

3. CLOUT case No. 261 [SWITZERLAND Bezirksgericht [District Court] Sanne 20 February 1997; available at <http://cisgw3.law.pace.edu/cases/970220s1.html>].

4. CLOUT case No. 133 [GERMANY Oberlandesgericht [Appellate Court] München 8 February 1995, available online at <http://cisgw3.law.pace.edu/cases/950208g1.html>].

5. CLOUT case No. 103 [ICC Court of Arbitration, case No. 6653 of 26 March 1993, available online at <http://cisgw3.law.pace.edu/cases/936653i1.html>], where the court noted that article 84(1) is not clear on whether such a formal request for interest is required, but that the provision would be construed not to demand such a request, particularly in light of the fact that domestic law that would apply under article 7(2) to resolve matters not settled by the provisions of the CISG or its general principles did not require a formal request for interest. This portion of the decision was affirmed in [FRANCE Cour d'appel [Appellate Court] Paris 6 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950406f1.html>].

6. CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] (see full text of the decision); CLOUT case No. 302 [ICC Court of Arbitration, case No. 7660 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947660i1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>]; CLOUT case No. 136 [GERMANY Oberlandesgericht [Appellate Court] Celle 24 May 1995, available online at <http://cisgw3.law.pace.edu/cases/950524g1.html>]; CLOUT case No. 261 [SWITZERLAND Bezirksgericht [District Court] Sanne 20 February 1997; available at <http://cisgw3.law.pace.edu/cases/970220s1.html>]; CLOUT case No. 293 [GERMANY Hamburg Arbitration award of 29 December 1998 available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>]; CLOUT case No. 133 [GERMANY Oberlandesgericht [Appellate Court] München 8 February 1995, available online at <http://cisgw3.law.pace.edu/cases/950208g1.html>]; [RUSSIA Arbitration Award case No. 1/1993 of 15 April 1994; available online at <http://cisgw3.law.pace.edu/cases/940415r1.html>]; [FRANCE Cour d'appel [Appellate Court] Aix-en-Provence 21 November 1996, available online at <http://cisgw3.law.pace.edu/cases/961121f1.html>]; [ICC Court of Arbitration, case No. 9978 of March 1999, available online at <http://cisgw3.law.pace.edu/cases/999978i1.html>]. See also CLOUT case No. 90 [ITALY Pretura circondariale [Court of First Instance] Parma 24 November 1989, available online at <http://cisgw3.law.pace.edu/cases/891124i3.html>] (the court applied CISG to transaction and held that buyer was entitled to avoid and recover payments from seller; it also awarded interest at the domestic law statutory rate, but without citing article 84 and perhaps on the basis of national law); [CHINA CIETAC Arbitration Award of 30 October 1991; available online at <http://cisgw3.law.pace.edu/cases/911030c1.html>] (tribunal awards 8% interest on payments that seller must refund to avoiding buyer, but does not specify how it determined the rate).

7. CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] (see full text of the decision); CLOUT case No. 302 [ICC Court of Arbitration, case No. 7660 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947660i1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>]; CLOUT case No. 136 [GERMANY Oberlandesgericht [Appellate Court] Celle 24 May 1995, available online at <http://cisgw3.law.pace.edu/cases/950524g1.html>]; [ICC Court of Arbitration, case No. 9978 of March 1999, available online at <http://cisgw3.law.pace.edu/cases/999978i1.html>]; CLOUT case No. 261 [SWITZERLAND Bezirksgericht [District Court] Sanne 20 February 1997; available at <http://cisgw3.law.pace.edu/cases/970220s1.html>]; CLOUT case No. 293 [GERMANY Hamburg Arbitration award of 29 December 1998 available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>]; CLOUT case No. 133 [GERMANY Oberlandesgericht [Appellate Court] München 8 February 1995, available online at <http://cisgw3.law.pace.edu/cases/950208g1.html>].

8. CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] (see full text of the decision); CLOUT case No. 261 [SWITZERLAND Bezirksgericht [District Court] Sanne 20 February 1997; available at <http://cisgw3.law.pace.edu/cases/970220s1.html>]; CLOUT case No. 293 [GERMANY Hamburg Arbitration award of 29 December 1998 available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>] (see full text of the decision).

9. CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997; available at <http://cisgw3.law.pace.edu/cases/970205s1.html>] (see full text of the decision).

10. CLOUT case No. 103 [ICC Court of Arbitration, case No. 6653 of 26 March 1993, available online at <http://cisgw3.law.pace.edu/cases/936653i1.html>].

11. [FRANCE Cour d'appel [Appellate Court] Paris 6 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950406f1.html>].

12. See CLOUT case No. 304 [ICC Court of Arbitration, case No. 7531 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947531i1.html>]; [FINLAND Käräjäoikeus [District Court] Kuopio 5 November 1996, available online at <http://cisgw3.law.pace.edu/cases/961105f5.html>].

13. [RUSSIA Arbitration Award case No. 1/1993 of 15 April 1994; available online at <http://cisgw3.law.pace.edu/cases/940415r1.html>]; CLOUT case No. 253 [SWITZERLAND Cantone del Ticino [Appellate Court] Lugano 15 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980115s1.html>] (see full text of the decision); CLOUT case No. 214 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 5 February 1997; available at <http://cisgw3.law.pace.edu/cases/970205s1.html>] (advance payment); CLOUT case No. 302 [ICC Court of Arbitration, case No. of 1994, available online at <http://cisgw3.law.pace.edu/cases/947660i1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>]; CLOUT case No. 136 [GERMANY Oberlandesgericht [Appellate Court] Celle 24 May 1995, available online at <http://cisgw3.law.pace.edu/cases/950524g1.html>]; CLOUT case No. 261 [SWITZERLAND Bezirksgericht [District Court] Sanne 20 February 1997; available at <http://cisgw3.law.pace.edu/cases/970220s1.html>] (award of interest to breaching buyer on refund from avoiding seller); CLOUT case No. 293 [GERMANY Hamburg Arbitration award of 29 December 1998 available online at <http://cisgw3.law.pace.edu/cases/981229g1.html>]; [CHINA CIETAC Arbitration Award of 30 October 1991; available online at <http://cisgw3.law.pace.edu/cases/911030c1.html>]; CLOUT case No. 312 [FRANCE Cour d'appel [Appellate Court] Paris 14 January 1998, available online at <http://cisgw3.law.pace.edu/cases/980114f1.html>] (see full text of the decision). But see CLOUT case No. 90 [ITALY Pretura circondariale [Court of First Instance] Parma 24 November 1989, available online at <http://cisgw3.law.pace.edu/cases/891124i3.html>] (court applied CISG to transaction and held that buyer was entitled to avoid and recover payments from seller; it awarded interest from the date of avoidance, but without citing article 84 and perhaps on the basis of national law).

14. [FRANCE Cour d'appel [Appellate Court] Aix-en-Provence 21 November 1996, available online at <http://cisgw3.law.pace.edu/cases/961121f1.html>]; [FRANCE Cour de Cassation [Supreme Court] 26 May 1999, available online at <http://cisgw3.law.pace.edu/cases/990526f1.html>].

15. CLOUT Case No. 103 [ICC Court of Arbitration, case No. 6653 of 26 March 1993, available online at <http://cisgw3.law.pace.edu/cases/936653i1.html>]; [FRANCE Cour d'appel [Appellate Court] Paris 6 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950406f1.html>].

16. [RUSSIA Arbitration Award case No. 1/1993 of 15 April 1994; available online at <http://cisgw3.law.pace.edu/cases/940415r1.html>].

17. CLOUT case No. 302 [ICC Court of Arbitration, case No. 7660 of 1994, available online at <http://cisgw3.law.pace.edu/cases/947660i1.html>].

18. CLOUT case No. 165 [GERMANY Oberlandesgericht [Appellate Court] Oldenburg 1 February 1995, available online at <http://cisgw3.law.pace.edu/cases/950201g1.html>] (see full text of the decision).

19. Id. (see full text of the decision).

20. Id. (see full text of the decision).

21. Id. (see full text of the decision).

22. [GERMANY Amtsgericht [Lower Court] Charlottenburg 4 May 1994, available online at <http://cisgw3.law.pace.edu/cases/940504g1.html>].

Reprinted by special permission of Northwestern University School of Law. 34 Northwestern Journal of International Law and Business (Winter 2004) 299-440.[*]

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4. Effects of Avoidance: Articles 81-84

The effects of avoidance are set forth in Articles 81, 83, and 84. [799] Avoidance of the contract releases both parties from their obligations subject to any damages attributed to them.[800] Additionally, a party who has wholly or partially performed the contract may claim restitution from the other party consisting of whatever has been paid or supplied under the contract.[801] Articles 83 and 84 also contain provisions setting forth specific [page 426] rights and liabilities of buyers and sellers. For example, if it is impossible to return the goods in the same condition in which the buyer received them, a buyer is not entitled to avoid the contract.[802] A buyer who has lost the right to declare the contract avoided or to require the seller to deliver substitute goods in accordance with Article 82 retains all other remedies set forth in the contract and under the provisions of the CISG.[803]

As discussed in the coverage of notice of non-conformity,[804] a party must declare a contract avoided in a timely fashion. This duty of timely avoidance can be implied from Article 49's language that the non-breaching party must declare avoidance "within a reasonable time."[805] A German court looked to the general principles of the CISG in fashioning the principle of timely avoidance. It held that a plaintiff's attempt to declare a contract avoided after 2 years was a violation of the principle of good faith contained in Article 7(1) CISG.[806]

Under Article 83, the loss of the right to declare the contract avoided or to require the seller to deliver substitute goods does not deprive the buyer of the right to claim damages, to require that any defects be cured, or to declare a reduction in price.[807] In addition, Article 84 states that if the seller is required to refund the price "he must also pay interest from the date on which the price was paid."[808] Despite this reference to the payment of interest, the CISG does not specify how the applicable interest rate is to be determined.[809] A Swiss court offered a reasonable answer by holding the rate of interest the seller had to pay was determined on the basis of the prevailing rate of interest at the seller's place of business.[810] [page 427]

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FOOTNOTES

* For a subsequent text on this subject by these authors, see Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene, Virginia Maurer & Marisa Pagnattaro, "International Sales Law: A Critical Analysis of CISG Jurisprudence", Cambridge University Press (2005) 241 p.

[...]

799. CISG, supra note 4, at arts. 81, 83-84. For a general discussion of notice and avoidance, see Ericson P. Kimbel, Nachfrist Notice and Avoidance Under the CISG, 18 J.L. & Com. 301 (1999). See also Secretariat Commentary to art. 81, available at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-81.html>.

800. CISG, supra note 4, at art. 81(1).

801. Id. at art. 81(2). Note that if both parties are required to make restitution, they must do concurrently. Id. A classic illustration of this situation took place when a German buyer entered into a contract with a French seller for the delivery of sunflower oil. The buyer paid a timely installment for the first delivery, yet the seller did not ship the goods. Accordingly, the seller had to refund the price paid. OLG München 7 U 1720/94, supra note 701. This was also the case in a dispute involving multiple shipments of machines. OLG Celle 20 U 76/94, supra note 481. Because the first shipment contained only half of the machines specified by the contract, and the buyer had already paid a considerable part of the contract price before the shipment, the court found that the parties mutually terminated the contract. Accordingly, it found that the buyer's repayment claim was justified under Article 81(2). Id. See also ICC Court of Arbitration no. [9978], Mar. 1999, available at [<http://cisgw3.law.pace.edu/cases/999978i1.html>] [English text] (tribunal found that the buyer was allowed to avoid the contract since non-delivery was a fundamental breach of contract and awarded restitution under Article 82, along with interest under Article 84).

802. CISG, supra note 4, at art. 82(2). See generally, OLG Koblenz 2 U 1899/89, Sept. 27, 1991 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/910927g1.html>.

803. CISG, supra note 4, at art. 83.

804. Supra Part V.B.1.

805. CISG, supra note 4, at art. 49(2).

806. OLG München 7 U 1720/94, supra note 701.

807. CISG, supra note 4, at arts. 45(a)(b), 46, 50 and 83.

808. Id. at art. 84(1). See generally OLG Celle 20 U 76/94, supra note 481. However, contrary to this provision with regard to the time of accrual of interest, an Italian court held that interest was payable from the date of avoidance of the contract. Foliopack Ag v. Daniplast S.p.A., Pretura circondariale [Court of First Instance] [PR] di Parma, sez. di Fidenza Nov. 24, 1989, 77/89 (It.), available at <http://cisgw3.law.pace.edu/cases/891124i3.html> [English translation by Hanz G. Chiappetta, translation edited by Angela Maria Romito].

809. ICC International Court of Arbitration no. 7197, supra note 745.

810. HG Zürich, HG 950347, Feb. 5, 1997 (Switz.), CLOUT Case No. 214, available at [<http://cisgw3.law.pace.edu/cases/970205s1.html>].

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