CROSS-REFERENCES AND EDITORIAL ANALYSIS

Article 44


Editor:

Joseph Lookofsky[*]


Article 44 of the CISG provides the buyer with certain remedies for a seller's breach even though that buyer fails to comply with the notice provisions of articles 39(1) and 43(1). Article 44 applies in cases where the buyer has a "reasonable excuse" for his failure to give the required notice.

An exception to the main rules in articles 39(1) and 43(1)

Article 44 serves as an exception to the main rules in articles 39(1) and 43(1). In order to understand the scope of the exception, consideration must first be given to the scope of the main rules. Both main rules provide that buyers who fail to notify of an alleged breach lose the "right to rely" on such breach. As explained more fully below, the distinction between these rules is that article 39(1) applies in cases where the seller fails to deliver goods which conform to the contract under article 35, whereas article 43(1) applies in cases where the seller's breach relates to third-party claims under articles 41 and 42.

Article 39(1) sets forth the consequences of buyer's failure to give notice of non-conforming goods under article 35. Article 39(1) must, in turn, be read against the background of article 38, which provides a general time frame for the inspection of delivered goods. Under article 38, the buyer's inspection must take place as soon as practicable after delivery. If buyer then discovers that the goods do not conform in some specific respect, article 39(1) requires that she notify seller of such non-conformity within a reasonable time. If she does not provide the seller with such timely and specific notice, she loses "the right to rely" on the lack of conformity. As a starting point, at least, the buyer loses the right to assert any and all of the various remedies otherwise provided under the Convention for seller's breach: the right to require performance under article 46, the right to avoid under article 49, the right to claim damages under articles 45(1)(b) and 74-77, or a proportionate price reduction under article 50 (see footnote 1).

Article 43(1) sets forth the consequences of a buyer's failure to give notice regarding a breach which relates to the right or claim of a third party. If the buyer becomes aware of a conflicting third-party right or claim, article 43(1) requires that she notify the seller within a reasonable time. If she does not provide the seller with such timely and specific notice, she loses "the right to rely" on the provisions of article 41 or 42. As a starting point, at least, the buyer loses the right to assert all the various remedies otherwise provided under the Convention for seller's breach: the right to require performance, the right to avoid, the right to claim damages, and -- at least arguably -- the right to a proportionate reduction in price (see footnote 2).

Article 44 modifies the starting points set forth in both article 39(1) and article 43(1). Article 44 provides, in other words, an exception to the two main rules: "Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1) of article 43, the buyer may reduce the price in accordance with article 50 or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the required notice."

Thus, a buyer who has a "reasonable excuse" for his failure to notify does not lose all of the right to rely: such buyer, while still losing the right to require performance and the right to avoid, retains the right to a proportionate reduction in price (at least in the case of an article 35 breach: see preceding note) as well as a limited right to claim damages (i.e., except for loss of profit under article 74, which remains lost by virtue of the failure to notify). The two-year cut-off rule in article 39(2) remains unaffected by article 44.

Although article 44 does not refer directly to article 38, it seems reasonable to extend the protection afforded in cases of "reasonable excuse" to comprise the buyer's failure to inspect on time. The effects of article 44 might, on the other hand, be offset somewhat by the mitigation rule in article 77 (see footnote 3).

Excuses that might be regarded as "reasonable"

The most difficult question is to determine which kinds of excuses might be held "reasonable" so as to afford buyers with relief in a given case. The legislative history of the Convention suggests that article 44 was drafted to meet what representatives from developing countries saw as the drastic consequences of a failure to notify under article 39(1), and it has been suggested that buyers in less developed regions may be among those likely to enjoy the benefits of a "reasonable excuse" (see footnote 4). While this surely ought not be taken to mean that article 44 should be interpreted differently for parties situated in developing regions, it might (e.g.) be held that a party residing in an area where transportation and communication systems are less than well-developed might have a "reasonable" excuse for the failure to discover and notify of a defect as promptly as might otherwise (elsewhere) be expected.

Two caveats

In any event, it should be noted that article 44 does not affect to the two-year cut-off rule in article 39(2). Even a buyer with a "reasonable excuse" will lose "the right to rely on a lack of conformity [under article 35] if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee."

Finally, whereas the parties are, in principle, free to "contract out" of article 44 (by virtue of CISG article 6), any significant dilution of the buyer's article 44 rights might well be subjected to special scrutiny by the tribunal concerned, particularly if the buyer's bargaining position is weak and/or if the seller has drafted the clause in question (see footnote 5).


FOOTNOTES

* Professor of Law, University of Copenhagen.

1. Regarding buyer's remedies for seller's breach, see generally Joseph Lookofsky, Understanding the CISG in the USA (1995), Chapter 6B. See also Lookofsky, The 1980 United Nations Convention on Contracts for the International Sale of Goods (monograph) in International Encyclopedia of Laws, Contracts (1993).

2. Professor Honnold (Uniform Law for International Sales (2d ed.) p. 397) argues that article 50 (concerning proportionate price reduction) should not apply to breaches involving third-party claims under articles 41 and 42; and if Honnold is right, then Article 44 could not preserve buyer's "right to rely" on article 50 in the case of a third-party claim. But at least some national sales laws (e.g., those in Scandinavia) are applied so as to permit buyers a proportionate price reduction in appropriate cases involving (limited) third-party claims, and it seems likely that CISG article 50 would be similarly applied: either directly, by analogy or by using the CISG "general principle" technique. Regarding recent, increasingly expansive applications of article 7(2), see Joseph Lookofsky, Understanding the CISG in the USA (1995) [[section]] 2-11.

3. Accord: John O. Honnold, Uniform Law for International Sales (2d ed.) p. 339, citing the first edition of the von Caemmerer/Schlechtriem Kommentar at 71. See now: the commentary on article 44 by Ulrich Huber in von Caemmerer and Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht - CISG, 2d ed. (1995).

4. John O. Honnold, Uniform Law for International Sales (2d ed.) p. 338.

5. Regarding "agreed remedies" under the CISG, see generally Joseph Lookofsky, Understanding the CISG in the USA (1995) Chapter 7.


Pace Law School Institute of International Commercial Law - December 1996