2008 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods
Digest of Article 54 case law [reproduced with permission of UNCITRAL] [*]
[Text of article
Scope of the buyer's obligation
Currency of payment]
The buyer's obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.
1. This provision deals with actions preparatory to payment of the price which are specified in the contract or in applicable laws and regulations. For example, the contract may provide for the opening of a letter of credit, the establishment of security for or a bank guarantee of payment, or the acceptance of a bill of exchange. Preparatory actions required under applicable laws or regulations might include, for example, an administrative authorization needed to transfer funds.
2. Article 54 has two important effects. First, unless otherwise specified in the contract article 54 assigns responsibility for the tasks it references to the buyer, who must thus bear the costs thereof. Indeed, one court decision suggests that the costs associated with payment are generally the responsibility of the buyer. Furthermore, the steps for which the buyer is responsible under article 54 are obligations, violation of which permits the seller to resort to the remedies specified in articles 61 et seq.; they are not considered merely conduct in preparing to perform or in performing the contract as described in article 71(1)). Thus failure to perform those steps constitutes a breach, not merely a factor in a possible anticipatory breach of contract.
Scope of the buyer's obligations
3. The question arises whether article 54 merely obliges the buyer to perform the steps necessary to satisfy the pre-conditions for payment, but does not make the buyer responsible for the result, or whether the buyer breaches his obligations if the necessary outcome is not attained. A number of decisions follow the principle that the buyer is in breach of an obligation to provide a letter of credit if he does not deliver the letter of credit opened on behalf of the seller, without inquiring into the efforts the buyer undertook.
4. Questions arise under article 54 with regard to administrative measures that may be required under applicable laws or regulations in order to effect payment. Under one possible interpretation of article 54, a distinction should be drawn between measures of a commercial nature, as to which the buyer assumes a commitment to achieve the needed result, and administrative measures, with regard to which the buyer takes on only an obligation to employ best efforts. The rationale for the distinction is that the buyer cannot guarantee, for example, that administrative authorities will approve a transfer of funds, so that the buyer should only be obliged to carry out the steps needed to obtain the relevant administrative authorization. The argument against this distinction is that, under article 54, the buyer is responsible as a matter of law if a prerequisite to payment, whatever its nature, is not satisfied, subject to the possibility of exemption under article 79 of the Convention.
Currency of payment
5. Article 54 says nothing about the currency of payment. On this issue the intention of the parties is the primary consideration (article 6), along with commercial usages (article 9(2)) and any practices the parties have established between themselves (article 9(1)). In those cases where the currency of payment cannot be determined by reference to these considerations, the appropriate approach is unclear.
6. Most decisions refer to the currency of the seller's place of business or to the currency of the place where payment is to be made. These decisions tend to rely on the general principles on which the Convention is based (article 7(2)), and thus to define the currency of payment as the currency where the seller's place of business is located, since this is generally the place where the obligation to pay the price is discharged (article 57) and the place where delivery of the gods occurs (article 31(c)). One court, however, has held that the currency of payment should be determined by the law applicable to matters beyond the scope of the Convention.
* This presentation of the UNCITRAL Digest is a slightly modified version of the original UNCITRAL text at <http://www.UNCITRAL.org/pdf/english/clout/CISG_second_edition.pdf>. The following modifications were made by the Institute of International Commercial Law of the Pace University School of Law:
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1. [GERMANY Landgericht Duisburg 17 April 1996 (Textiles case)], concerning costs associated with payment of the price by cheque.
2. [AUSTRALIA Supreme Court of Queensland 17 November 2000 (Scrap steel case)].
3. [AUSTRALIA Supreme Court of Queensland 17 November 2000 (Scrap steel case)]; [AUSTRIA Oberster Gerichtshof 6 February 1996 (Propane case)] (the buyer, however, was not deemed in breach of its obligations because the seller failed to indicate the port of embarkation, and that fact was needed, under the contract, for establishing the letter of credit); [ICC International Court of Arbitration, Award 7197 of 1992 (Failure to open letter of credit and penalty clause case)]; [CHINA Xiamen Intermediate People's Court 31 December 1992 (Fish meal case)]. Similarly, it was decided in arbitration that a buyer who failed to effect payment for equipment delivered was liable if he merely gave instructions to his bank to make a transfer to the seller, but had not ensured that the payment would in fact be made in convertible currency: see [RUSSIA Arbitration-Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 123/1992 of 17 October 1995 (Equipment / automatic diffractameter case)].
4. See [GERMANY Kammergericht Berlin 24 January 1994 (Wine case)], (see full text of the decision) (in case of doubt, the currency of payment is that of the place of payment); [GERMANY Oberlandesgericht Koblenz 17 September 1993 (Computer chip case)] (currency of the place where the seller has his place of business is the currency in which the price should be paid); [HUNGARY Fovárosi Biróság 24 March 1992], (court compelled the buyer to pay the seller in the seller's currency without stating a reason). See also the Digest for art. 57, para. 3.
5. [SWITZERLAND Tribunal Cantonal du Valais 30 June 1998 (Granite stones case)].