UNCITRAL Digest of Article 76 case law

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).