UNCITRAL Digest of Article 84 case law

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>].