Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

EDITORIAL REMARKS
Delchi Carrier S.p.A. v. Rotorex Corp.

U.S. Court of Appeals (2nd Circuit) 6 December 1995

Editorial remarks also reproduced at
Pace International Law Review (1997) 187-222

EDITOR: Albert H. Kritzer

Issues discussed:

Applicability/Choice of law (agreement silent). The CISG was held applicable to a contract for the sale of goods concluded between a seller from the U.S. and a buyer from Italy at a time when this Convention was in effect in both countries. The Circuit Court of Appeals stated:

"Generally, the CISG governs sales contracts between parties from different signatory countries. However, the Convention makes clear that the parties may by contract choose to be bound by a source of law other than the CISG, such as the Uniform Commercial Code. See CISG art. 6 (`The parties may exclude the application of this Convention or . . . derogate from or vary the effect of any of its provisions.') If, as here, the agreement is silent as to choice of law, the Convention applies if both parties are located in signatory nations. See CISG art. 1."

Conformity to contract. The Circuit Court of Appeals stated:

"Under the CISG, `[t]he seller must deliver goods which are of the quantity, quality and description required by the contract,' and `the goods do not conform with the contract unless they . . . [p]ossess the qualities of goods which the seller has held out to the buyer as a sample or model.' CISG art. 35. The CISG further states that `[t]he seller is liable in accordance with the contract and this Convention for any lack of conformity.' CISG art. 36."

This case involved the supply of compressors for use by buyer in the manufacture of air conditioners. The District Court held: "[T]here is no question that [seller's] compressors did not conform to the terms of the contract between the parties. . . . There are ample admissions [by the seller] to that effect." The Circuit Court of Appeals stated: "We agree. . . . There was . . . no genuine issue of material fact regarding liability . . ."

Fundamental breach/Avoidance/Substitute goods, buyer's right to require. The Circuit Court of Appeals stated: "Under the CISG, if the breach is `fundamental' the buyer may either require delivery of substitute goods, CISG art. 46, or declare the contract [avoided], CISG art. 49, and seek damages." Quoting Article 25, the Circuit Court stated: "[T]he District Court held that "[t]here appears to be no question that [buyer] did not substantially receive that which [it] was entitled to expect' and that `any reasonable person could foresee that shipping nonconforming goods to a buyer would result in the buyer not receiving that which he expected and was entitled to receive.' Because the cooling power and energy consumption of an air conditioner compressor are important determinants of the product's value, the District Court's conclusion that [seller] was liable for a fundamental breach of contract under the Convention was proper."

Damages (issues addressed and types of damages allowed/disallowed): findings of fact and rulings of law.

SUMMARY OF FACTS (Circuit Court of Appeals). "In January 1988, [seller] agreed to sell 10,800 compressors to [buyer] for use in [buyer's] line of portable room air conditioners. The air conditioners were scheduled to go on sale in the spring and summer of 1988. . . . The compressors were scheduled to be delivered in three shipments before May 15, 1988.

"[Seller] sent the first shipment by sea on March 26. . . . [Seller] sent a second shipment of compressors on or about May 9. . . . While the second shipment was en route, [buyer] discovered that the first lot of compressors did not conform to the sample model and accompanying specifications. On May 13 . . . [buyer] informed [seller] that 93 percent of the compressors were rejected in quality control checks because they had lower cooling capacity and consumed more power than the same model and specifications. After several unsuccessful attempts to cure the defects in the compressors, [buyer] asked [seller] to supply new compressors conforming to the original sample and specifications. [Seller] refused . . .

"[On] May 23, 1988, [buyer] cancelled the contract [declared the contract avoided]. Although it was able to expedite a previously planned order of suitable compressors from Sanyo, another supplier, [buyer] was unable to obtain in a timely fashion substitute compressors from other sources and thus suffered a loss in volume of [air conditioner units] during the 1988 selling season."

RULING. The District Court held seller liable for breach of contract. The Circuit Court of Appeals affirmed this ruling.

BUYER'S DAMAGE CLAIMS ALLOWED/DISALLOWED (The opinion expresses costs and expenses in lire. These costs and expenses are expressed below [in dollars] (rounded off) and at the exchange rate the District Court assigned in accordance with New York law).

[$ 23,550] "[E]xpenses [buyer] incurred in attempting to remedy the nonconformity of the compressors". Allowed: District Court. Affirmed: Circuit Court.

[$407,750] "[T]he cost of expediting shipment of previously ordered Sanyo compressors after [buyer] rejected the [nonconforming] compressors". Allowed: District Court. Affirmed: Circuit Court. In an act the court approved as mitigation of damages, instead of paying [$12,550] for the sea shipment of compressors previously ordered from another source, buyer spent [$420,000] to have them shipped by air.

[$ 15,250] "[S]hipping, customs, and incidentals relating to the two shipments of [nonconforming] compressors". Disallowed: District Court. Reversed: Allowed, Circuit Court.

[$ 10,650] "[C]osts of handling and storing the rejected compressors". Allowed: District Court (with a portion of these damages based on a "reasonable estimate"). Affirmed: Circuit Court.

[$ 31,500] "[T]he cost of obsolete tooling purchased only for production of units with . . . compressors" purchased from seller. Disallowed: District Court. Reversed: Allowed, Circuit Court.

[$ 21,900] "[T]he cost of obsolete insulation and tubing that [buyer] purchased only for use with . . . compressors" purchased from seller. Disallowed: District Court. Reversed: Allowed, Circuit Court.

[$ 17,850] "[L]abor costs for four days when [buyer's] production line was idle because it had no compressors to install in the air conditioning units". Disallowed: District Court. Remanded for additional facts: Circuit Court.

[$ 1,650] "[T]he cost of modification of electrical panel for use with substitute Sanyo compressors". Disallowed: District Court ("[buyer] failed to prove that this cost was directly related to [seller's] breach"). Affirmed: Circuit Court.

[$806,750] "[L]ost profits resulting from a diminished sales level of [air conditioner] units". Allowed: District Court (lost profits on "unfilled orders" but not on "indicated orders" said to be speculative). Affirmed: Circuit Court.

These claims are discussed in two parts: the claim for [$407,750] (for steps buyer took to mitigate the loss); and other damages claims.

Damages (cost of expediting shipment of previously ordered Sanyo compressors after buyer rejected the nonconforming compressors supplied by seller)/Mitigation of damages/Cover

FINDINGS OF FACT (District Court)

[$407,750] "Seller was able to expedite shipment of previously ordered Sanyo compressors, thereby filling part of the void left by [seller's] breach. [Buyer] paid [$420,000] for accelerated air shipment of previously ordered Sanyo compressors. . . . Sea shipment of the Sanyo compressor would have cost [$12,550]."

CONCLUSIONS OF LAW

District Court: "Once [buyer's] attempts to remedy the nonconformity failed, it was entitled to expedite shipment of previously ordered Sanyo compressors to mitigate its damages. Indeed, [the] CISG requires such mitigation. . . . CISG article 77 (`A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss.'). The shipment of previously ordered Sanyo compressors did not constitute cover under . . . CISG article 75, because the Sanyo units were previously ordered, and hence cannot be said to have replaced the nonconforming . . . compressors. Nonetheless, [buyer's] action in expediting shipment of Sanyo compressors was both commercially reasonable and reasonably foreseeable, and therefore [buyer] is entitled to recover [$407,750] as the net cost of early delivery of Sanyo compressors ([$420,000] for air shipment less [$12,550] expected cost for ocean shipment)." Circuit Court of Appeals: Affirmed.

Article 77 states: "A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated." And the statutory source of a damages claim for mitigation expenses such as these is Articles 45 and 74.

Damages/Interpretation of the Convention/General principles of the Convention. Provisions of the CISG that are relevant to the court's review of the remaining damages issues include:

Article 7

"(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application . . .

"(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."

Article 74

"Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

THE COURT'S APPROACH. The court's syllogism was:

(1) Citing the importance of looking to the "language [of the] Convention", "the `general principles' upon which it is based" and the Convention's direction "that its interpretation be informed by its `international character' and the need to promote uniformity in its application";

(2) Reasoning that "[c]ase law interpreting analogous provisions of Article 2 of the Uniform Commercial Code (`UCC') may also inform where the language of the relevant CISG provisions tracks that of the UCC";

(3) The court looked to U.S. domestic law to interpret the CISG's rules on damages "[b]ecause there is virtually no U.S. case law on the Convention".

The quotations are from the Circuit Court's opinion. The District Court reasoned in a similar manner. This led to: references to "incidental damages", "probable consequence" and "reasonable certainty"; a reading into Article 74 of requirements that the damages be "directly attributable to "the other party's breach" and "reasonably envisioned by [both] parties"; and, when confronted with a gap in the CISG (no explicit direction as to the manner in which to handle direct and variable costs in computations of lost profits), reliance upon American authority.

The language of the District Court and the Circuit Court of Appeals on these subjects is:

To illustrate the court's drawings on domestic interpretations of damages issues: Citing McCormick, Farnsworth refers to "certainty" (later modified to "reasonable certainty)" as a "distinctive contribution of the American courts". E. Allan Farnsworth, "Farnsworth on Contracts" (1990), vol. III at 252. "Incidental damages" is a UCC phrase. UCC Section 2-715(1). "Probable consequence" is also not a CISG term. The CISG's term is "possible consequence". Etc.

AN ALTERNATIVE LINE OF REASONING. An alternative approach is to center on Articles 7 and 74. This would lead to a different type of reasoning. Examples of such reasoning are:

Domestic Law

Article 7

ADDITIONAL GUIDANCE. For further data on reasoning that centers on Article 7 and for citations to international case law and other aids to interpreting Article 74, researchers are invited to hypertext link to:

Fifty CISG cases that cite Article 74 are identified. Also provided are citations to thirty-six court rulings on Article 82 of the 1964 Hague Uniform International Sales Law (ULIS): relevant to the interpretation of the language contained in CISG Article 74 because CISG Article 74 was taken from (and is substantively identical to) ULIS Article 82.

CAVEAT. Notwithstanding Article 7's impetus to uniformity, there is a side to all proceedings -- procedural conceptions -- that can lead to rulings on certain matters in accordance with the law of the forum instead of the Convention.

Domestic regimes have different procedural conceptions. And, if under domestic law a matter is regarded as procedural, it has been customary to rule on it in accordance with the law of the forum.

"POSSIBLE" CONSEQUENCES. In damages proceedings, one encounters a spectrum of words and phrases that can apply to losses that may be the consequence of a breach of contract. They include: "certain", "reasonably certain", "probable" or "likely", "speculative" [a word the District Court used to procedurally preclude evidence on one of buyer's damages claims (testimony on "indicated orders" that failed to materialize as opposed to "unfilled orders" for which loss of profit was allowed)] or "unlikely" or "remote". To this spectrum, the CISG adds its own word, "possible". There is controversy among commentators as to its meaning.

Interest. The District Court stated: "[Buyer] is entitled to pre-judgment interest pursuant to . . . CISG Article 78. Because Article 78 does not specify the rate of interest to be applied, the court in its discretion awards [buyer] pre-judgment interest at the United States Treasury Bill rate as set forth in 28 U.S.C. § 1961(a)." The Circuit Court of Appeals affirmed this ruling without comment. Relevant issues include: rate of interest, and accrual of interest.

Article 78 states: "If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74."

The United States Code (law of the forum) states: "Interest shall be allowed on any money judgment in a civil case recovered in a District Court. . . . Such interest shall be calculated from the date of the entry of the judgment, at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of the judgment." 28 U.S.C. § 1961(a) (1988).

ACCRUAL OF INTEREST. Article 78 refers to interest on a "sum that is in arrears". Does this authorize pre-judgment interest? Commentators have reasoned as follows.

Also relevant is whether accrual of interest (rate of interest also) is regarded as a procedural or a substantive matter.

RATE OF INTEREST. The court allowed interest at a rate specified in a domestic statute that was apparently applied as the law of the forum. Alterative approaches are general principles of the Convention (Article 7(2), first part), or "in conformity with the law applicable by virtue of the rules of private international law" (Article 7(2), second part). The following is an excerpt from an arbitral award describing these alternatives and ruling in favor of the latter approach:

"Article 78 of the CISG, while granting the right to interest, is silent on the question of the applicable rate. In international writings and case law to date it is disputed:

whether the question is outside the scope of the Convention -- with the result that the interest rate is to be determined according to the domestic law applicable on the basis of the relevant conflict-of-laws rules or

whether there is a true gap in the Convention within the meaning of Article 7(2) so that the applicable interest rate should possibly be determined autonomously in conformity with the general principles underlying the Convention (see in this sense, for example, J. O. Honnold, "Uniform Sales Law, 2d edition (Deventer-Boston 1991) 525-526; ICC Arbitral Award No. 6653 (1993, 1040)." Arbitral Proceeding SCH-4318 of 15 June 1994 at the Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft of Austria, Unilex database 1995/II, D.1994-13 (English translation of German text).

That tribunal stated: "This second view is to be preferred, not least because the immediate recourse to a particular domestic law may lead to results which are incompatible with the principle embodied in Art. 78 of the CISG, at least in the cases where the law in question expressly prohibits the payment of interest. One of the general principles underlying the CISG is that of `full compensation' of the loss caused (cf. Art. 74 of the CISG). It follows that, in the event of failure by the debtor to pay a monetary debt, the creditor, who as a business person must be expected to resort to bank credit as a result of the delay in payment, should therefore be entitled to interest at the rate commonly practiced in its country with respect to the currency of payment, i.e., the currency of the creditor's country [Germany in this case] or any other foreign currency agreed upon by the parties [U.S. dollars in this case] . . . The information received from the Deutsche Bundesbank is that the average `prime borrowing rate' for U.S. dollars in Germany in the period in question was 6.25%. The interest due from the respondent should be calculated at that rate."

Exchange rates (date of conversion to dollars)/Foreseeability. A finding of fact was: "[Seller's] first shipment of compressors reached [buyer's] facility . . . on April 20, 1988". The District Court stated: "The parties do not dispute that the exchange rate in effect on April 20, 1988 is appropriate for converting damages from lire to dollars. This is in conformity with the New York `breach-day rule,' under which damages sustained in foreign currencies are converted as the rate of exchange prevailing on the date of breach. Middle East Banking v. State Street Bank Int'l, 821 F.2d 897, 902-903 (2d Cir. 1987). Thus damages shall be converted at the rate of 1,238 lire per one dollar. [Buyer's] total compensable damages equal 1,545,434,848 lire, or 1,248,331.87 dollars in principal, plus interest." The Circuit Court of Appeals affirmed this ruling without comment.

The "breach-day rule" selected by the court appears to be one of several approaches. In commenting on the time at which the loss to the injured party should be measured under Article 74, the closest counterpart to an Official Commentary on the language contained in Article 74 lists three alternatives. The Secretariat Commentary states: This language "gives no indication of the time . . . at which `the loss' to the injured party should be measured. Presumably it should be . . . at an appropriate point of time, such as the moment the goods were delivered [a "breach-day rule"], the moment the buyer learned of the non-conformity of goods, or the moment that it became clear that the non-conformity would not be remedied by the seller under [Article 37, 46, 47 or 48]." Official Records, p. 59, n. 2. For exchange-rate calculations, there may also be another alternative: the time of the conclusion of the contract. Referring to delay-in-payment exchange-rate case law under ULIS Article 82, Enderlein & Maskow state that "the loss suffered from a decline in the currency which occurred as a consequence of the delay in payment was predominantly rejected as not foreseeable." Fritz Enderlein & Dietrich Maskow, "International Sales Law" (Oceana 1992), 302.

Addendum


DELCHI V. ROTOREX, ADDITIONAL DATA

TWO KEY ARTICLES OF THE CISG AT ISSUE: 7(2) AND 74


Table of contents

CISG Article 7(2)

CISG Article 74

CISG Article 7(2)

ULIS antecedents

Article 17 (and Article 2) of the 1964 Hague Sales Convention (ULIS) contain the general rules for interpretation of the Convention considered by the UNCITRAL Working Groups that met to formulate the CISG.

ULIS Article 17

"Questions concerning matters governed by the present Law which are not expressly settled therein shall be settled in conformity with the general principles on which the present Law is based."

See also ULIS Art. 2: "Rules of private international law shall be excluded for the purpose of the application of the present Law, subject to any provision to the contrary in the said Law."

["ULIS was intended to be a self-contained law of sales, divorced from the surrounding law of the countries of the buyer and the seller, and especially divorced from the law of the forum in case of litigation. If there was a problem which fell within its general scope but which was not to turn to the law that would otherwise have governed the transactions." Eric E. Bergsten, "Basic Concepts of the UN Convention on the International Sale of Goods", Das UNCITRAL-Kaufrecht im Verleich zum Österreichischen Recht, Doralt ed. (Vienna 1985) 16.]

CISG Article 7(2)

"Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."

See also CISG Art. 7(1): "In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."

[CISG Article 7 "can be said to combine three different rules: . . . Interpretation of the Convention should be autonomous, in the sense that it should not depend on principles and concepts derived from any national legal system. In a similar spirit, the article provides for gap-filling through analogy, which shall be given priority over the application of national rules. At the same time, through reference to rules of private international law which point to national legal systems, it is admitted that all questions cannot be settled by the method of analogy." Jan Hellner, "Gap-filling by Analogy", Hjerner Festskrift (Stockholm 1990) 220.]

See also Rosenberg who refers to CISG Art. 7(2) as "a compromise more favourable to the supporters of Art. 17 of ULIS than its opponents". Mark N. Rosenberg "The Vienna Convention: Uniformity in Interpretation for Gap-filling -- An Analysis and Application", 20 Australian Bus. L.R. (1992) 450; and André Tunc, one of the chief architects of ULIS (retained to help UNCITRAL Working Groups make their transition from ULIS to the CISG). He stated: "[T]he application of domestic law or of the law indicated by the conflict rules of law or of the law indicated by the conflict rules of the lex fori would amount to precluding the application of the Uniform Law in many cases which the legislator and the parties themselves had wanted the law to cover. The application of the national law of the court hearing the case . . . would also render unachievable the desire that the rights and obligations of the parties be defined without recourse to a court. . . Recourse to the law designated by the rules of private international law would have the same effect and would introduce an additional element of uncertainty." André Tunc, Annex XIV to A/CN.9/WG.2/WP.6/Add.1, reported in Peter Winship, "Private International Law and the UN Sales Convention", 21 Cornell Int'l L.J. (1988) 827-828.

Guides to CISG Article 7(2)

Views of commentators are presented.

Winship states:

"Reference to private international law rules is the least problematic aspect of [Article 7(2)]. The true danger lies in courts unnecessarily resorting to these rules. The provision itself requires that before the rules are consulted, the reader must first find that there is a gap in the text, and then find that the Convention does not provide a clear answer. . . . If the reader is generous in his approach to the Convention text there should be little need to consult conflicts rules and then prove the applicable law. . . ." Peter Winship, Cornell Int'l L. J., op. cit. at 843.

Rosenberg states:

"Recourse may only be had to domestic law solutions when it is not possible to fill a gap by applying the general principles on which the Convention is based, or where no such principles exist. . . . In addressing these questions, tribunals must be conscious of the mandate in Art. 7(1) that regard is to be had to the international character of the Convention and the need to promote uniformity in its application. The temptation to adopt a domestic law analysis of the problem should be resisted. Tribunals must recognise the uniquely international nature of the Convention and its function as uniform law." Mark N. Rosenberg, Australian Bus. L.R., op cit. at 101.

Enderlein & Maskow similarly state:

"Gaps should be closed in the first place from within the Convention. This is in line with the aspiration to unify the law which, in a way, is established in the Convention itself (paragraph 3 of the preambular part, Article 7, paragraph 1) as one of its underlying principles. Such gap-filling can be done . . . by applying such interpretation methods as extensive interpretation and analogy. The admissibility of analogy is directly addressed in the wording contained in the CISG because it is aimed at obtaining, from several comparable rules, one rule for a not expressly covered fact and/or a general rule under which the fact can be subsumed. When one interpretation reaching this far beyond the wording of the law is expressly approved by the Convention's text, then this must all the more apply to an extensive interpretation. But it seems as though the Convention goes one step further permitting decisions which themselves go beyond analogy and reach into the area of a creative continuation of the development of the law. It also appears to be admissible under the Convention that decisions can be the result of principles which the Convention itself formulates and which do not necessarily have to be reflected in individual rules. . . ." Fritz Enderlein & Dietrich Maskow, International Sales Law (Oceana 1992) 58-59.

And Honnold states:

"[One should follow an approach] designed to reconcile the two competing values embodied in Article 7(2): (1) That the Convention should be developed in the light of its `general principles' and (2) that this development would be subject to limits. This approach responds to the reference in Article 7(2) to the principles on which the Convention `is based' by requiring that general principles to deal with new situations be moored to premises that underlie specific provisions of the Convention. Thus, like the inductive approach employed in case law development, the first step is the examination of instances regulated by specific provisions of the Convention. The second step is to choose between these two conclusions: (a) The Convention deliberately rejected the extension of these specific provisions; (b) The lack of a specific provision to govern the case at hand results from a failure to anticipate and resolve this issue. If the latter alternative applies, the third step is to consider whether the cases governed by the specific provisions of the Convention and the case at hand are so analogous that a lawmaker would not have deliberately chosen discordant results for the group of similar situations. In this event, it seems appropriate to conclude that the general principle embracing these situations is authorized by Article 7(2)." John O. Honnold. Uniform Law for Internatinal Sales Under the 1980 United Nations Convention, 2d ed. (Kluwer 1992) 155-156.

CISG Article 74

ULIS and other antecedents

Article 82 of the 1964 Hague Sales Convention (ULIS) contains the general rules for damages considered by the UNCITRAL Working Groups that met to formulate the CISG. This article passed through their sieve and that of the UNCITRAL Committee of the Whole that overviewed their work. Accompanied by an interpretive commentary commissioned by the United Nations General Assembly (the Secretariat Commentary), the general rule for damages contained in ULIS Article 82 was also approved by the delegates to the 1980 Diplomatic Conference at which the CISG was promulgated.

Following ten years of deliberations, ULIS Article 82 was adopted as CISG Article 74 with no substantive differences between these texts. For the citations to the Official Records of these proceedings, see the section of the Pace Internet database on the CISG reporting on the legislative history of its Article 74.

Comparison with CISG Article 74

ULIS Article 82 and CISG Article 74 compare as follows:


    ULIS Article 82                      CISG Article 74

    . . . damages for a breach of        Damages for breach of contract

    contract by one party shall          by one party consist of a sum 

    consist of a sum equal to the        equal to the loss, including

    loss, including loss of              loss of profit, suffered by

    profit, suffered by the other        the other party as a

    party.                               consequence of the breach.

    Such damages shall not exceed        Such damages may not exceed

    the loss which the party in          the loss which the party in

    breach ought to have foreseen        breach foresaw or ought to

    at the time of the conclusion        have foreseen at the time of

    of the contract, in the light        the conclusion of the

    of the facts and matters which       contract, in the light of the

    then were known or ought to          facts and matters of which he

    have been known to him as a          then knew or ought to have

    possible consequence of the          been known, as a possible

    breach of contract.                  consequence of the breach of

					 contract.

Antecedents to CISG Article 74/ULIS Article 82 Many commentators ascribe a common law parentage to ULIS Article 82/CISG Article 74. Hadley v. Baxendale, 156 Eng. Rep. 145 (1854), is frequently referred to as its source. Tunc, however, points out that the doctrine of foreseeability of damages is encountered in many legal systems. André Tunc, Commentary on the Hague Convention (The Hague 1966), Official Records at 92. And, quoting from the opinion in Hadley v. Baxendale ("the sensible rule appears to be that which has been laid down in France, and which is declared in their code -- Code Civil 1149, 1150 1151"), Ferrari traces the ancestry of the doctrine of foreseeability to long established rules (Code Napoléon, etc.) in effect in French-based legal systems. Franco Ferrari, "Comparative Ruminations on the Foreseeability of Damages in Contract Law," 53 Louisiana Law Review (1993) 1257 at 1267, 1268.

Guides to the language contained in CISG Article 74

Guides to the language contained in CISG Article 74 are to be found in scholarly writings on this subject and in case law on ULIS Article 82 and CISG Article 74.

Scholarly writings

Among the several thousand scholarly writings on the CISG are many that provide guidance on the proper interpretation of the language contained in CISG Article 74. Several are listed below, in chronological order.

TEXTS PUBLISHED IN ENGLISH

1966 André Tunc, Commentary on the Hague Conventions on the 1st of July 1964 on International Sale of Goods and the Formation of the Contract of Sale/Commentaire sur les Conventions de La Haye du 1er juillet 1964 sur la Vente Internationale des objets mobiliers corporels et la Formation du contrat de vente, in Ministry of Justice of the Netherlands (ed.), Diplomatic Conference on the Unification of Law Governing the International Sale of goods (The Hague, 2-25 April 1964) - Records and Documents of the Conference, Vol. 1 - Records, The Hague (Government) 1966, 355-391

1979 Secretariat Commentary, Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna 10 March - 11 April 1980, A/CONF. 97/19 at 14-66

[These two commentaries merit special attention as they are part of the Official Records of the conventions they interpret. The Secretariat Commentary that interprets the language of CISG Article 74 may be accessed on the Pace Internet database on the CISG.]

1979 E. Allan Farnsworth, "Damages and Specific Relief," 27 Am. J. Comp. L. (1979) 247-253

1981 Jacob S. Ziegel, "Analysis from a Provincial Common Law Perspective", in Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods 143-144 (on file at Faculty of Law Library University of Toronto) [this commentary may also be accessed on the Pace Internet database on the CISG]

1984 Nina M. Galston & Hans Smit, eds., "International Sales: The United Nations Convention on Contracts for the International Sale of Goods" (New York: Matthew Bender) [commentary by Jacob S. Ziegel], Ch. 9 pp. 36-42

1986 Petar Sarcevic & Paul Volken, eds., "International Sale of Goods: Dubrovnik Lectures" (New York: Oceana) [commentaries by Leif Sevón and Jelena Vilus], pp. 235, 246-250

1986 Peter Schlechtriem, "Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods" (Vienna: Manz) p. 97

1987 Massimo C. Bianca & M. Joachim Bonell, "Commentary on the International Sales Law" (Milan: Giuffré [commentary by Victor Knapp], pp. 538-548

1989 Joseph Lookofsky, "Consequential Damages in Comparative Context: From Breach of Promise to Monetary Damages in the American, Scandinavian and International Law of Contracts and Sales", (Jurist-og Økonomforbunded, København) 23-27, 101, 197-199, 255-288

1989 Arthur G. Murphey, "Consequential Damages in Contracts for the International Sale of Goods and the Legacy of Hadley", 23 Geo. Wash. J. Int'l L. & Econ. 415-474

1989 Jeffrey S. Sutton, "Measuring Damages under the United Nations Convention on the International Sale of Goods", 50 Ohio St. L. J. 737-752

1991 John O. Honnold, "Uniform Law for International Sales Under the 1980 United Nations Convention" 2d ed. (Deventer: Kluwer Law International), pp. 503-506 [Honnold is the most frequently cited authority on the CISG]

1992 Fritz Enderlein & Dietrich Maskow, "International Sales Law, United Nations Convention on Contracts for the International Sale of Goods - Convention on the Limitation Period in the International Sale of Goods" (New York: Oceana), pp. 207-302

1993-94 Albert H. Kritzer "Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods" (Deventer: Kluwer Law International) [looseleaf text containing excerpts from the above and other commentaries], Detailed Analysis, pp. 581-592

LITERATURE IN OTHER LANGUAGES

There is also an abundance of scholarly writings on CISG Articles in other languages. They include books (doctoral theses) on Article 74, e.g., Norbert Kranz, diss. Hamburg (Lang: European University Studies 1989) 286 p.; and Gritli Ryffel, diss. Zürich (Lang 1992), 155 p., and much other material. In Germany, a commentary that is frequently cited is:

1994 "Kommentar zum Einheitlichen UN-Kaufrecht, Ernst von Caemmerer & Peter Schlechtriem, eds., 2d ed. (München: Beck) [commentary by Hans Stoll] pp. 624-645 [an English translation is scheduled for publication by Oxford University Press]

Guides to the language contained in CISG Article 74: case law

Case law on both ULIS Article 82 and CISG Article 74 can assist in the interpretation of the language of CISG Article 74.

ULIS ARTICLE 82 CASE LAW

A good source of information on ULIS case law interpreting the language of CISG Article 74 is Peter Schlechtriem/Ulrich Magnus, Internationale Rechtsprechung zu EKG und EAG. Eine Sammlung belgischer, deutscher, italienischer, israelischer und niederländischer Entscheidungen zu den Haager Einheitlichen Kaufgesetzen (Baden-Baden 1987), 410-438. See also Peter Schlechtriem, "Einheitliches Kaufrecht, Erfarhungen mid den Haager Kaufgesetzen-Folgerungen für das Wien UN-Kaufrecht", Österreichisches Recht der Wirtschaft (1989/2a, 51 et seq.).

The following ULIS Article 82 cases are reported in Internationale Rechtsprechung:

Supreme Court [Germany] 24 October 1979, VIII ZR 210/78 at 410-415
Supreme Court (Israel) 10 October 1982 (Harlo & John's Ltd. v. Adams) at 415 and 449-453
LG Konstanz [District Court Germany] 1976, 3 HO 376 at 415 and 465-466
LG Konstanz [District Court Germany] 15 July 1976, 3 HO 18/76 at 416 and 339-340
LG Siegen [District Court Germany] 15 October 1976, 1 O 173/75 at 416 and 388-389
LG Münster [District Court Germany] 24 May 1977, 76 O 142/75 at 416-418
LG Münster [District Court Germany] 25 August 1977, 76 O 157/75 at 418 and 202-204
OLG Hamm [Appellate Court Germany] 23 March 1978, 2 U 30/77 at 418-421
OLG Hamm [Appellate Court Germany] 6 April 17 1978, 2 U 256/77 at 421 and 59-64
LG München [District Court Germany] 12 May 1978, 6 HKO 17 595/77 at 421 and 440-441
OLG München [Appellate Court Germany] 18 October 1978, 7 U 2762178 at 422-423
OLG Hamm [Appellate Court Germany] 7 December 1978, 2U 35/78 at 423-424
OLG Hamm [Appellate Court Germany] 29 January 1978, 2 U 12/77 at 424 and 333-337
LG Konstanz [District Court Germany] 18 October 1979, 3 HO 45/79 at 424 and 46-48
LG Konstanz [District Court Germany] 6 December 1979, 3 HO 104/79 at 424 and 252-254
LG Essen [District Court Germany] 10 June 1980, 45 O 237/79 at 425-426
OLG Hamm [Appellate Court Germany] 26 June 1980, 2 U 28/80 at 426-429
LG Konstanz [District Court Germany] 14 July 1980, 3 HO 38/80 at 429
LG Heidelberg [District Court Germany] 27 January 1981, O 116/81 at 429-432
LG Heidelberg [District Court Germany] 21 April 1981, O 216/80 KfH I at 432 and 257-260
OLG Düsseldorf [Appellate Court Germany] 25 June 1981, 6 U 5781 at 433-434
LG Dortmund [District Court Germany] 23 September 1981, 10 O 68/80 at 434 and 307-308
LG Bonn [District Court Germany] 21 April 1982, 12 O 154/81 at 434 and 147-149
LG Heidelberg [District Court Germany] 23 September 1982, O 39/82 KfH II at 434 and 369
OLG Düsseldorf [Appellate Court Germany] 20 January 1983, 6 U 206/77 at 435 and 400-406
LG Konstanz [District Court Germany] 3 March 1983, 3 HO 55/83 at 435 and 446-447
OLG Hamm [Appellate Court Germany] 14 November 1983, 2 U 26/83 at 435 and 159-160
OLG Koblenz [Appellate Court Germany] 23 December 1983, 2 U 1186/82 at 435 and 71-72
Rb Arnhem [District Court Netherlands] 16 February 1984, 1983/1200 at 435-436
OLG Celle [Appellate Court Germany] 2 March 1984, 15 U 78/83 at 436 and 337-339
OLG Koblenz [Appellate Court Germany] 16 March 1984, 2 U 1719/82 at 436 and 46
LG Konstanz [District Court Germany] 10 May 1984, 3 HO 2/84 at 436 and 234-236
OLG Frankfurt [Appellate Court Germany] 17 April 1984, 5 U 116/83 at 436 and 170-171
LG Konstanz [District Court Germany] 6 December 1984, 3 HO 19/83 at 436 and 279-281
LG Braunschweig [District Court Germany] 15 January 1985, 6 S 218/84 at 437 and 344-346
OLG Frankfurt [Appellate Court Germany] 15 May 1985, 21 U 183/84 at 432-438
Rb Alkmaar [District Court Netherlands] 5 September 1985, 1377/1985 at 438

[Internationale Rechtsprechung, the source of these citations, was published in 1987. Other sources must be consulted for subsequent ULIS Article 82 case law.]

CISG CASE LAW: CISG CASES THAT CITE CISG ARTICLE 74

A good source of information on court and arbitration cases that cite CISG Article 74 is Michael R. Will, "International Sales Law Under the CISG: The First 284 or So Decisions" (4th ed. August 1996) 13-101 [published by Michael R. Will, Faculté de Droit, Université de Genève, Switzerland].

In addition to Delchi v. Rotorex, Professor Will reports the following cases in which CISG Article 74 is cited:

Watkins-Johnson v. Iran [Iran-US Claims Tribunal] 28 July 1989*
ICC Arbitration No. 6281 of 26 August 1989*+
LG Stuttgart [District Court Germany] 31 August 1989*+
LG Aachen [District Court Germany] 3 April 1990*+
Supreme Court [Netherlands] 13 September 1991
LG Frankfurt [District Court Germany] 16 September 1991*+
ICC Arbitration No. 7179 of 1992*+
ICC Arbitration No. 7585 of 1992
LG Heidelberg [District Court Germany]
LG Berlin [District Court Germany] 6 October 1992
LG Göttingen [District Court Germany] 19 November 1992*
Xiamen Intermediate People's Court [PRC] 31 December 1992
N.N. People's Court [PRC] 1993
Arbitral Tribunal IETAC [PRC] 27 February 1993
LG Krefeld [District Court Germany] 28 April 1993*
LG Aachen [District Court Germany] 14 May 1993*+
LG München [District Court Germany] 24 May 1993
Supreme Court [Israel] 22 August 1993
HG Zürich [District Court Switzerland] 1 September 1993
LG Hannover [District Court Germany] 1 December 1993
Tribunal Vaud [Switzerland] 6 December 1993
ICC Arbitration No. 7531 of 1994
ICC Arbitration No. 7565 of 1994*
OLG Düsseldorf [Appellate Court Germany] 14 January 1994*
KG Berlin [Appellate Court Germany] 24 January 1994*+
OLG München [Appellate Court Germany] 2 March 1994*+
Rb Zwolle [District Court Netherlands] 16 March 1994
Rb Amsterdam [District Court Netherlands] 15 June 1994*+
Arbitral Tribunal Vienna [Austria] SCH-4318, 15 June 1994*+
Arbitral Tribunal Vienna [Austria] SCH=4366, 15 June 1994*
LG Kassel [District Court Germany] 14 July 1994
ICC Arbitration No. 7660/JK of 23 August 1994*
LG Salzburg [District Court Austria] 13 January 1995
AG Wangen [District Court Germany] 8 March 1995*
LG Landshut [District Court Germany] 5 April 1995*
HG Zürich [Commercial Court Switzerland] 26 April 1995
Roder v. Rosedown [Fed. Court South Australian District] 28 April 1995
AG Alsfeld [Municipal Court Germany] 12 May 1995
LG München [District Court Germany] 29 May 1995
AG München [Municipal Court Germany] 23 June 1995*
HG Zürich [Commercial Court Switzerland] 21 September 1995
LG Trier [District Court Germany] 12 October 1995
Arbitral Tribunal Budapest [Hungary] 5 December 1995
AG Augsburg [Municipal Court Germany] 29 January 1996
Supreme Court [Austria] 6 February 1996
Arbitral Tribunal Hamburg [Germany] 21 March 1996
Arbitral Tribunal Hamburg [Germany] 21 June 1996
LG Paderborn [District Court Germany] 25 June 1996

* = Abstract of case (English language) and in many instances full text (original language) published in Unilex: International Case Law & Bibliography on the UN Convention on Contracts for the International Sale of Goods (Transnational 1996), Michael Joachim Bonell, ed.

+ = Abstract of case (English and other languages) published by the United Nations Commission on International Trade Law as a Case Law on UNCITRAL Texts (CLOUT) service.

(. . .)

Go to Case Table of Contents

Pace Law School Institute of International Commercial Law - Last updated June 8, 1999
Comments/Contributions

Go to Database Directory || Go to CISG Table of Contents || Go to CISG Search Form || Go to Bibliography