Remedies under the Convention on Contracts for the International Sale of Goods

Remedies under the CISG are one of the its most effective mechanisms for ensuring the both parties to understand and carry out their contractual obligations successfully.

The remedies have been noted in three major categories in the CISG to the sellers and the buyers. First category remedy, and the main remedy is specific performance. The second category remedy is substitutionary relief (generally damages) which demands the party in breach to pay the other for compensating the loss which the other party faced with. The third remedy is the right to avoid contract. Remedies have been demonstrated in Articles 45 and 61 of the CISG for the buyers and the sellers, in turn. There is a difference between the equalities of remedies which provided for both sellers and buyers. So, in Article 45, generally remedies such as specific performance, the right to avoid contract, damages and the reduction of price are noted for the buyers. But in Article 61, the remedy of the reduction of price is not noted for the sellers. Also, it is noted there is no need for the requirement that the buyers cure a defect in their performance.

Here I generally discuss the remedies which are available for the parties in the CISG:

Specific performance: It is noted the availability of the specific performance as a remedy under the CISG is related to the civil law system. Also, no aspect of a system of contract law is more revealing of its underlying assumptions than is the law that prescribes the relief available for breach. Article 46 lets the specific performance arise for the buyers in the type of the seller’s right to delivery, substitute delivery and repair. But Article 62 allows the specific performance to arise for the sellers demanding the buyers to pay the price, take delivery and carry out the other obligations, if the sellers did not resort to a remedy that is inconsistent with this demand. 

Damages: The damages may be the only choice for the aggrieved party, if the others are not available in the conditions. It is noted for the damages that, for the sake of putting the aggrieved party into as good a position as he would have been had the contract been performed as agreed, the aggrieved party has, therefore always a right to claim for damages in addition to a claim for specific performance or avoidance. Loss of profit is also included in the damages. In Article 74 of the CISG foreseeability is noted as a condition for the amount of damages by meaning damages may not exceed the loss that the party in breach foresaw or should have foreseen. Also, the mitigation rule is noted in Article 77 as imposing on the innocent party the duty to mitigate the loss. Additionally, the right to receive interest is noted in Article 78 of the Convention.

Avoidance: In Articles 49 and 64 of the CISG the right to avoid a contract is demonstrated. The avoidance of contract becomes in force if the breach of the contract is considered fundamental. Also, the contract avoidance is sometimes referred to as a “self-help” remedy. The fundamental feature of the avoidance in the CISG is its autonomous, unilateral character, because it demands no court action and may be executed entirely through appropriate declarations.

Reduction of price: As a remedy, it is noted the reduction of price comes from the continental European legal systems, while it was unknown in the common law system, which only define the right to damages. It is also noted where the price of the goods sold has gone down since the contract was concluded under Article 50 will be higher than the actual difference in value between the defective and non-defective goods at the time of delivery.

Although the remedies are helpful for both parties to carry out their contractual obligations, however, they don’t balance the interests of the parties fairly. The problems are as below:

Article 62 of the CISG says that the seller may require the performance by the buyer of any obligation such as payment of price, taking delivery or the buyer’s any other obligations that arise from the contract. There is a collision for the interests of the parties in the article. Collision happens when the seller tries to force the buyer to accept goods which the buyer doesn’t want or to pay for the goods which have been delivered to the buyer, but not accepted. But it is noted the buyer should pay for the goods if has already received the conforming goods. On this issue, it is noted if payment is not made in time, the seller may require the buyer to pay the price. Such a requirement may be presented irrespective of an extension of the delay. Even if the delay amounts to a fundamental breach of contract, the seller may choose to require payment. He may do so even if he has the right to sell the goods under the provisions on preservation of the goods in Article 88. If he chooses to sell the goods or is under an obligation to do so, thereafter he may claim the balance between the price and the proceeds from the sale. This means the seller can require the buyer to pay for the goods even he has not received the goods. As it seems from the Article 62, the seller can also require the buyer to take delivery. This makes clear that if the buyer doesn’t want to receive goods, he has still the obligation to take delivery. It is noted if the buyer has neither paid the price nor taken delivery, the remedy may be used together with, or separately from, a requirement for payment. Situations can be envisaged where the seller is more anxious to receive payment than to force the buyer to take delivery of the goods. He may therefore present these requirements simultaneously or separately.

It should be noted Article 62 of the CISG is limited to some circumstances where the seller has not resorted to an inconsistent remedy with the right to require performance. This is also considered one of the remedy collisions under the CISG. If the seller declares the contract avoided under Article 64, he loses the right to require performance of the buyer’s obligations.

Regarding the seller’s right to performance, it is noted it contrasts with other remedies provided in Article 61 of the CISG, because it does not create any new right to seller or a new obligation to buyer. It is simply a pursuance of their initial rights and obligations under the contract. Hence, the intention of Article 62 is to emphasise that the mere non-performance by the buyer of his obligations does not cause an ipso facto avoidance of the contract and that the contractual obligations continue in force even if not performed in due time. It was also noted that a seller could have contracted to supply all of the requirements of the buyer’s manufacturing business over an extended period of time (therefore the goods are neither specific nor necessarily ascertained) for a contracted price. The seller may have made a significant initial investment and the market price might vary in such a way as to make any damage award speculative. Under these circumstances, the seller has some justification to seek specific performance.

According to Article 85 of the CISG, if the buyer is in delay in taking delivery of the goods, the seller must take such steps as are reasonable in the circumstances to preserve them. So, if the seller has the goods and the buyer has failed to take delivery, then Article 85 defines an obligation for the seller to preserve the goods. Also, Article 85 leads to another provision, the provision in Article 88(2) which notes that if the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them. Although Article 62 does not directly make obligations for the seller to sell the goods when the buyer is in breach, this obligation can arise for the seller. It is noted Articles 85 and 88 will force the seller into resale when the buyer is unwilling to take the goods.

As the discussion of the remedies under the CISG showed, usually remedies prefer ensuring the interests of the sellers rather than the buyers. However, the situation changes for the articles. (other remedies, such as the reduction of price is available for the buyers, not the sellers). Although the other articles may provide for carrying out of the rights of the buyers effectively, firstly, this may not be realized directly, also, in general, they don’t eliminate the collisions on the remedies. For this reason, the remedies under the CISG should be reviewed again and they should provide the buyer’s interests more fairly.

Sources

1. Robert Koch. The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG): Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International 1999, pp. 177-354.
2. Alison E. Williams. Forecasting the Potential Impact of the Vienna Sales Convention on International Sales Convention on International Sales Law in the United Kingdom: Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International 2000-2001, pp. 9-57.
3. E. Allan Farnsworth. Damages and Specific Relief: 27 American Journal of Comparative Law, 1979, pp. 247-253.
4. Jonathan Yovel. Comparison between Provisions of the CISG and the Counterpart Provisions of the PECL. April 2005.
5. Ulrich Huber. Commentary on the UN Convention on the International Sale of Goods (CISG), (Peter Schlechtriem & Ingeborg Schwenzer ed., Geoffrey Thomas trans., 2d ed. 1998).
6. David R. Rivkin. Lex Mercatoria and Force majeure: Gaillard ed., Transnational Rules in International Commercial Arbitration, ICC Publ. Nr. 480, 4; Paris 1993.
7. Michael Joachim Bonell. Unification of Law by Non-Legislative Means: The UNIDROIT Principles for International Commercial Contracts, 40 Am. J. Intl L., 1992.
8. Jussi Koskinen. CISG, Specific Performance and Finnish Law: Publication of the Faculty of Law of the University of Turku, Private law publication series B:47, 1999.
9. G.H. Treitel. Specific Performance in the Sale of Goods: J.B.L. 211, 1966.
10. John O. HONNOLD. Uniform Law for International Sales under the 1980 United Nations Convention (2d ed. 1991).