International Business Law - Chapter 10
Transcript of International Business Law - Chapter 10
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Sales of Goods
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UN Convention CISG
United Nations Convention onContracts for the International Sale ofGoods Parties to CISG
Transactions covered under CISG contracts for the international sale of
goods Both of the states must be contracting parties or
The rules of private international la! must leadto the application of a contracting state
http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.htmlhttp://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.htmlhttp://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html -
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Seller" State #
Bu$er" State B
Contract entered into at State C %CISG&
Seller breaches in State C
Bu$er sues in State B
State B choice of la! clause points to State
C la! appl$ing
Since State C is CISG and contract isinternational CISG !ould appl$
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'pting In 'pting 'ut
Parties to an international contract ma$opt out of its application or modif$ its
application Need factual evidence to support opt out
see Case ()*(ASANTE TECHNOLOGIES
Parties ma$ opt in to the CISG Using a choice of la! clause to opt in+This depends on !hether the State la!allo!s the domestic la! to be e,cluded
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Sales
Sale" The e,change of goods for an amountof mone$ or its e-uivalent
CISG" does not de.ne sales but spea/s of
obligations Seller" deliver the goods hand over an$
documents relating to them and transfer thepropert$ in the goods as re-uired b$ the
contract and this Convention Bu$er" is to pa$ the price
Note" US UCC 0 passing of title from the sellerto the bu$er for a price
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Goods
Good" a movable tangible ob1ect+
CISG" goods do not includeThings bought for personal use or
2ocal shop/eepers selling to foreigners
3omestic consumer protection la!s Bought at an auction %sales on e,ecution4authorit$ of la!& or
Uni-ueness of the transaction
#uctions 0 !hen !as the contract formed5
'thers 0 forced sales 0 lac/ of negotiated terms
Stoc/s shares investment securities negotiable instruments
mone$ Special domestic la!s govern the sales
'ceangoing vessels or aircraft Special domestic la!s govern the sales
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6i,ed Sales
Goods and Services 7,ample" Sale of a Good %photocop$
machine& !ith 8 $ear Service %maintenance
and cleaning& CISG" it is a good unless the preponderance
part of the obligations of the seller is thesuppl$ of labor or other services 9eminder" preponderance !ould be more than :);
Goods manufacturing" it is goods unless the Bu$erunderta/es to suppl$ a substantial part of thematerials
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Contractual Issues 7,cluded from
CISG
CISG onl$ covers
=ormation
9emedies
7,cludes" Illegalit$ and Incompetenc$
Third Part$ Claims Personal In1ur$
Preemption 0 to ta/e precedence over
If CISG applies domestic la! is preempted
7stablishes uniform rules for internationalsales contracts
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Interpreting CISG
>ords of CISG must be interpreted
International character of CISG
Need to promote uniform application of
CISG
'bservance of good faith
Implies" plain meaning or plain
meaning rule be used 2egislative histor$
6a$ be used due to !ide use of thispractice
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Interpreting CISG %cont?d&
General PrinciplesT!o suggested principles found throughout the
CISG # part$ to a contract has the dut$ to communicate
information needed b$ the other part$
Parties have the obligation to mitigate damagesresulting from a breach
9ules of Private International 2a!T!o basic camps" statutes and case la!
#llo!ing individual states to enact PI2 0 drafters!anted to avoid states adopting ad hoc interpretiveaids
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Interpreting Sales Contracts
Statements and Conduct of Parties
meeting of the minds or commonintent Sub1ective intent approach
Courts !ill turn to this .rst if this is easil$ascertained
'b1ective intent approach
>hen not clear courts !ill loo/ to this approach
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Interpreting Sales Contracts %cont?d&
Negotiation 0 %intent& due consideration given to all relevant
circumstances Includes negotiations leading up to the contract
practices the parties have established bet!eenthemselves and parties conduct after the$ agree thecontract
this negates common la! 1urisdictions parol evidence rules
Parties ma$ opt outusing an integration clause !hich
ignores all prior or contemporaneous agreements !hich isadopting the parol evidence rule 0 ma/ing the !rittencontract the onl$ evidence
Parties ma$ also opt out to e,clude parties conduct afterthe$ agree the contract
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Interpreting Sales Contracts %cont?d&
Practices and Usages Parties are bound b$ an$ practices !hich the$
have established bet!een themselves
Court can consider an$ usages that the partiesagreed to 7,ample" use of INC'T796S
Court can consider common Trade Usage a usage of !hich the parties /no! or ought to have
/no!n and !hich in international trade is !idel$ /no!nto and regularl$ observed b$ parties to contracts of thet$pe involved in the particular trade concerned
See case ()*8" TREIBACHERon the de.nition of consignment
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Interpreting Sales Contracts %cont?d&
=orm
>ritten re-uirement5 Sales contract need not be evidenced in
!riting and is not limited to !hat form 0 itma$ be proved b$ !itnesses
7mails purchase orders etc
Compromise"
States ma$ %at time of rati.cation& e,clude CISGand use domestic la! for form and !rittenre-uirements for part$ has its place of business inthat state
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=ormation of Contract
'@er # proposal b$ one person to another indicating an intention
to enter into a contract under speci.ed terms 6ust sho! intention to be bound
7,ample 0 ne!spaper advertisement
3e.neteness '@er must describe the goods !ith suAcient clarit$ that the
parties /no! !hat is o@ered for sale its -uantit$ and price Price ma$ be determined b$ price generall$ charged at the time and
circumstances involved
See e,amples of rush orders etc+
Speci.c '@erees 'ne or more speci.c persons 0 i+e+ Not a ne!spaper
advertisement Invitation to Treat
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=ormation of Contract%cont?d&
7@ectiveness of an o@er
9evocation '@ers are revocable at an$ time before the o@eree has
dispatched an acceptance UN27SS o@er is stated to be
irrevocable CISG" b$ an$ means
Common la!" b$ the same means sent
=irm '@ers '@er that o@eror promises to /eep open for a .,ed period of
time CISG" enforceable
Common la! must be supported b$ consideration
Promise does not need to be signed nor in !riting no time limitation+
7nforceable if irrevocable or o@eree can reasonabl$ rel$ on
conduct that implies that the o@er is .rm
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=ormation of Contract%cont?d&
#cceptance Statement or conduct b$ the o@eree indicating
assent that is communicated to the o@eror #greement to enter into a contract proposed b$ an o@eror
Silence 0 obviousl$ not a statement and does not
meet the conduct re-uirement unless agreed to b$ o@eree b$ statement or conduct
this is such a good deal I assume that $ou haveaccepted unless I hear other!ise
unless $ou hear other!ise from me !ithin threeda$s of $our order I !ill ship the product to $ou at())4pc
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=ormation of Contract%cont?d&
#cceptance %cont?d&
Time of acceptance >ithin time period speci.ed
If no time period then reasonable time If oral acceptance must be immediate
CISG adopts the receipt theor$4rule 0acceptance valid upon receipt
#s opposed to postal rule4dispatch rule4mailbo,rule 0 !here acceptance is valid upon dispatch
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=ormation of Contract%cont?d&
#cceptance %cont?d&
#cceptance b$ conduct If o@eror as/s for performance of an act 0
acceptance is e@ective !hen act isperformed+
'@er" Ship me () !idgets at ()4pc
#cceptance" Seller ships !idgets !ithoutcon.rming order
'@er trade usage or the practice of theparties must ma/e it clear that o@eree is notre-uired to notif$ o@eror
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=ormation of Contract%cont?d&
#cceptance %cont?d&
>ithdra!al #cceptance valid upon receipt"
'@eree ma$ !ithdra! its acceptance an$ timebefore or simultaneous !ith its receipt
#s opposed to mailbo, rule
9e1ection
9e1ection of o@er is e@ective upon receipt # re1ection and acceptance is sent b$ o@eree on
the same da$ 0 !hich one is given e@ect5
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=ormation of Contract%cont?d&
#cceptance !ith 6odi.cations
Battle of the =orms Seller sends o@er to sell %'@er 2etter&
Bu$er sends acceptance %Purchase 'rder& CISG if inconsistencies are material the
!ould*be acceptance is a countero@er 6aterial" price pa$ment -ualit$ of goods place
and time of deliver$ e,tent of liabilit$ of partiessettlement of disputes etc+
If not material becomes part of contractunless '@eror promptl$ re1ects+
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General Standards ofPerformance
Both parties are entitled to get fromtheir contract !hat the$ e,pect If fail to perform accordingl$ D breach
If one part$ fundamentall$ breaches theother ma$ #void the contract
6a/e demand for speci.c performance
=undamental Breach =ailure to substantiall$ deliver !hat the
other part$ reasonabl$ anticipated receiving
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General Standards ofPerformance
=undamental Breach %cont?d&
#voidance" Noti.cation b$ the part$ that he is canceling the
contract Notif$ other part$
9eturn the goods
'nl$ a@ects obligation to perform does notcancel
#n$ provision in the contract re" settlement of disputes%arbitration choice of la! choice of forum etc&
#n$ other provisions re" rights and duties of the parties%trade secrets con.dentialit$ intellectual propert$ etc+&
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General Standards ofPerformance
=undamental Breach %cont?d& Speci.c Performance
CISG allo!s speci.c performance
Courts not obligated unless allo!ed to under
domestic la!s Common la!" fairl$ narro! application disobedience has
serious conse-uences"contempt of court !ith .ne orimprisonment
Speci.c or ascertained goods %UE& goods are uni-ue or
other proper circumstances %US& Civil la!" broader application and not so serious
conse-uences" no .nes or imprisonment allo!s
Part$ is entitled to re-uire performance not limited b$the nature of the goods involved
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Seller?s obligation
3eliver the goods
Fand over an$ documents relating tothem
7nsure the goods conform !ith thecontract
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Seller?s obligation %cont?d&
Place for deliver$
#s agreed to in contract orThe .rst carrier?s place of business %if carriage of goods&
Place !here both parties /ne! the goods !ere located or
manufactured or produced
If contract re-uires seller to arrange shipping but does notspecif$ carrier transportation must be" #ppropriate in the circumstances and made according to usual terms
for such transportation
Insurance" if seller is not re-uired to arrange insurance 0 sellermust %at bu$er?s re-uest& provide bu$er !ith all availableinformation to allo! bu$er to obtain insurance+
Seller also must at time of deliver$ to carrier" Identif$ to the carrier the bu$er and the goods
Give notice to bu$er of consignment of goods to the carrier
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Seller?s obligation %cont?d&
Time for 3eliver$ 'n the date .,ed in the contract or if no date then
reasonable time+ If a time period is speci.ed %( une 0 (: une& then seller
can deliver an$ time during that period Unless bu$er speci.es that bu$er chooses the time
Turning over of documents #t time and place for deliver seller must turn over
an$ documents relating to the goods that thecontract re-uires+ If delivered earl$ seller has the right to cure an$ missing
documents if it doesn?t cause the bu$er unreasonableinconvenience or e,pense
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Seller?s obligation %cont?d&
Conformit$ of Goods Seller must deliver goods !hich are of the
-uantit$ -ualit$ and description re-uired b$ thecontract and !hich are contained or pac/aged inthe manner re-uired b$ the contracts 3etermining Conformit$
Third*Part$ Claims
>aiver
Time for e,amining goods Notice of 3efects
Curing 3efects
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Seller?s obligation %cont?d&
Conformit$ of Goods %cont?d& 3etermining Conformit$
=it for the purposes that the goods ordinaril$ used
=it for an$ particular purpose e,pressl$ or impliedl$ made/no!n to the seller
7,cept !here bu$er did not rel$ or unreasonable for him to rel$ onseller?s s/ills or 1udgment
Possess the -ualities of goods that seller gave bu$er as sampleor model
Contained or pac/aged in the same manner usual for such
goods or in a manner ade-uate to preserve and protect goods+Third*Part$ Claims
Goods do not conform if sub1ect to HrdPart$ Claims 0 o!nershipintellectual propert$ rights 0 patents trademar/s cop$right
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Seller?s obligation %cont?d&
Conformit$ of Goods %cont?d&
>aiver Parties ma$ e,pressl$ !aive conformit$
Parties ma$ impliedl$ !aive conformit$ 0
If bu$er /ne! or could not have been una!are that the goods !erenonconforming
Time for e,amining goods Bu$er obligated to inspect !ithin as short a period as is
practicable If shipped e,amination can be deferred until after goods arrive at
destination
If bu$er must redirect4redispatch goods then !hen goods arrive atdestination
Seller must have /no!n or ought to have /no!n the possibilit$ ofthe redirection
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Seller?s obligation %cont?d&
Conformit$ of Goods %cont?d& Notice of 3efects
Bu$er must inform seller of defects !ith a reasonabletime after deliver$
If defect discovered later seller must promptl$ notif$ seller inorder to preserve his rights
9egardless Seller !ill not be responsible for a defect thatarises more than 8 $ears after deliver$
Unless" Seller /ne! or ought to have /no!n of nonconformit$and did not disclose it to bu$er or contract establishes a longer
period of guarantee
Curing 3efects If seller delivers earl$ he ma$ correct an$ defects up to
agreed upon deliver$ date
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Bu$er?s 'bligations
Pa$ment of the Price Bu$er obliged to ta/e !hatever preliminar$ steps
re-uired to ma/e pa$ment in accordance !ith thecontract and an$ relevant la!s4regulations
Bu$er must pa$ price at the time and place incontract If no time speci.ed at the time !hen the goods or the
documents are delivered Unli/e Civil la! countries no re-uest4formalit$ re-uired b$ Seller
to re-uire pa$ment sub1ect to inspection of goods
If no pa$ment place speci.ed If deliver$ place 0 then pa$ment at deliver$ place
If no deliver$ place then pa$ment at seller?s place
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Bu$er?s 'bligations
Ta/ing 3eliver$ Bu$er obligated to cooperate !ith seller to facilitate
transfer and actuall$ ta/e over the goods Bu$er !ho fails to cooperate !ill be responsible for an$
resulting costs Bu$er failing to ta/e deliver$ assumes ris/ for an$
damage to the goods after that time carpet deliver$ e,ample" Seller delivered carpet to Bu$er at
speci.ed time and place bu$er?s shop !as closed seller leftcarpet at Seller?s shop+ 9ain ruined the carpets+ Court found
bu$er responsible for loss
ha$ purchase e,ample" Seller sold bale of ha$ to bu$er bu$er
to pic/ up ha$ bale ha$ bale destro$ed b$ .re+ Bu$erresponsible for loss as didn?t pic/ up ha$ in a reasonable time
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Passing of 9is/
Passage of 9is/ determines !ho isresponsible for the loss 0 prior todeliver$ during transit or inspection
or after deliver$ #greement of the Parties
CISG allo!s parties to allocate ris/
among themselves CISG does not de.ne an$ terms ma$
use domestic terms or internationalterms Commonl used INC'T796S %='B CI=&
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Passing of 9is/ %cont?d&
6eans of 3eliver$* b$ carrier or b$ seller Goods transported b$ carrier 0 CISG
distinguishes t$pe of carrier contract Shipment contracts
Transshipment contracts
In*Transit contracts
3estination contracts
9egardless of contract used ris/ of loss !illnot pass until the goods are clearl$identi.ed b$ mar/ings shipping documentsnotice given to the bu$er or other!ise
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Passing of 9is/ %cont?d&
6eans of 3eliver$ * Goodstransported b$ carrier %cont?d&
Shipment contracts Seller re-uired to deliver the goods to a
carrier for shipment and does not re-uirethe seller to deliver them to a particularplace the ris/ of loss passes !hen the
goods are handed over to the .rst carrier =C# Paris e,ample
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Passing of 9is/ %cont?d&
6eans of 3eliver$ * Goodstransported b$ carrier %cont?d&
Transshipment contracts Seller re-uired to deliver the goods to a
carrier at a named place carrier !ill thencarr$ the goods to the bu$er ris/ of losspasses to the bu$er !hen the goods are
handed over to carrier at the .rst place 7,ample =#S 64< 'cean Trader
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Passing of 9is/ %cont?d&
6eans of 3eliver$ * Goods transported b$carrier %cont?d& In*Transit contracts
If goods are sold in*transit ris/ of loss passes to thebu$er at the time the contract is concluded Contaminated oil e,ample if seller /no!s ris/ doesn?t
pass
3estination contracts
Seller re-uired to arrange transport to nameddestination ris/ of loss passes to bu$er !hen thegoods are handed over to bu$er or at that place
7,ample 33P Seattle >ashington
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Passing of 9is/ %cont?d&
6eans of 3eliver$ %cont?d& Goods delivered !ithout being transported
>hen goods are not transported ris/ of loss passes!hen the goods are handed over to the seller or
other!ise put at the bu$er?s disposal %ha$bale& 7,ample 7> Seller?s Cit$
Breach of Contract CISG rules on ris/ of loss are not concerned
!ith breach of contract %e,cept tainted in*transit contracts& 0 ris/ of loss passes to bu$erat agreed upon time and place
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9emedies
Uni-ue to bu$er
Uni-ue to seller
#vailable to either part$
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9emedies %cont?d&
Bu$er?s 9emedies * cumulative
Speci.c performance
#voidance
9educe price
9efuse earl$ deliver$
9efuse e,cess -uantities
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9emedies %cont?d&
Bu$er?s 9emedies 0 %cont?d&
Speci.c performance 0 see discussionbefore
3eliver substitute goods 6a/e repairs
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9emedies %cont?d&
Bu$er?s 9emedies 0 %cont?d&
#voidance Provide Nachfrist Notice
Generall$ re-uired for bu$er to provide areasonable time period before avoiding thecontract
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9emedies %cont?d&
Bu$er?s 9emedies 0 %cont?d& 9educe price
If bu$er not entitle to damages !hen a seller
delivers nonconforming goods the bu$er !ill beentitled to a reduction in price+ Bu$er must have accepted non*conforming goods and
Sell must not be responsible for non*conforming goods
7,ample force ma1eure
9efuse earl$ deliver$ or e,cess -uantities Bu$er is under no obligation to ta/e earl$
deliver$ or e,cess -uantities
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9emedies %cont?d&
Bu$er?s 9emedies 0 %cont?d&
7@ect of Partial Non*conformit$ ())) bags of Jo!er
3eliver$ ()) bags vermin infested unusable Bu$er ma$ see/ speci.c performance price
reduction or avoid that part of contract 0 inaccordance !ith the CISG rules for each
#voiding entire contract %refuse entiredeliver$& 0 'N2K if the partialnonconformance is a fundamental breach
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9emedies %cont?d&
Seller?s 9emedies 0 cumulative and immediate Speci.c performance
Ta/e deliver$ and pa$ contract price
Perform an$ other obligations re-uired b$ the contract
#void contract for fundamental breach or failure tocure a defect Same as bu$ers failure to cure after Nachfrist Notice
'btain missing speci.cations
If bu$er doesn?t suppl$ speci.cations b$ the giventime4date seller can ascertain speci.cations and notif$bu$er of them if bu$er does not respond the$ becomebinding on the bu$er
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9emedies %cont?d&
Bu$er?s and Seller?s 9emedies
Suspension of performance
#voidance in anticipation of
fundamental breach #voidance of an installment contract
3amages
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9emedies %cont?d&
Bu$er?s and Seller?s 9emedies %cont?d& Suspension of performance %cont?d&
6a$ suspend if there is a threat of
nonperformance 6a$ prevent the handover of goods if threat
of nonpa$ment is found after goods are in*transit
6ust give immediate notice and mustcontinue performance if ade-uate assuranceof performance is made
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9emedies %cont?d&
Bu$er?s and Seller?s 9emedies %cont?d& #voidance in anticipation of fundamental
breach
Before a breach if Speci.c goods promised to bu$er are !rongfull$ sold
to a third part$
Seller?s onl$ emplo$ee capable of producing goodsdies or is .red
Seller?s manufacturing plant is sold Should provide immediate notice and allo! for
assurances
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9emedies %cont?d&
Bu$er?s and Seller?s 9emedies%cont?d&
#voidance of an installment contract 6a$ avoid a particular installment If avoidance of one installment creates good
grounds that further installments !ill be atris/ further installments ma$ be avoided
If subse-uent installments areinterdependent a breach of one installment!ill allo! a part$ to avoid the entire contract
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9emedies %cont?d&
Bu$er?s and Seller?s 9emedies %cont?d& 3amages
# sum e-ual to the loss including loss of pro.t
su@ered b$ the other part$ as a conse-uenceof the breach+
6ust be reasonabl$ foreseeable Fadle$ v Ba,endale
Substitute transaction price 3i@erence in bu$4sell price in transaction
Substitute purchase price
Parties must mitigate their loss
7 cuses for
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7,cuses forNonperformance
=orce ma1eure
Not liable for damages if failure toperform is
3ue to an impediment be$ond its control Impediment !as not reasonabl$ foreseen
during contracting
9emains unable to overcome the
impediment or its conse-uences 'ther remedies ma$ appl$ 0 suspension
of performance or avoidance Note" force ma1eure clauses 0 can save the
contract
f f
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7,cuses for Nonperformance
%cont?d&
=orce ma1eure %cont?d&
Part$ must promptl$ notif$ the otherpart$ of impediment and its e@ect on
performance If claim involves third part$ performance
%supplier& then third part$ must be ableto claim impediment
7,cuse is onl$ good for as long asimpediment continues to e,ist
3oes N'T appl$ to commercial
impracticabilit$
7 f N f
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7,cuses for Nonperformance
%cont?d&
3irt$ Fands
# part$ ma$ not rel$ on a failure of theother part$ to perform to the e,tent
that such failure !as caused b$ the .rstpart$?s act or omission