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The United Nations Convention on Contracts for the International Saleof Goods

Virginia G. Maurer

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CISG Database, Pace Institute of International Commercial

Law. Reproduced with permission from 15 Syracuse J. Int'l L.

Com. (1989) 361-389;

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Contents

Contents

The United Nations Convention on Contracts for the Inter-

national Sale of Goods,

Virginia G. Maurer [*] 1

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 1II. The Scope and Coverage of the COnvention . . . . . . 3

III. Formation of the Sales Contract . . . . . . . . . . . . . 5

A. Statute of Frauds . . . . . . . . . . . . . . . . . 5

B. Approach to Offer and Acceptance . . . . . . . . 6

C. Firm Offers . . . . . . . . . . . . . . . . . . . . . 7

D. Acceptance . . . . . . . . . . . . . . . . . . . . . 8

E. The Battle of the Forms . . . . . . . . . . . . . . 8

IV. The Risk of Loss . . . . . . . . . . . . . . . . . . . . . 9

A. Goods to Be Transported . . . . . . . . . . . . . 10

B. Good Not to Be Transported . . . . . . . . . . . 12

V. Performance . . . . . . . . . . . . . . . . . . . . . . . . 12A. Fundamental Breach . . . . . . . . . . . . . . . 14

B. Good Faith . . . . . . . . . . . . . . . . . . . . . 15

C. Excuse of Performance . . . . . . . . . . . . . . 15

VI. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 16

A. Buyers' Remedies . . . . . . . . . . . . . . . . . 16

B. Sellers' Remedies . . . . . . . . . . . . . . . . . 17

C. Damages . . . . . . . . . . . . . . . . . . . . . . 17

D. Restitution . . . . . . . . . . . . . . . . . . . . . 18

VII. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . 19

FOOTNOTES. . . . . . . . . . . . . . . . . . . . . . . . . 19

Metadata 20

SiSU Metadata, document information . . . . . . . . . . . 20

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The United Nations Convention on Contractsfor the International Saleof Goods

body of national law for certain international sales transactions. It

also provides a common basis for interpreting contract provisions,

and it provides substantive law for filling the gaps left by contract

drafters.7 In addition, the CISG addresses the choice of law prob-

lems that vex drafters of international sales contracts. 8

Thesuccessof this effort is as yet unclear. There is no international5

court with jurisdiction over disputes arising in trade that would be

addressed by the treaty. Rather, the treaty is adopted by positive

authority as the internal trade law of each signatory nation, to be

applied and interpreted by the judiciary of each nation.9 Thus, the

treaty must be used to resolve conflict before one knows whether

unification has been achieved or uncertainty reduced. The treaty

has been adopted by countries with substantially different tradi-

tions of procedure and legal authority.10 The success of the treaty,

therefore, will depend upon the extent to which ambiguities will be

resolved in a common manner. This will depend, in turn, on the

willingness of the national courts of each signatory nation to draw

on other signatory nations' judicial experience with the

treaty, as well as their willingness to recognize the multilateral na-6

ture of the treaty and the desirability of harmonized interpreta-

Contracts for the International Sale of Goods, 97 Harv. L. Rev. 1984, 1985

(1984) [hereinafter Unification and Certainty].7Honnold,supranote 1, at 125-133 (1982); Volken, The Vienna Convention:

Scope Interpretation, and Gap-Filling, in Volken and Sarcevic,supranote 1, at

19;Cf. Unification and Certainty,supranote 6, at 1991 (indicating disagreement

among delegates as to the ability of CISG to provide gap filling principles).8

SeeRohwer and Coe,The 1980 Vienna Convention on the International Saleof Goods and the UCC -- Peaceful Coexistence? in D. Campbell and C.

Rohwer, Legal Aspects of International Business Transactions 224, 232-234

(1984) [hereinafter Rohwer and Coe].9CISG,supranote 1, art. 99(2). Article 99(2) provides that when a State

accepts or ratifies the treaty, this Convention . . . enters into force in respect of

that State . . . Id.10SeeUnification and Certainty,supranote 6, at 1984.

tion.11

It is possible, nevertheless, to identify the potential areas of 7

ambiguity and uncertainty, based on the American experience 8

with construction of the Uniform Commercial Code (UCC). Like

the UCC, the CISG was designed to harmonize the trade law ofseparate legal jurisdictions. Although international trade prac-

tices differ significantly from interstate trade practices, the basic

dynamic of selling and shipping goods from one place to another

-- whether in international or interstate trade -- poses certain

common and inherent problems. These problems include: 1) How

is a contract formed? 2) Who bears the risk of loss of the goods

at various points in the transaction? 3) What kind of performance

is necessary to trigger the party's obligation to perform? 4) What

remedies are available for a buyer who receives defective goods?

To a great extent, trade practice turns on the expected legal

resolution of these fundamental issues. It is possible, however, toidentify the areas of likely conflict under the CISG by analogy to

the resolution of conflicts under the UCC.

This paper provides a descriptive analysis of the most significant 9

aspects of the CISG, with particular attention to those ambiguities

most likely to defeat the Convention's goal of providing certainty

and uniformity in trade law. The paper first explains the coverage

of the CISG and the scope of its use in international sales trans-

actions. The paper then identifies four areas of potential conflict

between buyersand sellers of goods in international trade andana-

11CISG,supranote 1, art. 7(1). Article 7(1) states: In the interpretation of thisConvention, regard is to be had to its international character and the observance

of good faith in international trade. See Patterson,supranote 2, at 277, citing

with approval the United States Supreme Court opinion in Air France v. Saks,

470 U.S. 392, 400-405 (1985) (the Court's responsibility is to give the specific

words of the treaty a meaning consistent with the shared expectations of the

contracting parties.);See generally, 1 K. Zweigert and H. Kotz, An Introduction

to Comparative Law 22-23 (1987) [hereinafter Zweigert and Kotz].

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lyzes the manner in which these areas are addressed by the CISG.

The analysis draws on experience under the UCC and speculates

on the potential similarities and differences in resolution of the con-

flicts under the CISG. The four areas are: 1) formation of the con-

tract; 2) risk of loss; 3) performance; and 4) remedies. The goal

of this analysis is to inform the negotiating and decision processin sales transactions and to illuminate underlying premises of the

CISG's approach to transactions.

II. The Scope and Coverage of the COnvention10

The CISG is a self-executing treaty; its provisions become effective11

as a source of legal rights without need of implementing domestic

legislation.12 In the United States, federal treaties preempt incon-

sistent state law.13 Thus, for the American lawyer, the first salient

question of scope and coverage is whether the CISG displaces the

state UCC law in a given transaction.

Article 1 of the CISG provides that the Convention applies to con-12

tracts between parties whose places of business are in different

States: (a) when the States are Contracting States; or (b) when

the rules of private international law lead to the application of the

law of a Contracting State.14 Under Article 6, however, the parties

may exclude the application of this Convention or . . . derogate

from or vary the effect of any of its provisions.15 Thus, the par-

ties have the capacity to modify by contract the application of the

CISG.

A further complication of scope and coverage lies in the fact that13

12CISG,supranote 1, art. 99. Self-executing treaties require no further federal

legislation to be effective throughout the United States. See Patterson,supra

note 2, at 276; Volken and Sarcevic, supranote 1, at 21.13U.S. Const. art. VI; Zschernig v. Miller, 389 U.S. 429 (1968).14CISG,supranote 1, art. 1. See Honnold,supranote 1, at 77-84.15CISG,supranote 1, art. 6.

the CISG applies only as to issues expressly covered by the Con-

vention. As to issues not covered by the CISG, states must revert

to their choice of law rules to find applicable substantive law. 16 Un-

der the UCC, an American court seeking such law would look to its

version of UCC 1-105, which states:

Except as provided hereafter in this section, when a transac- 14

tion bears a reasonable relation to this state and also to an-

other state or nation, the parties may agree that the law either

of this state or of such other state or nation shall govern their

rights and duties. Failing such agreement this Act applies to

transactions bearing an appropriate relation to this State.17

Where the parties to the contract have specified the applicable for- 15

eign law, American courts have scrutinized the contractual choice

of law provision for some nexus between the transaction and the

law identified in the contract.18 Where the contract is silent as to

choice of law, the appropriate relation test may be invoked. In adomestic commercial sales transaction context, this provision has

had limited significance, since the UCC is universally, if not uni-

formly, adopted within the United States.19 In the context of a

transaction covered by the CISG, but unaddressed by the CISG,

the appropriate relation test may emerge as a significant choice

of law provision.20 Both the CISG and the UCC may apply to a dis-

16In addition, the courts of signatory states to the CISG may look to the Hague

Convention on the Law Applicable to Contract for the International Sale of

Goods (Choice of Law Convention), which provides courts in signatory states

with rules for determining the law applicable to sales contracts between parties

from different states. However, the areas covered by the Choice of LawConvention are, for the most part, those covered by the CISG.

17U.C.C. ? 1-105 (1978).18SeeRohwer and Coe, supranote 8, at 230-232.19U.C.C. article 2, which governs contracts for the sale of goods, has been

adopted in forty-nine states, the District of Columbia and the Virgin Islands. See

Uniform Commercial Code XLII (West 1978).20SeeRohwer and Coe, supranote 8, at 232.



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pute arising out of an international sales transaction in an American

court.

TheCISG governs only theformation of thecontract of sale andthe16

rights and obligations of the seller and the buyer arising from such

a contract.21 In fact, the CISG does not cover several common

issues of sales law that are covered under the UCC. For example,

CISG Article 4(a) specifically excludes from coverage the validity

of the contract or of any of its provisions or of any usage. 22 Article

5 excludes application of theConvention to the liability of the seller

for death or personal injury caused by the goods by any person.23

In addition, theCISG is silentas to liability forcommercial fraud and

capacity of the contracting party. In addition, Article 7(2) provides

that: 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.24

Since the CISG supplies substantive law only in the area where17

the UCC, or other local law, is displaced, the Convention does not

eliminate the incentive to forum shop.25 To identify the relative

advantage of forums, it is useful to review the substantive areas of

law covered by the CISG.

In general, the CISG does not apply to sales of goods bought for18

consumption by the buyer, unless the seller did not know that the

21

CISG,supranote 1, art. 4. The Convention is divided into four parts. Part Icovers the application of general rules of interpretation. Part II deals with the

formation of the contract. Part III covers the substantive obligations of the buyer

and seller. Part IV concerns ratification of the treaty.22CISG,supranote 1, art. 4(a).23Id. art. 5.24CISG,supranote 1, art. 7.25SeeRohwer and Coe, supranote 8, at 225.

buyer intended the goods for consumer use.26 It also does not

apply to the sales of securities, negotiable instruments or money27

or to the sale of ships, aircraft or electricity.28 It also does not apply

to contracts for the sale of future goods not to be manufactured

by the seller, or to contracts where the preponderant part of the

obligation consists of the supply of labor or services.29

The CISG does apply to other contracts of sale of goods between 19

parties whose places of business are in different states, when the

states are Contracting States.30 An exception is carved out where

it does not appear from the contract or from dealing between the

parties before the conclusion of the contract that their parties have

their places of business in different states.31 Two criteria must

be met for the Convention to apply automatically: the places of

business of the contracting parties must be in different states, and

those states must be Contracting States. So, for example, if a

non-American party has a place of business in a non-Contracting

State, the CISG will not apply, and the UCC or the domestic law ofthe non-Contracting State will apply. If the non-American contract-

26CISG,supranote 1, art. 2(a). Article 2(a) states: This Convention does not

apply to sales: (a) of goods bought for personal, family or household use, unless

the seller, at any time before or at the conclusion of the contract, neither knew

nor ought to have known that the goods were bought for any such use . . . Id.

SeeHonnold,supranote 1, at 85-90.27CISG,supranote 1, art. 2(d). Article 2(d) excludes sales of stocks, shares,

investment securities, negotiable instruments or money. Id.28See id. art. 2(e) and (f). Subsection (e) excludes sales of ships, vessels,

hovercraft or aircraft. Subsection (f) excludes sales of electricity.Id.29See id. art. 3(2). Article 3(2) states: This Convention does not apply to

contracts in which the preponderant part of the obligations of the party whofurnishes the goods consists on the supply of labour or other services.Id.

30Id. art. 1.31See id. art. 1(2). Article 1(2) states: The fact that the parties have their

places of business in different States is to be disregarded whenever this fact

does not appear either from the contract or from any dealings between, or from

information disclosed by, the parties at any time before or at the conclusion of

the contract. Id.



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the Soviet Union sought to preserve the requirement of a writing,

which that country regards as necessary to protect its domestic

rules for making foreign trade contracts. Thus, the Soviet Union

may exercise rights under Article 96 to opt out of Article 11 and

impose formal requirements for international sales contracts. The

United States has not done so.

B. Approach to Offer and Acceptance25

In contrast to the UCC, the CISG takes a relatively formal view26

of contract formation. Under the UCC, a contract for the sale of

goods may be made in any manner sufficient to show agreement,

so long as the parties have intended to make a contract and there

is a reasonably certain basis for giving an appropriate remedy. 42

Intent, of course, can be a source of legal controversy. Under Ar-

ticle 8 of the CISG, intent is determined from an objective analysisof what a reasonable person would have intended, given the rel-

evant circumstances, the course of dealing, trade usage and the

subsequent conduct of the party. The functional approach to con-

tract -- of givinglegal recognition to a transaction that appears to be

regarded by the parties as a contract, without need of formal anal-

ysis of offer and acceptance -- characterizes the UCC. The CISG,

in contrast, adopts a more formal analysis of contracting behavior,

manufactured for the buyer and are not suitable for sale to others, and the seller

has made a substantial beginning of their manufacture or commitments for their

procurement, U.C.C. ?2-201(3)(a); the party against whom the contract is to be

enforced has admitted in pleadings, testimony or otherwise in court proceedingsthat a contract exists, U.C.C. ? 2-201(3)(b); or payment has been made and

accepted or goods have been received and accepted, U.C.C. ?2-201.42U.C.C. ? 2-204 (1978). This language is broad, authorizing courts to weigh

and balance a wide variety of facts which might be relevant in showing

`agreement'.See Note,supranote 5, at 532; Sono, Formation of International

Contracts Under the Vienna Convention: A Shift Above the Comparative Law, in

Volken and Sarcevic, supranote 1, at 111.

and is reminiscent of the First Restatement of Contracts approach

to contract analysis.43

Under the CISG an offer must be addressed to a definite person 27

and it must be sufficiently definite and indicate the intention of the

offeror to be bound in case of acceptance.44 To meet the suffi-

ciently definite test, the offer must indicate the goods and also ei-

ther fix the quantity and price or explicitly or implicitly provide for

determining the quantity and price.45 This language is only slightly

narrower than that of UCC 2-204(3), which permits open and in-

definite terms, subject to the requirement that the court have a rea-

sonably certain basis for giving a remedy.46 Presumably, under the

43Restatement of Contracts ?? 19-74. Note, for example, the similarity with the

Restatement in the approach taken in article 23 of the CISG: A contract is

concluded at the moment when an acceptance of an offer becomes effective in

accordance with the provisions of this Convention. See generally,Farnsworth,

Contracts During the Half-Century Between Restatements, 30 Clev. St. L. Rev.

371 (1981); Note,supranote 5, at 533 (The Convention's offer-and-acceptance

formality is mitigated, fortunately, by provisions which make practices between

the parties and trade usages relevant in the determination of the parties' intent

to enter into a contract.).44CISG,supranote 1, art. 14. Subsection 8(3) of article 8 provides that due

consideration is to be given to all relevant circumstances of the case including

the negotiations, any practices which the parties have established between the

negotiations, any practices which the parties have established between

themselves, usages and any subsequent conduct of the parties. In addition,

article 9 explicitly permits the parties to agree upon usages and practice, and it

applies to contract formation and interpretation those usages which the parties

knew or ought to have known and which in international trade [are] widely

known to, and regularly observed by, parties to contracts of the type involved in

the particular trade concerned. Id. art. 9.45CISG,supranote 1, art. 14. It is not necessary, however, for the seller to

have identified the goods to the contract. In fact, the Commentary to the

Convention contemplates requirements contracts. United Nations Conference

on Contracts for the International Sale of Goods -- Official Records, U.N. Doc.

A/Conf.97/19, at 21, comments 11-13 to art. 12.46U.C.C. ? 2-204(3) provides: Even though one or more terms are left open a

contract for sale does not fail for indefiniteness if the parties have intended to



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CISG, a price would be fixed implicitly if the goods were subject to

a catalog price or a widely-ascertainable market price. Similarly,

the UCC provides that when a contract is formed with the price

left open, the price will be a reasonable price at the time of deliv-

ery.47

C. Firm Offers28

Under Article 16 (2)of the CISG an offer is effective when received,29

but it may be withdrawn before receipt. If the offer has been re-

ceived, however, it cannot be revoked:

(a) if it indicates, whether by stating a fixed time for accep-30

tance or otherwise, that it is irrevocable; or

(b) if it was reasonable for the offeree to rely on the offer as31

being irrevocable and the offeree has acted in reliance on the

offer.48

Under subsection (a), a dispute could arise as to whether the of-32

feroreffectively indicated that the offerwas irrevocable. Under sub-

section (b), a dispute could arise as to the reasonability of the of-

feree in relying on the offer being irrevocable. The potential for

misunderstanding, under both subsections, is exacerbated by the

different domestic laws on firm offer among the signatories.

For example, under traditional common law contract principles, an33

make a contract and there is a reasonably certain basis for giving an appropriate

remedy.47

U.C.C. ? 2-305(1) (1978) provides:The parties if they so intended can conclude a contract for sale even though the

price is not settled. In such a case the price is a reasonable price at the time for

delivery if (a) nothing is said as to price; or (b) the price is left to be agreed by

the parties and they fail to agree; or (c) the price is to be fixed in terms of some

agreed market or other standard as set or recorded by a third person or agency

and it is not so set or recorded.48CISG,supranote 1, art. 16(2).

offer is revocable at any time before acceptance is dispatched,

unless the offeror has promised not to revoke the offer and that

promise has been met with consideration. Under some circum-

stances, reliance may substitute for consideration. Where, for ex-

ample, a subcontractor submits an offer to a contractor and knows

the offer will be relied on in a bid, the subcontractor may not revokethe offer while the contractor is relying on it. In addition, the Uni-

form Commercial Code permits merchants to make a firm offer in

a signed writing and it is effective only for a reasonable period of

time, not to exceed three months.49

Under most civil law contract principles, an offer may be irrevo- 34

cable during the time necessary to make a response, or at least

it is irrevocable if the offeror reasonably relies on the offer. 50 In

the alternative, the offeror may be liable in tort for wrongful revoca-

tion of an offer, even if the revocation is effective in contract law. 51

Thus, traders in different signatory states will have different expe-riences with domestic law of firm offer and, presumably, different

concepts of what constitutes reasonable reliance. This is likely to

occasion confusion and misunderstanding about when an offer can

be revoked. Nevertheless, the language of Article 16(2) represents

a great improvement over previous efforts to codify a common in-

ternational trade law on firm offers.52

49U.C.C. ?2-205 provides that:

An offer by a merchant to buy or sell goods in a signed writing by its terms gives

assurance that it will be held open is not revocable, for lack of consideration,

during the time stated or if no time is stated for a reasonable time, but in noevent may such period of irrevocability exceed three months; but any such term

of assurance on a form supplied by the offeree must be separately signed by the

offeror.50SeeGalston and Smit, supranote 1, at 3-10, 3-12; Honnold, supranote 1, at

172-175 (1982).51Honnold,supranote 1, at 145-150.52Id. at 142-145.



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D. Acceptance35

Under Article 18 of the CISG, acceptance may take the form of a36

statement made or by other conduct indicating assent. An accep-

tance is effective when it reaches the offeror.53 Conduct indicating

assent constitutes acceptance effective at the moment the act isperformed, and under Article 18(3) such conduct seems to cre-

ate a contract even if the offeror does not learn of the conduct. 54

In contrast, UCC 2-206 permits the offeror to treat the offer as

lapsed if beginning of performance is a reasonable means of ac-

ceptance andthe offeror is notnotifiedwithin reasonable time of the

offeree's performance.55 Under the CISG, the burden is passed on

to the offeror to ascertain whether the offeree has accepted the of-

fer through the performance of an act.

E. The Battle of the Forms37

Not infrequently, an offeree's purported acceptance contains terms38

at variance with the terms of the offer. Typically, the offer and ac-

ceptance are made on standard forms, each containing the terms

most favorable to the drafter of the form. Each party hopes that in

the event of a breakdown in the transaction, the terms contained in

53CISG,supranote 1, art. 18(1) and (2). Article 18(1) and (2) provides:

(1) A statement made by or other conduct of the offeree indicating assent to an

offer is an acceptance. Silence or incapacity does not in itself amount to

acceptance.

(2) An acceptance of an offer becomes effective at the moment the indication of

assent reaches the offeror. An acceptance is not effective if the indication ofassent does not reach the offeror within the time he has fixed or, if no time is

fixed, within a reasonable time, due account being taken of the circumstances of

the transaction, including the rapidity of the means of communication employed

by the offeror. An oral offer must be accepted immediately unless the

circumstances indicates otherwise.54CISG,supranote 1, art. 18(3). See Honnold,supranote 1, at 186-188.55U.C.C. ? 2-206 (1978).

his forms will be regarded by the court as the terms of the contract.

This classic fact pattern can result in what is called the battle of

the forms, and it is handled somewhat differently by the CISG and

the UCC.

Under the common law, a variation from the terms of the offer in 39

a purported acceptance resulted in a rejection and counter-offer. 56

The UCC alters the common law mirror image rule and treats a

reply that purports to be an acceptance as an acceptance, even if

it varies the terms of the offer, unless the acceptance is expressly

made conditionalon assentto theadditional or different terms. The

additional terms are construed as proposals for addition to the con-

tract. Between merchants, these termsbecome part of the contract

unless they materially alter the contract or are specifically objected

to within a reasonable time after notice is received. 57 Article 19 of

the CISG, however, takes a different approach. A reply that pur-

ports to be an acceptance, but contains terms that materially alter

the terms of the offer constitutes a counter-offer anddoes notserve

as an acceptance.58 Thus, a major difference in approach lies in

56Restatement (Second) of Contracts ?59. See Vergne,The Battle of the

Forms Under the 1980 United Nations Convention on Contracts for the

International Sale of Goods,33 Am. J. Comp. L. 233, 243 (1985).57U.C.C. ? 2-207(1) and (2) (1978) provides:

(1) A definite and seasonable expression of acceptance or written confirmation

which is sent within a reasonable time operates as an acceptance even though

it states terms additional to or different to from those offered or agreed upon,

unless acceptance is expressly made conditional on assent to the additional or

different terms.

(2) The additional terms are to be construed as proposals for addition to thecontract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it;

(c) notification of objection to them has already been given or is given within a

reasonable time after notice of them is received.

SeeVergne,supranote 56, at 244-245.58CISG,supranote 1, art. 19(1).



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the result that, under the UCC, a purported acceptance that materi-

ally alters the terms of the offer results in a contract on the offeror's

terms. Under the CISG, however, a purported acceptance that ma-

terially alters the terms of the offer results in no contract. The reply

is regarded as a counter-offer and may be accepted by the original

offeror. Commentators have suggested that the CISG approachconforms more closely to both the mirror image rule and to west-

ern European civil code than does the UCC. 59

Under the CISG, if the purported acceptance contains additional40

or different terms that do not materially alter the terms of the offer,

then the reply serves as an acceptance, unless the offeror, with-

out undue delay, objects orally to the discrepancy or dispatches a

notice to that effect60 Then, as under the UCC, if the offeror does

not object, there is a contract on the terms of the offer as modified

by the acceptance. Unlike the UCC, however, the CISG specif-

ically identifies those terms that materially alter the terms of the

offer. Such terms include among other things, price, payment,

quality, quantity, time and place of delivery, extent of one party's

liability to the other or the settlement of disputes under the con-

tract.61 However exhaustive this list may appear, there is still room

to construe material in light of trade practice and course of deal-

ing. Inevitably, materiality, too, will be determined in the light

of commercial practice or good faith,62 as that is understood by

judges in different countries and legal traditions.

IV. The Risk of Loss41

The CISG provides basic rules for fixing the risk of loss or damage 42

to goods.63 Like the UCC, the CISG addresses the specific fact sit-

uations that inhere in the sale of goods. When goods are in transit,

and particularly when goods are transferred in transit among differ-ent modes of transport, it may be exceedingly difficult to fix in time

the incidence of damage or loss. Roman law placed the transfer of

the risk of loss at the conclusion of the contract.64 Some western

civil law countries have retained this rule, or have placed the time

of transfer of the risk at the time of the transfer of ownership. 65 It

is highly practical to fix the time of transfer of the risk of loss or

damage at a clearly ascertainable point, independent of the facts

that give rise to the loss. Usually, this would be either at the time

the goods are handed over to the carrier by the seller,and subject

to inspection by the seller at that point, or when the goods are de-

livered by the carrier to the buyer, and subject to the inspection bythe buyer at that point.66

It would be efficient to permit theparties to determinethe better risk 43

bearer, and recognize the allocation of risk made by the parties. In

59Vergne, supranote 56; Note,supranote 5, at 548-556. See generally,Ersi,

Problems of Unifying Law on the Formation of Contracts for the International

Sale of Goods,27 Am. J. Comp. L. 311 (1979).60CISG,supranote 1, art. 19(2).61Id. art. 19(3).62Honnold,supranote 1, at 191 (1982).63The risk of loss provisions are found in Chapter IV, articles 66 through 70 of

the Convention. See Roth,The Passing of Risk, 27 Am. J. Comp. L. 291(1979); Note,After the Damage is Done: Risk of Loss Under the United Nations

Convention on Contracts for the International Sale of Goods, 22 Colum. J.

Transnat'l L. 575 (1984).64Hoffman, Passing of Risk in International Sales of Goods, in Volken and

Sarcevic,supranote 1, at 268.65Id.66Id. at 269-70.



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fact, that approach is taken in both the UCC and the CISG. Typ-

ically, the risk is allocated by the parties through the use of UCC

terms for shipment or delivery contracts67 in domestic transactions,

or by reference to INCOTERMS68 in international transactions. In

the absence of an allocation of risk by the parties, however, the

CISG provides a rule of risk allocation, depending on whether thegoods are to be transported, are in transit at the time of the sale,

or are to be sold without transport. The effect of the rule of risk al-

location in each of these fact situations is that the buyer is not dis-

charged from his obligation to pay the contract price of the goods

if the risk of loss has passed to him under the rule. An exception is

made for loss or damage due to an act or omission of the seller. 69

In addition, breach of the contract causes the risk of loss to remain

on the seller.70 Similarly, the seller's failure to disclose damage or

loss known at the time of the conclusion of the contract causes the

seller to retain the risk of loss or damage.71

67U.C.C. ?2-509(1) provides:

(1) Where the contract requires or authorizes the seller to ship the goods by

carrier

(a) if it does not require him to deliver them at a particular destination, the risk of

loss passes to the buyer when the goods are duly delivered . . . ; but

(b) if it does require him to deliver them at a particular destination and the goods

are there duly tendered while in the possession of the carrier, the risk of loss

passes to the buyer when the goods are there duly so tendered as to enable the

buyer to take delivery.68SeeInternational Chamber of Commerce, International Rules for the

Interpretation of Trade Terms, I.C.C. Pub. No. 350 and International Chamber of

Commerce, Guide to Incoterms (1980). The International Chamber of

Commerce has promulgated accepted meanings of specific trade terms, suchas FAS (free alongside ship), CIF (cost, insurance, freight), and CandF

(cost and freight).69CISG,supranote 1, art. 66.70Id. art. 79. Article 79 provides: If the seller has committed a fundamental

breach of contract, article 67, 68 and 69 [on risk of loss] do not impair the

remedies available to the buyer on account of the breach.71Id. art. 69. Article 69 provides, in salient part: Nevertheless, if at the time of

A. Goods to Be Transported 44

Article 67 of the CISG provides the following rule on risk of loss or 45

damage:

(1) If the contract of sale involves carriage of the goods and 46

the seller is not bound to hand them over at a particular place,the risk passes to the buyer when the goods are handed over

to the first carrier for transmission to the buyer in accordance

with the contract of sale. If the seller is bound to hand the

goods over to a carrier at a particular place, the risk does not

pass to thebuyeruntil the goods arehanded over to the carrier

at that place. The fact that the seller is authorized to retain

documents controlling the disposition of the goods does not

affect the passage of the risk.

(2) Nevertheless, the risk does not pass to the buyer until the 47

goods are clearly identified to the contract, whether by mark-

ings on the goods, by shipping documents, by notice given to

the buyer or otherwise.72

This provision reflects the general approach of the UCC, in which 48

the risk of loss passeswhen the seller hascompleted his obligation

with respect to physical transfer of the goods. Under 2-319 of the

UCC, if the seller is obligated under the contract terms to put the

goods into the hands of a carrier, then the risk of loss passes to the

buyer when the seller puts the goods in the hands of a carrier.73 If

the seller is obligated to deliver the goods to a carrier at a particu-

lar port, then the risk of loss passes when the seller completes this

delivery alongside the ship.74 Finally, if the seller is obligated to de-

the conclusion of the contract of sale the seller knew or ought to have known

that the goods had been lost or damages and did not disclose this to the buyer,

the loss or damage is at the risk of the seller.72Id. art. 67.73U.C.C. ?2-509(1); U.C.C. ?2-319(1).74U.C.C. ?2-509(1); U.C.C. ?2-319(2).



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liver the goods to their final destination, then the risk of loss passes

when the seller delivers the goods to that destination.75

There are difficulties, however, with the first carrier rule, partic-49

ularly where the seller is obligated to transport the goods to the

particular place and does so by transporting the goods in its own

trucks. Commentators have observed that in this fact situation, thebuyer, in effect, assumes the risk of loss even when the goods

are in the hands of the seller.76 As a practical matter, the time

of the damage to the goods will be indeterminable if the nature of

the damage is breakage, seepage, freezing, overheating, theft or

other covert injury, and the buyer will bear the risk. This is a prac-

tical, albeit probably unintended, effect of the rule. Similarly, if the

seller contracts with a carrier to transport the goods to the par-

ticular place, and the goods are damaged in a manner not easily

ascertainable, the buyer will bear the risk of loss as a practical mat-

ter, even though the intent of the CISG appears to be otherwise.

Both of these problems underline the importance of avoiding shift-ing the risk of loss of goods, whether by treaty or by contract, while

they are actually in transit.77

Article 67 does not appear to cover destination contracts, in which50

the seller is obligated to deliver physical possession of the goods

to the buyer. Article 69, however, provides:

(1) In cases not within articles 67 and 68, the risk passes to51

the buyer when he takes over the goods or, if he does not do

so in due time, from the time when the goods are placed at his

disposal . . .

(2) However, if the buyer is bound to take over the goods to52

a place other than a place of business of the seller, the risk

75U.C.C. ?2-509(1)(b).76Honnold,supranote 1, at 374-375; Note, supranote 63, at 593.77SeeHonnold,supranote 1, at 376-377 (1982); 2 K. Zweigert and H. Kotz, An

Introduction to Comparative Law 187-207 (1977).

passes when delivery is due and the buyer is aware of the fact

that the goods are placed at his disposal at that place. 78

This provision is, in part, a reciprocal of article 67. 79 The articu- 53

lation, however, is not complete. Article 69(2) appears on its face

to address fact situations where the goods are to be sold without

being moved by the seller or from the seller's place of business. Itwould apply where, for example, the goods were to be moved by

the buyer from a warehouse operated by a third party, and it would

pass the risk of loss at the time delivery is due and the buyer is

aware that the goods are placed at his disposal at that place. This

fact situation was contemplated by the drafters.80

Article 67 appears to cover shipment contracts, where the seller 54

is obligated to turn goods over to a third party carrier either at the

seller's place of business (first sentence of article 67(1)) or at a

distant point to be then transported by carrier to the buyer (second

sentence of article 67(1)). Article 69 appears to cover destinationcontracts. Thus, if the seller is obligated to deliver the goods to

the buyer's place of business or to a place where the buyer is to

take over the goods, Article 69 would apply. It has been pointed

out in commentary, however, that the CISG is silent on the problem

of goods sent to a buyer under a shipping term such as Ex Ship

Buyer's Port. Under INCOTERMS, this term designates that the

seller's liability ends when the goods are off-loaded at the port and

placed at the disposal of the buyer. Article 69(2) would produce the

same result. Arguably, however, a liberal reading of Article 67(1)

(second sentence) would makethat provision applicable and cause

the risk of loss to pass to the buyer at a later point. That result canbe avoided by reading literally the language of Article 67(1) that

refers to the seller's obligation, not the carrier's obligation, to hand

78CISG,supranote 1, art. 69.79See supranote 78 and accompanying text.80Note,supranote 63, at 598-599.



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the goods over to a carrier. A parallel construction of Article 69(2),

however, would make that provision inapplicable where the buyer's

carrier, not the buyer, is to take over the goods. This ambiguity

underscores the need to use INCOTERMS to obviate this practical

construction problem.81

B. Good Not to Be Transported55

Article 69(1) provides that if the goods are to be picked up by the56

buyer at the seller's place of business, the risk is allocated to the

buyer when the goods are placed at his disposal. This language

requires factual evidenceof buyer's and seller's knowledge. In con-

trast, UCC 2-509(3) addresses this fact situation by passing the

risk of loss to the buyer on his receipt of the goods if the seller is

a merchant . . .82 This language appears to provide a more easily

ascertainable moment in time for risk-shifting. It also provides an

opportunity for the buyer to inspect the goods beforetaking receipt,

and that opportunity provides greater certainty as to who bore the

risk of loss or damage if loss or damage has occurred.

Article 69(2), which appears to be an exception to article 69(3),57

provides for the risk of loss where the buyer takes over the goods

at a place other than the place of business of the seller, such as

a bailee or warehouse. The risk of loss passes when delivery is

due and the buyer is aware that the goods are placed at his dis-

posal. Thus, it turns on factual knowledge of the buyer. In contrast,

UCC 2-509(2) provides a far more easily ascertainable standard

for identifying the risk of loss.83 The CISG language appears toprovide an unnecessarily subjective approach to determining risk

of loss, particularlyin comparison with theUCC language. It seems

81SeeNote,supranote 63, at 599 n.68.82U.C.C. ?2-509.83Id. See alsoNote,supranote 63, at 583-585.

prudent for traders to specify an allocation of risk provision in their

salescontractso as to avoidthe possible complications of theCISG

approach.

V. Performance 58

Most of the provisions of the CISG on contract performance are fa- 59

miliar to the American commercial lawyer because they resemble

the analogous UCC provisions. The seller is obliged to deliver the

goods, hand over any documents and transfer the property in the

goods, as required by the contract and the CISG. 84 If the seller is

not bound to deliver the goods at a particular place, then he is ob-

ligated to hand the goods over to the first carrier for transmission

to the buyer or to place the goods at the buyer's disposal. 85 If the

seller is obligated under the contract to arrange for carriage of the

goods, he must make such contracts as are necessary for car-riage to the place fixed by means of transportation appropriate in

the circumstances and according to the usual terms for such trans-

portation.86 The seller must deliver the goods at the contractually

agreed time, or within a reasonable time if no time is specified.87

Necessary documents must be handed over to the buyer as re-

quired by the contract.88

Under the CISG, the seller must provide goods which, in addition 60

to meeting contract specifications, meet standards of the CISG

which are similar to the implied warranty of merchantability under

84CISG,supranote 1, art. 30. See Enderlein,Rights and Obligations of the

Seller Under the UN Convention on Contracts for the International Sale of

Goods,in Volken and Sarcevic, supranote 1.85CISG,supranote 1, art. 31.86Id. art. 32(2).87Id. art. 33.88Id. art. 34.



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the UCC.89 The goods must be fit for ordinary purposes, must con-

form to a model or description, and be packaged or contained in

the manner usual for such goods or, where there is no such man-

ner, in a manner adequate to preserve and protect the goods.90

In addition, the seller must meet a standard similar to the UCC's

implied warranty of fitness for a particular purpose.

91

The selleris liable for any lack of conformity that exists at the time the buyer

assumes the risk of loss, even if the lack of conformity does not be-

come apparent until after the risk of loss has shifted.92 However, if

the seller has delivered non-conforming goods before the due date

of delivery, the seller may cure93 a breach of conformity up until

the due date of delivery by delivering any missing parts, making up

deficiencies in quantity, or delivering replacement goods.94

The buyer's obligations are also similar in many respects to those61

of the buyer under the UCC. The buyer is obligated to pay the price

of the goods95 and to take delivery of the goods.96 In addition, the

buyer is obligated to examine thegoodswithin as short a period as

is practicable in the circumstances,97 andthis examination maybe

deferred until shipped goods arrive at their destination.98 In order

to preserve his right to rely on a lack of conformity of the goods,

the buyer must give notice to the seller specifying the nature of

lack of conformity within a reasonable time after he has discov-

89Id. art. 35.90Id.91Id.92Id. art. 36.93

Id. art. 37.94Id.95Id. art. 53. Sevn,Obligations of the Buyer Under the UN Convention on

Contracts for the International Sale of Goods, in Volken and Sarcevic, supra

note 1, at 203.96CISG,supranote 1, art. 53.97Id. art. 38(1).98Id. art. 38(2).

ered [the lack of conformity] or ought to have discovered it. 99 In

any event, the buyer must notify the seller of the lack of conformity

within two years after receiving the goods, unless that period is in-

consistent with the period of guarantee specified in the contract.

The opportunity for late discovery of non-conformity permits the

buyer to assert claims against the seller based on hidden defectsin the goods, or defects not reasonably discoverable on immediate

inspection.

A major distinction between the CISG and the UCC approach to 62

performance lies in the fact that under the CISG there is no explicit

perfect tender rule100 permitting the buyer to reject the goods for

lack of conformity. The buyer under the CISG may, in effect, reject

the goods only if their non-conformity amounts to a fundamental

breach of the contract. Otherwise, the buyer is left to remedies for

99Id. art. 39(1). See Patterson,supranote 2, at 284-294 for a discussion of the

nature of the compromise that his provision represents between developing and

developed nations. In brief, nations that primarily buy industrial goods regardthe sanction for failing to notify the seller of non-conformity of the goods to be

too harsh -- such a buyer loses the right to rely on non-conformity of the goods

as a defense to non-payment. Moreover, buyers of technically complex

machinery perceive that defects in goods may not be readily ascertainable, that

sufficient time for inspection, testing and operations must be provided to detect

latent defects in goods. Sellers of such goods, on the other hand, perceive the

need for finality in sales, particularly with geographically distant buyers whom

they fear may unreasonably withhold approval of the goods to gain a strategic

advantage in price. The role of a trade treaty is to balance these concerns and

provide reasonable certainty of expectations. Article 39, requiring notice within a

reasonable time, normally not to exceed two years, reflects this compromise. Id.

The critical tension in judicial decisions under article 39 will be the commercial

standards which the forum court employs -- those of more industrial or lessindustrial nations -- in determining whether the buyer gave notice of

nonconformity within a reasonable period. Id. at 301-302.100U.C.C. ?2-503(1) provides, in part: Tender of delivery requires that the seller

put and hold conforming goods at the buyer's disposition and give the buyer any

notification reasonably necessary to enable him to take delivery . . . .

Tender that is rejected for non-conformity may be cured by the seller pursuant

to U.C.C. ?2-508.



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breach of contract. In contrast, under 2-601of the UCC, thebuyer

is entitled to reject or accept the goods if the goods or the tender

of delivery fail in any respect to conform to the contract . . .101

This provision is designed to take account of the relatively difficult

position of the seller in an international transaction when goods

are rejected by the buyer for a minor defect or imperfect tender ofdelivery. Given the significant asymmetry of power between the

seller and the buyer at that point, the remedies available under the

CISG appearsufficient to protect thelegitimate needsand interests

of the buyer.

A. Fundamental Breach63

The concept of fundamental breach is central to the CISG. Article64

25 provides:

A breach of contract committed by one of the parties is fun-65

damental if it results in such detriment to the other party as

substantially to deprive him of what he is entitled to expect

under the contract, unless the party in breach did not foresee

and a reasonable person of the same kind in the same circum-

stances would not have foreseen such a result. 102

This definition of fundamental breach appears to permit judgment66

as to whether avoidance of the contract is necessary to protect

the non-breaching party. Remedies available to the buyer turn on

whether the seller's breach was fundamental. Under article 49, for

example, the buyer may declare the contract avoided if the seller'sfailure to perform amounts to a fundamental breach. 103 Similarly,

a fundamental breach by the buyer is a basis for the seller avoid-

101U.C.C. ?2-601 (1978).102CISG,supranote 1, art. 25.103Id. art. 49.

ing the contract under article 64.104 If the non-conformity of goods

constitutes a fundamental breach of the contract, the buyer may

require that the seller provide substitute goods. 105 Avoidance of

the contract releases both parties from their obligations under the

contract, leaving them subject to any damages.106

In contrast, the UCC does not require that a breach of a sales con- 67

tract be so severe as to substantially deprive the non-breaching

party of thebenefit of hiscontract in order to permitavoidance of the

contract. A buyer may reject non-conforming goods, subject only

to the requirement that he permit timely re-tender of conforming

goods. If the buyer accepts the goods, he can revoke acceptance

and avoid his own performance only if its non-conformity substan-

tially impairs its value to him, and either (1) he has accepted the

goods knowing of the non-conformity but on the reasonable as-

sumption that the non-conformity would be cured, or (2) his accep-

tance was reasonably induced either by the difficulty of discovery

before acceptance or by the seller's assurances.107

Article 26 provides that a contract may be effectively avoided only 68

if notice is made to the other party. This relatively simple rule

represents a significant improvement over the Hague Convention

on Sales, which permitted the ipso fact avoidance, whereby the

breaching party could continue to perform at his own peril, igno-

rant of the fact that the non-breaching party had avoided the con-

tract.108 The drafters of the CISG sought to produce a rule that

looked at the severity of the breach, in the light of the foreseeable

consequences of the breach, rather than at the subjective knowl-

edge of the parties at the time of contract, which was the approach104Id. art. 64.105Id. art. 46(2).106SeeVilas,Provisions Common to the Obligations of the Seller and the

Buyer,in Volken and Sarcevic, supranote 1, at 255-59.107U.C.C. ?2-608 (1978).108SeePatterson,supranote 2, at 294-296.



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taken by the Hague Convention.109 While the severity of a breach,

and the extent to which it impairs contract expectations, may be

perceived differently against the background of domestic law, the

CISG approach appears superior as an international code.

B. Good Faith69

Article 7(1) provides that in interpreting the Convention there shall70

be regard for promoting the observance of good faith in interna-

tional trade.110 Unlike the UCC, however, the CISG does not at-

tempt to define what behavior constitutes evidence of good faith,

and the CISG falls short of declaring good faith to be a necessary

part of each party's performance. The UCC's good faith require-

ment is clearly broader in principle: Every contract or duty within

this Act imposes an obligation of good faith in its performance or

enforcement.111 The uncertain meaning of the CISG good faith

provision undoubtedly will provide opportunity for national courts

to impose local concepts of business ethics and, therefore, for lack

of uniformity in interpretation.112

C. Excuse of Performance71

Article 79 of the CISG provides:72

(l) A party is not liable for a failure to perform any of his obli-73

gations if he proves that the failure was due to an impediment

beyond his control and that he could not reasonably be ex-pected to have taken the impediment into account at the time

109Honnold,supranote 1, at 212-213.110Id. art. 7(1). See Unification and Certainty,supranote 6, at 1991 n.41.111U.C.C. ?1-203.112Unification and Certainty,supranote 6, at 1991.

of the conclusion of the contract or to have avoided or over-

come it, or its consequences.113

Article 79 further provides that the party who fails to perform be- 74

cause of an impediment must give notice to the other party of the

impediment and its effect on its ability to perform, or else stand li-

able for damages resulting from the lack of notice.114 This broad

provision reflects a compromise between the force majeure doc-

trine of the civil law countries and the relatively narrower excuse

for non-performance found in the common law doctrine of impos-

sibility.115

Section 2-615 of the UCC provides a somewhat stricter standard, 75

excusing failures to deliver goods if performance as agreed

has been made impracticable by the occurrence of a contin- 76

gency the non-occurrence of which was a basic assumption

on which the contract was made.116 Thus, the CISG looks tothe unexpected and permits excuse for performance where an

unexpected contingency occurs, while the UCC standard appears

to permit non-performance where the contingency that prevents

performance was anticipated, and the risk of that contingency

was not on the party whose performance was prevented. The

term impediment is not defined in the CISG. Undoubtedly, the

national courts that resolve conflicts under this provision will draw

heavily upon their own approaches to impossibility. To the extent

this happens, the goals of certainty and uniformity of international

trade law are compromised.117

113CISG,supranote 1, art. 79(1).114Id. art. 79(4).115SeeZweigert and Kotz,supranote 77, at 187-207; Unification and Certainty,

supranote 6, at 1993.116U.C.C. ?2-615 (1977).117Unification and Certainty,supranote 6, at 1992 n.54.



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VI. Remedies77

A. Buyers' Remedies78

If the seller fails to perform his obligations, the buyer has a selec-79

tion of possible remedies. The buyer may require specific perfor-

mance of the contract, unless he has resorted to a remedy that is

inconsistent with specific performance. If the non-conformity of the

goods constitutes a fundamental breach of the contract, the buyer

may require delivery of substitute goods. Even if the breach is not

fundamental, the buyer may require the seller to repair the non-

conforming goods, unless it would be unreasonable to require the

seller to do so.118

The availability of specific performance would come as a surprise80

to the unsuspecting common law merchant. Historically, the com-

mon law has regarded specific performance as an equitable rem-

edy, available only where monetary damages would prove an in-adequate remedy. Under UCC 2-716, a buyer may seek spe-

cific performance where the goods are unique or in other proper

circumstances, or, in some circumstances, the buyer may seek

replevin of the goods.119 Civil law systems tend to make specific

performance more readily available to the buyer.120 The general

rule of article 46 favoring specific performance is closer to the civil

law approach. However, article 28 permits the forum court not to

apply theremedy of specific performance if it would notdo so under

the substantive law of the forum state.121 Thus, the availability of

118

CISG,supranote 1, art. 46(3). See generally,Gonzalez,Remedies Underthe U.N. Convention for the International Sale of Goods, 2 Int'l Tax and Bus.

Law 79 (1984).119U.C.C. ? 2-716.120Honnold,supranote 1, at 227.121CISG,supranote 1, art. 28 states:

If, in accordance with the provisions of this Convention, one party is entitled to

require performance of any obligation by the other party, a court is not bound to

specific performance will vary, depending on the law of the forum

state, posing the possibility of surprise for either common law or

civil law merchants.

In addition, the CISG evidences a solicitude for the interests of the 81

seller in curing defective performance of the contract. The buyer

has the option of fixing an additional period of time for the seller to

perform his obligations, and during that period he may not resort

to any other remedy for the breach, unless he receives notice that

the seller will not perform.122 He may, however, claim damages

for the delay. Failure of the seller to perform within the extended

period entitles the buyer to avoid the contract, even if the breach

was not fundamental.123 In addition, the seller may cure a non-

fundamental breach even after the date of delivery if he can do

so without unreasonable delay and without causing the buyer un-

reasonable inconvenience or uncertainty of reimbursement by the

seller of expenses advanced by the buyer.124 Unless the buyer

has avoided the contract and notified the seller, the seller may no-

tify the buyer that he will perform within a specified period of time.

Such a notice is assumed to include a request that the buyer make

known whether he will accept performance. If the buyer does not

comply with the request within a reasonable time, the seller may

perform within the time indicated in his request. During this pe-

enter a judgement for specific performance unless the court would do so under its

own law in respect of similar contracts of sale not governed by this Convention.

Id.122Id. art. 47.123

Id. art. 49. Article 49 provides:(1) The buyer may declare the contract avoided:

(a) if the failure by the seller to perform any of his obligations under the contract

or this Convention amounts to a fundamental breach of contract; or

(b) in case of non-delivery, if the seller does not deliver the goods within the

additional period of time fixed by the buyer in accordance with [Article 47] or

declares that he will not deliver within the period so fixed. Id.124CISG,supranote 1, art. 48.



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21/23


read in conjunction with article 77, which requires a party who re-

lies on a breach of contract to take reasonable measures to miti-

gate the loss, including loss of profit, resulting from the breach, or

to be treated in the damage award as though he had taken such

measures.135

If the contract has been avoided, the party may have a more spe-92cific damage claim. The avoiding buyer who covers in the market

place, as well as the avoiding seller who resells the goods, has a

right to recover the difference between the contract price and the

price in the substitute transaction as well as further damages un-

der article 74.136 Under article 76(1), if the avoiding party has not

made a substitute transaction, he may nevertheless claim dam-

ages based on the difference between the price fixed by the con-

tract and the current price at the time of avoidance as well as dam-

ages under article 74. The problem of identifying the appropriate

market for determining such a price is addressed in article 76(2),

which refers to the price prevailing at the place where delivery ofthe goods should have been made or, if there is no current price at

that place, the price at such other place as serves as a reasonable

substitute, making due allowances in the cost of transporting the

goods.137

D. Restitution93

In addition to money damages, if the contract has been avoided,94

the buyer or seller who has performed the contract may claim resti-

tution in an amount equivalent to whatever he has supplied or paid

under the contract.138 If the buyer has received the goods and is

unable, due to his own act or omission, to make restitution of them

135Id. art. 77.136Id. art. 74.137Id. art. 76(2).138Id. art. 81.

in substantially the condition he received them, he loses the right

to declare the contract avoided.139 The buyer does not lose the

right to avoid, however, if the goods have perished or deteriorated

as a result of the buyer's exercise of his right of inspection, or if the

goods have been sold in the normal course of business or have

been consumed or transformed by the buyer in the course of nor-

mal use before he discovered or ought to have discovered the lack

of conformity.140 Finally, in making restitution, the buyer must ac-

count to the seller for all benefits which he has derived from the

goods. If he cannot return the goods under an avoided contract,

he must account to the seller for the disposition of the goods. 141

Similarly, the seller who is bound to refund the price of goods in

restitution must pay interest from the date on which the price was

paid.142

The remedies of buyer and seller are intended to maintain a bal- 95

ance of fairness between the parties in a long-distance trading re-

lationship and to prevent either party from gaining the capacity todeal with the other in an overbearing manner. For example, spe-

cific performance may be a sensible remedy for the seller faced

with a recalcitrant buyer who refuses, unreasonably, to take deliv-

ery of conforming goods. On the other hand, the seller is required

to mitigate damages, so that the buyer is likely to be faced with

specific performance only where the seller has no effective way to

mitigate through a resale of the goods. In addition to balancing the

rights of the parties, this feature of the Convention also balances

the civil law and common law approaches to remedies. Similarly,

the capacity of eitherpartyto fix an additional periodof time for per-

formance, and insist on either performance or breach, may reflectthe need for greater certainty in dealing at a distance. In general,

139Id. art. 82.140Id. art. 82(2)(c).141Id. art. 84(2)(a).142Id. art. 84(1).



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however, the remedy and damage provisions of the CISG are con-

sistent with the overall approach of the UCC, and the American

lawyer should be comfortable with them.

VII. Conclusion96

The Convention of the International Sale of Goods has now be-97

come an important part of American commercial law. This piece

of the legal puzzle must be understood as a document designed

to harmonize and bridge legal, developmental and cultural differ-

ences in the international setting. While several of its important

provisions are not found in American commercial code law, many

Uniform Commercial Code concepts are reflected in the Conven-

tion. This is not surprising since the UCC is designed to harmo-

nize differences, albeit lessdramaticdifferences, among the states.

Moreover, it is clear that some areas of potential conflict have not

been addressed by the Convention. Thus, it is important to under-stand the scope and coverage of the Convention. In addition, it is

useful to identify the most significant provisions of the Convention

that depart from the UCC approach.

This paper has provided a descriptive analysis of the major as-98

pects of the Convention's scope and coverage. While the CISG

addresses the formation of contracts and the rights and obligations

of the seller and buyer, it does not address other salient aspects of

a sales contract, such as contract validity, product liability, capac-

ity of the parties, or commercial fraud. Thus, the contract drafter

must draft around these gaps in coverage, at the same time identi-fying any unexpected areas covered by the Convention. Similarly,

the Convention does not cover contracts for the sale of goods to

consumers.

In addition, the paper has analyzed the problematic aspects of the99

provisions on the formation of the contract, allocation of the risk of

loss, performance, and remedies. The thrust of this analysis has

been both to identify significant departures from American com-

mercial law and to identify areas of the Convention that may create

difficulty in achieving certainty and uniformity in international trade

law. The most problematic areas for an American traderare: 1) the

issues of coverage and inclusion and the choice of law appropriate

to those areas not covered by the Convention; 2) the ambiguities

inherent in a view of contract formation that seeks to identify the

time of contract conclusion through an offer and acceptance anal-

ysis; 3) the Convention's approach to modifications and alterations

of an offer in a purported acceptance; 4) the uncertainties intro-

duced by the first carrier approach to allocation of the risk of loss;

5) the use of substantial performance theory instead of a perfect

tender rule; 6) the concept of the fundamental breach; 7) the rel-

atively broader excuse of performance doctrine; and 8) the buyer's

right to reduce the price as a remedy in breach.

FOOTNOTES 100

* Associate Professor of Business Law and Legal Studies, Gradu- 101

ate School of Business, University of Florida.



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