United Nations Convention on the Contracts for the ... Contract Law Enforcement (CLE) Program in...

USAID Contract Law Enforcement (CLE) Program in Kosovo

1

November 2014

United Nations Convention on the Contracts for the

International Sales of Goods (CISG)

Training Manual:

United Nations Convention on the Contracts

for the International Sales of Goods (CISG)

DISCLAIMER

The content of this manual is sole responsibility of Checchi and Company Consulting, Inc., and the author’s views

do not necessarily reflect the views of the United States Agency for International Development or the

Government (USAID) or the United States Government.

This publication may be reproduced, multiplied, or transmitted in electronic, mechanical, photocopy, recorded, or

any other manner, provided that attribution to USAID and the USAID Kosovo Contract Law Enforcement (CLE)

Program is clearly indicated on any copy made and distributed.

Table of contents MODULE 1: ........................................................................................................................................................................ 1

Introduction and General Issues of the CISG ............................................................................................................. 1

1.1 Overview ...................................................................................................................................................................... 2

1.2 Learning Objectives .................................................................................................................................................... 2

1.3 Introduction ................................................................................................................................................................. 2

1.4 CISG: A Brief History ................................................................................................................................................ 3

1.5 Structure of the CISG ................................................................................................................................................ 5

1.6 Interpretation of the Convention ........................................................................................................................... 6

1.7 Advantages and Disadvantages of the CISG ......................................................................................................... 7

1.8 Summary ....................................................................................................................................................................... 8

MODULE 2: ........................................................................................................................................................................ 9

Application of the CISG in Kosovo ............................................................................................................................... 9

2.1 Overview .................................................................................................................................................................... 10

2.2 Learning Objectives .................................................................................................................................................. 10

2.3 Contracting States .................................................................................................................................................... 10

2.3 Status of the 1980-United Nations Convention on Contracts for the International Sale of Goods ... 11

2.4 CISG in Kosovo ......................................................................................................................................................... 12

2.4.1 Vienna Convention on succession of states in respect of international treaties ............................... 12

2.4.2 Succession of Kosovo to the CISG under the Vienna Convention on succession of states in

respect of international treaties .............................................................................................................................. 13

2.4.3 CISG Application in Kosovo ......................................................................................................................... 15

2.5 Summary ..................................................................................................................................................................... 17

MODULE 3: ...................................................................................................................................................................... 18

SCOPE AND APPLICATION OF THE CISG .......................................................................................................... 18

3.1 Overview .................................................................................................................................................................... 19


3.3 Determination of applicability ................................................................................................................................ 19

3.4 Contract of Sale of Goods ..................................................................................................................................... 20

Goods ............................................................................................................................................................................ 20

Contract of Sale........................................................................................................................................................... 21

3.5 International character (Art. 1(1) CISG) ............................................................................................................. 21

3.6 Connection to contracting state ........................................................................................................................... 21

3.7 Temporal scope of application .............................................................................................................................. 23

3.8 Party autonomy ......................................................................................................................................................... 23

MODULE 4: ...................................................................................................................................................................... 27

Formation of the Contract ............................................................................................................................................ 27

4.1 Overview .................................................................................................................................................................... 28


4.4 The offer ..................................................................................................................................................................... 28

4.4.1 Intention to be bound ...................................................................................................................................... 28

4.4.2 Offer sufficiently definite ................................................................................................................................. 29

4.4.3 “Effective” offer (Art. 15(1) CISG) ............................................................................................................... 30

4.4.4 Offer not terminated ....................................................................................................................................... 31

4.5 Acceptance ................................................................................................................................................................. 32

4.5.1 General ................................................................................................................................................................ 32

4.5.2 Assent .................................................................................................................................................................. 32

4.5.3 Unqualified acceptance .................................................................................................................................... 33

4.5.4 Effective acceptance.......................................................................................................................................... 33

4.5.5 Withdrawal of acceptance .............................................................................................................................. 34

4.6 Modification of the Contract ................................................................................................................................. 34

4.7 Exercise 1.................................................................................................................................................................... 35

Summary Charts .............................................................................................................................................................. 35

4.7.1 Offer and acceptance ....................................................................................................................................... 35

4.8 Summary ..................................................................................................................................................................... 36

MODULE 5: ...................................................................................................................................................................... 37

Obligations of the Seller ................................................................................................................................................. 37

5.1 Overview .................................................................................................................................................................... 38


5.3 Obligations of the seller .......................................................................................................................................... 39

5.3.1 Overview ............................................................................................................................................................ 39

5.3.2 Convention Hierarchy ..................................................................................................................................... 40

5.4 Delivery of the goods and documents ................................................................................................................. 41

5.4.1 Obligation to deliver the goods ..................................................................................................................... 41

5.4.2 Seller’s obligation to hand over the documents ........................................................................................ 43

5.4.3 Transfer of property ........................................................................................................................................ 43

5.5 Conformity of the Goods ....................................................................................................................................... 43

5.5.1 Contractual conformity requirements (Art. 35(1) CISG) ....................................................................... 43

5.5.2 Conformity with the standards set out in Art. 35(2) CISG.................................................................... 45

5.5.3 Relevant time (Art. 36(1) CISG) ................................................................................................................... 46

5.5.4 Seller’s right to cure before delivery date (Art. 37 CISG) ...................................................................... 47

5.6 Examination and notice requirements ................................................................................................................. 47

5.6.1 Examination of the goods (Art. 38 CISG) ................................................................................................... 47

5.6.2 Notice of lack of conformity (Art. 39 CISG) ............................................................................................. 47

5.7 Checklist Seller .......................................................................................................................................................... 48

5.8 Exercise 1:................................................................................................................................................................... 49

5.9 Summary ..................................................................................................................................................................... 50

MODULE 6: ...................................................................................................................................................................... 51

Remedies of the buyer ................................................................................................................................................... 51

6.1 Overview .................................................................................................................................................................... 52


6.3 Buyer’s remedies for the Seller’s Breach of Contract ..................................................................................... 52

6.3.1 General outline of remedies........................................................................................................................... 54

6.3.2 Right of performance and substitute performance (Art. 46, 47 CISG) ............................................... 54

6.3.3 Avoidance of the contract .............................................................................................................................. 56

6.3.4 Reduction of the price ..................................................................................................................................... 57

6.3.5 Damages .............................................................................................................................................................. 59

6.4 Exercise 1.................................................................................................................................................................... 59

6.5 Summary ..................................................................................................................................................................... 59

MODULE 7: ...................................................................................................................................................................... 60

Obligations of the buyer, passing of risk and remedies of the seller .................................................................. 60

7.1 Overview .................................................................................................................................................................... 61


7.3 Obligations of the buyer and passing of the risk ............................................................................................... 61

7.3.1 Outline ................................................................................................................................................................. 61

7.3.2 Payment ............................................................................................................................................................... 61

7.3.3 Risk ....................................................................................................................................................................... 62

7.3.4 Taking delivery ................................................................................................................................................... 63

7.4 Remedies of the seller ............................................................................................................................................. 64

7.4.1 Outline ........................................................................................................................................................... 64

7.4.2 Seller’s right to require performance........................................................................................................... 64

7.4.3 Avoidance ........................................................................................................................................................... 65

7.4.4 Damages .............................................................................................................................................................. 66

7.5 Summary ..................................................................................................................................................................... 66

Bibliography ....................................................................................................................................................................... 67

USAID Kosovo Contract Law Enforcement (CLE) Program 1

MODULE 1:

Introduction and General Issues of the CISG


1.1 Overview

This module deals with basic principles of the CISG, as well as the historical background. It furthermore

explains the Structure of the CISG as well as the applicable interpretation method according to Art. 7

CISG.

1.2 Learning Objectives

Upon completion of this module, you will be able to:

Explain historical background of the CISG

State the advantages and disadvantages of the CISG

Get an idea how to solve a conflict of laws

Understand the structure of the CISG

1.3 Introduction

Cross border business often comes with insecurities and lack of knowledge of the foreign business

practices and legal provisions. These inconveniences stem from a different economic, cultural and

linguistic background of the involved business partners and these problems do amount to significant

costs for businesses. As soon as there is a cross-border transaction, the question arises which is the

applicable law governing the contract and which court would be competent.

For example:

The German manufacturer of a device sells it to France. Which law is applicable? In addition attention

has also to be paid to the relevant EU and other international provisions.

According to the law governing the contract, there can be different solutions for the case. Therefore it

is of utmost importance to determine the applicable law beforehand. Every jurisdiction already has such

a law regulation cross border contracts. The applicable is determined according to the chart below:


1.4 CISG: A Brief History

The United Nations Convention on Contracts for the International Sale of Goods (short

CISG) is a multilateral treaty introducing a uniform sales law that has until now been ratified by 83

countries.

(http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html).

Part of the convention are countries, which account for a significant proportion of world trade, thus

making the CISG to one of the most successful international uniform laws. A universal adoption of the

convention is desirable.

The CISG allows the parties of a contract to avoid choice of law issues as the CISG offers substantive

rule on which contracting parties, courts and arbitrators may rely.

The CISG is the result of a long process which began in the 1920s. The development of the uniform

sales law was initially started by the International Institute for the Unification of Private Law

(UNIDROIT) and the Hague Conference for Private International Law and then the United Nations

Commission on International Trade Law (UNCITRAL).

The treaty was signed in Vienna in 1980, therefore the treaty is sometimes referred to as the Vienna

Convention. The CISG entered into force on January 1988, for a number of 11 states. Since then the

number has been growing steadily, which can be called a success story for the unification of law. Most

importantly the CISG has found a broad field of application, because it was accepted from ‘every

geographical region, every stage of economic development and every major legal, social and economic

system’. The CISG after accession of the state becomes part of the domestic law and supplants any

• Determining which court is competent

• International agreement, International Civil Procedure Law

• Determining which domestic substantive law applies to a given dispute.

• Conflict of Laws, private international law, international private law

• Application of the found applicable substantive law

http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html


otherwise applicable national law of the Contracting state. Of the uniform law conventions, the CISG

has been described as having ‘the greatest influence on the law of worldwide trans-border commerce’.

The CISG has been described as a great legislative achievement and the ‘most successful international

document so far’ in unified international sales law. The factors which make the CISG so successful are

first and foremost its flexibility. It allows Contracting States the opt out some specified articles. It is very

important that a Convention is flexible to convince states with varying legal traditions to subscribe to

unification of a certain part of the law. A number of countries that have signed the CISG have made

declarations and reservations as to the Treaty's scope, though the vast majority has acceded to the

Convention without any reservations.


1.5 Structure of the CISG

Structure

The CISG contains detailed rules of application. This prevents the looking to the national Private

International Law for the determination of the applicable substantive law. Therefore the application of

the CISG is independent from the competence of a court. The following chart illustrates this.

Besides the rules of applicability, more importantly the CISG also contains substantive law dealing with

sales of movable goods. This in effects prevents the sometimes very difficult application of foreign

substantive law. However, the provisions in the CISG are not complete. Although they contain the

most important provisions governing sales contracts, there still exist gaps, which have to be filled with

the applicable national law. If applied correctly the CISG can be an immense simplification of

international business.

The CISG is divided into four parts:

I. The first part (Art. 1-13 CISG) contains rules on its sphere of application (Chapter I, Art. 1-6

CISG) and a number of general provisions (Chapter II, Art. 7-13 CISG).

II. The second part (Art. 14-24 CISG) deals with the formation of the contract

III. The third part (Art. 25-88 CISG) is by far the most comprehensive part of the Convention. It is

entitled “Sale of Goods” and provides the actual “sales law” of the Convention. It is subdivided

into five chapters:

1. Chapter I (Art. 25-29 CISG) contains some general provisions which may be relevant

throughout the entire sales law, in particular the definition of the notion of “fundamental

1. Application of the CISG? Determination according to the rules

of application (Art. 1-6 CISG)

2. Application of the substantive provisions of the CISG

3. Determination of the comptent court


breach” which will be relevant in particular as a precondition to the availability of certain

remedies including the right to avoid the contract (cf. Art. 49, 64, 72 et seq. CISG)

2. Chapter II (Art. 30-52 CISG) deals with the obligations of the seller. After the general

rule in Art. 30 CISG setting out the obligations of the seller in broad terms, Section I

(Art. 31-34 CISG) deals with the conformity of the goods and with third party claims,

and finally, Section III (Art. 31-34 CISG) contains the core elements of every sales law,

the buyer’s remedies for breach of contract by the seller.

3. Chapter III (Art. 53-65 CISG) has a similar structure: Art. 53 CISG states the buyer’s

obligations in a general way. Section I (Art. 54-59 CISG) deals with the obligation to pay

the price. Section II (Art. 60 CISG) deals shortly with the obligation to take delivery.

Section III (Art. 61-64 CISG) governs the seller’s remedies for breach of contract by the

buyer.

1.6 Interpretation of the Convention

One has to pay attention to the international character of the convention when attempting to interpret

its provisions. Art. 7 (1) CISG sets out certain guidelines for the standard of interpretation. The general

principles in the interpretation are the international character of the Convention and the need to

promote uniformity in the application. From this statement the three main guidelines can be deprived:

International character

This means that the Convention has to be interpreted autonomously, which means no analogies

to domestic laws should be drawn, the terms should be given a CISG meaning, which is o be

based on the underlying policies, the structure and the negotiation history of the Convention.

Uniformity

The goal would be that every court or arbitrator would apply the CISG in the identical way.

That this is an rather utopian goal is obvious, however courts can still take into account foreign

case law and at least try to distance themselves in CISG issues to confer to domestic practices

and consult scholarly opinions on the issues.

Observance of good faith

The first difficulty encountered is to find the relevant standard of good faith. Again, domestic

concepts of good faith should not be transferred into the Convention. It can only be derived

from case law, international practice and scholarly writings.


1.7 Advantages and Disadvantages of the CISG

Notwithstanding the large popularity among states of the Convention it is also subject to

criticism

First and foremost critics deemed the CISG as not being capable to agree on a code that

‘concisely and clearly states universal principles of sales law’. The guideline for interpretations

(‘international character’) just gives judges the opportunity to develop ‘diverse meanings’. The

CISG has been described to just be ‘a variety of vague standards and compromises that appear

inconsistent with commercial interests’.

That the CISG is ‘written in plain business language’ allows judges to apply the Convention in

numerous situations. This ‘drafting style’ is clear and with the wording being simple and

uncluttered by complicated subordinating clauses, and the ‘general sense’ can be understood by

the first reading.

The argument that the uniform application of the CISG is problematic because of the reluctance

of courts to use ‘solutions adopted is unfortunately in some cases true. However there are also

some courts which have been particularly willing to do so.

Contradictory jurisprudence is another disadvantage f the Convention. However, it would seem

that if there is room for contrary decisions, but it should be clarified to increase certainty in the

contradicting decision for judges to make use of it. This is particularly important if the

reluctance to use foreign precedent continues.

CISG advocates are also concerned that the natural inclination of judges is to interpret the CISG

using the methods familiar to them from their own State rather than attempting to apply the

general principles of the Convention or the rules of private international law. This concern has

been supported by research of the CISG Advisory Council which has said, in the context of the

interpretation of Articles 38 and 39, there is a tendency for courts to interpret the articles in

the light of their own State’s law and some States have ‘struggled to apply the CISG

appropriately’. In one of a number of criticisms of Canadian court decisions to use local

legislation to interpret the CISG one commentator said the CISG was designed to ‘replace

existing domestic laws and case law’ and attempts to resolve gaps should not be by ‘reference to

relevant provisions of [local] sales law’.

Critics of the multiple language versions of the CISG claim it is inevitable the versions will not be

totally consistent because of translation errors and the untranslatability of ‘subtle nuances’ of

language. This argument, although with some validity, would not seem peculiar to the CISG but

common to any and all treaties that exist in multiple languages.

The Convention, critics say, is incomplete and that there is no mechanism for updating the

provisions and no international panel to resolve interpretation issues. For example, the CISG

does not govern the validity of the contract, nor does it consider electronic contracts.


1.8 Summary

In this module, you have examined the history, foundations and the structure of the CISG. This module

has also provided information about the advantages and disadvantages of the CISG.

In this module, you learned to:

Explain historical background of the CISG

State the advantages and disadvantages of the CISG

Get an idea how to solve a conflict of laws

Understand the structure of the CISG


MODULE 2:

Application of the CISG in Kosovo


2.1 Overview

This module examines the application of the CISG to Kosovo’s international sale contract. The

application of the CISG to contracts will be evaluated under the light of the Vienna Convention on

succession of states in respect of international treaties, the UNMIK (Regulation 2000/68 on contracts

for the sale of goods) and its adoption of the CISG. And the module will be concluded by remarks and

examples of the application of the CISG in practice.



Understand the system of state succession in regards to international treaties

Derive from the examples given a notion about the applicability of the CISG to contracts concluded

with a Contracting state and a Non-Contracting state.

2.3 Contracting States

Graphic from http://www.cisg.law.pace.edu/cisg/cisgintro.html


2.3 Status of the 1980-United Nations Convention on Contracts for the International Sale

of Goods1

State Notes Signature

Ratification, Accession(*),

Approval(†), Acceptance(‡)

or Succession(§) Entry into force

Bosnia and

Herzegovina

12/01/1994(§) 06.03.1992

Croatia (c )

08/06/1998(§) 08.10.1991

Montenegro

23/10/2006(§) 03.06.2006

Serbia (l)

12/03/2001(§) 27.04.1992

Slovenia

07/01/1994(§) 25.06.1991

The former

Yugoslav

Republic of

Macedonia

22/11/2006(§) 17.11.1991

Currently there are 83 contracting parties of the CISG

(c) Upon succeeding to the Convention, Croatia has decided, on the basis of the Constitutional Decision

on Sovereignty and Independence of the Republic of Croatia of 25 June 1991 and the Decision of the

Croatian Parliament of 8 October 1991, and by virtue of succession of the Socialist Federal Republic of

Yugoslavia in respect of the territory of Croatia, to be considered a party to the Convention with effect

from 8 October 1991, the date on which Croatia severed all constitutional and legal connections with

the Socialist Federal Republic of Yugoslavia and took over its international obligations.

(l) The former Yugoslavia signed and ratified the Convention on 11 April 1980 and 27 March 1985,

respectively. On 12 March 2001, the former Federal Republic of Yugoslavia declared the following:

"The Government of the Federal Republic of Yugoslavia, having considered [the Convention], succeeds

to the same and undertakes faithfully to perform and carry out the stipulations therein contained as

1 Available at http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html

This page is updated whenever the UNCITRAL Secretariat is informed of changes in status of the Convention.


from April 27, 1992, the date upon which the Federal Republic of Yugoslavia assumed responsibility for

its international relations."

2.4 CISG in Kosovo

2.4.1 Vienna Convention on succession of states in respect of international treaties

To understand the concept of Art. 34 of the Vienna Convention on Succession of States in respect of

Treaties we have to explain the convention itself first.

Article 6

Cases of succession of States covered by the present Convention

The present Convention applies only to the effects of a succession of States occurring in

conformity with international law and, in particular, the principles of international law embodied in

the Charter of the United Nations.

The Convention distinguishes between the so called “newly independent states” and the “cases of

separation of part of state” (all other states). This is to give the newly independent states a “clean slate”

(Art. 16 of the Convention), which means that especially the newly independent post-colonial states do

not inherit the treaty obligations of the colonial power. However, this is not applicable to “cases of

separation of part of state”, where Art. 34(1) applies, thus the states remains bound to all treaty

obligations of the state from which they separated.

The former Yugoslavia had signed and ratified the Convention on 6 February 1979 and 28 April 1980,

respectively. Also participants of the Convention: “Bosnia and Herzegovina” (22 July 1993, by

succession), “Croatia” (22 October 1992, by succession), ”former Yugoslavia”, “Slovenia” (6 July 1992,

by succession), “The Former Yugoslav Republic of Macedonia” (7 October 1996, by succession) and

“Yugoslavia”.

Article 9

Unilateral declaration by a successor State regarding treaties of the predecessor State

1. Obligations or rights under treaties in force in respect of a territory at the date of a succession of

States do not become the obligations or rights of the successor State or of other States Parties to those

treaties by reason only of the fact that the successor State has made a unilateral declaration

providing for the continuance in force of the treaties in respect of its territory.


2. In such a case, the effects of the succession of States on treaties which, at the date of that succession

of States, were in force in respect of the territory in question are governed by the present Convention.

Part IV. Uniting and Separation of States

Article 34

Succession of States in cases of separation of parts of a State

1. When a part or parts of the territory of a State separate to form one or more States, whether or not

the predecessor State continues to exist:

(a) Any treaty in force at the date of the succession of States in respect of the entire

territory of the predecessor State continues in force in respect of each successor State so

formed;

(b) Any treaty in force at the date of the succession of States in respect only of that part of the

territory of the predecessor State which has become a successor State continues in force in respect of

that successor State alone.

2. Paragraph 1 does not apply if:

(a) The States concerned otherwise agree; or

(b) It appears from the treaty or is otherwise established that the application of the treaty in

respect of the successor State would be incompatible with the object and purpose of the treaty or

would radically change the conditions for its operation.

2.4.2 Succession of Kosovo to the CISG under the Vienna Convention on succession of states in

respect of international treaties

The former Yugoslavia as a contracting member of the CISG has signed and ratified the Convention on

11 April 1980 and 27 March 1985, respectively. On 12 March 2001, the former Federal Republic of

Yugoslavia has declared that the Federal Republic of Yugoslavia, succeeds to the Convention and

undertakes faithfully to perform and carry out the stipulations therein contained as from April 27, 1992,

the date upon which the Federal Republic of Yugoslavia assumed responsibility for its international

relations.

As we can see from the chart above the states of Farmer Yugoslavia have all adhered to the Convention.

The Kosovo, as the most recent state is still in question. As the Kosovo has not yet notified the

succession to the Convention important questions are unanswered. Are Kosovar parties to contracts

considered as coming from CISG Contracting States for the purposes of Art. 1(1)(a) CISG? And

whether Kosovo law is to be considered as to include the CISG if the rules of private international law


lead to its application under Art. 1(1)(b) CISG while the underlying contract is concluded in the current

period?

With Serbia being a contracting state of the CISG and used to be also on the territory of Kosovo. Is Art.

34 of the 1978 Vienna Convention on Succession of States applicable in this case? Art. 34 states that in

case of dissolution of a state, for automatic continuation of application of the multilateral treaties signed

by the predecessor state at the territory of the successor state.

The practice of making notifications by the successor state and the following acceptance by the

depositories can be interpreted as a way of clarification of the situation and not an argument to the

contrary, that because of the notification the state adhered to the convention. Thus the status of a

contracting state to the treaty would be established ipso facto, from the date the state declares

independence. The notifications can therefore be seen as a mere formalization.

Art. 100 CISG, however, is in conflict with the only constitutive nature of notification. This becomes

obvious very the law of the state is chosen as the law governing the contract. When the parties chose

the Kosovo law now, they do probably not intend to be bound by the CISG, since it does not form part

of the Kosovo Law at the time of the contract conclusion. This is where Art. 100(2) CISG comes into

effect, which protects the parties of the contract from subsequent CISG incorporation in the national

law, in their contract. Without this provision there would be an imbalance between the parties who

contract after the CISG enters into force, because they can derogate the application of the CISG under

Art. 6, while the parties which contracted before the incorporation had no such choice. Therefor with

due consideration under light of legal certainty, contract concluded with the choice of law being Kosovo

Law will not constitute the CISG.

Art 100 CISG

(1) This Convention applies to the formation of a contract only when the proposal for concluding the

contract is made on or after the date when the Convention enters into force in respect of the

Contracting States referred to in subparagraph (1) (a) or the Contracting State referred to in

subparagraph (1) (b) of article 1.

(2) This Convention applies only to contracts concluded on or after the date when the Convention

enters into force in respect of the Contracting States referred to in subparagraph (1)(a) or the

Contracting State referred to in subparagraph (1)(b) of article 1.

However, Kosovo ( first through UNMIK Regulation 2000/68 on contracts for the sale of

goods and now through the Law on Obligational Relationships) has adopted the CISG

unilaterally.

Kosovo was previously, because of its status as a administrative subordination under the U.N., party to

the CISG, however this status was later lost, because of the declaration of independence without the full

recognition of the UN bodies. Technically speaking, CISG has already been applied in Kosovo not only

for international sales but also for domestic sales and the interpretation of this law had been

unsatisfactorily.


Law No. 04/L- 077

On Obligational Relationships

Article 1058

Termination of validity and application of other laws

1. On the day of entry into force of the present law, the provisions of the UNMIK Regulation

2000/68 on contracts of sales of goods shall cease to exist.

2. In the meaning of this Law, and in accordance with Article 145 of the Constitution of

Republic of Kosovo, the applicable Law on Contracts on International Sale of Goods shall be the

United Nations Convention on Contracts for the International Sale of Goods.

3. On the day the present Law enters into force the Obligations Relations Act (Official Gazette of

the SFRY, Nos. 29/78, 39/85 and 57/89) shall cease to apply, with the exception of the

provisions of Title XXXI (Articles 1035 to 1046), Title XXXII (Articles 1047 to 1051), Title

XXXIII (Articles 1052 to 1060), Title XXXIV (Articles 1061 to 1064), Title XXXV (Articles

1065 to 1068), Title XXXVI (Articles 1069 to 1071), Title XXXVII (Articles 1072 to 1082),

Title XXXVIII (Articles 1083 to 1087) and Title XXXIX (Article 1088), which shall continue to

be applied as appropriate as national regulations until the issue of the relevant regulations.

4. Upon entry into force of the present law, the provisions of previous laws that regulated this

matter shall cease to exist, unless the law provides otherwise.

2.4.3 CISG Application in Kosovo

If the Vienna Convention on Succession of States in respect of Treaties under Art. 100 CISG were not

applicable that would create the situation that the CISG was applicable to contracts before the

independence of Kosovo and under the UNMIK Regulation 2000/68 on contracts for the sale of goods.

The contracts concluded under the law concluding the CISG would still have to be decided under the

rules of the CISG. Also contracts with countries being Contracting states to the CISG may under the

respective circumstances evaluated in Module 3 lead to an application of the CISG in Kosovo.


From the Macedonian Example we can derive opinions on the applicability in cases of conflict

Example

In the case of Macedonia (it took Macedonia from the date of its independence to file a notification of

succession to the CISG 15 years) the arbitrator in the 2 cases before the formal notification stated after

elaborating the reasons for CISG application "Since the seller is a Serbian company the applicable law should

be the law of Serbia, i.e. the Law on Contracts and Torts. However, since both states on whose territory

the parties have places of business were constituents of former SFRY, and since the SFRY has

signed the UNCITRAL Convention on Contracts for International Sale of Goods and the contract

at hand is a contract for international sale of goods, the arbitrator considers the Vienna

(UNCITRAL) Convention as also applicable for reasons of automatic succession to multilateral

treaties."

Awards Nos. T-14/04 and T-15/04 of 21 February 2005.

Example for after Macedonia filed a notification of succession and was listed on the UNCITRAL web site

as a CISG Contracting State.

Example

In a dispute between a Serbian seller and a Macedonian buyer, the CISG was applied as part of the

Serbian law on the basis of conflict-of-laws (COL) analyses. The sole arbitrator explicitly noted in the

obiter dictum that the analysis of CISG application on the basis of Art. 1(1)(a) was purposefully omitted

although Macedonia was a party to the Convention at the time of the making of the award, since this

was not the case at the time of the contract conclusion.

Award No. T-23/06 of 15 September 2008

Example

Opposite opinions given to the example above:

The opposite conclusion was reached in and award, where the CISG was applied on the basis of Art.

1(1)(a) since both countries of the parties' place of business were deemed parties to the CISG, despite

the fact that the underlying contract was concluded prior to Macedonia's filing of notification

of succession to the CISG. This contradicts Art. 100(2) CISG.

Award No. T-8/07 of 9 May 2008

Award No. T-1/08 of 17 November 2008


2.5 Summary

This module examines the application of the CISG to Kosovo’s international sale contract. The

application of the CISG to contracts will be evaluated under the light of the Vienna Convention on

succession of states in respect of international treaties, the UNMIK (Regulation 2000/68 on contracts

for the sale of goods) and its adoption of the CISG. And the module will be concluded by remarks and

examples of the application of the CISG in practice.


Understand the system of state succession in regards to international treaties

Derive from the examples given a notion about the applicability of the CISG to contracts concluded

with a Contracting state and a Non-Contracting state.


MODULE 3:

SCOPE AND APPLICATION OF THE CISG


3.1 Overview

This module specifically outlines the scope of application of the CISG, as well as the rules on the scope

of application. You will get a notion about the contracts governed by the CISG, the necessity of

international character and the connection to a Contracting State. Understand the temporal scope of

the CISG and be able to conclude a contract by opting-in or out of the CISG.


Upon Completion of this module, you will be able to:

Comprehend the scope of application of the CISG;

Interpret situations/contracts according to the applicability of the CISG.

3.3 Determination of applicability

The applicability of the CISG to certain contracts is determined by its own rules set out in the Art. 1 to

6 CISG. For the determination of the applicability it is important to take into consideration the different

elements of the contract. The important elements for the determination are the parties, their

connection to the contracting state to the CISG and the transaction itself. When Art. 1 to 6

governing the determination of applicability leaves a gap or allows interpretation choice of law rules may

be used to determine the application.

Besides governing the rules of applicability the Art. 1 to 6 also limits the scope of the CISG. As the

unification by the CISG does not provide a full unification of sales law, it can only be seen as a partial

one, the one concerning sales contract and its performance. This results in the situation that domestic

law will be applicable together with the CISG. It is therefore advisable to stipulate in a contract not only

the applicability of the CISG but also the domestic law governing the contract.

To determine the applicability of the CISG according to the Art. 1 to 6 in the given situation follows the

chart below:


3.4 Contract of Sale of Goods

Goods

Art. 1 CISG provides that the CISG applies to “contracts of sale of goods”. It is irrelevant whether the

respective contract is of civil or commercial nature (Art. 1(3)). According to the interpretation of legal

scholars (see for details Schlechtriem/Schwenzer, Commentary on the Convention on the international

sale of goods, 3rd edition, 2010) goods are moveable, tangible, objects. The term goods shall be

subject to a wide interpretation so as to cover all objects – new or used – which form the subject

matter of commercial sales contracts and those which the drafters of the convention could not have

foreseen. Certain items are expressly excluded from the scope of applicability of the convention (see

Art. 2(d)-(f)). Items which are extra commercium or trade with them is otherwise restricted, they are

goods in the sense of Art. 1. As for software, it also can be subject of the CISG, if it is permanently

transferred to the other party in all respects except for copyright and restrictions to its use by third

parties and becoming part of other parties property. However the transfer of know-how not

implemented in a physical medium does not fall under the CISG, because it has no link to the notion of a

good. For documentary sales the CISG also applies. This is not true for the sale of entire business

undertakings; these do not fall under CISG. This is beyond doubt true for shares, partnership interests,

as they constitute rights, however it might be different in case of asset deal matters. Then the acquisition

of these items may be the real objects of the buyer’s share purchase. In general the CISG will be

precluded even in the case of an asset deal, as real property and/or rights, usually make up the major

part of the subject-matter of the sale. Moreover, goodwill and other intangibles such as patents

copyrights etc. will also play an important role. The plain sale of rights is not covered by the CISG.

Is this an international sale? Does the CISG applies under Art. 1(1)(a)-(b)?

Does the transaction qualify as a sale of goods under Art.1-3?

Have the parties exercised their freedom to contract out under Art. 6?

Is the matter (issue) in question governed by the Convention (Art.4-5)?

If the matter is governed, is it governed-but-not-settled under Art. 7(2)?


However as Art. 41, 42 make clear, that items containing intellectual property rights does not influence

their character as goods. Claims, licences, patents, copyrights etc. are not goods in the sense of Art. 1.

Contract of Sale

The CISG does not define the term Contract of Sale. “Contract of Sale” in the sense of the CISG are

reciprocal contracts directed at the exchange of goods against the price. By following this definition

one can conclude that Art. 1(1) encompasses most kinds of sales. Listed in the CISG are certain types of

contracts, where the classification may create difficulties. Expressly mentioned in the convention are the

carriage of the goods (Art. 31(a), 67), ales by sample or model (Art. 35(2)(c)) or in accordance with

specifications made by the buyer (Art. 65), and instalment contracts (Art. 73). Encompassed by the

convention, but not explicitly mentioned are sales under conditions including the retention of the title

or time limits as well as contracts providing for the direct delivery of the goods to the customer of the

buyer. The CISG also applies to contracts containing pre-emptive options or repurchase-rights, buy-back

sales, counter-purchases, and offsets. In Art. 3 the special provision for goods to be manufactured can

be found. Although the concept of barter resembles the sales contracts, they are not encompassed by

the scope of the convention. In the case of sales contracts with special financing agreements the general

rule is in Anaglogy to Art. 3(2) CISG the weight of the purchase part in the particular case is the decisive

criterion. Distributership, dealership, agency or franchise are excluded from the scope of the CISG. A

modification, avoidance or change of the initial sales contracts falls under the rules of the CISG (Art. 29).

3.5 International character (Art. 1(1) CISG)

To meet the requirements of the international character in Art. 1 CISG the parties of the contract must

have their place of business in different states and this requirement is common in both subsections (lit. a

and lit. b). The CISG does not refer to the place of conclusion of the contract nor the place of

performance of the contract, but simply looks at the place of business. The burden of proof has to be

borne by the party which claims the CISG applicable.

3.6 Connection to contracting state

The requirement in Art. 1 CISG sets forth that the contract must have some connection to at least one

of the Contracting States of the CISG. Art. 1 CISG contains 2 rules of application of the CISG. The rule

in Art. 1(1) lit.(a) is the most important. Whenever on party whose business is located in a given

Contracting State sells goods to another party having its relevant place of business in another CISG

State, the Convention “automatically” applies, because the sale concerned involves a contract between

parties whose place of business are in different Contracting States.

Example

Two parties with their places of business in France conclude a contract for the sale of a shipment of

goods from China to Spain, the CISG will not be applicable.


Example

If a party with its place of business in China concludes a with a party with its place of business in Spain

for the sale and shipment of the goods from Paris to Bordeaux, the internationality requirement of the

CISG is met.

Example

The application of the CISG is not affected if two German citizens conclude a contract in Hamburg

about a certain amount of liquor, which is handed immediately from the seller to the purchaser, as long

as their places of business are in different states.

When the given sale is “international”, the courts of most Contracting States are not only obliged to

apply the Convention when the requirements set forth in Art. 1(1) lit. a are met, but also lit. b can

trigger the CISG application even if only one of the parties has its place of business in a CISG

Contracting State. The application under lit. b is a little bit more complicated as it leads to the

application of the CISG via private international law rules of the forum. The CISG applies when these

rules lead to the application of the law of a Contracting State.

Example

A dispute between the two parties (German seller and a British purchaser) will be decided by the

(internationally competent) German Court according to Private International Law rule of the “closest

ties” to be governed by German Law. Therefore as part of the German law the CISG will be applicable

to the contract, when the requirements for the application of the CISG are met. For the same reason

the CISG would apply if the British internationally competent Court would have to apply German law,

because of the rules on the conflict of laws.

However, due to a declaration, a reservation, made by some Contracting States (e.g. China, U.S.A.)

pursuant to Art. 95, courts in those States are not bound by the rule in subparagraph (b) of Art. 1(1).

Example

A contract with the contracting parties (a British purchaser, Britain not contracting state of the CISG

and a U.S.-American Seller. Internationally competent U.S. court and the application of substantive U.S.

law, the court will not apply the CISG, even though it would be part of the U.S. law, because of the Art.

95 declaration of the U.S.A. Which constitutes that the CISG will only be applied if both States are

contracting States and does not apply if only private international law leads to the application of the

CISG without both countries being part of the Convention.


As seen above this case would lead to an application of the CISG in the case of a British purchaser and a

German Seller.

For the Convention to apply the cross border element must be apparent to the contractors either from

the contract or from the dealings between, or information disclosed by, during the parties’ negotiations

(Art. 1(2) CISG).

Example

If an Austrian company with its branch in Austria buys something from the Austrian agent of a Swiss

company (which does not have a branch in Austria) then the Austrian company must have been aware

that the agent acted for the Swiss company and/or the Swiss company has the closest connection to the

contract and its performance, for the CISG to apply pursuant to Art. 10(a) CISG. If the agent did not

reveal that he/she contracted on behalf of the Swiss company and if its not evident that the contract has

a close connection with the Swiss company (either through previous dealings, negotiations or from the

contract or its performance) the CISG will not be applicable. Instead Austrian law would apply.

3.7 Temporal scope of application

Art. 100 CISG governs the temporal scope of the Convention. This provision distinguishes between the

rules on the formation of the contract and the other rules of the convention.

Art. 100(1) sets forth that the „Convention applies to the formation of a contract only when the

proposal for concluding the contract is made on or after the date when the Convention enters into

force in respect of the Contracting States referred to in subparagraph (1) (a) or the Contracting State

referred to in subparagraph (1) (b) of article 1.

(2) This Convention applies only to contracts concluded on or after the date when the Convention

enters into force in respect of the Contracting States referred to in subparagraph (1)(a) or the

Contracting State referred to in subparagraph (1)(b) of article 1.“

3.8 Party autonomy

The application of the CISG is subject to the principle of party autonomy. According to Art. 6 CISG the

parties can exclude the application of the CISG or according to Art. 12 CISG derogate from or vary the

effect of any of its provisions. This provision contains 2 different mechanisms: First the complete

“opting-out” of the application of the convention and secondly the derogation from specific provisions

of the Convention.

In the case of “opting-in” to the CISG if the requirements for the application are not met (for example

from two non-contracting states) whether the parties can chose the application. Two situations have to

be distinguished: First, when the parties have chosen the law of a contracting state the exact treatment

may depend on where the forum is situated (see chart in chapter connection to a contracting state), but


in most cases the CISG will apply as part of the chosen law in the contracting state. In the second

situation the parties have chosen the CISG as the applicable law. Here the question remains, whether

the parties can chose an international legal instrument “as such”, not as part of the law of a state, which

has enacted this instrument. The effect of such a choice will be that the provisions of the CISG will be

incorporated in their contract. The rules of the CISG will therefore not be incorporated as the

applicable law, but as simple contract clauses.

CISG

"Opt-out" This agreement shall be governed by the laws of [...]. The application of the United nations Convention on the Sale of Goods 11 April 1980 shall be excluded.

"Opt-in" Governing Law German substantive law shall apply to the Agreement, including the United Nation Convention on Contracts for the International Sale of Goods of April 11, 1980 or The rights and obligations of the parties under this Agreement shall be governed by the United Nations Convention on Contracts for the International Sale of Goods of April 11, 1980 or The contract shall be governed by the United Nations Convention on Contracts for the international Sale of Goods of April 11, 1980, or, to the extend that the convention does not settle the rights and obligations of the parties, the substantial laws of [...] shall apply.


CISG does not apply;

Not unified national law has to be applied.

Examination of the other applicaton

requirements necessary. Art. 1(1)lit.

a

Yes

• Is it a contract of sale?

Yes

• Is the a good in the meaning of the convention? A moveable, tangible object?

Yes

•Do the contracting parties have their places of business in different contracting states? Art. 1(1)

Yes

•Are both States Contracting State of the CISG? Art. 1(1)lit. a

No

•1) Is the application of the Convention excluded (Art. 12) or do the parties derogate from any effects of the Convention? 2) Convention does not apply according to Art. 2?

NOTE •CISG applies national law governs gaps

3.9 Summary: Does the CISG apply?

No

No

No

Yes

No


3.9 Summary

In this module you have examined the scope of application of the Convention. With a closer evaluation

of the contract of sale of goods, to which contracts the CISG applies. Why the international character is

necessary to fall under the CISG and the connection to a contracting state. We further took a look at

the temporal scope of the application and the party autonomy.

In this module, you learned to:

Comprehend the scope of application of the CISG;

Interpret and evaluate situations/contracts and conclude whether the CISG is applicable;


MODULE 4:

Formation of the Contract


4.1 Overview

This module deals with the Formation of the contract under the CISG. It elaborates what an offer must

contain, the intention to be bound, that it must be sufficiently definite, the offer must be effective and it

must not be terminated. Further the the offer mirroring acceptance will be examined. Also included are

some charts which show the offer and acceptance with and without standard forms.



Understand the necessary prerequisites for an offer under the CISG

Understand the necessary prerequisites for an acceptance under the CISG

Closely explain from the chart the formation of the contract

4.3 Model of offer and acceptance

Part II of the CISG deals with the provisions on the “Formation of the Contract”, the rules relating to

offer, acceptance and the like.

Offer and Acceptance are the two essential elements in the contract formation process. To sell or buy

goods on the international market, a given offer must contain certain minimum Convention

requirements.

4.4 The offer

The first sentence in Art. 14(1) sets out the main requirements for an offer to meet the minimum

standard. An offer must be as a general rule be addressed to one or more specific persons, the offer

must be sufficiently definite and indicate the intention of the offeror to be bound.

4.4.1 Intention to be bound

Intention to be bound is defined by the willingness of the offeror to be bound in case of acceptance. The

usage of the phrases as “we order for immediate delivery” and “we offer for sale” indicate an intention

to be bound, whereas the term “without obligation” clearly indicates otherwise. According to Art. 8

these statements have to be interpreted in their context. As in most legal systems, the Convention

draws a distinction between an offer and a communication intended to only invite the recipient to make

an offer (“invitation ad offerendum”).

Art. 14(2) deals with the offer made other than to “one or more persons”. It states that this is

considered to be merely an invitation to make offers, unless the contrary is clearly indicated. As it

cannot be concluded in general that an offer made to one or more specific persons will always be

treated as an offer neither can a proposal according to Art. 14(2) never be an offer. This clearly is

subject to interpretation under Art. 8.


4.4.2 Offer sufficiently definite

The second sentence of Art. 14(1) defines a proposal as being “sufficiently definite” if it

a) indicates the goods

b) expressly or implicitly fixes the price

This means that the essential terms of the future agreement (“essentialia negotii”) must be contained in

the offeror’s proposal. This is of great importance that the offer, when accepted and the contract is

capable of enforcement comes into existence.

The degree of specification needed will depend upon the type of goods that are subject matter.

Therefore if a broader range of products is available (quality differences), an offer will have to be more

precise, even though there is no general requirement that the quality of the goods has to indicated.

Example

Purchase order which identifies a given computer program (standard software type –X) and the

compensation to be paid for will satisfy the requirements.

Example

An order for chinchilla pelts of “middle or better quality” at a price between 35 and 65 German marks’

has been held sufficiently definite.

Example

Contract for the future supply of “commercial quantities” of a chemical ingredient was sufficiently

definite under Art. 14 was held by a American Court in a flexible decision.

If the proposal does not fulfil the minimum standards of definiteness in Art. 14(1), it cannot qualify as a

CISG offer, nor can it qualify as a counter-offer under Art. 19(1). However, if a communication seems to

not fulfil the requirement, custom and usage may serve to fill it out. So when the determination of the

“essentialia negotii” has to be made implicitly, all circumstances of the case, including the negotiations,

any practices which the parties have established between themselves, usages and any subsequent

conduct of the parties (Art. 8, 9 CISG).


Example

In a Hungarian case a seemingly nebulous oral communication by a German seller was held sufficiently

definite under Art. 14(1), in that the quality, quantity and the price of the goods were impliedly fixed by

the parties’ prior course of dealings in accordance with Art. 9(1). On several occasions the seller had

delivered goods ordered by the buyer who had regularly and without objection paid the price after

delivery.

The proposal of a “truck load of eggs” was held permissible due to custom of the parties.

In the case of the determinability of the offer under Art. 14(1) second sentence, a proposal can be

sufficiently definite notwithstanding that the price, goods and quantity are neither expressly nor

implicitly fixed if provision is made for their determination. Then it is determinable.

Example

Buyer place the order for 50 widgets described and priced per unit in catalogue, the price of the order

is sufficiently determinable.

The only remaining problem is the “open price term”. Domestic laws vary of whether parties can

conclude a contract without finally settling or fixing the price. According to Art. 14(1) CISG an offer is

sufficiently definite if it expressly or implicitly fixes or makes provision for determining quality and price.

The question scholars concluded e contrario from this provision is that a proposal, which does not fix or

make provision for determining the price is not sufficiently definite and can therefore not constitute an

offer. The opposing pint of view is that this problem is solved by Art. 55, which provides a default rule

reference to the price generally charge in cases ”where a contract has been validly concluded but does

not expressly or implicitly fix or make provisions for determining the price. Since Art. 55 CISG provides

a method of dealing with this problem and closing the gap in at least some of the CISG contracts, this

provision negates the opinion that the absence of a price term hinders a sufficiently definite offer.

To find a solution in this case the courts and arbitrators should first attempt to discern the true

intention of the parties, not only because this is the overriding principle of Art. 14, but also because Art.

6 lets the parties derogate from any of the CISG provision pertaining to contract formation.

4.4.3 “Effective” offer (Art. 15(1) CISG)

The next step after the determination as an offer is the question when the offer takes effect. This is

important for periods relying on that point in time (offer remains open, or whether acceptance arrives

in time). As generally agreed upon an offer becomes effective when it reaches the offeree. An oral offer

reaches the offeree instantaneously, whereas a written offer takes a certain time to be delivered to the

place of business if there is not place of business, to his habitual residence).


4.4.4 Offer not terminated

For the offeree to accept the offer, it must not have been terminated. It is important to distinguish

between withdrawal and revocation.

Withdrawal (Art. 15(2) CISG)

Identifies a termination of the offer made before or at the same time as the offer reaches the

offeree.

Where the communication terminating the offer reaches the offeree before or at the same time

as the offer, this is effective to withdraw the offer even if the offer is states to be irrevocable.

(Art. 15(2) CISG) The main difference to the revocation of the offer is that the right to

withdraw deals with offers which have never taken effect.

Revocation (Art. 16 CISG)

Termination after the offer reaches the offeree.

An offer, which has not been effectively withdrawn in accordance with Art. 15(2) reaches the

offeree and takes effect, the offeror has the right to revoke the offer. The right of revocation is

permissible if the revocation reaches the offeree before he has dispatched an acceptance. (Art.

16(1) CISG) The underlying idea is that the offeror should be free to revoke it at least until the

offeree has accepted the offer.

The two important modifications of the right to revoke are to be found in Art. 16(2). The first

modification is that an offer to enter an international contract of sale cannot be revoked if it

“indicates … irrevocable” (Art. 16(2) (a)). The second limitation states that “if it was reasonable

for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance of

the offer” (Art. 16(2) (b)).

Example

S (in CISG State X) sends a telefax offering to supply cloth at a given price to the potential buyer

B-1 (in CISG State Y). B-1, who regularly does business with S, calculates her manufacturing

costs on the basis of that offer and then offers to sell finished goods (coats) to B-2. Just after B-2

accepts the offer made by B-1, S revokes its offer to B-1. Denying the effect of that revocation,

B-1 accepts the original offer by S.

Since the offer by S did not fix a time for acceptance. S remained free to revoke prior to B-1’s

acceptance, unless the “reliance-exception” in Art. 16(2) (b) applies. In this case a court might

say it was reasonable for B-1 to have relied on the offer “as being irrevocable”, because of the

prior dealings between the parties gave B-1 reason to anticipate that S would not revoke.

According to this rule the offeree can accept the offer, even after an offeror’s subsequent

attempt to revoke.


Rejection of offer (Art. 17 CISG)

The offer is terminated when a rejection of the offer reaches the offeror. This termination by

rejection even takes effect when the offer is stated to be irrevocable. The rejection can be

declared expressly or impliedly. The acceptance under new terms as foreseen in Art. 19 CISG

may be interpreted as an implied rejection of the original offer accompanied by a counteroffer.

To be effective the rejection must reach the offeror.

4.5 Acceptance

4.5.1 General

The contract according to Art. 23 is concluded if the acceptance of the offer comes effective. Art. 18 to

22 regulate the requirements for the acceptance of an offer. Art. 18 defines what an acceptance

constitutes and when it becomes effective. Art. 19 deals with with acceptences that contain

modifications to the original offer. The rules on the relevant time period are contained in Art. 20. Late

acceptances are dealt with in Art. 21.The withdrawal of an acceptance is subject to Art. 22.

The three core elements that have to be present for an acceptance to take effect are:

Indication of assent to the offer

Assent must be unqualified

Assent must be effective

(The assent must not have been withdrawn)

4.5.2 Assent

Art. 18 requires the offeree indicating assent to the offer. Regularly the indication of assent will be made

clearly orally or in writing. However, it can also be made by conduct. What acts can be classified as

assent has to be determined according to Art. 8 to the interpretation of the conduct. Examples of

actions which qualify as such conduct are delivery of goods, payment etc. But also other acts of a more

preparatory nature may also amount to acceptance.

Example

In Magellan International Corp v. Salzgitter Handels GmbH the steeltrading business which has its seat in

the US negotiated with German company in regard to the delivery of Ukrainian steel. In regard to the

claimants offer the respondent originally sent an acceptance including its standard term of delivery,

which differed from those of the claimant. This resulted in further negotiations in which the claimant

relented an established a line of credit in favor of the respondent for the payment of the goods. After

that the respondent wanted further amendments to the contract, which the claimant refused. The

respondent refused delivery of the Ukrainian steel and the claimant sued for damages because of breech

of contract. The issue was whether the issuing of the line of credit would be interpreted as acceptance

and, therefore, the contract was concluded. The Court affirmed that the issuing of the line of credit was

an acceptance according to Art. 18(1)1 CISG “other conduct of the offeree in indicating assent to an

offer”.


Example

The buyer signed off a bill, which had been sent to the buyer in advance and had presented it to their

financial institution. An Argentinian Court saw therein an implied acceptance.

The validity of an acceptance depends on it reaching the offeror (Art. 18(2) first sentence). This also

defined the timespan for the withdrawal of the acceptance. As a general rule the CISG states that

“silence and inactivity does not in itself amount to acceptance”. This provision can be treated as a

cautionary provision, that an offeree does not have to take action to an offer he would otherwise

ignore. However, if the parties have expressly agreed that a failure to react to an offer within a certain

timeframe, the silence can be interpreted as an acceptance.

4.5.3 Unqualified acceptance

As a general rule an acceptance is a final and unqualified expression of assent to the terms proposed by

the offeror. If the offeree does not unqualifiedly accept the terms offered but instead strives too

introduce new terms, qualifications or modifies the original offer, the offer cannot be treated as

accepted. The not unqualified accept will be treated as a rejection of the original offer and as a counter-

offer with the terms set out in reply (Art 19(1)).

Example

A German court treated the sellers’ delivery of 2700 pairs of shoes as a rejection of the buyer’s offer to

buy 3400 pairs. The delivery of the 2700 pairs constituted a counter offer, which was accepted by the

buyer when he took the delivery. A contract was therefore concluded by 2700. Had the buyer refused

the 2700 pairs, it would not have been open to the seller subsequently to accept the original offer by

delivering 3400 pairs, since the reply that results in a counter offer rather than an acceptance has the

effect of rejecting the original offer thus making it incapable of subsequent acceptance.

4.5.4 Effective acceptance

An acceptance can only take effect when it is communicated/reaches (to) the offeror (Art. 18(2)). Until

that moment no contract is concluded. There is no particular method the acceptance has to be

communicated. A certain method may be agreed upon by the parties. Where this is agreed upon, the

contract is only concluded when the offeree accepts by the method agreed upon. Certain provisions at

the discretion of the parties may apply to the time for acceptance. The CISG provides for late

acceptance that it has to be distinguished between the obvious delay in transmission (Art. 21(2)) and the

late acceptance for reasons other than the obvious transmission delay (Art. 21(1)). In the first case the


late acceptance will be treated as effective, for the other case the contract will only be concluded if the

offeror gives notice to that effect.

4.5.5 Withdrawal of acceptance

Art. 22 states that the acceptance may be withdrawn if the withdrawal reaches the offeror before or at

the same time as the acceptance would have become effective.

4.6 Modification of the Contract

The contract outlines in Art. 29 CISG that the contract may be modified or terminated by the mere

agreement of the parties. Art. 29(2) contains a modification to the general form free approach of the

agreed modifications. If the original contract contains a provision which requires the modification at a

later date also to be in writing, this requirement has to be fulfilled. The counter exception of this

provision states that a party may be precluded by his conduct from asserting such a clause to the extent

that the other party has relied on that conduct.

Example

Party A orally suggests a modification to the contract (which includes “no oral modification”-clause,

which party B accepts by performing according to the suggested modification. In such a case party A will

normally be precluded from relying on the “no oral modification”-clause in order to insist on the

originally agreed performance rather than the modified performance.


Contract not concluded

Yes

•Offer? Art. 14 CISG

•"Effective" offer? Art. 15 CISG

•Suffiecinetly definite?

• Intention to be bound

Yes

•Has the offer reached the offeree? Art. 24 CISG

Yes

•No revocaton of the offer? Art. 16 CISG

•No withdrawal of the offer? Art. 15(2) CISG

Yes •Acceptance of the offer? Art. 18 CISG

No

•Modified acceptance as a new offer? Art. 19 CISG

Yes •No withdrawal of the acceptance?

NOTE •Contract concluded

A non-material alteration? Art.

19(2) CISG

No notice of objection? Art. 19(2)

CISG

4.7 Exercise 1

Summary Charts

4.7.1 Offer and acceptance

Yes

No

No

No

No

Yes

No

No

Yes

No


4.8 Summary

This module deals with the Formation of the contract under the CISG. It elaborates what an offer must

contain, the intention to be bound, that it must be sufficiently definite, the offer must be effective and it

must not be terminated. Further the offer mirroring acceptance will be examined. Also included is a

chart, which shows the offer and acceptance.

Upon completion of this module, you learned to:

List the necessary prerequisites for an offer under the CISG

List the necessary prerequisites for an acceptence under the CISG

Identify problematic areas if confronted with a case involving problematic fields in offer and

acceptance.


MODULE 5:

Obligations of the Seller


5.1 Overview

This module explains the obligations of the seller under system of the CISG. It focuses on the different

obligations in detail to achieve a better understanding of the obligations in detail in system of the CISG.

In this module the requirement of the conformity of the goods will be taken a closer look at and the

module furthermore explains the importance of the notice requirement an the possible effects of the

lack of such notice.



Understand the system of obligations of the seller

Be able to place the contractual terms, trade usages and the provisions of the convention in a

system of hierarchy

Analyze the conformity of goods if given in a case

Apply the notice requirement correctly and understand the importance of it


5.3 Obligations of the seller

5.3.1 Overview

Chapter II of Part III of the Convention outlines the main obligations of the seller. These can be divided

into three parts

1. Seller must deliver the goods and hand over the documents (Art. 30-34 CISG)

2. Goods must be in conformity with the contractual requirements (Art. 35-40 CISG) (also

included are rules on duties of examination and notice)

3. Goods must be free from third party claims (Art. 35-40 CISG) (also included are rules on duties

of examination and notice)

•Seller bound to deliver at particular place and time

•Packaging as required by contract

•Hand over documents

Delivery of the goods and documents

•Contractual quantity

•Contractual quality

•Contractual description

•Fitness for ordinary/particular purpose

Conformity of the goods

•Goods must be free from third party claims Transfer the property in

the goods

•Duty to give notice to the buyer of consignment

•Conclusion of the contract of carriage

• Insurance of the goods

Associated (contractual) duties


5.3.2 Convention Hierarchy

The basic elements of the due performance are set out in Art. 30 CISG. However, the Art. lies down

the clear rule that the CISG will determine the terms of the contract only if the contract is silent. This is

attributable to Art. 6 CISG, which permits the parties to exclude the Convention as a whole or any of

its provisions. In cases of conflict between the contract and the provisions of the Convention, the seller

must fulfill his obligations as required by the contract. In general we can say that express promise takes

precedence over prior practice and implied custom. So in analyzing a case one has to start with the

performance obligations set for the expressly in the contract concerned.

Example

An Italian seller undertakes to deliver special pipes for the production of natural gas to a buyer in

Denmark and to deliver those pipes in Denmark on February 1st . If the seller delivers the pipes to

another place, the seller’s failure to perform as expressly promised would constitute a breach of

contract. Since the parties’ agreement clearly covers the case there would be no reason to consult the

otherwise applicable CISG rules.

Example

An Italian seller undertakes to deliver special pipes for the production of natural gas to a buyer in

Denmark and to deliver those pipes in Denmark on February 1st . The pipes to be delivered have to

meet the criteria “type 3357 rust-free and acid resistant”. If there is any other pipe delivered than the

ones agreed upon, the seller has failed to perform its obligations regarding the conformity of the goods.

Therefore the failure automatically triggers CISG remedies for breach.

1) Obligations based upon (express) consent to terms

set forth in the sales contract concerned

2) Obligations based upon prior practices and implied consent to

usages of trade

3) Obligations based upon the application of CISG rules


5.4 Delivery of the goods and documents

Art. 30 CISG provides that:

“The seller must deliver the goods, hand over any documents relating to them and transfer the

property in the goods, as required by the contract and the convention.” In short: the seller must deliver

the right goods at the right time and place as required by the contract and CISG rules.

The obligations to deliver the goods and documents are more fully explained in Art. 31 to 34 CISG.

5.4.1 Obligation to deliver the goods

The details of the seller’s duty to deliver are set out in more detail in Art. 31 CISG, this Art. is

supplemented by Art. 32 CISG, which outlines additional obligations in case of an independent carrier.

Art. 33 CISG lies out the rules on the time of delivery

The term delivery is not expressly defined in the CISG. Certain indications allow us to narrow the term

to the fact that delivery can be performed unilaterally by the seller without the buyer’s cooperation.

Delivery cannot be interpreted that delivery is only the delivery of conforming goods, delivery of non-

conforming goods will also constitute a delivery (with the liability of the seller under Art. 35 CISG).

Delivery and the payment can be made according to the parties’ agreement. However, in absence of an

explicit agreement, art. 58(1) CISG provides that “[the buyer] must pay “[the price] when the seller

places either the goods or documents controlling their disposition at the buyer’s disposal in accordance

with the contract of the convention.” So, if not agreed otherwise, payment is due with placing of the

goods at the buyer’s disposal.

In terms of the time of delivery the international sales contract will usually require the that the delivery

take place on a particular date or (at least) within a given time-period, and in these kinds of cases Art.

33 (a) – (b) clearly bind the seller to deliver at the time agreed. In absence of a specific agreement the

seller must deliver within a reasonable time.

The options therefore are:

if a date is fixed by or determinable from the contract, on that date;

if a period or time is fixed by or determinable from the contract, at any time within that

period unless circumstances indicate that the buyer is to chose a date;

or in any other case, within a reasonable time after the conclusion of the contract.

Example

The German buyer has ordered clothes from the Italian seller which were to be delivered in July,

August, and September. The seller made the first delivery at the end of September. An interpretation of

the time of delivery in accordance with Art. 8 CISG found that a third of the goods had to be delivered

each month at a time determined by the seller in July, August and September but not the entire goods at

the end of September.


The place of delivery is to be determined – again – contractually, which preempts the default rules as

provided in the CISG. This contractual agreement might be done with the help of the INCOTERMS2.

These well established commercial terms supplement to a large extent the corresponding rules of the

CISG. If the place of delivery is neither defined in the contract nor the Incoterms define the place, Art.

31 CISG fills the gap.

Art. 31 (a) regulates cases if the contract of sale involves carriage of the goods, the goods have to be

handed over to the first carrier for transmission to the buyer; which means that the good is to be

handed over to the “first carrier”, first person not under the seller’s or buyer’s direct control. Place of

delivery is therefore where the handing over occurs. Lit. (b) deals with the case if, in cases not within

the preceding subparagraph, the contract relates to specific goods, or unidentified goods to be drawn

from a specific stock or to be manufactured or produced, and at the time of the conclusion of the

contract the parties knew that the goods were at, or were to be manufactured or produced at, a

particular place--in placing the goods at the buyer's disposal at that place; In the case under lit. (c) the

delivery is carried out with placing the goods at the buyer's disposal at the place where the seller had his

place of business at the time of the conclusion of the contract. It is therefore for the buyer to collect

the goods.

To illustrate the most common case of Art. 31 (a)

2 The Incoterms® are a series of pre-defined commercial terms by the International Chamber of Commerce. They

have been incorporated in contracts for the sale of goods worldwide and provide rules and guidance to importers,

exporters, lawyers, transporters, insurers and students of international trade. The idea, first conceived by the

International Chamber of Commerce (ICC) in 1921, and published with the first Incoterms® rules in 1936, today the

Incoterms® 2010 are in effect.

Good

"Delivery"


The place of delivery is particular important for the passing of the risk and for the determination of the

conformity of the goods. The place of delivery may also help in the determination whether a court

asked to resolve the conflict has “jurisdical jurisdiction”.

5.4.2 Seller’s obligation to hand over the documents

Art. 34 CISG sets forth that the seller must hand over the documents relating to the good, he must do

so “at the time and place required by the contract”. The Convention does not contain a “fall-back”-

provision in this case. It does neither contain any definition what “documents relating to the goods are”,

nor does it list which documents the seller has to hand over to the buyer. To determine the

documentary obligations the court must look to the contract, previous dealings and trade usages.

5.4.3 Transfer of property

According to Art. 30 CISG the seller must transfer the property in the goods to the buyer. The

question whether the property has been transferred or not, is not governed by the CISG. This is made

clear by Art. 4 lit.(b) CISG, which states that the Convention is not concerned with the effect the

contract may have on the property in the goods sold. The transfer of property in the goods is governed

by the law applicable pursuant to the private international law of the forum.

5.5 Conformity of the Goods

Most litigation in sales contracts is attributable to the issue of the conformity of the goods. Art. 35 CISG

sets out when goods are deemed to conform to the contract. This Section of the CISG also contains the

obligations a buyer needs to comply with to be able to claim his or her rights under the CISG (e.g. give

notice 5.6). It also specifies the seller’s obligation to deliver the goods free from defects in title or third

party claims based on intellectual property rights (see below Third party rights 5.7.)

5.5.1 Contractual conformity requirements (Art. 35(1) CISG)

The concept of lack of lack of conformity according to the CISG can be differences in quality,

quantity, delivery of an aliud and packaging. Art. 35 CISG sets out the basic rule that the contract

determines whether good conform the standard. It states “The seller must deliver goods which are of

the quantity, quality and description required by the contract and which are contained or packaged in

the manner required by the contract.” The seller must deliver the exact quantity of goods stipulated in

the contract of sale, a breach of that, whether more or less, constitutes a breach of contract. The term

quality should be given a wide interpretation, it cannot be limited to the physical characteristic of a

A

"Independent" Carrier

• Third party not under the seller's or buyer's control

B


product (so it might be as well that the product origins from another country than agreed upon). A

breach of contract might also be a deviation from the contractual description. It also will be a breach of

contract when the goods are not packaged as required by contract.

Conformity is not determined objectively, it depends first and foremost on the “subjective” description

of the goods in the contract. This also applies to the packaging. This “subjective defect” is illustrated in

the following example.

Example

The buyer agreed to purchase from the seller 200 tons of Pre Suspension Resin (F622) produced by US

Formosa plastics Corp at a unit price of RBM 790/ton CFR Huangpu Port China. The total price of the

goods is RMB 158000. 3% more or less in quantity and total price is allowed, subject to the seller’s

discretion. When the goods arrived the buyer discovered that the goods that were delivered were

compliant to “H622” instead of “F622”, however was not suitable for what the buyer wanted to use the

PVC suspension resin for. Objectively H622 instead of F622 as required by Contract referred to the

same product and conformed to the same standard.

Example

According to the negotiations by telephone, B in Austria signs a contract to buy 200 kilos of bacon from

Texas. B accepts, the first 4 instalments delivered, but when Austrian health authorities raise objections

as to their quality, B refuses to accept and pay for more, and S sues B in a Texas Court. B raises the

point that S promised during the negotiations on the phone that B could cancel the order immediately if

the Austrian authorities would raise such concerns. However, the written contract between the parties

does not include such a clause.

The contract undoubtedly is governed by the CISG. But since the deciding court is a court in Texas, the

admissibility and relevance of the oral statement needs to be considered. Under domestic law the

content of the contract would be limited to the terms expressly set forth within the written document.

This “parol evidence”-rule would not allow the Texan court to admit any other evidence. But, according

to Art. 7(2) CISG the particular issue of admissibility of evidence is governed by the CISG and Art 8(3)

requires the Texan Court to give “due consideration … to all relevant circumstances of the case

including the negotiations”. And Art. 11 confirms that a CISG sales contract (and its content) “may be

proved by any means, including witness”. It is confirmed by American case law that the parol evidence

rule does not apply in CISG cases.


Example

B (in CISG state X) asks S (in CISG state Y) for information regarding the performance of a given

machine. Anxious to generate income for his fledging business, S negligently provides information about

a more costly model with a higher maximum capacity. Acting in reliance on this information, B orders

the machine. After delivery, B makes repeated, unsuccessful attempts to run the machine at the stated

capacity. Three weeks after the final attempt, B gives notice of non-conformity to S.

Almost certainly a breach of obligation under Art. 35(1) to supply conforming goods, but B may have

lost its right to any contractual (CISG) remedy, in that S (arguably) has not been notified of the non-

conformity within a reasonable time. the academia and case law are divided on this one, because some

say that the CISG non-conformity rules occupy the entire non-conformity field, thus preventing B’s

access to alternative domestic law remedies (e.g. negligent misrepresentation). Other opinions

(supported by CISG case law) argue that B’s claim lies outside the CISG scope, thus allowing B to file a

domestic delictual claim.

Example

Dentist (B) in CISG State X purchases a combined chair- and-drill unit from a supplier (S) in CISG State

Y. soon after delivery, a fire caused by defective wiring in the unit destroys the unit itself and also does

damage to the office.

Assuming the defective unit does not conform to the contract (Art. 35) B can set forth a contractual

cause of action against S for breach of their CISG contract, and the damages recoverable under that

claim would include the particular loss in question. B can also assert a delictual claim (product liability)

depending on the jurisdiction. This claim may well be allowed to compete with the contractual claim.

5.5.2 Conformity with the standards set out in Art. 35(2) CISG

Art. 35(2) sets out a series of obligations that apply to all sales contracts governed by the CISG unless

they are excluded by contract (expressly or impliedly). This provision will apply if there is no contractual

conformity requirement under Art. 35(1) CISG.

a) are fit for the purposes for which goods of the same description would ordinarily be used.

The fitness of the products for ordinary purpose has to be defined by reference to what a

reasonable person in the same trade as the seller and buyer would think. If there has been made

any particular purpose clear to the seller Art. 35(2) has to take precedence over Art. 35(1).


There cannot be a quality standard product fit for ordinary purpose have to meet, it all depends

on what a reasonable person in the position of the buyer would be entitled to expect.

b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of

the conclusion of the contract, except where the circumstances show that the buyer did not

rely, or that it was unreasonable for him to rely, on the seller's skill and judgement;

Art. 35(2) lit.(b) CISG establishes the criteria of the “particular purpose” for which he intends

the goods. By lying down the particular purpose the buyer that he requests a specific good. If

the purpose is more specific, the seller has to make sure that the products fit these specified

purpose.

Example

If the buyer breeds especially rare and delicate birds and he informs the seller, an expert in

animal feed, that he needs feed for these birds, the seller will be in breach of Art. 35(2) lit.(b)

CISG if the feed harms these birds, even if that feed would not have been harmful to most

birds.

c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;

If the seller delivers a good that does not possess the qualities that were present in the sample

or model it is a breach of contract. The model is used to describe the subject matter of the

contract. Instead of words the specification of the goods is performed by the model.

d) are contained or packaged in the manner usual for such goods or, where there is no such

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

This provision specifies the obligation of the seller to package the goods as required by contract.

5.5.3 Relevant time (Art. 36(1) CISG)

The time when the goods must conform the contract is when the risks passes from the seller to the

buyer. If the goods are not in conformity the buyer can exercise the remedies available to him under

Art. 45 CISG. If the goods at a later point deteriorate, but were in conformity at the passing of the risk,

the buyer has to pay for the goods. This does not necessarily mean that if the goods disclose their lack

of conformity after the passing of the risk that they have to be treated as conforming goods. Art. 36(2)

CISG

Example

If the seller is required by the terms of a sales contract to conclude a contract of carriage and he does

so with an obvious incompetent carrier, damage cause to the goods after the risk has passed would not

fall within Art. 36(1) CISG, because no lack of conformity at the passing of the risk. However, the seller

would under Art. 36(2) CISG be liable.


5.5.4 Seller’s right to cure before delivery date (Art. 37 CISG)

The seller has the right to cure if he has delivered the goods before the date for delivery. He may

cure any non-conformity (only if he does not cause the buyer unreasonable inconvenience or

unreasonable expense.

5.6 Examination and notice requirements

5.6.1 Examination of the goods (Art. 38 CISG)

The buyer is obliged to examine the goods upon delivery according to Art. 38 CISG, the Art. also

provides the timeframe during which the inspection has to be done. The phrase “within as short a

period as it is practicable in the circumstances” indicates that there are different factors influencing the

time for an examination. This might be the nature of the good, their characteristics, special

circumstances. There are also special regulations in the Article. 38(2) id the goods are deferred (may be

examined at their destination), or in Art. 38(3) if the goods are sent on or the buyer redirects them

(they may be examined at the place of their final arrival). Said short: there is no generally applicable rule

to when the examination of the goods has to take place and what timespan is allowed for the

examination. It will vary on the facts of each case.

Example

A Dutch company contracted with an Italian company for the delivery of deep frozen cheese. The buyer

argued that the cheese was infested with maggots. Since the examination took place some time after the

cheese had been delivered and consequently notice had been given late, the decisive factor was whether

the examination had been done in a period as short as practicable. The buyer claimed that an earlier

examination had not been possible because the cheese was delivered frozen. The court did not accept

this argument: the buyer could have examined part of the cheese delivery and could have examined

these cheeses immediately.

5.6.2 Notice of lack of conformity (Art. 39 CISG)

In case the buyer discovers a defect when examining the goods, the buyer is allotted a reasonable time

from the time of detection to give notice. He has to object to any non-conformity of the delivery. This

may be a qualitative or quantitative non-conformity. The consequence of the failure to give notice is that

the buyer looses the right to claim remedies. The notice needs to be specific enough to inform the

seller about the details of the non-conformity. The term “reasonable time” depends on the

circumstances in the case.

It has to be noted the buyer’s examination obligation and the time to give notice cannot be summarized

under one timespan, they have to remain strictly separated. But the can still influence each other (this is

when a very time consuming examination period takes place, an expert has to be consulted, the buyer

certainly can make up his mind during that time what he is planning to do.


The notice has to specify the kind of defect and the argument has to be substantiated. The seller has

with the notice get an idea of the defect and the appropriate remedy. If the seller does not fully detect a

non-conformity the seller had known, the CISG also covers gross negligence and fraudulent deception

(Art. 40 CISG).

Example

The buyer situated in Germany bought shoes from an Italian seller. The buyer refused payment of the

purchase price for the delivered shoes and declared the avoidance of the contract. When giving notice

the buyer had stated that shoes were defective in all aspects, the material was defective and finish was

different for each pair of shoes, sometimes the shoes were stepped, sometimes folded. The court held

that these notices were deficient since it was not possible to ascertain from them the exact nature of

the defects and the degree of non-conformity.

5.7 Checklist Seller

Place of delivery

Time of Delivery

Carrier and costs of delivery

Information, papers, freight documents

Insurance

Authorizations, tariffs, customs


5.8 Exercise 1:

INSTRUCTIONS:

Below you find some situations as discussed before. Please evaluate the cases and state

your opinion for the solution of the cases. Please also mention in your answer the relevant

provisions of the CISG.

Example

If the seller is required by the terms of a sales contract to conclude a contract of carriage and he does

so with an obvious incompetent carrier, damage cause to the goods after the risk has passed would not

fall within Art. 36(1) CISG, because no lack of conformity at the passing of the risk. However, the seller

would under Art. 36(2) CISG be liable.

What would be the case if the carrier would be a very reliable carrier, who treated the package as usual.

But the seller was in a rush before handing the package over to the carrier and used newspapers for

wrapping instead of the usual bubble wrap, which was not handy?

Example

A public authority bans the sale and use of of a certain part in an exhaust pipe that fits all VW, because –

as the public authority mistakenly assumes – they distribute dangerous substitutes, which are ordinarily

filtered out. The authority issues the ban without having legal basis. Seller A has different kinds of this

part, because they can be used interchangeably, but only a certain one has been banned. Seller A got the

order for 100 parts to be used in VWs pipes right after the ban was issued. He packages the banned

ones, since the buyer did not specify the order any further. What are the consequences?

Example

A steel merchant from Germany bought steel sheets from an Austrian manufacturer. Those sheets were

to be delivered to Rostock but were to be redispatched immediately to the German steel merchant’s

Portuguese customers. The steel sheets were rolled up, so that an examination is not possible without

significanat costs.

What would would a court in this case rule?

Because the examination is only economically viable by the end purchaser once the sheets had reached

their final destination. The Court held that the examination period only started from the time the sheets

had reached the Portuguese purchaser.


Example

Both parties had, after the buyer gave late notice, negotiated further and waited for the reaction of the

buyer’s end purchaser. When the negotiations stalled and the buyer claimed remedies, the seller

objected drawing attention to the late notice. The buyer replied, pointing at the further negotiations,

arguing that the seller had waived his or her right to lack of notice defence

5.9 Summary

This module explains the obligations of the seller under system of the CISG. It focuses on the different

obligations in detail to achieve a better understanding of the obligations in detail in system of the CISG.

In this module the requirement of the conformity of the goods will be taken a closer look at and the

module furthermore explains the importance of the notice requirement an the possible effects of the

lack of such notice.


Understand the system of obligations of the seller

Be able to place the contractual terms, trade usages and the provisions of the convention in a

system of hierarchy

Analyze the conformity of goods if given in a case

Apply the notice requirement correctly and understand the importance of it


MODULE 6:

Remedies of the buyer


6.1 Overview

This module explains the system of remedies available to the buyer, including the right of performance,

avoidance of the contract, reduction of the price and damages. In each chapter the different remedies

are explained in detail stating the prerequisites and including examples of the applications in practice.



Understand the system of remedies available to the buyer

Gain knowledge when the different remedies apply and under which prerequisites

Analyze a case and decide which remedy applies

6.3 Buyer’s remedies for the Seller’s Breach of Contract

The general objective is to save the contract and avoid restitution. As a consequence the termination of

the contract is only available as a last resort. It also affects the other remedies such as claims for

performance and the right to reduce the price. The underlying principle of this idea of the termination

as the last resort is the principle of “pacta sunt servanda”. The second reason for this policy is a purely

economic one. Termination of the contract for defective delivery leads to restitution of the goods

originally delivered and possibly to a restitution of the money. The restitution of the goods leads to

considerable costs and risks, which could be avoided if the contract were not terminated and the

buyer’s interest in getting conforming goods were remedied. So economically speaking the termination

is a very expensive remedy. Thirdly the legitimate interests of the parties play an important role.

Below you find a graphic with an overview about the remedies available for the buyer


Remedies available:

- performance - substitute delivery

- reduction of the price

- avoidance of the contract - damages (additionally)

"Fundamental" breach of contract? importance of foreseeability of the seller

Additional period of time for performance?"Nachfrist"

Adhered to statute of limitations? Art. 39(2) CISG

Examination and notice requirement met?

Hidden defects? Art. 38, 39 CISG

No cure of non-conformity befor delivery date? Art. 37 CISG

Breach of place of delivery, time of delivery or terms of delivery

goods are not conform to the contract or third party rights

Breach of contract by the seller

No

No

Yes

No

No

No

No

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

No remedies

Performance and

damages

Remedies available:

performance

reduction of

the price

damages


6.3.1 General outline of remedies

Article 45 provides the basic rule on remedies.

It states that if the seller fails to perform any of his obligations under the contract or this Convention,

the buyer may:

“(a) exercise the rights provided in articles 46 to 52; (b) claim damages as provided in articles 74 to 77.

(2) The buyer is not deprived of any right he may have to claim damages by exercising his right to other

remedies.”

From this article we can derive the following options for the buyer:

Performance, including substitute delivery and repair in the cases of non-conformity (Art. 46

CISG)

Avoidance of the contract (Art. 49 CISG)

Reduction of the purchase price (Art. 50 CISG)

Damages (Art. 45(1)(b), Art. 74 et seq. CISG)

Save for the right to reduce the price, all other rights require that the seller has breached only one of

his or her obligations under the contract of the CISG. Art. 45(2) states explicitly that claims can be

cumulative.

6.3.2 Right of performance and substitute performance (Art. 46, 47 CISG)

Art. 46 CISG claims the right to claim performance from the seller. If a seller fails to perform the

convention permits the buyer to require

1) That the seller deliver

2) that he deliver substitute goods

3) that he repair non-conforming goods

The first requirement under Art 46(1) CISG is that the seller has breached an obligation under the

contract. The buyer can demand performance as long as he did not choose a remedy which excludes

performance or as long as he did not loose the right, because of a failure to give notice. The right to

seek performance is excluded if the buyer has validly avoided the contract, but also if the buyer reduced

the purchase price where the buyer could have demanded either substitute delivery because of the lack

of conformity of the goods, or that the seller remedy the defect. Although it is not likely that a CISG

buyer will seek to compel specific performance by a non-performing seller, this is still an option. The

example below illustrates that courts and arbitrators will have reason to show restraint before granting

this remedy. An court deciding on the specific performance in this case, after a market change, might

permit speculation at the seller’s expense.


Example

January, 15 S in Toronto contracts to sell 100 silver bars at a fixed price to B in New York, the bars to

be delivered before the end of the month. The fixed price equals the market price on January 15, but

the market price soon goes up, exceeding the contract price by 25%, and S declares that he will not

perform. Despite repeated refusals by S to deliver the goods, B stands firm and brings an action seeking

specific performance in a Toronto court. By the time the case reaches final judgement, the market price

of silver bars is twice the price originally agreed.

Art. 46(1) provides no exception which would let S out of the contract in this situation. Commentators

argue that B’s right to require performance (delivery) should be interpreted in conjunction with – and

limited by – the general Convention obligation to mitigate damages, as well as the general CISG principle

of goods faith. However, there is also support for the opposing view. An additional factor is Art. 28,

since this express limitation upon the right to specific performance set forth in Art. 46(1).

Art. 46(2) and (3) CISG provide specific rules for substitute delivery or repair in cases where the seller

has delivered goods that do not conform with the contract. According to Art. 46(3) CISG the buyer has

the right to require the seller to remedy the lack of conformity by repair, unless this is reasonable

having in regard to the circumstances. The provision on substitute delivery (Art. 46(2)) is more

restrictive: the buyer can only claim delivery of a substitute good if the lack of conformity constitutes a

fundamental breach of contract in the sense of Art. 25 CISG. All claims for performance are subject to

certain restrictions. These two performance alternatives are so different that a free choice seems hardly

possible. The buyer can only demand delivery under Art. 46(2) if the lack of conformity amounts to a

fundamental breach. A breach is only fundamental under exceptional circumstances, such as the defect

cannot be remedied or the goods are unable to be used for any purpose. Art 46(3) is different from the

right to deliver in art 46(2) as the threshold is in most of the paragraph (3) cases lower than for (2)

since it should be generally reasonable for the seller to repair the goods. The delivery of the spare parts,

that are needed in an Art. 46(3)-case, is not the delivery in Art 46(2), it is also Art. 46(3).

Example

The German buyer ordered window elements from an Italian seller. The window had to be repaired

because of the defects in the insulation glass. To repair the windows the glass had to be ordered by the

seller. The seller was required to order the new glass under Art. 46(3) CISG, even though the defect did

not meet the threshold for a fundamental breach.


Example

A German company bought six fold-out beds from an Italian company. Since five of these beds had

defects they went back to the seller for repair. In regard to the seller’s claim for payment of the

purchase price, the buyer claimed that they still were defective. The repair had not been successful. The

buyer had only notified the seller about the unsuccessful repair four weeks after the “repaired beds had

been given back to the buyer. The buyer had, because of the late notice, lost all his or her rights under

art 39(1) CISG.

6.3.3 Avoidance of the contract

Avoidance is generally only possible if the breach of contract is so fundamental that the party at fault at

least ought to have known that the other party would not have any further interest in being bound by

the contract. The buyer’s right to avoid the contract is governed by Art. 49 CISG. Art. 49(1) CISG

names the 2 grounds for avoidance of the contract. A fundamental breach is required under Art. 49(1)

lit.(a), additionally the CISG allows under Art. 49(1) lit.(b) the contract to be avoided if an additional

time for delivery does not lead to performance of the contract.

A fundamental breach is defined as a foreseeable and substantial detriment. The buyer must show that

the concerned breach caused a detriment so serious “as substantially to deprive him of what he was

entitled to expect under the contract”. A reasonable seller would have foreseen that serious result.

Example

A Greek seller (S) was required to supply “thermoforming lining equipement” (for the manufacture of

plastic gardening pots) to an American buyer (B). Later, alleging “breach of warranty” with respect to

the equipment delivered, B sued S in a U.S. Federal Court. Although the Court held that B had some

“legitimate complaints”, it concluded that they did not amount to a fundamental (or even substantial)

breach of the contract by S, since B has successfully operated the equipment (with assistance from S),

and since B (a cash-strapped business) did not complain about the qualitxy until after S had made formal

inquiries regarding B’s failure to pay the price as agreed.


Example

Italian seller S enters a contract with Chicago buyer B for the supply of shoes As S is aware, B intends to

resell the shoes in his own retail store (where only high quality shoes are sold), but the shoes actually

delivered by S are such poor quality that they are totally unfit for B’s intended purpose.

S here commits a serious breach of obligation, because he knew that the goods were totally unfit for the

purpose B intended. So presuming that B provides S with the timely and specific notice under Art. 39

CISG. The fundamental breach of will entitle B to avoid the contract.

Example

Italian Seller S contracts with Chicago buyer B for the supply of shoes to be produced by S in

accordance with the design and specifications provided by B. According to the contract, B maintains the

exclusive right to distribute and sell the shoes produced by S. Later, S displays shoes designed in accord

with B’s specifications at a New York trade fair, thus giving others the impression that S has the right to

distribute them.

Also the breach of a ancillary duty like the breach of a non-compete agreement, can amount to a

fundamental breach and confer the right to avoidance of the contract, since the party can no longer be

trusted.

Art. 49(2) sets out the rules that the right to avoid can be lost under certain circumstances. Simply said,

this comes into effect if the seller delivered the goods and the buyer unreasonably delayed the attempt

to exercise the right to avoid the contract.

6.3.4 Reduction of the price

Art. 50 gives the buyer the right to reduce the contract price if the goods do not conform to the

contract. The provision however, explicitly provides that the seller’s right to cure takes priority over

the buyer’s right to reduce the price. This can even lead to a reduction to zero. The non-conformity

applies according to Art. 35(1) CISG to defects of the goods, delivery of an aliud, and defects in regard

to the agreed quantity of the goods.

The idea of the reduction in price is the re-adjustment of the contractual party which has been

disturbed due to the non-conformity of the goods. The adjustment has to be made in relation to the

purchase price and not in regard to the absolute amount of damages occurring due to the lesser value of

the goods. Also the costs to remedy the non-conformity must not be taken into account.


So, Art. 50 provides that the reduction of the price is proportional to the reduction in value due to the

defect and may be derived from the following equation. X designates the price (after reduction) which

the buyer is to pay.

Price X=value w/defect

contract price value w/o defect

Example

S (in Uzbekisthan) contracts to deliver to B (in Uganda) 10 tons of No. 2 corn at $400 per ton (the

market price for No.2 corn at the point of time). S delivers 10 tons of No. 3 corn instead. at the time of

delivery the market price of corn No. 3 is $300 per ton; that of No. 2 corn is still $400.

The delivers clearly does not conform with the contract, this fact entitles B to reduce the price. So even

if the delivery of No. 3 corn does not constitute a fundamental breach (if it does B chooses not to avoid

the contract), B can reduce the purchase price from $4000 to $3000.

Example

The buyer bought sulphur free fuel oil for €32 per 100 l. The seller delivered fuel oil containing sulphur.

Sulphur free fuel oil had a value of 32€ per 100 l (the buyer had bought inadvantageously), fuel oil

containing sulphur had the value of €15 per 100 l and was therefore only worth half of the other oil.

The purchase price gets reduced to half, that means € 16, and not in accordance with the difference of

the value of sulphur free oil and the sulphur containing oil. That means the reduction is from €15 to €17

per 100 l.

In practice it can be difficult to ascertain the value of the contract conform goods and the non-

conforming goods necessary for the comparison.

Example

A Swiss buyer bought furniture from the Italian manufacturer. The buyer states that certain living room

furniture had not been conform to the contract. In regard to the delivered furniture the buyer’s right to

reduction of the price was recognized. The court calculated the price reduction in accordance with Art.

50 CISG so that, unless proven to the contrary, the value of the contract conforming goods equals the

value of the agreed purchase price.


6.3.5 Damages

A breach of contract by the seller will give the buyer the right to claim damages. The basis for this claim

is Art. 45(1) lit.(b) CISG. The damage will be measured and calculated by the general rules in Art. 74 to

77 CISG. Damages are not fault-based in the CISG. It is to say that liability is strict, but there are certain

grounds of exemption in Art. 79, 80 CISG (impediments beyond the seller’s control, failure caused by

the buyer himself).

6.4 Exercise 1

Example

The buyer bought sulphur free fuel oil for €32 per 100 l. The seller delivered fuel oil containing sulphur.

Sulphur free fuel oil had a value of 32€ per 100 l (the buyer had bought inadvantageously), fuel oil

containing sulphur had the value of €15 per 100 l and was therefore only worth half of the other oil.

The purchase price gets reduced to half, that means € 16, and not in accordance with the difference of

the value of sulphur free oil and the sulphur containing oil. That means the reduction is from €15 to €17

per 100 l.

Has the buyer bought the fuel oil at the bargain price of €28 per 100 l. What would the reduction in

price then be?

Answer:

The reduction of price would be calculated from the comparative value of sulphur free and sulphur

containing oil 15:30 =1/2 (above)) also in this case half of the agreed price, therefore €14 per 100 l and

not €13 per 100 l (the subtraction of the absolute difference). The cheaper purchase price in relation to

the value of the good reduces also the reduction quota.

6.5 Summary

This module explains the system of remedies available to the buyer

Upon Completion of this module, you learned to:

Understand the system of remedies available to the buyer

Gain knowledge when the different remedies apply and under which prerequisites

Analyze a case and decide which remedy applies


MODULE 7:

Obligations of the buyer, passing of risk

and remedies of the seller


7.1 Overview

This module gives an overview of Chapter III of the CISG, which governs the obligations of the buyer

(Art. 53 – 60 CISG) and the remedies of the seller (Art. 61 – 65 CISG).



Identify the obligations of the seller

Explain the obligations of the seller in the context of the Convention mirroring the duties of the

buyer

Understand the system of the passing of the risk

Understand the system of remedies available to the seller

7.3 Obligations of the buyer and passing of the risk

7.3.1 Outline

Art. 53 CISG contains the basic rule on the obligations of the buyer. “The buyer must pay the price for

the goods and take delivery of them as required by the contract and this Convention.”

The two important obligations of the buyer are therefore:

payment of the price (Art. 54-59 CISG)

taking delivery (Art 60 CISG)

These do not necessarily have to be the only obligation for the buyer, in the contract or trade usages

can be foreseen different other obligation of the buyer. The possible existence of other obligations has

been widely accepted.

7.3.2 Payment

The buyer must pay the price for the goods and take delivers as required by the contract and the

Convention. The term “as required by contract” illuminates – again – the hierarchy, which places the

will of the parties first. The important determining factors defining the payment are not only the price,

but also the exact time and place of payment.

Art. 57(1) CISG provides a rule if the contract is silent in regards the place of payment. Absent contrary

agreement the buyer must pay at the seller’s place of business. In case the payment has to be made

when the goods are handed over, place of payment id where the handing over takes place. The place of

payment can be determining for the preliminary question whether a given forum court enjoys juridical

jurisdiction (international competence) to decide a dispute relating to the buyer’s obligation to pay.


In regard the proper timing of payment (in case the contract is silent) Art. 58(1) provides a default rule,

it is a principle applicable to bilateral treaties in general. The exchange of goods against the payment has

too take place at the same time. This means that the seller does not have to extend credit nor does the

buyer have to pay before the seller places the goods. However, in an international sales context, the

contract will ordinarily involve the carriage of the goods by an independent carrier. Art. 58(2) provides

for this situation that the seller may dispatch the goods on terms whereby the goods will not be handed

over to the buyer except against payment of the price.

The buyer’s obligation to pay the price includes the implied obligation to take such steps as required to

enable payment to be made.

Example

A Bulgarian buyer purchase goods from an Austrian seller. The contract provided for payment by

documentary credit to be opened by a certain date. The credit was not opened on time, and the seller

claimed (inter alia) damages for the breach. The tribunal held for the seller, observing that the buyer had

an obligation under Art. 54 to take all measures required (in this case by the contract) for payment of

the price.

The seller must preserve the right of the buyer to inspect the goods, he is entitled to examine the goods

before making the payment. This right has to be preserved by the seller.

7.3.3 Risk

The obligation to pay the purchase price is linked to the rules on the passing of the risk. Art. 66 requires

the buyer to pay the purchase price, if the goods were lost or damaged after the risk has passed. Unless

of course the loss or damage are the fault of the seller. The exact time when the risk passes will often

be determined by contract. The default rule in case of silence of the contract and no applicable trade

usage is in Art. 66-70 CISG. Generally it is strongly advisable for the parties to provide specifically for

the passing of the risk in the contract or by using the Incoterms. The practical importance of the default

rule in Art. 66-70 CISG is limited, since most trade contracts provide the necessary rules on the passing

of the risk.

The Art. 67-69 CISG distinguish between several types of sales contracts. In general these rules mirror

the rule on the delivery. The main types types to be differentiated are:

Contract of sale involves the carriage of the good

The seller is not bound to hand them over at a particular place, the risk in principle passes to the

buyer when the goods are handed over to the first carrier for transmission to the buyer (Art. 67(1)

CISG)

Goods, that are sold in transit

Art. 68 CISG, here we start with the first sentence, which states the risk passes at the time of the

conclusion of the contract. This exact time will often be difficult to determine. To provide a better

solution sentence two provides that the risk assumed from the time the goods were handed over to


the carrier (i.e. for the entire carriage period), if the circumstances so indicate. The third sentence

of Art. 68 CISG places the risk on the seller if he knew or ought have known that that the goods

had been lost or damaged and did not disclose this to the buyer.

All other cases

The risk will pass according to Art. 69 CISG, which distinguishes between two types of contracts. If

the buyer is bound to take over the goods at the seller’s place of business, the risk passes 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 and he commits a breach of contract by failing to take delivery (Art. 69(1) CISG). If

the buyer is bound to take over the goods at a place other than the place of business of the seller,

the risk passes when the delivery is due and the buyer is aware of the fact that the goods are placed

at his disposal there (Art. 69(2) CISG).

In any of the cases the risk will not pass to the buyer until the goods are clearly identified to the

contract, for instance by making of the goods, by the shipping documents, by notice to the buyer etc.

Example

If the goods have been sold FOB (free on board) Hamburg the risk passes only to the buyer when the

goods are loaded onto the ship at the Hamburg harbour.

Example

A load of wheat was shipped from Rotterdam to Calcutta. The Indian trade had sold the wheat on

October 15, 2006 to a customer in Singapore. When the wheat arrives on October 30, 2006 it is

established that water had been coming through a defective cargo hatch and the wheat had partially

gone bad. It cannot be ascertained when the damage had occurred – whether before the sale of Indian

trader to the customer or after. The question arises who in such cases bears the risk for the damage to

the goods.

7.3.4 Taking delivery

Art. 53 CISG states that the buyer must take delivery of the goods. “Taking delivery” as defined

according to Art. 60 CISG consists in taking (physical possession) the goods, and in doing all the acts,

which could reasonably be expected of him in order to enable the seller to make delivery. This is subject

to further concretisation (e.g. Incoterms).

In case the buyer refuses the acceptance of the delivery, this amounts to non-performance which will

entitle the seller to the remedies specified in Art. 61, unless the buyer was justified (according to Art. 52

CISG) to refuse to take delivery. The refusal also might be justified if there is a breach of contract and

the seller’s breach is fundamental (Art. 25 CISG). If the breach, however, does not amount to a

fundamental breach, the buyer will as a rule not be justified to refuse to take delivery.


7.4 Remedies of the seller

7.4.1 Outline

Art. 61(1) CISG lays out the system of remedies available to the seller. It the buyer fails to perform ay of

his obligations under the contract or the Convention the seller may:

exercise the rights provided in Art, 62-65 CISG

claim damages as provided in Art. 74-77 CISG

Whereas Art. 61(1) lit.(a) CISG is only used as a reference to the provisions in the Articles, Art. 61(1)

lit.(b) CISG is itself the actual basis for the claim of damages. The referred Art. 74 CISG is only used for

the calculation of the damages.

For an overview, we can define three types of remedies for the seller:

performance (Art. 62 CISG)

avoidance of the contract (Art. 64 CISG)

damages (Art. 61(1) lit.(b), Art. 74 et seq. CISG)

The system of remedies of Art. 61 of the CISG does not make a distinction between the different types

of breach and indeed it will apply to any failure to perform by the buyer, but there are a number of

cases when there will be a difference between the various types of breach. The remedy system is not

fault-based, which allows the remedies to be used irrespective of whether the buyer acted negligently or

even wilfully.

7.4.2 Seller’s right to require performance

The seller may require the buyer to pay the price, take delivery or perform his obligations unless the

seller has resorted to a remedy that is inconsistent with this requirement. This provision mirrors Art.

46(1) CISG.

Example

Austrian seller S agrees to manufacture goods for Bulgarian buyer B. The contract, which contains an

arbitration clause, obligates B to effect payment by opening a letter of credit on a specific date. When

the credit is not opened, S initiates arbitration, demanding that B open the credit and compensate S for

losses caused by the breach.

B has not performed his obligations to pay as promised, and since S has not resorted to an inconsistent

remedy, Art. 62 provides the arbitrators with the authority to order B to openthe letter and and pay as

agreed. B’s failure to perform her promise also provides the basis for an award of damages to

compensate losses caused by that breach.


7.4.3 Avoidance

An injured seller is also provided with the right to avoid the contract according to Art. 64 CISG. Art.

64(1)(a) provides the rule that the seller can “declare the contract avoided” only in the case of the

buyer’s fundamental breach. This provisions applies to any of the buyer’s obligations under the contract

and the Convention. Also the breach of an ancillary provision of the contract may amount to a

fundamental breach. The breach has to be determined according to the standards set out in Art. 25

CISG. The main guideline in defining a breach as being fundamental is whether it substantially impairs the

seller’s interest in the performance of the contract, taken together with the foreseeability requirement

in Art. 25 CISG.

Example

The seller of crude oil has her business in a country in which the foreign exchange is tightly controlled.

She sells some crude oil: the payment, as usual in the crude oil industry, was to be made in US dollar.

The seller agreed with the buyer that the buyer should make a down payment on the oil to a Swiss bank

account. This is necessary because the seller cannot get US dollars in her own country because the

country has a foreign exchange control. The seller wants to use the down payment to pay her supplier.

In the contract with the supplier high penalties ensue from delayed payments and it provides that the

supplier can avoid the contract at any time should the seller not make payments in time. If the buyer

does not pay the down payment in time to the Swiss bank account it has serious consequences for the

seller since she cannot the US dollars in her own country and outside her country will not have any

money or be able to loan money. The delayed down payment would constitute a fundamental breach.

Example

Parties agreed on a contract for the sale of 200 t of bacon which had to be delivered in ten installments.

After the German buyer had accepted five installments she refused to accept delivery of any more

installments. The buyer claims that the parties had agreed that the buyer could avoid the contract if the

goods were complained about by the health and safety authorities and/or customs. The buyer could not

prove such an additional oral agreement. The Court assumed that the refusal of the instalments was a

fundamental breach.

Example

An Italian machine manufacture sold a French buyer a printing press. The buyer did not collect the

machine at the agreed upon with the seller. He also did not react in regard to any reminder or the

setting of an additional time period. The seller avoided the contract and claimed damages. The buyer

defended himself that the building in which the machine was to be installed had not been finished in time

due to some building regulations problems. The seller's avoidance was not in good faith. The Milan

Court allows the claim because due to the setting of the additional time period for the payment and the

acceptance of the delivery the avoidance requirements were fulfilled. The buyer had no defense. The use

of the principle of good faith could not come to a different result since international business deeply

relied on legal certainty and contract stability.


7.4.4 Damages

The right to claim damages is an independent remedial right under the CISG. Generally it can be stated

that by exercising his demand performance or to avoid the contract, the seller is not deprived of a

monetary claim. According to Art. 61(1) lit.(b) CISG the seller is entitled to claim damages as provided

in Art. 74-77 CISG. Art. 74-77 only govern the method of calculating the damages whereas Art. 61(1)

lit.(b) CISG is the actual basis for a damage claim. The principles of damages, which have been

established under the buyer’s right to damages are also applicable in this case. Generally it can be stated

that by exercising his demand performance or to avoid the contract, the seller is not deprived of a

monetary claim.

The Convention seeks to place the seller in the position he would have enjoyed if the buyer had not

breached the contract. It is a expectation-interest protection with a no-fault basis. The seller’s damages

may not exceed the loss which the buyer foresaw or ought have foreseen as a consequence of the

breach of contract concerned.

Example

Dealer S in Detroit accepts an order for 5 new GM trucks (FOB Detroit) from buyer B in Toronto. S

happens to have 5 such vehicles in stock, but before he can complete the shipping arrangements, B

sends a fax advising that the deal is off. Later S resells the trucks to a third party (B2) and then sues for

damages (profits lost under the first sale).

We can safely assume that supply exceeds demand, S cannot enter a substitute transaction, so as to

cover the buyer’s breach, simply because a subsequent sale of 5 trucks is not a substitute for the first

transaction. Since we can assume that S can obtain as many trucks (from the manufacturer) as necessary

to satisfy demand, there is no relationship between the the breach by the particular buyer (B) and the

subsequent sale (B2). The loss suffered is therefore inavoidable , and the Art. 75 contract/market

differential would be “inadequate to put the seller in as good position as performance (by B) would have

done. So in this case, the profit lost by reason of B’s breach is a direct loss compensable only pursuant

to the general Article 74 rule. Domestic sales law recognizes this same kind of expectation protection

and an Austrian court has acknowledged that the argument for permitting recovery by a CISG “lost

volume-seller” is equally strong.

7.5 Summary

This module gives an overview of the obligations of the seller, the passing of the risk and explains the

different remedies available to the seller.


Name and place the main obligations of the buyer contrasting the obligations of the seller

Ability to comprehend the system of the passing of the risk

Explain the obligations and remedies in the context of the Convention

Understand the system of remedies available to the seller


Bibliography

1. Huber/Mullis, The CISG: a new textbook for students and practitioners

2. Janssen/Meyer, CISG methodology

3. Kröll/Mistelis/Perales Viscasillas, UN Convention for Contracts on the International Sale of

Goods (CISG)

4. Lookofsky, Understanding the CISG: a compact guide to the 1980 United Nations Convention

on Contracts for the International Sale of Goods

5. Pace International Law Review, Review of the Convention on Contracts for the International

Sale of Goods (CISG)

6. Schlechtriem/Schwenzer, Commentary on the UN Convention on the International Sale of

Goods (CISG)

7. Schlechtriem / Schwenzer, Kommentar zum Einheitlichen UN-Kaufrecht - CISG (German

Version)

8. Verweyen/Foerster/Toufar, Handbuch des Internationalen Warenkaufs UN-Kaufrecht (CISG)

9. Zeller, CISG and the unification of international trade law

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