SALES

1. SALES • Jurisdiction: see Part III • Conflict rule: • Obligational aspects: see supra Rome-I Regulation; but see Art. 1 CISG infra • Transfer of property (incl. and effectiveness of the property transfer towards third parties): lex rei sitae • Degree of harmonisation : • CISG, Succesful, limited to (some aspects of) international business sales of movables • Applicable national law: domestic sales and non-business sales • EU law has harmonised some aspects of consumer sales (and very few aspects of other sales) • Result: fragmentation of sales law • But influence of CISG on developments outside its scope is huge. • October 11, 2011: draft common EU sales law « CESL » (« optional instrument »)

2. CESL • It provides for a common regimen of contract law that is identical for all 27 Member States • According to the original draft, it could be applicable: • only if both parties voluntarily and expressly agree to it (optional instrument) • to cross-border contracts • to contracts for the sale of goods as well as digital content contracts, e.g. sales of software • for both business-to-consumer and business-to-business transactions where at least one of the parties is an SME • if one party is established in a Member State of the EU • Will probably be limited to distance contracts • It is left to the discretion of the Member States whether to give the regime a wider application

3. SALES – UNIFORM LAWS • Predecessor: ULIS & ULFIS (Hague conventions 1964, Unidroit) • Replaced by Vienna Sales Convention 1980 (Uncitral, 1 convention), in force 1988, Fall 2013 already 80 countries (map outdated, Brazil joined in 2013 with effect in 2014) • Missing i.a. UK, Portugal, India, S.Africa, Indonesia, Taiwan, Hongkong

4. CISG – SCOPE OF APPLICATION • Rationemateriae: Art. 1: “This Convention applies to contracts of sale of goods...” The CISG contains no definition of contracts of sale of goods. It requires: (1) an obligation to transfer property and (2) an obligation to pay the purchase price (monetary consideration, ≠ barter) The CISG applies to sales of corporeal movables, including gaz. Does it also apply to sales of software?

5. CISG – SCOPE OF APPLICATION • Art. 2: This Convention does not apply to sales: • (a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use • Domestic consumer-protection laws are not affected by the CISG • Burden of proof is placed on the party claiming the applicability of the Convention • (b) by auction • (c) on execution or otherwise by authority of law; • (d) of stocks, shares, investment securities, negotiable instruments or money; (see eg ISDA rules on sale of derivatives) • (e) of ships, vessels, hovercraft or aircraft • (f) of electricity.

6. CISG – MIXED CONTRACTS • Art. 3 on mixed contracts: • (1) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. > “substantial part of materials”: criterion is economic (value); > plans & know how are as such not materials (CISG advisory council Opinion n° 4) • (2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services. > if preponderant part is labour, services (turn key etc.) > again “economic” criterion: value of the goods compared to value services • Lease agreements are excluded from the scope of the CISG • Distribution / Agency agreements ? The framework agreement ≠ actual sale

7. CISG – TERRITORIAL APPLICATION • Ratione loci: only « international sales », more specifically in 2 cases : A) Direct application: - Parties whose places of business are in different States and both States (of place of business) are Contracting States (i.e. have ratified CISG). This supposes that either the forum is a contracting State or the conflict rule of the forum refers to the law of a contracting state. - No other requirement (as e.g cross-border delivery or payment): Art. 1 (3): “Neither the nationality of the parties nor the civil of commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention” - Problem of interpretation of place of business (comp. Rome-I-Regulation): next slide • Exception (for both cases): art. 94 “neighbour clause” – countries with similar law making a declaration. Applies to Inter-Nordic sales (5 Nordic countries).

8. CISG – TERRITORIAL APPLICATION Problem of interpretation of place of business (comp. Rome-I-Regulation) • It must be a place at which there is a stable business organization • The contracting party at that place must have autonomous power to enter into the agreement Different place of business is not apparent (subjective international dimension): Art. 1 (2): “The fact that the parties have their place of business in different States is to be disregarded whenever this fact does not appear either from the contract of from any dealings between, or from information disclosed by, the parties at any time before of at the conclusion of the contract” More than one place of business: Art. 10 (1): “If a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract” No place of business: Art. 10 (2): “If a party does not have a place of business, reference is to made to his habitual residence”

9. CISG – TERRITORIAL APPLICATION • Ratione loci: only « international sales », more specifically in 2 cases : • B) Indirect application: • when the rules of private international law of the forum lead to the application of the law of a Contracting State (usually when sellers place of business in a contracting state, See Rome-I-Regulation; also in case of choice of the law of a contracting state*) • However no indirect application if the applicable law is that of a country having made the reservation of art. 95 (USA, PR China, Singapore, Armenia, Czech R, Slovakia) • even if that law is applicable because of the conflict rule of a foreign forum ? (disputed) (e.g. sale between US and UK; forum refers to the application of American law. Domestic American law applied as American law does not apply CISG in relation to a non-CISG state as the UK) (disputed, but not disputed in Germany given explicit declaration of Germany) The Convention may also apply as the law applicable to the contract if so chosen contractually agreed by the parties. Choice of law of a contracting state includes choice of CISG and is not presumed to exclude CISG – eg Cass. France 13 Sep. 2011

10. CISG – REGULATED MATTERS • Regulated matters : • Only law of obligations, no property law (art. 4). • No procedural law, esp. burden of proof • Only formation (incl. question of writing), performance, non-performance and associated questions (art. 4) • Does include passing of risk. Some (deliberate) lacunae (gaps) such as price revision, interest rate, ... • Some CISG provisions not applicable in certain states because of reservations made under Art. 92 (no form >< writing requirement in some countries)

11. CISG – MATTERS NOT REGULATED • Matters of the law of obligations NOT Regulated : • validity and invalidity of the contract (see next slide), incl. legal capacity • liability for damage consisting of death or personal injury • prescription (separate Convention NY 1974 as modified Vienna 1980) • assignability of rights and effect of assignment in relation to the assigned debtor (s. Assignment & Factoring Conventions); subrogation • set-off • plurality of debtors (divisible or indivisible liability?) • authority of agents (1983 Unidroit Geneva Convention, not in force, 5 ratifications) • Choice of law useful for matters not regulated

12. CISG – REGULATED MATTERS • Validity is not regulated by CISG, including • legal capacity • defects of consent, other invalidities (Unidroit Convention without success; see general contract law principles UPICC, PECL/DCFR, OI) • invalidity of specific clauses (nullity of penalties, exemption clauses, unfair clauses ...) • exception: writing requirement falls under CISG (art. 11) even if a matter of validity in some jurisdictions Discussion about negative effect of CISG provisions on possibility to invoke invalidity. esp. non-conformity and mistake/misrepresentation (comp. Also UPICC art. 3.7). Majority in favor of negative effect of CISG. NB. Validity is in part regulated in the “optional instrument“

13. CISG – OPT-OUT & DEROGATION Art. 6 : The parties may: • exclude the application of this Convention (opt-out - domestic law then applies, incl. an optional sales law if domestic law so allows) • or • derogate from or vary the effect of any of its provisions (remaining CISG articles apply) • No mandatory law in CISG (bus most matters of mandatory law are not regulated in CISG) • Attention: NY Limitation convention (s. infra) is a separate Convention. A separate opt-out in necessary to avoid its application • Usually, a general reference to national law of a contracting state is not considered to be an opt-out from CISG. But a reference to specific articles of national law on matters covered by CISG may imply an opt-out

14. CISG – INTERPRETATION AND GAP-FILLING (1) • First question: is the matter governed by CISG or not ? • If not governed by CISG = « external » gap > national law applicable by virtue of the conflict of law rules • If governed by CISG: either interpretation or « internal» gap • Art. 7 (1) CISG – principle of autonomous interpretation Elements: internationality, need for uniformity, promotion of good faith in international trade (except where the CISG uses a notion that is necessarily to be filled in by domestic law, eg the reference to conflict of law rules (of the forum), as CISG contains no such rules) No duty to act (perform) in good faith ! Good faith only for interpretation of CISG itself

15. CISG – INTERPRETATION AND GAP-FILLING (2) • Art 7 (2) CISG – Gap-filling (for internal gaps) • 1° Usages and practices (Art. 9, I CISG) • 2° Gap can be filled according to Art. 7, 2 on the basis of the « underlying principles » • 3° Gap cannot be filled on the basis of underlying principles / in the absence of such principles, applicable national law • Examples of gaps: • Place of payment of compensation: internal gap • Electronic communication as writing ? Internal gap. See CISG Advisory Council n° 1 • Interest rate: gap; disputed whether internal or external gap • Hardship: disputed, see discussion further

16. CISG – GENERAL PROVISIONS JURIDICAL ACTS (1) • No duty to act according to good faith (see Art. 7) • How intention is determined – interpretation of acts: Art. 8 CISG Interpretation of statements made by and other conduct of a party: - (1) according to the intent of that party where the other party knew or could not have been unaware what that intent was • (2) subsidiary: according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances • > taking into account all circumstances , incl. later conduct (can be excluded: « No Oral Modification » clause in art. 29, 2 CISG, however, estoppel can apply to that clause) • CISG does not incorporate: plain meaning rule, parol evidence rule (CISG AC Opinion n° 3)

17. CISG – GENERAL PROVISIONS JURIDICAL ACTS (2) • Art. 9 CISG Usages and practices • Practices are specific to two persons, e.g. giving credit, and are established by a course of conduct that creates an expectation that this conduct will be continued • Usages are of more general application. Art. 9 (1) « The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves » • Usage does not have to be well known in international trade. It can even be a local usage as long as the parties have agreed to it. Art. 9 (2) « The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. » Comp. Art. 1.9 Unidroit Principles and Art. 67 CESL

18. CISG – GENERAL PROVISIONS JURIDICAL ACTS (3) • No formal requirements for formation or evidence – Art. 11 But reservation can be made (art. 12) and was made by several countries • « Writing » includes telegram and telex (Art. 13) • Comp. Art. 1.2 Unidroit Principles and Art. 6 CESL • No formal requirements for modification or termination – Art. 29 (1) > by mere agreement, Art. 29 (but see 29 II : « no oral modification clause » is possible) • Merger clause or Four Corners clause: is a deviation from CISG default rules • Other general rules can be deduced from specific ones e.g.: - when notice becomes effective (art. 24, 26, exception in 27), - meaning of silence or inactivity (art. 18,1), - etc.

19. CISG – FORMATION (1) • Formation of the contract by offer and acceptance (Mirror model) • Offer: Art. 14 – definition/minimum content. Differs from proposal: addressed to one or more specific person(s); sufficiently definite (goods and price determinable, see art. 55 for price determination); indicates intention to be bound if accepted • «effective» (not necessarily irrevocable) when it reaches the offeree (unless withdrawal reaches earlier or at the same time) (Art. 15) • But still revocable (until the offeree has dispatched acceptance), unless irrevocability indicated (eg period for acceptance) or reasonably relied upon (Art. 16) • It is terminated when a rejection reaches the offeror (Art. 17)  • Effect: if accepted during period of validity (and before revocation) (rules concerning the calculation of the period in Art. 20, 21) a contract is formed when the acceptance becomes effective (Art. 23)

20. CISG – FORMATION (2) • Formation of the contract by offer and acceptance (Mirror model) • Acceptance: not by mere inactivity (Art. 18 I) • It becomes effective when it reaches the offeror within the time fixed or, if no time is fixed, within a reasonable time (Art. 18 II); possibly already when an act is performed (18 III). • Modified acceptance (Art. 19): do the modifications « materially» alter the terms of the offer ? • Yes > counter-offer (19 I); • No > accepted with modifications unless protest (« last shot ») (19 II). • Acceptance may be withdrawn if the withdrawal reaches the offeror before of at the same time as the acceptance would have become effective

21. CISG – STANDARD TERMS • Incorporation of standard terms • German Supreme Court “It is unanimously required that the recipient of a contract offer that is supposed to be based on general terms and conditions has the possibility to become aware of them in a reasonable manner.” • Reasonable opportunity to take notice: see CISG AC Opinion 13. • Except suprising terms: CISG AC Opinion 13. • No special rules for battle of forms: general clauses contained in the forms exchanged between the offeror and the offeree are contradictory. • Case law diverges: • Outside the scope of the Convention (external gap) ? • Knock out rule? (or knock out as far as incompatible). • No gap, as under the last shot rule (Art. 19 CISG)? • Comp. divergent national laws: UK last shot; Netherlands first shot; knock-out in B, Germany (BGH 9 Jan 2002), Austria, France; mixed rule in USA. • CISG AC Opinion 13: knock out rule unless…

22. CISG - SELLER’S OBLIGATIONS (delivery 1) • Art. 30 - Obligations: delivery of the goods (incl. documents), transfer of property, conformity • Obligation of delivery: • Place of performance (Art. 31 – default rules) • Carriage involved: first carrier (independent carrier) • No carriage involved and contract relates to (a) specific goods, (b) unidentified goods to be drawn from a specific stock or (c) goods to be manufactured of produced and parties knew that the goods were at, or were to be manufactured of produced at, a particular place: place of the goods (ex works). • In other cases: seller’s place of busines. • See also Incoterms (infra). • Additional duties (Art. 32) related to (1) specification, (2) carriage and (3) insurance

23. CISG - SELLER’S OBLIGATIONS (delivery 2) • Art. 30 - Obligations: delivery of the goods (incl. documents), transfer of property, conformity • Obligation of delivery: • Time of performance (Art. 33) • Fixed date • Fixed period of time • In other cases: reasonable time after conclusion of the contract • Delivery of documents (Art. 34) • Duty to preserve the goods if buyer fails to take delivery (Art. 85 ff.)

24. CISG - SELLER’S OBLIGATIONS (CONFORMITY 1) • Obligation of conformity in respect to the goods - Art. 35 –  • There is conformity only if the goods are :  • 1) in conformity with specifications of the contract  (quantity, quality, packaging)  • 2a) fit for ordinary purposes (see next slide) • 2b) fit for particular purpose made known to seller • Exception: circumstances show that the buyer did not rely,  or that it was unreasonable for him to rely,  on the seller’s skill and judgement, • 2c) in conformity with the qualities of the sample • 2d) usual or adequate packaging, Exception: visible non-conformity at the time of conclusions (35, 3) • Relationship between (1) and (2): cumulative or exclusive ? Cumulative unless express deviation.

25. CISG - SELLER’S OBLIGATIONS (CONFORMITY 2) • Ad 35, 2° : there is conformity only if the goods are « fit for ordinary purposes », but where ? • Quid technical standards in country of buyer ≠ seller ? • German cadmium in mussels case (BGH 8 march 1995) where standards in country of buyer (NZ) were stricter than standards in country of seller, they do not apply unless the seller should have been aware of them • If the seller advertised in the buyer’s country or other special circumstances, standards of that country • Danish check-valves for petrol case (VLR 21 Dec 2004): rubber cracked and valve leaking due to additives (MTBE) used in buyers’ country (Scandinavia) but not in country of seller (Italy): non-conformity accepted

26. CISG - SELLER’S OBLIGATION- PASSING OF RISK • Risk ≠ liability ! (question of risk arises if seller is not liable for non-conformity) • Unless caused by the buyer itself, conformity has to be present at the time of passing of risk (Art. 36); • Even if the lack of conformity becomes apparent after that time • lack of conformity arising later ? Seller liable if consequence of breach, or if guaranteed (to remain fit or maintain qualities for a period) (‘warranty’). Implicitly limited to 2 years unless longer contractual period of warranty (39, 2) • Relevance of « Passing of risk » is thus • Risk of force majeure (price risk) Art. 66 « Loss or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller » • Time to judge conformity (or rather the cause of the lack of conformity) (Art. 36 (1))

27. CISG - SELLER’S OBLIGATION- PASSING OF RISK • Different theories on the passing of risk: • At the time of conclusion of the contract • At the time of passing of ownership • At the time of delivery and possession of the goods • When does risk pass under CISG? As agreed, otherwise • Art. 69: at the moment of delivery, but (a) If the buyer refuses to take delivery: risk passes at that time (b) If other place than place of business of the seller: risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place Presupposes that the goods are identified to the contract (69 (3)).

28. CISG - SELLER’S OBLIGATION- PASSING OF RISK • Art. 67: in case of carriage of the goods: (a) No particular place: first carrier (independent carrier) (b) Particular place: carrier at that place Presupposes that the goods are identified to the contract (67 (2)) • Art. 68: in case of goods sold in transit: at the moment of conclusion of the contract, unless: (a) an agreement that the buyer will assume the risk from the moment the goods are handed over to the carrier can be implied from the circumstances (b) the seller knew of ought to have known that the goods had been lost or damaged and did not disclose this to the buyer • See also Incoterms

29. CISG – CONFORMITY AND EXAMINATION • Art. 38: Buyer must examine the goods within a short period (not a real obligation, but a duty or Obliegenheit) • The examination must be objectively suitable for disclosing recognizable defects • The intensity of the examination depends upon: (a) The type of the goods (b) The quantity of the goods and their packaging (c) The buyer’s capabilities (d) The costs and time needed for the examination (e) The probability of defects (f) The potential losses caused by undisclosed defects - In case redispatch is foreseen, examination may take at final destination (38 III). Some case law is very strict (eg Ugandan used shoes case).

30. CISG – CONFORMITY AND EXAMINATION • Art. 39: Buyer must give notice of non-conformity (if unknown to seller) • As soon as discovered or ought to have discovered (CISG AC Opinion 2) • At the latest within a period of two years after delivery to the buyer, unless longer contractual period of guarantee • The notice is effective upon dispatch (Art. 27) • The notice must specify the nature of the lack of conformity • Sanction: loss of remedies (infra), unless reasonable excuse: limited remedies available (Art. 44) • Delivery in parts – examination (+ notice) of each part necessary, buyer cannot wait until last delivery • Art. 44: in case of reasonable excuse, limited remedies available (price reduction, damages) - Art. 40: rules not applicable if lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.

31. CISG – SELLER’S OBLIGATIONS - to transfer property • The seller is obliged to procure the buyer property of the goods • And to transfer them “free from any right or claim of a third party” (Art. 41) unless ... • (a) Unless the buyer agreed to take such goods. The buyer’s mere knowledge of the third-party claim does not relieve the seller of his obligation. Consent is needed. • (b) The legal nature of the claim is irrelevant: claims based on better title to the goods, but also contractual claims. E.g. retention of ownership, the sale of goods belonging to another, right of pledge, lease, etc • (c) Decisive factor: whether the buyer’s use of the goods is infringed or disrupted by the third-party claims. Public law restrictions on the use of the goods are governed not by Art. 41, but by Art. 35. • Similar duty to give notice (if unknown to seller) within a reasonable time after he has become aware or ought to have become aware of the right or claim (Art. 43). Reasonable time very often 1 month (German stolen car case, BGH 11 Jan 2006) • Sanction: loss of some remedies • Which remedies survive ? In case of reasonable excuse still price reduction or damages (Art. 44). • When is the obligation to procure property fulfilled ? Requirements for an effective transfer of property not in CISG, question of (national) property law.

32. CISG - SELLER’S OBLIGATIONS – FREE FROM RIGHTS • Obligation of conformity in respect to rights (art. 41) requires also: • That goods are “free from any right or claim of a third party based on industrial property or other intellectual property” under some conditions: a) IP right in the country of the seller or place of resale if contemplated*, - In the absence of a special intended use: in the country in which the buyer has his place of business - In the event the goods are to be resold and used in a state other than the one where the buyer has his place of business: in the country of resale. • b) (constructive) knowledge of the seller and not of the buyer • c) not resulting from compliance with instructions (drawings etc.) of the buyer (Art. 42) • Similar duty to give notice (if unknown to seller) within a reasonable time after he has become aware or ought to have become aware of the right or claim (Art. 43). Sanction: loss of some remedies • Which remedies survive ? In case of reasonable excuse still price reduction or damages (Art. 44).

33. CISG – SELLER’S OBLIGATIONS - to transfer property The seller is obliged to transfer property of the goods • When is the obligation fulfilled? Requirements for an effective transfer of property not in CISG, question of (national) property law. • Consensual vs. Delivery transfer systems • Causal vs. Abstract transfer systems • Retention of ownership (cf. Art. 7 Insolvency Regulation, see further)

34. CISG – BUYER’S OBLIGATIONS (1) • Obligations of the buyer : specify, take delivery, pay the price, examine • If the contract provides so: specify the form, measurement or other features of the goods (Art. 65) • Taking delivery of the goods (Art. 60) • Buyer must undertake all acts which could reasonably be expected of him in order to enable the seller to make delivery. • Place & time: see supra delivery. • Buyer may refuse or accept early delivery (Art. 52 (1)). • Buyer may accept (and pay) or refuse excess quantity (Art. 52 (2)) • Examination & notice, see supra. • Duty to preserve the goods if buyer intends to reject them (Art. 86-88)

35. CISG – BUYER’S OBLIGATIONS (2) • Payment of the price: • Includes all of the measures agreed upon in the contract to enable payment to be made • Price not fixed nor mode of determination? Normal price (Art. 55) • Sufficient to constitute an offer in the sense of Art. 14? • Place of payment : seller’s place c.q. place of handing over (Art. 57) • Time of payment (Art. 58): • When control is given to the buyer (for controlling doculents, see CISG AC Opinion no. 11) • At the condition that he has had the opportunity to examine the goods • The seller does not need to send any advance reminder or other formal request for payment • Concrete rule will depend on clauses (often payment against documents). • Payment instruments: no provisions in CISG. See further. • The seller must accept partial payment or early payment if he is required to do so by contract.

36. SALES -INCOTERMS • « International commercial terms »: standard abbreviations, often three letter words (FOB, CIF, etc.) • Defined as usages by the ICC (sinds 1936, several revisions; since Jan 1, 2011 : version 2010) • Now (2011) 11 Incoterms (before 2011: 13 terms) • Each summarising obligations of the parties in relation to 10 typical points (esp. the point of delivery, procurement of transport documents, contract of insurance and other documents necessary for the export and import of the cargo) • Applicable when inserted in the contract, expressly or impliedly (specify the chosen version) • Four basic categories : • C-terms : seller pays carrier to agreed destination, but does not bear risk during carriage (attention: in CIF buyer must pay before inspection) • D-terms: sellers bears cost of carriage and risk until arrival at agreed destination – thus some « arrival duties » on the seller • E-terms: ex works of the seller • F-terms: delivery to the person paid by the buyer

37. SALES –INCOTERMS Rules for any mode of transport: • EXW        Ex Works • FCA         Free Carrier • CPT         Carriage Paid To • CIP          Carriage And Insurance Paid To • DAT         Delivered At Terminal • DAP        Delivered At Place • DDP        Delivered Duty Paid Rules for sea and inland waterway transport: • FAS          Free Alongside Ship • FOB         Free On Board (risk passes when goods put on board; in old versions: over the ship’s rail) • CFR         Cost And Freight • CIF          Cost, Insurance and Freight

40. SALES –INCOTERMS • Each term summarising the obligations of (A) the seller and (B) the buyer in relation to 10 typical points: • 1. mainobligation: provision of goods, paymentof the price • 2. licenses, authorisationsandformalities • 3. contracts of carriageandinsurance • 4. delivery andtakingdelivery (NB. often relevant forjurisdiction !) • 5. transfer of risks • 6. division of costs • 7. noticestobegiven • 8. proof of delivery, transport document • 9. checking, packaging, marking, inspecting • 10. other

42. CISG – REMEDIES - OVERVIEW • Overview of remedies for non-performance: • Specific performance (Art. 46 and 62) • Suspension (Art. 71) • Avoidance of the contract (Art. 49 and 64) • Price reduction (Art. 50) • Damages (Art. 45 and 61) • General principles • Free choice, no hierarchy of remedies (« pari passu ») (but sometimes fundamental breach required) • Combinability, esp. of damages and other remedies) • Largely self-help (unilateral declaration) • By notification (usually within a reasonable time) • Fundamental objective: saving the contract and avoiding restitution • > Instruments for restraining termination as a remedy • Nachfrist mechanism (Art. 47 and 63) • The seller’s right to cure (Art. 48)

43. CISG – GENERAL RULES ON NON-PERFORMANCE • Remedies for non-performance: separately mentioned for buyer and seller. But basically a unitary concept of non-performance (« breach ») (comp. the dualism still remaining in e.g. Belgian law). • Some remedies require a « fundamental breach » (Art. 25). Interpretation: CISG AC Opinion n° 5 • Fault or strict liability ? - damages excluded if exemption: failure due to an impediment beyond control (art. 79) (+ give notice to other party). Hardship ? See next slide. - other remedies: strict liability - a party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission (Art. 80). • Exemption clauses: possible under CISG (art. 6), but national law may invalidate them.

44. CISG – HARDSHIP • Does art. 79 include a rule on hardship ? • Hardship is a « matter governed by CISG », but disputed whether: a) excluded by Art. 79 (Cass.Fr. 2004, Behr v. Romay in a specific case: third party buyer no longer interested); b) included in Art. 79 but gap as to more precise rules (Cass.B. 19 June 2009 – steel price plus 70 %) – in line with CISG AC Opinion n° 7 c) internal gap which can be filled by principles; d) internal gap which can not be filled by principles. Which principles: only « internal » to CISG, or also « external » such as UPICC ? (Cass. B.: also UPICC)

45. CISG – SPECIFIC PERFORMANCE • Primacy of specific performance • The buyer has the right to require specific performance: • Whether he can claim specific performance depends upon the domestic law of the forum (art. 28) • Subject to the condition of not having recourse to other remedies that are inconsistent with it (Art. 46 (1)) • If specific performance is available, it includes (a) requiring delivery of substitute goods when breach is fundamental or (b) requiring repair unless unreasonable (Art. 46 (2) and (3) • The buyer can choose between damages and specific performance, without any discretion left to the court • The seller has the right to « cure » (repair) under certain conditions that secure the buyer’s interests (Art. 48)

46. CISG – SPECIFIC PERFORMANCE • Seller also has the right to compel performance: payment and taking delivery (Art. 62) • Good faith should be taken into account when determining whether to grant specific performance • Creditor can fix an additional period of reasonable length for cure (function: termination allowed afterwards) (« Nachfrist « ) (Art. 47 & 63) • Nachfrist notice • Demand of performance • Express determination of the additional period of time • Consequences of an unreasonable period of time? • The creditor is not entitled to resort to any remedy for breach of the contract unless the other party notifies that he will not perform during the period so fixed • Opens the door to avoidance (see further) • If the buyer does not give specifications: seller may specify (Art. 65)

47. CISG – REMEDIES - SUSPENSION • Order of performance: in principle at the same time • Suspension of performance as long as other party does not perform • A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes clear that the other party will not perform a substantial part of his obligations (Art. 71, anticipatory breach) • Possible indicia that a breach will be committed: (a) serious definiency in the ability to perform (b) serious deficiency in a party’s creditworthiness • Both (advanced) performance and acts regarding preparation of the performance may be suspended, provided that there is a reciprocal relationship between the obligation suspended and the counter-performance • Requires Notice of suspension • Suspension no longer allowed if adequate assurance of performance

48. CISG – REMEDIES – AVOIDANCE (1) • Termination, called « avoidance » (misleading term) • Requirements (Art. 49 & 64) - either « fundamental breach » or still in breach after the additional period granted for performance (Nachfrist) - also in case of anticipatory breach (if fundamental) (Art. 72) - fault not required; but events after passing of risk are for the risk of the buyer • Relevant factors in determining fundamental breach (art. 25) • Nature of the contractual obligation • Gravity of the consequences of breach • Contract’s overall value and the monetary loss suffered by the aggrieved party • Frustration of the purpose of the contract • Remedy-oriented approach • (In)ability of performance • (Un)willingness to perform • Lack of reliance on the other party’s future performance • Offer to cure / possible cure

49. CISG – REMEDIES – AVOIDANCE (1) • Cases of fundamental breach: • Definite non-performance • Delivery of defective goods when the defect is such that the non-defaulting party cannot be expected to be satisfied with damages or price reduction • Delay in delivery of the goods when compliance with a particular deadline is essential for the buyer • Remedy: avoidance

50. CISG – REMEDIES – AVOIDANCE (2) • Scope: depends on whether the contract is divisible or indivisible, see Art. 51 and 73 (instalment contracts) • Exercise and loss: - by notice (Art. 26) • - time limits (reasonable time) in late performance (Art. 49 (2)(a) and Art. 64 (2)(a)) and in defective performance (Art. 49 (2)(b) and Art. 64 (2)(b)) - buyer loses remedy if restitution in substantially the same condition made impossible (Art. 82) • - The seller’s proposal to cure: buyer cannot exercise his right to avoid the contract during the performance period if: (a) the buyer has agreed to the seller’s proposal (b) the buyer fails, within a reasonable time, to reject or otherwise respond to the seller’s notice for delayed performance