Remedies for breach of contract

Relevant CISG Articles. The remedies of the buyer for breach of contract by the seller are addressed in connection with CISG Chapter II obligations of the seller (CISG Articles 45-52), and the remedies of the seller for breach of contract by the buyer are addressed in connection with CISG Chapter III obligations of the buyer (CISG Articles 61-65). The same principles apply for both: if all required conditions are fulfilled, the aggrieved party may require performance of the other party’s obligations, claim damages, or avoid (terminate) the contract. In addition, the buyer may reduce the price if the delivered goods do not conform to the contract.

Specific performance. The foremost principle in case of breach of contract is that the buyer is permitted to require specific performance (unless it has resorted to a remedy that is inconsistent, such as termination of the contract – CISG Articles 28 and 46). Specific performance means that the seller must perform in kind: deliver the goods. Especially in the common law, this is inconsistent with the historic belief that a public court should refrain from interfering in private relationships. From this perspective, a court’s order to perform duly would also introduce complications related to the question of how such performance has to be effected. Since modern times, however – and particularly regarding sales contracts –common law courts have become less reluctant and have accepted the principle. In civil law countries, legislators have always considered such order of specific performance (instead of damages) to be the default remedy: in several jurisdictions, a court’s judgement might even operate as an instrument reflecting the contractual rights (e.g. as an instrument for effecting transfer of ownership).

Replacement. A buyer can require the delivery of substitute goods only if the goods delivered were not in conformity with the contract and the lack of conformity constituted a fundamental breach of contract (CISG Article 46(2)).

Force majeure. A party in breach of its obligations might excuse itself (and be exempted from liability) on the basis of an event of force majeure (CISG Article 79). To be excused successfully, the failure must be due to an impediment beyond its control (external) that the party could not reasonably have been expected to take into account (reasonably unforeseeable) at the time of the conclusion of the contract, and that it could not have avoided or overcome (no alternative for due performance).

Such event of force majeure exempts that party from the consequences of its failure to perform, including the payment of any damages. This exemption may also be invoked by a subcontractor. Furthermore, a successful claim of force majeure does not preclude either party from invoking any other remedy (e.g. a reduction of the purchase price if the goods contained defects) – see also section 4.4.

A key criterion to benefit from the force majeure exemption is that the party notifies the other party within a reasonable period of time. Otherwise, the other party is entitled to compensation of its damages to the extent that these could have been prevented but for the lapse of such additional time.

Suspension of performance and anticipatory breach. If, before the date on which performance is due, it becomes apparent that a party will not perform a substantial part of its obligations or will commit a fundamental breach, two scenarios are available to the (potentially) aggrieved party:

  • it may suspend performance in cases involving a failure to perform a substantial part of the other party’s obligations, if such failure results from that party’s inability to perform or its lack of creditworthiness, or if such failure becomes apparent from that party’s conduct in preparing to perform (or the performance itself) (CISG Article 71); or
  • it may avoid (terminate) the contract once it becomes clear that the other party will commit a fundamental breach of contract (CISG Article 72).

Preservation of the goods. The Vienna Convention imposes on both parties a duty to preserve any goods in their possession that belong to the other party (CISG Articles 85-88). This duty is particularly important in view of the international nature of the contract: the other party is from abroad and might not have representatives in the country where the goods are located. The party in possession of the goods may sell them, or may even be required to sell them, if circumstances so require. In such cases, the selling party is entitled to retain part of the sales price as a compensation for reasonable expenses incurred in preserving the goods and selling them. Obviously, it must account to the other party for the balance (CISG Article 88).

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