LECTURE 7 REMEDIES OF BUYER AND SELLER
7.1 BUYER’S REMEDIES : art 45
Buyer may :
a) exercise rights found in art 46-52 and
b) claim damages (art74-77)
7.2 Seller’s breaches
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Breach can apply to both documents and
goods. Examples:
Non – delivery
Late delivery
Wrong quantity
Non-conformity
Q: Is there a fundamental breach?
7.3 Request performance: art46(1)
• Seller’s obligations: to deliver goods, hand over
documents and transfer property:art 30
• Buyer may request performance unless buyer has
resorted to a remedy which is inconsistent with
this requirement eg avoidance of contract. NB
Can still sue for damages.
• Specific performance not available unless court
would, under its own law, grant order: art 28
• In common law countries, specific performance
granted for rare or unique item, or when damages
would not be sufficient compensation. Eg vintage
car, antique chair
7.4 Request substitute goods: art46(2)
When non-conformity amounts to fundamental breach,
buyer may request for substitute goods by giving notice.
This right may be used instead of avoiding the contract.
Refer to art 35, 25
art 46(2) subject to art 28
Request must be made in conjunction with notice to be
given under art 39 or within a reasonable time thereafter
Buyer loses right to substitute goods if it is impossible to
make restitution substantially in same condition in which
they were received: art 82
7.5 Request for repair: art 46(3)
When non-conformity does not amount to
fundamental breach, buyer may require
seller to repair item unless this is
unreasonable.
Request must be made in conjunction with
notice given under art 39 or within a
reasonable time thereafter.
7.6 Giving of additional time (Nachfrist): art 47
Buyer may fix additional time for seller’s
performance. Moral duty?
Unless buyer has received notice from seller
that he will not perform, buyer may not
resort to any remedy for breach of contract.
Buyer still entitled to claim damages for
delay in performance.
7.7 Buyer’s objection to Seller’s self- cure: art 48
Under art 48, seller has right to remedy any
failure to perform his obligation, if he can
do so without unreasonable delay and
without causing buyer unreasonable
inconvenience or uncertainty of
reimbursement by seller of expenses
advanced by buyer.
7.8 Avoidance of contract: art 49
Other provisions that are relevant: art
25,26,51,81,82,84
Art 49 contains two paragraphs
(1) The buyer may declare the contract avoided:
(a) if the failure amounts to a fundamental breach; or
(b) in the case of non-delivery, if the seller does not
deliver the goods within additional time fixed by buyer
under art 47 or declares that he will not deliver within
the fixed period.
49(2)
Where seller has delivered goods, buyer loses right to
avoid contract unless he does so:
(a) In respect of late delivery, within a reasonable time after
he has become aware that delivery has been made;
(b) In respect of any breach other than late delivery, within a
reasonable time:
(i) after he knew or ought to have known of the breach;
(ii) after the expiration of additional time under art47, or
after seller has declared that he will not perform; or
(iii) after the expiration of any additional period
indicated by the seller under art 48(2), or after buyer has
declared he will not accept performance
7.9 Reduction of the price: art 50
Buyer plans to retain goods or buyer is unable to
reject goods eg there is no fundamental breach.
If goods do not conform with contract, buyer may
reduce the price in the same proportion as the
value that the goods actually delivered had at the
time of the delivery bears to the value that
conforming goods would have had at that time.
Reduced price = Contract price X (Value of
delivered goods/ Value of conforming goods)
Reduced Price = 30,000 X ( 10,000/ 50,000) =
6,000
If the seller remedies any failure to perform
under art 37 or art 48 or if buyer refuses to
accept performance by the seller, buyer may
not reduce the price.
Right is to offer reduced sum to seller.
7.10 Partial delivery or partial non-conformity: art 51
Art 46-50 apply in respect of the part which
is missing or which does not conform: art
51(1)
Buyer may declare contract avoided in its
entirety only if the failure to make delivery
completely or in conformity with the
contract amounts to a fundamental breach:
art 51(2)
7.11 Early delivery or excess delivery: art 52
If there is early delivery, buyer may accept
or refuse delivery: art 52(1)
If there is excess delivery, buyer may accept
or refuse delivery of excess. If buyer takes
all or part of excess, he must pay for it at
the contract rate: art 52(2)
7.12 Provisions common to the both parties
NB Art 71onwards apply to both parties.
Art 71
(1) A party may suspend performance if it becomes
apparent that the other party will not perform a substantial
part of his obligation as a result of:
(a) a serious deficiency in his ability to perform or in his
creditworthiness; or
(b) his conduct in preparing to perform or in performing
the contract.
Notice of suspension must be issued and party must
continue to perform if the other party provides adequate
assurance of his performance: art 71(3) Eg guarantee by
third party.
7.13 Avoid contract for anticipatory breach: art 72
If prior to performance date, it is clear that one
party will commit a fundamental breach, the other
party may declare contract avoided: art 72(1)
Reasonable notice must given to permit other
party to provide adequate assurance of his
performance: art 72(2)
Refusal to establish a timely letter of credit
amounted to a fundamental breach: Downs
Investments v Perwaja Steel [2000]402
QSC 421
Co placed under voluntary administration:
Roder Zelt- und Hallenkonstruktionen
GmbH v Rosedown Park Pty Ltd
[1995]FCA 1221
7.14 Avoidance in instalment contract: art 73
Fundamental breach of one instalment entitles avoidance
of that instalment: art 73(1)
If one party’s failure to perform one instalment gives the
other party good grounds to conclude that a fundamental
breach will occur with respect to future instalments, he
may declare the contract avoided for the future: art 73(2)
Special right for buyer under art 73(3)
A buyer who declares the contract avoided in
respect of any delivery may, declare the contract
avoided in respect of deliveries already made or of
future deliveries if, by reason of their
interdependence, those deliveries could not be
used for the purpose contemplated by the parties at
the time of the conclusion of the contract.
7.15 Claim for damages
Independent of other rights: art 45(1)(b)
Damages consist of sum equal to foreseeable loss
suffered as a consequence of the breach, including
loss of profits: art 74
Loss of profits = Value of conforming goods –
Value of goods delivered.
Other types of damage: transportation costs,
damage to other goods.
Art 75 provides as follows:
If contract is avoided and buyer has bought
goods or seller has resold goods, damages
equal difference between contract price and
price in substitute transaction, plus any
further damages recoverable under art 74
Art 76 provides as follows:
(1)If party has not made purchase or resale, damages is
difference between contract price and current price at time
of avoidance plus any further damages. If party has
avoided contract after taking over the goods, the current
price at the time of such taking over shall be applied
instead of the current price at the time of avoidance.
(2)Current price is price prevailing at place of delivery or
if there is no current price, price at some other place
making due allowance for differences in cost of
transporting goods
Party who relies on breach must mitigate loss. Failure to mitigate may
result in a reduction in damages to reflect loss which should have been
mitigated : art 77
Downs Investments Pty Ltd v Perwaja Steel Sdn Bhd [2000]402 QSC
421
In order to fulfil sale contract which required transporting goods, seller
had agreed with third party to charter vessel to be used for loading
goods. Buyer reneged on deal.
Mitigation did not require seller to put at risk its commercial reputation
by using technical points to avoid its obligation under the agreement to
charter a vessel. Seller mitigated by re-chartering vessel. Loss to be
borne by buyer.
7.16 Claims may be made outside VC.
Ginza Pte Ltd v Vista Corp Pty Ltd (2003)
WASC11 (Unreported)
Claim in tort of negligence available for
supply of goods that were not sterile.
Other claims include action for negligent
misrepresentation, fraud or under a statute.
7.17 Seller’s Remedies: art 61
Rights under art 62 to 65
Claim damages: art 61(1)(b)
Rights are similar to those available to
buyer.
Buyer’s breaches relate to payment of price
and taking delivery.
• Request performance : art 62, 28
• No need to request for payment of price: art
59
• Duty to give additional time (Nachfrist): art
63
• Avoid contract: art 64, 25
7.18 Avoidance of contract
S64(1) The seller may declare the contract
avoided:
(a) if there is a fundamental breach; or
(b) if the buyer does not within additional
time under art 63, perform his obligation to
pay the price or take delivery of the goods,
or if he declares that he will not do so
within the period fixed.
Art 64 (2) In cases where the buyer has paid the price, the
seller loses the right to avoid the contract unless he does
so:
(a) in respect of late performance by buyer, before the
seller has become aware that performance has been
rendered; or
(b) in respect of any breach other than late performance by
the buyer, within a reasonable time:
(i) after the seller knew or ought to have known of the
breach; or
(ii) after the expiration of any additional period fixed
under art 63, or after the buyer has declared he will
not perform within such additional period.
Seller’s right to supply own specification
when buyer fails to do so, based on
information at hand. Seller informs buyer
and if buyer fails to respond, seller’s
specification is binding: art 65
Rights under art 71- 73
Special right to stop goods in transit: art
71(2). Covers rights as between the buyer
and seller. Right may be exercised even if
title has passed to buyer.