Damages Under the UN Convention of
Contracts for the International Sale of Goods
Prof. Peter Mazzacano
Miami Conference, October 30, 2009
CISG Canada www.cisg.ca
pmazzacano@osgoode.yorku.ca
 1. Overview of the Damages Provisions
 2. Areas of Controversy:
 a. Foreseeability
 b. Attorneys’ Fees
 c. Interest
 1. Overview of the Damages Provisions
 damages, n. pl. Money claimed by, or ordered to be paid to,
a person as compensation for loss or injury.
Black’s Law Dictionary 416 (8th ed. 2004)
 “Damages are the sum of money which a person wronged is
entitled to receive from the wrongdoer as compensation for
the wrong.”
Frank Gahan, The Law of Damages (1936)
 1. Overview of the Damages Provisions
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Follow the twists and turns…
 1. Overview of the Damages Provisions
 UCC Section 1-106(1): “The remedies provided by this Act
shall be liberally administered to the end that the aggrieved
party may be put in as good a position as if the other party
had fully performed…”
 1. Overview of the Damages Provisions
 Article 5 Exclusions: Claims against Seller for death or
personal injury caused by goods
 Remedies for breach of contract by Seller: Articles 45 to 52
 Remedies for breach of contract by Buyer: Articles 61 to 65
 Chapter V: Provisions common to the obligations of the
Seller and of the Buyer
 Section II
 Damages: Articles 74 to 77
 1. Overview of the Damages Provisions
 Damages under the CISG enjoys a prominent position.
 Liability in damages represents a compromise between
competing Civil and Common law conceptions.
 CISG adopts the “no-fault” preference in Common law (e.g.
Article 45(1)(b)).
 But the CISG adopts the Civil law view regarding the effect of
a legal excuse (e.g. a force majeure-type event per Article 79):
no contractual discharge, but to exempt the party from
liability for damages.
 1. Overview of the Damages Provisions
 Damages: Articles 74 to 77
 Article 74: Establishes the basic principles concerning
recovery and the calculation of damages.
 Article 75: Specific rules governing calculation of damages
for contract avoidance.
 Article 76: Adopts the “market price” test measure for
damages.
 Article 77: Aggrieved party has a duty to mitigate damages.
 1. Overview of the Damages Provisions
 “Damages for breach of contract by one party consist of a
sum equal to the loss, including loss of profit, suffered by the
other party as a consequence of the breach. Such damages
may not exceed the loss which the party in breach foresaw or
ought to have foreseen at the time of the conclusion of the
contract, in the light of the facts and matters of which he then
knew or ought to have known, as a possible consequence of
the breach of contract.”
 Generally conforms to the common law and US rules on
foreseeability (Hadley v. Baxendale and UCC ss. 2-714(1), 2715(2)).
 2. Areas of Controversy:
 a. Foreseeability
 UCC: foreseeability is subsumed under the phrase in s. 2-
714(1), “he may recover as damages … the loss resulting in
the ordinary course of events.”
 Consequential losses are generally irrecoverable except
where the second rule in Hadley is met (re: foreseeability).
 CISG Article 74 expands the test of foreseeability relative to
the UCC and the common law.
 Bottom line: Under the CISG, it’s the foreseeability of the
breaching party that is of legal significance.
 2. Areas of Controversy:
 a. Foreseeability
 CISG’s Foreseeability Test:
 Is subjective and objective.
 Liability is based on what a party foresaw, AND liability is
based on what a party “ought to have foreseen.”
 Note: the test should not be based on the reasonable
person, but rather on the reasonable foreseeability of the
non-performing party.
 “[T]he loss which the party in breach … ought to have
foreseen.”
 2. Areas of Controversy:
 b. Attorneys’ Fees
 The American Rule: Attorneys’ Fees Not Recoverable.
 But CISG Article 74 Protects a Party’s Expectation Interests:
Enshrines the Principle of Full Compensation.
 In Zapata Hermanos Sucesores, S.A. v. Hearthside Baking
Co. (2001) the U.S. Federal District Court Awards Successful
Party its Attorney’s Fees. But Ruling is Overturned as a
Procedural Matter Governed by the Lex Fori.
 Some CISG Commentators Continue for an Expansion of
Article 74 to Cover Attorneys’ Fees.
 2. Areas of Controversy:
 c. Interest
 Article 78: “If a party fails to pay the price or any other sum
that is an arrears, the other party is entitled to interest on it,
without prejudice to any claim for damages recoverable
under article 74.”
 How do we Calculate the Interest Rate? Via Procedural or
Substantive Law?
 In Delchi Carrier, SpA v. Rotorex Corp. (1994) interest
awarded based on US Treasury Bills.
 Additional Notes on Damages under the CISG:
 Articles 75 and 76 provide additional damages in the event of
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contract avoidance.
To calculate damages, the party must choose between Article
75 (substitute transaction; “concrete” calculation) and Article
76 (current price; “abstract” calculation).
Articles 75 and 76 do not prevent a party from claiming
damages under Article 74 even if the contract is avoided.
Advantage of arts. 75 and 76 is that the foreseeability
requirement under Art. 74 does not apply.
CISG negates the recovery of punitive damages.
The End.
Thank you!