VI – Sales 货物买卖
CISG
(United Nation’s Convention On
Contracts For the International Sale
Of Goods)
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Web site:
http://www.uncitral.org/
 http://cisgw3.law.pace.edu/
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• A. United Nation’s Convention On Contracts For the
International Sale Of Goods (CISG)（联合国国际货物销
售合同公约）
• B. Transactions Covered In CISG （公约调整的交易）
• C. Contractual Issues Excluded From the Coverage
Of the Convention （公约排除适用的合同问题）
• D. Interpreting the Convention（公约的解释）
• E. Interpreting the Sales Contract（买卖合同的解释）
• F. Formation of the Contract （合同的订立）
• G. General Standards For Performance （履行标准）
• H. Seller’s Obligations （卖方义务）
• I. Buyer’s Obligations （买方义务）
• J. The Passing of Risk （风险转移）
• K. Remedies （救济）
• L. Excuses For Nonperformance （免责）
A. CISG

United Nations Convention on Contracts for the
International Sale of Goods
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In effect since January 1, 1988
Current state parties: 65, including
Canada
Mexico
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China
Russia
France
United States
Germany
return
B.
Transactions Covered In CISG
1. CISG Applies to Contracts for the
International Sale of Goods
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a. The sale must be international.
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1)The buyer and seller must
have their places of business in
different states.
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2) Additionally, either:

•
a) Both of the states must be
contracting parties to the convention, or
•
b) The rules of private international
law must lead to the application of the law of
a Contracting State.
•
1] Note: CISG may apply even if
the buyer’s and seller’s places of business
are not in a contracting state.
•
2] Exception: The final provisions
of the Convention allow a ratifying state, if it
wishes, to declare that it will apply the CISG
only when the buyer and seller are both
from contracting states.
• 2. Opting In and Out
• a. The parties to a contract may exclude or
modify the CISG’s application by a “choice
of law” clause.
• b. Whether parties can exclude a domestic
law and adopt the CISG in its place depends
on the rules of the state where the case is
heard.
• Case 10-1. Asante Technologies, Inc. v.
PMC-Sierra, Inc.
• Case 10-1. ASANTE TECHONOLOGIES, INC. v.
PMC-SIERRA, INC.
• United States District Court, Northern District of
California, 2001
• FACTS: Asante, a Delaware corporation with its
headquarters in California, ordered component
parts for the switchers it manufactures from PMCSierra, a Delaware corporation with its
headquarters in British Columbia. Four of the five
orders were placed through Unique Tech., one of
PMC-Sierra’s authorized distributors in California,
but the fifth was sent by fax directly to PMC-Sierra
in BC. Asante sued PMC-Sierra in a California
court. PMC-Sierra had the suit removed to a US
federal court. Asante now challenges the removal.
• Note: Both the US and Canada are parties to the
CISG.
• ISSUES:
• (1) Does federal jurisdiction attach to
claims governed by CISG?
• (2) Were the parties from two different
CISG states?
• (3) Did the parties’ choice of law clause
exclude the CISG?
• (4) Does the well-pleaded complaint rule
prevent the assumption of federal
jurisdiction?
• HOLDINGS:
• (1) Yes. (2) Yes. (3) No. (4) No.
• LAW: (1) 28 USC §1331(a) gives US district
courts jurisdiction over claims that arise
under “treaties of the US.” (2) CISG applies
when the parties are from two different CISG
states. A distributor is ordinarily not an
agent. (3) CISG is the law of both California
and BC (because of federal supremacy
rules). (4) The well-pleaded complaint rule
says that a federal cause of action arises
only when the plaintiff’s well-pleaded
complaint raises issues of federal law. The
introductory text of CISG says that it is
meant to establish uniform rules to promote
international trade.
• EXPLANATION: (1) CISG is a US treaty and
therefore US district courts may hear complaints
that arise under it. (2) Unique Tech. is a distributor
and Asante is not bound by its actions. The
transaction was thus between Asante and PMCSierra, both from different CISG contracting states,
so the CISG applies. (3) The parties’ choice of law
clause adopted “California law.” California law,
however, includes the CISG; so the CISG is not
excluded. (4) While Asante’s complaint only refers
to California law, the CISG is actually that law.
This is because the CISG is a federal treaty that is
meant to preempt all state laws. This can be seen
from the CISG statement that it is meant to
establish uniform international trade rules. To
hold otherwise would defeat this purpose.
• ORDER: Asante’s motion to remand the case to
• 3. Sale Defined
• a. CISG does not directly define a
sale.
• b. Implied definition: The delivery of
the goods and their supporting
documentation by the seller and the
payment of their price by the buyer.
•
[ the US UCC’s definition: the
passing of title from the seller to the
buyer for a price. ]
• 4. Goods Defined
• a.CISG does not directly define goods.
•
1) The drafters assumed that the CISG
only applies to goods that are movable and
tangible. [This is in accord with international
usage.]
• b.
CISG list the sales and goods that
are excluded from its coverage.
•
1) Sales transactions that are excluded:
•
a) Goods bought for personal, family
or household use.
•
1]
This exclusion does not apply
unless the seller knew or ought to have
known that the goods were bought for
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b) Auction sales.
c) Sales on execution or otherwise by
authority of law.
2)
Goods that are excluded:
a) Stocks, shares, investment securities,
negotiable instruments or money.
b) Ships, vessels, hovercraft or aircraft.
c) Electricity.
Why be excluded?
• 5. Mixed Sales
• a. Mixed sales and services contracts are treated
by the CISG as sales of goods, unless “the
preponderant part of the obligations” of the seller
“consists in the supply of labor or other services.”
•
1) Preponderant probably means more than half.
•
2) Whether this is measured by the cost, the
sale price, or by some other basis is not clear.
•
• b. Contracts for goods to be manufactured are
sales unless the buyer undertakes to supply a
substantial part of the materials.
•
1) Substantial is probably less than half.
•
return
C. Contractual Issues Excluded From The
Coverage Of The Convention
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1. The CISG Only Deals With:
a. The formation of contracts.
b. The remedies available to the buyer and
seller.
2. The CISG Specifically Excludes
Questions About:
a. The legality of the contract.
b. The competency of the parties.
c. The rights of third parties.
d. Liability for death or personal injury.
• 3. Preemption: When the CISG applies,
domestic law is preempted.
• a.Reason: the CISG’s basic function is to
establish uniform rules for international
sales contracts.
• b.
Scope of the CISG.
•
1) CISG applies to contractual issues.
•
a) CISG preempts the local law even if
the local law gives a different name to a
particular remedy.
•
b) CISG preempts the local law even if
the local law adds additional elements to a
matter that is contractual in nature.
•
D.
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Interpreting the Convention
1. Interpreting the Provisions of the CISG
a. Apply the following basic principle: The
goal of the CISG is the creation of a uniform
body of international commercial sales law.
b. Consider the following sources, in the
following order:
1) The Convention.
2) The general principles on which the
Convention is based.
3) The rules of private international law.
• 2. Interpreting the CISG
• a. To interpret the words of the CISG itself,
consider:
•
1) The international character of the Convention.
•
2) The need to promote uniformity in the
Convention’s application.
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3) The obligation to observe good faith.
• b. Rules of interpretation.
•
1) “Plain meaning”: Look at the words of
Convention itself.
•
2) Travaux preparatoires: Look to the CISG’s
legislative history to determine its intent.
•
3) Precedent: Use case law to interpret the CISG.
• 3. General Principles
• a.The CISG calls for courts to look to the
general principles on which the Convention
is based when interpreting its provisions.
•
1) The CISG gives no list of general
principles.
•
a) Suggested principles (that appear, in
varying forms, throughout the convention):
•
1] Each party must communicate
information needed by the other party.
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2] Parties have the obligation to
mitigate damages resulting from a breach.
•
2) The CISG requires that general
principles be derived only from rules given
• 4. Rules of Private International Law
• a.
Rules of private international law may be
used only when:
•
1) The Convention itself does not directly settle
a matter.
•
2) The matter cannot be resolved by the
application of a general principle derived from the
Convention itself.
• b. Private international law rules vary from
country to country.
•
1) Some states have enacted private
international law codes.
•
2) Some states rely on case law.
• c. The reason for allowing courts to turn to the
rules of private international law: the Convention
avoids the possibility that courts will adopt
E.
Interpreting the Sales Contract

1. Statements and Conduct of the Parties
a. Varying approaches in domestic law.
1) The subjective approach: Look at what
was in the minds of the contracting parties
at the time they made their contract.
a) Rule in many civil law countries.
2) The objective approach: Look only at
the circumstances as they would seem to
an impartial bystander.
a) Rule in the common law countries.
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b.
The CISG’s approach:
1) Use the subjective intent of a speaker.
a) Only do so if “the other party knew or
could not have been unaware” of the
speaker’s intent.
•
2) When a speaker’s intent is not clear
look at “objective” intent.
•
a) The party’s statements and other
conduct “are to be interpreted according to
the understanding that a reasonable person
of the same kind as the other party would
have had in the same circumstances.”
• 2. Negotiations
• a.CISG Art. 8(3) directs courts interpreting
contracts to give “due consideration … to
all relevant circumstances,” including:
•
1) The negotiations leading up to the
contract.
•
2) The practices the parties have
established between themselves.
•
3) The parties’ conduct after they agree to
the contract.
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•
b.
Purpose of Art. 8(3): to do away with
the technical rules that domestic courts
sometimes use to interpret contracts.
1) Example: the common law’s parol
evidence rule.
2) Caveat: The CISG allows parties to
“derogate from or vary the effect of” any of
the provisions of the Convention.
a) If the parties include a contract term
(often called an “integration clause”)
directing a court to ignore all prior or
contemporaneous agreements, the court
will have to give effect to that term.
Case 10-2. MCC Marble Ceramic v.
• Case 10-2. MCC-MARBLE CERAMIC, INC. v.
CERAMICA NUOVA D’AGOSTINO SpA
• United States Eleventh Circuit Court of Appeals,
1998
• FACTS: MCC’s president (who did not speak
Italian) signed a pre-printed contract form in Italian
in Italy with Ceramica for the purchase of tiles.
The contract specified price, quality, quantity,
delivery, and payment. On its reverse side it
specified the procedure to follow if the tiles
delivered by Ceramica were non-conforming.
Under the signature line on the front was a
statement in Italian that said that the buyer was
aware of all of the conditions of the reverse of the
form. Later, when Ceramica sent non-conforming
• payment to Ceramica (as it is entitled to do
under the UN CISG). Later yet, when
Ceramica did not satisfy several orders,
MCC sued for breach of contract. Ceramica
responded that it was under no obligation to
deliver the order because MCC had not fully
paid for previous shipments and had not
followed the procedure for complaining of
non-conforming shipments. MCC sought to
introduce evidence to show that the terms
on the reverse of printed contract form were
not intended to be part of the contract. The
trial court rejected MCC’s offered evidence
and relied solely on the terms of the
contract. It granted Ceramica’s motion for
• ISSUES:
• (1) Must the subjective intent of the parties
be considered in determining the term of a
CISG contract?
• (2) Does the parol evidence rule apply to
CISG contracts?
• HOLDINGS: (1) Yes. (2) No.
• LAW: (1) CISG Art. 8(1) requires courts to
consider “a party’s subjective intent as long
as the other party to the contract was aware
of that intent.” (2) CISG Art. 8(3) directs
courts to give “due consideration to …
negotiations.”
• EXPLANATION: (1) MCC’s offered evidence
attempted to show that the seller did not
intend to be bound by the terms on the
reverse of the form and that the buyer knew
of this. This is exactly the evidence that Art.
8(1) requires a court to consider. (2) Art. 8(3)
is a clear rejection of the US parol evidence
rule.
• ORDER: Summary judgment is reversed and
the case is remanded.
• 3. Practices and Usages
• a. CISG states that parties are bound by
“any practices which they have established
between themselves” including:
•
1) Usages the parties agree to.
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2) Usages the parties knew or ought to
have known and which, in international
trade, are widely known to, and regularly
observed by, parties of contracts of the type
involved in the particular trade concerned.
• 4. Form
• a.Most delegates at the CISG Convention
felt that a writing requirement is
inconsistent with modern commercial
practice.
•
1) The Soviet delegates insisted that a
writing requirement is important for
protecting their country’s longtime pattern
of making foreign trade contracts.
• b.
The CISG compromise.
•
1) Art.11: No writing is required.
•
2)Art.96: Unless the contracting state of
one of the parties to a contract made a
declaration at the time of ratification
F.

Formation Of the Contract
1. A Contract is Formed when an offer
to buy or sell a good is accepted
• 2. The Offer
• a. Defined: A proposal addressed to
specific persons indicating an intention by
the offeror to be bound to the sale or
purchase of particular goods for a price.
•
1) For a communication to be an offer:
•
a) The offeror must communicate an
intention to be bound.
•
b) The proposal must be definite.
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1]A proposal is sufficiently definite if
it:
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a] Describes the goods, and
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b] States or provides a means for
determining the quantity.
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2] A proposal should also state or
provide a means for determining the price.
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a] Otherwise the price will be: The
price generally charged at the time of the
contract for like goods sold under
comparable circumstances in the trade
concerned.
•
c) The proposal must be addressed to
one or more specific persons.
•
1] Proposals made to the public are
invitations to negotiate, unless the contrary
is clearly indicated.
• b. Effectiveness of an Offer.
• 1) An offer becomes effective only after it reaches
the offeree.
•
a) Offers may be withdrawn any time before they
reach the offeree.
•
1] Offers that promise that they are irrevocable
can be withdrawn prior to their reaching the
offeree.
• 2) Revocation.
•
a) Offers that do not state that they are
irrevocable.
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1] Can be revoked anytime before the offeree
dispatches an acceptance. a] Similar to the
English common law’s “post box” rule.
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1] The CISG rule: An offeror’s promise to
keep an offer open for a fixed period is
enforceable.
a] Requirements:
(1)
The offeror must expressly
state the offer is irrevocable, or
(2)
The offeror’s conduct must
imply that the offer is firm.
b] The promise of irrevocability:
(1)
Does not have to be signed.
(2)
Does not have to be in writing.
c] There is no time limitation.
• 3. The Acceptance
•
a. A contract comes into existence at the
point in time when an offer is accepted.
•
b. Acceptance is a statement or conduct
by the offeree indicating assent that is
communicated to the offeror.
•
1) The form or mode in which an offeree
must express assent: Any form or mode is
allowed.
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2) The offeree must communicate his
assent to the offeror.
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c.Silence.
1) Generally, silence or inactivity does not,
in and of itself, constitute acceptance.
2) Exception: Where a party voluntarily
assumes the duty to respond, silence will
constitute acceptance.
d.
Time of Acceptance: Acceptance
must be received by the offeror within the
time period specified in the offer.
1) If no time period is given: Acceptance
must be received within a “reasonable” time.
a) If the offer is oral, acceptance must be
made immediately unless the circumstances
indicate otherwise.
• Case 10-3. UNITED TECHNOLOGIES
INTERNATIONAL, INC. v. MAGYAR LÉGI
KÖZLEKEDÉSI VÁLLALAT
• Hungary, Metropolitan Court of Budapest, 1992
• FACTS: Pratt and Whitney (P&W) offered to sell
Málev Hungarian Airlines (MHA) either two or three
PW4000 series engines for installation in a Boeing
aircraft or two or three PW4100 series engines for
installation in an Airbus aircraft. The offer stated
different prices for the different series engines. It
also said that it was subject to Hungarian and US
government approval. One week later, MHA sent a
letter accepting the offer for the PW4000 series
engines. When MHA reneged on going forward
with the purchase, P&W sued to obtain a
• ISSUES: (1) Was there an offer? (2) Was there an
acceptance? (3) Was the requirement of
governmental approval meant to be a condition
precedent or condition subsequent?
• HOLDINGS: (1) Yes. (2) Yes. (3) No.
• LAW: CISG Art. 14(1) provides that “a proposal
addressed to one or more specific persons
constitutes an offer if it is sufficiently definite and
indicates the intention of the offeror to be bound
in case of acceptance.” And “a proposal is
sufficiently definite if it indicates the goods and
expressly or implicitly fixes or makes provisions
for determining the quantity and the price.” Art.
18(1) defines an acceptance as “a statement …
indicating assent to an offer.” Art. 32: “a contract
• EXPLANATION: (1) The offer described the
goods, and the fact the buyer had the right
to choose between the listed engines does
not affect the description of the engines.
The offer stated a quantity, even though the
buyer could choose between two or three
engines. The offer stated a price and the
offer stated a time for delivery. Thus, there
was a valid offer. (2) MHA’s letter
unambiguously stated its acceptance. A
contract was therefore concluded at the
time of acceptance. (3) The offeror did not
mean for the proposed government
approval to function as either a condition
precedent or subsequent, but as only the
•
e.Responsibility for Delays in
Communicating Acceptance.
•
1) CISG uses the “receipt rule”: The
offeree is responsible for insuring that the
acceptance gets to the offeror.
•
a) Reason for using this rule: Because
it is the offeree who chooses the medium
through which to send a response, it is the
offeree who is better able to avoid the risk of
loss or delay.
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f. Assent by Performance of an Act: If the
offeror asks for performance of an act rather
than the indication of acceptance, the
acceptance is effective at the moment the
act is performed.
1) Caveat: An act does not constitute
acceptance if the offeree is required to
notify the offeror first.
a) The notification requirement may be:
1]
In the offer.
2]
A trade usage.
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g.
Withdrawal: An offeree may
withdraw his acceptance any time before or
simultaneous with its receipt.
h.
Rejection.
1) A rejection becomes effective when it
reaches the offeror.
•
a) If an offeree dispatches both a
rejection and an acceptance at the same
time, the one which reaches the offeror first
will be the one given effect.
• 4. Acceptance with Modifications
• a.
A would-be acceptance that contains
material differences from the offer is a counteroffer.
•
1)Terms relating to the following constitute
material differences:
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a) Price.
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b) Payment.
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c) Quality of the goods.
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d) Place or time of delivery.
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e) The extent of one party’s liability to the
other.
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f) The manner of settling disputes.
• b.
Additions that are not material are
proposals for addition that will become part of the
• Case 10-4. FILANTO, SPA v. CHILEWICH
INTERNATIONAL CORP.
• United States District Court, Southern District of
New York, 1992.
• FACTS: Chilewich (a US export-import firm) had a
contract to deliver footwear to Russia. This
contract contained an arbitration provision that
called for all disputes to be arbitrated in Moscow.
Chilewich then engaged Filanto (an Italian
corporation) to supply it with footwear that
Chilewich had contracted to deliver to Russia.
Chilewich’s correspondence to Filanto said that
the arbitration provision in the Russian contract
was to be part of their contract as well. Filanto
supposedly sent Chilewich a counteroffer
• Chilewich meanwhile proceeded to obtain a
letter of credit benefiting Filanto and
proceeded as if there was a contract.
Filanto, however, signed a contract on
August 7 that contained this provision,
although it said in its cover letter that it was
not bound by the provision. When a dispute
arose and Filanto sued in a US court,
Chilewich invoked the arbitration provision
and asked the court to dismiss Filanto’s suit.
• ISSUE: (1) Was the August 7 reply a
counteroffer? (2) If it was, was there a
contract anyway based on unobjected-to
• LAW: A reply that purports to be an acceptance
but contains material (such as the rejection of an
arbitration provision) additions, limitations, or
modifications are a rejection of the offer and a
counteroffer. If the offeree knows that the offeror
has begun performance and fails to notify the
offeror within a reasonable time that it objects to
the terms of the contract, it will be deemed to have
assented to those terms.
• EXPLANATION: (1) The objections to the
arbitration provision in the August 7 cover letter
were a material modification amounting to a
rejection of the offer. (2) Because Chilewich went
ahead with the contract (getting the letter of credit)
and Filanto did not timely object, Filanto accepted
the terms of the Chilewich’s proposed contract.
• ORDER: Case dismissed; the matter must be
G. General Standards For Performance
1. Fundamental Breach
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a. Defined: When one party
substantially fails to deliver what the
other reasonably anticipated receiving.
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• 2. Avoidance
•
a. Defined: The right to be excused from
having to perform any obligation required
by the contract.
•
1) Requirements:
•
a)
The other party must have
committed a fundamental breach.
•
b)
The injured party must notify
the other party.
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2) Effect of avoidance:
a)
Only the obligation to perform
is set aside.
•
b)
Avoidance does not affect any
provision in the contract concerning:
•
1] The settlement of disputes (such
as arbitration, choice of law, or choice of
forum clauses), or
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2] Any other provisions governing
the rights and duties of the parties
“consequent upon the avoidance of the
contract.”
• 3. Requests for Specific Performance
• a. An injured party may ask a court “to
require performance” if the other party fails
to carry out its obligations.
•
b. A court is not obliged to order specific
performance unless the court can do so
under its own domestic rules. return
H.
Seller’s Obligations
1. The Seller’s Basic Obligations are:
 a.To deliver the goods.
 b.
To hand over any documents
relating to the goods.
 c.To insure that the goods conform to
the contract.
 2. If the Contract Fails to Specify How
the Seller is to Perform the CISG
provides rules to fill in the gaps.
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• 3. Place for Delivery
• a. The place agreed in the contract,
otherwise:
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1) The first carrier’s place of business if
the contract involves the carriage of goods,
or
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2) The place where the parties knew the
goods were:
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a) Located, or
•
b) Were to be manufactured or
produced.
• 4. Time for Delivery
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a. The date fixed in the contract,
otherwise:
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1) Within a reasonable time after the
making of the contract.
•
b. If a time period is provided, the seller
may deliver at any time within that period,
unless the contract expressly says that the
buyer is to choose the time.
• 5. The Turning over of Documents
•
a.At the time and place for delivery, a
seller must turn over any documents
relating to the goods that the contract
• 6. Conformity of Goods
• a.A seller must deliver goods that are:
•
1) Of the quantity, quality, and description
required by the contract, and
•
2) Which are contained or packaged in the
manner required by the contract.
• b .To determine conformity:
•
1) Use rules agreed to by the parties.
•
2) Otherwise, the goods do not conform
to the contract unless they are:
•
a) Fit for the ordinary purposes of such
goods.
•
b) Fit for the particular purposes that:
•
1]
Were expressly or impliedly
made known to the seller at the time of the
conclusion of the contract, and
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2] The buyer reasonably relied upon
the seller’s skill and judgment.
•
• c) Of the same quality as a sample or
model provided by the seller.
•
• d) Contained or packaged in a same
manner that is:
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1] Usual for such goods, or
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2] Adequate to preserve and protect
the goods.
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3) Goods also do not conform if they are
subject to third party claims.
•
a) Third party claims include:
•
1]
Assertions of ownership.
•
2]
Rights in intellectual property.
•
4) Waiver: A buyer may waiver a seller’s
obligation to conform:
•
a) Expressly.
•
b) Impliedly, if the buyer knew or “could
not have been unaware” that the goods
were non-conforming.
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c.Time for Examining Goods: The buyer
must examine the goods for defects within
as short a period as is practicable after
delivery.
•
1) If the goods are shipped, the
examination may be deferred until after the
goods have arrived at their destination.
•
2) If the goods have to be redirected or
redispatched, examination may be deferred
until after the goods have arrived at their
new destination.
•
•
•
•
•
•
•
d. Notice of Defect: The buyer must notify the
seller of any defects he discovers within a
reasonable time after delivery or within a
reasonable time after discovering the defect.
1) If the buyer fails to do so he waives his right
to require performance.
2) The seller will not be responsible for a defect
that arises more than two years after delivery,
unless:
a) He knew or ought to have known of a nonconformity and did not disclose it to the buyer, or
b) The contract establishes a longer period of
guarantee.
3) What constitutes notice is not described in
the CISG.
a) It probably must be sufficient to inform the
•
e.Curing Defects: A seller who delivers
goods early may correct or “cure” any
defect up to the agreed date for delivery.
•
1) The cure may not cause the buyer any
unreasonable inconvenience or expense.
•
2) Even if the seller does make a cure,
the buyer retains the right to claim any
damages that are provided for in the CISG.
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I. Buyer’s Obligations
1. Paying the Price
 a.The buyer must:

1) Take whatever preliminary steps
are necessary under the contract or
any laws or regulations to enable
payment to be made.

•
•
•
•
•
•
•
•
2) Pay the price at the time and place designated
in the contract.
a) If no time is specified, the buyer is to pay
when the goods or the documents controlling their
disposition are delivered.
1] The buyer must pay even if the seller makes
no formal request.
2] The buyer may delay payment until he has
had time to examine the goods.
b) If no place for payment is specified, the buyer
is to pay at:
1] The agreed place for the delivery of either
the goods or their controlling documents, or
2] The seller’s place of business.
Case 10-5.
The Natural Gas Case
• Case 10-5. THE NATURAL GAS CASE
• Austria, Supreme Court, 1996
• FACTS: Buyer agreed to buy natural gas for
itself and a third party. Seller agreed to ship
gas from the US. Buyer agreed to obtain a
letter of credit, but told seller that its bank
needed to know the place of loading in order
to issue the letter. Seller agreed to provide
the place of loading, but never did so. Later,
the seller told buyer that its US supplier
would not agree to export the gas to buyer
in Belgium. The third party bought gas from
another source for an additional $141,131.
• sued seller to recover the $141,131 for the
third party plus $15,000 in loss profits for
itself. Seller asserted: that it was not liable
because the buyer had never obtained the
letter of credit; if it was liable, that the buyer
had avoided the contract and the damages
should be calculated accordingly, that the
buyer was not entitled to loss profits and
that the buyer/third party failed to mitigate
the damages.
• ISSUES: (1) Had the buyer breached by not
obtaining the letter of credit? (2) Had the
seller breached? (3) Was the contract
avoided? (4) Was the buyer entitled to lost
profits? (5) Had the buyer failed to mitigate?
• HOLDINGS: (1) No. (2) Yes. (3) No. (4) Yes.
(5) No.
• LAW: (1) A defendant cannot complain that a
plaintiff failed to fulfill its obligations when
the defendant’s own failure to act caused
the plaintiff’s inaction. CISG Art. 41 says
that a seller must deliver goods free from
any right or claim of third parties. (2) A nonbreaching party’s intention to avoid must be
clear to the breaching party for there to be
an avoidance. (3) A plaintiff is entitled to
loss of profits only if the defendant was
aware of an intended resale. (4) The
defendant has the burden of proving that
the plaintiff failed to mitigate.
• EXPLANATION:
• (1) The buyer did not breach, because the failure
to provide a letter of credit was caused by the
seller’s failure to provide the place of loading.
• (2) The seller breached by failing to obtain
clearance for the export of the gas and failing to
deliver the gas.
• (3) The buyer never notified the seller that it was
avoiding the contract. Notification of the amount
of losses incurred is not a notification of
avoidance.
• (4) When merchantable goods are sold to a
merchant, resale is presumed. Indeed, seller knew
that this was the case. Lost profits, therefore, are
an appropriate measure of damages.
• (5) The seller failed to show how the buyer could
• 2. Taking Delivery
• a.The buyer must:
•
1) Cooperate with the seller to facilitate
the transfer, and
•
2) Actually “take over the goods.”
• b.
A buyer who fails to cooperate will
be responsible for any resulting costs.
• c.A buyer who fails to take delivery
assumes the risk for any damage to the
goods after that time. return
J.





The Passing Of Risk
1. Defined: The shifting of responsibility for
loss or damage from the seller to the buyer
a. Once the risk passes:
1) The buyer must pay the agreed-upon
price for the goods involved.
a) Only if the buyer can show that loss
or damage was due to an act or omission of
the seller is he excused from paying the
price.
2) The buyer must absorb the cost of any
loss, or lodge a claim against his insurer.
•
b.
CISG allocates risk by considering
the agreement of the parties and the means
of delivery.
• 2. Agreement of the Parties
• a.The parties may agree to allocate risk
among themselves and to specify when the
risk will pass between them.
•
1) Commonly this is done through the use
of trade terms.
• 3. Means of Delivery
• a. Goods Transported by Carrier.
•
1) Prerequisite for risk to pass: The goods
must be clearly identified to the contract.
•
2) Kinds of contracts:
•
•
a) Shipment contracts:
1] Defined: The seller is to deliver the
goods to a carrier for shipment and does
not require them to be delivered to a
particular place.
•
2] Risk passes when the goods are
handed over to the first carrier.
•
• b) Transshipment contracts:
•
1] Defined: The seller is to deliver the
goods to a carrier for shipment at a named
place.
•
•
c) In transit contracts:
1] Defined: Contracts made after the
goods are already aboard a carrier.
•
2] Risk passes at the time the contract is
made.
•
a] Exception: If the seller knew or
ought to have known that the goods had
been lost or damaged, and he did not
disclose this to the buyer, the risk does not
pass to the buyer.
•
•
d) Destination contracts:
1] Defined: The seller is to arrange
transportation to a named place of
destination.
•
2] Risk passes when the goods are
handed over or otherwise placed at the
buyer’s disposal at the place of destination.
• b. Goods Delivered Without Being
Transported.
• 1) Defined: the goods are not shipped
but are handed over directly to the buyer.
• 2) Risk passes when the goods are
handed over or otherwise placed at the
buyer’s disposal. return
K.
Remedies
1. Buyer’s Remedies
a. The buyer’s remedies are cumulative.
1) “Cumulative” means that the right to
recover damages is not lost if a buyer
exercises any other available remedy.
 b. The buyer’s remedies are immediate.

1)“Immediate” means that a court or
arbitral tribunal may not grant the seller
grace period (délai de grâce) in which to
comply with a buyer’s demand for a remedy.

a) This is contrary to the practice in
some civil law countries.



•
•
•
•
•
•
•
•
•
•
c. Remedies unique to the buyer.
1) Specific performance.
a) Specific performance is available only in
states where the local law provides for such a
remedy.
b) If it is available, the buyer may ask that the
seller either:
1] Deliver substitute goods, or
2] Make repairs.
c) Prerequisites:
1] Buyer cannot have avoided the contract
or resorted to some other inconsistent remedy.
2] Buyer must first notify the seller that the
goods are non-conforming.
3] If the buyer asks for substitute goods, the
•
•
2)
Avoidance.
a) The CISG’s provisions for avoidance by
a buyer are patterned after German law,
especially in the Convention’s adoption of
the German Nachfrist notice.
•
b) A buyer may avoid a contract if either:
•
1] The seller commits a fundamental
breach, or
•
2] The buyer gives the seller a Nachfrist
notice and the seller rejects it or does not
perform within the period it specifies.
•
•
•
•
•
a] A buyer’s Nachfrist notice is the fixing of an
additional period of time of reasonable length for
performance by the seller of his obligations.
(1) The period must be definite and the
obligation to perform within that period must be
clear.
(2) During the Nachfrist period the seller is
entitled to correct (i.e., “cure”) the non-conformity
at his own expense.
(a)
A cure may not be made if the
breach is fundamental and the buyer chooses to
avoid the contract.
3] Once the Nachfrist period has run, or once
the fundamental breach becomes clear, the buyer
has a reasonable time in which to avoid the
• Case 10-6. THE SHOE SELLER’S CASE
• Germany, Court of Appeals, Frankfurt am
Main, 1994
• FACTS: The plaintiff delivered shoes to the
defendant. Delivery was late and the shoes
did not completely conform to the sample
the plaintiff-seller had originally shown to
the defendant-buyer. When the defendantbuyer refused to pay on two invoices, the
plaintiff-seller brought suit. On appeal, the
defendant argued that she was entitled to
invoke the remedy of avoidance because of
the plaintiff’s late delivery and the
• ISSUE: Is the remedy of avoidance available
to the defendant?
• HOLDING: No.
• LAW: (1) Avoidance is only allowed after a
buyer gives the seller a Nachfrist notice and
defines an additional fixed period in which
the seller is to make delivery. (2) There is no
nonconformity in cases where a buyer is
able to use some of the goods.
• EXPLANATION: The buyer did not give the
seller a Nachfrist notice. The buyer also
was able to use some of the goods delivered.
• ORDER: Decision in favor of the plaintiff is
affirmed.
• 3) Reduction in Price.
• a)
Prerequisites:
•
1] The seller must have delivered nonconforming goods.
•
a] The buyer must have accepted them.
•
b] The seller must not be responsible for
the non-conformity.
•
2] The buyer must not be entitled to
damages.
•
• b) Formula for determining the price
reduction: The price is to be reduced by that
ratio of:
•
1] The value at the time of delivery of the
goods actually delivered, to
•
2] The value that conforming goods would
have had at the time of delivery.
• 4) Refusing Early Delivery.
• 5) Refusing Excess Quantity.
• Example
 Idaho potatoes sold at $3.50/bushel for
delivery in Djakarta
 Damaged in transit by act of nature
 Undamaged potatoes are worth
$4.00/bushel if purchased in Djakarta
 Damages potatoes are worth $2.80/bushel
• The price reduction ratio is:
$2.80 =
7
$4.00
10
Applying this ratio, the reduced price the
buyer pays is:
$3.50 x 7/10 = $2.45
• 2. Seller’s Remedies
• a. Seller’s remedies mirror
those of the buyer.
• b. Seller’s remedies are both
cumulative and immediate.
•
• c. Remedies unique to the seller:
•
1) Specific Performance:
•
a) The availability of this remedy
depends on the domestic rules applicable to
the court hearing the suit.
•
b) If the remedy is available, a seller may
ask the buyer to either:
•
1] Take delivery and pay the contract
price, or
•
2] Perform any other obligation
required by the contract.
•
•
•
2) Avoidance
a) A seller may only avoid a contract:
1] If there has been a fundamental
breach, or
•
2] Following a Nachfrist notice, the
buyer refuses to cure any defect in his
performance.
•
•
•
•
•
•
3) To Obtain Missing Specifications.
a) If the buyer does not produce the
measurements that the seller needs by the
date specified in the contract, or within a
reasonable time after the seller asks for
them, the CISG allows the seller to ascertain
them himself.
b) The seller must:
1] Inform the buyer of what he has
done,
2] Set a reasonable time period for the
buyer to supply different specification.
a]
If the buyer does not respond,
• 3. Remedies Available to Both Buyers and Sellers
• a. Suspension of performance.
•
1) In response to threats of nonperformance: A
party may stop performing.
•
2) In response to threats of nonperformance
after the goods have been shipped: A party may
prevent the handing over of the goods to the
buyer even though the buyer holds a document
which entitles him to obtain them.
•
a) Caveat: This relates only to the rights in the
goods as between the buyer and the seller.
•
1] Should a third person acquire legal rights
in the goods, the CISG will not apply - instead
domestic law applies.
•
•
•
•
•
•
•
•
3) Grounds for suspending performance.
a) It becomes apparent that the other party will
not perform a substantial part of his obligations as
a result of:
1] A serious deficiency in his ability to
perform.
2] A serious deficiency in his creditworthiness.
3] A deficiency in his conduct in preparing to
perform.
4] A deficiency in his conduct in performing.
4) Notice: The suspending party must give
notice.
5) Suspending party must resume his
obligations under the contract if the other party
•
•
•
•
•
b.
Avoidance in anticipation of a
fundamental breach.
1) Distinguish this remedy from those that
apply uniquely to the buyer and seller:
a) Those remedies only apply after an
offending party has committed a
fundamental breach.
b) This remedy applies as soon as “it is
clear” that the other party “will commit a
fundamental breach.”
2) Likely cases in which this remedy
could be invoked:
•
a) The specific goods promised to the
buyer are wrongfully sold to a third party.
•
b) The seller’s only employee capable of
producing the goods dies or is fired.
•
c) The seller’s manufacturing plant is
sold off.
•
3) Notice requirement: The party opting to
anticipatorily avoid must “if time allows”
notify the other party so that the latter can
“provide adequate assurance of his
performance.”
•
•
c.Avoidance of an installment contract.
1) Avoidance of a particular installment:
Allowed when there has been a breach of
that installment.
•
2) Avoidance of a subsequent installment:
Allowed when the breach of a prior
installment gives a party “good grounds” to
believe that a fundamental breach of later
installments will occur.
•
3) Avoidance of entire contract (including
past and future installments): Allowed when
the installments are interdependent.
•
d.Damages.
•
1) Foreseeable damages: The breaching
party is liable for the losses suffered by the
other party that the breaching party foresaw
or ought to have foreseen at the time of the
making of the contract.
•
a) Calculating damages: Two CISG
rules •
1] If an avoiding party has entered into
a good faith substitute transaction: The
difference between the contract price and the
price received (or paid) in the substitute
transaction.
•
2] If the avoiding party did not enter
into a substitute transaction: The difference
•
•
a] Current price is either:
(1) The price prevailing at the place
where delivery of the goods should have
been made, or
•
(2) If there is not current price at that
place, the price at such other places as
serves as a reasonable substitute.
•
b) Mitigation of damages: The party
claiming damages must take reasonable
measures to mitigate the loss.
•
1] Effect of failure to mitigate: The
breaching party may seek a proportionate
reduction in the damages.
• Case 10-7. DOWNS INVESTMENTS PTY. LTD. v.
PERWAJA STEEL SDN BHD
• Australia, Supreme Court of Queensland, 2000
• FACTS: Wanless, an Australian company, agreed
to sell 30,000 tons of scrap metal to Perwaja, a
Malaysia company. Their contract called for
Perwaja to obtain a letter of credit (L/C) as soon as
Wanless chartered a ship to transport the scrap. It
also provided that the Brisbane, Queensland law
would govern their relationship. Perwaja did not
do so and Wanless treated the contract as
breached. It arranged to sell the scrap to other
buyers at a much lower price and it had to subcharter the ship it had chartered, losing money on
this. Wanless sued to recover damages.
•
•
•
•
•
•
ISSUES: (1) What law governs?
(2) Was there a fundamental breach?
(3) Was Wanless entitled to end the contract?
(4) Could Wanless have performed?
(5) Was Wanless entitled to damages?
(6) Had Wanless acted properly to mitigate
damages?
• HOLDINGS: (1) CISG. (2) Yes. (3) Yes. (4)
Yes. (5) Yes. (6) Yes.
• LAW: (1) Queensland has adopted the CISG as the
law governing the international sales of goods.
• (2) A fundamental breach is one that results in a
detriment that substantially deprives a party of
what he was entitled to expect under the contract
unless the breach party could not have reasonably
foreseen that result.
• (3) The non-breaching party may terminate a
contract if the breach is fundamental.
• (4) A non-breaching party must be ready, willing,
and able to perform in order to sue for breach.
• (5) A non-breaching party that suffers loss may
recover damages.
• (6) Damages are sum loss including loss of
profits. The non-breaching party must attempt to
mitigate the damages.
• EXPLANATION: (1) CISG governs.
• (2) The failure to deliver the L/C was a
fundamental breach. It was an essential element
of the contract necessary to protect Wanless from
any effort by Perwaja to renegotiate the terms after
Wanless had chartered the ship.
• (3) Wanless could terminate as the breach was
fundamental. (4) Wanless had been ready, willing,
and able to deliver the scrap as it had already
chartered and loaded the ship.
• (5) Wanless is entitled to damages.
• (6) Wanless had tried to mitigate damages in that it
promptly sub-chartered the ship. It is entitled to
loss profits on the substitute sales plus the loss it
suffered from sub-chartering the ship.
• ORDER: Wanless entitled to U.S. $1,280,347.80.
L.







Excuses For Nonperformance
1. Force Majeure
a. A party is not liable for damages resulting from
his failure to perform if he can show that:
1) His failure was due to an impediment beyond
his control.
2) The impediment was not something he could
have reasonably taken into account at the time of
contracting, and
3) He remains unable to overcome the impediment
or its consequences.
b. Rationale for rule: Neither party is really at fault.
c. Typical situations: Natural disasters, war,
embargoes, strikes, breakdowns, and the
bankruptcy of a supplier.
•
•
•
•
•
•
d. Limitations.
1) Scope: Force majeure only excuses the
breaching party from paying damages.
a) Nonbreaching party may obtain any other
appropriate remedy (e.g. suspension of
performance or avoidance).
2) Notice: Breaching party must promptly notify
the other party of the impediment and its effect on
his ability to perform.
3) Basis: If a breaching party’s claim is based on
the failure of a third person to perform (such as a
supplier), the third person must himself be able to
claim the excuse of force majeure.
4) Duration: Force majeure may only be used as
long as the underlying impediment continues in
existence.
• Case 10-8. NUOVA FUCINATI, SpA v.
FONDMETALL INTERNATIONAL AB
• Italy, Civil Court of Monza, 1993.
• FACTS: A seller, in Italy, contracted in Sweden to
deliver 1,000 tons of ore to a buyer, in Sweden.
The seller’s costs increased by 43%, so the seller
sought to use the excuse of “commercial
impracticability” to avoid the contract. The buyer
defended by arguing that the contract was
governed by the CISG and the excuse of
commercial impracticability is not available under
the CSIG.
• ISSUES: (1) Does the CISG provide for the excuse
of commercial impracticability? (2) Does the CISG
apply to this case? (3) Is the seller excused
• HOLDINGS: (1) No. (2) No. (3) No.
• LAW: (1) CISG provides for the excuse of
impossibility of performance (in Art. 79) but
does not provide for the excuse of
commercial impracticability.
• (2) The CISG applies if the parties are from
states that are both signatories of the
convention, or if the rules of private
international law lead to its application.
• (3) The Italian code provides for the excuse
of commercial impracticability. This
requires the seller to show that performance
is so economically burdensome that the
seller does not have the resources to
perform.
• EXPLANATION: (1) CISG does not provide for the
excuse of commercial impracticability.
• (2) The CISG does not apply because (a) Sweden
was not a party to the CISG when the contract was
signed and (b) because Italy’s rules of private
international law direct the court to use Swedish
law (as the contract was signed in Sweden), and
Swedish law at the time did not recognize the
CISG.
• (3) An increase of 43% in costs to the seller is not
so burdensome that the seller cannot perform.
• ORDER: The seller’s case was dismissed.
• 2. Dirty Hands: One 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. return