Remedies under CISG

1. Avoidance- due to fundamental breach (Under Article 25 of CISG) committed by one of the parties.

2. Specific Performance of the Contract:

Article 62, CISG- the seller may demand the breaching buyer to ‘pay the price, take delivery or perform his
other obligations’ under the convention as long as seller has not chosen an alternative inconsistent method
(alternative method such as initiation of a litigation against the buyer).

Article 46 of the CISG which allows that a "buyer may require performance of the seller of his obligations
unless the buyer has resorted to a remedy which is inconsistent with this requirement".

Who may pursue the remedy? If it is the option of the buyer to require specific performance on the part of
the seller, he can do so without resorting to a court for remedy.

Article 28 of the CISG contains a substantial limitation on the ability of a party to obtain specific performance
in certain circumstances. It states:

"If, in accordance with this Convention, one party is entitled to require performance of any obligation
by the other party, a court is not bound to enter a judgment for specific performance unless the court would
do so under its own law in respect of similar contracts of sale not governed by this Convention."

Suppose the buyer is at default, the seller may require him to perform his part of obligation under Article 62,
thereby if this matter is litigated in a court, may or may not include the remedy of specific performance as
per CISG unless the domestic law, applicable to the court would require the courts to do so for a contract
governed by such law.

Eg. Contract between A(Seller) and B (Buyer), whereby B is at default and A required specific performance of
the contract by B. The matter is with English Court (Court in England). The question is whether the Court can
grant relief of specific performance or not? If the court can do so in an ordinary domestic contract, governed
by domestic law of England, i.e. Sale of Goods Act (applicable in England) then the Courts can grant a similar
remedy under a contract governed by CISG also.

Article 28 of CISG, allows a country's court to determine whether it would grant specific performance based
on the parameters of its own domestic law.

The CISG also contains a provision in favour of the seller under Article 62 of CISG to require the buyer to "pay
the price, take delivery or perform his other obligations".

Article 62 is a remedy for sellers who have a special interest in performance by the buyer, particularly
in performance of the obligation to take delivery of the goods. The right to require performance under
article 62 is subject to two kinds of limitations. One such limitation is expressed in article 62 itself: a
 seller is deprived of the right if he has resorted to a remedy that is inconsistent with requiring
performance, such as where the seller has declared the contract avoided (article 64) or fixed an
additional period of time for performance (article 63). The second limitation derives from article 28 of the
Convention, under which a court is not bound to order specific performance on behalf of a seller,
even if that would otherwise be required under article 62, if the court would not do so under its
domestic law in respect of similar contracts not governed by the Convention.

Article 46(1) provides that the buyer may require performance by the seller of his obligations unless the
buyer has resorted to a remedy which is inconsistent with this requirement. It further provides under Article
46(2) that if the goods do not conform with the contract, the buyer may require delivery of substitute goods
only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods
is made either in conjunction with notice given under article 39 or within a reasonable time thereafter.
Article 46(3) provides that, if the goods do not conform with the contract, the buyer may require the seller to
remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A
request for repair must be made either in conjunction with notice given under article 39 or within a
reasonable time thereafter.

Eg. Situation 1- contract between A(seller) and B(buyer), for supply of furniture for nursery school, the seller
supplied home furniture, amounting to fundamental breach, then the buyer may require the seller under
Article 46(2) to substitute the goods within a reasonable period.

Situation 2- same contract as above, for supply of nursery school furniture which was delivered broken. The
buyer may require the seller to repair the goods under Article 46(3), which is in line of notice under Article 39
(Buyer’s responsibility to notify the seller upon non-conformity of the goods supplied and agreed upon).

There is no requirement under Articles 46 or 62 that the goods be specific, ascertained or otherwise
identified under the contract.

3. Granting Additional Time to Defaulting Party

A remedy that allows one party to grant additional time to the other party is not really a stand alone remedy
in the traditional sense. One would expect that any ability to grant additional time to perform would mostly
be used where there has been some delay in performance by the defaulting party, such as delay in delivery
by the seller or delay in payment by the buyer. The additional time gives the defaulting party time to cure its
performance by making delivery or paying the purchase price. The opportunity to cure defective
performance can be a significant help to the seller where it has delivered the goods but the performance is
otherwise tainted, such as by defective goods.

Article 47 outlines the scope of the remedy as follows:

"(1) The buyer may fix an additional period of time of reasonable length for performance by the seller
of his obligations.
 "(2) Unless the buyer has received notice from the seller that he will not perform within the period so
fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer
is not deprived thereby of any right he may have to claim damages for delay in performance."

The remedy in Article 47 was designed to be a companion to Article 46 and is often referred to as Nachfrist,
after the German law remedy of similar effect. It also ties in with Article 33, which fixes the time in which the
seller must deliver the goods. A similar remedy in favour of the seller is set forth in Article 63, which is
connected with timing obligations of the buyer in such provisions as Article 38(1) (examination) and Article
59 (payment of the price).

Article 47 is not really a remedy of its own. It is meant to fit into the CISG concept of fundamental breach. Its
primary purpose is to protect the buyer who is waiting for a delayed delivery. While waiting, the buyer might
have to determine at what point the delay constitutes such a fundamental breach that the buyer becomes
entitled to avoid or repudiate the contract. Where the buyer is in doubt whether the seller has committed a
fundamental breach, the buyer can declare an additional period of time under Article 47 for performance of
the contract. This period must be "reasonable" (though there is no definition in the CISG of what would
constitute a reasonable time). After the expiry of this period the buyer can consider a fundamental breach to
have occurred and avoid the contract. This would apply regardless of whether the breach would otherwise
have been considered fundamental. The buyer's ability to avoid the contract after the delivery of a Nachfrist
notice is outlined in Article 49(1)(b), which reads:

"The buyer may declare the contract avoided . . .

(b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by
the buyer in accordance with paragraph 1 of article 47 or declares that he will not deliver within the period so
fixed."

The combination of Articles 47 and 49(1)(b) leads to some uncertainty as to the full effect of Article 47 as a
remedy. Article 47 states that additional time may be granted to allow the seller to perform its "obligations",
while Article 49(1)(b) speaks only avoidance in regard of the delivery obligation. The opportunity of the buyer
to avoid the contract where the seller has breached an obligation other than a delivery obligation is limited
to cases where there is in fact a fundamental breach. This means that if a buyer gives a Nachfrist notice in
such circumstances, the effect of the notice will be that the buyer will be prohibited from resorting to any
other remedy for breach of contract during the period of such notice.

During this period, the seller would certainly have the opportunity to cure the breach, but the buyer would
be precluded from taking any remedial action. This prohibition is useful protection for the defaulting seller
who may be trying to perform or cure the contract, perhaps at significant expense. From the buyer's
perspective, it is unclear what purpose a Nachfrist notice would serve in those circumstances. Instead of
offering a remedy to the buyer, it instead imposes a burden. Perhaps fortunately for the buyer, after the
expiry of the notice, the buyer would still be entitled to any of the other remedies allowed by the CISG.

4. Reduction of price
 Article 50 of the CISG, reads:

"If the goods do not conform with the contract and whether or not the price has already been paid, the 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. However, if the seller
remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer
refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the
price."

The question of whether the goods conform with the contract can be determined in reference to Article 35,
namely:

whether the goods are of the quality, quantity and description required by the contract and generally fit for
the purpose.

No distinction is drawn in Article 50 between different types of non-conformity. The same remedy applies
regardless of the reason of non-conformity and there is no difference between the approach to defects of
quantity and defects of quality.

The method of calculation of the price reduction is easier in questions of defects in quantity rather than
defects in quality. When determining the "proportion as the value that the goods actually delivered, had to
be the value that conforming goods would have had", proportions of quantity can be easily calculated.
Suppose, if the parties contract for the delivery of 100 apples, and the seller delivers 90 apples, the
proportion is 9/10, so the buyer is only responsible for paying ninety percent of the purchase price. Where
the quantity of apples delivered is accurate but the quality is questionable, the proportion that the value of
the non-conforming apples bears to conforming apples can be difficult to calculate and could be the subject
of dispute between the buyer and the seller.

Price reduction can be obtained by the buyer under the CISG in conjunction with damages. In most
circumstances before a court, seeking damages alone would give the buyer the largest recovery, since
damages are calculated on the basis of the loss suffered by the buyer. Price reduction alone is calculated
without reference to the loss suffered by the buyer, and so therefore would not include common costs
incurred by the buyer, such as costs of mitigation, lost profit and so on.

5. Payment of arrears

CISG Article 78 provides that if a party fails to pay the price or any other sum that is in arrears, the other
party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74.

CISG Article 84(1) provides that if the seller is bound to refund the price, he must also pay interest on it, from
the date on which the price was paid. The buyer must account to the seller for all benefits which he has
derived from the goods or part of them.

Interest starts to accrue from the moment any sum is in arrears. For example, a sum is in arrears when:

a. payment of the purchase price ought to have been made;

 b. liability in damages arises on the occurrence of loss;

c. payment of a claim for reimbursement ought to have been made.

Any monetary obligation, liquidated or unliquidated, can bear interest. The rate of interest may be determined by the
agreement of the parties. In the absence of such agreement, the applicable rate of interest is the rate which the
court at the creditor's place of business would grant in a similar contract of sale not governed by the CISG.
Compound interest may be payable if the parties have agreed to its payment, or if the court at the creditor's place of
business would allow compound interest in a similar contract of sale not governed by the CISG. Interest shall be paid
in the same currency and at the same place, complying also with the same payment formalities, as the principal sum.

6. Damages

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.

An aggrieved party may choose to claim under article 74 even if entitled to claim under articles 75 and 76. The latter
provisions explicitly provide that an aggrieved party may recover additional damages under article 74. Damages
recoverable under articles 74 are reduced if it is established that the aggrieved party failed to mitigate these
damages as required by article 77. The reduction is the amount by which the loss should have been mitigated.

Article 74 provides a general formula for the calculation of damages. The right to claim damages is set out in articles
45(1)(b) and 61(1)(b). These paragraphs provide that the aggrieved buyer and the aggrieved seller, respectively, may
claim damages as provided in articles 74 to 77 if the other party "fails to perform any of his obligations under the
contract or this Convention". Thus, the article 74 formula may be used for calculating damages for breach of
obligations under the Convention as well as breach of provisions of the sales contract.

Exemption under CISG

Article 79 provides that

(1) A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an
impediment beyond his control and that he could not reasonably be expected to have taken the impediment into
account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.

(2) If the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of
the contract, that party is exempt from liability only if:

(a) he is exempt under the preceding paragraph; and

(b) the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him.

(3) The exemption provided by this article has effect for the period during which the impediment exists.

(4) The party who fails to perform must give notice to the other party of the impediment and its effect on his ability to
perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform
knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt.

(5) Nothing in this article prevents either party from exercising any right other than to claim damages under this
Convention.
Article 79 excuses a breaching party from the payment of damages (but not from other remedies for non-
performance) if he proves that his non-performance was due to an impediment that satisfies the conditions of
paragraph (1) of article 79. Paragraph (4) of article 79 provides, however, that the breaching party will be liable for
damages resulting from the other party's non-receipt of a timely notice of the impediment and its effects.

UNIDROIT Principles

The International Institute for the Unification of Private Law (UNIDROIT) is an independent intergovernmental
Organisation with its seat in the Villa Aldobrandini in Rome. Its purpose is to study needs and methods for
modernising, harmonising and co-ordinating private and in particular commercial law as between States and groups
of States and to formulate uniform law instruments, principles and rules to achieve those objectives. Set up in 1926
as an auxiliary organ of the League of Nations, the Institute was, following the demise of the League, re-established
in 1940 based on a multilateral agreement, the UNIDROIT Statute. Membership of UNIDROIT is restricted to States
acceding to the UNIDROIT Statute. UNIDROIT's 63 member States are drawn from the five continents and represent a
variety of different legal, economic and political systems as well as different cultural backgrounds.

Preamble to the UNIDROIT provides that these principles set forth general rules for international commercia
contracts. UNIDROIT are applicable only-

1. International Contracts- UNIDROIT principles are applicable only where there is more than one jurisdiction
involved.

2. Commercial Contracts- UNIDROIT principles applies to all commercial contracts, in contrast to the CISG which
is applicable to the international contracts of sale of goods only. UNIDROIT principles are applicable to
commercial contracts including finance, banking etc.

3. If the parties have agreed to be governed by the UNIDROIT principles.

UNIDROIT principles may be used to interpret or supplement uniform law instruments of the member nations.

2016 UNIDROIT Principles are being followed. The 2016 edition of the UNIDROIT Principles is not intended as a
revision of the previous edition of 2010. the 2016 edition of the UNIDROIT Principles, like the 2010 edition,
consists of 211 Articles (as opposed to the 120 Articles of the 1994 edition and the 185 Articles of the 2004
edition) and covers virtually all the most important topics of general contract law.