FUNDAMENTAL BREACH OF

CONTRACT

Factors to determine fundamental breach of contract.

1. Nature of contractual obligation.

2. Gravity of consequence of breach.
3. Inability of party to perform.
4. Unwillingness of party to perform.
5. Lack of reliance on party’s future performance.
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Article 25 CISG
A breach of contract committed by one of the parties is fundamental if
it results in such detriment to the other party as substantially to
deprive him of what he is entitled to expect under the contract, unless
the party in breach did not foresee and a reasonable person in the
same circumstances would not have foreseen such a result.
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Essentials of Article 25
1. Breach of contractual obligation
2. Detriment
3. Substantial deprivation to the aggrieved party of expectation under
the contract
4. Foreseeability
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The Drafters' commentary stated that
The determination whether the injury is substantial must be made in the light of the
circumstances of each case, e.g., the monetary value of the contract, the monetary
harm caused by the breach, or the extent to which the breach interferes with other
activities of the injured party.
It may be possible to conclude that the drafters simply intended the word detriment
to be synonymous with monetary injury or harm, or of a consequential harm, and that
the determination of a fundamental breach was to be made on a case-by-case basis.
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Robert Koch, The Concept of Fundamental Breach of Contract Under

the UN Convention on Contracts for the Int’l Sale of Goods, (Pace
International Law Review, ed. 1999)

The injured party’s expectations should be determined primarily by

what the parties have explicitly or impliedly agreed in the contract.
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Buyer’s Right to Termination

(Breach of Seller’s Obligation)
1. Non – delivery
2. Late delivery
3. Modification of contract terms
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Seller’s Right to Termination

(Breach of Buyer’s Obligation)
1. Refusal to pay
2. Delay in payment
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Article 49
(1) The buyer may declare the contract avoided:
(a) if the failure by the seller to perform any of his obligations under the
contract amounts to a fundamental breach of contract; or
(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.
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Article 47
(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.
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Article 64
(1) The seller may declare the contract avoided:
(a) if the failure by the buyer to perform any of his obligations under the
contract or this Convention amounts to a fundamental breach of contract; or
(b) if the buyer does not, within the additional period of time fixed by the
seller in accordance with paragraph (1) of article 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 so fixed.
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Article 63
(1)The seller may fix an additional period of time of reasonable length
for performance by the buyer of his obligations.
(2) Unless the seller has received notice from the buyer that he will not
perform within the period so fixed, the seller may not, during that
period, resort to any remedy for breach of contract.