UNIT 9 (2014)Apunte Inglés
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UNIT 9: SALES CONTRACT
Concept: any contract under which the trader ('the seller') transfers or undertakes (se
compromete) to transfer the ownership of the goods to another person ('the buyer'), and the
buyer pays or undertakes to pay the price thereof (el precio del mismo); it may include a
contract for the supply (suministro) of goods to be manufactured or produced.
Legal sources in Spain: - Articles 1445-1537 Civil Code - Articles 325-345 Commercial Code - United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG) - Special regulations: - o Consolidated Consumer Protection Act (TRLGDCU (distant contracts; offpremises sales)).
o Act 28/1998, on Hire Purchase Agreements (or Installment Plans) [Ley 28/1998 de venta a plazos de bienes muebles] o Act 7/1996 on retail trade regulations (Ley 7/1996, de ordenación del comercio minorista).
Proposal for a Regulation of the European Parliament and the Council on a Common European Sales Law (CESL) [COM(2011) 635 final]. (link).
Parties and obligations Obligations established in the Vienna Convention CONSIDERATIONS (1) Good Valid object: the good has to be valid, if not, the contract will be null.
Future goods Contracts for the supply of goods that have to be manufactured or produced (we don’t know if they are going to exist) Traditional distinction: (a) Emptio spei: buyer purchases (adquiere) an expectation. He is bound to pay the price regardless of the fact the good finally exists. The buyer is purchasing an expectation.
(b) Emptio rei speratae: buyer purchases a good conditioned to its future existence. He is bound to pay the price only if the good exists. The buyer only pays the price if the object exists. Performance of the buyer is a consequence of the existence (existence is a condition to pay) Example: buyer promises a price for all the fish catch that fisherman would capture during the day.
(a) (b) In the first case the buyer has to pay, even if there’re not fish.
In the second case, the buyer pays if there’re fishes.
Sale of a third party’s good: not expressly regulated in Spanish law This is a valid contract.
Different cases: • • • Seller purchases good from third party and delivers it to buyer valid sale Seller fails to purchase good from third party and thus cannot deliver it to buyer breach of contract expectation damages.
Seller delivers a good from a third party before purchasing it. Third party may bring claims against buyer (e.g.: actio reivindicatoria): o If claims are made and the buyer looses possession over the good: Seller may be liable to buyer under art. 1475 and ff. CC (“saneamiento por evicción”) o If buyer becomes owner of the goods (for instance, by adverse possession (“usucapio”) or by rules concerning “a non domino” acquisitions (art. 464 CC, 522-8 CCCat i 34 LH): Seller may be liable to third party.
Example: “A non domino” aquisitions - We have 3 parties: A (owner/seller) B (buyer) C (buyer).
- Sales contract between A-B (owner of the House will become B) - B didn’t go to the registry, so the owner in registry is A - A says to C he has a house and he shows him the register - C is the owner, because he went to the registry - B loses ownership.
- If B lives there, C can claims against B for a eviction (desnonament) - B can claims against A (2) Price Price is generally a required consideration for the sales contract. Traditionally, lack of price or any referenced there to leads to nullity of contract (see article 1445 and 1447 CC). Price is one of the main elements of the contract.
Price has to be established with money or something related to money. If it’s not established with money we don’t have a sales contract, but we have a barter (permuta).
However, CSIG allows sales contracts to be concluded without a price: Article 55 “Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly (implícitamente) made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned”.
Lack of price is not problematic in Vienna Convention, because CISG gives a solution in case parties don’t determined a price.
Determination of price In some cases it may be possible to one of the parties to determine the price unilaterally, for example in long-term contracts.
Price may be determined by a third party: If a third party cannot or will not determine the price, a court may, unless this is inconsistent with the contract terms, appoint another person to determine it. Where a price determined by a third party is grossly (gravemente) unreasonable, the price normally charged in comparable circumstances at the time of the conclusion of the contract or, if no such price is available, a reasonable price is substituted.
Article 74 CESL: Unilateral determination by a party “1. Where the price or any other contract term is to be determined by one party and that party’s determination is grossly unreasonable then the price normally charged or term normally used in comparable circumstances at the time of the conclusion of the contract or, if no such price or term is available, a reasonable price or a reasonable term is substituted.
2. The parties may not exclude the application of this Article or derogate from or vary its effects”.
It’s not possible in Spanish Law. [Contrast it with article 1449 CC:] “El señalamiento del precio no podrá nunca dejarse al arbitrio de uno de los contratantes”.
Payment of price and delivery of goods are not required elements for the validity of a sales contract. Contract becomes legally binding (vinculante) because of the parties’ intentions: consensual contract; non real contract. The intention of the parties to perform a sales contract is enough to have the contract. So, the agreement is enough for the conclusion of the contract.
Art. 1450 Civil Code: “La venta se perfeccionará entre comprador y vendedor, y será obligatoria para ambos, si hubieren convenido en la cosa objeto del contrato, y en el precio, aunque ni la una ni el otro se hayan entregado”.
SELLER’S OBLIGATIONS The seller of goods must: (a) (b) (c) (d) deliver the goods (deliver possession off the goods) deliver such documents representing or relating to the goods as may be required by the contract; ensure that the goods are in conformity with the contract (quality of the good); transfer the ownership of the goods.
(a) Delivery of goods Place and method of delivery Normally the parties establish a place, time of deliver of the good. If not, there are some default rules that give solutions: Article 31 “If the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists: (a) if the contract of sale involves carriage of the goods—in handing the goods over to the first carrier for transmission to the buyer; (b) if, in cases not within the preceding subparagraph, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place—in placing the goods at the buyer’s disposal at that place; (c) in other cases—in placing the goods at the buyer’s disposal at the place where the seller had his place of business at the time of the conclusion of the contract”.
Consumers: Consumer sales contract, distance or off-premises contract, or in which the seller has undertaken to arrange carriage to the buyer, the consumer’s place of residence at the time of the conclusion of the contract.
Rules on carriage of goods Article 32 (a) If the seller, in accordance with the contract or this Convention, hands the goods over to a carrier and if the goods are not clearly identified to the contract by markings on the goods, by shipping (envío) documents or otherwise, the seller must give the buyer notice of the consignment specifying the goods.
(b) If the seller is bound to arrange (disponer/poner) for carriage (transporte) of the goods, he must make such contracts as are necessary for carriage to the place fixed by means of transportation appropriate in the circumstances and according to the usual terms for such transportation.
(c) If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer’s request, provide him with all available information necessary to enable him to effect such insurance.
INCOTERMS Are usages or customs that parties use sometimes. They have 3 letters. Thay say which party have to charge with / be responsible of each costs. Displays the rules of place and method of delivery.
It says in a contract (if it’s added in the agreement) who is bound to pay costs in each case. It’s like a default rule.
− The Incoterms rules (a.k.a. International Commercial Terms) are a group of preestablished commercial terms published by the International Chamber of Commerce (ICC), which are very used in international sales and other commercial transactions.
− They consist in three-letter trade terms which describe usual practices in performing a sales contract they clearly provide information about the tasks, costs, and risks associated with the transportation and delivery of goods. Reduction of uncertainty and transaction costs.
− They were first published by the ICC in 1936. The current version is the eighth one (Incoterms® 2010).
INCOTERMS Incoterms determine the ways of delivery and divide the costs and risk: a) E-clause (EXW): no additional obligations for seller after he places the goods - in conformity with the contract - at the disposal of buyer.
b) F-clauses (FCA, FAS, FOB): seller has to take care of transport until goods are handed over to the agreed carrier, but seller shall not conclude a contract of carriage nor pay for the transport.
c) C-clauses (CFR, CIF, CPT, CIP): seller is bound to pay the main transport until the place of destination. The seller bears the risk of loss of or damage to the goods until the goods are handed over to the main carrier. In contrast to FOB, seller must bear the costs to bring the goods to the determined port of destination and cover insurance for the transport overseas.
d) D-clauses (DAT, DAP, DDP): seller has to take care of the arrival of the goods at the place of destination at his own costs and risks. Whereas the C-clauses constitute forwarding clauses, the D-clauses constitute arrival clauses.
Time of delivery Default rule if parties haven’t established a time of delivery: Article 33 The seller must deliver the goods: (a) if a date is fixed by or determinable from the contract, on that date; (b) if a period of time is fixed by or determinable from the contract, at any time within that period unless circumstances indicate that the buyer is to choose a date; (c) in any other case, within a reasonable time after the conclusion of the contract.
(b) Delivery of documents Article 34 “If the seller is bound to hand over (entregar) documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. If the seller has handed over documents before that time, he may, up to that time, cure (subsanar) any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention”.
- This provision does not specify when the seller has that obligation nor does it further define the documents to which it refers. The contract generally provides for what documents must be handed over.
- “Documents relating to the goods” may include: documents that give their holders (titulares) control over the goods, such as bills of lading (conocimientos de embarque), dock receipts (recibos de muelle) and warehouse receipts (recibos de almacén), but they may also include insurance policies (pólizas de seguros), commercial invoices (facuras comerciales), certificates (e.g., of origin, weight, contents or quality), and other similar documents.
(c) Conformity Conformity = crucial standard to asses correct performance of sales contract.
In application of CISG, domestic courts have held that the unitary notion of conformity defined in CISG displaces the concepts of “warranty” found in some jurisdictions, and that, under the CISG, delivery of goods of a different type from those required by the contract (“aliud”) constitutes delivery of goods that lack conformity. For instance, in the case of the Spanish Supreme Court: “aliud pro alio” (doctrine used to prevent shortcomings from the traditional regulation on defective goods (“saneamiento por vicios ocultos” (arts. 1484-1499 CC)).
Breach of contract, because he deliver something different as it’s established in the contract (“aliud pro alio”).
CISG: Article 35 (1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.
(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes (uso, propósito) for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly (explícitamente) or impliedly (implícitamente) made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement; (c) possess the qualities of goods which the seller has held out (ofrecer) to the buyer as a sample or model; (d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.
(3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if, at the time of the conclusion of the contract, the buyer knew or could not have been unaware (inconsciente) of such lack of conformity.
In a consumer sales contract, any agreement derogating from the requirements of conformity to the detriment of the consumer is valid only if, at the time of the conclusion of the contract, the consumer knew of the specific condition of the goods and accepted the goods as being in conformity with the contract when concluding it.
Conformity is to be assessing (se va a evaluar) at the time of delivery of the goods.
Sources for B2C sales: - Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees.
- Articles 114-127 TRLGDCU.
General criteria to assess conformity of goods with the contract: - Fitness with idiosyncratic purposes disclosed by the buyer to the seller at the time of the conclusion of the contract. Exception: buyer did not actually relied (confiar) or what unreasonable for him to rely on the seller’s skill and judgment in meeting such idiosyncratic purposes.
- Fitness with usual purposes (fines habituales) of goods of the same description.
- Possession of the same qualities of goods supplied to buyer by seller as samples or models.
- Same packaging or container used in such goods or packaging adequate to preserve and protect the goods.
- Delivery of accessories, installation instructions or other reasonably expected instructions.
- Possession of qualities and capabilities informed in any pre-contractual statement which forms part of the contract terms (e.g.: advertisings, public statements).
- Possession of qualities and capabilities that can be reasonably expected by the buyer.
Time of conformity: Article 36 (1) The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time.
(2) The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics.
In a consumer sales contract, any lack of conformity which becomes apparent within six months of the time when risk passes to the buyer is presumed to have existed at that time unless this is incompatible with the nature of the goods or with the nature of the lack of conformity. Relevant time: lack of conformity which exists at the time the goods were delivered to consumer.
Possibility to remedy non-conformity Article 37 [see also article 48] If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency (compensar cualquier deficiencia) in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.
Duties to examine goods by the buyer Article 38 (1) The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.
(2) If the contract involves carriage of the goods, examination may be deferred (podrá aplazarse) until after the goods have arrived at their destination.
(3) If the goods are redirected in transit or redispatched (reenviar)by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination.
Article 39 (1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.
(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over (entregar) to the buyer, unless this time limit is inconsistent with a contractual period of guarantee.
Fraudulent non-disclosure of information: information which good faith or precontractual information duties would require that party to disclose.
Article 40 The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose (revelar/decir) to the buyer.
(d) Transfer of ownership Vienna Convention doesn’t regulate the transfer of ownership The rules on transfer of ownership are different between the countries.
Article 4 “This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold”.
- Obligation to transfer ownership in Spanish Law: it is not expressly stated in the regulation of the sales contract. It is an implied term grounded on good faith (article 1258 CC).
According to Spanish Law there’s no provision establishing an obligation to the seller of transferring ownership. If it’s not transferred, it’ll be considered as a case of breach of the contract.
- Rules on transfer of ownership are diverse across jurisdictions.
Systems of transfer of ownership: a brief overview - French law: consensual agreement Property in goods passes from the seller to the buyer at the moment when they have agreed about the goods and price (solo consensu), even though the goods are not delivered nor the price paid (Civil Code article 1583).
According to this system, a sales agreement if it’s valid, it transfers ownership of the good from the seller to the buyer.
- German law: abstract conveying agreement. Invalidity of sales contract does not necessarily affect ownership.
This depends on an abstract conveying agreement. In order of good to be transfer, we would distinguish two agreements: - Sales agreement with a causa (causal agreement) Conveyance agreement (it’s an abstract agreement which means that it has no causa) You basically need the second aspect. The parties agree to the transfer of ownership.
Even if the sales contract is not valid, the buyer is the owner.
- Spanish law (article 609 CC; also 531-3 CCCat): This system is based on Roman law, according to which property could be transferred if two conditions were fulfilled: the legal ground (iustus titulus) and the method of acquiring the thing (modus acquirendi): título y modo (grounds of acquisition followed by the traditio or delivery).
In order to transfer the ownership of a good, in Spanish Law there are 2 elements you need: Título Sales agreement + Modo transfer of possession (conveyance) If the sales agreement is not valid, the transfer of the ownership doesn’t exist.
Under Spanish law: default rule: conveyance of ownership occurs at the time of deliver (traditio): Examples of traditio: - Material delivery of good Symbolic traditio: delivery of keys (traditio clavi) and delivery or documents in which a credit is included.
Instrumental traditio: conclusion of public deed (escritura).
Consensual agreement (traditio ficta): modify the effects of tradition, parties establishes that ownership is transfer at the time the contract is concluded (before the buyer has the good).
Examples of traditio: - Traditio brevi manu: purchaser (comprador) is already in possession of good (e.g.: lessee (arrendatario) who buys the leased good (bien arrendado) to lessor (arrendador)).
- Constitutum possessorium: seller remains in possession of good (e.g.: owner sells good and simultaneously enters into a lease contract (contrato de arrendamiento)).
Goods that are sold twice (article 1473 CC) It is possible given that conveyance (transmission) of ownership in Spanish law is dependent on traditio and forms that do not involve material delivery of the good are admitted.
- Movable goods /chattels: Property is assigned to the buyer who firstly took possession of the good acting in good faith. If different possessions exist, material possession is preferred.
- Immovable goods/ Real property: Property is assigned to the buyer who firstly registered ownership in the Land Register. If none of the buyers registered, property is assigned to the buyer who firstly took possession of the good. If not, property is assigned to the buyer with a previous title of ownership (it’s the day of the contract). Each case requires good faith.
Exception: acquisitions a non domino (art. 464 CC; art. 522.8 CCCat in Catalan Law; art. 85 CCom and art. 34 Ley Hipotecaria).
BUYER’S OBLIGATIONS Buyer’s obligations (article 53): (a) Payment of price for the goods (b) Taking delivery of goods (a) Payment of price Article 54 The buyer’s obligation to pay the price includes taking such steps and complying (cumplir) with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.
Place and time of payment Article 57 (1) If the buyer is not bound to pay the price at any other particular place, he must pay it to the seller: (a) at the seller’s place of business; or (b) if the payment is to be made against the handing over of the goods or of documents, at the place where the handing over takes place.
(2) The seller must bear (deberá soportar) any increase in the expenses incidental to payment which is caused by a change in his place of business subsequent (con posterioridad) to the conclusion of the contract.
Article 58 (1) If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer’s disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents.
(2) If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price.
(3) The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity.
Article 59 The buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller.
(b) Taking delivery of goods Article 60 The buyer’s obligation to take delivery consists: (a) in doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery; and (b) in taking over (hacerse cargo/aceptar) the goods.
Article 52 (1) If the seller delivers the goods before the date fixed, the buyer may take delivery or refuse to take delivery.
(2) If the seller delivers a quantity of goods greater than that provided for in the contract, the buyer may take delivery or refuse to take delivery of the excess quantity. If the buyer takes delivery of all or part of the excess quantity, he must pay for it at the contract rate (tarifa).
REMEDIES FOR BREACH Remedies available to Buyer for Seller’s Breach (1) Specific performance Article 46 (1) 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.
(2) 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.
(3) 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.
(2) Granting of additional period to perform 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. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance.
Seller’s right to cure [see also article 37] Article 48 (1) Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer.
However, the buyer retains any right to claim damages as provided for in this Convention.
(2) If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.
(3) A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision.
(4) A request or notice by the seller under paragraph (2) or (3) of this article is not effective unless received by the buyer.
(3) Avoidance/termination 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 or this Convention amounts to a fundamental breach of contract; (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.
(2) However, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided 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 any additional period of time fixed by the buyer in accordance with paragraph (1) of article 47, or after the seller has declared that he will not perform his obligations within such an additional period; or (iii) after the expiration of any additional period of time indicated by the seller in accordance with paragraph (2) of article 48, or after the buyer has declared that he will not accept performance.
Effects of avoidance/termination Article 81 (1) Avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract.
(2) A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently.
Article 82 (1) The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them.
(2) The preceding paragraph does not apply: (a) if the impossibility of making restitution of the goods or of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission; (b) if the goods or part of the goods have perished or deteriorated as a result of the examination provided for in article 38; or (c) if the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity.
Article 83 A buyer who has lost the right to declare the contract avoided or to require the seller to deliver substitute goods in accordance with article 82 retains all other remedies under the contract and this Convention.
Article 84 (1) 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.
(2) The buyer must account to the seller for all benefits which he has derived from the goods or part of them: (a) if he must make restitution of the goods or part of them; or (b) if it is impossible for him to make restitution of all or part of the goods or to make restitution of all or part of the goods substantially in the condition in which he received them, but he has nevertheless declared the contract avoided or required the seller to deliver substitute goods.
(4) Reduction of price Article 50 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.
Remedies available to Seller for Buyer’s Breach (1) Specific Performance Article 62 The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.
(2) Granting of additional period 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. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance.
(3) Avoidance/termination 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.
(2) However, in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so: (a) in respect of late performance by the 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 of time fixed by the seller in accordance with paragraph (1) of article 63, or after the buyer has declared that he will not perform his obligations within such an additional period.
Effects of avoidance/termination (articles 81-84) Damages (following rules apply to both buyer and seller’s breaches) (i) Expectation damages + foreseeability rule Article 74 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.
(ii) Cover transaction approach to assessment of damages Article 75 If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74.
(iii) Market price approach to assessment of damages Article 76 (1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale (compra o reventa) under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the 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) For the purposes of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods.
(iv) Duty to mitigate losses Article 77 A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.
Anticipatory breach (following rules apply to both buyer and seller’s breaches) (i) Suspension of performance Article 71 (1) A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations 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.
(2) If the seller has already dispatched (enviado) the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over (entrega) of the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller.
(3) A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance.
(ii) Avoidance/termination Article 72 (1) If prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided.
(2) If time allows, the party intending to declare the contract avoided must give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance.
(3) The requirements of the preceding paragraph do not apply if the other party has declared that he will not perform his obligations.
Passing of risks - When goods are accidentally lost or damaged between conclusion and fulfilment of the contract, it must be decided who is going to have to bear (soportar) this loss: the seller or the buyer.
- Risks not properly defined: The CISG contains no definition of the types of risks covered by the rules on transfer of risk. Literal meaning: physical loss and deterioration: disappearance of the goods, including theft, misplacing the goods, their transfer to a wrong address or person, mixing up the goods with other goods; occurrences in transporting the goods from one party to the other; occurrences in handling and storage (manejo y almacenamiento), such as unloading in emergencies, including the risk of natural processes leading to a decline in quality (resulting from whichever cause, like lack of care, bad packaging or from melting (fusion), thawing (descongelación), shrinking (encogimiento), loss of weight or of strength or taste, or appearance).
- Not necessarily related with “force majeure”.
- Different from lacks of conformity.
General rule: effects of passing of risks Article 66 Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.
(a) If goods are deteriorated or physically lost after the risk has passed to the buyer, the buyer has an obligation to pay the agreed price (b) Article 66 is silent as to when the risk of loss or damage passes: the parties’ contract and articles 67-70 set out rules for determining when the risk passes (that is, default rules: passing of risks may be amended by parties (ex.: INCONTERMS)). The parties may deviate by agreement from the default risk allocation (Article 6). An Incoterm may have been used or the applicable standard contract terms may bring about another partitioning.
(c) Exception: unless due to act or omission by seller. Examples: ▪ Seller of a chemical substance is liable if he failed to give the carrier instructions on the temperature at which the goods were to be stored during carriage and this caused the goods to be damaged through melting and leakage (fuga).
▪ Seller is liable for deterioration of the goods (live sheep) during shipment when his instructions to the carrier cause the overloading of the truck, which leads to the bad physical condition of the sheep.
This exception to the buyer's obligation to pay is distinct from the seller's continuing liability under article 36(1) for non-conformities that exist at the time the risk of loss passes even if they do not become apparent until a later time; the exception in the "unless" clause of article 66 is also distinct from the seller's liability under article 36(2) for non-conformities that arise subsequent to passage of risk if the seller has guaranteed the goods against these non-conformities.
Rules on passing of risks: Traditional solutions to this problem: Three basic starting points for the passing of risk in different law systems: (a) Moment of conclusion of the contract Examples: article 1452 Spanish Civil Code (?), Swiss Zivilgesetzbuch (b) Moment of transfer of ownership Examples: French Civil Code and English Sale of Goods Act.
(c) Moment of handing over the goods Examples: CISG, German BGB and Uniform Commercial Code of the United States.
Passing of risk when the contract involves carriage of the goods Primarily, the handing over of the goods at the place determined by the contracting parties is decisive. When no particular place is determined, the handing over of the goods to the first carrier (portador) decides.
In cases of combined transport (e.g. international transport and especially with container transport), the risk passes with handing over the goods to the first carrier.
Identification or specification of goods (especially in unascertained goods) is required: When a necessary identification notice is not made before the fulfilment of the prerequisites of art. 67 et seq., the risk passes at this later moment in which the identification has been made.
Article 67 (1) If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.
(2) Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise. The goods have to be clearly identified at the time of passing the goods (are those that have to be deliver to the buyer?) Maybe the transportation contract should be responsible for the damages.
Passing of risk in goods sold in transit Article 68 The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage.
Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller.
Passing of risk in other situations Article 69 (1) In cases not within articles 67 and 68, the risk passes to the buyer when he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery.
(2) However, if the buyer is bound to take over the goods at a place other than a place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place.
(3) If the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract.
Even the seller has control over the good, is the buyer that has to assume the risk.