Introduction
The United Nations Convention on Contracts for the International Sale of Goods (hereafter CISG) is a treaty that lays down a uniform international sales law. The CISG always requires two parties, namely a buyer and a seller. It is obvious those two parties have to fulfill certain obligations. Deriving from article 53 CISG the buyer is obliged to pay the price and to take the delivery of goods as required by the contract. On the other hand, according to article 30 CISG, it is the seller’s obligation to deliver the goods, hand over any documents relating to them and transfer the property in the goods as required by the contract.
When the situation occurs whereby one party cannot fulfill its obligations towards another party, there is committed a breach of contract. However the CISG has laid down some rules to deal with such a violation. When the buyer commits a breach of his obligations, the CISG made up some remedies available for the infested seller. We can derive from the reading of article 61 CISG the possibilities where the seller can rely on in case of a breach of contract by the buyer. If the buyer fails to perform any of his stipulated obligations under the contract, the seller may exercise the rights provided in articles 62 to 65 or claim damages as provided in articles 74 to 77. In the hypothesis whereby the seller commits a breach of contract, the buyer can also rely on some remedies. Those remedies are laid down in article 45 to 52 CISG. The buyer’s primary concern is to receive actual performance of the breaching party’s obligations, namely the seller. In this research paper I will discuss one specific remedy: the buyer’s right to require performance as mentioned in article 46 (1) CISG. The questions I will be answering through this paper are dealing with the meaning and limitations of the right to require performance.
§1. The right to require performance
The CISG prescribes the right to require performance to the both parties of the contract: seller and buyer. According to article 46 CISG, the buyer has the right to claim performance when the seller does not fulfill his obligations. The CISG provides a similar right to the seller.
1.1. Buyer’s right to require performance under article 46 CISG
Article 46 (1) CISG provides the right of the buyer to compel performance. In aforementioned article is stated 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”.
From the above underlined words we can derive that the buyer loses his right to claim performance of the seller when he chooses a reduction of price or an avoidance of the contract.
Besides the provision to require performance, article 46 CISG is also dealing with situations of fundamental and non-fundamental breaches. Article 46 CISG takes two types of breach into consideration, namely non-conformity and non-delivery.
In the case of a lack of conformity, article 46 (2) and 46 (3) CISG will be applicable. We have to make a distinction whether the breach is fundamental or non-fundamental. If we are dealing with a fundamental breach the buyer can rely on
1. his right to avoid the contract as laid down in article 49 CISG;
2. his right to require the delivery of substitute goods.
The second form of performance, right to require the delivery of substitute goods, is laid down in article 46 (2) CISG. For the applicability of this article three requirements has to be fulfilled: (1) seller has delivered non-conforming goods, (2) the non-conformity constitutes a fundamental breach of contract and (3) the buyer’s request to replace the goods has to be done within a reasonable time. When the foregoing conditions are met, the buyer can rely on the right to require the delivery of substitute goods.
When the breach is not fundamental, the buyer has to rely on article 46 (3) CISG: right to repair. Before the buyer can rely on article 46 (3) CISG he has to fulfill some conditions. These conditions are more or less the same as those stated in article 46 (2) CISG.
However when there is a lack of conformity, the following has to be taken into consideration. In the situation where is opted for the delivery of substitute goods, the seller has the possibility to deliver substitute goods when it is more favorable for him. When the foregoing occurs, the buyer will not have the option to require substitute goods. The buyer has also the possibility to rely on a ‘favorable-principle’: a buyer who is entitled to claim the delivery of substitute goods can decide to chose a repair in favor. Note, the foregoing applies only when there is a breach of fundamental nature.
When a seller totally fails to deliver the goods as stipulated by the contract, the buyer has the right to claim performance under article 46 (1) CISG. When such a situation occurs the will not be relieved of his obligation to deliver. As long as the seller do not fulfill his obligation (delivery of goods) the buyer retains the right to delivery. The same applies when there is an incomplete delivery or the goods are delivered at another location than agreed in the contract. In this case, performance or non-performance depends on the buyer because of the fact the seller is not allowed to do not perform on the grounds that the benefits to the buyer outweigh the costs of the seller or on grounds that the non-conformity is not essential.
However article 46 (2) and (3) are separate remedies, they can be both applied in some circumstances. So they are not considered as alternatives, this is why, in some cases, the buyer can opt for the delivery of substitute goods and the repair of goods.
1.2. Seller’s right to require performance under article 62 CISG
As mentioned above, the CISG also provides for the seller a right to require performance. This right to specific performance is laid down in article 62 CISG: “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.” From the foregoing we can derive that article 62 CISG is drafted in an analogous way to article 46 CISG. Moreover Article 62 CISG is more simplified than article 46 CISG because of the fact article 46 CISG prescribes more obligations for the buyer than article 62 CISG. However the rationale behind article 62 CISG is the same as article 46 CISG, namely promoting respect for the agreement and to ensure there is a adequate compensation. Another rationale behind article 62 CISG is the difficult task of the seller of the seller to dispose of goods when the buyer refuses to comply with his obligation to take the delivery of certain goods. So it is buyer’s duty to make delivery possible. According to article 62 CISG the seller may claim payment and the purchase of goods when the buyer has not paid the price or made the delivery impossible. Concerning the payment of the price, the seller’s primary concern is that the buyer pays the price. On the basis of article 62 CISG, the seller will be authorized to claim payment of the buyer. However the scope of article 62 CISG is also limited: if the seller declares the contract avoided he loses the right to require performance of the buyer’s obligations.
In sum, article 62 CISG does not constitute any new right to the seller or a new obligation of the buyer. This article wants to emphasize the duty of the buyer. It is not possible for the buyer to withdraw from the contract by simply failing to fulfill his obligation. Even if the buyer do not want to take the delivery of the goods, the seller has the possibility to claim payment of the buyer or to perform other obligations.
§2. Limitations on performance
Now we have figured out the meaning of the right to require performance under article 46 CISG, we will have a look at the limitations on the right to performance which has to be taken into consideration by the buyer. First I will discuss the limitation as laid down in article 28 CISG, thereafter I will focus on the remaining limitations. Both are recognized by the United Nations Convention on Contracts for the International Sale of Goods.
2.1. Article 28 CISG
As has been set forth above, specific performance is the primary remedy for a breach of a contract under the CISG. However the availability of specific performance under article 46 CISG is limited by article 28 CISG. According to article 28 CISG, a court is not bound to grant performance of a foreign contract unless it would require specific performance of a similar domestic contract.
However a distinction has to be made between the civil law approach and the common law approach. The civil law system maintains the principle of pacta sunt servanda: the buyer has the possibility to require the seller to fulfill his obligations as made up in the contract between the parties. On the other hand, in the common law system, the following action can be brought by the buyer: a claim for damages. This claim will be considered as the primary remedy for a breach of contract according to the common law approach. Only in exceptional circumstances the right to require performance will be granted to the aggrieved buyer. All by all, countries with a civil law approach will be more inclined to grant specific performance, on the other hand in the opinion of common law countries the right to require performance will be seen as an extraordinary remedy.
2.1.1. Ambiguities in article 28 CISG
A court is not bound to enter a judgment for specific performance unless the court would do so under its own domestic law. According to article 28 CISG, the main goal is to retain national law regarding the availability of specific performance.
The following is stipulated in article 28 CISG: “If, in accordance with the provisions of 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.”
The language used in article 28 CISG is not entirely clear and rather vague, moreover it contains in my opinion three ambiguities. Therefore I will declare the phrases “judgment for specific performance”, “under its own law” and “similar contracts of sale not governed by this Convention”. Each phrase will be declared in a civil law and common law sense.
2.1.1.1. Judgment for specific performance
The first thing to figure out is the meaning of “specific performance”. Therefore we have to compare its meaning within the context of the civil law and common law systems. In common law countries, a decision of specific performance refers to an order that could only have been made by a court of equity. In the civil law system, the notion of specific performance, in comparison with common law, is much broader and encompass any mechanism that lets the buyer receive what he is entitled to under the contract. Because of such a broad interpretation the concept of specific performance under civil law can contain some common law remedies such as recovery of the price of cover or purchasing substitute performance at the breaching party expense. Concerning the notion of specific performance, some remedies do not quite fit into the common law approach. A judgment of specific performance includes actions under article 46 CISG. However, because of the fact requiring substitute delivery or repair is unknown under common law the question arose whether due to article 28 CISG the applicability of the remedies as laid down in article 46 (2) and 46 (3) CISG are limited. The ambiguity of the phrase “judgment of specific performance” brings along consequences. For any court it will be difficult to apply its own domestic law. Deriving from that difficulty we can conclude article 28 CISG applies equally to common law and civil law courts.
2.1.1.2. Under its own law
A second important ambiguity of article 28 CISG deals with the meaning of the phrase “under its own law”. This phrase can possible refer to the substantive domestic law of the forum or to the forum’s entire law, including its conflict of law rules. What is meant by the substantive law of the forum? After examination of the purpose of article 28 CISG, a court is permitted to preserve its own domestic law on specific performance and not force it to order specific performance when it is not available under that legal system. However, the rules of a court which are granting specific performance will be in that case the applicable rules. The foregoing eliminates the ability of the court to preserve its own national laws that do not grant specific performance. This is why this purpose of article 28 CISG will not be reached.
Another purpose of article 28 CISG is dealing with the avoidance of the problem that may occur when there is claimed a specific performance in a country whose national laws have no mechanisms for enforcing specific performance. Therefore this purpose of article 28 CISG will be attained when the phrase “under its own law” will be interpret as referring to substantive law of the forum.
2.1.1.3. Similar contracts of sale not governed by this Convention
The limitation on specific performance of article 28 CISG is not applicable to all international sales contract. It extends only to “similar contracts not governed by this Convention”. But what does article 28’s CISG reference to? Similar contracts are those contracts that govern subject matters comparable to those to which the CISG applies. Article 2 CISG enumerates all types of sales to which the CISG does not apply, so when a particular sales contract does not fall within the list of article 2 CISG we are potentially dealing with a similar contract.
As pointed out, the phrase “similar contracts of sale not governed by this Convention” is referring to contracts outside the scope of the CISG. Therefore a court would not be required to grant specific performance under CISG unless it would do so under the court’s substantive law of contracts in a domestic sales case. It seems to be a reasonable interpretation, however it is not entirely consistent with a civil law judge’s function. It requires the civil law court to examine what it has done in similar domestic cases.
2.2. Remaining limitations
The remaining limitations generally define the circumstances in which it would be unfair or unwise to allow the buyer to insist on full performance. When the buyer has declared the contract avoided in accordance with article 49 CISG or when he has reduced the price under article 50 CISG, this will imply he cannot enforce his right to require performance as laid down in article 46 CISG.
The buyer’s right to full performance where the seller has delivered non-conform or defective goods can be limited by article 46 (2) and (3) CISG. Subsection (2) stipulates that the buyer has a right to substitute goods if the lack of conformity constitutes a fundamental breach. Similarly, subsection (3) gives the buyer a right to require the seller to repair the defect unless the defect is not substantial and repair is unreasonable.
In addition article 7 (1) CISG has to be taken into consideration: “In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.” In other words, article 7 (1) CISG states that the observance of good faith in international trade has to be taken into account when interpreting the convention. The right to require performance under article 46 CISG has to be exercised in good faith. So the principle of good faith should be available for the seller who is required to perform his contractual obligations, but only when bad faith behavior has been obviously evidenced.
In cases of impossibility or impracticability the good faith limitation on the right to performance may be considered as important. Therefore article 79 (1) CISG is of great importance, because of the fact this article excuses a party from liability for damages where that party proves that the failure to perform was due to an impediment beyond his control. In other words, article 79 (1) CISG deals with situations of force majeure. However, when we read subsection (5) of the aforementioned there is stated nothing in this article prevents either party from exercising any right other than to claim damages under this convention. This is why subsection (5) the excuse of article 79 (1) CISG expressly limits to damage claims. For further explanation I have to refer to the Secretariat’s Commentary:
“The effect of article 79 (1) CISG in conjunction with article 79 (5) is to exempt the non-performing party only from liability for damages. All of the other remedies are available to the other party, i.e. demand for performance, reduction of the price or avoidance of the contract.
However, if the party who is required to overcome an impediment does so by furnishing a substitute performance, the other party could avoid the contract only if that substitute performance was so deficient in comparison with the performance stipulated in the contract that is constituted a fundamental breach of contract.”
We can conclude the principle of good faith is an essential element of the right to require performance, because of the fact if one party is confronted by an impediment, the other party still has a right to performance but may be required to accept a substitute performance. Further when the situation occurs whereby a party cannot fulfill his obligations due to force majeure, the principle of good faith may require the involved party is relieved of its obligations and even of its obligation to make a substitute performance if it would be unreasonably burdensome.
In the doctrine is argued article 77 CISG may impose an additional limitation on the right to require performance as laid down in article 46 CISG. Article 77 CISG contains a general duty to mitigate damages. Nevertheless, it is doubtful the duty to mitigate limits the right to require performance under article 46 CISG. The drafting history of the CISG indicates that the right to require performance is not affected by the obligation to mitigate damages under article 77 CISG. This is why I will not discuss article 77 CISG in detail.
Conclusion
Throughout the discussion of this paper, I tried to figure out the significance / meaning of the right to require performance and its limitations. As has been set forth above, the buyer’s right to require performance as laid down in article 46 CISG can be divided into three categories. Subsection (1) states that the buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with the requirement. This is the buyer’s general right to enforce the seller to perform his obligations under the contract, unless he has resorted to a remedy which is inconsistent with such a requirement. In case of a fundamental non-conformity subsection (2) points out that if the seller fails to perform the buyer can require to deliver substitute goods. However, subsection (2) provides a limit regarding to specific performance: delivery of substitute goods may be required only in case of a fundamental breach. The last category can be found in subsection (3) where is stipulated the buyer can require the seller to repair non-conforming goods if he fails to perform. It has to be said this subsection is dealing with a non-fundamental breach. The buyer is allowed to require the reparation of non-conforming goods only if such requirement is not unreasonable having regard to all circumstances.
A similar right to require performance is given to the seller under article 62 CISG. This article is drafted in an analogous way to article 46 CISG. Therefore the rationale behind article 62 CISG is the same as under article 46 CISG: promoting respect for the agreement and ensuring a adequate compensation.
The buyer’s right to require performance can be limited in two ways. On the one hand, there is the limitation under article 28 CISG which has to be taken into consideration by the buyer. On the other hand his right to require performance can be restricted by the remaining limitations. According to article 28 CISG a court is not bound to grant performance of a foreign contract unless it would require specific performance of a similar domestic contract. The main goal of article 28 CISG is to retain national law regarding the availability of specific performance. Lastly, remaining limitations has to be considered as those circumstances in which it would be unfair or unwise to allow the buyer to insists on full performance.
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