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The Guide to Damages in International Arbitration

Damages Principles under the Convention on Contracts for the International Sale of Goods (CISG)

Introduction

The CISG provides a neutral set of rules for international sale of goods transactions.[2] It encapsulates the modern understanding of the key legal contract principles in regard to international sales and is heralded as a successful amalgamation of common and civil law contract principles.[3] According to WTO trade statistics, nine of the 10 largest export and import nations are CISG contracting states, with the United Kingdom being the exception. Those 10 countries account for more than 50 per cent of world trade.[4] It follows that international sale of goods contracts account for a large majority of international contracts related to trade. It is, therefore, essential to be aware of the application of the CISG, as the most widely accepted uniform international sales law, and its damages regime.[5] The major advantage of the CISG is that it provides a uniform and neutral set of substantive rules specifically drafted for international sale of goods contracts. Importantly, unlike some national contract laws that favour either the buyer or the seller, the CISG balances the rights and obligations of both equally. The CISG provides for the substance of an international sale of goods dispute what international arbitration provides in regard to procedure: a neutral, independent from any domestic law, regulatory framework. Parties who want their international sale of goods disputes decided in a truly international manner should choose the CISG as applicable law, and international arbitral tribunals should apply the CISG to an international sale of goods dispute whenever they have a mandate.[6]

Application of the CISG (esp Article 1 CISG)

In regard to the application of the CISG to business-to-business international sale of goods contracts by an arbitral tribunal, three scenarios have to be distinguished (Article 1 CISG).[7] Firstly, and uncontroversially, an arbitral tribunal will generally respect the choice of the CISG by commercial parties as the governing law of their sale of goods contract.[8] Second, it is also uncontroversial that Article 1(1)(b) CISG can be applied by an international arbitral tribunal.[9] Article 1(1)(b) dictates the application of the CISG when the rules of the private international law of the forum lead to the application of the law of a CISG Member State. Article 1(1)(b) is not a choice of law rule. It gives the CISG domestic law status and prevents any possible renvoi.[10] Third, it is controversial, however, whether an arbitral tribunal can apply the CISG by virtue of Article 1(1)(a) CISG, which stipulates the application of the CISG if parties have not agreed on an applicable law to their contract but do have their businesses in two CISG Member States. The prevailing view is that Article 1(1)(a) of the CISG does not apply in the context of arbitration.[11] This view is based on the understanding that the CISG is an international treaty and as such binds the states and its organs but only those. In other words, Article 1(1)(a) is a direction to the courts alone and not (international) arbitral tribunals.[12]

Entitlement to damages

The buyer’s entitlement to damages under Article 45(1)(b) and the seller’s entitlement to damages under Article 61(1)(b) stem from the respective duties of the parties imposed by the contract, in particular, the duties stated in Articles 30[13] and 53.[14] Any kind of breach, even the most minor one, of a contractual duty can trigger the entitlement to damages. Also, a breach of the obligation to make restitution when unwinding the contract upon avoidance (Article 81(2)) leads to liability under Article 74.[15]

To ascertain the particular obligations that the parties have agreed upon, arbitral tribunals are required to consider not only any written contract but also pre-contractual and post-contractual behaviour of the parties (Article 8(3) CISG) as well as trade usages between the parties and usages in the relevant industry (Article 9 CISG).[16] The seller’s duty to deliver goods in conformity with the contract (Article 35 CISG) has generated considerable jurisprudence by courts and arbitral tribunals.[17] ‘Lack of conformity’ includes not only differences in quality, but also differences in quantity, delivery of an altogether different good and defects in packaging.

Damages

Under the CISG, the obligee can choose either specific performance,[18] price reduction or damages as the primary remedy for a breach of the sales contract. Articles 74 et seq. do not provide a basis for an aggrieved party to claim damages. The requirements of Articles 45 and 61 have to be met for an obligee to be entitled to damages. The extent of the damages an obligee is entitled to is set out by Articles 74 et seq. In the majority of cases the remedy sought will be damages.[19] The award of damages is dealt with in four provisions of the CISG (Articles 74–77). These provisions provide the framework for the recovery of economic loss. The CISG does not contain specific guidelines for the calculation of damages. Interest is dealt with separately in Article 78. Article 79 sets out the requirements when a party is excused of its performance as a result of force majeure or hardship.

General principle – Article 74[20]

The purpose of a damages award under the CISG is clearly stated by Article 74 to be compensatory. The obligee is entitled to a sum equal to the loss caused by the breach of contract. The obligee is entitled to be put in the economic position as if the contract had been fully and correctly performed.[21] The obligor is liable for all losses arising from non-performance, irrespective of fault,[22] unless the obligor is exempted in accordance with Articles 79 and 80 CISG.[23] Article 74 encompasses two principles: full compensation and limitation of liability by the foreseeability rule, and thereby strives to marry the civil law and common law traditions.

Compensation

That full compensation is the underlying damages principles is undisputed. However, the precise meaning of full compensation has yet to be determined.[24] Jurisprudence and academic commentary have established that compensation under the CISG comprises the obligee’s expectation interest (i.e., gaining the benefits from the performance),[25] their indemnity interest (i.e., not to suffer damage to other interests as a result of non-performance),[26] but also their reliance interest (i.e., the expenditure made in reliance on the existence of the contract).[27] It is generally accepted that the CISG does not differentiate between pecuniary and non-pecuniary loss and that the CISG does not per se prohibit overcompensation (i.e., that the damages claim exceeds the performance interest).[28]

Loss

Loss is not defined, except for Article 74 stating that loss includes loss of profits. It follows that future losses are included in the concept of loss. Not included in the concept of loss are punitive damages, since Article 74 is directed only towards the claimant’s loss. Article 74, therefore, gives tribunals broad authority to award damages ‘in a manner best suited to the circumstances’.[29]

It should be noted that the CISG does not adhere as such to the doctrine of efficient breach of contract. Where the obligee has the right to avoid the contract, damages will be awarded under Article 74, despite any assertion that certain future losses would not have accrued but for the avoidance of the contract.[30]

Categories of loss

Direct loss – Direct loss is measured by ‘the difference between the value to the injured party of the performance that should have been received and the value to that party of what, if anything, actually was received’.[31] If the contract is avoided, direct damages are calculated pursuant to Articles 75 and 76 (i.e., based on the costs of a cover purchase or based on the market value of the goods). In cases where the obligee undertakes measures to place itself in the same position that it would have been in had the contract been properly performed, the obligee is entitled to recover the costs of those measures, provided that they were reasonable.[32]    

Examples:

  • If the delivery of the goods is unjustifiably delayed and the buyer carries out reasonable measures to overcome the temporary loss and to avoid consequential damages, the buyer may be entitled to recover the expenses incurred.[33] In particular, rental costs for a replacement good can be claimed irrespective of whether or not a replacement was actually obtained.[34]
  • If the buyer is in possession of the defective goods but has not avoided the contract, the buyer can recover damages pursuant to Article 74 for substitute transactions. The value of the non-conforming goods has to be deducted.[35]
  • If the non-conformity of the delivered goods can be remedied, the loss can be calculated according to the necessary and reasonable expenses for the cure.[36]
  • The seller is generally entitled to reimbursement of a bridging loan if the buyer unjustifiably does not pay the purchase price in time.[37]
  • The seller is entitled to damages if, as a result of the buyer’s late payment, the seller suffers loss because of change of exchange rates or currency devaluation.[38]
  • The loss of value of the purchase price due to inflation cannot generally be recovered.[39]

Incidental loss – Expenses that were incurred by the obligee to avoid any additional disadvantages are recoverable under Article 74 and are referred to as incidental loss.[40] Generally, additional costs incurred by a party as a result of the other party’s unjustified refusal to perform are recoverable.[41] Article 77 (mitigation of damages) must be taken into account for all incidental losses.[42]

Examples:

  • The buyer’s expenses for storing and preserving goods that have been delivered late or that are defective and are returned to the seller.[43]
  • The buyer’s expenses for the expedited shipment of alternative goods.[44]
  • The buyer’s reasonable expenses incurred ascertaining whether the goods are in conformity with the contract, but only if the non-conformity is actually established and notice is given to the seller.[45]
  • The seller’s expenses for storing and preserving goods that the buyer has unjustifiably rejected or has not taken delivery of to avoid greater loss.[46]
  • The seller’s expenses as a result of the buyer’s late payment.[47]
  • The seller’s expenses as a result of the shipping space provided by the buyer being unsuitable for the loading of the goods because it is dirty.[48]
  • The seller’s expenses as a result of damage to the goods from the goods being stored because the buyer had not paid in time.[49]

Consequential loss – Consequential loss comprises losses other than those caused by non-performance as such. Typically, consequential loss arises because of the obligee’s liability to third parties as a result of the breach.

It is controversial whether damages resulting from the buyer’s liability to third parties for death or personal injury caused by the seller’s defective products can be recovered under the CISG. Some courts and academic literature deny the applicability of the CISG to the recourse of the buyer in accordance with Article 5 CISG.[50] Others, and the CISG Advisory Council, allow the buyer’s claim for a consequential damage that is a result of the seller’s defective product injuring a third party or his or her property.[51] The latter view is arguably preferable since it allows the buyer to be compensated under one damages regime (i.e., that of the CISG). It avoids unnecessarily distinguishing between separate heads of the buyer’s liability, namely contract, tort or property. Having to claim under different heads of damages would mean that a mixture of international law, the CISG in regard to contractual claims, and applicable domestic law, in regard to tort or property claims, would be applicable for a breach of the contract. The application of those different damages regimes has the potential to either overcompensate or undercompensate the buyer. In regard to compensating for the consequences of a breach of an international sales contract, the CISG comprises a modern damages regime that amalgamates common and civil law principle and is, therefore, preferable.

Academic literature and jurisprudence are not unanimous as to whether domestic tort law may be applied concurrently with the CISG. Some support leaving this decision to the applicable domestic law.[52] Others argue for the exclusion of domestic tort law in these cases.[53] A third view distinguishes between damage caused by the defective performance of the good, in which case the CISG is exclusively applicable, and damages caused because the goods did not adhere to general safety expectations and standards, in which case the buyer has a course of action under the CISG and the applicable domestic tort law concurrently available to them.

Examples:

  • Time (e.g., visiting customers) and cost spent in trying to rectify defective goods are only recoverable if extra staff had to be employed or additional workload was caused.[54]
  • Legal costs (extrajudicial or procedural) incurred by the obligee in disputes with third parties are recoverable.[55]
  • Reputational loss and loss of goodwill as a result of breach of contract can be recovered.[56] The calculation of the loss of reputation should take into account, for example, the size of the company, the market, the value of the trademark and the necessary costs to re-establish the reputation.[57]
  • Damage to the buyer’s own property as a result of the defective goods can be recovered.[58]
  • If the buyer has agreed to a contractual penalty in a subsequent contract, this penalty can generally also be recovered from the seller.[59]
  • The seller might incur consequential loss where the buyer refused to take delivery of the goods (Article 53).[60]

Loss of profits

Article 74 explicitly provides that damages for breach of contract include lost profits.[61] Lost profits are awarded to place the aggrieved party in the same pecuniary position it would have been in but for the breach.[62] It has to be emphasised that, in line with the view advanced with regard to standard of proof,[63] lost profits do not have to be calculated with mathematical precision.[64] Lost profits need to be established with reasonable certainty.[65] The buyer cannot claim lost profits if the buyer failed to give notice pursuant to Article 44. Whether or not the buyer has a reasonable excuse for not having given notice is irrelevant.[66]

The obligee is not only entitled to recovery for lost profits incurred prior to the judgment or award, but also for future lost profits. Future lost profits are limited by the requirements that they have to be proved with reasonable certainty, that there has to be a causal connection between the breach and the future profits, and that they be foreseeable.[67]

Examples:

  • Lost profits include losses resulting from the inability to keep a business running caused by the breach of contract.[68]
  • Lost profits also include fixed costs (i.e., general expenses) on a pro rata basis[69] that have to be reduced by the expenses that would have been incurred when realising those fixed costs.[70]
  • The loss of chance of winning is recoverable.[71]
  • Frustrated expenses are recoverable. They constitute the minimum loss incurred.[72]
  • The seller is entitled to lost profits that are as a result of having missed out on an investment opportunity.[73]

Calculation of loss

  • Concrete and abstract calculation – The principle of full compensation necessitates the admissibility of the loss being calculated abstractly[74] to achieve equal outcomes for all obligees. As Schwenzer explains:

It cannot be justified that a truck seller is to compensate a commercial carrier for the costs of vehicles the carrier rents in case of non-delivery, while the same breach of contract remains without consequences when the buyer is an NGO which intends to use the trucks to deliver food to conflict areas and cannot rent substitute vehicles. The loss due to the loss of use can be easily calculated abstractly since rental markets exist for nearly for all types of goods.[75]

  • Accounting for gain –The obligee has to offset the loss from the breach by any gains resulting from the non-performance.[76] It is important to note that only the gain that has an adequate connection to the breach is to be subtracted.[77]

Time

Article 74 does not provide a specific time for the calculation of damages. A tribunal, therefore, has broad discretion to determine the appropriate moment in time to calculate the damages. The principle of full compensation, however, means that damages should be assessed at the latest possible time.[78] That allows compensation for all possible consequences that may arise.

Place

The CISG does not provide for where damages have to be paid. Schwenzer argues that damages should be paid at the place where the breached obligation was to be performed.[79] Others contend that damages should be paid at the obligee’s place of business.[80] The latter view is in line with the general principle of Articles 57 and 74 of full compensation.

Currency

General jurisprudence and academic opinion is that to fully compensate an obligee, damages should be calculated under the currency of the loss.[81] However, the actual payment of the damages may be in a different currency. In the case that a different currency in regard to the damages is chosen, the tribunal will have to determine the appropriate exchange rate.

Causation

The obligee must establish that the loss was caused by the breach of the contract. It is necessary, but generally also sufficient, for the breach to have been the conditio sine qua non (i.e., the precondition for the occurrence of the detriment).[82] It is immaterial whether the breach caused the damage directly or indirectly.

Foreseeability

The loss has to be foreseeable at the time of contract conclusion.[83] It is not the exact size of the loss, but only the possibility of such loss that must be foreseeable. The foreseeable loss must be assessed in light of the facts that the party in breach knew (subjective assessment) or ought to have known (objective assessment). What is relevant is what in that sector of trade normally could have been foreseen, taking into account the information the contracting party had at its disposal.[84]

Limitation on damages

Limited to monetary relief

It is well accepted that relief under Article 74 must be in the form of a monetary payment.[85]

Limited to material loss

The CISG does not expressly exclude liability for non-pecuniary loss. However, given the nature of the CISG regulating international sales of goods between businesses, the CISG’s ambit does not extend to damages for pain and suffering, mental distress and loss of amenities.[86] Loss of reputation and loss of chance are classified under the CISG as pecuniary loss.[87] Schwenzer argues that non-pecuniary damages maybe recoverable under Article 74 if the intangible purpose of the performance became part of the contract and, therefore, making the incurred loss a typical consequence of the non-performance.[88] Including non-pecuniary damages under Article 74, if the parties have so agreed, conforms with the CISG’s underlying principle of party autonomy.

Punitive damages

Article 74 does not permit the recovery of punitive damages. Article 74 expressly limits damages to ‘a sum equal to the loss’.[89] The prevailing view is that the application of the CISG excludes the award of punitive damages under the applicable domestic law. However, the parties are free to stipulate the provision of punitive damages in their contract.

Special cases

Disgorgement of profits

Given the considerable divergence of jurisprudence and academic literature in civil and common law jurisdictions in regard to the question of whether disgorgement of profits is a remedy, a head of damages or not recoverable at all,[90] tribunals should arguably consider granting damages based on disgorgement of profits only in narrow circumstances. In practice, international sale of goods cases where the obligee has suffered no loss at all, while the obligor was able to make a profit, will be rare. Schwenzer has identified three scenarios where the obligee should be entitled to disgorgement of profit under Article 74 (i.e., as a head of damage):[91]

  • the seller sells the goods a second time and realises a higher profit than agreed to under the contract with the first buyer (i.e., efficient breach);
  • the seller, who is contractually obliged to manufacture the goods in accordance with ethical or human rights standards, lowers his or her production costs by resorting to production mechanisms that are in breach of the agreement, and thereby increasing their profits; or
  • the buyer supplies a defined market, such as the European Union, NAFTA or Mercosur, against an express stipulation in the contract with the purchased goods, and thus makes a profit.

The commonality in all three cases is that common damages under Article 74 are difficult, if not impossible, to prove. Therefore, tribunals may be open to calculate damages as disgorgement of profits in cases where damages under Article 74 are otherwise impossible to prove but the obligor would gain a clear windfall otherwise.

Legal costs

A uniform application of the CISG requires that the question of recoverability of legal costs cannot depend on its classification as substantive or procedural by the relevant lex fori. That would lead to a non-uniform interpretation and application of the CISG. Uncontroversially, attorney fees and costs can be awarded when the contract provides for their payment. The majority of academic literature is in agreement that extrajudicial costs may be recovered as incidental damages under Article 74 (especially if extrajudicial activity mitigates damages).[92] Extrajudicial costs include legal costs incurred in connection with preventing the breach or pursuing rights under the contract, such as a demand for performance.[93] On the other hand, the majority in the academic literature and jurisprudence by the courts does not support that litigation costs are recoverable under Article 74.[94] Arbitral tribunals do not present a unified picture. Often it is hard to ascertain whether the tribunal has awarded costs under the applicable rules or under Article 74.[95]

The majority opinion holds that the recovery of litigation costs is a matter of the applicable domestic law or the applicable arbitration rules respectively. The main rationale advanced is that allowing for litigation costs to fall under the ambit of loss under Article 74 would violate the principle of equality between the parties which is embodied in the CISG.[96] If recovery of litigation costs was possible under Article 74, it would lead to an unjustifiable preferential treatment of the successful plaintiff over the successful defendant, since the defendant would not be able to claim litigation costs.[97] However, this view misinterprets the CISG equality principle. The CISG’s equality principle relates to seller and buyer and not claimant and respondent. Buyer and seller will not be treated differently in regard to the recovery of litigation costs under Article 74. The buyer as well as the seller are able to claim litigation costs as part of their damages if they are the plaintiff. To achieve global uniformity for parties to a contract to which the CISG applies, the better view to take arguably is that litigation costs are incidental damages under Article 74. The recoverability of litigation costs will be limited by the foreseeability and causation requirements inherent in Article 74.[98]

It seems less controversial that legal costs may indirectly be recovered as damages if they accrue in regard to a sale to a third party.[99]

Penalty clauses/liquidated damages

The CISG does not regulate if the contracting parties agree in advance the amount of recoverable damages: be it as a penalty clause or a liquidated damages clause, be it that the amount agreed falls below the foreseeable amount of loss, be it that the amount agreed is in excess of any loss caused by the breach of contract.[100] Whether or not an agreed damages clause is valid in accordance with Article 4 is a matter of the applicable domestic law to the contract ‘it has to be noted that tribunals have to fill the gap in the CISG finding an internal solution in accordance with Article 7 instead of resorting to domestic law’.[101] Agreed damages clauses, which are valid under the applicable domestic law, are compatible with the CISG since an agreed damages clause may encourage performance of the contract and deterring a breach, thereby fostering a basic value underlying the CISG as a whole. In the event of a breach of contract, the agreed damages clause may encourage the parties to settle their differences and avoid legal costs. In addition, a clause will provide clearer guidance for recovery than often the foreseeability requirement can provide. An agreed damages clause can, therefore, aid dispute resolution.[102]

Third-party claims

Only the contracting party can seek damages under Article 74. Third parties must pursue their claims under applicable domestic law.[103]

Loss of volume

To allow for full compensation in the case of a lost volume seller,[104] damages under Article 74 should encompass the recovery of lost profits that the seller would have made but for the buyer’s breach, irrespective of any subsequent transactions by the aggrieved party.[105] The calculation of the lost profit may present, in some cases, a considerable forensic challenge.[106]

Child labour/human rights standards

It has been argued that human rights standards can be an inherent characteristic of goods. In particular, there seems to be a general opinion that it is an inherent characteristic of any good that a good be manufactured without child labour.[107] If a good is manufactured with child labour or contrary to a contractually agreed ethical/human rights standard, the buyer can demand the difference between the price for the goods manufactured under ethical/human rights compatible conditions and the price for goods manufactured in violation of those conditions. In cases where the market value is difficult to assess, the manufacturing costs that were saved as a result of the breach of contract can be used as minimum damages.[108]

Burden of proof and standard of proof

The CISG does not explicitly address either the burden of proof nor the level of proof required. Jurisprudence and academic commentary generally agree that ‘a party who asserts a claim has to prove all circumstance or facts advantageous to him’ (i.e., the party claiming damages bears the burden to prove its damages).[109]

In regard to the level of proof required, jurisprudence and academic literature do not present a unified picture. First, it has to be noted that tribunals have to fill the gap in the CISG finding an internal solution in accordance with Article 7, instead of resorting to domestic law.[110] Some courts and tribunals have required a specific ascertainment of damages.[111] Others have required that the damages be reasonably proved,[112] others that have required sufficient proof of damages.[113] Belgian courts, especially, have determined the amount of damages often ex aequo et bono.[114] The CISG-Advisory Council reasons that the requisite standard should be one of ‘reasonable certainty’ without a need for ‘mathematical precision’.[115] The reasonable certainty standard is supported by and consistent with the CISG as a whole, which generally applies the reasonableness standard.[116] It is also consistent with the PICC.[117]

Limitation period

The CISG does not cover limitation periods. If the Convention on the Limitation Period in the International Sale of Goods 1974 is applicable to the contract, damages fall under the four-year limitation period under Article 8 of the Limitation Convention.[118] In all other cases, the choice of the parties’ dispute resolution mechanism will become highly relevant. Civil law jurisdictions generally characterise statute of limitation issues as matters of substantive law and, therefore, as a matter of lex contractus.[119] In many common law jurisdictions, statute of limitation issues are considered a matter of procedural law and, therefore, a matter of lex fori.[120] Tribunals should consider whether to apply Articles 10.1 et seq. PICC, which stipulate a relative limitation period of three years and an absolute limitation period of 10 years.[121]

Damages in case of substitute transaction – Article 75[122]

Article 75 allows, in case of the avoidance of the contract, a concrete calculation of damages in the form of the difference between the contract price and the price of a cover purchase (buyer) or the resale of the goods (seller). Further damage that is not already part of the calculation under Article 75 can often be claimed under Article 74 (see Article 76). Article 75 does not replace Article 74. It supplements and works in conjunction with it. The application of Article 75 is not mandatory. Parties that have avoided the contract can choose whether to seek damages pursuant to Article 75 or whether they only rely on the abstract calculation of damages under Article 74.[123]

Avoidance

To claim damages in accordance with Article 75, the obligee has to avoid the contract (i.e., it must have dissolved its contractual obligation)[124] before making a substitute purchase.[125] Jurisprudence and academic commentary also concur that Article 75 is applicable if the obligor unequivocally and finally refuses to perform.[126]

Substitute transaction

A sale or purchase by an aggrieved party qualifies as a substitute transaction under Article 75 if two requirements are satisfied. First, the aggrieved party has to have undertaken the purchase or sale as a substitute for the avoided transaction. Second, the cover purchase or sale has to be commercially reasonable. It is generally accepted that the price of the cover purchase or sale will minimise the loss of the breaching party to the extent reasonably possible.[127] If the difference between the avoided contract and the substitute transaction results in reduced costs, an adjustment to the damage amount may be warranted to account for expenses saved by the obligee.[128]

The wording of Article 75 makes it clear that it is not applicable if the obligee does not transact with a third party to fulfil the avoided contract.[129] Article 75 is also not applicable when the buyer uses goods in substitution for the non-conforming goods that have been purchased before the avoidance of the contract.[130]

Reasonable time and manner

To avoid that the obligee, at the expense of the obligor, speculates on the development of the market, Article 75 requires that the cover purchase has been made in a reasonable manner and within reasonable time. Those requirements do not exclude, however, that the obligee waits to avoid the contract to take account of market developments.[131]

Jurisprudence has determined that the threshold in regard to acting in a reasonable manner is whether a party has acted as a ‘careful and prudent businessman’ who observes the relevant trade practices.[132] Being a ‘careful and prudent businessman’ can entail reselling the goods substantially below the contract price.[133]

The substitute transaction also has to be done within a reasonable time. The time period for a reasonable substitute transaction commences when the obligee declares the contract avoided.[134] What is reasonable depends on the circumstances and the good in question. For goods that are subject to market price fluctuations, a reasonable time period will be relatively short,[135] whereas for goods that are seasonal or unique the period will be longer.[136]

If the obligee has not made an identified substitute transaction in a reasonable manner or time frame, the obligee is free to claim damages in accordance with Articles 74 and 76, which allow for an abstract calculation of damages.[137] Conversely, if an obligee who pursues a damages claim under Article 76 makes a substitute transaction after initiating litigation, but before a reasonable time has elapsed since avoidance, then damages may be calculated pursuant to Article 75.[138]

Calculating damages

Damages in accordance with Article 75 are measured by the difference between the price of the substitute transaction and the contract price. The contract price is the price either agreed expressly or implicitly between the parties in the contract, or the price as determined by Article 55 if the parties did not agree expressly or implicitly on a price.[139] The price of the substitute transaction is the price paid for the substitute goods plus extra expenses incurred from having to make the substitute transaction, such as costs associated with transport or changed market conditions, minus saved expenses.[140]

Further damages recoverable under Article 74

An aggrieved party may recover further damages under Article 74. This allows the recovery of incidental and consequential damages in addition to the damages recovered under the Article 75 calculation.

Examples:

  • Costs associated with the substitute transaction under Article 75.[141]
  • Loss caused by the delay in locating a substitute transaction.[142]
  • Loss caused by a change in the interest rates or in the currency exchange rate between the date that the transaction was supposed to have occurred under the contract and the substitute transaction.[143]
  • Costs of an unsuccessful tender of goods or their necessary storage by the seller.[144]
  • Costs associated with the failed transaction.[145]

Foreseeability

‘Foreseeability’ is not a requirement of Article 75, according to its wording. This is not surprising, since loss resulting from a substitute transaction is generally foreseeable.[146]

Burden of proof

It is on the obligee to prove that the avoidance of the contract was justified and that the obligor was correctly notified of the avoidance. The obligee must also show that the substitute transaction was reasonable and within a reasonable time period after the avoidance of the contract. If the obligor asserts that the substitute transaction could have been made sooner, the obligor also implicitly invokes a breach of the duty to mitigate damages (Article 77) for which the obligor carries the burden of proof.[147]

Concrete calculation of damages without substitute transaction – Article 76[148]

Like Article 75, Article 76 is lex specialis to Article 74. Article 76 allows calculating damages based on the current price of goods when the obligee has avoided the contract without entering into a resale or cover purchase. The difference between Article 76 and Article 75 is that under Article 76 the damages are calculated abstractly without the need to show a concrete measure of actual loss. Therefore, the advantage is that the obligee can recover damages simply based on a straightforward calculation.

Article 76 allows when its requirements are met to abstractly calculate the performance loss as the difference between the contract price and the market price. The advantage for the obligee to claim under Article 76 is that concrete proof of the non-performance loss is unnecessary.

Avoidance of the contract

The application of Article 76 requires that the obligee has avoided the contract. In addition, the prevailing view applies Article 76 to cases where the obligor unambiguously and definitively refuses to perform.[149]

Current price

Nature of current price

Article 76 requires a current price for the goods – ‘the price prevailing at the place where delivery of the goods should have been made’ – but if no current price is available then ‘the price at such other place as serves a reasonable substitute’. The current price must be for goods of the same kind as the avoided contract, under comparable terms. Article 35(2) stipulates factors that can give guidance to determine what goods conform to the contract and whether they can be used to set a comparable price.[150] An adjustment should be made for any differences in terms or circumstances between the contract terms and those associated with the market price.[151]

A current price can exist without being officially quoted.[152] As one court has observed:

it is sufficient for the existence of a market price in the sense of Article 76(1) CISG if, owing to regular business transactions for goods of the same type at a particular trade location, a current price has been established.[153]

If there is no current price, then an abstract calculation cannot be performed and the obligee may resort to Article 74.[154] For subjectively valued goods or goods made on special order, it might be impossible to ascertain a current price.[155] The obligee thus has to resort to Article 74.

Time of determination

The time at which to set the current price for the calculation is the time at which the obligee made the statement of avoidance.[156] Basing the relevant time on the statement of avoidance leaves no room for tribunal discretion with regard to the timing, and avoids that the obligee speculates at the obligor’s expense. If the obligee unreasonably delays making a statement of avoidance, the obligor may seek relief under Article 77.[157] Article 76 provides an exception for the setting of the current price if the obligee avoids the contract after taking over of the goods. In that case, the current price is determined at the time when the party took over the goods rather than at the time of avoidance.[158]

Location of goods

In determining the current price for the calculation of damages, first resort must be to the place where the seller should have delivered the goods.[159] If a determination at the place of delivery is not possible, the tribunal can resort to a location that would be a reasonable substitute.[160] In accordance with the CISG’s underlying principles, ‘reasonable’ has to be evaluated from the perspective of a typical merchant under similar circumstances, including taking into account the cost of shipping to the substitute location.[161]

Price fixed by the contract

To calculate damages under Article 76, the ‘price fixed by the contract’ has to be determined. It should be noted that Article 75 merely requires a ‘contract price’. The latter means that to satisfy the requirement of Article 75, the price does not need to be fixed by the contract; instead it can be determined by means of Article 55.[162] Therefore, if the price is not fixed by the contract and the obligee has not engaged in a substitute transaction, the obligee can only pursue damages in accordance with Article 74. An application of Article 55 would result in implying a contract price based on the market price at the time of the contract and then calculating abstractly based on the market prices at the time of avoidance. Such a damages calculation is undesirable since it would increase the uncertainty in the amount of damages.[163]

No substitute transaction

Abstract calculation of damages is only possible if the obligee has not engaged in a substitute transaction. It has to be noted that fixing damages concretely based on a substitute transaction takes precedence over an abstract calculation.[164] The primacy of concrete calculation supposes that a substitute transaction will generally be the most cost-effective resolution after the avoidance of a contract.[165]

Whether the obligee has made a substitute transaction or not is assessed in accordance with the requirements under Article 75. Thus, if the obligee made a ‘substitute’ transaction that fails to meet the requirements stipulated under Article 75, the obligee is free to claim abstractly calculated damages under Article 76.[166] Abstract calculation might also be appropriate when the obligee has made a separate transaction similar to the avoided one and where the obligee cannot show that a particular transaction replaced the avoided one.[167]

Foreseeability

The wording of Article 76 clarifies that foreseeability is not a requirement of Article 76.[168] It would be contrary to the principle of full compensation if the obligor were able to argue unforeseeable changes in the price, after the conclusion of the contract, that the obligor did not take into account.[169]

Recovery of further loss

In addition to damages based on the difference between the current price at the time of avoidance and the price fixed by the contract, the obligee may recover further damages under Article 74. Article 76 allows a party to claim compensation for incidental and consequential damages that occurred as a result of voiding the contract under Article 74. The requirements of Article 74 have to be met, however, especially that further damages must have been foreseeable.[170] Care has to be taken that when the obligee claims additional damages under Article 74, the obligee is not placed in a better position than it would have been in if the contract had not been avoided.

Anticipatory breach

If it is clear that one party will commit a fundamental breach, Articles 72 and 73 allow for the avoidance of the contract before the date that performance was due. These provisions may impact the determination of damages under Article 76 in a fluctuating market. In such a market, it is uncertain whether the market price at the time of performance would be the same as or even similar to the market prices at the time of avoidance. As Gotanda observes:[171]

To address the risk that the market will change to the detriment of the obligee, Article 75 provides the option to proceed with a substitute transaction and calculate damages concretely rather than proceeding abstractly under Article 76. By choosing to proceed under Article 76, the aggrieved party accepts the risk of inadequate compensation.

Burden of proof

The obligee has to prove the calculation of damages under Article 76 (i.e., the price fixed by the contract as well as the current price).[172] However, the obligor has to prove that the obligee has or should have carried out a more favourable substitute transaction (Article 77).[173]

Mitigation of damages – Article 77

Article 77(1) obliges the party that wants to claim damages because of the breach of contract of the other party to take reasonable measures to mitigate the damage caused by the breach of contract. Under Article 77(2), a breach of this obligation will result in a decrease in the amount of damages that can be claimed. The obligation to mitigate damages exists only in regard to damages claims and not in regard to other remedies, such as claims in regard to the performance of the contract.[174]

Obligation to mitigate

What the obligation to mitigate damages entails depends on the circumstances in the particular case. The threshold is a reasonable person in the shoes of the obligee.[175] Trade usages and practices, as well as special habits that exist between the parties, have to be taken into account.[176] In general, a cover transaction is reasonable if it is ‘made in such a manner as is likely to cause a resale to have been made at the highest price reasonably possible in the circumstances or a cover purchase the lowest price reasonably possible’.[177] Cover transactions that are identical to the terms of the original contract are more likely to be considered reasonable.[178] However, cover transactions that differ in terms such as quantity, credit or time of delivery may still be considered reasonable, all circumstances taken into account.[179]

Examples of factors that have been taken into account are:[180]

  • timeliness of a cover purchase[181] or sale;[182]
  • seasonal nature of goods;[183]
  • potential consequences of a defect;[184]
  • desirability to stop performance;[185] and
  • ability to preserve and store goods.[186]

Lost volume sales

Article 77 does not impose on a lost volume seller an obligation to find a substitute buyer for the contracted goods following a breach. This is because, in the case of a lost volume seller, the second sale would have been made even if there had been no breach of contract. The second sale is thus not a substitute transaction.[187]

Burden of proof

The obligor has the burden of proof in regard to the facts that establish the obligee’s duty to mitigate.[188] In practice, the obligor may find it difficult to meet its burden because evidence concerning mitigations efforts is often within the knowledge and control of the obligee.[189] Some tribunals have placed some obligation on both parties when a failure to mitigate defence has been raised under Article 77.[190]

Interest – Article 78

Interest is due under Article 78 regardless of proof of loss.[191] Interest can be claimed pursuant to Article 78 independently from the damages under Articles 74 to 76.[192] It applies to the purchase price and to ‘any other sum in arrears’. Most courts and tribunals have held that ‘any other sum in arrears’ includes damages.[193] The preponderant opinion also presumes that the liability to pay interest arises under Article 78, even if the precise amount owed has to be determined by a tribunal.[194] Article 78 is silent on the most important questions in regard to interest: the accrual period and the rate of interest. Both questions have to be answered relying on general CISG principles to achieve uniform and congruent application of the CISG.

Accrual period

Interest starts to accrue the moment the payment is in arrears, without any further requirement, such as a request or demand for payment or default, having to be met or any compliance with formalities being necessary.[195] Interest ceases to accrue when the obligation to pay is extinguished.

Interest rate

The most controversial issue presented by Article 78 is at what rate interest on a sum in arrears is to accrue, since Article 78, although providing an obligation to pay interest whenever a payment is in arrears, does not specify an interest rate or the means to determine the interest rate. Therefore, interest rates are one of the most discussed issues by courts and tribunals in regard to the CISG.[196] Various modi of determining the interest rate have been used by courts and tribunals. The attempts can be roughly categorised into two broad clusters: those preferring a uniform approach,[197] and those giving domestic law primacy.[198] The former interprets the lacuna in Article 78 as inviting tribunals to define the applicable interest rate by way of resorting to general principles deduced from the CISG (Article 7(2)). The latter interprets Article 78 as excluding the question of the interest rate from the sphere of application of the CISG, and therefore, as an express invitation to tribunals to resort to the applicable domestic law. However, those who favour the uniform approach are not unified in regard to the general principle that should be applied to determine the rate of interest.[199] The following approaches can be found in the jurisprudence of courts and tribunals:

  • the current interest rate at the creditor’s place of business;[200]
  • the current interest rate at the debtor’s place of business;[201]
  • the current rate of interest related to the particular currency of the claim;[202]
  • an internationally or regionally applied interest rate like the Libor[203] or the Euribor;[204] and
  • the application of Article 7.4.9 of the UNIDROIT Principles.[205]

The CISG Advisory Council suggests that the interest rate applicable to any mature sum should be determined according to the law of the state where the creditor has its place of business.[206] The major purpose of an interest claim is compensating the time value of money for the creditor. Therefore, the interest claim in Article 78 is akin to a damages claim. Thus, the full compensation principle underlying CISG damages should also be applied to interest claims and the focus should be on compensating the creditor’s loss.

Simple versus compound interest

The CISG does not address whether interest should accrue on a simple or compound basis. Most courts and tribunals have awarded simple interest.[207] Parties are free to agree on the payment of compound interest. If the parties have not addressed the issue of compound interest in their contract, the CISG Advisory Council takes the view that the question of whether compound interest should be awarded be resolved in accordance with the domestic law of the creditor.[208] Gotanda points out that awarding compound interest is in line with modern economic and financial principles and practices, and the CISG’s underlying principle of full compensation.[209]

More generally, it should be noted that a party may also be able to seek compound interest as damages under Article 74. Article 78 provides for a claim to interest on a sum in arrears without the proof of loss; such an interest claim is, therefore, independent from any claim for damages (and, as noted above, only simple interest is awarded on such a claim by most courts and tribunals). If, however, the obligee can prove under the standard required for loss by Article 74 that a consequential loss resulting from the obligor’s breach of contract was the loss of compound interest, compound interest should be recoverable in accordance with Article 74.

Article 78 and Article 79

The obligation to pay interest under Article 78 remains, notwithstanding an exemption from paying damages under Article 79 (discussed below). However, interest does not accrue when and insofar as the failure to pay the monetary obligation was caused by the act or omission of the obligee or when the obligor has exercised its right to suspend performance.

Exemptions under Articles 79 and 80

An obligor will be exempt from paying damages, but not from other remedies for non-performance, in accordance with Article 79(1). Article 79(1) requires that because of an unforeseeable impediment beyond the obligor’s control, the obligor is not able to perform the obligor’s obligation under the contract. Article 79 has not been of great practical importance, since the threshold imposed by Article 79(1) to exempt the obligor is high and parties have rarely succeeded in invoking Article 79.[210] For example, financial constraints are generally regarded as surmountable.[211] Article 79(2) complements Article 79(1) by clarifying that the obligor cannot avoid liability by relying upon third parties in order to fulfil the obligor’s duties.[212]

Article 80 provides that an obligee may not rely on a breach by the other party to the extent that the breach was caused by the obligee’s act or omission.

Other remedies

As stated earlier, it lies within the party’s choice which remedy the party wishes to pursue. In addition to damages, the CISG provides for specific performance (Articles 46(1), 62, 28), avoidance of the contract (Article 49(1), 64(1)), and price reduction (Article 50). A claim for damages pursuant to Article 74 can be made concurrently with all three other remedies.[213] The amount of the recoverable damages depends on whether and to which extent the other remedy has been redressing the loss suffered.

Conclusion

Articles 74 et seq. provide for the obligor to put the obligee into the position the obligee would have been in if the contract had been performed according to its terms. The CISG offers the obligee a choice, if the breach was so fundamental that the obligee could avoid the contract, to either calculate the obligee’s damages abstractly under Article 74, or concretely under Article 75 if the requirements of Article 75 are met. The obligee may prefer recovery under Article 75 (or recovery under Article 76 if no substitute transaction was done) if the obligee cannot prove with a requisite degree of certainty that it suffered damages as a result of the breach. In addition, the concrete calculation under Article 75 avoids the possibility of having to open a company’s ‘books, i.e., ... disclose its internal calculations, its customers and other business connections, etc.’[214] to prove its loss.

Notes

  1. Petra Butler is associate professor at Victoria University of Wellington and co-director of the Centre for Small States at Queen Mary University of London.
  2. Article 7 CISG directs to an autonomous interpretation of the CISG void of any fall back on domestic principles. CISG academic literature is almost unanimous in the conclusion that recourse to any national law, which must be defined according to private international law rules, is an ultima ratio solution for gap filling under the CISG and should be avoided as far as possible [I Schwenzer/P Hachem in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 7 para 42; J Honnold/H Flechtner, Uniform Law for International Sales under the 1980 United Nations Convention (4th ed, Wolters Kluwer, Alphen aan den Rijn, 2009) para 102; U Magnus in Vol XIV Staudingers Kommentar zum Bürgerlichen Gesetzbuch (14th ed, De Gruyter, Berlin, 2011) Article 7 para 58; P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) paras 45, 47]. Deducing general principles from the CISG is always the first priority (Article 7(2)). Since there is no highest court deciding on issues arising from the application of the CISG note should be taken of academic literature, the opinions by the CISG Advisory Council, an independent body of experts (www.cisgac.com/) and the jurisprudence from courts and arbitral tribunals.
  3. Compare P Schlechtriem ‘25 Years of the CISG: An international lingua franca for Drafting Uniform Laws, Legal Principles, Domestic Legislation and Transnational Contracts’ in H Flechtner/R Brand/ M Walter (eds) Drafting Contracts under the CISG (OUP, Oxford, 2008) 167, 168.
  4. See www.wto.org/english/res_e/statis_e/its2014_e/its14_world_maps_merchandise_e.pdf (last accessed 12 July 2016).
  5. There are a number of free databases dedicated to providing near comprehensive resources in regard to case law and academic writing on the CISG: cisg-online: www.globalsaleslaw.org/index.cfm?pageID=29; CISG database: http://iicl.law.pace.edu/cisg/cisg; UNCITRAL Digest on the CISG: https://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf; case law on UNCITRAL texts (‘CLOUT’): www.uncitral.org/clout/index.jspx.
  6. See below in regard to the application of the CISG, in particular footnote 8.
  7. See also for a more detailed discussion I Schwenzer/P Hachem in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Intro to Articles 1- 6 paras 12 et seq.
  8. An arbitral tribunal will apply the CISG as the choice of the parties directly if the parties have chosen the law of a member state without any specification since the CISG is part of its domestic law. However, the requirements of Article 1(1) have to be met. In addition, a tribunal will respect the direct choice of the CISG as applicable law if it is either acting as amiable compositeurs or if the lex arbitri permits or even requires the application of rules of law instead of (or in addition to) a particular domestic law [see I Schwenzer/P Hachem in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Intro to Articles 1- 6 para 12]. Note that issues of the application of mandatory rules or ordre public in regard to the application of the CISG should only arise in exceptional circumstances (potentially in regard to interest if the seat of the arbitration is in an Islamic state) since the CISG was drafted with the aim to amalgamate the world’s legal regimes.
  9. G Petrochilos ‘Arbitration Conflict of Laws Rules and the 1980 International Sales Convention’ (1999) 52 Revue Hellenique de Droit International 191; S Kröll ‘Arbitration and the CISG’ in I Schwenzer, Y Atamer, P Butler (eds) Current Issues in CISG and Arbitration (Eleven International Publishing, Den Haag, 2013) 59.
  10. See in regard to the application of Article 1(1)(b) A Janssen, M Spilker ‘CISG in the World of International Commercial Arbitration’ 77 (2013) RabelsZ 131, 139 who also discusses whether Article 95 CISG binds the arbitral tribunal.
  11. See G Petrochilos ‘Arbitration Conflict of Laws Rules and the 1980 International Sales Convention’ (1999) 52 Revue Hellenique de Droit International 191; S Kröll ‘Arbitration and the CISG’ in I Schwenzer, Y Atamer, P Butler (eds) Current Issues in CISG and Arbitration (Eleven International Publishing, Den Haag, 2013) 59.
  12. S Kröll ‘Arbitration and the CISG’ in Schwenzer, Atamer, Butler (eds) Current Issues in CISG and Arbitration (Eleven International Publishing, Den Haag, 2013) 59, 65; A Janssen, M Spilker ‘CISG in the World of International Commercial Arbitration’ 77 (2013) RabelsZ 131, 137; see in regard to the view that arbitral tribunals should have regard to Article 1(1)(a) P Butler ‘Choice of Law’ in L DiMatteo/A Janssen/U Magnus/R Schulze (eds) International Sales Law (Beck, Hart, Nomos, Munich, 2016) Ch 30 paras 63-70.
  13. CISG, Article 30 ‘The seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention.
  14. CISG, Article 53: ‘The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.’
  15. Roder Zelt- und Handelskonstruktionen GmbH v. Rosedown Park Pty Ltd and Reginald R Eustace (Fed Ct, Adelaide, SA (28 April 1995) CISG-online 218.
  16. That means the parol evidence rule is not applicable under the CISG unless the parties have specifically agreed to the exclusivity of the written contract. It also should be noted that consideration is not required for a valid contract under the CISG.
  17. Overview in S Kröll in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 35; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 35.
  18. A claim for specific performance is subject to Article 28.
  19. See the jurisprudence in I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Articles 74 et seq.; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Articles 74 et seq.
  20. CISG, 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.’
  21. 'Der Gläubiger ist wirtschaftlich so zu stellen, wie wenn der Vertrag vollumfänglich korrekt erfüllt worden wäre’. Handelsgericht Zürich (17 September 2014) CISG-online 2656.
  22. OGH (15 January 2013), CISG-online 2398; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 3.
  23. See page 31, infra.
  24. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 5.
  25. M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 para 23; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 3.
  26. OGH (14 January 2002) CISG-online 643; W Witz in W Witz/H-C Salger/M Lorenz, Internationales Einheitliches Kaufrecht (Beck, Munich, 2016) Article 74 para 12.
  27. OGH (14 January 2002) CISG-online 643, CISG-AC Op 6, J Gotanda, Comment 1.1.
  28. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 8.
  29. Secretariat Commentary on the 1978 Draft, Article 70 (now Article 74) para 4.
  30. This is implicit in Articles 75 & 76. M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 para 22.
  31. Handelsgericht Zürich (17 September 2014) CISG-online 2656; Landgericht Trier (12 October 1995) CISG-online 160; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 17; see also Secretariat Commentary on 1978 Draft, Article 70 (now Article 74) para 7. Note that in regard to the seller’s calculation of damages Article 74 et seq. are applicable within the European Union instead of the domestic provisions of the Late Payment Directive (see I Schwenzer/P Hachem in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 90 para 4 et seq.)
  32. See Oberster Gerichtshof (14 January 2002) CISG-online 643; Nova Tool and Mold Inc v. London Industries Inc, Ontario Court of Appeal (16 December 1998) CISG-online 572, [2000] O.J. No. 307. No. C31315; Delchi Carrier SpA v. Rotorex Corp, U.S. Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140; See Secretariat Commentary on 1978 Draft, Article 70 (now Article 74) para 6.
  33. Oberlandesgericht Köln (24 April 2013) CISG-online 2480 para 46; Oberlandesgericht Köln (8 January 1997) CISG-online 217; see Secretariat Commentary on 1978 Draft, Article 70 (now Article 74) para 7.
  34. Compare Oberlandesgericht Köln (8 January 1997) CISG-online 217.
  35. Handelsgericht Zürich (17 September 2014) CISG-online 2656; OLG Graz (29 July 2004) CISG-online 1627; Audiencia Provincial de Palencia (26 September 2005) CISG-online 1673; Chamber of National and International Arbitration of Milan (28 September 2001) CISG-online 1582.
  36. Bundesgerichtshof (25 June 1997) CISG-online 277; Delchi Carrier SpA v. Rotorex Corp US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140; Oberlandesgericht Hamm (9 June 1995) CISG-online 146. It has to be noted that the seller keeps the right to remedy the defects pursuant Article 48.
  37. App Ct of Eastern Finland (27 March 1997) CISG-online 782.
  38. Kantonsgericht Wallis (28 January 2009) CISG-online 2025; Oberlandesgericht München (18 October 1978) but see OLG Düsseldorf (14 January 1994) CISG-online 119: recognition only in as far as seller can prove that a timely payment would have yielded a higher monetary value than was possible as a result of the delay; see overview J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 paras 52 et seq.
  39. OLG Düsseldorf (14 January 1994) CISG-online 119.
  40. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 28.
  41. Bundesgerichtshof (10 December 1986) NJW 1987, 831.
  42. See in regard to Article 77, page 27, infra.
  43. OLG Köln (14 August 2006) CISG-online 1405; CIETAC (9 November 2005) CISG-online 1444; Landgericht Landshut (5 April 1995) CISG-online 193; Arbitral Award Vienna Arbitral Tribunal (15 June 1994) CISG-online 691; Arbitral Award, Arbitration Institution of the Stockholm Chamber of Commerce 107/1997, CISG-online 1301.
  44. Delchi Carrier SpA v. Rotorex Corp US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140.
  45. OLG Köln (14 August 2006) CISG-online 1405; Arbitral Award, Arbitration Institution of the Stockholm Chamber of Commerce 107/1997, CISG-online 1301; Bundesgerichtshof (25 June 1997), CISG-online 277.
  46. See Arbitral Award, ICC 7585/1992, CISG-online 105.
  47. District Court Tukums (5 May 2010) CISG-online 2584; ICC Ct Arb 7197/1992 CLOUT No 104; Int Ct Russian CCI (9 September 1994) 375/1993 http://cisgw3.law.pace.edu/cases/940909r1.html.
  48. OLG Karlsruhe (8 February 2006) CISG-online 1328.
  49. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 28.
  50. Cour d’appel de Paris (18 June 2002) www.cisg.fr/decision.html?lang=fr&date=02-06-18 (last accessed 27 July 2016); W Witz in W Witz/H-C Salger/ M Lorenz, Internationales Einheitliches Kaufrecht (Beck, Munich, 2016) Article 5 para 5; U Magnus in J v Staudingers Kommentar zum Bürgerlichen Recht Vol XIV (14th ed, De Gruyter, Berlin, 2011) Article 5 para 8.
  51. Supported by OLG Düsseldorf (2 July 1993) CISG-online 74; Handelsgericht Zürich (26 April 1995) CISG-online 248 para 5.b.; CISG-AC Op 12 Rapporteur Sono, Comment 2.3.1; I Schwenzer/P Hachem in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 5 para 10.
  52. See Miami Valley Paper LCC v. Lebbing Engineering and Consulting GmbH SD Ohio (10 October 2006) CISG-online 1362, Supreme Court of Israel (17 March 2009) CISG-online 1980 para 73; U Magnus in J v Staudingers Kommentar zum Bürgerlichen Recht Vol XIV (14th ed, De Gruyter, Berlin, 2011) Article 5 para 14; J Lookofsky ‘Understanding the CISG’ (2003) Duke J Comp & Int’l L 263, 285.
  53. OLG Tübingen (26 May 1998) CISG-online 513; J Honnold/H Flechtner, Uniform Law for International Sales Under the 1980 United Nations Convention (Kluwer Law International, Alphen aan Den Rijn, 2009) Article 5 para 73.
  54. See Castel Electronics Pty Ltd v. Toshiba Sinagpore Ptd Ltd Fed Ct Aust (28 September 2010) CISG-online 2158.
  55. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, 2016) Article 74 para 35 but see in regard to the recovery of the obligee’s legal costs under Article 74 from the obligor stemming from their relationship, see page 15, infra.
  56. CISG-AC Op 6, Calculation of Damages under CISG Article 74, Rapporteur J Gotanda, Comment 7.1; P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) para 299a; U Magnus in J v Staudingers Kommentar zum Bürgerlichen Recht Vol XIV (14th ed, De Gruyter, Berlin, 2011) Article 74 para 27; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, 2016) Article 74 para 36.
  57. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, 2016) Article 74 para 36.
  58. See examples in P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) para 40.
  59. Aricle 74’s foreseeability requirement, however, might limit the recoverability – see page 13, infra.
  60. See LG Aachen (14 May 1993) CISG-online 86.
  61. Secretariat Commentary: the reference to loss profits was included since ‘in some legal systems the concept of ‘loss’ standing alone does not include loss of profit’ (Secretariat Commentary on 1978 Draft, Article 70 (now Article 74) para 3.
  62. See Audiencia Provincial de Murcia (15 July 2010) CISG-online 2130.
  63. See page 18, infra.
  64. See CISG-AC Opinion No 6, Calculation of Damages under CISG Article 74, Rapporteur J Gotanda, Comment 3.19.
  65. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 27.
  66. Compare ICC Court of Arbitration Arbitral Award No 9187/1999 CISG-online 705; W Witz in W Witz/H-C Salger/M Lorenz (eds), Internationales Einheitliches Kaufrecht (Beck, Munich, 2016) Article 74 para 15; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 38.
  67. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 28; D Saidov, The Law of Damages in International Sales: The CISG and other International Instruments (Hart Publishing, Oxford, 2008) 76.
  68. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 38.
  69. OLG Hamburg (26 November 1999) CISG-online 515; Delchi Carrier SpA v Rotorex Corp US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140.
  70. Compare Handelsgericht Zürich (22 November 2010) CISG-online 2160.
  71. CISG-AC Opinion No 6, Calculation of Damages under CISG Article 74, Rapporteur J Gotanda, Comment 3.15; I Schwenzer/P Hachem ‘The Scope of the CISG Provisions on Damages’ in D Saidov/R Cunnington (eds), Contract Damages: Domestic and International Perspectives (Hart, Oxford, 2008) 91, 98; D Saidov, The Law of Damages in International Sales: The CISG and other International Instruments (Hart, Oxford, 2008) 70 et seq. but Delchi Carrier SpA v. Rotorex Corp US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140; Kantonsgericht Zug (14 December 2009) CISG-online 2026 not 13.5; but compare PICC (International Institute for the Unification of Private Law, UNIDROIT Principles of International Commercial Contracts 2010, Official Comment 2) 7.4.3(2), which also stipulates the reimbursement of the loss of chance.
  72. CIETAC (4 April 1997) CISG-online 1660; Serbian Chamber of Commerce (1 October 2007) CISG-online 1793; P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) para 308.
  73. Landgericht Stuttgart (31 August 1989) CISG-online 11; AG Oldenburg (24 April 1990) CISG-online 20.
  74. Compare Semi-Materials Co Ltd v. MEMC Material Electronics, Ed Mo (10 January 2011) CISG-online 2168.
  75. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 43.
  76. Compare Secretariat Commentary on 1978 Draft, Article 70 (now Article 74) para 5; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 34.
  77. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 27; see also I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 44.
  78. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 29; see also I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 46.
  79. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 63.
  80. OLG Düsseldorf (2 July 1993) CISG-online 74; P Huber in P Huber/A Mullis, The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007) 281; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 30.
  81. Handelsgericht Aargau (10 July 2010) CISG-online 2176; OLG Hamburg (28 February 1997) CISG-online 261; D Saidov, The Law of Damages in International Sales: The CISG and other International Instruments (Hart, Oxford, 2008) 265; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 31; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 65.
  82. Kantonsgericht Zug (14 December 2009) CISG-online 2026, note 11.2.
  83. Bundesgerichtshof (25 November 1998) CISG-online 353 (seller delivered surface-protective film to buyer for use by the buyer’s business partner. The buyer did not test the film, which had to be self-adhesive and removable. When the film was removed from polished high-grade steel products by the buyer’s business partner, it left residues of glue on the surface. The buyer paid the expenses of removing the glue residue and claimed for reimbursement of these expenses against the seller.); OLG Köln (21 May 1996) CISG-online 254. Cour de Cassation (17 February 2015) www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT000030270329&fastReqId=1445360440&fastPos=1 (last accessed 28 July 2016) – foreseeability not ascertainable, if damages cannot with certainty be established.
  84. See ICC Court of Arbitration, Arbitration Case No. 9187 of June 1999 (Coke case) www.cisg.law.pace.edu/cisg/wais/db/cases2/999187i1.html.
  85. See Oberster Gerichtshof (12 January 2002) CISG-online 643.
  86. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 paras 38, 39 with further references; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed,  OUP, Oxford, 2016) Article 74 para 41 with further references.
  87. See I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 4; see examples in UNCITRAL Digest on the CISG, Article 74 paras 21 et seq. www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf.
  88. M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 para 41. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 41; explicitly disagreeing P Huber in P Huber/A Mullis, The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007) 279.
  89. Oberlandesgericht Düsseldorf (2 July 1993) CISG-online 74.
  90. See for a general overview of the treatment of disgorgement of profits: E Hondius/A Janssen (eds), Disgorgement of Profits - Gain Based Remedies throughout the World (Springer, Heidelberg, 2015).
  91. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 45.
  92. LG München (30 August 2001) CISG-online 668; Hermanos Successors SA v. Hearthside Baking Company, Federal Appellate Court (7th Cir) (19 November 2002) CISG-online 684; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 73; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 31.
  93. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 73.
  94. San Lucio et al v. Import & Storage Services et al D NJ (15 April 2009) CISG-online 1836; Norfolk Southern Railway Company v. Power Source Suppy Inc WD Pa (25 July 2008) CISG-online 1776; M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 paras 53, 54; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 30; CISG-AC Opinon No. 6, Calculation of Damages under CISG Article 74, Rapporteur J Gotanda Comment 5.1.
  95. See overview in UNCITRAL Digest on the CISG, Article 74 para 27 www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf.
  96. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 30; CISG-AC Opinon No. 6, Calculation of Damages under CISG Article 74, Rapporteur J Gotanda Comment 5.1.
  97. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 31 with further references.
  98. See not excluding that Article 74 covers legal costs Stemcor v. Miracero (30 September 2014) US District Court, SD of New York (14-cv-00921 (LAK)) CISG-online 2659; in regard to foreseeability, page 13, and in regard to causation page 13.
  99. See M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 para 55: Goods are sold by A to B under a CISG contract. The same goods are sold by B to C, whether under the CISG or domestic law. A breaches the contract with B by delivering defective goods. B who on-sells those defective goods is in breach of its contract with C. B ends up having to pay damages to C as well as its own legal costs and a contribution to C’s legal costs. When B sues A for breach of contract under the CISG, B’s loss will include not just its damages liability to C but also both sets of legal costs in the B-C proceedings.
  100. See in contrast PICC, Article 7.1.6.: ‘A clause which limits or excludes one party’s liability for non-performance or which permits one party to render performance substantially different from what the other party reasonably expected may not be invoked if it would be grossly unfair to do so, having regard to the purpose of the contract.’
  101. Article 4 states;’ 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;[…]’; see in regard to the application: OLG München (8 February 1995) cisgw3.law.pace.edu/cases/950208g2.html; Hof Arnhem (22 August 1995) http://cisgw3.law.pace.edu/cases/950822n1.html; ICC Court of Arbitration, Arbitral Award No 7197/1992 cisgw3.law.pace.edu/cases/927197i1.html; CISG AC Opinion No 10, Agreed Sums Payable upon Breach of an Obligation in CISG Contracts, Rapporteur P Hachem.
  102. M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 para 72.
  103. See P Huber in P Huber/A Mullis The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007) 280.
  104. A lost volume seller is a seller who can produce as much of certain goods as they can sell. That means that a lost volume seller loses out on an opportunity to sell extra goods if the buyer breaches the contract.
  105. Oberster Gerichtshof (28 April 2000) CISG-online 581; see for an extensive analysis M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 paras 48-50.
  106. See example by M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 para 50.
  107. See for an in depth discussion of human rights standards as inherent characteristics of goods (Article 35): I Schwenzer/B Leisinger ‘Ethical Values and International Sales Contracts’ in R Cranston/J Ramberg/J Ziegel (eds) Commercial Law Challenges in the 21st Century; Jan Hellner in memorium (Stockholm Centre for Commercial Law, Juridiska institutionen, 2007) 249; P Butler ‘The CISG - a secret weapon in the fight for a Fairer World?’ in I Schwenzer (ed), CISG – 35 years and beyond (Eleven International Publishing, Den Haag, 2016) ch 18.
  108. See I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 24; I Schwenzer/P Hachem ‘The Scope of the CISG Provisions on Damages’ in D Saidov/R Cunnington (eds), Contract Damages: Domestic and International Perspectives (Hart, Oxford, 2008) 91, 99, 100; N Schmidt-Ahrendts ‘Disgorgement of Profits under the CISG’ in I Schwenzer/S Spagnolo (eds), State of Play: The 3rd Annual MAA Peter Schlechtriem Conference (Eleven International Publishing, Den Haag, 2012) 89, 101.
  109. Handelsgericht Zürich (17 September 2014) CISG-online 2656; Oberlandesgericht Zweibrücken (31 March 1998), CISG-online 481; Tribunale die Vigevano (12 February 2000) CISG-online 493; CLOUT case No. 476 (Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (6 June 2000) Arbitral Award 406/1998); CLOUT case No. 935 Handelsgericht Zürich (25 June 2007); J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 9; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para 66.
  110. M Bridge ‘Remedies and Damages’ in L Di Matteo/A Janssen/U Magnus/R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016) Ch 19 para 39; CISG-AC Opinion No 6, Calculation of Damages under the CISG Article 74, Rapporteur J Gotanda Comment 2.1.
  111. Oberlandesgericht Celle (2 September 1998), CISG-online 506; Oberlandesgericht Köln (21 May 1996) CISG-online 254; Landgericht München (20 February 2002) CISG-online 712.
  112. Käräjäoikeus of Kuopio (5 November 1996) CISG-online 869; CIETAC CISG/1990/01 http://cisgw3.law.pace.edu/cases/910418c1.html (last accessed 28 July 2016).
  113. CIETAC CISG/1995/01 CISG-online 971; Tribunal de Commerce Namur (15 January 2002) CISG-online 759.
  114. Steinbock-Bjonustan EHF v. NV Duma (4 June 2004) District Court Kortrijk http://cisgw3.law.pace.edu/cases/040604b1.html (last accessed 27 July 2016); District Court Hasselt (18 October 1995) www.unilex.info/case.cfm?pid=1&do=case&id=266&step=FullText (last accessed 28 July 2016); Vital Berry Marketing v. Dira-Frost (2 May 1995) District Court Hasselt (last accessed 28 July 2016) http://cisgw3.law.pace.edu/cases/950502b1.html.
  115. CISG-AC Opinion No 6, Calculation of Damages under the CISG Article 74, Rapporteur J Gotanda Comment 2.9; see Cour de Cassation (17 February 2015) www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT000030270329&fastReqId=1445360440&fastPos=1 (last accessed 28 July 2016) & Delchi Carrier SpA v. Rotorex Corp US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140 which refer to ‘sufficient certainty’ albeit without discussion.
  116. J Bonell in CM Bianca/J Bonell, Commentary on the International Sales Law (Giuffrè: Milan, 1987) Article 7 para 2.3.2.2.
  117. PICC, Article 7.4.3. The UNIDROIT Principles of International Commercial Contract are soft law (devised by UNIDROIT) and designed to be an elaboration of an international restatement of general principles of contract law. They can be found at www.unidroit.org/english/principles/contracts/principles2010/integralversionprinciples2010-e.pdf (last accessed 17 August 2016).
  118. Convention on the Limitation Period in the International Sale of Goods 1974 can be found at: www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1974Convention_limitation_period.html (last accessed 5 October 2016).
  119. Landgericht München I (6 April 2000) CISG-online 665; Oberlandesgericht Braunschweig (28 October 1999) CISG-online 510; Landgericht Heidelberg (2 October 1996) 264.
  120. Lord Collins of Mapesbury et al, Dicey, Morris & Collins on the Conflict of Laws Vol I (15th ed, Sweet & Maxwell, London 2012) paras 7-055, 7-056.
  121. PICC, Article 10.2(1) and Article 10.2(2) respectively.
  122. CISG, Article 75 states: ‘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.’
  123. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 74 para 3.
  124. See Articles 49, 64, 72, 73 in regard to the requirements of avoidance for buyer and seller respectively.
  125. Oberlandesgericht Bamberg (13 January 1999) CISG-online 516; CISG-AC Opinion No 8, Calculation of Damages under the CISG Articles 75 and 76, Rapporteur J Gotanda, Comment 2.3.3.
  126. Handelsgericht des Kantons Zürich (17 September 2014) CISG-online 2656; OLG Brandenburg (5 February 2013) CISG-online 2400; Supreme Court Poland (27 January 2006) CISG-online 1399; Oberlandesgericht Hamburg (28 February 1997) CISG-online 261 (where the Court held that in the case of the seller seriously and finally refusing to perform the principle of good faith mandated that the buyer did not have to avoid the contract before making the cover purchase); I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 75 para 5.
  127. See Secretariat Commentary on 1978 Draft, Article 71 para 4.
  128. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 75 para 11.
  129. P Huber in P Huber/A Mullis, The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007) §13 (VII)(2)(a)(bb).
  130. Delchi Carrier SpA v. Rotorex Corp, U.S. Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 75 para 14.
  131. P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) para 311.
  132. ICC Court of Arbitration, Arbitral Award No 8128/1995, CISG-online 526; Oberlandesgericht Düsseldorf (14 January 1994) CISG-online 119; compare Secretariat Commentary on 1978 Draft, Article 71 para 4
  133. Oberlandesgericht Düsseldorf (14 January 1994) CISG-online 119.
  134. Secretariat Commentary on 1978 Draft, Article 71 para 5.
  135. Compare Oberlandesgericht Hamburg (28 February 1997) CISG-online 261 – period of two weeks considered reasonable for cover purchase for iron-molybdenum.
  136. Compare Oberlandesgericht Düsseldorf (14 January 1994) CISG-online 119 – period of three months reasonable for seasonal goods.
  137. The wording of Article 76 does not seem to support the view that an unreasonable substitute transaction can be be claimed under Article 76 since Article 76 assumes that no substitute transaction has been made. However, in practice a substitute transaction will be reasonable as to the market price (the market price is generally reasonable under Article 77 mitigation of loss – see in regard to Article 77, page 27, infra) of the goods which is what can be claimed as damages under Article 76. Therefore, in practice it will make little difference whether to base one’s claim on Article 75 or Article 76 in the case of an unreasonable substitute transaction (see N Schmidt-Ahrendts, Das Verhältnis von Erfüllung, Schadensersatz und Vertragsaufhebung im CISG (Mohr Siebeck, Tübingen, 2007) 84, 85; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 75 para 10).
  138. Oberster Gerichtshof (28 April 2000) CISG-online 581.
  139. Article 55 provides that when a contract has been validly concluded but does not expressly or implicitly fix the price, the price will be the generally charged price for those goods at the time the contract was concluded, unless the parties provide otherwise.
  140. See Secretariat Commentary on 1978 Draft, Article 71 para 3; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 75 para 22.
  141. Downs Investment v. Perwaja Steel, Supreme Court of Queensland (17 November 2000) CISG-online 587.
  142. Delchi Carrier SpA v. Rotorex Corp, US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140.
  143. Landgericht Krefel (28 April 1993) CISG-online 101.
  144. Handelsgericht Aargau (26 September 1997) CISG-online 329.
  145. ICC Court of Arbitration, Arbitral Award 8128/1995, CISG-online 526; Delchi Carrier SpA v. Rotorex Corp, US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140.
  146. See I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 75 para 8.
  147. Compare Hof van Beroep Gent (20 October 2004) CISG-online 983.
  148. CISG, Article 76 states: ‘(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 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.’
  149. Oberlandesgericht München (15 September 2004) CISG-online 1003; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 76 para 3 with further references; but formal avoidance needed to have certainty in regard to the time for establishing the market price. Oberlandesgericht Graz (29 July 2004) CISG-online 1627; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 76 para 7.
  150. CISG, Article 35(2) states: ‘2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:
    (a) are fit for the purposes for which goods of the same description would ordinarily be used;
    (b) are fit for any particular purpose expressly or impliedly 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 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 of such lack of conformity.’
  151. CIETAC, Arbitral Award CISG/2000/01 (1 February 2000).
  152. Novia Handelsgesellschaft mbH v. AS Maseko, Tallinna Ringkonnakohus (19 February 2004) CISG-online 826.
  153. Oberlandesgericht München (15 September 2004) CISG-online 1627 (translation); see also official commentary to Article 7.4.6 PICC.
  154. See Oberlandesgericht Celle (2 September 1998) CISG-online 506.
  155. See ICC, Court of Arbitration, Arbitral Award 8740/1996, CISG-online 1294; F Enderlein/D Maskow, International Sales Law (Oceana, Dobbs Ferry NY, 1992) Article 76 para 2.
  156. Oberster Gerichtshof (28 April 2000) CISG-online 581. Note that Article 31 determines the place of delivery.
  157. See page 27, infra.
  158. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 76 para 20.
  159. See Oberlandesgericht Hamm (22 September 1992) CISG-online 75.
  160. Secretariat Commentary on the 1978 Draft, Article 72 (now Article 76) para 11.
  161. See Oberlandesgericht Hamburg (4 July 1997) CISG-online 1299; CISG AC-Opinion No 8, Calculation of Damages under the CISG, Articles 75 and 76 Rapporteur J Gotanda, Comment 4.5.
  162. CISG, Article 55 provides: ‘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 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.’ The drafting history of Article 76 clarifies that Article 76 was drafted to exclude any price calculation on the basis of Article 55 (Summary of Records of Meetings of the First Committee, 37th Meeting, Consideration of Report of the Drafting Committee to the Committee (7 April 1980) 1980 Vienna Diplomatic Conference, paras 59-69).
  163. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 76 para 17.
  164. Oberlandesgericht Hamm (22 September 1992) CISG-online 75; Oberlandesgericht Graz (29 July 2004) CISG-online 1627.
  165. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 76 para 13.
  166. Secretariat Commentary on 1978 Draft, Article 72 (now Article 76) para 2.
  167. See Oberlandesgericht Hamm (22 September 1992) CISG-online 75. Alternatively, in that scenario the obligee may seek damages under Article 74. A claim under Article 74 may be particularly appropriate in the case of a lost volume seller.
  168. See for a different view: D Saidov, The Law of Damages in International Sales: The CISG and other International Instruments (Hart Publishing, Oxford, 2008) 118, 119.
  169. See I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 76 para 6; P Huber in P Huber/A Mullis, The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007) 283, 288.
  170. See page 13, supra.
  171. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 76 para 28.
  172. Oberlandesgericht Celle (2 September 1998) CISG-online 506; CIETAC, Arbitral Award (5 February 1996) http://cisgw3.law.pace.edu/cases/960205c1.html.
  173. Oberlandesgericht Hamm (22 September 1992) CISG-online 57.
  174. UNCITRAL Digest on the CISG, Article 77 fn 7 www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf.
  175. Compare Article 8(2): ‘If the preceding paragraph is not applicable, statements made by and other conduct of a party 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.’
  176. P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) para 315; see Article 9:
    ‘(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.
    (2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.’
  177. Secretariat Commentary on the 1978 Draft, Article 71 (now Article 75).
  178. D Saidov, The Law of Damages in International Sales: The CISG and other International Instruments (Hart Publishing, Oxford, 2008) 134; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 77 para 20.
  179. Secretariat Commentary on the 1978 Draft, Article 71 (now Article 75); CISG-AC Opinion No 8, Calculation of Damages under the CISG Articles 75 and 76 Rapporteur J Gotanda, Comment 2.3.
  180. See for additional examples UNCITRAL, Digest on the CISG, Article 77 paras 9 et seq. www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf.
  181. Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade (1 January 2005) CISG-online 1372; Oberlandesgericht Celle (2 September 1998) CISG-online 506; Oberlandesgericht Hamburg (28 February 1997) CISG-online 261: cover purchase three times the contract price reasonable given it was the market price in the available time period; P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) para 315.
  182. Treibacher Industrie AG v. Allegheny Technologies Inc, US Court of Appeals (11th Circuit) (12 September 2006) CISG-online 1278; Lothringer Gunther Grosshandelsgesellschaft für Bauelemente und Holzwerkstoffe v. NV Fepco International, Hof van Beroep Antwerpen (24 April 2006) CISG-online 1258: Six months not a reasonable time period for resale.
  183. Oberlandesgericht Düsseldorf (14 January 1994) CISG-online 119.
  184. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 77 para 23.
  185. Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Arbitral Award (27 July 1999) CISG-online 779.
  186. ICC Court of Arbitration, Arbitral Award 7585/1992, CISG-online 105.
  187. Oberster Gerichtshof (28 April 2000) CISG-online 581.
  188. Handelsgericht Zürich (17 September 2014) CISG-online 2656.
  189. See Handelsgericht des Kantons St Gallen (3 December 2002) CISG-online 727: ‘The Court appreciates that it might be extremely burdensome and difficult to prove [buyer’s] allegations to the satisfaction of the Court, because [seller] only is in the position to give notice about its particular measures to mitigate.’
  190. Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Aribtral Award (23 December 2004) CISG-online 1188.
  191. ICC Court of Arbitration, Arbitral Award 8962/1997, CISG-online 1300.
  192. Oberlandesgericht Frankfurt (18 January 1994) CISG-online 123; Landgericht Hamburg (26 September 1990) CISG-online 21; K Bacher in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 78 para 5.
  193. See Kantonsgericht Zug (21 October 1999) CISG-online 491; Handelsgericht des Kantons Zürich (5 February 1997) CISG-online 327; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 78 para 7; CISG-AC Opinon No 14, Interest under Article 78, Rapporteur: Y Atamer Comment 3.b.
  194. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 78 para 10; CISG-AC Opinion No 14, Interest under Article 78, Rapporteur Y Atamer Comment 4 both with further references.
  195. Handelsgericht des Kantons Aargau (5 November 2002) CISG-online 715; Landgericht Stendahl (12 October 2000) CISG-online 592; Tribunale di Padova (31 March 2004) CISG-online 823; P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) paras 318, 319. See J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 78 paras 17-20 for a discussion of the consequences of applying domestic law to the issue.
  196. See Chicago Prime Packers v. Northam Food Trading C 320 F Supp 2d 702, 715 (ND III 2004) (7th Circ 2005); P Butler ‘CISG and Arbitration - A Fruitful Marriage’ (2014) XVII International Trade and Business Law 322; J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 78 para 21.
  197. See Zapata Hermanos Sucessors v. Hearthside Baking Co Inc US District Court, Northern District of Illinois (28 August 2001) CISG-online 35; Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in Österreich, Arbitral Award (15 June 1994) CISG-online 120; J Gotanda ‘Damages in Private International Law’ (2007) 326 Recueil des Cours 73, 241 et seq.
  198. ICC Court of Arbitration, Arbitral Award 7153/1992 CISG-online 35; Oberlandesgericht Koblenz (31 January 1997) CISG-online 256; Tribunale di Pavoda (31 March 2004) CISG-online 823.
  199. See CISG-AC Opinon No 14, Interest under Article 78, Rapporteur Y Atamer Appendix with an overview of cases; UNCITRAL Digest on the CISG: www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf.
  200. Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in Österreich, Arbitral Award (15 June 1994) CISG-online 691; ICC Court of Arbitration, Arbitral Award No.7331 (1 January 1994) CISG-online 106; Landgericht Frankfurt am Main (16 September 1991) CISG-online 26; Rechtbank van Koophandel, Hasselt (20 September 2005) CISG-online 1496; Serbian Chamber of Commerce Arbitration (19 October 2009) CISG-online 2265.
  201. Oberlandesgericht Graz (13 June 2013) CISG-online 2458; Landgericht Berlin (21 March 2003) CISG-online 785; Tribunal Cantonal Vaud (11 April 2002) CISG-online 899; Yugoslav Chamber of Commerce Arbitration, Arbitral Award (28 January 2009) CISG-online 1856; Rechtbank van Koophandel Oudenaarde (10 July 2001) CISG-online 1785; LG Heidelberg (2 November 2006) CISG-online 1416.
  202. Rechtbank van Koophandel Ieper (18 February 2002) CISG-online 764; Rechtbank van Koophandel Oudenaarde (10 July 2001) CISG-online 1785.
  203. ICC Court of Arbitration, Arbitral Award No 11849 (1 January 2003) CISG-online 1421; Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Arbitral Award (15 November 2006) CISG-online 2008.
  204. Serbian Chamber of Commerce, Arbitral Award (4 June 2009) CISG-online 2266; Serbian Chamber of Commerce, Arbitral Award (23 January 2008) CISG-online 1946; Rechtbank van Koophandel, Hasselt (10 May 2006) CISG-online 1259.
  205. China International Economic and Trade Arbitration Commission, Arbitral Award (2 September 2005) CISG-online 1712; ICC Court of Arbitration, Arbitral Award No 8769 (1 December 1996) CISG-online 775; ICC Court of Arbitration, Arbitral Award 8128/1995, CISG-online 526.
  206. CISG-AC Opinion No 14, Interest under Article 78, Rapporteur Y Atamer Comment 3.36.
  207. ICC Court of Arbitration, Arbitral Award No 8502 (1 November 1996) CISG-online 1295; ICC Court of Arbitration, Arbitral Award No 8908 (1 December 1998) CISG-online 1337; Hof van Beroep, Antwerpen (24 Apr-2006) CISG-online 1258.
  208. CISG-AC Opinon No 14, Interest under Article 78, Y Atamer (Beijing 2013) Comment 3.45.
  209. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 78 para 28.
  210. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article para 1.
  211. See, for example: Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (17 October 1995) CISG-online 207: the lack of free convertible bank credit of the Russian buyer/payment debtor does not relieve the buyer to pay the purchase price to the seller. Tribunale Civile Monza (14 January 1993) CISG-online 540 the rise of the market price of steel by 30 per cent since the conclusion of the contract is not unreasonable hardship.
  212. For a full discussion, including the requirements of Article 79, see Y Atamer in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 79; I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 79; P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) paras 288 et seq.
  213. I Schwenzer in Schlechtriem & Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, 2016) Article 74 para 10. The claim for specific performance is subject to Article 28.
  214. J Gotanda in S Kröll/L Mistelis/P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (Beck, Hart, Munich, 2011) Article 75 para 3 citing P Schlechtriem, ‘Calculation of Damages in the Event of Anticipatory breach under the CISG’ in Liber Amicorum Jan Hellner (2007) Sections I and III available at www.cisg.law.pace.edu/cisg/biblio/schlechtriem20.html#*.

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