Buyer remedy on avoidance of delivered goods

Article 49 is the specific provision of the CISG that provides for the condition under which
the buyer would be able to declare a contract avoided, and subsequently terminate the
contractual relationship with the seller. It is available under two circumstances, either that the
seller has failed to perform its contractual obligations which amounts to a fundamental breach
of contract as defined under article 25, or that in the case of non-delivery, the seller has failed
to deliver the goods within an additional period of time as according with article 47 or
declaring that he will not deliver the goods within the fixed period.

In the circumstance that a seller has already delivered the goods, the buyer shall lose the right
to exercise the remedy if he does not exercise it within the time periods stipulated under
article 49(2). Besides that, article 82 also provided that a buyer may not exercise the remedy
if he is unable to return the goods in their original conditions.

As it was stated in CLOUT case No. 171, article 49 provides a remedy of last resort, which
is available where the buyer could not be expected to continue the contract. Further on, the
burden of proof is on the buyer for him to justify that the seller has fundamentally breach the
contract and deprived the buyer of what is entitled to him under the contract. It is also
necessary for the buyer to prove that he has declared avoidance of the contract and served the
prerequisite notice on the seller.1

For the remedy to be executed, it is conducted through the buyer providing a notice of
avoidance according with article 26 of CISG. The contract could not be automatically
terminated, no specific form is necessary to be prescribed for the notice of avoidance, and it
is not necessary to institute legal proceedings to make the declaration.2 In CLOUT case No.
1029, a notification by copy has been held to suffice. The notice must also clearly express the
buyer’s intention of ending the contract as by CLOUT case No. 1039.

Apart from being an independent remedy, rightful avoidance of contract is also related to
other provisions in the CISG. Whereby, it is the prerequisite for damage assessment under
articles 75 and 76, along with the right to requisite restitution of performance which has
already been rendered under the contract under article 81(2).

1
CLOUT case No. 938
2
Ibid
Seller right to cure after delivery

Article 48 (1) gives the seller the so-called right to "cure," which allows the seller to correct
any failure to perform its obligations under the contract or under the Convention, and to do so
even after the date for performance required under the contract, provided that the exercise of
that right does not cause the buyer unreasonable inconvenience. If the seller has made an
early non-conforming delivery, article 37, in comparison, permits the seller to cure up to the
required date for delivery. Even if the seller cures a failure of performance, the last sentence
of article 48 (1) provides that the buyer retains the right to claim damages for losses suffered
despite the cure.

Under article 48 (2), the seller may give the buyer notice of its willingness to cure a failure of
performance within a particular time, and may request that the buyer "make known whether
he will accept" the cure. According to article 48 (3), a notice indicating the seller's
willingness to cure is deemed to include such a request. If the buyer does not respond to such
a request within a reasonable time (or, presumably, consents to the request),'" the seller may
cure within the time indicated and, pursuant to article 48 (2), the buyer may not during that
period, resort to remedies inconsistent with the seller's curing performance. Under article 48
(4) the buyer must receive a request for the buyer's response to a proposed cure (or a notice of
intent to cure deemed to include such a request under article 48 (3)), or the request or notice
will not have the effect specified in article 48 (2).

This right to cure, however, is "subject to article 49", the provision governing the buyer's
general right to avoid the contract. Avoidance of the contract, therefore, excludes the seller's
right to cure. Generally, it is for the buyer to decide whether or not the contract should be
avoided. The buyer may exercise a right to avoid without restriction from the seller's right to
cure.' This approach is supported by article 48 (2) according to which the seller may ask
whether the buyer will accept a cure2 and by article 49 (2) (b) (iii), which evidences that the
buyer need not accept the seller's offer to cure. There are courts, however, that have adopted
the view that the buyer must first allow the seller to cure any breach (even a fundamental one)
before avoiding, and who deny that there is a fundamental under paragraph (2) or (3) of this
article is breach where the buyer has not given the seller the opportunity to remedy the failure
of performance. It should be noted, however, that a breach is rarely fundamental when the
failure of performance could easily be remedied.6 This rule, however, should not be
misunderstood to mean that in each case the seller must be offered an opportunity to cure
before the buyer can avoid the contract.7 The contract, however, may stipulate that avoidance
is only available after the seller had the opportunity to remedy the defect.

The right to cure is only granted in certain circumstances-specifically, where the seller's
failure to perform can be remedied without unreasonable delay, without unreasonable
inconvenience to the buyer, and without uncertainty that the seller will compensate any costs
the buyer may have advanced.

It has been concluded, based on articles 46 and 48, that the seller is responsible for costs that
the buyer incurs in connection with the seller's cure of defects in delivered goods.

Seller right to cure may avoid buyer’s right to reduction to price

Article 50 provides for the remedy of price reduction when the seller has delivered goods that
do not conform with the contract. In these circumstances, the buyer then may reduce the price
in proportion to the reduced value of the goods. The remedy is, however, not available if the
seller has cured the defects in the goods under articles 37 or 48, or if the buyer has refused the
seller the opportunity for such cure.

It has been indicated that the buyer bears the burden to prove the reduction in value.

Price reduction applies whether the non-conformity constitutes a fundamental or a simple

breach of contract, whether or not the seller acted negligently, and whether or not the seller
was exempted from liability under article. Non-conformity is to be understood in the sense of
article 35, i.e., defects as to quantity,5 quality, description (aliud) and packaging. It thus
applies if inadequate or unsafe packaging causes the destruction or deterioration of the goods.
6 In addition, defects in documents relating to the goods can be treated as a case of non-
conformity. Thus even where damages are excluded because of article, price reduction may
be available. Furthermore, the remedy does not depend on whether the buyer has paid the
price.

The amount of price reduction must be calculated as a proportion: the contract price is
reduced in the same proportion as the value that the non-conforming delivered goods bears to
the value that conforming goods would have. The relevant value is determined as of the date
of actual delivery at the place of delivery.
The parties are free to agree on a specific way to calculate the reduction in value. Where the
parties agreed that the buyer would resell non-conforming goods at the best possible price, it
was held that the buyer could reduce the original contract price by the difference produced by
the resale. If disputed by the parties and not otherwise determinable, the respective values can
be assessed by expert witnesses.

Seller right to avoidance for non-performance

Article 64 defines the conditions under which the seller is entitled to declare the contract
avoided. The rules mirror those of article 49 governing the buyer's right to declare the
contract avoided for breach by the seller. The effects of avoidance are governed by articles 81
to 84. The seller must declare the contract avoided by means of a notice (article 26).
Avoidance under article 64 is available in two cases: first, if the buyer's failure to perform its
contractual obligations amounts to a fundamental breach of contract as defined in article 25
(article 64 (1) (a)); and, secondly, if the buyer fails to pay the price or to take delivery of the
goods within an additional period of time fixed pursuant to article 63 (article 64 (1) (b)).

Avoidance of the contract is a remedy of last resort (ultima ratio) that is available when the
seller cannot be expected to continue the contract. 2 Avoidance does not occur automatically
but requires notice of avoidance by the seller (article 26). In cases of non-payment of the
price, the seller is entitled to avoid the contract at any time after all prerequisites for
avoidance have been met. Where the buyer has paid the price, the seller loses the right to
avoid the contract if the seller does not exercise it within the time periods specified in article
64 (2).

Under article 64, avoidance of the contract is affected by means of a declaration by the seller
("The seller may declare the contract avoided").' By virtue of article 26, a declaration of
avoidance of the contract is effective only if made by notice to the buyer.25 In accordance
with article 27, a delay or error in the transmission of the communication or its failure to
arrive does not deprive the seller of the right to rely on the communication. Pursuant to article
11, the notice need not be in writing and is not subject to any requirement as to form, except
where the article 96 reservation applies. The freedom-from-form requirements principle
governing the notice means that the avoidance declaration can be made orally or derive from
the seller's action.26 Irrespective of the means of expression chosen by the seller, the notice
must clearly indicate that the seller is terminating the contract.27