Seller's Recovery of Price Under the
UN Convention of 1980 for
the International Sale of Goods


Submitted to
Contract for the International Sales of Goods
(CISG) Conference
14-15 September 2005
The Cairo Regional Center for
International Commercial Arbitration (CRCICA)
Cairo, Egypt

By Dr. Hamzeh Haddad*
Law and Arbitration Centre
Amman – Jordan
Tel: 00 962 6 5345777
Fax: 00 962 6 5340 666
E-mail: info@lac.com.jo http://www.lac.com.jo



References and Abbreviations
 

- Atiyah, p.s, the Sale of Goods, 6th ed., London, Pitman.



- Baer, Marvin G., Seller's Remedies (MS), Ontario Law Reform Commission, Draft Act for Sale of Goods, Research Paper, No. III.9.



- Benjamin's Sale of Goods, 2nd ed., by Guest, A.G, London, Sweet and Maxwell, 1981.



- CC: Civil Code.



- CLOUT: Case Law on UNCITRAL TEXTs.



- DUSA: Draft Uniform Sale of Goods Act (1981) in Canada.



- Cheshire and Fifoot's Law of Contract, 10th ed., by Furmston, M.P., London, Butterworths, 1981.



- Farnsworht, E.Allon, Damages and Specific Relief, 27 American Journal of Comparative Law.



- Fridman, G.H.L., Sale of Goods in Canada, 2nd ed., Toronto, The Carswell Co. Ltd. 1979.



- Goldenhielm, Berndt, Some Views on the System of Remedies in the Uniform Law on International Sales, 10 Sca. Stud. In Law (1966), p.10.



- Graveson and Cohn, The Uniform Laws on International Sales Act 1967, London, Butterworths, 1968.



- Honnold, Uniform Law for International Sale Under 1980 UN Convention, Kluwer, 1982.



- ICLQ: International Comparative Law Quarterly.



- Lansing, Paul, the Change in American Attitude to the International Unification of Sales Law Movement and UNCTRAL, 18 A. Bus. L.J.



- Magnus, Ulrich, European Experience with the Hague Sales Law, 3 Com.L.YB, 1979, p.105.



- Mozeaud, Leçon de Droit Civil, Paris, 1968, 1969.



- Nordstrom, Robert J., Sales, West publishing Co., 1970.



- OLRC Report: Ontario Law Reform Commission Report on Sale of Goods, 1979, three volumes.



- Planiol et Riper, Traite Prtique de Droit Civil Français, 2 èm éd., t.6, par Esmein, p. and t.10 (Vente) par Hamel J., Paris, L.G.D.J.



- Strack, Boris, Droit Civil (Obligation), Paris, Libraries Techniques, 1972.



- Szakats, Alexander, the Influence of Common Law Priciples on the Uniform Law on the International Sale of Goods, ICLQ, 1969, p. 749.



- Treitel, G.H., Remedies for Breach of Contract, International Encyclopeida of Comparative Law, Vol. 7, ch. 16.



- UCC: Uniform Commercial Code.

 

Section I
Availability
 

unconfirmed credit. In this hypothesis, the seller is not bound to accept such a credit, nor can he claim payment until the lapse of July. This means that the buyer is allowed to cure any defect in payment as long as he is still having the time to do so. Thus, it is submitted that the reference by ULIS and the Convention to the buyer's failure in making payment is to be understood to that extent.



Relying on the same principle, it is to be observed that the buyer's anticipatory breach does not accelerate the time of payment. So the seller who desires to obtain the contract price must wait until the maturity of payment; otherwise he may have only an action for damages which becomes available immediately after avoiding the contract.



An action for the price remains available to the seller until either he is paid or the contract is avoided(4). But it is suggested that a valid tender by the buyer does not prevent the seller from claiming the price although it may have some effects on other remedies available to him (5).



The seller cannot require the buyer to make payment if he has already resorted to a remedy which is inconsistent with this requirement, namely, the remedy of avoidance. This will be considered below.



Assuming that the buyer's failure in making payment is not lawfully excused, these are the only requirements in respect of the seller's action for the price and any other factor, such as the acceptance of goods or the position of property, is immaterial. This general rule in both ULIS and the Convention is in line with French Law(6) while the approach of English Law, as will be seen later(7), is different.



4- Payment after passage of risk



The question concerning the passing of the risk is outside the scope of the current study, but it is important to consider it to the extent necessary in respect of the buyer's duty of payment. In this connexion, Art. 96 of ULIS provides that:



"Where the risk has passed to the buyer, he shall pay the price notwithstand­ing the loss or deterioration of the goods, unless this is due to the act of the seller or of some other person for whose conduct the seller is responsible."



And Art. 66 of the Convention provides that:



"Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller"(1) .



It is clear from these provisions that the buyer is bound to pay the contract price even though the goods are lost or damaged before receiving them but after the risk has passed to him. A similar approach is followed by English Law(2). An obvious illustration of this is the case in which the risk passes to the buyer after delivering the goods to a carrier for transmission to the buyer, which is familiar in the international sale(3). In such a case, the buyer is obliged to pay the price despite the fact that the goods have lost or deteriorated in transit.



Of course, neither Art. 71 of ULIS nor Art. 58.3 of the Convention applies to the extent that its application is inconsistent with the foregoing provisions. Both articles entitle the buyer not to pay the price until he has had an opportunity to examine the goods. So, for instance, if the goods have been lost in transit after the risk has passed, the buyer is nevertheless bound to pay the price even if no opportunity has been given to him for examining the goods.



The second part of Art. 96 of ULIS and of Art. 66 of the Convention may lead to confusion. In both, the buyer is to pay the price unless the loss or damage (or deterioration) is due to the act (or omission) of the seller. If strictly construed, these words mean that the buyer is absolutely released from his obligation to pay the price even if, for example, the damage to the goods is so trivial that it may easily be covered by reducing the price or by damages. Whether this is the strict intention of the draftsmen is doubtful(4).



The provision under Art. 96 of ULIS differs from Art. 66 of the Convention. Under the former, the buyer may also be discharged from his obligation to make payment when the loss or deterioration of the goods is due to the act of "some other person for whose conduct the seller is responsible". There is no similar provision in the Convention(5); accordingly, this question is subject to the domestic law applicable to the contract which would also be applied in respect of ULIS for determining the persons for whose conduct the seller is responsible (6).



5- Contrast with other remedies



It is of prime significance to note that the seller's right to require payment is inconsistent with the remedy of avoidance, and it is not possible to resort to both at the same time. If the seller has avoided the contract, he cannot subsequently demand payment(1). The reason for that is obvious, that is, the avoidance generally puts an end to the contract and once it operates, both parties are released from their obligations under the contract. However, the seller may, in instalment contracts, be entitled to avoid only part of the contract while other parts survive. In that case, the buyer remains bound by his obligations under any part which has not been affected by avoidance.



It seems that there is no need for ULIS or the Convention to have a particular provision stating that the seller cannot require payment if he has already resorted to any remedy which is inconsistent with that requirement. This is in fact the situation in ULIS while the Convention expressly contains such a provision(2). It is doubtful, however, whether there is any remedy which is inconsistent with demanding payment other than the avoidance(3).



In the Convention, the seller does not lose his right declare the contract avoided so long as he is still unpaid, which means that he can do so even if he has affirmed the contract by requiring payment or otherwise. This is not the situation in at least one case in ULIS. A seller, who bases avoidance on the additional time notice, must avoid the contract "promptly" otherwise the contract is regarded as being affirmed and, as submitted, he cannot retract the affirmation.



Unlike avoidance, there is no contradiction between the seller's action for damages and his action for the price. Therefore, he can under ULIS and the Convention bring the two actions together if their requirements are satisfied(4). Besides, he may be entitled to claim interest on the unpaid sum. In English Law, by contrast, the seller may have the right to claim interest for the delay in making payment while his claim for damages in these circumstances is not well‑founded yet.



It is granted that the rules on damages dealing with the loss, foreseeability and mitigation do not apply to the seller's action for the price where all these matters are irrelevant(5).















6- No period of grace



Art. 64 of ULIS provides that:



"In no case shall the buyer be entitled to apply to a court or arbitral tribunal to grant him a period of grace for the payment of the price.."



While Art. 61.3 of the Convention provides that:



"No period of grace may be granted to the buyer by a court or arbitral tribunal when the seller resorts to a remedy for breach of contract."



This rule in both laws differs from that prevailing in French Law. According to which the general rule is that the court may, after considering the economic situation of the debtor, grant for the payment a period (or periods) of grace up to one year(1). A period of grace may also be granted when the creditor demands the avoidance of the contract.



The approach of English Law seems to be different according to whether the seller seeks performance or avoidance. In the former situation, it appears that there is no authority in the case Law supporting the idea of giving the buyer a period of grace by the court. But in the latter, equity may interfere by giving relief against the strictness of the common law in case of forfeiture of the deposit for non‑payment of a fixed sum on a day certain(2). This principle, as has been suggested, also applies to the buyer who fails to pay the purchase price and equity may thus extend the time for payment(3) (period of grace). The precise length of the time so extended is a matter of discretion and it may be extended again on subsequent application. This is subject to an essential condition, that is, the balance of the price, if not available to the buyer, shall be paid within the time specified by the court(4).



In any case, the whole idea of granting the buyer a period of grace for payment is expressly rejected by ULIS(5) as well as the Convention(6).



7- Rate of interest



In addition to the unpaid price, the seller is entitled to claim interest on it. Under ULIS, the rate of interest shall be equal to the official discount rate in the country where the seller has his place of business or, if he has no place of business, his habitual residence, plus 1%(1). In the Convention, the provision entitling interest does not include its rate or the basic principle for its calculation(2). Therefore, it has been suggested that this question would be subject to the domestic law applicable to the contract(3). But this view raises an important question: What is the solution if that law does not allow, for any reason(4), the payment of interest? The same question arises in respect of ULIS when, for example, the country where the seller has his place of business also forbids interest.



In answering this question, one main fact should be kept in mind; that is, nothing precludes the seller from claiming interest when its requirements are satisfied, and this is so even where the domestic law applicable to the contract forbids interest(5) and even if the seller has the right to claim damages. Accordingly, it is submitted that the law applicable to the rate of interest is to be replaced by another one recognizing interest if the former is not so. This is of course the task of the court, and its choice would presumably be based on grounds reasonable in the circumstances.



In English Law, the court has a discretion to award interest on any debt claimed at such rate as it thinks fit on the whole or any part of the debt, and to decide whether interest is to be allowed for the whole or any part of the period between the date when the cause of action arises and the date of judgment(6). These provisions apply to the seller's action for the price which is an action for a debt (7). But it should be noted that when the contract enables the seller to claim interest, the court has no discretion in the matter(8). It has also been suggested that a similar principle applies when a trade custom or a course of dealing between the parties gives the seller such a night(9).



The approach of French Law is completely different from that of English Law where, in French Law, the buyer is bound to pay interest in three situations(10). Firstly, if the contract so provides. In that case, the contract itself determines the rate of interest and the date on which it starts to run(11). Secondly, if the thing sold and delivered produces fruits or other civil or natural revenues, and interest starts to run here from the date of delivery(12). Thirdly, if the buyer has been summoned. In this case, interest starts to run from the date of the summons or of the seller's claim for the price in justice(13). The rate of interest, if there is no agreement to the contrary, is fixed by the law itself; in civil matters it is 4% while it is 5% in the commercial matters(14). It should be added that, unlike English Law, a French court has no discretion in the matter of interest.

 

Section II
Exceptions
 

8- Texts

Art. 61.2 of ULIS provides that:

"The seller shall not be entitled to require payment of the price by the buyer if it is in conformity with usage and reasonably possible for the seller to resell the goods. In that case the contract shall be ipso facto avoided as from the time when such resale should be effected."

And Art. VIII. 1 of the Convention relating to ULIS provides that:

"Where under the provisions of the Uniform Law one party to a contract of sale is entitled to require performance of any obligation by the other party, a court shall not be bound to enter or enforce a judgement providing for specific performance except in the cases in which it would do so under its law in respect of sale not governed by the Uniform Law."

And Art. 16 of ULIS provides that:

"Where under the provisions of the present Law one party to a contract of sale is entitled to require performance of any obligation by the other party, a court shall not be bound to enter or enforce a judgment providing for specific performance except in accordance with the provisions of Article VII of the Convention dated the 1st day of July 1964 relating to a Uniform Law on the International Sale of Goods."