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1- Introduction
This
working paper is derived from the author's books "Remedies of the
Unpaid Seller in International Sale of Goods under (ULIS) and 1980 UN
Convention" which was published in 1985 by the Law and Arbitration
Centre (Amman – Jordan). Reference has also
been made in this paper to some cases applying the Convention as have
been published in CLOUT. The Uniform Law on the International Sale of
Goods (ULIS) was the outcome of the Hague Convention of 1964. The UN
Convention on Contracts for the International Sale of Goods (the
Convention) came into existence as a result of UNCITRAL's efforts.
According to a resolution taken by the General Assembly(1),
a conference was held at Vienna
in 1980 the outcome of which was the adoption of the Convention(2).
The
unpaid seller has may remedies provided for in ULIS and the Convention of
which is the recovery of price. The general rule under both is that a
seller maintains an action for the price(3).
But the application of this rule, which is in conformity with French Law,
is subject to another provision which seems to have taken into consideration
the Common Law view. Furthermore, ULIS contains another exception which
has no counterpart in the Convention. The questions concerning the
seller's recovery of the price will be dealt with under two sections: the
first will be concerned with the availability of the recovery while the
other will deal with the exceptions.
Section I
Availability
2- Texts
Art. 61.1 of ULIS
provides that:
"If the buyer fails to pay the price in
accordance with the contract and with the present Law, the seller may
require the buyer to perform his obligation."
While art. 62 of the Convention provides that:
"The
seller may require the buyer to pay the price... unless the seller has
resorted to a remedy which is inconsistent with this requirement"(1).
3- Nature
and requirements
The
recovery of the price is a personal remedy(1) entitling
the seller to require the buyer to pay the contract price or any part of
it which is not paid yet. In doing so, the seller enforces the
buyer to perform what he has undertaken under the contract. This action
is therefore in the nature of "specific performance"(2)
though neither ULIS nor the Convention uses this expression when giving
the seller the right to call for payment. The practical importance of
this fact is that the exception to the "specific performance"
rule, as so called in both laws, applies to the seller's action for the
price(3).
This
action may not be available unless the time of payment has elapsed. This
is so even if the buyer has already violated the contract in respect of
payment. To illustrate, assume that a contract calls upon the buyer to
make payment during three months, say May, June and July by a confirmed
letter of credit. Assume too that on the 10th of May the buyer has opened
an 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.
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