Remedies for seller’s breach of contract

Luca Davini
Lawyer in Milan and Turin


The provisions of Section III, Part III, Chapter II of the Vienna Convention address various aspects of the remedies available to a buyer who has suffered a breach of contract by the seller, specifically:

– list these remedies and their use (Article 45(1));

– define their usability and operation (Articles 45(2) and (3), 46, 48 and 50);

– provide for the right of the damaged buyer to obtain the resolution of the contract (Articles 47 and 49), regulating the choice available to the buyer between alternative remedies;

– define the operation of the remedies available to the buyer in certain special circumstances (Articles 51 and 52).

BASIS OF THE REMEDIES AVAILABLE TO THE PURCHASER

The availability of any remedy to the buyer presupposes that the seller has failed to perform one of his obligations under

– the contract,

– by commercial usage,

– the practices between the parties, or

– convention.

Note that even where an additional obligation not specifically addressed in the Convention-such as, for example, the obligation to extend a bank guarantee in favor of the buyer-has been breached, the buyer is entitled to the remedies available under the Convention.

The extent of the seller’s failure to perform one of its obligations is irrelevant in deciding whether or not the buyer is entitled to activate the remedies available to him: however, some remedies are available to the buyer only if the seller’s breach constitutes a fundamental default.

As for the causes of the seller’s breach, they are as a general principle irrelevant, except in special cases for the exemption from liability agreed between the parties.

Indeed, Article 45(1) does not require that the seller acted negligently, fault or deceit in order for the buyer to be able to claim remedies under the Convention.

However, if the ability to assert the seller’s liability for a breach of contract depends on additional conditions-for example, timely and detailed notice by the buyer (Articles 38, 39, 43, see Decalogue Item 4)-the additional conditions must be met in order for the buyer to retain his or her right to the remedy.

Conversely, the parties may also agree on an exclusion of remedies based on, for example, applicable domestic law, just as on the basis of international practice or custom it is possible to exclude any remedy under certain conditions.

REMEDIES AVAILABLE TO THE BUYER

In the event of infringement by the seller (e.g., delayed delivery, delivery of defective goods, etc.), the Convention grants the buyer the following remedies:

(i) Demand for performance (Art. 46).

The buyer may, provided he has not resorted to an incompatible remedy, demand performance of the unperformed services (e.g., completion of the supply, delivery of the goods). He may also demand the replacement of non-conforming goods, but only if there is an essential default on the part of the seller. As for the repair of the goods, this may be demanded only where this does not appear unreasonable, considering all the circumstances.

(ii) Termination of the contract (Art. 49)


Termination of the contract (with consequent return of services rendered) may be demanded only in the event of essential default or in case of failure to deliver the goods within a reasonable additional period set by the buyer in accordance with Article 47.

(iii) Price Reduction (Art. 50).

In case of non-conformity of the goods, the buyer may demand a price reduction. However, the buyer may not avail himself of this means if the seller remedies the defect or if the buyer refuses the seller’s performance.

(iv) Compensation for damages (Article 45)

In addition to the above remedies, the buyer may claim compensation for the damage caused by the seller’s infringement (provided it is not attributable to force majeure, see Section 6 of the Decalogue). The damage consists of the loss suffered as a result of the non-performance, including lost profit. The fact that damages also include losses that are not an immediate consequence of the counterparty’s breach (e.g., loss of production, costs incurred in recalling defective products, etc.) is a common rule in most sales’ legislation, which does not preclude the parties from derogating from it by special exemption clauses.

THE GRANTING OF A TIME LIMIT “Of GRACE” FOR PERFORMANCE

 Article 47(1) gives the buyer the right to set a further period of time, in addition to that provided for in the contract, within which the seller may fulfil his obligations.

The aforementioned provision, in addition to supplementing the buyer’s right to demand contractual performance, has a special connection with the right to demand termination of the contract under Article 49.

In fact, Article 47 acquires practical significance in connection with the latter provision since Article 49(1)(b) provides that if the seller fails to deliver by the expiration of the additional period of time fixed under Article 47, the buyer may declare the termination of the avoided contract.

Therefore, it can be said that setting an additional period of time in favour of the seller to be able to fulfill its obligations, “paves the way” for applying for termination of the contract.

This mechanism allowing termination of the contract, however, only applies in cases of non-delivery in the strict sense: in fact, if the seller has delivered nonconforming goods, the fixing of an additional period for performance is neither necessary nor useful for acquiring the right to obtain termination of the Contract, since in such cases the right to terminate depends only on the fact that the non-performance qualifies as essential.

Article 47(2) stipulates that a buyer who fixes an additional period of time for the benefit of the seller to remedy his non-performance is obliged in turn not to apply for other remedies during that period, although he reserves the right to claim damages for delays in performance occurring during the period.

Only if the seller informs the buyer that it will not fulfil its obligation during the additional period will the buyer be free to apply for other remedies from among those available during the said period.

POSSIBILITY OF REMEDY TO NON-PERFORMANCE AFTER THE DATE OF DELIVERY AND REMEDIES FOR PARTIAL NON-PERFORMANCE

Article 48(1) gives the seller the so-called right of “cure,” which allows the seller to correct any unfulfillment of its obligations under the contract or the Convention, and to do so even after the date of performance under the contract, provided that the exercise of this right does not cause unreasonable hardship to the detriment of the buyer.

In addition, if the seller has made a non-conforming early delivery, Article 37, in comparison, allows the seller to cure his non-performance up to the required delivery date.

Article 51 covers partial non-delivery and delivery of partially nonconforming goods: in such cases, Article 51(1) allows the buyer’s remedies to apply only to that part of the delivery that was not properly performed.

Remedies available to the buyer include termination of the contract limited to the undelivered part or the part of the products delivered that is partially nonconforming.

However, the buyer may obtain termination of the entire contract if the partial or nonconforming delivery constitutes essential breach of contract.

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Marcello

Dear Aurelia, the information you have provided are not sufficient for an answer which is subject to a professional engagement. In any case, we should study the provisions of the contract and identify governing law of the contract.If it does not provide anything on governing law then conflict law shall apply (in the most part of the countries likely the governing law will be the law of the country where the agent is domiciled). best regards Marcello Mantelli

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Aurelia

I signed a contract with a fashion agency but there were no termination clauses in the contract and decided to withdraw it before one week after signature so sent them an email but after 14 days they sent me an email and asserted that because i didnt withdraw in legal deadlines i have to perform the contract and pay whole money.Noboday told me about any deadlines and nothing was in the contract!! Why did they claim such a thing?

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