Which article of the Vienna Convention on contracts for the International sale of goods covers usages or practices between parties?

The Convention on Contracts for the International Sale of Goods (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 World Trade Organization 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 relating to trade. It is essential, therefore, 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 regulatory framework, independent of any domestic law. Parties who want their international sale of goods disputes decided in a truly international manner should choose the CISG as the applicable law, and international arbitral tribunals should apply the CISG to an international sale of goods dispute whenever they have a mandate.[6]

In regard to the application of the CISG to business-to-business international sale of goods contracts by an arbitral tribunal, three situations have to be distinguished (Article 1).[7] First, 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) 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), 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) 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 only binds the states and its organs. In other words, Article 1(1)(a) is a direction to the courts alone and not (international) arbitral tribunals.[12]

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, particularly the duties stated in Articles 30[13] and 53.[14] Any kind of breach of a contractual duty, even the most minor, 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, arbitral tribunals are required to consider not only any written contract but also pre-contractual and post-contractual behaviour of the parties (CISG, Article 8(3)) as well as trade usages between the parties and usages in the relevant industry (CISG, Article 9).[16] The seller’s duty to deliver goods in conformity with the contract (CISG, Article 35) 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.

It should be noted that, unlike in some legal systems, the remedy of damages is available irrespective of the breaching party’s fault.[18]

Under the CISG, the obligee can choose specific performance,[19] price reduction, avoidance or damages as the primary remedy for a breach of the sales contract. Article 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 Article 74 et seq. In the majority of cases, the remedy sought will be damages,[20] often in addition to other remedies. The award of damages is dealt with in four provisions of the CISG (Articles 74 to 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.

The purpose of a damages award under the CISG is clearly stated in Article 74[21] 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.[22] The obligor is liable for all losses arising from non-performance, irrespective of fault,[23] unless the obligor is exempted in accordance with Articles 79 and 80.[24] 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.

That full compensation is the underlying damages principles is undisputed. However, the precise meaning of full compensation has yet to be determined.[25] 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),[26] their indemnity interest (i.e., not to suffer damage to other interests as a result of non-performance),[27] but also their reliance interest (i.e., the expenditure made in reliance on the existence of the contract).[28] 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).[29]

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. In accordance with the underlying core principle of the CISG, to leave the contractual relationship between the parties intact as long as possible, punitive damages are not included in the concept of loss.[30]

Article 74 gives tribunals broad authority to award damages ‘in a manner best suited to the circumstances’.[31]

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.[32]

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’.[33] 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.[34]

Expenses that were incurred by the obligee to avoid any additional disadvantages are recoverable under Article 74 and are referred to as incidental loss.[42] Generally, additional costs incurred by a party as a result of another party’s unjustified refusal to perform are recoverable.[43] Article 77 (mitigation of damages) must be taken into account for all incidental losses.[44]

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.[52] 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.[53] The author submits that the latter view is preferable because 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 with regard to contractual claims) and applicable domestic law (with 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 principles 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,[54] whereas others argue for the exclusion of domestic tort law in these cases.[55] A third view distinguishes between damage caused by the defective performance of the good, in which case the CISG is exclusively applicable, and damage 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.

Article 74 explicitly provides that damages for breach of contract include lost profits.[63] Lost profits are awarded to place the aggrieved party in the same pecuniary position it would have been in but for the breach.[64] It has to be emphasised that, in line with the view advanced for standard of proof,[65] lost profits do not have to be calculated with mathematical precision.[66] Lost profits need to be established with reasonable certainty.[67] 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.[68]

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.[69]

When calculating loss, two positions have to be taken into account: concrete versus abstract calculation and whether to account for any gain made.

As regards concrete and abstract calculation, the principle of full compensation necessitates the admissibility of the loss being calculated abstractly[76] to achieve equal outcomes for all obligees. As Schwenzer explains:

However, it should be noted that if the buyer purchases substitute goods, Article 75 mandates a concrete calculation of loss.[78]

As regards accounting for gain, the obligee has to offset the loss from the breach by any gains resulting from the non-performance.[79] It is important to note that only the gain that has an adequate connection to the breach is to be subtracted.[80]

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 point in time.[81] This allows compensation for all possible consequences that may arise.

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,[82] whereas others contend that damages should be paid at the obligee’s place of business.[83] The latter view is in line with the general principle of Articles 57 and 74 of full compensation.

General jurisprudence and academic opinion is that to fully compensate an obligee, damages should be calculated under the currency of the loss.[84] 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.

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).[85] It is immaterial whether the breach caused the damage directly or indirectly.

The loss has to be foreseeable at the time of contract conclusion.[86] It is not the exact size of the loss, but only the possibility of the 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.[87]

It is well accepted that relief under Article 74 must be in the form of a monetary payment.[88]

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.[89] Loss of reputation and loss of chance are classified under the CISG as pecuniary loss.[90] Schwenzer argues that non-pecuniary damages may be 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.[91] Including non-pecuniary damages under Article 74, if the parties have so agreed, conforms with the CISG’s underlying principle of party autonomy.

Article 74 does not permit the recovery of punitive damages; it expressly limits damages to ‘a sum equal to the loss’.[92] 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.

Given the considerable divergence of jurisprudence and academic literature in civil and common law jurisdictions regarding the question of whether disgorgement of profits is a remedy, a head of damages or not recoverable at all,[93] tribunals should arguably consider granting damages based on disgorgement of profits only in narrow circumstances. In practice, international sale of goods cases in which the obligee has suffered no loss at all, while the obligor was able to make a profit, will be rare. Schwenzer has identified three situations in which the obligee should be entitled to disgorgement of profit under Article 74 (i.e., as a head of damage):

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 when damages under Article 74 are otherwise impossible to prove but the obligor would gain a clear windfall otherwise.

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).[95] Extrajudicial costs include legal costs incurred in connection with preventing the breach or pursuing rights under the contract, such as a demand for performance.[96] However, the majority of academic literature and courts’ jurisprudence does not support that litigation costs are recoverable under Article 74.[97] 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.[98]

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 embodied in the CISG.[99] The argument is that, if recovery of litigation costs were possible under Article 74, it would lead to an unjustifiable preferential treatment of the successful plaintiff over the successful defendant, because the defendant would not be able to claim litigation costs.[100] However, the author submits that this view misinterprets the CISG’s equality principle. The CISG’s equality principle relates to equal treatment of the buyer and the seller, not equal treatment of the plaintiff and the defendant in a litigation or to the claimant and the respondent in an arbitration. The buyer and the seller will not be treated differently in regard to the recovery of litigation costs under Article 74. The buyer, as well as the seller, is able to claim litigation costs as part of his or her damages if he or she is the plaintiff. To allow litigation costs to be claimed as incidental damages under Article 74 will achieve global uniformity for parties to a contract to which the CISG applies. The recoverability of litigation costs will be limited by the foreseeability and causation requirements inherent in Article 74.[101]

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.[102]

There is a lacuna in the CISG regarding the recoverability of damages agreed by the parties in a penalty clause or a liquidated damages clause if the amount agreed falls below the foreseeable amount of loss or is in excess of any loss caused by the breach of contract.[103] 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’.[104] Agreed damages clauses, which are valid under the applicable domestic law, are compatible with the CISG because an agreed damages clause may encourage performance of the contract and deter 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.[105]

Only the contracting party can seek damages under Article 74. Third parties must pursue their claims under applicable domestic law.[106]

To allow for full compensation in the case of a lost volume seller,[107] 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.[108] The calculation of the lost profit may present, in some cases, a considerable forensic challenge.[109]

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 it be manufactured without child labour.[110] If a good is manufactured with child labour or contrary to a contractually agreed ethical or human rights standard, the buyer can demand the difference between the price for the goods manufactured under conditions that are ethical or compatible with human rights standards and the price for goods manufactured in violation of those conditions. If 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.[111]

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 of proving the damage suffered).[112]

Jurisprudence and academic literature do not present a unified picture of the level of proof required. First, tribunals have to fill the gap in the CISG finding an internal solution in accordance with Article 7, instead of resorting to domestic law.[113] Some courts and tribunals have required a specific ascertainment of damages,[114] some have required that the damages be reasonably proved[115] and others have required sufficient proof of damages.[116] Belgian courts, in particular, have determined the amount of damages often ex aequo et bono.[117] The CISG Advisory Council reasons that the requisite standard should be one of ‘reasonable certainty’ without a need for ‘mathematical precision’.[118] The reasonable certainty standard is supported by and consistent with the CISG as a whole, which generally applies the reasonableness standard.[119] It is also consistent with the UNIDROIT Principles of International Commercial Contract (PICC).[120]

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 thereof.[121] 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.[122] In many common law jurisdictions, statute of limitation issues are considered a matter of procedural law and, therefore, a matter of lex fori.[123] Tribunals should consider whether to apply PICC, Article 10.1 et seq., which stipulate a relative limitation period of three years and an absolute limitation period of 10 years.[124]

Article 75[125] allows, in the case of 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 rely only on the abstract calculation of damages under Article 74.[126]

To claim damages in accordance with Article 75, the obligee has to avoid the contract (i.e., it must have dissolved its contractual obligation)[127] before making a substitute purchase.[128] Jurisprudence and academic commentary also concur that Article 75 is applicable if the obligor unequivocally and finally refuses to perform.[129]

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 that is reasonably possible.[130] If the difference between the avoided contract and the substitute transaction results in reduced costs, an adjustment to the amount of damages may be warranted to account for expenses saved by the obligee.[131]

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.[132] 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.[133]

To avoid the obligee speculating on the development of the market, at the expense of the obligor, Article 75 requires that the cover purchase is made in a reasonable manner and within a reasonable amount of time. Those requirements do not exclude, however, that the obligee waits to avoid the contract to take account of market developments.[134]

Jurisprudence has determined that the standard for acting in a reasonable manner is whether a party has acted as a ‘careful and prudent businessman’ who observes the relevant trade practices.[135] Being a ‘careful and prudent businessman’ can entail reselling the goods substantially below the contract price.[136]

The substitute transaction also has to be done within a reasonable time. The period for a reasonable substitute transaction commences when the obligee declares the contract avoided.[137] What is reasonable depends on the circumstances and the good in question. For goods that are subject to market price fluctuations, a reasonable period will be relatively short,[138] whereas for goods that are seasonal or unique, it will be longer.[139]

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.[140] 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.[141]

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 impliedly 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.[142] 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.[143]

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.

‘Foreseeability’ is not a requirement of Article 75, according to its wording. This is not surprising, because loss resulting from a substitute transaction is generally foreseeable.[149]

The onus 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 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.[150]

Like Article 75, Article 76[151] is lex specialis to Article 74. Article 76 allows for the calculation of damages to be 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.

The application of Article 76 requires that the obligee has avoided the contract. In addition, the prevailing view applies Article 76 to cases in which the obligor unambiguously and definitively refuses to perform.[152]

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 which goods conform to the contract and whether they can be used to set a comparable price.[153] An adjustment should be made for any differences in terms or circumstances between the contract terms and those associated with the market price.[154]

A current price can exist without being officially quoted.[155] As one court has observed:

If there is no current price, then an abstract calculation cannot be performed and the obligee may resort to Article 74.[157] For subjectively valued goods or goods made on special order, it might be impossible to ascertain a current price.[158] The obligee thus has to resort to Article 74.

The time at which to set the current price for the calculation is the time at which the obligee made the statement of avoidance.[159] Basing the relevant time on the statement of avoidance leaves no room for tribunal discretion with regard to the timing, and avoids the obligee speculating at the obligor’s expense. If the obligee unreasonably delays making a statement of avoidance, the obligor may seek relief under Article 77.[160] Article 76 provides an exception for the setting of the current price if the obligee avoids the contract after taking 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.[161]

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.[162] If a determination at the place of delivery is not possible, the tribunal can resort to a location that would be a reasonable substitute.[163] 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.[164]

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’. This 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.[165] 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 because it would increase the uncertainty in the amount of damages.[166]

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.[167] The primacy of concrete calculation supposes that a substitute transaction will generally be the most cost-effective resolution after the avoidance of a contract.[168]

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.[169] 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.[170]

The wording of Article 76 clarifies that foreseeability is not a requirement of Article 76.[171] 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.[172]

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, especially the requirement that further damages must have been foreseeable.[173] 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.

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 affect the determination of damages under Article 76 in a fluctuating market. In these circumstances, 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:

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).[175] However, the obligor has to prove that the obligee has, or should have, carried out a more favourable substitute transaction (Article 77).[176]

Article 77(1) obliges the party that wants to claim damages because of the breach of contract by another 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.[177]

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.[178] Trade usages and practices, as well as special habits that exist between the parties, have to be taken into account.[179] 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’.[180] Cover trans­actions that are identical to the terms of the original contract are more likely to be considered reasonable.[181] However, cover transactions that differ in terms such as quantity, credit or time of delivery may still be considered reasonable, with all circumstances taken into account.[182]

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.[190]

The obligor has the burden of proof in regard to the facts that establish the obligee’s duty to mitigate.[191] In practice, the obligor may find it difficult to meet its burden because evidence concerning mitigation efforts is often within the knowledge and control of the obligee.[192] Some tribunals have placed an obligation to prove the requirements of Article 77 on both parties when a failure to mitigate defence has been raised under Article 77.[193]

Interest is due under Article 78 regardless of proof of loss.[194] Interest can be claimed pursuant to Article 78 independently from the damages under Articles 74 to 76.[195] 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.[196] 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.[197] 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.

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.[198] Interest ceases to accrue when the obligation to pay is extinguished.

The most controversial issue presented by Article 78 is the rate at which interest on a sum in arrears is to accrue, because 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,[199] and various methods of determining the interest rate have been used. The attempts can be roughly categorised into two broad clusters: those preferring a uniform approach[200] and those giving domestic law primacy.[201] 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.[202] The following approaches can be found in the jurisprudence of courts and tribunals:

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.[208] The major purpose of an interest claim is compensating the time value of money for the creditor. Therefore, an 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.

The CISG does not address whether interest should accrue on a simple or compound basis. Most courts and tribunals have awarded simple interest.[209] 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.[210] 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.[211]

More generally, 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 of 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.

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.

The contractual ethos underlying the CISG is that the contractual relationship between the parties is preserved for as long as possible. Hence the CISG places a strong emphasis on the principle of pacta sunt servanda: once the parties have concluded the contract, subsequent developments, in principle, will not allow either party to avoid or modify its contractual obligations unilaterally. The exception to this principle is stipulated in Article 79. An obligor will be exempt from paying damages, but not from other remedies for non-performance, if the obligor is not able to perform its obligation under the contract because of an unforeseeable impediment beyond the obligor’s control (Article 79(1)). Regarding the seller’s obligation to deliver goods, Article 79(1) is applicable not only to the non-delivery of the goods but also to defective goods.[212]

To date, parties have rarely succeeded in invoking Article 79, because the threshold imposed by Article 79(1) to exempt the obligor is high.[213] However, the covid-19 outbreak has put the spotlight on this Article.

Article 79(1) sets out several requirements for a party to be exempt from liability for damages: (1) an impediment to the performance of a contract has arisen; (2) the party’s non-performance was caused by the impediment; (3) the impediment was beyond the control of the party claiming the exemption; (4) the party could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract; and (5) the party could not reasonably be expected to have avoided or overcome the impediment or its consequences.

There are a number of circumstances that are widely accepted to constitute the core requirement of an impediment within the meaning of Article 79(1): natural disasters such as earthquake, fire, flood, drought, hurricane, epidemic or pandemic.[214] Financial constraints, on the other hand, are generally regarded as surmountable.[215]

The unforeseeability of the impediment at the time of contract conclusion will often not be controversial between the parties. At the time the contract is concluded, the parties must have not foreseen the impediment.[216]

The party relying on Article 79(1) has to prove a causal link between the party’s non-performance and the impediment.[217] Article 79(2) complements Article 79(1) by clarifying that the obligor cannot avoid liability by relying on third parties to fulfil the obligor’s duties.[218] Furthermore, Article 79(3) exempts the obligor from liability only for the period for which the impediment exists.

Article 79(4) requires that the obligor should inform the other party of the impediment and its effects on its ability to perform within a reasonable time after it has or should have become aware of the impediment. Otherwise the liability remains in force.

The wording of Article 79(1) clearly stipulates that the party who fails to perform is under the duty to prove that the requirements for the exemption are met.[219]

Article 79 only regulates the consequences of the failure to perform by one party in regard to the party’s liability for damages resulting from the failure to perform (Article 79(5)) and the exemption from liability for damages of the contracting party, not the question of whether and how the contract is continued. Article 79 is silent on the fact that it is not possible to finally dissolve the contract by termination or withdrawal.

The CISG does not contain a special provision dealing with questions of hardship. However, the CISG Advisory Council in its Opinion No. 20, published in February 2020, has stated that the CISG does cover hardship situations.[220]

It is also the view of the CISG Advisory Council that to bring hardship into the fold of Article 79 is to broaden the meaning of impediment. Hardship only meets the threshold of an impediment if the performance of the contract has become excessively onerous or if the equilibrium of the contract has been fundamentally altered.[221] The CISG Advisory Council Opinion sets out the following rules regarding the obligations of the parties and how a court or arbitral tribunal should deal with a case of hardship:

Like Article 79, Article 80 sets out an exception to the remedies regime set out in the CISG. 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. Unlike Article 79, Article 80 excludes not only claims for damages but all remedies.[222]

As stated earlier, it is the choice of the party which remedy or remedies to pursue. In addition to damages, the CISG provides for specific performance (Articles 46(1), 62, 28), avoidance of the contract (Articles 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.[223] The amount of the recoverable damages depends on whether and to what extent the other remedy has redressed the loss suffered.

Damages under the CISG can be claimed in addition to other available remedies for breach of contract, such as specific performance or avoidance of the contract. The CISG’s damages regime under Article 74 et seq. provides 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 calculate the obligee’s damages either 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 damage 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.’[224] to prove its loss.

Article 6 stipulates that the parties are free to derogate from the provisions of the CISG. The damages regime of the CISG generally provides for a comprehensive and best practice regime. Lacuna do exist regarding the actual rate of interest, lawyers’ fees and the legal significance of hardship. Parties might want to consider providing for those issues in their contract.

[1] Petra Butler is professor at Victoria University of Wellington Faculty of Law and Director of the Institute of Small and Micro States.

[2] Article 7 of the Convention on Contracts for the International Sale of Goods [CISG] directs to an autonomous interpretation of the CISG void of any fallback 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 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 Staudingers Kommentar zum Bürgerlichen Recht, Vol. XIV (15th ed, De Gruyter, Berlin, 2018), 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)). Because 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 (http://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.

[6] See below in regard to application of the CISG, in particular footnote 8.

[7] See also for a more detailed discussion, I Schwenzer, P Hachem in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Intro to Articles 1 to 6, para. 12 et seq; U Magnus in J von Staudinger Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen, Wiener UN-Kaufrecht (CISG) (Sellier-de Gruyter, Berlin, 2018), Article 1, para. 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 because 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 Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Intro to Articles 1 to 6, para. 12. Note that issues of the application of mandatory rules or public policy 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) because 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, The Hague, 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 CISG, Article 95 binds the arbitral tribunal.

[11] 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, The Hague, 2013), 59.

[12] S Kröll, ‘Arbitration and the CISG’ in I Schwenzer, Y Atamer, P Butler (eds), Current Issues in CISG and Arbitration (Eleven International Publishing, The Hague, 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) Chapter 30, paras. 63 to 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 by S Kröll in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 35; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 35.

[18] See Oberster Gerichtshof [OGH] (Austria), 15 January 2013 (Glass mosaic tiles) CISG-Online 2398 (‘fault is not a requirement (for liability for damages under the CISG)’); Oberlandesgericht [OLG] Linz (Austria) 8 February 2012 (Safety belts) CISG-online 2444 (‘the CISG does not recognize any discharge of liability by proving lack of fault’); Polimeles Protodikio Athinon (Greece), 1 January 2009 (Bullet-proof vest) CISG-Online 2228; Arbitral Award, Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce T-14/07, 23 May 2008 (Seamless steel pipes) CISG-online 2272 (‘the buyer is obliged to pay the price even where it is not his fault that he is unable to do so. This is because such non-payment represents a breach of contract’).

[19] A claim for specific performance is subject to Article 28.

[20] See the jurisprudence in I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74 et seq.; J Gotanda and M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74 et seq.

[21] 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.’

[22] ‘Der Gläubiger ist wirtschaftlich so zu stellen, wie wenn der Vertrag vollumfänglich korrekt erfüllt worden wäre’, Handelsgericht Zürich (17 September 2014) CISG-online 2656.

[23] OGH (15 January 2013) CISG-online 2398; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 3.

[24] See section titled ‘Exemptions under Articles 79 and 80’, below.

[25] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 5.

[26] M Bridge, ‘Remedies and Damages’ in L Di Matteo, A Janssen, U Magnus, R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016), Chapter 19, para. 23; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 3.

[27] 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.

[28] OGH (14 January 2002) CISG-online 643, CISG-AC Op 6, J Gotanda, Comment 1.1.

[29] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 8.

[30] See also section titled ‘Punitive damages’, below.

[31] Secretariat Commentary on the 1978 Draft, Article 70 (now Article 74), para. 4.

[32] This is implicit in Articles 75 and 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), Chapter 19, para. 22.

[33] Handelsgericht Zürich (17 September 2014) CISG-online 2656; Landgericht Trier (12 October 1995) CISG-online 160; J Gotanda and M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), 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 Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 90, para. 4 et seq.).

[34] See OGH (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, US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140; see also Secretariat Commentary on 1978 Draft, Article 70 (now Article 74), para. 6.

[35] OLG Köln (24 April 2013) CISG-online 2480 para. 46; OLG Köln (8 January 1997) CISG-online 217; see Secretariat Commentary on 1978 Draft, Article 70 (now Article 74), para. 7.

[36] Compare OLG Köln (8 January 1997) CISG-online 217.

[37] 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.

[38] 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; OLG Hamm (9 June 1995) CISG-online 146. It has to be noted that the seller keeps the right to remedy the defects pursuant to Article 48.

[39] App Ct of Eastern Finland (27 March 1997) CISG-online 782.

[40] Kantonsgericht Wallis (28 January 2009) CISG-online 2025; OLG München (18 October 1978) but see OLG Düsseldorf (14 January 1994) CISG-online 119: recognition only insofar as the 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, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 52 et seq.

[41] OLG Düsseldorf (14 January 1994) CISG-online 119.

[42] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 28.

[43] Bundesgerichtshof (10 December 1986) NJW 1987, 831.

[44] See also section titled ‘Mitigation of damages – Article 77’, below.

[45] 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.

[46] Delchi Carrier SpA v. Rotorex Corp, US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140.

[47] 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.

[48] See Arbitral Award, ICC 7585/1992, CISG-online 105.

[50] OLG Karlsruhe (8 February 2006) CISG-online 1328.

[51] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 28.

[52] Cour d’appel de Paris (18 June 2002) http://www..cisg.fr/decision.html?lang=fr&date=02-06-18 (last accessed 20 September 2020); W Witz in W Witz, H-C Salger, M Lorenz, Internationales Einheitliches Kaufrecht (Beck, Munich, 2016), Article 5, para. 5; U Magnus in J von Staudingers Kommentar zum Bürgerlichen Recht, Vol. XIV (15th ed, De Gruyter, Berlin, 2018), Article 5, para. 8.

[53] Supported by OLG Düsseldorf (2 July 1993) CISG-online 74; Handelsgericht Zürich (26 April 1995) CISG-online 248, para. 5.b.; CISG-AC Opinion No. 12 Rapporteur Sono, Comment 2.3.1; I Schwenzer, P Hachem in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 5, para. 10.

[54] 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 von Staudingers Kommentar zum Bürgerlichen Recht, Vol. XIV (15th ed, De Gruyter, Berlin, 2018), Article 5, para. 14; J Lookofsky ‘Understanding the CISG’ (2003), Duke J Comp & Int’l L, 263, 285.

[55] 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.

[56] See Castel Electronics Pty Ltd v. Toshiba Singapore Ptd Ltd, Fed Ct Aust (28 September 2010) CISG-online 2158.

[57] I Schwenzer in 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 section titled ‘Legal costs’, below.

[58] CISG-AC Opinion No. 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 von Staudingers Kommentar zum Bürgerlichen Recht Vol. XIV (15th ed, De Gruyter, Berlin, 2018) Article 74 para. 27; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, 2016) Article 74 para. 36.

[59] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, 2016) Article 74 para. 36.

[60] See examples in P Schlechtriem/P Butler, UN Law on International Sales (Springer, Heidelberg, 2009) para. 40.

[61] Article 74’s foreseeability requirement, however, might limit the recoverability – see section titled ‘Foreseeability’, below.

[62] See Landesgericht Aachen (14 May 1993) CISG-online 86.

[63] Secretariat Commentary: the reference to loss profits was included because ‘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.

[64] See Audiencia Provincial de Murcia (15 July 2010) CISG-online 2130.

[65] See section titled ‘Calculation of loss’, below.

[66] See CISG-AC Opinion No. 6, Calculation of Damages under CISG Article 74, Rapporteur J Gotanda, Comment 3.19.

[67] J Gotanda and M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 27.

[68] 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 Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 38.

[69] 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.

[70] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 38.

[71] 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.

[72] Compare Handelsgericht Zürich (22 November 2010) CISG-online 2160.

[73] 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, para. 13.5; but compare International Institute for the Unification of Private Law, UNIDROIT Principles of International Commercial Contracts 2010, Official Comment 2 [PICC], 7.4.3(2), which also stipulates the reimbursement of the loss of chance.

[74] 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.

[75] Landgericht Stuttgart (31 August 1989) CISG-online 11; AG Oldenburg (24 April 1990) CISG-online 20.

[76] Compare Semi-Materials Co Ltd v. MEMC Material Electronics, Ed Mo (10 January 2011) CISG-online 2168.

[77] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 43.

[78] See section titled ‘Damages in case of substitute transaction – Article 75’, below.

[79] Compare Secretariat Commentary on 1978 Draft, Article 70 (now Article 74), para. 5; J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 34.

[80] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 27; see also I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 44.

[81] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd, Beck, Hart, Munich, 2018), Article 74, para. 29; see also I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 46.

[82] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 63.

[83] 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, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 30.

[84] 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, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 31; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 7,4 para. 65.

[85] Kantonsgericht Zug (14 December 2009) CISG-online 2026, para. 11.2.

[86] 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. Court of Cassation (17 February 2015) http://www..legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT000030270329&fastReqId=1445360440&fastPos=1 (last accessed 26 October 2020) – foreseeability not ascertainable, if damages cannot with certainty be established.

[88] See Oberster Gerichtshof (12 January 2002) CISG-online 643.

[89] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, paras. 38, 39 with further references; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 41 with further references.

[90] See I Schwenzer in 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, para. 21 et seq., available at https://www..uncitral.org/pdf/english/clout/CISG_Digest_2016.pdf (last accessed 20 September 2020).

[91] M Bridge, ‘Remedies and Damages’ in L Di Matteo, A Janssen, U Magnus, R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016), Chapter 19, para. 41; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 41; explicitly disagreeing with P Huber in P Huber, A Mullis, The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007), 279.

[92] OLG Düsseldorf (2 July 1993) CISG-online 74.

[93] For a general overview of the treatment of disgorgement of profits, see E Hondius, A Janssen (eds), Disgorgement of Profits – Gain Based Remedies throughout the World (Springer, Heidelberg, 2015).

[94] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 45.

[95] Landesgericht 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, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 73; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74, para. 31.

[96] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 73.

[97] 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), Chapter 19 paras. 53, 54; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 30; CISG-AC Opinion No. 6, Calculation of Damages under CISG, Article 74, Rapporteur J Gotanda, Comment 5.1.

[99] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 30; CISG-AC Opinion No. 6, Calculation of Damages under CISG, Article 74, Rapporteur J Gotanda, Comment 5.1.

[100] I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016) Article 74 para. 31 with further references.

[101] See section titled ‘Legal costs’, above. Stemcor USA, Inc. v. Miracero, S.A. de C.V., 66 F. Supp. 3d 394, 395 (S.D.N.Y. 2014); in regard to foreseeability and causation, see section titled ‘The foreseeability requirement’ in Chapter 1.

[102] 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), Chapter 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.

[103] 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.’

[104] 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.

[105] M Bridge, ‘Remedies and Damages’ in L Di Matteo, A Janssen, U Magnus, R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016), Chapter 19, para. 72.

[106] See P Huber in P Huber, A Mullis, The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007), 280.

[107] 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.

[108] Oberster Gerichtshof (28 April 2000) CISG-online 581; for an extensive analysis, 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), Chapter 19, paras. 48 to 50.

[109] 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), Chapter 19, para. 50.

[110] For an in depth discussion of human rights standards as inherent characteristics of goods, see (Article 35): 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), Chapter 18; I Schwenzer, ‘Ethical Standards in CISG Contracts’ (2017), 22 Uniform Law Review, 122; 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.

[111] See I Schwenzer in 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.

[112] Handelsgericht Zürich (17 September 2014) CISG-online 2656; OLG 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, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74, para. 9; I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 74, para. 66.

[113] M Bridge, ‘Remedies and Damages’ in L Di Matteo, A Janssen, U Magnus, R Schulze (eds), International Sales Law (Beck, Hart & Nomos, Munich, 2016), Chapter 19, para. 39; CISG-AC Opinion No. 6, Calculation of Damages under the CISG, Article 74, Rapporteur J Gotanda, Comment 2.1.

[114] OLG Celle (2 September 1998), CISG-online 506; OLG Köln (21 May 1996) CISG-online 254; Landgericht München (20 February 2002) CISG-online 712.

[116] CIETAC CISG/1995/01 CISG-online 971; Tribunal de Commerce Namur (15 January 2002) CISG-online 759.

[119] J Bonell in C M Bianca, J Bonell, Commentary on the International Sales Law (Giuffrè: Milan, 1987), Article 7, para. 2.3.2.2.

[122] Landgericht München I (6 April 2000) CISG-online 665; OLG Braunschweig (28 October 1999) CISG-online 510; Landgericht Heidelberg (2 October 1996) CISG-online 264.

[123] 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.

[124] PICC, Article 10.2(1) and Article 10.2(2), respectively.

[125] 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.’

[126] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 74 para. 3.

[127] See Articles 49, 64, 72, 73 in regard to the requirements of avoidance for buyer and seller, respectively.

[128] OLG 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.

[129] 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; OLG 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 Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 75, para. 5.

[130] See Secretariat Commentary on 1978 Draft, Article 71, para. 4.

[131] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 75, para. 11.

[132] P Huber in P Huber, A Mullis, The CISG: A Textbook for Students and Practitioners (sellier, Munich, 2007), Section 13(VII)(2)(a)(bb).

[133] Delchi Carrier SpA v. Rotorex Corp, US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140; J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 75, para. 14.

[134] P Schlechtriem, P Butler, UN Law on International Sales (Springer, Heidelberg, 2009), para. 311.

[135] ICC Court of Arbitration, Arbitral Award No. 8128/1995, CISG-online 526; OLG Düsseldorf (14 January 1994) CISG-online 119; compare Secretariat Commentary on 1978 Draft, Article 71, para. 4.

[136] OLG Düsseldorf (14 January 1994) CISG-online 119.

[137] Secretariat Commentary on 1978 Draft, Article 71, para. 5.

[138] Compare OLG Hamburg (28 February 1997) CISG-online 261 – period of two weeks considered reasonable for cover purchase for iron-molybdenum.

[139] Compare OLG Düsseldorf (14 January 1994) CISG-online 119 – period of three months considered reasonable for seasonal goods.

[140] The wording of Article 76 does not seem to support the view that an unreasonable substitute transaction can be claimed under Article 76 because the Article 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 – see section titled ‘Mitigation of damages – Article 77’, below) 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 Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 75, para. 10).

[141] Oberster Gerichtshof (28 April 2000) CISG-online 581.

[142] 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.

[143] See Secretariat Commentary on 1978 Draft, Article 71, para. 3; J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 75, para. 22.

[144] Downs Investment v. Perwaja Steel, Supreme Court of Queensland (17 November 2000) CISG-online 587.

[145] Delchi Carrier SpA v. Rotorex Corp, US Circuit Court of Appeals (2nd Cir) (6 December 1996) CISG-online 140.

[146] Landgericht Krefeld (28 April 1993) CISG-online 101.

[147] Handelsgericht Aargau (26 September 1997) CISG-online 329.

[148] 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.

[149] See I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 75, para. 8.

[150] Compare Hof van Beroep Gent (20 October 2004) CISG-online 983.

[151] 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.’

[152] OLG München (15 September 2004) CISG-online 1003; I Schwenzer in 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. OLG Graz (29 July 2004) CISG-online 1627; J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 76 para. 7.

[153] 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.’

[155] Novia Handelsgesellschaft mbH v. AS Maseko, Tallinna Ringkonnakohus (19 February 2004) CISG-online 826.

[157] See OLG Celle (2 September 1998) CISG-online 506.

[158] 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.

[159] Oberster Gerichtshof (28 April 2000) CISG-online 581. Note that Article 31 determines the place of delivery.

[160] See section titled ‘Mitigation of damages – Article 77’, below.

[161] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 76, para. 20.

[162] See OLG Hamm (22 September 1992) CISG-online 75.

[163] Secretariat Commentary on the 1978 Draft, Article 72 (now Article 76), para. 11.

[164] See OLG 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.

[165] 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 to 69).

[166] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2d ed, Beck, Hart, Munich, 2018), Article 76, para. 17.

[167] OLG Hamm (22 September 1992) CISG-online 75; OLG Graz (29 July 2004) CISG-online 1627.

[168] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 76, para. 13.

[169] Secretariat Commentary on 1978 Draft, Article 72 (now Article 76), para. 2.

[170] See OLG Hamm (22 September 1992) CISG-online 75. Alternatively, in that situation, 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.

[171] 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, .

[172] See I Schwenzer in 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.

[173] See section titled ‘Foreseeability’, above.

[174] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article,76, para.,28.

[176] OLG Hamm (22 September 1992) CISG-online 57.

[178] 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.’

[179] 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.’

[180] Secretariat Commentary on the 1978 Draft, Article 71 (now Article 75).

[181] D Saidov, The Law of Damages in International Sales: The CISG and other International Instruments (Hart Publishing, Oxford, 2008), 134; J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 77, para. 20.

[182] 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.

[184] Tribunal of International Commercial Arbitration at the Ukraine Chamber of Commerce and Trade (1 January 2005) CISG-online 1372; OLG Celle (2 September 1998) CISG-online 506; OLG 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; P Schlechtriem, P Butler, UN Law on International Sales (Springer, Heidelberg, 2009), para. 315.

[185] 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 period for resale.

[186] OLG Düsseldorf (14 January 1994) CISG-online 119.

[187] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 77, para. 23.

[188] Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Arbitral Award (27 July 1999) CISG-online 779.

[189] ICC Court of Arbitration, Arbitral Award 7585/1992, CISG-online 105.

[190] Oberster Gerichtshof (28 April 2000) CISG-online 581.

[191] Handelsgericht Zürich (17 September 2014) CISG-online 2656.

[192] 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.’

[193] Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Arbitral Award (23 December 2004) CISG-online 1188.

[194] ICC Court of Arbitration, Arbitral Award 8962/1997, CISG-online 1300.

[195] OLG Frankfurt (18 January 1994) CISG-online 123; Landgericht Hamburg (26 September 1990) CISG-online 21; K Bacher in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 78, para. 5.

[196] See Kantonsgericht Zug (21 October 1999) CISG-online 491; Handelsgericht des Kantons Zürich (5 February 1997) CISG-online 327; J Gotanda,Y Atamer in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 78, para. 7; CISG-AC Opinion No. 14, Interest under Article 78, Rapporteur Y Atamer, Comment 3.b.

[197] J Gotanda, Y Atamer in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 78, para. 10; CISG-AC Opinion No. 14, Interest under Article 78, Rapporteur Y Atamer, Comment 4, both with further references.

[198] 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 to 20 for a discussion of the consequences of applying domestic law to the issue.

[199] 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, Y Atamer in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 78, para. 21.

[200] See Zapata Hermanos Sucesores 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.

[201] ICC Court of Arbitration, Arbitral Award 7153/1992 CISG-online 35; OLG Koblenz (31 January 1997) CISG-online 256; Tribunale di Pavoda (31 March 2004) CISG-online 823.

[202] See CISG-AC Opinion No. 14, Interest under Article 78, Rapporteur Y Atamer, Appendix with an overview of cases; UNCITRAL Digest on the CISG, Article 78, para. 9, available at https://www..uncitral.org/pdf/english/clout/CISG_Digest_2016.pdf (last accessed 26 October 2020).

[203] 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.

[204] OLG 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; Landesgericht Heidelberg (2 November 2006) CISG-online 1416.

[205] Rechtbank van Koophandel Ieper (18 February 2002) CISG-online 764; Rechtbank van Koophandel Oudenaarde (10 July 2001) CISG-online 1785.

[206] 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.

[207] 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.

[208] CISG-AC Opinion No. 14, Interest under Article 78, Rapporteur Y Atamer, Comment 3.36.

[209] 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.

[210] CISG-AC Opinion No. 14, Interest under Article 78, Y Atamer (Beijing 2013), Comment 3.45.

[211] J Gotanda, Y Atamer in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 78, para. 28.

[212] Y Atamer in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 79, para. 12.

[213] Successful cases include, for example, District Court Berlin-Charlottenburg, CISG-Online No. 386 (4 May 1994); Commercial Court Besançon, CISG-Online No 557 (19 Jan 1998); ICC Court of Arbitration, Case No. 8790/2000, CISG-Online No 1172 = CLOUT Case No. 1085 (1 Jan 2000); District Court Willisau, CISG-Online No. 961 = CLOUT Case No. 893 (12 March 2004); Raw Materials, Inc. v. Manfred Forberich GmbH & Co., KG, No. 03 C 1154, 2004 WL 1535839, at *1 (N.D. Ill. July 7, 2004); Belgian Court of Cassation, CISG-Online Nr. 1963 (19 June 2009); U Magnus in J von Staudinger Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen, Wiener UN-Kaufrecht (CISG) (Sellier de Gruyter, Berlin, 2018), Article 79, para. 7.; see also I Schwenzer in Schwenzer Commentary on the UN Convention on the International Sale of Goods (4th ed, OUP, Oxford, 2016), Article 79, para. 1.

[214] Y Atamer in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), Article 79, para. 46; A Janssen states that pandemics are classical examples of an impediment under Article 79 (A Janssen, ‘Der internationale Warenkauf in Zeiten der Pandemie’ EuZW 2020, 393, III.1.a); however, the arbitrators in a CIETAC arbitration held that the seller could not invoke Article 79 due to the SARS outbreak because at the time of contracting SARS was already known (CIETAC Arbitration proceeding (5 March 2005), https://cisgw3.law.pace.edu/cases/050305c1.html.

[215] See, e.g., Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (17 October 1995) CISG-online 207 (holding that the lack of free convertible bank credit of the Russian buyer/payment debtor did not relieve the buyer from paying the purchase price to the seller); Civil Court Monza (14 January 1993) CISG-online 540 (holding that the rise of the market price of steel by 30 per cent since the conclusion of the contract was not unreasonable hardship); but regarding the view that financial constraints might constitute an impediment, see U Magnus in J von Staudinger Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen, Wiener UN-Kaufrecht (CISG) (Sellier-de Gruyter, Berlin, 2018), Article 79, para. 24, citing, inter alia, Peter Huber in MünchKomm, Article 79, para. 21, Peter Mankowski in MünchKomm/HGB, Article 79, para. 81; OLG Hamburg ForInt 1997, 168. However, Magnus does not elaborate what those circumstances might be. See below for discussion on hardship.

[216] E Wagner, R Holtz, T Dötsch, ‘Auswirkgungen von COVID-19 auf Lieferverträge’, Betriebs-Berater 2020, 845; A Janssen, ‘Der internationale Warenkauf in Zeiten der Pandemie’ EuZW 2020, 393, III.1.b.; compare the decision in Raw Materials, Inc. v. Manfred Forberich GmbH & Co., KG, No. 03 C 1154, 2004 WL 1535839, at *1 (N.D. Ill. July 7, 2004), (holding that the freezing over of the harbour – a once in 60 years occurrence – was not foreseeable).

[217] Compare Macromex SRL v. Globex Int’l, Inc., No. 08 CIV. 114 (SAS), 2008 WL 1752530, at *1 (S.D.N.Y. Apr. 16, 2008), aff’d, 330 F. App’x 241 (2d Cir. 2009), with Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry (42/2005), CISG-online 1520 (21 Nov 2005).

[218] For a fuller 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 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), para. 288 et seq.

[219] See Commercial court of the Canton of Aargau, CISG-online 2176 (10 March 2010); Tribunal of Vigevano, CISG-online 493 (12 July 2000); Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Arbitration (155/1994), CISG-online 205 (16 March 1995); T Dornis in P Mankowski, Commercial Law (Beck, Munich, 2019), Article 79, para. 25.

[220] CISG-AC Opinion No. 20, Hardship under the CISG, Rapporteur: Prof. Dr Edgardo Muñoz, Universidad Panamericana, Guadalajara, Mexico. Adopted by the CISG Advisory Council following its 27th meeting, in Puerto Vallarta, Mexico on 2 to 5 February 2020; see also Hof van Cassatie, 19 June 2009, CISG-online 1963 (granting a right to renegotiate the contract to a seller in light of a 70 per cent price increase in steel after the conclusion of the contract); I Schwenzer, E Muñoz, ‘Duty to renegotiate and contract adaptation in case of hardship’, 24 (2019) Uniform Law Review, 149, 152, 153.

[221] CISG-AC Opinion No. 20, Hardship under the CISG, Rapporteur: Prof. Dr Edgardo Muñoz, Universidad Panamericana, Guadalajara, Mexico. Adopted by the CISG Advisory Council following its 27th meeting, in Puerto Vallarta, Mexico on 2 to 5 February 2020, Principles 4 to 6; for a discussion what these thresholds mean, see I Schwenzer, E Muñoz, ‘Duty to renegotiate and contract adaptation in case of hardship’, 24 (2019) Uniform Law Review, 149, 155.

[222] For a more in-depth discussion, 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 80; T Dornis in P Mankowski, Commercial Law (Beck, Munich, 2019), Article 80.

[223] I Schwenzer in 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.

[224] J Gotanda, M Djordjevic in S Kröll, L Mistelis, P Perales-Viscasillas (eds), UN Convention on Contracts for the International Sale of Goods (2nd ed, Beck, Hart, Munich, 2018), 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 http://www..cisg.law.pace.edu/cisg/biblio/schlechtriem20.html#*.

What is United Nations Convention on Contracts for the International Sale of Goods 1980?

What is Vienna Convention on sale of goods?

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Which of the following is true of the United Nations Convention on Contracts for the International Sale of Goods CISG )?