Apart from the termination, which releases both parties from their duty to effect and to receive performance, claims for damages can be asserted by the aggrieved party under corresponding rules of each of the three instruments or based on contractual provisions. This refers in particular to claims for damages which have arisen in connection with the obligations from which he is now released. Damages, for instance, have to be paid because of delay, even if the contract is later avoided because of that delay and even if damages arise because of avoidance. 635
According to CISG Art. 81(1), the fact that a party has resorted to the avoidance remedy does not deprive him of his right to claim damages that may be due under the Convention (pursuant to Arts. 74, 75, and 76) or the contract. Indeed, CISG Arts. 45 and 61 have already made it clear that claims for damages can be asserted apart from other legal consequences of breaches of contract, thus also apart from avoidance. The term "damages which may be due" is in this context conceived as a bit tight, for the same should apply to obligations to pay penalties under the contract in their different manifestations. 636
Similarly, under Art. 7.3.5(2) of the UNIDROIT Principles, the fact that, by virtue of termination, the contract is brought to an end, does not deprive the aggrieved party of its right to claim damages for non-performance in accordance with the rules laid down in section 4 of Chapter 7 (Arts. 7.4.1 et seq.). The PECL provisions that are relevant to this point are to be found in Art. 8:102, entitled Cumulation of Remedies, which clearly states that a party is not deprived of its right to damages by exercising its right to any other remedy. Thus, a party which pursues a remedy other than damages is not precluded from claiming damages. A party which terminates the contract may, therefore, also claim damages. 637
Thus, the primary effect of termination (supra. 12.2) may be more correctly stated as: "To the extent that the right to claim damages remains unaffected, the effects of contract avoidance are that the parties are deemed to have performed their respective obligations and no further performance remains to be tendered." 638
Although avoidance of the contract relieves the parties from their contractual obligations, this does not mean that every clause of the avoided contract ceases to be effective or that all the rights and obligations provided for in the contract automatically come to an end. 639 Generally speaking, dispute resolution clauses always remain binding after the contract ceases to exist by way of avoidance or automatic termination. 640 All systems now accept that termination will not affect the application of clauses such as arbitration clauses which were intended to apply despite termination. 641
Hereby a widely recognized rule is repeated under each of the three instruments. Under CISG Art. 81(1), if the contract itself provides that a party may exercise various rights and that the other party must fulfill certain obligations after the contract is avoided, these provisions, despite the contract having been avoided, will remain effective until those rights and obligations are fully realized. These contractual rights and the corresponding obligations to honor these rights do not cease to exist simply because the contract is avoided. These clauses, unlike those that are performance-related, are not avoidable unless the contract itself or a subsequent agreement between the parties indicates otherwise. 642 Under either of the two sets of Principles, a similar rule is set out in UPICC Art. 7.3.5(3) and PECL Art. 9:305(2), respectively. Thus, notwithstanding the general rule laid down in UPICC Art. 7.3.5(1)/PECL Art. 9:305(1), there may be provisions in the contract which survive its termination. This is the case in particular with provisions relating to dispute settlement but there may be others which by their very nature are intended to operate even after termination. 643
The purpose of these provisions is to prevent complete termination of the contract, 644 including those provisions concerning not only those rights and obligations which are ancillary to an avoidance of the contract, like a respective penalty, but such which are to help solve a conflict between the parties and which, of course, are of special importance when that conflict aggravates so that the contract is terminated early, such as arbitration and renegotiation clauses and forum selection clauses, all of which will help the party relying on the avoidance take recourse to remedies provided by the instruments and the applicable law. 645 It is to be noted that the Secretariat Commentary declares non-exhaustive the two named conditions (sentence 2, CISG Art. 81(1)) which continue in existence. 646 This is not convincing because the second condition (any other provision of the contract governing...) actually is a description of general features. The surviving conditions can be multifaceted. They relate to general questions of cooperation between the parties, like agreement of general business terms whose individual elements again have to be examined according to that criterion, agreements on the form of declarations, a general obligation to cooperate, obligations to maintain secrecy, a reservation of title up to restitution, limitation of claims, and the applicable law. Another group of conditions refers to the modalities of performance, i.e. commercial terms, risk bearing, packaging, procurement of licenses, which can play a role where the return of the goods or of the price is concerned. Of particular practical relevance are those agreements which deal with liability, such as penalties, liquidated damages and damage clauses, including possibilities of exemption and restrictions, the amount of interest, etc. 647
On the other hand, one should note that the rule does not remedy deficiencies which lead to non-validity of an arbitral clause or any other provision intended to apply despite termination under national law, including that based on other conventions. 648 None of these rules say that these provisions are valid; it merely provides the rule according to which avoidance of the contract "does not effect" such provisions. 649 This is confirmed by the Secretariat Commentary: "It should be noted that article 66(1) [draft counterpart of CISG article 81(1)] would not make valid an arbitration clause, a penalty clause, or other provision in respect of the settlement of disputes if such a clause was not otherwise valid under the applicable national law. Article 66(1) [draft counterpart of CISG article 81(1)] states only that such a provision is not terminated by the avoidance of the contract." 650
635. Supra. note 7.
637. See Comment and Notes to the PECL: Art. 8:102. Comment A. Available online at ‹http://www.cisg.law.pace.edu/cisg/text/peclcomp45.html›
638. See Jianming Shen in "Declaring the Contract Avoided: The U.N. Sales Convention in the Chinese Context": New York International Law Review, Vol. 10, No. 1, New York State Bar Association (1997); p. 33. Available online at ‹http://www.cisg.law.pace.edu/cisg/biblio/shen.html›
639. See John O. Honnold in " On the Road to Unification of the Law of Sales": Forum International, No. 2, June 1983, 8.
640. Supra. note 25, p. 34.
641. E.g. COMMON LAW: Heyman v. Darwins  A.C. 356, H.L.; FINLAND: Aurejärvi 106; FRANCE: clause compromissoire (NCPC art. 1466) and penalty clause (Malaurie and Aynès, Obligations no. 543); GERMANY, see Stein-Jonas (- Schlosser) 1025 No. 00; GREEK law, see Kerameus 171-173, with further refs, and Papanicolaou in Georgiadis and Stathopoulos II art. 389 no. 14 (1979); ITALIAN law: no specific text but see Satta 852; Cass. 5 Aug.1968 n. 2803, in Foro It., 1969, I c.445 and Cass. 27 May 1981 n.3474, in Foro It., 1982, I c.199; NETHERLANDS BW art. 6:271; PORTUGUESE CC art. 434(1); SPANISH Arbitration Act 1988 (see Bercovitz, Arbitraje, art. 1, 17 ff and Unidroit art. 7.3.5(3). (Supra. note 12, Note 3.)
642. Supra. note 25, p. 35.
643. Comment 3 on Art. 7.3.5 UPICC.
644. Supra. note 9.
645. Supra. notes 6, 9.
646. It is stated with this regard: "The enumeration in paragraph (1) of two particular obligations arising out of the existence of the contract which are not terminated by the avoidance of the contract is not exhaustive. Some continuing obligations are set forth in other provisions of this Convention. For example, article 75(1) [draft counterpart of CISG article 86(1)] provides that 'if the goods have been received by the buyer, and if he intends to reject them, he must take such steps as are reasonable in the circumstances to preserve them' ['If the buyer has received the goods and intends to reject them, he must take such steps to preserve them as are reasonable in the circumstances'] and article 66(2) [draft counterpart of CISG article 81(2)] permits either party to require of the other party the return of whatever he has supplied or paid under the contract. Other continuing obligations may be found in the contract itself or may arise out of the necessities of justice." (Supra. note 4, Comment 6.)
647. Supra. note 7, pp. 342-343.
648. Supra. note 7.
649. Supra. note 9.
650. Supra. note 4, Comment 5.
Eric von Hippel
Erik S. Raymond