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Remedies for Non-performance - Perspectives from CISG, UNIDROIT Principles and PECL,
Liu Chengwei *
INTRODUCTION
[INTRODUCTION]
LIST OF ABBREVIATIONS
A. For Documents
B. For Journals
C. For Organizations
D. For Citations
PART I. GENERAL REVIEW
CHAPTER 1. SOURCES OF INSPIRATION
[CHAPTER 1. SOURCES OF INSPIRATION]
1.1 INTRODUCTION
1.2 OVERVIEW OF THE STUDIED INSTRUMENTS
1.2.1 CISG
1.2.2 UNIDROIT Principles
1.2.3 PECL
1.2.4 Brief Comparison
1.3 MAJOR SOURCES OF INFORMATION
CHAPTER 2. REMEDIES AVAILABLE UPON NON-PERFORMANCE
[CHAPTER 2. REMEDIES AVAILABLE UPON NON-PERFORMANCE]
2.1 INTRODUCTION
2.2 THE CONCEPTS: BREACH OF CONTRACT vs. NON-PERFORMANCE
2.3 REMEDIAL SCHEMES OF THE STUDIED INSTRUMENTS
2.3.1 CISG Part III (Partial)
2.3.2 UNIDROIT Principles Chapter 7
2.3.3 PECL Chapters 8, 9
2.3.4 Concluding Remarks
2.4 STRUCTURE OF THIS PRESENTATION
PART II. PRESERVING PERFORMANCE
PART III. TERMINATION
PART IV. DAMAGES
PART V. EXCUSES
PART II. PRESERVING PERFORMANCE
CHAPTER 3. SPECIFIC PERFORMANCE
[CHAPTER 3. SPECIFIC PERFORMANCE]
3.1 COMPRISED APPROACH UNDER THE CISG
3.1.1 Introduction
3.1.2 Primacy of Specific Performance under Arts. 46/62
3.1.3 Forum's Rule under Art. 28
3.2 BUYER'S RIGHT TO SPECIFIC PERFORMANCE: CISG ART. 46
3.2.1 Introduction
3.2.2 General Rule: Art. 46(1)
3.2.2.1 Right to require performance
3.2.2.2 Non-resorting to inconsistent remedies
3.2.3 Right to Demand Cure: Arts. 46(2) and 46(3)
3.2.3.1 In general
3.2.3.2 Delivery of substitute goods: Art. 46(2)
3.2.3.3 Right to repair: Art. 46(3)
3.2.3.4 Time limit restriction
3.2.3.5 A summary
3.3 SELLER'S RIGHT TO SPECIFIC PERFORMANCE: CISG ART. 62
3.3.1 Rationale of Art. 62
3.3.2 General Application
3.3.3 Potential Problems
3.4 UNIFORM REMEDY IN UNIDROIT PRINCIPLES / PECL
3.4.1 Introduction
3.4.2 Performance of Monetary Obligation
3.4.2.1 Money due generally recoverable
3.4.2.2 Money not yet due
3.4.3 Performance of Non-monetary Obligation: In General
3.4.4 Exceptions to Performance of Non-monetary Obligation
3.4.4.1 The principle and exceptions
3.4.4.2 Performance impossible
3.4.4.3 Unreasonable burden
3.4.4.4 Performance from another source available
3.4.4.5 Performance of an exclusively personal character
3.4.4.6 Unreasonable delay in requiring performance
3.4.5 Right to Require Remedying of Defective Performance
3.4.6 Other Issues
CHAPTER 4. NACHFRIST FOR LATE PERFORMANCE
[CHAPTER 4. NACHFRIST FOR LATE PERFORMANCE]
4.1 GENERAL CONSIDERATIONS
4.2 RATIONALE UNDERLYING THE OPTIONAL APPROACH
4.2.1 Optional Approach under the Studied Instruments
4.2.2 Underlying Rationale
4.2.3 Granting Additional Period in Two Situations
4.3 SETTING OF A NACHFRIST NOTICE
4.3.1 Transmission of the Intention
4.3.1.1 Form of the notice
4.3.1.2 Risk in transmission
4.3.2 Fixing of the Time-limit
4.3.2.1 Fixed period
4.3.2.2 Reasonable length
4.4 EFFECTS OF SERVING A NACHFRIST NOTICE
4.4.1 Remedies Available/Suspended during the Period
4.4.2 Early End of the Existing Uncertainty upon Rejecting Notice
4.4.3 Termination upon Expiry of the Extension
4.4.3.1 In general
4.4.3.2 CISG approach
4.4.3.3 UNIDROIT Principles / PECL approach
CHAPTER 5. CURE BY NON-PERFORMING PARTY
[CHAPTER 5. CURE BY NON-PERFORMING PARTY]
5.1 INTRODUCTION
5.2 CONDITIONS FOR INVOKING CURE
5.2.1 In General
5.2.2 Reasonableness of Notice
5.2.3 Appropriateness of Cure
5.3 SELLER'S RIGHT TO CURE AND BUYER'S RIGHT TO TERMINATION
5.4 EFFECTS OF EFFECTIVE NOTICE
5.4.1 Right to Inquire vs. Duty to Accept Cure
5.4.2 Suspension of Inconsistent Remedies
5.4.3 Retained Rights of the Aggrieved Party
CHAPTER 6. PRICE REDUCTION FOR NON-CONFORMITY
[CHAPTER 6. PRICE REDUCTION FOR NON-CONFORMITY]
6.1 GENERAL CONSIDERATIONS
6.2 FEATURES OF CISG ART. 50
6.2.1 Unique Role and Justification
6.2.2 Self-help Remedy
6.2.3 Seeming Advantages
6.3 IN CONTRAST WITH DAMAGES
6.3.1 Introduction
6.3.2 Distinctions from Damages under the CISG
6.3.2.1 Diverse ratio legis
6.3.2.2 Different manner in calculation
6.3.2.3 Other differences
6.3.2.4 A summary
6.3.3 An Alternative to Damages
6.3.3.1 Introduction
6.3.3.2 In conjunction with force majeure
6.3.3.3 In case of falling market
6.3.3.4 Upon difficulty in proving damages
6.3.3.5 A summary
6.4 ESSENTIALS OF CISG ART. 50
6.4.1 Scope of Application
6.4.1.1 General application in case of non-conformity
6.4.1.2 Ambiguity over defects in title
6.4.2 Exercise of the Right to Price Reduction
6.4.3 Calculation of Proportional Reduction
6.4.3.1 Decisive point: time of delivery
6.4.3.2 Place for comparing
6.4.4 Limited by the Cure
6.5 STATUS OF THE PRICE REDUCTION UNDER UNIDROIT PRINCIPLES / PECL
6.5.1 Exclusion under the UNIDROIT Principles
6.5.2 Inclusion under the European Principles
PART III. TERMINATION
CHAPTER 7. RIGHT TO TERMINATION
[CHAPTER 7. RIGHT TO TERMINATION]
7.1 GENERAL CONSIDERATIONS
7.2 GROUNDS FOR TERMINATION
7.3 CONCLUDING REMARKS
CHAPTER 8. FUNDAMENTAL NON-PERFORMANCE
[CHAPTER 8. FUNDAMENTAL NON-PERFORMANCE]
8.1 GENERAL CONSIDERATIONS
8.2 FORESEEABLE SUBSTANTIAL DETRIMENT
8.2.1 Introduction
8.2.2 Substantial Detriment
8.2.2.1 Existing detriment
8.2.2.2 Substantial deprivation
8.2.2.3 Discernible expectations
8.2.3 Foreseeability
8.2.3.1 Introduction
8.2.3.2 Test for foreseeability
8.2.3.3 Time for foreseeability
8.2.3.4 Burden to prove unforeseeability
8.3 OTHER ELEMENTS IN DEFINING FUNDAMENTAL NON-PERFORMANCE
8.3.1 Strict Compliance of Essence
8.3.2 Intentional Non-performance
8.3.3 No Reliance on Future Performance
8.3.4 Disproportionate Loss
8.4 CONCLUDING REMARKS
CHAPTER 9. ANTICIPATORY NON-PERFORMANCE
[CHAPTER 9. ANTICIPATORY NON-PERFORMANCE]
9.1 GENERAL CONSIDERATIONS
9.2 GROUNDS FOR SUSPENSION
9.3 SELLER'S RIGHT TO STOP GOODS IN TRANSIT UPON SUSPENSION
9.4 DUTY TO GIVE NOTICE IN EXERCISING SUSPENSION
9.5 RESTORING PERFORMANCE BY GIVING ADEQUATE ASSURANCE
9.6 TERMINATION UPON ANTICIPATORY FUNDAMENTAL NON-PERFORMANCE
9.6.1 In General
9.6.2 Clear Indication of A Fundamental Non-performance
9.6.3 Notice Given in case of Termination
9.7 ADEQUATE ASSURANCE OF DUE PERFORMANCE
9.7.1 Purpose of Rule
9.7.2 Non-receipt of Adequate Assurance
9.8 CONCLUDING REMARKS
CHAPTER 10. TERMINATION OF BREACHED INSTALLMENT OR PART
[CHAPTER 10. TERMINATION OF BREACHED INSTALLMENT OR PART]
10.1 TERMINATION OF INSTALLMENT CONTRACTS: CISG ART. 73
10.2 TERMINATION OF FUTURE INSTALLMENTS: CISG ART. 73(2)
10.3 TERMINATION OF A CONTRACT AS A WHOLE: CISG ART. 73(3)
10.4 PARTIAL TERMINATIO: CISG ART. 51
10.5 COMBINED APPROACH: PECL ART. 9:302
10.6 CONCLLUDING REMARKS
CHAPTER 11. DECLARATION OF TERMINATION
[CHAPTER 11. DECLARATION OF TERMINATION]
11.1 NO AUTOMATIC TERMINATION
11.2 INFORMALITY OF THE NOTICE
11.3 TRANSMISSION OF THE INTENTION
11.4 RISK IN COMMUNICATION
11.4.1 CISG Approach
11.4.2 Receipt Principle under the UNIDROIT Principles
11.4.3 Combined Approach under the PECL
11.5 TIME LIMIT FOR THE DECLARATION: IN GENERAL
11.6 DECLARATION WITHIN REASONABLE TIME
11.6.1 Definition of reasonable time
11.6.2 CISG Approach
11.6.3 UNIDROIT Principles / PECL Approach
11.6.4 Concluding Remarks
CHAPTER 12. EFFECTS OF TERMINATION
[CHAPTER 12. EFFECTS OF TERMINATION]
12.1 INTRODUCTION
12.2 RELIEF OF FUTURE PERFORMANCE
12.3 RETROSPECTIVE OR PROSPECTIVE APPROACH
12.4 UNAFFECTED RIGHTS AND OBLIGATIONS AFTER TERMINATION
12.4.1 Continuing Right to Claim Damages
12.4.2 Unaffected Clauses Intended to Apply despite Termination
12.5 RESTITUTION
12.5.1 In General
12.5.2 Entitlement of Parties to Restitution on Termination
12.5.3 Restitution under the PECL
12.5.3.1 Property reduced in value: Art. 9:306
12.5.3.2 Recovery of money paid and property: Arts. 9:306, 9:307
12.5.3.3 Concluding remarks
12.5.4 Restitution of Benefits Received
12.5.5 Exceptions: Restitution Not Possible or Appropriate
12.5.5.1 CISG approach: making restitution a prerequisite for avoidance
12.5.5.2 UPICC/PECL approach: focusing on the allowance upon impossible restitution
12.5.5.3 Comparative perspectives
12.5.5.4 Concluding remarks
PART IV. DAMAGES
CHAPTER 13. GENERAL MEASURE OF DAMAGES
[CHAPTER 13. GENERAL MEASURE OF DAMAGES]
13.1 RIGHT TO DAMAGES
13.2 FULL COMPENSATION
13.3 RECOVERABLE LOSSES
13.4 COMPENSATION OF NON-PECUNIARY LOSS
13.5 COMPUTATION OF LOSSES AND GAINS
CHAPTER 14. LIMITS TO CLAIMS FOR DAMAGES
[CHAPTER 14. LIMITS TO CLAIMS FOR DAMAGES]
14.1 GENERAL CONSIDERATIONS
14.2 FORESEEABILITY OF LOSS
14.2.1 In General
14.2.2 Test for Foreseeability
14.2.3 Party Concerned and Reference Point
14.2.4 Evaluation of Foreseeability
14.2.5 Content of Foreseeability
14.2.6 Concluding Remarks
14.3 CERTAINTY OF HARM
14.4 CONTRIBUTION TO HARM
14.4.1 In General
14.4.2 Ways of Contributing to the Harm
14.4.3 Remedies Affected by the Contribution
14.4.3.1 Remedies available upon non-performance caused solely by the contribution
14.4.3.2 Damages proportionately reduced due to partial contribution
14.5 DUTY TO MITIGATE
14.5.1 In General
14.5.2 Reasonable Measures Taken
14.5.3 Effects of Failure to Mitigate
CHAPTER 15. DAMAGES UPON TERMINATION
[CHAPTER 15. DAMAGES UPON TERMINATION]
15.1 GENERAL CONSIDERATIONS
15.2 DAMAGES UPON SUBSTITUTE TRANSACTIONS
15.2.1 Introduction
15.2.2 Presupposed Situations Calling for Concrete Calculation
15.2.3 Substitute Transaction must be Reasonable Substitute
15.3 DAMAGES UPON CURRENT PRICE
15.3.1 Introduction
15.3.2 Presupposed Situations Calling for Abstract Calculation
15.3.3 Determination of "Current Price"
15.3.3.1 In general
15.3.3.2 Reference point
15.3.3.3 Relevant place
15.4 FURTHER DAMAGES
CHAPTER 16. AGREED PAYMENT FOR NON-PERFORMANCE
[CHAPTER 16. AGREED PAYMENT FOR NON-PERFORMANCE]
CHAPTER 17. RECOVERY OF ATTORNEYS' FEES
[CHAPTER 17. RECOVERY OF ATTORNEYS' FEES]
17.1 GENERAL CONSIDERATIONS
17.1.1 Introduction
17.1.2 Recoverability under "Loser-pays" Principle
17.1.3 Excluded by "American Rule"
17.2 CISG DECISIONS CONCERNING ATTORNEYS' FEES
17.3 PROBLEMATIC RECOVERY UNDER ART. 74 CISG
CHAPTER 18. PAYMENT OF INTEREST
[CHAPTER 18. PAYMENT OF INTEREST]
18.1 INTRODUCTION
18.2 GENERAL ENTITLEMENT TO INTEREST
18.3 ADDITIONAL DAMAGES
18.4 INTEREST ON DAMAGES
18.5 ACCRUAL OF INTEREST
18.6 RATE OF INTEREST
PART V. EXCUSES
CHAPTER 19. CHANGE OF CIRCUMSTANCES
[CHAPTER 19. CHANGE OF CIRCUMSTANCES]
19.1 INTRODUCTION
19.2 UNSDERLYING DOCTRINCE; REBUS SIC STANTIBUS
19.3 DIFFERENT APPROACHES TO CHANGED CIRCUMSTANCES
19.3.1 Historical Review
19.3.2 National Doctrines
19.3.3 International Perspective
19.3.3.1 Public international law
19.3.3.2 International commercial practice
19.3.4 Conclusion
19.4 DEFINITIONS OF force majeure AND HARDSHIP
19.4.1 Force Majeure
19.4.2 Hardship
19.4.3 Comparison
19.5 GENERAL APPROACHES IN THE STUDIED INSTRUMENTS
19.5.1 Approach under the CISG
19.5.2 Approach under the UNIDROIT Principles
19.5.3 Approach under the PECL
19.5.4 Concluding Remarks
CHAPTER 20. force majeure
[CHAPTER 20. force majeure]
20.1 INTRODUCTION
20.2 RELEVANT TEXTS
20.2.1 Exemptions: CISG Art. 79
20.2.2 Force Majeure: UNIDROIT Principles Art. 6.1.7
20.2.3 Excuse Due to an Impediment: PECL Art. 8:108
20.2.4 Comparison
20.3 GENERAL RULE
20.3.1 Scope of Excusable Non-performance
20.3.2 Existence of Qualifying Impediment
20.3.2.1 Introduction of a new word
20.3.2.2 Interpretation of the word
20.3.2.3 Problematic situations
20.3.3 Conditions for Exempting Impediment
20.3.3.1 Beyond control
20.3.3.2 Unforeseeable
20.3.3.3 Unavoidable or insurmountable
20.3.3.4 Causation
20.4 RESPONSIBILITY FOR THIRD PARTIES
20.5 TEMPORARY IMPEDIMENT
20.6 DUTY TO NOTIFY
20.7 EFFECTS
20.7.1 In General
20.7.2 Effect on Right to Damages
20.7.3 Effect on Right to Performance
20.7.4 Effect on Right to Termination
CHAPTER 21. HARDSHIP
[CHAPTER 21. HARDSHIP]
21.1 GAP IN THE CISG?
21.2 INTERPLAY BETWEEN CISG EXCUSE AND UNIDROIT PRINCIPLES / PECL HARDSHIP
21.2.1 Hardship: UNIDROIT Principles Arts. 6.2.1 through 6.2.3
21.2.2 Change of Circumstances: PECL Art. 6:111
21.2.3 Gap-filling Application of Hardship Provisions?
21.3 CONDITIONS FOR INVOKING HARDSHIP
21.3.1 In General
21.3.2 Crucial Point: Fundamental Alteration of Equilibrium
21.3.3 Additional Requirements for Hardship to Arise
21.3.3.1 Time factor: occurrence after conclusion
21.3.3.2 Unforeseeability
21.3.3.3 Risk not assumed
21.4 EFFECTS OF HARDSHIP
21.4.1 In General
21.4.2 Triggering of Renegotiation
21.4.2.1 Request for renegotiation
21.4.2.2 Renegotiation in good faith
21.4.3 Court Measures in case of Hardship
21.4.4 Concluding Remarks
CHAPTER 22. FORCE MAJEURE and HARDSHIP CLAUSES
[CHAPTER 22. FORCE MAJEURE and HARDSHIP CLAUSES]
22.1 GENERAL CONSIDERATIONS
22.2 FORCE MAJEURE CLAUSE
22.2.1 Introduction
22.2.2 Drafting Considerations
22.3 HARDSHIP CLAUSE
22.3.1 Introduction
22.3.2 Drafting Considerations
22.4 OVERLAPPING OF THE CLAUSES
22.5 USE OF STANDARD FORMS: ICC No. 421 (partial)
Endnotes
Endnotes
Metadata
SiSU Metadata, document information
Manifest
SiSU Manifest, alternative outputs etc.
Remedies for Non-performance - Perspectives from CISG, UNIDROIT Principles and PECL,
PART IV. DAMAGES
CHAPTER 18. PAYMENT OF INTEREST
Another important aspect on interest is to clarify whether interest on damages can be claimed. As stated above, Art. 78 CISG grants the right to interest on the purchase price or "any other sum that is in arrears". It is questionable whether this language also extends to claims for damages. Case law on this issue is very rare since most published decisions in which interest has been sought seem to deal with actions for the purchase price. Legal scholars, on the other hand, seem to agree that one has a right to interest on damage claims under Art. 78 if the amount in question has been liquidated vis-à-vis the other party. In this context, however, the question arose among authors from the Anglo-American legal family whether other sums were only meant to be such which are already liquidated, for which interest could be claimed under that legal system, or sums that have not yet been specified. 991
One could argue that the language of Art. 78 ("sum that is in arrears") indicates that a right to interest on damages only exists if the amount in question is liquidated at the time it becomes due. However, Thiele doesn't believe this textual argument is persuasive. Even if the amount of damages to be paid is not fixed yet, the claim for damages is still a claim for a "sum". In case of a breach of contract, the breaching party has to compensate the other party for the loss which that party has suffered. When it fails to do so, this "sum" may be considered as being "in arrears". Therefore, the textual interpretation may not be used as an argument against the application of Art. 78 to unliquidated damages. Thiele further submits that the pertinent question, thus, does not appear to be if Art. 78 applies to damages at all, but rather when damages can be considered as being "in arrears" under Art. 78. If one party breaches the contract, the other party is entitled to damages. Regardless of whether the exact amount of damages has been specified yet, the breaching party still owes compensation to the other party from the time of the breach. Accordingly, the breaching party should be prevented from retaining the benefit from the sum owed to the creditor from that time until payment. Similarly, had the breaching party not breached the contract, the other party would not have suffered any loss. The basis for this loss, however, accrues at the moment of the breach of contract when the initial loss occurs. Therefore, the aggrieved party is deprived of the use of the money from the moment of the loss, even though that amount has not been specified yet. Accordingly, the non-breaching party should be entitled to interest payments on the loss from the time of the breach. 992
Damages under Art. 78, therefore, become due at the moment the contract is breached and the initial loss occurs. Consequently, Art. 78 applies not only to liquidated but also to unliquidated damages. Unfortunately, the Official Comment to PECL Art. 9:508 states that Art. 9:508(1) confers a general right to interest on primary contractual obligations to pay; the provision does not cover interest on secondary monetary obligations, such as damages or interest. 993 However, although takes no stand on the question of compound interest, UPICC Art. 7.4.10 clearly grants the right to interest on damages and gives further guidance by providing that: "Unless otherwise agreed, interest on damages for non-performance of non-monetary obligations accrues as from the time of non-performance."
UPICC Art. 7.4.10 determines the time from which interest on damages accrues in cases of non-performance of obligations other than monetary obligations. In such cases, at the time of non-performance the amount of damages will usually not yet have been assessed in monetary terms. The assessment will only be made after the occurrence of the harm, either by agreement between the parties or by the court. The present article fixes as the starting point for the accrual of interest the date of the occurrence of the harm. This solution is that best suited to international trade where it is not the practice for businesspersons to leave their money idle. In effect, the aggrieved party's assets are diminished as from the occurrence of the harm whereas the non-performing party, for as long as the damages are not paid, continues to enjoy the benefit of the interest on the sum which it will have to pay. It is only natural that this gain passes to the aggrieved party. However, when making the final assessment of the harm, regard is to be had to the fact that damages are awarded as from the date of the harm, so as to avoid double compensation, for instance when a currency depreciates in value. 994
