3.2 BUYER'S RIGHT TO SPECIFIC PERFORMANCE: CISG ART. 46

3.2.1 Introduction

The CISG establishes for the buyer a clear right under Art. 46 to require the seller to perform as originally agreed. Art. 46 reads as follows:

"The buyer may require performance by the seller of his obligation unless the buyer has resorted to a remedy which is inconsistent with this requirement.

If the goods do not conform with the contract the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter.

If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under article 39 or within a reasonable time thereafter."

The Secretariat Commentary on Art. 42 of the 1978 Draft [draft counterpart of CISG Art. 46]  ⁷⁶  states that, Art. 46 describes the buyer's right to require the seller to perform the contract after the seller has in some manner failed to perform as agreed.  ⁷⁷  Art. 46 is divided into three subparts. Art. 46(1) sets out the buyer's general right to specific performance of the seller's obligations, provided that the buyer has not pursued a remedy inconsistent with requiring performance. Art. 46(2) grants the buyer the right to require delivery of substitute goods in the case of non-conforming goods and under certain circumstances. Art. 46(3) provides that the buyer may require the seller to repair non-conforming goods under circumstances similar to those in Article 46(2). All three subparts can be grouped under the buyer's right to specific performance because the nature of the remedy in all the subparts requires the seller to deliver conforming goods or perform other obligations.  ⁷⁸  It is "an expression of the maxim pacta sunt servanda".  ⁷⁹ 

One should note, however, the three different categories of specific performance under Art. 46 each provide limits to the granting of specific performance under the said paragraph: Para. (1) states that the buyer may require specific performance unless he has resorted to a remedy which is inconsistent with such requirements; para. (2) delivery of substitute goods may be required only if the breach constitutes a fundamental breach; para. (3) allows the right to require repair of non-conforming goods only if such requirement is not unreasonable having regard to all circumstances. Nonetheless, the buyer does not lose in seeking specific performance his right to recover any damages he may have suffered thereby. Art. 45(2) ensures by providing that: "The buyer is not deprived of any right he may have to claim damages by exercising his right to other remedies". "The right to claim damages ensures that the buyer is put into as good a position as if he would have been had the contract been performed. Therefore, the right to claim damages essentially supplements the buyer's right to require performance."  ⁸⁰ 

3.2.2 General Rule: Art. 46(1)

3.2.2.1 Right to require performance

The buyer's general right to demand the seller to perform his obligations under the contract derives from Art. 46(1): "The buyer may require performance by the seller of his obligations...". "The obligations that the buyer may require the seller to perform are covered under Articles 30 through 34, and under Articles 41 and 42. Those obligations include the obligation to produce, procure, or deliver goods at a place or time required by the contract and the obligation to deliver the goods free from third-party claims."  ⁸¹ 

Thus, the right to require performance includes the delivery of the goods, or of any missing part thereof, the handing over of documents, the curing of defects or the performance of all other acts necessary to fulfill the contract as originally agreed. Its purpose can be understood as seeing to it that the obligations of the seller are performed as laid down in the contract and the CISG: "Paragraph (1) recognizes that after a breach of an obligation by the seller, the buyer's principal concern is often that the seller perform the contract as he originally promised. Legal actions for damages cost money and may take a considerable period of time. Moreover, if the buyer needs the goods in the quantities and with the qualities ordered, he may not be able to make substitute purchases in the time necessary. This is particularly true if alternative sources of supply are in other countries, as will often be the case when the contract was an international contract of sale."  ⁸² 

As for the application of Art. 46(1), Koskinen states: "The buyer's right to require performance under Article 46(1) is at hand in situations where the seller has totally failed to perform, i.e. non-delivery. It is thus distinguished from the buyer's right to require delivery of substitute goods or right to demand repair. What is a total failure to perform? It is clear that if the seller refuses to deliver the goods, he is in breach, as addressed by Article 46(1). But if the seller delivers goods that are totally different from what has been agreed upon, i.e. apples instead of pineapples, the answer is a bit more complicated. Should the matter be then considered as a non-delivery? The problem lies in the right to avoid. Will states that 'If the answer were positive the buyer might find it difficult to avoid the contract. For the mere delay in performance caused by the delivery of apples instead of pineapples does not necessarily amount to a fundamental breach.' Therefore, Will concludes that the delivery of goods other than those agreed upon between the parties, should not be regarded as non-delivery, but as a non-conformity of goods, covered by paragraph (2) of Article 46."  ⁸³ 

In short, the buyer's right to require performance under Art. 46(1) is at hand in cases of non-delivery. "If he has delivered, but the goods do not conform with the contract, paras. 2 and 3 provide remedies for specific claims for performance."  ⁸⁴ 

3.2.2.2 Non-resorting to inconsistent remedies

As mentioned above, despite the broad language of Art. 46, the buyer's remedies under this article are subject to a number of restrictions, one of which is expressed by Art. 46(1), by virtue of which the buyer will be entitled to apply for specific performance only when he has not "resorted to a remedy which is inconsistent with this requirement". Despite the express language of this provision, it is not quite clear which remedies are incompatible with the remedy of requiring performance.

Inconsistency is clearly at hand if the buyer avoids the contract: If the buyer effectively avoids the contract, the exclusion of his right to require performance follows automatically from Art. 81(1) which provides: "Avoidance of the contract releases both parties from their obligations under it ...". Consequently, the buyer may not compel performance if he has chosen to put an end to the contract by avoiding it. "The same is true in the case where the buyer has claimed price reduction in the case of non-conforming delivery pursuant to Art. 50, since it would re-establish equivalence."  ⁸⁵  It is obvious that if the delivered goods are defective and the buyer demands a price reduction or refund for repair costs as compensation, he may not at the same time require repair or delivery of substitute goods, as provided by paras. (2) and (3) of Art. 46, by the seller; in such a case the right to require performance and claim for a price reduction are inconsistent remedies, because they aim to compensate the same interest. Thus, the buyer may not require performance if he has chosen to reduce the price or avoid the contract.  ⁸⁶ 

The question whether a claim for damages would be an inconsistent remedy, depriving the buyer of the right to require performance gives rise to some doubt. What is certain is that, under the Convention, the buyer is not deprived of his right to claim damages by exercising his right to claim performance (Art. 45(2)); as mentioned above, the right to claim damages essentially supplements the buyer's right to require performance. But is the converse necessarily true, i.e. is the buyer not deprived of his right to require performance by claiming damages? The Convention does not make the position clear.

Koskinen submits in this respect that claiming damages is not generally inconsistent with the remedy of specific performance, due to the provision of Art. 45(2). However, the buyer may lose his right to require performance if he has, without avoiding the contract, claimed damages for failure to perform or defective performance of some other obligation. Of the essence is the point of time when the buyer becomes bound by his damages claim. Such point of time must be decided in conformity with general principles of good faith. If the buyer has only claimed for damages and the seller has expressly or impliedly indicated his agreement to the buyer's damages claim, the buyer may lose his right to subsequently require the seller to perform his obligations, because such a further requirement to perform could constitute an inconsistent requirement especially if the seller has had reason to rely on the buyer's notification of a damages claim. On the other hand the buyer may, in addition to a requirement of specific performance, claim for damages by the seller, provided that the buyer makes it clear to the seller that such requirements are made simultaneously.  ⁸⁷  Jafarzadeh notes from another perspective that "a distinction must be drawn between the case of a claim for damages for late delivery and that of non-delivery. Where the buyer has claimed damages for delay in delivery he would not be pursuing a remedy 'inconsistent' with that of requiring performance, while a claim for damages for non-delivery would be inconsistent with requiring performance, since such a claim for damages can only be brought 'If the contract is avoided'."  ⁸⁸ 

In sum, "inconsistent remedies include: (1) avoidance of the contract under articles 26, 49, or 81; (2) reduction of the contract price under article 50; and (3) a claim for damages based on the market-contract price differential under article 74."  ⁸⁹  Absent resort to such remedies, Art. 46(1) imposes no limits on the buyer's right to specific performance within its text. The reason is apparently to impress upon the seller the importance of his or her obligations. The seller must rely on the buyer's actions. It is expressly mentioned in the Secretariat Commentary: "Subject to the rule in paragraph (2) relating to the delivery of substitute goods, [and the rules on repair contained in paragraph (3) that was added to article 46 of the Official Text], this article does not allow the seller to refuse to perform on the grounds that the non-conformity was not substantial or that performance of the contract would cost the seller more than it would benefit the buyer. The choice is that of the buyer."  ⁹⁰ 

3.2.3 Right to Demand Cure: Arts. 46(2) and 46(3)

3.2.3.1 In general

The general right to specific performance is augmented in Art. 46 by two more specific provisions which deal with the right to require substitute goods or repair of the goods. Both of these instances deal with situations where there has been performance in fact, but where the performance does not conform with the provisions and requirements of the contract.  ⁹¹  Thus, Arts. 46(2) and 46(3) contemplate seller's delivery of non-conforming goods and the buyer requiring substitute goods, or repair of defective goods.

The delivery of substitute goods under Art. 46(2) and the right to demand repair under Art. 46(3) are, of course, significant above all in regard to non-conforming or defective goods. Evaluation of the non-conformity is to be made pursuant to Art. 35.  ⁹²  As for the scope of the term non-conformity, Enderlein and Maskow state: "Non-conformity of goods not only comprises defective quality and deficiencies in quantity but also wrong deliveries (c. Article 35). Goods do not conform with the contract when they are not free from third party rights or claims (c. Articles 41 and 42; [...])."  ⁹³  Thus, even cases of defects in title seem to be covered under Arts. 46(2) and Art. 46(3). However, neither Art. 46(2) nor Art. 46(3) is entirely clear at this point. Also, it is said that the nature of the goods plays here an important role: "If the goods, which are burdened with a third party claim, are generic, the buyer has generally a right to require the seller to re-deliver substitute goods. And, accordingly, if the goods are specific and the seller cannot 'buy himself out' of such a third party right, a right to require specific performance would anyway seem to be impossible."  ⁹⁴ 

As indicated above, the right of the buyer to demand that the seller cure the non-conforming delivery may be exercised in the form of requiring him to tender substitute goods (Art. 46(2)) or to repair the defect in the goods (Art. 46(3)). It is to be noted that although the language of Arts. 46(2) and (3) shows that the remedies provided under these two sub-paragraphs are separate remedies, they are not to be regarded as alternatives but can both be resorted to in the same case. Thus, it is possible for a buyer to request both substitute goods and the repair of goods depending on the circumstances. For instance, the seller may only be able to supply a portion of replacement goods but be in a position to repair the remainder of the defective goods.  ⁹⁵ 

However, as to be demonstrated below, when the non-conformity of goods does not amount to fundamental breach and repair is not reasonable, the buyer has the right to damages or price reduction, but has no right for performance at the expense of the debtor under Art. 46.

3.2.3.2 Delivery of substitute goods: Art. 46(2)

According to para. (2) of Art. 46, the buyer can require delivery of substitute goods, if the seller delivers goods that do not conform with the contract and the non-conformity constitutes a fundamental breach.

As for the application and purpose of Art. 46(2), Koskinen states: "The said paragraph governs therefore the scope of specific performance when the seller has delivered goods but they do not conform to the contract made between the parties. By delivery of substitute goods is meant that defective goods have been delivered and due to the defectiveness a second delivery is made to replace the first delivery. The situation where buyer rejects defective goods before delivery and demands a new conforming delivery is governed, as a matter of fact, by Article 46(1) and not by Article 46(2). Such a situation shall, consequently, be evaluated under Article 46(1). The buyer's right to demand re-delivery of substitute goods reflects further the CISG's aim to respect the pacta sunt servanda principle. The buyer is given the possibility to rely on the seller's promise and require him to re-deliver substitute goods and consequently perform as originally agreed between the parties."  ⁹⁶ 

However, one particular situation is to be noted here: Whether can the buyer of specific goods require the seller to deliver substitute goods on the basis of para. (2) of Art. 46? Since under a contract for specific goods the seller has not undertaken any duty other than to deliver the particular goods, it seems that requiring him to deliver substitute goods would be contrary to the mutual agreement of the contracting parties. Koskinen confirms: "When applying Article 46(2), as regards conformity of goods, it is important to separate generic and specific goods. If the contract made between the parties consists of generic goods, it follows directly from Article 46(1) that the buyer is entitled to require the seller to perform as agreed in case of non-conformity, and accordingly require re-delivery of substitute goods under Article 46(2). Therefore, the precondition of an absence of resorting to an inconsistent remedy must also exist. When, on the other hand, the contract consists of specific goods, a requirement of re-delivery of substitute goods seems to be irrelevant as the nature of the goods makes such re-delivery impossible, de facto. Consequently, the buyer would only have a right to require repair under paragraph (3) of Article 46 or claim damages."  ⁹⁷ 

Clearly, Art. 46(2) governs the scope of specific performance when the seller has delivered goods but they do not conform to the contract made between the parties. However, the right to require re-delivery of substitute goods under Art. 46(2) is expressly limited by two provisions, one of which is that the non-conformity must amount to a fundamental breach (for criteria in determining what constitutes a fundamental breach, see Chapter 8). Jafarzadeh submits that "since it could be expected that the cost of shipping a second lot of goods to the buyer and of disposing of the non-conforming goods already delivered might be considerably greater than the buyer's loss from having non-conforming goods, the Convention adopts the approach that a buyer will be entitled to resort to require the seller to deliver replacement goods only where the non-conformity is serious enough to constitute a 'fundamental breach'. Accordingly, relatively trivial defects do not justify a claim for substitute delivery, though in appropriate cases they may entitle the buyer to require the seller to remedy the lack of conformity by repair (Art. 46(3))."  ⁹⁸ 

In this respect, Enderlein and Maskow confirm as: "Under the CISG, substitute goods can be requested by the buyer only when the non-conformity of the goods constitutes a fundamental breach of contract; hence not in the case of minor defects as was the case under ULIS. This is in line with Article 49 according to which avoidance of a contract (at first) can only be requested if a fundamental breach of contract is committed, for the economic consequences of a delivery of substitute goods may be the same for the seller as in the case of an avoided contract (O.R. 337). [...] The economic consequences could even surpass those of an avoidance of contract because the additional expenses incurred and the risks involved in transporting substitute goods are to be born by the seller [...]."  ⁹⁹ 

In sum, "[p]aragraph (2) of Article 46 gives the buyer the right to require the delivery of substitute goods when the goods delivered are not in conformity with the contract, and this non-conformity constitutes a fundamental breach. Requiring delivery of substitute goods is one form of specific performance. This remedy is limited by the conditions of the breach. [...] When the breach is not fundamental, the buyer has recourse to repair, price reduction or damages."  ¹⁰⁰  Of course, even in the case of a fundamental breach of contract, the buyer can decide in favour of repair at his option.  ¹⁰¹  On the other hand, since the right to avoid is similarly preconditioned with the requirement of fundamental breach. Therefore, the buyer has a possibility to choose between avoidance of the contract or requirement of re-delivery of substitute goods.  ¹⁰²  In any event, if the buyer does require the seller to deliver substitute goods, he must be prepared to return the unsatisfactory goods to the seller.  ¹⁰³ 

3.2.3.3 Right to repair: Art. 46(3)

The third aspect of the buyer's right to specific performance under the CISG, is his right to require repair under Art. 46(3) of delivered but defective goods. Unlike the right to require re-delivery of substitute goods, it generally applies as well to specific as to generic goods. "Naturally, if specific goods are burdened with a third party right, there is, however, no right to require repair in case the seller cannot buy the third party out."  ¹⁰⁴ 

However, like the buyer's right to re-delivery of substitute goods under Art. 46(2) the right to demand repair is also subject to Art. 35, defining non-conformity of goods. "When determining non-conformity of goods pursuant to Article 35, and as regards any third-party rights to the delivered goods, it is of importance to decide whether the breach occured is fundamental. If the breach is one of a fundamental nature, the buyer has naturally a right to avoid the contract or to require delivery of substitute goods. If, however, the requirements of a fundamental breach are not met, the buyer would nevertheless have a right to require repair."  ¹⁰⁵  Clearly, the remedy to require repair is not restricted by a requirement of fundamental breach. As stated above, the reason delivery of substitute goods is available only in cases of fundamental breach is to avoid hardship to the seller, since the delivery of certain goods, and especially heavy machinery, is very costly. The seller must bear the cost of transporting the conforming goods to the buyer and the cost of transporting the non-conforming goods back to his place of business. Alternatively, he may resell the non-conforming goods, which will likely be difficult if he does not have the necessary network in a foreign market. Another burden may arise when the delivered goods have perished as result of improper storage. For all these reasons, it is unfair to put such a heavy burden on the seller when the non-conformity is negligible. Repair in such cases will satisfy the buyer without causing unnecessary hardship to the seller.

According to the wide language of the provision the buyer will have a general right to require the seller to cure any form of lack of conformity by way of repair except in cases where it is unreasonable, having regard to all the circumstances. "The flexible language of the provision is designed to encourage a reasonable and flexible approach to cases where the buyer can readily make repair, particularly when the seller's facilities for repair are in a distant country. Accordingly, a buyer will not be entitled to require the seller to make good minor defects which can readily be repaired by him."  ¹⁰⁶ 

Although the right to require repair can be regarded as a more lenient right than the right to demand substitute goods, it is also limited by a provision recited in the Article itself, as follows: "... unless this is unreasonable having regard to all the circumstances." Thus, the right to repair is limited to situations where it is reasonable to repair under the circumstances. In this point, it reflects the same concern for not causing hardship to the seller is the underpinning of the provision that governs the right to repair. In any event, the buyer can require repair only if it is reasonable to do so. The reasonableness of the demand is judged according to the circumstances surrounding the contract and the conflicting interests of the parties. Unreasonable in this context means unreasonable to the seller and it does not depend on the character of the breach, but rather on the nature of the goods delivered and all the other circumstances. The nature of some goods is such as to exclude repair at all, e.g. in the case of agricultural products. More generally, a claim for repair may be unreasonable if there is no reasonable ratio between the costs involved and the price of the goods or if the seller is a dealer who does not have the means for repair  ¹⁰⁷  Specifically speaking, of particular importance are the extra costs that the seller would have to suffer as a result of the repair. If such cost would be unreasonably high especially compared to a delivery of substitute goods, the precondition of Art. 46(3) is likely to be fulfilled.  ¹⁰⁸  This means that when repair by the seller is very onerous, the buyer cannot claim repair.

When judging what is unreasonable, all circumstances have to be taken into account. When it comes to all the other circumstances, regard must be given to both the seller's and the buyer's interests. Under Art. 46(3) it should also be noted that some minor defects in the goods could be repaired more readily by the buyer, especially when the seller's facilities for repair are in a distant country. At that, the availability of qualified repair locally is an important point to be evaluated. Where qualified personnel are particularly scarce, as may be the case in some developing countries, the seller's inconvenience may have to give way to the interests of the buyer. On the other hand, it is doubtful whether the (little) interest of the buyer in performance in conformity with the contract must be considered. As a matter of fact, there can be no doubt. The requirement of repair is a right and not an obligation of the buyer. When the buyer is not interested in having goods repaired, he will not require it. The little interest of the buyer could, however, constitute a problem of Art. 48 when the seller of his own accord offers repair.  ¹⁰⁹  Furthermore, whether the repair is unreasonable may also depend on technical difficulties. Repair could even be impossible due to technical reasons (this could, however, constitute a fundamental breach of contract).

In any event, the costs as a consequence of repair must be born by the seller, as is the case with delivery of substitute goods. When the repair is not reasonable, the buyer will be entitled to damages or a reduction in price. "It can be concluded that the buyer's right to require the seller to repair non-conformities, not amounting to a fundamental breach, in delivered goods supplements the CISG's basic principle to respect the contract made between the parties. Consequently, the pacta sunt servanda principle and the thinking that the most natural remedy for a breach of contract is to require the seller to perform as originally agreed upon between the parties, is supported. Such right is limited in exceptional circumstances and to 'avoid economic waste where the seller has substantionally performed or where the cost of repair exceeds the benefit to be gained.'"  ¹¹⁰ 

3.2.3.4 Time limit restriction

As discussed above, when applying for replacement goods, what the buyer is required to prove is that the seller's non-conforming delivery is serious enough to constitute a "fundamental breach" (Art. 46(2)). In contrast, when he applies for an order requiring the seller to repair the lack of conformity he should only show that his request is not "unreasonable having regard to all the circumstances" (Art. 46(3)). Nonetheless, another limitation of the same is both found in Arts. 46(2) and 46(3). As provided in paras. (2) and (3) of Art. 46, the request for substitute goods or repair must be made "either in conjunction with notice given under article 39 or within a reasonable time thereafter".

Thus, the Convention provides a further restriction which is applicable to the remedies prescribed both under Arts. 46(2) and (3). Under this requirement the buyer must request supply of substitute goods or repair from the seller in conjunction with notice he has to give under Art. 39 so as to inform the seller of the lack of conformity. If the buyer does not request cure at the very moment of giving notice, he has to do so within a reasonable time after he has given notice to the seller that the goods delivered do not correspond to the contract. Failure to request the remedy either in conjunction with the notice given under Art. 39 or within a reasonable time thereafter would deprive him of the right to require the seller to deliver substitute goods or repair the defects. "The time limitation serves the interests of both parties. It is important for the buyer to receive the goods within a certain period of time, otherwise the receipt of the goods will have no meaning for him. As for the seller, he is protected from the constant threat of claims."  ¹¹¹ 

Although reasonable time, as provided by Art. 46(2)/46(3), is not defined further, most of the commentators believe that necessities of international trade seem to set a maximum limit of two years, as defined in Art. 39(2). For instance, Jafarzadeh states: "On this provision, in the case of latent defects the buyer may be entitled to demand that the seller cure the lack of conformity up to two years from the date in which the goods are actually handed over to him."  ¹¹²  Enderlein and Maskow also believe that: "What is appropriate here is therefore to fix a short time and by no means another two-year period as allowed for under Article 39, paragraph 2."  ¹¹³ 

3.2.3.5 A summary

Having accepted that the buyer has a right to require the seller to perform what he has undertaken under the contract, it is suggested that the Convention provisions giving the buyer a right to require the seller to cure his non-conforming delivery by delivery of substitute goods and/or repair are consistent with general principles and the authorities authorising the buyer to obtain specific performance.  ¹¹⁴ 

However, it was suggested that in giving the buyer a right to demand cure, a distinction should be made between the right to demand replacement goods and to demand cure by repair. The right to demand substitute goods should be given only where the lack of conformity results in sufficiently serious consequences. But the right to demand cure by repair is to be available unless it is unreasonable having regard to all the circumstances. Nonetheless, the concern for these two express restrictions is of the same and they are both designed to avoid causing unnecessary hardship to the seller. However, it is submitted from the practical perspective that the buyer should not be given a right to demand delivery of replacement goods where the contract was for sale of specific goods, although he may be entitled to demand cure by repair. Demanding delivery of substitute goods should be available only where the contract is for the sale of unascertained goods.

Strangely, neither Art. 46(2) nor 46(3) refers to inconsistent remedies. However, it appears that the choice of an inconsistent remedy does preclude the buyer from later demanding repair or substitute goods. Art. 81 dictates this result by providing that avoidance of the contract releases both the buyer and the seller from their obligations under the contract. Essentially, the avoiding buyer releases the seller from the obligation to provide repair or substitute goods.  ¹¹⁵  Furthermore, both provisions expressly require that the request for repair or substitute goods be given within the time limit. "If the buyer does not through immediate notice request a delivery of substitute goods or repair, he has to do so within a reasonable time. The CISG is based on the assumption that this rule serves the interests of both parties. Usually the buyer is interested in receiving conform[ing] goods as quickly as possible, and the seller wants to know the claims of the buyer. It should be avoided in any case that the buyer can speculate on rising market prices."  ¹¹⁶ 

After all above, although according to the wide language of Art. 46 the buyer will have a general right to performance for non-delivery and specific rights to require the seller to cure any form of lack of conformity by way of substitute goods or repair, the buyer who contemplates resorting to these remedies obviously takes the risk that, if the matter comes to litigation, the court may hold that inconsistent remedies exist or to require repair is unreasonable or that the lack of conformity is not sufficiently serious to constitute a fundamental breach. Accordingly, although specific performance under the Convention may be regarded as the logically prior remedy, in practice the buyer would likely prefer the certainty and simplicity of damages, unless repair or replacement other forms of performance is very easy and economical for the buyer to obtain otherwise.