Fundamental Breach of Contract Under the UN Sales Convention: 25 Years of Article 25 CISG

Fundamental Breach of Contract Under the UN Sales Convention: 25 Years of Article 25 CISG

Description

Of the many topics Professor Šarčević focused his attention on during his very distinguished career, I will deal with one only, namely the United Nations Convention on Contracts for the International Sale of Goods (hereinafter: CISG), which is celebrating its twenty-fifth anniversary. This anniversary provides an opportunity for a brief examination of one of the key provisions of the CISG, namely Article 25, the dispositive provision that defines the concept of "fundamental breach", a concept which is of central importance to the CISG's remedial system. This provision's central importance stems from the fact that a "fundamental breach" triggers particularly far-reaching legal consequences. Thus a party's ability to avoid the contract (even without fixing an additional time-limit), the buyer's entitlement to substitute delivery, as well as the question of who carries the risk in case of delivery of defective goods, all depend on a fundamental breach. From what has just been said, it follows that Article 25 itself does not lay down the various instances in which a fundamental breach is relevant; rather, it constitutes a "tool with the help of which to distinguish between a fundamental and a simple breach of contract". As for the legal consequences of the fundamental breach, these must be derived from the various more specific provisions of the CISG or from the contract. This is why it is correct to emphasize, as some commentators have done, that Article 25 cannot be applied alone, but only in conjunction with other provisions which contemplate a fundamental breach as a prerequisite. The reason for limiting particularly drastic legal consequences (such as the avoidance of the contract) to cases in which the breach of contract is fundamental lies, on the one hand, in ensuring the performance of the contract despite a (non-fundamental) breach to avoid considerable unnecessary and unproductive costs, such as those associated with the return or storage of the goods. On the other hand, this limitation helps to contain the number of cases in which the damaged party may take advantage of the defaulting party's breach to revise an agreement based on a specific economic situation or to shift the risk of a change in the market conditions to the other party.

Source Publication

Liber Memorialis Petar Petar Šarčević: Universalism, Tradition and the Individual

Source Editors/Authors

J. Erauw, V. Tomljenović, P. Volken

Publication Date

2006

Fundamental Breach of Contract Under the UN Sales Convention: 25 Years of Article 25 CISG

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