1. In General
2. Gravity of the Consequences of Non-performance
   2.1   The core: foreseeable substantial deprivation of contractual expectations
   2.2   Substantial deprivation of contractual expectations of the aggrieved party
           (a) The broad term "detriment"
           (b) Substantiality of the deprivation
           (c) Contractual expectations of the aggrieved party
           (d) A summary
   2.3   Foreseeability by the breaching party of the substantial deprivation
           (a) A conditional element availing the breaching party
           (b) Burden of proof
           (c) Assessment of (un)foreseeability
           (d) Reference point of the assessment
3. Nature of the Breached Obligations
   3.1   Overview
   3.2   Strict compliance of essence
   3.3   Breach of ancillary obligations not excluded
4. Other Elements in Defining Fundamental Breach
   4.1   Intentional non-performance depriving reliance on future performance
   4.2   Disproportionate loss
5. Particular Instances of Fundamental Breach
   5.1   Overview
   5.2   Late performance
           (a) Late delivery by the seller
           (b) Late performance (payment or taking delivery) by the buyer
           (c) A summary
   5.3   Defective performance
           (a) Delivery of defective goods (including wrong goods)
           (b) Relevance of reparability of defects or of ability to put the goods to another reasonable use
           (c) Defects in documents
           (d) Relevance of the offer to cure
           (e) A summary
6. Concluding Remarks

Key provisions at issue

• CISG Art. 25
• UNIDROIT Principles Art. 7.3.1(2)
• PECL Art. 8:103

  Article 25 [of the Convention] attempts to define "fundamental breach". This concept, though unfamiliar in many parts of the world, is fundamental to the Convention's remedy system. [...]. The definition purports to separate a non-fundamental and a fundamental breach of contract. The distinction is of cardinal importance for the system of remedies, because it can determine the life or death of the contract. Hence the need, and permanent battle for precision.[1]

1. In General

The concept of fundamental breach is "a milestone"[2] in the remedial provisions of the United Nations Convention on Contracts for the International Sale of Goods (1980; "CISG" or "Convention"). It appears several times throughout the Convention with regard to various remedies of buyer and seller (avoidance Arts. 49(1)(a), 51(2), 64(1)(a), 72(1), 73(1) and (2); delivery of substitute goods Art. 46(2)) as well as to the passing of risk (Art. 70).

Specifically speaking, as a rule envisaged in CISG Art. 49/64, only if a party's failure to perform his contractual obligations amounts to a fundamental breach will the other party be entitled to avoid the contract as of right (de pleno jure).[3] The concept is also used to deal with avoidance in special situations: in CISG Art. 51(2) on avoidance of an entire contract based on defective performance of a part of the contract, in CISG Art. 72 on anticipatory breach, and in CISG Art. 73 on deliveries by installments.[4] Moreover, according to CISG Art. 46(2), fundamental breach is a prerequisite for the right of the buyer to demand substitute delivery if the goods delivered do not conform to the contract. Thus, the concept defines the border line between the "normal" remedies for breach of contract - like damages and price reduction - and incisive remedies like termination and delivery of substitute goods.[5] In addition, fundamental breach also plays an important role in the transfer of risk. According to CISG Art. 70, "[i]f the seller has committed a fundamental breach of contract, articles 67, 68 and 69 [passing of risk] do not impair the remedies available to the buyer on account of the breach."

The most important role of this concept, however, is that it constitutes the usual precondition for the contract to be avoided.[6] In other words, although the Convention uses the term "fundamental breach" in various settings, it plays its most important roles in Arts. 49(1)(a) and 64(1)(a) which state grounds on which the buyer or seller may "avoid" the contract and thereby become free from further contractual obligations - e.g., to receive and pay for the goods or to deliver them.[7] In this sense, if a breach of contract takes place, one must first establish if it is a fundamental one that entitles a party to declare the avoidance of the contract.[8] Then the question comes at hand: What is a "fundamental breach"? In this respect, CISG Art. 25 gives the following guideline:

Generally speaking, as to be discussed in details in the following sections, a fundamental breach as defined in CISG Art. 25 requires:

-	that the defaulting party have violated a duty it was obliged to perform either under the contract, under trade usages, practices established between the parties, or under the Convention;
-	that the breach frustrate or essentially deprive the aggrieved party of its justified contract expectations; what expectations are justified depends on the specific contract and the risk allocation envisaged by the contract provisions, on usages, where they exist, and on the additional provisions of the Convention; and
-	that the party in breach have foreseen the result of the breach of contract; even if the defaulting party did not foresee that result, the breach remains fundamental when a reasonable person would have foreseen such a result, because in such cases the breach would equally deprive the other party of most or all of the benefit of the contract.

Basically following CISG Art. 25, Art. 7.3.1(2) of the UNIDROIT Principles of International Commercial Contracts (1994; "UNIDROIT Principles") further provides some specific guidelines by listing "a number of circumstances which are relevant to the determination of whether, in a given case, failure to perform an obligation amounts to fundamental non-performance."[9] Art. 7.3.1(2) of the UNIDROIT Principles states:

In this respect, Art. 8:103 of the Principles of European Contract Law (1998; "PECL") also specifies three situations in which non-performance of an obligation is fundamental to the contract, though some narrower than the situations listed in UNIDROIT Principles Art. 7.3.1(2). PECL Art. 8:103 reads:

In substance, both UNIDROIT Principles Art. 7.3.1(2) and PECL Art. 8:103 resemble CISG Art. 25, though the terms and content of each differ to some extent. But it should be recalled that the definition, as it stands (in the Convention), evolved through countless proposals and constant drafting. Fruit of world-wide compromise, it may not always be easy to apply both for the parties and the judges, and foreseeably may give rise to divergent interpretation and continuous controversy.[10] This is particularly due to the fact that CISG Art. 25 does not provide any examples of events that constitute such a fundamental breach. Instead, general terms and phrases are used to define fundamental breach, such as "detriment," "substantial deprivation," and "foreseeability."[11] It thus simply provides "general interpretive guidelines."[12] Therefore, it benefits to present an insight into how these general guidelines operate in defining a fundamental breach; and this will be done in details in the following sections, with regard had to both scholary writings and CISG decisions in this field.

2. Gravity of the Consequences of Non-performance

In the CISG drafting, "fundamental breach" is not fraught with history. It is a fresh legal concept, born from compromise and - for better or worse - open to interpretation.[13] Generally speaking, CISG Art. 25 defines the concept in the two elements: substantial deprivation (the perspective from the aggrieved party) and unforeseeability (the perspective from the non-performing party).

Specifically, the above two elements are contained in CISG Art. 25 as below:[14]

The above two elements are contained in the concept of fundamental non-performance under the UNIDROIT Principles as well. Of particular relevance is UNIDROIT Principles Art. 7.3.1(2)(a), which reads: "the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract unless the other party did not foresee and could not reasonably have foreseen such result." The Official Comment on this provision states accordingly:[15]

In this respect, it is noted that PECL Art. 8:103(b) contains a provision almost identical to UNIDROIT Principles Art. 7.3.1(2)(a), both basically following CISG Art. 25. PECL Art. 8:103(b) reads: "the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract, unless the other party did not foresee and could not reasonably have foreseen that result." As further made clear in the PECL Comment:[16]

Although the similarity between the definition of CISG Art. 25 and the two elements referred to in either UNIDROIT Principles Art. 7.3.1(2)(a) or PECL Art. 8:103(b) is obvious, they have, according to El-Saghir, "subtle differences."[17] With this regard, El-Saghir provides a comparison between the CISG approach and the PECL approach, which seems applicable to the comparison between the CISG approach and the UNIDROIT Principles approach as well. In his comparison, El-Saghir firstly recalls the Secretariat Commentary to Art. 23 of the 1978 Draft (former draft of CISG Art. 25), which states in the pertinent part that: "The basic criterion for a breach to be fundamental is that 'it results in substantial detriment to the injured party.'"[18] By contrast, under PECL Article 8:103(b), according to El-Saghir, "the basic criterion for a fundamental non-performance is that it substantially deprives the aggrieved party of what he is entitled to expect under the contract. The main difference between the language of this provision and CISG Article 25 is that on the part of the aggrieved party, under the CISG, there must be substantial detriment; whereas under PECL Article 8:103(b), a detriment is not a precondition of a fundamental non-performance of the contract."[19]

No doubt El-Saghir correctly catches the basic criterion underlying PECL Art. 8:103(b), but it is in my point of view that this "main difference" is more imaginary than real. This is particularly true when we come to the definition of the term "detriment" (more details on this term will be given below), a "newcomer"[20] (introduced by the Convention in the field) which "had to be interpreted in a broader sense" (Official Records, II, 330) and which goes beyond actual loss. Indeed, as El-Saghir has also noted, one must bear in mind that the Secretariat Commentary, which refers the "basic criterion" to "substantial detriment," was written prior to the introduction of the refined expectation interest of the present CISG Art. 25. For the breach to be fundamental under CISG Art. 25, the aggrieved party must suffer a detriment which must be such as to "substantially to deprive him of what he is entitled to expect under the contract." From the history of CISG Art. 25 it is clear that, unlike the drafts,[21]

Therefore, not only under PECL Art. 8:103(b) (or under UNIDROIT Principles Art. 7.3.1(2)(a)) but also under the present CISG Art. 25, the basic criterion is the same in each system, namely that the breach or non-performance substantially deprives the aggrieved party of what he is entitled to expect under the contract. Thus read, it may be generally submitted here, in conjunction with the second element (i.e., foreseeability of the deprivation) to be discussed later, that in either system,[22]

The two basic elements will be discussed separately below, with reference made both to CISG Art. 25 and to UNIDROIT Principles Art. 7.3.1(2)(a) or PECL Art. 8:103(b).

      2.2 Substantial deprivation of contractual expectations of the aggrieved party

On the part of the aggrieved party, be it buyer or seller, there must be substantial detriment, which test is one of the innovations of the Convention as compared with ULIS.[23] What then is detriment? And what detriment is substantial? Furthermore, as it stands in the present CISG Art. 25, evolved through countless proposals and constant drafting, the focus has been transformed to "substantial deprivation of contractual expectations of the aggrieved party." Then another question has to be made clear: What are the "contractual expectations of the aggrieved party"? The three questions put forward here will be answered respectively below.

      (a) The broad term "detriment"

The Convention itself does not contain any definition of the term "detriment." Nor does it give any example of detriment that rises to the level of a fundamental breach. Confronted with such a "newcomer" word in the field of international sale, commentators have taken diverging views in its interpretation.[24] Generally speaking, absent precise definition, it seems that the term "must be interpreted in the light of the Convention's legislative history as well as its intended purpose."[25]

The legislative history of CISG Art. 25 shows that the test developed out of the debate over the weaknesses of the 1964 ULIS's criterion for defining the "fundamental breach" doctrine. The draftsmen, in avoiding the difficulty of subjectivity of the ULIS test, accepted the "detriment" criterion so as to present an objective test for determining the fundamentality of the breach.[26] Although the history of the term "detriment" is short,[27] it has been noted that in the Secretariat's repeated Commentaries (see Yearbook, VII (1976), 101 and Official Records, II, 26) "detriment" not only alternates indistinctively with "injury," "harm," and "result," but is also exemplified by "monetary harm" and "interference with other activities." At some point the Working Group report is quoted as having stressed that the term detriment "had to be interpreted in a broader sense" (Official Records, II, 330). That is not really conclusive by itself but does indicate a direction.[28]

The term is further clarified by considering its purpose, which clearly requires a broad sense. As Will notes, the purpose simply is, in exceptional cases, to allow avoidance, to allow delivery of substitute goods or to prevent the risk of loss from passing. This evidently aims beyond the realm of compensation for damages and therefore beyond Art. 74 of this Convention. Accordingly, keeping in mind both its history and purpose, any narrow construction must be excluded. Detriment does not equal damage nor does it equal loss or any similar international or national term of art.[29] Graffi notes in this respect,[30]

In its technical use it has been said that the detriment need not be real and need not involve actual loss, nor does it necessarily refer to material disadvantage to the party suffering it, but means a legal detriment as distinguished from a detriment in fact and has been defined as giving up something which one had the right to keep, or doing something which he had the right not to do.[31] Indeed, the "detriment" within CISG Art. 25, without qualifying language, fulfills the modest function of filtering out certain cases, as for example where breach of a fundamental obligation has occurred but not caused injury: the seller disregarded his duty to package or insure the goods, but they arrived safely nevertheless; if, however, the buyer would lose a resale possibility or a customer, there would be detriment.[32] In any event, as Enderlein & Maskow properly state:[33]

Despite, in some sense, "a very complex phenomenon," the nature and concept of the term "detriment" has been examined neither during the UNCITRAL Working Group's sessions nor at the 1980 Diplomatic Conference.[34] The testimony is corroborated by a lack of concern for that term in several concurring proposals.[35] What is really concerned is that it will become obvious that the relevant detriment is not a static element, but in many instances occurs only when the breach of contract continues. Hence, one of the greatest difficulties in analyzing the fundamentality of a breach is to determine when the detriment has become so great that the prerequisites are met.[36] Indeed, the Convention's definition in Art. 25 turns on the degree of the detriment resulting from the breach, namely, substantiality of the deprivation, for which will be given details below.

      (b) Substantiality of the deprivation

While the nature of detriment is seldom at real issue, its degree was and still is - the debate over substantiality.[37] This comes to the wording "substantially to deprive" that qualifies the detriment within CISG Art. 25. But what is the test for judging the "substantiality of the deprivation"?

Defining "fundamental" by "substantially," to begin with, leaves an impression of playful tautology.[38] As to the substantiality, there is, no doubt, a tautology between substantial and fundamental as characterizing a breach of contract. According to Enderlein & Maskow, this repetition seems to have been unavoidable to ensure congruence of the definiens and the definiendum.[39] According to Graffi, however, such a tautology makes it hard to establish when substantial detriment equals fundamental breach.[40] In this, Graffi seems to be over concerned. Actually, the focus was in no event placed on "a tautology," but rather on the addition (in the final version of CISG Art. 25) that for the breach to be fundamental under CISG Art. 25, the aggrieved party must suffer a detriment which must be such "as substantially to deprive him of what he is entitled to expect under the contract."

Examination of the legislative history of Art. 25 shows that it was first suggested that to ascertain whether a breach was fundamental, it should have been proved that the detriment caused by the breach was substantial and the Committee welcomed that proposal and inserted it into the definition of fundamental breach. At the Diplomatic Conference, however, the debate on the words "substantial detriment to the other party" was extensive. Some delegates labelled it something between "vague," "subjective" and "objective and flexible." The main objection to the "substantial" criterion was that "substantial" as an adjective caused as much uncertainty as "fundamental" itself, and, therefore, required an objective yardstick. Various proposals were offered for this purpose. Eventually, in order to reconcile the different proposals, it was decided that for a breach to be fundamental, it must result in such detriment as substantially to deprive the victim of breach of what he is entitled to expect under the contract.[41] Thus, as properly noted by El-Saghir:[42]

That is to say, although it may be generally argued that the determination whether the detriment is substantial must be made in the light of the circumstances of each case,[43] the major emphasis is clearly laid upon the contractual expectation of the injured party: "of what he is entitled to expect under the contract." The expectation of a party under a contract is a central criterion to the determination whether a breach of contract is detrimental.[44] In other words, the degree of the requisite substantiality of deprivation caused by detriment must be ascertained within the framework of the detriment incurred by the aggrieved party in respect of those expectations required under the contract. Jafarzadeh even believes that the "legitimate expectation interest" test of CISG Art. 25 is the only criterion in determining whether or not deprivation is substantial.[45]

This line of understanding is further supported in CISG decisions. For instance, the Court in [Germany 17 September 1991 Oberlandesgericht [Appellate Court] Frankfurt] rules:[46]

What is thus decisive, according to the Court in [Switzerland 1 March 2002 Zivilgericht [Civil Court] Basel], "is how important the interest is."[47] This interest belongs to the sphere of contractual expectation, which largely depends on the agreement between the parties.[48] In any event, as the Court in [Germany 2 July 2002 Landgericht [District Court] Saarbrücken] again holds, a fundamental breach of contract by the defaulting party is established within the meaning of Art. 25 CISG if that party "fails to receive the essence of what could have been expected according to the contract."[49]

In sum, the focus in defining a fundamental breach is placed on the substantial deprivation of the contractual expectations of the aggrieved party. It is a key element for establishing whether a breach is fundamental. Put another way, a "detriment" within CISG Art. 25 can lead to fundamental breach only if the aggrieved party has lost interest in receiving performance.[50] Thus, another question arises: How would the "contractual expectation" be judged for that purpose? This will be discussed below.

      (c) Contractual expectations of the aggrieved party

In relying on the expectation test, as just discussed above, one should be careful. In particular, two points should be made clear: on the one hand, the criterion for this purpose is not left to the aggrieved party's inner feelings but instead tied to such expectations as derived from the terms of the contract; on the other hand, not only the express contractual terms, but also established practices, usages or additional provisions of the governing Convention, can be regarded as the sources in determining the particular expectations.

As evident from the text of CISG Art. 25, the expectations of the aggrieved party are qualified by such phrases as "what he is entitled to expect under the contract." It is in this reading that Lorenz argues:[51]

Generally speaking, the aggrieved party is clearly entitled to expect to receive the performance promised by the other party, but since this depends on the latter's contractual undertaking, it is thus indeed defined as much by the latter's expectations as by the former's. Thus, suppose that the aggrieved party is deprived of the opportunity to obtain a particular benefit he expected to receive from the other party's performance but of which he has not informed the other party (in the contract). Can it be said that the aggrieved party is "entitled" to expect that benefit under the contract? Moreover, the test of the aggrieved party's expectations is further limited by the qualification, i.e., foreseeability of the deprivation which takes account of what the other party could reasonably foresee. As will be seen later, this further qualification makes clear that if the aggrieved party is deprived of a benefit which the other party could not foresee and could not reasonably be expected to foresee, the breach is not fundamental. Accordingly, it is stressed that the degree of the requisite substantiality of deprivation caused by detriment must be ascertained within the framework of the detriment incurred by the aggrieved party in respect of those expectations required under the contract.[52]

In short, the expectations of the aggrieved party have to be discernible from the contract. This element is quite evident in itself and also contained in the element of foreseeability.[53] This suggests not merely a substantial or material breach of contract, or one which substantially impairs the value of the contract to the injured party, but a breach which goes "to the root" of the contract.[54] In respect of the expectations test, the parties are undoubtedly free to determine when and under which circumstances a breach of the contractual expectation is fundamental. However, it is unclear whether negotiations, trade usages, or other facts subsequent to the conclusion of the contract and not mentioned in the contract may also come into play, as suggested by some authors, for determining the party's contractual expectation.[55] The question arising here is: Whether the terms of the contract are the only source in defining the aggrieved party's contractual expectations?

Generally speaking, the wording "under the contract" qualifying the deprived expectations in the sense of CISG Art. 25, in principle refers to all the terms of the contract whether express or implied. As Jafarzadeh notes, the extent to which a party suffers an injury to its expectations will, therefore, be found not only in the language of the contract but in the circumstances surrounding the contractual relationship of the parties. However, it does not mean that the assessment of the existence of substantial detriment will depend on the circumstances of any individual case, even those circumstances that take place after the time of making the contract. If some particular circumstances are significant for a contracting party, he should bring them into the other party's attention at the time of contract. Accordingly, it is fair to say that the Convention has not left the determination of the degree of a given detriment, and drawing the line between substantial and insubstantial deprivation, not to the judge's sole and sovereign appreciation, but requires him to decide in the framework of the contract and the circumstances that existed at the time it was made.[56]

In short, what expectations are justified depends on the specific contract and the risk allocation envisaged by the contract provisions, on customary usages and on the additional provisions of the Convention.[57] More comprehensively, it may be stated:[58]

Speaking of "the ever changing circumstances", it is recalled that, as a rule, whether or not the non-performance was excused (due to exempting impediments, i.e., force majeure); the aggrieved party may give notice of avoidance.[59] The expectations of the aggrieved party may, however, be influenced by the possibility of exempting impediments. A point in favor of this opinion is the observation of the principle of good faith; furthermore, it is noted that the definition of a fundamental breach of contract in CISG Art. 25 in a certain way refers to the conduct of the party in breach, even though it relates mainly to the effects the breach of contract has on the other party.[60]

In some sense, the underlying purpose of the fundamental breach requirement is not so much concerned with protecting the interests of the breaching party as much as preserving the enforceability of the contract if it all feasible and to avoid economic waste in trade.[61] This understanding is further supported by the foreseeability test, which will be discussed below.

      (d) A summary

From the above, it may be concluded that the concept of fundamental breach looks not at the strictness of the duty to perform but at the gravity of the consequences of non-performance.[62] And the yardstick to measure the gravity of the consequences, has to be understood not as relying on the amount of actual damages,[63] but rather as meaning that the aggrieved party has lost, due to the claimed non-performance, his interest in receiving performance. Such interest, i.e., the contractual expectations of the aggrieved party, largely depends on the agreement between the parties and has to be judged in the light of all of the circumstances of the case. Of particular notice in this respect if the following:[64]

In sum, where the effect of non-performance is substantially to deprive the aggrieved party of the benefit of its bargain, so that it loses its interest in performing the contract, then in general the non-performance is fundamental. This is not the case, however, where the non-performing party did not foresee and could not reasonably have foreseen those consequences.[65] This unforeseeability qualification, the other major element of defining a fundamental breach, is discussed below.

      2.3 Foreseeability by the breaching party of the substantial deprivation

On the part of the breaching party, even where the aggrieved party has successfully proven that the claimed breach caused to him, as discussed above, a "substantial deprivation of contractual obligations," such a proven "deprivation" might be prevented from establishing a fundamental breach and thereby defeat the aggrieved party's justification of avoidance, provided the breaching party substantiates his "unforeseeability of the deprivation."

       (a) A conditional element availing the breaching party

Commensurate with striking a reasonable balance between the parties,[66] a conditional clause is contained in CISG Art. 25 (similarly in UNIDROIT Principles Art. 7.3.1(2)(a) or PECL Art. 8:103(b)), namely, "the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result [the substantial deprivation of contractual expectations]." It follows, "whether a breach is fundamental depends not only on its consequences but also on the foreseeability of those consequences to the other party."[67]

The foreseeability element is "a filter," lack of which is a ground of excuse, and, if proven, it will prevent the aggrieved party being entitled to declare the contract avoided.[68] That is to say, where substantial deprivation comes as a surprise, the party in breach, be it seller or buyer, may escape the verdict of fundamental breach and its consequences by showing either that he did not foresee the negative result, or that a reasonable person could not have foreseen it.[69] The rationale underlying this foreseeability is presented as follows by Enderlein & Maskow:[70]

The foreseeability requirement in the conditional clause of CISG Art. 25 constitutes a further innovation (along with the innovative "detriment") of the Convention. There have always been opponents to such an additional filter for fear that it would only encourage a breaching party to claim ignorance and thus tie the hands of the other.[71] Indeed, as some authors argue, the foreseeability test serves only to exempt the party in breach, and cannot contribute to qualifying a breach as fundamental. Foreseeability is only a conditional element that must be proven to prevent the contract from being avoided, substantial detriment and contractual expectation remain the key elements for establishing fundamental breach.[72]

As a matter of law, only if the aggrieved party has substantiated and, if necessary, proven that the claimed breach is so grave that his interest in the performance of the contract essentially ceases to exist, does the question arise whether the other party foresaw or could have reasonably foreseen this result.[73] In either case, the burden of proof becomes of immediate relevance and thus the following section will get down to this issue.

       (b) Burden of proof

As implied from the text of CISG Art. 25, as well as made clear in the legislative history and further supported by the opinions of the majority, it is the responsibility of the aggrieved party to prove that he suffered a detriment that substantially deprived him of what he is entitled to expect under the contract. Where such detriment and substantial deprivation are established, the burden of proof shifts to the party in breach.[74] Put another way:[75]

This burden of proof involved in CISG Art. 25, again confirms the preferable view held by some authors and by several courts, according to which the issue of the allocation of the burden of proof is an issue implicitly governed by the CISG, in accordance with the Latin maxim onus probandi incumbit ei qui dicit.[76]

Of particular relevance here is the burden shifted to the party in breach, who invokes the unforseeability. The element of foreseeability within CISG Art. 25 shifts the burden of proof to the party in breach when that party claims that neither he nor any reasonable person of a similar class and in the same circumstances could have foreseen the result.[77] Speaking of this shifted burden, Will gives the following guideline:[78]

In some sense, as to be further shown below, this burden shifted to the party in breach is somewhat strict on account of the "reasonable person" test qualifying thereunder. Nevertheless, if the party in breach can prove that he did not foresee the substantial loss of expectation interest that the breach caused the non-breaching party, and can prove that a reasonable person similarly situated, facing the same market conditions, would not have foreseen that the breach would cause a substantial loss of expectation interests, then usually there is no fundamental breach.[79] By this, the party in breach could defeat the other party's justifications of avoidance; and in that case, the other party itself could be in breach by avoiding without justifications and thereby may claimed damages. In any event, as properly pointed out in [ICC June 1999 International Court of Arbitration, Case 9187]:[80]

But it is to be noted that the foreseeability element within CISG Art. 25 has not only a procedural function concerning burden of proof, but also a substantive function, i.e., the breaching party's knowledge or foreseeability of the harsh consequences of the breach.[81] Thus, the following section will move on to the assessment of foreseeability (or unforeseeability). Of course, the substantive knowledge and the procedural burden are two blended concepts. Indeed, the following discussions on the assessment of (un)foreseeability will provide a better understanding of the burden of proof in respect of the foreseeability element contained in CISG Art. 25.

       (c) Assessment of (un)foreseeability

The parties may, from the outset, characterize as fundamental, certain categories of non-fulfillment of obligations; e.g., by determining that time is of the essence. This would correspond to the principle of contract autonomy.[82]

Therefore, the circumstances in which the breaching party may invoke unforeseeability may vary in accordance with the contractual wording. When the contract expressly states that performance of an obligation is of the essence, there will be little room for proving that the breach caused an unforeseeable detriment. Conversely, when the contract does not clearly state the importance of an obligation, the conduct of the party in breach may be interpreted with more tolerance.[83] Absent express characterization, which can also be done by invoking established practices,[84] the assessment will then follow from the standard of the Convention, namely, "the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen."

In respect of the first test, i.e., actual foreseeability, Will believes that whether or not the breaching party actually failed to foresee that result will have to be evaluated like in the context of Art. 74 of the Convention, "in the light of the facts and matters of which he then knew."[85] That is to say, as Koch similarly states:[86]

However, one cannot ignore Will's concern that anyone who has committed a breach of contract giving rise to major problems will hardly admit that he foresaw those problems, but most likely will insist that unfortunately he did not foresee that the claimed detriment would substantially deprive the other party of the benefit that the latter was entitled to expect from the transaction. Generally speaking, unforeseeability depends on the defaulting party's knowledge of relevant circumstances. But his knowledge of those circumstances may have been deficient for various reasons. Whatever the reason, whoever the culprit - he may simply assert that he did not know, he did not foresee! Of course, the assertion alone does not suffice. Proof is required. But it is obviously not always easy to establish conclusive evidence for a very personal point of view of the matter. Furthermore, even if such proof succeeds, a merely subjective test hardly satisfies the necessities of international trade.[87]

Therefore, an additional, more objective test imposed itself.[88] Specifically speaking, CISG Art. 25 requires the party in breach who invokes unforeseeability must further prove that "a reasonable person of the same kind in the same circumstances would not have foreseen" the substantial deprivation. An objectivization is, therefore, made here.[89] In this sense, "the personal qualities of the party in breach are not essential for the foreseeability test, since the test must be conducted on objective grounds."[90] Of course, on the other hand, the other party may properly expect, of the party invoking unforeseeability, more skill and knowledge from a highly paid specialist than from an unskilled, modestly paid employee.[91] Of not much question, if the party in question does foresee more than average, this will be relevant.[92] But it should be stressed that, it is the aggrieved party who would be burdened to prove that the party who has successfully invoked the unforeseeability according to CISG Art. 25 should be held to foresee more than average.

Hoping to narrow the scope of speculation and to approximate the fictitious reasonable person to the real position of the party in breach, the formula in present CISG Art. 25 uses two distinctive elements: first, "of the same kind," and second, "in the same circumstances." And in respect of these two elements, Will provides some further details:[93]

-

Of the same kind, intended to be the first sub-element of precision, means that: The hypothetical merchant ought to be engaged in the same line of trade, exercising the same function. And not only must business practices be taken into account, but the whole socio-economic background as well, including religion, language, average professional standard. It has been justly observed that the more of those criteria that are assembled, the higher the degree of individualization.

-

In the same circumstances, the second objective element, taking into account ever varying situations, refers to the conditions on world and regional markets, to legislation, politics and climate, also to prior contacts and dealings and to other factors, in short: to a whole spectrum of facts and events at the relevant time. As under CISG Art. 8(3), "due consideration is to be given to all relevant circumstances of the case."

It will be preferable not only to evaluate whether a reasonable person of the same kind could foresee the event, but also to look if business people of the same trade sector would have foreseen the event. The importance of limiting the analysis to a specific trade sector must be stressed, since standards of reasonableness may differ considerably from one sector to another.[94] Indeed, what it all boils down to is not so complicated. The reasonable person test simply serves to eliminate unreasonable persons; i.e., those who are to be considered intellectually, professionally or morally sub-standard in international trade. By proving that the fictitious merchant, too, would not have foreseen the detrimental result of the breach in question, the party in breach removes possible doubts that his own foresight might have been beclouded - a risk which the aggrieved party need not bear under the Convention.[95]

In any event, CISG Art. 25 adds an objective test into the determination of whether a breach is fundamental by asking two questions: (1) Did the party in breach foresee that the breach of contract would result in a substantial deprivation of the non-breaching party; and (2) Would a "reasonable person of the same kind in the same circumstances" have foreseen such a result. These two questions will require the court to view the contract from the subjective perspective of the party-in-breach, as well as from the objective perspective of a reasonable merchant of the same kind in the circumstances of the party in breach. Furthermore, it should be stressed that these subjective and objective elements are cumulative, not alternative. The outcome is that a breach would be regarded as non-fundamental only where courts or tribunals are satisfied that both elements are proved.[96]

Here, it may not be superfluous to mention the conjunction and (used in the phrase "the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen"). This conjunction replaced the former "or" at the Vienna Working Group Session in 1977 and survived an attempt to switch back to "or" at the Vienna Conference. The underlying rationale is:[97]

In light of the above discussions, the burden of proof becomes clearer:

Where a "substantial deprivation of contractual expectations," the first element of CISG Art. 25, has been substantiated by the aggrieved party, it is a prima facie that the claimed fundamental breach is established; unless the party in breach moves on to successfully invoke his "unforeseeability of the substantial deprivation" according to the second element of CISG Art. 25, by meeting a "double test" as indicated above. But in no event should the real person be allowed to hide behind the reasonable person, however, keeping in mind that in such a particular case the burden of proof is shifted to the aggrieved party again, who is required to substantiate his assertion that the breaching party's actual foresight was above the "reasonable test."

       (d) Reference point of the assessment

As discussed above, regarding the foreseeability element, CISG Art. 25, while shifting the burden of proof to the party in breach, expressly applies to that party a reasonable person standard.[98] However, this second element is subject to an ambiguity that has generated a substantial literature.[99] The time element remains to be considered: unforeseeability at what moment? In the eyes of Will, it is "a final item, because it matters on the levels of the real person as well as of the reasonable person."[100]

The language of CISG Art. 25 does not answer this question.[101] Here it is recalled that in setting forth the first of the two elements, i.e., "substantial deprivation of contractual expectations of the aggrieved party" (section 2.2 above), CISG Art. 25 refers to what the aggrieved party "is entitled to expect under the contract," meaning that the "contractual expectations" of the aggrieved party should be decided in the framework of the contract and the circumstances that existed at the time it was made.[102] But there is no similar reference to the time of the making of the contract in the second element that was based on the deprivation that the party in breach foresaw or could have foreseen.[103] Therefore, in legal writing different views are expressed as to when the party in breach must have foreseen the aggrieved party's interest in receiving the performance, particularly, of whether circumstances arising after the conclusion of the contract are relevant for determining fundamental breach. While some authors argue that the importance of an obligation must be determined only in light of the circumstances known at the conclusion of the contract, other authors deem equally important any subsequent information that may indicate the parties' interest in receiving performance.[104]

It seems that, like dealing with other issues, it would be helpful to analyze the present issue in the light of the legislative history of the provision. Here it is recalled that Art. 10 of ULIS answered "at the time of the conclusion of the contract." But the UNCITRAL Draft Convention, after some discussion, preferred not to specify that point leaving the decision to tribunals. Despite further discussion at the Vienna Conference and a frustrated attempt to reintroduce "at the time when the contract was concluded," the question remained unsettled.[105] From this, it is argued that the omission was intentional, designed to permit courts to decide the issue on a case-by-case basis. There is, therefore, no reason to impose an interpretation of Article 25's foreseeability requirement that ignores post-formation developments, especially when the approach contradicts legislative history.[106] Furthermore, it seems to be preferable to take the subsequent information into account, under the general principle of good faith which according to case law underlies the Convention, at least to the extent that the party in breach was aware of that subsequent information.[107]

Still, different interpretation with the "time of the conclusion" or "time of the breach" plays a role.[108] In this respect, it is noted that the Secretariat Commentary states in the pertinent part: "Article 23 [draft counterpart of CISG article 25] does not specify at what moment the party in breach should have foreseen the consequences of the breach, whether at the time the contract was concluded or at the time of the breach. In case of dispute, that decision must be made by the tribunal."[109] Thus, the point at which foreseeability is determined could be when: 1) the contract is concluded, 2) performance begins or 3) the defaulting party decides to breach.[110] Will seems to suggest a broader approach, concerned that the aforementioned Secretariat Commentary "seems to admit only the alternative: 'time of conclusion' or 'time of breach.'" According to Will, "it is suggested that a less rigid approach could contribute to the arbitrators' and judges' finding a more balanced solution in a particular case."[111]

However, on such a broad approach, one has to be in conformity to Honnold's view that information received by the breaching party later than the breach should not have any value attached to it.[112] Honnold pertinently states in this respect, information that a party receives too late to affect performance seems outside the scope of CISG Art. 25, since the foreseeability principle presumably is designed to give the party in breach an opportunity to give special attention to minor details of performance the importance of which he could not otherwise have anticipated.[113] An even more prudent and convincing approach is to allow the taking into account of subsequent knowledge - but only as an exception and only up to the time when preparations in view of performance actually did start or should have started.[114]

In any event, no time is fixed in CISG Art. 25 when this foreseeability or required foresight must exist.[115] Unlike CISG Art. 74, which deals with damages, Art. 25 was never drafted with the words: "at the time of the conclusion of the contract." Nor like the first sentence of CISG Art. 25, which defines the consequences ("substantial deprivation of contractual expectations") relevant to the determination of fundamental breach, the second sentence of CISG Art. 25 does not use the terms of what the party in breach foresaw or should have reasonably foreseen "under the contract." The absence of such words was not due to an inadvertent omission, because the drafters specifically rejected a proposal to make the "vantage point" for foreseeability only at the time of contracting.[116] From this perspective, one may argue that the question was deliberately left unanswered because the working groups could not agree on the answer. They therefore left the question to the courts. Although the other delegates were not unanimous, a substantial number favored leaving the question at large to be decided by the adjudicating body, taking into account the circumstances surrounding the case in question.[117]

Although a less strict approach seems to be derived from the legislative history, the post-Vienna legal literature, on the other hand, seems to favor the criterion of "time of conclusion." This criterion is favored by those who take the moment, when the parties define the scope of their contract, as decisive for the foresight clause.[118] A convincing viewpoint in support of the "time of conclusion" criterion, has been expressed by Schlechtriem, according to whom the opposing viewpoints (such as the above favoring the broad approach to consider information subsequent to conclusion but before breach) were still based on the objective version of the 1978 Draft Convention, in which the extent of the detriment was the only determining factor. As already shown (section 2.2 above), the present version of CISG Art. 25, in which the decisive factor is the interest of the party concerned as fixed by the terms of the contract also fixes the conclusion of the contract as the relevant time for knowledge or foreseeability: a contract in which the delivery time is not binding cannot be turned into a transaction where time is of the essence merely because the seller later learns that the buyer has obligated himself to sell the goods at a particular time.[119]

Similarly, according to Jafarzadeh, there is the possibility of arguing in support of the "time of conclusion" approach. As explained when dealing with the concept of the injured party's expectations under the contract, whether or not the injured party was entitled to expect to have a particular benefit should be ascertained within the contract terms and other circumstances which came to the attention of the party in breach at the time of making the contract. The same analysis seems to be applicable to the measurement of foreseeability of the consequences of the breach. It can even go further and argue that the language of Art. 25 is in line with this approach, since it defines the consequences relevant to the determination of fundamental breach in terms of what a party "is entitled to expect under the contract" and the second sentence of the Article refers to the foreseeability of "such result" by the party in breach. Accordingly, as contractual expectations are formed at the time of contracting, foreseeability of substantial deprivation of those expectations by the reason of breach should also be measured at that time.[120]

More interestingly, Ziegel interprets the foreseeability test in CISG Art. 25 by referring to the important CISG Art. 74, which contains the foreseeability test for the recovery of damages and provides that the 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" as a possible consequence of the breach of contract. According to Ziegel, it would surely be anomalous if a party were able to avoid the contract for breach by the seller if the grounds justifying avoidance were regarded as too remote for the recovery of damages under CISG Art. 74.[121] By this, Ziegel seems to exclude information subsequent to the conclusion of the contract from the judgment of foreseeability within CISG Art. 25. In practice, one court also seems to have decided that the time of conclusion of contract is the relevant time.[122] Another source in support of the "conclusion of the contract" test may be lent from the Comment on the counterpart PECL Art. 8:103(b), where it is stated that the test is whether a person in the same situation as the non-performing party and using reasonable skill and diligence would have known or foreseen the consequences at the time of conclusion of the contract.[123]

In any event, due to the absence of an express reference in CISG Art. 25, time is probably the most controversial issue of the foreseeability test.[124] But as already noted earlier, only where the aggrieved party has substantiated the first element, i.e., "substantial deprivation of contractual expectations," does the question arise whether the party in breach foresaw or could have reasonably foreseen this result.[125] Moreover, avoidance in an international sales context is regarded as a particular severe - and therefore an "exceptional" - remedy, and many courts have indeed showed great reluctance to allow a party injured by a breach to avoid and thus put an end to the whole CISG contractual relationship.[126] Thus, actually speaking, the time issue of the second element or even this second element itself, i.e., "foreseeability by the breaching party of the substantial deprivation," may not arise (in the real world) often.[127]

3. Nature of the Breached Obligations

From the above, it indicates that the concept of fundamental breach looks not at the strictness of the duty to perform but at the gravity of the consequences of non-performance.[128] But, as shown above, whether the injured party suffers a "substantial" deprivation as a result of a given breach and whether such deprivation is "foreseeable" by the other party requires a concrete evaluation of the circumstances of the particular case, and even the breach of a "secondary" obligation can amount to a fundamental breach.[129]

Indeed, the determination of a fundamental breach is a very complex issue. And as further made clear below, the nature of the breached obligations plays a significant role in this respect as well: on the one hand, the violation of obligations of essence would usually constitute a fundamental breach; on the other hand, also the breach of an obligation which is not a primary obligation of the contract, but, rather, a secondary obligation can be fundamental. However, it should be emphasized that, a breach of contract, be it an obligation of essence or a secondary obligation, is fundamental, only when the purpose of the contract is endangered so seriously that, for the concerned party to the contract, the interest in the fulfillment of the contract ceases to exist as a consequence of the breach of the contract (and this was capable of being known by the party in breach of the contract).[130]

      3.2 Strict compliance of essence

Under UNIDROIT Principles Art. 7.3.1(2)(b), the regard in determining a fundamental non-performance is clearly had to whether "strict compliance with the obligation which has not been performed is of essence under the contract." This is followed in PECL Art. 8:103(a), which stipulates that a non-performance of an obligation is fundamental to the contract if "strict compliance with the obligation is of the essence of the contract."

This way, unlike CISG Art. 25, UNIDROIT Principles Art. 7.3.1(2)(a) or PECL Art. 8:103(b), either UNIDROIT Principles Art. 7.3.1(2)(b) or PECL Art. 8:103(a), "looks not at the actual gravity of the non-performance but at the nature of the contractual obligation for which strict performance might be of essence."[131] It is further stated in the PECL Comment:[132]

Such obligations of strict performance are not uncommon in commercial contracts.[133] Even without such an express provision the law may imply that the obligation is to be strictly performed. For example, it is a rule in many systems of law that in a commercial sale the time of delivery of goods or of presentation of documents is of the essence of the contract. And in a documentary credit transaction the documents tendered must conform strictly to the terms of the credit. The duty of strict compliance may also be inferred from the language of the contract, its nature or the surrounding circumstances, and from custom or usage or a course of dealing between the parties.[134]

No such express reference to the nature (strict compliance of essence) of the breached obligations has been found within CISG Art. 25. The definition of a fundamental breach in Art. 25 is, however, not final. The parties themselves may in any part of their contract derogate from the requirements of Art. 25, and thereby set their own standards as to what will be regarded as a fundamental breach under the contract.[135] Of particular relevance is the provision of CISG Art. 6, which states: "The parties may exclude the application of this Convention or, subject to article 12, derogate or vary from any of its provisions." Established under this Article is the principle of contract autonomy, "one of the cornerstone principles of the Convention."[136] Under this principle,[137]

Furthermore, although CISG Art. 25 has no express provision like PECL Art. 8:103(a) (or UNIDROIT Principles Art. 7.3.1(2)(b)), the expectation interests in both Articles are tied entirely to the terms of the contract. Therefore, if a contract governed by the CISG requires strict compliance with an obligation of buyer or seller, for example, where the contract contains a clause providing that "time is of the essence," a minor deviation from the defined standard of performance would amount to a fundamental breach of contract.[138] In this respect, the parties can still define certain terms of the contract as "conditions," if they so require, by clearly classifying what will be regarded as a fundamental breach. The significant difference is that where the parties fail to define their terms in this fashion, then in the case of a minor breach, Art. 25 will prevent avoidance.[139]

In sum, the nature of the contractual obligation is one factor in the determination of fundamental breach. Where the parties have expressly or implicitly agreed that in the case of a breach by one party the other party may terminate the contract, strict compliance with the contract is essential and any deviation from the obligation is to be regarded as a fundamental breach. Absent such an express provision, the duty of strict compliance may also be inferred from the language of the contract, the surrounding circumstances, custom, usage, or a course of dealing between the parties.[140]

      3.3 Breach of ancillary obligations not excluded

Generally speaking, the breach of any obligation under the contract suffices irrespective whether the duty had been specifically contracted for or followed from the provisions of the Convention. Even the breach of a collateral duty can amount to a fundamental breach.[141]

According to legal scholars and case law, the breach is fundamental regardless of whether it occurred in respect of a main obligation or an ancillary obligation.[142] For example, a manufacturer's duty to deliver goods under a certain trademark exclusively to the buyer has been held to have been fundamentally violated when the manufacturer displayed those goods at a fair for sale and kept them there despite a warning by the buyer. Likewise, the unjustified denial of contract rights of the other party - e.g., the validity of a retention of title clause and the seller's right to possession of the goods or the unjustified denial of a valid contract after having taken possession of the goods - can amount to a fundamental breach of contract. The same is true when resale restrictions have been substantially violated.[143] As it is correctly held in [Germany 3 April 1996 Bundesgerichtshof [Federal Supreme Court]]:[144]

It is, however, necessary that the breach deprives the aggrieved party of the main benefit of the contract and that this result could have been foreseen by the other party.[145] That is to say, the breach of the additionally-agreed duty entitles the aggrieved party to avoid the contract, only if the breach is fundamental, i.e., when it deprives the aggrieved party of the main benefit of the contract. As discussed above, the breach must frustrate or essentially deprive the aggrieved party of its justified contract expectations; what expectations are justified depends on the specific contract and the risk allocation envisaged by the contract provisions, on usages, where they exist, and on the additional provisions of the Convention.[146] In this sense, it seems to again indicate that the concept of fundamental breach looks not at the strictness of the duty to perform but at the gravity of the consequences of non-performance.[147]

But it should be kept in mind, on the other hand, particularly in light of the discussions above (section 3.2), that whether the obligation breached is a primary or a secondary obligation is sometimes of importance.[148] In addition, it is properly noted that:

Actually speaking, the determination of fundamental breach is a very complex issue. And in respect of this concept, the rulings found in the leading case [Switzerland 15 September 2000 Bundesgericht [Supreme Court] (4C.105/2000)] may give some guideline (albeit it seems to need to be adapted to some extent subject to the above discussions):[150]

4. Other Elements in Defining Fundamental Breach

Another regard in determining the fundamental non-performance is had, under UNIDROIT Principles Art. 7.3.1(2)(c), to whether "the non-performance is intentional or reckless." It may, however, be contrary to good faith to terminate a contract if the non-performance, even though committed intentionally, is insignificant.[151] Therefore, UNIDROIT Principles Art. 7.3.1(2)(d) adds that "the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party's future performance."

Indeed, the fact that non-performance gives the aggrieved party reason to believe that it cannot rely on the other party's future performance is of great significance.[152] Thus, UNIDROIT Principles Art. 7.3.1(2)(c) should be read in conjunction with Art. 7.3.1(2)(d). Indeed, the two elements have been both combined in the single PECL Art. 8:103 (c), which states that a non-performance of an obligation is fundamental to the contract if "the non-performance is intentional and gives the aggrieved party reason to believe that it cannot rely on the other party's future performance." In respect of this paragraph, the PECL Comment states:[153]

Sometimes an intentional breach may show that a party cannot be trusted.[154] But in other cases the reason for non-reliance may vary. Thus, the approach of PECL Art. 8:103(c) seems to narrow the scope, albeit it is more persuasive in not allowing a termination due to a mere insignificant non-performance, even though committed intentionally. A typical situation where non-reliance usually becomes of truth is: If a party is to make its performance in installments, and it is clear that a defect found in one of the earlier performances will be repeated in all performances, the aggrieved party may terminate the contract even if the defects in the early installment would not of themselves justify termination.[155] Such a situation of performance by installments is specifically dealt with in CISG Art. 73.

Thus, although CISG Art. 25 has no provision on intentional non-performance like the one provided in PECL Art. 8:101(c) (or in UNIDROIT Principles Art. 7.3.1(2)(c)),[156] non-reliance on future performance is dealt with in CISG Arts. 51, 72 and 73. The different cross-references of CISG rules do confirm the no-reliance approach (Arts. 72, 73(2)) and the approaches looking at one party's (in)ability / (un)willingness to perform (Art. 72) or whether the goods are fit to their intended purpose (Art. 51(2)).[157]

In light of the CISG's remedial system, it however seems to be more plausible not to automatically qualify any intentional or reckless breach as fundamental in terms of Art. 25 CISG.[158] The intention of the breach can be only taken into account "where the breach or conduct creates uncertainty as to one party's future performance and where, as a consequence, the other party loses his interest in the contract."[159]

      4.2 Disproportionate loss

In addition to the aforementioned grounds, UNIDROIT Principles Art. 7.3.1(2)(e) further takes into account whether "the non-performing party will suffer disproportionate loss as a result of the preparation or performance if the contract is terminated." It is clarified in the companying Comment:[160]

The approach, which focuses on whether the breaching party will suffer disproportionate loss as a result of the preparation for performance if the contract is avoided (Art. 7.3.1(2)(e) of the UNIDROIT Principles), is not applicable under the CISG. In supporting this conclusion, Koch gives the following reasons: First, the language of Article 25 CISG does not allow consideration of the consequences for the breaching party when the breach is treated as fundamental. Second, it is not clear under which circumstances a breaching party's loss becomes significant. Any determination of fundamental breach would therefore be arbitrary and cause uncertainty. Third, the UNIDROIT factor is aimed at limiting the exercise of the right of avoidance, not at determining fundamental breach. In other words, it limits the availability of the avoidance remedy in spite of the existence of a fundamental breach but it does not prevent a breach from being fundamental.[161]

Nor is such a consideration found in PECL Art. 8:103. The reason underlying may be that:[162]

5. Particular Instances of Fundamental Breach

Given the complexity of the theoretical structure of CISG Art. 25 and given that the Convention does not provide the interpreter with specific interpretive guidelines, it may be useful to take a look at the case law on fundamental breach.[163]

The above discussions have provided details on elements operating in defining a fundamental breach, as under CISG Art. 25, UNIDROIT Principles Art. 7.3.1(2) and PECL Art. 8:103. However, it has to be admitted that these elements are defined too generically to enable the interpreter to grasp the concept of fundamental breach. This inevitably calls for a case-by-case analysis, thus confirming the importance of a case law approach for a correct understanding of the issue.[164] Case law has to some extent developed guidelines that may help to determine in similar cases whether or not a breach of contract qualifies as fundamental.[165]

But it should also be noted that the circumstances of each case are always decisive.[166] Thus, it would be of little use to simply list all the decisions. Nevertheless, some types of controversies are likely to occur more often than others.[167] Courts have decided whether certain typical fact patterns constitute fundamental breaches.[168] Among such the most typical are late performance and defective performance, both frequently dealt with in CISG case decisions, which are the expression of court practice trends.[169]

      5.2 Late performance

      (a) Late delivery by the seller

In practice, it is frequently held that the mere delay in delivery does not constitute a fundamental breach. One of the possible ideas underlying that is found in [Germany 20 February 2002 Landgericht [District Court] München], where the Court rules:[170]

The above ruling is affirmed by the Appellate Court, which holds in [Germany 1 July 2002 Oberlandesgericht [Appellate Court] München]:[171]

Untimely delivery, it is true, does not always constitute a fundamental breach. This general rule under the Convention, however, does not apply to cases where, at the time of the formation of the contract, it was obvious to the seller that the buyer had a special interest in punctual delivery.[172] Indeed, one of reasons given for the above denial in [Germany 1 July 2002 Oberlandesgericht [Appellate Court] München] is that the buyer furthermore does not make any submissions regarding a time bargain.[173] That is to say, as already held in [Germany 20 February 2002 Landgericht [District Court] München], reasons for an exception such as the stipulation of a transaction for which time is of the essence were not put forward.[174] With respect to this exception, it is generally held in [Switzerland 15 September 2000 Bundesgericht [Federal Supreme Court] (4C.105/2000)]:[175]

The issue then comes to what constitutes a delivery of essence. The most obvious way to determine if the term is essential is the existence of a contractual clause stating that delivery must be effected at an exact time.[176] Thus, a violation of the time for performance constitutes a fundamental breach of contract when, for instance, the other party cannot use the late delivery for the purpose envisaged in the contract. When the contract stipulates that time is of the essence or uses such customary terms as "fixed," "absolutely," "precisely," "at the latest," it could be considered as an agreement, where non-fulfillment of this condition will have to be regarded as a fundamental breach of contract.[177]

Yet, the term is to be considered essential not only when the parties specified it in the contract, but also in the light of the circumstances, customs, usage or other relevant factors. Further, the term may be considered essential because of the nature of the goods. A term may also be considered essential ipso facto.[178] For instance, the Hamburg Court of Appeals, seized of an action in respect of a CIF contract in [Germany 28 February 1997 Oberlandesgericht [Appellate Court] Hamburg], holds that in CIF contracts timely delivery is per definitionem an essential term of the contract.[179] Also relevant is the delivery at a certain date of goods for which the price in the market varies every day.[180] As the Court in [Switzerland 15 September 2000 Bundesgericht [Federal Supreme Court] (4C.105/2000)] correctly points out, the circumstances determine if it must be without delay.[181] In a word, absent express stipulation, the essentiality of a term must be determined according to the circumstances of each case and that many different factors may be relevant.[182]

In summary, the particular importance of the date of delivery can result from the contract itself, as for example in the case of a transaction where time is of the essence, as well as from the circumstances, e.g., in the case of delivery of seasonal items.[183] Be it through a contractual clause to that effect or determined according to the circumstances, late delivery usually constitutes a fundamental breach where the parties decided that the delivery must be made at a specific date. In that case, the date for delivery would be of essence (cf. section 3.2 above). It thus seems that the distinction made between essential and non-essential term for delivery again plays a significant role. But even if a date of essence, the emphasis should be placed on that a special interest in punctual delivery[184] must exist with the aggrieved buyer; furthermore, the foreseeability condition should be satisfied. That is to say, the delay would constitute a fundamental breach only if that date was determinative from the point of view of the interest of the buyer in the performance of the contract and that the seller knew (or should have known) it.[185] But such conditions do not apply to the case under CISG Art. 47/49(1)(b) where a Nachfrist notice has been served and the date or period specified in that notice expired again without delivery.

Still, even without a clause stipulating that the delivery must be made at a specific date or no circumstance indicates to that effect, it has been found on various occasions that the final non-delivery by the seller constitutes a fundamental breach of contract unless the seller has a justifying reason to withhold its performance.[186] For instance, the Tribunal in [ICC March 1999 International Court of Arbitration, Case 9978] rules: "An absolute failure to deliver the goods definitely constitutes a fundamental breach (citations omitted)."[187] Also, the Appellate Court in [France 21 October 1999 Cour d'appel Grenoble] rules, "the refusal to honor an order received, without legitimate reason, by asserting in a deceitful manner that the order had not been made, constitutes on the part of the seller a fundamental breach of contract within the meaning of Article 25 of the CISG in that it 'substantially deprives [buyer] of what he is entitled to expect under the contract'."[188] Another such ruling is found in [Germany 18 November 1993 Oberlandesgericht [Appellate Court] Düsseldorf], where the Court holds that where delivery was objectively possible, but where it was obvious that the seller for idiosyncratic reasons would not be able to deliver the goods in question (subjective impossibility), the buyer would be entitled to avoid the contract; albeit the Court in this case finds at the same time, the mere non-delivery or late delivery in general does not constitute a fundamental breach under Art. 25 provided that delivery is objectively possible and the seller was willing to deliver.[189]

In sum, with respect to late delivery of the goods, both the case law and the legal authors hold, as a rule, that delay does not per se constitute a fundamental breach. Obviously, this interpretation serves the purpose of preserving contractual bonds, since considerable costs may arise in international trade if the standards of avoidance become too lax.[190] Exceptional to this rule, however, it has been held, on one hand, in many decisions that the breach of an essential term can constitute a fundamental breach if delivery within a specific time is of special interest to the buyer. But in arguing that the breach of an essential term can constitute a fundamental breach, the following logic as set forth in the ruling of [Germany 24 April 1997 Oberlandesgericht [Appellate Court] Düsseldorf], must be always be kept in mind (unless it is a case where a Nachfrist notice has been served in accordance with CISG Art. 47/49(1)(b) and the date or period specified in that notice expired again without delivery):[191]

On the other hand, it has also been held that the serious, final and unjustified refusal of the seller to fulfill its contractual obligations amounts to a fundamental breach. However, if only a minor part of the contract is finally not performed, the breach is not fundamental unless the delivered part by itself is of no use to the buyer (and in such a case the fundamentality and the avoidance thereunder are both limited to that delivered part; but also compare the delivery by installments as dealt with under CISG Art. 73).[192]

      (b) Late performance (payment or taking delivery) by the buyer

With regards to late payment, it is generally acknowledged that late payment does not amount by itself to a fundamental breach.[193] Just like the case for delay of delivery for the seller, it is held, for instance, in [ICC 1992 International Court of Arbitration, Case 7585],[194]

Arguably, only in an exceptional case should a delay in payment by itself be a fundamental breach of contract.[195] It has been decided that definitive failure to pay the price constitutes a fundamental breach of contract.[196] For instance, here recalling that the failure to establish a letter of credit is also to be regarded as a failure by the buyer to meet its "obligation to pay the price" of the goods under the contract of sale,[197] it is held in [Australia 17 November 2000 Supreme Court of Queensland (Downs Investment v. Perwaja Steel)] that: "The refusal to establish a timely letter of credit was clearly a fundamental breach within the meaning of Article 25 and Article 64(1)(a) of the Convention."[198]

A special case, for the aggrieved seller, is the delayed acceptance of the goods by the buyer. A delay in accepting the goods will generally not constitute a fundamental breach, particularly when there is only a few days of delay.[199] For instance, the Court in [France 4 February 1999 Cour d'appel [Appellate Court] Grenoble] holds that a delay of a few days in taking delivery could not amount to a fundamental breach on seller's part, and would normally have as a consequence the cancellation of the discount on the price.[200] It is even believed that in case of longer delay, which results in considerable costs of storage, the seller should still not be entitled to declare the contract avoided, but simply to claim damages. But a different conclusion may be reached when the buyer definitely refused to take over the goods.[201]

Final refusal to take delivery, or return of the goods in the absence of a fundamental breach of contract by the seller, have been judged as constituting fundamental breaches of contract.[202] Actually, as a general rule, regardless of the obligations breached, "a final and unjustified announcement of the intention not to fulfill one's own contractual obligations has been found to constitute a fundamental breach."[203]

      (c) Summary

In international sales transactions, late performance occurs rather frequently, due, amongst others, to the distances. Indeed, late performance may be caused either by the seller's late delivery of the goods or by the buyer's late payment or late taking over of the goods.[204]

As a rule, as shown above, the mere fact that a party has delayed in performance does not constitute by itself a fundamental breach. According to circumstances, a delay on payment (or taking delivery) by the buyer or delay of delivery by the seller cannot in and of itself be the cause of immediate avoidance of the contract.[205] It is a general rule applicable both to buyer and seller; though two different standards seem to apply in case of late performance.[206] The following conclusion thus can be drawn:[207]

On the other hand, several limited exceptions to the above general rule have also been demonstrated, be it a case where the precise compliance is of particular interest to the aggrieved party that he prefers not to receive performance at all rather than receiving delayed performance, or a case based on a final and unjustified announcement of the intent by the other party not to fulfill his contractual obligations.

Yet, since in case of late performance it is often hard to determine when delay may amount to fundamental breach, it is usually advisable that the parties fix an additional term for performance (the so-called Nachfrist).[208] By introducing such a Nachfrist procedure, even if there is no fundamental breach, the Convention allows the aggrieved party to fix an additional period of time for performance; if the party in breach fails to perform during that period, the aggrieved party thereupon may declare the contract avoided (CISG Arts. 49(1)(b) and 64(1)(b)). Therefore in case of a delay in the performance, but only in that case, the lapse of that additional period turns a non-fundamental breach into a fundamental one.[209]

      5.3 Defective performance

       (a) Delivery of defective goods (including wrong goods)

The greatest problems arise in respect of the delivery of defective goods.[210] The delivery of defective goods, including wrong goods (aliud),[211] is certainly the most recurrent situation in international sales litigation. The number of decisions dealing with this issue is remarkably high, but often it is rather problematic to establish which kind of deficiencies in the goods may amount to a fundamental breach.[212]

As for the fundamentality of the delivery of defective goods, the following general rule is found in [Germany 18 January 1994 Oberlandesgericht [Appellate Court] Frankfurt]:[213]

It therefore becomes essential to know under what conditions delivery of non-conforming goods constitutes a fundamental breach of contract.[214] In determining what type of deficiency may lead to a fundamental breach, Graffi believes, although without expressly saying so, case law seems to favor an economically oriented approach, based on the actual loss suffered by the aggrieved party.[215] But I would rather put the emphasis, as I always do in this discussion, on the "substantial deprivation of contractual expectations" (section 2.2 above). Thus, for instance, while the Court in [Germany 2 March 1994 Oberlandesgericht [Appellate Court] München] holds, "this lack of conformity would not constitute a fundamental breach of contract, as the deviation was objectively not of considerable importance";[216] the Tribunal in [ICC 1994 International Court of Arbitration, Case 7531] finds that: "The lack of conformity of an important part of the goods supplied amounts to a breach of the contract which, under Article 25, is fundamental since the buyer is deprived of substantially what he was entitled to expect under the contract."[217]

As a rule, a violation of the qualitative requirements (non-conforming delivery or delivery of wrong goods) is fundamental when the non-conformity considerably impedes the fitness for use of the goods.[218] Of course, just like the case in all other considerations discussed above, in determining the fundamentality of the delivery of defective goods, it remains a general rule that the circumstances of the case are always decisive.[219] In the present consideration, however, particular notice should be given to clarify the role played by the reparability of the defects in defining a fundamental breach. And thus the following discussion is necessary.

      (b) Relevance of the reparability of the defects or of the ability to put the goods to another reasonable use

Special problems arise when the goods are defective, even seriously defective, but reparable.[220] In particular, it has to be considered whether it can be expected for the buyer to put the goods to another reasonable use.[221]

Court decisions on this point have found that any non-conformity concerning quality remains a mere, non-fundamental breach of contract as long as the buyer - without unreasonable inconvenience - can use the goods or resell them even with a rebate.[222] Thus, as the starting point, the usual practice seems to be:[223]

Several courts have held that easy reparability excludes any fundamentality of the breach. For instance, in [France 26 April 1995 Cour d'appel [Appellate Court] Grenoble (Marques Roque v. Manin Riviére)], where it is agreed between the parties that a certain quantity of goods (one-third of the goods, according to the buyer; ten parts of girders according to the seller) were not fit for the special use of reassembly in the identical manner brought expressly to the seller's attention, the Court nevertheless finds that, "this defect relates only to a part of the warehouse shed and concerns some metal parts which it was possible to repair; it did not constitute an essential breach of the kind that would substantially deprive [buyer] of that which he had a right to expect under the contract (Article 25)."[224] It is even held in [Germany 27 February 2002 Landgericht [District Court] München] that, if a buyer is able to use in any respect defective goods, one cannot assume a fundamental breach of contract.[225]

This latter seems too absolute a ruling, however. Courts have considered, for instance, a breach to be fundamental without reference to possible alternative uses or resale by the buyer when the goods had major defects and the buyer needed the goods for manufacture.[226] This has been held as well for the case in [Austria 1 July 1994 Oberlandesgericht [Appellate Court] Innsbruck], where the goods suffered from a serious and irreparable defect although they were still useable to some extent (e.g., flowers which were supposed to flourish the whole summer but did so only for part of it).[227] The same conclusion has also been reached where the non-conformity of the goods resulted from added substances the addition of which was illegal both in the country of the seller and the buyer.[228] Another possibility where the non-conformity may be deemed fundamental within CISG Art. 25 is the case in which the non-conformity consists in a lack of correspondence between the goods and a sample or model presented at the conclusion of the contract (CISG, Article 35(2)(c)).[229]

Again, the circumstances of the case are always decisive and such circumstances may satisfy or dissatisfy the fundamentality of a non-conformity. Thus, for instance, in some particular cases, there might be situations for applying the following statement:

In sum, contrary to some national sales law (e.g., Germany) which except for insignificant deviations in principle grants the right to cancellation of the contract on grounds of a defect, under the Convention,[231]

      (c) Defects in documents

As shown above, it seems that if the non-conforming goods cannot be used or resold with reasonable effort this constitutes a fundamental breach and entitles the buyer to declare the contract avoided.[232]

Likewise, defects in the documents constitute a fundamental breach if they essentially impair the buyer's possibility to negotiate the goods. If the buyer itself can easily cure any defects in the documents, e.g., by requesting new documents, the breach will not be considered fundamental.[233] In respect of defects in documents, a detailed ruling is found in [Germany 3 April 1996 Bundesgerichtshof [Federal Supreme Court]], where the Court states:[234]

However, in determining whether or not a contract can be avoided for faulty documents, much depends on "typical practice" and general rules applicable to the transaction, for example, the rules applicable to CIF and other documentary sales transactions. For such transactions, the Secretariat Commentary states:

The ability to avoid a contract for faulty documents in such circumstances can be precisely as stated in the Secretariat Commentary when the CISG applies because, by virtue of Articles 6 and 9 (Freedom of contract and Usages and practices), where there are general rules - e.g., the general rules applicable to CIF and other documentary sales transactions - they prevail wherever agreed to by the parties and adopted by them for their contracts, in accordance with Article 6, or where such rules apply to their contracts, by virtue of Article 9.

      (d) Relevance of the offer to cure

To help preserve transactions from technical mishaps, the Convention includes important provisions permitting the seller to "cure" a non-conforming delivery by replacing or repairing defective goods (Art. 37, cure until date for delivery; and Art. 48, cure after the date for delivery).[236] However, the relationship between the seller's right to cure and the buyer's right to avoid is still unclear and is subject to diverging interpretations. Of particular concern, it must be established if the offer by the seller to replace or repair the defective goods may halt the effects of the buyer's declaration of avoidance. Much controversy exists in this respect.[237]

In CISG case law, as shown above, some courts have held that easy reparability excludes that there can be a fundamental breach. At least when the seller offers and effects speedy repair or replacement without any inconvenience to the buyer, courts deny a fundamental breach.[238] Of particular relevance is the seller's right to cure provided for in CISG Art. 48. Several decisions suggest that in case of delivery of defective goods there is no fundamental breach if the seller (or its supplier) has made a serious offer to cure the defect. For instance, in [Germany 31 January 1997 Oberlandesgericht [Appellate Court] Koblenz], since the seller made an offer to deliver new goods, which has been refused by the buyer, it was held that the lack of quality did not amount to a fundamental breach of contract (Art. 25 CISG). According to the Court in that case, in considering a breach to be fundamental, account has to be taken not only of the gravity of the defect, but also of the willingness of the party in breach to provide substitute goods without causing unreasonable inconvenience to the other party (Art. 48(1) CISG). Thus, in the given case, even a serious lack of quality is said not to constitute a fundamental breach as the seller has offered to furnish additional blankets (Art. 49(1) CISG).[239]

As observed in the UNCITRAL Digest, courts are reluctant to consider a breach to be fundamental when the seller offers and effects speedy repair without any inconvenience to the buyer.[240] Some commentators support this reluctance. For example, according to Honnold, a rapid replacement of the defective part, even after the agreed date of delivery, would prevent any "substantial" detriment to the buyer; on this assumption, the breach would not be "fundamental" and the contract could not be avoided. That is to say, the question whether the breach was "fundamental" for the purpose of avoidance must be answered in the light of the effect of a rightful offer to cure, for otherwise seller's exercise of this right (i.e., cure under CISG Art. 48) would be futile. Therefore, in the eyes of Honnold, when the applicable provisions (Arts. 25, 48, 49) are construed together, buyer's attempt to avoid the contract should be ineffective.[241] Reasons underlying the reluctance to consider a breach to be fundamental where the seller has made a serious offer to cure, may be found in [Switzerland 5 November 2002 Handelsgericht [Commercial Court] des Kantons Aargau]:[242]

However, I would not agree with this Court when it continues to rule that:

In my view, the aggrieved party is always entitled to avoid the contract so long as a fundamental breach is established, be it an objective one or not; but he is in no event obligated to do so. Thus, absent a declaration of avoidance, even if a fundamental breach occurred thereby justifying such a declaration, "cure is not precluded merely because the failure to perform amounts to a fundamental non-performance."[244]

In this area, the distinction must be made between the concept of fundamental breach which establishes a right to avoidance and the exercise of avoidance by a declaration which is justified by that breach. On the one hand, under the CISG avoidance requires a unilateral declaration of the party loyal to the contract made to the other party,[245] and it is always mandatory to declare the avoidance of the contract.[246] Thus, so long as no declaration has been made to the effect of bringing the contract to an end, the contract remains binding on both the aggrieved party and the non-performing party. And therefore, where such an avoidance by declaration has not taken place, an opportunity for cure should be offered to the non-performing party (that is the case dealt with in CISG Art. 48). That is to say, even if the failure of the goods to operate at the time of delivery constituted a fundamental breach of contract, the seller would have the right to remedy the non-conformity in the goods by repairing or replacing them, unless the buyer terminated the seller's right by declaring the contract avoided.[247] On the other hand, this rule should not be misunderstood to mean that in each case the seller must first be offered an opportunity to cure.[248]

Not surprisingly, in light of the Convention's "fundamental precedence of preservation of the contract,"[249] as well as of the other underlying principle of the CISG that "a declaration of avoidance of a sales contract should be the mere ultima ratio, i.e., last resort,"[250] the willingness of the non-performing party to cure a failure of performance has often been taken into account as a factor in determining a fundamental breach of contract. This has been evidenced by the case law. But in no event can the fundamentality of a breach be denied only because the buyer did not first request (under CISG Art. 46(2)) or allow (under CISG Art. 48) the seller to cure any defective performance. If cure is delayed or causes the buyer unreasonable inconvenience an otherwise fundamental breach remains fundamental.[251]

Generally speaking, the feasibility of curing a defect is not the only decisive factor in determining fundamental breach; and unfeasibility to cure does not necessarily constitute a fundamental breach. Indeed, in answering the question whether the possibility of a subsequent remedy of the goods excludes the assumption of a fundamental breach, it is the following statement (concerning the delivery of defective goods), that determines:[252]

"'Fundamental' in the meaning of Arts. 49 and 25 CISG requires a considerable breach of contract - both when interpreting the wording, and when looking at the purpose of the CISG's provisions regarding the buyer's legal remedies. Such gravity can be derived from the contract itself, from the relevant circumstances (Art. 8 CISG), or from the reasons listed in Art. 35(2) CISG."

Within the framework of the above statement, it follows:

-

If a considerable breach satisfies these criteria, the fundamentality of the breach is not denied by the non-performing party's offer to cure, nor by the aggrieved party's failure to request such a cure. Especially when the term for performance is of the essence, the aggrieved party may have lost its interest in receiving the performance even if the defect may be cured swiftly.[253] Of course, even if a fundamental breach is established in respect of the defects, the aggrieved party may also decide not to avoid the contract if he is satisfied with the breaching party's offer to cure. Obviously, the aggrieved party may accept, in case of a fundamental breach, the breaching party's offer to cure the defects, and this may be intended as a waiver of the former's right of avoidance.[254]

-

On the other hand, even if a subsequent remedy of the non-conformity is impossible, it does not necessarily follow that the aggrieved party's performance interest essentially ceases to exist (quite independent of the kind and extent of the non-conformity). If a considerable breach does not follow from the above criteria, then even a defect which cannot be remedied does not entitle the buyer to avoid the contract under Art. 49(1)(a) CISG (since no fundamental breach in that case has been established in conformity with CISG Art. 25).[255]

Pursuant to the above understandings, the answer to the question put forward at the outset, i.e., if the offer by the breaching seller to replace or repair the defective goods may halt the effects of the entitled buyer's declaration of avoidance, is available as well:

-

As a rule, since automatic or ipso facto avoidance has been excluded from the remedial system of the Convention,[256] and in light of the Convention's "fundamental precedence of preservation of the contract,"[257] as well as of the other underlying principle of the CISG that "a declaration of avoidance of a sales contract should be the mere ultima ratio, i.e., last resort,"[258] where no avoidance by declaration has taken place, an opportunity for cure usually should be offered to the non-performing party.

-

On the other hand, where an avoidance is justified due to a fundamental breach and where such a justified avoidance has already been declared by a notice to that effect, the effects of such a declared avoidance cannot be suspended by a subsequent offer to cure; for no remedy, even for the sake of preserving the bargain between parties or other considerations of cost, should be allowed to breathe new life into a contract already terminated; otherwise the aggrieved party would be unjustifiably placed in a position of uncertainty. (Thus, disagreeing with Honnold, text keyed to supra. n. 241.)

Finally, it is not irrelevant here to mention that the cure under CISG Art. 48 is limited to the case where "fundamental breach was not a delay in performance."[259] As correctly stated in the Secretariat Commentary:[260]

[As for the relationship between the non-performing party's right to cure and the aggrieved party's right to avoid, see also the Author's discussion separately presented on Cure issues.]

      (e) Summary

It is true that a delivery of goods (or documents) that do not conform with the contract can be a fundamental breach of contract within the meaning of CISG Art. 25; in case of a lack of express agreement, CISG Art. 35(2) governs the question whether the goods conform with the contract.[261] But it should also be pointed out that, in case of delivery of defective goods, it is the aggrieved buyer that bears the burden of proof for the lack of conformity of the goods as a prerequisite for the avoidance of contract desired by him under Art. 49(1)(a) CISG.[262] As generally held in [Germany 2 July 2002 Landgericht [District Court] Saarbrücken]:[263]

Eventually, although in case of defective goods it is the buyer's interest that must prevail,[264] it should be noticed that the buyer loses the right to avail himself of the remedies for non-conformity, including avoidance due to fundamental non-conformity, if he fails to give notice to the seller within a reasonable time after discovering the defects pursuant to Art. 39 CISG. Art. 39 CISG shows that the Convention requires a proper notice of the lack of conformity of the goods to the other party.[265]

6. Concluding Remarks

While the CISG attempts to protect the interests of the aggrieved party by recognizing in principle the right to avoidance, hence taking into account that there are situations where the interests of the aggrieved party are not sufficiently protected by an award of damages; it is generally required, as a rule, that a fundamental breach exists as a prerequisite for the aggrieved party to avoid the contract. The avoidance remedy, therefore, should only be allowed as a last resort in response to a breach so serious that the non-breaching party would have lost his interest in performing the contract.[266]

Regarding the concept of fundamental breach, "according to both the general framework of the Convention and its interpretation in case law, the notion of fundamental breach is usually construed narrowly in order to prevent an excessive use of the avoidance of the contract."[267] In particular, in determining a fundamental breach, in the absence of prevailing terms in the contract, the remedial system of the Convention and its underlying purposes, namely to preserve the enforceability of the contract and to restrain avoidance in favor of the damage or price reduction remedies, must be taken into account. As discussed above, whether or not a breach is fundamental has to be determined by taking into account all the relevant circumstances of the particular case. Such factors include the gravity of the consequences of non-performance, i.e., substantial deprivation of contractual expectations of the aggrieved party; the nature of the breached obligations, especially when such obligations are of or made to be of essence; as well as the buyer's ability to otherwise process the goods or to sell them or the seller's offer to cure without causing unreasonable inconvenience; etc. In any event, it is mainly up to the trial judge to determine whether a breach of contract is deemed fundamental according to the above standards. The circumstances of the case are always decisive.[268]

Of course, these factors will not always be present and in many cases only avoidance will adequately protect the aggrieved party. Therefore, in transactions where a party is concerned that CISG Art. 25 is too lax or too strict or that a tribunal might improperly apply the law, the contract can provide stricter (or looser) grounds for avoidance.[269] This is in line with CISG Art. 6. As shown above, meditation over terms as pregnant with connotations as "fundamental," "substantial" or "foreseeable" never ends, nor does controversy about their meaning. But while philosophers have time to muse, lawyers usually do not; and merchants even less. Those who do not want to be bothered or who distrust esoteric phraseology, quickly find ways around Art. 25: the parties may choose to exclude the application of the Convention altogether, or to derogate from or vary the effects of that provision only. Another way out would be for them to redefine, in so many words, which instances in their contractual relations are to be considered a fundamental breach.[270]

These pragmatic considerations are mentioned because the definition of "fundamental breach" in Art. 25 had to be drafted in general terms and could not specify all the circumstances that may be relevant in determining whether a breach will "substantially" deprive a party "of what he is entitled to expect under the contract."[271] An express clause dealing with the definition of fundamental breach (including its effects and the exercise of avoidance) is advisable also in consideration of the fact that, as shown above, although case law seems to provide some valuable guidelines in this respect, a uniform notion of fundamental breach is hardly achievable at least on a general base.[272]

Finally, it is to be mentioned that even absent contractual provisions that relieve the uncertainty concerning the definition of a fundamental breach, serving a Nachfrist notice (CISG Art. 47/63) may as well assist the party who intends to avoid; because by virtue of such a notice, the noticing party is relieved from establishing a fundamental breach before avoidance. In that case, it suffices for the noticing party to justify his right to avoidance, as expressly envisaged in CISG Art. 49(1)(b) / 64(1)(b), that he proves the additional period set in the Nachfrist notice sent to the other party expired still without performance by the latter.

[For details on the Nachfrist procedure and the notice-avoidance mechanism thereby, see the Author's discussion separately presented on Nachfrist issues.]

FOOTNOTES

1. See Will in Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds., Milan (1987), p. 205; available at: <http://www.cisg.law.pace.edu/cisg/biblio/will-bb25.html>.

2. See Hossam El-Saghir in "Fundamental breach: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Article 25 CISG"; July 2000; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp25.html>.

3. See Robert Koch in "The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG)": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999), p. 185; available at: <http://www.cisg.law.pace.edu/cisg/biblio/koch.html>.

4. See John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed., Kluwer Law International, The Hague (1999), p. 212; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ho25.html>.

5. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/25: Digest 1; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

6. See Hossam El-Saghir, supra. n. 2.

7. See John O. Honnold, supra. n. 4; p. 205.

8. See Leonardo Graffi in "Case Law on the Concept of 'Fundamental Breach' in the Vienna Sales Convention": Revue de droit des affaires internationales / International Business Law Journal(2003) No. 3, 338-349 (Forum Europeén de la Communication) Paris, p. 338; available at: <http://www.cisg.law.pace.edu/cisg/biblio/graffi.html>.

9. Comment 3 on UNIDROIT Principles Art. 7.3.1.

10. See Will, supra. n. 1; p. 205.

11. See Robert Koch, supra. n. 3; pp. 185-186.

12. See Leonardo Graffi, supra. n. 8; p. 338.

13. See Will, supra. n. 1; p. 210.

14. See Leonardo Graffi, supra. n. 8; p. 339.

15. Comment 3(a) on UNIDROIT Principles Art. 7.3.1.

16. See Comment and Notes to PECL Art. 8:103: Comment C; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp25.html>.

17. See Hossam El-Saghir, supra. n. 2.

18. See Secretariat Commentary on 1978 Draft Art. 23 [draft counterpart of CISG Art. 25]: Comment 3; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-25.html>.

19. See Hossam El-Saghir, supra. n. 2.

20. See Will, supra. n. 1; p. 210.

21. See Hossam El-Saghir, supra. n. 2.

22. Ibid.

23. See Will, supra. n. 1; p. 210.

24. See Mirghasem Jafarzadeh in "Buyer's Right to Withhold Performance and Termination of Contract: A Comparative Study Under English Law, Vienna Convention on Contracts for the International Sale of Goods 1980, Iranian and Shi'ah Law" (2001); available at: <http://www.cisg.law.pace.edu/cisg/biblio/jafarzadeh1.html>.

25. See Will, supra. n. 1; p. 211.

26. See Mirghasem Jafarzadeh, supra. n. 24.

27. The word "detriment" was proposed in the sixth session of the UNCITRAL Working Group in 1975 (Yearbook, VI (1975), 53, 64), and was retained in the 1978 Draft proposal (Yearbook, VII (1976), 90).

28. See Will, supra. n. 1; p. 211.

29. Ibid.

30. See Leonardo Graffi, supra. n. 8; pp. 339-340.

31. Corpus Juris Secundum, Volume 26a, p. 984.

32. See Will, supra. n. 1; p. 212.

33. See Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods, Oceana Publication (1992), p. 113; available at: <http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html>.

34. See Mirghasem Jafarzadeh, supra. n. 24.

35. See Will, supra. n. 1; p. 211.

36. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 113.

37. See Will, supra. n. 1; p. 212.

38. Ibid..

39. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 113.

40. See Leonardo Graffi, supra. n. 8; p. 339.

41. See Mirghasem Jafarzadeh, supra. n. 24.

42. See Hossam El-Saghir, supra. n. 2.

43. Comment 3 on 1978 Draft Art. 23 [draft counterpart of CISG Art. 25]; supra. n. 18.

44. See Alexander Lorenz in "Fundamental Breach under the CISG", June 1998; available at: <http://www.cisg.law.pace.edu/cisg/biblio/lorenz.html>.

45. See Mirghasem Jafarzadeh, supra. n. 24.

46. See Judgment by Oberlandesgericht [Appellate Court] Frankfurt, Germany, 17 September 1991; No. 5 U 164/90. English translation from 12 Journal of Law and Commerce 261-270 (1993); available at: <http://cisgw3.law.pace.edu/cases/910917g1.html>.

47. See Judgment by Zivilgericht [Civil Court] Basel-Stadt, Switzerland, 1 March 2002; No. P 1997/482. English translation by Mark Beamish; available at: <http://cisgw3.law.pace.edu/cases/020301s1.html>.

48. See Leonardo Graffi, supra. n. 8; p. 340.

49. See Judgment by Landgericht [District Court] Saarbrücken, Germany, 2 July 2002; No. 8 O 49/02. English translation by Julian Waiblinger, translation edited by Camilla Baasch Andersen; available at: <http://cisgw3.law.pace.edu/cases/020702g1.html>.

50. See Leonardo Graffi, supra. n. 8; p. 340.

51. See Alexander Lorenz; supra. n. 44.

52. See Mirghasem Jafarzadeh, supra. n. 24.

53. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 113.

54. See Jacob S. Ziegel in Galston & Smit ed., International Sales: The United Nations Convention on Contracts for the International Sale of Goods, Juris Publishing, Matthew Bender (1984), Ch. 9, p. 9-14; available at: <http://www.cisg.law.pace.edu/cisg/biblio/ziegel6.html>.

55. See Leonardo Graffi, supra. n. 8; p. 340.

56. See Mirghasem Jafarzadeh, supra. n. 24.

57. UNCITRAL Digest 3 on CISG Art. 25; supra. n. 5.

58. See Will, supra. n. 1; p. 215.

59. See Comment and Notes to PECL Art. 9:301: Note 2; available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp49.html>.

60. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 332.

61. See Robert Koch, supra. n. 3; p. 335. This policy is also reflected in offering the breaching party the possibility to cure under CISG Art. 48, albeit it is not necessarily correct to say, as Koch submits, that the aggrieved party wishing to avoid the contract due to late delivery is required to provide a Nachfrist. As to be indicated later, in cases where the seller does not deliver in time, whether the buyer can immediately avoid the contract or must first set an additional period of time for performance by the seller, depends on the importance of the date of delivery agreed upon by the parties. If the date was of the essence for the contract, the aggrieved buyer need not set firstly a Nachfrist so as to justify his subsequent declaration of avoidance due to the late delivery. On the other hand, however, where the time of delivery was not of the essence, and the buyer had not set an additional period of time, the remedy of avoidance was not granted in some cases. (See also Peter Schlechtriem in "Uniform Sales Law - The Experience with Uniform Sales Laws in the Federal Republic of Germany": Juridisk Tidskrift (1991/92); pp. 1-28; available at: <http://www.cisg.law.pace.edu/cisg/text/schlechtriem25.html>.)

62. Comment C on PECL Art. 8:103; supra. n. 16.

63. See Peter Schlechtriem; supra. n. 61.

64. Comment D on PECL Art. 9:301; supra. n. 59.This issue has also been generally dealt with in CISG Art. 80, as well as UNIDROIT Principles Art. 7.1.2 or PECL Art. 8:101(3), which may be invoked to prevent a party from recovering damages, or be used to block a party from avoiding the contract and from using the other side's non-performance as a defense.

65. Comment C on PECL Art. 8:103; supra. n. 16.

66. See Jacob S. Ziegel, supra. n. 54; p. 9-15.

67. See Robert Koch, supra. n. 3; p. 228.

68. See Leonardo Graffi, supra. n. 8; p. 340.

69. See Will, supra. n. 1; p. 215.

70. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 115.

71. See Will, supra. n. 1; p. 215.

72. See Leonardo Graffi, supra. n. 8; p. 340.

73. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; No. VIII ZR 51/95. English translation by Dr. Peter Feuerstein; translation edited by Ruth M.Janal; available at: <http://cisgw3.law.pace.edu/cases/960403g1.html>.

74. See Hossam El-Saghir, supra. n. 2; see also Will, supra. n. 1; p. 216.

75. UNCITRAL Digest 12 on CISG Art. 25; supra. n. 5.

76. See Leonardo Graffi, supra. n. 8; p. 340. For a further commentary on burden of proof in general under the CISG, see Sonja A.Kruisinga in "Non-conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?", Intersentia (2004); pp.157-186.

77. See Robert Koch, supra. n. 3; p. 229.

78. See Will, supra. n. 1; pp. 216-217.

79. See Hossam El-Saghir, supra. n. 2.

80. See Judgment of ICC Arbitration Case No. 9187 of June 1999; available at: <http://www.cisg-online.ch/cisg/urteile/705.htm>.

81. See Robert Koch, supra. n. 3; p. 229.

82. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 113.

83. See Leonardo Graffi, supra. n. 8; p. 340. In respect of an obligation of essence, This may be the case of goods that must be delivered within a fixed term, indicated by the buyer as essential. The transportation insurance for the goods and the payment by means of letter of credit may also constitute essential obligations, respectively for the buyer and for the seller. (Ibid.)

84. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 113.

85. See Will, supra. n. 1; p. 217.

86. See Robert Koch, supra. n. 3; p. 229. With this regard, Koch further states: "Where the parties, for instance, expressly or implicitly agreed that strict compliance with the contract terms is essential and any deviation from those terms is to be regarded as fundamental, the party in breach cannot invoke non-foreseeability. Under such circumstances, substantial detriment is foreseeable to a reasonable person of the same kind and in the same circumstances. The same is true where the importance of the obligation breached follows from the terms of contract or from the negotiations between the parties, which preceded the formation of the contract. For example, where the parties stipulated that performance should be effected at an exact time, or where the buyer had made known to the seller that he needed the goods by a certain date in order to fulfill his own obligations vis-à-vis third parties, the seller cannot argue in defense that he was unaware of the fact that his failure to deliver on time would result in substantial detriment to the seller. Only when the particular importance of the violated duty has neither been established in the contract itself nor discussed during the contract negotiations, can foreseeability be relevant." (See Robert Koch, supra. n. 3; pp. 229-230.)

87. See Will, supra. n. 1; p. 217.

88. Ibid.

89. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 116.

90. See Leonardo Graffi, supra. n. 8; p. 340.

91. Comment C on PECL Art. 8:103; supra. n. 16.

92. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 116.

93. See Will, supra. n. 1; pp. 218-219.

94. See Leonardo Graffi, supra. n. 8; pp. 340-341.

95. See Will, supra. n. 1; p. 219-220.

96. See Mirghasem Jafarzadeh, supra. n. 24.

97. See Will, supra. n. 1; p. 220.

98. See Will, supra. n. 1; p. 216.

99. See John O. Honnold, supra. n. 4; p. 208.

100. See Will, supra. n. 1; p. 220.

101. See John O. Honnold, supra. n. 4; p. 208.

102. See Mirghasem Jafarzadeh, supra. n. 24.

103. See John O. Honnold, supra. n. 4; p. 208.

104. See Leonardo Graffi, supra. n. 8; p. 341.

105. See Will, supra. n. 1; p. 220.

106. See Harry M. Flechtner in "Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C.": 8 Journal of Law and Commerce (1988), pp. 53-108; available at: <http://www.cisg.law.pace.edu/cisg/biblio/flecht.html>. See also Mirghasem Jafarzadeh, supra. n. 24.

107. See Leonardo Graffi, supra. n. 8; p. 341.

108. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 116.

109. Comment 5 on Secretariat Commentary on 1978 Draft Art. 23 [draft counterpart of CISG Art. 25]; supra. n. 18.

110. 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 (Winter 1997), p. 13 at fn. 25; available at: <http://www.cisg.law.pace.edu/cisg/biblio/shen.html>.

111. See Will, supra. n. 1; p. 220.

112. See Mirghasem Jafarzadeh, supra. n. 24.

113. See John O. Honnold, supra. n. 4; p. 209.

114. See Will, supra. n. 1; p. 221. This is the view held by Enderlein & Maskow, who state: "While we hold that generally the time of the conclusion of the contract should be referred to, we consider it possible that in exceptional cases subsequent information should be taken into account as well. Such information could be given until the actual and/or required commencement of the preparation in view of performance so that the other party can still adapt itself to it. This seems justified to us because it can be doubted that the information available at the time of the conclusion of the contract has really made possible the foreseeability or required foresight of the consequences. This doubt may be removed when subsequent information is taken account of. When, for instance, in the case of a contract for delivery of consumer goods to be manufactured the buyer signals immediately after the conclusion of the contract that the imprint of agreed data on the packaging is of decisive importance because the goods otherwise could not be sold in the envisaged sales area, this will have to be regarded as sufficient for the violation of the respective obligation to be characterized as fundamental (annotation omitted)." (See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 116.)

115. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 116.

116. See Jianming Shen; p. 13 at fn. 25; supra. n. 110.

117. See Mirghasem Jafarzadeh, supra. n. 24.

118. See Will, supra. n. 1; pp. 220-221.

119. See Peter Schlechtriem, Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods; Manz, Vienna: 1986; p. 60; available at: <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem-25.html>.

120. See Mirghasem Jafarzadeh, supra. n. 24.

121. See Jacob S. Ziegel, supra. n. 54; p. 9-20.

122. In [Germany 24 April 1997 Oberlandesgericht [Appellate Court] Düsseldorf], the Court rules in the pertinent part: "In so far, it is required that the precise compliance with the delivery deadline is of particular interest to the buyer, namely that the buyer prefers not to receive delivery at all than receiving delayed delivery and that this is apparent for the seller at the conclusion of contract (emphasis added; citations omitted)." (See Judgment by Oberlandesgericht [Provincial Court of Appeal] Düsseldorf, Germany 24 April 1997; No. 6 U 87/96. English translation by Julian Waiblinger; available at: <http://cisgw3.law.pace.edu/cases/970424g1.html>.)

123. Comment C on PECL Art. 8:103; supra. n. 16.

124. See Leonardo Graffi, supra. n. 8; p. 341.

125. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

126. See Joseph Lookofsky in "The 1980 United Nations Convention on Contracts for the International Sale of Goods": J. Herbots editor / R. Blanpain general editor, Suppl. 29 International Encyclopaedia of Laws - Contracts, Law International (December 2000), p. 123; available at: <http://www.cisg.law.pace.edu/cisg/biblio/loo49.html>.

127. See John O. Honnold, supra. n. 4; p. 208.

128. Comment C on PECL Art. 8:103; supra. n. 16.

129. See Joseph Lookofsky in "The 1980 United Nations Convention on Contracts for the International Sale of Goods": J. Herbots editor / R. Blanpain general editor, Suppl. 29 International Encyclopaedia of Laws - Contracts, Kluwer Law International (December 2000), p. 79; available at: <http://www.cisg.law.pace.edu/cisg/biblio/loo25.html>.

130. See Judgment by Oberlandesgericht [Appellate Court] Frankfurt, Germany, 17 September 1991; supra. n. 46.

131. Comment 3(b) on UNIDROIT Principles Art. 7.3.1.

132. Comment B on PECL Art. 8:103; supra. n. 16.

133. Comment 3(b) on UNIDROIT Principles Art. 7.3.1.

134. Comment B on PECL Art. 8:103; supra. n. 16.

135. See Alison E. Williams in "Forecasting the Potential Impact of the Vienna Sales Convention on International Sales Law in the United Kingdom": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001), pp. 9-57; available at: <http://www.cisg.law.pace.edu/cisg/biblio/williams.html>.

136. See Robert Koch, supra. n. 3; p. 299.

137. See Robert Koch, supra. n. 3; p. 300.

138. See Hossam El-Saghir, supra. n. 2.

139. See Alison E. Williams, supra. n. 135.

140. See Robert Koch, supra. n. 3; pp. 215-216.

141. UNCITRAL Digest 2 on CISG Art. 25; supra. n. 5.

142. See Leonardo Graffi, supra. n. 8; p. 339.

143. See, e.g., CLOUT case No. 2, Oberlandesgericht [Appellate Court] Frankfurt a.M., Germany, 17 September 1991], English translation by Journal of Law & Commerce, available at: <http://cisgw3.law.pace.edu/cases/910917g1.html>; CLOUT case No. 154, Cour d'appel [Appellate Court] Grenoble, France, 22 February 1995, English translation by Prof. Gary F. Bell, available at: <http://cisgw3.law.pace.edu/cases/950222f1.html>; CLOUT case No. 308, Federal Court of Australia, 28 April 1995, available at: <http://cisgw3.law.pace.edu/cases/950428a3.html>; CLOUT case No. 217, Handelsgericht [Commercial Court] des Kantons Aargau, Switzerland, 26 September 1997, available at: <http://cisgw3.law.pace.edu/cases/970926s1.html>; CLOUT case No. 313, Cour d'appel [Appellate Court] Grenoble, France, 21 October 1999, English translation by Charles Sant 'Elia, translation edited by Kirsten Stadtländer, available at: <http://cisgw3.law.pace.edu/cases/991021f1.html>.

144. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

145. UNCITRAL Digest 9 on CISG Art. 25; supra. n. 5.

146. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/49: Digest 6; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

147. Comment C on PECL Art. 8:103; supra. n. 16.

148. See Judgment by Oberlandesgericht [Appellate Court] Köln, Germany, 8 January 1997; No. 27 U 58/96. English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen; available at: <http://cisgw3.law.pace.edu/cases/970108g1.html>.

149. UNCITRAL Digest 11 on CISG Art. 25; supra. n. 5.

150. See Judgment by Bundesgericht [Supreme Court], Switzerland, 15 September 2000; No. 4C.105/2000. English translation by Alban Renaud, translation edited by Claude Witz and Julia Eisengräber; available at: <http://cisgw3.law.pace.edu/cases/000915s2.html>.

151. Comment 3(c) on UNIDROIT Principles Art. 7.3.1.

152. Comment 3(d) on UNIDROIT Principles Art. 7.3.1.

153. Comment D on PECL Art. 8:103; supra. n. 16.

154. Comment 3(d) on UNIDROIT Principles Art. 7.3.1.

155. Ibid.

156. Note 2 to PECL Art. 8:103; supra. n. 16. The reasons for this lacking counterpart rules may be that, unlike the PECL (nor like the UNIDROIT Principles), the CISG does not interfere with special rights and remedies that domestic law gives to persons who have been induced to enter into contract by fraud (see Hossam El-Saghir, supra. n. 2). It is the prevailing view that in sales governed by CISG the remedies for fraud are to be found in national law (Note 2 to PECL Art. 8:103; supra. n. 16).

157. See Robert Koch, supra. n. 3; p. 331.

158. See Robert Koch in "Commentary on Whether the UNIDROIT Principles of International Commercial Contracts May Be Used to Interpret or Supplement Article 25 CISG" (November 2004); available at: <http://www.cisg.law.pace.edu/cisg/biblio/koch1.html>.

159. See Robert Koch, supra. n. 3; p. 268.

160. Comment 3(e) on UNIDROIT Principles Art. 7.3.1.

161. See Robert Koch; supra. n. 158.

162. See Robert Koch, supra. n. 3; p. 267.

163. See Leonardo Graffi, supra. n. 8; p. 341.

164. See Leonardo Graffi, supra. n. 8; p. 340.

165. UNCITRAL Digest 8 on CISG Art. 49; supra. n. 146.

166. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

167. See Leonardo Graffi, supra. n. 8; p. 341.

168. UNCITRAL Digest 2 on CISG Art. 25; supra. n. 5.

169. See Leonardo Graffi, supra. n. 8; p. 341.

170. See Judgment by Landgericht [District Court] München, Germany, 20 February 2002; No. 10 O 5423/01. English translation by Julian Waiblinger, translation edited by Mark Beamish; available at: <http://cisgw3.law.pace.edu/cases/020220g1.html>.

171. See Judgment by Oberlandesgericht [Appellate Court] München, Germany, 1 February 2002; No. 10 O 5423/01. English translation by Ruth M. Janal; available at: <http://cisgw3.law.pace.edu/cases/020701g1.html>.

172. See Judgment by Oberlandesgericht [Appellate Court] Hamburg, Germany, 28 February 1997; No. 1 U 167/95. English translation by Robert Koch: supra. n. 3; at fn. 203; comment also by Leonardo Graffi, supra. n. 8; at fn. 55.

173. See Judgment by Oberlandesgericht [Appellate Court] München, Germany, 1 February 2002; supra. n. 171.

174. See Judgment by Landgericht [District Court] München, Germany, 20 February 2002; supra. n. 170.

175. See Judgment by Bundesgericht [Supreme Court], Switzerland, 15 September 2000; supra. n. 150.

176. See Leonardo Graffi, supra. n. 8; p. 341.

177. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 114.

178. See Leonardo Graffi, supra. n. 8; pp. 341-342.

179. See Judgment by Oberlandesgericht [Appellate Court] Hamburg, Germany, 28 February 1997; supra. n. 172.

180. This is the case when it concerns an agreement with a reseller and the price goes down suddenly and considerably. In the presence of minor fluctuation in prices, the avoidance of the contract depends on the fixing of a supplementary period of a short time in accordance with Art. 49(1)(b) CISG. Against a considerable delay which constitutes a fundamental breach of the contract according to Art. 25 CISG, the buyer receives the right to immediately avoid the sale without giving a notice for a supplementary period. (See Judgment by Bundesgericht [Supreme Court], Switzerland, 15 September 2000; supra. n. 150.)

181. See Judgment by Bundesgericht [Supreme Court], Switzerland, 15 September 2000; supra. n. 150.

182. See Leonardo Graffi, supra. n. 8; p. 342.

183. See Judgment by Oberlandesgericht [Appellate Court] Düsseldorf, Germany, 24 April 1997; supra. n. 122.

184. See Judgment by Oberlandesgericht [Appellate Court] Hamburg, Germany, 28 February 1997; supra. n. 172.

185. See Judgment by Bundesgericht [Supreme Court], Switzerland, 15 September 2000; supra. n. 150.

186. UNCITRAL Digest 8 on CISG Art. 49; supra. n. 146.

187. See Judgment of ICC Arbitration Case No. 9978 of March 1999; available at: <http://www.cisg-online.ch/cisg/urteile/708.htm>.

188. See Judgment by Kantonsgericht [District Court] Zug, Switzerland, 21 October 1999; No. A3 1997 61. English translation by Dr. Andrea Vincze; available at: <http://cisgw3.law.pace.edu/cases/991021f1.html>.

189. See Judgement by Oberlandesgericht [Provincial Court of Appeal] Düsseldorf, Germany, 18 November 1993; No. 6 U 228/92; English Commentary by Robert Koch, supra. n. 3; pp. 245-246.

190. See Leonardo Graffi, supra. n. 8; p. 341.

191. See Judgment by Oberlandesgericht [Appellate Court] Düsseldorf, Germany, 24 April 1997; supra. n. 122.

192. UNCITRAL Digest 8 on CISG Art. 49; supra. n. 146.

193. See Leonardo Graffi, supra. n. 8; p. 342.

194. See Judgment of ICC Arbitration Case No. 7585 of 1992; available at: <http://www.unilex.info/case.cfm?pid=1&do=case&id=134&step=FullText>.

195. Stoll in "Commentary on the UN Convention on the International Sale of Goods (CISG)"; Schlechtriem ed.; Munich (1998); p. 1.

196. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/64: Digest 4; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

197. In accordance with Art. 54 CISG, the obligation of the buyer to pay the price involves the obligation to take all measures and comply with all contractual and legal formalities required for payment of the price, such as the opening of a documentary credit or a bank guarantee or even the authorization to transfer currency. (See, e.g., UNILEX Abstract of ICC Arbitration Case No. 7197 of 1992; available at: <http://www.unilex.info/case.cfm?pid=1&do=case&id=37&step=Abstract>.)

198. See Judgment by Supreme Court of Queensland, Australia, 17 November 2000; No. Civil Jurisdiction No. 10680 of 1996; available at: <http://cisgw3.law.pace.edu/cases/001117a2.html>.

199. UNCITRAL Digest 10 on CISG Art. 25; supra. n. 5.

200. See Judgment by Cour d'appel [Appellate Court] Grenoble, France, 4 February 1999; No. RG 98/0270 (appeal of decision RG 97008146). English translation by Gary F. Bell; available at: <http://cisgw3.law.pace.edu/cases/990204f1.html>.

201. See Leonardo Graffi, supra. n. 8; p. 342.

202. UNCITRAL Digest 5 on CISG Art. 64; supra. n. 196.

203. UNCITRAL Digest 5 on CISG Art. 25; supra. n. 5.

204. See Leonardo Graffi, supra. n. 8; p. 341.

205. See Judgment of ICC Arbitration Case No. 7585 of 1992; supra. n. 194.

206. In this respect, it is argued that: "In case of late delivery by the seller, the general rule that delay does not amount to a fundamental breach is not settled, since there are many exceptions to the rule. In case of late payment by the buyer, a different standard applies and more tolerance seems to be admissible." (See Leonardo Graffi, supra. n. 8; p. 342.)

207. UNCITRAL Digest 6 on CISG Art. 25; supra. n. 5.

208. See Leonardo Graffi, supra. n. 8; p. 342.

209. UNCITRAL Digest 6 on CISG Art. 25; supra. n. 5.

210. UNCITRAL Digest 11 on CISG Art. 49; supra. n. 146. In determining the non-conformity of delivered goods, the agreement of the parties is of first and foremost relevance (Art. 35(1) CISG). Except where the parties have agreed otherwise, the goods do not conform with the contract unless they are fit for the purposes for which goods of the description would ordinarily be used; unless they possess the qualities of goods which the seller has held out to the buyer as a model or sample; and unless the goods are packed in the usual and necessary manner (Art. 35(2) CISG).

211. Under the CISG, the delivery of an aliud is also treated as delivery of a non-conforming good (and not as non delivery). (See Leonardo Graffi, supra. n. 8; p. 342.) For instance, it is held in [Germany 3 April 1996 Bundesgerichtshof [Federal Supreme Court]], "the CISG does not differentiate between delivery of different goods and delivery of goods that do not conform to the contract. Under the CISG, an aliud delivery does therefore, at least generally, not constitute a non-delivery, but constitutes a delivery of non-conforming goods." (See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.) Thus, the rules concerning the delivery of defective goods apply as well if wrong goods (aliud) are delivered." (UNCITRAL Digest 11 on CISG Art. 49; supra. n. 146.)

212. See Leonardo Graffi, supra. n. 8; p. 342.

213. See Judgment by Oberlandesgericht [Appellate Court] Frankfurt, Germany, 18 January 1994; No. 5 U 15/93. English translation from 14 Journal of Law and Commerce 201-207 (1995); available at: <http://cisgw3.law.pace.edu/cases/940118g1.html>.

214. UNCITRAL Digest 7 on CISG Art. 25; supra. n. 5.

215. See Leonardo Graffi, supra. n. 8; p. 343.

216. See Judgment by Oberlandesgericht [Appellate Court] München, Germany 2 March 1994; No. 7 U 4419/93. English translation by Ruth M. Janal; available at: <http://cisgw3.law.pace.edu/cases/940302g1.html>.

217. See Judgment of ICC Arbitration Case No. 7531 of 1994; available at: <http://www.unilex.info/case.cfm?pid=1&do=case&id=139&step=FullText>.

218. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 114.

219. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

220. UNCITRAL Digest 12 on CISG Art. 49; supra. n. 146.

221. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

222. UNCITRAL Digest 7 on CISG Art. 25; supra. n. 5.

223. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

224. See Marques Roque Joachim v. Manin Rivière: Judgment by Cour d'appel [Appellate Court] Grenoble, France, 26 April 1995; No. 93/4879. English translation by Charles Sant 'Elia; available at: <http://cisgw3.law.pace.edu/cases/950426f2.html>.

225. See Judgment by Landgericht [District Court] München, Germany, 27 February 2002; No. 5 HKO 3936/00. English translation by Stefan Kuhm, translation edited by Camilla Baasch Andersen; available at: <http://cisgw3.law.pace.edu/cases/020227g1.html>.

226. UNCITRAL Digest 7 on CISG Art. 25; supra. n. 5.

227. See Judgment by Oberlandesgericht [Appellate Court] Innsbruck, Austria 1 July 1994; No. 4 R 161/94. English translation by Ruth M. Janal, translation edited by Todd Fox; available at: <http://cisgw3.law.pace.edu/cases/940701a3.html>.

228. UNCITRAL Digest 7 on CISG Art. 25; supra. n. 5.

229. See Judgment by Oberlandesgericht [Appellate Court] Frankfurt, Germany, 18 January 1994; supra. n. 213.

230. See Fritz Enderlein & Dietrich Maskow, supra. n. 33; p. 114.

231. See Judgment by Oberlandesgericht [Appellate Court] Frankfurt, Germany, 18 January 1994; supra. n. 213.

232. UNCITRAL Digest 7 on CISG Art. 25; supra. n. 5.

233. UNCITRAL Digest 13 on CISG Art. 49; supra. n. 146.

234. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

235. See Secretariat Commentary on 1978 Draft Art. 45 [draft counterpart of CISG Art. 49]: Comment 7; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-49.html>.

236. See John O. Honnold, supra. n. 4; p. 210.

237. See Leonardo Graffi, supra. n. 8; p. 344.

238. UNCITRAL Digest 12 on CISG Art. 49; supra. n. 146.

239. See CLOUT case abstract No. 282, Oberlandesgericht [Appellate Court] Koblenz, Germany, 31 January 1997, available at: <http://cisgw3.law.pace.edu/cases/970131g1.html>;

240. UNCITRAL Digest 8 on CISG Art. 25; supra. n. 5.

241. See John O. Honnold, supra. n. 4; p. 210.

242. See Judgment by Handelsgericht [Commercial Court] Aargau, Switzerland, 5 November 2002; No. OR.2001.00029. English translation by Martin F. Koehler; available at: <http://cisgw3.law.pace.edu/cases/021105s1.html>.

243. Ibid.

244. See Comment on Art. 7.1.4 UNIDROIT Principles: Comment 3; available at: <http://www.cisg.law.pace.edu/cisg/principles/uni48.html>.

245. See Judgment by Oberster Gerichtshof [Supreme Court], Austria 9 March 2000; No. 6 Ob 311/99z. Translation by Marko Maljevac, translation edited by Ruth M. Janal; available at: <http://cisgw3.law.pace.edu/cases/000309a3.html>.

246. See Judgment by Landgericht [District Court] Frankfurt am Main, Germany 16 September 1991; No. 3/11 O 3/91. English translation by Stefan Kuhm; available at: <http://cisgw3.law.pace.edu/cases/910916g1.html>.

247. See Secretariat Commentary on Art. 44 of the 1978 Draft [draft counterpart of CISG Art. 48]: Comment 3; available at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-48.html>.

248. See UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods (8 June 2004), A/CN.9/SER.C/DIGEST/CISG/48: Digest 2; available at: <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.

249. See Judgment by Handelsgericht [Commercial Court] Aargau, Switzerland, 5 November 2002; supra. n. 242.

250. See Judgment by Landgericht [District Court] München, Germany 27 February 2002; supra. n. 225.

251. UNCITRAL Digest 12 on CISG Art. 49; supra. n. 146.

252. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

253. See Leonardo Graffi, supra. n. 8; p. 344.

254. See Leonardo Graffi, supra. n. 8; p. 345.

255. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

256. See Knapp in Commentary on the International Sales Law: The 1980 Vienna Sale Convention, Cesare Massimo Bianca & Michael Joachim Bonell eds., Milan (1987), pp. 465-466; available at: <http://www.cisg.law.pace.edu/cisg/biblio/knapp-bb64.html>

257. See Judgment by Handelsgericht [Commercial Court] Aargau, Switzerland, 5 November 2002; supra. n. 242.

258. See Judgment by Landgericht [District Court] München, Germany 27 February 2002; supra. n. 225.

259. Comment 3, supra. n. 247.

260. Comment 6, supra. n. 247.

261. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 8 March 1995; No. VIII ZR 159/94. English translation by Walter, Conston, Alexander & Green, P.C., translation edited by William M. Barron, Esq.; Birgit Kurtz, Esq.; available at: <http://cisgw3.law.pace.edu/cases/950308g3.html>.

262. See Judgment by Oberlandesgericht [Appellate Court] Innsbruck, Austria 1 July 1994; supra. n. 227.

263. See Judgment by Landgericht [District Court] Saarbrücken, Germany, 2 July 2002; supra. n. 49.

264. See Leonardo Graffi, supra. n. 8; p. 345.

265. See e.g. Judgment by Landgericht [District Court] Stendal, Germany 12 October 2000; No. 22 S 234/94. English translation by Ruth M. Janal; translation edited by Camilla Baasch Andersen; available at: <http://cisgw3.law.pace.edu/cases/001012g1.html>. (Despite this notice requirement, the seller would be prevented from relying on buyer's failure to give that notice if, according to CISG Art. 40, "the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer." Similarly, CISG Art. 44 establishes an exception where the buyer can reasonably excuse its failure to give notice of defect.)

266. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

267. See ICC Arbitration Case No. 9887 of August 1999: ICC International Court of Arbitration Bulletin, 2000; p. 118.

268. See Judgment by Bundesgerichtshof [Federal Supreme Court], Germany, 3 April 1996; supra. n. 73.

269. See John O. Honnold, supra. n. 4; p. 206.

270. See Will, supra. n. 1; p. 209.

271. See John O. Honnold, supra. n. 4; p. 206.

272. See Leonardo Graffi, supra. n. 8; p. 345.