30 June 2024

Vienna Convention on Contracts for the International Sale of Goods (CISG): Key Provisions and Application

June 30, 2024

BRACE Law Firm ©

For more than 40 years of its existence, the 1980 United Nations Convention on Contracts for the International Sale of Goods (the "Convention", "Vienna Convention", or "Vienna Sales Convention") has become one of the most important instruments of international trade.

The Convention provides a uniform framework for the conclusion of sales contracts between parties whose places of business are located in different states. By defining the rights and obligations of the parties in a clear and accessible form, the Convention increases predictability in the field of international trade law, thereby contributing to the reduction of transaction costs.

Currently, 97 states are parties to the Convention, representing all legal traditions, belonging to diverse economic systems, and accounting for more than two-thirds of the total volume of global trade. The Convention undoubtedly makes a significant contribution to the unification of international trade law. For Russia, the Convention entered into force on September 1, 1991.

The Convention is divided into four parts. Part I concerns the scope of application of the Convention and provides general provisions. Part II contains rules governing the formation of contracts for the international sale of goods. Part III concerns the fundamental rights and obligations of the buyer and the seller arising from the contract. Part IV includes final provisions of the Convention, regulating issues such as the procedure and timing of its entry into force, permissible reservations and declarations, and the application of the Convention to international sales in cases where both interested states have identical or similar legal norms on the matter.

Scope of Application of the Vienna Convention

Part I of the Convention is devoted to the question preceding all other issues regulated by the CISG — the applicability of the Convention—as well as general matters such as interpretation and formal requirements.

The Convention applies to contracts for the sale of goods between parties whose places of business are located in different states:

When these states are participants in the Convention;
When, according to the rules of private international law, the law of a Contracting State is applicable.

The dispositive nature of the Convention allows for the inclusion of references to the application of the Vienna Convention in the contract, even if the parties to the contract do not belong to Contracting States. This provision is contained in the recommendation for the model contract of the International Chamber of Commerce (ICC).[1]

The fact that the parties have their places of business in different states is not taken into consideration whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.

Neither the nationality of the parties nor their civil or commercial status, nor the civil or commercial character of the contract, is taken into consideration in determining the application of this Convention.

Despite the absence of a unified approach in scientific literature regarding the interpretation of the term "place of business," an analysis of the authentic English text of the Convention leads to the conclusion that the term "place of business of a party" means the permanent place for conducting business operations. This may be recognized as the location of the main office of a legal entity, its representative office, or a branch.

According to scholars, the main place of business of a legal entity and the place of state registration should not be considered identical. In foreign judicial practice, the actual place of business activity is taken into account, rather than the state registration of the legal entity or its location specified in the constituent documents.

Branches and representative offices of commercial organizations located abroad may be recognized as the location of a place of business for the purposes of the Convention, provided that they are linked to a specific sales contract. A necessary condition for recognition as a place of business is that it must be established to conduct business operations over a sufficiently long period of time. Conducting activities related to a short-term exhibition cannot be considered the location of a place of business in that country. Some representatives in the working group for the creation of the draft Convention spoke in favor of including the term "permanent place of business" in its text. However, this proposal did not receive support.[2]

In Which Cases Does the Vienna Convention Not Apply?

The Convention does not apply to the sale of:

Goods purchased for personal, family, or household use, except in cases where the seller, at any time before or at the conclusion of the contract, did not know and ought not to have known that the goods were purchased for such use. To determine whether the intended use of the goods for personal, family, or household use was apparent, it is necessary to refer, in particular, to objective elements such as the nature of the goods, the quantity of the goods, and the delivery address. Case law has noted that the Convention does not impose an obligation on the seller to make inquiries about the intended use of the goods;[3]
By auction;
On execution or otherwise by authority of law;
Stocks, shares, investment securities, negotiable instruments, and money;
Ships, vessels, hovercraft, and aircraft;

Contracts for the supply of goods to be manufactured or produced are considered sales contracts unless the party ordering the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. The Convention also does not apply to contracts in which the obligations of the party supplying the goods consist mainly in the performance of labor or the provision of other services.

The Convention regulates only the conclusion of the sales contract and those rights and obligations of the seller and the buyer arising from such a contract. In particular, unless otherwise expressly provided in the Convention, it does not concern:

The validity of the contract itself or any of its provisions or of any usage;
The effects which the contract may have on the property (ownership) in the goods sold.

The Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person.

Also, issues of the statute of limitations are not included in the scope of the Convention's regulation. The applicable law regarding the statute of limitations must be determined based on the agreement of the parties on the applicable law[4] or conflict-of-laws rules (rules for determining the applicable law) in the absence of such an agreement.[5]

Thus, if the relevant international sales contract falls within the scope of the Vienna Convention, part of the relationship between the parties will be regulated exclusively by the provisions of the Vienna Convention (for example, the conditions and amount of compensation for damages), while another part (for example, the invalidity of the contract) will be regulated by the legislation of the country determined in accordance with conflict-of-laws rules.[6]

The parties may exclude the application of this Convention or, subject to Article 12, derogate from any of its provisions or vary its effect. Article 12 provides that any provision of Article 11, Article 29, or Part II of the Convention, which allows a contract of sale, its modification or termination by agreement, or any offer, acceptance, or any other indication of intention to be made in any form other than in writing, is inapplicable if at least one of the parties has its place of business in a Contracting State that has made a declaration to this effect at any time.[7] The parties may not derogate from this article or vary its effect.

Provision on the Application of the Vienna Convention in the Contract

The Convention explicitly establishes its optional character. The parties may completely exclude its application by choosing another body of law, in addition to the Convention itself, to regulate their contract. They may also exclude its application partially or limit or vary the effect of any of its provisions by adopting provisions in their contract that provide for solutions different from those provided in the Convention. Only one exception is provided — regarding compliance with the requirements for the form of the contract. Consequently, all provisions of the Convention (with the specified exception) are dispositive, i.e., they can be freely derogated from at the discretion of the parties. The purpose of this article, based on the priority of the contract over the Convention, is to provide the parties with the opportunity to decide for themselves issues related to the conclusion, performance of the contract, and liability for non-performance or improper performance of obligations, which most closely corresponds to the practice of international turnover.

If the parties have not indicated anything, their legal relations will be regulated on the basis of subsidiarily applicable law determined by the composition of the arbitration, or the system of law of which the Vienna Convention is an integral part (Russian law, Swedish law, etc.).

It should be noted that the provision on the law applicable to the contract must be expressly stated or clearly follow from the terms of the contract or the totality of the circumstances of the case. Vague or uncertain terms regarding the applicable law can create difficulties in the relationship between the parties during the performance of contractual obligations, as well as lead to difficulties in the consideration of disputes in court.

Interpretation of the Vienna Convention on International Sale of Goods

In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade. Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

Statements made by and other conduct of a party are to be interpreted according to that party's intent where the other party knew or could not have been unaware of what that intent was. Statements made by and other conduct of a party may be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in similar circumstances.

In determining the intent of a party or the understanding that a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case, including the negotiations, any practices which the parties have established between themselves, usages, and any subsequent conduct of the parties. The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. Unless otherwise agreed, the parties are considered to have implied the application to their contract or its formation of a usage of which they knew or ought to have known and which in international trade is widely known and regularly observed by parties to contracts of the type involved in the particular trade concerned.

Conclusion of a Contract Under the Vienna Convention on International Sale of Goods

Part 2 of the Convention on the Sale of Goods establishes rules concerning the conclusion of contracts for the international sale of goods. The temporal requirements regarding the application of these rules are set out in paragraph (a) of Article 100. According to the norms contained in Part 2, a contract is considered concluded when the acceptance of an offer becomes effective (Article 23). The first four articles of Part II (Articles 14–17) concern the offer, and the following five articles (Articles 18–22) concern the acceptance. The two final articles (Articles 23–24) are devoted to regulating issues concerning, respectively, the moment when the contract is considered concluded and the moment when a communication is considered "received" by the addressee.

It is not required that a contract of sale be concluded in or evidenced by writing or be subject to any other requirement as to form. It may be proved by any means, including witnesses. But, as mentioned earlier, a Contracting State may make a declaration that this provision of the Convention is not applicable.

The term "writing" also includes telegram and teletype communications.

A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.

A proposal addressed to indeterminate persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.

An offer becomes effective when it is received by the offeree. An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer.

Until a contract is concluded, an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. However, an offer cannot be revoked:

If it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable;
If it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.

An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.

A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance. An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror.

An oral offer must be accepted immediately unless the circumstances indicate otherwise. However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph.

A reply to an offer which purports to be an acceptance but contains additions, limitations, or other modifications is a rejection of the offer and constitutes a counter-offer. However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance. Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other, or the settlement of disputes are considered to alter the terms of the offer materially.

A period of time for acceptance fixed by the offeror in a telegram or a letter begins to run from the moment the telegram is handed in for dispatch or from the date shown on the letter or, if no such date is shown, from the date shown on the envelope. A period of time for acceptance fixed by the offeror by telephone, teletype, or other means of instantaneous communication begins to run from the moment that the offer reaches the offeree.

Official holidays or non-business days occurring during the period for acceptance are included in calculating the period. However, if a notice of acceptance cannot be delivered at the address of the offeror on the last day of the period because that day falls on an official holiday or a non-business day at the place of business of the offeror, the period is extended until the first business day which follows.

A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs the offeree or dispatches a notice to that effect. If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time, the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs the offeree that he considers his offer as having lapsed or dispatches a notice to that effect.

An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective. A contract is concluded at the moment when an acceptance of an offer becomes effective.

For the purposes of this Convention, an offer, declaration of acceptance, or any other indication of intention "reaches" the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence.

Termination of a Contract Under the Vienna Convention on International Sale of Goods

A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless 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 degree" of deprivation following from the caused "detriment" requires the presence of a certain character and gravity in the committed breach. The breach must negate or substantially devaluate the expectations of the aggrieved party regarding the contract, that is, be "so fundamental that the party would rather have refused to conclude the contract regardless of the variation in its terms permissible by the parties, if it had known that such a breach would be committed"; the breach must "concern the very essence of the contract," "lead to serious consequences for the economic goal pursued by the parties." "Substantiality" should be determined by the expectations of the aggrieved party in the form in which they were recorded in the contract, i.e., in an objective manner.[8]

A declaration of avoidance of the contract is effective only if made by notice to the other party. It should be noted that notices are critically important in the structure of the Convention's rules. The purpose of the notice requirements is to inform the other party and place it in a position where it will be able to make informed decisions about further actions and preparations regarding the subject of the notice (for example, that the goods are of poor quality, about the replacement of the goods, or about the avoidance of the contract). The contract is not terminated automatically after a breach — the aggrieved party must exercise its will and choose a legal remedy, informing the other party of such a choice, which will provide certainty about the date from which the contract will be considered terminated.[9]

The party terminating the contract must make this clear enough to the other party. A mere assertion of defects in the goods or even their return to the seller without comment will not be sufficient, as this leaves uncertainty regarding the chosen legal remedy—what exactly the seller should do with the returned goods — replace, repair, or return the money?

A delay or error in the transmission of a communication or its failure to arrive at its destination does not deprive that party of the right to rely on the communication.

If one of the parties is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention.

A contract may be modified or terminated by the mere agreement of the parties. A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct.

Obligations of the Parties Under the Vienna Convention on International Sale of Goods

For cases where a contract for the international sale of goods is concluded, Part 3 of the Convention on International Sale of Goods contains norms that establish the substantive obligations of the parties created by this contract. Part 3 of the Convention consists of Chapter 1 "General Provisions" (Articles 25–29); Chapter 2 "Obligations of the Seller" (Articles 30–52); Chapter 3 "Obligations of the Buyer" (Articles 53–65); Chapter 4 "Passing of Risk" (Articles 66–70); and Chapter 5 "Provisions Common to the Obligations of the Seller and the Buyer" (Articles 71–88). Although the Convention does not expressly provide for general rules regarding the burden of proof, it is considered that the Convention (rather than national legislation) regulates the question of who bears the burden of proof for the elements of the provisions in Part 3: it is generally accepted that the Convention includes general principles according to which the party claiming rights on the basis of a particular rule bears the burden of proving that the conditions of this rule are met, and the other party must prove facts that exclude the application of this rule or prevent it.[10]

The seller must deliver the goods, hand over any documents relating to them, and transfer the property (ownership) in the goods, as required by the contract and this Convention.

If the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists:

If the contract of sale involves carriage of the goods—in handing the goods over to the first carrier for transmission to the buyer;
If the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place — in placing the goods at the buyer's disposal at that place;
In other cases — in placing the goods at the buyer's disposal at the place where the seller had his place of business at the time of the conclusion of the contract.

If the seller hands the goods over to a carrier and if the goods are not clearly identified to the contract by markings on the goods, by shipping documents or otherwise, the seller must give the buyer notice of the consignment specifying the goods.

If the seller is bound to arrange for carriage of the goods, he must make such contracts as are necessary for carriage to the place fixed by means of transportation appropriate in the circumstances and according to the usual terms for such transportation.

If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer's request, provide him with all available information necessary to enable him to effect such insurance.

The seller must deliver the goods:

If a date is fixed by or determinable from the contract — on that date;
If a period of time is fixed by or determinable from the contract — at any time within that period unless circumstances indicate that the buyer is to choose a date;
In any other case — within a reasonable time after the conclusion of the contract.

If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. If the seller has handed over documents before that time, he may, up to that time, cure any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. The buyer, however, retains any right to claim damages.

The seller must deliver goods which are of the quantity, quality, and description required by the contract and which are contained or packaged in the manner required by the contract.

Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:

Are unfit for the purposes for which goods of the same description would ordinarily be used;
Are unfit for any particular purpose expressly or implicitly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement;
Possess the qualities of goods which the seller has held out to the buyer as a sample or model;
Are not contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.

The seller is not liable for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.

The seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time. The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics.

If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. The buyer, however, retains any right to claim damages.

The buyer must examine the goods or cause them to be examined within as short a period as is practicable in the circumstances. If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination. If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination.

The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee.

The seller is not entitled to rely on the provisions regarding the buyer's failure to examine the goods if 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.

The seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim.

The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property:

Under the law of the state where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that state; or
In any other case, under the law of the state where the buyer has his place of business.

The specified obligation of the seller does not extend to cases where:

At the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or
The right or claim results from the seller's compliance with technical drawings, designs, formulae, or other such specifications furnished by the buyer.

The buyer loses the right to rely on the seller's obligation to deliver goods free from any right or claim of a third party if he does not give notice to the seller specifying the nature of the right or claim of the third party within a reasonable time after he has become aware or ought to have become aware of the right or claim. The seller is not entitled to rely on such an obligation if he knew of the right or claim of the third party and the nature of it. Nevertheless, the buyer may reduce the price or claim damages, except for lost profits, if he has a reasonable excuse for his failure to give the required notice.

The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.

The buyer's obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made.

Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price ordinarily charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned.

If the price is fixed according to the weight of the goods, in case of doubt it is to be determined by the net weight.

If the buyer is not bound to pay the price at any other particular place, he must pay it to the seller:

At the seller's place of business;
If the payment is to be made against the handing over of the goods or of documents — at the place where the handing over takes place.

The seller must bear any increase in the expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract.

If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents.

If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price.

The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity.

The buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller.

The buyer's obligation to take delivery consists:

In doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery;
In taking over the goods.

Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.

If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk. Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer, or otherwise.

The buyer assumes the risk in respect of goods sold while in transit from the time of the handing over of the goods to the carrier who issued the documents embodying the contract of carriage. However, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller.

The risk also passes to the buyer when he takes over the goods or, if he does not do so in due time, from the moment when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery. If, however, the buyer is bound to take over the goods at a place other than a place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place. If the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract.

If the seller has committed a fundamental breach of contract, the moment of passage of the risk of loss or damage to the goods does not affect the remedies available to the buyer on account of such breach.

A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of:

A serious deficiency in his ability to perform or in his creditworthiness; or
His conduct in preparing to perform or in performing the contract.

If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them.

A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance.

If prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided. If time allows, the party intending to declare the contract avoided must give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance.

If, in the case of a contract for delivery of goods by instalments, the failure of one party to perform any of his obligations in respect of any instalment constitutes a fundamental breach of contract with respect to that instalment, the other party may declare the contract avoided with respect to that instalment. If one party's failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude that a fundamental breach of contract will occur with respect to future instalments, he may declare the contract avoided for the future, provided that he does so within a reasonable time. A buyer who declares the contract avoided in respect of any delivery may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries if, by reason of their interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract.

Liability of the Parties Under the Vienna Convention on International Sale of Goods

The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement. If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either at the same time as notice given under Article 39 or within a reasonable time thereafter. If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either at the same time as notice given under Article 39 or within a reasonable time thereafter.

The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations. Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. The buyer is not, however, deprived thereby of any right he may have to claim damages for delay in performance.

The seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. The buyer, however, retains any right to claim damages. If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller. A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision. A request or notice by the seller under this article is not effective unless received by the buyer.

The buyer may declare the contract avoided in the following cases:

If the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract;
In case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer or declares that he will not deliver within the period so fixed.

However, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so:

In respect of late delivery — within a reasonable time after he has become aware that delivery has been rendered;
In respect of any breach other than late delivery — within a reasonable time;
After he knew or ought to have known of the breach;
After the expiration of any additional period of time fixed by the buyer or after the seller has declared that he will not perform his obligations within such an additional period;
After the expiration of any additional period of time indicated by the seller or after the buyer has declared that he will not accept performance.

If the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations or if the buyer refuses to accept performance by the seller, the buyer may not reduce the price.

If the seller delivers only a part of the goods or if only a part of the goods delivered is in conformity with the contract, the buyer's rights apply in respect of the part which is missing or which does not conform. The buyer may declare the contract avoided in its entirety only if the failure to make delivery completely or in conformity with the contract amounts to a fundamental breach of the contract.

If the seller delivers the goods before the date fixed, the buyer may take delivery or refuse to take delivery. If the seller delivers a quantity of goods greater than that provided for in the contract, the buyer may take delivery or refuse to take delivery of the excess quantity. If the buyer takes delivery of all or part of the excess quantity, he must pay for it at the contract rate.

In case of non-performance by a party of its obligations, the other party may claim damages. This right belongs to both the buyer and the seller. It is worth noting that the exercise by the buyer of his right to other remedies does not deprive him of any right he may have to claim damages. No period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract.

Damages for breach of contract by one party consist of a sum equal to the loss, including lost profits, suffered by the other party as a consequence of the breach. Such 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, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.

The principle of compensation for damages aims to place the aggrieved party in the same position in which it would have been if the contract had been properly performed.[11] Thus, the Convention establishes the following conditions for liability:

There must be a breach of the contract by the seller or the buyer; there must be harm on the part of the buyer or the seller, respectively;
As well as the presence of a causal link between the breach of the contract by one party and the harm suffered by the other party.

However, there is a way to limit damages based on the criterion of their foreseeability. It contains both an objective and a subjective element: a party is liable not only for the damage caused that it actually foresaw but also for that which it ought to have foreseen. Certain types of damages are recognized as obviously foreseeable:

The price of a substitute transaction (concluded in place of the one that was not performed) and the loss of profit on resale;
Additional costs for transportation, storage, and insurance;
Loss of customers by the buyer due to a defect in the goods.

Damages suffered by a party from the fall of a currency during a delay in payment by the other party are predominantly recognized as unforeseeable.[12]

If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages.

If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance. The current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods.

A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including lost profits, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.

If the buyer fails to perform his obligations under the contract, the seller may require the buyer to pay the price, take delivery, or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.

The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations. Unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. The seller is not, however, deprived thereby of any right he may have to claim damages for delay in performance.

The seller may declare the contract avoided:

If the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract;
If the buyer does not perform his obligation to pay the price or take delivery of the goods within the additional period of time fixed by the seller, or if he declares that he will not do so within the period so fixed.

However, in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so:

In respect of late performance by the buyer — before the seller has become aware that performance has been rendered;
In respect of any breach other than late performance — within a reasonable time;
After he knew or ought to have known of the breach;
After the expiration of any additional period of time fixed by the seller or after the buyer has declared that he will not perform his obligations within such an additional period.

If under the contract the buyer is to specify the form, measurement or other features of the goods and he fails to make such specification either on the date agreed upon or within a reasonable time after receipt of a request from the seller, the seller may, without prejudice to any other rights he may have, make the specification himself in accordance with the requirements of the buyer that may be known to the seller. If the seller makes the specification himself, he must inform the buyer of the details thereof and must fix a reasonable time within which the buyer may make a different specification. If, after receipt of such a communication, the buyer fails to do so within the time so fixed, the specification made by the seller is binding.

The exercise by the seller of his right to other remedies does not deprive him of any right he may have to claim damages. No period of grace may be granted to the buyer by a court or arbitral tribunal when the seller resorts to a remedy for breach of contract.

If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages.

A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences. If the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if:

He is exempt under the preceding paragraph;
The person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him.

The exemption provided by this article has effect for the period during which the impediment exists.

The party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt.

A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission.

Avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract.

A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently.

The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them, except in the following cases:

If the impossibility of making restitution of the goods or of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission;
If the goods or part of the goods have perished or deteriorated as a result of the examination;
If the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity.

A buyer who has lost the right to declare the contract avoided or to require the seller to deliver substitute goods retains all other remedies.

If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid.

The buyer must account to the seller for all benefits which he has derived from the goods or part of them:

If he must make restitution of the goods or part of them;
If it is impossible for him to make restitution of all or part of the goods or to make restitution of all or part of the goods substantially in the condition in which he received them, but he has nevertheless declared the contract avoided or required the seller to deliver substitute goods.

If the buyer is in delay in taking delivery or, where payment of the price and delivery of the goods are to be made concurrently, if the buyer fails to pay the price, and the seller is either in possession of the goods or otherwise able to control their disposition, the seller must take such steps as are reasonable in the circumstances to preserve them. He is entitled to retain them until he has been reimbursed his reasonable expenses by the buyer.

If the buyer has received the goods and intends to exercise any right to reject them, he must take such steps as are reasonable in the circumstances to preserve them. He is entitled to retain them until he has been reimbursed his reasonable expenses by the seller.

If goods dispatched to the buyer have been placed at his disposal at their destination and he exercises the right to reject them, he must take possession of them on behalf of the seller, provided that this can be done without payment of the price and without unreasonable inconvenience or unreasonable expense. This provision does not apply if the seller or a person authorized to take charge of the goods on his behalf is present at the destination.

A party who is bound to take steps to preserve the goods may deposit them in a warehouse of a third person at the expense of the other party provided that the expense incurred is not unreasonable.

A party who is bound to preserve the goods may sell them by any appropriate means if there has been an unreasonable delay by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation, provided that reasonable notice of the intention to sell has been given to the other party.

If the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, a party who is bound to preserve the goods must take reasonable measures to sell them. To the extent possible he must give notice to the other party of his intention to sell.

A party selling the goods has the right to retain from the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them. He must account to the other party for the balance.

The main task of the Convention is to create a unified legal space for participants in the international trade of goods. The value of this international treaty consists, in particular, in the fact that it became the first treaty in human history that unified substantive norms in the field of trade and at the same time covered such a large number of countries.

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References

Gizetdinova I.Yu., Influence of the Vienna Convention on Contracts for the International Sale of Goods on Russian Civil Law, Legal State: Theory and Practice, 2016, No. 2(44).
Glinshchikova T.V., Stepkina K.V., Some Aspects of the Scope of the 1980 UN Convention on Contracts for the International Sale of Goods, Journal of Humanitarian, Social-Economic, and Social Sciences, 2020.
UNCITRAL Digest of Case Law on the United Nations Convention on Contracts for the International Sale of Goods.
Review of Judicial Practice of the Supreme Court of the Russian Federation No. 2 (2021).
Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated July 9, 2013, No. 158, "Review of Practice for Consideration of Cases with the Participation of Foreign Persons by Arbitration Courts."
Resolution of the Plenum of the Supreme Court of the Russian Federation dated July 9, 2019, No. 24, "On Application of Rules of Private International Law by Courts of the Russian Federation."
Argentina, Armenia, Belarus, Chile, North Korea, Paraguay, Russia, Ukraine, Vietnam.
Valyavsky S.A., Termination of the Contract by the Buyer Under the UN Convention on Contracts for the International Sale of Goods, Journal of Juridical Science, 2021, No. 1.
UNCITRAL Digest of Case Law on the United Nations Convention on Contracts for the International Sale of Goods.
Khamizova D.S., On the Question of the Criterion of Foreseeability of Damages Under the 1980 Vienna Convention on Contracts for the International Sale of Goods, Science Time, 2015.