I. INTRODUCTION
A uniform law convention does not enjoy the privilege of a sheltered upbringing. It is susceptible to the charge of uncertainty, so from its inception the pressure is on to manufacture legal growth and development in the cause of clarity and critical mass. A widespread acceptance of the convention by States assists in building up this critical mass, but the highly variable quality, type and cultural approach of different national courts and tribunals militate against clarity and consistency. That said, some degree of inconsistency in the early case law may not just be unavoidable but also desirable. A vigorous body of case law encourages the testing of ideas—argued law is tough law—and guarantees the healthy long-term future of the convention. Certain features of a convention, especially the innovative ones, may have greater need than others to be probed in this way. This arguably is the case for the doctrine of fundamental breach in the United Nations Convention on the International Sale of Goods (the CISG) 1980,Footnote 1 whose particular vulnerability (also its opportunity) is its general lack of pedigree in national systems of law.Footnote 2 The purpose of this article is to provide a critical analysis of the doctrine of fundamental breach and of the way it has developed since the CISG came into force in 1988. In an incidental way, a review of the operation of fundamental breach should illuminate domestic legal provisions allowing for avoidance in the event of a breach of contract.
The CISG provides two routes to the avoidanceFootnote 3 of a contract of sale for non-performance. The first route is for the complainant to establish a fundamental breach of contract and the second is for the complainant to fix an additional time of reasonable length for the other party to perform, in default of which the complainant may avoid the contract.Footnote 4 These routes are alternative routes, though, despite their separation, there is at times an interplay between them that calls for attention.Footnote 5 As stated above, this article is concerned with the first of these routes to avoidance. Before the meaning of fundamental breach is explored, however, it is first necessary to determine the meaning and effects of contractual avoidance so as to highlight the issues that are at stake in making avoidance available as a remedy for non-performance of the contract.
II. AVOIDANCE
Under article 81 of the CISG, the primary consequence of avoidance is that it releases both parties, and not just the party exercising the right of avoidance, from their contractual obligations.Footnote 6 The non-performing party, however, unless exempted under article 79, remains bound to pay damages in accordance with article 74 and related provisions. The CISG does not use the language of primary (performance) and secondary (damages) obligations, so one possible inference from article 81 is that liability in damages is not regarded as an obligation arising under the contractFootnote 7 but rather arising by operation of law. For present purposes, however, little turns upon this. It is also interesting to note that the CISG makes no dogmatic statement about whether a contract that is avoided ceases to exist prospectively, or else is expunged with retrospective effect.Footnote 8 Since the CISG spells out the consequences of avoidance, and since the CISG does not explicitly treat liability in damages as an obligation arising under and created by the contract, the issue of retrospective or prospective avoidance need not be considered further in this article.Footnote 9
The effects of avoidance under the CISG, apart from the release of the parties from their contractual obligations, are complex, and complexity breeds expense. This is due in part to the length of time that might elapse before avoidance takes place,Footnote 10 and in part to the unwinding of performance that is inherently more expensive in international than in national cases.Footnote 11 Apart from a return of the price and the goods, where payment and delivery have taken place, the seller who has received payment must also pay interest on the price to the buyer, without the buyer having to prove that the seller has derived any financial gain from the price.Footnote 12 In contrast, a buyer who has received some or all of the goods must account only for such benefits from those goods as in fact have been derived from them.Footnote 13 The quantification of such benefits is far from being a straightforward matter. Intricate issues of proof and timing have to be addressed in the case of a fully executed contract where avoidance takes place.Footnote 14 Moreover, the CISG leaves unstated the place and time of the performance that seller and buyer must carry out, whether in relation to the goods and the price or the benefits flowing from the goods or the interest attributed to the price, in order to effect the mutual restitution mandated as the consequence of avoidance.Footnote 15 The process of mutual restitution, even before benefit and interest are taken into account, amounts to a type of sale in reverse of which only the barest details are provided in the CISG itself. Apart from the expense of reversing the sale, possibly across national frontiers, there are certain transactional costs in negotiating the incidents of that reverse sale against an undefined legal default position.
III. JUSTIFICATION FOR AVOIDANCE
It is, of course, not sufficient simply to assert that the inherent justification for avoidance is the fundamental character of the breach. An assertion is not the same thing as a reason, and even a fundamental word like ‘fundamental’ does not repel reason. Moreover, the inherent uncertainty of what constitutes a fundamental breach deprives of conviction any such apodictic assertion. The doctrine of ipso facto avoidance, a much-criticized feature of the Uniform Law on the International Sale of Goods (ULIS),Footnote 16 provided for the automatic avoidance of the contract unless the aggrieved party informed the party in breach of his intention to keep the contract on foot. This doctrine suggests a qualitative difference between fundamental breach and non-fundamental breach. It has, however, no part to play in the CISG.Footnote 17 Moreover, in more general terms, the binding character of contractual obligation compels the decision of one contracting party to disavow the contract to be justified. Once it is accepted that contractual release is not available in all cases of breach, certain questions present themselves. Should a contracting party ever be allowed to avoid the contract whilst there exists an alternative remedy in damages or price reduction? In what circumstances may a contracting party who has committed a breach of contract rightfully expect the other to perform? How, if at all, are the material interests of the two contracting parties to be balanced?
A feature of the case law on fundamental breach and avoidance, and indeed of common law cases on termination of contract for breach with which I am familiar, is that very little is said about the policies that lie behind empowering one party to avoid or terminate a contract for the other's non-performance or breach.Footnote 18 Nor, can it be said, is there much in the academic literature that throws light on the matter.Footnote 19 In comparison with the volume of writing on damages, the volume that deals with avoidance is slim. Even in the common law tradition, with its emphasis on remedies, there is some reluctance to recognize that avoidance is a remedy,Footnote 20 despite its interplay with an accompanying award of damages. The existence of a right to avoid is treated in the case law and literature as a matter of whether, not why. One aspect of the matter that makes the rationalization of avoidance so difficult is that many of the policy arguments that might be called into play could be used indifferently to support or oppose avoidance rights. To assert the binding force of contract in order to limit avoidance invites the counter-assertion that the other party, in failing to perform the contract, is not abiding by that same principle. Can a party who does not perform in accordance with the contract insist that the other do so? If there is any force in this question, practical wisdom would have to confine its scope to serious breaches of contract, or else the binding force of contract would be weakened by permitting avoidance for all and every trivial breach. In cases where substantial investment has been made in a contract, as will most probably be the case with long-term contracts, it is arguable that avoidance should be available only in extreme cases. But equally, it might be said, it is futile to imprison two parties in a long-term, loveless contract where there is an absence of trust or the prospect of mounting, incremental losses. The prevention of economic waste—and the CISG might fairly be said to espouse this as a general principle—is a general dampener on avoidance but, in some cases of long-term contracts, might justify early avoidance if there is a real prospect of losses increasing over the term of the contract. Taking the example of an under-performing machine with a long industrial life, it may be less expensive for the seller to repossess and scrap the machine than to have to pay damages for the buyer's losses stretching into the future and flowing from that underperformance.Footnote 21 Where there is a ready market for goods, so often the case with commodities, it is easier to justify avoidance than it is in the case of bespoke goods. Yet, in so many commodities cases, the buyer is as well placed as the seller in disposing of goods that the buyer no longer wants as a result of the breach. It is, moreover, common for contracting parties in these markets to seize upon the right of avoidance when a movement in the market price makes this an expedient thing to do.Footnote 22 To that extent, it may well be argued that providing an easy way out of the contract frustrates the spirit of the original agreement, in forward delivery contracts, to allocate market risk. If any lesson can be drawn from these conflicting considerations, so far as they can be factored into the fundamental breach test in article 25, which is not a foregone conclusion, it is that the availability of the right of avoidance will often be hard to predict. Since avoidance is a self-help remedy, not sanctioned in advance by court intervention, the danger of uncertainty is that a contracting party who purports to avoid when lacking the right to do so will either commit an anticipatory refusal to perform under article 72, or an actual refusal that, in its totality of resistance to performance, will necessarily be a fundamental breach itself under article 25.Footnote 23 The very uncertainty of the right to avoid a contract for fundamental breach then becomes a powerful disincentive to avoidance.
IV. FUNDAMENTAL BREACH
The test for a fundamental breach is laid down by article 25 as follows:
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 origins of fundamental breach have at times been attributed to English law.Footnote 24 The expression has indeed been employed in English law, where it has a rather chequered history. Fundamental breach emerged in the 1950s as a judicial device for controlling exclusion and related clauses,Footnote 25 the idea being that no words of exclusion or limitation of liability would be effective to protect from liability one who committed a fundamental breach of contract The definition of fundamental breach for this purpose was never very precise and, as a device for the control of exclusion clauses, fundamental breach was abandoned at the end of the 1970s, after legislationFootnote 26 had been introduced to deal with the excesses presented by clauses that were drawn in immoderately wide terms.Footnote 27 Fundamental breach has also been used, in a way that is not dissimilar to its use in article 25, to describe the type of serious breach of contract that permits termination in circumstances where the contractual term itself is not judged sufficiently important for any breach of that term to permit termination. This usage is widespread in modern Canadian law,Footnote 28 but does not feature in English law, where other expressions, such as a breach that goes to the root of the contract or a breach that deprives the claimant of substantially the whole of the benefit for which he bargained,Footnote 29 enjoy a wider currency. Given that the origins of article 25 precede the emergence of fundamental breach in English law to control exclusion clauses,Footnote 30 and given also the expression is not used to describe breaches of contract giving rise to termination rights, it hardly seems accurate to lay the responsibility for article 25 at the door of English law, just because the expression is known in English law.Footnote 31 Besides, English law is much more receptive to avoidance than the CISG;Footnote 32 this divergence in the availability of avoidance serves to deny any close kinship between English law and the CISG in the matter of fundamental breach. Furthermore, given that fundamental breach in English law, in the years when it flourished, primarily served a dissimilar purpose to the one served by article 25, there is all the more reason not to look at English law to determine the meaning of fundamental breach in article 25. And even if article 25 used language very similar to the language of English law, and tracked the same purpose as fundamental breach in English law, the imperatives of uniformity, and an international interpretation of the CISG in article 7(1),Footnote 33 demand that the domestic antecedents of any provision or legal notion be abandoned.
V. ELEMENTS OF FUNDAMENTAL BREACH
Since avoidance for a fundamental breach is a self-help remedy, there is a particularly compelling case for certainty so that the complainant might know when it may be safely exercised. Article 25 may be criticized for its vagueness and the lack of guidance it gives on the meaning and scope of its internal features. It is one of the CISG's characteristics that it eschews the definition of essential expressions, such as the meaning of ‘sale’ and ‘goods’. Even if one accepts this degree of forbearance to be somewhat extreme, there is no substantial case for defining in the CISG every term or expression that is used. Adopting an intermediate approach, the only two features of article 25 that might plausibly call for definition, or at least further elaboration, are detriment and the substantial deprivation of contractual expectations. These will be discussed below, as also will other aspects of article 25. The distinction between a refusal to perform at allFootnote 34 and defective performance is not referred to in article 25 but cannot be ignored. In addition, much has been made of the combination of subjective and objective elements into the definition of a fundamental breachFootnote 35—based on the actual foresight of the contract-breaker (subjective) and the hypothetical foresight of the reasonable person (objective)—but this is not a matter of definition. Nor too is the question of when foresight is taken into account, whether at the date of the contract or of the breach.Footnote 36
A. Detriment
The existence of a fundamental breach depends in part on whether the breach ‘results in [sufficient] detriment’ for the injured party to be entitled to avoid the contract. The meaning of detriment, a somewhat colourless word lacking in legal pedigree, has caused some small tremors,Footnote 37 but in an effects-based test like the one in article 25 it ought uncontroversially to include financial or physical harm measured against a party's contractual expectations. The CISG, as a code of commercial sales, plainly promotes financial expectations, but the protection it also provides for property damageFootnote 38 firmly makes the case for giving ‘detriment’ a broad meaning embracing at least all types of loss or damage for which damages might be recovered under article 74.Footnote 39 Detriment, which is not referred to elsewhere in the CISG, ought not to be confined to the loss of the economic benefit bargained for by the contract.Footnote 40 An interesting question, closely connected to the question whether there can be a fundamental breach of the contract when it is an ancillary contractual obligation that is breached, is whether detriment might extend to intangible or semi-intangible interests such as reputation,Footnote 41 inconvenience and disappointment, regardless of whether these sound in damages under article 74. The confinement of the CISG to commercial contracts reduces to a degree the need to define the outer limits of detriment (can a company be disappointed?) but does not obviate it entirely. Companies still have business reputations to protect and business reputations are ultimately measured in financial terms. There is no reason at all why breaches of ancillary obligations, if sufficiently serious, may not be fundamental.Footnote 42
In principle, detriment ought to be interpreted so as to encompass the complainant's contractual expectations broadly understood. The further these expectations stray from the central ground of property damage and financial loss, the more the requirement of foreseeability will play a part in setting limits on the availability of avoidance. In addition, it is those expectations to which a complainant is entitled ‘under the contract’ that are weighed in the balance in article 25.Footnote 43 Henry Ford reportedly stipulated that wooden boxes of a certain kind should be used as packaging by his parts suppliers.Footnote 44 His purpose, unknown to the suppliers, was to re-use the preformed wood in the bodies of his model T cars. Ford's expectation that the wood might be used in this way could not fairly be said to be an expectation to which he was entitled as a matter of law under the contract. His suppliers did not undertake that the wood could be used for that purpose. It was at best a factual expectation. This conclusion does not, of course, deny that he was contractually entitled to have the parts shipped to him in the wooden boxes stipulated in the contract and that, in the event of breach, he would be entitled to damages for whatever foreseeable loss he might be able to prove, which might be little or nothing.Footnote 45
Suppose, however, that Ford's purpose was known to those parts suppliers and that the contract gave them no added reward for supplying wood that Ford could use in his intended way. This ought not to prevent it from being a legal expectation that could be taken into account under article 25, but there should be some reluctance to find a fundamental breach in respect of a matter as collateral as this. If the breach were fundamental, this would give rise to awkward questions. Would Ford be entitled to sever an instalment contract with (possibly) years to run? Would he be entitled to reject the conforming parts that were actually supplied in the non-conforming boxes?Footnote 46 Could he demand some sort of contractual restitution in respect of the boxes,Footnote 47 after rejecting the ones that he has received, when the contract assigned no portion of the price to packaging?Footnote 48
B. Substantial Deprivation of Expectation
A more difficult issue concerns the substantial deprivation of contractual expectations. Although some of the case law, for reasons to be explained, takes a narrow view of what constitutes a substantial deprivation, it is always a salutary experience actually to read the text of any legislative provision that is to be applied. It should not be assumed for a moment that a substantial deprivation of contractual expectations is the same thing as a deprivation of the substance, or of substantially the whole, of one's contractual expectations. The test for a dischargingFootnote 49 breach used in one of the leading English cases is that it deprive the complainant of ‘substantially the whole benefit’ promised by the contract.Footnote 50 That is a very difficult test indeed to satisfy, systemically workable in English law only because so many important contractual terms are promissory conditions,Footnote 51 whose every breach gives rise to a right to terminate the contract. It is only in residual cases that the whole benefit test comes into play. The substantial deprivation of benefit provided for in article 25 is semantically a very different thing and, if the formula be taken at face value, is far from being fundamental at all.Footnote 52 The word ‘substantial’ is also used in article 3(1),Footnote 53 where its meaning is far removed from the meaning that certain courts and writers have assigned to ‘substantial’ in article 25.Footnote 54 Moreover, article 25 is not coupled with an alternative, more broadly available, ground of avoidance that supports a stringent reading of article 25 so as to confine avoidance to extraordinary cases.Footnote 55
Turning to the decided cases, there are at least two major (and similar) themes that have emerged from the case law deserving of particular consideration, if only because there is nothing in the text of article 25 or the remainder of the CISG to justify them. The first of these is that a buyer who can make use of the goods, even if it is not the use for which the buyer purchased the goods, ought to retain the goods and claim instead a price reduction or damages or both.Footnote 56 Now, it is quite possible that, when goods have been shipped across national frontiers, the cost of sending them back to the seller may be prohibitive.Footnote 57 But the seller may have local agents for disposing of unwanted goods and the buyer receiving non-conforming goods should not be put in a position equivalent to that of an unpaid agent just because in some way or other he might be able to dispose of or make some use of the goods. To say that ‘[a]s long as the goods are not totally useless to the buyer, he should be restricted to claims for damages and the right of price reduction’Footnote 58 is to set the bar far too high and to pay no regard to the wording of article 25. It may be particularly harsh on a buyer who has not paid and simply wishes to walk away from the contract, who is now to be told that he will have to keep the goods and so, at some considerable cost and with unreliable prospects of recovering damages, sue a distant and uncooperative seller. Nevertheless, in defence of this view, one should recognize the difficulty of applying a quantitative test. At what point does serious become very serious or fundamental? It is almost impossible to present a principled case for stopping at an intermediate point on a graduated scale. The difficulty here is largely embedded in the very concept of fundamental breach and ensures unpredictability in the availability of avoidance.
The second major theme is that avoidance for fundamental breach is a sort of ultima ratio or last resort, available if no other remedial expedient is appropriate.Footnote 59 This approach represents pure judicial creativity unsupported by the text of the CISG. Even where fundamental breach is interpreted restrictively, the highest Swiss court has stopped short of this point by holding that the avoiding buyer does not have to show an absolute loss of all of its ‘objective interests’.Footnote 60
Apart from these themes, there is a significant body of case law stating that fundamental breach should be defined restrictively.Footnote 61 Since the case law is so fact-specific, as necessarily it must be given the test laid down in article 25, there is little to be gained by listing the circumstances in which a breach has been held in the case law to be fundamental. Nor can the cases sensibly be clustered so as to gain a sense of the gravity of breach occupied by the median cases.Footnote 62 Because of the myriad types of contract and circumstances in which they might be breached, judicial decisions cannot be plotted on a graph, with outriders eliminated so as to leave a quantified minimum of prejudice constituting fundamental breach. The conclusion that a breach is fundamental is a matter of judicial discretion in which particular factors may or may not play a prominent part.Footnote 63 The fact that a defect in the goods cannot be cured will not be sufficient for a finding of fundamental breach,Footnote 64 but if that defect poses a health risk—and European courts are particularly sensitive to this factorFootnote 65—a court is likely to conclude that a fundamental breach has occurred.Footnote 66 And if the defect can be cured, this has been said to be a ‘decisive’ factor in the conclusion that a breach is not fundamental.Footnote 67 All told, it is a brave lawyer who would ever be confident when advising a buyer client to avoid the contract for fundamental breach. If the advice to do so is given only in the most serious cases, a diet of only serious cases coming before courts may persuade them to take a restrictive line on fundamental breach. Stringency in the application of the test therefore becomes self-reinforcing.
C. Foresight
Foresight was placed at the heart of the fundamental breach rule in ULIS. According to article 10 of ULIS:
For the purposes of the present Law, a breach of contract shall be regarded as fundamental wherever the party in breach knew, or ought to have known, at the time of the conclusion of the contract, that a reasonable person in the same situation as the other party would not have entered into the contract if he had foreseen the breach and its effects.
Two striking features of this test call for particular attention. First, the reference to entry into the contract is more appropriate to the case where a statement is made by one party to the other at or around the time of the conclusion on the contract, which has an inducing effect on the other party. Moreover, if the test is applied in a straightforward manner, it ought to be recognized that many reasonable people would not have contracted at all if they had foreseen harm or prejudice falling short of the standard of seriousness associated with fundamental breach. Why should anyone buy from A as opposed to B when foreseeing that A will commit a breach that is more serious than just a trivial breach? That said, this version of the fundamental breach test, rather than the present one in article 25 of the CISG, would better accommodate the concerns of the commodities markets in respect of time and documentary breaches.Footnote 68 Secondly, the foresight test came in for much justified criticism in that it called for double foresight. In the case of a breach by the seller, S, for example, then S should have had to foresee that the buyer, B, had he foreseen the breach to be committed by S, would not have entered into the contract. The difficulty of any court applying that test is exceeded only by the difficulty of a lawyer having to explain it to a client.
Foresight was simplified in article 25 of the CISG so that the breaching party or his platonic reasonable self did not hypothetically have to read the mind of the other party but simply had to foresee the substantial detriment that a breach of contract would cause the other party. Like its predecessor, however, article 25 does not state when the breaching party's actual or imputed foresight should occur. Moreover, it is not clear what purpose is served by foresight. Indeed, according to one view, the purpose of foresight changed during the drafting process, from indicating the significance of individual obligations to giving the party in breach a chance to exonerate himself.Footnote 69 Foresight can work both ways: its absence can protect from avoidance the party who did not foresee and its presence can subject to avoidance the party who did foresee. It is the time when the foresight test applies that determines whether it expands or abridges avoidance rights.Footnote 70
With regard to liability in damages, article 74 makes it clear that foresight applies at the date of the conclusion of the contract. Although the CISG is silent in rationalising matters of this kind, this point of temporal reference makes most sense if one accepts that liability in damages is an integral part of the bargain struck between the parties. Without embracing notions of efficient breach, or accepting the notion that a contracting party is given an option either to perform or to pay damages, the role of foresight can be defended for the part it plays in calculating the weight of a contracting party's obligations. A contracting party who foresees the extent of his liability in damages should, as a rational person, either charge more if the other party is more vulnerable than other customers might be, or else exclude or limit his liability in damages. This approach balances the relationship of foresight and obligation.
When it comes to avoidance for fundamental breach, it is not quite so obvious that foresight has a part to play at all. Nevertheless, though avoidance is not the same thing as damages, the act of avoidance by one party may have an effect on the other party's damages exposure. This is because a contracting party may suffer a loss as a result of the absence of future performance by the breaching party, such future non-performance occurring as a result of the avoidance of the contract rather than the antecedent breach.Footnote 71 The loss, therefore, may in more than a trivial sense be due to a complainant's own decision to avoid the contract and not to the other party's breach. There is nothing in the CISG to indicate that damages are limited to losses arising from the non-performance preceding avoidance, and indeed articles 75–76 point clearly to liability in damages embracing losses that flow from the avoidance of the contract itself.Footnote 72 Foresight effects a balancing of the interests of the two contracting parties, but, since liability to pay substantial consequential damagesFootnote 73 is unlikely to be in play as a result of the avoidance of a contract, the interests of the party not in breach should outweigh the interests of the breaching party in the matter of avoidance or contractual continuance. This undermines the case for foresight but, since foresight is plainly a part of article 25, its relevance cannot now be challenged.
The role of foresight has been explained thus by Honnold: ‘[T]he foreseeability principle is designed to give [the breaching party] an opportunity to give special attention to minor details of performance the importance of which he would not otherwise have anticipated.’Footnote 74 It is not entirely clear what this means. The author's view follows immediately from an assertion that information, received too late to affect performance, should not be considered for the purpose of foresight. This of itself should not be a contentious matter, but it hardly seems relevant to the notion that foresight is concerned with minor details of performance. The disclosure of a particular vulnerability of the party seeking performance would appear to be a better explanation of the foresight requirement, though more is required to justify why the breaching party should be informed of this. Whatever the justification for foresight, it has to be linked to the reasons why, in some circumstances, a contracting party is entitled to avoid a contract after the other's breach so that no further performance of the seller's and the buyer's duties is thereafter permissible. As stated above, these policies have not been coherently expressed. To the extent that there has to be substantial detriment if the contract is to be avoided, which is a demanding test, fundamental breach expresses the simple justice of liberating a party from further contractual obligation who has suffered serious harm as a result of the other's breach of contract. It therefore seems decidedly odd to disallow avoidance where a breaching party may well have recognized that he was acting in breach of contract and that his breach of contract would cause some harm, but did not foresee that the breach would cause the degree of harm, required under article 25, that has actually occurred.Footnote 75 Once there has to be substantial detriment for avoidance to be justified, the case for foresight becomes weak. It appears to add to the already heavy burdens of a party seeking avoidance. Moreover, substantial detriment is so demanding a test that the party in breach is unlikely not to have foreseen such a result, except in the case of the idiosyncratic injured party. It may be that the foresight rule, over time, will be confined in practical terms to giving idiosyncratic contracting parties an incentive to disclose their particular vulnerability. In other cases, it is marginalized by the substantial deprivation of benefit test, at least, by the strict way that this test is applied.
The time of foresight in article 25 is far from certain. If the fault of a contracting party were a relevant consideration,Footnote 76 then an argument could be made that foresight at any time until the breach itself should be considered when applying the fundamental breach test. There is something of a paradox in eliminating personal fault for the purpose of damages liability,Footnote 77 but retaining it, in the form of foresight, for the purpose of avoidance in those cases where the contract breaker's foresight expands the availability of avoidance. If, however, foresight is relevant in establishing the bargain of the parties—which seems to be the case for damages under article 74—then it should only be taken into account as of the time of formation.Footnote 78 Nevertheless, proposals to restrict foresight explicitly to this time were rejected during the drafting process,Footnote 79 which gives rise to one of the difficulties of interpretation that arise from time to time under the CISG. The question is whether the omission of a time reference signifies that foresight at any time, or at least any time prior to the breach, is relevant, or whether, for reasons of drafting style, the failure of delegates to reach agreement on an issue or otherwise, it was not thought appropriate to include the date of foresight explicitly in the text. The drafting history of the CISG gives some support to the latter view.Footnote 80 Yet, since the general damages provision in article 74 does refer explicitly to the time of foresight, it is highly unsatisfactory that the time factor is not even mentioned in article 25. The silence of article 25 gives comfort to those who would argue that the omission indicates a legislative intention that foresight at any time prior to breach is relevant, at least in some cases. For example, it has been argued that the time of foresight should be evaluated on a case-by-case basis, so that the knowledge of adverse circumstances, acquired by a party committing a wilful breach, should be relevant even though that knowledge was acquired after the contract date.Footnote 81 Yet, damages and avoidance are both remedies and each, in its own way, defines the bargain struck by the parties. As a matter of rationality, the date of foresight should be the same for both, but the drafting history of the CISG makes this argument unsustainable.Footnote 82 For those who regret the introduction of foresight into article 25 as unduly limiting the right of avoidance, postponing the time of foresight is the next best thing to omitting foresight altogether. Since it is inherently more likely that later information will expand the likelihood of substantial detriment than diminish it, postponement will tend to amplify the availability of avoidance for fundamental breach and therefore act as a corrective to an excessively strict approach to substantial detriment.
D. Refusal to Perform
So far, the physical character of the breach or non-performance has not been considered. It is one thing to measure the effects on the buyer of a seller's delivery of defective goods in breach of the obligations imposed by article 35; there is a yardstick against which the seller's actual performance might be compared, namely, the goods that were delivered against the goods that should have been delivered. But what of the seller who refuses to deliver at all when the time comes, or who will only deliver if alternative terms are agreed with the buyer, or who delivers the wrong type of goods? Article 72 deals with anticipatory fundamental breach and provides that a contracting party may avoid the contract if it becomes ‘clear’ prior to the performance date that the other will commit a fundamental breach. This provision does not state what will constitute a fundamental breach on the due date—it merely brings forward the commission of that fundamental breach—and so it does not directly state the effect of a refusal to perform on the due date.
Suppose that on the due date a seller refuses point blank to deliver, or offers to deliver on a different date, or insists on delivery in a different place to the one agreed, or ships goods of a different type or grade than the one agreed. Has the seller in these circumstances committed a fundamental breach? An adamant refusal will surely be a fundamental breach since it deprives the buyer of everything that the buyer contracted for and not just a substantial part. There may be issues concerning a seller who declares an inability to deliver and cannot offer an alternative date whilst expressing a non-specific willingness to deliver. Although it depends on all the circumstances whether this amounts to a fundamental breach, a buyer with no reliable hope of obtaining delivery ought to be able to declare a fundamental breach, especially if an expeditious avoidance would stem the prospect of mounting lossesFootnote 83 and permit the buyer to obtain the goods from an alternative source. A prompt avoidance of the contract may quell the need to make a claim for damages and, since avoidance is a matter of self-help, reduce legal costs. The offer by the seller of a different date or place of delivery poses no particular difficulties for the application of the fundamental breach except that, since future modified performance is offered by the seller, the question arises whether the buyer's legitimate doubts of getting even the alternative performance offered by the seller may tip the balance in favour of the conclusion that a fundamental breach has occurred.Footnote 84
The most interesting case of those stated above is that of the seller who delivers different goods. There is no doubt that some lawyers from the civilian tradition have welcomed the CISG for the reason, among others, that it permits a much criticized distinction between the supply of defective goods (peius) and different goods (aliud), to be avoided.Footnote 85 The distinction is neither recognized nor rejected expressly in the CISG.Footnote 86 In determining whether it may impliedly play a part, certain complications that might arise under domestic law, relating for example to differential limitation periods for defective performance and non-performance, are not present to cloud analysis. Suppose that the seller delivers to the buyer a quantity of number 2 grade amber durum wheat instead of number 1 grade, the latter having a higher protein count and the former considered by the buyer to be unsuitable for its pasta-manufacturing business. Is this a more serious breach than the supply of the correct grade with an admixture of silica or some other adulterant, calling for the wheat to be treated before it enters the manufacturing process? If the goods cannot be used in the buyer's business, either at all or without a loss of commercial reputation, it is submitted that the breach is fundamental. The fact that the buyer might be able to dispose of the goods at an appropriate discount should not alter the conclusion. Were the buyer to do so, the buyer might be considerably inconvenienced and might place itself in a position where the seller disputes that the buyer has obtained a reasonable price. The buyer deserves a clean exit from the contract. The delivery of goods radically different from those contracted for should be, if not explicitly treated as a case of non-delivery, influenced by that notion so as to regarded as an example of fundamental breach.
VI. FUNDAMENTAL BREACH AND CURE
Article 48, the principal cure provision, notoriously makes the availability of cure dependent upon article 49, that is to say, upon whether the contract has been avoided for fundamental breach. This is in contrast with the Unidroit Principles of Commercial Contracts, which make a notice of termination (avoidance) subject to the performing party's right to cure non-performance.Footnote 87 Article 48 is in this respect a blemish on the CISG. The subordination of cure in article 48 to avoidance in article 49 runs against the grain of the CISG's policy to avoid economic waste and appears also on its face to permit a type of opportunism by the buyer who gives a notice of avoidance before the seller has had a chance to effect a cure.Footnote 88 It has nevertheless been argued that the nature of the test for fundamental breach allows account to be taken of the prospects of cure, so that these might prevent from being fundamental a breach that otherwise would have been fundamental.Footnote 89 If the argument is sound,Footnote 90 it renders the provision in article 48 that it is ‘[s]ubject to Article 49’ a dead letter. If the defective performance has already been cured, there is no longer a fundamental breach if there previously was one; if cure has not yet been effected but is a possibility, what might otherwise be a fundamental breach is not a fundamental breach until that possibility has been tried and has failed. In consequence, it is possible that a modest repair of goods may leave them defective, but not seriously enough for there to be a fundamental breach. The buyer is then left with the goods and, if the market is going down, will have to absorb the market decline, when avoidance would have put it back on the seller.
There is case law authority for the view that the prospects of cure should be considered in determining whether a breach of contract is fundamental in the first place.Footnote 91 To similar effect, though it is not an official source of interpretation, is the Secretariat Commentary on the 1978 Draft Convention.Footnote 92 The unanswered question relates to the effectiveness of the cure: must it eradicate the effects of breach altogether, or is it sufficient that those effects be alleviated to the point that, while a breach remains, it is now less than fundamental? In interpreting the cure provisions,Footnote 93 much depends upon what is meant by the seller's right to ‘remedy’ non-performance. The demanding character of fundamental breach in article 25 makes it difficult to argue the case for a perfect re-tender, especially since the cure provisions of the CISG already protect the buyer from unreasonable inconvenience and expense.Footnote 94 Moreover, once it is accepted that account may be taken of cure prospects when determining the existence of a fundamental breach, the union of fundamental breach and cure means that no convincing case can be made that the cure has to be a perfect one.Footnote 95 It should be stressed how much differently cure is capable of operating under the CISG, in connection with fundamental breach, than it works with the perfect tender rule in article 2 of the Uniform Commercial Code.Footnote 96 The perfect tender rule demands a high standard of cure if the buyer is not to be allowed to avoid the contract as a result of the continuing non-conformity of the goods. Hence, the seller is given the opportunity to make a ‘conforming delivery’ under UCC article 2.Footnote 97
VII. FUNDAMENTAL BREACH AND TIME
As stated above, there are two routes to the avoidance of a contract for breach, by the buyer in article 49 and by the seller in article 64. The first is fundamental breach under article 25. The second is where the seller or buyer has given the other party a notice requiring performance within a reasonable timeFootnote 98 and that other party has failed to comply with the notice. This latter route to avoidance does not require that there be a fundamental breach, and non-compliance is not deemed to be a fundamental breach.Footnote 99 A possible argument is that the availability of the time notice procedure signifies that time breaches should not qualify as fundamental breaches in article 25, unless the parties have made contrary provision in accordance with article 6. Some comfort for this view lies in the way that avoidance for failing to comply with a time notice is restricted to cases of non-delivery by the seller;Footnote 100 avoidance is not available, in the absence of fundamental breach, if a time notice is served in respect of defective delivery. This proposition has been described as ‘controversial’,Footnote 101 not, evidently, in the sense that it is contested but rather because the CISG conspicuously departs from the ULIS text which permitted avoidance for failure to comply with time notices in cases where goods had been delivered but they were defective.Footnote 102 Further support, of an indirect kind, comes from ULIS, which explicitly recognizes that a failure to deliver on time may be a fundamental breach and which gives the buyer the option of serving a time notice instead of avoidance.Footnote 103 It may be thought more significant, however, that the CISG does not expressly exclude time from fundamental breach.
The better view is that the CISG does not prevent the application of fundamental breach to non-timely performance. This is borne out by the support given by courts and authors to the proposition that a time provision may be of the essence of the contract so that its breach is a fundamental breach under article 25.Footnote 104 Other case law supports the same conclusion.Footnote 105 Where the contract contains precisely calculated time limits based on the particular needs of the contracting parties, it is been held to be inappropriate to require a party in the event of lateness to give a time notice as opposed to declaring the contract avoided for fundamental breach.Footnote 106 The availability of the time notice as a means of avoiding the contract may, however, make some courts reluctant to find a fundamental breach where performance does not take place in a timely fashion.Footnote 107 In a similar way, a contracting party unsure of its position may take steps to serve a time notice so as to resolve any uncertainty.Footnote 108 Finally, it cannot be doubted that non-performance is a fundamental breach, but the teasing and unanswerable question is when does late performance become non-performance.Footnote 109
VIII. FUNDAMENTAL BREACH OF CONTRACT AND COMMODITIES MARKETS
One of the concerns presented by the doctrine of fundamental breach is whether it is apt to deal with issues presented by dealings in commodities. In commodities markets, characterized by market movement that is often volatile in character, and where there is commonly integrated contractual activity between forward delivery and futures contracts,Footnote 110 a strict attitude to timely performance is adopted by English law, which is very often the law of choice for commodity sales. This is particularly so in the case of timely delivery.Footnote 111 August wheat, for example, is not the same commodity as September wheat. It is less obvious that the same strict approach should be taken to payment, but given the mutuality of payment and delivery in those instances where cash-on-delivery prevails,Footnote 112 and the assurance of payment that a seller needs where a letter of credit is to be opened, the existence of a strict attitude to timely payment should come as no surprise.Footnote 113
Matching the strict approach to timely performance is a similar approach to documentation. In this case, commerce is promoted by the ability of holders of documents representing a shipment of goods to deal with those documents, whether by sale or pledge, expeditiously without awkward obstacles being presented and questions raised by non-conforming or irregular documents.Footnote 114 Not all goods in transit, by any means, are dealt with through the medium of shipping documents—which accounts for the use of (non-transferable) sea waybills in some trades—but it is a feature of commodities that they are sold and pledged in this way. String sales, and hence the use of forward delivery contracts for purely financial purposes by intermediate traders, are made possible by freely transferable documents. Banks handling these documents are not expected to have the expertise necessary to assess from these documents the extent to which the underlying goods are non-conforming.
Given the evident importance of time and documentary integrity in the commodities world, arguments have been advanced that the test for fundamental breach in the CISG is flexible enough to accommodate rules of strict performance in these matters.Footnote 115 In the Cobalt Sulphate case,Footnote 116 the German Bundergerichtshof asserted that the gravity of a breach can be derived from the contract itself (as well as from the surrounding circumstances) and noted also that the buyer in that case had not availed itself of the opportunity to state in the contract which obligations it considered essential. The argument as implied in this case, and as presented in the literature,Footnote 117 goes beyond the obvious point that the contracting parties, availing themselves of article 6, may impliedly or expressly take advantage of the liberty to depart from the fundamental breach test in article 25. Rather, the text of article 25 itself is said to support this approach.
One problem with this line of reasoning is its ahistorical character. As Will so clearly and forcefully demonstrates,Footnote 118 the fundamental breach test emerged in the Rome drafts, preceding ULIS, over half a century ago. Prior to those drafts, the right to avoid a contract centred on the nature of the term the subject of the breach,Footnote 119 and on whether the buyerFootnote 120 would have concluded the contract without the term in question.Footnote 121 The fundamental breach test moved away from the term and its particular importance to the factual consequences of the breach on the contract as a whole. History therefore precludes the isolation in article 25, without reference to consequences, of certain important contractual terms.
Furthermore, the drafting history of article 49 indicates a conscious movement away from strict termination rights in the case of documentary breaches. According to the Secretariat Commentary:
The rule that the buyer can normally avoid the contract only if there has been a fundamental breach of contract is not in accord with the typical practice under CIF and other documentary sales. Since there is a general rule that the documents presented by the seller in a documentary transaction must be in strict compliance with the contract, buyers have often been able to refuse the documents if there has been some discrepancy in them even if that discrepancy was of little practical consequence.Footnote 122
This comment indicates a change of legal direction for rights of avoidance. It is significant, too, that a provision in ULIS, article 28, which laid down a special rule of avoidance for late delivery in the case of market-quoted goods, was not repeated in the CISG. Attempts to discover a time of the essence rule in article 25 of the CISG amount therefore to attempts to recover lost features of ULIS.Footnote 123
Similarly, the above argument of the Bundesgerichtshof also comes up against a further hard obstacle that demands to be taken seriously in any legal tradition attaching primacy to the words of the treaty or statutory text, instead of attaching itself to a notion of dynamic interpretation that carves out over time a substantial gap between the words of a text and the circumstances of its application. This obstacle, whose existence is deep-rooted in the evolution of modern English commercial law, is defined by the right to terminate (or avoid) a contract arising as either a matter of law—whether from the interpretation of a statutory text or the contract itself,Footnote 124 or from the incorporation of custom or tradition in the contractFootnote 125—or as a matter of mixed fact and law, from the gravity of circumstances brought about by non-performance (or breach). If the gravity of the post-breach circumstances comes into the equation, the availability of avoidance cannot be determined from an examination of the contract alone, with or without the context provided by the circumstances surrounding the making of the contract.Footnote 126 Nor can the contract itself assist in establishing the fundamental character of a breach, except to the extent that it establishes the existence and degree of detriment as foreseeable.
The difficulty presented by article 25 for those arguing the suitability of the CISG for commodities dealings is that it is circumstantial.Footnote 127 It is not potential or likely detriment that falls to be assessed, nor is it systemic detriment in this particular trade or in trade generally, but actual detriment, that is, the detriment that in fact results from this particular breach of contract between these particular parties.Footnote 128 Nor does the test in article 25 have anything to do with the subjective intention of the parties, determined with the aid of article 8.Footnote 129 Foresight is a relevant consideration, but it supplements actual detriment; it is not a substitute for it. It therefore follows that, for a breach to be fundamental, its effects have to be weighed in the instant case and found to be sufficient under article 25. In the words of the Swiss Bundesgericht: ‘The importance of the breach is not determinative; only the consequences of the breach to the damaged party are determinative.’Footnote 130 In applying article 25, there is little room for asserting that the untimely performance of a delivery (or payment) obligation, or the breach of a documentary obligation, always amounts to a fundamental breach on the ground that the prevailing commercial sentiment or conviction is that this is the case. This is an argument for modifying the CISG, in particular article 25, in the light of a contrary intention in article 6. An express provision in a contract that time is of the essence or that importance is attached to exact documentary performance ought to be sufficient; anything less than this is not readily to be seen as an implied modification of article 25 by the parties themselves. One reason why the possibility of implied modification of the CISG is not explicitly mentioned in the CISG, though it was in ULIS,Footnote 131 was the desire to discourage departures from the written text of the CISG.Footnote 132 An implied modification, though certainly permitted, is therefore not lightly to be inferred. The trading environment in which the parties operate is not sufficient without more to generate a contrary intention for the purpose of article 6, where the parties themselves have not otherwise evidenced an intention to depart from the clear wording of article 25. This is insufficient reason for a destructive reading of article 25 itself. Nor can the trading environment and any sentiments favouring strict performance as a matter of commercial rigour lead to a strict performance rule as a matter of usage under article 9(2). Strict performance and avoidance pertain to legal remedies as opposed to practices between merchants. The word ‘usage’ should not be stretched beyond its natural meaning to make up for deficiencies in the drafting of the CISG.
Nothing in the documentary history of the CISG supports the proposition that the identification of a fundamental breach of contract in article 25 flows from anything other than the consequences of a particular breach. It is interesting to note that the equivalent provision in the Undroit Principles of International Commercial Contracts, article 7.3.1, cites strict performance being of the essence of the contract as a factor additional to—one might more accurately say alternative to—substantial deprivation of benefit,Footnote 133 for the purpose of determining whether non-performance is fundamental. Whatever the arguments might be in favour of resorting to the Unidroit Principles to supplement the CISG via article 7(2), they offer no support for the use of those Principles to contradict or correct the text of the CISG. In this respect, there is no gap in the CISG to be filled from extrinsic sources. The problems of article 25 have much to do with its very limited scope as drafted.
As soon as this is conceded, then the certainty that would be present if all breaches of these obligations were fundamental is unattainable. The right to avoid the contract will always depend upon the facts surrounding and ensuing from the breach. This will have a marked effect on the advice that lawyers give their clients and on the conduct of litigation or of an arbitration. The much valued ability to take a firm stand on one's right of avoidance at the time of breach is illusory because that stand will have to be validated by a demanding inquiry into the evidence, which includes what the performing party foresaw or ought to have foreseen. Avoidance as a self-help remedy speedily exercised is compromised.
IX. FUNDAMENTAL BREACH AND TENDER
Article 46(2) prevents the buyer from requiring the delivery of non-conforming goods in cases where the lack of conformity does not amount to a fundamental breach, though the seller may be required to comply with a reasonable request for repair instead. Now, article 46(2) may be significant when it comes to a rather demanding question. Suppose, before the buyer takes delivery of the goods, he notices that the goods are non-conforming and on that account refuses to take delivery. Is it sufficient, for such refusal to be justified, that the goods are non-conforming, or is the buyer's action justified only if the non-conformity of goods would entail a fundamental breach by the seller when the goods are delivered?Footnote 134 According to article 53, the buyer's duty to take delivery of the goods is ‘as required by the contract and this CISG’, a formula repeated in article 58, which deals with cash on delivery transactions. This provision matches the seller's corresponding duty in article 30 to deliver the goods ‘as required by the contract and this Convention’. What exactly does this mean? Does it refer merely to the time and place of delivery, or does it refer also to the quality and the fitness of the goods? The buyer's duty could not be limited to time and place, or else the seller might be able to demand that the buyer take delivery of seriously non-conforming goods, which the buyer might then, having paid the price in some cases at least, immediately reject as a consequence of avoiding the contract for fundamental breach. This would be a futile exercise, except in so far as it would alter the balance of power between seller and buyer by putting the burden on the buyer to recover the price paid rather than on the seller to pursue the buyer for payment of the price.
The buyer's duty to take delivery correlates to the seller's duty to make delivery, which, ‘as required by the contract and this Convention’,Footnote 135 is to deliver goods that conform to the standards of quality, description and fitness laid down by article 35. Does this mean that the buyer might lawfully refuse to take delivery, without yet claiming that the contract has been avoided, as long as the seller fails to comply with those standards? If this were so, it would be especially to the advantage of the buyer in those cases where it is obvious that the seller is not performing in accordance with the contract and it does not take a subsequent examination of the goods to find this out. Such would be the case where documents are tendered to the buyer who, detecting a discrepancy, declines to take them up and pay for them. It may be, then, that some sellers would be able to cure any defects in the documents in accordance with the regime in article 34.Footnote 136 Another example is that of the seller who is late, for here again it could fairly be said that the seller is not delivering the goods as required by the contract and the Convention.
In the former case of the documents, the seller might never be able to put the tender right, especially in the case of those documents whose originality and dating are vitally important;Footnote 137 in the latter case, since the clock can never be turned back, the seller will never be able to put the tender right. The result, therefore, if the buyer were able to resist the tender, is that the buyer would be able, by a combination of effluxion of time and an incapable seller, to demonstrate eventually the fundamental breach necessary to avoid the contract under article 25. And this could occur too in the case of obvious faults in the goods, though here the seller might be able to correct them so as to put them into a fit state to be tendered while meeting the demands of a perfect tender rule. The effect of acceding to a buyer's claim for a fully complying tender would be to undermine article 46(2) and the rule of fundamental breach in article 25. Yet tender and delivery are different and the justification for not unwinding a delivery, because of the expense and waste that this might generate, may not extend to an earlier refusal of tender, where the seller still controls the goods, whether directly or through the carrier. In addition, the more restrictive statements made by some courts about a buyer's right of avoidance, where the goods possess some utility, might lead to a buyer being required to take delivery of quite severely sub-standard goods, unless a distinction were to be made between tender and delivery. This is not an attractive prospect.
Neither position, the insistence that the buyer must accept the goods if the seller has not committed a fundamental breach (though surely the fundamental breach could only occur once the delivery has been completed), nor the assertion that the buyer can rely upon any non-conformity in the seller's performance at the point of tender, seems satisfactory. The fundamental breach approach would be particularly inappropriate if the goods had to be practically useless in the buyer's hands for a fundamental breach to occur. Requiring the buyer to take delivery of goods that are only just on the right side of the usable/useless line is oppressive to the buyer. This prompts a search for some middle ground. Article 71 permits a contracting party to suspend the performance of his obligations ‘if it becomes apparent that the other party will not perform a substantial part of his obligations’. The most likely case for this provision to operate is where the obligee has grounds, based on the behaviour or predicament of the obligor, to suppose that performance due at a future date will not be rendered. It would be an unduly narrow reading of article 71, however, to say that it might not be invoked at the point of tender, for this would produce an irrational distinction between applying article 71 on the day before performance becomes due by the obligor and refusing to apply it on the day that performance does fall due.Footnote 138
The significance of article 71 is that the test for its application is significantly less demanding than the test for avoidance based on fundamental breach. This is borne out by a simple comparison of article 71 with article 72, which deals with anticipatory repudiation by invoking the test for a fundamental breach. So far as article 71 allows for suspension where a ‘substantial part’ of the obligor's obligations might not be forthcoming, this would not permit suspension in trivial cases but it would certainly allow for suspension in instances falling short of fundamental breach. If this interpretation is not correct, then there is no reason to separate the text of article 71 from the text of article 72. An obligee might instead, in a single provision, have been given the choice of avoidance or suspension when apprehending a fundamental breach by the obligor. A further issue of no small difficulty is whether, suspension of performance having been notified to the obligor, the adequate assurance that the obligor must now give to lift the suspension has to be an assurance of perfect performance or an assurance of imperfect performance that does not cross the bar of substantiality. There is some similarity between this issue and the quality of cure that a seller must effect under articles 37 and 48. If the seller need not effect a perfect cure in order to prevent the commission of a fundamental breach, then the seller's adequate assurance under article 71 should only be sufficient to assure the buyer that any possible future non-performance will be less than a substantial part of the seller's obligations.
The possible application of article 71 was nevertheless overlooked by the Austrian Oberster Gerichtshof,Footnote 139 which, relying upon article 58, concluded that the buyer could resist accepting the seller's non-conforming performance without qualifying such right to resist by the need for a particular standard of non-conformity to be attained. The court further stated that, unless the buyer were able to resist performance by the seller in this way, this would render meaningless the buyer's right of examination under article 58(3). This point by no means follows, since the buyer's right of examination could still be employed to determine the existence of a fundamental breach. The position of the Austrian court amounts to a revival of the civilian plea of exceptio non adimpleti contractus, for which no provision is made in the CISG.
X. CONCLUSION
The test for a fundamental breach is in numerous respects unsatisfactory. The lack of any assistance to courts in measuring substantial detriment has encouraged some courts to pay scant regard to the text of article 25 and to find in it elements that are not present. One observer has noted in the case law ‘a somewhat worrying tendency to ignore the commercial background and to give too much emphasis to the policy of keeping contracts going’.Footnote 140 Fidelity to the text of the CISG is not the same thing as blind literalism. The more that courts take an excessively creative role when interpreting the wording of a convention, the more the cause of continuing uniformity is compromised. In international sales, many transactions will take place on terms resembling cash on delivery. In those cases, buyers will in any event think long and hard before rejecting the goods, which will inevitably generate some expenditure, and claiming recovery of the price from a seller, who may or may not be solvent, as part of a complex process of restitution that will inevitably give rise to legal costs. There are sufficient natural bars to avoidance without courts inventing more when adopting a wayward interpretation of article 25.
The test of a fundamental breach in article 25 is, nevertheless, a broken one.Footnote 141 It might have been better if, in its application to the seller's duties, it had been formulated along the lines of finding which party, seller or buyer, should in all the circumstances bear the burden of dealing with the unwanted, non-conforming goods. Alternatively, the party claiming the right to avoid might have been required to provide cogent reasons, from an indicative list, like the one contained in article 7.3.1 of the Unidroit Principles, for abandoning the contract. This would encourage the development of an orderly case law around those indicia. Foresight plays no meaningful role in article 25, except, possibly, to ameliorate the strictness of the fundamental breach test. The fundamental breach test in article 25 also makes no allowance for the different types of goods and the markets in which they are sold. This has encouraged some courts, reading the text of article 25 again in a cavalier fashion, to find an accommodation for commodity and related sales that is not present in the text of article 25. The conclusion one reaches from the case law is that avoidance for fundamental breach is either very easy (time and documents in commodity transactions) or very hard (other transactions). In the latter case, unless special provision, as advocated above, is made for cases where the buyer objects to the quality and fitness of goods at the point of tender, a seller could force severely non-conforming goods on an unwilling buyer. It is no satisfactory answer that truly egregious conduct can be prevented by interpreting the CISG in the spirit of good faith. This merely encourages courts to read any ambiguity against the party in bad faith and is a retrospective cover-up for bad legislation. Suppose that the text is clear: there is no ambiguity that can be seized upon in order to bring good faith interpretation into play under article 7(1). Wayward interpretation, even in the spirit of good faith, is not productive of future commercial certainty and continuing uniformity.
In the case of domestic legislation, an adverse commentary on a text can make a case for legislative revision, with varying degrees of success. It is unlikely that the CISG will ever be amended and unrealistic to advocate it. A better approach might be to educate merchants and their legal advisors about the need to take steps under article 6 to exclude or derogate from article 25.Footnote 142 To date, the published literature on the CISG has been skewed towards publications by academics and research students. There is a shortage of practitioner writing. As the CISG grows, there is a need for it to put down deeper roots in the commercial and legal communities.
