General Rules of a Contract

Introduction

The general rules of a contract required from either the seller or the buyer is to comply with their obligations. Therefore, the seller is expected to do his obligation and the buyer is also expected to oblige, but sometimes one party may breach the contract in many ways. For example, the seller may deliver the goods to the buyer late or the delivered goods fail to conform to the standards which are set by the agreement between them. However, in some cases the buyer may breach the contract by not paying the price of the goods. When the breach of contract happens, the injured party may claim for remedies or damages which are available to both the buyer and the seller. This essay, however, will only deal with the buyer remedies. (perhaps say why)

It may be generally said that if the parties have not chosen remedies in their contractual relationship, the law which governs the contract will apply in this case. It appears that the remedies which are available for the buyer for breach of contract are different from form to form. These remedies for instance seem to be more elaborated in the Vienna Convention 1980 on Contract for The International Sale of Goods (CISG) compared with English Sale of Goods Act 1979. Therefore the buyer under the CISG has many remedies such as specific performance, more time (Nachfrist) and price reduction. However, under the (SGA) 1979 these remedies are very limited such as termination and damages. It could be said that this difference for the buyer remedies existence due to the CISG being designed to consider the characteristics of the international trade such as the long distance between the parties which increases the cost of transportation.

This paper will not examine all the buyer remedies, instead it will just examine one remedy: specific performance. This will be analyzed in two different approaches which are the CISG approach and the common law approach, in particular the English law act (SGA 1979). Additionally, there has been much debate about whether the specific performance remedy under the Vienna Convention is more useful than the specific performance remedy under the English Law for international sales transactions. Hence, this paper is going to examine and analyze this argument in more detail.

1. Specific Performance under the Vienna Convention on contract for the International Sale Of Goods

One of the buyer remedies is specific performance. The main provision dealing with this remedy is Article 46, which states that:

(1) The buyer may require performance by the seller of his obligations unless the buyer has resorted to remedy which is inconsistent with this requirement.

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

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

It seems important to mention the basic principle of the Vienna Convention which is that the parties have the right to exclude the whole of the convention or part of it article (6). The CISG gives effects to the doctrine of the freedom of the contract to the parties. Therefore, Article 46 will apply if the parties have not chosen other remedies.

It may be helpful to briefly explain the principles of Article 46 concerning specific performance as buyer remedy when the seller fails to perform his obligations.

Specific performance under the CISG can be considered as automatic right to the buyer so it is not the subject to the court’s discretion. Therefore under this Article the buyer has priority to require the seller to perform his obligation unless the buyer used another right such as avoidance of the contract especially in the case of fundamental beach (breach?). Furthermore, in the situation when the seller delivery non-conforming goods, the buyer may claim the delivery of substitute goods or repair the goods if there is lack of conformity. It is worth noting that the buyer can exercise this remedy and claims for damages as provided in Articles 74-77.

The question may arise from time to time is what the justification under the CISG to consider a specific performance as a primary remedy. Indeed there has been much debate concerning this point between academic writers (who?). On the one hand, the supporters (who?) of this remedy claim that when the party has concluded a contract the parties are bound to perform their obligations so the buyer must be entitled to require specific performance. Additionally, it might be said that sometimes it can become difficult to receive substitute goods.

On the other hand, the opponents of the specific remedy argue that in practice even under civil law systems an immediate remedy is not often ordered. This is because it takes time and costs more. Strictly speaking from a legal point of view there is a limit for using this remedy even in some civil law countries such as France and Germany.

Another point is that justification under the CISG gives the aggrieved party the right to choose between damages and specific performance although it seems enough to award them the damages only. The reason for that is in the international trade, giving the aggrieved party damages is not enough as full compensation for their loss. Furthermore, the court might err to estimate for compensatory damages for the aggrieved party.

2. Comparative Study between Traditional English Approach and Vienna Convention in Specific Performance

It seems necessary to compare between the CISG and the English Law in order to decide whether the specific performance remedy in the CISG is more useful than the remedy which is offered by the English Law. Hence, this part examines some aspects of the English Law Act 1979 which differs from the CISG.

1. Specific or Ascertained Goods

Under English Law, the term of specific performance is granted as an exceptional remedy and is granted by the discretion of the court in very limited circumstances. This point is provided in Section 52(1) SGA which states “In any action for breach of contract to deliver specific or ascertained goods the court may, if it thinks fit, on the plaintiffs application, by its judgment or decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages”.

There are many points regarding this provision which are necessary to note in the perspective of the SGA. The specific performance under the SGA opens two problems: misinterpretation and uncertainty. Section 52(1) puts limit to the specific performance remedy in the sale of specific or ascertained goods. The goods are specific at the time the contract is concluded between the parties, or there is other agreement after the time of selling is made. For example, it was held in the case of James Jones & Sons Ltd v Earl of Tankerville the growing and the natural products become specific once they are severed under a contract of sale. It could be said that even if the contract involves specific goods, there is no guarantee that the court will not exercise the discretionary power to decide whether it will order the specific performance or not. This point was illustrated by the decision held in the court of appeal wasrejected to order the specific of delivery machine manufactured. Therefore even if the claimant is seeking the specific performance for unique or semi-unique, the courts might refuse to order the specific performance for the plaintiff. Although, the court is not usually required to order specific relief, it will order it if its conditions are satisfied and does not cause “severe hardship” to the seller.

Another relevant point is that whether the court will order the specific performance for unascertained goods. The court was taken narrow vision regarding this point, for example in the leading case Re Wait. The court rejected granting an order to specific performance because the goods were considered as unascertained goods.

In contrast, the CISG approach Article 46 equivalent to Section 52(1) of the SGA, under the CISG there is no requirements for the goods to be specific, ascertained or the same as shown in the contract. It could be said that the buyer cannot demand the specific performance if there is resorting to a remedy which is inconsistent with specific performance such as avoidance of contract. This is due to the avoidance of contact being considered as termination and the end of the contract which makes the parties not required to do their obligations.

It may be generally considered that, under the CISG, the seller can deliver substitute goods in the case of non conforming goods. Unlike the English, the CISG does not restrict performance so the seller can offer substitute delivery in the case of non -conforming. Therefore, it may be said that the CISG is more flexible regarding to the point in order to for fulfillment of the contract between the parties.

With reference to the previous discussion (see section……?) on the specific or ascertained goods in the SGA and in the CISG, there seem to be some differences. Under the English law this remedy is an extraordinary remedy and it requires specific or ascertained goods unless the goods are unique or semi-unique. Furthermore, in some cases even if the goods are specific or ascertained, the courts will exercise the discretionary power to grant the specific performance, meaning there is no certainty to grant this remedy. Whereas under the CISG this remedy is the primary and there is no requirement for the goods to be specific or ascertained so this provides more flexibility for the seller.

It could be said that CISG regarding specific or ascertained goods is more useful than the English law because there is much certainty and flexibility under the CISG.

The Exercise of the Discretion

Another difference between the English law (SGA) and the CISG is that who could pursue the specific performance. Under the (SGA) the specific relief is a discretionary remedy granted by the court while under the CISG this remedy is an option for the buyer to require it without any requirement to take it to the court.

First the discretion power to the court (should this be the adjective-check it) under the English law in S (52) does not continue any attempt to structure the discretion power (ad above – adjective?) of the court. In the light of the specific performance remedy the courts were historically unwilling to grant this remedy.However, the courts in current years may search for other factors in order to decide whether or not it will grant the specific performance.It may be generally said that the most crucial factor is more likely to be the nature of the goods which are the subject matter of the contract. Therefore, in the case (which case?) if the goods are available in the market, the court will be reluctant to order the specific performance. On the other hand, if the goods are unavailable in the market (unique what?), the courts are more likely to order specific performance remedy. Furthermore, the court may sometimes consider other factors such as the conduct of both parties the buyer and the seller. For example, if the buyer claims the specific performance very late the court may refuse their claim.

It is worth mentioning that in some circumstances the court may fail to discuss whether the court has the power to order such a remedy and how the remedy will fit in to S(52) SGA. This point was illustrated in the case of Sky petroleum Ltd v VIP Petroleum Ltd, where the parties had a long term contract to supply petrol to a filling station but the seller defaulted on the supply. Because of the impossibility for the buyer to get an alternative source of supply due to the Yom Kippur War, then the buyer’s business may break down without the seller’s oil. The court was in no doubt under this circumstances to decree of specific performance.

Based on these decisions, the English Law SGA is unsettled regarding the specific performance remedy. It seems ambiguous the precise scope when the court will exercise the discretion power to order this remedy. Therefore there is no guarantee to grant the specific performance to the buyer because the discretion power of the court even some times the requirements of S (52) are met. (confusing)

In contract, the CISG provides the buyer with the automatic right to require specific performance so it is not subject to the discretion of the court.Nevertheless, there is a substantial limitation on the ability for the buyer to get specific performance in certain situations under the Article 28 of the CISG. Some continental European legal systems give the courts the right to enforce the specific performance while others do not such as the English and the American legal system. Therefore Article 28 represents a compromise aimed at bridging the two different legal systems.

Although this article is straightforward, there are some ambiguities with some of the phrases such as “judgment of specific performance” and “similar contracts of sale not govern by this convention”. Both these phrases will be discussed in the following section.

The meaning of the first phrase is varied depending on whether the common law lawyers or the civil law lawyer is reading it (a bit informal, perhaps say opinions?). For example, under the common law the decree of specific performance will only refer to an order that may have been made by a court of equity. On the other hand, under the civil law system, the notion of specific performance remedy is much broader and it can include the common law remedies as in recovering the price.

Another unclear phrase under Article 28 “similar contracts of sale not governed by this convention” could be understood as the contract that (is?) outside the scope of the CISG. Consequently, a court would not be required to order the specific performance under the CISG unless it does so under the domestic law of the contract in domestic sale cases. It could be said that the vagueness under article 28 is a result of the compromise between the two different legal systems. These are the common law system and the civil law system.

In general when the domestic courts apply for (what?) the CISG provisions could be faced with three different types of situations. First, the law of the country (L) gives the buyer remedy to a ward of specific performance so the courts in this country will be bound to order the specific performance under its own domestic law against a similar sales contract not governed by the CISG.

In the second situation, the law of state (M) disallows the use of specific performance as remedy so the courts in this state would not bound to grant the specific performance in respect to a similar sales contract not governed by the Convention.

In the third situation, the country (N) does not prohibit the specific performance remedy at the same time not abound to award this remedy in respect of a similar sales contract not governed by the convention. It seems that in the last situation it depends on the discretion of the courts in the country.

Therefore the first situation does not cause any problems through the operation of Article 28 while it may lead to various problems in the other two situations. In other words, in the last situation the result will be under the discretion of the courts such as the courts in England which may exercise the discretion depending on different circumstances.

Furthermore, there are other limitations on the buyer remedy for the specific performance. First, limitation on the buyer’s right for replacement or repair Article 46 paragraphs (2) and (3) which have been discussed previously. In addition, there is an indirect limitation for the specific performance in the Article 7 which is in the case of “good faith”.

Finally, it is worth noting that there are other limitations for the buyer remedy to order the specific performs under Article 79 in the CISG. It may be generally said that if the seller fails to perform his obligation due to an impediment which gives the seller the right to claim exemption from his obligation (if clause..then what??). However, this exemption will only apply to permanent impediments not for temporary impediments. Additionally, there is other exemption in the case if the performance in accordance with contract is very difficult and impossible for any person. For example, if the goods purchased has been destroyed.

It seems that my research has highlighted a difference between the two remedies (see previous discussion). This difference under the SGA discretion is clearly granted to the court whereas under the CISG there is no mention of any court discretion. However, in the real (practice?) this difference does not appear that much due to the limitations under Article 28 of the CISG and other limitations.

It might be said that concerning the exercises discretion by the court the CISG is not useful and it seems the same as in the English law.

Specific Performance in the Practice

Under the SAG, the general rule is that there is no specific performance where available damages would be an adequate remedy. In practice the courts have the power to exercise discretion, and the courts are unwilling to order the specific performance except in some circumstances. This point was illustrated previously (see section ……?).

Under the CISG, there is a specific performance remedy for the buyer in Article 46, but in practice there are few cases that demonstrate the injured party seeking for this remedy. Furthermore, there are rare cases, even in the civil law countries, where the courts grant the specific performance.

It is difficult to find cases where both decided (what do you mean?)by national courts or arbitration awards where a buyer claimed for specific performances; however, there are a few cases and it may be helpful to provide the reader with an example of one.

A Russian company had sold raw aluminum to a group of buyers located in Argentina and Hungary. After which the Russian company was privatized in December 1994. The new owners of the company stopped delivery of the product in February 1995 and the case was then submitted to arbitration in Switzerland. In this case, the buyers claimed for specific performance but the request was denied.

Also, in practice, from an economic perspective the specific performance to some extent is worthless for the parties because it will takes long time and the costs are relatively high.

Conclusion

This paper has examined the specific performance remedy for the buyer under the English law SGA and the CISG. It has also analyzed the differences between the two approaches and has discussed whether this remedy is useful or not.

Under the CISG, the specific performance is considered as the primary remedy whereas under the SGA it is exceptional and discretionary. It could be said that the CISG is more useful than SGA regarding specific or ascertained goods. However, the scope of the discretion(adj?) power of the courts are both similar to some extent. Although Article 46 CISG grants the specific performance remedy, Article 28 provides the courts with more flexibility to avoid Appling (what’s appling?)Article 46. Article 28 came to compromise between the two different legal systems but it creates some problems in the application for this article.

In practice, there is not much use to the specific performance remedy in both legal systems and it is not supported by many cases. However, both parties, in practice, prefer to claim for damages in order to save time and money.

It can be suggested that after the previous discussion (see section…….?), the CISG seems not to add any certainty or uniformity to the English law. However, the CISG is useful in respect of the specific performance remedy to some extent as a step forward in the development and harmonization of the English law, and to become part of the business community.