July 17, 2007
Avoidance Damages Under the CISG
A surprising amount of international business is done in America by folks who don't know that the United Nations Convention on Contracts for the International Sale of Goods is part of the law of the United States -- let alone understand how its provisions differ from domestic sales laws. Jonathan Yovel (Columbia/Haifa) offers a good introduction to the international rules in The Seller's Right to Avoid the Contract in International Sales. Here's the abstract:
In the context of transnational transactions, the question of severing contractual relations due to a breach of contract (designated as "avoidance" or "termination" by different legal instruments) is of special interest. The complexities, costs, and particular risks associated with international transactions call for inventive balances between an aggrieved party's interest in protecting reliance interests - inter alia, through termination of the contractual relations - and the interest that the party in breach may still have in maintaining them, even under conditions of breach. This article analyzes an aggrieved seller's right (or more precisely, power) to terminate the contract for breach in the context of two sophisticated transnational regimes that are quickly growing in prominence and influence. These are the UN Convention on Contracts for the International Sale of Goods, 1980 (hereinafter CISG) and the Principles of European Contract Law, 2003 (hereinafter PECL). The Uniform Commercial Code and other national regimes are considered as well.
Evaluated both together and separately, a comparison of these systems yields a new analysis of the question of contract avoidance in transnational transactions. Here is an opportunity for drafters to formulate remedial regimes that respond to diverging provisions in legal systems informed by different ideological approaches to the question of contractual relations: from the tactical, risk-allocating approach that regards contractual relations as something akin to an investment, to be continued or aborted upon rational calculations of alternative transactions, to the most relational approaches, emphasizing long-time cooperation, wishing to strengthen relations and allow parties to move through an escalation of remedies and other measures until reaching the radical severance of contractual relations through avoidance of the contract. Indeed, in important respects the very nature of the contractual interaction is best studied through the topic of remedies for breach, and through the availability of the power to unilaterally severe the contractual relation in particular.
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