Name: Lương Diệu Minh Nhật
Studernt ID: 31221026806
Question 1:
Discuss the role of Article 72 of the CISG in addressing anticipatory breach in international
sales contracts. How does this provision protect the interests of the aggrieved party, and
what implications does it have for international trade?
Article 72 of the CISG can be understand as before the time for performance of the
contractual obligations as agreed, if the entitled party becomes aware that the obligation will
not be performed or has grounds to suspect that the obligation cannot be performed, it may
immediately exercise the rights or some of the rights that are usually reserved for cases
where the obligation has not actually been performed. The word "clear" in Article 72(1)
emphasizes the need for clear and compelling proof of a potential fundamental breach. The
party accused of an anticipatory breach is shielded against an unfair contract termination by
this high standard. Before declaring the contract avoided, the injured party must give the
other party due notice under Article 72(2). This prohibits premature avoidance by enabling
the party accused of breaking the contract to offer guarantees or take remedial action to
fulfill the agreement. When there is a "reasonable notice" that the party in violation will not
fulfill their obligations, Article 72(3) exempts them from the notice requirement. In these
situations, notice might not be necessary, giving the harmed party more time to break the
contract. This article is designed to prevent further losses of aggrieved party by reducing the
losses that can result from a breach by enabling the aggrieved party to avoid the contract
before the breach really happens. This is especially crucial for international trade since
delays and interruptions can have a big financial impact. It also gives the aggrieved party
the rights to choose between pursuing other remedies or avoiding the contract. To guarantee
that this right is not used arbitrarily and to maintain the predictability and clarity of
contractual relationships, it is necessary for the anticipatory breach to be "clear." Article 72
giving the party in violation of the notification requirement a chance to correct the situation
or provide assurances, the notice requirement fosters communication between the parties.
By doing so, corporate relationships can be maintained by preventing conflicts and
promoting cooperative settlement. This provision plays an important role in managing risks
in contract of sale from countries to countries. This can lead to greater confidence and
security in cross-border transactions. If there is clear evidence that the other party will
seriously breach the contract, the affected party has the right to terminate the contract early
according to Article 72. This helps businesses avoid risks and losses by allowing the
partner party to maintain contracts that they cannot fulfill. Businesses will have more
motivation to engage in international trade transactions when they can protect
themselves against such risks. Before terminating the contract, Article 72 encourages the
parties to act honestly and in good faith by requiring clear evidence and notification. This
helps maintain long-term and stable business relationships, which are essential for
international trade. To avoid swift legal disputes, this regulation encourages the parties to
negotiate and collaborate to resolve potential issues. Therefore, it helps the parties maintain
effective and friendly cooperation, preventing conflicts and lawsuits. A unified legal
framework for international sales transactions is provided by Article 72, along with other
provisions of the CISG. This helps reduce uncertainty and disputes over laws among
international parties, creating an easier and more stable trade environment. Article 72
supports businesses and lawyers by establishing clear and understandable rules regarding
anticipated violations. This encourages trade and reduces overall transaction costs.
Question 2: Company A (the exporter) located in Germany and company B (the importer)
located in China entered into a contract on machinery products, payment by L/C. When the
machines were delivered, B inspected the machines and found that they were completely
inconsistent with the parameters specified in the technical documents. For this reason, B
refused to take delivery of the goods and informed A that the contract would be avoided due
to the latter's fundamental breach. At the same time, B abandoned these machines and left
them unattended at the port.
2.1. When settling the dispute, the court decided to apply the Vienna Convention (CISG) to
because the contract did not include a provision on governing law. Do you agree with the
decision of the court?
2.2. According to the CISG, is company B's declaration to avoid the contract consistent with
CISG?
2.3. According to the CISG, is company B liable for any damage caused to the machines
abandoned at the port?
2.1 Indeed, using the CISG makes sense and is compliant with the regulations controlling
the choice of law in contracts for foreign sales. Contracts for the international sale of
commodities between parties with places of business in different nations that are both CISG
Contracting States are immediately subject to the CISG (Article 1(1)(a)). In this instance,
Business A is based in Germany and China is where Company B is situated.
China and Germany are both CISG Contracting States.
The CISG automatically applies to the contract since both parties have approved it and there
is no clause in the agreement that prevents it from doing so. As a result, the court made the
right choice in applying the CISG.
2.2 Article 25 of the CISG states that a violation is deemed fundamental if it causes the
aggrieved party to suffer a significant amount of harm and the breaching party knew it
would happen.
According to Company B, the apparatus was “completely inconsistent with the parameters
specified in the technical documents.” If the differences in the equipment materially impact
how it is used or intended to be used, then the breach may be deemed fundamental.
If there is a fundamental violation by the seller (Company A), the buyer (Company B) has
the right to avoid the contract under Article 49(1)(a): “ (1) The buyer may declare the
contract avoided: (a) if the failure by the seller to perform any of his obligations under the
contract or this Convention amounts to a fundamental breach of contract;”.
If the violation is genuinely fundamental, Company B's declaration to escape the contract
and refusal to accept delivery seem compatible with Article 49(1)(a). The machines'
noncompliance with the contract's parameters suggests a potential fundamental violation,
which justifies avoidance.
But as stipulated by Article 39(1): “The buyer loses the right to rely on a lack of conformity
of the goods if he does not give notice to the seller specifying the nature of the lack of
conformity within a reasonable time after he has discovered it or ought to have discovered
it”, Company B must also make sure that it has given prompt notice of the violation. The
right to depend on the non-conformity of the products may be lost if the seller is not notified
within a reasonable amount of time.
Business B's decision to terminate the contract is compliant with the CISG if it can
demonstrate that the machinery's disparity represents a fundamental violation and that it
gave Company A prompt notice.
2.3 Yes, Company B may be liable for damages caused to the machines abandoned at the
port, as per the CISG provisions. Article 86(1) states that the buyer should take reasonable
measures to keep the products in its possession or under its control if it wants to reject the
items or avoid the contract. Following its notification to Company A of its intention to
abandon the contract, Company B is still obligated to hold onto the items until the seller is
able to retrieve them or find another use for them.
In addition, if the seller's removal of the items is unjustified or if the products are
deteriorating quickly, the buyer is permitted to sell them under Article 88(1). The purchaser
is required to take commercially reasonable steps to minimize any potential losses.
According to Article 86, Company B appears to have neglected its duty to maintain the
products by leaving the machinery unattended and abandoned at the port.
If Company B was negligent or abandoned and the items deteriorated as a result, Company
B could be responsible for the losses.
