International Commercial Law the Objective Research Paper

• Length: 13 pages
• Subject: Business - Law
• Type: Research Paper
• Paper: #93445773
• Related Topics: Law School, Common Law, Contract Law, Conformity

Excerpt from Research Paper :

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Zamir (2007) states "is one of the most litigated sections of the convention. Under it the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. In practice the requirement for a reasonable time has been read narrowly and inspections of the goods should be made in a very timely fashion. The buyer may also fix an additional period of time of reasonable length for performance under article 47 but, unless he has received notice from the seller that he will not perform within the period so fixed, he may not resort to any remedy for breach of contract during that period, although he is not deprived of a right to claim damages for delay in performance; article 47(2)."

Article 48 while subject to Article 49 states that the seller may "…even after the date of delivery remedy at his own expense any failure to perform his obligations if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer." (Zamir, 2007) the provision contained in Article 49 is that the buyer may "declare the contract avoided if the failure by the seller to perform any of his obligations amounts to a fundamental breach of contract or, in the case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed under article 47(1) or declares that he will not deliver within the period so fixed." (Zamir, 2007) Finally the buyer may declare the contract avoided entirely only in the instance that the failure to make delivery "completely or in conformity with the contract" occurs which is stated as equivalent to a fundamental breach of the contract. (Zamir, 2007)

Repudiatory Breach

Chigbo states that the contrast is of the nature that either party may be given the right to resile "if the consent of a third party to some step is not forthcoming when such consent is a condition precedent in such a contract." (Chigbo, 2009)

The term 'repudiatory breach' is used sometimes and is a term that is useful in some contexts however not precise enough for generalities in the area of breach of contract. A breach is stated to potentially have all the effects of a material breach and, in particular "…can justify rescission, even although it would be straining language to say that it indicated an intention to repudiate." (Chigbo, 2009)

Reasons for Declaring Contract Null and Void

It is related that contracts would be declared null and void at one time and of not effect 'ab initio' due to a material breach including such as failure to pay purchase price for land which had been bought, want of due execution or improper execution of a deed or failure to comply with a statutory requirement for the contract and lack of contractual capacity or failure to obtain the consent of a party to a contract where such consent is necessary etc." (Chigbo, 2009) Generally speaking 'breach' as it relates to a contract means a failure, without justification legally to perform an obligation under the contract as required by the contract." (Chigbo, 2009)

Contract law is specifically addressed in Articles 71 and 72 of the Principles of European Contract Law (PECL) which states as follows:

CISG Article 71

(1) a party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of: (a) a serious deficiency in his ability to perform or in his creditworthiness; or (b) his conduct in preparing to perform or in performing the contract.

(2) if the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller. (3) a party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance. (Chigbo, 2009)

CISG Article 72

(1) if prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided;

(2) if time allows, the party intending to declare the contract avoided must give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance;

(3) the requirements of the preceding paragraph do not apply if the other party has declared that he will not perform his obligations. (Chigbo, 2009)

Within this framework the following the contract's conclusion it becomes clear that the other party will not perform a substantial part of his obligations due to either serious deficiency in the ability to perform or due to his lack of creditworthiness or due to his conduct in preparing to perform or in performing. If the seller has already sent the goods to the buyer then that seller may serve to prevent the goods being handed over to the buyer although the buyer might hold a document of sort entitling him to obtain the same goods. It is important to note that when a party suspends performance that party must give notice immediately of the suspension to the other party of the agreement and is required to continue in performing his obligations if the other party gives assurance that is adequate as to his performance of contractual duties. (Chigbo, 2009)

CISG Article 72

CISG Article 72 states that in the period leading up to the date for the contractual performance should it become obvious that one of the parties will effectively breach the contract fundamentally the other party has the right to declare the contract avoided. Should enough time be allotted the party that intends to declare the contract avoided must provide time that is reasonable in serving notices to other parties. The requirements set out in CISG Article 2 are stated to be non-applicable if the other party has declared that they will not conduct their statements.

Article 71 and 72 Compared

Article 71 set out that when it has become apparent that the other party to the contract will not perform a substantial part of the contractual obligations due to: (1) a serious deficiency in his ability to perform or in his creditworthiness; or (2) his conduct in preparing to perform or in performing the contract, that that party must promptly give notice to the other party of the suspension. However, in Article 72 it is set out that when it is clear that one of the parties will commit a fundamental breach of contract that reasonable notice must be given to the other party 'if time allows'. (Liu, 2005)

The preconditions that must be fulfilled include:

(1) the failure on the part of the buyer to pay for previous shipments;

(2) the failure on the part of the buyer to open a letter of credit;

(3) failure on the part of the seller to reduce price and commit the delivery of the goods on time; and (4) the deliberate termination of goods being delivered on the part of the seller. (Liu, 2005)

Preconditions are not fulfilled when:

(1) the goods were held back upon the buyer failing to establish a letter of credit;

(2) the seller having expressed an interest in deliveries being stopped while agreeing to continue negotiations; and (3) the failure on the part of the buyer to pay one installment. (Liu, 2005)

It is reported that quite different from the "ordinary breach of contract" following the date for performance when discovering this fact is not complex that in the case of anticipatory breach of contract there is a "hypothetical future breach situation." (Liu, 2005)

This means that one of the parties to the contract will make an estimation of the events which are to occur solely on the basis of his objective view influenced by a test that is objective in nature. Article 71 makes a requirement of "some standard of certainty concerning a future breach before one can spend the performance. The suspecting party bears the risk of presuming wrongly." (Liu, 2005)

Stated to be a more basic problem is the 'degree of certainty' that is set out as being required in relation to the other party's presumed failure to perform what is termed as a 'substantial' portion of the contractual obligations. The grounds required for conclusion that the other party will fail…