10/11/13 Bruno Zeller

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Reproduced with permission of 8 Vindobona Journal of International Commercial Law & Arbitration
(2004) 81-94.

Fundamental Breach and the CISG - a Unique Treatment or Failed Experiment?

[d1]

Bruno Zeller [a1]

1. Introduction
2. The Common Law Experience
3. The CISG and Fundamental Breach
4. Conclusion

1. INTRODUCTION

Within the four corners of the CISG a 'multi-layered' system of principles solves the disturbance of the
smooth exchange of agreed performances between parties.[1] In effect, Arts. 45 and 61 lay the foundation to
solve the remedial rights of an aggrieved party. It should be noted that a breach of a contract gives rise to
secondary rights and obligations.[2] Fundamental breach is one of the secondary rights and must be read
within the remedial framework of the CISG and not in isolation.

It has been argued that fundamental breach is one of those provisions which contain vague language and
terminology causing uncertainty and unpredictability.[3] However Art. 25 is not a self-contained article, as it
is arguably only 'declaratory' in character. It requires that it must be read in conjunction with 'functional'
articles. The most important one in case of the buyer is Art. 49.[4] However aspects of avoidance are also
discussed in other Articles. [page 81]

Generally speaking, a contract is only as secure as the ability of courts and tribunals to award appropriate
remedies. The CISG consciously separates remedies of damages and fundamental breach. Breaches of
contract cannot be compensated alone by awarding damages. Such a separation is important as the business
community has a basic desire to seek certainty, predictability and hence security in the law of contract.[5]

Article 25 [6] attempts to define fundamental breach as it plays a crucial role within the remedial system of the
CISG. It 'purports to separate a non-fundamental and a fundamental breach of a contract [...] because [such
a distinction] can determine the life or death of a contract.'[7] The CISG however does accept that a party
can be fully compensated for a breach of a contract, but this premise is only accepted once the parties have
performed their obligations to deliver the goods, paid the price for it, and taken delivery of them.[8]

The basic premise is to keep the contract afoot as long as possible as the CISG has recognised that
cancelling a contract in international trade is difficult and should only be the remedy of last resort.

The Landgericht in Munich recognised this principle: motors in video monitors were not big enough and the
court found that a mere exchange of motors in the monitors remedied the situation. Furthermore the buyer
could still use the inferior motors for other purposes.[9] In the court's view the buyer was not totally deprived
of what he was entitled to expect therefore only damages were allowable. The important point was the
consideration of a fundamental expectation, which was derived by the court examining the objective intent of
the parties. Objectively, as the informed bystander, the court found that the contract was not in total disarray.

This paper will build on suggestions by Koch [10] who pointed out that academic writing and case law points
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to several approaches in the application and interpretation of Art. 25. Koch furthermore advocates correctly
that pursuant to Art. 7, a unified and coherent approach is necessary.[11] He proposes that the new
methodology incorporates a test and he concludes that: [page 82]

"The convention, in the determination of fundamental breach, incorporates a dual test based on a
certain degree of severity of the breach and focuses on whether the aggrieved party especially needs
these remedies -- as opposed to damages -- to compensate for impairment."[12]

This paper does not argue that the dual test proposed by Koch is to be rejected. It is argued that such a test
is not materially different from an earlier suggestion offered by Will who points out that the two tests should
be 'substantial detriment and unforeseeability'.[13]

Arguably Koch incorporated unforeseeability into his test by implication. If an aggrieved party 'needs these
remedies' then by implication the detriment suffered by the party must be foreseeable as being severe,
otherwise damages would be sufficient. The important tool, which Koch and Will to an extent neglected to
incorporate into their tests is arguably Art. 8. The general principle of fundamental breach demands such an
approach as Art. 25 incorporates a modified version of Art. 8.

Furthermore it is argued that most writers overlook the basic principle that the drafters of the CISG
purposefully incorporated words which need to be understood in an international rather than national context.
Honnold suggested that the drafters solved this problem by 'rooting out words with domestic connotations in
favour of non-legal earthy words to refer to physical acts.' [14]

Section 2 will briefly examine the common law approach to fundamental breach. Section 3 will focus on Art.
25 and its connection to Art. 8, taking the legislative history of the CISG where necessary into consideration.
It will also be argued that a 'functional' approach to fundamental breach is preferred over an 'interpretative'
one. Section 4 will introduce a conclusion to the arguments.

2. THE COMMON LAW EXPERIENCE

Before the ratification of the convention fundamental breach was not an unknown method in curing contracts
within the common law system. However it has been argued that fundamental breach in the CISG has nothing
to do with the now buried English doctrine of the same name.[15]

It is appropriate that the question of fundamental breach is comparatively addressed. It could be argued that it
is unnecessary to investigate a principle, which is specifically [page 83] excluded from the sphere of the
CISG. However Flechtner put it succinctly when he noted:

"Lawyers cannot help but approach a new legal regime from the perspective of the law which they are
already acquainted. Done carefully, to avoid distorting the new law into either a mere image of the
known or a menacing shadow of change, comparisons can build on established knowledge to provide
an efficient introduction to unfamiliar provisions."[16]

There is abundant evidence to show that courts and lawyers, due to their unfamiliarity, have fallen into the
ethnocentric trap. As far as fundamental breach is concerned it is of value to indicate and isolate municipal
principles, which have no place in the CISG. Hopefully such a comparison will assist the users of the CISG to
'become fluent in the Convention's language'.[17]

For that reason it is important to examine briefly the English experience where it was a distinct body of case
law, which was developed before the 1980s. It specifically dealt with the construction of exclusion clauses.
[18] In essence a party was not protected from liability for fundamental breach or breach of a fundamental
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term.[19] However the House of Lords rejected the doctrine in Photo Production Ltd. v Securior Ltd.[20]
Lord Diplock commented that even if an exclusion clause is unreasonable but the words are clear then:

"it is in my view wrong to place a strained construction upon words in an exclusion clause which are
clear and fairly susceptible of one meaning only even after due allowance has been made for the
presumption in favour of the implied primary and secondary obligation."[21]

However the approach to construction of exclusion and limitation clauses in Australia never relied on the
doctrine of fundamental breach, 'nor did it require an exclusion clause to be construed in isolation from the
rest of the contract'.[22] Australian courts attempted to construct the language of an exclusion clause in the
context of the whole contract. However a clear solution to constructing a contract has not been achieved:
[page 84]

"Nevertheless, the earlier cases are helpful because they show the kind of specific language in an
exclusion clause which has been held sufficient to override primary contractual obligations."[23]

Arguably, fundamental breach in Australian case law has been used where an exclusion clause contradicts or
changes the primary contractual obligation. The court viewed its role in these disputes as to whether the
clause has been drafted in such a way as to override the contractual obligation. It is not a question whether to
give force to the primary obligation of the contract but rather to give force to the technical construction of a
contract.

Such an approach to interpreting contracts is in line with the common law principle of the parol evidence rule.
Arguably the demise of fundamental breach can be attributed to the fact that there was an uneasiness between
the doctrine of fundamental breach and the application of the parol evidence rule. Especially in Australia,
where fundamental breach was always viewed with caution, the overriding consideration was that a contract
must be interpreted within its four corners and that is words must be given their natural meaning. This is
specially so as the common law favours the 'condition-warranty' approach to allow an injured party to treat
the contract as discharged.

In sum fundamental breach was never successful and has been abandoned as in reality it was merely an
attempt to bypass the parol evidence rule, and in any case was confined to the interpretation of exclusion
clauses. It must be noted that at its inception Lord Denning used the concept of fundamental breach as a rule
of law rather than a rule of construction.[24] However, as seen above, it was used as a tool of construction to
determine whether an exemption clause survives a particular breach of a contract.

It is interesting to note that the term 'fundamental breach' has not been abandoned. It is frequently used to
describe the problem posed by an attempt to read down an exclusion clause, which cannot be reconciled
with the primary contractual undertaking of the parties.[25]

It is instructive to view Glebe Island Terminals Pty Ltd v Continental Seagram Pty Ltd.[26] The facts are
simple: thieves stole Whiskey from a container with the connivance of some employees of the terminal
operator. By virtue of a Himalaya clause, the exemptions in the Bill of Lading were extended to the terminal
operator as a subcontractor of the carrier. Clause 4 stated in brief that the carrier is protected from all liability
for the loss of goods after they were unloaded 'in any circumstances [page 85] whatsoever' and 'howsoever
caused'. Clause 8(3) contained a provision, which stated that the exemption applied whether or not the loss
was caused by negligence or actions constituting a fundamental breach of the contract.

The court took the view that clause 4 alone would not have exempted the carrier as it did not extend to an
unauthorised delivery.[27] However clause 8(3) was plain and clear and hence clause 4 became applicable.

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[28]

Of interest is the dissenting judgment of Handley JA who preferred the view that clause 8(3) did not protect
the carrier as delivery to a thief was not authorised by the contract and hence a breach of an express
provision relating to delivery.[29] A question could be asked whether such a situation could or was ever
contemplated by the parties or if the parties would have signed the contract if such events were contemplated
as being covered by the exception clause. Arguably the answer is that a reasonable person in the same
circumstances would not have signed a contract covering such a situation. The question in essence is to
balance the demands of justice and certainty.

The clause is wide enough to reach the conclusion the Supreme Court adopted hence certainty is maintained.
However justice is not served by the decision as subjectively and arguably objectively such a situation was
never contemplated and hence is not within the intent of the contractual parties.

3. THE CISG AND FUNDAMENTAL BREACH

3.1 Introduction

The CISG does not use fundamental breach as a tool of interpretation and furthermore the term 'fundamental
breach' as used in the CISG has no familiar counterpart in any other jurisdiction and therefore it is not fraught
with history.[30] Such a treatment of fundamental breach is a unique concept and, as already indicated, it is a
'fresh legal concept [...] and [...] has no parentage in other jurisdictions'.[31] However the concept of
fundamental breach is not a hastily construed principle either. Rabel, in his original draft of a uniform
international law in 1935, already had the concept of fundamental breach in mind.[32] The original draft Art.
26 only allowed an avoidance if the delivery of goods was not timely.[33] However the limitations imposed in
Art. 26(1) and (2) indicate that time must be of the essence either by having it fixed in the contract or if the
intent of the parties establishes that time was a fundamental term in the contract. [page 86] The principle of
Nachfrist was also introduced in Art. 27 much in the same fashion as in Art. 49(2) of the CISG.

3.2 Interpretation of Article 25

The CISG contains clear rules as to its interpretation and any attempt to understand individual articles or
concepts must commence with an understanding of the underpinning concepts. Art. 25 is no exception.
Broadly speaking the interpretation of the CISG is regulated on two levels; first the convention as a whole,
which is governed by article 7, and secondly the relationship or the contractual obligations between the two
parties governed in article 8 and 9.[34] As such Arts. 7 and 8 contain basically five rules.[35] A general rule
as to interpretation, a rule regarding the purpose of good faith, a rule regarding the intent of parties, a rule
regarding filling of gaps and a rule regarding the relationship between the CISG and national law. It must be
pointed out that not all cases require the use of all five rules. As an example in the interpretation of Art. 25 the
relationship between the CISG and national law is of no consequence, as fundamental breach has no
parentage in other jurisdictions.

Of importance in this context is the rule regarding the intent of the parties. As the CISG is an international
instrument the intention of the drafters must first be discovered through the words they chose. The starting
point should be the consultation of the various texts of the CISG. The problem is that Art. 25 to describe
'fundamental breach' uses the words 'fundamental' as well as 'substantial' and Will correctly remarked that
'defining fundamental with substantial, to begin with, leaves an impression of playful tautology.'[36] The
French as well as the Spanish translations are essentially using the same phraseology however the German
text appears to describe the intention of a fundamental breach best.

The phrase used is that a fundamental breach destroys the legitimately expected outcome of a contract.[37]
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The question therefore is what is the legitimate expectation? To answer that particular question Art. 8 needs
to be consulted. The Oberlandesgericht München ruled that a late delivery in this instance did not constitute a
fundamental breach, as otherwise Art. 49(1)(b) would not have been a necessary inclusion into the CISG.
[38] The court furthermore proclaimed that without setting of a Nachfrist the buyer is not entitled to avoid
the contract.[39] The court came to its conclusion as the [page 87] investigation of the intent of the parties
indicated, that an order was only given by the buyer after they examined a sample hence late delivery was
never an expectation which was fundamental to the contract. In a Swiss decision the court noted that because
already more than a month had passed since the goods had to be delivered pursuant to a clause in the
contract, there was no need to give the seller an additional time according to Art. 47.[40] At first glance one
could argue that there is a discrepancy between the two cases. However a close analysis will indicate that the
connecting factor is Art. 8. In both decision the intent of the parties is taken into consideration. Arguably
therefore 'the importance of the breach is not determinative: only the consequences of the breach to the
damages party area determinative.' [41]

Another question is whether the travaux préparatoire are of particular importance and should be taken into
consideration when interpreting fundamental breach. Arguably travaux préparatoire should only be taken into
consideration as an informative opinion but not as a precedental instrument as most of the history is made up
of individual opinions. As an example in the First Committee deliberations of the Plenary Conference seven
amendments were proposed to then Art. 23. However each amendment was opposed by a number of other
countries. Furthermore the proposal of the civil law countries was not acceptable to the common law
countries.[42] Such division amongst delegates merely points to the difficulties in preparing a compromise
solution to a problem.

The problem with Art. 25 is that not all breaches can be treated as fundamental. It is left to the parties to
determine what importance they attach to contractual obligations. The German Kardinalpflicht describes best
what is to be considered a fundamental obligation. Furthermore Art. 25 also includes a proviso, namely a
foreseeability and knowledge that a breach would result in substantially depriving the other party 'of what he
is entitled to expect'.[43] To take the promise's expectations into account would require a consultation of Art.
8(1) and (2).[44]

It is irrelevant whether the promoters of the convention anticipated or even contemplated that Art. 8 would be
used to interpret Art. 25. The important part is that words and the overall intention of Art. 8 have been
embodied in Art. 25. As such the traveaux préparatoire are of little importance as they are historical
expressions frozen in time.[45] Of importance is that Art. 25 by its wording and as a final product
incorporated segments of Art. 8. Even without such an incorporation, Art. 8 would [page 88] need to be
consulted as it compliments Art. 7 as an interpretative tool. After all the 'determining interest of each of the
parties must be identifiable by the other'.[46]

As pointed out above Art. 25 requires that a substantial detriment to one party can be termed as a
fundamental breach. Such a term cannot be uniformly defined as it depends on each party's expectation of the
entitlement, which they expect under the contract. Hence a fundamental expectation or Kardinalpflicht varies
from contract to contract. This is specifically true if consideration is given that 'substantial detriment' is not
narrowed to a specific harm but rather widened 'to all detrimental effects in the particular context of the other
party's situation.'[47] In essence the term detriment fulfils a mere filtering function as it suffers from the
problem of all general principles by taking on substance within a particular context only, that is within a
contract. Furthermore substantial detriment goes beyond damages as described in Art. 74 as otherwise the
promoters of the CISG would not have introduced a particular principle which as Will coined is a fresh legal
concept and is not fraught with history.[48]

Admittedly as a general principle it suffers from vagueness and Wills commented correctly that:
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"Meditation over terms as pregnant with connotations as 'fundamental', 'substantial' or 'foreseeable'

never ends, nor does controversy about their meaning. But while philosophers have time to muse,
lawyers usually have not; and merchants even less."[49]

Undoubtedly fundamental breach is a vague concept [50] but to cover the intentions of parties it is essential
that it covers 'the field'. It is argued that a vagueness of term is not the problem but rather the inability to
understand the underpinning concepts, which are 'rooted' in the methods of interpretation pursuant to Arts. 7
and 8. The CISG has never been technical in its interpretation. Article 7 supplemented by Art. 8 play an
important role when interpreting the convention as a whole. As such the mandate of good faith and the
subjective as well as objective intent of contractual parties are to be taken into consideration. The law is
working in a cohesive fashion with the intention that both parties will benefit from the contract. Certainty,
flexibility and justice are displayed within the CISG and have been given meaning through Arts. 7 and 8.

Fundamental breach is a principle which bears all the hallmarks of the desire of the CISG to keep a contract
afoot as long as possible. It is interesting to note that courts [page 89] will give life to Art. 49 first before an
attempt is made to define fundamental breach. Not all breaches of a contract are fundamental in nature.
Article 25 makes this abundantly clear.

The problem with Art. 25 is that its application requires a sophisticated grasp of the function of the CISG.
Fundamental breach is as noted above 'declaratory' and has to be read additionally to Art. Furthermore Arts.
7 and 8 will also help in the definition of what in essence 'he is entitled to expect under the contract'. The
investigation therefore needs to commence with an understanding of the 'substantial entitlement' under the
contract. Such a process must take note of the contract itself or any other means permitted pursuant to Art.
8. It is precisely Art. 8 which allows a court to interpret Art. 49 in such a way as to declare:

"Against a considerable delay which constitutes a fundamental breach of the contract according to
article 25 CISG, the buyer receives the right to immediately avoid the sale without giving notice for a
supplementary period."[51]

That is so as the CISG does not provide an obligation concerning the form of the avoidance of a contract
therefore some 'juridical effect must be given to the inaction of the parties [...] and must be analysed as the
reciprocal manifestation of the tacit will to renounce the performance of the contract'.[52]

The need to consult Art. 8 is essential and made clear in the second part of Art. 25. That part is written as an
excluder and if rewritten could be read that a fundamental breach has been committed if 'the party in breach
did foresee and a reasonable person of the same kind in the same circumstances would have foreseen such a
result'. Arguably Will was correct when he noted that the tests should be 'substantial detriment and
unforeseeability' [53] which are only truly detectable if Art. 8 -- that is subjective as well as objective intent --
is taken into consideration. The most important effect in determining a detriment is that it is no longer left to
judges to rule between substantial and insubstantial but it is tied to the expectations and terms of the existing
contract. [54]

It is not surprising if practitioners or academics investigating Art. 25 in isolation do not understand the
complexity of the CISG. Van Reesch examined judicial consistency and Art. 25.[55] He specifically
commented on the lack of consultation of precedent and that foreseeability is conspicuously absent.[56] He
ads that 'it is difficult [page 90] to establish that consequences were unforeseen when the terms of a contract
are clear and unequivocal ... [and therefore] the consequences [of a breach] must have been foreseen'.[57]

The first point to note is that the examination of judicial decisions was restricted to reporting of CLOUT

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('Case Law on UNCTIRAL Texts'), which is a summary and does not give necessary details to come to a
meaningful conclusion. Secondly, the question of foreseeability is undertaken with an ethnocentric view.
Foreseeability is not only detectable in terms of contracts but are also discoverable under Art. 8. The parol
evidence rule has no place within the CISG. However his conclusion is not surprising as it indicates that
'casual observers' of the CISG lack the sophistication required to properly understand the subtleties of the
Convention. It points to the fact that Art. 25 read in isolation will not yield the result as envisaged by its
promoters. Article 25 must be read with Arts. 49, 7 and 8 in mind, which has been confirmed by the
jurisprudence of the CISG.

3.3 Function of Article 25

Generally speaking a contract can only be avoided if a fundamental breach has been committed and hence it
constitutes a pre-condition for avoiding the contract.[58] In other words the threshold test for avoidance is
the notion of fundamental breach.[59] Furthermore despite the risk having passed to the buyer pursuant to
Art. 70 the buyer has not lost any of his remedies available under the CISG.

Once a fundamental breach is established it will act as a trigger to claim delivery of substitute goods pursuant
to Art. 46(2) if the goods do not conform to the contract and Art. 46(3) will allow the buyer to ask for repair
of delivered goods. However only in cases of fundamental breach is the buyer in a position to choose
between the two remedies pursuant to Art. 46. In all other cases repair is the only remedy available.

To avoid the need to establish and define what constitutes a fundamental breach the CISG has simplified the
process by allowing the buyer or seller to fix an additional period of time (Nachfrist) to remedy the breaches
of the contract. If the buyer or seller do not fix the contract within the additional time pursuant to Art. 49(1)
(b) all doubt as to whether a fundamental breach has been committed is removed. In essence what would
otherwise be a non-fundamental breach is now beyond any doubt and must be treated as fundamental.

At first reading it appears to be a simple process; namely to define a fundamental breach which then will allow
access to the above remedies. However such a process is [page 91] not as it appears. Courts will look at the
Convention first and analyse whether a breach of an article within the CISG will prevent a fundamental
breach. As an illustration a German district court ruling from Stendal [60] is of interest. The court noted that
the buyer did not fix a Nachfrist as required under Art. 47(1). Furthermore the buyer did not insist on a
substitute delivery and agreed also on a reduction of the purchase price therefore an insistence on a
fundamental breach had become impossible.[61]

The court looked at the contract as a whole not merely its technical components. Of importance is the
insistence of the court to judge the intention of the parties, which was expressed in an agreement to reduce
the price. Such an agreement will negate the insistence on a fundamental breach. Even severe non-
conformities of goods, which are in essence amounting to a fundamental breach, do not guarantee that
avoidance will be allowed by the courts.

However there is an interesting interplay between Arts. 48 and 49. Article 48 is subject to Art. 49, which
means that it touches the relationship between cure and avoidance.[62] Arguably there is a 'functional' rather
than 'interpretative' relationship between cure and avoidance. Fountoulakis [63] alludes to this interplay and
commented that the seller's ability to remedy is to be preferred over the severity of the breach. Article 48
allows the seller to cure the after the date of delivery taking into consideration Art. 37. It follows that all the
acts mentioned in Art. 37 are open to the seller, which would include delivery of overdue goods.[64]

Arguably such a preference of cure over avoidance does not extend to the principle of Nachfrist. Once
additional time has been granted an expiry of that date will amount to a fundamental breach. Such a view is

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contained within article 48. The buyer in effect makes known to the seller that he will accept a cure, which is
merely the reverse obligation, which is contained in Art. 48(2). The function therefore of fundamental breach
is to force the parties to either cure the contract or agree on avoidance. Courts have used this interplay to
deny fundamental breach.

There are several decisions confirming this view but as an example the decision of the Handelsgericht Aargau
[65] is instructive. This is particularly so as the Swiss Court reaffirmed the views of the OLG Koblenz.[66]
[page 92]

The facts are simple: the buyer ordered three arches filled with air for advertising purposes at a car-race. At
the first race one of the arches collapsed and the buyer attempted to avoid the contract. The seller was
prepared to remedy the situation so that the arches would be ready for the subsequent races. The court
considered that a fundamental breach is not only to be judged on the severity of the breach but also whether
the breach can be cured. If a breach can be cured the detriment to the buyer is not depriving him substantially
from what he is entitled to expect and therefore avoidance should be the remedy of last resort.

4. CONCLUSION

Academics and, to a much lesser degree, courts have had their minds fixed on words such as 'breach',
'detriment' and 'foreseeable' and tried to give meaning to these variables rather than step back and look at
Art. 25 as a single thought.

Arguably Art. 25 is looked at too closely and a broad concept has been made more complicated than it
actually is. It has been noted that it is not the amount of damages but the importance of the damage, which is
crucial in dealing with fundamental breach. Only by looking at the CISG as a whole -- that is, Art. 25 read in
conjunction with other Articles, specifically 49, 7 and 8 -- can a picture be constructed.

Once the Kardinalpflicht of a contract has been pin pointed the problem of defining fundamental breach has
been solved. Admittedly such a view could be criticised as being too simplistic but then again Will pointed
out:

"[...] But while philosophers have time to muse, lawyers usually have not; and merchants even less."
[71]

Lord Mansfield put it similarly in 1761 when he observed:

"The daily negotiations and property of merchants ought not to depend upon subtleties and niceties, but
upon rules easily learned and easily retained because they are the dictate of common sense."[72]

A reading of court decisions does not indicate that courts have 'mused' over these terms but they have gone
on with their job and asked the simple question 'what is the party entitled to expect under the contract?'. If the
breach destroyed the legitimately [page 93] expected outcome of a contract, fundamental breach has
occurred. It appears that courts have followed the dictum of common sense. [page 94]

FOOTNOTES

d1. This paper was presented at the 2nd International Conference on Law and Commerce -- Law,
Commerce and Ethics, 8-10 December 2003, School of Law, Victoria University, Melbourne, Australia.

a1. Dr Bruno Zeller, Victoria University, Melbourne, Australia.

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1. Zweigert & Kötz., An Introduction to Comparative Law, 1998, 3rd ed., at p. 488.

2. Enderlein. F, Sarcevic & Volken, (eds.) International Sale of goods: Dubrovnik Lectures, 1996, at p. 134.

3. Cook, S., 'The UN Convention of Contracts for the International Sale of Goods, A Mandate to Abandon
Legal Ethnocentricity', 16 J.L. & Com. 247, at p. 258.

4. This paper will only consider the position of the buyer, however it must be understood that the position of
the seller in relation to fundamental breach is in essence identical to the buyer. For that purpose see Art. 64.

5. Phang, A. 'Security of Contract and the Pursuit of Fairness' (2000) 16 Journal of Contract Law 158, at p.
158.

6. Article 25 CISG. '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.'

7. Wills, M., in Bianca & Bonell (ed) Commentary on the International Sales Law, 1987, at p. 205.

8. Koch, R., 'The Concept of fundamental Breach of Contract under the United Nations Convention on
Contracts for the International Sale of Goods (CISG)', (1998) Review of the Convention on Contracts for
the International Sale of Goods (CISG) 177, at p. 348.

9. Landgericht München, 27.02.2002, 5HK 0 3936/00.

10. Koch supra fn 8.

11. Ibid, at p. 352.

12. Ibid, at p. 350.

13. Will, M., supra fn 7, at p. 210.

14. Honnold, J., 'Uniform Laws for International Trade: Early "Care and Feeding" for Uniform Growth',
(1995) 1 International Trade and Business Law Annual 2.

15. Will, M., supra fn 7, at p. 209.

16. Flechtner, H. 'Remedies Under the New International Sales Convention: The Perspective from Article 2
of the U.C.C'. (1988) 8 Journal of Law and Commerce 53, at p.53.

17. Ibid.

18. In this context it is of importance to note that the CISG does not specifically address the construction of
exclusion clauses. Schlechtriem specifically suggested that Art. 8 addresses that point.

19. Suisse Atlantique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1
AC 361 .

20. [1980] AC 827.

21. Ibid, at p. 851.

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22. Sovereign v Bevillestra [2001] NSWSC 369 (revised - 21/01/2002), at para 20.

23. Ibid, at p. 33.

24. Phang, A., supra fn 5, at p. 164.

25. Sovereign v Bevillesta [2001] NSWSC 369 (7 May 2001), at p. 17.

26. (1993) 40 NSWLR 206.

27. Ibid, at p. 239.

28. Ibid, at p. 240.

29. Ibid, at p. 215.

30. Will. M., supra fn 7, at p. 210.

31. Ibid.

32. Rabel, E., 'Der Entwurf eines einheitlichen Kaufgesetzes', (1935) 9 RabelsZ 1.

33. Ibid, at p. 16.

34. See Zeller, B., 'Four-Corners - The Methodology for Interpretation and Application of the UN
Convention on Contracts for the International Sale of Goods', Chapter 8, available at:
<http://www.cisg.law.pace.edu/cisg/biblio/4corners.html>.

35. See Hellner, J., 'Gap filling by Analogy', available at:

<http://www.cisg.law.pace.edu/cisg/text/hellner.html>, who recognised three rules in Art. 7. The author has
added two rules which can be drawn from Art. 8.

36. Will, M., supra fn 7.

37. 'der erhoffte Vorteil ist im wesentlichen zerstört'.

38. OLG München, 1. July 2002, U2513/02, 10 0 5423/01 LG München II.

39. Ibid.

40. Bundesgericht, Switzerland, 15 September 2000, 4C.105/2000, available at:

<http://cisgw3.law.pace.edu/cases/000915s2.html>.

41. Ibid.

42. Koch., R., supra fn 8, at p. 281.

43. Article 25.

44. Schlechtriem P., ed., Commentary on the UN Convention on the International Sale of Goods (CISG),
(2nd ed., Oxford University Press, 1998), at p. 178.

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45. See Zeller, B., supra fn 34.

46. Bundesgericht, Switzerland 15 September 2000.

47. Will, M., supra fn 7, at p. 208.

48. Ibid, at p. 210.

49. Ibid, at p. 209.

50. Burkhart, F., Interpretatives Zusammenwirken von CISG und UNIDROIT Principles (2nd ed., Nomos
Verlaggsgesellschaft, Baden-Baden, 2000), at p. 233.

51. Bundesgericht Switzerland, supra fn 46.

52. Ibid.

53. Will M., supra fn.7, at p. 210.

54. Ibid, at p. 215.

55. Van Reesch. P. 'Judicial consistency and Article 25 of the Convention on the International Sale of Goods'
(2003) 77 ALJ 436.

56. Ibid, at p. 443.

57. Ibid.

58. Schlechtriem, P., supra fn 44, at p. 176.

59. Peacock, D., 'Avoidance and the Notion of Fundamental Breach Under the CISG: An English
Perspective' (2003) Vol VIII International Trade and Business law Annual 95.

60. Landgericht Stendal, 22 S 234/94.

61. Ibid.

62. Will, M., supra fn 7, at p. 348.

63. For an excellent treatment of this interplay see Fountoulakis, C, 'Das Verhältnis von Nacherfullungsrecht
des Verkäufers und Vertragsaufhebungsrecht des Käufers im UN-Kaufrecht' 4/2003 Internationales
Handelsrecht (IHR) 160, at pp. 160-168.

64. Will M., supra fn 7, at p. 347.

65. 5.11.2002, OR. 2001.00029.

66. 31.1.1997, -- 2 U 31/96.

71. Will, M., supra fn 7, at p. 209.

72. Hamilton v. Mendez (1761), 2 Bur. 1214.

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Pace Law School Institute of International Commercial Law - Last updated August 18, 2006

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