Remedies for Breach of Contract

( 合同的违约救济）

• Remedies available to the injured party under the general contract law

payment

Buyer Seller goods

• Contractual parties fully perform their obligations and gain the benefits they bargained for.

• If a party fails to perform part or all of the required duties under the contract, then breach of contract occurs. The other party cannot get the benefits it bargained for.

• What types of breach of contract are there?

Nonperformance, delayed performance and defective performance.

• What are the buyer’s remedies for the seller’s breach?

What are the seller’s remedies for the buyer’s breach?

• What are the buyer’s remedies for the seller’s breach?

1. Nonperformance(1) The buyer may avoid the contract

and claim damages.(2) The buyer may ask for specific

performance. (3) The buyer may cover and claim

damages.

2. Delayed performance(1)The buyer may give a grace

period.(2) Although a grace period is

given, the seller does not perform within this period. Then the breach is fundamental, the buyer may avoid the contract and claim damages.

3. Defective performance(1) The buyer may reject the non-

conforming goods and ask the seller to deliver conforming goods.

(2) The buyer may ask the seller to repair the non-conformity.

(3) The buyer may reduce the price. (4) If the former three remedies are

not available, the buyer may avoid contract and claim damages.

• What are the seller’s remedies for the buyer’s breach?

1.The seller may grant the buyer a grace period

2.The seller may ask for specific performance, e.g., make payment.

3.The seller may resell the goods and claim the difference between the contract price and the selling price if the buyer does not take the delivery.

4.The seller may avoid contract and claim damages directly.   

• Remedies for breach of contract outlined in the CISG include ----

1. avoidance of the contracts, 2. sellers’ right to remedy or cure, 3. sellers’ additional time to

perform, 4. price reduction, 5. money damages, 6. specific performance.

• Fundamental breach and avoidance of contract

1. What is a fundamental breach under the CISG?

Art.25 defines a fundamental breach as one that will substantially deprive one party of what he is entitled to expect under the contract.

According to the CISG, one party can avoid the contract only in the case of a fundamental breach of the other party.

In this way the CISG makes efforts to keep the parties in their contractual relationship.

( Compare the CISG and the UCC in this aspect.)

2. How to avoid a contract under the CISG?

(1)“avoidance” refers to a party’s right to cancel the contract.

(2) How may a buyer avoid the contract if the seller commits a fundamental breach?----Art. 49

cancel/ notify/ protect/ return

(3) Notice of avoidance– Art.49A. How to make an effective avoidance? The buyer’s avoidance rights are not

effective until the seller is given notice.

B. Under what situation may the buyer lose his right to avoid the contract?

If the buyer does not notify the seller of the intention to avoid within a reasonable time after the buyer knew or have known of the breach.

•Seller’s right to remedy/cure under the CISG1. Seller’s right to remedy within the

time for performance (prior to the delivery date)

(1) What time is “ the delivery date ”?

The “date for delivery” under the contract is the date the seller hands the goods over directly to the first carrier unless the parties specify otherwise.

• Two supplementary problems:(1) Where is the place of delivery if the

contract of sale involves carriage of the goods?

The seller exercises his obligation to delivery while handling the goods over to the first carrier for transmission to the buyer. (Art. 31)

(2) If the contract of sale involves carriage of the goods, when does the risk pass from the seller to the buyer?

The risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale.

(2) Seller’s right to remedy within the time for performance (prior to the delivery date)

---- Under what circumstances can the seller exercise the right to remedy?

• The seller has delivered some goods to the buyer before the delivery date.

• Exercising the right to remedy does not cause unreasonable inconvenience or expense to the buyer.

Under these circumstances the buyer may not avoid the contract until the time for performance expires; before the time for performance expires the seller has the right to cure by sending substitute or replacement goods if the goods are nonconforming or the shipment is not complete. (Art.37)

2. Seller’s right to remedy beyond the date for performance—grace period

In the event that the seller has failed to deliver the goods, and the time for their shipment or delivery has passed, what can the parties do to keep their contract?

(1) The buyer can grant the seller extra time to perform the contractual obligations. During this time, the buyer may not avoid the contract or resort to a breach of contract action.

(2) The seller is entitled to ask for additional time to perform if it does not cause the buyer “unreasonable delay” or “unreasonable inconvenience”.

If a seller asks a buyer to agree to an extension of time for delivery and the buyer fails to respond within a reasonable time, the seller may perform within the time requested. (Art.48)

•Specific performance1. Specific performance is used when a

court requires a party to the contract to perform, or carry out its part of the bargain.

Under the common law, this remedy is only used where money damages cannot be calculated or are inadequate; however, under the civil law, this is the usual remedy and it is granted quite often without regard to whether money damages are inadequate.

2. Specific performance under the CISG

Specific performance may be granted only if all of the following conditions are met:

(1) The buyer had not resorted to another remedy;

(2) The seller has made non-delivery or delivered seriously nonconforming goods;

(3) The buyer gave timely notice to the seller that the goods were nonconforming;

(4) The buyer had made a timely request that the seller provide substitute goods.

(Art. 46)