Q 77-1
(a) What concept underlies Article 77 CISG?
(b) What are the legal consequences if the aggrieved party fails to take ‘such measures’?
(c) To what kind of remedies does Article 77 CISG apply?
(d) Are there similar provisions in domestic sales laws?
(a) Avoidable losses should not be compensated.
(b) Exclusion or reduction of damages.
(c) According to its wording, systematic position, and drafting history, Article 77 CISG only applies to damages. However, Article 77 CISG must also have implications for other remedies. Hence, delaying avoidance of the contract for speculative reasons, although it does not exclude avoidance, may lead to a reduction in damages.
(d) All legal systems acknowledge the principle of the duty to mitigate damages.
Q 77-2
(a) Specify the most important factors that a court must take into account in order to determine whether the aggrieved party acted in accordance with Article 77 CISG. See C 77-2.
(b) At what point in time are measures to mitigate damages to be taken? Consider seasonal goods, goods in a highly volatile market, non-perishable goods, the urgency in receiving the goods, etc.
(c) When will a cover transaction be necessary in order to comply with Article 77 CISG? See C 77-1.
(d) Is a party obliged to conclude a substitute transaction with the contract breacher? See C 77-4.
(a) The most important factors to consider are the certainty of the breach, possible time constraints, reasonableness, and the availability of substitute transactions.
(b) At the earliest point in time when it becomes clear that the contract is breached and loss will occur. The point in time may nevertheless vary. A speedier reaction is called for in the case of seasonal goods, goods in a volatile market or when the goods are urgently needed and loss is imminent than in cases of non-perishable goods.
(c) In general, it depends upon the circumstances of the case. The court in C 77-1 takes a very restrictive approach in upholding the performance principle. In contrast, the court in C 77-2 even required the buyer to contract for substitute goods with its direct competitor.
(d) If the breach has not entirely destroyed the trust between the parties, the aggrieved party may be obliged to contract with the breaching party. For example, if the seller refuses to perform at the contract price but offers the goods at a price still below the current market price.
Q 77-3
Decide whether the party complied with Article 77 CISG in the following cases:
(a) Seller does not resell the goods as long as the buyer, which is the party in breach, could still claim performance of the contract.
(b) Seller does not resell goods which had been made on the buyer’s instructions.
(c) Seller collects debts through an agent or a lawyer where the legal situation is not particularly complicated.
(d) Buyer fails to resell defective, rapidly deteriorating goods.
(e) Buyer uses its own buffer stocks of coal where the seller is late in delivery.
(f) Buyer fails to look for replacement goods in markets other than the local region.
(g) Buyer offers the goods delivered too late by the seller to its own buyer at a 10% discount.
(h) Buyer fails to examine the shipments before mixing the shipments together.
(a) It depends on whether the seller is obliged to avoid the contract, See C 77-1 and Q 77-2 (c)).
(b) It depends on whether there is a market for the goods.
(c) If seller can be expected to collect the debts itself, employing an agent or lawyer constitutes a breach of the duty to mitigate damages under Article 77 CISG.
(d) It depends on whether the buyer is knowledgeable and has access to the respective market.
(e) In this case, buyer complied with its duty under Article 77 CISG.
(f) It depends on whether the buyer is knowledgeable and has access to markets other than the local region.
(g) Article 77 CISG is complied with if the buyer can thus prevent higher damages.
(h) In general, this is a question of Articles 38 and 39 CISG. In extreme circumstances, the duty to examine may form part of the duty to mitigate damages under Article 77 CISG.
Q 77-4
(a) To what extent will the aggrieved party’s damages be reduced if it fails to comply with Article 77 CISG? See C 77-5.
(b) Who bears the burden of proof for compliance with the duty to mitigate damages?
(a) Reduction as far as the loss could be prevented by reasonable measures.
(b) The party breaching the contract bears the burden of proof that the other party violated its duty to mitigate damages.
Q 77-5
Can the party who incurred expenses in order to comply with Article 77 CISG be compensated for these expenses? See also Article 88(3) CISG. On which provision(s) would the creditor base its calculation?
The costs incurred in mitigating damages may be claimed as part of damages under Article 74 CISG.
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