Q 88-1
(a) Distinguish Article 88(1) from Article 88(2) CISG.
(b) Compare Article 88 CISG with Sections 2-603(1) and 2-604 UCC. Does the UCC make the same distinction as paragraphs 1 and 2 of Article 88 CISG ?
(a) Article 88(1) CISG embodies the right of the party that is bound to preserve the goods to resell them, whereas Article 88(2) CISG states the duty to resell the goods if those goods are subject to rapid deterioration or cause unreasonable costs of preservation.
(b) The distinction is slightly different: Section 2-603(1) UCC imposes the duty to sell the goods if they are perishable or threaten to decline in value speedily, whereas Article 88(2) CISG imposes the same duty in case of rapid deterioration or unreasonable costs of preservation. Unlike the UCC, which expressly requires a resale where the economic value of the goods may decline rapidly, the CISG does not require a resale in that case, and depreciation in the value of the goods is not included in the term ‘deterioration’ either.
Q 88-2
(a) Which factors are relevant in determining whether a resale was made by appropriate means? Are there any particular formalities to be observed?
(b) Which criteria guided the court in C 88-1 in holding that the resale was appropriate? Can a general rule be formulated?
(c) What are the consequences of a resale that was not made by appropriate means?
(a) The most important element is the reasonability of the resale price, which will depend on the circumstances. Even a very low resale price may be reasonable if the party reselling the goods can show that it made sufficient effort to obtain a reasonable price.
No particular formalities or special procedures must be observed.
(b) The behaviour of the buyer, who was obviously unwilling to take over the goods; the efforts undertaken by the seller to resell the goods; the difficulty in reselling goods that were specifically tailored to the buyer. Thus, a ‘scrap’ price was admissible.
As a general rule, it can be stated that, if the goods were catered to the specific needs of the buyer, the seller can resell them at a substantially lower price, as long as it is able to show that it made reasonable efforts to obtain the best price in the circumstances.
(c) It results in a liability for damages which could have been avoided, but the effectiveness of the resale as such is not affected.
Q 88-3
(a) When will the notice required by Article 88(1) CISG become effective? See also Article 27 CISG.
(b) What are the legal consequences if no such notice is given?
(c) Is it possible that, in exceptional cases, the fact that no notice was given will not harm the party who undertook the self-help sale? See C 88-1.
(a) The notice is effective upon dispatch.
(b) It results in a liability for damages which could have been avoided, but the effectiveness of the resale as such is not affected.
(c) The purpose of the notice is to give the other party an opportunity to take measures to prevent the resale. Thus, failure to give notice does not trigger the consequences described in C 88-1 where the other party never answered previous communications and demonstrated by its conduct that it would not take delivery of the goods at all.
Q 88-4
What are the legal consequences if goods subject to rapid deterioration are not resold? See C 88-2.
The loss due to the deterioration of the goods cannot be imposed on the other party. In C 88-2, the seller who did not try hard enough to resell the goods could not claim the full damages arising out of the buyer’s breach of contract.
Q 88-5
It is virtually undisputed that a rapid decrease of the economic value of the goods does not constitute a ‘rapid deterioration’ within the meaning of Article 88(2) CISG.
(a) Compare the situation under the Convention with Section 2-603(1) UCC. Are there any differences?
(b) Is a rapid decline in market value completely irrelevant under Article 88(2) CISG? Consider, in particular, the criterion of ‘unreasonable preservation expenses’ mentioned in Article 88(2) CISG.
(a) Yes, see above Q 88-1(b).
(b) A rapid decline in market value may lead to the preservation expenses for such goods becoming unreasonably high. Where the market price of the goods is worth less than the costs of preservation, an emergency sale of the goods within the meaning of Article 88(2) must be undertaken.
Q 88-6
What criteria are taken into account by courts when deciding whether the preservation costs are ‘unreasonably high’?
The costs of storage and preservation are compared to the value of the goods. Where the costs exceed the value of the goods, a preservation of the goods is unreasonable. Their preservation is also unreasonable if the costs are higher than the difference between the original purchase price and the price obtainable in a resale.
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