Explain the concepts of fundamental breach and nachfrist under the CISG, and their importance in regulating international sales. In light of your analysis (and referring to the CISG in general), does the CISG adequately protect the interests of an ‘innocent' party where the other party is in breach of contract?
What Is The CISG?
There are a number of conventions which relate to the international sale of goods including the United Nations Convention on the Limitation Period in the International Sale of Goods 1974, the International Institute for the Unification of Private Law (UNIDROIT) Convention on Agency in the International Sale of Goods 1983, and the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Procurement of Goods, Construction and Services 1994.
The United Nations Convention on Contracts for the International Sale of Goods 1980 (CIGS) is the main convention for the International Sale of Goods. The CISG is an international set of rules designed to provide clarity to most international sales transactions involving the sale of goods. The CISG went into effect on January 1, 1988, with the United States as a party. Most Western countries are now signatories to the CISG. The CISG can be both a discretionary and mandatory set of rules. It is discretionary when both parties agree to be bound by its rules; it has mandatory application when the parties do not choose to use it but become bound to it by virtue of its automatic application. As a result of the mandatory application of the CISG, most international sale of goods contracts with parties in western countries will be subject to the CISG, unless specifically excluded in accordance with the CISG's terms.
The purpose of the CISG is to make it easier and more economical to buy and sell raw materials, commodities and manufactured goods in international commerce. Without the Convention, there is greater room for uncertainty and disputes. The trading law of one country often differs from that of another. In international transactions, there is often doubt about which nation's law is in control. Where there is doubt about the rules that apply, the parties cannot be sure of their rights and obligations. Such uncertainty breeds inefficiency and mistrust.
The CISG does not deprive parties to the contract of the freedom to form their contracts to their specifications. Generally, the parties are free to modify the rules established by the Convention or to agree that the Convention is not to apply at all.
Domestic law also affects the International Sale of Goods provided that no inconsistency arises between the application of these domestic laws and the performance of the country's obligations under any international conventions: See Williams v The Society of Lloyd's and Hi-Fert Pty ltd v Kiukiang Maritime Carriers Inc.
Fundamental Breach
Fundamental breach, sometimes known as a repudiatory breach, is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages. When a contract of carriage by sea is breached, the defaulting carrier must recompense the shipper or consignee for the damages suffered according to the terms of the contract, and the applicable common law or civil law, or the applicable international convention - The Hague, Visby, or Hamburg Rules, or the Multimodal Convention.
The problem is complicated in carriage of goods by sea cases, because of the long-established principle of geographical deviation, and because the international conventions on carriage of goods have legislated in part on fundamental breach, in respect of geographic deviation, misrepresentation by the shipper and unjustified deck carriage. Moreover, fundamental breach does not fit conveniently into the traditional principles of either the common or the civil law.
There can also be a fundamental breach by the shipper, and this is specifically referred to in the Hague and Hague/Visby Rules, but not specifically dealt with under the Hamburg Rules or the Multimodal Convention.
In English law, fundamental breach was first examined by the House of Lords in the Suisse Atlantique case , wherein they decided that a contract can be voided if a breach of a fundamental term can be found. That is, a breach of a condition that "goes to the root of the contract". This approach is known as the Rule of Law doctrine.
At the Court of Appeal level in Photo Productions Ltd. v. Securicor Transport Ltd., Denning championed the Rule of Law doctrine and extended the rule in the Suisse Atlantique case to apply to all exemption clauses. However on appeal to the House of Lords Lord Wilberforce effectively overturned the Rule of Law doctrine and instead maintained a strict Rule of Construction approach whereby a fundamental breach is found only through examining the reasonable intentions of the parties at the time of the contract.
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