If in an international sales contract – to which the Convention on Contracts for the International Sale of Goods (CISG) is applicable – the buyer does not obtain performance from the seller in the agreed time, or if he obtains the goods on time but in a condition that does not conform to the contract, the buyer can choose to proceed to terminate the contract and hold the seller liable for damages for economic loss as a result of the breach.
The buyer’s right to withdraw from the contract varies depending on the circumstances. In some cases, time will essential for any delay that substantially deprives the buyer of the benefit that he was entitled to expect under the contract. The same situation could also arise if the goods are non-conforming and the non-conformity cannot be remedied within a reasonable time.
In general, time is essential when a sale of goods concerns a product subject to price fluctuations. Another situation where time is essential would be a sale of manufactured goods that must be resold at an agreed time in perfect condition. In other cases, a small delay or disagreement would not be so important to the buyer. Time may then not be essential as it could await delivery or the rectification of the discrepancy by the seller.
The cancellation of a contract should not be taken lightly. A very clear red line must be crossed before obtaining the right of cancellation, this red line is crossed, as stipulated in art. 25 of the CISG, when a fundamental breach occurs. The breach, to be considered essential, must result in such harm to the other party that it substantially deprives him of what he is entitled to expect under the contract.
In this sense art. 25 of the CISG states that:
Breach of the contract by one of the parties shall be essential when it causes the other party such damage as to substantially deprive him of what he was entitled to expect under the contract, unless the breaching party did not foresee such a result and that a reasonable person of the same condition would not have foreseen it in the same situation.
There is another limitation on the right to terminate the contract, which is that the offending party should have been able to foresee such an outcome. Given that, in the case of termination of the contract by the buyer, the seller will be tempted to deny that he could have foreseen the importance for the buyer of obtaining conforming goods in the agreed time, however art. 25 also refers to the concept of what “a reasonable person” would have foreseen in the same circumstances as the seller. If such a “reasonable” person would have foreseen a significant damage to the buyer, he has the right to terminate the contract.
By reference in art. 49 a) to art. 25, the principle of fundamental breach applies to the breach by the seller of any of his obligations under the contract or the Convention, that is, including late delivery and non-conformity of the goods.
In short, it is very important, before proceeding to terminate the contract by the buyer, to analyze exhaustively whether or not there has been a fundamental breach, in the terms established by the CISG, in order to avoid unpleasant surprises once resolved. contract.