REMARKS ON THE MANNER IN WHICH THE PRINCIPLES OF EUROPEAN CONTRACT LAW MAY BE USED TO INTERPRET OR SUPPLEMENT ARTICLE 75 OF THE CISG

Abstract

Article 75 of the Convention is part of the set of rules and principles that provide the law of damages in the CISG.1 CISG article 75 regulates the operation of a substitute transaction, which is adopted in most legal systems as well as in basic multilateral instruments such as the CISG and the PECL.2 Pursuant to CISG art. 75, as a result of a breach of contract the aggrieved party may carry out a substitute transaction in a reasonable manner and within a reasonable time after avoidance and may recover the difference between the contract price and the price of the substitute transaction. The same issue is regulated in substantively identical terms in PECL art. 9:506. However, the drafters of the PECL go further and in other provisions of the European Principles define terms that may help the interpretation and application of PECL art. 9:506 and its counterpart CISG provision. CISG article 75 provides a method for measuring damages when a party avoids a contract, usually due to a fundamental breach by the other party. This provision represents a specific application of CISG art. 74, which states the general rule for the measurement of damages.3 Both CISG art. 75 and PECL art. 9:506 stipulate the same basic premises that have to exist before the substitute transaction takes place. - Firstly, one of the contracting parties must breach the contract and in consequence the innocent party must undertake action for the termination of the contract. As far as it concerns this premise, a problem may arise in respect of the determination of the moment when the contract is declared avoided. - Secondly, there must be a substitute transaction effected by the aggrieved party. Here the issues that have to be discussed are in respect of the substitute transaction's characteristics and aspects. - Thirdly, the substitute transaction must be performed in a reasonable manner and within a reasonable time after avoidance. Specific attention must be drawn to the concept of “reasonableness”. - Fourthly, the amount of the damages claimed by the aggrieved party must be assessed. The method for measuring damages stipulated in CISG art.75 is seemingly clear but still needs elucidation. - Finally, CISG art. 75 CISG, like PECL art. 9:506, provides for the possibility of recovery of further damages.