Fundamental Breach in Documentary Sales Contracts: The Doctrine of Strict Compliance in Letters of Credit Law and the Underlying Sales Contract

Document Type : academic

Author

Abstract

Documentary Sales Contracts including “CIF” and “FOB” sales as the typical case, impose twofold separate and independent obligations on the sellers: the obligation to the delivery of conforming goods, and obligation to present complying documents. Fulfilling each of these obligations does not discharge the other. Consequently, the breach of each of them confers on the buyer remedies specific to the breached obligation. When the contracting parties use letters of credit in documentary sales contract as a payment method of price, the seller as the beneficiary of the credit must comply strictly with terms and conditions of the letter of credit to pay the amount of credit. This requirement is known as “standard of strict compliance” in letters of credit law. As a result of applying the standard of strict compliance in letters of credit law, the most trivial discrepancy allows, even requires, a bank to reject the documents for non-conformity with the letter of credit. This paper seeks to answer this question whether the standard of strict compliance, as applied in letters of credit, must have effect in sales contract as well. Furthermore, in the event that seller presents non-conforming documents to the bank, and does not cure the non-conformities of documents in proper time, whether his action could be characterized as fundamental breach of sale contract in the sense of this concept in CISG, and consequently, whether we can confer the relevant remedy, i.e. the right of avoidance on the buyer are discussed.

Keywords

References

  •  

    - Books

    • Bianca, C. M., and M. J. Bonell. Commentary on theInternational Sales Law: The 1980 Vienna Sales Convention. 1st Ed. Milan: Guiffre, 1987.
    • De Rooy, F. P., Documentary Credits. 1st Ed. Deventer: Kluwer, 1984.
    • Enderlein, F., and D. Maskow. International Sales Law. 1st Ed. Cary: Oceana Publications, 1992.
    • Goode, R., Commercial Law, 3rd Ed., London: Penguin Books, 2004.
    • Honnold, J. O. Uniform Law for International Sales under the 1980 United Nations Convention. 3rd Ed., The Hague: Kluwer Law International, 1999.
    • International Chamber of Commerce, Uniform Customs and Practice for Documentary Credits (UCP 600), ICC Publication No. 600 (rev. 2006).
    • Jack, R., Documentary Credits. 3rd Ed. London: Butterworths, 2001.
    • Lando, Ole, and Hugh Beale (eds). Principles of European Contract Law: Parts I and II. 1st Ed. The Hague: Kluwer Law International, 2000.
    • Oelofse, A.N., The Law of Documentary Letters of Credit in Comparative Perspective. 1st Ed. Pretoria: Interlegal, 1997.
    • Ramberg, J., International Commercial Transactions. 2nd Ed. Stockholm, 2000.
    • Schlechtriem, P., and I. Schwenzer. Commentary on the UN Convention on the International Sale of Goods. 2nd Ed. Oxford: Oxford University Press, 2005.

     

    - Articles

    • Bonell, M. J., “The UNIDROIT Principles and the CISG.”, in An International Restatement of Contract Law, edited by M. J. Bonell, 301-334. 2nd Ed. Irvington, NY: Transnational, 1997.
    • El-Saghir, H., “Fundamental Breach: Remarks on the Manner in which the Principles of European Contract Law May be Used to Interpret or Supplement Art. 25 CISG”, July 2000, available online at: <www.cisg.law.pace.edu/cisg/text/pecl-comp25.html>. (last visited Aug. 20, 2015).
    • Garro, A. M., “Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods”, (1989) 23 International Lawyer.
    • Garro, A. M., “The Gap-Filling Role of the UNIDROIT Principles in International Sales Law: Some Comments on the Interplay between the Principles and the CISG”, (1995) 69 Tulane Law Review.
    • Graffi, L., “Case Law on the Concept of ‘Fundamental Breach’ in the Vienna Sales Convention”, Revue de droit des affaires internationales/International Business Law Journal 3 (2003).
    • Hillmann, R. A., “Applying the United Nations Convention on Contracts for the International Sale of Goods: The Elusive Goal of Uniformity, in Review of the Convention on Contracts for the International Sale of Goods (CISG)”, (1995) Cornell Int'l L.J..
    • Huber, P., “Some Introductory Remarks on the CISG”, (2006) 6 Internationales Handelsrecht.
    • Koch, R., “The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG).” in Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), edited by Pace University International Law Journal Staff, 177-354. The Hague: Kluwer Law International, 1999.
    • Lorenz, A., “Fundamental Breach under the CISG”, 1998, available at: <www.cisgw3.law.pace.edu/cisg/biblio/lorenz.html>. (last visited Aug. 20, 2015).
    • Mullis, A., “Avoidance for Breach under the Vienna Convention: A Critical Analysis of Some of the Early Cases”, in Anglo-Swedish Studies in Law, edited by Andreas and Jarborg. Uppsala: Iustus Forlag, 1998.
    • Schwenzer, I., “The Danger of Domestic Preconceived Views with respect to the Uniform Interpretation of the CISG: The Question of Avoidance in the Case of Nonconforming Goods and Documents”, (2005) 36:4 Victoria University of Wellington Law Review.
    • Xiang, G. and R. P. Buckley, “The Unique Jurisprudence of Letters of Credit: Its Origin and Sources”, (2003) 4 San Diego Int'l L. J..
    • Yovel, J., “Buyer’s Right to Avoid the Contract: Comparison between Provisions of the CISG (Art. 49) and the Counterpart Provisions of the PECL (Art. 9:301, 9:303 and 8:106)”, June 2005, available at: <www.cisg.law.pace.edu/cisg/biblio/yovel49.html>. (last visited Aug. 20, 2015).
    • Yovel, J., “Seller's Right to Avoid the Contract in International Transactions: Comparative Analysis of the Respective Provisions in the CISG (Art. 64) and in the PECL”, June 2005, available at: <www.cisgw3.law.pace.edu/cisg/biblio/yovel64.html>. (last visited Aug. 20, 2015).

     

    - Websites

    • Commentary on the 1978 Draft Convention on Contracts for the International Sale of Goods (UN DOC. A/CONF. 97/5), available online at: <www.cisg.law.pace.edu/cisg/text/secomm/>. (last visited Aug. 20, 2015).
    • Principles of European Contract Law, 1999, available online at: <frontpage.cbs.dk/law/commission_on_european_contract_law/>. (last visited Aug. 20, 2015).
    • Secretariat Commentary on 1978 Draft Art. 23 (draft counterpart of CISG Art. 25), available at: <www.cisg.law.pace.edu/cisg/text/secomm/ secomm- 25.html>. (last visited Aug. 20, 2015).
    • Status-uncitral, <www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html>.
    • UNCITRAL Digest on Art. 54, available online at: <www.uncitral.org/ uncitral/en/case_law/digests/cisg.html>. (last visited Aug. 20, 2015).
    • UNCITRAL Digest on Art. 54, available online at: <www.uncitral.org/ uncitral/en/case_law/digests/cisg.html>. (last visited Aug. 20, 2015).
    • UNIDROIT Principles for International Commercial Contracts, 2004, available online at: <www.unidroit.org/english/principles/contracts/ main.htm>. (last visited Aug. 20, 2015).
International Law Review
Volume 34, Issue 56
March 2017
Pages 235-262

Files

History

  • Receive Date: 30 April 2017
  • Accept Date: 30 April 2017

Share

How to cite

Statistics