Non-fulfilment of Obligations by Sellers and Buyers Arising from the Contracts for International Sale of Goods

Non-fulfillment of obligations by sellers and buyers arising from the contracts for international sale of goods

International sale of goods is regulated by Convention on Contracts for the International Sale of Goods, signed in Vienna in 1980. And the Republic of Armenia is the party to this Convention. This Convention establishes the order of conclusion of such contracts, rights and obligations of the parties as well as consequences of non-fulfillment of contractual obligations by the parties. Taking into account the variety of legislative provisions on issues of regulating parties’ obligations, it is getting clear that protection of rights of the parties is not possible without determining consequences of non-fulfillment of contract’s conditions.

The buyer must pay the price for the goods and take delivery of them in accordance with provisions of the contract and this Convention. Taking delivery consists in doing all the acts which could reasonably expected of him in order to enable the seller to make delivery and in taking over the goods.

If the buyer failed to fulfil any of his obligations, the seller has the right to:

-require the buyer to pay the price for the goods, take delivery or fulfil another obligation;

-establish additional reasonable term for performance by the buyer of his obligations;

-avoid the contract, if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract or if the buyer does not, within the additional period of time fixed by the seller perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed;

-determine the specialization of the goods in accordance with the requirements of the buyer that may be known to him, if the buyer fails to make such specification of the goods on the date agreed upon or within a reasonable period after request of the seller. 

Risk of accidental loss of the goods is passing to the buyer, when the goods are handed over to the first carrier for transmission to the buyer. The fact that the seller is authorized to retain documents controlling the disposition of the goods doesn’t affect the passage of the risk. The seller is obliged to make delivery of goods, transmit the documents concerning the goods and pass ownership rights of the goods in accordance with provisions of the contract. The delivery may be carried in a certain date, interval of time or in reasonable term after concluding contract.

If the seller failed to perform his contractual obligations, the buyer has a right to:

-require the seller to perform his obligations, unless the buyer used the remedy, which is inconsistent with this requirement;

-require delivery of substitute good in case of a fundamental breach of contract;

-require the seller to remedy the lack of conformity of the goods with the contract by repair, in case of a fundamental breach of contract;

-fix an additional reasonable period of time for the seller to perform his obligations;

-declare the contract avoided, if the failure by the seller to perform any of his obligations is deemed as a fundamental breach of the contract, or in case of non-delivery, if the seller doesn’t deliver the goods within the additional period of time, or declares that he won’t deliver the goods within established period;

-above listed provisions is also used with respect to the part of the goods, in case if the seller delivers only the part of goods or if only the part of delivered goods conform to the contract;

-avoid the contract on the whole, if partial non-fulfillment or partial lack of conformity of the goods to the contract constitutes a fundamental breach of the contract;

-refuse to take delivery or take the goods, delivered before the fixed date;

-take or refuse to take the excessively delivered goods.

Vienna Convention also establishes the ways of rights protection, which are common both to the sellers and the buyers.

 A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of a serious deficiency in his ability to perform or in his creditworthiness, or his conduct in preparing to perform or in performing the contract. A party suspending performance must immediately give notice of the suspension to the other party and must continue with performance if the other party provides assurance of his performance.

If prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided. If time allows, the party intending to declare the contract avoided must give reasonable notice to the other party. It is worth mentioning the refunding damages. Damages consist of a sum equal to the loss as well as loss of profit, suffered as a consequence of the breach.

If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable. The parties may protect their rights in legal process. Competition of Common Jurisdiction Courts in Armenia is determined by Civil Procedure Code of the Republic of Armenia.

The action against defendant can be brought in the court of residence (whereabouts) of the defendant in Armenia, or in the court of place of performance, if that place is located in Armenia. The parties are also entitled to determine the jurisdiction on their own. Above listed ways of determining jurisdiction can be applied, if the offender is in Armenia, and legislations of other countries may differ from each other. Parties to the contract are also entitled to submit their dispute to arbitration by virtue of an arbitration clause or separate agreement of the parties on arbitration. Arbitration may be located both in Armenia and overseas.