Non-Conforming Delivery

Vienna Convention on Contracts for the International Sale of Goods 1980: Special Cases

Partial Delivery and Partial Non-Conforming Delivery

Although Art. 52(2) entitles the buyer to refuse to take delivery of the excess quantity, it does not make clear whether the buyer has the right to refuse to take delivery where the seller delivers less than the contract quantity.

It could be argued that according to the principles already dealt with, the buyer can refuse to perform his obligations on account of the seller’s partial non-delivery. The view can also be supported by the fact that short delivery gives the buyer the right to terminate the contract in its entirety in certain circumstances (Art. 51(2) which includes the right to refuse to perform his obligations insofar as this has not taken place. The same logic justifies the buyer’s right to refuse to perform until complete delivery in conformity with the contract is offered.

A further question is: “Does the buyer have the option to refuse to perform in respect of the missing part or non-conforming part where the seller has delivered goods some part of which conform with the contract?” Art. 51(1) seems to enable the buyer to treat the missing and the non-conforming part (as the case may be) as the subject of separate contracts for the purpose of remedy and to resort to his remedies under Arts. 46-50. But those provisions do not include such an option. Can the buyer treat the missing or non-conforming part as the subject of a separate contract for the purpose of the right to refuse to perform for the proportion of the missing or the non-conforming part? Since he is entitled to terminate the contract with respect to the missing or the non-conforming part if the requirements of fundamental breach or Nachfrist notice procedure are satisfied, it can be said, by analogy, that he is entitled to refuse to perform the contract to the proportion of the missing part. The view can also be supported by Art. 58(1) which provides that the buyer is not bound to pay only when the seller places the goods at the buyer’s disposal in accordance with the contract. By analogy, the same rule is applicable where only part of the goods is in conformity with the contract. The same rule would be applicable to an instalment where the seller has delivered a defective instalment, since Arts. 51 and 73 are in fact concerned with a similar case, i.e., where the contract is severable.

Partial Non-Conforming Delivery and Delivery of Wrong Quantity under the Convention and English Law

Both English law and the Convention have set forth particular provisions for the cases where the seller has either delivered the wrong quantity, or has delivered the right quantity but not all of the goods delivered conform to the contract.

In English law, where the seller has made a partial non-conforming delivery, the buyer will be entitled to reject all if the requisite requirements are satisfied (s. 35A of the Sale of Goods Act 1979). Similarly, the same Act gives the buyer the right to reject some or all of the defective goods and keep those which conform to the contract, provided that the goods unaffected by the breach were included in those goods he has accepted (s. 35A(1)). In contrast, although the Convention has allocated a particular provision to the case of partial non-conforming delivery (Art. 51), it does not expressly address the question whether the buyer would be entitled to reject all the goods for partial non-conformity, or keep the conforming part and reject the non-conforming part.

Nevertheless, relying on Art. 51(1) which expressly enables the buyer to exercise his remedies under Arts. 46-50 in respect of the non-conforming part, one may suggest that the same principles applicable to the case where the whole goods are affected by the seller’s default can be applied to the case where a particular part is affected. However, it seems that the rules under s. 35A of the English Sale of Goods Act and the rule set forth by Art. 51(1) of the Convention differ in two aspects. First, as the language of s. 11(4) shows, s. 35A(1) is concerned with non-severable contracts, while the position of Art. 51(1) of the Convention is not so clear. Some commentators suggest that it is designed to regulate severable contracts but others say that it is general. Second, is that the first applies to the case where the buyer could reject all of the goods but wishes to keep some and reject the other part, while under the latter the buyer may reject the non-conforming part even though he is not entitled to reject all. It might be argued that these two differences are not substantial.

This is because:

• First, the provision under s. 35A(1) is subject to the qualification that goods accepted by the buyer should not constitute a part of single commercial unit (s. 35A(7)). Accordingly, in English law the mere fact that something is physically separate does not follow that it would be necessarily appropriate to reject it separately.
• Second, as some commentators suggest, Art. 51(1) of the Convention is only concerned with severable contracts to which s. 31(2) of the English Sale of Goods Act refers.

Partial rejection is also addressed by both systems where the contract is for delivery of goods by instalments. In both systems, the buyer is impliedly empowered to reject a defective instalment even though he has accepted previous instalments. However, it is not clear what lack of conformity gives the buyer the right to refuse to accept the non-conforming instalment(s). One difference appears between the English Sale of Goods Act and the Convention in this respect; the former extends the right of partial rejection right to the instalments (s. 35A(2)), while the Convention contains no such provision.

Tender of Non-Conforming Documents

Although the Convention has referred to the seller’s duty to deliver goods and documents in accordance with the contract terms (Arts. 30 and 34), it does not deal properly with the issue. It is therefore not quite clear whether the buyer has two separate rights to refuse to accept non-conforming documents and goods, and if so, what relation there is between these two rights. It appears that the issue must be examined according to the same principles as elaborated for goods.

According to the principles explained above, it seems that where the seller fails to tender the shipping documents, the buyer is entitled to refuse to pay the price, since where the contract does not specify otherwise, the buyer is under the duty to pay the price only “when the seller places the … documents controlling their disposition at the buyer’s disposal” (Art. 58(1). In other words, the seller’s duty to hand over the documents controlling the disposition of the goods at the buyer’s disposal and the buyer’s duty to pay the price are to be fulfilled at the same time. However, it seems that the rule prescribed under Art. 58(1) would not be applicable to all shipping documents, since the Convention qualifies the non-defaulting buyer’s right to withhold performance of his obligation to pay the price with the qualification that the documents should be those “controlling their disposition.” Accordingly, the seller’s failure to tender documents which lack this qualification is to be placed within the category of defective delivery rather than non-delivery.

Where the seller tenders documents which do not correspond with the contract requirements, the buyer is not required to take delivery [1] and pay the price in exchange for such documents, since, as the last phrase of Art. 30 and Art. 58(1) provides, the seller must tender documents which are in conformity with the contract, otherwise the buyer is not obliged to accept and pay for them. Furthermore, it seems that the right to refuse to take over the documents could be inferred from the obligation of the seller under Art. 34.[2] Under this Article, the seller is obliged to hand over the documents at the time and place and in the form required by the contract. [3] In addition, rejection of non-conforming documents is a well-accepted customary law which is to be given effect under Art. 9.[4] Accordingly, where documents tendered by the seller do not show the respective conditions in respect of the goods and documents, the buyer would be entitled, under some circumstances, to refuse to accept them.[5]

Rejection of Goods and Documents. From the preceding discussions it has been made clear that the Convention allows the buyer to reject defective documents. However, it contains no clear provision to regulate the case where the subject of the documents is defective. Does the buyer have a further right to reject the non-conforming goods when they are landed?

It seems that since the seller’s duties to deliver the goods and the relevant documents are two separate obligations, breach of each would give rise to a separate right to refuse to accept. Accordingly, the buyer should be given the right to refuse to accept the goods when they arrive. He should also be entitled to reject documents which do not comply with the contract even though the goods themselves are perfectly in accordance with the contract.[6]

On the above interpretation, the question arises whether the right of rejection of non-conforming goods is impaired by the acceptance of the documents. What is certain is that where the given defect is reflected on the documents, the buyer’s acceptance may be treated as a waiver of his right to reject for the defect in the goods. But where the buyer accepts the documents, for example, a bill of lading, which turns out to have been falsely dated, it would not, it seems, prevent him refusing to take delivery of the goods on discharge from the ship.

Although, the question is not expressly addressed by the Convention, it can be argued that, under the Convention, the buyer would lose the right to rely on the lack of conformity of the goods only “if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he discovered it or ought to have discovered it” (Art. 39(1)).[7]

Therefore, he can rely on an unspecified defect if at the time of acceptance he had neither knowledge nor means of knowledge of it. He can also rely on the non-conformity of the goods, even if at the time of acceptance of the documents with a minor defect he had neither knowledge nor means of knowledge of another defect in respect of the goods.

(In conclusion) the Convention, while referring to the seller’s duty to deliver goods and documents in accordance with the contract terms (Arts. 30 and 34), has not properly answered these questions. Although, relying on Arts. 30, 34 and 58(1) which provide that the seller must tender documents which are in conformity with the contract, one may argue that the buyer has an option to refuse to accept non-conforming documents, the other questions are left unanswered. This is perhaps because the subject is already adequately covered in such well known and widely accepted terms as the International Chamber of Commerce’s Incoterms and its Uniform Customs and Practice for Documentary Credits.

Delivery of Non-Conforming Goods under the Convention and English Law

Although the Convention does not mention the buyer’s right to withhold performance within the remedial provisions provided for the buyer (Arts. 45-52), close analysis of the Convention provisions demonstrates that the buyer has a separate right simply to withhold performance of his obligations. The two systems, however, differ in that in the Convention, unlike English sale of goods law, which precisely provides that any breach of condition entitles the buyer to reject, it is not precisely determined what non-conformity will give rise to the right to refuse to accept and take delivery of the goods.

However, (…) the buyer is certainly not required to show that the lack of conformity has amounted to a “fundamental breach” defined in Art. 25. Fundamentality of breach is only required for the purpose of termination and requiring delivery of substitute goods (Arts. 49(1)(a), 51, 72, 73 and 46(2)). Similarly, it was argued that the Convention does not certainly allow the buyer to refuse to accept the goods for any lack of conformity. Close consideration of Arts. 46(2), (3) and 71(1) suggest that the buyer is not entitled to reject the goods for minor lack of conformity. This result, deduced from the relevant provisions of the Convention, accords with the system of remedies provided by the Convention, the principles of good faith (Art. 7(1)) and mitigation (Art. 77). It appears that the Convention has left the case to the arbitrators to decide in accordance with the particular circumstances of each case.

Despite this apparent sharp difference, it seems that as far as the buyer’s right to reject is concerned, the difference between the two systems will not be substantial in some cases. This would be the case where the buyer has alleged that the seller’s non-conforming delivery has resulted in breach of a term implied by ss. 13-15 of the English Sale of Goods Act. In that event, s. 15A(1) of the Act, by recognising the rule that the buyer who does not deal as a consumer will not be entitled to reject where breach of a term implied by ss. 13-15 is so slight that it would be unreasonable for the buyer to reject the goods, gives in fact the court a discretionary power to decide whether rejection was or not was reasonable. Moreover, as already shown, English courts will usually be disinclined to treat a term placed outside the area of legally classified terms as a condition if the result of such a construction would be unreasonable.

By Mirghasem Jafarzadeh. LLB (University of Tehran), LLM (University of Shahid Beheshti, Tehran-Iran, and, Sheffield University, Sheffield-England) and PhD (Sheffield University, Sheffield-England). Senior lecturer at the Department of Law, Faculty of Law, University of Shahid Beheshti, Tehran-Iran.

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Notes

• It is worth noting that the Convention fails to mention any statement that the buyer is bound to take over the documents tendered to him by the seller. Nevertheless, this failure can be justified by the fact that in the case of documentary sales, insofar as documents are concerned, any document which is necessary for taking delivery of the goods, e.g. documents of title, the obligation to take delivery of the goods regularly comprises an obligation to take those documents.
• Art. 34; “If the seller is not bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. …”
• See also, Enderlein; F.; Maskow, D., (1992) at 231.
• Art. 9: ” 1. The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. 2. The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.”
• It is worth noting that where the parties make payment through the system of letters of credits banks, of course, have very strict requirements in regard to the adequacy of documents where letter of credit are issued. That is, they will refuse to pay against documents which do not strictly comply with the requirements of the contract. See in this connection: Uniform Customs and Practices for Documentary Credits (1993 Version), Art. 13.
• See in this respect, Guest A.G. et al, (1997) para. 19-126, no. 91.
• See also Art. 43(1).