Mitigation of Damages for Breach of Contract for the International Sale of Goods*
Mitigación de daños por incumplimiento del contrato de compraventa internacional de mercaderías
Vniversitas, no. 137, 2018
Pontificia Universidad Javeriana
Jorge Oviedo-Albán a jorgeoa@unisabana.edu.co
Universidad de La Sabana, Colombia
Date received: 14 August 2017
Date accepted: 10 September 2017
Date published: 30 November 2018
Abstract: This article addresses the duty to mitigate damages in activities relating to the international sale of goods that are govern by the 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG), which is performed by the creditor in the event that the debtor breaches the contract. It is based on a dogmatic understanding of Article 77 of the CISG. The paper examines legal theory in order to establish the concept and legal character of mitigation of damages, and, through this, the scope. Court decisions and arbitration awards have also been studied, which, when implemented, have established what type of mitigating behavior should be undertaken by the creditor if the debtor breaches the contract.
Keywords Mitigation of damages, Breach of contract, International Sale of Goods.
Resumen: Este artículo se refiere al deber de mitigar los daños en operaciones de compraventa internacional de mercaderías regidas por la Convención de las Naciones Unidas sobre los Contratos de Compraventa Internacional de Mercaderías, asumido por el acreedor ante el incumplimiento del contrato por el deudor. Para su elaboración se han tenido en cuenta la interpretación dogmática del artículo 77 de la Convención, apoyada en una indagación de tipo doctrinal con el fin de establecer el concepto y la naturaleza jurídica y a partir de ello su alcance, para lo cual igualmente se han estudiado fallos y laudos arbitrales que en su aplicación han establecido qué tipo de conductas mitigadoras deben ser asumidas por el acreedor frente el incumplimiento del deudor.
Palabras clave: Mitigación de daños, incumplimiento contractual, compraventa internacional de mercaderías.
Introduction
This article addresses the duty to mitigate damages in activities relating to the international sale of goods that are governed by the 1980 United Nations Convention, hereinafter the Convention on the International Sale or CISG (United Nations Convention on Contracts for the International Sale of Goods), which is performed by the creditor in the event that the debtor breaches the contract. It is based on a dogmatic understanding of Article 77 of the United Nations Convention on Contracts for the International Sale of Goods, which, to date, has been implemented by 89 countries, including several in Latin America. The paper examines legal theory in order to establish the concept and legal character of mitigation of damages, and, through this, the scope. Court decisions and arbitration awards have also been studied, which, when implemented, have established what type of mitigating behavior should be undertaken by the creditor if the debtor breaches the contract.
The aim of the article is to demonstrate that there is a duty to mitigate damage, and also to avoid it. This is included in some of the Convention's rules, especially in Article 72, which allows the creditor to terminate the contract in the event of a future fundamental breach. If such action is not undertaken, Article 77 will apply, and, as such, the other party can request that compensation is reduced. This article, thus, suggests that for activities relating to the international sale of goods there is a duty not only to mitigate but also to avoid damage.
This article is organized into the following sections: First, the concept and legal recognition of the mitigation of damages in legal traditions are addressed. Subsequently, reference is made to the regulation of mitigation of damages in international contract instruments that have seemingly drawn on the rule contained in Article 77 of the Convention on the International Sale. Thirdly, the legal nature and scope of the mitigation of damages are discussed, then several representative mitigating behaviors are identified, including termination for fundamental foreseeable breach of contract in accordance with the regulations stated in the CISG. The final section contains the conclusions and bibliography.
Concept and recognition in the legal traditions
The following section explains the concept of mitigation of damages that is included in the Convention on the International Sale, and reference is also given to how it is recognized in other international contract instruments and in several harmonization proposals. Additionally, the way in which it has been adopted by countries that follow the Anglo-Saxon tradition as well as some that use continental European law will be referred to in order to provide an insight into the context on its inclusion into foreign laws.
The duty to mitigate damages can be considered to be a set of reasonable measures that the party who suffers the breach of contract should adopt in order to avoid being damaged to any further extent. As such, it cannot be claimed that the other party compensates them for those damages that are not a consequence of the breach, but instead for their own lack of adopting such measures. 1
The duty to mitigate damages, at least with respect to contemporary law, has Anglo-Saxon origins. 2 In England, it has been recognized that this includes the duty for the creditor to adopt reasonable measures to protect his interests when the debtor breaches the contract. This should be undertaken in such a way that the loss resulting from the breach should be minimized and any increase in damages should be avoided. The debtor will only be eligible for compensation of losses after having taken these measures. 3 Sections 50 and 51 of the Sales of Goods Act establishes that the buyer or seller has the duty to minimize damages if the other party breaches contract by signing an alternate contract, and, if this duty is breached, the compensation for breach can be reduced. 4
In the United States, the duty to mitigate damages can be found in §350 of the Restatement (2nd) of Contracts; damages cannot be recovered if they could have been avoided by the aggrieved party. This does not prevent the affected party claiming compensation if they made reasonable efforts to avoid the loss, which, of course, depends on the circumstances. 5 Also, the Uniform Commercial Code contains applications regarding the duty to mitigate damages such as those written in § 2-712, which establishes the possibility for the buyer to purchase replacement goods in place of the goods that the seller should have delivered, thus being able to reclaim the costs incurred. Sections § 2-708, § 2-713, and § 2-715 include the right to deduct the costs from the respective compensation that the seller or buyer breaching contract could have avoided as well as the indirect damages stemming from the seller's breach. This includes the loss that comes from the overall or specific needs that the seller had reason to be aware of when contracting and could not have reasonably been avoided through a replacement purchase or other method. 6
In some codes that are based on the continental European tradition, mitigation of damages has been expressly included, for example in Articles 1227-1 of the Italian Civil Code, 1479 of the Civil Code of Québec, 6:101 of the Dutch Civil Code, 44 of the Swiss Code of Obligations, and §254-2 of the German Civil Code. 7
In Latin American law, there have been no further developments other than the inclusion of mitigation of damages in Article 1327 in the Peruvian Civil Code of 1984; in Article 348 in the Bolivian Civil Code; and also in Article 1074 of the Colombian Code of Commerce, despite being written into insurance contracts when establishing that the insured party is obliged to avoid any increase in loss and to recover what is insured. 8 Recently, the Argentine Civil and Commercial Code, which was created in August 2015, has included the duty to avoid causing unjustified damage and to take reasonable measures to avoid damage or reduce its extent. 9
Despite the dearth of normative regulation, some authors have posed the possibility of deriving the duty to mitigate damages from the obligation to behave in good faith when implementing contracts that are explicitly legally regulated. As such, JORGE CUBIDES-CAMACHO has commented in the Colombian legal theory that the mitigation of damages should be seen as a demonstration of the “responsibility of indemnity”, which is, in turn, derived from the duty to act in good faith when implementing a contract that is established in Article 1603 of the Colombian Civil Code. 10
Similarly, ÁLVARO VIDAL-OLIVARES bases his comments in Article 1546 of the Chilean Civil Code when he affirms that good faith serves to limit the powers and rights of the contractors and as a source of duties of conduct, for example, in this case, for the creditor affected by the breach of contract. 11 In Spain, LUIS DÍEZ-PICAZO affirms that the mitigation of damages is derived from good faith, which means avoiding increasing damages. In order to do so, preventative measures that require reasonable care should be adopted. 12
It is worthwhile mentioning that in the modernization proposal of the Spanish Civil Code, in terms of obligations and contracts, the duty to mitigate damages was included in Article 1211. The suggested rule sets out that the debtor will not respond for damages that the creditor could have avoided or reduced by adopting the measures required by good faith but will compensate for the expenses reasonably incurred by the creditor, even if the measures have been unsuccessful.
Regulation in the CISG and other international contractual instruments
Despite there being no rule that defines it expressly, the Convention on the International Sale includes a broad concept of breach of contract in an objective manner, which, apart from subjective elements such as guilt, includes the non-implementation of services as well as late and defective performance. It establishes a system of remedies that work for the creditor, who is able to choose freely from remedies such as enforced implementation, price reduction, repair; resolution or substitution is reserved for fundamental breaches —in events of breach of contract— according to what is specified in Articles 25 and 46.2 of the Convention. 13
Compensation from damages can be found (Chapter V, Section II, Articles 74-77) among the remedies for breach of contract that are written in the CISG. It includes the value of the loss suffered and the gain that was not obtained by the creditor as a result of the breach, but is limited to the loss that the debtor would or should have had foreseen in the moment that the contract was signed. Facts are considered that he had or should have had a knowledge of at this moment of time as a possible consequence of the breach in terms of what is written in Article 74. It is worthwhile remembering that damages in the Convention on the International Sale can be filed for either independently or in addition to other remedies that are available to the creditor. 14
However, compensation is limited by the duty to mitigate damages, which is regulated in Article 77 of the Convention for the International Sale in the following terms:
“A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.”
The mitigation of damages is understood in both the legal theory and in case law as one of the principles upon which the CISG is based. 15 It is also considered to be based on the principle of good faith in international law 16 , and there is also an economic element which attempts to disincentivize passive behaviors that aggravate damages that would otherwise have been avoided. 17
In addition, as VIDAL-OLIVARES explains, the Convention on the International Sale makes sure that the creditor reasonably manages the effects that result from the debtor's breach. There are a series of duties that must be carried out in order to exercise the rights that are set out in each situation, in such a way that a balance is achieved when protecting the interests of the creditor and the debtor by assuring that he will behave in a reasonable way according to his particular circumstances. 18
This rule has been incorporated into the modern instruments of contract law, which, through the Convention on the International Sale, seek global or regional harmonization or unification, and they are also widely approved in international arbitration; it is even recognized as one of the principles of lex mercatoria. 19 Article 7.4.8 of the Unidroit Principles 2016 establishes that:
“Mitigation of harm
The non-performing party is not liable for harm suffered by the aggrieved party to the extent that the harm could have been reduced by the latter party's taking reasonable steps.
The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the harm. 20
Similarly, Article 9.505 of the Principles of European Contract Law states that:
The non-performing party is not liable for loss suffered by the aggrieved party to the extent that the aggrieved party could have reduced the loss by taking reasonable steps.
The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the loss. 21
Also, in the Draft of the Common Frame of Reference (DCFR), Article III, 3.705:
III.-3:705: Reduction of loss
The debtor is not liable for loss suffered by the creditor to the extent that the creditor could have reduced the loss by taking reasonable steps.
The creditor is entitled to recover any expenses reasonably incurred in attempting to reduce the loss. 22
Similarly to the above-mentioned instruments, it is worthwhile mentioning that the Proposal for the Principles of Latin American Contract Law, which included this duty in terms of compensation being reduced if the creditor omitted adopting measures that, in accordance with good faith, were reasonable to mitigate losses. The reduction corresponds to the amount by which it would have been possible to mitigate damages. 23
Legal character and scope
There are two theories regarding the legal character of the mitigation of damages: the first conceives it as an obligation and the second as a duty. 24 According to the first, it is a behavior that party adversely affected by the damage should assume and, as such, can legally be required by the debtor. 25 Conversely, when the mitigation of damages is conceived as a duty, the debtor of the non-executed obligation cannot demand that the adversely affected creditor assumes mitigating behavior. The latter must, instead, execute the duty in order to protect his own interest, which, in this case, is the right to be compensated for the debtor's breach under penalty of a negative consequence for his/ her omission. This is because his behavior is taken into consideration when the compensation is valued for which he has the right, which will reduce the loss that the affected party could have avoided. 26
The mitigation of damages in the international sale of goods is not a contractual obligation as the debtor cannot turn to the remedies that the Convention has established for the situations in which there has been non-execution of the parties’ obligations. It is, instead, a duty. Non performance with this duty will bring about consequences for the creditor in terms of his inability to claim complete damages for the debtor's breach. 27
The mitigation of damages involves both a positive and negative aspect, the first is that the creditor should adopt the measures necessary to reduce or avoid the losses that the breach has generated or may generate, and second, to refrain from behaviors that could increase the debtor's losses. 28
It has also been argued that, as a consequence of the duty to mitigate damages, the creditor should be compensated for the cost of the measures adopted; compensation for losses that could have effectively been avoided are excluded. 29 Moreover, the failure to comply with the duty to mitigate damages only affects the compensation for damages that arise as a result of the debtor's breach, but not the use of other remedies that are available to the creditor. 30
It is worthwhile mentioning that the duty to mitigate damages is limited by reasonableness as in no case can the creditor be required to mitigate losses that arise from a breach. It can also not be assumed that by reducing losses the creditor should undertake expensive operations according to the particular circumstances. 31 Additionally, it can be considered that the evidence regarding the violation of duty to mitigate damage corresponds to the debtor. 32 As this is assumed by the creditor, alleging breach of contract corresponds to the party that it benefits (the debtor) to the extent that he can maintain this circumstance in order to avoid having to compensate for the damages as a result of his breach of contract.
Examples of the duty to mitigate and avoid damages in the CISG
Determining reasonable measures to mitigate damage is a factual matter that depends as much on the uses as it does the practices established between the parties and the behavior of what a similar person in the same position and same circumstances to whoever must take such measures would have done in a similar situation. This is all in accordance with what is established in Articles 9 and 8.2 of the Convention, respectively, without obviously involving disproportionate efforts or expenses, as has already been mentioned. 33 In the following subsections, references are made to some representative cases that mitigate behaviors in order to illustrate them; they come from some considerations in the legal theory and case law decisions.
A replacement transaction
ANA SOLER-PRESAS highlights that in the international sale of goods the initiation of a replacement transaction or “business of market coverage” is quintessential mitigating behavior. 34 The author defines the business of market coverage or replacement as that which is entered into by the creditor who terminates the original agreement in order to satisfy his interest in performance: that is, they obtain an alternative provision from the one that was originally agreed upon. This business is entered into in exclusive interest of the creditor of the compensation at the expense of the debtor who breaches contract. 35
This type of replacement transaction can be undertaken by either the seller (reselling the goods) or by the buyer (buying replacement goods), as is established in Article 75 of the Convention. According to this rule, if the contract is terminated but one of the two parties implements it within a reasonable timeframe after termination, the party claiming the compensation may obtain the difference between the price of the contract and the price stipulated in the replacement transaction, as well as any other damages that are can be requested according to Article 74. 36 The reasons that can lead to either one of two contractors to enter into a replacement transaction are varied. They include: preventing the goods from becoming damaged, for example if the buyer fails to comply with his obligation to receive the goods; events in which it is expensive for the seller to keep the goods based on an unjustified refusal of the buyer to receive them; or the buyer can enter into a replacement transaction if the seller has not delivered the goods, which are necessary to carry out a production process that cannot be interrupted in order not to breach contracts with third parties, etc. SCHWENZER assumes that Article 77 may mandate a replacement if this indeed functions to avoid the failure that comes from a breach and the creditor's intention is not to terminate the contract. It also indicates that the replacement transaction is mitigating behavior if, as a result of it, the loss is less than expected. 37
In several cases, it has been accepted that the replacement sale or purchase is mitigating behavior; for example, in a decision regarding a shoe sales contract in which the seller terminated the contract and sold the shoes to retailers due to the buyers' breach of contract in terms of payment and the concession of requested guarantees. 38
Contracting the delivery of goods that were not delivered on time by the buyer with a third party is also considered to be mitigating behavior. An example of this is a contract entered into between a Canadian company (seller) and a U.S. company (buyer) for the production and delivery of templates to manufacture car parts. The seller was delayed in production, which led the buyer having to request another producer to manufacture the templates in order to be able to deliver the end-buyers their parts in a timely manner. The buyer filed a claim and was awarded the extra costs that he incurred resulting from changing producer as well as the damages for breach of contract due to the fact that some of the templates were not in line with the contractual specifications. 39
Purchasing parts that replace the damaged pieces from another provider
The buyer purchasing parts to replace the damaged pieces or parts is a demonstration of the duty to mitigate damages. Indeed, in a case in which the buyer made allegations regarding a lack of conformity for some air compressors, the seller, who was the manufacturer, was ordered to pay compensation that covered the expenses incurred by the buyer when he attempted to rectify the defects. These included the payment made by the defendant when he bought compressors from a third party in order to mitigate the original losses as the claimant could not secure orders due to the defendant's breach of contract, there were handling and storage costs of the non-conforming goods, and there was also the buyer´s loss of profit that resulted from the decrease in sales of the said goods to third parties. 40
Paying the transport and storage costs of goods that were not received by the buyer
If the buyer does not receive the object of the contract, a mitigating measure on the part of the seller would be to pay the transport and storage costs. This decision was arrived at in a case involving a lawsuit that was filed by the seller in which compensation was claimed for the buyer's breach of contract as well as interest for failure to pay the purchase price. The court accepted the seller's termination of contract for the payment not having been made in the additional time-frame established in accordance with Articles 63.1 and 64.1b of the Convention. It also ruled that the seller had the right to claim interest according to Article 78 and compensation for the maintenance of undelivered machinery, according to Article 74. It also accepted that the seller had mitigated the damage according to Article 77 when he transported and stored the goods that were not received by the buyer. 41
Protecting or preserving the goods
It is worthwhile mentioning that the principle of mitigation of damages is also seen in other rules in the Convention, such as Articles 85-88, which relate to the preservation of goods for both the seller and the buyer. 42 According to these rules, if the buyer delays receiving the goods, or when the payment of the agreed price and the delivery are supposed to take place at the same time but the agreed price is not paid, and, the seller is in possession of the goods, then they must take reasonable measures to preserve them according to the circumstances.
Similarly, when the buyer who has received the goods intends to reject them due to a breach of contract by the seller, such as when the goods are defective in terms of quality or quantity or when they are delivered to a place or at a time that is different to what was agreed upon either in the contract or the Convention, in accordance with Articles 45-52, reasonable measures should be adopted for their preservation, according to the circumstances. This includes depositing them in third party warehouses at the expense of the other party insofar as the costs are not excessive, which is contemplated in Article 87 of the Convention. Moreover, they could be sold by what is contemplated in Article 88 of the Convention when the other party has taken a very long time to claim the goods, accept their return, or pay the price of the cost of preserving them, or any other reasonable costs. 43
As VICENTE MONTES points out, the stated Articles are applications of the principle of mitigation of damages, which is established in Article 77, since the creditor who claims that the debtor has breached contract should adopt reasonable measures, according to the circumstances, to reduce the loss. This includes the loss of earnings that are a result of the breach. 44
Early termination for future fundamental breach of contract
As was indicated in the introduction of this article, it might arguably be the case that in the context of the CISG, the duty to mitigate damages is not only limited to the moment at which the fundamental breach of the obligations stipulated in the contract happens; it also includes the duty to avoid damage. As such, SOLER-PRESAS has stated that by including lost profits in the object of the mitigation the Convention has made it clear that the measures to be adopted are not only mitigating in the strict sense. They should also include those measures that help to avoid the imminent detrimental consequences that could arise from breach of contract. 45 Similarly, VIDAL-OLIVARES, notes that the creditor does not only have the duty to mitigate losses that have already taken place; he also has the duty to prevent or avoid other losses that may occur in the future. 46 For this reason, termination of contract for future fundamental breach falls within this type of mitigating conduct.
This possibility can be found in Article 72 of the Convention, according to which, if before the date of performance of the contract it was clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoid. As far as is possible, this entails the duty to communicate what is written in point 2 of the Article with reasonable notice to the debtor. This remedy is not only useful for the seller who will not be obliged to manufacture or deliver a product for which they will not be paid, but it is also useful for the buyer who will not have to wait for the delivery that will not be made. Adopting this possibility will contribute to minimizing the damage that the parties will be forced to repair as a result of the breach. 47
Conclusions
The following are the main conclusions from the previous sections:
The duty to mitigate damages, which are contained in Article 77 of the United Nations Convention Contracts for the International Sale of Goods, is not understood as an obligation but as a duty that is assumed by the creditor who seeks compensation for damages resulting from breach of contract. It consists of adopting reasonable measures to reduce the loss that comes from the other party´s breach. These can either be in the preparatory stage of the contracting process or avoiding that the loss ever occurs.
The creditor should undertake this duty while seeking to protect his/ her own interests that entail the right to obtain compensation for the debtor's breach of contract. The consequences of breach of contract are that his/her behavior will be taken into consideration when deciding on the amount of compensation for breach of contract and the loss that disadvantaged party could have avoided.
Determining reasonable measures to mitigate damage is a factual matter that depends on both the uses and the practices established between the parties and the behavior that will be or would have been carried out in a similar situation by a similar person in the same position or in similar circumstances to the person who needs to take the measures. This is in accordance with what is established in Articles 9 and 8.2 in the Convention, respectively, and, obviously, there should be no unreasonable costs.
Based on some decisions and considerations from the legal theory, the following could be examples of mitigating behavior: A replacement transaction, which seeks to obtain a replacement of what was originally agreed upon and which can be effected by both the seller and the buyer. The second could be obtaining parts from another provider that replace those damaged. The costs of transporting and storing the good that was not received by the buyer may also be assumed by the seller, and the contract can be terminated for a fundamental foreseeable breach.
Acknowledgements
This paper is a product of the research project La protección del acreedor en el derecho privado colombiano, DER-55-2017, sponsored by Universidad de La Sabana.
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FOUNTOULAKIS, CHRISTIANA, Article 72, in Schlechtriem & Schwenzer: Commentary on the UN Convention on the International Sale of Goods (CISG), 1024-1040 (4th ed., INGEBORG SCHWENZER, ed., Oxford University Press, Oxford, 2016).
GANDARILLAS-SERANI, CRISTIÁN, Algunas consideraciones acerca del deber de mitigación o minimización del daño frente al incumplimiento contractual, in Estudios de Derecho Civil IV, Jornadas Nacionales de Derecho Civil, Olmué, 2008, 431-449 (CARLOS PIZARRO-WILSON, coord., Legal Publishing, Santiago de Chile, 2009).
KNAPP, VICTOR, Article 77, in Commentary on the International Sales Law, 559-567 (C. MASSIMO BIANCA & MICHAEL JOACHIM BONELL, coords., Giuffrè, Milan, 1987).
MCKENDRICK, EWAN, Article 7.4.8, in Commentary on the Unidroit Principles of International Commercial Contracts (PICC), 901-904 (STEFAN VOGENAUER & JAN KLEINHEISTERKAMP, eds., Oxford University Press, Oxford, 2009).
MONTES, VICENTE, Artículo 85, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 684-688 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir. coord., Civitas, Madrid, 1998).
MONTES, VICENTE, Artículo 86, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 688-692 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir. coord., Civitas, Madrid, 1998).
MONTES, VICENTE, Artículo 87, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 692-693 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir. coord., Civitas, Madrid, 1998).
MONTES, VICENTE, Artículo 88, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 693-696 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir. coord., Civitas, Madrid, 1998).
MUÑOZ, EDGARDO, Sección comparativa iberoamericana a los artículos 74 al 77 de la CISG, in Schlechtriem & Schwenzer: Comentario sobre la Convención de las Naciones Unidas sobre los Contratos de Compraventa Internacional de Mercaderías, t. II, 1749-1755 (INGEBORG SCHWENZER & EDGARDO MUÑOZ, dirs., Aranzadi, Thomson Reuters, Pamplona, 2011).
NANCLARES-VALLE, JAVIER, Capítulo 5. Libro III. Obligaciones y derechos, in Unificación del derecho patrimonial europeo, marco común de referencia y derecho español, 163-217 (EDUARDO VALPUESTA-GASTAMINZA, coord., Bosch, Barcelona, 2011).
OPIE, ELISABETH, Mitigation of Losses: Remarks on the Manner in which the UNIDROIT Principles May be Used to Interpret or Supplement Article 77 of the CISG, in An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, 226-231 (JOHN FELEMEGAS, ed., Cambridge University Press, New York, 2007).
SCHWENZER, INGEBORG & HACHEM, PASCAL, Article 7, in Schlechtriem & Schwenzer: Commentary on the UN Convention on the International Sale of Goods (CISG), 119-142 (4th ed., INGEBORG SCHWENZER, ed., Oxford University Press, Oxford, 2016).
SCHWENZER, INGEBORG, Article 77, in Schlechtriem & Schwenzer: Commentary on the UN Convention on the International Sale of Goods (CISG), 1104-1110 (4th ed., INGEBORG SCHWENZER, ed., Oxford University Press, Oxford, 2016).
SOLER-PRESAS, ANA, Artículo 75, Artículo 76, in La Compraventa internacional de mercaderías. Comentario de la Convención de Viena, 609-621 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir., coord., Civitas, Madrid, 1998).
SOLER-PRESAS, ANA, Artículo 77, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 621-628 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir., coord., Civitas, Madrid, 1998).
VIDAL-OLIVARES, ÁLVARO, El cálculo de la indemnización del daño y la operación de reemplazo en la compraventa internacional, in Colección de estudios de Derecho Civil en homenaje a la profesora Inés Pardo de Carvallo, 387-397 (ALEJANDRO GUZMÁN-BRITO, scientific editor, Ediciones Universitarias de Valparaíso, Pontificia Universidad Católica de Valparaíso, Valparaíso, 2008).
VIDAL-OLIVARES, ÁLVARO, La carga de mitigar las pérdidas del acreedor y su incidencia en el sistema de remedios por incumplimiento, in Estudios de Derecho Civil III. Jornadas Nacionales de Derecho Civil, Valparaíso 2007, 429-457 (ALEJANDRO GUZMÁN-BRITO, scientific editor, Legal Publishing, Santiago de Chile, 2008).
VILLA, GIANROBERTO, Danno e risarcimento contrattuale, in Trattato del Contratto a cura di Vincenzo Roppo, V, Rimedi, 2, 751-976 (Giuffrè, Milano, 2006).
ZELLER, BRUNO, Mitigation of Damages: Comparison between the Provisions of the CISG (Art. 77) and the Counterpart Provisions of the Principles of European Contract Law (Art. 9:505), in An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, 486-490 (JOHN FELEMEGAS, ed., Cambridge University Press, New York, 2007).
Papers in Law Journals
DOMÍNGUEZ-ÁGUILA, RAMÓN, Notas sobre el deber de minimizar el daño, 5 Revista Chilena de Derecho Privado, 73-95 (2005). Available at: http://www.redalyc.org/pdf/3708/370838862003.pdf
FERRARI, FRANCO, Uniform Interpretation of the 1980 Uniform Sales Law, 24 Georgia Journal of International and Comparative Law, 2, 183-228 (1994). Available at: http://digitalcommons.law.uga.edu/gjicl/vol24/iss2/2/
FUENTES-GUIÑEZ, RODRIGO, El deber de evitar o mitigar el daño, 217-218 Revista de Derecho, Universidad de Concepción, 223-248 (2005). Available at: http://www.revistadederecho.com/pdf.php?id=3018
LÓPEZ-SANTA MARÍA, JORGE, Informe en Derecho sobre la obligación del acreedor de una indemnización, de mitigar o atenuar los daños. Contrato de transporte marítimo, 8 Revista Chilena de Derecho Privado, 203-233 (2007). Available at: http://www.redalyc.org/articulo.oa?id=370840820005
MORALES-MORENO, ANTONIO MANUEL, Los principios latinoamericanos de derecho de los contratos. Un debate abierto sobre las grandes cuestiones jurídicas de la contratación, LXVII Anuario de Derecho Civil, 1, 227-254 (2014). Available at: https://www.boe.es/publicaciones/anuarios_derecho/abrir_pdf.php?id=ANU-C-2014-10022700254
OVIEDO-ALBÁN, JORGE, Mitigación de daños en la compraventa internacional. A propósito de la sentencia de Casación de la Corte Suprema de Justicia de Colombia de 16 de diciembre de 2010, 36 Revista Iusta, 49-60 (2012). Available at: http://revistas.usantotomas.edu.co/index.php/iusta/article/view/758/1040
RIZNIK, PETER, Some Aspects of Loss Mitigation in International Sales of Goods, 4 Vindobona Journal of International Commercial Law and Arbitration, 267-282 (2010). Available at: http://www.cisg.law.pace.edu/cisg/biblio/riznik1.pdf
SOLER-PRESAS, ANA, La indemnización por resolución del contrato en los PECL/DCFR, 2 InDret, Revista para el Análisis del Derecho, 1-32 (2009). Available at: https://www.raco.cat/index.php/InDret/article/viewFile/130906/180672
VIDAL-OLIVARES, ÁLVARO, El incumplimiento contractual y los remedios de que dispone el acreedor en la compraventa internacional, 33 Revista Chilena de Derecho, 3, 439-477 (2006). Available at: https://scielo.conicyt.cl/pdf/rchilder/v33n3/art02.pdf
VIDAL-OLIVARES, ÁLVARO, La gestión razonable de los efectos del incumplimiento en la compraventa internacional, 18 Revista de Derecho (Valdivia), 2, 55-81 (2005). http://dx.doi.org/10.4067/S0718-09502005000200003. Available at: https://scielo.conicyt.cl/scielo.php?script=sci_arttext&pid=S0718-09502005000200003
Cases cited: Canada
Canada, Ontario Court of Appeal, Nova Tool & Mold Inc. v. London Industries Inc., 26th January, 2000. http://cisgw3.law.pace.edu/cases/000126c4.html
Canada, Ontario Court, General Division, Nova Tool & Mold Inc. v. London Industries Inc., 16th December, 1998. http://cisgw3.law.pace.edu/cases/981216c4.html
Cases cited: Colombia
Colombia, Supreme Court of Justice, Court of Civil Cassation, 16th December, 2010, Reporting Judge Arturo Solarte-Rodríguez. http://www.cisgspanish.com/jurisprudencia/colombia/corte-suprema-de-justicia-16-diciembre-2010
Cases cited: Germany
Germany, Landgericht Zwickau [District Court Zwickau], Chemical Products Case, 19th March, 1999. http://cisgw3.law.pace.edu/cases/990319g1.html
Germany, Oberlandesgericht OLG [Provincial Court of Appeal] Düsseldorf, 17 U 146/93, 14th January, 1994, Clout Case 130. http://cisgw3.law.pace.edu/cases/940114g1.html
Cases cited: International Chamber of Commerce, ICC
International Chamber of Commerce, ICC, Arbitration Award ICC 8817, 10 ICC International Court of Arbitration Bulletin, 2, 75 (Fall 1999). http://cisgw3.law.pace.edu/cases/978817i1.html, https://www.trans-lex.org/208817/_/icc-award-no-8817-10-icc-bull-no-2-1999-at-75-et-seq-/
International Chamber of Commerce, ICC, Arbitration Award ICC 7585, 1992, Clout Case 301, 6 ICC International Court of Arbitration Bulletin, 2, 60 (November 1995). http://cisgw3.law.pace.edu/cases/927585i1.html, http://library.iccwbo.org/dr-bulletins.htm
Cases cited: Italy
Italy, Tribunale di Rimini, Al Palazzo S.r.l. v. Bernardaud di Limoges S.A., 26th November, 2002, Clout Case 608. http://cisgw3.law.pace.edu/cases/021126i3.html
Cases cited: Switzerland
Switzerland, Bundesgericht [Supreme Court], Watches Case, 17th December 2009. http://cisgw3.law.pace.edu/cases/091217s1.html
Cases cited: United States
United States, Federal District Court, Northern District of New York, Delchi Carrier SpA, v. Rotorex Corp., 9th September, 1994, Clout Case 85. http://cisgw3.law.pace.edu/cases/940909u1.html
United States, Federal Court of Appeals for the Second Circuit, Delchi Carrier SpA, v. Rotorex Corp., 6th December, 1995, Clout Case 138. http://cisgw3.law.pace.edu/cases/951206u1.html
National laws
Argentine, Civil and Commercial Code (Ley 26994, 2014), article 1710.
Bolivia, Civil Code, Decreto Ley 12760, 6 de agosto de 1975. Available at: https://bolivia.infoleyes.com/norma/821/codigo-civil-cc
Colombia, Code of Commerce, Decreto 410, 27 de marzo de 1971, 33.339 Diario Oficial, 16 de junio de 1971. Available at: http://www.secretariasenado.gov.co/senado/basedoc/codigo_comercio.html
Germany, Civil Code, Bürgerliches Gesetzbuch, 1900. Available at: http://www.gesetze-im-internet.de/englisch_bgb/index.html
Holland, Civil Code. Available at: http://www.dutchcivillaw.com/civilcodegeneral.htm
Italy, Civil Code, Regio decreto 262, 16 marzo 1942. Available at: http://www.altalex.com/documents/codici-altalex/2015/01/02/codice-civile
Peru, Civil Code, Decreto legislativo 295, 1984. Available at: https://www.mimp.gob.pe/files/direcciones/dgfc/diff/normatividad_nacional_general/2_Codigo_Civil.pdf
Québec, Civil Code, CCQ-1991. Available at: http://legisquebec.gouv.qc.ca/en/ShowTdm/cs/CCQ-1991
Switzerland, Federal Act on the Amendment of the Swiss Civil Code, Part Five: Code of Obligations, 30 March 1911. Available at: https://www.admin.ch/opc/en/classified-compilation/19110009/201704010000/220.pdf
United Kingdom, Sales of Goods Act 1979. Available at: http://www.legislation.gov.uk/ukpga/1979/54
International Treaties and other legal sources
European Union, The Principles of European Contract Law (PECL). Available at: http://www.jus.uio.no/lm/eu.contract.principles.parts.1.to.3.2002/
European Private Law Draft Common Frame of Reference (DCFR). Available at: http://ec.europa.eu/justice/policies/civil/docs/dcfr_outline_edition_en.pdf
International Institute for the Unification of Private Law, Unidroit, Unidroit Principles of International Commercial Contracts (Rome, 2016). Available at: http://www.unidroit.org/instruments/commercial-contracts/unidroit-principles-2016
Uniform Commercial Code, § 2-708, § 2-712, § 2-713, § 2-715, https://www.law.cornell.edu/ucc
United Nations Convention on Contracts for the International Sale of Goods (CISG). Available at: http://www.uncitral.org/uncitral/es/uncitral_texts/sale_goods/1980CISG.html
United States of America, Restatement (2nd) of Contracts, § 350, in: Restatement of the Law Second, Contracts 2nd, Pamphlet Bo. 3 (American Law Institute, ALI, Saint Paul, Minnesota, 1981).
Notes
1
LUIS
DÍEZ-PICAZO, Fundamentos del Derecho
Civil patrimonial, II. Las relaciones obligatorias, 783 (6ª ed., Thomson Civitas, Cizur Menor, Pamplona,
2008).
2
However, without doubt,
as LILIAN C. SAN MARTÍN-NEIRA indicates, the duty to avoid damages was
recognized by Roman law. The author has suggested appealing to Roman law as a
method of establishing the rules that govern the damage avoidable in the Latin
American legal subsystem. LILIAN C. SAN MARTÍN-NEIRA, La
carga del perjudicado de evitar o mitigar el daño. Estudio histórico-comparado,
passim
(Universidad Externado de Colombia, Bogotá, 2012). The following author also acknowledges its Roman origins:
CARLOS IGNACIO JARAMILLO-JARAMILLO, Los
deberes de evitar y mitigar el daño. Funciones de la responsabilidad civil en
el siglo XXI y trascendencia de la prevención, 145-159 (Pontificia
Universidad Javeriana, Temis, Bogotá, 2013).
3
PATRICK S. ATIYAH,
An Introduction to the Law of Contract,
458 (5th ed., Clarendon Press,
Oxford, 1995). GUENTER HEINZ TREITEL, The Law of Contract,
976-982 (11th ed., Thomson Sweet & Maxwell, London, 2003). In
these texts, reference is made to the verdicts that have implemented the
mitigation of damages. In relation to these rules that include the duty to
mitigate damages as developed by the English, see: MARÍA LUISA PALAZÓN-GARRIDO,
Los remedios frente al incumplimiento en el Derecho comparado, 219-220
(Thomson Reuters Aranzadi, Cizur Menor, Pamplona, 2014). As the author explains, this
duty includes three rules: a) The adversely affected
party cannot claim compensation for damages that could have been avoided by
adopting reasonable measures that were appropriate for the circumstances. b)
The damage mitigated is not compensable, and c) If the affected party incurs a
reasonable amount of costs or losses due to their mitigating actions, they can
be recovered. Ibid.
4
PATRICK S. ATIYAH, JOHN N. ADAMS & HECTOR MACQUEEN,
The Sale of Goods, 487 (11th
ed., Pearson, London, 2005).
5
American Law Institute, ALI, Restatement of the Law (2nd), 3, 126 (American Law
Institute Publishers, Saint Paul, Minnesota, 1981). E. ALLAN FARNSWORTH, Contracts, 808 (3rd ed., Aspen Law & Business, New
York, 1999).
6
JOHN D. CALAMARI & JOSEPH M. PERILLO, The Law of Contracts, 562-564 (4th ed., West Group, Saint Paul, 1998). E. ALLAN FARNSWORTH, op. cit., 806-817 (1999).
7
The concept is not
greatly recognized in the codes that are based on continental European
tradition. However, despite not explicitly referring to it, ROBERT JOSEPH POTHIER
also mentions it when explaining a case based on the sale of livestock that
suffered a contagious disease that caused the buyer a heavy economic loss due
to other cattle he owned being affected. He was then left with land that was
not possible to cultivate, and the author questioned if the debtor's
responsibility extended to all damages caused despite knowing about the
existence of the disease affecting the livestock. That is to say, should the
seller be treated as malicious. Faced with this
situation, POTHIER affirms that the seller should not respond for all the
damages as these were not so inevitable that the buyer could not have overcome
them by looking for other animals to plow the land, or by giving them to a
settler. As such, this conduct must be estimated when calculating damages. ROBERT JOSEPH POTHIER, Tratado de las obligaciones, Nos.
166-168, 101-102 (traducido
al español con notas de Derecho patrio por una sociedad de amigos
colaboradores, parte primera, Barcelona, Imprenta y litografía de J. Roger, Barcelona, 1839).
8
EDGARDO MUÑOZ, Sección
comparativa iberoamericana a los artículos 74 al 77 de la CISG, in Schlechtriem & Schwenzer:
Comentario sobre la Convención de las Naciones Unidas sobre los Contratos de
Compraventa Internacional de Mercaderías, t. II, 1749-1755, 1754 (INGEBORG
SCHWENZER & EDGARDO MUÑOZ, dirs., Aranzadi,
Thomson Reuters, Pamplona, 2011). Regarding regulations
in civil law, PALAZÓN-GARRIDO explains how for some that
belong to this tradition, “the duty to mitigate damage is connected with
the coincidence of the creditor's fault when causing damage, and it is
regulated jointly with the latter as limits to the compensation of the
contractual damages.” MARÍA LUISA PALAZÓN-GARRIDO, op. cit., 220 (2014). In relation to other countries that have
adopted Napoleonic style codes, the author indicates that, often, the duty to
mitigate damages has been considered in these systems as an assumption of
breach of causal link to avoid the creditor being able to claim for damages
caused in part by their passivity. On some occasions, the theory of
predictability has been applied, and, on others, the general principles of
blame and the coincidence of contributory negligence have been applied;
however, the author adds that in countries such as France, Belgium, and Spain
the principle of good faith allows the mitigation of damages to be
substantiated. MARÍA LUISA PALAZÓN-GARRIDO, op.
cit., 222 (2014).
9
As provided in the rule
(article 1710 of the Civil and Commercial Code), every person has the duty,
insofar as it depends on them, to: a) avoid causing unjustified harm; (b) take,
in good faith and in accordance with the circumstances, reasonable measures to
prevent damage, or to reduce its extent. If such measures prevent or reduce the
extent of damages for which a third party would be liable, the person has the
right to be reimbursed for the value of the expenses incurred in accordance
with the rules of unjust enrichment; c) not worsen the damage, if it has
already occurred.
10
According to this article,
contracts must be implemented in good faith, and, therefore, enforce not only
what is expressed in them, but everything that clearly arises from the nature
of the obligation, or from the law that it falls under. JORGE CUBIDES-CAMACHO, Obligaciones, 237 (8ª ed.,
Ibáñez, Pontificia Universidad Javeriana, Bogotá, 2017). Also, JORGE SUESCÚN-MELO, Derecho privado. Estudios de derecho civil y comercial contemporáneo,
t. 1, 203 (2ª ed., Legis, Bogotá, 2003). Regarding the admission of mitigation
of damages in Colombian case law, it is necessary to consult the Court of Civil
Cassation's judgment of December 16th, 2010, Reporting Judge Arturo Solarte-Rodríguez. It should be noted that the remarks made
as part of this ruling referred to Article 77 of the Convention on the
International Sale of Goods. On this subject: JORGE OVIEDO-ALBÁN, Mitigación de daños en la compraventa internacional. A propósito de la
sentencia de Casación de la Corte Suprema de Justicia de Colombia de 16 de
diciembre de 2010, 36 Revista Iusta, 49-60 (2012).
11
ÁLVARO VIDAL-OLIVARES, La protección del comprador. Régimen de la Convención de Viena y su contraste con el Código Civil, 163 (Ediciones Universitarias de Valparaíso, Pontificia Universidad Católica de Valparaíso, Valparaíso, 2006). And ÁLVARO VIDAL-OLIVARES, La carga de mitigar las pérdidas del acreedor y su incidencia en el sistema de remedios por incumplimiento, in Estudios de Derecho Civil III. Jornadas Nacionales de Derecho Civil, Valparaíso 2007, 429-457, 437 (ALEJANDRO GUZMÁN-BRITO, scientific editor, Legal Publishing, Santiago de Chile, 2008). In this text, the author also raises the possibility of laying the groundwork for the admission of the duty to mitigate damages without the need for an express rule that recognizes it in the application of the causality criteria in terms of breach of contract, according to Article 1558 of the Chilean Civil Code. ÁLVARO VIDAL-OLIVARES, La carga de mitigar las pérdidas…, 429-457, 449 (2008). Along similar lines, CRISTIÁN GANDARILLAS-SERANI, Algunas consideraciones acerca del deber de mitigación o minimización del daño frente al incumplimiento contractual, in Estudios de Derecho Civil IV, Jornadas Nacionales de Derecho Civil, Olmué, 2008, 431-449, 447 (CARLOS PIZARRO-WILSON, coord., Legal Publishing, Santiago de Chile, 2009). See also, RAMÓN DOMÍNGUEZ-ÁGUILA, Notas sobre el deber de minimizar el daño, 5 Revista Chilena de Derecho Privado, 73-95, 74 (2005). JUAN IGNACIO CONTARDO-GONZÁLEZ, Indemnización y resolución por incumplimiento, 434-435 (Thomson Reuters, Santiago de Chile, 2015). Presenting the opposite opinion, JORGE LÓPEZ-SANTA MARÍA, Informe en Derecho sobre la obligación del acreedor de una indemnización, de mitigar o atenuar los daños. Contrato de transporte marítimo, 8 Revista Chilena de Derecho Privado, 203-233, 214 (2007). The author states that there is no general rule in Chilean law from which such an obligation can be derived although there are particular rules that recognize it, as is the case of Article 77 of the Vienna Convention which is the subject of this work. JORGE LÓPEZ-SANTA MARÍA, op. cit., 203-233, 218-222 (2007).
12
LUIS
DÍEZ-PICAZO, op. cit., 783 (2008). The author adds that it is clear that an element is introduced that
breaks the causal relationship as the increase in damages does not constitute a
direct or immediate consequence of breach of contract. This, instead, comes
from the creditor's inaction. LUIS DÍEZ-PICAZO, op. cit., 784 (2008).
13
ÁLVARO
VIDAL-OLIVARES, El incumplimiento
contractual y los remedios de que dispone el acreedor en la compraventa
internacional, 33 Revista Chilena de
Derecho, 3, 439-477 (2006).
14
On this point,
see, among others: ÁLVARO VIDAL-OLIVARES,
La protección del comprador…, 109
(2006).
15
Cfr.
BERNARD AUDIT, La compraventa internacional de mercaderías, 64 (Ricardo
de Zavalía, transl., Zavalía Editor, Buenos Aires, 1994). ALEJANDRO M. GARRO & ALBERTO L. ZUPPI, Compraventa
internacional de mercaderías. La Convención de Viena de 1980, 79 (2a ed., Abeledo Perrot, Buenos Aires, 2012). FRANCO FERRARI, Uniform Interpretation of
the 1980 Uniform Sales Law, 24 Georgia
Journal of International and Comparative Law, 2, 183-228, 225 (1994). JOHN HONNOLD, Uniform
Law for International Sales under the 1980 United Nations Convention, 101
(4th ed., HARRY M. FLECHTNER, edited and updated, Wolters Kluwer, Alphen aan den
Rijn, 2009). FRANCO FERRARI & MARCO TORSELLO, International Sales Law -
CISG - in a Nutshell, 21 (West Academic Publishing, Saint Louis, Minnesota,
2014). JAVIER SAN JUAN-CRUCELAEGUI, Contrato de
compraventa internacional de mercaderías. Convención de Viena de 1980, y otros
textos complementarios, 77-78 (Thomson Civitas, Cizur
Menor, Madrid, 2005). INGEBORG SCHWENZER & PASCAL HACHEM, Article 7, in Schlechtriem & Schwenzer: Commentary on the UN Convention
on the International Sale of Goods (CISG), 119-142,
137 (4th ed., INGEBORG SCHWENZER, ed., Oxford University Press,
Oxford, 2016). Also, INGEBORG SCHWENZER, Article 77, in Schlechtriem & Schwenzer: Commentary
on the UN Convention on the International Sale of Goods (CISG), 1104-1110,
1104 (4th ed., INGEBORG SCHWENZER, ed., Oxford University Press,
Oxford, 2016). The courts have accepted this as a principle upon which the
Convention is based. Germany, Landgericht
Zwickau [District Court Zwickau], Chemical
Products Case, 19th March, 1999. http://cisgw3.law.pace.edu/cases/990319g1.html.
International Chamber of Commerce, ICC, Arbitration
Award ICC 8817, 10 ICC International Court of Arbitration Bulletin, 2, 75 (Fall 1999). http://cisgw3.law.pace.edu/cases/978817i1.html, https://www.trans-lex.org/208817/_/icc-award-no-8817-10-icc-bull-no-2-1999-at-75-et-seq-/.
Italy, Tribunale di Rimini, Al Palazzo S.r.l. v. Bernardaud di Limoges
S.A., 26th November,
2002, Clout Case 608. http://cisgw3.law.pace.edu/cases/021126i3.html
16
INGEBORG SCHWENZER, op. cit., 1104-1110, 1104 (2016). JAVIER
SAN JUAN-CRUCELAEGUI, op. cit.,
228 (2005). INGEBORG SCHWENZER, PASCAL HACHEM &
CHRISTOPHER KEE, Global Sales and
Contract Law, 630-631 (Oxford University Press, Oxford, 2012).
17
ANA
SOLER-PRESAS, La valoración del daño en
el contrato de compraventa, 64-65 (Universidad Pontificia Comillas,
Aranzadi Editorial, Pamplona, 1998). Also see different
theories on its foundation: DJAKHONGIR SAIDOV, The Law of Damages in International Sales.
The CISG and other International Instruments, 125-127 (Hart Publishing,
Portland, 2008).
18
In fact, and as the author
explains, the Convention sets forth a series of duties in terms of communication
and material conduct for the creditor affected by the breach, which are
demonstrated in the duty to report the lack of conformity of the goods within a
reasonable timeframe, starting from when it was discovered. According to what
is established in Articles 35 and 30 of the Convention, there is a limit of two
years that commence when the goods are delivered after which the possibility of
invoking the lack of conformity will be lost. Similarly, the duty to
communicate the decision to terminate the contract (Article 26) as a material
conduct duty, is precisely to mitigate the losses that derive from the breach,
and is established in Article 77. Cfr. ÁLVARO VIDAL-OLIVARES, La
gestión razonable de los efectos del incumplimiento en la compraventa
internacional, 18 Revista de Derecho
(Valdivia), 2, 55-81 (2005). ÁLVARO VIDAL-OLIVARES, La carga de mitigar las pérdidas…, 429-457,
435-436 (2008). In the author's words “…in
Vienna the creditor —the party who is damaged by the breach— must, just like
the debtor, behave reasonably, according to the requirements of objective good
faith. This is the behavior that the debtor, and every reasonable person in his
position, hopes from the creditor, even though they have been affected by the
breach. By establishing the idea of reasonable management of the effects of the
creditor's breach, the Convention manages to establish a system of balanced
remedies that are strict not only with the debtor who has breached contract but
also with the creditor who has been affected by the non-performance. If they
fail to observe reasonable behavior, then they may be deprived of their right
to compensation, to one of the remedies, or even the reduction in compensation
to which they are entitled”. ÁLVARO VIDAL-OLIVARES, La carga de mitigar las pérdidas…, 429-457, 436 (2008).
19
FILALI OSMAN, Les
principes généraux de la lex mercatoria, 183-186 (Bibliothèque de Droit Privé, volume 224, Librairie générale de droit et
de jurisprudence, LGDJ, Paris, 1992). BRUNO ZELLER, Mitigation of
Damages:
Comparison between the Provisions of the CISG (Art. 77) and the Counterpart
Provisions of the Principles of European Contract Law (Art. 9:505),
in An International Approach to the
Interpretation of the United Nations Convention on Contracts for the
International Sale of Goods (1980) as Uniform Sales Law, 486-490, 486 (JOHN
FELEMEGAS, ed., Cambridge University Press, New York, 2007). INGEBORG SCHWENZER, PASCAL HACHEM &
CHRISTOPHER KEE, op. cit., 631
(2012). PETER RIZNIK, Some
Aspects of Loss Mitigation in International Sales of Goods, 4
Vindobona Journal of International Commercial Law and Arbitration,
267-282, 268 (2010).
20
EWAN MCKENDRICK, Article 7.4.8, in Commentary
on the Unidroit Principles of International
Commercial Contracts (PICC), 901-904 (STEFAN VOGENAUER & JAN
KLEINHEISTERKAMP, eds., Oxford University Press, Oxford, 2009). ELISABETH
OPIE, Mitigation
of Losses: Remarks on the Manner in which the UNIDROIT Principles May be Used
to Interpret or Supplement Article 77 of the CISG, in An International Approach to the Interpretation of the United Nations
Convention on Contracts for the International Sale of Goods (1980) as Uniform
Sales Law, 226-231 (JOHN FELEMEGAS, ed., Cambridge University Press, New
York, 2007). Also see the article's official comments: International Institute for the
Unification of Private Law, Unidroit, Unidroit Principles of International Commercial Contracts, 282-283 (Rome, 2016).
21
Regarding this subject, LUIS DÍEZ-PICAZO,
ENCARNACIÓN ROCA-TRÍAS & ANTONIO MANUEL MORALES-MORENO, Los principios del Derecho europeo de
contratos, 382-383 (Civitas,
Madrid, 2002). As Vidal Olivares points out, despite
the fact that both the UNIDROIT Principles and the PECL, unlike the Convention,
do not explicitly impose the duty to mitigate damages on the creditor, they
take it for granted as this explains the reduction in compensation. ÁLVARO VIDAL-OLIVARES, La
carga de mitigar las pérdidas…, 429-457, 441
(2008).
22
CHRISTIAN VON BAR, ERIC CLIVE & HANS
SCHULTE-NÖLKE, eds., Principles,
Definitions and Model Rules Model Rules of European Private Law, Draft Common Frame
of Reference (DCFR), 251 (Outline Edition Prepared
by the Study Group on a European Civil Code, and the Research Group on EC
Private Law (Acquis Group) Based in part on a revised version of the Principles
of European Contract Law, Sellier, Munich, 2009). On the reception
of the duty to mitigate damage
in the PECL/DCFR see: ANA SOLER-PRESAS, La indemnización por resolución
del contrato en los PECL/DCFR, 2 InDret, Revista para el Análisis del Derecho, 1-32, 9-19 (2009). JAVIER NANCLARES-VALLE, Capítulo 5. Libro III.
Obligaciones y derechos, in Unificación
del derecho patrimonial europeo, marco común de referencia y derecho español,
163-217, 189-191 (EDUARDO VALPUESTA-GASTAMINZA, coord., Bosch, Barcelona,
2011).
23
The Principles of Latin
American Contract Law Proposal relates to a project that was prepared by a
group of teachers from several Latin American countries and sponsored by the Foundation
for Continental Law. The article on the suggested mitigation of damages was
taken from a draft version written in 2013, which can be found in ANTONIO
MANUEL MORALES-MORENO, Los principios latinoamericanos de derecho de los contratos. Un debate abierto sobre las grandes cuestiones jurídicas de la
contratación, LXVII
Anuario de Derecho Civil, 1, 227-254,
253 (2014).
24
On the difference between obligation and duty as elements of the imperative relationship, see: ANTONIO CABANILLAS-SÁNCHEZ, Las cargas del acreedor en el Derecho Civil y en el Mercantil, passim (Montecorvo, Madrid,
1988). After explaining its origin in procedural law,
the author points out that although the behavior of which the duty is part must
be observed by the creditor as it is in his own interest as a requirement to
carry it out, the author also considers DÍEZ-PICAZO's position
who points out that, regardless, the debtor is also interested in the creditor
exercising the duty as it affects him. ANTONIO CABANILLAS-SÁNCHEZ, op. cit., 45 (1988). Also, LUIS
DÍEZ-PICAZO, op. cit., 152 (2008). Colombian
legal theory: MARIANA BERNAL-FANDIÑO, El deber de coherencia en el Derecho
colombiano de los contratos, 181-185 (Pontificia Universidad Javeriana,
Bogotá, 2013).
25
This thesis is upheld by TOMÁS VÁZQUEZ-LÉPINETTE, La conservación de las mercaderías en la compraventa internacional, 188 (Tirant
lo Blanch, Valencia, 1995), as he believes that it is the right to demand the
reduction in compensation that is due to the counterpart.
26
ÁLVARO VIDAL-OLIVARES, La protección del comprador…, 33-34 (2006). RODRIGO FUENTES-GUIÑEZ, El deber de evitar o mitigar el daño, 217-218 Revista de Derecho, Universidad de Concepción, 223-248, 226 (2005). RAFAEL ILLESCAS-ORTIZ & PILAR PERALES-VISCASILLAS,
Derecho mercantil internacional. El
derecho uniforme, 233 (Editorial Centro de Estudios Ramón Areces, Madrid,
2003). LILIAN C. SAN MARTÍN-NEIRA, op. cit., 311-316
(2012). ANA SOLER-PRESAS, La
indemnización por resolución…, 1-32 (2009). GUENTER
HEINZ TREITEL, Remedies for Breach of
Contract. A Comparative Account, 179 (Oxford University Press, Oxford,
1988). ANTONI
VAQUER-ALOY, La armonización del derecho
de obligaciones y contratos, 211 (Astrea,
Universidad Sergio Arboleda, Bogotá, 2017). Also on the
discussion about the legal character of the mitigation of damages: CARLOS
IGNACIO JARAMILLO-JARAMILLO, op. cit.,
178-180 (2013). PALAZÓN-GARRIDO points out that despite being known as “the
duty to mitigate” it is not properly a duty as it does not involve an
obligation of a subject with respect to another who can be considered to be the
owner of a right. It is, rather, a rule that prevents the party affected by the
breach from claiming for those losses that could have been avoided, reduced, or
offset simply by adopting reasonable measures that were appropriate for the
particular circumstances. MARÍA LUISA PALAZÓN-GARRIDO, op. cit., 218
(2014).
27
In
this regard, MARÍA LUISA
PALAZÓN-GARRIDO, op. cit., 199 (2014). ANA SOLER-PRESAS, Artículo 77, in La
compraventa internacional de mercaderías. Comentario de la Convención de Viena,
621-628, 622 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir.,
coord., Civitas,
Madrid, 1998). Also, in ANA SOLER-PRESAS, La indemnización…, 9-19, 10
(2009). INGEBORG SCHWENZER, op. cit., 1104-1110, 1105 (2016). ÁLVARO VIDAL-OLIVARES, La protección del comprador…, 35, 156 (2006). TREITEL remarks that the breach of “duty” to
mitigate does not involve legal responsibility as it only reduces the amount of
the compensation that the plaintiff can seek. GUENTER HEINZ TREITEL, The Law of…, 976-977 (2003). In the same
vein, in relation to Article 7.4.8 of the UNIDROIT Principles: EWAN MCKENDRICK, op. cit., 901-904, 901 (2009).
28
VICTOR KNAPP, Article
77, in Commentary on the
International Sales Law, 559-567, 560 (C.
MASSIMO BIANCA & MICHAEL JOACHIM BONELL, coords.,
Giuffrè, Milan, 1987). TOMÁS
VÁZQUEZ-LÉPINETTE,
op. cit., 181-183 (1995). ÁLVARO VIDAL-OLIVARES, La protección del comprador…, 157, 160 (2006). Accordingly,
with reference to Article 1227 of the Italian Civil Code: GIOVANNA VISINTINI,
Tratado de la responsabilidad civil,
2, 269 (AÍDA KEMELMAJER DE CARLUCCI, transl., Astrea, Buenos Aires, 1999). GIANROBERTO VILLA, Danno e risarcimento contrattuale, in Trattato del Contratto a cura di Vincenzo
Roppo, V, Rimedi, 2, 751-976, 922 (Giuffrè, Milano, 2006).
29
FRITZ ENDERLEIN & DIETRICH
MASKOW, International Sales Law:
United Nations Convention on Contracts for the International Sale of Goods;
Convention on the Limitation Period in the International Sale of Goods, 308-309
(Oceana, New York, 1992). ANA
SOLER-PRESAS, Artículo 77, 621-628, 627, 628 (1998). ÁLVARO VIDAL-OLIVARES, La protección del comprador…, 162 (2006). RODRIGO
FUENTES-GUIÑEZ, op. cit., 223-248, 228 (2005). ÁNGEL
CARRASCO-PERERA, Derecho de contratos,
1222 (2ª ed., Aranzadi-Thomson Reuters, Cizur Menor, Pamplona, 2017). Also in point two of Article 7.4.8 of the Unidroit
Principles: “The aggrieved party is entitled to recover any expenses
reasonably incurred in attempting to reduce the harm”.
30
ÁLVARO VIDAL-OLIVARES, La protección del comprador…, 157 (2006).
31
Cfr.
VICTOR KNAPP, op. cit., 559-567, 560 (1987). INGEBORG
SCHWENZER, op. cit.,
1104-1110, 1107 (2016). INGEBORG SCHWENZER, PASCAL
HACHEM & CHRISTOPHER KEE, op. cit.,
632 (2012). ÁNGEL CARRASCO-PERERA, op. cit., 1222 (2017). ESPERANZA CASTELLANOS-RUIZ, La
compraventa internacional de mercaderías, in Contratos, t. XVI, Los
contratos internacionales (I), 381-632, 612 (MARIANO YZQUIERDO-TOLSADA, dir., Thomson Reuters Aranzadi, Cizur
Menor, Pamplona, 2014).
32
INGEBORG SCHWENZER, op. cit., 1104-1110, 1110 (2016). ANA
SOLER-PRESAS, Artículo 77,
621-628, 627 (1998). Although in any case, the UNCITRAL
digest of case law highlights that the verdicts are divided by who should
invoke the failure to adopt measures to reduce the loss as, while in some it
has been decided that the burden of evidence corresponds to the debtor who made
the breach, others have opted to demand that the creditor take reasonable
measures to reduce the loss. Cfr. United Nations
Commission on International Trade Law, Uncitral, Digest of Case Law on the United Nations
Convention on Contracts for the International Sale of Goods, 358 (2016
edition, United Nations, New York, 2016).
33
FRITZ ENDERLEIN & DIETRICH
MASKOW, op. cit., 308 (1992). VICTOR KNAPP, op.
cit., 559-567, 560 (1987). EWAN MCKENDRICK,
op. cit., 901-904, 902 (2009). ELISABETH OPIE,
op. cit., 226-231, 229 (2007). CARLOS
IGNACIO JARAMILLO-JARAMILLO, op. cit.,
180-188 (2013). INGEBORG SCHWENZER, op. cit., 1104-1110, 1107 (2016). ÁLVARO
VIDAL-OLIVARES, La protección del comprador…, 158
(2006). BRUNO ZELLER, op. cit., 486-490, 487 (2007). I will also be a
factual matter to evaluate the elements that damage derived from the breach of
contract to be distinguished from the escalation of damages that is effectively
ascribable to the creditor's negligent omission. UMBERTO
BRECCIA, Le obbligazioni, 651
(Giuffrè, Milano, 1991).
34
ANA SOLER-PRESAS, Artículo 77, 621-628, 625 (1998). Also see: BERNARD AUDIT, op. cit., 199. ÁNGEL CARRASCO-PERERA, op. cit., 1224 (2017). INGEBORG SCHWENZER, PASCAL HACHEM & CHRISTOPHER KEE, op. cit., 632 (2012). ÁLVARO VIDAL-OLIVARES, El cálculo de la indemnización del daño y la operación de reemplazo en la compraventa internacional, in Colección de estudios de Derecho Civil en homenaje a la profesora Inés Pardo de Carvallo, 387-397, 390 (ALEJANDRO GUZMÁN-BRITO, scientific editor, Ediciones Universitarias de Valparaíso, Pontificia Universidad Católica de Valparaíso, Valparaíso, 2008). ÁLVARO VIDAL-OLIVARES, La carga de mitigar las pérdidas…, 429-457, 444 (2008). The author affirms that, in this case, the amount of compensation is fixed by the difference between the price of the contract and the price of the replacement operation, notwithstanding the other damages that can be awarded compensation in accordance with Article 74 of the Convention. Additionally, in terms of assuming that the replacement operation is mitigating behavior, see: ANTONIO MANUEL MORALES-MORENO, Incumplimiento del contrato y lucro cesante, 182 (Civitas, Thomson Reuters, Cizur Menor, Pamplona, 2010). ANTONIO MANUEL MORALES-MORENO, Claves de la modernización del derecho de contratos, 103-104 (Ibáñez, Centro de Estudios de Derecho Comparado, Bogotá, 2016). JUAN IGNACIO CONTARDO-GONZÁLEZ, op. cit., 437 (2015). In terms of not recognizing the replacement operation as an indication of the risk management of the breach, see: JAIME ALCALDE-SILVA, Incumplimiento y reemplazo: bases para una teoría general de la operación de reemplazo en derecho español, 453-468 (Doctoral thesis, Universidad de Valencia, Valencia, 2013).
35
ANA
SOLER-PRESAS, Artículo 75, Artículo 76,
in La Compraventa internacional de
mercaderías. Comentario de la Convención de Viena, 609-621, 613 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir., coord.,
Civitas, Madrid, 1998).
36
According to AUDIT, if the
buyer obtains replacement goods or the seller finds another buyer in a
sufficiently short period of time, an objective mechanism can be used to
evaluate the prospective damages suffered. Article 75 sets the amount of
damages as the price difference between the contract and the replacement;
therefore, there will only be damages and losses on the part of the debtor in
relation to the value of the goods if there is an unfavorable difference. BERNARD
AUDIT, op. cit., 203 (1994).
37
INGEBORG SCHWENZER, op. cit., 1104-1110, 1108 (2016).
38
Germany, Oberlandesgericht OLG
[Provincial Court of Appeal] Düsseldorf, 17 U 146/93, 14th January,
1994, Clout Case 130. http://cisgw3.law.pace.edu/cases/940114g1.html
39
Canada, Ontario Court, General Division, Nova Tool & Mold Inc. v. London
Industries Inc., 16th
December, 1998. http://cisgw3.law.pace.edu/cases/981216c4.html.
Canada, Ontario Court of Appeal,
Nova Tool & Mold Inc. v. London Industries Inc., 26th
January, 2000. http://cisgw3.law.pace.edu/cases/000126c4.html.
In other case the tribunal said: “Under Art. 77 CISG, the aggrieved party must take such
measures as are reasonable in the circumstances to mitigate the loss, including
loss of profit; if he fails to do so, the party in breach may claim a reduction
in the damages in the amount by which the loss should have been mitigated”. Switzerland, Bundesgericht [Supreme Court], Watches Case, 17th December
2009. http://cisgw3.law.pace.edu/cases/091217s1.html
40
United States, Federal District Court,
Northern District of New York, Delchi Carrier SpA, v. Rotorex Corp., 9th
September, 1994, Clout Case 85. http://cisgw3.law.pace.edu/cases/940909u1.html. When the case was appealed, the decision was upheld, and some
additional compensation was included that had been denied in the first
instance: this included transport and customs costs relating to the delivery of
the compressors that were not in line with the original contract. United States, Federal Court of Appeals for
the Second Circuit, Delchi Carrier SpA, v. Rotorex Corp., 6th
December, 1995, Clout Case 138. http://cisgw3.law.pace.edu/cases/951206u1.html
41
International Chamber of Commerce, ICC, Arbitration Award ICC 7585, 1992, Clout Case 301, 6 ICC International Court of Arbitration Bulletin, 2, 60 (November 1995). http://cisgw3.law.pace.edu/cases/927585i1.html, http://library.iccwbo.org/dr-bulletins.htm
42
BRUNO ZELLER, op.
cit., 486-490, 486 (2007).
43
JOHN HONNOLD, op. cit., 101 (2009). VICENTE MONTES, Artículo 86, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 688-692, 689 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir. coord., Civitas, Madrid, 1998). VICENTE MONTES, Artículo 88, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 693-696 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir. coord., Civitas, Madrid, 1998). VICENTE MONTES, Artículo 87, in La compraventa internacional de mercaderías. Comentario de la Convención de Viena, 692-693, 693 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir. coord., Civitas, Madrid, 1998).
44
VICENTE MONTES, Artículo
85, in La compraventa internacional
de mercaderías. Comentario de la Convención de Viena, 684-688, 686 (LUIS DÍEZ-PICAZO Y PONCE DE LEÓN, dir.
coord., Civitas,
Madrid, 1998).
45
ANA SOLER-PRESAS, Artículo 77, 621-628, 625 (1998). VICTOR
KNAPP, op. cit., 559-567,
566-567 (1987). Also, SCHWENZER, points out that the
affected party should take the appropriate and possible measures to prevent
losses or reduce their scope. INGEBORG SCHWENZER, op. cit., 1104-1110, 1104 (2016).
46
ÁLVARO VIDAL-OLIVARES, La
carga de mitigar las pérdidas…, 429-457, 444 (2008).
47
Accordingly: ALFONSO LUIS CALVO-CARAVACA, Artículo 72, in La compraventa internacional de mercaderías. Comentario de la
Convención de Viena, 569-573, 569 (LUIS
DÍEZ-PICAZO Y PONCE DE LEÓN, dir., coord., Civitas,
Madrid, 1998). CHRISTIANA FOUNTOULAKIS, Article 72, in Schlechtriem & Schwenzer: Commentary
on the UN Convention on the International Sale of Goods (CISG), 1024-1040,
1040 (4th ed., INGEBORG SCHWENZER, ed., Oxford University Press,
Oxford, 2016).
*
Research paper
Author notes
a
Corresponding author. E-mail: jorgeoa@unisabana.edu.co
Additional information
To cite this article/Para citar este artículo: Oviedo-Albán,
Jorge, Mitigation of Damages for Breach
of Contract for the International Sale of Goods, 137 Vniversitas, (2018). https://doi.org/10.11144/Javeriana.vj137.mdbc