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On Non-fulfilment of Obligations by Sellers and Buyers

International sale of goods is regulated by the Convention on Contracts for the International Sale of Goods signed in Vienna in 1980. 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 the parties’ obligations, it is getting clear that the protection of rights of the parties is not possible without determining consequences of non-fulfillment of contractual terms.

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

If the buyer failed to fulfill any of his/her obligations, the seller has the right to:

  • require the buyer to pay the price for the goods, take delivery or fulfill another obligation;
  • establish an 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/her obligation to pay the price, or take delivery of the goods, or if he/she declares that he/she 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/her, if the buyer fails to make such specification of the goods on the date agreed upon, or within a reasonable period after the request of the seller.

Risk of accidental loss of the goods is passed 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 over the goods in accordance with the provisions of the contract. The delivery may be carried in a certain date, an interval of time, or in reasonable term after concluding the contract.

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

  • require the seller to perform his/her 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/her obligations;
  • declare the contract avoided, if the failure by the seller to perform any of his/her 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/she 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.

The 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 the obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of the obligations as a result of a serious deficiency in his/her ability to perform, or in his/her creditworthiness, or his/her 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/her 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 refund of 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 the legal process. Competition of Common Jurisdiction Courts in the Republic of Armenia is determined by Civil Procedure Code of the Republic of Armenia.

The action against the defendant can be brought in the court of residence of the defendant in the Republic of Armenia, or in the court of place of performance if that place is located in the Republic of 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 the Republic of Armenia, but legislation of other countries may differ. 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 the Republic of Armenia and overseas.

10.10.2016

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