Zbornik Radova Pravnog Fakulteta u Nišu (Jan 2023)
The right to suspend performance in case of anticipatory breach of contract on international sale of goods
Abstract
In this paper, the author analyzes the provisions of the UN Convention on Contracts for the International Sale of Goods (CISG) which regulate the legal remedies available to contracting parties in case of anticipatory breach of contract. Anticipatory or presumed breach of contract implies a situation when one contracting party, on the basis of objective indicators, assumes that the other party will not perform its obligation. In this regard, the CISG provides for two legal remedies available to the contractual party that anticipates the breach of contract: a) to suspend the performance of its obligation, and b) to terminate the contract. This paper specifically analyzes the provisions of Article 71 of the CISG, which governs the right of a contracting party to suspend the performance of its obligation. Article 71 CISG authorizes a seller or a buyer to suspend performance of its obligations under the sales contract if a party is unlikely to receive a substantial part of the counter-performance promised by the other party. The suspending party does not breach the contract if the suspension is rightful. However, if the suspension is not authorized by Article 71 CISG, the suspending party will breach the contract when it fails to perform its obligations. A party may suspend the performance of its obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of its obligations as a result of a serious deficiency in the party's ability to perform, or the party's creditworthiness, or the party's conduct in preparing to perform or in performing the contract. The right to suspend perfomance under Article 71 CISG is to be distinguished from the right to avoid the contract. Unlike the contract avoidance, which terminates the obligations of the parties, the suspension of contractual obligations recognizes that the contract continues and encourages mutual reassurance that both parties will perform. If the seller has already dispatched the goods, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain the goods. This relates only to the rights in the goods as between the buyer and the seller. A party suspending performance, either before or after dispatching the goods, must immediately give notice of suspension to the other party, and must continue with performance if the other party provides adequate assurance of his performance.
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