CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background To The Study

With the modern day increase in international trade and commerce, national commercial law has often proved inadequate to international business needs and the resolution of disputes involving international contracts.

As the needs of commerce have changed, so have the practices by which businessmen conduct their trade. Increased trade overseas has drawn attention to the problems that are caused by the different ways in which countries have chosen to regulate international sales. Businessmen have found that their contracts and dealings with foreign traders have been subject to different standards and usages.

The last century has seen a huge change in the field of international trade. The development of the market economy, the growth of markets for manufactured goods and the opening up of new markets in raw products from developing countries has led to a boom in overseas trade. Newer and faster methods of communication have enabled traders to buy and sell goods at a distance more reliably, and modern technology has made it much easier to transport goods around the globe in shorter periods of time.

It has become clear that in the modern world, it is no longer possible for a country to isolate itself from the international circulation of goods and persons. This growth in international trade has led to the re-emergence of the need for the harmonization of the services that facilitate overseas trade: global monetary mechanisms, cross-border transport possibilities, and universal rules and standards which allow traders the world over to conduct business on the same terms.

Against such a background, the legal community has tried to facilitate overseas trade through efforts to harmonize national laws by legislative or non-legislative means; thereby reducing the uncertainties and potential costs associated with transacting business under unfamiliar laws. Among such efforts, there is above all in this contribution the reference to the relevant rules of the United Nations Convention on Contracts for the International Sale of Goods(1980; hereinafter “CISG” or “Convention”).

On the other hand, the need of general principles in international contract law, usage and custom of international trade and lex mercatoria has led to certain other unification actions in addition to the CISG. Since the CISG came into force in 1988, there have been other efforts to develop overall unifying principles covering the field of contract law.

As these two Principles were introduced in 1994 and 1998 it is perhaps premature to consider these principles as a “generally accepted lex mercatoria”. However, these rules have potential to be generally accepted by the international trading community and thereby achieve a position to be regarded as lex mercatoria.

Thus, the studied legal instruments in this contribution will be focused on the two instruments mentioned above – CISG, OHADA Principles. These instruments are internationally drafted instruments governing contracts which combine elements from both civil law and common law systems. The CISG harmonized interests and ideas of different legal systems and of countries on different levels of economic development and is understood as a modern uniform substitute for the wide array of foreign legal systems; thus, a text that is suited for implementation in civil law countries and common law countries and for economies that are developed and those which are developing.

The CISG Principles and the OHADA Principles in turn represent the latest developments in the field of contract law and combine civil law and the common law as well as international contract practices.

The United Nations Convention on Contracts for the International Sale of Goods (CISG), though promulgated more than a quarter of a century ago in an entirely different socio-economic and political environment, remains a landmark in the international unification process. Adopted by seventy countries, including most of the major trading nations, the CISG has not only achieved the status of a veritable world sales law but has also led a number of States to modernize their domestic sales laws.

In addition, it heavily influenced the EC Consumer Sales Directive in Europe and is a source of inspiration to the current work on a possible European Civil Code. Moreover, at a universal level, the CISG has prompted UNIDROIT to prepare the UNIDROIT Principles of International Commercial Contracts, a sort of restatement of the law of international commercial contracts in general. The present article is intended to explore these developments further, focusing in particular on the potentialities of legislative instruments such as the CISG and the EC Consumer Sales Directive as opposed to non-binding or soft law instruments such as the UNIDROIT Principles.

The rule on a fundamental breach of contract was set forth in Art. 25. of the Vienna Convention, which reads as follows: “A breach of contract committed by one of the parties is fundamental if it results in such a detriment to the other party, so as to substantially deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.”

The preamble to the treaty of the Organization for the Harmonization of Business Laws in Africa (better known by its French acronym OHADA points to the establishment of a new economic order based on the mutual economic benefit of cross border trade.

The primary objective of this treaty was to provide a secure legal and judicial environment for business to operate in.  This was to be done through the elaboration and adoption of simple modern and common rules adapted to their economies, by setting up appropriate judicial procedures and by encouraging arbitration for the settlement of contractual disputes.

This suggests that uniform laws governing trans-national trade are essential to achieving these goals. To effectively carry out the piece-meal harmonization of the business laws of member states, specifically through the elaboration of uniform laws, nine Uniform Acts have been adopted till date.

Our interest being sale of goods contract, we shall examine the Uniform Act on General Commercial Law (UAGCL), with respect to its provisions governing sales contracts. Thus, the principal concern of this work is to critically test the application of the UAGCL to barter-like transactions. The focus on the OHADA business law is to test its functionality in achieving its predictability of business transactions within its contracting states.

Under the CISG, avoidance is the one-sided right of a party to terminate the contract by its mere declaration.  Such termination of a contract is the hardest sword that a party to a sales contract can draw if the other party has breached the contract. No other remedy—claim for performance, price reduction, damages—has the same incisive effect. For, it not only deprives avoidance to the party in breach of the benefit of the contract including the lost profit and renders often futile prior investments; if it is the seller who has breached the contract he is also burdened with the risks of the goods.

These risks of damage to or even loss of, the goods are particularly high when the goods are already in a foreign country. In CISG sales, this is typically the case. The seller must then either re-transport the goods with the respective costs or attempt to resell them on the foreign market, which he may not know very well. Rightfully declared avoidance can therefore be very burdensome to the seller.

However, if it is the buyer who has breached the contract the consequences of termination may be hard for him, too, in particular if he already has resold the goods and now faces damages claims from his sub buyers because of non-delivery or if he already made investments in expectation of the delivery.

Therefore, it is clear that on the one hand the remedy of avoidance should not be granted too easily, but on the other hand there must be a borderline from where the innocent party must be entitled to bring the contract to an end. The following paper gives first (Part B) an overview over the availability and general requirements of the remedy of avoidance now that the CISG is 25 years old and has been applied in practice for 17 years.  In the second section.

1.2 Statement Of Problem

The CISG grants the remedy of avoidance in four different situations: first, where the seller has fundamentally breached the contract;  second—in a parallel manner—where the buyer has fundamentally breached the contract ; and third, in the situation that it is clear and almost certain that either the seller or the buyer will fundamentally breach the contract (anticipatory breach) . The fourth situation is the case of an instalments sale.

Avoidance with respect to the single instalment is permitted if a party committed a fundamental breach with respect to that single instalments; avoidance of the contract as a whole can be claimed where the fundamental breach concerns the whole contract.

The Ohada Uniform Act of General Commercial Law shares a similar view with the CISG when it comes to breach of obligation by a party. Regarding delivery of goods it is expressly stated that, unless the parties have agreed otherwise, failure from the seller to deliver the goods in conformity with the ethical standards amounts to a breach of contract. In particular, when the seller is required to deliver goods that are fit for the purpose for which goods of that nature are commonly used or when a special request on an ethic (such as health and environmental considerations) was made known to the seller .

The buyer remedy will be its rights of redress  and claim for damages.  We see that the CISG and OHADA provides for the rights to non-performance and circumstances in which they will be granted, it is important for us to note that courts find it difficult to grant these rights because of its effects on the economy. The right to non-performance causes failure in enhancing economic activities.

If a party exercise this right we see that the contract has failed and its effects are far reaching to third parties for example, a ordered goods from B to supply to C who intend has to resale to other customers, B then fail to supply after all efforts made by A leaving A with the right not to perform his own part of the contract too. We see that this will not only affect A but it will go a long way to affect C and  his customers thereby slowing down economic activities. So the right to non-performance should be replace with a different right whose effects will not be as grievous as the rights to non-performance.

The rights to non-performance causes economic lost to the party who came to equity with clean hands and does not fulfil the aim in which the contract was entered into. Parties enter into contract to either for personal or commercial purposes.

Failure for one party to performs its own part of the contract will cause the other party economic lost and the party is left with the option of exercising rights to non-performance after specific performance must have failed. We see that the right to non-performance does not remedy the main aim in which the contract was entered into and so courts should rather look for more stringent ways to compel parties to perform their own part of the bargain unless instances of force majeure.

It is based on the foregoing that the researcher has embarked on this research propose policy recommendations to address the issues raised.

1.3 Research Questions

The researcher seeks to answer the following questions which can be categorized under general questions and a set of specific questions.

1.3.1 General Research Question

The general question is, what is the right to non-performance Under Sales Contract: CISG V. Ohada Uniform Act General Commercial Law?

1.3.2 Specific Research Questions

1. What is the concept of non-performance?
2. How is the applicability of the right to non-performance under the CISG and the Ohada Uniform Act on General Commercial law?
3. What is the right to non-performance as an exceptional measure?
4. What policy recommendations can be made to address the issue?

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