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The Remedy of Reduction of Price
Eric E. Bergsten and Anthony J. Miller

UNCITRAL

The difficulties experienced by UNIROIT and at the Hague Conference in attempting to draft an unambiguous text of art. 46 of ULIS were to some degree repeated during the revision by UNCITRAL.

The subject was discussed for the first time at the third session of the Working Group on the International Sale of Goods. A number of conflicting views were expressed in respect of the value of the provision and of the clarity of its drafting.  53  No action was taken however, pending the receipt of a study on the price reduction remedy requested from the Secretariat.  54 

This study was submitted to the Working Group at its next session.  55  It reflected a Common law approach to the interpretation of art. 46. The most important criticism was that art. 46 did not measure the monetary compensation for non-conformity of the goods in accordance with the principles underlying the provisions for damages, namely "that, to the extent practicable, the injured party should be placed in the same position as would have resulted from performance of the contract."  56  Since the study assumed that the buyer could reduce the price under art. 46 only if it was still unpaid at the time the goods were examined, a result which was later stated by the Working Group not to be intended,  57  the conclusion was reached that "significant differences in the parties' rights depend on whether or not the buyer has paid before he learns of the defect."  58 

In order to remedy these objections, the study recommended that there be only one standard for measuring the buyer's claim arising out of non-conformity of the goods, namely that of damages, and that art. 46 be redrafted so as to authorize the buyer to "deduct all or any part of the damages resulting from any breach of the contract from any part of the price due under the same contract."  59 

The Working Group was more influenced by the Civil law origins of the remedy of price reduction  60  and accordingly retained the separate remedy of reduction of price as contained in ULIS with a drafting change not relevant to this discussion. The text adopted by the Working Group at its fourth session provided that:

"Where the goods do not conform with the contract, the buyer may declare the price to be reduced in the same proportion as the value of the goods at the time of contracting has been diminished because of such non-conformity."  61 

This text, with the minor amendment indicated in n. 57 above, which was added at the Working Group's seventh session, was submitted to UNCITRAL.

By the tenth session of UNCITRAL at which the current text of art. 46 was adopted, all the problems of the past had been isolated and identified. The Common law participants recognized and accepted that reduction of price was, and was intended to be, a remedy separate from that of damages. The Civil law participants recognized that the nature of the remedy and the mechanism by which it worked could be difficult for Common lawyers to understand from the wording of the text alone. Therefore, the provision was redrafted to make it as self-explanatory as possible.  62  Unfortunately, the result is a text which -- with all its merits -- is awkward to read.


 53. See Working Group, Report on Third Session (1972) A/CN.9/62 and Adds. 1 and 2, Annex II, paras. 109 to 113; III Yearbook 89.

 54. Id., para. 115 (and Annex I, para. 28).

 55. A/CN.9/WG.2/WP.16, paras. 146-152, IV Yearbook 56-57.

 56. Id., para. 150, IV Yearbook 57.

 57. At its fourth session, the Working Group stated that it "was understood that the phrase ?the buyer may declare the price to be reduced? not only authorized the buyer to withhold the designated portion of the price but also served as a basis for the buyer to recover the designated portion of the price that had been paid." A/CN.9/75, para. 126; IV Yearbook 71. At its seventh session the Working Group elevated this statement of intent into the text of the article on price reduction (then renumbered as art. 31) by adding the words "and whether or not the price has already been paid." See Working Group, Report on Seventh Session (1976) A/CN.9/116, Annex I, art. 31, VII Yearbook 92.

 58. A/CN.9/WG.2/WP.16, para. 148, IV Yearbook 57.

 59. Id., para. 152, IV Yearbook 57.

 60. Working Group, Report on Fourth Session(1973) A/CN.9/75, para. 119, IV Yearbook 71. The influence of the Civil law tradition was also made clear by the fact that one representative expressed the view that the right of the buyer to reduce the price should be limited to breaches of contract in respect of non-conformity of the goods, meaning, presumably, non-conformity as to quality rather than as to quantity (para. 120). Another representative also indicated a Civil law point of view when he pointed out "that an important difference between price reduction and damages was that for a reduction in price it was not necessary to prove fault while damages could only be recovered if fault was proven" (para. 121). One observer supported this view and added "that the right to reduce the price was not even subject to the conditions laid down in article 74 of ULIS" (ibid). (Art. 74 of ULIS exempts a party from liability for non-performance "if he can prove that it was due to circumstances which, according to the intention of the parties at the time of the conclusion of the contract, he was not bound to take into account or to avoid or to overcome. . . .")

 61. Id. at para. 125.

 62. The tenth session of UNCITRAL also added the second sentence of art. 46 of the Draft Convention to make it clear that the seller?s right to remedy any non-conformity in the goods comes ahead of the buyer?s right to reduce the price, A/32/17, Annex I, para. 299.


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