Identifying Fundamental Breach of Articles 25 and 49 of the CISG: The Good Faith Duty of Collaborative Efforts to Cure Defects – Make the Parties Draw a Line in the Sand of Substantiality

Article 49(1) of the CISG allows buyers of international goods to avoid their sales contracts “if the failure by the seller to perform . . . amounts to a fundamental breach.” A breach is “fundamental,” as defined by CISG article 25, when it causes the buyer such detriment “as substantially to deprive him of what he is entitled to expect under the contract.” This definition is followed by the so-called “foreseeability test,” an “unless” clause that excepts the situation where “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.” There are two long-standing and daunting problems in the interpretation of article 25. The first problem lies in the foreseeability test. The second problem lies in how “substantially deprived” the buyer must be for the seller’s breach to become fundamental.

This article attempts to provide parties and judges with an alternative solution to interpreting articles 25 and 49: Determining the existence of a fundamental breach by evaluating the success of the parties’ own attempts to cure. In analyzing this solution, this article argues that article 7(1)’s good faith requirement obliges the parties to collaboratively attempt to cure. Thus, where a buyer fails to meet her good faith obligations to cure, there is no fundamental breach, disincentivizing buyers from opportunistic avoidance. But where the seller fails to meet his good faith obligations to cure (or makes good faith efforts but does not succeed), there is a fundamental breach that permits avoidance. This incentivizes sellers to right their deliveries, and it correctly allows buyers to avoid contracts where they cannot get any other relief. This theory, therefore, replaces an irrational test with a rational one. Because it allows avoidance only where societally and economically beneficial, it should be of much use to courts and parties alike than the former foreseeability test.