. INTRODUCTIONThe origin of the 1980 Vienna Convention on the International Sale of Goods, of April 11, 1980 (hereinafter, the CISG) must be sought in the exponential growth of international trade in the twentieth century, which showed that the various national legal systems needed to be adapted to enable them to resolve the particular problems arisen from the volume of international transactions, including the need to harmonize the various remedies of the parties in case of breach.According to articles 1 through 6 of the CISG, the CISG only applies to contracts of sale of goods concluded between parties (typically, contracts of sale of goods among traders with the aim to resell) having their places of business in different States when those States are contracting States or when the rules of Private International Law lead to the application of the law of a Contracting State, regardless of the nationality of the parties or the civil or commercial character of the parties or of the contract.In this context, the CISG, set up as a uniform instrument and inspired by the US Uniform Commercial Code, regulates the international sale of goods, dealing exclusively with: (i) the formation of the contract; and (ii) the rights and obligations of buyer and seller under the contract. As a result, unless expressly provided otherwise in the CISG itself, it is not concerned with the validity of contracts nor their clauses, nor with the ownership of the goods.Notwithstanding the limited scope of the CISG described above, the rules of the CISG usually serve to support the caselaw interpretation by local civil courts1, even to the point where it has been clearly specified2that the CISG may fill in gaps in the civil local provisions, and also sustain or support the interpretation by the courts in relation to any legal institution which, although not included in the Civil Codes or the Commercial Codes, is protected by case law3. Similarly, it is considered that the CISG may be used to confirm principles or general rules contained in the Civil Codes, Commercial Codes or in special laws and that, furthermore, the CISG may be applied to cases in which the parties did not specify the applicable law or where, even having done so and such law being other than the CISG, the judge deems that the CISG should be applied to the dispute in question.1Supreme Court of Justice (hereinafter, SCJ) of April 5, 2006; SCJ of July 20, 2006; Palma de Mallorca Provincial Appellate Court (hereinafter, PACJ) of November 9, 2006; Huesca PACJ of December 21, 2006; SCJ of December 22, 2006; Barcelona PACJ of February 4, 1997; Barcelona PACJ of January 28, 2004; Barcelona PACJ of November 9, 2004 and Barcelona PACJ of November 27, 2003.2SCJ of April 5, 2006, SCJ of July 20, 2006; Palma de Mallorca PACJ of November 9, 2006; Huesca PACJ of December 21, 2006.3SCJ of July 11, 2006; SCJ of April 5, 2006, SCJ of July 20, 2006; Palma de Mallorca PACJ of November 9, 2006; Huesca PACJ of December 21, 2006.2

On the other hand, it has to be taken into account that the CISG synthesizes different traditions of law (Common Law and Civil Law), in which there is a clear predominance of Common Law. This predominance has become apparent, among others, in a favorable orientation toward maintaining the contract and the resulting restrictive interpretation of breach to the fundamental breach.According to Article 25 of the CISG, a breach of contract by one of the parties is fundamental if it results in such detriment to the other party as substantially to 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.Under the present circumstances: is the fundamental breach under Article 25 CISG the best solution in practice to protect the nonbreaching party?In order to reply this question it is necessary to briefly analyze, firstly, the other remedies provided by the CISG in case of breach of a contract and, secondly, the requirements of a fundamental breach under the CISG.II.ALTERNATIVE RIGHTS TO THE PARTIES IN CASE OF A BREACH OF CONTRACT

The CISG provides, in relation to an event of breach of contract, a selection of remedies to the buyer and seller, based on the socalledfavor negotii, to avoid the termination/avoidance of the contract concerned (in some cases, these alternative remedies were not previously provided by the relevant national local law, though applied by the local courts). It may therefore be understood that contractual termination/avoidance will operate where all other measures for preserving the contract provided for under the CISG do not eliminate the imbalance produced by the breach of one of the parties, rendering the contract invalid4.The distinction between "fundamental" and "nonfundamental" breach is crucial in order to determine the various remedies available to the aggrieved party, remedies which have different degrees for serious cases of a breach of contractual obligations, according to the extent of the frustrated interests and the foreseeability of the consequences of the breach. Thus, more severe remedies are only provided for essential shortcomings in the performance of a contract.Accordingly, in the event of abreach of the sellers obligations, the following specific rights are conferred on the buyer under the CISG:(a)Specific performance (article 46 CISG): in cases of a breach, partial delivery or lack of conformity of the goods, performancein naturamay be claimed only in respect of the4SCJ of January 17, 2008.

3portion that is lacking or does not conform, unless the buyer has resorted to a remedy which is inconsistent and subject to the limits in article 28 (it can only be exercised if thelex foriallows it).Judgment of the New York Federal District Court (hereinafter, the NYFDC) of August 20, 2008 (Hilaturas Miel, S.L. v. Republic of Iraq), quoting the Macromexdecision of another court of the same district, stated that if without fault of either party () the agreed manner of performance () becomes commercially impracticable but a commercially reasonable substitute is available, substitute performance must be tendered and accepted (); a reasonable substituted performance tendered by either party should excuse that party from strict compliance with the contract terms which do not go to the essence of the agreement.Under such case, as a consequence of the war in the Republic of Iraq, Hilaturas Miel, S.L. was unable to deliver goods to a buyer who was in Iraq, given that such goods were retained in a third country, despite the fact that the seller sent several letters to the buyer in order to explain the situation and requested that the relevant officers of the United Nations Security Council renegotiate and prioritize their contract in order to avoid the impossibility of meeting its obligations. The NYFDC had to analyze whether the buyer should have made an extra effort with a view to receiving and accepting the goods or, otherwise, whether the seller ought to have sought an alternative performance of its obligations. In this connection, the NYFDC, in its Judgment of August 20, 2008, also held that the seller has failed to allege that it ever tendered reasonable substitute performance, nor does the seller describe any method of substitute performance that was available. Moreover, it was placed on record that the buyer does not bear a legal duty to compensate the seller for goods that were never delivered due to unforeseen events outside the control of the parties.(b)Extension of the period for performance (article 47 CISG): in cases of breach, partial delivery or partial lack of conformity of the goods, the seller is given an additional period of time of reasonable length in which if the buyer accepts, and unless the seller gives notice that he will not perform, the buyer cannot resort to any remedy for breach of contract, except for claiming damages.In connection with the above, the Judgment of Arnhem Appellate Court (The Netherlands) of October 7, 2008 (Arens Sondermaschinen GmbH v. Smit Draad / Draad Nijmegen B.V.), provided that the period of grace did not apply in the case at hand, as the delivery to the buyer as required by Article 47 in connection with Article 49 of the CISG never took place: in cases in which nondelivery amounts to a fundamental breach, the buyer is not required to grant the seller an additional period of time as foreseen in Article 47 of the CISG. However, the Court holds that the buyers declaration to give a definite decision after the test [experts report] in order to declare the avoidance of the contract, constituted the setting of an additional period of time () which expired on the date of the test (). Hence, it was clear for the seller that the buyer intended to give the seller a last chance to fulfill its obligations. Moreover, the Court holds that when determining whether the breach was fundamental in the sense of Article 25 of the CISG in connection4with Article 49.1 of the CISG (reason for avoidance) or not, it is also relevant if the non performance could have been remedied within a reasonable period of time.(c)Remedy at the sellers expense (article 48 CISG): even after the delivery date, only if he can do so without unreasonable delay and without causing extensive unreasonable inconvenience or uncertainty to the buyer, who retains the right to claim the relevant damages. The remedy option does not apply in the case of specific goods in which the conformity defect cannot be eliminated. In addition, if the breach could be remedied in more than one way (repair or substitution), if both options are equivalent and do not imply an unjustified delay for the buyer, the seller has the right to choose. For instance, the view taken in Spanish case law is that, under the principle of good faith, the buyer is required to accept a repair or substitution even if it implies a slight variation in the identity of the item, unless the buyers interests can only be satisfied with identical performance to what was agreed upon.An example of this is reflected in the Navarra PACJ of March 27, 2000, in a case of delivery of goods and failure to pay the price where the buyer never informed the seller of any deficiencies or faults in the goods. This Navarra PACJ took the view that the buyer in the event that the notice of the faults had been given in a reasonable period of time, he would always have to have required performance of the warranty, and if he had obtained a court decision against the plaintiff(the seller)to repair the fault, only if he had not done so within the period specified to him, can () do so at its expense, but the repair of a fault by the buyer at the expense of the seller can never be allowed without the seller having the opportunity to claim them, even if that obligation is imposed on him by the court, on pain of causing him denial of due process rights (), because the seller can remedy it at its own expense, after the delivery the breach of its obligations, if it can do so without an unreasonable delay and without causing the buyer unreasonable inconvenience, which is determined by the failure by () to charge the price reduction. Furthermore, it adds that, if the buyer had requested performance of the warranty from the seller, the seller would have had the opportunity to repair the faults with its own resources, and it would have turned out cheaper for it, or it would simply have been able to substitute the defective appliances with others.On the other side, in the event of abreach of the obligations of the buyer, the following specific rights are conferred to the seller under the CISG:(a)Specific performance (article 62 CISG): in cases of breach of the obligation to pay the price, take delivery of the goods and other contractual obligations, performancein naturamay be claimed only in respect of the portion that is lacking or does not conform, unless the buyer has resorted to a remedy which is inconsistent.(b)Extension of the period for performance (article 63 CISG): in cases of breach, failure to pay the price and failure to take delivery of the goods according to the terms that have been fixed, the buyer is given an additional period of time of reasonable length in which if the seller accepts, and unless the buyer gives notice that he will not perform, the seller cannot resort to any remedy for breach of contract, except for claiming damages.5

(c)If under the contract the buyer is bound to specify the form, measurement or other features of the goods and he fails to make such specification, the seller may make the specification himself, in accordance with the requirements of the buyer that may be known to him, in which case the seller must inform the buyer of the details thereof and must fix a reasonable period of time so that the buyer may make a different specification. If the buyer fails to do so, the specification made by the seller is binding.(d)The right of termination/avoidance of the contract by the buyer5or by the seller6will only come into play in the fixed cases defined (ultima ratio), and only where they are met in the due time and form. Thus, some commentators and local courts practically unanimously agree that legal transactions, save for the exceptions provided for by law, are at all times expected to produce effects and, even if they contain a defect leading to unenforceability, they are to be remedied and preserved. The aforementioned principle of preservation, whether or not based on a general principle of law, makes it possible to safeguard all or some of the effects of the contract and to ensure the circularization of goods and services necessary for the automatic reproduction of the socioeconomic scheme.In addition, articles 44 and 50 of the CISG provide for the following rights only in cases where the goods do not conform:(a)Substitution: if the goods delivered do not conform to the contract and their lack of conformity constitutes a fundamental breach of contract, and a request for substitute5Avoidance by the buyer (article 49 CISG):(a)Fundamental breach of contract (initial or supervening).(b)Failure to deliver the goods, if the seller does not deliver them within any additional period of time that may have been agreed.In case the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so: (c.1) in respect of late delivery: within a reasonable time after he has become aware that delivery has been made; or (c.2) in respect of any breach other than late delivery, within a reasonable time: after he knew or ought to have known of the breach or after the expiration of any additional period of time or after the seller has declared that he will not perform his obligations or after the buyer has declared that he will not accept performances.6Avoidance by the seller (article 64 CISG):(a)Fundamental breach of contract (initial or supervening).(b)Failure to pay the price by the buyer if he declares that he will not do so within any additional period of time that may have been agreed.(c)Failure to take delivery of the goods by the buyer, if the buyer declares that he will not do so within any additional period of time that may have been fixed.(d)In case the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so, in respect of late performance, within a reasonable time: (d.1) after the seller knew or ought to have known that performance has been rendered or (d.2) after the expiration of any additional period of time or after the buyer has declared that he will not perform his obligations or after the seller has declared that he will not accept the performance.6

goods is made in conjunction with notice given in article 39 of the CISG within a reasonable period of time.(b)Remedy or repair of defective goods: only if this is possible taking into consideration all the circumstances and if requested in the notice given under article 39 of the CISGwithin a reasonable time period (it does not have to be a fundamental breach). Spanish case law7has been accepting that the buyer may repair the goods himself at his own expense and claim the expenses he has incurred from the seller. It has also been accepted that the repair does not have to leave the goods in an identical state to the state they would have been in if the defect had occurred, and it is sufficient for them to leave the goods in a substantially identical state, subject to compensation for any failure to reach the exact same state.(c)Price reduction: the remedy ofquanti minoris, by means of which the balance is reestablished between the price stipulated and the value received, without affecting the validity of the contract and regardless of any damages, only in cases where the goods do not conform, and the fundamental element is not important. It is also necessary for the buyer to receive and accept the delivery of the goods that do not conform to the contract and for them not to have been remedied by repair. If the goods do not conform to the contract, whether or not the price has been paid, the buyer may reduce the price in proportion to the difference between the value of the goods actually delivered, upon their delivery, and the value they would have had at such time had they conformed to the contract, provided that the lack of conformity is proved in due form and time.In this connection, the Vizcaya PACJ of November 5, 2003, analyzed the lawfulness of the price reduction claimed by the buyer in a possible case of lack of conformity of the goods. The Provincial Appellate Court deemed that the buyers pretences could not be admitted because said buyer could not successfully prove the lack of conformity of the goods, since it had had reasonable knowledge of the characteristics of the goods sent to him as agreed and, furthermore, it had been proved that the amendment of the initial contract by the seller had been accepted in full by the buyer, who, upon receiving the documentation, made no exception or protest whatsoever regarding the qualities and quantities delivered, paying up to 90% of the price, having put on record the goods unloaded()to be consistent with what had been agreed, being very significant for such purposes that it made no protest regarding damage.(d)Claim damages: such damages would include a sum equal to the loss suffered(damnum emergens) and a sum equal to the loss of profit (lucrum cessaus) as a result of the breach8.78Navarra PACJ of March 27, 2000; Barcelona PACJ of March 11, 2002.Barcelona PACJ of June 20, 1997.7

In light of the foregoing comments, in the event of a fundamental breach, the injured party may not only claim damages, a price reduction or the repair of nonconforming goods, but may also declare the contract avoided or request the delivery of substitute goods. Said distinction may lead to different legal consequences.III. TERMINATION/AVOIDANCE OF CONTRACT AS THE ULTIMATE REMEDYOn the principle of preservation of the contract, the aim sought by the CISG is to reduce the number of events in which the contract can be terminated/avoided on the ground of a fundamental breach of the obligations acquired, especially since the effectiveness and certainty of legal transactions are truly necessary to international trade and to its dynamics. It will only be accepted in specific events and on an exceptional basis, in order to preserve the effective continuance of the legal transaction, by preventing the termination/avoidance of the agreement as a result of minimum and not fundamental breaches9.Since certain remedies are only available in cases of a fundamental breach, this is where the distinction between a "fundamental" and a "nonfundamental" breach is of cardinal importance for the system of remedies, because it can determine the life or death of the contract10. Thus, as from a certain degree of breach, there emerges a qualitative leap of legal significance that enables the contract to be avoided.According to the foregoing, termination of the contract will only operate asultima ratioin cases of fundamental breach. Such breach must occasion substantial, obvious and notable damage which entails the deprivation of what was expected pursuant to the provisions agreed in the contract. In this connection, according to Spanish case law, the success of an action for termination based on fundamental breach requires that the breach of what was agreed be serious and fundamental, without being sufficient to claim a breach of ancillary or supplementary obligations which, not being decisive, do not prevent the creditor from obtaining the economic result which led it to enter into the contract11.This starting point is equivalent to the traditional interpretation of Spanish by the Spanish courts.In this connection, it is important to highlight the SCJ of July 14, 2003, quoted subsequently in the Cuenca PACJ of January 31, 2005, among others. The Supreme Court held that the exceptio non rite adimpleti contractus must be weighted by considering the specific circumstances of the case since, although a complete breach, which configures the exceptio non rite adimpleti contractus, does not create problems in connection with the evaluation of its effects as a lawful cause of contractual termination, a partial breach requires more detailed evaluation by the instance court of its extent and repercussions on the economy of the9El contrato de compraventa internacional de mercaderas (Convencin de Viena de 1980), by Maria del Pilar Perales Viscasillas.10Fundamental Breach, by Will M., Bianca & Bonell.11Navarra PACJ of December 27, 2007; SCJ of February 29, 1988; SCJ of February 28, 1989; SCJ of April 16, 1991; SCJ of February 8, 1993 and SCJ of November 18, 1994.8

contract, since the success of the aforesaid exception for breach of contract is conditional on the defect or defects being of certain significance or transcendence in relation to the aim pursued and on the ease or difficulty of their correction, making it unsuitable to satisfy the interest of the contracting party. Moreover, and in accordance with articles 79 and 80 of the CISG, which exempt the party at breach in certain circumstances, it will at all times prove necessary to investigate the foreseeable nature of the breach and the debtors chances of avoiding it, and it may therefore be said that the CISG provides for a quasiobjective liability regime, mitigated by the exemptions system and the reasonability principle.IV. FUNDAMENTAL BREACH VS. MERE MATERIAL BREACHAll in all, it is worth noting the existing difficulty when it comes to translating the standard Common Law expression fundamental breach into Civil Law. Thus, roughly speaking, it may be asserted that a fundamental breach of contract is characterized by the seriousness of the breach and the consequences deriving therefrom. This is usually described in doctrine as a breach which goes to the root of the contract12or which goes to the essence of the agreement13.Moreover, it is crucial to define and expressly determine the partys interests in the contract. It is common to redefine or specify general concepts in line with the partys needs, to specify the quantity and quality of the goods, as well as to incorporate the relevant information within the contract, for the purpose of assembling the puzzle with as many pieces as possible, in order to discover the true intentions of the contracting parties when it comes to interpreting the contract.In light of the foregoing and as regards the importance of defining the parties interests in the contract, the Switzerland Federal Supreme Court (hereinafter, the SFSC), in its Judgment of May 18, 2009, considered that the buyer was entitled to declare avoidance of the contract because of nondelivery and because of a fundamental breach of contract () existed as a result of the fact that the parties adopted a meaning of the term delivery which is in deviation to the meaning adopted by the CISG. According to the parties, delivery should refer to the day when installation of the packaging machine has finished and when the machine is operating to buyers full satisfaction. Consequently, the delivery of the packaging machine never actually occurred in the present case.In view of the standpoint under the CISG, it may be deduced that two requirements must be met in order to deem a potential breach to be fundamental: first of all, the breach must give rise to such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, and, second, the seriousness of the damage caused must be12Remedies for Breach of Contract (Courses of Action Open to a Party Aggrived), by Trietel, G.H., Vol. VII., chapter 16 of the International Encyclopedia of Comparative Law, Tbingen. Pars, The Hague, 1976.13NYDC Judgement of August 20, 2008.9

foreseeable by the party at breach and by a reasonable person of the same kind and in the same circumstances.(i)Detriment of a contractual interest:The concept of detriment is not defined in the CISG. However, a definition of detriment cannot be confined simply to material loss or damage, but must rather be interpreted in a broader sense, also including immaterial detriment such as loss of clientele, loss of resale possibilities or being brought into disrepute etc. ("Detriment()fills the modest function of filtering out certain cases, for example where breach of a fundamental obligation has occurred but not caused injury"14).Moreover, it should be noted that cases in which a breach derives from the acts of a third party are not understood to fall under Article 25 of the CISG. Such cases would constitute noncontractual liability excluded under Article 4 of the CISG. Nonetheless, cases of a breach by a third party engaged by one of the parties should be included, in situations similar to that under Article 79.2 of the CISG.To this end, in cases of contract avoidance, certain national courts15have even held that non conformity of goods does not result in any substantial detriment of expectation if the goods may reasonably be used for another purpose or can be resold elsewhere. In this case, the buyer may claim damages or seek other remedies but may not declare the contract avoided for the reason that the CISG aims at saving contracts. Therefore, the buyer is face with a dilemma: on the one hand, he must retain the non conforming goods in order not to forfeit the right to avoid the contract, and, on the other hand, the buyer may be forced to resell the goods or make other use of them in order to mitigate the loss. Thus, the term substantial detriment is open to various interpretations and each interpretation may come into conflict with certain provisions in the CISG or render them meaningless.In this connection, it is worth mentioning the Judgment of the Hamburg Appellate Court (Germany) of January 25, 2008, which rejects the possibility of classifying a failure to meet the sellers obligations as a fundamental breach of contract, arguing that the buyer can make some use of the nonconforming goods. To this end, the aforesaid Court reasoned that in cases of delivery of defective goods, they must be practically useless for the buyer in order for the breach to be fundamental. If the defective goods can be put to use (and even where only restricted use is possible) there will generally be no fundamental breach of contract [BGHZ 132, 290 (298) (unrecoverable deviation in quality, which however did not render the delivered cobalt sulphate unmarketable); BG SZIER 1999, 177 (meat with too high and therefore non conforming content of a fat while it remained marketable)]. Given the efforts necessary14Bianca & Bonell and Honsell.15Appeal Court in Frankfurt a.M., January 18, 1994 and Federal Court of Justice of Germany, BGH UrteilVII ZR 51/95, April 3, 1996.10

to unwind the transaction, an avoidance of the contract should be only available as a lastresort remedy (). This rule also applies to cases where goods cannot be put into full operation, where there is a failure to comply with additional obligations under the contract, such as the obligation to install the goods in a readyforuse condition. Furthermore, the Court states that even if the inventory which had been intended for ice cream production had not been usable in a similar manner, the buyer could at least have made use of a part of the inventory () and has in fact made use of it. Avoidance of the entire contract would have only been possible under these circumstances if the missing installation of the inventory for ice cream production had affected the buyers interest in making use of the other part (); a delivery which is not in conformity with the contract, is also applicable to cases like the present only by way of analogy. Finally, the Court held that since the buyer has actually made use of a considerable part of the inventory, it has demonstrated that it has been interested in this particular part. Thus, there is no basis for an avoidance of the entire contract. The buyer has not declared a partial avoidance in terms of Article 51 of the CISG, which might have covered only the inventory intended for ice cream production. Moreover, any partial avoidance would not entitle the buyer to claim reimbursement of the whole advance payment.Notwithstanding the above, in the event of a nonperformance by the seller, where the buyer has made some use of the delivered non conforming goods before he had notified the seller about the lack of conformity within a reasonable period of time and duly fixed an additional period of time to perform the obligations, within which the seller failed to remedy the lack of conformity, the BaselStadt Appellate Court (Switzerland), in its Judgment of September 26, 2008, understood that the seller has constantly attempted to remedy the lack of conformity and is liable for a fundamental breach of contract. The Appellate Court stated that the right to declare avoidance will not be lost if the buyer has consumed or transformed the goods in the course of normal use before he discovered or ought to have discovered the lack of conformity. It is important to note that this rule only applies where the consumption or transformation has taken place before the buyer was aware or ought to have been aware of the lack of conformity () in the present case, the relevant timeframe for utilization extends to the time when avoidance was declared. () Any utilization () by the buyer after its declaration of avoidance (i.e., during the time when the seller was in arrears with redeeming the goods) does not have any bearing on the validity of the declaration.Returning to the concept of detriment, the main emphasis is placed upon the contractual expectations of the injured party, on what he is entitled to expect under the contract16. The expectation element adds an objective criterion to the definition since it is the contract that determines the parties obligations and also determines the importance of such duties. This becomes important when a contract is declared avoided and the seller has made an offer to remedy.16SFSC Judgement of May 18, 2009 and SFSC Judgement of October 28, 1998.11Such detriment must substantially deprive the injured party of what he is entitled to expect under the contract. It has even been argued that to define fundamental as substantial is anidem per idemdefinition and, therefore, mere tautology. It implies that the substantial nature of the detriment depends on whether or not the breach can be remedied without causing unreasonable inconvenience and delay.Further to the above, in a case where the seller had delivered a packaging machine which failed to achieve the performance required under the contract and, consequently, the buyer experienced a loss of productivity of 71%, in its Judgment of May 18, 2009, the SFSC analyzed whether the buyer had been substantially deprived of what he was entitled to expect under the contract. In this case, the Court held that a fundamental breach applies, in particular, to those lacks of conformity which cannot be remedied within reasonable time and by reasonable efforts to the effect that the goods are practically useless, untradeable or cannot be appropriately resold (). If the goods are essentially inappropriate for the buyers own production, resale or other needs, he will be entitled to declare the contract avoided. The SFSC also stated that given a loss of productivity of 71%, the buyer is substantially deprived of what it has been entitled to expect under the contract. This amounts to a fundamental breach. The numerous attempts by the seller to remedy the lack of conformity also demonstrate that the nonconformity could not be remedied within a reasonable time. Moreover, the particular packaging machine was specifically designed for the buyers individual needs. Therefore, any resale of the machine has been impossible or at least inappropriate for the buyer.Finally, the SFSC considered that the buyer was entitled to expect that the machine delivered by the seller would actually achieve the promised performance. However, this was not the case by far. Therefore () it would not have concluded the particular contract had it been aware of the packaging machines actual performance. Even the buyers former packaging machine () had been capable of a similar performance. A price reduction could not be considered because the buyers loss of productivity throughout the expected lifetime of the machine exceeded the purchase price by far. Moreover, it was not possible for the buyer to resell the machine and thereby (partially) compensate its losses. Consequently, the seller was liable for a fundamental breach.(ii)Foreseeability of the substantial detriment:The unforeseeability criterion is meant to be a filter for extraordinary situations. It may be assumed that reasonable businessmen will foresee the negative effects of a breach of contract so that they either will not contract or will avoid the breach. The burden of proof of the unforeseeability lies on the party in breach. The reference to a reasonable person of the same kind introduces an objective standard by comparing the party in12

breach with a hypothetical contracting party of the same commercial branch, the same function, the same socioeconomic background and the same education17.As far as foreseeability of a substantial detriment is concerned, a breach is not fundamental unless the party in breach did not foresee and a reasonable person in the same circumstances would not have foreseen such a result. This second part of Article 25 of the CISG is composed of a subjective and an objective test of foreseeability, and it is meant to rule out a fundamental breach where the substantial detriment occurs unexpectedly.However, as parties in breach are not likely to admit that they foresaw the detrimental result, the objective criterion of a reasonable person was introduced. The whole range of facts, such as the conditions of world and regional markets, national legislation and prior trade usage between the parties, among others, must be taken into account to determine whether a reasonable person would have foreseen a detrimental result.Notwithstanding the above, the main problem of foreseeability rests with the time at which the detrimental result must be foreseen. Article 25 of the CISG does not answer this question and it remains uncertain whether the time of the contract execution is crucial to assess foreseeability or whether foreseeability of a detrimental result occurring after the conclusion of contract also has to be taken into consideration. It is so expected that, in particular cases, information which the party in breach received only after the conclusion of the contract will also be considered in determining whether the effects of the breach were foreseeable or not.It has been suggested that if a detrimental result was not foreseeable at the time of the conclusion of the contract, and becomes foreseeable thereafter, the party in breach cannot claim that the detrimental result was unforeseeable. According to this view, any foreseeability of a substantial detriment before the time of breach but after the time of conclusion is to be taken into consideration18. Others suggest that the foreseeability of detrimental results after the conclusion of the contract can only be considered in exceptional cases and only up to the time when the preparations for performance of the contract started19. Otherwise, one party could make substantial a certain interest that was not mentioned at the time of execution of the contract and change a nonfundamental breach into a fundamental breach simply by providing the other party with further information.Thus, the definition in Article 25 of the CISG can be divided into two elements: first, a detriment such as substantially to deprive the other party of what he is entitled to expect under the contract and second, the foreseeability of the detriment. Unfortunately, the17Remedies for International Sellers of Goods, by Dennis Campbell.18Honnold.19Bianca & Bonell.13

interpretation of a substantial detriment and the crucial time of foreseeability leave the buyer and the seller exposed to uncertainty.However, a fundamental breach had to be drafted in general terms since such a concept cannot specify all possible circumstances. Thus, the current definition in Article 25 of the CISG has generated much controversy and difficulties in its interpretation.Moreover, a fundamental breach, as defined in the CISG, should not be confused with the English doctrine of fundamental breach20, according to which the party responsible for such breach may not resort to a restriction of liability which was fixed in standard business conditions.If the breach serves to deprive the other party of what he is entitled to expect under the contract, the party in breach can still prove that he did not foresee, and a reasonable person of the same kind in the same circumstances would not have foreseen, such negative consequences. Thus, a fundamental breach appears to exist if a risk materializes to the detriment of the other party which the violated term of the contract obviously intended to prevent21.Further to this reasoning, the avoidance of a contract due to a fundamental breach of the same, would only take effect on compliance with examination and notification requirements pursuant to Articles 38 and 39 of the CISG. By way of example, the Hamburg Appellate Court, in its Judgment of January 25, 2008, considered that there is no fundamental breach to support the avoidance of the contract since in any event, the buyer has not properly notified the nonconformities within due time and sufficiently specified the nature of the lacks of conformity. These may prove to be the most frequent mistakes when it comes to declaring the avoidance of a contract. In this connection, the Court explained that any lack of conformity must be notified in a way that the defect is sufficiently specified in order to enable the seller to comprehend it and to be able to plan his reaction (). Buyers letters () merely state that there has not been any installation of the machines for ice cream production in readyforuse condition for the operation of the caf which would have been required under the contract. Any reasonable person of the same kind as the other party would have understood this as a mere reminder to install the machines but not as a complaint about the actual condition of the inventory (). Consequently, the buyer has lost its right to rely on a lack of conformity ().To sum up, a breach of contract should generally be classified as fundamental only where the aggrieved party is no longer interested in performance due to the breach22. In other words: whether the remedy of avoidance is indeed justifiable23.20Photo production, Ltd. vs. Securicor Transport, Ltd., 1980, 2 WLR 283.21Remedies for International Sellers of Goods, by Dennis Campbell.22Federal Court of Justice of Germany, BGHUrteilVII ZR 51/95, April 3, 1996.23Swiss Federal Supreme Court of October 28, 1998.14

With respect to the need or otherwise to account for negligence on the part of the party at breach, it should be noted that the foreseeability test inevitably entails a certain reference to the negligence of the party at breach. Nonetheless, it should be clarified that the CISG maintains criteria similar to those of countries, in which the debtor is liable for the breach, regardless of whether or not such a breach has been deliberate in nature, while distancing itself from where the intention to breach is relevant.For example, in Spain, in order for termination of contract by virtue of article 1,124 of the Civil Code, the following requirements are laid down24: (i) it must be a contract with reciprocal obligations; (ii) there must have been a serious breach of the obligation.Moreover, with the exception of fixed term contracts, certain corporate/commercial contracts and contracts providing for a time delay or a justification of compliance compatible with the plan to perform what has been promised, Spanish case law25required prior to 2006 that the debtor, in addition to breaching the contract in a serious or objectively significant manner, must have an undeniable intention to deliberately rebel against performance (deliberately defiant intention of the debtor) in order to be able to terminate the contract pursuant to Article 1.124 of the Civil Code. This intention may take shape expressly, orally or by action, or may emerge due to the negligent conduct of the debtor, which definitively, absolutely and irremediably prevents performance.Since 2006 the seriousness is evidenced by the very fact of the unenforceability of the price by violating the assumed obligation () due either to a frustration of the aim of the contract without the need for a fast and persistent resistance obstructing fulfillment, as it is sufficient for the legitimate aspirations () of the other party () to fail to be achieved; or by finally requiring simply that the debtors conduct must be serious ();and, in cases of successive breaches, it is required that the party in breachgive the other injured party reasons to believe that it cannot trust that there will be future compliance by the other party. This new line is consistent with the rules on breach contained in the CISG. A manifest intention not to perform the obligation incumbent on one of the parties does not constitute an essential factor when it comes to classifying a breach as fundamental. Nonetheless, the existence of an intention manifestly contrary to the performance of the obligation entails the fundamental nature of the breach, unless the party has justified grounds to oppose performance of the obligations incumbent on it.In contracts for delivery of goods by installments, if the failure of one party to perform any of his obligations in respect of an installment constitutes a fundamental breach of contract with respect to that installment, the other party may declare the contract avoided with respect to24SCJ of April 5, 2006. Setting case law: SCJ of July 20, 2006; SCJ of December 22, 2006; Palma de Mallorca PACJ of November , 2006, Huesca PACJ of December 21, 2006; SCJ of October 10, 2005; SCJ of May 16, 1996; and SCJ of March 21, 1986.25SCJ of November 6, 1987 and SCJ March 22, 1984.15

that installment only, unless the partys failure to perform gives the other party good grounds to conclude that a fundamental breach of contract will occur with respect to future installments, in which case he may declare the contract avoided for the future, provided that he does so within a reasonable time.Mention must be made in this context of the Barcelona PACJ of November 3, 1997, which is one of the first judgments to apply the CISG, specifically, in a case of the sale of goods in which delivery by installments was stipulated (akin, in Spain, to the supply contract). In that judgment it was affirmed that the CISG also authorizes the contract to be avoided for the future if the breach by one of the parties of any of his obligations relating to any of the installments gives to the other party well founded grounds to conclude that a fundamental breach of contract will occur as regards future installments, in the same way as in a case of late delivery, the subsistence of the buyers right to avoid the contract is subject to the requirement to exercise that right within a reasonable time after he has become aware that the delivery has been made. Furthermore, it is concluded in the same judgment that in the case on trial it has already been seen that the buyer tolerated successive delays in the delivery of the goods (which is equivalent to the granting of additional time provided for in article 47 of the CISG), and upon determining the persistence of the delays, it was decided to exercise, within a period of forty eight hours from the last late dispatch, the right to declare the contract avoided for the future. This is a case, as a result, of a justified right to unilaterally declare the contract avoided for the case in which it is applied and legally, and therefore it must prevail. It would be another matter if, after making supplies, despite the declaration to avoid the contract, their contents had to be returned to their lawful owner.A purchaser who declares the contract avoided with respect to any delivery may, at the same time, declare it avoided with respect to deliveries that have already been made or to future deliveries if, by reason of their interdependence, such deliveries cannot be put to the use provided for by the parties upon the conclusion of the contract.However, as may be concluded from the wording of articles 32.3, 48.2 and 60 through 65 of the CISG26, and in line with the intention to preserve the continuity of the contract, the CISG provides for the obligation of a party to cooperate to make it possible for the other party to perform its obligations.Moreover, and further to article 77 of the CISG, a party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate any loss, including26Article 32.3 CISG: If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer's request, provide him with all available information necessary to enable him to effect such insurance.Article 48.2 CISG: If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.16

loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the aforesaid loss should have been mitigated. Nevertheless, the duty to mitigate the damage is restricted to cases in which the action taken as a result of the breach is a claim for damages and does not therefore apply to cases of contractual termination.The prerequisite of a fundamental breach is meant to save the contract and, consequently, to avoid expensive and wasteful reshipment where either the defect of goods is immaterial or the deprivations from the contract are insubstantial.In light of the above, an analysis of the concept of substantial detriment reveals that the intention of achieving an objective term partially vanishes, if we take into account the expectations of the aggrieved party, which involves an interpretation of the contract before qualifying the breach, and if we take into account that certain facts and behaviours of the breaching party, may justify, in themselves, the existence of a substantial detriment. A study of the foreseeability test, which reveals that there is no fundamental breach where the substantiality was unpredictable, concludes that it has an exoneratory function, demonstrates the meaning of the reasonable man concept, its influence on the burden of proof and on the time for assessing the essential nature of the breach.In light of the above, the term fundamental breach under Article 25 of the CISG is to be interpreted narrowly27. If it is doubtful whether or not a breach may be qualified as fundamental it should generally be assumed that no fundamental breach exists.27Swiss Federal Supreme Court Judgement of September 5, 2000.