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Part VII Obligations of the Seller, 34 Examination and Notice

From: Global Sales and Contract Law

Ingeborg Schwenzer, Pascal Hachem, Christopher Kee

Content type:
Book content
Product:
International Commercial Law [ICML]
Published in print:
26 January 2012
ISBN:
9780199572984

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Subject(s):
Examination and notice and obligations of the seller — Remedies for breach of contract — Conformity of goods

(p. 421) 34  Examination and Notice

  1. A.  General 34.01

    1. I.  Rationale and Comparative Overview 34.01

      1. 1.  Strict Notice Requirement 34.03

      2. 2.  Intermediate Approaches 34.05

      3. 3.  No Notice 34.09

      4. 4.  International Level 34.10

    2. II.  Legal Basis for Buyer’s Notice Requirement 34.16

      1. 1.  Contract and Usages 34.16

      2. 2.  Statutory Default Provisions 34.17

      3. 3.  Good Faith 34.18

    3. III.  Scope of Notice Requirement 34.19

      1. 1.  Type of Breach 34.20

        1. (a)  Non-Conformity 34.21

        2. (b)  Documents 34.23

        3. (c)  Third Party Rights 34.24

      2. 2.  Transactions Covered 34.25

        1. (a)  Identity of Contracting Parties 34.26

        2. (b)  Subject Matter 34.28

  2. B.  Examination 34.29

    1. I.  General 34.29

      1. 1.  Applicable Law 34.30

      2. 2.  Right v Duty to Examine 34.32

      3. 3.  Statutory Provisions on Examination 34.34

    2. II.  Details of Examination 34.36

      1. 1.  Contract and Usages 34.36

      2. 2.  Default Rules 34.37

      3. 3.  Circumstances of the Case 34.38

    3. III.  Time for Examination 34.39

      1. 1.  Determination of the Period 34.40

      2. 2.  Beginning of the Period 34.44

  3. C.  Notice 34.47

    1. I.  General 34.48

    2. II.  Details of Notice 34.50

      1. 1.  Form Requirements 34.51

      2. 2.  Specificity 34.52

      3. 3.  Transmission Risk 34.55

    3. III.  Time for Notice 34.58

      1. 1.  Determination of Period 34.59

        1. (a)  Contract and Usages 34.60

        2. (b)  Statutory Defined Periods 34.61

          • (i)  Fixed Period 34.62

          • (ii)  Prompt v Reasonable Period of Time 34.63

          • (iii)  Apparent v Hidden Non-Conformities 34.69

      2. 2.  Start of the Period 34.70

        1. (a)  Delivery v Physical Possession 34.70

        2. (b)  Defect Discernible 34.71

      3. 3.  Cut-Off Periods 34.72

        1. (a)  Statutory Provisions 34.73

        2. (b)  Relationship to Limitation Periods 34.74

  4. D.  Consequences 34.76

    1. I.  General Consequences 34.76

      1. 1.  Loss of all Remedies 34.77

        1. (a)  General 34.77

        2. (b)  Sample and Instalment Contracts 34.79

        3. (c)  Excessive Quantity or Better Quality 34.81

        4. (d)  Exclusion of Non-Conformities Not Mentioned in Notice 34.82

      2. 2.  Loss of Right to Cure Only 34.83

      3. 3.  Loss of Right to Avoid Only 34.84

    2. II.  Exceptions 34.86

      1. 1.  Seller’s Knowledge of Defect 34.87

      2. 2.  Waiver 34.89

      3. 3.  Buyer’s Excuse 34.90

A.  General

I.  Rationale and Comparative Overview

34.01  The idea of a buyer having to examine the goods and subsequently notifying a seller of any defects discovered is known to the overwhelming majority of legal systems. However, there is significant difference in both the purpose and the operation of this concept.

34.02  It should be noted from the outset that the failure by the buyer to examine the goods and notify the seller of any non-conformities discovered does not give rise to any liability on the part (p. 422) of the buyer. The legal consequences of such a failure are legal detriments to the buyer in that it loses some or all remedies for breach of contract.1 Hence examination and notice—although termed obligations—cannot be compared to obligations such as the payment of the purchase price. Examination and notice are not actionable by the seller. In other words, the seller cannot sue the buyer for not having examined the goods and failed to give notice.

1.  Strict Notice Requirement

34.03  Many civil law legal systems traditionally operate with a very strict notice requirement,2 although in a number of them it is only established for commercial transactions.3 This means that in order to preserve (all of) its remedies for breach of contract the buyer must examine the goods and notify the seller of any defects. A certain relief is achieved by provisions in some legal systems which dispense with the notice requirement where the goods delivered differ in kind or quantity from the goods due under the contract so greatly that the seller cannot reasonably assume the buyer to accept the goods.4 The same result is achieved in those legal systems that distinguish between peius and aliud.5 The duty to examine and give notice applies to a peius only but not to the delivery of an aliud.

34.04  The basic concept of a strict notice requirement is, by and large, undisputed in these legal systems. The majority view argues that the strict notice requirement is necessary to create legal certainty in commerce and thus enhance quick and uncomplicated transactions.6 However, there are legal systems where it is doubted that such strong protection of the breaching seller at the expense of the aggrieved buyer can be justified.7 Naturally, in light of the fact that the buyer is precluded from asserting any remedies for breach of contract8 should it fail to comply with the notice requirement, in practice this requirement has emerged as the seller’s most forceful—and thus primary—defensive weapon.

(p. 423) 2.  Intermediate Approaches

34.05  Intermediate approaches can be found in the common law systems, mixed jurisdictions,9 as well as in the majority of Eastern European and Central Asian legal systems.10

34.06  In those common law legal systems which follow the English model a buyer who fails to examine and notify the seller of any non-conformity within a reasonable period of time loses the right to reject the goods and to avoid the contract.11 The buyer is then considered to have accepted the goods as they are.12 Hence, common law jurisdictions following the English model do not directly speak of an obligation of the buyer to examine the goods and notify the seller of defects. Instead the buyer has a right to inspect the goods before acceptance and the buyer’s request to make use of it cannot be refused by the seller.13 Consequently, the prospect of losing the right to reject the goods and to avoid the contract imposes an indirect obligation on the buyer to examine and notify. In contrast to the strict notice requirement of civil law origin, the English model does not deprive the buyer of all remedies in case it fails to timely notify the seller of defects. Rather, only the right to avoid the contract is lost while the right to claim damages for non-conformity is generally retained.14

34.07  In the USA the situation is different insofar as, in essence, two notice requirements exist. The first notice requirement mirrors the English one in that the buyer is deemed to have accepted the goods if it fails to timely15 notify the seller of non-conformities.16 The buyer then loses the right to avoid the contract.17 In certain instances this right can be restored by the revocation of acceptance.18 After acceptance the buyer generally retains the right to claim damages for non-conformity. However, at this point the second notice requirement is triggered. If after acceptance the buyer fails to notify the seller of any non-conformity within a reasonable period of time the buyer then also loses the right to other remedies, especially damages.19

34.08  The majority of Eastern European and Central Asian legal systems expressly oblige the buyer to examine the goods and notify the seller—absent any agreement to the contrary—within a reasonable period of time.20 However, they go on to state that in case the buyer fails to comply with this requirement, the seller can refuse cure if the seller can prove that due to the failure of the buyer to give proper notice cure has become impossible or would cause (p. 424) disproportionate costs.21 These legal systems are silent as to the fate of the other remedies, namely damages and avoidance. It would seem that the buyer is not deprived of these.

3.  No Notice

34.09  A notable exception to the general acceptance of the idea of the buyer examining the goods and notifying the seller of defects to preserve its remedies for breach of contract is to be found in France and some legal systems following the French legal tradition. Here, no explicit requirement for the buyer to examine the goods and notify the seller of defects is established. Rather, the buyer has to bring a claim based on breach of contract either within a specified limitation period22 or within a ‘bref délai’.23

4.  International Level

34.10  At the international level, uniform laws as well as the DCFR are familiar with the requirement to examine the goods and notify of defects.

34.11  The CISG deals with this requirement in its Articles 38–40, 43, 44.24 Pursuant to these provisions the buyer must examine the goods delivered (Article 38 CISG) and give notice of defects (Article 39 CISG). The seller may not rely on a failure to give notice where it could not have been unaware of the non-conformity (Article 40 CISG). The notification requirement also encompasses third party rights or intellectual property held by third parties in the goods (Article 43 CISG).

34.12  These provisions gave rise to much debate during the Vienna Conference at which the CISG was drafted.25 In particular, representatives from developing countries opposed the inclusion of the notice requirement into the Convention as they feared that parties located in developing countries would typically not be aware of such provisions and their requirements.26 A compromise was eventually found by softening the notice requirement via Article 44 CISG which states that the failure of a buyer to give notice of defects within a reasonable period of time does not deprive it of the right to reduce the purchase price or claim damages, except for loss of profit, where the buyer has a reasonable excuse.27

34.13  Indicative of the growing sophistication of African traders, it appears that these concerns were no longer relevant when drafting the OHADA AUDCG in 1998. This Act in fact contained an even stricter notice requirement than the CISG as the cut-off period for notification of defects is limited to one year28 as opposed to the two years in Article 39(2) CISG.29 Furthermore, there is no equivalent to the reasonable excuse exception found in Article 44 CISG.

34.14  The 2011 OHADA AUDCG displays significant changes to the 1998 position. In particular it distinguishes between apparent and hidden defects with regard to the length of the notification period. For defects apparent at the time of taking delivery the notification period is one month.30 (p. 425) For hidden defects the period for giving notice is one year after the defect should have been discovered.31

34.15  Among the uniform projects only the DCFR contains a notification requirement.32 This is not surprising as it is the only one of them which contains a specific part on sales contracts.

II.  Legal Basis for Buyer’s Notice Requirement

1.  Contract and Usages

34.16  In accordance with the principle of freedom of contract it is first for the parties to establish a notice requirement and any modalities of examination and notice on the side of the buyer. Where this is not done expressly in the contract, it may be necessary to consider usages which may apply. These usages in turn may establish such a notice requirement.33

2.  Statutory Default Provisions

34.17  Where the contract is silent and a notice requirement does not arise from usages, this requirement is frequently found in statutory default provisions.34

3.  Good Faith

34.18  Where the contract is silent and no statutory default provisions establish a notice requirement on the side of the buyer, legal systems occasionally acknowledge that this requirement can arise from the general principle of good faith.35

III.  Scope of Notice Requirement

34.19  While the notice requirement is generally acknowledged by the majority of legal systems, it is not without limits. In this regard, legal systems display a considerable variety when it comes to the actual imposition of this requirement—both in the context of the transactions to which it applies and the types of breach that require notification.

1.  Type of Breach

34.20  The notice requirement, however, does not necessarily apply to all kinds of breaches. In particular, it should be remembered that the notification requirement as far as applicable only applies to cases which the applicable law classifies as cases of non-conformity.

(a)  Non-Conformity

34.21  As discussed above, a significant number of legal systems still adhere to the traditional distinction of aliud and peius.36 This distinction is again a factor in regard to the scope of the notice requirement. A legal system may require notice only in case of non-conformity (p. 426) but not in case of delivery of a different thing—that is, non-delivery.37 Other legal systems which distinguish aliud and peius consider the degree to which the goods delivered differ from those described in the contract.38 Where the difference is minimal, notice is still required. Where the difference is so substantial that it would be unreasonable for a seller to assume acceptance, notice is not required.

34.22  It has previously been noted that a deficiency in quantity may be considered a case of non-conformity.39 This generally means that the buyer has to notify the seller not only of defects but also of missing goods or parts of a delivery.40 This may lead to the situation that the buyer has to pay for goods that were never delivered because it failed to notify the seller in time. In such cases it may be irrelevant that the buyer believed erroneously that the missing goods would be subsequently delivered. At the international level, the DCFR exempts the buyer from the notice requirement where there is a deficiency in quantity and the buyer has reason to believe that the seller would subsequently deliver the missing goods.41

(b)  Documents

34.23  If documents are also subject to the rules of conformity, then as a matter of consequence all rules relating to conformity must also apply to documents including examination and notice, for example where bill of lading displays wrong shipment dates.

(c)  Third Party Rights

34.24  A distinction is made in most jurisdictions between physical non-conformity and goods which are the subject of third party rights.42 In many legal systems the notice requirement only applies to physical non-conformity.43 However, in those legal systems operating with the Roman law concept of eviction, in the context of third party property rights and encumbrances the buyer is typically under an obligation to notify the seller of the third party attempting eviction of the buyer.44 From a functional perspective this is a separate notice requirement for legal defects. Other legal systems, including the CISG, simply establish a separate notification requirement for legal defects that in essence mirrors the notification requirement for physical non-conformity.45

2.  Transactions Covered

34.25  The application of the notice requirement may, however, not only depend on the type of breach in question but also on the type of transaction concerned. Where legal systems restrict the (p. 427) application of the notice requirement to certain transactions, they typically focus on the identity of the contracting parties and the subject matter of the contract.

(a)  Identity of Contracting Parties

34.26  In many civil law legal systems the notice requirement is contained in the commercial code46 in which case it does not generally apply to those who are not subject to regulation by these commercial codes in the first instance. Since these codes are limited to merchants,47 or to transactions that pursue a goal of economic speculation or a profit purpose,48 there may not be a requirement on non-merchants or on sales that do not pursue a goal of economic speculation or intend a profit purpose. In these legal systems civil codes regularly do not establish a notice requirement.49

34.27  In other civil law jurisdictions and indeed most common law systems there are no specific commercial codes or acts applicable only to merchants. In some of these systems the notice requirement therefore applies unrestrictedly to all kinds of transactions.50 However, in the majority of these legal systems potentially unreasonable results are avoided by the operation of specific provisions designed to protect consumers.51 Where no such provisions have been established, court practice applies different standards for examination and notice depending on the identity of the parties.52

(b)  Subject Matter

34.28  In the ordinary factual matrix the notice requirement relates to the goods and their lack of conformity. This is not the only scenario, however, as frequently contracts are of a mixed nature involving both elements of sales contracts as well as elements from service contracts.53 In such circumstances the applicable law may dictate that the entire contract is subject to sales law provisions. While relatively rare in the domestic context,54 the CISG takes an all-or-nothing approach to mixed contracts.55 The question which then arises is whether the notice requirement extends to a breach of a service obligation. At the international level the general position under the CISG is that the rules on non-conformity of the goods in (p. 428) their entirety—that is, including the notice requirement—should be adapted to the breach of a service obligation in a mixed contract.56

B.  Examination

I.  General

34.29  The notice requirement necessarily implies that the buyer should have discovered the non-conformity of the goods delivered. This in turn presupposes that the buyer has examined the goods or should be treated as having done so.

1.  Applicable Law

34.30  The question as to the law applicable to the examination of the goods may present problems in international sales contracts. The question whether the buyer has the right or is required to examine the goods is to be decided by the law governing the sales contract.57 However, where this law provides for the examination of the goods, some rules of private international law expressly stipulate that the actual process of examination as regards time, place, and form shall be governed by the law of the state where the examination takes place.58

34.31  This situation may have particular implications for some contracts governed by the CISG. The 1955 Hague Convention on the law applicable to international sales of goods is fully applicable alongside the CISG on account of Article 90 CISG giving priority to international agreements.59 However, once the CISG is determined as the law applicable to the contract, the details of examination are also to be derived from the Convention.60

2.  Right v Duty to Examine

34.32  In a number of civil law legal systems examination of the goods is established as an obligation of the buyer that precedes the notification requirement. In some Central European, Eastern European, Central Asian jurisdictions,61 the majority of the Nordic systems,62 and in most common law jurisdictions,63 however, that obligation is only indirect. Where the buyer does not examine the goods it is not able to notify the seller of non-conformities. Common law jurisdictions expressly establish inspection of the goods as a right of the buyer which the seller cannot refuse.64 The consequence of losing remedies naturally poses an indirect obligation on the buyer to actually make use of its right to inspect the goods.

34.33  In other instances the buyer may be entitled to request time for examination before effecting payment of the purchase price.65 Although in these situations a full examination will not be (p. 429) possible, at least an examination of the quantity and similar obvious features of the goods will be feasible.66 Such examination must not be confused with the examination preceding the notification of the seller by the buyer. The brief examination before payment is merely intended to allow the buyer to briefly assess the situation and to determine whether there are non-conformities of such seriousness that withholding the purchase price may be justified.

3.  Statutory Provisions on Examination

34.34  While the examination of the goods necessarily forms the basis for the notification of non-conformity, legal systems rarely, if ever, establish specific provisions on examination.67 Often civil law legal systems content themselves with merely stating that an examination should or must take place.68 Likewise, in common law jurisdictions, statutes simply (usually) provide that acceptance is postponed until the buyer has had a reasonable opportunity to examine the goods.69 In contrast, the CISG and the DCFR contain specific provisions on the examination of the goods.70

34.35  The thrift of legal systems in this regard is not surprising given that it is the failure to give notice which is the trigger for any loss of rights, rather than the failure to examine.

II.  Details of Examination

1.  Contract and Usages

34.36  To determine the details of examination one must first give consideration to the parties’ contract and/or applicable usages.71 Details for examination include the time within which the examination of the goods has to be made, the way in which examination has to be carried out and the allocation of the costs for examination. For example, parties may agree on the number of samples to be taken from the bulk delivered, the specificities of test runs of a machine, or which chemical analyses are to be conducted. Furthermore, parties may agree on the persons examining the goods, for example whether the staff of the buyer or seller is involved or whether an expert is to be called upon.

2.  Default Rules

34.37  Where the contract is silent on the details of examination, and there are no usages applicable, the default rules on examination apply. Given that legal systems rarely deal in detail with examination of the goods, consideration of this issue by the parties is all the more important. Nevertheless, occasionally legal systems do establish certain modalities of examination,72 such (p. 430) as a requirement that examination must comply with an ordinary procedure73 or goods be inspected by an expert.74

3.  Circumstances of the Case

34.38  Given the relative lack of guidance provided by the default rules, it is clear that what amounts to a proper examination will in all situations have to be determined on a case-by-case basis. The buyer first of all has to examine the outer appearance of the goods including their shape, weight, smell, or number.75 In case of large deliveries the buyer can be expected to take random but representative samples even if this leads to the uselessness of the samples.76 Where the amount of goods is small, taking random samples is not necessary if it leads to their uselessness.77 Where the goods are to be assembled before being put to use, the buyer may be obliged to do so where this can be done at low or no cost.78 Further examinations can only be expected where the non-conformity of the goods could lead to particularly large amounts of damages,79 where certain defects typically occur,80 or where the customer of the buyer has already suffered damages.81 Yet, they are not to be expected where nothing hints at a defect82 or defects have already been discovered in samples.83 At the same time they are not excluded just because of the complexity of the goods.84 Whether the buyer has to run tests with raw materials or machines is uncertain. Problems may arise, for example, where using the machine once for testing would lead to a diminishment in value.85 Again, whether such tests can be expected will depend on the circumstances of the individual case.

III.  Time for Examination

34.39  As the examination must occur before the notice consideration should be given to the time for examination. Three points are of interest in this regard: the length of time within which the (p. 431) buyer has to examine the goods, the point in time at which the period begins and the significance of whether the examination takes place pre- or post-delivery.

1.  Determination of the Period

34.40  The length of the period granted to the buyer may be described in the parties’ contract or established by usages. Failing this, statutory default rules have to be consulted. The guidance by these default rules varies considerably and in the vast majority of cases little detail is provided.

34.41  One common approach is for statutes to use phrases such as ‘prompt’,86 ‘immediately’,87 ‘timely’,88 ‘as soon as possible’,89 ‘without undue delay’,90 ‘as soon as it is customary in accordance with usual business practice’,91 but also ‘reasonable opportunity’,92 ‘at any reasonable place and time’,93 or ‘within as short a period as is practicable in the circumstances’.94 Where these flexible phrases apply it is clear that the circumstances of the case will dictate the precise length of the period available to the buyer. However, there is difference amongst these phrases—as, for example, ‘prompt’ would appear to indicate a shorter and stricter period than ‘within as short a period as is practicable in the circumstances’.95 At the domestic level the more restrictive approach is favoured by civil law legal systems, while common law jurisdictions are more buyer friendly. At the international level the CISG and the DCFR also take the more buyer-friendly position. With respect to the relevant circumstances, regard should be had first to the type of goods, such as their complexity and durability; and secondly, the location of the goods and the location of personnel capable of conducting the examination. Other relevant circumstances might include the type of packaging, quantity, the ability to determine defects without further processing the goods, the need for a trial run, and the seller’s awareness of the buyer’s economic position including general strikes or strikes in the buyer’s business. Finally, an appreciation for cultural differences is also appropriate, particularly in international transactions.96

34.42  A second approach taken by legal systems and occasionally by usages97 is to not address examination specifically but to establish an overall period for giving notice. Amongst legal systems using this approach, only a few systems establish specific periods of time within which notice has to be given to the seller.98 Most of these systems similarly employ phrases for notice as those which have been quoted in the previous paragraph for examination.99

(p. 432) 34.43  Where a distinction is made between periods for examination and periods for notice it is important that the distinction be actually recognized. At the international level the drafters of the CISG, the OHADA AUDCG, and the DCFR have opted for such dual time periods. Consequently, and contrary to what has been stated by one court,100 there is not one overall time period from which the time used for examination must be deducted but rather a second period which begins after examination of the goods.101

2.  Beginning of the Period

34.44  Typically the period within which the buyer has to examine the goods begins upon delivery.102 Delivery in this context is not necessarily legal delivery but rather physical possession by the buyer.103 This is of particular relevance for contracts involving the carriage of goods where legal delivery often occurs at the point at which the goods are handed over to the first carrier.104 It stands to reason that it must be physically possible to examine the goods. Furthermore, if materials necessary for the conduct of the examination such as operating instructions for technical equipment have not been provided, then the buyer is not in the position to examine the goods and the period cannot start.105

34.45  In the event that the seller delivers the goods ahead of the contractual delivery date, it would be unreasonable to commence the period for inspection before that date, as the buyer should be entitled to organize the operation of its business activities including necessary examinations in accordance with its contracts.106 Where the seller delivers after the contractual delivery date, it will also be necessary to take into account the buyer’s ability to adapt to the delay and any time necessary to reorganize planned examinations.107 In cases of partial delivery usually regard should be had to the date of each partial delivery.108 However, where it is not possible to determine the conformity of the entire good before delivery of the last instalment, then the time period for examination does not begin until delivery of the last part.109

34.46  It is conceivable that goods may be redirected during transit. In certain circumstances this will lead to the postponement of the time at which the period for examination begins. In this situation the knowledge or constructive knowledge of the seller at the time of the conclusion of the contract is decisive. Article 38(3) CISG expressly states that where the seller knew or could not have been unaware that redirection was possible, then the commencement of the period for examination is postponed.110 Such knowledge can be assumed where the buyer is an intermediary (p. 433) seller as is typical in commodity trade.111 Similar considerations apply to situations where the goods are redispatched by the buyer.112

C.  Notice

34.47  As explained above,113 it is the notice of non-conformity to the seller which carries the legal significance for the situation of the parties. The examination of the goods in this sense is the basis for the notification of the seller by the buyer.

I.  General

34.48  The notice requirement may take different guises. On the one hand, it may be expressed as a positive obligation114 on the buyer as typically seen in civil law legal systems, the CISG, OHADA AUDCG, and the DCFR.115 On the other hand, it may manifest itself in the requirement to actively reject non-conforming goods failing which acceptance occurs and thereafter damages is the only remedy. This position is taken by the common law116 as well as some Eastern European and Central Asian jurisdictions.117 Thus, it can be said that notice is always required to at least preserve the right to avoid the contract on the grounds of delivery of non-conforming goods.

34.49  Whether the parties can of their own volition dispense with the notice requirement is not always certain. The general principle of freedom of contract would suggest that this can be done and in most legal systems118 as well as under the CISG119 this is the case. However, there are legal systems in which courts refuse to enforce such derogations where they are established in standard terms.120

II.  Details of Notice

34.50  The details of the notice of defects given by the buyer to the seller are in the first instance to be derived from the contract or applicable usages. Failing this statutory default provisions have to be consulted.

(p. 434) 1.  Form Requirements

34.51  General remarks on formal requirements have already been made in a previous chapter.121 The principles discussed there apply also to the notice requirement. Thus, where the parties have established formal requirements for the communications under the contract, this applies also to the notice of defects. The presence of a no-oral-modification clause in a contract should not in and of itself establish a form requirement for the notice of defects. Such imposition of a form requirement may also occur by way of usage.122 It is a rare occurrence that legal systems establish form requirements for notice of defects by default.123 Also relevant in this context are those indirect form requirements which are essentially evidentiary rules. The burden of proving a notice lies with the buyer and thus it is highly advisable to give the notice in a manner which clearly demonstrates its content and existence.

2.  Specificity

34.52  As has been explained above, the notice requirement serves the purpose inter alia of enabling the seller to protect itself by preserving evidence of its compliance but also to put it in a position where it may be able to cure the non-conformity. Furthermore, the seller is aided in the task to seek recourse against its own suppliers. To achieve this purpose the notice given by the buyer must sufficiently identify and substantiate the problems discovered. The standards applied by legal systems with regard to the level of required specificity again vary. Some legal systems take a seller-friendly approach while others are more buyer-friendly. As a general minimum all systems require the buyer to have some basis for the allegations of non-conformity it is putting forward. In this sense buyers cannot misuse the notice requirement by routinely giving a bald statement alleging non-conformity simply in an effort to preserve their rights particularly where short notice periods are imposed. However, especially in non-commercial transactions the buyer may not be bound to describe the problem in detail.124

34.53  Some domestic legal systems125 as well as the OHADA AUDCG126 require the buyer to give very detailed notice of defects with accurate descriptions of the problems discovered. The (unofficial) German translation of the CISG also indicates that a high degree of specificity is required under Article 39(1) CISG as the term ‘specifying’ has been translated to mean ‘exactly specify’.127 This imprecision has led some German-speaking courts to apply a higher standard than actually required by the Convention.128

34.54  The majority of legal systems as well as the CISG and the DCFR content themselves with requiring the buyer to describe the general symptoms of non-conformity.129 The general test to be applied is thus: whether the seller is able to understand the lack of conformity and take the appropriate steps, such as sending a representative to examine the goods, securing necessary evidence regarding the conformity of the goods for any eventual dispute, preparing for delivery of additional or substitute goods or for repair, or taking recourse against its supplier.130 Under this test, general statements such as ‘not in order’, ‘not as we expected’, and ‘must be repaired’ (p. 435) are insufficient.131 The same has been held for the statement ‘the same crap has been delivered again’.132

3.  Transmission Risk

34.55  The risk of an error or failure in transmission of the notice is generally allocated by the applicable law in accordance with the general position on the effectiveness of a notice. Here, two approaches can be discerned: one relies on the receipt of the notice while the other only requires that the notice has been dispatched.

34.56  Legal systems following the receipt approach place the transmission risk regarding the notice of defect on the buyer as the party sending the notice, namely the buyer loses its remedies for breach of contract where the notice is lost in transmission.133 Likewise, where the notice is received by the seller with a different content, this would also be at the risk of the buyer. Legal systems requiring the dispatch of the notice accordingly place the risk of transmission including the correct content upon receipt on the seller as the party receiving the notice.134

34.57  At the international level the starting points taken by uniform laws and projects differ. However, the results achieved are by and large identical. The CISG as a starting point follows the dispatch approach.135 Hence, the seller bears the transmission risk for the notice of non-conformity. In contrast, the uniform projects generally follow the receipt theory.136 However, an exception is made where the notice has been prompted by the failure of the other party to perform its obligations. The delivery of non-conforming goods is such a failure. The PECL and the DCFR contain specific rules to that effect.137 With regard to the PICC commentators arrive at the same result as they affirm the application of the receipt theory only where the party sending the communication chooses an unreliable means of transmission.138 Consequently, there is an international consensus to place the transmission risk for the notice on the seller.

III.  Time for Notice

34.58  As it is the notice that is usually of particular legal significance, it is necessary to consider the time within which that notice must be given. Just as considerations of length of period and the start of the period were relevant in the context of examination,139 so too they are relevant in this context.

1.  Determination of Period

34.59  The length of the period granted to the buyer may be described in the parties’ contract or established by usages. Failing this, statutory default rules have to be consulted.

(a)  Contract and Usages

34.60  As the parties may contractually determine the period within which the buyer must give notice to the seller of a non-conformity, regard must be had to the (p. 436) contract itself,140 which should be interpreted in accordance with the usual rules. Where the contract does not expressly provide for a time period such may be established by usages141 or practices between the parties.142

(b)  Statutory Defined Periods

34.61  In the absence of contractual stipulations, usages or practices regarding the time period for giving notice, the statutory default rules of the applicable law must be consulted. Legal systems have developed essentially two approaches. One opts for fixed time periods, while the other establishes a description of how the period has to be determined but abstains from naming concrete time periods.

(i)  Fixed Period

34.62  Legal systems which stipulate a fixed period of time for notice tend to describe that period in days rather than weeks or months.143 This in itself is indicative of the generally strict approach taken by the majority of these legal systems to the notice requirement. Time periods established by these legal systems often only allow the buyer to give notice within one day to ten days.144 In this category the more liberal periods allow 15 to 30 days.145 Only in exceptional cases, fixed periods of time allow for notice to be given within 90 days to six months.146 This may particularly depend on whether the non-conformity was apparent or hidden. Nevertheless, some of these legal systems acknowledge that certain accommodations must be made in commerce. The very narrow time periods for notice may in some jurisdictions be extended either where the contract involves the transport of goods,147 where longer time is needed due to the particular conditions of the goods or the personal situation of the buyer,148 or where the seller has guaranteed the conformity of the goods for a specific time.149

(ii)  Prompt v Reasonable Period of Time

34.63  The vast majority of legal systems do not establish fixed time periods for notice but rather indicate by general phrases how the period in the respective situation is to be calculated. Nevertheless, also among legal systems following this approach, both a restrictive position—particularly in legal systems with a Germanic background150—and a more buyer-friendly position can be discerned. The first group of phrases typically includes (p. 437) ‘immediately’151 or ‘without undue delay’.152 In many instances these phrases equate to the most restrictive fixed periods identified in the previous paragraph.

34.64  The second group of legal systems operates with the more buyer-friendly requirement of a ‘reasonable period of time’. Among the civil law jurisdictions this approach is taken by Central European, Eastern European, and Central Asian as well as Middle Eastern and Arabic legal systems.153 It is also to be found in the majority of the Nordic systems.154 Determining what is reasonable allows the taking into account of a variety of circumstances including in particular the nature of the goods.155 The concept of a reasonable period of time is also the position of all common law jurisdictions.156 They consider the buyer to have accepted157 the goods if they are not rejected within a reasonable period of time.158 In the USA a second period of time exists following acceptance within which the buyer must notify the seller of defects. The criterion is again that notice must be given within a reasonable period of time.159

34.65  At the international level both uniform law and the DCFR also establish a reasonable period of time,160 although ULIS—the predecessor of the CISG—in its Article 39 had required the buyer to give notice ‘promptly’. The differences among legal systems regarding the time period for notice have impeded the uniform application of Article 39 CISG.

34.66  Where it is used, the term ‘reasonable period of time’ is naturally imprecise and its application in practice depends on the facts of the individual case. While this at first glance appears to be prone to create disputes, under English law there are only very few reported cases dealing with this matter.161 In the USA courts were more often faced with determining whether a notice was given within a reasonable period of time. Based on an analysis of the individual circumstances, courts have clarified that eight days is reasonable.162 In another case nine months was (p. 438) considered reasonable.163 Then again five to eight weeks was held to be unreasonable.164 Clearly unreasonable were two years165 and 22 months166 respectively.

34.67  Under the CISG the different approaches at the domestic level became visible. In particular German-speaking courts in an early phase of the CISG have applied their strict domestic standards when interpreting the term ‘reasonable period of time’ in Article 39(1) CISG often allowing the buyer only a mere couple of days to give notice to the seller.167 Even today the Austrian Supreme Court still adheres to an overall period of 14 days for examination and notice.168 At the other end of the spectrum courts in France and the US were prepared to grant the buyer several weeks or even several months to give notice of non-conformity.169 The difference in these periods does not appear to be justified by the circumstances of the cases decided. The shorter time periods in particular appear to have been imposed arbitrarily. However, the differences in the periods allowed may be attributable to the different perspectives from which the term ‘reasonable’ is approached. On the one hand, if ‘reasonable’ relates to the first opportunity to give notice by the buyer, it is somewhat understandable that the period is short. However, if on the other hand the reasonableness includes considerations such as the prejudice (or lack thereof) to the seller, then it is entirely possible that the period is considerably longer.

34.68  Nowadays, at least in the context of the CISG, there appears to be an alignment of the positions taken which centres on an average period of one month. This so called ‘noble month’170 has been widely accepted.171 This is not to imply, however, that one month is appropriate in every situation. It remains necessary to consider all the circumstances of the case such as durability of the goods.172 Thus, for example, where perishable goods are concerned, notice of lack of conformity may be required to be given within a few hours or at least within a few days.173 Further aspects to be taken into account include the remedy sought by the buyer and third party buyer reactions.174

(iii)  Apparent v Hidden Non-Conformities

34.69  Whether a non-conformity is apparent or hidden may have different implications depending on the applicable law.175 In those legal systems which employ a fixed period for notice the commencement of this period may be suspended or its length be extended where the non-conformity was hidden and thus not discernible by usual examination.176 In those systems operating with a flexible description of the notification (p. 439) period the buyer may be given more time in these situations.177 On the other hand, in those jurisdictions where rejection of the goods is only possible before acceptance has occurred,178 the existence of hidden defects not discoverable by examination does not prevent acceptance. This would, however, mean that the buyer loses the right to reject the goods and avoid the contract.179 In the USA this result has been found to be unsatisfactory and hence the UCC enables the buyer to revoke acceptance of the goods where the defect was not discoverable despite examination.180

2.  Start of the Period

(a)  Delivery v Physical Possession

34.70  As noted above,181 some legal systems establish an overall period for examination and notice. Where this is the case, it is necessary to draw a distinction between legal delivery and physical possession. If it is not possible to examine the goods, for example if they are in possession of a carrier, it is similarly not possible to notify the seller of non-conformity, notwithstanding legal delivery may have occurred at the time the goods were transferred to the first carrier. Hence, the period for examination and notice will only begin once the buyer actually has a reasonable opportunity to examine the goods.182

(b)  Defect Discernible

34.71  Where legal systems establish separate periods for examination and notice, the period for giving notice of non-conformity begins separately from the period for examination. In these cases the point in time at which the defect was discernible is decisive. Where the defect was discernible upon proper examination, the period for notice of defects begins at the end of the period for examining the goods. In case the non-conformity is not recognizable by examination but only appears later, then the period for notice begins when the buyer should have realized the defect.183

3.  Cut-Off Periods

34.72  As indicated above, a number of legal systems do not establish fixed time periods for notice but rather use open phrases.184 These periods for notice of defect when taken to their logical extent are potentially open ended. For example, under the standard of ‘reasonable period of time’ it is conceivable that periods of whatever length might be considered reasonable due to the specific circumstances of the case. For example, this is of relevance where a hidden defect becomes apparent after years. However, this is prevented in two ways. First, the applicable limitation periods put an end to the period within which the buyer may enforce a claim based on non-conformity. This is discussed in a separate chapter below.185 Secondly, the applicable law may establish absolute periods within which the seller must be notified of defects, so called cut-off periods.186

(p. 440) (a)  Statutory Provisions

34.73  In order to balance the need for commercial certainty some jurisdictions establish specific cut-off periods. Such periods can be described as absolute time limits to give notice of non-conformity.187 At the international level both uniform law as well as the DCFR contain cut-off periods. The most restrictive approach is taken by the OHADA AUDCG which establishes a one-year cut-off period,188 while the CISG and the DCFR grant the buyer a maximum of two years for giving notice of defect.189

(b)  Relationship to Limitation Periods

34.74  Cut-off periods as discussed in the previous paragraph must be distinguished from limitation periods. Whereas a limitation period may be interrupted or suspended, the cut-off period for notice of non-conformity is absolute.

34.75  At the international level specific problems arise where the applicable cut-off period for non-conformity is longer than the applicable limitation period.190 In practice, this has been particularly relevant before Swiss courts in cases where the CISG was applicable to the sales contract and domestic Swiss law was applicable to the limitation of actions. The same situation may, however, arise with regard to all legal systems which have limitation periods shorter than two years.191 Since such cases have not yet been reported, the issue shall be explained using domestic Swiss law. Article 39(2) CISG provides for a cut-off period for notice of non-conformity of two years, while domestic Swiss law establishes in Article 201 CO a limitation period of one year. The Swiss Federal Supreme Court has recognized that the one year limitation period of Swiss domestic law cannot apply in situations where notice of non-conformity was given in accordance with Article 39(2) CISG but later than one year after delivery. The court, however, did not decide what limitation period should apply instead. Lower courts have either modified the one-year limitation period of Swiss domestic law to two years192 or have held that the one-year period commences only with the buyer giving notice of non-conformity.193

D.  Consequences

I.  General Consequences

34.76  The failure of the buyer to examine and notify the seller of any lack of conformity naturally has consequences. While it is not the case that the seller can positively sue on the basis of these failures, it is the case that the buyer’s remedies are restricted and possibly barred entirely by these failures. The legal consequence on the side of the buyer is thus a legal detriment.

1.  Loss of All Remedies

(a)  General

34.77  In those legal systems following a strict notice requirement the buyer is deprived of all remedies for breach of contract,194 thus leaving it with the obligation to pay the purchase (p. 441) price in its full amount and unable to bring counterclaims where the seller brings an action for the price. Especially in legal systems providing for short periods for examination and notice, the notice requirement is particularly dangerous to the buyer. It is this potentially particularly harsh result for a buyer—being the aggrieved party—that on the one hand casts doubt on the appropriateness of the policy underlying the notice requirement in general and on the other hand militates against short notification periods. At the international level both the uniform law and the DCFR also take the approach of depriving the buyer of all remedies for breach of contract.195

34.78  In the USA the loss of all remedies occurs in two steps. First, where the buyer fails to reject the goods within a reasonable period of time, it is considered to have accepted the goods196 thus losing the right to reject them and avoid the contract. Upon acceptance of the goods a second reasonable period of time begins to run within which the buyer must notify the seller of non-conformities or lose its claim for damages as well. The 2003 revision of the Uniform Commercial Code proposed a more buyer-friendly approach in that the buyer will only be deprived of a remedy as far as the seller is prejudiced by the buyer’s failure to give notice.197 A similar approach is taken by the majority of Eastern European and Central Asian legal systems with regard to the buyer’s right to cure.

(b)  Sample and Instalment Contracts

34.79  In a sale by sample, the remedies relating to conformity are limited to conformity with the sample. In other words, once a sample has been accepted the buyer can only object to the non-conformity of the goods with the sample. It may, however, not object to the sample not fulfilling a particular or—as the case may be—ordinary purpose if the sample has been accepted at a previous point in time.

34.80  Where the contract provides for the successive delivery of goods, the buyer has to object to each instalment individually.198 On the other hand, failing such notice, the buyer loses its remedies only with regard to that particular instalment but not with regard to the future instalments to be delivered under the contract.199

(c)  Excessive Quantity or Better Quality

34.81  In those legal systems that apply a broad concept of non-conformity the delivery of excessive quantity or of goods of better quality than required by the contract generally also constitutes a non-conformity and thus also requires notification. Failing such notification, two types of issues arise. On the one hand the buyer may incur increased costs such as storage costs for excessive quantity. Where this is the case, this is just a typical loss incurred due to the breach of contract committed by the seller. Therefore, it is only recoverable where the buyer has given notice of the excessive quantity.

(p. 442) (d)  Exclusion of Non-Conformities Not Mentioned in Notice

34.82  When notifying the seller, it appears important in most jurisdictions that the buyer specify every instance of non-conformity on which it may wish to later rely. The failure to give notice of a non-conformity when notice is first given may deprive the buyer of doing so later and consequently to base a claim for breach of contract on that particular non-conformity.200 Whether it is possible to reserve the right to give further notices of non-conformity will depend on the applicable law.

2.  Loss of Right to Cure Only

34.83  As indicated earlier, the majority of Eastern European and Central Asian jurisdictions only allow the seller to refuse cure where it has not been properly notified by the buyer. However, the seller must then show that cure has become impossible or that it would cause disproportionate costs.201

3.  Loss of Right to Avoid Only

34.84  The approach to deprive the buyer of all remedies for breach of contract in case of failure to give timely notice of non-conformity is not universal. In common law jurisdictions, which place a greater significance on the acceptance of the goods by the buyer, the difference between the pre-acceptance and the post-acceptance phases of the transaction must be considered. It has already been observed that the consequence of a failure to examine and notify of non-conformities pre-acceptance will result in the loss of the ability to reject the goods and thus avoid the contract.202 If there is no post-acceptance examination and notice requirement, then only the right to avoid the contract can be lost.

34.85  However, the described common law position only applies to those common law jurisdictions following the English model. As outlined earlier,203 the USA operate with two notification requirements. Failure to comply with the first leads to acceptance of the goods and thus to avoid the contract. Failure to comply with the second deprives the buyer of the remaining remedies.

II.  Exceptions

34.86  Notwithstanding the general rule that a failure to examine and notify leads to a legal detriment for the buyer, there are certain exceptions to this consequence.