1. Buyer’s claim based on property after contract conclusion

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Does the CISG govern the buyer’s claim for the goods after contract conclusion, and if so, does it do so exhaustively? A case in which this may become relevant is if the buyer becomes the owner of the goods by mere contract conclusion and without being in possession of the goods. Could the buyer require the goods from the seller based on a claim found in national property law?

544

While Articles 30 and 46(1) of the CISG make it unmistakably clear that the buyer’s claim for the goods is a matter regulated by the CISG, it is open for discussion whether the respective claim under the CISG governs the matter exhaustively. From the very beginning, Rabel considered the buyer’s claims based on national property law to be available concurrently with contractual claims for performance.1123 This assessment has subsequently not been refuted. Even regarding tort claims, Rabel stated that national law may allow for concurrent application if the prerequisites of both types of claims are fulfilled.1124

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Yet, a more differentiated approach is appropriate: Whether the CISG governs this matter exhaustively cannot be answered by a simple yes or no, but the aspects of the respective claim must rather be broken down further. For example, Article 58(1), sentence 2 allows the seller to make payment a condition for handing over the goods. The uniformity in the application of the Convention would be severely undermined if the buyer could claim the goods based on national law without paying the price first or at least concurrently. On the other hand, if the claim based on the CISG was merely barred due to the applicable statute of limitations, while a claim based on property was still enforceable, there is no reason to consider the CISG to preempt the claim based on property under national law. The CISG does not govern limitation periods and should, thus, not be considered to preempt claims merely because a different limitation period applies. This reasoning is supported by the fact that nothing within the CISG could hinder national law from generally applying a different limitation period to contractual claims too. Moreover, a claim based on national property law will in some cases be considered stronger than a claim for performance under the CISG vis-à-vis a third party seeking an enforcement order against the seller for the goods. Also under such circumstances, there is no reason why the CISG should preempt this claim based on national law that is otherwise identical in content. This would deprive the buyer of the goods even though the contract and the CISG envisage that the buyer receives the goods.

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Thus, the test should be whether a claim for the goods exists under the CISG. If no such claim exists, the more extensive claim based on national property is preempted. If a claim also exists under the CISG but the claim based on national law offers a more advantageous position to the buyer for reasons outside the CISG’s scope of application, for example, regarding the statute of limitations or the effectiveness with regard to third parties, the CISG does not displace national law in this regard.

244 2. Seller’s claims based on property after avoidance of contract

547

A different situation in which a contractual party might rely on property is after the avoidance of the contract: The seller may want to reclaim the goods based on national property law.

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This would in some cases be immediately ruled out if the CISG were to prevent the seller from once again becoming the owner of the goods upon avoidance. This approach favored by Schlechtriem and other scholars will be discussed and opposed below,1125 because it does not exhaustively rule out cases in which the seller can base claims on property. For example, under a retention of property clause, the seller can remain the owner of the goods even if one were to follow Schlechtriem’s approach. For the purposes of the discussion at hand and in line with the result reached below, it will be assumed that the seller can be the owner of the goods after avoidance of the contract.

549

Fountoulakis argues that the seller should not be allowed to rely on claims based on property after avoidance of contract. She relies on Article 7(1) of the CISG to argue that the CISG provides a uniform set of rules for the consequences of contract avoidance, and that remedies stemming from diverging national laws should not be available in addition. She singles out the unequal treatment between the buyer and seller that could otherwise occur: Usually only the seller will have claims based on property with regard to the goods, since today’s payments methods will render cases in which the buyer retains (or ever had) property in the paid money merely theoretical. If claims based on property were not preempted by the CISG, this would hence favor the seller who is more likely to have such a claim. It would, however, neither be the concept of the CISG to differentiate between claims for the goods and claims for money, nor to treat the buyer’s and seller’s rights after avoidance differently.1126 Fountoulakis, thus, considers the availability of (any) claims of the parties after avoidance of the contract a matter exclusively governed by the CISG.

550

Staying true to this train of thought, one may reason that a claim based on property should also be preempted in case of a retention of property clause, since otherwise the same unequal treatment would result. Fountoulakis does not address this question explicitly, but generally asserts claims based on national law to be preempted.1127 The inference that claims based on property in case of a retention of property clause are necessarily preempted too is not compelling, since a retention of property clause could be interpreted under Article 6 of the CISG as also relaxing the preemptive effect of the CISG on 245 claims based on property. Yet, when writing this section she also followed Schlechtriem’s approach in considering property not to fall back to the seller automatically upon avoidance of contract.1128 Considering that if buyers are in possession of the goods, they will generally have acquired property in them even under property laws that provide for a relatively late transfer of property, the relevant scenario of Fountoulakis’ opinion is, thus, the case in which a retention of property clause has been agreed upon.

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Yet, it appears questionable whether Article 7(1) of the CISG can be relied upon in this context. The provision’s mandate to favor uniform interpretations is limited to the Convention itself (“the need to promote uniformity in its [this Convention’s] application”). As highlighted above,1129 the relative strength of a claim based on property compared to a CISG claim vis-à-vis third parties is not a matter governed by the CISG. For this reason, the unequal treatment of the seller and the buyer vis-à-vis creditors of the respective contractual partner also does not render this a question within the scope of the CISG. Complex considerations under national law can lead to the result of which Fountoulakis disapproves. In the conflict between creditors who supply goods and creditors who “merely” provide capital, national laws can (and do) privilege the supplier of goods in finding it more important for the continuation of trade and not as easy to replace as the provider of capital. The CISG, focusing on the relationship between the seller and the buyer, does not evaluate the relative strength and importance of one of the parties’ claims with third party claims. While Fountoulakis acknowledges that third party rights can have priority under the applicable national insolvency procedures,1130 she in effect excepts sellers under CISG contracts from this protection under insolvency law if their priority would be based on property in the goods. The comparison to the status of third parties shows that the CISG does not govern the matter exhaustively. Fountoulakis’ proposed interpretation is more detrimental to the allocation of assets in insolvency than the concurrent application of remedies based on national law would be to uniformity under Article 7(1) of the CISG. Moreover, the concept of not treating the parties unequally in the rewinding process cannot be found within the CISG. While it is true that the CISG aims to provide a balanced set of rules, the parties are not treated equally. For example, Article 84(1) of the CISG provides that the seller has to pay interest on the price he or she is obliged to refund, while according to Article 84(2) of the CISG the buyer has to “account to the seller for all benefits which he has derived from the 246 goods or part of them”. The interest the seller must pay is independent from whether it was earned.1131 The benefits the buyer has to account for, in contrast, are based on the actual benefits.1132 It is difficult to conclude that the CISG contained a concept of treating the buyer and the seller equally after avoidance of contract.

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Therefore, the claim for possession based on property should generally be available concurrently with the seller’s claim based on Article 81(2) of the CISG. Mohs states that there is “no danger of contradiction with the principles of the Convention” in this regard.1133 This holds true if the seller concurrently offers to repay the price or if the buyer has not paid the price, yet. However, if the claim based on property was allowed without regard to the counter performance, Article 81(2), sentence 2 of the CISG and its principle of concurrent performance could be undermined. For this reason, the approach developed with regard to the buyer’s claim based on property after contract conclusion can also be applied here: If the same claim exists under both the CISG and national law, and the latter offers a more advantageous position for the seller, for example, regarding the statute of limitations or the effectiveness with regard to third parties, the CISG does not displace national law in this regard. Yet, if no claim for the goods exists under the CISG, remedies based on national property law are preempted as well. This reasoning can also explain why claims based on national tort law that do not provide for the restitution of the goods but for damages are preempted as far as no such claim is provided by the CISG, specifically based on Articles 81–84.1134 The CISG contains rules for compensation for these specific circumstances and would be undermined if national law were to provide the seller with diverging claims.

3. Seller’s claims based on a retention of property clause

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Lastly, sellers may claim for possession of the goods without avoidance the contract if they have retained property by way of a retention of property clause and the buyer does not pay the price. In contrast to section 449(2) of 247 the German Civil Code,1135 the CISG has no explicit rule in this regard. This problem has not received attention in literature or case law.1136

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The Convention does not directly address which of the parties should be in possession of the goods. Yet, it provides claims that clarify which party should be in possession of the goods in Articles 30, 33, 58, and 81(2) of the CISG. Furthermore, Article 58(1), sentence 2 of the CISG allows the seller to make payment a condition for handing over the goods. However, once the buyer is in possession of the goods, the CISG provides no remedies for the seller to regain possession apart from Article 81(2), which only applies if the contract has been avoided. This is in line with the reasoning underlying the elevated requirements for an avoidance of contract under the CISG: In international cases the transport of the goods typically entails even more risks and costs than in national cases.1137 The CISG aims at limiting these risks and costs by allowing contract avoidance only in limited circumstances and not in response to any breach of contract.1138 If the goods were to be transported back to the seller and the buyer ultimately paid before the contract is avoided, the goods would have to be transported yet another time. Since the CISG aims to prevent one additional transport, it should be interpreted to also limit the necessity of two transports. Hence, the rule developed above can be applied in this regard too: A claim based on property should only be available to the seller if the CISG provides such a claim. Since the CISG does not provide such a claim after the buyer has received the goods but before avoidance of contract, claims based on property before contract avoidance should generally be considered preempted.

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It is important to note that this question only arises when the parties have opted for a retention of property clause. The question is, thus, whether such a clause modifies the stance of the CISG described in the preceding paragraph under Article 6 of the CISG as to allow the seller to repossess the goods in case of mere non-payment without prior avoidance of contract. Article 8 of the CISG provides the tools to interpret the parties’ behavior and the contractual clauses. Under subsection 1, the parties’ intent is decisive and if no intent can be found or proven, subsection 2 explains that state 248 ments “are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.” To discover the understanding of a reasonable person, the parties’ respective interests have to be investigated.

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On the one hand, sellers have an interest to part with the goods only if they receive the full purchase price. Sellers emphasize this interest by insisting on a retention of property clause. The possibility to repossess the goods prior to avoidance would not discharge sellers from their obligation to deliver the goods to the buyer. The obligation would only be discharged by avoidance according to Article 81(2) of the CISG. Thus, sellers would have to keep the goods to remain capable of performance and not be in breach of the contract in case the buyer decided to pay. On the other hand, the buyer has an interest to remain in possession of the goods. Oftentimes, the buyer needs to be in possession of the goods to generate the revenues necessary to pay the price either by using or reselling the goods.1139 Depriving the buyer of possession, thus, makes it considerably less likely that the buyer will be able to pay the price. For this reason, the interpretation of the retention of property clause to modify the CISG’s rules to allow the seller to repossess the goods would violate the economic motivation for this type of contract. A reasonable person would, therefore, generally not consider the buyer’s consent to the retention of property clause to mean that it allowed the seller to repossess the goods without prior avoidance of contract. Yet, nothing would prevent the parties from agreeing otherwise under Article 6 of the CISG.

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In conclusion, the mere existence of a retention of property clause generally does not provide a sufficient basis for the seller to claim possession of the goods if the contract has not yet been avoided. As far as national property law allows such a claim, it is preempted by the CISG.