Compare fundamental breach under the us law,vietnam law and the cisg

Vietnamese Law: Article 313 of Law on Commerce 2005 presents that fundamental breach means breach of contract by one party causing loss to the other party to the extent that such other p

TRƯỜNG ĐẠI HỌC LUẬT THÀNH PHỐ HỒ CHÍ MINH

KHOA CÁC CHƯƠNG TRÌNH ĐÀO TẠO CHẤT LƯỢNG CAO

Compare FUNDAMENTAL BREACH UNDER THE US LAW,

VIETNAM LAW AND THE CISG

Bộ môn: Law of Contract

Giảng viên:

Nhóm: 07

Lớp: CLCQTL46B

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Thành phố Hồ Chí Minh, ngày tháng 10 năm 2023

Table of Contents

I Similarity 2

II Differents .2

1 VN Law 4

2 US LAW 5

3 CISG (Convention on Contracts for the International Sale of Goods) 5

III Reference documents 9

I A definition of fundamental breach in US, Vietnam and CISG

I.1 Vietnamese Law:

Article 3(13) of Law on Commerce 2005 presents that fundamental breach means breach of contract by one party causing loss to the other party to the extent that such other party is not able to achieve its objective of entering into the contract 1

I.2 US Law:

The US law doesn’t stipulate obviously and directly the definition of fundamental breach, but Restatement (Second) of Contracts 1981 refers to the term “material breach” It is similar to the term “fundamental breach” However, it is used more commonly than the term “fundamental breach” in

US law

A “material breach” which is defined by Westlaw from the provisions of Article 241 of Restatement (Second) of Contracts is a breach that is serious enough to justify the other party in abandoning the contract A “material breach” is one that substantially defeats the purpose of the contract, or relates to an essential element of the contract, and deprives the injured party of a benefit that he or she reasonably expected

I.3 CISG:

Article 25 of CISG 1980 regulates that a breach of contract committed 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 2

I.4 Similarities:

These definitions of fundamental breach are based on a breach of a contract and the significant and serious impact of the consequences of the conduct breach by one party against what the parties expected to achieve from the contract 3

I.5 Differences:

The first criterion is the basis for determining the level of serious impact on the expected benefits from the contract It is different depending on the legal regulations of each country or international For example, Vietnam

1 Law on Commerce section 3(13)

2 https://wtocenter.vn/file/15447/CISG.pdf

https://lsvn.vn/vi-pham-hop-dong-theo-quy-dinh-cua-luat-thuong-mai-2005-va-bo-nguyen-tac- picc1658240480.html

3 Võ Sỹ Mạnh (2015) VI PHẠM CƠ BẢN HỢP ĐỒNG THEO CÔNG ƯỚC VIÊN NĂM 1980 VỀ HỢP ĐỒNG MUA BÁN HÀNG HÓA QUỐC TẾ VÀ ĐỊNH HƯỚNG HOÀN THIỆN CÁC QUY ĐỊNH CÓ LIÊN

law determines the level of the damage in relation to the purpose of

entering into the contract The US law bases on an essential element of the contract which is stipulated in Article 241 of Restatement (Second) of Contracts The CISG is based on substantial prejudice and results in a substantial deprivation of what the aggrieved party is entitled to expect from the contract unless the breaching party could not have foreseen it and

a reasonable person would not have foreseen consequences if they were in

a position and similar circumstances

The second criterion is that the breaching party and a reasonable person of the same kind in the same circumstances would not have foreseen such a result The CISG is more advanced than Vietnam law and the US law when

it takes into account both the interests of the person suffering the damage and the person causing the damage because it considers objective factors that make it impossible for them to predict that damage will be caused 4

II Elements of fundamental breach in US, Vietnam and CISG and case laws

ELEMENTS:

There is no requirement

that fundamental breach

must contain the specific

terms Through the

definition of fundamental

breach in Vietnam law,

we conclude that

fundamental breach must

contain two following

terms:

One party causes loss to

the other party to the

extent that such other

party is not able to

achieve its objective of

entering into the

contract

Article 241 of Restatement (Second) of Contracts 1981 provides for circumstances significant in determining whether a failure is material In determining whether a failure to render

or to offer performance is material, the following

significant:

(a) the extent to which the injured party will be

deprived of the benefit

which he reasonably expected;

(b) the extent to which the injured party can be

adequately compensated

for the part of that

“Fundamental breach of contract” is a legal regime stipulated in Article 25 of the CISG However, the CISG does not provide a specific explanation to

fundamental breach must contain From the provision

of Article 25, it shows that

fundamental breach must contain the following terms:

1 A breach of a contract The existence of a breach

of a contract is the

4 Bùi Thị Bích Sơn (2011) Tuyên bố hủy hợp đồng và hậu quả pháp lý của việc hủy hợp đồng mua bán hàng hóa quốc tế theo Công ước Viên 1980 và Luật thương mại 2005 Khóa luận tốt nghiệp Đại

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The other party fails to

achieve its objective of

entering into the

contract

Caselaw: JUDGMENT

07/2018/KDTM-PT

DATED November 23,

2018 ON PURCHASE

CONTRACT DISPUTE

Company B and

Company S N sign a

contract, whereby

Company S N provides

tapioca starch products to

Company B and the two

parties agree on quantity,

quality, delivery time

And two If the parties

agree, any party that

violates the contract will

be fined 8% of the value

obligation

Company B ordered

500,000 kg of tapioca

starch, unit price 7,000

VND/kg, value of the

shipment 3,500,000,000

VND, the order was

signed and confirmed by

Company S N After

that, the company

announced a request to S

N company to deliver the

benefit of which he will

(c) the extent to which the

party failing to perform

or to offer to perform will suffer forfeiture;

(d) the likelihood that the party failing to perform

or to offer to perform will cure his failure, taking account of all the circumstances including

assurances;

(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards

of good faith and fair dealing.

Facts: The Defendant (Mr

Wallis) agreed to buy a used car if the vendor was able to find a company with which the Defendant could enter into a hire-purchase agreement The vendor found such a company (the Claimant) Once the agreement was entered into, the Defendant inspected the vehicle he had agreed to purchase through the hire purchase agreement and found that it had been substantially altered from the version he had previously seen and agreed

to buy Namely, the radio was missing, as were the chrome strips around the

primary element of a fundamental breach under the CISG, thus without breach Article 25 is not applicable 6

2 A breach that causes the detriment that substantially deprives the other party of what he was entitled to expect under the contract

3 The detriment could have been foreseen

by the defaulting party, and by a reasonable person of the same kind under the same circumstances of the breaching party 7

Delchi v Rotorex is

considered a good example

of using the criterion of percentage of damaged goods when determining a fundamental breach of contract In January 1988, Rotorex agreed to sell

10,800 air compressors to

Delchi for use in room air conditioners Before signing the contract, Rotorex sent Delchi a compressor model with technical details about performance However, while the second shipment

goods, but S N company

confirmed the notice and

responded that it could

not meet the order,

informing company B

that it was facing many

difficulties due to the

source of raw materials

input is unstable and

scarce

Company B requested

Company S N to pay a

fine for breach of

contract and compensate

for damages totaling

800,000,000 VND S N

Company agreed to pay a

fine and compensate the

plaintiff a total of

800,000,000 VND

=> Proves that company

S N caused damage to

the company to the

extent that company B

did not have enough

goods to use as raw

materials for production

A problem arose between

the two parties that was

not as previously agreed,

leading to the failure to

achieve the purpose of

entering into the contract

due to the delivery being

incorrect in quantity and

body, the new tires had been replaced by old ones, the bumper was not held together with rope and perhaps most importantly, the car could not start The Defendant therefore refused

to pay for the car The hire purchase agreement contained an exclusion clause which stated that

‘No condition or warranty that the vehicle is roadworthy or as to its age, condition or fitness for any purpose is given by the owner or implied herein.’

Decision: It was held that

Karsales was under an obligation to provide a car which is in substantially the same condition as when Mr Wallis inspected it This is particularly the case for hire purchase agreements where the purchaser had previously inspected the vehicle More broadly, where there is a fundamental breach of a contract, a party cannot rely

on an exemption clause

Not in the least, the Sale of Goods Act 1979 would still imply a term into the contract that the goods will

be fit for purpose which cannot be excluded through

such a clause Based– on

Karsales (Harrow) v Wallis

was on its way to Delchi, Delchi discovered that a large number of compressors from the first shipment were of a quality that did not conform to the samples and accompanying specifications Specifically, Rotorex discovered that up

to 93% of delivered air conditioner compressors had weak cooling ability and consumed more power than the samples and technical details accompanying the samples The Federal Court of Appeals upheld the judgment of the New York Court and held that the seller had fundamentally breached the contract because the cooling capacity and power consumption of the air conditioner were important factors in determining the price product quality value

8Case:

Facts: In January 1988, Rotorex Company agreed to sell 10,800 air compressors

to Delchi Company for use

in room air conditioners Before signing the contract, Rotorex sent Delchi a compressor model with technical details about performance However,

time due to a force

majeure event arising

and both parties Failure

to agree on compensation

due to force majeure

events leads to disputes

over compensation

agreements

=> The purpose of

entering into a contract

cannot be achieved

[1956] 1 WLR 936

Explain:

In the contract between Mr

Wallis and Karsales, the car which Mr Wallis agreed to buy was the one he had previously inspected So that, it is reasonable when

Mr Wallis expected to receive that car and its benefit However, once the agreement was entered into, Mr.Wallis inspected the vehicle he had agreed to purchase through the hire purchase agreement and found that it had been

substantially altered from

the version he had previously seen and agreed

to buy Namely, the radio

was missing as were the,

chrome strips around the body, the new tires had been replaced by old ones, the bumper was not held together with rope and perhaps most importantly, the car could not start

In conclusion, Mr Wallis

while the second shipment was on its way to Delchi, Delchi discovered that a

compressors from the first shipment were of a quality that did not conform to the samples and accompanying specifications Specifically, Rotorex discovered that up

to 93% of delivered air conditioner compressors had weak cooling ability and consumed more power than the sample products and technical details attached to the samples Decision: The Federal Court of Appeal held that the rate of 93% of the goods being of a quality that did not conform to the contract provisions in relation to the total contract value was a very significant injury and that such breach of contract was considered as

fundamental breach Based

on Delchi v Rotorex [266]

Elements constitute 5

https://www.lawteacher.net/cases/karsales-v-wallis.php

6 4 Robert Koch, The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG), REVIEW OF THE

CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CISG), 1998, KLUWER LAW INTERNATIONAL 177, 261 (1999), available at

http://cisgw3.law.pace.edu/cisg/biblio/koch.html

7 Ana Paula S C Rizzo de Barros, Definition of Fundamental Breach under CISG’s Art 25 and Analysis of Recent Case Law ,,page 16, 17,

https://iicl.law.pace.edu/sites/default/files/bibliography/full_text.pdf.

8Thanh Thanh, “Fundamental breach under CISG", Viet Nam lawyer journal, 18th January 2021

was deprived of the benefit which he reasonably expected by

Karsales company

fundamental breach in

Based on Delchi v Rotorex [266] case:

1 Rotorex delivered air-conditioners which were not proper for the requirements of the samples This is a violation of contractual obligations

2 93% of delivered air conditioner compressors had weak cooling ability and consumed more power than the sample products and technical details attached to the samples 93% was the substantial deprivation and led to Delhi losing what they expected from the contract

3 The air conditioner is the subject of the contract, so

it is clearly agreed upon

by the parties There is

consequences of a violation cannot be foreseen

SIMILARITIES:

One party causes loss to the other party

The detriment resulting from the breach must extensively hamper the legitimate contractual expectations of the aggrieved party

DIFFERENCES:

There is no foreseeability in Vietnam law and US law whereas a breach that causes a detriment that substantially deprives the other party of what he was entitled to expect under the contract is not a fundamental breach if the detriment could not have been foreseen by the defaulting party, and by a reasonable person of the same kind under the same circumstances of the breaching party under the CISG’s interpretative rules

The US law refers to the likelihood that the party failing to perform or to offer to perform will cure his failure and the extent to which the behavior of the party failing

to perform or to offer to perform comports with standards of good faith and fair dealing while Vietnam law and the CISG doesn’t point out that

Under US law, in determining whether a failure to render or to offer performance is material, the innocent party's benefit which they want from the contract must be reasonably expected which was shown through Article 241(a) of Restatement (Second) of Contracts 1981 Meanwhile, Vietnam law and CISG only seem to stipulate that what is harmed is what the innocent party aims or expects to achieve when entering into the contract, without mentioning the reasonableness of that aim or expectation

III Conditions to be excluded from liability for fundamental breach

Acording to Article 294

(1) of Law on Commerce

2005 there are following

conditions:

Upon occurrence of any

event which the parties

have agreed will give rise

to immunity from

liability;

Upon occurrence of an

event of force majeure;

Upon a breach by one

party which was due to

the fault of the other

party;

Upon a breach by one

party which was due to

implementation of a

decision of a competent

State administrative body

of which the parties could

not have known at the

time

Exclusion of liability clauses;

Other principles stipulate under the law

Through the process of studying cases, it can be seen that the parties can stipulate exemptions from fundamental violations through the terms of the contract

Failure was due to an impediment beyond the party’s control;

Failure by a third person whom he has engaged to perform the whole or a part

of the contract;

The party who fails to perform must give notice in

a reasonable time to the other party of the impediment and its effect on his ability to perform

SIMILARITIES:

3 different law systems illustrate hardship and force majeure

DIFFERENCES:

In Vietnam law and the US law, there are provisions to be excluded from liability that the parties have agreed will give rise to immunity from liability and a breach by one party which was due to the fault of the other party while the CISG does not provide that The CISG makes a request that the party who fails to perform must give notice in a reasonable time to the other party whereas vietnam law and the US law don’t regulate

an obligation of notice to the aggrieved party

The CISG is more advanced than vietnam law and the US law when there is protection for the party breaching the contract because of the third person’s fault; however, it doesn’t refer to the fault of the other party which is a condition of exclusion liability

4 Legal consequences of fundamental breach in US, Vietnam and CISG:

A Law