B Cisg H: R C Cisg D C B Cisg H: R C Cisg D C

BRINGING THE CISG HOME:
RESTITUTIONARY C ONSIDERATIONS FOR THE CISG

IN THE DOMESTIC CONTEXT
BRINGING THE CISG HOME:

RESTITUTIONARY C ONSIDERATIONS FOR THE CISG
IN THE DOMESTIC CONTEXT
REBEKAH PLACHECKI*
REBEKAH PLACHECKI*
Introduction
Introduction
New Zealand became a party to the United Nations Convention on

Contracts for the International Sale of Goods (CISG) in 1994.1
However, the CISG only applies to international sale of goods
contracts.2 Where the CISG does not apply, ordinary conflict of laws
rules and domestic law continue to apply. Unlike the CISG, the New
Zealand domestic law has been described as outdated. Consequently,
New Zealand has reformed its law for consumer transactions3 and
further legislative reform has been debated for commercial ones.4 In
New Zealand, domestic commercial contracts for the sale of goods are
currently regulated by the Sale of Goods Act 1908 (SOGA). The Law
Commission has hinted that for New Zealand, the application of the
CISG as a domestic law may be an advance on the retention of SOGA.
Compared to the CISG, the SOGA is an older model, less direct, and
has a less flexible range of remedies.5
New Zealand became a party to the United Nations Convention on

Contracts for the International Sale of Goods (CISG) in 1994.1
However, the CISG only applies to international sale of goods
contracts.2 Where the CISG does not apply, ordinary conflict of laws
rules and domestic law continue to apply. Unlike the CISG, the New
Zealand domestic law has been described as outdated. Consequently,
New Zealand has reformed its law for consumer transactions3 and
further legislative reform has been debated for commercial ones.4 In
New Zealand, domestic commercial contracts for the sale of goods are
currently regulated by the Sale of Goods Act 1908 (SOGA). The Law
Commission has hinted that for New Zealand, the application of the
CISG as a domestic law may be an advance on the retention of SOGA.
Compared to the CISG, the SOGA is an older model, less direct, and
has a less flexible range of remedies.5
The CISG has an inclusive set of remedies (including restitutionary

ones) which are particularly tailored to the sale of goods context. In
contrast, the SOGA does not deal with relief following rescission or
rejection, or for relief following a frustrating event. Therefore, the
The CISG has an inclusive set of remedies (including restitutionary

ones) which are particularly tailored to the sale of goods context. In
contrast, the SOGA does not deal with relief following rescission or
rejection, or for relief following a frustrating event. Therefore, the
LLB, Candidate for LLM, Victoria University of Wellington.

New Zealand acceded 22 September 1994: AppHR 1995 A1:81; 1994 UN Status,
384,386 (footnote). Entered into force for New Zealand 7 October 1995 by virtue of
section 1 of the Sale of Goods (United Nations Convention) Act 1994.
2 These contracts are for the international sale of goods in the commercial context unless
parties opt for domestic law to apply. Consumer transactions are governed by the
Consumer Guarantees Act 1993 (NZ).
3 Consumer Guarantees Act 1993 (NZ).
4 New Zealand Law Commission The United Nations Convention on Contracts for the
International Sale of Goods: New Zealands Proposed Acceptance (NZLC Report 23,
Wellington, 1992) p. 51.
5 Ibid.
LLB, Candidate for LLM, Victoria University of Wellington.

New Zealand acceded 22 September 1994: AppHR 1995 A1:81; 1994 UN Status,
384,386 (footnote). Entered into force for New Zealand 7 October 1995 by virtue of
section 1 of the Sale of Goods (United Nations Convention) Act 1994.
2 These contracts are for the international sale of goods in the commercial context unless
parties opt for domestic law to apply. Consumer transactions are governed by the
Consumer Guarantees Act 1993 (NZ).
3 Consumer Guarantees Act 1993 (NZ).
4 New Zealand Law Commission The United Nations Convention on Contracts for the
International Sale of Goods: New Zealands Proposed Acceptance (NZLC Report 23,
Wellington, 1992) p. 51.
5 Ibid.
132
The New Zealand Law Students Journal
(2006) 1 NZLSJ
132
(2006) 1 NZLSJ
SOGA which was intended to be a code is not fulfilling that original

objective. Restitution under the current domestic law is a matter for the
general common law and other statutes.
SOGA which was intended to be a code is not fulfilling that original

objective. Restitution under the current domestic law is a matter for the
general common law and other statutes.
This paper is therefore based on the premise that the CISG should
extend to cover internal sales which remain covered by the SOGA.
Remedies are critical to the effective operation of law and especially in
an area such as the sale of goods.6 Hence, the thrust of this paper is to
evaluate the advantages and disadvantages of obtaining restitutionary
remedies through such reform.7
This paper is therefore based on the premise that the CISG should
extend to cover internal sales which remain covered by the SOGA.
Remedies are critical to the effective operation of law and especially in
an area such as the sale of goods.6 Hence, the thrust of this paper is to
evaluate the advantages and disadvantages of obtaining restitutionary
remedies through such reform.7
The structure of this paper is as follows: Part A will examine the

restitutionary remedies available under the CISG.8 Part B will examine
the restitutionary remedies available under the current New Zealand
domestic law. The examination in these Parts will be divided into
restitution for failed contracts followed by restitution as a form of
damages for a breach of contract (restitutionary damages)9. These two
situations are quite different from each other. In the first situation,
parties may wish to exercise their right to recover goods or money
where they have performed the contract up until its failure.10 The
objective of a restitutionary remedy for a failed contract is therefore to
restore the parties to their pre-contractual positions. In contrast,
restitutionary damages may apply while the contract is in existence.
They may become relevant where the obligee wants to bring a damages
claim against the obligor but has difficulty in proving that loss is caused
by the breach. Therefore, the loss suffered by the obligee might be
measured by the benefit the obligor received.
The structure of this paper is as follows: Part A will examine the

restitutionary remedies available under the CISG.8 Part B will examine
the restitutionary remedies available under the current New Zealand
domestic law. The examination in these Parts will be divided into
restitution for failed contracts followed by restitution as a form of
damages for a breach of contract (restitutionary damages)9. These two
situations are quite different from each other. In the first situation,
parties may wish to exercise their right to recover goods or money
where they have performed the contract up until its failure.10 The
objective of a restitutionary remedy for a failed contract is therefore to
restore the parties to their pre-contractual positions. In contrast,
restitutionary damages may apply while the contract is in existence.
They may become relevant where the obligee wants to bring a damages
claim against the obligor but has difficulty in proving that loss is caused
by the breach. Therefore, the loss suffered by the obligee might be
measured by the benefit the obligor received.
Ibid., p. 40.
The paper does not attempt to provide an exclusive set of considerations relevant to
such reform. There are many potential issues that could arise in regard to restitution for
example those surrounding the demand of substitute goods where the goods have been
destroyed. However, this paper instead aims to focus on some of the more important
considerations particularly in regard to articles 79, 81, 82 and 84 of the CISG.
8 See appendix.
9 Also known as a disgorgement of profits.
10 This paper considers two types of failed contracts. First, a contract may fail because a
party is entitled to have the contract discharged for breach by the other party. Second, a
contract may fail where it has become impossible for a party to perform the obligations
under the contract.
Ibid., p. 40.
The paper does not attempt to provide an exclusive set of considerations relevant to
such reform. There are many potential issues that could arise in regard to restitution for
example those surrounding the demand of substitute goods where the goods have been
destroyed. However, this paper instead aims to focus on some of the more important
considerations particularly in regard to articles 79, 81, 82 and 84 of the CISG.
8 See appendix.
9 Also known as a disgorgement of profits.
10 This paper considers two types of failed contracts. First, a contract may fail because a
party is entitled to have the contract discharged for breach by the other party. Second, a
contract may fail where it has become impossible for a party to perform the obligations
under the contract.
Restitution under the CISG in the Domestic Context
133
133
Next, Part C will discuss what issues in relation to restitution should be

considered were the CISG to apply to domestic sale of goods contracts.
Various questions arise. For example: Does the CISG have more
advantageous restitutionary provisions than those available under New
Zealand domestic law? Would the CISG need to be supplemented by
other provisions? If so, how would the legislature proceed to deal with
those inadequacies?
Next, Part C will discuss what issues in relation to restitution should be

considered were the CISG to apply to domestic sale of goods contracts.
Various questions arise. For example: Does the CISG have more
advantageous restitutionary provisions than those available under New
Zealand domestic law? Would the CISG need to be supplemented by
other provisions? If so, how would the legislature proceed to deal with
those inadequacies?
Finally, Part D will summarise the findings of this paper, namely that
the restitutionary remedies under the CISG provide parties with
adequate protection.
Finally, Part D will summarise the findings of this paper, namely that
the restitutionary remedies under the CISG provide parties with
adequate protection.
A: Restitution Under the CISG
A: Restitution Under the CISG
1. Breach
1. Breach
The CISG allows restitution for a failed contract under Section V

Effects of Avoidance. Avoidance of contract is expressly allowed
under the CISG in Articles 49 and 64. These Articles provide that the
buyer or seller may avoid the contract where the other party is in
fundamental breach.11
The CISG allows restitution for a failed contract under Section V

Effects of Avoidance. Avoidance of contract is expressly allowed
under the CISG in Articles 49 and 64. These Articles provide that the
buyer or seller may avoid the contract where the other party is in
fundamental breach.11
However, the right to avoid the contract is conditional. Articles 49(2)

and 64(2) prevent a buyer or seller from avoiding the contract where
the other party has already performed, unless avoidance is declared
within the time specified in the CISG.12
However, the right to avoid the contract is conditional. Articles 49(2)

and 64(2) prevent a buyer or seller from avoiding the contract where
the other party has already performed, unless avoidance is declared
within the time specified in the CISG.12
Avoidance prima facie releases both parties from further obligations to

carry out the contract. The seller need not deliver the goods and the
buyer need not take delivery or pay for them.
Avoidance prima facie releases both parties from further obligations to

carry out the contract. The seller need not deliver the goods and the
buyer need not take delivery or pay for them.
However, despite the parties being free from future obligations,

avoidance is not nullifying the contract altogether. The CISG continues
to regulate the rights and obligations of the parties to eliminate
However, despite the parties being free from future obligations,

avoidance is not nullifying the contract altogether. The CISG continues
to regulate the rights and obligations of the parties to eliminate
A fundamental breach is defined. See, United Nations Convention on Contracts for the
International Sale of Goods (CISG) (11 April 1980) 3 UNTS 1489, art. 25 (entered into
force 30 September 1981).
12 Ibid., art. 49(2) and 64(2).
11
11
A fundamental breach is defined. See, United Nations Convention on Contracts for the
International Sale of Goods (CISG) (11 April 1980) 3 UNTS 1489, art. 25 (entered into
force 30 September 1981).
12 Ibid., art. 49(2) and 64(2).
134
(2006) 1 NZLSJ
134
(2006) 1 NZLSJ
unnecessary detriment as a result of the contract being avoided. Article

81(2) says that:
unnecessary detriment as a result of the contract being avoided. Article

81(2) says that:
[a] party who has performed the contract either wholly or in

part may claim restitution from the other party of whatever
the first party has supplied or paid under the contract. If both
parties are bound to make restitution, they must do so
concurrently.
[a] party who has performed the contract either wholly or in

part may claim restitution from the other party of whatever
the first party has supplied or paid under the contract. If both
parties are bound to make restitution, they must do so
concurrently.
This provision allows a party to seek a restitutionary remedy according

to the contractual arrangements.
This provision allows a party to seek a restitutionary remedy according

to the contractual arrangements.
Article 84 then recognises that gains made from the goods also should
not be retained by the buyer. And, as for recovery of money by the
buyer, the seller is bound to pay interest on it. It is notable that Article
84(2) is unique in regard to the sellers rights. The seller may seek not
only the return of the goods but also an account of profits. This
additional remedy for an account of profits is a personal remedy against
the buyer. In contrast the buyer would not be entitled to excess money
supposing the seller has invested it and gained proceeds.13 Therefore,
from an unjust enrichment perspective, the seller may have the more
favourable claim. Nevertheless, in practical terms, there may be
calculation difficulties in assessing the sellers remedy.
Article 84 then recognises that gains made from the goods also should
not be retained by the buyer. And, as for recovery of money by the
buyer, the seller is bound to pay interest on it. It is notable that Article
84(2) is unique in regard to the sellers rights. The seller may seek not
only the return of the goods but also an account of profits. This
additional remedy for an account of profits is a personal remedy against
the buyer. In contrast the buyer would not be entitled to excess money
supposing the seller has invested it and gained proceeds.13 Therefore,
from an unjust enrichment perspective, the seller may have the more
favourable claim. Nevertheless, in practical terms, there may be
calculation difficulties in assessing the sellers remedy.
Avoiding the contract has another condition in addition to the time

constraint.14 Being able to make restitution to the other party (where
that other party has performed in whole or part) is a pre-requisite. The
CISG provides that (subject to the three exceptions listed in Article
82(2)), if a buyer cannot return the goods substantially in the condition
in which the buyer received them, the buyer must proceed with the
contract and the remedy will be limited to damages.15
Avoiding the contract has another condition in addition to the time

constraint.14 Being able to make restitution to the other party (where
that other party has performed in whole or part) is a pre-requisite. The
CISG provides that (subject to the three exceptions listed in Article
82(2)), if a buyer cannot return the goods substantially in the condition
in which the buyer received them, the buyer must proceed with the
contract and the remedy will be limited to damages.15
In conclusion, if a party is in breach of contract, the other party may

seek avoidance of contract. However, the approach of the CISG
requires restitution of whatever has been received as a condition to
In conclusion, if a party is in breach of contract, the other party may

seek avoidance of contract. However, the approach of the CISG
requires restitution of whatever has been received as a condition to
Although the buyer is entitled to interest, that is not an additional personal remedy. The
domestic law (which applies because there is no provision in the CISG) merely sets an
interest rate as part of the remedy.
14 Supra n. 12.
15 CISG (11 April 1980) 3 UNTS 1489, art. 82 (entered into force 30 September 1981).
13
13
Although the buyer is entitled to interest, that is not an additional personal remedy. The
domestic law (which applies because there is no provision in the CISG) merely sets an
interest rate as part of the remedy.
14 Supra n. 12.
15 CISG (11 April 1980) 3 UNTS 1489, art. 82 (entered into force 30 September 1981).
135
135
avoiding the contract. Furthermore, the restitutionary rights set out in

Articles 81 and 84 apply irrespective of which party caused or declared
avoidance.16
avoiding the contract. Furthermore, the restitutionary rights set out in

Articles 81 and 84 apply irrespective of which party caused or declared
avoidance.16
2. Impossibility
2. Impossibility
Another situation in which restitution may become relevant is where

the contract has become frustrated. This is because a contract may fail
because it has become impossible for a party to perform. A party in
such situation may wish to be put into his or her pre-contractual
position. The relevant provision in the CISG to deal with a contract
that has become impossible to perform is Article 79. However, it is
notable that this Article is not an exception to Articles 49 and 64.
Therefore, to avoid a contract and obtain the right to restitution, always
requires a breach. So, Article 79 does not deal with a failed contract.
The fact that Article 79 is not a gateway to avoidance (and therefore
restitution) can be problematic.
Another situation in which restitution may become relevant is where

the contract has become frustrated. This is because a contract may fail
because it has become impossible for a party to perform. A party in
such situation may wish to be put into his or her pre-contractual
position. The relevant provision in the CISG to deal with a contract
that has become impossible to perform is Article 79. However, it is
notable that this Article is not an exception to Articles 49 and 64.
Therefore, to avoid a contract and obtain the right to restitution, always
requires a breach. So, Article 79 does not deal with a failed contract.
The fact that Article 79 is not a gateway to avoidance (and therefore
restitution) can be problematic.
Article 79 exempts a party from performing his or her obligations

under the contract if an unexpected impediment occurs. The Article
does not however bring the contract to an end. Article 79(3) says that
the exemption provided has the effect for the period during which
the impediment exists. Further, although Article 79 allows either party
to seek other remedies,17 namely avoidance; it does not provide an
exception to the prerequisite of showing a breach to avoid. Hence, the
only way for the contract to come to an end permanently, is for there
to be a breach.18
Article 79 exempts a party from performing his or her obligations

under the contract if an unexpected impediment occurs. The Article
does not however bring the contract to an end. Article 79(3) says that
the exemption provided has the effect for the period during which
the impediment exists. Further, although Article 79 allows either party
to seek other remedies,17 namely avoidance; it does not provide an
exception to the prerequisite of showing a breach to avoid. Hence, the
only way for the contract to come to an end permanently, is for there
to be a breach.18
Peter Schlechtriem and Ingeborg Schwenzer (eds) Commentary on the UN Convention on

the International Sale of Goods (CISG) (2nd ed, 2005) p. 888.
17 Except for damages.
18 Or for the parties to terminate the contract (both parties must agree to this). See,
Article 29(1) of the CISG. This paper is based on the premise that the parties do not have
mutual wishes to end the contract. Rather one (either the buyer or seller) wishes to
proceed but the other party does not. This is the difficulty of the CISG because if an
unexpected impediment occurs one party may suffer detriment and wish to be free from
his or her obligations under the contract. However, he or she cannot invoke Article 29
(because the other party is not in agreement to end the contract) nor can the contract be
avoided for mere frustration.
16
16
Peter Schlechtriem and Ingeborg Schwenzer (eds) Commentary on the UN Convention on

the International Sale of Goods (CISG) (2nd ed, 2005) p. 888.
17 Except for damages.
18 Or for the parties to terminate the contract (both parties must agree to this). See,
Article 29(1) of the CISG. This paper is based on the premise that the parties do not have
mutual wishes to end the contract. Rather one (either the buyer or seller) wishes to
proceed but the other party does not. This is the difficulty of the CISG because if an
unexpected impediment occurs one party may suffer detriment and wish to be free from
his or her obligations under the contract. However, he or she cannot invoke Article 29
(because the other party is not in agreement to end the contract) nor can the contract be
avoided for mere frustration.
136
(2006) 1 NZLSJ
136
(2006) 1 NZLSJ
The operation of Article 79 is therefore problematic. Avoidance

cannot be sought for mere frustration because the Article does not
permanently exempt a party from performing. Therefore, the way the
Article operates may result in economic disadvantages to either the
seller or the buyer. The seller may face undue hardship in making
alternative arrangements to carry out his or her obligations.
Alternatively, the buyer may face inconvenience from the sellers delay.
The operation of Article 79 is therefore problematic. Avoidance

cannot be sought for mere frustration because the Article does not
permanently exempt a party from performing. Therefore, the way the
Article operates may result in economic disadvantages to either the
seller or the buyer. The seller may face undue hardship in making
alternative arrangements to carry out his or her obligations.
Alternatively, the buyer may face inconvenience from the sellers delay.
Suppose for example, a seller is obliged to manufacture and supply

goods to the buyer. The sellers factory is destroyed by an act of God
making it impossible to deliver the goods to the buyer. To be able to
perform the contract, the seller now has to re-locate to a new factory
and manufacture new goods (meaning that now the seller will incur
enormous cost increase). In this situation, because performance could
still be carried out at a later date, the seller is only temporarily exempted
from performing19 and the seller cannot seek avoidance for mere
frustration. The seller cannot avoid the contract although he or she can
return whatever has been received from the other party.20 Likewise, if
the seller had partly performed prior to the frustrating event, there
would be no right to avoid the contract and seek restitution unless the
seller can show that the buyer is in breach of contract. Alternatively, the
time delay by the seller may be burdensome for the buyer. But, the
buyer cannot avoid the contract either unless the seller is in breach. 21
Since Article 79 temporarily exempts the seller from performing, the
seller would only be in breach if he or she failed to perform at all.
Suppose for example, a seller is obliged to manufacture and supply

goods to the buyer. The sellers factory is destroyed by an act of God
making it impossible to deliver the goods to the buyer. To be able to
perform the contract, the seller now has to re-locate to a new factory
and manufacture new goods (meaning that now the seller will incur
enormous cost increase). In this situation, because performance could
still be carried out at a later date, the seller is only temporarily exempted
from performing19 and the seller cannot seek avoidance for mere
frustration. The seller cannot avoid the contract although he or she can
return whatever has been received from the other party.20 Likewise, if
the seller had partly performed prior to the frustrating event, there
would be no right to avoid the contract and seek restitution unless the
seller can show that the buyer is in breach of contract. Alternatively, the
time delay by the seller may be burdensome for the buyer. But, the
buyer cannot avoid the contract either unless the seller is in breach. 21
Since Article 79 temporarily exempts the seller from performing, the
seller would only be in breach if he or she failed to perform at all.
3. Restitutionary Damages for Unjust Enrichment
Article 74 of the CISG is the damages provision. It provides that

[d]amages for breach of contract by one party consist of a sum equal to
the loss, including loss of profit, suffered by the other party as a
consequence of the breach.
Article 74 of the CISG is the damages provision. It provides that

[d]amages for breach of contract by one party consist of a sum equal to
the loss, including loss of profit, suffered by the other party as a
consequence of the breach.
Also, there is nothing to prevent the other party from bringing a claim for specific
performance. See, Nina M Galston and Hans Smit (eds) International Sales The United
Nations Convention on Contracts for the International Sale of Goods (1984) at 5.03.
20 This is assuming the buyer wishes the contract to be continued of course: supra n. 18.
21 This is also assuming that the seller would not suffer undue detriment and therefore
does wish to proceed with the contract once his or her affairs have been sorted out: supra
n. 18.
19
19
Also, there is nothing to prevent the other party from bringing a claim for specific
performance. See, Nina M Galston and Hans Smit (eds) International Sales The United
Nations Convention on Contracts for the International Sale of Goods (1984) at 5.03.
20 This is assuming the buyer wishes the contract to be continued of course: supra n. 18.
21 This is also assuming that the seller would not suffer undue detriment and therefore
does wish to proceed with the contract once his or her affairs have been sorted out: supra
n. 18.
137
137
The specific reference to loss of profit is necessary because in some

legal systems the concept of loss standing alone does not include loss
of profit.22
Therefore loss includes wasted expenditure and
compensation for lost profits.
The specific reference to loss of profit is necessary because in some

legal systems the concept of loss standing alone does not include loss
of profit.22
Therefore loss includes wasted expenditure and
compensation for lost profits.
It is clear that the drafters of the CISG had compensatory and not
restitutionary damages in mind in relation to this article. The thrust of a
restitutionary remedy is for an account of profits and is different from
lost profits.
It is clear that the drafters of the CISG had compensatory and not
restitutionary damages in mind in relation to this article. The thrust of a
restitutionary remedy is for an account of profits and is different from
lost profits.
So the question becomes whether a party could ever claim an account

of profits under the CISG apart from under Article 74. The answer lies
in whether a buyer or seller may assert, in addition to or instead of his
rights under Article 45(1) [and 61(1)], further claims he derives under
domestic law that is secondarily or complementarily applicable by virtue
of the rules of private international law. 23
So the question becomes whether a party could ever claim an account

of profits under the CISG apart from under Article 74. The answer lies
in whether a buyer or seller may assert, in addition to or instead of his
rights under Article 45(1) [and 61(1)], further claims he derives under
domestic law that is secondarily or complementarily applicable by virtue
of the rules of private international law. 23
The Schlechtriem and Schwenzers Commentary on the CISG 24

provides some guidance on this issue.
The Schlechtriem and Schwenzers Commentary on the CISG 24

provides some guidance on this issue.
[Article] 74 therein provide[s] for an evaluation of the

parties interests with the intent of protecting the seller from
excessive liability. Domestic law should not be permitted to
interfere with this carefully considered assessmentA buyers
concurrent remedy based on domestic law is admissible only
under three conditions: the grounds upon which the remedy is
based cannot fall within the scope proper of Uniform Sales
Law; the remedy cannot be in conflict with the regulatory
goals of Uniform Sales Law; and the domestic law itself must
permit concurrent assertion of the remedy.25
[Article] 74 therein provide[s] for an evaluation of the

parties interests with the intent of protecting the seller from
excessive liability. Domestic law should not be permitted to
interfere with this carefully considered assessmentA buyers
concurrent remedy based on domestic law is admissible only
under three conditions: the grounds upon which the remedy is
based cannot fall within the scope proper of Uniform Sales
Law; the remedy cannot be in conflict with the regulatory
goals of Uniform Sales Law; and the domestic law itself must
permit concurrent assertion of the remedy.25
Accordingly, it is uncertain whether restitutionary damages would be

allowed as a matter of principle. There is no international consensus on
allowing restitutionary damages for a breach of contract. As will be
Accordingly, it is uncertain whether restitutionary damages would be

allowed as a matter of principle. There is no international consensus on
allowing restitutionary damages for a breach of contract. As will be
Albert Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for
the International Sale of Goods (1989) p. 475.
23 Schlechtriem; Schwenzer, supra n 16, p. 530.
24 Ibid.
25 Ibid., p. 531.
22
22
Albert Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for
the International Sale of Goods (1989) p. 475.
23 Schlechtriem; Schwenzer, supra n 16, p. 530.
24 Ibid.
25 Ibid., p. 531.
138
(2006) 1 NZLSJ
138
(2006) 1 NZLSJ
noted later in this paper, even common law commentators are divided
on the acceptability of allowing such claim.
noted later in this paper, even common law commentators are divided
on the acceptability of allowing such claim.
However, there remains another possibility that of excluding the

application of Article 45 altogether. Article 6 of the CISG allows the
parties to derogate from or vary the effect of any of its provisions.
Hence, derogating from Article 45 means that damages will be a matter
for the domestic law and not subject to the CISG.26 Consequently, if
the law of the jurisdiction (which is to be applied according to the rules
of private international law) allows for restitutionary damages, then a
party may be entitled to seek them.
However, there remains another possibility that of excluding the

application of Article 45 altogether. Article 6 of the CISG allows the
parties to derogate from or vary the effect of any of its provisions.
Hence, derogating from Article 45 means that damages will be a matter
for the domestic law and not subject to the CISG.26 Consequently, if
the law of the jurisdiction (which is to be applied according to the rules
of private international law) allows for restitutionary damages, then a
party may be entitled to seek them.
B: Restitution Under New Zealand Domestic Sale of Goods Law
B: Restitution Under New Zealand Domestic Sale of Goods Law
1. Breach
1. Breach
Unlike the CISG, there is no provision regulating the avoidance of a

contract under the SOGA. The set-up of the New Zealand Act is quite
different. Under the SOGA it is the buyers obligation to accept and
pay for the goods. 27 However, where the seller is in breach the buyer
may reject them.28 Accordingly, it is the duty of the seller to deliver the
goods.29
Unlike the CISG, there is no provision regulating the avoidance of a

contract under the SOGA. The set-up of the New Zealand Act is quite
different. Under the SOGA it is the buyers obligation to accept and
pay for the goods. 27 However, where the seller is in breach the buyer
may reject them.28 Accordingly, it is the duty of the seller to deliver the
goods.29
However, if the buyer is in breach, the seller may rescind the contract
and may also exercise a right to an equitable lien over the goods in the
sellers possession. Under the current law it seems that so long as the
seller retains possession he or she is adequately protected by rights of
retention if there is a breach of contract by the buyer.30 On the other
hand, the rescinding seller who has given up possession is confined to
rights in personam against the buyer.31
However, if the buyer is in breach, the seller may rescind the contract
and may also exercise a right to an equitable lien over the goods in the
sellers possession. Under the current law it seems that so long as the
seller retains possession he or she is adequately protected by rights of
retention if there is a breach of contract by the buyer.30 On the other
hand, the rescinding seller who has given up possession is confined to
rights in personam against the buyer.31
If the seller is in breach and does not deliver any goods at all (therefore
the buyer cannot accept or reject them) but the buyer has pre-paid,
If the seller is in breach and does not deliver any goods at all (therefore
the buyer cannot accept or reject them) but the buyer has pre-paid,
26
Ibid., p. 533.
Sale of Goods Act 1908 (NZ), section 29.
28 New Zealand Law Commission, Contract Statutes Review, (NZLC Report 25, Wellington,
1993) p. 116.
29 Sale of Goods Act 1908 (NZ) section 29.
30 New Zealand Law Commission, supra n. 28, p. 121.
31 Ibid.
26
27
27
Ibid., p. 533.
Sale of Goods Act 1908 (NZ), section 29.
28 New Zealand Law Commission, Contract Statutes Review, (NZLC Report 25, Wellington,
1993) p. 116.
29 Sale of Goods Act 1908 (NZ) section 29.
31 Ibid.
139
139
then under section 55 of the SOGA the buyer can bring an action to
recover the money, based on a failure of performance. In contrast, if
the seller is in breach of contract but the goods have been delivered,
the buyer may reject them. By rejecting them, the buyer is free from the
duty to pay. However, if the buyer has pre-paid for them, because the
SOGA does not deal with relief following rejection, the buyer must
seek restoration of benefits on the ground of a failure of basis.
Likewise, as the SOGA does not deal with relief following rescission,
restitution for the seller is dealt with on the ground of a failure of basis.
then under section 55 of the SOGA the buyer can bring an action to
recover the money, based on a failure of performance. In contrast, if
the seller is in breach of contract but the goods have been delivered,
the buyer may reject them. By rejecting them, the buyer is free from the
duty to pay. However, if the buyer has pre-paid for them, because the
SOGA does not deal with relief following rejection, the buyer must
seek restoration of benefits on the ground of a failure of basis.
Likewise, as the SOGA does not deal with relief following rescission,
restitution for the seller is dealt with on the ground of a failure of basis.
Failure of basis within a contractual context is dealt with at common

law. Common law allows a plaintiff to either seek compensation for the
loss of performance or recover the value of money or other benefits
transferred pursuant to the contract.32 Common law dealing with
failure of basis supplements the SOGA.33 Nevertheless, although
restitutionary remedies where a contract is discharged for breach are
available, the common laws practical implications have been criticised.
Obtaining restitution through this avenue is therefore often going to be
an inefficient or ineffective process. The problems arising under
common law will be discussed in greater detail later in this paper.34
Failure of basis within a contractual context is dealt with at common

law. Common law allows a plaintiff to either seek compensation for the
loss of performance or recover the value of money or other benefits
transferred pursuant to the contract.32 Common law dealing with
failure of basis supplements the SOGA.33 Nevertheless, although
restitutionary remedies where a contract is discharged for breach are
available, the common laws practical implications have been criticised.
Obtaining restitution through this avenue is therefore often going to be
an inefficient or ineffective process. The problems arising under
common law will be discussed in greater detail later in this paper.34
2. Impossibility
2. Impossibility
Because the SOGA does not deal with impossibility to perform, other
law applies namely, the Frustrated Contracts Act 1944 (NZ) (FCA).35
Because the SOGA does not deal with impossibility to perform, other
law applies namely, the Frustrated Contracts Act 1944 (NZ) (FCA).35
The FCA allows a party to seek restitution where a contract has

become impossible of performance or otherwise been frustrated.36
Section 3(2) of the FCA provides that:
The FCA allows a party to seek restitution where a contract has

become impossible of performance or otherwise been frustrated.36
Section 3(2) of the FCA provides that:
[a]ll sums paid or payable to any party in pursuance of the

contract before the time when the parties were so
[a]ll sums paid or payable to any party in pursuance of the

contract before the time when the parties were so
Ross Grantham and Charles Rickett, Unjust Enrichment and Restitution in New
Zealand (2000), p. 165.
33 See, the Sale of Goods Act 1908 (NZ), sections 55 and 60.
34 See, below Part C(1)(a).
35 There is a saving provision in the FCA in regard to the Sale of Goods Act 1908 (NZ)
section 9. However, this paper will focus on the reasons for impossibility apart from that
saving, and which therefore fall within scope of the FCA.
36 Frustrated Contracts Act 1944 (NZ) section 3(1).
32
Ross Grantham and Charles Rickett, Unjust Enrichment and Restitution in New
Zealand (2000), p. 165.
33 See, the Sale of Goods Act 1908 (NZ), sections 55 and 60.
34 See, below Part C(1)(a).
35 There is a saving provision in the FCA in regard to the Sale of Goods Act 1908 (NZ)
section 9. However, this paper will focus on the reasons for impossibility apart from that
saving, and which therefore fall within scope of the FCA.
32
140
(2006) 1 NZLSJ
140
(2006) 1 NZLSJ
dischargedshall, in the case of sums paid, be recoverable

from him as money received by him for the use of the party
by whom the sums were paid, and, in the case of sums so
payable, cease to be so payable.37
dischargedshall, in the case of sums paid, be recoverable

from him as money received by him for the use of the party
by whom the sums were paid, and, in the case of sums so
payable, cease to be so payable.37
This remedy is subject to the proviso which is a statutory recognition of

the defence of change of position.
This remedy is subject to the proviso which is a statutory recognition of

the defence of change of position.
Provided that, if the party to whom the sums were so paid or payable
incurred expenses before the time of discharge in, or for the purpose
of, the performance of the contract, the Court mayallow him to
retain orrecover the whole or any part of the sums so paid or
payable, not being an amount in excess of the expenses so incurred.38
Provided that, if the party to whom the sums were so paid or payable
incurred expenses before the time of discharge in, or for the purpose
of, the performance of the contract, the Court mayallow him to
retain orrecover the whole or any part of the sums so paid or
payable, not being an amount in excess of the expenses so incurred.38
Therefore if the defendant has changed position in reliance on the

contract then restitution to the plaintiff may be subject to those
expenses incurred by the defendant. A restitutionary remedy could be
calculated as the amount paid or payable to the plaintiff minus the
defendants wasted expenses.
Therefore if the defendant has changed position in reliance on the

contract then restitution to the plaintiff may be subject to those
expenses incurred by the defendant. A restitutionary remedy could be
calculated as the amount paid or payable to the plaintiff minus the
defendants wasted expenses.
The FCA then goes on to allow the plaintiff recovery where a benefit is
obtained by a defendant other than money. Under section 3(3) the
court has the discretion to grant the party conferring the benefit such
sum as it thinks just.
The FCA then goes on to allow the plaintiff recovery where a benefit is
obtained by a defendant other than money. Under section 3(3) the
court has the discretion to grant the party conferring the benefit such
sum as it thinks just.
The common law principle of damages for a breach of contract has

been that the plaintiff should be put in the position, had the contract
been performed.39 Hence, a general restitutionary claim for profit
gained by a defendant for breach of contract has not been recognised in
New Zealand.40 In assessing damages for the breach of contract, the
court is concerned with the plaintiffs loss and not with the defendants
gain.41 However, there has recently been a significant shift in thinking.
The common law principle of damages for a breach of contract has

been that the plaintiff should be put in the position, had the contract
been performed.39 Hence, a general restitutionary claim for profit
gained by a defendant for breach of contract has not been recognised in
New Zealand.40 In assessing damages for the breach of contract, the
court is concerned with the plaintiffs loss and not with the defendants
gain.41 However, there has recently been a significant shift in thinking.
37
Frustrated Contracts Act 1944 (NZ) section 3(2).

Grantham; Rickett, supra n. 32, p. 176.
39 Robinson v Harman (1848) 1 Ex 850, p. 855.
40 Blanchard (ed), Civil Remedies in New Zealand (2003) p. 32.
41 Sotiros Shipping Inc v Sameiet Solholt [1983] 1 Lloyds Rep 605 (CA).
37
38
38
Frustrated Contracts Act 1944 (NZ) section 3(2).

39 Robinson v Harman (1848) 1 Ex 850, p. 855.
40 Blanchard (ed), Civil Remedies in New Zealand (2003) p. 32.
41 Sotiros Shipping Inc v Sameiet Solholt [1983] 1 Lloyds Rep 605 (CA).
141
141
Attorney-General v Blake42 became a leading case in 2003 for recognizing

the possibility of restitutionary damages for breach of contract. This
English case mentions two situations where restitutionary damages
could be sought - for skimped performance and/or for doing the very
thing you contracted not to do. The latter situation could easily arise in
a contract for the sale of goods. Whether the obiter dictum of this case
would be accepted in New Zealand has been a matter of academic
debate.43 It is notable that there is no statutory impediment to allowing
this remedy for a breach of a sale of goods contract. While the SOGA
does not provide any express regulation of applying for restitutionary
remedies, section 60 provides that rules of common lawsave in so
far as they are inconsistent with the express provisions of this
Actshall continue to apply to contracts for the sale of goods.
Therefore, development in the common law for allowing restitutionary
damages is possible.
Attorney-General v Blake42 became a leading case in 2003 for recognizing

the possibility of restitutionary damages for breach of contract. This
English case mentions two situations where restitutionary damages
could be sought - for skimped performance and/or for doing the very
thing you contracted not to do. The latter situation could easily arise in
a contract for the sale of goods. Whether the obiter dictum of this case
would be accepted in New Zealand has been a matter of academic
debate.43 It is notable that there is no statutory impediment to allowing
this remedy for a breach of a sale of goods contract. While the SOGA
does not provide any express regulation of applying for restitutionary
remedies, section 60 provides that rules of common lawsave in so
far as they are inconsistent with the express provisions of this
Actshall continue to apply to contracts for the sale of goods.
Therefore, development in the common law for allowing restitutionary
damages is possible.
C: Restitutionary Considerations for the CISG

Applying to Domestic Contracts
C: Restitutionary Considerations for the CISG

Applying to Domestic Contracts
The preceding Parts have set out how and when restitution is available
under the CISG and the domestic law. As can be seen, the domestic
law is substantively different to the CISG in various ways. This paper
will now explore those differences and determine whether the
restitutionary remedies available under the CISG would be an
acceptable alternative to those available under the current domestic law.
The preceding Parts have set out how and when restitution is available
under the CISG and the domestic law. As can be seen, the domestic
law is substantively different to the CISG in various ways. This paper
will now explore those differences and determine whether the
restitutionary remedies available under the CISG would be an
acceptable alternative to those available under the current domestic law.
This Part will first focus on the weaknesses of the domestic law
concerning restitution for failed contracts and determine whether the
CISG would eliminate those weaknesses if it were to supersede SOGA.
Alternatively, if the CISG has any weakness then those will also be
addressed. Then, since restitutionary damages are not available under
the CISG or current domestic law, the paper will address whether that
is an inadequacy and how it could be dealt with if the CISG were a
basis for a new domestic code. Finally, domestic law that would be
This Part will first focus on the weaknesses of the domestic law
concerning restitution for failed contracts and determine whether the
CISG would eliminate those weaknesses if it were to supersede SOGA.
Alternatively, if the CISG has any weakness then those will also be
addressed. Then, since restitutionary damages are not available under
the CISG or current domestic law, the paper will address whether that
is an inadequacy and how it could be dealt with if the CISG were a
basis for a new domestic code. Finally, domestic law that would be
Attorney-General v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268 (HL). See also,
Experience Hendrix LLC v PPX Enterprises INC Edward Chalpin [2003] EWCA Civ 323 for
application of restitutionary remedies for breach of contract in the commercial context.
43 Views are currently divided. See Maree C Chetwin and David K Round Breach of
Contract and the New Remedy of Account of Profits (2002) 38 ABACUS.
42
42
Attorney-General v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268 (HL). See also,
Experience Hendrix LLC v PPX Enterprises INC Edward Chalpin [2003] EWCA Civ 323 for
application of restitutionary remedies for breach of contract in the commercial context.
43 Views are currently divided. See Maree C Chetwin and David K Round Breach of
Contract and the New Remedy of Account of Profits (2002) 38 ABACUS.
142
(2006) 1 NZLSJ
142
(2006) 1 NZLSJ
needed in addition to the CISG to regulate contracts for the sale of

goods will be noted.
needed in addition to the CISG to regulate contracts for the sale of

goods will be noted.
1. Failed Contracts
1. Failed Contracts
(a) Breach
(a) Breach
There are two main problems with the domestic law in regard to
restitution for a breach of contract. First, the SOGA makes no
provision for when a buyer who rejects the goods actually cancels the
contract.44 And second, restitution under the common law for failure
of basis is inadequate and dated. The Law Commission has noted these
issues and suggested amendments to SOGA. This paper will now
determine whether those recommendations by the Law Commission
could also be achieved by replacing SOGA with the CISG.
There are two main problems with the domestic law in regard to
restitution for a breach of contract. First, the SOGA makes no
provision for when a buyer who rejects the goods actually cancels the
contract.44 And second, restitution under the common law for failure
of basis is inadequate and dated. The Law Commission has noted these
issues and suggested amendments to SOGA. This paper will now
determine whether those recommendations by the Law Commission
could also be achieved by replacing SOGA with the CISG.
In regard to the cancellation issue, the Law Commission suggested that

the buyer should have the choice to either reject the goods or cancel
the contract. This would eliminate the current ambiguity of when
rejection also amounts to cancellation. The Law Commission noted
that to complete the dovetailing, it is necessary to affirm the rule that
the effect of rejecting goods after the property has passed or
cancellation of the contract is that title re-vests in the seller unless the
goods have been accepted.45 They said that it would be inconvenient, if
in the majority of fact situations, the property were to remain in the
buyer after cancellation.46 Accordingly, a proprietary right is transferred
back to the seller and this right can be enforced by way of restitution.47
In regard to the cancellation issue, the Law Commission suggested that

the buyer should have the choice to either reject the goods or cancel
the contract. This would eliminate the current ambiguity of when
rejection also amounts to cancellation. The Law Commission noted
that to complete the dovetailing, it is necessary to affirm the rule that
the effect of rejecting goods after the property has passed or
cancellation of the contract is that title re-vests in the seller unless the
goods have been accepted.45 They said that it would be inconvenient, if
in the majority of fact situations, the property were to remain in the
buyer after cancellation.46 Accordingly, a proprietary right is transferred
back to the seller and this right can be enforced by way of restitution.47
If the CISG were to take the place of SOGA, then the inadequacy of
the word rejection would not be an issue. Under the CISG rejection
and cancellation would be combined into avoidance. Where a party
wishes to avoid the contract under the CISG, notice to the other side is
If the CISG were to take the place of SOGA, then the inadequacy of
the word rejection would not be an issue. Under the CISG rejection
and cancellation would be combined into avoidance. Where a party
wishes to avoid the contract under the CISG, notice to the other side is
It is unclear what further act is required for the contract to be cancelled. Rejecting is
not always going to involve complete cancellation of the contract. The Law Commission
also suggested that the word rescission by the seller should be replaced with
cancellation. However, unlike the situation for the buyer, that does not substantially
change the provision so it will not be discussed.
46 Ibid.
47 Ibid.
44
44
It is unclear what further act is required for the contract to be cancelled. Rejecting is
not always going to involve complete cancellation of the contract. The Law Commission
also suggested that the word rescission by the seller should be replaced with
cancellation. However, unlike the situation for the buyer, that does not substantially
change the provision so it will not be discussed.
46 Ibid.
47 Ibid.
143
143
required.48 The CISG then has the desirable objective of putting the
parties into their pre-contractual positions by allowing restitution of
performance to be claimed by either party. Upon avoidance the seller
has the right to the re-vesting of his or her property interest. And, the
buyer may recover any money pre-paid.
required.48 The CISG then has the desirable objective of putting the
parties into their pre-contractual positions by allowing restitution of
performance to be claimed by either party. Upon avoidance the seller
has the right to the re-vesting of his or her property interest. And, the
buyer may recover any money pre-paid.
The second issue - failure of basis - is that, as mentioned earlier in this

paper, the common law has been criticised. The problems with the
current law are as follows. First, the common law requires a total failure
of basis.49 Therefore a plaintiff who has received part of the contractual
performance is prevented from seeking restitution. Second, restoration
can only be to the party not in breach thereby barring the party in
breach from restitution.50 Third, restitution as a failure of basis claim
allows the party to have returned only what was agreed under the
contract. Therefore gains made would not be recoverable.51 Finally,
benefits conferred under the contract are not recoverable if the
contract was one constructed as requiring complete performance.52
The second issue - failure of basis - is that, as mentioned earlier in this

paper, the common law has been criticised. The problems with the
current law are as follows. First, the common law requires a total failure
of basis.49 Therefore a plaintiff who has received part of the contractual
performance is prevented from seeking restitution. Second, restoration
can only be to the party not in breach thereby barring the party in
breach from restitution.50 Third, restitution as a failure of basis claim
allows the party to have returned only what was agreed under the
contract. Therefore gains made would not be recoverable.51 Finally,
benefits conferred under the contract are not recoverable if the
contract was one constructed as requiring complete performance.52
Although the enactment of the Contractual Remedies Act 1979 (NZ)

(CRA) was implemented to remove the common law inadequacies, it
specifically excluded its application to the sale of goods.53 Nevertheless,
it is notable that the drafters of the CRA intended the saving to be
temporary.54 It seems that the saving was merely to allow time to
conduct a thorough overhaul of the SOGA, which was to be the
Contracts and Commercial Law Reform Committees (CCLRC) next
project.55 The CCLRC was, however abolished before it could
undertake that review.56
Although the enactment of the Contractual Remedies Act 1979 (NZ)

(CRA) was implemented to remove the common law inadequacies, it
specifically excluded its application to the sale of goods.53 Nevertheless,
it is notable that the drafters of the CRA intended the saving to be
temporary.54 It seems that the saving was merely to allow time to
conduct a thorough overhaul of the SOGA, which was to be the
Contracts and Commercial Law Reform Committees (CCLRC) next
project.55 The CCLRC was, however abolished before it could
undertake that review.56
48
CISG (11 April 1980) 5 UNTS 1489, art 26 (entered into force 30 September 1981).
50 Ibid.
51 Ibid.
52 Cutter v Powell (1795) 6 Term Rep 320.
53 Contractual Remedies Act 1979 (NZ) section 15(d). But also see sections 4(3) and 6(2)
of the CRA for exceptions where the CRA applies despite the SOGA. Those exceptions
are however are not discussed in this paper.
54 Grantham; Rickett, supra n. 32, p. 169.
48
49
49
CISG (11 April 1980) 5 UNTS 1489, art 26 (entered into force 30 September 1981).
50 Ibid.
51 Ibid.
52 Cutter v Powell (1795) 6 Term Rep 320.
53 Contractual Remedies Act 1979 (NZ) section 15(d). But also see sections 4(3) and 6(2)
of the CRA for exceptions where the CRA applies despite the SOGA. Those exceptions
are however are not discussed in this paper.
144
(2006) 1 NZLSJ
144
(2006) 1 NZLSJ
Therefore the Law Commission has since argued that the CRA and the
SOGA should be harmonised. Particularly that section 9 of the CRA
should be made available for sale of goods contracts.
Therefore the Law Commission has since argued that the CRA and the
SOGA should be harmonised. Particularly that section 9 of the CRA
should be made available for sale of goods contracts.
Section 9 overcomes the problems of the common law noted above.

However, at the time of the Law Commissions proposal, the CISG had
not been adopted by New Zealand. Therefore, proceeding with the
CCLRCs original plan, the CISG could overtake SOGA. The
substantive objectives of the Law Commission would also be achieved
but through a different avenue the CISG instead of the CRA.
Section 9 overcomes the problems of the common law noted above.

However, at the time of the Law Commissions proposal, the CISG had
not been adopted by New Zealand. Therefore, proceeding with the
CCLRCs original plan, the CISG could overtake SOGA. The
substantive objectives of the Law Commission would also be achieved
but through a different avenue the CISG instead of the CRA.
The CISG is an advance on the common law by allowing restitution

(whether or not there has been part performance) to be sought by
either party, not limiting recovery to the contract (Article 84), and by
being available whether or not complete performance was stipulated in
the contract. The CISG is a mechanism to provide a fairer remedy for
restitution than what is available to parties under the current domestic
law.
The CISG is an advance on the common law by allowing restitution

(whether or not there has been part performance) to be sought by
either party, not limiting recovery to the contract (Article 84), and by
being available whether or not complete performance was stipulated in
the contract. The CISG is a mechanism to provide a fairer remedy for
restitution than what is available to parties under the current domestic
law.
Further, the CISG is arguably even more desirable than the CRA in that
it makes restitution a guaranteed right on avoidance. Under the CRA
restitutionary relief is entirely at the courts discretion and not the
subject of firm rules.57 Importantly, this point was criticised by
Professor D McLauchlan shortly after the CRA was implemented.
Further, the CISG is arguably even more desirable than the CRA in that
it makes restitution a guaranteed right on avoidance. Under the CRA
restitutionary relief is entirely at the courts discretion and not the
subject of firm rules.57 Importantly, this point was criticised by
Professor D McLauchlan shortly after the CRA was implemented.
The [CCLRC] has effectually swept away 200 years of case-law dealing
with restitution upon rescissionwith no reported discussion of the
important and complex issues involved. [However] it is not suggested
that the common law ought to have been retainedIt is for the
legislature to make the policy decisions, not simply to uproot the
existing rules and dump the problems into the lap of the courts to be
solved by the exercise of an almost boundless discretion.58
The [CCLRC] has effectually swept away 200 years of case-law dealing
with restitution upon rescissionwith no reported discussion of the
important and complex issues involved. [However] it is not suggested
that the common law ought to have been retainedIt is for the
legislature to make the policy decisions, not simply to uproot the
existing rules and dump the problems into the lap of the courts to be
solved by the exercise of an almost boundless discretion.58
However, restitution under the CISG is not free from criticism. Some
academics have argued that Article 82, which bars the buyer from
However, restitution under the CISG is not free from criticism. Some
academics have argued that Article 82, which bars the buyer from
Contractual Remedies Act 1979 (NZ) sections 9(1)-(4); Cynthia Hawes (ed) Butterworths
Introduction to Commercial Law (2005), p. 127.
58 David McLauchlan Contract Law Reform in New Zealand: The CRA 1979 (1981) 1
OJLS 284, pp. 288 and 292.
57
57
Contractual Remedies Act 1979 (NZ) sections 9(1)-(4); Cynthia Hawes (ed) Butterworths
Introduction to Commercial Law (2005), p. 127.
58 David McLauchlan Contract Law Reform in New Zealand: The CRA 1979 (1981) 1
OJLS 284, pp. 288 and 292.
145
145
avoiding the contract if the buyer cannot make restitution of the goods,
is too restrictive.59 Perhaps a more liberal provision in place of the
current Article 82 would be to grant a party an allowance in money.
This is the approach of The International Institute for the Unification
of Private Law (UNIDROIT). On the other hand, the criticism that
the CISG is too restrictive has also been countered:
avoiding the contract if the buyer cannot make restitution of the goods,
is too restrictive.59 Perhaps a more liberal provision in place of the
current Article 82 would be to grant a party an allowance in money.
This is the approach of The International Institute for the Unification
of Private Law (UNIDROIT). On the other hand, the criticism that
the CISG is too restrictive has also been countered:
Due to the wide range of exceptions to the bar of avoidance under Art.
82(2)(a) to (c) CISG and the objective equalization of benefits
according to Art. 84(2) CISG, restitution under [UNIDROIT and
CISG] will quite often produce the same or, at least, a similar result.
Furthermore, one should give broad application to the exceptions of
para. (2) and thereby limit the bar of Art. 82(1) CISG.60
Due to the wide range of exceptions to the bar of avoidance under Art.
82(2)(a) to (c) CISG and the objective equalization of benefits
according to Art. 84(2) CISG, restitution under [UNIDROIT and
CISG] will quite often produce the same or, at least, a similar result.
Furthermore, one should give broad application to the exceptions of
para. (2) and thereby limit the bar of Art. 82(1) CISG.60
Therefore, the exceptions in Article 82(2) mean that the buyer would
not often face a dissimilar result to that under the UNIDROIT
approach. If the reason the buyer cannot return the goods is not his or
her fault, or if the goods have simply been on-sold the goods in the
normal course of business, then the buyer can avoid the contract.
These exceptions are very wide. The working operation of article 82
arguably strikes a good balance and is fair for both parties.
Therefore, the exceptions in Article 82(2) mean that the buyer would
not often face a dissimilar result to that under the UNIDROIT
approach. If the reason the buyer cannot return the goods is not his or
her fault, or if the goods have simply been on-sold the goods in the
normal course of business, then the buyer can avoid the contract.
These exceptions are very wide. The working operation of article 82
arguably strikes a good balance and is fair for both parties.
(b) Impossibility
(b) Impossibility
If the CISG became a code for domestic contracts, then it would trump
the FCA where the sales of goods are involved.61
If the CISG became a code for domestic contracts, then it would trump
the FCA where the sales of goods are involved.61
The domestic law differs from the CISG in that it deals with restitution
for frustrated contracts and restitution where the contract is discharged
for breach separately. As pointed out earlier in this paper, there are
problems with the operation of Article 79 of the CISG. Under the
CISG, discharging the contract is not a guaranteed option for the party
faced with the impossibility.62 The CISGs problem of having a breach
The domestic law differs from the CISG in that it deals with restitution
for frustrated contracts and restitution where the contract is discharged
for breach separately. As pointed out earlier in this paper, there are
problems with the operation of Article 79 of the CISG. Under the
CISG, discharging the contract is not a guaranteed option for the party
faced with the impossibility.62 The CISGs problem of having a breach
See, Florian Mohs Remarks on the manner in which Articles 7.3.5 and 7.3.6 of the
UNIDROIT Principles compare with Articles 81 and 82 of the CISG
http://www.cisg.law.pace.edu/cisg/biblio/mohs.html at 21 January 2006.
60 Ibid.
61 This is because the CISG has its own regime for dealing with frustrated contracts in
Article 79.
62 Supra Part A(2).
59
59
See, Florian Mohs Remarks on the manner in which Articles 7.3.5 and 7.3.6 of the
UNIDROIT Principles compare with Articles 81 and 82 of the CISG
http://www.cisg.law.pace.edu/cisg/biblio/mohs.html at 21 January 2006.
60 Ibid.
61 This is because the CISG has its own regime for dealing with frustrated contracts in
Article 79.
62 Supra Part A(2).
146
(2006) 1 NZLSJ
146
(2006) 1 NZLSJ
as a pre-requisite to avoid as opposed to allowing avoidance for a

frustrating event, has been criticised:
as a pre-requisite to avoid as opposed to allowing avoidance for a

frustrating event, has been criticised:
The system of remedies is ill-adapted to the situation dealt with in

Article 79. The remedies, of course, are simply the general remedies for
the kind of non-performance which a common lawyer calls breach of
contract, whereas in article 79 we are not dealing with breach. We are
concerned with adjusting the rights of two innocent parties. The
problems are those of balancing benefits received against expenses
incurred, problems which are normally thought of in the context of the
law of restitution, but call for the exercise of a greater degree of judicial
discretion than found in normal restitutionary remedies.63
The system of remedies is ill-adapted to the situation dealt with in

Article 79. The remedies, of course, are simply the general remedies for
the kind of non-performance which a common lawyer calls breach of
contract, whereas in article 79 we are not dealing with breach. We are
concerned with adjusting the rights of two innocent parties. The
problems are those of balancing benefits received against expenses
incurred, problems which are normally thought of in the context of the
law of restitution, but call for the exercise of a greater degree of judicial
discretion than found in normal restitutionary remedies.63
Unlike the CISG, discharging a contract for impossibility under the

current domestic law is not dependent on a breach by the other party.
So in that respect the domestic law is better. Consequently, the
question becomes whether or not the problems of Article 79 could be
overcome if the CISG were to apply to domestic contracts. The easiest
way to overcome the problem would be to delete Article 79(3). Article
79(3) makes the exemption under Article 79 temporary during the
period that the impediment exists. If a party is permanently exempted
from performing, the contract has failed. In that case, either party could
declare the contract avoided and seek restitution.64
Unlike the CISG, discharging a contract for impossibility under the

current domestic law is not dependent on a breach by the other party.
So in that respect the domestic law is better. Consequently, the
question becomes whether or not the problems of Article 79 could be
overcome if the CISG were to apply to domestic contracts. The easiest
way to overcome the problem would be to delete Article 79(3). Article
79(3) makes the exemption under Article 79 temporary during the
period that the impediment exists. If a party is permanently exempted
from performing, the contract has failed. In that case, either party could
declare the contract avoided and seek restitution.64
Despite the FCA perhaps being advantageous as to when it applies, its

provisions on how it applies are not so attractive for sales of goods. 65
Particularly, perhaps the CISG is more geared to dealing with
commercial contracts for the sale of goods in that it provides the
option to have the actual goods returned where applicable. The FCA
section 3(2) does not allow the restitution of property, other than in a
monetary form.66 This limitation may be problematic at times.
Despite the FCA perhaps being advantageous as to when it applies, its

provisions on how it applies are not so attractive for sales of goods. 65
Particularly, perhaps the CISG is more geared to dealing with
commercial contracts for the sale of goods in that it provides the
option to have the actual goods returned where applicable. The FCA
section 3(2) does not allow the restitution of property, other than in a
monetary form.66 This limitation may be problematic at times.
63
Galston and Smit, supra n. 19, at 5.20.

This however brings inconsistency to the domestic and international approach.
However, the author is of the view that Article 79 needs to be amended for international
contracts as well. However, reform of the CISG in the international context is a
complicated matter requiring consensus by parties. That inquiry is beyond the scope of
this paper.
65 New Zealand Law Commission, supra n. 28, p. 296. Note that there were several
criticisms in regard to the subsection.
66 Ibid., p. 297.
63
64
64
Galston and Smit, supra n. 19, at 5.20.

This however brings inconsistency to the domestic and international approach.
However, the author is of the view that Article 79 needs to be amended for international
contracts as well. However, reform of the CISG in the international context is a
complicated matter requiring consensus by parties. That inquiry is beyond the scope of
this paper.
65 New Zealand Law Commission, supra n. 28, p. 296. Note that there were several
criticisms in regard to the subsection.
66 Ibid., p. 297.
147
147
Arguably, if the actual goods could be returned, (as allowed in the

CISG) the parties could be restored to their pre-contractual positions
with minimum hardship.67 Additionally, in some circumstances it may
be very difficult for the court to assess a just sum in relation to a
benefit incurred. It may be easier for the courts to order the return of
the goods if for instance the goods have increased in value.
Arguably, if the actual goods could be returned, (as allowed in the

CISG) the parties could be restored to their pre-contractual positions
with minimum hardship.67 Additionally, in some circumstances it may
be very difficult for the court to assess a just sum in relation to a
benefit incurred. It may be easier for the courts to order the return of
the goods if for instance the goods have increased in value.
Moreover, there is no provision in the FCA equivalent to Article 84 of

the CISG allowing the recovery of gains made from the goods or
interest to be paid on the refunded money. However, interest would be
available by recourse to section 87 of the Judicature Act 1908 (NZ). In
regard to gains made from the goods by the buyer, the FCA says that
the seller may recover a just sum but such sum cannot exceed the value
of the said benefit to the party obtaining it.68 Therefore, unlike the
CISG, the seller has no personal remedy for profits under the FCA.
Moreover, there is no provision in the FCA equivalent to Article 84 of

the CISG allowing the recovery of gains made from the goods or
interest to be paid on the refunded money. However, interest would be
available by recourse to section 87 of the Judicature Act 1908 (NZ). In
regard to gains made from the goods by the buyer, the FCA says that
the seller may recover a just sum but such sum cannot exceed the value
of the said benefit to the party obtaining it.68 Therefore, unlike the
CISG, the seller has no personal remedy for profits under the FCA.
2. Restitutionary Damages for a Breach of Contract
2. Restitutionary Damages for a Breach of Contract
As a general rule the measure of damages for breach of contract is

compensatory rather than restitutionary, so that the claimant will have
his [or her] damages assessed by reference to the loss sustained, not to
the profit made by the defendant as a result of his [or her] wrongful
act.69
As a general rule the measure of damages for breach of contract is

compensatory rather than restitutionary, so that the claimant will have
his [or her] damages assessed by reference to the loss sustained, not to
the profit made by the defendant as a result of his [or her] wrongful
act.69
However, both academic articles and case law have criticized the
limitation of damages to compensatory relief. Some writers have
favoured the view that in some circumstances the innocent party to a
breach of contract should be able to disgorge the profits he [the
breaching party] obtained from his breach of contract.70 An award of
damages assessed by loss is not always going to be adequate.71
However, both academic articles and case law have criticized the
limitation of damages to compensatory relief. Some writers have
favoured the view that in some circumstances the innocent party to a
breach of contract should be able to disgorge the profits he [the
breaching party] obtained from his breach of contract.70 An award of
damages assessed by loss is not always going to be adequate.71
It is quite possible for a defendant to gain from a breach of contract

but without causing any loss to the plaintiff. This can be illustrated by
the following examples:
It is quite possible for a defendant to gain from a breach of contract

but without causing any loss to the plaintiff. This can be illustrated by
the following examples:
67
Ibid., p. 301.
Frustrated Contracts Act 1944 (NZ), section 3(3) (emphasis added).
69 Attorney-General v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268, 274 (HL).
70 Ibid., (Lord Nicholls of Birkenhead); see, Catherine Mitchell Remedial Inadequacy in
Contract and the Role of Restitutionary Damages (1999) 15 JCL 133.
71 See, Attorney-General v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268, 274 (HL).
67
68
68
Ibid., p. 301.
Frustrated Contracts Act 1944 (NZ), section 3(3) (emphasis added).
69 Attorney-General v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268, 274 (HL).
70 Ibid., (Lord Nicholls of Birkenhead); see, Catherine Mitchell Remedial Inadequacy in
Contract and the Role of Restitutionary Damages (1999) 15 JCL 133.
71 See, Attorney-General v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268, 274 (HL).
148
(2006) 1 NZLSJ
148
(2006) 1 NZLSJ
Suppose Company A contracts with Company B not to manufacture

and sell a particular type of good for one year except to Company B
(the buyer) with Company Bs name attached. Company A sells the
exact same model to Company C inside that same year. Company A
gains 10 per cent profit from sales to Company B and Company C. Can
Company B sue Company A for the profit obtained from Company C?
Has there been a loss to Company B or merely a gain to Company A?
There is no doubt that Company A is in breach but what would
Company Bs remedy be?
Suppose Company A contracts with Company B not to manufacture

and sell a particular type of good for one year except to Company B
(the buyer) with Company Bs name attached. Company A sells the
exact same model to Company C inside that same year. Company A
gains 10 per cent profit from sales to Company B and Company C. Can
Company B sue Company A for the profit obtained from Company C?
Has there been a loss to Company B or merely a gain to Company A?
There is no doubt that Company A is in breach but what would
Company Bs remedy be?
Suppose Company A is in breach of contract because it delays

transferring goods under the contract entered into with Company B.
Company A chooses to delay in transferring the goods to Company B
because it is making money by selling them elsewhere. Can the party in
breach of contract be sued for the money made by Company A as a
result of the delay?
Suppose Company A is in breach of contract because it delays

transferring goods under the contract entered into with Company B.
Company A chooses to delay in transferring the goods to Company B
because it is making money by selling them elsewhere. Can the party in
breach of contract be sued for the money made by Company A as a
result of the delay?
Under the CISG and the current New Zealand domestic law, the
plaintiff in both scenarios would be without remedy. Academics have
argued that it is not clear why it should be any more permissible to
expropriate personal rights than property rights.72
Under the CISG and the current New Zealand domestic law, the
plaintiff in both scenarios would be without remedy. Academics have
argued that it is not clear why it should be any more permissible to
expropriate personal rights than property rights.72
Therefore, the legislature may wish to consider whether to allow for

restitutionary damages in addition to the CISG. This could be achieved
perhaps by drafting a separate remedies provision to apply alongside
the CISG. However if a provision allowing for restitutionary damages
was accepted, then drafters should take into account that restitutionary
damages differ from true restitution. Consequently, a plaintiff should
not be able to claim restitutionary damages as well as compensatory
damages.73 Furthermore, such provision would only be able to apply
for domestic contracts. This is because parliament cannot unilaterally
add to the international convention.74
Therefore, the legislature may wish to consider whether to allow for

restitutionary damages in addition to the CISG. This could be achieved
perhaps by drafting a separate remedies provision to apply alongside
the CISG. However if a provision allowing for restitutionary damages
was accepted, then drafters should take into account that restitutionary
damages differ from true restitution. Consequently, a plaintiff should
not be able to claim restitutionary damages as well as compensatory
damages.73 Furthermore, such provision would only be able to apply
for domestic contracts. This is because parliament cannot unilaterally
add to the international convention.74
See, Lionel D Smith Disgorgement of the Profits of Breach of Contract: Property,

Contract and Efficient Breach (1995) 24 Can BLJ 121.
73 Blanchard, supra n. 40, p. 32.
74 This paper is based on the presumption that the new sales code simply uses the CISG
as a basis for domestic sale of goods contracts. International contracts would be
governed strictly by the Sale of Goods (United Nations Convention) Act 1994 (NZ)
where the parties had not chosen ordinary conflict of laws rules to apply.
72
72
See, Lionel D Smith Disgorgement of the Profits of Breach of Contract: Property,

Contract and Efficient Breach (1995) 24 Can BLJ 121.
73 Blanchard, supra n. 40, p. 32.
74 This paper is based on the presumption that the new sales code simply uses the CISG
as a basis for domestic sale of goods contracts. International contracts would be
governed strictly by the Sale of Goods (United Nations Convention) Act 1994 (NZ)
where the parties had not chosen ordinary conflict of laws rules to apply.
149
149
3. Gaps
3. Gaps
Although the CISG is set up as a code for international sale of goods

contracts,75 sometimes by virtue of the ordinary rules of private
international law, a domestic law may apply (relevant for this paper are
those New Zealand domestic laws that apply alongside the CISG).
Although the CISG is set up as a code for international sale of goods

contracts,75 sometimes by virtue of the ordinary rules of private
international law, a domestic law may apply (relevant for this paper are
those New Zealand domestic laws that apply alongside the CISG).
Questions concerning matters governed by this Convention which are

not expressly settled in it are to be settled in conformity with the
general principles on which it is based or, in absence of such principles,
in conformity with the law applicable by virtue of the rules of private
international law.76
Questions concerning matters governed by this Convention which are

not expressly settled in it are to be settled in conformity with the
general principles on which it is based or, in absence of such principles,
in conformity with the law applicable by virtue of the rules of private
international law.76
There are some gaps in the CISG in regard to restitution. Two of the
major ones are discussed in this chapter. First, the CISG does not deal
with the passing of property. Consequently, the SOGA section 19
currently applies even where a contract is governed by the CISG.
Accordingly, if the CISG became SOGAs successor, the legislature
would need to address this gap. A provision such as the following
(equivalent to that of section 19 SOGA) should apply alongside the
CISG:
There are some gaps in the CISG in regard to restitution. Two of the
major ones are discussed in this chapter. First, the CISG does not deal
with the passing of property. Consequently, the SOGA section 19
currently applies even where a contract is governed by the CISG.
Accordingly, if the CISG became SOGAs successor, the legislature
would need to address this gap. A provision such as the following
(equivalent to that of section 19 SOGA) should apply alongside the
CISG:
(1) Where there is a contract for the sale of goods to which

this Act77 applies, the property in them is transferred to the
buyer at such time as the parties to the contract intend it to be
transferred.
(1) Where there is a contract for the sale of goods to which

this Act77 applies, the property in them is transferred to the
buyer at such time as the parties to the contract intend it to be
transferred.
(2) For the purpose of ascertaining the intention of the

parties, regard shall be had to the terms of the contract, the
conduct of the parties, and the circumstances of the case.
(2) For the purpose of ascertaining the intention of the

parties, regard shall be had to the terms of the contract, the
conduct of the parties, and the circumstances of the case.
Second, the CISG is silent on the details of transfer in restitution. It is

therefore a matter for domestic law to determine which of the parties
(or their insurance companies)78 bears the cost. Restitutionary costs
could be very substantial for the buyer. For example, the buyer may
Second, the CISG is silent on the details of transfer in restitution. It is

therefore a matter for domestic law to determine which of the parties
(or their insurance companies)78 bears the cost. Restitutionary costs
could be very substantial for the buyer. For example, the buyer may
75
Sale of Goods (United Nations Convention) Act 1994.

CISG (11 April 1981) 3 UNTS 1489, art 7(2) (entered into force 30 September 1981).
77 This Act will be the new domestic code based on the CISG.
78 Insurance law is beyond the scope of this paper and therefore it will not be discussed.
75
76
76
Sale of Goods (United Nations Convention) Act 1994.

CISG (11 April 1981) 3 UNTS 1489, art 7(2) (entered into force 30 September 1981).
77 This Act will be the new domestic code based on the CISG.
78 Insurance law is beyond the scope of this paper and therefore it will not be discussed.
150
(2006) 1 NZLSJ
150
(2006) 1 NZLSJ
incur significant shipment expenses by returning a large quantity of

goods back to the seller. Also, if a party is obliged to make restitution in
money terms then he or she could incur expenses in accessing the
funds. This would occur for example if the partys bank requires a fee
to withdraw from the account. Domestic statute law in New Zealand
does not expressly deal with this issue where the contract is discharged
for breach.79 Therefore, the availability of restitutionary costs is a
matter for the common law. In contrast, if the contract is discharged
for impossibility, the FCA seems to exclude the recovery of
restitutionary costs incurred by a seller making restitution. The FCA
says that where the seller is obliged to make restitution only the
expenses for which allowance may be made, are those paid incurred
before the time of discharge80 In other words, the wasted expenditure
incurred by the party bound to make restitution, would fall within
scope of the provision, but restitutionary costs would not (as those
would be incurred by the seller after the contract had been discharged).
As for the buyer, the set-up of the FCA pre-empts potential claims for
restitutionary expenses in returning goods. This is because, as noted
earlier, section 3(3) of the FCA does not allow a party to obtain
restitution for the particular goods but only their money equivalent.
However, restitutionary costs could still be incurred (like with the
seller) in accessing money. Yet, unlike the situation for the seller, the
Act does not expressly exclude the recovery of restitutionary costs. The
FCA leaves the amount of money the buyer must pay (as restitution) at
the discretion of the court.81 While the Act expresses factors that a
judge should particularly take into account, those factors are not
exclusive.82 Accordingly, it is quite possible that restitutionary costs
incurred by the buyer could be deducted from sellers restitutionary
remedy.
incur significant shipment expenses by returning a large quantity of

goods back to the seller. Also, if a party is obliged to make restitution in
money terms then he or she could incur expenses in accessing the
funds. This would occur for example if the partys bank requires a fee
to withdraw from the account. Domestic statute law in New Zealand
does not expressly deal with this issue where the contract is discharged
for breach.79 Therefore, the availability of restitutionary costs is a
matter for the common law. In contrast, if the contract is discharged
for impossibility, the FCA seems to exclude the recovery of
restitutionary costs incurred by a seller making restitution. The FCA
says that where the seller is obliged to make restitution only the
expenses for which allowance may be made, are those paid incurred
before the time of discharge80 In other words, the wasted expenditure
incurred by the party bound to make restitution, would fall within
scope of the provision, but restitutionary costs would not (as those
would be incurred by the seller after the contract had been discharged).
As for the buyer, the set-up of the FCA pre-empts potential claims for
restitutionary expenses in returning goods. This is because, as noted
earlier, section 3(3) of the FCA does not allow a party to obtain
restitution for the particular goods but only their money equivalent.
However, restitutionary costs could still be incurred (like with the
seller) in accessing money. Yet, unlike the situation for the seller, the
Act does not expressly exclude the recovery of restitutionary costs. The
FCA leaves the amount of money the buyer must pay (as restitution) at
the discretion of the court.81 While the Act expresses factors that a
judge should particularly take into account, those factors are not
exclusive.82 Accordingly, it is quite possible that restitutionary costs
incurred by the buyer could be deducted from sellers restitutionary
remedy.
However, if the CISG succeeded the SOGA, the FCA would not
apply.83 Therefore, recovery of restitutionary costs would be a matter
However, if the CISG succeeded the SOGA, the FCA would not
apply.83 Therefore, recovery of restitutionary costs would be a matter
79
The Sale of Goods Act 1908 (NZ) is silent on the matter.

Frustrated Contracts Act 1944 (NZ) section 3(2), emphasis added.
82 The Court has regard to all the circumstances: Frustrated Contracts Act 1944 (NZ),
section 3(3).
83 This is because this paper assumes that the CISG would be implemented as a domestic
code and proposes that a consequential amendment would be to exclude the application
of the FCA.
79
80
80
The Sale of Goods Act 1908 (NZ) is silent on the matter.

Frustrated Contracts Act 1944 (NZ) section 3(2), emphasis added.
82 The Court has regard to all the circumstances: Frustrated Contracts Act 1944 (NZ),
section 3(3).
83 This is because this paper assumes that the CISG would be implemented as a domestic
code and proposes that a consequential amendment would be to exclude the application
of the FCA.
151
151
for common law in all cases for contracts discharged for breach or
impossibility. Whether restitutionary costs should be allocated by
statute or left to judicial discretion is something the legislature may wish
to consider on reform of its sales of goods law. Further, Schlechtriem
and Schwenzers Commentary on the CISG 84 has provided some
guidance on restitutionary costs, which should be considered by either a
judge (if restitutionary costs are left to the common law), or parliament
(if it chose to regulate such costs by statute):
for common law in all cases for contracts discharged for breach or
impossibility. Whether restitutionary costs should be allocated by
statute or left to judicial discretion is something the legislature may wish
to consider on reform of its sales of goods law. Further, Schlechtriem
and Schwenzers Commentary on the CISG 84 has provided some
guidance on restitutionary costs, which should be considered by either a
judge (if restitutionary costs are left to the common law), or parliament
(if it chose to regulate such costs by statute):
It would seem appropriate for the innocent party to include

[restitutionary] costs in his damages calculation, while the other party
should bear his own costs. If the other party is exempt from damages
by virtue of Article 79, the innocent party must bear his own costs of
making restitution.85
It would seem appropriate for the innocent party to include

[restitutionary] costs in his damages calculation, while the other party
should bear his own costs. If the other party is exempt from damages
by virtue of Article 79, the innocent party must bear his own costs of
making restitution.85
If the legislature chose to regulate the availability of restitutionary costs

by statute then it may consider drafting a provision with a similar effect
to the following:
If the legislature chose to regulate the availability of restitutionary costs

by statute then it may consider drafting a provision with a similar effect
to the following:
(1) Subject to subsection (2) a party who is bound to make

restitution in accordance with this Act, may include
restitutionary costs in a damages claim.
(1) Subject to subsection (2) a party who is bound to make

restitution in accordance with this Act, may include
restitutionary costs in a damages claim.
(2) A party cannot include restitutionary costs under

subsection (1) if he or she is in breach of contract or if the
contract has been avoided because of an impediment under
Article 79.
(2) A party cannot include restitutionary costs under

subsection (1) if he or she is in breach of contract or if the
contract has been avoided because of an impediment under
Article 79.
D: Conclusion
D: Conclusion
The SOGA which was set up as a code is not fulfilling that original
objective. This is because over time, inadequacies with the SOGA have
arisen. As a consequence, other law supplements the SOGA for
example the general common law and the FCA. This paper concludes
that the CISG as a basis for a domestic code in New Zealand is
desirable. That way, the SOGA could be replaced with a more inclusive
code. Restitutionary remedies would be available under the one code.
The SOGA which was set up as a code is not fulfilling that original
objective. This is because over time, inadequacies with the SOGA have
arisen. As a consequence, other law supplements the SOGA for
example the general common law and the FCA. This paper concludes
that the CISG as a basis for a domestic code in New Zealand is
desirable. That way, the SOGA could be replaced with a more inclusive
code. Restitutionary remedies would be available under the one code.
84
85
Schlechtriem and Schwenzer, supra n. 16.

Ibid., p. 861.
84
85
Schlechtriem and Schwenzer, supra n. 16.

Ibid., p. 861.
152
(2006) 1 NZLSJ
152
(2006) 1 NZLSJ
This paper has discussed the key provisions relating to restitution in the
CISG and the current domestic law. It has pointed out various issues in
regard to restitution that should be considered if the CISG were to
succeed the SOGA in New Zealand. As noted throughout this paper,
there are substantial differences between the CISG and SOGA in
regard to restitutionary rights and obligations.
This paper has discussed the key provisions relating to restitution in the
CISG and the current domestic law. It has pointed out various issues in
regard to restitution that should be considered if the CISG were to
succeed the SOGA in New Zealand. As noted throughout this paper,
there are substantial differences between the CISG and SOGA in
regard to restitutionary rights and obligations.
The paper finds a number of problems with the current domestic law
that could be overcome if the CISG were used as a basis for a domestic
sale of goods code. Furthermore, while the CISG has some
disadvantages, this paper argues that those too could be overcome
through an adjustment to the principles in the CISG or drafting
separate provisions to apply alongside the CISG.86 Finally the paper has
addressed the gaps in the CISG and pointed out how they should be
dealt with.
The paper finds a number of problems with the current domestic law
that could be overcome if the CISG were used as a basis for a domestic
sale of goods code. Furthermore, while the CISG has some
disadvantages, this paper argues that those too could be overcome
through an adjustment to the principles in the CISG or drafting
separate provisions to apply alongside the CISG.86 Finally the paper has
addressed the gaps in the CISG and pointed out how they should be
dealt with.
This paper concludes that the CISG has a better regime to deal with
restitutionary rights and obligations than the current domestic law. It
would provide New Zealand with a more inclusive code. Moreover, if
the international and domestic law for sale of goods contracts are
eventually harmonised, then certainty and consistency in the law is
increased.
This paper concludes that the CISG has a better regime to deal with
restitutionary rights and obligations than the current domestic law. It
would provide New Zealand with a more inclusive code. Moreover, if
the international and domestic law for sale of goods contracts are
eventually harmonised, then certainty and consistency in the law is
increased.
Note that these would only apply in the domestic context. While there are still some
inadequacies at the international level, that issue is beyond the scope of this paper.
86
86
Note that these would only apply in the domestic context. While there are still some
inadequacies at the international level, that issue is beyond the scope of this paper.
153
Appendix: Restitution under the CISG
Appendix: Restitution under the CISG
Fundamental Breach of Contract
Fundamental Breach of Contract
Avoiding the Contract what are the restitutionary rights and obligations?
Avoiding the Contract what are the restitutionary rights and obligations?
Avoidance sought by buyer
Avoidance sought by buyer
Avoidance sought by seller
Has the buyer pre-paid any/all of

the amount due AND/OR
Have any/all of the goods been
delivered by the seller to the buyer?
Yes

delivered by the seller AND/OR
the amount due?
No
Yes
Yes
No
Other remedies may be

relevant.
Does an exception in
Article 82 apply?
Yes
Article 81. Buyer can avoid the
contract and seller can claim
restitution for goods and/or
buyer can bring a restitutionary
claim for pre-paid money
No
Can avoid contract and no

restitutionary claim is
relevant. Neither party
need perform
If goods have been delivered, can

the buyer return them in
substantially the same condition?
No
Article 81. Seller can avoid

the contract and bring a
restitutionary claim for any
goods delivered and/or buyer
can claim in restitution for
money paid to be refunded
Cannot avoid the Contract can

try for other remedies (Article
83)
Article 84: Buyer can claim
interest and/or seller can claim
for gains made from the goods
by buyer
153
Avoidance sought by seller

the amount due AND/OR
delivered by the seller to the buyer?
Yes

delivered by the seller AND/OR
the amount due?
No
Yes
Can avoid contract and no

restitutionary claim is
relevant. Neither party
need perform
If goods have been delivered, can

the buyer return them in
substantially the same condition?
Yes
No
Other remedies may be

relevant.
Does an exception in
Article 82 apply?
Yes
Article 81. Buyer can avoid the
contract and seller can claim
restitution for goods and/or
buyer can bring a restitutionary
claim for pre-paid money
No
No
Article 81. Seller can avoid

the contract and bring a
restitutionary claim for any
goods delivered and/or buyer
can claim in restitution for
money paid to be refunded
Cannot avoid the Contract can

try for other remedies (Article
83)
Article 84: Buyer can claim
interest and/or seller can claim
for gains made from the goods
by buyer
154
(2006) 1 NZLSJ
154
(2006) 1 NZLSJ

B Cisg H: R C Cisg D C B Cisg H: R C Cisg D C

Uploaded by

Copyright:

Available Formats

B Cisg H: R C Cisg D C B Cisg H: R C Cisg D C

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

B Cisg H: R C Cisg D C B Cisg H: R C Cisg D C

Uploaded by

Copyright:

Available Formats

BRINGING THE CISG HOME:

RESTITUTIONARY C ONSIDERATIONS FOR THE CISG

BRINGING THE CISG HOME:

New Zealand became a party to the United Nations Convention on

New Zealand became a party to the United Nations Convention on

The CISG has an inclusive set of remedies (including restitutionary

The CISG has an inclusive set of remedies (including restitutionary

LLB, Candidate for LLM, Victoria University of Wellington.

LLB, Candidate for LLM, Victoria University of Wellington.

The New Zealand Law Students Journal

The New Zealand Law Students Journal

SOGA which was intended to be a code is not fulfilling that original

SOGA which was intended to be a code is not fulfilling that original

The structure of this paper is as follows: Part A will examine the

The structure of this paper is as follows: Part A will examine the

Restitution under the CISG in the Domestic Context

Restitution under the CISG in the Domestic Context

Next, Part C will discuss what issues in relation to restitution should be

Next, Part C will discuss what issues in relation to restitution should be

A: Restitution Under the CISG

A: Restitution Under the CISG

The CISG allows restitution for a failed contract under Section V

The CISG allows restitution for a failed contract under Section V

However, the right to avoid the contract is conditional. Articles 49(2)

However, the right to avoid the contract is conditional. Articles 49(2)

Avoidance prima facie releases both parties from further obligations to

Avoidance prima facie releases both parties from further obligations to

However, despite the parties being free from future obligations,

However, despite the parties being free from future obligations,

The New Zealand Law Students Journal

The New Zealand Law Students Journal

unnecessary detriment as a result of the contract being avoided. Article

unnecessary detriment as a result of the contract being avoided. Article

[a] party who has performed the contract either wholly or in

[a] party who has performed the contract either wholly or in

This provision allows a party to seek a restitutionary remedy according

This provision allows a party to seek a restitutionary remedy according

Avoiding the contract has another condition in addition to the time

Avoiding the contract has another condition in addition to the time

In conclusion, if a party is in breach of contract, the other party may

In conclusion, if a party is in breach of contract, the other party may

Restitution under the CISG in the Domestic Context

Restitution under the CISG in the Domestic Context

avoiding the contract. Furthermore, the restitutionary rights set out in

avoiding the contract. Furthermore, the restitutionary rights set out in

Another situation in which restitution may become relevant is where

Another situation in which restitution may become relevant is where

Article 79 exempts a party from performing his or her obligations

Article 79 exempts a party from performing his or her obligations

Peter Schlechtriem and Ingeborg Schwenzer (eds) Commentary on the UN Convention on

Peter Schlechtriem and Ingeborg Schwenzer (eds) Commentary on the UN Convention on

The New Zealand Law Students Journal

The New Zealand Law Students Journal

The operation of Article 79 is therefore problematic. Avoidance

The operation of Article 79 is therefore problematic. Avoidance

Suppose for example, a seller is obliged to manufacture and supply

Suppose for example, a seller is obliged to manufacture and supply

3. Restitutionary Damages for Unjust Enrichment