A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. (CISG 1980)
One of the parties suffers damages due to a breach of contract. The breach becomes fundamental when it is due to the other parties fault. This article could be interpreted as to whether or not the breaching party was ‘guilty’ of any form of neglect which caused the damages. If they could have prevented the damages, by handling reasonably, they are guilty of a fundamental breach of contract.
Tribunal: Court of Arbitration of the ICC
Case#: 7531 of 1994
Seller’s Country: China (defendant)
Buyer’s Country: Austria (claimant)
Goods involved: Scaffold fittings
Summary of the case:
The plaintiff bought 80.000 scaffold fittings from the Chinese seller. Upon delivery it turned out a substantial amount of the fittings were of bad quality. The buyer was only able to sell the goods partially and at a reduced price. Sorting out the good ones from the bad ones would have added an estimated third of the purchase-price. The Tribunal ruled in favour of the plaintiff as ‘an important part’ of the fittings did not conform to the sample which therefore resulted in a fundamental breach of contract.
What was the effect of Article 25:
It was proven that the plaintiff had suffered substantial damages due to the breach of contract. This enabled him to use art 25 and sue for damages.
(1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. (2) Except where the parties have agreed otherwise, the goods do not conform with the contract...