If the contract in question is one that, according to Chapter 22, qualifies as commercial and dynamic (as contrasted with the “civil” or static type), the remedies for its breach should compensate the innocent victim (also known as the “the aggrieved party”1) as quickly and closely to the moment of the actual or “anticipatory” breach as possible, thereby stimulating the constant flow of commerce.2 This is not what would happen if the remedy were that of Article 376 of the Mexican Commercial Code: “In commercial sale agreements, once the contract is perfected, the complying party will have the right to claim [in court] from the non-complying party, the rescission or performance of the contract, and compensation and damages.”3
According to this provision, the only party entitled to terminate the contract and seek damages is he who complies with the contract by performing his side of the bargain. If that party is the seller, he must deliver what he sold; if he is the buyer, he must pay for what he bought. Having so performed, the aggrieved party may claim, in court, the termination of the contract and the damages.4 Thus, during the entire period of non-compliance, and while an aggrieved party wearily weighs the consequences of complying with a breached contract, valuable goods, services and payments remain in legal and transactional limbo, unused and unproductive.
It should not be surprising if very few if any aggrieved parties would be willing to comply with their contractual obligations once the other party failed to perform his. All that Article 376’s requirement of compliance by the aggrieved party does, then, is to freeze the breached or certain-to-be-breached transaction with the attendant and accumulating economic losses.5
A commercially-inspired remedy then would require that the aggrieved party be allowed to terminate the contract without having to be involved in a lengthy and costly judicial proceeding. If he is the seller, he would be able sell what the original buyer did not buy to another buyer and claim the difference between the price of the original and 1194breached contract and that of his resale and in doing so he has the duty to mitigate the breaching party’s damages.6 The same would remedy would be applicable mutatis mutandis to the aggrieved buyer. In broad terms, this is the approach of the Vienna Convention on the International Sale of Goods (CISG)7 and the sections of the U.C.C. that follow.
As was also discussed in the preceding chapter, the current international remedial trends, then, are open to extrajudicial remedies, such as mediation, arbitration and express or implied resolution of contracts by the parties. We will now discuss the U.C.C. remedies related to judicial and extrajudicial resolution of contracts. Subsequently we will discuss counterpart remedies in civil law systems. The reader might be well advised to revisit Chapter 2’s discussion of Holmes’ bad man of contracts with the role of archetypal commercial transations in the formation, interpretation and remedies of the law of commercial contracts.8
§ 2–609. Right to Adequate Assurance of Performance
(1) A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.
(2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.
(3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.
(4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.
§ 2–610. Anticipatory Repudiation
When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may
(a) for a commercially reasonable time await performance by the repudiating party; or
(b) resort to any remedy for breach (Section 2–703 or Section 2–711), even though he has notified the repudiating party that he would await the latter’s performance and has urged retraction; and 1195(c) in either case suspend his own performance or proceed in accordance with the provisions of this Article on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (Section 2–704).
§ 2–701. Remedies for Breach of Collateral Contracts Not Impaired
Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this Article.
Contrary to Justice Holmes’ assumption that all the common law requires from the party who has chosen to breach a contract is the payment of damages, Section 2–609 imposes an obligation not to impair “the other’s expectation of receiving due performance.” Hence, “when reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance.” Clearly, this duty to provide assurances of performance would not have been required if the contracting party’s duty were merely that of paying damages for his chosen breach.
The enforcement of the duty to provide assurances of performance starts out extrajudicially but can be subsequently pursued in court and can include damages beyond those discussed in the common law decisions relied upon by Justice Holmes.9
According to Section 2–609 of the U.C.C., this extrajudicial claim coexists with the suspension of performance by the party that has reasonable grounds for insecurity; and, as just noted, it may then be followed by a unilateral and extrajudicial termination of the contract. Consider the following example: Buyer “C” purchases 100 computers [on] credit (with a small down-payment) from an intermediate Seller “S” who purchases them from a third party, the producer “P.” C gives S a check for ten percent of the total price as a partial payment of the transaction. The bank dishonors payment of the check due to insufficient funds. This situation gives S grounds for insecurity with respect to C’s performance, grounds that are serious and reasonable. Thus, it would be unfair to force S to enter into the obligation with P, unless C is able to give him adequate assurance of his performance. Consequently, S would suspend his performance until he receives this assurance.10
Another situation that can lead to a claim for adequate assurance of performance is where an intermediate “X” finds out that producer “P” has been delivering defective products to brokers “C” and “D.” Additionally X finds out that his exclusivity agreement is not being honored by P who has sold the same product to other intermediates in the area where he has exclusive distribution. These facts can be 1196reasonable grounds for X to claim adequate assurance from P and eventually terminate the contract.
The element of reasonableness has to take into consideration the type of contract, as well as the rights and obligations stipulated in it.11 For instance, if it is a CIF12 sale agreement (or any other “documentary agreement” in which payment is due not upon delivery of the goods but the documents), the buyer cannot suspend payment until he inspects the goods based on rumors about their bad quality. Given that payment is due upon delivery of documents, it would be contrary to the CIF terms to hold an inspection of the goods prior to payment.
On the other hand, in an ordinary sale or non-documentary sale, where the seller has a good reputation in the market, his verbal assurance to fix the defective products could be sufficient. Therefore, the standard used for this remedy is not that of subjective fear but one which results from an objective or commercially-reasonable evaluation, taking into consideration the type of contract, the course of dealing between the parties, and usages of the trade. As with the market standard of fairness so often referred to in this book, the “insecure” party must place himself in the position of a regular participant in that type of transaction (“the other”) and inquire whether such a person would reasonably require assurances. This remedy, as well as its U.C.C. Article 2 companions, reflects the dynamic nature of contemporary commercial contract law. Can you see how and why?
If a contracting party is certain that the other party will not perform, he can claim the second of the above-transcribed remedies. U.C.C. § 2–610 grants an action for extrajudicial termination of the contract against a defendant’s anticipatory repudiation. This action is intended to terminate the duty to carry out performances not yet due. However, for the anticipatory repudiation to be effective against the defendant, it has to be easily and clearly proven. Additionally, plaintiff has to prove that he will be substantially impaired as a consequence of the non-performance of the other party.
U.C.C. § 2–610 requires an overt communication of intention or an action by the repudiating party that renders performance impossible or demonstrates a clear intention not to continue to perform or counter-perform.13 In measuring the seriousness of non-performance, how would a request from the supposedly breaching seller, say, for a higher price or an increase in the volume of the agreed-upon goods or services be characterized? Could this request be considered an objective indication of repudiation?
According to the Official Comment 2 of this Section, this would not in itself be considered repudiation. However, it will be repudiation if such request for a higher price or an increase in the volume of performance includes a statement that the requesting party will not continue to perform unless the difference in the price is paid or the additional volume of the performance is granted. The remedies aforementioned 1197and especially their interrelation are illustrated in the following decision, which has 1309
been considerably reduced in length from its original full version but still contains a succinct catalogue of the U.C.C. Article 2 remedies.
AMERICAN BRONZE CORPORATION, APPELLEE, v. STREAMWAY PRODUCTS, APPELLANT14
No. 44828
Court of Appeals of Ohio, Eighth Appellate District, Cuyahoga County 8 Ohio App. 3d 223; 456 N.E.2d 1295; 1982 Ohio App. LEXIS 11256; 8 Ohio B. Rep. 295; 37 U.C.C. Rep. Serv. (Callaghan) 687
December 16, 1982, Decided
DISPOSITION: Judgment reversed and remanded on counterclaim.
SUMMARY: Defendant-customer filed a counterclaim against plaintiff-producer alleging that the producer breached its contract to construct for and deliver to the customer a stated number of bronze castings. The producer had filed suit to recover funds due on account. A trial court, Cuyahoga County (Ohio) determined that the producer had not breached the contract and was entitled to the funds due, and the customer appealed to this court.
The defendant-customer contended that the parties entered into three binding contracts and that the producer repudiated the binding agreements; that the producer’s refusal to perform was an anticipatory repudiation of the contracts; that the producer terminated the contractual relationship and in so doing failed to give reasonable notice; that the producer was bound to the contracts after receiving adequate assurances of performance from the customer; and that the producer breached the contract.
The court held that (1) the parties entered into the three contracts at issue; (2) the producer anticipatorily repudiated the contracts and became liable to the customer; (3) the action taken by the producer was not “rescission” as defined by the Ohio Uniform Commercial Code (U.C.C.), Ohio Rev. Code Ann. § 1302.12; (4) the producer did not “terminate” the contractual relationship because the contracts were for a definite duration so were not subject to termination pursuant to Ohio Rev. Code. Ann. Section 1302.22(B); (5) the producer was not entitled to unilaterally breach the contract; and (6) when the producer repudiated the contracts, the customer was free to pursue its remedies under the Ohio U.C.C.
OUTCOME: The trial court erred in its conclusions of law, so the judgment was reversed and remanded on the customer’s counterclaim.
OPINION BY: PRYATEL
FINDINGS OF FACTS
Streamway, the defendant-customer, called in orders from American, plaintiff-producer, and then confirmed through written purchase orders. From November 21, 1979 to January 3, 1980, American partially performed—meaning that they only delivered part of the products they had promised to deliver.
On January 17, 1980, American’s Vice-President, in a telephone conversation, informed Streamway’s Plant Manager and Streamway’s President that American would no longer accept new Purchase Orders from Streamway but that American would produce all open orders then in existence. American requested adequate assurances from Streamway in order to continue production of castings. The assurances requested were bringing their account current, paying future invoices within ten days, arriving at an agreed price for scrap returned, and holding American harmless for any failure to produce the castings. Streamway, on January 18, 1980, delivered a check in excess of $66,000.00, which brought its account current with American.
On January 14, 1980, Streamway had placed an order, before American’s Vice-President informed them of their decision not to accept new purchase orders. On January 18, of that same year, American returned said order refusing to produce the requested castings. On January 24, 1980, American informed Streamway that they would not produce the castings which were on open order, and in addition, that they had melted down any of the castings which had been previously produced for said open orders. As a result of this information Streamway placed orders with another company to cover for said castings. This lead to the following additional costs: difference in price—$16,301.30; cost to Streamway in converting some castings—$2,374.11; cost of retooling—$2,970.00; and other miscellaneous costs—$3,500.00. The total cost incurred by Streamway as a result of American’s alleged anticipatory repudiation was twenty-five thousand one hundred forty-five dollars and forty-one cents ($25,145.41).
The trial court held that American had not breached any of the contracts because it was not a commercially unreasonable period of time, from November 21, 1979 to January 24, 1980, for American to unilaterally rescind its acceptance of part of the purchase orders, and the totality of the final purchase order. There being no breach of contract, Streamway had no right to damages. Judgment was granted on the complaint in favor of American in the sum of $9,489.64, with statutory interest at the rate of 8% per annum from December 3, 1981, and against Streamway with costs to Streamway.
STREAMWAY’S ALLEGATIONS
Streamway appeals citing three assignments of error. First, that American’s refusal to perform was an anticipatory repudiation of the contracts. Although “anticipatory repudiation” is not defined in Ohio’s Revised Code, the case law and official comments to the Ohio Revised Code Section 1302.68 provide a detailed definition. “Anticipatory repudiation” occurs where one party “repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other.” On this issue we have to mention the case Columbia Gas Transmission Corp. v. Larry H. Wright, Inc. (S.D. Ohio 1977), 443 F. Supp. 14, 21 and the Official Comment 1 to R.C. 1302.68 that states: “anticipatory repudiation centers upon an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance.”
In the case at hand, American’s Vice-President, Gerald Goldstein, unequivocally stated on January 24, 1980 that from that moment American would not perform any further on the three contracts and in fact had melted down those units already produced. Consequently, Streamway then rightfully removed the tooling necessary to produce these parts. The value of the contracts to Streamway was substantially impaired in that a new producer of the parts had to be found at substantial cost to Streamway. Therefore, American anticipatorily repudiated these contracts … The total cost incurred by Streamway as a result of American’s actions was $25,145.41.
Nevertheless, the trial court concluded as a matter of law that American rescinded these contracts within a commercially reasonable time, thus causing no breach of the contracts. These conclusions are erroneous. The action taken by American was not “rescission” as defined by the Ohio Uniform Commercial Code. The Official Comment 3 to R.C. 1302.12 defines “rescission” as including “abandonment or other change (in the contractual relation) by mutual consent” (parenthesis added); it does not include unilateral termination or cancellation in the concept of rescission.
FINDINGS OF LAW
The trial court held that American had not breached any of the contracts because it was not a commercially unreasonable period of time, from November 21, 1979 to January 24, 1980, for American to unilaterally rescind its acceptance of part of the purchase orders, and the totality of the final purchase order.
I. Termination and Repudiation
We cannot agree to this categorization of American’s acts. What American did was to unilaterally terminate its contracts with Streamway. This termination is explicitly defined in R.C. 1302.01(A) (13) as occurring “when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach”. This is supplemented by the language of R.C. 1302.22(B) and (C) and with the Official Comments 7 and 8 to those sections stating that “termination” deals with contracts indefinite in duration. The contracts in the instant case were for a definite duration, an inherent characteristic to the production of a specific number of units; therefore these contracts are not subject to termination as provided in R.C. 1302.22(B).
The R.C. Section 1302.22(B) and (C) and with the Official Comments 7 and 8 provide that:
Section 1302.22
(B) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.
(C) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.
Official Comments
7. Subsection (2) applies a commercially reasonable view to resolve the conflict which has arisen in the cases as to contracts of indefinite duration. The “reasonable time” of duration appropriate to a given arrangement is 1200limited by the circumstances. When the arrangement has been carried on by the parties over the years, the “reasonable time” can continue indefinitely and the contract will not terminate until notice.
8. Subsection (3) recognizes that the application of principles of good faith and sound commercial practice normally call for such notification of the termination of a going contract relationship as will give the other party reasonable time to seek a substitute arrangement …
American’s actions in repudiating the contracts in the case sub judice led to Streamway’s removal of its tooling on January 24, 1980 … Repudiation of a contract by one party leaves the other free to cancel and resort to its remedies for breach. In Pillsbury Co. v. Ward (Iowa 1977), 250 N.W. 2d 35, 41, the buyer unreasonably extended the date for delivery (and collection) of the sold goods, thus reducing the value of the contract to the seller. This was found to constitute a repudiation of the contract and to entitle the seller to cancel and resort to his remedies for breach. In the instant case, American refused to perform further under these contracts thus allowing Streamway to cancel and resort to its extrajudicial remedies under R.C. 1302.85, including “cover” (substitute purchases) as defined in R.C. 1302.86. Accordingly, Streamway’s first assignment of error is sustained.
On its relevant parts the R.C. 1302.85 reads:
Section 1302.85
(A) Where the seller fails to make delivery … or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, … as provided in section 1302.70 of the Revised Code, the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid:
(1) “cover” and have damages under section 1302.86 of the Revised Code as to all the goods affected whether or not they have been identified to the contract; or
(2) recover damages for non-delivery as provided in section 1302.87 of the Revised Code.
The R.C. 1302.86 defines the remedy to “cover” as:
Section 1302.86
A) After a breach within the preceding section, the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
(B) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as defined in section 1302.89 of the Revised Code, but less expenses saved in consequence of the seller’s breach.
II. Adequate Assurance
The trial court erred in concluding, as a matter of law, that the defendant was justified in unilaterally rescinding the contracts with appellant after receiving adequate assurances of performance from the appellant. Streamway here argues that 1201American was bound to these contracts after receiving adequate assurances of performance from Streamway.
Under R.C. 1302.67, either party may require adequate assurances of performance from the other when there are reasonable grounds for insecurity. According to Section (B), between merchants, the reasonableness of the grounds for insecurity as well as the adequacy of the assurances offered will be determined according to commercial standards, including the obligation of good faith. Furthermore, the reasonableness of the grounds for insecurity is a question of fact.
In the instant case, American asked for assurances of performance in the form of payment of all outstanding accounts, payment of all new accounts within ten days of delivery, a new policy on return of scrap metal … One day after this request, Streamway tendered a check in full payment of its past due accounts and agreed to pay all future invoices within ten days of delivery. American in return agreed to produce all open orders then in existence. The reasonableness of this request is not contested, only the adequacy of the assurances given is in issue.
As a matter of law, the trial court held these assurances to be adequate but that American was still justified in unilaterally rescinding the contract. We agree that the assurances given were commercially reasonable to insure Streamway’s performance, but we cannot agree that American was still entitled to unilaterally breach the contract. Having received adequate assurances, American was bound to perform and its failure to do so rendered it liable to Streamway. Accordingly, Streamway’s second assignment of error is sustained.
The trial court’s judgment is reversed …
Professors Luis Díez Picazo and Antonio Gullón summarize the following remedies with respect to the ineffectiveness of contracts:
Following the regulations of the Spanish Civil Code, a contract can be declared:
1) Absolutely null. It is the maximum penalty provided by the legal system, because it disallows the transaction to have any legal consequences. As a distinct legal category, in some case law and doctrine it is contrasted with the non-existence of the contract;
2) Annullable. It brings about a relative ineffectiveness of the agreement, and is characterized by the fact that the contract produces effects from the moment of its perfection… But these effects are relative, because an action for annulment will render the transaction ineffective, or, conversely, if the parties confirm the transaction by their words or conduct it will render it effective; similarly, the expiration of the statute of limitations for bringing an action for nullity will render it effective;
3) Rescindable. Rescission is a supervening ineffectiveness of a contract which has all of its essential elements and fulfills all the requirements that are particular to that type of contract. But, because of the harm that the contract inflicts on protected parties, the legal system grants an action (action of rescission) to cease its effectiveness. One of its outstanding features is that it is an action in extremis because it is given only when no other remedies are available.
Apart from these categories there are others such as resolution (for non-performance), revocation (for example, a donation that is revoked because of an ungrateful beneficiary) and reduction, which entails a partial loss of the contractual goods (e.g., a donation that affects forced heirship assets). In all of these cases, there is a total or partial termination of the transaction as a result of supervening events …15
As indicated in earlier chapters, in order to avoid a purely semantic conflict, the term “termination” (instead of “rescission”) is used in this book as the English equivalent for the Spanish and Latin American law “resolution.” Rescission will be used only when applicable to cases of what the French, Spanish and Latin American civil codes (and exceptionally some commercial codes) refer to as lesion or the U.C.C. refers to as unconscionability.16
With regard to the above categorization, how do the remedies described by Justices and Professors Luis Díez Picazo and Antonio Gullón compare to the ones described in the American Bronze decision? It should be recalled that in that decision the following remedies were discussed: 1) adequate assurance; 2) extrajudicial resolution as a result of anticipatory repudiation; 3) termination of the contract; 4) rescission; 5) substitute performance or cover; and 6) damages resulting from the substitute purchases. Apart from these remedies, Section 2–106 (4) of the U.C.C. adds the remedy of “cancellation”: “ ‘Cancellation’ occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of “termination” except that the canceling party also retains any remedy for breach of the whole contract or any unperformed balance.”17
Which of the above remedies require judicial intervention and which do not?
When Díez Picazo and Gullón refer to resolution as a remedy, do they include in this remedy the following situations? 1) Seller “X” affected by buyer “B’s” non-performance decides to resell the goods previously sold but undelivered to B to a third party “C.” After this resale, X claims from B payment of the difference in the price from the original price of sale and that of the sale to C, and assuming that this price is lower than the original price of sale, then he claims the difference in price plus interest for the time of sale until its collection; or 2) Seller “A” affected by buyer “B’s” non-performance determines the market price of the sold good at the time of breach and then claims payment to B for the difference between the price of a hypothetical sale at the time of breach and the contractual price plus interest. If these situations are not considered as part of the Spanish concept of resolution, are they likely to be included under the same remedy in the Spanish and Latin American remedial systems?
DECISION of OCTOBER 20, 1994, Civil Decision 7491. The Supreme Court orders dismissal of the appeal.
By: Honorable Mr. D. Gumersindo Burgos Pérez de Andrade
POINTS OF LAW AND AUTHORITIES
FIRST—This appeal was brought before the court on the basis of three arguments; the first two were made … under former Section 4, Article 1692 of the Law of Civil Procedure (Ley de Enjuiciamiento Civil), and were dismissed in the proceedings below because they did not fall within the scope of said Section; therefore all allegations were reduced to the alleged violation of Article 1124 of the Civil Code … According to the appellant, this provision allows him to unilaterally terminate reciprocal obligations when one of the parties believes that the other party has stopped performing as stipulated, even when the latter believes otherwise and opposes the intended resolution—or, in other words, the unilateral will of a party in a reciprocal obligation is sufficient to declare the resolution of an obligation, rendering judicial intervention unnecessary, despite the argument of the other party.
This position, if accepted, would render unnecessary the provision of Article 1256 of the said code, leaving all contractual dealing without substance, because the mere opinion of one of the parties would be enough to breach any agreement, alleging as an excuse that the other party has not performed as agreed. The right to the resolution of obligations is implicit in all reciprocal obligations, but only Courts have the right to order such resolution upon the claim of a party against the opposition of the other; and this order will only be granted based on the following evidence: non-performance of the defendant and the full performance by the plaintiff. Case law is vast and unanimous in this issue, … holding that the declaration of resolution enclosed in a telegram dated August 21, 1987 was not accepted by the plaintiff, who opposed it through notarial summons on August 28 of that same year, and through the filing for injunctive relief on the following month of September, which resulted in a favorable decision on November 21, 1987.
The document dated December 19, 1987, in which repossession was agreed, did not include the waiver that the appellant was seeking, but rather the complete opposite. And never has the appellant correctly proven the alleged non-performance of the other party; furthermore, the opposite of that is presumed …
For all the previous reasons, the only allegation that was admitted to this process is dismissed, thus dismissing the entire appeal and costs are on the appellant … and the deposit granted forfeited …
As with Article 376 of the Mexican Commercial Code, in order to obtain the resolution of a contract for non-performance, the plaintiff in this case must show that he has fully performed. Additionally, Spanish courts hold that such a decision can only be granted by the courts themselves, meaning that the aggrieved party cannot extrajudicially terminate the contract. Can you see how this remedy is an outgrowth of the static ceremonial native of civil contracts? How much influence does Article 1124 of the Spanish Civil Code have on the availability of this remedy not only in Spain but in Latin American nations such as Mexico.19
Article 1124: The right to the resolution of obligations is implicit in all reciprocal obligations where one of the parties does not perform what is stipulated.
The aggrieved party may choose to claim specific performance or resolution of the obligation, with damages and interest in both cases. Even after the aggrieved party has chosen specific performance, if performance becomes impossible, he may also claim resolution….20
According to the Spanish Supreme Court, the only way to interpret this provision is by denying the possibility of extrajudicial resolution; if not, then it would be: “[[L]eaving all contractual dealing without substance,] because the unilateral opinion of one of the bound parties would suffice to leave unfulfilled any agreement, with the pretextual argument that the counterparty has incurred in breach of contract.”21
What is the basis used by the Supreme Court in order to affirm that if extrajudicial resolution is allowed, it would “leav[e] all contractual dealing without substance”? Is this argument of an empirical or a dogmatic nature? If it were empirical, then this affirmation obviously disregards the day-to-day contractual life in Germany, Italy, the U.S. and other countries. If it were dogmatic, what is the dogma that supports it? Would it be the judicial monopoly over all contractual non-performance disputes? If so, why aren’t the following commercial legal institutions considered illegal? Bankers’ set-offs of reciprocal debts in clearing houses or with amounts on deposit by their customers; or the right to retain possession of assets granted to carriers, innkeepers and other suppliers of services when their clients fail to pay for their services—a right that presupposes a prior unilateral resolution of the contract by the obligee. Finally, one has to question the assumption made by the Supreme Court in its analysis of the contracting parties’ conduct. Did it assume the contracting parties’ good or bad faith? Did it assume the aggrieved party’s bad faith?
Number 1637, February 13, 1964
Plaintiff: Pedro J. González
Opinion by: Minister Agustín Mercado Alarcón
If the defendant executes a contract agreeing to transfer a piece of land to the state government and then transfers it to a private party, the defendant will be criminally guilty of embezzlement. He is not excused from such a crime by alleging that he acted the way he did because the state government did not perform according to the draft of the contract and that he does not consider himself bound to such a document, and for this reason he transferred the land at issue to another party.
The fact that the state government as an entity and acting in its private capacity did not perform its contractual obligations does not give the defendant the right to consider the contract as terminated, nor does it allow him to transfer the rights at issue. The defendant has the right to file the corresponding claim before a judicial authority in order to obtain the termination or the non-performance of the contract; therefore, until the time a court decision is granted, the defendant-seller has no right to transfer the piece of land to another person. Even when in the contract it was established that it was a “draft of the contract,” from its wording and the fact that it is 1205not subject to any subsequent approval by the defendant or any other party, it is hence clear that it is not a draft but the contract itself.
The fact that the contract was not recorded at the Real Property Public Registry only means that it has no effects against third parties; the contract binds the parties to perform in accordance with the provision of Article 3003 of the Civil Code of the State of Baja California. Finally, with regard to the defect of its form in that the contract was not granted in a public deed, this does not mean that the contract is null and void, but rather that it grants the parties the right to claim to the other that the contract be granted in a public deed, without diminishing the rights and obligations stipulated therein.
Mexican law and other civil-law jurisdictions allow contractual clauses that expressly terminate the agreement upon the happening of certain acts or events. In principle, this clause should bring about a unilateral termination of a contract upon non-performance of a party. However, decisional law is far from unanimous among Mexican state courts; one state supreme court may hold that the clause is self-executing and does not require a judicial order, while another may state that it does not matter if the contract allows the parties to rescind the contract under certain circumstances, because there is always the need for judicial intervention.
The following decision by another Mexican appellate court illustrates how, in some cases, judicial intervention would in the opinion of this court not be required:
In accordance with the provision of Article 1949 of the Civil Code of the State of Guerrero … the right to terminate is implicit in reciprocal obligations, where one of the parties does not perform what is stipulated; that is why the doctrine refers to this right to resolution as an implied pactum commissorium, because it is implied and understood as part of bilateral contracts. However, there is also an express pactum commissorium, where the parties stipulate this right as part of the contractual covenants and it is considered legal, because, according to Articles 1832 and 1839 of the cited civil code, in matters of contracts the will of the parties is the supreme law, because they can include the covenants that they deem convenient, apart from the fact that in civil contracts each party binds itself to the terms and conditions that it intended to be bound to. Following this line of thought, contrary to what happens with the implied pactum commissorium, in the case of an express clause of resolution the contract can be resolved or automatically terminated by the mere non-performance of one of the parties; i.e., by the fact that in practice some of the stipulated causes for rescission can be updated without requiring court intervention to that effect; in other words, as a result of the express pactum commissorium, the contracting parties have the right to rescind the contract by and before themselves where one of the parties has failed to perform their contractual obligations. Second Collegiate Court of the Twenty First Circuit.23
Compare the following decision by Mexico’s Second Collegiate Court of the Seventeenth Circuit:
Articles 1745 to 1751 and 1684 to 1691 of the Civil Code of the State of Chihuahua do not imply that the pactum commissorium has the effect of allowing the contracting parties to unilaterally rescind the contract upon non-performance; instead, they require that a judicial authority determine if the rescission of the contract is adequate or not. Second Collegiate Court of the Seventeenth Circuit.24
Section 326 of the BGB, in effect until the 2002 amendments of the BGB,25 influenced the drafting of Articles 48 and 49 et. al. of the CISG and Article 7.3.1 of the UNIDROIT Principles and were applied in the following decisions by German appellate courts. Its 2002 amendment will be transcribed thereafter.
Section 326 of the BGB:
If, in the case of a mutual contract, one party is in default in performing, the other party may give him a reasonable period within which to perform his part with a declaration that he will refuse to accept the performance after the expiration of the period. After the expiration of the period he is entitled to demand compensation for non-performance, or to withdraw from the contract, if the performance has not been made in due time; the claim for performance is barred. If the performance is only partly made before the expiration of the period, the provision of § 325 (1) sent. 2 applies mutatis mutandis. If, in consequence of the default, the performance of the contract is of no use to the other party, such other party has the rights specified in (1) without giving any period.26
FACTS
On March 29, 1989, plaintiff bought from defendant (a car and yacht dealer) a yacht and a trailer for DM 42,500. Plaintiff knew that defendant had to import the yacht from the U.S. According to the sales contract, defendant had to deliver the yacht in eight to ten weeks. Ultimately, defendant was able to deliver the yacht on August 5, 1989; defendant had delivered the trailer in July 1989. Also on March 29, 1989 plaintiff authorized defendant to sell his car for at least DM 65,000. Plaintiff paid defendant the 1207difference between the purchase price of the yacht and the price for the car, namely DM 22,500, on March 30, 1989. On July 26, 1989, plaintiff told defendant that he had revoked the sales contract of the yacht because he had not received any notice when the yacht would be delivered.
Plaintiff argued that he was entitled to terminate the contract because defendant had told him several times before that he was not going to be able to determine when he would be able to deliver the yacht. He further argued that defendant knew that he, the plaintiff, intended to use the yacht for a family vacation in July 1989. Accordingly, he had told the defendant on July 13, 1989 that he should provide a yacht at least on July 20, 1989. This deadline and also several calls by plaintiff’s brother-in-law until July 26, 1989 did not produce any positive results. Essentially, the plaintiff claimed reimbursement of the purchase price of DM 42,500.
REASONING AND HOLDING OF THE BUNDESGERICHTSHOF
The Court of Appeals (Oberlandesgericht) found that under Section 326 of the BGB, plaintiff was entitled to terminate the sales contract for the yacht. Thus, the defendant had the obligation to reimburse the purchase price (Sections 346 and 347 of the BGB). According to the sales contract, defendant was obliged to deliver the yacht within the first half of June 1989. At least at the beginning of July, plaintiff could have expected that defendant would inform him of a precise date of delivery. Plaintiff’s reaction on July 13, 1989 had to be interpreted as a demand for delivery. Consequently, defendant was in default of delivery. With his appeal, defendant is not questioning that his obligation was due and that he was in default.
The Bundesgerichtshof pointed out that a further requirement for a lawful revocation of a sales contract, and consequently for reimbursement or damages to the revoking party under Section 326 Abs. 1 of the BGB, is that the obligee grants the obligor an additional period (“Nachfrist”)28 to perform his obligations. In combination with this period, the obligee also has to warn that he will reject the performance after the granted period lapses.
The Court of Appeals ruled that in the case at bar, plaintiff did not have to comply with this requirement because the defendant refused several times to name a precise date of delivery. According to the Oberlandesgericht, the grant of an additional period to perform would not have changed the situation because defendant did not know when his supplier in the U.S. could deliver the yacht to him. Thus, plaintiff must have been allowed to clarify the situation by revoking the contract without a Nachfrist. It would have been unfair to plaintiff if defendant were still entitled to deliver the yacht even after plaintiff’s vacation had started.
The Bundesgerichtshof stated that this finding of the Oberlandesgericht was erroneous because plaintiff had to comply with all of the requirements of Section 326 Abs. 1 of the BGB. Thus, he should have granted defendant an additional period to perform and stated that after the lapse of this period he would reject the performance. Only if defendant had refused to perform in due time or within a suggested reasonable time would the additional period not have been required. Under those circumstances, the grant of an additional period to perform makes no sense because the obligor does not need a second chance to perform. In such a case, the obligee would have the rights 1208under Section 326 Abs. 1 of the BGB, without granting an additional time, to revoke the contract (with reimbursement) or to claim damages for non-performance.
In the instant case, defendant did not refuse to perform. He did not even refuse to inform of the date of delivery. He simply said that he was not able to answer this question due to his own lack of information as to when his supplier in the U.S. would deliver. The Bundesgerichtshof stated that there could be one other reason why plaintiff might not have been required to grant a Nachfrist which the Oberlandesgericht failed to examine: where delivery of the yacht was made after plaintiff’s vacation, when it would no longer be of interest to him.
The case was remanded.
In this case, the Court of Appeals interpreted that Section 326 of the BGB would apply only if there were no anticipatory repudiation, as it is known under the U.C.C. In other words, it is not required that a party allow for an additional time period to perform if the other party has unequivocally shown his repudiation of the contract, and the aggrieved party wants to suspend performance of his own obligations and proceed as if the other party had breached. However, according to the German Supreme Court, the BGB requires previous notice and an additional time period to perform, even when there are signs of possible repudiation of the contract. It would be useful to determine how the Nachfrist is formulated under the United Nations Convention on Contracts for the CISG. Is its regulation similar to that of the above German decision, or is it more similar to the U.C.C.’s anticipatory repudiation? How is this legal concept regulated under the UNIDROIT Principles and the European Principles for Contracting?
FACTS
Defendant-seller was a car dealer in Vienna. Defendant entered into a sales contract for a sailing ship with Plaintiff-buyer. The sailing ship was to be delivered from Duesseldorf, Germany to Hamburg, Germany. Part of the conditions of the contract were defendant’s “General Terms and Conditions of Trade or Business” (Allgemeine Geschaeftsbedingungen), which established that defendant would be entitled to twenty-five percent of the sale price as flat rate damages if the plaintiff terminated the contract without justification.
After entering into the contract, plaintiff and defendant had discussions pertaining to several contractual conditions and the sailing ship. The parties reached an agreement on the date for delivery in Hamburg. Plaintiff-buyer traveled to Hamburg with his legal counsel. First, he noticed that the interior of the ship had a different color than the one they had agreed on. Second, he saw a sign in the same ship he already bought offering it for sale. Plaintiff told defendant that he was terminating the sales contract, and his counsel confirmed this in a letter. Defendant’s counsel responded that defendant was not accepting such termination and that he intended to claim damages. Plaintiff’s counsel answered that plaintiff was upholding his decision to terminate the contract. Defendant then sold the sailing ship to a third party and reimbursed DM 40,950 for plaintiff’s down payment, keeping the remaining amount of 1209DM 43,549.50. He considered that DM 42,250 was equivalent to the twenty-five percent flat rate damages that he was entitled to according to the contract and that he was also entitled to DM 1,299.50 in additional damages for his attorney’s fee.
REASONING AND HOLDING OF THE BUNDESGERICHTSHOF
The Bundesgerichtshof found that plaintiff’s termination of the contract was unjustified. Termination of the contract was not justified by the fact that at the time of delivery in Hamburg the color of the ship was different than what was agreed on—and plaintiff had not allowed the defendant to modify the color. However, this did not give defendant the right to the flat-rate damages stipulated in the contract. Because both plaintiff and defendant were merchants, the statute that governs the General Conditions of Trade (Gesetz ueber die Allgemeinen Geschaeftsbedingungen (AGBG) and Allgemeine Geschaeftsbedingungen (AGB) respectively) is only applicable with the least degree of strict scrutiny for merchants under Section 24 of the AGBG. But even under this less strict standard, a merchant is not allowed to use the AGBG which generally entitles him to damages without a previous grant of an additional time period to perform (Nachfristsetzung). For this reason … defendant’s AGBG is void, and the defendant is not entitled to the flat-rate damages.
The Bundesgerichtshof remanded the case to the Court of Appeals to determine if there might be other provisions of the law that enable defendant to recover damages.
It is understood from this case that the requirement of a prior notice may be waived or voided among merchants or participants in the same sector or market, and that a flat rate for damages can be stipulated in the contract. However, the court does not appear eager to make a broad definition of the concept of merchants of the same sector or market. In this case, a car dealer is not in the same sector or market as a seller of sailing ships; yet they were both merchants and thus it was possible to argue that in accordance with Section 24 of the AGBG a less strict standard could be applied (this section assumes that the parties are informed). The plaintiff should have granted the Nachfrist to the defendant.
Could it be understood that the Nachfrist is a middle-ground between the extrajudicial resolution for anticipatory repudiation under U.S. law and the Mexican judicial resolution, as it was held in the case of Pedro J. Gonzalez? Is there any similar concept regulated under the reader’s legal system? Is it found in case law, customs, or under the general terms and conditions of contracting? During one of our class discussions a German lawyer compared the Nachfrist and the U.C.C.’s extrajudicial resolution for anticipatory repudiation as follows:
The concept of the Nachfrist seems to have a fundamentally different orientation than that of the U.C.C. Its purpose is to protect both the obligor and obligee; for this reason it requires an additional period to perform. The U.C.C., on the other hand, seems more oriented to protect the obligee, using a standard [of notice even] less strict than that of the Nachfrist, and allowing for a declaration of non-performance at an earlier stage. The Nachfrist also protects the obligor in other ways, apart from allowing him additional time to 1210perform. German law requires that the obligee who wants to terminate a contract must communicate its intentions with time in advance …30
Does the U.C.C. require the granting of an additional period of performance in addition to the notice of termination? What is the significance of this requirement?
The present-day version of the Nachfrist is found in Section 323 of the BGB.
Withdrawal for nonperformance or for performance not in conformity with the contract:
(1) If, in the case of a reciprocal contract, the obligor does not render an act of performance which is due, or does not render it in conformity with the contract, then the obligee may withdraw from the contract, if he has specified, without result, an additional period for performance or cure.
(2) The specification of a period of time can be dispensed with if
1. the obligor seriously and definitively refuses performance,
2. the obligor does not render performance by a date specified in the contract or within a specific period and the obligee, in the contract, has made the continuation of his interest in performance subject to performance being rendered in good time, or
3. there are special circumstances which, when the interests of both parties are weighed, justify immediate revocation.
(3) If the nature of the breach of duty is such that setting a period of time is out of the question, a warning notice is given instead.
(4) The obligee may revoke the contract before performance is due if it is obvious that the requirements for revocation will be met.
(5) If the obligor has performed in part, the obligee may revokethe whole contract only if he has no interest in part performance. If the obligor has not performed in conformity with the contract, the obligee may not revoke the contract if the breach of duty is trivial.
(6) Revocation is excluded if the obligee is solely or very predominantly responsible for the circumstance that would entitle him to revoke the contract or if the circumstance for which the obligor is not responsible occurs at a time when the obligee is in default of acceptance.31
The following are contemporary variants of extra judicial termination remedies prompted by the breach or default of borrowers in loans secured by commercial assets (also known as secured transactions or asset based loans, or (in Spanish) as prestamos con garantias mobiliarias). As shown by a study of the Central Bank of Brazil, as well 1211as other economic studies, the cost of the uncertainty of collection subject to the prevailing judicial procedures accounts for at least one third of the amount of interest rates of commercial loans in that country.32
(a) [Possession; rendering equipment unusable; disposition on debtor’s premises.] After default, a secured party:
(1) may take possession of the collateral; and
(2) without removal, may render equipment unusable and dispose of collateral on a debtor’s premises under Section 9–610.
(b) [Judicial and nonjudicial process.]
A secured party may proceed under subsection (a):
(1) pursuant to judicial process; or
(2) without judicial process, if it proceeds without breach of the peace.
(c) [Assembly of collateral.]
If so agreed, and in any event after default, a secured party may require the debtor to assemble the collateral and make it available to the secured party at a place to be designated by the secured party which is reasonably convenient to both parties.
Article 61. At any time, before or during the enforcement proceeding, the debtor may reach an agreement with the creditor on terms other than those previously established, either for the delivery or repossession of the goods, the terms of the sale or auction, or any other matter; this agreement will be obligatory, provided that said agreement does not affect other secured creditors or buyers in the ordinary course of business.
Article 62. In any event, the debtor will retain the right to claim damages for the abuse of his rights by the creditor.
Article 65. Voluntary enforcement. The secured creditor and secured debtor may agree in the security agreement or at any time, before or during the judicial enforcement proceedure established in this law, that the enforcement against the collateral be performed privately under the terms and conditions that they may freely agree on.
They may agree on the delivery and repossession of the collateral, the form and conditions of sale or auction, and any other matter, provided that they do not infringe the parties’ and third parties’ constitutional rights.
In case of chattel mortgage bonds and guarantee trusts, the parties may agree that enforcement be done in accordance with the Law of Warehouses and the Code of Commerce, as the case may be.
Article 66. Secured debtor’s right. In any event, the secured debtor will retain the right to claim damages for the abuse of rights by the secured creditor.
Article 57. General Principles on Enforcement. Enforcement of security interests will be conducted based on the following general principles:
1. Enforcement will always be conducted on an extrajudicial basis by means of a public auction before a notary public, in compliance with the provisions of this Law and, in a subsidiary manner, with those of the Notarial Code.
2. Notwithstanding the preceding provision, the secured creditor may directly take possession of the collateral when he has a right of retention derived by law or created by contract. The same right will be available when the collateral has an agreed-upon value under twenty minimum wages at the highest end of the scale, or upon an agreement for the resolution of a contractual obligation that expressly allows it.
3. Judicial intervention may only be requested in those cases where it has been agreed that enforcement will take place before a judge or when the obligation attempted to be extrajudicially enforced has already been paid by the secured debtor, that the secured debtor has defense based on forgery of its signature or on the alteration of the documents text, in these cases a summary trial shall be followed.
The conditions pursuant to which enforcement shall be conducted will be determined in the agreement that creates the security interest. Such conditions shall be used as a guide by the judge or notary for purposes of the auction of the security interests.
J. Extra Judicial Remedies Among Correspondent Letter of Credit Banks
i. If the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents or to the Beneficiary, if it received the documents directly from him.
ii. Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to, the presenter.
iii. The Issuing Bank and/or Confirming Bank, if any, shall then be entitled to claim from the remitting bank refund, with interest, of any reimbursement which has been made to that bank.
If the Issuing Bank and/or Confirming Bank, if any, fails to act in accordance with the provisions of this Article and/or fails to hold the documents at the disposal of, or return them to the presenter, the Issuing Bank and/or Confirming Bank, if any, shall be precluded from claiming that the documents are not in compliance with the terms and conditions of the Credit.39
An aggrieved party’s right to terminate commercial contracts quickly and extrajudicially is a necessity of a marketplace that places a premium on the contracting parties’ ability to compete. But please notice that at root the justification of a unilateral termination by an aggrieved commercial party is the opposite of a breach of contract by Justice Holmes’ “bad man” or Judge Posner’s economic rational man: It is not to allow the breaching party to reduce his losses but to minimize the accumulation of transactional damages and wasted social resources that would occur when the aggrieved innocent party must (in some jurisdictions) quixotically, as it were, perform his side of the bargain (even though the other party has breached) and then sue for damages the party in breach. The justification for this course of action is also to increase the competiveness of regular and bona fide participants in the marketplace by allowing them to participate more quickly in another possibly profitable transaction, whether it is by reselling what was not bought or repurchasing what was not sold.
The tendency to grant to aggrieved parties the right to terminate contracts and other commercial relations is also a result of the need to provide finality to transactions and courses of dealings that could not exist without them. Consider, for example, the finality of an extrajudicial set off between a bank and its client depositor. Both the bank and its depositor are better off by knowing what is the net amount owed to each other, so that they can invest it or enter into another banking or commercial transaction as quickly as possible. Add to the amount involved in a two party set off, the amounts accumulated by countless banks involved when clearing their respective debits and credits at the end of each banking day in a city, region, country or group of countries. Can you visualize the economic costs of having courts of law approve or reject the set offs that take place among the participants to a clearing house? The longer it takes to know what each entity can dispose of or pay, the costlier its business cycle. The same is true with the strict “preclusion” rule of the Uniform Customs and Practices for Documentary Credits sub-Article 14d, transcribed above. By being precluded to claim that documents not examined in a timely manner do not comply with the terms and conditions of the credit, the decision of the issuing or confirming 1214bank becomes final and the equivalent of payment. Even though it could be litigated, having agreed to be governed by such a rule, the bank that breached it will not be likely to succeed and most often than not, do what a colorful New York bank lawyer once referred to me as “eat the documents.” It is clear that this extrajudicial remedy has saved an immeasurable amount of trips to court and dollars spent on court proceedings.
An unnamed counsel for an unnamed central bank in a developing nation once told me that such inter-bank or private party “adjudications of rights” (billions of which take place each banking day) deprived objecting banks and parties of their due process of law. My reply was that what he described as a deprivation of due process in the clearing and set off procedures was, at worst, a temporary deficit in claimant’s credit column that if proven could be adjusted during the next clearing day. The same argument applies to the breaching party who believes that the resale or repurchase by the aggrieved party resulted in him having to pay more damages. For in our day, it would be rare to find a legal system that did not grant such a party an action for, in ascending scale of gravity, 1) an accounting; 2) damages; 3) unjust enrichment; 4) fraud or abuse of rights if the facts warranted them. So the problem of extrajudicial adjudication is not due process but the competitive consequences of its absence.
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1 See Party, Legal Definition http://law.yourdictionary.com/party (last visited Oct. 30, 2013) (for the definition of an aggrieved party: “a party whose pecuniary, personal, or property rights have been negatively affected by the actions of another or by a court’s [sic] ruling.” Id.)
2 See the definition of an anticipatory breach in U.C.C. § 2–610 (2013) later in this section.
3 Cód. Com. (Mex.) art. 376 (2008) (translation by author) (emphasis added).
4 This is one instance in which a code in a civil law country uses the term rescission to mean the same thing as termination.
5 William Headrick, La Rescisión de la Compraventa, 49 Rev. de Derecho U.N.A.M. 83 (1963). As noted in the preceding chapter, to my knowledge, this point was first made in Mexican legal literature by William Headrick in this landmark article.
6 See Pioneer Bank and Trust Co., v. Seiko Sporting Goods, 184 Ill. App. 3d 783 (1989) (for a judicial qualification of the aggrieved party’s duty to mitigate damages).
7 See CISG arts. 74–77.
8 See supra § 2:1(B)(4).
9 See infra § 30:3(D)(2) (discussing the damages available against a contracting party who acts with bad faith).
10 U.C.C. § 2–609 cmt. 1 (2012). In relevant parts it states:
The section rests on the recognition of the fact that the essential purpose of a contract between commercial men is actual performance and they do not bargain merely for a promise, or for a promise plus the right to win a lawsuit and that a continuing sense of reliance and security that the promised performance will be forthcoming when due, is an important feature of the bargain.
Id.
11 See id. cmts. 3 & 4.
12 See Glossary, “Documentary Sales.”
13 U.C.C. § 2–610 cmt. 1 (2012).
14 American Bronze Corp. v. Streamway Products, 8 Ohio App. 3d 223 (1982).
15 Luis Díez Picazo & Antonio Gullón, 2 Sistema de Derecho Civil 102–04 (9th ed. 2001) (translation by author).
16 See U.C.C. § 2–302 (2012).
17 Id. § 2–106(4).
18 S.T.S., Oct. 20, 1994 (R.J., No. 7491) (Spain).
19 See generally Headrick, supra note 5.
20 C.C. (Spain) art. 1124 (1889) (translation by author).
21 S.T.S., Oct. 20, 1994 (R.J., No. 7491) (Spain) (translated by author).
22 Pedro J. Gonzales, Tribunales Colegiados de Circuito [TCC] [Collegiate Circuit Court], Semanario Judicial de la Federación, Sexto Época, tomo LXXX, febrero de 1964, tesis 1637/63 (Mex.).
23 Tribunales Colegiados de Circuito [TCC] [Collegiate Circuit Court], Semanario Judicial de la Federación, Octava Época, tomo XIII, Marzo de (undated) Pagina 413 (Mex.) (emphasis added).
24 Tribunales Colegiados de Circuito [TCC] [Collegiate Circuit Court], Semanario Judicial de la Federación, Octava Época, tomo V (undated) Pagina 435 (Mex.).
25 German Civil Code—Bürgerliches Gesetzbuch, http://www.iuscomp.org/gla/statutes/BGB.htm (last visited Oct. 31, 2013). This source explains:
When the Act to Modernise the Law of Obligations (Schuldrechtsmodernisierungsgesetz) entered into force on 1 January 2002, this marked the most sweeping reform of the German Civil Code or Bürgerliches Gesetzbuch since it was enacted on 1 January 1900. The following is a bilingual edition of those provisions of the BGB’s Book 1 (General Part) and Book 2 (Law of Obligations) which are affected by the reform. Some unaltered provisions were added to this translation for context, whereas some minor alterations to less central provisions are only mentioned as such without having been reproduced. The English translation by Geoffrey Thomas and Gerhard Dannemann was made possible through the generous support of the Zeit-Stiftung Ebelin und Gerd Bucerius.
Id.
26 Id. § 326.
27 Translation by Susana-Jacqueline Butler, Esq.
28 See Glossary, “Nachfrist” for its latest legislative formulation in § 321 of the BGB.
29 Translation by Susana-Jacqueline Butler, Esq.
30 Susana-Jacqueline Butler, Materials for the Comparative Commercial Law Course—Spring 2000 (2000) (unpublished manuscript) (on file with author) (translated by author).
31 German Civil Code—Bürgerliches Gesetzbuch, supra note 25, § 323.
32 Kozolchyk & Furnish, A Comparative Analysis, at 242.
33 U.C.C. § 9–609 (2012).
34 Organization of American States [OAS], Model Inter-American Law on Secured Transactions, Final Act, 3(F), adopted at the Sixth Inter-American Specialized Conference on Private International Law (CIDIP-VI), (Feb. 8, 2002).
35 Decreto No. 51–2007 [Decree Number 51–2007] Diario Oficial [DO], 16 de noviembre de 2007 (Guatemala), available at http://natlaw.com/natlaw-world/.
36 Decreto No. 182–2009 [Decree No. 182–2009], Diario Oficial [DO], 28 de enero del 2010 (Honduras), available at http://www.garantiasmobiliarias.hn/ley.pdf.
37 See Int’l Chamber of Commerce, Uniform Customs and Practice for Documentary Credits [UCP] No. 500 sub-art. 14(d)(i–iii) (1993).
38 See id. sub-art. 14(e).
39 Id. (emphasis added.) See supra § 24:6(F) for a discussion on the importance of this remedy.