Dodging Windfalls: Damages Based on Market Price, Actual Loss, and Appropriate Awards
Journal of Law, Society and Development, 2015. (Papers from the University of South Africa-UNCITRAL Conference: Use of UNCITRAL Instruments to Promote Regional Harmonization), Forthcoming
10 Pages Posted: 30 Oct 2015
Date Written: October 2015
This article draws on the underlying policy of the United Nations Convention on Contracts for the International Sale of Goods (CISG) to demonstrate that Article 76’s market damages approach permits an aggrieved party in certain circumstances to recover damages in excess of the aggrieved party's actual loss for the breach of the underlying contract. While at first glance this result may appear to be at odds with the principles of full compensation and mitigation, in reality, it is not. It is consistent with the text of the CISG damages provisions. In addition, it effectuates the parties' allocation of risk in their agreement and allows the aggrieved party to take advantage of the fluctuation in the market which it bargained for. It also encourages performance of contracts, deters breaches, and ultimately leads to a more predictable contract regime.
Keywords: CISG, Article 76, breach of contract remedies, market damages approach, hedging risk, perform contractual obligations
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