"Possible Consequences" as contained in Article 74 of the Convention for the International Sale of Goods (CISG): Friend of Foe?

Norbert Altvater — Thu, 22 Nov 2007 12:11:47 PST

Canadian lawyers have been reluctant to use CISG for sales transactions between jurisdictions with well developed sale of goods régimes. This stems in great part from their fear of the potential interpretation of the phrase “possible consequences” in Article 74 and the attendant liability to which that may expose their clients. Article 74 of CISG states that the damages which may be recovered “may not exceed the loss which the party in breach foresaw ... as a possible consequence of the breach.” This is often erroneously seen as being significantly broader that the concept of foreseeablility at common law. In this article I examine the legislative history of CISG and ULIS (one of its predecessors) and the meaning of that phrase “possible consequences” using the interpretive techniques specific to CISG, that is inter alia good faith and reasonableness. I come to the conclusion that the foreseeability test in CISG is not materially different from the concept of foreseeability at common law (in Canada) and as such should not cause concern to Canadian lawyers, but what is sorely needed is a solid judicial interpretation of this phrase “possible consequences” on which they can base their advice to their clients.