Obligations of the seller and buyer, and provisions common to both

Q: Where must the seller deliver goods if the contract involves carriage and specifies no location?

Delivery is completed by handing the goods over to the first carrier for transmission to the buyer.

Q: Under what specific condition may a buyer demand substitute goods or avoid the contract?

Only if the seller's failure to perform constitutes a fundamental breach of contract.

Corporate and Business Law (LW) · ACCA · 7 min read · Updated: 3 Nov 2026

Welcome to International Sales!

Hello there! Today, we are diving into the rules that govern international trade. Imagine you are buying 1,000 laptops from a supplier in another country. How do you ensure you get what you paid for? And what does the seller expect from you?

In the world of ACCA Corporate and Business Law (LW-GLO), these rules are governed by the UN Convention on Contracts for the International Sale of Goods (CISG). Think of it as a global rulebook that keeps international business transactions predictable and fair. We are going to examine what the seller must do, what the buyer must do, their remedies when things go wrong, and the rules common to both parties.

1. Obligations of the Seller

The seller has core duties regarding delivery, documents, conformity, and third-party rights. If they fail to perform, the buyer has clear statutory remedies under the Convention.

A. Delivery of Goods

The seller must deliver the goods as agreed in the contract:
- Where: If the contract does not specify a place and the sale involves carriage, delivery is made by handing the goods over to the first carrier for transmission to the buyer. If no carriage is involved and specific goods were agreed at a particular place, they are placed at the buyer's disposal there.
- When: On the date fixed in the contract, or within a specified period, or within a reasonable time after contract conclusion.

B. Handing over Documents

Commercial documents (such as bills of lading, insurance policies, and commercial invoices) must be handed over at the time, place, and in the form required by the contract.

C. Conformity of the Goods

The seller must deliver goods that are of the quantity, quality, and description required by the contract. Conformity means the goods must:
- Be fit for the ordinary purpose for which such goods are normally used.
- Be fit for any particular purpose expressly or impliedly made known to the seller at the time the contract was concluded.
- Possess the qualities of any sample or model held out by the seller.
- Be contained or packaged in the manner usual for such goods, or adequately preserved and protected.

Examination Duty: The buyer must examine the goods (or cause them to be examined) within as short a period as is practicable, and give notice specifying the lack of conformity within a reasonable time after discovering it (and at the latest within two years from the date the goods were handed over).

D. Third-Party Claims

The seller must deliver goods that are free from any right or claim of a third party, including claims based on industrial or intellectual property (such as patents or trademarks), unless the buyer agreed to take the goods subject to that right or claim.

E. Remedies for Breach of Contract by the Seller

If the seller fails to perform any obligation, the buyer may:
- Require specific performance: Demand delivery of the goods or performance of unfulfilled terms.
- Require substitute goods: Only if the lack of conformity constitutes a fundamental breach of contract.
- Require repair: Unless this is unreasonable in all circumstances.
- Fix an additional period of time (Nachfrist): Allow the seller a reasonable extra period to perform.
- Reduce the price: If goods do not conform, reduce the price in proportion to the value the delivered goods had at delivery compared to conforming goods.
- Avoid the contract: Declare the contract avoided if the seller's breach is fundamental, or if the seller fails to deliver within the fixed additional period.
- Claim damages: Either on their own or together with any other remedy.

2. Obligations of the Buyer

The buyer's role balances the seller's duties through payment, taking delivery, and corresponding remedies for the seller.

A. Payment of the Price

The buyer must take all necessary steps and comply with formalities required under the contract or regulations to enable payment to be made (such as establishing a letter of credit). If no time is fixed, payment is due when the seller places the goods or documents at the buyer's disposal.

B. Taking Delivery

The buyer must:
- Do all acts reasonably expected to enable the seller to make delivery.
- Actually take over the goods.

Analogy: Ordering goods requires opening the warehouse doors and receiving them. A buyer cannot simply refuse to accept conforming goods to escape a fluctuating market!

C. Remedies for Breach of Contract by the Buyer

If the buyer fails to perform their obligations, the seller may:
- Require performance: Compel the buyer to pay the price, take delivery, or perform other obligations.
- Fix an additional period (Nachfrist): Grant a reasonable additional time for the buyer to pay or take delivery.
- Avoid the contract: Declare the contract avoided if the buyer commits a fundamental breach, or fails to pay or take delivery within the additional period.
- Make specifications: If the buyer fails to provide required specifications (e.g., dimensions or shapes) on time, the seller may make them according to known requirements.
- Claim damages: Recover monetary losses caused by the buyer's breach.

3. Provisions Common to Both Seller and Buyer

The Convention sets out essential rules governing contractual disruptions, risk, and termination that apply equally to both parties.

A. Anticipatory Breach and Instalment Contracts

- Anticipatory Breach: If it becomes clear prior to the performance date that one party will commit a fundamental breach, the other party may declare the contract avoided. If a party merely shows a substantial deficiency in ability to perform or creditworthiness, the other party may suspend performance.
- Instalment Contracts: A breach regarding a single instalment may allow remedies for that instalment alone. However, if failure on one delivery gives good grounds to conclude a fundamental breach will occur for future instalments, the aggrieved party may declare the contract avoided for future deliveries (or even past deliveries if interdependent).

B. Passing of Risk

Once risk passes, loss of or damage to the goods does not discharge the buyer from the obligation to pay the price, unless caused by the seller's act or omission.
- Contracts involving carriage: Risk passes to the buyer when the goods are handed over to the first carrier.
- Goods sold in transit: Risk generally passes to the buyer from the time the contract is concluded.
- Other cases: Risk passes when the buyer takes over the goods, or when they are placed at the buyer's disposal and the buyer breaches by failing to take delivery.

C. Damages and Interest

- Damages: Equal to the loss suffered, including loss of profit, but limited to the loss that was foreseeable at contract conclusion. The innocent party is under a strict duty to mitigate the loss.
- Interest: If a party fails to pay the price or any other sum in arrears, the other party is entitled to interest on that sum without prejudice to any claim for damages.

D. Exemptions (Frustration / Force Majeure)

A party is not liable for failure to perform if they prove the failure was due to an impediment beyond their control that could not reasonably have been expected at contract conclusion, and could not reasonably have been avoided or overcome.

E. Effects of Avoidance and Preservation of Goods

- Effects of Avoidance: Avoidance releases both parties from their obligations, subject to damages. Any party who has performed may claim restitution of whatever was supplied.
- Preservation of the Goods: If the buyer delays taking delivery, or if the buyer intends to reject goods already received, the party possessing or controlling the goods must take reasonable steps to preserve them (and may store them in a third party's warehouse at the other's expense or sell them if unreasonable delay occurs).

Quick Review Box:
1. Seller: Deliver, provide documents, ensure conformity, ensure freedom from third-party claims.
2. Buyer: Pay the price, take delivery.
3. Remedies: Nachfrist notice, avoidance for fundamental breach, price reduction, substitute goods, repair, damages.
4. Common Rules: Risk passes on handover to first carrier; damages require foreseeability and mitigation; preservation of goods is compulsory.

References

ACCA LW-GLO Syllabus and Study Guide September 2026 to June 2027 — ACCA

Quick check

Can you answer these now?

Open each question to check the key ideas from this chapter.

Where must the seller deliver goods if the contract involves carriage and specifies no location?

Delivery is completed by handing the goods over to the first carrier for transmission to the buyer.

What are the primary criteria determining the conformity of goods under the CISG?

Goods must meet the contract description, be fit for ordinary or known particular purposes, match any sample or model, and be adequately packaged.

What time limits apply to the buyer's duty to examine goods and give notice of non-conformity?

The buyer must examine the goods within as short a period as practicable and give notice within a reasonable time, at the latest within two years of delivery.

What is the seller's obligation regarding third-party rights and intellectual property claims?

The seller must deliver goods free from any third-party rights or claims, including intellectual property claims, unless the buyer agreed to take them subject to such claims.

Under what specific condition may a buyer demand substitute goods or avoid the contract?

Only if the seller's failure to perform constitutes a fundamental breach of contract.

What are the two core obligations of the buyer under an international sale contract?

The buyer must pay the contract price and take delivery of the goods.

What remedies are available to a seller if the buyer fails to perform contractual obligations?

The seller may require performance, fix an additional period (Nachfrist), avoid the contract, supply missing specifications, and claim damages.

How does the CISG treat an anticipatory breach of contract?

A party may suspend performance if a serious deficiency appears, or avoid the contract if it is clear a fundamental breach will occur.

When does risk of loss pass to the buyer in a sales contract involving carriage of goods?

The risk passes to the buyer when the goods are handed over to the first carrier.

What principles govern the calculation and limitation of damages under the CISG?

Damages compensate actual loss including lost profit, but are limited by foreseeability and the duty to mitigate.

What conditions must be satisfied for a party to be exempt from liability under the CISG force majeure rules?

The failure must be due to an impediment beyond their control, unforeseeable at contract conclusion, and unavoidable or insurmountable.

What duty does a party have regarding goods that are in their possession but subject to dispute or rejection?

The party possessing or controlling the goods must take reasonable steps to preserve them at the other party's expense.

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More Corporate and Business Law (LW) chapters

Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms

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