Sellers can terminate contracts of buyers, who delay take delivery of goods, even after payment


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Saudi Gazette report

JEDDAH — International sellers are allowed to withhold goods until the buyer pays the expenses caused by his delay in taking delivery of goods. In such cases, goods would continue to be under the possession or at the disposal of the seller. However, there is an exemption in cases wherein there is a condition to make payment of the price of goods only at the time of its delivery.

This is one of the provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG) or the Vienna Convention. The Saudi Council of Ministers approved on June 22, 2023 the Kingdom’s accession to the UN CISG. The move will enable Saudi Arabia to implement regulatory and legislative frameworks for cross‑border trade in line with international standards, leading to the integration of its economy with regional and global markets.

In addition to helping the Kingdom enhance its local contract system, accession to the CISG will also provide clarity to businesses through improved transparency in international trade procedures. It also provides mechanisms to resolve disputes more efficiently and helps eliminate trade obstacles. It should also promote the diversification of the Saudi economy, and facilitate more participation by small and medium enterprises in cross‑border trade.

The CISG stressed that the buyer loses the right to declare the contract stand cancelled or to request replacement of goods from the seller in the event of the impossibility of the buyer to return goods in a condition that closely matches their condition at the time of taking delivery.

The seller was allowed to cancel the contract in specific cases, notably when the buyer failed to comply with either paying the price or taking delivery of goods within the additional period specified by the seller. The contract can also be cancelled if buyer announced that he would not pay the price or receive the goods in the additional period. Even if the buyer paid the price for the goods, the seller has the right to cancel the contract in the event of late payment by the buyer.

The contract can also be cancelled in the event of violations other than delay in taking the delivery of goods, with the seller’s knowledge of such violation, or after the expiry of an additional period specified by the seller, or after the buyer’s declaration of non-compliance with its obligations in the additional period.

In the event of a difference in prices after the termination of contract, with the buyer purchasing substitute goods or the seller reselling goods, the party claiming compensation is entitled to get the difference between the contract price and the replacement purchase price or the price at resale, together with other compensations, it was stated in the provisions of the agreement.

It is noteworthy that CISG is a multilateral treaty that establishes a uniform framework for international commerce. As of May 2023, it has been ratified by 95 countries, representing two-thirds of world trade. The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs.

The contract of sale is the backbone of international trade in all countries, irrespective of their legal tradition or level of economic development. As per the contract, obligations of the sellers include delivering goods in conformity with the quantity and quality stipulated in the contract, as well as related documents, and transferring the property in the goods. Obligations of the buyer include payment of the price and taking delivery of the goods. The aggrieved party may require performance, claim damages or avoid the contract in case of fundamental breach.

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