CTU Journal of Innovation and Sustainable Development Vol. 16, No.

1 (2024): 1-6

DOI:10.22144/ctujoisd.2024.258

The right to avoid the international sale of goods contract: Comparison of Viet Nam
to CISG and PICC

Nguyen Thi Hoa Cuc*, Doan Nguyen Phu Cuong, and Nguyen Minh Phu
School of Law, Can Tho University, Viet Nam
*Corresponding author (nthcuc@[Link])
Article info. ABSTRACT

Received 06 Jun 2022 Foreign trade is an indispensable activity in the globalization era.
Revised 07 Jul 2022 Researching the liabilities of parties in performing the sale contracts and
Accepted 11 Mar 2023 the avoidance right of parties in the contracts is a vital issue. Therefore,
this article compared Vietnamese Commercial Law 2005 with the United
Nations Convention for the International Sale of Goods (CISG) and
Keywords Principles of International Commercial Contracts (PICC) regarding the
avoidance of sale contracts, including the three aspects, fundamental
Anticipatory breach, breach, failure in performance obligations of contract at the end of adding
avoidance of contract, claim time, and anticipatory breach. The findings not only enable Vietnamese
for termination, CISG, merchants to master international rules in establishing foreign trading but
fundamental breach, PICC, also show differences and similarities between Vietnamese law and
Vietnamese Commercial Law international rules. By doing that, this article puts forward some
implications for rebuilding the definition of “fundamental breach” in
Vietnamese commercial law. Also, this paper suggested that the avoidance
clause of the Vietnamese law should include the claim to terminate the
agreement of the innocent party due to the non-performance party’s failure
to fulfill contractual duties at the end of adding time, and the other party
will be constituted an “anticipatory breach”.

1. INTRODUCTION depends on specific regulations in domestic and

international rules.
The sellers and buyers enter a sale of goods
transaction to acquire their benefits from performing While CISG and PICC have codified a clear
the content of the agreement. Thus, the contract is foundation for identifying how “fundamental
not obviously avoided by the parties or the judges. breach” is understood, the current laws of Viet Nam
Avoiding contracts will be entitled as having a regarding “fundamental breach” are quite general,
breach of a party in the contract; however, not all so it is impossible to make a uniform understanding
breaches of a contract permit the aggrieved party to at courts. Also, in Vietnamese law, the claim to
end the agreement. Typically, different legal avoid the transaction of the innocent party after the
systems have various approaches to limit a claim for debtor’s failure to continuously undertake their
avoidance. In international trading, among several obligation within added time needs to be outlined
conditions that are adopted, a serious breach more concretely. Finally, a contractual remedy can
(fundamental breach) is commonly used as a only be brought where the other party failed to
mandatory criterion for termination (Jan, 2017). It perform. It means that no termination can be
was seen above that identifying whether such non- claimed before there is an actual non – performance
performance is severe enough for avoidance (Jan, 2017). Nevertheless, PICC and CISG have

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CTU Journal of Innovation and Sustainable Development Vol. 16, No. 1 (2024): 1-6

shown that one party involved in a contract is the contract by one party which in turn causes
entitled to announce to the other party, prior to the detriment to the other party to the extent that the
agreed-upon performance date, that he is not able to other party suffers from substantial deprivation of
conduct his duties according to their consensus. This what they are entitled to expect from the contract,
is called an “anticipatory breach” of contract, which unless the breaching party is unforeseeable and a
entitles the aggrieved party to terminate the reasonable person in similar circumstances would
performance of the contract immediately regardless not have foreseen such an outcome (Article 25).
of the day fixed for performance (Evan, 2005). The Clearly, according to Article 25, to determine how
author’s view of point is that Vietnamese lawmakers fundamental breach is, we need to provide focus on
should consider an “anticipatory breach” as a four main contents. First, what is the detriment? The
context for avoidance. Above all, taking a critical detriment in CISG can be understood as a result of
look at the terms of CISG and PICC may help Viet a contractual breach from the breached party.
Nam improve its pertinent rules as well as provide However, detriment was not defined clearly.
useful knowledge to Vietnamese merchants in Whether impairment requires factual damages or
concluding and conducting international sales of losses and whether it covers only material losses or
goods contracts. invisible damages as well. To this extent, legal
scholars have recognized that the term detriment
2. FOUNDATION FOR AVOIDING
within the CISG encompasses all (actual and future)
CONTRACT UNDER CISG, PICC AND
negative consequences of any breach of contract,
VIETNAMESE LAW
not just present and future financial losses resulting
2.1. Fundamental breach from a breach of contract, but also any other adverse
consequences. The extent of the detriment does not
Evaluating a non-performance of the breaching
matter in this assessment. The extent of the
party as a condition for termination is not similar in
deprivation is a noteworthy point (Michael, 2010).
different countries. In France, the courts will allow Thus, for a breach to be considered fundamental
the injured parties to avoid the contract if a non- under the CISG, it must result in a detriment that
performance is serious and causes a significant
significantly deprives the innocent party of what
detriment to them. Under German law, avoid the
they are entitled to expect from the contract. The
contract is allowed “the non-performance or poor
reference to the expectation under the agreement
performance of the contract brings a disadvantage
clarifies that the criteria for determining a breach of
for the innocent party that is substantially deprives contract should be based on both the explicitly
the innocent's expectations under the contract” stated terms and the implied terms within the
(Hein, 2017). Under English law, there exists a
contract itself. For example, tiles sold as
fundamental principle allowing the innocent party to
“impermeable” that turned out to be easily stained
terminate a contract if the breach by the other party
by household items such as juice constituted a
is adequately severe, requiring a "substantial failure
fundamental breach of contract. In Delchi Carrier
of performance." English lawmakers divide terms of SpA v. Rotorex Corp, the second Circuit Court of
contracts into two groups, namely condition and Appeals held that a fundamental breach of contract
warranty terms. The contract can only be terminated
occurred when the air compressor did not comply
due to condition terms (the root of the contract) that
with the sample model and the accompanying
were committed (Evan, 2005).
specifications regarding cooling capacity and
To make a uniform statute for working out foreign energy consumption (Larry, 2005). The next
trade contract, the United Nations Convention for element of a fundamental breach is in favor of the
the International Sale of Goods (CISG) has now breached party since the foreseeability requirement
been ratified by eighty countries, including Viet would be considered. It means that the
Nam. “Fundamental breach” was found in CISG as consequences caused by the breaching action must
a base requirement for an immediate termination. have been foreseeable. If the debtor proves that they
did not foresee and a person who has similar
Under CISG (United Nations,1980), the buyer has qualifications in the same situation is unforeseeable,
the right to claim the contract terminated if the such result, there is no fundamental breach
seller's failure to fulfill any contractual obligations, (Eduardo, 2007). Typically, in international
as outlined in the contract or the convention itself, business, requiring one party to be aware of all of
constitutes a fundamental breach (Article 49). the expectations under the contract of the other party
“Fundamental breach” is defined as a violation of is difficult. So, foreseeability plays a crucial role in

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CTU Journal of Innovation and Sustainable Development Vol. 16, No. 1 (2024): 1-6

contract law by excluding the breaching party from contract and prepared or promoted to perform the
liability for violation of the agreement if the contract. Here, even though the breach is severe
substantial consequences of the breach could not enough that the aggrieved party may terminate the
have been anticipated. Similar to CISG, PICC (The contract, it is also necessary to focus on
International Institute for the Unification of Private disproportionate damages suffered by the breaching
Law [UNIDROIT], 1994) recognizes fundamental party. The aggrieved contractor cannot claim
breach is an essential ground for avoidance as well. avoidance if the substantial consequences of this
It is noteworthy that while the foundation for remedy give rise to serious damage regarding the
identifying fundamental breaches has yet to be breaching party because they spent a wealth of cost,
clarified in CISG, PICC has made a specific and effort for preparation or performance while
guideline for determining a fundamental breach continuously performing the contract still enables
with five remarkable signals. the aggrieved party to gain what they expect under
the contract.
The first signal also takes substantial deprivations
into account: “The non-performance substantially According to Vietnamese law, the claim for
deprives the aggrieved party of what it was entitled avoidance of the aggrieved is accepted if the
to expect under the contract, unless the other party breaching party’s actions constitute a fundamental
did not foresee and could not reasonably have breach (The National Assembly of Viet Nam, 2005).
foreseen such a result” (Art. 7.3.1, cl. 2, pt. a). The definition of fundamental breach in Vietnamese
Unlike CISG, PICC does not require actual damages commercial law is partly different from that of CISG
or material losses (detriment) as a basic condition and PICC. Under Vietnamese commercial law,
for avoidance. Under PICC, there is a fundamental “fundamental breach means a contractual breach by
breach if the aggrieved party is bereaved of what a party, which causes damage to the other party to
they expect under the agreement. Obviously, this an extent that the other party cannot achieve the
rule allows for eradicating the difficulties of the purpose of the entry into the contract” (Art. 3, cl.13).
aggrieved party in proving actual detriment. In the Clearly, to determine a breach as a fundamental
next circumstance, PICC considers the type of terms breach, two factors need to be proved. Whether the
in the contract as a base. It means that if the duty that aggrieved party suffered “detrimental” and whether
has been violated is the root of the contract, this non- they were deprived of their purpose of concluding
performance also becomes a fundamental breach. the contract. The concept of fundamental breach
(Art. 7.3.1, cl. 2, pt. b). The next signal for under Vietnamese law repeats an ambiguous
determining a fundamental breach depends on the requirement that has yet to be clarified in CISG.
breaching party's fault. Naturally, the non– Apparently, the innocent party’s deprivation
performance which is caused by a neglectful or regarding his expectation is a vital condition, and it
intentional action obviously raises a claim for is proof of damage (negative consequence) whilst
avoidance from the breaching party (Art. 7.3.1, cl. proving actual loss is unnecessary. Considering the
2, pt. c). The right to avoid the contract of the findings from analyzing the relevant regulations in
aggrieved party in this situation is not only used as CISG and PICC, determining whether the aggrieved
a self-protective solution but also is a strict remedy party can no longer acquire the purpose of entering
to the negligent party. The next concept of a into the contract can be challenging. This
fundamental breach is that “the non-performance determination often relies on the intentions of the
gives the aggrieved party reason to believe that it parties, which might not always be explicitly
cannot rely on the other party's future performance” outlined in the contract terms. Vietnamese law lacks
(Art. 7.3.1, cl. 2, pt. d). For a claim for avoidance in specific guidelines for determining a “fundamental
this situation, the injured party must illustrate that breach”, whereas PICC has named concrete
there is proper non-performance in the future from circumstances that promote its application more
the breaching party. Termination will be merely effectively than Vietnamese law.
adopted if the innocent party's inference is
2.2. Failure in performance obligations of
justifiable. The last concept of fundamental breach
contract within the adding period
is that “the non-performing party will suffer
disproportionate loss because of the preparation or Article 49 CISG lays down two conditions for
performance if the contract is terminated” (Art. avoidance by the buyer. Subparagraph (1) (a) gives
7.3.1, cl. 2, pt. e). This concept relates to the case the buyer the right to terminate the contract where
whereby the breaching party has believed in the the seller’s breach amounts to a fundamental breach

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of the contract mentioned in Article 25 CISG. a reasonable period for performance or cure” (Art.
Whilst, Subparagraph (1) (b) deals with the late 323(1) BGB). Other legal systems also adopt
delivery and circumstances where the seller does not Nachfrist model as the basis for statutory
completely deliver the goods. In some cases, a delay regulations concerning contract termination (Hein,
or non-delivery might not automatically qualify as a 2017).
fundamental breach unless timely delivery is
Obviously, the avoidance right will be laid down
explicitly outlined as a critical aspect of the contract.
because of a fundamental non–performance
However, if the timely delivery is deemed essential,
(comprising non–conforming goods or late
the buyer can still declare the contract avoided if the
performance). If a delay in performance is not
seller fails to deliver within an additional period
justified as a fundamental breach, the innocent party
specified by the buyer after the initial breach. As
is not entitled to declare avoidance immediately.
regards to the seller’s entitlement for avoidance,
The breaching party will be extended for
Article 64 CISG indicates the seller can make a
continuously conducting their duty. A claim for
claim for avoidance if the buyer does not conduct
avoidance is merely accepted, in which the party in
his obligation to pay the price or take delivery
breach is unable to fulfill their obligation within the
of the goods within the additional timeframe
extended period set by the injured party.
predetermined by the seller or if they declared that
they will not do so during the period so fixed. It is Vietnamese law has not emphasized this concept in
accepted that the injured party has the right to the avoidance regime. A similar content has been
terminate the contract merely after the additional found in Article 299 – Vietnamese Commercial law
period has expired and subsequent performance has regarding the relationship between specific
not been tendered. The party in breach has not performance remedies with the rest of remedies
utilized its “second chance” (Reiner, 2021). It is (including avoidance). According to Art 299,
noteworthy that, in this context, late delivery is not applying the remedy to specific performance allows
required to become a fundamental breach, whereas the breaching party to be extended for a period to
the failure in performance obligations at the end of finish his late delivery. If they fails to conduct their
the added time becomes a crucial condition. obligations subsequently within the adding period of
time fixed by the injured party, the other remedies
According to Art. 7.1.5, cl. 3, PICC acknowledges
(comprising avoidance) could be applied by the
that “Where in a case of delay in performance which
aggrieved party in order to prevent his detriment.
is not fundamental, the aggrieved party has given
Perhaps, this content leaves open the question
notice allowing an additional period of reasonable
whether the aggrieved party could be obviously
length, it may terminate the contract at the end of
declared contract avoided after the failure of the
that period. If the additional period allowed is not of
breaching party in continuously conducting
reasonable length, it shall be extended to a
breached obligation within the time limit set by the
reasonable length. The aggrieved party may in its
innocent party. Whether this breached action must
notice provide that if the other party fails to perform
be determined as a fundamental breach, which the
within the period allowed by the notice, the contract
creditor may make a claim for avoidance. It is vital
shall automatically terminated”. Furthermore,
to build a concrete circumstance in the avoidance
Article 7.3.1, PICC indicates that: “In the case of
regime under Vietnamese commercial law.
delay, the aggrieved party may also terminate the
contract if the other party fails to perform before the 2.3. Anticipatory breach
time allowed under Article 7.1.5, cl.3 has expired”.
According to Art. 72 in CISG, the test of the
Thus, the nature of these PICC regulations is similar anticipatory breach has been addressed that one
to the relevant acts of CISG. The avoidance clause party has the right to avoid the transaction if the
under PICC also distinguishes between termination other party constitutes a fundamental breach of
due to failure to perform essential obligations (Art. contract before the time fixed for performance under
7.3.1) and termination resulting from a delay in the contract. It has to be clear that this non-
delivery because of non – compliance with a performance will occur, which will more easily be
Nachfrist (Art. 7.1.5). Under German law, the satisfied with renunciation than for incapacity. In
termination of a reciprocal contract is called the words of one court, this requires that a debtor
Rücktritt. Under the Nachfrist approach, if a debtor both seriously and expressly or unambiguously deny
fails to perform on time or in line with the contract its obligation under the contract (Michael, 2013). It
and the creditor has also “specified, without result, is accepted that the concept of anticipatory breach

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may be illustrated by the creditor's inference or is a results show that accepting the right to avoid the
notice from the non-performance party. As for the contract because of an anticipatory breach in CISG
former, the party intending to declare the contract and PICC encourages Vietnamese Lawmakers to
being avoided must issue a suitable announcement take a critical look at this concept. Clearly, this
to the other party in order to permit him to provide regulation assists in minimizing losses to the
consistent assurance of his performance. As for the aggrieved party instead of waiting until the non–
latter, such notice is not mentioned (Art. 72, cl 2 and performance has happened on the day fixed.
cl 3). It is possible that including anticipatory breach
3. CONCLUSION
as one of grounds for avoidance stems from
constraint that the aggrieved party must mitigate The avoidance of the agreement in CISG and PICC
their losses in making a claim for damages. As contains the same crucial elements, while
regards to adequate assurance, this matter has yet to Vietnamese law reveals several different points. To
be interpreted in CISG, but it could provide make the regulations in terms of the basics for
information to the party in need of assurance or avoidance much more conceivable and consistent
interpreting to his suspicion or even giving a bank with international rules, Vietnamese law should
guarantee of performance. Giving the breaching consider the following three issues:
party this opportunity prevents the injured party
First, it is vital to rebuild a new definition in relation
from abusing the authority to put the contract to an
to “fundamental breach”. The new definition should
end.
cover two main ideas: The first one is that the
For anticipatory breaches in PICC, it can be found expectation of the innocent party can be probably
in Article 7.3.3. This provision was modeled on found in the terms of the contract. So, determining
Article 72(1) CISG. Article 7.3.3 PICC provides: what the injured party may expect under the contract
“Where prior to the date for performance by one is more reasonable than clarifying what the
party it is clear that there will be a fundamental non- innocent’s purpose is. The new concept of
performance by that party, the other party may fundamental breach should exclude the “damage”
terminate the contract”. PICC has mentioned factor because its meaning has been neglected in
adequate assurance as well. The context, however, ascertaining the characteristics of fundamental
is not similar to CISG. While Article 72(2) CISG breach in practices.
requires the creditor to give reasonable notice to the
Second, the termination of the contract in a
debtor in order to permit him to provide adequate
assurance of his performance in cases of an circumstance where the breaching party fails to
'objective' anticipatory breach, under Article 7.3.4 carry out their obligation during the adding period is
necessary for protecting the legitimate rights of the
PICC, a sufficient guarantee requirement can be
innocent party. The strict remedy in such a context
applied as the innocent party’s intention rather than
is worthy of the non-performance party’s failure in
his obligation (Larry & Chen, 2017). Naturally,
the second chance. It is recommended that
offering an opportunity for the breaching party to
ensure his capacity is established as a legitimate Vietnamese law should draw a specific framework
right of the innocent party. Therefore, ignoring such for this concept in the avoidance regime.
content would result in the contract being avoided Finally, the anticipatory breach should be accepted
by the subjective judgment from the non-breaching as an advanced rule since it makes the legitimate
party because the non-performance has not occurred safety of the parties in the contract much more
at the time fixed. thoughtful and allows the parties to mitigate their
Under Article 314 of Vietnamese commercial law, damages. It is easy to understand why CISG and
PICC have taken anticipatory breach as an essential
the aggrieved party may solely avoid the contract as
context for avoidance. Thus, anticipatory breaches
the non–performance party committed their
should be considered in improving Vietnamese law
obligations (fundamental breach or others under
regarding avoidance.
their agreement). It means that anticipatory breach
has not been stipulated in Vietnamese law. The

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