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ACCA Applied Skills · Corporate and Business Law (Global) · Obligations of the seller and buyer, and provisions common to both

Alpha Ltd (seller) delivers machinery to Beta Inc under a contract governed by the CISG. The machinery is delivered a week late, but Beta still receives substantially what it contracted for and suffers no significant loss of benefit. Beta wishes to terminate the contract. Which statement is correct?

Beta cannot avoid the contract because a short delay causing no substantial loss of expected benefit is not a fundamental breach under the CISG. Beta may still claim damages for any loss caused by the delay, but avoidance requires fundamental breach.

  1. ABeta may avoid the contract, because any late delivery entitles the buyer to avoidance
  2. BBeta may not avoid the contract, because the delay is not a fundamental breach, but it may claim damages for any lossCorrect
  3. CBeta may only claim a price reduction, never damages
  4. DBeta may avoid the contract only if a court first approves

Explanation

Under the CISG, avoidance is available only for fundamental breach, where the aggrieved party is substantially deprived of what it was entitled to expect. A short delay without significant detriment is not fundamental. Beta keeps the right to damages for loss caused. Option A is wrong because not every breach permits avoidance.

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