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

Corvo Ltd agreed under a CISG contract to buy 12 monthly deliveries of components from Delmar SA. After the first delivery, Corvo discovers that Delmar's factory has been seized by creditors, and there are serious doubts that Delmar can perform. Delmar has not yet been late. What may Corvo do for the second delivery under the CISG?

Corvo may suspend its own performance because it is apparent that Delmar will not perform a substantial part of its obligations due to a serious deficiency in ability to perform. It must notify Delmar and continue if Delmar provides adequate assurance of performance.

  1. ASuspend its own performance, but must continue if Delmar gives adequate assurance of performanceCorrect
  2. BImmediately avoid the whole contract without notice
  3. CSuspend performance and refuse any assurance from Delmar
  4. DDo nothing until the second delivery is missed

Explanation

A party may suspend performance if it becomes apparent that the other will not perform a substantial part of its obligations because of a serious deficiency in ability to perform or creditworthiness. Suspension must be notified, and the party must continue if adequate assurance is given. Avoidance without notice is not allowed, and waiting is not required.

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