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

Garnet Ltd and Holm AB have a CISG contract for three instalments. The second instalment is fundamentally defective, so Holm avoids the contract in respect of that instalment. The three instalments are interdependent because they are parts of one production line and could not be used for the intended purpose separately. Which is the correct position on instalments already delivered or yet to come?

Holm may also avoid the first and third instalments, because the CISG allows avoidance of past or future deliveries when, owing to their interdependence, they cannot be used for the purpose both parties contemplated at the time of contracting. Garnet's consent is not needed.

  1. AHolm can avoid only the second instalment, regardless of interdependence
  2. BHolm may also declare the contract avoided in respect of the first and third instalments if, due to their interdependence, they could not be used for the purpose contemplated at the time of contractingCorrect
  3. CHolm may avoid only the third instalment
  4. DHolm cannot avoid any other instalment unless Garnet agrees

Explanation

Under the CISG, a buyer who avoids the contract in respect of one delivery may, at the same time, avoid it for past or future deliveries if, because of their interdependence, they could not be used for the purpose contemplated by the parties when contracting. Limiting avoidance to the second instalment ignores this rule, and Garnet's agreement is not required.

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