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

Harlan Ltd validly avoided a CISG contract with Pryce Ltd because of a fundamental breach by Pryce. Harlan had already paid part of the price, and Pryce had delivered some goods. What is the effect of avoidance?

Avoidance releases both parties from their contractual obligations, but damages remain claimable. Each party who has already performed or paid can claim restitution of what it supplied or paid, so Harlan can recover its part payment.

  1. ABoth parties are released from their primary obligations, subject to damages, and each may claim restitution of what it supplied or paidCorrect
  2. BThe contract is cancelled only for future obligations, and neither party may recover anything already supplied or paid
  3. COnly the party in breach is released from its obligations
  4. DThe contract is released in full and damages can no longer be claimed by Harlan

Explanation

Avoidance under Article 81 releases both parties from their obligations, subject to any damages due. A party that has performed may claim back what it supplied or paid. The no-restitution option is wrong because restitution is expressly available.

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