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

Haskel Ltd (seller) and Orrin Inc (buyer) had a CISG contract for two deliveries. Orrin validly avoided the whole contract after a fundamental breach by Haskel. Orrin had already paid the price. Which statement describes the effect of avoidance?

Avoidance releases both parties from future performance but leaves any damages claim intact. Orrin, having paid, can claim the price back, and Haskel can claim back any goods it supplied. So the correct statement is mutual release with restitution and damages preserved.

  1. ABoth parties are released from their obligations, subject to any damages due, and each may claim back what it supplied or paidCorrect
  2. BOnly the buyer is released, while the seller must still deliver the goods
  3. CThe contract is cancelled retrospectively, so no damages can be claimed by either party

Explanation

Avoidance releases both parties from their obligations, but it does not remove liability for damages. A party that has performed may claim restitution of what it supplied or paid. The third option is wrong because damages remain available after avoidance.

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