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ACCA Applied Skills · Corporate and Business Law (Global) · Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms

Orla Ltd (seller) delivered goods to Pavo Co under a CISG contract. On inspecting them, Pavo discovered a defect in quality that Orla could not have been unaware of. Pavo gave Orla notice of the lack of conformity three years after delivery. Which is the correct position?

Pavo may still rely on the defect. Although the CISG sets a two-year outer limit for notice of non-conformity, the seller cannot rely on that limit where it knew, or could not have been unaware of, the defect and failed to disclose it.

  1. APavo may rely on the defect because the seller knew of it, which removes the two-year outer limitCorrect
  2. BPavo has lost the right to rely on the defect because the two-year limit from handing over applies in all cases
  3. CPavo may rely on the defect only if the notice was given within 14 days of delivery

Explanation

The buyer must give notice within a reasonable time after discovering or ought to have discovered the lack of conformity, and at the latest within two years of the goods being handed over, unless that period is inconsistent with a contractual guarantee. However, a seller cannot rely on these notice provisions if it knew, or could not have been unaware of, the facts and did not disclose them. So the two-year limit does not protect Orla, and the 14-day period is not a CISG rule.

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