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

Under a CISG contract, Carvet Ltd sold goods to Mendo Co. Mendo avoided the contract for a fundamental breach and must return the goods. Before return, the goods were lost through a cause outside Mendo's control and not related to any act or omission of Mendo, and the loss was not caused by Mendo's failure to examine or preserve them. Which statement is correct?

Mendo keeps its right to avoid. Although a buyer generally loses that right if it cannot return the goods substantially as received, the CISG excepts cases where the impossibility is not caused by the buyer's act or omission, as here.

  1. AMendo loses the right to avoid because it cannot return the goods substantially in the condition received
  2. BMendo keeps the right to avoid, because the impossibility of restitution was not due to its act or omissionCorrect
  3. CMendo may avoid only if Carvet agrees to accept the loss

Explanation

The buyer normally loses the right to avoid if it cannot make restitution of the goods substantially in the condition received. There is an exception where the impossibility is not due to the buyer's act or omission. Here the loss was outside Mendo's control, so the right to avoid is retained. Carvet's agreement is not required.

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