Measurement of damages when contract avoided: Comparison between the provisions of CISG Article 76 and the counterpart provisions of PECL Article 9:507

Both the CISG and the PECL distinguish between two mutually exclusive types of situations following breach (“non-performance” in the context of the PECL) of contract and avoidance (“termination” in the context of the PECL) by either party. 1.1 In one type of situation, the aggrieved party engages in an alternative transaction that substitutes for the performance expected from the original, now avoided (terminated) contract; this is a so-called cover transaction. Such transactions fall under CISG Art. 75 and PECL Art. 9:506. In the other type of situation, the aggrieved party does not resort to a substitute transaction. In such cases, market-price-based damages may become available to the aggrieved party under so-called current price clauses, CISG Art. 76 and PECL Art. 9:507. Note that under perfect market conditions, the two types of situations converge. This chapter begins by exploring the general logic of current price damages shared by the CISG and PECL and subsequently identifies and analyzes the differences in approach between the two instruments. 1.2 Monetarily speaking, current price damages are a compensation for a devaluation or increase of price in terms of a theoretical substitute transaction. They represent the difference between the contractual price of goods (or, in the case of the PECL, also services, etc.) and their price at a certain later time, whether higher or lower (how this later time is determined is discussed below).