A foreign buyer who refuses the goods without proving a defect is in breach of contract: he must take delivery and pay the price (CISG, art. 53 and 60). The seller first puts the goods in safety, then chooses between requiring payment, avoiding the sale and reselling, and claiming the price difference. Every day at the port costs money, and the seller’s silence is held against him.
The container reached Jebel Ali on 3 September. On the 5th, the Emirati buyer writes that he “will not take the goods”, with no explanation other than a market that has turned against him. Forty tonnes of aluminium parts sit on the terminal, demurrage starts running on the seventh day, the invoice of 310,000 euros is unpaid, and the Breton seller, who sold CFR, discovers that he knows neither what he may do with the goods nor what he may claim. This page answers that situation, one of the most frequent in export disputes, in the order in which the questions arise: save the goods, characterise the refusal, choose the remedy, quantify, act.
First emergency: the goods, not the dispute
The buyer’s refusal does not make the goods disappear, and it is the goods that cost money. Terminal charges, container demurrage, insurance, sometimes deterioration of the product, all accumulate while the parties exchange emails. A seller who leaves the goods on the quay for six weeks waiting for the buyer to come round pays twice: the charges, then the reproach of not having mitigated his loss. The Vienna Convention, which applies as of right to most sales between a French seller and a buyer established in another Contracting State, requires the party relying on the breach to take reasonable measures to mitigate the loss, failing which the other party may claim a reduction in damages equal to the loss that should have been avoided (CISG, art. 77). A passive seller has this provision quoted back at him at the hearing.
The Convention organises what follows. A seller who still has the goods in his possession or under his control, because the buyer delays taking delivery or fails to pay the price, must take reasonable steps to preserve them, and may retain them until the buyer has reimbursed his reasonable expenses (CISG, art. 85). He may deposit them in a third party’s warehouse at the buyer’s expense, provided the cost is not unreasonable (CISG, art. 87). And he may sell them by any appropriate means if the buyer has unreasonably delayed taking delivery or paying, on condition that reasonable notice of his intention is given; where the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, the sale becomes an obligation, and notice is due to the extent possible (CISG, art. 88). The seller retains from the proceeds his costs of preservation and resale and accounts to the buyer for the balance.
That mechanism gives the seller an immediate weapon, provided it is handled in due form. A dated notice which recalls the obligation to take delivery, sets a deadline, announces warehousing at the buyer’s expense and the intention to resell if no answer comes, turns a seller who suffers into a seller who decides. It later serves as the key exhibit before the judge or the arbitrator.
Is the refusal justified? The Incoterm and the question of conformity
Before choosing the remedy, the refusal must be characterised. The buyer may refuse the goods if he establishes a lack of conformity amounting to a fundamental breach, one that substantially deprives him of what he was entitled to expect under the contract (CISG, art. 25 and 49), and he must have given notice specifying the nature of the defect within a reasonable time (CISG, art. 39). A refusal motivated by a falling market, a duplicated order or the default of the buyer’s own customer is not a refusal: it is a failure to perform. In the Emirati case that opens this page, the buyer invokes no defect, and his email says so. That email is the best exhibit in the file.
The Incoterm chosen sheds light on the debate. It fixes the place of delivery and the moment risk passes, and nothing else: neither the transfer of title, nor the price, nor any right to refuse. A CFR Jebel Ali sale is delivered at the port of loading, on board the vessel; risk passed to the buyer at that moment, and damage at sea does not allow him to refuse the goods as against the seller, only to claim against the carrier or the insurer. A DAP or DDP sale is delivered at destination, and the seller bears the carriage; a buyer who then refuses a container damaged on unloading refuses, this time, with good reason. Many refusals are in truth attempts to shift onto the seller a risk that has not been his since the ship sailed. Our analysis of Incoterms 2020 and the transfer of risk details that allocation, and our page on choosing the Incoterm and the payment method explains why the two are decided together.
When the buyer does invoke a defect, the seller must neither admit nor deny it by email: he must have it recorded. An independent surveyor appointed at the port of destination, a joint inspection, dated photographs, the pre-shipment inspection report where one exists, fix the condition of the goods at a time when nobody has yet moved them. A buyer who has received the goods and intends to reject them must himself preserve them (CISG, art. 86); one who lets them deteriorate on the terminal loses part of his argument.
The seller’s three remedies
The Convention offers the unpaid and rejected seller a scale of remedies whose degree he chooses. He may first require performance: payment of the price, taking delivery and performance of the buyer’s other obligations (CISG, art. 62). That route suits specific, made-to-order goods that cannot be sold elsewhere, and a solvent buyer. He may also fix an additional period of reasonable length for performance (CISG, art. 63), which has two merits: a documented last chance, and avoidance at the end of the period without having to prove a fundamental breach.
He may then declare the contract avoided, by simple notice, without going to court, if the failure amounts to a fundamental breach or if the buyer has not paid or taken delivery within the additional period (CISG, art. 64). An outright refusal to take delivery, without reason, is the fundamental breach par excellence. Avoidance frees the seller from the goods: he becomes master of them again and may resell.
He may finally claim damages, which are cumulative with avoidance. The Convention offers two methods of calculation that are particularly convenient for an exporter. If the seller has made a substitute sale in a reasonable manner and within a reasonable time after avoidance, he recovers the difference between the contract price and the resale price, plus any further damages (CISG, art. 75). If he has not resold and the goods have a current price, he recovers the difference between the contract price and the current price at the time of avoidance (CISG, art. 76). In both cases are added the costs of preservation, return carriage and rerouting, and loss of profit, within the limit of what the buyer foresaw or ought to have foreseen at the conclusion of the contract (CISG, art. 74). Sums in arrears bear interest (CISG, art. 78), at the rate set by the law applicable in the alternative.
French domestic law, where it applies because the Convention has been excluded or because the buyer is established in a non-Contracting State and the conflict rule designates French law, reaches similar results by more formal paths: the defence of non-performance (Civil Code, art. 1219), termination by notice after formal demand (Civil Code, art. 1226), compensation for foreseeable loss (Civil Code, art. 1231-3). It also contains an old and little-known rule that exporters should know: in sales of goods and movable effects, the sale is terminated as of right and without demand, in the seller’s favour, once the agreed time for collection has expired (Civil Code, art. 1657). Under French law, a seller of goods that the buyer does not come to collect does not have to apply for termination: it is acquired.
Documentary credit and advance payment
When the sale is paid by documentary credit, the refusal of the goods changes nature. The bank knows only documents: if the seller makes a complying presentation within the validity period, the issuing bank and, where applicable, the confirming bank must honour, whatever the buyer says, because the credit is a transaction separate from the sale contract (UCP 600, art. 4 and 5). A buyer who wants to refuse the goods cannot block payment other than by proving manifest fraud by the beneficiary, which a mere allegation of defect does not establish. A seller who has shipped and holds complying documents must therefore present without delay; if he has presented and the bank refuses, the question becomes the validity of the bank’s refusal, dealt with on our page on the bank refusing the documentary credit.
An advance payment follows a different logic. A seller who avoids the sale must in principle return what he has received, but he sets off the damages due to him, and a non-refundable deposit or forfeiture clause, lawful in both systems, allows him to keep it. The clause is worth what its drafting is worth: a deposit characterised as “arrhes” under French law allows the buyer to withdraw by forfeiting it (Civil Code, art. 1590), which is not what the seller thought he had negotiated.
Where to act, and against whom
The competent court is determined as for any international unpaid debt: the jurisdiction clause or the arbitration clause first, then, for a buyer established in the European Union, the court of the place where the goods were or should have been delivered (Regulation (EU) No 1215/2012, art. 7(1)), a place fixed by the Incoterm. An EXW or FCA sale from France locates delivery in France and gives jurisdiction to the French commercial court; a DAP sale to Rotterdam gives jurisdiction to the Dutch court. Outside the Union, as in the Emirati case, suing in France is only worthwhile if the judgment can be enforced where the buyer has assets, which often argues for an arbitration clause, the award circulating under the 1958 New York Convention. Our page on the foreign customer who does not pay details those choices, and our page on governing law and jurisdiction explains how to fix them in advance.
One point of timing governs the rest. The Convention contains no limitation period, which is a matter for the law designated by the conflict rule (Cass. com., 26 October 2022, no. 20-22.528); before a French court, between traders, it will most often be five years (Commercial Code, art. L. 110-4). But the declaration of avoidance must be made within a reasonable time, and the substitute sale within a reasonable time after avoidance, on pain of losing the favourable calculation of article 75. A seller who waits a year to resell can no longer charge the buyer with the fall in the market that occurred in the meantime.
The ten-day plan
On the day of the refusal, the seller does three things: he notifies the buyer in writing that he takes note of the refusal, disputes any ground of non-conformity, is placing the goods in storage at the buyer’s expense and will resell them if delivery is not taken within a stated period; he has the condition of the goods recorded by a third party; he presents his documents to the bank if a documentary credit exists. Within the week, he obtains two or three purchase offers on the local or regional market and keeps them, because they will prove that the resale was reasonable. At the end of the period, he declares the contract avoided, resells, and sends the buyer an account: price difference, storage and carriage costs, interest. That account is the basis for negotiation, then for the writ or the request for arbitration. In the aluminium case, the resale to a Sharjah trader, thirteen days after the refusal, at 91% of the original price, fixed the loss at 28,000 euros of price difference and 9,400 euros of costs, claimed and obtained by award.
A foreign buyer refuses the goods or sends the container back? The first decisions are taken within the week, before the costs outgrow the dispute. A first conversation settles the notice to send, the preservation measure and the remedy to pursue.
Frequently asked questions
Can the buyer refuse the goods because the market has fallen [[Q]]
No. The buyer must pay the price and take delivery (CISG, art. 53). A refusal without a proven lack of conformity is a breach of contract, which opens avoidance and damages to the seller.
What should be done with refused goods stuck at the port [[Q]]
Put them in safety, at the buyer’s expense, in a third-party warehouse (CISG, art. 85 and 87), then resell them after notice of a reasonable period (CISG, art. 88). A seller who lets them deteriorate fails in his duty to mitigate (CISG, art. 77).
Is a court needed to terminate the sale [[Q]]
Not under the Vienna Convention: avoidance takes effect by a declaration notified to the buyer (CISG, art. 64). Under French domestic law, termination by notice after formal demand is available (Civil Code, art. 1226), and for goods not collected within the agreed time it is acquired as of right (Civil Code, art. 1657).
How is my claim calculated [[Q]]
By the difference between the contract price and the price of a resale made within a reasonable time (CISG, art. 75), or between the contract price and the current price at avoidance (CISG, art. 76), plus storage and carriage costs, foreseeable loss of profit (art. 74) and interest (art. 78).
Does the refusal of the goods block the documentary credit [[Q]]
No. The bank pays against complying documents, independently of the sale contract (UCP 600, art. 4 and 5). Only manifest fraud by the seller allows payment to be blocked.
In which country should a buyer who refuses the goods be sued [[Q]]
Before the court designated by the contract; failing that, for an EU buyer, before the court of the place of delivery fixed by the Incoterm (Brussels I bis Regulation, art. 7(1)); outside the Union, where the judgment or the award can be enforced.
Written by Hervé Guyader, avocat at the Paris Bar, doctor of law. This content is general information and does not replace legal advice.