a. General Principles
The CISG follows the general principle of full compensation of damages. Under this principle, the starting point is that all damages the aggrieved party suffered from the breach of contract can be recovered. Limitations of the damages that are recoverable like they occur in many domestic jurisdictions are unknown to the CISG. Accordingly, the CISG does not distinguish between direct or indirect damages and – at least according to the prevailing opinion – also not between pecuniary and non-pecuniary loss as long as it is encompassed by the scope of the contractual agreement. The latter limitation excludes claims based on “pain and suffering”, “mental distress”, or “loss of amenities”, since these sufferings are not covered by the contractual agreement to sell and purchase a good. In contrast, loss of good will, e.g. as consequence of a party’s inability to supply its customers with adequate goods, is covered by a sales contract. While not undisputed, punitive damages are generally found to be outside of the scope of the convention and can thus be claimed only under the applicable domestic law (if that provides for the possibility to claim punitive damages).
In addition to this compensator function the claim for damages also serves the purpose of indirectly protecting the promisee's interest in proper performance of the promisor's obligations. It follows from this so called performance principle that the claim for damages also is the instrument under the CISG to make sure that a breach of contract does not pay off for the breaching party.