The Draft Uncitral Digest And Beyond: Cases, Analysis And Unresolved Issues in the U.n. Sales Convention

The Draft UNCITRAL Digest and Beyond

The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the U.N. Sales Convention Papers of the Pittsburgh Conference Organized by the Center for International Legal Education (CILE) edited by

Franco Ferrari, Harry Flechtner, Ronald A. Brand

Sellier. European Law Publishers

ISBN 0-421-875-40-2 (Hard cover edition by Sweet & Maxwell) ISBN 3-935808-14-3 (Soft cover edition by Sellier. European Law Publishers)

Die Deutsche Bibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detailierte bibliografische Daten sind im Internet
ber http://dnb.ddb.de abrufbar. #

2004 by Sellier. European Law Publishers GmbH, M
nchen / Sweet & Maxwell, London

Dieses Werk einschließlich aller seiner Teile ist urheberrechtlich gesch
tzt. Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulssig und strafbar. Das gilt insbesondere f
r Vervielfltigungen, bersetzungen, Mikroverfilmungen und die Einspeicherung und Verarbeitung in elektronischen Systemen. Gestaltung und Herstellung: Sandra Sellier, M
nchen. Satz: Federer & Krauss, Augsburg. Druck und Bindung: Ksel, Kempten. Gedruckt auf surefreiem, alterungsbestndigen Papier. Printed in Germany.

Table of Contents

Preface Digest of case law on the UN Sales Convention: The combined wisdom of judges and arbitrators promoting uniform interpretation of the Convention Jernej Sekolec

1

Articles 1-13, 78 The CISG’s sphere of application: Articles 1-3 and 10 Franco Ferrari

21

Scope of application: Articles 4-5 Franco Ferrari

96

CISG rules on exclusion and derogation: Article 6 Franco Ferrari

114

Interpretation of the Convention and gap-filling: Article 7 Franco Ferrari

138

Interpretation of statements: Article 8 Franco Ferrari

172

Trade usage and practices established between the parties: Article 9 Franco Ferrari

191

Writing requirements: Article 11-13 Franco Ferrari

206

CISG foreign case law: how much regard should we have? Joseph Lookofsky

216

A commentary on Articles 1-13 and 78 Michael Bridge

235

V

Table of Contents

Articles 14-24, 66-77 Comments on the draft Digest relating to Articles 14-24 and 66-70 Pilar Perales Viscasillas

259

Observations on passing of risk Johan Erauw

292

Articles 25-34, 45-52 Beyond the Digest: Part III (Articles 25-34, 45-52) Ulrich Magnus

319

General provisions, obligations of the seller, and remedies for breach of contract by the seller Henry Gabriel

336

Cases, analyses and unresolved issues in Articles 25-34, 45-52 Alejandro M. Garro

362

Articles 35-44, 79-88 Buyer’s obligation to give notice of lack of conformity (Articles 38, 39, 40 and 44) Harry M. Flechtner

377

Article 79 and a transactions test analysis of the CISG Ronald A. Brand

392

Revisiting the north-south debate in light of the draft Digest: Articles 38, 39 and 44 Mark S. Walter

408

Articles 53-65 Beyond the Digest: Articles 53-65 Claude Witz

424

Buyer obligations under the CISG John E. Murray, Jr.

440

VI

Table of Contents

Obligations of the buyer and remedies for the buyer’s breach of contract (Articles 53-65) Filip De Ly

468

Articles 53-65 Petar Sˇarcˇevic´

482

Conclusion Concluding comments: Historic progress, opportunities, and the work ahead Harold Burman

496

The Draft UNCITRAL Digest on the United Nations Convention on Contracts for the International Sale of Goods (1980) Articles 1-13 Franco Ferrari

501

Articles 14-24 Peter Winship

580

Articles 25-34 Ulrich Magnus

600

Articles 35-44 Harry Flechtner

627

Articles 45-52 Ulrich Magnus

696

Articles 53-65 Claude Witz

725

Articles 66-77 Peter Winship

753

Article 78 Franco Ferrari

810

Articles 79-88 Harry Flechtner

818

VII

Preface and Acknowledgements The United Nations Commission on International Trade Law (UNCITRAL) was created in 1966 by the U. N. General Assembly to further the harmonization of transnational commercial law. One of UNCITRAL's most successful products is the United Nations Convention on Contracts for the International Sale of Goods (CISG), a multilateral commercial treaty that has now been adopted by more than 60 nations, which account for more than two-thirds of world trade in goods. With the appearance of numerous court decisions and arbitral awards (now numbering more than 1100) applying the CISG, the UNCITRAL Secretariat charged five CISG experts (Professors Franco Ferrari, Harry M. Flechtner, Ulrich Magnus, Peter Winship, and Claude Witz) from a variety of regions with the task of creating a digest of CISG case law. The appearance of UNCITRAL's CISG Case Digest is expected to revolutionize the understanding and practice of international sales law. This book contains both a draft version of the UNCITRAL Case Digest as it was given to the UNCITRAL Secretariat, as well as commentary that is the result of a conference held at the University of Pittsburgh School of Law and sponsored by its Center for International Legal Education on February 7, 2003. The conference presentations, and the chapters of this book, have allowed the Digest authors and other distinguished CISG scholars to address the results of UNCITRAL's Digest initiative. While the final UNCITRAL Digest will differ slightly from the draft version that appears in this volume, and will be available in all official U. N. languages, we sincerely hope that the draft Digest and the commentaries that follow will provide useful information for courts, scholars, and legal practitioners faced with questions arising from the CISG. This volume is intended to go beyond the draft Digest by providing the authors of its various chapters the opportunity to critique and analyze the cases catalogued in the Digest. While the Digest is an invaluable resource for those seeking information on existing interpretation of the CISG, it has two particular limitations. The first is that the Digest authors were charged only with the task of presenting cases interpreting the CISG. They were not asked (and were not allowed) to express opinions on whether the decisions in those cases were correct, or otherwise open to question. The second is that, by limiting itself to existing cases interpreting the CISG, the Digest contains no

VIII

Preface and Acknowledgements

interpretive information on important issues not yet addressed in the cases. In this volume, we have invited the authors to travel both of these roads not taken in the Digest by providing both a critique of existing case law and commentary on issues not yet addressed by the courts. Their commentary thus goes “beyond” both the draft Digest and the ultimate final version of the Digest. In this sense, we hope this volume will serve as a useful companion to the Digest in all its versions, and will advance the goals of Article 7 of the CISG by promoting uniformity of interpretation. Ultimately, we hope this book will help us all come closer together through the efforts toward legal harmonization and unification made by the United Nations Commission on International Trade Law. There are many to whom we are indebted for the work that follows. The five Digest authors have set the foundation for this effort, and the two of us included in that group particularly thank the others for making this such a rewarding cooperative project. Secretary Jernej Sekolec and his staff at UNCITRAL deserve special congratulations for creating and shepherding the Digest to fruition. Secretary Sekolec deserves our particular gratitude for the special part he played in the conference and this book. Jeff Kovar and Harold Burman at the Office of Private International Law of the Legal Adviser's Office of the U. S. Department of State also played a special role in the conference and in supporting efforts to inform the legal profession about the work of UNCITRAL. Jamie Burchianti, Kerri Frederick, and Jamie Hudson provided valuable research assistance in editing the final product; and LuAnn Driscoll, Karen Knochel, Darleen Mocello, Valarie Pompe, and Barbara Salopek put up with endless variety in citation forms, handwriting, and odd requests in preparing the manuscript. Finally, we provide a note about citation form. As the parts to this volume were compiled, it became apparent that there exists no single workable source for citation conventions in such a global project. Thus, some conventions necessarily result from arbitrary decisions by the editors. To the extent possible, the following citation conventions were followed in the final version of materials in this volume: 1) All cases dealing with the CISG are cited by identifying the court, country, date of the decision, and CLOUT case number1 (e. g., Oberlandesgericht M
nchen, Germany, 8 February 1995, CLOUT case No.167). 1

“CLOUT” stands for “Case Law on UNCITRAL Texts,” a project of UNCITRAL to collect decisions construing the CISG and other UNCITRAL initiatives, and to make available information concerning those decisions in the official U. N. languages. The CLOUTsummaries of decisions, organized by CLOUT number, are available online through the home page of UNCITRAL (http://www.uncitral.org/).

IX

Preface and Acknowledgements

This may be followed by the inclusion of additional useful citation information (e. g., the official reporter citation for U. S. cases) in parentheses where such information is considered helpful to the reader. Citations to the Unilex database and the Pace University School of Law website are included, particularly where the textual reference may have been derived from information not included in the CLOUT abstract, or at variance with the CLOUT abstract. 2) Citations to the draft Digest are to the article of the CISG being examined in the cited portion of the Digest, followed by the specific paragraph number(s) of the cited Digest discussion. For example, “draft UNCITRAL Digest art. 39, ¶ 20.” 3) Secondary English language materials (books and articles) generally are cited in accordance with the rules found in The Bluebook: A Uniform System of Citation (17th ed. 2000). 4) Secondary sources in languages other than English are not in large and small capital letters, and generally are cited in the form selected by the author of the particular chapter of the volume. Changes were made only as necessary to be certain that the information was complete enough to help the reader find the source. 5) All dates included in footnotes are in day/month/year format (e. g., 20 January 2003). 6) Use of the word “Article” in text or a textual footnote is with the first letter capitalized when the reference is to a specific provision of the CISG or any other treaty or law. Citations to articles of the CISG or other documents are abbreviated and in all lower case. (e. g., art. 7). 7) References to secondary case sources take two forms. For Unilex, the signal is “available in” or “also available in” without italics: e. g., “English abstract also available in Unilex at http://...” For other references, “available at” is used in italics: e. g., “English translation available at http://www.cisg. law.pace.edu/.” Pittsburgh and Verona October 2003

Digest of case law on the UN Sales Convention: The combined wisdom of judges and arbitrators promoting uniform interpretation of the Convention Jernej Sekolec* I. Need for uniform interpretation The United Nations Convention on Contracts for the International Sale of Goods (“CISG”) has been adopted by 62 States.1 Their combined share in cross-border trade represents over two-thirds of the total volume of international trade. The States members range from the least economically developed to the most developed, and all major legal traditions of the world are represented among them. This makes the Convention a world sales law and the experience with the Convention to date guarantees that membership in the Convention will continue to grow. The Convention has made the rights and obligations of parties to international export and import of goods remarkably transparent – easy to ascertain and easy to understand by parties from different legal systems – and in step with evolving international contract practices. One of its benefits is that it reduces the costs of administering international transactions for the sale of goods. This will remain so, however, only if the Convention is interpreted uniformly. The expectation of its uniform *

Secretary of UNCITRAL (United Nations Commision on International Trade Law) and Chief of the International Trade Law Branch of the United Nations Office of Legal Affairs. The views in this paper are personal and do not necessarily represent the views of the organization. 1 As of 21 January 2003, the following States had adhered to the Convention: Argentina, Australia, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Burundi, Canada, Chile; China, Colombia, Croatia, Cuba, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Guinea, Honduras, Hungary, Iceland, Iraq, Israel, Italy, Kyrgyzstan, Latvia, Lesotho, Lithuania, Luxembourg, Mauritania, Mexico, Mongolia, Netherlands, New Zealand, Norway, Peru, Poland, Republic of Moldova, Romania, Russian Federation, Saint Vincent and the Grenadines, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Syrian Arab Republic, Uganda, Ukraine, United States of America, Uruguay, Uzbekistan, Yugoslavia, and Zambia.

1

Jernej Sekolec

interpretation will also help attract more States to membership in the Convention. The objective of uniform interpretation is expressed in Article 7(1) of the Convention: “In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity...” Yet, uniformity does not mean that the Convention should be frozen in time and independent of evolving circumstances. The longevity and usefulness of the Convention requires that it be interpreted in a way that allows the uniform regime to be in harmony with certain basic principles of law and to be adapted to evolving practices and needs. This flexibility is ensured in particular by the following provisions and principles: (a) Article 7(1), according to which one of the factors to be taken into account in interpreting the Convention (next to the need to promote uniformity in its application) is “the observance of good faith in international trade”; (b) Article 9, which provides that “The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves”. The threshold for usages to become binding on the parties is rather low, since under Article 9(2), “The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned”. Thus, evolving usages will complement or even supersede the specific statutory language of the Convention; (c) Article 7(2), according to which if questions should arise “concerning matters governed by this Convention which are not expressly settled in it”, those questions “are to be settled in conformity with the general principles on which [the Convention] is based ...” Only when such principles cannot be ascertained may the interpreter of the Convention resort to the non-unified national law determined in accordance with the rules of private international law. Accomplishing the task of promoting uniform interpretation is facilitated by the fact that the drafters of the Convention used, wherever it seemed possible, concepts that are described in factual terms, rather than traditional terms that have, over the course of history, acquired definite and possibly disparate meanings in national legal systems. Thus, for example, the Convention speaks of goods being “handed over” or “taken over” instead of using concepts such as “delivery” (or ‘‘de´liverance’’) which may in various

2

Digest of case law on the UN Sales Convention: The combined wisdom

national laws carry established but different meanings. Article 79 of the Convention also describes in factual terms the circumstances in which a party is not liable for a failure to perform, and avoids using technical legal terms such as “force majeure” or “frustration”. Since it was not possible to completely eliminate from the Convention language that has a technical meaning in national legal systems, however, the interpreter is reminded (in Article 7(1)) that concepts of the Convention should not be given the meaning determined by the interpreter’s domestic legal system, but rather the CISG should be interpreted having regard to “its international character”. For any interpreter or user of the Convention, it would be difficult to ensure consistency with the uniform interpretation of the Convention, have an appreciation of what it means to have regard “to its international character”, ascertain how regularly observed trade usages are being given effect in the context of the Convention, or how good faith is being understood in international trade, without having information on how courts and arbitral tribunals in States that are parties to the Convention have interpreted the uniform text. Such information must be reliable, objective, easily accessed in various languages, as comprehensive as possible, and presented in a manageable and understandable way. The value of such information is helpful beyond the purpose of promoting uniformity of interpretation. First, information on decisions taken by courts and arbitral tribunals regarding the Convention assists parties and their legal advisers in negotiating and performing commercial sales contracts, particularly by allowing the tailoring of negotiated contracts or general contract conditions to individual needs and expectations, and by promoting contractual performance in line with the prevailing understanding of the Convention’s provisions. Second, dissemination of knowledge of case law created by the combined wisdom of judges and arbitrators of many countries exhibits the Convention in a more meaningful and complete way, rather than as an isolated international text that stands on its own in the context of one legal system. This will give confidence to States that have not yet joined the Convention to do so.

II. UNCITRAL and promotion of uniform interpretation of the Convention The United Nations Commission on International Trade Law, or UNCITRAL, which prepared the draft Convention that was eventually finalized at

3

Jernej Sekolec

the Universal Diplomatic Conference in Vienna in 1980,2 was established in 1966 by the UN General Assembly3 with the objective of “the promotion of the progressive harmonization and unification of the law of international trade”.4 The General Assembly based its decision to establish UNCITRAL on considerations that included the following: – The interests of all peoples, and particularly those of developing countries, demand the improvement of conditions favouring the development of international trade; – Disparities in national laws governing international trade constitute one of the obstacles to the flow of international trade; – The progress in this area had not been commensurate with the importance and urgency of the problem; – Furthering international trade is one of the most important factors in economic development; – There was no existing United Nations organ which was both familiar with this technical legal subject and able to devote sufficient time to work in this field.5 When UNCITRAL was established, its founding resolution6 determined its mandate in the following terms: (a) Co-ordinating the work of organizations active in this field and encouraging co-operation among them;

2

Final Act of the United Nations Conference on Contracts for the International Sale of Goods, A/CONF.97/18 and Annex I, reproduced in United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March-11 April 1980, Official Records, A/ CONF.97/19, at 176 (available at www.uncitral.org/english/travaux/sales/cisg/travaux-cisgindex-e.htm). 3 Resolution no. 2205(XXI) of 17 December 1966, reproduced in the UNCITRAL Yearbook, Volume I: 1968-1970, at 65 of the English version [hereinafter GA Res. 2205 (XXI)]. The Yearbook is available at http://www.uncitral.org under “UNCITRAL Yearbook”. 4 Id. at § I. 5 Id. 6 Id.

4

Digest of case law on the UN Sales Convention: The combined wisdom

(b) Promoting wider participation in existing international conventions and wider acceptance of existing model and uniform laws; (c) Preparing or promoting the adoption of new international conventions, model laws and uniform laws and promoting the codification and wider acceptance of international trade terms, provisions, customs and practices, in collaboration, where appropriate, with the organizations operating in this field; (d) Promoting ways and means of ensuring a uniform interpretation and application of international conventions and uniform laws in the field of the law of international trade; (e) Collecting and disseminating information on national legislation and modern legal developments, including case law, in the field of the law of international trade; (f) Establishing and maintaining a close collaboration with the United Nations Conference on Trade and Development; (g) Maintaining liaison with other United Nations organs and specialized agencies concerned with international trade; (h) Taking any other action it may deem useful to fulfil its functions.7 The function, mentioned above at (d), of “[p]romoting ways and means of ensuring a uniform interpretation and application of international conventions and uniform laws in the field of the law of international trade”, has been undertaken by UNCITRAL and its Secretariat in a number of ways, including by publishing in the six UN languages (i. e., Arabic, Chinese, English, French, Russian, and Spanish) the travaux pre´paratoires on texts emanating from its work, by organizing conferences and seminars, and by publishing informational notes and bibliographies. However, the activity most focused on promoting uniform interpretation is the CLOUT information system, established in 1988, which has been complemented with the decision in 2001 to prepare a “digest” of cases on the Convention in the six UN languages.

7

Id. § II, ¶ 8.

5

Jernej Sekolec

III. The CLOUT information system Based on a decision by UNCITRAL at its twenty-first session in 1988,8 the Secretariat has established a system for collecting and disseminating information on court decisions and arbitral awards relating to Conventions and Model Laws resulting from the work of the Commission. The system is known by the acronym “CLOUT” (Case Law on UNCITRAL Texts). The purpose of the system is to promote international awareness of legal texts endorsed or adopted by the Commission; to enable judges, arbitrators, lawyers, parties to commercial transactions, and other interested persons to take account of decisions and awards relating to those texts when dealing with matters within their responsibilities; and in that way to promote the uniform interpretation and application of those texts. The CLOUT system has been designed to cover, potentially, a number of legislative texts prepared by the Commission.9 However, the bulk of the information collected so far concerns the United Nations Convention on Contracts for the International Sale of Goods (1980) and the UNCITRAL Model Law on International Commercial Arbitration (1985). The system relies on a network of national correspondents designated by those States that are parties to a Convention or have enacted legislation based on a Model Law.10 The national correspondents monitor and collect court decisions and arbitral awards, and prepare abstracts of those considered relevant in one of the official languages of the United Nations. The abstracts are translated by the Secretariat into the other five United Nations

8 Report of the United Nations Commission on International Trade Law on the work of its twenty-first session, New York, 11-20 April 1988, A/43/17, ¶¶ 98-109, reproduced in the UNCITRAL Yearbook, 1988, which is also available at www.uncitral.org under “UNCITRAL Yearbook”. 9 These texts are, in particular: Convention on the Limitation Period in the International Sale of Goods (1974), as amended by the Protocol of 1980; United Nations Convention on Contracts for the International Sale of Goods (1980); UNCITRAL Model Law on International Commercial Arbitration (1985); United Nations Convention on the Carriage of Goods by Sea (1978); United Nations Convention on Independent Guarantees and Stand-by Letters of Credit (1995); UNCITRAL Model Law on Procurement of Goods, Construction and Services (1994); UNCITRAL Model Law on Electronic Commerce (1996); UNCITRAL Model Law on Cross-Border Insolvency (1997). 10 The list of national correspondents, which is regularly updated, may be obtained upon written individual request to the UNCITRAL Secretariat.

6

Digest of case law on the UN Sales Convention: The combined wisdom

languages and are published in all six languages. The Secretariat stores the original court or arbitral decisions in its original language. The primary task of national correspondents is to collect decisions on a Convention which have been issued by courts of their respective implementing States. National correspondents may also collect other relevant decisions or awards, including those relating to a national law that is closely modelled on the text of a Convention endorsed by UNCITRAL even if the State is not party to the Convention. Special considerations apply to the collection of arbitral awards. The accessibility of arbitral awards varies considerably and is, as a rule, rather limited. Often, their availability is restricted by requirements of confidentiality. Thus, arbitral awards are included in the collection only to the extent they come to the attention of national correspondents and in the form in which they are made available to them. Generally, the complete court decision or arbitral award, in its original language, is forwarded to the Secretariat. In exceptional cases, however, a certain portion of a decision or arbitral award will be omitted for reasons, for example, of confidentiality, or because of a lack of relevance of the portion omitted to an UNCITRAL text, or because the portion is not available to the national correspondent. The Secretariat stores the decisions and awards in the form in which they are forwarded to the Secretariat by the national correspondents. They will be made available, subject to any copyright restrictions, in electronic form on the UNCITRAL website (www.uncitral.org). The abstracts are intended to provide sufficient information to enable readers to decide whether it is worthwhile to obtain and examine the complete decision or arbitral award that is the subject of the abstract. The abstracts are usually no longer than one-half of a page, in keeping with the expected large number of decisions and arbitral awards to be collected and of the costs of publishing the abstracts. In view of the necessity for brevity, the substantive part of the abstract is ordinarily not a complete summary of the full decision or award, but generally serves as a “pointer” to the specific issues concerning the application and interpretation of the relevant UNCITRAL text in a given decision or arbitral award. The abstracts and related information are published as U.N. documents and are also available on the UNCITRAL website.

7

Jernej Sekolec

IV. Decision to prepare a Digest of case law One of the benefits of the CLOUT information system is that it can be used to identify issues in the interpretation of the Convention, including divergent or conflicting interpretations. In designing the CLOUT system, a key question was whether it could be enhanced by providing a way for resolving such issues in the interest of promoting uniformity. One possible idea in the Secretariat’s proposal made in 1985 to establish the CLOUT system was for the Commission itself to attempt to resolve conflicting interpretations in court or arbitral decisions. According to the Secretariat note: “Under this possibility, the Commission would consider conflicts in the interpretation of UNCITRAL legal texts by courts or arbitral tribunals and would express its opinion as to the proper interpretation of the texts”.11 While raising the idea, the Secretariat itself was skeptical, noting that: This approach might be found to be unsuitable with respect to conventions elaborated by the Commission and model laws adopted by it. Such legal texts are incorporated into the national laws of the States adhering to the conventions or implementing the model laws. This approach would therefore involve the Commission in intervening in interpretations by courts of their own national laws when the competence to do so has not been granted to the Commission by the States parties to or adopting the texts concerned. In addition, in the case of conventions which have been adopted in final form by forums other than the Commission itself (i. e. by conferences of plenipotentiaries), the Commission would become involved in interpreting texts which it had not even adopted in final form. Moreover, an interpretation of a legal provision is very often made within the particular factual context of the case in which the interpretation is rendered. Therefore, the task of resolving two conflicting interpretations would in many cases require a detailed review of the cases within which the interpretations were rendered. The performance of such a task by the Commission would make it very similar to an “international court of appeal”.12

11

Dissemination of decisions concerning UNCITRAL legal texts and uniform interpretation of such texts, A/CN.9/267, ¶ 10, reproduced in the UNCITRAL Yearbook, 1985 which is also available at www.uncitral.org under “UNCITRAL Yearbook”. 12 Id. ¶ 10.

8

Digest of case law on the UN Sales Convention: The combined wisdom

Another possible way of dealing with such issues of interpretation would be to respond to questions referred to the Commission in the context of a dispute. Under such an approach, “the Commission would render interpretations of UNCITRAL legal texts at the request of a court or arbitral tribunal or of one or both of the parties to a dispute”.13 This suggestion was also not promoted by the Secretariat, which noted that: Many of the factors referred to in [the previously-quoted note concerning the proposal to have UNCITRAL resolve interpretational conflicts] may be relevant to the question of whether such an approach is suitable. It may also be relevant to consider that, if the interpretations were to be rendered by the Commission as a whole at its annual sessions, the resolution of the disputes could be delayed for substantial periods of time until such interpretations were rendered. In addition, it may be considered that in order for such a function to be exercised effectively by the Commission, the parties to the dispute should be entitled to present their views to the Commission on the question referred to it.14 A further idea mentioned was for the Commission to consider abstract questions of interpretation: Under this possibility, the Commission would respond to abstract questions of interpretation, arising from UNCITRAL legal texts, addressed to the Commission by parties to a commercial transaction or by other interested persons. Such questions are those which do not arise in the context of a dispute (although dealing with such questions may affect concrete disputes). The circumstances discussed in [the previouslyquoted note concerning the proposal to have UNCITRAL resolve interpretational conflicts] may also make this approach unsuitable with respect to abstract questions of interpretation of conventions elaborated by the Commission and model laws adopted by it.15 In the end the Secretariat suggested that, ... the Commission could request its Secretariat also to monitor judicial and arbitral decisions relating to the interpretation of such texts, and to report to the Commission on the status of the interpretation of such texts as circumstances warrant. In pointing out conflicts in the interpretation of provisions of UNCITRAL texts, as well as gaps in such provisions which come to light, the issuance of such reports could itself assist in promoting 13 14 15

Id. ¶ 11. Id. ¶ 11. Id. ¶ 12.

9

Jernej Sekolec

the uniform interpretation of such texts. Moreover, in the light of these reports, the Commission could consider steps to be taken to deal with such conflicting interpretations or gaps.16 In 1988, when the Commission discussed the proposal to establish the CLOUT system (which it eventually adopted, defining the functions of the national correspondents and the Secretariat in the system), it also spent some time discussing how it wished to deal with the gathered material, in particular if the material would reveal such issues as divergent interpretations of the Convention.17 At that time the Commission considered what it termed a “far-reaching proposal” of establishing “a permanent editorial board” for the CLOUT system. According to the proposal, ... the board would proceed to a comparative analysis of the collected decisions and report periodically to the Commission at its annual sessions on the state of application of the Convention. The reports should evidence in particular the existence of uniformity or divergency in the interpretation of the individual provisions of the Convention as well as the existence of gaps in the provisions which might come to light in actual court practice. In support of the proposal, it was pointed out that the establishment of such a board, composed of representatives of States parties to the Convention, would ensure that in the comparative analysis of the material collected and the regular reporting on the state of application of the Convention equal attention would be given to the national experience of each State without giving any State or region a privileged position for political, economic or purely linguistic reasons. In response to the proposal, various concerns were expressed. At the technical or organizational level, the institution of a permanent editorial board was said to be too formalized and its operation appeared unwieldy in view of the expected large number of States parties to the Convention that would wish to have a representative on the board. At a substantive level, the proposal was said to be too ambitious or at least premature. In particular, there was a risk that the interpretation given to the Convention in the analysed decisions of a particular jurisdiction would appear to represent an authoritative opinion of the member State although the collection of court decisions and arbitral awards was unlikely to be complete and the status and value of court judgments differed consider16

Id. ¶ 15 and also Collection and dissemination of information on interpretation of

UNCITRAL legal texts, A/CN.9/312, ¶ 27. 17 Collection and dissemination of information on interpretation of UNCITRAL legal texts, A/CN.9/312, reproduced in the UNCITRAL Yearbook, 1988 which is also available at www.uncitral.org under “UNCITRAL Yearbook”.

10

Digest of case law on the UN Sales Convention: The combined wisdom

ably from one legal system to another. Any such impression should be avoided, and reports on the interpretation of the Convention were to be for purposes of information only. After deliberation, the Commission decided for the time being not to establish a permanent editorial board. It was understood that the proposal would be reconsidered in the light of experience gathered in the collection of decisions and the dissemination of information along the lines suggested in the note and adopted by the Commission. It was generally understood that any measures in the new undertaking would have to be reviewed and possibly adjusted in the light of such experience.18 Over time, a considerable multinational body of case law on the Sales Convention has developed. As practitioners and academics evaluated this case law and noted divergences in interpretation, strong support was expressed for the provision of appropriate advice and guidance to help foster a more uniform interpretation of the Convention and to ensure that divergences would not be repeated and develop into distinct strands of interpretation. Against that background, in 2001 the Secretariat suggested that the Commission consider ways of ensuring the uniform interpretation and application of the Sales Convention.19 The delegates at the session were also reminded that when the Commission decided in 1988 to establish the CLOUT system, it had also considered the desirability of establishing an editorial board, which, among other things, could undertake a comparative analysis of the collected decisions and report to the Commission on the state of application of the legal texts. At that time, the Commission decided not to establish the board, but to reconsider the proposal in the light of experience gathered in the collection of decisions and the dissemination of information under the CLOUT system. The preparation of an analytical digest of court and arbitration cases, identifying trends in interpretation, was suggested as a method of providing the needed advice and guidance. One format suggested for the digest was to simply note diverging case law for information purposes; alternatively, 18

Report of the United Nations Commission on International Trade Law on the work of its twenty-first session, New York, 11-20 April 1988, A/43/17, ¶¶ 107-109. 19 The proposal was contained in Uniform Interpretation of UNCITRAL texts: sample digest of case law on the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), A/CN.9/498, which is available at http://www.uncitral.org/english/ sessions/unc/unc-34/acn9-498e.pdf.

11

Jernej Sekolec

guidance as to the interpretation of the Convention might be provided, based in particular on the legislative history of the provision and the reasons underlying it.20 The document that was submitted to the Commission to facilitate a discussion of the proposal summarized case law on articles 6 and 78 of the Convention.21 It was intended to offer the Commission an example of how court and arbitral decisions might be presented with a view to fostering uniform interpretation. In that paper it was suggested that the Commission consider whether the Secretariat, in consultation with experts from the different regions, should prepare a complete digest of cases reported on the various articles of the Convention. The Commission was invited to consider whether the approach taken in preparing the sample digest in the document under review, including the style of presentation and the level of detail, was appropriate.22 The Commission adopted the following report of its consideration of the proposal: The Commission took note with appreciation of the document in general and, in particular, of the examples given as to how court and arbitral decisions might be presented with a view to fostering uniform interpretation. The Commission commended the Secretariat for its innovative approach towards the implementation of the mandate the Commission had received from the General Assembly to promote and ensure a uniform interpretation and application of international conventions. A widely shared view was that, given the amount of information gathered, the decision taken in 1988 should be reconsidered and that the document constituted a good starting point for discussion in that respect. It was suggested that the Secretariat should also explore whether other initiatives could be undertaken to assist the Commission in carrying out its mandate. As to the contents of the document, it was suggested that the project should not only consider case law, but also existing legal writing. In respect of the drafting procedure of the digest, it was suggested that the Secretariat should avail itself of the network of national correspondents, as they were persons knowledgeable about CLOUT and its context. It was further suggested that the digest should not only have the goal of evidencing divergences in the case law of different countries or giving 20 21 22

12

Id. ¶ 3. Id. Id. ¶ 4.

Digest of case law on the UN Sales Convention: The combined wisdom

guidance as to the interpretation of uniform legal texts, but also to identify gaps in those texts. It would then be the task for the Commission to decide on how to deal with such gaps. It was further suggested that the project should be an ongoing one, in that it should be updated continually, as new cases emerged. In response, some concerns were expressed. It was stated that it was not clear to whom the digest would be addressed, as the natural addressees of any UNCITRAL text were States. States, however, might not need a digest such as the one under consideration. As far as practitioners and judiciaries were concerned, it was felt that they did not need such a digest, as much literature existed that aimed at helping to understand the Convention on Contracts for the International Sale of Goods. In respect of the contents, it was suggested that the digest could be merely a compilation of differences in the interpretation of the Convention rather than a guide. In support of that view it was stated that if the digest to be drafted were to function as a guide, it would necessarily have to indicate preference for some views over others. It was felt that such an expression of preference might be read as a criticism of decisions taken by national courts, which was felt to be an inappropriate result. With a view to alleviating some of the above-mentioned concerns, it was stated, for instance, that although it was true that much literature existed on the Convention on Contracts for the International Sale of Goods in some countries, there were countries where no such literature was available. It was also stated that any work done by UNCITRAL would have the advantage not only of being translated into the six official languages of the United Nations (and thus have a very wide reach), but also of taking a more international view than most existing commentaries and papers, which were drafted from a national point of view. As it was observed that any decision taken by the Commission with respect to the digest would be subject to reconsideration at any future session, it was felt that the Secretariat should be given the mandate to continue to draft that digest. It was again pointed out that, in line with the sample provisions presented in the note by the Secretariat,23 the digest should not criticize domestic case law. After discussion, the Commission requested the Secretariat to draft a digest on the entire Convention on Contracts for the International Sale of Goods. In doing so, the Secretariat should avail itself of the help of the network of national correspondents and avoid criticism of the decisions of national courts.24 23 24

Id. Report of the United Nations Commission on International Trade Law on its thirty-fourth

13

Jernej Sekolec

V. Principles guiding the work towards a Digest A noteworthy feature of the discussions by delegates in the Commission session was the admonition that the Digest should avoid criticism of the decisions of national courts. Related to that was the suggestion that the Digest should be a compilation of differences in the interpretation of the Convention rather than a guide (because, if it were a guide, it would have to indicate preference for some views over others, which could be read as a criticism of decisions by national courts, which was felt to be an inappropriate result).25 That line of reasoning is sensible on several grounds. In many States, court decisions are frequently the subject of comments, sometimes critical, by practitioners and academics, and publications expressing such comments are widely used and appreciated. However, a criticism in a publication sponsored by an intergovernmental organization such as UNCITRAL might raise a number of questions for courts, practitioners or States – questions such as, who is the author of that view? Are there contrary views? Has the criticism taken into account all the factual particularities of the case? Could the State or the court respond to the criticism? And whether the criticism is endorsed by UNCITRAL. Such questions would draw the wrong kind of attention to the Digest and might compromise its usefulness. Bearing in mind that the Digest would be essentially an analytical summary of numerous decisions, it would be difficult to criticize a decision without presenting in sufficient detail all the factual and legal grounds on which it was based. Moreover, it was unnecessary to complement the Digest with criticisms of individual decisions, since questionable decisions tend to draw authored criticisms in various publications anyhow, and the Digest, by presenting the mainstream views emerging in practice, could fulfil its role of fostering uniform interpretation without censuring the decisions. Thus, to the extent differences have been identified in court practice, the Digest should either limit itself to identifying those differences or, if considered appropriate, offer comments based on the travaux pre´paratoires. The absence of criticism in the Digest, however, does not mean that a decision that is an aberration (and as such is likely to appear in the Digest as an isolated or minority view alongside the prevailing and mainstream position adopted by other courts) would not attract attention of the users session, 25 June-13 July, 2001 A/56/17, ¶¶ 391-395, which is available at http://www.uncitral.org/english/sessions/unc-34/A-56-17e.pdF. 25 Id. ¶ 393.

14

Digest of case law on the UN Sales Convention: The combined wisdom

of the Digest. It would be for readers to form their own opinion by considering the divergence of views. They could either find the decisions that form the prevailing view or the view supported by travaux pre´paratoires as the most convincing, or delve into the grounds of the decisions in search of reasons that justify distinguishing the various positions taken on the basis of facts, usages, good faith etc. Such an exercise, if it is undertaken by judges and then commented upon in academic writings and if such judicial decisions are reflected in subsequent editions of the Digest, will contribute to a welcome refinement of the understanding and interpretation of the Convention. During the discussion in the Commission referred to above,26 it was also suggested that the project should encompass not only case law, but also existing legal writing. The suggestion did not elicit much comment and, ultimately, was not picked up in the conclusion of the discussion. It seems that the purpose of the envisaged digest would not be furthered by including such opinions. The additional project, furthermore, would conflict with the approach that the digest should, in analytical fashion, compile the cases and indicate differences, giving the reader the sense of the number of courts having taken one or the other position, possibly combined with comments about the intended meaning of the provision pursuant to the travaux pre´paratoires. A further obstacle to including views expressed in legal publications is that it would be difficult to make that information representative of writings in all States party to the Convention and to take appropriate account of writings in the various languages of the States party to the Convention. Moreover, academic and other writings are available to users, and including them in the Digest would involve a process of selection among various points of view. Writings also tend to contain criticism, and their inclusion would be difficult to reconcile with the view that the Digest should refrain from criticism of court decisions. It is therefore perhaps better to limit the Digest to identifying the views and trends in interpretation and to leave to commentators the task of presenting evaluations, proposals and criticisms.

VI. The process of preparing the Digest The drafting of a digest of case law is a task that requires a full command of the preparatory materials for the Convention and the analysis of a large number of cases, whether included in the CLOUT system or not. The UNCITRAL Secretariat, with its limited resources could not undertake this enormous task, which also requires a specialized knowledge of the text. It was 26

Id. ¶ 392.

15

Jernej Sekolec

therefore felt that the best approach would be to enlist the assistance of a group of experts who would prepare parts of the text, consult among themselves, and produce a draft that could then be circulated widely and in particular to national correspondents. The draft Digest would then be finalized by the UNCITRAL Secretariat on the basis of the comments received. We had the pleasure at the conference sponsored by the Center for International Legal Education of the University of Pittsburgh School of Law of discussing with most of these experts27 the result of their work, and of thanking them for it. Every effort has been made to make the draft Digest a comprehensive reflection of views taken by national courts. However, it is clear that there are decisions (in some countries, a good number of decisions) that have not been quoted in the draft Digest. Nevertheless, I am confident that the draft Digest is for all practical purposes a sufficiently broadly based and useful reflection of views of courts on individual provisions of the Convention. This confidence is based on the fact that the national correspondents are called upon to transmit to the UNCITRAL Secretariat a selection of court cases that are significant and representative and, in their view, reflect the case law of each country. In addition, cases have been included in the draft Digest that have not yet been included in the CLOUT system. The wide consultation process prior to finalizing the text will also increase the likelihood of obtaining information and suggestions that will help make the final version of the Digest more comprehensive and reflective of significant judicial views. To the extent decisions not reflected in the Digest confirm the broadly supported mainstream views taken by other courts, their omission may not be seen as critical. If the decisions not reflected are exceptional or regarded as aberrations in comparison to the mainstream view, their absence may also not materially affect the usefulness of the Digest, as the majority view is likely to be the most influential for users of the Digest. The reader will also note that the draft Digest does not (yet) refer to decisions from courts from all States party to the Convention. It is important that the Digest be, and be seen to be, a work reflecting as broadly as possible the case law in States from different geographical regions, with different legal traditions and at different levels of economic development. It should be noted that this will be the first edition of the Digest and that the text will be updated as developments in case law occur. The Secretariat, in 27 Professor Franco Ferrari; Professor Harry M. Flechtner; Professor Ulrich Magnus; Professor Peter Winship; and Professor Claude Witz.

16

Digest of case law on the UN Sales Convention: The combined wisdom

cooperation with the national correspondents and experts, will take care to monitor and act on such developments, and include in updates to the Digest new cases or significant cases that may have been missed. We should also cultivate lines of communication with the academic community in order to obtain the necessary information to ensure that the Digest is as comprehensive and useful as possible. The Secretariat plans, once the Digest has been issued, to circulate it widely and invite courts and others in States that are members of the Convention, in particular those that have no or few decisions reflected in the Digest, to provide us with the information to update the Digest. Therefore, I would like to conclude this introduction to the discussion of the draft Digest by thanking the University of Pittsburgh for organizing this conference and requesting the participants (and any readers of this text) to send us your comments or information that may be relevant for future editions of the text.28

VII. Digests for other texts In the Secretariat’s proposal for the preparation of a digest of case law on the Sales Convention, it was suggested that the reasons for the preparation of that digest also apply to the UNCITRAL Model Law on International Commercial Arbitration (1985).29 The Model Law has served as the basis for national legislation in some 44 jurisdictions and parts of its uniform texts have been used in many other jurisdictions. Its text and principles have become the standard for assessing the international acceptability of national regimes for international commercial arbitration. Many countries have taken the Model Law as the basis for legislation on domestic arbitration as well, because they consider that the policy considerations underlying domestic arbitration are no different from the policies on which the Model Law is based. With respect to the Model Law, more than 148 cases have been reported in the CLOUT system. Those decisions also reveal some unsettled issues and divergent trends. The provisions that have most frequently been interpreted 28 The UNCITRAL Secretariat can be contacted at the Vienna International Centre, P.O. Box 500, Room E0440, A-1400, Vienna, Austria (fax 43-1-26060-5813; email: uncitral@ uncitral.org). 29 The proposal was contained in Uniform Interpretation of UNCITRAL texts: sample digest of case law on the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), A/CN.9/498, ¶ 5, which is available at http://www.uncitral.org/ english/sessions/unc/unc-34/acn 9-498e.pdf.

17

Jernej Sekolec

by reported court decisions include those regarding the scope of application of the Model Law (Article 1); the extent of court intervention (Article 5); the definition and form of the arbitration agreement (Article 7); the referral of the parties to arbitration by the court before which an action has been brought (Article 8); the arbitration agreement and interim measures of protection granted by a court (Article 9); the appointment of arbitrators by the court (Article 11); the competence of the arbitral tribunal to rule on its jurisdiction (Article 16); correction and interpretation of the award (Article 33); the recourse against the award (Article 34); and the recognition and enforcement of the award (Articles 35 and 36). The Commission discussed the idea of a digest of case law on the Model Law on Arbitration at its annual session in 2002 and, without considering further the guidelines for the preparation of a digest of case law (the implication being that the methodology used for the Digest on the Sales Convention would also apply), concluded that, in view of the importance of international commercial arbitration and the relevance of the UNCITRAL Model Law on International Commercial Arbitration in that context, the Secretariat should prepare a similar digest of case law on the Model Law.30 In that connection the Commission also discussed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), a landmark instrument and one of the most successful treaties in the area of trade law, currently having 133 States as members with the expectation of that number growing. It has served as a model for many subsequent international multilateral and bilateral treaties as well as the UNCITRAL Model Law on International Commercial Arbitration. The Convention has become a cornerstone of the rule of law in international commerce and is essential to ensuring that disputes regarding international contractual obligations are treated fairly. International trade can only prosper if it is based on the rule of law: if parties do not have that confidence, the expansion of trade relations to unfamiliar parties or parties in new markets will be seriously hampered. With respect to the enforcement of foreign arbitral awards, the UNCITRAL Secretariat has taken note of worrying developments in some trades. For example, in a recent letter to the UNCITRAL Secretariat from the International Cotton Advisory Committee (ICAC, an intergovernmental organization of States having an interest in the production, export, import and consumption of cotton), which was also brought to the Commission’s 30 Report of the United Nations Commission on International Trade Law on its thirty-fifth session (17-28 June 2002), A/57/17, ¶ 243, which is available at http://www.uncitral.org/ english/sessions/unc/unc-34/A-57-17e.pdf.

18

Digest of case law on the UN Sales Convention: The combined wisdom

attention, it was stated that in 2001 about two thirds of all arbitral awards issued in conjunction with international trade in cotton were ignored by the party at fault, and that this fact undermined confidence in the cotton trading system and imposed costs throughout the cotton distribution chain.31 The reaction in the Commission was “... that non-compliance with arbitral awards was a serious matter that required immediate attention since it could undermine the efficiency of arbitration and the reliability of contracts, which could seriously disrupt international trade”.32 While in other sectors of commerce the situation is not the same as it is in the cotton trade (or perhaps in some other commodity trades), it is necessary to ensure, in the interest of safeguarding the basis of the development of international trade, that the regime for the enforcement of arbitral awards is clear and well understood, both as regards legislation implementing the Convention and its judicial interpretation. As to the legislative aspect of the issue, UNCITRAL has on its agenda a project, undertaken jointly with Committee D of the International Bar Association (IBA), aimed at monitoring the legislative implementation of the New York Convention. The purpose of the project is limited to that aim, and is not to monitor individual court decisions applying the Convention. The Secretariat has sent out a questionnaire to States party to the Convention inquiring how the Convention was enacted, and has so far received over 60 replies (out of a current total of 133 member States). The Commission urged the Secretariat to intensify its efforts to obtain information necessary for preparing the report and for that purpose to re-circulate the questionnaire. The Secretariat has also been urged to obtain information from other sources, in particular intergovernmental and non-governmental organizations. This work will lead to a report presenting findings based on the analysis of the information gathered, which the Secretariat plans to prepare for a future session of the Commission.33 The discussion in UNCITRAL, however, showed that the interpretation of the Convention by courts also deserves attention, and that an analytical presentation of case law interpreting the New York Convention, compiled and presented in a fashion similar to the one used in the draft Digest of case law on the Sales Convention, would be useful. As a result, the Commission, at its annual session in 2002, decided that the Secretariat should explore the feasibility of preparing a digest of case law

31 32 33

Id. ¶ 236. Id. ¶ 236. Id. ¶¶ 234-235.

19

Jernej Sekolec

on the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.34 The UNCITRAL Secretariat has included the implementation of these further mandates on its agenda. Bearing in mind that the Secretariat has to work with very limited personnel and other resources, and must give priority to the preparation of studies and drafts for legal texts that are being formulated by the Commission and its working groups, we hope to be able to show the first results soon. 34

20

Id. ¶ 243.

The CISG’s sphere of application: Articles 1-3 and 10 Franco Ferrari* I. Introduction The CISG’s provisions contained in Chapter I of Part I (relating to the “Sphere of Application”) are without any doubt the Convention’s most important provisions. Indeed, unless it has been decided on the basis of those provisions that the CISG applies at all, neither the Convention’s substantive provisions, nor its provisions on interpretation (i. e. Articles 7 and 8), can be used to solve any dispute. This is why it is no surprise that the Convention’s applicability has been dealt with in many state courts and arbitral tribunals, as can easily be evinced from a look at the draft Digest. Despite the large number of court decisions and arbitral awards concerning the issue at hand, there are many issues regarding the CISG’s applicability that have not yet been touched upon in any decision. This chapter deals both with the issues to which the draft Digest refers, for which there is case law, and to those with which the draft Digest does not deal due to the lack of case law. In doing so, this paper will go beyond the draft Digest in two ways: on the one hand, it will criticize those court decisions that deserve criticism; on the other hand, it will examine issues that are not at all touched upon by the draft Digest. This way of proceeding is designed to guide the practitioners in a way the Digest cannot due to its limited scope. Before looking more closely into the issues relating to the Convention’s applicability, it is necessary to focus briefly on a preliminary problem – very important in practice – that has to be solved before even examining whether the CISG’s applicability requirements are met: the question of whether a court (of a Contracting State) has to resort to its private international law rules in order to determine the applicable substantive law or whether it has to have direct recourse to the Convention. This problem arises due to the fact that both the Convention’s rules and private international law rules are specifically designed to deal with international (sales) disputes.

*

Professor of International Law, Verona University School of Law.

21

Franco Ferrari

As pointed out by the draft Digest, according to some decisions, courts of Contracting States have to look into whether the CISG applies before resorting to the private international law rules (of the forum);1 in other words, recourse to the CISG (like recourse to any substantive law convention) prevails over recourse to the forum’s private international law.2 Two courts expressly stated this; they held that the CISG’s prevalence over the conflicts of law approach (i. e. over recourse to private international law) is due to the principle “lex specialis derogat generalis” and to the fact that the CISG is more specific than any private international law rule: This specificity is due not only to the narrower scope of the [CISG] (it applies only to sales contracts whose international character depends on the location of the buyer and seller in different countries, whereas – as is commonly recognized – [the private international law rules of the forum] apply to all kinds of international sales contracts) but also, and above all, to the fact that rules of uniform substantive law must always prevail over the rules of private international law (independent of their sources). Uniform substantive law is more specific per definitionem than the rules of private international law because the former settles ‘directly’ the question of applicable substantive law. It thus avoids the two-step approach – consisting first in the identification of the applicable law and then in its application – necessarily required by resort to private international law.3

1

Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 286 (2001)). 2 For this statement, see Tribunale di Pavia, Italy, 29 December 1999, CLOUT case No. 380 (Corriere giuridico 932 f. (2000)); Landgericht Zwickau, Germany, 19 March 1999, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/519.htm; Handelsgericht Z
rich, Switzerland, 30 November 1998, CLOUT case No. 251 (Schweizerische Zeitschrift f
r europisches und internationales Recht 186 ff. (1999)); Oberlandesgericht Dresden, Germany, 9 July 1998, CLOUT case No. 347 (Internationales Handelsrecht 18 f. (2001)); Oberlandesgericht Frankfurt, Germany, 20 April 1994, CLOUT case No. 84 (Recht der internationalen Wirtschaft 593 f. (1995)). 3 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 286 (2001)). See also Tribunale di Rinini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003).

22

The CISG’s sphere of application: Articles 1-3 and 10

II. The internationality of sales contracts under the CISG A. Internationality under the 1964 Hague Conventions In order for the CISG to apply (as was true under its predecessors, the 1964 Hague Conventions, as well), the contract for the sale of goods has to be “international”. In other words, the CISG (and, prior to the CISG, the 1964 Hague Conventions) solely applies to sales contracts deemed to be “international”, a choice that has been criticized on the grounds that currently “[the] differences which one time existed between transnational sales and sales of the same goods within one legal system have no reason [to exist]”.4 Although both sets of rules (the CISG and the 1964 Hague Conventions) apply only to “international” sales, their international spheres of application are very different. This is due to the different criteria adopted by these Conventions in order to determine the internationality of a sales contract.5 Indeed, the 1964 Hague Conventions (as opposed to the CISG) considered “international” only those sales which presented two elements of internationality: a subjective and an objective one.6 As far as the first element is concerned, the 1964 Hague Conventions required the parties’ place of business (or, absent a place of business, their residence)7 to be located in different States, regardless of the parties citizenship.8 As for the second element, the objective one, Article 1(1) ULIS9 required that “either [the] acts constituting offer and acceptance are effected in different States, or that 4

M. J. Bonell, La convenzione di Vienna sulla vendita internazionale: origine, scelte e principi fondamentali, Rivista trimestrale di diritto e procedura civile 717 (1990); for a similar statement, see Arthur Rosett, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L. J. 269 (1984). 5 See S. M. Carbone & M. Lopez de Gonzalo, Commento all’art. 1 della convenzione sui contratti di vendita internazionale di beni mobili, Nuove leggi civili commentate 3 (1989). 6 See A. Frignani, Il contratto internazionale 262 (1990). 7 See Article 1(2) ULIS: “Where a party to the contract does not have a place of business, reference is to be made to his habitual residence”. For a court decision applying the aforementioned provision, see Bundesgerichtshof, Germany, 22 October 1980, Neue Juristische Wochenschrift 1158 (1981). 8 See Article 1(3) ULIS: “The application of the present Law shall not depend on the nationality of the parties”. 9 See Article 1(1) ULIS: The present Law shall apply to contracts of sale of goods entered into by the parties whose places of business are in the territories of different States, in each of the following cases: (a) where the contract involves the sale of goods which are at the time of the conclusion of the contract in the course of carriage or will be carried from the territory of one State to the territory of another;

23

Franco Ferrari

the goods are sold during international transports or are to be transported internationally, or that the act of offer and acceptance are made in a State other than the State of the place of delivery”.10 B. The Internationality of Contracts under the CISG It is common knowledge that the 1964 Hague Conventions’ international sphere of application was criticized. This criticism undoubtedly influenced the decision of the drafters of the CISG to decide against the objective criterion of internationality and, thus, simplify the CISG’s approach. Indeed, according to the CISG, the sole criterion to determine the internationality of a sales contract corresponds to the subjective criterion of the 1964 Conventions. Thus, under the CISG the internationality of a contract depends merely on the parties having their places of business (or habitual residences)11 in different States, as stated by several courts.12 As pointed out by one court, in order to be relevant, the aforementioned internationality must exist at the moment of conclusion of the contract.13 It must be noted, however, that the CISG did not adopt the approach of the 1964 Hague Conventions according to which the criteria of internationality constituted, at the same time, the only criterion of applicability. Thus, the internationality of a sales contract does not by itself suffice to make the CISG applicable, as recently pointed out by an Italian court decision, referred to in the draft Digest.14 It is for this reason that a German court15 – correctly, in (b) where the acts constituting the offer and the acceptance have been effected in the territories of different States; (c) where delivery of the goods is to be made in the territory of a State other than that within whose territory the acts constituting the offer and the acceptance have been effected. 10 F. J. A. van der Velden, The Law of International Sales: The Hague Convention 1964 and the Uncitral Uniform Sales Code 1980 – Some Main Items Compared, 4 Hague-Zagreb Essays 50 (C. C. A. Voskuil & J. A. Wade eds., 1983). 11 See Article 10(b): “[...] if a party does not have a place of business, reference is to be made to his habitual residence”. 12 See Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana (2001), 280 ff.); Oberlandesgericht Kln, Germany, 21 May 1996, CLOUT case No. 168, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/254.htm; Oberster Gerichtshof, Germany, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 ff. (1995)); Oberlandesgericht Kln, Germany, 26 August 1994, CLOUT case No. 122 (Neue Juristische Wochenschrift 245, 246 (1995)). 13 Oberlandesgericht Dresden, Germany, 27 December 1999, available at http://www. jura.uni-freiburg.de/ipr1/cisg/urteile/text/511.htm. 14 Tribunale di Vigevano, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 286 (2001)).

24

The CISG’s sphere of application: Articles 1-3 and 10

this author’s opinion – stated that it is wrong to suggest, as some authors do,16 that the different States in which the parties must have their places of business in order for a sales contract to be international under CISG must also be Contracting States. Where the “subjective international prerequisite” is missing, the CISG will not be applicable per se, even if the contract’s execution involves different States,17 as has been confirmed by a German court decision referred to in the draft Digest.18 The court refused to apply the CISG to a case where a German buyer had acquired tickets from a German seller for the 1990 Soccer World Cup final where the tickets were to be handed over in Rome, on the grounds that the contract was not an international one. On the other hand, the contract can be considered international even in those cases where the goods do not cross any border19 and where the parties have the same citizenship, since, as pointed out by case law quoted in the draft Digest, citizenship is – according to article 1(3) CISG – irrelevant in determining internationality,20 as is the civil or commercial nature of the contract or the parties,21 as long as the parties have their place of business in different States. Internationality does not appear to create many problems in case law, unless an agent is involved in the conclusion of the contract. In this case it becomes 15

Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Praxis des internationalen Privat- und Verfahrensrechts 401 (1991)), where it is expressly stated that in order for a sales contract to be international under the CISG, the parties do not have to have their places of business in different Contracting States. 16 See, e. g., Carbone & Lopez de Gonzalo, supra note 5, at 68; A. Kaczorowska, L’internationalit d’un contrat, Journal de droit international et de droit compar 223 (1995). 17 See R. Herber & B. Czerwenka, Internationales Kaufrecht 18 (1991). 18 Oberlandesgericht Kln, Germany, 27 November 1991 (Die Deutsche Rechtsprechung auf dem Gebiete des Internationalen Privatrechts, T
bingen 85 (1991)). 19 For a similar conclusion, see, e. g., Peter Schlechtriem, From the Hague to Vienna – Progress in Unification of the Law of International Sales Contracts?, The Transnational Law of International Commercial Transactions 127 (Horn/Schmitthoff eds., 1982). 20 See Bundesgerichtshof, Germany, 31 October 2001, available at http://www.cisg.law. pace.edu/cisg/wais/db/cases2/011031gl.html (Internationales Handelsrecht 14 f. (2002)); Rechtbank van Koophandel Veurne, Belgium, 25 April 2001, available at http://www.law. kuleuven.ac.be/int/tradelaw/WK/2001-04-25.htm; Court of Arbitration of the Bulgarian Chamber of Commerce and Industry, Bulgaria, 24 April 1996, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=421&step=FullText (award No. 56/1995). 21 Bundesgerichtshof, Germany, 31 October 2001, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases/011031gl.html (Internationales Handelsrecht 14 f. (2002)).

25

Franco Ferrari

necessary to identify who is party to the contract (the principal or the agent) in order to determine internationality. Since agency is, as often pointed out in case law,22 one of the issues that falls outside the CISG’s scope of application, it is on the basis of the law applicable by virtue of the rules of private international law of the forum that it must be decided who is party to the contract.23 Thus, where the agent discloses the principal and according to the applicable law this leads to the principal being the party to the contract, it is the principal’s place of business that is to be taken into account to determine whether the contract is international.24 C. The “place of business” under the CISG Considering that by virtue of Article 1(1) CISG the internationality of a sales contract (and, thus, the applicability of the CISG) depends on the location of the parties’ places of business, the importance of the definition of “place of business” is evident.25 It is therefore surprising that the drafters of the CISG have not defined it, apparently due to the lack of a uniform concept acceptable to all the delegates to the Vienna Diplomatic Conference, who suggested the most disparate definitions.26

22 For court decisions stating that issues of agency law and related matters are not dealt with by the Convention, see Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 376 (Giurisprudenza italiana 280 ff. (2001)); Oberster Gerichtshof, Austria, 20 March 1997, CLOUT case No. 189 (Zeitschrift f
r Rechtsvergleichung 204 ff. (1997)); Appellationsgericht Tessin, Switzerland, 12 February 1996, CLOUT case No. 335 (Schweizerische Zeitschrift f
r internationales und europisches Recht 135 ff. (1996)); Obergericht Thurgav, Switzerland, 19 December 1995, CLOUT case No. 334 (Schweizersche Zeitschrift f
r internationales Recht 118 ff. (2000)); Landgericht Kassel, Germany, 22 June 1995, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/370.htm; Amstgericht Alsfeld, Germany, 12 May 1995, CLOUT case No. 410 (Neue Juristische Wochenschrift RechtsprechungsReport 120 f. (1996)); Kammergericht Berlin, Germany, 24 January 1994, CLOUT case No. 80 (Recht der internationalen Wirtschaft 683 f. (1996)); Zivilgericht Kanton Basel-Stadt, Switzerland, 21 December 1992, CLOUT case No. 95 (Baseler Juristische Mitteilungen 310 ff. (1993)); Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Praxis des internationalen Privat- und Verfahrensrechts 400 ff. (1991)). 23 See Oberlandesgericht Kln, Germany, 13 November 2000, available at http://www. cisg.law.pace.edu/cisg/text/001113g1german.html. 24 Id. 25 According to Kaczorowska, supra note 16, at 228, the definition of “place of business” is “the center of the CISG”. 26 For an overview of the various definitions proposed in 1980 on the occasion of the Vienna Diplomatic Conference, see Carbone & Lopez de Gonzalo, supra note 5, at 5.

26

The CISG’s sphere of application: Articles 1-3 and 10

The difficulties on the part of the drafters of the CISG in coming up with a definition of “place of business” acceptable to all parties does not preclude one from being able to identify some elements that allow for a better determination of “place of business”, even though one must keep in mind that there is no general abstract definition. The “place of business” has to be defined on a case-by-case basis, as pointed out in scholarly commentary.27 As a general rule, however, it can be asserted that there is a place of business where there is a stable business organization28 or, as stated by the German Supreme Court (in relation, however, to the 1964 Hague Conventions), where “the center of the business activity directed to the participation in commerce” is located,29 which links the contracting party to the State where the business is conducted, as long as the party has autonomous power.30 A look at the draft Digest shows that a similar definition can also be found in a much more recent court decision (this one relating to the CISG) which defines “place of business” as “the place from which a business activity is de facto carried out [...]; this requires a certain duration and stability as well as a certain amount of autonomy”.31 That autonomous power is an element that characterizes the concept of place of business is evidenced by the fact that an arbitral award considered that a contract concluded between a Chinese seller and an Austrian buyer was international, despite the fact that the buyer had conducted the negotiations partially through its liaison office located in China;32 a liaison office, as pointed out by an even more recent French

27

For this conclusion, see G. A. Ferretti, Commento all’art. 10 della convenzione di Vienna sui contratti di vendita internazionale di beni mobili, Nuove Leggi civ. commentate 43 (1989). 28 For this requirement of stability, see, e. g., Kevin Bell, The Sphere of Application of the Vienna Convention on Contracts for the International Sale of Goods, 8 Pace Int’l L. Rev. 245 (1996); Carbone & Lopez de Gonzalo, supra note 5, at 5; Czerwenka, supra note 1, at 131 ff. 29 Bundesgerichtshof, Germany, 2 June 1982 (Juristische Wochenschrift 2731 (1982)). 30 See also Carbone & Lopez de Gonzalo, supra note 5, at 5, arguing that even though it is necessary that there be autonomous power, it is doubtful whether the power must relate to the possibility of concluding the contract or whether it is sufficient that it relates to the possibility of conducting the bargaining. 31 Oberlandesgericht Stuttgart, Germany, 28 February 2000, available at http://www.cisg. law.pace.edu/cisg/wais/db/cases2/000228gl.html (Internationales Handelsrecht 66 (2001)); for a similar definition, see also Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 ff. (1995)); for a court decision stating that the Convention’s definition of “place of business” requires the parties to “really” do business out of that place, see Amtsgericht Duisburg, Germany, 13 April 2000, CLOUT case No. 360, available at http://www.cisg.law.pace.edu/cisg/text/000413g1german.html. 32 ICC Court of Arbitration, Case No. 7531, 1994, CLOUT case No. 304 (ICC Bulletin 67-68 (1995)).

27

Franco Ferrari

Supreme Court decision33 (which confirmed a decision of the Cour d’appel de Paris)34 must not be considered a “place of business”, since it has no distinct legal personality and no autonomy. The other element characterizing the concept de quo, i. e., the stability requirement, has been referred to only once, without having been examined closely.35 Legal writers suggest, however, that from this requirement it follows that places of temporary sojourn cannot be considered “places of business”.36 This is why one cannot consider conference centers housing exhibitions or hotels or rented offices at exhibitions as being places of business under the CISG.37 Hopefully, case law will soon adopt this view, too. D. Multiple places of business Although the concept of “place of business” will not cause too many problems, the exact determination38 of the relevant place of business does, at least in those cases where a party to the contract has more than one place of business. It is common knowledge that the 1964 Hague Conventions did not answer the question of which among several places of business was to be considered the relevant one. This is why a dispute arose among legal scholars as to what criteria had to be used in order to solve the problem.39 While several legal scholars favored the view according to which the relevant place of business was that where the principal place of business was located,40 others suggested 33

Cour de Cassation, France, 4 January 1995, CLOUT case No. 155 (Recueil Dalloz Sirey 289 (1995)). 34 Cour d’appel de Paris, France, 22 April 1992, CLOUT case No. 158, available at http:// witz.jura.uni-sb.de/CISG/decisions/220492v.htm. 35 See Oberlandesgericht Stuttgart, Germany, 28 February 2000, available at http://www. cisg.law.pace.edu/cisg/text/000228g1german.html. 36 For this conclusion, see, e. g., John O. Honnold, Uniform Law for International Sales § 43 (3d ed. 1999). 37 See Franco Ferrari, International Sale of Goods 45 (1999); Honnold, supra note 36, at § 124. 38 Note that the exact determination of the places of business of the party is not only important for the applicability of the Sales Convention, but for other purposes as well. See, e. g., arts. 12, 20(2), 24, 31(c), 42(1), 57, 69(2), 90, 93(3), 94, 96. 39 For a very detailed discussion of the issue de quo, see, e. g., Gerold Herrmann, Anwendbarkeit des Einheitskaufrechts auf Kaufvertrag mit Zweigniederlasung (Art. 1 Abs. 1 EKG), Praxis des internationalen Privat- und Verfahrensrechts 214 (1983). 40 This view was favored, for instance, by U. Huber, Das Einheitliche Gesetz
ber den internationalen Kauf, Der Betrieb 1205 (1975).

28

The CISG’s sphere of application: Articles 1-3 and 10

that the solution depended upon which place of business had the closest relationship with the contract.41 The dispute was finally solved in 1982 by the German Supreme Court,42 which stated that the preferred solution was the second one and that “one must not share [...] the point of view according to which the decisive place of business is always the principal one”.43 Under the CISG, this dispute does not have any reason to exist, as the Convention expressly provides for a solution to the foregoing problem. According to this solution, laid down in Article 10(a) CISG, the place of business relevant for the determination of the internationality of a sales contract is the one having the closest relationship with the contract, as recalled by a recent German court decision.44 The CISG has, in other words, expressly rejected the so-called “theory of the principal place of business”.45 However, although Article 10(a) prevents a dispute among legal scholars as to which thesis should apply (“principal place of business theory” or “closest relationship theory”), it does not solve all of the problems. Indeed, quid iuris where the contract is concluded at one place of business and has to be executed at another one? To solve this issue, which is one of those on which no case law exists – and which is why the draft Digest does not even refer to it – one has first to examine whether the parties have agreed upon which place of business must be considered relevant. If this is the case, the problem of determining which of several places of business is relevant will not arise, since that agreement will have to be taken into account in determining the relevant place of business. But where there is no agreement concerning the relevant place of business, Article 10(a) CISG creates a new problem, that of how to determine the “closest relationship with the contract and its execution”. In order to facilitate this task, Article 10(a) itself provides for some elements to be used, which, however, have not yet been employed by courts, although at least one court might have had reason to do so.46 41

See V. Sttter, Internationales Einheits-Kaufrecht 132 (1975). Bundesgerichtshof, Germany, 1 June 1982 (in Internationale Rechtsprechung zu EKG und EAG). Eine Sammlung belgischer, deutscher, italienischer und niederlndischer Entscheidungen zu den Haager Einheitlichen Kaufgesetzen 89 ff. (Schlechtriem/Magnus eds. 1987). 43 D. Memmo, La “sede d’affari” secondo la disciplina uniforme sulla vendita internazionale nella pi recente giurisprudenza della Corte federale tedesca, Rivista trimestrale di diritto e procedura civile 759 (1983). 44 Oberlandesgericht Stuttgart, Germany, 28 February 2000, available at http://www. cisg.law.pace.edu/cisg/text/000228g1german.html. 45 For the use of this expression, see Peter Schlechtriem, Einheitliches UN-Kaufrecht 29 (1981). 46 In U. S. District Court for the Southern District of New York, United States, 14 April 1992, CLOUT case No. 23 (Filanto S. p. A. v. Chilewich International Corp., 789 F. Supp. 42

29

Franco Ferrari

According to Article 10(a) CISG, one must take into account all the circumstances known to or contemplated by the parties at any time before (or contemporaneous with) the conclusion of the contract. Consequently, one is not allowed to take into consideration the circumstances which become apparent only after the contract is concluded. Thus, it does not matter whether the places of business change after the conclusion of the contract, as pointed out by the Secretariat Commentary to the Draft Convention.47 Sometimes, however, the circumstances are insufficient to unequivocally determine the relevant place of business. In such circumstances it is here suggested, as no guidance can be found in case law (and, thus, in the draft Digest), that the international character of a sales contract be determined by resorting to the places of business involved in the conclusion of the contract, since these places of business will always be known to both parties.48 However, where the parties know that the contract is to be performed at a place of business different from the one involved in the conclusion of the contract, the text of Article 10(a) suggests that the relevant place of business is the one where performance takes place. In those rare cases where the parties do not have a place of business, Article 10(b) CISG provides that one must resort to the parties’ habitual residence in order to determine whether a sales contract is international. That means, in this author’s opinion, that one must look at a situation of fact, i. e., the real place of sojourn for a long period of time. Whether courts will adopt this view is still to be seen, as there appears to be no case law on the issue yet.

1229), the court did not address the issue of which of several places of business was the “relevant” one, although the buyer had places of business in the United States and England. 47 United Nations Conference on Contracts for the International Sale of Goods, Official Records: Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committees (Vienna, 10 March - 11 April 1980) 19 (United Nations ed., 1981), available in Documentary History of the Uniform Law for International Sales: The Studies, Deliberations and Decisions that Led to the 1980 United Nations Convention with Introductions and Explanations 409 (John O. Honnold ed., 1989) [hereinafter Documentary History]. 48 Franco Ferrari, The Sphere of Application of the Vienna Sales Convention 9 (1995).

30

The CISG’s sphere of application: Articles 1-3 and 10

E. Knowledge of the location of the place of business As can be evinced from the draft Digest, an Italian court49 recently stated that for the CISG to apply it is not sufficient that parties have their places of business in different States, i. e., that the sales contract be an international one. Even though it is not required that the parties be conscious of the applicability – or existence – of the CISG, Article 1(2) requires, as emphasized by the aforementioned Italian court decision, that the internationality of the transaction be apparent to both parties. The Convention, in other words, seeks to protect parties who rely upon the domestic setting of their contract. Given a very recent United States court decision not to be found in the draft Digest,50 this cannot be stressed enough. The aforementioned United States court appears not to have understood this; it interpreted Article 1(2) CISG to protect the parties’ reliance upon the CISG’s inapplicability. This is incorrect. As mentioned, Article 1(2) CISG protects the parties’ reliance upon the domestic setting in which a particular transaction is embedded. The position taken by the United States court would limit the CISG’s applicability in a way not intended by the drafters of the CISG. In order to determine whether the aforementioned requirement – apparent internationality of the contract – is satisfied, the following objective elements51 – exhaustively listed in Article 1(2) CISG – must be taken into account: the contract itself, and the dealings between, or the information disclosed by, the parties before or at the conclusion of the contract. Thus, the Convention is not applicable “[...] where the parties appeared to have their place of business in the same State but one of the parties was acting as the agent for an undisclosed foreign principal”.52 As far as the burden of proof is concerned, a recent Italian decision correctly stated that the party invoking the impossibility of recognizing the interna-

49

Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 286 (2001)). 50 U. S. District Court for the Southern District of Florida, United States, 22 November 2000, available at http://cisgw3.law.pace.edu/cisg/wais/db/cases2/021122u1.html (Impuls I. D. Internacional, S. L., Impuls I. D. Systems, Inc., and PSIAR, S. A. v. Psion-Teklogix Inc.). 51 See Czerwenka, infra note 103, at 136; M. Karollus, UN-Kaufrecht 29 (Vienna/New, 1991). Contra, B. Audit, La vente internationale 19 (1990) (stating that the parties must know that they have concluded a contract which is to be considered an international one under the CISG). 52 Official Records of the United Nations Conference, supra note 47, at 15, available in Documentary History, supra note 47, at 405.

31

Franco Ferrari

tional character of the sales contract (and, thus, the inapplicability of the CISG) carries that burden.53

III. The criteria for applicability of the CISG A. The CISG’s “direct” application ex Article 1(1)(a) As can be evinced from the draft Digest, there is at least one court54 that – correctly – states that in order for the CISG to apply, it is not per se sufficient that the sales contract be an (apparently) international one. Article 1(1) CISG also lists two alternative requirements for applicability, at least one of which has to be met in order to lead to the applicability of the Convention. According to the criterion set forth in Article 1(1)(a), the CISG is “directly”55 or “autonomously”56 applicable, or, as stated by the German Supreme Court, “without the need to resort to the rules of private international law”,57 when the parties have their places of business in different Contracting States, and this is true even where the parties are unaware that the States where their places of business are located are Contracting States. Thus, whenever this requirement is met (and the contract is an apparently international one) and the parties have not excluded the CISG,58 it will be applicable. 53

Tribunale di Vigevano, Italy, 12 July 2000 (Giurisprudenza italiana 280, 287 (2001)). For the same solution in scholarly writing, see Czerwenka, infra note 103, at 136; Herber & Czerwenka, supra note 19, at 21. 54 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 286 (2001)). 55 For a reference to the CISG’s “direct” applicability in case law, see, e. g., Schweizerisches Bundesgericht, Switzerland, 11 July 2000, available at http://www.cisg.law.pace.edu/cisg/text/ 000711s1german.html; in scholarly writing see U. Magnus, Zum rumlich-internationalen Anwendungsbereich des UN-Kaufrechts und zur Mngelr
ge, Praxis des internationalen Privat- und Verfahrensrechts 390 (1993); G. Reinhart, UN-Kaufrecht. Kommentar zum bereinkommen der Vereinten Nationen vom 11 April 1980
ber Vertrge
ber den internationalen Warenkauf 13-14 (Heidelberg, 1991); P. Schlechtriem, Internationales UN-Kaufrecht 8 (T
bingen, 1996). 56 This expression was used by several courts. See Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 286 (2001)); Oberster Gerichtshof, Austria, 20 March 1997, CLOUT case No. 189, available at http://www.cisg.at/2_5897m.htm. 57 Bundesgerichtshof, Germany, 11 December 1996, CLOUT case No. 268 (Neue Juristische Wochenschrift 870 ff. (1997)). 58 Courts and arbitral tribunals have often pointed out that the lack of an exclusion of the CISG by the parties is a requirement for the CISG to apply. See Tribunale di Vigevano, Italy,

32

The CISG’s sphere of application: Articles 1-3 and 10

Although initially this criterion did not often lead to the CISG’s applicability, given the current number of Contracting States to the CISG59 – sixty-two60 – it now is the prevalent basis for its application,61 as can easily 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 280 ff. (2001)); Oberster Gerichtshof, Germany, 9 March 2000, available at http://www.cisg.at/6_31199z.htm; Court of Arbitration of the Zurich Chamber of Commerce, Switzerland, 31 May 1996, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=396&step=FullText; Arbitration Court of the Chamber of Commerce and Industry of of Budapest, Hungary, 5 December 1995, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/163.htm. 59 See also Bell, supra note 28, at 247, stating that “[t]he odds of the CISG not being applied in circumstances contemplated by sub. (1)(a) grow increasingly remote as more States adhere to the Convention”. 60 For an updated list of Contracting States, see the following site on the Internet: http:// www.uncitral.org/english/status/status-e.htm#United Nations Convention on Contracts for. 61 For court decisions rendered in the last years applying the Convention by virtue of article 1(1)(a), see Hof Beroep Gent, Belgium, 21 January 2002, available at http://www.law. kuleuven.ac.be/int/tradelaw/WK2002-01-31.htm; Cour d’appel d’Orlans, France, 29 March 2001, CLOUT case No. 398, available at http://witz.jura.uni-sb.de/CISG/decisions/ 290301v.htm; Landgericht Trier, Germany, 7 December 2000, abstract available in Unilex at http://www.unilex.info/case.cfm?pid.=1&do=case&id=800&step=Abstract (Internationales Handelsrecht 2001, 35); Oberlandesgericht Oldenburg, Germany, 5 December 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/001205g2.html (Recht der internationalen Wirtschaft 2001, 30 ff.); Landgericht Stendal, Germany, 12 October 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/001012g1.htm; Tribunal de Commerce de Montargis, France, 6 October 2000, available at http://witz.jura.uni-sb.de/ CISG/decisions/061000v.htm; Oberster Gerichtshof, Austria, 7 September 2000, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=473&step=Abstract (Internationales Handelsrecht 2001, 42 ff.); Oberlandesgericht Frankfurt, Germany, 30 August 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/000830g1.html (Recht der internationalen Wirtschaft 2001, 383 f.); Sixth Civil Court of First Instance, City of Tijuana, Mexico, 14 July 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/ cases2/000714m1.html (Internationales Handelsrecht 2001, 38 f.); Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 280 ff. (2001)); Oberster Gerichtshof, Austria, 28 April 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/ cases2/000428a3.html#cx (Zeitschrift f
r Rechtsvergleichung 2000, 188 f.); Oberster Gerichtshof, Austria, 13 April 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/ cases2/000413a3.html#cx (Zeitschrift f
r Rechtsvergleichung 2000, 231); Audiencia Provincial de Navarra, Spain, 27 March 2000, CLOUT case No. 397 (Revista general de derecho 2000, 12536 ff.); Oberster Gerichtshof, Austria, 21 March 2000, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=478&step=Abstract (Internationales Handelsrecht 2001, 40 f.); Oberster Gerichtshof, Austria, 9 March 2000, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/000309a3.html#cx (Internationales Handelsrecht 2001, 39 f.); Oberlandesgericht Stuttgart, Germany, 28 February 2000, available at

33

Franco Ferrari

http://www.cisg.law.pace.edu/cisg/wais/db/cases2/000228g1.html#cx (Internationales Handelsrecht 2001, 65 ff.); Tribunal Supremo, Spain, 28 January 2000, CLOUT case No. 395 (Repertorio de Jurisprudencia 454 (2000)); Ontario Court of Appeal, Canada, 26 January 2000, available at http://is.dal.ca/~cisg/cases/nova2.htm (Nova Tool & Mold Inc. v. London Industries Inc.); Oberlandesgericht Hamburg, Germany, 26 January 2000, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/000126g1.html#cx (OLG-Report Hamburg 464 f. (2000)); Oberlandesgericht M
nchen, Germany, 3 December 1999, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/991203g1.html#ct (Internationales Handelsrecht 25 f. (2001)); Oberlandesgericht Koblenz, Germany, 18 November 1999, CLOUT case No. 359 (OLG-Report Koblenz 281 (2000)); Oberster Gerichtshof, Austria, 12 November 1998, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=476& step=Abstract (Zeitschrift f
r Rechtsvergleichung 78 (2000)); Bundesgerichtshof, Germany, 11 November 1999 (Recht der internationalen Wirtschaft 381 f. (2000)); Cour d’Appel Grenoble, France, 21 October 1999, CLOUT case No. 313, available at http://witz.jura.unisb.de/CISG/decisions/211099.htm; Kantonsgericht Z
rich, Switzerland, 21 October 1999 (Internationales Handelsrecht 45 (2001)); Amstgericht Stendal, Germany, 21 October 1999 (unpublished); Obergericht Basel-Landschaft, Switzerland, 5 October 1999, CLOUT case No. 332 (Schweizerische Zeitschrift f
r internationales und europisches Recht 115 f. (2000)); Ontario Superior Court of Justice, Canada, 31 August 1999, CLOUT case No. 341 (La San Guiseppe v. Forti Moulding Ltd., available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=413&step=FullText; Oberster Gerichtshof, Austria, 27 August 1999, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/990827a3.html#ct (Zeitschrift f
r Rechtsvergleichung 31 f. (2000)); Oberster Gerichtshof, Austria, 29 June 1999, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/990629a3.html#cx (Transportrecht-Internationales Handelsrecht 48 ff. (1999)); Handelsgericht Aargau, Switzerland, 11 June 1999, CLOUT case No. 333 (Schweizerische Zeitschrift f
r internationales und europisches Recht 117 f. (2000)); Appelationsgericht Kanton Tessin, Switzerland, 8 June 1999, CLOUT case No. 336 (Schweizerische Zeitschrift f
r internationales und europisches Recht 120 (2000)); Cour de Cassation, France, 26 May 1999, CLOUT case No. 315, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=417&step=FullText; Cour d’appel de Paris, France, 21 May 1999, CLOUT case No. 314, available at http:// witz.jura.uni-sb.de/CISG/decisions/210599v.htm; Oberster Gerichtshof, Austria, 19 March 1999 (Zeitschrift f
r Rechtsvergleichung 33 (2000)); U. S. District Court for the Eastern District of Louisiana, United States, 17 May 1999, CLOUT case No. 418 (Medical Marketing Int’l, Inc. v. Internazionale Medico Scientifica, S. r. l., available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=360&step=FullText; Oberlandesgericht Naumburg, Germany, 27 April 1999, CLOUT case No. 362 (Transportrecht-Internationales Handelsrecht 22 f. (2000)); Handelsgericht Z
rich, Switzerland, 8 April 1999, CLOUT case No. 325 (Schweizerische Zeitschrift f
r internationales und europisches Recht 113 f. (2000)); Bundesgerichtshof, Germany, 24 March 1999, CLOUT case No. 271 (Transportrecht-Internationales Handelsrecht 35 ff. (1999)); Landgericht Zwickau, Germany, 19 March 1999, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/519.htm;

34

The CISG’s sphere of application: Articles 1-3 and 10

be evinced from the number of court decisions quoted in the draft Digest in relation to Article 1(1)(a). This criterion of applicability generally causes no problems. Problems may, however, arise with respect to whether a State must be considered a Oberster Gerichtshof, Austria, 11 March 1999, CLOUT case No. 306 (Zeitschrift f
r Rechtsvergleichung 152 (1999)); Kantonsgericht Zug, Switzerland, 25 February 1999, CLOUT case No. 327 (Internationales Handelsrecht 45 (2001)); Handelsgericht Z
rich, Switzerland, 10 February 1999, CLOUT case No. 331 (Internationales Handelsrecht 44 f. (2001)); Cour d’appel Grenoble, France, 4 February 1999, CLOUT case No. 243 (Transportrecht-Internationales Handelsrecht 43 f. (1999)); Schiedsgericht Hamburger Freundschaftliche Arbitrage, Germany, 29 December 1998, CLOUT case No. 293 (Internationales Handelsrecht 35 ff. (2001)); Landgericht Regensburg, Germany, 17 December 1998 (Transportrecht-Internationales Handelsrecht 30 f. (2000)); Ontario Court, Canada, 16 December 1998 available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/981216c4.html#ta (1998 ACWSJ LEXIS 56746); Corte di appello Milano, Italy, 11 December 1998, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/981211i3.html#cx (Rivista di diritto internazionale privato e processuale 112 ff. (1999)); Comisin para la Proteccin del Comercio Exterior de Mexico, Mexico, 30 November 1998, available at http://www.uc3m.es/cisg/smexi3.htm; Landgericht Mainz, Germany, 26 November 1998, CLOUT case No. 346, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/563.htm; Bundesgerichtshof, Germany, 25 November 1998, CLOUT case No. 270 (Praxis des internationalen Privat-und Verfahrensrechts 377 ff. (1999)); U. S. District Court for the Northern District of Illinois, United States, 27 October 1998 CLOUT case No. 419 (Mitchell Aircraft Spares v. European Aircraft Service, 23 F. Supp. 2d 915); Cour d’appel Paris, France, 4 March 1998, available at http:// witz.jura.uni-sb.de/CISG/decisions/211099v.htm; Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (sterreichische Juristische Bltter 321 f. (1999)); Oberlandesgericht Oldenburg, Germany, 22 September 1998, CLOUT case No. 340 (TransportrechtInternationales Handelsrecht 23 ff. (2000)); Bezirksgericht Unterrheintal, Switzerland, 16 September 1998, CLOUT case No. 263 (Transportrecht-Internationales Handelsrecht 14 f. (2000)); Oberlandesgericht Koblenz, Germany, 11 September 1998, CLOUT case No. 285 (OLG-Report Koblenz 49 f. (1999)); Oberlandesgericht Celle, Germany, 2 September 1998, CLOUT case No. 318, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/ 506.htm; Oberlandesgericht Bamberg, Germany, 19 August 1998, available at http://www. jura.uni-freiburg.de/ipr1/cisg/urteile/text/482.htm; Corte Suprema di Cassazione, Italy, 7 August 1998, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case &id=348&step=FullText; Landgericht Erfurt, Germany, 29 July 1998, CLOUT case No. 344, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/561.htm; Cour de Cassation, France, 16 July 1998, CLOUT case No. 242 (Transportrecht-Internationales Handelsrecht 43 (1999)); Oberster Gerichtshof, Austria, 30 June 1998, CLOUT case No. 305 (Zeitschrift f
r Rechtsvergleichung 249 (1999)); Oberster Gerichtshof, Austria, 25 June 1998, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=347&step=Abstract (Zeitschrift f
r Rechtsvergleichung 248 f. (1999)).

35

Franco Ferrari

Contracting State or not. As stated in article 99 CISG, a State becomes a Contracting State once it has either ratified, approved, accepted or acceded to the Convention and once a twelve month period of time – fixed by the CISG itself – has elapsed. However, as far as the applicability of Part II (Formation of Contracts) of the Convention is concerned, the applicability presupposes, according to Article 100, that a State be a Contracting state before the offer is made. It is, in other words, not sufficient that a sales contract be concluded after the Convention enters into force for the Contracting States concerned, as pointed out, among others, by the Italian Supreme Court.62 The court had to decide a dispute that had arisen between 62

Corte Suprema di Cassazione, Italy, 24 October 1988, CLOUT case No. 8 (Giustizia civile 1998 (1998/I)). For other judicial applications of Article 100, see also Bundesgerichtshof, Germany, 17 December 1997, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/ text/296.htm (not applying the CISG to a contract concluded between a German seller and an Israeli buyer); Tribunal Supremo, Spain, 3 March 1997, CLOUT case No. 188 (La Ley 9 ff. (1997)) (not directly applying the CISG on the grounds that the contract had been concluded prior to the CISG’s entry into force in Spain); Rechtbank voor koophandel Hasselt, Belgium, 24 January 1995, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1& do=case&id=261&step=Abstract (Rechtkundig Weekblad 444 f. (1995-96)) (not applying the CISG to a contract concluded between a German seller and a Belgium buyer); Oberster Gerichtshof, Austria, 16 May 1994, available at http://www.cisg.at/2_53494.htm (not applying the CISG since the requirements for its application laid down in Article 100 were not met); Rechtbank voor koophandel Hasselt, Belgium, 30 March 1994, available at http://www.law .kuleuven.ac.be/int/tradelaw/WK/1994-03-30.htm (Rechtkundig Weekblad 264 (1994-95)) (not applying the CISG to a contract concluded between a Dutch seller and a Belgian buyer); Kantonsgericht Zug, Switzerland, 13 January 1994 (Schweizerische Zeitschrift f
r internationales und europisches Recht 135 (1996)) (excluding the applicability of the CISG for the same reasons); Rechtbank Arnhem, Netherlands, 27 May 1993, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=72&step=Abstract (Nederlands Internationaal Privaatrecht 328 (1994)) (relying upon Art.100(1) to rightly deny the applicability of the CISG to a contract concluded in 1990 between a Dutch seller and a German buyer); Rechtband Arnhem, Netherlands, 29 April 1993, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=73&step=Abstract (Nederlands Internationaal Privaatrecht 692 f. (1993)) (rightly refusing to apply the CISG to a contract between a German buyer and a Dutch seller concluded in 1986); Rechtbank Arnhem, Netherlands, 15 April 1993, available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=74&step=FullText (Nederlands Internationaal Privaatrecht 690 ff. (1993)) (not applying the CISG to an English-Dutch contract concluded in 1986); Gerechtshof Amsterdam, Netherlands, 8 April 1993, available in Unilex at http://www. unilex.info/case.cfm?pid=1&do=case&id=75&step=FullText (Nederlands Internationaal Privaatrecht 460 f. (1993)) (holding that the CISG was not applicable to a contract concluded in 1990 between a Dutch buyer and a German seller, since the CISG had not entered into force in either country); Rechtbank Arnhem, Netherlands, 12 November 1992,

36

The CISG’s sphere of application: Articles 1-3 and 10

an Italian seller and a German buyer in relation to a contract for the sale of fruit concluded prior to the CISG’s entry into force in Italy in 1988. According to Article 100(2), for the applicability of Part III (Rights and Obligations of Buyer and Seller), it is sufficient that, in either the Contracting States referred to in Article 1(1)(a) or the Contracting State referred to in Article 1(1)(b), the CISG had entered into force at a date not later than that of the conclusion of the contract.

available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/921112n1.html#cabc (excluding the CISG’s applicability to a contract between a German seller and a Dutch buyer); Rechtbank Arnhem, Netherlands, 22 October 1992, available in Unilex at http://www. unilex.info/case.cfm?pid=1&do=case&id=100&step=FullText (Nederlands Internationaal Privaatrecht 185-6 f. (1993)) (Justifying the decision not to apply the CISG to an international sales contract concluded in 1991 between an English seller and a Dutch buyer by quoting Art.100(1)); Hoge Raad, Netherlands, 25 September 1992, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=71&step=FullText (Nederlands Internationaal Privaatrecht 126 ff. (1993)) (the court held that the CISG was not applicable to a contract concluded in 1986 between a French seller and a Dutch buyer); Rechtbank Arnhem, Netherlands, 3 September 1992, available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=99&step=FullText (Nederlands Internationaal Privaatrecht 183 (1993)) (not applying the CISG since the rules of private international law led to the law of the Netherlands, which at the time of the conclusion was still a non-Contracting State); Rechtbank Arnhem, Netherlands, 7 May 1992, abstract available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=98&step=Abstract (Nederlands Internationaal Privaatrecht 659 f. (1992)) (not applying the CISG to a contract concluded in 1989, i. e., before the CISG’s entry into force either in Germany or the Netherlands, the countries in which the parties to the contract had their places of business); Gerechtshof s’Hertogenbosch, Netherlands, 27 November 1991, abstract available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=96&step=Abstract (Nederlands Internationaal Privaatrecht 338 (1992)) (excluding ex Art.100-and-99-the CISG’s applicability to a contract concluded in 1989 between a German seller and a Dutch buyer); Handelsgericht Z
rich, Switzerland, 9 April 1991, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do= case&id=89&step=FullText (not applying the CISG to a contract concluded between an Italian seller and a Swiss buyer); C mera Nacional de Apelaciones en lo Comercial, Argentina, 15 March 1991, CLOUT case No. 22 (El derecho 307 f. (1993)) (finding that the contract could not be governed by the CISG since it had been concluded prior to its entry into force); Corte Suprema di Cassazione, Italy, 24 October 1988, CLOUT case No. 8 (Foro italiano 2878 ff. (1989/I)) (the court held rightly that the CISG could not govern since the contract between an Italian seller and a German buyer had been entered into before the CISG’s coming into force and, thus, the requirements laid down in Art.100 were not met).

37

Franco Ferrari

B. The impact of reservations on the status of “Contracting State” (Articles 92 and 93) With reference to the concept of “Contracting State”, it must also be pointed out that where a State declares itself not to be bound by Part II or Part III of the CISG – either of which is possible under Article 9263 – it cannot be considered a Contracting State in respect of the Part that it has excluded. Consequently, it is possible that a sales contract concluded between two parties that have their places of business in two Contracting States, one of which has made a declaration according to Article 92, either is governed by the CISG as a whole or is governed partly by the rules of the CISG and partly by the rules of domestic law. This is true even with respect to issues normally within the scope of the CISG – a situation that certainly does not favour uniformity. The effects of the Article 92 reservation have been dealt with in several court decisions, as evidenced by the draft Digest’s references to case law. In one case, a German court64 had to decide whether the CISG was applicable to a contract for the sale of 3000 tons of nickel-copper electrolyte cathodes between a German buyer and a Finnish seller. The court held that the CISG was applicable to the rights and obligations of the parties by virtue of Article 1(1)(a), but that the issue of the contract’s formation could not be governed by Part II (Formation of Contracts) of the CISG, at least not by virtue of Article 1(1)(a), since Finland had made an Article 92 reservation and therefore could not be considered a Contracting State in respect to that Part. Nevertheless, the court held that by virtue of Article 1(1)(b) (relating to the CISG’s indirect applicability, to be examined more closely in the next chapter), the CISG had to govern contract formation as well, since the German private international law rules made German law (i. e. the law of a contracting State) applicable to that issue. Similarly, a court, even though located in Denmark – i. e. a State that made an article 92 reservation in respect of Part II – applied the CISG as a whole, in part on the basis of

63 Article 92 CISG: (1) A Contracting State may declare at the time of signature, ratification, acceptance, approval or accession that it will not be bound by Part II of this Convention or that it will not be bound by Part III of this Convention. (2) A Contracting State which makes a declaration in accordance with the preceding paragraph in respect to Part II or Part III of this Convention is not to be considered a Contracting State within paragraph (1) of article 1 of this Convention in respect to the matters governed by the Part to which the declaration applies. 64 Oberlandesgericht M
nchen, 8 March 1995, CLOUT case No. 134, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/145.htm.

38

The CISG’s sphere of application: Articles 1-3 and 10

Article 1(1)(a) (Part III), and in part by virtue of its rules of private international law leading to the law of a Contracting State (Part II).65 In another case, a German court of appeals66 had to decide whether a dispute between a Danish seller and a German buyer had to be solved by resorting to the rules of the CISG. The court held that since both Germany and Denmark were Contracting States at the moment of the conclusion of the contract, the CISG applied by virtue of Article 1(1)(a), except for the CISG’s rules on formation of contract. Since Denmark had made an Article 92 reservation by virtue of which it is not bound by Part II, it cannot “be considered a Contracting State within paragraph (1) of article 1 of [the] Convention”.67 The German court therefore resorted to its private international law rules and applied Danish domestic, non-uniform law to the formation of the contract. More recently, a Hungarian court68 as well as an arbitral tribunal69 – correctly – took the same view on this issue.

65

Østre Landsret, Denmark, 23 April 1998, CLOUT case No. 309, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=393&step=FullText. For a comment on this decision, see Joseph Lookofsky, Alive and Well in Scandinavia: CISG Part II, 18 J. L. & Com. 289 ff. (1999). 66 Oberlandesgericht Rostock, Germany, 27 July 1995, CLOUT case No. 228 (OLG-Report Rostock 50 f. (1996)). 67 Article 92(2) CISG. 68 Metropolitan Court of Budapest, Hungary, 21 May 1996, CLOUT case No. 143, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/960521h1.html. The court held that, even though a contract concluded between a Swedish seller and a Hungarian buyer after the CISG’s entry into force in both Sweden and Hungary was generally governed by the CISG by virtue of Article 1(1)(a), its formation was not, since Sweden had made an Article 92 reservation by virtue of which it was not bound by Part II of the CISG. The court therefore had recourse to its rules of private international law and determined that Swedish law had to govern the formation of the contract. In another case, Gerichtsprsident Laufen, Switzerland, 7 May 1993, CLOUT case No. 201, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=105&step=Full Text, the Article 92 reservation was mentioned. A Finnish manufacturer sold industrial equipment to a Swiss buyer. The court applied the CISG to the rights and obligations of the parties by virtue of Article 1(1)(b) as part of the law of Finland, where the CISG had already entered into force. As for Part II, the court stated that the conclusion of the contract was not disputed, which is why it did not take the reservation into account. 69 ICC Court of Arbitration, Case No. 7585, 1992, CLOUT case No. 301 (Journal du droit international 1015 ff. (1995)) (applying the CISG in its entirety to a contract concluded between an Italian seller and a Finnish buyer, due partially to article 1(1)(a) – with respect to CISG Part III – and partially to article 1(1)(b) – with respect to CISG Part II).

39

Franco Ferrari

In deciding whether a party to an international sales contract has its place of business in a Contracting State, another reservation also has to be taken into account, namely the one referred to in Article 93. According to that provision, if a Contracting State has two or more territorial units in which, according to its constitution, different systems of law are applicable in relation to the matters dealt with in the CISG, that Contracting State may make a declaration pursuant to which the CISG does not extend to all of the territorial units. The consequence of such a declaration is that if the place of business of a party is located in that territorial unit, that place of business is considered not to be in a Contracting State. As only one State, Canada, made use of the possibility of limiting the reach of the CISG to certain “territorial units”, and since that State later extended the CISG to all of its “territorial units”, it is no surprise that no case law can be found on this subject in the draft Digest. C. The CISG’s “indirect” application by virtue of Article 1(1)(b) and the 1980 Rome Convention The applicability of the CISG is not necessarily excluded where the parties do not have their places of business in different Contracting States. By virtue of Article 1(1)(b) CISG, one of the provisions that has led to major discussions,70 the CISG can be applicable even where one or both parties do not have their places of business in Contracting States, provided that the rules of private international law (of the forum, as pointed out by a recent Italian court decision71) lead to the application of the law of a Contracting State, as they have apparently done rather often, given the number of court decisions quoted in the Digest in this regard.72 In that case, the CISG is 70 For papers dealing with this provision, see F. Diedrich, Anwendung der “Vorschaltlsung” im Internationalen Kaufrecht, Recht der internationalen Wirtschaft 758 ff. (1993); Franco Ferrari, Diritto uniforme della vendita internazionale: Questioni di applicabilit e diritto internazionale privato, Rivista di diritto civile 669 ff. (1995/ II); Franco Ferrari, CISG Article 1(1)(b) and Related Matters, Nederlands Internationaal Privaatrecht 317 ff. (1995); H. P
nder, Das Einheitliche UN-Kaufrecht – Anwendung kraft kollisionsrechtlicher Verweisung nach Art. 1 Abs. 1 lit. b UN-Kaufrecht, Recht der internationalen Wirtschaft 869 ff. (1990). 71 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 286 (2001)). 72 For recent applications of the CISG by virtue of Article 1(1)(b), see Cour de Cassation, France 26 June 2001, available at http://witz.jura.uni-sb.de/CISG/decisions/2606012v.htm; Supreme Court of Queensland, Australia, 17 November 2000, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=472&step=FullText (Downs Investment Pty Ltd. v. Perwaja Stell SDN BHD, Supreme Court of Queensland, unpublished); C mara Nacional de Apelaciones en lo Comercial, Argentina, 24 April 2000, available at http://

40

The CISG’s sphere of application: Articles 1-3 and 10

applied as part of the law of the forum, and not as part of foreign law, even www.cisg.law.pace.edu/cisg/wais/db/cases2/000424a1.html; Tribunale di Pavia, Italy, 29 December 1999, CLOUT case No. 380 (Corriere giuridico 932 f. (2000)); Oberlandesgericht Hamburg, Germany, 26 November 1991 (Internationales Handelsrecht 19 ff. (2001)); Oberlandesgericht Bamberg, Germany, 13 January 1999, CLOUT case No. 294 (Transportrecht-Internationales Handelsrecht 17 f. (2000)); Handelsgericht Z
rich, Switzerland, 30 November 1998, CLOUT case No. 251 (Transportrecht-Internationales Handelsrecht 12 (2000)); Oberlandesgericht Celle, Germany, 11 November 1998, CLOUT case No. 274 (Transportrecht-Internationales Handelsrecht 18 ff. (2000)); Ostre Landsret, Denmark, 23 April 1998, CLOUT case No. 309 (Ugeskrift for Retsvaesen 1092 (1998)); Corte di appello Milano, Italy, 20 March 1998, available at http://www.cisg.law.pace.edu/cisg/wais/db/ cases2/98032i3.html#ct (Rivista di diritto internazionale privato processuale 170 ff. (1998)); Oberster Gerichtshof, Austria, 12 February 1998, CLOUT case No. 238 (Zeitschrift f
r Rechtsvergleichung 65 ff. (1999)); Cour de Cassation, France 27 January 1998, CLOUT case No. 224, available at http://witz.jura.uni-sb.de/CISG/decisions/270198.htm; Hoge Raad, Netherlands, 7 November 1997, available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=333&step=FullText (Nederlands Internationaal Privaatrecht No. 91 (1998)); Rechtbank Koophandel Kortrijk, Belgium, 6 October 1997, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/1997-10-06.htm; Oberlandesgericht Kln, Germany, 9 July 1997, CLOUT case No. 283, available at http://www.jura.uni-freiburg.de/ipr1/ cisg/urteile/text/495.htm; Rechtbank Zutphen, Netherlands, 29 May 1997, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=353&step=FullText (Nederlands Internationaal Privaatrecht No. 110 (1998)); Oberlandesgericht Hamburg, Germany, 28 February 1997, CLOUT case No. 277 (OLG-Report Hamburg 149 ff. (1997)); Handelsgericht Z
rich, Switzerland, 5 February 1997, CLOUT case No. 214 (Schweizerische Zeitschrift f
r internationales und europisches Recht 75 ff. (1998)); Rechtbank Koophandel Kortrijk, Belgium, 6 January 1997, available at http://www.law.kuleuven.ac.be/int/tradelaw/ WK/1997-01-06.htm; Cour de Cassation, France, 17 December 1996, CLOUT case No. 206 (Revue critique de droit international priv 72 f. (1997)); Cour d’Appel Grenoble, France, 23 October 1996, CLOUT case No. 205, available at http://witz.jura.uni-sb.de/CISG/decisions/ 231096v.htm; Rechtbank van Koophandel Hasselt, Belgium, 9 October 1996, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/1996-10-09.htm; Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176 (Recht der Wirtschaft 203 ff. (1996)); Landgericht Siegen, Germany, 5 December 1995, available at http://www.jura.uni-freiburg.de/ ipr1/cisg/urteile/text/287.htm; Rechtbank van Koophandel Hasselt, Belgium, 8 November 1995, available at http://www.law.kuleuven.ac.be /int/tradelaw/WK/1995-11-08.htm; Rechtbank van Koophandel Hasselt, Belgium, 18 October 1995, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=266&step=FullText (Rechtkundig Weekblad 1378 f. (1995-1999)); Landgericht Hamburg, Germany, 2 October 1995, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/395.htm; Tribunal de Commerce Nivelles, Belgium, 19 September 1995, available at http://www.law.kuleuven.ac.be/int/tradelaw/ WK/1995-09-19.htm; Hof Arnhem, Netherlands, 22 August 1995, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=156&step=FullText (Nederlands In-

41

Franco Ferrari

ternationaal Privaatrecht 683 ff. (1995)); Rechtbank Almelo, Netherlands, 9 August 1995, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=155&step=Full Text (Nederlands Internationaal Privaatrecht 686 (1995)); Oberlandesgericht Frankfurt, Germany, 5 July 1995, CLOUT case No. 276, available at http://www.jura.uni-freiburg.de/ipr1/ cisg/urteile/text/258.htm; Landgericht Kassel, Germany, 22 June 1995, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/370.htm; Oberlandesgericht Hamm, Germany, 9 June 1995, CLOUT case No. 125 (Praxis des internationalen Privat- und Verfahrensrechts 269 f. (1996)); Rechtbank Zwolle, Netherlands, 1 March 1995, abstract available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/950301n2.html (Nederlands Intrnationaal Privaatrecht 126 f. (1996)); Cour de Cassation, France 4 January 1995, CLOUT case No. 155 (Recueil Dalloz Sirey 289 f. (1995)); Rechtbank Middelburg, Netherlands, 30 November 1994, abstract available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2 /941130n1.html (Nederlands Internationaal Privaatrecht 410 f. (1996)); Tribunal Commercial de Bruxelles, Belgium, 5 October 1994, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/199410-05.htm; Rechtbank Amsterdam, Netherlands, 5 October 1994, abstract available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/941005n1.html (Nederlands Internationaal Privaatrecht 195 f. (1995)); Landgericht D
sseldorf, Germany, 25 August 1994, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=150&step=FullText; Rechtbank van Koophandel Hasselt, Belgium, 16 March, 1994, available at http://www.law. kuleuven.ac.be/int/tradelaw/WK/1994-03-16.htm; Rechtbank Zwolle, Netherlands, 16 March 1994 (Nederlands Internationaal Privaatrecht 126 f. (1996)); Rechtbank van Koophandel Hasselt, Belgium, 23 February 1994, available at http://www.law.kuleuven.ac.be/ int/tradelaw/WK/1994-02-23.htm; Oberlandesgericht Kln, Germany, 22 February 1994, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/940222gl.html (Praxis des internationalen Privat- und Verfahrensrechts 393 ff. (1995)); Oberlandesgericht D
sseldorf, Germany, 10 February 1994, CLOUT case No. 81 (Der Betrieb 2492 ff. (1994)); Kammergericht Berlin, Germany, 24 January 1994, CLOUT case No. 80 (Recht der internationalen Wirtschaft 683 f. (1994)); Rechtbank Arnhem, Netherlands, 30 December 1993, CLOUT case No. 100 (Nederlands Internationaal Privaatrecht 339 f. (1994)); Tribunal Cantonal Vaud, Switzerland, 6 December 1993, available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=173&step=FullText; Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281 (Recht der internationalen Wirtschaft 934 ff. (1993)); Oberlandesgericht D
sseldorf, Germany, 2 July 1993, CLOUT case No. 49 (Recht der internationalen Wirtschaft 845 f. (1993)); Cour d’Appel Grenoble, France, 16 June 1993, CLOUT case No. 25 (published in English in 14 Journal of Law and Commerce 209 ff. (1995)); Gerichtsprsident Laufen, Switzerland, 7 May 1993, CLOUT case No. 201, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=105&step=FullText; Rechtbank Roermond, Netherlands, 6 May 1993, available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=94&step=FullText; Oberlandesgericht D
sseldorf, Germany, 12 March 1993, CLOUT case No. 310, available at http://www.jura.uni-freiburg.de/ipr1/cisg/ urteile/text/82.htm; Rechtbank Arnhem, Netherlands, 25 February 1993, CLOUT case No. 99 (Nederlands Internationaal Privaatrecht 686 ff. (1993)); Oberlandesgericht Saar-

42

The CISG’s sphere of application: Articles 1-3 and 10

where the the rules of private international law lead to the law of a State different from the forum State. In practice this means, for instance, that where the lex fori is the law of a Contracting State in which the relevant rules of private international law of sales contracts are based upon the 1980 EEC Convention on the Law Applicable to Contractual Obligations (hereinafter: Rome Convention), as in many European countries, the CISG will generally be applicable when the law either chosen by the parties or, absent choice of law, that having the closest connection with the contract, is the law of a Contracting State. The Rome Convention’s recognition of party autonomy (in the sense of choice of law) did not raise any problems, it being a concept widely acknowledged throughout European private international law codifications long before the Rome Convention came into force. This is why its application to international sales contracts does not cause many difficulties,73 as evidenced by the fact that several courts,74 as well as arbitral br
cken, Germany, 13 January 1993, CLOUT case No. 292, available at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/83.htm; Oberlandesgericht D
sseldorf, Germany, 8 January 1993, CLOUT case No. 48 (Recht der internationalen Wirtschaft 325 (1993)); Zivilgericht Kanton Basel-Stadt, Switzerland, 21 December 1992, CLOUT case No. 45 (Baseler Juristische Mitteilungen 310 ff. (1993)); Oberlandesgericht Karlsruhe, Germany, 20 November 1992, CLOUT case No. 317 (Neue Juristische Wochenschrift Rechtsprechungs-Report 1316 f. (1993)). 73 See, however, the decision of the Tribunale di Monza, Italy, 29 March 1993 (Foro italiano 916 ff. (1994)), which expressly states that the rules of private international law to which Article 1(1)(b) refers cannot be applied when the parties have expressly chosen the law applicable to their contractual relationship. For strong criticism, see Franco Ferrari, Uniform Law of International Sales: Issues of Applicability and Private International Law, 15 J.L & Com. 159 ff. (1995). 74 See Hof Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven.ac.be/ int/tradelaw/WK/2002-05-17.htm (applying the CISG due to the choice of French law as the applicable law); Cour de Cassation, France 17 December 1996, CLOUT case No. 206 (Revue critique de droit international priv 72 f. (1997)) (annulling the appellate’s court decision not to apply the CISG to a contract concluded between a French seller and an Irish buyer which contained a choice of law clause leading to the law of a Contracting State); Rechtbank s’Gravenhage, Netherlands, 7 June 1995, abstract available in Unilex at http://www.unilex. info/case.cfm?pid=1&do=case&id=154&step=Abstract (Nederlands Internationaal Privaatrecht 687 (1995)) (applying the CISG due to the choice of Dutch law as the law applicable to the contract); Oberlandesgericht Kln, Germany, 22 February 1994, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/940222gl.html (Recht der internationalen Wirtschaft 972 f. (1994)) (applying the CISG to a contract concluded between a Dutch seller and a German buyer by virtue of the parties’ choice of German law as the applicable law and, thus,

43

Franco Ferrari

tribunals,75 all referred to in the draft Digest, have already relied upon the parties’ choice of law to make the CISG applicable by virtue of Article 1(1)(b). Absent choice of law, the Rome Convention makes applicable the law of the country with which the contract is most closely connected,76 as pointed out by several court decisions that can be found in the draft Digest.77 And since it is presumed that the contract is most closely connected with the country where the party who is to effect the contract’s characteristic performance has the law of a Contracting State); Oberlandesgericht D
sseldorf, Germany, 8 January 1993, CLOUT case No. 48 (Neue Juristische Wochenschrift 999 f. (1993)) (applying the CISG – by virtue of the choice of German law – to a contract concluded between a Turkish seller and a German buyer at a date at which Germany but not Turkey was a Contracting State). 75 See, e. g., Schiedsgericht der Handelskammer Hamburg, Germany, 21 March 1996, CLOUT case No. 166 (Monatschrift f
r deutsches Recht 781 ff. (1996)) (wrongly applying the CISG to a contract concluded between a German buyer and a Chinese seller by virtue of the [hypothetical] choice of German law as the law applicable to the contract; since the parties had their place of business in different Contracting States, the CISG should have been held applicable by virtue of Article 1[1][a] not 1[1][b]); ICC Court of Arbitration, case No. 8324, 1995, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1& do=case&id=240&step=Abstract (Journal du droit international 1019 ff. (1996)) (applying the CISG to a sales contract by virtue of the choice of French law, the law of a Contracting State, as the applicable law). 76 See Article 4(1) EEC Convention: “To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected. Nevertheless, a severable part of the contract which has a closer connection with another country may by way of exception be governed by the law of that other country”. 77 For cases referring to the “closest connection”, see Rechtbank Amsterdam, Netherlands, 5 October 1994, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1& do=case&id=124&step=Abstract (Nederlands Internationaal Privaatrecht 195 (1995)); Landgericht D
sseldorf, Germany, 25 August 1994, available in Unilex at http://www. unilex.info/case.cfm? pid=1&do=case&id=150&step=FullText; Oberlandesgericht D
sseldorf, Germany, 10 February 1994, CLOUT case No. 81, available at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/116.htm; Rechtbank Arnhem, Netherlands, 30 December 1993, CLOUT case No. 100 (Nederlands Internationaal Privaatrecht 339 f. (1994)); Rechtbank Roermond, Netherlands, 6 May 1993, available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=94&step=FullText; Oberlandesgericht Karlsruhe, Germany, 30 November 1992, CLOUT case No. 317 (Neue Juristische Wochenschrift RechtsprechungsReport 1316 f. (1993)); Oberlandesgericht Koblenz, Germany, 27 September 1991, CLOUT case No. 316, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/30.htm; Oberlandesgericht Frankfurt, Germany, 13 June 1991, CLOUT case No. 1 (Recht der internationalen Wirtschaft 591 f. (1991)).

44

The CISG’s sphere of application: Articles 1-3 and 10

its place of business78 – and since the monetary obligation is generally not the characteristic one, as expressly stated by a German court79 – the law applicable to international sales contracts is generally (i. e. where the presumption is not rebutted80) the law of the seller. This has often been pointed out in case law,81 since it is the seller who has to execute the characteristic performance consisting of the transfer of ownership and the delivery of the goods, as stated by various courts82 and arbitral tribunals,83 reference to which can be found in the draft Digest. D. The CISG’s “indirect” application by virtue of Article 1(1)(b) and the 1955 Hague Convention It must be noted that, although the 1980 EEC Convention on the Law Applicable to Contractual Obligations has come into force in all EU countries, it does not mean that the issue of what law is to be applied to 78

See Article 4(2) EEC Convention. For this statement in case law, see Oberlandesgericht Koblenz, Germany, 16 January 1992, CLOUT case No. 226 (Recht der internationalen Wirtschaft 1024 (1992)), expressly stating that “the payment of money never constitutes the characteristic performance”. 80 For a case in which the presumption contained in article 4(2) of the Rome Convention was rebutted and the law of the buyer was applied rather than the law of the seller, see Landgericht Kassel, Germany, 22 June 1995, available at http://www.jura.uni-freiburg.de/ipr1/ cisg/urteile/text/370.htm. 81 See, e. g., Hof Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/2002-05-17.htm; Landgericht Kassel, Germany, 15 February 1996 (Neue Juristische Wochenschrift Rechtsprechungs-Report 1146 (1996)); ICC Court Arbitration, Case No. 8324, 1995, abstract available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=240&step=Abstract (Journal du droit international 1019 ff. (1996)); Rechtbank s’Gravenhage, Netherlands, 7 June 1995, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=154&step=Abstract (Nederlands Internationaal Privaatrecht 687 (1995)); Oberlandesgericht D
sseldorf, Germany, 8 January 1993, CLOUT case No. 48 (Praxis des internationalen Privat- und Verfahrensrechts 412 ff. (1993)); Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/91.htm. 82 See, e. g., Landgericht Berlin, Germany, 24 March 1998, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=440&step=FullText; Landgericht M
nchen, Germany, 6 May 1997, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/ 341.htm; Landgericht Siegen, Germany, 5 December 1995, available at http://www.jura. uni-freiburg.de/ipr1/cisg/urteile/text/287.htm; Rechtbank Amsterdam, Netherlands, 5 October 1994, abstract available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/94100 n1.html#cabc (Nederlands Internationaal Privaatrecht 195 (1995)); Rechtbank Zwolle, Netherlands, 1 March 1995, available in Unilex at http://www.unilex.info/case.cfm?pid=1& do=case&id=152&step=FullText; Oberlandesgericht M
nchen, Germany, 2 March 1994, 79

45

Franco Ferrari

an international sales contract must always be solved by resorting to that Convention. Even in the countries bound by the Rome Convention, that Convention is not always the one to be taken into account to determine the applicable law. Indeed, since Article 21 of the Rome Convention states that it “shall not prejudice the application of international conventions to which a Contracting State is, or becomes, a party”, other rules might govern the foregoing issue, despite the Rome Convention being in force. Thus, in those States bound by the Rome Convention where the 1955 Hague Convention on the Law Applicable to International Sales of Goods is still in force, such as in France and Italy, one must resort to the rules of this Convention rather than those of the Rome Convention, as several courts have done recently.84 Unfortunately, however, the issue of the relationship between the Rome CLOUT case No. 83 (Neue Juristische Wochenschrift Rechtsprechungs-Report 1076 (1994));

Oberlandesgericht D
sseldorf, Germany, 10 February 1994, CLOUT case No. 81 (Recht der internationalen Wirtschaft 54 (1995)); Kammersgericht Berlin, Germany, 24 January 1994, CLOUT case No. 80 (Recht der internationalen Wirtschaft 683 (1994)); Oberlandesgericht Karlsruhe, Germany, 20 November 1992, CLOUT case No. 317 (Neue Juristische Wochenschrift Rechtsprechungs-Report 1316 (1993)); Oberlandesgericht Kln, Germany, 16 October 1992, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do= case&id=90&step=Abstract (Recht der internationalen Wirtschaft 144 (1993)); Oberlandesgericht Koblenz, Germany, 16 January 1992, CLOUT case No. 226 (Recht der internationalen Wirtschaft 1024 (1992)); Oberlandesgericht Frankfurt, Germany, 17 September 1991, CLOUT case No. 2 (Recht der internationalen Wirtschaft 951 (1991)); Landgericht Frankfurt, Germany, 16 September 1991, CLOUT case No. 6 (Recht der internationalen Wirtschaft 953 (1991)); Oberlandesgericht Frankfurt, Germany, 13 June 1991, CLOUT case No. 1 (Neue Juristische Wochenschrift 3102 (1991)); Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Praxis des internationalen Privat- und Verfahrensrechts 401 (1991)); Amstgericht Oldenburg, Germany, 24 April 1990, CLOUT case No. 7 (Praxis des internationalen Privat- und Verfahrensrechts 337 (1991)); Landgericht Aachen, Germany, 3 April 1990, CLOUT case No. 46 (Recht der internationalen Wirtschaft 492 (1990)); Landgericht Stuttgart, Germany, 31 August 1989, CLOUT case No. 4 (Praxis des internationalen Privat- und Verfahrensrechts 317 (1990)). 83 See, e. g., ICC Court of Arbitration, Case No. 8611, 1997, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=229&step=FullText; ICC Court of Arbitration, Case No. 7197, 1992, CLOUT case No. 104 (Journal du droit international 1030 (1993)). 84 In this respect see, e. g., Tribunale di Pavia, Italy, 29 December 1999, CLOUT case No. 380 (Corriere giuridico 932 f. (2000)) (stating that in Italy “the conflict of law rules relating to international sales are not those provided by the Rome Convention; instead, one must look to the Hague Convention of 15 June 1955 (ratified by Law of 4 February 1958 no. 50, entered into force in Italy on 1 September 1964), since by virtue of Article 21 of the Rome Convention, the Hague Convention takes precedence over the conflict rules of the Rome Convention”.).

46

The CISG’s sphere of application: Articles 1-3 and 10

Convention and the 1955 Hague Convention has not been dealt with in the draft Digest, although references to case law applying the CISG by virtue of recourse to either convention can be found in it. For the sake of completeness, it should be mentioned that as far as party autonomy is concerned, the application of the 1955 Hague Convention, rather than the Rome Convention, does not lead to diverging results, as article 2 of the 1955 Hague Convention85 also obliges judges to acknowledge the choice of law made by the parties, a provision that has already led to the application of the CISG.86 Absent choice of law, under the 1955 Hague Convention courts have to apply the law of the seller,87 except in cases where the seller receives the order in the buyer’s country, in which case the law of the buyer governs.88

85

See article 2 of the Hague Convention: A sale shall be governed by the domestic law of the country designated by the Contracting Parties. Such designation must be contained in an express clause, or unambiguously result from the provisions of the contract. Conditions affecting the consent of the parties to the law declared applicable shall be determined by such law. 86 For a case applying the CISG by virtue of a choice of law acknowledged by the court on the grounds of article 2 of the 1995 Hague Convention, see Tribunal Commercial de Bruxelles, Belgium, 13 November 1992, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/ 1992-11-13.htm. 87 See Rechtbank Hasselt, Belgium, 9 October 1996, available at http://www.law.kuleuven. ac.be/int/tradelaw/WK/1996-10-09.htm; Rechtbank Hasselt, Belgium, 8 November 1995, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/1995-11-08.htm; Cour d’appel Grenoble, France, 26 April 1995, CLOUT case No. 151, available at http://witz.jura.uni-sb.de/ CISG/decisions/2604952v.htm; Rechtbank Hasselt, Belgium, 18 October 1996 (Rechtkundig Weekblad 1995, 1378 f.); Tribunal Commercial de Bruxelles, Belgium, 5 October 1994, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/1994-10-05.htm; Kantonsgericht Wallis, Switzerland, 6 December 1993, available in Unilex at http://www.unilex. info/case.cfm?pid=1&do=case&id=173&step=FullText; Gerichtsprsident Laufen, Switzerland, 7 May 1993, CLOUT case No. 201 (Schweizerische Zeitschrift f
r internationales und europisches Recht 277 f. (1995)); Pretore della Giurisdizione di Locarno-Campagna, Switzerland, 27 April 1992, CLOUT case No. 56 (Schweizerische Zeitschrift f
r internationales und europisches Recht 665 (1993)). 88 Cour de Cassation, France 26 June 2001, available at http://witz.jura.uni-sb.de/CISG/ decisions/2606011v.htm; Tribunale di Verona, Italy, 17 December 1997 (Rivista veronese di giurisprudenza economica e dell’impresa 22 ff. (1998)).

47

Franco Ferrari

From what has been said thus far, one general rule can be set forth: provided that the parties have not excluded the CISG and that no electio iuris occurred, the CISG should be applied in the courts of Contracting States (provided the State did not limit the scope of Article 1(1)(b) by means of an Article 95 reservation, to be discussed infra), at least to most international sales contracts involving a seller who has its place of business in a Contracting (non-reservatory) State. E. The impact of the Article 95 reservation on the CISG’s applicability The CISG’s “indirect” application was criticized,89 both by former socialist countries which “wanted to avoid the excessive restriction of the applicability of their domestic statutes governing the relationships with foreign parties”,90 as well as by the United States. As a consequence of such criticism, the drafters of the CISG provided for a reservation clause, Article 95 CISG, which gives Contracting States the option not to be bound by Article 1(1)(b). Although the Article 95 reservation has a big impact on trade relations involving States that have adopted it, in case law and, thus, in the draft Digest, the reservation’s effects have not been dealt with often, nor have they been dealt with in depth. The only cases listed in the draft Digest that deal with the reservation at hand merely (but correctly) point out that the reservation does not impact the CISG’s applicability by virtue of article 1(1)(a). Therefore it is no surprise that courts of Contracting States that declared an Article 95 reservation have applied the CISG as a whole by virtue of Article 1(1)(a) where the parties to the sales contract had their relevant places of business in different Contracting States.91 89

For a criticism of Article 1(1)(b), see, e. g., Gyula Ersi, A propos the 1980 Vienna Convention on Contract for the International Sale of Goods, 31 Am. J. Comp. L. 353 (1983); G. Sacerdoti, I criteri di applicazione della convenzione di Vienna sulla vendita internazionale: diritto uniforme, diritto internazionale privato e autonomia dei contratti, Rivista trimestrale di diritto e procedura civile 739-740 (1990). 90 R. Luzzatto, Vendita (dir. internaz. priv.), in 46 Enciclopedia del diritto 510 (1993). 91 4th Circuit U. S. Court of Appeals, United States, 21 June 2002, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/020621u1.html (Schmitz-Werke GmbH & Co. v. Rockland Industries, 37 Fed. Appx. 687); U. S. District Court for the Northern District of Illinois, United States, 7 December 1999, CLOUT case No. 417 (Magellan International v. Salzgitter Handel, 199 U. S. Dist. LEXIS 1938b, available at http://www.cisg.law.pace.edu/cisg/ wais/db/cases2/991207u1.html); State of Minnesota District Court for the Fourth Judicial District of the County of Hennepin, United States, 9 March 1999, CLOUT case No. 416 (KSTP-FM, LLC v. Specialized Communications, Inc. and Adtronics Signs, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/990309u1.html); U. S. District Court for the East-

48

The CISG’s sphere of application: Articles 1-3 and 10

But what impact does the Article 95 reservation have on the “indirect” applicability of the CISG? In this author’s opinion, several situations – none of which is dealt with by the Digest – must be distinguished.92 (A) It has been argued, that where the forum is located in a reservatory State and the rules of private international law of that state lead to the applicability of the law of a Contracting State (whether reservatory or not), the CISG will not apply,93 since the Contracting reservatory States are bound to apply the CISG only where both parties have their places of business in Contracting States.94 This view is held not only by commentators but also by a United ern Division of the Northern District of Illinois, United States, 27 October 1998, CLOUT case No. 419 (Mitchell Aircraft Spares, Inc. v. European Aircraft Service AB, 23 F. Supp. 2d 915, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/981027u1.html); 11th Circuit U. S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino S. p. A., 144 F.3d 1384, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/980629u1.html); U. S. District Court for the Southern District of New York, United States, 6 April 1998, CLOUT case No. 413 (Calzaturificio Claudia s. n. c. v. Olivieri Footwear Ltd., 1998 Westlaw 164824); U. S. District Court for the Southern District of New York, United States, 21 July 1997, CLOUT case No. 187 (Helen Kaminski Pty. Ltd. v. Marketing Australian Products, Inc. d/b/a Fiona Waterstreet Hats, U. S. District Court, LEXIS 10630 (1997)); Circuit U. S. Court of Appeals, United States, 6 December 1995, CLOUT case No. 138 (Delchi Carrier, SpA v. Rotorex Corp.,71 F.3d 1024, 1995 U. S. App. LEXIS 34226); U. S. District Court for the Southern District of New York, United States, 22 September 1994, CLOUT case No. 86 (Graves Import Company, Ltd. and Italian Trading Company v. Chilewich International Corporation, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/940922u1.html); U. S. District Court for the Southern District of New York, United States, 6 April 1994 (S. V. Braun v. Alitalia-Linee Aeree Italiane, S. p. A. v. AEL International Shipping Company, U. S. Dist. LEXIS 4114); 5th Circuit U. S. Court of Appeals, United States, 15 June 1993, CLOUT case No. 24 (Beijing Metals & Minerals Import/Export Corp. v. American Business Center, Inc., 993 F.2d 1178, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/930615u1.html); U. S. District Court for the Southern District of New York, United States, 14 April 1992, CLOUT case No. 23, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/ 920414u1.html (Filanto S. p. A. v. Chilewich Int’l Corp., 789 F. Supp. 1229). 92 See Franco Ferrari, La vendita internazionale, Applicabilit ed applicazioni della Convenzione di Vienna 78 ff. (1997). 93 For this solution, see, among others, Isaak I. Dore, Choice of Law under the International Sales Convention: A U. S. Perspective, 77 Am. J. Int’l Law 537 (1983); Malcolm Evans, Art. 95, in Commentary on the International Sales Law 656 (C. M. Bianca & M. J. Bonell eds., 1987); P
nder, supra note 70, at 872. 94 For a similar conclusion, see Bradley J. Richards, Note, Contracts for the International Sale of Goods: Applicability of the United Nations Convention, 69 Iowa L. Rev. 222 (1983) (stating that where an Article 95 reservation has been declared, the application of the Convention in

49

Franco Ferrari

States court that recently stated that “the only circumstance in which the CISG could apply [in the court of a reservatory State] is if all the parties to the contract were from Contracting States”.95 It is certainly true that, in this situation, the courts of reservatory States do not have to apply the CISG by virtue of Article 1(1)(b), as pointed out by the aforementioned Unites States court. This does not mean, however, that the CISG cannot be applied. Indeed, it is here suggested96 that even the courts of a reservatory State should apply the CISG in this situation – not by virtue of Article 1(1)(b), but as part of the law of the Contracting State to which the conflict of law rules lead.97 There is, however, a limit: if it is true, as has been suggested, that the ratio behind the possibility of the Article 95 reservation is to promote the application of domestic law,98 it must be concluded that in cases where the

reservatory States is limited to contracts between parties having their places of business in different Contracting States). 95 U. S. District Court for the Southern District of Florida, United States, 22 November 2002, available at http://cisgw3.law.pace.edu/cisg/wais/db/cases2/021122u1.html (Impuls I. D. Internacional, S. L. v. Psion-Teklogix Inc., 234 F. Supp. 2d 267). For similar statements see Francis A. Gabor, Stepchild of the New Lex Mercatoria: Private International Law from the United States Perspective, 8 Nw. J. Int’l L. & Bus. 538 (1988); Albert H. Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods 33 (1989); A. Lanciotti, Norme uniformi di conflitto e materiali nella disciplina convenzionale della compravendita 116 (1992); Richards, supra note 94, at 222. 96 For this conclusion, see also Ferrari, supra note 92, at 79. 97 A similar solution has already been suggested by Peter Winship, The Scope of the Vienna Convention on International Sale Contracts, in International Sales, in The United Nations Convention on Contracts for the International Sale of Goods 1. 32 (N. Galston & H. Smit eds., 1984) stating that a court from a reservatory State “might conclude after examining the facts that the law of a Contracting State, such as France, is the applicable law and apply the Convention although not bound by treaty to do so”. (emphasis added). See also Volker Behr, Commentary to Journal of Law and Commerce Case 1: Oberlandesgericht Frankfurt am Main, 12 J. L. & Com. 272-273 (1993), stating that despite the Article 95 reservation, the courts of reservatory States may very well be in a situation to apply CISG based on private international law. Courts of a State which has made such a reservation are not obliged to apply Article 1(1)(b). But when the State’s private international law requires its courts to apply foreign law under which CISG is triggered, the court must apply CISG as part of that foreign law. 98 See Bell, supra note 28, at 248, where it is stated that “[t]he Article 95 reservation narrows the applicability of the Convention and enlarges the applicability of the domestic law”. For a similar statement, see also E. Allen Farnsworth, Review of Standard Forms or Terms Under the Vienna Convention, 21 Cornell Int’l L. J. 440 (1988).

50

The CISG’s sphere of application: Articles 1-3 and 10

forum is located in a Contracting reservatory State whose private international law leads to the law of the forum, the CISG is inapplicable.99 (B) There is a dispute regarding another situation as well: quid iuris where the forum is located in a Contracting non-reservatory State whose rules of private international law lead to the applicability of the law of a Contracting reservatory State? According to some authors, the CISG should not be applicable in this scenario100 because, it is argued, the judges from the reservatory State would not apply the CISG.101 Consequently, “[...] in the situation where State A has not taken the reservation under Article 95 and State B has done so, and where the parties have their places of business in State B and in non-Contracting State C, consistency would appear to require that a court in State A should, if it finds the law of State B to be applicable, select the domestic law of that State as the law governing the contract rather than the Convention”.102 The preferable view, however, seems to be to the contrary,103 not only because generally a reservation of the kind at hand 99

For this conclusion, see also M. Pelichet, La vente internationale de marchandises et le conflit de lois, Recueil des Cours 43-44 (1987), according to which, in the situation discussed in the text, the Convention is inapplicable only where the rules of private international law of the forum State which has declared an Article 95 reservation lead to the application of the law of the forum. Where, however, the rules of conflict of laws lead to the application of the law of a different Contracting State, the Convention is always applicable. 100 See, e. g., Dore, supra note 93, at 538-539 (stating that when the forum is a third Contracting State and its rules of private international law lead to U. S. law, the forum should apply the U. C. C. instead of the Convention, since the United States declared an Article 95 reservation). 101 See Schlechtriem, supra note 55, at 12. 102 Evans, supra note 93, at 657; for a similar solution, see also K. Neumayer, Offene Fragen zur Anwendung des Abkommens der Vereinten Nationen
ber den internationalen Warenkauf, Recht der internationalen Wirtschaft 101 (1994); P
nder, supra note 70, at 872; L. Vekas, Zum persnlichen und rumlichen Anwendungsbereich des UN-Einheitskaufrechts, Recht der internationalen Wirtschaft 344 (1987); L. Vekas, Diskussionsbeitrag, in Einheitliches Kaufrecht und nationales Obligationenrecht 109 (Peter Schlechtriem ed., 1987); Peter Winship, Private International Law and the U. N. Sales Convention, 21 Cornell Int’l L. J. 523524 (1988). 103 Several authors favor this solution. See, e. g., B. Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht. Das Kollisionsrecht bei grenz
berschreitenden Kaufvertrgen und der Anwendungsbereich der internationalen Kaufrechts
bereinkommen 159 (1988); B. Czerwenka, Diskussionsbeitrag, in Einheitliches Kaufrecht und nationales Obligationenrecht, supra note 102, at 109; Franco Ferrari, Vendita internazionale di beni mobili. Art. 1-13. Ambito di applicazione. Disposizioni generali 41 (1994); R. Herber, Gedanken zum Inkrafttreten des VN-Kaufrechts
bereinkommens, Recht der internationalen Wirtschaft 342 (1987); Gerold Herrmann, Anwendungsbereich des Wiener Kaufrechts – Kollisions-

51

Franco Ferrari

made by one State cannot bind another State104 (unless the forum State adheres to the comity doctrine), but also because, from the point of view of the Contracting (forum) State, all the prerequisites for the applicability of the Convention set forth in Article 1(1)(b) are met.105 And this view is preferable despite the contrary opinion of some German writers106 who prefer to apply domestic law rather than the CISG in cases where the rules of private international law lead to the law of a reservatory State. But in this case, the German writers’ views cannot be decisive, since in Germany the courts must adopt this approach: a statute – which, in this author’s opinion contradicts, if nothing else, CISG Article 7(1) – was passed in Germany under which German judges are bound to apply domestic sales law107 rather than the CISG108 when their rules of private international law lead to the law of a Contracting reservatory State.109 There are, however, some German court decisions which should be taken into account and which support the solution here suggested. Indeed, in applying the Hague Conventions, rechtliche Probleme, in Wiener Kaufrecht. Der schweizerische Aussenhandel unter dem bereinkommen
ber den internationalen Warenkauf 89 (E. Bucher ed., Bern, 1991); O. Lando, The 1985 Hague Convention on the Law Applicable to Sales, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 82 (1987); Luzzatto, supra note 90, at 510; B. Piltz, Internationales Kaufrecht, Neue Juristische Wochenschrift 619 (1989); K. Siehr, Der internationale Anwendungsbereich des UN-Kaufrechts, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 602 (1988). 104 For this argument, see also Ferrari, supra note 103, at 42; P. Kindler, Die Anwendungsvoraussetzungen des Wiener Kaufrechts
bereinkommens der Vereinten Nationen im deutschitalienischen Rechtsverkehr, Recht der internationalen Wirtschaft 778 (1988). 105 For this line of reasoning, see, e. g., N. Boschiero, Le Convenzioni di diritto materiale uniforme, in 21 Trattato di diritto privato 272 (P. Rescigno ed., 1987); Ferrari, supra note 92, at 82. 106 For a reference to these opinions, see Ulrich Magnus, Stand und Entwicklungen des UNKaufrechts, Zeitschrift f
r Europisches Privatrecht 205 (1995). 107 See Article 2 of the German statute introducing the CISG from July 5, 1989, BGBl. II 586 (1989). This statute violates Article 7(1) insofar as it provides an interpretation of what the effects of an Article 95 reservation are, thus preventing German judges from taking into account the Convention’s “international character and ... the need to promote uniformity in its application”. 108 For a short reference to this statute, see also F. Enderlein et al., Internationales Kaufrecht: Kaufrechtskonvention. Verjhrungskonvention. Vertretungskonvention. Rechtsanwendungskonvention 294 (1991). 109 This is why the decision of the Oberlandesgericht D
sseldorf, 2 July 1993, CLOUT case No. 49 (Recht der internationalen Wirtschaft 845 f. (1993)), has to be criticized. In this case, the German court applied the CISG to a contract concluded between a German buyer and an American seller before the CISG entered into force in Germany, despite the statute mentioned in the text.

52

The CISG’s sphere of application: Articles 1-3 and 10

German courts have stated that the reservations declared by other Contracting States were to be disregarded,110 i. e., German courts have applied the Hague Conventions even where the Contracting States whose law was to be applied would not have done so by virtue of a reservation.111 (C) There is disagreement also as to the solution where the forum is located in a non-Contracting State whose rules of private international law lead to the law of a Contracting reservatory State. Despite some statements that the CISG should not apply in this situation,112 it is here suggested113 that the CISG should be applied. The application, however, cannot be based upon Article 1(1)(b), but must be based upon the CISG’s being part of the applicable (foreign) law.114 One should, in other words, adopt the same solution employed in cases where the rules of private international law of the non-Contracting State lead to the applicability of the law of a Contracting non-reservatory State. In this situation, the courts have to apply the CISG for the very same reasons,115 i. e. not by virtue of Article 1(1)(b) (as wrongly stated by very many courts116) because the forum is not bound by that 110

For a reference to this case law in support of the applicability of the CISG in cases where the rules of private international law of a forum located in a Contracting State lead to the law of a Contracting reservatory State, see, e. g., Ferrari, supra note 92, at 82-83. 111 See, e. g., Bundesgerichtshof, Germany, 4 December 1985 (Europische Zeitschrift f
r Wirtschaftsrecht 166 (1986)); Oberlandesgericht Karlsruhe, Germany, 14 April 1978 (Recht der internationalen Wirtschaft 544 f. (1978)). 112 See, e. g., Boschiero, supra note 105, at 272; Dore, supra note 93, at 537-538; Luzzatto, supra note 90, at 510-511; J.-P. Plantard, Un nouveau droit uniforme de la vente internationale: La Convention des Nations Unies du 11 avril 1980, Journal du droit internationale 321 (1988); P
nder, supra note 70, at 872; Reinhart, supra note 55, at 15; Sacerdoti, supra note 89, at 742. 113 See also Franco Ferrari, L’ambito di applicazione della convenzione di Vienna sulla vendita internazionale, Rivista trimestrale di diritto e procedura civile 923-924 (1994). 114 For this solution, see also Kindler, supra note 104, at 778; Pelichet, supra note 99, at 44; Siehr, supra note 103, at 610. 115 For this solution, see also Ferrari, supra note 103, at 42-43. 116 See, e. g., Rechtbank Amsterdam, Netherlands, 7 December 1994 (Nederlands Internationaal Privaatrecht 196 f. (1995)); Rechtbank Amsterdam, Netherlands, 5 October 1994, abstract available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/941005n1.html#cabc (Nederlands Internationaal Privaatrecht 195 (1995)); Oberlandesgericht Frankfurt, Germany, 5 July 1995, CLOUT case No. 276, available in Unilex at www.unilex.info; Rechtbank Zwolle, Netherlands, 1 March 1995, available in Unilex at www.unilex.info/case. cfm?pid=1&do=case&id=152&step=Abstract; Tribunal de Grand Commerce Bruxelles, Belgium, 5 October 1994, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/ 941005b1.html; Landgericht Stuttgart, Germany, 13 August 1991, available in Unilex at www.unilex.info/case.cfm?pid=1&do=case&id=86&step=Abstract; Oberlandesgericht

53

Franco Ferrari

provision,117 but rather by virtue of the CISG being part of the applicable foreign law. This view is not only held by legal scholars,118 but it has already found judicial application in several instances,119 as can be evinced from the draft Digest.120 Frankfurt, Germany, 13 June 1991, CLOUT case No. 1 (Neue Juristische Wochenschrift 3102 (1991)); Rechtbank Dordrecht, Netherlands, 21 November 1990, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=32&step=Abstract (Nederlands Internationaal Privaatrecht 214 (1991)); Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Recht der internationalen Wirtschaft 1015 ff. (1990)); Amstgericht Oldenburg, Germany, 24 April 1990, CLOUT case No. 7 (Praxis des internationalen Privat- und Verfahrensrechts 337 (1991)); Landgericht Stuttgart, Germany, 31 August 1989, CLOUT case No. 4 (Praxis des internationalen Privat- und Verfahrensrechts 317 (1990)). 117 The applicability of the CISG in cases where the forum is located in non-Contracting States cannot be based upon Article 1(1)(b), since the courts of non-Contracting States are not bound by this Article, has been pointed out, for instance, by P
nder, supra note 70, at 872. For a more detailed criticism, see Franco Ferrari, CISG Art. 1(1)(b) and Related Matters: Brief Remarks on the Occasion of a Recent Dutch Court Decision, Nederlands Internationaal Privaatrecht 317 ff. (1995). 118 See, e. g., Pelichet, supra note 99, at 38-39; Plantard, supra note 112, at 321; P
nder, supra note 70, at 872; Reinhart, supra note 55, at 14. 119 For a list of cases in which the CISG was applied in non-Contracting States by virtue of the conflict of laws rules of the forum State leading to the law of a Contracting (non-reservatory) State, see, e. g., Rechtbank Koophandel Kortrijk, Belgium, 16 December 1996, abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=340&step= Abstract; Rechtbank Koophandel Hasselt, Belgium, 9 October 1996, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case &id=264&step=FullText; Rechtbank Koophandel Hasselt, Belgium, 8 November 1995, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=265&step=FullText; Rechtbank Koophandel Hasselt; Belgium, 18 October 1995, available in Unilex at http://www.unilex. info/case.cfm?pid=1&do=case&id=266&step=FullText (Recktkundig Weekblad 1378 f. (1995)); Tribunal de commerce Nivelles, Belgium, 19 September 1995, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/950919b1.html; Rechtbank Amsterdam, Netherlands, 7 December 1994 (Nederlands Internationaal Privaatrecht 196 f. (1995)); Tribunal Commercial de Bruxelles, Belgium, 5 October 1994, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/941005b1.html; Rechtbank Arnhem, Netherlands, 5 October 1994 (Nederlands Internationaal Privaatrecht 195 f. (1995)); Rechtbank Koophandel Hasselt, Belgium, 16 March 1994, available in Unilex at http://www.unilex.info/case.cfm?pid=1& do=case&id=267&step=FullText; Rechtbank Koophandel Hasselt, Belgium, 23 February 1994, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=268 &step=FullText; Tribunal Commercial de Bruxelles, Belgium, 13 November 1992, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=175&step=FullText; Rechtbank Roermond, Netherlands, 19 December 1991, CLOUT case No. 98 (Nederlands

54

The CISG’s sphere of application: Articles 1-3 and 10

F. The application of the CISG by arbitral tribunals In order for the CISG to be applicable in the courts of Contracting States, either the requirements set forth in Article 1(1)(a) or those laid down in Article 1(1)(b) must be met. There appears to be little doubt as to the applicability of these same rules to arbitral tribunals. Indeed, the draft Digest Internationaal Privaatrecht 665 ff. (1992)); Oberlandesgericht Koblenz, Germany, 27 September 1991, CLOUT case No. 316 (available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=128&step=FullText); Oberlandesgericht Frankfurt, Germany, 17 September 1991, CLOUT case No. 2 (Recht der internationalen Wirtschaft 950 ff. (1991)); Landgericht Frankfurt, Germany, 16 September 1991, CLOUT case No. 6 (Recht der internationalen Wirtschaft 952 ff. (1991)); Landgericht Baden-Baden, Germany, 14 August 1991, CLOUT case No. 50 (Recht der internationalen Wirtschaft 62 f. (1992)); Landgericht Stuttgart, Germany, 13 August 1991, available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=86&step=FullText; Oberlandesgericht Frankfurt, Germany, 13 June 1991, CLOUT case No. 1 (Recht der internationalen Wirtschaft 591 f. (1991)); Amstericht Frankfurt, Germany, 31 January 1991, CLOUT case No. 51 (Praxis des internationalen Privat-und Verfahrensrechts 345 f. (1991)); Amstgericht Ludwigsburg, Germany, 21 December 1990, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/17.htm; Rechtbank Dordrecht, Netherlands, 21 November 1990, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=32&step=FullText (Nederlands Internationaal Privaatrecht 214 (1991)); Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Europische Zeitschrift f
r Wirtschaftsrecht 181 f. (1991); Landgericht Hildesheim, Germany, 20 July 1990, available at http://www.jura.uni-freiburg.de/ipr1/cisg/ urteile/text/241.htm; Landgericht Frankfurt, Germany, 2 May 1990, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/183.htm; Landgericht Aachen, Germany, 3 April 1990 CLOUT case No. 46 (Recht der internationalen Wirtschaft 491 f. (1990)); Amtsgericht Oldenburg, Germany, 24 April 1990, CLOUT case No. 7 (Praxis des internationalen Privat-und Verfahrensrechts 336 f. (1991)); Oberlandesgericht Koblenz, Germany, 23 February 1990, available in Unilex at http://www.unilex.info/case.cfm?pid=1& do=case&id=22&step=FullText (Recht der internationalen Wirtschaft 316 ff. (1990)); Rechtbank Alkmaar, Netherlands, 8 February 1990, available in Unilex at http://www. unilex.info/case.cfm?pid=1&do=case&id=31&step=FullText (Nederlands Internationaal Privaatrecht No. 460 (1990)); Rechtbank Alkmaar, Netherlands, 30 November 1989 (Nederlands Internationaal Privaatrecht No. 289 (1990)); Landgericht Stuttgart, Germany, 31 August 1989, CLOUT case No. 4 (Recht der internationalen Wirtschaft 984 f. (1989)); Landgericht M
nchen, Germany, 3 July 1989, CLOUT case No. 3 (Praxis des internationalen Privat- und Verfahrensrechts 316 f. (1990)). 120 The draft Digest lists cases in which the courts of non-Contracting States have applied the CISG where their rules of private international law led to the law of a Contracting nonresevatory State. The Digest does not deal with the issue of whether the courts of nonContracting States would apply the CISG where the applicable law is that of a Contracting State that made an Article 95 reservation.

55

Franco Ferrari

lists several arbitral awards that apply the CISG on the grounds that both parties have their places of business in different Contracting States.121 There are also many arbitral awards that make the CISG applicable because the rules of private international law resorted to by the arbitrators lead to the law of a Contracting State.122 From this it follows that arbitration tribunals generally apply the CISG as if they were courts located in Contracting States. 121 For arbitral tribunals applying the CISG to international sales contracts where both parties had their place of business in different Contracting States, see ICC Court of Arbitration, case No. 9887, August 1999 (ICC court of Arbitration Bulletin 109 ff. (2000)) (location of the parties’ places of business not indicated); Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, Hunrary, 25 May 1999, CLOUT case No. 265 (arbitral award No. Vb/97142, Transportrecht-Internationales Handelsrecht 16 (2000)) (applying the CISG to a contract between a Hungarian seller and an Austrian buyer); Hungarian Chamber of Commerce Court of Arbitration, Hungary, 5 December 1995, CLOUT case No. 164, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=181&step=Full Text) (applying the CISG to a contract between a Hungarian seller and an Austrian buyer); ICC Court of Arbitration, case No. 7531, 1994, CLOUT case No. 304, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=139&step=FullText) (applying the CISG to a contract concluded between an Austrian buyer and a Chinese seller on the grounds that the parties had their place of business in two Contracting States); ICC Court of Arbitration, case No. 7331, 1994, CLOUT case No. 303, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=140&step=FullText) (applying the CISG by virtue of Article 1[1][a] CISG, since the parties had their place of business in different Contracting States, namely Yugoslavia and Italy); ICC Court of Arbitration, case No. 7153, 1992, CLOUT case No. 26 (14 J. L. & Com. 217 ff. (1995)). 122 See, e. g., Schiedsgericht der Handelskammer Hamburg, Germany, 21 March 1996, CLOUT case No. 166 (Recht der internationalen Wirtschaft 766 ff. (1996)) (applying the CISG by virtue of Article 1(1)(b) to a contract concluded between a German buyer and a Hong Kong seller, which contained a choice of law clause making applicable the law of Germany, a Contracting State to the CISG); ICC Court of Arbitration, case No. 8324, 1995 (Journal du droit international 1019 ff. (1996)) (applying the CISG by virtue of Article 1(1)(b)); ICC Court of Arbitration, case No. 7660, 23 August 1994, CLOUT case No. 302 (ICC Bulletin 69 ff. (November 1995)) (applying the CISG on the grounds that the parties chose the law of a Contracting State as the applicable law and, thus, the requirements set forth in Article 1(1)(b) were met); ICC Court of Arbitration, case No. 7565, 1994, CLOUT case No. 300, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do= case&id=141&step=FullText (applying the CISG to an international sales contract by virtue of the choice of law of the parties leading to the law of a Contracting State); Internationales Schiedsgericht der Bundeswirtschaftskammer der gewerblichen Wirtschaft Wien, Austria, 15 June 1994, CLOUT case No. 94 (Recht der internationalen Wirtschaft 591 f. (1995)) (applying the CISG by virtue of a choice of law which led to the law of a Contracting State); ICC Court of Arbitration, case No. 7197, 1992, CLOUT case No. 104 (Journal du droit international 1028 ff. (1993)) (applying the CISG by virtue of Article 1(1)(b) to a contract

56

The CISG’s sphere of application: Articles 1-3 and 10

At this point, however, it is worth mentioning that some arbitral tribunals have – incorrectly – applied the CISG even where the contract was outside the Convention’s stated sphere of application. In one case, an arbitral tribunal123 applied the CISG to a series of contracts concluded in 1979, on the grounds that “[t]here is no better source to determine the prevailing trade usages than the terms of the United Nations Convention on the International Sale of Goods of 11 April 1980 [...]. This is so even though neither the [country of the Buyer] nor the [country of the Seller] are parties to that Convention”.124 In another case, the Iran-United States Claims Tribunal125 applied the CISG as part of the so-called “lex mercatoria” or as relevant trade usages126 to a contract not subject to the CISG under the rules in Article 1. This line of cases, which opens the door to the applicability of the CISG even to cases not falling within its scope, has been rightly criticized for several reasons. It has been said, for instance, that the CISG’s provisions do not necessarily reflect uniform commercial practices,127 but are rather the result of a careful political compromise.128 Most importantly, however, the appliconcluded between an Austrian seller and a Bulgarian buyer); ICC Court of Arbitration, case No. 6653, 26 March 1993, CLOUT case No. 103 (Journal du droit international 1040 ff. (1993)) (applying the CISG to a German-Syrian contract by virtue of the parties’ choice of French law). 123 See ICC Court of Arbitration, case No. 5713, 1989, CLOUT case No. 45 (Yearbook of Commercial Arbitration 70 ff. (1990)). 124 Id. 125 See Iran-United States Claim Tribunal, 28 July 1989 (Yearbook of Commercial Arbitration 220 f. (1990), Watkins Johnson Ltd. v. The Islamic Republic of Iran & Bank Saderat Iran). 126 For another award where the CISG was referred to as a reflection of “general principles of international commercial practice and usages”, see ICC Court of Arbitration, case No. 7331, 1994, CLOUT case No. 303 (ICC Bulletin 73 ff. (1995)). 127 See, e. g., John C. Reitz, A History of Cutoff Rules as a Form of Caveat Emptor: Part I – The 1980 U. N. Convention on the International Sale of Goods, 36 Am. J. Comp. L. 471 n. 127 (1988), stating that “[m]erchants’ custom does not appear to have played as significant a role in the drafting of the CISG. Proponents of the notice rule, for example, do not appear to have based their arguments to any significant extent on custom”. 128 See Richard Hyland, Commentary on ICC Arbitration Case No. 5713 of 1989, in ICMGuide to Practical Applications of the UN Convention on Contracts for the International Sale of Goods, Suppl. 9 (April 1994), Case Commentaries, at 11, stating, with reference to the provisions of the CISG applied by the ICC Court of Arbitration in arbitral award No. 5713, that “the source of the CISG’s conformity provisions was not a uniform commercial practice, as found, for example, in standard terms frequently employed in international commercial contracts. Rather, those provisions represent a careful political compromise between those states that demanded shorter periods of inspection and notice of defects and those states that had hoped that the CISG would permit even longer periods. In

57

Franco Ferrari

cation of the CISG to contracts concluded before its coming into force violates a principle that appears to be recognized by most developed legal systems, according to which, absent an agreement among the parties, the law in force at the moment a contract is concluded governs the contract even if that law is modified.129 Therefore, one can only hope that arbitral tribunals, like State courts, hold (as a few recent arbitral awards have actually done130) that the CISG is inapplicable to transactions entered into before the CISG’s coming into force in the countries involved.

IV. The Convention’s sphere of application A. The sales contract For a contract to be governed by the CISG, it is not sufficient that the contracts meet the requirements discussed in the foregoing chapters; the contracts must also fall within the CISG’s sphere of application ratione materiae,131 i. e. it must be a contract for the sale of goods (or any other type of contract governed by the CISG). The first question to be dealt with, therefore, is that of what constitutes a “sale”. In this respect, it must be noted that the CISG, like the 1964 Hague Conventions,132 does not define “sales contract”, as pointed out not only in scholarly writing,133 but also in other words, there is no reason to believe that the CISG rules on this question rest on the generalized trade practice”. 129 See Hyland, supra note 128, at 12-13. 130 See, e. g., ICC Court of Arbitration, case No. 6281, 26 August 1989, CLOUT case No. 102 (Journal du droit international 1054 ff. (1991)) (holding that the CISG was not applicable to a contract concluded in 1987 between an Egyptian seller and a Yugoslav buyer). 131 For a distinction between the international, territorial, and personal prerequisites on the one hand, and the prerequisites ratione materiae on the other hand, see Carbone & Lopez de Gonzalo, supra note 5, at 4-5; Ferrari, supra note 92, at 91. 132 It has often been pointed out that the 1964 Hague Conventions did not define “sales contract”. See, among others, A. Frignani, Il contratto internazionale 264 (Padova, 1990); R. Herber, Art. 1, in Kommentar zum Einheitlichen Kaufrecht 8 (H. Dlle ed., Munich, 1976); L. Reczei, The Field of Application and the Rules of Interpretation of ULIS and UNCITRAL Conventions, Acta Juridica Academiae Scientiarum Hungaricae 170 f. (1982). 133 See, e. g., Bell, supra note 28, at 250; P. Kahn, Convention de Vienne du 11 avril 1980. Caractres et domaine d’application, Droit et pratique du commerce international 387 (1989); F. Padovini, Der internationale Kauf: Von den Haager Konventionen zur Wiener Konvention – Erfahrungen und Aussichten, Zeitschrift f
r Rechtsvergleichung 91 (1987); B. Piltz, Internationales Kaufrecht. Das UN-Kaufrecht (Wiener bereinkommen von 1980) in praxisorientierter Darstellung 23 (1993); Richards, supra note 94, at 227; C. Samson, La Convention des Nations Unies sur les contrats de vente internationale de marchandises:

58

The CISG’s sphere of application: Articles 1-3 and 10

two cases,134 the older one of which is quoted in the draft Digest. The lack of an express definition does not, however, make it impossible to define the sales contract covered by the CISG. This is pointed out not only in commentary135 and in the case law referred to in the draft Digest,136 but also in a more recent court decision, rendered on January 8, 2003.137 Indeed, a definition of “sales contract” can be inferred from Articles 30 and 53,138 the provisions laying down the obligations of the parties to a sales contract governed by the CISG. Furthermore, “the economic function of exchange [also] constitutes a valid reference in order to unify without contrasts the concept of sale, as opposed to other contractual schemes”.139 Thus, independently from the civil or commercial character of the parties or of the contract itself,140 the sales contract can – and has been – defined both in scholarly writing141 and case law as the contract “pursuant to which one Etude comparative des dispositions de la Convention et des rgles de droit qubcois en la matire, 23 Cahiers de droit 927 (1982). 134 See Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003); Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106, available at http:// www.cisg-online.ch/cisg/urteile/117.htm. 135 For this conclusion, see Fritz Enderlein & Dietrich Maskow, International Sales Law 27 (1992) (stating that “[t]he description of what is a contract of sale, whose existence is the first decisive criterion for the application of the Convention, follows in particular from the provisions on the obligations of the seller [Article 30] and of the buyer [Article 53]. Both taken together could be conceived as a definition of the contract of sale”); Kritzer, supra note 95, at 69 (stating that “the Convention does not contain a section on the definition of the sales contract. However, taken together, Articles 30 and 53, which identify the elements of a sale, are said to constitute a definition”). 136 Rechtbank Rotterdam, Netherlands, 1 November 2001 (Nederlands Internationaal Privaatrecht, No. 114 (2001)); Tribunal Cantonal Vaud, Switzerland, 11 March 1996, CLOUT case No. 211 (Schweizerische Zeitschrift f
r internationales und europisches Recht 82 (1998)). 137 Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003). 138 Id. 139 D. Memmo, Il contratto di vendita internazionale nel diritto uniforme, Rivista trimestrale di diritto e procedura civile 189 (1983). P. Bernardini, La compravendita internazionale, in Rapporti contrattuali nel diritto internazionale 85 (Milan, 1991), as well, points out that the economic function of an exchange of goods for a price constitutes a center of reference to be used in order to identify a uniform definition of the sales contract as governed by the CISG. 140 See Article 1(3) CISG: “Neither the nationality of the parties nor the civil or commercial character of the parties or the contract is to be taken into consideration in determining the application of this Convention”. 141 See Louis F. Del Duca & Patrick Del Duca, Practice under the Convention on International Sale of Goods (CISG): A Primer for Attorneys and International Traders (Part I), 27 UCC Code Law Journal 350 (1995), stating that

59

Franco Ferrari

party – the seller – is bound to deliver the goods and transfer the property in the goods sold and the other party – the buyer – is obliged to pay the price and accept the goods”.142 Thus, it is not surprising that one court held that the essence of a sales contract lies in goods being exchanged for money.143 The aforementioned seller’s obligation to transfer the property in the goods seems to exclude the applicability of the CISG to contracts that transfer the property in the goods at the moment the contract is concluded and that, therefore, do not create any obligation to transfer the property in the goods.144 This is true, for instance, in both the Italian and French legal systems.145 In these systems, the property passes generally solo consensu, that is, at the moment the sales contract is concluded146 – whenever the goods are specified, exist and belong to the seller – as opposed to the transfer of property by means of the delivery of the goods, a rule applicable, for instance, in the Germanic legal systems.147 However, a similar exclusion from the [i]n determining whether a particular transaction qualifies as a “sale of goods” and is therefore subject to the CISG, the general understanding within the international community of what constitutes a “contract for the sale of goods” (subject to any specific provision in the CISG to the contrary) would therefore appear to be applicable. Such an approach would be consistent with the rule of construction set forth in Art. 7. 142 Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106, available at http://www.cisg-online.ch/cisg/urteile/117.htm. For this exact same definition, see also Tribunale di Rimini, Italy, 8 January 2003 (unpublished). For a reference to the buyer’s obligation mentioned in the definition referred to in the text, see Rechtbank Koophandel Hasselt, Belgium, 2 May 1995, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/ 1995-05-02.htm. 143 Kantonsgericht Zug, Switzerland, 21 October 1999, CLOUT case No. 328 (Internationales Handelsrecht 45 (2001)). 144 For a more detailed discussion of this issue see Ferrari, supra note 103, at 46 ff. 145 For an overview of legal systems employing the rule that the conclusion of a sales contract immediately transfers the property of moveables (provided that the goods are specified, existing and belonging to the seller), see Francesco Galgano, Il trasferimento della propriet

per atto tra vivi. Il trasferimento della propriet in civil law e common law, in Atlante di diritto privato comparato 104-105 (F. Galgano et al. eds., 3d ed., 1999); R. Sacco, Le transfert de la proprit des choses mobilires dtrmines par acte entre vifs en droit compar, Rivista di diritto civile 452 ff. (1979). 146 For a discussion of this principle as well as of other principles which can govern the transfer of moveable goods, see U. Drobnig, Transfer of Property, in Towards a European Civil Code 345 ff. (Arthur Hartkamp et al. eds., 1994); Franco Ferrari, Vom Abstraktionsprinzip und Konsensualprinzip zum Traditionsprinzip. Von den Mglichkeiten der Rechtsvereinheitlichung im Mobiliarsachenrecht, Zeitschrift f
r Europisches Privatrecht 52 ff. (1993). 147 For a detailed discussion of the principles governing the transfer of moveable property in the Germanic legal systems (Austria, Germany and Switzerland), see, in addition to the

60

The CISG’s sphere of application: Articles 1-3 and 10

CISG cannot be justified,148 not only because otherwise the sphere of application of the CISG would become too restricted, but – and fore-

most – because the effects which an international sales contract may have on the property in the goods sold have, unfortunately,149 been placed by Article 4(b) CISG beyond the Convention’s scope of application, as will be shown later. B. Other contracts governed by the Vienna Sales Convention The sales contract as defined above is not the only contract governed by the CISG. According to several courts (all referred to in the draft Digest)150 and

commentators,151 contracts modifying an international sales contract fall under the CISG as well, since they directly affect the rights and obligations of the parties to the international sales contract.152 Furthermore, as can be evinced from the draft Digest, courts – true also for legal writers153 – also consider

authors quoted in the preceding note, Franco Ferrari, Principio consensualistico ed “Abstraktionsprinzip”, Contratto e impresa 889 ff. (1992); H. Kronke, Il trasferimento della propriet mobiliare per atto tra vivi. Il trasferimento della propriet nel diritto tedesco, in Atlante di diritto privato comparato, supra note 145, at 108 ff. 148 For this conclusion, see also Ferrari, supra note 103, at 46. 149 For a criticism of the exclusion of the transfer of property from the matters governed by the Uniform Sales Law, see Franco Ferrari, Abstraktionsprinzip, Traditionsprinzip e consensualismo nel trasferimento di beni mobili. Una superabile divaricazione?, Rivista di diritto civile 756-757 (1993). 150 See Oberlandesgericht Hamburg, Germany, 5 October 1998, CLOUT case No. 279, available at http://www.cisg-online.ch/cisg/urteile/473.htm; Oberlandesgericht M
nchen, Germany, 8 February 1995, CLOUT case No. 131, available at http://www.cisg-online.ch/ cisg/urteile/143.htm; ICC Court of Arbitration, Case No. 7331, 1994, CLOUT case No. 303 (Journal du droit international 1001 ff. (1995)); Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Praxis des internationalen Privat- und Verfahrenshrechts 400 (1991)). 151 See, in this respect, Herber & Czerwenka, supra note 17, at 16. Note that contracts modifying an international sales contract fell under the 1964 Hague Conventions; see, e. g., Oberlandesgericht Hamburg, Germany, 3 March 1982 (Recht der internationalen Wirtschaft 435 f. (1982)). 152 For this reasoning as well as for this conclusion, see Ferrari, supra note 103, at 47-48. 153 This view is favored, for instance, by G. De Nova, L’ambito di applicazione ratione materiae della Convenzione di Vienna, Rivista trimestrale di diritto e procedura civile 749 (1990); M. Endler & J. Daub, Internationale Software
berlassung und UN-Kaufrecht, Computer und Recht 601-602 (1993); Schlechtriem, supra note 55, at 16. Doubts were, however, expressed by Padovini, supra note 133, at 91.

61

Franco Ferrari

contracts for the delivery of goods by instalments as falling under the CISG’s sphere of application.154 As far as the CISG’s applicability to distribution agreements is concerned, this is an issue dealt with by various courts, as can easily be derived from the draft Digest. The draft Digest also shows, however, that the matter is not solved uniformly. The Italian Supreme court,155 for instance, in a much criticized decision rendered in 1999,156 applied the CISG to distribution agreements. The majority of courts have, however, taken the opposite view.157 Unfortunately, the draft Digest does not indicate what view is to be favoured, although this would without doubt contribute to uniformity. According to the majority view (which should be followed),158 distribution agreements are not covered by the CISG, because as has been expressly pointed out by one court, this type of agreement aims more at the “organization of the distribution” than the transfer of the goods’ ownership.159 This is also why 154

Contracts for the delivery of goods by instalments were also considered to fall under the 1964 Hague Conventions’ sphere of application. See, e. g., Bundesgerichtshof, Germany, 28 March 1979 (Neue Juristische Wochenschrift 1779 ff. (1979)). 155 Corte di Cassazione, Italy, 14 December 1999, CLOUT case No. 379 (Giustizia civile 2333 (2000)). 156 For critical comments on the decision cited in the preceding note, see, e. g., F. Ferrari, Contratti di distribuzione, ambito di applicazione ratione materiae della Convenzione di Vienna del 1980: gli insegnamenti che si possono trarre dalla giurisprudenza straniera, Giustizia civile 2334 ff. (2001); F. Ferrari, Der Vertriebsvertrag als vom UN-Kaufrechts
bereinkommen (nicht) erfasster Vertragstyp oder wie der italienische Kassationshof einen groben Fehler htte vermeiden knnen; zu Corte di Cassazione (I) 14. 12. 1999, The European Legal Forum 7 ff. (2000). 157 See, e. g., Oberlandesgericht Hamburg, Germany, 5 October 1998, CLOUT case No. 279, available at http://www.cisg-online.ch/cisg/urteile/473.htm; Oberlandesgericht Hamm, Germany, 5 November 1997, CLOUT case No. 295, available at http://www.cisg-online.ch/cisg/ urteile/381.htm; U. S. District Court for the Southern District of New York, United States, 21 July 1997, CLOUT case No. 187 (Helen Kaminski v. Marketing Australian Products, U. S. Dist. LEXIS 10630 (1997)); Oberlandesgericht Luzern, Switzerland, 8 January 1997, CLOUT case No. 192, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/970108sl.html; Oberlandesgericht D
sseldorf, Germany, 11 July 1996, CLOUT case No. 169 (Recht der internationalen Wirtschaft 958 (1996)); Fov rosi Bis g, Hungary, 19 March 1996, CLOUT case No. 126; Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281 (Recht der internationalen Wirtschaft 934 f. (1993)); Gerechtshof Amsterdam, Netherlands, 16 July 1992 (Nederlands Internationaal Privaatrecht 716 (1992)). 158 Franco Ferrari, Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing, 15 J. L. & Com. 56 (1995). 159 Obergericht des Kantons Luzern, Switzerland, 8 January 1997, CLOUT case No. 192 (Transportrecht-Internationales Handelsrecht 53 (1999)).

62

The CISG’s sphere of application: Articles 1-3 and 10

franchise agreements are considered to fall outside the CISG’s substantive sphere of application, a view validated by two court decisions.160 Where, however, the distribution agreement itself creates obligations comparable to those arising out of a sales contract, that agreement can, at least according to one author161 and one court, be governed by the CISG.162 Although commentators do not agree on whether distribution agreements fall under the CISG’s sphere of application, they all hold – in this author’s opinion, correctly – that the single contracts concluded in execution of such distribution agreements fall under the CISG’s sphere of application,163 even where the distribution agreement was concluded prior to the entry into force of the CISG. This view was recently confirmed by a Swiss court, also referred to in the draft Digest.164 The aforementioned contracts are not the only ones that raise the issue of whether they are governed by the CISG. So far, however, courts have not had the occasion to deal with other contracts. For example, barter transactions, where all of the price is to be paid in something other than money, do not fall under the CISG.165 This is the preferable view, even though the contrary has been argued,166 and some authors even assert that there are many arguments in favor of applying the Convention to barter transactions.167 It has been argued, for instance, that “[a]ny partner is to be considered here both as buyer and seller, though with 160

See Bundesgerichtshof, Germany, 23 July 1997, CLOUT case No. 236 (Neue Juristische Wochenschrift 3309 (1997)); Obergericht des Kantons Luzern, Switzerland, 8 January 1997, CLOUT case No. 192 (Transportrecht-Internationales Handelsrecht 53 (1999)). 161 U. Magnus, Das UN-Kaufrecht: Fragen und Probleme seiner praktischen Bewhrung, Zeitschrift f
r europisches Privatrecht 829-830 (1997). 162 Oberlandesgericht M
nchen, Germany, 22 September 1995, CLOUT case No. 286 (Recht der internationalen Wirtschaft 1035 ff. (1996)). 163 For a similar affirmation in scholarly commentary, see Ferrari, supra note 92, at 102-03. 164 Handelsgericht Z
rich, Switzerland, 16 April 1997 (Transportrecht-Internationales Handelsrecht 54 (1999)). 165 For this solution, see Ferrari, supra note 92, at 49; H. Hoyer, Der Anwendungsbereich des Einheitlichen Wiener Kaufrechts, in Das Einheitliche Wiener Kaufrecht 419 (H. Hoyer & W. Posch eds., Vienna, 1992); Karollus, supra note 51, at 25; R. Loewe, Internationales Kaufrecht 27 (Vienna, 1989); Reinhart, supra note 55, at 13; Winship, supra note 97, at 1. 24. 166 See, e. g., B. Lurger, Die Anwendung des Wiener UNCITRAL-Kaufrechts-
bereinkommens 1980 auf den internationalen Tauschvertrag und sonstige Gegengeschfte, Zeitschrift f
r Rechtsvergleichung 421 ff. (1991). 167 For this view, see, e. g., Enderlein & Maskow, supra note 135, at 28, stating that “[a]n overwhelming number of arguments in our view speaks in favour of applying the Convention

63

Franco Ferrari

regard to different performances – in respect of the obligations to deliver, to hand over documents, to acquire title in the goods and to take delivery”.168 This view does not give due consideration to Article 53 CISG which expressly mentions the buyer’s obligation “to pay the price”,169 i. e. an element the lack of which characterizes the barter transaction. Where, however, the buyer trades goods and pays a price, the CISG’s application will depend on whether the price to be paid is higher than the value of the goods to be traded and whether the parties wanted to conclude a sales contract rather than a countertrade transaction.170 Leasing contracts as well, do not fall within the sphere of application of the CISG,171 not even when they contain a purchase option,172 because their economic function is different from that of the sales contract covered by the CISG.173 Although some scholars suggest that consignment contracts are excluded from the CISG’s sphere of application,174 it is here suggested175 that even in this case [barter]”. See also De Nova, supra note 153, at 749-750, favoring the view that international countertrade transactions fall within the scope of the CISG. 168 Enderlein & Maskow, supra note 135, at 28. See also D. Maskow, Art. 53, in Commentary on the International Sales Law, supra note 93, at 386, stating that the Uniform Sales Law should apply to barter transactions as well, since “in genuine barter contracts both parties are sellers. Therefore, the Convention would not necessarily be excluded”. 169 For this line of reasoning, see Piltz, supra note 133, at 24. 170 For this conclusion, see Ferrari, supra note 92, at 100-01. 171 For this conclusion, see Czerwenka, supra note 103, at 146; Enderlein & Maskow, supra note 135, at 28; M. Karollus, Der Anwendungsbereich des UN-Kaufrechts im berblick, Juristische Schulung 380 (1993); Piltz, supra note 133, at 28. 172 See Enderlein & Maskow, supra note 135, at 28, stating that “[t]he Convention cannot be applied to leasing contracts even if they contain a purchase option”). See also Ferrari, supra note 92, at 50. For a position expressing doubt about this conclusion, see L. Reczei, The Rules of the Convention Relating to Its Field of Application and to Its Interpretation, in Problems of Unification of International Sales Law 74 (1980), stating that “[i]t is not clear [...] whether a leasing-contract, which guarantees to the leaseholder an option for the purchase of the object of lease, comes within the domain of the Convention. There are legal systems which do not consider leasing-contracts without option as leasing. According to others, an option qualifies the leasing-contract as sales contract”. 173 For this reasoning see Ferrari, supra note 92, at 50, and authorities cited therein; F. Graf von Westphalen, Grenz
berschreitendes Finanzierungsleasing, Recht der internationalen Wirtschaft 258 (1992). Hire-purchase contracts, like leasing contracts, are excluded from the sphere of application of the CISG (for this conclusion, see also Czerwenka, supra note 103, at 146). The reason behind this exclusion is the economic function of this type of contract, which is not comparable to that of a sales contract. 174 See Winship, supra note 97, at 1. 24, stating that consignment arrangements “under which

64

The CISG’s sphere of application: Articles 1-3 and 10

they fall within the Convention’s sphere of application, as they fell under the sphere of application of the 1964 Hague Conventions.176 Since a sale-and-lease-back transaction is generally composed of two different contracts, a sales contract and a leasing contract, one must distinguish between them. Whereas the latter does not fall under the CISG, as already mentioned,177 the former does. C. Contracts for the sale of made-to-order goods and services Even though the sales contract as defined above178 still constitutes the “commercial contract par excellence”179 and, consequently, the “pillar of the entire system of commercial relations”,180 it has undergone (and still is undergoing) a change.181 This change is due to the fact that modern trade not only calls for ready-made-goods, but also for goods to be manufactured and, therefore, for the “sale” of labor and services.182 This is why it is fair to state that the sales contract tends to become more and more a service contract.183 The tendency to consider as sales contracts those contracts “which require further activities besides the traditional exchange of goods with money”184 has been evident for years, not only in the various legal systems, but also in the efforts made to unify international sales law.185 Indeed, the Draft Conventions of 1935186 and 1939,187 as well as that of 1956,188 and finally the ... supplier will take back unsold units might not be within the convention because title to the goods may not be transferred to the consignee and payment is conditional on resale”. 175 See also Ferrari, supra note 92, at 102. 176 See Landgericht M
nster, Germany, 25 August 1977 reported in P. Schlechtriem & U. Magnus, Internationale Rechtsprechung zu EKG und EAG. Eine Sammlung belgischer, deutscher, italienischer und niederlndischer Entscheidungen zu den Haager Einheitlichen Kaufgesetzen 107 ff. (1987), applying the 1964 Hague Conventions to a consignment contract. 177 See the text accompanying note 171. 178 See the text accompanying note 142. 179 Galgano, Il diritto privato fra codice e costituzione 6 (2d ed., 1980). 180 Memmo, supra note 139, at 181. 181 For a similar affirmation, see Ferrari, supra note 92, at 77 ff., with further references. 182 For a similar affirmation, see Honnold, supra note 36, at § 58, stating that “a modern sales law must include transactions which call for the manufacture or production of goods [...]”. In this respect, see also De Nova, supra note 153, at 750. 183 See Ferrari, supra note 92, at 78. 184 Memmo, supra note 139, at 189. 185 See, e. g., Ferrari, supra note 92, at 78. 186 See Article 2 of the 1935 Draft Convention.

65

Franco Ferrari

the ULIS of 1964,189 included a provision dealing with the relation between sales contracts and transactions that call for the manufacture or production of goods. That is why it is not surprising that the draftsmen of the CISG extended its applicability190 to the point that it governs (within certain limits) contracts which under some domestic laws are considered to be service contracts.191 Article 3(1) CISG deals with the Convention’s applicability to contracts for the supply of goods to be manufactured or produced, whereas Article 3(2) CISG deals with contracts that include the supply of labor or other services in the “seller’s obligations”. Thus, the CISG contains some provisions which “confront the scholar with contractual schemes which have uncertain functional characteristics”192 and “which therefore raise the problem of whether such contracts fall under its sphere of application”.193 This is true, above all, in cases where the seller is liable not only for the transfer of ownership and the delivery of the goods, but also for providing labor or services.194 But it is also true for those cases in which the buyer has to deliver part of the materials needed for the production of the goods. Among the contracts falling in the latter category are those contemplated by Article 3(1) CISG,195 i. e., contracts for the supply of goods to be manufactured or produced, which in practice seem to be rather important given 187

See Article 2 of the 1939 Draft Convention. See Article 10 of the 1956 Draft Convention. 189 See Article 6 ULIS: “Contracts for the supply of goods to be manufactured or produced shall be considered to be sales within the meaning of the present Law, unless the party who orders the goods undertakes to supply an essential or substantial part of the materials necessary for such manufacture or production”. 190 See, in addition to De Nova, supra note 153, at 751, Secretariat Commentary on Art. 3, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406. 191 For a similar statement, see Enderlein & Maskow, supra note 135, at 36, stating that “[the] inclusion of contracts for the delivery of goods to be manufactured (machines, manufactured goods) or produced (agricultural produce, raw materials) at the time of the conclusion of the contract in sales contracts means that the CISG can be applied also to certain contracts which are considered to be work contracts”. 192 Bernardini, supra note 139, at 85. 193 Id. 194 See also Memmo, supra note 139, at 189, stating that the CISG governs even those contracts “where the seller is bound not only to the delivery, but where he is also liable for the preliminary phase [of preparing the goods to be sold]”. 195 See Michael J. Bonell & Fabio Liguori, The U. N. Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law (Part I), Uniform L. Rev. 150 (1996); Ferrari, supra note 92, at 79. 188

66

The CISG’s sphere of application: Articles 1-3 and 10

the number of decisions dealing with those contracts in the draft Digest.196 By treating these contracts like the more “classical” contracts for the sale of goods, it is made clear that the sale of goods to be manufactured or produced is as much subject to the CISG as the sale of ready-made goods.197 But there is a limit to the CISG’s applicability to these contracts. Indeed, Article 3(1) CISG itself excludes from the scope of the Convention contracts where the party who “buys” the goods to be manufactured or produced supplies a “substantial part” of the materials necessary for the manufacture or production (it is not sufficient that such contracts serve a different purpose). Unfortunately, however, the provision does not set forth a specific test to be used in determining whether the materials supplied by the buyer constitute a “substantial part” of the materials necessary to manufacture or produce the

196

See, e. g., Hof van Beroep Gent, Belgium, 17 May 2002, available at http://www.law. kuleuven.ac.be/int/tradelaw/WK/2002-05-17.htm; Oberster Gerichtshof, Austria, 18 April 2001, available at http://www.cisg.at/7_7601d.htm; Saarlndisches Oberlandesgericht, Germany, 14 February 2001 (Internationales Handelsrecht 64 (2001)); Oberlandesgericht Stuttgart, Germany, 28 February 2000, available at http://www.jura.uni-freiburg.de/ipr1/ cisg/urteile/text/583.htm; Handelsgericht Kanton Z
rich, April 8, 1999, CLOUT case No. 325 (Internationales Handelsrecht 45 (2001)); Handelsgericht Z
rich, Switzerland, 10 February 1999, CLOUT case No. 331 (Internationales Handelsrecht 44 f. (2001)); Handelsgericht Z
rich, Switzerland, 21 September 1998, CLOUT case No. 252 (Transportrecht-Internationales Handelsrecht 14 (2000)); Landgericht Saarbr
cken, Germany, 26 March 1996, CLOUT case No. 337, available at http://www.cisg-online.ch/cisg/urteile/ 391.htm; Arbitration Court of the Chamber of Commerce and Industry of Budapest, Hungary, 5 December 1995, CLOUT case No. 164 (Arbitral award No. 94131), available at http:// www.cisg-online.ch/cisg/urteile/163.htm; Hof s’Hertogenbosch, Netherlands, 9 October 1995 (Nederlands Internationaal Privaatrecht No. 118 (1996)); Landgericht Oldenburg, Germany, 9 November 1994 (Recht der internationalen Wirtschaft 65 f. (1996)); Gerichtskommission Oberrheinthal, Switzerland, 30 June 1995, CLOUT case No. 262 (Transportecht-Internationales Handelsrecht 11 (2000)); Oberlandesgericht M
nchen, Germany, 8 February 1995, CLOUT case No. 131, available at http://www.cisg-online.ch/cisg/urteile/ 142.htm; Landgericht Memmingen, Germany, 1 December 1993 (Praxis des internationalen Privat- und Verfahrensrechts 251 f. (1995)); ICC Court of Arbitration, case No. 7660, 1994, CLOUT case No. 302 (ICC Court of Arbitration Bulletin 69 ff. (1995)); ICC Court of Arbitration, case No. 7844, 1994 (ICC Court of Arbitration Bulletin 72 ff. (1995)); Handelsgericht Z
rich, Switzerland, 9 September 1993, CLOUT case No. 97. 197 See Secretariat Commentary on Art. 3, Official Records of the United Nations Conference, supra note 47, at 17, available in Documentary History, supra note 47, at 407, stating that Article 3(1) of the Uniform Sales Law “provides that the sale of goods to be manufactured or produced by the seller to the buyer’s order is as much subject to the provisions of this convention as the sale of ready-made-goods”. See also Piltz, supra note 133, at 26 (stating the same).

67

Franco Ferrari

goods,198 thus giving rise to a dispute as to how to determine the “substantial part”. Despite this dispute, commentators agree that the supply of accessories does not exclude the CISG’s applicability.199 Conversely, where all the materials are supplied by the buyer, there is no doubt that the CISG is inapplicable, as confirmed by a decision of the Austrian Supreme Court from 1994.200 As for the determination of the concept of “substantial part”, some commentators argue that it is to be judged merely from a quantitative point of view.201 A recent arbitral award202 – the only decision cited in the draft Digest on this issue – seems to have adopted this view when it held that the CISG was applicable by virtue of Article 3(1) on the sole grounds that the value of the materials supplied by the buyer amounted only to about 10% of the total value of the goods (containers) to be produced.203 The fact that the aforementioned arbitral award is the only decision cited in the draft Digest on this issue should, however, not lead one to believe that 198

For this criticism, see also Rosett, supra note 4, at 280, stating that Article 3 explicitly includes contracts for goods to be manufactured unless the goods are incidental to supplying labor and services, without providing guidance concerning the determination of the meaning of the “incidental” criterion. See also S. M. Carbone & M. Lopez de Gonzalo, Art. 3, Nuove Leggi civ. commentate 8 (1989); Memmo, supra note 139, at 189. 199 For this conclusion, see also Ferrari, supra note 92, at 81; Memmo, supra note 139, at 189. 200 See Oberster Gerichtshof, Austria, 27 October 1994, CLOUT case No. 105 (Zeitschrift f
r Rechtsvergleichung 159 ff. (1995)), holding that the CISG was inapplicable since the buyer supplied all the material necessary for the manufacturing of the goods. For a reference to this case, see Bonell & Liguori, supra note 195, at 151 n. 24. 201 See, e. g., T. C. Ebenroth, Internationale Vertragsgestaltung im Spannungsverhltnis zwischen ABGB, IPR-Gesetz und UN-Kaufrecht, sterreichische Juristische Bltter 684 (1986); A. Garro & A. Zuppi, Compraventa internacional de mercaderias 74 (1990); Herber & Czerwenka, supra note 17, at 28; H. Lacasse, Le champ d’application de la Convention des Nations Unies sur les contrats de vente internationale de marchandises, in Actes du colloque sur la vente internationale 29 f. (H. Lacasse & L. Perret eds., 1989); Piltz, supra note 133, at 26; Reinhart, supra note 55, at 20. Some authors prefer to use a “criterion of value”. See, e. g., Winship, supra note 97, at 1. 24 (stating that it is difficult to determine whether the materials provided by the buyer are a “substantial part” of the materials necessary for the production unless one uses a measure that looks to value). This approach, however, does not differ from the one described in the text, since the latter refers to an economic evaluation of the relationship between materials provided by the buyer and those provided by the seller. 202 Arbitration Court of Chamber of Commerce and Industry of Budapest, Hungary, 5 December 1995, CLOUT case No. 164 (Arbitral award No. 94131), available at http:// www.cisg-online.ch/cisg/urteile/163.htm. 203 For another reference to this case, see Magnus, Das UN-Kaufrecht, supra note 161, at 828.

68

The CISG’s sphere of application: Articles 1-3 and 10

that award’s solution is correct and should therefore be followed. On the contrary, in determining whether the materials provided by the buyer constitute a “substantial part” of the material necessary for the production or manufacture of the goods, a qualitative criterion should be used as well,204 not unlike under the 1964 Hague Conventions.205 This view is based, on the one hand, on the French language counterpart of the “substantial part” requirement, which reads “partie essentielle”, thus stressing the importance of the “essence” – and, therefore, the quality – of the materials as well. On the other hand, this view is based on the fact that the wording used, “substantial part”, is different from that used in Article 3(2) which speaks of “preponderant part”, a concept undoubtedly linked to a mere quantitative approach. Consequently, “the materials to be provided by the buyer may constitute a substantial part of the goods sold even where their value represents less than 50% of the value of the goods”.206 Although many courts have already applied Article 3(1) CISG,207 they have not yet explicitly elaborated on the concept of “substantial part” in the aforementioned exception. However, a different issue has been touched upon by some courts: whether the buyer’s supply of plans, design specifications, etc., compares to the supply of “material necessary” for the manufacture or production of the goods.208 In one case,209 for instance, the CISG was held inapplicable, on the grounds of Article 3(1), to a contract under which the French seller had to manufacture goods according to the Italian

204

For this conclusion, see also Audit, supra note 51, at 26. Despite the different wording of the relevant provisions of the CISG and the 1964 Hague Conventions, it has been suggested that there is no difference between the criteria to be used. See, e. g., Richards, supra note 94, at 231 (stating that “[d]espite the deletion of ‘essential’ from the CISG, the nature of the materials supplied will be a factor in deciding whether a ‘substantial’ amount of the materials will be supplied”). Arguing that there is no space for an approach which takes into account the quality of the goods provided by the buyer, see W. Khoo, Art. 3, in Commentary on the International Sales Law, supra note 93, at 42, stating that “[u]nder paragraph (1), unlike the parallel provision in ULIS, the materials supplied need not be essential for the manufacture or production. Nor is it sufficient to take the transaction out of the Convention that the material supplied is an essential part”. 206 Carbone & Lopez de Gonzalo, supra note 198, at 8. 207 See supra note 196. 208 In this respect, see, most recently, Bonell & Liguori, supra note 195, at 151; Magnus, Das UN-Kaufrecht, supra note 161, at 828-829. 209 Cour d’Appel Chambry, France, 25 May 1993, available at http://witz.jura.uni-sb.de/ CISG/decisions/250593v.htm. 205

69

Franco Ferrari

buyer’s specifications.210 It appears that the court considered the plans and instructions given to the “seller” by the “buyer” as being a “substantial part of the materials necessary” for the production of the goods.211 As a look at the draft Digest shows, there are courts that have favored the opposite view.212 Thus, the problem arises, once again, as to which of the opposing views neutrally cited in the draft Digest is to be preferred. In this author’s opinion213 (and this appears to be the prevalent view today214), design specifications, plans or the like provided by the buyer should not be relevant in deciding whether a contract is outside the scope of the CISG under Article 3(1),215 as such items do not constitute “material necessary for the manufacture or production” of the goods. D. Contracts for the sale of labor and services The applicability of the Vienna Sales Convention extends not only to contracts for the sale of made-to-order goods. Article 3(2) CISG extends it also to contracts pursuant to which the seller undertakes to supply labour or other services in addition to the obligations to deliver the goods, transfer the property and hand over the documents,216 as long as the supply of labour or services does not constitute the “preponderant part” of the seller’s obligation,217 as often pointed out in case law.218 This provision was introduced in 210

See C. Witz, Les premires applications jurisprudentielles du droit uniforme de la vente internationale. Convention des Nations Unies du 11 avril 1980 34 f. (Paris, 1995). 211 For a summary of this case in light of the issues discussed in the text, see also Del Duca and Del Duca, supra note 141, at 352 ff. 212 See Handelsgericht Z
rich, Switzerland, 10 February 1999, CLOUT case No. 331, available at http://www.cisg-online.ch/cisg/urteile/488.htm; Oberlandesgericht Frankfurt, Germany, 17 September 1991, CLOUT case No. 2 (Neue Juristische Wochenschrift 633 f. (1991)). 213 Ferrari, supra note 92, at 111. 214 See Magnus, Das UN-Kaufrecht, supra note 161, at 829; Witz, supra note 210, at 34-35; Witz & Wolter, supra note 85, at 811. 215 For this conclusion, compare Schlechtriem, supra note 55, at 17. 216 For a definition of the contract for the sale of goods covered by the CISG which refers to these obligations, see the text accompanying note 142. 217 For a very detailed comparative study of the categories of contracts for the supply of labor and/or services as opposed to contracts for the supply of goods, see Werner Lorenz, Contracts for the Work on Goods and Building Contracts, in 8/8 International Encyclopedia of Comparative Law 1 ff. (1980). 218 See Gerechtshof Arnhem, Netherlands, 27 April 1999 (Nederlands Internationaal Privaatrecht No. 245 (1999)); Kantonsgericht Zug, Switzerland, 25 February 1999, CLOUT case No. 327 (Internationales Handelsrecht 45 (2001)); Oberlandesgericht M
nchen, Germany, 9 July 1997, CLOUT case No. 287 (Betriebs-Berater 2295 (1998)); Oberlandesgericht Luzern, Switzerland, 8 January 1997, CLOUT case No. 192 (Schweizerische Ju-

70

The CISG’s sphere of application: Articles 1-3 and 10

order to solve the problems that had arisen under the 1964 Hague Conventions concerning their applicability to contracts for the supply and installation of goods,219 such as turn-key contracts220 and the concept of Liefervertra¨ge mit Montageverpflichtung recognized in German law.221 The relevant element on the basis of which to decide whether the CISG is applicable to contracts for the supply of goods and labor or services222 is the “preponderance” of the seller’s obligations regarding the supply of services or labor.223 This criterion seems to generate fewer difficulties than the “subristenzeitung 515 ff. (1998)); Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196 (Transportrecht-Internationales Handelsrecht 54 (1999)); Cour d’appel Grenoble, France, 26 April 1995, CLOUT case No. 152, available at http://www.cisg-online.ch/cisg/ urteile/154.htm; Oberster Gerichtshof, Austria, 27 October 1994, CLOUT case No. 105, available at http://www.cisg-online.ch/cisg/urteile/133.htm; Richteromt Laufen des Kantons Berne, Switzerland, 7 May 1993, CLOUT case No. 201 (Schweizerische Zeitschrift f
r internationales und europisches Recht 277 (1995)). For a recent decision in which article 3(2) was mentioned, but in which the court did not resolve the issue of whether the contract was one for the sale of goods or one for the supply of labour and services, see Rechtbank van Koophandel Hasselt, Belgium, 19 September 2001, available at http://www.law.kuleuven. ac.be/int/etradelaw/WK/2001-09-19.htm. 219 For this justification for the introduction of Article 3(2) CISG, see, e. g., Peter Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods 31 (1986), stating that Article 3(2) “attempts to regulate a question that proved to be difficult in Ulis, namely whether a contract for both the delivery and the installation of goods is covered by the Uniform Law for International Sales”. 220 That Article 3(2) has been introduced in order to solve the problems concerning the extension of the CISG’s applicability to turn-key-contracts can be deduced from the statements to be found in 7 UNCITRAL Yearbook 98 (1976). For a reference to the CISG’s applicability to turn-key-contracts, see Ferrari, supra note 92, at 83-84 (arguing that turn-key-contracts do not fall within the scope of the CISG). 221 For a detailed discussion on whether the Liefervertra¨ge mit Montageverpflichtung were governed by the 1964 Hague Conventions, see U. Huber, Diskussionsbeitrag, in Einheitliches Kaufrecht und nationales Obligationenrecht, supra note 102, 107-108; Memmo, supra note 139, at 191. 222 Several courts have already dealt with the issue at hand; compare Cour d’Appel Grenoble, France, 26 April 1995, CLOUT case No. 152, available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=109&step=FullText; Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196, available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=166&step=FullText; ICC Court of Arbitration, Case No. 7153, 1992, CLOUT case No. 26 (Journal du droit international 1005 ff. (1992)). 223 Note, that “[w]hen the terms ‘labor’ or ‘services’ are used to characterize non-sales obligations, then this is obviously done to express that human labor as such is owed, irrespective of whether it has a form giving effect or not. If it is only the result of labor which is

71

Franco Ferrari

stantial part” criterion laid down in Article 3(1) CISG,224 as it seems merely to refer to a comparison between the economic value of the obligations regarding the supply of labor and services, on the one hand, and the economic value of the obligations regarding the delivery of the goods, on the other hand.225 “The sale price of the goods to be delivered must [in other words] be compared with the fee for labor and services”,226 as if two separate contracts have been made – a principle which, according to the draft Digest, appears to already have found support in case law.227 Thus, where the owed, like in many contracts on the preparation of scientific or technological results (project contracts), then there exists a sales contract in the sense of the CISG in any case”. Enderlein & Maskow, supra note 135, at 38. 224 However, according to Schlechtriem, supra note 219, at 31, the criterion of “preponderance”, “is likely to prove difficult to interpret and to apply. Therefore, the parties should attempt to reach clear agreement in their contract”. 225 For a similar affirmation, see Ferrari, supra note 92, at 83; Garro & Zuppi, supra note 201, at 74-76; Herber & Czerwenka, supra note 17, at 29; Karollus, supra note 51, at 24; Schlechtriem, supra note 219, at 17. Note, however, that some authors have argued that “preponderance” must be evaluated having regard to other criteria as well. See, e. g., Richards, supra note 94, at 240, stating that in order to determine the “preponderance” of the obligations to supply services and labor versus the supply of goods, “[a] two-part test involving a quantitative judgement of the predominant part of the agreement and a subjective judgement of the intent of the parties and the purpose of the agreement should be used”. Based upon the fact that a United Kingdom proposal to use a “major part in value” criterion in order to distinguish sales contracts from contracts for the supply of labor and services was rejected (for this proposal, see Report of the First Committee at the 1980 Vienna Diplomatic Conference, Article 3, Official Records of the United Nations Conference, supra note 47, at 84, available in Documentary History, supra note 47, at 656). Reinhart, supra note 55, at 21, states that “a quantitative criterion is not sufficient to determine the preponderance of either the obligations regarding the supply of goods or those consisting in the supply of labor or services”. 226 Schlechtriem, supra note 219, at 31. In case law see Kantonsgericht Zug, Switzerland, 25 February 1999, CLOUT case No. 327 (Internationales Handelsrecht 45 (2001)). 227 See ICC Court of Arbitration, case No. 7153, 1992, CLOUT case No. 26 (published in English at 14 J. L. & Com. 217 ff. (1995)). The dispute related to a contract concluded in 1989 by an Austrian seller and a Yugoslavian buyer for the furnishing and assembling of materials to be used in the construction of a hotel in then-Czechoslovakia. In resolving the dispute, the arbitral tribunal dealt with the issue of whether the contract was one for the sale of goods by stating merely that “given that the text of the contract is unequivocal in this respect, and that no contrary provision emerges from the plaintiff’s mail, the court of arbitration assumes that the type of contract in question here was a sales contract, such that the Convention applies”. Per se, this statement does not support the rule mentioned in the text. However, it has been stated that the tribunal’s aforementioned conclusion “was supported by a bill addressed to the defendant which made apparent that the price to be paid for the assembly of the materials was

72

The CISG’s sphere of application: Articles 1-3 and 10

economic value of the obligation regarding the supply of labor or services is “preponderant”, i. e., where it amounts to more than 50%,228 as is usually the case in turn-key contracts229 and Liefervertra¨ge mit Montageverbindung,230 the CISG is inapplicable.231 It is on the basis of the aforementioned criterion that a court decided – correctly – that a contract asking for a market study did not fall under the CISG’s sphere of application.232 On the other hand, a contract for the sale and dismantling of a second-hand hangar was considered to fall within the CISG’s sphere of application on the grounds that the value of the dismantling amounted only to 25% of the total value of the contract.233 It must be noted, however, that one court stated that, because a clear calculation would not always be possible, other circumstances (such as those surrounding the conclusion of the contract, as well as the purpose of the contract), should also be taken into account in evaluating whether the of a completely secondary order of magnitude compared to that of the purchase of the materials. The arbitrator thus correctly examined the economic value of the benefits furnished in order to conclude that the contract at issue came within the purview of the Vienna Convention”. Dominique Hascher, Commentary on International Court of Arbitration, Matter No. 7153 in 1992, 14 J. L. & Com. 222-223 (1995). See also Bonell & Liguori, supra note 195, at 152. 228 There is no doubt among legal scholars that a “preponderant” part is more than a “substantial part” and that the former has to mean more than 50%. For similar statements, see, e. g., Enderlein & Maskow, supra note 135, at 37 (stating that “the ‘preponderant’ part is bigger than a substantial part and has to mean more than half”); Honnold, supra note 36, at 106 (stating that “a ‘substantial’ part would be less than preponderant”); Schlechtriem, supra note 219, at 32 (stating that “[p]reponderant in this sense should be considerably more than 50% of the price”). 229 Several authors have pointed out that the “preponderance” test prevents the CISG from being applicable to turn-key-contracts. See, e. g., Czerwenka, supra note 103, at 145; R. Herber, Art. 3, in Kommentar zum Einheitlichen UN-Kaufrecht 70 (P.Schlechtriem ed., 2d ed., 1995); Richards, supra note 94, at 243. According to some authors, however, turn-key-contracts are not per se excluded from the CISG’s sphere of application, but only where the “preponderance” test leads, on particular facts, to their exclusion. See, for instance, P. Schlechtriem, Einheitliches UN-Kaufrecht. Das bereinkommen der Vereinten Nationen vom 11 April 1980
ber Vertrge
ber den internationalen Warenkauf (CISG), JuristenZeitung 1039 (1988). 230 See Herber & Czerwenka, supra note 17, at 28-29. 231 See Richards, supra note 94, at 234. 232 See Oberlandesgericht Kln, Germany, 26 August 1994, CLOUT case No. 122 (Recht der internationalen Wirtschaft 970 ff. (1994)). 233 See Cour d’appel Grenoble, France, 26 April 1995, CLOUT case No. 151, available at http://www.cisg-online.ch/cisg/urteile/154.htm.

73

Franco Ferrari

obligation to supply labour or services is preponderant.234 Another court referred to the overall purpose of the contract as a criterion to determine whether the CISG is applicable or should be disregarded.235 In this author’s opinion, these criteria may well be relevant, but only where the aforementioned “preponderance test” does not lead to a solution: the text of the CISG appears to be very clear on this, as it only refers to “preponderance”. An issue closely related to the one just examined, but not yet dealt within decisions (as evidenced by the lack of any reference to this matter in the draft Digest), is whether a contract for the supply of both goods and services or labor is entirely governed by (or excluded from) the CISG or whether the CISG always governs at least the part concerning the supply of goods.236 Even though both legal scholars237 and the Official Records of the United Nations Conference238 assert that this question should be answered by the relevant rules of domestic law, the better view seems to be to the contrary: the question of severability should be answered by resorting to the principles of the CISG,239 since otherwise the mandate (set forth in Article 7(1) of the CISG) to promote uniformity in the Convention’s application would not be sufficiently honored.240 However, since the CISG, as well as most domestic laws, resort to party autonomy as the principal criterion in order to solve the problem de quo, the differing views will hardly lead to different results,241 at least from a practical point of view.242 234

See Landgericht Mainz, Germany, 26 November 1998, CLOUT case No. 346, available at http://www.cisg-online.ch/cisg/urteile/563.htm. 235 See Corte Suprema di Cassazione, 9 June 1995 (Foro padano 2 ff. (1997)). 236 For a discussion of this issue, see, inter alia, Honnold, supra note 36, at 108. 237 See, e. g., Schlechtriem, supra note 219, at 32, stating that in contracts for the supply of goods and labor or services it is difficult “to decide whether there are, in fact, two separate contracts, and, for example, whether the delivery is subject to the Uniform Law for International Sales while the installation contract is governed by domestic law. Domestic law should decide whether these two contracts can be distinguished” (footnotes omitted). This solution has also been advanced by Lacasse, supra note 201, at 31; C. Samson, supra note 133, at 928-929. 238 See Secretariat Commentary on Art. 3, Official Records of the United Nations Conference, supra note 47, at 16-17 available in Documentary History, supra note 47, at 40607, stating that “the question whether the seller’s obligations relating to the sale of goods and those relating to the supply of labor or services can be considered as two separate contracts (under what is sometimes called the doctrine of ‘severability’ of contracts), will be resolved in accordance with the applicable national law”. 239 See, e. g., Czerwenka, supra note 103, at 146 n. 696; Herber & Czerwenka, supra note 17, at 29. 240 For this view, see also Enderlein & Maskow, supra note 135, at 38. 241 For this statement, see also R. Herber, Art. 1, in Kommentar zum Einheitlichen UN-

74

The CISG’s sphere of application: Articles 1-3 and 10

E. The international sale of “goods” The CISG governs only international sales contracts (or other international contracts which the CISG considers to be sales contracts)243 whose subject matter, at the time of delivery,244 is moveable, including245 livestock,246 plants,247 art objects,248 as well as chemical substances needed for the production of pharmaceuticals.249 As far as the concept of “moveable goods” under the CISG is concerned, it essentially corresponds to the one in the 1964 Hague Conventions,250 even though the expressions used by the different laws partially differ from each other.251 While all the English language texts use the expression “goods”, the official French version of the Kaufrecht, supra note 229, at 70; Piltz, supra note 133, at 27; P. Schlechtriem, Anwendungsvoraussetzungen und Anwendungsbereich des UN-bereinkommens
ber den internationalen Warenkauf (CISG), Archiv f
r die juristische Praxis 347 (1992). 242 See Ferrari, supra note 92, at 86. 243 See text accompanying notes 150-242. 244 See, e. g., Cour d’appel Grenoble, France, 26 April 1995, CLOUT case No. 152, available at http://www.cisg-online.ch/cisg/urteile/154.htm; Herber & Czerwenka, supra note 17, at 16-17 (stating that “the goods must be moveable at the time of delivery, not necessarily at the moment the contract is concluded”); P. Schlechtriem, Das Wiener Kaufrechts
bereinkommen von 1980 (Convention on the International Sale of Goods), Praxis des internationalen Privat- und Verfahrensrechts 278-279 (1990) (stating the same). 245 For an overview on recent case law concerning this issue, see also Magnus, Das UNKaufrecht, supra note 161, at 830-831. 246 Landgericht Flensburg, Germany, 19 January 2001 (Internationales Handelsrecht 67 f. (2001)) (applying the CISG to the sale of live sheep); Gerechtshof Arnhem, Netherlands, 22 August 1995, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do= case&id=156&step=FullText (applying the CISG to a contract for the sale of living lambs between a German seller and a Dutch buyer). 247 See Rechtbank s’Gravenhage, Netherlands, 7 June 1995, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=154&step=FullText (applying the CISG to a contract for the sale of apple trees); Oberlandesgericht Innsbruck, Austria, 1 July 1994, CLOUT case No. 107 (Schweizerische Zeitschrift f
r internationales und europisches Recht 51 (1996)) (applying the CISG to a contract for the sale of daisies). 248 See Rechtbank Amsterdam, Netherlands, 15 June 1994, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=126&step=FullText (applying the CISG to a contract for the sale of lithographs). 249 See Amstgericht M
nchen, Germany, 23 June 1995, available at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/368.htm. 250 For this conclusion, see Ferrari, supra note 92, at 51. For a detailed discussion of the concept de quo under the 1964 Hague Conventions, see Herber, supra note 132, at 9. 251 For this conclusion, see also Czerwenka, supra note 103, at 147; Herber, supra note 241, at 50; V. Heuz, La vente internationale de marchandises. Droit uniforme 6 (Paris, 1992).

75

Franco Ferrari

CISG uses the expression “marchandises” as opposed to the expression “objets mobiliers corporels” employed by the 1964 Hague Conventions.252 However, this innovation is considered to be merely a terminological change, not a substantial one.253 Thus, as confirmed by some court decisions cited in the draft Digest, only “moveable and tangible”254 goods are considered goods under the CISG,255 regardless of whether the goods are solid or not256 and regardless of whether they are used or new goods.257 Consequently, the sale of immovable property,258 or of intangible goods,259 such as industrial property rights,260 or a quota of a limited liability 252

This has already been pointed out by several authors. See, e. g., F. Diedrich, Anwendbarkeit des Wiener Kaufrechts auf Software
berlassungsvertrge, Recht der internationalen Wirtschaft 446 (1993); Ferrari, supra note 113, at 930-931; Herber, supra note 241, at 50. 253 For this conclusion, see Herber & Czerwenka, supra note 17, at 16. 254 See Kantonsgericht Z
rich, Switzerland, 21 October 1999 (Internationales Handelsrecht 45 (2001); Tribunale Pavia, Italy, 27 December 1999 (Corriere giuridico 932 ff. (2000)); Oberlandesgericht Kln, Germany, 21 May 1996, CLOUT case No. 168, available at http:// www.cisg-online.ch/cisg/urteile/254.htm; Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 ff. (1995)); Oberlandesgericht Kln, Germany, 26 August 1994, CLOUT case No. 122, available at http://www.cisg-online.ch/ cisg/urteile/132.htm. 255 See also Bernardini, supra note 139, at 85 (stating that “goods” in the sense of the CISG are only “corporeal moveable goods”); Enderlein et al., supra note 108, at 42 (stating the same); Endler & Daub, supra note 153, at 602 (stating the same); Herber, supra note 241, at 50 (stating the same); H. Hoyer, Der Anwendungsbereich des UNCITRAL-Einheitskaufrechts, Wirtschaftsrechtliche Bltter 71 (1988) (stating the same); Samson, supra note 133, at 927. 256 See Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 170 (Recht der Wirtschaft 203 ff. (1996) (applying the Convention to the international sale of propane gas). 257 See Landgericht Kln, Germany, 16 November 1995, available at http://www.cisgonline.ch/cisg/urteile/265.htm. 258 See Honnold, supra note 36, § 56, at 52, stating that “[m]any provisions of the Convention also make clear that the term ‘goods’ (French: marchandises; Spanish: mercaderias) refers to moveable tangible assets. A sale of land is excluded. Any possible doubt on this point is foreclosed by numerous provisions that are incompatible with transactions in land – e. g., quality and packaging (Art. 35), replacement or repair of defective parts (Art. 46), shipment and damage during transit (Art. 46), delivery by instalments (Art. 73), preservation and warehousing to prevent loss or deterioration (Art. 85-88)”. 259 Id. at 51, stating that “‘goods’ governed by the Convention must be tangible, corporeal things, and not intangible rights”. For this conclusion, see also B. Piltz, UN-Kaufrecht, in Handbuch des Kaufvertragsrechts in den EG-Staaten einschließlich sterreich, Schweiz und UN-Kaufrecht 10 (F. Graf von Westphalen ed., 1993). 260 See also Enderlein & Maskow, supra note 135, at 29, stating that “[t]he goods referred to [in the CISG] are conceived as moveable assets ... hence, sales of immovable property and legal assets (e. g. sales of industrial property rights) are not covered by the Convention”.

76

The CISG’s sphere of application: Articles 1-3 and 10

company,261 or receiveables, do not constitute sales of “goods” in the sense of the CISG.262 It should be noted, however, that the draft Digest cites (as always without any further comment) one case in which the court states that the concept of “goods” is to be interpreted “extensively”.263 Hopefully courts will not construe that reference to mean that intangible goods or immoveable goods should be considered “goods” under the CISG. By virtue of this definition of “goods” which is favored here, the sale of “know-how”, as well, is to be excluded from the CISG’s sphere of application,264 despite some statements to the contrary.265 Whereas computer hardware clearly falls under the CISG concept of “goods”,266 it is not clear whether that concept also encompasses computer software and, if it does, to what extent. This dilemma is evidenced by the fact that the draft Digest cites several court decisions that hold opposing views – without giving any guidance as to which view is to be favored. According to some court decisions, only standard software is considered a “good” under the CISG.267 According to one court, however, any kind of software is considered a “good”, even custom-made software.268 In this author’s opinion, the sale of See also Honnold, supra note 36, § 56, at 52, asserting that “[the] conclusion that ‘goods’ refers to tangible, corporeal things means that sales of patent rights, copyrights, trademarks ... are not governed by the Convention”. 261 See Arbitration Court of Chamber of Commerce and Industry of Budapest, Hungary, 20 December 1993, CLOUT case No. 161 (stating that the CISG is inapplicable to a contract for the sale of shares of a limited liability company). 262 For this conclusion, see also Ferrari, supra note 92, at 51; B. Piltz, Der Anwendungsbereich des UN-Kaufrechts, Anwaltsblatt 59 (1991). 263 Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281, available at http://www.cisg-online.ch/cisg/urteile/91.htm. 264 For this conclusion, see Ferrari, supra note 92, at 52; Honnold, supra note 36, at § 56; P. Schlechtriem, Einheitliches Kaufrecht. Erfahrungen mit den Haager Kaufgesetzen – Folgerungen f
r das Wiener UN-Kaufrecht, Recht der Wirtschaft 43 (1989). 265 See, e. g., De Nova, supra note 153, at 752; Piltz, supra note 133, at 30. 266 See, e. g., Landgericht M
nchen, Germany, 29 May 1995 (Neue Juristische Wochenschrift 401 f. (1996)) (applying the CISG to a contract for the sale of computer hardware); Landgericht Heidelberg, Germany, 3 July 1992, available at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/38.htm (applying the CISG to a contract for the sale of computer components). 267 See Landgericht M
nchen, Germany, 8 February 1995, CLOUT case No. 131, available at http://www.cisg-online.ch/cisg/urteile/203.htm; Oberlandesgericht Kln, Germany, 26 August 1994, CLOUT case No. 122, available at http://www.cisg-online.ch/cisg/urteile/132.htm. 268 Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281, available at http://www.cisg-online.ch/cisg/urteile/91.htm.

77

Franco Ferrari

software other than custom-made software and standard software that is extensively modified to fit the purposes of the buyer is governed by the CISG,269 at least when the software is incorporated in corporeal goods.270 According to one court, however, even though intended to be incoporated in a document, a market study does not constitute a “good” in the sense of the CISG.271 The justification for the exclusion of contracts for the sale of custom-made software, even if incorporated in a tangible good, is to be found in Article 3(2): in this kind of “sales”, the labor or service part will generally be preponderant; where this is not the case, even custom-made software can fall under the CISG. Furthermore, even though the sale of immovable property is excluded from the sphere of application of the CISG,272 the sale of a mobile building, even though it is intended to be permanently affixed to immovable property, falls within the CISG’s field of application.273 The same is true for the sale of tangible goods to be extracted or severed from land.274 It is clear that a precise and uniform definition of the concept of “goods” does not yet exist.275 However, this should not lead one to resort to domestic definitions in order to solve interpretive problems concerning that con-

269

This view is held, for instance, by Czerwenka, supra note 103, at 148; Diedrich, supra note 252, at 441-442; Arthur Fakes, The Application of the United Nations Convention on Contracts for the International Sale of Goods to Computer, Software and Database Transactions, 3 Software L. J. 582-584 (1990); Ferrari, supra note 92, at 52; Herber & Czerwenka, supra note 17, at 17; Herrmann, supra note 103, at 92; Karollus, supra note 171, at 380; Magnus, supra note 178, at 35; Piltz, supra note 133, at 30; L. Scott Primak, Computer Software: Should the U. N. Convention on Contracts for the International Sale of Goods Apply? A Contextual Approach to the Question, 11 Computer L. J. 214 & 217 (1991). 270 For this line of argument, see also Diedrich, supra note 252, at 449; Endler & Daub, supra note 153, at 603; Ferrari, supra note 113, at 931-932; Piltz, supra note 133, at 30. 271 Oberlandesgericht Kln, Germany, 26 August 1994, CLOUT case No. 122 (Neue Juristische Wochenschrift Rechtsprechungs-Report 247 (1995)). 272 See, in addition to the authority cited in note 258, Ferrari, supra note 92, at 54; Karollus, supra note 51, at 380. 273 For this conclusion, see, e. g., Honnold, supra note 36, § 56, stating that “the Convention would apply to an international sale of mobile building even though the buyer might decide to affix it permanently to his land”. For a similar statement, see Memmo, supra note 139, at 194. 274 See Herber, supra note 241, at 51; Herber & Czerwenka, supra note 17, at 17; Karollus, supra note 51, at 21. 275 For this affirmation, see also Diedrich, supra note 252, at 443 & 446.

78

The CISG’s sphere of application: Articles 1-3 and 10

cept.276 In order to achieve uniformity in the CISG’s application, one must interpret the expression “goods” (not unlike most other expressions used by the CISG) in an autonomous way, that is, not in the light of the concept of one’s own domestic legal system.

V. Exclusions from the Convention’s sphere of application by virtue of Article 2 A. General remarks For the CISG to apply it is not sufficient that all the above mentioned prerequisites exist.277 The CISG’s sphere of application, as it results from Articles 1 and 3, is restricted by Article 2 of the CISG.278 Article 2 is important because it excludes certain categories of international sales contracts from the CISG’s sphere of application. These exclusions, which are analogous, but not identical to the ones contemplated by the ULIS, can be divided into three categories279 (and not into two, as has been stated280) depending on the reasons for the exclusions from the CISG’s field of application. The exclusions are based either on the purpose of the acquisition of the goods (Article 2(a)), or on the type of sales contract (Article 2(b) and (c)), or on the kind of goods sold (Article 2(d), (e) and (f)).281 276

For this view with respect to the 1964 Hague Conventions, see P. Kahn, La Convention de La Haye du 1er juillet 1964 portant loi uniforme sur la vente internationale d’objets mobiliers corporels, Revue trimestrielle de droit commercial 692 (1964). But see Garro & Zuppi, supra note 201, at 78-79, favoring recourse to domestic definitions to determine what must be considered a “good” under the CISG. 277 For a similar conclusion, see Ferrari, supra note 92, at 56. 278 It is commonly understood that Article 2 restricts the CISG’s sphere of application. In this respect, see, e. g., Boschiero, supra note 105, at 276; S. M. Carbone & M. Lopez de Gonzalo, Art. 2, Nuove Leggi civ. commentate 7 (1989); Schlechtriem, supra note 219, at 28. 279 For this tripartition, see Enderlein et al., supra note 108, at 45; Karollus, supra note 171, at 380; Samson, supra note 133, at 928. 280 For the bipartition, see, e. g., Carbone and Lopez de Gonzalo, supra note 278, at 7 (categorizing the exclusions on the basis of the characteristics of the contractual relationship created by the parties and on the nature of the goods sold); Honnold, supra note 36, § 49 (categorizing the exclusions on the basis of the nature of the transaction and the nature of the goods). 281 For a similar tripartition, see Enderlein & Maskow, supra note 135, at 32 (stating that “[t]here are three types of restrictions in this article [Article 2]; – those based upon the purpose for which the goods were purchased (subpara. (a)), – those based on the type of sales

79

Franco Ferrari

Even though there is dispute among legal scholars as to the number of categories of sales contracts excluded from the sphere of application of the CISG by Article 2, most legal scholars agree upon the importance of the restrictions referred to in Article 2, despite the lack of case law dealing with these exclusions, as evidenced by the small number of court decisions cited in the draft Digest. Thus, interpreters will not find much guidance in the cases (or in the draft Digest), but rather must look to scholarly commentary, which is why this part of the discussion attempts to deal in depth with the matters touched upon in Article 2. The exclusions are commonly understood to be further-reaching than those provided for in the 1964 Hague Conventions.282 This is evidenced, for example, by the exclusion of auction sales from the sphere of application of the CISG,283 an exclusion not to be found in the ULIS,284 at least if one interprets this exclusion to refer merely to private auctions. According to the contract (subparas. [b] and [c]), – those based on the kinds of goods sold, (subparas. (d), (e) and (f)”); W. Khoo, Art. 2, in Commentary on the International Sales Law, supra note 93, at 37 (stating the same); Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (stating the same); Paul Volken, The Vienna Convention: Scope, Interpretation, and Gap-Filling, in International Sale of Goods, Dubrovnik Lectures 34 (Peter arcˇevic´ & Paul Volken eds., 1986) (stating the same). 282 See, for a similar affirmation, R. Herber, Art. 2, in Kommentar zum Einheitlichen UNKaufrecht, supra note 229, at 59. 283 Even though auction sales are not subject to the CISG, this does not mean that sales at commodity exchanges are excluded from the CISG’s sphere of application (for this conclusion, see Heuz, supra note 251, at 76). Indeed, the sales at commodity exchanges being “rather rapidfire communication of offers and acceptances” (Honnold, supra note 36, § 51 n. 3), they cannot be considered as auction sales. For a similar argument, see M. Kantor, The Convention on Contracts for the International Sales of Goods: An International Sales Law, 1 International Legal Practice 10 (1988) (stating that “sales on commodity exchanges are not sales by ‘auction’ but rather extremely quick communications of offers and acceptance. Therefore, as long as a commodities trading contract is between companies with places of business in different Contracting States and the transaction is not otherwise excluded from coverage under the Convention, the Convention is applicable to international sale of goods consummated on such ... exchanges”.). For a similar conclusion, see Audit, supra note 51, at 29; Ferrari, supra note 92, at 57 n. 7 (stating that the CISG can be applicable to commodity exchange transactions). 284 It has often been stated that the exclusion of auction sales constitutes one of the innovative characteristics of the CISG. See, e. g., Khoo, supra note 281, at 36 (stating that “[p]aragraph (b) excepting ‘auction[s]’ has no precedent in Ulis. It was introduced by the Working Group in 1970 [...]. There is a similar provision in the 1974 Limitation Convention”). See also Carbone & Lopez de Gonzalo, supra note 278, at 7 (stating the same).

80

The CISG’s sphere of application: Articles 1-3 and 10

Official Records of the United Nations Conference, that exclusion finds its reason to exist in the draftsmen’s intent to avoid a conflict between CISG rules and special rules to which auction sales are often subject under national law.285 B. Exclusions of consumer contracts: The definition of consumer contracts Article 2 of the CISG also excludes the sale of goods bought for personal use from the Sales Convention’s sphere of application. Even though it has been argued that this exclusion has no antecedent in the 1964 Hague Conventions,286 its rationale underlies the Article 5(2) ULIS exclusion,287 although the latter has a more restrictive scope of application.288 This exclusion,289 which despite the proclaimed irrelevance of the civil or

285

See Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (stating that “[s]ubparagraph (b) of this article [Article 2] excludes sale by auction from the scope of the Convention. Sales by auction are often subject to special rules under the applicable national law and it was considered as desirable that they remain subject to those rules even though the successful bidder was from a different State”). Note, however, that some authors have justified the exclusion de quo differently. See, e. g., Enderlein & Maskow, supra note 135, at 34-35 (stating that the exclusion of sales by auction is rather due to the intent to avoid a conflict between CISG rules and party autonomy: “the rules for auctions are mostly created by the very institutions which hold such auctions; and the participants in the auction are obliged to accept those conditions”). For a similar justification of the Article 2(b) exclusion, see Reczei, supra note 172, at 70. 286 For a similar statement, see, e. g., Cabone & Lopez de Gonzalo, supra note 278, at 7 (stating that the Article 2(a) exclusion “has no antecedent in the 1964 Hague Conventions”); Boschiero, supra note 105, at 276 (stating the same); Czerwenka, supra note 103, at 148; Reinhart, supra note 55, at 18 (stating the same). 287 For a similar affirmation, see Memmo, supra note 139, at 196, stating that “the consideration of this question has already emerged during the drafting of the uniform laws of The Hague of 1964 and has been incorporated in Article 5(2) of the ULIS”. See also Schlechtriem, supra note 219, at 28, stating that “this exclusion intends to ensure that domestic consumer-protection laws are not affected by the Uniform Law for International Sales. Article 2(a) thereby fulfills the same function as article 5(2) of ULIS”. 288 For this conclusion, see Herber & Czerwenka, supra note 17, at 23, stating that the scope of the exclusion of Article 5(2) of the ULIS is more restricted than the one contained in Article 2(a) of the CISG. 289 The importance of this exclusion has already been stressed by the commentators on the 1978 Draft of the CISG; see, e. g., I. Fadlallah, Le projet de convention sur le vente de marchandises, Journal du droit international 764 (1979); John O. Honnold, The Draft

81

Franco Ferrari

commercial nature of the contract290 leads de facto to a limitation of the CISG’s sphere of application to commercial contracts.291 It has been justified, on the one hand, on the ground that the CISG should not be applicable to contracts having only local relevance,292 and on the other hand, on the ground that there are only a few cases where the consumer contract is international.293 However, a more convincing justification for the exclusion of sales of goods bought for personal use (i. e., for the exclusion of consumer contracts294) seems to be the intent of the draftsmen to avoid a conflict between CISG rules and domestic laws aimed at consumer protection.295 The German Supreme Court, however, pointed out in a recent decision cited in the draft Digest that a conflict cannot always be avoided,296 since domestic law defines “consumer sales” differently than does the CISG. At this point, it is worth focusing on the prerequisites a sales contract must meet in order to be excluded by virtue of Article 2(a) from the CISG’s sphere Convention on Contracts for the International Sales of Goods: An Overview, 27 Am. J. Comp. L. 227 (1979); U. Magnus, Reform des Haager Einheitskaufrechts, Zeitschrift f
r Rechtspolitik 131 (1978). 290 See Article 1(3) quoted supra at note 21. 291 For this conclusion, see Samuel K. Date-Bah, The United Nations Convention on Contracts for the International Sale of Goods: Overview and Selective Commentary, 11 Rev. Ghana L. 53 (1979); Ferrari, supra note 92, at 59; Garro & Zuppi, supra note 201, at 80; Herber, supra note 282, at 61; Reinhart, supra note 55, at 18; Schlechtriem, supra note 55, at 8 n. 5; P. H. Wang, Das Wiener bereinkommen
ber internationale Warenkaufvertrge vom 11 April 1980, Zeitschrift f
r vergleichende Rechtswissenschaft 186 (1988). 292 For this argument, see Herber, supra note 282, at 60; 2 UNCITRAL Yearbook 56 (1971). For a criticism of this justification, see Reczei, supra note 172, at 70. 293 For this argument, see, e. g., Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (stating that “most consumer sales are domestic transactions and it was felt that the Convention should not apply to the relatively few cases where consumer sales were international”); M. J. Bonell, La revisione del diritto uniforme della vendita internazionale, Giurisprudenza commerciale 123 (1980); Date-Bah, supra note 291, at 53 (arguing the same way); Maureen T. Murphy, Note, United Nations Convention on Contracts for the International Sale of Goods: Creating Uniformity on International Sales Law, 12 Fordham Int’l L. J. 746 (1989); Schlechtriem, supra note 45, at 13 (stating the same). 294 It has often been pointed out that the exclusion from the sphere of application of the CISG of the sale of goods bought for the purposes mentioned in Article 2(a) corresponds to the exclusion of consumer sales. For similar affirmations, see, e. g., Bernardini, supra note 139, at 87; De Nova, supra note 153, at 749; Ferrari, supra note 92, at 60; Garro & Zuppi, supra note 201, at 81-82; Magnus, supra note 289, at 131; Schlechtriem, supra note 45, at 19. This is also evidenced by the fact that the first Draft Conventions (for the history of Article 2[a], see, e. g., Czerwenka, supra note 103, at 148 f.; Khoo, supra note 281, at 34-36) contained a

82

The CISG’s sphere of application: Articles 1-3 and 10

of application. The sole297 criterion to be taken into account, as pointed out in case law,298 is the intention with which the goods are bought;299 the actual use of the goods is irrelevant.300 The goods must be bought for a non commercial purpose,301 i. e., for “personal” use,302 as for example where the

definition of “consumer sale” (for such a definition, see, e. g., 2 UNCITRAL Yearbook 55 (1971), defining the consumer sales as a sale “[...] of a kind and in quantity ordinarily bought by an individual for personal, family or household use”) which in the early 1970’s was abandoned (for this decision, see 6 UNCITRAL Yearbook 51 [1975]) in favor of the expression “sale of goods bought for personal, family or household use”. 295 For a similar justification of the Article 2(a) exclusion, see, e. g., Honnold, supra note 36, § 50 (stating that “[i]n UNICTRAL attention was drawn to the development of national legislation and case law designed to protect consumers; it was agreed that the Convention should not supersede these rules”); Murphy, supra note 293, at 746 (stating that “the drafters wanted to ensure that domestic consumer-protection laws were not minimized by the Sale of Goods Convention”); Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (arguing that “[a] rationale for excluding consumer sales from the scope of this Convention is that in a number of countries such transactions are subject to various types of national laws that are designed to protect consumers. In order to avoid any risk of impairing the effectiveness of such national laws, it was considered advisable that consumer sales should be excluded”). 296 Bundesgerichtshof, Germany, 31 October 2001 (Internationales Handelsrecht 16 (2002)). 297 See Bernardini, supra note 139, at 87; Lanciotti, supra note 95, at 126; Memmo, supra note 139, at 194 (stating the same). 298 Bundesgerichtshof, Germany, 31 October 2001 (Internationales Handelsrecht 16 (2002)). 299 For this conclusion, see Ferrari, supra note 92, at 61. 300 See, e. g., Oberster Gerichtshof, Austria, 11 February 1997, CLOUT case No. 190, available at http://www.cisg.at/10_150694.htm. 301 It is commonly understood that the criterion by which sales contracts are excluded ex Article 2(a) is the non-commercial purpose of the sale of goods. For a similar statement, see, e. g., Enderlein & Maskow, supra note 135, at 33 (stating that “[t]hose contracts are mostly excluded from the Convention’s scope of application which in many countries are regarded as civil law contracts (in contrast to trade law contracts). That criterion, however, is not applied with regard to the character of the parties to a contract, which would have to be defined, but rather, to the purpose of the goods”). 302 Various legal scholars have stressed the fact that the commercial nature of the goods is irrelevant; what matters is the commercial purpose of the sales contract. See Kritzer, supra note 95, at 71 (stating that the Article 2(a) exclusion “is an exclusion of consumer sales; it is not an exclusion of consumer goods”). For similar affirmation, see, e. g., Carbone & Lopez de Gonzalo, supra note 278, at 7; Honnold, supra note 36, § 50, at 47.

83

Franco Ferrari

buyer purchases a car303 or a caravan304 to use it for himself as opposed to for business. The fact that the goods are consumer goods is generally speaking irrelevant for the purposes of the Article 2(a) exclusion.305 However, this does not necessarily mean that the contract must be concluded for either commercial or industrial purposes in order to be governed by the CISG. The CISG is also applicable where the goods are bought for professional use;306 consequently, where a professional photographer buys a camera to use it for business, the application of the CISG is not excluded.307 The same is true where a lawyer buys an office machine in order to use it in his law firm.308 In order to determine whether a sales contract falls within the Article 2(a) exclusion, only the purpose at the time of purchase is relevant,309 that is, it is 303 See Oberster Gerichtshof, Austria, 11 February 1997, CLOUT case No. 190, available at http://www.cisg.at/10_150694.htm; Kantonsgericht Nidwalden, Switzerland, 5 January 1996, CLOUT case No. 213 (Transportrecht-Internationales Handelsrecht 10 (1999)). See also Landgericht D
sseldorf, Germany, 11 October 1995, available in Unilex at http://www. unilex.info/case.cfm?pid=1&do=case&id=234&step=FullText, where, however, the court did not realize that the sale should have been excluded from the CISG’s sphere of application by virtue of Article 2(a), since the good, a generator, was to be installed to provide for the cooling system on the buyer’s yacht, used merely for pleasure trips. 304 Rechtbank Arnhem, Netherlands, 27 May 1993 (Nederlands Internationaal Privaatrecht (No. 261 1994)). 305 See, e. g., Carbone & Lopez de Gonzalo, supra note 278, at 7; J. Erauw, Waneer is het Weens koopverdrag van toepassing?, in Het Weens Koopverdrag 40 (H. van Houtte et al. eds., 1997); Karollus, supra note 171, at 380; Piltz, supra note 133, at 34. 306 For this conclusion, see also Audit, supra note 51, at 28; Ferrari, supra note 92, at 133; Herber, supra note 282, at 61; Karollus, supra note 171, at 380; Piltz, supra note 133, at 34; Schlechtriem, supra note 244, at 278. 307 For this example, see also Garro & Zuppi, supra note 201, at 81; Honnold, supra note 36, § 50, at 47. For this and other examples, see Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (stating that “the following situations are within the Convention: the purchase of a camera by a professional photographer for use in his business; the purchase of soap or other toiletries by a business for the personal use of the employees; the purchase of a single automobile by a dealer for resale”). 308 For this example, see Schlechtriem, supra note 219, at 28. For a court decision relating to a case with a similar fact pattern (covered, however, by the ULIS), see Bundesgerichtshof, Germany, 11 May 1977 (Neue Juristische Wochenschrift 1632 f. (1977)). 309 For a similar statement, see, e. g., Honnold, supra note 36, § 50 (stating that “[t]he phrase ‘goods bought for personal, family or household use’ refers to the purpose of the buyer at the time of the purchase”); Audit, supra note 51, at 28 (stating the same); Carbone & Lopez de

84

The CISG’s sphere of application: Articles 1-3 and 10

irrelevant that the use the buyer makes of the good is different than the intended one.310 Consequently, the CISG will not apply where the goods are bought for an intended personal use, even though the buyer later changes its mind and uses them for commercial purposes.311 For the determination of the applicability of the Article 2(a) exclusion it is also relevant to determine whether the intended personal use is an exclusive one or not.312 Where the goods are bought exclusively for personal use, the CISG is not applicable,313 while, conversely, it is applicable where the purpose is not an exclusively personal one, even though the personal use might be the primary purpose of the purchase.314 This is confirmed by the fact that during the drafting process a proposal was rejected to exclude even those sales of goods bought “primarily” for personal use.315 C. The recognizable purpose of the purchase of goods and the burden of proof The problem of determining whether a specific sale falls within the Article 2(a) exclusion is accentuated by the Article 2(a) requirement that the “consumer” purpose of the purchase be known316 (or ought to have been known)317 to the seller at the time of the conclusion of the contract.318 Consequently, it is irrelevant whether the seller learns of the non-comGonzalo, supra note 278, at 7 (stating the same); Herber, supra note 282, at 58 (stating the same); Herber & Czerwenka, supra note 17, at 24 (stating the same); Karollus, supra note 51, at 25-26. 310 For a similar conclusion, see also Enderlein & Maskow, supra note 135, at 33 (stating that “late changes in purpose are irrelevant”); Ferrari, supra note 92, at 63 (stating the same). 311 Conversely, the CISG will apply, even where the buyer uses the goods for non-commercial purposes, if, at the time of the conclusion of the contract, he intended to make a commercial use of them. 312 For a short discussion of this question, see Ferrari, supra note 92, at 63-64. 313 For this solution, see also Czerwenka, supra note 103, at 151-152; Herber & Czerwenka, supra note 17, at 24; Karollus, supra note 51, at 26; Piltz, supra note 133, at 34. 314 For this solution, see, e. g., Herber, supra note 282, at 58. 315 For a reference to this proposal, see UNCITRAL Yearbook 44 (1971). 316 This might be the case where the seller expressly states that the intended use is a personal one. 317 As far as this criterion is concerned, it has been said that the CISG is excluded solely where the personal use to be made of the goods was unknown to the seller because of his gross negligence. See, e. g., Herber & Czerwenka, supra note 17, at 24-25. The preferable view is, however, that any kind of negligence is relevant in order to invoke the Article 2(a) exclusion. See, e. g., Schlechtriem, supra note 45, at 13. 318 For this conclusion, see Enderlein et al., supra note 108, at 34; Khoo, supra note 281, at 37; Memmo, supra note 139, at 197.

85

Franco Ferrari

mercial purpose of the purchase after the conclusion of the contract.319 Some suggest that the rationale for this exclusion is the need for certainty of law: the seller has to know whether the CISG or its domestic sales law is applicable.320 Whether this view is tenable, however, is doubtful since it requires the seller to know about the CISG, which he often does not. One of the most practical problems concerning this “prerequisite” relates to the burden of proof. Indeed, there has been (and still is) dispute among legal scholars as to its allocation. Some authors assert that the CISG does not deal with any procedural questions321 and, consequently, that the issue of the burden of proof also should be left to domestic procedural law.322 The better view seems to be to the contrary: there is a general principle regarding the 319

For a similar statement, see, e. g., Enderlein & Maskow, supra note 135, at 34 (stating that “[i]n regard to whether the seller ‘knew’ or ‘ought to have known,’ what matters again is the time of the conclusion of the contract. It is not sufficient to gain this knowledge only when, for instance, the machine is being installed”); Herber and Czerwenka, supra note 17, at 25 (stating that the seller has to have knowledge (or the possibility of knowing) of the personal use the buyer wants to make of the goods at the moment the contract is concluded). See also Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406. 320 For this rationale, see Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406, stating that “[t]he seller might have no reason to know that the goods were purchased for [personal] use. This information must be available to the seller at least by the time of the conclusion of the contract so that he can know whether his rights and obligations in respect to the sale are those under this Convention or those under the applicable national law”. For a similar statement, see Khoo, supra note 281, at 36. 321 For papers on procedural issues in general and the issues of burden of proof under the CISG, see C. Antweiler, Beweislastverteilung im UN-Kaufrecht. Insbesondere bei Verletzungen des Verkufers (1995); O. Hartwieg, Prozessuale Aspekte einheitlicher Anwendung der Wiener UN-Konvention
ber den Internationalen Warenkauf (CISG), Zeitschrift f
r vergleichende Rechtswissenschaft 282 ff. (1993); H. Michael, Die Frage der Beweislast im Rahmen des UNKaufrechts (1995); C. Giovannucci Orlandi, Procedural law issues and uniform law conventions, Uniform L. Rev. 23 ff. (2000); B. Reimers-Zocher, Beweislastfragen im Haager und Wiener Kaufrecht (1995). 322 This view is taken, for instance, by Khoo, supra note 281, at 39, according to whom the same view was favored by the delegates during the Vienna Conference: “[d]elegations speaking on the burden of proof were all quite definite that it was not the intention to deal in the Convention with any questions concerning the burden of proof. The consensus was that such questions must be left to the court as matters of procedural law”. For the statements of several delegates at the Vienna Conference, see Summary Records of the First Committee at the 1980 Vienna Diplomatic Conference, First Meeting (10 March 1980) and Twelfth Meeting (19 March 1980), Official Records of the United Nations Conference, supra note 47,

86

The CISG’s sphere of application: Articles 1-3 and 10

burden of proof upon which the CISG is based, as will be shown in the comments on the draft Digest parts relating to the CISG’s scope of application. On the basis of that principle, the burden of proving that the seller did not know (or that it ought not to have known) the buyer’s purpose is placed on the party claiming the applicability of CISG.323 In addition to the question of the burden of proof, there is an issue as to the criteria to be used in deciding whether the “personal use” purpose was (or should have been) known to the seller.324 In this regard, there are various indicia from which to infer the non-commercial purpose of a sales contract325 and, therefore, the inapplicability of the CISG.326 It has been stated, for example, that the goods’ non-commercial use can be inferred from their being generally used for personal purposes,327 as in the case of the purchase of clothing, food,328 or a caravan.329 On the other hand, the purchase of several items of the same type of goods, even where they are generally intended for personal use, might lead to the opposite presumption – that is, that they are bought for a purpose different than personal use.330

at 238-239 and 295-298, available in Documentary History, supra note 47, at 459-60, 51619. 323 For this solution, see Schlechtriem, supra note 219, at 28, stating that “[t]he exception for sellers who ‘neither knew nor ought to have known’ that the goods were for private use is deliberately formulated in the negative in order to place the burden of proof firmly on those who claim the exception to the consumer-contracts exclusion and assert that the Convention should apply” (footnote omitted). See also Ferrari, supra note 48, at 20. 324 For this issue, see Herber, supra note 282, at 61-62; Memmo, supra note 139, at 198. 325 Note, that where the contract is concluded by an agent, the law applicable by virtue of the rules of private international law of the forum will decide whether the non-commercial purpose of the purchase must be recognizable to the agent or to the principal. Herber, supra note 282, at 62. 326 For a discussion of this problem, see Ferrari, supra note 92, at 66. 327 For this statement, see U. Huber, Der UNCITRAL-Entwurf eines bereinkommens
ber internationale Warenkaufvertrge, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 421 (1979). 328 See Herber, supra note 282, at 61-62. 329 See Rechtbank Arnhem, Netherlands 27 May 1993 (Nederlands Internationaal Privaatrecht No. 261 1994) (declaring the CISG inapplicable to a contract concluded between a German buyer and a Dutch seller on two grounds: that the object of the contract was a caravan bought for personal use, and that the contract had been concluded at a time at which neither Germany nor the Netherlands was a Contracting State). 330 See Ferrari, supra note 92, at 66.

87

Franco Ferrari

There are other indicia that do not relate to the nature of the goods, but to the “buyer”.331 Where, for instance, the buyer concludes a contract providing an enterprise’s address as the one to which the goods must be delivered, then an intent to use the goods for non-commercial purposes does not seem to be recognizable.332 The same is true where the buyer concludes a sales contract using an enterprise’s letterhead, or where the buyer uses an enterprise’s office during the bargaining process.333 However, Article 2(a) CISG provides that the goods need not necessarily be intended for personal use334 in order to be excluded from the CISG’s scope of application.335 Indeed, Article 2(a) equates family and household use to personal use, but it is doubtful whether the express contemplation of “family and household use” adds anything to the exclusion of the sale of goods bought for personal use,336 since the former exclusions merely represent examples of “personal use”.337 However, those who argue that “family or household use” has a meaning different and independent from “personal use” must avoid defining these terms on the basis of their domestic law;338 rather, they have to interpret them in a fashion that conforms to Article 7(1) CISG. This is why these concepts should be interpreted on a sociological basis339 rather than a legal one. Thus, the purchase of goods for a god-child340 or a cohabiting partner341 will fall within the Article 2(a) exclusion.

331

See also Herber, supra note 282, at 62. See Memmo, supra note 139, at 198. 333 This has already been pointed out by Herber, supra note 282, at 62. 334 The exclusion of “sales of goods bought for personal use” seems to require that the buyer be a person, as opposed to a corporation or enterprise. For a similar conclusion, see Huber, supra note 327, at 422 (stating that “[t]he buyer has to be a natural person”); Memmo, supra note 139, at 198 (stating the same). 335 Note that the expression “personal use” does not necessarily signify that the goods must be bought for a use strictly related to the person of the buyer. Consequently, the Article 2(a) exclusion applies, for instance, where the sale is made in order to complete a private collection. See Herber & Czerwenka, supra note 17, at 24. The same appears to be true for goods which the buyer wants privately to donate to another person. 336 See Czerwenka, supra note 103, at 152; Huber, supra note 327, at 422. 337 See Memmo, supra note 139, at 196. 338 See Ferrari, supra note 92, at 63; Schlechtriem, supra note 45, at 14-15. 339 See Schlechtriem, supra note 219, at 29, stating that “the purpose of Article 2(a) is to allow a broad description, based on sociological evidence, of those persons who are regarded as included in the family or household”. See also Herber, supra note 282, at 61. 340 Several authors have argued in favor of the inclusion of the god-child within the concept of CISG’s “family”. See, e. g., Herber, supra note 282, at 61; Schlechtriem, supra note 45, at 15. 341 See Ferrari, supra note 92, at 63; Herber, supra note 282, at 62. 332

88

The CISG’s sphere of application: Articles 1-3 and 10

D. Exclusions of sales based upon the nature of the goods sold: Negotiable instruments and money As already pointed out,342 the Article 2 exclusions are not only based upon the purpose behind the acquisition of the goods or upon the type of sales contract (such as auction sales or sales on execution or otherwise by authority of law mentioned in Article 2(c)), but also on the kind of goods sold (Article 2(d), (e) and (f)).343 Article 2(d) excludes sales of stocks, shares, investment securities, negotiable instruments, and money from the CISG’s sphere of application344 in order to avoid a conflict between CISG rules and domestic rules governing these matters, which often are mandatory.345 The commercial instruments referred to in Article 2(d) (which some authors consider to be a superfluous provision, because the concept of “goods”, which can be deduced from the Convention, is sufficient to exclude the instruments listed in the provision de quo)346 include bills of exchange, cheques,347 as well as other “[...] instruments calling for the payment of money”.348 Sales of documents controlling the delivery of goods, such as warehouse receipts and bills of lading,349 are, on the contrary, governed by CISG rules,350 for the real subject of those sales is the goods rather than the documents.351 342

See the text accompanying note 281, supra. See Garro & Zuppi, supra note 201, at 79, expressly stating that the exclusion of some sales is based upon the goods sold. 344 See Piltz, supra note 133, at 31. 345 For this rationale for the Article 2(d) exclusion, see Schlechtriem, supra note 219, at 30, stating that the exclusion de quo “takes into consideration that international securities and currency transactions are governed by their own rules and laws which are often compulsory”. See also Enderlein et al., supra note 108, at 47, stating that the Article 2(d) exclusion “can be explained by the existence of mandatory domestic rules”. 346 See, e. g., Audit, supra note 51, at 29, stating that “the expression ‘marchandises’ which has been used ... in the Vienna Convention would suffice to justify the exclusion of stocks, negotiable instruments and money from the Convention’s sphere of application”. Honnold, supra note 36, § 53, goes even further and states that “[t]he exclusion of the intangible rights listed in Article 2(d) illustrates ... that the sale of ‘goods’ refers to moveable, corporeal things”. 347 For a reference to bills of exchange and cheques as instruments excluded from the Convention’s sphere of application, see Enderlein & Maskow, supra note 135, at 35; Erauw, supra note 305, at 41; Ferrari, supra note 92, at 71; Reinhart, supra note 55, at 19. 348 Honnold, supra note 36, § 53. 349 For a more detailed list of documents controlling the delivery of goods, the sale of which are subject to the CISG, see Herber, supra note 282, at 65. 350 For this conclusion, see Heuz, supra note 251, at 37 (stating that documentary sales are 343

89

Franco Ferrari

Article 2(d) expressly excludes the sale of money from the sphere of application of the Vienna Sales Convention.352 Since, in this author’s opinion,353 “money” in the sense of the CISG means “money that is legal tender in a country”, there is no reason why the CISG should not be applied to the sale of money which is no longer in use. Consequently, the purchase of vintage coins from the last century by a store owner, made with the intention of reselling them, should be subject to the CISG. And the same appears to be true with reference to the aforementioned negotiable instruments: if a museum, for example, buys a number of shares which have only historical or artistic value, there is no reason why this sale should not be governed by the CISG,354 even though the sale of shares is generally not governed by the CISG, as pointed out in case law and the draft Digest.355

not excluded from the CISG’s scope of application); Kantor, supra note 283, at 11 (stating that “[t]he reference to ‘negotiable instruments’ is intended to refer to instruments calling for the payment of money. Instruments such as bills of lading and other documents controlling the delivery of goods, even though characterized as ‘negotiable instruments’ under Article 3 of the UCC, should be subject to the Convention when employed to effect the delivery of goods”); Karollus, supra note 51, at 21-22 (stating that the sale of documents controlling the delivery of goods is governed by the CISG); Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (stating that Article 2(d) “does not exclude documentary sales of goods from the scope of [the] Convention, even though, in some legal systems, such sales may be characterized as sales of commercial paper”); Schlechtriem, supra note 219, at 30 (arguing that the “[s]ales contracts which name a document as the subject of the sales, because the document controls the delivery of goods, are considered to be within the sphere of application of the Uniform Law for International Sales”). 351 For a similar affirmation, see Enderlein & Maskow, supra note 135, at 35 (“the buyers of such papers are basically the buyers of the goods to which those refer”); Czerwenka, supra note 103, at 152 (stating the same); Ferrari, supra note 92, at 71 (stating the same); Grigera Naon, The UN Convention on Contracts for the International Sale of Goods, in The Transnational Law of International Commercial Contracts 96 (N. Horn & C. M. Schmitthoff eds., 1982); Reinhart, supra note 55, at 19 (stating the same). 352 See D. Martiny, Kommentar zum UN-Kaufrecht, in 7 M
nchener Kommentar zum B
rgerlichen Gesetzbuch 1652 (H.-J.Sonnenberger ed., 2d ed., 1989); Piltz, supra note 133, at 31. 353 See Ferrari, supra note 92, at 72; see also Herber, supra note 282, at 65. 354 See also Plantard, supra note 112, at 325. 355 For decisions excluding the Convention’s applicability to the sale of shares, see Cour de Justice de Genve, Switzerland, 9 October 1998, CLOUT case No. 260 (TransportrechtInternationales Handelsrecht 12 (2000)); Arbitral Tribunal attached to the Zurich Chamber of Commerce, Switzerland, 31 May 1996 (Arbitral Award No. ZHK 273/95, Yearbook Commercial Arbitration 128 ff. (1998)).

90

The CISG’s sphere of application: Articles 1-3 and 10

E. The exclusion of sales of ships, vessels, hovercraft, aircraft and electricity (Article 2(e) and (f)) The exclusion of the sale of ships,356 vessels, hovercrafts and aircrafts357 fall within the same category as the exclusion of commercial paper and money,358 that is, sales excluded on the basis of the nature of the goods sold.359 These exclusions,360 which according to the Official Records of the United Nations Conference are due to the existence, in some legal systems, of rules according to which the excluded “goods” are treated as immovables,361 were – at least partially – already contained in ULIS.362 Indeed, Article 5(1)(b) of ULIS excluded the sale of ships, vessels and aircraft from the sphere of application of the 1964 Uniform Sales Law.363 However, it did not mention the sale of

356 For cases dealing with the inapplicability of the Convention to contracts for the sale of ships, see Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 6 April 1998, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/980406r1.html (award No. 236/1997); Yugoslav Chamber of Economy Arbitration Proceeding, Yugoslavia, 15 April 1999, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/990415y1.html#ca (award No. T-23/97). 357 For the inapplicability of the Convention to a contract for the sale of an aircraft, see Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 2 September 1997, available at http://www. cisg.law.pace.edu/cisg/wais/db/cases2/970902r1.html (award No. 255/1996). 358 See Heuz, supra note 251, at 76-77. 359 See Kritzer, supra note 95, at 72. 360 Note that the exclusions de quo were retained despite arguments in favor of their elimination during the Vienna Conference. For references to these arguments, see Summary Records of the First Committee at the 1980 Vienna Diplomatic Conference, Second Meeting (11 March 1980), Official Records of the United Nations Conference, supra note 47, at 240241, available in Documentary History, supra note 47, at 461-62 (reporting the delegates’ views on the Article 2(e) exclusion); Schlechtriem, supra note 219, at 30. 361 See Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (“This subparagraph excludes from the scope of the Convention all sales of ships, vessels and aircraft. In some legal systems ... some sales of ships, vessels and aircraft are assimilated to sales of immovables”.). See also Garro and Zuppi, supra note 201, at 79; Samson, supra note 133, at 928. 362 Under the ULIS, as well, the basis for the exclusion of sales of ships, vessels and aircraft from its sphere of application was that they were similar to sales of immovables. See, e. g., Kahn, supra note 276, at 694. 363 For a comment on Article 5 ULIS, see R. Herber, Art. 5, in Kommentar zum Einheitlichen Kaufrecht, supra note 132, at 25 ff.

91

Franco Ferrari

hovercraft.364 The CISG’s innovation was introduced in order to make sure that the exclusion applies to hovercraft as well,365 independently of whether hovercraft are ships, vessels or aircraft.366 The scope of the CISG’s Article 2(e) exclusion is different367 and broader than the ULIS’ Article 5(1)(b) exclusion for another reason as well. Indeed, whereas the ULIS merely excluded the ships, vessels and aircrafts that were subject to registration by virtue of national law,368 the CISG, by eliminating this criterion, broadened the exclusion of sales of the foregoing “goods”.369 The deletion of the registration requirement has some advantages. It avoids, for instance, requiring judges to examine the difficult question of which ships, vessels or aircraft are subject to a registration requirement and, therefore, fall within the scope of the exclusion.370 However, it raises the question whether sales of smaller boats fall within the scope of the Article 2(e) exclusion.371 The view, held by several authors, according to which the concept of “ship” (or “vessel”) is limited to larger ships (or vessels) 364

See Herber, supra note 282, at 67. See also Herber, supra note 282, at 67. 366 According to Khoo, supra note 281, at 38, this is the rationale behind the inclusion of sales of hovercraft in the list of excluded sales. Indeed, the express exclusion of sales of hovercraft “makes it unnecessary to decide whether hovercraft are ships, vessels or aircraft”. For a similar justification for the exclusion de quo, see Carbone and Lopez de Gonzalo, supra note 278, at 8. 367 See Martiny, supra note 352, at 1652. 368 See Erauw, infra note 305, at 41; Reinhart, supra note 55, at 19. 369 See Ferrari, supra note 92, at 73. 370 See Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406: [I]n most legal systems at least some ships, vessels and aircraft are subject to special registration requirements. The rules specifying which ones must be registered differ sidely. In order not to raise questions of interpretation as to which ships, vessels or aircraft were subject to this Convention, especially in view of the fact that the relevant place of registration, and therefore the law which would govern the registration, might not be known at the time of the sale, the sale of all ships, vessels and aircraft was excluded from the application of this Convention. See also Khoo, supra note 281, at 38 (omitting the registration requirement as the criterion for exclusion has the effect that “[...] all vessels, ships, hovercraft and aircraft are excluded, whether or not they are subject to the registration requirement of any national law”.). 371 See Schlechtriem, supra note 219, at 30 (“With the elimination of the registration criterion, it has, however, become uncertain whether and to what extent smaller boats – row boats, canoes, dinghies and yachts – belong to the subject matter excluded from the application of the Convention”.). See also Honnold, supra note 36, § 54, at 50, wondering whether “the exclusion of the sales of ‘ships, vessels’ (Fr.: navires, bateaux; Sp.: buques, embarcaciones) [does] extend to small pleasure craft such as sailboats and row boats”. 365

92

The CISG’s sphere of application: Articles 1-3 and 10

only, does not seem to be grounded in the text of the CISG.372 The better view is that the size of a watercraft is not a relevant criterion for the exclusion of a sale from the CISG’s sphere of application.373 But this does not mean that all purchases of small watercraft fall within the CISG’s sphere of application. It only means that an exclusion must be based upon a criterion different than the size of the watercraft, such as the functional characteristics of the watercraft.374 Consequently, the sale of watercraft which do not have the function ships or vessels have, i. e., watercraft which are not permanently destined for the transport of goods or persons, does not fall within the exclusion de quo (regardless of their size).375 This is why the sale of a row boat376 or a sailing boat should be governed by the CISG.377 Indeed, these boats must be considered sporting goods378 rather than means of transport.379 It may be that if one were to use a ship or vessel’s normal function as a criterion to decide whether the sale of a watercraft is excluded from the CISG’s sphere of application, the award referred to in the draft Digest,380 which held that the CISG was applicable to the sale of an out-of-commission military submarine, could be justified, although more facts would be needed to decide whether the arbitral tribunal was correct.

372 See Herber, supra note 282, at 63. See, however, Reczei, supra note 172, at 71, who admits the possibility that, on the basis of the text of the CISG, the exclusions of sales of ships and vessels could be restricted to larger ships and vessels only, since “[i]n the English language [...] the terms ‘ship’ and ‘vessel’ are used to denote watercraft of larger dimensions. The question is how other languages are capable of expressing the shades and hues distinguishing the one term from the other”. 373 For this view, see, e. g., Honnold, supra note 36, § 54, at 50 (“UNCITRAL’s inability to find a workable basis for distinguishing between large and small crafts and the difficulty that courts would encounter in developing such a distinction suggests that Article 2(e) must be read without qualification: Sales of small pleasure craft do not fall within the Convention”). See also Martiny, supra note 352, at 1652. 374 For this solution, see Ferrari, supra note 92, at 74; Schlechtriem, supra note 45, at 16. 375 See Herber, supra note 282, at 66. 376 See Piltz, supra note 133, at 32. 377 See Czerwenka, supra note 103, at 154. 378 See Herber, supra note 282, at 66. 379 Note, however, that where a row boat is bought for personal use, it is irrelevant whether it is considered a sporting good or a “ship” or “vessel”, since consumer sales are excluded from the Sales Convention’s sphere of application (Article 2(a)), not unlike sales of ships or vessels (Article 2(e)). Where, however, the row boat is bought by an owner of a shop with the apparent intent to resell it, the CISG could apply. 380 See Russian Maritime Commission Arbitral Tribunal, Russia, 18 December 1998, available at http://cisgw3.law.pace.edu/cisg/text/draft/981218case.html.

93

Franco Ferrari

The aforementioned problem (size of watercraft as criterion for exclusion from CISG’s sphere of application, an issue to which the draft Digest does not refer at all) was not the only one which produced doctrinal dispute. There was also disagreement among scholars as to whether the sale of components of goods excluded by Article 2(e) would be subject to the exclusion. Some authors argue that such a sale falls within the sphere of the exclusion, at least where the components are essential elements of the good excluded ex Article 2(e).381 The better view, however, is to the contrary,382 and has been confirmed by a Hungarian Supreme Court decision383 applying the CISG to a sales contract concerning aircraft engines, which certainly constitute “essential elements” of aircraft. Finally, there is the exclusion from the CISG’s sphere of application of sales contracts covering electricity.384 According to some authors, the exclusion de quo can be justified on the ground of the electricity’s “unique” nature385 or “[...]on the ground that in many legal systems electricity is not considered to be a good”.386 Neither justification appears to be convincing.387 Indeed, the

381 See, e. g., Herber, supra note 282, at 66, stating that the sale of non-essential parts of a “good” excluded under Article 2(e) should not fall within the exclusion; conversely, the sale of essential parts of those “goods” should not be governed by the Sales Convention. 382 This view has been expressed, for instance, by Karollus, supra note 51, at 22; R. Loewe, Internationales Kaufrecht 28 (1989); Reinhart, supra note 55, at 19. 383 See the decision rendered by the Legfelsbb Birs g, Hungary, 25 September 1992, CLOUT case No. 53, published in English in 13 J. L. & Com. 31 ff. (1993). 384 This exclusion was also found in Article 5 of the ULIS. 385 For a similar justification of the exclusion of sales of electricity from the Convention’s sphere of application, see, e. g., Heuz, supra note 251, at 77 (stating that the exclusion of sales of electricity can be explained on the ground of its nature); Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406 (stating that the exclusion of electricity is justified because its sale presents unique problems that are different from those presented by the usual international sale of goods). 386 Secretariat’s Commentary on Article 2, Official Records of the United Nations Conference, supra note 47, at 16, available in Documentary History, supra note 47, at 406. For a similar justification of the Article 2(f) exclusion, see Samson, supra note 133, at 928. 387 For a detailed summary of the different justifications suggested for the electricity exclusion, see N. R. Merchor, La regulacion internacional de las operaciones mercantiles enfrentada a un caso extremo: el trafico transfronterizo de energia electrica, Derecho de los Negocios 9 ff. (1995).

94

The CISG’s sphere of application: Articles 1-3 and 10

first overlooks the fact that there are other goods whose sale presents “unique” problems,388 such as the sale of gas389 and crude oil,390 which are governed by the Sales Convention,391 as are sales of other sources of energy.392 The second one is not convincing, “because the Convention may create its own definition of good”.393 Indeed, the exclusion of electricity sales from the sphere of application of the CISG cannot be justified. 388

For this argument, see Winship, supra note 97, at 1. 25 (“[A]ny suggestion that the problems raised by the excluded items are ‘unique’ overlooks other items, such as oil and gas supply contracts or livestock transactions, which also raise unique problems”.). 389 See Honnold, supra note 36, § 56 (arguing that the sale of gas is within the Convention); Huber, supra note 327, at 419 (stating the same and criticizing the exclusion of the sale of electricity). 390 See Herber, supra note 282, at 64. For a detailed discussion of the problems of the oil trade and the Sales Convention, see J. W. Skelton, CISG and Crude Oil Traders, 9 Hous. J. Int’l L. 95 ff. (1986). 391 For a case applying the CISG to the sale of gas, see Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176, available at http://www.cisg-online.ch/cisg/urteile/ 224.htm. 392 For a discussion of the issues relating to the sale of energy under the CISG, see Peter Winship, Energy Contracts and the United Nations Sales Convention, 25 Texas Int’l L. J. 365 ff. (1990). 393 Enderlein & Maskow, supra note 135, at 35.

95

Scope of application: Articles 4-5 Franco Ferrari* I. Introduction Whereas Articles 1-3 (as well as Article 6) deal with the CISG’s sphere of application, Articles 4 and 5 define the Convention’s scope of application. In other words, whereas the former provisions determine whether the CISG applies at all, the latter ones determine to what extent it applies. From this, one can gather the importance of Articles 4 and 5. Although the CISG may be applicable, by limiting the CISG’s scope of application, these two Articles may make it necessary to resort to domestic law, as the CISG may not deal with the specific substantive issue to be solved. It is therefore of paramount importance to determine exactly the CISG’s scope of application. Case law may be helpful in doing so, which is where the Digest (in particular, the Digest parts relating to Articles 4 and 5) becomes relevant, as it provides what is supposed to be a complete list of existing cases on the issue. The following remarks will show, however, that for an exact determination of the CISG’s scope of application, the draft Digest is only of limited help, for various reasons. There are instances where the court decisions that are acritically cited in the draft Digest are incorrect; there are other instances where the case law cited in the draft Digest is contradictory (contradictions the draft Digest does not attempt to solve); and, last but not least, there are issues the draft Digest does not refer to at all, since no cases dealing with those issues yet exist.

II. Issues the CISG is expressly concerned with The need to determine exactly the CISG’s scope of application is due to the fact that the CISG is, contrary to what has been stated by one court,1 not an “exhaustive body of rules”. If it were exhaustive – if, in other words, it were concerned with all matters that can arise from a sales contract – an exact *

Professor of International Law, Verona University School of Law. Gerichtsprsident Laufen, Switzerland, 7 May 1993, CLOUT case No. 201, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=105&step=FullText. 1

96

Scope of application: Articles 4-5

determination of its scope of application would not be necessary. Like any other substantive uniform law convention,2 however, the CISG only deals with some specific matters, not all of them, with the result that some issues will always be left to a set of rules different from those of the CISG. For the purpose of determining the CISG’s exact scope of application, the most relevant provision is Article 4, since it identifies both the matters the CISG is concerned with (“this Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract”), and some of the matters that are excluded from its scope (“In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold”). As far as the first part of the provision is concerned, it is worth pointing out that despite the wording, the matters listed are not the only ones the CISG is concerned with. It is therefore incorrect to state, as have several French courts,3 that the CISG applies only to those matters. For example, Article 8 sets forth rules relating to the interpretation of any statement or conduct of a party, issues that do not relate to any of the matters listed in the first part of Article 4. Moreover, the issue dealt with in Article 29 (modification of contracts) also cannot be classified as one of the matters listed in the first part of Article 4.4 It may be more appropriate to consider the reference in Article 4 to the matters the CISG is “only” concerned with as meaning that these matters are “without any doubt” dealt with in the CISG. It must also be stressed that not all issues relating to those listed in Article 4 as governed by the CISG actually fall within the scope of the Convention, as is correctly pointed out by the draft Digest. As far as formation of contract is concerned, for instance, the CISG merely governs the mechanism leading to 2

Accord, e. g., S. Annibale, Il diritto uniforme: problematiche e limitazioni (dalla giurisprudenza all’art. 2 della legge di riforma del sistema di diritto internazionale privato, Archivio civile 158-159 (1996)); F. Ferrari, Das Verhltnis zwischen den Unidroit-Grundstzen und den allgemeinen Grundstzen internationaler Einheitsprivatrechtskonventionen, JuristenZeitung 10 (1998); J. Kropholler, Internationales Einheitsrecht. Allgemeine Lehren 167 (1975); B. Trompenaars, Pluriforme unificatie en uniforme intepretatie 18 ff. (1988). 3 See Cour de Cassation, France, 5 January 1999, CLOUT case No. 241 (Revue critique de droit international priv 519 (1999)); Cour d’appel Paris, France, 22 April 1992, CLOUT case No. 158, available at http://witz.jura.uni-sb.de/CISG/decisions/220492v.htm. 4 See A.K. Schluchter, Die G
ltigkeit von Kaufvertrgen unter dem UN-Kaufrecht: Wie gestaltet sich die Ergnzung des Einheitsrechts mit deutschen und franzsischen Nichtigkeitsnormen? 27 (1996).

97

Franco Ferrari

the conclusion of a contract,5 i. e., it is concerned solely with the objective requirements for conclusion of a contract, as is also pointed out in case law.6 The issue of whether a contract is validly formed, however, is subject to the applicable national rules,7 as can easily be derived from Article 4(a), except for those issues for which the Convention provides exhaustive rules, as correctly emphasized by a German court.8 Thus, issues such as capacity to contract,9 and the consequences of mistake, duress and fraud,10 are left to applicable domestic law. Where, however, one party errs with respect to the qualities of the goods to be delivered or the solvency of the other party, the rules of the applicable law give way to those of the Convention, since the Convention exhaustively deals with those issues,11 as is correctly pointed out in the draft Digest. As far as the reference to “the rights and obligations of the seller and the buyer arising from [an international sales] contract” is concerned, it must be pointed out (although the draft Digest does not do so) that it leads to third party rights not falling within the CISG’s scope.12 “Rights and obligations of 5

F. Bydlinski, Das allgemeine Vertragsrecht, in Das UNCITRAL-Kaufrecht im Vergleich zum sterreichischen Recht 60 (P. Doralt ed., 1985); M. Karollus, UN-Kaufrecht 55 (1991); U. Magnus, Kommentar zum B
rgerlichen Gesetzbuch mit Einf
hrungsgesetz und Nebengesetzen, Wiener UN-Kaufrecht (CISG) 109 (13th revised ed., 1999). 6 See Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg.at/ 1_4901i.htm; Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176, available at http://www.cisg.at/10_51895.htm; Zivilsgericht Basel, Switzerland, 21 December 1992, CLOUT case No. 95 (Baseler Juristische Mitteilungen 310 ff. (1993)). 7 In case law see, e. g., Handelsgericht St. Gallen, Switzerland, 24 August 1995, CLOUT case No. 329, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do= case&id=162&step=FullText; Camara Nacional de Apelaciones en lo Comercial, Argentina, 14 October 1993 (EL Derecho 4 ff. (April 2, 1994)). 8 Landgericht Aachen, Germany, 14 May 1993, CLOUT case No. 47, available at http:// www.cisg-online.ch/cisg/urteile/86.htm. 9 See Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg.at/ 1_4901i.htm; Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Praxis des internationalen Privat- und Verfahrensrecht 400 (1991)). 10 See Schiedsgericht der Handelskammer Z
rich, Switzerland, 31 May 1996, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=396&step=FullText (Arbitral Award No. 273/95). 11 For this conclusion, see also R. Loewe, Internationales Kaufrecht 29 (1989). For the position that the CISG leaves these issues, too, to be solved by the applicable domestic law, see T.C. Ebenroth, Internationale Vertragsgestaltung im Spannungsverhltnis zwischen AGBG, IPR-Gesetz und UN-Kaufrecht, Juristische Bltter 688 (1986); Karollus, supra note 5, at 42; R. Lessiak, UNCITRAL-Kaufrechtsabkommen und Irrtumsanfechtung, Juristische Bltter 487 ff. (1989).

98

Scope of application: Articles 4-5

the seller and the buyer” are basically those arising between the parties, independently of whether they originate from the CISG’s provisions or from a specific agreement between the parties.

III. Matters expressly excluded from the CISG’s scope of application:

validity and the effects on the property of the goods sold Article 4 not only lists some of the matters the CISG is without doubt concerned with, but it also contains a non-exhaustive13 list of matters it is not concerned with (Article 4(a) and (b)), namely the validity of the contract or of any of its provisions or of any usage as well as the effect the contract may have on the property in the goods sold. As correctly pointed out in the draft Digest, the reason for the exclusion of these issues from the CISG’s scope of application is to be found in the fact that unifying the rules on these issues proved rather difficult. If the drafters had insisted upon dealing with these matters, completion of the CISG would certainly have been much delayed.14 At first sight, the aforementioned part of Article 4 does not seem to cause any problems (one author has even stated that the provision at hand was superfluous, since it only stated the obvious).15 Quite the contrary is true, however, even though one would not be able to infer this from the draft Digest which, once again, appears to oversimplify things. The insertion, for instance, of the introductory wording to Article 4(a) and (b) (“except as otherwise expressly provided in this Convention”) leads to the conclusion that even where a dispute concerns a matter listed either in Article 4(a) or Article 4(b) and thus, apparently, is excluded from the CISG’s scope of application, one cannot simply disregard the CISG. Rather, one has to first examine whether the CISG provides a solution for the specific problem.16 When an issue arises with respect to validity, for instance, which according to Article 4(a) is a matter excluded from the CISG’s scope of

12 See F. Ferrari, Art. 4, in Kommentar zum Einheitlichen UN-Kaufrecht 94 (P. Schlechtriem ed., 3d ed., 2000). 13 F. Ferrari, Vendita internazionale di beni mobili. art. 1-13. Ambito di applicazione. Disposizioni generali 101 note 1 (1994); Schluchter, supra note 4, at 26. 14 See UNCITRAL Yearbook 65 f. (1978). 15 Warren Khoo, Art. 4, in Commentary on the International Sales Law: The 1980 Vienna Sales Convention 45 (C. Massimo Bianca & Michael Joachim Bonell, eds., 1987). 16 F. Ferrari, Jurisprudence Concernant les Questions non abordes par la CVIM, Revue de Droit des Affaires Internationales 836 (1998).

99

Franco Ferrari

application (as often pointed out in case law17), one has to first look into whether the validity issue in dispute is expressly dealt with by the CISG before resorting to the law applicable by virtue of the private international law rules of the forum. Apart from the matters already referred to above (mistake as regards the characteristics of the goods and the financial soundness of the parties18), the CISG is also concerned with the formal validity of the contracts it governs. Article 11 provides that a contract governed by the CISG need not be concluded in or evidenced by writing and is not subject to any other requirement of form, thus dealing with an issue that in many legal systems is considered to be an issue of validity. This problem is not the only one, however, that arises from the wording quoted above. Another (rather important) one – not at all referred to in the draft Digest – is the definition of “validity” for the purposes of the CISG. The importance of that definition becomes evident if one considers how different the definitions of validity in the various legal systems are.19 In defining it for purposes of the CISG, one should not resort to one’s own legal background, but rather should interpret this concept, like most other CISG concepts, “autonomously”.20 Most recently, an attempt to define the concept was made by a U.S. court.21 According to that court, a validity issue is “any issue by which the domestic law would render the contract void, voidable, or unenforceable”.22 Whether this definition will prevail is still to be seen. The outcome of those decisions dealing with the issue of whether a contract was validly concluded by a third person acting on behalf of one of the parties 17

See U.S. District Court for the Southern District of New York, United States, 10 May 2002, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/020510u1.html#svia (Geneva Pharms. Tech. Corp. v. Barr Labs., Inc., 201 F. Supp. 2d 236); U.S. District Court for the San Jose Division of the Northern District of California, United States, 27 July 2001, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/010727u1.html (Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d 1142); Oberster Gerichtshof, Austria, 7 September 2000, available at http://www.cisg.at/8_2200v.htm; Hof van Bereop Antwerpen, Belgium, 18 June 1996, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/1996-06-18.htm. 18 See supra note 11 and accompanying text. 19 For a recent comparative overview of concepts of validity, see E.A. Kramer, Der Irrtum beim Vertragsschluss: Eine Weltweit Rechtsvergleichende Bestandsaufnahme (1998). 20 For a detailed analysis of the interpretation of the CISG, see “Interpretation of the Convention and Gap-Filling: Article 7”, infra. 21 U.S. District Court for the Southern District of New York, United States, 10 May 2002, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/020510u1.html#svia (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc., U.S. Dist. Lexis 8411 (2002)). 22 The definition cited in the text was borrowed from Helen Elizabeth Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale J. Int’l L. 45 (1993).

100

Scope of application: Articles 4-5

would not have been different. That issue would certainly be left to applicable national law, since agency is not governed by the CISG.23 The validity of standard contract terms, as correctly pointed out in the decisions cited in the draft Digest, is also clearly outside the scope of the CISG.24 The validity exclusion in Article 4(a), however, is not limited to the validity of the contract or of its individual provisions, such as a retention of title clause inserted into the contract.25 It also encompasses the validity of usages, which is why the Austrian Supreme Court26 was correct in stating that this issue is left to applicable domestic law. As the draft Digest correctly points out, this validity issue must be distinguished from the questions of how usages are to be defined, under which circumstances they are binding on the parties, and what their relationship is to the substantive rules set forth in the CISG. These issues are dealt with in Article 9, as stated correctly by the Austrian Supreme Court.27

23

See Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001)); Handelsgericht Aargau, Switzerland, 11 June 1999, CLOUT case No. 333 (Schweizerische Zeitschrift f
r internationales und europisches Recht 117 f. (2000)); Landgericht Berlin, Germany, 24 March 1999, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=440&step=FullText; Handelsgericht Z
rich, Switzerland, 30 November 1998, CLOUT case No. 251 (Schweizerische Zeitschrift f
r internationales und europisches Recht 186 ff. (1999)); Oberster Gerichtshof, Austria, 20 March 1997, CLOUT case No. 189, available at http://www.cisg-online.ch/cisg/urteile/ 269.htm; Amstgericht Tessin, Switzerland, 12 February 1996, CLOUT case No. 335 (Schweizerische Zeitschrift f
r internationales und europisches Recht 135 ff. (1996)); Obergericht Thurgau, Switzerland, 19 December 1995, CLOUT case No. 334 (Schweizerische Zeitschrift f
r internationales und europisches Recht 118 ff. (2000)); Kammergericht Berlin, Germany, 24 January 1994, CLOUT case No. 80 (Recht der Internationalen Wirtschaft 683 f. (1994)). 24 See Oberster Gerichtshof, Austria, 7 September 2000, available at http://www.cisg.at/ 8_2200v.htm; Rechtbank Zutphen, Netherlands, 29 May 1997 (Nederlands Internationaal Privaatrecht No. 110 (1998)); Amstgericht Nordhorn, Germany, 14 June 1994, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/259.htm. 25 See Federal Court for the South Australian District in Adelaide, Australia, 28 April 1995, CLOUT case No. 308 (Roder Zelt- und Hallenkonstruktionen GmbH v. Rosedown Park Pty. Ltd. and Reginald R Eustace), available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=197&step=FullText; Oberlandesgericht Koblenz, Germany, 16 January 1992 (Recht der internationalen Wirtschaft 1019 ff. (1992)). 26 See Oberster Gerichtshof, Austria, 21 March 2000 (Internationales Handelsrecht 40 ff. (2001)). 27 See Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Zeitschrift f
r Rechtsvergleichung 63 f. (1999)).

101

Franco Ferrari

Article 4 also makes clear that the CISG does not govern the passing of property in the goods sold.28 According to the travaux pre´paratoires of the Convention, this exclusion was implemented because it was considered impossible to unify the rules on this point29 (although today that view is rejected by various commentators).30 Thus, the effects of the contract on the property in the goods sold is unfortunately31 left to the applicable national law, to be determined by the rules of private international law of the forum.

IV. Matters expressly excluded from the CISG’s scope of application: Liability for death or personal injury According to Article 5, a provision which does not have a predecessor in the 1964 Hague Conventions, the CISG is not concerned with liability for death or personal injury caused by the goods to any person,32 a point emphasized in case law as well.33 28

See U.S. District Court for the Eastern Division of the Northern District of Illinois, United States, 28 March 2002 (Usinor Industeel v. Leeco Steel Products, Inc., 209 F. Supp. 2d 880); U.S. District Court for the Southern District of New York, United States, 26 March 2002 (St. Paul Guardian Insurance Co. et al. v. Neuromed Medical Systems & Support et al., 2002 U.S. Dist. Lexis 5096). 29 See Secretariat’s Commentary, Art. 4, ¶ 4, in United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March – 11 April 1980, Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee 16 (1981). 30 Ulrich Drobnig, Transfer of Property 495 ff., in Towards a European Civil Code (Arthur Hartkamp et al., eds., 1994). 31 For a criticism of this exclusion, see, e. g., F. Padovini, Der internationale Kauf: Von den Haager Konventionen zur Wiener Konvention – Erfahrungen und Aussichten, Zeitschrift f
r Rechtsvergleichung 93 (1987). 32 For papers dealing with the issue referred to in the text, see R. Herber, UN- Kaufrechts
bereinkommen: Produkthaftung – Verjhrung, Monatsschrift f
r Deutsches Recht 105 ff. (1993); R. Herber, Mangelfolgeschden nach dem CISG und nationales Deliktsrecht, Internationales Handelsrecht 187 ff. (2001); D. Kuhlen, Produkthaftung im internationalen Kaufrecht. Entstehungsgeschichte, Anwendungsbereich und Sperrwirkung des Art. 5 des Wiener UN-Kaufrechts (CISG) (1997); D. Otto, Produkthaftung nach dem UN-Kaufrecht, Monatsschrift f
r Deutsches Recht 533 ff. (1992); D. Otto, Nochmals – UN-Kaufrecht und EG- Produkthaftungsrichtlinie, Monatsschrift f
r Deutsches Recht 306 ff. (1993); D. Schneider, UN-Kaufrecht und Produktehaftpflicht: zur Auslegung von Art. 4 Satz 1 und Art. 5 CISG und zur Abgrenzung vertraglicher und außervertraglicher Haftung aus der Sicht des CISG (1995). 33 See Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196 (Transportrecht-Internationales Handelsrecht 54 (1999)).

102

Scope of application: Articles 4-5

At first sight this provision, like Article 4, seems to raise no problems. Unfortunately, this is not true. One problem relates to whether the Article 5 exclusion really is a general one, i. e., whether it in fact covers liability for death or personal injury caused by the goods to “any person”. It has been correctly pointed out not only by commentators,34 but also in the draft Digest, that the exclusion covers “both injury to the buyer or other persons participating at least indirectly in the contract and also injury to nonparticipating third parties”.35 Because the exclusion covers liability for death or personal injury “to any person”, the buyer’s claims for pecuniary loss resulting from a claim made against the buyer by its own customer for personal injury caused by the goods is also excluded from the CISG’s scope of application,36 despite a decision cited in the draft Digest that states the contrary.37 This latter view has been justified on the grounds that “only in that way can the damages claim be passed back to the producer through the contractual claim”.38 Whereas liability for personal injury is excluded from the CISG’s scope, liability for damage caused to property is not, as pointed out both in commentary39 and case law.40 This, of course, may cause a conflict – not referred to in the draft Digest – between contractual claims based on the CISG and tort claims based on domestic law.41 The issue is whether the 34 B. Audit, La vente internationale de merchandises 36 (1990); Ferrari, supra note 13, at 104; J.-P. Plantard, Un nouveau droit uniforme de la vente internationale: La Convention des Nations Unies du 11 avril 1980, Journal du droit international 327 (1988). 35 Rolf Herber, Art. 5, in Commentary on the UN Convention on the International Sale of Goods (CISG) 50 (Peter Schlechtriem ed., 1998). For similar statements, see Kuhlen, supra note 32, at 61; Magnus, supra note 5, at 128; G. Reinhart, UN-Kaufrecht 25 (1991). 36 Audit, supra note 34, at 36; Ferrari, supra note 13, at 105 n. 13; Herber, supra note 35, at 50. 37 See Oberlandesgericht D
sseldorf, Germany, 2 July 1993, CLOUT case No. 49, available at http://www.cisg-online.ch/cisg/urteile/74.htm. 38 Herber, supra note 35, at 50. 39 Ferrari, supra note 13, at 106; Albert H. Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods 95 (1989); Peter Schlechtriem, The Borderland of Tort and Contract – Opening a New Frontier?, 21 Cornell Int’l L.J. 471 (1988); H. Stoll, Inhalt und Grenzen der Schadensersatzpflicht sowie Befreiung von der Haftung im UN-Kaufrecht im Vergleich zu EKG und BGB, in Einheitliches Kaufrecht und nationales Obligationenrecht 257 ff. (P. Schlechtriem ed., 1987); contra, Muna Ndulo, The Vienna Sales Convention 1980 and the Hague Uniform Laws on International Sale of Goods 1964: A Comparative Analysis, 38 Int’l & Comp. L.Q. 5 (1989). 40 See Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196 (Transportrecht-Internationales Handelsrecht 54 (1999)). 41 Because the CISG pre-empts the applicability of domestic contract law, domestic rules

103

Franco Ferrari

damaged party can also bring a tort claim or whether the CISG pre-empts that possibility, even though the CISG, as correctly pointed out in case law, is not concerned with tort law.42 According to some commentators, this issue is irrelevant in practice.43 This is incorrect, as evidenced, for instance, by the fact that under the CISG claims based on damage to property caused by the goods require the buyer to notify the seller within the reasonable time period referred to in Article 39,44 whereas most legal systems do not require such notice. Thus, in those legal systems a tort claim can be brought even where no notice was given.45 In this author’s opinion,46 the view that the CISG is exclusively applicable in these property damage situations,47 i. e., that it prevails also over domestic tort law,48 is to be rejected.49 The reason for this can be summarized as follows: If the goods are defective – non-conforming to the contract or not – and cause bodily injury, we are outside the scope of the CISG, Article 5. But even if only property damages were caused, ... we are outside the principal domain that classify product liability as a contract law issue cannot be applied concurrently with the CISG. See Herber, supra note 32, at 50. 42 U.S. District Court for the Southern District of New York, United States, 10 May 2002, available at http://cisgw3.law.pace.edu/cases/020510u1.html#svib (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc., 201 F. Supp. 2d 236); U.S. District Court for the Eastern District of Pennsylvania, United States, 29 August 2000, CLOUT case No. 420, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/000829u1.html (Viva Vino Import Corp. v. Farnese Vini S.r.l., 2000 U.S. Dist. LEXIS 12347). 43 See, e. g., Otto, Produkthaftung, supra note 32, at 537. 44 See Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196 (Transportrecht-Internationales Handelsrecht 54 (1999)). 45 B. Rudolph, Kaufrecht der Export- und Importvertrge 126 (1996). 46 See F. Ferrari, Art. 5, in Kommentar zum einheitlichen UN-Kaufrecht 108 (P. Schlechtriem ed., 3d ed., 2000). 47 For this view, see Kuhlen, supra note 32, at 114 ff.; Otto, Produkthaftung, supra note 32, at 537; G. Ryffel, Die Schadenersatzhaftung des Verkufers nach dem Wiener bereinkommen
ber internationale Warenkaufvertrge vom 11 April 1980 136 (1992). 48 See Herber, supra note 32, at 105 f. 49 B. Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht. Das Kollisionsrecht bei grenz
berschreitenden Kaufvertrgen und der Anwendungsbereich der internationalen Kaufrechts
bereinkommen, 168 f. (1988); U. Magnus, Aktuelle Fragen des UNKaufrechts, Zeitschrift f
r europisches Privatrecht 95 f. (1993); Plantard, supra note 34, at 327; Peter Schlechtriem, Einheitliches UN-Kaufrecht. Das bereinkommen der Vereinten Nationen vom 11 April 1980
ber Vertrge
ber den internationalen Warenkauf (CISG), JuristenZeitung 1040 (1988).

104

Scope of application: Articles 4-5

of interests created by contracts and protected by contractual remedies, and would have entered the field of genuinely extra-contractual remedies. Therefore, a tort action for property damages caused by defective and non-conforming goods should not be barred by an omission to give notice within reasonable time under Article 30 of CISG.50 The solution here advocated is also more compatible with the CISG’s dispositive nature. If the CISG were to be the exclusive law governing all claims – whether contractual or extra-contractual – arising from property damage, and the CISG were to be excluded (or the relevant provisions were derogated from), the damaged party would not be able to claim damages for the injury at all. This cannot be. The draft Digest does not deal with another important issue, that of the relationship between the CISG and the EC Product Liability Directive of July 25, 1985.51 This issue arises because Article 90 CISG states that under certain circumstances the CISG “does not prevail over any international agreement which has already been or may be entered into and which contains provisions concerning the matters governed by this Convention”. According to some commentators,52 this provision leads, by analogy,53 to the priority of domestic rules enacted on the basis of the aforementioned EC Product Liability Directive over the rules of the CISG. In this author’s opinion, this position is not tenable because,54 among other reasons, the EC Product Liability Directive itself does not constitute an “international agreement” in the sense of CISG Article 90. Furthermore, an application of Article 90 by analogy is incorrect; as Article 90 constitutes an exception to the usual rule on the applicability of the CISG, it should be interpreted restrictively, thus excluding the possibility of an application by analogy.

50

Schlechtriem, supra note 39, at 473-474. See EC Council Directive 85/374/EEC, Official Journal 29 ff. (L 210, 1985). 52 Ryffel, supra note 47, at 137. 53 A direct application of Article 90 to the domestic statutes enacted on the basis of the EC Product Liability Directive mentioned in the text is not possible. This has been acknowledged even by those commentators that favor the priority of the domestic statute over the CISG. See, e. g., Herber, UN- Kaufrechts
bereinkommen: Produkthaftung, supra note 32, at 105 f.; Kuhlen, supra note 32, at 122. 54 Accord, Otto, Produkthaftung, supra note 32, at 306. 51

105

Franco Ferrari

V. Other matters the CISG is not concerned With As mentioned above, CISG Articles 4 and 5 expressly list by way of example only a few matters with which the Convention is not concerned. There are, nevertheless, many other matters that fall outside the CISG’s scope of application.55 The draft Digest shows that many courts have tried to identify such matters. Unfortunately, however, not all the matters they have identified in fact fall outside the CISG’s scope of application. Matters that courts have correctly excluded from the CISG’s scope include the validity of a choice of forum clause,56 the validity of a penalty clause,57 the validity of a settlement agreement,58 the assignment of receivables,59 the assignment of a contract,60 the applicable statute of limitations,61 the issue of 55

For an overview, see, in addition to the paper cited in note 16 supra, C. Witz, CVIM: interprtation et questions non couvertes, Revue de droit des affaires internationales 253 ff. (2001). 56 See Camara Nacional de los Apelaciones en lo Comercial, Argentina, 14 October 1993, available at http://www.uc3m.es/uc3m/dpto/PR/dppr03/cisg/sargen6.htm. 57 See Rechtbank van Koohandel Hasselt, Belgium, 17 June 1998, available at http:// www.law.kuleuven.ac.be/int/tradelaw/WK/1998-06-17.htm; Hof van Beroep Antwerpen, Belgium, 18 June 1996, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/199606-18.htm; Hof Arnhem, Netherlands, 22 August 1995 (Nederlands Internationaal Privaatrecht No. 514 (1995)); ICC Court of Arbitration, Case No. 7197, 1992, CLOUT case No. 104 (Journal du droit international 1028 ff. (1993)). 58 See Landgericht Aachen, Germany, 14 May 1993, CLOUT case No. 47 (Recht der internationalen Wirtschaft 760 f. (1993)). 59 See Oberster Gerichtshof, Austria, 7 September 2000, available at http://www.cisg.at/ 8_2200v.htm; Oberster Gerichtshof, Austria, 25 June 1998 (Zeitschrift f
r Rechtsvergleichung 77 (2000)); Bundesgerichtshof, Germany, 12 February 1998, CLOUT case No. 269 (Neue Juristische Wochenschrift 3205 (1998)); Obergericht Thurgau, Switzerland, 19 December 1995, CLOUT case No. 334 (Schweizerische Zeitschrift f
r internationales und europisches Recht 118 ff. (2000)); Tribunal de Commerce Nivelles, Belgium, 19 September 1995, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/1995-09-19.htm; Oberlandesgericht Hamm, Germany, 8 February 1995, CLOUT case No. 132 (Recht der internationalen Wirtschaft 153 ff. (1997)); Bezirksgericht Arbon, Switzerland, 9 December 1994, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id= 172&step=FullText. 60 See Bundesgerichtshof, Germany, 15 February 1995, CLOUT case No. 124 (Recht der internationalen Wirtschaft 60 (1996)). 61 See Rechtbank van Koophandel Ieper, Belgium, 29 January 2001, available at http:// www.law.kuleuven.ac.be/int/tradelaw/WK/2001-01-29.htm; Oberster Gerichtshof, Austria, 7 September 2000, available at http://www.cisg.at/8_2200v.htm; Tribunale di Vigevano, Italy,

106

Scope of application: Articles 4-5

jurisdiction,62 other issues of procedural law,63 the assumption of debts,64 the acknowledgement of debts,65 the effects of the contract on third parties,66 and the issue of whether one is jointly liable.67 One court also ruled that the question of who had priority rights in the goods as between the seller and the third party creditor also was beyond the scope of the CISG, and was therefore governed by the applicable national law.68 Whereas courts unanimously exclude the aforementioned matters from the CISG’s scope of application (at least according to the draft Digest), there are matters in respect of which case law is in conflict. This is true, for instance, with respect to the issue of set-off. Although the majority of cases rightly exclude it from the matters with which the CISG is concerned,69 there are 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001), English translation at 20 J.L. & Com. 209 ff. (2001)); Oberlandesgericht M
nchen, Germany, 21 January 1998, CLOUT case No. 297, available at http://www.cisg-online.ch/cisg/urteile/536.htm; Oberster Gerichtshof, Austria, 25 June 1998 (Zeitschrift f
r Rechtsvergleichung 77 (2000)); Landgericht Heilbronn, Germany, 15 September 1997, CLOUT case No. 345, available at http://www.cisg-online.ch/cisg/urteile/562.htm; Cour de Justice Genve, Switzerland, 10 October 1997, CLOUT case No. 249 (Schweizerische Zeitschrift f
r internationales und europisches Recht 182 (1999)); Landgericht D
sseldorf, Germany, 11 October 1995, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/180.htm; Oberlandesgericht Hamm, Germany, 9 June 1995, CLOUT case No. 125 (Recht der internationalen Wirtschaft 689 f. (1996)); ICC Court of Arbitration, Case No. 7660, 1994, CLOUT case No. 302 (ICC Court of Arbitration Bulletin 69 ff. (1995)). 62 See Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196 (Transportrecht-Internationales Handelsrecht 54 (1999)). 63 Bundesgericht, Switzerland, 11 July 2000, available at http://www.cisg.law.pace.edu/cisg/ text/000711s1german.html. 64 See Oberster Gerichtshof, Austria, 24 April 1997 (Zeitschrift f
r Rechtsvergleichung 89 ff. (1997)). 65 See Oberlandesgericht Hamm, Germany, 23 June 1998, CLOUT case No. 338 (Recht der internationalen Wirtschaft 786 f. (1999)). 66 See U.S. District Court for the Northern District of Illinois, United States, 28 March 2002 (Usinor Industeel v. Leeco Steel Products, Inc., 209 F. Supp. 2d 880); Bundesgerichtshof, Germany, 12 February 1998, CLOUT case No. 264 (Neue Juristische Wochenschrift 3205 (1998)). 67 See Landgericht, M
nchen, Germany, 25 January 1996, available at http://www.cisgonline.ch/cisg/urteile/278.htm. 68 U.S. District Court for the Northern District of Illinois, United States, 28 March 2002 (Usinor Industeel v. Leeco Steel Products, Inc., 209 F. Supp. 2d 880). 69 See Oberster Gerichtshof, Austria, 22 October 2001 (Internationales Handelsrecht 27 (2002)); Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001), published in English in 20 J.L. & Com. 209 ff. (2001)); Amstgericht

107

Franco Ferrari

two court decisions70 stating that set-off is governed by the CISG, provided that the mutual debts arise from contracts governed by the CISG. In this author’s opinion, the latter view is not tenable because nowhere does the CISG deal with the issue of set-off. Another issue as to which there is contradictory case law is estoppel. According to one court decision, estoppel is not dealt with in the CISG.71 According to other decisions, however, estoppel is to be regarded as a general principle of the CISG.72 In this author’s opinion, the latter view is Duisburg, Germany, 13 April 2000, CLOUT case No. 360 (Internationales Handelsrecht 114 f. (2001)); Oberlandesgericht M
nchen, Germany, 11 March 1998, CLOUT case No. 232 (Transportrecht-Internationales Handelsrecht 20 ff. (1999)); Kantongericht Freiburg, Switzerland, 23 January 1998, CLOUT case No. 259 (Transportrecht-Internationales Handelsrecht 13 (2000)); Landgericht Hagen, Germany, 15 October 1997, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/311.htm; Landgericht M
nchen, Germany, 6 May 1997, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/341.htm; Oberlandesgericht M
nchen, Germany, 9 July 1997, CLOUT case No. 273, available at http:// www.cisg-online.ch/cisg/urteile/282.htm; Oberlandesgericht D
sseldorf, Germany, 24 April 1997, CLOUT case No. 275, available at http://www.cisg-online.ch/cisg/urteile/385.htm; Oberlandesgericht D
sseldorf, Germany, 11 July 1996, CLOUT case No. 169 (Recht der internationalen Wirtschaft 958 ff. (1996)); Landgericht Duisburg, Germany, 17 April 1996, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/186.htm; Landgericht Stuttgart, Germany, 21 August 1995 (Recht der internationalen Wirtschaft 943 f. (1995)); Landgericht M
nchen, Germany, 20 March 1995, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/164.htm; Rechtbank Middelburg, Netherlands, 25 January 1995 (Nederlands Internationaal Privaatrecht No. 127 (1996)); Amstgericht Mayen, Germany, 6 September 1994, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/382.htm; Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281 (Recht der internationalen Wirtschaft 934 ff. (1993)); Oberlandesgericht Hamm, Germany, 9 June 1995, CLOUT case No. 125 (Recht der internationalen Wirtschaft 689 f. (1996)); Rechtbank Roermond, Netherlands, 6 May 1993, available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=94&step=FullText; Rechtbank Arnhem, Netherlands, 25 February 1993, CLOUT case No. 99 (Nederlands Internationaal Privaatrecht No. 445 (1993)). 70 For the application of the Convention to set-off in respect of receivables all arising out of contracts governed by the Convention, see Amstgericht Duisburg, Germany, 13 April 2000, CLOUT case No. 360 (Internationales Handelsrecht 114 f. (2001)); Oberlandesgericht M
nchen, Germany, 9 July 1997, available at http://www.cisg-online.ch/cisg/urteile/282.htm. 71 Rechtbank Amsterdam, Netherlands, 5 October 1994 (Nederlands Internationaal Privaatrecht No. 231 (1995)). 72 See Oberlandesgericht Karlsruhe, Germany, 25 June 1997, CLOUT case No. 230 (Recht der internationalen Wirtschaft 235 ff. (1998)); Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in sterreich, Austria, 15 June 1994, CLOUT case No. 94 (Arbitral Award 4318, Recht der internationalen Wirtschaft 591 f. (1995)); Inter-

108

Scope of application: Articles 4-5

preferable,73 as it is but a manifestation of the general principle of good faith underlying the CISG.74 Another matter on which case law is contradictory concerns the currency of payments. Various courts have correctly held that this matter falls outside the CISG’s scope of application and, where the parties did not choose the currency,75 is therefore rightly left to the applicable domestic law.76 According to one court, however, the issue of the currency of payment is, absent an agreement of the parties, to be determined in conformity with a general principle allegedly to be derived from Article 57, on the basis of which the currency of the place of payment applies.77 It does not appear, however, that such a general principle exists. nationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in sterreich, Austria, 15 June 1994, CLOUT case No. 93 (Arbitral Award 4366, Recht der internationalen Wirtschaft 590 f. (1995)); Hof s’Hertogenbosch, Netherlands, 26 February 1992 (Nederlands Internationaal Privaatrecht No. 354 (1992)). 73 For this view, see also U. Magnus, Die allgemeinen Grundstze im UN-Kaufrecht, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 481 (1995). But see B. Frigge, Externe L
cken und Internationales Privatrecht nach dem UN-Kaufrecht (Art. 7(2)) 82 (1994). 74 For papers dealing with good faith under the CISG, see, e. g., S. Keinath, Der gute Glauben im UN-Kaufrecht (1997); G. Lefebvre, La bonne foi dans la Convention des Nations Unies sur les contrats de vente internationale de marchandises, 27 Revue Juridique Thmis 561 ff. (1993); Ulrich Magnus, Remarks on Good Faith: The United Nations Convention on Contracts for the International Sale of Goods, 10 Pace Int’l L. Rev. 89 ff. (1998); E.N. Najork, Treu und Glauben im CISG (2000); Paul J. Powers, Defining the Undefinable: Good Faith and the United Nations Convention on the Contracts for the International Sale of Goods, 18 J.L. & Com. 333 ff. (1999). 75 For a case expressly referring to the fact that the parties are free to choose the currency of payment, since the Convention does not deal with the issue, see Oberlandesgericht Frankfurt, Germany, 20 April 1994, CLOUT case No. 84 (Recht der internationalen Wirtschaft 593 ff. (1994)). 76 See Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg.at/ 1_4901i.htm; Handelsgericht Z
rich, Switzerland, 30 November 1998, CLOUT case No. 251 (Schweizerische Zeitschrift f
r internationales und europisches Recht 186 ff. (1999)); Kantonsgericht Wallis, Switzerland, 30 June 1998, CLOUT case No. 255 (Schweizerische Zeitschrift f
r internationales und europisches Recht 192 f. (1999)). 77 Kammergericht Berlin, Germany, 24 January 1994, CLOUT case No. 80 (Recht der internationalen Wirtschaft 683 f. (1994)). See, however, Landgericht Berlin, Germany, 24 March 1998, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case &id=440&step=FullText) (expressly stating that only a minority view holds that the Convention deals with the issue by referring to the currency of the place of payment of the price).

109

Franco Ferrari

VI. Burden of proof As evidenced by the draft Digest, there is also a dispute in case law (as well as in academic writing) as to whether the allocation of the burden of proof is a matter governed by the CISG. Given the importance of this matter, it appears appropriate to deal with it in more detail. Some authors claim that the issue of burden of proof is not governed by the CISG,78 and so one should – apart from very exceptional cases79 – have

recourse to domestic law to solve it.80 There is, however, no agreement between these commentators as to how to determine the applicable domestic law. Whereas some hold the view that recourse should be had to the lex fori, on the basis that the issue is one of procedural law,81 others propose to resort to the domestic law applicable by virtue of the rules of private international law of the forum.82 The preferable view, however, appears to be that the issue of burden of proof is a matter governed by the CISG,83 at least implicitly”.84 This view has been 78

See Reinhart, supra note 35, at 90. For an author who states that the issue of burden of proof is generally not governed by the CISG, but who claims that there are exceptions to the rule, see M. Hutter, Die Haftung des Verkufers f
r Nichtlieferung bzw. Lieferung vertragswidriger Ware nach dem Wiener UNCITRAL-bereinkommen
ber internationale Warenkaufvertrge vom 11. April 1980 44 (1988). 80 See, e. g., Warren Khoo, Art. 2, in Commentary on the International Sales Law, supra note 15, at 39; U. Huber, Der UNCITRAL-Entwurf eines bereinkommens
ber internationale Warenkaufvertrge, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 479 f. (1979); Arthur Rosett, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L.J. 281 (1984). 81 Ryffel, supra note 47, at 59. 82 See Shivbiv S. Grewal, Risk of Loss in Goods Sold During Transit: A Comparative Study of the United Nations Convention on Contracts for the International Sale of Goods, the Uniform Commercial Code, and the British Sale of Goods Act, 14 Loy. L.A. Int’l & Com. L.J. 102 (1991). 83 C. Antweiler, Beweislastverteilung im UN-Kaufrecht. Insbesondere bei Vertragsverletzungen des Verkufers 74 (1995); J. Aue, Mngelgewhrleistung im UN-Kaufrecht unter besonderer Ber
cksichtigung stillschweigender Zusicherungen 110 ff. (1989); C.M. Bianca, Art. 36, in Commentary on the International Sales Law, supra note 15, at 287; Ferrari, supra note 13, at 102; M. Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts: zugleich eine rechtsvergleichende Grundlagenstudie zur Beweislast 153 ff. (1995); R. Herber, Anwendungsbereich des UNCITRAL-Kaufrechts
bereinkommens, in Das UNCITRALKaufrecht im Vergleich zum sterreichischen Recht 41 (Doralt ed., 1985); A. Imberg, Die Verteilung der Beweislast beim Gefahr
bergang nach UN-Kaufrecht 20 ff. (1998); R. Jung, 79

110

Scope of application: Articles 4-5

justified on the grounds that the CISG itself provides at least one rule on the burden of proof, namely the one to be found in Article 79,85 and this is why it cannot be asserted that the CISG does not govern the issue at hand.86 Another justification is that the issue of burden of proof is so closely linked to substantive law that a rule on the allocation of burden of proof must necessarily be derived from the CISG, i. e., the set of applicable substantive rules.87 Thus the issue of burden of proof is a matter governed, albeit not expressly, by the CISG. But how is the burden of proof to be allocated in concreto? A close examination of both the wording88 and the legislative history of the various provisions of the CISG has led those legal writers who conclude that the CISG governs the issue of burden of proof to assert that the allocation is based upon the principle, “ei incumbit probatio, qui dicit, non qui negat”.89 This means, on the one hand, that a party has to prove the existence of the factual prerequisites required by a legal provision from which it wants to derive beneficial legal consequences.90 On the other hand, this also means that a Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Kufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen
ber Verkufer- und Kuferpflichten 10 ff. and 40 (1996); Victor Knapp, Art. 74, in Commentary on the International Sales Law, supra note 15, at 541; U. Magnus, Stand und Entwicklungen des UN-Kaufrechts, Zeitschrift f
r europisches Privatrecht 207 (1995); K. Noussias, Die Zugangsbed
rftigkeit von Mitteilungen nach den Einheitlichen Haager Kaufgesetzen und nach dem UN-Kaufgesetz 105-106 (1983); B. Reimers-Zocher, Beweislastfragen im Haager und Wiener Kaufrecht 148 (1995); K. Siehr, Art. 4, in Kommentar zum UNKaufrecht 71 (H. Honsell ed., 1997); Kazuaki Sono, Art. 44, in Commentary on the International Sales Law, supra note 15, at 327. 84 R. Herber, Art. 4, in Kommentar zum Einheitlichen UN-Kaufrecht 77 (P. Schlechtriem ed., 2d ed., 1995); R. Herber & B. Czerwenka, Internationales Kaufrecht. UN-bereinkommen
ber Vertrge
ber den internationalen Warenkauf. Kommentar 32-33 (1991). 85 For this justification, see, e. g., Reimers-Zochers, supra note 83, at 146 ff. 86 Magnus, supra note 5, at 122. 87 C. Hartwieg, Prozessuale Aspekte einheitlicher Anwendung der Wiener UN-Konvention
ber den Internationalen Warenkauf (CISG). Eine komparative Fallstudie zur einheitlichen Rechtsanwendung, Zeitschrift f
r vergleichende Rechtswissenschaft 288-289 (1993); Jung, supra note 83, at 38 and 40. 88 For discussion of the wording of the CISG as an element to be taken into account in allocating the burden of proof, see Rolf Herber, Art. 4, in Commentary on the International Sale of Goods, supra note 35, at 47, stating that the wording can give clues in that regard, but is not decisive. 89 See Ferrari, supra note 12, at 104; Jung, supra note 83, at 44. 90 See Magnus, supra note 5, at 123; Reimers-Zocher, supra note 83, at 146 ff.

111

Franco Ferrari

party claiming an exception has the burden of proving that exception’s prerequisites.91 As the draft Digest shows, CISG case law mirrors the dispute found in legal writing. Although a few courts conclude that the issue of burden of proof is a matter beyond the scope of the CISG, most courts hold that it is governed by the Convention.92 Thus an ICC arbitral award rendered soon after the CISG’s entry into force,93 expressly stated that the issue of burden of proof is not governed by the CISG, but rather by domestic law to be determined either by means of the rules of private international law (if it is considered to be a substantive issue) or by the lex fori (if it is considered a procedural one). More recently, a similar view was held by a Swiss court.94 Most courts, however, rightly embrace the view that the matter is governed by the CISG.95 One of these courts96 expressly stated that even though the issue of burden of proof is not one explicitly settled in the CISG, it is implicitly governed by it. In other words, the issue involves an internal gap in the CISG which, according to both that Swiss court and an Italian one,97 has to be settled by resorting to the CISG’s general principles. Several courts,

91

See Ulrich Magnus, General Principles of UN-Sales Law, International Trade and Business Law Annual 52 (1997). 92 For a decision that refers to the dispute on this matter, without, however, itself taking a position one way or the other, see Tribunale d’appello Cantone Ticino, Switzerland, 15 January 1998, CLOUT case No. 253 (Schweizerische Zeitschrift f
r internationales und europisches Recht 189 f. (1999)). 93 See ICC Court of Arbitration, Case No. 6653, 1993, CLOUT case No. 103 (Journal du droit international 1044 (1993)). 94 See Tribunal de la Sane, Switzerland, 20 February 1997, CLOUT case No. 261 (Schweizerische Zeitschrift f
r internationales und europisches Recht 195-196 (1999)). 95 See Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001), English translation at 20 J.L. & Com. 209 ff. (2001)); Tribunale di Pavia, Italy, 27 December 1999 (Corriere giuridico 932 f. (2000)); Handelsgericht Z
rich, Switzerland, 10 February 1999, CLOUT case No. 331 (Internationales Handelsrecht 44 f. (2001)); Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196 (Transportrecht-Internationales Handelsrecht 54 (1999)); Handelsgericht Z
rich, Switzerland, 9 September 1993, CLOUT case No. 97, available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=136&step=FullText. 96 Handelsgericht Z
rich, Switzerland, 9 September 1993, CLOUT case No. 97, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=136&step=FullText. 97 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001), published in English in 20 J.L. & Com. 209 ff. (2001)).

112

Scope of application: Articles 4-5

including a German98 and an Austrian one99 have expressed their view on the general principles governing the issue de quo. These views have been summarized in a recent Italian case100 which rightly lists the following three general principles: (a) any party which wants to derive beneficial legal consequences from a legal provision has to prove the existence of the factual requirements of that provision; (b) any party claiming an exception has to prove the existence of the factual prerequisites for that exception to apply; and (c) those facts that fall exclusively under the sphere of responsibility of a specific party and which therefore are – at least theoretically – better known to that party have to be proven by that party, since it is that party who exercises control over that sphere. The practical results of the aforementioned principles are very well evidenced by the cases referred to in the draft Digest. 98 Landgericht Frankfurt, Germany, 6 July 1994, available in Unilex at http://www.unilex. info/case.cfm?pid=1&do=case&id=189&step=FullText. 99 Oberlandesgericht Innsbruck, Austria, 1 July 1994, CLOUT case No. 107, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/107.htm. 100 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001), English translation at 20 J.L. & Com. 209 ff. (2001)).

113

CISG rules on exclusion and derogation: Article 6 Franco Ferrari* I. Introduction The draft Digest comments on Article 6 CISG, not unlike those on other provisions, evidence both the Digest’s usefulness and its weaknesses. The former is evidenced by the number of court decisions cited in the draft Digest – court decisions the retrieval of which would otherwise be difficult. Furthermore, the Digest is helpful as it organizes all decisions under appropriate headings, thus making research even easier. With respect to the draft Digest’s weaknesses, it is worth mentioning that the most important one is closely related to the aforementioned strength: as the draft Digest cites most, if not all, the decisions that deal with a specific provision, there will be cases where contrasts in case law will emerge. Pursuant to a decision taken by the United Nations Commission on International Trade Law when authorizing the drafting of the Digest,1 it was not allowed to criticize any decision, not even when decisions are contradictory. Neither is the Digest allowed to point out those cases that are worth being followed. This means, however, that ultimately the draft Digest is not too helpful in guiding the interpreter through the labyrinth of case law which it makes readily available. If one were to look for a guide, one would therefore have to look elsewhere, for instance to comments by legal writers. This is true also in respect of those issues that – albeit linked to the provisions the Digest is concerned with – have not yet arisen in case law, as those matters, too, are beyond the Digest.

II. Effects of Article 6 in general It is common knowledge, confirmed by the draft Digest, that even where all the CISG’s requirements for applicability (the international requirement,

*

Professor of International Law, Verona University School of Law. See Report of the United Nations Commission on its thirty-fourth session, UN document A/56/17. 1

114

CISG rules on exclusion and derogation: Article 6

the substantive requirement, the temporal requirement, the personal/territorial requirement)2 are met, the CISG does not necessarily apply.3 This is so because, pursuant to Article 6,4 the parties may exclude the Convention’s application. Consequently, in order to decide whether the CISG is applicable, one must also look into whether it has been excluded by the parties,5 as pointed out in several court decisions quoted in the draft Digest.6 Thus, the lack of an agreement to exclude is also an applicability requirement.7

2

For remarks concerning these requirements, see the author’s Comments on the Draft Digest Parts Relating to the CISG’s Sphere of Application (Articles 1-3, 10), supra. 3 See Franco Ferrari, The Sphere of Application of the Vienna Sales Convention 20 (1995). 4 For a detailed overview of the history of Article 6 of the CISG, see Maureen T. Murphy, United Nations Convention on Contracts for the International Sale of Goods: Creating Uniformity on International Sales Law, 12 Fordham Int’l L.J. 727-29 (1989). 5 Accord, Kenneth C. Randall & John E. Norris, A New Paradigm for International Business Transactions, 71 Wash. U. L.Q. 616 f. (1993). 6 See, e. g., Tribunale di Vigevano, Italy, July 12, 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001)); Oberlandesgericht Hamm, Germany, 23 June 1998, CLOUT case No. 338, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/434.htm; Cour d’appel Paris, France, 15 October 1997, CLOUT case No. 223, available at http://witz.jura.unisb.de/CISG/decisions/151097v.htm; Oberlandesgericht M
nchen, Germany, 9 July 1997, CLOUT case No. 273, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/ 281.htm; Oberlandesgericht Karlsruhe, Germany, 25 June 1997, CLOUT case No. 230, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/263.htm; Oberster Gerichtshof, Austria, 11 February 1997, CLOUT case No. 190, available at http://www.cisg.at/ 10_150694.htm; Landgericht Landshut, Germany, 5 April 1995, available at http://www. jura.uni-freiburg.de/ipr1/cisg/urteile/text/193.htm; Landgericht Oldenburg, Germany, 15 February 1995, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/197.htm; Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 f. (1995)); Tribunal Cantonal Valais, Switzerland, 29 June 1994, CLOUT case No. 199 (Zeitschrift f
r Walliser Rechtsprechung 125 (1994)); Amstgericht Nordhorn, Germany, 14 June 1994, available at http://www.jura.uni-freiburg.de/ipr1/cisg/ urteile/text/259.htm; Oberlandesgericht Karlsruhe, Germany, 20 November 1992, CLOUT case No. 317 (Neue Juristische Wochenschrift Rechtsprechungs-Report 1316 f. (1993)); Landgericht D
sseldorf, Germany, 9 July 1992, available at http://www.jura.uni-freiburg.de/ ipr1/cisg/urteile/text/42.htm. 7 In this respect, see Landgericht Trier, Germany, 12 October 1995, CLOUT case No. 170 (Neue Juristische Wochenschrift Rechtsprechungs-Report 564 ff. (1996)) (expressly mentioning the parties’ not having excluded the CISG as a requirement for the CISG’s applicability).

115

Franco Ferrari

By providing for the possibility of the parties excluding the Convention, the draftsmen of the CISG reaffirmed one of the general principles already embodied in the 1964 Hague Conventions,8 that is, the principle that the primary source of the rules governing international sales contracts is party autonomy.9 That is why it is not surprising that some court decisions state that the CISG is based upon the general principle of “prevalence of party autonomy”.10 By stating that the CISG can be excluded, the drafters clearly acknowledged the CISG’s dispositive nature11 – emphasized also in case 8

Despite some textual differences, Article 6 CISG is based upon Article 3 ULIS, as has often been pointed out. See, e. g., Michael Joachim Bonell, Art. 6, in Commentary on the International Sales Law 51 (C. Massimo Bianca and Michael Joachim Bonell eds., 1987); F. Ferrari, La vendita internazionale. Applicabilit ed applicazioni della Covnenzione di Vienna 157 (1997); R. Herber, Art. 6, in Kommentar zum Einheitlichen UN-Kaufrecht 83 (P. Schlechtriem ed., 2d ed., 1995). 9 For similar statements, see B. Audit, La vente internationale de marchandises 37 (1990) (stating that “the Convention makes of the parties’ will the primary source of the sales contract”); F. Enderlein, Die Verpflichtung des Verkufers zur Einhaltung des Lieferzeitraums und die Rechte des Kufers bei dessen Nichteinhaltung nach dem UN-bereinkommen
ber Vertrge
ber den Internationalen Warenkauf, Praxis des internationalen Privat- und Verfahrensrechts 314 (1991); H. Hoyer, Der Anwendungsbereich des Einheitlichen Wiener Kaufrechts, in Das Einheitliche Wiener Kaufrecht 41 (H. Hoyer & W. Posch, 1992); U. Magnus, Kommentar zum B
rgerlichen Gesetzbuch mit Einf
hrungsgesetz und Nebengesetzen, Wiener UN-Kaufrecht (CISG) 133 (13th rev. ed., 1999). 10 See Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 (2003); Hof Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven.ac.be/int/ tradelaw/WK/2002-05-17.htm; Rechtbank Koophandel Ieper, Belgium, 29 January 2001, at http://www.law.kuleuven.ac.be/int/tradelaw/WK/2001-01-29.htm; Landgericht Stendal, Germany, 12 October 2000 (Internationales Handelsrecht 32 (2001)). 11 For this statement, see S.M. Carbone, L’ambito di applicazione ed i criteri interpretativi della convenzione di Vienna, dans La vendita internazionale. La Convenzione dell’11 aprile 1980 78 (1981); S.M. Carbone & R. Luzzatto, I contratti del commercio internazionale, in 11 Trattato di diritto privato 131 (P. Rescigno ed., 1984); J. Erauw, Waneer is het Weens koopverdrag van toepassing?, in Het Weens Koopverdrag 47 (Hans van Houtte et al. eds., 1997); F. Ferrari, Vendita internazionale di beni mobili. Art. 1-13. Ambito di applicazione. Disposizioni generali 110 (1994); Herber, supra note 8, at 84; A. Lanciotti, Norme uniformi di conflitto e materiali nella disciplina convenzionale della compravendita 146 (1992); B. Piltz, Internationales Kaufrecht 64 (Munich, 1993); G. Reinhart, UN-Kaufrecht 26 (1991); G. Sacerdoti, I criteri di applicazione della convenzione di Vienna sulla vendita internazionale: diritto uniforme, diritto internazionale privato e autonomia dei contratti, Rivista trimestrale di diritto e procedura civile 744 (1990); C. Witz, L’exclusion de la Convention des Nations Unies sur les contrats de vente internationale de marchandises par la volont des parties (Convention de Vienne du 11 avril 1980) Receuil Dalloz Chron. 107 (1990). Note, however, that even though the principle of party autonomy is widely accepted, there

116

CISG rules on exclusion and derogation: Article 6

law12 – and the “central role which party autonomy plays in international commerce and, particularly, in international sales”.13 As far as party autonomy is concerned,14 it must be pointed out that Article 6 CISG refers to two different possibilities15 – one where the Convention’s application is entirely excluded, the other where the parties derogate from – or modify the effects of – CISG provisions on a substantive level.16 These two situations differ from each other in that the former, according to the CISG, does not per se encounter any restrictions,17 whereas the latter is were some States which expressed reservations about it: “[t]heir concern was that, in practice, the principle could be abused by the economically stronger party imposing his own national law or contractual terms far less balanced than those contained in the Convention”. Bonell, supra note 8, at 51. See also 1 UNCITRAL Yearbook 168 (1968-1970); 2 UNCITRAL Yearbook 43-44 (1971); 3 UNCITRAL Yearbook 73 (1973). 12 For an express reference to the Convention’s non-mandatory nature, see Cassazione civile, Italy, 19 June 2000 (Giurisprudenza italiana 236 (2001)); Oberster Gerichtshof, Austria, 21 March 2000 (Internationales Handelsrecht 41 (2001)); Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Zeitschrift f
r Rechtsvergleichung 63 ff. (1999)); Handelsgericht Wien, Austria, 4 March 1997, available at http://www.cisg.at/ 1R4097x.htm; Kantonsgericht Wallis, Switzerland, 29 June 1994, CLOUT case No. 199 (Zeitschrift f
r Walliser Rechtsprechung 126 (1994)). 13 M.J. Bonell, Commento all’art. 6, Nuove Leggi civili commentate 16 (1989). For similar affirmations in scholarly writing, see S.K. Date-Bah, The United Nations Convention on Contract for the International Sale of Goods: Overview and Selective Commentary, Review of Ghana Law 54 (1979); Enderlein, supra note 9, at 316; H. Hoyer, supra note 9, at 41; P. Schlechtriem, Einheitliches UN-Kaufrecht 21 (1981). For a reference in case law to party autonomy’s central role, see Landgericht Stendal, Germany, 12 October 2000 (Internationales Handelsrecht 32 (2001)). 14 Carbone, supra note 11, at 78, has compared the affirmation of party autonomy as a basic principle of the CISG to “the recognition of a necessity for the development of international commerce”. See also L. Rovelli, Conflitti tra norme della Convenzione e norme di diritto internazionale privato, in La vendita internazionale, supra note 11, at 102, stating that the introduction of Article 6 CISG and, therefore, the recognition of party autonomy, was a “political need”. 15 For this statement, see Bonell, supra note 8, at 53; E. Castellanos Ruiz, Autonomia de la voluntad y derecho uniforme en la compraventa internacional 37 (1998); F. Ferrari, La compraventa internacional 119 ff. (1999); T. Vazquez Lepinette, Compraventa internacional de mercaderias. Una vision jurisprudencial 86 (2000). 16 For this distinction, see also Lanciotti, supra note 11, at 148 f.; Magnus, supra note 9, at 105 ff.; D. Martiny, Kommentar zum UN-Kaufrecht, in 7 M
nchener Kommentar zum B
rgerlichen Gesetzbuch 1655 f (H.J. Sonnenberger ed., 1989); Sacerdoti, supra note 11, at 745-46; P. Schlechtriem, Internationales UN-Kaufrecht 15 (1996). 17 For this statement, see Hoyer, supra note 9, at 41.

117

Franco Ferrari

limited, as there are provisions from which the parties are not allowed to derogate. Where, for instance, at least one of the parties to a contract governed by the CISG has its place of business in a State that has made a reservation under Article 96, the parties may not derogate from or vary the effect of Article 12. In those cases, according to Article 12, any provision “that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing does not apply”. Although the fact that the effect of an Article 96 reservation cannot be derogated from has been referred to in the draft Digest as well, the draft Digest does not conclusively deal with the effects of such a reservation, not even in its comments on Article 12. It states – correctly – that there is case law indicating that the effects of Article 12 lead to the principle that form requirements are not per se applicable where one party has its relevant place of business in a State that made an article 96 declaration.18 It then cites the opposing views adopted in other cases with respect to the effects of an Article 96 declaration, unfortunately without stating which view is the correct one: the one according to which the sole fact that one party has its place of business in a State that made an Article 96 reservation does not necessarily mean that the form requirements of that State apply,19 thus letting it (correctly) depend on the law to which the rules of private international law of the forum lead;20 or that pursuant to which, if one party has its relevant place of business in a State that made an Article 96 reservation, the contract must necessarily be concluded or evidenced or modified in writing.21

18

See Rechtbank van Koophandel Hasselt, Belgium, 2 May 1995, available at http:// www.law.kuleuven.ac.be/int/tradelaw/WK/1995-05-02.htm. 19 See Rechtbank Rotterdam, the Netherlands, 12 July 2001 (Nederlands Internationaal Privaatrecht, 2001, No. 278). 20 See Rechtbank Rotterdam, the Netherlands, 12 July 2001 (Nederlands Internationaal Privaatrecht, 2001, No. 278); Hoge Raad, the Netherlands, 7 November 1997, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=333&step=FullText; Metropolitan Court Budapest, Hungary, 24 March 1992, CLOUT case No. 52. 21 See The High Arbitration Court of the Russian Federation, Russian Federation, 16 February 1998, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/980216r1. html; Rechtbank van Koophandel Hasselt, Belgium, 2 May 1995, available at http:// www.law.kuleuven.ac.be/int/tradelaw/WK/1995-05-02.htm.

118

CISG rules on exclusion and derogation: Article 6

It should be noted that, although the Convention does not expressly mention it, there are other provisions that the parties cannot derogate from, as correctly pointed out in the draft Digest. Specifically, the public international law provisions of the CISG (i.e. Articles 89-101) are not subject to derogation.22 As the draft Digest correctly states, this is due to the fact that those provisions relate to issues relevant to Contracting States rather than private parties. Even though the draft Digest states that there is no case law on this point yet, it should be noted that the Tribunale di Vigevano, in its rather famous decision of July 12, 2000, expressly took the view referred to in the draft Digest and stated that Article 89-101 cannot be derogated from. The aforementioned exceptions, however, are the only ones. All other provisions can be derogated from.23

III. Implied exclusion of the CISG and choice of the applicable law Party autonomy also played a very important role under the ULIS.24 A comparison of Article 6 CISG and its “direct predecessor”,25 Article 3 ULIS, could even lead to the conclusion that under ULIS party autonomy was more widely recognized,26 since the ULIS expressly stated that its exclusion could also be made implicitly.27 However, this provision was later criticized,28

22

Accord, B. Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht 172 (1988); Ferrari, supra note 11, at 111. 23 Thus, it is not surprising that a court has stated that Article 55, relating to open-price contracts, is only applicable where the parties have not agreed to the contrary. Cour d’appel Grenoble, France, 26 April 1995, CLOUT case No. 152, available at http://witz.jura.uni-sb.de/ CISG/decisions/2604952v.htm. Neither is it surprising that a decision states that Article 39, relating to the notice requirement, is not mandatory and can be derogated from. Landgericht Giessen, Germany, 5 July 1994 (Neue Juristische Wochenschrift Rechtsprechungs-Report 438 (1995)). According to the Austrian Supreme Court, furthermore, Article 57 also can be derogated from. Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 ff. (1995)). 24 For a similar statement, see R. Herber, Art. 3, in Kommentar zum Einheitlichen Kaufrecht 19 (H. Dlle ed., 1976); Hoyer, supra note 9, at 41; Lanciotti, supra note 11, at 145-46. 25 Bonell, supra note 13, at 17. 26 This has already been pointed out by Carbone and Luzzatto, supra note 11, at 132. 27 Article 3 ULIS reads as follows: “The parties to a contract of sale shall be free to exclude the application thereto of the present Law either entirely or partially. Such exclusion may be express or implied”. 28 See 1 UNCITRAL Yearbook 168 (1968-1970).

119

Franco Ferrari

which is why the express reference to the possibility of an implicit exclusion was not retained by the CISG,29 even though at the Vienna Diplomatic Conference proposals to reintroduce that express reference were made.30 However, this does not mean that under the CISG exclusion always has to be made expressly,31 despite contrary statements in several court decisions 29 See C. Samson, La Convention des Nations Unies sur les contrats de vente internationale de marchandises: Etude comparative des dispositions de la Convention et des rgles de droit qubcois en la matire, Cahiers de droit 931 (1982). 30 Both the representatives of England and Belgium made proposals to reintroduce a reference to the possibility of implicitly excluding the CISG’s application. For references to these attempts, see Ferrari, supra note 8, at 162; Herber, supra note 8, at 83-84; Magnus, supra note 9, at 134; United Nations Conference on Contract for the International Sale of Goods, Official Records: Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committees (10 March – 11 April 1980) 85-86 and 249-250 (1981) 249-250; Schlechtriem, supra note 13, at 22 note 98. 31 The possibility of an implicit exclusion is favored by most legal scholars. See, e. g., W.A. Achilles, Kommentar zum UN-Kaufrechts
bereinkommen (CISG) 25 (2000); Audit, supra note 9, at 38; Kevin Bell, The Sphere of Application of the Vienna Convention on Contracts for the International Sale of Goods, 8 Pace Int’l L. Rev. 255 (1996); J. Cappuccio, La deroga implicita nella Convenzione di Vienna del 1980, Diritto del commercio internazionale 868 (1994); Carbone & Luzzatto, supra note 11, at 132; Czerwenka, supra note 22, at 170; Date-Bah, supra note 13, at 54; Ferrari, supra note 11, at 113; A. Garro & A. Zuppi, Compraventa interncional de mercaderias, Buenos Aires 98 (1990); R. Herber & B. Czerwenka, Internationales Kaufrecht 42 (1992), R. Holthausen, Vertraglicher Ausschluß des UN-bereinkommens
ber internationale Warenkaufvertrge, Recht der internationalen Wirtschaft 515 (1993); Hoyer, supra note 9, at 41; M. Karollus, UN-Kaufrecht, 38 (1991); N. Lacasse, Le champ d’application de la Convention des Nations Unies sur les contrats de vente internationale de marchandises, in Actes du colloque sur la vente internationale 37 (N. Lacasse and L. Perret eds., 1989); F. Liguori, La Convenzione di Vienna sulla vendita internazionale di beni mobili nella pratica: un’analisi critica delle prime cento decisioni, Foro italiano 158 (1996); J. Lindbach, Rechtswahl im Einheitsrecht am Beispiel des Wiener UN-Kaufrechts 253 (1996); U. Magnus, Das UN-Kaufrecht tritt in Kraft, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 126 (1987); Martiny, supra note 16, at 1655 f.; Barry Nicholas, The Vienna Convention on International Sales Law, 105 L. Q. Rev. 208 (1989); Reinhart, supra note 11, at 27; Bradley J. Richards, Contracts for the International Sale of Goods: Applicability of the United Nations Convention, 69 Iowa L. Rev. 237 (1983); Schlechtriem, supra note 13, at 21; Peter Winship, The Scope of the Vienna Convention on International Sale Contracts, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods 1. 35 (Nina Galston and Hans Smit, eds., 1984); Witz, supra note 11, at 108. See also Arthur Rosett, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L.J. 281 (1984), where the author criticizes the draftsmen who, although they could have foreseen the problems which the lack of an express

120

CISG rules on exclusion and derogation: Article 6

cited – once again, without any comment – in the draft Digest.32 This is evidenced, inter alia, by the fact that “the majority of delegations was ... opposed to the proposal according to which a total or partial exclusion of the Convention could only be made ‘expressly.’”33 Consequently, the lack of express reference to the possibility of an implicit exclusion must not be regarded as precluding such possibility.34 Rather it has a different meaning: to discourage courts from too easily inferring an “implied” exclusion or derogation.35 Therefore, an implicit exclusion must be regarded as possible, reference to the possibility of implicitly excluding the Convention would cause, “chose to provide little guidance”. 32 See U.S. District Court for the Southern District of New York, United States, 21 July 1997, CLOUT case No. 187 (Helen Kaminski Pty. Ltd. v. Marketing Australian Products, Inc. d/b/a Fiona Waterstreet Hats, 1997 U.S. Dist. LEXIS 10630); Landgericht Landshut, Germany, 5 April 1995, available at http://www.jura.uni-freiburg.de/iprl/Convention; Court of International Trade, United States, 24 October 1989 (Orbisphere Corp. v. United States of America, 726 F. Supp. 1344 (1990)). 33 Bonell, supra note 8, at 52; see also Audit, supra note 9, at 38; Piltz, supra note 11, at 48. For the proposal mentioned in the text, see Official Records of the United Nations Conference, supra note 30, at 86 and 249-50. 34 However, several authors have argued that in order to be effective, the exclusion of the Convention’s application must be explicit. See, e. g., Isaak I. Dore & James E. Defranco, A Comparison of the Non-Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Int’l L.J. 53 (1982), stating that “unlike the U.C.C. ... the Convention does not seem to recognize implied agreements which exclude the application of the Convention. The Convention may therefore govern contracts which the parties by their implied agreement might have assumed to be governed by domestic law”. For a similar conclusion, see Isaak I. Dore, Choice of Law under the International Sales Convention: A U.S. Perspective, 77 Am. J. Int’l Law 532 (1983); Caroline Delisle Klepper, The Convention for the International Sale of Goods: A Practical Guide for the State of Maryland and Its Trade Community, 15 Md. J. Int’l L. & Trade 238 (1991); Murphy, supra note 4, at 728; Robert S. Rendell, The New U.N. Convention on International Sales Contracts: An Overview, 15 Brook. J. Int’l L. 25 (1989). 35 For a similar justification for the lack of reference to the possibility of implicitly excluding the CISG’s application, see Official Records of the United Nations Conference, supra note 30, at 17 (stating that “[t]he second sentence of the Ulis, article 3, providing that ‘such exclusion may be express or implied’ has been eliminated lest the special reference to ‘implied’ exclusion might encourage courts to conclude, on insufficient grounds, that the Convention has been wholly excluded”); Peter Schlechtriem, Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods 35 (1986) (stating that “[i]n contrast to Article 3 sentence 2 of Ulis, the Convention does not mention the possibility of an ‘implied’ exclusion, but this does not mean that a tacit exclusion is impossible. The intent to delete the word ‘implied’ was to prevent the courts from being too quick to impute exclusion or the Convention”); see also Bell, supra note 31, at 255; Cappuccio, supra note 31, at 868; T.C.

121

Franco Ferrari

a view that has already been confirmed by several court decisions36 which the draft Digest cites, like the cases holding the opposite view, without commenting on them. Of course, there must be clear indications that the parties really wanted such an exclusion,37 that is, there must be a real – as opposed to theoretical, fictitious or hypothetical38 – agreement on exclusion.39

Ebenroth, Internationale Vertragsgestaltung im Spannungsverhltnis zwischen ABGB, IPRGesetz und UN-Kaufrecht, Juristische Bltter 684 (1986); Ferrari, supra note 11, at 145-146; Magnus, supra note 9, at 104; Piltz, supra note 11, at 48. 36 See Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg.at/ 1_7701g.htm; Cour de Cassation, France, 26 June 2001, available at http://witz.jura.unisb.de/CISG/decisions/2606012v.htm; Tribunale di Vigevano, 12 July 2000, Italy, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001)); Oberlandesgericht Dresden, Germany, 27 December 1999, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/511. htm; Oberlandesgericht M
nchen, Germany, 9 July 1997 CLOUT case No. 273, available at http://www.cisg-online.ch/cisg/urteile/282.htm; Landgericht M
nchen, Germany, 29 May 1995 (Neue Juristische Wochenschrift 401 f. (1996)); Oberlandesgericht Celle, Germany 24 May 1995, CLOUT case No. 136, available at http://www.cisg-online.ch/cisg/urteile/ 152.htm. 37 For a similar affirmation, see M.J. Bonell, La nouvelle Convention des Nations-Unies sur les contracts de vente internationale de marchandises, Droit et pratique du commerce international 13 (1981) (stating that a “tacit exception may only be admitted if there are valid elements of indications showing the parties ‘true’ intention”); Fritz Enderlein & Dietrich Maskow, International Sales Law 48 (1992) (suggesting that there must be clear indications that an implicit exclusion is wanted); Erauw, supra note 11, at 47 (stating the same); Rovelli, supra note 14, at 105 (stating that “of course, the determination of the applicable law can result from an implicit choice of the parties, but is must be ‘certain’: this means that the intention of implicitly excluding the Convention must be real, not hypothetical”). 38 See also Kammergericht Berlin, Germany, 24 January 1994, CLOUT case No. 80 (Recht der internationalen Wirtschaft 683 (1994)) (stating that the CISG’s applicability cannot be excluded by a hypothetical choice of law). 39 For a similar statement, see John O. Honnold, Uniform Law for International Sales 80 (3d ed., 1999) (stating that “although an agreement to exclude the Convention need not be ‘express’ the agreement may only be implied from facts pointing to real – as opposed to theoretical or fictious – agreement”); for similar statements, see C. Reifner, Stillschweigender ausschluss des UN-Kaufrechts im Prozess?, Interrnationales Handelsrecht 55 (2002). Note, however, that according to Murphy, supra note 4, at 749, the possibility of implicitly excluding the CISG conflicts with the need for certainty of law.

122

CISG rules on exclusion and derogation: Article 6

This is not a merely theoretical problem, as evidenced by the variety of ways to implicitly exclude the CISG. A typical40 way is through the parties’ choice of the applicable law.41 There is no doubt that such a choice is an effective exclusion of the CISG, at least where the applicable law chosen by the parties is the law of a non-Contracting State.42 This was true under the ULIS as well43 and has been confirmed by a German court decision44 cited in the Digest. The choice of the law of a Contracting State as the law governing the contract poses more difficult problems.45 One of these problems relates to the question of whether the CISG is applicable when the parties agree upon a national law, such as French, US, or Italian law, as the law applicable to their

40

Accord, Herber, supra note 8, at 81; Magnus, supra note 9, at 138. As far as the validity of a choice of law agreement is concerned, it must be judged on the basis of the law applicable to this issue. According to Article 2 of the 1955 Hague Convention on the Law Applicable to Contracts for the International Sale of Goods, the electio iuris is governed by the law chosen by the parties; the same is true according to Article 3(4) and 8 of the 1980 EEC Convention on the Law Applicable to Contractual Obligations. For further discussion of this problem, see Bonell, supra note 13, at 19; Ferrari, supra note 11, at 115-16; Herber and Czerwenka, supra note 31, at 43. 42 For similar statements, see, e. g., Bonell, supra note 8, at 56 (stating that there is an “[implicit] indication of the parties’ intention to exclude the application of the Convention, either entirely of partially, whenever they have chosen as the proper law of their contract the law of a non-Contracting State”); Audit, supra note 9, at 39; Carbone & Luzzatto, supra note 11, at 132; F. Enderlein et al., Internationales Kaufrecht: Kaufrechtskonvention. Verjhrungskonvention. Vertretungskonvention. Rechtsanwendungskonvention 58 (1991); Ferrari, supra note 8, at 166; Garro and Zuppi, supra note 31, at 95; Holthausen, supra note 31, at 515; O. Lando, The 1985 Hague Convention on the Law Applicable to Sales, Rabels Zeitschrift f
r auslndisches und internationals Privatrecht 84 (1987); Liguori, supra note 31, at 158; Lindbach, supra note 31, at 308; Magnus, supra note 9, at 138; Martiny, supra note 16, at 1656; Piltz, supra note 11, at 48; Reifner, supra note 39, at 55; Sacerdoti, supra note 11, at 746; Winship, supra note 31, at 1. 35. 43 See Herber, supra note 24, at 20. See, however, Rechtbank Koophandel Tongeren, Belgium, 18 March 1976, in Internationale Rechtsprechung zu EKG und EAG 136 f. (P. Schlechtriem and U. Magnus eds., Baden-Baden, 1987); Rechtbank Koophandel Tongeren, Belgium, 9 June 1977, in Internationale Rechtsprechung zu EKG und EAG, supra this note at 138. 44 See, e. g., Oberlandesgericht D
sseldorf, Germany, 2 July 1993, CLOUT case No. 49 (Recht der internationalen Wirtschaft 845 (1993)). 45 For an overview of this issue, see F. Ferrari, Zum vertraglichen Ausschluss des UNKaufrecht, Zeitschrift f
r europisches Privatrecht 743 ff. (2002); Magnus, supra note 9, at 138-39. 41

123

Franco Ferrari

contract. As the draft Digest clearly shows, in respect of this issue case law is again contradictory. Since the draft Digest, however, simply lists the contradictory cases, once again without commenting on them at all, the interpreter has to look elsewhere to determine which cases should be followed. In respect of the issue at hand, several courts (acritically cited in the draft Digest)46 as well as several commentators47 suggest that designating the law of a Contracting State ought to amount to an implicit exclusion of the CISG, because otherwise the manifested intent of the parties would have no practical meaning.48 In this author’s opinion,49 however, this solution is not tenable under the CISG.50 As was the case under the ULIS;51 designating the

46

See Cour d’Appel Colmar, France, 26 September 1995, available at http://witz.jura.unisb.de/cisg/decisions/260995.htm; Kantonsgericht Zug, Switzerland, 16 March 1995, CLOUT case No. 326 (Internationales Handelsrecht 44 (2000)); Ad Hoc Arbitral Tribunal Florence, Italy, 19 April 1994, CLOUT case No. 92 (Diritto del commercio internazionale 861 ff. (1994)); Tribunale Civile di Monza, 14 January 1993, CLOUT case No. 54 (Foro italiano 916 ff. (1994/I)). 47 See, e. g., F. Bydlinski, Diskussionsbeitrag, in Das UNCITRAL-Kaufrecht im Vergleich zum sterreichischen Recht 48 (P. Doralt ed., 1985); M. Karollus, Der Anwendungsbereich des UN-Kaufrechts im berblick, Juristische Schulung 381 (1993). 48 See, in addition to the authors cited in the preceding note, Karollus, supra note 31, at 3839; F.A. Mann, Anmerkung zu BGH, Urteil vom 4. 12. 1985, JuristenZeitung 647 (1986); W.A. Stoffel, Ein neues Recht des internationalen Warenkaufs in der Schweiz, Schweizerische Juristenzeitung 173 (1990); L.Vekas, Zum persnlichen und rumlichen Anwendungsbereich des UN-Einheitskaufrechts, Recht der internationalen Wirtschaft 346 (1987). 49 See F. Ferrari, Exclusion et inclusion de la CVIM, Revue de droit des affaires internationals 403 (2001). 50 This view was also expressed at the Vienna Diplomatic Conference, where a large number of delegations rejected proposals by Canada and Belgium (for these proposals, see Official Records of the United Nations Conference, supra note 30, at 250) under which domestic sales law, and not the CISG, would have to be applied whenever the parties indicated the law of a Contracting State as the proper law for their contract. For a reference to the rejection of the foregoing proposals as an argument in favor of the view expressed in the text, see Bonell, supra note 8, at 56; Magnus, supra note 9, at 106. 51 This view was predominant under the 1964 Hague Conventions. For a reference to this view in legal writing, see, e. g., Enderlein & Maskow, supra note 37, at 49; Herber, supra note 24, at 21; G. Reinhart, Dix ans de jurisprudence de la Re´publique Fe´de´rale d’Allemagne a` propos de la loi uniforme sur la vente internationale d’objets mobiliers corporels, Uniform L. Rev. 424 (1984); Witz, supra note 11, at 110; K. Zweigert and U. Drobnig, Einheitliches Kaufrecht und internationales Privatrecht, Rabels Zeitschrift f
r auslndisches und internationals Privatrecht 162 f. (1965).

124

CISG rules on exclusion and derogation: Article 6

law of a Contracting State, if done without particular reference to the domestic law of that State52 (as in two of the cases cited in the draft Digest53) does not per se exclude the Convention’s application,54 as confirmed by many court decisions55 and arbitral awards56 cited in the draft Digest. And this is 52 There is no doubt that the CISG’s application is excluded where the parties merely refer to the domestic law of a Contracting State. For a similar conclusion, see Bonell, supra note 13, at 18; Cappuccio, supra note 31, at 873; Erauw, supra note 11, at 49; Ferrari, supra note 11, at 117; Schlechtriem, supra note 35, at 35. Consequently, where the parties state, for instance, that “the contract is governed by American law as laid down in the U.C.C.”, the CISG’s application should be considered as being excluded. For further examples of clauses that successfully exclude the Convention’s application, see B. Blair Crawford, Drafting Considerations under the 1980 United Nations Convention on Contracts for the International Sale of Goods, 8 J.L. & Com. 193 (1988); E. Allen Farnsworth, Review of Standard Forms or Terms under the Vienna Convention, 21 Cornell Int’l L.J. 442 (1988); Herber, supra note 8, at 87; Holthausen, supra note 31, at 515; David L. Perrott, The Vienna Convention 1980 on Contracts for the International Sale of Goods, Int’l Cont. L. & Fin. Rev. 580 (1980); Piltz, supra note 11, at 48; Winship, supra note 31, at 1. 35. 53 Oberlandesgericht Frankfurt, Germany, 30 August 2000, available at http://cisgw3. law.pace.edu/cisg/text/000830g1german.html; Oberlandesgericht Frankfurt, Germany, 15 March 1996, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/284.htm. 54 This view is shared by the majority of commentators. See, e. g., Audit, supra note 9, at 39; Bonell, supra note 8, at 56; Erauw, supra note 11, at 21, 25 and 48; Farnsworth, supra note 52, at 442; Ferrari supra note 11, at 117; R. Herber, Anwendungsvoraussetzungen und Anwendungsbereich des Einheitlichen Kaufrechts, in Einheitliches Kaufrecht und nationales Obligationenrecht 104 (P. Schlechtriem ed., 1987); Herber & Czerwenka, supra note 31, at 44; Albert H. Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods 100-01 (1989); J.P. Plantard, Un nouveau droit uniforme de la vente internationale: La Convention des Nations Unies du 11-4-1980, Journal du droit international 321 (1988); Schlechtriem, supra note 13, at 22; P. Thieffry, Les nouvelles rgles de la vente internationale, Droit et pratique du commerce international 373 (1989); Peter Winship, International Sales Contracts under the 1980 Vienna Convention, 17 UCC L.J. 65 (1984). 55 Hof van Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven.ac.be/ int/tradelaw/WK/2002-05-17.htm; Oberlandesgericht Frankfurt, Germany, 30 August 2000, available at http://cisgw3.law.pace.edu/cisg/text/000830g1german.html; Bundesgerichtshof, Germany, 25 November 1998, CLOUT case No. 270 (Transportrecht-Internationales Handelsrecht 18 ff. (1999)); Oberlandergericht Hamburg, Germany, 5 October 1998, CLOUT case No. 279, available at http://www.cisg-online.ch/cisg/urteile/473.htm; Kantonsgericht Nidwalden, Germany, 3 December 1997, CLOUT case No. 220 (Transportrecht-Internationales Handelsrecht 10 (1999)); Bundesgerichtshof, Germany 25 June 1997, CLOUT case No. 235, available at http://www.cisg-online.ch/cisg/urteile/277.htm; Oberlandesgericht M
nchen, Germany, 9 July 1997, CLOUT case No. 287, available at http://www.cisg-online. ch/cisg/urteile/281.htm; Oberlandesgericht Karlsruhe, Germany, 25 June 1997, CLOUT case

125

Franco Ferrari

No. 230, available at http://www.cisg-online.ch/cisg/urteile/263.htm; Handelsgericht Z
rich, 5 February 1997, CLOUT case No. 214, available at http://www.cisg-online.ch/cisg/urteile/ 327.htm; Cour de Cassation, France, 17 December 1996, CLOUT case No. 206, available at http://www.cisg-online.ch/cisg/urteile/220.htm; Landgericht Kassel, Germany, 15 February 1996, CLOUT case No. 409 (Neue Juristische Wochenschrift Rechtsprechungs-Report 1146 f. (1996)); Oberlandesgericht Hamm, Germany, 9 June 1995, CLOUT case No. 125 (Recht der internationalen Wirtschaft 689 f. (1996)); Rechtbank s’Gravenhage, Netherlands, 7 June 1995, (Nederlands Internationaal Privaatrecht No. 524 (1995)); Oberlandesgericht M
nchen, Germany, 8 February 1995, CLOUT case No. 167, available at http:// www.cisg-online.ch/cisg/urteile/142.htm; Oberlandesgericht Kln, Germany, 22 February 1994 (Praxis des internationalen Privat- und Verfahrensrechts 393 ff. (1995)); Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281 (Recht der internationalen Wirtschaft 934 ff. (1993)); Oberlandesgericht D
sseldorf, Germany, 8 January 1993, CLOUT case No. 48 (Recht der internationalen Wirtschaft 325 (1993)). 56 See ICC Court of Arbitration, Case No. 9187, 1999, available at http://www.unilex.info/ case.cfm?pid=1&do=case&id=466&step=FullText (CISG applicable pursuant to the parties’ choice of French law, i.e. the law of a Contracting State); Schiedsgericht der Handelskammer Hamburg, Germany, 21 March 1996, CLOUT case No. 166 (Monatsschrift f
r Deutsches Recht 781 ff. (1996)) (applying the CISG on the grounds that the choice of the Hamburg arbitral tribunal was to be analogized to the choice of German law, i.e., that of a Contracting State); Arbitration Court of the Chamber of Commerce and Industry of Budapest, Hungary, 17 November 1995, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=217& step=FullText (stating that the CISG was applicable, among other reasons, because the parties had chosen the law of two (!) Contracting States as the law governing the contract); ICC Court of Arbitration, Case No. 8324, 1995 (Journal du droit international 1019 ff. (1996)) (applying the CISG to a contract which the parties had subjected to French law, i. e., the law of a Contracting State); ICC Court of Arbitration, Case No. 7844, 1984 (ICC Court of Arbitration Bulletin 72 f. (1995)) (stating that the CISG is applicable where the parties have chosen the law of a Contracting State to govern their international sales contract); ICC Court of Arbitration, Case No. 7660, 1994, CLOUT case No. 302 (ICC Court of Arbitration Bulletin 68 (1995)) (holding that the CISG was applicable on the grounds that the parties had agreed upon the law of a Contracting State (Austria) as the law governing their contract and that the choice of the law of a Contracting State included the CISG); ICC Court of Arbitration, Case No. 7565, 1994, CLOUT case No. 300 (ICC Court of Arbitration Bulletin 64 ff. (1995)) (applying the CISG to a contract to which the parties had made applicable “the Laws of Switzerland”, based upon the argument that “Swiss law, when applicable, consists of the Convention itself as of the date of its incorporation into Swiss law”); ICC Court of Arbitration, Case No. 6653, 1993, CLOUT case No. 103 (Journal du droit international 1040 ff. (1993)) (applying the CISG to a contract which the parties had agreed to subject to French law, the law of a Contracting State); Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft – Wien, Austria, 15 June 1994, CLOUT case No. 93 (Arbitral Award No. SCH-4366, Recht der internationalen Wirtschaft 590 f. (1995))

126

CISG rules on exclusion and derogation: Article 6

true even where the law chosen is that of a Contracting State that made an Article 95 reservation.57 The application of the Convention does not make the national law irrelevant, as has been suggested;58 the designation of the law of a Contracting State must be interpreted as both making the CISG applicable (as part of the chosen law)59 and as determining the law applicable to issues not governed by the CISG itself (to the extent to which the parties are allowed to make a choice in respect of those issues),60 such as issues relating to validity. Interpreting the parties’ choice of law in this fashion avoids having to resort to the complex rules of private international law in order to determine the law applicable to issues not governed by the CISG.61 Quid iuris if under the 1964 Hague Conventions the parties have established practices between themselves according to which the reference to the law of a Contracting State had to be interpreted as an exclusion of the uniform sales law, and the parties continue to refer to the law of that State even after that State ratifies the CISG? Does the continuing reference to the law of that State have to be considered an exclusion of the CISG? Even though several

(expressly stating that “the parties’ choice of the law of a Contracting State is understood as a reference to the corresponding national law, including the CISG as the international sales law of the State and not merely to the – non-unified – domestic sales law”). 57 Accord, G. Herrmann, Anwendungsbereich des Wiener Kaufrechts – Kollisionsrechtliche Probleme, in Wiener Kaufrecht. Der schweizerische Aussenhandel unter dem bereinkommen
ber den Internationalen Warenkauf 95 (E. Bucher ed., 1991); Magnus, supra note 9, at 139. For the argument that in this type of case the CISG should not apply, see Audit, supra note 9, at 39 n. 3. 58 See also Ferrari, supra note 8, at 170. 59 See Schlechtriem, supra note 16, at 13. 60 Compare F. Ferrari, Diritto uniforme della vendita internazionale: questioni di applicabilit e di diritto internazionale privato, Rivista di diritto civile 685 (1995/II); Liguori, supra note 31, at 158. 61 For a similar conclusion in respect of the consequences of the parties’ choice of the law of a Contracting State as the proper law for their contract, see Enderlein & Maskow, supra note 37, at 49, stating that “[w]hen a state participates in the Convention the latter can be assumed to be part of his domestic law so that additional reference to it could be considered as superfluous at first, and/or for the reference to make sense, as an exclusion of the CISG. But the application of the Convention does in no way make the application of the other parts of the national law irrelevant ... Therefore, it must be recommended to the parties to determine the national law that is applicable in addition to the Convention ... so that they can avoid the uncertainties involved in determining that law, using the conflict-of-law norms”.

127

Franco Ferrari

authors have argued in favor of an affirmative answer to this question,62 most recently the opposite view was adopted by a German court.63

IV. Exclusion of the CISG by virtue of standard contract forms and choice of forum The choice of the law of a State – whether Contracting or not – does not constitute the only kind of implicit exclusion which can be used to bar the Convention’s application,64 as is evidenced by the draft Digest. Indeed, in certain situations, as was also true under the 1964 Hague Conventions,65 the use of standard contract forms can lead to the exclusion of the CISG’s application.66 This occurs if the forms become part of the contract67 and (a) their content is so profoundly influenced by the rules and the concepts of a specific legal system that their use is incompatible with the CISG and implicitly manifests the parties’ intention to have the contract governed by that legal system68 and (b) their use suggests an intention to exclude the 62

See, e. g., Ferrari, supra note 11, at 118; Holthausen, supra note 31, at 516. Compare Landgericht D
sseldorf, Germany, 11 October 1995, available at http://www. jura.uni-freiburg.de/ipr1/cisg/urteile/text/180.htm (where the court stated that the express exclusion of the 1964 Uniform Sales Law did not amount per se to an implied exclusion of the CISG, and therefore applied the CISG to an international sales contract which the parties had agreed upon subjecting to the sole law of Germany, i.e., the law of a Contracting State). 64 Accord, Achilles, supra note 31, at 26; Ferrari, supra note 8, at 172 ff.; Magnus, supra note 9, at 140 ff. 65 For a very detailed discussion of the possibility of implicitly excluding the application of both the Ulis and Ulf, among others by adopting standard contract forms, see, e. g., F.Graf van Westphalen, Allgemeine Geschftsbedingungen und Einheitliches Kaufgesetz (EKG), in Einheitliches Kaufrecht und nationales Obligationenrecht, supra note 54, at 49 ff.; R. Hausmann, Stillschweigender Ausschluß der Einheitlichen Kaufgesetze durch allgemeine Geschftsbedingungen, Recht der internationalen Wirtschaft 186 ff. (1977); G.Reinhart, Erschwerter Ausschluß der Anwendung des Einheitlichen Kaufgesetzes, Praxis des internationalen Privat- und Verfahrensrechts 288 ff. (1986). 66 For a similar statement, see also Erauw, supra note 11, at 49; Herrmann, supra note 57, at 95-96; Martiny, supra note 16, at 1656. 67 See Schlechtriem, supra note 16, at 14. 68 The possibility of an implicit exclusion of the CISG by means of standard contract forms has also been favored by Bonell, supra note 8, at 56-57, who states that the use of general conditions or of standard from contracts whose content is influenced by principles and rules typical of the domestic law of a particular State, is certainly an element from which one could infer the intention of the parties to have that domestic law rather than the Convention govern their contract. Before reaching such a conclusion, however, due consideration should be given to other circumstances of the case. 63

128

CISG rules on exclusion and derogation: Article 6

application of the CISG as a whole.69 Where, on the contrary, standard contract forms are intended to merely regulate specific issues in derogation from certain rules of the Convention, one must presume that only a partial exclusion of the CISG is desired.70 Furthermore, the choice of a forum can also lead to the exclusion of the Convention’s application.71 The same is true with reference to the choice of an arbitral tribunal,72 provided that two requirements are met: (a) one must be able to infer from the parties’ choice their clear intention to have the domestic law of the State where the forum or arbitral tribunal is located govern their contract,73 and (b) the forum must not be located in a

This view is shared by other authors as well. See, e. g., Audit, supra note 9, at 39; U. Huber, Der UNCITRAL-Entwurf eines bereinkommens
ber internationale Warenkaufvertrge, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 426 (1979); Schlechtriem, supra note 13, at 21. 69 See Magnus, supra note 9, at 141, stating that standard contract forms which contrast with specific provisions of the CISG should not per se be looked upon as excluding the CISG as a whole. This was true under the Hague Conventions as well. See, for instance, Oberlandesgericht Hamm, Germany, 7 May 1979 (Internationale Rechtsprechung zu EAG und EKG, supra note 43, at 141 f.). 70 For a similar solution, see Enderlein & Maskow, supra note 37, at 49 (stating that “[o]n no account can the exclusion of the Convention be deduced merely from agreement of such terms of contract which contradict specific provisions because deviating individual exclusions are indeed compatible with the CISG”). This view is also held by Ferrari, supra note 11, at 119; Witz, supra note 11, at 111. 71 Note in this regard that it has been asserted that “[i]f the parties have not provided otherwise, but have included a choice of forum clause, courts are inclined to rule that the choice of forum indicates a choice of that jurisdiction’s substantive law”, Ronald A. Brand, Nonconvention Issues in the Preparation of Transnational Sales Contracts, 8 J.L. & Com. 167 (1988). For illustrations of this tendency, see Court of Appeal, England, 24 January 1968 (Tzotrzis v. Monard Line A/B, [1968] W.L.R. 406, 411-412 (C.A.)); U.S. Supreme Court, United States, 12 June 1972 (Bremen v. Zapata Off-Shore Co., 407 U.S. 1 n. 15 (1972)). 72 For this conclusion, see Holthausen, supra note 31, at 517-518; Magnus, supra note 9, at 140-41. 73 Several authors have pointed out that, even though the choice of a forum or of an arbitral tribunal may indicate the parties’ intention to exclude the CISG, that choice by itself is not sufficient to bar the Convention’s application. See Herber & Czerwenka, supra note 31, at 43 (stating that an arbitration clause or the choice of a forum might indicate the parties’ intention to exclude the Convention); Huber, supra note 68, at 426 (stating that the choice of an arbitral tribunal by itself does not lead to the exclusion of the Convention); Schlechtriem, supra note 35, at 35 (stating that the choice of an arbitral tribunal does not by itself imply that the parties wish to exclude the Convention’s application).

129

Franco Ferrari

Contracting State,74 because in that case the CISG is applicable,75 as confirmed by two arbitral rewards referred to in the draft Digest.76 Finally, although this possibility is nowhere referred to in the draft Digest, parties can exclude the CISG by agreeing that specific issues arising under their contract be subject to provisions of a law different than the CISG. The exclusion will occur if the designated issues are fundamental ones,77 and if from the subjection of those issues to a domestic sales law one can infer the parties’ clear intention to have the contract governed by a law different from the Sales Convention. This was the approach taken by various court decisions rendered under the 1964 Hague Conventions.78 As correctly stated in a decision referred to in the draft Digest, however, the inclusion of Incoterms by the parties does not constitute an implicit exclusion of the Convention.79

V. Implicit exclusion and pleadings based solely on domestic law Quid iuris where the parties argue a case on the sole basis of a domestic law despite the fact that all of the CISG’s criteria of applicability are met? Although this issue is mentioned in the draft Digest, as there is case law on it, the draft Digest itself does not help to answer the question: the cases it cites are contradictory, a contradiction the draft Digest does once again not help to solve.

74 For similar, albeit not identical conclusions, see Erauw, supra note 11, at 49; Herber, supra note 8, at 87; Holthausen, supra note 31, at 519; Reifner, supra note 39, at 55. 75 For this solution, see G. Walter, Kaufrecht. Handbuch des Schuldrechts 632 (1987) (stating that whenever the arbitral tribunal chosen by the parties is located in a Contracting State, the CISG is applied). 76 See Schiedsgericht der Hamburger freundlichen Arbitrage, Germany, 29 December 1998, CLOUT case No. 293 (Internationales Handelsrecht 36-37 (2001)) (applying the CISG on the grounds that the choice of the Hamburg arbitral tribunal was to be analogized to the choice of German law, i. e., that of the Contracting State in which the arbitral tribunal was located); Schiedsgericht der Handelskammer Hamburg, Germany, 21 March 1996 (Monatsschrift f
r deutsches Recht 781 ff. (1996)) (applying the CISG on the same grounds)). 77 For this prerequisite, see Herber, supra note 8, at 87. 78 See, e. g., Landgericht Bamberg, Germany, 12 October 1983 (Praxis des internationalen Privat- und Verfahrensrechts 266 (1984)); Bundesgerichtshof, Germany, 26 November 1980 (Neue Juristische Wochenschrift 1156 f. (1981)). 79 Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg.at/ 1_7701g.htm.

130

CISG rules on exclusion and derogation: Article 6

In this author’s opinion,80 the mere fact that the parties argue on the sole basis of domestic law does not per se lead to the exclusion of the CISG,81 a view recently confirmed by several courts,82 unless the parties are aware of the CISG’s applicability or the intent to exclude the CISG can otherwise be inferred with certainty. If the parties are not aware of the CISG’s applicability and argue on the basis of a domestic law merely because they believe that this law is applicable, the judges will nevertheless have to apply the CISG on the grounds of the principle iura novit curia, provided that this principle is part of the lex fori. One of the courts stated this very clearly: The fact that during the preliminary legal proceedings in this case the parties based their arguments exclusively on Italian domestic law without any references to the CISG cannot be considered an implicit manifestation of an intent to exclude application of the Convention ... Reference in a party’s brief to the non-uniform national law of a Contracting State – even though it is theoretically some evidence of an intent to choose the national law of that State – does not imply the automatic exclusion of the CISG. One has to assume that the parties wanted to exclude the application of the Convention only if it appears in an unequivocal way that they recognized its applicability and they nevertheless insisted on referring only to national, non-uniform law. In the present case, it does not appear from the parties’ arguments that they realized that the CISG was the applicable law...; we cannot, therefore, conclude that they implicitly wanted to exclude the application of the Convention by choosing to refer exclusively to national Italian law. Thus according to the principle iura novit curia, it is up to the judge to determine which Italian rules should be applied; for the reasons mentioned above, the applicable rules are those in the Vienna Convention.83

80

See Ferrari, supra note 45, at 744 ff. For this conclusion, see also Schlechtriem, supra note 16, at 14. 82 See Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 281 ff. (2001)); Oberlandesgericht Hamm, Germany, 9 June 1995, CLOUT case No. 125 (Praxis des internationalen Privat- und Verfahrensrechts 269 (1996)); Landgericht Landshut, Germany, 5 April 1995, available at http://www.jura.uni-freiburg.de/ipr1/cisg/ urteile/text/193.htm. 83 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378, English translation quoted from 20 J.L. & Com. 213-14 (2001). 81

131

Franco Ferrari

In light of what has been said thus far, one has to reject the opposite view held by two tribunals (a state court84 and an arbitral tribunal85), acritically referred to in the draft Digest, according to which if the parties’ pleadings are based solely on domestic law, that automatically leads to the exclusion of the CISG.

VI. Express exclusion of the CISG Problems can arise not only with respect to implicit exclusion of the CISG, but also with respect to its explicit exclusion.86 Two situations should be distinguished: exclusion with and exclusion without designation of the law applicable to the contract between the parties.87 Nulla quaestio that the tribunal must apply the law chosen by the parties when the CISG is excluded with an indication of the applicable law.88 Under the CISG, not unlike under the Hague Conventions,89 such a designation can also be made in the course of a legal proceeding,90 at least where this is

84

Cour de Cassation, France, 26 June 2001, available at http://witz.jura.uni-sb.de/CISG/ decisions/2606012v.htm. 85 ICC Court of Arbitration, Case No. 8453, 1995 (ICC Court of Arbitration Bulletin 55 (2000)). 86 For a suggestion of various clauses by means of which the CISG can be expressly excluded, see Peter Winship, Changing Contract Practices in the Light of the United Nations Sales Convention: A Guide for Practitioners, 29 Int’l Law. 538 (1995). 87 For this distinction, see Ferrari, supra note 11, at 121. 88 Accord, Sacerdoti, supra note 11, at 746. 89 Under the 1964 Hague Conventions, designation of the applicable law could be made during the legal proceeding. For a reference to this rule in respect of ULIS and ULF, see V. Sttter, Stillschweigender Ausschluß der Anwendbarkeit des Internationalen Kaufabschluß
bereinkommens und des Einheitlichen Kaufgesetzes, Recht der Internationalen Wirtschaft 38 (1980); C. von der Seipen, Zum Ausschluß des Einheitlichen Kaufrechts im Deutsch-Englischen Rechtsverkehr, Praxis des Internationalen Privat- und Verfahrensrechts 246 (1984). For judicial applications of this principle, see, e. g., Bundesgerichtshof, Germany, 26 November 1980 (Neue Juristische Wochenschrift 1156 (1981)); Bundesgerichtshof, Germany, 26 October 1983 (Recht der internationalen Wirtschaft 151 (1984)). 90 See Erauw, supra note 11, at 47; Karollus, supra note 31, at 38; Schlechtriem, supra note 16, at 14.

132

CISG rules on exclusion and derogation: Article 6

admissible according to the lex fori,91 as in Germany92 and Switzerland93 for instance, and even though the parties normally make their choice before the conclusion of the contract.94 The law chosen by the parties also is the law on the basis of which a judge has to decide upon the validity of the choice of law, at least where the applicable rules of private international law correspond to those laid down in the 1980 Rome Convention.95 Where the parties’ choice of law is invalid, the contract should be governed by the law to be determined on the basis of the rules of private international law of the forum.96 If this law turns out to be that of a Contracting State to the CISG, its domestic law rather than the CISG should be applied.97

91 See Achilles, supra note 31, at 27; Czerwenka, supra note 22, at 169-170; Holthausen, supra note 31, at 515; U. Magnus, Zum rumlich-internationalen Anwendungsbereich des UN-Kaufrechts und zur Mngelr
ge, Praxis des internationalen Privat- und Verfahrensrechts 391 (1993). 92 Oberlandesgericht Kln, Germany, 26 August 1994, CLOUT case No. 122, available at http://www.cisg-online.ch/cisg/urteile/132.htm; Oberlandesgericht Saarbr
cken, Germany, 13 January 1993, CLOUT case No. 292, available at http://www.cisg-online.ch/cisg/urteile/ 83.htm. 93 Handelsgericht Z
rich, Switzerland, 10 February 1999, CLOUT case No. 331 (Schweizerische Zeitschrift f
r internationales und europisches Recht 111 (2000)). 94 In this respect, it has been stated that “[o]ne might expect that, in practice, the parties would normally indicate their intention at the beginning of their negotiations, or at least before the contract is concluded. Nonetheless, there is nothing to prevent them from deciding at a later stage, even after the initiation of a legal proceeding relating to their contract ... It should, however, be borne in mind that any exclusion of or derogation from the Convention agreed upon after the conclusion of the contract amounts to a modification of the contract, which in some cases may require a particular form”. Bonell, supra note 8, at 58. 95 Although it is common knowledge that the question of whether the parties’ choice of law is valid falls outside the sphere of application of the Convention, there is uncertainty about the law on the basis of which to decide whether the parties have validly excluded the Convention, as has been pointed out, for instance, by Bonell, supra note 8, at 60-61, stating that “given the special nature of a choice-of-laws clause, it is uncertain whether the validity of the parties’ consent is to be decided according to the proper law as objectively determined, the law chosen by the parties, or the substantive rules of the forum. ... [S]ee Article 10 of the 1985 Hague Convention on the Law Applicable to Contracts for the International Sale of Goods, according to which whenever the parties’ agreement as to the applicable law is either express or clearly demonstrated by the terms of the contract and the conduct of the parties, the existence and validity of that agreement shall be determined by the law chosen”. 96 Accord, Bonell, supra note 8, at 61; Ferrari, supra note 11, at 121; Honnold, supra note 39, at 126. 97 But see Herber & Czerwenka, supra note 31, at 44 (favoring the view according to which the invalidity of the parties’ choice of law leads to the application of the CISG).

133

Franco Ferrari

Quid iuris, however, in the case of an express exclusion without indication of the applicable law (an issue also referred to in the draft Digest, although there is no case law on it yet)?98 In this case, the preferable view, held by most legal scholars,99 is the one according to which “if the parties merely agree that the Convention does not apply, rules of private international law would determine the applicable domestic law”.100 And whenever these rules refer to the law of a Contracting State, its domestic sales law, not the uniform one, should apply.101 Undoubtedly, this rule applies in cases in which the CISG is excluded in toto.102 However, its application to cases in which the Convention is excluded only partially created disagreement among legal scholars.103 Some authors favor the view that the issues dealt with in the excluded provisions must be settled, according to Article 7(2) CISG, in conformity with the CISG’s general principles.104 In this author’s opinion,105 the better view is the opposite one: the rules to substitute for the excluded CISG provisions are to be determined, as in the case of an exclusion in toto of the Convention, by applying the rules of private international law of the forum State106 – without resorting to the general principles of the CISG; otherwise, the exclusion would have no practical meaning. Indeed, it would make little

98

Note that, while at one point an exclusion without indication of the applicable law was considered inadmissible, this view is no longer tenable. See, e. g., M.J. Bonell, UN-Kaufrecht und das Kaufrecht des Uniform Commercial Code im Vergleich, Rabels Zeitschrift f
r auslndisches und internationals Privatrecht 28 (1994); but see Honnold, supra note 39, at 78. 99 This solution has been favored, for instance, by Ferrari, supra note 8, at 179; Sacerdoti, supra note 11, at 746; Schlechtriem, supra note 13, at 21. 100 Honnold, supra note 39, at 78. For the same conclusion, see Bonell, supra note 13, at 19; Ferrari, supra note 11, at 122; K. Kostkiewicz & I. Schwander, Zum Anwendungsbereich des UN-Kaufrechts
bereinkommens, in Festschrift Neumayer 48 (F. Majoros ed., Basle, 1997); Magnus, supra note 9, at 137. 101 Accord Herber, supra note 8, at 85; Karollus, supra note 31, at 38; Magnus, supra note 9, at 104; Martiny, supra note 16, at 1656; K. Siehr, Der internationale Anwendungsbereich des UN-Kaufrecht, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 600 (1988). 102 Accord, Bonell, supra note 8, at 59. 103 For a recent overview of the discussion on this issue, see Magnus, supra note 9, at 142-43. 104 For this view, see, e. g., Bonell, supra note 8, at 59; Herber, supra note 8, at 88-89; Herber & Czerwenka supra note 31, at 42. 105 See Ferrari, supra note 11, at 122. 106 Compare Ferrari, supra note 8, at 180.

134

CISG rules on exclusion and derogation: Article 6

sense to replace specific solutions provided for by the Convention and which, therefore, are necessarily in conformity with its general principles, with solutions that are “in conformity with the general principles on which [the Convention] is based”.107

VII. Opting-in to the CISG As stated, the CISG provides for the possibility of the parties excluding (totally or partially) its application. The Convention does not, however, address the issue of whether the parties may make the Convention applicable when it would otherwise not apply,108 that is, where the prerequisites for application are not met.109 As pointed out in the draft Digest, this issue did not arise at all under the ULIS, which included a provision, Article 4,110 that expressly provided for

107

Article 7(2). For a discussion of this problem, see also Audit, supra note 9, at 40; Ferrari, supra note 11, at 124-26. 109 Note, that according to Bonell, supra note 8, at 63-64, the issue of “opting-in” arises only where State courts are involved, since generally the parties are not allowed to select by virtue of a choice of law an international convention, instead of a particular domestic law. “The situations may be different if the parties agree to submit the disputes arising from their contract to arbitration. Arbitrators are not necessarily bound by a particular domestic law. This is self-evident, if they are authorized by the parties to decide ex aequo et bono ... But even in the absence of such an authorization there is a growing tendency to permit arbitrators to base their decisions on principles and rules different from those adopted by State courts. This tendency has recently received a significant confirmation by the UNCITRAL Model Law on International Commercial Arbitration, where it is expressly stated that “[t]he arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute” (Article 28[1]) ... Following this approach the parties to an international contract would be free to indicate in the Convention the ‘rules of law’ according to which the arbitrators shall decide any dispute, with the result that the Convention would directly apply regardless of whether or not the positive and negative conditions for this application are fulfilled in the single case”. 110 See Article 4 ULIS: The present law shall also apply where it has been chosen as the law of the contract by the parties, whether or not their places of business or their habitual residences are in different States and whether or not such States are Parties to the Convention dated the 1st day of July 1964 relating to a Uniform Law on the International Sale of Goods, to the extent that it does not affect the application of any mandatory provisions of the law which would have been applicable if the parties had not chosen the Uniform Law. 108

135

Franco Ferrari

the possibility of “opting-in”.111 However, this omission should not be interpreted as preventing the parties from doing so under the CISG.112 This is evidenced by the fact that a proposal was made by the former German Democratic Republic,113 under which the Convention would apply even where the preconditions for its application were not met, as long as the parties wanted it to be applicable. This proposal was rejected on the sole ground that it was not necessary,114 because of the already existing principle of party autonomy.115 More recently, this view was confirmed by a Chinese court which applied the CISG by virtue of the parties’ opting-in under a contract for the sale of fish powder that otherwise would have fallen outside the CISG’s scope116 – a decision not referred to in the draft Digest.

111

For a reference to Article 4 of ULIS in scholarly writing relating to Article 6 CISG, see, e. g., Ferrari, supra note 8, at 182-183; Herber & Czerwenka, supra note 31, at 45; Honnold, supra note 30, at 82. 112 For the possibility of “opting-in”, see also Enderlein & Maskow, supra note 37, at 51 (stating that “the Convention can be interpreted in such a way that its application ... can be agreed. In this case the substantive and territorial, and hence personnel and time scope of application, can be extended”); Schlechtriem, supra note 35, at 36 (stating that “[n]ot only can the parties agree to reject the application of the Convention, but they can also agree to apply the Convention when the preconditions for application have not been met”); Winship, supra note 31, at 1. 34, stating that “[a]lthough the conference rejected an amendment which would have expressly permitted parties to derogate from Articles 2 and 3 the debate suggests that delegations could not agree on how to express the limitations on party autonomy required by “mandatory” national laws. Parties should not be foreclosed, therefore, from agreeing to have the convention apply to a transaction otherwise excluded as long as the policy behind the specific exclusion is not contravened”. 113 See Official Records of the United Nations Conference, supra note 30, at 86 (proposing to amend Article 6 to include the following: “Even if this Convention is not applicable in accordance with articles 2 or 3, it shall apply if it has been validly chosen by the parties”). 114 For similar reasoning, see Ferrari, supra note 11, at 125; Honnold, supra note 30, at 83; Magnus, supra note 9, at 145. 115 For this argument, see, e. g., the comments of the delegate of the Republic of Korea at the Vienna Conference, reported in Official Records of the United Nations Conference, supra note 30, at 252 (stating that “the provision proposed by the [former] German Democratic Republic was not necessary because of the principle of the autonomy of the will of the parties. It [is] thus always possible for the parties to decide to apply the Convention, even in the cases covered by articles 2 and 3”). 116 See Xiamen Intermediate People’s Court, China, 5 September 1994 (published in English at www.unilex.info).

136

CISG rules on exclusion and derogation: Article 6

As far as the significance of the parties’ “opting-in” is concerned, it must be emphasized that by virtue of “opting-in” the Convention becomes part of contract in a manner not unlike any other contractual clause,117 as there are no private international law rules that allow “opting-in” to have a different value. Consequently, it can be presumed that “[t]he mandatory rules of the applicable law are ... not affected by this [opting-in]”.118 117

For a similar statement, see Audit, supra note 9, at 40; Luzzatto, supra note 25, at 511-12. Enderlein & Maskow, supra note 37, at 51. For a similar conclusion, see Bonell, supra note 13, at 19, stating that the result of the parties’ “opting-in” “will be that the individual provisions of the Convention like any other contractual term may bind the parties only to the extent that they are not contrary to mandatory rules of the proper law of contract, i. e., the domestic law which by virtue of the rules of private international law of the forum governs the transaction in question”. See also Grigera Naon, supra note 163, at 101 (stating the same); Herber & Czerwenka, supra note 31, at 45 (stating the same); Honnold, supra note 30, at 134 (stating that “[r]ules of domestic law that are ‘mandatory’ are not disturbed when the Convention becomes applicable by virtue of an agreement by the parties”); Magnus, supra note 9, at 111; Sacerdoti, supra note 11, at 746 (stating the same). Note, however, that a similar statement had already been made at the Vienna Conference. See Official Records of the United Nations Conference, supra note 30, at 252, reporting the following statement by the Egyptian delegate: [t]he draft amendment was an attractive one but was unnecessary because of the principle of the autonomy of the will of the parties. If the latter agreed to apply the Convention, even in cases where it would normally not apply, their wish should be respected. Naturally, if the applicable law did not admit certain provisions of the Convention, that law would prevail. But is was not for the Convention to settle this question. 118

137

Interpretation of the Convention and gap-filling: Article 7 Franco Ferrari* I. Introduction It is common knowledge that in order to create legal uniformity, it is insufficient merely to devise and enact uniform law instruments,1 because “even when outward uniformity is achieved ..., uniform application of the agreed rules is by no means guaranteed, as in practice different countries almost inevitably come to put different interpretations upon the same enacted words”.2 In order to reduce the risk of diverging applications of a single text, that text must also be interpreted uniformly, since, as stated by Viscount Simonds on behalf of the House of Lords in Scruttons Ltd. v. Midland Silicones Ltd.,3 “it would be deplorable if the nations should, after protracted negotiations, reach agreement ... and that their several courts should then disagree as to the meaning of what they appeared to agree upon”.4 The drafters of the CISG (as well as those of many other uniform law conventions, such as the 1980 Rome Convention on the Law Applicable to Contractual Obligations and the 1988 UNIDROIT Conventions on Inter-

*

Professor of International Law, Verona University School of Law. For similar affirmations, see D. Martiny, Autonome und einheitliche Auslegung im Europischen Zivilprozeßrecht, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 427 (1981); Lisa M. Ryan, The Convention on Contracts for the International Sale of Goods: Divergent Interpretations, 4 Tul. J. Int’l & Comp. L. 101 (1995); Michael F. Sturley, International Uniform Law in National Courts: The Influence of Domestic Law in Conflicts of Interpretation, 27 Va. J. Int’l L. 731 (1989). 2 R.J.C. Munday, Comment, The Uniform Interpretation of International Conventions, 27 Int’l & Comp. L.Q. 450 (1978). 3 House of Lords, United Kingdom, 6 December 1961 (Scruttons Ltd. v. Midland Silicones Ltd. 1962 A.C. 471). 4 For similar statements see F. Ferrari, La vendita internazionale. Applicabilit ed applicazioni della Convenzione di Vienna del 1980 10 f. (1997). 1

138

Interpretation of the Convention and gap-filling: Article 7

national Factoring and International Financial Leasing5), were aware of this problem, which is why they inserted Article 7 into the Convention. This provision is designed to help reach the uniformity they aimed at. The relevant part of the provision states that in interpreting the CISG “regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade”.6 Article 7 is one of the CISG provisions most often addressed by commentators, since it deals not only with the interpretation of the CISG,7 but also with gap-filling.8 5

See Article 18 of the EEC Convention on the Law Applicable to Contractual Obligations, reprinted in 19 I.L.M. 1496 (1980); Article 4 of the UNIDROIT Convention on International Factoring, reprinted in 27 I.L.M. 945 (1988); Article 6 of the UNIDROIT Convention on International Financial Leasing, reprinted in 27 I.L.M. 933 (1988). 6 Art. 7(1) CISG. For identical provisions, see art. 4(1) of the International Factoring Convention, and art. 6(1) of the International Financial Leasing Convention, supra note 5. 7 For papers dealing with the interpretation of the CISG, see J. Adame Goddard, Reglas de interpretacion de la Convencion sobre Compraventa Internacional de Mercaderias, Revista de investigaciones juridicas 9 ff. (1990); M.J. Bonell, L’interpretazione del diritto uniforme alla luce dell’art. 7 della Convenzione di Vienna sulla vendita internazionale, Rivista di diritto civile 221 ff. (1986/II); V. Susanne Cook, The Need for Uniform Interpretation of the 1980 United Nations Convention on Contracts for the International Sale of Goods, 50 U. Pitt. L. Rev. 197 ff. (1988); F. Diedrich, Autonome Auslegung von Internationalem Einheitsrecht. Computersoftware im Wiener Kaufrecht (1994); Franco Ferrari, Uniform Interpretation of the 1980 Uniform Sales Law, 24 Ga. J. Int’l & Comp. L. 183 ff. (1994); Franco Ferrari, CISG Case Law: A New Challenge for Interpreters?, 17 J.L. & Com. 245 ff. (1998); Franco Ferrari, Interprtation uniforme de la Convention de Vienne de 1980 sur la vente internationale, Revue internationale de droit compare 813 ff. (1996); Franco Ferrari, Brevi considerazioni critiche in materia di interpretazione autonoma ed applicazione uniforme della convenzione di Vienna, Rivista di diritto civile 81 ff. (1998/II); Richard Happ, Anwendbarkeit vlkerrechtlicher Auslegungsmethoden auf das UN-Kaufrecht, Recht der internationalen Wirtschaft 376 ff. (1997); Richard Happ & Marianne Roth, Interpretation of Uniform Law Instruments According to Principles of International Law, 1997 U. L. Rev. 702 ff.; E.A. Kramer, Uniforme Interpretation von Einheitsprivatrecht – mit besonderer Ber
cksichtigung von Art. 7 UNKR, sterreichische Juristische Bltter 137 ff. (1997); Phanesh Koneru, The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minn. J. Global Trade 105 ff. (1997); U. Magnus, Whrungsfragen im Einheitlichen Kaufrecht. Zugleich ein Beitrag zu seiner L
ckenf
llung und Auslegung, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 116 ff. (1989); D. Maskow, Zur Auslegung des Einheitskaufrechts der UNOKaufrechtskonvention von 1980, in Nationales Komitee f
r Rechtswissenschaft der DDR (ed.), Nationalberichte zum XII. Internationalen Kongreß f
r Rechtsvergleichung (Sydney/

139

Franco Ferrari

As will be shown infra, Article 7, and more specifically paragraph (1) thereof, is also the provision on the basis of which the efforts towards the elaboration of the draft Digest attempted during the Pittsburgh Conference and in this book can be justified. The Digest’s ultimate goal, as can be evinced from the Report of the UNCITRAL on its Thirty-Fourth Session, is “to promote and ensure a uniform interpretation and application” of the CISG.9

II. The issue of interpretation (Article 7(1)) A. Autonomous interpretation As already mentioned, Article 7(1) provides that, in interpreting the CISG, “regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade”. Many commentators construe the reference to the obligation to regard the Convention’s “international character” in its interpretation to mean that the CISG is to be interpreted “autonomously”,10 not “nationaMelbourne, 18. – 26. 8. 1986) 5 ff. (1986); M.d.P. Perales Viscasillas, Una aproximacion al articulo 7 de la Convencion de Viena de 1980 sobre compraventa internacional de mercaderias, Quadernos de derecho y comercio 55 ff. (1995); A. Rizzi, Interpretazione e integrazione della legge uniforme sulla vendita internazionale di cose mobili, Rivista di diritto privato 237 ff. (1997); Michael P. van Alstine, Dynamic Treaty Interpretation, 146 U. Pa. L. Rev. 687 ff. (1998); Tom s Vazquez-Lepinette, The Interpretation of the 1980 Vienna Convention on International Sales, Diritto del commercio internazionale 377 ff. (1995). 8 For papers on gap-filling under the CISG, see, James J. Callaghan, Convention on Contracts for the International Sale of Goods: Examining the Gap-filling Role of CISG in two French Decisions, 15 J.L. & Com. 183 ff. (1995); F. Diedrich, L
ckenf
llung im Internationalen Einheitsrecht – Mglichkeiten und Grenzen richterlicher Rechtsfortbildung im Wiener Kaufrecht, Recht der internationalen Wirtschaft 353 ff. (1995); B. Frigge, Externe L
cken und internationales Privatrecht nach dem UN-Kaufrecht (art. 7 Abs. 2) (1994); Alejandro Garro, The Gap-Filling Role of the UNIDROIT Principles in International Sales Law, 69 Tul. L. Rev. 1149 ff. (1995); J. Hellner, Gap-Filling by Analogy: Art. 7 of the U.N. Sales Convention in Its Historical Context, in Studies in International Law: Festskrift till Lars Hjerner 219 ff. (J. Ramberg ed., 1990); Mark N. Rosenberg, The Vienna Convention: Uniformity in Interpretation for Gap-Filling – An Analysis and Application, Austl. Bus. L. Rev. 442 ff. (1992); H. Stoll, Regelungsl
cken im Einheitlichen Kaufrecht und IPR, Praxis des internationalen Privat- und Verfahrensrechts 75 ff. (1993). 9 Report of the United Nations Commission on International Trade Law on its ThirtyFourth Session, 25 June – 13 July, 2001, UN document A/56/17, at 74, ¶ 391. 10 See, among others, B. Audit, La vente internationale de marchandises 47 (1990); M.J. Bonell, Commento all’art. 7 della Convenzione di Vienna, Nuove Leggi civili commentate 21 (1989); Frank Diedrich, Maintaining Uniformity in International Uniform Law via Autonomous

140

Interpretation of the Convention and gap-filling: Article 7

listically”, i. e. not in the light of domestic law.11 This is the case despite the fact that, once put in force by individual states, international conventions become part of their domestic law.12 Consequently, one should not have recourse to any domestic concept in order to solve interpretive problems arising under the CISG.13 Many commentators have argued that what has just been said is true even where the expressions employed by the CISG (but this is also true for any uniform law convention)14 are textually the same as expressions which within a particular legal system have a specific meaning – for example, “avoidance”, “reasonable”, “good faith”, “trade usages”, etc. Such expressions have to be considered independent15 and different16 from the domestic concepts designated by the same words,17 since the Interpretation: Software Contracts under the CISG, 8 Pace Int’l L. Rev. 303 ff. (1996); F. Ferrari, Il factoring internazionale 106 ff. (1999) (with respect to the 1988 Unidroit Convention on International Factoring); M. Jametti Greiner, Der Vertragsabschluß, in: Das Einheitliche Wiener Kaufrecht. Neues Recht f
r den internationalen Warenkauf 42 (H. Hoyer ed., 1992). 11 See similarly John O. Honnold, The Sales Convention in Action – Uniform International Words: Uniform Applications?, 8 J.L. & Com. 208 (1988), where the author states that “one threat to international uniformity in interpretation is a natural tendency to read the international text through the lenses of domestic law”. See also Andrew Babiak, Defining ‘‘Fundamental Breach’’ under the United Nations Convention on Contracts for the International Sale of Goods, 6 Temp. Int’l & Comp. L.J. 117 (1992). 12 Compare S. Carbone, L’ambito di applicazione ed i criteri interpretativi della convenzione di Vienna, in La vendita internazionale. La Convenzione di Vienna dell’11 aprile 1980 84 (1981); W. Witz, H. Ch. Salger, M. Lorenz, International Einheitliches Kaufrecht 81 (2000). 13 Accord, John O. Honnold, Uniform Law for International Sales under the United Nations Convention 89 (3d ed. 1999), stating that “the reading of a legal text in the light of the concepts of our domestic legal system [is] an approach that would violate the requirement that the Convention be interpreted with regard to its international character”. For a similar affirmation in case law, see Corte Suprema di Cassazione, Italy, 24 June 1968 (Rivista di diritto internazionale privato e processuale 914 (1969)). 14 For a detailed discussion of the interpretation of uniform law conventions as well as of the issues referred to in the text, see S. Bariatti Interpretazione delle convenzioni internazionali di diritto uniforme (1985); B.W.M. Trompenaars, Pluriforme unificatie en uniforme interpretatie – in het bijzonder de bijdrage van UNCITRAL aan de internationale unificatie van het privaatrecht (1989). 15 For this affirmation, see, e. g., R. Herber, B. Czerwenka, Internationales Kaufrecht. Kommentar zum bereinkommen der Vereinten Nationen vom 11. April 1980
ber Vertrge
ber den internationalen Warenkauf 47 (1991). 16 See Franco Ferrari, The Relationship Between the UCC and the CISG and the Construction of Uniform Law, 29 Loy. L.A. L. Rev. 1026 (1996). 17 For a similar statement, see also A. Lanciotti, Norme uniformi di conflitto e materiali nella

141

Franco Ferrari

expressions employed by uniform law conventions such as the CISG are intended to be neutral.18 Indeed, it has often been noted that the choice of one expression rather than another is generally the result of a compromise19 and does not correspond to the adoption of a concept peculiar to a specific domestic law,20 at least where it is not apparent from the legislative history that the drafters wanted a specific concept to be interpreted in light of a specific domestic law.21 The policy behind the autonomous interpretation principle also precludes recourse to domestic interpretive techniques in order to solve problems,22 since that would lead to results which conflict with the other premise upon which the interpretation of the CISG is to be based – the need to promote uniformity in its application.23

disciplina convenzionale della compravendita 287 (1992). Contra, F. van der Velden, Indications on the Interpretation by Dutch Courts of the United Nations Convention on Contracts for the International Sale of Goods, in Netherlands Reports to the Twelfth Congress of Comparative Law: Sidney-Melbourne (1986), 33 (1987). 18 The presumed neutrality of the CISG’s language has also been pointed out by Michael J. Bonell, Art. 7, in Comment. Int’l Sales L. 74 (M.C. Bianca & M.J. Bonell eds., 1987) (stating that when “drafting the single provisions these experts had to find sufficiently neutral language on which they could reach a common understanding”). 19 Diedrich, supra note 10, at 310, even states that “the [entire] text of the CISG consists of unique, supranational collective terms formed out of compromises between state delegates based on several systems of laws”. For statements to the effect that the provisions of the CISG are the result of a compromise, see, among others, Eva Diederichsen, Commentary to Journal of Law & Commerce Case I, Oberlandesgericht Frankfurt am Main, 14 J.L. & Com. 177 (1995); Ferrari, Uniform Interpretation, supra note 7, at 201; Koneru, supra note 7, at 105; Barton S. Selden, Lex Mercatoria in European and U.S. Trade Practice: Time to Take a Closer Look, 2 Ann. Surv. Int’l & Comp. L. 121 (1995). 20 See F. Enderlein et al., Internationales Kaufrecht: Kaufrechtskonvention, Verjhrungskonvention, Vertretungskonvention, Rechtsanwendungskonvention 61 (1991). 21 For a similar statement, see Ferrari, supra note 16, at 1021 (using several concrete examples to illustrate the negative consequences that can arise from the use of domestic concepts). For an earlier statement, see V. Zannini, Questioni sull’uniformit di interpretazione del diritto uniforme, Rivista di diritto internazionale privato e processuale 336 (1971) (with reference to a different uniform law convention). 22 For similar statements, see, e. g., Bonell, supra note 18, at 72, stating, in respect of the CISG, that “[t]o have regard to the ‘international character’ of the Convention means first of all to avoid relying on the rules traditionally followed in interpreting ordinary domestic legislation”. 23 For similar statements, see Ferrari, Uniform Interpretation, supra note 7, at 202.

142

Interpretation of the Convention and gap-filling: Article 7

Similar statements can now be found in CISG case law as well, as evidenced by the draft Digest. Several courts have expressly referred to the need to take into account the CISG’s international character.24 One United States court, like several before it,25 interpreted that need to mean that “although the CISG is similar to the UCC with respect to certain provisions, ... it would be inappropriate to apply UCC case law in construing contracts under the CISG”.26 According to various Swiss courts,27 the need to take into account the CISG’s international character obliges one to interpret the CISG autonomously and not in light of any domestic law. Similar statements can also be found in a recent decision rendered by the German Supreme Court.28 On an earlier occasion, that same court29 had stated that generally it did not matter whether there were differences between domestic German law and the CISG, since one was not allowed to interpret the CISG in light of domestic law in any case. This, however, is merely a different way of saying that the CISG has to be interpreted autonomously. The draft Digest shows, however, that there are also courts that have – in this author’s opinion, wrongly – taken the opposite view, i. e., that case law interpreting analogous domestic law provisions may also inform a court where the language of the relevant provisions of the CISG tracks that of the 24

See, e. g., U.S. District Court for the Eastern District of Louisiana, United States, 17 May 1999, CLOUT case No. 418 (Medical Marketing International, Inc. v. Internazionale Medico Scientifica, 1999 U.S. Dist. LEXIS 7380) (“under CISG, the finder of fact has a duty to regard the ‘international character’ of the Convention and to promote uniformity in its application. CISG Article 7”); 2d Circuit U.S. Court of Appeals, United States, 6 December 1995, CLOUT case No. 138 (Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1028); Oberlandesgericht Frankfurt, Germany, 20 April 1994 CLOUT case No. 84, available at http:// 131.152.131.200/cisg/urteile/125.htm; Bezirksgericht Laufen, Switzerland, 7 May 1993 (Schweizerische Zeitschrift f
r internationales und europisches Recht 277 (1995)). 25 See 2d Circuit U.S. Court of Appeals, United States, 6 December 1995, CLOUT case No. 138 (Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1028) (stating that “UCC case law is not per se applicable”); U.S. Court of International Trade, United States, 24 October 1989 (Orbisphere Corp. v. United States, 726 F. Supp. 1355) (stating the same). 26 U.S. District Court for the Southern District of New York, United States, 6 April 1998, CLOUT case No. 413 (Claudia v. Olivieri Footwear Ltd., 1998 U.S. Dist. LEXIS 4586). 27 See Handelsgericht Aargau, Switzerland, 11 June 1999, CLOUT case No. 333 (Schweizerische Zeitschrift f
r internationales und europisches Recht 117-118 (2000)); Bezirksgericht Laufen, Switzerland, 7 May 1993 (Schweizerische Zeitschrift f
r internationales und europisches Recht 277 (1995)). 28 Bundesgerichtshof, Germany, 24 March 1999, CLOUT case No. 271 (Recht der internationalen Wirtschaft 617 ff. (1999)). 29 Bundesgerichtshof, Germany, 3 April 1996, CLOUT case No. 171 (Neue Juristische Wochenschrift 2364 ff. (1996)).

143

Franco Ferrari

domestic law, even though the domestic law “is not per se applicable”.30 This line of cases clashes with the CISG’s goal of promoting uniformity. Unfortunately, the draft Digest does not criticize those decisions, just as it does not criticize other incorrect decisions, due to its limited scope. B. Resort to foreign case law: Practical issues Considering the CISG an “autonomous body of rules” does, however, not per se guarantee uniformity.31 In order to achieve the CISG’s ultimate goal of uniformity,32 it is also necessary, as pointed out by courts, to consider the CISG’s legislative history33 and to take into account international scholarly writing.34 According to many commentators, it is even more important to resort to the practice of other jurisdictions,35 i. e., to “what others have already done”.36 In others words, uniformity can only be achieved if one also considers foreign case law.37 The interpreter must therefore consider decisions rendered by 30

See, e. g., 2d Circuit U.S. Court of Appeals, United States, 6 December 1995, CLOUT case No. 138 (Delchi Carrier S.p.A. v. Rotorex Corp., 71 F.3d 1028). For a more recent case stating the same, see 4th Circuit U.S. Court of Appeals, United States, 21 June 2002 (Schmitz-Werke v. Rockland, 37 Fed. App. 687). 31 For a very similar statement, see Bonell, supra note 18, at 74-75. 32 It has often been pointed out that the CISG’s ultimate goal is uniformity. See, e. g., Susie A. Malloy, The Inter-American Convention on the Law Applicable to International Contracts: Another Piece of the Puzzle of the Law Applicable to International Contracts, 19 Fordham Int’l L.J. 667 n. 17 (1995). 33 See Landgericht Aachen, Germany, 20 July 1995, available at http://www.jura.unifreiburg.de/ipr1/cisg/ (referring to the legislative history of article 78); Oberlandesgericht Frankfurt, Germany, 20 April 1994, CLOUT case No. 84 (Recht der internationalen Wirtschaft 593 f. (1994)). 34 Oberster Gerichtshof, Austria, 13 April 2000, available at http://www.cisg.at/ 2_10000w.htm. 35 See R. Herber, Art. 7, in Kommentar zum Einheitlichen UN-Kaufrecht 94 (P. Schlechtriem ed., 2d ed., 1995); Peter Winship, Changing Contract Practices in the Light of the United Nations Sales Convention: A Guide For Practitioners, 29 Int’l Law. 528 (1995). 36 D. Maskow, The Convention on the International Sale of Goods from the Perspective of the Socialist Countries, in La vendita internazionale, supra note 12, at 54. 37 See Joanne M. Darkey, A U.S. Court’s Interpretation of Damage Provisions Under the U.N. Convention on Contracts for the International Sale of Goods: A Preliminary Step Towards an International Jurisprudence of CISG or a Missed Opportunity, 15 J.L. & Com. 142 (1995); Helen E. Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale Int’l L.J. 7 (1993); V. Heuz, La vente internationale de marchandises. Droit uniforme 79 (1992); Elizabeth Hayes Patterson, United Nations

144

Interpretation of the Convention and gap-filling: Article 7

judicial bodies from foreign jurisdictions,38 since it is possible that the same or similar questions have already been examined by other States’ courts.39 Commentators derive this obligation directly from that part of Article 7(1) that reads: “regard is to be had to ... the need to promote uniformity in [the Convention’s] application”. Requiring interpreters to consider foreign decisions, however, creates practical difficulties, for two main reasons: foreign case law is not readily available, i. e. it cannot easily be retrieved, and even where it can be retrieved, it is often written in a language unknown to the interpreter. In order to overcome these difficulties, many steps have been taken.40 The Pace University Institute of International Commercial Law, for instance, has developed a web-site41 which at no cost provides not only the text of the CISG, a current list of Contracting States, and the most up-to-date bibliography on the CISG, but also case law from all over the world.42 Similar web-sites have been created in Austria,43 Belgium,44 Germany,45 France,46 Switzerland,47 Spain48 and elsewhere.49 Convention on Contracts for the International Sale of Goods: Unification and the Tension Between Compromise and Domination, 22 Stan. J. Int’l L. 283 (1986). 38 See most recently, V. Susanne Cook, The U.N. Convention on Contracts for the International Sale of Goods: A Mandate to Abandon Legal Ethnocentricity, 16 J.L. & Com. 259 (1997). 39 See G. Reinhart, UN-Kaufrecht. Kommentar zum bereinkommen der Vereinten Nationen vom 11. April 1980
ber den internationalen Warenkauf 30 (1991). 40 For an overview of the steps taken, see also R. Herber, CLOUT, Unilex and andere Verffentlichungen zum internationalen Kaufrecht, Recht der Internationalen Wirtschaft 502 ff. (1995). 41 See http://cisgw3.law.pace.edu. 42 For a description of this as well as other Internet sites dealing with the CISG, see, e. g., Camilla Baasch Andersen, Furthering the Uniform Application of the CISG: Sources of Law on the Internet, 10 Pace Int’l L. Rev. 403 ff. (1998); Claire M. Germain, The United Nations Convention on Contracts for the International Sale of Goods: Guide to Research and Literature, 1995 Cornell Rev. on the CISG 117 ff. (1995); Albert H. Kritzer, The Convention on Contracts for the International Sale of Goods: Scope, Interpretation and Resources, 1995 Cornell Rev. on the CISG 147 ff. (1995). 43 See http://www.cisg.at/. 44 See the web-site created by the Institute for International Trade Law of the Katholieke Universiteit Leuven: http://www.law.kuleuven.ac.be/int/tradelaw/WK/WKhome.html. 45 See the web-site created by the Institute of Foreign and International Law of Freiburg University: http://www.jura.uni-freiburg.de/iprl/cisg. 46 See the web-site created at Saarbr
cken University: http://www.jura.uni-sb.de/FB/LS/ Witz/cisg.htm. 47 See http://131.152.131.200/.

145

Franco Ferrari

The Centre for Comparative and Foreign Law Studies in Rome has put together UNILEX,50 a “reasoned collection of case law and an international bibliography on the CISG”,51 which includes features similar to those found on the Internet sites mentioned above, and which is now available for free on the Internet.52 The most “official” efforts to neutralize the danger of diverging interpretations and applications of the CISG by making foreign decisions (or at least abstracts of such decisions) available are, however, the efforts made by UNCITRAL. After rejecting the idea of creating an international tribunal to which all cases should be referred, which some considered to be the only way to ensure uniformity,53 UNCITRAL, in its twenty-first working session,54 decided to adopt a procedure in which the decisions rendered in the application of the CISG in the various States are gathered by so-called national correspondents. The national correspondents then have to “send to the UNCITRAL Secretariat the full text of the decisions in their original languages” and “[t]he Secretariat will then make these decisions accessible to

48

See http://www.uc3m.es/cisg. For other Internet sites dedicated to the CISG, see the links provided at http:// www.cisg.law.pace.edu/cisg/links.html. 50 For a comment on UNILEX as a tool to promote the CISG’s uniform application, see F. Liguori, “UNILEX”: A Means to Promote Uniformity in the Application of CISG, Zeitschrift f
r europisches Privatrecht 600 ff. (1996). 51 Michael J. Bonell, F. Liguori, The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law (Part I), Unif. L. Rev. 147 n. 1 (1996). 52 See www.unilex.info. 53 This issue arose under the 1964 Hague Conventions as well. See, e. g., R.H. Graveson, The International Unification of Law, 16 Am. J. Comp. L. 12 (1968), where the author states that “[a]llowing for the necessary and inevitable divergence of human decision, a problem still remains of ensuring that any tendencies towards divergence in the application of uniform laws shall be corrected at appropriate times and in suitable ways. How then shall continuing uniformity be ensured? Shall it be done by giving ultimate jurisdiction to an international court, such as the International Court of Justice?” However, “a similar solution can hardly be conceived with respect to [the Vienna Sales] Convention. This Convention, like other international conventions elaborated under the auspices of the United Nations or other international organizations ... is intended to receive a world-wide acceptance. To expect that all adhering States, notwithstanding their different social, political and legal structure, could even agree on conferring to an international tribunal the exclusive competence to resolve divergences between the national jurisdictions in the interpretations of the uniform rules, would be entirely unrealistic”. Bonell, supra note 18, at 89. 54 See Report of the United Nations Commission on International Trade Law on its TwentyFirst Session, New York, 1988, at 98 ff. 49

146

Interpretation of the Convention and gap-filling: Article 7

any interested person”.55 One way that UNCITRAL makes the decision accessible is by preparing abstracts of them, translating the abstracts into the various official languages of the United Nations, and distributing the papers in which they are published, the so-called CLOUTs,56 to the interested parties.57 The most recent effort by UNCITRAL, however, is the UNCITRAL Digest, the focus of the Pittsburgh Conference and this volume. As the purpose of the Digest, the parameters for its elaboration and its limits have already been dealt with in detail by Secretary Sekolec, it may suffice to refer here to his paper. Although the aforementioned efforts may appear to have more theoretical than practical value, two recent Italian court decisions show that some of these efforts have begun to yield concrete results in practice (of course, as far as the Digest is concerned, as it has not yet been publicized, one will have to wait before it starts producing practical results). In the most recent case, decided on January 8, 2003 (and therefore not cited in the draft Digest), the Tribunale di Rimini58 decided a dispute concerning a contract governed by the CISG by resorting to about 30 foreign court decisions that had been published not only in law reviews, but also on the various Internet sites referred to earlier. In the other Italian case, decided in 2000, the Tribunale di Vigevano59 had to decide a dispute concerning a contract concluded between a German party and an Italian one. In dealing with issues such as the applicability of the CISG, its exclusion, its rules on non-conformity, and the issue of burden of proof, the Vigevano court quoted even more foreign court decisions (40 to be exact) published both in law reviews and on the most disparate Internet sites.60 55

Honnold, supra note 13, at 98. Note that the CLOUTs (Case Law on UNCITRAL Texts) are available at http// www.un.or.at/uncitral/. 57 For a reference to this procedure, see also Michael J. Bonell, International Uniform Law in Practice – Where the Real Trouble Begins, 38 Am. J. Comp. L. 878 (1990); Herber, Czerwenka, supra note 15, at 48. 58 Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003). 59 See Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 280 ff. (2001)). 60 For comments on the decision referred to in the text, see F. Ferrari, Problematiche tipiche della Convenzione di Vienna sui contratti di vendita internazionale di beni mobili risolte in una prospettiva uniforme, Giurisprudenza italiana, 2001, 281 ff.; F. Ferrari, Internationales Kaufrecht einheitlich ausgelegt – Anmerkungen anlßlich eines italienischen Urteils (Trib. Vigevano, 12. 07. 2000), Internationales Handelsrecht 56 ff. (2001); F. Ferrari, Applying the CISG in a Truly Uniform Manner: Tribunale di Vigevano, 12 July 2000, Unif. L. Rev. 203 ff. 56

147

Franco Ferrari

Although these two court decisions are without doubt exceptional for the number of foreign court decisions they refer to, they are not the only ones in which foreign court decisions have been cited, as evidenced by the draft Digest comments relating to Article 7. One Belgian court,61 for instance, cited two foreign court decisions, as did an Italian court.62 In other cases, courts have referred to one foreign court decision in reaching their decisions.63 C. Resort to foreign case law: Methodological issues The basic methodological problem created by the need to refer to foreign case law concerns the degree of its authority. Is foreign case law to be treated as binding or as having merely persuasive value? According to one author, “[i]f there is already a body of international case law”64 it should have the authority of precedent. Another author even speaks of a “supranational stare decisis”65 which can be achieved if “common law and civil law judges ... reverse their approaches in a number of ways”,66 that is, for example, if the civil law judge starts to “search other cases throughout (2001); F. Ferrari, Tribunale di Vigevano: Specific Aspects of the CISG Uniformly Dealt With, 20 J.L. & Com. 225 ff. (2001); F. Rosati, Anmerkung zu Trib. Vigevano, 12. 7. 2000, Internationales Handelsrecht 78 ff. (2001); N. Spiegel, Exclusion tacite de la CVIM par les parties et dnonciation des dfaits de conformit, Recueil Dalloz 395 f. (2002); A. Veneziano, Mancanza di conformit delle merci ed onere della prova nella vendita internazionale: un esempio di interpretazione autonoma del diritto uniforme alla luce dei precedenti stranieri, Diritto del commercio internazionale 509 ff. (2001). 61 Rechtbank Koophandel Hasselt, Belgium, 2 December 1998, available at http://www.law. kuleuven.ac.be/int/tradelaw/WK/1998-12-02.htm. 62 Tribunale Civile di Cuneo, Italy, 31 January 1996, available at http://www.unilex.info/ case.cfm?pid=1&id=160&do=case. 63 See U.S. District Court for the Eastern Division of the Northern District of Illinois, United States, 28 March 2002 (Usinor Industeel v. Leeco Steel Products, Inc., 209 F. Supp. 2d 880, availableathttp://www.unilex.info/case.cfm?pid=1&do=case&id=746&step=FullText;Rechtbank Koophandel Hasselt, Belgium, 6 March 2002, available at http://www.law.kuleuven. ac.be/int/tradelaw/WK/2002-03-06s.htm; Oberster Gerichtshof, Austria, 13 April 2000, available at http://www.cisg.at/2_10000w.htm; Tribunale di Pavia, Italy, 29 December 1999, CLOUT case No. 380 (Corriere giuridico, 2000, 932 f.); Cour d’Appel Grenoble, France, 23 October 1996, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=222& step=FullText. 64 Bonell, supra note 18, at 91. 65 Lawrence A. Dimatteo, An International Contract Law Formula: The Informality of International Business Transactions Plus the Internationalization of Contract Law Equals Unexpected Contractual Liability, 23 Syracuse J. Int’l L. & Com. 79 (1997).

148

Interpretation of the Convention and gap-filling: Article 7

the world and follow precedent in much the same way the common law judge does within her national system”.67 One must agree that in order to obtain uniformity civil law judges should start to “approximate their common law counterparts in increasing their reliance on [case law]”,68 just as common law judges should increasingly take into account legal writing as well as legislative history. This does not mean, however, that one can attribute the value of precedent to uniform foreign case law, much less advocate a doctrine of “supranational stare decisis”.69 From a substantive point of view, stating that uniform foreign case law should be treated as binding precedent does not take into account that a uniform body of case law does not per se guarantee the correctness of a substantive result,70 as evidenced by the criticism directed toward the large body of CISG case law which has applied the rate of interest of the domestic law designated by the rules of private international law.71 66

Lawrence A. Dimatteo, The CISG and the Presumption of Enforceability: Unintended Contractual Liability in International Business Dealings, 22 Yale J. Int’l L. 133 (1997). 67 Id. 68 Vivian Grosswald Curran, The Interpretive Challenge to Uniformity, 15 J.L. & Com. 177 (1997). 69 For this criticism, see most recently F. Ferrari, Art. 7, in Kommentar zum UN-Kaufrecht – CISG 128 (P. Schlechtriem ed., 3d ed. 2000). 70 For similar remarks, albeit with reference to a different uniform law convention, see C.W. Wilhelm Canaris, Die Bedeutung allgemeiner Auslegungs- und Rechtsfortbildungskriterien im Wechselrecht, JuristenZeitung 543 ff. (1987). 71 For case law applying the rate of interest of the domestic law applicable by virtue of the rules of private international law, see, most recently, Landgericht Stendal, Germany, 12 October 2000 (Internationales Handelsrecht 31 (2001)); Oberlandesgericht Stuttgart, Germany, 28 February 2000 (OLG-Report Stuttgart 407 f. (2000)); Tribunale di Pavia, Italy, 29 December 1999, CLOUT case No. 380 (Corriere giuridico 932 f. (2000)); ICC Court of Arbitration, Case No. 8611, 1997, available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=229&step=FullText, full text English translation available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/978611i1.html); Tribunal civil de la Gl ne, Switzerland, 20 May 1996, abstract available in Unilex at http://www.unilex.info/case. cfm?pid=1&do=case&id=239&step=Abstract; Unilex; Amstgericht Tessin, 12 February 1996 (Schweizerische Zeitschrift f
r internationales und europisches Recht 135 f. (1996)). For papers dealing with the issue of interest under the CISG, see H. Asam, Ersatz des Zins- und Geldentwertungsschadens nach dem Wiener Kaufrechts
bereinkommen vom 11. 4. 1980 bei deutsch-italienischen Kaufvertrgen, Recht der internationalen Wirtschaft 841 ff. (1989); F. Ferrari, Uniform Application and Interest Rates Under the 1980 Vienna Sales Convention, 24 Ga. J. Int’l & Comp. L. 467 ff. (1995); F. Ferrari, Le taux d’intrÞt applicable au montant des arrirs dans la jurisprudence concernant la CVIM, Revue de droit des affaires internationals 86 ff. (1999); F. Ferrari, Tasso degli interessi ed applicazione uniforme della convenzione di

149

Franco Ferrari

From a methodological point of view, the suggestion to create a system of “supranational stare decisis” similar to that existing in common law countries must be criticized, since it does not take into account the rigid hierarchical structure of the various court systems in which any “national” stare decisis doctrine is embedded. It is the lack of a similar hierarchy on an international level that does not allow for the creation of a “supranational stare decisis” doctrine.72 Indeed, how should one decide whether a specific court is, from a hierarchical point of view, a lower court in respect to the court of a different country? And how, in the scheme of things, would arbitral tribunals fit into the hierarchy? Are they to be considered hierarchically superior to courts of first instances, appellate courts or even supreme courts? And what about the courts of Non-Contracting States? Should their decisions be taken into account at all? In order to be able to solve these problems, foreign case law should always be considered as having merely persuasive value.73 This view has been confirmed by various Italian court decisions, one of which expressly stated that “foreign case law, contrary to what a minority of authorities have argued, is not binding on this tribunal. It must nevertheless be considered in order to assure and to promote uniform enforcement of the CISG”.74 This result, in essence, is what Article 7(1) of the CISG imposes when it provides that “regard is to be had ... to the need to promote uniformity in its application”.75 Foreign case law – and therefore also the Digest – should be used as a source from which to draw either arguments or counterarguments.76 Vienna sui contratti de vendita internazionale, Rivista di diritto civile 277 ff. (1995); U. Kniger, Die Bestimmung der gesetzlichen Zinshhe nach dem deutschen Internationalen Privatrecht (1997); G. Reinhart, Flligkeitszinsen und UN-Kaufrecht, Praxis des internationalen Privat- und Verfahrensrechts 376 ff. (1991); D. Roßmeier, Schadensersatz und Zinsen nach UN-Kaufrecht – Art. 74 bis 78 CISG, Recht der internationalen Wirtschaft 407 ff. (2000); Christian Thiele, Interest on Damages and Rate of Interest Under Article 78 of the U.N. Convention on Contracts for the International Sale of Goods, 2 Vindobona J. Int’l Com. L. & Arb. 3 ff. (1998). 72 For this criticism, see also Ferrari, Brevi considerazioni critiche, supra note 7, at 81. 73 For this conclusion, see also Ferrari, supra note 69, at 128; Kramer, supra note 7, at 146; Witz, Salger, Lorenz, supra note 12, at 83. 74 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 280 ff. (2001), English translation at 20 J.L. & Com. 209 ff. (2001)). See also Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003); Tribunale di Pavia, Italy, 29 December 1999, CLOUT case No. 380 (Corriere giuridico 932 f. (2000)). 75 Article 7(1) CISG (emphasis added). 76 For similar statements, see F. Enderlein, D. Maskow, International Sales Law 56 (1992), where the authors state that “[w]hat matters ... is not a prejudicial effect of rulings by

150

Interpretation of the Convention and gap-filling: Article 7

Consequently, an arbitral award could have more influence on a specific issue than a decision of a supreme court of a country whose judges are not accustomed to dealing with international issues in general, and the CISG in particular. Similarly, a court decision of a Non-Contracting State could be more influential than that of a Contracting State. Furthermore, the obiter dicta to be found in one decision could impact the resolution of an issue more than the rationes decidendi of other court decisions. D. Good faith: Mere instrument of interpretation or more? According to Article 7(1) CISG, in interpreting its provisions one must have regard not only to the necessity of promoting the Convention’s uniform application, but also to the need for promoting the observance of good faith in international trade.77 This provision represents a compromise between the views of those representatives “who would have preferred a provision imposing directly on the parties the duty to act in good faith, and those who on the contrary were opposed to any explicit reference to the principle of good faith in the Convention”.78 The question this history raises is, how does one interpret the result of this compromise: is good faith relevant only with reference to the interpretation of the CISG, or is it also relevant as far as the parties’ behavior is concerned?

foreign courts or arbitrational tribunals and not that the decision taken by an organ, which by accident entrusted first to deal with a specific legal issue, is attached a particularly great importance; rather, the existing material in regard to relevant rulings has to be taken account of when giving the reasons for a decision”. 77 For papers dealing with good faith under the CISG, see, e. g., S. Keinath, Der gute Glauben im UN-Kaufrecht (1997); G. Lefebvre, La bonne foi dans la Convention des Nations Unies sur les contrats de vente internationale de marchandises, 27 Revue Juridique Thmis 561 ff. (1993); Ulrich Magnus, Remarks on Good Faith: The United Nations Convention on Contracts for the International Sale of Goods, 10 Pace Int’l L. Rev. 89 ff. (1998); E.N. Najork, Treu und Glauben im CISG (2000); Paul J. Powers, Defining the Undefinable: Good Faith and the United Nations Convention on the Contracts for the International Sale of Goods, 18 J.L. & Com. 333 ff. (1999). 78 Bonell, supra note 18, at 83-84; for similar affirmations, see Honnold, supra note 13, at 99, according to whom art. 7(1) “was adopted as a compromise between two divergent views: (a) Some delegates supported a general rule that, at least in the formation of the contract, the parties must observe principles of ‘fair dealing’ and must act in ‘good faith’; (b) Others resisted this step on the ground that ‘fair dealing’ and ‘good faith’ had no fixed meaning and would lead to uncertainty”.

151

Franco Ferrari

According to some authors, good faith is relevant solely as an additional tool of interpretation to which judges must resort and which must be employed by them to neutralize the danger of reaching inequitable results.79 One must note, however, that even if conceived as a mere instrument of interpretation, good faith may pose some problems and conflict with the “ultimate” goal of the Convention, i. e., the promotion of its uniform application. In fact, since the concept of good faith is very vague,80 several authors state that “courts will be unable to develop a common definition”.81 This will inevitably lead to differing interpretations of the Convention’s uniform provisions.82 This danger becomes apparent if one considers the variety of good faith definitions one can find in a comparative setting.83 For example, in the United States, where, by virtue of the influence of civil law teachings,84 the principle of good faith was adopted by both the Uniform Commercial Code85 and the

79

See, e. g., E. Allen Farnsworth, The Convention on the International Sale of Goods from the Perspective of the Common Law Countries, in La vendita internazionale, supra note 12, at 18; Honnold, supra note 13, at 99; Peter Winship, Commentary on Professor Kastely’s Rhetorical Analysis (Symposium Reflections), 8 Nw. J. Int’l L. & Bus. 631 (1988). 80 The vagueness of the concept of good faith has been criticized, for instance, by Arthur Rosett, Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, 45 Ohio St. L.J. 289 (1984) (pointing out “the multiple meanings of good faith and the differing connotations the doctrine possesses in different legal systems”). 81 Isaak I. Dore & James E. Defranco, A Comparison of the Non-Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Int’l L.J. 63 (1982). For a similar conclusion, see also Gyula Eorsi, Problems of Unified Law on the Formation of Contracts for the International Sale of Goods, 27 Am. J. Comp. L. 314 (1979). 82 Regarding this risk, see Note, A Practitioner’s Guide to the United Nations Convention on Contracts for the International Sale of Goods, 16 Int’l L. & Pol’y 89 (1983) (“the vagueness of a good faith provision may create problems for courts trying to decide when and how to apply it; in addition, overuse or underuse of the principle may lead to inconsistent results or to outright abuse”). 83 For a comparative overview on good faith, see, e. g., Ralph A. Newman, The General Principles of Equity, in Equity in the World’s Legal Systems: A Comparative Study 589 ff. (Ralph A. Newman ed., 1973). 84 For a similar statement, see Honnold, supra note 13, at 100 (the “general requirements of ‘good faith’ is not [sic] typical of common-law statutory drafting; [it] reveals the unstated influence of some of the civil law codes”). 85 See U.C.C. § 1-203 (1978) (“Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement”.). For a detailed discussion of the good faith provision in the U.C.C., see Steven J. Burton, Good Faith Performance of a Contract Within Article 2 of the Uniform Commercial Code, 67 Iowa L. Rev. 1 ff. (1981); E. Allen Farnsworth, Good Faith Performance and Commercial Reasonableness under the Uniform Commercial Code, 30

152

Interpretation of the Convention and gap-filling: Article 7

Restatement (Second) of Contracts,86 its area of operation is limited to the performance of the contract.87 In civil law systems, on the contrary, there is not only a “common law duty to perform in good faith”,88 but the good faith principle operates also with regard to the interpretation and the formation of contracts.89 However, “even where ... the principle as such is expressly stated with respect not only to performance but also to formation and interpretation of the contract ... its specific applications in practice may differ considerably”.90 Recall, for example, the importance of the good faith principle set down in § 242 of the German Civil Code.91 While some authors, as mentioned, hold that good faith operates solely as an instrument for the interpretation of the CISG, other authors affirm that the reference to the necessity of promoting the “observance of good faith in international trade”92 (Article 7(1)) is “also necessarily directed to the parties to each individual contract of sale”.93 This is so despite the reference to good faith being found only in the provision dedicated to the CISG’s interpretation.94 In support of this thesis, according to which good faith can U. Chi. L. Rev. 666 ff. (1963); Robert S. Summers, ‘‘Good Faith’’ in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54 Va. L. Rev. 195 ff. (1968). 86 See Restatement (Second) of Contracts § 205 (“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement”.). 87 See, e. g., Farnsworth, supra note 79, at 18 (“[T]he American rules on good faith go to the performance of the contract”.). 88 For this expression, see Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev. 369 (1980). 89 See Rosett, supra note 80, at 290 (“In continental and socialist systems the concept [of good faith] may have broader connotations. In particular, the notion of good faith is not limited to the performance of completed agreements, but extends to the process of formation. It operates as a limit on the right of a party to terminate the formation process”). 90 Bonell, supra note 18, at 85-86. 91 See § 242, German Civil Code [hereinafter BGB]: “The debtor is bound to effect performance according to the requirements of good faith, giving consideration to common usage”. 92 As far as the notion “good faith in international trade” is concerned, it has been pointed out that the reference to international trade prevents national courts from being allowed to draw on domestic conceptions of good faith. But see, Note, Unification and Certainty: The United Nations Convention on Contracts for the International Sale of Goods, 97 Harv. L. Rev. 1991 (1984) (“In applying the [good faith] rule, national courts remain free to draw on domestic – and hence diverse – conceptions of ‘good faith.’”). 93 Bonell, supra note 18, at 84. For similar statements, see P. Schlechtriem, Uniform Law of Sales 39 (1986); P. Schlechtriem, Einheitliches UN-Kaufrecht 25 (1981). 94 See, for a similar statement, Gyula Eorsi, General Provisions, in International Sales, in The United Nations Convention on Contracts for the International Sale of Goods

153

Franco Ferrari

also be considered as being one of the “general principles” upon which the CISG is based, it is sufficient to recall that there are several provisions which constitute a particular application of that principle,95 such as Article 16(2)(b).96 In fact, it is undeniable that the aforementioned provision is grounded on the principle of good faith to the extent that it provides that a proposal is irrevocable where it was reasonable for the offeree to rely upon the offer being held open and the offeree acted in reliance on the offer.97

2-8 (Nina M. Galston & Hans Smit eds., 1984) (“[T]he good faith clause may play an active role in spite of its location in the Convention”.). The same has been said by U. Huber, Der UNCITRAL-Entwurf eines bereinkommens fur internationale Warenkaufvertrage, 43 Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 432 (1979); Laszlo Reczei, The Rules of the Convention Relating to its Field of Application and to its Interpretation, in Problems of Unification of International Sales Law 86 (1980). 95 Similar statements can be found in Audit, supra note 10, at 49; Honnold, supra note 13, at 100; Albert Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods 111 (1989). 96 Article 16(2)(b) provides, in its pertinent part, “(2) [A]n offer cannot be revoked: ... (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer”. 97 For a list of other applications of the good faith principle in particular provisions of the Convention, see Secretariat’s Commentary, Art. 6 ¶ 3, in Official Records of the United Nations Conference on Contracts for the International Sale of Goods. Vienna, 10 March - 11 April 1980, at 18 (1981), where it is stated that “[a]mong the manifestations of the requirement of the observance of good faith are the rules contained in the following articles: – article 19(2) [which became final art. 21(2)] on the status of a late acceptance which was sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time; – article 27(2) [which became final art. 29(2)] in relation to the preclusion of a party from relying on a provision in a contract that modification or abrogation of the contract must be in writing; – article 35 and 44 [which became final articles 37 and 48] on the rights of a seller to remedy non-conformities in the goods; – article 38 [which became final art. 40] which precludes the seller from relying on the fact that notice of non-conformity has not been given by the buyer in accordance with articles 36 and 37 [which became final articles 38 and 39] if the lack of conformity relates to facts of which the seller knew or could not have been unaware and which he did not disclose to the buyer; – articles 45(2), 60(2) and 67 [which became final articles 49(2), 64(2) and 82] on the loss of the right to declare the contract avoided; – articles 74 and 77 [which became final articles 85 and 88] which impose on the parties obligations to take steps to preserve the goods”.

154

Interpretation of the Convention and gap-filling: Article 7

Those who argue in favor of a similar notion of good faith, i. e., good faith as one of the general principles of the CISG rather than an instrument of mere interpretation,98 risk, however, being driven to the conclusion that “[a]s such it may even impose on the parties additional obligations of a positive character”,99 such as acting in good faith in the bargaining and formation process.100 In this author’s opinion, the possibility of imposing on the parties additional obligations based upon the good faith principle must be doubted. This does not mean, however, that one should adopt the view that good faith represents merely an instrument of interpretation. It means that obligations different from the ones resulting from the CISG should not be imposed on the parties. Where, however, an obligation already exists under the CISG, the parties’ behavior in relation to the performance of that obligation must be measured against a good faith standard.101 As for the courts, the draft Digest shows that they appear to favor the view that the good faith principle is one of the general principles upon which the CISG is based.102 This is why it is not surprising that in one case a court 98

A similar notion seems to be supported, for instance, by Dore, Defranco, supra note 81, at 61, where the authors state that the good faith provision does not constitute a mere instrument of interpretation, but rather, it “appears to be a pervasive norm analogous to the good faith obligation of the U.C.C”. 99 Bonell, supra note 18, at 85. 100 The view that art. 7(1) imposes on the parties the duty of good faith bargaining has been taken, for instance, by Pedro F. Silva-Ruiz, Some Remarks about the 1980 Vienna Convention on Contracts for the International Sale of Goods – Emphasis on Puerto Rico, 4 Ariz. J. Int’l & Comp. L. 141 (1987), where the author states that “Article 7 makes good faith applicable not only to the performance and enforcement of contracts but also to their formation”, and (citing Gert Reinhart, Development of the Law for the International Sale of Goods, 14 Cumb. L. Rev. 100 (1983)) that the culpa in contrahendo principle “may be incorporated into the Convention by the court even though not expressly adopted by the Convention”. For the view expressly denying the existence of a duty of good faith bargaining imposed on the parties by virtue of Article 7, see Jametti Greiner, supra note 10, at 46; Herber, supra note 35, at 74. 101 Maskow, supra note 36, at 55, seems to reach the same conclusion by stating that “the most objective criterion for what the principle of goof faith in international trade means is the Convention itself”. 102 See Hof Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven.ac.be/ int/tradelaw/WK/2002-05-17.htm; Bundesgerichtshof, Germany, 9 January 2002 (Internationales Handelsrecht 17 (2002)); Bundesgerichtshof, Germany, 31 October 2001 (Internationales Handelsrecht 14 ff. (2002)); Handelsgericht Z
rich, Switzerland, 30 November 1998, CLOUT case No. 251 (Transportrecht-Internationales Handelsrecht 12 (2000)); Corte d’Appello Milano, Italy, 11 December 1998, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=359&step=FullText; Compromex Arbitration, Mexico, 30 Novem-

155

Franco Ferrari

justified an order to pay damages on the basis that the liable party’s conduct was “contrary to the principle of good faith in international trade laid down in article 7 CISG”; the court also stated that abuse of process violates the good faith principle.103 In another case, this one also quoted in the draft Digest, the view that the good faith principle is one upon which the CISG is based led one court to state that an explicit declaration of avoidance of the contract was not necessary once the seller had refused to perform its obligations, and that to insist on such a declaration would be against the principle of good faith.104 In this author’s opinion, that holding is incorrect. Since general principles are to be resorted to only in order to deal with matters not expressly settled in the CISG, as will be pointed out in greater detail infra, and the CISG expressly requires a declaration to avoid the contract, the issue at hand is not one in respect of which interpreters are entitled to resort to the CISG’s general principles at all. Unfortunately, the draft Digest does not point out this inconsistency.

ber 1998, available at http://www.uc3m.es/cisg/rmexi3.htm; Oberlandesgericht Hamburg, Germany, 28 February 1997, CLOUT case No. 277 (OLG Rechtsprechungs-Report Hamburg, 1997, 149); Rechtbank Arnhem, Netherlands, 17 July 1997, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=355&step=FullText; Landgericht M
nchen, Germany, 6 May 1997, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/341.htm; Landgericht Saarbr
cken, Germany, 26 March 1996, CLOUT case No. 337, available at http:// 131.152.131.200/cisg/urteile/391.htm; Schiedsgericht der Handelskammer Hamburg, Germany, 21 March 1996, CLOUT case No. 166 (Recht der internationalen Wirtschaft, 1996, 766 ff.); Oberlandesgericht Celle, Germany, 24 May 1995, CLOUT case No. 136, available at http://131.152.131.200/cisg/urteile/152.htm; ICC Court of Arbitration, Case No. 8128, 1995 (Journal du droit international 1024 ff. (1997)); Arbitration Court of the Chamber of Commerce and Industry of Budapest, Hungary, 17 November 1995 (Award No. VB/94124, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=217&step=FullText; Cour d’appel Grenoble, France, 22 February 1995, CLOUT case No. 154 (Journal du droit international 632 ff. (1995)); Court of Appeal of New South Wales, Australia, 12 March 1992 (Renard Constructions v. Minister for Public Works, available at http://www.unilex.info/ case.cfm?pid=1&do=case&id=57&step=FullText). 103 Cour d’appel Grenoble, France, 22 February 1995, CLOUT case No. 154, available at http:// 131.152.131.200/cisg/urteile/151.htm. 104 Oberlandesgericht Hamburg, Germany, 28 February 1997, CLOUT case No. 277, available at http://131.152.131.200/cisg/urteile/261.htm.

156

Interpretation of the Convention and gap-filling: Article 7

III. Gap-filling and general principles A. General issues Although “[o]ne of the reasons for enacting the Convention is to provide a uniform body of law in the event the parties fail to consider, or agree on, the applicable body of law”,105 the Convention does not “constitute an exhaustive body of rules”,106 i. e., it does not provide solutions for all the problems that can originate from an international sale. According to Article 4 CISG,107 the issues governed by the CISG are limited to formation of the contract and the rights and obligations of the parties resulting from such a contract.108 This limited scope of application gives rise to issues relating to the incompleteness of the CISG. To resolve such issues, Article 7(2) CISG provides that [q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. The aim of Article 7(2) is not very different from that of Article 7(1),109 i. e., uniformity in the CISG’s application. Since this is the ultimate goal, 105

Kritzer, supra note 95, at 31. G. Benedetti, Commento all’art. 4, Nuove Leggi civili commentate 9 (1989). 107 CISG art. 4 provides: This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold. 108 For an overview of issues the CISG does not deal with, see, e. g., F. Ferrari, Die Schuld
bernahme als vom UN-Kaufrecht nicht geregelte Rechtsmaterie, Forum International 89 ff. (1997); F. Ferrari, Jurisprudence concernant les questions non abordes par la CVIM, Revue de droit des affaires internationales 835 ff. (1998); Henry Mather, Choice of Law for International Sales Issues not Resolved by the CISG, 20 J.L. & Com. 155 ff. (2001); C. Witz, CVIM: interprtation et questions non couvertes, Revue de droit des affaires internationals 253 ff. (2001). 109 For a discussion of the relationship between art. 7(1) on interpretation and art. 7(2) on gap filling, see Eorsi, supra note 94, at 2-9, where the author, after having discussed art. 7(1), states [a]s a transition to Article 7(2), it might be mentioned that gaps in the law constitute a danger in respect of interpretation of the Convention, since one way to follow the homeward trend is 106

157

Franco Ferrari

[i]n accordance with the basic criteria established in paragraph (1), first part, for the interpretation of the Convention in general, not only in the case of ambiguities or obscurities in the text, but also in the case of gaps, courts should to the largest possible extent refrain from resorting to the different domestic laws and try to find a solution within the Convention itself.110 Before providing a list of the general principles referred to in Article 7(2) (as identified in case law), however, it is necessary to identify the matters to which the rule set forth in Article 7(2) applies. In this respect, it must be noted that the gaps to which the rule refers are not the matters excluded from the scope of application of the Convention, such as the excluded issues contemplated in Articles 4 and 5 CISG, but the gaps praeter legem – i. e., issues to which the Convention applies but which it does not expressly resolve.111 To fill these gaps (praeter legem), the drafters of the CISG have chosen an approach that combines recourse to general principles with recourse, where needed, to the rules of private international law,112 a choice that shows that the drafters were aware of the fact that absolute independence from domestic law is unreachable.113 Recourse to general principles in filling gaps is a method well-known in civil law countries.114 In fact, recourse to general principles in order to fill gaps “finds precedent in many codes of the Roman-Germanic legal systems, even though among such codes there are differences”.115 It is sufficient to recall to find gaps in the law. On the other hand, if a gap is detected, the problem arising thereby should be solved by way of interpretation of the Convention. This must be the means whereby gaps are filled. 110 Bonell, supra note 18, at 75. 111 Bonell, supra note 18, at 75 also stresses that “[a] first condition for the existence of a gap in the sense of Article 7(2) is that the case at hand relates to ‘matters governed by [the] Convention.’ Issues which are not within the scope of the Convention have been deliberately left to the competence of the existing non-unified national laws”. 112 For a similar statement, see Kritzer, supra note 95, at 117, affirming that “[w]hen a matter is governed by the Convention but not expressly settled in it, the Convention’s solution is (i) internal analogy where the Convention contains an applicable general principle; and (ii) reference to external legal principles (the rules of private international law) where the Convention does not contain an applicable general principle”. 113 For a similar statement, see A. Frignani, Il contratto internazionale 309 (1990). 114 See Honnold, supra note 13, at 102, where the author emphasizes that the provision contemplating the settlement of questions in conformity with the general principles of the Convention “reflects the approach established for civil law codes”. 115 Frignani, supra note 113, at 308.

158

Interpretation of the Convention and gap-filling: Article 7

Article 12(2) of the Italian Civil Code’s Preliminary Provisions, which states that “if a controversy cannot be decided on the ground of a specific provision, one can resort to similar provisions or analogous matters; if the question remains doubtful, it shall be settled in conformity with the general principles of the legal system of the [Italian] State”. It is upon this approach that other civil law systems, such as that of Austria,116 Egypt,117 Spain,118 and others,119 are based as well. In the common law, the notion of general principles is different from that in civil law,120 in part, because of the “diverse notion and function of the ‘general principles,’”121 and in part because of the different sources from which the general principles are derived. In fact, in civil law the source is legislation, whereas in common law, the source is case law.122 In effect, at common law statutes are seen merely as fixing rules for defined situations, not as a possible source of general principles. As such, not only are statutes traditionally interpreted in a very strict fashion, but where there is no provision specifically regulating the case at hand, the gap will immediately be filled by principles and rules of the judge-made common law.123 116 See Article 7 of the Austrian Civil Code [hereinafter ABGB] (1811) (“Where a case cannot be decided either according to the literal text or the plain meaning of a statute, regard shall be had to the statutory provisions concerning similar cases ... If the case still remains doubtful, it shall be decided ... on the ground of principles of natural law”.). 117 See Article 1(2) of the Egypt Civil Code (1948). For a reference to this provision, see Bonell, supra note 18, at 77. 118 See Article 6(2) of the Spanish Civil Code (“Whenever there is no directly applicable statutory provision, usages must be applied and, absent such usages, the general principles of the law”.). 119 According to Bonell, supra note 18, at 77, even “in countries such as France or the Federal Republic of Germany, where the approach is not formally imposed by statute, it is taken for granted that a Code or any other legislation of a more general character must be considered as more than the mere sum of its individual provisions. In fact, it must be interpreted and, if necessary, supplemented on the basis of the general principles which underlie its specific provisions”. 120 It has even been said that “the term [general principles] sounds alien to English lawyers”. N. Brown, General Principles of Law and the English Legal System, in New Perspectives for a Common Law of Europe 174 (M. Cappelletti ed., 1978). 121 Frignani, supra note 113, at 308. 122 For a similar statement, see O. Kahn-Freund, Common Law and Civil Law – Imaginary and Real Obstacles to Assimilation, in New Perspectives for a Common Law of Europe, supra note 120, at 154 (“in the common law world, the lawyer looks for his principles in the ‘cases,’ and the statutes merely fill in details, the “case law” playing the role of the Codes on the Continent”). 123 Bonell, supra note 18, at 77-78.

159

Franco Ferrari

To fill gaps, one can resort to various types of reasoning in order to find a solution within the Convention itself.124 In this respect, recourse to general principles constitutes merely one method of gap-filling. Therefore one must determine whether Article 7(2) CISG also covers other methods of legal reasoning, such as analogical application,125 or whether it is to be interpreted restrictively. On this question, one can share the opinion of those legal scholars who assert not only that the CISG permits both methods, but also that “[i]n the case of a gap in the Convention the first attempt to be made is to settle the unsolved question by means of an analogical application of specific provisions”.126 However, when the matter de quo is not so closely related to matters expressly settled in the CISG as to justify analogical application,127 one must resort to general principles as contemplated in Article 7(2) of the Convention. This procedure differs from analogical application in that it does not resolve the case at hand solely by extending specific provisions dealing with analogous matters, but rather solves the issue “on the basis of principles and rules which because of their general character may be applied on a much wider scale”.128 B. General principles of the CISG in case law Hereinafter only those general principles will be dealt with that have been identified in case law. This does not mean that the general principles identified by case law really are in fact general principles upon which the CISG is based, nor does is mean that other general principles do not exist; it 124

Enderlein & Maskow, supra note 76, at 58, point out that Article 7(2)’s major concern is to make sure that gaps are “closed ... from within the Convention. This is in line with the aspiration to unify the law which ... is established in the Convention itself”. 125 For a clear distinction between analogical application and recourse to general principles, see J. Kropholler, Internationales Einheitsrecht 292 (1975). 126 Bonell, supra note 18, at 78. Analogical application as a method of gap-filling has been advocated by other authors as well. See, e. g., Enderlein & Maskow, supra note 76, at 58, where the authors state that gap-filling can be done, as we believe, by applying such interpretation methods as extensive interpretation and analogy. The admissibility of analogy is directly addressed in the wording contained in the CISG because it is aimed at obtaining, from several comparable rules, one rule for a not expressly covered fact and/or a general rule under which the fact can be subsumed. 127 For a similar criterion employed in order to distinguish analogical approach from recourse to general principles, see Bonell, supra note 18, at 79 (stating that if cases expressly settled by specific provisions and the case in question are so analogous “that it would be inherently unjust not to adopt the same solution”, the gap should be closed by resorting to the general principles). For a criticism of this criterion, see Rosenberg, supra note 8, at 451 (affirming that “[t]here are inherent problems with an ‘inherently unjust’ test”). 128 Bonell, supra note 18, at 80.

160

Interpretation of the Convention and gap-filling: Article 7

simply signifies that decisions have, to date, identified the following general principles and there is yet no case law on other principles. The most important general CISG principle is that of party autonomy.129 The importance of this principle is shown by the fact that it confers a dispositive nature to the CISG130 and, thus, a subsidiary role to it.131 As a consequence, where there is a conflict between the principle of party autonomy and any other general principle, the former always prevails.132 Courts have also 129

For this view, see, e. g., Kritzer, supra note 95, at 114. Many commentators consider the principle of “party autonomy” one of the general principles upon which the CISG is based. See, e. g., Achilles, infra note 160, at 30; F. Burkart, Interpretatives Zusammenwirken von CISG und UNIDROIT Principles 194 (2000); A. Garro & A. Zuppi, Compraventa internacional de mercaderias 58 note 10 (1990); Richard Hyland, Conformity of Goods to the Contract under the United Nations Sales Convention and the Uniform Commercial Code, in Einheitliches Kaufrecht und nationales Obligationenrecht 329 ff. (P. Schlechtriem ed., 1987); M. Karollus, UN-Kaufrecht 16 f. (1991); Kramer, supra note 7, at 149. 130 For references to the CISG’s dispositive nature in scholarly writing, see Carbone, supra note 12, at 78; S. Carbone & R. Luzzatto, I contratti del commercio internazionale, in 11 Trattato di diritto privato 131 (P. Rescigno ed., 1984); Calvo Caravaca, Art. 6, in La compravendita internacional de mercaderias 92 (L. Diez-Picazo ed., 1998); Ferrari, supra note 4, at 158; Lanciotti, supra note 17, at 146; J. Lindbach, Rechtswahl im Einheitsrecht am Beispiel des Wiener Kaufrechts 67 (1996); B. Piltz, Internationales Kaufrecht § 2, Rn.174 (1993); G. Sacerdoti, I criteri di applicazione della convenzione di Vienna sulla vendita internazionale: diritto uniforme, diritto internazionale privato e autonomia dei contratti, Rivista trimestrale di diritto e procedura civile 744 (1990); C. Witz, L’exclusion de la Convention des Nations unies sur les contrats de vente internationale de marchandises par la volont des parties (Convention de Vienne du 11 avril 1980) Chron. 107 Recueil Dalloz (1990). For express reference to the CISG’s non-mandatory nature in case law, see Suprema Corte di Cassazione, Italy, 19 June 2000 (Giurisprudenza italiana, 2001, 236); Oberster Gerichtshof, Austria, 21 March 2000 (Internationales Handelsrecht 41 (2001)); Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Transportrecht-Internationales Handelsrecht 25 (1999)); Handelsgericht Wien, Austria, 4 March 1997 (unpublished); Kantonsgericht Wallis, Switzerland, 29 June 1994, CLOUT case No. 199 (Zeitschrift f
r Walliser Rechtsprechung 126 (1994)). 131 For this thesis, see, for example, Honnold, supra note 13, at 4 (stating that “the Convention’s rules play a supporting role, supplying answers to problems that the parties have failed to solve by contract”). For a similar conclusion, see Kazuaki Sono, The Vienna Sales Convention: History and Perspective, in International Sale of Goods: Dubrovnik Lectures 14 (Petar arcˇevic´ & Paul Volken eds., 1986) (affirming that “the rules contained in the Convention are only supplementary for those cases where the parties did not provide otherwise in their contract”). 132 E.A. Farnsworth, Rights and Obligations of the Seller, in Wiener bereinkommen von 1980
ber den internationalen Warenkauf 84 (1985), draws the same conclusion (“[I]n case of

161

Franco Ferrari

adopted this correct view. Indeed, they not only refer to “party autonomy” as a general principle, but they also speak of the principle of the “prevalence of party autonomy”.133 According to some courts134 as well as some commentators,135 another general principle, this one closely linked to the general principle of good faith,136 is that of “estoppel”. Although that opinion is the prevailing one, there is case law137 and commentary138 that deny that “estoppel” is one of the general principles upon which the CISG is based. With respect to the conflicting case law on this issue, the draft Digest, once again, merely cites the contrasting decisions, without guiding the interpreter

a conflict between the contract and the Convention, it is the contract – not the Convention – that controls”). 133 See Tribunale di Rimini, Italy, 8 January 2003 (unpublished) (on file with the author); Hof Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven.ac.be/int/tradelaw/ WK/2002-05-17.htm; Rechtbank Koophandel Ieper, Belgium, 29 January 2001, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/2001-01-29.htm; Landgericht Stendal, Germany, 12 October 2000 (Internationales Handelsrecht 32 (2001)). 134 See Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 27 July 1999 (award No. 302/1996, available in English at http://www.cisg.law.pace.edu/cgi-bin/SFgate?language=english&verbose=0& listenv=DL&application=&convert=&waisurl=cases2/HTML/12519/1=cisgw3.law.pace.edu %3A210;2=/usr/local/apache/htdocs/cisg/wais/cases2;3=0%2012519%20/usr/local/apache/ htdocs/cisg/wais/db/cases2/990727r1.html;4=cisgw3.law.pace.edu%3A210;5=/usr/local/apache/ htdocs/cisg/wais/cases2;6=0%2012519%20/usr/local/apache/htdocs/cisg/wais/db/cases2/9907 27r1.html;7=%00; Oberlandesgericht, Karlsruhe, Germany, 25 June 1997, CLOUT case No. 230 (Recht der internationalen Wirtschaft 235 ff. (1998)); Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft, Austria, 15 June 1994, CLOUT case No. 93 (Arbitral Award SCH-4366, available at Recht der internationalen Wirtschaft 590 ff. (1995)); Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft, Austria, 15 June 1994, CLOUT case No. 94 (Arbitral Award SCH-4318, available at Recht der internationalen Wirtschaft 590 ff. (1995)); Hof s’Hertogenbosch, Netherlands, 26 February 1992 (Nederlands International Privaatrecht No. 354 (1992)). 135 See Ferrari, supra note 69, at 134; U. Magnus, Die allgemeinen Grundstze im UNKaufrecht, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht, 481 (1995). 136 As was noted previously, both cases and commentators have recognized that good faith is one of the general principles on which the CISG is based. See supra notes 77-104 and accompanying text. 137 Rechtbank Amsterdam, Netherlands, 5 October 1994 (Nederlands Internationaal Privaatrecht No. 231 (1995)). 138 See Frigge, supra note 8, at 82.

162

Interpretation of the Convention and gap-filling: Article 7

as to which decisions are to be followed. Whether this helps to promote uniformity in the application of the CISG is questionable. Case law has also dealt with the issue of whether there is a general principle concerning the place of performance of monetary obligations. In determining the place for payment of compensation for non-conformity of the goods, one court for instance stated that “if the purchase price is payable at the place of business of the seller” under Article 57 CISG, then “this indicates a general principle valid for other monetary claims as well”.139 In a comparable situation, another court, confronting an action for restitution of an overpayment received by the seller, stated that there was a general principle under which “payment is to be made at the creditor’s domicile, a principle that is be extended to other international trade contracts under Article 6. 1. 6 of the UNIDROIT Principles”.140 The Austrian Supreme Court, which had previously adopted the opposite position, decided that the gap in the CISG with respect to the place to perform the restitutionary obligations arising upon avoidance was to be filled by means of a general principle of the CISG, according to which “the place for performance of restitution obligations should be determined by transposing the primary obligations – through a mirror effect – into restitution obligations”.141 It should be noted, however, that there is one decision which denies (correctly, in this author’s opinion) the existence of a general principle to determine the place of performance for all monetary obligations.142 Of course, the draft Digest once again does nothing to help the interpreter to decide which solution to favor. One court has observed that the determination of the currency of payment is a question governed by, albeit not expressly settled in, the CISG.143 The court referred first to the view that, according to a general principle underlying CISG, the seller’s place of business is the relevant location for all obligations relating to payment, at least where the parties have not agreed otherwise, and therefore it also determines the question of currency. The court, however, also mentioned the view that the question cannot be solved by applying a general principle of the CISG, but rather must be determined by 139

Oberlandesgericht D
sseldorf, Germany, 2 July 1993, CLOUT case No. 49 (Recht der internationalen Wirtschaft 845 f. (1993)). 140 Cour d’appel Grenoble, France, 23 October 1996, CLOUT case No. 205 (Revue critique de droit international priv 756 (1997)). 141 Oberster Gerichtshof, Austria, 29 June 1999 (Transportrecht-Internationales Handelsrecht 48 (1999)). 142 Cour d’appel Paris, France, 14 January 1998, CLOUT case No. 312 (Schweizerische Zeitschrift f
r internationales und europisches Recht 201 (1999)). 143 Landgericht Berlin, Germany, 24 March 1998, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=440&step=FullText.

163

Franco Ferrari

applying domestic law. Nevertheless, the court did not choose between the alternatives since in the case at hand the result was the same (payment should be made in the currency of the seller’s place of business). In this author’s opinion, the currency in which payment is to be made is not an issue dealt with, even implicitly, by the CISG, and thus it is not one to be determined by recourse to a general principle; rather, it is an issue to be left to domestic law. According to some courts,144 the issue of the burden of proof is a matter governed by, but not explicitly settled in, the CISG. Therefore, the issue is to be settled in conformity with the general principles on which the Convention is based.145 Various decisions argue that Article 79(1)146 and, at least according to one court, Article 2(a) evidence the general principles of the CISG in respect of this issue. These general principles have been summarized as follows: the party who wants to derive beneficial legal consequences from a legal provision has to prove the existence of the factual prerequisites of the provision,147 and any party claiming an exception has to prove the factual prerequisites of that exception.148 This view is to be preferred149 over that of a few courts – also cited in the draft Digest150 – and commentators151 that 144

See Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003); Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana, 2001, 280 ff.); Tribunale di Pavia, Italy, 27 December 1999 (Corriere giuridico 932 f. (2000)); Handelsgericht Z
rich, Switzerland, 26 April 1995, CLOUT case No. 196 (TransportrechtInternationales Handelsrecht 54 (1999)); Handelsgericht Z
rich, Switzerland, 9 September 1993, CLOUT case No. 97. 145 See Handelsgericht Z
rich, Switzerland, 9 September 1993, CLOUT case No. 97. 146 Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 280 ff. (2001)); Bundesgerichtshof, Germany, 9 January 2002 (www.unilex.info); Tribunale di Pavia, Italy, 27 December 1999 (Corriere giuridico 932 f. (2000)). 147 For references to this principle, see Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana, 2001, 280 ff.); Landgericht Frankfurt, Germany, 6 July 1994, available at http://www.jura.uni-freiburg.de/ipr1/cisg/; Oberlandesgericht Innsbruck, Austria, 1 July 1994, CLOUT case No. 107, available at http://131.152.131.200/cisg/urteile/107.htm. 148 See Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana 280 ff. (2000)). 149 For commentators asserting that, as far as the issue of burden of proof is concerned, the CISG is based upon the general principles referred to in the text, see Magnus, supra note 135, at 489. 150 See Bezirksgericht Saane, Switzerland, 20 February 1997, CLOUT case No. 261 (Transportrecht-Internationales Handelsrecht 11 (2000)); ICC Court of Arbitration, Case No. 6653, 1993, CLOUT case No. 103 (Journal du droit international 1040 ff. (1993)). In one case, a state court referred to the question of whether the Convention contains a particular general principle in respect of the issue of burden of proof or whether the issue is one

164

Interpretation of the Convention and gap-filling: Article 7

argue that the issue of burden of proof is one governed not by the CISG, but by the applicable domestic law. Courts152 and commentators153 as well have asserted that the CISG is also based upon the principle of full compensation. However, one court restricted this general principle to cases in which, as a result of a breach of contractual obligations, a contract is avoided.154 In this author’s opinion, the aforementioned general principle is not so limited. Of course, if one looks to the draft Digest for guidance on this issue, one looks in vain, as it merely lists the various court decisions dealing with “full compensation” without further comment. Several tribunals have expressly stated – correctly – that the principle of informality, referred to in Article 11 CISG, also constitutes a general principle upon which the CISG is based.155 From this principle it follows, among other things, that the parties are free to modify or terminate their contract in writing or orally or in any other form. Even an implied

not governed by the Convention, but it left the question open. See Tribunale cantonale del Ticino, Switzerland, 15 January 1998, CLOUT case No. 253 (Transportrecht-Internationales Handelsrecht 12 f. (2000)). 151 See, e. g., W. Khoo, Art. 2, in Comment. Int’l Sales L., supra note 18, at 39. 152 Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003); Oberster Gerichtshof, Austria, 9 March 2000, available at http://www.cisg.at/6_31199z.htm; Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft, Austria, 15 June 1994, CLOUT case No. 93 (Arbitral Award SCH-4366, Recht der internationalen Wirtschaft 590 ff. (1995)); Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft, Austria, 15 June 1994, CLOUT case No. 94 (Arbitral Award SCH-4318, Recht der internationalen Wirtschaft 590 ff. (1995)). 153 See Franco Ferrari, General Principles and International Uniform Law Conventions: A Study of the 1980 Vienna Sales Convention and the 1988 UNIDROIT Conventions on International Factoring and Leasing, 10 Pace Int’l L.J. 173 (1998, 173); Dionysios P. Flambouras, The Doctrines of Impossibility of Performance and Clausula Rebus Sic Stantibus in the 1980 Convention on Contracts for the International Sale of Goods and the Principles of European Contract Law – A Comparative Analysis, 13 Pace Int’l L. Rev. 289 (2001); Magnus, supra note 135, at 484 f.; Mather, supra note 108, at 158; Michael P. van Alstine, Dynamic Treaty Interpretation, 146 U. Pa. L. Rev. 752 (1998). 154 Oberster Gerichtshof, Austria, 9 March 2000, available at http://www.cisg.at/6_ 31199z.htm. 155 See Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003); Compromex Arbitration, Mexico, 16 July 1996, available at http://www.uc3m.es/cisg/rmexi2.htm; Compromex Arbitration, Mexico, 29 April 1996, available at http://www.unilex.info/ case.cfm?pid=1&do=case&id=258&step=FullText.

165

Franco Ferrari

termination of the contract has been held possible.156 Furthermore, on the basis of the aforementioned general principle, it has been held that a written contract may be changed orally.157 The dispatch principle set forth in Article 27 appears to be the CISG’s general principle concerning communications made after the parties have concluded their contract. According to that principle a notice, request, or other communication becomes effective as soon as the declaring party releases it from its own sphere by an appropriate means of communication. This rule applies to notice of non-conformity or of third-party claims (Articles 39, 43); to requests for specific performance (Article 46), price reduction (Article 50), damages (Article 45 par. 1 (b)) or interest (Article 78); to a declaration of avoidance (Articles 49, 64, 72, 73); to the fixing of an additional period for performance (Articles 47, 63); and to other notices as in Articles 32(1), 67(2) or 88. According to case law, as a general principle underlying Part III of the CISG, the dispatch principle applies as well to any other communication the parties may have provided for in their contract unless they have agreed that the communication has to be received to be effective.158 Article 77 lays down a mitigation principle pursuant to which a party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If the aggrieved party fails to mitigate its losses, the party in breach is entitled to claim a reduction in damages in the amount by which the loss should have been mitigated. Both courts159 and commentators have

156

Oberster Gerichtshof, Austria, 29 June 1999 (Zeitschrift f
r Rechtsvergleichung 33 (2000)). 157 Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176, available at http:// 131.152.131.200/cisg/urteile/224.htm. 158 See Landgericht Stuttgart, Germany, 13 August 1991, available at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/33.htm (according to the contract notice of non-conformity had to be by registered letter. The court held that this meant that the notice had to be received by the other party. Moreover, the declaring party had to prove that the notice had been received by the other party). See also Oberster Gerichtshof, Austria, 30 June 1998, CLOUT case No. 305 available at http://www.cisg.at/1_27397x.htm. 159 See Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003); Landgericht Zwickau, Germany, 19 March 1999, available at http://www.jura.uni-freiburg.de/ ipr1/cisg/urteile/text/519.htm; ICC Court of Arbitration, Case No. 8817, 1997, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=398&step=FullText.

166

Interpretation of the Convention and gap-filling: Article 7

considered mitigation to be a general principle upon which the CISG is based.160 Another general principle acknowledged by courts161 and commentators162 is that underlying the rule in Article 9(2) that, unless otherwise agreed, the parties are bound by a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. One court suggested that the issue of set-off was governed, but not expressly settled-in, the CISG, and that the CISG contained a general principle within the meaning of Article 7(2) that permitted reciprocal claims arising under the Convention (such as the buyer’s claims for damages and the seller’s claim for the balance of the sale proceeds) to be offset.163 In this author’s opinion, this view is not tenable, since, as pointed out by many courts164 (as well as the 160

See W.H. Achilles, Kommentar zum UN-Kaufrechts
bereinkommen (CISG) 30 (2002); Audit, supra note 10, at 52. 161 See Rechtbank Koophandel Ieper, Belgium, 29 January 2001, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/2001-01-29.htm. 162 See Dore & Defranco, supra note 81, at 63; Karollus, supra note 129, at 17; J.P. Plantard, Un nouveau droit uniforme de la vente internationale: La Convention des Nations-Unies du 11 avril 1980, Journal du droit international 332 (1988). 163 Oberlandesgericht Hamburg, Germany, 26 November 1999, CLOUT case No. 348 (OLG Rechtsprechungsreport Hamburg 155 (2000)). 164 See Oberster Gerichtshof, Austria, 22 October 2001 (Internationales Handelsrecht 27 (2002)); Tribunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378 (Giurisprudenza italiana, 2001, 280 ff.); Amtsgericht Duisburg, Germany, 13 April 2000, CLOUT case No. 368 (Internationales Handelsrecht 114 f. (2001)); Oberlandesgericht M
nchen, Germany, 11 March 1998, CLOUT case No. 232 (Transportrecht-Internationales Handelsrecht 20 ff. (1999)); Kantonsgericht Freiburg, Switzerland, 23 January 1998, CLOUT case No. 259 (Transportrecht-Internationales Handelsrecht 13 (2000)); Landgericht Hagen, Germany, 15 October 1997, available at http://www.jura.uni-freiburg.de/ipr1/cisg/; Landgericht M
nchen, Germany, 6 May 1997, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/ text/341.htm; Oberlandesgericht M
nchen, Germany, 9 July 1997, CLOUT case No. 273, available at http://131.152.131.200/cisg/urteile/282.htm; Oberlandesgericht D
sseldorf, Germany, 24 April 1997, CLOUT case No. 275, available at http://131.152.131.200/cisg/urteile/ 385.htm; Oberlandesgericht D
sseldorf, Germany, 11 July 1996, CLOUT case No. 169, available at http://131.152.131.200/cisg/urteile/201.htm; Landgericht Duisburg, Germany, 17 April 1996, available at http://www.jura.uni-freiburg.de/ipr1/cisg/; Oberlandesgericht Stuttgart, Germany, 21 August 1995, CLOUT case No. 289, available at http:// 131.152.131.200/cisg/urteile/150.htm; Landgericht M
nchen, Germany, 20 March 1995, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/164.htm; Rechtbank Mid-

167

Franco Ferrari

majority of commentators), the issue of set-off is not governed by the Convention at all and, therefore, is left to applicable domestic law.165 This issue presents one more example of the situation where the draft Digest lists conflicting court decisions without providing any help as to which should be followed. An arbitral tribunal (correctly166) stated that the entitlement to interest on all sums in arrears also constitutes a general principle of the CISG.167 Some courts have further stated that entitlement to interest does not require a formal notice to the debtor in default.168 The majority of commentators rightly hold that same view. There are, nevertheless, courts that state that a formal notice must be given to the debtor before one is entitled to interest on sums in arrears.169 Commentators170 have also correctly suggested that the CISG is based upon the “favor contractus” principle, “which means that, whenever possible, a delburg, Netherlands, 25 January 1995 (Nederlands Internationaal Privaatrecht, 1996, No. 127); Amtsgericht Mayen, Germany, 19 September 1994, available at http://www.jura.uni-freiburg.de/ipr1/cisg/; Oberlandesgericht Koblenz, Germany, 17 September 1993, CLOUT case No. 281, available at http://131.152.131.200/cisg/urteile/91.htm; Oberlandesgericht Hamm, Germany, 9 June 1995, CLOUT case No. 125 (Recht der internatinoalen Wirtschaft 689 f. (1996)); Rechtbank Roermond, Netherlands, 6 May 1993, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=94&step=FullText; Rechtbank Arnhem, Netherlands, 25 February 1993, CLOUT case No. 99 (Nederlands Internationaal Privaatrecht No. 445 (1993)). 165 See, e. g., F. Ferrari, Art. 4, in Kommentar zum Einheitlichen UN-Kaurecht, supra note 69, at 101. 166 For this view, see also F. Ferrari, Das Verhltnis zwischen den Unidroit-Grundstzen und den allgemeinen Grundstzen internationaler Einheitsprivatrechtskonventionen, JuristenZeitung 12 (1998). 167 ICC Court of Arbitration, Cae No. 8908, 1998, available at http://www.unilex.info/ case.cfm?pid=1&do=case&id=401&step=FullText. 168 Handelsgericht Aargau, Switzerland, 26 September 1997, CLOUT case No. 217 (Transportrecht-Internationales Handelsrecht 11 (1999)); Kammergericht Berlin, Germany, 24 January 1994, CLOUT case No. 80 (Recht der Internationalen Wirtschaft 683 f. (1994)); Pretore della giurisdizione Locarno-Campagna, Switzerland, 27 April 1992, CLOUT case No. 56 (Schweizerische Zeitschrift f
r internationales und europisches Recht 665 (1993)). 169 Arbitral Tribunal at the Bulgarian Chamber of Commerce and Industry, Bulgaria, 12 February 1998 (award No. 11/1996, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=420&step=FullText; Landgericht Zwickau, Germany 19 March 1999, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/519.htm. 170 For discussion of the favor contractus principle, see Ferrari, supra note 166, at 12; J.O. Honnold, Uniform Words and Uniform Application: The 1980 Vienna Sales Convention

168

Interpretation of the Convention and gap-filling: Article 7

solution should be adopted in favour of the valid existence of the contract and against its premature termination on the initiative of one of the parties”.171 This view was also adopted by two courts. One court expressly referred to the principle of favor contractus.172 The other court stated that avoidance of the contract constitutes an “ultima ratio” remedy,173 which, in essence means the same as favor contractus. Several courts have identified Article 40 as embodying a general principle of the CISG. According to one arbitration tribunal, “Article 40 is an expression of the principles of fair trading that underlie also many other provisions of the Convention, and it is by its very nature a codification of a general principle”.174 Thus, the decision asserted, even if Article 40 did not directly apply to a lack of conformity under a contractual warranty clause, the general principle underlying Article 40 would be indirectly applicable to the situation by way of Article 7(2). In another decision, a court derived from Article 40 the general principle that even a very negligent buyer deserves more protection than a fraudulent seller, and then applied the principle to hold that a seller could not escape liability under Article 35(3)175 for misrepresenting the age and mileage of a car, even if the buyer could not have been unaware of the lack of conformity.176 The draft Digest, furthermore, cites (again, without any comment) the opinion of an arbitral tribunal177 that, when deciding what rate of interest to apply to sums in arrears, courts should apply the average bank short term lending rate to prime borrowers. The tribunal adopted this approach because it is the one taken by both Article 7. 4. 9 of the UNIDROIT Principles of and International Judicial Practice, in Einheitliches Kaufrecht und nationales Obligationenrecht, supra note 129, at 140; Plantard, supra note 162, at 333; Rosenberg, supra note 8, at 452. 171 Bonell, supra note 18, at 81. 172 Cour de Justice de Gnve, Switzerland, 10 October 1997, CLOUT case No. 249 (Schweizerische Zeitschrift f
r internationales und europisches Recht 182 ff. (1999)). 173 Oberster Gerichtshof, Austria, 7 September 2000, available at http://www.cisg.at/ 8_2200v.htm. 174 Arbitration Institute of the Stockholm Chamber of Commerce, Sweden, 5 June 1998, CLOUT case No. 237 (Transportrecht-Internationales Handelsrecht 26 (1999)). 175 Article 35(3) provides that a seller is not liable for a lack of conformity under Article 35(2) “if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity”. 176 Oberlandesgericht Kln, Germany, 21 May 1996, CLOUT case No. 168, available at http:// 131.152.131.200/cisg/urteile/254.htm. 177 ICC Court of Arbitration, Case No. 8128, 1998, available in Unilex at http://www. unilex.info/case.cfm?pid=1&do=case&id=207&step=FullText.

169

Franco Ferrari

International Commercial Contracts and Article 4.507 of the Principles of European Contract Law, and the arbitral tribunal argued that such rules had to be considered general principles on which the CISG is based. In this author’s opinion, it is not correct to use either the UNIDROIT Principles of International Commercial Contracts or the Principles of European Contract Law to derive the general principles upon which the CISG is based.178 Article 7(2) CISG clearly refers to “the general principles on which it [the CISG] is based”. Thus recourse to external principles, such as the UNIDROIT Principles and the Principles of European Contract Law, appears to be excluded.179 This does not mean, however, that the UNIDROIT Principles and the Principles of European Contract Law are meaningless with respect to a contract governed by the CISG. These principles can be useful, for instance, to corroborate a solution reached through the application of the CISG’s rules, as evidenced not only by several arbitral awards,180 but also by one state court decision.181 In these cases, the UNIDROIT Principles of International Commercial Contracts were used to confirm the results reached by applying the rules of the CISG. According to a state court, furthermore, the UNIDROIT Principles can also help to determine the exact meaning of a general principle upon which the CISG is based.182 C. Resort to private international law as ultima ratio Article 7(2) CISG states that gaps praeter legem are to be filled in conformity with the Convention’s general principles. What happens when recourse to such general principles does not solve the problem? To address this question, the drafters of the CISG, after some debate,183 laid down the rule that, absent dispositive general principles, one has to resort to the “law applicable by virtue of the rules of private international law” (Article 7(2)). Thus, as

178

For a detailed analysis of the arguments in favor of this position, see Ferrari, supra note 166, at 9 ff. 179 See also R. Herber, “Lex mercatoria” and “Principles”, Internationales Handelsrecht 1 ff. (2003). 180 ICC Court of Arbitration, Case No. 9117, 1998, available at http://www.unilex.info/ case.cfm?pid=1&do=case&id=399&step=FullText; ICC Court of Arbitration, Case No. 8817, 1997, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=398&step=FullText. 181 Cour d’appel Grenoble, France, 23 October 1996, CLOUT case No. 205 (Revue critique de droit international priv 756 (1997)). 182 Rechtbank Zwolle, Netherlands, 5 March 1997, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=332&step=FullText. 183 For an overview of the dispute which finally led to the solution adopted by the Uniform Sales Law, see Schlechtriem, supra note 93, at 23.

170

Interpretation of the Convention and gap-filling: Article 7

pointed out both in case law184 and legal writing,185 one should resort to the applicable national law only as ultima ratio,186 i. e., only where the general principles do not lead to a solution or where no such principles exist. In that case, however, not only is one allowed to have recourse to the rules of private international law, one is obliged to do so.187 This does not mean that recourse to the rules of private international law should be abused.188 Such recourse “represents under the ... uniform law a last resort to be used only if and to the extent that a solution cannot be found either by analogical application of specific provisions or by the application of ‘general principles’ underlying the uniform law as such”.189 Of course, matters beyond the scope of the CISG are to be resolved directly by having recourse to the applicable national law190 – i. e., without first having to look into whether general principles of the CISG exist. 184 See ICC International Court of Arbitration, Case No. 8611/HV/JK, 1997, available at http://www.jura.uni-freiburg.de/ipr1/cisg/. 185 Ferrari, supra note 166, at 15. 186 M.J. Bonell, art. 7, Nuove Leggi civili commentate 25 (1989); Herber, supra note 35, at 93. 187 For a similar conclusion, see Bonell, supra note 18, at 83, stating that the “recourse to domestic law for the purpose of filling gaps under certain circumstances is not only admissible, but even obligatory”. 188 The danger of an abuse of the recourse to the rules of private international law is considerable, since gaps can easily be filled by virtue of the rules of private international law: “It is enough to state that no general principles can be found and therefore the only way out is to resort to private international law”. Eorsi, supra note 94, at 2-12. 189 Bonell, supra note 18, at 83. 190 See, e. g., Cour d’appel Paris, France, 6 November 2001, available at http://witz.jura.unisb.de/CISG/decisions/061101v.htm, stating that issues not governed by the Convention have to be solved by means of the applicable law. For similar statements, see Camara Nacional de Apelaciones en lo Comercial, Argentina, 24 April 2000, available at http://www.uc3m.es/ uc3m/dpto/PR/dppr03/cisg/sargen10.htm; Handelsgericht Aargau, Switzerland, 11 June 1999, CLOUT case No. 333 (Schweizerische Zeitschrift f
r internationales und europisches Recht 117 f. (2000)); Rechtbank Zutphen, Netherlands, 29 May 1997, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=353&step=FullText; Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 28 March 1997 (arbitral award No. 38/1996, English available at http://www.cisg.law.pace.edu/cgi-bin/SFgate?language=english&verbose=0&listenv=DL& application=&convert=&waisurl=cases2/HTML/14964/1=cisgw3.law.pace.edu%); Amtsgericht Mayen, Germany, 6 September 1994, available at http://www.jura.uni-freiburg.de/ipr1/ cisg/urteile/text/382.htm; Handelsgericht Z
rich, Switzerland, 9 September 1993, CLOUT case No. 97.

171

Interpretation of statements: Article 8 Franco Ferrari* I. Introduction The draft Digest comments on Article 8, like those on other CISG provisions, show that even though the Digest is very useful in providing a means for interpreters to know what case law exists on specific issues, it is helpful only in a limited way. This is due to the restrictive guidelines, set by the United Nations Commission on International Trade Law in its thirtyfourth session.1 The guidelines require that the Digest not criticize any court’s decisions, with the consequence that, where it lists contradicting views, it is not supposed to point in any particular direction. Of course, this means that the guidance it provides is limited. Furthermore, the Digest is supposed to refer merely to the issues dealt with in case law; it is not supposed to deal with other issues, even though they may be more important than those arising in existing cases. This is why it is necessary to go beyond the Digest, in the sense that it is important to take a position not only in those instances where there is contradictory case law, but also on those issues for which there is no case law at all. It is with this goal in mind that the draft Digest comments on interpretation will be dealt with. As the draft Digest itself points out, the CISG contains two provisions that refer to issues of interpretation, namely Articles 7 and 8. Whereas Article 7 concerns the interpretation (and gap-filling) of the Convention, which has often been the focus of legal scholars,2 Article 8 sets forth dispositive3 rules relating to the interpretation of any statement or conduct of a party. The rules of Article 8 seem to have been neglected by commentators, despite *

Professor of International Law, Verona University School of Law. Report of the United Nations Commission on its Thirty-Fourth Session, UN document A/56/17, at 74. 2 For discussion of interpretation and the gap-filling of the CISG, see the sources cited supra, “Interpretation and Gap-Filling”, notes 7 and 8. 3 The dispositive nature of the CISG’s rules on interpreting the statements of the parties has been pointed out for instance by Junge, Art. 8, in Kommentar zum Einheitlichen UNKaufrecht (CISG) 141 (P. Schlechtriem ed., 3d. ed., 2000); W. Witz et al., International Einheitliches Kaufrecht 96 (2000). 1

172

Interpretation of statements: Article 8

being rather important in practice. This paper will discuss those rules, the importance of which is evidenced by the number of cases that dealt with these rules and are cited in the draft Digest. Even though Article 7 lays down rules on the interpretation of the CISG designed to “promote its uniform application”,4 Article 8 also assists in that goal by setting forth uniform rules (on the interpretation of statements and conduct) which prevent interpreters from resorting to domestic interpretive criteria.5 Indeed, invoking domestic interpretive criteria would be detrimental to the uniformity aimed at by the CISG,6 as such criteria vary from country to country.7 By laying down interpretive criteria, which, where applicable, prevail over any domestic interpretive rule (as pointed out by a German court cited in the draft Digest8), Article 8 reduces the need to have recourse to non-uniform domestic rules, thus undoubtedly promoting uniformity.

II. The scope of the rules on interpretation set forth in Article 8 Before looking more closely into the various rules laid down in Article 8 – rules which, according to one decision cited in the Digest, correspond to principles generally accepted in international commerce9 – it seems appropriate to remark at least briefly on the scope of those rules, i.e., in what circumstances they are applicable.

4

Article 7(1). Accord, F. Ferrari, Art. 7, in Kommentar zum einheitlichen UN-Kaufrecht, supra note 3, at 124. 6 For discussion of the dangers for uniformity raised by interpretation based on domestic interpretive criteria rather than uniform ones, see, among others, Michael F. Sturley, International Uniform Law in National Courts: The Influence of Domestic Law in Conflicts of Interpretation, 27 Va. J. Int’l L. 733 ff. (1987). 7 See F. Diedrich, Autonome Auslegung von Internationalem Einheitsrecht 59 ff. (1994); H.Ktz, Rabels Rechtsvergleichung – Nutzen, Kosten, Methoden, Zielen, Zeitschrift f
r auslndisches und internationales Privatrecht 33 (1986). 8 Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Recht der internationalen Wirtschaft 1015 ff. (1990)). 9 ICC Court of Arbitration, Case No. 7331, 1994, CLOUT case No. 303 (ICC Court of Arbitration Bulletin 73 ff. (1995)), stating that “the Vienna Convention reflects ... general international commercial principles and sets forth in Article 8 general rules with respect to interpreting statements of parties and provisions of contract”. 5

173

Franco Ferrari

The Article 8 rules apply only to statements and conduct10 that relate to matters governed by the Convention,11 as pointed out not only by legal scholars12 but also by a decision of the Austrian Supreme Court cited in the draft Digest.13 In that case,14 the Austrian Supreme Court had to determine whether a Court of Appeal had correctly applied Article 8 in interpreting a party’s conduct. The Supreme Court stated that Article 8 was not applicable at all on the grounds that “pursuant to Article 4 CISG, the Convention exclusively [governs] the formation of sales contracts and the rights and obligations of the seller and the buyer deriving from the contract” and that “Article 8 [relates only to] the interpretation of declarations and conduct as governed by the Convention”. Thus the provision could not be applied in relation to an assumption of debts because such assumption is excluded from the CISG’s sphere of application. Article 8 is one of the CISG’s “general provisions”.15 Consequently, Article 8 applies whenever a statement or conduct of a party (relating to a matter governed by the Convention) is to be interpreted with a view to determining its contents, or whenever it is to be decided whether that statement or conduct has legal effects for the purposes of the Convention,16 independently of whether the issue in question relates to Part II (on “Formation”) or

10 According to commentors, the “statements” and “conduct” subject to the rules of Article 8 also include omissions, although no case on this issue is cited in the draft Digest. See Melis, Art. 8, in Kommentar zum UN-Kaufrecht 95 (H. Honsell ed., 1997). 11 The legislative history also points in this direction. See United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March – 11 April 1980, Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee at 18 (1981), stating that Article 8 “on interpretation furnishes the rules to be followed in interpreting the meaning of any statement or other conduct of a party which falls within the scope of application of this Convention” (emphasis added). 12 Witz et al., supra note 3, at 97. 13 Oberster Gerichtshof, Austria, 24 April 1997, available at http://www.cisg.at/2_ 10997m.htm. 14 For a comment on this decision, see Franco Ferrari, Assumption of Debts as a Subject Matter Excluded from the UN Sales Convention (Commentary on Oberster Gerichtshof, Austria, 24 April 1997), Int’l Legal F. 90 ff. (1997). 15 Melis, supra note 10, at 94. 16 For a distinction between the two issues mentioned in the text, see F. Ferrari, Vendita Internazionale di beni mobili art. 1-13 Ambito di applicazione. Disposizioni generali 172 f. (1994); C. Fioravanti, Commento all’art. 8, Nuove Leggi Civ. Commentate 33 (1989); M. Karollus, UN-Kaufrecht 46 (1991); A. Kaczorowska, Rgles uniformes d’interprtation d’un contrat international, Revue de Droit International et de Droit Compar 297 (1991).

174

Interpretation of statements: Article 8

Part III (on “Rights and Obligations of the Parties”) of the CISG.17 This can be evinced not only from the legislative history,18 but also from case law referred to in the draft Digest. Courts have indeed resorted to the criteria set forth in Article 8 to interpret statements and conduct relating to both formation of contracts governed by the CISG19 and the performance of such contracts20 as well as avoidance of contract.21 Although Article 8 CISG appears to be applicable merely to the interpretation of unilateral acts of a party to a contract governed by the CISG, according to the Convention’s legislative history,22 legal writing,23 and case

17 This means that Article 8 also applies in those countries that have declared a reservation under Article 92 – as have the Scandinavian countries. 18 Official Records of the United Nations Conference, supra note 11, at 18. 19 For cases in which Article 8 CISG was used to interpret statements relating to the formation process, see Oberlandesgericht Frankfurt, Germany, 30 August 2000, available at http://cisgw3.law.pace.edu/cisg/text/000830g1german.html; Oberster Gerichtshof, Austria, 9 March 2000, available at http://www.cisg.at/6_31199z.htm; Landgericht Zwickau, Germany, 19 March 1999, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/519.htm; Oberster Gerichtshof, Austria, 20 March 1997, CLOUT case No. 189 (Zeitschrift f
r Rechtsvergleichung 204 ff. (1997)); Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176 (Zeitschrift f
r Rechtsvergleichung 248 ff. (1996)); Obergericht Thurgau, Switzerland, 19 December 1995, CLOUT case No. 334 (Schweizerische Zeitschrift f
r internationales und europisches Recht 118 ff. (2000)); Kantonsgericht St. Gallen, Switzerland (Internationales Handelsrecht 44 (2001)); Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Praxis des internationalen Privat- und Verfahrensrechts 137 ff. (1996)). 20 See, e. g., Bundesgerichtshof, Germany, 25 November 1998, CLOUT case No. 270 (Neue Juristische Wochenschrift 1259 ff. (1999)) (dealing with the issue of whether an offer to pay damages on the seller’s part constitutes a waiver of the seller’s right to rely on Articles 38 and 39). 21 See Oberlandesgericht Koblenz, Germany, 31 January 1997, CLOUT case No. 282 (OLGReport Koblenz 37 ff. (1997)) (dealing with the issue of whether certain conduct amounted to avoidance of the contract). 22 Official Records of the United Nations Conference, supra note 11, at 18, suggesting, however, that Article 8 is restricted to the interpretation of a contract “when the contract is embodied in a single document”. 23 See W.A. Achilles, Kommentar zum UN-Kaufrechts
bereinkommen (CISG), 32 (2000); F. Bydlinski, Das allgemeine Vertragsrecht, in Das UNCITRAL-Kaufrecht im Vergleich zum sterreichischen Recht 74 (H. Doralt ed., 1985); F. Enderlein et al., Internationales Kaufrecht. Kommentar 67 (1991); E. Allan Farnsworth, Art. 8, in Commentary on the International Sales Law: The 1980 Vienna Sales Convention 101 (C.M. Bianca & M.J. Bonell eds., 1987); A.M. Lopez Lopez, Art. 8, in La compraventa internacional de

175

Franco Ferrari

law cited in the draft Digest,24 it “is equally applicable to the interpretation of ‘the contract.’25

III. Interpretation according to the subjective intent of a party

(Article 8(1)) Article 8, which does not have an antecedent in the 1964 Hague Uniform Laws26 but is modelled after the UNIDROIT Draft Law for the Unification of Certain Rules Relating to the Validity of Contracts for the International Sale of Goods,27 lists two different interpretive rules in Articles 8(1) and 8(2). As can easily be derived from the wording of these provisions, the drafters intended to lay down the order in which those rules would apply.28 Accordingly, one has to first interpret a statement or conduct subjectively, on the basis of Article 8(1)29 – i. e., one has to resort first to the real “subjective intention” of the declaring party,30 and a mere hypothetical

mercaderias. Comentario de la convencion de Viena 115 (L. Diez-Picazo ed., 1998). But see V. Heuz, La vente internationale de marchandises No. 235 (2d ed., 1999). 24 See ICC Court of Arbitration, Case No. 7331, 1994, CLOUT case No. 303 (Journal du droit international, 1995, 1001). 25 See Bundesgericht, Switzerland, 22 December 2000, available at http://www.cisg.law.pace.edu/cisg/text/001222s1german.html. 26 See, e. g., Ferrari, supra note 16, at 172; U. Huber, Der UNCITRAL-Entwurf eines bereinkommens
ber Internationale Warenkaufvertrge, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 429 (1979); U. Magnus, Wiener UN-Kaufrecht (CISG) 164 (1999). 27 See Farnsworth, supra note 23, at 95; Lopez Lopez, supra note 23, at 113 f. 28 For similar statements, see Ferrari, supra note 16, at 174; W. Junge, Art. 8, in Commentary on the UN Convention on Contracts for the International Sale of Goods (CISG) 70 (P. Schlechtriem ed., 1998); B. Rudolph, Kaufrecht der Export- im Importvertrge 140 (1996). 29 Commentators have often highlighted the order referred to in the text, i.e., the prevalence of the criterion referred to in Article 8(1) over that contained in Article 8(2). See, e. g., Ferrari, supra note 16, at 174; Fioravanti, supra note 16, at 34; R. Herber & B. Czerwenka, Internationales Kaufrecht 52 (1992); K. Neumayer & C. Ming, Convention de Vienne sur les Cotnracts de Vente Internationale de Marchandises. Commentaire 111 (1993); Michael van Alstine, Consensus, Dissensus, and Contractual Obligation through the Prism of Uniform International Sales Law, 37 Va. J. Int’l L. 58 (1996). 30 For an express reference to “subjective” interpretation, see Oberlandesgericht Frankfurt, Germany, 30 August 2000, available at http://cisgw3.law.pace.edu/cisg/text/000830g1german.html.

176

Interpretation of statements: Article 8

intention is not relevant.31 As the draft Digest shows, one court paraphrased the rule in Article 8(1), stating that it requires a substantial inquiry into the parties’ subjective intent, even if the parties did not engage in any objectively ascertainable means of registering this intent. Article 8(1) ... instructs courts to interpret the “statements ... and other conduct of a party... according to his intent” as long as the other party “knew or could not have been unaware” of that intent. The plain language of the Convention, therefore, requires an inquiry into a party’s subjective intent as long as the other party to the contract was aware of that intent.32 Article 8(1) also applies if the other party could not have been unaware of such intent.33 This means, as correctly pointed out in scholarly writing34 (although confirmation of this in case law is still lacking), that where the addressee of a statement does not recognize the intent of the party making the statement even though it is easily recognizable, that addressee will be bound by the declaring party’s subjective intention. And if the addressee understands the declaring party’s real subjective intention, despite that party’s unclear or incorrect language, the declaring party’s real subjective intention will be binding,35 regardless of what a reasonable person may have understood.36 Thus, according to commentators (case law on this point is missing, which is why once again the draft Digest does not refer to this issue and therefore is of limited help), the principle “falsa demonstratio non nocet” applies.37

31

Junge, supra note 28, at 70. 11th Circuit U.S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino S.p.A, 144 F.3d 1387). For other cases in which the part of Article 8(1) referred to in the text was invoked, see Cour d’appel de Grenoble, France, 21 October 1999, CLOUT case No. 313 (Somm. 441-442 Recueil Dalloz (2000)); Bundesgerichtshof, Germany, 11 December 1996, CLOUT case No. 268 (Neue Juristische Wochenschrift 873 ff. (1997)). 33 For references to this part of the Article 8(1), see, e. g., Bezirksgericht St. Gallen, Switzerland, 3 July 1997, CLOUT case No. 215 (Schweizerische Zeitschrift f
r internationlaes und europisches Recht 84 f. (1998)). 34 Magnus, supra note 26, at 166. 35 B. Piltz, Internationales Kaufrecht 67 (1993). 36 Farnsworth, supra note 23, at 98. 37 Accord, Achilles, supra note 23, at 32; M. Jametti Greiner, Der Vertragsabschluss, in Das Einheitliche Wiener Kaufrecht 53 (H. Hoyer & W. Posch eds., 1992); Magnus, supra note 26, at 166. 32

177

Franco Ferrari

Of course, for the subjective intent of a party to be relevant at all, it must somehow have been manifested.38 This view was adopted by a German court that, according to the draft Digest, held that “the intent that one party secretly had, is irrelevant”.39 That court also stated – correctly, in this author’s opinion – that the party who asserts that the other party did know or could not have been unaware of the former party’s subjective intent has to prove that assertion.40

IV. Interpretation according to objective intent: General issues Although courts must first try to establish the meaning of a statement or other conduct by looking into the subjective intent of the party making the statement or performing the conduct,41 as correctly pointed out by one arbitral tribunal, “most cases will not present a situation in which both parties to the contract acknowledge a subjective intent ... In most cases, therefore, Article 8(2) of the [Convention] will apply, and objective evidence will provide the basis for the court’s decision”.42 The fact that in most cases Article 8(1) will be inapplicable is, according to the aforementioned arbitral tribunal, due to the fact that Article 8(1) requires either that the parties have established practices between themselves and know each other well, or that the statements are very clear about the declarant’s subjective intent.43 Thus if, in the interpretation of a statement or conduct (or omission)44 of a party, it is not possible to rely on Article 8(1), one must – according to both case law45 and commentary46 – resort to “a 38

See Lopez Lopez, supra note 23, at 120; Witz et al., supra note 3, at 98. Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Praxis des Internationalen Privat- und Verfahrensrechts 400 ff. (1991)). 40 Id. 41 See, e. g., ICC Court of Arbitration, Case No. 8324, 1995, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText. 42 11th Circuit U.S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc v. Ceramica Nuova D’Agostino S.p.A, 144 F.3d 1384). For similar statements in legal writing, see, e. g., John Murray, Essay on the Formation of Contracts and Related Matters Under the United Nations Convention on Contracts for the International Sale of Goods, 8 J.L. & Com. 48 (1988); Witz et al., supra note 3, at 98. 43 ICC Court of Arbitration, Case No. 8324, 1995 available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText. 44 See, the authority cited supra in note 10, and Junge, supra note 3, at 142. 45 See ICC Court of Arbitration, Case No. 8324, 1995, available in Unilex at http:// www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText. For other cases expressly referring to the need, absent the possibility of a subjective interpretation, to interpret the statements or conduct of the parties on a more “objective” basis, see Oberlandesgericht 39

178

Interpretation of statements: Article 8

more objective analysis” provided for in Article 8(2). According to this provision, which is often relied upon in cases,47 (as can easily be deduced from the draft Digest), the statements and conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. According to one court, this means simply that a tribunal must “reasonably interpret the parties’ statements”.48 This also means, however, that the actual understanding of the addressee of the statement to be interpreted is

Kln, Germany, 16 July 2001, available at http://www.cisg.law.pace.edu/cisg/text/ 010716g1german.html; Bundesgericht, Switzerland, 22 December 2000, available at http:// www.cisg.law.pace.edu/cisg/text/001222s1german.html; Oberlandesgericht Frankfurt, Germany, 30 August 2000, available at http://cisgw3.law.pace.edu/cisg/text/000830g1german. html; 11th Circuit U.S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc v. Ceramica Nuova D’Agostino S.p.A, 144 F.3d 1384); Hoge Raad, Netherlands, 7 November 1997, available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=333&step=FullText; Landgericht Kassel, Germany, 15 February 1996, CLOUT case No. 409, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/ text/190.htm. 46 For a reference in legal writing to the fact that Article 8(2) can only be used where Article 8(1) is not applicable, see Bydlinski, supra note 23, at 74; Peter J. Calleo, The Inapplicability of the Parol Evidence Rule to the United Nations Convention on Contracts for the International Sale of Goods, 26 Hofstra L. Rev. 819 (2000); Ferrari, supra note 16, at 175; Fioravanti, supra note 16, at 34; Kaczorowska, supra note 16, at 297; Murray, supra note 42, at 46; van Alstine, supra note 29, at 58. 47 For cases referring to this provision and wording, see Landgericht Zwickau, Germany, 19 March 1999, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/519.htm; Oberster Gerichtshof, Austria, 20 March 1997, CLOUT case No. 189 (Zeitschrift f
r Rechtsvergleichung 204 ff. (1997)); Hoge Raad, Netherlands, 7 November 1997, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=333&step=FullText; Bezirksgericht St. Gallen, Switzerland, 3 July 1997, CLOUT case No. 215 (Schweizerische Zeitschrift f
r internationals und europisches Recht 84 f. (1998)); Schiedsgericht der Handelskammer Hamburg, Germany, 21 March 1996, CLOUT case No. 166 (Recht der internationalen Wirtschaft 766 ff. (1996)); Arbitration Court of the Chamber of Commerce and Industry of Budapest, Hungary, 17 November 1995 (Arbitral Award No. Vb 94124, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=217&step=Full Text; Federal Court of Adelaide, Australia, 28 April 1995, CLOUT case No. 308 (Roder Zeltund Hallenkonstruktionen v. Rosedown Park Pty Ltd and Reginald R Eustace), available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/218.htm; Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 ff. (1995)). 48 Oberlandesgericht M
nchen, Germany, 9 July 1997, CLOUT case No. 273, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/282.htm.

179

Franco Ferrari

irrelevant, as was made clear in a decision by the German Supreme Court.49 Instead, one has to resort to the understanding of a normally diligent businessman50 that has the same knowledge as the actual addressee of how business is conducted in the trade concerned,51 of technical language,52 and of the technical implementation of the transaction.53 According to one author, this signifies that the addressee’s understanding “therefore applies in this case too, but in a generalized form;”54 in other words, the reasonable person referred to in Article 8(2) is “not a reasonable person in the abstract”.55 What happens, however, when the “objective interpretation” attributed to a statement differs from that which the declaring party wanted to attribute to it? Since this issue should be characterized as one of validity of the contract,56 which pursuant to Article 4(a) falls outside the CISG’s scope of application,57 the issue of whether the contract can be rescinded on the grounds of mistake will depend on the applicable domestic law, as pointed out not only by commentators,58 but also by the Austrian Supreme Court.59

49 Bundesgerichtshof, Germany, 25 November 1998, CLOUT case No. 270 (TransportrechtInternationales Handelsrecht 18 ff. (1999)). 50 See Herber & Czerwenka, supra note 29, at 53; Kaczorowska, supra note 16, at 304. 51 See Witz et al., supra note 3, at 99. 52 See Lopez Lopez, supra note 23, at 125. 53 See Achilles, supra note 23, at 32. For a discussion at the Vienna Diplomatic Conference of the concept of the reasonable person to be taken into account, see Official Records of the United Nations Conference, supra note 11, at 260-61. 54 Junge, supra note 28, at 72. 55 Farnsworth, supra note 23, at 99. 56 See Herber & Czerwenka, supra note 29, at 53. 57 It may well be that a validity issue comes within the scope of the CISG – for example the validity of a contract affected by a mistake regarding the characteristics of the goods. The issue referred to in the text, however, is one of those validity issues that is not governed by the CISG. In this respect, see F. Ferrari, Art. 4, in Kommentar zum Einheitlichen UN-Kaufrecht, supra note 3, at 95 ff.; Helen Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale J. Int’l L. 1 ff. (1993); Christoph R. Heiz, Validity of Contracts Under the United Nations Convention on Contracts for the International Sale of Goods, April 11 1980, and Swiss Contract Law, 20 Vand. J. Transnat’l L. 639 ff. (1987); A. Schluchter, Die G
ltigkeit von Kaufvertrgen unter dem UN-Kaufrecht (1996); Todd Weitzmann, Validity and Excuse in the U.N. Sales Convention, 16 J.L. & Com. 265 ff. (1997). 58 See Achilles, supra note 23, at 33; Farnsworth, supra note 23, at 102; Karollus, supra note 16, at 41; Neumayer, Ming, supra note 29, at 114; P. Schlechtriem, Internationales UNKaufrecht 36 (1997); A. L
deritz and A. Fenge, Art. 8 CISG, in B
rgerliches Gesetzbuch mit

180

Interpretation of statements: Article 8

V. Interpretation according to objective intent: Case law Since “in most cases, ... Article 8(2) of the [Convention] will apply, and objective evidence will provide the basis for the court’s decision”,60 rather than Article 8(1) and its “subjective interpretation”, it is not surprising that courts have relied upon Article 8(2) to solve various interpretive problems. In order to show the effects of an “objective” interpretation, some cases cited in the draft Digest will be discussed. In one case, a Swiss court inferred the buyer’s intention to be bound and the quantity of the goods by interpreting the buyer’s statements and conduct according of the understanding of a reasonable person of the same kind as the other party in the same circumstances. The court held that, absent any relevant circumstance or practice between the parties at the time the contract was concluded (which must always be taken into account), the buyer’s intention to be bound could be deduced from the buyer’s request to the seller to issue an invoice for the delivered textiles.61 The Austrian Supreme Court has noted that according to Article 14(1) CISG, a declaration must be sufficiently definite in order to constitute a proposal, and that a proposal is sufficiently definite where it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. The Court then stated that for the offer to be accepted, “it suffices that the required minimum content can be understood as being sufficiently definite as understood by ‘a reasonable person of the same kind’ as the other party (offeree) ‘in the same circumstances.’62 In determining the quality of goods agreed upon, the German Supreme Court held that, since the parties had a different understanding of the meaning of the contract, the language of the contract had to be interpreted according to Article 8(2), i. e., “according to the understanding that a reasonable person of the same kind as the other party would have had in the Einf
hrungsgesetzen und Nebengesetzen, vol. 13, bereinkommen der Vereinten Nationen
ber Vertrge
ber den internationalen Warenkauf (CISG) 29 (2000). 59 See Oberster Gerichtshof, Austria, 20 March 1997, CLOUT case No. 189 (sterreichische Juristische Bltter 592 f. (1997)). 60 11th Circuit U.S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc v. Ceramica Nuova D’Agostino S.p.A, 144 F.3d 1384). 61 Bezirksgericht St. Gallen, Switzerland, 3 July 1997, CLOUT case No. 215 (Schweizerische Zeitschrift f
r internationals und europisches Recht 84 f. (1998)). 62 Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 (1995)).

181

Franco Ferrari

same circumstances”. The buyer was an expert and knew that it had not been offered a new machine, but rather one which was built fourteen years prior to the conclusion of the contract. Consequently, the machine did not conform to the latest technical expectations. The court of first instance had found that, under Article 8(2), the seller was entitled to expect that the buyer had concluded the contract in full knowledge of the technical limitations of the machinery. The supreme court concurred with the court of first instance that the machine sold was offered to the buyer in conformity with the specifications of the contract.63 In another case,64 a different German court cited Article 8(2) CISG as “the primary source of interpretation”. It held that the claim for the purchase price was due at the end of the agreed period for payment. Only within this period was the buyer allowed to propose a compensation transaction as provided in the contract. The offer would have given the [buyer] a respite in payment while the performance of the compensation transaction would have fulfilled the [buyer’s] obligation to pay the purchase price. The parties’ interests also point in favor of such an understanding of their agreement. While the [buyer] would have benefited from reciprocal shipments which allowed it to set-off its payment obligation against the [seller’s], it was evidently important for the [seller] to receive a [monetary] equivalent for its goods no later than at the expiration of the payment period. In particular, the [buyer] could not have been unaware that it would have been commercially unreasonable for the [seller] to grant a respite in payment beyond the agreed period only upon the [buyer’s] announcement of a compensation transaction. Article 8(2) was also used in a dispute relating to non-conformity of the goods in order to determine whether the seller had, through its behavior, implicitly waived its right to invoke the defense that notice of nonconformity was not timely under Article 39(1).65 More specifically, the court stated that a seller who enters into negotiations over the lack of conformity of the goods need not necessarily be regarded as having waived its rights under Article 39. Instead, the circumstances of each case should be considered, a view this author shares. Since after its own inspection of the claimed defect, the seller in the case at hand “negotiated over the amount 63

Bundesgericht, Switzerland, 22 December 2000, available at http://www.cisg.law.pace.edu/ cisg/text/001222s1german.html. 64 Oberlandesgericht Dresden, Germany, 27 December 1999, available at http://www.jura. uni-freiburg.de/ipr1/cisg/urteile/text/511.htm. 65 Bundesgerichtshof, Germany, 25 November 1998, CLOUT case No. 270 (TransportrechtInternationales Handelsrecht 18 ff. (1999)).

182

Interpretation of statements: Article 8

and manner of a settlement of damages for practically 15 months – ... without expressly or at least discernibly reserving the objection to the delay” and even “offered through legal counsel to pay compensatory damages that amount to practically seven times the value of the goods”,66 Articles 8(2) and 8(3) led the court to state that “the [buyer] could only reasonably understand that the [seller] was seeking a settlement of the affair and would not later refer to the allegedly passed deadline as a defense to the [buyer’s] reimbursement claim”, i. e. that the seller had waived its right to rely on the untimeliness of the notice. According to another court,67 such a waiver cannot be assumed from the mere readiness of the seller to discuss the issue with the buyer. This results both from the need for certainty in commercial transactions and from the principle of good faith, which is applicable also in the interpretation of the parties’ statements or other conduct. One court resorted to Article 8(2) to interpret the clause “franco domicile” contained in a contract. The court found that this clause dealt not merely with the cost of transporting the goods but also with the passing of the risk. In reaching this conclusion, the court interpreted the phrase ‘franco domicile’ according to the understanding that a reasonable person would have had in the same circumstances (Article 8(2)). In the court’s opinion, a buyer entitled to the delivery of goods ‘franco domicile’ would not worry about transportation and insurance for the goods. Furthermore, the court found that the fact that the seller obtained transport insurance meant that it was prepared to take the risk of the transportation of the goods. According to the court, this clearly indicated the parties’ intention to accept the passing of the risk at the buyer’s place of business, and accordingly to deviate from Article 31(a). In a different case,68 Article 8(2) was invoked in order to determine whether the conduct of one party indicated that an agreement as to the purchase price had been reached by the parties. Since the buyer had taken delivery of the goods without contesting the price indicated by the seller, and since such conduct was to be interpreted as acceptance of the price under Article 8(2), the court ordered the buyer to pay the price requested by the seller.

66

Id. Handelsgericht Z
rich, Switzerland, 30 November 1998, CLOUT case No. 251 (Schweizerische Zeitschrift f
r internationales und europisches Recht 186 ff. (1999)). 68 Cour d’appel de Grenoble, France, 26 April 1995, CLOUT case No. 151, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/default.htm. 67

183

Franco Ferrari

Article 8(2) and the interpretive standards to which it refers were also invoked in order to determine whether a loss was to be considered foreseeable under Article 74.69

VI. Elements to be taken into account in interpreting statements: Negotiations and the parol evidence rule Article 8(3) provides that, in determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case,70 including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.71 According to both commentators72 and courts,73 these criteria have to be taken into account whenever a statement or conduct has to be interpreted, i. e., regardless of whether the interpretation is to occur under Article 8(1)74 or Article 8(2).75 As the list of relevant criteria in Article 8(3) is non-exhaustive,76 however, other elements may become germane. One court, for instance, stated that in the interpretation of statements or conduct the good faith principle referred to in Article 7(1) in connection with interpreting the Convention, must also

69 Oberster Gerichtshof, Austria, 14 January 2002, available at http://131.152.131.200/cisg/ urteile/643.htm. 70 See Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Praxis des internationalen Privat- und Verfahrensrechts 137 (1996)). 71 For references in case law to Art. 8(3), see Bezirksgericht St. Gallen, Switzerland, 3 July 1997, CLOUT case No. 215 (Schweizerische Zeitschrift f
r internationales und europisches Recht 84 f. (1998)); Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 ff. (1995)). 72 See B. Audit, La vente Internationale de Marchandises 43 (1991); Melis, supra note 10, at 94; Murray, supra note 42, at 48; Rudolph, supra note 28, at 142. 73 In arbitration, see ICC Court of Arbitration, Case No. 8324, 1995, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText. 74 See Bundesgerichtshof, Germany, 11 December 1996, CLOUT case No. 268 (Der Betrieb 572 (1997)) stating that the elements referred to in art. 8(3) have to be taken into account when interpreting a statement or other conduct by a party under art. 8(1). 75 See Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106 (Zeitschrift f
r Rechtsvergleichung 79 ff. (1995)). 76 According to both the legislative history (see Official Records of the United Nations Conference, supra note 11, at 18) and scholarly writing (see Bydlinski, supra note 23, at 75; Farnsworth, supra note 23, at 100; Ferrari, supra note 16, at 179; Lopez Lopez, supra note 23, at 125; Melis, supra note 10, at 96), the list of circumstances to be taken into account is not an exhaustive list.

184

Interpretation of statements: Article 8

be considered.77 Taking into account all these elements may, as pointed out both in scholarly writing78 and by case law referred to in the draft Digest,79 result in silence amounting to acceptance of an offer. With respect to the circumstances expressly listed in Article 8(3), it has been suggested that the order in which the circumstances appear indicates a hierarchy to be followed in employing them.80 Pursuant to that view, priority is to be given to the negotiations, a view justified on the basis that the contents of a contract can – more often than not – be deduced mainly from the negotiations.81 Despite this view, which I share,82 one court applied the so-called “parol evidence rule” to a contract governed by the Convention.83 This rule, which notwithstanding its name applies indiscriminately to both parol and written evidence,84 seeks to give legal effect to the contracting parties’ final, and in certain instances complete, expressions of their agreement which they have reduced to writing. Consequently, where the agreement is supposed to be a complete integration, the parol evidence rule prohibits a party from introducing evidence of prior agreements or negotiations that contradict or even are consistent with the writing. This means, however, that the parol evidence rule is inconsistent with Article 8(3), by virtue of which the negotiations have to be taken into account in the interpretation of a contract. This is why the majority of commentators rightly find that the parol evidence rule does not apply to contracts governed by the CISG.85 Moreover, this decision is in contrast with opinions from 77

Handelsgericht Z
rich, Switzerland, 30 November 1998, CLOUT case No. 251 (Schweizerische Zeitschrift f
r internationales und europisches Recht 186 ff. (1999)). See also Schiedsgericht der Handekkammer Hamburg, Germany, 21 June 1996, CLOUT case No. 166, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=196&step= FullText. 78 See Junge, supra note 28, at 73; Rudolph, supra note 28, at 140. 79 See U.S. District Court for the Southern District of New York, United States, 14 April 1992, CLOUT case No. 23 (Filanto S.p.A. v. Chilewich International Corp., 789 F. Supp. 1229). 80 See Witz et al., supra note 3, at 102. 81 See Audit, supra note 72, at 43. 82 See Ferrari, supra note 16, at 180-81. 83 5th Circuit U.S. Court of Appeals, United States, 15 June 1993 (Beijing Metals & Minerals Import/Export Corporation v. American Business Center, Inc., 993 F.2d 1178). 84 See, e. g., Calleo, supra note 46, at 806-07. 85 See Ron N. Andreason, MCC-Marble Ceramic Center: The Parol Evidence Rule and Other Domestic Law under the Convention on Contracts for the International Sale of Goods, 1999 BYU L. Rev. 351 ff. (1999); Audit, supra note 72, at 43 note 3; Louis F. Del Duca & Patrick Del Duca, 106 Dick. L. Rev. 208-10 (2001); Samuel J.M. Donnelly & Mary Ann Donnelly, Commercial Law, 49 Syracuse L. Rev. 303 (1999); Anite Esslinger, Contracting in the Global Marketplace:

185

Franco Ferrari

several U.S. courts,86 which the draft Digest also quotes without taking any position as to which of the opposing views is the better one. Thus here is another example where more guidance would better promote the uniform and correct application of the CISG. One court87 expressly stated that “the parol evidence rule is not viable in [Convention] cases in light of Article 8 of the Convention”,88 since Article 8(3) expressly directs courts to give ‘due consideration ... to all relevant circumstances of the case including the negotiations’ to determine the intent of the parties. Given Article 8(1)’s directive to use the intent of the parties to interpret their statements and conduct, Article 8(3) is a clear instruction to admit and consider parol evidence regarding the negotiations to the extent they reveal the parties’ intent. According to another court, “Article 8(3) essentially rejects ... the parol evidence rule”.89 And another court correctly stated that “contracts governed by the [Convention] are freed from the limits of the parol evidence rule and there is a wider spectrum of admissible evidence to consider in construing the terms of the parties’ agreement”.90 One court, after pointing out the problems that may arise under the Convention with respect to parol evidence, stated that to the extent parties The UN Conventions on Contracts for the International Sale of Goods and the Limitation Period in the International Sale of Goods, SE06 A.L.I.-A.B.A. 84 (1999); Sunil R. Harjani, The Convention on Contracts for the International Sale of Goods in United States Courts, 23 Hous. J. Int’l Law 77 ff. (2000); Monica Killian, CISG and the Problem with Common Law Jurisdictions, 10 J. Transnat’l L. & Pol. 231 (2001); Lopez Lopez, supra note 23, at 118; Murray, supra note 42, at 46; Witz et al., supra note 3, at 96. 86 In addition to the decisions referred to subsequently in the text, see U.S. District Court for the Western District of Michigan, United States, 17 December 2001 (Shuttle Packaging Systems v. Tsonakis et al., 2001 U.S. Dist. LEXIS 21630) also available at http://www. cisg.law.pace.edu/cisg/wais/db/cases2/011217u1.html; U.S. District Court for the Northern District of Illinois, United States, 27 October 1998, CLOUT case No. 419 (Mitchell Aircraft Spares, Inc. v. European Aircraft Service AB, 23 F. Supp. 2d 915). 87 11th Circuit U.S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino S.p.A, 144 F.3d 1384). 88 Id. 89 U.S. District Court for the Southern District of New York, 14 April 1992, CLOUT case No. 23 (Filanto S.p.A. v. Chilewich Int’l Corp., 789 F. Supp. 1229). 90 U.S. District Court for the Southern District of New York, United States, 6 April 1998, CLOUT case No. 413 (Calzaturificio Claudia S.n.c. v. Olivieri Footwear Ltd., 1998 U.S. Dist. LEXIS 4586).

186

Interpretation of statements: Article 8

wish to avoid parol evidence problems they can do so by including a merger clause in their agreement, thus extinguishing any and all prior agreements and understandings not expressed in the writing.91

VII. Elements to be taken into account in interpreting statements:

Subsequent conduct Pursuant to Article 8(3), another element to be taken into account in the interpretation of statements is the subsequent conduct of the parties. According to one author, the reference to the subsequent conduct is surprising, “since the meaning of a statement is supposed to be determined at the time of its effectiveness”.92 This is why various authors (correctly) have stated that subsequent conduct merely serves to show what intention existed at the time the statement was made,93 a view held also by both a Swiss court94 and a German one.95 In the Swiss case,96 the court inferred the buyer’s intention to be bound and the quantity of the goods by interpreting the buyer’s statements and conduct according to the understanding of a reasonable person of the same kind as the other party in the same circumstances. It held that, absent any relevant circumstance or practice between the parties, the intention to be bound had to be interpreted according to the subsequent conduct, after the conclusion of the contract, of the party that had made the statement. In particular, it held that the buyer’s request to the seller to issue an invoice to the embroiderer for delivered textiles was sufficient evidence of the buyer’s intention to be bound at the time it made its proposal. Furthermore, the fact that the buyer complained about the quantity only two months after delivery to the embroiderer gave the court good reason to believe that a valid contract had been concluded for the sale of the quantity of textiles actually delivered to the embroiderer. It has also been stated that “waiver clauses” do not prevent subsequent conduct from being relevant, as the purpose of “waiver clauses” is simply to 91

11th Circuit U.S. District Court, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino S.p.A, 144 F.3d 1384). 92 Schlechtriem, supra note 58, at 36-37. 93 See Achilles, supra note 23, at 33; Farnsworth, supra note 23, at 100; Magnus, supra note 26, at 168; Melis, supra note 10, at 97; Karollus, supra note 16, at 49. 94 Bezirksgericht St. Gallen, Switzerland, 3 July 1997, CLOUT case No. 215 (Schweizerische Zeitschrift f
r internationales und europisches Recht 84 f. (1998)). 95 Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5 (Praxis des internationalen Privat- und Verfahrensrechts 400 ff. (1991)). 96 Bezirksgericht St. Gallen, Switzerland, 3 July 1997, CLOUT case No. 215 (Schweizerische Zeitschrift f
r internationales und europisches Recht 84 f. (1998)).

187

Franco Ferrari

bar modification of the contract through conduct. These clauses should not, however, prevent subsequent conduct from being relevant for determining the meaning of a contract already concluded.97 Where subsequent conduct of one party conflicts with a statement that party made, the latter must prevail98 on the basis of the principle “protestatio facto contraria non valet”.99 Where, however, there is a contrast between the original common intention of the parties and their subsequent conduct, this may be seen as a modification of the contract pursuant to Article 29 CISG.100 This issue is another one of those not dealt with in the draft Digest, as case law on this point is still missing.

VIII. Standard contract terms and the language of statements Finally, it should be mentioned that Article 8 has also been invoked not only in commentary, but also in case law, to solve the problem of whether and under what conditions standard contract terms proposed by one party become part of the contract.101 As for case law (referred to in the draft Digest), the German Supreme Court has correctly held that the issue of the inclusion of standard terms is to be 97

See Witz et al., supra note 3, at 103. See Magnus, supra note 26, at 169; Melis, supra note 10, at 97. 99 See Junge, supra note 28, at 71. 100 See Schlechtriem, supra note 58, at 37. 101 For papers dealing in detail with the issue referred to in the text, see, e. g., W. Drasch, Einbeziehungs – und Inhaltskontrolle Vorformulierter Geschftsbedingungen im Anwendungsbereich des UN-Kaufrechts (1999); C.T. Ebenroth, Internationale Vertragsgestaltung im Spannungsverhltnis zwischen AGBG, IPR-Gesetz und UN-Kaufrecht, sterreichische Juristische Bltter 681 ff. (1986); A. Janssen, Kollidierende Allgemeine Geschftsbedingungen im internationalen Kaufrecht (CISG), Wirtschaftsrechtliche Bltter 453 ff. (2002); C.M. Moecke, Das UNCITRAL-bereinkommen
ber den Warenkauf und die Allgemeinen Geschftsbedingungen – doch etwas mehr als nichts?, Recht der internationalen Wirtschaft 678 ff. (1984); H.M
ller, Allgemeine Geschftsbedingungen im internationalen Wirtschaftsverkehr (1994); P. Schlechtriem, Kollidierende Geschftsbedingungen im internationalen Vertragsrecht, in Festschrift f
r Rolf Herber zum 70. Geburtstag 36 ff. (K.H.Thume ed., 1999); C. Sistermann, Die Anwendung des AGB-Gesetzes bei Geltung des Kaufrechts
bereinkommens der Vereinten Nationen vom 11. April 1980 am Beispiel formularmssiger Schadensersatzfreizeichnungen (1995); S. Teklote, Die Einheitlichen Kaufgesetze und das deutsche AGB-Gesetz (1994); F.G. von Westphalen, Allgemeine Geschftsbedingungen und Einheitliches Kaufgesetz, in Einheitliches Kaufrecht und nationales Obligationenrecht 49 ff. (P. Schlechtriem ed., 1987). 98

188

Interpretation of statements: Article 8

resolved on the basis of the Convention’s interpretation rules rather than the rules of applicable domestic law.102 Invoking the interpretive criteria set forth in Article 8, the German Supreme Court stated that whether the standard contract terms are part of a proposal must be determined on the basis of how a “reasonable person of the same kind as the other party” would have understood the offer. Specifically, the court asserted that “it is required that the recipient of a contract offer that is supposed to be based on general terms and conditions has the possibility to become aware of them in a reasonable manner” and that “an effective inclusion of general terms and conditions above all requires that the intention of the offeror that it wants to include its terms and conditions into the contract be apparent to the recipient of the offer”. Furthermore, according to the court, the Convention requires the user of general terms and conditions to transmit the text or make it available” to the other party.103 A different German court104 reached basically the same conclusions, and in doing so it also dealt with the issue of the language in which statements have to be made to be effective. According to that court, in the absence of an express provision in the Convention, the inclusion of standard contract terms has to be decided on the basis of an interpretation of the contract in light of Article 8. A reference by one party to its standard terms must be such as to put a reasonable person of the same kind as the other party in a position to understand it and to gain knowledge of the standard terms. According to the court, one of the circumstances to be taken into account is the language in which the standard terms are written. In the case at hand the seller’s standard contract terms were not in the language of the contract. The seller should have sent a translation or at least a text both in the language of the contract and in the other language. Since, however, the seller had not done this, the standard contract terms had not become part of the contract. A similar solution was adopted by a Belgian court which stated that standard contract terms written in a language different from that of the contract cannot bind the other party.105 Another German court, furthermore, held that a party that accepts statements relating to the contract in a language different from the one used for the contract is bound by the contents of such statements, since it is up to that party to get acquainted with the contents of 102 Bundesgerichtshof, Germany, 31 December 2001 (Internationales Handelsrecht 14 ff. (2002)). 103 Id. 104 Landgericht Heilbronn, Germany, 15 September 1997, CLOUT case No. 345, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/562.htm. 105 Rechtbank Koophandel Hasselt, Belgium, 2 June 1999, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/1999-06-02.htm.

189

Franco Ferrari

that statement.106 In this author’s opinion, this decision does not necessarily contradict the foregoing ones. However another German decision, also referred to in the draft Digest,107 is inconsistent with the foregoing decisions. In that case, the court held that whether a notice written in a language other than the language in which the contract was made (and not the language of the addressee) was effective had to be decided on a case-by-case basis, taking into account the understanding of a reasonable person and giving due consideration to usages and practices observed in international trade, as per Articles 8(2) and 8(3). The mere fact that the notice was given in a language that was not that of the contract or the addressee did not prevent the notice from being effective. The foreign language could be the language normally used in the respective trade sector, to which the parties may be considered to have agreed; and even where this was not the case, the notice would be effective if the debtor, as was true in the case before the court, could have reasonably been expected to request from the sender of the notice explanations or a translation. The cases that deal with the language issue again illustrate the limits of the draft Digest, which merely cites the various court decisions without commenting on them, even where the decisions conflict with each other. This goes to show that, although the draft Digest is useful, it should not be read acritically. 106

Landgericht Kassel, Germany, 15 February 1996, CLOUT case No. 409, available at http:// www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/190.htm. 107 Oberlandesgericht Hamm, Germany, 8 February 1995, CLOUT case No. 132 (Recht der Internationalen Wirtschaft 153 ff. (1997)).

190

Trade usage and practices established between the parties: Article 9 Franco Ferrari* I. Introduction Despite the importance of Article 9 – it describes the extent to which trade usages and practices established between the parties are binding – it has seldom been referred to in case law, as evidenced by the limited number of court decisions cited in the draft Digest section dealing with this provision. Nor has it been frequently discussed in academic writing.1 Since the few existing cases have not dealt with all the issues which may arise in connection with trades usages and practices established between the parties, it is once again necessary to go beyond the Digest. This is true, however, not only with respect to the issues the draft Digest does not touch upon, but also with respect to those to which it refers by merely citing court decisions that in some cases contradict each other. The starting point for these remarks, obviously, is the text of Article 9, which has its predecessors in Article 13 ULF and Article 9 ULIS,2 but which *

Professor of International Law, Verona University School of Law. For articles on usages and practices, see Stephen M. Bainbridge, Trade Usages in International Sales of Goods: An Analysis of the 1964 and 1980 Sales Convention, 24 Va. J. Int’l L. 619 ff. (1984); M.J. Bonell, Die Bedeutung der Handelsbruche im Wiener Kaufrechts
bereinkommen von 1980, Juristische Bltter 385 ff. (1985); E. Allan Farnsworth, Unification of Sales Law: Usage and Course of Dealing, Unification and Comparative Law in Theory and Practice: Liber amicorum Jean Georges Sauveplanne 81 ff. (1984); F. Ferrari, La rilevanza degli usi nella convenzione di Vienna sulla vendita internazionale di beni mobili, Contratto e Impresa 239 ff. (1994); Aleksandar Goldstajn, Usages of Trade and Other Autonomous Rules of International Trade According to the UN (1980) Sales Convention, in International Sale of Goods: Dubrovnik Lectures 55 ff. (Ptar arcˇevic´ & Paul Volken, eds., 1986); V. Holl & O. Keßler, “Selbstgeschaffenes Recht der Wirtschaft” und Einheitsrecht – Die Stellung der Handelsbruche und Gepflogenheiten im Wiener UNKaufrecht, Recht der internationalen Wirtschaft 457 ff. (1995). 2 See W.H. Achilles, Kommentar zum UN-Kaufrechts
bereinkommen (CISG) 35 (2000); Michael Joachim Bonell, Art. 9, ¶ in Commentary on the International Sales Law 104 1

191

Franco Ferrari

nevertheless generated intense discussions at the 1980 Vienna Conference at which the final text of the CISG was adopted.3 Article 9, which is as dispositive as any other provision of the CISG4 (with the exception of Article 12), although this is nowhere pointed out in the draft Digest, defines the legal consequences of trade usages and practices within the framework of the CISG.5 With regard to their binding character, however, it is essential to note that the text of Article 9 distinguishes – as does the draft Digest6 – between usages and existing practices that have been accepted by the parties (paragraph (1)), and other relevant usages which bind the parties even in the absence of any agreement between them (paragraph (2)).7

II. Usages agreed to and practices established between the parties (Article 9(1)) A. Usages Under Article 9(1), the parties are bound by any usage to which they have agreed. As pointed out in case law (referred to in the draft Digest), such agreement need not be explicit;8 the agreement by which a usage becomes relevant may be implicit,9 as long as there is a real consent,10 and it can also take place after conclusion of the contract. (Cesare Massimo Bianca & Michael Joachim Bonell eds., 1987); R. Herber & B. Czerwenka, Internationales Kaufrecht. Kommentar zu dem bereinkommen der Vereinten Nationen vom 11 April 1980
ber Vertrge
ber den internationalen Warenkauf 56 (1991); W. Melis, Art. 9, Kommentar zum UN-Kaufrecht 99 (H. Honsell ed., 1997); U. Magnus, Kommentar zum B
rgerlichen Gesetzbuch mit Einf
hrungsgesetz und Nebengesetzen, Wiener UNKaufrecht (CISG) 172 (13th revised ed., 1999). 3 See United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March – 11 April 1980, Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee 89, 262 ff. (1981); Bonell, supra note 2, at 109-10. 4 See M.J. Bonell, Commento all’art. 9, Nuove leggi civ. comm. 38 (1989). 5 See Holl & Keßler, supra note 1, 457. 6 See draft UNCITRAL Digest comments on Article 9, ¶ 1. 7 See A. Goddard, El Contrato de Compraventa Internacional 80 (1994); Calvo Caravaca, Art. 9, in La compraventa internacional de mercaderas. Comentario de la Convencin de Viena 137 (L. Diez-Picazo ed., 1998). 8 See, e. g., Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/ 10_34499g.htm. 9 See Official Records of the United Nations Conference, supra note 3, at 19; Achilles, supra note 2, at 36; Bonell, supra note 2, at 107; Bonell, supra note 4, at 39; Ferrari, supra note 1, at 247; Melis, supra note 2, at 99; U. Huber, Der UNCITRAL-Entwurf eines bereinkommens

192

Trade usage and practices established between the parties: Article 9

The term “usage” is unfortunately not defined in the CISG.11 Nevertheless, this does not warrant recourse to domestic notions or definitions, as this would run counter to the ratio conventionis.12 As is the case with most of the terms used in the CISG,13 the concept of “usage” must be interpreted autonomously;14 in other words, it must be interpreted on its own, without resorting to the national law of the interpreter or to particular national concepts or perceptions.15 Accordingly, “usage” within the meaning of the
ber internationale Warenkaufvertrge, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 427 (1979); M. Karollus, UN-Kaufrecht, 50 (1991); B. Rudolph, Kaufrecht der Export und Import Vertrge, Kommentierung des UN-bereinkommens
ber Internationale Warenkaufvertrge mit Hinweisen f
r die Vertragspraxis 141 (1996); W. Junge, Art. 9, in Kommentar zum Einheitlichen UN-Kaufrecht (CISG) 150-151 (P. Schelchtriem ed., 3d ed., 2000); A. L
deritz & A. Fenge, art. 9, B
rgerliches Gesetzbuch mit Einf
hrungsgesetz und Nebengesetzen, Volume 13, bereinkommen der Vereinten Nationen
ber Vertrge
ber den internationalen Warenkauf (CISG) 31 (2000); W. Witz et al., International Einheitliches Kaufrecht 107 (2000); to the same effect in the case law, see Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/10_34499g. htm. For the opposite view, see Goddard, supra note 7, at 80 ff.; Clayton P. Gilette, Harmony and Stasis in Trade Usages for International Sales, 39 Va. J. Int’l L. 713. (1999). 10 See Achilles, supra note 2, at 37; Herber & Czerwenka, supra note 2, at 57-58; Magnus, supra note 2, at 174. 11 See Goddard, supra note 7, at 80; Bonell, supra note 2, at 110-11; Bonell, supra note 4, at 38; Calvo Caravaca, supra note 7, at 140; Goldstajn, supra note 1, at 96; Melis, supra note 2, at 99; Rudolph, supra note 9, at 144; Junge, supra note 9, at 148. 12 See F. Ferrari, Vendita internazionale di beni mobili. Arts. 1-13. Ambito di applicazione. Disposizioni generali 187 (1994); Holl & Keßler, supra note 1, at 458. 13 For more details, see F. Ferrari, La jurisprudence sur la CVIM: un nouveau dfi pour les interprtes?, Revue de droit des affaires internationales 495 ff. (1998). 14 See Achilles, supra note 2, at 35-36; Bonell, supra note 2, at 111; Bonell, supra note 1, at 386; Calvo Caravaca, supra note 7, at 140; Ferrari, supra note 12, at 187; Herber & Czerwenka, supra note 2, at 57; Melis, supra note 2, at 99; Witz et al., supra note 9, at 107. 15 See F. Diedrich, Autonome Auslegung von Internationalem Einheitsrecht. Computersoftware im Wiener Kaufrecht 77 (1994); F. Ferrari, Besprechung von Magnus, Wiener UNKaufrecht, Berlin, 1995, Praxis des internationalen Privat- und Verfahrensrechts 65 (1997); V. Heuz, La vente internationale de marchandises – droit uniforme No. 95 (2d ed., 2000); P. Schlechtriem, Internationales UN-Kaufrecht 29-30 (1996); Paolo Torzilli, The Aftermath of MCC-Marble: Is This the Death Knell for the Parol Evidence Rule?, 74 St. John’s L. Rev. 859 (2000). In the case law, see Oberlandesgericht Karlsruhe, Germany, 25 June 1997, CLOUT case No. 230, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=296&step=FullText (stating that German legal terms such as “mistake” and “warranties” are not transferable to the CISG); Gerichtsprsident Laufen, Switzerland, 7 May 1993, CLOUT case No. 201, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=105&step=FullText (stating that the CISG should be interpreted

193

Franco Ferrari

CISG includes all those actions or modes of behaviour (including omissions)16 that are generally and regularly observed in the course of business transactions in a specific area of trade or at a certain trade centre.17 It is not necessary, however, that the relevant commercial circles believe that the usages are binding.18

In contrast to usages that the parties are bound by under Article 9(2),19 usages to which the parties are bound by agreement under Article 9(1) need not be international, as is correctly pointed out in case law20 cited in the draft Digest.21 Local, regional or national usages may also be relevant under Article 9(1).22 Furthermore, Article 9(1), as opposed to Article 9(2),23 does not require that the usages be “widely known”24 – as was correctly stated by the Austrian Supreme Court.25 The fact that any rule agreed on by the parties supersedes those of the CISG26 has induced some authors to contend that an exact definition of “usages” is not relevant as far as Article 9(1) is concerned, although this is not true to the same extent in respect of Article 9(2).27 According to Article 4 CISG, the issue of validity is one generally28 not dealt with by the CISG,29 as has been expressly stated by the Austrian Supreme Court on two different occasions,30 both of which are cited in the draft autonomously and not from the national law viewpoint held by the individual applying the law). 16 See Ferrari, supra note 1, at 244; Junge, supra note 9, at 148. 17 See Bonell, supra note 2, at 112; Melis, supra note 2, at 99; Magnus, supra note 2, at 173. 18 See Junge, supra note 9, at 148. 19 See infra notes 53 ff and accompanying text. 20 See Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/ 10_34499g.htm. 21 See Melis, supra note 2, at 101; Karollus, supra note 9, at 51. 22 See Achilles, supra note 2, at 36; Bonell, supra note 2, at 388; Junge, supra note 9, at 15051. 23 See infra notes 51 ff and accompanying text. 24 To this effect, see L
deritz & Fenge, supra note 9, at 31; Magnus, supra note 2, at 173-74. 25 Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Juristische Bltter 318 (1999)). 26 See, e. g., Bonell, supra note 2, at 107. 27 See Magnus, supra note 2, at 173; Rudolph, supra note 9, at 144-45. 28 However, it follows from Article 11 CISG that the formal requirements under the applicable national law concerning validity do not govern as a rule. See, contrary to all others, Herber & Czerwenka, supra note 2, at 57. 29 See, e. g., Bonell, supra note 4, at 42; Karollus, supra note 9, at 50; Rudolph, supra note 9, at 143. 30 See Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg.at/

194

Trade usage and practices established between the parties: Article 9

Digest. Thus whether usages agreed to by the parties are valid will depend on either the national law applicable by virtue of the private international law rules,31 as correctly stated by the Austrian Supreme Court,32 or in the case of usages that are common to certain trade centres (such as seaports or stock exchanges), the law applicable to that location.33 If it is determined that these usages are applicable (and effectively agreed upon), they prevail over the provisions of the CISG.34 This point was recently made in case law.35 B. Practices established between the parties “Practices” within the meaning of the CISG are modes of conduct that are regularly observed by or have been established between the parties to a specific transaction36 (such as, to name one of the examples referred to in the draft Digest,37 the prompt delivery of spare parts for machinery).38 Thus, the practice between the individual parties, rather than general practice, is decisive.39 This necessarily presupposes a business relationship characterised 1_4901i.htm; Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/ 10_34499g.htm. 31 See Goddard, supra note 7, at 83; Bonell, supra note 2, at 109-10; Ferrari, supra note 12, at 188; Holl & Keßler, supra note 1, at 460; Melis, supra note 2, at 100; L
deritz & Fenge, supra note 9, at 32; Magnus, supra note 2, at 174; Witz et al., supra note 9, at 111. 32 Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Zeitschrift f
r Rechtsvergleichung 63 (1999)). 33 See Junge, supra note 9, at 149. 34 See Goddard, supra note 7, at 81; F. Enderlein et al., Internationales Kaufrecht 70-71 (1991); Ferrari, supra note 12, at 192; Herber & Czerwenka, supra note 2, at 57-58; Holl & Keßler, supra note 1, at 460; Melis, supra note 2, at 101; Karollus, supra note 9, at 50; J.-P. Plantard, Un nouveau droit uniforme de la vente internationale: La Convention des Nations Unies du 11 avril 1980, Journal du droit international 317 (1988); Rudolph, supra note 9, at 143; Junge, supra note 9, at 147. 35 Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/ 10_34499g.htm. 36 See Bonell, supra note 2, at 387; Karollus, supra note 9, at 51; B. Piltz, Internationales Kaufrecht 69 (1993). 37 For other examples of court decisions referring to practices established between the parties, see Cour d’appel Grenoble, France, 21 October 1999, CLOUT case No. 313, available at http://witz.jura.uni-sb.de/CISG/decisions/211099v.htm; Cour d’appel Grenoble, France, 13 September 1995, CLOUT case No. 202 (Transportrecht-Internationales Handelsrecht 7 (1999)). 38 ICC Court of Arbitration, Case No. 8611, 1997, available in Unilex at http://www. unilex.info/case.cfm?pid=1&do=case&id=229&step=FullText. 39 See Bonell, supra note 2, at 106; Bonell, supra note 4, at 39; Ferrari, supra note 12, at 189; Herber & Czerwenka, supra note 2, at 56-57; Holl & Keßler, supra note 1, at 457; Melis, supra

195

Franco Ferrari

by a certain duration and the conclusion of a number of contracts.40 Thus, the requirements are not satisfied in the case of a relationship between two parties limited to two prior contracts that were concluded simultaneously.41 Furthermore, no practice can arise from a single delivery of goods between the parties.42 Another court decision on this issue,43 also cited in the Digest (unfortunately without any comment as to whether the view expressed therein is correct), is surprising, to say the least. The court ruled that a party’s perceptions from preliminary discussions, although not expressly agreed upon, could become “practices” within the meaning of Article 9 even at the outset of the business relationship, provided that the business partner realizes from these circumstances that the other party is only willing to enter into a contract under certain conditions or in a certain form. The fact that parties are bound by those practices that have originated between them in the course of extended business relations is in keeping with the general principles of good faith underlying the CISG,44 as well as the prohibition of venire contra factum proprium.45 An element of trust, which should not be frustrated, has come into existence between the parties.46 Accordingly, for instance, a party cannot contend that the contract does not provide for notification periods if existing practices indicate the opposite. The parties may, of course, dispense with these practices by agreement.47 note 2, at 100; Karollus, supra note 9, at 51; K. Neumayer & C. Ming, Convention de Vienne sur les contrats de vente internationale de marchandises. Commentaire 111 (1993); Rudolph, supra note 9, at 143; L
deritz & Fenge, supra note 9, at 31; Magnus, supra note 2, at 174. 40 See Junge, supra note 9, at 150; Schlechtriem, supra note 15, at 38. 41 See Zivilgericht Basel-Stadt, Switzerland, 3 December 1997, CLOUT case No. 221, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=372&step=FullText. See also Amstgericht Duisburg, Germany, 13 April 2000, CLOUT case No. 360 (Internationales Handeslrecht 115 (2001)), where it is explicitly pointed out that the requisite duration and continuity does not yet exist in the case of two previous deliveries. 42 See Landgericht Zwickau, Germany, 19 March 1999, available at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/519.htm. 43 Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176, available at http:// www.cisg.at/10_51895.htm. 44 See Melis, supra note 2, at 100; Junge, supra note 9, at 150. 45 See Calvo Caravaca, supra note 7, at 137; John O. Honnold, Uniform Law for International Sales No. 116 (3d ed. 1999); Melis, supra note 2, at 100; Rudolph, supra note 9, at 143; Witz et al., supra note 9, at 112. 46 See Herber & Czerwenka, supra note 2, at 56-57; Honnold, supra note 45, ¶ 116; L
deritz & Fenge, supra note 9, at 31. 47 See Honnold, supra note 45, ¶ 116; in case law, see ICC Court of Arbitration, Case No. 8817, 1997, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=398&step=FullText.

196

Trade usage and practices established between the parties: Article 9

With regard to the relationship between practices existing between the parties and the provisions of the CISG, it must be assumed that the former have priority,48 as have usages agreed upon by the parties.49 Should the usages agreed upon contradict the practices established between the parties, the usages take precedence.50

III. The binding force of international trade usages (Article 9(2)) A. Widely-known and regularly-observed usages Even absent any agreement to that effect, the parties to an international sales contract may be bound by certain trade usages, as the parties “are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation”51 those usages. Thus, by means of a “fiction”,52 Article 9(2) makes applicable those trade usages. At the 1980 Vienna Diplomatic Conference concerns were expressed by several countries that Article 9(2) would lead to the applicability of usages unknown to them or in the development of which they had not taken part.53 As a result, the scope of the “fictional agreement” Article 9(2) refers to has been very narrowly circumscribed.54 Indeed, in order to be binding under Article 9(2) usages must be widely known and regularly observed in the particular

48

See Calvo Caravaca, supra note 7, at 138; Rudolph, supra note 9, at 143; Magnus, supra note 2, at 174; Witz et al., supra note 9, at 105-06. 49 See note 27 supra, and accompanying text. 50 See Achilles, supra note 2, at 38; Calvo Caravaca, supra note 7, at 138; Ferrari, supra note 12, at 192; A. Garro & A. Zuppi, Compraventa internacional de mercaderas 62 (1990); Piltz, supra note 36, at 69; G. Reinhart, UN-Kaufrecht, Kommentar zum bereinkommen der Vereinten Nationen vom 11 April 1980
ber Vertrge
ber den internationalen Warenkauf 35 (1991). For different opinions, see Magnus, supra note 2, at 174-75 (proposing a case-bycase approach); Enderlein et al., supra note 34, at 71 (holding the view that practices should take precedence). 51 Article 9(2). 52 See Achilles, supra note 2, at 37; Bonell, supra note 4, at 40; Enderlein et al. supra note 34, at 71; Herber & Czerwenka, supra note 2, at 58; Melis, supra note 2, at 101; Rudolph, supra note 9, at 143; Magnus, supra note 2, at 175; Witz et al., supra note 9, at 108. In case law, see Oberster Gerichtsohf, Austria, 21 March 2000, available at http://www.cisg.at/10_ 34499g.htm. 53 See Junge, supra note 9, at 151; H. van Houtte, Algemene Bepalingen en interpretatie, in Het Weens Koopverdrag 65 (H. van Houtte et al. eds., 1997). 54 See Schlechtriem, supra note 15, at 38-39.

197

Franco Ferrari

international trade concerned, as has been emphasized also in case law.55 Moreover, the parties must have known (or ought to have known) about the usages.56 If the aforementioned prerequisites are met, the usages are binding57 and take precedence over the CISG,58 as was correctly pointed out in two cases decided by the Austrian Supreme Court and mentioned in the draft Digest.59 The draft Digest also cites a recent U.S. decision that gives a different – less restrictive – reading of Article 9(2), stating that all “usages and practices of the parties or the industry are automatically incorporated into any agreement governed by the Convention, unless expressly excluded by the parties”.60 The draft Digest, as usual, limits itself to acritically citing all the cases, without taking a position as to which view is preferable. It is therefore once again up to commentators to determine which interpretation 55

See Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Juristische Bltter 318 (1999)). 56 See Ferrari, supra note 12, at 195; Herber & Czerwenka, supra note 2, at 58; Gilette, supra note 9, at 719; D. Maskow, The Convention on the International Sale of Goods from the Perspective of the Socialist Countries, in La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 58 (1981); Neumayer & Ming, supra note 39, at 117-18. In case law, see ICC Court of Arbitration, Case No. 8324, 1995 (English abstract available in Unilex at www.unilex.info); Zivilsgericht Basel-Stadt, Switzerland, 21 December 1992, CLOUT case No. 95, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=104& step=FullText. 57 Thus the decision of the U.S. District Court for the Southern District of New York, United States, 10 May 2002 (Geneva Pharms. Tech. Corp. v. Barr Labs. Inc., 201 F. Supp. 2d 236), according to which the usages always apply provided that the parties have not expressly negated them, is incorrect. 58 See B. Audit, La vente internationale de marchandises 45 (1990); P. Bernardini, La compravendita internazionale, in Rapporti internazionali nel diritto internazionale 82 (G. Mirabelli ed., 1991); F. Bydlinski, Das allgemeine Vertragsrecht, in Das UNCITRALKaufrecht im Vergleich zum sterreichischen Recht 76 (P. Doralt ed., 1985); S.M. Carbone, L’ambito di applicazione ed i criteri interpretativi della convenzione di Vienna sulla vendita internazionale, in La vendita internazionale. La convenzione di Vienna dell’11 aprile 1980 77 (1981); Calvo Caravaca, supra note 7, at 144; Ferrari, supra note 12, at 202; Garro & Zuppi, supra note 50, at 62; Gilette, supra note 9, at 711; Honnold, supra note 45, ¶ 122; Official Records of the United Nations Conference, supra note 3, at 19; Rudolph, supra note 9, at 145. 59 Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/ 10_34499g.htm; Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Juristische Bltter 318 (1999)). 60 U.S. District Court for the Southern District of New York, United States, 10 May 2002 (Geneva Pharms. Tech. Corp. v. Barr Labs., Inc., 201 F. Supp. 2d 236, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/020510u1.html#vi).

198

Trade usage and practices established between the parties: Article 9

is to be preferred and which is to be rejected. The correct view is that only those usages which the parties knew or ought to have known and which in international trade are widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned, apply through Article 9(2)) (and the less restrictive U.S. court’s interpretation is wrong). As previously mentioned,61 where there is a conflict between usages applicable by virtue of Article 9(2) and rules of the CISG, the former prevail; where, however, there is a conflict between usages agreed upon by the parties or practices established between them, under Article 9(1), and usages that are applicable by virtue of a fictional agreement between the parties referred to in Article 9(2), the former takes precedence.62 This conflict is not dealt with in the draft Digest, but the draft Digest touches upon a different conflict – that between individual contractual clauses and usages applicable by virtue of Article 9(2): it refers to a German court decision which (correctly) states that the contractual clauses prevail.63 This conclusion should not cause any dispute, as the precedence of the contractual clauses can clearly be derived from the introductory language of Article 9(2). No court has yet dealt with the issue of which usage is to be preferred where there is a conflict between several usages applicable under Article 9(2). In that case, it may be assumed that those usages most closely related to the contractual relationship would take precedence.64 As mentioned earlier, to bind the parties by virtue of Article 9(2) usages must be “widely known” in the relevant branch of international trade.65 This does not mean that all persons who are active in that particular trade must know those usages,66 nor is it necessary that the usages be known throughout the

61

See note 58 supra, and accompanying text. See Achilles, supra note 2, at 35; Bonell, supra note 4, at 40; Gilette, supra note 9, at 722; Herber & Czerwenka, supra note 2, at 58; Rudolph, supra note 9, at 144-45; L
deritz & Fenge, supra note 9, at 31; Magnus, supra note 2, at 175. 63 Oberlandesgericht Saarbr
cken, Germany, 13 January 1993, CLOUT case No. 292, available at http://www.cisg-online.ch/cisg/urteile/83.htm. 64 See Achilles, supra note 2, at 38. For a different suggestion, see Bonell, supra note 2, at 109, who is of the opinion that the contradicting usages cancel each other out. 65 The period during which usages have been exercised is irrelevant, provided that the usages are widely known and observed regularly. See Honnold, supra note 45, ¶ 120. 1; Magnus, supra note 2, at 176. 66 See Magnus, supra note 2, at 176. 62

199

Franco Ferrari

world.67 This requirement also does not preclude the application of those usages which may be of mere local relevance, or valid only in certain places, such as usages at trade exhibitions or seaports.68 For such local usages to be valid under Article 9(2), however, it is necessary that international trade occur at these places69 and that the usages comply with all requirements concerning the degree of recognition and regular observance.70 This view now finds support in case law that is cited in the draft Digest. According to an Austrian court,71 Article 9(2) does not mean that, in the future, purely national or local usages can find no application for the interpretation and supplementation of contracts without an explicit reference by the parties. One can still presume an exception for usages that are in force at certain stock markets, trade fairs or deposit sites, as long as the usage is also regularly observed there in the trade with foreigners. Furthermore, the possibility does not seem to be excluded that a foreign tradesman, who is constantly active in another country and has already formed a number of transactions there, is bound by possible national usages. Some commentators have suggested that the requirement concerning the regular observance of usages is a “superfluous” prerequisite, since all usages that are widely known would also be regularly observed.72 This is not valid,73 however, since it is certainly possible that particular usages in certain

67

See Achilles, supra note 2, at 37; Audit, supra note 58, at 46; Bonell, supra note 2, at 391; Calvo Caravaca, supra note 7, at 142; Ferrari, supra note 12, at 199; Herber & Czerwenka, supra note 2, at 58-59; Rudolph, supra note 9, at 145; Junge, supra note 9, at 151; van Houtte, supra note 53, at 65. 68 See Achilles, supra note 2, at 37; Audit, supra note 58, at 46; Bonell, supra note 2, at 109; Bonell, supra note 4, at 40; Ferrari, supra note 1, at 255; Herber & Czerwenka, supra note 2, at 59. For a different opinion, see Harold J. Berman & Colin Kaufman, The Law of International Commercial Transactions (Lex Mercatoria), 19 Harv. Int’l L.J. 221 (1978); Melis, supra note 2, art. 9, ¶ 8. 69 See Herber & Czerwenka, supra note 2, at 58-59; Junge, supra note 9, at 151; L
deritz & Fenge, supra note 9, at 31-32. 70 See Achilles, supra note 2, at 38-39; Audit, supra note 59, at 46; Bonell, supra note 2, 391; Calvo Caravaca, supra note 7, at 142; Ferrari, supra note 12, at 199; Honnold, supra note 45, ¶ 120. 1; Karollus, supra note 9, at 52; Neumayer & Ming, supra note 39, at 118-19; Magnus, supra note 2, at 176. 71 Oberlandesgericht Graz, Austria, 9 November 1995, CLOUT case No. 175, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=370&step=FullText. 72 See Huber, supra note 9, at 428. 73 Accord, Herber & Czerwenka, supra note 2, at 59.

200

Trade usage and practices established between the parties: Article 9

countries are also known in other countries, but are not regularly observed there.74 B. Extent of familiarity with usages Under Article 9(2), parties involved in a specific business transaction are bound only if usages are known to them at the time of conclusion of the contract,75 or if they ought to have been familiar with the usages. This subjective requirement76 would often but – and this is the point – not always be satisfied in the case of usages that are “widely known”; the requirement is therefore not dispensable or redundant.77 One could in fact conceive of cases where usages were not known to the particular parties and where the parties ought not necessarily to have known about these usages, even though such usages were indeed “widely known”.78 Some commentators have argued that only parties involved in the relevant trade and located in the area where usages are widely known are subject to being bound by usages because of constructive (as opposed to actual) knowledge of the usages.79 This view appears to find confirmation in case law as well, as evidenced by the draft Digest. According to the Austrian Supreme Court,80 a usage can bind a party by virtue of Article 9(2) only if it either has its place of business in the geographical area where the usage is applicable, or if the party permanently deals within the area where the usage is applicable. In an earlier decision, that same court had made a similar statement:81 it held that a party to an international sales contract is charged with being familiar only with those international trade usages that are commonly known and regularly observed by parties to contracts of that specific branch in the specific geographic area where the party in question has his or her place of business. 74

See also Enderlein et al., supra note 34, at 73; Ferrari, supra note 1, at 253. See Karollus, supra note 9, at 52. 76 See Achilles, supra note 2, at 37-38; Ferrari, supra note 12, at 196; A. Frignani, Il contratto internazionale 311 (1990); Herber & Czerwenka, supra note 2, at 59; Reinhart, supra note 50, at 36. But see Bainbridge, supra note 1, at 655, characterizing the requirement as an objective one. 77 To this effect, see Huber, supra note 9, at 428. See also L
deritz & Fenge, supra note 9, at 32 (pointing out the limited practical importance of the requirement). 78 See Enderlein et al., supra note 34, at 72; Ferrari, supra note 12, at 198. 79 To this effect, see Magnus, supra note 2, at 176; Achilles, supra note 2, at 37-38. 80 Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/10_ 34499g.htm. 81 Oberster Gerichtshof, Austria, 15 October 1998, CLOUT case No. 240 (Juristische Bltter. 318 (1999)). 75

201

Franco Ferrari

C. Silence as a response to commercial letters of confirmation Are rules governing silence by the recipient of a commercial letter of confirmation usages that are binding on the parties to a contract governed by the CISG? This question must be answered in light of what was said above with respect to Article 9(2) – a position confirmed by one court.82 Thus the rules pertaining to this issue may be understood as “usages” within the (autonomous) meaning of the CISG.83 However, neither this fact, nor the fact that the rules relating to letters of confirmation are valid at the place of business of the recipient, suffice to bind the parties under Article 9(2).84 It is required that both parties have their place of business in the area where this practice exists or that they conduct business there on a regular basis. Furthermore, the practice must be well known and regularly observed in the relevant branch of trade.85 This position finds confirmation in two out of the three decisions cited in the draft Digest on this issue, namely in a German court decision86 and a Swiss one.87 The third cited decision,88 however, contradicts the aforementioned ones, as it rejected (wrongly, in this author’s opinion) the idea that usages on the effects of silence in response to a letter of confirmation may be at all relevant under the CISG.

82

Zivilgericht Basel-Stadt, Switzerland, 21 December 1992, CLOUT case No. 95, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=104&step=FullText (stating that a letter of confirmation is contractually binding, provided that this manner of concluding a contract meets the requirements for a trade usage under Article 9 CISG). 83 To this effect, see M.J. Esser, Die letzte Glocke zum Geleit? – Kaufmnnische Besttigungsschreiben im Internationalen Handel: Deutsches, Franzsisches, sterreichisches und Schweizerisches Recht und Einheitliches Recht unter der Kaufrechtskonvention von 1980, Zetischrift f
r Rechtsvergleichung 188 ff. (1988); Piltz, supra note 36, at 69. 84 Accord, Herber & Czerwenka, supra note 2, at 59-60. But see T.C. Ebenroth, Internationale Vertragsgestaltung im Spannungsverhltnis zwischen AGBG, IPR-Gesetz und UN-Kaufrecht, Juristische Bltter 688 (1986). 85 See Achilles, supra note 2, at 36, ¶ 4; Bydlinski, supra note 58, at 79 ff.; Holl & Kessler, supra note 1, at 459; Neumayer & Ming, supra note 39, at 118-19; Schlechtriem, supra note 15, at 39; L
deritz & Fenge, supra note 9, at 32; Magnus, supra note 2, at 177; van Houtte, supra note 53, at 65 (setting less stringent requirements). 86 Oberlandesgericht Frankfurt, Germany, 5 July 1995, CLOUT case No. 276, available at http://www.cisg-online.ch/cisg/urteile/258.htm. 87 Zivilgericht Basel-Stadt, Switzerland, 21 December 1992, CLOUT case No. 95, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=104&step=FullText. 88 Landgericht Frankfurt, Germany, 6 July 1994, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=189&step=FullText.

202

Trade usage and practices established between the parties: Article 9

The foregoing remarks show once again that, although the draft Digest is useful in that it cites (supposedly) all the decisions and views to be found in case law, it does not provide enough guidance. Per se the draft Digest cannot help to resolve doubts where there is contradicting case law. Neither does is help where there is no case law. D. INCOTERMS and the Unidroit Principles As indicated in the draft Digest, the relationship between usages and the INCOTERMS has been dealt with in case law. Clearly the INCOTERMS may

be binding under Article 9(1) on the basis of an agreement between the parties89 or under Article 9(2), if the requirements set forth in that provision are met. But the recent statement of U.S. court90 that, pursuant to article 9(2) of the Convention, “INCOTERMS definitions should be applied to the contract despite the lack of an explicit INCOTERMS reference in the contract” is incorrect. The court held that where “a contract refers to CIFdelivery, the parties refer to the INCOTERMS”,91 even where an explicit reference to the INCOTERMS is lacking. A similar statement can also be found in an arbitral award,92 as well as in the decision of an Italian court93 that interpreted an FOB clause according to the INCOTERMS, even though the parties had made no reference to the INCOTERMS. In this author’s opinion (and other commentators hold the same view),94 that position is incorrect, as it does not take into account that in various countries abbreviations such as FOB, CIF, etc., do not always have the meaning ascribed to them by the INCOTERMS.95 Unfortunately, the fact that the draft Digest lists three decisions all holding the same view makes that view appear not only to be the correct one, but also the only one. This is not necessarily so. Once again, it is wise to take a critical approach toward the draft Digest and the material it provides. 89

See Melis, supra note 2, at 101. U.S. District Court for the Southern District of New York, United States, 26 March 2002 (St. Paul Insurance Co. v. Neuromed Medical Systems & Support, 2002 U.S. Dist. LEXIS 5096, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/020326u1.html. 91 Id. 92 Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 6 June 2000 (Award No. 406/1998, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/000606r1.html). 93 Corte d’appello Genova, Italy, 24 March 1995, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=198&step=FullText. 94 See, e. g., Witz et al., supra note 9, at 112; contra, see Goddard, supra note 7, at 85; Bonell, supra note 2, at 113-14; Bonell, supra note 4, at 42; Enderlein et al., supra note 34, at 73; Herber & Czerwenka, supra note 2, at 61. 95 Accord, Gilette, supra note 9, at 736 ff. 90

203

Franco Ferrari

This should also be kept in mind when considering those decisions cited acritically in the draft Digest holding that the UNIDROIT Principles of International Commercial Contracts constitute usages of the kind referred to in Article 9(2) CISG.96 Whether those Principles in fact constitute usages in the sense of Article 9(2) CISG is to be decided on a case-by-case basis. At this point the Principles do not necessarily constitute usages of which the parties knew or ought to have known and which in international trade are widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned, even though a few arbitrators and commentators state the contrary.

IV. Burden of proof In conclusion, the question of the burden of proof will be touched upon briefly, although this is an issue of great practical importance. The starting point of any discussion on this issue is the question of whether it is possible to draw up one or more general principles relating to the burden of proof that precludes the application of national law under Article 7(2). This is a controversial question.97 Although several authors have rejected the point of view that the burden of proof is governed by the CISG and have therefore suggested that national law applies,98 the prevalent opinion – including in case law – is to the contrary.99 In principle, according to the prevailing view, the party benefiting from a provision must prove the prerequisites set out by

96

See ICC Court of Arbitration, Case No. 9333, 1998, English abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=400&step=Abstract; International Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation, Russian Federation, 5 June 1997 (award No. 229/1996, English abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=682&step=Abstract). 97 For monographs on the relationship between the CISG and procedural law in general and the burden of proof in particular, see M. Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts: Zugleich eine rechtsvergleichende Grundlagenstudie zur Beweislast (1995); R. Jung, Die Beweislastverteilung im UN-Kaufrecht (1996); B. Reimers-Zocher, Beweislastfragen im Haager und Wiener Kaufrecht (1995). 98 See, e. g., Warren Khoo, Art. 2, in Commentary on the International Sales Law, supra note 2, at 39. 99 See, e. g., Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003); Tribunale di Vigevano, 12 July 2000, CLOUT case No. 378 (published in English translation in 20 J.L. & Com. 209 ff. (2001). But see, e.g, ICC Court of Arbitration, Case No. 6653, 1993, CLOUT case No. 103 (Journal du droit international 1044 (1993)) (applying the Convention, but solving the problem of the burden of proof on the basis of non-uniform French law).

204

Trade usage and practices established between the parties: Article 9

that provision.100 As far as the allocation of the burden of proof is concerned, the basic rule is therefore actore incumbit probatio. This rule has also gained recognition in case law,101 most recently in an Italian court decision rendered on January 8, 2003.102 Therefore, the party that alleges the existence of any binding usage has to prove it,103 at least in those legal systems104 that consider the issue as being one of fact105 or in which for other reasons the tribunal is not obliged to seek proof of the usage itself.106 Where the party that carries the burden of proof does not succeed in proving it, the alleged usage will not be binding.107 100

See U. Magnus, Die allgemeinen Grundstze im UN-Kaufrecht, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 489 (1995); Neumayer & Ming, supra note 39, at 77-78; Schlechtriem, supra note 15, at 33-34. 101 See supra note 99. 102 Tribunale di Rimini, Italy, 26 November 2002, Giurisprudenza italiana 896 ff. (2003). 103 See Herber & Czerwenka, supra note 2, at 62; Witz et al., supra note 9, at 111. 104 In Austria, the question of whether a specific trade usage exists is a factual question, as expressly stated in a decision by the Oberster Gerichtshof, Austria, 21 March 2000, available at http://www.cisg.at/10_34499g.htm. 105 Id. 106 See Goddard, supra note 7, at 84; Rudolph, supra note 9, at 145. 107 See, e. g., Oberlandesgericht Dresden, Germany, 9 July 1998, CLOUT case No. 347, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/559.htm (party alleging that recipient’s lack of response to a letter of confirmation constitutes consent was unable to establish that this was a valid international trade usage); Zivilgericht Basel-Stadt, Switzerland, 3 December 1997, CLOUT case No. 221, available in Unilex at http://www.unilex.info/ case.cfm?pid=1&do=case&id=372&step=FullText (party alleging existence of a binding international trade usage according to which payment by means of direct transfer into the account of the seller is acceptable in the import trade industry need not prove that the parties ought to have been aware of this practice).

205

Writing requirements: Article 11-13 Franco Ferrari* I. Freedom from form requirements As pointed out both by commentators1 and courts,2 Article 11 CISG, which is based on Article 15 ULIS and Article 3 ULF,3 establishes for the Convention the principle of freedom from form requirements, which is also found in many domestic legal systems.4 Thus, under the CISG a contract of sale need in general not be concluded in writing and is not subject to any other specific requirement as to form.5 This means that a contract can, as has *

Professor of International Law, Verona University School of Law. See J. Adame Goddard, El contrato de compraventa internacional 73 (1999); K. Neumayer & C. Ming, Convention de Vienne sur les contrats de vente internationale de marchandises. Commentaire 126 (1993); B. Piltz, Internationales Kaufrecht 106 (1993); J. Rajski, Art. 11, in Commentary on the Uniform Sales Law: The 1980 Vienna Sales Convention 121 (Cesare Massimo Bianca & Michael Joachim Bonell, eds., 1987). 2 See Bundesgericht, Switzerland, 15 September 2000, available at http://www.bger.ch/ index.cfm?language=german&area=Jurisdiction&theme=system&page=content&maskd= 220. 3 Coca Pyeras, Art. 11, in La compraventa internacional de mercaderas. Comentario de la Convencion de Viena 150 (1998); R. Herber & B. Czerwenka, Internationales Kaufrecht 65 (1992). 4 Peter Schlechtriem, Art. 11, in Kommentar zum Einheitlichen UN-Kaufrecht 157 (Peter Schlechtriem ed., 3d ed., 2000). 5 See Oberster Gerichtshof, Austria, 9 March 2000, available at http://www.cisg.at/ 6_31199z.htm; Bezirksgericht St. Gallen, Switzerland, 3 July 1997, CLOUT case No. 215 (Schweizerische Zeitschrift f
r Internationales und Europisches Recht 84 (1998)); Oberster Gerichtshof, Austria, 2 February 1995 (Zeitschrift f
r Rechtsvergleichung 248 (1996)); Federal Court of Australia for the South Australian District in Adelaide, Australia, 28 April 1995, CLOUT case No. 308 (Roder Zelt-und Hallenkonstruktionen GmbHv. Rosedown Park Pty. Ltd., et al., available at http://cisgw3.law.pace.edu/cisg/wais/db/cases2/950428a2.html; Oregon Court of Appeals, United States, 12 April 1995, CLOUT case No. 137 (GPL Treatment v. Louisiana-Pacific, 133 Or. App. 633, also available at http://www.cisg.law.pace.edu/cisg/wais/ db/cases2/950412u1.html. See also United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March – 11 April 1980, Official Records, Documents of 1

206

Writing requirements: Article 11-13

been confirmed by various court decisions, be concluded orally6 as well as through the conduct of the parties.7 Article 11, furthermore, also pre-empts domestic rules that require a contract to be signed to bind the parties, a view apparently shared by a Swiss court which stated that a signature was not necessary because a sales contract is not subject to any requirement as to form.8 From a substantive view Article 11 refers only to the conclusion of contracts. Thus, the principle of freedom from form requirements expressly applies only to matters that are relevant in the formation process (such as an offer, withdrawal, revocation, acceptance, etc.9). The informality principle, however, should in fact apply generally to all matters governed by the CISG.10 In respect of agreements that relate to the termination or modification of a contract governed by the CISG this can be derived from Article 29, which presupposes the principle set forth in Article 1111 and extends it to cover these other agreements.12 Consequently, both commentators13 and courts14 have rightly held that a written contract can be modified orally, provided the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee 20 (1981). 6 See 11th Circuit U.S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino, S.p.A., 144 F.3d 1384), also available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/980629u1.html; Oberster Gerichtshof, Austria, 2 February 1995 (Zeitschrift f
r Rechtsvergleichung 248 (1996)); Oberlandesgericht M
nchen, Germany, 8 March 1995, CLOUT case No. 134, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/145.htm. For an example of a case where an oral contract was held to be valid, see Oberlandsgericht Kln, Germany, 22 February 1994, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/127.htm. 7 See Hof van Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven. ac.be/int/tradelaw/WK/2002-05-17.htm; Oberlandesgericht M
nchen, Germany, 8 March 1995, CLOUT case No. 134, available at http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/ 145.htm. 8 Handelsgericht St. Gallen, Switzerland, 5 December 1995, CLOUT case No. 330 (Schweizerische Zeitschrift f
r internationales und europisches Recht 53 (1996)). 9 W.H. Achilles, Kommentar zum UN-Kaufrechts
bereinkommen (CISG) 40 (2000). 10 U. Magnus, Kommentar zum B
rgerlichen Gesetzbuch mit Einf
hrungsgesetz und Nebengesetzen, Wiener UN-Kaufrecht (CISG) 183 (13th revised ed., 1999). 11 For a similar statements, see Schlechtriem, supra note 4, at 159. 12 F. Ferrari, Vendita internazionale di beni mobili. Art. 1-13. Ambito di applicazone. Disposizioni generali 221 f. (1994); Neumayer & Ming, supra note 1, at 126; Piltz, supra note, at 105. 13 M. Karollus, UN-Kaufrecht 78 (1991); W. Melis, Art. 11, in Kommentar zum UNKaufrecht 107 (H. Honsell ed., 1997). 14 Hof van Beroep Gent, Belgium, 17 May 2002, available at http://www.law.kuleuven.ac.be/

207

Franco Ferrari

that the written contract does not contain a provision requiring a modification or termination by agreement to be in writing.15 Furthermore, an implied termination of a contract has been held possible.16 In respect of those matters to which neither Article 11 nor Article 29 applies directly, freedom from form requirements depends on finding a general principle upon which the CISG is based. Such a principle can be derived from Articles 11 and 29, pursuant to which, as has been pointed out in case law (referred to in the draft Digest),17 parties are free to make any statement in any form, be it in writing or orally or in any other form.18 Of course, this general principle can only be resorted to where the statements relate to issues dealt with in the CISG. Therefore it is up to applicable domestic law to determine, for example, what form requirements have to be met for a choice of forum clause19 or an agreement restricting competition20 to be validly included in the contract.

int/tradelaw/WK/2002-05-17.htm; Oberster Gerichtshof, Austria, 2 February 1995 (Zeitschrift f
r Rechtsvergleichung 248 (1996)). 15 See ICC Court of Arbitration, Case No. 9117, 1998, available at http://www.unilex.info/ case.cfm?pid=1&do=case&id=399&step=FullText. 16 Oberster Gerichtshof, Austria, 29 June 1999 (Zeitschrift fu¨r Rechtsvergleichung, 2000, 33). 17 See Compromex Arbitration, Mexico, 16 July 1996, available at http://www.uc3m.es/cisg/ rmexi2.htm; Compromex Arbitration, Mexico, 29 April 1996, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=258&step=FullText; Oberster Gerichtshof, Austria, 2 February 1995 (Zeitschrift f
r Rechtsvergleichung 248 (1996)). 18 For this general principle, see, in legal writing, Achilles, supra note 9, at 40-41; Michael Joachim Bonell, Art. 7, in Commentary on the Uniform Sales Law, supra note 1, at 80; F. Ferrari, Das Verhltnis zwischen den UNIDROIT-Grundstzen und den allgemeinen Grundstzen internationaler Einheitsprivatrechtkonvention. Zugleich ein Beitrag zur L
ckenf
llung durch staatliche Gerichte, JuristenZeitung 12 (1998); Herber & Czerwenka, supra note 3, at 50; contra, i. e. denying that the principle of freedom from form requirements constitutes a general principle on which the CISG is based, M. Jametti Greiner, Der Vertragsabschluss, in Das Einheitliche Wiener Kaufrecht 46 f. (H. Hoyer & W. Posch eds., 1992). 19 Herber & Czerwenka, supra note 3, at 66; Melis, supra note 13, at 107; H. van Houtte, Algemeene bepalingen en interpretatie, in Het Weens Koopverdrag 69 (H. van Houtte et al. eds., 1997); contra, stating that where the choice of forum clause is inserted into a contract govnerned by the CISG, no form requirements have to be met, Piltz, supra note, at 106. 20 See Magnus, supra note 10, at 183.

208

Writing requirements: Article 11-13

II. Definition of “form” and the rules superseded by the CISG According to Article 11, not only does a contract not have to be concluded in writing, it also “is not subject to any other requirement as to form”. Unfortunately, the CISG does not provide a definition of what constitutes a “form” requirement. The CISG merely contains a dispositive provision,21 Article 13, that equates telegrams and telexes with “writings”.22 This provision does not constitute a definition of “writing”23 but rather an interpretive rule24 that is supposed to make sure that telegrams and telexes are considered “writings”.25 Although the provision only refers to telegrams and telexes, it does not preclude other means of communication from being a “writing”.26 For example, due to its similarity to a telex, a telefax should also be considered a “writing”,27 as has been pointed out not only in legal writing28 but also in case law (referred to in the draft Digest).29 Despite some commentary to the contrary,30 communications transmitted electronically should also be considered “writings”.31

21 See Achilles, supra note 9, at 42; W. Witz et al., International Einheitliches Kaufrecht 123 (2000). 22 Compare P. Schlechtriem, Art. 13, in Kommentar zum Einheitlichen UN-Kaufrecht, supra note 4, at 166. 23 See Achilles, supra note 9, at 42; Ferrari, supra note 12, at 232; Magnus, supra note 10, at 189. 24 For this qualification, see Schlechtriem, supra note 22, at 166-67. 25 Herber & Czerwenka, supra note 3, at 70. 26 B. Rudolph, Kaufrecht der Export- und Importvertr
ge 151 (1996); M. Wey, Der Vertragsabschluß beim internationalen Warenkauf nach UNCITRAL- und schweizerischem Recht 486 (1984). 27 See, however, Peter Schlechtriem, Art. 13, in Commentary on the UN Convention on Contracts for the International Sale of Goods (CISG) 94-95 (Peter Schlechtriem, ed., 1998), stating that “Article 13 can be applied only a fax which has been printed; in the present author’s opinion, it cannot apply to a fax which is transferred from compute rto computer and only appears on the recipient’s screen or is only retrievable”. 28 B. Audit, La vente internationale de marchandises 73 (1990); A. Garro & A. Zuppi, Compraventa internacional de mercaderias 69 (1990); Manfredonia, Commento all’art. 13, Nuove Leggi civili commentate 50 (1989); Witz et al., supra note 21, at 124. 29 See Oberster Gerichtshof, Austria, 2 July 1993, available at http://www.unilex.info/case.cfm?pid=1&do=case&id=165&step=FullText. 30 V. Heuz, La vente internationale de marchandises. Droit uniforme 187 (2d ed., 1999); Witz et al., supra note 21, at 124. 31 Franco Ferrari, Einige kurze Anmerkungen zur Anwendbarkeit des UN-Kaufrechts beim Vertragsschluss
ber das Internet European Legal Forum 305 (2001); Christopher C. Nicoll,

209

Franco Ferrari

Although Article 13 is certainly helpful in solving the question of whether the aforementioned means of communications are “writings”, it also raises a new problem: when is the rule it sets forth applicable (another one of the issues the draft Digest does not even touch upon)? Nulla quaestio in the few cases where the CISG itself refers to “writing”, such as in Articles 21 and 29: in those cases Article 13 ensures that telegrams and telexes (as well as the other means of communication referred to above32) fulfill the writing requirement.33 According to commentators, Article 13 also applies where the parties agree upon a writing requirement.34 It also applies in those cases in which a writing requirement is based on practices established between the parties or usages that are applicable pursuant to Article 9(2),35 unless the agreement of the parties, their practices, or the usages provide otherwise.36 As pointed out above,37 Article 13 merely provides a rule of interpretation for the term “writing”; it does not define the “requirements as to form” referred to in Article 11. This does not mean that one should resort to domestic law to define that concept. “Requirements as to form” is a term to be defined – as with most other terms used in the CISG – “autonomously”, i.e. not in light of any domestic law.38 Therefore it is not surprising that the expression in question has been defined broadly,39 so as to include all requirements that “make validity conditional on the observance of requirements as to form and which therefore render contracts invalid, void, or voidable (but possibly curable) where those requirements have not been observed”.40 E.D.I. Evidence and the Vienna Convention, J. Bus. Law 31 (1995); Magnus, supra note 10, at 190. 32 See the text accompanying notes 27-31 supra. 33 See also F. Enderlein et al., Internationales Kaufrecht: Kaufrechtskonvention, Verj
hrungskonvention, Vertretungskonvention, Rechtsanwendungskonvention 77 (Berlin, 1991); Neumayer & Ming, supra note 1, at 134-35. 34 Accord, Schlechtriem, supra note 27, at 95. 35 Heuz, supra note 30, at 187; Magnus, supra note 10, at 190; Neumayer & Ming, supra note 1, at 135. 36 For a similar statement with reference to the agreement of the parties, see Achilles, supra note 9, at 42. 37 See supra, text accompanying notes 22 and 23. 38 For a detailed analysis of the CISG’s “autonomous interpretation”, its advantages and its difficulties, see “Comments on the Draft Digest Parts Relating to the CISG’s General Provisions: Interpretation of the Convention and Gap-Filling (Article 7)” supra. 39 See Magnus, supra note 10, at 183, asking for an extensive interpretation of “form”. 40 Schlechtriem, supra note 27, at 95.

210

Writing requirements: Article 11-13

This broad definition leads, for example, to the irrelevance of domestic rules requiring written communications to be signed.41 The definition also leads to “consideration” being irrelevant as a requirement for validity,42 and for the exclusion of form requirements created in order to assist the enforcement of exchange controls and other regulatory purposes.43 However, as pointed out in the draft Digest and the CISG’s legislative history to which it refers, any administrative or criminal sanctions for breach of the rules of any State requiring that such contracts be in writing, whether for purposes of administrative control of the buyer or seller, for purposes of enforcing exchange control laws, or otherwise, would still be enforceable against a party which concluded the non-written contract even though the contract itself would be enforceable between the parties.44

III. Form requirements for evidentiary purposes Article 11 establishes the principle of freedom from form requirements not only for substantive purposes, but also for evidentiary ones.45 That is why it has been asserted that Article 11 has a procedural aspect.46 By establishing the informality principle also for evidentiary purposes, the drafters wanted to make sure that parties are freed from having to comply with domestic requirements concerning the means to be used in proving the existence of a contract governed by the Convention.47 Consequently, domestic rules 41

Accord, Achilles, supra note 9, at 142; Ferrari, supra note 12, at 233; Manfredonia, supra note 27, at 49. Contra Herber & Czerwenka, supra note 3, at 70-71. 42 Audit, supra note 28, at 74; Samuel K. Date-Bah, Art. 2, in Commentary on the Uniform Sales Law, supra note 1, at 109; Enderlein et al., supra note 33, at 241-42; Ferrari, supra note 12, at 222; U. Huber, Der UNCITRAL-Entwurf eines bereinkommens f
r internationale Warenkaufvertrge, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 435 (1979); Jametti Greiner, supra note 18, at 46. 43 Fritz Enderlein & Dietrich Maskow, International Sales Law 73 (1992); John O. Honnold, Uniform Law for International Sales under the United Nations Convention 135 (3d ed., 1999). 44 United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March – 11 April 1980, Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings of the Main Committee 20 (1981). For similar affirmations, see Adame Goddard, supra note 1, at 118; Wey, supra note 26, at 421. 45 L. Comoglio, Libert di forma e libert di prova nella compravendita internazionale di merci, Rivista trimestrale di diritto e procedura civile 788 (1990); Rajski, supra note 1, at 123. 46 Witz et al., supra note 21, at 118. 47 Peter Schlechtriem, Art. 11, in Commentary on the UN Convention on Contracts for the International Sale of Goods (CISG), supra note 27, at 88.

211

Franco Ferrari

requiring a contract to be evidenced by a writing in order to be enforceable (such as Section 2-201 UCC (United States), Article 1341 of the French Civil Code, Article 2721 of the Italian Civil Code, etc., all of which exclude oral testimony in cases where the value of the contract is higher than a certain amount)48 are superseded. That is why several decisions cited in the Digest are correct when they state that “the contract can be proven by any means”,49 including through witnesses. The CISG does not deal with the probative value of evidence presented by the parties;50 in other words, the CISG does not establish a hierarchy of the probative value of different types of evidence.51 Thus, as was held correctly both by a Belgian case52 and a German one,53 it is up to the judge to determine, within the limits set by the procedural rules of the forum, how to evaluate that evidence.54 Consequently, a judge may well attribute more weight to a written document than to oral testimony, as has been pointed out both in legal writing55 and case law.56

48

For references to various domestic rules superseded by Article 11 CISG, see also Achilles, supra note 9, at 41; M.J. Bonell, UN-Kaufrecht und das Kaufrecht des Uniform Commercial Code im Vergleich, Rabels Zeitschrift f
r auslndisches und internationales Privatrecht 35 (1994); Enderlein et al., supra note, at 76; Ferrari, supra note 12, at 216; Michael Kabik, Through the Looking Glass: International Trade in the ‘‘Wonderland’’ of the United Nations Convention on Contracts for the International Sale of Goods, 9 Int’l Tax & Bus. Law. 418 (1992); Magnus, supra note 10, at 184; Rudolph, supra note 26, at 148. 49 See Rechtbank van Koophandel Hasselt, Belgium, 22 May 2002, available at http:// www.law.kuleuven.ac.be/int/tradelaw/WK/2002-05-22.htm; Rechtbank van Koophandel, Kortrijk, Belgium, 4 April 2001, available at http://www.law.kuleuven.ac.be/int/tradelaw/ WK/2001-04-05.htm; Handelsgericht St. Gallen, Switzerland, 5 December 1995, CLOUT case No. 330 (Schweizerische Zeitschrift f
r internationales und europisches Recht 53 (1996)); Oberlandesgericht M
nchen, Germany, 8 March 1995, CLOUT case No. 134, available at http://www.cisg-online.ch/cisg/urteile/145.htm. 50 Witz et al., supra note 21, at 121. 51 Magnus, supra note 10, at 183; Melis, supra note 13, at 107-08. 52 Rechtbank van Koophandel Kortrijk, Belgium, 4 April 2001, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/2001-04-05.htm. 53 Landgericht Memmingen, Germany, 1 December 1993, available at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/73.htm. 54 A. L
deritz & A. Fenge, Art. 11 CISG, in Brgerliches Gesetzbuch mit Einfhrungsgesetzen und Nebengesetzen, vol. 13, bereinkommen der Vereinten Nationen
ber Vertrge
ber den internationalen Warenkauf (CISG) 33 (2000); Schlechtriem, supra note 27, at 88. 55 See Achilles, supra note 9, at 41; Herber & Czerwenka, supra note 3, at 66; Neumayer & Ming, supra note 1, at 128-29.

212

Writing requirements: Article 11-13

IV. Limitations on the freedom from form requirements As was correctly pointed out in a case cited in the draft Digest,57 according to Article 12 the principle of freedom from form requirements does not per se apply where one party has its relevant place of business in a State that made an Article 96 declaration.58 But, as was also pointed out in the draft Digest, conflicting views exist in case law as to the effects of the Article 96 reservation. Unfortunately, this is one more instance in which the draft Digest merely points out the different views, without giving any guidance as to which view is preferable. According to one view, if at least one party has its relevant place of business in a State that made an Article 96 reservation, the contract must be concluded in or evidenced by, or even modified, in writing.59 In this author’s opinion, this view is to be rejected. Instead, the sole fact that one party has its place of business in a State that made an Article 96 reservation does not necessarily make applicable the form requirements of that State,60 as was pointed out in a recent Dutch case.61 Rather, the rules of private international of the forum should dictate whether any form requirements have to be met.62 The legislative history of the Convention appears to corroborate this view, since at the 1980 Vienna Diplomatic Conference a proposal was rejected pursuant to which the form requirements of a State that had made an Article 96 reservation had to be applied.63 Thus, where those rules lead to 56

Rechtbank van Koophandel Hasselt, Belgium, 22 May 2002, available at http://www.law.kuleuven.ac.be/int/tradelaw/WK/2002-05-22.htm. 57 See Rechtbank van Koophandel, Hasselt, Belgium, 2 May 1995, available at http:// www.law.kuleuven.ac.be/int/tradelaw/WK/1995-05-02.htm. 58 See Harry M. Flechtner, The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1), 17 J. Law & Com. 196 (1998). 59 See, e. g., The High Arbitration Court, Russian Federation, 16 February 1998, referred to on the Internet at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/980216r1.html; Rechtbank van Koophandel Hasselt, Belgium, 2 May 1995, available at http://www.law.kuleuven.ac.be/ int/tradelaw/WK/1995-05-02.htm. 60 Accord, Achilles, supra note 9, at 267; Jametti Greiner, supra note 18, at 47. Contra E. Rehbinder, Vertragsschluß nach UN-Kaufrecht im Vergleich zu EAG und BGB, in Einheitliches Kaufrecht und nationales Obligationenrecht 154 (Peter Schlechtriem ed., 1987). 61 Rechtbank Rotterdam, Netherlands, 12 July 2001 (Nederlands Internationaal Privaatrecht No. 278 (2001)). 62 Herber & Czerwenka, supra note 3, at 399-400; Magnus, supra note 10, at 767. 63 See 9 UNCITRAL Yearbook 45 (1978). See also Malcolm Evans, Art. 96, in Commentary on the Uniform Sales Law, supra note 1, at 658.

213

Franco Ferrari

the law of a State that made an Article 96 reservation, the form requirements of that State (where they exist)64 will be applicable.65 Where, on the other hand, the applicable law is that of a Contracting State that did not make an Article 96 reservation, the principle of freedom from form requirements laid down in Article 11 applies, as has been repeatedly pointed out in case law.66 The draft Digest refers (although not exhaustively) to the restrictions on the principle of freedom from form requirements resulting from (at least) one party having its place of business in a Contracting State that declared an Article 96 reservation. It does not refer at all, however, to the possibility of the parties limiting the principle of freedom from form requirements. Article 11, like most provisions of the CISG,67 is subject to derogation, so that the parties can agree upon a specific form requirement to be met in order for a statement to have effect.68 Whereas the conclusion of such an agreement is subject to the rules of the CISG,69 specifically those on formation of contracts (Articles 14-24),70 the consequences if a party fails to comply with the form requirement agreed upon are not governed by the CISG, but rather by applicable domestic law. The draft Digest does not expressly deal with the allocation of the burden of proof. Since freedom from form requirements is the Convention’s general rule, the general principles governing the burden of proof – which have been laid out elsewhere71 – dictate that the party asserting the existence of 64

Although according to Article 96 only States “whose legislation requires contracts of sale to be concluded in or evidenced by writing” are allowed to declare an Article 96 reservation, it appears that some States, such as Argentina and Chile have made such a reservation although their domestic law does not meet that requirement. 65 Melis, supra note 13, at 110; Witz et al., supra note 21, at 122. 66 See, e. g., Rechtbank Rotterdam, Netherlands, 12 July 2001 (Nederlands Internationaal Privaatrecht No. 278 (2001)); Hoge Raad, Netherlands, 7 November 1997, available at http:// www.unilex.info/case.cfm?pid=1&do=case&id=333&step=FullText; Municipal Court of Budapest, Hungary, 24 March 1992, summary published in Praxis des internationalen Privatund Verfahrensrechts 263 (1996). 67 See Comoglio, supra note 45, at 792; S. Patti, Commento all’art. 4, Nuove Leggi civili commentate 47 (1989); Rajski, supra note 1, at 123. 68 See Adame Goddard, supra note 1, at 118; M.J. Bonell, La formazione del contratto, in La vendita internazionale. La convenzione di Vienna dell’ 11 Aprile 1980 123 (1981); Ferrari, supra note 12, at 225 f.; Herber & Czerwenka, supra note 3, at 67; Karollus, supra note 13, at 78; Wey, supra note 26, at 423. 69 See Magnus, supra note 10, at 185. 70 See Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176 (Zeitschrift f
r Rechtsvergleichung 248 ff. (1996)). 71 See the Comments on the Digest Part Relating to the CISG’s Scope of Application, supra.

214

Writing requirements: Article 11-13

an agreement that requires a specific form for a statement to be effective has to prove that such agreement exists.72 72

For this conclusion, see also R. Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des K
ufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen ber Verk
uferund K
uferpflichten 140 f. (1996); Magnus, supra note 10, at 185.

215

CISG foreign case law: how much regard should we

have? Joseph Lookofsky* I. Introduction: Uniform interpretation and Article 7(1) As my contribution to this Conference, the University of Pittsburgh has invited me to comment upon draft sections of the UNCITRAL Digest of the 1980 Vienna Sales Convention (CISG). I will address certain sections drafted by Professor Franco Ferrari,1 particularly those which relate to Part I of the Convention, its Sphere of Application and General Provisions.2 The interpretation of the entire Vienna Convention – including, of course, CISG Part I – is governed by CISG Article 7(1), the first part of which provides: “In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application ...”3 I permit myself to dwell on this particular General Provision at the outset, because it relates to many comments I have with respect to other rules in CISG Part I. Article 7(1) is, in effect, a command to all CISG Contracting States to “have regard” to the Convention’s international character and the need to promote its uniform application. Furthermore, as Professor Ferrari’s

*

Professor of Law, University of Copenhagen. In addition to being a distinguished CISG scholar, Professor Ferrari has also been a key player in the UNCITRAL Digest project. His Digest drafts relating to Articles 6 and 78 were originally prepared for use by the UNCITRAL Secretariat as examples (models) for the entire Digest project. See Report of UNCITRAL on its 34th Session, 25 June – 13 July 2002, A/56/ 17, ¶ 389. 2 I was originally also invited to comment on the other Digest segments authored by Professor Ferrari: those dealing with CISG Part IV (Final Provisions), as well as Article 78 on Interest in CISG Part III (Sale of Goods). For various reasons, the Conference organizers and I decided it would be best to limit my commentary to the drafts relating to CISG Part I. 3 Emphasis added. Compare (e. g.) the very similar provision in Article 18 of the 1980 (Rome) Convention on the Law Applicable to Contractual Obligations [1998] OJ C27/34 (consolidated version), also available at http://europa.eu.int/eur-lex/pri/en/oj/dat/1998/c_027/ c_02719980126en00340053.pdf. 1

216

CISG foreign case law: how much regard should we have?

excellent Digest confirms, Article 7 requires courts in Contracting States to “take into account decisions rendered by foreign courts”.4 In fact, the goal of the whole Digest project is to promote uniform interpretation of the Convention, especially in the light of the fact that divergences in CISG interpretation have been noted, and since appropriate advice and guidance would be useful to foster a more uniform interpretation.5 In other words, the Case Digest project is in full accord with CISG Article 7(1); it is also in line with – and helps “organize” – the ongoing CLOUT project,6 which itself is an integral part of UNCITRAL’s effort to promote uniform interpretation and application of international conventions and uniform laws.7 The Digest, including the segments drafted by Professor Ferrari, will surely help courts fulfill their obligation to “have regard” to foreign case law, not least because the Digest will provide those who interpret the Convention with increased access to CISG decisions rendered by courts around the world. This is indeed a very important service, since – apart from the “black letter” of the treaty text itself – the CISG case law must be regarded as the single most important source of CISG “law”.8 On the other hand, a few words of caution would also seem to be in order, especially since our previous experience with similar international instruments shows that mere “access” to foreign precedent does not ensure uniform interpretation,9 particularly when the uniform law in question does not specify how much “regard” to foreign case law courts should “have”. 4 Draft UNCITRAL Digest art. 7, ¶ 3 (emphasis added). See also generally Herbert Bernstein & Joseph Lookofsky, Understanding the CISG in Europe § 2-9 (2d ed., 2002). 5 See ¶ 13 of United Nations Document A/CN.9/503 ¶ 13 (26 March 2002), available at http://www.uncitral.org/english/sessions/unc/unc-35/503.e.pdf. 6 Case Law on UNCITRAL Texts. This is the system previously established by UNCITRAL for the collection and dissemination of information on court decisions and arbitral awards relating to normative texts emanating from the Commission, inter alia, the CISG. See U. N. Document A/CN.9/SER.C/GUIDE/1/Rev.1; see also A/CN.9/503, supra note 5, at ¶ 12. 7 When the U. N. General Assembly gave UNCITRAL its mandate, the Commission was instructed to implement it, inter alia, by promoting ways and means of ensuring a uniform interpretation and application of international conventions and uniform laws in the field of the law of international trade. See the Report of UNCITRAL, supra note 1, at ¶ 386. 8 See generally Bernstein & Lookofsky, supra note 4, at §§ 2-8 and 2-9. Regarding the CISG legislative history (travaux pre´paratoires) see id. and text infra with notes 31 et seq. 9 For an example concerning the application of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards see U. S. Supreme Court, United

217

Joseph Lookofsky

According to Professor Ferrari, only two courts (both in Italy) have dealt with the question of the value which foreign CISG decisions should have, and the answer provided by both these courts was that foreign court decisions “merely have persuasive, non-binding value”.10 Though I would not dare challenge Professor Ferrari’s Digest of Italian case law, and though that case law might also reflect the “majority” view in (Italian and German) academic circles,11 I would nonetheless suggest that foreign court decisions at most have “persuasive” (non-binding) value. The fact that (e. g.) an Italian court must have regard to the need to promote uniform CISG application – and thus “have regard” to CISG decisions rendered by courts in Denmark, the United States and elsewhere – means only that the Italian court must “take [them] into account”.12 Because there is no established system or “scale” to evaluate the “weight” of foreign CISG precedents,13 the “persuasiveness” of any foreign CISG decision will depend on various factors, including “the force of the reasoning in the opinion and the apparent soundness of the result;”14 it may also depend on the prominence of the court and whether the decision has support in other jurisdictions.15 We can, of course, take a “head count” of foreign decisions States, 2 July 1985 (Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614), discussed by Joseph Lookofsky & Ketilbjørn Hertz, Transnational Litigation and Commercial Arbitration ch. 6. 3. 1 (2d ed., 2003). 10 See draft UNCITRAL Digest art. 7, ¶ 4 (emphasis added), citing the cases in note 11. Conversely, I assume that a lower Italian court called upon to interpret a given CISG rule would consider itself bound by any prior decisions rendered by higher Italian courts on the same point. 11 See Franco Ferrari, Tribunale di Vigevano: Specific Aspects of the CISG Uniformly Dealt With, 20 J. L. & Comm. 230 n. 39 (2001) (citing Ferrari, Kramer, Melis, & Magnus), also available at http://cisgw3.law.pace.edu/cisg/biblio/ferrari6.html. 12 Regarding the quoted passage see draft UNCITRAL Digest art. 7, ¶ 3. 13 For a fuller discussion of this problem – and a proposed method for determining the precedential authority of foreign decisions – see generally Harry Flechtner, Recovering Attorneys Fees as Damages under the U. N. Sales Convention: A Case Study on the New International Commercial Practice and the Role of Foreign Case Law in CISG Jurisprudence, 22 Northwestern J. Bus. L. & Policy 727 (2002), also available at http://cisgw3.law.pace. edu/cisg/biblio/flechtner4.html. 14 E. Allan Farnsworth, An Introduction to the Legal System of the United States 52-57 (3d ed. New York 1996) (speaking of the American notion of “persuasive” – as opposed to binding – “case law authority”, a category which includes the decisions of courts of other jurisdictions). 15 Id. Since Professor Farnsworth’s observations (cited here and in the preceding note) apply, inter alia, to the “regard” which the (e. g.) New York courts have for decisions rendered in New Jersey, and since the role played by the courts and case law in the American system is much

218

CISG foreign case law: how much regard should we have?

rendered with respect to a given, perhaps debatable proposition – (e. g.) 2 cases for, 1 against – and a court might then take that statistical fact “into account”, but the numbers do not necessarily count for very much, e. g., if the reasoning of the (first-in-time) majority is weak,16 or if a “heavyweight” court later proves the majority “wrong”.17 If my largely “academic” reasoning as to the factors affecting the value of foreign case law is itself “persuasive” (I can only cite a bit of Italian case law to back it up),18 it follows that courts in Contracting States need not follow the case law reported in the Digest even if that case law, at a given point in time, represents the “majority view”. For example, if a majority of courts in Contracting States (thus far) have held that only “standard” software is a “good” under the Convention,19 courts in other jurisdictions which rule on the same question remain free to treat all software – “even custom-made software” – as CISG “goods”.20 By the same token, a given court might first take a given line of foreign decisions “into account”, and then decide to beat an entirely different path, especially if that court is not persuaded by the force of the reasoning of the foreign cases or the soundness of their results.21 This might lead to (increased) uncertainty, but the hard fact is that no international court has been placed at the top the CISG “pyramid” with the authority to iron out differences in opinion among the many national instances below.22 For this reason, Professor Schlechtriem has likened the courts in the many Contracting States to members of an orchestra without a greater than in other systems (see, e. g., Mads Bryde Andersen, Ret & Metode, 155 (2002), I consider it fair to generalize on this basis. See also Flechtner, supra note 13. 16 Accord Clayton Gillette & Steven Walt, Sales Law Domestic and International 6 (Rev. ed. 2002) (U. S. court unlikely to adopt interpretation favored by a court elsewhere simply because that decision was promulgated first). 17 Consider, for example, the zig-zag course of precedent on the “attorneys’ fees” issue, discussed infra (text with notes 65-72) in connection with the draft Digest of Article 4. 18 See the decision of the Tibunale di Vigevano, Italy, 12 July 2000, CLOUT case No. 378, as translated in 20 J. L. & Com., 220 (2001) regarding the burden of proof issue (“According to a minority of courts and commentators ... According to better reasoned and more numerous authorities, however...”) (emphasis added). 19 See the draft UNCITRAL Digest art. 1, ¶ 10 with notes 29-30. See also discussion infra notes 46-48 and accompanying text. 20 Id. 21 Regarding (e. g.) the “shifting” of attorneys’ fees as procedural matter not governed by the Convention, see the comments to the draft Digest of Article 4 infra notes 63-72 and accompanying text. 22 Contrast the authority granted to the European Court to answer questions submitted by the courts of EU Member States regarding the proper interpretation of EU legislation.

219

Joseph Lookofsky

conductor,23 and the reality of that metaphor is confirmed by both Professor Ferrari’s Digest and other case law sources: the CISG musicians do not all play the same tune.24 Granted, the advent of the Digest should make it easier for courts to hear the message sounded by foreign precedent, but the Digest authors have no baton of legitimacy to make judges (let alone arbitrators) march in step. For this and related reasons, some might regard the Digest project as a risky, even “dangerous” venture,25 especially to the extent Digest authors (themselves academics) cannot resist the temptation to put scholarly “spin” on the (often diverging) case law they report.26 Significantly, the task assigned to the Digest authors is not just to “take note” of CISG case law for “information” purposes;27 the authors should also “provide guidance” as to the proper interpretation of the Convention.28 But since any expression of “preference” for one judicial view over another might be viewed as criticism of decisions taken by national courts, and since the Commission hoped the Digest would take a more “international” view than existing commentaries and papers, the only “politically correct” source of Digest guidance – in addition to case law – is the CISG legislative/diplomatic history (travaux pre´paratoires).29 23

Peter Schlechtriem, Uniform Sales Law in the Decisions of the Bundesgerichtshof, available at http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem3.html. 24 Regarding (e. g.) the varied interpretations by national courts of the notice provisions in CISG Articles 38-39, see Bernstein & Lookofsky, supra note 4, at § 4-9. 25 Compare Rolf Herber, Article 7, Commentary on the UN Convention on the International Sale of Goods (CISG) 63 (Peter Schlechtriem ed., 1998), characterizing a previous “Digest”-project proposal (to form an Editorial Board to monitor and clarify published CISG decisions) as “dangerous”. See also Report on UNCITRAL work on its 21st session, 11-22 April 1988, ch. X at § 98 et seq. 26 In some instances, for example, it is not difficult to read a certain sense of “approval” or disapproval into Professor Ferrari’s otherwise objective digest of existing “majority” and “minority” views. See (e. g.) draft UNCITRAL Digest art. 1, ¶ 6 (“Despite one court decision stating the contrary...”) and draft UNCITRAL Digest art. 3, ¶ 3 (regarding one decision which “contradicts” others). For a different kind of example, involving the hardly objective sources of foreign case law upon which Professor Ferrari sometimes must draw, see discussion infra regarding the Danish decision cited in the draft UNCITRAL Digest art. 1, ¶ 19 n. 49. 27 In respect of the contents, it was suggested, as one alternative, that the Digest could be merely a compilation noting diverging case law for information purposes. See ¶ 3 of the Note on Uniform Interpretation by the UNCITRAL Secretariat, 26 April 2001, A/CN.9.498, also available at http://www.uncitral.org/english/sessions/unc/unc-34/acn9-498e.pdf. 28 Id. 29 See id. regarding the Commission’s reluctance to permit “criticism” of the case law, but compare id. regarding acceptable non-case law sources (“guidance may be provided ... in particular on the legislative history and the reasons underlying it”) (emphasis added).

220

CISG foreign case law: how much regard should we have?

In my view, these sources are insufficient to provide a realistic picture of CISG “law”. Just as I have reservations regarding the precedential value of foreign case law, I think experience dictates caution when it comes to legislative history.30 The CISG history is, to be sure, voluminous,31 but it is often inconclusive;32 and I would not base much “guidance” on it. Indeed, CISG scholarly writing (doctrine) – even if taboo in the Digest context – may sometimes provide the only reliable available information as to why courts and arbitrators have ruled as they do, especially in those instances where the Digest does not (maybe can not) reveal the ratio underlying the decision(s) concerned.33 Having set forth these preliminary (Article 7) observations, I shall now proceed to comment more specifically upon portions of Professor Ferrari’s Digest draft, especially those which I find most interesting from my own (academic) point of view. Because practical considerations preclude a “complete” commentary, I am pleased that Professor Ferrari has drafted an excellent Digest of what hundreds of CISG cases tell us about CISG Part I. I approach my own very limited assignment with all due respect. Obviously, it 30 See, e. g., Lookofsky & Hertz, supra note 9, ch. 4. 2, regarding the U. S. Supreme Court’s interpretation of the Hague Service Convention in Volkswagenwerk A. G. v. Schlunk, 486 U. S. 694 (1988), where both the majority and minority of the Court cite excerpts from the same history in support of their own, respective positions. 31 Many commentators trace the CISG “history” back to the first Uniform Sales Law, ULIS (Bernstein & Lookofsky, supra note 4, at § 1-2), but since that (separate and distinct) treaty was found unacceptable by most States who later became CISG States, the application of ULIS concepts, interpretations and precedents will not always advance the goal of a uniform (and autonomous) interpretation of the CISG. For examples of the use of ULIS as a CISG interpretative tool see Bernstein & Lookofsky, id., § 2-5 n. 49, § 2-6 n. 78 and § 2-9 n. 122. 32 See Bernstein & Lookofsky, id. at § 2-8 (proposals, counter-proposals and comments by scores of delegates during years of drafting cannot provide simple solutions to complex questions of interpretation). Accord Gillette & Walt, supra note 16, at 171. See also Franco Ferrari, Uniform Interpretation of the 1980 Uniform Sales Law, 24 Ga. J. Int. & Comp. L. 183 (1994), text with note 125 (“recourse to such materials must not be overestimated”). Even as regards the use of his own Documentary History of the 1980 Uniform Law for International Sales (John O. Honnold ed., 1989), John Honnold urges restraint: “Interpretation based on discussions by a large legislative body is more meaningful for decisions of broad issues of policy than for detailed applications”. John O. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention 463 (3d ed. 1999). 33 I. e., in American legal parlance, the holding: see Farnsworth, supra note 14, at 54 (distinguishing the holding from less consequential dictum, i. e. “whatever else the judges said which was not necessary to their decision”). For examples of the lack of information provided by the Digest drafts in this respect, see infra, notes 46-52 and accompanying text.

221

Joseph Lookofsky

was far more difficult for Professor Ferrari to research and formulate his most scholarly Digest contribution than it is for me, a Conference Commentator, to indulge the temptation to take a few isolated (and surely debatable) “pot shots” at it.

II. CISG Part I: Sphere of application and general provisions This Part of the Convention sets forth the rules used by courts and arbitrators to determine whether or not the Convention applies (Articles 1-6). It also contains important General Provisions (Articles 7-13) regarding, inter alia, the proper interpretation of both the Convention text and of contracts regulated by the Convention regime. Article 1 According to CISG Article 1(1), the Convention applies to sales of goods between parties whose places of business are in different States (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State. According to the CISG case law, courts in Contracting States should look to the Convention before they have recourse to their rules of private international law.34 Though I certainly agree with that proposition, I might prefer to defend it on the basis of logic which differs from the ratio of the (relatively few cases) reported on point.35 I also wonder whether my preferred explanation might find support in any of the 100 or so other cases separately cited by Professor Ferrari in connection with the “autonomous applicability” of the Convention by virtue of Article 1(1)(a).36 A “special Article 1 situation” arises where one of the parties to a CISG contract has its place of business in a State which has made an Article 92 reservation. In that situation, the draft Digest reports that “one must determine on the basis of Article 1(1)(b) whether the Part of the Convention to which the reservation relates is applicable”.37 In support of this proposition, the draft cites four cases – each involving a Scandinavian34

Draft UNCITRAL Digest art. 1, ¶ 2 nn.1 and 2. If I understand Professor Ferrari correctly, the ratio of all the cases cited in the draft Digest of Article 1, ¶ 2, notes 1-4, rest on lex specialis logic. But as regards the application of the CISG in an Article 1(1)(a) situation, I would add that there is simply no conflict of laws. See Joseph Lookofsky, Understanding the CISG in Scandinavia § 2-3 (2d ed. 2002). 36 See draft UNCITRAL Digest art. 1, ¶ 17 n. 46. 37 See draft UNCITRAL Digest art. 1, ¶ 19. For a further explanation regarding the need for 35

222

CISG foreign case law: how much regard should we have?

based party.38 However, since two of these decisions – a Hungarian decision (reported in CLOUT) and an ICC award (reported in Unilex)39 – make no reference to Article 1(1)(b) whatsoever,40 I wonder whether “case law” per se supports the “digested” view. (I do not, by the way, make this point to challenge the Digest proposition set forth by Professor Ferrari, but rather to illustrate that the “politically correct” Digest sources do not always themselves provide readers with all the information they might need.41) The Convention does not define the concept of “goods”, but – according to the Digest – this does “not allow” us to look into domestic law to find a definition; instead, like most other Convention concepts, “goods” must be interpreted “autonomously”.42 However, the only documentation which the draft provides in support of this particular proposition is a general crossreference to the Digest of Article 7,43 and there we find reference to seemingly contradictory (case law) authority: according to a minority of courts, “case law interpreting analogous domestic law provisions [while not per se applicable] may also inform a court ...”44 Does the bold proposition set forth in the draft of Article 1 (which forbids us access to domestic law) perhaps indicate the Digester’s subjective sympathy for the majority view?45 and nature of this determination, see Joseph Lookofsky, Alive and Well in Scandinavia: CISG Part II, 18 J. L. & Com. 289-99 (1999). 38 Article 92 reservations have thus far only been made by the Scandinavian States: Denmark, Finland, Norway and Sweden. Iceland which is not a member in the “Scandinavian” group has not made an Article 92 reservation. 39 See draft UNCITRAL Digest art. 1, ¶ 19 n. 49, citing Fov rosi Birs g Budapest, Hungary, 21 May 1996, CLOUT case No. 143, and ICC Court of Arbitration, Case No. 7585/92, 1992, CLOUT case No. 301. 40 At least not in the CLOUT and Unilex reports. 41 Østre Landsret, Denmark, 23 April 1998, CLOUT case No. 309 certainly supports Professor Ferrari’s Case Digest, but had the person who prepared the CLOUT abstract of that opinion not himself put a considerable measure of scholarly “spin” on it, I doubt that Professor Ferrari would be in a position to cite the case as authority for the point he himself makes in the Digest text. For more information regarding the complex relationship between Articles 1(1)(b) and 92 in this particular case, see Joseph Lookofsky& Ketilbjørn Hertz, in Ugeskrift for Retsvæsen B 1999, at 6-10. See also Lookofsky, supra note 37 and Lookofsky supra note 35, at § 8-4. Regarding the relationship between CISG scholarly writing (doctrine) and acceptable Digest sources of law, see note 33, supra and accompanying text. 42 Draft UNCITRAL Digest art. 1, ¶ 8. 43 Id. n. 18. 44 See draft UNCITRAL Digest art. 7, ¶ 2 n. 5. 45 See id. (“Nevertheless, there are courts that have stated ...”) and compare Franco Ferrari, Tribunale de Vigevano: Specific Aspects of the CISG Uniformly Dealt With, 20 J. L. & Com. 225 (2001) 226-27 with notes 11-15.

223

Joseph Lookofsky

“According to some courts, only standard software is considered a ‘good’ under the Convention;46 according to one court, however, any kind of software is considered a ‘good’, even custom-made software”.47 But since the majority on this question only leads by a score of “2 to 1”,48 I would like to know why each of these courts held as they did. We are also advised of a related, albeit more general limitation: that CISG goods “are, at the moment of delivery, moveable and tangible”,49 in that only “one court ... appears” to have extended the concept to intangible goods.50 We are not, however, advised whether the majority view extends to software (which may be “intangible” at the moment of delivery/downloading).51 Since the Digest provides no information regarding the ratio underlying any of these diverging decisions – and since the Digest is not allowed to even allude to the (extensive) scholarly opinion on point – I cannot help but wonder whether the limited information which the Digest does provide on the software issue will be put to “good” use.52 Article 3 Article 3(2) “extends the Convention’s sphere of application to also cover contracts pursuant to which the seller undertakes to supply labour or other services alongside the obligation to deliver the goods”.53 Though I would tend to agree with that statement, I would hope that the Digest would provide some case-law documentation for it: (1) because the word “alongside” does not find obvious support in the letter of Article 3, (2) because I am not sure about the scope of the related Digest proposition that the Convention is “inapplicable” where the obligation to supply services “amounts to more

46

See draft UNCITRAL Digest art. 1, ¶ 10 n. 29. Id., ¶ 10 n. 30 (emphasis added). 48 Id. n. 29 reveals that “some” means “2”. 49 Id., ¶ 9 n. 20 (emphasis added). 50 Id. n. 27 (emphasis added). 51 Those who maintain that the CISG only applies to software contained in a “tangible medium” may be confusing the intangible good (the software) with the (tangible or intangible) medium which “carries” and/or “contains” that good. If B buys a program on a disk, she has really bought two “things”: a program and a disk. See generally Joseph Lookofsky, In Dubio Pro Conventione? Some Thoughts About Opt-Outs, Computer Programs and Pree¨mption under the 1980 Vienna Sales Convention (CISG), 13 Duke J. Int. L. 258 (forthcoming 2003) also available at http://www.law.duke.edu/journals/djcil/djciltoc13n3.htm. 52 See id. and Lookofsky, supra note 35, at § 2-5. 53 Draft UNCITRAL Digest art. 3, ¶ 4 (emphasis added). 47

224

CISG foreign case law: how much regard should we have?

than 50%” of the seller’s obligations,54 and (3) because I doubt whether the case cited in the same section of the Digest regarding the supply of a “market study” concerns the supply of services “alongside” goods.55 What I am quite sure about is this: If a fancy restaurant (B) in Italy buys a high-priced set of dishes from the Royal Copenhagen Factory (S) in Denmark, then that transaction does qualify as a CISG “sale of goods” (as opposed to a transaction involving the provision of “services”) – this notwithstanding the fact that the design on each dish is painstakingly hand-painted by a Danish crafts(wo)man, i. e., although the value of the “labour or other services” required to produce these handmade items dwarfs all other manufacturing costs concerned. Article 4 Article 4 helps us identity matters which the CISG “governs” – as opposed to matters with which it is “not concerned”. Issues of “procedural law” are among the issues which have been “identified by Courts as not being dealt with by the Convention”.56 The draft Digest not only tells us that this proposition applies to the (obviously procedural) issue of whether a court has jurisdiction;57 it also applies generally, i. e., to “any other issue of procedural law”.58 While I see no reason to disagree with the Digest on this (general) point, I would emphasize that the line between substance and procedure is not always clear. For example, when the draft cites case law indicating that statutes of limitation are “not governed” by the Convention, this is not necessarily because they are “procedural” in nature;59 indeed, in some places such statutes are ordinarily classified as “substantive”.60 I also think that burden-of-proof issues lie on the conceptual “borderline”, but the otherwise extensive Digest on this particular aspect of Article 4 contains no reference (or cross-reference) to burden-of-proof issues – perhaps because “some, albeit not all, courts” have held that the Convention governs the burden

54

Id. In other words, I am not sure whether this statement (also) refers to the “alongside” situation referred to in the first sentence of the same paragraph. 55 See case cited at id. n. 12. 56 See draft UNCITRAL Digest art. 4, ¶ 13. 57 Id. n. 39. 58 Id. n. 40, citing (as the sole authority for this very general proposition) Bundesgericht, Switzerland, 11 July 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/ 000711s1.html. 59 Compare id. with note 36. 60 For an interesting illustration in a conflict-of-laws context see the decision of the Danish Court of Appeal in Krægpøth v. Rasmussen (1982), reported in UfR 1982.886 VL, translated into English and discussed by Lookofsky & Hertz, supra note 9, at ch. 3. 2. 3.

225

Joseph Lookofsky

of proof,61 or perhaps because the Digest draft itself takes the position that the burden of proof should not be grouped in the “procedural law” category.62 The elusive line between (CISG) substance and (non-CISG) procedure leads to other complications as well. For example, since the Convention expressly governs the “rights and obligations” of the parties to a CISG contract,63 and since an injured CISG party is generally entitled to full “expectation-interest protection”,64 several decisions rendered by courts in Europe might lend support to the proposition that the prevailing party in a CISG litigation should recover its attorneys’ fees,65 and a U. S. Federal District Court – citing this foreign case law – has also so held.66 However, since the prevailing party in an American litigation is generally not entitled to recover its attorneys’ fees,67 and since this “American rule” applies in all civil cases (not just contract cases), the whole fee-shifting “matter” is arguably not governed by the Convention at all!68 So it was hardly surprising that the U. S. District Court decision was subsequently reversed by a U. S. Court of Appeal.69 While this latter opinion (authored by Judge Posner “himself”70) 61

See draft UNCITRAL Digest art. 4, ¶ 4. Id., ¶ 13. 63 See CISG art. 4. 64 At least within the limits of “foreseeability”. See CISG art. 74 and Lookofsky, supra note 35, at § 6-15. 65 See generally Flechtner, supra note 13. 66 U. S. District Court for the Northern District of Illinois, United States, 28 August 2002, available at http://cisgw3.law.pace.edu/cases/010828u1.html (Zapata Hermanos Sucesores, S. A. v. Hearthside Baking Co., Inc.). 67 See, e. g., Supreme Court, United States, 12 May 1975 (Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240). Although the judgment rendered by an American court will usually require the losing party to pay the costs of the successful party (e. g. fees paid to the court), such “costs” do not generally include attorney’s fees. Although this principle has been modified by “fee shifting” statutes in certain instances, no fee-shifting is still the overwhelming “American rule”: see Supreme Court, United States, 29 May 2001 (Buckhannon Board and Care Home, Inc. v. West Virginia Dept. of Health and Human Resources, 532 U. S. 598). The same rule does not, however, necessarily apply in (American) arbitrations. 68 See Lookofsky, supra note 35, at 142-43. See also Joseph Lookofsky, at http://www. cisg.law.pace.edu/cisg/biblio/lookofsky5.html and Harry Flechtner, at http://cisgw3.law. pace.edu/cisg/biblio/flechtner4.html. But see John Felemegas, at http://cisgw3.law.pace. edu/cisg/biblio/felemegas1.html and compare Peter Schlechtriem, at http://cisgw3.law.pace. edu/cisg/biblio/schlechtriem4.html. 69 See 7th Circuit U. S. Court of Appeals, United States, 19 November 2002, available at http://cisgw3.law.pace.edu/cases/021119u1.html (Zapata Hermanos Sucesores, S. A. v. Hearthside Baking Company, Inc., 313 F.3d 385). 70 Regarding the prominence of the court – and even the judge (in this case, the renowned 62

226

CISG foreign case law: how much regard should we have?

cites no CISG cases, it does take particular note of the absence of specific CISG legislative history on the fee-shifting issue. To this extent, the appellate judge takes at least one Digest-acceptable source “into account”. But the main ratio underlying the decision seems to be Judge Posner’s “gut reaction”, as tempered by a good common sense: in America – as in Denmark (and elsewhere) – the question of fee-shifting is rightly regarded as a procedural question,71 and obviously, “The Convention is about contracts, not about procedure”.72 Article 5 CISG Article 5 deals with the non-applicability of the Convention to certain “product liability” issues (the seller’s liability for death or personal injury). As regards this provision and the related (very brief) draft Digest segment on it, I note only the Digest proposition that “claims based on damage to property caused by the goods require the seller to have been notified within the reasonable time period referred to in Article 39”.73 I assume that what is meant here is that no such “claims” can succeed unless the seller has been notified in accordance with Article 39, i. e., even if other relevant CISG requirements (under Articles 35 et seq.) are met.74 But if that is what is “father” of Law and Economics) – as supplementary factors which enter into the “persuasiveness” (value) of CISG case law, see note 15 supra and accompanying text. 71 Regarding American law see note 67 supra, and accompanying text. Regarding (e. g.) the Danish Code of Civil Procedure (Retsplejeloven) see Bernhard Gomard, Civilprocessen (Copenhagen 2000) at 584: “The losing party must generally reimburse the winning party for expenses incurred in connection with the litigation, unless the parties have made a different agreement, or the court, due to special circumstances finds good reason to depart from this rule ... The losing party’s obligation ... to compensate the winning party for its costs is not dependent on whether the winning party could have demanded compensation for these costs under general substantive liability principles [almindelige erstatningsregler] ...” (translation by the present author). 72 See p. 3 of Judge Posner’s opinion cited supra note 69. By discussing this issue within the context of Article 7(2), Judge Posner seems to imply that the issue of attorneys’ fees is “governed” (but not settled) by the Convention. In my opinion, the issue of attorneys’ fees is simply not governed – and therefore, of course, not (expressly) “settled” – by Article 74 or any other part of the Convention (for a criticism of the District Court’s opinion, see Lookofsky, supra note 68; regarding Article 7(2) see Lookofsky, supra note 35, at § 2-11). Accord, Harry Flechtner and Joseph Lookofsky at http://cisgw3.law.pace.edu/cisg/biblio/ flechtner5.html. In any case, Professor Ferrari might want to add the Court of Appeals decision in Zapata – and perhaps also the foreign precedents cited by the District Court – to his draft Digest of Articles 4 and Article 7(2). 73 Draft UNCITRAL Digest art. 5, ¶ 3 (emphasis added). 74 See Bernstein & Lookofsky, supra note 4, § 2-6, at 27 nn.84-86 and accompanying text.

227

Joseph Lookofsky

meant, I doubt whether the single (Swiss) case cited in the draft provides sufficient case law authority for such a (very general) proposition,75 since it would seem to ignore the possibility – discussed in the CISG jurisprudence, though not yet dealt with by CISG case law – that, in some jurisdictions, domestic “product liability” law rules would be allowed to “compete” with the CISG regime.76 For these reasons, I would suggest a slightly different “digest” of the Swiss case.77 Article 6 Though this section of the Digest deals with the parties’ freedom to limit Convention application – a provision which is very important in practice – I only find occasion to make a minor comment with respect to Professor Ferrari’s comprehensive Digest draft. As noted in paragraph 3 of the draft Digest, Article 6 makes a distinction between exclusion (of the entire Convention) and derogation (from some of it). Though the draft Digest suggests that the former “does not encounter any limitations”,78 I assume we are to understand this statement as modified (1) by the requirement that “opting-out” requires clear evidence of the parties’ intent,79 and (2) by the requirement that the parties’ choice of non-CISG law be “acknowledged” by the applicable rules of private international law.80 Article 7 I have previously made some general observations with respect to the first part of the rule in Article 7(1), concerning CISG interpretation, as well as the draft Digest of it.81 In addition, “Article 7(1) requires that the Convention be interpreted in such a manner that the observance of good faith in international trade is promoted”.82 Moreover – and perhaps more sig75

According to the CLOUT abstract of Swiss case cited in the draft UNCITRAL Digest art. 5, ¶ 3 n. 4, the holding was much more narrow, focusing – as it should – on the rights and obligations of the parties in the particular case concerned. 76 See Bernstein & Lookofsky, supra note 4, at § 2-6, Illustration 2b. 77 E. g.: “In one case it was held that the buyer’s claim for damage to property caused by allegedly non-conforming goods could not succeed, because the seller had not been notified of the defect within the reasonable time period ...” 78 Draft UNCITRAL Digest art. 6, ¶ 3. 79 Though I am quite sure that this is what is meant by the last sentence of paragraph 1 of the draft Digest, I suggest that it be re-reformulated. 80 Draft UNCITRAL Digest art. 6, ¶ 7 n. 16. 81 See the Introduction to the present commentary, supra. 82 Although the letter of Article 7 provides primary (and hardly debatable) authority for this

228

CISG foreign case law: how much regard should we have?

nificantly – the CISG case law confirms that the obligation of the parties to act in good faith is a (broad) general principle upon which the Convention is based.83 When it comes to the existence or scope of certain other CISG “general principles”, however, the “case law” seems more open to debate. For example, while I understand that the Digest “rules” do not permit criticism of any court,84 I wonder how much (uncritical) regard we should have for the single reported (1993) decision which extends the general place-of-payment principle underlying Article 57 to determine the place of payment of compensation (damages).85 Does the fact that this particular German decision has not (yet) been challenged by courts elsewhere mean the case represents “good law”, or should Digest readers have more regard to the fact that CISG commentators have attacked its underlying logic?86 Assuming, arguendo, that the latter is the better view,87 I would submit that the “service” performed by the Digest – providing access to unpersuasive “case law” (and nothing else) – may actually represent a well-meaning disservice: what we in Denmark aptly refer to as a bjørnetjeneste.88 proposition, the draft UNCITRAL Digest art. 7, ¶ 5 n. 12 provides secondary authority (in the form of legislative history) as well. 83 The draft UNCITRAL Digest art. 7, ¶ 8 nn.17 and 18, is in accord with my “expanded” statement; it also seems confirmed by the text of the Digest with note 19 (regarding a party’s “conduct”). 84 See note 29 supra and accompanying text. 85 See draft UNCITRAL Digest art. 7, ¶ 11 n. 23 citing CLOUT case No. 49. 86 See (e. g.) Bernstein & Lookofsky, supra note 4, at § 2-11, text with notes 174-78 (and the additional sources cited there). 87 In the last sentence of para. 11 Professor Ferrari notes “however, that there is also one decision which denies the existence of a general principle under the Convention on the basis of which to determine the place of performance for all monetary obligations” (emphasis added). I doubt, however, that the French decision cited in note 26 (CLOUT case No. 312) provides persuasive support for the broad proposition that the place-of-payment principle governs “all monetary obligations” (i. e., including the obligation to pay damages for breach), and I wonder how many of the other cases cited by Professor Ferrari do. Regarding the distinction between ratio and dictum, see supra note 33 and accompanying text. If I perceive some healthy academic disagreement between Professor Ferrari and me on this issue, it may relate to the range of “matters” governed-but-not-settled pursuant to Article 7(2). See generally Lookofsky, supra note 35, at § 2-11, and compare the (case law?) view in para. 6 of the Digest draft: “Para. 7(2) makes sure” that gaps, if possible, are filled; whereas only matters “not governed at all” are to be solved by the national/domestic law” (emphasis added). 88 Literally, a “bear-service” (German: Ba¨rendienst), a term deriving from La Fontaine’s 19th century fable about the bear who – in a well-meaning attempt to brush a fly off its master’s head – cracked the master’s skull.

229

Joseph Lookofsky

Article 8 Whereas Article 7 deals with the interpretation of the Convention, Article 8 is another important rule which deals with the interpretation of CISG contracts, and Professor Ferrari has provided us with an extensive and most informative digest of the case law on point. In determining the intent of a party or the understanding of a reasonable person, due consideration is to be given to all relevant circumstances of the case, including the negotiations.89 In this connection, the draft describes the relationship between Article 8(3) and the “parol evidence rule” – i. e., the rule of substantive law which, in some American states,90 in some circumstances, serves to limit the content of a contract in writing to the “four corners” of that document.91 Quite apart from the fact that I doubt whether the draft Digest formulation of the rule is correct,92 and that I doubt CISG parties can always “avoid parol evidence problems”,93 I wonder about the subtle Digest criticism of cases which do not go the “right” way.94 Not that I disagree with this critique – on the contrary95 – but it is my understanding that the Digest is not supposed to criticize CISG case law.96 Perhaps I might suggest a way out of this (academic) Digester’s predicament: to express his 89

See draft UNCITRAL Digest art. 8(3), ¶ 17 n. 33. The rule, where applicable, is a rule of state (as opposed to federal) law. 91 See (e. g.) Joseph Lookofsky, Consequential Damages in Comparative Context 55 (1989), citing the rule as formulated by A. Corbin, Contracts (1963) § 573: When two parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing (emphasis added). Accord E. Allan Farnsworth, Contracts § 7. 3 (3d ed. 1999). As indicated in the draft Digest of Article 11, a CISG contract need not be in writing in all; if the contract is not in writing (or does not represent a complete and accurate integration), the parol rule cannot apply for that reason. 92 Compare the formulation in the preceding note (and Farnsworth) with para. 18 of the draft Digest, text following note 36, suggesting that the rule excludes “consistent” (supplementary) evidence. Apart from the need to correct this part of the Digest formulation, I would suggest that the word “indiscriminately” be changed to “both”. 93 Even by the inclusion of a “merger clause”, as suggested in para. 19 of the digest Draft (citing CLOUT case No. 222): see Gillette & Walt, supra note 16, at 175-76. 94 See draft UNCITRAL Digest art. 8, ¶ 18: “The express reference in article 8(3) ... did not prevent one court from holding ...” that the rule applies even to CISG contracts. 95 See Joseph Lookofsky, Loose Ends and Contorts in International Sales: Problems in the Harmonization of Private Law Rules, 39 Am. J. Comp. L. 403 (1991). See also Bernstein & Lookofsky, supra note 4, at § 4-5. 96 See supra note 29. 90

230

CISG foreign case law: how much regard should we have?

objective “disapproval” of CLOUT case No. 24,97 the Digester could first indicate that the view expressed in that case represents only dictum;98 then, to express (objective) “approval” of CLOUT case No. 222,99 the quotation from that court’s opinion could be expanded to include the court’s own references to the international scholarly opinion supporting the arguably “better” view.100 Turning to a more general point, I would ask whether Article 8 – when read together with Articles 4 and 7 – really “precludes the applicability of [all] domestic interpretative rules;”101 in other words, I wonder whether Article 8 deals “exhaustively” with the issue of CISG contract interpretation. For even assuming, arguendo, that this broad Digest proposition is “supported by” the single (1990 German) cited to that end,102 the proposition hardly represents the holding of that case.103 (Certainly no Danish court would see any reason to make a sweeping statement like that, i. e., in order to decide whether a given CISG seller “could know” that its buyer made a certain statement which intended to bind a particular third party.104) Beyond this, I would hardly expect Scandinavian judges and arbitrators to regard the three sentences in Article 8 as a viable “replacement” for everything they have ever learned about “contract interpretation”. In other words, I doubt that it is realistic to demand or expect truly “autonomous” interpretation of CISG contracts. Consider, for example, the familiar situation where an arguably onerous clause purports to displace an otherwise applicable remedial rule.105 Asked to deal with the effect of such a clause, courts and arbitrators – in Scandinavia and elsewhere – are likely to 97

Draft UNCITRAL Digest, ¶ 18 n. 38. See Bernstein & Lookofsky, supra note 4, at § 4-5 n. 9. Regarding the distinction between holding (ratio) and dictum see supra note 33. 99 Draft UNCITRAL Digest, ¶ 18 nn.40-41 and accompanying text. 100 11th Circuit U. S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino S. p. A., 144 F.3d 1384), citing, inter alia, the views of Bernstein & Lookofsky in the first edition of Understanding the CISG in Europe (The Hague 1997). 101 See Draft UNCITRAL Digest art. 8, ¶ 2. 102 See Landgericht Hamburg, Germany, 26 September 1990, CLOUT case No. 5, cited in draft UNCITRAL Digest art. 8, ¶ 2 n. 7. 103 See note 33 supra and accompanying text. 104 Id. 105 Regarding Scandinavian sellers’ use of standard terms (Nordiske Leveringsbetingelser) in international sales see Lookofsky, supra note 35, at § 7-1. Regarding the use of the similar terms in domestic and inter-Scandinavian sales see Joseph Lookofsky, Køb. Dansk indenlandsk købsret ch. 9. 1 (2d ed. 2002). 98

231

Joseph Lookofsky

proceed cautiously, employing an inter-related series of “tests”. The first test asks whether the clause in question has been incorporated into the overall contract between the parties.106 If this hurdle is passed, courts and arbitrators will employ an interpretation test to determine whether the term applies to the dispute at hand.107 Finally, as regards incorporated terms held applicable, courts sometimes proceed to inquire into the validity of such terms and, as a result of their inquiry, may refuse to give effect to a particular unreasonable clause.108 In Scandinavian theory, the question of whether a given judge decides to use the first, second and/or third tool to “strike out” an unreasonable term is simply (and realistically) regarded as a matter of taste,109 just as the opaque ratio of a Danish court’s “unanimous” decision might well conceal which elements were decisive for the individual judges concerned.110 So if the Danish Supreme Court (Højesteret) decides a CISG case involving these issues, it might cite Article 8 in the ratio, but commentators would still rightly wonder if there were more than meets the eye.111 Even as regards “interpretation” per se, I doubt whether Article 8 provides all the tools courts and arbitrators need in order to interpret (e. g.) one party’s standard terms, especially if the language supplied by one party is susceptible to two “reasonable” interpretations, one of which favors each party. In such a situation, it may be most reasonable to construe a standard warranty exclusion or liability limitation clause (purporting to displace the otherwise applicable CISG rules) “narrowly”, i. e., against the drafter (contra proferentem/stipulatorem), especially since such standard terms rarely reflect the kind of balance resulting from negotiations between organisations of equal bargaining power (capable of protecting the interests of sellers and buyers alike). The contra proferentem idea, though perhaps not a CISG “general principle”, is at least consistent with the letter and spirit of Article 8; it is also an internationally accepted rule.112

106

In the CISG cases involving a party whose place of business is in a Scandinavian State, this issue will sometimes be governed by the CISG, sometimes by domestic law. Regarding the effect of the Scandinavian Article 92 declarations see Lookofsky, supra note 35, at § 8-4. 107 In the CISG context, the obvious starting point is Article 8. See id. at § 7-3. 108 Regarding the applicable domestic validity rules in this context, see id. at § 7-4. 109 Regarding Danish domestic law, see Lookofsky, supra note 105, at 211. 110 Id. In Denmark, where “concurring” opinions are rare, tradition dictates that the members of the Supreme Court majority formulate a ratio which they all can “live with”. 111 For a fuller, more comparative discussion see Joseph Lookofsky, The Limits of Commercial Contract Freedom: Under the UNIDROIT ‘‘Restatement’’ and Danish Law, 46 Am. J. Comp. Law 485-508 (1998), also available at http://www.cisg.law.pace.edu/cisg/biblio/lookofsky2.html. 112 See Lookofsky, supra note 35, at § 7-3.

232

CISG foreign case law: how much regard should we have?

III. Conclusions I certainly believe that national courts in all Contracting States should consider themselves bound by the rule of interpretation in CISG Article 7(1), just as they should always, to the extent practicable, “have regard” to the case law concerning relevant CISG rules. For this reason alone, I am convinced that the UNCITRAL Digest assembles – and helps organize – much relevant and useful CISG information “under one roof”. Having (re)stated that, I would respectfully make a few humble suggestions to those who author the Digest and to those who will read it. The first of these suggestions is that the UNCITRAL Digest authors – Professor Ferrari and all my other distinguished friends who have done such fine work on this project – take a hard second look to make sure there is clear authority for every (objective) Digest remark. In this connection, I suggest that the Digesters do their (objective) best to take the “why-question” – i. e., the ratio underlying the reported decisions – “into account”. To this end, I have suggested that the Digest might do well to include occasional references to CISG scholarly writings (doctrine), in that UNCITRAL might view such citations as “politically correct” in those cases where the courts – in their published decisions – themselves expressly refer to such secondary authority.113 On the other hand, I would caution courts (and arbitrators), as well as lawyers and other readers, not to rely on the Digest as their sole source of CISG law, since – in many, if not most instances – the selected sources in the Digest cannot provide courts and arbitrators (or anyone else) with a balanced and realistic picture of CISG “law”. At the same time, I should emphasize that the “solution” to the problems created by the narrow range of acceptable Digest sources should definitely not be the establishment by UNCITRAL of a panel of academics, i. e., with a view to promulgating a “uniform” – and thus perhaps “politically correct” – academic point of view (of the case law or anything else). We cannot – and ought not attempt to – replace healthy academic debate on controversial CISG issues by the creation of a body which, by necessity, could only speak with “one voice”. This is hardly the right place to get (even more) philosophical about the degree of commercial law harmonization which we – by way of the Vienna Sales Convention (or other uniform law initiatives) – might seek to

113

See text supra with note 100.

233

Joseph Lookofsky

achieve,114 but I will say that I do not believe that CISG “success” should be measured solely in terms of legal “certainty”, especially since the kind of certainty some might seek could only be obtained at a price which other Convention advocates would not want to pay.115 114 Regarding private law harmonization see also: Lookofsky, supra note 95; Joseph Lookofsky, The State of the Union in Contract and Tort, 41 Am. J. Comp. L. 89 (1993); and Joseph Lookofsky, The Harmonization of Private and Commercial Law: ‘‘Towards a European Civil Code’’, 39 Scandinavian Studies in Law 111 (2000). 115 Regarding the spirit of Scandinavian Realism see Lookofsky, supra note 91, at 17-18, citing Richard Posner, Legal Formalism, Legal Realism and the Interpretation of Statutes and the Constitution, 37 Case W. Res. L. Rev. 179 (1986/87). See also Lookofsky, id. at 192 (regarding skønnet, i. e., “judicial discretion” which often determines the outcome before the premises, which test the correctness of the conclusion, are established).

234

A commentary on Articles 1-13 and 78 Michael Bridge* The decision of the United Nations Commission on International Trade Law (UNCITRAL) to compile a Digest of case law on the Convention on the International Sale of Goods (the CISG) represents a pragmatic and realistic response to the challenge of uniformity of law. There is more to uniformity than the diplomacy and compromise that produces an agreed text and the persuasion that follows to see that the text is adopted by signatory States. The agreed text does not remain inert in the treaty that gives it birth, but grows in the hands of tribunals and commentators. In the course of that growing process, a uniform law that is drawn into the interstices of domestic law ceases to be uniform. Article 7 of the CISG, seeking to prevent this from happening, is the primary engine of continuing uniformity. It requires that the CISG be interpreted in an international spirit and that gaps in its coverage be filled in a way that is true to the principles on which it is based. In the pursuit of these objectives by tribunals, a Digest of decided cases is an invaluable aid to decision making. A Digest represents, however, only a starting point in the approach of a tribunal to decided cases and should not be seen as a substitute for a critical evaluation of the decisions recorded in it, or as an invitation to pursue uniformity by the mechanical expedient of counting decisions and following the majority view. The object of this selective commentary is twofold. First, it aims to draw upon a limited number of court and arbitral decisions recorded in the draft Digest1 and consider their contribution to the development of those articles of the CISG under review in this commentary. Secondly, it aims to present a critical assessment of those same provisions: case law has not penetrated all the depths of the CISG provisions. The development of the CISG is best achieved by a partnership of case law and critical commentary. The CISG has now been in force for nearly 15 years and has been adopted by more than 60 States. It has attracted a huge literature and has been the subject of many hundreds of national court decisions and arbitral awards. Its *

Professor, University College London. For reasons of brevity, cases on a particular point will not be listed in this commentary. They can be drawn readily from the draft Digest. 1

235

Michael Bridge

influence has by no means been confined to the law of commercial sales. The ideas generated in the CISG are also evident in influential soft law instruments, namely, the Lando Principles of European Law2 and the Unidroit Principles of International Commercial Law,3 as well as in the EU Directive on Consumer Sales Guarantees.4 It is likely to have a powerful influence on the draft European Civil Code prepared under the auspices of the Study Group for a European Civil Code.5 The field of comparative private law has been transformed in recent years. The CISG may be seen as both the product and the progenitor of activity in this field. It is much more than just a special statute dealing with one of the more important contracts. Some years ago, I wrote that the challenge confronting the CISG was the manufacture of an enveloping culture of uniformity before the assimilating properties of national legal systems imposed their different stamps upon the CISG.6 Nationalist tendencies are probably fated to be with us always but the events of the last several years contain a most impressive record of success. This has been due in a large measure to the private sector, namely, the commentators who have written at length about the CISG, have created web pages rendering it and its offshoots just as accessible to researchers and lawyers in countries with underresourced library systems as in those more generously endowed and, in collating decisions and in translating them, have provided much assistance to judges and arbitrators all over the world, with the fruits of such assistance beginning to emerge. The UNCITRAL Digest provides a real opportunity for a fruitful partnership between public and private sectors. 2

The Commission of European Contract Law, Principles of European Contract Law (O. Lando & H. Beale eds., 2000) [hereinafter PECL]. 3 Principles of International Commercial Contracts (Rome, 1994) [hereinafter UNIDROIT Principles or UPICC]. 4 Council Directive 99/44, 1999 O. J. (L 171), through which it finds its way into UK consumer sales law as the directive is transposed, though the UK has not adopted the CISG itself. See The Sale and Supply of Goods to Consumer Regulations 2002, SI 2002 No. 3045 (laid before Parliament and entered into force 31 March 2003). 5 In the short to medium term at least, it is by no means likely that there will be a Civil Code for the European Union. Following on from its Communication on European Contract Law of July 2001 (COM (2001) 398), the Commission in its January 2003 Communication on European Contract Law (COM (2003) 68) firmly rules out the possibility of a European Civil Code (see also its Green Paper on the Rome Convention of 1980 (COM (2002) 654), para. 1. 6), though intriguingly it mentions the possibility of an optional instrument for dealing with cross-border contracts that (bewilderingly) could be binding on contracting parties (see paras 92 and 94). 6 Michael Bridge, The Bifocal World of International Sales: Vienna and Non-Vienna, in Making Commercial Law 277-96 (Ross Cranston ed., 1997).

236

A commentary on Articles 1-13 and 78

Articles 1-2 There is little in the case law on Article 1 that provides insight into the meaning and significance of its provisions. Though cited in many decisions, it is simply a routine port of call for a tribunal that is identifying the applicable law. In view of the success of the CISG, with more than 60 countries adopting it, it should be no surprise that the dual residence (or place of business)7 gateway to the application of the CISG in Article 1(1)(a) is much more important now than the private international gateway contained in Article 1(1)(b). Similarly, Article 95, which permits Contracting States to declare that they will not be bound by Article 1(1)(b) – a regrettable departure from uniformity – has lost much of its significance. A matter of some theoretical importance arises out of the relationship between uniform law and national and domestic law.8 In simple terms, the question is whether uniform law is part of the national law of the adopting State or part of an international order arrived at by a tribunal pursuant to its choice of law process. For Article 1(1)(b), the answer, superficially at least, is clear: the CISG applies by virtue of the private international law rules of the forum in the Contracting State. The differentiation of Article 1(1)(a) makes it again superficially clear that the dual residence test has nothing to do with private international law. But is this correct? And does the indirect application of the CISG by Non-Contracting States throw any light on the process of its application? Taking first the dual residence test, it has been said by one eminent authority that Article 1(1)(a) “can be seen as including a kind of choice-of-law rule, one which makes the Vienna Convention as adopted and interpreted by either the buyer’s State or the seller’s State applicable where both States are Parties to the Vienna Convention”.9 As a choice of law rule it is incomplete in that it gives the forum no guidance as to whether the CISG is applied as the law of the State of the seller’s or of the buyer’s residence. The CISG, by 7

The place of business is identified according to the tests in Article 10. By domestic law, I mean the law of a State minus its private international law rules; by national law, I mean the law of a State plus its private international rules. 9 Professor Arthur T. Von Mehren, Explanatory Report on the 1986 Hague Convention on the Law Applicable to International Sales of Goods ¶ 192 (1986). The argument is assumed to be wrong in the decisions of the Tribunale Civile di Vigevano, Italy, 12 July 2000, CLOUT case No. 378; Landgericht Landshut, Germany, 5 April 1995, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/950405g1.html; and U. S. District Court for the Northern District of Illinois, United States, 28 March 2002 (Usinor Industeel v. Leeco Steel Products, 209 F. Supp. 2d 880, 47 UCC Rep. Serv. 2d 887). 8

237

Michael Bridge

this reasoning, would therefore certainly not be applied as part of the domestic law of the forum in those cases where the forum State is neither the State of the seller’s nor of the buyer’s residence. It may seem a matter of no great interest how the forum arrives at the CISG under Article 1(1)(a) but the matter is not unimportant in determining potential conflicts between the CISG and private international law conventions like Hague 195510 and Rome 1980.11 It would certainly become important if the CISG were regrettably to be domesticated by different national laws counter to the rule of international interpretation in Article 7(1). If, for example, American federal courts were to take a different line on the interpretation of the CISG to that taken by German courts, then litigants would have a real interest in knowing whether it was Germany’s CISG or the version of the CISG applied in those federal courts that governed the case. The status of the CISG in the forum State is also important in the matter of its practical application. Under the conventional choice of law process, foreign law is a fact and is pleaded and proved like any other fact. The parties are free, if they wish, not to plead and prove it, whereupon the court will rely upon the fiction that foreign law is the same as the lex fori. The cost of dealing with foreign law and the unpredictability of foreign law, given the very high degree of risk that the forum will get it wrong, persuades many litigants to leave foreign law undisturbed. Now, if the CISG is part of the domestic law of the Contracting State in whose courts the dispute is being heard, then it is not foreign law. It is local, specialised law in just the same way as the Contracting State might have separate sales laws for commercial and consumer contracts of sale. If the CISG is part of the forum State’s domestic law in this way, the principle of jura novit curia, if applicable in that State, will oblige the forum to apply the CISG even if the parties themselves do not invoke it.12 In addition to this principle, it is arguable that the forum State is treaty-bound to ensure that its courts apply the CISG pursuant to Article 1. Given the long-standing freedom for litigants to turn to domestic instead of to foreign law in the choice of law process, Article 1 would have to be clearer than it is about the mandatory application of the CISG for that freedom to be excluded, if the CISG were applied as part of the forum’s choice of law process. If the CISG, however, were part of the forum State’s domestic law, the mandatory application argument might have more substance, at least in those cases where the conduct of the parties in the course of litigation could

10

Hague Conference on Private International Law Convention on the Law Applicable to International Sale of Goods (1955). 11 European Community, Convention on the Law Applicable to Contractual Obligations opened for signature in Rome, 19 June 1980, consolidated version at 1998 O. J. C27. 12 See, e. g., Tribunale Civile di Vigevano, Italy, 12 July 2000, CLOUT case No. 378.

238

A commentary on Articles 1-13 and 78

not be seen as a tacit agreement ousting the application of the CISG pursuant to Article 6. In those cases where the CISG is applied by the courts of a Non-Contracting State, such application will necessarily occur by way of the choice of law process. Cases where the CISG might have been applied according to the dual residence test in a Contracting State will in a Non-Contracting State be disposed of pursuant to its private international law rules. An English court, for example, in a case involving a German buyer and a French seller is likely, where there is no chosen applicable law, pursuant to the Rome Convention to apply French law as the law of the place of residence of the characteristic performer, namely, the French seller.13 What then is the English court to do? It should apply the CISG if the dual residence test means that the CISG is part of French domestic law. But suppose the buyer is English instead of German. If the dispute were before a French court, that court would be required by the Rome Convention to apply French law. The French court, turning to Article 1(1)(b) of the CISG and recognising that France is a Contracting State under the CISG, would therefore apply the CISG. If however the dispute between the English buyer and French seller were before an English court, that court, equally bound under the Rome Convention to apply French law, could on the face of it apply the CISG only with the aid of French private international law rules, which would involve an infringement of the prohibition on renvoi in the Rome Convention.14 This conclusion is avoidable only if a rather bold interpretation of Article 1(1)(b) is advanced, namely that, despite the reference to private international law in that provision, the CISG has become part of French domestic law in substitution for the former body of law that included French private international law rules. After all, the French court itself would apply the CISG, not because its private international law rules say so, but because it is treaty-bound under the CISG to do so. If the English court adopted the same view of the location of the CISG within French law, then it could apply the CISG without invoking renvoi. Paradoxically, given the characterisation of the homeward trend in private international law cases as fundamentally opposed to the spirit of internationalism, the best way to promote the international operation of the CISG is to view it as the domestic law of Contracting States. Another private international law issue that is immanent in Article 1, and not expressly referred to in it, concerns the freedom of contracting parties to choose the CISG as the applicable law outside cases where it would otherwise apply under Article 1. The Uniform Law on the International Sale of Goods 13 EC Convention on the Law Applicable to Contractual Obligations, 19 June 1980 [Rome Convention] art. 4(2). 14 Id. art. 15.

239

Michael Bridge

1964 (ULIS) explicitly recognised the right of parties to do this,15 though of course such right would not be binding on the courts of a Non-Contracting State. If the right of parties to choose were to be recognised by Contracting States, then it could not be by virtue of the CISG itself but rather according to the choice of law rules of that State, whether of purely national origin or derived from an international convention. For EU States, the autonomy of the parties in choosing the applicable law is recognised,16 subject to certain exceptions of a public policy and mandatory law kind,17 but there is very real doubt whether the parties can choose a body of legal rules that is not as such chosen as part of an applicable law and the better view is that they cannot. In consequence, the parties might not expect a court to recognise their choice of the UNIDROIT Principles of International Commercial Contracts (UPICC) as the applicable law. Nor too, though it is a very different type of instrument, may they expect their choice of the CISG to prevail. It is one thing for the parties to choose French law when French law, applying the dual residence test in Article 1(1)(a), would apply the CISG; it is a quite different matter for those parties to go directly to the CISG. Now, it may be that too much is being made of the difficulties facing the parties. Because the CISG lacks rules on validity and property, all that is left are dispositive rules that can be ousted by contrary intention. As such, they are in competition with similar dispositive rules of domestic law. A court, therefore, faced with a choice of the CISG, should give very careful attention to the question whether the parties, in choosing the CISG, have thereby evinced an intention to exclude the corresponding domestic rules of the law that is the applicable law under the forum’s private international law rules, supplanting those rules severally and in gross with the corresponding CISG rules. Article 1 can be taken as a reference point for some other issues that are not of a private international law kind. It states the application of the CISG to contracts of sale of goods without defining either sale or goods. It seems to be uncontroversial, however, that the definition of a contract of sale can be drawn from Articles 30 and 53, taken together, with their vital references to “price” and to “the property in goods”. But the only guide to the meaning of “goods” resides in the exceptions in Article 2, which perhaps, with their specific references to electricity, negotiable instruments and money, encourage an expansive interpretation of “goods”.18 (If items beyond the 15

Convention Relating to a Uniform Law on the International Sale of Goods, 1 July 1964 [ULIS] art. 4. 16 Rome Convention, supra note 13, art. 3. 17 Id. arts. 7 and 16. 18 This may explain why a contract for the preparation of a market study was excluded from

240

A commentary on Articles 1-13 and 78

conventional understanding of goods have to be explicitly excluded, does this not suggest an otherwise broad definition?) This would be a matter of some significance when dealing with software which, despite certain decisions, cannot be treated as goods if the conventional interpretation of goods as tangible items is followed. The disk that incorporates the software, if it exists (and in many cases a disk is not used to download), is just the packaging and not the software. If, however, the meaning of goods in the CISG is not confined to tangible things – and this is an open question, not to be resolved by reference to national laws – then it should accommodate software if it were sold. The reality, however, is that software is not sold but rather licensed for use. The licensor is under no obligation to transfer the property in the software and so the licensing agreement falls outside the CISG. An issue that has arisen on a number of occasions is whether framework contracts, such as distributorship agreements, under which individual contracts of sale are concluded from time to time, qualify as contracts of sale. There is a real risk of discord if, for example, the applicable law treats such a framework contract as enforceable, in circumstances where individual contracts will always give the seller an exemption under Article 79,19 but this is no more of a problem than the problem of reconciliation that arises in the case of a single contract and dpeage (or the allocation of different aspects of the contract to different applicable laws).20 As convenient as it would be to incorporate distributorship agreements in the CISG, this is not the view generally taken in the case law. It would also not be easy to reconcile with the text of Article 30 and the seller’s duty to transfer the property in the goods under the contract. No property passes under the distribution agreement as such. The difficulty with dismissing the application of the CISG on this ground, however, is that it could justify the exclusion of output and requirements contracts if these were seen as distinct from the individual transactions effected under them. There seems little reason to exclude output and requirements contracts which might be alternatively rationalised, not as framework contracts coupled with satellite sales, but rather as single sales agreements with instalments and delivery dates to be settled from time to time. Given the other purposes of distribution agreements (which in the CISG under Article 3 instead of Article 1: Oberlandesgericht Kln, Germany, 26 August 1994, CLOUT case No. 122. 19 But see Bundesgerichtshof, Germany, 23 July 1997, CLOUT case No. 231 (holding that the sales contracts forming the basis of the seller’s claim were not affected by the nullity of the parties’ distribution agreement). 20 This is expressly allowed under the Rome Convention Articles 3(1), 4(1). There is no reason why, in a case arising under Article 1(1)(a) of CISG, the same principle should not be recognised in the guise of a derogation from CISG provisions under Article 6.

241

Michael Bridge

some respects are akin to commercial agency contracts), in particular the distributor’s obligation to advance sales of the manufacturer’s goods in the defined territory, a line can be drawn between output and requirements contracts, on the one hand, and distribution agreements on the other.

Article 3 In some legal systems, the distinction between sale of goods and related contracts has been difficult to draw. This has been the history of English law though the subject in modern times has lost most of its significance. This is because the courts worked assiduously to apply to related contracts, outside the Sale of Goods Act, the same rules refashioned as common law rules, an activity that was carried on later by the legislature.21 Such a relaxed approach, however, is not possible with the CISG. This is because the domestic rules of the forum applicable to non-sale-of-goods contracts may be quite different from those in the CISG. Article 3 requires some care to be taken when interpreting its two paragraphs since different quantitative words are used – “substantial” (where the buyer supplies the materials) and “preponderant” (where labour or other services come with the goods). In addition, those quantitative words are applied to different matters – “substantial” goes to materials and “preponderant” to obligations. It is not easy to see why there should be such quantitative differentiation. In addition, the rationale for the exclusion of certain cases where the buyer supplies materials is unclear: why should it matter whether the materials come from the buyer or from a third party (especially in a convention that does not contain rules on the transfer of property)? Still less, why should a contract be excluded where only a “substantial” part of the materials is supplied by the buyer? However that may be, “preponderant” in respect of the supplier’s obligations connotes a bare majority of those obligations, but how can this be measured? It hardly makes sense to count individual contractual obligations without regard being paid to the onerousness of those obligations.22 As for what constitutes a “substantial” part of the materials supplied by the buyer, this is plainly less than a majority but how much less? Inevitably, these words will be interpreted impressionistically, with the result that it will be a challenge even for tribunals in the same jurisdiction to interpret them consistently.

21

See Michael Bridge, The Sale of Goods 45-49 (1997). The financial onerousness of those obligations has been favoured: Kantonsgericht Zug, Switzerland, 25 February 1999, CLOUT case No. 327. 22

242

A commentary on Articles 1-13 and 78

It has been held that the CISG is excluded where the seller supplies goods to the buyer’s specifications,23 but the text of the CISG has to be liberally extended to justify the exclusion and this runs counter to the spirit of uniform legislation. In any case, this interpretation runs against the grain of Article 65 which deals explicitly with cases where the buyer is bound “to specify the form, measurement or other features of the goods”. If in such respects the buyer plays an active part in defining the seller’s delivery obligations, why should design be singled out for special treatment?

Article 4 Article 4 excludes from the CISG both validity (of the contract or any of its provisions or of usages) and property issues. The validity exclusion is particularly significant in charting the uniform interpretation of the CISG. Since the meaning of “validity” can vary so much among legal systems, it is especially important that the word, like any other concept in the CISG, be given a uniform interpretation. For example, since the CISG deals at some length with matters of form, it would be subversive of the Convention and of uniformity if national courts were to treat it as going to validity because it is so treated in their own system. In view of the wide scope given to mistake in some legal systems, particular care must be taken with it. For example, given that the CISG deals at such length with the rights and duties of the buyer concerning the quality and fitness of goods, it would be destructive of the CISG if the domestic law of mistake were to be applied because of the buyer’s misapprehension about important attributes of the goods. The scope of mistake (or erreur) could be a particular problem in the case of French law, which grants relief in the case of subjective, unilateral mistake,24 going beyond the subject matter of the contract and extending to substantial qualities of the subject matter.25 Similarly, the existence in some common law jurisdictions of contractual rescission for misrepresentation, even where the misrepresentation has only 23

Cour d’Appel de Chambry, France, 25 May 1993, CLOUT case No. 157 (treating the buyer as supplying a substantial part of the “materials”). 24 See Code Civil (France) art. 1110. There can be relief where one party’s contractual consent has been determined by the false idea that the party had (“fausse ide que cette partie avait”) concerning the rights he acquired under the contract: Cour de cassation 17 November 1930, DP 1932. 1.161. 25 The Dalloz commentary on the Code civil makes it clear that an established body of case law (jurisprudence constante) supports relief in respect of mistakes concerning “qualits substantielles”, a category that includes matters pertaining to origin, authenticity and use of the subject matter. C. civ. 1995-96 art. 1110, ¶ 6.

243

Michael Bridge

a partial inducing effect on entry into the contract, should not be allowed to subvert the Convention’s scheme of remedies and particularly the rule that avoidance of the contract for non-conforming goods requires the seller’s breach to be fundamental. The ability to rescind a contract with no great difficulty, as a result of a misrepresentation by the other party to the contract, is destructive of core CISG values of contractual continuance and the avoidance of economic waste. Whilst rescission in common law systems for misrepresentation is retrospective and avoidance under the CISG is prospective, this is only a technical difference: in both cases, the buyer throws unwanted goods back on the seller. For the uniform integrity of the CISG, it is vital that not only must “validity” be interpreted autonomously, but that the permissible scope of domestic validity rules be determined according to the CISG. This would mean curtailing any broad effect of domestic validity rules where this would undermine CISG rules on performance and remedies.26 Another issue of validity concerns cause and consideration. In a bilateral contract, the former civilian doctrine is most unlikely to cause any difficulties. To a significant degree, the very nature of sale – a transfer of goods for the payment of a price – leads to the same conclusion. In the case where consideration is most likely to cause practical problems in the commercial world of sale, it will be in relation to open offers and contractual variation. In both cases, the CISG, whilst not explicitly rejecting consideration, makes it clear that the doctrine has no part to play.27 The definition of “property” – also excluded from the CISG – is not straightforward, given that different legal systems draw the line between contract and property differently. This is the case for assignment of contractual rights in common law and civil law systems. Possession too is more likely to be regarded as a proprietary interest in common law than in civil law systems. In those cases where the seller’s duty to deliver and the buyer’s duty to take delivery and pay are mutual and concurrent, the seller relying upon the terms of Article 30 can stand on the buyer’s failure to pay as a defence to his own non-delivery. A duty to deliver “as required by the contract” in a contract of this type is a duty to deliver against payment. The

26

In the case of subjective mistake, this approach gains support from Article 8(1), which applies a subjective approach to the interpretation of statements and conduct only where a party knew or must have known of the other’s intention. 27 Articles 16(2) (an offer cannot be revoked in stated circumstances) and 29(1) (modification of the contract “by the mere agreement of the parties”).

244

A commentary on Articles 1-13 and 78

effect of an unpaid seller’s lien is therefore replicated in contractual terms.28 The same easy shift from property to contract cannot, however, be carried out in respect of the unpaid seller’s right of stoppage in transit in Article 71(2). If stoppage were anything other than the rare event that it is, its precise analysis ought to call out for considerable thought. But stoppage amounts to a reversal of delivery and moreover cannot readily be reconciled with the terms of the contract of carriage which, in any case, is not the subject of the CISG. Stoppage bears the trappings of a proprietary right. The question of property also arises in a disguised form in Article 81(2), where the seller is given a right to restitution of the goods after avoidance of the contract which, to be effective, requires the property in those goods to be retransferred to the seller. That said, it goes too far to say that, if the law dealing with property issues permits the buyer to retain the goods despite non-payment, then the remedy of avoidance is no longer governed by the CISG.29 Rather, it is a normal consequence of avoidance that is unavailable. The separation of contract and property in Article 4(b) is by no means the straightforward matter that it might appear to be under Article 4(b). It therefore seems that, until a third party claiming property rights in the goods or an insolvency officer appears, the CISG does not in fact shirk from dealing with property. A seller who includes in the terms of the contract a reservation of property clause may properly claim that the buyer should respect that right and not deal or otherwise dispose of the goods except in a way that is consistent with the clause. As between seller and buyer, the remedies provisions of the CISG – not the corresponding provisions of the law otherwise applicable to the property issues – should apply.30 Once the third party dimension intrudes, however, the case law supports the exclusion of the CISG.

28

See also Article 82(1) (seller’s right to retain goods against reimbursement of reasonable expense arising out of buyer’s failure to take delivery). 29 U. S. District Court for the Northern District of Illinois, United States, 28 March 2002 (Usinor Industeel v. Leeco Steel Products, 209 F. Supp. 2d 880, 47 UCC Rep. Serv. 2d 887). 30 Federal Court of the South Australian District, Australia, 28 April 1995, CLOUT case No. 308 (instalment sale).

245

Michael Bridge

Article 5 Article 5 has yielded very few reported cases. It is, however, gratifying to see that a German court has given it a sensible commercial interpretation by ruling that, where the buyer incurs liability under domestic law to sub-buyers for personal injuries, this should be classified as an economic loss when the buyer seeks recovery from the seller under the CISG.31 The seller in such a case is not being made liable for personal injury caused to the sub-buyer; the seller is being made liable to the buyer for the balance sheet loss that flows from the buyer’s liability to the sub-buyer for personal injuries. The words “any person” at the end of Article 5 appear to be surplusage, quite possibly attributable to the late appearance of this provision in the drafting process. Article 5 was designed largely to minimise the risk of conflict between the CISG and domestic systems of product liability and tort. The CISG does, however, apply to property damage. Suppose a seller has been negligent in recommending to the buyer goods that are not at all suitable for the buyer’s purpose and that damage the buyer’s plant and machinery. Suppose too that the buyer fails to comply with the examination and notice of defect provisions in Articles 38-39. May the buyer by-pass the restrictions on recovery in the CISG and obtain full damages in domestic tort law? In some respects, this might appear a similar question to the one dealt with above concerning mistake and misrepresentation. Nevertheless, while that question went to the heart of sales law and the CISG, the application of the CISG to property damage seems more of an extension of sales law. Moreover, the earlier inquiry concerned the meaning of “validity”, a Convention concept. There is no such Convention concept of tort (or delict) that could limit the domestic application of a Contracting State’s tort rules. Consequently, a buyer ought to be able to take the tort route, especially if domestic law permits a free election between different causes of action. Issues of this kind are bound to arise where uniformity is partial and does not run through the whole of private law. Election should, unless a very good counter-argument can be made, be treated as a matter of the broader domestic law. If it had been intended to deprive the buyer of freedom to sue in tort, then the CISG ought to have explicitly said so.

31

246

Oberlandesgericht D
sseldorf, Germany, 2 July 1993, CLOUT case No. 49.

A commentary on Articles 1-13 and 78

Article 6 A question squarely raised by Article 6 concerns whether the parties may impliedly derogate from or exclude the CISG, or whether they must do so expressly. The drafting history of the CISG shows32 that, despite the rejection of an attempt to refer explicitly to express and implied exclusion, as was done under ULIS,33 no significance should be attached to the failure to repeat the ULIS approach. Decisions of courts to the contrary34 can be criticised for their failure to refer to the history of the Convention. They might also be based upon a failure of logic. Just because Article 6 makes no mention of express exclusion and derogation is no reason to rule out an express agreement of the parties, so why should a similar argument succeed with an implied agreement, especially in a Convention that gives extensive recognition to informal dealings between the parties?35 Implied exclusion is a matter that most often arises in connection with a choice of law clause. While such a clause does not explicitly exclude the CISG, that may be its implicit meaning. If the parties choose the law of a Non-Contracting State, this can only mean that they have availed themselves of their rights under Article 6. But what is the case if they choose the law of a Contracting State? The issue is one of interpretation of the parties’ intentions36 and should be so treated in a Convention that recognises freedom of contract and party autonomy. It should not be treated as a case of the parties availing themselves of a legal privilege which must be narrowly 32

Documentary History of the Uniform Law for International Sales 469-71 (John O. Honnold ed., 1989) [hereinafter Documentary History] (First Committee Deliberations 1980 (A/CONF. 97/C.1/SR4)). 33 ULIS, supra note 15, art. 3: “The parties to a contract of sale are free to exclude the application thereto of the present Law either entirely or partially. Such exclusion may be express or implied”. 34 See, e. g., Landgericht Landshut, Germany, 5 April 1995, available at http://www.cisg. law.pace.edu/cisg/wais/db/cases2/950405g1.html; Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 24 January 2000, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/000124r1.html (case No. 54/1999). 35 Note, however, that the drafting history shows a rejection of the mention of implied agreements in order to discourage courts and tribunals from too readily finding such an intention: Documentary History, supra note 32, at 470-71, ¶ 18 (Japanese delegate) (First Committee Deliberations 1980 (A/CONF. 97/C.1/SR4)). 36 It is entirely appropriate to demand a genuine intention of the parties to depart from the CISG: see Obergericht des Kantons Luzern, Switzerland, 8 January 1997, CLOUT case No. 192.

247

Michael Bridge

interpreted: the CISG is not a regulatory law. If the parties are resident in different Contracting States, it might fairly be asked why they inserted an applicable law clause in favour of a Contracting State when the CISG would have applied in any event. Is the insertion of the clause to be regarded as otiose? The same problem does not arise so keenly, of course, if the CISG applies as a result of the reference to the forum’s private international law rules under Article 1(1)(b). The selection by the parties of the law of a Contracting State may well be the only way that they could have brought in the CISG, assuming that they could not have chosen the CISG itself directly as the applicable law. This tends to the conclusion that the parties intended the CISG to apply, or at least that they did not intend to exclude it, which is sufficient. Further, if the applicable law clause is treated as a contractual provision to be interpreted in just the same way as other contractual provisions, it might be important to know whether the parties are using a standard form that predates the CISG. Language inserted expressly in the contract after the circumstances giving rise to the applicability of the CISG might be seen as more readily displaying an intention to exclude the CISG than old boilerplate language. It is relevant to ask further how the parties ought to have expressed an intention that French sales law, for example, as contained in the Code Civil, should govern the contract. To say that they should have stated that this does not mean the CISG comes close to demanding that the CISG can only be excluded expressly. This is a matter that concerns a number of English lawyers37 since many contracts that have no physical or party connection to England contain English law governing clauses, precisely because of the perceived commercial merits of English law.38 The routine insertion of a clause ousting the CISG, which is a feature of many oil and commodities trading forms, may not be as readily achieved in a bespoke shipbuilding contract. Suppose, to continue with our French example, that the parties say French domestic law applies. It would be the worst sort of pedantry to say that the CISG is part of French domestic law and therefore has not been excluded by the parties. The parties are merchants and do not have lawyers looking over their shoulders. In an arbitration, French domestic law was held applicable when the contract referred to French law and the terms of reference of the arbitral tribunal mentioned French law without its private

37

And might explain in part the United Kingdom’s failure to adopt the CISG. For example, the great majority of contracts for the construction of ships and tankers (“newbuildings”) are governed by English law. This is particularly true of newbuildings in Japanese and Korean yards. 38

248

A commentary on Articles 1-13 and 78

international law rules.39 Since the question is one of intention, it must be wrong to say, as the German Bundesgericht has done in the Benetton II case, that “an agreement on the applicability of substantive German law by itself cannot be seen as an exclusion of the CISG” and to demand that the parties refer to German national sales law provisions.40 For that reason, it is too dogmatic to say, as the Austrian Oberster Gerichtshof has done, that: “The choice of law without an explicit declaration that the Convention be excluded does not constitute an implicit exclusion, and because the CISG is a part of the chosen law, it is therefore included in the referral, and takes precedence over the non-unified law which would otherwise be applicable ...”41 This is to confuse party intention with the precedence of legal instruments. The resolution of this issue is by no means easy and the only sensible advice that can be given – namely, to be as clear as possible about the meaning of the governing law clause – is addressed to transaction lawyers as opposed to litigation lawyers.

Article 7 Article 7(1) deals with the interpretation of the CISG and Article 7(2) with the filling of gaps in it, an exercise seen in common law countries as one of implying terms in the contract. The former provision proclaims that, however much the CISG may have been incorporated into the domestic law of a Contracting State, it is not domestic law in the same way that other national legal instruments are. The international character of the CISG has to be recognised as a matter of treaty obligation and not just pious aspiration. This is all the more reason why terms used in the CISG should be given an autonomous interpretation and why great care should be taken in using domestic legal experience of similar or even identical terms. For example, supposing the U. K. were belatedly to adopt the CISG, it might well be useful to turn to English law on the meaning of fitness for purpose in Article 35 but it would be very dangerous to call up English cases on the meaning of description which, for a number of reasons, some of them occult, has been given a highly artificial interpretation in English case law.

39

ICC Court of Arbitration, Case No. 7754, 1 January 1995, available at http://www.cisg. law.pace.edu/cisg/wais/db/cases2/957754i1.html. 40 Bundesgerichtshof, Germany, 23 July 1997, CLOUT case No. 236. 41 Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/011022a4.html.

249

Michael Bridge

To counter the homeward tendency, which is the natural enemy of uniform law, a reference to academic literature,42 and to the decisions on the CISG of foreign courts and tribunals is to be positively encouraged. To serve the cause of uniformity, a premium is placed upon tight and persuasive reasoning and it would therefore be useful for courts to consider the export potential of their judgments. It has to be said, however, that the case law tends to fall short of this high standard, with many judges and arbitrators contenting themselves with assertion rather than reason. Perhaps intellectual persuasion is more of a task for legal scholars than for judges. The development of an internationalist spirit should encourage courts not to go looking in the CISG for longstanding problems in domestic law.43 It might alert those courts referring to a paucity of case law on the CISG to the difference between a paucity of national decisions and an abundance of decisions world-wide. After a very slow start, there are encouraging signs of a greater willingness of courts to look at decisions handed down outside their national boundaries.44 This tendency can only be encouraged by the remarkable achievements of those who have created data bases and have posted there decisions translated into English, which has become the lingua franca of the uniform law movement. A sensitive point that does arise under Article 7(1) concerns the extent to which a court ought to follow the decisions of a foreign court even if it considers that those decisions lay down bad law. A number of the decisions of German courts on the examination of goods and the giving of notice of defect under Articles 38-39, which take as their starting point of comparison decisions on their own very strict domestic commercial law, have set a standard of harshness and pedantry that few tribunals would want to emulate. Even an internationally-minded court should be free not to follow bad law. One way would be to observe the distinction between law and fact and to note that what constitutes a reasonable notice and the giving of notice within a reasonable time can be a matter for local variation and usage. This is an expedient, however, that should be used sparingly if the interests of 42

Oberster Gerichtshof, Austria, 13 April 2000, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/000413a3.html. 43 See, e. g., the American concern with the parol evidence rule in 11th Circuit U. S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino S. p. A., 144 F.3d 1384). 44 See, e. g., Tribunale Civile di Vigevano, Italy, 12 July 2000, CLOUT case No. 378; Tribunale Civile di Cuneo, Italy, 31 January 1996, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/960131i3.html; U. S. District Court for the Northern District of Illinois, United States, 28 March 2002 (Usinor Industeel v. Leeco Steel Products, 209 F. Supp. 2d 880, 47 UCC Rep. Serv. 2d 887); U. S. District Court for the Southern District of New York, United States, 26 March 2002 (St. Paul Insurance Co. v. Neuromed Medical Systems & Support GmbH, 2002 WL 465312).

250

A commentary on Articles 1-13 and 78

uniformity are to prevail. It might therefore be better – certainly it would be more transparent – to depart expressly and on principled grounds in order to give a lead to other tribunals. The same might be said for the reference to good faith in Article 7(1). In view of the inherent vagueness of the expression, and the tendency to use it in a reductionist way to mean whatever the user wants it to mean, there is a threat posed to uniformity if it is given too expansive a meaning by some national courts. I am far from convinced, for example, that the laying of a duty on contracting parties to preserve the contract goods is a manifestation of good faith. If good faith explains everything, then it explains nothing. The real test for good faith will come, however, in the case of a party who follows the letter of the CISG and is accused of acting in breach of the good faith standard.45 If, for example, a buyer were to take steps to make time of the essence of the contract, believing that the seller would not be able to perform in the reasonable time given, and serving such a notice only because the market had swung against him, would it be a good faith interpretation of Article 47 if his notice to the seller were recognised as effective? Should the existence of a good faith motivation be read into Article 47? Similarly, if a buyer were to declare the contract avoided as soon as a fundamental breach has occurred, so as to deprive the seller of a chance to cure the defective performance, should not Articles 48-49 be interpreted so as to prevent the buyer from acting in this way? Article 7(2) is in many ways the linchpin of the CISG since its use by courts and tribunals will have a marked effect upon the future of the CISG. Sale is but a special contract which draws upon general contract law. There is however no uniform general contract instrument that corresponds to the CISG. Yet, when the CISG is compared to the UPICC, it can be seen that, once validity provisions have been stripped out, the UPICC, if appropriately supplementing the CISG, add some useful extra detail in certain areas but hardly venture into parts of contract that are not dealt with in the CISG, either in detail or in outline. In other words, apart from validity, the CISG might be said to contain the whole of contract law in the particular setting of sale of goods. This is a justification for giving an expansive reading to Article 7(2) so that a court should not be too ready to say that a contractual matter falls outside the CISG. Yet a number of courts, for example, have said that set-off is not dealt with by the CISG.46 In such a case, the court will 45

See Oberlandesgericht Hamburg, Germany, 28 February 1997, CLOUT case No. 277 (bad faith for a seller to insist on a declaration of avoidance from the buyer). 46 See, e. g., Oberster Gerichtshof, Austria, 22 October 2001, available at http://www.cisg. law.pace.edu/cisg/wais/db/cases2/011022a4.html; Oberlandesgericht Hamm, Germany, 9 June 1995, CLOUT case No. 125.

251

Michael Bridge

invoke its rules of private international law to find the applicable law. The result is the same as if set-off were recognised as belonging to the CISG but incompletely dealt with by it so that, in the absence of helpful general principles, the court has to turn to its rules of private international law pursuant to Article 7(2). Nevertheless, there is scope for arguing that set-off, or at least one version of it, is governed by the CISG. It is not a large step from the recognition that the buyer reducing the price under Article 50 may exercise self-help and tender to the seller only that reduced price (“... the buyer may reduce the price ...”) to the conclusion that this is a type of set-off broadly considered and that Article 50 contains but one example of a general principle on which the CISG is based. The inclusion of claim and cross-claim in this way, both arising under the same contract of sale, provides of course no warrant for an altogether different type of set-off as where, for example, a buyer might want to set off against the seller’s claim for the price the buyer’s own claim for the reimbursement of sums due under a previous and unconnected transaction. A reference to private international law under Article 7(2) is an admission that the uniformity vehicle has broken down. In the interest of uniformity, courts and tribunals should be encouraged to adopt a creative approach to reading the text of the CISG in the search for general principles. There is a restrictive argument to the effect that it is not all general principles that might be inferred from the CISG that may be brought in under Article 7(2) but only those general principles on which the CISG is “based”. By this reasoning, an isolated example, such as perhaps the implicit reference to setoff in Article 50, may not be sufficient. The danger of this reasoning is that it would cut down uniformity and speed the assimilation of international sales law incorporating the CISG into the domestic laws of the Contracting States. If the particular example of set-off in Article 50 is seen as an isolated case, so as thereby evincing an intention to exclude other types of set-off pursuant to the inclusio unius, exclusio alterius principle, one response to this would be to descend from set-off to the more general case of self-help and point to other examples of self-help in the CISG.47 If self-help could then be seen as a general principle on which the CISG is based, it might be less controversial to assert the existence of other examples of set-off in addition to that specifically provided for in Article 50. A catalogue of general principles immanent in the CISG has been drawn up by more than one author. There is no need to repeat the exercise here, though it is a matter of no small interest to note that the various lists differ. Do I have to agree with an Austrian court that full compensation is a general 47

252

See, e. g., arts. 65(1), 71(1), 75-76, 87.

A commentary on Articles 1-13 and 78

principle48 when Article 74 plainly contains a remoteness of damage rule which is designed to limit recovery in respect of losses caused by a breach of contract? There is obviously a balance that has to be struck between excessive conservatism and excessive creativity: each is destructive of uniformity. The best antidote to these two extremes is to take heart from Article 7(1) and cultivate the spirit of internationalism in order to create a true CISG community. One item that would feature on most if indeed not all lists of immanent general principles would be good faith. It may not have been expressly incorporated in the CISG as an overriding principle governing the rights and duties of the parties, though there is much in the argument that an interpretation of the CISG according to the canon of good faith amounts to the same thing, since the enforceability of the parties’ rights and duties derives from the CISG itself. Even assuming this argument to be sound, however, good faith is not entrenched in the CISG as it is in the UPICC,49 namely, as an overriding principle which the parties may not exclude in the contract. Interestingly, however, the freedom the parties may exercise under Article 6 to exclude or derogate from the CISG in part or in full may not extend to Article 7(1), since that provision lays a duty on courts and tribunals rather than upon contracting parties. Nevertheless, to the extent that the parties in a contract make it expressly clear that a party serving a time of the essence notice may do so in all cases regardless of motive or impulsion, the court will no longer be interpreting the time of the essence provisions in CISG as such but rather the express terms of the contract itself. Article 7(1) applies to the interpretation of the Convention and not of the contract. If this response is to be countered, then it will have to be on the ground that Article 6 itself is being interpreted by the court so as to place limits on the parties’ freedom to opt out. As for what does constitute good faith, it is much easier to find agreement on its immanent existence in the CISG than agreement on its precise content. It is almost certain that judge and jurist will bring domestic baggage into the definition of good faith. How can a German judge resist the mass of legal culture reposing in the extensive body of law resting upon § 242 of the German Civil Code? The reductionist tendency inherent in good faith is so strong that there is a very real danger that it will come to mean anything and everything so that, even if there is uniformity of definition, the concept no longer serves a useful purpose and moreover introduces a dangerous degree of unpredictability into the CISG. 48 Oberster Gerichtshof, Austria, 9 March 2000, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/000309a3.html. 49 UPICC art. 1. 7(2).

253

Michael Bridge

Article 8 The question of objectivity versus subjectivity is one of those questions that bedevils relations between civil lawyers and common lawyers. Article 8 contains an admirable compromise from the point of view of a common lawyer. In paragraph (1), it appears to lay down a subjective standard, yet carefully circumscribes it so that the subjective intent governs only where the other party either knew or must have known what that intent was. This confines paragraph (1) to an empty statement of the subjectivity principle. Paragraph (2) then introduces as a residual rule a standard based upon the hypothetical reasonable cocontractant. Though a residual rule, this objective rule is the controlling one and has been recognised as such.50 This same provision has also proved useful in dealing with the sufficiency of notice that a party may demand if the other’s standard terms are to be incorporated into the contract.51 Any lingering affection that a domestic court might have for the parol evidence rule ought to be comprehensively banished by paragraph (3),52 which makes available a comprehensive mass of evidence, precontractual and post-contractual and of various kinds, all adding up to difficulties for any legal system using civil juries. One of the general principles often cited as capable of being inferred under Article 7(2) is estoppel. Some support for this can be found in Article 8(2) which, in any case, is capable of being used in a free-standing way to assert an estoppel (or waiver in the sense of estoppel) position. On this basis, a German court concluded in one case that the seller had by its conduct in negotiating a settlement over an extensive period waived its right to raise the buyer’s lateness in giving notice of non-conformity.53 In systems of law like English law, which place a bar on post-contractual behaviour as a guide to interpreting the contract, doctrines of waiver and estoppel by convention are sometimes employed to achieve the same result as would have been reached by an ex post facto interpretation. A reliance on waiver is less necessary when subsequent conduct can be looked at under Article 8(3) as a guide to interpretation.

50

Oberlandesgericht Dresden, Germany, 27 December 1999, available at http://www.cisg. law.pace.edu/cisg/wais/db/cases2/991227g1.html. 51 Landgericht Heilbronn, Germany, 15 September 1997, CLOUT case No. 345. 52 But note the perverse decision in 5th Circuit U. S. Court of Appeals, United States, 15 June 1993, CLOUT case No. 24 (Beijing Metals & Minerals v. American Business Center Inc., 993 F.2d 1178). 53 Bundesgerichtshof, Germany, 25 November 1998, CLOUT case No. 270.

254

A commentary on Articles 1-13 and 78

Article 9 Article 9 has a potentially wide scope, along with Article 7, in putting the flesh on the skeleton of international uniform sales law laid out in the CISG. Paragraph (1), with its reference to practices established between the parties, might – like Article 8 – be used to support waiver and estoppel, but the better view is that it is predicated on a series of prior contracts and contacts between the parties.54 Paragraph (2) introduces into the contract widely observed international usages that should have been known to the parties. Perhaps the most interesting question is what amounts to a “usage” under Article 9. It has been held that the UPICC may be usages under Article 9.55 If so, this would avoid some of the difficulties inherent in bringing them in under Article 7, the most notorious of which is: How can the UPICC furnish general principles on which the CISG was based when they were published 14 years after the diplomatic conference in Vienna where the CISG was signed? The response, that the UPICC recorded principles already in existence, is countered by the preface to the UPICC which makes it plain that they were not selected on the basis of their general acceptance but rather upon their individual quality. Article 9 does not necessarily represent an easier passage for the UPICC. How many of them qualify as usages? The rules dealing with validity are hardly a matter of “usages” that are “observed by” parties in international trade. The same can also be said for substantive contractual rules like the definition of fundamental non-performance.56 A somewhat more promising prospect for incorporation under Article 9 is presented by the Incoterms57 which most certainly do represent usages in that they give clear practical guidance to parties in international sales as to what each is required to do to bring the contract to fruition. What they might lack in subtlety58 they more than make up for in clarity and suitability for those contracting parties who may not be adept in the field of international 54

Zivilgericht Basel-Stadt, Switzerland, 3 December 1997, CLOUT case No. 221. Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 6 June 2000, available at http://www.cisg.law. pace.edu/cisg/wais/db/cases2/000606r1.html (case No. 406/1998). 56 UPICC art. 7. 3. 1. 57 Published by the International Chamber of Paris, the current version is Incoterms 2000 (ICC Publication No. 560). 58 The Incoterms are quite dogmatic in allocating certain responsibilities to each of the parties (e. g. export licences) even though the particular facts of a case might argue for a more nuanced approach. 55

255

Michael Bridge

sales. They have been held applicable under Article 9(2).59 It must however be stressed that Article 9(2) refers to usages adopted by “parties to contracts of the type involved in the particular trade concerned”. The widespread use of Incoterms in international sales generally would not be sufficient to bring them into a contract without express incorporation. They are frequently expressly incorporated in contracts for the sale of oil in bulk but are rarely to be seen in the sales of dry commodities (such as wheat and soya bean meal). Any argument tending towards their inclusion in an oil contract under Article 9(2) would therefore carry no weight in the case of a contract for the sale of dry commodities. Even so, some degree of disquiet must still be expressed about their silent incorporation into oil contracts. If they are frequently expressly incorporated into oil contracts, does this not show an intention not to incorporate them if the oil contract is silent? Oil sales are carried out on the basis of standard forms; contracts are not hurriedly drafted on the back of an envelope. Apart from this, the scope of Article 9(2) should be determined according to the degree of detail to be found in the particular contract as well as to the nature of that detail. It may be that Article 9(2) is most appropriately used in respect of matters of fine detail that one might expect not to be the subject of express treatment in the contract. In certain types of contracts, involving dry commodities for example, the contract forms descend into minute detail. This degree of detail leaves little scope for Article 9(2), just as in domestic contract law there is a relationship of inverse proportion between the implication of terms in a contract and the amount of express detail.

Articles 11-13 Articles 11-13 deal with form and writing. In promoting the cause of informal contracting, they reinforce the cause of party autonomy and, by diminishing the possibility of technical escapes from contractual obligation, promote the CISG values of good faith and the avoidance of economic waste that comes from a premature end to the contract. It is well-known in those countries that have Statute of Frauds provisions that the objection raised by a party to the lack of formality is usually made, not for purist reasons, but rather to shroud the true, often, but by no means always, unmeritorious, reason for escaping from the contract. In a similar way, a seller may object that a complaining buyer has not given a proper notice of defect under Article 39 when the seller’s real grievance is that it was that the goods were conforming goods all the while. Largely to accommodate the interests of socialist 59 See, e. g., U. S. District Court for the Southern District of New York, United States, 26 March 2002 (St. Paul Insurance Co. v. Neuromed Medical Systems & Support GmbH, 2002 WL 465312).

256

A commentary on Articles 1-13 and 78

economies, provision was made for countries to make a declaration under Article 96 disapplying Articles 11 and 29 to the extent that they permit contracts to be concluded, modified, and terminated by informal means. The Article 96 declaration only applies if at least one of the parties has his place of business60 in a declaring country. The parties themselves may not derogate from or vary the Article 96 declaration,61 which has the following odd result. Although a party might be precluded under Article 29 by his conduct from asserting a contractual provision demanding that any contractual modification or termination be in writing, no such waiver or estoppel should apply in Article 96 cases. At the risk of propounding a pathetic fallacy, Article 96 appears to be designed to protect the susceptibilities of legal systems and not contracting parties. And yet it applies on the face of it whether or not proceedings are brought in the courts of a State that has made a declaration. It may turn out to be an empty diplomatic gesture. Article 12 disapplies provisions of the CISG permitting informality: it does not bring into effect any CISG provisions that actually require formality because the CISG contains no such provisions. If the forum State were a declaring State, it would no doubt impose its own formal rules, but there is no machinery in the CISG for requiring the courts of a Non-Declaring State to implement the formal requirements of a declaring State. Even to recognise the interests of the Declaring State might be inconsistent with private international law conventions having a very pluralistic approach to determining the governing law in matters of form.62 And that same Declaring State might be treatybound under such a convention to recognise the formal validity of an informally concluded contract. Nor is there any way in which the courts of a Non-Declaring State could manufacture an ideal rule of form for international sale of goods contracts in the absence of express provision for such in the CISG. What are the courts of a Non-Declaring State to do, especially when Article 96 does not require them to respect another State’s declaration? The answer is to ignore it.

60 Principal place or any place? Under Article 10, it would seem that this is the place of business with the closest relationship to the contract. 61 Article 12. 62 For example, the Rome Convention on the Law Applicable to Contractual Obligations 1980, Article 9 (either the law applicable to the contract, or the law of the State where both parties are present, or the law of the State where either party is present when they are present in different States). See also the private international approach adopted by the Rechtbank Rotterdam, Netherlands, of 12 July 2001.

257

Michael Bridge

Article 78 Article 78 has generated a very large amount of case law as a result of stating an entitlement to interest where the price or any other sum is in arrears but without stating when interest is to run and at what rate and whether it is to be compound or simple. There appears to be some overlap with Article 74: some legal systems recognise a right to interest as damages, where the payee has either lost an investment opportunity or has had to borrow as a result of the payer’s breach of contract in not making payment. In such cases, the terms of borrowing and prevailing rates of investment should solve the questions left unanswered under Article 78 by providing a route under Article 74 instead.63 Not all cases of non-payment, however, will be in breach of contract, so there will remain a need to fill out that provision. Furthermore, some may not pass the test of remoteness of damage in Article 74. As for whether the various questions concerning interest are governed by the Convention, it is hard to agree with those courts who see them as excluded.64 Why is there an Article 78 at all if the practical questions that follow on from its provision do not fall within the CISG? This should be a case for applying Article 7(2) to fill the gap in the coverage of the CISG. Nevertheless, as for the arbitral tribunals that found a general principle of full compensation,65 one can only say that compensation is payable upon breach and breach permits recourse to Article 74 and thus obviates any need to implement Article 78. 63

The separate route under Article 74 has been recognised on a number of occasions: see the cases listed by Ferrari in draft UNCITRAL Digest art. 78 n. 11. The CISG does not deal expressly with matters of currency but it is notorious that currency and interest are separate sides of the same coin. For example, it would be inappropriate to award an Argentinian interest rate in the case of a Swiss franc debt and vice versa. Currency, like interest, is commonly a function of compensation for breach and should therefore be seen in an appropriate case as an Article 74 matter. 64 See the cases listed by Ferrari in draft UNCITRAL Digest art. 78 n. 29. 65 Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (Austrian Arbitral Tribunal – Vienna), Austria, 15 June 1994, CLOUT case No. 94.

258

Comments on the draft Digest relating to Articles 14-24 and 66-70 Pilar Perales Viscasillas* I. Introduction The draft UNCITRAL Digest certainly constitutes a major aid to understanding the case law arising under the 1980 U. N. Convention on Contracts for the International Sale of Goods (CISG). This effort to further harmonize the case law has to be seen as a companion to other initiatives around the world, including the CISG databases (CLOUT,1 UNILEX,2 PACE3). The UNCITRAL Digest, however, presents several advantages over its companions, mainly that it is a systematic approach to cases, prepared by experts, that will help courts and arbitrators identify issues and the relevant decisions from tribunals around the world. This will certainly help to harmonize the results achieved in litigation involving the CISG. The University of Pittsburgh’s Center for International Legal Education, which is well known for its initiatives promoting a better understanding of the CISG, has gone “Beyond the Digest” by asking several CISG Commentators to analyze the draft Digest. I have been asked to study, critique and analyze the portion of the draft Digest authored by Professor Peter Winship, covering Articles 14 to 24 (formation of contract) and 66-70 (passing of risk). For reasons of limited time and space, and also because many case citations to these articles are of limited interest, I will confine my written comments to selected cases and issues raised in that portion of the draft Digest.

*

Professor of Commercial Law, Carlos III University of Madrid. http://www.uncitral.org. CLOUT (Case Law on UNCITRAL Texts) also compiles cases on UNCITRAL Texts besides the CISG. 2 http://www.unilex.info. Unilex also collects cases on the 1994 UNIDROIT Principles of International Commercial Contracts. 3 http://www.cisg.law.pace.edu, with links to other databases – for example, Basel University (Switzerland) and Carlos III University of Madrid (Spain). 1

259

Pilar Perales Viscasillas

II. Consideration or causa In a decision by the U. S. District Court for the Southern District of New York (Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc. et al.),4 the defendant-seller raised challenges involving the doctrine of consideration. The court analyzed the issue under non-uniform domestic law (New Jersey law) because it considered it to be a question of validity and thus outside the scope of the Convention (see Article 4(a)). It relied on an article written by Professor Helen Hartnell5 and her statement that by validity, the CISG refers to any issue by which “domestic law would render the contract void, voidable, or unenforceable”.6 In my opinion, the statement made by the court raises an important question, particularly since the Convention also states in Article 4 that it governs the formation of contracts of sale.7 The question is what is the treatment of an issue that is labeled as a validity matter under domestic law8 – like consideration or causa9 – but that it is also covered by the CISG. Part II of the CISG is entitled “Formation of the contract”, and it does not mention the need for consideration or causa in order to have a contract concluded. Under Part II of the Convention only nudum consent is needed. Furthermore, Article 29 expressly states that a contract may be modified or terminated by 4

U. S. District Court for the Southern District of New York, United States, 10 May 2002 (Geneva Pharmaceuticals Tech. Corp. v. Barr Labs., Inc., 201 F. Supp. 2d 236). In this case a U. S. buyer alleged that an implied-in-fact contract was created under the CISG which obligated the seller to supply clathrate (a component of the oral anti-coagulant named “warfarin sodium”). The buyer also maintained that a contract was concluded under the doctrine of promissory estoppel (see infra, part III). 5 Helen Elizabeth Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale J. Int’l Law 1 (1993). 6 Id. at 45. 7 See ICC Court of Arbitration, Case No. 7399, 1993, CLOUT case No. 299 (abstract also available in Bulletin de la Cour Internationale d’Arbitrage, ICC, November 1995, vol. 6 n. 2, 67-68) (“That the Convention applies not only to completed contracts but also to the question whether or not a contract has been validly made is apparent from the fact that the Convention contains a section (Chapter 1, Part II) entitled “Formation of the Contract.’”). 8 And probably so labelled under international uniform law as well, although, as we will see, consideration or causa is irrelevant. 9 See, e. g., Restatement of Conflicts of Law § 332 (1934), cited by Hartnell, note 226, and article 1261 Spanish Civil Code, stating that there is no contract unless the following conditions are met: the will of the parties, object and causa. Article 1261 is located in chapter II (the essential conditions for the validity of contracts), Title II (Contracts) of the Civil Code of Spain.

260

Comments on the draft Digest relating to Articles 14-24 and 66-70

the mere agreement of the parties, so no consideration is needed.10 Thus, it is clear that the Convention displaces the domestic rules of validity about consideration and causa, deeming them unnecessary for contract conclusion, modification or termination. Now also, the statement of the U. S. court about the meaning of the term “validity” under the CISG, which is quoted from Professor Hartnell’s article, is taken out of context. It is also worth mentioning that, on the one hand, Professor Hartnell supports the view that an adjudicator should adopt a balanced approach to the matter of validity in order to preserve the internationalist goals articulated in CISG Article 7(1),11 and on the other, that she refers only very briefly on two occasions to consideration and causa.12 Besides, the court failed to apply the solutions given by Professor Hartnell to certain issues under CISG, like the treatment of formal validity, which I believe is analogous to consideration and causa. Had the Court applied the kind of reasoning employed by Professor Hartnell in relation to formal validity under CISG, for the reasons stated above, the Court would have concluded that under the CISG the requirement of consideration or causa are pre-empted, and that neither is needed for the conclusion, modification or termination of a contract. This is precisely the holding of the U. S. District Court for the Western District of Michigan,13 which dealt with a non-competition clause in a sales contract. The Court held that under Article 29 there is no need for consideration in order to modify a contract of sale. The Court could have resorted to Article 7(1) and the need to achieve a 10

Scholars agree on the irrelevance of consideration and causa in international contracts: Ulrich Drobnig, Substantive Validity, 40 Am. J. Comp. L. 635 (1992); Barry Nicholas, The Vienna Convention on International Sales Law, 105 Law Q. Rev. 214 (1989); Peter Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht: Das U¨bereinkommen der Vereinten Nationen u¨ber Vertra¨ge u¨ber den internationalen Warenkauf (3d ed. 2000), Widerruf des Angebots, n. 8; M. del Pilar Perales Viscasillas, La formacin del contrato de compraventa internacional de mercaderas 344, 447-448. See also Alejandro Garro, Reconciliation of Legal Traditions in the UN Convention on Contracts for the International Sale of Goods, 23 Int’l Law. 453-54 (1989), pointing out that “consideration” is supplied by the obligation assumed by the parties to deliver the goods and pay the price; Peter Winship, Formation of International Sales Contracts Under the 1980 Vienna Convention, 17 Int’l Law. 3-5 (1983). 11 See Hartnell, supra note 5, at 17-18. 12 Id. at 23 (referring to choice of law rules pertaining to validity issues such as consideration) and at 26 (referring to the Draft rules of UNIDROIT prepared to deal with the substantive validity of contracts of sale covering, among other issues, the requirement of consideration). Those rules have been converted into Chapter 3 (Validity) of the UNIDROIT Principles of International Commercial Contracts, 1994. 13 U. S. District Court for the Western District of Michigan, United States, 17 December 2001 (Shuttle Packaging Systems, L. L. C. v. Tsonakis, 2001 WL 34046276).

261

Pilar Perales Viscasillas

uniform and international interpretation of the Convention. Particularly, the UNIDROIT Principles, as well as the European Principles of Contract Law, 1998, shed light on the meaning of validity under the CISG. In this regard, Chapter III (Validity) of the UNIDROIT Principles does not require either consideration or causa for the formation, modification or termination of contracts.14

III. Promissory estoppel In the Geneva Pharmaceuticals case, the Court said that promissory estoppel, as claimed by the buyer, was not preempted by the CISG (Article 16(2)(b)). Invamed (the US buyer) alleged that a promise on which it relied (the issuing of a letter by the seller to the FDA – Food and Drug Administration – supporting the buyer’s application for permission to manufacture a medication and confirming that the seller would serve as a supplier of clathrate to the buyer) should be recognized as binding, as if it were a contract.15 The Court asserted that Article 16(2)(b) adopts a modified version of promissory estoppel, which would preempt domestic law only if a plaintiff were to bring a promissory estoppel claim to avoid the need to prove the existence of a firm offer. The Court thus seems to have analyzed this issue based on a very narrow and literal application and interpretation of Article 16(2)(b). The Court also said that the promissory estoppel claim would be preempted only if the CISG had contemplated a similar “reliance” principle in its determination of whether a contract had been formed. Since the defendants did not present any argument that the CISG does so, the

14

See Article 3. 2 of the UNIDROIT Principles, which states: “A contract is concluded, modified or terminated by the mere agreement of the parties, without any further requirement”. See also The Commission of European Contract Law, Principles of European Contract Law Parts I and II Combined and Revised (O. Lando & H. Beale eds., 2000) art. 2:101 cmt. D. This approach is consistent with the opinion of Professor Hartnell about the meaning of “validity” under the CISG. According to Hartnell, a balancing approach has to be applied and “the only way to be sensitive to both the parochial interests reflected in the CISG’s drafting history and the internationalist object and purpose embodied in article 7(1) is to consider domestic validity law in light of evolving concepts of public policy and the development of jurisprudence under CISG”. Hartnell, supra note 5, at 21. 15 Another issue arose from this case: whether an order for “commercial quantities” of the raw material (clathrate) was sufficiently definite to constitute an offer under Article 14(1). No specific quantity was mentioned by the buyer, who declared that this was an industry custom. The Court considered that the alleged usage of trade could be a valid method for determining the quantity. Interestingly, the court applied Article 18(3) to the acceptance of the offer.

262

Comments on the draft Digest relating to Articles 14-24 and 66-70

court held that the particular promissory estoppel claimed was not preempted.16 In my opinion, the Geneva Pharmaceuticals court not only adopted a myopic interpretation of Article 16(2)(b), but also failed to analyze the problem as an issue of the scope of the CISG; although the court was probably constrained by the defendants’ lack of arguments. In any event, the correct analysis of the problem would have been based on a study of the CISG and its goals. Part II of the Convention governs contract formation, adopting the traditional model for contract conclusion, i. e., the exchange of an offer and its acceptance. The issue, from this perspective, is whether the CISG, Part II, can govern other ways or mechanisms forming a contract. If one considers Article 4 (which states that the CISG governs the formation of international sales contracts), part II (Formation of the Contract), and the principles of a uniform and international interpretation of the Convention – particularly the good faith principle (Article 7) – the solution could only be that the CISG governs contract formation whether or not the contract followed the offer and acceptance pattern. In this regard, both scholars and the case law are in agreement.17 In my opinion, it can be derived from Part II of the Convention that in order to conclude a contract a sufficient agreement of the parties is needed. Also, one of the general principles derived from Articles 16(2)(b), 29(2) and 80 is to protect a party who relies on statements or conduct of the other party.18 16

In the decision of the Metropolitan Tribunal, Hungary, 17 June 1997, CLOUT case No. 173, the buyer claimed damages based on a promissory estoppel theory. The Court considered the claim under domestic, non-uniform law (Hungarian law) and rejected the claim. Again, the tribunal failed to analyze the case under the general principles on which the CISG is based (Arts. 16(2)(b) and 29(2)). 17 See Perales Viscasillas, La formacin del contrato, pp. 117-124 (with further citations). Oberlandesgericht M
nchen, Germany, 8 March 1995, CLOUT case No. 134, held that under the CISG other forms of consent are possible as long as they can be regarded as a mutually binding arrangement and the agreement process is comparable to Articles 14-24 CISG. In this regard, both the UNIDROIT Principles (art. 2. 1) and the European Principles of Contract Law (art. 2:211) recognize the possibility that a contract can be concluded without an offer and acceptance. The question in regard to the facts of the Geneva Pharmaceuticals case would be whether it is possible to derive general principles from Part II of the Convention to apply to the dispute (Article 7(2)). The answer should be “yes”, if one considers Article 16(2)(b). 18 This principle, which has been recognized as a general principle applicable within the Convention, has been used to solve other issues under the Convention, i. e. the question of a possible forfeiture of the defense of late notice, see Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft-Wien, Austria, 15 June 1994, CLOUT case No. 94 (SCH-4318), which states, citing Arts. 7, 16(2)(b), and 29(2), that the principle of

263

Pilar Perales Viscasillas

This general principle can be applied to situations like the Geneva Pharmaceuticals case, provided that the promise and the acts done in reliance on the promise (statements or conduct made by the other party) are enough to show an indication of assent to a contract, i. e., an intention to be bound (Article 8 would be an important article to consider in these kinds of situations). This would mean, analogously to the test for claims for promissory estoppel under U. S. Law, that a clear and definite promise as well as reasonable reliance by the promisee is needed. These kinds of issues involved in the Geneva Pharmaceuticals case seem to be distinguishable from the issue of precontractual liability under the CISG. Specifically, the OLG Frankfurt am Main,19 seemed to consider precontractual liability issues outside the scope of the CISG. The buyer claimed damages based on the doctrine of culpa in contrahendo, asserting that the seller, by a manifested willingness to deliver, had established a basis for the buyer to rely on the promise of delivery and thus contract for resale of the estoppel or, to use another expression, the prohibition of venire contra factum protium, represents a special application of the general principle of good faith; Oberlandesgericht Karlsruhe, Germany, 25 June 1997, CLOUT case No. 230, relying on arts. 7(1) (good faith principle) and 80 CISG; Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and industry, Russian Federation, 27 July 1999, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/990727r1.html (302/1996), citing the good faith principle under art. 7(1) and treating estoppel as a principle of the lex mercatoria; and Tribunale di Rimini, Italy, 26 November 2002, available at http://www.cisg.law.pace.edu/cisg/ wais/db/cases2/021126i3.html (obiter dicta, without referring to any particular article of the Convention). Professor Ferrari, in Draft UNCITRAL Digest art. 7, ¶ 28 n. 21, cites the decision of the Gerechtshof s’Hertogenbosch, Netherlands, 26 February 1992, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=97&step=FullText, editorial remarks available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/920226n1.html. However, it appears from the “full” text that appears on Unilex that the case does not state that estoppel is a general principle of the Convention. It is in editorial remarks on the Pace database treatment of the case where it is stated that “Article 7. 2 could also be relevant if one regards estoppel as a general principle of the Convention”. But see Arrondissementsrechtbank Amsterdam, Netherlands, 5 October 1994, English abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=124&step=FullText, considering estoppel under German Law; and U.S. District Court for the Northern District of Illinios, Eastern Division, United States, 29 January 2003, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/030129u1.html (Ajax Tool Works, Inc. v. Can-Eng Manufacturing Ltd., 2003 U.S. Dist. LEXIS 1306), where the Court held that the question of waiver (whether the seller has waived its right to enforce the limited warranty) in accordance with art. 7(2) has to be solved under the rules of private international law, suggesting that the Court was not able to find any general principles or case law to apply. 19 Oberlandesgericht Frankfurt am Main, Germany, 4 March 1994, CLOUT case No. 121.

264

Comments on the draft Digest relating to Articles 14-24 and 66-70

goods. The Court, without further explanation, analyzed this issue under German domestic law (BGB), although the contract was subject to the CISG. The Court rejected the buyer’s claim, as it was clear the buyer was not arguing for the conclusion of the contract based on promissory estoppel (as in the Geneva Pharmaceuticals case) or the irrevocability of the offer based on Article 16(2)(b), but was seeking damages based on precontractual liability. This is a situation which is not governed by the CISG, as shown by the drafting history of the Convention, where a German proposal to address those issues was rejected.20

IV. Incorporating standard terms The use of preprinted forms by the parties during the process of forming a contract raises many issues, which have been solved in different ways by the CISG case law. This is not a surprise considering the different views among scholars, and different approaches in national laws. The first issue is whether the CISG governs the incorporation of standard terms. Although the Convention does not have special rules dealing with the use of standard terms, the question has to be answered affirmatively, since the Convention governs the formation of contracts. In other words, since the issue is whether the general terms and conditions used by the parties are part of the contract, then the solution can only be found by applying the rules that govern the formation of international sales contracts (Part II of the Convention). Other rules of the Convention would apply as well (e. g., Article 8). In this regard, Court decisions that deny the application of the CISG and resort to the application of non-uniform domestic law have to be rejected.21 They not only conflict with an international and uniform interpretation of the CISG but also are not supported by the legislative history of the Convention, which shows that the incorporation of standard terms is not a question excluded from the scope of the CISG.22

20 See Summary Records of Meetings of the First Committee of the United Nations Diplomatic Conference, Vienna, 10 March-11 April, 1980, 11th meeting, 18 March 1980, ¶ 77-87, A/ CONF.97/C.1/SR.11, reprinted in Documentary History of the Uniform Law for International Sales (John O. Honnold ed., 1989) [hereinafter “Documentary History”] at 515-16. 21 Those decisions are cited by Professor Winship in Draft UNCITRAL Digest, Overview of Part II of the CISG, ¶ 11, nn.18-20. 22 In this regard, the preprinted terms are declarations that can be analyzed under the offer and acceptance rules.

265

Pilar Perales Viscasillas

To take the issue of language problems relating to general conditions, an analysis of case law shows different interpretations adopted by tribunals. The fact that some courts apply the CISG to solve the problem raised by the use of general conditions in a language different from that used during the negotiations that led to the conclusion of the contract (which in my opinion, is the correct solution under the Convention),23 while others 23

Amtsgericht Kehl, Germany, 6 October 1995, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/951006g1.html, holding that under the CISG general terms and conditions written in a language (German) different from that of the contract (Italian) do not become part of the contract. A different approach is that of Gerechtshof Arnhem, Netherlands, 27 April 1999, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/ 990427n1.html, that purportedly applied the CISG (it does mention the applicability of the CISG but it does not refer to any single rule of the CISG in regard to the general conditions) to the incorporation of general terms and conditions contained on the back of the seller’s invoices. Each invoice also contained a reference on its front page to the conditions on the back (“said conditions are presented on the back”). After affirming that the general conditions were part of the contract, the tribunal commented on the language of the text of the terms. The general terms and conditions were written in the seller’s language – Dutch – while the buyer had its place of business in Germany. In the opinion of the tribunal, the general conditions were binding upon the buyer, although drafted in Dutch, because the buyer was acting in the operation of the seller’s business. This opinion was reinforced by the fact that it is not unusual in Germany for a party operating its business (as the seller was here) to use general conditions. In the opinion of the tribunal, it was up to the buyer to request a clarification by, for example, asking for information from the seller such as a German translation. The tribunal also considered that the buyer did not object to the terms until the proceedings began. Finally, the tribunal referred to a previous practice of the seller, different from the one described above, consisting of just mentioning to a contractual counter-party that the conditions that applied to the contract were deposited in the Registry of the Court. According to the tribunal, in those circumstances the buyer was not bound by the terms when he was not a resident or established in the Netherlands. Finally, it is interesting to note the correct reasoning of the 11th Circuit Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino S.p.A., 144 F.3d 1384), which analyzed a transaction conducted outside the ordinary course of dealing in international contracts. It was not a contract concluded at a distance, and the order, which contained the general terms and conditions of the seller, was signed by the buyer. In this case, the contract was orally negotiated in English and Italian through a translator in Italy. The parties recorded the crucial terms agreed upon orally on one of the seller's standard, pre-printed order forms, which were in Italian. The front of the order contained a clause acknowledging the terms on the reverse, and on the reverse side the terms and conditions were signed by the buyer, who did not understand Italian. The buyer stated that the parties subjectively intended not to be bound by the terms on the reverse of the form. The court ruled that the buyer should have an opportunity to prove its allegations, but said in a footnote (n.9) that: we find nothing in the CISG that might counsel this type of

266

Comments on the draft Digest relating to Articles 14-24 and 66-70

without further explanation consider it a question of validity beyond the scope of the CISG,24 does not help to build a uniform body of case law. This is particularly true of the language issue, which has produced a third position: that the incorporation of general conditions drafted in a different language from the negotiations ought to be analyzed under Article 8, but the validity of the terms is governed by domestic law.25 It is also worth noting the lack of supporting arguments in the decisions that analyze the incorporation of standard terms under non-uniform domestic law. Some Courts do not even refer to the possible application of the CISG, and apply domestic law by virtue of the forum’s rules of private international law,26 while others refer expressly to Article 4(a) CISG to justify applying domestic law.27 Not even the cases that analyze this issue under both domestic law and the CISG really help to clarify the position.28 reckless behavior and nothing that signals any retreat from the proposition that parties who sign contracts will be bound by them regardless of whether they have read them or understood them”. 24 See Oberlandesgericht Celle, Germany, 2 September 1998, CLOUT case No. 318, which did not consider validly incorporated the general conditions of the seller on the grounds that the reference to his standard terms was in small print and in Dutch. 25 Landgericht Heilbronn, Germany, 15 September 1997, CLOUT case No. 345. Cour d’Appel de Paris, France, 13 December 1995, CLOUT case No. 203, addressed the inclusion of a forum selection clause in the general conditions of the offeror, since those terms were accepted by the addressee, but found that Article 17 of the Brussels Convention precluded enforcing the terms (there was no mention on the front page of the general conditions on the back). 26 Some tribunals expressly refer to this issue as a question of validity (Oberlandesgericht Celle, Germany, 2 September 1998, CLOUT case No. 318), while others do not. Landgericht Duisburg, Germany, 17 April 1996, available at http://www.cisg.law.pace.edu/cisg/wais/db/ cases2/960417g1.html; Landgericht M
nchen, Germany, 29 May 1995, English abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=161&step=Abstract; Rechtbank van Koophandel Hasselt, Belgium, 24 January 1995, available at http:// www.law.kuleuven.ac.be/int/tradelaw/WK/1995-01-24j.htm. 27 See Rechtbank’s Hertogenbosch, Netherlands, 2 October 1998, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/981002n1.html, considering the application of domestic law by virtue of Article 4 to the issue of the validity of the agreement and the clauses contained therein. The court refused to incorporate the general conditions of the seller due to the fact that it did not inform the buyer in due time of the existence of new general conditions, but it is not clear if the holding was based on the CISG. See also Kantonsgericht Freiburg, Switzerland, 23 January 1998, CLOUT case No. 259. 28 See, e. g., Oberlandesgericht Braunschweig, Germany, 28 October 1999, CLOUT case No. 361 (“Since the parties are acting in their commercial capacity, the incorporation of these standard terms is valid both under domestic German Law... and under the alternatively

267

Pilar Perales Viscasillas

In contrast, at least one case that considers the incorporation of general standard terms and conditions under the CISG discusses the application of the CISG more extensively. In particular, the High Court of Germany (Bundesgerichtshof)29 applied the CISG rules on formation of contracts (Articles 14 and 18) as well as the rules on interpretation (Article 8).30 It also cited several scholars (not only CISG commentaries but also commentaries on the domestic German Unfair Contract Terms Act) who support that view. In determining whether general terms and conditions are part of an offer under Article 8, the court found first that this can follow from the negotiations between the parties, the existing practices between the parties, applicable UN Sales Law”); Rechtbank s’Hertogenbosch, Netherlands, 24 April 1996, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=224&step=Full Text. 29 Bundesgerichtshof, Germany, 31 October 2001, available at http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/011031g1.html, deals with an international sales contract between a German seller and a Spanish buyer of a second-hand machine. The tribunal discusses whether or not the seller’s general terms of delivery referred to in the offer but not attached to it were included in the contract. 30 The other cases applied the rules on formation of contract, i. e., they considered the incorporation of standard terms and conditions a formation of contract issue. Landgericht Norhorn, Germany, 14 June 1994, available at http://www.cisg.law.pace.edu/cisg/wais/db/ cases2/940614g1.html, applying art. 14, stating that the validity of the incorporation is governed by the CISG, but not the validity of the standard terms ((art. 4(a)), although the Court referred to the CISG rules); Oberlandesgericht Naumburg, Germany, 27 April 1999, CLOUT case No. 362, applying art. 19(2); Oberster Gerichtshof, Austria, 6 February 1996, CLOUT case No. 176; Tribunal de commerce Nivelles, Belgium, 19 September 1995, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/950919b1.html, applying arts. 19(2), 8(1), and 8(3) CISG; Courd’ Appel de Paris, France, 13 December 1995, CLOUT case No. 203, applying arts. 19(1) and 19(2), but deciding validity under the Brussels Convention; Bundesgerichtshof, Germany, 9 January 2002, available at http://www.cisg.law.pace.edu/cisg/ wais/db/cases2/020109g1.html, applying art. 19(1) and (3) CISG, and applying the knock-out rule to a battle of the forms problem. The last case also held that a rejection clause in the seller’s terms replaced the general conditions of the buyer. Rechtbank van Koophandel Hasselt, Belgium, 18 November 1995, applied the CISG in a case in which general terms and conditions were contained in invoices sent after the delivery of the goods (i. e. post-conclusion of the contract). Such terms included a penalty clause in case of non-performance by the buyer. The tribunal held that a derogation from CISG rules need not be express but it must clearly result from the common intention of the parties. In the opinion of the court, the provisions in the seller’s invoice were unilateral and did not bind the buyer. Some cases also refer to article 8. See, e. g., 11th Circuit U. S. Court of Appeals, United States, 29 June 1998, CLOUT case No. 222 (MCC – Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino S. p. A., 144 F.3d 1384).

268

Comments on the draft Digest relating to Articles 14-24 and 66-70

or international custom (Article 8(3)). The tribunal also analyzed how a reasonable person of the same kind as the other party would have understood the offer (Article 8(2)). Applying this standard, and in accordance with the view of some scholars, the court held that it is unanimously required that the recipient of a contract offer that is supposed to be based on general terms and conditions have the possibility to become aware of them in a reasonable manner ... (i. e.) that the intention of the offeror that he wants to include his terms and conditions into the contract be apparent to the recipient of the offer. In addition, as the Court of Appeals correctly assumed, the Uniform Sales Law requires the user of general terms and conditions to transmit the text or make it available in another way. I agree with the court,31 although it does not appropriately refer to the CISG rules in its analysis. Instead of referring to arguments related to consumer protection or considerations of speed, the court could have referred to the Convention itself. In my opinion, interpretative argument based on Article 8 and on the general principles on which Part II of the Convention is based is missing from the decision. Under Part II of the Convention, an offer or counteroffer has to reach the other party in order to become effective (Articles 15(1) and 24). Thus, if the offeror wants its general terms and conditions to become part of its offer and the offeree to become aware of them, then the offeror – in the Bundesgerichtshof’s words – ought to transmit the text32 or make it available in another way, i.e, in a way that reasonably allows the offeree to acquire knowledge of the terms. In my opinion, it will suffice if, for example, the offeror includes the general terms and conditions in an attachment to an e-mail message or on a web site referenced by address. 31

See a partially different view in Martin Schmidt-Kessel, On the Treatment of General Terms and Conditions of Business under the UN Convention on Contracts for the International Sale of Goods (English translation of commentary on decision of Bundergerichtshof, Germany, 31 October 2001, published in Neve Juristische Wochenshrift (2002)), available at http:// cisg.law.pace.edu. 32 Impliedly, such a duty is required by Amstgericht Kehl, Germany, 6 October 1995, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/951006g1.html, and by Landgericht Nordhorn, Germany, 14 June 1994, available at http://www.cisg.law.pace.edu/cisg/ wais/db/cases2/940614g1.html, which analyzed the incorporation of standard terms under Article 14 and stated that the terms of the seller were included in the contract because they were printed on the back of the order in the language of the contract and also in the language of the buyer, and because a clause on the front side of the order form referred to the standard terms. In the opinion of the Court “this is sufficient to make the standard terms an effective part of the contract”.

269

Pilar Perales Viscasillas

The court also referred to the question of whether the recipient of an order containing a reference to general terms and conditions has a duty to inquire about them. The court correctly stated that this would contradict the general principle of good faith in international trade (Article 7(1)) as well as the parties’ general obligations to cooperate and provide information.33 The court, however, did not explicitly address possible exceptions to the rule in situations in which the inclusion of general terms and conditions is well known to both parties (because the parties had extensive prior dealings, because the conditions are well known in the trade, etc.). This issue is important in light of the statement of the court that “the user of general terms and conditions has to transmit the text or make it available in another way”. In my opinion, a different answer might be reached from the reasoning of the court, i. e., that a mere reference to general terms and conditions that are well known to both parties will suffice to include them in the contract.34 The answer could be based on the Article 8 interpretative criteria (assuming, of course, no practice or usage under Article 9) as well as on the duty of good faith (Article 7(1)). This approach is consistent with a Belgian decision35 in which an international sales contract for “vulcanization machinery” was made between a Swiss seller and a Belgian buyer. The negotiations began in June 1990 and continued through numerous offers from the seller from October 1990 through 31 July 1991 (the date of the last offer, which was accepted). The tribunal held that the general terms and conditions of the seller were accepted by the buyer (Article 19(2)), since all the offers made reference in bold print to the conditions of the Swiss Association of Machinery Manufacturers. Thus, on the basis of Articles 8(1) and (3), the buyer, during the negotiations, was or should have been aware of the conditions to which the offers from the seller made reference.36 33

The tribunal made an interesting distinction between the situation in national and international trade. According to the tribunal, in a domestic environment between merchants a duty to inquire exists because the clauses within one industry sector are often similar and usually known to the participating merchants. 34 When the court rejected the existence of a duty to inquire about the contents of general conditions as contrary to the duty of good faith (Article 7(1)) and the general obligations to cooperate and provide information, the Court restricted its analysis to general terms and conditions which are unknown to the other party. 35 Tribunal de commerce Nivelles, Belgium, 19 September 1995, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/950919b1.html. 36 The existence of a duty to inquire or to ask for a translation was recognized by the Oberlandesgericht Hamm, Germany, 8 February 1995, CLOUT case No. 132. In this case, an Italian seller and a German buyer concluded a contract in Italian for the sale of socks. The seller assigned to a bank the right to receive payment of the price. The seller notified the buyer

270

Comments on the draft Digest relating to Articles 14-24 and 66-70

V. Open price contracts One of the most difficult issues under the CISG is whether a contract can be concluded when it is silent about the price. As is well known, this problem arises from an apparent contradiction between Articles 14 and 55. The former expressly states that, to constitute an offer, the proposal for concluding a contract needs to have an expressly or impliedly fixed price or to make provision for determining the price. The latter provision, which is placed in Part III of the Convention, indicates that a contract might be validly concluded although the parties are silent about the price, i. e. they have neither expressly or implicitly fixed the price, nor made a provision for determining it. The most delicate problems in regard to the relationship between Articles 14 and 55 CISG arise when two specific circumstances are present. First, if the parties keep silent on the price and the price is not impliedly fixed by the practices established between the parties, usages37 or previous negotiations. of the assignment in English and French. The buyer did not pay the price to the bank, and the bank commenced action against the buyer for the price. The court relied on several articles of the Convention, particularly Article 24. The court held that the parties may use either the language agreed upon or the one customarily practiced between them (Articles 8 and 9). Otherwise, the circumstances of the case are decisive: since the buyer in the case recognized that the assignment notice could have some legal relevance, it was up to the buyer to request from the sender of the notice explanations or a translation (Article 8). It seems that this case is not really a case dealing with general conditions, although it is so cited in the Draft UNCITRAL Digest, Overview of Part II of the CISG, ¶ 12, n. 23. There is no contradiction with the decision of the Gerechtshof’s Hertogenbosch, Netherlands, 19 November 1996, available in Unilex at http://www.unilex.info/case.cfm?pid=1&do=case&id=329&step=Abstract, because in this case only one of the parties – the seller – used general conditions while the offer made by the buyer (the offer to modify the contract was a confirmation of an oral contract) did not contain general conditions, but did include a forum clause in favor of German courts in a footnote in small characters. Also, the buyer’s confirmation said that the general terms and conditions of the seller were excluded if they were in conflict with the ones stated in the buyer’s confirmation. 37 It seems from the obiter dicta of ICC Court of Arbitration, Case No. 7819, 1999 (available in Bulletin de la Cour internationale d’arbitrage de la CCI, vol. 12 n. 2, 2. Semestre 2001, 6061), that in the particular trade involved in the case – sugar – contracts are ordinarily concluded without a price. The case deals with an insurance contract between a bank and a syndicate of insurance companies. The object of the contract was the risk of a change in circumstances, due to the political situation in Brazil, that rendered the international sales contract financed by the bank impossible to perform. The insurance companies alleged the validity of the export contracts under Brazilian Law, and the arbitrators stated that “the sale

271

Pilar Perales Viscasillas

Second, if there is no performance of the contract. If the contract is performed, no conflict between Articles 14 and 55 arises. This is a situation in which the contract would be considered concluded under the rules of the Convention, and the gap in the contract would be filled by Article 55. The part of the draft Digest devoted to Articles 14 and 55 refers to eight cases that cite Article 55. Not all of them, however, involved open price contracts. An analysis of these cases – and a couple of others in which the courts did not refer to Article 55 even though the contract was concluded without a price – are discussed below: A. Cases in which the contract was not performed and the offer did not include a price – Budapest Metroplitan Court, 10 January 1992; and Hungarian Supreme Court, 25 September 1992 (CLOUT case No. 53) (Hungary). This case involved the sale of airplane engines by the U. S. Company Pratt and Whitney (seller) to the Hungarian Airline Malev (buyer). This is a complex case, complicated also by the fact that the Metropolitan court and the Supreme Court differed as to their conclusions. I will focus my comments on the lack of price, although there were other issues discussed by both courts. The Metropolitan court did not discuss the issue of the lack of price, since it held that the offer unambiguously indicated the price. Therefore it did not discuss whether the lack of the price for one of the engines (PW 4060) was an impediment to the valid conclusion of the contract. The High Court did refer to this issue. There were four engines offered to Malev, along with spare engines. The buyer, Malev, had not decided what brand of airplane it would acquire, and according to the seller’s proposal, two of the engines were offered for a Boeing model plane (PW 4056 and PW 4060, plus the spare engines), while the other two (PW 4152 and PW 4156A, also coupled with spare engines) were offered for an Airbus model. The proposal for the PW 4060 did not contain the base price, while the proposal for the Airbus model engines included only the spare engine price – and not the base price of the jet engine system. In the Supreme Court’s opinion, based on Pratt and Whitney’s own submissions, the concepts of jet engine system and jet engine were not identical because the former includes other parts and as a result the price is different. Therefore, since the offer did not contain either the base price of the PW 4060 engine or the price of the jet engine systems, the Supreme Court held that it did not comply with the requirements of Article 14(1) CISG. without prior fixing a price is common in international trade, as is shown by the Vienna Convention of 11 April 1980 on the international sale of goods (art. 55) and the Unidroit Principles for international commercial contracts (art. 5(7))”.

272

Comments on the draft Digest relating to Articles 14-24 and 66-70

The Hungarian Court also referred to Article 55, but only in one sentence, stating that the “price cannot be determined according to Section 55 of the Agreement [sic – “convention”?] either, as jet engine systems have no market price”. It seems that the court viewed Article 55 as a method for determining the price. However, this seems to contradict the wording of Article 55 and the court’s opinion that an offer needs to have a price. The court certainly lost an opportunity to discuss the relationship between Articles 14 and 55. The analysis might have provided some insight about the different approaches to this problem by CISG scholars. It might also have analyzed the relationship between the validity exception under Article 4 and the introductory words of Article 55, “when the contract has been validly concluded ... ”. The court, in fact, referred to Article 55, but it did not stop the legal analysis with the offer, and went on to analyze the “acceptance” by Malev.38 It thus seems that the court opened the door to a possible “cure” of the lack of a price term in the offer if a market price and an acceptance would exist.39 However, the Court found that no acceptance was made since Malev chose neither the engine nor the jet engine system. Thus, the Malev declaration that it had chosen the PW 4000 series engine “expresses a mere intention to close the contract, which is insufficient for the establishment of the contract”.40 This declaration of the Court goes to the core question of the interplay between Articles 14 and 55 when there is no performance, i. e., the relationship between the several conditions established in article 14 for having an offer (something that is deeply linked in common law and civil law systems to the formation of a contract). The question is whether the subjective intent element in Article 14 – the intention of the offeror to be bound in case of acceptance – prevails over the material requirements – the specification of quantity or price – or if all of those elements are required 38

The purported acceptance by Malev was made on the same day as the deadline stated in the offer. In a letter, Malev informed Pratt and Whitney that “it had chosen the PW4000 engine for its new fleet of wide-bodied aircraft”. According to the Metropolitan Court this was an acceptance, and that court rejected Malev’s allegation that it was a letter of intent. The court further noted that Malev even explained the reasons for its decision in that letter, namely that the decision had been based on technical and economical evaluations. The letter of acceptance also gave details of the technical and economic advantages, pointing out that the credit facilities granted by the plaintiff for the introduction of PW4000 engines were essential in its decision. 39 I do not agree with the remarks on this case in the part of the draft Digest devoted to Article 55 CISG, ¶ 3. 40 The Tribunal also said that, “Lacking an appropriately explicit offer from Plaintiff and not having a clear indication as to the subject of the service in Defendant’s declaration of acceptance, no sales contract has been established between the parties”.

273

Pilar Perales Viscasillas

(as seems to be the approach in the case). The answer remains uncertain when it is not clear if the parties intended to waive an agreement on the price. Several other issues arise from the Malev decision. One is whether the identification by the tribunal of market price with “the price generally charged” (Article 55) was accurate. Another is whether, in this kind of situation, other international texts (like the UNIDROIT Principles), can be used to help interpret or supplement the CISG. This can be difficult since the definition of “offer” in the UNIDROIT Principles (see Article 2. 2) does not expressly require specification of the price. – Oberlandesgericht Frankfurt am Main, 4 March 1994 (Germany). In this case, the court analyzed the negotiations between a buyer located in Sweden and a German seller. The court held that a letter in which the buyer requested the seller to make an offer for specified screws of a certain quality had to be considered an invitation to make an offer (invitation ad offerendum). The seller’s answer, in which it filled in the prices and the delivery periods, was the offer, since it had all the essential elements: a description of the goods, along with specification of the quantity, price, and time of delivery. The “order” of the buyer dated 5 March 1992, in which the buyer ordered 3,400 pieces of the named screws (stated by price), as well as 290 pieces of six other items not previously mentioned and without a price, could not be considered either an acceptance or a counteroffer. It was not an acceptance because the buyer deviated from the seller’s offer with regard to the quantity and the additional items, which did not have a price. It was not a counteroffer (new offer) due to the lack of sufficient certainty, i. e., the price of some ordered items was neither fixed nor determinable. The court went on to say that even if one considered the “order” on 5 March 1992 an offer, the reply of the seller on 10 March 1992, in which it thanked the buyer for the order and informed the buyer of its request for payment in advance or a letter of credit, had to be considered a counteroffer. In the court’s opinion, only the pro-forma invoice sent by the seller should be considered an offer, because it listed all the items of a lower quality with their respective prices. Since this proposal was never accepted, according to the court, no contract was ever concluded between the parties. In this case, although the court did not mention Article 55 CISG, it is my impression that it did analyze the possibility that the “order” of 5 March 1992 was an offer with an open price term, only to reject that possibility. In the court’s opinion it is implied that an offer is not an offer unless it contains all the essential elements mentioned in Article 14. Therefore, implied that Article 55 would not play a role in situations like the one before the court, in which there is no performance. After finding that the buyer’s order could not

274

Comments on the draft Digest relating to Articles 14-24 and 66-70

be considered an offer since the price was neither fixed nor determinable, the court commented that, “[t]hough it could be conceivable to presume a contractual agreement pertaining to the matching items in the offer, this presumes a divisibility of the complete order. However, that would be something that the buyer explicitly did not want: in its written order dated 5 March 1992, the buyer expressly insisted on the delivery of the total order of all items”. B. Cases in which there was performance of the contract and the offer did not include a price – Handelsgericht St. Gallen, 5 December 1995 (Switzerland). This case involved a sales contract between a Swiss buyer and a German seller of computer hardware. The buyer sent an unsigned fax to the seller ordering three computer devices. The order contained the following language: “we order” and “immediate delivery”, but did not contain the price of the goods. The seller sent the goods, but the buyer did not pay, so the seller sued the buyer, who alleged that the fax was not a valid offer, and therefore no valid contract was concluded. The tribunal found that the intention of the offeror to be bound was derived from the terms of the order and stated that the offer was valid although the fax did not indicate the price of the goods. The tribunal referred to Article 14 but it did not mention Article 55. This, however, is the type of case in which Article 55 should play a role in determining the price where the parties failed to agree on it. The tribunal nevertheless did not consider applying this provision, probably because the buyer’s pleadings did not claim a reduction of the invoiced price to reflect the price generally charged for such goods, but instead merely challenged the validity of the contract. The tribunal did correctly refer to Article 14 to analyze the intention of the offeror to be bound by its order. It implied that the most important element for the formation of a contract is the intention of the parties to be bound, so if that intention is found, even if one of the other Article 14 elements is missing, this will not deprive the declaration of its offer status. The tribunal did not explore the relationship between Articles 14 and 55, although this is certainly correct, particularly since in this case the order required from the seller “immediate delivery”. CISG scholars41 are in agreement that Article 55 applies to situations in which there is an implied exclusion of the price in the offer (Articles 6 and 14) – in this case, the fax required immediate delivery, and there was an acceptance of such offer by delivering the goods or by sending a notification of acceptance (Article 18). The tribunal could also have resorted to the 41 See Perales Viscasillas, La formacin del contrato, pp. 355-357, citing Ersi, Schlechtriem and Plantard for similar approaches.

275

Pilar Perales Viscasillas

estoppel principle to conclude that the buyer could not take advantage of the lack of the price in his offer when he accepted the goods with no objections. Cases in which performance has occurred might be easily analyzed under this principle. Finally, the tribunal could have adopted another kind of analysis: that the buyer’s order (fax) was an invitation to deal (assuming it could not be an offer since the price was missing), the delivery of the goods by the seller was an offer, and the receipt of the goods was the acceptance (Article 18(3)). Berzirksgericht St. Gallen, 3 July 1997 (Switzerland). In this case there was a sales contract between a Dutch seller and a Swiss buyer, which manufactured goods with textiles delivered by the seller. Before delivery to the buyer, the textiles had to be processed by an embroiderer. The seller sent some textiles to the embroiderer. After a visit to the seller, the buyer decided to quit the relationship and asked the seller to send an invoice for the textiles delivered. One month after receiving the invoice, the buyer complained to the seller about the high price. The buyer did not pay, and the seller sued. The buyer did not allege the invalidity of the contract due to the lack of a price, but rather claimed a reduction of the invoiced price. The tribunal, however, analyzed the requirements for contract conclusion and, after considering Articles 14 and 8(2) – (3), it concluded that the buyer, when it asked the seller to issue an invoice for the textiles delivered to the embroiderer, had an intention to be bound by a contract. To this point the analysis of the tribunal is certainly correct. It then considered the price in the invoice in light of Article 55, and stated that the invoice price was to be interpreted as the price generally charged under comparable circumstances in the trade concerned. This kind of analysis is not only unnecessary but also dangerous. It is unnecessary because, as the tribunal pointed out, the buyer did not object promptly to the price invoiced. Thus, the tribunal is implicitly saying that the buyer made a tacit acceptance of that price, so the citation of Article 55 seems futile. The analysis, in my opinion, was also dangerous because if the agreed price has to be interpreted as the price generally charged, then there is an open door to the application of Article 55 to reduce or increase an agreed price to conform it to the standard in Article 55. Handelsgericht Aargau, 26 September 1997 (Switzerland). A German seller and a Swiss buyer concluded a contract in which the seller produced sets of cutlery for the buyer based on an order by the latter. The buyer refused to accept delivery and claimed that no contract had been validly concluded. The tribunal ruled that the contract was validly concluded although the offer contained no purchase price. It analyzed the buyer’s order under Article 14 and concluded not only that the offer was sufficiently definite (the buyer used the words for order (Auftrag and Abrufbestellung), specified the exact number of sets, and informed the seller about the time of delivery), but also

276

Comments on the draft Digest relating to Articles 14-24 and 66-70

that the offer indicated clearly the intention of the offeror to be bound in case of acceptance. The seller had replied to the order by assuring delivery on time at the price prevailing at that moment, something that was not taken into account by the tribunal, which also considered that not all the required elements were agreed in writing – for example, the price was mentioned only during a phone conversation. Note that, since all three cases discussed in this section come from Swiss tribunals, they could have been influenced by the Swiss Code of Obligations (Article 212 Code des Obligations), which allows open price contracts.42 C. Cases in which Article 55 was cited, although the issue did not involve an open price contract – Landgericht Graz, 4 March 1993 (Austria). In this case there was a sales contract between a German seller and an Austrian buyer for chinchilla pelts. The parties agreed to a price between DM 35 and 65 per fur, depending upon quality. The Court of Appeal found that the agreed price range did not affect the valid conclusion of the contract and cited article 55. The Supreme Court43 correctly analyzed the case under Article 14 and concluded that there was a determinable price agreed by the parties, thus rejecting the application of Article 55 to the case at hand. The Supreme Court pointed out the correct field of application for Article 55: “In this case, the question can remain open whether, at the relevant point of conclusion and in absence of an express or implicit determination of the price, a contract can be validly concluded through the fiction of an agreement on the usual price (Article 55 CISG)”. – Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 3 March 1995 (Russia).44 In this case an 42

Article 212 provides: 1. Si l’acheteur a fait une commande ferme, mais sans indication de prix, la vente est pre´sume´e conclue au cours moyen du jour et du lieu de l’execution. 2. Lorsque le prix se calcule sur le poids de la marchandise, le poids de l’emballage (tare) est de´duit. 3. Sont re´serve´s les usages particuliers du commerce, d’apre`s lesquels le prix de certaines marchandises se calcule, soit sur le poids brut, soit avec une de´duction fixe ou de tant pour cent. 43 Oberster Gerichtshof, Austria, 10 November 1994, CLOUT case No. 106. 44 The Pace Database refers to two cases from the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry rendered on 3 March 1995. One of them is designated as case number 309 (CLOUT case No. 139) http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/950303rl.html, while the other is case nuber 304 (no CLOUT abstract) http://www.cisg.law.pace.edu/cisg/wais/db/cases2/950303r2.html. The latter is accompanied by a case commentary by M. Rozenberg, which gives details on the grounds of the decision. Reading the commentary, one has the impression that both cases are

277

Pilar Perales Viscasillas

international sales contract covering certain goods was concluded between an Austrian buyer and a Ukrainian seller. The background to the contract is described in several documents. One referred to a previous contract between the parties, while the second referred to a telex sent by the seller in which it offered to deliver to the buyer an additional quantity of the goods in the first quarter of the following year at prices to be agreed upon by the parties ten days before the new year began. The third document was the buyer’s telex confirming acceptance of the seller’s offer. The issue was whether a contract for additional goods was concluded between the parties. Citing Article 14, the tribunal found that the seller’s telex failed to provide the price of the goods or a way to determine the price. The tribunal found that the statement in the telex that the prices of the goods would be agreed upon (revised) ten days before the new year began could not be construed as signifying the mode of determining the price. Therefore, in the tribunal’s opinion, the agreement of the parties to agree in the future about the price of the contract was not a valid method for determining the price under Article 14. Consistent with this point of view, the tribunal pointed out that Article 55 was not applicable. The central issue in this case was whether under the CISG an agreement of the parties to agree to the price in the future is a valid method for determining the price under the Convention. In my opinion, the tribunal failed to examine certain considerations in its analysis. First, Article 14 is silent about the permissible means for determining the quantity and the price, and thus a wide range of freedom is given to the parties in the ways of determining these elements. Second, the majority of scholars are in agreement that a valid method for determining the price is to leave the determination to a third party or even to one of the parties, so a fortiori a determination by both parties is possible. Third, the modern approach to contract formation, as expressed in the UNIDROIT Principles (Article 2(14)(1)) and the Principles of European Contract Law (Article 2(103)), is to allow contract conclusion when the parties intend to conclude a contract, even though they leave a term to be agreed upon in further negotiations. Had the tribunal considered these matters, the analysis should have focused on the will of the parties: did the parties have the purpose to conclude a contract? The seller might be seen as having made an offer to the buyer, which was accepted four days later. If this is so, however, the tribunal would have needed to answer another question: whether the lack of a subsequent agreement on the price prevented contract conclusion. This question has the same. I follow the commentary of M. Rozenberg as well as CLOUT abstract 139 in my comments on this case.

278

Comments on the draft Digest relating to Articles 14-24 and 66-70

been answered affirmatively by the UNIDROIT Principles, which state that the existence of the contract is not affected by the fact that subsequently the parties fail to reach agreement on a term (Article 2(14)(2)(a)). The answer under the Convention, which is necessarily linked to the existence of a method to fill in the essential elements of a contract, might have been derived from the general principles of the Convention (yielding a “reasonableness” standard) and the application by analogy of Article 55 to supply the missing price term.45 – Cour d’appel Grenoble, 26 April 1995 (France). This case involved a sales contract for candy between an Italian seller and a French buyer. The buyer asserted that his successor had benefited from lower prices than those charged to him by the seller and requested that the court apply Article 55 to reduce the debt claimed by the seller. The Court said that if Article 55 were applicable to the case, it would be displaced by the contrary agreement of the parties. In this case, the buyer had taken delivery of the goods without specifically inquiring about the purchase price, and the seller was justified under Articles 8(2) and 8(3) to interpret this behaviour as indicating acceptance of the rate charged. It does not seem that the parties were in fact silent as to the price, even though the buyer was demanding a reduction of the price. It simply is not clear whether in this case the parties agreed on a price during the formation of the contract. If they did, the reference to Article 55 was unnecessary, although the court needed to discuss it because it was invoked by the buyer. – Amtsgericht Alsfeld, 12 May 1995 (Germany). This case involved a sales contract between a German buyer and an Italian seller entered into at a market fair through a standhostess of the seller. After the seller sent an invoice to the buyer, the hostess collected the price from the buyer but did not transfer it to the seller. The seller sued the buyer for payment of the price; and the buyer requested a discount from the invoiced price pursuant to an agreement with the standhostess after the conclusion of the sales contract. As is clear from the facts of the case, this is a problem of agency law, i. e., whether the standhostess had the authority to discount the price. The tribunal, however, cited Article 55, stating that the buyer did not allege circumstances justifying a lower price under Article 55. Again, the tribunal wrongfully resorted to Article 55 and opened the door to an application of Article 55 as a rule to correct an agreed price.

45

See Perales Viscasillas, La formacin del contrato, pp. 313-15.

279

Pilar Perales Viscasillas

– Oberlandesgericht Frankfurt, 15 March 1996 (Germany).46 In this case, an Italian seller claimed payment for clothes delivered to a German buyer. The Court cited Articles 14 and 55 to inquire whether the parties undertook definite obligations under the oral contract. – Landgericht Darmstadt, 9 May 2000 (Germany). This case involved a sales contract for video recorders between a German seller and a Swiss buyer. It appears that the buyer argued that the price in the seller’s invoices should be reduced by 30% because the invoiced price was not a realistic one, i. e., it differed from the current price of the goods. Although the court did not agree with the allegations of the buyer, it again opened the door to an incorrect interpretation of Article 55. The court referred to the buyer’s submission as one under Article 5547 (although the buyer apparently did not invoke that provision) and held that “there is no indication that the parties formed an implicit agreement on the price generally charged at the time of the conclusion of the contract”. Thus, the Court seemed to believe that Article 55 is a method for determining the price when there is a (previous) implied agreement between the parties on the price generally charged. It is my opinion that the court failed to state something which was obvious: that the parties agreed on a price and therefore there was no room for the application of Article 55. In fact, the court’s discussion of the importance of freedom of contract under the CISG was enough to reject the buyer’s argument, without the need to mention Article 55.48 A couple of statements by the court deserve some attention. In one, the court asserted that “there is no indication that the buyer was tricked into the settlement through willful deceit on the part of the seller”, and in the second the Court referred to the fact that the buyer was not arguing that the price was unconscionable. As in a case described previously, one of the parties to the contract relied on Article 55 to obtain a discount from the invoiced price. Article 55, however, was not designed to cover that kind of situation. The situation would be different if the parties had not agreed on the price, and the seller had sent an invoice with a higher price than the current price. 46

Affirmed, Bundesgerichtshof, Germany, 23 July 1997, CLOUT case No. 236, although the

BGH did not discuss Articles 14 and 55 CISG. 47 In the translation of this case on the PACE Database (see http://www.cisg.law.pace.edu/ cisg/wais/db/cases2/000509g1.html), the translator adds a note stating that the reference to Article 55 is probably a typo and that the reference is intended to Article 50. However, I believe that the tribunal, considering the arguments of the buyer, is referring to Article 55. 48 The court correctly stated that, since freedom of contract is a principle that underlies the CISG and that it was manifest that the prices were negotiated and then invoiced accordingly, whether or not these prices corresponded to the current price of the goods is absolutely irrelevant, as the agreement on price is each business person’s own responsibility.

280

Comments on the draft Digest relating to Articles 14-24 and 66-70

In this situation, the buyer, provided it complained in time, would have been entitled to receive the price generally charged. Whether Article 55 can be helpful in situations in which the price is unconscionable is a different issue.49 Although it is not easy to find cases in which the price is unconscionable, particularly because unconscionability is more commonly found with respect to general terms and conditions, it is my opinion that if the price clause is a standard term, the solution might depend on the consideration of unconscionable terms under CISG, i. e., whether unconscionability is a question of validity (excluded from the CISG by Article 4) or an issue governed by the CISG. In the latter situation, the reasonableness principle in the CISG, or even the standard of Article 55 CISG, could control the content of the price clause. However, if the price term is not a standard term, I find it difficult to believe that an international businessman would agree to an unconscionable price, so therefore Article 55 would not help, nor was it intended to control the content of the agreement.

VI. The place where the contract is concluded The part of the draft Digest devoted to Article 23 states that “Article 23 does not address where a contract is concluded. One court deduced from article 23 that the contract was concluded at the place of business where the acceptance reached the offeror”. The case referred to is an Australian decision.50 I do not, however, agree with the statement in the draft Digest, since the court notes that “it was a common ground between the parties that the acceptance occurred in Germany, and that the contract of sale was made in Germany”.51 It therefore seems that the parties were in agreement about that issue and therefore the will of the parties prevailed over the Convention and the non mandatory domestic law. Even assuming that the court linked the moment of the conclusion of the contract with the place of conclusion, it is still an unresolved issue how the court arrived at that result. It is true that the CISG does not expressly address the question of the place for the contract conclusion. Therefore, the issue here would be whether that question is a gap in the Convention that has to 49

Black’s Law Dictionary 1526 (7th ed. 1999), refers to an unconscionable bargain or contract as a contract or a clause in a contract that is grossly unfair to one of the parties because of the stronger bargaining power of the other party. 50 Federal Court, South Australian District, Adelaide, Australia, 28 April 1995, CLOUT case No. 308 (Roder Zelt-und Hallenkonstruktionen GmH v. Rosedown Park Pty Ltd and Reginald R Eustace). 51 See ¶ 21 of the opinion, available at http://www.law.pcae.edu/cisg/wais/db/cases2/ 950428a2.html.

281

Pilar Perales Viscasillas

be solved in accordance with its general principles (Article 7(2)) or is a question outside the Convention’s scope (Article 4) and thus governed by domestic law. The question is important because the place of contract conclusion might be useful for purposes, among others, of identifying the applicable law and the competent court. In the Australian case, under either of the two approaches the result would be the same, i. e., that the contract was concluded in Germany. If the question is treated as a gap in the CISG to be resolved pursuant to Article 7(2), the general principle that could be inferred from articles 18 and 23 is that the place of the conclusion of the contract is where the acceptance is considered to be effective. Under this approach, the question of the place of the conclusion of the contract would be settled by the CISG. In the Australian case, since the contract was concluded when the acceptance reached the offeror, who had his place of business in Germany, then the place of the conclusion of the contract would have been Germany as well. This reasoning is in accordance with the presumption made by several domestic contract laws that connect the moment of the conclusion of the contract with the place of conclusion (§ 130 of the German Civil Code (BGB) and Article 1326. 1 in combination with Article 1335 of the Italian Civil Code). Other legal systems, however, follow a different approach. For example, Article 444 of the Russian Civil Code, 1994, and Article 1262 of the Spanish Civil Code and Article 54 of the Spanish Commercial Code establish that the place of contract conclusion is the place where the offeror has his place of business.52 This approach means that if the contract is concluded following the dispatch or “mailbox” rule (for example, under Article 18(3) CISG), then the contract would be concluded when the acceptance is sent, but the place of the contract conclusion would be the place where the offeror is located. If the place of contract conclusion is deemed a question outside the scope of the Convention, and therefore non-uniform domestic law would apply to the issue, then the differences among domestic laws described in the previous paragraph would play a role. In the Australian case under discussion, this would mean that, since German domestic law links the moment and the place of the conclusion of the contract, then the place the contract was concluded would be Germany. Applying domestic law has a certain logic since the legislative history of the CISG shows that the place of the performance of the contract was a question that was consciously placed

52 However, the place of conclusion of electronic contracts is where the service provider has its place of business (Article 29 Spanish Electronic Commerce Law, 11 July 2002, n. 34).

282

Comments on the draft Digest relating to Articles 14-24 and 66-70

outside the scope of the CISG.53 There are several reasons for that conscious decision. First, there is not any single rule within the CISG that relates to the place of the conclusion of the contract.54 Second, questions that are very closely connected to the rules of private international law generally are outside the scope of the work of UNCITRAL. In conclusion, it is my opinion that it cannot be inferred that the moment and the place of the conclusion of the contract are linked questions under the CISG.

VII. Application of Article 24 and the meaning of “reaches” According to the draft Digest, “Article 24 applies only to communications made before or at the time the contract is concluded. For communications after the contract is concluded, Article 27 provides that the addressee bears the risk of non-receipt or of delay or error”.55 This statement is certainly correct, subject to one caveat: Article 24, in my opinion, applies also to communications made under Part III of the Convention where it expressly provides for the application of the receipt principle. As for the meaning of the term “reaches” in Article 24, a Dutch case of 5 October 199456 applied Article 24 to the seller’s letter that was sent in response to the buyer’s letter explaining the reason for partially rejecting the goods. The decision must be considered wrong. The seller’s communication, which seems to have been a specific performance notice under article 62, is subject to the general rule under Article 27, and therefore the application of Article 24 is excluded. The application of Article 27 to the case was not considered by the tribunal even though it would have easily solved the question before it, i. e., the effectiveness of a communication sent by the seller that never reached the buyer because the buyer changed its address. In my opinion, the seller fulfilled the requirements of Article 27, and therefore 53

A proposal by the Italian delegation to the 1980 Vienna Diplomatic Conference that would have linked the moment and the place of contract conclusion was rejected. See Summary Records of Meetings of the First Committee of the United Nations Diplomatic Conference, Vienna, 10 March-11 April, 1980, 11th meeting, 18 March 1980, ¶ 16-17, A/CONF.97/C.1/ SR.11, reprinted in Documentary History, supra note 20, at 511. 54 See the Secretariat Commentary to the draft Convention art. 21 (current art. 23), reprinted in Documentary History supra note 20, at 416. 55 Draft UNCITRAL Digest art. 24, ¶ 2. 56 Arrondissementsrechtbank Amsterdam, Netherlands, 5 October 1994, available at http:// www.unilex.info/case.cfm?pid=1&do=case&id=124&step=FullText (Tuzzi Trend Tex Fashion v. Keijer-Somers).

283

Pilar Perales Viscasillas

the fact that the communication never reached the buyer-addressee does not undercut its effectiveness. The buyer was negligent in not providing the seller with the new address. The Dutch decision is, however, important because it establishes that, for purposes of Article 24, a communication is considered to be received if it reaches a party’s mailing address even though the addressee did not in fact receive the communication because of a change of address which was not communicated to the other party. In other words, as the Dutch case asserts, a declaration reaches a party when it is delivered to the place of business or mailing address previously designated by that party, despite a subsequent change of address that was not communicated to the other side.

VIII. Passing of risk There have not been many decisions dealing with Articles 66-70 (Passing of Risk), but some of them deserve attention in this commentary.57 Several decisions deal impliedly with the foundations of the passing of risk from the seller to the buyer. A German Court had to interpret the meaning of the clause “free delivery, duty-paid, untaxed”, contained in a contract between a French seller and a German buyer.58 The Court stated that the “free delivery” clause as interpreted by German law dealt not merely with the cost of the transport but also with the passing of the risk. The Court further noted that the interpretation of the clause by the parties had to be taken into account (Article 8(2)), and held that the parties intended to provide for the passing of the risk at the buyer’s place of business in Germany and accordingly to deviate from Article 31(a). According to the CLOUT summary of the case, “the fact that the seller concluded a transport insurance meant that it was prepared to take the risk of the transportation of the goods”, as did the fact that “the seller had sometimes carried certain goods for the buyer by its own means of transportation”. In my opinion, the Court is making an incorrect assumption when it reasons that the fact that the seller is in charge of the insurance and of the transport 57 Some articles dealing with the passing of the risk have been cited in reported decisions, although those decisions do not necessarily interpret the contents of the CISG provisions, as pointed out in draft UNCITRAL Digest art. 68 ¶ 1. One case cited in id. n. 41 (Landgericht Trier, Germany, 12 October 1995, CLOUT case No. 170) does not cite art. 68 CISG, although the presentations of the case in the Pace website (see http://www.cisgw3.law.pace.edu/cases/ 951012g1.html) and in the Basel website (see http://www.cisg-online.ch/cisg/overview.cfm ?test=160) do. 58 Oberlandesgericht Karlsruhe, Germany, 20 November 1992, CLOUT case No. 317.

284

Comments on the draft Digest relating to Articles 14-24 and 66-70

costs means that it will be in charge of the delivery of the goods to the buyer’s place of business, and therefore the seller assumes the risk of loss or damage to the goods. That is incorrect,59 as shown by current commercial terms,60 by scholars,61 and by the antecedents of the CISG.62 In this regard, the holding of a Spanish court is more correct.63 In the Spanish case, involving a sales contract between an Italian seller and a Spanish buyer, the tribunal stated that the seller’s responsibility in accordance with Articles 31 and 67 ended when the goods passed the ship’s rail at the port of shipment. From that point on, the risk was on the buyer irrespective of whether it contracted for the insurance of the goods sold. The German and the Spanish cases are interesting for another reason: they both interpret commercial terms agreed upon by the parties in a contract subject to the CISG. Twelve out of the twenty cases on the passing of risk cited in the draft Digest contain a trade term, which shows the importance such terms have in practice. In the German case cited previously, the parties agreed to the clause “free delivery (frei Haus), duty-paid (versollt), untaxed (unversteuert)”, and the court interpreted that clause according to German law because the seller had used a clause common in German commerce, drafted in German and with a German buyer (Article 8(2) CISG). It is worth mentioning that the tribunal did not analyze the clause in line with listings of international terms, like the INCOTERMS, which have been treated as usages of trade under paragraph 1 or 2 of Article 9 (see also Article 8(3)). For example, the court could have said that the clause, franco domicilie (frei Haus), duty paid, corresponded with the INCOTERM DDP or with Article 69(2) CISG.64 The court, however, interpreted the clause according 59 Also incorrect was the judgment of the C mara Nacional de Apelaciones en lo Comercial, Argentina, 31 October 1995, CLOUT case No. 191, involving an international sales contract with a C&F clause, where the Court said that the buyer contracted for the insurance and therefore it was aware that it assumed the risk of loss during the transportation of the goods. 60 According to INCOTERMS 2000 (International Chamber of Commerce (ICC)), under a CIF clause the seller must contract for the carriage of the goods to the named port of destination and also must obtain at its own expense the cargo insurance. The risk, however, is on the buyer when the goods have passed the ship’s rail at the port of shipment. 61 Id. See, e. g., Francisco Oliva, La transmisin del riesgo en la compraventa internacional de mercancas. Valencia: Tirant lo blanch, 2000, p. 37, with further citations. 62 According to Article 101 of the 1964 Uniform Law on International Sales (ULIS), the passing of risk is not necessarily determined by the provisions of the contract concerning expenses. 63 Audiencia Provincial de Crdoba, Spain, 31 October 1997, CLOUT case No. 247. 64 Note that under Article 69(2) it does not matter whether the seller arranges for transport by his own means of transportation or by contracting with an independent third party (unlike cases under article 67(1). Therefore, the fact that the seller carries goods to the buyer by its

285

Pilar Perales Viscasillas

to non-uniform German law, and was also of the opinion that the parties’ agreement on the frei Haus clause meant an implied exclusion of CISG Articles 31(a) (and 67(1)65 by virtue of Article 6. Of course, interpreting the agreed clause in the German case in accordance with one of the INCOTERMS was difficult due to the fact that the clause did not exactly correspond with any of them. This was also the case in the Spanish decision, where the court more correctly, in my opinion, interpreted the term “C. F. F. O”. under both the INCOTERMS 1990 and the CISG itself.66 This kind of reasoning seems to be correct (particularly when the parties have failed to specify the specific regime that will govern the agreed commercial term, as they could by specifying, e. g., INCOTERMS 2000), and consistent with the fact that international contracts need international and uniform interpretation rather than interpretation in light of a domestic system (Article 7(1)). Such an approach also reflects the fact that Articles 66 et seq. of the CISG are drafted in line with modern international commercial practices as embodied own means of transportation could help to interpret whether the parties agree on a shipment term or on a destination term. However, in the German case discussed above, the court derived the intention of the parties to agree on a destination term from the fact that “the seller had sometimes carried certain goods for the buyer”, nothwithstanding that in the actual case, the goods were handed over to a carrier. 65 This is the description in the Unilex abstract. The CLOUT abstract is closer to the original German of the decision, because it refers only to the implied exclusion of Article 31(1)(a). But see Audiencia Provincial de Murcia, Spain, 18 June 2001, available at http://www.uc3m.es/ cisg/sespan18.htm, interpreting a clause “ex factory Caravaca (Murcia) met by mutual agreement of the parties on July 5 1999 “in accordance with Article 31. 66 The draft UNCITRAL Digest, Overview of Part II, Chapter IV of the CISG, ¶ 6, n. 10, states: “Not all trade terms address the issue of risk of loss or damage. See, e. g., Audencia Provincial de Crdoba, Spain, 31 October 1997, CLOUT case No. 247 (CFFO allocates cost of shipment to the destination, but has no relevance to passing of risk)”. However, the Spanish court held in relation to the interpretation of the CFFO clause that: it cannot be interpreted in the terms done by plaintiff, since in conformity with the clauses of the Vienna Convention of 11th April 1980 (ratified by Spain in 1991) ..., the two first acronyms – CF, presently “INCOTERM CFR” – meant that the seller has to pay the expenditures and the transportation needed to carry the goods at the delivery port, being on the buyer the risk of loss and damage, as well as any other additional agreement when the goods are delivered on board the vessel. The next two acronyms – FO – , are a condition for stowing the goods, that the carrier is relieved during the unloading operations. It is clear from the decision that the court did consider the clause as relevant to the passing of the risk. In this regard, it is worth mentioning that the decision relied on both the CISG and the INCOTERMS, particularly when it dealt with the passing of the risk, where the court used the same wording as clause A.5 in the INCOTERMS 1990 treatment of CFR.

286

Comments on the draft Digest relating to Articles 14-24 and 66-70

in the INCOTERMS,67 and also that the use of trade terms does not entirely displace the CISG rules on the passing of risk. In this regard, the holding of a Chinese arbitration panel68 and of a Russian arbitral tribunal69 also seem to 67

See C mara Nacional de Apelaciones en lo Comercial, Argentina, 31 October 1995,

CLOUT case No. 191. It should be noted that CLOUT abstract 191 incorrectly states that the

court held that “a C & F clause does not affect the passing of the risk”. On the contrary, the court said that: “the shipment of the goods means the delivery of the goods to the buyer and also the transfer of the property, and from then on the risk of loss or damage is on the buyer”. See also id. Oberlandesgericht Kln, Germany, 9 July 1997, CLOUT case No. 283 (interpreting the clause “list price ex works”, where the court found that there was no inconsistency between the terms and the provisions of Article 67(1) CISG); Arbitration Court of the Chamber of Commerce and Industry of Budapest, Hungary, 10 December 1996, CLOUT case No. 163 (where the parties agreed on a price FOB Kladovo (Yugoslavia) and the court said that according to Article 60 CISG the buyer’s obligation consists of taking delivery of the goods, which had to be interpreted in light of the INCOTERMS treatment of “FOB”.). This also seems to be the reasoning in ICC Court of Arbitration, Case No. 7197, 1992 CLOUT case No. 104, where the parties agreed that the goods would be delivered “DAF (ICCIncoterms 1980)” and the Court cited Article 69 CISG to say that the risk in respect of the goods had not passed to the buyer as the seller had neither delivered the goods nor placed them at the disposal of the buyer. In this case, the goods were to be delivered by the seller 4 weeks after the opening of the documentary letter of credit. However, the buyer never opened it, and the seller put the goods into storage. The seller claimed, among other things, the expenses it incurred in storing the goods, as well as damage to the goods due to the prolonged period of storage. The court refused to award those damages to the seller since it never delivered the goods nor placed them at the disposal of the buyer according to Article 69(2). In my opinion, the court did not exam the central issue here: whether the breach of the buyer had an influence on the passage of the risk. Article 69(2) is certainly the provision to apply to this case. That provision provides for the transfer of risk to the buyer when delivery is due. Delivery was to take place (Articles 30 and 58(1)) in accordance with the contract 4 weeks after the opening of the documentary credit by the buyer, which never happened. Therefore, the court should have investigated the impact of the breach of the buyer on the passing of the risk. Although the CISG is silent on this particular issue, the court could have taken into account the provision of Article 69(1) and the interpretation of it advanced by scholars (for example: G
nter Hager, Article 69, in Commentary on the UN Convention on the International Sale of Goods (CISG) 513 n. 9 (Peter Schlechtriem ed., 2d ed. (in translation) 1998), as well as the principles embodied in Articles 66 and 58(1). Article 58(1) specifies the basic contract rule of exception on adimpleti contractus (for this statement, see ICC Court of Arbitration, Case No. 7645, March 1995, available at http://www.cisg.law.pace.edu/cisg/wais/ db/cases2/957645i1.html). 68 China International Economic and Trade Arbitration Commission (CIETAC), China, 1995, English abstract available at http://www.unilex.info/case.cfm?pid=1&do=case&id =210&step=Abstract. In this case the parties agreed on a “CIF New York” clause, and the tribunal applied Article 66 since the damage to the goods was caused by an act or omission of

287

Pilar Perales Viscasillas

be correct. This is particularly important because the German case described above opened the door to the interpretation of those commercial terms in the light of domestic law. It is also well known that INCOTERMS is not the only codification of trade terms in the world, and that there are certain discrepancies among the different legal texts.70 In my opinion, the interpretation of commercial terms agreed on by the parties (for example, FOB or CIF terms) has to be made, for the reasons stated above, in light of INCOTERMS and the CISG. Using the text of the INCOTERMS will provide a uniform interpretation of the clauses used by the parties with the consequence that the terms, absent a contrary intention of the parties, will govern the passing of risk and also the question of the distribution of costs.71 The use of the CISG would operate as an aid to the the seller, who did not give to the carrier the appropiate directives as regards the temperature of the goods (10,000 kg of jasmine aldehyde) during transport, even though the buyer warned the seller that the goods were subject to deterioration at high temperatures. 69 Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, 20 June 2000, where the Court interpreted a CIF term under INCOTERMS 1990: “Although the contract does not refer to Incoterms, the Tribunal considers it is reasonable and allowed relying on the Incoterms guidelines which reflect the practices of international trade”. 70 Note, however, that in the recently approved revision of Article 2 the Uniform Commercial Code (UCC) the sections defining trade terms (sections 2-319 et seq.) have been erased. 71 Oberlandesgericht Kln, Germany, 9 July 1997, CLOUT case No. 283, is a case in which the clause “list price ex works” was interpreted as referring only to responsibility for costs and not to the passing of the risk. The court found that the term was not inconsistent with Article 67(1) CISG, and that the seller was not able to prove that the delivery to the first carrier had occurred. Although it is difficult to analyze this case due to the fact that only the CLOUT abstract is available, an EXW term under INCOTERMS means that the seller delivers the goods at its factory. In this case, although the seller was from Spain, the goods were produced in Japan, so under an EXW term the obligation of the German buyer would have consisted in taking delivery of the goods at the production factory in Japan. However, the Court considered that the risk passed to the buyer, according to Article 67(1), when the goods were to be taken by a third-party carrier. See also Arbitration Court of the Chamber of Commerce and Industry of Budapest, Hungary, 10 December 1996, CLOUT case No. 163, where the parties (a Yugoslavian seller and a Hungarian buyer) agreed that the “buyer has to pick up the fish eggs at the Seller’s address and bring the goods to his facilities in Hungary and the price was agreed on FOB Kladovo basis”, and that “the freight bills contained terms of delivery ‘FCO KAMION KLADOVO.’” In this case, it seems that the parties agreed on a price FOB Kladovo (Yugoslavia) and the delivery of the goods at the seller’s address, which seems to be Kladovo as well. In this regard, the Court said that according to Article 60 the buyer’s obligation consisted of taking delivery of the goods, which had to be interpreted as governed

288

Comments on the draft Digest relating to Articles 14-24 and 66-70

interpretation of the agreed term or to fill gaps in the INCOTERMS,72 particularly when there is no express reference in the parties’ agreement to the application of the ICC text. In this situation, reference should normally be made to Article 8(3) (interpretative usages) and Article 9(1) (agreed by the INCOTERMS, which in the case applied to the contract to pick up the goods at Seller’s facilities, FOB Kladovo. In Handelsgericht Z
rich, Switzerland, 10 February 1999, CLOUT case No. 331, the parties agreed on prices “ex works”, while noting that the goods were “ready for delivery”. The parties disputed who had to bear the risk for the delay in the delivery of the goods by the forwarding agent. The seller submitted that it arranged for the forwarder solely as a favor and without a corresponding obligation. The buyer argued that the forwarding agency and the responsibility for its actions were the seller’s obligation. The court analyzed Article 31 CISG and stated that it did not cover a situation where the seller had to deliver the goods to one of the buyer’s places of business. The court asserted that in doubtful cases, such an obligation cannot be assumed: if the contract requires carriage of the goods at all, the seller has an obligation to dispatch the goods; in other cases the goods are to be placed at the buyer’s disposal at the seller’s place of business. The conclusion was clear: the seller’s delivery obligation consisted in initiating the transport of the goods. In ICC Court of Arbitration, Case No. 7645, March 1995, available at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/957645i1.html the parties’ contract under the heading “price”, referred to a clause “CNF FO ... Korea (INCOTERMS 1990)”. In order to interpret the meaning and effect of the said clause the tribunal referred to Articles 8 and 9(1) CISG and held that the parties intended a CFR clause with the meaning of that term under INCOTERMS 1990. Therefore, the intention of the parties was to incorporate all the aspects of the clause as embodied in the INCOTERMS: “the reference is to be understood to refer to the clauses “CFR” (cost and freight ...named port of destination), and whereby further the reference was to be understood as a general reference to such clauses and not as a reference for defining the price only”. See also Sentencia Audiencia Provincial Castelln, Spain, 12 January 2000. This case involved an international sales contract concluded between Spanish and French corporations. Although the tribunal did not mention the applicability of the CISG, the contract contained a CIP clause that was interpreted in the light of INCOTERMS 1990. See also Audiencia Provincial de Barcelona, Spain, 14 September 1994, involving an international sales contract between a Swedish buyer and a Spanish seller with a clause “ex works”. Again the tribunal did not mention the applicability of the CISG, but interpreted the clause ex works in accordance with the INCOTERMS. 72 See ICC Court of Arbitration, Case No. 7645, March 1995, available at http://www.cisg. law.pace.edu/cisg/wais/db/cases2/957645i1.html, where in interpreting a clause “CNF FO ... Korea (INCOTERMS 1990)” the tribunal referred to Articles 8 and 9(1). It also said: “Where the provisions of the contract and of the Incoterm clauses do not provide specific answers, the rules of the CISG and, in a subordinated way, rules of its underlying principles and, even in a more subordinated way, the rules of Austrian Law are determining for defining the mutual obligations of the parties based on their contract”.

289

Pilar Perales Viscasillas

usages)73 and not to Article 9(2) (normative usages, i. e., usages that have the force of law) unless it can be proved that the agreed term fulfills the requirements of paragraph 2 of Article 9. Article 9(2) has been invoked by several tribunals. For example, the U. S. District Court for the Southern District of New York,74 held, in an international sales dispute between a U. S. buyer and a German seller, that a CIF clause had to be interpreted in accordance with INCOTERMS 1990 pursuant to Article 9(2). In the opinion of the court, the INCOTERMS are incorporated into the CISG through Article 9(2). If this is so, the analysis made by the court under German domestic non-uniform law was unnecessary, although it could be seen as an additional argument to sustain the court’s decision. The same approach was followed by an Argentine court,75 where the court stated (obiter dicta) that usages of international commerce have long been accepted in the commercial jurisprudence – as an example, by the FOB, C&F, CIF clauses regulated by the International Chamber of Commerce INCOTERMS. Usages of international commerce are presently accepted as a source of law applicable to international sales, even over the 1980 Vienna Convention, as the rule of the Convention mandates in its Article 9(2).76

73

See, e. g., Corte di Appello di Genova, Italy, 24 March 1995, available at http:// www.cisg.law.pace.edu/cisg/wais/db/cases2/950324i3.html: “according to the accepted scheme of the international sale FOB-Free on Board-port of loading agreed, ... is binding inter partes as an international trade usage under Article 9 CISG (...)”. Although the court did not refer expressly to paragraph 1 of Article 9, the reference to the agreement inter partes has to be so understood. In any case, the court failed to provide an analysis of the case under the CISG rules that were presumably applicable by virtue of Article 1(1)(b) CISG. The seller sold contaminated oil (mixed with water) before the passing of the risk (which occurred, according to the FOB clause, with the entrance of the product into the tanks of the ship that the buyer had chartered), and also delivered a lesser quantity than that contracted. This means that this case involved not only the passing of risk but also a lack of conformity (quantity) of the goods delivered before the passing of risk (Article 36(1) CISG). However, the court failed to appreciate the former issue. See also High Arbitration Court of the Russian Federation, Information letter n. 10, 25 December 1996, although it also cites Article 9(2) CISG without further explanation. 74 United States 26 March 2002 (St. Paul Guardian Insurance Co. v. Neuromed Medical System & Support, 2002 WL 465312). 75 Juzgado Nacional de Primera Instancia, Argentina, 20 May 1991, CLOUT case No. 21. 76 The Argentine case is clearly wrong in mentioning the C&F clause as one regulated by INCOTERMS. It is certainly a variation of the CIF clause, but it is not expressly covered by the INCOTERMS.

290

Comments on the draft Digest relating to Articles 14-24 and 66-70

In a German case,77 the court seemed to interpret a DDP term using the INCOTERMS,78 although it is uncertain in this case whether the parties also expressly agreed not only to the acronym of the term but also to the word “Incoterm”.79 Such a reference definitely would incline the interpretation towards INCOTERMS particularly if the words are used by a non-English speaker. In the cases mentioned, the courts were of the opinion that the most wellknown and frequently-used trade terms defined in INCOTERMS (CIF and FOB clauses) had to be considered as trade usages in the sense of Article 9(2) CISG. There have not been any cases involving less known trade terms, such as some of the “D” terms, and therefore the interpretative results for those terms are still uncertain. 77

Oberlandesgericht Oldenburg, Germany, 22 September 1998, CLOUT case No. 340. See also Hof van Beroep Gent, Belgium, 17 May 2002, interpreting a price list DDP term (“425 Francs Frangais DDP unloaded at Guyancourt or another address in France”) under INCOTERMS 1990. 79 The decision mentions the DDP clause only twice: 1) “The fax noted the time allowed for delivery (15-25 June), the delivery address, and the terms for delivery (Incoterm DDP);” 2) “A diverging place of delivery does not bar a correct performance of the contractual obligations, even though the (seller) was obliged under the contract and Incoterm ‘DDP’ to deliver the goods at his cost and risk to the delivery address (v. Caemmerer/Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, Anh. V, DDP, A3)”. The clause DDP was interpreted using INCOTERMS in conformity with the German commentary cited by the court. In support of the assertion that courts will interpret a trade term in conformity with the INCOTERMS, even absent an express contractual reference to INCOTERMS, the draft Digest also cites Cantone del Ticino, La Seconda Camera civile del Tribunale d’appello, Switzerland, 15 January 1998, CLOUT case No. 253; and Oberster Gerichtshof, Austria, 2 February 1995, CLOUT case No. 176. See Draft UNCITRAL Digest, Overview of Part III, Chapter IV of the CISG, ¶ 9, n. 19. I assume this refers to the interpretation of commercial terms agreed in a contract, like FOB or CIF, but without express reference to INCOTERMS, and thus, I believe it refers to the interpretation of those terms under INCOTERMS. In Cantone del Ticino, LaSeconda Camera civile del Tribunale d’appello, Switzerland, 15 January 1998, CLOUT case No. 253, the parties agreed upon a CIF clause. However, the court did not mention anything about the interpretation of that clause using INCOTERMS. On the contrary, the court just mentioned Article 67 (“the transfer of risk to the buyer occurred with the delivery of the identified goods to the carrier”). From Oberster Gerichsthof, Austria, 2 February 1995, it cannot be derived (at least from the abstract) that the FOB term agreed by the parties was enforced as an INCOTERM. 78

291

Observations on passing of risk Johan Erauw* I. Introduction I have chosen to discuss problems of the passing of risk. For that purpose I will discuss primarily Articles 66 to 70 of the Convention on Contracts for the International Sale of Goods (CISG). In and beyond the draft UNCITRAL Digest, there are a few cases that invite analysis and some problems remain unsolved. Articles 66-70 are strongly influenced by the risk of loss provisions of the earlier Uniform Law on the International Sale of Goods (ULIS) of UNIDROIT, concluded at The Hague on 1st July 1964 (Articles 96-101). Indeed, risk of loss concepts used in uniform sales law have been the object of debate, study and practice since 1930. Article 99 ULIS was the most discussed rule of the old uniform sales law at the time of drafting; and the debate continued into the preparation of the comparable rule in the CISG.1 But because risk of loss issues can be tricky, they are frequently avoided by traders. Buyers and sellers tend to clarify things for themselves by their agreement. They frequently avoid problems by referring to well-known trade terms. Parties often use the INCOTERMS of the ICC to agree on the division of burdens and costs and also to determine the place and time of delivery and of the passing of risk. CISG Article 6 gives preference to party agreements relating to any principle or section of the convention. This may explain the scarcity of cases. Pilar Perales, in her comments for this volume, remarks that twelve of the twenty cases mentioned in the part of the draft UNCITRAL * Professor of Law, University of Ghent and American University (Washington College of Law). The author thanks Professor Harry Flechtner for his editing. 1 Dlle/Neumayer, “Zeitpunkt des Gefahren
bergangs – Art. 97 ULIS” (1976), at 601 – transfer of risk is “one of the big problems” and remains a “crucial problem” – and at 607 – “difficult and controversial”; John Honnold called the transfer of risk for the sale of goods in transit a “troublesome situation”. John Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention § 359 (3d ed. 1999). See also Elise Degroote, Overgang van het risico en zorg voor de zaak, in Het Weens Koopverdrag (Hans Van Houtte Johan Erauw & Patrick Wautelet, eds., 1997) at 283.

292

Observations on passing of risk

Digest devoted to risk, involved contracts containing a trade term. Even where the parties have agreed to a trade term, application of the rules governing risk transfer can be difficult. For the education of commercial lawyers further doctrinal analysis therefore is necessary. We need to compare the rules in the articles on transfer of risk, with the solutions that several of the INCOTERMS offer. We need to understand the dispositive nature of the risk rules, their replacement by agreed terms and their interplay with such terms. The CISG provisions, such as Article 66, compliment and work in tandem with the INCOTERMS. A comparison with the rules of the UNIDROIT Principles on International Commercial Contracts (1994) is also informative. Note that the effect of the sale agreement on the property in the goods sold is not covered by the CISG (Article 4). Neither does the CISG deal with a number of topics that concern liability arising from the goods and diverse aspects of what may fall under the “risk” of either party.2 The discussion of Articles 66-70 of the Convention will require examination of several other articles of the CISG, because the notion of risk is central to the relationship between the two parties. For example, we must look at the risk the seller runs when preparing to make a conforming delivery – in particular, the mechanism whereby the risk may be rerouted back to the seller under Articles 70 and 82(2) and then may pass again to the buyer thanks to a new delivery in which the non-conformity was remedied.

II. The notion and nature of risk in CISG – which risks? A. “Loss or damage” The risk of loss rules of the Convention contain definition of the types of risk they cover. Actually, a good number of questions relating to risk are not handled in the CISG, so there is occasion to speculate on the types of risk within the scope of the convention. The notion of risk is vague, but the draft UNCITRAL Digest offers good illustrations. The wording used in the CISG is “loss or damage” (Articles 66 and 68) or “goods (that) have perished or deteriorated” (Article 82, 2(b)). In ULIS the terms were always “loss or deterioration” (Articles 96 and 99 ULIS).

2 For example, the liability of the seller for death or personal injury is beyond the scope of the CISG, Article 5 CISG. Also consider risk associated with services provided in conjunction with a sale and the transfer of documents that may not be governed by CISG.

293

Johan Erauw

B. Physical loss and deterioration Physical risks to the goods, including their entire destruction, are covered by the concept of “loss”. Also covered is disappearance of the goods, including theft, misplacing the goods, their transfer to a wrong address or person, and mixing up the goods with other goods. Risk of physical loss or deterioration is a broad notion that encompasses occurrences in transporting the goods from one party to the other and in handling and storage.3 It includes the risk of natural processes leading to a decline in quality, including deterioration through ripening, aging, oxidation, sickness or death of the merchandise.4 Such natural processes of decline usually resulting from lack of care, including inappropriate packaging or insufficient cooling (e. g. leakage, softening, melting,5 shrinking, loss of weight or of strength or taste, discoloring, risk of scratching or otherwise showing wear and tear). Risk of physical loss or deterioration also encompasses the risk of others causing damage to the goods. It is necessary to determine not only who bears the risk, but also the amount of compensation that will be due as a result of the risk. Thus the risk associated with goods might include the cost of new packaging and the expense of repackaging frozen products that had thawed. The costs of measuring, handling, replacing, and moving, goods need to be counted. The risk of loss for documents relating to the goods, in my opinion, passes together with the risk for the goods. In many cases, some of the documents actually accompany the goods. A bill of lading, furthermore, is deemed to represent the physical goods. The time and place to hand documents over is the same as for goods (Article 34). Thus, if the documents are lost, the risk should be treated similarly. This justifies using the approach in Articles 67 through 69, which generally associates risk with physical control over the goods, for documents. Article 34 provides that, if the documents were handed over early and were deficient, the shortcoming may be cured as long as such cure does not cause the buyer unreasonable inconvenience or expense. That illustrates that paperwork may reach the buyer before the agreed time of delivery and even before its “conformity” was assured. 3 Annemieke Romein, The Passing of Risk: A Comparison Between the Passing of Risk Under the CISIG and German Law (1999) (English translation of thesis, Heidelberg, available at http://www.cisg.law.pace.edu/cisg/biblio/romein.html). 4 The exclusion of death or personal injury in Article 5 is only for damage caused by the goods to a “person”. 5 Rechtbank von Koophandel Hasselt, Belgium, 2 May 1995 (sale of deep-frozen raspberries).

294

Observations on passing of risk

Remedies for such non-conforming documents may include avoidance as well as self-declared extension of the delivery date, both of which stop risk from passing. Thus the risk of loss rules of the Convention apply as easily to documents as to goods. Note that there is a positive side to receiving risk of loss – namely the benefit of acquiring any fruits, by-products or offspring of the goods (e. g. the right to the foal of a mare), which right passes together with the risk.6 The loss of the buyer who bears risk of loss is limited to the price paid or still to be paid (see the comment infra on Article 66). If there was also a breach on the seller’s part, then the buyer’s loss may be reduced (see the comment infra on Article 70). Thus if the seller has breached, there may be a partial return of the goods for lack of “delivery”, and speaking in terms of risk there will be less to compensate. Delay in delivery (which might occur in combination with a deterioration in the quality of the goods) can constitute a breach of contract that prevents risk from passing. The possibility of delayed delivery may seem like an aspect of “legal risk”, but it is not the same: it is a risk associated with contracting to perform by a particular date, and nonperformance by the date is simply a breach of contract. The same comments apply, mutatis mutandis, to delivery at the wrong place. The draft Digest7 describes a case in which a painting represented at the time of sale to be the work of a famous artist was later shown to be misattributed.8 The court, invoking Articles 69(1) and 36(1), dismissed the buyer’s claim because, at the time of delivery, there were no indications that the artist was not the painter. The court incorrectly treated the risk of a faulty attribution of the painting as a part of the risk that passes to the buyer. Contrary to the court’s view, the circumstances of the case present a case of non-conforming delivery for which the seller should be liable. The identity of the creator of a work of art or an antique is, in my view, at most an economic risk which, in the circumstances of this case, did not pass to the buyer. Of course, delivering a wrongly attributed painting may be attacked under the national law governing misrepresentation or error in substance because such rules are matters of validity.9

6

See Barry Nicholas, An Introduction to Roman Law 180 (1962). See draft UNCITRAL Digest art. 69, ¶ 3. 8 Arrondissementsrechtbank Arnhem, The Netherlands, 17 July 1997, affirmed on other grounds (CISG held inapplicable), Hof Arnhem, The Netherlands, 9 February 1999. 9 See CISG art. 4a. 7

295

Johan Erauw

C. Economic risk Economic risk has to do with the fluctuation of the value of goods on the market. It is closely linked to property in the goods or the passing of title. These concepts can coincide with risk for loss or damage, as we shall see with sale of goods afloat (in transit). At the time of a conclusion of a sale, the price is fixed (or is determinable) in the currency of account. The market price of the goods as well as the currency exchange rate could thereafter fluctuate. Later fluctuations of the market-price bring advantage either to the seller (when there is an intermediate drop in price) or to the buyer (if a price increase occurred).10 The economic risk may pass in parallel or in a manner similar to the risk of damage. But Professor Nicholas11 does not connect this risk, historically, to the “periculum” as it was discussed under the Roman law. The terms of Articles 66-70 do not treat the issue of fluctuation in marketprice, nor of exchange-rate fluctuation. I would say the risk of these events passes at the time of the valid conclusion of the agreement. D. Legal risk It is uncertain whether legal risk passes together with physical risk.12 Such risk comprises the chance that an authority will intervene (“act of state doctrine”), confiscate, or forbid the possession, intended use or further commercial exploitation of the goods. It is the risk that through operation of the law a party would be deprived of the right to make valuable use of the goods. I think, those risks too are to be allocated along the lines of the rules that I will discuss. It is true, that the wording of the CISG seems to exclude the literal application of its risk of loss rules to legal risk.13 Risks as to obtaining customs clearance for export and receiving import permission or customs quotas are included in the agreement comprised in the use of an INCOTERM. If the parties have not adopted a trade term to deal with those risks, they might be treated under the Convention’s risk of loss rules; but – again – the wording of the CISG seems to preclude this. 10

See Clive M. Schmitthoff, The Risk of Loss in Transit in International Sales in Unification of the Laws Governing International Sales 179 (John Honnold ed., 1966); Sylvain Bolle, The Theory of risks in the Vienna Sale of Goods Convention in Pace Review of the Convention on Contracts for the International Sale of Goods 271 (1999). 11 Nicholas, supra note 6, at 179 ff. 12 See Degroote, supra note 1, at 284 referring to Herbots and Heuz, who both include legal risk with physical risk, and Schlechtriem, who rejects that approach. Bolle, supra note 10, at 273 includes loss by confiscation as parallel to physical loss. 13 Article 97(2) ULIS was quite different: it gave a rule regarding the transfer of risk for nonconformity, and therefore it could be said that legal risk transferred in the same manner: Dlle/ Neumayer, supra note 1, at 619.

296

Observations on passing of risk

I would also place the risks associated with language under the heading of legal risk, and consider such risks not included in the risk of physical loss or deterioration of goods. The risk of an impediment to performance beyond a party’s control (force majeure) is discussed by the commentators analyzing Article 79.14 I will discuss the relationship with Article 66 below. E. Contractual risk: Seller liable for lack of conformity – buyer liable to pay price The law only explicitly treats the “passing” of risk. It logically leaves us to put the risk with the seller before it passes, and subsequently with the buyer after it passes. Before a contract is concluded, all risk including legal, economic and physical risk, lies with the seller. The risk of obtaining all needed documents and of managing the documentary or administrative process, is part of this. Perhaps the most important risk has to do with the kind of obligations a party takes on, as a result of the contract negotiations. Thus there is the risk of non-satisfactory performance (as in choosing your business-partner – insolvency, incompetence and the like). That can be called the contractual risk, and it applies to both buyer and seller.15 The CISG imposes on the seller an obligation to make a conforming delivery, generally measured as of the time the risk passes (Articles 35-37). That should suffice, because the Convention is oriented towards contractual provisions and offers what the crucial performance phase of the transaction requires – namely detail as to the obligations imposed for a legally effective “delivery” – the “handing over” of the right thing.16 The buyer will have to pay good money. The different possible deficiencies on the point of conformity are mentioned in Article 35. If there was lack of conformity at the time that risk normally passes to the buyer, seller’s “liability” for that breach does not pass to the buyer (Article 36). The rule of breach trumps the passing of risk.17 The risk of loss or deterioration of the goods covers the buyer’s risk of having to pay the 14

Bolle, supra note 10, at 276-77 discusses this as a risk factor. Romein, supra note 3. 16 This is done without the terminological difficulties of the de´livrance concept that the ULIS previously employed. See Honnold, supra note 1, at § 359. 17 As was noted above, remedies for material defects can be cut-off (Articles 38 and 39 CSIG); so risk for breach can indeed effectively pass, at the deadline for giving notice of lack of conformity indicated by Article 39 (which must be read in conjunction with Articles 40 and 44 CISG). See also the discussion of article 70. 15

297

Johan Erauw

price for what is either entirely not there or not there in full value. This price risk – the obligation to pay notwithstanding the loss or reduced value – is a negative way of defining the risk that undoubtedly does pass to the buyer.18 Article 66 describes the effect of this “passing”, and specifically puts the effect problem in terms of the law’s choice not to discharge the buyer of his asyet-unperformed obligation.19 There may also be risk flowing from the way the parties structure their legal relationship. For example, part of the risk associated with a non-conforming delivery involves the costs of transporting and insuring during transport, as well as the costs of handling and storage. Depending on what the buyer paid to the seller for the goods, which may include the cost of those services, the seller may lose that value because getting a replacement product delivered to the same place will cost anew. These costs will be higher if the goods were to be delivered at or close to the buyer’s establishment. This risk looks to be decided by the agreement and by price negotiations. Those transport costs are a matter of contractual risks even if they were not included in the product price and needed to be contracted out to other entities. If the parties have by agreement added other financial consequences to the delivery of non-conforming goods, such as a penalty clause (which is not expressly addressed in the Convention) the contractual risk is greater.20

III. Measuring risk of loss: Comparing the breaching seller’s

obligation to pay damages A. Damage caused by the goods after risk has passed The risk of loss for goods sold under a sales contract is altogether different from the risk of damage later caused by the goods sold. The sold goods can deteriorate and can damage persons or other property – e. g. stains, damage by fire, contamination. The sold goods can also disturb processes or cause further loss to other property by mechanical or electronic failure. This other damage raises issues of contractual or tortuous liability between buyer and 18 The buyer’s obligation may be to pay a reduced price in conjunction with, e. g., Articles 70, 50 and/or 51. 19 Romein, supra note 3; Neil Gary Oberman, Transfer of Risk from Seller to Buyer in International Commercial Contracts: A Comparative Analysis of Risk Allocation Under the CISG, UCC and INCOTERMS (1997) (Thesis, Laval, available at http://www.cisg.law. pace.edu/cisg/thesis/Oberman.html. 20 Albert H. Kritzer, Guide to Practical Applications of the United Nations on Contracts for the International Sale of Goods 21-22 (1989).

298

Observations on passing of risk

seller,21 or tortuous liability vis- -vis third parties who suffer damage to their property or economic loss. With respect to contractual liability between buyer and seller, recovery for this damage is exclusively based on breach of contract (lack of conformity) and the damages fall under Article 74 CISG. The risk for this damage also passes to the buyer when the delivery is duly made or when the deadline for notice of non-conformity under Article 39 (see also Articles 40 and 44) runs out. Claims under tort law, of course, are beyond the scope of CISG and outside the possible extensions of its principles by way of gap-filling (Article 7(2)). But even contractual liability for damage caused to other property of the buyer cannot be simply identified with or subsumed under the rubric of passing of risk: The convention’s risk of loss rules clearly limit their ambit to loss or damage to “the goods” (i. e., the goods sold) – Articles 66 and 68 – or “in respect of goods sold” – Article 68. A seller’s liability for casualty caused by the goods to other property of the buyer, and also the compensation for damage to the sold goods themselves, is handled by Article 74 – the article that orders full compensation for broadly defined losses. A seller’s liability for such damages under Article 74 would be based on a breach by delivery of non-conforming goods even though the damage caused, shown to be within the chain of causality, might occur after the time of delivery (Article 36(2)).22 The conforming delivery (quod plerumque fit) or the withdrawal of remedies makes that “risk” for damage to other property pass definitively. The appearance of such damage, of course, could be the first indication that something was wrong with the goods all along, a situation that implicates the time limits for giving notice of lack of conformity under Article 39 (mitigated by Article 44, but not for the two-year limitation on notice imposed by Article 39(2)). B. Harm to persons The express exclusion from the scope of the CISG of compensation for persons injured or killed by the goods (Article 5), implies, a contrario, that the risk of collateral damage to other property of the buyer is covered.23 The 21 The Hague Convention on the law applicable to product liability would exclude such a case from its field of application. 22 Article 70 makes clear that the rules on transfer of risk at one or other point in time leave the buyer’s remedies for fundamental breach unimpaired. 23 Kritzer, supra note 20, at 27-28; Johan Erauw, Wanneer is het Weens Koopverdrag van Toepassing in Het Weens Koopverdrag (Hans Van Houtte, Johan Erauw & Patrick Wautelet, eds., 1997) at 45.

299

Johan Erauw

applicable national law of contract or tort will come to the rescue for personal injury. But, of course, by making the distinction between personal and property damage and by letting damage to persons be governed by conflicts rules, and national substantial law, a split between the liability principles for the two kinds of injury is inevitable.

IV. The structure of part III, chapter IV of CISG Chapter IV of Part III of the CISG (Articles 66-70) determines the place where risk passes. It provides different rules depending on whether the sales agreement involves the carriage of the goods (Article 67), whether the sale relates to goods in transit (Article 68), or whether the transaction does not fit into the prior two categories (Article 69). The distinctions controlling which rule applies are not clear to all, as the draft Digest illustrates. In international sales, presumably, the large majority of transactions will involve carriage, so that Article 67 will usually be applicable. Professor Honnold intimated that sales not involving carriage were typically domestic, or were otherwise the unusual case where one may presume the seller had its own trucks for distribution.24 Article 67 should indeed apply whenever the goods are to be handed over to an independent carrier, including to a forwarding agent.25 The Digest asserts that if the contract is silent about carriage, Article 69 rather than Article 67 will govern.26 The question whether the contract “involves carriage of the goods” so that Article 67 applies, turns on the parties’ agreement. In one case, a contract provision requiring the buyer “to pick up” the goods and to “take the goods to” its facilities in another country was held to mean that the contract “involved carriage of the goods” and thus was governed by Article 67 where the contract also included an “FOB” delivery term.27 On the other hand, an arbitration panel in another case discerned an absence of carriage arrangements and applied Article 69(2), notwithstanding the parties had used the INCOTERM DAF (“Delivery at

24 Honnold, supra note 1, at 237; see also Jan Hellner, The Vienna Convention and Standard Form Contracts in International Sale of Goods: Dubronik Lectures (Petar arcˇevic´ & Paul Volken, eds., 1986) at 345. 25 See Romein, supra note 3, who excludes from Article 67 only the case where the seller hands the goods over to personnel under the seller’s responsibility for transmittal. 26 Draft UNCITRAL Digest art. 69, ¶ 2. 27 Court of Arbitration of the Hungarian Chamber of Commerce, Hungary, 10 December 1996, CLOUT case No. 163.

300

Observations on passing of risk

Frontier”).28 The results of applying Article 69(2) are very much in line with that particular INCOTERM. Still, the risk was, in my view, to pass simply according to the Contract term used, rather than the CISG-provision, even though the result was the same. The value of this latter decision as precedent for application of Article 69 is questionable.

V. Agreements concerning passage of risk and the use of international trade terms (INCOTERMS et al.) A. Party autonomy and diversity of standard terms on offering Under Article 6 of the Convention, parties have freedom of contract and they may deviate from provisions of the CISG governing the passing of risk, or, for that matter, any aspect of risk. In a CIETAC-arbitration,29 a buyer of jasmine aldehyde from China warned the seller to keep the goods cool during transport to New York. The seller took insufficient care to assure a direct transport, and during the vessel’s stop-over excessive heat accumulated causing the goods to deteriorate. The contract included the term “CIF New York”. The tribunal found that, notwithstanding the CIF clause (under which the risk passes when goods cross the ship’s rail) the parties had entered into a separate agreement relating to temperature risk. The tribunal found that the seller was responsible for the damage under Article 66 CISG. Trade terms typically dictate who takes the price-risk (economic risk) of providing carriage. In the language of Article 67 CISG, contracts including such a trade term generally “involve carriage” in the contract, but by employing a trade term they at least partly derogate from the CISG. They opt out of some aspects of the rules on passing of risk and, while involving carriage, they put the application of Article 67 in doubt. That makes the application of Article 67 (discussed below) not straightforward at all. The use of commercial terms for shipping is pervasive. If parties consider carriage, they very often use INCOTERMS or a similar shorthand reference to usages in shipping.30 Besides INCOTERMS promulgated by the ICC in 28

ICC Court of Arbitration, Case No. 7197, CLOUT case No. 104.

29

China International Economics and Trade Arbitration Commission (CIETAC), China, 1995, English abstract available in Unilex at http://www.unilex.info/case.cfm?pid=1&do= case&id=210&step=Abstract. 30 There seems to be consensus on this point. See Comments on Passage of Risk under National Rules, under CISG, and under INCOTERMS (Albert H. Kritzer, ed.), available at www.cisg.law.pace.edu/cisg/text/passage.html; Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the

301

Johan Erauw

Paris, with support of the world business community, there were the terms promoted by CMEA (1968/1976) and those of the United Nations Economic Commission for Europe. Presently American law contains, in UCC §§ 2-319 et. seq. several definitions of trade terms (such as “F.O.B”.) that are explicitly intended to cover the passing of risk. Under the revised version of UCC Article 2 being considered, those definitions would be deleted.31 Besides terms with a broad geographical range of use, there are many local trade usages in particular localities or trades that relate to passage of risk.32 B. The legal effect of INCOTERMS in an international sales contract The draft Digest illustrates that there is a need to know how the CISG and INCOTERMS interact. One author says a properly-agreed-to INCOTERM draws the entire definition of the term into the contract by way of incorporation.33 The cases cited in the draft Digest seem to concur. Another author feels that swapping otherwise applicable uniform world law for contract-based rules that are neither complete nor necessarily in harmony with the provisions of law is inappropriate.34 Commercial partners that have, in the past, regularly, employed an INCOTERM in their contracts may subsequently be bound by the term on the basis of Article 9(1) of CISG, even in a contract that does not expressly refer to the INCOTERM.35 The trickier question is whether INCOTERMS bind parties who have not established such a personal practice? A great many people have referred to the INCOTERMS as an example of lex mercatoria or

International Sale of Goods 257 (1992) (absence of agreement is “rare”); Joseph Lookofsky, Understanding the CISG in Scandinavia 110-11 (2d ed. 2002) (the “realities of contract life” are that “a large percentage of [international sales] contracts contain trade terms clearly designed to regulate the passing of risk”). 31 See Pilar Perales Viscasillas, Comments on Articles 14-24, 66-70 of the Draft UNCITRAL Digest, supra. 32 Didier Le Masson, Les INCOTERMS in Convention de Vienne et les INCOTERMS 41 (Yves Drains & Jacques Ghestin, eds., 1990). 33 Lookofsky, supra note 30, at 112. 34 Burghard Piltz, INCOTERMS and the CISG in Pace Review of the Convention on Contracts for the International Sale of Goods (CISG) (1999). I offer illustrations of a few discrepancies between INCOTERMS and the risk of loss rules of the CISG in the following paragraphs. 35 Honnold, supra note 1, at § 145; M.J. Bonell, Article 9: Usages and Practices in Commentary on the International Law: The 1980 Vienna Sales Convention (C.M. Bianca & M.J. Bonell eds., 1987) at 113; Piltz, supra note 34.

302

Observations on passing of risk

soft law.36 According to those authors, the definitions in the INCOTERMS should be consulted whenever parties have used a trade term defined in INCOTERMS, even if the parties have used only a similar term or have not expressly incorporated those definitions. But I cannot see an INCOTERM being imposed without the parties making a clear reference to it. The Foreword to the INCOTERMS (2000) stated that a reference to the INCOTERMS, must be included in the contract in order for their definitions to apply. CISG Article 9(2) – which binds parties to industry usages that “the parties knew or ought to have known” – does not seem to change that result because the harmonized international sales law that is binding under the CISG is not fully compatible with the INCOTERMS, suggesting that the INCOTERMS rules are neither international usages nor usages that the parties “ought to have known”.37 Professor Pilar Perales, my fellow commentator on the risk of loss rules of the draft Digest, shares a similar view.38 C. Rules of interpretation – Article 8(3) The true content and significance of the trade terms used in a particular sale, is not always clear. There are differences in the definitions of the same trade term in the various sets of trade terms. Surely many business people are not well aware of the precise meaning or legal content of such terms, and are not familiar with the divergences among them.39 Perhaps the framers of ULIS and after them the UNCITRAL Commission that prepared the CISG should have promulgated their own shipping terms;40 but that was not practicable. The positive side is, this leaves the business world the chance to develop

36

See Le Masson, supra note 32, at 39. See also J.H. Dalhuizen, Dalhuizen on International Commercial, Financial and Trade Law 273 (2000). 37 See Piltz, supra note 34, who finds support from Andreas Renck, with Ulrich Magnus, in Staudinger/Magnus, Kommentar zum B
rgerlichen Gesetzbuch mit Einf
hrungsgesetz und Nebengesetzen: Wiener Kaufrecht (CISG), and from K. Neumayer & C. Ming, Convention de Vienne sur les contats de vente internationale de marchandises: Commentaire (1993) at 120. 38 Perales Viscasillas, Comments on Articles 14-24, 66-70 of the Draft UNCITRAL Digest, supra this volume. Dalhuizen, supra note 36, at 273 would go further – too far, in my view – in giving pre-eminence to the INCOTERMS. 39 According to P.M. Roth, The Passing of Risk, 27 Am. J. Comp. L. at 309-10 (1979), the many variations are not generally known, particularly in developing countries. A similar complaint was made at the time ULIS was negotiated. I note a decision of the Hof van Beroep Brussels, Belgium, 2 September 1998, in which it was wrongly said the CIF-term determined the place of payment of the purchase price (Rechtskundig Weekblad 1998-1999, at 924 and comment by J. Meeusen at 1546). 40 See the criticism in Roth, supra note 39, at 309.

303

Johan Erauw

terms freely and to adapt them to changing needs. The downside is, that parties’ true intentions in employing a trade term are often not clear.41 When the parties have used a trade term, therefore an important problem of interpretation arises, for which we must look to Article 8(3) CISG. It provides that, in determining the intent of the parties, all circumstances shall be considered, including negotiations, practices between the parties, usages and any subsequent conduct of the parties. When parties to a sales agreement use a standard INCOTERMS, the exercise of their autonomy is both narrow and clear. Where the parties have used a general trade term42 and have used it correctly; interpretation is necessary.43 The applicable national law must be sought to fill in the gaps regarding the terms of delivery and the passing of risk. This flows from Article 7(2) CISG, which requires supplementation of the CISG via the rules of conflict of laws if no general principle of the convention fills the gap. The national law so applicable may look to the INCOTERMS for guidance on the meaning of trade terms. If parties have made unclear references or used confusing terms, the same applicable national law of the contract may supplement the provisions of the agreement. If the parties use clear contract terms, however, those terms prevail over the rules of the CISG. A clear reference to an INCOTERM, for example, calls for the full incorporation into the agreement of the definition of the particular term as a “codified” trade practice. D. Discrepancies between the CISG and INCOTERMS The relationship between the CISG and INCOTERMS in itself is problematic. Neither CISG nor INCOTERMS absolutely, in all cases, tie in the passing of risk with the de facto handing over of control over the goods. But there is a link in both the CISG and in INCOTERMS.44

41

Kritzer, supra note 20, at 229, cites Honnold’s argument for abstention; Roth, supra note 39, at 309 gives arguments for and against. 42 The most authoritative commentators advise an explicit reference to the INCOTERMS: Jan Ramberg, ICC Guide to INCOTERMS 2000: Understanding and Practical Use (1999) at 10; approvingly cited by Piltz, supra note 34. 43 See Perales Viscasillas, Comments on Articles 14-24, 66-70 of the Draft UNCITRAL Digest, supra this volume. 44 Hellner, supra note 24, at 345-46; Dionysios P. Flambouras, Transfer of Risk in the Contract of Sale Involving Carriage of Goods: A Comparative Study in English, Greek Law and the United Nations Convention on Contracts for the International Sale of Goods (Oxford thesis, 1999), available at http://www.cisg.law.pace.edu/cisg/biblio/flambouras at n. 283 (“they are connected”).

304

Observations on passing of risk

Under the INCOTERMS the place of “delivery” (as the term is used) is close to the place of “handing over”, as referenced in Article 67(1) of the CISG, but the INCOTERMS use the time and place of physically placing the goods on board the vessel for the terms most often used. When the word “delivery” is used under CISG, furthermore, it implies “conformity”, meaning the absence of defect in the performance.45 In comparing the CISG and INCOTERMS, there are two sets of problems that we must distinguish: The first problem involves the time that risk passes. When carriage is involved, the rule on the passing of risk in CISG is different from the mostused INCOTERMS FCA or FOB and C&F or CIF – because the place of delivery differs for those important types of sales. Under those INCOTERMS risk passes at the place of loading onto the vessel; under the CISG risk passes at the place of “handing over to the carrier”. When you choose an INCOTERM, you exclude the CISG for the narrow issue of the passing of risk, thus altering the point of “handing over” – and sometimes not requiring the strict identification of the goods as mandated under CISG Article 67(2). The second problem is the relation of the passing of risk to other elements of the sale, such as the place of performance, defining what constitutes non delivery, and determining the consequences of breach in relation to the passing of risk. For example, “delivery” as defined under the INCOTERMS makes risk pass, but such delivery does not necessarily occur at the same place where seller must perform his delivery obligation under the CISG (“place of delivery”). Indeed, the place of delivery and the place where risk passes may not be the same even under the CISG. The INCOTERMS, furthermore, do not deal with the consequence of a non-conforming delivery on the passing of risk, whereas under the CISG the effect of a breach is rather harmoniously built into the rules on risk transfer. Article 70, for example, coordinates the passing of risk and the existence of remedies for a fundamental breach. E. Using the CISG to supplement an INCOTERM is hazardous It has been said that the INCOTERMS are so complete on the point of passing of risk, there is no need to supplement them with provisions from the CISG.46 That seems exaggerated. Piltz recently wrote that INCOTERMS used to be supplemented by national law; now they effectively are supple-

45 46

See Honnold, supra note 1, § 238, who compares the problems of ULIS in this area. Hellner, supra note 24, at 343. See also Lookofsky, supra note 30, at 113.

305

Johan Erauw

mented by the uniform rules on sales law.47 He sees a need for supplementation because the INCOTERMS only provide for the primary obligations of the parties. They give no detailed rules for the times of delivery or for the buyer’s obligation to pay. The INCOTERMS say nothing about possible exceptions to the parties’ obligations. The elements of contract conclusion and the consequences of the failure to perform are not provided for. The INCOTERMS have nothing like Articles 66 and 70 of CISG. As indicated above, the INCOTERMS do not relate the concept of delivery to the concept of conforming goods. Therefore, a discrepancy between the results under the INCOTERMS and under the CISG is possible. Although the risk would appear to have passed to the buyer under an INCOTERM, in reality – under the sales contract – the seller may have breached his obligation to deliver and the risk might remain on the seller under the CISG. This situation highlights a need for harmonization in this area, although such harmonization would require cooperation between different institutions.

VI. Risk under the CISG in case of sale with transport A. The goods need to be clearly identified to the contract When the sales-contract involves carriage, Article 67(2) formulates a strict condition before risk can pass to the buyer: the goods must be clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise. It is a basic principle that risk of loss cannot pass until the goods in question are identified.48 This is a general concern throughout several rules in Chapter IV. I will return to the problem later because some specific rules apply to bulk goods and to retroactive identification. B. Sale involving carriage but no specified place to hand the goods over to the carrier (Article 67(1)) Article 67 offers a double rule for two possibilities: The first hypothesis covered by Article 67(1) is where sale “involves carriage” but no particular place is specified to hand the goods over to the carrier: risk in this case passes when the “goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale”. Von Hoffmann has looked closely at this rule to define the first carrier. He 47 48

306

Piltz, supra note 34. Dlle/Neumayer, supra note 1, at 657-59 with comments on ULIS.

Observations on passing of risk

points out that vehicles of the seller itself (e. g., its truck bringing the goods to the station or airport) are generally thought not to constitute a “carrier” within the meaning of Article 67(1);49 under this approach the risk stays with seller as long as the goods are in the seller’s vehicles. Von Hoffmann finds that neither logical, nor necessary. He argues that the movement towards the buyer was initiated when the seller started his own transport and the seller generally holds insurance for that part of the transport, which he can turn over to the buyer. Essentially, Von Hoffman argues, once goods are loaded and traveling, it is often hard to determine the location of the occurrence that damaged or destroyed them, especially if deterioration took place during multi-model transport. Consider also the use of the INCOTERMS FCA (delivery at first carrier) and FOB (free on board) with no further indication as to the location, and how those terms interact with the risk of loss rules of the CISG. There are differences as to the place where risk passes under these terms and under the CISG. Under these INCOTERMS the place of delivery and of the passing of risk coincide. The goods need to be put on to the carrier before risk passes, so that the risk of storage at the place of loading and of further handling as well as the risk of stowage and of trimming lies with the seller. Under the FOB term the delivery (and thus risk transfer) is said to occur, in a symbolic way, at the moment when the goods pass the ship’s railing, but in effect the stowage will still need to be completed inclusive of the tying down and trimming. Under Article 67(1) risk passes at a different time: “when the goods are handed over to the first carrier”, i. e. when they are brought into the control of the carrier. That moment is much less well defined.50 It could certainly mean that warehousing and handling within the confines of a carrier’s facilities would be at the risk of the buyer. With reference to goods handled in a harbor, that result would look more like the result under the INCOTERM FAS (free alongside ship). But if stowage was contracted out to a harbour authority or to stowage firms, the goods would indeed not be handed over to the carrier until they were put on the ship. C. Sale involving carriage with specification of the place for handing over (Article 67(1)) The second hypothesis covered by Article 67(1) is the case where the sale involves carriage of the goods and the seller is bound to hand the goods over to the carrier at a particular or named place. Here too, international 49

Bernd von Hoffman, Passing of Risk in International Sales of Goods in International Sales of Goods: Dubrovnik Lectures, supra note 24, at 286-87. See also Romein, supra note 3. 50 Dlle/Neumayer, supra note 1, at 659.

307

Johan Erauw

commercial practices play a role in how such specification of a particular place for handing over the goods may be accomplished (Article 9). For example, under terms such as FCA and FOB the buyer may name e. g., the airport or port.51 The indication of a vessel might also indicate the place where the vessel will moor within the relevant time. Risk will then pass when conditions for handing over the goods to the carrier at that particular place have been fulfilled and – as mentioned above – the goods have been identified to the contract. But handing over to a carrier at the wrong place does not make risk pass unless the buyer clearly waives its right to reject. The difference between the CISG and INCOTERMS concerning the place for passage of risk is the same as previously described. Even after the goods have been handed over to the carrier, the seller might retain documents, e. g. to fulfill documentary conditions of a letter of credit issued for its benefit. For example, the seller might retain a bill of lading, the prime example of a document “controlling the disposition of the goods” (Article 67(1), third sentence). Under applicable law, that might mean the seller retains title. The risk however is not associated with title to the goods and the final sentence of Article 67(1) reminds us of that fact. D. Some consequences of applying Article 67(1) Where Article 67(1) governs, the risk passes to the buyer before he must determine and give notice of a lack of conformity under Articles 38 and 39.52 Thus, “if the contract involves carriage”, Article 38(1) the buyer must examine the goods after their arrival at the destination of the transport. Under Article 67(1), risk will generally have passed to the buyer before then. If the goods (or the documents controlling the goods) are lost, destroyed or damaged during transit in such a manner that determining their conformity at the time the risk passed is impossible, the presumption of conforming delivery is to the advantage of the seller, who has transferred control and subsequently also has transferred the risk to the buyer. The buyer has the burden to prove that the goods were non-conforming. If the buyer succeeds, it gets the buyer’s remedies.53 That is however not the case for the buyer who exercises a remedy and who, in doing so, has the non-conforming goods under its control. That is the case where the buyer avoided the contract and is in the process of restitution, triggering obligations of preservation under Article 76(1); or he could be 51

Then again, the use of such a particular indication, if accompanied by a clear reference to the INCOTERMS definitions, obviates any need to call on Article 67. 52 For the situation under ULIS, see Dlle/Neumayer, supra note 1, at 629. 53 Dlle/Neumayer, supra note 1, at 629.

308

Observations on passing of risk

waiting for the seller to deliver a replacement or to cure or repair. See my comments below on Article 70.

VII. Goods sold in transit (Article 68): Cargo afloat A. A history of difficulties The draft Digest indicates that no decisions have actually applied Article 68 on goods sold while in transit. Perhaps the Convention has got the rule right, in conformity with what the commercial world knows and expects. Article 68 differs in important respects from its predecessor, Article 99 ULIS. Neumayer wrote a seminal critique of the ULIS provision. He indicated that there were misunderstandings (and some incompetence) exhibited in the drafting of provision in the 1950’s. He challenged the parallel drawn by delegates to the working groups and conference between the ULIS provision and the INCOTERM CIF (Cost, Insurance, Freight) – under which the risk passes when the goods cross the ship’s rail, irrespective of whether the agreement requires the seller to pay the cost of insurance for the buyer. Article 99 ULIS – governing the purchase of goods while they are in transport – made buyers retroactively liable for risk, from the time goods were handed over to the carrier, even before the contract of sale was concluded. Neumayer explained that this approach was not justified or even technically correct: there was not necessarily any agreement on insurance in this scenario, which could lead to odd situations; and under the ULIS provision the risk was not made to pass at the ship’s rail which made the arrangement potentially more lopsided.54 But it may in fact be wise to relate risk back to the time that goods were loaded onto the carrier in this situation. That approach avoids the difficult task of determining the time when deterioration of the goods occurred while they were in transit. There is also good practical – and legal – support for the approach, because most transit sales are accomplished through the transfer of a bill of lading.55 That document controls title and it offers a record of the outward appearance of the goods when they were received on board the carrier. In many cases, 54 Dlle/Neumayer, “Vertrge
ber schwimmende Ware – Art 99” (1976) at 643 et seq. (647-648 and 653). Risk, it was said, could pass much earlier than the time the goods passed the ship’s rail – namely as soon as the carrier had taken control. 55 Romein, supra note 3, indicates that German law follows the approach of transferring risk upon the handing over of the bill of lading. For historical background about the transfer of property, see Nicholas, supra note 6, at 179. Also see Article 1138 of the French Code Civil for transfer of risk as the corollary to transfer of title; see also Dlle/Neumayer, supra note 1, at 612 ff. Flambouras, supra note 44; Oberman, supra note 19, at n. 120.

309

Johan Erauw

moreover, there is also insurance coverage provided to protect the buyer, which justifies the retroactive transfer of risk. The retroactive passing of risk is generally considered acceptable in those cases where the buyer has insurance. B. The CISG’s two-legged rule CISG restored balance to the rules governing passage of risk for goods sold in transit. Under Article 68 the presumptive rule is that risk passes from the time of conclusion of the contract of sale.56 However, the provision pushes the date for buyer’s assumption of risk back to the time the goods were handed over to the carrier “if the circumstances so indicate”.57 The phrase allows courts to check for insurance coverage that benefits the buyer. If there is such insurance, the buyer is best placed to claim compensation. I note again, that “handing over” to the carrier is not synonymous with passing the ship’s rail; and there is a chance that insurance for transport might not go back far enough in time to cover storage with the carrier, handling or stowage.

C. Comparison with INCOTERMS: If identification of the goods in transit is feasible Does Article 68 require that goods be identified to the particular contract of sale before risk passes? Articles 67 and 69 explicitly require identification, and the omission of such a requirement from Article 68 is notable. Because we often see bulk shipments of fungible commodities, in high seas trade, it must be determined if identification is necessary for risk to pass.58 A German scholar states that current opinion assumes that the identification requirement also applies to sale of goods, in transit, but she is satisfied the requirement is met for undifferentiated fungible goods that are sold out of a bulk transport.59 She compares the situation with the situation described in Article 31(b) – unidentified goods drawn from a stock. She sees the handing over of the bill of lading as a mode of placing the bulk goods that are to be sold at the disposal of buyer at the place where they are destined, thus effectuating identification.60 56 Of course, the exact time of conclusion of an agreement may be hard to determine, and so can the moment the casualty occurred (or when the damage became inevitable). For the rule to apply properly, the two times have to be measured precisely. 57 The expression is not precise and is criticized by Flambouras, supra note 44; see also Oberman, supra note 19, at n. 115 et seq. 58 Flambouras, supra note 44, calls CISG unclear on this point. 59 Romein, supra note 3. 60 Id. Similarly appeased by the provision of the bill of lading is N.G. Oberman, supra note 19

310

Observations on passing of risk

D. A rebuttable presumption of retroactive risk transfer The second leg of the rule of Article 68, in effect, offers a presumptive rule (that risk has passed retroactively) which allows a court to put the burden of proof on the buyer. The latter can reverse the risk, by proving that the loss or damage arose before the sales contract was concluded, and that circumstances indicate that putting such risk on the buyer’s shoulders is inequitable – specifically because the buyer is uninsured and is not the cause of casualty to the goods.61 He thus asks for the first leg of Article 68 to apply. Furthermore, in conjunction with the final sentence in Article 68, the buyer may succeed in demonstrating that the seller ought to have known of the existence of damage before he sold. E. Risk remains on seller for fault The last sentence of Article 68 indicates that when the seller knew or ought to have known, at the time of a sale during transit, that the good had been lost or damaged (seller’s mala fide or negligence being for the buyer to prove), and did not disclose this, the loss or damage remains the seller’s liability. In this way the loss of uninsured goods or of the uninsured portion thereof is on the seller who was negligent or acted in bad faith. Article 68 places such risk on the seller for the whole transit, so that in this scenario too, there is no shifting or sharing of the burden of damage according to its occurrence or increase before or after the moment of sale.62

VIII. Article 69: The residual rule on passing of risk A. Sale with no carriage: In general Article 69 covers sales not “involving carriage” and not relating to goods sold in transit; it is thus the residual rule for passage of risk. It does not in practice cover the standard international case. It seems to cover scenarios more associated with domestic sales. The analysis of situations covered by Article 69 may be simpler, for carriage is not involved; the value of the provision, however, may be greater, because the parties are less prone to make their own arrangements in the kinds of situations covered by Article 69.

n. 120. Article 100 ULIS made a clear reference to Article 19(3) ULIS which allowed as an alternative mode of identification the handing over of documents specifying the goods. 61 Dlle/Neumayer, supra note 54, at 652. 62 Under article 100 ULIS, the rule related back only until the sending of the documents whose transfer was part of the sale; the CISG rule is stronger.

311

Johan Erauw

The only distinction made in Article 69, does not turn on the parties’ agreement or practices or on usage of trade: the distinction focuses on the place where the buyer is to “take over” the goods: – at a place of business of the seller (which is the result under the default rule of Article 31(c) if the parties’ agreement does not specify a place of delivery), producing a situation governed by Article 69(1), or – at a place that is not “a place of business of the seller” producing a situation governed by 69(2). Under Article 69(1), risk passes when the buyer either takes over control of the goods or the buyer breaches by failing to take delivery while the goods were at his disposal. If Article 69(2) applies, risk passes when delivery is due and the buyer is aware that the goods are at his disposal. B. Passing of risk in comparative law At this point one could compare a number of the approaches of domestic rules on passage of risk. Several systems exist and they often lead to very similar results. Risk can follow ownership in systems where ownership passes at agreement.63 Alternatively, risk can be placed with the buyer, even though title only passes to the buyer at the time of taking over the goods.64 Finally, risk can follow ownership in systems where ownership passes late – indeed at the time of taking over.65 This is what ULIS adopted and the CISG, in the main, maintains. As the typical international sale is over a distance, the Convention seeks to pass the risk when the goods effectively leave the 63 ”Res perit domino”; reflecting the influence of the Code Civil. This approach is too disadvantageous for the buyer. R. Dekkers, a great civilist and specialist of Roman law, said that article 1138 Code civil was probably based on historical error (Handboek voor burgerlijk recht, II, 1971, at 99). In classical Rome, there was no insurance and sellers needed incentive to deliver to risky, out-of-the-way places. Risk was therefore shifted to the buyer at an earlier time than when title and control passed, namely at the time of agreement, thus forcing the faroff buyer to insure against loss and making him pay even when delivery failed. That explains how property and risk were disassociated. Later there was no longer this same pressing social need to advantage the seller. See historical references in Kritzer, supra note 30. See also Dalhuizen, supra note 36, at 228-32. 64 ”Periculum est emptoris” reflecting Roman law, the law of Switzerland and the Netherlands, and the commercial law of Spain. See Dlle/Neumayer, supra note 1, at 601-02. 65 This is the approach in Germany, the Scandinavian countries and (in part) Austria. Ernst Rabel, schooled in Germany, pushed this principle in ULIS in 1939. Transfer of property interests is beyond the scope of the CISG (Article 4(b)), but passing of risk is addressed in the Convention, which thus in effect disassociated risk from the property right.

312

Observations on passing of risk

control of the seller. The focus is on actions and facts, and not on legal abstractions like title. In the international setting, title passes in accordance with the law applicable to property. There would be no uniform results if the passing of risk were linked to the passing of title. C. Chronological analysis of the CISG rules on passing of risk under Article 69 (a) When the goods are taken over by the buyer at the seller’s place of business (Article 69(1), first part), risk passes even if this occurs before the date by which delivery is due. (b) In other cases the key element for passing of risk is the goods being at the disposal of buyer (Article 69(2) and the second part of Article 69(1)). That means they must be identified to the contract (Article 69(3)). 1. If the buyer is to take over the goods at the seller’s place of business but the buyer delays such taking over (Article 69(1) second part), risk passes when buyer is in breach for not taking delivery, provided the goods have been placed at the buyer’s disposal. The provision does not explicitly require the seller to notify the buyer that the goods are available. But as Article 67(2) makes clear, identification of the goods often requires communication or notice. Furthermore the agreement between the parties may require such notice. When the parties did not agree on the delivery at a particular place other than the seller’s place of business, the seller must place them at the disposal of the buyer – by virtue of Article 31(c) – at the seller’s place of business as it existed at the time of conclusion of the contract. 2. If the buyer is to take over the goods at a location other than a place of business of the seller (e. g., where the seller is to transport the goods to the buyer’s plant), risk passes when “delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place” (Article 69(2)). The risk shifts more readily when the place of delivery is not at a place of business of the seller. There are several reasons for this. First, the buyer knows the place. Secondly, it is likely that the buyer was notified or otherwise became aware of the availability of the goods.66 Thus under Article 69(2) the risk shifts independently of whether the buyer has breached it’s obligation to take over the goods.67 In my view, Article 69(2) covers some of the situations 66

Roth, supra note 39, at 295. Neumayer & Ming, supra note 37, at 447; P. Schlechtriem, Internationales UN-Kaufrecht: Ein Studien- und Erluterungsbuch zum bereinkommen der Vereinten Nationen
ber der Vertrge
ber den internationalen Warenkauf (CISG) (1996) at 130; Degroote, supra note 1, at 294. 67

313

Johan Erauw

contemplated by Article 31(b) – i. e., when the parties have not agreed on a place of delivery of specific goods, goods to be drawn from a specific stock, or goods to be manufactured or produced, and when the contract was concluded the parties knew that the goods were located at (or were to be manufactured or produced at) a location that was not a place of business of the seller.

IX. Consequences of the passing of risk (Article 66) A. Buyer must pay the price despite loss or damage to the goods: Price-risk and performance-risk I have, to this point, postponed mentioning the first article (Article 66) of Chapter IV, Part III of the CISG. Article 66 describes the effect if risk passes, as detailed in the three articles that follow it. It emphasizes that, once risk has passed, the buyer has the price risk. The article, in a sense, repeats or reaffirms Article 53, which imposes the payment obligation on the buyer. The buyer acquires the price-risk at the moment the seller is divested of the risk of loss.68 Up until that point, in order to assure conforming delivery the seller must procure the goods, must preserve them, repair them if necessary and duly bring them to the point of delivery; and if they are lost or undergo accidental damage during this process, he must re-supply them because his obligation remains. If the risk is still with the seller and loss occurs due to an impediment not within the seller’s control (force majeure), then the loss is still the seller’s. But the risk of being liable for the buyer’s damages is alleviated by Article 79. If loss or damage to goods occurs after the parties have performed their obligations and while the goods are under the control of the buyer, the rule that the buyer loses the value is self-evident. This reflects the economic risk after purchase, a matter beyond the scope of the Convention. The rule of Article 66 is contractual by nature and relates to the performance of the buyer’s obligation to pay (Article 53). The payment obligation applies subject to Article 58, which establishes the time of payment and which, for example, usually permits a buyer to first examine the goods (Article 58(3)).69 Once risk of loss has passed, the buyer has the price-risk meaning the buyer must pay even though the goods in his possession are damaged or lost. Article 66 so states, but it also introduces the possibility of passing the performance-risk back to the seller if the loss or damage is due to the seller’s “act or omission”. Thus the seller may find its obligations to care, to repair

68 69

314

Enderlein & Maskow, supra note 30, at 259-60. Oberman, supra note 19, at n. 104.

Observations on passing of risk

and eventually to re-deliver, all reborn again – with no clear time-limit and under a vague standard. B. The text of Article 66 requires clarification Article 96 of the ULIS, which with only minor change became Article 66 CISG, was criticized for only confirming the evident effect of the rule of risk transfer.70 In the process of preparing CISG, several countries asked for this rule to be clarified, but they were not successful. That part of the CISG provision that makes the seller bear the risk of loss or damage due to its “act or omission” has been called “an unfortunate rule”.71 Article 66 also covers damage or loss occurring after the passing of risk, but flowing from old defects that existed before the passing of the risk (see also, in this regard Article 36(2)). Article 66 indeed contemplates that there may have been a breach by the seller. The rules on non-conforming delivery specify the consequences of such a breach. Article 66 only reminds us that the buyer must pay the price. The provision explains that the buyer enjoys no automatic exceptions and finds no automatic liberation from his payment obligation because of loss or damage occurring after risk of loss has passed. It could be held to influence buyer’s possible use of the remedy of Article 71(1) and its exceptio non adimpleti contractus (recognized in Article 80). If the seller has committed a fundamental breach, this could be seen as crass punishment for the buyer. Article 66 looks like it introduces a principle of “pay first, discuss later”. Realistically speaking, however, it will not work where the buyer has a defense to a demand for full or partial payment from the seller. In such a setting the rule simply imposes the burden of proof regarding his claims on the buyer. C. Risk can fall back to the seller: Due to the seller There is, furthermore, mitigation to the strictness of the rule of Article 66. This relief comes not from Article 70, because that deals with the effect of a seller’s fundamental breach – a matter beyond the scope of Article 66. Rather, the relief comes from the final words of Article 66, providing that the buyer is discharged from its price obligation in case “the loss or damage is due to an act or omission of the seller”. The first appearance of that phrase in the ULIS had brought surprise. It introduced something like a possible right of

70

Dlle/Neumayer, supra note 1, at 605. But the provision has also been characterized as useful because it defines the concept of risk as the risk to have to pay the price. Bolle, supra note 10, at 270. 71 Enderlein & Maskow, supra note 30, at 261-63.

315

Johan Erauw

set-off for a tort the seller may have committed.72 That would be odd indeed under the Convention, because both tort and set-off fall outside the scope of CISG. But the vague wording seems to introduce the fault concept into the Convention’s treatment of mutual contractual obligations.73 The final CISG text refers only to the seller’s own actions, and mentions the seller’s “omission” suggesting that the CISG exception merely covers – with quaint phrasing – the possibility that a seller’s breach of contract has caused the particular damage or this loss. When the exception applies, presumably, the buyer’s obligation to pay the whole price or to pay part of it is postponed or even waived, and the obligations of the seller are reborn in part or entirely. It is conceivable, in this situation, that neither of the parties carries the risk. But taking a dynamic view of the “passing” of risk (the title of Chapter IV), it looks more logical to decide that risk stayed put with the seller. If the seller were to cure or to replace the lost or damaged goods with substitute goods then the obligation to pay the price would be back on the buyer. I presume too, that when the risk returns to the seller, it gets rights commensurate with the type of relief the buyer has appealed for under the odd terms of Article 66. The exception in the last words in Article 66 can be interpreted broadly or narrowly. The drafting literally allows the buyer to suspend or withhold payment for a variety of reasons connected to the behavior of the seller. In any case it is a disturbing exception. It will be especially interesting to see whether the exception will be applied if the parties choose to use INCOTERMS – where the effect would again be to offer an equitable exception to the passing of price-risk.

X. Remedies for fundamental breach apply after risk has passed (Article 70) As a rule, the conformity of delivered goods must be judged at the time of the passing of the risk.74 This was neatly formulated in Article 97(2) ULIS, the remote antecedent of Article 70. Under the CISG, conformity is governed by Articles 35 and 36. Under the latter provision, conformity is sometimes determined as of the passing of risk (Article 36(1)); in other cases, however,

72

The Article 96 ULIS (1964) version said: “due to the act of the seller or of some other person for whose conduct the seller is responsible” – phrasing that truly seemed to raise the question of tort compensation. 73 Seller’s omission could perhaps be justified through an appeal to Article 79 (exemption for force majeure). 74 Comisin pare la Proteccin del Comercio Exterior de Mxico (Compromex), Mexico, 29 April 1996.

316

Observations on passing of risk

defects occurring after that stage will render goods non-conforming under the rule of Article 36(2). What effect do Articles 67 to 69 (which determine how risk for loss or damage to the goods passes) have on the buyer’s remedies in cases of breach of contract by seller?75 Article 70 declares that Articles 67-69 do not impair the remedies for seller’s fundamental breach. Thus, CISG Article 70 allows the buyer to call on the remedies available in case seller’s breach was fundamental. The buyer’s remedies for fundamental breach with respect to delivered goods are: requiring delivery of substitute goods (Article 46(2)), asking repair (Article 46(3)), reducing the price (Article 50), avoiding the contract (Article 49(1)(a)) and claiming damages (Articles 74-77). If a buyer either avoids the contract or demands substitute goods, the original delivered goods are returned to the seller (Articles 81(2) and 82), hence the risk also goes back to the seller.76 Given the consequences on the original delivery if a buyer avoids the contract or successfully demands substitute goods, one understands the drastic effects of these remedies. The risk goes back to the seller retroactively. And depending on the remedy used, that might for example mean: a substitute good is due or the contract is avoided because the original delivery was non-conforming – but the first delivery has been lost or destroyed so that only damaged goods (or perhaps no goods at all) are returned to the seller. The CISG conditions the availability of the remedies of avoidance and demanding substitute goods, on meeting the requirements of Article 82.77 But a buyer who has lost the right to use those two remedies under Article 82 still retains his right for all other remedies (Article 83). For example, damages may be requested. And a reduction of purchase price pursuant to Article 50, based on proven breach, may still be imposed, even after the goods have been destroyed. These are examples of claims by the buyer who 75 After risk has passed according to the rules of articles 67, 68 and 69, loss or damage could be caused by the seller’s breach, but also by some other cause, including force majeure. Even if the risk passed because of a breach by the buyer, or the buyer committed a breach after the risk passed the buyer may still be entitled to a remedy against the seller. 76 Henry D. Gabriel, Practitioner’s Guide to the CISG and UCC: A Comparison of the Substantive Law of the United Nations Convention on Contracts for the International Sale of Goods (CISG) with the Uniform Commercial Code (UCC) 216 (1994). 77 Dlle/Neumayer, supra note 1, at 624-25.

317

Johan Erauw

still has the obligation to pay the price; such claims result in a set-off from the price, as was recognized in a German decision.78 When the buyer holds goods in his possession while waiting for substitute goods or after avoiding the contract, the buyer does not bear risk, but does have an obligation to preserve the goods pursuant to Articles 86-88. The risk also does not pass to a buyer to whom the seller has communicated that he will remedy a non-conforming delivery of documents or of goods tendered before the date of maturity (Articles 34 and 37). 78

See Oberlandesgericht D
sseldorf, Germany, 11 July 1966, CLOUT case No 169. Set-off is not governed by the CISG and falls under the domestic law applicable to the contract. Erauw, supra note 23, at 46; Schlechtriem, supra note 67, at 28.

318

Beyond the Digest: Part III (Articles 25-34, 45-52) Ulrich Magnus* I. Introduction The CISG is the first of UNCITRAL’s children which its originator really cares for after having created it. Not only has UNCITRAL built up the CLOUT system,1 which provides systematic information on the international court practice on CISG, but also, for the first time UNCITRAL has prepared and published an official commentary on how the legal text has been applied in practice and should therefore be understood. This “CISG Digest”, a draft version of which accompanies this book, will probably further add to the global reception of the CISG since it will considerably reduce the uncertainties which the pure text not only of the CISG but of any legislative instrument inevitably poses. Hopefully the CISG Digest can and will serve as a model for similar initiatives for other UNCITRAL conventions and model acts. At the Pittsburgh conference and in this book I am invited to go “beyond the Digest”. This mandate could be understood in rather different ways. It could mean pursuing problems of interpretation of the CISG which have not yet been addressed in the draft Digest and have not aroused any court practice but which nonetheless merit mentioning, or which, on the other hand, have been incorrectly decided by digested decisions. In this sense to go beyond the Digest would be a critique of the Digest and the method used by the Digest, which merely reports the existing case material irrespective of its correctness or the respective weight of the decisions (a county court decision counts almost as much as a Supreme Court decision). “Beyond the Digest” could, however, also mean exploring the hidden and dangerous question of whether the review of court practice reveals any shortcomings of the CISG so that the Convention should be amended in some respect. This would mean a critique of the CISG itself, though it might *

Professor of Law, University of Hamburg, Germany; Judge, Court of Appeal of Hamburg. ”Case Law on UNCITRAL Texts”, a valuable data bank which contains English abstracts of national court decisions on CISG (and some other UNCITRAL texts), available on line at http://www.uncitral.org. 1

319

Ulrich Magnus

appear as hubris even to think of amending the CISG – having in mind that the CISG is the fruit of nearly a century’s efforts of leading lawyers of almost all nations.2 But as time goes by even such a time-honoured monument may need adaptation to new demands. For my part of the “Beyond the Digest” project I will therefore combine both understandings as far as possible.

II. Beyond Articles 25-34 and 45-52 of the Draft Digest: An overview My part of the “Beyond the Digest” project covers Articles 25-34 and 45-52. On the one hand these articles contain some general definitions relevant for the whole of Part III (the substantive sales law) of the Convention. On the other hand they prescribe the main obligations of the seller – except his duty to deliver conforming goods3 – and the remedies to which the buyer is entitled when the seller has violated his duties. The following discussion starts with some questions and observations concerning the general definitions, in particular the notion of fundamental breach. Then some critical points of the provisions on the seller’s obligations and the buyer’s remedies are addressed. It is, however, not intended to discuss in detail each provision which belongs to ‘my’ part of the “Beyond the Digest” project.

III. The notion of fundamental breach The meaning of fundamental breach is a key issue of the Convention.4 It is addressed in several provisions of the CISG5 and, in particular, it draws the dividing line between cases where a contract can be terminated6 and cases where only other remedies which are less incisive (like damages7 or price 2 It should be remembered that the efforts to unify the law for international sales started as early as 1929, when UNIDROIT authorized Ernst Rabel to prepare a first draft of a uniform sales law. 3 This duty is dealt with in arts. 35-44. 4 For recent discussions of the notion of fundamental breach in relation to CISG see Lurger, Die wesentliche Vertragsverletzung nach Article 25 CISG, Internationales Handelsrecht (IHR) 2001, 91 ss. with many references; Trommler, Die Auslegung des Begriffs “wesentliche Vertragsverletzung” in Article 25 CISG (2002). See also Andrew Babiak, Defining ‘‘Fundamental Breach’’ under the United Nations Convention on Contracts for the International Sale of Goods, 6 Temp. Int. Comp. L.J. 113 (1992). 5 See CISG arts. 49(1)(a); 51(2); 64(1)(a); 72(1); 73(1) and (2). Specific performance by way of replacement presupposes that the non-conformity of the delivered goods constitutes a fundamental breach. See CISG art. 46(2). 6 See the Articles cited in the preceding footnote. 7 Damages as a remedy require only a violation of a contractual duty of whatever kind; they

320

Beyond the Digest: Part III (Articles 25-34, 45-52)

reduction) are available.8 The relevant provision defining fundamental breach of contract in the sense of the Convention is Article 25. Four questions in connection with this provision shall be answered here: (1) Is the definition precise enough? (2) Can a reparable non-conformity of goods constitute a fundamental breach, and if so, in what circumstances? (3) At what point in time must the party in breach have foreseen the detrimental consequences of the breach? (4) Does the provision allocate the burden of proof? A. Is the definition precise enough? Article 25 stamps a breach as fundamental: if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. The language of the provision is not easy to understand. One reason is that the article employs many vague legal terms like “fundamental”, “substantial”, and “reasonable”. Even “detriment” has no precise and clear meaning, but is capable of covering a variety of different meanings. In particular the term can be understood in a more “subjective” or more “objective” way. Another reason for difficulties with Article 25 is that the core idea is expressed in complicated and to some extent redundant language. In fact, the central idea of the provision is simple and convincing: in order to be fundamental and to constitute grounds for the termination of the contractual bond the breach must on the one hand totally or mainly (“substantially”) eliminate the benefit the aggrieved party could expect from the contract. The aggrieved party must have lost her interest in the bargain. On the other hand the party in breach or a reasonable party in its place must have foreseen that the breach would result in the loss of the bargain’s benefit. It seems common ground now that an objective yardstick has to be applied to both requirements.9 However, this should not be misunderstood. It means, to are expressly foreseen by CISG arts. 45(1)(b); 47(2) (sentence 2); 48(1) (sentence 2); 61(1)(b); 63(2) (sentence 2). 8 See CISG art. 50. 9 See Michael Will, Article 25 in Commentary on the International Sales Law: The 1980 Vienna Sales Convention ¶ 2. 1. 2. 1. (Cesare Massimo Bianca & Michael Joachim Bonell eds., 1987); Heuz, La vente internationale de marchandises. Droit uniforme (2d ed. 2000) no. 399; Karollus, UN-Kaufrecht. Eine systematische Darstellung f
r Studium und Praxis (1991) 91; Lurger (supra n. 4) 91; Schlechtriem(-Schlechtriem), Kommentar zum

321

Ulrich Magnus

put it positively, that the benefit of the contract depends in the first place on the terms of the contract and the allocation of risks as agreed upon by the parties. It is not the objective weight of the breach as such that automatically counts as fundamental but the weight the parties have given it.10 If nothing specific has been contracted for, then a fundamental breach occurs only if the aggrieved party was deprived of what a reasonable person in the same situation – the Convention’s general standard where more specific commitments are lacking11 – would have expected to be the normal benefit of the contract. Problems due to the vagueness of the definition in Article 25 may also be indicated by the fact that many court decisions12 deal with different aspects of the notion of fundamental breach. However, despite the problems with the language of the provision I am not of the opinion that the wording of Article 25 CISG necessarily needs amendment. The border line between contracts which – due to their breach – should be allowed to be terminated, and those which should be maintained, cannot be formulated except in a flexible way. And that means some necessary vagueness in order to cover a great variety of different factual situations.13 Moreover, the relatively high number of court decisions concerning Article 25 is to some extent explained by the fact that the notion of fundamental breach plays a role in a number of Convention provisions.14 It also seems clear that Article 25 can be given more precise meaning only if courts delineate certain typical situations of fundamental and non-fundamental breach. The courts can thereby formulate and develop specific subrules for those groups of cases.15 To a considerable extent this has already Einheitlichen UN-Kaufrecht – CISG (3d ed. 2000) Article 25 no. 9; Schlechtriem, internationales UN-Kaufrecht (2d ed. 2003) no. 111; von Staudinger(-Magnus), Kommentar zum B
rgerlichen Gesetzbuch mit Einf
hrungsgesetz und Nebengesetzen. Wiener UN-Kaufrecht (CISG) (new ed. 1999) Article 25 no. 13; Witz/Salger/Lorenz, International Einheitliches Kaufrecht. Praktiker-Kommentar und Vertragsgestaltung zum CISG (2000) Article 25 no. 7. 10 Compare Achilles, Kommentar zum UN-Kaufrechts
bereinkommen (CISG) (2000) Article 25 no. 3; Heuz, supra note 9, at 399; Schlechtriem, Internationales UN-Kaufrecht, supra note 9, at 111; von Staudinger(-Magnus), supra note 9, at art. 25 no. 13; Witz/Salger/ Lorenz, supra note 9, at art. 25 no. 7. 11 See CISG art. 8(2), which extends this objective standard to statements and “other conduct of a party”. 12 Compare the decisions cited at draft UNCITRAL Digest art. 25. 13 See also John O. Honnold, Uniform Law for International Sales § 181. 2 (3d ed. 1999). 14 See supra note 5. 15 Compare the various groups of cases cited at draft UNCITRAL Digest art. 25.

322

Beyond the Digest: Part III (Articles 25-34, 45-52)

been achieved, and this also explains the rather large number of court decisions on Article 25. B. Fundamental breach in cases of reparable non-conformity of the goods? Among the various types of breaches for which it has already been decided whether or not they qualify as fundamental, the decision as to one type of case is still doubtful. It is still not quite clear whether the delivery of seriously defective goods constitutes a fundamental breach of contract if the nonconformity can be repaired. When the seller offers and effects speedy and full repair, courts tend to deny there was a fundamental breach.16 It is, however, open to debate whether in every case of delivery of seriously defective but reparable goods the buyer must first give the seller the chance to cure the defect – by repair or replacement – or whether the buyer can immediately declare the contract avoided. To give an example: flowers which ought to bloom the whole summer do so only for two months and then stop blooming.17 Is the buyer now entitled to avoid the contract at once, or must he first give the seller the chance to deliver new blooming flowers? Article 48 (which gives the seller a right to cure) and Article 49 (which gives the buyer a right to avoid when a breach is fundamental) provide no full and clear answer. Although Article 48 applies “(s)ubject to article 49”, it remains open whether the delivery of seriously defective but reparable goods amounts to a fundamental breach – confronting us with a potentially little vicious circle: no right to cure if the breach is fundamental, but no fundamental breach if the defect is curable. The answer should be that, in these cases of serious but easily and quickly reparable defects, the seller should have a second chance unless specific interests of the buyer require otherwise.18 Such an interest could be that the buyer needs the goods at a certain date or that he could not be expected to trust the seller any more, for example when the seller delivered goods (e. g.,

16 See, e. g., Cours d’Appel de Grenoble, France, 26 April 1995, CLOUT case No. 152; Oberlandesgericht Koblenz, Germany, 31 January 1997, CLOUT case No. 282. 17 These were the facts in Oberlandesgericht Innsbruck, Switzerland, 1 July 1994, CLOUT case No. 107 (Schweizerische Zeitschrift fu¨r Internationales und Europa¨isches Recht 1996, 51). 18 Accord, Herbert Bernstein & Joseph Lookofsky, Understanding the CISG in Europe § 6-9 (2d ed., 2003); Honnold, supra note 13, at § 184 (see also the example given there) and § 296; Schlechtriem(-Huber), supra note 9, at art. 48 no. 23; Staudinger (-Magnus), supra note 9, at art. 48 no. 30; most recently: Magnus, Aufhebungsrecht des Kufers und Nacherf
llungsrecht des Verkufers im UN-Kaufrecht, in: Festschrift Schlechtriem 599 ss. (2003).

323

Ulrich Magnus

food or drink) which he produced in violation of criminal statutes,19 or which were seriously dangerous (cattle with contagious diseases). C. Point of time at which consequences of breach must have been foreseen Article 25 does not state the point of time at which the party in breach must have foreseen the detrimental effects of the breach in order for the breach to be fundamental.20 Consequently the question which was left undecided at the Diplomatic Conference in Vienna21 is disputed.22 Either the time of conclusion of the contract is regarded as the relevant time,23 or foresight at any time – even after conclusion of contract – may suffice.24 Thus far the question has aroused little case law.25 There the view is taken, also supported here, that in principle it must be the time of conclusion of the contract which is relevant. Since the contractual risk is undertaken at that time and under the circumstances then foreseeable, the party who later breaches the contract should generally be entitled to rely on the fact that the original risk had not changed. Statements made and information given by the other party after that time, one-sided as they are, cannot and should not change the allocation of risk as originally agreed upon. The same principle is approved by Article 35(2)(b), which also shows that unilateral extra wishes 19 See Cour de Cassation, France, 23 January 1996, CLOUT case No. 150 (also available at Dalloz 1996.334) (artificially sugared wine contrary to statute = fundamental breach); Landgericht Trier, Germany, 12 October 1995, CLOUT case No. 170 (Neue Juristische Wochenschrift – Rechtsprechungs-Report 1996, 564) (artificially sugared wine = fundamental breach). 20 As to the discussion of the question, compare Honnold, supra note 13, at § 183; Honsell(-Karollus), Kommentar zum UN-Kaufrecht (1997) Article 25 no. 26 ss; Neumayer/ Ming, Convention de Vienne sur les contrats de vente internationale de marchandises. Commentaire (1993) Article 25 no. 8 (all with numerous references). 21 As to the history of this part of Article 25 see Honnold, supra note 13, at § 183. 22 The differing opinions are recorded in detail by Honsell(-Karollus), supra note 20, at art. 25 no. 26. 23 See, e. g., Oberlandesgericht D
sseldorf, Germany, 24 April 1997, CLOUT case No. 275; Achilles, supra note 10, at art. 25 no. 14; Herber/Czerwenka, Internationales Kaufrecht – UN-bereinkommen
ber Vertrge
ber den internationalen Warenkauf (1991) Article 25 no. 9; Heuz (supra n. 9) no. 400; Schlechtriem(-Schlechtriem), supra note 9, at art. 25 no. 15; Schlechtriem, Internationales UN-Kaufrecht, supra note 9, at no. 112; Staudinger(-Magnus), supra note 9, at art. 25 no. 19; Witz/Salger/Lorenz, supra note 9, at art. 25 no. 14. 24 See, e. g., Will, supra note 9, at art. 25 no. 2. 2. 2. 2. 5; Honnold, supra note 13, at § 183; Honsell(-Karollus), supra note 20, at art. 25 no. 27 s.; Neumayer/Ming, supra note 20, at art. 25 no. 8. 25 See Oberlandesgericht D
sseldorf, Germany, 24 April 1997, CLOUT case No. 275.

324

Beyond the Digest: Part III (Articles 25-34, 45-52)

of the buyer must be disclosed when the contract is concluded. However, the obligation of good faith (Article 7(1)) may have an overriding effect where exceptional circumstances of the case so require.26 But in general, in order to change the effect which a breach exerts on the existence of the contract, a new agreement between the parties is necessary. D. Burden of proof Article 25 CISG does not expressly address the burden of proof, but its wording and even more so its legislative history indicate rather clearly that the formulation “unless the party in breach...” was meant to shift the burden of proof for the fact that the effects of a breach were unforeseeable to the shoulders of the party in breach. This is clear because, in order to achieve that allocation of burden of proof, the prior ambiguous formulation was changed.27 Article 25 is therefore another example – besides, e. g., Article 79 – evidencing that the drafters of the Convention intended on several occasions to regulate the issue of burden of proof.28

IV. Is Article 28 necessary? A further provision of general application for Part III of the Convention is Article 28, which concerns the issue of specific performance. Specific performance – the right to require delivery in kind – is a remedy normally

26 Honnold, supra note 13, at § 183, gives an example where a seller refuses to deliver rice in new bags after the buyer – after the conclusion of the contract – had asked him to do so, whereas the seller intended to deliver in used bags but could easily deliver also in new bags at extra cost (which the buyer offered to bear). The buyer needed new bags for a favorable resale. It is doubtful whether the buyer should be entitled here to terminate the contract because of a fundamental breach when the seller delivers in used bags. This is particularly doubtful as Article 35(2)(b) states that extra requirements must be disclosed at the conclusion of the contract. In my opinion the good faith principle requires more extreme cases to constitute a fundamental breach – for instance, that the buyer must stop production and faces grave losses if the seller does not fulfill the buyer’s later disclosed extra wishes (again only if the seller could easily fulfill these wishes and if the buyer offers to bear any extra cost). 27 See Documentary History of the Uniform Law for International Sales 324 (John O. Honnold ed., 1989); Will, supra note 9, at art. 25, ¶ 2. 2. 1; Honnold, supra note 13, at § 183. 28 For a general discussion of the issue of burden of proof, see infra Section XI of this chapter.

325

Ulrich Magnus

available in Civil Law countries,29 but less frequently employed in Common Law countries where it is granted as a rare exception, for instance where the contracted goods are unique.30 Article 28 has the function of bridging this gap between Civil and Common Law.31 The article therefore provides that courts in countries which would not grant specific performance under domestic law – like the Common Law countries – are not forced to give this redress under the Convention either. Many questions concerning the interpretation of the provision are, however, disputed and unsettled.32 Despite the deep theoretical difference between the two approaches to specific performance, the article has not gained much practical importance. It has attracted almost no court practice – only one US case has thus far been reported where on a preliminary procedural level it was held that the UCC allowed for specific performance when the claimant faced difficulties in concluding a cover purchase.33 It could therefore be questioned whether Article 28 was and still is necessary or should be deleted. The provision is a good example of one of those theoretically interesting attempts to deal with irreconcilable conceptual problems which in practice prove unimportant. But since the provision does no harm it seems unnecessary to change it. Equally unnecessary appears extended discussion of it.

V. Articles 29 and 30 and electronic communication or documents The Convention was drafted and finalised when internet, computer, and electronic communication did not even exist as words. Consequently, none of the provisions of the Convention mentions these new communication techniques.34 Nor have court decisions thus far decided the question of whether or not the new techniques are covered by the Convention’s 29

See, e. g., for France: Article 1603, 1610 Code civil; for Germany: § 433 para. 1 B
rgerliches Gesetzbuch (Civil Code – BGB). 30 For Great Britain see, e. g., Michael Bridge, The Sale of Goods 531 ff (1997); for the United States, see § 2-716(1) Uniform Commercial Code (UCC) (specific performance is allowed “where the goods are unique or in other proper circumstances”). 31 See Rabel, Begr
ndung zum Entwurf von 1935 in RabelsZ 9(1935) 69. 32 See in particular Schlechtriem(-Huber), supra note 9, at art. 28 no. 12 ss.; Staudinger (-Magnus), supra note 9, at art. 28 no. 6 ss. 33 U.S. District Court for the Northern District of Illinois, United States, 7 December 1999, CLOUT case No. 417 (Magellan Int’l Co. v. Salzgitter Handel GmbH, 76 F. Supp. 2d 919, English abstract also available in UNILEX at www.unilex.info). 34 The general provisions on form (of the contract and of communications) are CISG arts. 11, 12, 13 and 29.

326

Beyond the Digest: Part III (Articles 25-34, 45-52)

provisions concerning form requirements.35 But such cases will come for decision. Therefore, it must be answered in relation to the CISG provisions relevant here (namely Articles 29, 30, and 34) whether the new communication forms can be regulated by the Convention, whether the Convention should be amended to address them explicitly, or whether the question should be left to the applicable national law. It is strongly advocated here that the new communication techniques can and should be regarded as being included wherever the Convention refers to writing (as, prominently, in Article 13, but also in Article 29 and other provisions)36 or to documents (as in Article 30, 34, 57(b) and 58). The reason for this solution is simple: the CISG’s general definition of “writing” (Article 13)37 is formulated in an open, non-exhaustive way.38 It therefore leaves room for addition by analogy. Thus, when the fax became a much used way of communication it was regarded as being covered by the Convention’s definition of “writing”.39 Today, e-mail has become more and more the regular form of communication and has more or less replaced typed letters or other forms of written communication. In essence, e-mail is nothing other than the immediate transmission of a written declaration. An e-mail message can probably be more easily forged than a hand-written signature, but that concerns only its value as evidence. At any rate, the Convention does not necessarily require that a written communication must be signed by

35

The draft Digest concerning the form provisions, supra note 34, reveals thus far no case law with respect to electronic communication is available. In particular, it is still undecided whether Article 13 is capable of covering e-mail as an equivalent to writing. Supporting the view that e-mail is covered, see, e. g., Bernstein & Lookofsky, supra note 18, at § 3-11; Ferrari, Einige kurze Anmerkungen zur Anwendbarkeit des UN-Kaufrechts beim Vertragsschluss
ber das Internet; The European Legal Forum 2000/01, 301 (305); Honnold, supra note 13, at § 130; Schlechtriem, Internationales UN-Kaufrecht, supra note 9, at no. 68 (though with the qualification that the e-mail could be printed); Ulrich G. Schroeter, I