Go to Database Directory || Go to Bibliography

Reproduced with the permission of Oceana Publications. [*]

     -  CISG table of contents
     -  Table of contents to Limitation Convention

CONTENTS
Table of abbreviations and of laws and legal documents quoted in an abbreviated version
Explanation of abbreviated bibliographical references
	PAGINATION OF OCEANA        PRINTED TEXT
QUICK TABLE OF CONTENTS
Preface	. . . . . . . . . . . . . . .     1
A. Commentary on the CISG
-   Preamble	. . . . . . . . . . . . . . .     19
-   Part I: Sphere of application and general provisions	. . . . . . . . . . . . . . .     25
-   Part II: Formation of the contract	. . . . . . . . . . . . . . .     82
-   Part III: Sale of goods	. . . . . . . . . . . . . . .     111
-   Part IV: Final provisions	. . . . . . . . . . . . . . .     367
B. Commentary on the Limitations Convention	. . . . . . . . . . . . . . .     393
DETAILED TABLE OF CONTENTS
Preface
1.  The need for the unification of law and the genesis of the United Nations Convention on Contracts for the International Sale of Goods and of the Convention on the Limitation Period in International Sale of Goods 1.1. The need for and problems involved in the        unification of law 1.2. On the genesis of the Conventions 1.3. Purpose of the Commentary	. . . . . . . . . . . . . . .     1
2.  General problems of the CISG
2.1. Convention instead of uniform laws	. . . . . . . . . . . . . . .     8
2.2. The CISG as a contribution to standardizing        international commercial law	. . . . . . . . . . . . . . .     9
2.3. International sales law and national law	. . . . . . . . . . . . . . .     10
2.4. The structure of the CISG	. . . . . . . . . . . . . . .     11
2.5. The structure of CISG norms	. . . . . . . . . . . . . . .     14
2.6. Formation of terms	. . . . . . . . . . . . . . .     14
2.7. Summary valuation of the system of the CISG	. . . . . . . . . . . . . . .     16
2.8. Summary valuation as to the contents of the CISG	. . . . . . . . . . . . . . .     16
2.9. On the introduction of the CISG	. . . . . . . . . . . . . . .     18
A. Commentary on the U.N. Convention on Contracts      for the International Sale of Goods of 11 April 1980
Preamble	. . . . . . . . . . . . . . .     20
Part I: Sphere of application and general provisions (Articles 1- 13)
Chapter I: Sphere of application
Introductory remarks	. . . . . . . . . . . . . . .     26
Commentary on:
-   Article 1	. . . . . . . . . . . . . . .     27
-   Article 2	. . . . . . . . . . . . . . .     32
-   Article 3	. . . . . . . . . . . . . . .     36
-   Article 4	. . . . . . . . . . . . . . .     39
-   Article 5	. . . . . . . . . . . . . . .     46
-   Article 6	. . . . . . . . . . . . . . .     48
Chapter II: General provisions
Commentary on:
-   Article 7	. . . . . . . . . . . . . . .     55
-   Article 8	. . . . . . . . . . . . . . .     61
-   Article 9	. . . . . . . . . . . . . . .     67
-   Article 10	. . . . . . . . . . . . . . .     71
-   Article 11	. . . . . . . . . . . . . . .     72
-   Article 12	. . . . . . . . . . . . . . .     74
-   Article 13	. . . . . . . . . . . . . . .     75
Part II: Formation of the contract (Articles 14-24)
Introductory remarks	. . . . . . . . . . . . . . .     81
Commentary on:
-   Article 14	. . . . . . . . . . . . . . .     82
-   Article 15	. . . . . . . . . . . . . . .     86
-   Article 16	. . . . . . . . . . . . . . .     87
-   Article 17	. . . . . . . . . . . . . . .     90
-   Article 18	. . . . . . . . . . . . . . .     91
-   Article 19	. . . . . . . . . . . . . . .     97
-   Article 20	. . . . . . . . . . . . . . .     101
-   Article 21	. . . . . . . . . . . . . . .     103
-   Article 22	. . . . . . . . . . . . . . .     106
-   Article 23	. . . . . . . . . . . . . . .     106
-   Article 24	. . . . . . . . . . . . . . .     107
Part III: Sale of goods (Articles 25-88)
Chapter I: General provisions
Commentary on:
-   Article 25	. . . . . . . . . . . . . . .     111
-   Article 26	. . . . . . . . . . . . . . .     116
-   Article 27	. . . . . . . . . . . . . . .     118
-   Article 28	. . . . . . . . . . . . . . .     120
-   Article 29	. . . . . . . . . . . . . . .     123
Chapter II: Obligations of the seller
Commentary on Article 30	. . . . . . . . . . . . . . .     127
Section I: Delivery of the goods and handing over of documents
Commentary on:
-   Article 31	. . . . . . . . . . . . . . .     129
-   Article 32	. . . . . . . . . . . . . . .     133
-   Article 33	. . . . . . . . . . . . . . .     135
-   Article 34	. . . . . . . . . . . . . . .     137
Section II: Conformity of the goods and third party claims
Commentary on:
-   Article 35	. . . . . . . . . . . . . . .     140
-   Article 36	. . . . . . . . . . . . . . .     149
-   Article 37	. . . . . . . . . . . . . . .     151
-   Article 38	. . . . . . . . . . . . . . .     154
-   Article 39	. . . . . . . . . . . . . . .     158
-   Article 40	. . . . . . . . . . . . . . .     163
-   Article 41	. . . . . . . . . . . . . . .     164
-   Article 42	. . . . . . . . . . . . . . .     167
-   Article 43	. . . . . . . . . . . . . . .     170
-   Article 44	. . . . . . . . . . . . . . .     172
Section III: Remedies for breach of contract by the seller
Commentary on:
-   Article 45	. . . . . . . . . . . . . . .     173
-   Article 46	. . . . . . . . . . . . . . .     177
-   Article 47	. . . . . . . . . . . . . . .     181
-   Article 48	. . . . . . . . . . . . . . .     184
-   Article 49	. . . . . . . . . . . . . . .     189
-   Article 50	. . . . . . . . . . . . . . .     195
-   Article 51	. . . . . . . . . . . . . . .     199
-   Article 52	. . . . . . . . . . . . . . .     200
Chapter III: Obligations of the buyer
Introductory remarks	. . . . . . . . . . . . . . .     203
Commentary on Article 53	. . . . . . . . . . . . . . .     203
Section I: Payment of the price
Commentary on:
-   Article 54	. . . . . . . . . . . . . . .     205
-   Article 55	. . . . . . . . . . . . . . .     208
-   Article 56	. . . . . . . . . . . . . . .     213
-   Article 57	. . . . . . . . . . . . . . .     214
-   Article 58	. . . . . . . . . . . . . . .     221
-   Article 59	. . . . . . . . . . . . . . .     227
Section II: Taking delivery
Commentary on Article 60	. . . . . . . . . . . . . . .     228
Section III: Remedies for breach of contract by the buyer
Commentary on:
-   Article 61	. . . . . . . . . . . . . . .     233
-   Article 62	. . . . . . . . . . . . . . .     235
-   Article 63	. . . . . . . . . . . . . . .     236
-   Article 64	. . . . . . . . . . . . . . .     242
-   Article 65	. . . . . . . . . . . . . . .     248
Chapter IV: Passing of risk
Introductory remarks	. . . . . . . . . . . . . . .     255
Commentary on:
-   Article 66	. . . . . . . . . . . . . . .     259
-   Article 67	. . . . . . . . . . . . . . .     264
-   Article 68	. . . . . . . . . . . . . . .     270
-   Article 69	. . . . . . . . . . . . . . .     273
-   Article 70	. . . . . . . . . . . . . . .     279
Chapter V: Provisions common to obligations of seller and buyer
Section I: Anticipatory breach and installment contracts
Commentary on:
-   Article 71	. . . . . . . . . . . . . . .     283
-   Article 72	. . . . . . . . . . . . . . .     290
-   Article 73	. . . . . . . . . . . . . . .     294
Section II: Damages
Commentary on:
-   Article 74	. . . . . . . . . . . . . . .     297
-   Article 75	. . . . . . . . . . . . . . .     303
-   Article 76	. . . . . . . . . . . . . . .     304
-   Article 77	. . . . . . . . . . . . . . .     307
Section III: Interest
Commentary on Article 78	. . . . . . . . . . . . . . .     310
Section IV: Exemptions
Introductory remarks	. . . . . . . . . . . . . . .     316
Commentary on:
-   Article 79	. . . . . . . . . . . . . . .     319
-   Article 80	. . . . . . . . . . . . . . .     335
Section V: Effects of avoidance
Introductory remarks	. . . . . . . . . . . . . . .     339
Commentary on:
-   Article 81	. . . . . . . . . . . . . . .     341
-   Article 82	. . . . . . . . . . . . . . .     345
-   Article 83	. . . . . . . . . . . . . . .     348
-   Article 84	. . . . . . . . . . . . . . .     348
Section VI: Preservation of the goods
Introductory remarks	. . . . . . . . . . . . . . .     351
Commentary on:
-   Article 85-88	. . . . . . . . . . . . . . .     352
-   Article 86	. . . . . . . . . . . . . . .     354
-   Article 87	. . . . . . . . . . . . . . .     358
-   Article 88	. . . . . . . . . . . . . . .     359
Part IV: Final provisions (Articles 89 -101)
Introductory remarks	. . . . . . . . . . . . . . .     367
Commentary on:
-   Article 89	. . . . . . . . . . . . . . .     367
-   Article 90	. . . . . . . . . . . . . . .     369
-   Article 91	. . . . . . . . . . . . . . .     371
Introduction to Articles 92-101	. . . . . . . . . . . . . . .     373
Commentary on:
-   Article 92-101	. . . . . . . . . . . . . . .     373
-   Article 93	. . . . . . . . . . . . . . .     375
-   Article 94	. . . . . . . . . . . . . . .     377
-   Article 95	. . . . . . . . . . . . . . .     380
-   Article 96	. . . . . . . . . . . . . . .     382
-   Article 97	. . . . . . . . . . . . . . .     383
-   Article 98	. . . . . . . . . . . . . . .     385
-   Article 99	. . . . . . . . . . . . . . .     386
-   Article 100	. . . . . . . . . . . . . . .     389
-   Article 101	. . . . . . . . . . . . . . .     390
-   Authentic languages of text	. . . . . . . . . . . . . . .     391
B. Commentary on Convention on Limitation Period      in the International Sale of Goods of 14 June 1974      in the version of the Protocol of 11 April 1980
Introduction	. . . . . . . . . . . . . . .     393
Preamble	. . . . . . . . . . . . . . .     399
Part I. Substantive Provisions (Articles 1- 30)
Sphere of application
Commentary on:
-   Article 1	. . . . . . . . . . . . . . .     400
-   Article 2	. . . . . . . . . . . . . . .     404
-   Article 3	. . . . . . . . . . . . . . .     405
-   Article 4	. . . . . . . . . . . . . . .     407
-   Article 5	. . . . . . . . . . . . . . .     408
-   Article 6	. . . . . . . . . . . . . . .     409
-   Article 7	. . . . . . . . . . . . . . .     410
The duration and commencement of the limitation period
Commentary on:
-   Article 8	. . . . . . . . . . . . . . .     411
-   Article 9	. . . . . . . . . . . . . . .     412
-   Article 10	. . . . . . . . . . . . . . .     413
-   Article 11	. . . . . . . . . . . . . . .     414
-   Article 12	. . . . . . . . . . . . . . .     415
Cessation and extension of the limitation period
Introductory remarks	. . . . . . . . . . . . . . .     417
Commentary on:
-   Article 13	. . . . . . . . . . . . . . .     417
-   Article 14	. . . . . . . . . . . . . . .     418
-   Article 15	. . . . . . . . . . . . . . .     419
-   Article 16	. . . . . . . . . . . . . . .     420
-   Article 17	. . . . . . . . . . . . . . .     421
-   Article 18	. . . . . . . . . . . . . . .     422
-   Article 19	. . . . . . . . . . . . . . .     423
-   Article 20	. . . . . . . . . . . . . . .     425
-   Article 21	. . . . . . . . . . . . . . .     425
Modification of the limitation period by the parties
Commentary on Article 22	. . . . . . . . . . . . . . .     427
General limit of the limitation period
Commentary on Article 23	. . . . . . . . . . . . . . .     428
Consequences of the expiration of the limitation period
Commentary on:
-   Article 24	. . . . . . . . . . . . . . .     429
-   Article 25	. . . . . . . . . . . . . . .     430
-   Article 26	. . . . . . . . . . . . . . .     432
-   Article 27	. . . . . . . . . . . . . . .     432
Calculation of the period
Commentary on:
-   Article 28	. . . . . . . . . . . . . . .     433
-   Article 29	. . . . . . . . . . . . . . .     433
International effect
Commentary on Article 30	. . . . . . . . . . . . . . .     434
Part II. Implementation (Articles 31- 33)
Commentary on:
-   Article 31	. . . . . . . . . . . . . . .     437
-   Article 32	. . . . . . . . . . . . . . .     439
-   Article 33	. . . . . . . . . . . . . . .     439
Part III. Declarations and reservations (Articles 34- 40)
Commentary on:
-   Article 34	. . . . . . . . . . . . . . .     441
-   Article 35	. . . . . . . . . . . . . . .     442
-   Article 36	. . . . . . . . . . . . . . .     443
-   Article 37	. . . . . . . . . . . . . . .     444
-   Article 38	. . . . . . . . . . . . . . .     444
-   Article 39	. . . . . . . . . . . . . . .     445
-   Article 40	. . . . . . . . . . . . . . .     446
Part IV. Final Clauses (Articles 41-46)
Commentary on:
-   Article 41	. . . . . . . . . . . . . . .     449
-   Article 42	. . . . . . . . . . . . . . .     449
-   Article 43	. . . . . . . . . . . . . . .     449
-   Article 44	. . . . . . . . . . . . . . .     449
-   Article 45	. . . . . . . . . . . . . . .     452
-   Article 46	. . . . . . . . . . . . . . .     454
Index [not reproduced]

PREFACE

2. General problems of the CISG
    2.1   Convention instead of uniform law
    2.2   The Convention as a contribution to standardizing international trade law
    2.3   International sales law and national law
    2.4   The structure of the Convention
    2.5   The structure of the CISG norms
    2.6   Formation of terms
    2.7   Summary valuation of the system of the CISG
    2.8   Summary valuation as to the content of the CISG
    2.9   On the introduction of the Convention

[1] The need for the unification of law and the genesis of the United Nations Convention on Contracts for the International Sale of Goods and of the Convention on the Limitation Period in the International Sale of Goods

     [1.1] The need for and problems involved in the unification of law

It is generally acknowledged that the existence of different national legal systems impedes the development of international economic relations with complicated problems arising from the conflict of laws. For a long time efforts have been made to overcome the contradiction between the character of contracts on the international sale of goods and the regulation of these contracts by the individual State under the domestic rules of civil and trade law by drafting uniform rules at the international level. Not only does the fact that the international sale of goods is provided for by each individual State constitute a serious obstacle, but the additional fact that most of those individual rules do not take into consideration the particularities and specific traits of international economic relations is a considerable obstruction as well.

In order to alleviate this situation, first, rules should be drafted which meet the specific character of international economic relations, i.e. rules which are adequate to the relations to be governed, and, second, it is a task for all States which participate in international trade and should be tackled and solved jointly on the basis of equality. (c. F. Enderlein, "The Law of International Trade: A new task for national legislators or a new lex mercatoria?" in: New Directions in International Trade Law, Dobbs Ferry 1977, Vol. II, 448.)

Work on the unification of sales law started in the 1920s, but not until 1972 did the laws on sale adopted at a diplomatic conference in The Hague in 1964 (Uniform Law on The International Sale of Goods and Uniform Law on the Formation of Contracts for the International Sale of Goods) enter into force between a few States (the parties to those laws were at the time Belgium, the FRG, Gambia, Britain, Israel, Italy, Luxembourg, the Netherlands and San Marino).

The results obtained so far in the unification of law, be it in the field of conflict of laws or of substantive law, clearly show that "joint law-making" in international economic relations is an extremely difficult task. Success could be achieved, therefore, above all in [page 1] those areas where objective requirements forced a solution, as in the international transport of goods.

And it became obvious that a unification of law is not impossible to achieve at a global level. The adoption in Vienna in 1980 of the CISG and the earlier adoption in New York of the 1974 Limitation Convention have proved to be a considerable success and are a demonstration that the international community of States is capable of solving complex tasks when it is guided by the principles of peaceful coexistence and the idea of equality of all States. Just like any achievement in the unification of law, the aforementioned two Conventions, which are to be commented on in the present work, are the result of many compromises.

Any unification of law is dependent on a certain readiness for compromise on the part of the States involved. Compromising is both a problem of substance and form with the chances for compromise being better in regard to form. But a compromise cannot be achieved in respect of each and every issue. Hence, the Convention as a whole constitutes a compromise in that all States either gave in or prevailed.

One problem involved with comprise is to decide by which yardstick to measure the proposed solutions. One's own rules cannot serve as a measure for what compromise is possible in regard of a uniform regulation at the international level, for the same functions can very well be fulfilled using different legal structures.

The limits of compromise solutions are determined by certain minimum functions to be implemented by way of the unification of law. The equality, for instance, of the parties involved in commercial relations must not be questioned, and a balanced relationship between the parties' rights and obligations must exist.

     [1.2] On the genesis of the Conventions

The above-mentioned Hague Conventions of 1964 were basically the result of the work of some Western countries. Apart from reservations concerning their substance, this was one of the main reasons that the Conventions a priori did not have a chance of being adopted worldwide. This followed from an analysis made on the basis of comments by governments, which was submitted by the Secretary-General of the United Nations to the third session of UNCITRAL in 1970 (A/CN.9/31). UNCITRAL, after having been founded, considered it as one of its primary tasks, to revise the Hague uniform sales law and to draft rules which all States of the world, irrespective of their economic and social systems, and of [page 2] their level of development, could accede to. At its first session in 1968 it decided to give priority to the following topics:

* The Convention was signed by the former German Democratic Republic on 13 August 1981, ratified on 23 February 1989 and entered into force on 1 March 1990.

** The Russian Federation continues, as from 24 December 1991, the membership of the former Union of Soviet Socialist Republics (USSR) in the United Nations and maintains, as from that date, full responsibility for all the rights and obligations of the USSR under the Charter of the United Nations and multilateral treaties deposited with the Secretary-General.

[1.3] Purpose of the commentary

The present commentary is to acquaint companies and factories with UNCITRAL sales law so as to enable them, when shaping and implementing their contracts, to better meet the new challenges arising with the entry into force of the Conventions.

The main purpose of the commentary, however, is to explain to the reader how the individual provisions of the CISG and the Limitation Convention are to be conceived and which importance should be attached to them; also, how the conventions should be interpreted and which interpretation can reasonably be expected.

The authors of the present commentary have for many years been involved in work on the unification of law. F. Enderlein was a member of the government delegation of the former GDR to the tenth and eleventh sessions of UNCITRAL and to the 1974 diplomatic conference in New York. At the 1980 Vienna Conference he was the Secretary of the Second Committee and represented the United Nations Office of Legal Affairs. D. Maskow was a member of the government delegation of the former GDR to the 1980 Vienna Conference and has had a considerable share in the work of the First Committee.

Both during the drafting of the CISG and the Vienna Conference the idea of such a commentary was repeatedly suggested. A relevant commentary would indeed be of great help to judges and arbitrators. But the discussion within UNCITRAL and at the diplomatic conferences made it clear that the project of an official commentary could not be realized because its preparation and adoption would take an additional period of time as long as that needed for drafting and adopting the Conventions themselves. As a consequence, there will be no official commentaries relating to the CISG and the Limitation Convention. The commendable commentaries by the Secretariat of UNCITRAL (c. Official Records) refer to the respective drafts and do not always reflect the views of the Commission's Member States.

Commenting is thus left up to science, and it is has already become obvious that there will be different views in regard to interpretation. [page 6] At the time this commentary went to press there were already several national commentaries in existence (c. v. Caemmerer /Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht, CISS, Munich 1990; J. Honnold, Uniform Law for International Sales, Deventer 1982; Z. Stalev, Vienskata konvenciha zu mezdunarodna prodazba na stoki: kratak kommentar, Sofia 1981; I. Vilus, Kommentar Konvencije Ujedinjenih Nacija o medunarodnoj prodaji robe, Zagreb 1981). Also an international commentary, in which D. Maskow participated, has been published: Blanca/Bonell, Commentary on the International Sales Law. The 1980 Vienna Sales Convention, Milan 1987). Several national and international conferences have also dealt with the International Sales Convention and its interpretation. In this context see also the list of abbreviations of the quoted publications.

A supreme international instance lacking, diverging interpretations of the Conventions by national courts - a problem of all international uniform laws - will not fail to appear. Hence even greater need for reciprocal information on the interpretation and application of the Conventions - an objective to which the present commentary is committed.

On the part of UNCITRAL it was thought how the Secretariat, with the assistance of national correspondents, could gather all court decisions and arbitral awards to be expected in regard of the conventions and how to disseminate the relevant information. It was decided to collect all decisions in the original language in the Commission's Secretariat and to make them available if requested. A short summary of each decision will be translated into the six official languages of the United Nations. These summaries will be published as regular United Nations documents.

The Limitation Convention was adopted in the Chinese, English, French, Russian and Spanish languages, with each version being equally authentic. In the case of the CISG a further official language - Arabic - was added. All versions in other languages are considered to be translations.

The sub-titles of the individual paragraphs of the two Conventions, which are put in brackets, are not part of the official texts. They were added to facilitate orientation for the reader of this commentary. [page 7]

[2] General problems of the CISG

     [2.1] Convention instead of uniform law

Whereas ULIS and ULFC have been adopted in the form of uniform laws which States adhering to the special conventions for their introduction are bound to incorporate into their national law, the CISG has been shaped in the form of a convention. It contains in one document rules governing the relations between parties to contracts of sale as well as the international law instruments to put them into force. The CISG thus follows a new trend in the formal arrangement of a universal standardization of law that was already given expression in the conventions on prescription, agency, factoring and leasing.

Prevailing opinions also expects meritorious rules of a contractual convention to be incorporated into the domestic law of the Contracting States, so that they become binding on their legal subjects. Yet, there is a difference with uniform laws insofar as this incorporation elucidates the international character of the respective rule, underlines its special position in domestic law, and furthers an interpretation and application which is orientated to the standardization of law. So it aims at an international harmony of decisions and represses a legal practice coined by national concepts, to which jurisdiction tend in the case of uniform laws (for examples c. Volken/Freiburg, p. 86).

An apparent expression thereof is that the use of the convention form provides, in cases of discrepancies, for an interpretation pursuant to the authentic text and not according to a translation into another language.

Incorporation into domestic law is effected by promulgating the adopted convention and not by enacting a special law. There exists a somewhat simplified procedure in some countries. In the USA, for instance, the Senate can decide on its own, whereas uniform laws suppose a decision by both Houses of Congress (Winship, Commentary, p. 626).

The strengthening of the international character of contractual norms may even be more effectively achieved, in the authors' view, if one dispenses with the auxiliary construction of an integration into domestic law, and rather proceeds from the assumption that domestic law renounces its own regulations and their use for the benefit of the convention and to the extent of its scope. When a State becomes party to a convention containing authoritative rules [page 8] for its legal subjects, we would prefer to interpret that the rules become directly binding on its legal subjects as international rules. Such a construction is even favoured whenever domestic law refers to international norms, and Mjullerson starts from this point ("Ober die Beziehungen zwischen Volkerrecht, Internationalem Privatrecht und nationalem Recht", Sowjetskoje gossudarstwo i prawo, 1982/2, p. 80 fol). This reference may clear up matters, however it does not seem to us a conditio sine qua non, for it implies making the direct application of international norms dependent on national law a practice being still widespread. However, this is not to be desired, for the very reason that it would lead to a situation where some countries apply international treaty norms as integral part of their domestic law system whereas other countries directly apply them as international law.

     [2.2] The Convention as a contribution to standardizing international trade law

The CISG refers to international contracts of sale as it ensues from its title and Article 1. Consequently, it leaves the domestic law of sales untouched. This approach is, at present, the only possible one as the domestic sales law is marked by targets of economic and social policy which result in very different legal solutions; Hence follows that standardization, comprising domestic matters as well, seems to be out of the question, at least on an international scale (see also Bonell/BB, p. 8). It would also hardly be desirable as it does not take sufficient account of the special features of international matters, evidenced by the fact that international economic treaties tie together different economic systems (with their respective civil, commercial, and foreign trade law regulations). Different currencies and issues that reach beyond borders must also be taken into consideration. This requires specific techniques in trade and the stipulation of special obligations (viz. the preservation of the goods -Article 86 fol). Certainly, these peculiarities tend to diminish in trade between integrated communities. Yet, they have not at all disappeared there: The special treatment of the individual consumption sphere which can be occasionally found in connection with the evolution of consumer protection leads, in addition to a differentiated contract law, temporarily rendering an all-out standardization more difficult.

By aiming for a standardization of the rules in the most important practical field of international economic relations between enterprises on a universal level, namely contracts of sale, the CISG creates an international uniform law of sales, or, as will call it henceforth, an "international sales law". It represents a decisive component of the growing international trade law, which itself is a weighty building block in setting up a legal regulation of international [page 9] economic relations, i.e. international economic law. But the CISG realizes only a partial legal standardization. Higher legal security and lucidity of the legal conditions of international trade caused by it will be none the less more beneficial to trade, the more States adhere to it and the more one succeeds in standardizing border matters. This is done by creating supporting conventions (Article 7, note 7). In a wider sense, conventions in the field of transport and currency circulation are to be considered as supporting conventions. In this way a growing stock of norms of international trade law, which calls ever more urgently to be conceived as a unity by science and to be interpreted as such in applying the law, is formed (in this regard see also van der Helden, esp. p. 18 fol). Finally, this requires that the further development of a stock of norms must take into consideration what has been achieved, and create new regulations which fit to it as far as possible.

     [2.3] International sales law and national law

The shaping of an international trade and sales law involves manifold disturbances of growth. They depend on different interests of the States conditioned by contradictions and/or differences in their socio-economic structures, economic development and foreign trade system, but also by their cultural and legal traditions. For those reasons, no settlement could be reached on a number of issues (see for instance subjects mentioned in Article 4). Therefore, it will be necessary to apply national law in addition to standardized law for a relatively long period of time. So, it has to be determined what problems are to be ruled by international sales law, and what problems are to be given over to national law. This is not a question of a conflict of laws in the traditional sense, for the limits of legal spheres are to be determined rather than those of national laws; and the national sphere consists of the individual national legal systems among which a choice must be made in a conflict of laws.

The question as to what relations are covered by the international sales law is determined by the CISG itself, as it:

• Defines its scope ratione materiae: in a general way or, in a positive or negative manner, with regard to certain legal institutions (Articles 1 to 5);

• Tries, in a general way, to mark off its scope from national law, and thus indicates possibilities and limits of an extensive interpretation (Article 7 - in this respect one could speak of a vertical rule in case of a conflict of laws);

• Refers to national law in either direct or, even more indirect manner (Article 20, paragraph 2; Articles 30, 42, 54 and, 78); settles problems and, consequently, supersedes national law. [page 10]

     [2.4] The structure of the Convention

The structure of the Convention (see Volter/Wagner, p. 142) follows the usual pattern by defining, in its introductory part, the sphere of application (Articles 1 to 6). Then follow the general provisions (Articles 7 to 13) which refer to the stipulations regarding the [page 11] formation of the contract (Part II) as well as its contents (Part II). Here, the points are the interpretation of the Convention and the conduct of the parties, trade customs and usages, and establishment and problems of form. According to the typical structure of contractual arrangements, including conventions, there follows the regulation regarding the formation of the contract (Articles 14 to 24). When Part II was set up, some solutions were conditioned by the legal policy decision to enable parties to omit Part II or Part III when adhering to the Convention. Therefore, it was not recommendable to interlace the questions of formation and the questions of modification and termination by agreement. The latter are now regulated by Article 29 under the general provisions for the sale of goods (Article 29, note 1.2.). Actually, Chapter I of Part II comprises very heterogeneous subjects that have been combined mainly for pragmatical rather than for theoretical reasons. Here we find also, in part, general provisions relating to breaches of contract (Articles 25, 26 and 28) and stipulating the rights of both buyer and seller. Of course, their inclusion in Chapter V would have been possible and, eventually, even more expedient.

The core of the regulation of part III is formed by Chapters II and Ill, regarding the obligations of the seller and the buyer respectively. They have been set up symmetrically, so far as the peculiarities of the performances of both parties allowed for it. In the respective introductory articles, the obligations of the parties are regulated, preceded by their, summing-up (with the exception of the obligation of the seller to confer property - Article 4, subpara. (b)). At this, the obligations of the seller take the larger space, because they are more multifarious, and because special attention has to be given to the conformity of the goods with the contract and to the rights and claims of third parties. Hereupon, the rights of the other party, in case of being violated of its rights, are set down.

Chapter IV deals with the passing of risk as a special problem. Thus, disturbances which affect the implementation of the contract from outside, but for which none of the parties is responsible (as they are chiefly disturbances which occur during transport), are classed with the parties'-risk spheres. Thus, the parties are being enabled to prepare for it by obtaining insurance policies.

Chapter V refers to the risks to the contract and special breaches of con tract respectively, and stipulates, in more detail, some of the legal consequences of breaches of contract (Section II, Section V). In this context, some stipulations governing the consequences of an avoidance of the contract may also be applied, so far as the statutory conditions are given, to an avoidance by agreement or a unilateral avoidance not pursuant to a breach of contract. Chapter V also lays down [page 12] special legal consequences of breaches of contract in principle (Section III).

Specific legal consequences of breaches of contract are also stipulated by Section VI regarding the preservation of the goods. Since they do not primarily concern the contract violator, but the party aggrieved in its rights, certain particularities in substance result. In between, Section IV, relates to exonerating circumstances, which determine the subjective part of breaches of contract (above all the exclusion of a generally presupposed liability with regard to damages), viz. objective liability with possible exoneration. So, if one proceeds on the assumption that the regulation of breaches of contract mainly comprises mainly of three elements:

• statutory breaches;

• subjective factors; and

• legal consequences;

     [2.5] The structure of the CISG norms

The norms of the Convention are predominately regulatory norms. In a smaller portion (apart from the international law rules of Part IV), they are in the nature of metanorms, which do not directly determine the commercial conduct of the parties, but the sphere of application of the regulation (Articles 1 to 6) and its interpretation {Article 9). According to the requirements of it subject matter, the Convention contains predominantly norms for reciprocal conduct.

We also find in the text of the CISG isolated target norms, which are characterized by the fact that they prescribe the result to be attained by the addressee of the norm, but leave it to him to choose the means, to wit, the concrete modes of conduct. In this manner, Article 54 determines the acts which form part of the obligation to pay the purchase price. Article 60, subpara. (a), and Article 70 also belong to this category. In view of the various possible and admissible modes of conduct in international trade, the conduct to be adopted in a definite situation cannot always be prescribed in detail. The use of this structure of norms serves as a means to secure the necessary flexibility of the regulations. Thus, as a consequence, the space of discretion is enlarged for both the parties and the adjudicating body.

It is apparent, with regard to other international contractual conventions, like the Hamburg Rules and the Convention on International Multiple Transport of Goods, that the CISG uses only a few formally independent legal definitions. Yet, there are quite a number of rules which represent definitions as to their contents, and we therefore threat them as such. But, more often they are shaped in the form of norms of conduct, i.e. operational rules (for instance Article 9, paragraph 2; Articles 30 and 53). The existing definitions (for example Articles 10, 13 and 24) appear largely in context with the respective practical issue, and we desist from giving a catalogue.

A typical structural principle of the norms of the CISG is seen in the fact that the character of the whole regulation as a compromise is reflected by the individual norms, by combining different principles, e.g. as rules or exceptions, from which the various legal systems proceed (Article 16 - for details see Maskow, Hauptzüge, p. 546 fol).

     [2.6] Formation of terms

It may be realized that there is an endeavour to use such terms whose corresponding words or expressions in other languages do not have a definite legal significance attributed to them, and which [page 14] are, consequently, non-technical in a legal sense and become legal terms by the CISG only. Terms to be so classified are "avoidance of the contract" (Articles 49 and 64), "to deliver" (Articles 30 and 33), "to hand over" (Article 31, subpara. (a); and Article 32, paragraph 1), "to take delivery" (Articles 53 and 60), and "to take over" (Article 60). The formation of terms in this manner favours an original interpretation of the Convention that is based upon its contents and does not refer to the significance of these terms in the national legal system (note 3 of Article 7). In view of the high differentiation in national legal languages, this goal could not consistently be reached, as new adequate terms may not be found for all legal problems, or the originality obtained is lost again with the translation. Furthermore, there is no safe protection against a nationally coloured interpretation (D. Tallon "Questions de langage à propos des textes d'unification de la vente immobilière", Prace z prawa cywilnego, Warsaw, 1987, p. 403). But the terms cited as examples are not entirely unknown in the national legal languages. However, in interpreting the Convention one should, insofar, depart from their originality. Thus they get a new meaning by the CISG. This phenomenon can also be observed within the law of a particular State, when the same term is used by different branches of the law.

Already, it ensues from the originality of the formation of terms that the precise and detailed legal contents of the terms has still to be defined in the process of the application of the Convention. This implies, a priori, that the terms are vague in a certain manner. Yet, their uncertainty is limited by the fact that often one can link up with their meaning in common or commercial language in order to determine their contents more precisely. Though one must state that the CISG often uses term where this is not easily possible, as, for instance, with "reasonable person" (Article 8, paragraph 2; Article 25), and "unreasonable inconvenience" (Articles 34, 37 and Article 48, paragraph 1). The precise contents may not only differ from Article to Article, but also in applying one and the same Article to different subject matters. Terms, the contents of which result from the relations to which they are applied, allow for a large degree of flexibility, appropriate to the variety of subjects presented with international contracts of sale. Thus, the disadvantage of a lesser anticipation is compensated for. The use of vague terms occasionally shows the smallest common denominator of the negotiating States and conceals different conceptions as to content.

The vagueness of the terms correlates with their abstract character and influences the CISG as a whole. It is shown by the relevancy of general principles, for one part (esp. Article 7, paragraph 2). Apart from good faith (Article 7, paragraph 1), the principles are not even characterized by terms. For the other part, concrete legal situations [page 15] are conceived in relatively abstract terms. Typical in this regard are the term "breach of contract" and the differentiation made, in its context, between fundamental and other breaches (Article 25). The term "acceptance of an offer" in Article 18, paragraph 2, is also very abstractly seized. Not only has the consistent use of such terms tightened the text of the Convention, in comparison with ULIS, but it may also facilitate the application of the law, as the regulation has become more easily surveyed, and subtle distinctions, which are hardly related to factual consequences, have been waived. The individual decisions do not become more foreseeable in this way. At any rate, this will change when, after a longer period of time, relevant jurisdiction is firmly established.

     [2.7] Summary valuation of the system of the CISG

Our explanations under ciphers 2.4. to 2.6. have shown that the method applied to the Convention is based on a thorough theoretical grasp of the structure of international sales of goods which is reflected by the high degree of abstraction of the Convention altogether, and also by its norms and terms. There is a guarantee that the legal problems of international contracts of sale are seized in a relatively comprising and flexible way. Whether the abstractions made are the right ones, is a matter of content that will have to be referred to, in general (cipher 2.8.) and in detail, in the course of commenting.

     [2.8] Summary valuation as to the content of the CISG

In order to evaluate the Convention as to its content, it must, above all, be stressed that the CISG is directed towards the needs of international trade and does not chiefly aim for a standardization of national regulations on sale, set up to meet domestic requirements. For example, the international character of the Convention is expressed by the authoritative rules governing its interpretation (Article 7), the weight it allots to trade usages, its consideration of the main forms of international sales of goods (Part III, Chapter II), and the preservation of the goods (Part III, Chapter V, Section VI). It is pointed out that the CISG, in comparison with ULIS, is more orientated toward the trade in machinery than in raw material (Hellner, Dubrovnik, p. 337 fol).

As unconventional or even modern as the CISG may appear in solving traditional problems (for examples, see Bonell/BB, p. 13 fol), it is predominantly cautious in regard to new legal phenomena. This applies to dealing with the process of negotiating the contract, the pre-contractual relations, the influence of administrative measures on contracts, and change of circumstances. Altogether, the [page 16] Convention represents a balance between a modernization of the law of sales and the status quo.

The CISG will not relieve the parties of the individual formation of the contract. This is not only due to the fact that it has left or had to leave open a number of questions, but rather certain provisions call for an individual agreement. Therefore, the Convention often refers to the contract itself. It is up to the parties to make arrangements which answer the particularities of the deal, correspond to the foreign trade regulations of the countries involved, and endeavour to bring to bear their respective interests. For that reason, auxiliary means of contract formation, like general conditions of individual enterprises, conditions of branches and sets of clauses (INCOTERMS, model contracts, guides) which are issued by international, regional or universal governmental organizations will also preserve their value within the framework of the Convention. Of course, in some cases, an appropriate adaptation will be expedient. Insofar as such documents have a bearing on the relations of the parties, by virtue of the contract, they will even rank before the CISG, because in the relation between the Convention and the contract, the letter has priority.

In our view, the CISG has taken into account both the interests of seller and buyer in a well balanced manner. This is also admitted by representatives of the developing countries (Date/Bah, Perspective, p. 37 fol) who, at the Diplomatic Conference, carried through a series of modifications, seen from the perspective of the buyer of plants, machinery and finished products.

Summing up, it may be said that the CISG seizes those basic problems of the international sale of goods which can be regulated at present, and it solves them in a way that meets the requirements. The Convention thus effects - to resume the statement made in valuating its method (cipher 2.7.) - a scientific generalization which is just in principle. So far, the question raised by Schlechtriem (Einheitliches Modell), as to whether the uniform law of sales represents a scientific model or a regulation close to practice, may be answered as follows: The CISG comprehends practice related rules within a new scientific model or under a new method. But this answer involves that, whenever the addressees of the provisions are neither jurists nor legal specialists in the international law of sales, understanding is affected by a certain discrepancy between contents and method. It is our impression that the contents of the CISG is closer to commercial practice than its methodical presentation. This contradiction can only be overcome by an effort of legal propaganda. [page 17]

Some constructions which are not familiar to the German lawyer are due to the influence of common law. At any rate, this should not be overstated, as Thieffry does (esp. p. 378 fol).

     [2.9] On the introduction of the Convention

It lies in the very nature of the standardization of law that practically any party to the comprised international economic contracts is confronted, though to a different extent, with conceptions that are new and unfamiliar to it, and that will first be met with skeptically. The addressees of these rules have to acquaint themselves with the new regulations. Business conditions and other documents have to be adapted and the ensuing business practices have to be developed. The pros and cons of the new regulation are not immediately comprehensible and, above all, they cannot be weighed against each other. This is one the reasons why the Hague Uniform Laws did not find striking success (Kahn, UNIDROIT, p. 359 fol), however, the perspective of the CISG is seen more favourably (ibid. p. 375; see also Herber, UNIDROIT, p. 514).

These difficulties, which will be overcome in a few years, should not detain the States and the parties to international economic contracts to adopt and to apply the Convention, which, as far as theoretical considerations allow to foretell, meets the requirements of the international sales law. The advantage of a standardization of law will prove worthwhile in the end. Those who make the effort, contribute to further the evolution of international trade law, for the CISG should be a starting point for far-reaching endeavours. (In the same sense, D. Tallon, "La resolution du contrat pour inexecution imputable au debiteur: ...", Recht in Ost und West, Tokio, 1988, p. 597).

A. COMMENTARY ON THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOOD 11 April 1980 [*]

* 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 Committees, United Nations, New York 1981, p. 178.

[TEXT OF THE PREAMBLE] [1]

The States Parties to this Convention,

Bearing in mind the broad objectives in the resolutions adopted by the sixth special session of the General Assembly of the United Nations on the establishment of a new International Economic Order [2],

Considering that the development of international trade on the basis of equality and mutual benefit [3] is an important element in promoting friendly relations among States,

Being of the opinion that the adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems [4] would contribute to the removal of legal barriers in international trade and promote the development of international trade [5],

Have agreed as follows:

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [importance of preamble]

Opinions differ in the legal systems as to the legal importance of preambles. In the Eastern European countries preambles, in general, define in a binding way the social function of the respective legal act. That definition is then decisive when it comes to interpreting such act. In common law countries, however, where skepticism prevails in regard to general principles, they play a negligible role. Honnold, in his commentary, does not even comment on the CISG preamble, and Evans (BB, 25) is very skeptical about it. Loewe does not want to refer to it in the interpretation of specific provisions. [page 19]

The preamble of the Convention, which was drafted at the diplomatic conference, was not the subject of substantive discussion (O.R., 219 fol). This might be an indication that no particular importance was attached to it. It would, however, be inappropriate to dismiss the preamble from the start as insignificant from a legal point of view. The principles it contains can be referred to in interpreting terms or rules of the Convention, such as the term of "good faith" (Article 7, paragraph 1) or the rather frequent and vague term "reasonable".

It could also be used to fill gaps because those principles can be counted among, or have an influence on, the basic rules underlying the Convention (Article 7, paragraph 2). The spirit of the preamble should also be taken account of when agreed texts of sales contracts are to be interpreted.

All in all and in spite of the reservations to follow, the preamble can be used, in a cautious way, to put restraint on the immense liberty the parties have to dispose of the Convention (Article 6). In so doing, a referral to national law, which would otherwise be necessary, can be avoided.

[2] [establishment of a New International Economic Order]

      [2.1] Reference is made here to the Declaration on the Establishment of a New International Economic Order of 1 May 1974,

3201 S-VI (resolutions 220 fol) and to the Programme of Action on the Establishment of a New International Economic Order of 1 May 1974, 3202 S-VI (ibid 234 fol). Both resolutions contain political-economic principles which aim to eliminate the developing countries' economic backwardness.

      [2.2] The first part of the preamble should be understood as including the CISG into the efforts for the establishment of a New International Economic Order and making it a component of those endeavours. Hence the altruism that Winship, Commentary (625), deduces from the preamble. But the Convention can make only a moderate contribution towards that objective. This can be inferred from the fact that trade measures, which are expressed in foreign trade regulations, have a much greater influence on the international flow of goods that the unified sales law (in this sense Date-Bah, Standpoint, 40). Furthermore, the Convention can exercise only a limited influence because it can be altered in general and disposed of (Article 6). [page 20]

Experience has shown that reference to current documents in a Convention which comes into force only eight years after its adoption and which is to exist for decades entails quite a few problems. We believe that a general reference to the New International Economic Order, as it is included in the preamble of the Convention on Agency, is more appropriate. We do not see any disadvantage in even renouncing such reference, as is done in the preambles to the Factoring and Leasing Conventions, for requirements which go beyond those mentioned under note 3 cannot clearly be deduced from the New International Economic Order and applied to contractual relations. It is, therefore, sufficient, to make only general mention of it.

[3] [equality and mutual benefit]

Emphasis is place here on two of the particularly important principles of international trade, "equality" and "mutual benefit", which should also govern the relations between States and the process of shaping the New International Economic Order. They expressly refer to the relations between States. However, it is exactly this part of the preamble which is relevant for commercial relations as well, for equal and mutually beneficial relations between States in this context have to be specified in the respective commercial relations, including sales contracts.

[4] [take into account the different social, economic and legal systems]

In the quarterly meetings before the holding of the diplomatic conference, agreement could be reached in that the different legal systems were taken into consideration in the Convention. As a result of those discussions, the Convention has the character of a compromise. This can be seen from both the substantive solutions and the regulation methods used (Preface 2.5. and Maskow, Hauptzüge, 546 fol).

[5] [removal of legal barriers]

The idea that the unification of law would promote international trade, as it is expressed here in an exaggerated way ("... removal of legal barriers"...), is the underlying motif of any efforts to achieve uniform laws in this field (c. Preface 1.1, 2.2, 2.3.). From this wording it can be deduced, in our view, that legal problems should, whenever possible, be solved in line with the Convention. Doubts, however, should always be removed in applying the provisions of the Convention, as is stipulated in Article 7, paragraph 2. [page 21]

Go to Table of Abbreviations || Go to Explanation of Abbreviated Bibliographic References
Go to entire contents of Enderlein & Maskow text

(1) This Convention applies to contracts of sale [1] of goods [2] between parties whose places of business [3] are in different States [4]:

(a) when the States are Contracting States [5]; or
(b) when the rules of private international law lead to the application of the law of a Contracting State [6].

(2) The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between or from information disclosed by, the parties at any time before or at the conclusion of the contract [7].

(3) Neither the nationality of the parties [8] nor the civil or commercial character of the parties or of the contract [9] is to be taken into consideration in determining the application of this Convention.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [contract of sale]

The 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. Article 3 extends the scope of application of the Convention to some contracts which are not purely sales contracts. [page 27]

Whether the so-called linked operations are also covered by the Convention's scope of application is not expressly clarified. At present those operations, above all in East-West economic relations, to which, however, they are not limited, include the following main forms of contracts: counter-purchase, buyback and barter, of which exists no uniform definition at all. It is widely held (Documents of the ECE TRADE/WP.5/R.4/Rev.1, Ziff. 8 fol for counter-purchase and TRADE/WP.5/R.5 for buyback) that at least the two first mentioned forms of bound transactions are understood to be such where separate contracts are often concluded in both directions; provided that further prerequisites are met those are no doubt governed by the Convention.

There are problems in regard to genuine barter which, in present day world trade, is relatively seldom. An overwhelming number of arguments in our view speaks in favour of applying the Convention also in this case (Loewe, 27, seems to have a different view). Any partner is to be considered here both as buyer and seller, though with 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.

It has to be admitted, however, that Article 53 expressly mentions the obligation to pay the price and that also the following provisions require payment of money. Difficulties could arise in regard to the provisions concerning the synallagmatic connection between performance and counter-performance (Article 58); and to that extent it is understandable that Huber (419) holds a different opinion. Those difficulties should be overcome in shaping the contract; and, according to our experience, this is actually done. The opinion substantiated in the genesis of ULIS, namely that the uniform law is not to be applied to barter (Herber/Dolle, 9) does not, as we believe, have to be applied in regard to the CISG.

The Convention cannot be applied to leasing contracts even if they contain a purchase option (Volken/Freiburg, 113 holds a different view). For such contracts there is a specific convention in the form of UCIF, even if it has not yet entered into force. This does not, however, exclude that in the case of financial leasing in regard to the sales contract between the seller and the lessor, the CISG is applied if the required conditions are met. Then the CISG is applied to the relations between the lessor and the lessee to the extent to which the conditions of the delivery contract affect the former (e.g. Articles 10 to 12, Factoring Convention). [page 28]

Neither does the Convention apply, as a matter of principle, to agency agreements with commercial dealers (Herber/Freiburg, 103). We believe, however, that it is valid for those sales contracts which are concluded on the basis of the dealer contract (e.g. through delivery on call).

As to investment contracts compare Article 3, note 7.

[2] [sale of goods]

The goods referred to are conceived as movable assets; and the common-law tradition sets great store by noting that they have to be corporeal as well (Honnold, 88). A reflection of this position was the exclusion of electricity from the Convention's scope of application. Hence sales of immovable property and legal assets (e.g. sales of industrial property rights) are not covered by the Convention's field of application. The results of scientific and technological research (e.g. projects, construction documents etc.), however, can well be the substance of sales contracts in the meaning of the Convention (Article 3, note 7). The term "goods" in the sense of the Convention is limited by Article 2, subparas. (d), (e) and (f); but then again extended in Article 3.

[3] [places of business]

Concerning the notion "place of business" compare Article 10, note 2.

[4] ["in different States"]

Reference is made here to the second decisive criterion for the Convention's application: the internationality of the contract. The inclusion of the requirement of transboundary transportation following the ULIS model, as was requested by Volken (Freiburg, 92 fol) citing examples which would cause problems, would have produced legal complications and lack of clarity in terms of substance.

[5] [Article 90, 94 restrictions; territorial restrictions]

      [5.1] Restrictions follow from Article 90 and, insofar as the States concerned have made relevant declarations, also from Article 94.

      [5.2] The Convention does not apply; per se, to the relations between parties from different territorial units of States having several relevant legal systems (Jayme/BB, 30).

[6] [rules of private international law lead to the application of the law of a Contracting State]

      [6.1] This rule enables the Convention to be applied also to contracts between parties of whom one, or in exceptional cases even two, does not have his place of business in a Contracting State. This is valid where the decisive rules of private international law refer to the law of a Contracting State. [page 29]

We hold that in the event of such reference the CISG should be applied at once without checking the private international law of the State to whose law reference is made (so convincingly Winship, 521 fol with reference to views contradicting one another; in favour of reference back or forth Loewe/Lausanne, 15).

      [6.2] What matters here are the rules of private international law which determine the law to be applied to sales contracts. In many instances this applies to arbitral tribunals. The national conflict-of-law rules in most cases permit a broad party autonomy in terms of conflicts of law (Lando, International Encyclopedia, 24 fol) of which the parties to international economic contracts make use frequently. As a consequence, the further connecting factors like the right of the seller's country and, having the same result, the right to characteristic performance are diminished in their practical significance.

Important arbitration rules, like those thought for ad hoc arbitration courts, e.g. the UNCITRAL arbitration rules (Article 33, paragraph 1) or the ECE arbitration rules (Article 38) or even those for international arbitral tribunals (ICC Rules of Conciliation and Arbitration, Publication of the International Chamber of Commerce No. 447, Paris 1987, Article 13, paragraph 3), while giving absolute priority to the choice of law by the parties, in the absence of it concede to the arbitrators the right to decide for themselves which are to be the decisive conflict-of-law rules and thus which is the substantive law.

The main cases to which this rule could apply will be those where the parties have chosen the law of one Contracting State, if only one or even none of them belongs to a Contracting State, and where because of the conflict-of-law rules of one Contracting State that State's own law is applied to a contract in which at least one of the parties is from a non-contracting State.

      [6.3] This rule may also place an obligation on courts and arbitral tribunals in non-contracting States to apply the Convention if they invoke the law of a Contracting State on the basis of the conflict-of-law rules that are decisive for them (see also Siehr, 610, fol). That State, in acceding to the Convention, has expressed that the provisions of the Convention are the decisive norms of its law in regard to international sales contracts. Since foreign law is to apply in the same way as in the State where it is in force, foreign arbitral institutions have to accept that decision. Concerning modifications in the context of a reservation (note 6.4.) compare Article 95, notes 1 and 2. [page 30]

      [6.4] At the diplomatic conference the FRG voiced reservations against this rule, inter alia, because according to the decisive private international law the conclusion and the content of the contract could be connected differently (O.R., 236 fol). Huber (423) declared a special way of connecting the formation of a contract as incompatible with the meaning of Article 1, paragraph 1, subpara. (b). This is incomprehensible since even a participation in the Convention can be limited to the conclusion of a contract or to the purchase of goods. We could well imagine the Convention to be applied only to the extent to which the decisive private international law refers to it: e.g. only in regard to the formation of the contract (there we are in agreement with the Norwegian delegate; O.R. 237).

Czechoslovakia and the former GDR, referring to their special legislation concerning international economic contracts, were in favour of deleting this rule (O.R., 237 fol).

Such interest in having the rule deleted was finally taken into consideration insofar as Article 95 provides for a reservation in respect of Article 1, paragraph 1, subpara. (b).

[7] [Article 1(1)(b) reservation; undisclosed principal or agent]

      [7.1] [in respect of Art. 1(1)(b)] In that case the Convention does not apply for either party Loewe/Doralt, 14). This rule is to prevent that a party who, because of the facts known to him believed the contract to be a domestic one, all of a sudden is confronted with the fact that it is an international contract to which the CISG applies.

      [7.1] [undisclosed principal or agent] Under the common law view, one of the essential applications of this paragraph is the case of agency of an i.e. indirectly acting as an agent which under continental European law is expressed through the legal institute of the commission (Secretariat's Commentary, O.R., 15; Honnold, 78; but also Jayme/BB, 31). A condition for this situation is that the applicability of the CISG in the case of a sales contract between an agent and a third party is derived from the status of the principal and the third party and, therefore, does not apply if the foreign capacity of the principal in the sense of the rule is not obvious to the third party. This is certainly true of the common law and may also be true in respect of the Member States of the Agency Convention which in Article 2, paragraph 2, provides for indirectly acting as an agent. Continental European laws would in this case regularly assume that the sales contract between the agent and the third party is valid and judge by their status whether the CISG is the applicable law.

[8] [nationality of parties or other criteria irrelevant]

Hence, what matters is the place of business (Article 10). In the case of legal persons neither the nationality of the actual owner nor the law on which they are based, nor other criteria are relevant. [page 31]

[9] [civil or commercial character of the contract irrelevant]

The notion of international sales contract had to be freed from the possible influence of different national differentiation which already, in regard to the scope of application, could prevent the uniform application of law. The criteria cited can only be examples by which it is to be generally expressed that the term "international sales contract" can only be interpreted on the basis of the Convention. The latter, however, gives a differentiation which is comparable to some of the national rules that have been rejected (Article 2, subpara. (a) and note 2 to that Article).

This Convention does not apply to sales [1]:

(a) of goods bought for personal, family or household use [2], unless the seller, at any time before or at the conclusion of the contract, neither knew or ought to have known that the goods were bought for any such use [3];
(b) by auction [4];
(c) on execution or otherwise by authority of laws [5];
(d) of stocks, shares, investment securities, negotiable instruments or money [6];
(e) of ships, vessels, hovercraft or aircraft [7];
(f) of electricity [8].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [types of restrictions]

There are three types of restrictions in this article:

[2] [goods bought for personal, family or household use]

This generally refers to a non-commercial purpose (similar view held by Huber, 421 fol). Those 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.

In many countries special laws have been enacted which are directed against clauses in general business conditions by which the legal rights, in particular of the buyer, are limited. Such legislation is above all aimed at consumer contracts which, irrespective of any national differences, meet the very definition of the contracts excluded here.

Insofar the relationship between the CISG and the mandatory domestic consumer protection rules does not have to be determined.

The legislation aimed against an abuse of general business conditions is not necessarily limited to consumer contracts and can, where it reaches beyond them, achieve importance also for international economic contracts. Since the CISG does not regulate those problems and also from its underlying principles the prohibition of abuses of general business conditions can hardly be deduced, it cannot be excluded that the relevant norms of the applicable law chosen on the basis of the decisive rules of private international law can be invoked in addition whenever a gap under Article 7, paragraph 2, is found. Contradictions that may exist between the CISG and the mandatory domestic law should, in our view, be settled in favour of the Convention (see Schlechtriem, 14; also as the Convention is the more recent and more specific law). This includes that the parties can make relevant arrangements, and the Contracting States must leave them that much freedom within the scope of application of the CISG (Herber/Doralt, 36). We believe that this is justifiable also because the structure in regard to parties to international economic contracts is generally more balanced than in the case of national ones. Should domestic protection rules, however, affect the validity of contracts or clauses they will generally supersede the CISG under Article 4, subpara. (a). There is a trend in publications to attach growing importance to this provision.

[3] [need to be able to recognize consumer sale from circumstances of transaction]

      [3.1] The purpose of the goods will in general be recognizable from the circumstances of the transaction, e.g. retail sale, sale through mail order firms, etc. If the goods, contrary to the purpose at the time of the purchase, are used for commercial purposes, the Convention will not apply because late changes in purpose are irrelevant (Honnold, 86). [page 33]

If, however, the circumstances of the transaction are such that an intended industrial use of the goods suggests itself (e.g. a wood-working machine for industrial purposes is ordered directly from the foreign manufacturer) the CISG is applied also in the exceptional case that the goods are destined for personal purposes (e.g. for use in one's own personal workshop), unless the seller knew or ought to have known this, e.g. because of an indication by the buyer (Loewe/Lausanne, 17). The Convention applies, however, to a contract which seems to be a consumer contract but is not (ibid).

In regard to whether the seller "knew" or "ought to have known", what matters again is the time of the conclusion of the contract (Secretariat's Commentary, O.R., 16; Khoo/BB, 37). It is not sufficient to gain this knowledge only when, for instance, the machine is being installed.

      [3.2] At the diplomatic conference (O.R., 238 fol) problems related to the burden of proof have played a role in this context. The view was also held that the Convention should not decide questions of burden of proof, but rather, this should be left to the courts as matters of procedural law (O.R., 295 fol; Khoo/BB, 39). It is no doubt correct that in formulating most of the provisions of the CISG the questions of burden of proof have not specifically been taken into account. Chances are that checking the Convention's text for them will not be successful. This should, however, not be made into a problem. The Convention should be invoked to the extent to which it solves such questions, and this is what it does in this place. Therefore, the usual methods of interpretation are to be used.

A typical constellation in this case could be, as Khoo (BB /40) rightly notes, that the buyer wishes to prevent application of the CISG in order to enjoy the domestic protection laws which are more favourable to him. The buyer will have to prove that he has bought the goods for personal use, and the seller will have to prove that he did not even have to have knowledge of it (Honnold, 87; Khoo, ibid).

[4] [sales by auction]

As a reason for this exception it was indicated that there are often specific rules for auctions under applicable domestic law (Secretariat's Commentary, O.R., 16). Already Réczei (Problems of Unification, 70) has justly objected that 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. This specific form of party agreement could be complemented by the Convention as decisive law. [page 34]

Already at present, the rules for auctions could naturally determine the CISG as the subsidiary applicable law (opting in).

[5] [sale on execution or otherwise by authority of law]

Such sales are excluded because they are governed by special and mostly mandatory rules in numerous countries.

[6] [sale of stocks, shares, investment securities, negotiable instruments or money]

This exception can be explained by the existence of mandatory domestic rules of which only foreign exchange control regulations shall be mentioned here.

The negotiable instruments referred to here include bills of exchange, cheques and shares; but not, however, the documents relating to the goods (see also Secretariat's Commentary, O.R., 16; Honnold, 88), i.e. documents of title. The buyers of such papers are basically the buyers of the goods to which those refer. That such purchases should not be excluded follows, inter alia, from the fact that the documents mentioned in Articles 34 and 58, paras. 1 and 2, which relate to the goods and/or allow to have disposal of the goods are, in particular but not exclusively, documents relating to the goods.

[7] [sale of ships, vessels, hovercraft or aircraft]

      [7.1] The reasons given for this exception were, above all, registration requirements and the existence of specific rules for the sale of ships in some countries according to which ships are treated as immovable property (Secretariat's Commentary, O.R. 16). But the problems of title, which are the first to be affected in this context, are left out of the Convention (Article 4, subpara. (a)). Besides, the latter does not apply to aircraft. The argument mentioned by the FRG representative, that sales contracts for ships are of a very specific nature (O.R., 240 fol) could be invoked in regard to many other types of contracts which are not excluded from the Convention. Kahn (958) also justifies the exclusion referring, inter alia, to Article 3, paragraph 2, though he wants to have the Convention applied to contracts for the setting up of plants (not in agreement Huber, 419).

      [7.2] A distinction between the terms "ships" and "vessels" is not easy to make. For this reason, Honnold (89) wants to exclude any ship from the scope of application as is doubtlessly done in the case of seagoing (Schlechtriem, 16), hovercraft and aircraft. It should, therefore, be recommended to the parties in cases of doubt to expressly agree when to apply the Convention.

[8] [sale of electricity]

The reason given here that electricity in many legislations is not considered to be a good (compare O.R., 16) is theoretically not convincing because the Convention may create its own definition of a good. It should be admitted, however, that in light of the strong centralization of electricity, trade contracts can be elaborated in [page 35] great detail. But this would not exclude application of the Convention's general provisions.

[TEXT OF THE UNIFORM LAW]

(1) Contracts for the supply of goods to be manufactured or produced are to be considered sales [2] unless the party who orders the goods undertakes to supply a substantial part [3] of the materials necessary for such manufacture or production [4].

(2) This Convention does not apply to contracts in which the preponderant part of the obligations [5] of the party who furnishes [6] the goods consists in the supply of labour or other services [7].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [general comments]

Given the difficulties in interpreting this article because of the vague terms used (notes 3 and 5) it is recommended that the parties use the following clause when wishing to apply the Convention:

"The contract is subject to the United Nations Convention on Contracts for the International Sale of Goods. Specific problems relating to services which are not covered by the Convention are subject to the law of the …' s country.That same law also applies under Article 7 of the Convention to complement it."

[2] [goods to be manufactured]

The inclusion of contracts on the delivery of goods to be manufactured (machines, manufactured goods) or produced (agricultural produce, raw materials) at the time of conclusion of the contract, in sales contracts means that the CISG can be applied also to certain contracts which are considered to be works contracts.

[3] [a substantial part]

The CISG uses here a vague term which permits flexibility but also creates uncertainty. The term "a substantial part" should be defined using criteria of value (Honnold, 92 and Khoo, BB, 42). Substantial is not "preponderant" as in Article 2, it may even be less than one half. We doubt, however, that 15 per cent will suffice, as believes Honnold. When the relevant proportional value is to be calculated, a complementary criterion could be to assess the importance of supplies of parts of the goods for the purpose of manufacture. Only if those are substantial for determining, for instance, the technical parameters of a machine to be delivered, a portion of less than one half of the value could be considered sufficient to exclude [page 36] the Convention. In this case, it should not be substantially lower, otherwise it should be above that portion.

The order has to be free of charge. When the seller acquires parts from the buyer which become part of the machine, there will be a sales contract irrespective of their proportional value.

The provision of technical drawings etc. has no influence on the character of a sales contract in the meaning of the Convention. This follows not only from the failure of a motion submitted by Britain and aiming towards the opposite (O.R., 84 fol), but can be deduced, above all, from Article 42, paragraph 2, subpara. (b) which regulates a specific problem related to it.

[4] [materials necessary for such manufacture]

This serves to exclude particularly processing upon contracts, and several other types of work contracts from the scope of application of the CISG.

[5] ["the preponderant part"]

The criteria of what is to be considered the preponderant part of the obligations are similar to those explained in note 3. But the "preponderant" part is bigger than a substantial part and has to mean more than half. A proposal by Britain, which aimed at adopting a merely quantitative, value related approach (major part of the value), did not meet with the approval of the Conference (O.R., 84 fol).

[6] [party who furnishes the goods]

The notion "seller" was not used because the partner in question was not a seller in this case, or rather not exclusively (O.R., 242)

[7] [supply of labour or other services]

The opposite conclusion would be that the CISG is to apply also to contracts which do not exclusively have the character of a sales contract. Therefore, regular contracts containing an obligation of assembly fall under the scope of the Convention.

There are problems when it comes to applying the Convention to contracts for the setting up of plants. Kahn (955 fol) is in favour of that solution in relation to turn-key contracts, while Herber (Freiburg/103), referring to ULIS jurisdiction, is considerably more cautious in aiming towards the same direction. The UNCITRAL Legal Guide on Drawing Up International Contracts for the Construction of Industrial Works, New York 1988, points to the fact that the Convention can be applied in regard to some works contracts and recommends agreements (303 fol). We endorse this position (in detail, see Brand/Maskow, Der internationale Anlagenvertrag, Berlin 1989, 78 fol). We do not understand why Honnold (89 fol) excludes building contracts (which have much in common with contracts for the setting up of plants even if more is manufactured at a construction [page 37] site) from the scope of the Convention. His argumentation is based on the common law interpretation of the term "goods". This is not necessarily the Convention's interpretation of the term; and furthermore, it has been extended by Article 3 (and not restricted, as Honnold (75) affirms in another place). The situation in respect of the application of the CISG to contracts for the setting up of plants and other combined contracts is different from what the Secretariat's Commentary (O.R., 16 fol) and Schlechtriem (17) believe, but is, as Kahn (956) correctly explains, to be decided pursuant to the CISG and not to applicable domestic law, since the latter is applicable only to the extent to which the former is unable to apply.

From the fact that the CISG is applicable to certain contracts containing elements that are alien to sales, it may be concluded that regulations of the Convention which are not typical for sales apply to the contract generally (see also Honnold, 93) e.g. the general provisions, the rules for the formation of the contract, the rights in case of breach of contract, and exemptions. Specific rules concerning the rights and obligations of the parties, which do not have the character of a sales contract (e.g. conditions of stay of experts) would, if need be, have to be drawn from national law (frequently the contracts sufficiently provide for them). Where there are contradictions between the CISG and the national rules for non-sales elements (e.g. when the national law to be applied to assembly contracts permits ordinary unilateral termination which is unknown under the CISG) the Convention will supersede that domestic law because it applies to the largest part of the performance anyway.

When the terms "labour" and "other services" are used to characterize non-sales obligations, then this is obviously done to express that human labour as such is owed, irrespective of whether it has a form giving effect or not. If it is only the result of labour which is owed, like in many contracts on the preparation of scientific and technological results (project contracts), then there exists a sales contract in the sense of the CISG in any case.

This also has to be taken into account when the preponderant part of obligations is defined. "Labour" or "other services" include, above all, assembly work, supervision, control, storage, after-sales services and maintenance. [page 38]

[TEXT OF THE UNIFORM LAW]

This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer [2] arising from such a contract. In particular [4], except as otherwise expressly provided in this Convention [3], it is not concerned with:

(a) the validity of the contract [5] or of any of its provisions [6] or of any usage [7];
(b) the effect which the contract may have on the property in the goods sold [8].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [CISG and other legal relationships]

      [1.1] Any legal relationship involves a host of legal relations so that it is covered in its entirety only by the respective national system of law. In the case of international legal relationships there are also other national legal systems and internationally agreed rules which are relevant. Since unification of law can only be achieved step by step there are inevitably problems of delimitation between unified and national law (Introductory remarks 2.3.). The Convention solves them, positively, in giving a definition of its scope of application so that the space left free can be covered by domestic law (or other conventions), and, negatively, in excluding certain aspects from its field of application.

      [1.2] The scope of application of the CISG is determined not only by the legal relations it involves, but also by the depth and comprehensiveness in which these relations are regulated (Maskow, Convention, 50).

As to the depth of regulation, i.e. the concreteness and detail with which the relations covered by the Convention are actually regulated, it is, in particular, Article 7, paragraph 2, which provides a general guideline. The first sentence of Article 4 covers the comprehensiveness of the regulation, i.e. the extent to which the problems falling under the substantive scope of application of the Convention are covered. [page 39]

[2] [substantive scope of application of the CISG]

The substantive scope of application of the CISG is once again summarized and described in a general way in this place, using terms which have been explained more precisely in the preceding articles. It is basically pointed to what is indeed governed by the Convention, i.e. the content of Parts II and III. Those parts can also serve to flesh out what is understood by the conclusion of the contract of sale and the rights and obligations of its parties (Honnold, 96).

In accordance with the principle of an interpretation that is favourable to the Convention (Introductory remarks 2.3.), the terms used here should be broadly interpreted. Many of the aspects of a sales contract, which are mentioned separately in Article 12 of the Hague Convention on the Law Applicable to Contracts for the International Sale of Goods 1986 apart from the rights and obligations of the parties, according to the Convention clearly fall under those terms. This is true of the interpretation and performance of the contract, (subparas. (a) and (b)); the time from which the buyer has the right to the fruits and use of the goods and/or the risk passes to him, (subparas. (c) and (d)); the consequences of non-performance; and the different ways of expiration of obligations and the loss of rights after the expiration of a time-limit, (subparas. (f) and (g)). Concerning the voidness and ineffectiveness of the contract, (subpara. (h)), compare note 4.

Other problems covered by the contract's statute in the meaning of the Hague Convention on the Law Applicable to Contracts for the International Sale of Goods 1986, namely the validity and effectiveness of reservation clauses on property and the limitation (Article 12, subpara. (e) and (g)), are not regulated by the CISG and therefore do not belong to the rights and obligations of the parties in the specific sense of Article 4.

[3] [terms which describe the substantive scope of application]

      [3.1] The discussion in note 2 has already shown that the terms which describe the substantive scope of application of the Convention in a positive or negative manner have to be identified under the CISG and not under domestic law or other conventions. This problem is of specific relevance when it comes to finding out whether the CISG expressly provides otherwise, i.e. regulates specific aspects of a problem, which is generally excluded. It is quite obvious, however, that no express, even if anonymous, rejection of certain national concepts can be demanded (similarly Schlechtriem, 19) as is indeed known under the CISG (e.g. Article 45, paragraph 3 and Article 61, paragraph 3; but there are quite a number of other articles which at least can be seen in this light). It is sufficient that the CISG contains other options to settle the problem. Here the general principles under Article 7, paragraph 2, are insufficient. But when was such express provision made? Schlechtriem (19), in our view, is [page 40] basically right in believing that national law on validity will not apply when the CISG provides a functionally adequate solution to the problem which has been settled nationally by questioning the validity of the contract, e.g. no rescission in the case of error on the character of a person under domestic law (119 (2), German BGB), if the problem can be solved pursuant to Article 71 (Article 8, note 3.4.). Honnold (97) holds a similar view, but even goes beyond and believes that the crucial question is whether the domestic rule is invoked by the same operative facts that invoke a rule of the Convention. If this is the case, the domestic law is dispensed by the Convention. Practice must show whether or not such a far-reaching general formula will prove its worth. The idea should be supported nevertheless. Heiz ("Validity of Contracts Under the United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, and Swiss Contract Law", Vanderbilt Journal of Transnational Law, Volume 30, (1987), 639 fol) has explained on the basis of this argumentation that Article 24, paragraph 1, clause 4 OR in most cases would not apply apart from the Convention in regard to an important error on a fact which by the person who erred was considered as belonging to the very foundations of a contract. Thus he chose an example that is similar to the one Schlechtriem mentioned. As a result, the view could crystallize, with respect to error on the character, that the relevant national rules as a matter of principle should not be invoked apart from the CISG. According to the opposite view, at least under Austrian law, rescission of an error is to be judged by 871 fol Austrian ABGB if this is the applicable law, because according to the latter, lack of intention is equal to defect in validity. This is clearly voiced by Lessiak ("Kaufrechtsabkommen und Irrtumsanfechtung", Juristische Blätter 1989, p. 487 fol, as above p. 496).

      [3.2] When the CISG itself proceeds on the assumption that certain facts do not constitute a reason for nullifying a contract (although they do under domestic law) then this includes, in our view, an express and different provision (express does not explicitly mean direct). This refers, for instance, to contracts without agreement on price (Article 55, notes 1 and 2) or certain grounds for failure (Article 79, note 13.6.).

[4] [rights and obligations of the seller and the buyer]

      [4.1] Apart from those mentioned in subparas. (a) and (b) there are many other problems which are relevant to sales contracts and which in part directly relate to the rights and obligations of the parties, which are not and/or not directly provided for. Those include agency (authority), limitation, calculation of periods (individual aspects are, however, provided in the CISG - e.g. in Article 20), plurality and change in Contracting Parties, claims for liquidated damages and the amount of interests. Domestic law is invoked to the [page 41] extent provided for in Article 7, paragraph 2. Also, unless conventions like the Limitation Convention (Part II) and, at a later date, the Agency Convention (Part IV) apply.

      [4.2] Another problem, which can only be mentioned briefly, here follows from the possible concurrence between claims that derive from the contract of sales law and those that fall under the law of torts.

Theoretically there is no doubt that in the context of sales contracts there can emerge rights under the law of torts which are not covered by the Convention and have, therefore, to be deduced from domestic law. Problems arise, however, in cases where the same fact may entail consequences both under the CISG and the domestic law of torts. This relates, in particular, to cases of product liability (Article 5). But the concurrence in regard to rights goes much further. This is also to be seen in connection with the broad term of breach of contract used in the Convention which is, in our view, expressed, above all, in Article 45, paragraph 1 and Article 61, paragraph 1 and not so much in Article 74 which does flesh out the consequences. We hold that in regard to this specific question (generally in note 2), the rules of the Convention should supersede domestic law. Schlechtriem (Borderline, 473 fol) makes an attempt to solve the problem by way of making a distinction between contractual and other interests with the contractual and their respective obligations being decided in accordance with the Convention. Since the qualification of the interests must not be characterized by domestic rules, they would have to be guided by the Convention. That is why we are afraid that not much will be gained by Schlechtriem's attempts because in the long run they will lead back to the question of the rights and obligations of the seller and the buyer under the Convention. We believe that it is still too early to try to make the general principles more precise; first a consensus will have to be achieved in regard to the categories of main cases.

Insofar as the Convention is invoked it must, in our view, be applied as it is, i.e. it excludes claims under the domestic law of torts. We, therefore, cannot join Khoo (BB, 47) who believes that the Convention would not want to take away rights from the parties which they would otherwise have. The Convention very well replaces existing rights by certain other rights.

We do not consider as sufficient other provisions regarding the competence for tort claims (Schlechtriem apparently believes otherwise, Borderline 475) in order to justify application of domestic law in regard to that. It would also be extremely problematic to limit the consequences of such application by interpreting that law in the [page 42] light of the CISG because the recognized methods of interpretation will not yield sufficiently certain results in this context.

[5] [validity of the contract]

      [5.1] Concerning the validity of contracts a distinction is made between formal and substantive validity. Formal validity may depend on keeping with provisions on form. The Convention provides for this so that domestic law will apply only in exceptional cases, namely when a reservation is made against the freedom of form (compare Articles 11, 12 and 29, note 2). Hence, this rule above all relates to the substantive validity of the contract. It is, however, pointed out that a distinction between provisions of validity as to substance and such relating to form can often be doubtful (Herber/Doralt, 41). In our view, obligations should be prevented from being re-introduced through the backdoor, by declaring certain form requirements to be substantive.

The validity of the contract in terms of substance depends on fulfillment of specific contract law provisions, which for instance could be aimed at fighting unfair behaviour that is contrary to normal commercial conduct (fraud, threat, profiteering). In this context, such situation should be mentioned where the rights and obligations of the parties are grossly imbalanced and where the contract is declared invalid by virtue of law for those and other reasons (e.g. impossibility of performance). By 1972 UNIDROIT had already submitted a draft convention on the validity of international sales contracts (ETUDE XVI/B, Doc. 22, U.D.P. 1972) which was examined in the process of preparing the CISG, but was not included (Enderlein, Ausarbeitung, 3 fol). As to the effects on validity it does not matter whether or not the relevant contracts are invalid by virtue of law or voidable (directly by the parties or the judge at the request of the parties) (Schlechtriem, 18 fol; Honnold, 97), nor does it matter whether invalidity is absolute or can be remedied by procuring a (governmental) approval. Validity or invalidity of a contract are governed by the applicable national law.

In regard to the contractual validity, the statute of the contract is applied in general, i.e. the law which under the decisive conflict-of-law rules (Introductory remarks 2.3., Article I, note 6.2. and Part IV of the Hague Convention on the Law Applicable to Contracts for the International Sale of Goods) governs contracts.

The substantive validity of international sales contracts can furthermore depend on norms of an economy-managing or economy-controlling character. In such case, each State will apply his own domestic rules without invoking conflict-of-law rules. This is also true of courts and arbitral tribunals (however with restrictions, above all in the case of international arbitral tribunals), provided that the relationship [page 43] to be judged is substantially related to the State in question. Other States, which are related in such a way, demand at the same time that their relevant rules be invoked. But apart from some provisions in conventions there is no general obligation to take foreign public prohibitions and permissions requirements into account. (On the overall problem, see Lando, International Encyclopedia, 112 fol).

The parties to the contract, however, have to consider the existence of those rules. Were they to not do so, the course of the transaction would slacken if the State which had prescribed the prohibitions or permissions requirements had a real influence on that process. Article 54 of the Convention is based on the same assumption.

      [5.2] The examples given for validity requirements should have made clear that, on the one hand, it was indeed not possible insofar to bring about broad unification and that, on the other, the States could not renounce the inclusion of a relevant reservation in regard to national law. Concerns are, therefore, not unfounded that those provisions could turn out to be the "black hole" which shortens the scope of application of the CISG (Winship, Commentary, 636). Indications of that kind are already given in publications (examples in note 6.2.). This trend can be countered at present by scientific efforts at the international level which are aimed at a narrow interpretation of the possibility to declare void under domestic law specific clauses or usages (note 6.1.) and at a broad interpretation of other express provisions of the Convention (note 3), but against which Lessiak expresses himself (loc sit, note 3.1., p. 492 fol).

[6] [domestic rules on general business conditions]

      [6.1] In regard to specific contract provisions, the same considerations apply as for the contract as a whole (note 5). In addition, the question should be asked how the contract in its entirety is to be treated when only some provisions are declared void. It has to be answered pursuant to domestic law.

      [6.2] There are legislative rules in a number of countries to prevent abuse of general business conditions. Those are, in part, limited to consumer sales. At least the British Unfair Contract Terms Act of 1977 to a large extent exempts international sales contracts. Insofar the problem is irrelevant. But other provisions of that kind relate completely or to a lesser degree to international sales contracts in the meaning of the Convention (regarding the legal situation in several countries see H. Rudolph/G. Neumann/P.-M. Petzow, Allgemeine Geschäftsbedingungen und Vertragsgestaltung, Berlin 1985, p. 31 fol). Herber (Doralt, 36) rightly pointed to the fact that the Contracting States' domestic law within the Convention's scope of application has to grant autonomy to conclude contracts unless [page 44] such protective provisions can be regarded as obstacles to the contract's effectiveness. This presupposes, in our view, that the relevant provisions, whether they are part of specific legislative acts or of general contractual rules, can clearly be recognized as referring to the validity of the contract and do not have to be re-interpreted as such.

We also believe that the problem of to what extent of domestic law contradict the validity of specific contractual provisions, which from time to time is raised in publications (see also note 3 of Article 6), has to be solved in a similar way. While Winship ("International Sales Contracts Under the 1980 Vienna Convention", Uniform Commercial Code Journal, 1984/1, p. 66 fol) seems to understand "mandatory" rules of law to be the international mandatory rules of the Lex fori in the meaning of Article 7, paragraph 2, ECE Convention 1980, Magnus (133) obviously sees this problem in a larger perspective. We hold that mandatory rules of domestic law should not be interpreted as contradicting the validity of specific contractual provisions in the meaning of the CISG (it appears that Thieffry, 383, believes the same, while Kahn, Caractéres, 399, leaves open the possibility of a broader interpretation of national law). This is unequivocal insofar as the CISG itself contains rules for this (note 3.1.). In regard to the area beyond, which is covered by the general principles of Article 7, paragraph 2, one should be very careful. Mandatory national rules should be invoked at most if they provide for the voidness of contrary stipulations not just implicitly. Typically, international mandatory norms are formulated clearly so that one can assume that they will prevail more often than normal mandatory rules of domestic law. Generally, there is still a large degree of uncertainty in this matter, but Hellner (Dubrovnik, 361) seems to be right in admitting that the unification of control in regard to standard terms of contract, that he would find desirable, might be very difficult to attain.

[7] [usage and non-validity]

Basically, recognition of a specific conduct as usage and non-validity exclude each other. It is nonetheless possible that certain countries consider as void internationally recognized usages or such usages which are agreed between the parties.

[8] [problems of title]

It is a fact that the Convention mentions problems of title in providing in Article 30 for the obligation of the seller to pass title in the goods, and also indirectly in Article 41, stipulating that the goods delivered have to be free from third party rights or claims (see furthermore Article 42). It is, however, up to the applicable domestic law to determine the time and conditions of such passing of title. [page 45]

These problems are extremely complex so that they could not be solved with the CISG. Even the attempt at regulating one partial problem, namely the protection of the bona fide purchaser of movable property by means of a uniform law whose draft had been prepared in the framework of UNIDROIT (UNIDROIT Yearbook, 1967-68, vol. 1, 222 fol), was not successful.

This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person [1].

[COMMENTARY]

[1] [products liability]

      [1.1] This rule relates to products liability. This term refers to the liability of the manufacturer and/or importer, seller and/or supplier for personal injury, damages and further possible damages to property which have been caused by defective goods. In a number of States this kind of liability has developed into an independent legal institute. While it is based in some countries (e.g. FRG) on the law of torts, it is construed in others (e.g. France) as falling under the law of contracts. There is also a combination of both (USA, Britain) (Liebold, Produktenhaftung, 1 fol). By enacting the guideline of the Council of the European Communities of 25 July 1985 for the alignment of the Member States' legal and administrative rules of liability for defective products (ABl. EG No. L 210/29-33), the obligation was placed on those States to put into effect relevant and generally mandatory liability norms under the law of torts (Liebold, "Zur Vereinheitlichung des Produktenhaftungsrechts der EGStaaten durch die EG-Produktenhaftungsrichtlinie", RiA, 112, Beilage zu AW-Dok., 1989/27, p. II).

This article clearly stipulates that national law and/or possibly other conventions apply to liability for personal injury caused by the goods sold. It is not relevant in this context whether it is the buyer himself, his employees, other Contracting Parties in the purchaser chain or third parties who suffer such personal injury. What is relevant, however, is whether or not it was the defect in the goods sold which caused the injury. Provided that is so, the buyer can, as a result, claim damages under national law (Schlechtriem, 20) also by way of recourse where they will typically appear as claims for damages. [page 46]

      [1.2] Proposals to exclude products liability for damages or injuries other than personal injury, as in damages in property, were not successful. It seems that, in spite of the opposite view of the Norwegian delegate (O.R. 245), the reverse conclusion has to be drawn from that situation that they come under the Convention. The arguments put forward against the proposal to exclude products liability in the case of such damages (set-back for the unification of law, difficulties in distinguishing claims) only serve to emphasize this. Therefore, in our view, claims from products liability for damages other than personal injury in the relationship between the Contracting Parties must be considered as part of the Convention and in general as being regulated by it (in particular because of the provisions on quality and the rights of the buyer). This is clearly the dominating view expressed in publications (Schlechtriem, 20 fol; Honold, 101 fol; Stoll/Freiburg, 259; Khoo/BB, 50; Herber /Doralt, 38).

Only occasionally is it affirmed that the Convention is not to apply to product liability (M. Ndulo, "The Vienna Sales Convention 1980 and the Hague Uniform Laws on the International Sale of Goods 1964: A Comparative Analysis", ICLQ, vol. 38 (1989), p. 5). There is no room for other claims under the law of torts (Stoll, 259, believes differently) because the Convention, even if only indirectly, has given a qualification of its own, and the possibility of an alternative application of national law cannot be made dependent on the qualification of that legal institute in domestic law (also note 4.2. of Article 4). It is exactly such attempts which Article 7 is directed against. However, it is not excluded that product liability claims from non-personal injury, which cannot be regarded as breaches of contract, are judged under the national law of torts. Naturally, third parties can assert claims from product liability as a result of damages other than personal injury under the applicable rules directly against the responsible person (manufacturer, seller). Given the typical constellation of international sales contracts this will not be the standard case. A third party will, in most cases, prefer to address his immediate partner, inter alia, because the latter is more easily accessible for him (in general he is from the same country).

Insofar as a case of product liability causes personal injury and other damages, both aspects are to be judged invoking different rules. Such duplication is in no way unusual in regard to issues which are subject to unification of law. [page 47]

The parties may exclude [1] the application of this Convention or, subject to article 12 [2], derogate from or vary the effect [3] of any of its provisions.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [exclusion of the Convention as a whole]

      [1.1] The Convention, by virtue of law, applies to all sales contracts which come under its sphere of application. The parties may, however, exclude it as a whole, i.e. including Part II regarding the formation of the contract. This may facilitate the adoption of the Convention by certain States because it allows those business circles which cannot get to like it or, at least, not at once to evade it and/or grants them a longer period of adaptation, thus building down possible resistance. Honnold (105) points out that this degree of freedom for the parties in concluding a contract was made possible by excluding certain, meaning those governed by nationally mandatory rules, transactions and issues from the Convention.

      [1.2] [express or implicit exclusion] While Article 3, sentence 2 ULIS provided that the exclusion can be express or implicit, the CISG does not say anything about how this should be done. The Convention can be excluded by expressly declaring so in the offer and also in the acceptance, which then, however, as a rule would take on the character of a counter-offer (Huber, 426 fol; Bonell/BB, 54 fol). But the view is overwhelmingly held that there is also a possibility of implicitly excluding it in its entirety (Bonell/BB, 55 mentioning further proof). By no longer mentioning such implied exclusion it was to be prevented that requirements for it were set too low (as already mentioned in the Secretariat's Commentary, O.R. 17) or that a hypothetical party will were construed in this sense (Huber, 425 fol). There must, however, be relatively clear indications (see also note 1.3.) that such an exclusion is indeed wanted. In regard to the Convention in its entirety this will, in our view, rather seldom be the case in practice.

Under the meaning of Article 7 and of Article 3 of the preambular part the Convention is to apply if there is doubt.

      [1.3] [invoking the law of a Contracting State] If the Contracting Parties have agreed invoking the law of one Contracting State, this does not, as is correctly believed by a majority, mean exclusion of the Convention (among others Schlechtriem, 22; Herber/Doralt, 42; Herber/Freiburg, 104; Bonell, 56). Loewe, 24, speaks up in favour of exploring the party will). In regard to the case most likely to occur in practice, given under Article 1, paragraph 1, subpara. (a), Vékas (346) expresses himself in favour of the [page 48] opposite assumption. When 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 (Article 4, note 3; Article 7, note 11). Therefore, it must be recommended to the parties to determine the national law that is applicable in addition to the Convention (Article 3, note 11) so that they can avoid the uncertainties involved in determining that law, using the conflict-of-law norms. When the parties agree on a shortened form expressing that a specific national law is to apply, then it would clearly amount to a wrong interpretation of their intention to consider this as an exclusion of the Convention. There is also a trend to reject such an exclusion in the FRG's jurisdiction in regard to Article 3 ULIS which is similar to Article 6 of the Convention. The 41 decisions collected by Schlechtriem (Magnus, 123 fol) on this matter are very illustrative and instructive. The interpretation preferred here is also supported by the fact that two proposals (Canada, Belgium), which aimed toward the opposite direction (O.R., 86), were clearly rejected. Agreement on the application of the law of a non-Contracting State will quite often amount to an exclusion of the Convention (Bonell/BB, 56). However, it remains to be explored here whether it should not be referred to in addition.

If the parties wish to safely exclude application of the Convention, they do so best in agreeing to invoke the law of a specific State under exclusion of the CISG (similarly now Winship, "International Sales Contracts under the 1980 Vienna Convention", Uniform Commercial Code Law Journal, 1984/1, p. 65, reacting to views cited in said place which reject the possibility of an implied exclusion). It is not advisable to exclude the Convention without replacement since in that case, the applicable domestic law will have to be determined by mostly using the rather vague conflict-of-law rules.

Reference made in the contract to specific national rules, e.g. in modifying them, can be considered as excluding the Convention as a whole only when they appear to be an expression of the parties' conviction that the Convention should not apply. This may follow, for instance, from the terminology used or from the system of the contract, while the contrary can occur when the rules invoked refer to such issues which are not regulated by the Convention anyway. On no account can the exclusion of the Convention be deduced merely from agreement of such terms of contract which contradict specific CISG provisions because deviating individual exclusions are indeed compatible with the CISG (note 2; but not in agreement Bonell/BB, 56). [page 49]

[2] [subject to Article 12]

This reservation serves to emphasize the rule given in the last sentence of Article 12 (Article 12, note 4).

Bonell (BB, 62) has drawn attention to the fact that there are further Articles (in particular Article 4) which must not be excluded because this would amount to nonsense. We agree in respect of the result, but there is no question of nonsense in this context; this is very well a matter of interpretation. At the time of the diplomatic conference, the generally expressed convictions, including the above-mentioned rejection of the Canadian proposal (note 1.3.) had in no way been sensitized toward prohibiting the exclusion and even less the modification of Article 4 of which particularly subpara. (a) is of interest here. In the meantime, the general convictions have been correctly changed, and now legislative omissions have to be compensated by interpretational efforts.

[3] [right to modifications]

      [3.1] When the contract is governed by the CISG, the mandatory rules of the otherwise applicable national law will be left out of the framework of the Convention's substantive scope of application. To start with, they are replaced by the Convention's provisions. The parties retain, however, the right to modifications. They can make agreements which are in contradiction to the mandatory rules of domestic law (different view on the very similar Article 3 ULIS, Herber/Dölle, 22 and on the result of the present rule also Bonell/BB, 54; evading Honnold, 112). This follows, in our view, also from the fact that a Canadian proposal which was aimed at declaring the exclusion of certain basic obligations (good faith, care) inadmissible was rejected by a large majority (O.R., 86). Most national laws, however, do not contain many mandatory rules under the substantive scope of application of the Convention. The freedom of the parties to make their own arrangements generally meets the needs of international commercial relations. Transactions which are subject to large restrictions in many countries, essentially are excluded from the sphere of application of the Convention (in particular Article 2, subpara. (a), but also Article 4).

Given the growing efforts of fighting grossly unjust contractual practices in international economic relations, it would, however, not have been superfluous to take precautions in order to secure certain basic requirements. We are now faced with the expected attempts (CISG Commentary 1985, 45) to invoke the national law instead (inter alia Bonell/BB, 60, and note 6.2. of Article 4). Once the dam has broken down to national law, the latter enters without encountering obstacles; and there is a risk that safeguards will be invoked which go beyond the requirements of international trade. As a result, the success of the unification of law is diminished. [page 50]

Grossly unjust agreements, which deviate from the CISG, can - under Articles 7, 8 and 9, and possibly under the preambular paragraph - only be interpreted restrictively. They can be declared void only under domestic law pursuant to Article 4, subpara. (a), whose possibilities should, however, not be abused.

      [3.2] [opting-in] Considering the discussion held at the diplomatic conference (O.R., 252 fol), the Convention can be interpreted in such a way that its application to such contracts which are not covered, can be agreed. In this case the substantive and territorial, and hence personnel and time scope of application, can be extended. Such an agreement can be made expressly or implicitly, but in the latter case it has to be sufficiently clear. The mandatory rules of the applicable domestic law, however, are not affected by this (Honnold, 109; Bonell/BB, 62). This follows from the fact that a proposal by the former GDR, aiming toward expressly empowering the parties to agree an extended application of the Convention, was rejected. The reason given for the decision was that a circumvention of mandatory national rules was to be prevented in this way (O.R. 252 fol). The Agency Convention provides for a broadened application by virtue of a relevant declaration by a State (Article 30). An agreed application of the Convention beyond the territorial scope of application is considered possible, including the possibility of superseding the otherwise applicable domestic law (Siehr, 611 fol). [page 51]

Go to Table of Abbreviations || Go to Explanation of Abbreviated Bibliographic References
Go to entire contents of Enderlein & Maskow text

[TEXT OF THE UNIFORM LAW]

(1) In the interpretation of this Convention [2], regard is to be had to its international character [3] and to the need to promote uniformity in its application [4] and the observance of good faith [5] in international trade [6].

(2) [7] Questions concerning matters governed by this Convention [8] which are not expressly settled in it are to be settled in conformity with the general principles on which it is based [9] or, in the absence of such principles [10], in conformity with the law applicable by virtue of the rules of private international law [11].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [rule on interpretation and relationship with national laws]

This rule is one of the most discussed rules of the CISG. One of the subjects of the XIIth International Congress on Comparative Law (Australia 1986) was dedicated to this issue, and it also played an important role at the Third UNIDROIT Congress on private law (Rome 1987) (International Uniform Law in Practice, Rome/New York 1988, in particular the second item, ibid, p.163 fol, Enderlein giving the general report, Interpretation). We have to confine ourselves here to explaining some basic ideas.

[2] [interpretation of the Convention]

      [2.1] During the preparation and the holding of the diplomatic conference (O.R., 87) there was an intensive debate regarding the extent to which the principles for interpretation as developed in Article 1, in particular the principle of good faith, were relevant for the interpretation of the Convention and for the relationship between the parties, and possibly even for the conclusion and realization of the contract. Norway suggested (O.R., 87) to consider the observance of good faith at the end of what is now Article 8, paragraph 3, making it clear that the principle would apply to the declarations of the parties and thus the contract. Italy (ibid) expressed even further-reaching considerations, suggesting that in including this principle and that of international co-operation in a separate article, reference should be made more to the conduct of the parties, not just at the time of performance, but also at the time of the conclusion of the contract, rather than to the interpretation of the Convention or of the contract. In the context of discussing these two [page 53] proposals (O.R. 255 fol), which were finally rejected (O.R., 87), it became evident that, as in the case of Article 6, the majority of delegations were cautious not to permit that unjust contracts may be avoided or corrected by way of the CISG. Neutral arguments, such as non-clarity of the principle, no need for its inclusion, were given at the conference mainly to explain the motives for the rejection. These arguments were put forward in another context more clearly by the American delegate Farnsworth (Problems of Unification, 18 fol). In regard to the growing restriction of party autonomy in the industrialized countries (P.-M. Petzow, Rechtsfragen der Verantwortlichkeit aus vor- und nachvertraglichen Abreden in den intersystemaren Wirtschaftsbeziehungen, doctoral thesis B, HfÖ 1989, 73 fol), the situation has changed over the past ten years since the adoption of the Convention (loc sit, 35).

Although the present-day wording refers to the Convention, no strict distinction can be made between the interpretation of the Convention and the agreement of the parties. When certain principles are applied in interpreting the Convention's provisions, they must have an effect on agreements between the parties to which the Convention is applied. It is exactly for party agreements that the principle of good faith must acquire particular importance, for it has to be assumed, in regard to the Convention's provisions, that they observe that principle. This is not always true of party agreements. A provision would have a limited effect if it did not also refer to the interpretation of party agreements. Even though this might have been the intention of some delegations, the final Convention has to be interpreted as a whole and in such a way that each and every of its provisions acquires a meaning. Eörsi (Convention, 348 fol), who had expressed his opinion already in 1983, recognized the limited role of the principle of good faith and regretted it (reserved also Honnold/Freiburg, 144). Quite a number of well-known authors in the meantime voiced their belief that the principle of good faith also addresses the parties and their conduct, and refers to agreements between them (Bonell/BB, 84 giving further examples; Kahn, 961; Ziegel, National Report of Canada on item I.C. of the XIIth International Congress on Comparative Law, 18). Some of the authors want to achieve this in deducing good faith from a number of provisions as being a general principle underlying the Convention, which then is applied in accordance with Article 7, paragraph 2 (note 10.1.) (Honnold, 125; C. Samson, National Report of Canada and Quebec on item I.C. of the XIIth International Congress on Comparative Law, 34; Bonell/BB, 85; Kahn, Caractères, 398, also sees the connection). Others refer to the closely related basic principle under which one would have to behave according to the standards of a "reasonable man" which they consider implemented in the Convention (Schlechtriem, 25). We share the conviction of Winship [page 54] (Commentary, 635) that the criticism, which seeks to broaden the effect of good faith, will in the course of time lead to the recognition of a general obligation of the parties to behave accordingly.

      [2.2] In interpreting the Convention a distinction has to be made between Parts I to III, on the one hand, and Part IV, on the other (Honnold, 134 fol). While the classical methods of interpretation under international law are applied to Part IV, the other parts of the Convention are to be interpreted in accordance with the emerging new method under the international uniform law. The latter is governed by such rules of the international uniform law as have just been commented on, and absorbs elements of the methods of interpretation under international law as well as a synthesis of methods which have developed in the national laws (in detail see Maskow, "On the Interpretation of the Uniform Rules of the 1980 UN Convention on Contracts for the International Sale of Goods", in: National Reports for the XIIth International Congress of Comparative Law, Potsdam-Babelsberg 1986, p. 5 fol). Scientific analysis makes its own contribution to that matter.

[3] [international character of the Convention]

To have regard to the international character of the Convention means, above all, not to proceed in interpreting it from national juridical constructions and terms (Introductory remarks 2.6.). This does not only refer to judges but also to the parties which in settling their differences of opinion first and foremost have to interpret the applicable rules. The meaning of terms and rules thus has to be concluded from the context and the function they have (Introductory remarks 2.6.). If reference to other materials is necessary, then those should primarily be international documents, above all those documents which have a connection to the CISG, such as preparatory documents, including protocols; and possibly the Limitation Convention and the Agency Convention. Usages can, in the meaning of Article 9, also be relevant in determining what is in conformance with the international character of the Convention. Likewise, in international trade this can be widely recognized non-governmental codifications, e.g. the INCOTERMS, the Uniform Rules and Practices for Documentary Credits and the Uniform Rules for Collections. This can be done independently of the degree by which they are already regarded as codification of usages. Surely, the rules of the PICC [Principles of International Commercial Contracts] project under preparation in the framework of UNIDROIT can be used in this sense. [page 55]

This also includes that the legal institutes have to be qualified in accordance with the common will of the Contracting States as expressed in the Convention; meaning that once a specific issue has been legally solved under the Convention, there will be no room left for functionally equivalent, but differently construed national rules to be applied.

We believe that it is not generally recommendable to determine the origin of certain provisions and to interpret those rules according to the law of their origin, as Thieffry (378 fol) seems to have in mind.

[4] [uniformity in the application of the Convention]

Since the CISG is applied by the deciding organs in a decentralized fashion, there is a great risk that those organs reach differing solutions, which could reduce the results of the unification of law. Disharmony in decisions cannot be excluded even if the international character of the CISG under Article 3 is strictly observed; additional efforts are required. Those efforts could include the taking into account of decisions which already exist in other countries when looking for a solution pursuant to the Convention. This is a method which was widely used in foreign trade arbitration in regard to the General Conditions of Delivery of Goods/CMEA and has helped making the finding of a decision more objective. In other countries foreign rulings are taken into consideration to a growing extent, but in differentiated form, as can be seen from the reports to the XIIth International Congress on Comparative Law on item I.C.1. (summarizing Honnold/Freiburg, 120 fol). What matters here is not a prejudicial effect of rulings by foreign courts or arbitrational tribunals and not that the decision taken by an organ, which by accident was 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. A basic prerequisite for this is to make the decisions taken in respect of the CISG known in an appropriate form (Introductory remarks 1.3.).

[5] [observance of good faith]

5. Observance of the principle of good faith means to display such conduct as is normal among businessmen. Hence, no exaggerated demands can be made, and observance of good faith does in no way necessarily include the establishment of material justice between the contracting parties. It is exactly these concerns which give reason to attribute to the principle of good faith only a limited role. Assuming that the provisions of the Convention are themselves an expression of good faith, the underlying principles of the Convention, to be explained below (note 9), have to be also conceived as manifestations of this principle. In applying the Convention to the agreements of the parties, the former has to be interpreted in such a way that the conduct prescribed coincides with the principle of [page 56] good faith, so that deviating conduct must be qualified as unlawful. This means, for instance, that unjust clauses are interpreted, in the case of doubt, in favour of the disadvantaged party. However, a contract with clear wording cannot be modified in this way. When judging what is conduct based on the principle of good faith, the usages and practice in concluding contracts cannot be left out of consideration (Article 9, note 8).

[6] [good faith in international trade]

National measures for a conduct based on good faith are thus only relevant insofar as they are also the recognized measure for international trade.

[7] [relationship between the Convention and domestic law]

Paragraph 2 also clarifies the relationship between the Convention and domestic law (Introductory remarks 2.3.). Since the laws can of necessity only be unified step by step, it remains unfinished work for now and cannot at once solve all legal issues involved in a concrete manifestation; as it is in this case international contracts of sale.

- The underlying idea of the unification of law is served best when such gaps are closed by way of supporting and complementary conventions (Introductory remarks 2.2.).

- Another possibility would be to close the gaps within the substantive scope of application on the basis of the principles governing the respective convention. This, however, requires a particularly exact formulation of the substantive scope of application. And this is the road followed by ULIS in Article 17. An analysis of the consequences of such rule nonetheless has clearly established the problems involved (Mertens/Rehbinder, 143 fol; Dölle, XXXVI). They result, above all, from the fact that not all problems falling under the substantive sphere of application of the Convention, which are, however, not expressly regulated by it, can be solved in this way and/or that divergent solutions can be expected. But there were sufficient voices welcoming the ULIS principle and requesting a development of it under the CISG in order to promote the achievement of uniformity in international trade law (Bonell, 2 fol).

- A third variant would be to immediately pass on to national law whenever gaps became apparent, as was done in 122, sec. 1 of the General Conditions of Delivery of Goods/CMEA. This was, however, no obstacle for arbitral tribunals to fill gaps also from within the General Conditions of Delivery of Goods/CMEA (Kemper/Strohbach/Wagner, 62 fol).

- And finally, those methods can be combined. [page 57]

For the sake of completeness it must be pointed out that there are parallel methods of gap-filling: 1. the (possibly broadened) interpretation of the contract (Article 8, in a way also Article 7, paragraph 1); and 2. recourse to usages and other practices (Article 9).

At the diplomatic conference Italy made an attempt to have recourse to domestic law excluded and, in the event of lacking general principles under the Convention, to have the parties attain a solution invoking the national law of both parties. Czechoslovakia suggested to immediately apply domestic law in the absence of a rule under the Convention. Bulgaria, in the same breath, wanted to have the conflict-of-law problem regulated in the sense of the law of the place of business of the seller (O.R., 87). A compromise proposal by the former GDR (O.R., 257), providing a combined solution, was eventually adopted.

[8] [scope of problems addressed by the Convention]

Pursuant to Article 4, the Convention governs "the formation of the contract of sale and the rights and obligations of the seller and the buyer", i.e. the substance of the contract. Hence, a very broad scope of problems is addressed. Insofar as Article 4, subparas. (a) and (b) and Article 5 expressly declare the non-applicability of the Convention to certain matters, it is inadmissible to decide on the basis of its underlying general principles. We favour a broad interpretation of the words commented here which also leads to a relatively wide scope of application of the Convention. W.C. Vis ("Aspectos de los contratos de compraventa internacional de mercaderías no comprendidos por la Convención de Viena de 1980, Anuario Jurídico, 1983/X, p. 11 fol), who at the time of the holding of the Conference was director of the International Trade Law Branch, opts in favour of a narrow interpretation. He fears a reduction of legal security because of the insufficient predictability of the principles. We do not see such risk because of the very fact that a broad interpretation does not necessarily have to lead to invoking the general principles.

[9] [gaps in the Convention]

      [9.1] Gaps should be closed in the first place from within the Convention. This is in line with the aspiration to unify the law which, in a way, is established in the Convention itself (paragraph 3 of the preambular part, Article 7, paragraph 1) as one of its underlying principles. Such 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. When one interpretation reaching this far beyond the wording of the law is expressly approved by the Convention's text, then this must all [page 58] the more apply to an extensive interpretation. But it seems as though the Convention goes one step further permitting decisions which themselves go beyond analogy and reach into the area of a creative continuation of the development of the law. It also appears to be admissible under the Convention that decisions can be the result of principles which the Convention itself formulates and which do not necessarily have to be reflected in individual rules. Such principles include (similarly Bonell/BB, 80) good faith (Article 7, paragraph 1), contract autonomy (Article 6) and the principle of dispatch (Article 27).

The conduct of a reasonable person is relevant in the CISG in several contexts (c. Article 8, paragraph 2, Article 25), in that reasonable conduct is expected from one of the Contracting Parties or from a potential Contracting Party (Article 16, paragraph 2, subpara. (b); Article 35, paragraph 2, subpara. (b)). Article 44 permits a reasonable excuse, and Article 79 mentions conducts which "could not reasonably be expected".

Other formulations, too, like the reference to comparable circumstances (e.g. Article 55) or to a reasonable period of time for performance (e.g. Article 63, paragraph 1), aim at declaring as binding normal commercial conduct in international trade and using it as a yardstick for the parties' conduct. Thus this yardstick can be used for those cases for which it has not expressly been declared binding. Taking it as a basis can, therefore, be considered as a general principle of the Convention. This includes also the principle of good faith (Article 7, note 5).

Another criterion to be conceived as a general principle of the Convention, at least when it comes to assessing the scope of the legal consequences which are liked to non-conformance or failure of a party and/or to the overall legal consequences, can be the predictability of effects (Article 25; Article 35, paragraph 2, subpara. (b); Article 42, paragraph 1, subpara. (a) and Article 74; and in a way also Article 79, paragraph 1).

It appears in a largely generalized form in Article 80, but is recognizable also in the concrete rules of Article 8, paragraph 3; Article 29, paragraph 2; Article 35, paragraph 3; Article 40; Article 41, first sentence; Article 43, paragraph 2; Article 47, paragraph 2; Article 48, paragraph 2, second sentence; and Article 63, paragraph 2. [page 59]

The obligation of the parties to co-operate in performing the contract, in particular in the case of disturbances, with the aim of minimizing the effect of such disturbances on the party who caused it or at whose place it occurred, can be synthesized from a number of articles (Article 34, second sentence; Article 37; Article 48, paragraph 1; Article 85 fol; and also Article 77).

We also count the principle of specific performance (subject to Article 28) among the general principles of the Convention. This follows above all from the provisions governing the rights in the case of breach of contract (Articles 46-52; Articles 62-65).

The discussion held so far has shown that there is gratifying agreement with regard to the principles contained in the CISG (in particular the summary of the principles established from the national reports on item I.C.l. to the XIIth International Congress on Comparative Law, see Honnold/Freiburg, 139 fol, which are largely congruous with the ones developed above). However, agreement on principles does not yet mean agreement on their application.

      [9.2] It is, in our view, not possible to obtain the Convention's general principles from an analysis prepared by comparison of the laws of the most important legal systems of the Contracting States (similarly van der Velden, National Report of the Netherlands to the XIIth International Congress on Comparative Law, 0013) as it was supported, in some cases, in regard to Article 17 ULIS (e.g. Wahl/Dölle, 139) and is occasionally advocated also for the CISG (Bonell/BB, 81). This also follows from the impossibility to choose, on the basis of objective criteria, the most important of the legal systems of the countries which were involved in preparing the Convention. The wording of the Convention does in no way support the application of this method. Where such need arises, domestic law will have to be invoked.

      [9.3] If priorities can be established under the admissible methods of interpretation, the method closest to the wording should in our view be preferred, e.g. analogy before deduction from general principles. Hellner (78) also points to the paramount importance of the Convention's wording for its interpretation.

[10] [absence of a general principle in the Convention]

An overburdening of the first alternative under Article 7, paragraph 2, would certainly not serve the unification of law. One will have to assume, in particular, that entire legal institutes, which are missing in the Convention, cannot be construed from its principles (examples given in Article 4, note 4.1.). This refers, no doubt, also to penalties. It is, however, not excluded in our view that solutions for problems provided for under the Convention, e.g. the reasons for [page 60] exemption (Article 79 fol), will also apply in regard to legal institutes which are not included in the Convention, like exemptions from penalties.

[11] [the conflict-of-law issue]

The conflict-of-law issue itself is not decided under the Convention (Introductory remarks 2.3.; Article 1, note 6). As decisive as the statute of sales contracts is, special connecting factors might apply. We cannot join Kahn (Caractères, 398); who advised to renounce the complementary reference to national law because this would heighten the legal uncertainty. [page 61]

[TEXT OF THE UNIFORM LAW]

(1) For the purposes of this Convention statements made by and other conduct of a party [2] are to be interpreted according to his intent where the other party knew or could not have been unaware [3] what that intent was.

(2) If the preceding paragraph is not applicable [4], statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party I would have had in the same circumstances [5].

(3) In determining the intent of a party or the understanding a reasonable person would have had [6], due consideration is to be given to all relevant circumstances [7] of the case including the negotiations [8], any practices [9] which the parties have established between themselves, usages [10] and any subsequent conduct of the parties [11].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [scope of this article]

While Article 7 deals with the interpretation of the Convention, which, however, has its effect on the interpretation of the agreements between the parties (Article 7, note 2), Article 8 governs the interpretation of statements and the otherwise legally relevant conduct of the parties. It does not refer only to offer and acceptance (Articles 14 and/or 18) and other acts done before the conclusion of the contract, withdrawal or revocation of an offer (Article 15, paragraph 2; Article 16, paragraph 1) and rejection of an offer (Article 17), but also to acts which are committed during the realization and with the objective of terminating the contract, e.g. notice of defects (Article 39, paragraph 1), notice of third party rights or claims (Article 43, paragraph 1), assertion of claims because of breach of contract [page 61] and related claims, including the right to performance (e.g. Article 46, paragraph 1; Article 62), damages and claims for compensation of expenses incurred (Article. 45, paragraph 1, subpara. (b); Article 61, paragraph 1, subpara. (b) in relation to Article 74 fol; Article 85; Article 86, paragraph 1)), mitigation of loss (Article 52), suspension of performance of obligations (Article 71, paragraph 1), avoidance of contract (Article 49, paragraph 1; Article 64, paragraph 1; Article 72, paragraph 1; Article 73), and restitution of supplies and expenses in the case of avoidance of contract (Article 81, paragraph 2). In specific cases (Article 52), even acceptance is an act which is to be interpreted under Article 8. And finally, the setting of an additional period for delivery (Article 47, paragraph 1; Article 63, paragraph 1) has to be mentioned. Apart from these most important examples, under the CISG numerous such acts, provided for in the contract or not, can emerge in connection with a possible modification or avoidance of the contract when claims for breach of contract are asserted. Their interpretation is also governed by Article 8.

[2] [statements made by and other conduct of a party]

      [2.1] The statements or other conduct - as can be seen from the further text of the Article - are such acts by which the intent of the respective party is to be expressed ("according to his intent"). This condition is given in general when the statement is made, unless the latter is of a purely informational character (e.g. communication that the goods have been dispatched). In this context there can be problems of interpretation, e.g. where the communication is considered to be an obligation and opinions diverge on whether this obligation was fulfilled through a specific act. Article 8, by analogy, would also apply to such a case.

      [2.2] Above all, in the context of the other conduct of a party, a distinction can be made between such conduct which is to express a legal intent (examples in Article 18, note 2) and mere acts of performance where this is not so. The rules of interpretation of Article 8 refer to the first-mentioned case, are however, applicable analogously to the mere acts of performance insofar as there is a need for interpretation. A party may in any case express his intent by a statement which is forwarded to the other party. There are cases where this is expressly prescribed (Article 26). Where this is not the case and/or where it is expressly permitted that a party can express his intent also by other conduct (Article 18, paragraph 1), a statement is not necessary but recommendable because it is as a rule clearer and can, therefore, be interpreted more easily.

In some cases, above all in the event of information which at the same time expresses an intent, the need for a statement is in the nature of things (non-conformity claim). [page 62]

      [2.3] Article 8 relates directly only to the acts (legal acts - referred to below also as acts) of a party and contains no provision for the interpretation of contracts. Insofar as contracts are based on corresponding unilateral acts by the parties, there will be no problems. This also holds true where a party accepts the contract offer made by the other party, for instance, by signing it. When the contract, however, is contained in a joint document of the parties, it cannot be generally determined which party made a specific statement becoming part of the document. Basically, each party has then made a statement relating to the entire, substance of the contract document so that the general rule can be applied, as in the case of corresponding individual statements of intent, i.e. the relevant clause is interpreted first as the statement of the one party and then as the statement of the second party (so already in the Secretariat's Commentary, O.R., 18; Farnsworth/BB, 101), their identity resulting in a common intent. Honnold (137) wants to apply here only paragraph 3, which seems inconsistent to us.

[3] [subjective theory / theory of intent]

      [3.1] Hereby, the subjective theory or theory of intent of the conclusion of a contract has found its way into the Convention. It is the intent of the party undertaking the legal act which is decisive. Such intent has an effect only when the other party is actually or supposedly aware of it. At the conclusion of the contract it becomes the common intent of both parties, if the other party accepts it. The fact that acceptance refers to the offer has, of course, an influence on its interpretation (because, e.g. an offer provides a substantive frame). The unequivocal cases are covered here, while otherwise paragraph 2 applies. When one party clearly expresses his intent through a legal act, the addressee cannot pretend to have insufficient knowledge of that intent. The same applies when the acting party has not clearly expressed his intent, or even disguised it, but the addressee knew of the real intent. It would, however, be up to the acting party to prove this. In this context, the factors mentioned in [paragraph 3 of Article 8] will be of particular relevance. Such proof is made easier for him by a certain objectiveness in regard to the knowledge of the other party which is based on the fact that it suffices that the other party "could not have been unaware". This notion is supposed to objectivize even more than "ought to have known" (O.R., 260). It follows from paragraph 1 that in the case of fictitious transactions the real substance is decisive. This does, however, not say anything about the validity of such transactions for it is the prohibitive norms of national law declaring contracts void which can be invoked here (Article 4, subpara. (a)). [page 63]

The decisive time is, in our view, the moment when the conduct is displayed and/or taken note of. According to Farnsworth (BB, 98) this should be the moment when the conduct has its effect. That opinion, as we believe, is concurrent with ours, but is less clear and gives, therefore, might cause difficulties of interpretation.

      [3.2] Of particular importance are statements which are legal acts. To recognize the intent expressed by them, the language in which they are formulated is of considerable relevance. Without being able to discuss this issue in detail (for a detailed explanation see Reinhart/Dölle, 97 fol), we hold that one should proceed from the following principles:

- When a party reacts in substance to a statement it has to be generally assumed that he has understood it, unless the contrary can be deduced from the content of his reaction.

- When the reply to a statement is formulated in the same language as the statement itself or in the language of the country of the statement's recipient or in a language which is customary in the relations between the countries where the parties have their places of business, it has to be assumed that the statement has been understood by the other party.

- Similar principles apply to statements made in the process of the performance of contracts, the language of the contract being of particular importance.

- Statements which are not made in a language which has possibly been agreed in the contract or which are made in a language which is not customary at all in the country of the recipient, even as business language, do not attain legal effect.

      [3.3] In some cases, the CISG makes assumptions on the interpretation of statements (Article 9, paragraph 2; Article 48, paragraph 3; Article 55 fol). Since in such cases neither the party making the statement can refer to having meant the statement differently nor the statement's addressee can refer to having interpreted it differently, these assumptions practically have the effect of dispositive rules, although they are in part the result of lack of agreement. The parties, therefore, have to clearly show that through their action they wish to express an intent other than that assumed by law. This will regularly require a statement. [page 64]

      [3.4] Since the CISG ignores problems of validity (Article 4, subpara. (a)) and the problems of rescission touch upon the validity, the rescission because of a defect in intent, notably a mistake, lies as a matter of principle outside the scope of application of the CISG (Honnold, 141; Farnsworth/BB, 102). The CISG does, however, apply if it contains rules which are functionally equivalent to the rescission pursuant to domestic laws (c. note 6 of Article 4). Cases of slips, transference and faulty transmission are also covered by the legal institute of rescission and are outside the Convention's sphere of application. Insofar as the addressee of the statement knew of the intent of the party making the statement, or could not have been unaware of it, the statement is effective according to the intent of the party making the statement (e.g. the price is to be indicated as amounting to Swiss francs 50,000 instead of Swiss francs 500,000, Secretariat's Commentary, O.R., 18). A special problem of faulty transmission is covered by Article 27.

[4] [individual intent / common intent that cannot be determined]

This refers to a situation where the intent of the acting party cannot be recognized from his action according to the relevant criteria or where the addressee of the action did not know the intent of the acting party and cannot be purported to have been aware of it, i.e. the individual intent or also the common individual intent cannot be determined.

[5] [understanding of a reasonable person]

5. The criteria mentioned here link subjective with objective elements in a way that one can speak of a type-related objectivization.

The subjective element relates to a person of the same type as the other party, hence the addressee of the action. The same type can be defined by different criteria whose cumulative application can amount to a relatively strong individualization. Such criteria include the kind of work done by the party's enterprise (e.g. a factory or a trading firm); the country in which he has his decisive place of business (including the language spoken there); the business forms customary in that country; and also (Farnsworth/BB, 99) the knowledge and experience of prior dealings between the parties. Another subjective element is added by the reference to the same circumstances, which is described in an exemplary way in precise terms under paragraph 3 (notes 7-11). Such circumstances can be a certain situation of the market; but they can also express that more simplified forms of business transactions are applied (e.g. sales contracts in the framework of an agency contract on a dealer basis); that statements are given under special conditions (trade fair transactions); or that specific links have been established between the parties' interests (e.g. counter-transactions). [page 65]

The objective element refers to a situation where the conduct of a reasonable person is made the yardstick (note 6). But in assessing how such person would behave, the subjective and objective elements of each case have to be taken into account. Only an unreasonable, e.g. professionally incompetent conduct or such conduct that is contrary to good faith of the addressee of the legal act would have to be left out of consideration.

As a result, according to Farnsworth (BB, 99), more reasonable solutions will prevail. An objectivized interpretation can, therefore, very well result in an act producing a legal effect which does not correspond to the intent of the acting person (Schlechtriem, 26, in our view unjustly considers this case as not provided for). The latter will then have to rely on rescission (note 3.4.).

[6] [intent of a party]

The criteria mentioned below serve, first, to determine the intent of a party. The mere subjective element is thus left, and the intent of a party is in a way objectivized. But from this it follows that a secret reservation of a party is irrelevant, at least when the other party is not aware of it. Secondly, these criteria are supposed to help determine the view of a reasonable person. Those criteria also play a role in determining whether the other party could not have been unaware of the intent of the acting party, because in this context the measure of a reasonable person is to be applied.

[7] [relevant circumstances]

The relevant circumstances are described below in an exemplary fashion, but they also include the kind of circumstances mentioned in note 5. To give due consideration to these circumstances means to determine their specific influence on the issue to be decided.

[8] [intent expressed during the negotiations]

This refers in particular to documents and oral statements which have been exchanged by the parties in the process of preparing the contract, but are not expressed in the documents which brought about the contract. Unlike Honnold (142 fol) and an agreement with Farnsworth (ibid.), we believe that possible national rules, which exclude the negotiations on the contract from the interpretation, are superseded by the CISG because the latter contains a specific rule to this (Article 4, second sentence).

[9] [intent expressed by established practices]

Established practices are practices or exercises which have developed between specific, in general two, parties over a longer period of time in similar business relations (Article 19, note 11). They refer to individual, not expressly regulated aspects of the contract; like for instance, to the way in which documents are presented and include the tendering of account, the notification of consignments, the regulation of non-conformity and other claims. [page 66]

[10] [intent expressed by usages]

Compare Article 9, note 1.

By contrast to Article 9, note 2, national practices can also, according to the certainly correct view of Schlechtriem (26), be related to as they attain relevance in international transactions.

[11] [intent expressed by subsequent conduct]

This serves - even if in a very cautious way - to express a prohibition of the venire contra factum proprium (prohibition to contradict one's own conduct) (similarly Huber, 430). If a party thus expresses through his conduct that he interprets the contract in a specific way, he can later not rely on the opposite interpretation. [page 67]

(1) The parties are bound by any usage [1] to which they have agreed [2] and by any practices which they have established between themselves.

(2) The parties are considered [4], unless otherwise agreed, to have impliedly made applicable to their contract [5] or its formation [6] a usage [7] of which the parties knew or ought to have known [8] and which in international trade is widely known [9] to, and regularly observed [10] [11] by, parties to contracts of the type involved in the particular trade concerned.

[WORDS, PHRASES AND CONCEPTS

[COMMENTARY]

[1] [parties are bound by any usage to which they have agreed]

     [1.1] It is not generally defined in the CISG what usages are. Insofar as reference is made to such usages which the parties have agreed to, this is of no relevance since agreed rules are binding for the parties in any case and independent of their character. This is true also of national usages and rules whose legal character is disputed. If, however, usages have been agreed whose validity is excluded under national law, they are not binding (Article 4, subpara. (a), which expressly mentions usages; c. also Article 4, note 6). Paragraph 2 defines those usages which are binding for the parties even though they were not agreed.

      [1.2] If usages are agreed, they will prevail over the Convention, just like all agreements between the parties (Article 6). This holds true also when the agreement is assumed under paragraph 2. Such is the view expressed overwhelmingly in publications (already Junge/Dölle, 47 on Article 9 ULIS which has a very similar content; Honnold, 149; Loewe/Lausanne, 19; Bydlinski/Doralt, 76; Bonell/BB, 104) and there are only rare instances where this issue is [page 67] considered unsolved (Garro, 479). The opinion of the majority is supported by the fact that a Czechoslovak proposal to consider only such usages as valid in the case of fictitious agreements, which are not contrary to the Convention, did not succeed (O.R., 89). Should there be contradictions between usages, agreed usages will prevail over fictitiously agreed ones, as can be concluded from the introductory half-sentence of paragraph 2. Agreed usages, in general, refer only to the post-conclusion stage of the contract, i.e. to the contract performance. Insofar as there are frame contracts or other agreements between the parties, whose effect reaches beyond the individual contract, they can also relate to the conclusion of the contract.

[2] [agreement can be express or, up to a point, implied]

This formulation expresses that there has to be an agreement between the parties. Such agreement can be an implied one. But the assumption that there is implied agreement must not be stretched too far because paragraph 2 would loose its function and the additional requirements mentioned thereunder could be evaded. A combination of both provisions by Bonell/BB, 107, seems rather unconvincing.

[3] [established practices; hierarchy: practices vs. agreed usages]

Concerning the term "established practices" compare Article 8, note 9. It is derived from US law (Art.1-205 UCC).

Practices, which can be interpreted as implied agreement between the parties and which frequently modify original agreements, should be considered as having priority in their relationship with agreed usages (so believes also Goldstajn/Dubrovnik, 99). They are generally better geared to the particularities of a concrete relationship because they are of an individual and thus more specific character. FRG jurisdiction, in line with the thus far identical (English) text of ULIS, has recognized a usage of fairness of the parties which deviates from the provisions on the time, form and content of a lack of conformity notice (OLG Düsseldorf in: Schlechtriem/Magnus, 167 fol).

[4] [concept of fictitious agreement]

This somewhat strange juridical construction of a fictitious agreement constitutes a compromise between those States whose aim was to have a normative validity of usages, hence validity brought about directly by virtue of law, and those which would have wanted to permit only the application of agreed usages. But in the end, the result in its substance comes close to a normative validity, which is even strengthened by the fictitious character of an agreement, because on grounds of party autonomy the agreement is on top of the hierarchy of the sources determining the substance of a contract (note 1.2.). A number of developing countries voiced some concern at this solution because they were not involved in establishing [page 68] those usages; and so did some Eastern European countries (summarizing Garro, 476 fol).

[5] [usages serve interpretation of the contract]

The obvious idea to be expressed here is that the usages are to be applied to those stages of contract performance which follow the conclusion of the contract, i.e. are to serve the interpretation of the contract.

[6] [fictitious agreement of usages also extends to formation of contract]

The fictitious agreement of usages thus also extends to the formation of the contract and can insofar only be deduced, apart from overlapping agreements, from relations the parties enter into at the time of starting preparation for a contract. The CISG proceeds here, as a matter of exception, from the existence of pre-contractual obligations. But fiction cannot reach beyond the substantive scope of application of the Convention (Article 4) and does, therefore, not cover subjects excluded by it.

[7] [usage an autonomous term]

It seems that using the term "usages" no additional features, except for the ones mentioned below, are to be required for the rules which become binding by virtue of fiction. This also serves to prevent the risk of an interpretation of the term "usages" under national law and related differences of opinion on whether specific rules are to be regarded as usages. The term "usages" is autonomous and can, therefore, be interpreted as broadly as possible (Bonell/BB, 111). It is not required that a usage be ancient or of long standing (Honnold, 148; Bonell/BB, 113). It seems questionable to us whether the measure of good faith should be used to determine to what extent usages are to be considered, as Bonell (ibid.) indicates. Even if one, as we do, does not want to limit this principle to the interpretation of the Convention, this does not mean it should be turned into the criterion for the validity of rules to be followed otherwise. (The situation is different in interpreting practices - note 5 of Article 7). After all, a Chinese proposal requiring usages to be reasonable (O.R., 89 fol) was rejected so that the necessary corrections have to be left to a large extent to the rules of validity of national law. Insofar as there are customary rights which meet the criteria of paragraph 2, they would have to be considered as a usage in the meaning of the CISG. The same goes for local customs which are accepted internationally as being valid for that trading place (similarly Honnold, 148; Bonell/BB, 109; more reserved Schlechtriem, 28).

[8] [knew or ought to have known the usage]

This feature is largely redundant (critical also Huber, 428, and the Indian delegate at the diplomatic conference, O.R., 266, who both go still further, and Bydlinski/Doralt, 77) because, if usages fulfill the requirement described in note 9, the parties have to recognize them as a rule. Only in very rare, exceptional cases one will be able [page 69] to permit that a party invokes that he did not know, nor ought to have known, the rules which meet the remaining requirements (e.g. a factory which regularly does not participate in transactions abroad buys, as an exception, a machine abroad which is traded according to international usage). On the other hand, it is not sufficient that the parties positively know certain rules, but that those rules are not widely known for the individual characteristics must be cumulative.

[9] [usage which in international trade is widely known]

This criterion is the most relevant of all. It will be assumed, in any case, that such usages are widely known in international trade which are known to the relevant business circles in the majority of countries which also belong to different groups of countries, hence in particular developed and developing countries. In a concrete case it may, however, suffice that the usages are known in the relevant business circles of those States where the parties have their places of business. But they must be known there as rules governing international trade and not just domestic transactions.

The applicable usages need not generally be valid for all contracts; it is a sufficient but also necessary requirement that they relate to sales contracts of the respective kind. The types of sales contracts, i.e. the subcategories, are divided according to the goods sold. Accordingly, the usages for trade in machinery and plants; raw materials or specific raw materials; foodstuffs etc. are applied to the respective contract. But the type of contract can also be determined according to whether the contract is one for single delivery or for delivery by instalments; whether it is a short-term or long-term contract; whether delivery is against cash or credit; or whether it is a tender or a direct transaction. The category of goods traded is also an important criterion for the determination of the decisive branch; but here also other requirements are to be considered like, e.g. the use of the goods sold (sales to re-sellers - e.g. dealers - on the one hand, and to final consumers, on the other).

[10] [usage which is regularly observed]

Contrary to the view held by Huber (428), we do not consider this characteristic superfluous, but rather very important. It may very well occur, for instance, that specific rules, which are applied in industrialized countries, are known but not applied in developing countries. Their agreement can then not be assumed, except for contracts between parties from industrialized countries.

[11] [usage fictitiously agreed when meets requirements]

When a rule meets the requirements explained under notes 8-10 their application is fictitiously agreed. Since this refers to the INCOTERMS, the Uniform Customs and Practices for Documentary Credits and the Uniform Rules for Collections, they are applied without taking a decision on whether they are usages at all. The [page 70] above-mentioned rules are rules of interpretation which require a specific stipulation in the contract (use of a specific trade term, of specific conditions of payment). If it is not determined at the same time which is the decisive interpretation; e.g. merely FOB, named port of shipment, then it is governed by the INCOTERMS and not by national usages or laws. Part of the problems with which Article 9, paragraph 3 ULIS deals (interpretation of expressions, clauses or forms), which in spite of relevant requests at the diplomatic conference did not find its way into the CISG (O.R., 89 fol), can be solved in this way (similarly Secretariat's Commentary, 19). Article 8, paragraph 2 can also be consulted in this context (Schlechtriem, 29). [page 71]

For the purpose of this Convention [1]:

(a) if a party has more than one place of business [2], the place of business is that which has the closest relationship to the contract and its performance [4], having regard to the circumstances known to or contemplated by the parties [3] at any time before or at the conclusion of the contract;
(b) if a party does not have a place of business, reference is made to his habitual residence [5].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [the decisive place of business]

It is important to determine the decisive place of business in order to find out whether the sales contract in question comes under the sphere of application of the Convention at all (c. Article 1). But a number of other articles also refer directly or indirectly to the place of business (e.g. Art. 12; Art. 18, paragraph 2; Art. 20, paragraph 1; Art. 24; Art. 31, subpara. (c); Art. 42, paragraph 1, subpara. (b); Art. 57, paragraph 1, subpara. (a); Art. 69, paragraph 2).

[2] [the term place of business]

The term "place of business" is not defined in the CISG. For an establishment to be regarded as a place of business it is not necessary for that establishment to be a legal person. It can, for instance, be also a business of an individual. However, the mere incorporation in a specific State would already create a place of business. Insofar as no legal person was created, certain facts have to be given: the establishment must have existed for a certain time, it must have an address and probably also an office, and it must have a certain competence. Temporary travel groups, therefore, do not form a place of business. As to production facilities, the former will, however, [page 71] generally apply insofar as they enter into contracts which refer to the provision of the facility. Such production facilities can, however, not be regarded as place of business if employees working there conclude contracts for the mother company, e.g. agree modifications of a contract for whose performance the facility was built.

[3] [circumstances known to or contemplated by the parties]

The circumstances which are contemplated by the parties must at least be known so that the latter criterion would have been sufficient. The relevant circumstances must be known to both parties at the latest at the conclusion of the contract. If they are not, they will have no influence on the determination of the decisive place of business. "Ought to have known" is not sufficient in this case.

[4] [criteria which have to be taking into account; closest relationship]

In regard to the criteria which have to be taken into account and weighed against each other, the details given by the parties themselves on the contract partnership should gain decisive importance. Normally, they are incorporated in the contracts. Further clues could be deduced from the permanent working place of the employee authorized to conduct contractual negotiations, the terms of payment, a distinction possibly made in the contract between contract partnership and performance of the contract, or from the correspondence in general or on specific issues etc. Less meaningful in this regard is the place of manufacture or destination of the goods. We tend to interpret "the closest relationship" more in the legal than in the factual sense because we consider the commercial management of the transaction as being the decisive factor.

[5] [habitual residence]

The alternative envisaged here can only apply in the case of natural persons who rarely are parties to international sales contracts in the meaning of the CISG (in particular the exception in Article 2, subpara. (a)). The habitual residence of a natural person is where that person actually stays most of the time (at the time of the preparation and conclusion of the contract), if it can be concluded from the circumstances of that stay (e.g. renting of an apartment) that the stay is intended for a certain duration. This last criterion can, however, not be taken into consideration when there is another permanent residence (if considered in a larger time frame). [page 72]

A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form [1]. It may be proved by any means, including witnesses [2].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [contract need not be concluded in or evidenced by writing; form prescription]

      [1.1] Basically, it is declared that international sales contracts, which fall under the CISG, need not be concluded in writing. The CISG determines here, as a matter of exception the validity of sales contracts, including such which under the applicable national law would be void because of lack of a required form, (Article 4, subpara. (a)). This is true independent of the nature of the requirement and of the purposes it is supposed to serve (Rajski/BB, 123). Article 96, however, opens up the possibility for a reservation. A reservation under the above-mentioned Article would entail the legal consequences indicated under Article 12. Many authors consider the removal of the writing requirement for sales contracts on movable goods as an achievement of western legal systems to speed things up, whereas the former socialist countries are believed to attach great importance to certainty, predictability and lack of surprises (e.g. Garro, 461; S. G. Zwart, "The New International Law of Sales: A Marriage between the Socialist, Third World, Common and Civil Law Principles", The North Carolina Journal of International Law and Commercial Regulative, 1988/1, 116). It is difficult for us to understand, however, why in the age of telex, and now even telefax, the speed, with which oral contracts would be concluded, should be considerably higher. On the contrary, modern international trade is not possible without storing information outside the heads of the people involved, including information concerning the conclusion of a contract. Therefore, in a broad sense, almost all contracts are formed in writing. It is no wonder, therefore, that it was in particular the western side which tried to save the writing requirement in certain cases (note 5.1. of Article 4; also note 1.2. at the end). We hold, nonetheless, that it is correct to proceed from the principle of freedom of form - even though in practice it is relied upon only exceptionally. We do so to prevent dishonoured contractual relationships. Where the contract is the result of a correspondence, it happens quite often that there is no reaction to the last statement, which leads to the conclusion of a contract, although it contains modifications which transform it into a counter-offer (Article 19). In such event there will be no contract since the written form is required, even though the parties have performed. The written form requirement of the General Conditions of Delivery of Goods/CMEA (4) has in such cases often led to difficult situations.

      [1.2] [form prescriptions] Form prescriptions under foreign trade regulations, e.g. in the area of approval of goods and foreign exchange flows, are not affected by Article 11 insofar as the sanctions envisaged therein remain effective, e.g. punishment in the event of violating those prescriptions. But they do not attain any effectiveness in the relations between the parties to the sales contract. The contract remains valid (Secretariat's Commentary, O.R., 20; Honnold, 153). [page 73]

Other State regulations, e.g. ministerial orders, and also internal company rules which prescribe that international sales contracts are to be concluded in writing are treated similarly.

      [1.3] The rule refers to the formation of the contract and thus to acts which lead to a contract. In regard to other legal acts the CISG generally does not prescribe a specific form unless it follows from the nature of the act (e.g. statement - Article 8, note 2.2., which can be done orally, - Article 24, Article 21, paragraph 1, but not by conduct implying an intent). Contradictory regulations under domestic law, which insofar are still scarcer, have to come second.

[2] [proof by witnesses]

It is here expressly noted that the exclusion of proof by witnesses, as may be envisaged in domestic legal systems, is not effective within the Convention's scope of application. [page 74]

Any provision of article 11, article 29 or Part II of this Convention that allows [1] 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 [2] where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention [3]. The parties may not derogate from or vary the effect of this article [4].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [exclusion of any form requirement]

The possible exclusion of any form requirement does not refer to all indications of intention and even less to all legal acts which come under the Convention's scope of application, but only to the conclusion of the contract (Art. 11), agreed avoidance of contract (Art. 29) and to all indications of intention ("or other indication of intention") which Part II of the Convention on the conclusion of a contract provides for. The decisive indications of intention of Part II, like offer and acceptance, will be expressly mentioned below. The freedom of form in the case of a reservation does, for instance, not apply to the withdrawal of an offer (Art. 15, paragraph 2) and the revocation of an offer (Art. 16, paragraph 1). National form requirements should, however, be seldom. Indications of intention which are mentioned in other parts of the Convention (except for Arts. 11 and 29), are however, also in the context of a reservation not governed by form requirements which may exist under national law (note 3). This is true, as was made clear at the Conference by a precise statement (O.R., 272 fol), of the statement according to which the contract is made void [page 74] (Art. 26) and of the notice of lack of conformity (Art. 39, paragraph 1).

[2] [reservation as to form]

      [2.1] Article 12 provides for the consequences which follow from a reservation for the contractual relations of the parties. The seeming duplication of the rule was called for because Article 96 includes only the admissibility under international law of the reservation, hence only relates to the relations between States.

      [2.2] The Convention merely states that the named provisions concerning freedom of form (note 1) do not apply in the case of a reservation when the party has his place of business in a State making a reservation. There is no positive provision as to the form. This corresponds to the one-sidedness of a reservation which has the effect that no agreement is brought about between the State making the reservation and the other State. As is widely believed, the applicable provisions as to form have to be taken from the applicable national law in this case (Art. 1, note 6) (Schlechtriem, 30, 32; Honnold, 156; Loewe/Lausanne, 20; Rajski/BB, 126 fol). The written form, therefore, is a condition for the validity of a contract only when it is prescribed by the applicable domestic law. Consequently, when a sales contract is concluded in a non-written form between a party from a reservation State and a party from a non-reservation State, that contract is valid no less than if it is governed by the law of the non-reservation State which does not provide for the relevant contract to be made in writing. But also the opinion to the contrary has found renowned champions (note 10 of Art. 96).

[3] [Art. 96 declaration]

The declaration under Article 96 must state that the provisions contained in Article 12, which allow a contract of sale to be made in any form other than writing, do not apply where a party has his place of business in the State making the declaration.

4. Article 12 does thus contain the sole mandatory rule of the Convention (but compare Article 6, note 2). The exclusion of the Convention as a whole, however, is hereby not precluded (Article 6) because in that case national law is invoked from which the respective rules as to form are to be deduced (Art. 29, notes 1.3. and 5). [page 75]

For the purposes of this Convention "writing" includes telegram and telex [1].

[COMMENTARY]

1. This rule, without any doubt, refers to cases where the Convention itself relates to the written form, e.g. in Article 29, paragraph 2. It seems to be appropriate, however, to invoke it also when interpreting a writing requirement under national law (Article 12, note 2). Although the use of the Convention for such interpretation of the national law leads to a strange entanglement of the two, it may be considered as covered by the introductory part of this Article for it refers to an interpretation of the national law to the extent to which it is to be applied as an exception within the substantive scope of application of the Convention. The definition given here of the written form is valid also for a contractually agreed written form.

By contrast, it seems to us to go too far to turn this rule as Schlechtriem does (32 fol) generally into a "uniform objective standard for form requirements". When the national law to be invoked as an exception prescribes further-reaching form requirements than mere writing (authentication, e.g. at consulates; certification, affixing of seal or stamp), those will certainly not be removed by Article 13. The rule includes machine-readable data carriers for being regarded as "writing". They certainly exist objectively and independently of the parties and are durable, thus meeting essential criteria for writing requirements to be substantiated. There are, however, concerns in regard to the recognizability of the content of their declaration by the other party which speak against recognizing them as written form. Similar considerations are relevant as they were made in respect of languages (Art. 8, note 3.2.). We, therefore, believe that machine-readable data carriers can be considered as indications of intention in the meaning of the CISG only if their content is recognizable to the addressee. In that case they also constitute written declarations or communications.

The Factoring Convention adopted in 1988 already considers further possibilities formulating: "notice in writing includes, but is not limited to telegrams, telex and any other telecommunication capable of being reproduced in tangible form" (Art. 1, paragraph 4, subpara. (b)) This refers in the first place to telefax and does not address the special problems of recognizability of machine-readable data carriers. It is said furthermore and expressly in the Factoring Convention that a notice in writing need not be signed, but must identify the person by whom or in whose name it is given (Art. 1, paragraph 4, subpara. (a)). A signature by a machine would, for instance, be sufficient. It seems to us that in the light of the discussion at the diplomatic conference (O.R., 269), Article 13 can also be interpreted in this sense, as Rajski (BB, 129) already does, even without reference to the Factoring Convention. [page 76]

We can, however, not agree with his view expressed in the same place that telegram and telex are less strong evidence than the traditional written form. This does, in our view, not depend on the category of document, but rather on such factors as the processing remarks, the role it has played in commercial intercourse between the parties, like reference to it, etc. [page 77]

Go to Table of Abbreviations || Go to Explanation of Abbreviated Bibliographic References
Go to entire contents of Enderlein & Maskow text

Introductory remarks

[1] While the 1964 Hague Conventions dealt separately with the formation and the terms of international sales contracts, the CISG integrates both, thus avoiding parallel provisions as well as problems related to the mutual reference with regard to the interpretation of the Conventions (Schlechtriem, 34). As suggested, in particular by Scandinavian States, Parts II and III became independent to a certain extent so that they can be ratified separately (Art. 92).

[2] From among the States that are parties to the CISG, only Denmark, Finland, Norway and Sweden have made use so far of the reservation under Article 92. In the case of a contract between parties from Germany and a Scandinavian State, Part II would be applied by German courts only under the preconditions of Article 1, paragraph 1, letter (b), if German law were applied generally. Article 1, paragraph 1, subpara. (a) would not be taken into account because the Scandinavian States are not parties to the Convention with regard to Part II.

[3] Part II sums up the most important provisions for the formation of a contract. However, other parts as well contain provisions which are relevant for the formation of a contract. This refers, in particular, to Article 4 and Articles 6 to 13. From Article 7, for instance, it can be inferred that in the case of problems related to interpretation, particularly concerning probable gap-filling, domestic law must not be applied immediately.

[4] Part II is structured in such a way that Articles 14 to 17 deal with the offer, Articles 18 to 22 with the acceptance of the offer, Article 23 with the moment of the conclusion of the contract and Article 24 with questions of definition.

[5] The rule underlying the formation of a contract is a compromise between States Parties having different legal traditions. The main controversy referred to the question of whether a contract should be formed with the dispatch or receipt of the statement of acceptance. Here the continental European thinking based on Roman legal traditions has prevailed, in which the receipt of the statement of acceptance is the prerequisite for the formation of a contract. Whereas, the Anglo-American doctrine found its way into the Convention through the general possibility to revoke the offer. [page 81]

Other essential points of discussion referred to the determinability of the price and the relationship between Articles 14 and 55; the formation of a contract outside the traditional scheme of offer and acceptance, and, finally, the inclusion of the general business conditions (battle of forms). As regards the latter questions, no generally acceptable solutions could be found.

[6] The rules under Part II of the CISG are based largely on the Uniform Law on the Formation of Contracts for the International Sale of Goods concerning movable goods (ULF) and, compared to the latter, constitute an improvement with regard to a number of issues. To leave room for other considerations, a comparison with the ULF (c. Rehbinder/Freiburg) will be omitted in this commentary. It will have to be taken into consideration, however, that courts of those countries which were parties to the Hague Conventions will resort to decisions regarding the ULF when it comes to interpreting the CISG insofar as the old rules were retained (see the excellent compilation by Schlechtriem/Magnus).

[7] Obviously, there have been no major practical differences with regard to the formation of a contract for there are not many relevant judgements (Rehbinder/Freiburg, 150). Schlechtriem (Kaufrecht, 46) points to the "noticeable discrepancy between the efforts made by scientists to cope with supposed problems, on the one hand, and questions which, on the other hand, turned out to be relevant for practical purposes because of the number of court decisions that have become necessary."

[8] The ruling concerning the formation of a contract under Part II of the CISG is aimed at the formation of sales contracts, but it does not specifically relate to sales in its entirety. A large number of existing provisions could also be applied to the formation of other international commercial contracts. Insofar, Part II could form the "core of a unified general contract law" (c. Hoffmann/Lausanne, 79). Also a study group of UNIDROIT, which deals with the drafting of general contractual rules, used Part II of the CISG as the foundation for their work (c. PICC). [page 82]

(1) A proposal [2] for concluding a contract [3] addressed to one or more specific [4] persons constitutes an offer [1] if it is sufficiently definite and indicates the intention [5] of the offeror to be bound in case [6] of acceptance. A proposal is sufficiently definite [7] if it indicates the goods [8] and expressly or implicitly [11] fixes or makes provision [12] for determining the quantity [9] and the price [10].

(2) A proposal other than one addressed to one or more specific [4] persons is to be considered merely as an invitation to make offers, unless the contrary [13] is clearly indicated by the person making the proposal.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [definition of an offer]

An offer is defined as a proposal for the conclusion of a contract if it is addressed to one or more specific persons, expresses the intention of the offeror to be bound and contains certain minimum terms. A statement of acceptance can also be an offer if it goes beyond the terms of the offer, differs greatly from that one or is given belatedly (c. Articles 19 and 21). Any successive proposal constitutes an offer. The decisive "offer" is always the declaration which preceded final acceptance (Eörsi/BB, 136 fol). Here the CISG follows the traditional treatment of the conclusion of a contract which does not fully meet the requirements of today's world of business, especially when it comes to the conclusion of sales contracts covering major and technically complicated objects.

In many instances the question is raised, therefore, of how to deal with contracts which do not fit into the scheme of offer and acceptance (e.g. see Doralt, 60; examples are given also by Schlechtriem, 34).

[2] [a proposal]

An offer is not defined as a statement but rather as a proposal. Sometimes the dispatch of goods can constitute such a proposal. It may be recalled here that the written form is not mandatory for the conclusion of a sales contract.

[3] [for concluding a contract]

The proposal has to be aimed at concluding a contract, i.e. it should cause the conclusion of a contract merely by accepting it. Inquiries for possible deliveries or proposals for negotiations on a sale do therefore not constitute an offer.

[4] [offers vs. invitations to make offers]

Newspaper advertisements and similar acts of publicity or public tenders do not constitute an offer. Proposals addressed to the public at large are mere invitations to make offers. Even if brochures, catalogues or circulars, for instance to all mechanical engineering companies, are addressed to specific persons, there will mostly be a lack of the intention to be bound (c. note 5). If there is such intention to be bound and if circulars, or catalogues are addressed to specific persons, those acts could constitute an offer, the number of addressees being of no consequence (Eörsi/-Lausanne, 45); also Sono/Dubrovnik,119). [page 83]

[5] [indicates the intention of the offeror to be bound]

A proposal is aimed at concluding a contract only when it expresses the intention of the offeror to be bound. The offer is one of the two statements of will which lead to the conclusion of a contract. Hence the relationship under a contract is a relationship of intention. The intention to be bound is not excluded because of the fact that the contract is to be concluded under a condition. A proposal for the conclusion of a contract does not automatically contain the intention to be bound; it may also be aimed at taking up negotiations on a sale. This could be the case in particular if the proposal at first only contains the category and quantity of the goods (c. note 7). If there is the intention to be bound, lacking provisions could be complemented by jus dispositivum (Sono/Dubrovnik, 120). Some formulations in the offer might cause doubt as to the intention to be bound. In some instances the intention to be bound can be seen from the clarity with which the goods are specified (Eörsi/BB, 140). As far as the intention to be bound is the result of an error, questions of validity are touched upon which do not come under the CISG. Non-binding offers do not contain an intention to be bound.

[6] [in case of acceptance]

It is expressly stipulated here that the intention to be bound must refer to the contract to be concluded. If the offer is not accepted, there will be no binding. The intention to be bound does not refer to the offer itself. (As to the binding nature of the offer, compare Article 15 fol).

[7] [minimum content of the offer]

The minimum content should include the description of the goods as well as the quantity and the price (c. Article 55). The goods can be indicated both individually and as a category. Insufficient and not a category in this sense are collect names, e.g. woodworking machinery. It is not necessary for the offer to indicate the quality, its packaging (Article 35) as well as the place or date of delivery (Articles 31 and 33). If the offer contains relevant information, however, those are to be considered as being material (Article 19, paragraph 3).

The second sentence of paragraph 1 had been particularly disputed both during the preparation and the holding of the Vienna Conference (O.R., 92) because such "minimum terms" do not suffice in many practical cases, and a relevant proposal is then not definite enough to constitute an offer (c. note 5). One has to proceed, however, on the assumption that the offeror will not express an intention to be bound unless he himself believes that the proposed parts of the contract are sufficient. If, on the contrary, the offeree considers those parts as insufficient, he may add the relevant amendments to his statement (c. Article 19). [page 84]

[8] [ - indicates the goods]

The mere indication of the goods may not always suffice, but rather calls for a certain specification depending on the category of the goods (Eörsi/Lausanne, 46).

[9] [ - indicates the quantity]

The quantity does not have to be determined from the outset. Reference to all the requirements or total output of the goods should be acceptable (O.R., 21). Any quantity may also be offered; the determination can be done through acceptance (Eörsi/Lausanne, 46). The quantity may also be determined by naming the requirements for a certain purpose or the amount of money available for it (Eörsi/BB, 141).

[10] [ - indicates the price]

While the price belongs here to the minimum content of an offer, Article 55 concedes that a contract may also be validly concluded if the price has not been fixed expressly or implicitly and nothing has been agreed that would make provision for its determination.

Thus there is a contradiction between Articles 14 and 55, which has been duly reflected in various sources (Bydlinski/Doralt, 62 fol; Schlechtriem, 37 fol; Rehbinder/Freiburg, 158; Eörsi/BB, 141). Article 55 presupposes the existence of a valid contract which pursuant to Article 14 simply cannot exist. It seems to us that the price problem has been over-emphasized in the discussion because Article 14, in the extreme, permits that nothing be said about the price but that the possibility of determining it is implied.

The determination of the price necessarily includes the currency, whereas agreement on the terms of payment is not necessary (c. Articles 54 and 57 fol).

[11] [explicitly or implicitly fixes or makes provision for determining the quantity and the price]

This rule of implicitly agreeing on the quantity and price was very much disputed at the Vienna Conference (O.R., 275, 292) for many delegations feared a misuse by (economically more powerful) sellers. Whether or not one can proceed on an implicit agreement on quantity and price certainly depends in the first place on the intention of the parties themselves (Article 8, paragraph 1) as well as on the usage of the parties and the established practices in the relevant branches (Article 9).

[12] [fixes or makes provision for determining the quantity and price]

Quantity and price can be fixed later on the basis of objective factors (requirements, output and/or offer of the competition, stock market or market prices). It may, however, also be left to one of the parties (list price) or a third person to fix quantity and price (Schlechtriem/Doralt, 187); Schlechtriem, 37; Eörsi/Lausanne, 47). [page 85]

[13] [unless the contrary is clearly indicated … (impact upon intention to be bound)]

The contrary means that the offeror wants to be bound also towards non-specific persons, e.g. in formulating ''as long as stocks last". Commercial practices may be of importance in this respect, too. [page 86]

(1) An offer becomes effective [1] when it reaches [2] the offeree.

(2) An offer, even if it is irrevocable [3], may be withdrawn [4] if the withdrawal [6] reaches the offeree before or at the same time [5] as the offer.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [an offer becomes effective]

An offer has only a limited life-span. It becomes effective at a specific date, later it ceases to be effective. Neither before (if e.g. the offeree is informed of the offer by a third person) nor afterwards can it be accepted. (Concerning late acceptance, however, compare Article 21.)

Also a binding offer is not binding before it becomes effective (Honnold,165).

It is a precondition for the offer to be effective in order to be accepted. From the offer and acceptance being effective it does, however, not follow automatically that the contract is effective. A conditional contract only becomes effective if and when that condition is fulfilled (Eörsi/BB, 148).

[2] [when it reaches the offeree]

It is a precondition for the offer to become effective that it reaches the offeree; it needs to be received. The withdrawal of the offer (Article 15, paragraph 2), the revocation of the offer (Article 16, paragraph 1), the rejection of the offer (Article 17) and the acceptance (Article 18, paragraph 2) also become effective when they are received. Here the CISG follows the rule of receipt. By contrast, Articles 26 and 27 are based on the dispatch rule. Also, the rejection or approval of a late acceptance under Article 21 becomes effective with dispatch. The subject here is the risk of transmission, which in each case should be assumed by the party which in deviating from the normal procedure gave rise to a statement (Bydlinski/Doralt, 65). The offer will, however, not become effective in spite of its reaching the offeree if a withdrawal reaches the addressee earlier or at the same time. [page 86]

Receipt of an offer does not mean that the addressee has to be aware of its content. It suffices that the offer reaches the area of receipt or disposal of the addressee. (As to the definition of "reaches" see Article 24).

[3] [an offer, even if it is irrovocable]

According to the CISG an offer is not always irrevocable, but only under certain conditions (c. Article 16, paragraph 2). As a basic principle it is revocable under Article 16; paragraph 1. An offer is irrevocable, for instance, if the offeror himself has declared it firm, binding or irrevocable.

[4] [may be withdrawn: distinction between "revocation" and "withdrawal"]

Even an irrevocable offer may be withdrawn. Hence, the CISG distinguishes between revocation (Article 16, paragraph 1) and withdrawal which is possible only until the offer has become effective. An offer which has not yet become effective is withdrawn, while the offer which has become effective is revoked. The difference consists thus in whether the offer is dropped before it becomes effective or afterwards. As to everyday language, revocation and withdrawal are identical anyway. The English language uses here two verbs, one of Latin and one of Germanic origin (revoke - withdrawn) which have the same meaning. If there is only one verb for this in one language, a translation should be difficult (Eörsi/BB, 147,149).

Incidentally, the rule of withdrawal as contained in the CISG corresponds to the rule of withdrawal in many legal systems.

[5] [revocation after the offer reaches the offeree]

According to the continental European law, no revocation is possible after the offer reaches the offeree. According to the CISG, the possibility of withdrawal ends; however, the possibility of revocation commences pursuant to Article 16.

[6] [form of the withdrawal]

The withdrawal does not have to be in the same form as the offer, i.e. offer by letter, withdrawal by telex or telegram. Withdrawal can also be declared by telephone even if otherwise the written form is required. [page 87]

(1) Until a contract is concluded [2] an offer may be revoked [1] if the revocation reaches [3] the offeree before he has dispatched [4] an acceptance.

(2) However, an offer cannot be revoked [5]:

(a) if it indicates, whether by stating a fixed time [7] for acceptance or otherwise [6], that it is irrevocable;
(b) if it was reasonable for the offeree to rely [8] on the offer as being irrevocable and the offeree has acted in reliance on the offer [9].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [exceptions to the principle of revocability of an offer]

Here we are dealing with a principle that is taken from the Anglo-American legal family: the principle of revocability of the offer. The binding to an offer is an exception there. This rule is the most important deviation from the rule that governs the conclusion of contracts under German law.

The CISG, however, makes some major exceptions to the principle of revocability so that principle is put into question again (c. notes 4 and 5). According to W. v. Marschall, who refers to E. v. Caemmerer (Freiburg, 174), an offer is, therefore, irrevocable as a rule. Rehbinder (Freiburg, 177), however, talks of a "feeble assumption of revocability". Sono draws attention to the fact that the Convention meets practical needs and should not be considered as being a compromise between Common Law and other legal systems, but rather brings to light the common basis of the two (K. Sono, "Restoration of the Rule of Reason in Contract Formation: Has There Been Civil and Common Law Disparity?", Cornell International Law Journal, 1988/3, p. 478).

[2] [revocation only possible before conclusion of contract]

Revoking is only possible before the conclusion of the contract. The contract is concluded when the acceptance becomes effective (Article 23). The date when the acceptance becomes effective is determined by Article 18, paragraphs 2 and 3. Consequently, only in the case of oral negotiations or in the case of acceptance by conduct. implying an intent can the offer be revoked up until the conclusion of the contract. When acceptance is given in writing, the possibility of revoking is further limited (c. note 4). Revoking is thus as a rule not possible up until the conclusion of the contract but only until the statement of acceptance is dispatched. If the offeror revokes his offer, he has to be aware that it may be too late to do so because the offeree by this time may have already dispatched his statement of acceptance (Eörsi/BB, 160).

[3] [revocation must reach the offeree]

For the revocation of an offer to become effective it needs to reach the offeree just as does the offer itself (Article 15, paragraph 1). (As to the definition of "reach" compare Article 24). [page 88]

[4] [before he has dispatched an acceptance]

Should the offeree receive a revocation even before he accepted the offer, he could no longer accept the offer because it is terminated. On the other hand, a revocation remains ineffective if the offeree has already dispatched a statement of acceptance even though a contract has not yet been formed. In this case, the offeror does not have the possibility to revoke his offer until the conclusion of the contract. The purpose of this rule is to cut short the time available for revocation (Eörsi/BB, 156).

[5] [two exceptions to revocability of an offer]

Two important exceptions are made here to the principle of revocability of an offer, which to a large extent annul the principle" itself: First, an offer can express not only that it is irrevocable (see note 6); and, second, an offer can be made out in such a way that the offeree could consider it as irrevocable (note 8).

According to Eörsi (BB, 156) the two exceptions, stipulated under (a) and (b), refer to identical situations both in Civil Law and Common Law language.

If an offer is revoked, even though the revocation is not admissible, then that revocation is not effective and the offer can still be accepted. In that case, however, the offeree has to take non-fulfilment of the contract by the offeror into account and has the obligation to reduce the damages under Article 77 (Honnold, 176).

One rule suggested by the former GDR concerning pre-contractual liability (e.g. unjustified breaking off of negotiations when through reliance on the conclusion of the contract project costs were incurred; A/Conf. 97/C.1/L.9S) was not adopted.

[6] [offer defined by offeror as firm, binding or irrevocable: relevance of origin of parties]

An offer is doubtlessly irrevocable only if the offeror expressly defines it as firm, binding or as irrevocable (Eörsi/Lausanne, 48).

[7] [significance of time limit for acceptance]

Whether or not the determination of a time limit for acceptance leads automatically to irrevocability, or whether additional statements by the offeror are necessary; was strongly disputed at the Vienna Conference (O.R. 278) since that determination can have different meanings. It may mean that the offer should be binding and irrevocable, or, as under Anglo-American law, that the offer lapses thereafter. It was, therefore, not stipulated that a time limit for acceptance should automatically mean irrevocability (Honnold, 171). In the CISG the time limit for acceptance is only an indication (Rehbinder/Freiburg, 158; Schlechtriem, 40). Bydlinski (Doralt, 67) would like the time limit for acceptance to be sufficient, just as according to the ULF the time limit for acceptance meant irrevocability. Thus the fixing of a time limit for acceptance alone does not suffice. The offer is not yet irrevocable if it states a fixed time for acceptance but only [page 89] if that statement of a fixed time is to express irrevocability (Eörsi/BB, 157). In interpreting the intention of a party (c. Article 8), the origin of the parties is also to be taken into consideration. If both come from the Anglo-American legal order then, in the case of the mere statement of a time limit for acceptance, a court having recourse to Article 9 would come to the conclusion that the offer is not irrevocable.

[8] [protection of the good faith of the offeree]

Reference is made here to the protection of the good faith of the offeree (Rehbinder/Freiburg, 160). It is not sufficient that the addressee of an offer relies on the irrevocability of that offer. Rather, he should reasonably be able to rely on it, i.e. another party in the same situation should have reached the same conclusion, and he must have become active. The irrevocability of the offer may be the result of circumstances, e.g. the ordering of replacement parts in the case of an accident. However, the offeree will under certain circumstances rely on the offer also if the acceptance of the offer requires time and cost-consuming investigations (O.R., 22) or if he has informed the offeror that he will participate in a tender, the offeror thus to be the sub-contractor (Honnold, 172). Eörsi (BB, 159) raises the question of whether an analogous situation is possible in that the offeror, e.g. because of his conduct in previous negotiations, may rely on the other party accepting an offer.

[9] [offeree has acted in reliance on the offer]

Such act could be, for instance, the participation in a tender on the basis of the offer (Honnold, 171) or the conclusion of contracts with third parties or also the preparation of production or other measures, provided such acts or conduct were considered as normal in the branch concerned, or were supported by previous negotiations, or could be foreseen by the offeror (Eörsi/BB, 159). It should be taken into account that the offeree in any case has to make a decision in favour of acceptance within the period fixed for acceptance (c. Article 18). [page 90]

An offer, even if it is irrevocable [2], is terminated [1] when a rejection [3] reaches [4] the offeror.

[COMMENTARY]

[1] Except for oral offers, one can in general proceed on the assumption that an offer remains valid for a certain time. After this time, which is either fixed by the offeror or is considered as being reasonable under the circumstances (Article 18, paragraph 2) has expired, the offer lapses. The offer, however, also lapses if it is rejected. The offeror becomes free even if the time which he has declared binding [page 90] for his offer has not yet expired. The addressee of the offer can therefore not reject it in the first place and then, within the original time frame, accept it nonetheless.

Whether or not the offer lapses in the event of death, bankruptcy or incapability to do business, is left open by the CISG in contrast to Article 11 ULF.

[2] Any offer is terminated with its rejection, irrespective of whether it was revocable or irrevocable.

[3] An offer is rejected not only when an offeree rejects it but also when he accepts the offer with material modifications. Such an "acceptance" constitutes a new offer (Article 19, paragraph 1). The rejection of an offer often is pronounced not only at the end of the time limit for acceptance (then the offer would lapse anyway) but during that time. In the interest of the possible conclusion of a contract, not every inquiry should be interpreted as being a rejection.

[4] The offer is terminated when its rejection reaches the offeror (as to the time of "reaching", c. Article 24). Consequently, if the offeree accepts the offer, for instance by telex, before his letter containing a rejection has reached the offeror, a contract is made (Honnold, 179). [page 91]

(1) A statement [1] made by or other conduct [2] of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself [3] amount to acceptance.

(2) An acceptance of an offer becomes effective [4] at the moment the indication of assent [5] reaches [6] the offeror. An acceptance is not effective [7] if the indication of assent does not reach the offeror within the time he has fixed [8] or, if no time is fixed, within a reasonable time [9], due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer [10] must be accepted immediately unless the circumstances indicate otherwise [11].

(3) However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage [13], the offeree [12] may indicate assent by performing an act, such as [14] one relating to [15] the dispatch of the goods or payment of the price, without notice [16] to the offeror, the acceptance is effective [17] at the moment the act is performed, provided that the act, is performed within the period of time laid down in the preceding paragraph.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [statement made by offeree indicating assent]

Generally, a contract is made by way of two corresponding statements of intention: the offer and the acceptance. But in case there is agreement between the parties (e.g. by way of signing a document) there will also be a contract, even if offer and acceptance are not identifiable (Rehbinder/Freiburg, 166; c. also Article 14, note 1).

The statement of acceptance does not expressly have to declare acceptance of the offer; it is necessary that assent to the offer be expressed by the offeree. The statement or conduct is interpreted pursuant to Article 8. The statement must express assent to the offer. The mere acknowledgment of receipt of the offer is thus not sufficient, neither is an expression of interest in it (Farnsworth/BB, 166).

The offeror may prescribe the form of the answer, e.g. by telex. This is of importance when it comes to interpreting the time limit for acceptance (c. note 8).

[2] [other conduct of offeree indicating assent]

The offeree may also express his assent through conduct implying an intent, e.g. dispatch the urgently needed replacement parts or open a letter of credit in the amount of the price. The act which is to express assent to an offer has to refer clearly to the offer. It also suffices that the offeree commences manufacture of the goods (s. Farnsworth/BB, 166) or performs the purchases required (O.R., 24). As to these examples, one fails to see why the offeree should not inform the offeror of his decision to accept the offer. After all, for both parties clarification is needed as regards the conclusion of the contract (Sono/Dubrovnik, 124). Only such conduct can, in our view, be judged to be an acceptance which becomes directly effective towards the other party.

If pursuant to Article 96 a reservation were made concerning the written form, assent through conduct implying an intent would be excluded (c. note 12). [page 92]

[3] [silence or inactivity … in itself]

There need not be a reaction to goods that were not ordered. Silence does not mean acceptance in this case. However, the offeree may have an obligation to preserve the goods (c. Article 85; Schlechtriem, 40).

The offeror cannot force the offeree to react in writing, for instance: "Consider your silence as assent." Conversely, the offeree may, if he wants to enter into a contract, keep silent and consider the contract as concluded (Famsworth/BB, 172).

Silence could express acceptance if usages and practices that exist between the parties (Article 9) called for expressly rejecting an offer. In the case of longstanding business relations, silence for reason of good faith (c. Article 7) may mean acceptance (Sono/Dubrovnik, 124). Through an inquiry or an invitation to submit an offer it may be communicated that one's own silence should be interpreted as acceptance (examples are given by Honnold, 182). The parties may also agree that for future contracts silence would amount to acceptance, e.g. in the case of continuous orders (Farnsworth/BB, 167). It is not clear, however, at which moment the contract is concluded in the event of agreed silence (Farnsworth/BB, 172), probably not when the offer is received but rather after a reasonable time. Silence in answer to a commercial letter of confirmation has taken on particular significance in the rather extensive (so Rehbinder/Freiburg, 167) jurisdiction of the Federal Republic of Germany. According to that state of affairs, a contract can be made through silence in answer to a letter of confirmation even if negotiations were not successful. While at the Hague Conference commercial letters of confirmation were considered as established practice, the Vienna Conference was against such treatment. Also in this regard the question will be decided in practical terms of whether or not the parties are familiar with this practice. (In its ruling A 9/78 of February 5, 1981 the Court of Arbitration to the Polish Chamber of Foreign, Trade judged silence in answer to a letter of confirmation to be assent because this was established practice. See Z Orzecznictwa Kolegium Arbitrow Przy Polskiej Izbie Handlu Zagranicznego. Przeglad Wybranych Orzeczein za lata 1979-1983, Warsaw 1987, p. 53 fol).

If the parties were not familiar with this practice, the letter of confirmation could be regarded as a counter-offer (c. Article 19; Rehbinder/Freiburg, 170).

According to Farnsworth (BB, 172) it is not clear whether the reservation under Article 96 would affect a written agreement between the parties on future silence since Article 96 does not mention general agreements between the parties but only provisions of the Convention which should not apply. From the sense of that reservation, [page 93] however, it becomes clear that not only oral contracts are to be excluded but even more so those concluded by silence.

[4] [time of effect of the acceptance]

Before an acceptance becomes effective, it can be withdrawn (Article 22). The time of effect of the acceptance and the date of the conclusion of the contract are identical (Article 23). This does not mean, however, that the contract itself is already effective, for its becoming effective may require approval by the State or other authorities. The contract may also become effective retroactively; in that case it will become effective upon approval (Schlechtriem, 45). Yet, pursuant to Article 4, questions relating to validity are excluded from the scope of the Convention.

[5] [indication of assent]

This may be done through a statement of acceptance or conduct implying an intent (c. note 2). Compare also with note 12.

[6] [effect of dispatch of acceptance]

Even before it is received, the acceptance has a certain effect: its dispatch already excludes revoking an offer (c. Article 16).

The contract is made not when there is an intention to accept it or when the acceptance is dispatched, but only when it reaches the offeree (as to the moment of "reaching" compare Article 24). The risk of transmission is borne by the offeree. Should the acceptance be lost, there would be no contract. If there is a postal delay, the offeror has to react (c. Article 21, paragraph 2).

According to Farnsworth (BB, 172) it would be fairer if the dispatch of the acceptance were considered as decisive and the burden of the risk of transmission were placed on the offeror. The offeror, in the case of no reply to the offer, would likely be more concerned with the destiny of the contract than the offeree who would not know that his acceptance was lost.

An act to be regarded as acceptance, however, becomes effective immediately and not only when the offeror is informed accordingly (c. note 17).

If the offeror becomes aware of the act, e.g. because he is informed by the carrier or a bank that the goods or the money have arrived, no additional statement of acceptance will be required and the loss of such statement will have no negative effects (Farnsworth/BB, 168).

[7] [acceptance must be received within the fixed period of time]

The statement of acceptance must be received within the fixed period of time; otherwise the acceptance will not become effective. There are, however, exceptions to this rule (c. Article 21). [page 94]

[8] [fixing the period of time]

The period of time for acceptance may be fixed according to the calendar or in another way (e.g. within four weeks). (As to the calculation of the time compare Article 20, paragraph 2 and the beginning of that period compare Article 20, paragraph 1).

[9] [if no time fixed, within a reasonable time]

What is reasonable always depends on the circumstances of each case. The offeree may, in any case, claim some time for reflexion which shall be the longer the more complex or complicated the contract offered is. In the case of perishable goods, where immediate delivery is taken for granted, such reasonable time would, for instance, be shorter than in the case of machinery. Account has to be taken also of the way in which the offeror transmits the offer. A simple letter calls for a longer time for reflexion than a telegram. Apart from the category and scope of the transaction, a reasonable time may be influenced by the practice that exists between the parties. Government regulations, which may require an examination as to whether the business transaction might be approved, have to be taken into consideration.

If the offeror is not sure whether the acceptance reached him within a reasonable time, he may give another confirmation. Such confirmation is, under Article 21, paragraph 1, considered as making a late acceptance effective. Farnsworth (BB, 173) is in contradiction to that view and believes that such a confirmation is the actual acceptance if no acceptance was received within a reasonable time.

[10] [oral offers]

The fact that oral offers have to be accepted immediately corresponds with the rules in many legal systems.

[11] [oral negotiations]

Also in oral negotiations it is up to the offeror to grant the offeree time for reflexion either at his own initiative or at the request of the latter. A period for examination (possible need to get information etc.) may be the outcome of negotiations. One has to expect from the offeree, however, that he will draw the attention of the offeror to unusual circumstances.

[12] [para. 18(3) an exception to para. 18(2)]

Paragraph 3 constitutes an exception to paragraph 2. Pursuant to paragraph 2 the offeror is informed of the acceptance within the time limit; however under paragraph 3 he is not, for conduct implying an intent would be sufficient already. The offeror who, after that time limit has expired, immediately concludes a contract with a third party, may thus end up in a difficult situation. [page 95]

According to paragraph 3 a more unfavourable situation arises for the offeror compared to the provision in paragraph 2. Therefore, a conduct implying an intent is somewhat restricted. While paragraph 2 includes any such conduct, paragraph 3 limits a conduct implying an intent to such acts which the offeree undertakes on the basis of the offer, of existing usages or practices. The offeror himself may thus have suggested the conduct implying an intent. A specific action can, for instance, be stipulated in the offer ("Request immediate dispatch!"; c. Schlechtriem, 40).

According to Sono (Dubrovnik, 122), such an offer is only thinkable in the form of an order by the buyer. A seller may also pronounce an invitation in his offer to immediately open up a letter of credit.

[13] [usages and practices]

Actually, usages and practices do always apply so that their mentioning here is superfluous. If this is done anyway, then it is done to preclude any doubts.

[14] [examples of conduct implying intent]

The two examples are, of course, the main forms of conduct implying an intent. For that reason a limitation to the supply of the goods and the payment of the price had been suggested in drafting the CISG (c. also note 2).

[15] [assent by performing an act … relating to …]

The formulation, "... an act ... relating to …", expresses that it is sufficient to give an instruction to the carrier or the bank without actually having dispatched the goods or transferred the price (O.R., 24). Bydlinski (Doralt, 73) even believes that the instruction to an employee is enough. In our view, only those acts which go beyond the sphere of the offeree are relevant.

[16] [notice of performance of act]

Since an acceptance is effective at the moment when the contract is made, even if the offeror knows nothing about it yet, an unsatisfactory situation may result, when, e.g., the goods are dispatched by ship and the ship is under way for a longer period of time. We, therefore, regard a solution in which the offeror has to be notified of the act within the period of time for acceptance as more favourable.

Depending on the circumstances of each specific case, from the general principles (Article 7) an obligation for the offeree to inform the offeror may be deduced. Rehbinder (Freiburg, 161) considers this as a supplementary obligation whose breach would entail liability for compensation. Honnold (186 fol) also includes the conditions under paragraph 2 and makes the need for the offeree to give notice dependent on whether or not, for instance, the goods are subject to constantly changing prices. In his view, the offeror also has to learn about the acceptance within a reasonable time. [page 96]

[17] [acceptance is effective at the moment the act is performed, provided that …]

Hence, the contract is concluded at that time. (This is put into doubt, however, by Rehbinder/Freiburg, 161.) Thus the possibility to withdraw or revoke the offer becomes inapplicable (c. note 4), and such prompt effect precludes a future' revocation of the offer (Farnsworth/BB, 174). [page 97]

(1) A reply to an offer which purports [2] to be an acceptance but contains additions, limitations, or other modifications [1] is a rejection [3] of the offer and constitutes a counter-offer [4].

(2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially [5] alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches [6] a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer [7] with the modifications contained in the acceptance.

(3) Additional or different terms [10] relating [9], among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially [8].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY

[1] [reply containing modifications: material vs. immaterial]

The CISG considers modifications, including additions and restrictions, as detrimental to the conclusion of a contract. This principle is, however, not made absolute. The main question is whether the modifications are material or immaterial (c. note 5).

There is a large gap here between theory and practice. In practice, most of the acceptances would actually be counter-offers, since it would suffice for the parties to 'have differing jurisdictional clauses in their business conditions; and the buyer and the seller regularly exchange their offers and acceptances on printed forms or together with their different business conditions. According to Honnold (188) businessmen do not read the backsides of those forms in their normal business relations because business would otherwise "come to a halt". Nevertheless, contracts are being fulfilled. [page 97]

Since an acceptance including modifications constitutes a counter-offer and the fulfillment of the contract is conduct implying an intent, the conditions of the acceptance apply. These consequences are rejected in many instances. If a seller answers to an order by mailing his business conditions, which contain limited liability or an exemption therefrom, Hyland (Freiburg, 338 fol, giving rather impractical recommendations), for instance, wants the acceptance of the counter-offer by the buyer through an act implying an intent to be valid only if the seller has made a serious attempt to explain the different terms to the buyer.

Eörsi (Lausanne, 50) makes a distinction between whether the modifications are intentional or unintentional, the latter probably not being material in his view.

[2] [inquiries or other remarks concerning the offer]

Not every answer to an offer is to be qualified as an acceptance. Inquiries or other remarks concerning the offer should not be promptly classified as a rejection. An answer to an offer can be rejected only when it has been accepted, i.e. the offeree wants it to be an acceptance.

Mere inquiries are neither acceptances nor rejections (Sono/Dubrovnik, 124). To save a contract, modifications are sometimes interpreted by the courts as being "mere suggestions" which the offeror might accept or reject. The acceptance is then divided into acceptance of the offer and a further offer to modify the contract (Farnsworth/BB, 178).

There is a dispute on whether a commercial letter of confirmation constitutes an acceptance (see Huber, 449 fol; Schlechtriem, 44; Rehbinder/Freiburg, 170).

[3] [acceptance including [material] modification is a rejection of the offer]

An acceptance including the modifications does not bring about a contract, but is regarded as a rejection of the offer and, therefore, terminates the offer (c. Article 17).

[4] [acceptance including [material] modification constitutes a counter-offer]

While an acceptance including the modifications terminates the original offer, that same acceptance remains an independent act and takes on the character of a counter-offer. Now the provisions of Article 14 fol are applied to this counter-offer. To lead to the conclusion of a contract, this new offer needs to be unreservedly accepted. Such acceptance may be expressed through conduct implying an intent, (within the periods of time fixed under Article 18). [page 98]

The counter-offer accepted through conduct implying an intent favours the party who, in the "battle of the forms" fires the last shot, i. e. sends the last printed confirmation. Farnsworth (BB, 179) believes this typically to be the seller when he sends his answer to the buyer's order. We doubt whether such a general statement can be made at all. In the case of technical goods the typical situation should rather be that the buyer calls for an offer and then, on his part, declares his acceptance.

[5] [additions or modifications will not be a rejection if they do not materially alter the terms of the offer]

Not every acceptance is limited to a simple "yes" as an answer to the offer. Often the terms of the offer are repeated in the offeree's own words. In so doing, modifications may be expressed verbally which are not based on differing intentions.

However, even actual additions or modifications will not be considered if they do not materially alter the terms of the offer. What is considered as material depends on the circumstances of each case. What is unimportant to one party may be important to the other, and vice versa (Sono/Dubrovnik, 126). The question will have to be asked, in particular, whether the modifications will cause the offeror additional efforts or difficulties or increase his risks. "Neutral" modifications will in general be regarded as immaterial. According to Rehbinder (Freiburg, 164), however, everything is material which is "not to the obvious advantage" of the offeror. Immaterial modifications could be, for instance, that a certain packaging of the goods was prescribed, but a more suitable packaging could be used to avoid additional costs or that global delivery dates are specified (Bydlinski/Doralt, 72).

[6] [offeror can insist on no modifications]

The offeror might, however, insist on an unreserved acceptance of his offer and reject any modification, no matter how immaterial it may be. He should, therefore, carefully read the acceptance. Nevertheless, he must declare his rejection promptly. To do so, it suffices for him to dispatch a relevant communication. The risk of the loss of or a delay in transmitting the communication is borne by the offeree.

[7] [right to object to otherwise immaterial discrepancies]

In the absence of an immediate objection by the offeror, a contract is created, the terms of which are drawn from the offer and the modifications made in the acceptance.

Basically, even an immaterial discrepancy constitutes a counter-offer, since the offeror retains the right to reject it. If he does not do so, he practically accepts the offer by silence. Rehbinder (Freiburg, 164) believes that in this connection a rule is missing concerning the moment the contract is concluded and wants to apply here the provisions of Article 21, paragraph 1 analogously. In our view such an [page 99] analogy is superfluous for it can be seen clearly from Article 18 when a contract becomes effective, i.e. at the moment the unchallenged acceptance reaches the offeror.

[8] [list of modifications considered material: refutable assumptions]

Material modifications of the offer raised through acceptance are obstacles to the conclusion of a contract. This rule is supposed to protect the offeror. Farnsworth (BB, 178) therefore rightly raises the question of what happens if the modifications are such that they are to the advantage of the offeror. If changes in the price, the quality etc. were advantageous to the offeror, while other terms remained the same, they should not be in the way of a contract (Bydlinski/Doralt, 72).

Paragraph 3, in listing those terms whose modification should always be considered as materially altering the terms of the offer, strongly limits the possibility, as contained in paragraph 2, to favourably interpret the offer and acceptance so as to come to the conclusion of a contract. If certain changes are considered as material, then this is only an assumption which can be disproved, among other things, by invoking usages (Schlechtriem, 43). Rehbinder (Freiburg, 165) also advocates a refutable assumption, but claims at the same time that the irrefutability of an assumption ensues from genesis. Actually, at the Vienna Conference a relevant half sentence was deleted in the draft at the request of Bulgaria, which referred to whether or not the offeree, because of the offer or the particular circumstances of a specific case, had reason to assume that his modifications were acceptable to the offeror. There is no doubt that commercial practice does not consider any alteration of the offer relating to the abovementioned factors as being an obstacle to the conclusion of a contract. Frequently, the offeror will commence with the realization of the contract in line with the terms of the acceptance, which will have to be regarded as an acceptance of the counter-offer through conduct implying an intent when acceptance, including the modifications, has led to the termination of the original offer.

[9] [other caveats associated with this list of material modifications]

What is unsatisfactory with regard to this solution is that only the object and not the degree of discrepancy should be taken into account. Though rather extensive, that listing is not even complete. Other material alterations could include prior negotiations which have no influence on a written contract, or oral alterations of the written contract which are not permitted. It is doubtful whether a force majeure clause which does not relate to the extent of liability but the liability itself, or a choice-of-law clause which does not relate to the settlement of disputes as such but rather to the rules for such settlement (e.g. the standard rules of the ECE or UNCITRAL) are considered as pertaining to the examples mentioned (Famsworth/BB, 183). [page 100] A restrictive interpretation should try here to save some of the intentions of paragraph 2.

[10] [battle of the forms: rejection of relevant rule by UNCITRAL working group; preferred solutions]

Discrepancies between the offer and acceptance are, in particular, the result of the transmission of contradictory general business conditions, which is a problem that was solved under domestic law, e.g. in paragraph 33 of the ICCA. The inclusion of a relevant rule into the CISG was rejected both in the working group of UNCITRAL (proposal by the former GDR) and at the Vienna Conference (proposal by Belgium) (O.R., 289).

Under the rules of the CISG the party which is the last to transmit terms or to invoke them has the advantage (Schlechtriem, 44). Honnold (195) does not prefer the latest transmitted terms, but rather the concurring terms. He admits nevertheless that one always has to assume that a counter-offer is accepted by conduct implying an intent if the terms are contradictory, but the contract is fulfilled. According to Kramer (Doralt, 95) contradictory terms are a dissent and raise problems of validity, which pursuant to Article 4, are not covered by the CISG. In our view, however, a solution on the basis of Article 19 is preferable. It is recommendable for the offeror to always react to an acceptance irrespective of whether he wants the contract or not. If he wants the contract and says "yes", then this is either a superfluous confirmation, because the acceptance contained only immaterial alterations, or a necessary acceptance of the counter-offer if the alterations were material. If he does not want the contract and says "no", then this is either a superfluous clarification, because the acceptance contained material alterations, or a necessary step because there were only non-material alterations (Farnsworth/BB, 184). [page 101]

(1) A period of time for acceptance [1] fixed by the offeror in a telegram or a letter begins to run [2] from the moment the telegram is handed in for dispatch or from the date shown on the letter, or if no such date is shown, from the date shown on the envelope. A period of time for acceptance fixed by the offeror by telephone, telex or other means of instantaneous communication, begins to run from the moment that the offer reaches [3] the offeree.

(2) Official holidays or non-business days occurring during the period for acceptance are included in calculating [4] the period. However, if a notice of acceptance cannot be delivered at the address of the offeror on the last day of the period because that day falls on an official holiday or a non-business day at the place [5] of business of the offeror, the period is extended until the first business day [6] which follows.

[WORDS AND PHRASES, COMMENTS

[COMMENTARY]

[1] [commencement of period of time for acceptance]

Only if the period for acceptance is not calculated by the offeror according to the calendar (e.g. offer valid until April 30) but in days or weeks, in special cases also in hours, there is the question of when that period begins. The objective of this rule is for the two parties to find identical bases for the calculation of that period. Since the moment of dispatch is generally easier to prove than the moment of receipt, the CISG chooses the moment of dispatch as the beginning of the period for acceptance (Farnsworth/BB, 186).

[2] [different provisions for commencement of the period of time]

There are different provisions in Article 20 regarding the commencement of the period for acceptance depending on which way was chosen to communicate the offer. The date contained in the letter and the date of the actual dispatch need not be identical. These dates provide, however, a basis for an identical calculation of the period because the sender has a copy and the addressee probably discards the envelope (Farnsworth/BB, 186). If the letter does not have a date, the date of the stamp will count; the handing in of the letter at the post office thus being decisive just as in the case of a telegram. Periods for acceptance fixed by telephone or telex begin to run with the moment of receipt (c. Article 24).

Article 20 is a rule of interpretation. The offeror might also prescribe something different, e.g. he may fix a time of ten days to begin upon receipt of the offer (Honnold, 197 fol; Farnsworth/BB, 187). In case the offeror has not set a time limit so that one can proceed on a reasonable time (c. Article 18); there will be no question as to when the period for acceptance begins to run but rather when it ends.

[3] [period of time fixed by telephone, telex …]

Insofar as the addressee himself has a telephone or telex, and the communication does not need to be transmitted through third persons, the moments of receipt and dispatch are practically identical.

[4] [effect of official holiday or non-business day]

In other words, when calculating the number of days of the period it is ignored whether they are holidays, non-business days or business days if the delivery of the acceptance is not impeded (c. note 6). [page 102]

[5] [consideration only given to holiday or non-business day at place of offeror, except …]

Only holidays or non-business days at the place of business of the offeror are being taken into consideration because those may not be known to the offeree. If, however, the last day of the period falls on a holiday at the place of business of the offeree and the offeree is prevented from dispatching an acceptance, he has to take this into account and hand m his acceptance for dispatch earlier.

[6] [first business day which follows]

The offeror will not be able to make different arrangements on the last business day of the period, but rather has to wait until the next business day. He has to consider that the offeree will fully exhaust the period (Schlechtriem, 42). [page 103]

(1) A late acceptance [1] is nevertheless effective as an acceptance if without delay the offeror [2] orally so informs the offeree or dispatches [3] a notice to that effect.

(2) If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time [4], the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs the offeree that he considers [5] his offer as having lapsed or dispatches a notice to that effect.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [cases of late acceptance]

The ruling under Article 21 covers two cases of late acceptance, i.e. an acceptance which has not reached the offeror in due time (c. Article 18, paragraph 2):

      (a) The acceptance was dispatched belatedly, either after the period fixed by the offeror has expired and the offer has therefore already lapsed (Article 17) or still during that period but using a way of communication which has precluded the offeror from being reached in due time. The offeree has to be aware at all times that he is late in his acceptance. He thus knows that his acceptance is actually a counter-offer and needs to be confirmed through an acceptance. Silence by the offeror cannot be inferred by him to be an acceptance (Article 18, paragraph 1). The situation is more difficult if the offeror has not fixed a time, the acceptance having to be made nonetheless within a reasonable period (Article 18, paragraph 2). In that case, the offeror and the offeree may well consider different periods as being reasonable. Objectively, a reasonable time may have [page 103] expired already, even though the offeree assumes that the acceptance was made in due time.

      (b) The acceptance was dispatched in time but its delivery to the offeror was delayed because of unforeseen circumstances. In this case, the offeree believes to have concluded a contract since he does not know of the delay in delivering the communication.

Both cases of late acceptance can be remedied.

[2] [up to offeror whether he considers late acceptance valid]

In both cases it is up to the offeror whether or not he considers the acceptance to be valid. If he wants a contract, in case (a) he must inform the offeree accordingly; in case (b) he may remain silent.

Should the offeror keep silent in case (a), there will be no contract. In the interest of clarity between the parties, a communication on the part of the offeror to the offeree is recommendable in any case. If the offeror wants the contract, the offeree may not invoke that he was late in accepting (Honnold, 210 fol, mentions examples which appear rather abstract because they disregard the date of delivery). This means that possibly changed circumstances, such as price developments, can only be to the advantage of the offeror, which may seem unjust because nothing is said about the causes for the delay. The acceptance, for instance, might have been dispatched only a little late and may in addition have been left at the post office for a long time. Such a case is not covered by paragraph 2.

[3] [offeree must be informed; risk of transmission borne by offeree]

If the offeree is informed accordingly, the offer, which actually should have lapsed, remains in existence and leads to the formation of a contract through late acceptance. In many legal systems there is a different solution for this case. Late acceptance is regarded as a new offer which can be accepted by the original offeror. If the latter remains silent there will, as under the CISG, be no contract. The practical difference lies in the date on which the contract is concluded; under the provisions of the CISG upon receipt of the late acceptance, otherwise when it is confirmed and/or the counter-offer is accepted.

The risk of transmission is borne by the offeree. The communication should indeed be received since it is the only way to bring about a contract and insofar constitutes the actual acceptance; otherwise, a contract might be created without the offeree knowing anything about it (Rehbinder/Freiburg, 163). In this context the wording "without delay" is not quite comprehensible since the offeror did not have to reckon with an acceptance and probably needs time for reflexion. He would have such time for reflexion if the late acceptance were treated as a counter-offer (Bydlinski/Doralt, 71). This [page 104] rule is questionable, in particular when the acceptance is declared very late and the circumstances as a whole have changed in the meantime (Rehbinder/Freiburg, 162).

It is not clear whether the late acceptance becomes effective at the moment when the offeror informs the offeree or dispatches the relevant communication or whether it becomes effective retroactively from the moment it is received. (Since the offeror needs to inform the offeree without delay, there will only be a slight difference in time. Nonetheless the question might be important whether the offeree can withdraw his acceptance. (affirmative: Honnold, 200, doubting: Farnsworth/BB, 193)). It is doubtful whether oral information will be sufficient if a reservation was made pursuant to Article 96 (c. note 3 regarding Article 18).

[4] [late acceptance in case of normal handling]

In the case of normal handling, a contract would under Article 18 have been made with timely acceptance. But what is normal handling internationally? Is a two weeks' postal handling from Italy to Germany normal, not however four weeks? The offeree relies on the conclusion of the contract and such reliance shall be protected. Hence, the offeror may remain silent if he, too, still wants the contract. Here the rare case is involved where silence leads to the making of a contract (Farnsworth/BB, 192).

The same rule is contained in 30(3) of the ICCA or 149 of the German BGB. The common law does not know such rules because according to the dispatch rule, that problem cannot arise (Honnold, 203).

[5] [option given to offeror on receipt of normal-handled communication from offeree that is late]

On the other hand, the offeror could not foresee that an acceptance would arrive even after the period for acceptance had expired. Meanwhile he may have made other arrangements or have lost his interest in the transaction. He is therefore, not obliged to be bound by the late communication, but he can inform the offeree that he regards his offer as lapsed.

[6] [offeror must inform offeree without delay]

If the offeror no longer wants a contract, he has to inform the offeree without delay that after the expiration of the period for acceptance his offer had already lapsed. "Without delay" relates to the moment of receipt of the late acceptance and not to the expiration of the period for acceptance. [page 105]

An acceptance may be withdrawn [1] if the withdrawal reaches [3] the offeror before or at the same time as the acceptance would have become effective [2].

[COMMENTARY]

[1] An acceptance can be withdrawn just as an offer (c. Article 15, paragraph 2) as long as it has not become effective.

The result is a situation where the offeror is bound, but not yet the offeree, for the offeror can no longer revoke his offer after the acceptance was dispatched (Article 16, paragraph 1). The offeree, however, can speculate during the time of postal handling. Farnsworth (BB, 196 fol) will prevent this by liberally applying the rule of good faith under Article 7, paragraph 1 or by way of invoking domestic law under Article 7, paragraph 2. It is not clear to us why the revoking of an acceptance which has not been received by the offeror constitutes a misuse which has to be fought with good faith. Unclear is also how such a misuse could be proved. Since our law is based on the assumption that an offer is generally binding, the unilateral binding of the offeror is not a problem.

[2] As to the effectiveness of an acceptance, compare Article 18, paragraph 2. A late acceptance does not become effective under Article 18, but rather under Article 21, i.e. either by express information or silence.

[3] Concerning receipt compare Article 24. [page 106]

A contract is concluded at the moment [1] when an acceptance of an offer [2] becomes effective [3] in accordance with the provisions of this Convention.

[COMMENTARY]

[1] Under the provisions of Article 18, paragraph 2 there should actually be no doubt as to the time when a contract is concluded. However, it was considered useful to expressly mention that time, namely for such cases where reference is made to the time of the conclusion, i.e. in Articles 33(c); 35, paragraph 2 (b); 35, paragraph 3; 41, paragraphs 1 and 2; 42, paragraph 1; 55; 57, paragraph 2; 68; [page 106] 71, paragraph 1; 73, paragraph 3; 74; 79, paragraph 1 and 100, paragraph 2.

The time of conclusion of a contract could also be of significance where questions not covered by the scope of application of the CISG are concerned.

What was not settled is the location of the formation of the contract. This may be important for several connecting factors. The proposal to include such a provision was rejected for varying reasons. We assume that the contract is concluded at theplace where the acceptance reaches the offeror. Should the contract already be concluded by conduct implying an intent, then the place of performance of this act and/or the place of business of the offeree would probably be decisive.

[2] The CISG provides for the conclusion of a contract through offer and acceptance. (Compare O.R. 292 and note 1 of Article 14 as well as note 1 of Article 18.) In the case of negotiations where the outcome is a joint final document, both the time and the place of the conclusion of a contract are undisputed.

[3] The parties may, however, make the effectiveness of the contract dependant on conditions (c. note 1, Article 15). [page 107]

For the purposes of this Part [1] of the Convention, an offer, declaration of acceptance or any other indication of intention [2] "reaches" the addressee when it is made [6] orally [3] to him or delivered [4] by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence [5].

[COMMENTARY]

[1] The definition of "reaches" according to the structure of the rule applies only to Part II of the CISG. The notion "reaches" is decisive where the effectiveness of the offer (Article 15, paragraph 1) and the acceptance (Article 18, paragraph 2) are concerned. That definition is of relevance for the commencement of the period allowed for acceptance under Article 20, paragraph 1. The rule of receipt itself does not automatically apply to the several statements which are governed by Part III of the Convention (c. also Articles 26 and 27). In that Part the rule of dispatch applies. Exceptions are made in Article 47, paragraph 2; Article 48, paragraph 4; Article 63, paragraph [page 107] 2; Article 65, paragraphs 1 and 2 and Article 79, paragraph 4. The definition of "reaches" may be applied analogously in those cases.

[2] All declarations indicating the intent to conclude a contract need to reach the addressee (Schlechtriem, 35). Other statements of intention are, in particular, the withdrawal or revocation of declarations (c. Article 15, paragraph 2; Article 16, paragraph 1, and Article 22) arid the rejection of an offer (Article 17).

[3] As to "him" or his agent, compare note 6. The authorization of an intermediary or intermediaries is determined by domestic law (Schlechtriem, 36). Regarding the written form of contracts, compare Article 11, note 1.

[4] Delivery does not mean that the addressee has taken cognizance of the statement. The communication, however, needs to have reached his area of receipt or disposal, and it needs to have been "recognizable" (Schlechtriem, 36). It would not be sufficient if it were left in an unattended place or on the door steps (Honnold, 206; Farnsworth/BB, 203).

Delivery can be made on holidays. Only if this is not possible will the fixed period be extended (c. Article 20, paragraph 2). The risk of transmission is born by the sender.

[5] Compare Article 10.

[6] Delivery to the addressee and deliveries to his statutory representative or agent have equal status (c. also Article 13, note 18 concerning the Agency Convention). [page 108]

Go to Table of Abbreviations || Go to Explanation of Abbreviated Bibliographic References
Go to entire contents of Enderlein & Maskow text

A breach of contract [1] committed by one of the parties is fundamental [2] 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 [3], unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen [4] such a result.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [breach of contract]

Concerning the term breach of contract as part of the regulation regarding responsibility under the CISG, compare clause 5 of the introductory remarks to Article 79.

[2] [fundamental breach of contract]

      [2.1] The CISG does not contain a specific term to complement "fundamental breach of contract" because "breach of contract" also functions as a generic term. We use the term "simple breach of contract" because the establishment of a complementary term by way of negation ("non-fundamental" - Huber, 461) is to be rejected for it could also serve to qualify a breach of contract which formally occurred [page 111] but is so irrelevant that it would not entail any legal consequences.

      [2.2] A fundamental breach is a condition for the immediate avoidance of the contract in the case of non-fulfilment of an obligation (Art. 49, paragraph 1, subpara. (a); Art. 64, paragraph 1, subpara. (a) and/or of an anticipated non-performance of an obligation (Art. 72, paragraph 1) as well as of avoidance in the case of incomplete or partially conform[ing] delivery (Art. 51). The same applies to contracts on delivery by instalments where the contract is to be made void in regard to the affected partial delivery and possibly also in regard to other partial deliveries (Art. 73). It also holds true for the right to delivery of substitute goods in the event of non-conformity (Art. 46, paragraph 2). And, finally, it may cause certain rights to be retained which would otherwise be lost after the passing of risk (Art. 70).

      [2.3] The distinction between fundamental breach and simple breach of contract is the basic criterion for the classification of breaches of contract. This criterion offers a wide scope of interpretation, all the more since it is linked, to a large degree, to assessments. The outcome of this situation are uncertainties which have to be reduced in the discussion at the international level. In this endeavour, one should cooperate with those institutions which take the decisions in practice. A new step cannot be renounced just because not all of its implications can be foreseen. The fact that the fundamentality of a breach of contract in many cases is the condition for an avoidance of contract is expression of the trend of the CISG to preserve contracts, which we consider as essential in international trade.

      [2.4] The certain awkwardness of the definition of fundamentality is the result of a compromise (in detail see Eörsi, Convention, 336 (fol). Basically, it refers to two essential criteria: to the party vis-a-vis to whom the breach was committed, the aggrieved party; (note 3) and, to the foreseeability of that breach (note 4). The elements which define a substantial detriment are extremely complex. In seeking a solution (as long as there is no experience) the legal consequence will not be deduced from the facts of the case, but rather will the facts be interpreted according to the legal consequence which is intuitively felt to be the just one. Article 10 ULIS also does not seem to be of great help considering the decisions given as examples by Schlechtriem/Magnus (171 fol).

[3] [detriment]

The detriment itself is characterized by three aspects: In the end, and that is the decisive element in our view, there has to be a relevant detriment to the aggrieved party (3.1.); it has to be fundamental (3.2.); and proportionate to the expectations justified under the contract (3.3.). This shall be made clear by citing some important examples [page 112] (3.4.). It will become obvious that the relevant detriment is not a static element, but in many instances occurs only when the breach of contract continues. Hence, one of the greatest difficulties in analyzing the fundamentality of a breach is to determine the time when the detriment has become so great that the prerequisites are met.

The parties may, from the outset, characterize as fundamental, certain categories of non-fulfilment of obligations; e.g. by determining that time is of the essence. This would correspond to the principle of contract autonomy. This can also be done by invoking established practices. The consequences will then follow from the Convention (not in agreement Huber/Dölle, 51).

      [3.1] The term "detriment" should be interpreted in a broad sense (accordingly Will/BB, 211 fol). Detriment basically means that the purpose the aggrieved party pursued with the contract was foiled and, therefore, led to his losing interest in the performance of the contract (Schlechtriem, 48). From this follows his interest in avoiding the contract.

Though in commercial relations most things can be reduced to a damage, this is not the central issue here. On the contrary, when compensation for damages can serve as the adequate remedial action, this should be an indication of the fact that there is no detriment in the meaning of the Convention. It will be the case, however, when the aggrieved party in remaining bound to the contract is hindered in his commercial or manufacturing activities in such a way that he can no longer be expected to continue holding on to it. Hence, detriment can be a very complex phenomenon. But it must be in existence at the time of the avoidance of the contract. What matters most in commercial relations are economic results and not formal fulfilment of obligations.

      [3.2] As to the substantiality, there is, no doubt, a tautology between substantial and fundamental as characterizing a breach of contract. That repetition seems to have been unavoidable to ensure congruence of the definiens and the definiendum. Actually, we have taken account of the element of substantiality in discussing the term "detriment". It should be added that it is the circumstances of each individual case which are relevant.

      [3.3] Finally, the expectations of the aggrieved party have to be discernible from the contract. This element to which, in particular, the FRG had attached great importance (Huber, 464, and a relevant proposal, O.R., 99) is quite evident in itself and also contained in the element of foreseeability (note 4). It is to be stressed that a fundamental [page 113] breach of contract must constitute also a non-fulfilment of a contractual obligation. Nothing can be said against this opinion. Sometimes, however, one gets the impression that when interpreting (Schlechtriem, 47) the main emphasis is shifted from the substantial detriment to the non-fulfilment of the obligation. Such approach, in our view, does not meet the intention of the provision insofar as it concerns the consequences of a contract violation which is then characterized more in detail. We thus consider reference to the contract more as a restriction of cases of fundamental breach rather than an extension (not every ambitious expectation is protected).

      [3.4] A violation of the time for performance constitutes a fundamental breach of contract when, for instance, the other party cannot use the late delivery for the purpose envisaged in the contract. When the contract stipulates that time is of the essence or uses such customary terms as "fixed", "absolutely", "precisely", "at the latest", it could be considered as an agreement, where non-fulfilment of this condition will have to be regarded as a fundamental breach of contract. Proof that the legal prerequisites of such breach are not fulfilled is then inadmissible (not in agreement Huber, 462 fol on the draft convention).

A violation of the qualitative requirements (non-conform[ing] delivery) is fundamental when the non-conformity considerably impedes the fitness for use of the goods and when it is irreparable. Whether or not a reparable lack of conformity is fundamental depends on the time element. Had the violation of the time for delivery been fundamental, much would speak in favour of considering a reparable fundamental lack of conformity as a fundamental breach of contract. If this is not the case, a non-conform[ing] delivery can then expand into a fundamental breach of contract when the lack is not removed.

We do not, however, consider the delivery of an aliud as a fundamental breach of contract. We hold that there are two approaches to this problem. Both proceed from the assumption that there is a fundamental breach from the very outset, of which notice is to be given (Art. 38 fol) and which entails the right to delivery of substitute goods (Art. 46, paragraph 2) or avoidance of contract (Art. 49, paragraph 1, subpara. (a)). The right to immediate avoidance in any case connected therewith cannot be justified. We, therefore, prefer an interpretation according to which there is non-delivery at first with the right of the other party to performance being retained, but the provisions governing the notice of a lack of conformity are applied by analogy. It would then have to be assessed whether a violation of the time for performance, which a further delivery (of now conform[ing] [page 114] good) mostly entails, would have to be characterized as a fundamental breach of contract.

To what extent a non-fulfilment of an obligation is fundamental depends on its relevance for the achievement of the purpose of the contract. In regard to the most important obligations (delivery, payment, acceptance) the possibility of avoidance can be achieved by using the mechanism of the Nachfrist (Art. 49, paragraph 1, subpara. (b); Art. 64, paragraph 1, subpara. (b)). In the event of a non-fulfilment of another obligation, avoidance is possible only when it is to be regarded as fundamental. That there is indeed a non-fulfilment will practically become obvious only after a period of waiting for fulfilment. Cases where there is, or will be, fundamentality include the non-delivery of certificates of analysis of chemical substances; operating manuals of technical consumer goods; the lack of agreed labels or, on the part of the buyer, non-supply of agreed drawings or of part of materials.

And, finally, the case should be mentioned where the seller has delivered goods which, contrary to his obligations, are not free from third party claims or rights (Art. 42) based on industrial or other intellectual property. If this lack is not removed, e.g. by way of licences, payment of compensation, satisfaction of claims, and the use of the goods according to the contract is at least substantially impeded, there will be a fundamental breach of contract. If these lacks can be removed, the decisive factor will be time required as in the event of non-conform[ing] delivery.

[4] [foreseeability]

      [4.1] It is assumed that a party who knows the far-reaching consequences of a breach of contract for the other party, if he is not sure of his possibility to fulfil, either does not conclude the contract at all or makes increased efforts to prevent its violation. Therefore, the fundamentality of a breach is made dependent not only on its consequences but also on its foreseeability by the other party. The same consideration can be found in Article 74 regarding the determination of the amount of damages. The rights of the aggrieved party are thus limited in the event that the other party did not foresee special consequences which make up the fundamentality of the breach of contract. It results that the parties should draw their respective attention to such consequences either in the contract itself or through additional information to be given in principle until the conclusion of the contract (but 3.3.), e.g. particularly serious consequences in the case of acceptance not in time because of lack of storage facilities, substantiality of proof of technical check-up for re-sale of the goods. [page 115]

      [4.2] It cannot be inferred that one party indeed did not foresee. the serious consequences of his breach of contract because this could be considered as professional competence below average. An objectivization is, therefore, made here (regarding the interpretation of the terms used here see Art. 8, note 5). If the party in question does, however, foresee more than average, this will be relevant (Will/BB, 220).

      [4.3] No time is fixed when this foreseeability or required foresight must exist. The interpretation is, therefore, different with the time of the conclusion of the contract or of the breach of contract playing a role (for a survey see Will/BB, 220 fol). While we hold that generally the time of the conclusion of the contract should be referred to, we consider it possible that in exceptional cases subsequent information should be taken into account as well. Such information could be given until the actual and/or required commencement of the preparation in view of performance so that the other party can still adapt itself to it. This seems justified to us because it can be doubted that the information available at the time of the conclusion of the contract has really made possible the foreseeability or required foresight of the consequences. This doubt may be removed when subsequent information is taken account of. When, for instance, in the case of a contract for delivery of consumer goods to be manufactured the buyer signals immediately after the conclusion of the contract that the imprint of agreed data on the packaging is of decisive importance because the goods otherwise could not be sold in the envisaged sales area, this will have to be regarded as sufficient for the violation of the respective obligation to be characterized as fundamental (agreeing Will/BB, 221). [page 116]

A declaration [1] of avoidance of the contract [2] is effective only if made by notice to the other party [3].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [declaration of avoidance]

      [1.1] Prescribing a declaration of avoidance, the CISG breaks with the ipso facto avoidance, i.e. avoidance by virtue of law, which has played a great role in ULIS, thus overcoming the uncertainty as to whether, and possibly when, the contract is made void. Avoidance constitutes a right. Since it is made dependent on a declaration, the entitled party can consciously decide to continue to claim performance of the contract even when there are grounds for avoidance. This being the case, the rule also has the effect of preserving the contract and its specific performance. The requirement of a declaration of avoidance is relevant because otherwise tradesmen, who are [page 116] supposed to work on the basis of the CISG would not always be aware that certain conduct could automatically entail the avoidance of the contract. The entitled party can, however, achieve partly similar effects when he, in cases where the right to make the contract void follows from the expiry of a Nachfrist without performance (Art. 49, subpara. (b); Art. 64, subpara. (b)), already in fixing such Nachfrist, declares the contract void If the other party does not perform within that additional period.

      [1.2] A specific form is required for the one-sided avoidance insofar as it has to be made in the form of a declaration, which can be oral or in writing (Secretariat's Commentary, O.R., 27; Date-Bah/BB, 224 referring to the legislative history of the provision). Avoidance of a contract by conduct implying an intent, e.g. the mere sending back of delivered and fundamentally non-conform goods, is not sufficient.

[2] [scope of avoidance remedy]

Avoidance of a contract is provided for by the Convention in Articles 49, 51, 64, 72 and 73. The rule applies to all those cases, but also for contractually agreed grounds for avoidance.

[3] [the notice to the other party]

      [3.1] [dispatch rule]

In a comparison with Article 27, it is sufficient for the declaration to be made with the means appropriate under the circumstances. An indirect, more accidental notice to the other party is, therefore, insufficient (example given by Date-Bah/BB, 224 fol). The dispatch is decisive. An oral notice could thus be given by phone to an answering machine. Written notices would have to be sent using the customary ways of communication. It is not necessary that the communication reaches the other party. The problem involved in the procedure envisaged in Article 27 becomes clearly evident in this case since it is possible for a party to continue performance of the avoided contract because he did not receive the notice.

      [3.2] [notice of grounds for avoidance: specificity; when provided]

The notice, of course, has the desired effect only when the grounds for avoidance were indeed given. But this can be doubtful. Since a fundamental breach of contract may become obvious only if it persists (note 3.4. of Article 25), it is possible, therefore, that this occurs only after the notice is given. In our view it should be considered as effective. [page 117]

[TEXT OF THE UNIFORM LAW]

Unless otherwise expressly provided [2] in this Part of the Convention, if any notice, request or other communication [3] is given or made by a party in accordance with this Part [4] and by means appropriate in the circumstances [5], a delay or error [6] in the transmission of the communication or its failure to arrive [7] does not deprive that party of the right to rely on the communication.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [dispatch principle]

      [1.1] The CISG establishes the principle of the theory of dispatch even if it is formulated in a cautious way. This has been interpreted in such a way that a communication becomes effective with dispatch (Date-Bah/BB, 227 fol). But what is this to mean in detail? It becomes rather obvious from the text that one can relate to the communication beginning with the moment of dispatch, even if this expressed in the negative way. Hence, the risk of transport is covered. Decisive is also the date of dispatch where the punctuality of the communication is concerned. Leser (Freiburg, 237 fol) held the view that in regard to the legal consequences and the binding of the party dispatching the communication, receipt should be decisive. This, however, in the event of late or non-receipt of the communication requires an auxiliary construction providing for the coming into effect of those consequences after the expiry of the regular time of handling. For both cases there are hardly any clues in the text. As to the substance, the need for receipt would insofar be welcomed. Besides, an analysis of the individual provisions of the CISG, which provide for reference to the principle of dispatch, has clearly shown that invoking it in its rigorous form leads to inappropriate results (note 10 of Article 65).

      [1.2] In favour of the principle of dispatch it is argued, inter alia, that it offers a largely uniform rule (Secretariat's Commentary, O.R. 27), which is contradicted by the many exemptions provided for (note 2) and also by the fact that it only applies to Part III. If this were not so, a rule for receipt would have been required (ibid), which the CISG offer in Article 24 (for Part III). The theory of dispatch would be useful where a party fulfilled an obligation or required remedy for a loss; not, however, where it served to substantiate an obligation for the other party (O.R., 303). Such foundation, to which also other authors refer (Date-Bah/BB, 230, even though hesitatingly), is not quite true for he who asserts a claim because of a breach of contract thereby substantiates an obligation of the other party. This rule was also not strictly followed (according to Art. 65, paragraph [page 118] 2; it is exactly the notice of the party keeping the contract which has to be received by the other party; see also note 3). Problems arise where the rule is applied to such contractually agreed communications like information on, the possibility to use a right (to participate in carrying out a test). A proposal by the former GDR to restrict the scope of application of Article 27 to notices of a defect was rejected (compare O.R., 100).

[2] [exceptions to the dispatch principle]

Exceptions are contained in Article 47, paragraph 2, and Article 63, paragraph 2, in which receipt of a notice is actually already a condition for the activities of the other party caused by it; Article 48, paragraph 2, Article 65, paragraphs 1 and 2, and Article 79, paragraph 4.

[3] [rule applicable to any notice, request or other communication]

This rule applies to all kinds of communications like notices of a defect (Art. 39, paragraph 1; Art. 43); claims (in particular Part III, Chapter II, Section III); information which entail legal consequences (Art. 32, paragraph 3); determining additional periods for delivery (Art. 47, paragraph 1) and warnings (Art. 72, paragraph 2; Art. 88, paragraph 1).

[4] [applicable to communications mentioned in Part III and agreed
       in the contract; it is also a general principle of the Convention]

      [4.1] This, no doubt, refers to the communications mentioned in this Part, but also those which are agreed in the contract (e.g. notice of defects in guarantee, statement of readiness for dispatch, notice of dispatch). Part III generally relates to the substance of contracts. Furthermore, Article 27 formulates expressis verbis a general principle of the Convention and is, therefore, under Article 7, paragraph 2, to be applied to cases which are not expressly decided. Difficulties may appear, however, in the context of specific cases because the exceptions regulated by the Convention (compare note 2) cannot be reduced to a common denominator.

      [4.2] From the reference to this Part it is also deduced, and rightly so in regard to substance, as we believe, that the communication has to meet the requirements (Date-Bah/BB, 228) fixed in Part III (substantive, formal and according to schedule) in order to cause the expected effect (compare also note 6).

[5] [means by which the communication may be made]

These have to be the means which correspond to the content of the communication in terms of rapidity and reliability. For instance, when choosing the means for communicating such an important decision, as it is the avoidance of a contract, particular care has to be exercised. However, sending a communication twice can only be requested when there is particular uncertainty in transmitting to the receiving party. Special circumstances can exclude specific means, e.g. sending by mail in the event of a strike of mailmen of [page 119] which the sender at least had to be aware. The party sending the communication may choose from among several possible means.

In the event that contractually agreed requirements in regard to the transmission are not met (e.g. telex with confirmation by certified letter), one cannot rely on the communication under Article 27, i.e. not on the telex not received if there was no confirmation, but very well on the latter if it was also not received.

Concerning the comprehensibility of the language compare Article 8, note 3.2. According to Date-Bah (BB, 230) it is irrelevant in this context.

[6] [communication must be sent correctly]

The communication must be sent correctly, i.e. it can only be garbled or distorted in the process of transmission. In that case, the party having dispatched the communication, does not have to rescind but can rely on the actual content of the communication sent. When, for instance, a notice of non-conforming delivery of a replacement part having a specific number is requested, and that number is changed when communicated by telex, so that the other party, in response, sends the wrong replacement part, the latter retains the obligation to send the right one.

[7] [good faith or mitigation]

If, however, the sending party recognizes from the behaviour of the other party that the latter has not received the communication, it should be a matter of good faith (Art. 7) or of mitigating a loss (Art. 77) for the former to draw the attention of the latter to the content of the communication. Otherwise, he would, for instance, no longer have the right to assert accumulating claims for damages. [page 120]

[TEXT OF THE UNIFORM LAW]

If, in accordance with the provisions of this Convention, one party is entitled to require performance [2] of any obligation by the other party, a court [4] is not bound [3] to enter a judgement for specific performance unless the court would do so under its own law [5] in respect of similar contracts of sale [6] not governed by this Convention.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [compromise language]

This provision contains a compromise between the legal systems of the continental European countries and those countries which are influenced by their law, which generally provide for the right to performance, on the one hand, and the legal systems which are based on the common law, on the other (comparison of laws Reinhard/Dölle, 109 fol). The right to specific performance is granted in [page 120] the common law countries only under particular conditions (summarizing Honnold, 225 fol). The reasons given for that situation include the view that the well-being of the society requires that one party breaks a contract and makes other arrangements if this is more favourable to him, taking account of the damages payable to the aggrieved party. This would help to achieve the most effective allocation of resources (Farnsworth, 247 fol). For the scope covered by the CISG, this concept is questionable because the CISG limits claims for damages, in particular, to the damage foreseeable at the time of the conclusion of the contract (c. Art. 74). There is no differentiation between deliberate and negligent damage so that this limitation will become effective in any case. It seems problematic to refer to a more strict or even mandatory liability under national law in the event that a damage is caused deliberately. A situation where it becomes obvious retroactively that a different allocation of resources would have been more appropriate is, so to speak, per definitionem unforeseeable because it is exactly a re-distribution which is to overcome the consequences of an overly strict planning (Honnold, 226, referring to Farnsworth). Here the problems involved in the integration of concrete domestic rules into another context become clearly visible.

It has to be admitted, however, that the right to specific performance of the contract in international trade in many instances is not practicable because assertion of that right, even if it exists without any doubt, is much more complicated than in the case of financial claims and of the right to avoid the contract. But this depends on the state of performance. In general, the realization of a transaction cannot be halted until there is a decision on the right to specific performance. The enforcement of a relevant decision entails additional problems. The authors of this commentary, therefore, agree in that the right to performance is rarely asserted.

By contrast to many national laws, the CISG does not provide for the possibility of exemption from specific performance, even in the context of impediments (Art. 79, paragraph 5). Only in the case of a breach caused by the other party (Art. 80) may the result be an exemption from performance. Such exemption may, however, under this Article be granted in accordance with national law (Schlechtriem, 51; Lando/BB, 237; note 13.6. of Art. 79). This does not exclude that in regard to claims for damages, which may be based on the same facts, the reasons for exemption under Article 79 are invoked (unclear insofar Loewe, 50). [page 121]

[2] [right to specific performance; restrictions upon this right]

      [2.1] The CISG grants the obligee a right to specific performance. In the event of a breach of contract such right persists as long as there is no right to avoidance or it can be asserted alternatively instead of the latter (Art. 46, paragraph 1; Art. 62): The rights to delivery of substitute goods and to repair, respectively under certain restrictive conditions (Art. 46, paragraphs 2 and 3), constitute specific forms of the right to performance.

      [2.2] Publications (above all Honnold, 222 fol; similarly Lando/BB, 237 fol) rightly point to the fact that the CISG, apart from the restrictions indicated here, contains certain other, as we believe, indirect restrictions of the right to specific performance. This refers, in particular, to the obligation to sell the goods (Art. 88, paragraph 2), whose realization removes the right of acceptance and turns the right to a price into a right to claim damages for possible losses. Also the obligation to mitigate losses under Article 77 may entail substitute purchase or sale instead of insisting on performance (doubting insofar Farnsworth, 250, on the draft). The obligation to mitigate losses may, however, result in an obligation to cease preparation of the contract in the event of a notified breach of contract (cancellation of the contract), to avoid the contract (Art. 72, paragraph 1) and to claim damages.

[3] [court is not bound to require specific performance]

This is not to limit rights to specific performance granted by the CISG. A court can grant a right to specific performance in such events where it would normally not do so (Honnold, 225; Lando/BB, 237).

[4] [arbitral tribunals as well as courts?]

At the diplomatic conference (O.R., 305) some speakers mentioned that these provisions would also have to apply to arbitral tribunals. Nothing should be said against, if arbitral tribunals would recognize the right to specific performance only in a limited way.

[5] [under its own law]

This rule positively determines the applicable national law. It does not refer to the norms of the international private law of the forum, as believed the Greek delegate at the conference (O.R., 305). The rule itself rather has the character of a conflict-of-law rule, to put it more concretely, of a horizontal conflict-of-law rule, (Introductory remarks 2.3.) even if only a very specific legal issue is connected. The law of the courts is to be invoked even when another law is the statute of the contract (in detail Honnold, 224). It is also not relevant whether what matters is material or procedural law. [page 122]

[6] [change from "could" to "would"]

In a Soviet-American compromise in the lobby, which referred, on the one hand, to the written form requirement and, on the other, to specific performance, "could" was changed into "would" at the conference following a British and an American proposal which, in regard to the substance, were identical (O.R., 100). Hence, American (Farnsworth, 250) and British (O.R., 304 fol) concerns were met, noting that their courts had a large scope of operation, but did not exhaust it. The projected rule, however, could force them to do so.

(1) A contract may be modified or terminated by the mere agreement of the parties [1].

(2) A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing [2] may not be otherwise modified or terminated by agreement [3]. However, a party may be precluded by his conduct [4] from asserting such a provision [5] to the extent that the other party has relied on that conduct [6].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [contract may be modified or terminated by mere agreement]

      [1.1] This rule is, under many laws, a natural rule in itself and would also follow from the CISG system. Modifications or terminations of a contract include instances where one party gains unilateral advantages (e.g. price increase without modification of the volume of the delivery and vice versa). Their effectiveness can, however, be prevented under common law by not granting consideration. This rule was thus considered as necessary in order to preclude such an interpretation. Article 4, subpara. (a) does, therefore, not apply so that the contrary national law cannot apply either.

      [1.2] It is not expressly said in which way the agreement on modification or abrogation is made. We believe that the provisions of Part II on the formation of a contract should be applied here, provided that the States concerned have adopted also that Part. This also includes that the offer for modification or abrogation meets the requirements of Article 14, paragraph 1; hence it has to be recognizable as a proposal referring to the conclusion of a contract. This is generally not the case when modifications of the terms of contract appear without prior notice in declarations and documents which the parties send each other in the process of realizing the contract (the Secretariat's Commentary, O.R., 28, which does not emphasize this requirement is insofar at least misleading). [page 123]

      [1.3] When a reservation is; made pursuant to Article 96, freedom of form under Article 12 does not apply to the modification or abrogation of the contract. The form to use is to be deduced from the applicable national law (Art. 12, note 2.2).

[2] [contract in writing with provision requiring that any modification etc. also be in writing]

This means that the agreement has to be in writing and must, therefore, be an express agreement. As became obvious in discussing an Italian suggestion (O.R., 101, 105 fol), a requirement of the written form is also decisive when it is contained in agreed general terms of business.

[3] [requirement that contract may not be otherwise modified etc. by agreement]

      [3.1] This can actually be inferred from the primary role which the CISG attributes to the agreements between the parties (Art. 6). Nevertheless, the provision is not superfluous irrespective of its role as an introduction to the following restriction, because some domestic laws allow that written form clauses are cancelled orally (Huber, 435 for the FRG; Hillman, 451 for the USA where they can hardly be enforced through the courts even though the UCC had wanted to give them effect) or that this is possible already in the case of doubt (Loewe, 50 for Austria). Insofar national law is superseded.

      [3.2] On various occasions the parties agree even further-reaching form requirements, for instance that modifications of the contract have to be marked as supplements and numbered continuously. Because of the priority of party agreements and/or, as Honnold (230) believes, a forteriori, a breach of such clauses will have to be attributed the same importance as a written form clause as such.

[4] [party may be precluded by his conduct]

The majority of commentators (e.g. Secretariat's Commentary, O.R., 28; Honnold, 231; Date-Bah/BB, 243; Hillman, 459) obviously proceed on the assumption that such conduct is meant from which an agreement on modification or abrogation can be inferred, hence, a relevant oral offer or such arrangement. This presupposes, in our view, that persons who have shown such conduct had an authorization to modify and/or terminate the contract. We hold above all that the conduct has to be measured against a relatively demanding yardstick if the general rule contained in the first sentence is not to be ineffective. Thus apart from an oral arrangement, further activities should be required which on the part of the other party would have caused the impression that the agreement lacking form were of a binding nature, e.g. reference to their substance in correspondence and/or further negotiations, performance and/or acceptance without contradiction according to the content of the modified agreement. An established practice of exchanging oral modifications may also have developed between the parties after the conclusion of the contract (Art. 9, paragraph 1). [page 124]

[5] [may be precluded by his conduct from asserting such a provision]

      [5.1] Here, too, reference is made to a specific manifestation of the prohibition of the venire contra factum proprium. This rule is directed against the misuse of agreed requirements as to form. It is to prevent the strict application of the principle pursuant to paragraph 1 from infringing upon the necessary adaptation of the contract.

      [5.2] Sentence 2 is not invoked within the scope of application of Article 12 when the agreement of the written form only serves to reaffirm a written form requirement which is prescribed by the applicable material law determined by way of a reservation. It has to be deduced, in this case from national law, which are the possible limitations on the consequences of a lack of form. If, however, a national law, which does not prescribe any form, is applied to a contract as a consequence of a reservation, the form requirement may be substantiated only by the agreement, thus meeting a requirement of the CISG. Here it should be considered to invoke Article 29, paragraph 2, sentence 2.

[6] [to the extent that the other party has relied on that conduct]

      [6.1] Hence, it matters here to what extent the other party showed a conduct in accordance with the agreement that was lacking in form. His conduct may become manifest in an oral statement, but then it should be complemented, in our view, by further activities, like an organization of the future economic activities that would be in line with the modification or termination. In this context, it does not matter solely whether a party has already started performance, but it has to be taken into account which preparations he has made for it. Mere conduct implying an intent will be considered as sufficient, however, even it is not manifest vis-a-vis the other party (Date-Bah/BB, 243). In both these cases it has to be taken into consideration whether such conduct was reasonable (analogy to Art. 16, paragraph 2, subpara. (b)), which on its part depends on the first party.

      [6.2] The solution given to a number of examples discussed in publications is not convincing to us. Instead of entering into polemics we mention here an example where the party, which asserts a claim, cannot rely on the written form clause. Buyer and seller, in spite of the existence of such a written form clause, orally agree to postpone the three months' date of delivery. The seller delivers accordingly, and the buyer accepts delivery and pays for it. Later, as differences of opinion emerge because of other things, the buyer refers to the written form clause, declares the modification of the date of delivery void and asserts a claim for liquidated damages in the context of late delivery. The buyer through his statement, acceptance and payment has displayed such a conduct as to bring about a modification. The seller, by way of a statement and the respective delivery, [page 125] has relied on it. The claim for liquidated damages is thus not justified.

      [6.3] We believe that the parties can exclude sentence 2, whereas Hillmann (462), who is opposed to written form clauses, prefers the opposite interpretation. However, the exclusion cannot be achieved merely by a simple clause because it is under sentence 2 that such a clause is to be interpreted; rather sentence 2 must expressly be excluded. This will be possible in practical terms and provable only by way of express exclusion. [page 126]

Go to Table of Abbreviations || Go to Explanation of Abbreviated Bibliographic References
Go to entire contents of Enderlein & Maskow text

The seller must [2] deliver [3] the goods, hand over [4] any documents relating to them and transfer [5] the property in the goods, as required by the contract [1] and this Convention.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [seller must deliver the goods etc. as required by the contract]

Like in other parts, it is stressed here that the parties decide themselves on their mutual rights and obligations, and that their contractual arrangements have priority and shall only be supplemented by the provisions of the Convention. The Convention, therefore, plays a supporting role, gives answers to those questions which the parties in their contract forgot to provide an answer for, and helps to solve problems (Honnold, 48). Compare also the importance of the parties' intentions (Article 8), their usages and practices (Article 9), their possibilities to exclude the Convention and/or deviate from its provisions (Article 6). Should there be a contradiction between a contract and the Convention, the former shall be considered as decisive.

[2] [main obligations of the seller]

The main obligations of the seller correspond largely with general legal opinions and are settled accordingly in most legal systems. This refers definitely to the obligation to deliver the goods and to transfer title in the goods. Part of these general obligations of the seller are explained in greater detail in the following provisions.

According to Lüderitz (Freiburg, 195) this section actually contains only minimum rules. What is dealt with here is more like a cover or wrapping than the content. Only in the case of guarantee for defects and third party rights and claims genuine obligations are substantiated, and the beginnings of an obligation to cooperate are basically settled.

[3] [delivery issues: that which parties have agreed is decisive]

Compare the provisions concerning the place of delivery (Article 31), transport of the goods (Article 32) and time for delivery (Article 33). In this context, the decisive factor is what the parties have themselves agreed in the contract. [page 127]

From this state of affairs it may even result that the seller does not have to deliver the goods because they are already in the possession of the buyer.

Also non-conformity of the goods or the delivery of an aliud generally constitutes a delivery, only in this case they would not be a delivery in conformity with the contract (see the extensive note 5 under Article 35). Such instances are cured by not giving notice (Welser/Doralt, 106). It is disputed whether delivery of completely different goods should be considered as delivery, e.g. corn instead of potatoes.

[4] [hand over : cross-reference]

Compare the rule given under Article 34.

[5] [seller must transfer the property in the goods]

Although the transfer of property constitutes a main obligation of the seller under the CISG, it is not explained here in greater detail because in Article 4 questions relating to the transfer of property are expressly excluded from the scope of the Convention. It may occur that the obligation to transfer title of the goods lasts longer than the obligation to deliver them, if under the legal provisions to be applied the property transferred only later (Lüderitz/Freiburg, 186). The transfer of property in most legal systems is done as agreed between the parties. The legal basis for the transfer of property sometimes greatly differs from country to country. In many countries (as in the Anglo-Amencan and Roman legal families), the property in specific goods is transferred at the moment of the conclusion of the contract. In the case of generic goods, that transfer is done when the goods are specified, i.e. not later than with their handing over to the carrier. In some countries, the property in the goods is passed to the buyer only when he receives the goods from the carrier. This distinction is important when a creditor of the seller or the buyer wants to take possession of the goods in transport (Lando/BB, 248).

The conflict-of-law rules relating to the passing of property differ from country to country as well. A widely adopted principle is that of the lex rei sitae, which means that a transfer of property effected in the seller's country remains valid even if not all conditions for the transfer of property are fulfilled in the buyer's country. Conversely, title may immediately be transferred in the buyer's country while the goods are being transported there, even if conditions for it are still lacking in the seller's country (Lando/BB, 248). [page 128]

If the seller is not bound to deliver the goods at any other particular place [1], his obligation to deliver [2] consists:

(a) if the contract of sale involves carriage [3] of the goods - in handing the goods over [5] to the first carrier [4] for transmission to the buyer;
(b) if, in cases not within [6] the preceding subparagraph, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties [7] knew that the goods were at, or were to be manufactured or produced at, a particular place - in placing the goods at the buyer's disposal [9] at that place [8];
(c) in other cases - in placing the goods at the buyer's disposal [9] at the place where the seller had his place of business [10] at the time of the conclusion of the contract.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [place of delivery; comparison with Incoterms]

The place of delivery is the place where delivery has to be made. If the seller at the time of delivery delivers at the place of delivery, he fulfills his obligation. Of importance is the place of delivery where the passing of the risk is concerned (Article 67 fol), but also in regard to other questions. Generally, the parties reach agreement in their contract on where delivery shall take place. Therefore, the provisions under Article 31 will relatively seldom apply.

Rather often the parties refer to customary delivery clauses, in particular to the INCOTERMS. As to whether the INCOTERMS may be invoked to interpret basic delivery clauses without such reference being made, compare Handbuch 1, 99 fol.

In accordance with the INCOTERMS [1990], the place of delivery is determined as follows: [page 129]

* EXW (Ex Works) - the seller's premises;
* FCA (Free Carrier) - the named departure point;
* FAS (Free Alongside Ship) - the named port of shipment, buyer may name the loading area;
* FOB (Free on board) - the named port of shipment;
* CIF and CFR (Cost, insurance and freight; Cost and freight) - the named port of destination;
* DES (Delivered Ex Ship) - the named port of destination;
* DEQ (Delivered Ex Quay) - the usual quay at the named port of destination;
* DAF (Delivered at frontier) - the named point at the frontier in the seller's country;
* DDP and DDU(Delivered Duty Paid/Delivered Duty Unpaid); - the named place in the country of importation;
* FRC (Free Carrier) - the named place or point (mostly in the seller's country);
* CPT and CIP (Carriage paid to; Carriage and insurance paid to) - the named point of destination (mostly in the buyer's country).

(Concerning the INCOTERMS compare also Handbuch 1, 99 fol; Handbuch 3, 393 fol).

As can be seen, the place of delivery and the place of dispatch or destination need not be identical. The place of destination is the place where the goods are transported to; it is the final destination of a dispatch. But the place of delivery is that place where the seller has to fulfil his obligation to deliver; the place where the obligations of the seller finally end (Lüderitz/Freiburg, 182). Therefore, there is no difference between the place of destination and the address to which the goods are sent (c. note 11).

The place of destination is of importance for the examination of the goods (Article 38, paragraphs 2 and 3). The place of destination may also be the result of usages and practices (Honnold, 235).

The delivery clauses, in most cases, settle further questions which could not be considered in the CISG, e.g. who should be responsible for providing the export or import licenses, who should pay export taxes etc. [page 130]

Under the INCOTERMS the seller is not generally responsible for providing the export license, i.e. he is not responsible where the clauses "EXW" and "FAS" apply. In those instances, he has to grant assistance only at the request and the cost of the buyer. Conversely, the seller sometimes is responsible for providing an import license in the country of import, i.e. where the clauses "DEQ" and "DDP" apply.

It is to be taken into consideration also that the providing of an export license, e.g. where "FOB" applies, is considered as a kind of guarantee; and in the event of denial of such license it is not permitted to invoke force majeure (F. Eisemann/W. Melis, INCOTERMS, 1980 edition. Commentary, Vienna, 1982, p. 194).

[2] [further obligations of seller in context of transporting the goods]

Further obligations of the seller in the context of transporting the goods are contained in Article 32.

The supplier has fulfilled his obligation to deliver even when the goods delivered do not conform with the contract. According to ULIS the term delivery comprises the handing over of goods which are in conformity with the contract. The handing over of goods which fail to conform with the contract does, therefore, not constitute a delivery (Bianca/BB, 269; Honnold, 238); and even less so the performance of an aliud.

[3] [when the contract of sale involves carriage]

This happens regularly in the international sale of goods, unless the goods are already in the possession of the buyer (e.g. in the event of a sale of an object that had originally been leased or goods that were available for inspection) or the buyer himself collects the goods from the seller (e.g. in the event of the clause ex works). Here carriage is always transport by one or several independent carriers. Insofar as the parties have their own vehicles and therewith transport the goods, this does not fall under carriage (Honnold, 236). This is of significance in cases where the seller may be discharged, hence whether the risk is passed or not (Article 66 fol). Schlechtriem (Doralt, 195) is against making the passing of risk dependent on whether the seller hires a dependent division of a company or an independent subsidiary for the transport of the goods.

[4] [definition of the term carrier]

A carrier is the collective term used for the different means of transportation (see, for instance, multimodal carrier). The place of delivery where the clauses "FCA", "CPT" and. "CIP" are applied is the first carrier, whereas the named port of shipment and/or destination is the place of delivery (even if transportation by ship is not the first means of transportation, where the clauses "FOB", "CIF" and "CFR" are concerned). It is, therefore, not sufficient for the seller, in the case of FOB, to hand over the goods to the railway [page 131] company as the first carrier. To what extent a forwarding agent can be considered as the carrier depends on whether he himself undertakes to transport the goods (see also Loewe, 52).

[5] [seller's obligation to dispatch the goods]

Most of the time the seller has an obligation to dispatch the goods. Distance sales and sales by delivery to a place other than the place of performance are, in most instances, treated equally (critical remarks - with reference to Schlechtriem and Enderlein - by Lüderitz/Freiburg, 191, who doubts the conclusion that also where carriage is performed by independent carriers the seller has to arrange for carriage if there is doubt).

As to the obligation to be performed at the debtor's place of business where the debtor must, however, dispatch the goods or remit the money, compare Article 32, paragraph 2.

The goods may, however, also be handed over to a carrier which was hired by the buyer, if the clause "FOB" was agreed, in which case the buyer will have to provide a means of transportation. International sales contracts usually involve several carriers. (Concerning the possibilities of multimodal carriage compare Handbuch 3, section 5.6, 306 fol).

[6] [in cases not within (para. (a) of Art. 31) the preceding subparagraph]

This means that there is neither an arrangement under the contract as to the place of delivery nor is carriage an obligation of the seller.

[7] [at the time of the conclusion of the contract, the parties knew]

It should suffice that the buyer had knowledge of it. It is self-evident that the seller is aware of it.

[8] [good placed at buyer's disposal at that place]

That place may be a warehouse or a production facility. Where a warehouse is used, but also in other cases, there might be a need to hand over documents in the form of a claim or directive for delivery. (Schlechtriem, 54). The INCOTERMS, too, contain for instance the clause "ex works" (ex factory, ex mill, ex plantation, ex warehouse etc.). If there is agreement to apply the INCOTERMS, then delivery has to be made at a specific place because of this agreement (c. note 1), and subpara. (b) need not be invoked.

[9] [placing the goods at the buyer's disposal]

To place at the disposal means that the seller must have the goods available at that place (Schlechtriem, 54; Welser/Doralt, 107).

Having them ready at that place, the seller has done his share. The initiative to take possession of the goods now rests with the buyer (Lando/BB, 254). Lando (BB, 254) holds that subpara. (b) of Article 31 also refers to the trade terms "FAS", "Ex Ship" and "Ex Quay". Subpara. (b), however, only applies if no specific place was agreed [page 132] on (c. note 8). When the seller places the goods at the disposal of the buyer, he has to inform him accordingly so that the latter can take possession of the goods. For this to come true, the goods have, if necessary, to be clearly identified to the contract and appropriately wrapped.

[10] [at the place where the seller had his place of business at the time of the conclusion of the contract]

10. Here reference is made to the obligation to be performed at the debtor's place of business. When the seller changes his place of business after the conclusion of a contract, he nonetheless has the obligation to place the goods at the disposal of the buyer at the agreed place and/or to bear the additional costs or the risks that are likely to be incurred. (As to the bearing of the risk in this case, see Article 69, paragraph 1). [page 133]

(1) If the seller, in accordance with the contract or this Convention, hands the goods over to a carrier [1] and if the goods are not clearly identified [3] to the contract by markings [2] on the goods, by shipping documents or otherwise, the seller must give the buyer notice [4] of the consignment specifying the goods.

(2) If the seller is bound to arrange [5] for carriage of the goods, he must make such contracts as are necessary [8] for carriage to the place fixed by means of transportation [6] appropriate in the circumstances and according to the usual terms [7] for such transportation.

(3) If the seller is not bound [9] to effect insurance in respect of the carriage of the goods, he must, at the buyer's request [10], provide [11] him with all available information necessary to enable him to effect such insurance.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [carrier: cross-reference]

As to the carrier compare note 4, Article 31.

[2] [identified to the contract by markings]

Under the CISG there is no general obligation to identify or mark the goods. Whenever markings are possible, the seller should, in his own interest, use them to identify the goods (see also Article 67, paragraph 2). [page 133]

[3] [obligation to give notice of dispatch: dependent on whether goods identified to the contract]

The need for a notice of dispatch is made dependent on whether the goods are clearly marked or in any other way identified to the contract. Only if this is not the case, has the seller an obligation to give notice of dispatch.

[4] [rules for giving the buyer notice]

The CISG does not provide rules for when such notice has to be given. In so far as delivery clauses are agreed, the latter frequently contain relevant rules (e.g. FOB A.7. - The seller has to "inform the buyer without delay that the goods were brought on board the vessel"). Even without agreeing to invoke the INCOTERMS, it would seem to follow from the general principles of the CISG (Article 7) that notice must be given within a reasonable, possibly very short time (Lando/BB, 259).

Paragraph 1 is applied irrespective of whether the seller or the buyer contracts a carrier. This is sufficiently provided for by the condition that the goods have to be handed over to a carrier. The CISG does not provide for a notice to the buyer in any other case (Lando/BB, 259).

If the CISG is invoked, the buyer should not forget to commit the seller in the contract to send a notice of dispatch if it is necessary for him to make the required arrangements for taking over the goods, in view of their nature, and the means of transportation.

The obligation to give notice is a supplementary obligation of the seller (Lüderitz/Freiburg, 191), its breach having the possible consequence that the risk is not passed (Article 67, paragraph 2), that additional costs arise for the buyer, and the seller is rendered liable in this respect. A breach of the obligation to notify of dispatch may, as an exception, be a fundamental breach of the contract which gives the buyer the right to make the contract void (O.R., 30). Therefore, the obligation to notify of dispatch can in no way be construed as being merely an obligation of the seller in his own interest (as believes Stoll/Freiburg, 260).

[5] [taking charge of carriage of the goods]

Whether the seller has to take charge of the goods' carriage follows from either the contract or commercial practice. (Compare also Article 31, notes 1 and 4.)

[6] [transportation: circumstances to take into account]

As to the circumstances which have to be taken into account, they include the category and quantity of the goods, their packaging, the distance which will have to be covered by transport, the available means of transportation and existing transport routes. [page 134]

In the case of perishable goods, cold storage wagons could be appropriate means of transportation or, depending on the nature of the goods, fast means of transportation like an aircraft or express train.

[7] [appropriate in the circumstances and according to the usual terms]

Here the seller must choose the usual transport routes and avoid unnecessary transshipment or unnecessary unloading (Lando/BB, 259). Some of the trade terms, e.g. CIF, contain duties pertaining to the seller and, if applicable, will supersede the CISG.

The conditions which are considered as customary for transport follow quite often from the binding prescriptions by international conventions (Handbuch, chapter 5, 115 fol).

[8] [must make such contracts as are necessary]

The seller does not himself have to conclude contracts with the carrier; he can so instruct a forwarding agent.

[9] [obligation to effect insurance]

A relevant binding clause may directly be deduced from the contract and/or the delivery clause chosen (e.g. CIF). There is no general obligation for the seller to insure the goods during carriage.

[10] [information to be transmitted to the buyer, at the buyer's request or …]

The seller may, because of commercial practices, have to transmit relevant information to the buyer at his own initiative (O.R., 30; approving Schlechtriem, 54; also Honnold, 244, who wants the obligation of the seller to be largely deduced from general principles). Lüderitz believes that these are the beginnings of an obligation to cooperate.

[11] [at the buyer's request, seller must provide ...]

A breach of this obligation entails liability (Stoll/Freiburg, 260). [page 135]

The seller must deliver [7] the goods:

(a) if a date is fixed by or determinable [1] from the contract, on that date [6];
(b) if a period of time is fixed by or determinable [1] from the contract, at any time within that period [2] unless circumstances indicate that the buyer is to choose [3] a date; or
(c) in any other case, within a reasonable time [4] after the conclusion of the contract [5].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [date for delivery fixed or determinable]

Usually the parties will agree on a time of delivery in the contract. The time of delivery may, however, be deduced from usages or established practices (c. Article 9). The time can be determined by choosing a date or in any other way by the calendar (two weeks after Easter), or by referring to a definite event (one week after first open water) (Lando/BB, 263). The time of delivery can also be fixed in relation to the latest of several events, e.g. as in clause 7.1. of the General Conditions for the Supply of Plant and Machinery for Export No. 188/574 of the Economic Commission for Europe (concerning the character of the ECE conditions compare Handbuch 2, 90 fol) which list: the date of the formation of the contract as defined in clause 2, the date on which the seller receives notice of the issue of a valid import license where such is necessary for the execution of the contract, and the date of the receipt by the seller of such payment in advance of manufacture as is stipulated in the contract (c. Handbuch 2, first edition, Berlin 1974, p. 422).

[2] [the agreed time for delivery]

If July is the agreed time of delivery, the seller may deliver on the first but also on the thirty-first of July. Agreement on a period of time for delivery often gives the seller the required flexibility to prepare the goods for delivery and arrange for their transport. Should the parties have agreed a period of first to fourth quarter of a year, it should be assumed that the same quantity of the goods is to be delivered in every quarter.

[3] [unless circumstances indicated that the buyer is to choose a [delivery] date]

This will be the case, in particular, when the buyer himself arranges for the transport or when he, for other reasons, e.g. limited capacity of his warehouse, has to be interested in fixing an exact date for receipt of the goods. The buyer will have to choose the date if, for instance, the delivery clause "FOB" is agreed. Also in the cases mentioned under Article 31, (b) and (c), where the buyer has to receive the goods, he himself chooses the date. The seller can, in those instances, not place the goods at the disposal of the buyer only on the last day of the period for delivery (Lando/BB, 263).

In these instances, the buyer has to provide the seller in time with the necessary shipping instructions for dispatch and/or calls. It would, however, be thinkable that the seller in such events had the right to choose the date when he provides the goods within the period agreed, that he must inform the buyer accordingly, and that then the latter must receive the goods within a reasonable period. [page 136]

[4] [within a reasonable time]

Subpara. (c) is applied if ''as soon as possible" has been agreed or if the delivery is tied to the occurrence of an unspecified event (c. Lando/BB, 263). What is in each individual case considered as appropriate depends on the circumstances.

[5] [within a reasonable time after the conclusion of the contract]

The date of the conclusion of the contract is provided for under Article 23.

[6] [impact of date of delivery]

The date of delivery may be so essential to the buyer that non-compliance with it may constitute a fundamental breach of contract. This is so in the case of fixed-time contracts. If the seller delivers before the date fixed, the rights of the buyer follow from Article 52, paragraph 1.

[7] [seller must deliver the goods]

This does not apply where the seller, in exceptional cases, has the right to retain the goods (c. Article 71). [page 137]

If the seller is bound to hand over documents relating to the goods [2], he must hand them over at the time and place [3] and in the form [4] required [1] by the contract. If the seller has handed over documents before that time, he may, up to that time, cure any lack of conformity [5] in the documents [6], if the exercise of this right does not cause the buyer unreasonable inconvenience [7] or unreasonable expense [8]. However, the buyer retains any right to claim [9] damages as provided for in this Convention.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [as required by contract]

It has to follow from the contract (or from usages or practices, Article 9), which documents the seller has to hand over to the buyer. The same applies to the kind of documents and the modalities of the transfer. Lando (BB, 267) refers in this context to the requirements of good faith.

[2] [documents to be handed over]

Such documents are in the first place documents of title (bills of lading, warehouse receipts etc.) which are handed over in the place of the goods and allow the buyer to have disposal over the goods (Honnold, 246). Which documents are to be handed over can mostly be seen from the trade terms agreed (c. Article 31, note 1). [page 137]

In fulfilling the contract the goods, in most cases, are not handed over to the buyer directly, but the seller transfers the goods to a carrier who, after having carried them, hands them over to the buyer. Regularly, the carrier takes charge of the goods against receipt, i.e. an acknowledgement of receipt which has a different form and a different content depending on the means of transportation. While simple documents of transport - a duplicate of the waybill in the case of railways (Handbuch 3, 235 fol), the dispatch copy of the waybill in international air traffic (Handbuch 3, 284 fol) and in freight traffic by land (Handbuch 3, 265 fol) - only confirm that the goods were taken over for transport purposes and the seller has fulfilled his obligation of delivery, other documents are issued as documents of title which take the place of the goods in relation to the transfer of title, e.g. the bills of lading in transport by sea (Handbuch 3, 178 fol) and the bills of lading in inland navigation (Handbuch 3, 297 fol). The goods are handed over to the addressee only against return of the documents of title. (Concerning the documents of title, compare also R. Richter.) The INCOTERMS contain detailed provisions with respect to the procurement, tender and transfer of the required documents.

In the case of the trade term "Free Carrier" it is for instance a railway consignment note; in that of "FAS", it is a quay receipt or receipt for the bill of lading; of "FOB", it is the mate's receipt; of "CFR" and "CIF", the on-board bill of lading; of "ex ship" a bill of lading or a delivery order; of "DEQ", a delivery order; and of "DAF", the usual transport document and/or a docking or warehouse certificate (Handbuch 3, 366) or a delivery note etc. As to the bills of lading the INCOTERMS demand that they be "clean". This means that the documents of title in the goods must not contain any additional remarks which indicate that the status of the goods or their wrapping are insufficient.

The documents to be handed over may, however, be insurance certificates, invoices, certificates of origin, certificates of control etc. And finally, technical documentation may be required, if it is not the object of the contract itself, which refers to the goods. Loewe (55) mentions as examples the model certificate of a vehicle or a mere manual for operation.

[3] [seller must hand over the documents at the time and place required]

This can be the place of delivery, but also any place that deviates from the former. As far as documents relating to the goods are concerned, a transfer may be envisaged through the banks involved, depending on the terms of payment. If the contract mentions nothing about date and place, the principle of good faith will probably require the seller to hand over the documents to the buyer in such a way that [page 138] the latter can take over the goods from the carrier when they arrive and bring them through customs (Lando/BB, 266).

[4] [ - and in the form required]

That form includes the number of copies, the language and probably the kind of duplication used (e.g. printed, written, photocopied).

[5] [up to delivery time required seller may cure any lack of conformity, except that …]

The lack of conformity may relate to both the contents of the documents and their form. It may, for instance, refer to a situation where the buyer is not in a position to receive the goods. There may, however, also be an insufficient number of copies, copies in the wrong language, or illegible copies.

The rule concerning the curing of such a lack of conformity of the documents was adopted according to a Canadian proposal (O.R., 106) and corresponds with Article 37 relating to material defects.

The right to remedy a lack of conformity exists only until the moment the documents should be delivered, hence requires their early delivery. Once the period of delivery is over, the seller can no longer remedy defects under Article 34 but only pursuant to Article 48.

[6] [lack of conformity in documents]

It will be up to the seller to remedy a lack of conformity of the goods. He may do so, for instance, through exchanging, correcting, or amending the documents.

[7] [except if exercise of seller's right to cure causes buyer unreasonable inconvenience]

Such inconvenience may occur when, e.g., the buyer has already passed on the documents and cannot obtain them again.

[8] [ - or unreasonable expense]

The buyer does in no way need to bear those costs; on the contrary, he may demand to be refunded by the seller. Since a reimbursement may entail a risk, the buyer has the possibility to refuse a curing of deficient documents when the costs to be incurred are unproportionately high.

[9] [buyer's right to claim damages: cross-reference]

Compare Article 45, paragraph 1 and Article 74 fol. [page 139]

Go to Table of Abbreviations || Go to Explanation of Abbreviated Bibliographic References
Go to entire contents of Enderlein & Maskow text

(1) The seller must deliver goods which are of the quantity [3], quality [4] and description [5] required by the contract and which are contained or packaged [6] in the manner required by the contract [1].

(2) Except where the parties have agreed [2] otherwise, the goods do not conform [7] with the contract unless they:

(a) are fit for the purposes for which goods of the same description would ordinarily be used [8];

(b) are fit for any particular purpose [9] expressly or impliedly made known [11] to the seller at the time of the conclusion of the contract [10], except [12] where the circumstances show that the buyer did not rely [13], or that it was unreasonable for him to rely [14], on the seller's skill and judgement;

(c) possess the qualities of goods, which the seller [15] has held out to the buyer as a sample or model [16];

(d) are contained or packaged [17] in the manner usual for such goods or, where there is no such manner [18], in a manner adequate to preserve and protect the goods.

(3) The seller is not liable under subparagraphs (a) to (d) [19] of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could [20] not have been unaware of such lack of conformity.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [seller must deliver goods in the manner required by the contract]

With regard to the quantity, the quality and the description of the goods, as well as their packaging or container, the provisions of the contract are to be referred to. The general provisions of the Convention can only be used as a supplement. Specific requirements may be deduced, however, from the purpose and the circumstances of the contract, and from usage even if there is no direct agreement. The parties' agreement is complemented by a number of objective standards by which the fulfilment of the contract is judged (Bianca/BB,272).

Where do the requirements of the contract ensue from? Do presentations by the seller concerning the quality of the goods become terms of the contract? In many legal systems a distinction is made between descriptions of the quality and promised characteristics, e.g. under American law between representations and promises. According to Honnold (251) such a distinction was, however, not included in the CISG because Article 8 does not provide for a distinction between different types of statements. Thus, the requirements of the contract are not only express assurances (see Welser /Doralt, 109). Posch (Doralt, 151), in contrast, believes the English text indicates that an express assurance is referred to.

[2] [subparagraphs (a) to (d) apply whenever the parties have not agreed otherwise]

Subparagraphs (a) to (d) apply whenever the parties have not agreed otherwise. They contain such provisions which the parties agree by reason or usage. If they are not to apply they must be disclaimed (Hyland/Freiburg, 338). What we are talking here about are the so-called disclaimers. Under some legal systems the exclusion of qualitative standards as are required by law is invalid. But questions of validity are not covered by the scope of application of the Convention (Article 4). Honnold (257 fol), therefore, warns that domestic law should be brought in through the backdoor. Where clauses regarding the limitation of liability are invoked, domestic law will probably have to be called in (Hyland/Freiburg, 313). In this context, attention should be drawn again to the problem of contradictory business conditions (Article 19, note 10).

[3] [seller must deliver goods which are of the quantity … required by the contract]

The CISG treats differing quantities (partial deliveries, lesser than agreed quantities) as a lack of conformity (and not as partial late delivery) having the consequence that differing quantities under Article 39 generally must be notified. A difference has to be made, however, whether or not the documents allow for a minimum quantity. Notice has to be given only when the seller really delivers less than indicated in the documents. If the documents correspond with the actually delivered quantity, the result is an incomplete performance of probably partial late delivery. The seller may not invoke that notice has not been given if he was aware of the lack of conformity, e.g. if he himself made out the documents in accordance [page 141] with the actually delivered quantity. (Analogous to Article 40, even though it is a condition for that Article to be invoked that the seller has not disclosed the non-conformity to the buyer.)

If parts are missing in a delivery it is not important under the CISG, if the same legal consequences follow, whether there is a lack in quality or in quantity. (Compare Article 51 which makes reference to Articles 46 to 50. As to a quantity greater than provided for in the contract, compare Article 52.)

[4] [ … of the quality … required by the contract]

The question of whether insignificant differences in quality have to be considered remains open. A relevant Australian proposal (O.R., 77) was not successful. (Concerning the possibility of an additional period of time for delivery in this case compare Article 47, note 3).

[5] [ … of the description … required by the contract; aliud (totally different goods) vs. peius (non-conforming goods)]

As regards the description of the goods, the parties in general determine the content of their obligations in describing the goods. The description of the goods as in the offer, is binding for the seller without the need of a specific promise. Even if the offer relates to an advertisement illustrating the goods and their quality, this illustration constitutes part of the offer and becomes binding when the offer is accepted.

The description of the goods may also be part of an offer made by the buyer. If the seller raises no objection, he is bound in the contract by this description (Bianca/BB, 273).

Views differ when it comes to the delivery of an aliud. While Article 33, subparagraphs (a) and (b) of ULIS describes non-conformity and false deliveries as being lack of conformity, thus treating a false delivery expressly as a delivery of defective goods, this was not included in the CISG. We believe, however, that the legal situation is still the same, no matter how significant the deviation may be (see also Schlechtriem, 54 fol referring to Huber, 483 fol). The same opinion is represented by Welser (Doralt, 111); undecided Bydlinski (Doralt, 133); c. Bianca/BB, 273 fol).

Hyland (Freiburg, 305 fol) gives an extensive statement on the scope of the deficiency and on the difference between aliud and peius.

The solution according to which the delivery of an aliud constitutes non-conformity under the CISG, is supported by the fact that any deviation from the description of the goods as given under the contract can be remedied by not giving notice (Schlechtriem, 54). The Secretariat's commentary, which draws a distinction between bad delivery and false delivery (O.R., 29), is therefore inconsistent. [page 142]

As far as the delivery of an aliud is concerned, the Secretariat's commentary (O.R., 32) points out that at least the general description must be met for an aliud to be a non-conformity. The obligation to deliver would not be fulfilled, if the seller delivered, e.g. potatoes instead of corn. (Agreeing Bianca/BB, 273; likewise Binder/Doralt, 146.) Such commentary by the Secretariat does not refer to the difference between the delivery of non-conform[ing] goods and an aliud but rather to a limitation of the notion aliud. According to Lüderitz (Freiburg, 185) the distinction between "aliud" and "defective delivery" is back to its origins. How can the tendering of goods that are "completely different" from those described in the contract constitute a delivery?

Should the seller deliver goods which have absolutely nothing to do with the goods desired by the buyer, then under the legal systems of many countries this does not constitute a delivery. The German BGB/Commercial Code considers the delivery of an aliud as no delivery (see R. Knoepfle, "Aliud-Lieferung beim Gattungskauf: Nichterfüllungs- oder Gewährleistungsrecht?", NJW, 1989/14, p. 871 fol) while 378 of the German Commercial Code makes a distinction between aliuds that may or may not be approved.

Some authors hold the same to apply to the CISG. A gross aliud would, therefore, be no delivery but would have to be treated as a delivery of unordered goods (see Neumayer/Doralt, 136; agreeing Loewe, 51). Though there is something to be said for this opinion, there are several factors that speak against it. For one, the need to give notice (since the seller does not have to be aware of the false delivery) and the possibility of curing it through not giving notice. But also, the theoretical and practical difficulty to differentiate between lacking quality and aliud, on the one hand, and a "simple" and a "gross" aliud, on the other.

The fact that no notice was given over a period of one year was reason for the Court of Arbitration to the Polish Chamber of Foreign Trade in the proceedings A. 737 /70 (ruling of May 10, 1971) to reject any claims by the buyer because of the delivery of an aliud (Collection of Awards 1960-1978, p. 75 fol).

[6] [packaging requirements: cross-reference]

Requirements in respect to the packing partly follow from agreed delivery clauses. For further comments compare note 17.

[7] [conform to the contract = conformity of the goods]

The wording "conform with the contract" and conformity of the goods are identical. [page 143]

[8] [goods must be fit for ordinary use]

The goods must be fit for ordinary use. Goods are detrimental to an ordinary use when they lack specific ordinary characteristics or when they have defects which impede their material use. Goods are also unfit for ordinary use when the defects, though not affecting the material use of the goods, considerably lessen their trade value (Bianca/BB, 274).

The goods can be more or less fit for ordinary use. The seller must on the whole deliver goods of average fitness. The fitness of the goods is measured against the standards of the seller's country (Bianca/BB, 274). Average fitness does not necessarily mean that the goods have to be of average quality. In some legal systems the seller has the right to deliver goods whose quality is below average. Under common law the goods must be merchantable. However, any goods are merchantable whether they are of high or low quality (Bianca/BB, 281). (Article 33, paragraph 1, subpara. (d) of ULIS requires the goods to have the characteristics needed for their commercial use, which includes their resale; c. Lüderitz/Freiburg, 185).

Hence the quality may be more or less good, but at least it must not be much below the standard that can reasonably be expected according to the price and other circumstances (Bianca/BB, 281). Since the requirement of ordinary use of the goods can be met in quite varying quality, one may safely assume that the buyer can only insist on a certain minimum (dti, 32).

The CISG does not prescribe any quality standards; e.g. cars can be traded for resale, but also for scrapping (Honnold, 252).

If the goods in question are only from time to time used for other purposes (e.g. after converting a printing machine) the buyer has no rights if he has not indicated a specific use. If the goods in the buyer's country or another country of destination have to meet special conditions, for instance with regard to the fulfilment of specific test or security regulations, the seller has to take these into account only if the buyer informs him accordingly in advance (c. note 11). The CISG stipulates nothing with respect to qualitative prerequisites which may be mandatory in the buyer's country or in the country of destination. An obligation of the seller to fulfil those requirements would have to be expressly agreed in the contract (Bianca/BB, 282). (Such requirements could also be as under subpara. (b) fitness for a particular purpose].

It should, however, not be sufficient if the buyer informed the seller of the country where the goods are to be used, in order to bind the seller, to meet the requirements under that country's law (Bianca/BB, 283). [page 144]

After all, fitness for ordinary purpose includes that the goods remain fit for a reasonable period of time even if no express guarantee was granted for them (Bianca/BB, 289). Such an interpretation can be expected at least in the Common Law countries (dti., 33).

A specific problem relates to the period of durability or fitness which plays a role in the foodstuffs and the pharmaceutical industries. Since no general standards have emerged yet in this respect, a relevant agreement in the contract should be recommended.

[9] [fitness for particular purpose]

The seller can take account of the purpose of the goods only if he is aware of it at the time of concluding the contract. It is, therefore, recommendable that the buyer makes this purpose known to the seller to secure probable claims. If the seller wants to avoid the agreement in regard of the quality of the goods, he must contradict it (Lüderitz/Freiburg, 186). If the seller is aware of the purpose of the goods, the principle of fairness requires him to conform to it (Bianca/BB, 275).

[10] [made known to the seller]

It is insufficient for the buyer to make the purpose of the goods known to the seller at a later date.

[11] [expressly or implicitly made known]

If the buyer has named the purpose of the goods in the offered contract and the seller has agreed, the result would be an agreement to which paragraph 1 of Article 35 applies. Make known is less than contractually agreed (see Huber, 480 fol). Welser (Doralt, 109) sees a problem in such interpretation "because hardly can something not conform with a contract that had not become a term of the contract". What matters here is that the purpose which is made known becomes a term of the contract by invoking the Convention. Hyland believes there will be difficulties when the seller is supposed to know the particular purpose intended by the buyer, but actually is not aware of it. We would, however, interpret "make known" in such a way that the seller was able to take note of it. While "expressly ... made known" does not cause any problem, disputes can be foreseen when it comes to interpreting "impliedly made known". In the proceedings SG 373/84 at the Court of Arbitration to the Chamber of Foreign Trade of the former GDR, the question was dealt with whether the seller by inspecting the production facilities became aware of their cleaning regime and thus of the conditions required to ensure anti-rust protection (see RiA, 111; Supplement to AdW-Dokumentationen, 1989/22, p. XIV).

[12] [buyer's knowledge]

The buyer may, for instance, have greater knowledge with regard to the goods he wants to buy than the seller. [page 145]

[13] [buyer's reliance on seller's skill and judgement]

Whether or not the seller gave a judgement in the process is irrelevant. The buyer may, e.g. indicate the purpose for which the goods must be fit, and at the same time have ordered them according to particular technical specifications. The seller may have an obligation to advise the buyer in this context. If the buyer, contrary to the advice of the seller, insists on his order, it is obvious that he does not rely on the judgement of the seller.

If the buyer participates in choosing the goods, inspects the goods before he buys them, selects the manufacturing process, hands over the specifications or insists on a particular brand, he does (c. the examples mentioned from the British Sale of Goods Act) not rely on the skill of the seller (Hyland/Freiburg, 321).

Honnold (253 fol) believes that the buyer has to prove that the seller was aware of the particular purpose, and then the seller has to prove that the buyer did not rely on the skill of the seller (agreeing Hyland/Freiburg, 322).

[14] [seller not manufacturer, only trading agent without special knowledge]

This refers to when the seller is not the manufacturer of the goods but only a trading agent who indicates that he has no special knowledge, or when the required judgement capacity in the seller's trade branch is not common under normal circumstances (Bianca/BB, 276).

[15] [quality of sample or model held out to the buyer]

Whether, as in this case, the seller has held out to the buyer, or whether the buyer has held out to the seller a sample or model, both events constitute contractual agreements having the approval of the other party, to which Article 35, paragraph 1 should apply. Under American law this is express and not implied warranty (Honnold, 254). (As to the differences between express and implied warranty see in extenso A. Henselmann, Zum Kaufrecht der USA, Aktuelle Beitrage der Staats- und Rechtswissenschaft, Heft 178, Potsdam-Babelsberg 1978.)

[16] [sample or model]

A sample is normally taken from an existing quantity while a model serves as a model for manufacturing goods (see Honnold, 255). The submission of a model or sample is a factual description of the goods and, therefore, excludes the application of subparagraphs 1 and 2 (ordinary purpose, particular purpose) (Bianca/BB, 276). Since goods possess numerous characteristics it is sometimes difficult to decide which are the characteristics intended to be shown by a sample or model (Hyland/Freiburg, 324). [page 146]

The seller is bound only if he has not pointed out in which way the goods will deviate from the submitted model. If the description of the goods in the contract and the model do not conform with each other, it may not be deduced, from the fact that without a description in the contract the model replaces an agreement; that the model shall have priority over contractual agreements.

[17] [packing]

These provisions regarding packaging are minimum requirements. The seller is free to provide better protection for the goods at his own cost. This is influenced not only by the category of the goods themselves, but also the means and duration of transport, the route, and the country of destination (climatic conditions etc.). Whether or not interior packaging is required apart from exterior packaging, or vice-versa, or whether the goods are contained instead of packaged also depends on the means of transportation used and the category of goods involved.

An adequate manner also includes that the seller reckoned with a foreseeable delay in transport and the possibility of a redirection in transit or a redispatch (Article 38) in case where he became aware of it at the time of concluding the contract (Bianca/BB, 278).

It does not matter whether the packaging is part of the goods, but the obligation to package the goods depends on what is customary. The seller has an obligation to package the goods not only when the goods are dispatched, but also under Article 31, subparagraphs (b) and (c) if the seller only has to place the goods at the disposal of the buyer. Also in these cases, the goods have to be packaged so as to allow the buyer to load and transport them. If the buyer himself is to provide for packaging, a clear relevant clause has to be agreed in the contract (Bianca/BB, 277).

[18] [contained or packaged in the manner usual for such goods]

This may relate in particular to new goods, but also to such which have to be manufactured in a special way.

[19] [exclusion of seller's liability: reference exclusively to qualitative requirements under para. 2]

The exclusion of liability of the seller refers exclusively to the qualitative requirements under paragraph 2. Qualitative requirements agreed upon under paragraph 1 as well as differing quantities and false deliveries, which under paragraph 1 also do not conform to the contract, have not been included here. It is hardly imaginable that the buyer should be aware of false deliveries when the contract is concluded.

We could imagine that paragraph 3 be applied analogously to the requirements under the contract pursuant to paragraph 1. Norway at the Diplomatic Conference spoke out in favour of an inclusion of paragraph 1 into paragraph 3, but without success (O.R., 426 fol). [page 147]

Bianca (BB, 280) is against the analogy suggested by us for he believes that the distinction has to be kept clear between contractual clauses (Article 35, paragraph 1) and the criteria of the CISG and/or usages (Article 35, paragraph 2). Hyland (Freiburg, 326), however, agrees that similar principles can be effective also vis-a-vis express guarantee. Welser (Doralt, 109 fol), too, is in favour of adopting the same yardstick. According to Loewe (56), it is not detrimental to the buyer if he was not, and need not be, aware of the deficiency, provided the seller committed himself to deliver according to the characteristics required.

[20] [exclusion of seller's liability: buyer's opportunity to examine goods at time of conclusion of contract; could not have been unaware: meaning of phrase]

Here the CISG proceeds on the assumption that the offer of the seller relates to specific goods with a specific quality and that the buyer purchases the goods as they are, provided that he had reasonable opportunity to examine them at the time of the conclusion of the contract (Bianca/BB, 278).

Such examination does in no way include complex or detailed methods. The seller remains responsible for latent defects. He even remains responsible for apparent defects which are not detected during spot checks (Bianca/BB, 279).

The buyer has, however, no obligation to inspect the goods before the conclusion of the contract. There is no solution offered in the CISG for the eventuality that the seller invites him to inspect the goods and he falls to do so. Under domestic law there would be different results in such an event (see Hyland/Freiburg, 325).

The CISG provides no information on the yardstick against which "have to be aware" should be measured. There are several formulations in regard to it. Apart from "knew/has become aware" (see Article 43, paragraph 2; Article 49, paragraph 2; Article 64, paragraph 2, subpara. (a)) there is "could not have been unaware" (like in Article 35, paragraph 3 and further in Articles 40; 42, paragraphs 1 and 2) as well as "knew or ought to have known" (see Article 38, paragraph 3; Article 39, paragraph 1; Article 43, paragraph 1; Article 49, paragraph 2, subpara. (b); Article 64, paragraph 2; Article 68 and : Article 79, paragraph 4).

The wording "could not have been aware" is often qualified as gross negligence (so Herber/Doralt, 141). According to Huber (479) this should not suffice. Welser (Doralt, 109) holds that there should be an objective and clearly recognizable deficiency of the goods, which must be obvious to the average buyer. [page 148]

Circumstances which suggest that the buyer could not have been unaware would be given, for instance, if the seller had sold in the past to the buyer poor quality goods without complaints from the buyer; or if the price corresponds to the price generally paid for poor quality goods (Bianca/BB, 279).

It is, however, not absolutely excluded for the seller to bear responsibility. If the buyer is aware of the non-conformity of the goods at the time of the conclusion of the contract, but insists on faultless quality, the responsibility will remain with the seller for he must be expected to remedy the deficiency.

(1) The seller is liable [1] in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes [2] to the buyer, even though the lack of conformity becomes apparent [3] only after that time.

(2) The seller is also liable for any lack of conformity which occurs [4] after the time indicated in the preceding paragraph and which is due [5] to a breach of any of his obligations, including a breach of any guarantee [6] that for a period of time [9] the goods will remain fit for their ordinary purpose [7] or for some particular purpose [8], or will retain specified qualities or characteristics.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [liability for lack of conformity of goods]

What is dealt with here is lack of conformity of the goods and not necessarily a lack of conformity in the conduct of the seller (Bydlinski/Doralt, 140, would prefer the latter). The responsibility of the seller for such lack of conformity comprises quality, quantity and description of the goods as well as the manner in which they are packed (Article 35).

[2] [seller's responsibility begins when risk is passed; claimed non-conformity: burden of proof]

The seller's responsibility traditionally begins the moment when the risk is passed (Article 66 fol). This rule is clearly intended to distinguish between buyer's risk and lack of conformity in the quality of goods (Bianca/BB, 285). In the practice of international economic relations, however, the moment when the risk passes is frequently difficult to prove. The CISG does not answer the question of who bears the burden of proof. Does the seller have to prove that the goods, at the time of the passing of risk, conformed with the contract (as believes Huber, 479 fol) or does the buyer have to prove [page 149] that the goods, already at that time, did not conform with the contract (as holds Welser/Doralt, 110). In the international trade practice it is always the party that claims non-conformity of the other party with the contract who has to furnish proof (Bianca/BB, 288).

[3] [even though the lack of conformity becomes apparent only after … the risk passes to the buyer]

It is only in rare cases that the lack of conformity becomes obvious at the time of risk passing and may, for instance, be taken note of by the carrier in the documents relating to the goods. Mostly the buyer will detect deficiencies in the quantity, damages to the packing, and apparent defects when he receives the goods. Latent defects will become evident only after careful examination of the goods or their being put to use (c. Article 38).

An obvious breach of contract is given when the lack of conformity in quality is the result of a natural process which requires more time than the time that elapsed between the moment the risk passed and the goods were received by the buyer, hence a process which must have started even before the risk was passed (Bianca/BB, 288).

[4] [defects which become evident later]

Here we are dealing not only with defects which become evident after risk passing but also with those which become obvious later, provided that the seller has breached his obligations (note 5) or given a guarantee (note 6). Welser (Doralt, 110) obviously believes that in delivering goods which do not conform with a contract, one party has always committed a breach and conversely, the judging of goods to be non-conform[ing] to a contract implicates a breach of an obligation.

[5] [passing of risk does not free seller from consequences of breach of contract]

A defect may have been caused by the seller before the risk was passed, e.g. using inappropriate containers or insufficient packing which damage the goods during transportation. It may also occur that additional requirements were not fulfilled, e.g. the wrong ship was chosen or containers were badly piled (Herber/Doralt, 142). The passing of the risk does not free the seller from the consequences of his breach of contract (c. Articles 66 and 70 as well as the relevant comments).

Under specific circumstances. the defect may also have been the result of acts which the seller commits after the risk has passed (Article 69, paragraph 1).

[6] [breach includes breach of any guarantee]

Guarantee is not a given right, but requires an agreement between the parties or a unilateral promise by the seller. It is hardly imaginable that guarantee is given impliedly (as believes Schlechtriem, 58); compare Article 35, note 8. [page 150]

It is not a breach of guarantee when goods become unusable, but only when the guarantee is not fulfilled (Bydlinski/Doralt, 141).

[7] [goods will remain fit for their ordinary purpose: cross-reference]

Compare Article 35, note 8.

[8] [goods will remain fit … for some particular purpose: cross-reference]

Compare Article 35, note 9.

[9] [if no guarantee given, goods must remain fit for reasonable time]

Also, if no guarantee is given, the goods have to remain fit for use for a reasonable time; otherwise they are not fit for ordinary use. Ordinary use includes a certain durability (Bianca/BB, 288 fol; doubting Welser/Doralt, 111; Article 35, note 8). The developing countries generally advocate a certain durability, a fixed time limit during which the goods have to retain their fitness. Such time may be relatively short and is expressly agreed, for instance for parts subject to wear and tear, and/or such parts [that] are excluded from the guarantee. As to Welser, the wording "for a certain time" indicates a time that is fixed in the contract; but this relates to the German translation and the English version only mentions "a period of time".

This would leave open the question of who would fix such a time, the contract or the court (Welser/Doralt, 111, following Schlechtriem (58), who does not exclude a different interpretation, but rather tends to a contractual stipulation).

In so far as a guarantee was given, no breach of obligation at the moment of risk passing has to be proved. The giving of a guarantee does not preclude the seller from proving that lesser quality is the result of improper handling of the goods by the buyer or a third party and the seller is not responsible. An improper handling involves, e.g., not following the instructions given by the seller or use of the goods without the normal or specific skills that are required (Bianca/BB, 287). [page 151]

If the seller has delivered goods before the date [1] for delivery, he may [2], up to that date, deliver any missing part or make up [3] any deficiency in the quantity of the goods delivered, or deliver [4] goods in replacement of any non-conforming goods delivered or remedy [5] any lack of conformity in the goods delivered, provided that the exercise of this right does not cause [6] the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim [7] damages as provided for in this Convention.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [early delivery]

Early delivery is either delivery before the date for delivery (c. Article 33, subpara. (a)) or delivery before the period for delivery (c. Article 33, subpara. (b)). The buyer has no obligation to accept a delivery before the date for delivery (c. Article 52, paragraph 1). Therefore, Article 37 presupposes that the buyer has accepted an early delivery without objection or that it was up to the seller to deliver within a period of time which had not yet elapsed.

The seller may remedy any lack of conformity up to the moment fixed (where a period was fixed up to the end of that period). (This was the case under Article 37, ULIS; c. Stumpf/Dölle, 281.) After this time, and/or after a period of time, he may do so under specific circumstances (Article 48). Even if an early delivery was agreed between the parties, i.e. the buyer's agreement with an early delivery constitutes an amendment of the contract, the seller could remedy a lack of conformity only under the provisions of Article 48 (Bianca/BB, 293).

[2] [possibilities to remedy lack of conformity]

Article 37 provides for four possibilities to remedy a lack of conformity, which can occur individually or combined. To exercise this right the seller has to be aware of the lack of conformity with the contract. As far as he does not know of the lack of conformity with the contract, e.g. in the case of deficiencies in the quantity, or was informed accordingly by the carrier, he should receive the relevant information from the buyer. The buyer has the obligation to examine the goods when he receives them (Article 38; compare note 2) and to give notice of it (Article 39). A delivery before the date for delivery will, however, not result in a change of the date of delivery so that the buyer must wait to invoke legal remedies under Article 45 fol (see note 7). If the seller, however, does not exercise his right and if it becomes clear that he will not cure the lack of conformity, Article 72, paragraph 1 may be applied (Honnold, 271). The right of the seller is only restricted by inconveniences and expenses that may be caused to the buyer. It refers even to such serious defects which otherwise would constitute a fundamental breach of contract (Honnold, 271). Problems arise in connection with this right if it can be exercised to the detriment of the buyer. If the buyer has already paid the price and if the goods have to be sent back to the seller to be remedied, the buyer is left with no security. The buyer should, therefore, only have to return the goods for which he already paid if the seller gives a proper guarantee for their restitution (Bianca/BB, 294). [page 152]

Article 37 does not provide for a refusal of the buyer to allow the seller to remedy the lack of conformity. In such case the buyer should lose the right to claim a lack of conformity (Bianca/BB, 294).

[3] [missing parts / missing quantities]

Missing parts (of a larger unit) or a missing quantity (of the same goods) can be delivered until the date for delivery, if need be up to the end of the period for delivery. The right of the seller to deliver any missing part or make up any deficiency in the quantity of the goods may be self-evident and not need special mention. Since fractionated delivery, definitely entails inconveniences for the buyer, for a fractionated delivery generally needs approval, it was recommendable to expressly provide for the right of the seller to complete delivery of missing goods.

[4] [goods which do not conform to the contract]

Goods which do not conform with the contract may have defects in the quality, legal defects, or they could constitute an aliud (c. Article 35, note 5). (Concerning the subsumption of legal defects in the context of lack of conformity with the contract, compare Article 46, note 3.)

If goods are delivered in replacement, the seller, at his own expense, may have the goods he originally delivered returned.

[5] [remedying lack of conformity]

To remedy a lack of conformity relates to touching up (repairing) the goods either after they have been returned to the seller or at the buyer's place (c. note 6). According to Honnold (271 fol) such repair may be imperfect. Repair of goods which are already in the possession and/or are property of the buyer requires extra cooperation by the buyer (Bianca/BB, 292), either sending the goods back to the seller or grant the mechanics of the seller access to the buyer's facilities.

[6] [provided that the exercise of th[e] right [to cure] does not cause the buyer unreasonable inconvenience or unreasonable expense]

It does not matter whether there are inconveniences or not; what counts here is whether they are reasonable. This can only be ascertained in individual cases. An inconvenience that may not be considered as reasonable could, for instance, be caused if a relatively long time were required to repair a machine that is part of an assembly line. Other inconveniences that would not be considered reasonable might occur if the seller wanted to cure a lack of conformity without telling the buyer in advance. While the CISG does not require the seller to notify the buyer of the intention to cure such lack, it may become necessary in order to avoid inconveniences to the buyer (see Honnold, 273).

(In this context and regarding expenses compare Article 34, notes 7 and 8.) [page 153]

[7] [right to claim damages]

The right to claim damages is deduced from Article 45 fol. As to the calculation compare Article 74 fol.

(1) The buyer must examine the goods, or cause them to be examined [1], within as short a period [2] as is practicable in the circumstances [3].

(2) If the contract involves carriage of the goods [4], examination may be deferred [5] until after the goods have arrived at their destination.

(3) If the goods are redirected in transit or redispatched [6] by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract [7] the seller knew or ought to have known [8] of the possibility of such redirection or redispatch, examination may be deferred [9] until after the goods have arrived at the new destination.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [buyer's examination of goods; distinction between apparent defects and latent defects]

This article stipulates an obligation of the buyer to examine the goods and, therefore, de facto does not belong under the chapter Obligations of the seller.

From the context of Articles 38 and 39 it can be seen that it is not really an "obligation" of the buyer, but rather a burden to examine the goods within a short time. If the buyer fails to do so, he does not commit a breach of contract (Bianca/BB, 297). If he does not comply with his obligation to examine the goods the buyer may lose (c. Articles 39 and 44) his rights vis-a-vis the seller that would devolve from a lack of conformity. It is, however, decisive for retaining his rights that he gives notice of a lack of conformity; the examination only serves to prepare such a notice. The duty to examine the goods also applies to an aliud (Huber, 483 fol; Herber, 28; Schlechtriem, 54, 59; Welser/Doralt, 111).

The purpose of the examination of the goods is to determine whether or not the goods are in conformity with the contract. The goods must be examined with care and skill. [page 154]

The way in which the examination is performed is frequently agreed between the parties, in particular in the case of machines and equipment, e.g. operation and performance tests, and depends primarily on the category of goods. The parties may, for instance, agree on a mathematical and statistical quality check and prescribe the use of specific examination or analysis proceedings. There may already exist specific usages between them. In general, customary methods of examination have emerged for certain branches of trade, which have to be observed (individual examination, spot checks; c. Article 9).

The buyer must examine the goods in a way that is reasonable according to the nature of the goods, their quantity, their packing and all other relevant circumstances. The buyer, therefore, is not bound to undertake an examination involving a complex technological analysis. When the goods are too complex or too numerous, the buyer is neither bound to undertake a thorough examination of every single good nor of every single part (Bianca/BB, 298). An examination in general only uncovers apparent defects. While the CISG does not use the terms "apparent" and "latent" defects, it can be deduced from the rule under Article 39 that a distinction is made between them.

Pursuant to Article 38, paragraph 4, ULIS, the methods and modalities of examination follow from the laws that govern and usages that are customary at the place of examination. Even though the CISG does not provide for that, one can often assume that this has impliedly been agreed (see Schlechtriem, 59).

The buyer does not have to undertake the examination himself; he may instruct a third party to do so. Impartial controlling organizations are frequently used (compare Handbuch 3, paragraph 8.3., 375 fol).

[2] [length of period within which goods must be examined]

The length of the period within which the goods must be examined depends on the circumstances of each case. For this reason, that period was not determined in days. This short period of time is based on the principle of reasonableness. The buyer must examine the goods as soon as this is reasonably possible. The buyer has to act with reasonable speed. Generally, it can be said that goods of sophisticated technology or of complex composition require a longer time to be examined. Impediments relating personally to the buyer or to his employees are not relevant. A delay in examining the goods maybe justified only when it is due to general and objective impediments, e.g. a general strike (Bianca/BB, 298). [page 155]

The examination within a reasonably short time is decisive for determining when the period begins during which notice of a lack of conformity is to be given (for Article 39, paragraph 1 refers to the moment when the buyer has discovered or ought to have discovered it).

In the case of early delivery, that period only commences with the date set for delivery and/or not before the beginning of a period for delivery (Article 33), except when there was agreement on such early delivery (c. Article 37, note 2, and Article 52).

[3] [examination must be within as short a period as is practicable in the circumstances]

The provision refers to objective situations and factors influencing the examination's length (Bianca/BB, 299). Circumstances that have to be taken account of include the place where the goods are at the moment the risk passes (c. Article 36, paragraph 1, and Article 66 fol) and the nature of the goods, i.e. single pieces, mass-produced articles,

perishable goods, consumer goods. An example given by Honnold (276) relates to gas canisters, the content of which can be examined only when using the gas. Those circumstances further include how the goods are packed, e.g. whether the interior packaging remains closed until it reaches the final user; whether the goods are used by the buyer himself or are resold by him; the technical facilities of the buyer to examine them (O.R. 34); and finally, the practices and usages that have emerged (c. Article 9).

If the goods are resold (c. note 3) they can be examined by the repurchaser, who, however, has to do so equally within a reasonably short time. If the new buyer fails to examine the goods promptly, he and the original buyer lose the right to claim a lack of conformity (Bianca/BB, 297).

[4] [cases in which contract involves carriage of the goods]

Paragraph 2 also applies when the buyer arranges for carriage but does not carry the goods himself. In this case, the carrier acts only as the agent who has the goods transported from the seller to the buyer. The situation is different when the handing over of the goods to the carrier constitutes delivery to the buyer and the carrier receives the goods as agent of the latter (Bianca/BB, 299). Then it is his duty to examine them.

[5] [cases in which examination may be deferred]

This is generally the standard case in the international sale of goods, which was not considered in ULIS. Hence the CISG better meets the requirements of commercial practice (Honnold, 275). An examination of the goods when passing a border, or when transferred over the deck rail of a ship, in general is not possible and not necessary. However, should disputes arise often over whether defects that are discovered when the goods are received occurred during transportation and before or after the risk had passed, it is recommendable [page 156] to call in a controlling organization which should examine the goods at the place and the date of risk passing.

[6] [goods redirected or redispatched]

This provision covers two different situations: on the one hand, the buyer himself; at the place of performance, is responsible for redispatch to the place of destination, and, on the other, the buyer resells the goods without receiving them first. But even if he receives the goods, e.g. 1,000 TV sets, and resells them from his stocks he is not obligated to open each wrapping and to examine each individual TV set. In this case it is customary that the buyer undertakes only spot checks (c. note 1).

[7] [significance of at the time of the conclusion of the contract]

A redirection in transit or a redispatch must be taken into consideration when the contract is concluded. It is not up to the buyer to postpone at his discretion the examination of the goods and to give notice to the seller of an unexpected change in their original destination (Bianca/BB, 301). The possibility that goods are redirected or redispatched is not related to what abstractly could happen but rather to a foreseeable event. The seller must face this possibility when the buyer has expressly mentioned it or when it results from the circumstances. The seller, however, does not have to consider the possibility of a further redirection or redispatch if it was not expressly mentioned to him (Blanca/BB, 301). (It must be seen from the contract whether a redispatch to third countries is admissible. Compare also Article 42, paragraph 1, subpara. (a).)

Redirection or redispatch and resale are not identical. Except for retail trade, a resale normally involves a redispatch of the goods (Bianca/BB, 302).

[8] [seller knew or ought to have known]

That the seller knew or ought to have known is required because by deferring the examination he might be confronted with a notice of non-conformity at a much later date. The seller has to reckon with the possibility of a resale of the goods whenever the buyer is a trading company.

[9] [conditions for deferral of examination]

Two conditions are required for a deferral of an examination: (a) the buyer had previously no reasonable opportunity to examine the goods; and (b) the seller knew or ought to have known of the possibility of such redirection or redispatch (Bianca/BB, 300). [page 157]

Whether or not the buyer has a reasonable opportunity to examine the goods depends on how long the goods stay with him before their redispatch. Generally a quick redispatch of the goods does not allow the buyer to examine the goods. Another relevant circumstance is the way the goods are contained or packaged. If the examination is not possible without removing or breaking the vessels, boxes, wrappers, etc., necessary to protect and transport the goods, it is normally assumed that the examination will be effected at the place of their new destination. The same is understood when the examination of the goods requires the removing of the trademark attesting the authenticity of the product (Bianca/BB, 300). [page 158]

(1) The buyer loses the right [1] to rely on a lack of conformity of the goods [2] if he does not give notice [9] to the seller specifying [5] the nature of the lack of conformity within a reasonable time [3] after he has discovered it or ought to have discovered [4] it.

(2) In any event, the buyer loses the right [1] to rely on a lack of conformity of the goods if he does not give the seller notice [9] thereof at the latest within a period of two years [6] from the date on which the goods were actually handed over [7] to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee [8].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [buyer's right to rely on lack of conformity of the goods lost if buyer fails to notify within a reasonable time]

The right of a buyer to rely on a lack of conformity of the goods lapses if he does not give notice of such lack of conformity within a reasonable time. A lack of conformity refers here only to quality, quantity (deficiencies in quantity, missing parts) and false deliveries (c. Article 35, note 5; Loewe, 58, believes differently). Notification of third party rights and claims is dealt with elsewhere (c. Article 43, paragraph 1).

The rights which the buyer loses in case of omission of notice include the right:

[2] [principle analogously applied to notice of lack of conformity of documents]

The duty under Article 39 to give notice is analogously applied also to a lack of conformity of documents. The seller cannot exercise his right to cure any lack of conformity under Articles 34 and 48, unless such lack is made known to him. As far as non-conformity of documents is concerned, there will, however, be no more problems after the goods are handed over (Honnold, 280). This concerns, however, only documents transferring title in the goods.

[3] [the reasonable time within which notice must be given]

The reasonable time is in any case a short period (just like in Article 39, paragraph 1 ULIS). Such time is a relative time (unlike the absolute time of paragraph 2, see Welser/Doralt, 112). It is in the interest of the buyer himself to inform the seller because the latter can do nothing to cure the lack before he becomes aware of it. In the event that a lack cannot be remedied, like in the case of perishable goods, there would be need for speed so that impartial control would be possible (Honnold, 281). Reasonable, in many cases, will mean giving notice immediately. [page 159]

According to Sono (309) there is actually no reason for a short time if the buyer wants to retain the goods and content himself with claiming damages. The wording of this paragraph, however, requires the giving of notice within a reasonable time also in this case. Furthermore, this view underestimates the difficulties to prove a non-conformity which grow as time goes by.

The reasonable time commences at the time of discovery of the non-conformity. In the case of apparent defects, this will usually be the time of the taking over and examination of the goods. In regard to latent defects, the time of discovery of the non-conformity will be the time of commencement of the use of the goods, the time of putting them into operation or even later. If the buyer already discovers defects before taking over the goods, the reasonable time also commences at the time of discovery, i.e. before taking delivery (c. Article 60).

[4] [time when buyer ought to have discovered the lack of conformity]

It should be taken into consideration that it is not only the factual discovery of non-conformity which is decisive, but as the Convention proceeds, the time when the non-conformity ought to have been discovered. In the case of apparent defects this will be the time when the buyer has the obligation to examine the goods (c. Article 38).

[5] [specificity requirement]

Notice of non-conformity serves several purposes: It allows the seller to examine the goods himself, to substitute or repair them, and to collect or obtain evidence which he might need in a probable dispute with the buyer (Sono, 309). The buyer's notice should enable the seller to take the necessary steps to remedy the non-conformity. For this reason, an exact description of the non-conformity is required. The notice should relate the essential result of the examination of the goods.

The parties may agree whether and which means of evidence have to be attached to the notice.

It is recommended that the buyer specify his claims at the time of giving notice. Whether he requests substitute goods or repair, he has to do so in conjunction with his notice or within a reasonable time thereafter (Article 46, paragraphs 2 and 3).

[6] [maximum period of two years]

Latent defects, which in spite of an examination at the time of the taking over of the goods could not be discovered, can become visible while the goods are being used. The later the defects are discovered, the more difficult it is to decide whether they were caused by a breach of an obligation of the seller or by outside influence after the passing of the risk, e.g. wrong use by the buyer or normal [page 160] wear and tear. Therefore, a maximum period of two years after the taking over of the goods is laid down in the, Convention. This is not a limitation period but rather a period of exclusion. It may neither be checked nor interrupted, e.g. through repair.

This exclusive period was greatly disputed during preparation of the Convention since the relevant period is much shorter in many domestic laws. (In Mexico, for instance, the period is extremely short: five days from receipt for curing a deficiency in the quantity and apparent defects, 30 days after receipt for inherent defects. c. Honnold, 281). However, under the conditions of international trade, the two-year period has been considered justifiable. Moreover, it may be modified by the parties (c. note 8.) This two-year period causes difficulties to countries which have a shorter limitation period, like Germany, Switzerland and Austria, because claims to remedy non-conformity are in lapse already before the period for giving notice has expired (Krapp/Lausanne, 105). On the other hand, the Limitation Convention prescribes a limitation period of four years, counted from the day the goods are handed over to the buyer, during which the buyer may take action against the seller because of a lack of conformity with a contract (Article 8, Article 10, paragraph 2, Limitation Convention). The above-mentioned difficulties should thus not arise if all States Parties to the CISG also acceded to the Limitation Convention. Otherwise, problems will have to be solved in the respective countries invoking domestic legislation or judicature (Loewe/Lausanne, 106).

After long discussions, a two-year exclusive period was stipulated in the CISG because at a later date difficulties would almost inevitably arise with regard to evidence on the status of the goods at the time of delivery, and the seller would no longer be in a position to take action against his suppliers (of the goods themselves or of the material needed for their manufacture) (Sono, 307).

A period that would be equally suitable for all goods cannot be established. Whether or not the two-year period is too short or too long depends on the goods in question (see Farnsworth/Lausanne, 106).

[7] [from the date on which the goods were actually handed over]

A factual handing over means physically handing over the goods and not just a transfer of title through handing over the respective documents. The maximum period does not commence when the risk passes or when the goods are handed over to the first carrier. If the goods are redispatched to a new buyer then it is the actual handing over of the goods to the latter that is decisive (see Schlechtriem, 62, relating to discussions at the diplomatic conference). If the buyer has taken over the goods himself, but has no sufficient [page 161] time to examine them (c. Article 38, notes 6 and 9), the two-year period nevertheless commences with the handing over of the goods to him. The beginning of the two-year exclusive period may hence be much earlier than the time of examination required under Article 38, paragraph 3 (Sono, 311).

[8] [contractual guarantees]

If a contractual guarantee is given the question has to be asked whether this guarantee as agreed between the parties is given in addition to the remedies of the CISG or whether the guarantee shall replace the Convention's remedies. There are several kinds of "guarantees". A seller could, for instance, guarantee that he will substitute defective parts if the buyer gives notice within 30 days after having taken over the goods. Where perishable goods are concerned such a short period would certainly be justifiable (Sono, 311).

If the guarantee clearly is granted in addition to the remedial rights under the Convention, and if the period of guarantee is shorter than two years, the buyer's rights to notify latent defects within a period of two year are not affected.

Sono (313) makes a distinction between guarantees which refer to the original status of the goods (practically in the sense of promised characteristics and qualities) and such which assure that the goods will retain their specific characteristics or their fitness for an ordinary or particular purpose over a certain period. If the contractual period of guarantee does not cover two years, the buyer may nonetheless take action against the seller within two years if he can prove that in their original status the goods were not in conformity with the contract. If the guarantee is to replace the remedies under the Convention, which is absolutely possible under Article 6 and is what many sellers aim to, the period under Article 39 may also be extended or shortened. See here Welser (Doralt, 113); Loewe (60). Other authors only mention the possibility of extending the exclusive period of two years by a contractual period of guarantee (see Schlechtriem, 62; Honnold, 282).

In the event that a guarantee was granted, the seller will have the duty to examine the goods immediately and to give notice, without delay, of a non-conformity at its discovery. Apparent defects may not be notified at the end of a guarantee period. If the period of guarantee covers more than two years, the seller may give notice of non-conformity till the end of that period. In the case of a contractual guarantee period, notice should be possible within a reasonable time even after that period itself has elapsed, provided that the defect was discovered only a short time before the guarantee expired (Sono, 312). [page 162]

[9] [notice appropriately sent but delay in transmission, or notice lost]

A seller does not have to acknowledge the receipt of a notice. The buyer retains his rights even if there is a delay in the transmission of the notice or if the notice gets lost on its way to the seller. The buyer, however, must give notice of non-conformity using the means that are appropriate in the circumstances (c. Article 27).

The seller is not entitled to rely [4] on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew [2] or could not have been unaware [3] and which he did not disclose [1] to the buyer.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [seller's obligation to disclose]

If the seller has not disclosed to the buyer non-conformity of the goods, he can neither require the latter to examine the goods within a reasonably short time (Article 38) nor can he demand from him to give notice of such defects (Article 39). In this case the buyer retains his rights devolving from a lack of conformity of the goods, even if he fails to examine the goods and to give notice. This also applies to the maximum period mentioned under Article 39, paragraph 2 (it being unlikely, however, that the seller knows of latent defects which become apparent only after two years).

The seller has thus an obligation to disclose defects, which is based on the principle of good faith (Article 7, paragraph 1). (Irrespective of this situation, domestic rules governing fraud may apply here, see Honnold, 283.)

The facts to be communicated not only include the qualities of the goods sold, but also the conditions which could influence or alter the goods once they have left the seller's area of competence (Schlechtriem,60).

By contrast to many domestic legal systems the CISG favours the buyer; it already suffices that the seller could not have ignored the lack of conformity. Under Swiss law, however, the buyer has to prove that the seller has cunningly mislead him (Widmer/Lausanne, 106). Also under 377, section 5 of the German Commercial Code the seller must have cunningly hidden the defect from the buyer. [page 163]

[2] [facts of which he knew or could not have been unaware]

What is referred to here is not only the knowledge of the seller personally, but also of his employees. Not, however, that of independent companies which he employs to fulfil his contract (Bydlinski/Doralt, 138), like-subsuppliers and carriers (Binder/Doralt, 146 fol, leaves open whether he would include their knowledge). Nothing is said about the time when the seller should have known or should not have been unaware of the lack of conformity (in contrast to Article 42, paragraph 1 where reference is made to the date of the conclusion of the contract). From the context of Articles 38 and 39 it can be concluded, however, that like in the case of the Articles mentioned above, the time of the handing over of the goods to the buyer is decisive (see also Article 40 ULIS, Stumpf/Dölle, 291).

[3] [knew or could not have been unaware: definition; cross-reference]

Compare Article 35, note 20.

The wording "could not have been unaware" is defined by Huber (482) as being a little bit less than cunning and a little bit more than gross negligence; others treat it as being equivalent to gross negligence (Schlechtriem, 60; Welser/Doralt, 113). In this context it is felt that efforts are made to protect the seller following domestic law. The wording of the CISG itself would, in our view, include simple negligence, which could also be described as a violation of customary care in trade.

[4] [seller's awareness of rights and claims of third parties: contrast with language of Art. 43(2)]

The consequence of the seller being aware of the rights and claims of third parties is contained in Article 43, paragraph 2 where, in contrast to Article 40, it is assumed that the seller has positive knowledge of the non-conformity. [page 164]

The seller must deliver goods which are free from any right [2] or claim [4] of a third party [1] unless the buyer agreed [3] to take the goods subject [5] to that right or claim. However, if such right or claim is based on industrial property or other intellectual property, the seller's obligation is governed by article 42 [6].

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [right to goods free from any right or claim of a third party: decisive time for existence of such rights or claims]

The buyer has the right to claim that the goods be free from third party rights or claims. This regards above all rights relating to title (c. note 2) because separate provisions are laid down for intellectual and industrial property (c. Article 42). [page 164]

The decisive time for the existence of third party rights or claims is the time of the delivery of the goods. This follows indirectly from the fact that the seller must deliver goods that are free from such rights or claims and that the buyer may agree to take goods that are not free from such rights or claims (c. also note 5). If the seller delivers goods in regard to which third party claims exist, the buyer can invoke all the rights under Article 45 fol concerning fundamental breach of contract and also the right to avoid the contract pursuant to Article 49.

[2] [the rights and claims included]

The rights and claims under Article 41 include rights of title (reservation of title), rights to possession and possessory and non-possessory pledges. To what extent a third party can exercise its right in title is not regulated by the CISG but by domestic law to be applied according to the Lex rei sitae. It is also domestic law which stipulates whether a buyer may purchase property in good faith because Article 4 excludes property issues from the scope of the Convention. (See also the draft Convention on the Protection of the Bona Fide Purchaser, UNIDROIT 1974, Study XLV - Doc. 55, and the Hague Convention of 15 April 1958.)

The rights of a third party must be able to affect the buyer and infringe upon his property the goods. Therefore, the rights and claims of a third party may also extend to obligatory claims which procure a third party possession of goods, e.g. rent or lease.

Third party rights and claims often include public law restrictions on the use of the goods (see Huber, 501; Welser/Doralt, 114). Honnold (241) counts exports duties and taxes, which must be born by the seller, among such rights and claims. Schlechtriem (63), who attributes legal restrictions, e.g. environmental protection, to Article 35, believes otherwise.

[3] [agreement (waiver) by buyer, express or implied]

The agreement need not be given expressly by the buyer, but it could also be construed if the buyer knows of the rights or claims of the third party, and nevertheless takes the goods without reserving his rights. In this case and in contrast to the buyer's awareness of a lack of conformity relating to quality (Article 35, note 20) and to intellectual property rights of a third party (Article 42, note 9), the buyer must have positive knowledge of such claims.

The buyer may express his consent already at the conclusion of the contract, but he may do so also retroactively, in particular when third party claims on goods become effective only after the conclusion of the contract. Acceptance with knowledge of the defects in title requires an implied agreement (Schlechtriem, 62 fol). Also a notice by the seller of the third party claims and a failure to protest [page 165] by the buyer are to, be considered as implied acceptance (Lüderitz/Freiburg, 187). (Silence is regarded here as agreement.)

The buyer will agree to take goods which are subject to third party rights of title whenever he can foresee that those rights will soon disappear or lapse (e.g. a pledge of the carrier which disappears when the cost of freight is paid).

[4] [third party claims as well as third party rights]

While usually only third parties rights are referred to, i.e. existing rights, the CISG also includes claims by third parties, and supposed claims for which there is no legal basis in reality. (Frivolous or vexatious claims would not be sufficient in the view of Schlechtriem, 63 fol). Unjustified claims may hinder the buyer in exercising his rights, and even unjustified third party claims can be asserted before a court (even if the third party claimant has no chance of winning); which may cost the buyer time and cause him expenses. Therefore, the seller has the duty to refuse and contest such claims and/or, if the buyer had to incur expenses, reimburse the latter (see Honnold, 287 fol; disagreeing Prager, 150).

[5] [right or claim must exist at time when contract concluded]

Third party rights or claims need not exist at the time when the contract is concluded, but definitely at the time of the delivery of the goods. The seller will not be responsible for claims that arise only later. (As to the obligation to give notice compare Article 43.)

[6] [differences between Arts. 41 (third party claims in general) and 42 (third party claims based on industrial or intellectual property)]

6. The differences between Articles 41 and 42 are the following:

	Article 41	Article 42
(a) Existence of a third party right required at the conclusion of the contract	No	Yes
(b) Knowledge of the seller required at the conclusion of the contract	No	Yes
(c) Third party rights	No territorial limits	In the country of destination
(d) Existence or non-existence of third party rights	Seller's responsibility even though rights do not exist (in the case of unjustified claims)	No responsibility of the seller even though rights exist (if the seller has no knowledge or the buyer is aware) [page 166]
(e) Exclusion of seller's responsibility	If buyer agrees	If buyer knows or could not have been unaware