Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 271-274. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§ 249 A. Significance of the Time for Examination
Article 38 provides rules on how soon the buyer "must examine" the goods. These rules are given legal effect by other provisions: Article 39(1) cuts off the buyer’s rights if it fails to notify the seller of a non-conformity within a reasonable time after the buyer "ought to have discovered" it. (Cf. Art. 44, infra at §254.) Under Article 49(2)(b) the buyer loses its right to avoid the contract a reasonable time after it "knew or ought to have known of the breach." Under these provisions Article 38 is important in fixing the time when the buyer ought to have discovered the defect.
"(1) The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.
"(2) If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination.
"(3) If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination."
§ 250 B. Legislative Background: ULIS
The 1964 Hague Convention on Sales (ULIS 38) stated rules on the time for examination that proved to be too rigid. Their most serious flaw was the requirement that the buyer must examine the goods at the place of "destination" unless the goods were redispatched " without transshipment." When a buyer purchases goods in sealed cans or cartons for resale in chain transactions employing containerized transport and, in general, whenever efficient [page 271] distribution calls for rapid transshipment of large quantities of goods, there would be no practical opportunity to inspect the goods (as ULIS required) at the initial terminal. As a result, the buyer’s time for giving notice of defects could expire and the buyer could be deprived of its rights before it had a fair opportunity to discover the defect. Efforts were made at the 1964 Hague Conference to correct the problem but to no avail. In the UNCITRAL proceedings it was possible to make the rules on examination of goods more flexible and consistent with current commercial practices.
§ 251 C. Time for Examination under Article 38
The heart of the change made in preparing the 1980 Convention was to delay the time for inspection (and the running of the time for notice) during the time consumed in transportation following the "redirection in transit" or "redispatch," if the seller knew (or ought to have known) of this "possibility."
All of Article 38 is subject to the standard set forth in paragraph (1): The examination must be made "within as short a period as is practicable in the circumstances." This standard was designed to stress the importance of timely inspection, a necessary step towards the timely notification of defects required by Article 39, infra. Timely notice may be needed to enable the seller to take samples or take other steps to preserve evidence of the condition of the goods. In some cases timely notice may enable the seller to cure defects (Arts. 37, 48) or make a price allowance or other adjustment to meet the buyer’s complaint. See also §255, infra.
The phrase "as short a period as is practicable in the circumstances" embodies nuanced responses to the interests of both parties. ULIS 38(1) stated that the buyer "shall examine the goods... promptly "—a standard that might not permit consideration of circumstances that would require delay. (See §250, supra, and the legislative history collected in [page 272] notes 2 and 5.) On the other hand, it was concluded that the need for inspection called for greater urgency than was suggested by the "reasonable" time standard established in many other provisions. See Arts. 33(c), 39(1), 43(1), 47(1), 48(2), 49(2), 63(1), 64(2)(b), 65, 75, 79(4), 88(1). Where extreme urgency is required and is feasible the Convention calls for "immediate" action: Under Art. 71(1) a party suspending performance "must immediately" give notice of the suspension. Setting a rigid time limit for inspection (6 days, 2 weeks) is, of course, impractical; the most that a law can do is to call for action "within as short a period as is practical in the circumstances".
Local standards. Another step towards flexibility was the omission of ULIS 38(4) which stated that, in the absence of agreement, methods of examination were governed "by the law or usage of the place where the examination is to be effected." This provision was omitted because of concern that it might invoke practices designed for local transactions in contrast to practices and usages applicable to international trade. See Article 9, §§112-122, supra: "usage...in international trade".
Example 38A. A sales contract called for the delivery to Buyer of 500 gallon cans of chlorine in sealed metal containers; when the seal is broken the chlorine must be used promptly or it will evaporate. On June 1 a shipment under this contract was delivered to Buyer. Buyer stored the containers in his warehouse without counting the number of cans or testing the contents. On September 1 Buyer notified Seller that he had just opened the containers to use the chlorine in his chemical processes, and found that there were only 400 containers, and that 200 contained chlorine that did not meet the contract specifications.
In these circumstances, one might well conclude that Buyer failed to check the number of cans within the required period but that the contents were examined as soon as "was practicable in the circumstances."
The general standard of practicability set forth in paragraph (1) remains applicable under paragraph (2) when the contract involves carriage of the goods. The fact that in such transactions the risk of loss normally shifts to the buyer under Article 67(1) "when the goods are [page 273] handed over to the first carrier" (§§363-367 infra) is irrelevant; in the absence of agreement to the contrary (Art. 6), Article 38(2) defers the examination "until after the goods have arrived at their destination". The basic rule of "practicality" in Article 38(1), the language of Article 38(2) and the legislative history all reject rules that turn on risk in transit and technical concepts such as an "agency" status of the carrier.
Decisions on Timeliness: Examination was Timely. (1) GER. LG Düsseldorf, 31 O 231/94, 23 June 1994. Delay in examination and notice was reasonable, since machinery had to be set up for testing. UNILEX D.1994-16. (2) Redispatch: GER. OLG Köln, 22 U 202/93, 22 February 1994. Delay reasonable since redispatch before examination was expected. UNILEX 1994-6, CLOUT 120.
Examination not Timely: B’s Claim of Non-conformity Rejected. (1) GER. LG Duisburg, 14 (19) O 80/94, 17 April 1996. Examination and notice of defects in textiles: not in as short a time as was available. UNILEX D. 1996-5. (2) NETH. Rb Roermond, U-1991-14, 19 December 1991. Although cheese was frozen, sample could have been thawed for inspection. UNILEX D. 1991-14. (3) SWITZ. Pr. Locarno, 6252, 27 April 1992. Defects in furniture easy to discover; inspection should have been made on delivery. UNILEX D.1992-10. (4) GER. OLG Saarbrücken, 1 U 69/92, 13 January 1993. B’s storing goods in warehouse for resale does not invoke redispatch exception under Art. 38(3); claim of defects rejected. UNILEX D. 1993-2.1. (5) SWITZ. OG Luzern, 11 95 123/357, 8 January 1997. Delay in inspection and notification based on redispatch of medical devices (Arts. 38(3), 39) led to loss of claim for defects; B had redispatched only a small quantity of delivered goods. The court noted the variations in the periods for notification allowed in different jurisdictions: German—short, e.g., eight days after discovery, compared with Anglo-American and Dutch—sometimes several months. The court settled on a compromise: one month after delivery. UNILEX D.1997-2, CLOUT 192.
See also: Bonell/Ligouri, ULR (1996-2) 360-362, (1997-3) 592–593; Schlechtriem, Com. (1998) 303–308.[page 274]
FOOTNOTES: Chapter on Article 38
1. This article is the same as Art. 36 of the 1978 Draft, except for the addition in paragraph (3) of references to "redirection" of goods in transit. Cf. ULIS 38, discussed infra at §250.
2. II Records 1964 Conf. 306; Honnold, ULIS: The Hague Convention of 1964, 30 Law & Contemp. Pr. 326, 346–347 (1965). Accord: Bianca in B-B Commentary 295. The UNCITRAL proceedings: I YB 185–186, Docy. Hist. 23–24; Rep. S-G., IV YB 47, Docy. Hist. 124.
3. Compare Schlechtriem, 1986 Commentary 69, citing Huber, 43 Rabels Zeitschrift 413 at 482 (regretting deletion of ULIS 38(4) with Bianca, B-B Commentary §2.3, pp. 297-298 (approving deletion).
4. This discussion does not address the issue that arises under Art. 39, infra at §254: Was the delay of three months in notifying the seller more than a "reasonable time" after Buyer "ought to have discovered" the non-conformity as to quantity (Art. 35(1))? Even if more than a "reasonable time" expired, Art. 44, infra at §254, permits the buyer to "reduce the price...or claim damages, except for loss of profit, if he has a reasonable excuse" for failure to give the required notice. The buyer’s duty to examine imposed by Art. 38 must, of course, be sharply distinguished from the buyer’s privilege to examine the goods before it pays (Art. 58).
5. For the legislative history see: WG: 1 YB 185–186, 197; S-G IV YB 47; WG VI YB 66, 76; S-G VI YB 99, 112–113; WG VI 55; Docy. Hist. 23–24, 35, 124, 144, 154, 224, 237–238, 246. UNCITRAL; VIII YB 39–40, Docy. Hist. 332–333; S-G Commy. O.R. 34, Docy. Hist. 424 (risk of loss irrelevant) DIPL. CONF.: 1st Comm. O.R. 320, 427, 106–107, Docy. Hist. 541, 648, 678–679; Plenary, O.R. 208, Docy. Hist. 743.