Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 359-362. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
§329 This is the first of three articles addressed to the manner of payment. The modalities for payment include place (the present Article) and time (Arts. 58 & 59).
§330 A. Significance of Place for Payment
In many countries it is impossible to export funds without a license; payment made in such countries may be of little value to a seller from a different country. By the same token, buyers in "soft currency" countries may find it difficult to pay in "hard currency" countries. The parties will usually be keenly aware of this problem so that the contract will specify the place for payment and the currency of payment; the Convention, of course, gives effect to the parties’ agreement, which includes the practices they have established (Arts. 6, 9(1)). When the contract fails to provide an answer the present article fills the gap.
§331 B. The Convention; Policy Considerations
"(1) If the buyer is not bound to pay the price at any other particular place, he must pay it to the seller:
(a) at the seller’s place of business; or
(b) if the payment is to be made against the handing over of the goods or of documents, at the place where the handing over takes place.
"(2) The seller must bear any increase in the expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract."[page 359]
Paragraph (1)(a) points to the "seller’s place of business," a choice that responds to the fact that in some circumstances payment at the buyer’s place of business would be of little value to the seller. The buyer is entitled to goods that are usable (Art. 35(2)(a)); the present Article gives the seller similar protection with respect to the price. The rule that, when the parties have not agreed otherwise, the buyer must pay at the seller’s place of business is consistent with standard contract practices applicable to international trade.
Decisions: Applications of Art. 57(1)(a). AUSTRIA, OGH (Sup. Ct.), 2 Ob 547/93, 10 November 1994. In the absence of agreement, the price was to be paid at seller’s place of business. CLOUT 106, UNILEX D.1994–29. See: Schlechtriem, Com. (1998) 464–469.
Application to Overcharge. FR. CA. Grenoble, 23 October 1996, SCEA Gaec...v. Teso. A French buyer of industrial equipment sued in France to recover an overcharge paid to a German seller. Although CISG Art. 57(1)(a) called for payment at the seller’s place of business, the underlying principle was that payment should be made at the creditor’s place of business, in this case the place of business of the French buyer. UNILEX D. 1996–10. (On jurisdiction for suit, see §332, infra.) See: Schlechtriem, Com. (1998) 466–467 and notes 21–27.
Under Article 57, the only exception from the norm calling for payment at the seller’s place of business is that of subparagraph (1)(b). This exception applies only "if the payment is to be made against the handing [page 360] over of the goods or of documents." If, pursuant to the contract, the seller ships the goods to the buyer and in the buyer’s country tenders documents controlling the goods, this contractual arrangement overrides the general rule of paragraph (1)(a) that the buyer must pay "at the seller’s place of business." Accord: Maskow, B–B Commentary 413.
Article 58, infra, in defining the time for payment, provides in paragraph (2) that "the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price." As we shall see, this provision permits but does not require the seller to arrange for the payment only after arrival of the goods. See Art. 58, infra at §§336–337.
Whether a transport document (bill of lading, waybill or the like) controls disposition of the goods depends on its terms: Does the carrier contract to deliver to the seller, to the order of the seller or to the buyer (§336, infra)? Similar principles govern delivery of goods by handing over a warehouse receipt or similar document evidencing possession by a third party.
When the contract does not specify the place (or other arrangements) for payment, the seller’s expectations will usually be indicated by the invoice that the seller sends to the buyer at the time the seller ships the goods; in many cases the buyer’s subsequent communications or conduct will show its assent to this term (Arts. 8(3), 18, 29). If there is no indication of the buyer’s assent the invoice will authorize the buyer to pay in accordance with the terms of the invoice but will not require the buyer to pay in a manner inconsistent with the contract or the provisions of the Convention. See Sevón, Dubrovnik Lectures 212.
When payment is to be made by a letter of credit the contract may (and the letter of credit almost certainly will) refer to the I.C.C. Uniform Customs and Practice for Documentary Credits (I.C.C. Brochure No. 400, 1984; where payment is to be made through banks the contract may refer to the I.C.C. Uniform Rules for Collections. See Maskow, B-B Commentary 416–418; Schmitthoff’s Essays 449–467. Note: UNCITRAL Model Law on International Credit Transfers (1992) and UNCITRAL Model Law on Electric Commerce (1996). Cf. (U.S.A.) Uniform Commercial Code, Article 4A, Funds Transfers (1989).[page 361]
Concern has been expressed lest the Convention’s rule calling for payment at the seller’s place of business might, under some procedural systems, also determine the place where suit must be brought—a result that might be impractical since the seller usually needs to sue for the price at the buyer’s place of business.
Article 4 states that (apart from formation of the contract) the Convention "governs only...the rights and obligations of the seller and the buyer" under the sales contract. This language hardly supports the extension of the Convention to procedural and jurisdictional matters, and the legislative history gave no indication that the Convention was designed to deal with these issues. In United States law there is no necessary connection between the place for payment and the place for suit. Construing the Convention to produce this result would broaden the Convention’s scope beyond that provided in Article 4, §§61–70, supra; inferring a rule on jurisdiction in some Contracting States would be inconsistent with Article 7(1) which calls for interpretation of the Convention "to promote uniformity in its application."
As was noted at Article 31, supra, jurisdiction for suit may be controlled by important Conventions, such as the EC Convention on Jurisdiction...(Brussels, 1968) and the 1988 Lugano Convention on Jurisdiction and Enforcement of Judgments. An example of the latter: SWITZ. SBG (Sup. Ct.), 18 January 1996. A Swiss seller sued an Italian buyer to recover the price of an antipollution device. To determine its jurisdiction, the court invoked CISG Art. 57(1)(a) (payment at S’s place of business) rather than Art. 57(1)(b) (payment against delivery of goods or documents). This decision supported jurisdiction in S’s country (Switzerland) under the 1988 Lugano Convention. UNILEX D. 1996–0.1, CLOUT 194.[page 362]
FOOTNOTES: Chapter on Article 57
1. Art. 57 is the same as Art. 53 of the 1978 Draft and is substantially the same as ULIS 59. See V YB 81–83 (S–G), 31–32, VIII YB 49, O.R. 79 (proposals), 45–46 (Sec. Comm.), 368–369, 112; Docy. Hist. 160–162, 177–178, 342, 400, 435–436, 589–590, 694.
2. If the seller has two places of business or has no place of business, the reference point is supplied by Art. 10, §§42, 123, supra.
3. Comparable policies are reflected in the general rule that unless the seller has agreed to extend credit, the buyer must pay at the time he receives control of the goods. See Art. 58(1), infra at §335; Brand, Pittsburgh Symposium (1988) 170–186.
4. General Conditions (ECE) Dry and Dried Fruit (1979) 39(c): "Unless otherwise agreed, the place of payment shall be that where the seller has his principal place of business...." (Other ECE contracts in the series and General Conditions (ECE) Plant and Machinery state that payment shall be as "agreed by the parties"): The Asian-African Legal Consultative Committee (AALCC), Standard Form of F.O.B. Contract, Part VII at 3–5, indicates payment in the seller’s country by calling for payment by a "confirmed...letter of credit" in exchange for a bill of lading. See Art. 58, infra at §337.
Domestic law; Fridman 283 at n.33 & 34; German (F.R.G.) Civil Code 270(1): "In case of doubt the debtor shall remit money at his own risk and expense to the residence of the creditor." (U.S.A.) UCC 2–310(a) and Swedish Sales Act 15 seem to respond to domestic conditions by calling for dispatch of the goods with payment for the goods at the point of receipt (destination).
5. See e.g., Huber, 43 Rabels Z 413, 512 (1979). If the plaintiff does not obtain a judgment at the place where the defendant has assets, the plaintiff may face the problem of obtaining recognition of the judgment in a second State.
6. O.R. 368–369, Docy. Hist. 589–590. But cf. Schlechtriem, 1986 Commentary 82 at note 325 (buyers should "seek a more favorable choice-of-forum clause in the contract.")