[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]
I. Internationality under Article 1
52. As a starting point, the Convention applies in cases falling within one of the two categories set forth in Article 1, paragraph 1, subparagraphs (a) and (b):
A. Parties' Places of Business in Different Contracting States
53. Common to subparagraphs (1)(a) and (1)(b) is the requirement that the sales contract in question be 'international', i.e., a sale between parties whose places of business are in 'different States'. This is the (always) necessary - but in itself insufficient - condition for the application of the Convention by virtue of the main Article 1(1) rule. If a party has more than one 'place of business', reference should be made to Article 10 (infra No. 91).
If, in a given situation, the different States in which the parties reside happen to be CISG Contracting States (States which have acceded to the Convention), then the Convention applies by virtue of subparagraph (1)(a). For example, if a contract for the sale of wine is entered into in January 2000 between a seller in France and a buyer in California (France and the United States being different Contracting States), both French and American courts are bound by Article 1(1)(a) of the treaty to apply the CISG as the gap-filling regime. In this situation, the Convention [page 33] applies without any recourse to rules of private international law; indeed, in this situation there is no conflict between the domestic sales laws of the US and France.
It should be noted in this context that the Scandinavian States (Denmark, Finland, Norway and Sweden) have all made Article 92 declarations; the limited effect of these declarations is that - in respect to matters governed by CISG Part II (Formation of Contract) - the Scandinavian States are not Contracting States within Article 1(1)(a).
B. Convention Application by Private International Law
54. Subparagraph (l)(b) of Article 1 becomes relevant when the subparagraph (l)(a) criterion is not met, i.e. when one or both parties to the contract do not reside in CISG Contracting States.
For example, if a contract for the sale of wine is made in January 2000 between a seller in France and a buyer in England, French courts would not be bound by Article l(l)(a) to apply the CISG as the gap-filling regime: the contract is of course between parties residing in different States, but because England (as of January 2000) is still not a CISG Contracting State, the different States concerned are not different 'Contracting States'. (Of course, English courts are not bound to apply the Convention either.) But the Convention becomes applicable nonetheless - at least in a French court - if the applicable rules of private international law (i.e., the choice of law or conflict of laws rules of the forum court) lead to the application of the law of a (single) Contracting State.
(Note that although Article l(l)(b) functions on the basis of such private international law (PIL) rules, the l(l)(b) rule is not itself a conflict of laws rule. Rather, Article 1(1)(b) corresponds to a domestic rule which, e.g. might help a French court decide whether to apply the rules which apply to domestic consumer sales or those which apply to domestic sales between merchants.)[l] [page 34]
To continue with the example set forth above (a year-2000 contract for the sale of wine between a seller in France and a buyer in England), French courts are bound to apply the CISG Convention if the applicable French PIL rule leads to the application of 'French law' (the law of 'a' Contracting State). And indeed, this would seem to be the likely result, since France is a party to the 1955 Hague Convention on the Law Applicable to International Sales of Goods, and since the main choice-of-law default rule under this 1955 Convention is that the 'seller's law' (in this case: the law of France) applies; therefore, we would expect a French court to conclude that the Convention applies by virtue of subparagraph (1)(b) of Article 1.
As previously noted, the Scandinavian States (Denmark, Finland, Norway and Sweden) have all made Article 92 declarations with respect to CISG Part II, but these declarations do not affect the obligation of the Scandinavian States to apply the rule in CISG Article 1(1)(b), and this can lead to the application of CISG Part II, even in cases where one party resides in a Scandinavian State.
C. Article 95 Declaration
55. The 'private international law' rule in Article 1(1)(b) was not embraced by all those involved in the drafting of the CISG. This led to the declaration set forth in Article 95, whereby a Contracting State may declare that it will not be bound by subparagraph (1)(b) of Article 1 of the Convention. Thus far (as of December 1999), China, Czechoslovakia, Singapore and the United States have availed themselves of this declaration.
In cases where only one party resides in a Contracting State, the courts in these Article 95 countries will apply (not Article 1(1)(b), but) the forum state's rules of private international law to select the applicable sales law, although it is still possible that this process will lead to the application of the CISG.
It should also be noted that a Contracting State which has not made an Article 95 declaration should not apply Article 1(1)(b) in respect of any Contracting State that has made an Article 95 declaration.
D. Parties in Different States: Disregarded in Exceptional Cases
56. The 'internationality' element, common to both subparagraph (l)(a) and (l)(b) situations, is that the parties to the contract have their places of business in different States. However, paragraph 2 of Article 1 creates an exception to the general rule:
If the parties concerned neither know nor ought to know that they reside in different States, they have no reason to know that the contract which they enter is 'international;' in such event they should hardly expect the CISG to be the applicable law. So in this case, it will be appropriate to 'disregard' the fact that the parties actually do reside in different States. By disregarding this fact, and thus the criterion common to the application of subparagraphs (l)(a) and (l)(b), a court would reach the result that the Convention does not apply to the transaction concerned.
E. Irrelevant Factors: Nationality, Civil-Commercial
57. Whereas paragraph 2 of Article 1 may be said to narrow the application of the Convention, paragraph 3 was designed to function as a non-restricting kind of rule. This provision provides:
Because the Convention applies in international situations, i.e. where the parties have their places of business in different States, the contracts in question will usually be 'commercial' in nature, in that both parties to the contract are likely to be 'merchants' in the usual sense. But this need not be the case for the Convention to apply, and the fact that the civil-commercial distinction is relevant in some domestic systems is of no significance as regards the applicability of the CISG. What is relevant in this connection, and as developed more fully below, is that most 'consumer'-type transactions are excluded from the Convention sphere by virtue of Article 2(a). [page 36]
II. Transaction Must Be a 'Sale' of 'Goods' Within Articles 1-3
A. Article 1: Sales, Goods (e.g., Computer Software) etc.
58. Article 1 makes it clear that the Convention rules apply only to 'sales of goods' (contrats de vente de marchandises). Apart from the fact that Articles 2 and 3 expressly exclude some transactions which might otherwise fall within this category, the CISG text does not contain any definition of the term 'sale' or of the term 'goods'.
Clearly, both these key Convention terms must be given an 'autonomous' interpretation, but we need not blind ourselves to a few basic notions widely accepted under domestic law, for example, the fact that a contract for the distribution of goods is not a contract of 'sale'.
By the same token, the term 'goods' (marchandises) is usually equated with 'things' (or - somewhat less appropriately - 'objects'), and it would seem that the subject of an international sale must be a moveable thing, i.e., a thing which can be transferred (from one place to another) by a carrier or other medium, although not necessarily by a 'physical' medium. Clearly, (immovable) real property lies outside the concept of a moveable thing, just as 'know-how' and 'goodwill' have little or no link with the generally accepted notion of goods.
Looking beyond these inherent restrictions, however, there is good reason to understand the CISG notion as broadly as possible, so as to cover all moveable and not just 'corporeal' - things. For this and other reasons, most commentators argue that the Convention should at least apply to sales of standard computer programs (software), even though the intangible content of a tangible (compact or floppy) disk is protected by an intangible property right. Indeed, even when computer programs are sold/downloaded over the Internet (i.e., when the programs are not even embodied in a tangible medium), the CISG default rules seem well-suited to regulate the parties' obligations and remedies for breach. And although some have maintained that contracts for the delivery of non-standard programs should be held to lie outside the CISG scope, the arguments presented for such a distinction do not appear convincing, in that the CISG expressly equates contracts for the supply of goods to be manufactured or produced with contracts for the sale of finished goods, and since the relationship between the value of the physical elements embodied in the particular good (e.g., the floppy disk which carries the program) and the value of the technology or information needed to manufacture or process the good seems irrelevant. If, on the other hand, the service element in a given mixed (sales/service) transaction - e.g., the supplier's post-delivery obligation to perform maintenance on the computer system sold under the same contract - is found to predominate the transaction (taken as a whole), then Article 3(2) will ensure that the (whole) contract is removed from the CISG scope. [page 37]