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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

[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).]

excerpt from

The 1980 United Nations Convention on Contracts
for the International Sale of Goods

Joseph Lookofsky

Article 35
Conformity of the Goods

A. Conformity of the Goods
B. Distinction Between Contractual and Delictual Claims
C. Conformity with Express Contractual Requirements (Description, Guarantee, Etc.)
D. Supplementary Convention Obligations
      1. Introduction: Implied Obligations, Express Disclaimers, Etc.
      2. Fitness for Ordinary Purpose
      3. Fitness for Particular Purpose
      4. Conditions and Warranties Under Domestic Law Distinguished
      5. Sample or Model: Packaging
E. Seller’s Knowledge of Defect Irrelevant
F. Caveat Emptor and Pre-Contractual Inspection of Goods
G. Disclaimer and Limitation of Liability
      1. Introduction
      2. Incorporation of Disclaimer
      3. Interpretation of Disclaimer
      4. Validity of Disclaimer
      5. Examples of Application of Domestic Validity Rules
      6. Validity v. Substance
      7. Convention as Validity ‘Yardstick’

A. Conformity of the Goods

161. A substantial portion of all sales litigation relates to claims by buyers that the goods are in some sense 'defective', i.e., in that they do not conform to that which has been agreed. As regards international sales subject to the CISG, Article 35 lays down the supplementary rules.

B. Distinction Between Contractual and Delictual Claims

162. Before proceeding to examine the important rules laid down in Article 35, it should again be emphasized that the Convention governs only contractual rights.[1] Depending on the circumstances in the particular case, the forum court may find that certain domestic law rules providing remedies for the breach of non-contractual duties can supplement - and complicate - the international regime.[2]

For example, even in a case where a seller cannot be said to have assumed (or breached) any contractual (promissory) commitment in the Article 35 sense, the applicable domestic law of tort (delict) might still provide the buyer with damages for losses suffered by reason of reliance on negligent misrepresentation,[3] just as the buyer's claim for rescission arising by reason of a fraudulent misrepresentation regarding the quality of the goods could serve to supplement the CISG avoidance [page 88] rules.[4] Similarly, courts might allow a 'product liability' claim grounded in domestic rules of tort (negligence) to 'compete' with a CISG claim for damages grounded in the seller's no-fault liability for damage to buyer's property when the seller has delivered non-conforming goods.[5]

1. Re. Article 4 see supra No. 62 et seq.
2. Supra No. 65.
3. Professor Honnold (Uniform Law (1999) at 254) [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>] states that earlier 'technical distinctions', e.g. between 'promises' and 'representations' have been 'softened' by more recent case law. With utmost respect, it would seem that the Howard Marine case, [1978] Q.B. 574, cited by Honnold (at id. with note 7) to support his position, clings with a vengeance to these very distinctions. In Howard Marine the English Court of Appeal, by a 2-1 majority, found for the lessee of the barge, as the misrepresenting lessor failed to carry his (reversed) burden of proof on the negligence issue pursuant to the Misrepresentation Act 1967. Also in American tort law, the 'tendency is clearly to treat the misrepresentation action as a separate matter from the contract': see Prosser and Keeton, Law of Torts (St. Paul 1984) at pp. 763-764. The basis of liability is sometimes fraud, sometimes negligence, sometimes strict: id. § 107. Re. the measure of damages see id. at p. 768 and the Restatement (Second) of Torts §552C. Regarding Danish case law see Lookofsky, J., Consequential Damages in Comparative Context (1989) at p. 159, discussing the case reported in Ugeskriftfor Retsvæsen 1977.876 V.L.D. (pre-contractual misrepresentation re. rate of investment return; reliance interest damages - though presumably appropriate - denied as undocumented in the concrete case); see also Nørregaard, J., in Ugeskrift for Retsvæsen (1978) at pp. 281-282 and Lynge Andersen, et. al., Aftaler and mellemmoend (Copenhagen 1987) at pp. 149-150.
4. See supra No. 63 with note 9.
5. See generally supra No. 69.

C. Conformity With Express Contractual Requirements (Description, Guarantee, etc.)

163. The Convention, to repeat, is concerned with contractual claims. According to Article 35(1):

'The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.'

Paragraph (1) of Article 35 is a specific - though perhaps somewhat redundant - 'restatement' of the familiar principle whereby the obligations of the parties to a CISG contract are, in the first instance, defined by their own agreement.[1]

In one simple yet illustrative CISG case,[2] a Turkish company had promised to deliver 1,000 tons of fresh cucumbers to a buyer doing business in Germany, but the seller allegedly delivered less than that amount. Since the CISG applied, the seller was obligated to deliver goods of the quantity required by the contract, and so delivery of less than 1,000 tons constituted a contractual breach.[3]

Another illustration of the Article 35(1) principle involved a German seller's obligation to sell steel bars in lots to a Syrian buyer.[4] The contract expressly permitted a weight variation of 5 per cent, but some of the bars delivered fell outside this range, so the seller was held to have breached its obligation to deliver steel bars which, as of the passing of risk, conformed to the quality and description required [page 89] by the contract.[5]

Since Article 35(1) requires that the seller (always) deliver goods of the quality and description 'required by the contract', the seller must, inter alia, deliver goods which conform with an express (contractual) guarantee - e.g. if the seller 'guarantees' that the goods sold (a machine) will run for a 'minimum of 10,000 working hours'. Indeed, for purposes of Article 35(1), there may be little difference between such a performance 'guarantee' and the seller's mere 'description' of the performance-characteristics of the goods.[6]

On the other hand, an agreement as to quality within the purview of Article 35(1) need not take the form of express words. If, prior to the conclusion of a contract for the sale of marble, the buyer provides the seller with a 'model' marble slab, thus indicating the buyer's expectations, and the seller does not indicate his unwillingness or inability to deliver goods of that kind, then the characteristics of the slab will impliedly become part and parcel of parties' contract under Article 35(1), i.e., their (implied) agreement with respect to the quality of the goods.[7]

1. Re. Article 6, see supra No. 70 et seq.
2. See the decision of Oberlandesgericht Düsseldorf, 8 January 1993, published in German in RIW 1993, 325 and IPRax 1993, 412; also reported in [at <http://cisgw3.law.pace.edu/cases/930108g1.html> and] UNILEX.
3. However, since timely notice of non-conformity was not given pursuant to Articles 38(1) and 39(1), the buyer lost the right to rely on the alleged breach. Re. this aspect of the case see infra Nos. 186 et seq.
4. ICC case No. 6653/1993, published in French, with a commentary by Arnaldez, in 4 Journal du droit international 1040, 1047 (1993); also reported [at <http://cisgw3.law.pace.edu/cases/936653i1.html> and] in UNILEX.
5. The conformity determination is usually made as of the passing of risk, even though the lack of conformity first becomes apparent at a later point in time: regarding Article 36, see infra No. 179 et seq.
6. For this reason, it is difficult to see the need for the 'special' guarantee rule set forth in paragraph (2) of Article 36: see infra No. 181. In any case, an express 'guarantee' with respect to durability (etc.) may be significant if interpreted as a contractual deviation from the usual 2-year period in paragraph (2) of Article 39: see infra No. 194.
7. See the decision of OLG Graz (Austria), 9 November 1995, reported [at <http://cisgw3.law.pace.edu/cases/951109a3.html> and] in UNILEX. As noted in the decision, the same result can be reached by analogy with Article 35(2)(c), a rule directly applicable where the seller provides the sample or model: see infra No. 169.

D. Supplementary Convention Obligations

1. Introduction: Implied Obligations, Express Disclaimers, etc.

164. Paragraph (2) of Article 35 sets forth a series of four implied obligations as to the quality of the goods which the Convention, as a starting point, imposes on every CISG seller. As under most modern domestic rule-sets, so too under the CISG: caveat emptor ('let the buyer beware') is no longer the supplementary rule, because today's international buyer is entitled to expect the goods to possess certain basic qualities, even if the contract does not expressly so state.[l] Indeed, it would seem that caveat venditor has become the supplementary CISG rule.[2]

Before proceeding to discuss the significant impact of the individual implied obligations set forth in Article 35(2), however, it should be noted that these duties are not to be implied in cases where the parties have (validly) 'agreed otherwise'. [page 90] That is to say, an express ('caveat emptor') provision in the contract - e.g. whereby the seller 'undertakes no obligations whatsoever in respect of the goods fitness for ordinary and/or particular purposes' - will serve to displace (negate) the obligations otherwise implied by subparagraphs (a) and (b) of Article 35(2), provided that the express provision (disclaimer etc.) is valid under the applicable domestic rules of law.[3]

1. See Secretariat Commentary, Comment 13 at 94 (re. Article 33 of the 1978 Draft).
2. Although the Convention does not obligate the buyer to undertake a pre-contractua1 inspection of the goods, a limited caveat emptor-type exception applies under Article 35(3): see infra No. 171.
3. See supra Nos. 63 and 72 and infra Nos. 172 et seq.

2. Fitness for Ordinary Purposes

165. Subparagraphs (a) and (b) of Article 35(2) contain the implied obligations which are of greatest practical importance:

'2. Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: a) are fit for the purposes for which goods of the same description would ordinarily be used;
b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement ...'

As regards the first test of non-conformity - set forth in subparagraph (a) - it may be noted that goods often are ordered by denotation of their general description, i.e., without any indication to the seller as to the buyer's particular purpose (intended special use).[1] In such cases, subparagraph (1)(a) will be especially relevant, since (absent agreement to the contrary), the seller always (automatically) undertakes an implied obligation that the goods sold will - at the minimum - be fit for the purposes for which goods of the same description would ordinarily be used. For this reason, the highest French court has held that ceramic 'ovenware' which was not resistant to high oven temperatures was not fit for ordinary (baking) purposes.[2]

Within the context of international trade, resale must be considered an 'ordinary' use,[3] so a CISG buyer who purchases for resale is entitled to expect goods which are resaleable in the ordinary course of business. What is resaleable will then depend upon the reasonable expectations of the ultimate purchasers. If, for example, a furniture merchant purchases sofas for resale to consumers, the goods are not fit for ordinary purposes if the cushions slide forward when the consumers sit down.[4]

When it comes to (perishable) food products, consumption by (ordinary) consumers must of course be considered an ordinary purpose (use). Ordinary does not mean 'perfect', however, and the German Supreme Court (BGH) has held that New [page 91] Zealand mussels sold by a Swiss seller to a German buyer were fit for 'ordinary' purposes, notwithstanding the fact that the mussels delivered contained cadmium at a level higher than that recommended by the German Federal Department of Health;[5] indeed, the quality requirements imposed by public law in the buyer's country are not even relevant in the context of Article 35(2) unless the seller had good 'reason to know' of their existence.[6] In another German case, for example, the delivery of goods (paprika) not complying with the minimum standards of German public law constituted a breach of the seller's implied obligations under Article 35(1).[7]

The kind of goods which are sometimes described as 'durable' goods (washing machines, industrial machinery, automobiles, etc.) are not fit for their 'ordinary' purposes unless they remain durable (usable) for an 'ordinary' period of time. A (new) refrigerator with a life-span of only a few weeks or months of use would clearly not be fit for the ordinary purposes to which refrigerators are usually put (long-term use). The precise period is, of course, a difficult determination which will vary depending on the nature of the particular goods, and the CISG could not be expected to provide guidance on this point.[8]

1. See A/CONF./97/5, Secretariat's Commentary to Article 33 of the 1978 Draft Convention.
2. See the decision of the French Cour de Cassation, 17 December 1996, CLOUT Case 206, also reported [at <http://cisgw3.law.pace.edu/cases/961217f1.html> and] in UNILEX.
3. See A/CONF./97/5, Secretariat's Commentary to Article 33 of the 1978 Draft Convention.
4. See the decision of Pretura della giurisdizione di Locamo-Campagna, Switzerland, 27 April 1992, reported [at <http://cisgw3.law.pace.edu/cases/920427s1.html> and] in UNILEX. In this case, however, the buyer lost the right to rely on the non-conformity because of failure to provide timely notification under Article 39: see infra No. 186 et seq.
5. See BGH, 8 March 1995, affirming the decision of OLG Frankfurt am Main, 20 April 94, RIW 1994, 593, CLOUT case 84 (A/CN.9/SER.C/ABSTRACTS/6/Corr. 1), also in UNILEX and [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>]. Significantly, the cadmium in the mussels delivered would pose a risk only to persons who consumed great quantities. Moreover, the maximum level fixed by the Department was the subject of a recommendation, as opposed to a binding directive. In its decision, the OLG had emphasized, inter alia, that a Canadian proposal to amend the Article 35 conformity definition so as to require the delivery of 'average quality' goods was rejected by the drafters of the eISG. The BGH, however, left open the question of whether the goods must be of 'average' quality or merely 'merchantable' under Article, since the buyer had not established (in the court below) that the mussels delivered contained more cadmium than New Zealand mussels in general. For a commentary, see Schlechtriem in IPRax 1996 at 12. Regarding 'reason to know' of administrative agency standards under American domestic law, compare White & Summers, Uniform Commercial Code §9-8 with note 26.
6. Id. See also Medical Marketing International Inc. v. Internazionale Medico Scientifica S.r.l., 1999 WL 311945 (ED. La.), 1999 US Dist LEXIS 7380, also reported [at <http://cisgw3.law.pace.edu/cases/990517u1.html> and] in UNILEX: the medical equipment supplied by the Italian seller did not comply with American public law; citing (and distinguishing) the 1995 BGH decision (see preceding note), the arbitrators found that, due to special circumstances, the seller knew or should have known of the regulations at issue.
7. See the decision of LG Ellwangen, 21 August 1995, reported [at <http://cisgw3.law.pace.edu/cases/950821g2.html> and] in UNILEX (court emphasized parties' prior commercial dealings).
8. See also infra Nos. 180-181.
[page 92]

3. Fitness for Particular Purposes

166. Prior to the conclusion of the contract, the seller may have been made aware of the particular purpose to which the goods will be put. If so, the seller assumes an implied obligation under Article 35(2)(b) that the goods are fit for such purpose, in that the buyer may reasonably rely on the seller's skill and judgment in this respect.

In one relevant example, a French seller and a Portuguese buyer had concluded a contract for the sale and dismantlement of a second-hand aircraft hangar. The French court held that the seller had breached the contract by delivering certain elements which were not fit for the particular purpose which the buyer had made known to the seller (reassembling of the hangar the same way as it was originally assembled). In this case, once the buyer's particular purpose was made known to the seller, the buyer was entitled to expect goods fit for that purpose.[1]

In other cases, however, where the buyer either does not make his particular purpose known, or does not rely on the seller's skill and judgment, or if it is unreasonable for the buyer to so rely, no "obligation as to fitness for the buyer's particular purpose will be implied.

1. See the decision of Cour d'Appel de Grenoble, Chambre Commerciale, 26 April 1995, reported [at <http://cisgw3.law.pace.edu/cases/950426f2.html> and] in UNILEX.

167. In many cases, the implied obligations set forth in subparagraphs (l)(a) and (l)(b) will overlap: a given buyer's particular purpose may well correspond to the purpose such goods are generally put. If so, any failure to comply with the 'reasonable reliance' test in subparagraph (l)(b) will be inconsequential as regards the establishment of a contractual breach in relation to subparagraph (l)(a).

4. Conditions and Warranties Under Domestic Law Distinguished

168. The implied Convention obligations set forth in subparagraphs (l)(a) and (l)(b) clearly resemble the obligation to supply what Common lawyers call (a) 'merchantable' goods and (b) goods 'fit for the purpose.' But, in contrast with the corresponding English and American rules, the CISG subsumes the delivery of unfit-for-purpose goods under the heading of goods which do 'not conform' with the contract. And since the CISG seller cannot be said to have breached a 'condition' or 'warranty' (in the Common law sense),[1] no remedial consequences can be deduced solely on the basis of the quality implications of Article 35.[2]

1. Such Common law terminology is foreign to the Convention. Regarding 'implied conditions' (now, outside England, referred to as 'implied terms') see the Sale of Goods Act UK, §§ll ff, and compare the corresponding 'implied warranties' in the American UCC §§2-313, 2-314, and 2-315.
2. Regarding the buyer's right to recover damages for seller's non-conforming delivery, see infra No. 208 et seq.; re. the right to avoid in the event of such breach see infra Nos. 225 et seq. As already indicated (supra No. 64), the Convention addresses only inter partes problems: thus, CISG Article 35 regarding conformity of the goods displaces, e.g. an American seller's warranties vis-à-vis his buyer, but the Convention contains no counterpart to UCC §2-318.
[page 93]

5. Sample or Model; Packaging

169. Article 35, subparagraph (l)(c) imposes a further obligation upon the seller regarding conformity to the 'qualities of goods which the seller has held out to the buyer as a sample or model'. By virtue of this - somewhat redundant - CISG provision, if a seller of computer software provides his buyer with a sample of same, the seller is (impliedly) obligated to deliver goods which conform to the sample.[l]

Subparagraph (l)(d) of Article 35 requires that the goods be 'contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.' For example, as regards the first of these criteria, a CISG seller who is - or should be - aware of the buyer's intention to purchase goods (foodstuffs) which can be resold in France, in conformity with French law, must deliver goods which are wrapped in the manner required by French law.[2]

As previously noted, neither of these Article 35(2) duties is to be implied in cases where the parties to the CISG contract have (validly) 'agreed otherwise'.[3]

1. See the decision of LG München (Germany), 8 February 1995, No. 8 HKO 24667/93, reported [at <http://cisgw3.law.pace.edu/cases/950208g4.html> and] in UNILEX. Some might prefer to reach the same result by the application of Article 35(1), in that the sample provided will usually serve to indicate the quality 'required by the contract', i.e., without the need to resort to a gap-filling rule: re. the American legal logic of an 'express warranty' created by a sample or model under UCC §2-313(c) see White & Summers, Uniform Commercial Code §9-6. Regarding the situation where a CISG buyer provides the sample or model see supra No. 163 with note 6.
2. See the decision of Cour d'Appel de Grenoble (France), Chambre Commerciale, 13 September 1995, published in French in Journal de droit international, 4, 1996,948-960, and commented upon by Witz, id. at 961-968; also reported [at <http://cisgw3.law.pace.edu/cases//950913f1.html> and] in UNILEX. See also, e.g., the COMPRIMEX award of 29 April 1996 reported [at <http://cisgw3.law.pace.edu/cases/960429m1.html> and] in UNILEX.
3. See supra No. 164.

E. Seller's Knowledge of Defect Irrelevant

170. The seller's implied obligations are not generally dependent upon the seller's 'state of mind.' In other words, the seller is obligated to deliver goods which meet the requirements set forth in Article 35(2)(a)-(d) whether or not the seller 'knew or could have been aware' of a given non-conformity at the time of contracting.[1]

Indeed, the seller's state of mind is also essentially irrelevant when it comes to the Convention's supplementary remedial rules: the CISG seller is liable in damages on a no fault basis, inter alia, for breach of the implied obligation to deliver conforming goods.[2]

1. Compare the corresponding qualification as regards third party claims based on industrial or intellectual property in Article 42, discussed infra No. 200 et seq. Re. the seller's knowledge of buyer's particular purpose' see supra No. 166.
2. See infra No. 210. Regarding the limited effect of an Article 79 'exemption', see infra No. 298 et seq.
[page 94]

F. Caveat Emptor and Pre-Contractual Inspection of Goods

171. As already indicated, the CISG seller is automatically (by default) deemed to accept the Convention catalogue of implied obligations with respect to fitness for purpose, etc., set forth in Article 35(2) - at least in the absence of an express contractual provision to the contrary (a warranty-limitation, disclaimer of liability, or the like).[1]

Then again, Article 35(3) of the Convention represents a limited remnant of the classical caveat emptor rule. According to this provision, the seller is not liable under subparagraphs (2)(a)-(d) for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.

So, although the CISG does not impose any pre-contractual duty to inspect,[2] a buyer who in fact undertakes such an inspection and thus becomes aware, e.g. that the goods offered for sale are not fit for a particular intended purpose is assumed to purchase such goods as he finds them; the same is true of a buyer who' could not have been unaware' of such lack of conformity.[3] In such clear-cut situations, where the buyer actually 'sees' the defective condition of the goods offered for sale, it seems fair to maintain a caveat emptor-type rule ('what you see is what you get'), i.e., the otherwise implied obligations in subparagraphs (2)(a)-(2)(d) notwithstanding.[4]

1. As regards disclaimers and liability limitations, etc. see infra No. 172 et seq.
2. Regarding Article 38, see infra No. 189 et seq.
3. This test is arguably more buyer-friendly than the familiar 'ought to know' standard. See, e.g., the decision of Tribunal Cantonal Valais (Switzerland), 28 October 1997, CLOUT Case 219 [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>] (buyer who had tested tractor before purchase must have been aware of patent defects).
4. Although paragraph (3) does not expressly apply to an Article 35(1) express promise of quality, the same principle might well be applied by analogy. Compare Schwenzer in Schlechtriem, Commentary (1998) p. 286 with note 14, citing sources that indicate disagreement on the relationship between Articles 35(1) and 35(3). See also the decision of OLG Köln (Germany), 21 May 1996, No. 22 U 4/96, CLOUT Case 168 [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>], where the documents incorrectly indicated that the car sold was first registered in 1992 and that the mileage was low; even if the buyer (a car dealer) 'could not have been unaware' of the non-conformity, the seller - who, acting fraudulently, had breached his obligation under Article 35(1) - could not rely on Article 35(3).

G. Disclaimer and Limitation of Liability

1. Introduction

172. A subject of great practical significance is the seller's ability to disclaim or limit the extent of liability for breach. [page 95]

As already emphasized, the implied obligations set forth in Article 35(2) apply by default, i.e., 'except where the parties have agreed otherwise'. This provision is in accord with the general Article 6 freedom-of-contract rule, in that the parties may 'derogate from or vary the effect of any [Convention] provisions.' On the one hand, such a derogation may take the form of a 'guarantee' from the seller (e.g. as to quality) which may serve to improve the remedial position buyer which the buyer would ordinarily enjoy pursuant to the CISG gap-filling regime.[l]

Of equal, if not greater practical importance are clauses whereby the seller seeks to reduce the commitments which ordinarily follow from the Convention scheme. For example, an express contract term in the seller's standard form whereby seller 'accepts no responsibility whatsoever that the goods are fit for any particular purpose, whether or not such purpose has been made known to him ...' will ordinarily serve to displace the obligation set forth in Article 35(2)(b). But this will only hold true if the clause in question is held incorporated into the overall contract, if it is interpreted in accordance with the draftsman's intent, and if domestic rules of validity do not get in the way. These conditions are the subject of the discussion which follows.

1. See supra No. 163.

2. Incorporation of Disclaimer

173. As already indicated, a given disclaimer or limitation of liability will not always achieve the (draftsman's) intended effect. For one thing, a given clause will only be effective if the clause can be described as incorporated into the contract, i.e., as a part of the overall contract of sale. One practically important subset of the incorporation problem relates to the fact that disclaimer clauses are likely to be hidden amidst the 'boilerplate' language in a seller's standard form, and courts will not always read surprising and/or unreasonably burdensome fine-print clauses as 'part of the deal.' Moreover, according to the 'battle of forms' rule in CISG Part II, a 'reply to an offer which purports to be an acceptance but contains [material] additions, limitations or other modifications [e.g., a limitation of liability] is a rejection' of the offer and constitutes a counter-offer;' and if the parties 'consummate' a CISG sale in this 'unmarried state', the Convention provides no clear solution to the remedial problem.[l]

1. See Article 19 (supra No. 122 et seq.) and (with respect to the language quoted above) Honnold, J., Uniform Law for International Sales (1st edition 1982) note 31, pp. 194-195; compare id. (3rd ed. 1999) pp. 182 ff.
According to Article 2.20(1) of the UNIDROIT Principles of International Commercial Contracts (International Institute for the Unification of Private Law, 1994), 'No term contained in standard terms which is of such a character that the other party could not reasonably have expected it is effective unless it has been expressly accepted by that other party.' As with similar domestic law constructs, this UNIDROIT 'Formation' provision is best characterized as a validity (reasonableness) rule: see Lookofsky, J., 'The Limits of Commercial Contract Freedom,' 46 American Journal of Comparative Law 485, 495-508 (1998) [available at <
http://www.cisg.law.pace.edu/cisg/biblio/lookofsky2.html>].
[page 96]

3. Interpretation of Disclaimer

174. Even an incorporated clause will only achieve its intended effect if it is interpreted as 'covering' the situation concerned. In this connection, the Convention's 'reasonable-man' standard (in Article 8) will surely be applied along lines which accord with those previously established under domestic law.[1] For this reason, disclaimers of liability will continue to be construed narrowly (contra preferentem) by national courts, i.e. 'against' the draftsman unless the draftsman can prove, e.g. that it was the intent of both parties that the seller should not be liable even if (grossly) negligent in the performance of his contractual duties, express or implied.[2]

1. Regarding Article 8, see supra No. 81 et seq.
2. See supra No. 79 and (e.g. from American practice) Salt River Project Agricultural Improvement and Power District v. Westinghouse Electric Corporation, 143 Ariz. 368, 694 P. 2d 198 (1985) (party asserting effectiveness of disclaimer must show 'provision was a part of the bargaining and negotiating process ... an intentional relinquishment of a known right').

4. Validity of Disclaimer

175. Even where a given clause passes the incorporation and interpretation hurdles just described, the validity issue remains. As previously noted, the validity of the contract, hereunder the validity of a limitation or disclaimer of the implied obligations set forth in Article 35(2), is an issue which lies outside the CISG; and since the Convention is simply 'not concerned with' the validity of the contract or of any of its provisions, the validity of a disclaimer must be settled in accordance with the applicable domestic law.[1]

1. Regarding Article 4(a) see supra No. 62 et seq.

5. Examples of the Application of Domestic Validity Rules

176. For example, under Swedish (and other Scandinavian) domestic law, a purported liability disclaimer will only be effective - even as between CISG merchants - if it passes a 'reasonableness' - test;[1] when the 'reasonableness' of a disclaimer in a CISG contract is tested under American domestic law, the relevant question is whether the disclaimer is unconscionable (UCC §2-302).[2] German courts have tested the validity of CISG liability disclaimers along similar lines.[3] And whereas, e.g. the UK Unfair Contract Terms Act would not authorize similar overt censorship in an international case,[4] an English or other national court might well reach the same kind of result by employing more covert judicial means, in that courts are able to 'interpret' their way 'around' an unfair - albeit incorporated and technically valid - disclaimer clause.[5]

1. Regarding the 'general clause' (§36) of the Uniform Scandinavian Contracts Acts, see generally Lookofsky, J., 'The Limits of Commercial Contract Freedom: Under the UNIDROIT 'Restatement' and Danish Law', XLVI American Journal of Comparative Law (1998) pp. 485-508 [available at <http://www.cisg.law.pace.edu/cisg/biblio/lookofsky2.html>]. [page 97]
2. I.e., assuming that the relevant rules of private international law point to American law. See generally Lookofsky, J., 'Loose Ends and Contorts in International Sales,' 33 Am. J. Comp. L 403 (1991), p. 410 ff. [available at <http://www.cisg.law.pace.edu/cisg/biblio/lookofsky6.html>].
3. See the decision of OLG Köln (Germany), 21 May 1996, No. 22 U 4/96, CLOUT Case 168, also reported [at <http://cisgw3.law.pace.edu/cases/960521g1.html> and] in UNILEX (contract documents incorrectly indicated that car first registered in 1992 and that mileage was low; Italian seller who, acting fraudulently, had breached Art. 35(1) duty to deliver confirming goods could not rely on clause excluding liability for lack of conformity, since clause was invalid under German domestic law).
4. - This point was duly noted by Honnold in the 2d (1991) edition of Uniform Law at p. 314, but the discussion (originally in section 235) has not been included in the 3rd/1999 edition: see id. pp. 260-261. Of course, the English domestic law on point remains of limited relevance in the present context unless and until England ratifies the CISG.
5. See supra No. 174 and, e.g. the English Court of Appeals' interpretation of the disclaimer in the Howard Marine case: see 2 All ER at 1147 [1978]: a 'clause of this kind is to be narrowly construed.'

6. Validity v. Substance

177. In future, courts may have to struggle with the fact that the line between (domestic) validity and (CISG) substance is not always clear.

To take one clear example, under both German and Austrian law an unusual clause does not become 'part of the contract' if the other party did not have reason to expect it under the 'circumstances', especially as regards the 'appearance' of the contract.[1] This provision functions as a validity rule and should (when otherwise applicable) supplement - and not be displaced by - the CISG substantive regime.[2]

On the other hand, under §2-316(2) of the American Uniform Commercial Code, a warranty disclaimer is without effect unless it is conspicuous and mentions the word 'merchantability'. And while it might well be argued that this too is a validity rule (in some respects similar to the German and Austrian ones just noted), the 'merchantability' requirement is so closely tied to American substantive law (DCC §2-313) that it renders the rule highly inappropriate - and arguably also ineffective - in the CISG context.[3]

1. AGBG §3 and compare the similar provision in §864a of the Austrian Civil Code.
2. See Bernstein & Lookofsky, Understanding the CISG in Europe (1997) at 129 and Schlectriem, Commentary (1998) at 103 f.
3. The same conclusion was reached by Honnold in the 2d (1991) edition of Uniform Law (p. 311) on the hardly persuasive ground that UCC §2-316(2) and CISG Article 8 both 'address the same issue' (the discussion of these provisions is not included in Honnold's 3rd/1999 edition: see id. pp. 260-261). Regarding 'merchantability' under American and English substantive law see supra No. 168.

7. Convention as Validity 'Yardstick'

178. The CISG is (generally) 'not concerned with' validity. Then again, the Convention serves not just as a gap-filler but also as a yardstick: [1] it 'aims at justice between the parties...'[2] Its remedial system, considered to be a fair (substantive) solution in the average case, is also relevant as regards the proper application of validity rules which strive to maintain a reasonable balance between contractual obligations and remedial relief. [page 98]

Of course, the CISG does not represent the only fair regime, but a given alternative set forth in the parties' contract should, at the minimum, provide each party with the potential for minimum adequate remedial relief. And if the contract in question provides, not for minimum adequate remedies, but, e.g. for damages that are 'unconscionably low,' the reasonableness-tests of domestic law, acting in tandem with the CISG's general principle of good-faith, should serve to (re)activate the supplementary CISG remedial rule.[3] [page 99]

1. See Schlechtriem, P., 'The Seller's Obligations under the United Nations Convention on Contracts for the International Sale of Goods' in International Sales (Galston and Smit ed., New York. 1984) at 6-6 [available at <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem10.html>] (re. clauses imposed through the use of standard terms, etc.).
2. Hellner, J., 'The Vienna Convention and Standard Form Contracts' in International Sale of Goods: Dubrovnik Lectures (Yolken Sarcevic ed., New York. 1986) at p. 351 [available at <http://www.cisg.law.pace.edu/cisg/biblio/hellner.html>].
3. The general CISG good faith-principle (supra No. 77 et seq.) clearly underpins the award rendered by the Arbitration Institute of the Stockholm Chamber of Commerce on 5 June 1998, CLOUT Case 237 [reported at <http://www.cisg.law.pace.edu/cisg/text/casecit.html>]. In this case, an American seller and Chinese buyer had concluded a contract for the sale of a press for the production of frame rails for light trucks. The seller, who first had received buyer's notice of defects some 3 years after delivery, was held liable in damages, notwithstanding the fact that the contract expressly provided the buyer with an 18-month warranty period. The contract also contained a clause excluding consequential or incidental damages, but the text of the award in UNILEX does not reveal the nature or extent of the damages awarded.


Pace Law School Institute of International Commercial Law - Last updated April 4, 2005
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