[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).]

62. Article 4 of the Convention distinguishes between (on the one hand) rules which regulate sales contract formation and the parties' rights and obligations, both of which are governed by the CISG, and (on the other hand) questions relating to sales contract validity and property in the goods, both of which lie outside the CISG scope:

Those who are already somewhat familiar with Parts II and III of the Convention (outlined in Chapter 2 above and discussed more fully in Chapters 4-6 of this monograph) might see Article 4 as an ex tuto kind of provision, the main effect of which is to reaffirm that which already follows by logical implication from the content of the Part II and III rules. For clearly, the Convention is designed to 'govern' only the formation of the sales contract (part II) and the rights and obligations of the seller and the buyer arising therefrom (part III); it is not designed to govern (most) validity questions or 'property' questions relating to the rights of third partes,[1] etc.

In some respects, however, Article 4 is a controversial rule. One point which has generated a good deal of debate is the extent to which the rules of the Convention governing contractual liability (damages for breach of obligations arising from the sales contract) serve to displace (or compete with) domestic law rules of delictual liability,[2] inter alia, those product liability rules which are grounded in delict (tort).[3] Another unresolved question is the extent to which the CISG avoidance rules serve to displace (or compete with) domestic law claims for rescission, e.g. by reason of mistake or misrepresentation.[4]

A. Contractual Validity, Domestic Law & Concurrent Remedies

63. As indicated in Article 4, the Convention is 'not [generally] concerned' with the validity of the contract, i.e., 'except as otherwise expressly provided in this Convention'. An example of an exception, i.e., an express CISG provision relating to a validity question, is Article 11;[1] another example is Article 29.[2]

The fact that the Convention is not (generally) concerned with the validity of the contract or of any of its provisions means that domestic rules of law must be used to resolve the great majority of problems which fall under the validity label, inter alia, questions which relate to the doctrines of mistake, fraud, duress (threat), and the reasonableness of contract terms.[3]

Thus, although the CISG gives the parties freedom to formulate their obligations and remedies in the event of breach (etc.),[4] the validity of the parties' contract (and its individual terms) cannot be resolved on the basis of the CISG alone, simply because the CISG was not designed to police international sales agreements for unfairness:[5] the CISG drafters made no attempt whatsoever to prescribe the legal effect of, e.g. a mutual mistake as to the existence of the subject matter of the contract, a seller's negligent or fraudulent misrepresentation as to the quality of the goods, a seller's threat of non-performance (unless a price-increase is secured, i.e., economic duress), an unreasonable disclaimer or limitation of liability, etc.

To expand upon one of the examples just listed, if a seller in Sweden sells goods to a buyer in France, then, as regards the rights and obligations of the seller and the buyer arising from such a contract, the CISG applies. However, if that seller's contract is a standard form which purports to disclaim all liability in the event of breach, the validity of that - arguably 'surprising' or otherwise unreasonable - disclaimer is a matter which lies outside the CISG scope.[6] And since the applicable rules of private international law in such a situation would probably point to Swedish domestic law,[7] the disclaimer will only be effective (so as to displace the CISG remedial regime) if it satisfies the 'reasonableness' requirement set forth in the General Clause of the Swedish Contracts Act.[8]

In the foregoing (disclaimer) example, the applicable validity rules serve to fill in the wide validity 'gap' in the Convention which is openly acknowledged by Article 4. A related, yet more difficult problem is the question of concurrent - and thus potentially 'competing' - domestic remedies. For example, depending on the circumstances of the particular case, a buyer's domestic law claim for rescission by reason of a seller's negligent or fraudulent misrepresentation as to the quality of the goods (i.e., the remedy which domestic law provides in such an 'invalidity' situation) might be seen to overlap (and thus also compete) with the CISG avoidance rules,[9] just as the same seller's liability for the economic consequences of such a misrepresentation would - at least in some situations - appear to overlap with the Convention damages regime.[10]

Of course, since solutions to a given legal problem may vary (in detail) from state to state, there is at least some risk that the outcome of a given case, decided in [page 42] accordance with the domestic law applicable to it, might be different if decided in accordance with the domestic law of another state. For this reason, courts and arbitrators may have reason to exercise restraint before they permit differences among domestic validity rules to do damage to the otherwise uniform Convention remedial solution.[11] On the other hand, courts and arbitrators should also think twice before allowing the Convention to pre-empt ('trump') domestic rules designed to police against unfairness,[12] inter alia, since those who drafted the Convention rejected a rule which would have limited recourse to competing rules of domestic law.[13]

B. Convention Not Concerned With Property in Goods

64. As indicated in the first sentence of Article 4, the Convention is concerned with the inter partes rights and obligations of the seller and buyer arising from an international sales contract. Conversely, according to paragraph (b) of Article 4, the Convention 'is not concerned with ... the effect which the contract may have on the property in the goods sold'. For example, the question of whether a given buyer, as a 'good faith' purchaser, cuts off rights which creditors or other third parties might otherwise have in the goods is not a CISG problem, but rather an issue to be decided under the otherwise applicable domestic law. Similarly, the right of a seller to obtain restitution of goods delivered may well be restricted by local laws protecting the rights of buyer's creditors.[1]

C. Delictual Obligations Not Governed by CISG

The first point to be noted in this connection is that national courts have no choice but to use domestic rules of liability in order to resolve 'delictual' matters clearly not governed by the Convention. This is especially clear as regards the claims of third parties, for example the right of a third-party consumer to hold a (CISG) seller liable for injuries to that consumer's person or property caused by a defective product (which happens to have been the subject matter of a CISG sale).[1] But the same necessity for recourse to domestic law arises, e.g., in respect of a 'seller's' claim for damages against his 'buyer' for bad-faith termination of contractual negotiations (culpa in contrahendo); for clearly, if no CISG contract has been made, the situation cannot be described as involving rights and obligations 'arising from the contract'.[2]

Beyond this, since domestic rules of delictual liability (e.g., the duty to exercise due care and thus avoid injury to others) are sometimes permitted to 'compete' with rules of contractual liability under domestic law, it has been argued that the delictual rules (otherwise applicable in a given international context) [3] should sometimes be permitted to compete with the CISG contractual regime. Thus, as regards product liability, misrepresentation and similar torts, the domestic solutions can and should sometimes serve to supplement - albeit also complicate - the CISG solution;[4] other commentators, putting a higher (and arguably excessive) premium on the interest of 'uniform' CISG application, have sometimes taken a different view.[5] [page 44]

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Pace Law School Institute of International Commercial Law - Last updated April 1, 2005

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