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Reproduced with permission from 39 American Journal of Comparative Law (1991) 403-416

Loose Ends and Contorts in International Sales:
Problems in the Harmonization of Private Law Rules

Joseph M. Lookofsky [*]

-   Introduction
-   Delimiting the Scope of the CISG
-   Misrepresentations, Parol and Non-Conforming Goods
-   Unconscionability and "the General Clause"
-   Good Faith and Economic Duress
-   Product Liability and Property Damage
-   Conclusion

Introduction

In a well-integrated world, the formal harmonization of private law would keep pace with the globalization of private business.

In the real world, international legislation may limp awkwardly behind the national pace. Not only is it often difficult to compromise and agree on content; it may not even be possible to lop off a clear-cut chunk of law as grist for the harmonization mill. The legislator cannot always delimit and divide his subject matter into neat and tidy compartments of issues and rules ... "little sovereign states".[1]

So, many international problems are still resigned -- by default -- to conflicts of law and other national rules. And the resulting collage of national and international rules may make for a less than cohesive system.

The latest -- and arguably the greatest -- legislative achievement aimed at harmonizing private commercial law is the "CISG": the United Nations (Vienna) Convention on Contracts for the International Sale of Goods.[2] The CISG is the product of a 50-year transnational effort,[3] and it surely represents a giant step forward in the private and commercial sphere. [page 403] And yet the Convention is by no means a trouble-free document.

The new statute seems "relatively straightforward and uncluttered with detail,"[4] not only because domestic anachronisms have been refined away,[5] but also because some unsightly loose ends were tucked under the rug.[6] On some points, the Convention codifies only an agreement to disagree and thus to revert to national law.[7] Contracting States can even opt out of certain CISG rules and rule-sets entirely.[8]

It is now up to the lawyers to pick up the loose ends: not just to interpret the substance of the new international statute, but also to recognize its limits; to juxtapose and supplement the Convention with the otherwise applicable law.

Delimiting the Scope of the CISG

Compared with its forerunners in the private commercial law sphere, the special significance of the CISG Convention is that it deals, not with procedure and conflicts, but with substantive contract law.[9] Its one hundred and one articles constitute a transnational gap-filling regime for the sale of goods, the single most important contract type.[10] When a sale is subject to the CISG, those who would shop for forum can no longer shop for law: when contracting parties reside in CISG Contracting States,[11] national courts and international arbitrators need no longer choose between the various national statutes of sale.[12]

The Convention does not, however, preclude all conflicts of law. Quite apart from its own "conflicts" rule,[13] the CISG does not resolve all issues which may relate to a contract of sale. The Convention deals with contract formation (Part II) and contract rights (Part III), but not with contract validity and not with tort.[14] [page 404]

The CISG formation/validity distinction itself appears troublesome: both formation and validity rules relate to the process by which a contract comes to be.[15] For this and other reasons, the Scandinavian countries all ratified, subject to an Article 92 reservation, whereby they declined to accede to the CISG formation rules (Part II) entirely.[16] (The Scandinavian reservations will hardly achieve their intended effect: where the buyer is in a Scandinavian state, the CISG formation rules are likely to be applied by virtue of Article 1(1)(b), i.e., notwithstanding the reservation made.[17])

Part II of the Convention purports only to govern part of the process by which the contract came to be: the mechanics-of-consent part, but not the defenses to enforcement of the promise made.[18] The overall scheme is thus that the CISG (usually) provides the rules of offer and acceptance;[19] national law then determines whether there is a valid (binding & enforceable) contract; where-after CISG Part III regains control if the answer is yes.

CISG Part III, which regulates the rights and obligations arising from the contract of sale, is the Convention core.[20] Indeed, the Convention is concerned only with obligations of the contractual kind.[21] The international sales contract thus has the character of private legislation, made by and for the parties in privity;[22] this in contrast with delictual obligation and the law of tort.

Such a traditional distinction will surely sit well, with lawyers in Common law systems at least. Common lawyers draw the line between contract and tort, inter alia, because contract liability is seen largely as no-fault liability.[23] Common lawyers seem more concerned with "efficient" than culpable breach;[24] he "who thinks negligence instinctively thinks tort."[25] [page 405] So the Common legal establishment seems hardly ready to merge Contracts and Torts into a single course in Contorts;[26] we find Restatements of Contracts and Torts, but no Restatement of Obligations (as yet).[27]

For others, there is no clear line between contract and tort. In Denmark, for example, the law of contract has long been conceived as an integral part of a hierarchically superior set of rules: the law of Obligations (obligationsret).[28] This central feature of Civil and Scandinavian law has no direct counterpart within the mainstream of Common legal analysis.[29] Nor can we find much Common support for the notion of a fundamental unity between contractual and delictual liability:[30] Only Civilian and Scandinavian lawyers start with fault as the general basis of liability in both contract and tort.[31]

We may find our sales law in a separate book, but this does not make it a sovereign state. And although most observers read the CISG liability compromise as one which codifies the no-fault view,[32] we cannot fully isolate the Convention rules from the rest of the law of Obligations -- neither in the Civil nor the Common law world.[33]

By singling out but a piece of the ever-evolving Contorts pie, the CISG legislator has given life to a complex new organism which depends for its survival on interaction, overlap and competition between the Convention and national law. [page 406] The Convention requires an international interpretation of its own rules,[34] but we cannot ask it to "settle" matters which lie clearly beyond its scope.

"Questions concerning matters governed by this Convention which are not expressly settled in it ["les matières régies par la présente Convention et qui ne sont pas expressément tranchées par elle ..."] are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."[35]

Since the Convention is clearly "not concerned with" questions of validity and rights arising in connection with delictual obligations,[36] it would appear that such matters are not "governed by" the CISG and therefore cannot be settled solely on the basis of CISG "general principles".[37] Such matters must be left to the otherwise applicable national law.

Misrepresentations, Parol and Non-Conforming Goods

According to Article 4:

"[The CISG] governs only ... the rights and obligations ... arising from such a contract ... it is not concerned with:

(a) the validity of the contract or of any of its provisions ..."[38]

Because the Convention only governs contractual rights and obligations, it is "not concerned" with validity and not with tort.[39] Such issues remain within the province of national law. And yet, experience at the national level tells us that real-world distinctions are much harder to make: [page 407]

Barge Capacity.[40] English Buyer needs a large barge to dump clay into the sea, Buyer asks about the carrying capacity of German Seller's vessel, and Seller quotes the tonnage stated in Lloyd's register (the industry "Bible"): 1,600 tonnes. The written contract, made in England, contains:

     a) a CISG choice of law clause

     b) no information regarding capacity

When Buyer puts the barge to use, he discovers that the actual capacity is but 1,000 tonnes.[41] For this reason, operations are delayed, Buyer's earnings are reduced, and he sues Seller for damages suffered as a consequence thereof.

The CISG would provide Buyer with damages for foreseeable loss,[42] but only if Seller has failed "to perform any of his obligations under the contract or this Convention ".[43] The Convention itself has been placed, by valid express reference, within the four corners of the contract,[44] but the capacity statement has not. So the question becomes: is Seller obligated to deliver a vessel which can carry 1,600 tonnes? Are we dealing with a CISG contractual description, a (non-contractual) misrepresentation, or perhaps just a statement made off the record?

Because Seller's express capacity-statement pre-dates the written agreement, some Common lawyers might be tempted to think in terms of parol evidence: after all, if the writing sets forth the entire agreement, then by definition, the parol statement is not part of it. Does the CISG provide a clue? Article 8 provides:

"(1) For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.

"(2) If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding [of a] reasonable person

"(3) In determining the intent of a party or the understanding that a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations ..."

To be sure, Article 8 appears to be "consistent with a growing body of opinion that the 'parol evidence rule' has been an embarrassment ...".[45] [page 408] It also accords well with the Scandinavian view:[46] in interpreting the content of the parties' contract, we may at least consider the undeniable fact that the capacity statement was made!

But Article 8 hardly solves the hard problem of whether we should treat the parol statement as part of the contract or (if you prefer) whether the barge-Seller "intended" his statement to bind.[47]

Of course, "Courts tend to place the responsibility on the person whom they think reasonably ought to bear the responsibility, rather than on the person who has agreed to bear it, for the simple reason that it is not usually apparent whether anybody has agreed to bear it."[48]

Barge Capacity may seem like a close case,[49] but the CISG wants an answer in yes-or-no terms: it provides expectation damages for breach -- or none at all.[50] Then again, the remedial alternative to the enforcement of CISG rights is not necessarily caveat emptor. Because the CISG is concerned with neither validity nor delictual obligations, we need also to apply the national rules, that is, the applicable law as determined by the private international law of the forum where the action is brought.[51] And as regards misrepresentation and related torts, the national solutions serve to supplement -- and complicate -- the new international Convention law.[52] For even if we find no contractual commitment, applicable tort law may still provide the barge-Buyer with (at least) reliance-interest damages for negligent misrepresentation.[53] Indeed, it may not even be possible to expressly disclaim.[54] [page 409]

Unconscionability and "the General Clause"

Under the Convention scheme of things, contractual freedom takes priority over the supplementary rule.[55] But because the Convention is "not concerned" with validity, problems of unconscionability and reasonableness must be dealt with by national law.

North Sea Cranes.[56] In connection with a North Sea drilling project, Norwegian Buyer solicits bids from foreign crane manufacturers. Buyer specifies that all materials must be "ASTM ... Grade 70". Using its standard purchase order, Buyer accepts the offer of American Seller.

After installation of several cranes offshore, one of the "adapters" delivered cracks, causing its crane to fall into the sea. When tests indicate that none of the adapters conform to the Grade 70 specification, all cranes must be unmounted and their adapters replaced. Buyer then seeks compensation for the resulting loss, which far exceeds the value of the adapters themselves.

Seller defends by reference to the terms of its offer which states that "Manufacturer's liability in any event shall not exceed the replacement value of the defective element F.O.B. [American] works." [page 410]

Nowadays, this kind of contract is governed by the CISG.[57] The Convention deals, inter alia, with contract formation and contract interpretation, but these issues cannot always be isolated from the specter of contract censorship under national law.[58]

Even if we were to see the North Sea liability-limitation problem as one hinging on issues of formation or interpretation, we could not work solely within the Convention regime.[59] And even if we could, Article 19, which makes only a small contribution to the "battle of forms" conundrum,[60] would not give us a clear answer in a case like this.[61]

Moreover, even assuming (arguendo) that the Seller has won the incorporation battle and that the disclaimer has become a part of the deal, the case is not yet closed. For one thing, a court can often interpret its way around an incorporated clause.[62] More striking and forthright is the willingness of some modern national courts to challenge openly the validity of an objectionable provision (e.g. using 2-302 of the American UCC or the "general clause" in 36 of the Scandinavian Contracts Acts, by which a court may

"... set aside an agreement in whole or part because it would be unreasonable or against good standards of dealing to enforce it, [taking into account] conditions at the time of contracting, subsequent developments and the content of the contract."[63]

Freedom of contract is still surely the rule, but both the Scandinavian general clause and its American unconscionability analogue are mandatory provisions which subject even the merchant's contractual freedom to a reasonableness-test,[64] and in international sales these tests are now tied to the CISG.[65] [page 411] The Convention serves not only as a gap-filler, but also as a yardstick:[66] it "aims at justice between the parties ."[67] Its supplementary remedial system, considered to be a fair solution in the average case, is relevant as regards rules of validity which strive to maintain a reasonable balance between contractual obligations and remedial relief. Where -- as in North Sea -- the express contractual remedy provides, not for minimum adequate remedies, but for damages that are "unconscionably low," the reasonableness-tests of national law should activate the supplementary CISG remedial rule.[68]

Good Faith and Economic Duress

The Convention purports not to deal with validity problems. And yet, Article 29(1) provides:

"A contract may be modified or terminated by the mere agreement of the parties."

Thus, without applying the validity label, the Convention does address an issue which for some seems to bear a validity-ring. Does a CISG modification agreement invariably bind? [page 412]

X plus Y.[69] American Seller agrees to custom-build a supercomputer for Danish Buyer at a fixed price (X) pursuant to a CISG contract. When Seller's costs increase to the point where delivery would involve a loss, he notifies Buyer that unless Buyer agrees to a price increase (Y), no computer will be delivered. Buyer (who needs the machine to fulfill his own commitments) agrees. When Seller finally does deliver, Buyer refuses to pay more than the original price (X).

Buyer's promise to modify the original contract is not supported by "consideration":[70] Seller is already legally bound to deliver at fixed price X when Buyer promises to pay X + Y for the very same thing.[71] Buyer makes a promise, but gets nothing in return. According to Common law tradition, Y is an unenforceable "gift".

Buyer's promise is not supported by consideration, but that is not relevant: not under the CISG;[72] certainly not in Scandinavia,[73] and not even (any longer) in America where "[a]n agreement modifying a contract for the sale of goods needs no consideration to be binding."[74] [page 413]

And yet, dispensing with the consideration requirement does not dispense with the underlying problem in the case. Even Scandinavian lawyers may have reason to look this gift horse in the mouth: we all have to draw the line between threats and extortion ("economic duress") on the one hand, and good faith (honest, acceptable business standards) on the other.[75]

The CISG does not address the hard problem in X plus Y. Article 29 states only that, once entered, a CISG sales contract may be modified by the "mere agreement" between the parties, but the question of whether a promise to modify is valid and binding in the concrete case -- or whether the modification has been extorted by a bad-faith exercise of economic duress -- lies quite outside the Convention scope.[76] Once again, the problem must be left to the proper national law.[77] [page 413]

Product Liability and Property Damage

According to CISG Article 5: "This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person."

Unguided Missile.[78] Danish Navy (DN) buys a launching system for its ship-to-ship missiles from American Manufacturer (AM). During DN's winter test of the system, a missile is launched inadvertently, flies ship-to-land, and destroys summer homes owned by Danish citizens. DN alleges that the system is not "fit" and seeks compensation from AM for (1) the value of the missile lost and (2) sums paid by DN to the homeowners.

The contract of sale, which requires that the parties arbitrate all disputes "relating to the contract," contains no choice of applicable law.

This is another sale between merchants in CISG Contracting States,[79] and the inescapable (e contrario) import of Article 5 is that a product liability case like this, which does not involve personal injury, is covered by the Convention.[80]

One ought not, however, jump to the conclusion that a neat line has now been drawn between national and international commercial law. In those jurisdictions where contract and tort have both served as a basis for product liability claims,[81] the contract rules of the Convention will, in all likelihood, continue to compete with tort actions authorized by national law.[82] [page 414] And in those jurisdictions where product liability actions have traditionally lain solely in tort,[83] there will be a pronounced tendency to let the existing national rules coexist and compete with the new CISG regime.[84]

In Unguided Missile, the parties have agreed to arbitrate all disputes "relating to" their contract, i.e., their entire Contorts dispute.[85] And indeed, in cases like this, where we must blend the Convention with private international and national law, it is appropriate that the parties "have recourse to commercial arbitration, in which [formal and procedural questions] tend to be blended in the arbitrator's discretion and terms of reference."[86]

Conclusion

The delimitation of the true scope of a given legal problem is itself problematical, both at the national and at the international or comparative levels.[87] Competing conceptions, coupled with the pragmatics of transnational legislation, sometimes make for progress on a piecemeal basis. In the beginning, at least, we are forced to deal with a complex and somewhat uncertain marriage of national and international law.

The problems illustrated by the examples here can be reduced, though hardly eliminated, by careful contract drafting (e.g.):

"This contract shall be interpreted in accordance with and governed by the 1980 Vienna Convention on Contracts for the International Sale of Goods (CISG). Any and all disputes relating to or arising in connection with the contract which cannot be resolved in accordance with the contract or the CISG shall be resolved in accordance with Swedish law."[88]

A clause which expressly selects a national system to supplement the limited CISG regime may serve to provide the parties with some increased sense of certainty. A broadly drafted arbitration clause coupled with a non-national supplementary choice of law (lex mercatoria) might be more in line with the international spirit of the Convention;[89] and this approach should not be second-guessed by a national Court.[90] The formal harmonization of private law is an important element in the larger internationalization process. The CISG is a most welcome first step, and probably the best that we could expect at this time.[91] The CISG can be no better or more predictable than the national laws on which the Convention compromise itself was built; so if our national law of contract is in "conceptual disarray",[92] should we then expect more from the CISG?

Convention supporters -- and I would like to include myself among them -- need not pay uncritical homage to this less-than-perfect legislative achievement. The Convention deserves our support, because substantive sales legislation at the transnational level represents a great improvement over the provincialism inherent in national sales law. As for those problems yet unresolved, the Convention brings us -- the lawyers of different systems -- to the bargaining table as regards the loose ends. [page 416]


FOOTNOTES

* JOSEPH M. LOOKOFSKY is Associate Professor of Law, University of Copenhagen. My thanks to Professors Herbert Bernstein, George Christie and Andreas Lowenfeld for commenting on earlier drafts of this paper prepared as the Danish National Report to the XIIIth International Congress of Comparative Law (Montreal, August 1990).

1. See Joseph Lookofsky, Consequential Damages in Comparative Context: From Breach of Promise to Monetary Remedy in the American, Scandinavian and International Law of Contracts and Sales 15 (1989) and Charles Knapp, Problems in Contract Law 99 (1976).

2. So far, the list of CISG Contracting States includes Argentina, Australia, Austria, Bulgaria, Byelorussian S.S.R., Chile, China, Czechoslovakia, Denmark, Egypt, Federal Republic of Germany, Finland, France, German Democratic Republic, Hungary, Italy, Iraq, Lesotho, Mexico, Netherlands, Norway, Spain, Sweden, Switzerland, Syria, Ukranian S.S.R., U.S.A., U.S.S.R., Yugoslavia, and Zambia.

3. See Winship, "The Scope of the Vienna Convention ..." in International Sales (Nina Galston & Hans Smit eds. 1984) at 1-4. The 50-year gestation period also includes the development of the Uniform Law on International Sales (ULIS) which was not widely adopted.

4. John Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention 69 (1982).

5. See id.

6. Re. CISG "loose ends," see Nicholas, "Force Majeure & Frustration," 27 Am. J. Comp. L. 231, 232 (1979) and compare generally Rosett, "Critical Reflections on the [C.I.S.G.]," 45 Ohio St. L. J. 265 (1984).

7. Re. the specific performance problem, see, e.g., Lookofsky, "Remedies for Breach Under the C.I.S.G.," in Commercial Damages (Charles Knapp ed. 1989).

8. See infra n. 13 (re. Art. 95) and the text following n. 15 (re. Art. 92).

9. As regards the ULIS, see supra n. 3.

10. Much like Article 2 of the UCC: see generally Lookofsky, supra n. 7.

11. See CISG Art. l(l)(a).

12. See Lookofsky, supra n. 1 at 23-24 and compare Juenger, "Forum Shopping, Domestic and International," 63 Tul. L. Rev. 553 (1989).

13. The Convention applies, inter alia, "when the rules of private international law lead to the application of the law of a Contracting State:" see Art. l(l)(b). By making Article 95-reservations, China and the United States have elected not to be bound by this principle.

14. See CISG Part I, Arts. 4 and 5, and the discussion which follows here.

15. Both subjects are regulated by the (Uniform) Scandinavian Contracts Acts.

16. The Danish Ministry of Justice also objected to the "foreign" (Common law) flavor of Article 16. (In Scandinavian law, every offer is a "firm offer" binding for a reasonable time, unless the offeror states otherwise in the terms of the offer.) See Joseph Lookofsky, Internationale kob (1989) at 47, 51-52.

17. See supra n. 13, Evans in C.M. Bianca & M.J. Bonell, Commentary on the International Sales Law (1987) and Lookofsky, id. at 29-30 and 47.

18. Re. the process by which courts "police" agreements against unfairness, see E. Allan Farnsworth, Contracts 225 (2d ed. 1990) and compare Bernhard Gomard, Almindelig kontraktsret (1988) Ch. 3 -5.

19. Unless a Scandinavian "seller's law" applies: see text supra with nn. 16-17.

20. See Art. 4 and generally Lookofsky, supra n. 1.

21. See Art. 4 and text infra with n. 38.

22. Compare Barry Nicholas, French Law of Contract 31 (1982) re. Code Civil, art. 1134.

23. See Farnsworth, supra n. 18 at 875. But see id. with n. 19 and compare Gunther Treitel, Law of Contract 642-646 (7th ed. 1987) (distinguishing among standards of contractual duty). Compare Nicholas, supra n. 22 at 30 (fault "plays no part in our [Common] thinking about contract") and Konrad Zweigert & Hein Kotz, An Introduction to Comparative Law Vol. II (2d. ed 1987) at 194 (Common law treats all contracts as guarantees).

24. See Richard Posner, Economic Analysis of Law 106-107 (3rd ed. 1986) and compare Gilmore, infra n. 26 at 52 (speaking of Holmes: intent doesn't make "a particle of difference").

25. Lawson, "Fault and Contract -- A Few Comparisons," 49 Tul. L. Rev. 295 (1975) at 301 with n. 30, quoting Buckland & McNair.

26. This idea was set forth in Grant Gilmore's The Death of Contract 90 (1974). Re. Common "tort theorists", see Charles Fried, Contract as Promise 4-5 (1981).

27. Compare Knapp, "Promise of the Future -- and Vice Versa: Some Reflections on the Metamorphosis of Contract Law," 82 Mich. L. Rev. 52 (1984) at 938-41 (proposing a "Restatement of Promissory Obligations") and Charles Knapp & Nathan Crystal, Problems in Contract Law 1155-1160 (1987).

28. See Lookofsky, supra n. 1 at 18-21.

29. For a less traditional approach see, e.g., Patrick Atiyah, Introduction to the Law of Contract 1 (1981) and Robert Summers & Robert Hillman, Contracts and Related Obligations (1987).

30. See (re. Danish law) Bernhard Gomard, Forholdet mellem erstatningsregler i og uden for kontrakt 13, 28 (1958) (rules presented separately, but no principal difference).

31. See Gunther Treitel, Remedies for Breach of Contract 8 (1988).

32. Re. Article 79 see, Honnold, supra n. 4 at 432, Lookofsky, "Fault and No-Fault in Danish, American and International Sales Law ...," 27 Scandinavian studies 109 (1983) and Peter Schlechtriem, Uniform Sales Law (1986) at 101 with n. 417. But see Nicholas, "Impracticability and Impossibility," in International Sales 12-13 (Nina Galston & Hans Smit eds. 1984) (predicting the German view).

33. Accord: William Prosser & W. Page Keeton, Law of Torts 660 (1984) (tort liability for misfeasance extended to every contract where defective performance may injure promisee). See also infra re. tort liability for misrepresentation and defective products.

34. CISG Art. 7(1) provides, inter alia, that "[i]n the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application ..."

35. Art. 7(2).

36. See Art. 4 and the discussion which follows below.

37. Re. CISG Art. 7(2) see Bonell in, Commentary on the International Sales Law s. 79 (C.M. Bianca & M.J. Bonell eds. 1987), Schlechtriem, supra n. 32 at 39, and Lookofsky, supra n. 16 at 22-24.

38. Nor is the Convention concerned with the property in the goods sold: see Article 4(b).

39. See Winship, supra n. 3 at 1-37 and Heiz, "Validity of Contracts Under the United Nations Convention on Contracts for the International Sale of Goods ... and Swiss Contract Law," 20 Vand. J. Transnat. L. 639 (1987).

40. Inspired by Howard Marine & Dredging Co. Ltd. v. A. Ogden & Sons (Excavations) Ltd. [1978] 2 All ER 1134. The Howard contract (a lease) also contained a disclaimer: see infra, nn. 54 and 62.

41. As in the real Howard Marine case (preceding note): [1978] 2 All ER at 1145 ("one of Lloyd's Register's rare mistakes").

42. Art. 74.

43. Art. 45. As to the seller's obligations with respect to the quality of the goods, see Art. 35.

44. Re. sales of ships and vessels, see Arts. 2(e) and 6 and Honnold, supra n. 4 at 110 (parties free to "contract in").

45. Honnold, supra n. 4 at 143. See also Halsburry's Monthly Review, March 1986 at 12-13 (English Law Commission concluded that the so-called "rule" does not exclude evidence which, in the interests of justice, ought to be admitted).

46. Re. a recent Swedish precedent (NJA 1980 s. 398) see Lookofsky, supra n. 1 at 56 (Buyer held entitled to rescind land purchase contract; Sellers prior oral assurances rendered written "caveat emptor" zoning provision ineffective);

47. Re. intent and reliance under English law see, e.g., Dick Bentley Productions, Ltd. v. Harold Smith (Motors), Ltd. [1965] 2 All E.R. 65 (Lord Denning: representation is warranty if "intended to be acted on and ... in fact acted on").

48. Re. "backwards thinking" and the passage cited, see Atiyah, supra n. 29 at 46 and 165.

49. In Howard Marine (supra n. 40) the English Court of Appeal refused to classify Seller's capacity statement in contractual terms, although Shaw L.J. confessed that he was "at one time inclined to view [the capacity statement] as part of the description of the subject matter ... giving rise to a warranty ...": see [1978] 2 All ER at 1148. Compare CISG Art. 35(1): "description required by the contract".

50. Re. expectation interest protection under the CISG, see Article 74 and Ziegel, "The Remedial Provisions in the Vienna Sales Convention: Some Common Law Perspectives," in International Sales 9-37 (Nina Galston & Hans Smit eds. 1984).

51. (Or the place the arbitration). Such issues may be complicated, inter alia, by the problem of whether to "characterize" the dispute as one of contract or tort. See, e.g., Arcado Sprl v. Haviland SA, Case no 9/87 [1989] ECC 1.

52. But compare Honnold, supra n. 4 at 251 with nn. 6 and 7: "technical distinctions ... softened by more recent case law". With utmost respect, it would seem that Howard Marine (supra n. 40), cited by Professor Honnold at id., clings with a vengeance to these distinctions.

53. In the Howard Marine case (supra n. 40), the English Court of Appeal, by a 2-1 majority, found for the lessee of the barge: the misrepresenting lessor failed to carry his (reversed) burden of proof on the negligence issue pursuant to the Misrepresentation Act 1967. The decision says little, however, about the measure of damages recoverable: see also [1978] 2 All ER at 1143-44 (Lord Denning MR dissenting).

Also in American tort law, the "tendency is clearly to treat the misrepresentation action as a separate matter from the contract": see Prosser & Keeton, supra n. 33 at 763-64. The basis of liability is sometimes fraud, sometimes negligence, sometimes strict: id. 107. Re. the measure of damages see id. at 768 and the Restatement (Second) of Torts 552C.

Regarding Danish case law see Lookofsky, supra n. 1 at 159, discussing UfR 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 Norgaard, in Ugeskrift for Retsvsen (1978) at 281-82 and Lynge Anderson, Madsen & Norgaard, Aftaler & mellemond 130-133 (1987). Compare Bernhard Gomard, Obligationsret, 1. del (1989) at 134-35.

54. In Howard Marine (supra n. 40), an express ''as is" disclaimer was held not fair and reasonable pursuant to section 3 of the Misrepresentation Act 1967: see [1978] 2 All ER 1147 and the discussion infra.

In Clements Auto Co. v. Service Bureau Corp., 444 F.2d 169 (8th Cir. 1971) the court (applying Minnesota law) awarded restitution and reliance interest damages for innocent misrepresentation, the parol evidence rule and a contractual limitation of liability notwithstanding.

55. Art. 6.

56. Inspired by Phillips Petroleum Co. v. Bucyrus-Erie Co., 131 Wis. 2d 21, 388 N.W. 2d 584, 1 UCC Rep. 2d 667, reconsideration denied by 132 Wis. 2d 393, 394 N.W. 2d 313 (1986).

57. See Art. l(l)(a). As of August 1989, both the United States and Norway are CISG Contracting States. The Phillips case (see preceding note) was governed by American law.

58. Re. CISG Art. 4 see Enderlein, "Rights and Obligations of the Seller under the UN Convention ...," in International Sale of Goods (Paul Volken & Peter Sarcevic eds. 1986) at 137 and compare Honnold, supra n. 4 at 96-98, 112 and 256-62.

59. As between an American seller and a Scandinavian buyer, we cannot even apply the Convention's formation rules: the direct effect of the Norwegian Art. 92 reservation (discussed supra in text following n. 15) is that Norway is not a "contracting State" as regards Part II of the Convention, and this limits the application of Article l(l)(a) in the case; nor could the rules of private international law lead to the application of Part II, because the United States has made an Art. 95 reservation (supra n. 13) which precludes the application of Art. l(l)(b).

60. See Nicholas, "The Vienna Convention on International Sales Law," 105 Law Quarterly Rev. 201, 217 (1989).

61. Accord: Honnold, supra n. 4 at 195. 62. Regarding the disclaimer in Howard Marine (supra n. 40) [1978] see 2 All ER at 1147 ("clause of this kind is to be narrowly construed").

62. Regarding the disclaimer in Howard Marine (supra n. 40) [1978] see 2 All ER at 1147 ("clause of this kind is to be narrowly construed").

63. My unofficial translation here is based on the Danish version of the essentially uniform Scandinavian statutes.

64. See, e.g., Gianni Sport Ltd. v. Gantos, Inc., 151 Mich. App. 598, 391 N.W.2d 760, 761, 1 UCC Rep. 2d 1433, 1435 (1986): "Reasonableness is the primary [UCC 2302] consideration."

In a recent application of the 36 reasonableness-test, the Supreme Court of Denmark set aside a unilateral termination clause in a written contract between merchants. Not only were these merchants of unequal size; there was no reasonable balance between the obligations imposed. See UfR 1988.1036 H and the Commentary in UfR 1989 B at 229. Re. the unconvincing distinction between procedural and substantive unconscionability, see Farnsworth, supra n. 18 at 332-34.

For a comparison of these Scandinavian and American rules see Lookofsky, supra n. 1 at 36-38.

65. The U.K. Unfair Contract Terms Act would not authorize such overt censorship in an international case (see Honnold, supra n. 4 at 262), but the same result might still be reached by covert means: see text supra with n. 62.

66. See Schlechtriem, "The Sellers Obligations under the United Nations Convention on Contracts for the International Sale of Goods," in International Sales (Nina Galston & Hans Smit eds. 1984) at 6-6 (re. clauses imposed through the use of standard terms, etc.).

67. Hellner, "The Vienna Convention and Standard Form Contracts," in International Sale of Goods: Dubrovnik Lectures 351 (Paul Volken & Peter Sarcevic eds. 1986).

68. Accord: Philips (supra n. 56) 388 N.W. 2d at 592, where the Supreme Court of Wisconsin affirmed a decision awarding buyer $1,600,000 in damages for seller's breach of its express ("Grade 70") warranty. The trial court had reached the same result by holding that the seller lost the "battle of forms". Re. the related doctrines of unconscionability and "failure of essential purpose," see James White & Robert Summers, Uniform Commercial Code (3rd ed. 1988) 12-10.

69. Inspired by North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. (The Atlantic Baron) [1979] Q.B. 705.

70. Compare: The Atlantic Baron (id.) where the promisor-seller agreed to render some additional service.

71. I assume that Seller's original promise to deliver at price X still binds, the "economic force majeure" argument notwithstanding: see Article 79, Schlechtriem, supra n. 32 at 102 and Lookofsky, supra n. 7 at 43.04[4][b].

72. See Honnold, supra n. 4 at 229-31.

73. See Gomard, "Kontraktsfrihed i Danske Lov," Danske og Norske Lov i 300 Ar (1988) 537, 570.

74. UCC 2-209(1).

75. See generally Lookofsky, supra n. 1 at 34-39.

76. Without imposing an obligation on the parties to deal fairly, the CISG provides, fu Article 7(1), inter alia, that the Convention is to be interpreted so as to "promote the observance of good faith in international trade".

77. Under American law, a seller's outright refusal to deliver without additional compensation has been held to constitute a threat made in violation of the duty to deal in good faith: see Roth Steel Products v. Sharon Steel Corp., 705 F.2d 134 (6th Cir. 1983). This case shows that the issues of duress, good faith and unconscionability all go hand in hand: see id. with notes 24 and 31.

Recent English precedents include the The Atlantic Baron case (supra n. 69), Atlas Express Ltd. v. Kafco Ltd. [1989] 3 W.L.R. 389, and Williams v. Roffey Bros, Ltd. [1990] 2 W.L.R. 1153, C.A.

The most recent Danish doctrine describes economic duress as a very difficult problem requiring a concrete solution in each individual case: see Lynge Andersen & Norgaard, Aftaleloven (1990) at 140-42 and compare Gomard, supra n. 18 at 114 with n. 10. See also UfR 1989.47 H.

78. Inspired by McDonnell Douglas Corp. v. Kingdom of Denmark, 607 F. Supp. 1016 (E.D.Mo. 1985), a pre-CISG case which provided for arbitration under New York law.

79. See supra nn. 2 & 11.

80. Under Art. 74 a seller is clearly liable for all foreseeable "loss ... suffered by the [buyer] as a consequence of the breach." See also Honnold, supra n. 4 at 100-04 and Schlechtriem, supra n. 32 at 34-35. Re. foreseeable settlements, see also Restatement (Second) of Contracts, Illustrations 9 & 10 to 351.

81. This is the case (e.g.) in England and in the United States. Re. American law see, e.g., Prosser & Keeton, supra n. 33, Ch. 17.

82. Compare Ziegel, supra n. 50 at 9-7 (debatable whether tort actions for negligent manufacture or supply outside Convention scope). But see Honnold, supra n. 4, 73.

83. This is the case, e.g., in Scandinavian jurisdictions.

84. Re. Danish law, see, e.g., Gomard, supra n. 53 at 137.

85. In the McDonnell case (supra n. 78), the American seller unsuccessfully challenged the Danish buyer's demand for arbitration, inter alia, as "a vehicle by which to litigate a tort claim for indemnity and contribution for third party property damage ...".

86. Rosett, supra n. 6 at 281. Private international (conflicts) rules, which do not themselves resolve substantive issues, are sometimes described as "formal".

87. Lookofsky, supra n. 1 at 15.

88. Lookofsky, supra n. 16 at 44-45. Compare Winship, supra n. 3 at 1-35.

89. See Article 7(1).

90. See Lowenfeld, "Lex Mercatoria: an Arbitrators View," 6 Arb. Intl. 133 (1990). See also Deutsche Schachtbau- und Tiefbohrges v. Ras Al Khaimah National Oil Co. (No. 1): case no. 3572 of 1982 in XIV Yearbook Commercial Arbitration 111 (1989) ("internationally accepted principles of law governing contractual relations" held to be the "proper law", representing parties' "implicit will"); [1987] 3 W.L.R. 1023 (C.A.) (enforcement not contrary to English public policy), and [1988] 3 W.L.R. 230 (H.L.). See also Brandeis Intsel Ltd. v. Calabrian Chemicals Corp., 656 F.Supp. 160 (S.D.N.Y. 1987), XIII Yearbook Commercial Arbitration 543 (1988) (not even "manifest regard" of English sales law would affect enforcement of New York Convention award).

91. See Nicholas, "The Vienna Convention on International Sales Law," 105 Law Quarterly Review 201 (1989) at 243.

92. Compare Eisenberg, "The Bargain Principle and Its Limits," 95 Harvard L. Rev. 741 (1982), alleging that the entire institution of American contract law is in conceptual disarray.


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