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Reproduced with the permission of 8 Journal of Law and Commerce (1988) 109-144

The U.N. Sales Convention & U.S.-Canada Transactions; Enticing the World's Largest Trading Bloc to Do Business Under a Global Sales Law

Errol P. Mendes [*]

There lies a grander ambition behind this paper than the title suggests. Therefore, at the outset let me state what my objectives are.

First, I wish to emphasize that the United Nations Convention on Contracts for the International Sale of Goods (hereafter, the "Sales Convention"),[1] represents the completion of a historical cycle of that part of international mercantile law dealing with the sale of commercial goods across national borders.

Second, I wish to argue that since the United States has chosen to catch this latest wave of international sales law integration,[2] Canada, as its largest trading partner,[3] has very little option but to follow suit. In this regard, I will also argue that the sales convention should apply in its entirety to Canada-U.S. sales transactions.[4]

Last, I wish to outline some of the constitutional problems Canada faces in catching this latest wave of international mercantile law integration.

I. The U.N. Sales Convention and the Historical Cycle of International Mercantile Law

In the 11th and 12th centuries, Europe experienced a commercial renaissance which necessitated the need for a new system of law to govern its commercial activities.[5] This became especially true with the establishment of autonomous cities, ports and merchant trade fairs all trading with each other across new national borders.[6] The new system that developed was called the Law Merchant.[7]

The Law Merchant incorporated both the customs of the market and fairs as well as maritime customs relating to trade into a single and unique body of law.[8] One should keep in mind when discussing the latest attempt to integrate at an international level that the earliest international traders demanded and received five special features of the Law Merchant.[9] These features were: (1) the law was truly transnational in nature;[10] (2) its principal source was the custom and usages of the international merchants themselves;[11] (3) it was administered by the international merchants themselves;[12] (4) the procedure under the law was speedy and informal,[13] and finally (5) the law stressed equity, in the medieval sense of fairness, as an overriding principle.[14]

The important point in analyzing this early period of international mercantile law, is to realize that it was the international merchants themselves who determined what laws were required for effective commercial transactions, not lawyers or judges. Obviously, international merchants at that time were (and presumably still are), more interested in reaching sound business decisions based on efficient legal norms rather than complicating their lives with complex legal technicalities.[15]

II. The Nationalization of the Law Merchant

Until the 17th century, commerce by land or sea was essentially governed by the Law Merchant. The 17th century marked the end of the autonomous mercantile courts that were solely governed and administered by the merchants themselves. England, under the guidance of Sir Edward Coke [16] began to develop an all encompassing common law. During this period, the common law courts were given the power to override any decision that was rendered in the mercantile courts.[17] Thus, to avoid wasting time and money, the merchants began to bring their disputes to the common law courts at the very outset.

The customs and usages of the merchants, while still relevant, were deemed not binding in the common law courts. Rather they were treated as ordinary questions of fact, which had to be proven in every instance to the satisfaction of twelve reasonable and somewhat ignorant jurors.[18] With the blending of the common law and the Law Merchant, the latter began to lose much of the definitiveness which had previously characterized it.[19] Even under the reign of Lord Mansfield as Chief Justice of the King's Bench in the mid-18th century, mercantile law continued to take on more and more of the peculiarities of the common law.[20]

The final step in the nationalization of the mercantile law, including international sales law, occurred in the 19th century. This era is marked by the codification of the commercial common law rules into national legislation.[21] In 1888, MacKenzie D. Chalmers, the author of the Bills of Exchange Act of 1882, was commissioned once again to draft a similar bill embracing the sales law area.[22] As Chalmers himself recorded, Lord Herschell's advice to him was to endeavour "to reproduce as exactly as possible" the existing law, rather than trying to rationalize it with the continental codes of that time.[23] The product of Chalmer's work was the Sale of Goods Act 1893. It should be noted that this Act served as a model for the various Canadian provincial Sale of Goods Acts as well. As several authors note,[24] this codification of the commercial common law rules resulted in the Law Merchant losing the last of its cosmopolitan character.

Although this nationalization of the commercial law was supposed to enhance mercantile affairs, time has shown that in fact, national laws are the international merchants and traders worst enemy.[25] As one commentator has appropriately noted, "whenever the private law is splintered into many jurisdictional fragments, the need for uniformity shows up most strongly in the field of commercial law."[26]

III. Brief History of the Vienna Sales Convention

Before we delve into a detailed discussion of the Sales Convention, it is crucial that the reader be made aware that this convention has had an extensive and impressive history. This paper does not pretend to provide a detailed account of this history,[27] however, the major events leading to the establishment of the Sales Convention shall be discussed.

The initial impetus with regard to the unification of international mercantile laws had occurred in the Netherlands during the late 19th century.[28] However, the first significant events in this area did not occur until the 1930's. The 1930's were dominated by the efforts of a distinguished group of European scholars who were working toward the unification of the private law in various areas, including sales law, under the auspices of the International Institute for the Unification of Private Law (UNIDROIT).[29] Unfortunately, UNIDROIT's work had to be suspended from 1939 until 1951, due to the outbreak of World War II.[30]

In l95l, an international Conference of 21 nations strongly encouraged the members of UNIDROIT to once again take up the reins and to continue with their work on the unification of international mercantile laws.[31] UNIDROIT's scholars were encouraged and eventually produced two conventions which were adopted by a diplomatic Conference at the Hague in 1964.[32] The two conventions were: (i) Uniform Law on the International Sale of Goods (ULIS), and (ii) Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF). From the titles of these conventions, one can see that various aspects of an international commercial transaction were to be treated separately.

UNIDROIT's mandate was aimed at eliminating the problems arising out of the variations in the law from country to country both in national rules governing the sale of goods and in the national conflict of laws rules for ascertaining the relevant law concerning the formation of international sales contracts.[33] Despite the desirability of such an objective, neither of these conventions received widespread support. The only countries which adopted the Hague Conventions were those European countries which heavily participated in the drafting of the Conventions.[34] In fact, although ULIS and ULF became effective in 1972, it was evident long before that date that neither convention would gain general acceptance.[35]

All this begs the question as to why such an effort, which from an historical perspective was obviously needed (and still is), would fail so badly. As early as 1964, the Hungarian Delegation gave the answer during the 19th Session of the United Nations General Assembly. They proposed that the following be included as an agenda item: "consideration of steps to be taken for progressive development in the field of private international law with a particular view toward promoting international trade."[36] It was urged by the Hungarians that the conflicts and divergences arising from differing national legal systems constituted an obstacle in the development of world trade. It was argued that hazards, uncertainties and complications regarding legal consequences discouraged transactions in international trade.[37]

Apparently, as history reveals, the United Nations General Assembly heeded the Hungarians request since the Secretary General was requisitioned to prepare a detailed report indicating the problems in this area as well as any possible solutions.[38] The Secretary General's Report concluded that "the most urgent problem in this area is the waste of time and confusion . . . caused by the existence of competing agencies in the work of unification. The remedy for this state of afairs would seem to lie in the establishment of a rallying ground for unificatory activities -- a kind of international clearing house -- which would co-ordinate and supervise activities of this nature and also facilitate the collection of any information that might be required, either from governmental or other sources."[39]

In response to the Secretary General's report, the United Nations Commission on International Trade Law (UNCITRAL) was established and adopted by the United Nations General Assembly during its 22nd Session on December 17, 1966.[40] The essence of UNCITRAL's mandate is to provide for the "progressive harmonization and unification of the law of international trade."[41] Was this not just another way of stating UNIDROIT's mandate? Although this may seem to be so, once the work of these two Commissions are compared, it will be entirely evident that the working methods utilized by UNCITRAL were far superior to those of UNIDROIT.

January 29, 1968, marked the opening session of the new United Nations Commission on International Trade Law.[42] It was unanimously decided during this first session that priority should be given to the promulgation of a unified international sales law.[43] The dilemma which immediately faced UNCITRAL was whether it should promote widespread adoption of the two Hague conventions or, in the alternative, undertake to prepare new legal texts. To seek guidance on this issue the Commission requested the Secretary General to distribute the two conventions, with Professor Tunc's commentary, to all the United Nations member states.[44] Each member was asked whether or not they intended to adopt the Hague Conventions and to provide the reasons for their choice.

The participants established that neither of these two conventions would be acceptable as a basis for a Uniform International Sales Law. As several distinguished authors note,[45] the basic difficulty stemmed from inadequate participation by representatives of different legal backgrounds in the preparation of the 1964 Conventions. In fact, although the United States is one of the world's largest international traders, it actually had very little to do with the formation of either ULIS or ULF. As one author has appropriately noted, "the United States Delegation had very little impact since consideration of its views would have required major revisions."[46] Thus, the 1964 Hague Conventions were essentially the product of scholars of the Civil law tradition of Western Europe.[47]

To remedy this situation, UNCITRAL established a Working Group of 14 states which comprised a cross-section of UNCITRAL's world-wide representation.[48] The Group was authorized to prepare revisions of the 1964 texts or to prepare a new text that would facilitate "wider acceptance by countries of different social, legal and economic backgrounds."[49] As we are all aware, UNCITRAL responded by eventually preparing a new draft on Contracts for the International Sale of Goods (CISG). However, before we discuss the CISG, two significant occurrences deserve mentioning.

In June 1978, a full Commission completed its review of the Working Group's drafts on ULIS and ULF. They decided to combine the subject matter of both conventions into a single draft. Thus, a single Convention would deal with both the formation of the sales contract and with the substantive rights of the parties under the international sales contract.[50] The Commission recognized that the issues involved in ULIS and ULF were so closely intertwined that implementing a single integrated convention would be far superior than trying to implement two separate Conventions.[51] One could easily imagine the confusion that would result if only one of the Conventions was adopted by some countries, both by other countries, and neither by the common law countries. As one learned author stated, "UNCITRAL provided for the marriage of two sets of rules that had lived separately for over four decades."[52]

In March 1980, a United Nations Conference of plenipotentiaries consisting of 62 states and 8 international organizations convened in Vienna to consider UNCITRAL's Draft Convention.[53] What is significant about this event is that after only five weeks of negotiations the Convention on the International Sale of Goods was unanimously approved on April 11, 1980.[54] The result of these five weeks of negotiations represents the completion of the historical cycle of international sales law which began in the 11th & 12th centuries.

The Sales Convention will go into force one year after its ratification by ten states.[55] The United States formally ratified the Convention on December 11, 1986, at about the same time as China and Italy, thus bringing the number of ratifications to 11.[56] Thus, the Convention will come into force on January 1, 1988. As will be stated several times in this work, Canada must not wait much longer before serious consideration is given to adopting the Vienna sales convention. As a leading Canadian authority has noted, "If Canada's other trading partners, particularly such states as Japan, the United Kingdom and above all the United States ratify the Convention, Canadian exporters and importers may frequently find their contracts subject to the Convention's rules unless they have taken care to exclude them."[57]

The practical ramifications of the United States ratification have also been astutely expressed by Professor Sono,[58] "Many countries would certainly be influenced if the United States ratified the Vienna Convention. The speed of the rolling bandwagon will be accelerated. Moreover, it is not an overstatement to indicate that many countries were in fact waiting for the United States to ratify the Convention so that their own bureaucrats would have an impetus to accelerate procedures for the approval of the Convention."[59] Beside being an important and influential member of UNCITRAL, the attitude of the United States is now being closely observed by a global community that is anxious to see the United States take an active leadership in this important field.[60]

Since the United States has ratified the Convention, one can assume that many other states who deal with the United States will also ratify the Convention. Therefore, if Canada wishes to catch this wave (or hop on the bandwagon as Professor Sono puts it), there will be no other alternative but to ratify the Vienna Sales Convention.

IV. Commentary on the Sales Convention

As is evident from the history leading to the adoption of the Sales Convention, this Convention represents the culmination of over fifty years of high-level work on the unification of international mercantile laws.[61] It must be vigorously stressed that the Sales Convention is not simply a collection of rules supplanted from a multitude of common law, civilian and other sources. Rather, the drafters have aimed for a synthesis of the best features that modern sales systems have to offer.[62]

While it is entirely clear that the Convention has retained some of the basic features of its predecessors, it is also patent that the Convention contains a number of improvements in terms of substance,[63] structure [64] and drafting style.[65] Perhaps the most significant advance of the Sales Convention, over past unificatory attempts, is that the Convention represents a truly global effort, with balanced representation of all the regions and economic and legal systems of the world.[66] In fact, the Convention was finalized in six culturally diverse languages.[67]

As a testament to the Sales Convention's superiority over the Hague Conventions, it has been duly noted by several authors that the Sales Convention has been received with general approval in marked contrast to the reception of ULIS and ULF.[68] Professor Sono has summed up the prevailing trend of commentaries on the Sales Convention, "The Convention enjoys praise throughout the world as a workmanlike attempt to devise legal rules and practical procedures for international sales transactions. Favorable attitudes prevail from countries of the South, North, East and West, and no seriously critical comments have been heard."[69]

There are several features unique to UNCITRAL, that have helped pave the way for the popular reception of the Sales Convention. To reiterate and stress a point that has just been made, UNCITRAL's success, to a large extent, is primarily due to its position as a specialized body of the U.N., thus enabling it to consider the views and suggestions of representatives from all parts of the world.[70] This world-wide composition of UNCITRAL is a direct result of the Commission's belief that, for unification and harmonization of international sales laws, views from all parts of the world must be reflected and reconciled.[71] The net result of UNCITRAL's efforts is a Sales Convention that escapes the ethnocentric perspectives and biases of any one legal system.[72] As an authority has noted, "The depolitisation of international trade law is an invaluable achievement. It is the precondition for the creation of a modern transnational law of international commercial transactions."[73]

Since we are mainly concerned in this paper with United States and Canadian international transactions under the Sales Convention, commentaries specifically devoted to those interests shall now be considered.

Although Canada was not an active participant in the negotiations that eventually established the Sales Convention, it is to be observed that Canadian interests have been well represented through other countries' legal systems. For example, of some relevance to the common law (civil law duality in Canada) is a Ghanian expert's view that the CISG provisions are compatible both with the needs of developing countries, and that they provide a sound basis for sales transactions between Anglo-phone and Francophone countries in Africa.[74] Other features, such as the Federal nature of the Canadian legal system have also been addressed. This is evidenced by Article 93(1)[75] which, in essence, permits Canada to ratify the Sales Convention, while allowing the provinces the individual choice of whether or not they wish to be bound by the Convention. Alternatively, if at first some of the provinces choose not to apply the Sales Convention, there are provisions to allow it to join at a later date.

As the Ontario Law Reform Commission has recognized, Canada, as one of the world's major exporters and importers, has an important stake in the development of uniform laws and practices to govern international sales transactions. The Commission also astutely observed that legislative and other efforts to achieve international uniformity may also provide useful sources for national reforms and for uniformity within federal states like Canada.[76]

The United States is one of the most important and influential members of the Commission. As one leading authority in this area has noted, "Ever since the Commission was established in 1966, UNCITRAL has constantly received warm support from the United States. The State Department always sends high-level experts for each item under consideration by UNCITRAL and contributes greatly to the maintenance of the high standard of deliberations in the Commission."[77]

There can be no doubt that the United States' input has had a significant impact on the outcome of the Sales Convention. The U.S. experts all seem to basically agree that the concepts and usages embodied in the Sales Convention are similar to those under the Uniform Commercial Code and that the Convention may serve to create an effective legal framework for co-ordinating the laws of many jurisdictions.[78] Furthermore, these experts conclude that United States businessmen will have little difficulty working with and understanding the Sales Convention.[79] As a last comment, it should be noted that despite the Convention's flaws, commentary on the Sales Convention in the United States has been favorable.[80]

In summary, although it took 500 years, it now appears that international trading merchants will once again have the benefit of a truly unified and integrated international sales law. The interests of both Canada and the U.S. have been addressed by this Convention. The Convention itself combines the essential characteristics of practicality, simplicity and clarity, to produce a sales law that is free of legal shorthand, free of complicated legal theory, and which is easy for the businessperson to understand.[81] As one author has noted, "It is hoped that at least in the area of international sales Voltaire's complaint, when crossing Europe in the 18th century, will soon no longer hold true, namely, that he had to change laws as often as he changed horses."[82]

V. The Article 94(1) Reservation

Upon ratification of the Sales Convention, the Convention permits a Contracting State to make certain reservations which have the effect of excluding the application of the Convention under specified circumstances. In particular, we are concerned with the reservation that is permitted by Article 94(1):

Two or more Contracting States which have the same or closely related legal rules on matters governed by this Convention may at any time declare that the Convention is not to apply to contracts of sale or their formation where the parties have their places of business in those states. Such declarations may be made jointly or by reciprocal unilateral declaration.

The leading Canadian Sales Law authority has suggested that it may be wise for Canada to make the Article 94(1) reservation, with respect to Canada-U.S. international sales transactions, should Canada decide to ratify the Sales Convention.[83] Several reasons were submitted as to why the Article 94(1) reservation should be made. The reasoning for making such a crucial decision must be thoroughly scrutinized and debated. At the outset, this author strongly suggests that Canada should adopt the Sales Convention as a whole without making the Article 94(1) reservation.[84]

The reasons both for and against Article 94(1) shall now be presented. Professor Ziegel gives the following arguments for making the Article 94(1) reservation as regards Canada-U.S. sales transactions.

1. "The Vienna Convention, though generally clearly and simply written is not a simple document. It represents the synthesis of principles and rules drawn from various legal systems whose practical success still has to be proven."[85]

The Sales Convention is not merely a collection of rules and principles drawn from various legal systems. The Sales Convention is a synthesis of the best features that modern sales systems have to offer.[86] Moreover, the Convention has benefitted from the mistakes of previous Conventions and from the best efforts of both academicians and business professionals.[87] As a preliminary precaution, the topics which eventually did reach UNCITRAL for consideration had to undergo an intense screening procedure by both trade experts familiar with the requirements of international trade and legal experts in this area.[88] Although such a procedure cannot guarantee practical success, it goes a long way toward improving the odds in favor of success.

The sale of goods is a highly practical affair; legal solutions can be successful only to the degree to which they are based on an intimate knowledge of commercial needs and practices.[89] As was just noted, expert advice governing all aspects of international sales was available and utilized by UNCITRAL in preparing the Sales Convention.[90] Furthermore, international commercial organizations,[91] which were formed to only deal with the "practical" world, played an important part in UNCITRAL's proceedings as well. Therefore, one can see that the Sales Convention does embody a practical set of rules.

The most that any international code can do is to remove the barriers which would interfere with a mature and flexible interpretation of each contract in the light of mercantile understanding.[92] Additionally, laws designed for use in the international arena require greater flexibility than those designed for merely regional use.[93] The Sales Convention promotes the significance of commercial understandings and trade usages in interpreting international sales contracts.[94] As has been noted, the Sales Convention has been designed for flexibility and will provide a framework on which a common body of international doctrine and case law can be built.[95]

One last point that should be made draws on Europe's experience under ULIS and ULF. Those countries that had ratified the Hague Conventions were well represented in the preparing of those texts, just as Canada and the U.S. are now well represented under the Sales Convention. The Europeans found that life under the Hague Conventions was far better than being governed by any national law system that would have otherwise governed the transaction.[96] Since the Sales Convention is notably a superior Convention as compared to its predecessors, one can confidently predict that experiences thereunder shall also be an improvement over the national laws that would otherwise govern.

In deciding whether or not to make the Article 94(1) reservation, we now have greater knowledge of the mistakes of the past, we now have more knowledge of experts from around the globe who participated in the drafting of the Sales Convention, and finally, we now have knowledge of limited success which even the inferior ULIS and ULF rules had. Thus, it is submitted if one were to catch this latest wave of international sales law unification, one would also have a safe and prosperous voyage.

2. "Many years are bound to elapse before a substantial body of jurisprudence is developed."[97]

Professor Ziegel himself, states that this is the least persuasive reason for making the Article 94(1) reservation. He goes on further to note that, "The reported decisions under the Hague Conventions . . . do not indicate that the courts experienced undue difficulty in applying their provisions."[98] Indeed, the courts should have an easier time applying the Sales Convention's provisions since many of the technical details which had complicated the previous two Conventions have been discarded.[99] Furthermore, experience with Article 2 of the Uniform Commercial Code in the U.S. has shown that the American courts are well equipped to deal with novel concepts.[100] Lastly, it would be wrong to assume that the courts would be working without guidance. The UNCITRAL working papers and reports are voluminous and very detailed and should provide considerable guidance on most questions.[101]

In addition, as one author notes, "there is a praiseworthy tendency of the courts to disregard national maxims of interpretation, to which they are traditionally accustomed, and to interpret these measures in an international spirit, aimed at preserving the uniformity of the measure in question."[102] The British case of Fothergill v. Monarch Airlines,[103] is an excellent example of this modern tendency.

In the words of Lord Diplock, ". . . The language of an international Convention has not been chosen by an English Parliamentary draftsmen . . . It is addressed to a much wider and more varied judicial audience than is an Act of Parliament that deals with purely domestic law. It should be interpreted, as Lord Wilberforce put it . . . 'unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation.'"

Therefore, it seems that the common law jurisdictions do take a responsible attitude towards the interpretation of international Conventions.

3. "The meaning of some of the provisions may never be satisfactorily resolved because they represent uneasy compromises between conflicting views among the drafters and the delegates at the Vienna Conference."[104]

This proposition is in conflict with the opinion of the majority in this area. It has been noted by several authors that broad agreement existed with regard to all the decisions that were taken, thus enabling the Commission to proceed on a consensus basis, not on the basis of uneasy compromises.[105] In fact, the Czechoslovakian Representative of UNCITRAL appropriately stressed the importance of proceeding on a consensus basis.[106] "Further complications may arise because the Vienna Convention does not claim to be a complete sales code."[107]

The very fact that the Sales Convention is not a complete sales code was due to the drafters' intentions to avoid further complications. As has been noted, "The Convention strikes an adequate balance between national compulsory law and public policy, and the freedom of the parties . . . questions concerning sources of the law and the institutional and economic organization of national communities remain untouched . . . this will certainly facilitate the ratification by developing and Latin American countries."[108]

UNCITRAL followed three basic guidelines in setting the Sales Convention's mandate; first, work was to be restricted to areas of practical need, second, issues on which international agreement was unlikely were excluded, and lastly, particular emphasis was to be placed on producing drafting features which would cope with the stresses and strains of international law making.[109] The drafters purposely kept their aspirations for reform modest so that there would be a greater likelihood of general acceptance of the Sales Convention. As time has shown they were right in doing so.

The mere removal of certain issues from the Sales Convention is an invaluable achievement in itself. As one learned author has appropriately noted, "Refining away anachronisms that complicate domestic law produced a statutory text that is relatively straightforward and uncluttered with technical detail. The value of simply eliminating technical rules that divert attention from the transaction and its commercial setting could easily be overlooked."[110] As a last thought on this particular issue, the first steps involved with any new task are always the most difficult. Consider the Sales Convention as the first significant match in a complicated jigsaw puzzle. All of the sudden, other pieces that previously seemed unrelated now take on form and add to the puzzle. With each new match the total picture becomes clearer and the remaining pieces are easily fit in.[111]

5. "With the exception of Quebec, the American states and the Canadian provinces share a common legal legacy. Though there are numerous differences in detail and sometimes of principle between Article 2 of the Uniform Commercial Code and the provincial Sale of Goods Acts, they still have much more in common than there is between either of these two enactments and the Vienna Convention. Moreover, there is a vast body of jurisprudence on Article 2 and on the Sale of Goods Acts, and in most cases the parties should have little difficulty determining the answer to a legal problem."[112]

As will be shown, such a statement is debatable. Granted, both the provincial S.G.A.'s and Article 2 of the U.C.C. share the same genus,[113] however, Article 2 has evolved into quite a different creature than today's provincial S.G.A.'s. Professor Ziegel's assertion should have read: Article 2 of the U.C.C. and the Sales Convention have more in common with each other than either does with the provincial S.G.A.'s.

The arguments proposed in favour of making the Article 94(1) reservation are underscored by the crucial assumption that American and Canadian sales laws meet the requirements of "the same or closely related."[114] One cannot dismiss the "numerous differences in detail and sometimes of principle," as being insignificant. In presenting a general overview of these differences, it will be shown that, in fact, this is not the case. Rather, the differences between the provincial S.G.A.'s and Article 2 of the U.C.C. are of such fundamental importance that major revisions would be required if Canada was to adopt Article 2 type provisions.[115]

To vividly illustrate the contrasting natures of Article 2 and the provincial S.G.A's, the following is a list of some of the areas of difference or conflict that have been cited by the Ontario Law Reform Commission (1979).[116]

(1) Warranty is not restricted by privity in the U.C.C.[117]

(2) The U.C.C. ousts the void/voidable distinction with regard to mistakes of identity.[118]

(3) Article 2 distinguishes between "merchants" and casual buyers and sellers, while the S.G.A applies to all sales.[119]

(4) Article 2 differs with respect to its treatment and definition of "goods attached to the land."[120]

(5) The S.G.A. requires monetary consideration where the U.C.C. does not.[l2l]

(6) Article 2 reverses the common law position on "firm offers" which is still followed under the S.G.A.[122]

(7) Article 2 differs in its treatment of the effect of "seals".[l23]

(8) The U.C.C. collapses the distinction between the effect of frustrating events with respect to perished goods.[124]

(9) The U.C.C. has tried to meet the criticisms attached to the Statute of Frauds.[125]

(10) The U.C.C. differs in its treatment of Parol Evidence.[126]

(11) The U.C.C. allows evidence that shows how the parties applied the agreement in practice, while the S.G.A. does not.[127]

(12) The U.C.C. has been drafted to meet the criticisms regarding "assignment" as it is governed under the common law.[128]

(13) The U.C.C. even addresses the thorny issue of modification of contractual rights after an assignment.[129]

(14) With regard to damages, the U.C.C. allows for reasonable expectations whereas the S.G.A. is strictly compensatory.[130]

(15) The U.C.C. incorporates both an unconscionability and good faith doctrine which is unprecedented in Canadian law.[131]

(16) The U.C.C. differs in its treatment of the parties' course of dealing and usages of trade.[132]

(17) The U.C.C. does not allow a contract to fail due to the absence of one or more terms.[133]

(18) While exclusive dealing contracts are governed under the U.C.C., they are not even considered under the S.G.A.[134]

(19) The U.C.C. contains provisions covering "options and cooperation respecting performance of the contract;" there is no counterpart under the S.G.A.[135]

(20) The U.C.C. differs in its treatment of implied warranties concerning freedom from encumbrances and absence of patent infringements.[136]

(21) The seller's liability for the description of goods by a third party is handled differently between the two Acts.[137]

(22) The U.C.C. regulates disclaimer clauses while the S.G.A. does not.[138]

(23) There are differences with regards to the transfer of title and its incidents.[139]

(24) Differences in the buyer's rights on the seller's insolvency.[140]

(25) Differences in the meaning of "bailee" and the duties as bailees of the goods.[141]

(26) Under the U.C.C. the concept of property does not govern the risk of loss as it does under the S.G.A.[142]

(27) In relation to risk of loss, the effect of the parties' breach is treated differently under the U.C.C. and S.G.A.[143]

(28) Deterioration of goods in transit is also handled differently.[144]

(29) Issues involving the delivery of non-conforming goods and the buyer's right to revoke acceptance require different analyses under each Act.[145]

(30) Sales on approval and contracts of sale or return are treated differently.[146]

(31) There are also differences in the way residual title problems are governed between the two Acts.[141]

(32) One's entitlement to sue for tort damages is greater under the U.C.C. than under the S.G.A.[148]

(33) The protection given to persons with a voidable title also differs between these Acts.[149]

(34) Also the law relating to documents of title is different.[l50]

In an effort to save space and perhaps sanity, the following areas of difference between the provincial S.G.A.'s and Article 2 will just be simply listed:

Passing of property;[151] goods authorized or required to be shipped;[152] delivery of goods in possession of another;[153] sales involving shipment;[154] reservation of disposal rights;[155] incorporation of mercantile terms;[156] time of payment;[157] letters of credit provisions;[158] sufficiency and form of payment rules;[159] place of payment;[160] right to reimbursement of a financing agency;[161] frustration of contracts of sale;[162] treatment of the buyer's and seller's remedies;[163] results of resale as proof of damages;[164] exhausting real remedies before suing for price;[165] stoppage in transit;[166] nature of the non-conformity;[167] place of examination;[168] revocation of acceptance;[169] buyer's powers and obligations with respect to the goods;[170] duty to state grounds of rejection;[171] buyer's lien rights;[172] buyer's damage remedies;[173] buyer's right to cover the seller's failure to perform;[174] test of substantial breach;[175] place and time for determining the commercially reasonable price;[176] anticipatory repudiation;[177] installment contracts;[178] limitation periods.[179]

Therefore, as one can see, Article 2 of the U.C.C. and the S.G.A.'s are not as similar as they may prima facie appear. It must be re-emphasized that these are only "some" of the differences between Article 2 and the S.G.A.'s.

Before we move on, some of the major differences that have just been cited shall now be considered in greater detail. Once the S.G.A. and the Article 2 differences have been compared, the Sales Convention's provisions shall be discussed to see how they relate to these issues.

A. Formation of Contracts in General

One of the first and most serious differences between the S.G.A.'s and Article 2, involves the way these Acts govern the formation of contracts. In general, Article 2 enshrines the important rules governing formation, while the S.G.A.'s leave most of these considerations to the common law.[180] Moreover, many of Article 2's provisions have been drafted with the particular intent to change the existing common law position, or, to provide assistance where the common law was silent on a specific issue.[181] Thus, many of Article 2's provisions differ from the common law rules that govern the formation of contracts in Canada.

1. Battle of the Forms

As an example of Article 2's deviation from the common law, let's consider the notorious problem appropriately called the "battle of the forms."[182] The common law position dictates that an acceptance must be unqualified and that it must not differ from the terms of the original offer. If the forms tendered in response to an offer offend either of these two conditions, they do not constitute an acceptance of that offer. Rather, they are viewed as representing a counter-offer. Unless the original offeror acts upon this counter-offer, there is not a valid contract and either party may refuse to continue performance.[183]

As the O.L.R.C. has noted, "The draftsmen of Article 2 of the U.C.C. did not feel that the 'mirror image' and the 'last shot' rules of acceptance corresponded with commercial realities. Accordingly, they set out consciously to change the common law position. . ."[184] The O.L.R.C. summarized how Article 2 changed the common law in three ways:[185] (1) they abolished the mirror image rule in favor of treating acceptance as confirmation, even when the acceptance contains additional or different terms,[186] (2) additional terms are to be treated as proposals for additions to the contract,[187] (3) where the offeree's communication can not be treated as an acceptance, but the parties have proceeded on the assumption that a binding contract exists, the conflicting terms are to be disregarded.[188]

The Sales Convention and the U.C.C., unlike the provincial S.G.A.'s, provide for a detailed set of rules governing the formation of contracts.[189] In particular, Article 19 of the Sales Convention specifically addresses the problem of the battle of the forms.[190] By virtue of Article 19, if without undue delay, the offeror objects to even an immaterial deviation in the purported acceptance, there is no contract. As has been noted by one learned author, "the U.C.C. 2-207 tried to go farther and, in effect, force through a marriage when the couple was quarreling at the alter."[191] Thus, the Sales Convention's rule is simple and straightforward. While the Convention seems to revert to the common law position, the way the provision is set up will make a great difference in practice. Specifically, immaterial changes in the acceptance are deemed to be acceptable unless prompt notice is given to the contrary. In practice, most merchants will not give prompt notice that immaterial changes are unacceptable, and so will be bound as they should be. Commercial efficiency will be the victor!

2. Consideration and Revocability of Offers

Another difference between the S.G.A.'s and Article 2 involves their treatment of "consideration." Under the common law a promise to hold an offer open for a stipulated amount of time is enforceable only if it is supported by consideration.[192] On the other hand, Section 2-205 of the U.C.C. provides that, "An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurances that it will be held open, is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time . . ." The official comment of section 2-205 specifically states that, "this section is intended to modify the former rule which required that 'firm offers' be supported by consideration in order to bind the parties."[193]

Article 16 of the Sales Convention provides for the same result as does section 2-205 of the U.C.C.[194] That is, with international business contracts, there is no need to furnish consideration to hold an offer open. Although the Sales Convention holds an offer open where the U.C.C. would not,[195] it has been observed that the Convention's result is much closer to the U.C.C. than to the traditional common law doctrines.[196] The ousting of this "consideration requirement will undoubtedly serve to promote certainty in the international trading community. Businesspersons' expectations and intentions will be protected from being defeated by a mere technicality.[197]

B. Good-Faith

Moving away from strictly formation issues, the U.C.C. incorporates a general obligation of good-faith that is required in the performance and enforcement of contractual obligations.[198] Furthermore, with respect to merchants,[199] the U.C.C. imposes a higher standard of good-faith than it does on casual buyers or sellers.[200] In contrast, the S.G.A.'s do not even hint at any such obligation of good-faith. Any issues that may be labelled as good-faith in Canada are left to the common law. As the O.L.R.C. has noted, "It can not be said that good-faith is already an integral part of our sales law. Indeed, the opposite has been asserted, or is generally assumed."[201]

In addition to this concept of good-faith, the U.C.C. also incorporates a doctrine of unconscionability.[202] The O.L.R.C. stated the difference between good-faith and this concept as follows, "The doctrine of unconscionability is concerned with fairness in the terms of the bargain; the doctrine of good-faith, on the other hand, focuses on decent behavior in the exercise of rights or duties imposed under the terms of the agreement or by the governing Act."[203] Again, there is no such doctrine in Canadian sales law.[204] Section 53 of Ontario's S.G.A.[205] reflects the attitude that is prevalent in Canadian sales law, that is, the parties are free to bargain to one's best advantage.

The Sales Convention, like the S.G.A., allows the parties to bargain freely without restraint. It does not regulate the types of terms or the exclusions that can be embodied in a contract. However, the Sales Convention also incorporates a general guiding principle of good-faith as the U.C.C. does.[206] It is submitted that, as far as international business transactions are concerned, the Sales Convention's approach combines the best of the domestic Acts.

Since the Sales Convention only applies to international sales transactions, the great majority of the negotiations will take place between bargaining parties of relatively equal strength and sophistication. This is especially true with regard to Canadian-American transactions. As a result, the Sales Convention does not need to employ provisions that are designed to protect the consumer or casual buyers and sellers. As has been noted, the exclusion of these types of provisions has allowed the Drafters of the Sales Convention to provide international merchants with a clearer and less complicated set of rules.[207]

On the other side, although the parties can freely bargain their positions, they must observe some standards of good-faith in carrying out their deal. This doctrine also serves other critical functions, namely, it gives the courts the flexibility needed to make the Convention work in practice. As has been noted, "this flexibility allows tribunals to avoid overly literal interpretations which would produce inequitable results that were unintended by the drafters."[208] Thus, we can see that the Sales Convention's provisions are reminiscent of the rules that prevailed during the reign of the Law Merchant. The merchants were free to determine their bargains, but once they entered into a deal, prime importance was paid to the principles of good faith.[209]

C. Course of Dealing and Usages of Trade

As the O.L.R.C. notes, "A course of dealing between the parties and usages of trade have long been recognized as serving two important roles . . . first, to give meaning to the express language adopted by the parties and, secondly, to supplement or qualify the express terms of the contract with terms presumptively imported because of past dealings between the parties, or because they are commonly observed by members of a trade or merchants trading in a particular locality."[210] And, as the O.L.R.C. further notes, "the S.G.A. recognizes these roles, but only fragmentarily . . . the language falls short of a comprehensive statement . . . it is only concerned with the exclusionary role of usage of trade and course of dealing."[211]

In contrast, the Sales Convention, like the U.C.C., provides for the interpretation of contracts for the sale of goods in light of the general practices of the business sector and of the previous practices between parties to the contract.[212] This particular attention paid to the course of dealing and usages of trade, is one of the dynamic aspects of the Sales Convention which will allow it to keep in touch with commercial realities.[213] This feature was also one of the key tenets of the Law Merchant.[214]

D. Ousting the Property Concept

While the concept of "property plays a crucial role under the S.G.A., the U.C.C. does not rely on this concept at all.[215] Under the S.G.A., one starts with the proposition that the party who has the property in the goods bears the risk. As a learned author notes, "Since businessmen do not draft their hurried sales contracts in light of this abstract concept, the Act sets forth presumptions concerning their intent as to the location of property, but the rules are complex and often call for speculation concerning elusive or non-existent states of mind."[216]

In contrast to the S.G.A.'s approach, both the Sales Convention and the U.C.C. allocate risks in accordance with physical acts done in the performance of the sales contract.[217] This emphasis and reliance on the happening of a specified physical event, provides the businessperson with a simple and practical method for determining when risk is to pass. For example, any "businessperson" can comprehend that risk is to pass when the goods are loaded into the ship's hold. However, only a few "lawyers" could accurately determine when risk was to pass in the same circumstances, if they were required to rely on the outdated concept of property.

In Ernst Rabel's words, the concept of property is one of the "awesome relics of the dead past that populate in amazing multitude the older codifications of the sales law."[218] According to the authorities in this area, by leaving this concept of "property" to the dead past, the Sales Convention has made striking gains in clarity and practicality.[219]

Hopefully, this elaboration of a few of the differences between the S.G.A.'s and the U.C.C., will have shown that, in fact, the substance of these two systems of sales law is anything but similar. Even if the only differences were those that were expanded upon, they are of such a fundamental nature that reform would still be necessary. However, as discussed, there are over eighty more areas of difference that would have to be addressed if one were to have a comprehensive understanding of the implications that are involved in Canada-U.S. sales transactions. Does the prospect of having a unified set of simple and practical rules sound more attractive?

Finally, after a review of some of the differences between U.S. and Canadian sales law, it should not seem unreasonable to question whether the Article 94(1) reservation would be appropriate in such a case. Article 94(1) requires that the sales law of the two countries be the "same" or "closely related." Professor Honnold, in his learned text on the Sales Convention, cites what he feels is an appropriate situation in which to make the Article 94(1) reservation: "the States of Eastern Europe that are members of the Council for Mutual Economic Assistance (CMEA) have adopted General Conditions of Delivery of Goods that are applicable to organizations of the member countries."[220] The reservation makes perfect sense in this case, since the member countries not only share a common set of rules, but they also share in a common ideology that is being promoted by these rules.

To give Article 94(1)'s requirement of "closely related" such an expansive scope, so as to include the fundamental differences between U.S. and Canadian sales law would, in this author's opinion, render such a requirement meaningless.

The last part of Professor Ziegel's argument stated that, "there is a vast body of jurisprudence on Article 2 and on the provincial S.G.A.'s, as a result there should be little difficulty in determining an answer to a legal problem." This argument is somewhat contradictory. One does not develop "vast bodies of jurisprudence" if the underlying laws are properly doing their jobs. The literature in this area supports the view that the domestic sales legislation is ill-suited for adequately dealing with international business transactions.[221] Finally, despite this vast body of jurisprudence, it has been noted that,"The world's exchange of goods, running at about a trillion dollars a year, still lacks answers to the most basic questions."[222]

6. Professor Ziegel's sixth argument in favor of making the Article 94(1) reservation is that, "the Sales Convention is not limited to large commercial contracts. It applies to contracts of sale between all types of parties and affecting all kinds of goods."[223]

Professor Ziegel submits that, "it is entirely possible that the Sales Convention will catch many thousands of contracts each year between Canadian and American buyers and sellers who are unlikely to know anything about the Convention, but who would ordinarily expect their contract to be governed by the domestic provincial or state law. He suggests that it would be more practical and efficient if the government were to make the Article 94(1) reservation to avoid such a result.[224]

Furthermore, Professor Ziegel advocates that the inclusion of an "opting-in" provision in the Sales Convention would serve to eliminate some, but not all of these problems.[225] However, the inclusion of an opting-in provision, which was favored by some delegations, did not find a majority during UNCITRAL's deliberations on the Sales Convention. As has been noted, "It would have reduced the uniform law to a uniform set of contract terms of rather theoretical interest."[226]

According to the studies that have been conducted in the business community, there seems to be a definite lack of interest among businesspersons as to the state of the law governing their transactions.[227] Thus, it would seem that businesspersons would be just as undereducated with respect to the S.G.A. and the U.C.C. as they would be about the Sales Convention. It is suggested that this state of affairs has arisen more by default than by design. As has been noted, "the sale of goods is a highly practical affair; legal solutions can only be successful to the degree to which they are based on an intimate knowledge of commercial needs and practice."[228]

By implication, one can assume that neither the S.G.A nor the U.C.C. have fulfilled the needs of the merchants dealing in the international arena. In fact, many international merchants have been forced to devise standard form contracts to narrow the content of the transaction that may be exposed to domestic sales law.[229]

In any event, even if the transaction was caught by the Sales Convention, in all likelihood, its application would not prejudice the parties' transaction. Businesspersons rely on customs and trade usages in conducting their daily business. The Sales Convention specifically recognizes this fact of life and therefore, it is unlikely that the Convention's provisions would alter the terms of the merchants' deal. Moreover, the fact that the Convention incorporates principles of good-faith, will serve as an assurance that inequitable results will not follow if the deal is caught by the Convention. Some authors are of the opinion that this good-faith concept will also foster an atmosphere of trust and co-operation amongst international merchants.[230] Therefore, it is submitted that it would be more efficient and practical if Canada were "not" to make the Article 94(1) reservation.

VI. Constitutional Issues

With reference to the constitutional position in the United States, Professor Honnold has stated that, "the necessity to act as one nation in dealing with foreign trade was one of the important forces behind the adoption of our Constitution, and from the beginning, the Supreme Court has given wide scope to the national power over foreign commerce.[231] The United States Congress can rely on either the federal treaty implementing power [232] or the federal commerce power,[233] to implement important treaties dealing with foreign trade such as the Sales Convention.

Unfortunately, the constitutional position in Canada is very different. Even though Canada's economic life is dependent on international trade,[234] the Canadian constitution does not bestow onto the federal government a supreme power which would allow them to act as one nation in dealing with matters regarding foreign trade.

This position, in part, resulted from jurisprudence emanating not from a Canadian court, but from England's Privy Council. The Privy Council was the highest appellate court for the Dominion of Canada until 1949.[235] The landmark decision which perpetuated Canada's current constitutional attitude with regard to foreign trade was the 1937 Labour Conventions case.[236] The Privy Council held that the federal government of Canada lacked a general treaty implementing power, and that it could only implement those treaties where the subject matter fell within the heads of jurisdiction expressly or impliedly given to the federal government by the Constitution Act 1867.[237] International treaties whose subject matter dealt with heads of jurisdiction expressly reserved to the provinces, could only be given effect if they were adopted by the legislatures of those provinces.

This common law position occasionally leads the federal government of Canada to feel incompetent to act with complete authority in the area of foreign trade and commerce. A good example of this is the present uncertainty as to whether the federal government of Canada can implement all the promises it makes with the United States in the current free-trade negotiations.[238] This is especially so where the subject matter of those promises falls within provincial jurisdiction. As it stands, it may well be that the provinces will be the ultimate deciders as to whether or not Canada enters into a free-trade agreement with the United States.

Although several judges of the Supreme Court of Canada have expressed serious doubts as to the correctness of the 1937 Privy Council's decision, the current reality is that both the federal and the provincial governments have proceeded on the assumption that the Labour Conventions case was correctly decided.[239] Thus, the federal government has sought at the earliest stages possible to seek provincial approval regarding those treaties whose subject matter falls within provincial jurisdiction.

The federal government is of the view that the Sales Convention deals essentially with questions of property and civil rights. These areas have been expressly reserved to the provinces under section 92, head 13 of the Constitution Act 1867. Case law has shown that these areas also include one's right to enter into a sales contract. As such, provincial implementation of the Sales Convention will therefore be necessary.

Urged by the federal government of Canada, the Uniform Law Conference of Canada approved in 1985 the Uniform International Sale of Goods Act which wholly incorporates the Sales Convention.[240] If this uniform sale of goods Act is adopted by each province, there will then be a uniform implementation of the Sales Convention. To date no provinces have passed the Act, and only two provinces, Ontario and Quebec, have expressed any interest in doing so. However, the relatively recent United States ratification of the Sales Convention on October 9, 1986, will no doubt serve to peak the interest of those provinces which have thus far remained uninterested.

It must be noted that Article 93 of the Sales Convention does contain the standard "federal-state" clause.[241] This clause enables federal states with divided jurisdictions over the implementation of treaties to limit their accession to those component units of the federal state that have agreed to adopt such a Convention. While the federal government does not have a policy which expressly states a minimum number of provinces which must consent, it is very likely that the federal government will attempt to obtain the consent of all ten provinces before it seeks to formally sign and ratify the Sales Convention. This strategy would make sense, since the alternative would be a "checker-board" quality to Canadian adherence to the Sales Convention.

Such a "checker-board" effect would not be good for either Canadian exporters doing business in the various parts of Canada or for foreign importers into Canada who would have to keep track of which jurisdictions have acceded to the Sales Convention and of those which have not.

The federal government of Canada recently showed great success in obtaining the accession of all ten provinces to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.[242] The subject matter of this Convention also fell within provincial jurisdiction, and therefore, the consent of all ten provinces was necessary for uniform application of this Convention in Canada. With this precedent, the time is ripe to push for the same result with the Sales Convention.

It is unlikely that the implementation of the Sales Convention will be high on the political agenda of the governments of the ten provinces. Uniform implementation of this Convention will only take place if there is quiet, consistent and competent lobbying of the important Ministers and bureaucrats in each province. One leading authority has expressed the view that if the provinces are not ready to move in unison, "the federal government of Canada together with those provinces who have so agreed, should accede to the Sales Convention. It is plain that the Sales Convention is too important to allow the luxury of waiting for unanimity."[243] However, it is suggested that unanimity may be worth waiting for, due to the dangers and pitfalls involved in a "checker-board" accession to the Sales Convention.

This author is convinced that with sophisticated and strategic approaches to each province, eventually each province will see the tremendous benefits that it can reap from governance by the Sales Convention. There is a greater impetus for the provinces to so act now that Canada's major trading partner, the United States, is riding high on this latest wave of international sales law unification.

VII. Conclusion

The United States and Canada share a continent in what is still referred to as the "New World." The origin of the legal systems of this new world can be traced back to Europe and in particular to the United Kingdom. The civil law system in Quebec, obviously can be traced back to French roots. It must be noted that ever since the Declaration of Independence there has been a deliberate move to create a legal culture that is distinctly American. This has occurred not just in the area of Constitutional law but in the areas of Corporate, Securities, and Commercial law.

In the case of commercial law, Karl Llewellyn and his band of reformers were not deterred from picking the best commercial law concepts from civil law systems such as Germany.[244] The effect of such reforms, which eventually found their way into the Uniform Commercial Code, was a further separation of United States law from its British roots.

In contrast, the Canadian provinces have kept those British roots almost intact in their commercial laws. Only in recent times has there been a movement towards reform which will inevitably point us in the American direction. As discussed earlier, until this movement is complete there will remain significant differences between Canadian and American commercial law, with the sale of goods being the classic example.

Canada and the U.S. form the largest trading bloc in the world. Each year, over $150 billion worth of trade goes across the longest undefended border in the world. The Province of Ontario alone conducts more trade with the U.S. than Japan does. The free trade agreement recently entered into by the U.S. Administration and the Canadian Government could make these figures even higher. Pursuant to the agreement it is hoped that Canada and the U.S. will have common trade law rules, especially in the countervailing duties and anti-dumping areas. The U.N. Sales Convention offers the opportunity for a common sales law also.

Even without a free trade agreement, Canada's economic well being depends on trade with the United States, which takes approximately 75% of Canada's exports. With such close ties, one would have expected that the commercial laws of both countries would be harmonized, but they are not. In one vital area, namely, export and import transactions between Canada and the United States, the United Nations Sales Convention offers a tremendous opportunity for harmonization and unification of international mercantile sales law. Moreover, adherence to the Sales Convention offers an even greater opportunity; if Canada and the United States adhere to the Sales Convention in its entirety, and harmonize the sales laws between the two countries, they will also be playing by the rules understood by traders in the larger global community as well.[245]

Lastly, because the rules in the Sales Convention are by necessity "open-textured", there may well be a leadership role for Canada and the United States in elucidating and defining these ambiguous terms. However, the longer Canada hesitates in actively promoting the adoption of the Sales Convention to the provinces, the less of a leader Canada will be in this vital area of international mercantile law. Canada must ride the wave with the United States as soon as possible.


* Professor of Law, Faculty of Law, The University of Western Ontario, London, Canada. The author is greatly indebted to Anthony J. Grassi, without whose valuable research assistance this paper would not have been possible.

1. U.N. Conference on Contracts For the International Sale of Goods, Final Act (April 10, 1980), U.N. Doc. A/Conf. 97/18, reprinted in S. Treaty Doc. No. 98-9, 98th Cong. 1st Sess. and 19 Intíl Legal Mat. 668 (1980) [hereinafter cited as the "Sales Convention"].

2. The United States formally ratified the Sales Convention on December 11, 1986. See Winship, Symposium, 18 Intíl Law. 3 (1984), for the legislative details leading to the United States ratification. See also Winship, New Rules for International Sales, 68 A.B.A.J. 1231, 1234 (1982), for reasons presented by the American Bar Association as to why the United States should adopt the Sales Convention.

3. Approximately two-thirds of Canadaís total external trade is absorbed by the United States: Canada Y.B. ß 18.22 (1976-77).

4. This is contrary to Professor Ziegelís assertion that Canada should not adopt the Sales Convention for Canada-U.S. transactions. See infra note 29.

5. Berman, The Overseas Commercial Transaction, 13 Law Intíl Trade 1, 13 (1975). See also W. Mitchell, Essay on the Early History of the Law Merchant 93 (1st ed. 1969).

The rise of this special law coincided with the establishment of conditions highly favourable to the evolution of a special law for commerce. It is only natural to conclude that it is these favourable conditions -- the rise of local jurisdictions in markets and fairs free from the effective control of central power and the existence of a merchant class distinct from the general mass of the population -- that the origin of the Law Merchant is due.

One can observe that those necessary conditions also exist in todayís modern business world. Multinational corporations are effectively free from central control and they are a special class of merchants that are distinct from the general population.

6. W. Mitchell, Essay on the Early History of the Law Merchant 27 (1st ed. 1969).

7. See F.M. Burdick, Contributions of the Law Merchant to the Common Law, in The Association of American Law Schools, 3 Select Essays in Anglo-American Legal History 34 (1st ed. 1909). Burdickís article scrutinizes the purported Law Merchant to see if it can be dismissed as a mere anomaly in history. He ends up concluding that, "for several centuries there was a true body of law in England which was known as the Law Merchant." See also T.E. Scrutton, id., at 7.

8. Berman, supra note 5, at 15. For a detailed account of how the customs of the sea were incorporated into the Law Merchant, see G. Gilmore & C.L. Black, The Law of Admiralty (1st ed. 1957).

9. L.E. Trakman, The Law Merchant: The Evolution of Commercial Law 7-23 (1983). See also Mitchell, supra note 6, at 151-61. For a comprehensive analysis of the effect of these demands, see Berman & Kaufman, The Law of International Commercial Transactions (Lex Mercatoria), 19 Harv. Intíl L.J. 221 (1978).

10. See Mitchell, supra note 6, at 7, 20.

11. See Berman supra note 5, at 18.

12. Id. at 19.

13. Id. at 20.

14. Id. at 22. See also Mitchell, supra note 6, at 20: "Plain justice and good-faith, disregard of technicalities, and regard for the sole truth of the matter, characterize alike in England, France and Italy, the development of the Law Merchant."

15. See L. Kopelmanas, International Conventions and Standard Contracts as a Means of Escaping From the Application of the Municipal Law, in The Sources of the Law of International Trade 118, 120 (C.M. Schmitoff ed. 1964).

16. Sir Edward Coke was appointed as Chief Justice of the Kingís Bench in 1606. During his reign the courts of pepoudrous and the staple courts (mercantile courts which were given special jurisdiction over certain commodities such as, woodfels, leather, lead and tin), declined in importance as England endeavoured to develop an all encompassing common law of its own. See supra note 5, at 25.

17. See, e.g., Pillans v. van Mierop, [1765] 3 Burr. 1665. Lord Mansfield held that, "the rules of the Law Merchant were questions of law to be decided by the courts rather than matters of custom to be proven by the parties and, further, that such rules are to be applied not only to merchants but to all persons."

18. C.H.S. Fifoot, English Law and its Background 105-31 (1st ed. 1932).

19. See Clerke v. Martyn, 92 Eng. Rep. 6 (1702) for an example of outright judicial hostility towards pleading the customs of the Law Merchant where they contradicted the common law. See also Berman, supra note 5, at 25-26.

20. See Burdick, supra note 7, at 44-50.

21. Such codifications include the following: The Sale of Goods, Bills of Exchange, Carriers, Marine Insurance, Merchant shipping, Bills of Lading, Partnership and Companies.

22. J.O. Honnold, The Influence of the Law of International Trade on the Development and Character of English and American Commercial Law, in The Sources of the Law of International Trade 73 (C.M. Schmitthoff ed. 1964).

23. M.D. Chalmers, Sale of Goods iv (1st ed. 1890).

24. See Honnold, supra note 22, at 73; Berman, supra note 5, at 90; and T.E. Scrutton, General survey of the History of the Law Merchant, in The Association of American Law Schools, 3 Select Essays in American Legal History 15 (1909).

25. This fact is obvious from the many learned articles and commentaries in this area that are advocating that commercial law unification is a necessary reform that should be pursued. Examples of such articles are as follows: Honnold, A Uniform Law for International Sales, 107 U. Pa. L. Rev. 299, 300, 316 (1959); Berman & Kaufman, supra note 9, at 264; Rosenstock, UNCITRAL-A Sound Beginning, 62 Am. J. Intíl L. 935, 936 (1968); Feltham, The United Nations Convention on Contracts for the International Sale of Goods, J. Bus. L. 346, 347 (1981).

26. See Mitchell, supra note 6, at 90.

27. For a detailed account, see Nadelmann, Introducing the Forum on: The United States and the International Unification of Law, 15 Am. J.L. 622 (1966-67). See also P. Schlechtriem, From the Hague to Vienna: Progress in the Unification of the Law of International Sales Contracts, in 2 The Transnational Law of International Commercial Transactions, 125 (Horn & Schmitthoff ed. 1982); Richards, Contracts for the International Sale of Goods: Applicability of the United Nations Convention, 69 Iowa L. Rev. 209, 212 (1983-84); Farnsworth, The Vienna Convention: History and Scope, 18 Intíl Law. 17-19 (1984).

28. See Richards, supra note 28, at 212. See also Lansing, The Change in American Attitude to the International Unification of Sales Law Movement and UNCITRAL, 18 Am. Bus. L.J. 269, 270 (1980), for a more detailed account of the Netherlands attempt at unification.

29. J.S. Ziegel, Should Canada Adopt the International Sales Convention? in Meredith Memorial Lectures (Export Sales) 67, 68 (1982); Honnold, The Draft Convention on Contracts for the International Sale of Goods: An Overview, 27 Am. J. Comp. L. 223-225 (1979).

30. See Berman & Kaufman, supra note 9, at 264.

31. Id. at 264-65.

32. See Honnold, On the Road to Unification of the Law of Sales, 2 Forum Internationale 5 (1983). Professor Honnold notes the valuable role that the Hague Conventions have played, "The 1964 Hague Conventions will be superceded by the 1980 Vienna Convention. But we should not forget the debt owed to the great European scholars who, half a century ago, dared to think of a uniform law for international trade and who carried out the basic work which led to the 1964 Hague Conventions. The Conventions finalized in 1964 laid the basic foundation for the more modern structure which was build in the last decade."

33. See Feltham, supra note 25, at 346.

34. J.O. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention 53, n.8 (1st ed. 1982) (for an account of those Nations which have ratified the Hague Conventions). You will find that after reviewing the participants to the Hague Conventions, that these documents were essentially the product of West European scholars.

35. See Berman & Kaufman, supra note 9, at 270.

36. See Nadelman, supra note 27, at 629.

37. See Rosenstock, supra note 25, at 936; Honnold, supra note 25, at 299-300. Professor Honnold writes: "It is a cold comfort to contemplate the feasibility of either finding an expert in foreign law and making his explanations intelligibly to an American court, or of presenting American law to a foreign tribunal."

38. U.N. Doc., G.A. Res. 2102 (No.20).

39. Cambridge Studies In International and Comparative Law 183-84 (H.C. Gutteridge, H. Lauterpacht & A.D. McNair ed. 1949).

40. U.N. Doc., G.A. Res. 2205 (No. 21).

41. G. Herrmann, The Contribution of UNCITRAL to the Development of International Trade Law, in The Transnational Law of International Commercial Transactions 35-37 (N. Horn & C.M. Schmitthoff ed. 1982).

42. See Rosenstock, supra note 25, at 935. Constantin A. Stavropoulous observed at the first meeting, "The opening of the first session of the Commission was a historic occasion for the United Nations, for it was only the second time in the history of the organization that a permanent Commission had been inaugurated in the field of international law." The first time was the creation of the International Law Commission in 1947, by U.N. Doc., G.A. Res. 174 (No. 3).

43. UNCITRAL, Report on the First Session, U.N. Doc. A/7216 (1968), reprinted in 1 Yearbook 71, 77-78 (1968).

44. See Honnold, supra note 29, at 225 n.9.

45. See Honnold, supra note 34, at 49; C.M. Schmitthoff, Nature and Evolution of the Transnational Law of Commercial Transactions, in 2 The Transnational Law of International Commercial Transactions 19 (N. Horn & C.M. Schmitthoff ed. 1982); Nadelman, supra note 27, at 625.

46. See Landau, Background to U.S. Participation in the United Nations Convention on Contracts for the International Sale of Goods, 18 Intíl Law. 29 (1984).

47. See Honnold, supra note 34, at 53; Honnold, supra note 32, at 13.

48. See Honnold, supra note 29, at 225-26. It should be noted that in addition to the increased national representation, UNCITRAL also benefited from the participation of the following international organizations: UNIDROIT, The Hague Conference on Private International Law, and the ICC, ECE, COMECON, and OAS.

49. Id. at 225.

50. See Eörsi, Problems of Unifying Law of Contracts for the International Sale of Goods, 27 Am. J. Comp. L. 311, 312 (1979).

51. Id. at 313.

52. Id. at 311.

53. See Dore & DeFranco, A Comparison of the Non-Substantive Provisions of the UNCITRAL Convention on the International Sale of Goods and the Uniform Commercial Code, 23 Harv. Intíl L.J. 49 (1982).

54. See Honnold, supra note 34, at 47.

55. Article 99(1) reads: "This Convention enters into force, subject to the provisions of paragraph (6) of this Article, on the first day of the month following the expiration of twelve months after the date of the deposit of the tenth instrument of ratification, acceptance, approval or accession, including an instrument which contains a declaration made under Article 92." See Sales Convention, supra note 1, art. 99(1).

56. See Ziegel, Commentary: Canada and the Vienna Sales Convention, 12 Can. Bus. L.J. 366 (1986-87).

57. See Ziegel, supra note 29, at 84.

58. Professor Sonoís official position is: Chief of the International Trade Law Branch, Office of Legal Affairs; Secretary of the United Nations Commission on International Trade Law.

59. K. Sono, UNCITRAL and the Vienna Sales Convention, 18 Intíl Law 7, 14 (1984).

60. Id. at 14-15.

61. See Winship, supra note 2, at 1231.

62. See Ziegel, supra note 29, at 74. As the author notes, "A student of the Convention must come to it with a fresh mind and free of the biases and presuppositions induced by familiarity with his own domestic rules."

63. See Honnold, supra note 34, at 69; Sono, supra note 59, at 13; Berman & Kaufman, supra note 9, at 211, 270-72; Dore & DeFranco, supra note 53, at 63; Feltham, supra note 33, at 347; Honnold, supra note 29, at 225; Farnsworth, supra note 27, at 19.

64. See Schlechtriem, supra note 27, at 125-29, 133; Rosenstock, supra note 25, at 938; Berman & Kaufman, supra note 9, at 271; Roth, The Passing of Risk, 27 Am. J. Comp. L. 291, 310 (1979).

65. See Ziegel, supra note 29, at 69; Honnold, supra note 34, at 68.

66. See Herman, supra note 41, at 38.

67. These languages are: English, French, Arabic, Chinese, Russian and Spanish.

68. See Winship, supra note 2, at 1234; Sono, supra note 59, at 130.

69. See Schlechtriem, supra note 27, at 239.

70. See Schmitthoff, supra note 45, at 28.

71. See Sono, supra note 59, at 9.

72. See Ziegel, supra note 29, at 84.

73. See Schmitthoff, supra note 70, at 21; Sono, supra note 59, at 9.

74. See Winship, supra note 2, at 1234.

75. Article 93(1) of the Sales Convention provides:

If a Contracting State has two or more territorial units in which, according to its constitution, different systems of law are applicable in relation to matters dealt with in this Convention, it may, at the time of signature, ratification, acceptance, approval or accession, declare that this Convention is to extend to all its territorial units or only to one or more of them, and may amend its declaration by submitting another declaration at any time.

See Sales Convention, supra note 1, art. 93(1).

76. Ontario Law Reform Commission, Ministry of the Attorney General, 1 Report on the Sale of Goods 19 (1979).

77. See Sono, supra note 59, at 7.

78. See Dore & DeFranco, supra note 53, at 51, 57-59.

79. Id. at 67; see also Sono, supra note 59, at 13; Landau, supra note 46, at 50.

80. See Notes, Unification and Certainty: The United Nations Convention on Contracts for the International Sale of Goods, 97 Harv. L. Rev. 1984, 1999 (1984).

81. For an example, see Dore & DeFranco, supra note 53, at 59;

The definition, scope and applicability of the usages of trade in the Convention are analogous to those of the U.C.C. Thus, United States businesspersons should encounter no difficulties understanding or employing the provisions governing the usages of trade.

See also Sono, supra note 59, at 13.

82. See T.C. Drucker, A Common Law Perspective on International Sales Contracts, in Meridith Memorial Lectures 58, 66 (1982).

83. See Ziegel, supra note 56, at 372.

84. With regard to the topic of "reservations" in general, see Koh, Reservations to Multilateral Treaties: How Internal Legal Doctrine Reflects World Vision, 23 Harv. Intíl L.J. 71 (1982). The following comments by Koh are especially relevant to this paper:

Although reservations appear to be merely a legal technicality, a last minute accommodation after complicated multilateral negotiations, the doctrine of reservations in fact strikes at the heart of the concept of a multilateral Convention. The doctrine pits an individual stateís desire to depart from the terms of the treaty against the general agreement of all parties to be bound equally by the terms of a common document.

85. See Ziegel, supra note 56, at 372.

86. See Ziegel, supra note 29, at 84.

87. See Honnold, supra note 34, at 71.

88. See Berman & Kaufman, supra note 9, at 239.

89.See Honnold, supra note 25, at 329.

90.See Honnold, supra note 34, at 68.

91. UNIDROIT, The Hague Conference on Private International Law, ICC, ECE, COMECON, and OAS.

92. See Sono, supra note 59, at 13.

93. See Roth, supra note 64, at 310.

94. See Honnold, supra note 34, at 68.

95. See Roth, supra note 64, at 310.

96. See Daw, Some Comments from the Practitionerís Point of View, 14 Am. J. Comp. L. 242 (1965); see also Honnold, supra note 25, at 316; Schlechtriem, supra note 27, at 126-27.

97. See Ziegel, supra note 29, at 82.

98. Id. at 82-83.

99. See Feltham, supra note 25, at 347.

100. See Dore & DeFranco, supra note 53, at 63. The most obvious examples can be found in the American Courtsí decisions regarding the concept of "good-faith."

101. See Ziegel, supra note 57, at 83; Farnsworth, UNCITRAL-Why? What? How? When?, 20 Am. J. Comp. L. 314-316 (1972).

102. See Schmitthoff, supra note 45, at 28.

103. [1980] 3 W.L.R. 209, 223.

104. See Ziegel, supra note 56, at 372.

105. See Sono, supra note 59, at 9; Honnold, supra note 34, at 56.

106. See Rosenstock, supra note 25, at 941:

I think that even if the procedure of the Commission does not require or will not require unanimity (consensus), we will seek it, I hope, on all substantive questions, such as those concerning the choice of subjects and the other priorities. If we agree tacitly on this "gentlemens'í agreement" our efforts will be repaid by the results we are pursuing.

107. See Ziegel, supra note 56, at 372.

108. H.A. Grigera Naon, The U.N. Convention on Contracts for the International Sale of Goods, in 2 The Transnational Law of International Commercial Transactions 123 (N. Horn & C.M. Schmitthoff ed. 1982).

109. See Sono, supra note 59, at 15;

At the outset of the unification efforts, it was recognized that there was no possibility for acceptance of a program to unify the law governing both domestic and international sales transactions. As early as ULF/ULIS it was decided that the only available choice was between an indefinite continuation of the present unhappy state of the law and the isolation of the international sale for separate treatment.

See also Honnold, supra note 25, at 305.

110. Professor Honnold appropriately states, "Who notices obstructions that have been removed from the road?" See Honnold, supra note 34, at 69.

111. See Sono, supra note 59, at 12.

112. See Ziegel, supra note 56, at 373.

113. For a general overview, see McCurdy, Some Differences Between the English and American Law of Sale of Goods, 9 Comp. Legal & Intíl L. 115 (1927) (cited also at supra note 76, at 13).

114. Article 94(1) of the Sales Convention states:

Two or more Contracting States which have the same or closely related legal rules on matters governed by this Convention may at any time declare that the Convention is not to apply to contracts of sale or their formation where the parties have their places of business in those states. Such declarations may be made jointly or by reciprocal unilateral declaration.

See Sales Convention, supra note 1, art. 94(1).

115. This assertion is based on the O.L.R.C.ís findings that, "In light of the above considerations (the numerous differences between the two Acts), the Commission recommends . . . the adoption of an entirely new Sale of Goods Act which borrows heavily from Article 2 of the U.C.C. but is not simply a copy of this Article." See supra note 76, at 28.

116. These differences will only be cited in this article since an excellent and exhaustive analysis has already been performed by the O.L.R.C.

117. See supra note 76, at 137.

118. Id. at 106.

119. Id. at 38.

120. Id. at 57-63.

121. Id. at 125.

122. Id. at 91.

123. Id. at 102.

124. Id. at 104.

125. Id. at 108-10.

126. Id. at 111.

127. Id. at 117.

128. Id. at 119.

129. Id. at 124.

130. Id. at 144.

131. Id. at 153,163.

132. Id. at 173.

133. Id. at 179.

134. Id. at 181.

135. Id. at 188.

136. Id. at 197-98.

137. Id. at 204.

138. Id. at 227.

139. Id. at 259.

140. Id. at 265.

141. Id. at 271-72.

142. Id. at 266.

143. Id. at 273.

144. Id. at 273.

145. Id. at 274.

146. Id. at 276.

147. Id. at 278.

148. Id. at 277.

149. Id. at 285 [hereinafter citing Volume 2 of the Report].

150. Id. at 322.

151. Id. at 324.

152. Id. at 327.

153. Id. at 337.

154. Id. at 339.

155. Id. at 344.

156. Id. at 347.

157. Id. at 351.

158. Id. at 354.

159. Id.

160. Id. at 355.

161. Id. at 358.

162. Id. at 369.

163. Id. at 388.

164. Id. at 403.

165. Id.

166. Id. at 407.

167. Id. at 464.

168. Id. at 467.

169. Id. at 472.

170. Id. at 475.

171. Id. at 478.

172. Id. at 482.

173. Id. at 494.

174. Id. at 498.

175. Id. at 519.

176. Id. at 524.

177. Id. at 532.

178. Id. at 545

179. Id. at 562.

180. See Eörsi, supra note 50, at 311. See also supra note 76, at 75.

181. See supra note 2.

182. This problem arises as a practical reality when buyers and sellers use different forms to conclude their bargain.

183. See A.G. Guest, Ansonís Law of Contract 36 (26th ed. 1979).

184. See supra note 76, at 82.

185. Id. at 83.

186. U.C.C. ß 2-207(1) (1978).

187. U.C.C. ß 2-207(2) (1978).

188. U.C.C. ß 2-207(3) (1978).

189. See Sales Convention, supra note 1, arts. 14-24 (Part III of the Convention which deals exclusively with the formation of the contract).

190. See Sales Convention, supra note 1, art. 19.

191. See Farnsworth, supra note 27, at 26.

192. See, e.g., Restatement (Second) of Contracts ß 87(11)(a) comment a (1981).

193. U.C.C. ß 2-205 comment 1 (1978).

194. See Sales Convention, supra note 1, art. 16.

195. Id. art. 16(1)(b).

196. See Farnsworth, supra note 27, at 25.

197. See Winship, supra note 1, at 1233.

198. See U.C.C. ß 1-203 (1978).

199. "Merchants" are specially defined under the U.C.C. See U.C.C. ß 2-104 (1978).

200. U.C.C. ß 2-103(1)(b) (1978).

201. See supra note 76, at 163-169.

202. U.C.C. ß 2-302 (1978).

203. See supra note 76, at 163.

204. Id. at 154. It should be noted that the O.L.R.C. recommended the adoption of unconscionability type provisions into Ontarioís Sale of Goods Act.

205. Sale of Goods Act, Ont. Rev. Stat., ch. 462 (1980).

206. See Sales Convention, supra note 1, art. 7(1).

207. See Honnold, supra note 34, at 68; Sono, supra note 59, at 13; and G.H. Cain, The Vienna Convention: Posing a New International Law of Sales, 57 Conn. B.J. 327 (1983).

208. See Dore & DeFranco, supra note 53, at 60.

209. See supra notes 17-26 and accompanying text.

210 See supra note 76, at 173.

211. Id. at 173-174.

212. See Sales Convention, supra note 1, art. 9; see also Dore & DeFranco, supra note 53, at 56.

213. Id. at 56-59; W. Holdsworth, 5 A History of English Law 60-65 (2d ed. 1937).

214. See supra notes 17-26 and accompanying text.

215. See Farnsworth, supra note 27, at 27:

The Convention's rules on risk of loss are closely patterned on the modern rules of the U.C.C. The approach is the same; the elusive concept of "property" (with which the U.K. is still saddled) is not employed.

216. See Honnold, supra note 25, at 317.

217. Id. See also Sales Convention, supra note 1, art. 67.

218. Cited in supra note 34, at 67. See Honnold, supra note 34, at 67.

219. See Honnold, supra note 25, at 317; Sono, supra note 59, at 13.

220. See Honnold, supra note 34, at 446.

221. See Honnold, The U.N. Commission on International Trade Law: Missions and Methods, 27 Am. J. Comp. L. 201, 202 (1979).

222. See Berman & Kaufman, supra note 9, at 264; supra note 76, at 19; Honnold, supra note 25, at 316; Ziegel, supra note 29, at 67-68; Schlechtriem, supra note 27, at 133; Honnold, supra note 34, at 67; and N. Horn, Uniformity and Diversity in Commercial Contract Law, in 2 The Transnational Law of International Commercial Transactions 9-10 (N. Horn & C.M. Schmitthoff ed. 1982).

223. See Ziegel, supra note 56, at 373.

224. Id. at 374.

225. See Ziegel, supra note 29, at 83.

226. See Schlechtriem, supra note 27, at 128.

227. See supra note 76, at 34.

228. See Honnold, supra note 25, at 329.

229. Id. at 299-301.

230. See Dore & DeFranco, supra note 53, at 60.

231. See Honnold, supra note 25, at 306.

232. U.S. Const. art. II, ß 2; and U.S. Const. art. VI.

233. U.S. Const. art. I, ß 8, "The Congress shall have the power . . . to regulate Commerce with foreign Nations, and among several States . . ."

See Gibbons v. Ogden, 9 Wheat. 1 (1824) (for judicial confirmation of this position).

234. See supra note 3.

235. P.W. Hogg, Constitutional Law of Canada 37 (Comb. ed. 1981).

236. [1937] A.C. 326 (P.C.)

237. Id.

238. See The Globe and Mail, Nat. ed., Aug. 6, 1987, at 1, for a discussion of this issue. Also, note the Comments of Texas Democrat Lloyd Bentsen.

239. See MacDonald v. Vapour Canada Ltd. 66 D.L.R. (3d) 1 (1976) (note especially Chief Justice Bora Laskinís comments at 27-29).

240. See supra note 76, at 25.

241. See supra note 75.

242. For an excellent discussion concerning Canadian accession to this Convention, see LaLonde, The New Environment for Commercial Arbitration, 1 Rev. of Intíl Bus. L. 31-47 (1987).

243. See Ziegel, supra note 29, at 83-84.

244. Williams, Book Review, 97 Harv. L. Rev. 1495, 1496 (1984).

245. See C.M. Schmitthoff, Law of International Trade-Growth and Operation, in The Sources of the Law of International Trade 38 (C.M. Schmitthoff ed. 1964).

Pace Law School Institute of International Commercial Law - Last updated February 6, 1998

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